International Trade Committee on May 18th, 2017

[The Chair, Liberal, Mark Eyking]

Good afternoon, everyone.

What a wonderful sunny warm day it is here in Ottawa. It's something we've been looking for for a long time. We've had snow and rain for the last six months here, so it's good to see things warming up and drying up.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

[Inaudible—Editor] and wonderful things happen.

[The Chair, Liberal, Mark Eyking]

It's what happens when you have climate change, Mr. Ritz.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Say that with a straight face.

[The Chair, Liberal, Mark Eyking]

Anyway, we are honoured to have some people through video conference from Mexico.

Welcome, folks. My son-in-law is from Querétaro, so I go to Mexico.

[Agustín Barrios Gómez, Co-Chair, Working Group on the Future of North America, Mexican Council on Foreign Relations]

That's a beautiful city.

[The Chair, Liberal, Mark Eyking]

I go there many times.

Folks, as you know, we are doing our study. Our committee is a very busy committee. We finished a European trade agreement. We've also done a major study on TPP, which of course Mexico was involved with, and right now our study is very focused on our future trade with Mexico and the United States. Of course, this is on the minds of many right now. Not only our three countries but the rest of the world is watching us.

Our committee has already done some extensive travel in western United States. Many Canadian stakeholders, who do a lot of business with United States and Mexico, have come in front of us.

Today we're very appreciative that we have some people from Mexico to speak to us. Sometimes video conferencing can be inconsistent, so I think we're going to start right off the bat with our folks from Mexico so we can get their comments in.

Gentlemen, we usually have around five minutes—it would be appreciated—and then we will go to dialogue with the MPs.

Without further ado, we're going to start off and we're going to go right to Mexico. From Mexico we have Mr. Ortega from the Canadian Chamber of Commerce.

Welcome, sir. You have the floor. Go ahead.

[Armando Ortega, President, Canadian Chamber of Commerce in Mexico]

That's very kind, sir. We are very honoured to be able to talk to you and to state the position of the Canadian Chamber of Commerce in Mexico. Our membership comprises around 300 Canadian companies that have ventured to invest in this country, that trade actively, and that are very much concerned and interested in ensuring that NAFTA is defended.

As stated in an open letter to President Peña on January 17 of this year, sir, the chamber considers NAFTA to be the main international trading asset of the three countries, and certainly of Canada and Mexico, in our view. I have here this open letter that was published in one of the main national newspapers. We also said that, after so many years of being in full force, the agreement certainly is fit to be modernized, and we consider TPP a very good reference for that exercise. It's an exercise that has already been done, which Canada and Mexico were a part of.

We also said that modernization should always be directed toward increasing the competitiveness of the North American region, which is something that NAFTA achieved in the many years of being in force, so to ensure that we have an increasing value within all the trade chains and all the investment chains.

The last we thing we said is that Canada—and this is the message for Mexico—is a reliable partner. Our position is that this should be a trilateral negotiation since NAFTA is a trilateral deal. As happened during the negotiations many years ago—anecdotally, I was a negotiator in those days—Canada and Mexico, if they joined forces, could do a good job in ensuring that it gets modernized.

Finally, in reading the letter that was sent by the USTR representative Mr. Lighthizer to the Senate, we are happy to read that Mr. Lighthizer is explicitly mentioning the concept of modernizing NAFTA. We wholly subscribe to that objective. This modernization, I think, is on our agenda. In particular, it is on the agenda of the Mexican government. We very much support that approach. Again, we consider that the TPP will be the main reference.

Finally, whatever happened with that negotiation, this is also a position we have stated publicly and in other forums to our representatives in Canada and Mexico. We consider that Mexico and Canada should reinforce their bilateral relationship within NAFTA, under the aegis of NAFTA, or elsewhere. There are many avenues to achieve that.

Whatever happens to NAFTA and that negotiation, certainly they should push for a successful TPP negotiation if the 11 countries left are able to launch it without one of the members that quit. The position of the chamber is that such an option should be explored, and I think it would be worth it.

That is what I have to say, sir.

[The Chair, Liberal, Mark Eyking]

Thank you very much.

We're going to move to the representative of the Mexican Council on Foreign Relations, Mr. Gómez.

Go ahead, sir; you have the floor.

[Agustín Barrios Gómez]

I want to thank you, and to thank the committee.

It's a pleasure and an honour to be a part of these hearings, and it's certainly extremely timely. I know you didn't plan it like that, but of course today is the official notification on behalf of the USTR vis-à-vis Congress and the negotiations that are happening.

If you'll allow me, I'm going to go back a bit. I don't think it's highlighted enough that the only reason we're living through this period of bewildered uncertainty is that our collective generation in North America was tested in the run-up to the American elections and we were found lacking.

In the case of Mexico it is perhaps more patently obvious. The current President of the United States based his campaign on ignorance and xenophobia vis-à-vis Mexico and Mexicans. As you know, he led the Republican field only after calling Mexicans rapists and he consolidated his base around the rallying cry, “build the wall”. Then he became a serious candidate in the eyes of many when the Canadian, American, and Mexican private sectors, as well as the Democratic candidate herself, responded with a deafening silence to his attacks on NAFTA. Suddenly he was perceived as being right on a very important policy issue and the die was cast. Now we are suffering the consequences of our negligence, to be perfectly frank.

Whenever I speak to a Canadian audience—and I think this is very important—there are a few things that need to be highlighted because our relationship with the United States is not as well known in Canada as it might be.

The first is that Mexico and the United States are the two most integrated, large countries in the world. We have the most legally crossed border in the world, with 350 million border crossings through 330 entry points. Mexico has the equivalent of the population of Canada in the United States, with 36.9 million Mexicans and Mexican Americans. Of those, 80% are either U.S. citizens or legal residents; that is, the Mexican experience is not an undocumented experience.

At the same time, Mexico is by far the most important destination for the U.S. diaspora. At any given time there are between one million and three million Americans in Mexico, which is between four and 12 times more than in Canada.

Official Washington is very well aware of the staggering depth of our relationship, which is the reason that Mexico City is the only place, outside of Washington, D.C., where every U.S. government agency is represented. It's the reason the new U.S. embassy here in Mexico City is a billion-dollar project, or at least it was because as is so often the case with this administration, nobody really knows what's going on anymore.

At the same time, Mexico maintains the largest consular presence of any country anywhere in the United States.

I'll try to give a focus to this. Basically, when I had the opportunity to introduce the Governor of Texas here in Mexico City, he talked about our being neighbours, which led to my very politely correcting him. We're not really neighbours; we're roommates. The bottom line is that just as with respect to Canada, American prosperity and national security directly depend on a co-operative and stable Mexico.

What is the Mexican perspective on what's going on in North America in general? There is certainly an element of anger at the insults, as well as significant bemusement at the lies, but mainly we don't have a clue as to what's going to happen with American policy, with one day NAFTA being on the verge of cancellation, another day NAFTA being saved because the U.S. President apparently likes his Canadian and Mexican counterparts. I don't know how viable that is in the medium and long term as a reason to stay in NAFTA, the fact that he gets along with Prime Minister Trudeau and President Peña Nieto.

Then we hear that the U.S. will seek separate arrangements with Mexico and Canada, which, if you actually know anything about our position, is a non-starter, at least with Mexico, and I think it is the same with Canada at this point. I know it didn't start like that, but that's at least our feeling. and we'd be very interested to find out your views on that.

But if the White House chief strategist Steve Bannon's whiteboard is to be believed, the U.S. will do its best to quarantine the rest of the world from his city on a hill, sunsetting American visa laws and all of that.

Canadians are being told by the president of Goldman Sachs to relax because the President of the United States apparently likes them, and I guess the corollary being that Mexicans should be sweating because he doesn't like us. I mean, we don't know how to interpret those things.

In his interview with The Economist, the President said that the problem with NAFTA is our VAT, our value-added tax or EVA—which at least is something the Mexican consumer can get behind—although I don't think he really knew very much what he was talking about. The truth is that nobody knows.

We're having to deal with the United States, which sounds more like a volatile developing country than the world's largest and most sophisticated market, sort of Venezuelaization of the United States, but at the same time nothing happens, right? Until today, of course. The peso drops. The peso has dropped significantly. We are about 20% below where we should be because of these tweets and these lies, and because of everything that's been said. Then, of course, American exporters are hurt, and everybody is worse off in a climate of insecurity and fear.

This brings me to Canada. Our perception of Canada is that after the unfortunate episode of Ambassador MacNaughton's comments in Washington that fed the whole throwing Mexico under a bus narrative, Canada has come to realize what was obvious to us from the beginning. That is something I've had a chance to share on CBC's Power & Politics, and I know it caused a bit of an uproar. It was the fact that it was just a matter of time until Canada was going to be put in the crosshairs. It's the reality.

It would be foolish to think that it is in anyone's interest to negotiate individually with this administration. I'm well aware of the fact that the Canadian business community is very interested in flying under the radar, and I'm sure you're being pressured to be accommodating, but with respect to this, I don't think it's a good idea. I think it's about acting on principle.

That's what I would share with you in this first round.

[The Chair, Liberal, Mark Eyking]

Thank you, sir, and thank you for your concise and frank description about where we're at right now.

Before I move on to our next witness, I'd just say that our committee is very focused on our relationship with Mexico. It's very important. We had conversations when we were doing the TPP.

To let both of you know, our committee is planning on going to Mexico. It's in the final stage. We're hoping to go down there this fall if everything works well, and if we do, we hope to meet you both there.

I will just let you know we're very close and we're still friends, and we want to work on the future.

[Agustín Barrios Gómez]

That's excellent news, sir.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you.

Mr. Dade, you're from the Canada West Foundation.

[Carlo Dade, Director, Centre for Trade and Investment Policy, Canada West Foundation]

Are you going to Colin next, or to me?

[The Chair, Liberal, Mark Eyking]

I have a third one. I'm sorry about that.

Mr. Robertson, go ahead, sir. I didn't recognize you down at the bottom there. Sorry about that.

You're coming from Montreal.

[Colin Robertson, Vice-President and Fellow, Canadian Global Affairs Institute, As an Individual]

I am.

[The Chair, Liberal, Mark Eyking]

Okay. Thank you.

Go ahead, sir.

[Colin Robertson]

Thank you, Mr. Chair.

My remarks will cover the upcoming trade negotiations, the Canada-Mexico relationship, and the need for middle powers like Canada and Mexico to stand up in support of the rules-based, liberal international system.

With regard to the North American accord, we need a new North American accord. NAFTA worked to the benefit of all three parties—Canada, U.S.A., and Mexico—but it is time to bring the NAFTA negotiated before the digital age and the arrival of e-commerce into the 21st century.

The trans-Pacific partnership would have largely accomplished this, but the Trump administration has withdrawn from this Obama administration initiative, so we need to adjust to the current circumstances. A new agreement would include and set the standards in emerging areas like e-commerce and the growing digital trade. We can also make improvements to integrate into the agreement standards on labour and the environment.

We need to address labour mobility, including the mutual recognition of accreditation. Then we can make maximum use of the talent pool that North America enjoys, but that we need to harness, to make us the most competitive region in the world. This means provision for trade adjustment so that those who are displaced by trade decisions or by efficiency improvements in automation, robotics, and artificial intelligence are guaranteed the opportunity to improve their skills or have training in another area. In doing so, we have the opportunity to create, just as NAFTA did in its time, the new model for trade agreements: a realistic but progressive trade agreement that gives a helping hand to those who are displaced or who lose out.

A trilateral trade negotiation leading to a new North American economic accord would respect the sovereignties of the three nations. It would be a very different model from that of the European Union with its centralized and heavy bureaucratic oversight. Rather, we would continue with the current approach of ad hoc working groups to ensure and evergreen the agreement to allow for continuous improvement in areas like transportation.

In the coming weeks, we'll hear a lot of noise and nonsense about Canada and Mexico out of Washington. We need to distinguish between what is real and what is theatre. To paraphrase the great Gretzky, we need to go “where the puck is going”, and keep our eyes on the net and on the goals that we want and can score.

With regard to Canada-Mexico, NAFTA transformed the Canada-Mexico relationship from one of cordial distance based on a shared neighbour into that of family. Today, there is an annual, increasing flow of two million Canadians to Mexico, especially during the winter months. Canadian investment, mining, manufacturing, and banking have increased manyfold, while trade has more than tripled—even faster than with our traditional partners in Europe and Japan. Today, Mexico is our third-largest trading partner, but it's not reciprocal. Mexican investment in Canada never took. There is one notable exception: Grupo Bimbo's acquisition of Canada Bread in 2014. It now operates 17 bakeries and employs over 4,000 across Canada.

The imposition of the visa in 2009 affected more than half of Mexican travel to Canada, effectively chilling tourism, study, and investment. The lifting of the visa this past December and its replacement with the electronic travel authorization has resulted in a significant increase in Mexican travel to Canada. We are already reaping rewards and more tourists, but we should be doing more in terms of tourism promotion. We expect more students, especially given President Trump's comments about building a wall on the Mexican border. We should encourage recruitment visits here by middle and high schools, university and vocational schools, and provincial education ministers.

Beyond students, we could do a lot more in joint research projects in manufacturing and agri-food. In the longer term, ease of entry into Canada would also generate more investment, but we need to target Mexican investment that matches Canada. Most promising are the automotive and automotive parts sector and the energy and energy services sector.

Goldman Sachs estimates that by 2050, Mexico will overtake China in terms of per capita GDP. There is already a middle class of 40 million in Mexico. Mexico is our springboard into the potential of the Americas. We already have preferred observer status in the Pacific Alliance that includes Mexico, Peru, Colombia, and Chile. In the short-term, before the end of the year, Prime Minister Trudeau should lead a “Team Canada” mission with premiers, business leaders, and university presidents to Mexico to deepen Canada-Mexico relations and to underline our solidarity with Mexico in negotiating a new North American accord.

The picture of solidarity, Mr. Trudeau with President Peña Nieto in Mexico City, would be appreciated in Mexico. Its significance would also be recognized in the United States, and it would give encouragement to our many allies in the Congress, the states, the business community, and even within the Trump administration.

A vigorous partnership with Mexico is already working to our mutual benefit, but we still have to realize the full potential of the Canada-Mexico relationship.

In terms of worry about middle powers, we live in a world of disarray. The rules-based, liberal international system and supporting architecture that Canadians helped engineer in the period after the Second World War has kept the peace and created the conditions for extraordinary growth and prosperity. Today, it is under strain and in need of reform and rejuvenation, and the middle powers need to step up. China and Russia would like to see a return to spheres of influence and a concert of great powers. This would not serve Canadian or Mexican interests.

The United States, which guaranteed this system and built it on its military might, wants more burden-sharing by like-minded states. This we must do, because the hard truth is that the U.S. carries and sustains the system under which Canadians and Mexicans have thrived. We need to stand up with like-minded middle powers such as Mexico and reaffirm our support and commitment to the rules-based, liberal international system. A new, progressive approach to sustainable trade and labour mobility in partnership with Mexico and other democratic middle powers is the place to begin the necessary reform and rejuvenation.

Thank you, Mr. Chair.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Robertson.

We're going to move now to the Canada West Foundation, with Mr. Dade.

Thank you for joining us here today, sir.

You're the wrap-up guy. Go ahead.

[Carlo Dade]

Thank you very much, Mr. Chair. It is a great honour to speak after Mr. Colin Robertson and Mr. Augustin Barrios, who I have known for a long time, as well as Mr. Armando Ortega, who I have not met before.

First of all, I would like to thank the committee for inviting me to present a few points of view relating to Canada West and to the prospect of long-term work with North America.

I would also like to introduce Canada West by bringing greetings from our CEO, your former colleague, who I think has worked with many of you here before, Martha Hall Findlay.

You'll notice that my presentation is much different than in the past. It is more formal. She gave me strict instructions to clean up my act when I came back to Parliament, so given that we have a new CEO, you'll see a change with Canada West.

I had the committee to myself this morning with foreign affairs. I'll cut my much more detailed testimony to something a bit more brief, in light of the news that we just received from Washington this afternoon.

With the informing of Congress by the administration of a written submission on goals by the administration for the negotiation of NAFTA, we have entered what could be called the TPA phase of negotiations. We are leaving the phase or the period of the sole formation of U.S. trade policy being done by tweet at 2 a.m by Donald Trump.

We are now in an era when Congress is exercising control over U.S. trade policy. This does not mean that Trump's influence on the administration will be completely negated, but it does mean that we now have balance. Article I, section 8, clause 3 of the Constitution of the United States, the commerce clause, states that Congress has responsibility for the regulation of trade between the United States and foreign states, among the states, and with the Indian nations.

It is clear that trade is a congressional area of responsibility. The negotiation of agreements is certainly the responsibility of the administration, but the rules on trade, the laws on trade, the rules and laws on tariffs, and anything the administration negotiates has to be approved by Congress. We are now entering an era when Congress will start exercising control. I would not refer to 20 years of U.S. history in trade negotiations but to a month and a half to two months ago.

On March 21, Secretary Ross and acting U.S. trade representative Vaughn went to the Senate finance committee to talk about their plans for trade and for renegotiating NAFTA. Secretary Ross, according to Politico and other sources in Washington, attempted to slip in a notification that they would like to begin renegotiating NAFTA.

The response from Ron Wyden, the ranking Democrat, and the rest of the committee, was practically to laugh him out of the room. This is not proper notification.

You have to give a written submission of how the negotiating positions of the administration align with the priorities established by the TPA legislation. The administration then has to listen to input from Congress, and not just respond but incorporate changes from Congress, the Senate, and the Committee on Ways and Means, into what the administration is proposing. It then has to demonstrate how they'll be going forward. That was not done.

The next attempt by the administration was to suggest that Vaughn, the acting USTR, could do this. Again, it was set back, with half of the committee saying, “No, it has to be a USTR.” The recent evidence, the facts and evidence before us by means of Congress strengthening its role suggest that it has never ceded its authority to the administration for trade policy; it has delegated. We're seeing a Congress that in evidence is exercising more influence.

I think we really have to take heed of the role that Congress is playing and will likely continue to play if recent evidence, not of the past 20 years but of the past couple of months, and even the questions they put forward today to the new USTR are any indication.

There are strict calls in the TPA legislation for updating Congress and for Congress to have access to the negotiating documents from the United States and its counterparts in the negotiations. There is every indication that Congress is going to hold the administration to this.

We are arriving at a period of balance. Having to wake up at two o'clock in the morning and worry about what Trump tweeted is going to be a little less important in light of the role that I expect Congress to play.

What does this mean for us and for Canada? There are a couple of things here. One is finance, ways and means. These are the areas of focus for us in Washington. If you are going to Washington, I would humbly suggest that's whom you need to spend time with. Focus laser-like on the members of the committee. Get to know them, and be able to work with them on the negotiations. Work with our Mexican counterparts in doing the same thing, targeting members of the committee. I'm quite sure that Lloyd Doggett, from Texas, would be amenable to talking to the Mexicans, given the importance of trade with Mexico for his district.

There are not just strategies for the Department of Foreign Affairs and International Trade—sorry, I still refer to them that way—but a role for Parliament to play in this, too.

Second, the other opportunity for us is getting to people to whom congressmen listen. When there is a crisis in Washington or when there are issues concerning NAFTA, U.S. congressmen may or may not answer a call from the Canadian ambassador, but they sure as hell are going to answer a call from the Speaker of the state house back home, the governor back home, or the president of the local chamber of commerce. With those ties, we have a unique ability to interact with and influence those people in ongoing relations at the subnational level.

Our premiers and Speakers of provincial legislatures in Canada are in Washington. We are a member of the U.S. Council of State Governments. We are a member of PNWER. We are a member of the Council of the Great Lakes Region. We are a member of the New England governors association. We need to pursue these, and it's something we haven't done in the past.

Part of the problem is.... It's an open secret that the Clerk of the Privy Council has told the premiers that the provinces need to do more in terms of reaching out to the states to exercise their influence. We are asking the premiers and the provinces to do more, but you've seen the Saskatchewan budget. You've seen the budget in Manitoba, in Alberta, even in B.C. We are asking the provinces to do more at a time when we need them to do more but they have less. We've been working with Western Economic Diversification, trying to get them to create a fund to co-finance subnational engagement activities with the provinces to double what we are doing in the states and take advantage of this unique window to exercise influence.

Finally, the other point I can make is that North America is not NAFTA. We often conflate NAFTA with North American integration. Even in testimony here and in foreign affairs people talk about the regulatory co-operation council and they confuse that with being part of NAFTA. We've had continued success on integration with the RCC, with our trusted travellers programs. At a time when we're talking about ripping up NAFTA, there is work under way to combine the Canada-U.S. regulatory co-operation council and the U.S.-Mexico high-level regulatory co-operation council. At a time when we are talking about building walls in North America, we are still working to link our two separate trusted travellers programs into one North American trusted travellers program.

No, these do not offset the potential of a redone NAFTA, or of NAFTA being ripped up, but it is important to note that there are other avenues to advance our economic interests in terms of integration in North America: strengthening the regulatory co-operation council or, as we did in a presentation to the U.S. parliamentary working group, looking at things like creating a North American infrastructure bank. It's the type of small-scale, focused initiative that would help the Americans solve a problem they have with border infrastructure and that could really benefit Canada and give us a leg up on dealing with the Americans.

I'll close with those notes. There are things we can do. Today is an important day, and we need to be prepared for an era of more balance. We can finally sleep through the night and not worry as much about that 2 a.m. tweet coming from Donald Trump.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Dade.

You're right. The timing couldn't have been better for today, for the witnesses to come and give us a little wind in our sails to forge on and bridge our relationships.

We are now going to move on to a dialogue with the MPs. We have the Conservatives up first, for five minutes.

Mr. Hoback, go ahead, sir. You have the floor.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Carlo and the other colleagues, thank you for this. I've been working on this in the background, just as you have, and you've just confirmed the data I've seen when looking at timelines and how realistic it is that we could have things done at an appropriate time based on the elections coming up in Mexico and the mid-terms in the U.S. That actually throws a lot of reality into what can happen in the next short term and/or medium and long term, so good job on that.

I want to talk with my friend from Mexico, Agustín. We've actually met before, when I was in Mexico. We were in a session together, if you remember. We were talking about how Canada and Mexico need to move forward with our trade agendas and how, if the U.S. wasn't going to participate, we'd do it ourselves.

[Agustín Barrios Gómez]

Absolutely.

[Randy Hoback, Conservative, Prince Albert, SK]

That's something I want to ask you about. You're looking at agricultural products. You were talking about corn in Mexico and how you source a lot of that out of the U.S., and you're looking at alternative markets. We have great barley up here in Canada that I think you'd really enjoy, plus corn, too, so I just put that out there.

In the Mexican political spectrum, how do you see these negotiations unfolding and how do they work into your timelines in relationship to the fact that you have an election coming up in the fall? With primaries in the fall, and I think you have a mid-term this June in Mexico City, how is this all going to play out?

[Agustín Barrios Gómez]

It's in Mexico State, which is actually the largest state in Mexico. Mexico State has 16 million inhabitants, so it's a very important election. It's also a bellwether election. It's a state that the PRI has never lost.

To be frank, it plays horribly. Perhaps the great advantage we have right now—and by “we” I mean those people who are liberals, but liberal in a classic, British sense of the word, people who believe in economic liberty, people who believe in basic liberalism, in the rule of law and in democracy, those of us who have been fighting for that—is that we are now at a point where there is a consensus in Mexico that free trade, and particularly North American free trade, is a good to be defended. That is giving us more leeway than we would normally have.

I'm not quite sure how much longer it's going to last. As you know, these vacuums of power fill very quickly. If you start seeing these spaces where interest groups, particularly in agriculture but also in manufacturing, start smelling blood in the water, they are going to want to get their protection. We started seeing that with respect to a group of people from the countryside. They took to the streets here in Mexico in one of the protests, and they started asking to be included in the NAFTA renegotiation.

With this I'll close. Right now what we are looking at in terms of agriculture is that Mexico has realized that the white voters in Iowa are taken much more seriously than the brown voters in Texas or California. Given that reality, we have realized that it is very important to signal to the United States that those jobs would be in peril, that we would look for sourcing. We don't want to do it. We love the fact of being part of the North American supply chain. We love sourcing our products from North America. We believe very profoundly in the region as a whole and we want to protect it as a region. We want to make it more competitive, but these are things on which we cannot just idly stand by.