International Trade Committee on Sept. 18th, 2017

[Dr. Michael Geist, Canada Research Chair in Internet and E-commerce Law, Faculty of Law, University of Ottawa, As an Individual]

Great. It's good to be back.

Good afternoon. From speaking for the country to speaking for myself, I'm a law professor at the University of Ottawa, where I hold the Canada research chair on Internet and e-commerce law. As always, I appear in a personal capacity representing only my own views.

There's much to say about NAFTA, and I've written a lot of articles and posts on the agreement, but I have limited time, so I thought I'd focus really on two issues: primarily the intellectual property chapter, and then, with a couple of comments, the e-commerce chapter.

While Canada is accustomed to playing defence when it comes to U.S. intellectual property demands in trade talks, this round of renegotiation offers the chance to proactively ensure that Canadian IP priorities and policies are reflected in the agreement.

To put the IP issue in context, over the past five years Canada has implemented anti-circumvention laws—the digital lock rules—similar to those found in the United States, has added stronger enforcement measures, has enacted anti-counterfeiting legislation, has extended the term of protection for sound recordings, and has engaged in patent and trademark reforms. It should be recognized that Canada already meets its international IP obligations and has largely addressed previous U.S. demands regarding further reforms.

At a broad level, the Canadian negotiating goal should be to retain an appropriate IP balance that fosters creativity and access while ensuring that there is room for Canadian-specific policies that sit within the flexibilities of the international IP framework.

What might that look like? I'd like to raise five points.

First, Canada should insist on the inclusion of language on maintaining balance across all IP rights: legitimate interests of users, promoting access to and preserving the public domain, ensuring that IP rights do not create barriers to legitimate trade, and facilitating access to affordable medicines. Similar language was raised during the negotiations of the trans-Pacific partnership—the TPP—and belongs in NAFTA.

Secondly, the availability of the fair use provision in the United States represents a significant competitive advantage for U.S. businesses and creators. To ensure a level playing field for innovation and creativity, the NAFTA IP chapter should require that all parties feature a fair use, or fair use equivalent, provision.

Third, Canadian copyright laws' anti-circumvention provisions are among the most restrictive in the world and badly undermine the copyright balance in the digital world, which may create unnecessary restrictions for innovation. While the Canadian exceptions were narrowly constructed and limited to just a handful of circumstances, the United States has actually been expanding its digital lock exceptions. That imbalance creates another uneven playing field for innovation and should be remedied within NAFTA.

Fourth, the Canadian IP chapter should also address the abuse of intellectual property rights that may inhibit companies from innovating or may discourage Canadians from taking advantage of the digital market. The advantage of anti-IP-abuse provisions could be used to touch on patents, trademarks, and copyright, and I would be happy to spell out why.

Fifth, one of the chief concerns from past trade negotiations is the expectation that the United States will require other countries to mirror its IP laws, even if those laws extend beyond international law requirements. The Canadian approach should be to require NAFTA parties to meet international law but retain the full flexibility that is found within those laws.

I'll give you an example. The term of copyright in Canada is presently the life of the author plus an additional 50 years, a term that is compliant with the international standards set by the Berne convention. The United States is expected to pressure us to increase that term from life plus 50 to life plus 70, or by 20 more years.

I recently conducted research on the role of copyright term in the public domain in Canadian schools, using data obtained by the Ontario Book Publishers Organization. According to data submitted by hundreds of schoolteachers and school districts in Ontario, half of the most popular books taught in grades 6 through 12 are in the public domain or about to enter into it. If we extend the term of copyright, as the U.S. seeks, dozens of books used by thousands of students today that are scheduled to enter into the public domain would be shut out for decades. The prospect of using those books in new and innovative ways without the need for further licensing or royalties, as well as increasing access in open electronic form—and we're seeing a lot of that open education emphasis—would be lost for a generation. These are crucial IP issues that I don't think should be overlooked.

I know my time is limited, so I'll just quickly reference the e-commerce chapter, but I'd be happy to address more in questions.

I note that Canada should be wary of including provisions in the e-commerce chapter that undermine legitimate public policy interests, particularly privacy and security.

The United States has identified restrictions against local data storage mandates—it's often called data localization—as one of its objectives. I believe the Canadian government should resist efforts within NAFTA to limit the ability for both federal or provincial governments to establish legitimate privacy and security safeguards through data localization requirements. We already have a couple of provinces in Canada that do just that.

Finally, limitations on data transfer restrictions, which mandate the free flow of information on networks across borders, can raise similar concerns. While the U.S. is seeking a ban on data transfer restrictions, Canada should ensure that privacy and security laws will not be superseded by NAFTA restrictions. In fact, I would argue that throughout the e-commerce chapter Canada should be seeking higher-level privacy protections and e-commerce regulations similar to those found within our own country.

I welcome your questions.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to start a dialogue with the MPs. It looks like we have time for a one full round here. We're going to start off with the Conservatives.

Mr. Allison, you have the floor.

[Dean Allison, Conservative, Niagara West, ON]

Thank you very much, Mr. Chair.

Thank you also to our witnesses.

Since I only have five minutes and there's hardly enough time to get started on anything, I can't ask “go to all” questions, but I'm going to go to Mr. Beal.

What keeps you awake at night when we look at the negotiation in terms of what the U.S. has stated in their document to say, “This is our negotiation and where our starting point is”? What are some of your concerns as it relates to your industry in terms of what they're at looking trying to do?

[Norm Beal]

It seems to change almost every day, but certainly chapter 19, the dispute resolution clause, is of critical importance to the long-term validity of NAFTA. That is a major concern of all food processors across the country. The key here—and I mentioned this in my submission—is that I spent a month on the road with Minister Leal, and we went down with 13 secretaries of agriculture from 13 different states. We met with many business leaders. The supply chain integration in our industry is extremely important. As a matter of fact, as the Canadian dairy council has alluded to, most of those states run in surpluses to Ontario, Quebec, Alberta, and Manitoba. Those states are running surpluses, so they're actually a higher risk if we start thickening that border and impacting the integrated supply chain. Minister Leal used to talk about his wife's Dodge Caravan and how it was assembled in Windsor, but it crossed the border eight times by the time it was assembled. That is exactly true of the food and beverage processing industry as well.

We visited Blommer Chocolate, which is one of the largest raw chocolate processors in North America, and as we were pulling into the parking lot of the plant, there were seven transport trucks with Ontario plates on them. They were taking product up to the Campbellford plant to be further processed, and then it would be shipped back down to the United States for further processing, whether it was going into chocolate milk or into a chocolate bar, that sort of thing. That integration is quick and important. Anything that creates a slowing down or thickening of that border will have a massive impact on the competitiveness of our industry. There's that, and then, of course, the dispute resolution is critical as well.

Like I say, tomorrow I'll wake up, and there will be something else that was tweeted out that we'll be concerned about.

[Dean Allison, Conservative, Niagara West, ON]

Thank you. That's two and a half minutes, and I know my colleague wants to answer questions, so I'm going to go to Mr. Dreeshen for at least one.

[The Chair, Liberal, Mark Eyking]

Go ahead, Mr. Dreeshen.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much. It's certainly an honour to be here and to be able to speak with you folks.

It will be no surprise that perhaps I want to talk about the Canadian dairy sector. I was on the agriculture committee for a number of years. When I was on the industry committee, we went down to the U.S. and talked to various New York senators about dairy and the issues that are taking place there. Of course, one of the things that they mentioned was a simple technical thing: simply going from milking two times a day to three times a day, increasing the volume by 15%. Then they wondered why the price was going to go down because of the extra milk in the system, and of course, after that, having the ability to take the milk solids, split them, and then move them into Canada. They perhaps wondered why it was that we got a little testy in that particular area.

I'm wondering if you can expand upon that because—and you mentioned it somewhat in your discussions, Mr. Lampron—there are so many U.S. subsidies out there as well. When we talk about what is taking place, that seldom comes up on the table. Could you expand a little bit on some of the issues that you see as far as the dairy industry is concerned and the issues that keep getting thrown at us in the discussions?

Could you then talk about what the U.S. subsidies are, specifically in the dairy industry, but obviously with your other sources you would no doubt know what some of the subsidies are for other commodities?

[Pierre Lampron]

Subsidies for agricultural production are part of food sovereignty. Every nation, every country, protects their agriculture. In the case of supply management products, such as milk, Canada has decided to implement a system that protects its borders and that provides producers with guaranteed income directly from the market.

The U.S. has another system. They are in a free market and follow the world price. However, they have the Farm Bill that supports producers, who would otherwise not be able to survive. We in Canada have the supply management system, and the Americans have another system. We need to have the same system to be able to trade with them. That's the foundation of our supply management system. That is why we are constantly protecting it and need borders.

I mentioned diafiltered milk. It is certainly complicated, but the filtration process did not exist when the first agreements were reached. The U.S. developed it so that it could cross the borders and replace the proteins produced by Canadian dairy farmers.

Ms. Bouchard, would you like to add anything?

[Isabelle Bouchard, Director, Communications and Government Relations, Dairy Farmers of Canada]

We are working very closely right now with the Canadian negotiating team. As you probably know, we have a study that we are updating on all the American subsidies for the dairy industry. For example, we're not calculating this because we cannot put numbers on that, but you have seen reports that most of the dairy workers in dairy farms in the U.S. are illegal immigrants. That cannot be quantified. What we know from the dairy farmers themselves and the American dairy farmers' association is that, if those workers were to be legal and therefore declared their income, the price of milk in the U.S. would go up by more than 50%. Those are examples.

Like I said, we are working very closely with the negotiators, so that the negotiators can use that study, at some point. Therefore, we are waiting to make it public, so that Canada can use it before we do that.

[The Chair, Liberal, Mark Eyking]

Thank you very much. That's a good question.

We're going to move over to the Liberals.

Ms. Lapointe, you have the floor.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you very much, Mr. Chair.

I would like to acknowledge and welcome my colleagues who are new to this committee.

My thanks to the witnesses for being here.

I am the only francophone on the committee and I'm pleased to see that a witness really wants to speak French.

You mentioned the workforce and said that there is a big difference in the U.S. and that there are a lot of illegal workers there.

What is the difference between Canada and the U.S. in terms of dairy production? You mentioned the workforce, but there's also the issue with growth hormones. What is their impact on trade?

What are your views on that? I have other questions for you afterwards.

[Pierre Lampron]

You are thinking of somatotropin, a hormone banned in Canada. For price comparison, we also have to look at milk without somatotropin. Canadian milk does not have the hormone, unlike American milk.

We must also keep the climate in mind. Canada is a northern country. In addition, U.S. farms are significantly larger, and in some states, we are talking about industries. Canadian farms are family farms with an average of 78 cows per farm.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

You briefly talked about the workforce. You said that you continue to conduct studies on the market. Are you able to estimate the number of workers not accounted for? I guess not.

[Isabelle Bouchard]

We would need much more exact figures than we are able to get.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Okay.

[Isabelle Bouchard]

It is hard to count who is illegal. They are not counted because they are illegal.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

You always talk about the American and Canadian markets, but never about Mexico. Can we assume that things in this area are going well in Mexico?

[Isabelle Bouchard]

Yes.

I would simply like to add the following about Mexico. Over the past three weeks, we have heard in the media that Mexican dairy farmers have shown their support for U.S. farmers, but that's because they are under a lot of pressure. The U.S. market has a presence in the Mexican market, and those two countries do a lot of business together. In terms of Mexico alone, there is no pressure on its producers to enter the Canadian market.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you.

I would like to ask a question about e-commerce.

Last week, the Parliamentary Secretary to the Minister of International Trade, Pam Goldsmith-Jones, kindly met with businesses in my riding to talk about free trade. Two groups expressed their concerns about e-commerce. You did not really talk about it earlier, except to say that we must ensure that we have the highest standards of security.

If you had to prepare a new chapter, which did not exist 24 years ago, what would you like to add in it on this issue?

[Dr. Michael Geist]

I should start by noting that while it will be new to NAFTA, it's unlikely to be new to Canada and the United States. I think the expectation is that the blueprint being used is the e-commerce chapter that was included in the trans-Pacific partnership, the TPP.

We have a pretty good sense of the kinds of issues that are out there. In fact, U.S. officials have highlighted the e-commerce chapter as one of their priorities. They foresee updating NAFTA to include some of these digital issues. To the extent to which they're representing, let's say, large Silicon Valley companies that have set up very large, cloud-based servers, they want to ensure that data flows freely to the United States and can be actively stored in the United States.

One thing we have seen take place over the last number of years, especially as people become more aware of some of the privacy implications and surveillance activities that take place around the world, is that more and more Canadians, more and more Europeans in Europe, and people in other jurisdictions are anxious to ensure that their data resides locally within the country and that it is subject to their own local or national laws.

In fact, both British Columbia and Nova Scotia have set up, for certain kinds of information, laws that require that information to be stored within the province. Also, the EU, as you may know, has become increasingly aggressive about limiting disclosure across borders outside the EU unless the country it goes to has strong privacy protections.

The danger we face is really two-fold, one aspect being the prospect that this chapter might limit our ability to say that we want to ensure at least in certain circumstances that Canadians' information is subject to Canadian privacy law and may be required to be retained locally in some circumstances. Also, we run the risk that if there is a data transfer provision that says you can't put up any restrictions on transferring between borders, we could on the one hand have NAFTA say “no restrictions” and the EU on the other hand say that if you want to continue to transfer data between Canada and the EU member states you must have some restrictions, because you can't allow that same data to, let's say, leak down to the United States.

That puts us between the proverbial rock and a hard place, whereby we have one major trading bloc saying no restrictions and another saying that you have to have some restrictions in order to trade.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

You are talking about the U.S. and Canada, but do you have any concerns about Mexico?

[Dr. Michael Geist]

On these kinds of issues, on IP and e-commerce, Mexico hasn't been particularly aggressive when it comes to their own interests. They've tended to prioritize some other issues. It has tended to be the United States that prioritizes both the intellectual property chapter and the e-commerce chapter.

From a Canadian perspective, I'd argue that over the last decade we've really crafted some of our own, in a sense, “made in Canada” solutions in the case both of intellectual property and of e-commerce within that international framework that I've talked about.

I think it's important to ensure that those kinds of Canadian policies and priorities, which we've worked quite hard to ensure reflect Canadian values, also be reflected within NAFTA.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you very much.

[The Chair, Liberal, Mark Eyking]

Thank you.

Before I go to the NDP, I have a question for you, Mr. Geist.

You mentioned the e-commerce “chapter”. We have talked about TPP, and now we're dealing with the NAFTA, but was there a chapter with the European Union—there must have been—and was it fairly robust or was it fairly modern? Also, can't we use some of that language in this agreement with NAFTA?

[Dr. Michael Geist]

No. There's no equivalent e-commerce chapter in the CETA, the Canada-EU trade agreement. Given that the TPP, at least for the moment, is either sidelined completely or likely to be renegotiated through TPP 11, NAFTA would represent really the first time that Canada had agreed to some of those provisions.

I think it's worth noting that from a U.S. perspective, the TPP e-commerce chapter really reflected what they wanted to see happen. They are anxious to see it implemented in some agreement, and in a sense we're at the very front of the line, given where NAFTA stands amongst their trade talks.