International Trade Committee on Sept. 20th, 2017

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

I have a question.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

I was going to ask about how my Maple Leafs are doing this year, but....

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

It's important, as I am the only francophone here.

[The Chair, Liberal, Mark Eyking]

It looks like we're almost wrapped up, but Madam Lapointe, you have a question and then I'll go to Mr. Dreeshen for a quick question.

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

Thank you very much, Mr. Chair.

This is important, as I am probably the only one who will talk to you about cultural exemption from a francophone perspective.

The Minister of Canadian Heritage, Ms. Joly, explained to us that cable companies like yours pay toward the creation of Canadian content. Earlier, you said that you wanted companies like Netflix to pay taxes. I want to be sure that I understand correctly. Were you talking about sales tax? That would not replace your investments in the fund, correct? The idea is to exempt culture and have Canadian content. The tax would not fund the creation of Canadian content.

[Rob Malcolmson]

The sales tax will not directly contribute to Canadian content. However, the sales tax will enable a service like CraveTV—which is a disseminator of Canadian content and is owned and operated by a Canadian company—a service like that, which plays an important role in the content ecosystem, to compete on a fairer playing field with Netflix, which operates at a—

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

However, that would not resolve the issue of Canadian content, for which cable companies contribute to a fund. We are not talking about that.

As everyone knows, people, especially young people, have been turning away from cable television in favour of the Internet for a long time. I think that is even more obvious now. Young people do not subscribe to cable television, and we have known that for a long time. Earlier, you talked about distance, density and space. I think that the American Midwest must be fairly similar to Canada, and yet I think that people in the Midwest have access to better offers in terms of telephone service costs. How do you explain that?

[Pam Dinsmore]

All I can say is that I don't have the intimate knowledge of what the rates are that are being offered by wireless providers in the Midwest in the United States. I do have knowledge about what we provide, and I can assure you that our plans are very affordable at the low end of the spectrum. That's the best I can offer on that one.

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

Mr. Chair, do I have any time left? I could continue talking about this for a long time.

[The Chair, Liberal, Mark Eyking]

No. We're going to go over to Mr. Dreeshen. We're going to give him a couple of minutes, and then we have to wrap up.

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

Cultural extension is very important.

[The Chair, Liberal, Mark Eyking]

Go ahead, Mr. Dreeshen, you have a couple of minutes.

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

Thank you very much, Mr. Chair.

I appreciate this opportunity to speak to a fellow barley grower and a neighbour from my part of Alberta.

Basically, Jason, some of the things you talked about—non-tariff barriers, maximum residue levels, issues like that—kind of get thrown into the mix. Not a lot of people understand unless they're in the business, so that's part of it with regard to non-tariff barriers.

Other advantages and opportunities that we have are plant-breeding techniques and trying to be able to work those into a North American context. Of course, in order to do that, you have to have a certain scale so it can take place. Then there are the biotech barriers as well. We have chemicals that we should be able to purchase coming across from the U.S., but of course, we have all these regulatory barriers that exist. I think trying to get into that sort of harmonization is a critical part.

I know when you responded to Ms. Ramsey earlier, you said you would bring a report in. However, I think it's important that people who perhaps aren't necessarily in the business have a little bit of an idea of what some of the concerns are, because, as you said, looking at the beef industry, it eats the barley that we grow. They may wonder why we only sell 21%, but it goes in the form of protein in a different way.

Could you expand on some of that in the bit of time the chair has allowed me?

[Jason Lenz]

Certainly, we're talking about the harmonization of being able to move some of our crop inputs and biotech from one country into the other. That harmonization between our own PMRA and our sister organizations in the United States and Mexico is very important to us as producers because a lot of times those are tools we can use on our farms to become more sustainable in what we're doing.

On the biotech side, we have a very capable breeding system here in Canada. We want to make sure we encourage some private investment, maybe coming from down in the United States or Mexico. This will not only allow us to have access to those improved breeding techniques, but it will increase our yields. It will allow us to have better disease management in our crops, which would also mean we could use less crop inputs—pesticides and that sort of thing.

That harmonization between our PMRA and those organizations through NAFTA would be very critical, very vital, to us.

[The Chair, Liberal, Mark Eyking]

Thank you.

That wraps up our first panel.

Thank you, folks, for coming. It was a good discussion.

We have witnesses ready to come on board, so we're going to suspend for one minute, and then we're going to go right back at it.

[The Chair, Liberal, Mark Eyking]

We're going into our second round now. We have three groups of witnesses.

For those who have just joined us, we are continuing our study on future trade between Canada and Mexico and the United States.

We have, via video conference all the way from Montreal, Quebec, the Council of Canadians, with Ms. Dey. As well, we have with us the Canadian Federation of Independent Business, with Corinne Pohlmann, and Scott Vaughan, from the International Institute for Sustainable Development.

We'll go right to the video conference first in case we have glitches. It's better to do that first, I find.

As the presenters here know, we try to keep it to five minutes or under, if you can. If you see my red light on that means the time is up. Then we'll have dialogue. If there's something that you didn't get in or you want to add, you can always add it when we get into the Qs and As later on. Without further ado, we'll go to the Council of Canadians.

Ms. Dey, you have the floor.

[Sujata Dey, Trade Campaigner, National, Council of Canadians]

Good afternoon.

My name is Sujata Dey, and I am in charge of the international trade campaign at the Council of Canadians.

I will make my presentation in English, but I could answer your questions in French.

Today we are coming full circle. The Council of Canadians was founded to fight the Canada-United States Free Trade Agreement, which later became NAFTA. While there is much that has changed over the 30 years, many of our basic concerns about NAFTA have not.

While some say that NAFTA is a win-win for the three countries, in reality it's been more of a win-win for the corporations of the three countries. During NAFTA, inequality in the U.S. and Canada has risen. Mexico, which started in NAFTA with a 58% poverty rate, still has a 58% poverty rate. Environmental policies have been threatened by chapter 11 lawsuits and by energy proportionality clauses. It is impossible for the government to talk about progressive trade, we feel, when there are no plans to remove these clauses.

Today, there are many pundits who will say that NAFTA is now too big to fail—where have we heard that before?—and that we must live in fear and dread about NAFTA's possible demise. Unfortunately, this logic puts Canada at a severe negotiating disadvantage. It locks us into accepting any demand at the negotiation table.

Instead, NAFTA negotiation must set the course for a very different type of deal. If Canada does not achieve an ambitious deal that protects Canadians and the environment, we must simply walk away.

This is not just me saying that; it's the C.D. Howe Institute. There are many people who have been saying the same thing. We are not the only ones. An overwhelming majority of the people we polled agree. We commissioned a poll with EKOS Research, which we just launched today, and 76% agreed with this statement, “In the event that NAFTA negotiations result in a bad deal for Canadians and the environment, Canada should walk away from the deal.” This statement was supported regardless of political affiliation by 69% of Conservatives, 77% of Liberals, 80% of the Bloc Québécois, 81% of the NDP, and 90% of Greens.

In addition, we surveyed people on what they think of different prescriptions in NAFTA.

Eighty per cent said that clauses in NAFTA that make water vulnerable to export and privatization should be removed. Remember that NAFTA's annex lists water as a tradable good. If any province allowed water exports, we'd be obligated to export water. Furthermore, with a proportionality clause, we would be forced to meet water export quotas. Our honorary chairperson, Maude Barlow, former senior UN adviser on water, has devoted many decades of her life to this issue.

In our poll, 70% said that we must remove energy proportionality provisions that lock Canada into maintaining energy export quotas to the United States. These energy quotas make it hard for Canada to transition away from fossil fuels and the tar sands. It makes it harder for us to meet our Paris climate change commitments.

Lastly, we asked people what they thought about chapter 11, the clause that allows corporations to sue states over policy changes. They were clear that they did not want tweaks to chapter 11. They did not want the CETA investor court system. They wanted it eliminated. Sixty-three per cent said that chapter 11 provisions that allow corporations to sue states should be eliminated from the deal. Therefore, we think that the U.S. trade representative's proposal for an ISDS opt-in option looks promising, since they can effectively disarm chapter 11. It is one that Canada should welcome.

The results of our online poll are available on our website. As you will see, it's very consistent in terms of region, age group, and political leaning.

We should not live in the fear of a Trump tear-up, nor should we put up meek and unbinding projects that do not substantially change the deal. People are asking the government to make major changes in NAFTA, and they need to be heard.

You can find out more about our campaign fact sheets and videos on our website at canadians.org/nafta.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, and thank you for being on time. We're going to move on now to the Canadian Federation of Independent Business.

I'm honoured to have been part of your membership for 30-some years. It's a good organization, and you guys do your homework.

Go ahead, Ms. Pohlmann. You have the floor.

[Corinne Pohlmann, Senior Vice-President, National Affairs and Partnerships, Canadian Federation of Independent Business]

Great. Thank you so much.

Thank you for the opportunity to be here today to present CFIB's perspective on NAFTA. You should have a slide presentation in front of you that I just want to walk you through very quickly.

CFIB is a not-for-profit, non-partisan organization that represents more than 109,000 small and medium-sized businesses across Canada. Our members represent all sectors of the economy, and are found in every region of the country. It's important to remember that Canada's SMEs employ 90% of Canadians who are working in the private sector, and they're responsible for the bulk of job creation in Canada. Addressing issues of importance to them can actually have widespread impacts on job creation and the economy overall.

Canada is a trading nation. Every year, billions of dollars of goods and services flow through our border, and many jobs depend on the vitality of our trade relationships. To better understand our members' perspective on NAFTA, we conducted a survey in May that got almost 4,400 responses.

Of the survey respondents, 63% had experience importing from the United States and 28% had experience exporting to the United States. As well, 3.5% had experience importing from Mexico, and 5% had experience exporting to Mexico.

As the U.S.A. is our largest trading partner, changes to NAFTA have the potential to seriously impact how we do business. Uncertainty in this area makes it difficult for Canada's SMEs to plan for the future. In fact, more than one in four businesses are already looking to alter their trade plans, with another 42% not yet knowing if they will. Only 30% were confident that their trade plans would continue as they are.

This reaction should not come as a surprise, as getting involved in trade, even when there is more certainty, is not easy for smaller firms. There are almost always challenges that smaller businesses must try to overcome. Some, such as currency fluctuations, will not be solved by trade agreements. Others however, such as the cost of shipping, duties, and taxes, and understanding rules and regulations can certainly be addressed to some degree by successful trade agreements. These are among the areas we are seeking governments to address in this renegotiation of NAFTA.

It should be known that most get involved in exporting because they see a growing market demand for their product or service, because they want to expand their business, or because they see a good potential market opportunity. However, more than one-third also cited favourable free trade agreements as having an influence on their intention to export, so addressing SME trade priorities could encourage even more to engage in trade.

Our survey garnered more than 100 pages of comments on how NAFTA could be improved, and many common themes emerged. These slides provide a summary of the most important priorities to address in these NAFTA negotiations to assist small and medium-sized businesses. They include having a chapter specifically addressing the needs and particular challenges faced by small businesses. It could include a series of commitments and principles that all parties agree to, and we have suggested a few in a submission that we've also circulated to the committee members.

We also think we need to ensure that the current range of duty-free goods within North America remains as is, or is expanded. Many small business owners stated how important the agreement was in making them competitive, and losing this advantage would be devastating to their business. A focus on simplifying the rules, with the aim of reducing the overall administrative burden for small businesses involved in trade is another area.

Our submission outlines some very specific examples raised by members in our survey that could be addressed. Sometimes, the toughest issues that small businesses face are the myriad of taxes and rules at the state and provincial levels of government. We would encourage governments to find ways to include sub-national levels of government when working towards regulatory co-operation of tax and regulatory systems across all those multiple levels of government.

We would also strongly discourage changes that would complicate or tighten the rules of origin. Many expressed alarm that the NAFTA renegotiations could further complicate what is already a very daunting task for many SMEs. Rules of origin should be easy to understand, clearly communicated, and include solid examples of what is required.

Some of the most frustrating aspects of trade are the paperwork and the processes businesses must follow to get people or products across borders. Making border processes easier should include better customer service, easier and timelier access to information resources, and quicker response times to business inquiries.

Also, truck transportation is vital. It's a vital aspect of free trade in North America. While we understand the importance of safe and secure borders, NAFTA should look at ways to improve the speed at which trucks are able to cross those borders. This could include looking at how well trade facilitation programs such as the FAST program serve their intended purpose, and ensure that they are easy to access and more tailored to the needs of small firms.

Many small businesses also told us that there is a lack of clarity as to what visa may be required or not required for various types of labour to cross the border. This is often compounded by the uncertainty as to how the CBSA or the U.S. Customs and Border Protection will react to those. Even when their paperwork is in order, there are sometimes complications that cause delays in what should be an otherwise simple and straightforward process. The federal government should ensure that the free flow of labour remains an important component of NAFTA, and work to improve and clarify labour mobility rules.

Finally, we need to look at ways to modernize NAFTA.

E-commerce may be best to illustrate a technological advancement that should potentially be included as part of any free trade agreement. However, any new provisions related to e-commerce should be balanced with the needs of “bricks and mortar” businesses that have to compete with those online businesses. There is much more information on each of these items in the submission that we provided to you here today, as well as many member comments, and I'd be happy to answer any questions that you may have.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you. We're moving along well here.

We're going to move over to our last panellist from the International Institute for Sustainable Development. Mr. Vaughan, you have the floor.

[Scott Vaughan, President and Chief Executive Officer, International Institute for Sustainable Development]

Mr. Chair, and honourable members, thanks very much for inviting me. I wanted to make three brief points.

First, in 1994 NAFTA and its environmental side agreement, at that point, broke new ground in aligning trade and environmental issues, and at a minimum, those environmental provisions that currently exist within NAFTA and its side agreement should not be weakened with backsliding in the renegotiations.

More importantly, these negotiations also offer a window to craft a new NAFTA for the next quarter-century. We live in a different world from 1994. The science of global environmental change is robust. The economics of the cost of pollution and the benefits of avoided ecological damage are extensive. International markets and international trade in green, low-carbon goods and services as well as e-commerce are rapidly expanding, and the engagement of the financial services sector in climate issues is—as an investment bank CEO said yesterday at the World Economic Forum in New York—at a tipping point.

Much of these actions are taking place under the umbrella not only of the Paris climate agreement and the sustainable development goals, but other commitments such as the UN Declaration on the Rights of Indigenous Peoples. NAFTA can and should be a catalyst to advance these commitments.

My second point focuses more specifically on climate change. We applaud the Government of Canada’s commitment to include climate as a core NAFTA objective. The European Union recently made a similar commitment to link trade, Paris, and the sustainable development goals, primarily through trade-related standards.

Some may argue that trade is not and should not be connected to climate issues. However, the International Monetary Fund and the World Economic Forum have identified climate change as the most pressing economic challenge of the 21st century, and the biggest risk to business stability today. We need to reform core economic policies, including trade, in order to reduce climate risk and scale-up joint action.

With that in mind let me identify a couple of entry points. One is disciplining environmentally damaging subsidies. The WTO, and the GATT before it, had talked about rules to reduce environmentally harmful subsidies for well over two decades. A new NAFTA ought to include disciplines to eliminate fossil fuel subsidies in accordance with G20 commitments.

Another is carving out a NAFTA climate environmental goods and services list, either in a new energy chapter, or through other chapters. The OECD, WTO, APEC, and others have identified lists of traded goods and services as well as their tariff lines. NAFTA has a chance to accelerate trade in clean technologies through not only zero tariffs but, more importantly, eliminating non-tariff barriers within Canada and between Canada, the U.S., and Mexico.

Linking the financial services chapter with climate finance options include climate disclosure; supporting innovative financial instruments like green bonds, climate bonds, sustainable development bonds that the World Bank has just issued; as well as cross-border clean power purchase agreements and energy purchase agreements to scale up North American-wide renewable and energy efficiency activities.

Another is establishing a North American climate-forest sink and offsets system. Frances Seymour, who was in Ottawa last week, reminds us that our forests represent the only proven carbon capture and storage option that is affordable and known. Therefore, North America could be a leader, which would also help our important forestry industry.

Finally, there's scaling up a North American climate adaptation focusing on supply chains, trade corridors, and related vulnerable areas. The more frequent and severe extreme weather events that we see today, literally today, are becoming the new norm for tomorrow.

Mr. Chair, I wanted to make a brief comment as well as about investment. The current chapter 11 was flawed from the outset by emphasizing investor rights without investor responsibilities. There have been several investor-state disputes that raised fundamental concerns with regard to the democratic right to regulate. NAFTA needs to reform. The CETA investment chapter provides a good basis. Moreover, the UN Commission on International Trade Law is discussing right now possible changes to investor-state dispute settlement.

For more than 20 years, IISD has been actively engaged in trade and investment issues, beginning under the leadership of David Runnalls. I would be glad to share the work that we've done related to our NAFTA analysis with the clerk.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We'll go right into the dialogue with the MPs. First we have the Conservative Party for five minutes.

Mr. Allison, go ahead.

[Dean Allison, Conservative, Niagara West, ON]

Thank you very much, Mr. Chair.

To all witnesses, thanks for being here.

Ms. Pohlmann, I want to direct my questions to you. I've known you guys well over the years. You talk about red tape. You guys sat on the red tape commission and we worked together as an organization when we had that red tape commission in the last government. Talk to me about anything specifically. We have had organizations say this red tape is an issue, so give us your thoughts specifically on what we should be looking at trying to address as it relates to red tape.

[Corinne Pohlmann]

Red tape is a broad category and can include everything from, obviously, dealing with regulations.... Again, we're not asking people to reduce regulations, but finding ways to simplify and co-operate so that we're not dealing with three different versions of a regulation when trying to trade in all three countries. There are ways that we can mutually recognize regulations between the countries so that businesses can maybe only have to do things one way, not three different ways. That's part of it.

The second part of red tape, I think, has to do with the communications and customer service side of the equation, because too often that's a big part of why businesses have struggled with complying with regulations. It's that they don't understand what the rules are. There's not a lot of good explanations. It's not clear in the communications aspects of what they're supposed to do. I can tell you, the vast majority, the 99.9%, want to comply. It's sometimes just understanding what they need to do to comply that's the biggest issue.

For us, red tape goes well beyond the regulations. It goes on to how governments communicate those regulations and how businesses can access that information so they can do it appropriately.

[Dean Allison, Conservative, Niagara West, ON]

You also suggested in your brief that you always should be looking at the subnational levels while also the state level. Do you want to expand on that?