International Trade Committee on Sept. 25th, 2017

[John Murphy]

I think it's an excellent point.

For the United States and Canada it's so obvious. We all know NAFTA families. In fact, my middle name is from a French-Canadian ancestor, so it's very common.

Perhaps a better example right now is to think about Mexico's progress in recent decades. I was a student in Mexico in the 1980s. Young people today wouldn't remember this but the United States, let alone Canada, was a very distant place for Mexico at that time. There was a single McDonald's in Mexico City. Middle-class families would take their children there on the weekend and it was a very exotic thing. English wasn't spoken anywhere and America seemed so far away. If you think about the journey Mexico has taken since then, Mexico joined the GATT in 1986. It wasn't even a member of the GATT; it had very high trade barriers. A few years later with NAFTA Mexico made a transition to democracy. Mexico today has a much more robust middle class and has become a major player in the world economy. Mexico back then used to export oil and today Mexico exports manufactured goods. It has much more sustainable economic prospects.

Yes, trade makes big changes in society, doesn't it?

[The Chair, Liberal, Mark Eyking]

Okay, thanks.

We're going to move over to Mr. Carrie. You now have the floor, sir.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you, Mr. Murphy. I think it was an excellent presentation and I really liked your examples.

On this side of the table we do have a trade deficit with my barber, too. The good news is as I'm getting older, there's a lot less for her to do, so it is getting better.

[John Murphy]

I hear you.

[Colin Carrie, Conservative, Oshawa, ON]

I also like what you said, that we make things together in North America.

I come from Oshawa and we build cars. There's a lot of rhetoric out there right now in the auto industry. There's a lot of talk of protectionism. I think even yesterday I heard one stakeholder say something along the lines of, “Don't worry too much about it. We'll just revert to the Canada-U.S. Free Trade Agreement if NAFTA falls through.”

Could you comment on that type of rhetoric and why it might not be a good idea? What kinds of risks to jobs might that pose in Canada and also the U.S.? Could you put it in a framework of international competitiveness? You mentioned the importance of this being a trilateral agreement. What kind of effect would that have if this protectionism rises and what kind of risk to jobs on all sides of the border are we looking at?

[John Murphy]

The debates about NAFTA over many years have been complex. Yet, that's not where we are. This isn't 1992 or 1993 and trying to decide whether to forge ahead with this agreement. It's 2017 and it's been the law of the land for decades. Industry has accommodated itself to this. Sector after sector have grown used to it and come to use it in a way that to take it asunder would do great harm. My boss, Tom Donohue, in the Wall Street Journal today, included the chamber's estimate that hundreds of thousands of jobs could be at risk. It's hard to game out how exactly that would all unfold and just how dramatic it would be. We've used the figure often that multiple economic studies come up with the same sort of number for the United States of about 14 million American jobs depending on trade with Canada and Mexico. If you took away the NAFTA, those jobs wouldn't all disappear. We traded with Canada and Mexico before NAFTA. But we're talking about a macroeconomic event here that would have very broad repercussions in the U.S. economy. It would be potentially larger for Canada and Mexico. As a representative of a U.S. business group, we want to call attention to that risk. It's very substantial for the United States as well.

[Colin Carrie, Conservative, Oshawa, ON]

Could you comment as well on the idea of multilateral versus bilateral? You brought that up in your initial comments.

I know your organization in January came out with a very supportive statement for TPP. It basically brought new standards for international trade agreements. With what we're talking about in NAFTA—I agree it's not 1992 but some people are still living there—why is it important for us to look at this multilateral versus bilateral especially when we're talking about our competitiveness as a North American bloc, internationally?

[John Murphy]

Well, this is a question that journalists often ask us and that we try to avoid answering.

[Colin Carrie, Conservative, Oshawa, ON]

I'm glad I asked you, then.

[John Murphy]

When we're asked if we support multilateral or bilateral trade agreements, we typically answer “yes”. There are many bilateral trade agreements that the United States has entered into that have been good and meaningful and have brought real benefits to both parties, but multilateralism has as well. We are strong supporters of the global rules-based trading system embodied in the World Trade Organization. The rule of trade law, and what was built in the aftermath of the Second World War in terms of trade liberalization worldwide, has played a very important role in a rising prosperity around the globe. It's easy to see it in emerging economies like China, but I would argue that it's countries like the United States and Canada that have benefited the most, so we'll continue to be staunch supporters of multilateralism.

[Colin Carrie, Conservative, Oshawa, ON]

As an organization that's not Canadian, do you think there's still a benefit for Canada to still move forward with the TPP and to see what can be done with that agreement, even if the United States, at least for the time being, has said they're not going to be part of it?

[John Murphy]

The United States has withdrawn from the TPP and is not participating. When we're talking about this with the U.S. administration, we usually at that point say, “Well, I understand, but what's the strategy, then?” By the year 2022, two-thirds of the world's middle-class consumers will be in Asia. They have rising purchasing power, they love American goods, and yet there are high barriers. If it's not the TPP as a strategy to access those markets, what is it?

As for Canada and whether or not the so-called TPP 11 should proceed, you know, as an American I salute Canada's clear-eyed pursuit of its economic self-interest. The TPP, in our view, as we said loudly and clearly for a long time, as we advocated for it, is a good agreement. Can it be improved? Yes. There are some sectors of the U.S. economy that would have hoped to improve some areas, but it is very clear to us that the Japanese, for instance, want to play a long game with the TPP. They want to see it move forward someday with the United States. I think that's interesting, but for now the United States is going to remain on the sidelines of that conversation.

[The Chair, Liberal, Mark Eyking]

Thank you, sir. That was a good discussion.

We'll now go to our cleanup man, Mr. Peterson.

You have the last five minutes. Go ahead, sir.

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

I don't often get to bat cleanup. I'm usually a number eight or nine batter, so I appreciate this, Mr. Chair.

Thank you, Mr. Murphy, for being here. I think it's appropriate that we're in Parliament itself today for this committee hearing. Long before NAFTA was around, I believe in 1961, President Kennedy, just a couple of hundred feet away, addressed the Canadian House of Commons and said the following:

Geography has made us neighbors. History has made us friends. Economics has made us partners. And necessity has made us allies.

Of course, this was long before NAFTA was around, or the Canadian-American free trade agreement, but I think those sentiments remain true today. I think your testimony certainly highlights some of that partnership that we'd like to see maintained beyond any renegotiating of NAFTA.

“Economics has made us partners”: I think that's the key thing for our purposes here. It's part of the reason that NAFTA is so important. I think President Kennedy was alluding to the partnership between Canada and the United States of America as countries, but there are also partnerships at the local level, and partnerships obviously at the business level. There are subsidiaries of parent companies on both sides of the border. This economic partnership far exceeds anything beyond just two nations and two countries. I think it's key for us keep that in mind. It's important to remember that. I am from an area of the country that relies heavily on auto manufacturing. Magna International is headquartered and has a lot of operations in my riding. Thousands of my constituents have jobs that depend on a robust manufacturing centre. The company is thriving and doing quite well, and of course I would like to see that maintained, so I appreciate your being here today.

I understand that you've been involved with a lot of trade deals through your professional role. I just wonder if you could elaborate a little bit, in the few minutes we have left, on the hallmarks of trade deals that you see as being successful. I agree with you that the trade balance or deficit is not the best barometer. What sort of measuring stick should we be using? What characteristics of trade deals that you see as successful should we strive for if we're striving to improve this trade deal?

[John Murphy]

Thank you. It's an interesting question.

In some ways, this NAFTA modernization is quite different from other trade negotiations. It's first of all different because we already have an agreement in place, and I think I would have to say it's really quite a good agreement. It's often said that it needs to be modernized, that it's old, but I have been impressed that some of the controversies of the past year have caused sectors and individual companies to come forward and share with us that they didn't even know it, but they were using the NAFTA to do something, and it turns out that it is pretty important to them. It is a peculiar negotiation because of that.

There are a number of areas where we can pursue, through negotiations, enhanced market access to one another's markets, but it's fairly limited because the NAFTA already delivered most of that. That makes it different.

I think about past free trade agreements between the United States and Latin American countries. There was always the enticement of that market access, and for the Latin American country, the promise of permanent access to the giant U.S. market. That made it possible politically to enter into not just the market access, but the rules provisions of the trade agreement, whether they are intellectual property protection, procurement rules, opening up services markets, and for a reform-minded government, the market access, and those other things, it was a chance to enter into a set of economic reforms that might have been difficult to do under other circumstances. That's what makes this a little different here today. I think we need to constantly remind ourselves of what we have right in front of ourselves. As George Orwell said, “To see what is in front of one's nose requires a constant struggle”. I think that is true when it comes to the NAFTA.

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

I agree with that.

Perhaps part of any concern with trade deals is the sentiment that people aren't sharing equally in the benefit, and you alluded a little bit to that. Is that, do you think, more of a communications problem than it is a subjective problem with the trade deals, particularly NAFTA?

[John Murphy]

I think it's both. I think people don't identify the degree to which somebody's consumer goods are much less expensive, and that there's greater competition in the marketplace in a way that brings more choice as well as lower costs. That's missing.

It's easy to say, in those narrow specific places where there have been many factory job losses, that trade is to blame. Sometimes trade is to blame, but there's research by Ball State University which says that 88% of manufacturing job losses are due to automation and not due to trade. It would be to everyone's benefit, I think, if we had a clearer-eyed assessment. Those are challenges. They need solutions, but you need to understand the problem so you can get the right solution.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Peterson.

That wraps up the dialogue with the MPs. It was a good conversation.

Mr. Murphy, we are going down to the United States on Wednesday. We are going to Columbus, Ohio.

[John Murphy]

Excellent.

[The Chair, Liberal, Mark Eyking]

We have a very robust agenda. We're going to go up on, I believe, Thursday and Friday, to Milwaukee, Wisconsin. We'll be meeting with a lot of companies. Yes, we've been down there a few times, the west coast, the east coast, and down to the centre. We've been in Detroit. When you're down there, you get the feeling. You meet with other companies, and you get a sense pretty much how you wrapped it up today.

Thank you very much for coming and bringing your people here today.

That ends the formal part of our meeting.

The meeting is adjourned.