International Trade Committee on Oct. 2nd, 2017

[The Chair, Liberal, Mark Eyking]

Welcome, witnesses, to our international trade committee. As you know, we are doing a study on future trade between Canada, the United States, and Mexico. We've been speaking with the stakeholders, both with Canadians and of course with our counterparts in the other countries. We've travelled quite extensively to the United States already. We tried to get to Mexico, but we had problems with the earthquake.

That said, we have three groups. We have Mr. Van Harten, who is appearing as an individual, and we also have Oxfam and the United Parcel Service of America.

We would appreciate it if you could keep your comments to under five minutes so that we can have a good dialogue with the MPs.

Without further ado, Mr. Van Harten, we'll start with you, if you're good to go.

[Dr. Gus Van Harten, Professor of Law, Osgoode Hall Law School, York University, As an Individual]

That would be fine.

I'm a law professor at Osgoode Hall Law School. For about 15 years in my research, I've specialized on international investment law and investor-state dispute settlement, or ISDS. I'll limit my comments to the investment chapter of NAFTA, chapter 11, and will quickly note that international adjudication of disputes that involve foreign investment should, in my view, meet four criteria.

First, it should be balanced, in the sense that foreign investors should have rights and protections, but also responsibilities that are enforceable in the same way.

Secondly, it should be independent, in the nature of other judicial processes at the international domestic level.

Thirdly, it should be fair, in that all parties with an interest in the resolution of the dispute should have an opportunity to have standing in the proceeding, to the extent of their interest.

Fourthly, it should be respectful of domestic institutions, especially domestic courts, in the same manner as other international courts and tribunals.

I emphasize these four criteria because the conventional design of ISDS, including in chapter 11 of NAFTA, does not meet these four criteria. I think that is relevant to the mandate of this committee, in the sense that you should consider, when Canada engages in the renegotiation of NAFTA, that one of the benefits of a termination of NAFTA is that we would get rid of this flawed mechanism of international adjudication. Alternatively, we might have an opportunity to replace it with something better in the context of renegotiation.

I'm not offering a comment on the pros and cons of termination versus renegotiation as a whole; obviously, we don't have a lot of public information to work with on that. I think we should keep in mind that the removal of chapter 11, and especially the ISDS mechanism, would be something of a silver lining in the negative overall outcome of termination of NAFTA, and that it's preferable to call the U.S. administration's bluff on termination if the alternative for Canada is an unduly concessionary deal, because there are some benefits to NAFTA termination.

I'll end my comments right there and summarize: balance, fairness, independence, and respect for domestic institutions should be the defining criteria for evaluating ISDS or any alternative.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We're going to Oxfam Canada, with Julie Delahanty and Francesca Rhodes.

Folks, you have the floor for five minutes. Go ahead.

[Julie Delahanty, Executive Director, Oxfam Canada]

Thank you very much for inviting Oxfam to present to the committee today.

Oxfam works in 90 countries around the world to support long-term development and to provide life-saving humanitarian assistance, but we're also an advocacy and campaign organization committed to addressing root causes of poverty and inequality. We put women's rights and gender equality at the centre of everything we do, both here at home in our work and in our work in some of the poorest countries on the planet.

The government has taken a very bold step in adopting the feminist international assistance policy. To be consistent, the government also needs to review its trade and diplomatic policies to ensure strong coherence and a true feminist foreign policy. The renegotiation of NAFTA is an opportunity for Canada to support the inclusion of gender equality in the trade agreement so that women and men benefit equally from its provisions.

Women form the majority of the world's poor, and trade is widely recognized as a key tool for poverty reduction, but women workers, producers, and consumers have unique characteristics and face particular constraints. If we want to maximize the gains from trade for women, and also the contribution that women make to a country's economic and trade outcomes, then trade rules, trade agreements, and trade support programs must take into account the sectors where women work, the types of businesses they operate, the goods and services they produce and consume, and the trade and other barriers they face.

The underlying theme of our intervention today is that there needs to be a strong gender analysis in order to ensure that negotiators are able to get the best trade deal. Evidence gathered through a sound gender and poverty analysis, including through the collection of sex-disaggregated data, would improve the knowledge, analysis, and choices of the negotiators, policy advisers, and partners with respect to the impacts and benefits of NAFTA on gender equality. Building on this broad recommendation around gender analysis, we have a couple of specific recommendations, as follows.

First, the proposed gender chapter should be strengthened to maximize its impact. We strongly support the inclusion of a stand-alone gender chapter as a concrete symbol of the importance of gender equality in the NAFTA negotiation and as recognition of the gendered impact of trade.

The gender chapter found in the Canada-Chile Free Trade Agreement has been highlighted as the model for a similar chapter in the NAFTA agreement. That chapter is a useful entry point and has some great ideas, including support for initiatives such as building women's networks, improving labour standards, supporting the specific needs of women to help them take advantage of the trade agreement, and so on, but the agreement is weak, in that it lacks specificity of what it will achieve and lacks accountability due to the fact that it is completely voluntary.

To strengthen the chapter, it could profit from more concrete requirements and commitments that a NAFTA committee would have to report on. At a minimum, it should require a poverty and social impact analysis or a gender trade impact analysis to be carried out. The analysis would explore the possible gendered impacts and outcomes of the agreement, including looking at gendered value chains analysis. This analysis could lead to a better understanding of where the needs are and could target some of the suggestions made throughout the side agreement. The analysis would be very useful, too, in seeing if things are improving and who is winning and losing as a result of the trade deal. The committee could also ensure that there is adequate monitoring of the commitments.

Second, gender equality objectives should be addressed throughout the agreement, and negotiators need to look at both gender and economic inequality together. Again, as highlighted, the negotiators need to have adequate sex-disaggregated data and a strong gender analysis to understand the gender impacts and benefits of the various elements of the agreement.

While a key issue, it is important that the focus not be solely on issues related to women entrepreneurs and business owners. The labour chapter, for example, is important to review from a gender perspective, given that the vast majority of women work and women are concentrated in the lowest-paid roles with the least job security. In Mexico, for example, women make up the majority of workers in the maquilas. As a result, Mexican women have seen new job opportunities created since the introduction of NAFTA, but under exploitative conditions and with well-documented labour rights abuses occurring in that sector. The current labour provisions in NAFTA have failed women and should be strengthened in ways that would support greater real gains for women in the economy.

Finally, civil society needs more information about the negotiations in order to be able to analyze and contribute to debates and recommendations for the agreement. In particular, to ensure that gender equality is a strong component of the agreement, organizations that have expertise in gender and trade policy-making and negotiations should be included. Women's rights organizations and labour movements that represent women workers should be supported, including through funding, to be able to engage and to continue to analyze the impact on NAFTA.

Lastly, it would be useful to look at specific trade institutions within each country that could be strengthened from a gender perspective to support ongoing monitoring and improvement.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to our last presenter, who is from UPS America.

It's good to see you again, Ms. Lusi. You have the floor.

[Aylin Lusi, Vice-President, Public Affairs, UPS Canada, United Parcel Service of America Inc.]

Thank you, Mr. Chair.

Good afternoon, members of the committee. Thank you very much for the opportunity to speak before you here today.

My name is Aylin Lusi, and I am the vice-president of public affairs for UPS Canada.

UPS is a global transportation and logistics company. We are also the world's largest customs brokerage service provider. We have a 110-year history of moving and delivering goods, and we have operated here in Canada for over 42 years. We very proudly employ 12,000 people across the country, and we move approximately 3% of global GDP each and every day.

As an organization, our ambition is to bring Canadian goods and services to global markets, and to bring international goods and services to Canadian citizens.

We see the ongoing NAFTA renegotiation process as an opportunity. It's an opportunity to further improve the flow of goods throughout the North American market. Today I would like to outline three recommendations that we believe will help to create efficiencies in the movement of goods between NAFTA partners: the improvement of customs processes, the alignment of border security processes, and continued investment in infrastructure at NAFTA borders.

I'll begin with Customs. While customs processes might not always attract the most attention in discussions on international trade, we are very firm believers that efficient customs are really the cornerstone of successful North American trade, particularly in an age with complex composite supply chains and, of course, the ever-increasing volume of cross-border e-commerce.

The WTO's trade facilitation agreement provides us with what we would consider to be a ready-made blueprint for improving the efficiency and transparency of customs regulations. We believe that this agreement could serve as a good foundation for NAFTA renegotiations.

More specifically, we would encourage the modernization of NAFTA certificates to allow those who are trading goods under NAFTA to use multi-year electronic certificates, as opposed to the current annual hard-copy format.

A second opportunity can be found in customs powers of attorney. We believe that electronic signatures, as opposed to the current wet-ink ones, could be permitted in order to clear goods through North American customs.

A third opportunity can be found in the single window initiatives of Canada, the U.S., and Mexico. These three distinct programs seek to achieve the same outcome of trade facilitation. UPS believes that NAFTA partners now have an opportunity to renew working together to align their respective single window initiatives, so that companies wishing to import from and into any NAFTA country are able to deal with more similar systems. Forums such as the Canada-United States Regulatory Cooperation Council might provide a helpful environment for this alignment.

Since Canada and the U.S. share the largest international border in the world, secure and safe trade will be a significant component of any discussion regarding NAFTA modernization. The three NAFTA countries' trusted trader programs all require companies to invest in their internal security and data-reporting compliance in exchange for expedited treatment at the border. We would encourage NAFTA partners to recognize one another's trusted trader programs, and move towards what we would call an “inspected once, cleared twice” model, where a shipment is examined by the entry country and is accepted as cleared by its NAFTA neighbour.

Finally, we believe that Canada and its North American partners must invest in world-class trade infrastructure in order to remain competitive. Upgrading infrastructure at points of entry and exit is vital to improving the cost and the time efficiency of cross-border trade. In addition, the removal of procedural barriers for certified carriers to use the existing free and secure trade program or express lanes at borders could help improve the flow of goods to market.

In order to ensure that these border processes have the desired effect of making North American trade more competitive, we would encourage a “one parcel, one policy” approach, meaning that the same parcel should be subject to the same customs duty and tax collection policies, regardless of the carrier of that parcel.

In conclusion, Mr. Chair, UPS shares the Government of Canada's commitment to help Canadian businesses realize their innovation, growth, and prosperity goals. We believe that the introduction of measures to facilitate cross-border trade will help to propel Canadian exports and enhance the capacity of NAFTA as a platform for growth. This will support a competitiveness strategy and, most importantly, it will support Canadian businesses, their employees, and their customers across the country.

Thank you very much.

[The Chair, Liberal, Mark Eyking]

Thank you.

I thank the witnesses for being timely. That gives us more time for dialogue with the MPs. We should get a full round in here. We're going to start with the Conservatives for five minutes.

Mr. Dreeshen, you have the floor.

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

Thank you very much, Mr. Chair, and thanks to all of the presenters.

I'd like to talk first to you, Mr. Van Harten. You went through some of the concerns and issues with regard to chapter 11. You indicated that something balanced, independent, fair, and respectful of domestic institutions is what you'd like to see.

Theoretically, that is, I suppose, what the initial decision had been. It seems as though you're saying that it hasn't hit the mark. I'm just wondering, if it's not a case of being able to just get rid of it, are there some adjustments that you could speak to on the four criteria you've presented?

[Dr. Gus Van Harten]

Thank you very much for the question.

“Independent” and “fair” are fairly straightforward, but it should be a judicial process instead of a private arbitration process. It doesn't have to be called a court, but it has to be designed in a way that you have the conventional safeguards of judicial independence, including a roster system in which the members are appointed by the states parties to the treaty. The roster members would not be allowed to have conflicting roles on the side as counsel in these cases, for example. There would be an objective way of assigning cases to the roster members. That would make it independent—even if you didn't call it a court—in a judicial sense.

With regard to fairness, there should be an opportunity for other parties who have an interest in the dispute. It might be a provincial government or a municipality whose decision is being challenged. It might be an individual whose reputation is being impugned in the proceeding. In any fair adjudicative process, they should have a right of standing in the process. That's another pretty straightforward fix, if you design it in a way that's judicially fair.

As for being respectful of domestic institutions, the main point there is that there should be, in NAFTA chapter 11, a duty to exhaust local or domestic remedies when they are reasonably available. That is the rule elsewhere in international law. It's very odd that foreign investors are allowed to skip domestic courts entirely without having to provide any evidence that there's anything wrong with the country's court system. That's the primary way, I think, to ensure that conventional way of respecting domestic institutions. It's to require foreign investors to use a country's domestic courts first unless they can show that there's some deep flaw in the courts that should allow them to skip them.

For balance, I would admit that this may be the most challenging to implement, but in principle it's just the conservative point that if foreign investors need a special system to protect them because of some failing of domestic institutions in a country, then there should be a way to hold foreign investors to basic responsibilities within the same process. You shouldn't have really powerful rights in international law without some responsibilities that are enforceable in the same process.

Implementing that can take different forms. It could be something such as a preliminary step of having enhanced requirements for information sharing, where the home government of the foreign investor is obliged to share information about that investor in the home country. For example, if there's a prosecution for some kind of regulatory offence and there's an interest in accessing bank accounts of a foreign subsidiary and that kind of thing, building that into the system would help to make it balanced in the allocation of rights and responsibilities.

Those are some thoughts. I thank you again for the question.

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

Thank you.

[The Chair, Liberal, Mark Eyking]

You have half a minute if you have a quick question.

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

Ms. Lusi, I would like to talk to you a bit. You spoke about investment in trade infrastructure, but I think one of the major concerns we're hearing about right now, of course, is in terms of the disruptive technologies that are taking place and how you keep up with things for which there don't seem to be any borders.

Your business, of course, will no doubt be grappling with those types of issues. I wonder if you could talk about how you see that in the future, and about what flexibility any NAFTA agreement would need to have.

[The Chair, Liberal, Mark Eyking]

It will have to be a short answer, please.

[Aylin Lusi]

Thank you for the question.

In the context of international trade agreements, what we look at is how specific trade agreements can bring us one step closer to a truly seamless border experience. That is the experience that we as a company aim to deliver to our customers, but obviously as a broker and an operator that's something that we would also like to see in the day-to-day realities of our own operations.

Taken in the context specifically of trade agreements, we look at how we can work together with national or local customs authorities and representatives in ensuring that there are efficient customs resources at borders, ensuring that technology is up to date, and ensuring that changes to technology occur in collaboration with those who are going to use those systems and programs. That's very specifically in the context of trade.

On disrupters more generally, it's certainly something that as an industry we look at. As a company, we use a lot of technology. We deploy our own proprietary technology to help us move goods more quickly within our own networks as well, but that's perhaps less connected specifically to international trade.

[The Chair, Liberal, Mark Eyking]

Thank you.

We'll have to go to the Liberals.

Mr. Peterson, you have the floor.

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

Thank you, Mr. Chair.

Thank you, everyone, for being with us this afternoon. I have questions for all three of you, so I'm going to try to be quick with my questioning.

Ms. Delahanty, I appreciated your presentation. You mentioned something about the data, and obviously all these analyses, which I think many of us agree need to be done, rely on the data. Can you talk to me about the reliability of that data, where it comes from, and the sources and the validity of it? Can you tell me as well if that's even a problem that needs to be addressed?

[Julie Delahanty]

Sure. You're not going to ask all your questions to me...?

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

No, I have a different one for each person.

[Julie Delahanty]

Francesca can jump in, but the problem I see is that when it comes to the negotiations we're all shooting in the dark, because most of that data doesn't exist and hasn't been collected. We have no idea, really, of what are the impacts of some of the negotiations that are going on and what we know already. I can give a lot of examples.

I've worked more on developing country agreements, so I have a better sense of that. For example, in a country like Namibia, where you have changes in trade agreements around chicken and suddenly chickens are flowing into a country, the cost of those chickens drops dramatically. By happenstance, it was women who were raising chickens. It completely undermines their market.

Without knowing those details of what's happening with different segments of the value chain, it's very difficult to move forward. As the previous speaker mentioned, UNCTAD has a number of tools that they use: the gender impact analysis and the poverty and social indicators assessment. There are different tools that can be used and that use a variety of methodologies, some of which are subjective and some more substantively qualitative. A lot of it just doesn't exist yet, and that's what we're asking for: that more of it exist.

Francesca, do you want to comment?

[Francesca Rhodes, Women's Rights Policy and Advocacy Specialist, Oxfam Canada]

Yes, I think there have been a few studies of the gendered impacts of NAFTA, but in very specific sectors—for example, in the maquila industries in Mexico or what happened to women farmers in Mexico. What we're asking for is an overall analysis that would bring the impacts together from across the three countries and also look at the predicted impacts over time as to what we're negotiating now.

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

Thank you for that.

Ms. Lusi, welcome. I know that you're relatively new to your role, so I hope you're enjoying it so far. We're happy to have you appear before the committee.

You mentioned infrastructure, obviously, as one of the three priorities that UPS has. Most people think of infrastructure as bridges, highways, and airports when it comes to trade. I think I know what your answer is going to be, but could you expand on the way we can streamline the electronic component of infrastructure between countries and between trading partners. I know that's something you would advocate for at UPS.

[Aylin Lusi]

Thank you for the question. I absolutely agree that physical infrastructure is certainly key and we wouldn't want to overlook that. It's something that UPS certainly pays very close attention to in the context of international trade.

On the perhaps somewhat less tangible side of infrastructure, one thing we're looking at in the context of NAFTA and particularly the movement of goods from Canada to the U.S., is enabling dedicated fast lanes to operate a little more efficiently. At present, there are restrictions on who is able to use those fast lanes and what kind of mix of load you can have in your truck as it crosses that border in order to benefit from the fast lane. We'd like to see some of those rules changed to enable a broader range of those who are transporting goods to use those dedicated fast lanes to move across borders.

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

Thank you for that.

Professor Van Harten, it's always good to see you in front of the committee as well. We share a keen interest in ISDS, so it won't surprise you that I have a couple of questions for you. I have time for probably just one of them.

You talked about chapter 11 in NAFTA, which I think is relatively flawed in the overall scheme of things. When we look at the new and improved CETA, we can even see that the CETA ISDS provision has been improved since the first draft of CETA was signed. Do you see CETA as capturing your criteria of being balanced, independent, fair, and respectful of domestic institutions? Is it leaning towards where you want it to be? Or is it completely off base?

[The Chair, Liberal, Mark Eyking]

It has to be some quick.

[Dr. Gus Van Harten]

I'll be really quick. In CETA, the investment court system, or ICS, took significant steps to improve the lack of independence, but it didn't deal with the other three.