International Trade Committee on Dec. 4th, 2017

[Steve Verheul]

Yes, that's right. We do have a number of provisions in CETA that are aimed squarely at those kinds of non-tariff barriers that you've mentioned. We have mutual recognition of processes, mutual recognition of standards, and those are the kinds of issues that increasingly are really at the core of what we're trying to do in free trade negotiations.

Tariffs are not the issue they once were many years ago. It's the non-tariff barriers that are the issue, so we've been focusing much more on trying to resolve those and we've been putting a lot more effort in those than we have in previous agreements. We are trying to bring some of those ideas into the NAFTA discussions. We have received some generally positive reactions from the U.S. and from Mexico, so we think we can make some concrete progress on practical areas just like that.

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

Thank you.

[The Vice-Chair, Conservative, Dean Allison]

Thank you, Mr. Dreeshen.

We're going to move over to Mr. Fonseca, please, for five minutes.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Thank you, Chair, and thank you, Mr. Verheul and Ms. Carriere.

I hear from my constituents in Mississauga East, and often they talk about NAFTA and mix that in with our economy. They're very optimistic. They're very positive about our job growth over the last two years. This last month we had almost 80,000 jobs created here in Canada. They like the way the economy is going and how unemployment is coming down. We're seeing the same types of numbers in the United States. Their economy is doing better, and unemployment has dropped significantly.

You're saying to do your homework before you come to the table. I want to thank you for the work you've done, the amount of work that was put together through your team, through the government, working together with the opposition, with everybody really in lockstep to be able to send a message down to the United States.

I was just googling “NAFTA” right now. CBS is talking about how the National Association for Business Economics is saying not to hurt NAFTA, to do no harm. It's talking about improving NAFTA with modernization. Three hours ago CNBC was talking about the benefits of NAFTA again, saying that the best way for the U.S. to deliver on putting America first is actually to put North America first.

Therefore, it's working. By having the teams go down to the United States and share the message, it's coming out. These are large news organizations that are putting out the right message. I'm sure it's filtering its way up to the President and the executive level.

I want to ask you about all the stakeholders. You had 900 meetings. How do you disseminate information to them as negotiations are ongoing and continue that loop of consultation? How do you do that through your team?

[Steve Verheul]

It takes a significant amount of our time, but we felt from the beginning that unless we entirely understood the interests of our stakeholders, we were not going to be very effective at the table. We have to understand at a fine level of detail what they are looking for, what they think can help them in the negotiations, and then bring that to the table. That only works effectively if we can keep them up to speed with what's happening at the negotiating table and go back to them to check whether we're still on the right track, whether they still see the right progress being made.

After every negotiating round, we do debriefs with all our consultation groups to inform them of what happened during the round. We talk to them about what we expect coming up in the following round and get their advice and input on their reaction to how things are going and whether they're satisfied with that progress. If they have comments to add or suggestions to make, we take those on board and refine our negotiating strategy from there.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

In your comments you mentioned that both Canada and Mexico have highlighted negative impacts of the U.S. proposal for the U.S. and North America more broadly. This speaks to the rules of origin for autos. Is that what would have happened in that case?

If at the table the United States is asking for 50% U.S. content and 85% North American content, would you then go out to our stakeholders and put it in front of them so they could run through all the different negative impacts as well as what might be positive in terms of what's being put on the table?

[Steve Verheul]

Yes, that's exactly right. We met with our auto manufacturers and our auto parts suppliers. We also met with representatives of U.S. auto manufacturers, U.S. auto parts suppliers, the U.S. Chamber of Commerce, and U.S. unions. All of them were as opposed to the U.S. proposal as we were.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

My colleague Ms. Ludwig talked about crossing the border and how many border crossings she has in her riding. How are we looking at modernizing that border crossing, at harmonizing some of the irritants we hear about all the time?

We were down in Milwaukee at the Johnson Controls company, and they were talking about driverless vehicles coming across the border and how that would work in terms of our border crossings.

[Steve Verheul]

It takes a number of different approaches. We have approaches that deal with issues right at the border, with customs and trade facilitation, to ensure that getting through customs and claiming preferences under NAFTA and all of those processes are as simple and automatic as possible, so that when people arrive at the border they're not delayed, that the processes have already been taken care of and they can get right through without delay.

A lot of what we're also doing takes place well away from the border, having to do with regulatory co-operation, or regulatory harmonization in some cases, so that there isn't a difference between the kinds of requirements for a product in the U.S., for example, and in Canada. Again, that reduces any delays moving products back and forth across the border.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Thank you.

[The Vice-Chair, Conservative, Dean Allison]

Thank you.

I'll ask a couple of questions now, if you don't mind.

You talked about the extreme proposals in rounds 3 and 4. It would appear to me that we're moving to a head. There's a good chance that this deal could be cancelled, even though none of us want this to happen.

First, what do you think the U.S. needs as a win? These are obviously starting positions, but is there any flexibility? Second, what kind of contingency plans has Global Affairs prepared for the government in terms of options?

[Steve Verheul]

Well, I think this is one of the issues we're struggling with: what does the U.S. need for a win?

I think we can certainly bring a lot of creativity to the table in developing outcomes that we think could certainly be characterized as a U.S. win or as a North American win. We could do that in sectors like the automotive sector. I think we could come up with other proposals on what they're trying to get at with the sunset clause and dispute settlement. We have made proposals, and I think we could address a lot of those issues.

Our concern is that what the U.S. has described as their overriding objective—this has come from some members of the administration—is that they want to take benefits enjoyed by Canada and by Mexico, reduce those, and draw those back to the U.S. so that the U.S benefits more and Canada and Mexico benefit less. We feel that the only way this negotiation will succeed is if it's a win-win-win negotiation, so that all three parties benefit and we make North America a more competitive market.

Going in the direction of drawing back benefits to the U.S. and weakening the benefits for the other partners is a recipe for making North America less competitive. We certainly won't accept outcomes like that for Canada.

On your second question, with respect to contingency plans, we are starting to do quite a bit of thinking about what would happen under different scenarios. If the U.S. does initiate the process for withdrawing from NAFTA, it triggers a six-month period before they can actually formally withdraw, so it's a question of whether they take that first step of the six-month notice. I think we'll see a rather strong reaction from U.S. industry and from others in the U.S. to try to convince the U.S. not to take the final step after six months. We would be working very closely with U.S. stakeholders and U.S. representatives to try to prevent that second step from being taken.

If the worst-case outcome does arise and the U.S. does formally withdraw from NAFTA, we would have a number of contingency plans in place to make sure that the impact is as modest as it can possibly be. We do have a number of ideas in that regard, but I would point out that there would also be a significant impact on the U.S. and, again, a significant impact on North American competitiveness.

[The Vice-Chair, Conservative, Dean Allison]

Absolutely.

Mr. Fonseca was talking about the harmonization of pre-clearance and things like that. Do you see things the trusted traveller program or NEXUS being in jeopardy as it relates to a NAFTA disagreement? That was part of the integration in terms of just trying to get across the borders. The U.S. doesn't like the word “thinning” the borders, but we talk about pre-clearance and things like that. Do you see programs like trusted traveller and NEXUS being in jeopardy should they move down the road...?

Their objective is to receive the benefits to what happens in the U.S., right? They're not concerned only about whether we get across the border in a timely fashion or a speedy fashion.

I would love your thoughts on that as well.

[Steve Verheul]

Those kinds of programs are not actually part of the NAFTA, but we would hope that the U.S. would recognize the efficiencies to both parties with those kinds of programs. We certainly have a lot of Americans travelling to Canada for business purposes or other purposes as well. It only makes sense for it to take place as efficiently as possible.

We will continue to make that effort to convince the U.S. Hopefully, they will recognize that it is far better if we're working together than at cross-purposes.

[The Vice-Chair, Conservative, Dean Allison]

Thank you very much.

I'll turn it over to Ms. Ramsey for three minutes.

[Tracey Ramsey, NDP, Essex, ON]

Thank you.

I represent Essex in southwestern Ontario, certainly the auto capital of Canada. We know that we've lost 44,000 auto jobs under the period of NAFTA. We spoke about labour and my colleagues talked about the rules of origin. I want to ask you about traceability. Can you provide us with some clarity on what's on the table in terms of auto traceability?

[Steve Verheul]

The U.S. has proposed that all products in the production of an automobile be subject to tracing. Under the current NAFTA, there was a list of products that are subject to tracing, and the others are not subject to it. Subjecting all products to tracing would increase the costs to auto manufacturers considerably, because documentation would have to be provided at every stage of the production process, and it's not clear from the U.S. proposal how far that would go back in terms of the origin of any kinds of products that would be used in the assembly of an automobile.

We think the proposal as it stands is entirely unworkable. We will be talking to the U.S. further about the whole tracing idea. Manufacturers, both in Canada and the U.S., have made it clear that they also think that particular proposal is unworkable. I think it will have to be significantly modified before it can become a realistic consideration.

[Tracey Ramsey, NDP, Essex, ON]

My next question is about supply management. We know that the U.S. is asking for 5% access per year, up to a 10-year window for supply management being gone in Canada. Can you tell me if there's any move towards expanding that market access?

[Steve Verheul]

Towards expanding the market access?

[Tracey Ramsey, NDP, Essex, ON]

Right. Where is Canada on the 5% per year?

[Steve Verheul]

We have rejected that proposal entirely. We certainly would not be surprised to see the U.S. asking for increased access to our dairy, poultry, and egg market, since that's a traditional request of theirs, but to ask for the complete elimination of our entire protection of that market—

[Tracey Ramsey, NDP, Essex, ON]

Are you rejecting all access? You're saying zero access. You're not going to increase access at all.

[Steve Verheul]

We are rejecting the U.S. proposal that has been put on the table.

[Tracey Ramsey, NDP, Essex, ON]

All right.

My next question is about people who live and work on both sides of the border and the expansion of the visas that are extended to a lot of folks in my region who live in my riding and work in the U.S. Can you speak to whether there's been any movement on that chapter's being expanded?

[Steve Verheul]

We have had a lot of discussion on that chapter, the temporary entry chapter. We have made the argument—and Mexico has been very supportive of our arguments on this issue—that we should be modernizing the chapter. Many of the professions that have been listed in the original NAFTA are now out of date. There are new professions that have emerged over the past 20 years that should be added. We've been making that pitch to the U.S., and Mexico has as well.

One challenge on the U.S. side is that there is often a confusion between those types of provisions allowing for temporary entry and movement and labour mobility on the one hand, and immigration on the other. We are trying to make it clear to the U.S. that this has nothing to do with immigration. It does not lead to immigration. It has no relationship to immigration. This is simply about good business practices. We continue to make that case. The U.S. still needs to be convinced somewhat further of the value of this particular chapter, but I think we're making some headway.