International Trade Committee on Dec. 4th, 2017

[Steve Verheul]

Yes.

First of all, with respect to what Canada has brought to the table, we have put forward an initial proposal that is drawn in large part from the outcome in CETA on investment dispute resolution, but have faced resistance for the proposal from Mexico and from the U.S.

The U.S., as you mentioned, has put forward a proposal that would allow parties to either opt in or opt out of investor-state dispute settlement. At the table, the U.S. promptly said they would opt out. Both Canada and Mexico have said that if this were to be the case, if the U.S. is going to opt out, Canada would opt out as well, and Mexico said they also would opt out. If the U.S. proposal were to be adopted—at this point, we are still opposing it—there would be no ISDS between NAFTA members.

[Tracey Ramsey, NDP, Essex, ON]

Okay.

Is there any attempt to remove the energy proportionality clause?

[Steve Verheul]

We are working on an energy chapter. Again, the U.S. is somewhat resistant to having an energy chapter, but we're including provisions that we're putting forward to try to modernize that chapter in particular.

The proportionality clause is one that also will exist in the chapter on national treatment and market access for goods. The current energy chapter in NAFTA simply replicates something that's already found in another chapter. We're also looking at bringing Mexico into the energy chapter, because they were not part of it in the original NAFTA when it was negotiated.

[The Vice-Chair, Conservative, Dean Allison]

Thank you very much.

We're going to move over to Mr. Dhaliwal.

You have five minutes, sir, to help finish off the round.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Thank you, Mr. Chair.

Welcome to the panel members.

I come from beautiful British Columbia. In my riding of Surrey—Newton, and in British Columbia generally, over 95% are small businesses. They always ask questions about NAFTA when I'm out in the community.

The exact question they ask me is basically whether I can highlight the process that will protect and promote trade opportunities within NAFTA for small and medium-sized businesses. Could you elaborate on that, please?

[Steve Verheul]

Yes. This is something we put a lot of effort into in the negotiations. The first chapter we completed was the chapter on small and medium-sized enterprises. That chapter is oriented primarily toward finding ways to allow small and medium-sized enterprises to take advantage of the opportunities in the free trade agreement. It includes elements of co-operation, elements of facilitation for those enterprises to participate more effectively.

We've also taken the approach in many of the other areas of the negotiations to simplify, as I mentioned earlier, a lot of the processes at the border. One of the complaints we've frequently heard from small and medium-sized enterprises is that the process is complicated. They don't necessarily want to hire some kind of broker or customs adviser to help them through this. We think that automatic processes at the border and electronic forms that are simplified and easy to manage would remove a significant burden from small and medium-sized enterprises.

We've addressed that area, and we've also been looking to negotiate other provisions that would simplify and make more efficient the efforts of small and medium-sized enterprises in trying to sell their products across the border.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Then so far what you've done.... Is there agreement among the U.S.A., Mexico, and Canada on those issues that you mentioned?

[Steve Verheul]

We have already agreed on a chapter on small and medium-sized business enterprises, and we have had a lot of positive reaction on those other areas as well. I think it's one of those areas where we do have very common objectives across the three parties. We all have small businesses and we're all trying to find ways to allow them to participate more effectively in international trade.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Okay.

On the other hand, you mentioned that the U.S.A. is proposing an agreement that expires every five years. Coming from British Columbia, I can tell you that the perfect example is softwood lumber duties, right? Because it expires so often, every 10 years we are in the hole and getting back to the table. It's not very productive.

Is there any way that this softwood lumber deal can be part and parcel of NAFTA on a long-term basis, instead of for that small period of time after which we have to negotiate, going from agreement to agreement?

[Steve Verheul]

At this point, the two issues are being dealt with separately. The NAFTA negotiations are one area, and the softwood lumber negotiations—at this point, at least—are being dealt with separately. That's the kind of path that's been followed over the last large number of years, as you're aware.

That, I'm afraid, will continue to be a difficult issue. I think it's probably unlikely that we'll be able to bring the softwood lumber issue into the NAFTA negotiations and effectively resolve it. However, many of the issues that softwood lumber is facing are issues that we're also trying to deal with in the negotiations.

I'll just make a brief comment on the sunset clause. It's a rather large concern to us because we don't think we can have an effective agreement when there's the possibility that it will expire every five years. When we talk to Canadian business, when we talk to groups like auto manufacturers, they plan on a fairly long horizon, and they make large investments on the basis of that horizon. If it's uncertain that an agreement will survive and you have that problem every five years, it's going to put a significant chill on investment, on planning, and on the strength of the agreement.

After all, free trade agreements are intended to provide security of access over the long term, and sunsetting goes absolutely in the wrong direction.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Thank you.

[The Vice-Chair, Conservative, Dean Allison]

That ends the first round.

We're going to start the second round with Ms. Lapointe.

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

Thank you, Mr. Chair.

Gentlemen, thank you for being here. This update is very important.

When negotiations began, the constituents in my riding of Rivière-des-Mille-Îles were worried. But as the negotiations move forward, my constituents are realizing that you really care about progressive Canadian values, and that comforts them. Negotiations aren't done yet, but the businesses in my riding are finding that things are progressing well in this regard.

You said the following in your presentation:

In addition, to ensure Canada's positions are well-informed, we have established a wide-reaching consultation mechanism that includes a steering committee, and specific sectoral groups.

You spoke in particular about agriculture, automotive, civil society and culture.

With respect to culture, you may know that here, in Canada, thousands of jobs are connected to culture. Could you tell me a little bit about that?

[Steve Verheul]

Culture is certainly an important issue in the negotiations for us. It is in every negotiation that we participate in and it's of particular importance with respect to any negotiation with the U.S.

We have put forward a proposal for a general exemption for culture in the NAFTA negotiations and we've sought to improve upon the existing general exception for culture in NAFTA. So far, the U.S. has not reacted positively to that proposal, but we have made it clear that protecting culture, cultural programs, and the cultural industries in Canada is a priority for Canada and we will not compromise that priority.

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

Thank you. I appreciate your comments.

Along the same lines, I would like to know how we could ensure that official languages are included in the modernization of NAFTA.

[Steve Verheul]

There would be nothing in the agreement, if we manage to finalize it, that would pose any kind of threat to our official languages or any kind of effect on it at all. When we get to a final agreement, assuming that we do, it will be equally legally valid in English and in French. We insist on that in all of our agreements. This would be no different. It should have no effect on our official languages policy or issues in any way.

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

As you know, it's tied to culture. That's why I spoke to you about it.

[Steve Verheul]

Absolutely.

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

My colleagues have talked about the provision that the Americans would like to see renegotiated every five years. You told my colleague that, in the automotive sector, investment forecasts are made over a number of years.

You said earlier that we have to compete globally. There is Europe and Asia. But the fact that over five years we could lose the manufacturing sector could be one argument.

I would like to hear your comments on that.

[Steve Verheul]

Yes. That's exactly the kind of argument we've been making at the table. Whether it's the sunset clause or their specific proposal on autos, the U.S. proposals would render the North American market much less competitive than it is now in relation to the rest of the world.

At this particular point in time, when we see China and other countries increasing their competitiveness and increasing their exports around the world, we feel that this is exactly the wrong time to weaken the North American market. We should be strengthening it and making it more efficient and more productive. We feel that many of the U.S. proposals are going in the opposite direction.

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

Thank you very much.

[The Vice-Chair, Conservative, Dean Allison]

Thank you very much.

We're now going to move back over to the Conservatives. We'll have Mr. Dreeshen for five minutes.

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

Thank you very much, Mr. Chair.

I want to thank both of our witnesses for being here today.

I know there's been good discussion on the issues such as labour and environment and whatnot, but when we've done our negotiations through CETA and all of the others, we've always had that as part of the discussion on where we are going. I see it as a continuation of some of the things that are there, and, of course, this is the reason that it was so important for us to get CETA settled.

Right now our discussions are taking place on NAFTA, but we've also seen the U.S. pull out of TPP. We see ourselves trying to look at where we might fit in there, and we have some issues that have come up there, so I think we will just continue to talk, as Canadians, as we always have, just to make sure that areas of human rights and so on are respected. I think that's very important.

I'll revert back to the agriculture side. One thing that was mentioned was the phytosanitary requirements. We have some issues and concerns with Mexico in the potato industry. I know that our seed potato exports to Mexico at one point were significant, and now they have declined. With issues such as the potato cyst nematodes and so on, we have concerns there. We also have extra costs that Canadians have in order to satisfy conditions. These are these non-tariff trade barriers that exist in that area.

I'm wondering if you can fill us in on that side of the agriculture discussions to see what we might be able to expect, and if there's anything else we should be doing when we are talking to our Mexican and our American counterparts.

[Steve Verheul]

This has been something we've been spending a lot of time on. I'll just say as an aside that I worked on the Mexico seed potato issue probably more than 20 years ago, so it's an issue that's been long-standing and an ongoing challenge at many points in time.

What we're trying to do in the negotiations, and in particular in the sanitary and phytosanitary chapter, is to get to a process whereby we don't make our inspection systems identical, because we think that's probably unrealistic at the end of the day, but we agree on a more outcomes-based type of approach. Although we might be using slightly different approaches to how we may certify a product or how we may do inspections on a product, we recognize that effectively the result is the same. If we can recognize each other's systems as doing as good a job as our own systems are doing, then there's no need to have those kinds of problems, because we would accept each other's systems.

That approach is intended to get exactly at issues like that seed potato issue. If we do our inspections on seed potatoes in Canada, as we do, then under this kind of proposal Mexico would accept those inspections as valid for allowing entry into their market. We're trying to move proposals like that forward so that we can eliminate, or at least significantly reduce, those kinds of problems that we've been experiencing.

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

Do we also have those kinds of arrangements on CETA, then? We were having the same discussions, and that's been part of it. I'm just wondering if there are parts that we can look at in the CETA that we can use to emphasize when we are speaking to our counterparts in the other two countries.