Evidence of meeting #11 for International Trade in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was agreement.
A video is available from Parliament.
1:35 p.m.
Liberal
1:35 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you, Madam Chair.
I apologize for being unable to ask more targeted questions.
I am interested in the difference between the findings of your studies and those of C.D. Howe Institute.
Can you explain to us the difference between the methodologies or data used, which lead to two fairly different conclusions?
1:35 p.m.
Chief Economist, Department of Foreign Affairs, Trade and Development
Thank you.
The study that was just published by C.D. Howe Institute presents certain hypotheses, on which we completely disagree. Two of those hypotheses have to do with rules of origin, one of which concerns chemical products.
Their interpretation of the study is that the new agreement makes it more restrictive, and the negotiators tell me that when you look at the provisions carefully, they do not. It is a big sector so it has a big negative impact. We don't agree with that. We think it's a mistake.
On the rules of origin in the automotive sector, what they have done is to say that we're going to increase the sourcing of the parts in North America until you meet the threshold of the content, regardless of the tariff, the MFN tariff, which you could decide to pay instead, so again, I do not think this is credible. Businesses are rational. They do want to maximize their profits and minimize their costs. The way we have done it—and the USITC has decided to do it as well—is to say that we are going to increase sourcing from North America, yes, up to a point where it might be easier just to pay the 2.5% in one direction and 6.1% in the other direction. We think this is more realistic.
Those are the two good examples that make it more restrictive in the C.D. Howe study, and that's why they have a bigger impact. Rules of origin in the automotive sector are a big driver of the results. We think those two.... There are other little things here and there, but those are the main ones that I would say we do not agree on.
1:35 p.m.
NDP
1:40 p.m.
Conservative
Michael Kram Conservative Regina—Wascana, SK
Thank you.
I only have two minutes. The document you've produced is an economic impact assessment comparing the complete elimination of the old NAFTA versus the new CUSMA that we have now. Could you do an economic impact assessment comparing the new CUSMA to Canada's just staying with the old NAFTA in a business as usual scenario?
1:40 p.m.
Chief Economist, Department of Foreign Affairs, Trade and Development
Effectively speaking, it's something that's possible to do, but this is not the situation we were facing, so that's why we decided to present the results this way.
1:40 p.m.
Conservative
Michael Kram Conservative Regina—Wascana, SK
No, I appreciate that, but could you produce the document and provide it to the committee so that at least the Senate committee could study the matter before ratifying the final deal?
1:40 p.m.
An hon. member
That's a good question.
1:40 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Your forecasts are there. You just have to take the current data and apply it.
1:40 p.m.
Chief Negotiator and Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development
We do not see a lot of sense in doing that. There was—
1:40 p.m.
Conservative
1:40 p.m.
Chief Negotiator and Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development
You may, but there was no possibility for us to continue with the existing NAFTA, so a comparison between something that was not a possibility compared with something that we did end up doing is the relevant comparison.
1:40 p.m.
Some hon. members
Oh, oh!
1:40 p.m.
Conservative
Michael Kram Conservative Regina—Wascana, SK
Okay, but it could be done, and it could be provided if you were directed to do so. Is that fair?
1:40 p.m.
Chief Economist, Department of Foreign Affairs, Trade and Development
It depends on the timelines.
1:40 p.m.
Conservative
1:40 p.m.
Chief Economist, Department of Foreign Affairs, Trade and Development
Not a month for sure, but you need to change all the models, and that takes time. The model has—you won't believe me—140,000 equations in it, with 280 variables and it takes hours to run.
1:40 p.m.
Conservative
Michael Kram Conservative Regina—Wascana, SK
Were you directed by the Prime Minister's Office or Minister Freeland's office to do the assessment the way you did it and not to compare it with the old NAFTA?
1:40 p.m.
Chief Economist, Department of Foreign Affairs, Trade and Development
This was my initial proposal.
1:40 p.m.
Liberal
February 26th, 2020 / 1:40 p.m.
Liberal
Randeep Sarai Liberal Surrey Centre, BC
Thank you. I'll be quick because I have two minutes.
First of all, have you been able to compare how much domestic gain might happen with...? For example, we'll be importing less from Mexico based on your report. Would that mean that domestic producers of certain things would gain from that? Has that been calculated? Or can we calculate that?
1:40 p.m.
Chief Economist, Department of Foreign Affairs, Trade and Development
If you think about exports and imports, we do have the tables in the documents. If you look at tables 4 and 5, you would see the impacts by sectors.
1:40 p.m.
Liberal
Randeep Sarai Liberal Surrey Centre, BC
Would you see a domestic gain in a sector that doesn't have to import something? They would gain from sourcing it here. If we're importing $4 billion less in something from Mexico, presumptively we're getting that good from somewhere else. Could it be that we're getting it domestically because of the price difference due to this new negotiation?
