Yes. Thank you, Madam Chair.
I'll make my remarks in French, but I'm happy to take questions in English.
Madam Chair, members of the committee, thank you for inviting me to appear here this evening. I would like to note that I'm here as an individual, so my comments and answers are in no way binding on the organizations I'm associated with.
I believe the agreement must come into force as soon as possible, as other witnesses have stated, not because it's better than NAFTA—it's not, and for more on that, see the analysis by Dan Ciuriak for the C.D. Howe Institute—but because we must avoid the uncertainty that plagued the negotiations. If Canada were to refuse to implement the Canada-U.S.-Mexico Agreement, the U.S. President would most likely carry out his threat to withdraw the United States from NAFTA.
If the White House did that and it ended up in court, that would have a very negative effect on the entire North American economy, especially the Canadian economy, because investments would be delayed or simply shifted to the United States. Companies would focus on the United States because they would see it as the biggest market. In addition, the costs of many business transactions between Canada and the United States could increase to offset the risk associated with the possible end of NAFTA. This scenario must therefore be avoided at all costs.
CUSMA is certainly not perfect. I'm sure you've heard plenty of criticism. In the time I have left, I would like to focus on two elements. Bob Fay already mentioned one, but I'd like to go into that in a little more detail.
In the future, the Canadian government's commitments under Chapter 19, which covers digital trade, may constrain domestic regulations that federal and provincial governments may wish to put in place to govern data flows between Canada and the United States and the digital space in Canada. I discussed this topic in detail in an October 2019 paper published by the Centre for International Governance Innovation, where I am a senior fellow.
For example, U.S. or Mexican companies, especially U.S. companies, could lobby the U.S. government to initiate a dispute over regulations requiring data localization in the private sector for privacy or national security reasons. That is the issue. The agreement contains a “legitimate public policy objective” exception. No one knows what that means. Ultimately, if there were a dispute between Canada and the United States over data localization, for example, a panel of arbitrators would be called upon to settle the dispute. The panel would have to determine what constitutes a legitimate objective in Canadian public policy.
So the question is, even if the panel is established jointly, do we want to let unelected, technocratic arbitrators decide what Canada can or cannot do? The same issue arises with article 19.7, which states that computer service suppliers cannot be held responsible for content on their platform. This mirrors the immunity laid out in section 230 of the U.S. Communications Decency Act of 1996.
The general WTO exception applies in this case, for example to defend public morality. The Canadian government could therefore decide, for reasons of public morality, to institute measures making companies that transmit content, such as Facebook, responsible for the content they transmit. That said, Facebook could appeal to the U.S. government on the grounds of article 19.7, alleging discrimination. Under CUSMA, Canada would therefore not be able to apply such a measure. This would result in a more constrained environment for Canadian companies and a less constrained one for American companies.
Here is my recommendation to this committee: The government and its partners should define in detail what constitutes a legitimate public policy objective in the context of the agreement so that business has greater regulatory and future certainty, especially with respect to data flows.
Lastly, we mustn't forget that CUSMA is set to expire 16 years after coming into force. After six years, the parties may review the agreement. The problem is that, for companies with an investment horizon longer than 15 years, uncertainty about whether the agreement will cease to exist partway through the lifespan of their investments could prompt them to invest in the United States rather than in Canada.
Not knowing which agreement will apply in 10 or 15 years, anyone looking to invest tens or hundreds of millions of dollars over the next 20 or 25 years in either Canada or the United States could decide to invest in the latter. That means investment and job losses in Canada.
Therefore, the sooner the parties can give CUSMA some permanence, the better for Canada.
Thank you. I'm happy to answer your questions in French or English.