International Trade Committee on March 11th, 2020

[Kendal Hembroff]

As a country that is highly dependent on free and open trade, Canada is very much committed to maintaining the basic principles that govern the WTO.

That being said, as part of our commitment to make trade more inclusive for Canadians but also globally, we have put a fair amount of emphasis on making sure that the kinds of rules that we have at the WTO work for everyone, whether that is in developing countries, where we need to be looking at how we take into account development considerations in terms of rule-making, or whether that is small and medium-sized enterprises, including through the initiative that has been recently launched dealing with micro, small and medium-sized enterprises.

Canada has also worked very hard to try to bring greater awareness to trade and gender issues in order to ensure that we are looking at things through a gender lens. For example, Canada led and championed an initiative in Buenos Aires on women's economic empowerment, which is really intended to ensure that we are looking at trade from a gender perspective and finding opportunities to ensure that trade is made more inclusive.

These are just examples of certain aspects where Canada is trying to ensure that trade works for our population. It is a work in progress where we continue to consult with Canadians to try to find ways to improve on this.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Blaikie, go ahead.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much for your presentation.

I think it was assumed, or certainly at least it was the fallback position of the Canadian government in the CUSMA negotiations, that the WTO provisions around procurement would vouchsafe Canada's access to U.S. government procurement.

The U.S. has since said that they are looking at pulling out of those provisions. They also have legislation in place that restricts Canadian access to U.S. government procurement under the buy America program.

I'm wondering, if Canadian companies don't have any right to access American government procurement, what rights American companies will have to access Canadian government procurement. Are there any corresponding restrictions on U.S. companies bidding on Canadian government work, not just the federal government but provinces, municipalities and other public authorities?

[Kendal Hembroff]

We're also very concerned by reports that the United States may be considering withdrawing from the WTO government procurement agreement. This is an agreement that means a lot to Canada and to Canadian business in terms of ensuring reciprocal rights for government procurement access.

We are following these reports very closely, and should the United States take action to withdraw from this agreement, we will have to look very closely at what our options would be. The access that is available to WTO members under that agreement applies to members of that agreement.

Obviously, given the implications that CUSMA, when ratified, could have for Canada in terms of our government procurement relationship to the United States, any withdrawal by the United States from that agreement could be very serious in terms of implications for Canada.

As a result of that, we are working very closely with provinces and territories to ensure that, if the United States does withdraw from the agreement, we have recourse through our own mechanisms.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Under the original NAFTA and under the WTO, it seems to me that buy America has restricted Canadians' access to U.S. government procurement.

I know that New Flyer Industries produces diesel and electric buses. They have manufacturing facilities in Transcona, among other places, but they've been losing jobs as the U.S. content requirement under buy America goes up for their buses.

How is it, if the principle is reciprocal access...? I'm not aware of U.S. companies being under any obligation of any kind to have jobs in Canada in order to get access to Canadian government procurement. Why is it that, despite all the boosterism about the WTO and NAFTA, buy America persists and the Canadian government hasn't taken any real action against these measures, which clearly contradict what are supposed to be the benefits of free trade for Canada?

[Kendal Hembroff]

We have expressed concerns over the years for a variety of different types of buy America measures. These are obviously measures that can and do have very significant implications for Canadian business. When measures have been proposed or enacted, we have sought out opportunities for us to raise these kinds of concerns using a variety of different channels. We typically try to start through advocacy—

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Have we ever challenged them formally either under NAFTA provisions or at the WTO?

[Kendal Hembroff]

We have not, although that option is there for us should we decide that is a route we want to take.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

In your opening remarks you talked about a number of committees that are doing work for the modernization of the WTO. You mentioned a committee on domestic regulation for services.

I'm wondering what is being discussed at those tables that would differ from the status quo. What would be the purpose of new rules and what would they be trying to achieve?

[Kendal Hembroff]

Chair, I'll ask my colleague Darren Smith, who is the lead for domestic regulation, to answer that question.

[Darren Smith, Director, Services Trade Division, Department of Foreign Affairs, Trade and Development]

Thank you very much for the question.

Quickly, I guess it's basically us trying to establish minimum standards with respect to domestic regulations in the sense of transparency and process-oriented matters. These are all the types of rules that would provide the kinds of standards we have in Canada with respect to, again, transparency and process-oriented matters for companies—

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Would those rules foresee enshrining the precautionary principle or is Canada arguing for the approach that was taken in CUSMA?

[Darren Smith]

Yes, this is much more basic. This is more about looking at licensing and certification matters and trying to ensure that the regimes for the members of the WTO provide a minimum standard of treatment with respect to these types of procedures.

For instance, if you are in a professionally regulated sector and looking to export your services to another jurisdiction, and you have to apply for a licence in order to provide that service, there are certain rules in place—which, hopefully, we're going to achieve through this agreement—that will allow that service supplier a higher degree of confidence that their application is being processed and regarded in a manner that is similar to what you have in Canada.

It's basically an outcome that we hope will raise the standards in other jurisdictions, because in Canada we already have a very high standard in terms of openness in this regard. It's a matter of putting our service suppliers, in this case, on a much more competitive footing with a wider range of WTO members.

This is also a plurilateral initiative. It involves about 60 WTO members. It's not, obviously, as.... The ideal situation would have this be a fully multilateral arrangement, but we're certainly moving the bar forward in this instance.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Smith.

Mr. Carrie, for five minutes.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Madam Chair.

I want to thank all the witnesses for being here and for their commitment and experience on this file.

I'd like to dig down on a couple of things that have already been mentioned.

In terms of the buy America clause, it was pointed out by a company, and I believe it was IPEX, which came here when we had CUSMA witnesses, that one of the things Mr. Harper was able to do was get a buy America exemption.

I believe that Mexico, in the new CUSMA, had a buy America exemption. However, we failed to get a buy America exemption. We've been aware for some time that the Americans are not engaging at the WTO. By not using the leverage we had to get this exemption that we've had in the past, some people see this as a big opportunity lost.

I was wondering if you could comment, Colin. You've spent a lot of time in the U.S. Why is the United States not engaging in the WTO? What are their big issues that they want to have resolved?

[Colin Bird, Director, Trade Policy and Negotiations Division , Department of Foreign Affairs, Trade and Development]

Thank you, Madam Chair.

The U.S. issues with the WTO are long-standing. On the dispute settlement side, they have had these issues that are notably around the issues of trade remedies. Frankly, that is a complication for Canada, because we are often finding ourselves on the receiving end of U.S. trade remedy measures.

When you look at the cases that they really complain about at the WTO, they tend to be around public bodies and state-owned enterprises, where there are a lot of common concerns that Canada and the U.S. have, but much of their concern has been around the area of how their trade remedy system has fared at the WTO, and some of those cases are Canadian.

[Colin Carrie, Conservative, Oshawa, ON]

Is this the reason they're giving for not engaging right now?

[Colin Bird]

They're not really giving a reason for engaging. They are indicating that they would like the membership to share the same views that they have of the overreach at the WTO. The challenge is that any time a legal question is put before the WTO, there is a winner and a loser. Finding agreement that the interpretations of the AB are inconsistent with the covered agreements is very challenging to do.

[Colin Carrie, Conservative, Oshawa, ON]

You mentioned the softwood lumber dispute. I remember being the parliamentary secretary to industry back in 2006-07 when we were working on resolving it. I remember the Honourable David Emerson working on it. We were able to have that resolved.

With this CUSMA.... Back in 2016, I believe Mr. Obama was here in Canada. One thing he wanted us to do was to sign on to the original TPP, which you guys mentioned was an important part of multilateralism. Unfortunately, we didn't sign onto that agreement and the softwood lumber dispute is ongoing. We were hoping that we would have some leverage with CUSMA and really nothing came of it.

What was our record with the WTO when we actually got it in front of them for our softwood lumber disputes in the past?

[Kendal Hembroff]

Chair, unfortunately we don't have that information handy, but we would be happy to provide it to you over the coming days.

[Colin Carrie, Conservative, Oshawa, ON]

My understanding is that we were always quite successful when we actually got a hearing. My concern is if we lose the WTO and we didn't address it in CUSMA. Would you be able to give us an opinion on what our options would then be?

How can we resolve these issues if the Americans aren't being active in these agreements? would it be through the U.S. courts?

What can our companies do if they're feeling that they're not being treated fairly?

[Kendal Hembroff]

I would love to be able to answer that question. In fact, another committee is discussing softwood lumber as we sit here now. Unfortunately, we don't have the appropriate expert to be able to answer questions around how we might handle softwood lumber, given the various scenarios that you've outlined.

I can suggest that if the committee is interested in hearing more and having a discussion around softwood lumber, I can certainly suggest someone that you may want to call as a witness.

[Colin Carrie, Conservative, Oshawa, ON]

For that and for buy America, it would be great if you could send it to us.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Carrie.

Mr. Arya.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Madam Chair.

My question is for Ms. Hembroff.

I have heard some reports, although I don't know if they are factual, that the U.S. is considering withdrawing the government procurement from WTO. As we know, under the new NAFTA, Canada and the U.S. have left that portion of trade to be considered under the WTO.

What are the chances that the U.S. will withdraw its government procurement from WTO? If that happens, what remedies do we have?