International Trade Committee on March 11th, 2020

[Kendal Hembroff]

I'll maybe build on an earlier discussion. I'm not sure what the chances are that the United States might withdraw from the government procurement agreement. That is ultimately a decision that will have to be taken by the U.S., presumably in consultation with its key stakeholders.

Certainly that is something we will have to take very seriously should that come to fruition or should we perceive that to be a real risk. We will endeavour to engage with U.S. interlocutors at every opportunity to try to clarify their specific position. Ultimately, I'm not sure how that will play out. That is something we would be studying very carefully.

[Chandra Arya, Liberal, Nepean, ON]

How do we fight the non-tariff barriers practised on Canadian exports by India, Korea and Japan, etc.?

[Kendal Hembroff]

Non-tariff barriers can come in a lot of different forms. We have certainly had the opportunity through a number of our bilateral and regional FTAs to try to tackle non-tariff barriers in a lot of different ways. That can be through very comprehensive provisions in areas such as technical barriers to trade, or sanitary and phytosanitary standards. It can be about improved transparency measures. We have taken a very similar approach to that of the WTO. In fact, the WTO agreements do contain a number of provisions that already are designed to try to address a variety of different non-tariff barriers.

One of the biggest concerns that Canadian businesses report to us is the lack of information and transparency about government measures. In fact, Canada and other WTO members have been working very hard to try to improve the compliance record of countries when it comes to notifying measures that are either under review as something that could be put in place, or in fact measures once they're put into place. Unfortunately, a lot of WTO members, especially developing countries, have not had a particularly good compliance record.

Part of what we've also been doing is working with like-minded countries to try to find ways by which we can help developing countries in terms of better compliance. That would go a long way in helping Canadian businesses that are struggling with these NTBs in a lot of markets.

[Chandra Arya, Liberal, Nepean, ON]

President Trump has stated that countries such as China and India are no longer developing countries and that we have to have a re-look at the preferential treatment they get. I tend to agree with that.

What can be done?

[Kendal Hembroff]

Canada takes a very pragmatic view on development at the WTO. The United States has rightly pointed out that there may be some countries that have long-claimed developing country status that—

[Chandra Arya, Liberal, Nepean, ON]

India is fifth just on a GDP basis. It's 126th on the per capita income basis.

[Kendal Hembroff]

Indeed. Our view though is that rather than getting into a lengthy and protracted debate on what criteria we should use in terms of identifying a developing country as such, it is better to identify through the various negotiations that are under way at the WTO, whether it is e-commerce, negotiations on fish subsidies, agriculture, the specific types of flexibilities that may be needed for certain developing countries in a unique context.

[Chandra Arya, Liberal, Nepean, ON]

You mentioned agriculture. Canada has big agricultural exports. India, because it is classified as a developing country, has some advantage on the agricultural subsidies it provides.

What does that mean for us?

[Kendal Hembroff]

There's no doubt that when we started out having agriculture discussions 20 years ago, the big subsidizers were not the same ones we see now. Countries such as China and India are certainly in that top tier of countries that have heavily subsidized their agricultural sectors. A really key interest for Canada and a number of other WTO members is tackling those trade-distorting agricultural subsidies.

The reality is we can't compete, nor should we. Those types of subsidies really do unduly distort trade and are a significant problem for Canadian agricultural producers.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Lewis.

[Chris Lewis, Conservative, Essex, ON]

Thank you very much, Madam Chair.

Thank you, Ms. Hembroff, for a very informative presentation. I appreciated it. I'm going to ask you some very simple questions, because you got my curiosity up.

How many members did you mention are part of the WTO right now?

[Kendal Hembroff]

There are 164.

[Chris Lewis, Conservative, Essex, ON]

Are all of those member countries in agreement that there should be reform at the WTO?

[Kendal Hembroff]

Yes, I would say that is true. Certainly, when we started this discussion, maybe two years ago, I'm not sure that everyone would have been of the same view. However, I would say yes, there is wide consensus that WTO reform is required, but there are very different views in terms of exactly what we should do and where the priorities should be.

[Chris Lewis, Conservative, Essex, ON]

I can appreciate that. How long has it been in discussion, a couple of years, perhaps?

[Kendal Hembroff]

Yes, roughly. We put out a discussion paper in September 2018, which was not necessarily the beginning of discussions on WTO reform, but it was at that point really that the discussions began to have momentum.

[Chris Lewis, Conservative, Essex, ON]

Who would typically take the lead on something like this? Which countries would you expect to take the lead, notwithstanding the fact that it sounds as though the United States may or may not want to be part of it? What does it look like to you?

[Kendal Hembroff]

Chair, I'm going to make one small comment, just to be clear.

The United States is actually very much in favour of WTO reform. They're not members of the Ottawa group, and we have not had a lot of engagement from them on reform of the appellate body, but there are actually a number of areas in which the United States is quite engaged. For example, the United States has been a key proponent of improved transparency and notification provisions at the WTO. It's also been very active in discussions on development. I just want to be clear that, notwithstanding some of the discussions here, the United States is quite active on reform.

Certainly the countries we have been working most closely with have tended to be more medium-sized countries that maybe don't have the economic might of some of the large players in order to be able to work outside of the WTO. We have—and this is a generalization—found a lot of success in working with countries like Norway, New Zealand, Australia, Chile and Mexico, countries of a similar economic size who have a shared and common interest in the rules-based system.

[Chris Lewis, Conservative, Essex, ON]

Great. You answered all my questions without even knowing it. My question was about medium-sized countries.

Would you consider Canada to be a medium-sized country?

[Kendal Hembroff]

I would.

[Chris Lewis, Conservative, Essex, ON]

In the grand scheme of the WTO, Canada would be medium-sized.

On timelines, I know you mentioned a couple of years going forward. In the event that a reorganization does go forward, what kind of timelines would we expect to see for this reorganization to happen? The second part of that question would be if we push it off, what kind of ramifications there would be. What is going to tie our wrists together, perhaps? Do you understand what I mean?

How much time do you think it's going to take, and if we don't do something, what will that look like?

[Kendal Hembroff]

Right.

I think it's all about incremental progress. We have the 12th WTO ministerial conference which is coming up in June. I think that will be an opportunity to achieve some key outcomes that would push the needle forward in terms of WTO reform.

One of our goals for that ministerial conference is to conclude negotiations on fish subsidies. A lot of work still has to be done between now and then, but we think that would go a long way in delivering on a key negotiation that has been going on for almost 20 years.

Similarly, the negotiations on domestic regulations for services are also getting quite close to conclusion. That would be another key opportunity to modernize the trade rules.

Other elements will take more time. Certainly those aspects, such as reform of the appellate body, will absolutely require engagement by all WTO members.

Speaking maybe quite frankly, it is unclear whether or not the current U.S. administration will be prepared to engage on dispute settlement issues, so there may be other areas in which we can make progress for now. However, in terms of some of the issues related to dispute settlement that we've talked about, we could very well be several years away from being able to have those discussions.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Dhaliwal.

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

Thank you.

Thank you to all the witnesses.

Randeep and I come from Surrey, British Columbia. A large number of businesses are SMEs. I'm going to ask you three or four questions, and then I'll give you all the time to speak.

First, what are some of the positive implications that Canada's trade policies and WTO policies have on SMEs? Do any of these policies create any challenges or barriers to trade for SMEs? Last, what are your recommendations for mitigating such challenges?

[Kendal Hembroff]

In answering that question, I would say that all of the WTO agreements have implications for SMEs. SMEs benefit from access to open markets, whether that is in terms of the elimination or reduction of tariffs, which can make their goods less costly in international markets, or whether it is liberalization of trade and services, allowing SMEs with the ability, for example, to provide services on a cross-border basis through electronic means. Rules on intellectual property are also needed by Canadian SMEs to ensure that their proprietary information is protected.

Beyond that very general answer, I would say that we have been paying more attention to the particular needs of SMEs. A lot of the things I have just mentioned I think would apply to large corporations as well.

In terms of the discussions we have had with the SMEs in Canada, they tend to be especially sensitive to things like very burdensome customs and trade facilitation procedures, onerous paperwork requirements, unclear information regarding regulatory requirements in different markets. We have tried to be very conscious of that in approaching our development of international trade rules.

For example, we are participating in a new WHO initiative, which I mentioned in my opening remarks, dealing with micro, small and medium-size enterprises, or MSMEs. That initiative is designed to take a very close microscopic look at the particular kinds of challenges that MSMEs face in international markets and to try to ensure that we develop WHO rules that are specifically designed for small and medium-size enterprises.