International Trade Committee on July 9th, 2020

[Randeep Sarai, Liberal, Surrey Centre, BC]

Thank you.

Mark, one of your recommendations is infrastructure, particularly infrastructure to enable supply chains. Can you elaborate on that? It's usually a very popular thing to do for a recovery, specifically after this, and if it gives long-term benefits, it's even better. We've seen the benefits of the Asian gateway in British Columbia and the gateway projects that improved a lot of our ports and our transportation corridors. Is that what you're envisioning, more improvement on that type of infrastructure? If you can let us know, it would be great to hear.

[Mark Agnew]

It is precisely those types of things—ports and airports. This isn't anything new, and I'm not trying to pretend it is. As always, the reality for these infrastructure funds is that the demand way outstrips the supply of money available. This is about putting more cash into the national trade corridors fund to open it up again for organizations to be able to tap into to build those projects.

[Randeep Sarai, Liberal, Surrey Centre, BC]

You spoke earlier about free trade zones. How feasible are they? I know people talk about them. We've seen them in other places around the world. In some cases, I've heard the argument that they're counterproductive, that people move to free trade zones temporarily for tax benefits and then they move back.

Are you talking about more of a logistical place where goods move in and out, rather than being manufactured there, or are you looking at places where value is added to products? Can you elaborate on your suggestion on that?

[Mark Agnew]

We're definitely talking about substantive value-added transformation. Precisely what you talked about is some of the problems we would have with the regime as it stands today, and loosening those rules to enable more production would build up our domestic capacity in the manufacturing sector and certainly create jobs for Canadians in the process.

[Randeep Sarai, Liberal, Surrey Centre, BC]

Thank you.

[The Chair, Liberal, Judy Sgro]

That will be the end for this group of witnesses. We have our next panel waiting.

Thank you to the witnesses for sharing very valuable information with us today. Certainly, we all appreciate it very much.

Stay safe and stay well.

I'll suspend for a couple of minutes while we get the other panel set up. Thank you.

[The Chair, Liberal, Judy Sgro]

We are meeting on the impact of COVID-19 on Canadian trade relationships, especially with the United States and the United Kingdom, for our third panel this afternoon. Please accept our apologies that we're running a bit late today.

We'll start with the Canadian Europe Round Table for Business, Mr. Langrish, who will then be followed by Canadian Agri-Food Trade Alliance, Claire Citeau. Next will be Centre d'etudes sur l'intégration et la mondialisation, Michèle Rioux; and then Partner Technologies Inc., George Partyka, Sr., chief executive officer.

Mr. Langrish, we will start with you for approximately five minutes, please.

[Jason Langrish, Executive Director, Canada Europe Round Table for Business]

It's nice to be here today. Hello to everyone.

I'll keep my remarks brief, to five minutes, and focus primarily on the United States and the United Kingdom.

First, broadly, the primary impact of COVID-19 on international trade is the continued rise of the sentiment “my country first”. We've obviously heard it being voiced south of the border as “America first”, but it's the concept that we're putting our country and its interests, at least as the politicians see them, ahead of the multilateral agreements that are in place. I feel that has the potential to be quite problematic.

The principal reason I feel it could be problematic is that there are arguments for some self-sufficiency given what's transpired. However, this can quite easily morph into a wider and more unjustified form of protectionism, notably in the form of technical barriers to trade—that is, putting up barriers based on the fact that it's not safe enough, their approvals are not robust enough, etc.

There are also some other issues. The nationalization of industries could run afoul of international trade commitments. Massive government expenditures could undercut things like state aid rules, which we may see play out in the negotiations between the U.K. and the EU, given the massive spending that Germany is making now in their stimulus program and the money that's going to specific industries.

When we look at our relations with the United States, I think our trade relations are generally under control. It's been a bumpy ride since Mr. Trump was elected as president. I think the government has generally done a pretty good job there, but we have to constantly be keeping an eye on things because protectionism pops up, as it has with aluminum, with the border at times, with bans on exporting protective equipment into Canada, etc.

The approval of the CUSMA is good news. Closing the border as a result of COVID was a more impactful development than the approval of the CUSMA, which has largely been factored into business decision-making since it's an agreement from some time ago. However, it's obviously important that we maintain a strong trading relationship with the U.S., the obvious reason for this being national prosperity and maybe the less obvious reason being that we will need U.S. support in dealing with difficult third party issues, such as the diplomatic dispute with China, including in Ms. Meng's extradition hearings.

Turning to the U.K., I think the real question for Canada is this: What will be the outcome of negotiations on a future relationship between the U.K. and the EU? In my view, the highest probability outcome at present is a hard Brexit, which would take place at the end of the year. That is, the U.K. would leave the customs union and the single market and would revert to WTO rules. There is a bit of good news there in the sense that the British have unilaterally decided that they are going to remove import tariffs for countries with which they have MFN status, so that would take some of the sting of a hard Brexit off Canadian exporters.

The problems with a hard Brexit, as I see them, are twofold. First, we would be unable to conclude a Canada-U.K. agreement to replace the CETA. The U.K. is currently a party to the CETA, the Canada-EU trade deal. Obviously, if they leave the single market and the customs union, they will no longer be a party to it. Frankly, once they leave the EU, they are no longer a party to it after the transition period. We won't be able to conclude a Canada-U.K. trade agreement until we know the outcome of U.K.-EU talks. The second problem is that if the U.K. leaves the single union, they'll no longer be covered by the CETA.

We're going to have to do some work to get an alternate arrangement in place. It would not make sense, in my view, to move forward with a trade agreement with the U.K. right now, because we do not know where there will be import tariffs in the EU, how we would deal with rules of origin and how we would deal with financial services and a whole host of other issues.

I'll end my remarks there. Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Langrish.

We'll go on to Ms. Citeau, for five minutes, please.

[Claire Citeau, Executive Director, Canadian Agri-Food Trade Alliance]

Thank you for having me today.

As you know, CAFTA is the voice of Canadian agri-food exporters, representing the 90% of farmers who depend on trade and the ranchers, producers, processors and agri-food exporters who want to grow the economy through better access to international markets.

Thank you for the opportunity to speak today with you about the state of global trade and what the road ahead may look like. The year 2020 was supposed to be a big year for trade for us with the ratification of CUSMA, the need to address CETA issues, non-tariff trade barriers and the lack of respect for international trade rules, the necessity to modernize the WTO, opportunities to diversify in Asia and the creation of a new post-Brexit trade relationship with the U.K.

Yet, in an instant, COVID-19 upended the predictability and stability businesses and exporters need. The last few months have shown us just how foundational agri-food trade is for our economy and way of life. While we’re proud of the role our members have played in feeding Canadians and the world while also protecting jobs in a time of crisis, clear worries remain.

Chief among them is the fear that this crisis will bring about new trade barriers and other forms of protectionism and that trade commitments will be undermined and not followed. Given the topics today, I will focus my remarks on, first, the need to continue to strengthen and improve existing trade relationships, the need to support WTO modernization and the rules-based global trading system, and the need to continue to open new markets, enforce free trade and put agri-food trade at the centre of the recovery.

Canada has no more important trading partner than the U.S. Our members are very pleased that CUSMA is now in force. It will help ensure a continued strong foundation for uninterrupted trade with our closest neighbour and trading partner. Restoring stability and predictability to North American trade is essential for Canadian agri-food exporters that have developed highly integrated supply chains for the past generation across the continent, and especially so in the U.S.

CUSMA will help restore the competitiveness in the North American free trade platform; normalize trade, not just for commodities but also for value-added food products; and enable a globally competitive sector that drives the economy forward in all three countries.

It will be important to monitor the proper implementation of the agreement to realize its full benefits. I will point to two sectors in particular. The food processing sector is concerned with the implications of the front-of-pack labelling regulation—a trade irritant with the U.S.—and, in the sugar industry, a key driver of food exports to the U.S., discussions on the administration of TRQs create a level of uncertainty of access.

It's very clear that the implementation of trade agreements is just as important as negotiating trade agreements and perhaps even more so. Take CETA, our comprehensive agreement with the European Union. It will turn three this September, yet despite holding so much promise for agri-food exporters, it continues to fall short. This is because the EU is not abiding by commitments to remove technical barriers.

We know there are solutions to these persisting barriers. Such work includes achieving mutual recognition of meat processing systems, developing protocols to verify livestock production practices, addressing misaligned regulation of crop protection products, more predictable and timely review of seed technologies, ensuring that Italy’s country-of-origin labelling requirements are not applied in a trade-restrictive manner and addressing production and trade-distorting EU sugar subsidies that make our exports uneconomical.

Italy provides an example where Canada needs to be assertive in defending our trade interests. Quiet conversations to date have not resolved the issues. It’s important that Canada challenges these so that Italy's protectionist measures do not spill over into other countries and products. We’ve asked the Canadian government to take up these issues with EU political leaders in order to secure commitments and timelines to remove and address the barriers that persist. As the world is moving toward the enforcement of rules, Canada, too, should step up its response and push for enforcement.

Vietnam, Peru, India and others—the list goes on of countries that do not follow internationally agreed-upon protocol, that do not live up to their bilateral and WTO commitments and that maintain unwarranted SPS measures. All of these create significant risks and uncertainty for exporters. Canada needs to be proactive and nimble in its response to the growing use of non-tariff barriers to block agriculture and food exports.

The current crisis has also shown us why we need a rules-based global trading system. CAFTA is pleased that the federal government has been at the forefront of efforts to safeguard the WTO and the rules-based trading system. This was done in large part through the Ottawa Group. The Ottawa Group, led by Canada, initially created to find ways to reform the WTO, has played a major role in keeping supply chains open to agri-food trade during the crisis and in seeking commitments from WTO members to limit and unwind the 200-plus trade restrictions adopted by 93 countries as a result of the crisis. It is imperative that this work continue.

In parallel, the Ottawa Group needs to drive forward WTO reforms to fix the dispute resolution processes to ensure their ongoing functionality, to revitalize the multilateral negotiation process and to restructure the overall governance of the WTO.

Amidst the crisis created by the pandemic, we must recognize that it's absolutely vital to get WTO reform right. We should fully expect that many countries will be tempted to use the current crisis to restrict trade and introduce non-tariff barriers disguised as excuses with protectionist motives. This is precisely why we need a solid, functioning WTO that can deliver on stable, predictable, open, rules-based trade as recovery begins to take root.

Now is the time to step on the gas—

[The Chair, Liberal, Judy Sgro]

Ms. Citeau, I'm sorry, but your time is up.

If you could just give your closing remarks or make your last few statements, or maybe you could get them in during an answer to some of the questions.

Thank you very much.

[Claire Citeau]

In closing, I will say that as people around the world need to continue to eat, agri-food trade gives us one of the best engines for growth.

We need to look at ways to strengthen relationships, including with China, to grow and modernize our existing FTAs, whether by launching FTA talks with ASEAN, or launching talks with countries that have expressed interest in joining the CPTPP, including the U.K.

Perhaps on the U.K. specifically, I will add that given that it's one of our largest partners in Europe, it's important that Canada engages [Technical difficulty--Editor].

[The Chair, Liberal, Judy Sgro]

I think she's having difficulties.

Ms. Citeau, maybe your ending remarks.... Can you hear me?

[Claire Citeau]

I can, with a lot of delay.

[The Chair, Liberal, Judy Sgro]

Maybe you can just stop at this point, Ms. Citeau, so that we'll have time for the members to ask you questions.

[Claire Citeau]

Sure.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We now go to Ms. Rioux for five minutes, please.

[Michèle Rioux, Centre d'études sur l'intégration et la mondialisation]

Good afternoon. Thank you for having me today. I am director of the Centre d'études sur l'intégration et la mondialisation. We are currently reflecting on the aftermath of COVID-19 and the pandemic's impact on Canada's international trade, but more broadly on the economic system.

First of all, I want to say I totally agree with Ms. Citeau on the importance of looking at multilateralism and the interface with the agreements that Canada signs. It is very important for maintaining consistent trade policy over the long term, but it is particularly important for the future of the international community to ensure that bilateral or regional trade agreements do not jeopardize co-operation at the multilateral level.

I know it is always taken a bit for granted that bilateral agreements are aligned with multilateralism. However, at the centre, we have mostly focused on the potential divergence between a multilateral system built on bilateral agreements and the risk of system fragmentation.

Our approach is to try to understand how COVID-19 revealed the flaws in our societies, in our international community and in the institutions that are there to enforce rule of law and stabilize the system.

We believe that our societies and the international community were not equipped to deal with the current pandemic and that, to deal with future catastrophes like this one, it's very important not only to consider short-term responses and challenges, but also to have a medium- and a long–term vision of them. This health crisis has revealed the pitfalls of collective action, which we also believe will be a catalyst for change and transformation.

The COVID-19 pandemic is forcing us to rethink economic policies [Technical difficulty—Editor] and trade. In fact, our colleague addressed the issue of the labels "made in Quebec", "made in Canada" and "made in America". That means the potential for relocation is there and could be very dangerous.

Globalization and trade are forcing us to thoroughly rethink the role of institutions. We anticipate a pre-COVID-19 era and a post-COVID-19 era. This is a historic time that will determine the path forward in the face of multiple social and economic trajectories, while opening up new avenues for economic governance.

We have organized a series of workshops that will continue until December. The worst-case scenario, which we have discussed, is border closure and the emergence of highly intrusive surveillance and monitoring systems. A number of our colleagues have written that deglobalization is not necessarily desirable or even possible in many industries. We are in the process of documenting such a deglobalization scenario, and we are adding a number of nuances.

We agree completely with Canada's approach, which we feel is to secure supply chains by showing flexibility and finding ways to secure those value chains so that Canada's supply is protected. The primary risks are therefore fragmentation, countries looking inward and deglobalization, but also trade warfare. These risks should not be underestimated. We also see as key risks rising inequality, economic concentration and challenges to the legitimacy of the international trading system. I believe all these issues must be taken very seriously.

Our approach is to look at institutions in the context of globalization, as well as state policy and actions. We are interested in how such actions can be aligned with more regulated globalization, while preserving economies that are open to trade and investment. The big picture for all this is to work toward a more stable trade system, one that could be more inclusive and progressive. It is in line with the approach Canada has been using in recent years.

[The Chair, Liberal, Judy Sgro]

Could you get to your closing remarks, Ms. Rioux?

[Michèle Rioux]

Okay, I will.

Coming back to the United Kingdom, we believe that a bilateral agreement should be founded on the Comprehensive Economic and Trade Agreement, or CETA, with the aim of ensuring consistent transatlantic trade and continuing to work with European countries as we did before Brexit. In our opinion, the agreements with the United Kingdom should follow on from the third-generation agreements, which take into account the global standards, policies and regulations that CETA has promoted.

With respect to CUSMA, very close attention must be paid to implementation, transparency and, above all, the cultural exemption and e-commerce. A number of issues affecting cultural industries will become clearer in the fall. I think our trade relationship with the United States will be seriously put to the test. It will be very important to properly articulate our objectives when it comes to cultural sovereignty and digital sovereignty. They are crucial issues that are not only the subject of trade disputes, but also—

[The Chair, Liberal, Judy Sgro]

Thank you very much, Ms. Rioux.

[Michèle Rioux]

These issues will also ensure the survival of our cultural industries in Canada.

Thank you for listening.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We go on to Mr. Partyka.

Mr. Partyka, it's your five minutes now.

[George Partyka Sr., Chief Executive Officer, Partner Technologies Inc.]

Thank you so much. I won't be that long, and I do want to thank the committee for this opportunity to speak today. It's nice to meet everybody.

It would have been very useful if I had heard some of the earlier comments, because I could probably have added to or supported some of the statements I agree with. Everybody has very valid points.

First, I'd like to take the opportunity to introduce what PTI Transformers is.

We probably aren't well known out there. We're not a brand name as such, but we are the largest privately owned Canadian manufacturer of transformers. We were established in January 1989 and started manufacturing in 1990. Currently, we are now building up to 500 MVA transformers, which are similar to 500,000 horsepower, if you want to equate them with something you're more familiar with. We have over 300,000 square feet and employ over 300 skilled personnel in Canada. In 2015, we purchased CG Power Systems Canada, which was owned by India, and we brought that technology back to Canada. We are continuing to reinvest in the technology and support the Canadian industry.

We're bringing back a lot of the stuff that was lost over the last 40 years. For example, in North America there's not a whole lot made here that you can buy at Costco right now in Canada, or the United States for that matter. Most of it is brought in from Asia, so my concern has more to do with Asia. We've been seeing a lot of penetration of our market from Asia, and we have some concerns.

We've performed very well, both financially and technically, since our inception, and despite the most recent impacts from COVID-19, we have remained open throughout the pandemic period without layoffs and without support. We have continued our business uninterrupted with all of our Canadian and U.S. customers. We do not export to Europe.

The business market demand for our product has decreased recently due to the economic slowdown and COVID-19 and the resulting decreases in new construction projects, along with the corresponding impacts on North American supply chains.

PTI Transformers has also been impacted by recent steel tariffs imposed by the U.S., and dumping by foreign competition. In response to this, we undertook an initiative by twice filing and winning dumping complaints against Korean manufacturers, who are my major concern right now. This in itself was a costly and time-consuming venture, but the resulting anti-dumping tariffs are of benefit to Canada.

Our relationships with other countries and the U.S., and all of our customers, continue to be amicable. However, there is noticeably more and more focus by many customers on buying local. Jason, to your point, there's obviously a lot of interest now in buying local for various reasons, whether for good security in our case or more dependable sources of supply and service. There's definitely a move afoot all over the place, and in North America especially, to buy local.

Also, I would like to take this opportunity to commend the politicians in our provincial jurisdictions for their unified stance with public health authorities, along with their positive approach to addressing the COVID-19 pandemic. Frequent and positive communication apprising the public of the current ongoing health status and plans for reopening the economy was, in my opinion, paramount to reaching the success we have achieved thus far in battling this virus. Although concerns may still be apparent regarding a potential second wave in the fall, we can all take solace in the fact that this proven-to-be successful approach can once again be followed and potentially even be improved.

PTI Transformers' strategy was to follow recommendations by public health authorities. Although there were times when it was tempting to consider deviating to more stringent but difficult to manage alternatives in addressing this virus, this ultimately garnered the good results we have today. Their unified approach and good communication helped stave off our temptation to move to a little more difficult to manage alternative. We have learned a lot these past few months, and although there are still many Canadian casualties, I am very proud of their efforts and what we all have been able to accomplish together.

I offer my commendation to all the politicians. It's been difficult yet, in my opinion, they have come through.

In addition to the COVID-19 pandemic and the steel tariffs imposed by the U.S., PTI's business opportunity has most recently been impacted, and if not addressed or corrected will have dire consequences going forward, regardless of a pandemic, or even be further compromised by the pandemic, if it reoccurs.

One particular circumstance I would like to bring forward to the committee is the Wataynikaneyap project in northern Ontario. This project connects Hydro One's electrical grid to many first nation communities that are currently running on undependable diesel, which is economically not viable. It's dirty and environmentally not warranted, currently. It's a big project and unfortunately the project, although it represents about 27% of our annual capacity for next year, has been given to the Koreans who twice were charged for dumping into Canada—the same company.

It's a federally funded project, and I'm just voicing my concern now because I find it's a surprise event for me. It represents over 100 person-years of direct employment, 20 person-years of engineering and professional employment, and it's come at a time when the work should be direly needed in Canada, and our company is here to do that.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Partyka.