International Trade Committee on Feb. 5th, 2020

[Michael Kram, Conservative, Regina—Wascana, SK]

They have.

In my province of Saskatchewan, in the southern part of the province, there's what's known as the Bakken oil field. Half of this oil field is on the Canadian side of the border, and half is on the American side. As I'm sure you're aware, the federal government recently imposed a carbon tax on the province of Saskatchewan.

I'm wondering if there are any requirements in the new NAFTA for oil drilling operations in North Dakota or Montana to have to pay a carbon tax or a similar fee the same way that this is the case on the Canadian side of the border.

[Steve Verheul]

There are no specific requirements in that regard, although we do have provisions under the environmental co-operation agreement that we would co-operate on various issues related to climate change, even though we did get a significant amount of resistance from the U.S. on issues related to climate change.

When it comes to many of the elements, including some of those that you're referring to, we do have this environmental co-operation agreement that obliges us to discuss these kinds of issues and try to find ways forward that we can both live with.

However, the issue of specific carbon taxes applying in a cross-border kind of fashion was not addressed.

[Michael Kram, Conservative, Regina—Wascana, SK]

All right.

[The Chair, Liberal, Judy Sgro]

Mr. Sarai, you have five minutes.

[Randeep Sarai, Liberal, Surrey Centre, BC]

Thank you, Mr. Verheul and your team. You've done an amazing job and punched well above your weight in dealing with a very powerful American regime that wanted a lot of changes. We're very proud of the work that you and your team did.

I come from the riding of Surrey Centre. I've been told that it has the highest number of softwood lumber employees, I think, in the province. Softwood lumber has been an ongoing issue, with countervailing duties and agreements and then the agreements expiring. When can we expect to reach true free trade in that? Does chapter 19 still protect our interests and monitor and defend our interests in every trade dispute?

[Steve Verheul]

Yes. Well, certainly softwood lumber has been a difficult issue between us and the U.S. for many, many years, as you're well aware.

With respect to the existing NAFTA and the new NAFTA, the agreement stipulates that there is free trade between Canada and the U.S. on softwood lumber products. The U.S. has a right to pursue anti-dumping and countervailing duty investigations against imports from Canada, and they've done that frequently. That's within their rights. We have the right under chapter 19 to challenge the way they've done those investigations, and we have fairly consistently won those disputes. The U.S. has tended to bend, if not entirely break, the rules fairly significantly from time to time in their calculations and in the way they proceed with those investigations. That is why we have won.

The preservation of chapter 19 exactly as it is from NAFTA into the new agreement is fundamental for us to be able to pursue those issues. We would like to negotiate an agreement whereby we don't have to go through this process all the time, but at this point, the U.S. has shown little interest in pursuing an agreement.

You may be aware that the most recent administrative review on softwood lumber duties has demonstrated that the U.S. Department of Commerce has found much lower rates than are currently in place. We're hoping that after these preliminary rates have been published and we get to the final rates, they will indeed be lower and we'll be in a better position to try to get rid of these tariffs.

It's not a question of softwood lumber being outside of the agreement; it's very much a part of the agreement. It's just that the U.S. has been very exuberant in applying anti-dumping and countervailing duties against Canadian exports.

[Randeep Sarai, Liberal, Surrey Centre, BC]

My next question is with respect to new non-market country free trade agreements.

If a CUSMA signatory other than Canada signs an FTA with a non-market country, what information would the Government of Canada require? What procedures would it use to assess the potential impact of the FTA on CUSMA, and vice versa, if we were to enter into an agreement with another country? What are the mechanisms whereby the other two signatories could impede that? What are their options and what are our options?

[Steve Verheul]

We do have certain obligations under that provision. If any of the three parties intends to enter into negotiations with a non-market economy, they are to notify the other two parties of that intention. They're also obliged to provide details of the outcome of that negotiation, if they manage to complete it, and essentially keep the other two parties informed of the progress of the negotiation. If at the end of the day there is an agreement that is concluded, the other two parties could exercise their right to withdraw from NAFTA if they saw fit.

I want to emphasize that this is really no different from what exists right now. We would ordinarily inform trading partners such as the U.S. and Mexico if we were to enter into negotiations with another country, particularly a non-market economy. We would keep them informed. We have regular discussions with our trading partners, including the U.S. and Mexico, on our negotiations.

The right to withdraw from an agreement is a fundamental provision in every free trade agreement. All that the party has to do is to issue a six-month notice that it will withdraw from the agreement.

There's nothing new here. This was more of an issue of attaching further optics to the whole issue of negotiating with a non-market economy. That was a desire of the U.S. They wanted to bring some profile to that. Fundamentally, it does not change our rights; it does not change our ability to negotiate with other negotiating parties. I think this provision has been blown somewhat out of proportion.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

I'm sorry, but your time is up.

Mr. Carrie.

[Colin Carrie, Conservative, Oshawa, ON]

I wanted to go back a little bit to the cost-benefit analysis, or what we would call an “economic impact study”. Through you to the minister, I would like to express how disappointed we are—I think the opposition was unanimous—that the minister didn't even commission a cost-benefit analysis or an economic study until a few weeks ago, particularly when the Americans finished theirs in April 2019.

We have about three inches of reading here, and I think it would have been beneficial if we were given that in advance. The American legislators and decision-makers were given it before they had to debate it in their house and their senate. We're going to be given our cost-benefit analysis and economic impact study with the Canadian perspective after ratification. If we have anything that comes up that needs an amendment, we can't even really go back unless we send it back to the United States and Mexico. That is concerning.

The other thing is that when you mentioned the analysis, you said that the minister is changing the parameters of the Canadian studies so that he can defend the agreement. Frankly, the minister needs to know that we're not necessarily interested in giving the government an opportunity to defend the agreement. We want to know the truth and the impact that it's going to have on Canadian industry.

My NDP colleague was quite eloquent on the aluminum question, as he was in the House as well. What's the status today for auto parts, for example, and what is it going to be in the future?

It's the lack of transparency and disappointment more than anything else. I know she'll be here, and maybe she'll have an answer for us.

You guys know I'm from Oshawa. We had really bad news that our plant wasn't allocated new product. Even if I hear from the auto industry that they can live with the agreement, it's too late for my community. What I'm worried about is that the agreement puts in place rules of origin that can be significant red tape.

My colleague asked about the cost on cars and things like that. My concern is that we're heading down this road for North American integration, and for them to build a car here in North America there is a tipping point. With regard to the costs of making a car here versus the costs of one of these manufacturers making it offshore and then sending it over here, I think it's very important that we get the analysis of those costs and what they're going to do to the automotive sector. Because we certainly would like to see an agreement if we're going to be having jobs moving north, so to speak, I'd really like to know for my constituents what the advantage is of investing in Canada versus investing in the United States.

Martin, I know that you've done a lot of work on this. What's in this agreement that would incent a General Motors, Chrysler or Ford decision-maker to put a plant in Canada versus the United States, to keep jobs here?

[Steve Verheul]

If I can just start.

[Colin Carrie, Conservative, Oshawa, ON]

There was a lot in that preamble.

[Steve Verheul]

There was quite a bit there, yes.

First of all, the Deputy Prime Minister has had no influence on this analysis. If I somehow gave that impression, I'd like to dispel it because she has had no input or guidance or views on our economic analysis. That is being conducted by the chief economist at Global Affairs without any kind of interference.

[Colin Carrie, Conservative, Oshawa, ON]

You did say, though, that the parameters for the Canadian perspective were being changed. I appreciate your clarifying that, but it is the government's role basically to take a look at those parameters—

[Steve Verheul]

Yes.

[Colin Carrie, Conservative, Oshawa, ON]

—so that we can compare apples with apples, and things like that.

[Steve Verheul]

That's right, and that's something that I have done.

[Colin Carrie, Conservative, Oshawa, ON]

Okay.

[Steve Verheul]

If we wanted to do the same kind of economic analysis the U.S. did some time ago, we could do that very quickly. I don't think that's the kind of analysis that we really want to submit to parliamentarians, to be able to judge an agreement on that basis, because we think there are fundamental flaws in that analysis.

We are trying to do some analysis that's going to have more rigour, that will be more accurate in terms of the actual impact of the agreement. I can assure you that you will not get the analysis after ratification has been completed; you will get the analysis within a matter of days. That analysis will be the best that we can come up with at this point in time. Again, this is inherently a limited kind of analysis because we already essentially have free trade, and many of the benefits of this agreement are not elements that you can put into a quantitative model and get a result for, so a lot of this has to be qualitative analysis, inherently, but we will be providing that analysis to you in the very near future and would be happy to defend it on any subsequent occasion.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

[Colin Carrie, Conservative, Oshawa, ON]

Yes, and we would like that as quickly as we can, because we just want to do the best job for Canadians at this table.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Carrie.

We'll go on to Mr. Dhaliwal.

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

Thank you to you, Assistant Deputy Minister Steve Verheul and your team. I want to thank you for the great work that you've done in the previous Parliament and welcome you back to this committee.

When I was going to doorsteps during the recent election campaign, I found that every worker I came across in Surrey—Newton, every small to medium-sized business that I came across, all wanted to get this deal done, and the majority of them were looking for predictability and stability. Could you please elaborate on how this is going to help when it comes to small and medium-sized businesses, not only in Surrey—Newton but across British Columbia? I see that the Business Council is supporting it and the Canadian Labour Congress is supporting it, and the premiers.

So what is in this deal that will help British Columbian SMEs?

[Steve Verheul]

I think this has been one of the major objectives that we had throughout the negotiations, to try to improve this agreement, modernize it in ways that would make it more relevant and more accessible to small and medium-sized businesses.

I'll give you one example. We have all of these tariff preferences, duty-free trade into the U.S. as it stands now under NAFTA. Only about 50% of those preferential rates are utilized. Part of the reason for that is that, if you want to claim a NAFTA preference, you have to fill out a form, fax it in to customs—and I'm not sure how many small businesses even still have fax machines—and you have to provide extensive amounts of documentation. Under the new agreement, you don't have to do any of that. You can simply send in your product. The actual bill going along with it can justify that it is of North American origin. We've streamlined the border. We've simplified all of the red tape that currently exists, so that small and medium-sized businesses can take advantage of this agreement, whereas before they may have been hesitant to go through the process of filling out a number of forms and that kind of thing.

We also have, for the first time, a chapter on small and medium-sized businesses, which is dedicated to trying to find ways to assist small and medium-sized businesses to access foreign markets, to make it as easy as possible, because many small businesses are going to be content with trying to serve the domestic market and may be hesitant to start looking at foreign markets. We're trying to make that as easy as possible so that they can start to expand into other markets and in particular the U.S., which is a common avenue that many small businesses work toward.

In addition to that, we've tried to address the regulatory barriers that exist, so that they don't have to face those going into other markets and in particular the U.S.

This is a very unrecognized area of the work we did on this agreement. It was very much below the radar because the U.S. wasn't particularly interested in this, but we've managed to streamline the process of putting goods back and forth across the barrier, reducing those barriers that are beyond the border—regulatory and technical barriers—and I think that's where we'll see the greatest gains over time.

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

When it comes to small businesses, you mentioned it helps small businesses, and I see a trend. More and more women are getting involved in running small businesses. How will this particular agreement help those small businesswomen to pursue this?