International Trade Committee on Feb. 5th, 2020

[Steve Verheul]

I think that this wasn't simply a matter of the U.S. wishing to eliminate investor-state dispute settlement across the board in NAFTA. What the U.S. was mainly concerned about was eliminating investor-state dispute settlement in relation to Mexico. Their view was that it actually provided an incentive for investors to invest in Mexico rather than in the U.S. because it—

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

But Canada did publicly state at one point that it was a goal of theirs to preserve chapter 11 in the NAFTA negotiations. Is that true?

[Steve Verheul]

I'm not sure that we ever explicitly stated that. We did have an interest in looking at investor-state dispute settlement in the context of this agreement, because, as you probably know, there have been far more cases taken by U.S. investors against Canadian policies than cases taken by any Canadian investors against the U.S.

In an environment where we have fairly sophisticated court systems on both sides, we didn't feel that we needed investor-state dispute settlement in relation to governing these issues between Canada and the U.S.

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

If I may, I just want to pursue—

[The Chair, Liberal, Judy Sgro]

I'm sorry, Mr. Blaikie, your time is up.

I was just allowing the witness to finish the testimony. Sorry.

Okay.

On for five minutes, we have Mr. Fast.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you very much, Madam Chair.

Welcome, everyone, to the panel, especially Steve. The last time you and I were at this committee together, I think I was sitting over there right next to you. We were defending CETA, or trying to defend CETA, right?

[Steve Verheul]

You were.

[Ed Fast, Conservative, Abbotsford, BC]

Let me just start by asking a follow-up question on Mr. Carrie's concerns, and that is about the economic impact statement. We have asked Minister Freeland for that for months now. Obviously, we as a committee, and certainly we on the opposition side, are not prepared to buy a pig in a poke. We want to know exactly what Canada is signing onto and the impact that this agreement will have on our economy.

I note that the United States, back in April of last year, completed its own economic impact assessment, some 400 pages, telling Americans and their decision-makers exactly what was in the agreement and the impact it would have on their economy. It just baffles me why our government—and, by the way, I'm not pinning this to your shoulder. I'm saying it's the government's failure to deliver on something essential when we're dealing with the largest trade agreement Canada will ever, ever be party to.

I'm going to ask you, first of all, to pass on our profound disappointment to the minister about her failure to deliver on this right now.

Can you, Steve, provide us with assurances that before final ratification takes place, before this committee process is finished, we will have an economic impact assessment available to all of us MPs around the table?

[Steve Verheul]

I'm fairly confident that I can provide you with that assurance, because we—not our group, but the chief economist's group—are very close to finishing that economic assessment.

You mentioned the U.S. assessment that was done. We examined that closely when it came out, and it did come out some time ago, as you pointed out, but they assigned a particularly large amount of value to what they termed “reduced policy uncertainty”. That's not really something that can be measured quantitatively through an economic assessment, but it made a huge difference in the conclusion of their assessment. If you remove this notion of reduced policy uncertainty, which is fairly nebulous, the U.S. analysis actually projects a loss in relation to the new NAFTA outcome.

What we've been trying to do in our own analysis—and we've been talking to our economists as they've been conducting this—is to come up with something that we can defend credibly. As I mentioned earlier, too, given that this is a revisiting of an existing agreement, we already essentially have free trade, so significant new gains are not something that's likely to appear.

[Ed Fast, Conservative, Abbotsford, BC]

Okay. Maybe I can follow up on that, because my time is short.

[Steve Verheul]

Sure.

[Ed Fast, Conservative, Abbotsford, BC]

You said in your comments that this is all about preserving Canada's market access to the partner states, to the U.S. and Mexico. I don't think Donald Trump saw it that way.

[Steve Verheul]

Absolutely not.

[Ed Fast, Conservative, Abbotsford, BC]

He saw it as gaining new market access.

I've looked at the agreement. On issues of market access, it looks like it was Canada that conceded without any corresponding gains on market access.

I know there are some improvements on how we deal with non-tariff barriers such as sanitary and phytosanitary standards, but I don't see any real substantive new market access in Canada's favour. Yet Americans certainly have new market access, especially in the areas of chicken, dairy and eggs.

I'm just wondering how we square that, because the government said that this was going to be a “win-win-win” and promised us it was going to be a better deal than we had before. Quite frankly, by any standard that I've applied, this agreement is lesser. Yes, it preserves market access to the United States, our largest trading partner, but it's not a better agreement.

[Steve Verheul]

I think that when you look at the issue of market access, what was negotiated is fairly limited. There were no real market access gains in the industrial sector. There were no real market access gains in the fisheries sector. The only area where there were any significant market access improvements—and “significant” might even be a strong word in this respect—was with respect to protected products: supply management for Canada and sugar and sugar-containing products, peanuts and margarine in the U.S.

While we did offer the U.S. increased access to our dairy, poultry and egg markets to some degree, under certain conditions, we also gained access to the U.S. dairy market. We gained access to the U.S. sugar and sugar-containing products market, the peanut butter market and other various markets.

I might ask Aaron if he wants to elaborate on some of that.

[Aaron Fowler]

Thank you very much.

[The Chair, Liberal, Judy Sgro]

Very briefly, please, Mr. Fowler.

[Aaron Fowler]

Yes, I'll keep it very brief.

I would say that the access may not look significant when taken in the context of the overall agreement, but I can assure you that it's quite significant to the sectors that stand to benefit. If you look at sugar in particular, you see that the United States will provide a new country-specific TRQ for Canada for 9,600 tonnes of refined sugar and 9,600 tonnes of sugar-containing products upon the entering into force. That's in addition to the market access that we already enjoyed under the NAFTA for those products.

The U.S. has agreed to eliminate its tariff on margarine over five years and to adjust the rule of origin so that it's easier for Canadian margarine manufacturers to access that market. They've also agreed to eliminate their tariff on peanut butter over five years and to eliminate their tariff on peanuts over five years.

It's not a wide range of products, but there wasn't very much that wasn't already subject to tariff disciplines under the NAFTA.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go on to Mr. Sheehan for five minutes.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you very much, Madam Chair.

As this is our first committee meeting, I just want to say that it's an honour having you before us at our first committee meeting of this 43rd session. You have presented before at the former trade committee meetings and some of us who were part of the past trade committee have heard about your great work, and some new folks are just hearing of it. I'm sure they are aware of your great work as well.

I'm from Sault Ste. Marie, a steel town, and 60% of Algoma steel is exported to the United States. When Donald Trump put the section 232 tariffs on steel and aluminum—well, 25% on steel and 10% on aluminum—there was great concern in my community and across this country. A lot of people didn't think he was going to do it, but he did it and he used it on the grounds of national security.

I have always said that from my window there, I literally look across at the United States and I don't see any gunboats in the St. Marys River or any turrets. We have the longest undefended border. We have NORAD in North Bay, a shared defence.

It was insulting for Canadians, I think, for them to use that tool at that time. It was not only insulting, but also of great concern to people in Sault Ste. Marie. I'd walk into a Tim Hortons for donuts and the nervousness, not just on the faces of the steelworkers, but their spouses, their children, their parents was of really deep concern and it hurt badly.

I was proud of this Parliament's coming together, and of this trade committee that went down to Washington—united, all parties—and looked square in the face of the American legislators and said that we would not pass this until they lifted those section 232 tariffs on steel and aluminum.

I know there were many other committees that went down. I went down with the industry committee. I co-chair the all-party steel committee, and we did the same thing. That, I think, coupled with the dollar-for-dollar counterpunching we did above our weight, not only on steel and aluminum, but also on gherkins and sleeping bags and Jack Daniel's, I think, caught their attention and hurt them back a bit.

As well, we made a lot of changes to strengthen our steel remedy system: anti-circumvention, scoping, and hired 40 new Canada Border Service Agency workers specialized in forensics to do that.

In your opinion, Steve, could you please explain to us how important it was and how maybe other areas of this great country came together to work against those section 232 tariffs that were really hurting the steel and aluminum industry?

[Steve Verheul]

Yes, from my perspective, you've described that feeling very clearly. When the U.S. put on those tariffs against Canada on steel and aluminum on national security grounds, when we have such a close alliance with the U.S. on defence issues and anything to do with national security, I think it's fair to say that we did feel it was a bit of an insult. We do not, in any measure, pose a security threat to the U.S. and, in particular, we don't pose a security threat to them with our steel and aluminum exports to their market.

We've had a fairly balanced trade with the U.S., particularly in steel. We happen to produce more aluminum than they do, but we've exported that without any kind of difficulty for many years. We are not a back door for subsidized steel coming from other countries like China and others. We've been a loyal trading partner and have worked closely with the U.S. on protecting the North American market.

From our perspective, there was no way we could accept an outcome in the context of a free trade negotiation where we would have national security tariffs applied against our steel and aluminum, so we made it very clear early on in those discussions that we could not have a conclusion to this negotiation with those tariffs remaining in place. It was simply entirely inconsistent with a free trade agreement to have those tariffs in place.

We insisted that those had to be removed. To this point, though, we continue, along with Mexico, to be the only countries that really have any kind of exemption from those steel and aluminum tariffs. They are applied across the world to most other suppliers. Some have negotiated exemptions, but they've paid for them in various ways. We have not.

The steel and aluminum sector has been a North American market, particularly between us and the U.S., for many years.

We've found it to be fundamentally unjust and insisted that they be removed before we completed this negotiation.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Okay.

[The Chair, Liberal, Judy Sgro]

We'll go on to Mr. Lewis.

[Chris Lewis, Conservative, Essex, ON]

Thank you very much, Mr. Verheul and your team. It's going to be very interesting times, no doubt. I just have a couple of questions for you, and I'm going to stay on the topic of steel and aluminum at this time.

In the deal to remove steel tariffs, the U.S. can reimpose steel and aluminum tariffs if there's a meaningful surge of imports above historic levels. What defines “meaningful”, and was that discussed during the negotiations?