Evidence of meeting #3 for International Trade in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was agreement.
A video is available from Parliament.
Conservative
Ed Fast Conservative Abbotsford, BC
But the reality is that eliminating ISDS, chapter 11, effectively means that Canadian companies now have to find their resort in the American court system. Is that correct?
Chief Negotiator and Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development
We also have investment obligations that we have agreed to that can be pursued state-to-state.
Conservative
Ed Fast Conservative Abbotsford, BC
That's right. But for a state to engage on that typically requires something more than just a company being aggrieved. I think states are reluctant to take up one company's case. That certainly was my experience when I was in the trade role. I'm just surprised that suddenly we've said, well, you know what, we had ISDS there and we felt it was important back when we negotiated the original Canada-U.S. Free Trade Agreement that morphed into NAFTA. Chapter 11 stayed there and suddenly, Canada is of a different mind, that we suddenly trust Donald Trump and the court system in the United States. Do you understand my difficulty?
Let me follow up with another question. It has already been mentioned that we have an obligation to present any trade agreement with a non-market economy to the United States and Mexico if we want to sign one. Basically we'd be going cap in hand to the United States, to Donald Trump, and saying please may we sign a trade agreement with China.
The United States has an obligation going the other way, except they've already signed a managed trade agreement with China—at least phase one of it. So they no longer have to come to us cap in hand to ask us to review that agreement and ask for permission. I find that disturbing simply because I'm not aware of any other trade agreement that Canada has signed where we've agreed to those kinds of provisions, where we actually cede our sovereignty to two other countries to determine whether we can negotiate a free trade agreement with a country like China.
Doesn't that concern you?
Chief Negotiator and Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development
It doesn't actually, because, first of all, the new NAFTA is not yet in effect. The agreement, the phase one agreement that the U.S. has reached with China is not something we could pursue even if we wanted to because the agreement is not yet in effect.
Chief Negotiator and Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development
Neither, if we started to negotiate an agreement with China right now, would the U.S. have any avenue to pursue us, because the agreement is not in effect.
I think the most important element of all of this is that it comes down to the recourse. The recourse is simply reflecting an element, a provision in the agreement, that already exists. You can withdraw from the agreement with six months' notice. If the U.S. does something that we don't like, we can withdraw with six months' notice. If we do something the U.S. doesn't like, it can withdraw with six months' notice. This is primarily an optical issue that the U.S. insisted on because of its preoccupation with the notion of a non-market economy. The notion of a non-market economy doesn't really exist in Canada or in Mexico. We don't use those terms. But the U.S. was preoccupied with this issue. It changes none of our legal obligations. It constrains us in no way from pursuing an FTA with a so-called non-market economy. I don't think there's a fundamental change in the way things work now with this provision.
Liberal
The Chair Liberal Judy Sgro
Thank you very much.
We'll go on to Ms. Bendayan, please, for five minutes.
Liberal
Rachel Bendayan Liberal Outremont, QC
The first question that my colleague opposite, Mr. Carrie, raised was with respect to amendments.
Should the opposition parties raise proposed amendments to this agreement, would we risk losing some of the hard-fought gains you've described over the course of the last two hours and others?
Can you speak to some of the risks this would entail?
Chief Negotiator and Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development
If on the Canadian side we were to propose new changes to the agreement, then that would mean that we would have to reopen the negotiations with the U.S. and with Mexico to see if we could re-establish a balance of concessions on the basis of a new proposal put forward by us.
When the U.S. proposed modifying the agreement following its discussions with the Democrats in the House—the agreement that was reached between the USTR and those Democrats—it did have to come to both Canada and Mexico to see whether we would be agreeable to those kinds of changes. We were part of those discussions. We agreed with those changes because they made the agreement better for us. That was a fairly easy calculation. If we were to make changes on this side, that would mean we would have to reopen negotiations.
Part of the difficulty in our current circumstance is that, as we know, Mexico has already approved the agreement and the U.S. has already approved the agreement. We're now in the situation where we are the last of the three parties to move toward ratification. The U.S. in their statement of administrative action has indicated that, if a third party has not ratified the agreement, then they could proceed with the other party that has ratified the agreement. In other words they could proceed with the agreement between the U.S. and Mexico, and Canada would be left out of that picture.
We do think it's strongly advisable that we move toward ratification as quickly as we can, to preserve the gains that we have, to maintain our open access to the U.S. and Mexican markets and to preserve NAFTA in it's new form.
Conservative
Michael Kram Conservative Regina—Wascana, SK
I would like to finish my questions with the end of NAFTA, if I may, the sunset clause that is now being proposed in the new NAFTA.
I have heard from many stakeholders about the need for certainty in the marketplace. Indeed, my colleague Mr. Dhaliwal has talked about the need for predictability and stability in the marketplace.
I've also heard a few people in the media talk about how this deal will just get us through the Trump administration. This strikes me as a little bit short-sighted. I don't have a crystal ball, but imagine the year 2036, because I believe it is a 16-year sunset clause. If in the year 2036, the White House has an extremely protectionist president and the U.S. does not want to renew any NAFTA agreement with Canada or Mexico, does that mean that NAFTA is done and that we have no more free trade agreement with the United States or Mexico?
Chief Negotiator and Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development
I think it's important to point out that none of these agreements is ever cast in stone. As I mentioned, there's a common element to almost all free trade agreements that you have the right to withdraw from the agreement with simply a six-month notice. This is not something that we can be assured will last indefinitely. Throughout the course of the 25-year history of the current NAFTA, we've modified NAFTA on many occasions. Going forward, we would expect to continue to make modifications to ensure that the agreement is up to speed.
What the U.S. originally proposed was a six-year sunset after which the agreement would cease. We rejected that out of hand for exactly the same reasons you've identified, that this would provide a high degree of insecurity for businesses that rely on trading back and forth. We now have an outcome where there's a likely 16-year assurance that the agreement is going to remain in effect.
Conservative
Michael Kram Conservative Regina—Wascana, SK
Okay, but just to be clear, under the old NAFTA, a party had to take the initiative to withdraw from NAFTA on six months' notice, but under the new NAFTA it expires, and the requirement to renew NAFTA is now on the shoulders of all three parties involved. Is that accurate?
Chief Negotiator and Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development
There is a review at a six-year mark to determine whether or not the three parties feel that the agreement remains something they want to continue with, and at that point they can extend it for a further 16 years. This is more of a review than an opportunity to simply remove a party from the agreement, although that always remains a possibility.
Conservative
Michael Kram Conservative Regina—Wascana, SK
Okay.
Madam Chair, I would like to give my remaining time to my colleague Colin Carrie.
Conservative
Colin Carrie Conservative Oshawa, ON
I will be quick, Madam Chair.
I'd like to move a motion relevant to today's discussions. Everyone around the table knows how important this study is and how we need to do it efficiently, so in the spirit of giving the agreement fulsome study and to provide certainty—
February 5th, 2020 / 5:30 p.m.
Liberal
Liberal
The Chair Liberal Judy Sgro
This is in the middle of witness testimony.
Mr. Carrie wants to read a motion into the record, and then if we're going to have further discussion, do we want to maintain our witnesses here while we go through this? They had agreed to stay the additional 15 minutes that we were late in starting.
Conservative
