International Trade Committee on Feb. 18th, 2020

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

I call to order meeting four of the Standing Committee on International Trade. We are continuing our study on Bill C-100, an act to implement the agreement between Canada, the United States of America and the United Mexican States.

With us on our first panel today is the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Intergovernmental Affairs. We're glad to have you here with us today. From the Embassy of Canada to the United States of America, we have Kirsten Hillman, acting ambassador of Canada to the United States. From the Department of Foreign Affairs, Trade and Development, we have Steve Verheul, chief negotiator and assistant deputy minister, trade policy and negotiations. Welcome back again. We're pleased to have you here.

I will turn the floor over to Minister Freeland for her remarks.

[Chrystia Freeland, Liberal, Deputy Prime Minister and Minister of Intergovernmental Affairs]

Thank you very much, Madam Chair.

Thank you, members of this committee. I'll make a few introductory remarks and then I will be happy to answer your questions.

I'd like to acknowledge that we're gathered on the traditional territory of the Algonquin.

Let me start with very great pleasure by introducing the outstanding Canadian public servants who are here with me today and without whose hard work, dedication and intelligence this pivotal new agreement would not have been possible. I'm going to introduce the two people sitting next to me. Let me just say that they lead an outstanding team of Canadian professional trade negotiators. At a particularly rough moment during the negotiations, one of our negotiators said, “We think of ourselves as the Navy SEALs of Canada”. I think that is a very appropriate way for all of us to think of our outstanding professional trade negotiators.

With me is Steve Verheul, chief negotiator of NAFTA and assistant deputy minister of trade, and Kirsten Hillman, our acting ambassador to the U.S., as well as a trade negotiator of some renown.

I'm very pleased to speak today in support of Bill C-4, the act to implement the new NAFTA, the Canada-United States-Mexico agreement.

Canada is a trading nation. Indeed, with the world's 10th largest economy, trade is the backbone of our economy. Trade is vital for the continued prosperity of Canadian workers, entrepreneurs, businesses and communities across the country.

Our government champions an open, inclusive society and an open global economy. These fundamental Canadian values transcend party and region. In fact, each of Canada's three major, recently concluded, trading agreements—the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and now the new NAFTA—were the outcome of efforts across party lines.

Canadians support free, fair, and balanced international trade, based on mutually agreed rules. These rules provide predictability and stability in how goods, services and investment are carried out between Canada and our major trading partners. We have seen remarkable success in this area.

In 1994 NAFTA created the largest free trade region in the world. In 2018 trilateral merchandise trade between the U.S., Canada and Mexico reached nearly $1.2 trillion U.S., a fourfold increase since 1993.

Today the NAFTA region comprises almost 490 million consumers and has a combined GDP of more than $23.5 trillion U.S. Our three countries together account for more than one-quarter of the world's GDP, with less than 7% of its population. This record of growth is a tribute to all Canadians, to our entrepreneurs and our workers across this country. Trade between the NAFTA partners has helped us build a continental network of supply chains across a range of industrial and agricultural sectors. It has made Canada more competitive globally. It has created good jobs for Canadians and has fostered job-creating direct investment between Canada and the United States.

The new NAFTA helps ensure we maintain this vital relationship, and that we maintain predictability and stability in our commercial relationship with the United States—our closest, and overwhelmingly our largest, trading partner—and with Mexico.

The negotiations to modernize NAFTA were unprecedented in their intensity, scope and urgency. At the outset we faced a barrage of protectionist trade actions from the United States and the very real threat of a U.S. unilateral withdrawal from NAFTA altogether. Team Canada stood firm and team Canada stood united. Guided by strong support for free trade from Canadians across the country, at all orders of government across the political spectrum, from business to labour leaders to indigenous leaders, we sought advice and consensus and we acted in a united way.

I would today like to particularly thank the NAFTA council for its hard work. Together we worked tirelessly to modernize NAFTA for the 21st century and to extract further benefits for Canadians from a trading partnership that has been a model for the world, and that is exactly what we accomplished.

The new NAFTA preserves Canada's tariff-free access to the United States and Mexico. It restores and strengthens the predictability and stability of Canada's access to our largest market, and crucially, it does so in the face of rising protectionist sentiment south of our border and around the world. The new NAFTA improves on and modernizes the original agreement.

Allow me to highlight some of the key tangible benefits for Canadians.

First, this agreement protects $2 billion U.S. worth of daily cross-border goods and services trade between Canada and the United States. This means that 99.9% of Canadian exports to the United States are eligible for tariff free trade.

The new NAFTA preserves crucial cross-border auto supply chains, and provides an incentive to produce vehicles in Canada.

The agreement also commits all partners to comply with stringent labour standards, and strengthens labour obligations to help level the playing field for Canadian workers. Mexico has also undertaken specific commitments to provide for the protection and effective recognition of the right to collective bargaining.

I would add that our government is working in collaboration with the Mexican government to help Mexico implement its labour reforms.

Throughout the negotiations, Canada was confronted with the American tariffs that were unprecedented, unjust, and arbitrary with respect to Canadian steel and aluminum. We were able to avoid an escalation, however, without backtracking. We stayed focused on defending Canadian workers, their families, and their communities.

We succeeded, and those U.S. tariffs have been lifted.

There was an additional U.S. threat to impose a section 232 tariff on Canadian autos and auto parts. For Canada, that threat was lifted on November 30, 2018, the day we signed the new NAFTA and the day we signed a binding letter on 232 autos and auto parts with the United States. As a result, Canada's auto industry now has the stability to seek investment for further growth and innovation.

The new NAFTA also preserves elements of the original NAFTA that have been essential for Canada and were under threat.

It maintains chapter 29 regarding the dispute settlement mechanism for trade. This is a fair and impartial mechanism, which had been included in the original agreement thanks to the hard work accomplished by Canada. This mechanism has been beneficial for our forest sector workers well over the years, and has protected their jobs from unjust trade measures.

The new agreement preserves NAFTA’s cultural exception, which contributes to protecting more than 666,000 jobs in Canada’s cultural industries and is so pivotal to supporting the artists who tell our stories, in both official languages.

Critically, the new NAFTA maintains tariff-free access to the U.S. market for Canadian ranchers and grain farmers. We should never lose sight of the fact that the starting objective of the United States in the NAFTA negotiations was to abolish Canada's system of supply management.

We did not accept that. Instead, we stood up for Canadian farmers and preserved supply management for this generation and for those to come.

The agreement includes an enforceable environment chapter that requires NAFTA partners to maintain high levels of environmental protection, as well as ensuring sound environmental stewardship. In addition, it recognizes and supports the unique role of indigenous peoples in safeguarding and preserving our environment.

The new NAFTA contains ambitious and enforceable labour obligations to protect workers from discrimination in the workplace, including on the basis of gender.

In conclusion, the new NAFTA is good for continued economic growth and prosperity in Canada. It restores stability and predictability for exporters and for the hundreds of thousands of Canadian workers in our export-oriented industries. It allows us to put the uncertainty of recent years in the past.

Most importantly, the new NAFTA is pivotal in securing the future of good-quality Canadian jobs across our country as market access to the United States and Mexico will be assured—will be guaranteed—by the new NAFTA for years to come.

I want to be clear. We have come a long way. However, until this agreement is ratified by all three countries and enters into force, there continues to be risk and uncertainty, which will inevitably grow with the passage of time. This agreement has already been ratified by the United States and Mexico—our two other NAFTA partners.

Debate in Parliament, including at committees, is very important in our democracy, but the risk to Canada is also real. It is imperative we lock in the gains we have made with this agreement, the security we have achieved and the market access we have fought for by ratifying the new NAFTA without undue delay. That is what Canadians expect all of us to do and it's the right thing to do.

Thank you very much.

I'll be happy to take your questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Minister Freeland.

Again, congratulations to you, your staff and your team. You've done a tremendous job here, bringing this before us today.

Before I go to the speakers list, I would like to recognize that we have some visitors from a Mexican delegation and to welcome them. We have Juan José Gomez Camacho, Ambassador of Mexico and the Honourable Jesús Seade Kuri, Undersecretary for North America, Ministry of Foreign Affairs.

Would you stand for one moment so we can recognize you?

Thank you all very much for being here.

[Some hon. members]

Hear, hear!

[The Chair, Liberal, Judy Sgro]

We will go on to Mr. Hoback for five minutes.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

I want to thank the minister for being here this morning and accommodating the committee.

Minister, I get that the process and the timing is so important. I understand the risks that are sitting there. We don't know what the Prime Minister may say today or tomorrow while he is seeking a UN security seat and how that will impact our relationship with the president. We saw that during the negotiations and how that created problems during negotiations. We know that timeliness is important.

One of my frustrations arises when I look at the U.S. system and how they went through the approval process. They had the agreement in April. We actually talked about this committee doing a pre-study in April and it was declined. We could have started then. In fact, I made the motion to do that and it didn't happen. We asked that Parliament be recalled in November or December, when we could have dealt with this. It wasn't done. We've looked for other opportunities to bring it forward sooner with no response.

I will also look at the fact that Lighthizer was talking to Nancy Pelosi almost on a weekly basis down there on the USMCA and how they could get it through the House, their Senate and to fruition. Their talks were ongoing between the government—the White House, in that scenario—and the Democrats, even during the impeachment process, to get this done. Yet we still haven't had a call from the Prime Minister to our leader to say this is urgent.

I know you're doing the best you can with the tools you have in your tool box and doing anything to get this done, and we will. We will do everything we can. If you want us to sit later, we'll sit later. If you want us to sit on weekends, we'll sit on weekends. If you want us to sit during the break week, we'll sit during the break week.

There are a lot of people who are impacted by this agreement. We need to understand what those impacts are. We need to understand if there's anything we can do in implementation to mitigate those impacts. We need to know what that is. We need time. I'm concerned that, with the rush to get this done and the pressure to get this done, those people won't get heard. That's one of my concerns.

I guess when I look at that I see there are things that we needed to do when we looked at previous trade agreements, for example, TPP. We did two cross-country studies. Then we came back here and studied it again when the legislation came forward. Nobody is proposing that. We want to get it done as quickly as possible so it's moved forward and our traders can take advantage of this agreement, but we do need time. I hope you understand that we need time and we're doing our best to get it through without shunning the people who are impacted by this.

When we look at the agreement, we see that we need to get a better understanding of some things. I was with the aluminum producers this last week. I went down to Mr. Martel's riding. We talked about green aluminum. They talked about implementation. I talked to the primary producers of aluminum. I talked to secondary users. While they're not happy, they understand the importance of getting this agreement done, but they are looking for a mitigation program for them.

Have you thought through, for example, in the aluminum sector, what that may look like?

How do we go to these sectors and give those who are negatively impacted by this agreement a path forward?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

First of all, let me thank the member from Prince Albert for his question and for the many conversations that we have had together about the new NAFTA. We go back to the time when I was sitting on the other side of the House, and I had the opportunity to ask the then Conservative government questions about trade. I really respect you, Mr. Hoback, with your long experience of trade issues and trade agreements and the many years now that we have spent talking about them and working on them.

You've raised a number of issues. Let me take them in turn.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

When it comes to Parliament and the committee having time to discuss this agreement, let me just say that the NAFTA negotiation was a long and very public and very consultative process. Throughout that process I appeared many times. I believe it was a dozen times that I appeared before parliamentary and senate committees to answer questions about the new NAFTA. Officials will correct me if that's wrong, please. Canada's trade officials have been available to all parties to discuss the agreement.

I'm actually very proud of the extent to which the negotiation was a very public, very consultative process including members of Parliament, but more broadly also including members of the NAFTA council, including premiers, mayors, business leaders, labour leaders and indigenous leaders across the country.

[Randy Hoback, Conservative, Prince Albert, SK]

We didn't get things like this agreement here. We didn't get information like this. In fact, we still don't have that.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Mr. Hoback, would you like me to finish answering all of your questions?

We have consulted extensively throughout the process, as is appropriate, and answered questions at committee and in Parliament throughout.

To the question of opposition parties having access to information about the final protocol of amendment, which has concluded the agreement and forms the body of the agreement we are now debating and seeking to ratify, immediately upon our conclusion of that protocol of amendment, we made our officials available to brief all the opposition parties. I know that Steve Verheul briefed all the parties, including the Conservative Party, including Mr. Scheer and his caucus. Information was made available right away.

To the idea that somehow we could have begun an official study of this agreement before the protocol of amendment was signed, let me simply say that it would have defeated the purpose of allowing Parliament and the committee to fully debate the finalized agreement. That finalized agreement was concluded only in December, after an extensive series of discussions between Canada, Mexico and the United States to introduce some further modifications to the agreement, which allowed for ratification in the U.S.

[Randy Hoback, Conservative, Prince Albert, SK]

We could have pre-studied it—

[Chrystia Freeland, Liberal, University—Rosedale, ON]

When it comes to those modifications, let me say one thing very clearly and with absolute conviction, and that is that the modifications that we agreed to in the protocol of amendment in December are 100% in Canada's national interest. It is very rare to have a negotiation where you can say that, but that set of modifications made a good deal better for Canada.

I see that our chair is asking me to wind up. I would be happy to go into those further, and I'd be happy to say more about aluminum. I suspect Simon-Pierre may have some questions for me about that.

We shall see.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Arya, you have five minutes, please.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Madam Chair.

Deputy Prime Minister, thank you so much for the work you and your team have done. On behalf of the people of Nepean, and indeed on behalf of all Canadians, I would like to thank you and your team.

This is a good agreement. A lot of members of Parliament from all sides of the House have worked hard for a long time to protect the interests of the automotive sector, the steel sector and the aluminum sector. They have worked very hard on these things.

However, the economy is changing worldwide. We are going to a global knowledge-based economy. Here in Canada the economy is changing so much. To give an example, a non-trade one, international students were contributing very minimally 10 years back. Today we have 500,000 international students contributing $21 billion to the Canadian economy. I'm told that is bigger than the automotive sector here.

The steel industry and the aluminum industry have not seen any new greenfield projects, new capacity added, in 10 to 15 years—I may be wrong. Ten or 15 years back, we were second or third in the world in our aluminum capacity; however, during the last 10 to 15 years, I have not seen one new smelter set up in Canada.

I don't know whether this agreement is going to solve the problem, but the point is that the economy is changing and trade is changing, and 10 or 15 years down the road, will this agreement be good enough for the changing trade requirements in the new knowledge-based economy? I would like to know your views on that.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Thank you very much, Mr. Arya. That is an excellent question. It points to something about the new NAFTA that is not fully appreciated by Canadians.

Something we have discussed often with the negotiators is that in many ways the negotiation around the new NAFTA was almost a two-level negotiation. There was the very high-profile set of issues, often about Canada's pushing back against unprecedented protectionist demands from the United States. That was what was most visible to Canadians, what Canadians were quite rightly most concerned about. Then there was a negotiation on what we sometimes have referred to as the set of bread and butter trade issues. These are the kinds of issues trade negotiations are more routinely concerned about, and they're where some of the greatest gains of NAFTA were won. Let me talk about a few of them.

One is that this agreement has very successfully removed a lot of the red tape associated with cross-border trade. In the consultations we did before and during the negotiation, one of the things we learned, and that we heard most urgently from Canadian businesses engaged in trade in the NAFTA region, was that their greatest issue was all the red tape involved in trade. We heard from a surprising number of businesses that simply didn't bother to claim their NAFTA preferences because the red tape was so overwhelming. Think about that. The weight of the red tape was greater than the value of the tariff-free access that NAFTA offered.

One of the real pluses of this agreement is that, working together with the United States and Mexico, we have done a very good job of cutting back a lot of the red tape by using some of the technologies that the 21st century allows to make it easier for people to trade. That is one of the things we did with NAFTA. It doesn't make a great headline, but it will make life easier for a lot of Canadian businesses and will make them much more competitive.

In terms of the 21st-century economy more broadly, that was another part of this that was beneath the sea level, if you think of an iceberg. There was the tip of the iceberg, the very visible struggles, and then there was all the rest of the iceberg. That was another part of all the rest of the iceberg of the negotiation: a stated effort where we had real agreement between Canada, the U.S. and Mexico to modernize this agreement, to make it relevant to the shape of the 21st-century economy, relevant for the service sector and for sectors of the economy that are based much more on intellectual property than on physical goods. I think we achieved a great deal there.

I would like to make one final point. When it comes to certainty in the future—and to me, this is a very important element of the new NAFTA, something that I hope we in Canada will be able to replicate—after an arduous process of negotiation, we have achieved an agreement that has strong cross-party support in both the U.S. and Mexico.

Mr. Hoback referred to the fact that the U.S. managed to ratify this agreement in the heat of the impeachment struggle in the U.S. We have, in the new NAFTA, an agreement that both Nancy Pelosi and Donald Trump support. I struggle to think of anything else those two important American leaders both support. It's important for Canada that they both support it, because that gives us a real guarantee for the future.

Madam Chair is asking me to wrap up, but let me just conclude by also referring to our guest from Mexico, Mr. Seade. He represents a government that was not in office when the bulk of this agreement was negotiated. I would like to thank and acknowledge the work of Ambassador Seade, and also of President López Obrador. They did a difficult thing, which was to take an agreement that was negotiated by their predecessors and political opponents, take ownership of it and get it across the finish line. That's a real show of national unity in Mexico.

I think it would be great if we could accomplish the same thing here in Canada.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Minister Freeland.

We'll move on to Mr. Savard-Tremblay.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Good morning, Deputy Prime Minister. Thank you for coming here to answer our questions. Thank you also for the prompt just now when you said that I would like to ask you questions about aluminum. However, I am first going to ask you one about another sector, if you don't mind.

There have been frequent discussions on the new agreement. It has also been debated in the House and in other situations. In general—as you repeated here—you see the new agreement as progress over the previous NAFTA. We are not here to oppose this on principle. We are here to study the new agreement and to determine whether or not it does represent progress over the previous agreement. On some points, we can state at the outset that there is progress.

However, I would like to ask you some questions about agriculture, more specifically the dairy sector. As we know, the market has been opened up by 3%, which could represent losses of $150 million annually. Class 7, the class dealing with milk proteins, was eliminated, as were some export control provisions. Those provisions could apply to third countries. In fact, milk producers are currently pouring a part of their surplus protein into international markets, especially in Asia and the Middle East.

In terms of agriculture, that is to say dairy production, is it your opinion that the new agreement is superior to the previous one?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Thank you for the question, Mr. Savard-Tremblay.

I am surprised that your first question is not about aluminum.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

We are full of surprises.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

I see that, but I will be very happy to answer questions about aluminum too.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

I will be happy to ask them.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

In terms of the agreement overall, I would like to start by saying that I am convinced that it is a good agreement for Canada and for Quebec. I am convinced of that because there were long consultations and discussions with entrepreneurs, workers and leaders in Quebec. As you are well aware, Premier Legault has said openly and clearly on a number of occasions that he and the federal government agree that this agreement is very significant and good for Quebec. I agree with Mr. Legault.

I have also observed, both in the negotiations on NAFTA and in those on CETA, that Quebec is one of the provinces in Canada that understands the importance of international trade very well. Quebec has negotiators with a lot of experience and we worked in close collaboration with them.

As for agricultural and dairy producers, it is important to understand the context. As I said in my remarks, the United States began with a clear demand, to completely dismantle the supply management system. To me, that is an astonishing demand. As you are well aware, that has been what the United States has wanted for a number of years. Once again, they tried to completely dismantle our supply management system.

I believe they thought it would be possible. I am very proud that our government stood firm in its response. We said that it would not be possible and that we were going to keep our supply management system.

You are right when you say that, in the negotiations, we gave the United States a little more access to our market, as the previous government had done in the negotiations on the Trans-Pacific Partnership (the TPP) and CETA. I agree with you and with the dairy producers of Canada that, as a result, it is essential for our government to provide fair and equitable compensation to Canadian dairy producers. I hope that all political parties will support that measure. Throughout the negotiations, I had long discussions with Canada's dairy producers. So the producers are well aware of everything that Canada has done.

I would like to take this opportunity to thank the producers in the dairy sector for their support and collaboration. People in the sector are well aware that Canada lives in a world of international free trade. We need open markets, but we have to preserve a part of our own market by protecting our supply management system.

It is complex, it is difficult, and producers in the sector stood with us throughout the process. After the agreement is ratified—which I hope will be done quite quickly—it will be time to provide those producers with fair and equitable compensation.

[The Chair, Liberal, Judy Sgro]

Thank you very much. Your time is up, sir.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

We will continue later.