Evidence of meeting #6 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 workers.
A video is available from Parliament.
Liberal
The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)) Liberal Judy Sgro
I would like to call to order the sixth meeting of the Standing Committee on International Trade.
Pursuant to the order of reference of Thursday, February 6, 2020, we are studying Bill C-4, an act to implement the agreement between Canada, the United States of America and the United Mexican States.
Before we start with our witnesses, Mr. Savard-Tremblay.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Madam Chair, if I may, I'd like to say a few words before we get going. In the audience, we have a group of students from the École nationale d'administration publique, ENAP. They are here with their professor, Rémy Trudel, who used to be a minister in the Quebec government.
Back in the day, I used to teach classes under my friend Rémy. In fact, today's meeting is somewhat of a class that we'll be giving. It's about understanding how our institutions work. Thank you all for being here.
Liberal
The Chair Liberal Judy Sgro
Thank you.
Welcome. We hope you enjoy the meeting. We're always pleased to have visitors here.
Today, for five minutes, we have Philippe Méla, the legislative clerk from the committees and legislative services directorate, and Nathalie Caron, legislative expert. They will give us a few minutes of advice or comment as we are going to be dealing with NAFTA at some point or another in the next few days. They will explain the services they can provide to committee members in drafting amendments and so on.
I will turn it over to you, Mr. Méla.
The Clerk
I'll start by introducing myself.
My name is Philippe Méla, as Ms. Sgro mentioned. I'm the legislative clerk for Bill C-4.
You adopted a motion yesterday determining the dates for the deadline for amendments and the clause-by-clause consideration of the bill. I'm going to be here to help you analyze the receivability of amendments, if you have any, and the amendments will be drafted by my colleague, Nathalie Caron.
Since you already know me, being here quite often, I'm going to let my colleague speak.
Nathalie Caron
Good afternoon. My name is Nathalie Caron, and I am the senior legislative counsel at the Office of the Law Clerk and Parliamentary Counsel of the House of Commons. I was tasked with drafting the amendments for Bill C-4.
I'd like to start by saying that the work we do for you, always on an individual basis, is confidential and non-partisan. The discussions we have with you about amendments are not shared with anyone without your consent. By the way, when you have amendments, we encourage you to contact us as soon as possible so that we can begin work on the amendments immediately. You don't need to wait until you are fully prepared or you have all your instructions ready. As soon as you're ready to give us instructions for one or two amendments, you can contact us so we can get to work right away.
It can be a lengthy process, depending on how complex the request is—hence the importance of the instructions you give us. It helps us if you can explain the purpose of the measure and your objectives, as well as provide some context. Having that information is very helpful as we draft the amendments. Our role is really to turn your instructions into legislation that does what you want it to. Your explanations and objectives are essential to the analysis we carry out. We perform a legal analysis of your instructions, and if we identify any issues, we let you know. That way, we can try to find you other options. Then, we start drafting.
We produce a draft, which is reviewed and then sent to you for approval. Once approved, it is translated and revised. The process has a number of steps, which is why it's so important that you contact us as quickly as possible.
What I'd like to convey to you today is this: don't hesitate to contact us, even if you're not ready to provide instructions for your amendments. That way, we can at least start the discussion and explore solutions.
Liberal
The Chair Liberal Judy Sgro
Ms. Caron, can you leave business cards and contact information with the members?
Thank you.
Mr. Hoback.
Conservative
Randy Hoback Conservative Prince Albert, SK
Thank you for your presentation. I appreciate the service.
What's the normal turnaround time if we have something we want you to consider? Does it take a day, two days, four days? Just give us an idea what is normal.
Nathalie Caron
It always depends on the number of requests we have, and on the complexity of the request. For some amendments, let's say to change a coming into force date, the turnaround time is very quick. But if you're trying to do something complex in fiscal legislation, sometimes there is a lengthy analysis to be done. It's also influenced by volume. Sometimes we get a crunch where we have many requests at the same time, so then it will take longer.
Conservative
Randy Hoback Conservative Prince Albert, SK
In this situation, where we have a very fixed, short time period to deal with this, if we were to come with an amendment in the middle of next week, how would that impact your ability—
Liberal
The Chair Liberal Judy Sgro
Are there any further questions or comments?
Thank you both very much for coming. We look forward to seeing more of you as the time passes.
We'll go on to our witnesses. Thank you for your patience.
As an individual, we have Michael Geist, Canada research chair in Internet and e-commerce law, faculty of law, University of Ottawa. From the Canadian Sugar Institute, we have Sandra Marsden, president. From Centro de Investigación Laboral y Asesoría Sindical, by video conference from Mexico City, we have Hector de la Cueva, general coordinator. And, on behalf of Unifor, we have Angelo DiCaro, director of research.
Welcome to all of you today.
Mr. Geist, we'll start with you.
Dr. Michael Geist Canada Research Chair in Internet and E-Commerce Law, Faculty of Law, University of Ottawa, As an Individual
Thank you, Madam Chair, and good afternoon.
As you heard, my name is Michael Geist. I'm a law professor at the University of Ottawa, where I hold the Canada research chair in Internet and e-commerce law. I'm also a member of the Centre for Law, Technology and Society. My areas of specialty include digital policy, intellectual property, privacy and the Internet. I appear today in a personal capacity, representing only my own views.
As you know, the typical approach before committee on a bill study is to examine the bill and identify provisions to support and areas for amendment. In this case, however, what really matters is not what is in the bill, but what is not. Indeed, the most notable issues from a digital policy perspective won't be found in Bill C-4. Rather, they are found in the new NAFTA itself, and they typically limit Canada's policy options for future reforms rather than require immediate legislative action. I think this raises a significant challenge, since the flawed aspects of the deal cannot, to my knowledge, be fixed in Bill C-4. Rather, they require change in a trade agreement that has been largely presented as a take-it-or-leave-it deal.
I'd like to briefly discuss four issues along these lines: copyright term extension, the cultural exemption, privacy and data protection, and Internet platform liability.
First is copyright term extension. The intellectual property provisions in the agreement raise some significant concerns, but none more so than the requirement to extend the term of copyright from the international standard of the life of the author plus 50 years to life plus 70. The additional 20 years is a reform that Canada rightly resisted for decades. By caving on the issue, the agreement represents a major windfall that could run into the hundreds of millions of dollars for rights holders and creates the need to recalibrate Canadian copyright law to restore the balance.
The independent data on copyright term extension is unequivocal: It results in less access to works, higher costs for consumers and no incentive for new creativity. In the words of Paul Heald, one of the leading researchers on the effects of term extension, it effectively represents a tax on consumers to the benefit of publishers with no obligation to benefit the public.
The copyright review that was conducted by the industry committee in the last Parliament included an extensive review into the issue and concluded that extension should only occur as part of a trade agreement ratification. In such a circumstance, it recommended establishing a registration requirement to obtain the additional 20 years of protection to mitigate against the disadvantages of term extension and increase the overall transparency of the copyright system.
Copyright term extension does not appear in Bill C-4 because the government, I think, smartly negotiated a 30-month transition period to address the issue. The government has not rushed into term extension, and it should take full advantage of the transition period to follow the copyright review recommendation by establishing the registration requirement for the additional 20 years. That would allow rights holders who want the additional protection to get it, while also ensuring that many other works enter into the public domain after their term has expired, after life plus 50.
Second is the cultural exemption. Now, much like the copyright term extension, there is no reference to the cultural exemption in Bill C-4, and that's because the cultural exemption doesn't require legislative reform. However, I'd argue that the exemption is one of the most poorly understood aspects of the agreement. Consistent with the government claims, the cultural exemption covers a broad range of sectors, with a near complete exemption for Canada.
However, while the government has emphasized its broad scope, it rarely speaks of subarticle 32.6(4), which comes immediately afterward. That provision was the price of the exemption, and it permits the U.S. to levy retaliatory measures of “equivalent commercial effect” where Canada relies upon the exemption. The retaliatory measures provision means that the U.S. is entitled to levy tariffs or other measures that have an equivalent commercial effect in response to Canadian policies that would otherwise violate the new NAFTA if not for the exemption.
Since the provision does not limit the response to the cultural sector, the U.S. can be expected to target sensitive areas in the Canadian economy, such as dairy or steel, in order to discourage the use of the exemption. That was the U.S. strategy when it recently responded to a French plan to levy a new digital tax: The U.S. planned to levy $2.4 billion in tariffs against French goods such as wine, cheese and handbags.
How could that play out in a Canadian policy context? The recent report of the broadcasting and telecommunications legislative review panel, the so-called Yale report, contains what I view as many ill-advised recommendations on regulating the Internet and online news services, such as news aggregators.
Should the government adopt the broadcast panel recommendations on content, the U.S. would have a strong case for permitting retaliation with measures of equivalent commercial effect. Panel proposals that may violate the new trade agreement include requirements to pay levies to fund Canadian content without full access to the same funding mechanisms enjoyed by Canadians, licensing requirements for Internet services that may violate NAFTA standards, and discoverability requirements that limit the manner in which information is conveyed on websites and services.
I'll emphasize that I think this is bad policy that should be rejected. However, for the purposes of this review of the new NAFTA, note that the policy flexibility to enact reforms in this area is severely limited by the agreement, which establishes the possibility of retaliatory tariffs for cultural policy.
Third is privacy. The limitations of new Canadian policy also arise in the context of privacy and data protection. Unlike the cultural exemption, which permits violations of the treaty subject to potential retaliatory tariffs, on the issue of privacy Canada would run the risk of being offside of its commitment under the new NAFTA.
Note, again, that there is no provision on point in Bill C-4. There is no need for one, since the new NAFTA prohibits certain privacy-related provisions, rather than requiring them.
For example, the new NAFTA includes a provision that prohibits data localization, which refers to measures requiring the data to be stored in Canada. The new NAFTA actually features a more restrictive provision than the one found in the CPTPP. There are some general exceptions that build in GATS-related rules, but the Canadian government will clearly be restricted in its ability to establish localization requirements under the agreement.
The implications of this limitation are far-reaching. With respect to data right now, consider the wide range of policy issues we're grappling with, whether that's Canada's digital charter and the proposals for privacy and data reforms, concerns around data sovereignty, AI-related issues, or fears about the competitiveness of Canadian businesses in relation to Canadian data.
It's notable that the Canadian government itself has established localization requirements as part of its cloud computing policy. Indeed, there is a recognition that data localization may be needed in some circumstances. Yet under this agreement, Canada is severely limited in terms of its ability to implement such requirements.
The same is true on the issue of data transfers, as the new NAFTA limits our ability to restrict them as well. As we enter into discussions with the European Union about the adequacy of Canadian privacy laws, there are concerns that the data transfer provision could put Canada between a proverbial privacy rock and a hard place, with the EU demanding certain restrictions on data transfers and the new NAFTA prohibiting them.
Finally, there is Internet platform liability. A similar dynamic arises in the context of Internet platform liability, which raises the question of what responsibility lies with Internet companies for third party content hosted on their sites. This issue captures large players, such as Google and Facebook, alongside anyone who offers user comments or content. Once again, there is no provision on this issue in Bill C-4. The reason it isn't there is that the new NAFTA restricts policy in the area rather than requiring a new provision.
The new NAFTA includes a legal safe harbour for Internet intermediaries and platforms for content posted by their users. The rule is designed to provide the platforms with immunity from liability both for the removal of content and for the failure to remove content. Contrary to some claims, the rule doesn't mean that “everything goes”. Sites and services are still subject to court orders and the enforcement of criminal law. Intellectual property rights enforcement is also exempted.
However, there are some who argue that the responsibility of Internet platforms should go further, with potential liability for failure to act even in cases of harmful, albeit legal, content. That position raises important freedom of expression concerns and questions about how to balance free speech safeguards with protection from harm.
The issue for a review in Bill C-4 is not to debate where Canada should land on the issue. For example, the broadcast panel recommended liability for online harms, even if the content is legal. Others, including myself, would argue that liability should rest with illegal content, but to create liability for legal content is to render Internet companies judge and jury over what remains online, thereby further empowering those large Internet companies, as well as limiting competition and freedom of speech.
The key point here is that there is a policy debate to be had. Under the new NAFTA, Canada has effectively already committed to a position, one that restricts our ability to establish liability for third party content.
I look forward to your questions.
Liberal
The Chair Liberal Judy Sgro
Thank you very much, Mr. Geist.
I'll move on to the Canadian Sugar Institute.
Ms. Marsden, please.
Sandra Marsden President, Canadian Sugar Institute
Thank you, Madam Chair and members of the committee.
I would like to share the views of Canada's sugar industry on the implementation of the new NAFTA, the Canada-United States-Mexico trade agreement. The Canadian Sugar Institute strongly supports timely ratification of the new agreement but is also seeking assurances from government that vital Canadian export administration procedures are in place when CUSMA enters into force this year.
The CSI represents Canadian refined sugar producers on nutrition and international trade affairs. The industry has three cane sugar refineries, in Vancouver, Toronto and Montreal; a sugar beet processing plant in Taber, Alberta; as well as two further processing, value-added, sugar-containing product operations in Ontario, one in Belleville and one in Scarborough.
Canadian refined sugar and sugar-containing product exports remain constrained by U.S. quotas that were established in the 1980s. These quotas were not liberalized under NAFTA or the WTO. In fact, those agreements further restricted our access to the U.S. market rather than liberalizing it. Our industry suffered the pain of that through the closure of the Winnipeg sugar beet factory in Manitoba, as well as a cane sugar refinery in Saint John, New Brunswick. The CSI strongly supported the renegotiation of NAFTA as a new opportunity to perhaps restore some of that access and gain some new, more flexible rules.
Unfortunately, CUSMA did not achieve the industry's objectives of substantial market access gains, but it did preserve existing access. Of course, during this negotiation we often weren't sure whether we would lose ground rather than gain it, and it did create two new small quotas.
The existing access that has been maintained includes 10,300 tonnes of beet sugar from Alberta, processed from Alberta sugar beets, and just over 59,000 tonnes of sugar-containing products. These are products high in sugar, such as tea mixes and other drink mixes, hot chocolate, gelatin desserts, those kinds of products. Those products are produced in eastern Canada, with sugar refined in Montreal and Toronto. These quotas are very small in relation to the 11-million-tonne U.S. sugar market, but they are critically important to an industry that's constrained by foreign trade barriers.
The two new U.S. quotas that are in CUSMA include a 9,600-tonne sugar beet quota, which is exceedingly important to southern Alberta, approximately doubling the current access; and a new 9,600-tonne quota for sugar-containing products. That's small in relation to the existing 59,000 tonnes, but it does bring with it more flexible rules that will allow the volume to be fully utilized.
The problem with the existing quota is that their restrictive rules of origin and end-use limitations haven't kept pace with changes in the marketplace. That quota utilization has been reduced by about 25% since 2006. The Canadian sugar refining and sugar-containing product operations in eastern Canada have suffered this loss, in the order of $11.5 million and 10,000 tonnes.
Coming back to administration, the value of these quotas to Canada depends on the method that Canada chooses to manage the export administration. Export controls are the firmly established method for managing access to restricted high-value markets in NAFTA and, for example, in CETA. They are necessary to provide predictability to enter into supply contracts with U.S. customers, to maintain supply chains and to justify ongoing investment in those further processing sugar-containing product operations.
We have consistently advocated for export controls alongside our market access objectives in CUSMA trade negotiations, as we did in the prior TPP negotiations. We have now received assurances that Canada will implement export controls. The issue will be a question of timing. It's important that these procedures be in place before CUSMA is implemented; otherwise, the value will not transfer to our industry.
A public consultation has been planned. We have been informed that this will be an omnibus consultation that will extend beyond CUSMA quotas to existing U.S. quotas as well as the CETA origin quotas. Of course we support public consultation. Our concern is that this not delay the necessary implementation of export controls and allocation to companies for the new CUSMA quotas.
We're seeking further assurances that there isn't any unnecessary delay, that Canada notify the U.S. immediately upon ratification of CUSMA, and that Canada will use export controls, because there is a requirement in CUSMA that Canada do so 150 days prior to U.S. acceptance of those export permits at entry. There won't be border enforcement this year, but, at the very least, it should be in place by the beginning of the second year, in 2021.
There is no need to consult on the beet sugar quota, because the only sugar that qualifies for that is produced and processed in Alberta. For the sugar-containing products, which are the key issue for our industry, the quotas should be allocated to those companies that have made and sustained investments in Canada, that have historically and actively participated in those quotas, and that have suffered the volume and financial losses. Essentially, that's the members of the Canadian Sugar Institute who do the sugar refining and the associated sugar-containing product operations. Right now 92% to 95% of the U.S. quota is filled by our members.
Thank you very much.
Liberal
The Chair Liberal Judy Sgro
Thank you very much, Ms. Marsden.
We will move on to Mr. de la Cueva, by video conference from Mexico City.
Okay, we're going to go to Mr. DiCaro first.
Angelo DiCaro Director of Research, Unifor
Please, I'll explain. When we were first invited, we also asked if Hector could join us and split our time. That's what we've decided to do. We'll do five minutes and five minutes, and that will make up Unifor's time. I only learned about the extra 10 minutes today, so it was too late to fill in the blanks on the comments. I'll go first, if you'll indulge me; then we'll go to Hector.
Good afternoon, Madam Chair and members of the committee. As was said, my name is Angelo DiCaro. I am the national director of research for Unifor.
Unifor is Canada's largest union in the private sector, representing more than 315,000 workers in nearly every industry, from coast to coast to coast.
I want to thank the committee for the invitation to speak today on Bill C-4 and the implementation of CUSMA, and I bring greetings from our national president Jerry Dias and national secretary-treasurer Lana Payne.
I also want to thank the committee for allowing me to share my time with Hector de la Cueva, a friend and an ally of our union, who is with us on video conference from Mexico City. Hector is the general coordinator of Mexico's Labor Research and Trade Union Advisory Center, and he has been a key point of contact for us throughout these NAFTA negotiations.
I want to open my remarks by stating what's probably the obvious. NAFTA has been a very challenging deal for working people, with many negative effects over time.
lt was an agreement built to limit democratic controls over trade and investment and tie the hands of government policy-makers. lt was one of the first agreements to establish private tribunals that investors could use to challenge Canadian regulations and potentially sue governments for unlimited sums of money. lt conceded sovereignty of Canada's energy production to the United States. And despite the obvious competitive pressures that “free trade” would put on workers in all three countries, NAFTA and its negotiators simply paid no mind.
A generation later, we have seen the outcome: a manufacturing trade deficit with Mexico that has ballooned from $3.5 billion at its onset to more than $27 billion today—half of that in the auto sector alone, including parts.
We've seen a workforce pressured by wage cuts and threats of job loss to low-wage right-to-work states or Mexican export processing zones. If you want examples, you don't have to look too far, considering the recent struggles we faced at Nemak, in Essex, and of course our fight with General Motors assembly operations in Oshawa.
These job dislocations happen largely because of NAFTA. They happen because businesses have unconditional access to markets. lt's why companies can sell here but have no obligation to build here.
In light of that, it's almost impossible for our union to be fully satisfied with the outcomes of CUSMA. Unifor members in Kitimat and in Saguenay, for instance, are rightly upset about the unequal treatment the aluminum sector received regarding aluminum content rules for automobiles. It's a problem that needs addressing.
Our members in the softwood lumber industry are still disadvantaged by unfair duties on exports, deepening our already challenged forest industry.
But while we are paying close attention to these concerns, there are, without a doubt, important advances in this deal, led by Minister Freeland and her team, that deserve support.
ln CUSMA, for the first time, tariff-free auto trade is now conditional on high-wage production. It's not a silver bullet, but it is a new tool to help stop the bleeding of investment to low-wage factories and an attempt to incentivize an upward pressure on low-wage production.
ln CUSMA, for the first time, Canada has scrapped its investor-state dispute settlement system, or ISDS. This is very good. Frankly, we would encourage the federal government to go one step further in its implementation efforts and direct the removal of ISDS from all other trade agreements that Canada currently has.
CUSMA also reclaims our energy sovereignty. lt maintains our cultural carve-out and reverses course on certain bad cultural policies enacted under the Harper government.
Most importantly, it establishes important fixes to pre-existing language and groundbreaking new provisions that address workers' rights—provisions that have been made even stronger, thanks to recent changes outlined in the protocol of amendment.
CUSMA's labour provisions not only exceed the terms of the original NAFTA, but they exceed provisions in any trade agreement negotiated ever since—provisions that I, personally, would have thought impossible to achieve even three years ago.
Now, we are not so naive as to think that CUSMA, by itself, fixes the deeply entrenched anti-worker practices in Mexico. If anyone thinks that, then they don't have a clear read of the problem in Mexico.
The implementation of this agreement must come with clear commitments that Canadian officials will work with their Mexican counterparts to finance rights-based community support projects and fully resource a proactive investigative approach to the rapid response mechanism.
All of this must be done in consultation with trade unions and worker advocacy groups in Mexico, like Hector's.
With that, I will pass the rest of my time over to Hector for his comments.
Hector de la Cueva General Coordinator, Centro de Investigación Laboral y Asesoría Sindical
Thank you, Angelo. Thank you to the chair and members of the committee for having me speak today.
I have travelled to Canada many times, but it is very cold, especially in winter, so I appreciate you allowing me to communicate from Mexico City, where it is much warmer. Spring came early for us.
I have spent much of my life working with the independent trade union movement here in Mexico. I have seen the damage caused by a system of undemocratic trade unionism and fake collective bargaining. In Mexico, under NAFTA, real wages have fallen over 25 years, despite major advances in productivity and trade.
I share the concern raised by Unifor. There is a lot in the new CUSMA that reflects the old NAFTA, an agreement that aimed to exploit my country for its low-wage workers and its natural resources, and reproducing inequalities between the countries and inside the countries. Mexico's relationship to North America is as a low-cost supplier of goods and services. That keeps more than 50% of Mexicans living in poverty. While Mexicans suffer, Canadian workers suffer too, with job losses and threats of low wages.
In NAFTA, workers do not win. I will say, like Angelo, that there are important advances in the new CUSMA on labour rights. This is perhaps its positive aspect. The new agreement has already had an immediate consequence on promoting long-overdue labour reforms in my country. This includes provisions to ensure democratic participation in trade union organizing and collective bargaining.
In Mexico, many workplaces are controlled by so-called “protection contracts”, which are collective agreements established by employers and supported by unelected unions. In Mexico, these powerful, unelected union officials are installed as worker representatives on tripartite committees, like arbitration boards, guaranteeing that workers have no voice.
The new rapid response mechanism for monitoring compliance is stronger than any measure we have seen before, and we hope it will allow us to better challenge this system of corruption that breeds unfair trade. However, these enforcement tools should not be used only as a weapon to attack Mexico. Instead, they should apply fully to all parties of CUSMA, including Canada.
In Mexico, the main problem we face has not been our national laws or ratification of international agreements. Having strong laws designed to protect workers and preserve human rights means nothing if states or corporations simply ignore them. The new CUSMA enforcement measures include significant penalties for corporations that break the rules. That is encouraging. That is something we have not seen before, but sometimes U.S.- and Canadian-based companies are the ones that ignore their obligations to labour and human rights, and that must stop as well.
To be truly effective, the labour provisions in CUSMA must be used as a tool to attack corporate injustice and social inequality, not simply to attack Mexico.
I was very pleased to come and meet with Canada's chief negotiator and other officials during the negotiation process. If you can believe it, we had an easier time arranging meetings with Canadian officials than with our own trade officials here in Mexico. I want to thank those who spoke to us, and who heard our concerns, for their openness.
Thank you again for allowing me to speak. I would be happy to answer any questions.
Thank you very much.
Liberal
The Chair Liberal Judy Sgro
To all of you, thank you very much for your contributions.
We will now go to committee members.
Mr. Lewis, please.
Conservative
Chris Lewis Conservative Essex, ON
Thank you very much, Madam Chair.
Thank you very much to the witnesses for coming here today.
Allow me to open by saying that we are the party of free trade. Not by any stretch of the imagination is it in our interest to hold it up. Families, workers and businesses depend on it. But without all the information at our fingertips, such as an economic impact study, we have to do our due diligence.
Mr. DiCaro, the clause that requires 40% of cars produced in Mexico to be completed by workers making at least $16 an hour, or $20 Canadian, on the surface is good news for auto workers in Canada, and obviously for workers in my riding of Essex. The underlying assumption is that automotive manufacturing jobs will migrate to the north. I am concerned, however, about the lack of analysis.
My question is twofold, sir. First, will you have an internal mechanism for tracking this sort of data to ensure that this provision does benefit auto workers in Canada? Second, if the measures are not being properly implemented, is there a means for you to intervene to ensure compliance?
Director of Research, Unifor
Thanks for that question. It's an excellent question.
I'll tell you that one piece of this is that the 40% applies to light cars. The 45% of this new labour value content applies to trucks. There are two different conditions. Mechanisms in the current language of the agreement allow parties to whittle that down to as low as 25% labour value content. It's conditioned on research and development work that can get pumped into the mix that you can shave off some of those percentage obligations, as well as a very strange provision around powertrain operations and how many units you produce in a year. It's not exactly a 40% clean figure. With that, I think compliance will be a little bit easier to meet. In terms of how this works out in practice, a lot of it will be conditioned on the uniform regulations that are still being written. We haven't seen a draft of those yet. We'll have to pay close attention to that. We're hoping to see those soon.
On the question about monitoring, that's something that has been on our minds since day one. It's not just on labour value content. When you look at the new rules that apply to auto, I think it's the one sector that's seen the most significant transformation of the rules of origin. I might be wrong, but to me it seems more significant than others. How these new and very complex rules will be monitored is an open question. We have poked and prodded to try to get information on this, but we are told that these are proprietary bits of information that live and reside with Canada Border Services and the exporters. Until they're willing to disclose that, we're a little bit in the dark, but absolutely, as this rolls out, this is something that will be top of mind for us to poke around in.
Conservative
Chris Lewis Conservative Essex, ON
Thank you.
I have one more question for you, sir. Yesterday, Brian Kingston, representing the Business Council of Canada, in response to my question about implementation indicated that one of the most complicated elements of this agreement is rules of origin, particularly in the auto sector. He suggested that there's a lot of work to be done to ensure that the implementation phase does not create backlogs at the border.
Do you have any concerns of your own about implementation? Are talks under way to ensure that the labour value content threshold will be properly tracked through the supply chain?
February 19th, 2020 / 4:15 p.m.
Director of Research, Unifor
I think I answered the second part of your question. Again, there's no tracking mechanism that I'm aware of. As the regulations come out, these are questions that need to be asked as those are drafted.
In terms of Mr. Kingston's comments, I do agree that there's a lot more to this new package of rules of origin. Is this something that is needed? Yes, given the extensive loopholes that existed in the original NAFTA deal. I guess in some ways, seeing the trend we were facing with the trans-Pacific partnership, for instance, where those rules of origin would have been further watered down, or even in a free trade zone giving tariff preferences to companies doing the trading—basically saying, in the TPP, that half the car doesn't even have to come from the free trade zone but we'll still give you the access—it seemed a little bit ridiculous.
We've moved the other way in CUSMA, with stricter rules to try to maintain the integrity of what is a North American-built car, so that if tariff-free preferences are given, we can say with a straight face that it was actually built on this continent. For that reason, it probably will be complicated to work through this, but I think it is a necessary step.