International Trade Committee on Feb. 19th, 2020

[Randeep Sarai, Liberal, Surrey Centre, BC]

Thanks, all of you, for your presentations.

I want to thank Mr. DiCaro. Unifor has a big presence in my riding. I have family members and constituents who are members. You protect workers' rights, and it has not gone unnoticed.

When it comes to particular labour rights, not just the salary of $16 per hour in Mexico but also gender equality and the protection against abuse and threats, repeated threats or single threats, does it not only affect and benefit the Mexican workers but also uplift the labour industry in North America in general and at the same time protect Canadian workers in the auto sector? I think for my constituents to see that it's not only about improving the rights of workers in Mexico but also the rights of workers in Canada, when they have parity or at least close to parity in workers' rights in North America on the same products that are being processed....

[Angelo DiCaro]

I wouldn't go so far as to talk about parity of certain auto rights, but on the other pieces you're absolutely right. We've been talking a lot about the auto rules as they relate to labour, talking a little about the Mexican annex that was negotiated to deal with the issues that Hector raised on protection contracts and all that, but the chapter itself is fundamentally different in a lot of areas from what we had in the previous NAFTA. It's a sea change, covering stronger, wider-reaching obligations for the parties. Those obligations not only refer to core standards like collective bargaining and freedom of association, but freedom of association also has a connection to the right to strike, which is again a remarkable inclusion into this deal that appears as a clarifying footnote.

As you say, there are provisions on gender equality, on worker violence and, for the first time, on migrant workers moving across borders. I think you're seeing an attempt to hear a lot of the concerns on NAFTA's failings that have been raised over the past 30 years and address those in kind.

Do I think it could have gone much further? I think so; I think there are areas. As with anything, we can do that, but when you look at it in isolation, when you look at the labour chapter as it stands now, with its connection to dispute settlement, which we've never had before, and fixing a lot of the terms that have proven to be effectively useless through dispute settlement rulings—because now some of the labour provisions are carbon copies of the trans-Pacific partnership labour terms—this deal corrects about 75% of that. So much of this is better than what we had that I think it's certainly going to bring us down a different path going forward.

[Randeep Sarai, Liberal, Surrey Centre, BC]

Thank you, Mr. DiCaro.

Mr. Geist, you gave a good analysis, saying we should ratify this but we should work to correct some of the privacy and other provisions in the next 30 months. What would you say are the key provisions that need to be protected for Canadians in this digital age, and what are the foremost ones that need to be done?

[Dr. Michael Geist]

Let me clarify. The issue of copyright term extension is where there is this 30-month phase-in transition period, and on that issue I think we ought to follow the recommendations we saw from the copyright review.

In terms of moving ahead with ratifying and solving this, the challenge is.... I don't know enough about the sugar industry or the labour practices or about the myriad other issues, but I just want to highlight how difficult it becomes when you're effectively being asked whether to trade your privacy for greater access of beet sugar or better labour standards. I don't know. I know about privacy, and I think one of the challenges we face in the current trading environment, and it is particularly pronounced in this deal, is that many issues are not as obvious up front, in part because we're not required to make any changes. Like many countries, Canada will often negotiate by saying that our starting point is that as long as we don't have to change our existing laws, we're okay.

The problem here is that we have locked ourselves in on a number of different issues, including copyright, privacy, as well as some of the other issues I've highlighted. I have real concerns that as we get into some of those issues—and they're taking up a lot of bandwidth right now for a lot of people—we may find ourselves having essentially given away some of the potential policy solutions, because we are now restricted by virtue of this agreement, and it is not obvious to me that there's a solution in that regard.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move on to Mr. Kram.

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

Thank you, Madam Chair.

Thank you to everyone for joining us today.

Mr. Geist, could you elaborate a little on what exactly changed in the new NAFTA compared to the old NAFTA with respect to the cultural exemption, in particular the retaliatory measures that are now available to the U.S.?

[Dr. Michael Geist]

In fact, not a lot has changed. We added a couple of things within this provision where we talked about broadcasting and some other issues. I raised this to emphasize that this notion that we've taken culture off the table and that's a big win really doesn't tell the whole story of what it means to regulate in the current cultural environment. In fact, this may be unavoidable. But if we move forward with different kinds of proposals or see the kinds of proposals, let's say, that we saw from the Yale report, which do envision reforms within Canada's digital sector and within Canada's cultural sector, that quite clearly would run afoul of the kinds of things we've now agreed to within this new NAFTA.

What we are doing is, I think, potentially setting ourselves up for the U.S. to say that if we want to do this, they've given us right to do it—or we've negotiated the right to have that policy flexibility—but it's not free. In order for us to be able to take advantage of that, they are entitled to be able to levy measures of equivalent commercial effect, and they're free to pick and choose on what industry they want to have that kind of effect.

For example, you are talking about new kinds of levies on large Internet companies, which is one of the proposals in the Yale report, potentially talking about hundreds of millions of dollars that they will have to pay into that system. If the rules that we have are seen to violate the new NAFTA, that means the U.S. will be entitled to levy against whatever they want to target in Canada, measures of equivalent commercial effect. There is potentially a huge cost involved.

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

Could you describe some of the current cultural programs or policies that Canada has in place that could be put at risk for some of these retaliatory measures from the U.S.?

[Dr. Michael Geist]

Sure. I will use the Yale report to give you a couple of examples.

One is this notion that the Yale report recommends having almost any website—certainly the large services like the Netflixes of the world, but potentially it captures many others—paying in through either levies or other sorts of fees. The problem with that system is that we, at the same time, have systems in place that are only available to Canadian businesses. So we say we're going to make it like-for-like. Canadian businesses paid into this; now foreign businesses will have to pay into this. The problem is that the only beneficiaries in some instances are the Canadian businesses. That's not like-for-like. That may well violate some of the services provisions that we have within NAFTA and may lead to retaliatory measures.

We also have, for example, discoverability requirements—the CRTC determining, potentially, what sites news aggregators have to link to. That may violate some of the rules that we have right now in terms of free flow of information. There is a cost there. The U.S. might be entitled to retaliate.

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

Just to be clear, you said that these retaliatory measures would not be limited to the culture sector.

[Dr. Michael Geist]

That's exactly right. It's measures of equivalent commercial effect. It does not specify that it has to be in the cultural sector. We can expect the United States to target sectors where they think it's going to have the most impact, in an effort to dissuade Canada from violating some of the provisions in the agreement by virtue of relying on the exemption.

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

So, for example, down the road if there was some new online streaming service that was all Canadian, and the U.S. felt that this was crowding them out of the Canadian market to the tune of $100 million a year, let's say, does that mean the Americans could turn around and slap $100 million on maple syrup exports or anything else going across the border the other way?

[Dr. Michael Geist]

Well, I'm not sure that having an all-Canadian service would be a violation. However, if you had a situation where the Canadian government decided they wanted to have an all-Canadian service and they would fully fund it and require others to pay into it, then, yes, foreign services might say it's an unfair advantage to a Canadian-based service, and here is the cost or the commercial effect. The U.S. would be entitled to levy measures of equivalent commercial effect, and they could target whatever sector they like.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Dhaliwal.

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

Thank you, Madam Chair.

Earlier, Mr. Savard-Tremblay mentioned the great work that our translators do when we speak here, particularly with an accent like mine. Madam Chair, I would like to thank all the support staff who are working with these extended hours, on both sides.

My question is going to Madam Marsden from the Canadian Sugar Institute. I wanted to give you an opportunity to say a few things. You said that CUSMA will preserve the existing sugar and sugar-containing products provisions among Canada, the U.S. and Mexico, and it will add new access to the U.S. for sugar and sugar-containing products.

Could you tell me what you were hoping to be achieved through this agreement that is not here particularly?

[Sandra Marsden]

Well, the volume gains are much lower than we had hoped for. The U.S. is a sugar market of 11 million tonnes. We got another 10,000 tonnes of sugar and sugar-containing products, so the volume gains were very small. The devil is in the details in the sugar market, as in other protected markets.

We wanted to see a change to the current rules around the quota access that we have for sugar-containing products, because we can't utilize that quota. If the U.S. restricts our exports to retail-ready products, we can't ship to food service; we can't ship to institutions, restaurants, bakeries. There were no changes there and on other issues around rules of origin in certain products and so on.

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

Thank you.

My next question is for Unifor.

Mr. DiCaro, your president has said this:

NAFTA has been a train-wreck of a trade deal for 25 years, causing great harm to Canada’s manufacturing industries and the rights of workers.... The new CUSMA, while far from perfect, provides a road map to implement necessary changes in trade policy to benefit workers. The improvements announced [in this agreement]...are a helpful boost in achieving those objectives.

Does this agreement allow for job security in the industry? How does it create certainty, especially for Canadian workers?

[Angelo DiCaro]

I'd say that the fact that this deal is going to get done is probably as much certainty as people have had in the last three years of this roller coaster. In a way, then, it becomes a good thing. Many big investment decisions have been on pause, with people waiting to find out what these final rules are going to look like. I think, then, that having this tumultuous period come to a close is a good thing.

I'm not going to speak for Jerry, but I think that some of the outcomes of the last number of months.... The eventual elimination of the steel and aluminum tariffs has been a big weight lifted off that industry. It's not entirely connected to the deal that's in front of us in Bill C-4, but it's a big thing for our members in those metal sectors. That was very helpful.

As for the auto industry, I've heard many commentators talk about the U.S. FTA with Canada, originally in 1988 and then spilling into NAFTA, as being largely about autos. I think it may be a little myopic for us to think that way, but it's a big component. What we've seen come out of the auto chapter has been a real change in what we've seen with respect to the auto industry in previous trade agreements.

As Dr. Geist was saying, it's always complicated when you're trading things off that you don't fully understand. I'll tell you that from the position of auto workers—and folks in those communities will know—it feels as though they have been the sacrificial lambs put out there for gains in other sectors. This is the first time, it seems, that the intent was to try to create greater certainty for them. For that reason, I think we've done pretty well.

There are still aspects of it that I think could be tightened up, but at this point, just having this thing in place and hoping that investments will now start to smooth out and trickle in is a good thing.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Savard-Tremblay, you have two minutes.

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

I have a question about the rules of origin for Mr. DiCaro and Mr. de la Cueva.

In an era of climate change, is it true that the trend in the auto sector will be towards lighter parts? Is that where the interest will lie?

[Angelo DiCaro]

Yes.

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

Now, on the subject of rules of origin, steel and aluminum are not treated the same under the agreement. That's come up a lot; it's an issue that's been front and centre in the debate.

Do you think that will have any consequences, especially considering the aluminum situation in Mexico? Not being a producer of aluminum, itself, Mexico has to look elsewhere for its supply.

[Angelo DiCaro]

The consequences are not clear about what the disparity between the steel and aluminum provisions are in NAFTA.

One thing that is important to put in perspective—although I'm not going to diminish it—is that the aluminum industry, for instance, is a very big industry in Canada, especially in B.C. and Quebec. What we're talking about in NAFTA are changes that apply to original equipment manufacturers purchasing steel and aluminum and where that comes from, and that's only for the purposes of auto. That's all we're talking about. Yes, it's unfortunate that there is disparity and that this is creating a bit of insecurity among folks.

The bigger picture we see is that there's some broad-based insecurity in the aluminum sector overall. We're seeing growth in export production and overcapacity from places like China. We're seeing Russian imports, Icelandic imports, imports from all over the world. That's putting greater pressure on Canadian producers and where the supplies are coming from. So when you—

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. DiCaro.

[Angelo DiCaro]

Oh, I'm sorry. We'll talk after.