Evidence of meeting #7 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 cusma.
A video is available from Parliament.
Counsel, Herman and Associates, As an Individual
That's my sense of what would happen, yes.
Liberal
Rachel Bendayan Liberal Outremont, QC
Also, there would be significant uncertainty then as to the applicability to Canada of the pre-existing NAFTA agreement.
Counsel, Herman and Associates, As an Individual
Technically, the NAFTA would remain in force as between the United States and Canada. This is what we think, but it's not entirely certain.
What would happen in that event is that the United States could decide to withdraw from the NAFTA. We know that the President has condemned the NAFTA as one of the worst agreements the United States has ever entered into. If Canada could not or refused to ratify the new agreement, bringing the the NAFTA back into force, would the United States maintain the NAFTA? I think that is in some doubt.
Whatever happens, there would be tremendous uncertainty. How you would reconcile the NAFTA, if it did continue, with the CUSMA or the USMCA, as it would be, would be highly problematic.
Liberal
Rachel Bendayan Liberal Outremont, QC
I see. Because of the current stage we are in, as you mentioned in your testimony, with the United States and Mexico having already ratified it, our options are limited. Basically, the question to the committee is whether we proceed with our ratification or not.
Counsel, Herman and Associates, As an Individual
That is correct.
Because the new agreement has gone through the ratification processes in both Mexico and the United States, it becomes very difficult for Canada to refuse ratification or to go back to those other two parties and ask for something more in order to secure ratification. As I mentioned earlier, in the case of NAFTA, we agreed to side letters with Mexico and the United States, but that was before the agreement was put to their respective legislatures.
Frankly, in my view, now that the new agreement has gone through Congress with all of the difficulties it had, it would be impossible for the United States to go through that process again or for Canada to think that we could get something more by putting it back to the United States.
Liberal
The Chair Liberal Judy Sgro
Thank you very much, Ms. Bendayan.
We'll move on to Mr. Savard-Tremblay for two and a half minutes.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
I would like to continue this discussion with Mr. Herman on the exchange-of-letters procedure. It's interesting that you mention it, because so far, in our discussions, very few scenarios have been mentioned about ways of amending, modifying or clarifying things after the agreement has been signed. You mentioned letters that were exchanged before the agreement was ratified by the various parliaments. On the other hand, some 20 changes were made, which are not considered amendments because an exchange of letters is generally considered a way of clarifying things that are not clear.
There is also the NAFTA Free Trade Commission, which allows for formal amendments to an agreement. Sixteen amendments were made in the first 15 years of NAFTA.
To your knowledge, will it still be possible to make such changes to CUSMA after ratification?
Counsel, Herman and Associates, As an Individual
I think that the Free Trade Commission could issue agreed interpretation rulings. The commission itself could not amend the agreement. The agreement can only be amended by the three parties and their respective legislatures.
However, where it is a matter of interpretation or application of the terms of the agreement itself, the commission could issue certain interpretation bulletins. In fact, the new commission could be an important part of the unfolding of the CUSMA. It will obviously depend on goodwill and good faith by the parties to make the commission work. I'm glad you mentioned this. The commission process could be an important feature of the CUSMA going forward. There's no question about that.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
The commission has already been used, for example, to make definitions clearer or to amend the rules of origin. In some cases, the rules of origin have been tightened in this way. There have already been cases where the list of products covered by the agreement has been amended, and procedures at common borders have been harmonised.
Lastly, the commission goes beyond mere interpretation. Is that the case?
Counsel, Herman and Associates, As an Individual
Where there is a lack of clarity in the terms of the agreement, the commission can issue clarification bulletins or adjustments, but the commission does not have the power to actually amend the agreement itself. Where administrative matters need some clarification, the commission would play an important role, but I have to emphasize that it depends on good faith with the parties to make the commission process work.
Liberal
The Chair Liberal Judy Sgro
Thank you very much.
We'll move on to Mr. Blaikie for two and a half minutes.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you very much.
Mr. Blydorp, I just wanted to come back to a comment you made earlier about pricing and the prices of your goods being set in a Chicago market. Often when we talk about trade deals, there's a tension between export-based agricultural producers and supply-managed agricultural producers. We often hear that we need to make concessions on supply management in order to expand our export markets.
I've heard—not just from you but from pork producers as well, and others—that despite increased market access there are often problems, either with getting product to these new markets or that the increased demand of those added markets doesn't increase the price because the prices are tied to what's going on in the U.S., irrespective of access to market in other countries.
I'd like for you to expand on that a little more. If we're making concessions for our supply-managed producers to increase the prospects of business for our exporters, how do we get to a point where the increased demand can actually issue better prices for Canadian agricultural products that are being exported?
February 20th, 2020 / 1:10 p.m.
As an Individual
A lot of it is sort of the base commodities, so they're not that differentiable, but there are certain markets that might buy a specific type of raised pork, for instance. There are some differentiations in the marketplace for various buyers who want certain animals produced in a certain way, so that might open something up.
There are some slight differences in what's allowed in animal production here in Canada versus the U.S. in terms of drugs. I'm not a livestock farmer, so I don't know a whole lot about that. However, I do know that occasionally there could be certain markets that are available to Canadian producers because they are generally smaller and they can produce to a specific requirement that some specific market might have.
Yes, most of the other commodities like pork and beef—particularly beef out west—and the grains and oilseeds are very reliant on trade. If we didn't have trade, we'd have half the agricultural industry that we have in Canada. There was the Barton report a little while ago that saw agriculture as one of the greatest prospects for enhanced growth, and there's a lot of manufacturing that goes on with agricultural products. There are, I think, 2.3 million people employed in the agricultural sector, and most of that is beyond the farm gate.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
However, the product pricing is tied to U.S. indices, irrespective of what the international demand is. I mean, obviously, international demand plays a role in establishing those prices, but if Canadian producers have better market access, that doesn't mean that they're going to get a better price for their product because they're tied to what the U.S. price is.
I realize that it's going to differ based on the commodity, but is that generally true for your business or...?
As an Individual
We're producing commodities and we have some benefit. That's reflected in a basis that is the difference between the Chicago price and the local price. Because we are closer to ports than somebody in North Dakota, we will have a slightly better price because we have a transportation advantage.
Liberal
Conservative
Randy Hoback Conservative Prince Albert, SK
Thank you, Madam Chair. I just have a couple of quick questions and maybe a quick comment.
I know that there have been a lot of people saying that we need to get this done relatively quickly, and we agree. We're not doing anything to stall or delay this at all. One of the concerns I have is this: As we talked to different associations and groups, we asked for the economic analysis or how they came to the conclusion that we should move forward with this agreement, and they all said that they haven't done it. That's a little concerning.
If I were to enter any type of agreement with a company, if I were to go into a partnership with another company, the first thing I would do is an economic analysis. You know, I get it. We have the history as our economic analysis to a certain point, which is fair, but this is totally different. I'm a little concerned about that, but I am comfortable in knowing that this analysis is going to be coming in front of this committee relatively shortly. You will have a chance to see that before this actually goes through clause-by-clause, so we're excited about that.
We didn't talk about how this agreement worked for competitiveness, and that was the function that I thought we really missed in going forward in this agreement. We didn't have a focus on what we could do to make North America a really strong, dynamic trading-partnership bloc. Was this in the agreement? Do you see anything in there that gives us some hope that this might do that?
Director of Policy, Canadian Manufacturers & Exporters
The new chapter 26 holds promise for us, just in the sense that it's going to try to coordinate all industry activity across these three countries in order to become more competitive. Our hope is that we don't lose sight of it and that it doesn't fall apart in implementation, which is why we're very gung-ho to get started on it and to set up the committee, and for us in Canada to show initiative on this.
Conservative
Randy Hoback Conservative Prince Albert, SK
What do you see to set that part up? I haven't seen anything in budgets. I haven't seen any allocation of resources from the government to do that. What do you think you need for the appropriate resources from the government to get that started?
Director of Policy, Canadian Manufacturers & Exporters
The chapter itself is pretty thin—I think it's a page long in total—so there's not a lot of guidance there from the agreement itself, but obviously—
Conservative
Randy Hoback Conservative Prince Albert, SK
That could be good or bad. It could be good because you could write it the way you want.
Director of Policy, Canadian Manufacturers & Exporters
It could give us a lot of creative room, true. Essentially, it's setting up committees between the three countries. We don't see any reason why we have to wait to do that. If it's just setting up a committee, Canada should show leadership and work with its American and Mexican partners.