International Trade Committee on Feb. 24th, 2020

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Madam Chair.

My first question is for Mr. Nantais.

We get it. The agreement does provide certainty and protection against 232s. The whole idea of these agreements is so we can get costs down and align regulations and things like that so we can be more competitive as a North American bloc.

I worry about the rules of origin. In some ways they are good, but, in other ways, the costs.... We know that manufacturers aren't afraid of importing cars into North America. Where's that tipping point if the costs are too high here, if somebody just built that car in China and just shipped the whole vehicle over here? That's a worry I have since I come from Oshawa, where we just lost our assembly plant for whatever reasons. Manufacturers say it's like death by a thousand cuts, and that's what I'd like to talk to you about.

The agreement here, the new CUSMA, is supposed to work on alignment and making us more competitive, but since I come from a government that was working on harmonizing regulations across the sector, the current government is putting in all kinds of unique Canadian costs and regulations.

We could talk about environmental considerations and costs such as the carbon tax. You mentioned the high cost of electricity. I hear that over and over again. You mentioned in your opening statement that we almost have to be more competitive here in Canada.

As the guy who represents Oshawa, where we just lost our assembly plant, I'd like you to comment. Is there anything specific in this agreement that would favour Canadian investment versus an investment in the United States? If I'm General Motors, Ford or Fiat Chrysler, why would I pick Canada versus the United States based on this agreement?

[Mark Nantais]

That's an excellent question, Mr. Carrie, and all of those things you have said are absolutely true. These are considerations that have to be given due analysis and consideration.

We do operate in a high-cost jurisdiction. We have signed other trade agreements where we don't have full reciprocal access to those markets. Certainly during the course of negotiations, we had discussions around what would happen if the cost of compliance and so forth exceeded the advantages.

It is true that all the multinationals that I represent under other trade agreements could, in fact, go abroad to manufacture their vehicles and simply ship them in, like all these other countries do, to Canada duty-free under those other trade agreements. These are all very serious considerations and risks, if you will. Absolutely.

We do believe, though, that with the agreement as it stands, yes, there's probably additional complexity and some costs. The question becomes whether we can manage those costs. All the companies now are giving consideration to those costs and complexities, how they report, and ultimately how they will factor that into their pricing and their production costs.

We think they're manageable at this point in time, as they stand. We are adding more content, if you will, by virtue of this agreement, more regional content. Parts makers have said that's probably an advantage for them.

Yes, we agree with that, but I will add the caveat that there are no guarantees. This agreement does not provide guarantees.

[Colin Carrie, Conservative, Oshawa, ON]

That's why I worry if we're diverging now and having all these uniquely Canadian costs. I think time will tell, but I can keep my fingers crossed on that.

My next question is for the Dairy Farmers.

Monsieur Lampron, you said something like “had we known”. We realize that these are families. These are small businesses. This sector is being negatively affected. One of the things we want to do at this committee is our due diligence.

We've been asking the government for impact assessment studies that have been done. The Americans finished theirs last April, and they gave their lawmakers material about three inches thick to go through ahead of ratification. We were not given the same courtesy here, even though my colleague Mr. Hoback wanted to do those studies last spring. At the time the Liberals had the majority and we weren't able to do that.

I'm worried. On Friday the C.D. Howe Institute gave its impact assessment for the agreement. Sadly, this looks as if it's going to be a $10-billion hit on our economy going through with this agreement. One of the things we've heard is that the only thing worse is not having an agreement. It's going to be even worse than that. We're in a catch-22 situation here.

I was wondering if you could comment on the openness and transparency of the government going through this process. The minister, rightfully, was here. She said that they consulted extensively. We've heard from the dairy industry, and pharmaceuticals of course, that they don't agree with that. She said that she was in front of committee 12 times. I think it was four times. Before the election, she said that this agreement was going to be a victory for Canada and a win-win-win.

Do you agree with that assessment? How would you rank the government on its openness and transparency on the way it managed this deal?

[Pierre Lampron]

In fact, on my farm, my brothers and I felt that it didn't fit the model that we had before with supply management, the Canadian market and investing in promotion to grow the Canadian market, and so on.

As far as transparency is concerned, I'm going to give the floor to Mr. Lefebvre, who can tell you how we feel as an organization.

[The Chair, Liberal, Judy Sgro]

I suggest that Mr. Carrie has run out of time. He was on a five-minute cycle, and we're at 5:50 at the moment.

[Colin Carrie, Conservative, Oshawa, ON]

That's too bad.

[The Chair, Liberal, Judy Sgro]

You can get Mr. Carrie's information in later on.

Mr. Arya, you have five minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Madam Chair.

My first question is for Mr. Lampron.

You said in your statement that the dairy farmers have been hit. What percentage of your 11,000 dairy farmers will go bankrupt due to this agreement?

[Jacques Lefebvre]

Mr. Arya, if that is the measure for any agreement, then I'm quite concerned.

[Chandra Arya, Liberal, Nepean, ON]

I've been in industry. I know what it means when somebody says that the industry is going to be hit. I had a publication. We closed down. I couldn't stand the competition. Then I was in high technology. We see hundreds of high-technology companies going bankrupt.

We use this term “the industry has been hit”. Every other sector faces complications. This is why they become strengthened, and they go and capture the market.

Ms. Robinson, last year you tweeted that the U.S. sees a 24% increase in farm bankruptcies. You went on to ask what do you think is going to happen to Canadian agriculture.

How hard is the agriculture sector going to be hit with this agreement?

[Mary Robinson]

In terms of bankruptcy, agriculture is unique as an industry. It's important to take into account that we're talking about the entire fabric of rural Canada. We do more than just bring amazing GDP contributions from agriculture. We also—

[Chandra Arya, Liberal, Nepean, ON]

Absolutely, I agree; Canadian agriculture is really a great success. I see that you export to worldwide markets. It's not just limited to the North American markets. You compete with other global producers.

When I see this tweet, I just want to understand whether this agreement is bad for Canadian agriculture.

[Mary Robinson]

Canadian agriculture is so diverse and broad that I don't think you can give a blanket answer to that question. If you're a sugar beet farmer, you're probably pleased with this agreement. If you're a supply-managed farmer, you're probably not pleased with it. If you're the neighbour of a supply-managed farmer, you're probably not happy with it, because we are so intertwined that it's important that each of us be profitable. What we do in Canadian agriculture, to our best ability, is collaborate and make sure that we're all profitable and able to move forward.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, madam.

On the vehicle manufacturing issue, Mr. Carrie asked whether this agreement will increase investments in Canada vis-à-vis those in the U.S. My question is the same. When I say “investment”, I also use the word “capacity”. Will this agreement allow for an increase in installed capacity in vehicle manufacturing in Canada?

[Mark Nantais]

As I said, Mr. Arya, there are no guarantees. We operate in a high-cost environment. We have to ensure that we are not as competitive as other jurisdictions; we have to be better than other jurisdictions.

The question becomes: What if we didn't have this? The downside is far greater. It's almost as though if we don't have this, which is really just the price of admission.... We need all of these other factors to be considered, both federally and provincially, to make sure that we get our local costs down, to make sure that we can capitalize on the capacities, as we say, in our universities and the other partnerships and the new part of the business, which is in artificial intelligence and software and connectivity and so forth. All of these are moving forward in Canada now, given our expertise in those areas and the partnerships that OEM companies have struck with these universities and companies.

[Chandra Arya, Liberal, Nepean, ON]

I'm glad you brought up artificial intelligence. In Ottawa we are promoting autonomous vehicles, we are promoting the software that is used in the new generation of vehicles. We are investing heavily in artificial intelligence, although I sense that future investment will be more towards the R and D that can be done in Canada in these advanced technologies.

[Mark Nantais]

Well, the answer to part of that question is yes. Again, it comes back to what it takes to produce profitably in Canada, given all the high costs we have to face.

[Chandra Arya, Liberal, Nepean, ON]

Let me ask you a blunt question.

[The Chair, Liberal, Judy Sgro]

Make it very short, Mr. Arya.

[Chandra Arya, Liberal, Nepean, ON]

It's very short.

Quickly, is hard product manufacturing a sunset industry today?

[Mark Nantais]

I would say not if we address many of these issues that I've identified.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We move to Mr. Lewis.

[Chris Lewis, Conservative, Essex, ON]

Thank you, Madam Chair.

Thank you to all of the witnesses for coming here today. I'm going to start my questioning, please, with Mr. Nantais.

As you are obviously very much aware now, the Canadian government has not yet provided Parliament with an economic impact statement, despite being asked to provide one weeks in advance of these deliberations. That being said, the focus of my questioning is not on whether to ratify, but rather on the implementation side of it. I am hearing concerns expressed by businesses that there's a very short 90-day window between ratification and implementation.

The committee was advised that one of the most complicated elements of this agreement is the stringent rules of origin that must be met for products to qualify for duty-free market access under CUSMA, with significant impact on the auto sector.

As a first question, sir, do you have any concerns about the short timeline between ratification and implementation? Are you aware of any proposals to negotiate a longer transition period, even up to January 2021?

[Mark Nantais]

Starting with the latter, I'm not aware of any direct negotiations that fall into that category. At the same time, we've said that one needs a reasonable time to make sure that all of these systems and processes are in place. I think governments in all three countries need to take that into consideration.

[Chris Lewis, Conservative, Essex, ON]

Thank you.

Here is a follow-up question. As Mr. Carrie said, the C.D. Howe Institute did release an economic impact study. They say that the “negative elements outweigh the positives” and that Canada's real GDP will shrink by 0.4%. They have also expressed concerns about a potential thickening at the border.

Do you share their concerns about the overall benefits and the potential for a backlog at the border?