The next generation, the one- and two-year-olds, will all learn the words, “You're on mute”, before they learn “mom” and “dad”.
Thank you, Madam Chair.
Good afternoon, members of the committee.
I am pleased to be here again to discuss this topic of critical importance to Canada, and particularly to the west—international trade in the era of COVID-19.
Saying that this topic is important to the west in particular is not an understatement. We in the west are less than a third of Canada's population, yet we account for over 35% of the country's exports, a ratio not matched by any other region of the country. Therefore, the subject at hand has been subject to a great deal of attention, thought and research here at the Canada West Foundation.
I'd like to share two items that emerge from this research that tie to your study: What will post-COVID trade look like and what should Canada do to prepare; and on what trade agreements should the country focus? I'll also add some comments about the trade relationship with our second-largest trading partner, which is fundamentally important to the subject.
Our written testimony, of which you have a copy, also goes in depth on other subjects of your study, such as the trade commissioner service and the larger issue of support to exporters. Our trade economist, as has become a habit at Canada West, has provided a great deal of facts, figures, numbers and charts to aid in your study.
With that, let's jump into the first question: How will trade change and what should we be doing?
Trade, if you think about it, is essentially the movement of four factors of production: ideas, money, people and goods. The largest or the factor on which we spend most time is the movement of goods, and this is an area where Canada has serious problems. It is also an area that is not going to change post-COVID, and by not change I mean, yes, you will have reshoring and other attributes, but the fundamental aspect of moving goods from point A to point B is not going to change. This is an area where we have real problems in Canada.
In 2019, the World Economic Forum's ranking of perception of quality of trade and reliability of trade infrastructure saw Canada drop 22 places, from a high in 2008-09 during the Asia-Pacific gateway days to 32nd in the globe. Our customers have been telling us that we have a serious problem, yet you'd be hard pressed to see this reflected in the actions we've been taking. If we're going to export our way into COVID recovery and earn the money that we need to move on, we're going to have to address this issue.
While our competitors such as the U.K. and Australia have developed robust systems, institutions and frameworks to collect data, turn it into information and transparently use that data to make long-term project pipelines that link all the supply and production chains in the country, you see almost none of this in Canada.
The one area where we have made investments, the national trade corridors fund, was underfunded to begin with and has yet to be recapitalized. This isn't an encouraging signal for countries that are wondering if Canada can be a reliable source of exports and customers that can help us fund our way into COVID recovery, yet there's hope.
The government has set the stage for making competitiveness of trade corridors a national priority. The council of ministers of transportation, co-chaired by Alberta's Ric McIver, is working on solutions. At CWF, we're leading a national coalition, including the Business Council of Canada, the Canadian Chamber of Commerce, the Construction Association, Western Roadbuilders, Canpotex and others to take six years of research to put forward concrete policy recommendations for government.
Therefore, the stage is set on the trade infrastructure file and I would urge attention to this. If you can't move goods or if customers don't believe you can move goods, you're not going to be able to take advantage of the trade opening and the market opportunities we have. That's fundamental to everything.
On the second question, which trade agreements should we focus on, the answer is fairly straightforward. It's to focus on the agreements that we already have.
First, this means focusing on the new North American agreement. We're going to have tons of issues dealing with the U.S. administration. This was known throughout the negotiations. We're going to have to focus time, effort and resources on working with or fighting with the Americans on these issues.
The second priority would be looking at expanding the CPTTP agreement.
Look, we were very lucky to get one progressive trade agreement in Asia. Getting another agreement is going to be a bridge too far. If “progressive” is really the focus, we should put our efforts into trying to expand the one progressive agreement that exists. Additionally, going the bilateral route—doing things such as looking at a trade agreement with Indonesia—is suboptimal and potentially harmful for Canadian business.
There's a reason businesses don't use trade agreements. They're complex. There are too many rules. You have one set of rules that work only for one market. You have to change your production techniques to fit that market, and then you have another set of rules and another set of requirements for yet another market. An agreement such as the CPTPP allows you to build supply and production chains across a large group of countries, cuts the cost and reduces the risk.
Think of the small Canadian exporter who wants to export to Asia. Under the CPTPP, this company has one set of rules that it can use for six economies. It has the ability to sign one distribution agreement with one company in Singapore that can access all six markets. If you go the Indonesia route, they would have to sign an agreement with different production rules for each economy and distribution agreements for each country, and you have a mess. Really, the multilateral route is the way to go.
An exception will have to be made for the U.K.—obviously, given the size of trade—but I would note that the U.K. trade is mostly in services. We only trade one commodity—73% of our exports to the U.K. are just one commodity—and it really doesn't benefit from a trade agreement, I would argue.
Finally, here is a note on our second-largest trading partner. Trade with China has been growing 12% a year. It has grown when we've had good relations with the country and when relations have been on the rocks. Again, that's overall growth.
The issue is that day in, day out, Canadian businesses and Canadian consumers are making decisions that result in this trade increase. This results in facts on the ground that we have to manage. The government doesn't trade. Political parties don't trade. The private sector trades, and that trade is creating issues that have to be managed whether we want to deal with them or not. Not engaging China to manage this trade does nothing to help Canada, does nothing to advance our interests and will not get our hostages back sooner.
We really have to face this. If you're thinking about countries that are growing, post-COVID—countries that are already on the rebound, you're talking about China, so this will become more of an issue.
Again, look at our competitors. Australia and New Zealand are confronting China on political issues, yet they have just signed a new agreement with China. The EU is also confronting and fighting China on issues on a daily basis, yet it has just signed a trade agreement. The U.S., which is almost in a hot war with China, just stabbed us in the back—shot us in the back—when it signed its phase one trade agreement with China.
You may remember that during the NAFTA negotiations, the Americans told us not to even dare think about negotiating with China, but what were they doing? They were negotiating an agreement that basically threw Canadian farmers under the bus. We're really going to have to think, then, about balancing our interests: the political and the economic with China, and the political and the economic interests with the United States.
You know, this is not a new problem. The Diefenbaker government managed to protect Canadian interests by breaking a U.S. embargo on grain sales to China while at the same time standing shoulder to shoulder with the U.S. in fighting the Cold War. This is something our allies continue to do, but which we've forgotten to do.
With that I'll end. Actually, for the first time ever in front of the committee I'm going to end early. I would note that I'm happy to talk about the TCS, about KXL or about buy America or any of the other issues that are current.
Thank you very much.
