International Trade Committee on Feb. 5th, 2021

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Okay. Thank you.

You mentioned the public announcement but also that you had heard earlier that the U.K. was looking at joining the CPTPP. On what date were you or your department notified that the U.K. was formally applying to join this agreement?

[Doug Forsyth]

We have heard on a number of occasions, informally, both at my level and at the level of my colleagues who deal exclusively with the CPTPP, about the U.K.'s interest in joining. My understanding is that Secretary of Trade Truss has mentioned it and noted it a few times as well to Minister Ng. I'm not sure of the exact date, but it has been mentioned more than a few times, and as you pointed out, there was the official announcement on that.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We go now to Mr. Arya for five minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Madam Chair.

Last year, we heard concerns from Canadian exporters that the final destination of most goods landing in the U.K. was somewhere else within the European Union. Since December 31, have you heard of any issues faced by Canadian exporters whose goods are landing in the U.K. but for which the final destination is somewhere else in Europe?

[Doug Forsyth]

Yes, we had heard that could be a concern for Canadian exporters. The logistics route for many Canadian shipments involved them first landing somewhere in the United Kingdom and then being broken up and transshipped on throughout the European Union. Similarly, a number of Canadians would ship to Rotterdam and then break up the load and send it on to the U.K., depending on the product and where it would ship from.

What I can say about that is that we are discovering that you can't do that anymore. Logistics routes will have to change. I haven't heard it directly about Canadian companies, but certainly the challenges that exporters are having with regard to trade between the United Kingdom and the European Union are well known in the press. Once a good lands in the United Kingdom and enters the customs territory of the United Kingdom, that's where it belongs, and if you were to ship it from there into Europe, you would have to pay duty on it.

I would just add that our trade commissioners in London and elsewhere in the United Kingdom are working closely with Canadian exporters to mitigate any of those challenges and difficulties that they might be having, but we have not heard directly about any to date.

[Chandra Arya, Liberal, Nepean, ON]

The bilateral trade agreements are good for any Canadian exporter exporting to that particular country or for any Canadian importer importing from that particular country; however, for Canadian companies that are part of the supply chain, the U.K. may be separate from the European Union but it's still geographically part of Europe, and it is part of the supply chain. So for a Canadian company that is part of the supply chain, with the goods travelling back and forth between the U.K. and other parts of the European Union, has having to deal with a separate bilateral agreement and a multilateral agreement with the European Union added to the complexity? Have you heard about any issues faced by any Canadian company on this?

[Doug Forsyth]

We have not heard directly from any Canadian companies about this as of yet, but, yes, there is no question that the supply chains into Europe or for goods coming out of Europe or coming out of the U.K. have been directly impacted by Brexit and by all of the challenges that the U.K. leaving the single market and the customs union have caused. There is no doubt about that. Paperwork has increased. The complexity of transactions has increased as well. We're following it very closely to see if there are any impacts on Canadian companies and what those might be, but again, to date, I'm not aware of any direct impacts.

[Chandra Arya, Liberal, Nepean, ON]

With the U.K. coming out of the European Union, we are in a separate agreement. Has it made an impact on any investments, if they are inflows or they are outflows?

[Doug Forsyth]

Again, it's a month in. I haven't heard directly about any impacts on investments, either here in Canada or in the U.K., but it's something that we'll follow closely and will continue to follow closely, and maybe at some point in the future we could be able to report on that.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We're on to Monsieur Savard-Tremblay for two and a half minutes, please.

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

I'd like to follow up on my last question. The witnesses weren't able to provide details because they ran out of time. According to Mr. Forsyth's and Mr. Fowler's answers, the negotiators have a clear mandate not to allow any new holes in supply management.

I am nevertheless going to press the matter. Previously allocated quotas have not been utilized. We were lucky in our misfortune: the other countries opted not to make the investment. The U.K., however, has made clear its intention to do so. Doesn't that pose a risk to our market?

What can we expect?

What impact could it have on our market?

[Doug Forsyth]

I think I might turn to my colleague at Agriculture Canada to respond.

[Aaron Fowler]

Again, the market access that Canada committed to provide in the context of the CPTPP was a negotiated outcome of the CPTPP and TPP members that negotiated that agreement. Our expectation at the time that we made those commitments was that this market access would be available for our trading partners to pursue and that we could anticipate imports on the lines that we made commitments on.

Ultimately, the countries that have moved forward with implementing and ratifying the CPTPP are not identical to the countries with which we negotiated the agreement. In practice, some of the products for which we made market access commitments in that negotiation have not been fully utilized thus far under the agreement, which is not to say they will not be utilized in the future, but our assumptions have been from the outset that utilization of the TRQs was a likelihood that comes with opening up that market access.

In the event that the United Kingdom were to accede to the CPTPP in a way that allowed them to access Canada's supply management tariff rate quotas, then there is a possibility that they would export on those lines, and that either those exports would replace the exports of other CPTPP countries that are currently selling into Canada or, for products that are not fully utilized right now, it might result in additional incremental access into the Canadian market, but not beyond the commitment we've already made within the commitments we've already made.

I think the situation you're describing is one we've anticipated. We would work closely with our sector stakeholders, as we always do, to identify any particular concerns arising as a result of the U.K.'s ability to access those particular TRQs, but from the standpoint of today, I think the situation is one that is well within the scenario that was contemplated by the government at the time that agreement was concluded. We will continue to work with our sector to make sure the impact on them is also what was anticipated at the time the negotiations were concluded.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go on to Mr. Blaikie, please.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

The Canada-U.K. trade continuity agreement is about a five-page document. Article V is the article that deals with the investor-state dispute settlement mechanism and represents about 20% of the work done in order to conclude the agreement. Am I really to believe that if we charge out all the hours people on both sides of the pond spent negotiating this full page of text that represents, as I say, about 20% of the agreement.... It sounds to me like taxpayers in Canada and Britain will have paid thousands of dollars to keep the door open to being sued for millions of dollars just because of the inertia of a previous agreement, when neither government sitting at the table wanted investor-state dispute settlement clauses in the agreement. Does that sound like good value for money?

[Doug Forsyth]

Again, I would come back to my earlier answer. The goal of the exercise we completed with the United Kingdom was to replicate what was in CETA. Changes were not made for the most part, except in areas, for example, of goods TRQs, which could not be replicated—

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

If I may interrupt, some changes were made. This document is 25% longer in order to talk about a provision that I understand neither government cares to include in a successor agreement. Our government has said clearly that it doesn't support ISDS provisions. The U.K. government hasn't asked for ISDS provisions, so why would we have an agreement that's 25% longer, just to include something that neither government wants?

[Doug Forsyth]

I might turn to my colleague who worked on the ISDS provisions to follow up on that.

[Shamali Gupta, Deputy Director, Investment Trade Policy, Department of Foreign Affairs, Trade and Development]

Sure. The investment chapter outcome that we have in the CUSMA is really a reflection of the unique North American context. While under CUSMA we don't have ISDS with the U.S., we still maintain ISDS with Mexico under the CPTPP.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

How does that square with the Deputy Prime Minister's comments? She said she was really proud that the government got rid of ISDS in CUSMA. Is it the position of the government that it wants ISDS chapters in future trade agreements, or is it the position of the government that it doesn't?

[Shamali Gupta]

Canada maintains the flexibility to negotiate variable outcomes with respect to our various partners on ISDS, and we would determine whether or not we would be seeking ISDS on a case-by-case basis.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll now move on to Mr. Lobb, please.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Thank you, Madam Chair.

Thank you to everybody for being here today.

My first question is in regard to edible beans—white beans. It's a bit of a sharp turn from what we've been talking about today, but we have quite a bit of success here in southwestern Ontario, shipping white beans to the U.K. Is this the status quo, going forward? Could we do any better? Are we looking at anything else going forward in the long-term free trade deal?

[Doug Forsyth]

Our exports of pulse crops in general have been excellent. I'm not sure of the exact HS code that is in question right now, but I can say for sure that the exports to both Europe and the United Kingdom, as well as around the world, have been outstanding over the last few years. Certainly what was available to us in CETA is now available to us in the context of the CUKTCA, so I would expect that those strong exports would continue.

I'll just ask my AAFC colleague if he wants to add anything there as well.

[Aaron Fowler]

I agree with what's been said so far. That is an important export crop into the United Kingdom. It was one of our top two or three agricultural exports into the United Kingdom in 2019, and the CETA outcome for that product was carried over into this TCA.