International Trade Committee on Feb. 5th, 2021

[Doug Forsyth]

We did an analysis that shows where the benefits will flow to the Canadian economy overall from the trade continuity agreement. I'll just remind you that it is about continuing the trade that we had between Canada and the United Kingdom, so it's about preserving those market access gains, preserving those exports, preserving all the employment opportunities that we already had in place.

I think it is clear from that analysis that the trade continuity agreement does exactly that. It provides the kind of continuity that businesses and exporters are looking for. It provides continuity to exporters or companies that produce quality products and export them to the United Kingdom as well as to the European Union. That's the kind of process that keeps people employed in Canada.

Absolutely, the work has been done internally, and the report is there for folks to view.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

On the flip of that question, obviously we have the positive side of it, but I think you kind of referred to it in your remarks, calling it "the edge of the cliff”. Could you delve into where? We want to see where the jobs are not only maintained but created, in particular throughout the regions, whether it's ACOA, CED, FedNor, FedDev, WD or the new B.C. regional development agency, and what businesses are supported. We also want to see where there might be businesses that are not covered, that kind of that cliff that you were talking about. We have to make sure that we're able to support any businesses that may be the 1% or the 2%.

[Doug Forsyth]

I think it speaks really to the success we've had with our increased exports to the European Union under CETA and that we wish to continue with for the U.K. The “cliff edge” that I referenced was very much around at the end of three years making sure that we have the agreement in place and that we're able to take advantage of it to the fullest extent possible.

As we were approaching the December 31 deadline, I think what we saw was that if there were no TCA in place, the big impact that would have on agriculture exporters, as well as fish and seafood exporters, who would have been subject to the MFN tariff rates that would have been applicable in the event that we had no preferential arrangement in place. We're very pleased that we were able to negotiate that and to get everything finalized.

Then, in order to take advantage of the agreement in full, we have to get past the.... Ideally, we will get the TCA ratified and then an entry into force date in the foreseeable future, so that not only our key goods exporters can take advantage of it, but our service exporters can as well. We can continue to have our business people enter the U.K. marketplace on the service side of things, as well as to create new business opportunities and seek out new investments.

I think that's the key. It's to have the entire agreement in place, and not just the goods aspects applying.

[The Chair, Liberal, Judy Sgro]

You can have a short comment, please, Mr. Sheehan.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

I was going to delve into something a little more.

I guess I would just like to again thank you for your hard work. I'm sure some people will ask the questions that I wanted to ask.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Sheehan.

We will move on to Mr. Savard-Tremblay.

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

Thank you, Madam Chair.

I'd like to thank all the witnesses for being with us today.

My first question is for the department officials. It's about the implementation of the agreement.

Today we heard a call to ratify the agreement. What is the plan? Will the agreement come into force as soon as both parliaments ratify the agreement or at a later date?

[Doug Forsyth]

The ratification process will follow its domestic course, both here in Canada and in the United Kingdom. The United Kingdom has finalized its ratification process this week. Once Canada has done that, there will be an exchange of letters between both governments to indicate that all of the domestic processes have taken place and that we are ready to agree on an entry into force date.

In order to do that, we will have to finish our domestic process, and this is an important part of it. We'll take the time we need to do that. Then, once we have completed that and Parliament has done its work, we will be able to move forward with the next step, which is very much about indicating to the United Kingdom that we have completed our process. We will formally notify them and then we can decide on the entry into force date.

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

I see. The date will be set after the agreement is ratified; the coming into force won't be immediately afterward.

The U.K. recently announced that it was applying to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP. The agreement is between Canada and 10 other countries in the Asia-Pacific.

Will Canada be negotiating its permanent agreement with the U.K. while the U.K. pursues the process to join the CPTPP?

[Doug Forsyth]

Yes, the United Kingdom had indicated that to us, mostly informally, but they had made a number of pronouncements that they would seek to join the CPTPP, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. This week, they made an official announcement, I believe on Monday, that they would pursuing the application process for that agreement by sending a letter to each and every CPTPP member.

I think we're still in the early days of our analysis, but I think our plan is to, yes, go forward with a bilateral negotiation in parallel with the process for the United Kingdom to go forward with the CPTPP.

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

Thank you, Mr. Forsyth.

There won't be any cross-discussions as far as the two agreements are concerned.

As you know, the CPTPP provides access to Canada's dairy market, undermining our dairy industry.

The TCA will result in annual losses. The Union des producteurs agricoles, the Producteurs de lait du Québec and others have estimated those losses.

The TRQs on dairy products are virtually the same in the CPTPP as they were in the TPP, to which the U.S. initially belonged. The country withdrew from the previous iteration of the agreement to potentially rejoin the trading bloc under the new agreement.

The decision to establish the quotas was based on the fact that the U.S. would be part of the agreement. As we all know, the previous administration targeted supply management, trying to drill holes in the system and even eliminate it.

Part of the quotas is currently not being utilized because the U.S. pulled out of the agreement. It's also difficult for countries that are far away to export dairy products. For its part, the U.K. clearly wants to export more cheese and take advantage of the market access that was given up.

If the U.K. joins the CPTPP, is there not a risk that it will take the quotas that have gone unused because the United States pulled out?

[Doug Forsyth]

When the U.K. officially goes through its application process, it will be required to meet the high standards the CPTPP members have already agreed to. There will be a bilateral market access negotiation. In parallel, as mentioned in my previous answer, we would continue bilateral negotiations with the U.K. on a parallel track.

The quotas for the CPTPP have been in place since that negotiation. They would not be expanded with any new members, if they were to come on. The government has been clear that there will be no new market access for supply-managed products coming into the Canadian marketplace.

I will just turn to my colleague from Agriculture Canada to see if he has anything he wants to add there.

[Aaron Fowler]

I agree with what's been said so far. I think Canada's commitments with respect to supply-managed products, including dairy products under the CPTPP, is well known. Those commitments were made with an expectation that that market access would be utilized by our trading partners that are in the CPTPP, as was described previously, owing in part to the fact that the United States has not ultimately joined that agreement.

There are dairy products for which the utilization rate of the TRQ is not being fully utilized right now. The expectation was that that volume would be used, and the approach that the government took in its discussions on compensation with the dairy sector assumed full utilization of the commitments that were made in the CPTPP.

While the terms of the U.K. accession would need to be determined with the U.K. and the other CPTPP members, were they to take some portion of that dairy access that Canada provided, that would not fundamentally change the outcome that Canada anticipated when it concluded the CPTPP negotiations.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Fowler.

We go now to Mr. Blaikie.

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

Madam Chair, elsewhere on the Hill this week, Minister of Procurement Anand testified that she had asked all of the companies that are producing vaccines for the right to produce domestically, and that she had been told no.

One of the things that CETA did was to reinforce the intellectual property protections for pharmaceutical companies. The TCA does that by extension. I'm wondering if that experience with these companies—that have seen their intellectual property rights protected in many trade agreements, including in CETA and this TCA—refusing Canada the opportunity to produce domestically has caused the government, and you particularly, Mr. Forsyth, to rethink Canada's willingness to use trade agreements to reinforce the intellectual property rights of giant pharmaceutical companies, when they so clearly are not interested in assisting Canada, even in the midst of a crisis like this?

[Doug Forsyth]

I think the experiences of this week, as you already noted, have caused a lot of people to turn their minds to different aspects of the procurement process. There has, to date, been no further analysis in terms of what the IP aspects of that are. It doesn't mean that there won't be in the future, but I'm not aware of any that has happened this week as of yet.

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

Generally speaking, isn't the experience sufficient to provide some insight on the wisdom of providing a lot of additional power and leverage to private multinational companies over and above governments that are democratically elected and expected to regulate in the public interest, in the context of these agreements? I think the vaccine rollout is a clear example of how the additional power that's been conferred on private companies, within agreements like this, can be at odds with the public interest.

Isn't an obvious conclusion from this that Canada should be a lot more wary than it has been in the past about solidifying the power that those companies enjoy within our international trade agreements?

[Doug Forsyth]

I think that the IP chapter, both in CETA and here in the U.K., includes the obligations of protection and enforcement. How far we want to go in the future is open for discussion. As we look forward to the consultations for the Canada-U.K. bilateral negotiation, I think that will provide stakeholders and others with all kinds of opportunity for their views. I think it will be an important opportunity for the government to engage on that topic and on others, and I look forward to hearing what others have to say about that.

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

On the same question, as to the ways agreements like this are often used to shore up the power of multinational corporations, as opposed to the powers of democratically elected governments with a responsibility to the public interest, one of the other ways that is done is through investor-state dispute settlement mechanisms. One of the things I note about this agreement—it's been said many times in different ways, and I thank you for the accuracy of your comment today—is that the ISDS provisions of CETA are suspended.

I've heard some members of government say that they're not in there, which of course isn't true, but these do reappear. One of the mysteries about this is that we heard some very strong statements from the Deputy Prime Minister during the CUSMA negotiations about the problems with ISDS provisions and the pride that she felt personally at having them removed from CUSMA.

We have before us a document, this agreement that we're being asked to ratify today, through which, if nothing else is done within three years, provided it's ratified in CETA, we would see similar kinds of investor-state dispute settlement provisions enter into force. Therefore I'm wondering how they even got in here. If this is the position of the Canadian government—and I've heard with some good authority that the U.K. government has not made ISDS provisions a priority or asked for them at all in not just its negotiations with Canada, but generally, as it negotiates a lot of agreements—wasn't this an opportunity for Canada to just move along from the ISDS question? Who is it that wants to see these provisions in here, and why, if Canada is of the view that these kinds of provisions have no place in trade agreements and if the U.K. is not asking for them, would we bother with this three-year review? Why wouldn't we just get rid of these in this very agreement, instead of preserving them and continuing to ask the question and having a default mechanism that they come into effect, rather than requiring a proactive affirmation of them by Parliament in order to actuate these ISDS provisions?

[Doug Forsyth]

I think one of the key reasons why these provisions are in the agreement is that this was a replication exercise, so we were looking to replicate what we had in CETA. There were a number of discussions that we had with our counterparts from the U.K. about changes to the agreement. It was clear, I think from fairly early on in the process, that we were talking about replication, that we needed to replicate the agreement in whole. That is what we did.

As the MP rightly pointed out, there are provisions that ISDS will not enter into force once the TCA is in place, and there will be the opportunity for both parties to discuss what could replace the ISDS provisions. There will be opportunity for that discussion. I think one of the opportunities would be certainly to decide in a bilateral context how or if the ISDS provisions could apply, but that will be part of the ongoing process.

[The Chair, Liberal, Judy Sgro]

Thank you.

We'll go to Ms. Gray.

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

Thank you, Madam Chair.

Thank you, Mr. Forsyth, for being here in front of this committee again, and thank you to the other witnesses.

I wanted to expand on my colleague Mr. Aboultaif's questioning. As we know, the EU has put in these export measures on COVID-19 vaccines. If Canada were to sign a contract to procure COVID-19 vaccines produced in the U.K., would this Canada-U.K. trade continuity agreement ensure these contracts were honoured? Or is there still a risk of export controls to prevent vaccines, PPE or other types of medicines from getting onto Canadian soil?

[Doug Forsyth]

Once we have the TCA in place, it is, as I have noted a couple of times, a replication of the CETA, so the CETA provisions would apply. There's nothing in the TCA that...though we continue to examine both the CETA and the WTO to review what recourse we might have for the export restrictions, but there does not appear to be any...we have not yet seen anything in either of those agreements that would prevent what has taken place, no.

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

We have known for a while that the U.K. was interested in joining the CPTPP. You've alluded to that. A few days ago, on January 30, it formally applied to join. We know that this could change timelines for tariff reductions compared to the Canada-U.K. trade continuity agreement.

Specifically, in the U.K.'s press release about joining the CPTPP, they cite that for cars they would reach 0% tariff rates for Canada by 2022 in the CPTPP, which is two years faster than under the Canada-U.K. trade continuity agreement.

Can you table for the committee any side-by-side comparisons of differing tariff rate schedules between the Canada-U.K. trade continuity agreement and if the U.K. joins the CPTPP?

[Doug Forsyth]

Yes, I think we certainly could table that. One thing I would just caution you on in terms of comparing the two, especially around automotive goods, but not necessarily exclusive to automotive goods, is that in order to qualify for a zero duty or preferential duty rate you would have to meet the rules of origin for those products. I haven't examined it in detail, but it's not clear to me that the United Kingdom would be able to meet those rules of origin under the CPTPP requirements.

There are provisions within the Canada-U.K. TCA that allow for European materials and labour from the European Union to count as originating in the context of Canada-U.K. Those provisions do not apply in the context of the CPTPP so, as I said, it's not clear to me that automotive production in the United Kingdom would be able to pass the test for the rules of origin in this context of the CPTPP and qualify for that zero duty rate.