International Trade Committee on Feb. 26th, 2021

[Randy Hoback, Conservative, Prince Albert, SK]

You've brought up a domestic problem, and you said it's the fact that our Canadian companies are at 80% to 90% capacity and that they're not reinvesting to take advantage of these new markets. What is holding them back? They're already exporting to the U.S. in most cases. Why aren't they reinvesting in Canada?

[Matthew Poirier]

Our production with the U.S. is a trade relationship, but it's an integrated North American production, so that sort of masks our performances there.

When we look at other countries, other jurisdictions, Europe and the other ones around the globe, we see where we start to stumble. Yes, like I mentioned, we're at 89% or so, which is effectively our maximum production capacity. Until we have more favourable business conditions within Canada—and that problem lays at the feet of many governments, federal and provincial—we simply cannot compete.

[Randy Hoback, Conservative, Prince Albert, SK]

That not competing is restricting the growth of our economy and the number of jobs we have in the manufacturing sector.

In what sectors do you see reinvestment happening here in Canada, where people say it makes sense to do it here because we have all the trade agreements, in fact, more than any other G7 country? We're positioned properly. It still comes back to that cost of production. Why are we not tackling that? What's holding us back?

[Matthew Poirier]

There are a number of things, but writ large, it's that the cost of doing business in Canada is too high. Whether it's our tax system, which is not as competitive, or whether it's our investment programs and incentives to get businesses to invest in tech adoption or our skill shortages. The number one issue for manufacturing is that they can't find workers. They can't find the basic number of workers to keep production at current levels, let alone be able to grow.

Until we tackle these challenges, and that's shared by the federal government and provincial governments as well when we're talking about cost of doing business, until we get serious about this.... What the pandemic has shown us is that we need manufacturing. These are good jobs, well-paying jobs. Frankly, if we don't do more than just pay lip service to how great it is, and if we don't help them by creating a more competitive business environment and stemming that flight out of Canada, the investment will go elsewhere.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Hoback.

We will move on to Ms. Bendayan, for six minutes.

[Rachel Bendayan, Liberal, Outremont, QC]

Thank you very much, Madam Chair.

Thank you to all the witnesses for your excellent presentations on this beautiful Friday afternoon.

I'll begin with Mr. Kennedy and the Business Council of Canada.

Mr. Kennedy, you mentioned a few times during your opening remarks the importance of certainty. I have down here that it is a priority for your organization and the members you represent to quickly ratify the TCA, and that the Business Council of Canada reiterates its request for a speedy ratification of the TCA.

I was wondering if you could comment briefly, Mr. Kennedy, on proposals that I believe this committee will have before them shortly for amendments to the TCA, which would require us to go back to the negotiating table. Such amendments obviously would delay the ratification process but also, more importantly, create uncertainty for the business community.

Do you have any comments with respect to that, Mr. Kennedy?

[Trevor Kennedy]

Thank you for your question.

Yes, swift ratification is a priority. We understand there are concerns with CETA, and I think there are sector-specific concerns that you've heard from other witnesses and in other settings.

We think that in this context the best thing Canada can do is to provide certainty around this trade relationship. We have built a trade relationship around CETA before Brexit, and after Brexit we want to continue that relationship to the greatest extent possible. That's what the TCA does.

Looking towards the future—and this is the key with ratifying this agreement—we have a clear commitment, and we have a timeline to start negotiating a permanent arrangement. As we've heard from many people, that agreement doesn't have to be based on CETA and the relationship with the EU. We have an opportunity to recreate that relationship.

I get a sense from counterparts in the U.K. that there is a lot of interest in working with Canada and building a new economic relationship, so I would just reiterate that it's very important that we move forward with this agreement, as is, and that we move quickly to start negotiating the next step in our relationship.

[Rachel Bendayan, Liberal, Outremont, QC]

Thank you, Mr. Kennedy.

Let me also say that we, too, are hearing a lot of interest on the part of the United Kingdom to return to the negotiating table, and as a government we certainly look forward to consulting you and the Business Council of Canada before entering into those negotiations.

If I can move quickly to Mr. Poirier and the Canadian Manufacturers & Exporters, I did note with great interest some of your recommendations around communications and the importance of supporting the scale-up of our manufacturers in this country. I really do thank you for being so eloquent on those points.

I also heard you mention that you urge the swift passage of Bill C-18. What do you think about the possibility of having to go back to the negotiating table? What effect would that have on the manufacturers you represent? Do they want us to move forward in a way that provides certainty?

[Matthew Poirier]

Yes. The transitional agreement is just that. For ultimate certainty, a final agreement is desirable. That's the main outcome.

We get it that the U.K. is trying to sign many free trade agreements in the meantime, so we'll fall into that order at some point with them, but the sooner the better for all involved. The longer it drags on, the less incentive and the less willingness there will be on behalf of businesses to expand and grow, until those fundamentals are nailed down.

[Rachel Bendayan, Liberal, Outremont, QC]

Absolutely. I certainly concur with your comment with respect to not having this drag on.

If I may turn to the CFIB, I think you can see me coming already. Let me just begin by saying that you were mentioned a few times in question period today. We certainly appreciate your engagement on behalf of small businesses and also your encouragement that we should swiftly pass Bill C-14, which would continue to support our small businesses.

With respect to Bill C-18, which is before this committee today, I note that you would like to see a continued focus on SMEs, that you are happy with the chapter on removing technical barriers to trade in this transitional agreement, but that you would like to see a dedicated chapter for small businesses in a final free trade agreement. That certainly has been noted.

With respect to where we are today and the ratification process, you said that trade will be key to our economic [Technical difficulty—Editor].

Would you also urge us to move quickly on the passage of Bill C-18 and avoid any possible return to the negotiation table at this stage?

[Corinne Pohlmann]

Thank you.

You did cut out briefly but I think I got the gist of your question.

Absolutely, we'd like to see Bill C-18 ratified quickly. Again, there are lots of ongoing trading relationships that are reliant on the rules that have been in place for the last few years with CETA. At the very least, we need to minimize disruption at a time when things are very challenging for many businesses out there. Moving into a new agreement, relatively quickly, I think, is also really important.

Again, we need stability and certainty when it comes to the trading relationships that are happening. Knowing that something is coming and that it's not going to dramatically change, or if it does, it will be to improve what's already been out there, is going to be an important message that has to be delivered as these negotiations go on. The quicker it can happen, the better, because that certainty is important.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move on to Mr. Savard-Tremblay.

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

Mr. Lemire is going to take my turn.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Madam Chair, if I may, I will take this turn to speak on behalf of the Bloc Québécois.

My thanks to the witnesses for their testimony.

My colleague Ms. Bendayan, who is in the governing party and whose comments I particularly respect, talked to Mr. Kennedy about consultations.

What consultations have been conducted proactively as part of this strategy?

How do you want to be consulted moving forward? What mechanisms need to be put in place, and when should the consultations be held with the Business Council of Canada, for example?

[Trevor Kennedy]

For this negotiation, our group and other groups have been in regular contact with the team at Global Affairs as well as in the minister's office. There were two stages of the negotiation at one point, dating back to about 2018—I don't want to misquote the year; perhaps it was 2019—when there would have been some of the initial negotiations, and then throughout the summer and fall, engaging with the negotiators.

We had a lot of discussions about the approach that Canada was taking in the negotiation. We understood it was meant to be a transitional approach to the negotiation. The priority was in maintaining and continuing the relationship as is and not so much about reimagining the relationship.

We fully understand in the documents that have been provided and in the standard process that I think the department follows that there's a lot of room for consultation. I've noticed there are many opportunities with the negotiators to interact and to share their thoughts, both in writing and verbally.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Mr. Kennedy, if I may, I'm going to ask Mr. Poirier the same question.

Is it important for Canadian Manufacturers & Exporters to be consulted? Were you consulted beforehand? When and how do you want to be consulted on the permanent agreement?

[Matthew Poirier]

At Canadian Manufacturers & Exporters, we always have our nose in these things. We're talking with elected representatives, with ministers and with officials.

For this one we've gone through the same motions as for other free trade agreements. We've also been active with our counterparts in the U.K. at the Make UK association. In coordinating with them, we don't see this as a hostile negotiation, by any means. It's an agreement amongst friends. Everyone has been rowing in the same direction, and we're pleased with where it's going. It could always be faster and it could always be better, but in the grand scheme of things it's moving in the right direction.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

One aspect clearly stands out, namely the whole issue of mechanisms and the provisions applied to the dispute resolution between states and investors.

Are you concerned about that issue? How concerned are you? Should Canada move towards the permanent agreement?

I'm still talking to Mr. Poirier.

[Matthew Poirier]

I'm sorry. Could you repeat the question?

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

My question was about the mechanisms and the provisions applied to the dispute resolution between states and investors. The current situation is temporary. Should Canada move towards something permanent or should it withdraw, as it did with CUSMA?

What do you think?

[Matthew Poirier]

To the largest extent possible, we want to be able to match our other trade agreements.

Between USMCA, for the most part, and CPTPP, we have mechanisms and structures that we fully support and that give businesses confidence in those structures. To the degree that we can replicate that, we're all for it.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

So predictability and compliance become important. How important is that in the minds of the people you represent?

[Matthew Poirier]

I would say it's issue number one. Most businesses, business leaders and manufacturers are not trade experts, and it's our job to monitor these things for them.

The more consistency possible between various trade agreements, the better, provided of course that they're matching good things, good elements of the trade agreements. However, we don't have any fundamental clause for our sector in any of our major agreements to date.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I would also like to come back to what Ms. Pohlmann from the Canadian Federation of Independent Business said.

The statistics are really interesting. They remind us that our trade balance with the European Union is negative, while giving us a sense of what we need in terms of investors, in relation to taxes, duties, and the complexity of the rules and regulations on non-tariff barriers. That has a huge impact.

Your recommendations focus on communication and predictability with respect to our SMEs. How is the current situation falling short?

[Corinne Pohlmann]

Historically trade agreements have often been focused on the larger firms and their needs, and I think in the last maybe five to 10 years we've been moving a little bit more to understanding that sometimes smaller businesses have very different needs.

They are even less trade experts than I think larger businesses are, when it comes to these particular issues. For smaller companies, you really have to think a little bit more about how to put things into plain language and how to make sure that they have information that is clear and concise. They don't mind if there are rules and duties that have to be paid. They just want to know the pathway to get to where they're going to go.

Frankly, it's rare that I've met a small business that has engaged in trade that has not faced penalties or fines of some kind, because it's such a complicated process. Anything that helps simplify that process for them—from trade facilitation to the customs processes, to the regulations and rules they have to follow, to the duties and taxes they have to pay—is going to help improve the number of small firms getting engaged. The last thing you want to do is make it more difficult for them. You want to make it as easy as possible.

Moving trade agreements to recognize that and to communicate that more clearly, and having governments work together to get that information across, is going to be essential to make sure we get small firms engaged in trade. That's when we are going to have a lot more growth happen, when we get those smaller firms into those trade agreements.