International Trade Committee on March 12th, 2021

[The Chair, Liberal, Judy Sgro]

I'm sorry, Ms. Bendayan, but you don't have any more time.

We'll move on to Monsieur Savard-Tremblay for six minutes, please.

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

Thank you, Madam Chair.

My thanks to all the witnesses. Good afternoon to my colleagues also.

I would like to ask you about softwood lumber. I will keep the question open and not direct it to any specific witness. I would like to hear from anyone who has anything to add on the matter.

As we know, in 2020, the WTO found in favour of Canada on the softwood lumber dispute, even though Canada had not exerted any pressure for the issue to be settled, given that we were renegotiating NAFTA. But the Quebec Forestry Industry Council warned us that this is a temporary solution, not a permanent one. They warned us that, until we have a long-term agreement, we are simply turning a blind eye and putting the problem off.

In your opinion, what is the impact of this WTO decision?

[Matthew Poirier]

I'll jump in to answer Monsieur Savard-Tremblay's question.

For the most part, the WTO has been helpful for us, especially on this file, which has been a perennial trade irritant between us and our biggest trading partner to the south. I agree, it's a constant battle and it's frankly an unfair one, and it octopuses out into different areas too, which are related to softwood but also involve pulp and paper and other manufacturing processes. To the extent that we can leverage an agreement or some sort of structure to try to help avoid these problems in the future, certainly we in the manufacturing industry would be very supportive of it.

My earlier comments on the situations I alluded to, whereby U.S. competitors game the trade tribunal system to their advantage is present, and it happens in this sector as well, so we're very concerned about that type of action. The problem is that if it's not punished, it keeps happening, because it becomes a viable business strategy.

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

Let me go back to my question: what effect does the WTO decision have? Is it worth the paper it is written on? Does it give us a little breathing room temporarily? In a word, how do you see it?

Put another way, do you feel that we absolutely need a real and permanent agreement between the two countries to settle the matter?

[Matthew Poirier]

That's a good question. It's very difficult in the structures we have in international frameworks, whether that be CUSMA or otherwise, to get these line items. We have to have robust dispute mechanisms to do it.

I guess that comes back to my earlier point. If that dispute settlement process is rapid, that's better for business, and it's also better when we have the right data—that's where the WTO comes in again—in that monitoring function.

When the data is scarce and it's sort of made up, that's where you can slip in garbage and try to get away with stuff that you otherwise wouldn't if you had the right data.

Also, with strong monitoring and strong data, you can avoid the dispute settlement processes generally, because if they have to present data and it's trash, then it's thrown out and dismissed right away.

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

Thank you.

My next question goes to all the witnesses.

We understand the importance of the Dispute Settlement Body, which is based on a principle of justice, that all countries, small and large alike, have the same status in a dispute that needs to be decided. We have examples of small countries managing to win against larger countries, which is very good in a global context.

But could there still be a problem with the approach?

In fact, we have seen examples that lead us to question the way in which the Dispute Settlement Body has come to its decisions. I am thinking, for example, about the energy program that Ontario established and that had requirements favouring local companies and local workers. The project made good sense at a time when we were rediscovering local purchasing and the importance of generating economic activity at home. But Japan and the European Union won against Canada before the WTO's Dispute Settlement Body.

So, setting the tool aside, should the approach be reviewed?

[Bob Fay]

That's a great question. Going back to the U.S. and the optimism around the new administration, of course, they have also reinforced their buy American provisions. All countries want to have the right to do that, but you want to be able to do it on a non-discriminatory basis. There are clearly tensions there that have to be worked out.

I want to go back to the previous question. There are ways to speed up dispute settlement at the WTO that I mentioned. The secretariat is severely constrained on the information it can use. There's no reason they shouldn't be able to gather information, and they can't do that right now. Then, on dispute settlement itself, roughly two-thirds of all panel decisions are disputed. It's now at a point of asking, why not do it?

We have ideas on how to speed up that process that I think would be beneficial to everybody.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Fay.

We'll go on to Ms. Mathyssen for six minutes.

Welcome. We're glad to have you at the committee today.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

Thank you, Madam Chair, and I thank the witnesses.

I think it was you, Mr. Fay, who mentioned the TRIPS segment of the WTO.

I was wondering if you could expand on that in terms of IP rights around vaccinations—especially as, obviously, we're dealing with a great deal of vaccination talk now—and the temporary waiver that Canada hasn't signed on to. What is the impact of that?

[Bob Fay]

Obviously, it's an incredibly topical question. The Institute for New Economic Thinking released a report yesterday on this very topic. The president of CIGI, Rohinton Medhora, is part of the commission that was behind that report. I'd refer you to it. There are four points in it.

As you've indicated, patent rights and their enforcement are integral to our trading system. They give temporary monopolies to allow companies to take risks and to get paid for those risks. What this report really discusses is that in this case the pharma companies have received enormous support from governments, which in fact has mainly covered their R and D costs, and then they've benefited tremendously from public research.

I guess the question would be, should they be allowed to enforce patent rights in this particular instance, when there is obviously a global health emergency, a pandemic? There are measures for compulsory licensing built in. I can't comment on Canada's position. I don't know enough about that. I think there is a clear case that patent rights could be waived or be considered to be waived for this pandemic.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

Maybe the other witnesses could chime in as well and add their voices to that question.

[Trevor Kennedy]

In my case, I know only what I've read in the news. There's no interaction with members. I don't have anything to say beyond what was already said.

[Matthew Poirier]

I have nothing to add.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

I have another question for you though, Mr. Poirier.

For a long time now, the manufacturers and exporters have been talking about that domestic side of the problems you have in terms of growing that export and so on. You also mentioned some of the domestic bodies that are involved. Could you go into a greater explanation of that? Was it called “Import in Canada”? There were several bodies that were supposed to increase that.

There were also discussions about the reductions of the people—I've forgotten what they're called—who monitor agricultural exports, and the safety inspectors and so on. If you could elaborate on that, that would be really helpful.

[Matthew Poirier]

Certainly. What I was referring to were Canada's big trade support agencies, such as the EDC's trade commissioner service and those agencies. We've found that our members and exporters who use those services really like them; they're very helpful, and they do the job. The problem is that when we survey our membership, most of the membership does not know that these places exist, let alone the specific programs you've just mentioned, which are very helpful.

There's been a retrenchment over the last number of years on having people from these agencies embedded, whether it's with us in the trade association or on the ground, and having offices where people can walk in and talk to someone in person. That has been pulled back quite considerably.

We could pretty much track where that sort of aimlessness began, and it was when that retrenchment happened. Certainly, having more people out in the field would be beneficial, but it's also about leveraging us in the trade association world to help the government connect with these people.

Picture, if you will, that you're an SME exporter and you're saying, “Gee, I wonder how I can increase my market in country X.” You'll talk to your accountant, you'll talk to your legal advisor and you'll talk to your staff. Your default setting is not to think, “Gee, I wonder what the government has to offer.” That's where trade associations and other people who are linked in can be leveraged.

The other side of it, too, is the training—the trade skills training. There are a number of programs, FITT being one of them, that we've partnered with in the past. That creates the capacity within Canada of skills for trading for that profession. Most Canadian companies are SMEs and have a certain bandwidth of what they can take on in terms of skills training. These types of programs, with proper funding and proper outreach, could be very beneficial.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Poirier.

I'm sorry, Ms. Mathyssen, but your time is up.

We go now to Mr. Hoback for five minutes.

Go ahead, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Madam Chair.

Thank you, witnesses, for being here on a Friday. It is great to see you all.

What I will start with is that it comes back to the decisions made at the Appellate Body. They rule in our favour, and then what? That is one of the concerns I hear from a lot of people. A good example of that involved our country-of-origin labelling in the U.S. with our beef sector. Okay, so we won the case, but then what?

Do you see anything that should be done or should be part of Canada's stance in the redoing of the Appellate Body to address that? I will start with Mr. Fay first and then go to Mr. Poirier.

[Bob Fay]

The first step is really to fix the Appellate Body. Nothing is going to happen until that's fixed. There are ways to fix it. I think a speedier resolution and more certainty are going to make things better for everyone.

On the appeal process beyond the Appellate Body or, I suppose, enforcement, I am going to have to pass it over to the people who are on the ground and who are fighting these battles.

[Matthew Poirier]

It is a good question. Things often fall apart in the enforcement part of it. That might be tied into the third pillar that I discussed, that when we are talking about rules and resetting rules, we might have to think about—and this is really out there—reforming the rules of the WTO to beef up that enforcement angle of it. How do you punish actors or players who do not abide by rulings?

That's the only way I see it, from the WTO perspective, but certainly I'll echo what Mr. Fay says, that just getting them more quickly might discourage people. If they know it takes years to do, then it is in their interest to go to the body, even if they know they are going to lose.

[Randy Hoback, Conservative, Prince Albert, SK]

I agree with you on the process.

Even the Trump administration highlighted a lot of flaws with the process—things that were being neglected and ignored that need to be addressed. I assume that under the Biden administration we will still see the same things being brought forth and we'll have to address them. I think they need to be addressed.

While we are addressing those issues, I am wondering if we should also be addressing some of the other issues, such as enforcement, as I mentioned. What used to bug me with COOL was that anything we did to retaliate also hurt the Canadian sectors, which would be retaliated against. I would almost like to be able to retaliate by exporting to Japan or somewhere else, so at least it wouldn't hurt us but would hurt somebody else. That's a different world.

Mr. Kennedy, I was going to ask you a question. Right now, with COVID, one of the things I'm hearing from the CEOs of my small businesses is that they're trying to plan for the summer. They're trying to figure out what they're going to do. I'm very concerned, as we see other countries like Israel and the U.S. being so far ahead of us in vaccinations, that they'll actually have their economies jump-started before we will, and then they could come in and scoop up our customers.

How big a threat is that?

[Trevor Kennedy]

I think we're all eagerly awaiting opportunities to get our vaccines. Just looking at business sentiment, I'll point towards something I saw this week that was quite interesting. Our counterpart organization in the United States, the Business Roundtable, polls its CEOs on a regular basis on business sentiment. It's quite clear that we have seen, as vaccines have been rolled out in the United States, a clear improvement in sentiment in the business community. I hope we're in the same position by the summer. It all depends on our ability to receive our vaccines on time. Fortunately, to date, we haven't had any of our shipments delayed.

This goes to the core of things like the multilateral trading system; concerns around vaccine nationalism; ensuring that our partners play by the rules now and in the future; and ensuring that we have access to critical supplies, vaccines and so on.

[Randy Hoback, Conservative, Prince Albert, SK]

Mr. Poirier, we're starting to see a rise in inventory levels at the manufacturing level. How concerned should we be with regard to that? What signal does that send to our economy?

[Matthew Poirier]

It is a worrying trend that we've started to see. It means they might not have enough customers out there to buy their goods. To piggyback on what Mr. Kennedy said too, the further we fall behind.... That gap between other countries' being vaccinated and our not being, even if it's a small one, for business translates into restrictions having to be in place that much longer. That has an impact, certainly, on our manufacturing sector—on central manufacturers—but it also affects the movement of workers across borders. It affects all those types of flows as well.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Hoback.

We'll move on to Mr. Sheehan for five minutes, please.

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

Thank you very much to all the presenters here today for their excellent testimony.

One of the pieces I've heard again and again about the WTO, among the various suggestions that have been made, has been in particular around the Ottawa Group. It made some suggestions in regard to the various supply chains. I know that's very important for the Canadian Manufacturers & Exporters. It's important for communities like Sault Ste. Marie, which I represent. We've talked about countries, but even within countries there are certain sectors, and of course I'm going to talk about steel, steel manufacturing and the various things that have been presented around dumping.

Could the Canadian Manufacturers & Exporters give us some thoughts around steel, the steel chain and how the WTO has performed around that? I know we introduced a number of measures around anti-circumvention and around scoping and market situation. Oftentimes, when we were talking about that many years ago, people were saying it wouldn't be WTO-compliant, but it has been compliant and it has been working.

Could the Canadian Manufacturers & Exporters comment on the WTO as it relates to steel manufacturing and others? Thank you.