International Trade Committee on April 30th, 2021

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

I'll call the meeting to order.

Welcome to meeting number 27 of the House of Commons Standing Committee on International Trade. Today's meeting is webcast and is taking place in a hybrid format, pursuant to the House order of January 25, 2021. Our first hour is in a public session, and our second hour will be to consider the two draft reports.

Pursuant to Standing order 108 and the motion adopted by the committee on March 12, the committee is resuming its study entitled “Canada's International Trade and Investment Policy: Selected Considerations Concerning COVID-19 Vaccines”. With us today we have, from the Department of Foreign Affairs and Trade, Steve Verheul, chief trade negotiator and assistant deputy minister, trade policy and negotiations; and Loris Mirella, director, intellectual property trade policy. From the Department of Industry, we have Mark Schaan, associate assistant deputy minister, strategy and innovation policy sector; and Darryl Patterson, director general, projects and policy, biomanufacturing strategy implementation team.

Also from the Department of Foreign Affairs and Trade, we are expecting Ambassador de Boer to join us.

We will turn the floor over to Mr. Verheul—

[The Clerk of the Committee, Ms. Christine Lafrance]

Just a second, Madam Chair, I think he just arrived in the attendees. I will promote him. Just a second, please.

[The Chair, Liberal, Judy Sgro]

Okay. We'll wait one second.

[The Clerk]

Ms. Sgro, the floor is yours.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Now I am pleased to be able to invite the ambassador, His Excellency Stephen de Boer, ambassador and permanent representative of Canada to the World Trade Organization, from Geneva, Switzerland, to speak.

Thank you very much, Ambassador, for joining us. I'll turn the floor over to you for opening remarks, please.

[Stephen de Boer, Ambassador & Permanent Representative of Canada to the World Trade Organization, Department of Foreign Affairs, Trade and Development]

Thank you very much, Madam Chair.

You have my apologies. I did all the right things and of course my system crashed, so here we are.

I welcome this opportunity to address this committee. I am joined today by two Global Affairs Canada officials. They are Steve Verheul, assistant deputy minister for trade policy and negotiations and chief trade negotiator, and Loris Mirella, director of intellectual property in the trade policy division.

I will first address the discussions at the WTO with respect to global vaccine production and distribution, followed by how Canada's trade agreements may be used to ensure that Canada's vaccine advance purchase contracts are respected.

Madam Chair, the pandemic continues to affect the world, from the third wave in Canada to the surges we are seeing now in large countries like India and Brazil. As the promise of vaccination offers a light at the end of the tunnel, Canada and the entire international community are looking at ways to better develop, produce and distribute vaccines. Canada shares our international partners' call for greater international coordination towards ending the pandemic. No one is safe until everyone is safe, which is why Canada strongly supports global solutions towards equitable vaccine distribution.

Over the course of the pandemic, Canada has invested in and contributed to global programs—namely, the access to COVID-19 tools accelerator and the COVAX facility—in addition to leading discussions here at the WTO on trade and health, specifically the barriers to vaccine trade. Vaccine production is highly complex. It relies heavily on access to raw inputs as well as the co-operative transfer of know-how, skills and human expertise from researchers to manufacturers. The distribution of vaccines is also complex due to differing export regimes, regulatory hurdles, highly sophisticated supply chains and significant logistical and technological requirements to ensure that vaccines can get to where they need to be.

Canada has engaged actively in WTO discussions on these issues. We are open to considering all proposals on how best to increase production and equitable distribution of safe and effective COVID-19 vaccines. Our goal and our hope is that interventions are targeted at addressing real bottlenecks and production issues. In these discussions, some are pointing at intellectual property, while others, such as vaccine manufacturers, including those in developing countries, are pointing to an array of trade and supply chain related challenges, as I mentioned before.

As committee members will be aware, in October last year a group of WTO members, led by India and South Africa, tabled a proposal for a COVID-19-related waiver from certain sections of the TRIPS agreement. This proposal has since been cosponsored by a number of developing and least-developed members, including the African group.

I want to be clear that Canada has never opposed this proposal. In fact, we are continuing to engage with the proponents to identify concrete issues related to or arising from the TRIPS agreement or that WTO members could not address through the agreement's existing public health flexibilities.

For example, late last year we submitted, as did Australia, Chile and Mexico, a set of questions aimed at enabling all members to better understand the nature of any barriers experienced in any member's responses to COVID-19 relating to or arising from the TRIPS agreement. However, thus far the conversation has focused on a number of historical, general or hypothetical concerns regarding IP. There has been much mention of unused or underused production capacity, but there has not yet been evidence presented of large amounts of COVID-19 vaccine manufacturing capacity that would be unused due to IP issues. Our understanding is that vaccine manufacturers, including those in developing countries, so far do not substantiate this perspective.

I am sure that many find it challenging to reconcile the perspective of proponents that IP is a key challenge and that partnerships are optional, while the vaccine manufacturers that have spoken up have indicated that IP is not a key challenge and that partnerships are essential. Canada continues to encourage the proponents to share information on where any unused or underutilized capacity is located so that we can assess why this is the case. We will continue to engage with WTO members, industry and civil society stakeholders to better understand the global situation and the challenges to equitable vaccine distribution.

Meanwhile, Canada is playing a leadership role in promoting rules-based trade and open supply chains to address COVID-19-related challenges including, at the WTO, through the trade and health initiative advanced by Canada and the Ottawa Group. This initiative encourages WTO members to implement trade-facilitating measures in the areas of customs, technical regulations and services; exercise restraint in the imposition of export restrictions; temporarily remove or reduce tariffs on essential medical goods, including vaccines and their inputs; and improve transparency of trade measures.

Canada also supports the third way approach advanced by the WTO director-general, which is enhancing the WTO's role in global dialogue with the pharmaceutical sector towards accelerating the production and equitable distribution of effective, safe and affordable COVID-19 vaccines and related medical products.

I will now move on to how Canada's trade agreements may be used to ensure Canada's vaccine advance purchase contracts are respected.

To recall, on January 29, 2021, the EU brought into force what they refer to as a transparency and authorization mechanism for exports of COVID-19 vaccines. The mechanism was originally set to expire on March 13, but on the same day, the EU extended it until June 30.

On April 9, the EU member states added two criteria to the mechanism. First was reciprocity aimed at vaccine-producing countries. Second was proportionality based on vaccination rates and the scale of the COVID-19 pandemic in the export country. These two additional criteria will remain in effect until May 6; however, they may also be extended.

Since Canada was first notified of the measure on January 29, the Government of Canada has vigorously pursued the EU and its member states at every opportunity to advocate for Canadian interests. While Canada remains concerned with the measure, we continue to receive assurances from the European Commission and EU member states that Canada is not the intended target.

In addition, the EU's recent acquisition of 250 million doses from Pfizer for the second quarter of 2021, may decrease the likelihood that the measure will be extended or applied to exports of vaccines destined for Canada. Canadian officials remain in close contact with counterparts in Brussels and Spain to ensure the smooth delivery of vaccines destined for Canada.

Both CETA and WTO rules permit export restrictions, as long as a restriction is temporary, necessary to prevent or relieve critical shortages, and the good—vaccines, in this case—is deemed essential to the implementing party. However, both CETA and WTO provide mechanisms to support transparency and dialogue on such measures. From the outset, Canada sought to be placed on the list of countries exempted by the EU from the mechanism. The EU did not agree to do so. In fact, on March 24, it removed 17 countries from the exemption list.

The EU is a trusted trading partner for Canada and CETA provides Canada with a direct and well-established channel to continue advocating for Canadian interests with the EU. Canada continues to impress upon the EU that this mechanism must not affect vaccine shipments to Canada, that it runs counter to Canada and the EU's call for global co-operation and that the EU must fully comply with the transparency undertakings that Canada and the EU are advocating for at the WTO.

Thanks in part to this privileged relationship and advocacy efforts, Canada has not been negatively affected by the mechanism, and the EU has streamlined its export process for vaccine shipments to Canada. Nevertheless, Canada has called on the EU to end this measure as soon as possible.

Meanwhile, we are actively monitoring and protecting the supply channels for Canada's vaccines from around the world and will continue to do so with Canadian interests in mind.

Madam Chair, this concludes my brief introduction. I would be happy to take any questions from committee members.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Ambassador.

We go to Mr. Aboultaif, please, for six minutes.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Good morning, Madam Chair.

I welcome the ambassador and all the other witnesses to our committee today.

I have an article from I think two or three days ago that says, “EU sues AstraZeneca over delays in vaccine deliveries”. That was over the alleged breach of its vaccine contract. The contract that appeared in the Italian magazine, from RAI, included a clause that appeared to release the company from legal action for delays on deliveries.

There's a contract between the EU and AstraZeneca that was published in the newspaper, and there's a lawsuit against the shortage or breaching of deliveries in the contract.

To the ambassador and to Mr. Verheul, what is the nature of our contracts with the vaccine suppliers, since we've been experiencing delivery shortages, delays pushing deliveries from one week to another week, which is causing us the third wave? Also, it's causing all the lockdowns and the mental health and the hardships that we're going through.

I would be interested to know, from the ambassador or from Mr. Verheul, who was involved in negotiating the contracts with the suppliers and what is the content of the contracts? How protected are we?

[Stephen de Boer]

I have to admit, I don't have any details on the contract. That is outside of my ambit. I'm not sure if any of the witnesses do, in fact.

[Steve Verheul, Chief Trade Negotiator and Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development]

Yes, I'm in the same position as Mr. de Boer. I don't have any information on the actual contracts either.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

You are a chief trade negotiator, Mr. Verheul, and the ambassador has also been talking about the relationships and the assurance that we have from the European Union. We've had all these verbal assurances, which includes the minister saying at one point in the committee that she received verbal assurances about deliveries, and that Canada is not targeted by the EU measures, but we have been experiencing that.

What's the action plan? How can we go about that? We have the wording. We have the verbal assurances on the other side, but we have been experiencing shortages in supply, and no one knows what the contract looks like.

What can we do to make sure we don't experience these breaches to our contracts that we don't know...?

[Steve Verheul]

I think the challenge here is really not with the European Union. They have been doing everything we have been asking them to do in terms of ensuring that we would be getting any deliveries that we would be expecting, and we have not had interruptions as a result of that.

The difficulties we've faced have been more at the company level and difficulties in production. Some setbacks have occurred. We're now getting lots of vaccines coming from Pfizer. They seem to have resolved most of their production difficulties. Moderna is still experiencing some, but is also coming back on track. With an operation of this scale, I think we can anticipate that there will be some production hiccups from time to time. That's what we have faced, but we now feel we're very much on track.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

I know we don't have the upper hand on the supplies because there's a large demand from everywhere for vaccines. To the ambassador, are you aware that the WTO has helped countries place orders with vaccine suppliers, including some terms that would protect the purchaser as far as the supply chain is concerned and as far as getting the product, if not on time, at least in some order where you don't have to suffer such big gaps between deliveries?

[Stephen de Boer]

I think we need to distinguish between trade policy and contract negotiations in this context, but I would say this. We have been having discussions on trying to remove barriers to the movement of inputs to vaccines and vaccine production, and we have been discussing ways that these things can move much more easily within the global context.

I would also say that the director-general's third way, where she's engaging with industry and with stakeholders, is meant to facilitate these types of discussions to see what can be done to facilitate the movement of vaccines, but also to facilitate the production of vaccines. The individual contract negotiations themselves fall outside of the ambit of the WTO, so in fact, what the DG is engaging in is almost, in certain respects, an issue of moral suasion to work with industry.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Ambassador.

We will go on to Mr. Arya, please.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Madam Chair.

Ambassador de Boer, I'm glad to hear your statement.

There are a lot of rumours that Canada is opposing the TRIPS waiver at the WTO. Many people don't realize that Canada is actually working with the TRIPS waiver proponents like South Africa and India, and of course the Africa group, the LDCs, on how best we can address the current situation. Many people think that if IP is relaxed and is made available certainly we'll get the vaccines, but most people don't understand that it's not just the IP. We need other inputs. We need manpower. We need.... Whosoever wants to manufacture should have access to the sophisticated supply chain.

As you pointed out, discussion on historical, general hypothetical IP issues is one thing, but we need to focus on what exactly is required to be done now so that vaccines are made available.

Madam Chair, for the people who may not know, the director-general of WTO is advocating the third way. It means facilitating technology transfer within the framework of multilateral rules so as to not just encourage research and innovation, but at the same time, allow licencing arrangements that help to scale up the manufacturing of medical products.

Ambassador de Boer, let me start with a very simple question. Can you reconfirm that Canada is not opposing, per se, the TRIPS waiver? Is that accurate?

[Stephen de Boer]

Yes, that is absolutely accurate. We have not opposed the decision on the waiver, and we welcome a full assessment of the specific challenges that are being faced by WTO members. It's one of the reasons why we, as I indicated earlier, along with Australia and Mexico posed questions to the TRIPS council so that we could further examine how the waiver might operate and what the problems were that were being faced in the production of vaccines.

However, I would point out that the WTO has not reached any decision stage on the waiver itself, so we continue to engage with WTO members, including the proponents of the TRIPS waiver, on this issue.

[Chandra Arya, Liberal, Nepean, ON]

Thank you.

That is the thing. Many times people think that there's one simple solution: Waive the IP rights and everything will be smooth and suddenly the vaccines will become available. That is not the thing. We have to understand all the issues, so that it should not lead to some unintended consequences in the medium- to long-term range.

In addition to IP, we should know what the manufacturing capacity is that is available today that is not being used due to IP issues. The partnerships in the products like these vaccines, which has a lot of science behind it, is probably much more important than the IP itself.

Ambassador, can you tell me, on this unused manufacturing capacity that's been almost bandied about, on how there's a lot of unused manufacturing capacity in developing countries that could be manufacturing COVID vaccines...? While we have to recognize that not all developing countries have any manufacturing capacity, can you just highlight on the issue of whether there is any unused manufacturing capacity?

[Stephen de Boer]

We're hearing when we talk to industry, including as part of the director-general's third way process, that there is some unused manufacturing capacity but not large quantities. We have not been able to identify large quantities of production capacity.

As well, we're learning that, even if there were large unused production capacity, it's not as if this production capacity can be used overnight to increase vaccine production, nor is it clear to us at this point—and we continue to ask the questions and examine this issue—how the suspension of IP rights or a waiver of TRIPS would actually unlock this unused production capacity.

This is a difficult issue for us to get our heads around, but we're not hearing about large-scale production capacity issues. I should also say that when we have been talking to industry stakeholders, the constraint does not seem to be IP but the complexities associated with technology transfer.

As you point out, the IP is one issue, but it's the transfer of the know-how. It's not as simple as simply creating a recipe and saying, “Here is the recipe.” This notion of unused production capacity is not just related to a facility, but also to having the technological know-how to receive the information, which would result in increased production.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We will move on to Mr. Savard-Tremblay, please, for six minutes.

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

Good afternoon and my thanks to all the witnesses for joining us.

Let me provide a brief background. Recently, Quebec's Minister of Economy and Innovation, Pierre Fitzgibbon, said in an interview that we had experienced an international problem of mask addiction at the beginning of the pandemic and that we had been very affected.

In terms of vaccines supply, what latitude do governments have to ensure that some of the vaccines and essential goods are reserved for our needs?

[Steve Verheul]

I'm sorry. Who was that question directed to?

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

Actually, it is for the officials from the Department of Foreign Affairs, Trade and Development. So you could answer.

[Steve Verheul]

Thank you.

We may also want to bring in our colleagues from ISED for some of these questions, because this really isn't within the mandate of what we do at Global Affairs in terms of our efforts on trade negotiations and those kinds of issues in trade agreements.

Vaccines were negotiated through domestic policies and domestic provisions, so we were not involved in any of those efforts. It is the same with PPE. We certainly were in contact with foreign suppliers to some degree, but this was not something we were responsible for.

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

I also have a question for our friends from the Department of Industry, Trade and Commerce.

At the beginning of the pandemic, the pharmaceutical community was clear on one thing, namely that, over the past five years, there had been no adequate policy. In fact, there had apparently been even a certain indifference. Witnesses who appeared before us said the same thing.

Can you tell us why players in the field feel this way?

What was done in the five years prior to the pandemic? I recall the pharmaceutical companies saying that they were not able to work with the community to hear its needs.

Was the idea to rebuild a pharmaceutical sector before the crisis?