International Trade Committee on Nov. 16th, 2020

[Hassan Yussuff]

I don't know all of the U.K. laws offhand in comparison with ours. This is going to be a new agreement between our two countries, and it's critical, given the steps we've taken in CUSMA, to make sure that we're consistent with how we approach trade, but equally, how we're going to protect our workers' rights within the context of trade.

The U.K. has the capacity to respond to this. It's a developed country. It certainly recognized the role of the ILO and the core conventions of the ILO that must be there. Equally so, putting that in the agreement gives us a mechanism should there be violations, whether it's in our country, but equally in the U.K. Both countries will have obligations and responsibilities. In short, we're not allowing that to become the competitive advantage to how we're going to conduct our international trade between our two countries.

[Randeep Sarai, Liberal, Surrey Centre, BC]

The concern is more to protect labour laws that are in existence and commitments already done, not worried about...As opposed to CUSMA, it was to increase levels...for example, in Mexico. This is more to protect them going forward, and to make sure there are no gaps in between. Is that what I'm hearing from you?

[Hassan Yussuff]

In the context of CUSMA, if you look at Mexico's labour laws and their regulations, they are actually quite strong. The reality, of course, is that Mexico doesn't enforce them.

You don't want to see that in the U.K., as the U.K. will now be an independent trading bloc outside the EU. We don't want the U.K. to use this position to undermine its labour laws simply to gain an advantage to how it's going to conduct its exports to other countries.

It's critical that we underpin our relationship based on some fundamental values as to how we're going to hold the U.K. accountable for the commitment it currently has and previously may have had, but equally how it's going to enhance it and protect it going forward.

[Randeep Sarai, Liberal, Surrey Centre, BC]

Mr. Kennedy, I wanted to ask about ISDS provisions. Have they been used a lot in the past, either by Canada against the U.K. or vice versa? Has there been much of an issue regarding these provisions?

[Trevor Kennedy]

Specifically in the CETA context, it's an area of trade policy with which I'm less familiar. From what I understand, in CETA's context, an investment court system replaced ISDS, and it's not in force for CETA until all the members fully ratify the agreement. I don't know if that's applicable to our current relationship with the U.K. but there is still value in investor provisions in agreements.

When we started studying CETA, and this is going back a decade ago now, a quarter of FDI in Canada came from the European Union, including the U.K. That investment is a source for a lot of good paying jobs in Canada. We would like to keep that investment flow open, and make Canada an attractive place to invest.

[Randeep Sarai, Liberal, Surrey Centre, BC]

My next question is also to you, Mr. Kennedy.

With CETA or other trade agreements we have with the U.K., currently in effect, where can we enhance our trading position, so that we can gain new markets? Are there any particular industries that are striving to make gains in the U.K.? If we were able to make some amendments or achieve some better relaxations or market access, where would that be?

[Trevor Kennedy]

This exercise provides an opportunity for Canada, at least in terms of looking toward the free trade agreement in the future, because in the immediate sense, we want to limit disruption with the transitional deal.

However, the U.K. and Canada have a very close relationship. We have complementary economies, and I don't want to get ahead of specific companies or industries that will certainly have their own perspectives, but I would imagine that outside of the EU context, there are a lot of areas where we can work closer together.

Mark mentioned critical minerals, for instance. There's a lot of interest in critical minerals that go into a lot of the green technology that many countries are very interested in developing. Canada can be a useful partner for the U.K. going forward, and potentially, a free trade agreement could help facilitate that.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move on to Mr. Savard-Tremblay for two and a half minutes, please.

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

Thank you, Madam Chair.

This time, I want to ask Mr. Agnew and Mr. Kennedy a question.

In July 2019, a federal government survey showed that almost three-quarters of Canadian SMEs had heard about free trade with Europe, but only 9% had taken advantage of it. We know that, in Quebec, SMEs constitute the backbone of our economy.

There appears to be an imbalance between how European companies have benefited from the Canadian market and how Canadian companies have benefited from the European market.

In your opinion, how should an agreement with the United Kingdom address this issue?

[Mark Agnew]

One thing I would say about the sorts of headline statistics is that there will be a lot of SMEs that, for capacity reasons, will not be able to export because it takes a fair amount of bandwidth internally. Not every SME today is also ready to export today, but maybe tomorrow they will be able to.

In terms of being able to equip those companies, one of the things that we can do better in terms of how the trade commissioners speak to businesses is being as specific and tangible as possible about what a trade agreement means for that company. It's not just about promoting it to, say, the manufacturing industry; you have to promote it to the companies that understand very specifically what the trade agreement means for the specific product that they make. They have to understand how to get into the market and understand all the navigation of the government red tape, whether it's at the border or other paperwork we've filed in that country. It takes a lot of hand-holding to make that happen. That is the labour-intensive work that we have on the ground with companies to help them take advantage of the agreements.

[Trevor Kennedy]

To add to that, we share the objective that we need to see more SMEs take full advantage of our suite of free trade agreements. Canada has some of the best market access to the world. We know, in the G7 context, that we have a very competitive position, but we know our SMEs haven't taken full advantage of the opportunities yet. The trade commissioner service is doing a lot of work to focus on this. We still think this should be the focus going forward.

I don't have the answers to how we can have more small businesses join to export more of their products and services, but it's certainly a goal that we share.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move on to Mr. Blaikie for two and a half minutes.

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

Thank you very much.

My question is to Mr. Yussuff and Mr. Brown.

We know very little about the government's objectives in the current negotiations with the U.K., other than that they want to reproduce the terms and conditions of CETA on some kind of non-permanent basis, I presume, although it is not exactly clear what a transitional agreement really means.

There are ISDS provisions in CETA, but they haven't come into effect yet because there are some European countries that haven't ratified that aspect of the agreement. Presumably, in a bilateral agreement, there wouldn't be cause to wait.

I know that the government, when it was passing CUSMA, made a lot out of the fact that the ISDS provisions were removed, the investor-state dispute settlement mechanism. Can you speak to signing a transitional agreement that effectively reproduces CETA between two parties that presumably have both agreed to the ISDS provisions of CETA, or would if they reappeared in a transitional agreement? Is that consistent with what the government has said around ISDS in CUSMA?

Do you think a transitional agreement between Canada and the U.K. should deliberately exclude the ISDS provisions of CETA?

I'll start with Mr. Yussuff and then go to Mr. Brown.

[Hassan Yussuff]

I would say they should eliminate the ISDS provisions.

The government said early that they are looking at negotiating agreements that are much more reflective of what is in CUSMA. I don't know why you would do something less in regard to a transition agreement with the U.K.

By the way, the U.K. was part of an agreement that they chose to leave. The reality is, of course, that the consequence of that is the world has changed, and we have changed our approach to trade negotiations; that's consistent. I think the U.K. should recognize that it has to agree to different provisions that may not be in CETA. Fundamentally, I would urge the government not to be consistent with CETA as they change provisions to reflect the new reality that is taken in CUSMA.

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

Mr. Brown, I think I'm running out of time. Would you have a very quick answer?

[Larry Brown]

First of all, the Canadian government did not ask for the removal of ISDS in the new NAFTA; the U.S. government did. The Canadian government agreed to it somewhat reluctantly. I'm a little bit nervous about what they will do with the U.K.

What they've talked about is replacing ISDS with the new investment court. The new investment...or whatever the title is called, is basically ISDS under new clothes. It's a procedural improvement, but the core of it is still ISDS. It should be excluded. There is no excuse for continuing with ISDS anymore. It's been proven to be such a monstrous mistake by government.

[The Chair, Liberal, Judy Sgro]

Thank you.

We go on to Mr. Lobb for five minutes.

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

Thank you, Madam Chair.

The first question I have is for Trevor and Mark. The question is in regard to consultation.

I hate to put you on the spot here, but I'm just wondering how much consultation you folks at the Business Council and the chamber have had with the department in the trade deal negotiations with the U.K.?

[Trevor Kennedy]

Maybe I can start.

I've only been in this position for about a half a year. I can only speak to that point onward.

The department has been very accessible. If we've had any questions, we've been able to reach out and receive an answer. Obviously, we're not part of the negotiation but I do feel that we've been well informed throughout the process. We've extended that to some of our members as well. We've had an opportunity for some of our member companies to interact with Global Affairs to ask questions around the negotiation itself. The minister's office has also been accessible as well.

[Mark Agnew]

Picking up on the comments I had made to Ms. Gray earlier, this discussion has been characterized a bit more by industry initiating some of those contacts. We haven't seen the same sort of Gazette-notice style. Then again, that can come to Trevor's point as well, about the government both at the departmental and the ministerial office level being accessible when we've sought updates.

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

Okay.

December 31 is the end of the line here with what we're going to do with the U.K. If you look at the calendar, you see there are pretty limited opportunities here, even if there is a deal struck. There's always a chance that we could work into the wee hours and get it done. I'm sure that would happen.

Failing that, on January 1, what happens when the first container hits the port in England, let's just say?

[Mark Agnew]

If you have a good coming in, you will have to pay a tariff on it according to the U.K.'s new global tariff regime, if it's going that way. If you're a Canadian wholesaler or retailer bringing in U.K. products to sell to Canadians, you will also have to pay a tariff on that product after December 31.

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

I guess where I'm coming at this from is that earlier one of you mentioned certainty. The market likes certainty. Business likes certainty. But really there is no certainty, because the way I look at it, for example, organizations like yours have been able to ask questions. Some of your members have been allowed to maybe provide input. Really they don't know. They have to make plans for 2021 still under the cloud of a pandemic.

I'm not criticizing you at all. I'm just saying if we're trying to create certainty here, how is it we're creating any certainty? It seems like what we've created, the government has created, is chaos almost at one level.

[Trevor Kennedy]

I would just maybe jump in to mention that I think our experience is very similar to that of many of our peers around the world. We know that, for example, Australia and New Zealand are trying to conclude agreements as well. Some countries have been able to conclude agreements, whether that's a permanent arrangement mimicking their existing EU agreement.... Throughout the Brexit process, we've seen a lot of moving pieces. Even today or this week we may know what that relationship looks like going forward. For Canada and many other countries, I think it's been a moving target.

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

Okay.

There's one other thing. Has anyone ever kicked around the idea of a USMCA-U.K. trade deal where you incorporate the three countries negotiating the deal? They've already come together in agreement for North America.

Was there any talk about doing a trade deal with the U.K. on those priorities or parameters?