International Trade Committee on Nov. 20th, 2020

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

I call the meeting to order.

Welcome to meeting number five of the House of Commons Standing Committee on International Trade.

Today's meeting is taking place in the hybrid format, pursuant to the House order of September 23, 2020. The proceedings are available via the House of Commons website.

To ensure an orderly meeting, I would like to outline a few rules to follow. Members and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting.

You have the choice at the bottom of your screen of floor, English or French.

For members participating in person, proceed as you usually would when the whole committee is meeting in person in a committee room. Keep in mind the directives from the Board of Internal Economy regarding masking and health protocols.

Before speaking, please wait until I recognize you by name. If you are on the video conference, please click on the microphone icon to unmute your mike. For those in the room, your microphone will be controlled as normally done by the proceedings and verification officer. When you are not speaking, your mike should be on mute.

Pursuant to Standing Order 108(2), the committee will now proceed with its study of trade between Canada and the United Kingdom and a potential transitional trade agreement.

We welcome our witnesses today.

From the Department of Foreign Affairs, Trade and Development, we have Steve Verheul, chief negotiator and assistant deputy minister, trade policy and negotiations; Sara Wilshaw, chief trade commissioner, and assistant deputy minister, international business development, investment and innovation; and Doug Forsyth, chief negotiator for the Canada-United Kingdom transitional trade agreement.

From the High Commission for Canada in the United Kingdom, we have Janice Charette, high commissioner for Canada in the United Kingdom of Great Britain and Northern Ireland; Nathalie Dubé, minister/counsellor (commercial/economic) and senior trade commissioner; and Aaron Fowler, chief agriculture negotiator and director general, trade agreements and negotiations.

Welcome to you all.

Mr. Forsyth, you have the floor.

[Doug Forsyth, Chief Negotiator for the Canada-United Kingdom Transitional Trade Agreement, Department of Foreign Affairs, Trade and Development]

Thank you, Madam Chair.

Good afternoon, honourable members. Thank you for the invitation to appear before the Standing Committee on International Trade to provide an update on the Canada-U.K. transitional trade agreement and Canada's discussions with the U.K. towards an agreement based on the Canada-EU comprehensive economic and trade agreement, or CETA.

We thank the committee for its interest in this topic.

As I believe we are all aware, in 2016 the United Kingdom held a referendum on its membership in the European Union, which resulted in the decision to leave the EU single market, customs union and free trade area.

That decision has clear consequences for the Canada-U.K. trade relationship.

For one, the United Kingdom leaving the EU means it can no longer be party to the CETA as of the end of the Brexit transition period, which is December 31, 2020.

Two, after over four decades of EU membership, Brexit will bring about significant changes in the United Kingdom's trade and economic relations with its largest trade partner.

Three, going forward, the U.K. may choose to take new approaches to trade. These will be of interest to close trade partners like Canada. Canada and the United Kingdom have historically enjoyed mutually advantageous commercial relations. Both sides are keen to work together to maintain our strong trading relationship post-Brexit and to seek to mitigate potential disruptions for stakeholders.

In September 2017, when the U.K.'s approach to Brexit was in its early stages, Prime Minister Trudeau and then U.K. prime minister May met to discuss how to strengthen our bilateral relations, including in the area of trade. At that time, Prime Minister Trudeau and Prime Minister May pledged to seek as seamless a transition as possible for our trade relations.

Soon thereafter, officials undertook a trade dialogue aimed at substantively replicating the CETA on a bilateral basis as an interim measure in response to Brexit. As the U.K. was still formally part of the EU until January 31, 2020, it was not able to undertake new international trade negotiations at that time. However, it could discuss a replication of CETA. Our trade dialogue talks advanced in 2018 and into 2019.

A number of CETA chapters could be converted to bilateral provisions in a straightforward manner. Others required some minor technical modifications. A small but important list of chapters required intensive negotiations to turn the CETA obligations into Canada-U.K. obligations. For these areas, we undertook targeted consultations with implicated sectors and have been keeping them informed of developments.

In addition to providing these stakeholders with updates on progress throughout the trade dialogue, we have also been keeping provincial and territorial trade representatives informed via the Committee on Trade, or C-Trade.

As of March 2019, our discussions with the U.K. were quite well advanced.

Then, the United Kingdom unexpectedly announced a plan to offer duty-free access on 95% of all of its tariff lines to all World Trade Organization members in the event of a no-deal Brexit. As this change in approach by the U.K. would have significantly undermined the benefits of any preferential trade agreement between us, we paused these discussions.

Over the months that followed, Canada continued to closely monitor Brexit developments. We welcomed the ratification of a withdrawal agreement between the EU and the United Kingdom in January 2020. That treaty established the current Brexit transition period, during which the United Kingdom continues to participate in the EU single market and benefit from EU FTAs like the CETA. Canada was pleased to confirm its agreement for this arrangement with the EU and U.K., as it offered a longer period of certainty for our stakeholders.

In May 2020, the U.K. released a new most-favoured nation, or MFN, applied tariff schedule called the U.K. global tariff, or UKGT.

Then, in June 2020, the U.K. decided it would not seek to extend the Brexit transition period beyond 2020. Just for reference, the withdrawal agreement provided the option of a one-time extension to the end of 2021 or 2022.

Soon after these events, Canada proposed a resumption of our discussions on a transitional trade agreement that could apply from the end of the transition period.

Minister Ng and her U.K. counterpart Secretary of State Truss confirmed that officials should re-engage in discussions on an interim agreement for the end of this year, with the goal of avoiding a “cliff edge” for business.

Both also agreed that we should look ahead to subsequent new bilateral negotiations to be launched as soon as next year. Despite COVID-19 restrictions, we undertook an intensive schedule of virtual discussions over the past few months. There has been very good progress, especially recently, and we expect to soon be able to announce a conclusion of talks.

A number of steps would then follow to prepare to seek the government's approval for signature and to table the bill in Parliament for its consideration.

This transitional trade agreement will not be like other trade agreements Canada has negotiated. It is an interim measure in response to the unique situation Brexit has presented, where a party to one of Canada's recent trade agreements, i.e., the CETA, can no longer be covered by its provisions. As such, Canada and the United Kingdom also plan to enter into subsequent new negotiations in the near term. Those future negotiations would be best tailored to our bilateral relationship, reflect the interests of the parties and respond to any post-Brexit developments.

Ahead of the launch of any new comprehensive FTA negotiations, the government will undertake consultations with Canadians and follow any policies in place for the notification of Parliament. Officials will look forward to providing this committee with updates on that future FTA initiative.

Returning to the transitional trade agreement discussion, Madam Chair, let me end by saying that throughout the Brexit process Canada has taken a constructive approach in seeking to avoid disruptions for our businesses. We have heard from a number of industry stakeholders, as well as provinces and territories, about the importance of maintaining a preferential trading relationship with the United Kingdom.

The trade commissioner service, or TCS, has been engaging with Canadian businesses on the implications of Brexit. The TCS has done this through a dedicated web page on Brexit for Canadian companies and in terms of direct client service. TCS remains committed to continuing to assist Canadian companies doing business with and in the U.K.

Whatever the ultimate outcome of Brexit, the United Kingdom will remain a significant market for Canadian businesses, and we will continue to work together to build on our strong trading relationship to grow our economies and benefit our people.

Along with my colleagues here today, I look forward to your questions and our discussions.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Forsyth. We appreciate your comments.

I'd like to welcome Mr. Fragiskatos to the committee today.

I hope you enjoy your time here.

We'll go on to the Conservative Party and Ms. Gray for six minutes, please.

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

Thank you, Madam Chair, and thank you to all of the witnesses for being here.

When looking at some type of an agreement started, and we know that this has been in the works for several years, was the goal always to have some type of a transitional agreement or was that decision made along the way? Did that change? Was it a matter of having a full free trade agreement or was it always to have some type of transitional agreement?

[Doug Forsyth]

I think one of our constraints—one of the biggest constraints during this—as we launched the negotiations was the fact that at the beginning, in September 2017 and then moving forward into 2018, the United Kingdom was a member of the European Union so they were not able to engage in a full-scale trade negotiation. The only thing they were able to do was to replicate the CETA, so from our perspective it was very much a transitional agreement. We identified early on that we would like to launch a full-scale bilateral negotiation, but the United Kingdom was not able to do that when we began the process.

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

When you decided to pause the negotiations, where did that direction come from? Did that come from the Prime Minister's Office or from the minister's office, or was that based on a recommendation from your department?

[Doug Forsyth]

I think that was a decision that we took as a negotiating team when it became evident that it would not provide a good outcome for Canadian producers and exporters. By providing all countries with basically duty-free access, there was no preferential agreement for Canadian producers and exporters, so we decided to pause negotiations.

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

So that was strictly an initiative taken on by your department. There was no involvement from the minister, or higher, to pause negotiations with another country.

[Doug Forsyth]

Well, we do have the mandate to negotiate free trade agreements in the best interests of Canada.

Of course, we would inform the minister of any decisions that we take along the way, which we did. However, at the negotiating table, there was no reason to continue if it was not in the interests of Canada.

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

You mentioned in your opening remarks that you did a number of consultations with specific sectors, not en masse. Can you let us know what those specific sectors are?

[Doug Forsyth]

They were mostly in the agriculture sector.

We published a Canada Gazette notice to seek views from people, from companies and associated stakeholders.

The sectors that had the most interests were on the exporting side, of beef, pork and grains, and on the importing side, because of the nature of the agreement, dairy stakeholders. We have kept them in the loop as well.

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

Going back to looking at the negotiations that were occurring, surely there would have been a sign-off from a minister to halt negotiations. Did that occur? Did the minister sign off on halting negotiations with the U.K.?

[Doug Forsyth]

We briefed the minister and the minister's office, as we would during the normal course of business.

As I said, there was clear recognition from the negotiating team and our recommendation was that we not continue the negotiations at that time. It would not have been in the interests of Canadian exporters and producers to have to compete with other [Technical difficulty—Editor]. These competitors, for example, producers from the United States and China, who would have had duty-free treatment into the U.K.—

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

Okay, but my question was, did the minister sign off on that?

[Doug Forsyth]

The minister was in agreement with our recommendation, yes.

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

Okay.

Why would other countries have continued on if the format was similar with other countries? We know now that many other countries have deals, and here we are literally at the eleventh hour. Why would other countries have continued on and we chose to hold off for so long?

[Doug Forsyth]

I think other countries are going to make decisions that are in their interests.

At the time that the United Kingdom chose to offer duty-free treatment to all WTO members, certainly other countries looked at what we did, and they also paused. They didn't do it officially, but they certainly took a step back and then looked at what's in their interests. That—

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

Okay, thank you, and thank you for confirming that the minister had signed off....

[The Chair, Liberal, Judy Sgro]

Thank you, Ms. Gray. I'm sorry, but your time is up.

We'll go to Mr. Sheehan.

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

First of all, thank you very much for your presentation.

It was interesting. Yesterday I had a Zoom call with some members of the United Steelworkers here—the three locals that are making steel—and the conversation about England came up.

As we know, England had a very robust steel industry, but over time they had chosen not to be in the steel business. It's one of the things that sometimes you hear in North America: “too big to fail”. You think that the steel industry will automatically always be there. It certainly takes a commitment by a country that they want to be in the steel and aluminum business, because other countries are outsourcing it.

My question for some of our negotiators to kick this thing off, especially since it's fresh in the mind, is about opportunities. I'm using steel as an example, but that England does not manufacture....

What are the other opportunities going forward that we would be looking at negotiating and securing our current trade status on, and looking at perhaps new opportunities for various industries from coast to coast to coast?

That's through you, Madam Chair, to our representatives.

[The Chair, Liberal, Judy Sgro]

Mr. Forsyth.

[Doug Forsyth]

I can start and then I probably will look to other colleagues to respond as well.

I think we have had a very successful run of great negotiations and/or renegotiations in the recent past, starting with CETA. We launched those negotiations about 10 years ago. It took about seven years. CETA has been in place for three years and has been quite successful for Canadian companies.

During that time we've also negotiated the CPTPP and then very recently there were the CUSMA negotiations that all of my colleagues were involved in as well.

As we look at the landscape of what's out there, we continue to look at interesting opportunities. We do have ongoing negotiations with the Pacific alliance, with Ukraine and with India.

At this point we're looking around and starting to look at other opportunities for what's out there beyond the big negotiations that we've recently concluded. That's part and parcel of some of the work we're undertaking now, both in the department and within the government.

Would my other colleagues like to add to that?

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

I'll just expand on what you were saying and perhaps delve a little deeper into this.

Did you guys wait for the official completion of Brexit before you started the process of negotiating or chatting with them—negotiating, calling and talking? Were you doing that ahead of time, or were you able to do it ahead of time?

[Doug Forsyth]

They had their referendum in June 2016. At that time there was some question as to how it would turn out. Then the United Kingdom needed to decide what they wanted to do after they got the result they ended up with.

Like any negotiation, it takes two willing partners. They had not had the competency to negotiate free trade agreements at that point. It does take a little bit of time to develop that expertise, move some resources around and prioritize that.

It took some time for that. I think they clearly recognized the benefit of maintaining trade relations with Canada in some way, shape or form. That's why, in 2017, former prime minister May and Prime Minister Trudeau decided there was some scope for us to explore how we could maintain the trade relationship and make sure that whenever they did officially get to Brexit we would have something in place to mitigate what would happen at that time.

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

I have another question.

We know the U.K. has been negotiating agreements with several countries now and they recently signed an agreement with Japan, I believe. I'm also co-chair of the Canada-Japan Inter-Parliamentary Group. I know that England was negotiating and signing with Japan.

What else is England doing in regard to various things? I know that for the CPTPP, which this committee had recently landed the plane on, England had tried at one point in time to get in on that because they had some islands in the area and whatnot.

Could you give us a bit of an overview of where they are with some of those other countries they've been negotiating with?