International Trade Committee on Nov. 20th, 2020

[The Chair, Liberal, Judy Sgro]

Please give a short answer, if that's possible, Mr. Forsyth.

[Doug Forsyth]

Okay, that's fair enough.

They have a couple of different streams of negotiations. They do have the continuity agreements, like what we're doing with Canada, where they are trying to replicate their agreements that they have with the European Union as they leave it.

They have another pool where they have actually launched trade negotiations. In that pool I would include Australia, New Zealand and the United States. Then, of course, they do have their major negotiation which they're doing right now with the European Union, which is about 50% of their trade.

You're correct, Madam Chair, that the United Kingdom has absolutely indicated a strong interest in joining the CPTPP. They have not filed an official application yet, but Canada has indicated that we would be supportive of their interest.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move to Mr. Savard-Tremblay.

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

Thank you, Madam Chair.

Thank you to all the witnesses for being here.

I would appreciate it if you kept your answers concise. As is often the case with these studies, the questions are numerous.

Mr. Forsyth, we are talking about a transitional agreement, not a full-scale trade agreement. We aren't at that stage yet. The honourable member asked you whether you had a transitional agreement in mind from the start or whether the initial goal was a full free trade agreement. She was wondering whether you realized that a full-scale agreement wasn't going to happen right away and you were forced to pivot towards a transitional agreement. You said a transitional agreement had been the plan all along.

Quickly, could you give me a sense of your timetable? If Canada signs off on the transitional agreement, how long will it be in effect? When do you expect to have a full free trade agreement for us to review?

[Doug Forsyth]

Thank you for the question, Madam Chair.

We definitely see the transitional trade agreement as an interim agreement, a first step.

We indicated early on that replicating the CETA is what we have available to us at this time. In order to ensure that continuity for businesses—Canadian businesses, exporters and producers—we wanted to ensure that continuity was in place.

We identified fairly early on that we would like to launch a bilateral agreement that best reflects the trade and the relationship between Canada and the United Kingdom. Part and parcel of our negotiations with the United Kingdom right now is how to best move forward with that.

When Secretary of State Truss and Minister Ng spoke in August, there was a clear commitment by both ministers to launch a bilateral negotiation once we completed the work on the transitional trade agreement. We expect to do that sometime next year. Of course, in advance of that we would do a full-scale consultation with all interested stakeholders.

It is very much the case that the transitional trade agreement is an interim step, from our perspective. Then we would have a full-scale bilateral agreement in place in the coming [Inaudible—Editor] launch the negotiations next year and then have it in place within a few years after that.

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

Will the transitional agreement remain in effect until the full-scale agreement is signed, or does it expire?

[Doug Forsyth]

Yes, Madam Chair. It would be in effect until we sign another agreement. That would absolutely be the case. It is transitional, but there would not be an expiry date with it.

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

That means the transitional agreement will remain in effect until a replacement agreement is reached, however long that takes. The transition period won't exactly be short.

The briefing package we got last week indicates that a copy and paste of CETA would not be an acceptable long-term solution. My understanding is that the transitional agreement looks a lot like CETA and could remain in force for quite a while should the negotiations hit a roadblock.

[Doug Forsyth]

The transitional agreement is based on the CETA, absolutely. As I mentioned, replicating the CETA was the goal. It was what the U.K. was allowed to do, as they were an EU member at the time when we launched the negotiations.

It was very much the case that we would bilateralize it to the greatest extent possible. Some areas were easy to bilateralize, others not so much. Then there were some areas in which we absolutely had to negotiate clear outcomes on a bilateral basis with the U.K.

When we conclude the negotiations and the treaty is presented, there will be quite a few similarities with the CETA, although it will not be an exact copy and paste of that agreement.

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

Thank you.

How much time do I have left, Madam Chair?

[The Chair, Liberal, Judy Sgro]

You have one minute.

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

I have a good question for you, Mr. Forsyth, but it would require more than a minute to answer. I will ask you another instead.

Without a transitional agreement, Canada would be subject to the tariff schedule released by the U.K. in May 2020. That would mean Quebec-made products that are currently not subject to duties would be taxed beginning on January 1, 2021.

Did you study the impact on exports if Canada and the U.K. do not have an agreement in place by January 1, 2021?

[Doug Forsyth]

If we did not get an agreement with the United Kingdom by January 1 of next year, then, yes, all MFN tariffs would apply for Canadian exports into the United Kingdom. The United Kingdom exports into Canada would also have to pay the MFN tariff.

Our analysis indicates that about 80% or so of exports would be MFN duty-free, or UKGT duty-free, going into the United Kingdom. Still, there would be some impact on certain sectors where there would be duties applicable. Those would be the agriculture and seafood areas.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Blaikie.

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

I'd like to follow up on the issue of economic impact. Could you table with the committee any economic impact assessment that the government has conducted on a “no deal” scenario between Canada and the U.K.?

[Doug Forsyth]

Yes, I think we can do that. Sure.

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

Thank you.

Could you also table a list with the committee of all of the stakeholders that you have been keeping apprised of negotiations since they first began?

[Doug Forsyth]

Yes, we can do that too.

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

Thank you very much.

With respect to having a sunset clause on a transitional agreement, I understand from what you just said that there is no plan for that. Was that possibility raised by either of the parties during negotiation?

[Doug Forsyth]

I don't recall specifically anybody talking about a sunset clause, per se. I think there was a clear indication by both parties and a recognition that this was a transitional agreement and that in some way, shape or form—although we used different terminology, it was in some way, shape or form—there was a desire to have a different type of bilateral agreement. There was a recognition that some things might not work as well as they could but that nevertheless, I think, in the short term, as they transitioned out of the EU, a transitional agreement could work. I'm thinking specifically about some of the rules of origin that would work better in a bilateral context.

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

For greater clarity, then, it was never Canada's position that there ought to be an expiration date on the transitional agreement.

[Doug Forsyth]

We never put forward an expiration date on the agreement, no.

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

Could you offer the committee an explanation as to what the difference is between a transitional agreement that never expires and a comprehensive trade agreement?

[Doug Forsyth]

I think a comprehensive trade agreement, much like we have with the CETA, covers all kinds of areas. It is in the context of the CETA. It is based on the fact that negotiation between Canada and 27, at the time 28, other members of the European Union.... That's why we looked at it and said we could replicate it, and would do our best to replicate it, with one country. Yet at the same time, I think there are areas where we could go farther with the United Kingdom.

As I mentioned early on in my remarks—

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

I'm interested in this point of clarification.

If the transitional agreement is going to be more or less a carbon copy of CETA, which is the comprehensive trade agreement, and if the transitional agreement has no expiration so that it could last indefinitely, what is the meaningful difference there between a comprehensive trade agreement and a transitional trade agreement that's a carbon copy of a comprehensive trade agreement that never expires?