International Trade Committee on June 4th, 2024

[Claude Vaillancourt]

Canada has been the subject of a record number of lawsuits under NAFTA. It's a little strange that the pressure to eliminate this mechanism comes from the United States, when we should have seen the very negative effects on our policies ourselves.

I think the step being taken in this agreement is important. However, it would have to be renewed. Since CUSMA was concluded, the last two years have shown that there have been no adverse or secondary effects in relation to that. There have been positive effects, although Canada is stuck with a former lawsuit under the old system.

It shows that, at the end of the day, we can live without this mechanism, not only with the United States, but also with all the other countries with which we have this type of agreement.

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

Chapter 28 of CUSMA on good regulatory practices, which you mentioned, looks very good in principle.

That said, I get the impression that you were telling us that it's an upstream dispute settlement mechanism, an investor-state dispute settlement mechanism that leaves out the fact there are consequences if you act, but that really means, “don't even think about it”.

Is that sort of it?

[Claude Vaillancourt]

Yes, I think that's a very good comparison.

It's true that investor-state dispute settlement happens upstream, in that it's done once the legislation is passed. However, there can also be pressure beforehand to keep the legislation from being passed. We know very well that this approach, creating a deterrent effect, is very common. It's been denounced on a number of occasions.

Chapter 28 of CUSMA nevertheless allows us to work upstream, that is to say before the act comes into force, to create a fairly significant number of obstacles and ensure that the act can ultimately be transformed or simply abandoned.

We're very concerned about this chapter. It's as if we made a gain by eliminating the dispute settlement mechanism, but it also feels like we lost something. Stakeholders, who are not from the government, can always intervene in a significant way with respect to legislation passed by governments. That's something we're very concerned about.

[The Chair, Liberal, Judy Sgro]

Thank you very much. I'm sorry to interrupt, sir.

We'll go on to Mr. Cannings for two and a half minutes, please.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

I'd like to turn to Mr. Verheul again and pick up a bit on what was just being talked about, which was these dispute mechanisms.

The investor-state dispute mechanism between Canada and the U.S. is not in CUSMA as it now stands, but I think it's a very good thing that we still have a state-to-state dispute mechanism. It's very important, especially when it comes to softwood lumber and other disputes.

I'm just wondering if you could comment in general about where you see those chapters going in a renewed CUSMA. Would there be any pressure, especially from the United States, to reintroduce ISDS or to get rid of the state-to-state dispute mechanisms?

I'm wondering if you could comment on that.

[Steve Verheul]

On the investor-state dispute settlement, we don't expect that the U.S. would have any interest in bringing that back, at least between Canada and the U.S. I think both administrations—the Trump administration prior and the current Biden administration—have no interest in going back down that track. Canada doesn't either, with respect to ISDS.

Of the two other main dispute settlement mechanisms, one is the state-to-state dispute settlement. We did a number of improvements so that it would operate more effectively. It is operating more effectively and reaches conclusions. We're now concerned about what the U.S. may do if it gets conclusions it doesn't like, but that process is working well.

Then the third process is dispute settlement with trade remedies—either countervailing duties or subsidies. This is where the softwood lumber issues come into play, because that dispute settlement process for those issues is not functioning well. That's hindering Canada from being able to move forward effectively on the softwood lumber issues.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Is that third mechanism linked at all with the WTO's problems with the Americans refusing to fill positions?

[Steve Verheul]

It's not that issue, but there are similar issues.

On a number of occasions, the U.S. has put forward panellists who were clearly inappropriate and conflicted to be on that kind of panel. They just kept submitting conflicted panellists, and Canada had to reject those panellists. It's had the effect of slowing the process down and not allowing the dispute settlement panellists to come to conclusions quickly.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Next is Mr. Baldinelli for five minutes, please.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Madam Chair.

I'd like to thank the witnesses for being with us this afternoon.

I'm going to begin with Mr. Meltzer and Mr. Verheul, if I could.

Both of you talked about the U.S. most likely using the review to push current disputes and try to obtain favourable outcomes instead of pushing for areas to improve the agreement, which is the notion of a coordinated approach that you both mentioned.

Mr. Meltzer, you interviewed the U.S. trade representative, Katherine Tai, at a Brookings event about CUSMA in March. The U.S. trade rep had some rather frank comments in her response in the interview. She mentioned, “I think that the disputes and the dispute outcomes need to be part of this, to the extent that we're not able to resolve the disputes using the dispute settlement system itself only.”

This and other comments from the U.S. trade representative suggest that for the U.S., dispute settlement is never really the final say.

Mr. Verheul, to your point earlier, what do we do when, essentially, the U.S. gets a response that it simply doesn't like?

[Steve Verheul]

That does undermine the whole process entirely. As I said in my opening comments, it undermines confidence in the dispute settlement process overall and even in the agreement, I would argue.

The difficulty is that if the U.S. isn't going to abide by dispute settlement decisions, there's not much incentive for Canada or Mexico to do that either, and then you start to move towards an environment where you no longer have trade rules in the agreement, and then you don't have much of an agreement.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Mr. Meltzer, would you comment?

[Joshua Meltzer]

I think one of the potential goals for the joint review, in order to focus on a coordinated, forward-looking agenda, is not necessarily saying to the U.S. that these bilateral irritants shouldn't be resolved politically; it is to try to push them into channels other than the joint review so that they don't crowd out the joint review and risk overwhelming the joint review, leading to potential risk that there is no successful agreement in 2026.

I think you're absolutely right that there are going to be domestic stakeholders that are going to push either administration to raise rules of origin or market access around Canadian dairy issues. The question is whether we can try to make some progress on those issues outside of the joint review.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you.

Ms. Vipond, Mr. Meltzer and Mr. Verheul, you all spoke of the need for a coordinated approach to trade issues with regard to Canada and the United States.

Mr. Verheul, you talked about a North American approach. Ms. Vipond, you talked about Canada needing a strategic approach aligned with the U.S. worker-centred approach. Mr. Meltzer, you talked about the U.S. looking to de-risk trade with China, and that to do so, closer co-operation with Canada and Mexico is needed.

Last week we had Brian Kingston of the Canadian Vehicle Manufacturers' Association here. He mentioned that the sector is looking for certainty and mentioned the recent U.S. decision to impose 100% tariffs on Chinese EVs as well as tariffs on batteries. I'd like to get your comments on that.

Mr. Verheul, you said that it would probably be better to get a coordinated approach in a trade agreement rather than trying to do these on a one-off basis, so how does Canada respond to that?

[Steve Verheul]

The fact is that the U.S. just announced that on their own, through their section 301 process, and I don't know for sure, but I don't expect that there were many consultations with Mexico or with Canada beforehand. It leaves Canada and Mexico in a difficult position.

Do Canada and Mexico have to follow the U.S. approach and have the same kinds of tariffs in order to protect the North American market? If they go with a different approach, they're vulnerable to being charged by the U.S. with allowing Chinese imports to come in through the back door.

There will be pressure on us to do something, but that does not make it easy. It would be so much easier if we coordinated those efforts.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

The difficulty that we find here right now is that the government has taken an industrial approach to create a supply chain system—$40 billion of investments—but, through its regulatory system, it's almost encouraging, because of the 2035 EV mandate, the continued importation of Chinese electric vehicles. To your point, the Americans are going to say, “Well, Canada, you're becoming a back door.” All the Teslas that are coming into Canada right now are coming from China, not from the state of California any longer.

How do we encourage a supply chain in critical minerals when, with this 2035 mandate, we won't have mines in the ground by then, so we're still going to be using Chinese minerals as well for our own supply chain?

[The Chair, Liberal, Judy Sgro]

Can we have a brief answer, please?

[Steve Verheul]

It's a complicated question, so brevity is a challenge.

I would just say that the way that the U.S. has proceeded with some of its policies, particularly the Inflation Reduction Act, means that it's very hard for Canada to get investment in critical minerals, for example, in Canada because the U.S. is attracting all of that. It's another illustration of how we should be trying to protect the North American market on a tripartite approach, not on a U.S. go-it-alone approach.

[The Chair, Liberal, Judy Sgro]

Thank you.

Ms. Fortier, you have five minutes, please.

[Mona Fortier, Liberal, Ottawa—Vanier, ON]

Thank you, Madam Chair.

My questions are for the Canadian Trucking Alliance and the Canadian Labour Congress. Each witness will have two minutes to answer.

What is your organization's relationship with your counterparts in the United States and Mexico? In terms of policies and regulations, what areas do you have in common and what areas do you disagree on, in the current context?

I'd like Mr. Laskowski to answer my questions first, and then Ms. Vipond can answer them.

[Stephen Laskowski]

I'll be brief.

We are very aligned with the American Trucking Associations and we work constantly with them on cross-border issues, including the issues I brought up today, which are processing issues at the border. One of the benefits we have as an industry with regard to going into this process is that we are aligned.

[Mona Fortier, Liberal, Ottawa—Vanier, ON]

In that context, what would you propose that we should be reviewing or adding, if you have more to say than what you said in your opening remarks?

[Stephen Laskowski]

On that note, maybe I'll turn it over to Lak. He's been up on the screen because he works with the American Trucking Associations.

Perhaps, Lak, you could discuss some of the processing questions at the border that we're working on with the American Trucking Associations.

[Lak Shoan, Director, Policy and Industry Awareness, Canadian Trucking Alliance]

Thank you, Steve.

As Steve mentioned earlier, we're going to be looking at, potentially, the feasibility of the impacts of nuclear verdicts that have been occurring in the U.S. and whether or not we can align with that issue both in the Canadian context and the U.S. trucking context.

International cargo fraud has been on the increase in Canada, the U.S. and Mexico. Criminal networks appear to be getting increasingly global and highly sophisticated. It's reaching a level that presents an emerging trade barrier and is impacting the free flow of goods between the CUSMA member states. That's another issue we're going to continue to look at.

Steve also, in his opening remarks, mentioned the burgeoning trade relationship with Mexico. There are going to be more Mexican trucking companies doing business within Canada and vice versa. We have many members looking into the Mexican market as well.

[Mona Fortier, Liberal, Ottawa—Vanier, ON]

Thank you.

I will now turn to Ms. Vipond.

I have the same question for you.