International Trade Committee on April 4th, 2022

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

I'm calling the meeting to order.

This is meeting number 12 of the House of Commons Standing Committee on International Trade. Today's meeting is taking place in a hybrid format pursuant to the House order of November 25, 2021. Per the directive of the Board of Internal Economy on March 10, 2022, all those attending the meeting in person must wear a mask, except for members who are at their place during proceedings.

I need to make a few comments for the benefit of the witnesses and members.

Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your mike, and please mute yourself when you are not speaking. For those participating via Zoom, you have interpretation options at the bottom of your screen of either floor, English or French. All comments should be addressed through the chair.

Pursuant to Standing Order 108(2) and the motions adopted by the committee on Monday, January 31, 2022, and March 21, 2022, the committee is resuming its study of the modernization of the Canada-Ukraine Free Trade Agreement.

We have with us, as an individual, Andriy Shevchenko; from the Alberta Labour History Institute, Winston Gereluk, treasurer; from the Canadian Chamber of Commerce, Mark Agnew, senior vice-president, policy and government relations; from the Canadian Institute of Ukrainian Studies, Jars Balan, director, Kule Ukrainian Canadian Studies Centre; from STAS, Louis Bouchard, president, who I believe has not quite tuned in yet virtually but will be joining us shortly; and, from the Western Canadian Wheat Growers Association, Clayton Kotylak, director.

Welcome, all of you. We will start with five minutes of opening remarks and then proceed with rounds of questions from the members.

Mr. Shevchenko, I invite you to make an opening statement of up to five minutes, please.

[Andriy Shevchenko, As an Individual]

Madam Chair, on a personal note to begin with, as a former member of the Ukrainian parliament and diplomat, I apologize for breaking the dress code of this meeting. I have not worn a tie in the last 40 days, and I don't think many Ukrainians have done that, because of the Russian invasion and because of the war.

I'm a reservist officer right now, currently coordinating the Ukraine Crisis Media Center, and I want to reassure you that I'm deeply honoured by this invitation and feel that it is a very important meeting.

I am in a very unusual position, because on this, the 40th day of the Russian invasion, and just days after we learned about the Bucha massacre and other Russian atrocities, my heart screams to talk about the war, the genocide inflicted on Ukraine by Russia, the courage of Ukrainians and the genuine support of Canada.

It is also clear to me that if we want to overcome this, and we will, we must think about the future. We must think about how we can modernize the world in the future. We believe that the freedom and justice we are fighting for will be accompanied by prosperity and growth, and we want to be there with Canada. My message, Madam Chair, to you and to the committee is very simple. It is long overdue to modernize the Canada-Ukraine Free Trade Agreement.

We have built a very impressive base for the rapid growth of trade between our countries. The Russian invasion interrupted this, but I am absolutely sure that we will continue growth, and that, wherever possible, we should use every opportunity right now to remove trade barriers. We need that to benefit our businesses. New opportunities under this agreement were found in places where no one would expect them.

As of 2020, Ukraine bypassed Japan to become the third-biggest buyer of Canadian fish and seafood. At the same time, 25% of the apple juice supplies in Canada were coming from Ukraine. We have other reasons to expect our trade to be boosted even further once we modernize the agreement and extend it into services and investments.

I can give you just one field of co-operation in which we expect major growth, and that is the ICT sector. Ukraine is well known for its human talent in IT, and even today, as we speak, major Canadian companies rely on Ukrainian IT specialists. We need to modernize CUFTA to make sure we meet all the global challenges. We need to go ahead with this to respond to the food security challenge caused by the Russian invasion.

Let's think about the future. We will win the war. We will start a major recovery program. Whether we talk about enormous infrastructure procurement in Ukraine going ahead, whether we talk about new investment opportunities that the Ukrainian government is going to introduce, or whether we talk about the enormous hunger for all sorts of supplies, we want to see Canadian companies benefit from those opportunities. It will be good for Ukraine and it will be good for Canada.

Let's look at the big picture. We are building a space that will be comfortable for our companies and for our extraordinary human talent. We should see this agreement as working alongside the excellent technical assistance programs, with amazing defence co-operation, great connection among academics, and people-to-people ties. Once we modernize the agreement, it should be accompanied by a visa-free regime, a mobility agreement and a customs agreement. We are very close to building an exemplary foundation for mutual economic growth and co-operation.

I'll stop there, Madam Chair.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Shevchenko, for spending a few minutes with us here at this committee meeting, and for those valuable comments. I think you know that all of Canada is praying every day for an end to this terrible war, and to stop the bloodshed.

It's very interesting to talk about the future, the free trade agreement, and how we can make it better for a better future. Thank you again for being with us.

Next, we have Mr. Gereluk for five minutes.

[Winston Gereluk, Treasurer, Alberta Labour History Institute]

Thank you, Madam Chair.

I'm honoured to make a few comments to this panel on the Canada-Ukraine Free Trade Agreement.

I am the son of immigrant homesteaders who came to Alberta before the First World War. They came as children. The events in Ukraine have really occupied a lot of my attention for these years.

I retired after spending most of my working life in investor relations, at both the practical level, working for trade unions, and the academic level. I worked a lot at the international level on projects involving labour law and sustainable development. I am telling you this because I want to focus on the sometimes unpopular topic of labour standards.

Labour provisions in the new free trade agreement must ensure that workers in Ukraine are well protected against some of the negative effects of liberalization that have been taking place since independence, and in particular since its leaders turned its trade policy toward the west.

I'm aware of some of the challenges facing workers in trade unions in Ukraine because I continue to receive accounts about reforms that its government has been pursuing. I'm naturally loathe to criticize a nation and a government that is defending itself against an attack, so much so that for a while I thought I would withdraw my intervention. I am going to proceed on the presumption that Ukraine will survive and that it will emerge as an independent nation. Otherwise, if it does not—God forbid—I guess all would be lost and academic.

First, I would suggest to this panel that you follow up on reports made by Ukrainian trade unionists, their central bodies, Ukrainian NGOs, the International Labour Organization and other international organizations, such as the European Trade Union Confederation, about the way workers in Ukraine are being impacted by changes in labour law, as well as about administrative action—or inaction—on the part of the Government of Ukraine.

George Sandul, a lawyer with the Ukrainian workers' rights NGO, Labour Initiatives, is definitely one who should be consulted. There are others. They will tell you that changes introduced by the Ukrainian government in the last two decades in many cases worked directly against the rights of workers and their trade unions. Chapter 13 in the 2017 agreement has done little to change this.

Many of the negative developments in Ukraine occurred after it joined the WTO in 2008, when it apparently stepped up the liberalization of the economy and proceeded with privatization of state-owned enterprises. Along with this was the growth of the gig economy, in which large companies are apparently taking advantage of tax breaks and a mismatch between the very high skill levels of Ukrainian workers and the low-paying jobs that are offered. This is also a highly vulnerable workforce, because such a large percentage is undeclared or informal and lacking any protection under labour law. A new law that was introduced just before COVID could actually make matters worse, according to my sources.

Canada should not be part of any agreement that contributes to a neo-liberal economic strategy that sacrifices labour standards. I know none of us want that. Trade policy does not just affect the economy; it impacts quality of life. Unfortunately, the Washington consensus is still alive and well. Most policy is still premised on a supposed disconnect between trade and the protection of labour rights.

Second, I suggest that you make it a prime objective of any future labour agreement to strengthen worker rights in Ukraine to levels prescribed by international labour law. This will happen only if strong enforcement procedures are in place. For this, I recommend the labour provisions that were negotiated into the United States-Mexico-Canada agreement that replaced NAFTA in 2020. It was given very high marks by the Canadian Labour Congress for several reasons, but primarily because it was brought into the main body of the text and made the provisions enforceable through a detailed, state-to-state dispute settlement process in chapter 31. It would be a step forward and could be a model.

[The Chair, Liberal, Judy Sgro]

Give your closing comments, please.

[Winston Gereluk]

I suggest that any future free trade agreements in Ukraine be based on a positive approach to workers, in which they're viewed as partners and not adversaries in any plan to rebuild the economy.

I had a few comments to make about that, based upon Canada's experience with the Wagner act in the United States after the New Deal, but I won't make them because I don't have time.

In closing, I would like to say that the world has seen too many attempts by governments to promote prosperity by joining a worldwide race to the bottom. I don't believe that's the plan in Ukraine. I would like to see Canada take a strong stand against this trend when it goes to the negotiating table for a new agreement.

Thank you very much.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Gereluk.

Next is Mr. Agnew, please, for five minutes.

[Mark Agnew, Senior Vice-President, Policy and Government Relations, Canadian Chamber of Commerce]

Chair and honourable members, it's a pleasure to be back at committee. Thank you for having me.

I want to share at the outset the Canadian Chamber's profound shock at the human tragedy currently unfolding in Ukraine, which is certainly nothing short of a strike against the international norms that underpin our democratic societies. Through the chair, I'd like to express our sympathy and solidarity to Mr. Shevchenko, everyone in the Ukrainian government and the Ukrainian people who are currently there right now.

In the few moments available, I want to cover both what the conflict has meant for Canadian businesses and what we should do on the path looking ahead. Besides the obvious geopolitical uncertainty that has been disruptive for Canadian businesses, there are a number of specific impacts that have arisen from the conflict.

Foremost among these has been the aggravation of inflationary pressures on companies. According to the most recent Canadian survey on business conditions, half of businesses expect rising input costs to be a challenge over the coming three months, which is up 8% from the previous quarter. This includes the impact of commodity prices in a variety of products across the market.

There are also the impacts that we've seen on commercial shipping through the Black Sea. Recent reports from various media outlets have highlighted work by Turkey, for instance, to disarm mines in the Black Sea, but there are more reports of other mines that have been placed there. Put simply, this places commercial shipping at risk today and in the future, after the conflict ends.

As reported in the media, there are a number of companies that have pulled back their operations from Russia. The Canadian Chamber has also made its contribution by ceasing to issue certificates of origin for Canadian exports that are bound for the Russian market.

The committee's motion of March 21 asked what we should be doing in response to the conflict from an economic standpoint. I would like to mention five items briefly today.

The first is sanction symmetry. Sanctions mean that western countries will feel pain in order to do the right thing. Therefore, Canada should continue to press its allies to ensure they maintain a high standard and consistent approach in the application of sanctions within their domestic frameworks.

Second, the federal government needs to continue to ensure a clear and regularly updated flow of guidance to businesses. We are in a fluid situation, and I would like to acknowledge the tireless work of the trade commissioner service in keeping up with the flow of announcements. I urge the TCS to continue to do so, to provide companies with the latest information.

Third, Canada should actively support efforts to ensure safe navigation through the Black Sea for commercial traffic.

Fourth, we need better integration between our defence policies and our defence industrial policies. This conflict has underscored the importance of a strong defence industrial base, and an increase in investments in defence will need to be done wisely going forward. We have a once-in-a-generation opportunity with the modernization of NORAD. We need to see stronger government and industry collaboration.

Finally, we need to increase our efforts to contribute to global energy security. The path to net zero becomes feasible only with access to a wide range of energy sources, and we have to step up to the plate if we want Europe to reduce its dependency on Russia. There is equally an opportunity for our critical minerals sector as the world turns away from Russia, but we need to build out more robust supply chains domestically.

In closing, what is happening right now is nothing short of a seismic event whose implications have yet to be fully understood. The conflict presents serious choices for the government, parliamentarians and businesses, in addition to all of our allies. More than ever, Canada needs to project strength at home and abroad. This is a genuine chance to be a leader on the global stage.

I want to thank the committee for initiating this timely study, and I look forward to your questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Agnew.

We'll move on to Mr. Balan, please, for five minutes.

[Jars Balan, Director, Kule Ukrainian Canadian Studies Centre, Canadian Institute of Ukrainian Studies]

Thank you, Madam Chair.

Having been privileged to be present at the July 2016 signing of the Canada-Ukraine Free Trade Agreement in Kyiv, and after having earlier followed for several years the progress of the CUFTA negotiations in my capacity as the Ukrainian Canadian Congress’s representative on the Canada-Ukraine advisory council, I am happy to share some of my thoughts on the two motions being put forward in relation to the study on the modernization of the Canada-Ukraine Free Trade Agreement.

First, I would like to say that as a proud Canadian of Ukrainian descent who has always been concerned about the fate of his ancestral homeland, I was thrilled to see Canada take steps to expand its trade relations with Ukraine by opening up sectors in both economies to a freer flow of goods and services. Canada has been a stalwart friend of Ukraine since it achieved independence in 1991, committing millions of dollars and extensive human resources to myriad projects providing invaluable practical support for Ukraine and to facilitate the development of its democratic institutions and a free market economy.

While all of the aid provided by Canada over the years has been important and hugely influential, notwithstanding challenges and setbacks met along the way, particularly in the realm of combatting corruption, the fostering of improved trade relations with the negotiation of CUFTA has been especially significant for three reasons. First, it recognizes that helping Ukraine to achieve greater prosperity is critical for its long-term stability, which in turn is essential for maintaining regional geopolitical stability. Second, it contributes to Ukraine’s further integration, culturally and economically, into the family of western nations. Third, because CUFTA serves as a symbolic vote of confidence in Ukraine’s future by laying the groundwork for continued engagement, it sends a strong signal to Putin’s Russia and the world at large that Ukraine “is, was, and always will be”, to refute a notorious Russian chauvinist formulation from tsarist times that seems to have acquired new currency in Moscow.

Some five years after CUFTA first came into effect, it makes sense that it is time to review the original agreement with the aim of possibly updating its scope and some of its provisions. Changes happen quickly in the modern world, and they have been especially accelerated in Ukraine since the 2014 Euromaidan, or the Revolution of Dignity, initiated a generational change in Ukraine’s political establishment. Although the modernization initiative was launched in advance of the 2022 Russian invasion that has wreaked havoc on Ukraine, it is nevertheless useful to examine the impact that CUFTA has had so far and to identify possible options for improving trade with Ukraine, which statistically remains relatively modest.

Assuming the Ukrainian side’s willingness to participate in a CUFTA modernization process, I think it is important for discussions to proceed, despite the turmoil that has been unleashed by Russia’s unprovoked military assault and its large-scale violation of Ukraine’s territorial integrity. The business of governing Ukraine cannot be allowed to stop completely, lest Russia be seen as making Ukraine look ungovernable with its current authorities. Obviously, the widespread destruction wrought by Russian forces on Ukraine’s infrastructure and the brutal toll being exacted on Ukraine’s civilian population and armed forces will pose enormous difficulties for any short-term implementation of a modernized trade agreement. Nevertheless, it is critical at this juncture to show confidence in Ukraine’s ability to withstand Russia's aggression and to be prepared for the time when Ukraine emerges from this dark chapter in its history.

In terms of expanding the study to include the examination of possible economic repercussions that the increased sanctions on Russia will have for countries standing in solidarity with Ukraine, it follows that improving trade with allies of Ukraine could help to mitigate some of the collateral damage caused by the punitive measures being directed at the Kremlin. At the same time, improving trade with Ukraine’s friends would not only benefit Canadian exports abroad by expanding our trade relations and opportunities, but also help to draw western allies closer together at a time of growing crisis in the international order.

Finally, knowing how long it can take to reach agreement on complex issues related to trade, undertaking a study in the present circumstances is a constructive first step toward creating the conditions for addressing what lies ahead in what are sure to be major changes in the landscape of international relations. I therefore support both resolutions adopted by the standing committee and look forward to learning the results of the study to be undertaken.

I will have other remarks, of course, in the discussion that is to follow. Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, sir.

Mr. Bouchard....

[The Clerk of the Committee, Ms. Dancella Boyi]

Madam Chair, I'd like to inform you that Mr. Bouchard is still not logged on. He had some technical difficulties. I will inform you as soon as he is able to log on.

[The Chair, Liberal, Judy Sgro]

That's fine.

We will go on to Mr. Kotylak, please, for five minutes.

[Clayton Kotylak, Director, Western Canadian Wheat Growers Association]

Madam Chair and members of the Standing Committee on International Trade, thank you for the opportunity to appear before you today.

Hello. Dobry den.

As a farmer of Ukrainian heritage, I find the current incursion by Russia very sobering. My grandparents immigrated to Canada from Ukraine under eerily similar conditions in the 1920s, fleeing a genocide that began to be inflicted on the Ukrainian people and culture by orders from Moscow. It is very sad to watch it happen all over again. My grandparents would wonder if we've learned anything from history.

I recognize that the 2017 CUFTA is not an old document. However, given current circumstances, it is appropriate for this committee to study the agreement.

We have all witnessed the Russian scorched earth policy in the territory of eastern Ukraine. Normally at this time of year, Ukrainian farmers would begin to plant their crops. Instead, the farmers are working the land in a very different way—defending it, protecting it, offering safe passage to those who are fleeing, and towing a broad range of Russian military equipment away from their invaders.

I don't profess to be an expert on the ins and outs of this particular trade agreement. Early research shows that the trade of goods and services has risen for both countries. That sounds like a win.

Given the damage being inflicted upon Ukraine, this committee may wish to consider how best to support the Ukrainian economy. Unless the war ends within a few weeks, the Ukrainian crop will not be planted, likely placing millions at risk of food insecurity and shortages—in other words, another Holodomor. The starvation of the Ukrainian people in the 1930s is remembered by every descendant, and while the circumstances are somewhat different, the outcome could be equally devastating. It's mind-boggling that a country that was, only a few months ago, a net exporter of wheat, sunflowers and other agriculture products is now potentially facing famine.

I note, through the Canada-Ukraine trade and investment support project, that agriculture products are listed as one of the top commodities exported from Canada to Ukraine. Ukraine will need both short-term and long-term support. In the short term, emergency food will need to be provided directly to Ukraine and likely the surrounding countries for Ukrainian refugees. Food security is something that Canadians take for granted. Ukrainians have as well, yet today catastrophe seems imminent. In the long-term, Canada can and should, one, assist with agriculture equipment, seed and crop inputs; two, remove bottlenecks in the Canadian grain transportation system, with a focus on the port of Vancouver; and three, create an environment to establish nitrogen fertilizer manufacturing independence.

The Western Canadian Wheat Growers Association believes that this is how Canada can play a significant role in re-establishing a vibrant Ukrainian economy. Canada has the expertise. Given significant lead time, we will be able to assist with many of the needs of Ukraine as it suffers from the Russian invasion.

Thank you. Dyakuyu.

[The Chair, Liberal, Judy Sgro]

Thank you very much, sir.

We will go to members for questions. If Mr. Bouchard is able to access us, we will give him his five minutes at a different time.

I believe we have Mr. Baldinelli, for six minutes, please.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Madam Chair.

Thank you to our witnesses for being with us this afternoon. Thank you for your presentations. I'd like to begin by directing my comments to Mr. Agnew, from the Canadian Chamber of Commerce.

Just looking at some of the particulars with the Canada-Ukraine Free Trade Agreement, perhaps you could provide some additional information with regard to the sectors of Canada's economy that are benefiting from this agreement. Perhaps you could elaborate on that. Mr. Shevchenko mentioned fish products, but I was wondering if you could elaborate a little.

[Mark Agnew]

I have to confess to the honourable member that this is an agreement that we haven't heard a whole ton from our members on in a broad-based sector association way.

There is admittedly a small market for our companies, but certainly some of the sectors that Mr. Shevchenko alluded to are ones that stand to benefit. People who are in the manufacturing groups and some other agricultural products have also seen a bit of an uptick.

I would have to triple-check the numbers on that.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you for that.

Maybe I'll direct this to Mr. Shevchenko and to Mr. Balan, who made some comments with regard to the agreement itself. I am just wondering if they could talk about some of the areas in the trade sector from which both countries benefit tremendously.

[Andriy Shevchenko]

We usually speak of Ukraine as a country of brains and grains, and that tells you something about our trade priorities.

My point is that actually, in the case of Canada and Ukraine, we still have very low numbers for trade. If we look at the numbers and if we think about Ukraine, which is a 47 million strong market, and if we think about Canada as one of the G7 economies, we'll see that trade at the moment is peanuts.

I think it's quite obvious that there is a huge potential to grow, and if we are thinking about the future fields for success, then I would definitely look at the ICT sector. Ukraine is known for having enormous human talent when it comes to IT specialists, and I would be happy to talk more about that if there is interest in that.

There is also public procurement. When we think about the major future recovery operation that Ukraine will be going through, I think that opens enormous opportunities for Canadian companies that will choose to participate in these major infrastructure procurement operations.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you.

Mr. Balan, do you have anything you would like to add to that? You were talking about the modernization of the agreement, and I was just wondering if there are any particular sectors you think could benefit.

[Jars Balan]

Obviously Ukraine has a tremendous brain trust. Our institute is involved with the academic community, and we know that Ukraine has a very highly educated workforce with lots of skills, and that some of them are already participating in the worldwide economy. Some of those people have now left the country and are working from outside of Ukraine because of the circumstances.

In terms of its intellectual capital and investment in it by Canadians, I think that offers one area of potential growth.

Former ambassador Shevchenko is right that trade levels, even though they've improved, are still very modest considering the size of the two countries, so there is potential for growth. I think especially now, in the rebuilding process that's going to have to follow this war, there is an obvious opportunity for Canadian investment in Ukraine and for developing the relationship further.

I suppose one of the challenges is that Ukraine exports products that Canada also exports—cereal grains and agricultural products in particular—so we're competitors on one level, though Ukraine's markets are quite specific.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you for that.

With respect to that and to the comment of Mr. Kotylak from the Western Canadian Wheat Growers Association regarding the implications of Ukraine's inability to get its wheat to market, what can we as not only a nation but a fellow wheat-growing country do to assist, and what can our western allies do to assist?

As he indicated, we could be facing some severe food shortages.

Mr. Kotylak.

[The Chair, Liberal, Judy Sgro]

Could we have a brief answer, sir?

[Clayton Kotylak]

Yes, absolutely, the export of Ukrainian products is not happening at this point. That leaves tremendous gaps in global trade, in particular in Africa, Asia and the Middle East.

We have to do everything we can to keep our products rolling into those areas, because it will not just be Ukraine; it will also be the surrounding countries that depend on Ukraine.

[The Chair, Liberal, Judy Sgro]

Thank you so much.

Mr. Virani, you have six minutes, please.