International Trade Committee on April 6th, 2022

[François Rivest]

Jay, I can answer, if you like.

Imports and exports are halted. Trade with Russia and Ukraine is mostly based on agricultural products, including urea, a fertilizer imported from eastern Canada. There is a long list of exports, including aeronautical and consumer products, but not in large quantities. It's mostly agricultural products. There is also trade in machinery, and we do some investment in the financial sector. In general, these operations have all been interrupted.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

Madam Chair, do I have any time left?

[The Chair, Liberal, Judy Sgro]

You have 40 seconds.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

What steps are countries like Canada taking to reduce the impact on trade or investment of sanctions and other measures against Russia?

[The Chair, Liberal, Judy Sgro]

Please give a short answer.

[Jay Allen]

Yes. Thank you, Madam Chair.

Absolutely. We are working with Canadian companies to help them find opportunities to replace imports. We're also working very closely with our trading partners to find synergies, to find ways to help one another, to ensure that we can make up what's lost to the sanctions.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Martel.

We'll go on to Mr. Sorbara for six minutes, please.

Welcome to the committee, by the way.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, honourable Ms. Sgro, for that wonderful welcome. It's very kind.

Good afternoon, everyone.

Mr. Allen, I wanted to ask about an instrument in your opening remarks that the Canadian government has used, in removing the most favoured nation trading status. What are the implications of that for both Russia and Belarus?

[Jay Allen]

The basic implication of that is that under the WTO agreement, they had preferential access to Canada, so they got our best possible tariff rates. Now, they are getting far higher tariff rates. They no longer benefit from that preferential access.

As I said, 35% is the tariff on most of them. Some products will have a higher tariff rate than that.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Secondly, you noted on the WTO accession process that Canada raised its hand and gave a big, red “stop” to Belarus. Can you explain the accession process and why it was so important for Canada to do that?

[Jay Allen]

Belarus is not a member of the WTO. It has been trying to join the WTO.

Joining the WTO is a process that requires the consensus of all members. Canada and a number of our trading partners who joined with us in that statement that day looked at the actions of Belarus in supporting the Russian invasion of Ukraine, and we simply did not think that it warranted membership.

That decision to keep Belarus out means that it will not get into the WTO. It will not get the benefit of the international trading order.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Can you explain to me, to provide some colour, the removal from the WTO? What would that look like, if there was an ask to remove an entity that has gained accession to the WTO?

[Jay Allen]

Right now, there isn't officially a process for removing a country from the WTO. Academics have debated over the years as to what the process might be and how it might be implemented, but right now, there simply isn't a process to do that.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

The reason I allude to that is I'm a big believer in rules-based trade systems in multilateral institutions. Canada is a beneficiary of international trade. Our economy benefits in that we create great middle-class jobs. We're a signatory to a number of trade agreements—the revised NAFTA, CETA, CPTPP—and under those systems, we follow a rules-based system. That's why it's so important.

When we look at what has transpired with the illegal, unjustified Russian invasion of Ukraine and what is happening on Ukrainian soil to Ukrainians, it's horrid. It needs to be deplored and condemned at every opportunity. I will do that right now. I condemn what is happening. I see some of my colleagues have joined me.

It's very important that we, as a country of some substance and some power, make sure that rules-based institutions are being followed, and that entities that want to be a partner with them, and/or that wish to join them, follow that. That's the only way we can function in this world and get along, if I can use those terms.

Moving on to the actual modernization of the agreement, how quickly, God willing, can the Ukrainian people regain their sovereignty and have their institutions start functioning fully again? How quickly can we re-engage with our Ukrainian friends, family members and great trading people, with whom we enjoy a long historical relationship? How quickly could our officials re-engage with them, when given the opportunity to do so?

[Jay Allen]

Madam Chair, Canada is prepared to re-engage. We were ready to have a first round of negotiations. Right now, we could be in negotiations with them.

The moment that Ukraine signals a willingness and an ability to re-engage, we will be ready to re-engage.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Can you, in your department...? In my view of the world, I am the chair of the Canada-Europe Parliamentary Association, which contains both EU and non-EU member states.

I met with the EU ambassador yesterday, and I coined the term...it's nothing new, but I just said, “What is old again is new again,” in terms of the relationship between Canada and Europe, and Ukraine being a part of that world, in my view.

What sectors would you and your department officials say would benefit most from the modernization of the free trade agreement?

[The Chair, Liberal, Judy Sgro]

Give a brief answer, sir.

[Jay Allen]

The existing FTA covers goods right now, so we have very good access to goods. We have the ability to expand commitments on services. We can improve the labour chapter. We also have the opportunity to cover things such as government procurement. There are a number of areas in which we can improve what's already there, but goods market access is already pretty solid.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go to Mr. Savard-Tremblay for six minutes, please.

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

Thank you, Madam Chair.

I thank the witnesses for being with us today. I extend my greetings to all of our colleagues.

We have heard that the sanctions on Russia have caused problems for companies, some of which have appeared before this committee. I reiterate that the sanctions were necessary. When you invade a country, you have to expect consequences. That is not the point.

However, we are still wondering what compensatory measures we could take so that our companies are not penalized as much as Russia rightly has to be.

Have you had any discussions or contacts with companies that have allegedly been penalized because of their investments in the Russian market?

[Jay Allen]

I have not personally had contact with companies that have been harmed by the sanctions, but I know there are some. We are aware of that. We recognize that to have a punitive effect on Russia, the sanctions have to be tough, which means that, unfortunately, there will be adverse consequences on companies, including Canadian companies.

We will work with those companies. We're trying to find ways to help them. We're trying to find ways to mitigate their exposure.

Perhaps my colleague, François Rivest, would like to add to that.

[François Rivest]

Thank you, Jay.

As I mentioned earlier, our Trade Commissioner Service is indeed in contact with some of the companies that are or were doing business in the conflict-affected region of Ukraine. Some of them have been affected. We are trying to help them as much as we can.

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

Are any compensation measures being considered for companies that placed orders before the sanctions were imposed in early March, but would still be subject to the 35% tariff?

[François Rivest]

I know that the issue has been raised. However, to my knowledge, no decision has been made on the approach to be taken.

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

So the idea of granting compensation measures is a possibility that is being considered, as I understand it. Earlier, there was talk of helping companies withdraw from Russia and move to new markets.

Is that correct?