International Trade Committee on April 25th, 2022

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

I am calling the meeting to order.

This is meeting number 14 of the House of Commons Standing Committee on International Trade.

Today's meeting is taking place in a hybrid format, pursuant to the November 25 House order. Per the directive of the Board of Internal Economy of March 10, 2022, all those attending the meeting in person must wear a mask, except for members who are at their place during the 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 your mike when you're not speaking. For those participating via Zoom, you have interpretation options at the bottom of your screen of floor, English or French.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on March 21, the committee is beginning its study on trade opportunities for Canadian businesses in the Indo-Pacific.

With us by video conference today from the Department of Foreign Affairs, Trade and Development, we have Arun Alexander, associate assistant deputy minister, trade policy and negotiations; Jay Allen, director general, trade negotiations; Weldon Epp, director general, north Asia; Steven Goodinson, director general, trade commissioner service operations; Emmanuel Kamarianakis, director general, investment and innovation; and Peter Lundy, director general, southeast Asia and Oceania.

Welcome to all of you. Thank you for taking the time to appear before the committee today.

We will start with opening remarks.

Mr. Alexander, I invite you to make opening remarks of five minutes, please.

[Arun Alexander, Associate Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs, Trade and Development]

Thank you very much, Madam Chair and honourable members.

My name is Arun Alexander. I am the associate deputy minister for trade policy and negotiations at Global Affairs Canada, and also the chief negotiator with the Canada-Indonesia CEPA negotiations.

It is indeed a pleasure to appear before you today.

Now and in the coming years, the prosperity, security and well-being of Canadians will be increasingly linked to economic, social and political developments in the Indo-Pacific region. The global economic centre of gravity is shifting in that direction, and decisions made there will increasingly affect Canada's place in the world.

It is also a region where the rules-based international order is under pressure. Upholding and expanding support for international rules has become all the more important in the context of growing challenges to sovereignty, democracy and human rights, as we have all seen with the ongoing crisis in Ukraine. Maintaining open, transparent and rules-based trade is critical to Canada's national interests, prosperity and values, and will be key, especially in the Indo-Pacific region.

The Indo-Pacific presents Canada and Canadian businesses with many opportunities but also some challenges. In parts of the region, economic nationalism and protectionism have intensified during the pandemic. COVID-19 has also exposed vulnerabilities in the complex global supply chains that flow through that region. Of course, the reality of China's market heft, growing influence and deep economic integration with the region cannot be ignored.

For Canadian businesses, the Indo-Pacific is a relatively distant market where competition can be fierce. Doing business in the region is further complicated by market, non-market, cultural and linguistic barriers that Canadians do not face when trading closer to home, but the opportunities and rewards are also immense. The region is developing rapidly. There are markets for Canadian raw materials, agriculture and agri-food products, manufactured goods and services. The region accounts for over half of the global population, and by 2030, it's expected to account for two-thirds of the global middle class.

Against this backdrop, Canada has developed a new approach to the Indo-Pacific aimed at intensifying and diversifying our engagement in the region. This work aligns directly with the Prime Minister's mandate to the Minister of Foreign Affairs to develop and launch a comprehensive Indo-Pacific strategy, the adoption and release of which is undergoing consideration by the government.

Building on our existing people-to-people, trade and investment ties, Canada will be seeking to deepen our engagement in the region, including on the economic front. This will support the government's trade diversification strategy and promote more resilient global supply chains. Our existing FTAs and new FTA initiatives in the region will be critical to this approach.

Canada already has significant trade agreements in the region with the Canada-Korea FTA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP. Canada also has five foreign investment promotion and protection agreements in force with Indo-Pacific economies—namely, China, Hong Kong, Mongolia, the Philippines and Thailand.

We also have a strong trade commissioner presence in the region to help Canadian businesses benefit from these agreements. There are 373 trade commissioners in 49 locations in the Indo-Pacific region, representing 39% of all TCS resources outside of Canada. The trade commissioner service also has five Canadian technology accelerators and two global mentor programs in the region.

Canada has an opportunity to build on this foundation. To this end, Canada has launched trade negotiations with ASEAN and Indonesia; resumed negotiations with India; is exploring new FIPAs, including with Taiwan; and is looking to expand membership in the CPTPP. These initiatives will lay the foundation for greater economic engagement in the Indo-Pacific region.

I am joined here today by Jay Allen, director general, trade negotiations; Weldon Epp, director general, north Asia; Peter Lundy, director general, southeast Asia and Oceania; Emmanuel Kamarianakis, director general, investment, innovation and education; and Steven Goodinson, director general, trade commissioner service operations.

My colleagues and I look forward to your questions and to discussing Canada's initiatives in the region with you.

Thank you very much.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Alexander. It sounds like everybody is very busy.

We will move to Mr. Hoback, for six minutes, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Thank you, gentlemen, for being here this afternoon to give us an overview of what we should be looking at with regard to these negotiations, and what to maybe expect as some of the hurdles or concerns we may have.

My first question would be by sector. What are the largest gains expected with these agreements? Which sectors do you think are going to be the big winners, and which are the ones that may not like it as much? Have you had a chance to do any analysis on that?

[Arun Alexander]

We have done an analysis on the sectors that are likely to gain from the agreement. I will speak about Indonesia, and then I'll turn to Mr. Allen to speak about the agreements for which he is responsible.

With respect to Indonesia, we estimate that a CEPA with Indonesia could raise Canada's exports to Indonesia by about $447 million by 2040. A wide range of sectors are expected to benefit from the agreement, including business services, machinery and equipment, agri-food, chemical products, computer and electronic products, and transport.

There is also the potential for increasing trade in sectors that are not currently exporting to Indonesia, including clothing and textiles, seafood, motor vehicles and parts, and metal products. We see great potential for increasing trade between Canada and Indonesia with a CEPA.

I'll ask Mr. Allen to speak to the other agreements.

[Jay Allen, Director General, Trade Negotiations, Department of Foreign Affairs, Trade and Development]

Thank you, Arun.

Canadians tend to export the same sorts of things. We tend to export a lot of raw materials. We export a lot of agricultural and agri-food products, and we increasingly are exporting more and more manufactured products.

As Mr. Alexander said, the sorts of benefits we would see in Indonesia are essentially the same ones we would expect to see when it comes to ASEAN and India.

This entire region has significant tariffs. As those tariffs come down, we will be able to export more and more different types of products. Right now, certainly in the India context, we're looking at gains with respect to pulses. We want to clear up some market access barriers on pulses. We certainly want to export more with respect to manufactured goods. Clean tech is a big one for us, throughout the region.

Similarly, in ASEAN, we would expect to see significant gains when it comes to agricultural products—pork, beef, grains and oilseeds—but also in the clean-tech field and the advanced manufacturing fields. It's largely similar across the board, because those are the interests Canadians have.

[Randy Hoback, Conservative, Prince Albert, SK]

What areas do you think would be sensitive for Canada? What sectors would feel a little threatened or need some concern?

[Arun Alexander]

Thank you very much for the question, honourable member.

In our consultations with Canadians, the sectors that raised some concerns were particularly clothing, textiles and some leather products. They raised concerns about increased competition from sectors in Indonesia and in the Asia-Pacific region.

Jay, do you want to add anything to that?

[Jay Allen]

Sure.

I think we always see sensitivities with respect to our supply-managed products, although the government has been very clear that we will not allow new market access for those products.

In the case of India, there are certainly sensitivities with respect to ensuring that we have reciprocal market access. The sectors don't want us to open our doors to a flood of manufactured products if we're not getting the same sort of access. In the ASEAN context, really, the sectors that Mr. Alexander highlighted—textiles, apparel and leather goods—seem to be at the forefront.

[Randy Hoback, Conservative, Prince Albert, SK]

Where do you see synergies between Canadian businesses and businesses in those countries and those regions in actually developing partnerships and exporting around the world? Do you see much of that as a possibility?

[Arun Alexander]

Thank you, honourable member, for the question.

We do see that opportunity. We see that this is a growing region. It's growing both economically and by population. It will become the centre for global supply chains in a variety of sectors, and we see the opportunity and the potential for Canadian companies to integrate into those sectors and to serve global supply chains through their contacts and establishment in the Indo-Pacific region.

[Randy Hoback, Conservative, Prince Albert, SK]

Who are our competitors? Who's in there? Is it the Australians and the Americans? Who else is knocking on the door?

[Arun Alexander]

I think the answer is exactly what you've said. It is a very fiercely competitive region. It's a fast-growth area, like I said. There's great potential there, so all our regular competitors, including Australia, the U.S. and the Europeans, are also looking to enter into the market and establish themselves there. Some of them are also negotiating free trade agreements and economic agreements with members of the Asia-Pacific region.

[Randy Hoback, Conservative, Prince Albert, SK]

In our agreement, how are we going to differentiate ourselves from them? How are we going to find an advantage that's truly Canadian?

[Arun Alexander]

Thank you very much for the question.

I think the Canadian advantage is the quality of our products.

We make very high-quality agricultural products: everything from grains to meat. Our services sector is very competitive. As for our other sectors, including things like mining and minerals, we produce the products countries need, so I think we can be competitive against the United States, Australia and the other major countries in the region.

[Randy Hoback, Conservative, Prince Albert, SK]

I have a quick question on first-mover advantage: Do we have it?

[Arun Alexander]

I would say that we're right on the precipice. I think other countries are turning their attention to this region as well, just like we are. There is the opportunity for us to have first-mover advantage. As we know, in earlier agreements like the CPTPP, that was a definite advantage, where we established ourselves in markets before our competitors could enter.

[The Chair, Liberal, Judy Sgro]

That's terrific.

Mr. Virani, you have six minutes, please.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Thank you very much, Madam Chair.

Thank you to the officials. I see some familiar faces.

Thank you for your comments, Mr. Alexander and Mr. Allen.

I have some pointed questions that build on some of what Mr. Hoback was raising. I personally have had some meetings with a particular industry, if we zone in on agriculture. For example, I've had beef farmers here in Canada explain some of the access that they would like in Asian markets.

I'm wondering if you could tell me about the prospects of beef being sold in Asia, for example, particularly in Indonesia, where they have significant requirements for halal meat. Is there some learning that needs to occur on the Canadian side about how to meet those expectations in a predominantly Muslim nation that is very sizable, with upwards of 250 million people?

I'll direct that to you, Mr. Alexander, since you are a lead negotiator with Indonesia. Congratulations on that role.

[Arun Alexander]

Thank you very much for the question, honourable member.

Yes, access for Canadian beef to Indonesia has been an issue of significant concern, and the halal issue is one of the key barriers to entry. We have raised this bilaterally with Indonesia, including by Minister Ng. We've raised this multilaterally at the WTO, and we're raising it during our CEPA negotiations. I have raised it myself with my counterpart.

I think part of the process is that there was a change of ministries responsible for halal certification in Indonesia in 2016-17, so they've been slow to certify new bodies. It's been very slow. It's 2022 now. We're putting significant resources and activity into ensuring that Canadian halal producers regain full access to the Indonesian market. It is a key priority for us, and we will work very hard. We have made this clear to the Indonesians—from the minister, to me, to the ambassador in Indonesia as well.

[Arif Virani, Liberal, Parkdale—High Park, ON]

This is open to you, Mr. Allen, or anyone else. On the agriculture side, when we're dealing with the conflict in Ukraine, we're dealing with very troubling concerns about both the ability of the eastern Europeans to feed themselves and the ability of Ukraine to feed other parts of the world. Do you feel that concern for global food insecurity in terms of our Asian partners that we're either working on agreements with or seeking to enter into agreements with?

We talked about policies, and we can talk about beef, etc. Are nations seeing what's happening with Europe clambering for other sources of quality products, and also those that can be delivered on time through agricultural exporting? Does that make us more attractive to the Asian markets, given the sense of global food insecurity?

[Arun Alexander]

Thank you very much for the question, honourable member.

I think that countries are realizing through the global food insecurity that's arisen out of the Ukraine crisis that it's important to diversify suppliers and have reliable suppliers. I think that really creates an opportunity for Canada, because our products are not only some of the highest-quality agriculture products in the world, but we are a reliable supplier and we will live up to our commitments to supply goods. Keeping the free trade open is a key priority for Canada, and I think Asian countries will see this as an advantage in dealing with Canada.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Okay.

Could I ask you about the clean-tech side? Obviously, this is a flagship sort of issue for our government in terms of trying to promote environmental sustainability domestically but also abroad. Could you create a hierarchy among the ASEAN nations? There are many members of ASEAN, but are there certain sectors or nations that are more interested in clean tech and addressing the environmental agenda than others? Can you give us a sense of how you would prioritize clean tech in terms of who it is most attractive to amongst the ASEAN members?

[Arun Alexander]

Thank you very much for the question, honourable member.

Perhaps I can speak about Indonesia, and I'll turn to Mr. Allen to speak about the other countries.

Indonesia still uses a lot of hydrocarbons in the production of electricity, especially coal, oil and natural gas. Being an island nation and located in the tropics, there is also great potential for renewable energy sources. I think there will be a great interest in the clean-tech sector for Indonesia. Being an island nation, they're also vulnerable to climate change and realize that they need to reduce their GHG emissions to fight climate change. There is great potential for Canadian industries in the clean-tech sector in Indonesia.

Maybe I'll turn to Mr. Allen to speak about the other countries.

[Jay Allen]

Thank you.

With respect to ASEAN, one of the ones that clearly stand out is Vietnam. They have a very clear government process, a government policy, in terms of greening their cities and advancing their smart cities. We think there's a tremendous market for clean tech there.

Obviously, across the region there are opportunities. This is a rapidly growing region. They are rapidly modernizing. They're rapidly urbanizing. All of that leads to more pressure on the environment, whether it's in terms of managing waste, providing clean drinking water or noise abatement. All those sorts of issues fall within the clean-tech sector. Those are opportunities for us across the region.

Similarly, in India, we have a lot of opportunities to partner with Indian companies, especially in terms of developing the technologies and broadening their application in the country. The opportunities are vast.