International Trade Committee on April 27th, 2022

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move to Mr. Masse for six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair.

Maybe I could start with Mr. Cho.

With regard to South Korea, one challenge we've had with trade for the automotive industry has very much been a lack of market access for Canadian manufactured vehicles, whereas importation has been nearly $3 billion. I think that's the latest. Even with the South Korea free trade agreement, there hasn't been a noticeable incline for our exportation.

Can you give me a little highlight of...? If we were looking to expand our opportunities, what would we need to do differently in terms of a better balance between the two?

[Sonny Cho]

I think we have to sell different kinds of vehicles. Germany exports an incredible number of vehicles to South Korea.

South Koreans, especially wealthy people, tend to drive top, brand-name cars. Mercedes-Benz and BMW do very well in South Korea. Most of the vehicles that are manufactured in Canada are probably not going to be competitive in South Korea. Unless we can come up with some unique Canadian brand, it might be tough.

[Brian Masse, NDP, Windsor West, ON]

There might be some of that, but there are other non-tariff barriers, like not being allowed to set up dealerships, not being able to service vehicles or OEMs not having the capabilities. We also have state-owned enterprises in South Korea, like Kia, that make it pretty difficult.

I'm concerned about the continuation of the erosion of our auto industry, especially during a transition right now, if we don't have access to the market, at least in a generally equitable way. It's so lopsided right now that it just gives me concern. It's fair enough if you're saying that it's the types of vehicles we're manufacturing. It's a global industry where we finally have our own battery plant now. We're way behind. That doesn't seem like incentive for us—to expand that trade and not have an access to a market that would be somewhat equitable.

I'm just looking for more on what we can do. Are there joint ventureships? What can it be? I'm searching for answers.

[Sonny Cho]

I agree with you, but I must be honest that we at the council are not the experts on those trade negotiations. We have the CKFTA. I think our Canadian embassy and the trade commission—the experts—have to keep negotiating further with the South Korean government. They are very protective in many sectors. It's not just in automotive.

That has to be done more at the government level. I don't think we can help you too much from our non-profit council level.

[Brian Masse, NDP, Windsor West, ON]

That's very helpful, though.

[Sonny Cho]

I'm saying that if Germans can sell a lot of cars from South Korea, maybe we need to study what Germany's doing that we're not doing.

[Brian Masse, NDP, Windsor West, ON]

Yes, Germany also has an interest in equity in its own state-owned manufacturing as well, when I look at Volkswagen. I think that's one myth of the auto industry that we seem to not wrestle with properly over here in Canada.

Mr. Agnew, maybe I can follow up with that.

What other state-owned enterprises should we be concerned about as we're looking into expanding trade?

We're going to run into this, perhaps even with some in the technological sector. I'd like to red-flag, I guess, some of the state-owned enterprises we'll have to compete with. We like to profess that there's a free market society over here, but at the same time, when we go into trade operations with state-owned competitors, it becomes quite challenging.

[Mark Agnew]

Yes, and if I can localize it to the southwestern Ontario region, certainly state-owned—or if I can say, heavily state-backed—steel producers are a major concern we have.

As much as our steel companies have the ability and the desire to compete, they can't do it against some of these companies that are not playing with the same commercial terms. They don't have to pay the same financing terms when they take out a loan. That's something that I think is quite challenging for businesses. We want to make sure that what we call the distortive industrial subsidies issue is being tackled front and centre by the government when it thinks about how to engage in the region.

[Brian Masse, NDP, Windsor West, ON]

Yes, and I'm looking for structural things we can do in an agreement. As a New Democrat, here I am advocating for some policy directive to deal with state-owned enterprises we compete against. We seem to ignore that in our trade agreements. We don't seem to even carve that out separately. We talk about the environment. We talk about labour and a series of things.

Is there a model or anything else that the chamber might have with regard to how to deal with state-owned enterprises, whether or not there's a policy directive we can work on in the future? There are lots of different ones in here that I'm concerned about.

[Mark Agnew]

There are a couple of different things that come to mind there. First, of course, a lot of this is going to be done, if at all, at a multilateral level. The question is what leverage we have in a bilateral negotiation.

One big challenge, I think, in the context of distortive industrial subsidies, is transparency. It's hard to discipline something if you don't actually know what it is. That's something that I think we can take on in a bilateral context.

The other thing linked to this is what it is we want to do when it comes to looking at national security interests. When we're talking about a domestic steel industry, what level of steel industry is important to maintain for our own domestic industrial base?

The third and final point is about reciprocal procurement market access. In trade agreements, we're giving and getting at the same time, so we want to make sure there's a balance of concessions that are made in the procurement chapter. Of course, as you would know for the infrastructure sector, a lot of steel gets used.

[Brian Masse, NDP, Windsor West, ON]

Am I out of time, Madam Chair?

[The Chair, Liberal, Judy Sgro]

In six seconds you will be.

[Brian Masse, NDP, Windsor West, ON]

Okay, I'll just say thank you, then.

Thank you, Mr. Agnew.

[The Chair, Liberal, Judy Sgro]

Mr. Martel, you have five minutes.

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

I thank the witnesses for being here with us today.

Mr. Agnew, do you think a free trade agreement with ASEAN countries would have a negative impact on Canada's manufacturing sector?

[Mark Agnew]

I don't have the economic analysis at hand. I think, certainly, there will be sectors that face competitive pressures from lower tariffs on goods that would be coming into Canada, absolutely.

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

How could we reach a satisfactory agreement, while providing incentives for Canadian companies to keep jobs in Canada?

[Mark Agnew]

One thing that we always say about trade agreements is that it's not just the tariff rates that influence the decisions that companies make. Companies will look at a whole host of factors: the tax policy domestically, the regulatory policy, the access to labour. What's important is that as we are opening up our markets, we have our domestic house in order. Right now, if we're talking about a number of sectors, we could talk about how Canada has a tax competitiveness problem. We have a regulatory approvals problem. That's going to be further exacerbated, certainly, as we have open markets and we need to be able to compete.

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

Are any members of the Canadian Chamber of Commerce experiencing particular problems in the Southeast Asian region?

One of the things I was told was that some of the traceability mechanisms were not clear in these countries and that this made free trade agreements much less effective.

Have you heard about this problem?

[Mark Agnew]

If I could ask the member for clarification, when you said “traceability”, it may have been lost in the interpretation. Are you talking about rules of origin, or are you talking about supply chain transparency?

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

My question is about transparency in relation to the supply chain.

[Mark Agnew]

This is, I think, an interesting area of trade policy. It's one that we hear about, from our members, as being very difficult to actually do in practice with the due diligence that a number of civil society groups are seeking for companies to implement. The reality is that a lot of company supply chain information is commercially proprietary information. Particularly for SMEs in Canada, they don't have the leverage in those relationships to fully certify that due diligence has been undertaken. If there is going to be greater supply chain due diligence taken by companies here, the federal government has to play a role in providing information to help companies make informed choices.

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

Thank you, Mr. Agnew.

Mr. Cho, I would like to start by saying that my region is very favourable to the development of critical minerals such as tantalum, niobium, mafic source phosphate and vanadium. Many people tell me that there is a lot of commercial opportunity between Canada and South Korea for critical minerals, especially for battery production.

Can you tell us more about these opportunities and how other ASEAN countries could learn from them?

[Sonny Cho]

Yes. Certainly for South Korea, as a very small country with very limited natural resources, Canada is a very good strategic partner for it to access those critical minerals. I think we can take advantage of the free trade agreement with South Korea.

Major Korean corporations are global. They have a lot of free trade agreements also with other nations like China and other Asian countries. We need the government to make more trips and work with the Korean government and some of the Korean conglomerates in stronger strategic partnerships on critical minerals.