International Trade Committee on April 27th, 2022

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Moffatt.

We'll now move to committee questions.

Mr. Lewis, go ahead, please, for six minutes.

[Chris Lewis, Conservative, Essex, ON]

Thank you, Madam Chair.

Thank you to all the witnesses. Thank you for your fantastic testimony this afternoon. We're sorry to delay you, but that's the life up here sometimes.

My first question, Madam Chair, is through you for Mr. Agnew.

I'm not here to blame anybody or any nation, but what is your perspective on why a trade agreement hasn't happened before with ASEAN nations? Why has there been a delay there?

[Mark Agnew]

I'll go into highly speculative mode here, but I think part of it is because of the pandemic. Certainly, the inability to do face-to-face interaction slows down a whole lot of things. Trade agreements aren't immune to that either.

The other thing I would say about ASEAN, though, is that if you look at some of the other negotiations, potentially, that they have done—for instance, with the EU—you'll see that these things took time to get off the ground and materialize. When you're negotiating with 10 countries at once, it's going to take a little bit longer.

The last thing I'll say is that there still is not entire clarity in my mind as to whether the levels of ambition are completely aligned between the countries. We want to make sure that we're maintaining a fairly high level of ambition and that there's a good deal on the table that matters for businesses and delivers real outcomes.

[Chris Lewis, Conservative, Essex, ON]

Thank you, sir.

My next question is for Mr. Farmer.

What sectors should we prioritize? Along with that, what would be the next step for those discussions? We talk about agriculture. We talk about automotive. We've had some really good discussions here, and great testimony, but which one do you believe, sir, we should be prioritizing?

[Wayne Christopher Farmer]

The reality is that Canadian business engagement with ASEAN is quite diverse. You can see that in our membership. There are probably a dozen or more industries.

Certainly, tariff bases on goods is a starting point. Financial services is another area of strong concern to our members. A lot of the Canadian insurance and pension funds are very active in this region, and are being encouraged to be more active by the ASEAN countries as well. Agribusiness, agrotech, infrastructure—all of these areas are areas of focus for us in this region.

Energy is another one that's potentially there in the existing supplies of gas, in future cleaner energy sources and in energy transition, which ASEAN itself is in the process of looking at in terms of their stated desire to reduce their carbon footprint as well in this part of the world.

The opportunity says “big” and it's very complex, but you'll note in the written testimony that I've submitted that there are probably half a dozen or more very core areas, including digital technology and digital access, that are of great importance for Canadian industry to focus on in this part of the world.

[Chris Lewis, Conservative, Essex, ON]

Thank you, Mr. Farmer.

I'll go back to you again, sir, with regard to electric vehicles. Basically in my own backyard, we have a $5-billion investment from both levels of government, provincial and federal, for an EV battery plant. Is there an appetite, if you will, in the ASEAN world for electric vehicles? Are they doing as much work on it? Do they want electric vehicles as much as the North American countries do?

[Wayne Christopher Farmer]

I'd say the answer to that is yes. Obviously, we have to recognize that within ASEAN you have 10 sovereign countries that have very different levels of development. They go from the highly developed, such as in Singapore, where I am, to Myanmar, Cambodia, Laos and the less developed countries in the region. Certainly, these countries are all looking at battery storage, digital to grid technologies, as well as component manufacturing.

To speak to Vietnam, VinFast is a very big and growing electronic vehicle brand and company that's coming out. Indonesia and Thailand have been very traditional centres of automotive assembly and manufacturing, not just for domestic consumption but also for export. You have a lot of the Korean and Japanese auto companies and others involved in these regions.

Yes, the general thrust is also toward electronic vehicles and battery storage, not just for vehicles but also for power in general. There's a lot of innovation coming down the road in this part of the world that I think translates back to Canada and vice versa.

[Chris Lewis, Conservative, Essex, ON]

Fantastic. Thank you, Mr. Farmer, for that answer. That was really good.

This last question is for Mr. Cho.

I'm going to stay along the lines of automotive here. Although we have some of the greatest manufacturers and assembly plants in the world, I'm wondering if there is a way that the ASEAN nations could help, if at all, with the shortage of our microchips. Long story short, we can build all these great vehicles, but we don't have the semiconductors to put into them.

Mr. Cho, do you have an opportunity there, or do you see an opportunity there?

[Sonny Cho]

Yes, I think there are lots of opportunities. We just have to have the government and the private sector work together and make more trips to meet with decision-makers. They're not as knowledgeable about Canada's capabilities yet, but they're beginning to recognize us. That's why they invested in Wattpad in Waterloo. They set up AI labs in Canada, in Toronto, Montreal and Vancouver. Now they're building EV plants.

The U.S. convinced Korea that it needs to become less dependent on China. That's why they are building semiconductor plants in the United States. We should get a share of that. It's because the Americans have been much more aggressive than we have.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Arya, go ahead, please, for six minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Madam Chair.

These discussions on the Canada's trade and investment relations with ASEAN countries are very important, especially in the context of Canada's development of its Indo-Pacific strategy. We all know that, for Canada, trade is very important. It accounts for 60% to 65% of our GDP. We also know that export companies provide high-quality jobs, with almost 40% higher salaries.

The pandemic has changed international trade, I think I should say, permanently. There is a permanent dent in globalization and international trade. Protectionism has come up. This Russian invasion of Ukraine is also going to have a major impact. Energy security has become very important for every country in the world. For Canada, we need to diversify. Today most of our trade is with the United States. Our companies are more comfortable dealing with the U.S. and the North American market than looking beyond North America.

This study we are conducting also includes India and Taiwan, along with ASEAN countries. India is, of course, a high-priority trading partner for Canada. This year we formally launched a comprehensive economic partnership agreement to consider an interim agreement, whatever that means. Let's see how it goes.

With Taiwan, merchandise trade with Taiwan is better than India. I think in 2021 we had about $10 billion in trade with Taiwan, against India's $9 billion. Taiwan, as we all know, has applied for the Comprehensive and Progressive Agreement for a Trans-Pacific Partnership, CPTPP. With Taiwan this year we have begun exploratory discussions on a foreign investment protection agreement. Also we have agreed with Taiwan to work together to further promote supply chain resilience.

ASEAN countries are very important for diversification. Combined, they make up a very big number in terms of their size. I think that their combined GDP in 2020 was about $8 trillion, with a combined population of around 617 million. We need to encourage Canadian companies to go beyond the North American market, to look outside of Europe and China. The next big thing is ASEAN countries.

As the Canada-Vietnam Society director Julie Nguyen said, ASEAN countries are our sixth-largest trading partner. I am glad to see the Canada Vietnam Society represented here.

It's good to hear the views of Mr. Farmer, the president of the Canada-ASEAN Business Council. With his feet on the ground there, his perspective is very important for us. I did note that you mentioned that Canada can be a supplier energy and food to these countries, which is very important.

To the Canada Korea Council chair Sonny Cho, it's so nice to see you. I was the previous co-chair of the Canada-Korea Interparliamentary Friendship Group. I know the investments South Korea has made in Canada, in the semiconductor and the electrical vehicle sectors. It is good.

As I said, ASEAN as a whole is very important. Recently I met with ambassadors from Brunei, Indonesia and Malaysia. In fact, later today, I'm scheduled to meet the Indonesian ambassador and an Indonesian delegation of officials and private sector leaders from energy, finance, mining and transportation sectors, who are interested in expanding their business in Canada.

My question is for Mr. Farmer, Ms. Julie Nguyen and Mr. Sonny Cho. It's the same question for all three of you. Because of the time restrictions, please answer in under one minute each. Tell us the three important things Canada should do, change or modify to improve trade relations between Canada and ASEAN countries.

Mr. Farmer, you can go first.

[Wayne Christopher Farmer]

Thank you for that.

In many ways, we're doing that already. A formal trade framework will certainly help encourage that and get us to a level playing field with some of our competitors in the region. That has started and is well under way, and we need to maintain the momentum on that.

The second thing, which is more challenging, is ensuring that once we have these trade frameworks in place, we continue to encourage Canadian businesses to take advantage of them. This requires a lot of coordination among the resources that we have. There's often a complaint that we don't have enough resources on these problems, but we have a tremendous amount of resources. It's just that we're not always very coordinated with the left hand and the right hand in getting a clear picture to Canadian business of what the opportunity set is there and what the resources are that they can take advantage of in accessing these markets.

I think the other thing is patience and a time commitment. It takes a long time, both to build these agreements and to building trading relationships, particularly in a region like Asia, or an ASEAN country, where relationships are highly valued. We've had remarkable success in the last decade or so, since rejuvenating our relationship with ASEAN and focusing on that. We are now at the table as a partner that's taken very seriously, and we need to take advantage of that and, being where we are at the moment, because there's no better time—

[The Chair, Liberal, Judy Sgro]

Thank you very much, sir, for the answer.

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

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

Thank you, Madam Chair.

I want to greet my colleagues and thank all the witnesses for being with us today.

Mr. Moffatt, you gave us a brief overview of the situation with palm oil and what it is used for. You mentioned Indonesia. Now, in the Association of Southeast Asian Nations, or ASEAN, there is also Malaysia, which is the second-largest exporter of palm oil in the world.

According to the feedback you get from there, have the operating conditions improved or does the same problem, generally speaking, persist?

[Shane Moffatt]

Thank you.

My understanding is that the environmental challenges regarding palm oil production are very similar, in both Indonesia and Malaysia. They have shared challenges related to deforestation and the monopoly of production by a relatively small number of individuals.

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

Thank you.

To your knowledge, are there other countries in the Indo-Pacific region where this is also a problem?

Although these are the two major exporters, are there any other major players in the field in this part of the world?

[Shane Moffatt]

I'm most familiar, I must say, with Indonesia, in particular, and Malaysia. My understanding is that between those two countries, they comprise a very significant majority of the global production of palm oil.

In terms of other commodities within the region, the concerns I have raised regarding commodity production in a manner that supports local communities, respects indigenous rights, enables small farmers.... Those are themes I have heard from my colleagues—working in the region and on the ground—that are of concern to people there, in many of the different countries across the region where we have offices.

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

Thank you.

As far as we know, imports have already increased greatly in Canada for a number of years.

In your view, is the need for palm oil already being met or will more be needed, particularly from these parts of the world?

[Shane Moffatt]

My understanding is that palm oil imports have increased roughly 1,600% over the past 20 years. That's a huge increase.

One of our concerns is that this deal would potentially open up the marketplace for a spike in those imports and further drive the connection between imports into Canada and deforestation and some of the indigenous rights violations that I've described. We see that as a potential impact of this deal that we would be very concerned about.

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

To your knowledge, are there ethical and eco-responsible ways to produce it, if necessary?

[Shane Moffatt]

That's a fantastic question.

As I mentioned, there are.... Palm oil production can be done sustainably. I think one of the main issues is how it's being produced, and how its production is dominated by a relatively small number of oligarchs in that region.

My organization has worked on the ground with a number of local communities that have invested much of their time and resources and have really put their heart and soul into producing sustainable palm oil. It can be done, but it goes back to these trade deals that need to create the enabling conditions for some of those local communities and small farmers to be rewarded for stepping up to the challenge that we're all facing in trying to produce these kinds of goods in a responsible manner.

One of our concerns, shared by Greenpeace Canada and Greenpeace Indonesia, is that this deal would potentially reward some of those multinational corporations that are currently benefiting from a very destructive model of palm oil production, which is not to the benefit of those who are producing it sustainably.

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

My understanding of what you are saying is that there should be greater restriction of access in the Canadian market to palm oil that is produced under ecocidal conditions, through the traceability that you are talking about and some means of investigation, and easier access to palm oil which is produced under ecologically responsible conditions.

Is this correct?

[Shane Moffatt]

Yes, that's exactly right. That's the kind of approach we're advocating for here in this deal.

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

You said that palm oil production was dominated by a handful of oligarchs. In terms of feasibility, I guess it's not easy to know where the product comes from.

What is your opinion on this?

[Shane Moffatt]

That's right. Traceability is a big issue with palm oil. On the international markets, it's very hard to know where palm oil has originated in many of the products that we consume here in Canada.

To really address the problems of lack of traceability and inability to distinguish between those who are producing in a very responsible manner and those who aren't producing in a responsible manner, we need much more transparency for the commodities that are being exchanged. We need to build that transparency and that oversight into the deal itself.

Transparency is absolutely key when it comes to palm oil and other commodities.