International Trade Committee on Feb. 14th, 2022

[Jay Allen]

Madam Chair, we wouldn't typically include a review clause, but it's something we often include.

In this case, we included it because there are such fundamental elements of the agreement that weren't included. We didn't include services or investment, for example. Cross-border trade in services and investment are fundamental to our FTAs, so we included that provision, with the full support of the Ukrainian government, because we recognized that at the time their regulatory system was in such flux that they weren't sure what they were going to be able to agree to. We didn't want a situation where we potentially came away from the negotiations with an agreement that walked back even the protections we had in our 1995 foreign investment protection and promotion agreement.

We put in the review clause with the idea that within two years we would look to see how we could deal with cross-border trade in services, financial services, investment and a number of other areas. It was fully anticipated this would happen, and it was fully supported by both parties at the time.

[Wilson Miao, Liberal, Richmond Centre, BC]

In 2020, Quebec, Ontario and British Columbia were Canada's three highest-value exporters of goods to Ukraine. You mentioned in your opening remarks that fish and seafood, vehicles, and machinery are a good part of Canada's export to Ukraine.

What would be some of the sectors that could potentially grow and benefit the most from a modernized agreement?

[Jay Allen]

From a goods perspective, once we hit 2024, we will have the full tariff elimination. Over the next couple of years, we will see tariffs eliminated, which will allow further growth, including in exports like pork, which currently still has tariffs.

From a goods market access perspective, we're not looking to reduce tariffs in any other places, because there really aren't that many tariffs left to reduce once we hit 2024. Where we're looking for growth is going to be on the services side. As Mr. Smith highlighted earlier, there are things like environmental services, financial services, insurance and education. Those are some of the real growth areas that we see.

[Wilson Miao, Liberal, Richmond Centre, BC]

If any provinces or territories have expressed support or opposition to the modernization of CUFTA, have they identified particular areas of concern in the existing agreement?

[Jay Allen]

No. In fact, in 2020, we consulted Canadians, and what we found was that, broadly speaking, Canadians were supportive. During that consultation—I apologize, the number escapes me—we heard from five or six provinces and they were all supportive.

The types of concerns we hear about an agreement like this.... When we're doing a modernization, we hear concerns about supply management. People don't want openings for supply management, and that is absolutely not on the table. We will not provide any more market access, or any market access, for supply-managed goods.

We didn't hear negatives about this. There was a lot of support. People saw that adding services and investment completes the picture.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you very much, Mr. Allen.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We're now moving on to Mr. Patzer, please.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you very much.

Could you update us right now as to where we are at for trading agricultural products to Ukraine under the current agreement?

[Jay Allen]

Sure. I'll turn to Dean Foster.

Dean, do you have some numbers on agriculture products?

[Dean Foster]

Sure, Jay.

Again, I apologize that my video is no longer working.

We are indeed seeing growth in various products in the ag sector. One that I would mention is pet food. It's looking to be toward $9 million in 2021, up from $6 million in 2019. Frozen fish, which is not ag but is food, looks like it is up to over $50 million for 2021, based on preliminary numbers. We also see chilled and frozen pork up to nearly $6 million in exports in 2021. That was one of the big tariff elimination items for Ukraine in the FTA.

Those are a few examples.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you.

What about the manufacturing side? I've been talking to a few different groups in my riding, and there's some concern about certification between countries. Is there a chance to update or modernize this agreement so that we have certainty in the certification between Canada and Ukraine within the context of manufacturing?

[Jay Allen]

Our technical barriers to trade chapter facilitates that exact thing. It's about looking at regulations and harmonization—or, if not harmonization, looking at compatibility of regulations—and putting in place systems so that regulators can talk to one another, specifically to avoid regulatory hurdles.

I'm very happy to say that it is in the agreement already. I don't know that there was a meeting of the minds in terms of updating that chapter. We have a WTO agreement that underpins the technical barriers to trade chapter. I don't know that there's a lot more that can be done, but suffice it to say that we do have the facility under the agreement—it's only been in place for a couple of years—to help reduce those barriers for people, because certification is a very big issue. You're absolutely right.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

I'm asking specifically about agricultural manufacturing again. I do know that there are quite a few manufacturers in Saskatchewan that ship products over there. How much room for growth is there for that in Ukraine? I'm hearing reports that their equipment is 30, 35 or 40 years old over there and that there's a great market opportunity there to try to help out.

Are there any proactive clauses or parts to the trade agreement whereby we can actually try to help boost and increase their use of more modern machinery and even, quite frankly, agricultural practices?

[Jay Allen]

We typically don't do that within an FTA. In Canada, we work with the trade commissioner service, Export Development Canada and BDC to help sell our products there. The trade commissioner service is really excellent in terms of promoting Canadian goods there and facilitating entrees into various things, whether it's trade shows or going to meet with industry associations.

That's typically how we will help industries get their products into a market. It's through the trade commissioner service and some of these other services, rather than putting it directly into a trade agreement, because it's pretty difficult to negotiate something that's that specific in an agreement.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you.

Lastly, just in looking around the regions, what would be the ramifications if Canada were to, say, impose Magnitsky sanctions? What would that do to potential trade or the general atmosphere over there if we were to use Magnitsky sanctions?

[Jay Allen]

For that, I will turn to my colleague Andrew Turner.

[Andrew Turner]

Canada has been very clear, along with our allies and partners, the G7 and the G20, that we are all collectively prepared to impose sanctions that will have massive economic consequences and impose severe costs on Russia if they choose to invade Ukraine.

Again, we continue to pursue diplomatic options so that this will not be necessary, but in support of that, we are also pursuing the path of deterrence to make it clear that Russia will face these costs.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Patzer.

We'll go on to Mr. Arya for five minutes, please.

[Chandra Arya, Liberal, Nepean, ON]

Thank you very much, Madam Chair.

My question is for Mr. Allen.

Mr. Allen, we talk about inclusive trade objectives. We include gender and indigenous peoples, etc. Is it something that used to be considered previously? For other countries, such as the United States or the United Kingdom, that have very extensive trade across the world, do they include any provisions related to the so-called inclusive trade practices?

[Jay Allen]

I'm very happy to say that a growing number of countries are including them, maybe not to the extent that Canada is, but certainly some of our partners, such as New Zealand and Chile, have partnered with us in terms of the global trade and gender initiative.

There are quite a number of countries that are starting to do it, and more and more, and it's seeing its way into a number of things. For example, the U.K. is putting a real emphasis on labour. We're seeing it in the United States, where they're a putting a big emphasis on labour. In terms of seeing gender and some of the other elements, it maybe hasn't caught on quite to this extent, but I'm very happy to say that it is catching on.

I have my colleague Sean Clark with us. Maybe I'll ask Sean if he wants to add anything on inclusive trade. He's our director responsible for inclusive trade.

[Sean Clark, Director, Trade Agreements Secretariat, Department of Foreign Affairs, Trade and Development]

Thank you, Mr. Allen.

We do have quite a bit of work going on. Canada is leading in international forums, including the WTO, to promote women's economic empowerment, and it is promoting opportunities for SMEs at the WTO as well. The work is spreading. It's taking some time, but there are more and more countries coming on board.

[Chandra Arya, Liberal, Nepean, ON]

Okay. Thank you.

When it comes to the modernization of this agreement, am I correct in saying that basically we are negotiating part of the trade agreement that was not concluded that year in the areas of services and investment?

[Jay Allen]

That's correct.

We're looking to add a number of things, such as services and investment, telecommunications and temporary entry. We're also looking to update some of our existing chapters like e-commerce, transparency and government procurement. The labour chapter is one that we're looking to update, as well as our environmental commitments under the agreement. We will be seeking to add inclusive elements.

Sorry, I don't want to take up too much of your time.

[Chandra Arya, Liberal, Nepean, ON]

One particular thing you mentioned is that it will cover temporary entry of business persons. Is that normally part of a trade agreement?

[Jay Allen]

Yes, it is.

We will typically make commitments on a reciprocal basis where we will work with the other country to facilitate the entry of certain categories of business people to make it easier for them to come in, whether it is to provide after-market service for goods that they've sold, to provide consulting services or a number of different areas. It absolutely is a feature of our agreement.

Maybe I'll ask if Darren Smith wants to add anything on temporary entry.