International Trade Committee on May 8th, 2023

[Jeff Nankivell]

Thanks.

In short, I would say it's of political significance in the signal it sends to the 10 member countries of ASEAN, as well as the secretariat of ASEAN, about the importance of the relationship with Canada. I think it is giving momentum and energy to the trade agreement negotiations with ASEAN.

That said, the biggest challenge about negotiating a trade agreement with a 10-country grouping is the different levels of development among the countries. You have members of ASEAN, including Cambodia, Laos, Myanmar and Vietnam, at lower levels of development, and you have countries like Singapore and Malaysia at the high end, so I wouldn't underestimate the challenges in getting across the finish line on that, but there's definitely a new energy.

Also, the announcements that came out of the Indo-Pacific strategy rollout by the government have been noted by our interlocutors, our counterparts in Southeast Asia, by leaders in those governments, and I can tell you, having been in the region a few times since November, there's keen anticipation about a sustained stepped-up Canadian engagement in the region. Leaders in those countries are looking forward to seeing the signs of that—both the beefing up of diplomatic missions, as has already been mentioned; and the establishment of a strengthened regional hub for Agriculture and Agri-Food Canada, including CFIA personnel in the region.

All of those things, as we start to see more Canadians on the ground in the region, will help to build the kinds of relationships you need to get these agreements across the line.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

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

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

Thank you, Madam Chair.

Greetings to all of the witnesses. Thank you for your presentations today.

First I want to pick up on the question that my colleague Mr. Virani asked Mr. Ross. He asked about the market diversification bureau that would be based in the Indo-Pacific region.

Mr. Ross, you appeared before the committee last June when we were doing a study on that topic. If an office of that type works in the Indo-Pacific region, then it could very well work elsewhere. It would have to be determined whether the model can be easily transferred or whether it's more tailored to the unique reality of the Indo-Pacific. You spoke about the requirements in Pakistan, and Vietnam's requirements regarding seed and import bans.

I must admit I'm surprised that the diplomatic corps was not able to monitor the situation on the ground and give you a heads-up.

Why is this office, which would be separate from embassies and consulates, necessary?

[Mac Ross]

Thank you for the question.

I think I'd start off by saying that we do rely on our trade commissioner service, and they do a very commendable and great job in a lot of our key markets, but oftentimes they have many issues to deal with, many priorities, and don't have the ability to focus directly on the agri-food trade issues that we experience and are experiencing increasingly in markets around the world. Specifically when it comes to SPS-related issues, we know that competitors such as the U.S. have a much more extensive network of diplomats and foreign officials working on these matters for them.

For us, it was really about how we can be efficient in a region that's very important for the ag sector broadly in the Indo-Pacific and have dedicated resources to address these issues. To your point about this model working elsewhere, I think that's a great point, yes. I think that's something we would like to see in other markets of key importance: having more of a sustained and long-term presence in the region and a specific focus on regulatory and technical capacity building as we see more of these non-tariff trade barriers in the area of SPS-related issues.

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

You spoke a great deal about this office, saying that it was a source of information. In other words, you would be informed before shipments arrived at their intended destination and before they were returned to the sender. Besides providing you information, the office helps you how? What is going to be done once these new policies are deployed and understood?

[Mac Ross]

If you're referring to the technical capacity-building efforts I noted, I think these can take place through a number of ways, whether it's visits to production sites, labs, research stations, engaging with eminent academics and their institutions, market studies, etc. However, all programs embedded in trade facilitation and development assistance we would see as very advantageous for addressing these barriers.

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

Thank you, Mr. Ross.

My next question is for Mr. Laird.

Investor-state dispute settlement mechanisms are included in the CPTPP, as they are in most other agreements. An exception is CUSMA, from which the famous chapter 11 of NAFTA was removed. This opens the door for foreign investors to bring legal action against a country that is promoting a public policy. The United Kingdom expressed its concerns in a report by the standing committee on international trade in London.

The report places the blame on policies aimed at increasing the minimum wage, ensuring affordable water rights for citizens and phasing out of fossil fuels. That is to say that even if these provisions could, in theory, make it possible to break through certain illegitimate non-tariff barriers, they would also somewhat censor democratic debate and political decision-making.

What mechanisms do you recommend to strike a balance between the healthy harmonization of public policies and respect of the right to legislate?

[Ian Laird]

I thank the member for the question.

That's a very key question. It goes to the balance of these types of investment protections, balancing the protection of the investor in the foreign state with the right to regulate, as you say, which is absolutely key.

I think you can look at an agreement like the CPTPP and see that there have been great efforts to try to address that balance. From an academic and practitioner point of view, the States' position is certainly well represented to make sure that the right to regulate is considered. As an individual who has been counsel in these types of cases of international arbitrations and an arbitrator, I believe there is a balance and that tribunals are certainly taking well into consideration the government issues.

In terms of the types of provisions, it really goes to the types of substantive standards, which I think you can see have well taken care of that issue of the right to regulate.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

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

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

I'll continue with Mr. Laird on that topic.

It seems that there's a trend recently with some of the free trade agreements around the world for these investor-state dispute mechanisms to be pulled out of agreements, especially where you have countries that seem to have a mature and robust judicial system and investors can use the courts. For instance, although the investor-state mechanism is enshrined in CPTPP, I heard recently that Australia and the U.K. signed a side letter agreement to remove it, in a bilateral way, when the U.K. accesses to that agreement. It's also come out of CUSMA.

I'm wondering whether you can comment on that trend.

As Monsieur Savard-Tremblay mentioned, there is this opposite effect, where it really does hamper what local governments, provincial governments and federal governments here can do in terms of new legislation around labour practices, environmental issues, etc.

[Ian Laird]

I thank the member for that question.

Falling on your last point, the idea there may be some regulatory chill.... From an academic point of view, that has been well studied. There certainly is no definitive conclusion that this is the case. If you look at the specific case law in terms of pure winners and losers, certainly, investors have not had particular success under these treaties. In fact, they received, when they were successful, fractions of what they claimed. Governments routinely win these cases. From the stats, it's hard to say this is something that has been undermining governments' right to regulate.

That being said—and this is WTO and all of international law—it is like all law. It puts limits on government and addresses very fundamental rights, such as not being discriminated against, being treated fairly and equitably, and being compensated for expropriation. These are very basic standards that have developed in international economic law in the last 100 years. It shouldn't be something the Canadian government and governments are afraid of.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

You were concentrating on mining in your remarks. Coincidentally, I had a meeting with the CEO of Teck Resources in my office last week here in Ottawa for another reason, as you can imagine. We were talking about their operations in Chile, for instance. I was just down in Chile recently on a parliamentary visit. He brought up the fact that Teck chose to act in Chile the way it acts in Canada. I don't think that is the case for many Canadian mining companies. They have managed to sign impact-benefit agreements with communities and develop very large projects with absolutely no controversy at all.

However, it seems Canada has trouble—a bad reputation, in many cases—when it does not do that and when companies take advantage of countries without the capacity to regulate.

[Ian Laird]

You're addressing a very key issue of these types of protections. They protect the investors, but it also gives a chance for respondent states to bring up these types of issues.

In fact, these cases show both sides of what's going on. That kind of transparency in bringing out those issues is very important because we should certainly hold Canadian miners and extractive industry folks abroad to Canadian standards. That's what these treaties seek to do as well.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I'll continue down that road because this is of particular interest to me.

In terms of dealing with Canada's operations in other countries.... As you mentioned, we have an oversized influence in the mining sector because most of the mining companies are based in Canada. That's where we see some of our impact abroad.

We have a commissioner for responsible enterprise in Canada, who was before this committee earlier. She was essentially getting no complaints from Latin America or Africa, for instance, because the community groups that had issues with Canadian mining companies felt the office had no power. It has no power to call testimony from witnesses or to call documents, so those groups were going to the United Nations and taking other routes.

Again, this is a side issue, perhaps. It's peripheral to the issue of non-tariff barriers, but I think it plays into why some of these countries may take actions against Canadian investors.

I'm wondering whether you could comment on that office. If we had it strengthened, we would have fewer disputes abroad.

[Ian Laird]

The commissioner issue is certainly one that's very important. I would put it a little outside my topic of discussion, but it goes to the overall point that.... When Canadian companies are involved in these foreign jurisdictions and investing substantial amounts of money, if there are going to be disputes, they should be balanced.

I believe the Canadian treaties that address these issues make great strides in seeking to achieve that balance.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We now go to Mr. Martel for five minutes, please.

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

Thank you, Madam Chair.

I thank the witnesses for being with us today.

Mr. Laird, you mentioned that Canada needs to step up its trade agreement efforts because it has fallen behind. I find that rather worrying.

Can we catch up, or have we fallen too far behind?

[Ian Laird]

Thanks to the member for asking that question. It was addressed indirectly earlier.

I have to give credit where credit is due. The efforts with regard to CPTPP and ASEAN certainly have been significant. When we look at the USMCA, or CUSMA as we call it in Canada, that was really about assuring continued rights and, in fact, I see it again as retrograde that our largest source of international investment has been eliminated from a dispute resolution point of view. However, in terms of those other areas, if we look to investment, say, in South America and Africa, there are still significant jurisdictions that have not been covered by free trade agreements or FIPAs.

I think that was more my commentary: that there is still significant work on that front and there are numerous agreements that have been negotiated but not signed and numerous states in which negotiations have started but are not completed. That is just on the record if you go to the Global Affairs website. There is clearly a lot more work to do.

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

I have another question for you.

I would like to discuss the Softwood Lumber Agreement between Canada and the United States, which has been in place since 2006. There doesn't seem to be a light at the end of the tunnel. We all know that many softwood lumber disputes between Canada and the U.S. have been brought before the WTO, the World Trade Organization. Minister Ng announced that she would challenge the United States' tariffs on softwood lumber under chapter 10 of the Canada-United States-Mexico Agreement, or CUSMA.

I would like to know what is happening with all of these softwood lumber disputes at the WTO. How have they not been able to reach an agreement after all these years?

[Ian Laird]

The WTO situation really goes to the difficulty in appointing new members to the dispute resolution body, so it has just become virtually impossible to bring disputes through the WTO mechanism, which is certainly a real shame because, in years past, it was a very useful venue for these disputes.

In terms of the options of Minister Ng, the USMCA still has a state-to-state dispute resolution mechanism. That's certainly open to Canada, and I suspect that's what she was talking about. That's still a pretty robust mechanism, and if Canada sought to use it, I think that would be the route to go.

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

My next question is for Mr. Kingston.

As you know, there is much talk of reciprocity of standards in trade agreements. We have found that reciprocity is not always fair in various sectors.

What sectors do you feel we could look at that put us at a disadvantage here in Canada?

[Brian Kingston]

Thank you, Mr. Martel. That's an excellent question.

Reciprocity, particularly in manufacturing and automotive, is really important. As I noted, most of our manufacturing and production goes to the United States. That said, we do have opportunities to export to other markets. If you look at both Japan and Korea, there are long-standing non-tariff barriers that have been in place that weren't fully addressed in our trade agreements and provide serious barriers to manufacturers that look to export from North America into those markets. There are many examples such as certification requirements and spectrum allocation—all sorts of tools to stifle imports from other markets.

It's really important that our trade deals have reciprocity built in and, if it's not achieved, then we need dispute settlement mechanisms to take on those barriers.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Go ahead, Mr. Arya, please, for five minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Madam Chair.

I would like to ask a question to Mr. Laird.

Mr. Laird, I'm glad you brought up the significance of mining companies in Canada. Many of us tend to forget the enormous contribution that mining companies have made and continue to make in the Canadian economy and the prosperity that we enjoy today. Mining companies have a significant role in that.

You rightly highlighted the non-tariff barriers coming up in different places. For example, in Tanzania they have implemented the export ban of gold and copper concentrates. In the Democratic Republic of Congo, I believe the second-largest cobalt mine has been shut down due to the demand of the government that there be local processing. It's the same in Tanzania, which has stopped the export of copper concentrates, again insisting on domestic processing. Indonesia is banning the export of raw nickel and also imposing some export taxes. Tanzania, again, is also insisting on mandatory government inspection and special requirements for exports

The other day I was listening to the United States national security adviser, Jake Sullivan, talking about the international economic agenda. I could sense the movement from multilateral agreements to economic partnership agreements with selected countries. That seems to be the key.

With respect to Africa, we don't have free trade agreements there with the countries I just mentioned, so that, I believe, will increase the complexities faced by Canadian mining companies. Can you comment on that, please?

[Ian Laird]

Thank you for that question, Member Arya.

I think you've raised a very good point with regard to the need for further negotiation, in general, in Africa with a number of jurisdictions.

In looking at foreign direct investment, we see that six of the top 10 recipients of Canadian foreign direct investment—and a good proportion of that relates to mining—don't have a free trade agreement or a FIPA. I would agree that we should very much be targeting those countries. If we're going to provide international protections and remedies, it's absolutely essential that the minister give some attention to those negotiations. I totally agree with what the member has said.