International Trade Committee on June 1st, 2023

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

I'm calling the meeting to order. This is meeting number 68 of the Standing Committee on International Trade.

Today's meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. Therefore, members are attending in person in the room and remotely using the Zoom application.

I'd like to make a few comments for the benefit of our witnesses and members.

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Pursuant to Standing Order 108(2) and the motion adopted by the committee on Friday, November 25, 2022, the committee is continuing its study of non-tariff barriers in Canada's existing and potential international trade agreements.

Before I go to our witnesses, Monsieur Savard-Tremblay, do you have your hand up?

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

I have the proposed schedule. Rumours suggest that the House will no longer sit after a certain date, but those remain rumours. Officially, according to the calendar, the House will adjourn on June 23. So I don't see why we would decide to shut down this committee. I have inquired with members of other committees, and they will have activities until the last week.

[The Chair, Liberal, Judy Sgro]

Thank you.

Mr. Seeback.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

I think I have at least a partial solution.

I think we should do the softwood lumber study that Mr. Savard-Tremblay wants us to do. We can put that on the calendar. That would certainly take up a meeting. I don't know how many we've put on the calendar for that. It's one or two, or something like that.

That's what I would say would be the solution to that.

[The Chair, Liberal, Judy Sgro]

All right.

That is the only outstanding issue we have, so we could certainly accommodate that request.

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

Generally speaking, we don't lose anything by scheduling meetings anyway. If the House stops sitting, we will postpone the meetings until the fall, as is the custom. The fact remains that we should not assume that the House will no longer sit starting on— If we see that there are no more meetings on June 15—

[The Chair, Liberal, Judy Sgro]

The reality is that it never is, unless it's going to change this year. However, if it continues to be 30 and 32 and 34, then it probably won't.

The issue when you get down to those last days is that there are usually a tremendous number of interruptions. When you have witnesses coming to appear before the committee—as we do today—then you have to quickly cancel them because suddenly the House is closed. Those last few days become pretty variable for a variety of reasons.

We are attempting to clean up what we have on our plate. We don't want to start something new in the last days of the House sitting.

Mr. Cannings.

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

I've been here for only seven or eight years and the House has never risen as early as the 15th. It's always risen a couple of days early, but not a couple of weeks early.

Let's not book anything for the last Thursday, but I think we should plan at least to the last Monday.

[The Chair, Liberal, Judy Sgro]

You'd like to ensure that we continue on until the 19th.

Let's see what we have on our agenda. I believe softwood lumber is the only outstanding issue that we have at the moment. Let me review the agenda. We can discuss this further at five o'clock when we go into committee business.

Is that okay with everybody?

[Some hon. members]

Agreed.

[The Chair, Liberal, Judy Sgro]

All right. Thank you.

We'll go on to our guests here.

Today, as an individual, we have Omar Allam, expert, global trade and investment. From the Canada West Foundation, we have Carlo Dade, director, trade and investment centre; and Sharon Zhengyang Sun, trade policy economist, trade and investment centre. From CropLife Canada, we have Émilie Bergeron, vice-president, chemistry; and Gregory Kolz, vice-president, government affairs. From Magellan Aerospace Corporation, we have Rushi Ghadawala, manager, business development, by video conference.

Welcome to all of you. We appreciate your taking time to be here.

We will start with opening remarks and then a round of questions.

Mr. Allam, I invite you to have opening remarks of up to five minutes, please.

[Omar Allam, As an Individual]

Thank you, Madam Chair and committee members, for this opportunity.

My name is Omar Allam. I am here today as an individual with 20 years of international business, public sector, diplomatic, World Bank and global trade consulting experience that spans the North American, European, African and Asian markets, in addition to having worked in emerging markets such as China, India, Saudi Arabia and Qatar, to name just a few.

Today our country faces important questions with respect to international trade policy, investment and competitiveness. We need clarity regarding our strategic goals and priorities in the global economy. At the same time, we need to urgently align our trade policy with domestic policies as well as choices on climate change, innovation, immigration, labour markets and regulations.

Over the last two decades, Canada has chosen to pursue international trade at varying degrees, and we've seen Canada continue to use various tools at its disposal to counter non-market practices and to defend Canadian jobs.

However, even with free trade agreements in place and the hard work of Canada's international trade portfolio and the broader trade ecosystem, Canadian exporters continue to face the same fundamental challenges, and I really want to focus on the lack of financing and capital for the Canadian companies that are doing business globally, because we're losing out on major global business opportunities in probably every market in the economy. Nevertheless, there's always room for improvement, and there are a number of areas that can be addressed.

The immediate focus for Canada should be a new international trade and investment strategy that maps out export and FDI priority markets and sectors. The traditional approach of reducing tariffs and dealing with trade barriers no longer works. When it comes to strategic tactics and trade policy, we need to do things differently.

Canada should continue to promote its trade policies as a means of complementing the multilateral trading system through strategic trade and economic partnership agreements that go beyond FTAs. We need to reorient towards these types of trade partnership models with key trading partners. This can in turn resolve trade barriers and, as well, get market access commitments. Moreover, countries such as the U.K., Japan, Singapore, Australia and the EU are all pursuing similar partnership arrangements. For example, the U.K. signed a state-level trade agreement with Oklahoma, and this is the fourth such agreement between the U.K. and an American state.

Moving to concessions, when designing and negotiating these types of trade partnerships, we need to be smarter about concessions in return for greater access to markets of interest to Canadian companies. For example, countries may want access to Canada's natural resources—critical minerals, for example, and renewables, LNG, etc. This gives Canada a greater incentive at the negotiating table and room to manoeuvre in terms of improving market access. Canada may also seek foreign investment from a given country to support economic diversification or commitments related to defence, security or foreign policy.

Canada can also ask for preferential market access in exchange for these types of concessions that trade partners are looking for. For example, Canada can ask for market access and the removal of non-tariff barrier measures from country X. We can fast-track approval of foreign takeovers or investments in critical infrastructure projects from a foreign company with strategic interests. Having said that, I would also propose concessions with some hooks, such as, the head office needs to be in Canada for x number of years in order to gain access to natural resources.

There's also a lack of trade finance, which is a significant non-tariff barrier to trade. To date, the Canadian government offers a broad array of financing and tools to support Canadian businesses in their international business pursuits. Financing for these activities falls short of our competitor countries.

Let's take the infrastructure sector as an example. The government's ability to assist companies to compete in infrastructure development or exports in the infrastructure sector in global markets is challenged by early-stage financing. The key issue is government financial support to help de-risk Canadian investments in foreign markets. This is what the U.S. is doing.

In closing, regardless of political stripe, Canada cannot keep up with the rapidly evolving and changing trade landscape and the highly competitive geopolitical economies of tomorrow. We need to think creatively. We need to act now. We need to put significant resources behind this now.

Without significant action, Canadian companies will continue to fall behind competitors and we will miss out on opportunities. The risk of inaction is too high.

Thank you for your time. I look forward to answering your questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move now to Mr. Dade and Ms. Sun.

You have the floor for up to five minutes. Go ahead, please.

[Carlo Dade, Director, Trade and Investment Centre, Canada West Foundation]

Thank you, Madam Chair and members of the committee.

For 50 years, the Canada West Foundation has been the public policy research, dissemination, education and advocacy organization for the four western provinces. Our mission has been and remains the creation of a strong west in a strong Canada.

As part of that mission, and given the economic portfolio of Canada and especially the western provinces, a lot of our work touches on areas of investigation and responsibility for this committee.

Today I am going to draw lessons from one example of such work. We've undertaken a two-volume study of the impact of non-tariff barriers with China and how to resolve those issues. My colleague Sharon Sun, our trade economist, did the quantitative work and the analysis along with me on this study. She's here to answer in-depth questions on those two points.

You have one of the appendices, I believe, from the study, which was given in advance.

Before I get into the lessons of the study, I will mention that we listened to the 15 hours of testimony you've had, and we have tailored our remarks to fill in some gaps in things that others touched upon but did not necessarily go into in depth.

Very quickly, there are two other items we are working on that will come to this committee's attention. One is the Indo-Pacific strategy. We are working with the western provinces to develop a western response to the strategy. We've convened or helped to facilitate a meeting of prairie trade ministers, and that work is continuing.

On the ability to move goods to market, two-thirds of our nation's income comes from moving goods in and out of the country, yet we have dropped from being in the top 10 in global infrastructure rankings to being 32nd, one place above Azerbaijan. There is a national coalition—the Canada West Foundation has done the research—that has a solution to this problem. That solution is supported by the Business Council of Canada, the Canadian Chamber of Commerce, the Canadian Construction Association and the premiers. The call for this solution, a national plan for trade infrastructure, will be on the agenda of this summer's meeting of the Council of the Federation, so I'll flag that for you as something that is coming that may be of interest to the committee.

On the study at hand, after listening to the other testimony, we have two points from our research and three recommendations for the study—not for the government but for the study.

Point number one is that, if you look at what the Americans have done with the U.S.-China phase one trade agreement, there is something completely new and unprecedented on the table in terms of what the Americans are using to resolve or eliminate—in a way we just haven't seen before—non-tariff barrier issues that they face with China. The appendix we shared with you shows Canadian issues, the American equivalent and what the Americans have done to completely eliminate the issue. I'm not going to go into depth in the opening remarks, but we're happy to talk about that during questions.

The second point is that, where Canada has had success in dealing with non-tariff barriers, that has not necessarily been through legal texts and trade agreements. Those are necessary but not in and of themselves sufficient to managing non-tariff barrier issues. If you take our experience with the United States, as good as our negotiators are—as clairvoyant as they are—they are not as creative as the forces in the U.S. are at seeking to exploit rules to create non-tariff barriers.

We maintain an active political presence in the U.S.—not just the Prime Minister, not just each premier making five or six trips to the U.S. and not just MLAs spending summers with their counterparts in state legislatures at the U.S. Council of State Governments. Our good friend at Economic Development Lethbridge was just telling me about his trip to the Montana economic developers meeting, at which they were looking at him and saying, “What are you doing down here?” His response was, “I'm doing my job, which is keeping an eye on your guys.” Who's going to be an ally in the future? Who's going to cause problems for us? In the U.S., we've invested an inordinate amount of time, resources and money on non-tariff barrier issue prevention and mitigation.

The other approach we've taken is the development angle. In China, from 1983 to 2003, the Canadian International Development Agency invested $117,765,792 in agricultural development projects. Yes, this reduced poverty and led to increased production in China, but it also brought Chinese officials to the Prairies and New Brunswick, where they met Canadians and lauded their practice. They saw, first-hand, our phytosanitary measures. We trained cadres and generations of officials in China. When China wrote their fertilizer regulations, they didn't ask the Americans or the Europeans. They asked us to sit at the table to help them write their regulations.

Ladies and gentlemen, if you want to prevent non-tariff barrier issues, you can't do much better than helping to write the regulations in that country, or having officials in that country trained in Canada. However, after 2003, we dropped that and lost this capacity. I think it certainly would have helped during the canola issue—having those ties.

I'll conclude with my three recommendations.

With the Indo-Pacific strategy, there is a proposal for the creation of an agricultural office. That office must focus on surviving market access—not gaining more market access but surviving the access we have. We have market access in the U.S. for beef. We had it in China for canola. We need to invest the resources to make sure we can survive. That means bringing officials to Canada and playing the long game for non-tariff barrier issue resolution—not solving it like Whac-a-Mole for each issue but investing in long-term capacity to pull the plug on the Whac-a-Mole machine, if I can use that analogy.

The other issue is looking at the experience of other countries. We did that with Australia and Brazil.

Finally, think about the U.S. example. It may not apply to us, but that doesn't mean we can't consider it. Think about what we can use in there and how it's changed the game.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Dade.

Ms. Bergeron and Mr. Kolz, the floor is yours for up to five minutes.

[Gregory Kolz, Vice-President, Government Affairs, CropLife Canada]

Thank you very much, Madam Chair.

Good afternoon, and thank you for granting CropLife Canada this opportunity to participate in your study on the impact of non-tariff barriers on existing and potential international trade agreements. My name is Greg Kolz and I am vice-president of government affairs at CropLife Canada. Joining me today is my colleague Émilie Bergeron, vice-president of chemistry.

CropLife Canada is a national trade association that represents the manufacturers, developers and distributors of pesticides and plant-breeding innovations. Our organization’s primary focus is on providing tools to help farmers be more productive and sustainable.

As you may be aware, Canada is the fifth-largest agricultural exporter globally. We produce some of the highest-quality and most sought-after products in the world. Global food insecurity continues to be an enormous challenge, and we believe Canada is and can be part of the solution. The world needs the food and feed that Canadian farmers produce. In turn, Canadian growers need predictable, transparent and science-based trade rules to get our products to market.

Unfortunately, despite the multiple free trade agreements to which Canada belongs, non-tariff barriers continue to impact Canadian producers. Whether it’s the lack of predictability and timeliness for the approval of biotechnology crops in export markets, or the adoption of non-scientifically driven policies on pesticides, many of these challenges have already been brought to the attention of this committee by our colleagues from other agricultural groups.

We share the view that all future free trade agreements signed by Canada must include provisions on agricultural biotechnology, as do the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Canada-United States-Mexico Agreement, and contain text to address trade issues related to differences in pesticide regulations.

Today, we would like to discuss with you a new non-tariff barrier that could set a dangerous precedent and undermine the entire global agricultural trading system.

I will ask Ms. Bergeron to explain this issue in more detail.

[Émilie Bergeron, Vice-President, Chemistry, CropLife Canada]

On March 7, the European Commission adopted new regulations that will allow for changes to the maximum residue limits for pesticides because of environmental concerns. This is a major departure from the internationally recognized scientific approach to establishing maximum residue limits.

If left unchallenged, this unilateral and unprecedented decision by Europe will have a significant negative impact on how Canada and other agricultural producers around the world operate within their borders and on how agricultural products are marketed globally.

As the name suggests, MRLs are the maximum allowable amount of pesticide residue that can remain on a crop when the product is used according to the approved label directions. MRLs are established following rigorous safety assessments by competent national authorities.

In Canada, Health Canada is in charge of completing these assessments and setting Canadian MRLs. There is an international standard-setting organization called the Codex Alimentarius Commission, Codex, for short, which sets scientifically based, internationally agreed upon standards to facilitate trade. Like Canada, the EU is a member of Codex, but their recent regulatory changes directly contradict the international consensus on MRLs.

The EU has openly stated that they are trying to create a level playing field for their farmers. In other words, if they ban a pesticide in the EU, regardless of the reason, they want to make sure that none of their trading partners have access to it either. This unilateral approach disregards the rigorous scientific process that is used to evaluate pesticides and set MRLs and is a direct effort by Europe to impose its domestic policies on countries like Canada.

Canadian farmers are faced with enormous challenges in growing more food more sustainably to feed Canadians and the world. We cannot allow ideologically driven approaches out of Europe to dictate which tools and technologies Canadian farmers have access to. Both CETA and the World Trade Organization call for any regulatory measures to be based on science and forbid unjustified barriers to trade. It is our view that by adopting this regulation, the EU is not meeting its trade obligations.

[Gregory Kolz]

With this in mind, we recommend that the federal government engage at all diplomatic levels to make Canada's objection to the EU's unilateral approach to MRL setting clear and unequivocal.

In addition, we strongly encourage the government to consult with agricultural stakeholders across the country and engage relevant departments to explore the merits of a WTO challenge.

Thank you, Madam Chair. We would be pleased to answer any questions the committee may have.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Ghadawala.

[Rushi Ghadawala, Manager, Business Development, Magellan Aerospace Corporation]

Thank you, honourable Madam Chair, for the opportunity to participate in this important work undertaken by the Standing Committee on International Trade: its study of non-tariff barriers in existing and potential trade agreements.

My name is Rushi Ghadawala, and I'm in the business development group at Magellan Aerospace.

Magellan is a global aerospace company that provides complex assembly and system solutions for aircraft and engine manufacturers and for defence and space agencies worldwide. Magellan designs and manufactures aeroengine and aerostructure assemblies and components for aerospace markets, and advanced proprietary products for military and space markets. It provides engine and component repair and overhaul services worldwide. Magellan is a public company whose shares trade on the Toronto Stock Exchange, with operating units throughout North America, Europe and India.

The aerospace and defence sector that Magellan works within is highly regulated with ever-increasing layers of regulatory and security-related requirements. These requirements add to the complexities of the global trade environment. It is important to recognize and address potential barriers in order to progress Canada's aerospace and defence industry globally.

Magellan has a long-standing history of innovation, technological expertise and international collaboration. Our successes, in many cases, have been through the partnership that exists between government and industry. While working on various opportunities, Magellan has recognized a number of aspects that impede the progress of these opportunities and restrict the ease of doing business with major international partners, particularly in the defence and space sectors. Endorsing Canadian-developed solutions by purchasing them domestically has been a tremendous benefit to the Canadian industrial base in the past. This practice needs to be built on, going forward.

The clause in the Canada-European Union Comprehensive Economic and Trade Agreement—or CETA—that permitted European companies access to procurement opportunities within Canada did not provide equal opportunity between Canada and Europe. The removal of this access—since we last sat in September 2022—is a positive step towards levelling the playing field through market access. The European market can be accessed through direct mission collaboration with European counterparts.

Similarly, the bilateral trade agreement between Canada and the USA, the Defence Production Sharing Agreement, has not been as effective in recent years as it was in the past. The agreement exists to allow Canadian companies to participate in the production requirements related to defence in U.S. government opportunities. The Canadian space and defence industrial base has the capability and capacity to support strategic bilateral programs at a time when there are significant geopolitical requirements.

Government procurement practices represent another area of opportunity. Government contracting can play a significant role in advancing the sector's technology and providing opportunities to showcase our capabilities. By developing policy that ensures Canada's participation in multinational programs, such as the joint strike fighter program, or in bilateral programs, such as continental defence and NORAD modernization, the Canadian industrial base can be engaged in progressive solutions as part of a collaborative approach with the United States' industrial base.

As a Canadian aerospace industry, Magellan works on various controlled goods programs. What we have observed as a barrier is the registration of new subcontractors. The time frame associated with the approval process is extensive. This can lead to missed opportunities and even potential loss of revenues.

My conclusion, Madam Chair, is this: Addressing non-tariff barriers is vital for the continued success and growth of our company in a global environment. By addressing these concerns, we can improve the potential of our operations internationally. We look forward to supporting the Canadian government in growing a global trading environment that fosters collaboration, innovation and a prosperous future for the Canadian aerospace industry.

Thank you very much.

[The Chair, Liberal, Judy Sgro]

Thank you very much, sir.

We'll now open up the floor for questions from the members.

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

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Thank you very much, Madam Chair.

Thanks, everyone, for coming. I'm very interested in reading the reports that you have mentioned, so I will have some reading to do once Parliament rises.

I want to talk about what we just heard about from CropLife but also from others who have come here—the MRLs—but we've also heard a lot about the sanitary and phytosanitary issues that seem to bedevil our agricultural industry within existing free trade agreements. Does anyone here have a potential solution for this?

For example, I learned that in the CPTPP, certain sanitary and phytosanitary measures are not subject to the dispute resolution process within CPTPP, so you end up trying to have a side negotiation within an FTA to resolve an issue that the other side clearly doesn't want to resolve. Would you think that sanitary and phytosanitary matters should always be subject to robust dispute resolution or, if not, is there another way to do it?

I would start with you, Mr. Dade, and then hear from Mr. Allam and from CropLife, if it wants to jump in as well.

[Carlo Dade]

Very quickly, under the U.S.-China phase one agreement, the Americans dictated what China has to do with MRLs, the maximum limits on beef and other items. I don't know that we can force them to take the Codex standard. They gave them one month to implement it and another month for it to be in effect. It applies to all things approved by USDA for export. I don't know that we can get that, but certainly it's on the table that the Americans have managed to do it.

This is a political issue, though. It's not a science issue, as much as we'd like to think that it's a science issue. You have to have the dispute resolution to give countries the ability to have these arguments. You can't dictate. Unless you're the Americans, you don't have the ability to simply dictate that, so I'd caution about expectations. Look, I'm surprised the Europeans haven't said to us, “We'll take your MRLs if you clean up your act on supply management.”

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Right, but do you think sanitary and phytosanitary things and things like MRLs should be subject to dispute resolution conditions within existing FTAs or in any new FTA?

[Carlo Dade]

I think politically they have to be. You need that safety valve. I think that, as elected members of Parliament, you can realize the politics around this. Having the dispute settlement mechanism as a way to shift the spotlight from you to a third party may be useful and may be necessary.