International Trade Committee on Nov. 9th, 2023

[The Vice-Chair, Conservative, Kyle Seeback]

I call this meeting to order.

Welcome, everyone, to meeting number 81 of the Standing Committee on International Trade.

I'm going to read through some of the things that many of us have heard many times over the last number of years.

Today's meeting is taking place in a hybrid format, pursuant to the Standing Orders. Therefore, some people are here in person and some are on Zoom.

I will make a couple of comments for the benefit of the witnesses.

Please wait until I recognize you before speaking. When speaking, please try to speak clearly and slowly. With regard to those online, please mute yourselves when you are not speaking. All comments should be directed through the chair. If you wish to speak, please raise your hand and you will be recognized. For interpretation online, you have the choice, at the bottom of your screen, of floor, English or French.

We have the same thing here, Ambassador, for you. There's an earpiece, and you can choose English or French translation—just so you're aware.

For the sake of our translators, I ask, please, that there be no yelling or loud noises into the microphone. Try not to speak with your earpiece close to the microphone, as I was almost doing there, because that can cause feedback.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Thursday, November 2, the committee is resuming its study of the subject matter of Bill C-57, an act to implement the 2023 free trade agreement between Canada and Ukraine.

Today we have with us, from the Embassy of Ukraine, Her Excellency Yuliya Kovaliv, Ambassador of Ukraine to Canada.

Welcome, Ambassador. We would like you to begin our committee today with some opening remarks. We usually give about five minutes, but I think you can take more time if you would like. The committee would be fine with that.

[Her Excellency Yuliya Kovaliv, Ambassador of Ukraine to Canada]

Thank you.

Distinguished chair, honourable members of Parliament and members of the committee, it is my honour to be with you today to talk about the importance of the modernized free trade agreement between Ukraine and Canada.

This agreement is more than just a trade agreement. It is a testament to the deepening of our bilateral relations. It is a symbol of Canada's economic support to Ukraine, and Ukraine's economic resistance amid unprovoked and unjustified Russian aggression against Ukraine.

The negotiations to modernize the free trade agreement started in January 2022, just a month before the Russian full-scale invasion started. That was the time when Russia had already started to build their troops near Ukrainian borders. Since then, the negotiation team has been working around the clock despite missile attacks and power disruptions, and sometimes from the bomb shelters during bombardment. This underscores our unwavering commitment to bolster our economic ties and lay the groundwork for Ukrainian reconstruction and Canadian companies to participate in Ukrainian reconstruction.

The Russian war against Ukraine has already caused damage to the Ukrainian economy of over $411 billion, according to the latest estimation of the World Bank. Unfortunately, this figure is growing every day. Sectors like infrastructure, energy, agriculture and social services suffer the most. Infrastructure has been decimated, energy facilities have been targeted and bridges and roads have been destroyed, with entire cities and villages left in ruins.

The rebuilding of Ukraine will represent one of the most substantial reconstruction and modernization efforts on the European continent in the years to come. Ukraine's approach to rebuilding can be summarized as “building better”. Ukraine's rebuilding will be possible with the participation of international business. The modernized free trade agreement with Canada paves the way for Canadian companies to participate in Ukraine's rebuilding.

Ukraine needs Canadian technology, Canadian innovation and Canadian equipment to rebuild many of the sectors in our economy. Energy, agriculture, mining, IT and many more are those sectors where Ukraine and Canada have already started to build close business ties. The modernized CUFTA provides a crucial framework for this co-operation to prosper. In fact, some of the long-term agreements, including the agreements in the nuclear sector, between Canadian and Ukrainian companies were signed during the war and will start to be implemented in January next year. The newly added chapter with the modernized CUFTA introduced essential provisions for investment protection, laying the groundwork for a sustainable regulatory environment for investors. This is very important for Ukraine and for Canadian companies.

This stability and security will serve as a catalyst for increased investment and economic co-operation, which will create jobs in both countries. Furthermore, the modernized CUFTA expands our collaboration in the digital trade sphere. The dedicated chapter on digital trade underscores our commitment to fostering closer relations between companies in this sector. It serves as another example of the significant potential for the growth of business ties between Canada and Ukraine.

In conclusion, the modernized CUFTA is not just a support to Ukraine. It is a mutually beneficial agreement to support the economy and create additional jobs in both countries. It symbolizes the enduring strength of our partnership. By working together, we can create a stronger and more prosperous Ukraine and provide new avenues for Canadian businesses to thrive.

Thank you.

[The Vice-Chair, Conservative, Kyle Seeback]

Thank you very much, Ambassador.

Before we start the questions, I just want to say that I know I am speaking on behalf of all parliamentarians when I say that we fully support Ukraine in this unbelievable war of aggression that has been commenced by Russia. We all stand with you, and we're proud of what Ukraine has done, how strong you've been and how much you've resisted against this Russian invasion.

I'm going to use the chair's prerogative to take the first round of questions for the Conservatives.

Ambassador, I wanted to talk briefly about a few things.

The trade minister was here on Tuesday and suggested that somehow, if we're criticizing aspects of the trade agreement, we're sort of playing into the hands of Vladimir Putin. I didn't agree with those comments. I disagreed with them strongly.

Conservatives have made some criticisms of this trade agreement, but Conservatives have been long-time supporters of Ukraine. In fact, it was a Conservative government under Brian Mulroney that was almost the first country in the world to recognize an independent Ukraine on December 2, 1991. I think Poland beat us by about half an hour or 45 minutes to be the first, but we were certainly the first western country to recognize an independent Ukraine. We have a very large Ukrainian diaspora in Canada that significantly built the Canada we know today, which I know all Canadians are proud of.

It was a Conservative government that began the first negotiations of the current trade agreement that's in place. That was done under Prime Minister Stephen Harper. Also, of course, it was under Prime Minister Stephen Harper's Conservative government that Operation Unifier began, which was a significant help to the Ukrainian military. In fact, some of that help, I'm sure, was helpful in the current conflict.

Everyone across both sides of Parliament supports Ukraine.

I do think, when I look at the trade agreement, there are some ways that the trade agreement could perhaps be improved.

As I was doing a bit of research before I came here today to the committee, it became apparent to me that Ukraine actually has very large natural gas deposits. I think they are the second-largest natural gas deposits in Europe. Now, from my research—and these numbers might not be completely accurate, because I did this research myself—1.87 trillion cubic metres of natural gas is the estimated amount of natural gas in Ukraine.

Developing that resource would do a lot. I think it could bring in great revenue for Ukraine, which needs revenue in a time of war. It could also perhaps be used to export natural gas to Europe, which would certainly cut off a lot of the funds from Vladimir Putin's war machine by taking the funding away from him and making it much harder for him to continue this illegal war in Ukraine.

When I look at the trade agreement itself, there are certainly chapters on investment, but there's no specific chapter in the trade agreement talking about bringing together great Canadian expertise in oil and gas development and helping to build that industry to use that resource in Ukraine.

Would you agree with me that either in this trade agreement or in a future trade agreement—another modernized trade agreement—having some form of detailed co-operation on the development of Ukrainian gas would be a benefit to Ukraine?

[Yuliya Kovaliv]

Thank you.

Indeed, as I mentioned in my opening remarks, the energy sector is one of the top five priority sectors for Ukraine's rebuilding. It includes a wide range of investments, including nuclear, which is over 50% of Ukraine's electricity mix, but also the gas sector, as Ukraine has one of the biggest and most developed infrastructures in gas storage. Indeed, Ukraine has the second-biggest proven reserves of natural gas.

Also, there's the renewable energy, which is the energy of the future, as Ukraine is on the way towards integrating into the EU, with the good news coming just yesterday from the recommendation of the European Commission to the European Council to start accession negotiations with Ukraine. That is on Ukraine's file.

Indeed, even during the war for the last two years, we have delegations from Ukrainian companies in the energy sector who are coming to the energy conferences in Canada and are interested in developing co-operation, both in terms of the services and in terms of the equipment in the energy sector.

[The Vice-Chair, Conservative, Kyle Seeback]

Thank you, Ambassador.

There's nothing in the agreement that specifically sets out how that co-operation and engagement could take place.

That's my review of the agreement. Would you agree with me that there's nothing specifically in the trade agreement to deal with natural gas and the development of that resource?

[Yuliya Kovaliv]

Not being a deep expert in how the free trade agreements are scheduled, this is the approach of the free trade agreement, which covers institutional bases: the regulation, the trade of services, the trade of equipment, the trade of goods, the protection of investments and how the other horizontal sectors are being settled.

It is an important framework to trade in different ways. It lays the groundwork for further specific sector approaches to that co-operation. As I mentioned, Ukraine has already started this with Canadian companies. We value this bolstering of co-operation and bolstering of trade with strategic projects, even during wartime.

[The Vice-Chair, Conservative, Kyle Seeback]

Thank you very much, Ambassador.

We'll now turn to Mr. Arya for six minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Chair.

Ambassador, welcome to the committee.

On behalf of the people of Nepean, I would like to expressly state that we stand in solidarity with the people of Ukraine. We have stood with Ukraine since the start of Russia's illegal war. We'll stand strong again with Ukraine once this war is done. We will work jointly toward the rebuilding of Ukraine.

The modernized Canada-Ukraine free trade agreement supports the long-term security, stability and economic development of Ukraine while also ensuring high-quality market access for Canadian businesses participating in Ukraine's economic recovery. This agreement will pave the way for high-quality jobs both in Canada and in Ukraine.

The signing of this agreement also marks a new era in the Canada-Ukraine socio-economic relationship. It will be fundamental to the participation of Canadian businesses in Ukraine's economic reconstruction and recovery from Russia's illegal and unjustified invasion.

It is very important for us, even during this war, to maintain economic relations and strategically prepare for postwar co-operation and economic rebuilding. This includes rebuilding infrastructure. A lot of infrastructure has been destroyed by Russian forces. We also have to foster entrepreneurship and strengthen Ukraine's agricultural land and industrial sectors. Canada has good expertise in energy, technology and agriculture. I am glad that you mentioned the digital trade.

Can you highlight one or two sectors that you feel are important for Canada's relationship in postwar Ukraine?

[Yuliya Kovaliv]

Thank you.

I would also like to stress one more time about the new chapter in the free trade agreement that will pave the way for fostering co-operation in the sector, the sector of today and the future, which is digital trade.

Both Canada and Ukraine are developing digital services. Ukraine has over 270,000 highly qualified IT specialists in the country. Even during the war and during the blackout caused by Russian attacks on critical infrastructure, the sector has been growing. This sector is the major export service from Ukraine. We believe that it is mutually beneficial for both countries to further develop digital trade, which will also boost co-operation in innovation and technology and is important for the further productive development of our economic relations.

[Chandra Arya, Liberal, Nepean, ON]

Once Ukraine wins the war and the rebuilding process starts, infrastructure rebuilding will become the key focus.

Can you highlight the kinds of things that Canada and Ukraine can work together on in rebuilding infrastructure?

[Yuliya Kovaliv]

Indeed, infrastructure is one of the sectors that suffered the most in terms of damages, including the critical infrastructure. Only last winter, 50% of all of the electricity grids, part of the critical infrastructure in Ukraine, has been damaged. This paves the way for the structural rebuilding of the sectors, and we would welcome Canadian companies to co-operate with Ukrainians in the rebuilding of the infrastructure sector.

We see the growing interest of Canadian companies. Last year Ukraine's rebuilding conference in Canada was fully crowded. We are waiting, in two weeks, to have the second Rebuild Ukraine Business Conference, to bring both Ukrainian companies and Canadian companies together to jointly discuss the priorities in these sectors and to also build economic ties. This will create the instrument for Ukraine's rebuilding but also additional jobs for Canadian businesses.

[Chandra Arya, Liberal, Nepean, ON]

You mentioned, and I would like you to re-emphasize, the enormous cost that is involved in rebuilding Ukraine. This modernized agreement between Canada and Ukraine opens doors for Canadian businesses for a long-term commitment. Rebuilding Ukraine is not a one-year or two-year or even a few years' project. It is a long-term commitment.

Can you kindly mention the total cost that is involved in rebuilding Ukraine and how this agreement paves the way for Canadian businesses to be engaged in Ukraine for a long period of time?

[Yuliya Kovaliv]

Indeed. According to the latest assessment from the experts of the World Bank, the damage that the Ukrainian economy has had because of the Russian illegal invasion is over $411 billion across all sectors.

Of course, that figure is huge and, as I mentioned, Ukraine's rebuilding will be the single biggest rebuilding on the European continent since the Second World War. We understand that the biggest contribution to this rebuilding will be done by the private sector.

Ukraine believes that partners in victory are partners in rebuilding. That is the approach to building business ties. We believe that the modernized CUFTA will pave the way for Ukrainian companies and Canadian companies to work together. International financial institutions today, already, are supporting foreign companies working in Ukraine with financing for the capital commitment of projects, so this is a really great framework to start and to boost the projects between the companies of our countries.

[The Vice-Chair, Conservative, Kyle Seeback]

That's your time, Mr. Arya.

Mr. Savard-Tremblay, you have the floor for six minutes.

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

Thank you, Mr. Chair.

Good afternoon, Ambassador.

Thank you for being here with us. I would like to join with my colleagues in conveying our message of solidarity and our hopes for a lasting peace at the earliest possible time.

Essentially, this agreement has relatively little impact on trade, but it is an affirmation of friendship. As we know, most goods and services were already traded freely under the World Trade Organization, or WTO, agreements and the earlier agreement between Canada and Ukraine. The fact remains that trade is still rather limited.

I would like to discuss a few things with you that are relatively interesting. You said you are not an expert in free trade; no problem. If there is a question you are not able to answer, the embassy can provide more details to the committee. Please do not hesitate to do that, if necessary.

The 2023 Canada-Ukraine Free Trade Agreement that we are discussing moves guaranteed access to the Ukrainian market up a year, and the tariff quota will rise to 20,000 metric tonnes of pork. Pork production is important in Quebec.

Can you tell us a bit about Ukraine's need for this product?

[Yuliya Kovaliv]

Thank you. We will follow up on this question. I am not in a position to answer it now.

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

That is not a problem. I would invite you to provide the answer to the committee in writing. I am now going to ask you a question that you should be in a better position to answer.

The chapter about government procurement will certainly be important, since there will of course be reconstruction as part of the peace process. We hope it will take place as quickly as possible, in fact. In Quebec, we have a lot of engineering firms that could be brought in to work on rebuilding the country's infrastructure. For example, when it comes to dams, we have internationally recognized expertise.

As long as the war is not over, no permanent count is possible, but have you estimated the needs in this regard up to now? Do you have an idea of the types of infrastructure that have been most affected?

[Yuliya Kovaliv]

Unfortunately, the scope of the damage in infrastructure is so high that I can definitely say that each sector of infrastructure will require rebuilding, whether it's railways, the grids, the roads or telecommunication. Of course, as Ukraine's approach to rebuilding is building better, Ukraine will be looking for strong partners with the best technologies, because nobody will rebuild the old-style, inefficient infrastructure.

Ukraine has welcomed two companies—both are engineering companies, constructions companies—to participate in the building and to build ties. That's why, with the support of the Business Council of Canada and the Ukrainian Chamber of Commerce, we are bringing businesses together, now, for the annual conferences. We are also welcoming Canadian business delegations to visit Ukraine to meet the companies in Ukraine—including many of the multinational companies that keep working in Ukraine, that keep on increasing their investments and presence in Ukraine—to build those ties. Of course, we, as an embassy, are here to help the companies build the relations with their Ukrainian counterparts and to help and support those business ties.

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

I certainly understand that desire, but that is why I was asking whether you had estimated the infrastructure losses up to now. As I said, we have globally recognized engineering expertise in Quebec. I was therefore wondering whether you had an idea of the needs.

In other words, to date, based on things you have heard, what has been destroyed in the course of this unfortunate war, primarily?

[Yuliya Kovaliv]

The exact figure of our estimates for the infrastructure, specifically the infrastructure damages, I will forward you as a follow-up to this meeting—to be very precise on the exact figure.

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

How much time do I have left, Mr. Chair?

[The Vice-Chair, Conservative, Kyle Seeback]

You have one minute left.

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

I will wait for my next turn to ask my other question.

[The Vice-Chair, Conservative, Kyle Seeback]

Thank you, Mr. Savard-Tremblay.

We will now turn to Mr. Cannings for six minutes.

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

Thank you, Ambassador, for appearing before us. We're very honoured to have you here. Again, we pass on our complete solidarity with Ukraine, and we look forward to the next phase of this extraordinarily terrible state of events that you are enduring—and enduring in many ways for us and for the rest of the world.

You mentioned in your remarks, and we heard from the minister earlier, about the need for the investment protection section in the free trade agreement. I'm just wondering if you could maybe expand on what Ukraine feels would be the benefits that this would bring. We were told, and you mentioned it, that it was at Ukraine's request that the old foreign investment protection agreement be rolled into this and modernized. I'm just wondering if you could expand on that.