International Trade Committee on Nov. 9th, 2023

[Ihor Michalchyshyn]

General messaging about the grain sector is a place where.... I don't want to get into naming specific companies, but there's a lot of historical investment, from Canada into Ukraine, in grain transportation and storage. Obviously, the Black Sea blockade by Russia has had a major impact on all of Ukraine's grain production.

The countries are very similar in terms of their agriculture industries. We've seen big interest in Ukraine when it comes to technology and equipment exports to Ukraine. Unfortunately, in the short term, Ukraine is now one of the top land mine countries in the world, and agricultural land is primarily affected. We've all seen some very brave Ukrainian farmers continue to try to plant, even though they know there could be land mines in their own fields.

In the short term, we need to help Ukraine become land mine free. There are already major Canadian and multinational agriculture companies in Ukraine with facilities that have been hit. These are looking to rebuild and expand, and to see the potential, again—as Mr. Waschuk said—in the next four to five years, in what could be a peaceful, demined agricultural sector.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you for your insights. I really appreciate it.

[The Vice-Chair, Conservative, Kyle Seeback]

We'll turn to Mr. Savard-Tremblay for six minutes.

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

Thank you, Mr. Chair.

Again, thanks to all the witnesses for being with us.

Mr. Potichny, we are doing a study on trade between Canada and Ukraine. You were in fact critical of Export Development Canada. You said it was difficult to access the funds that were available and there was a lot of work to be done.

Given the unfortunate events with which we are familiar, does the situation seem to have changed?

[Zenon Potichny]

Thank you for the question. I'm sorry, but I didn't quite understand it. The money was difficult to...?

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

I am going by what you said at the time.

[Zenon Potichny]

Absolutely. There's definitely a different tone when discussing business in Ukraine these days. I feel that EDC is much more open to looking at different solutions. We had meetings with them in a few cities across Canada. They even did a sort of tour across Canada to meet with businesses interested in doing something in Ukraine. They asked them direct questions: What do they need? What are they looking at? We certainly had them participate in the Rebuild Ukraine Business Conference last year. This year, they are bringing a whole team and participating in the panel.

I certainly see a huge difference. Besides some of the credits and funds available for businesses, they are also looking into, perhaps, some kind of insurance. I don't want to call it “war insurance” because, when we suggested looking at something like American companies are doing, they said, “We're different from American companies.” However, I know they are looking at some issues around insurance possibilities for businesses as well.

Yes, there is a huge difference.

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

Thank you, Mr. Potichny.

Mr. Waschuk, you are the business ombudsman in Ukraine.

As we know, the government talks a lot about the chapter of the agreement entitled "Transparency, Anti-Corruption, and Responsible Business Conduct". Provisions have been added regarding responsible business conduct, but they are still strictly voluntary. There is no authority that actually checks it. Nothing has been set up for doing that. Businesses are urged to adopt internationally recognized guidelines and principles of responsible business conduct and social responsibility, but, at the end of the day, they are purely voluntary codes.

The Ambassador told us earlier about the efforts that have been made by Ukraine since the war began to combat corruption, and there seem to be facts to support that.

Do you think what we are seeing is both sufficient and necessary, with respect to both the chapter in question and the Ukrainian government?

[Roman Waschuk]

I think all these efforts are part of a process. In terms of combatting corruption, an entire anti-corruption architecture has been put in place in Ukraine, including the Private Detectives Agency, the National Agency on Corruption Prevention, and the High Anti-Corruption Court. The judges who sit on that court were chosen with Canadian, British and European help. Candidates were assessed using a relatively rigorous checking process. It was not done on a volunteer basis.

A body like mine is independent. It is funded by the European Bank for Reconstruction and Development, or EBRD, and provides a possible recourse for business people inside Ukraine and people from outside, such as investors. It can help them restore their rights if they believe that they have been victims of wrongdoing by authorities of a municipality or the Ukrainian government.

Having people like me, a Canadian citizen and former ambassador of Canada in Ukraine, an interlocutor of the police or of representatives of the security services or the Ministry of Economy, a lawyer to defend small businesses and big businesses like the Louis Dreyfus Company or Shell, indicates a fairly high degree of transparency in relations with the Ukrainian government.

We are far from perfect, but we are aiming in the right direction, and that is quite encouraging.

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

I want to thank you for answering in 25 seconds.

[The Vice-Chair, Conservative, Kyle Seeback]

We will turn to Ms. Idlout for six minutes.

[Lori Idlout, NDP, Nunavut, NU]

Qujannamiik, Iksivautaq. Thank you, Chair.

My first question will be for Roman Waschuk regarding the Canada-Ukraine FIPA entered into force back in 1995.

I understand that the modernized CUFTA would suspend the Canada-Ukraine FIPA for as long as the modernized CUFTA remains in force. Could you describe for us how this modernized CUFTA would affect Canadian investors?

[Roman Waschuk]

As I understand it, the foreign investment protection agreement of 1995-96 was state-of-the-art 25 or 30 years ago. International trade law and international investment protection have advanced considerably. The new provisions take that into account. They take into account the international governance changes that have occurred. They take into account the way in which money flows have been modernized and have been made more electronic. Basically, it's getting up to speed with the way in which business operates now, going from a chequebook world to a digital transfer world, but having the governance instruments in place to deal with that.

It also provides new opportunities for Canadian investors to talk to the Government of Ukraine when they feel that their interests are being impinged upon. Again, what isn't in CUFTA, but exists, is our institution to which Canadian companies, along with any other companies, can appeal if they feel their interests are being disregarded or eroded.

[Lori Idlout, NDP, Nunavut, NU]

Qujannamiik. Thank you.

Could you describe both the similarities and the differences between the modernized agreement's investment provisions and the Canada-Ukraine FIPA?

[Roman Waschuk]

I am not an expert on investment protection agreements, so I can't give you an article-by-article comparison. However, I can certainly tell you that the Canadian trade and investment negotiators have upped their game considerably. What we've done is that we have taken the experience we've gained—from agreements like first NAFTA, then the renewed agreement with the U.S. and Mexico, and especially the Canada-Europe trade agreement—and built many of those elements into a modernized CUFTA.

[Lori Idlout, NDP, Nunavut, NU]

Thank you so much.

My next question will be to Ihor.

I'd like to ask you about your appearance before this committee back in February 2022, when you made recommendations for a renewed CUFTA, one of which was to “establish reform benchmarks in law enforcement, judicial and taxation systems and clear criteria for measuring reform progress.”

Can you explain to us if this has been achieved?

[Ihor Michalchyshyn]

The largest way that Canada has been helping Ukraine with judicial reform has been through programs such as Mr. Waschuk described—the court, the anti-corruption agencies, police reform and the many programs through the international development office that have been building both transparency and accountability within the Ukrainian government as well as helping Ukraine move toward EU accession.

I don't have specific insight into my remarks in the past versus this modern CUFTA, but I can say that the largest overall pattern we see happening is reform in terms of all legislative processes driven by the goal of EU accession. That has been supported by Canada's international development program for many years. We want to continue that, and, again, I don't have a list of specific initiatives, but there are more than a few in Ukraine that are making a deep impact on the way that corruption is dealt with by the legislature and by the police.

[Lori Idlout, NDP, Nunavut, NU]

Qujannamiik.

You are leading up to my final question.

We know that corruption has a very negative impact on trade, and we know that President Zelenskyy is working hard to uproot corruption in Ukraine. How successful has that been, and what more needs to be done?

[Ihor Michalchyshyn]

As the ambassador said, Ukraine, while fighting a war and while trying to join the EU, is continuing to reform its own house, to put its house in order, particularly with the European Union guidelines and regulations that it needs to meet. As the former ambassador said, it's a process, and there is the architecture of a system there.

I think we've all seen the high-profile dismissals of Ukrainian officials by the President of Ukraine when there are examples of corruption to make the point that it will not be tolerated. I think that we see progress, and we need to continue to support our partners in Ukraine on that progress.

[The Vice-Chair, Conservative, Kyle Seeback]

That is the end of the time. We'll now move to the second round.

Mr. Baldinelli, you have five minutes.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Chair.

I'd like to take this opportunity to thank the witnesses for being here this afternoon.

I'm going to begin with Mr. Waschuk, former ambassador to Ukraine.

Thank you for being here this afternoon.

One colleague allowed you the opportunity to finish off your five-minute period of remarks because, unfortunately, you ran out of the allotted time. You not only started to talk about the modernizing aspects of CUFTA, but you also discussed the moves of Ukraine towards accession to not only CETA but to closer relationships and ties with, and eventually becoming part of, the EU.

Just following up on those discussions, when do you see something like this coming to fruition?

[Roman Waschuk]

Yesterday we had the announcement by the European Commission that they are recommending the opening of negotiations with Ukraine on accession. Things are starting to get real here. That recommendation needs to be ratified by the European heads of government summit, which will be on December 14. In the usual EU fashion, there will probably be some horse-trading around that, but it's likely to be approved. By next March, we are supposed to have an agreed negotiating framework between the two sides and then negotiations.

Some countries have been stuck in negotiations for decades. What we can see, though, is that key countries in the EU—especially Germany and France—have now thrown their weight behind Ukraine, essentially thinking it's better to have Ukraine inside the tent than next door to the tent. In 2014, Ukraine signed an association agreement with the EU, which gave it some of the advantages of the single market but not all of them, and no co-determination. Now the decision is that it should be on the inside.

Once those two big countries, especially, switched to that position.... That was also reflected by German Chancellor Scholz a couple of weeks ago at a meeting with the Ukrainian Prime Minister and economy minister saying to German businesses that, when they are investing in Ukraine, they are investing in a future EU member country within our system. That's also a message to Canadian businesses.

I would say 2030—six and a half years or seven from now—is realistic. Some Ukrainians are more optimistic, but personally, I think they need a transition period. Just like Canada with the FTA with the U.S. and then NAFTA, you need transition periods so the parts of your economy that aren't ready for full integration and competition—like with the French, Spanish and German companies that have deeper pockets—don't get steamrolled in the process.

I would say 2030 is realistic.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Ambassador.

I think that's a key word that you used. This CUFTA agreement will then become a transition document, as accession to CETA begins. It's kind of interesting to note that there's no mention of a carbon tax or carbon leakage in CETA, to the best of my knowledge and that of my colleagues from our review of the document.

In the interim and in that transition period, we're going to be talking about the rebuilding of Ukraine, which is vitally important. The ambassador who was here earlier indicated that at a minimum $400 billion will be needed. Would it not, therefore, be prudent to have included chapters related specifically to the reconstruction and rebuilding of Ukraine as we move on that transition towards accession to CETA, in the short term? The reconstruction and the rebuilding that will be required in Ukraine is hugely important.

Have we missed an opportunity by not including chapters specifically regarding energy co-operation and energy security?

[Roman Waschuk]

Overall, the modernized framework generally allows for Canadian companies to participate effectively. Whether a separate energy security chapter would have made any great difference would actually depend on Canada's capacity to be a net provider.

As we know, unfortunately, we haven't made the internal federal-provincial and other arrangements to become a major exporter of things like liquid natural gas to Europe. That same Chancellor Scholz discovered that on his trip to Canada last year.

I'm not sure how it would have worked out to have a separate chapter on something that, domestically, Canada isn't quite ready to deliver on.

[The Vice-Chair, Conservative, Kyle Seeback]

I'm going to have to interrupt. We're over time.

We will turn to Mr. Arya for five minutes.