International Trade Committee on Nov. 21st, 2023

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

I call the meeting to order.

Welcome to meeting number 82 of the Standing Committee on International Trade. Today's meeting is taking place in a hybrid format, pursuant to the Standing Orders. 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 witnesses and members.

Please wait until I recognize you by name before speaking. For those online, please mute yourself when you are not speaking. I'll remind you that all comments should be addressed through the chair.

If any technical issues arise, please inform me immediately. We may need to suspend in order to deal with them.

I ask that all participants be careful when handling the earpieces in order to prevent feedback.

Thank you to Mr. Seeback for chairing the meeting when I was absent the previous week.

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

I heard I did an excellent job.

[The Chair, Liberal, Judy Sgro]

People have to be in training for all kinds of positions in the future. You never know.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Thursday, November 2, 2023, 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.

We have with us today, from the agri-food analytics lab, Sylvain Charlebois. He is the director of the agri-food analytics lab and a professor at Dalhousie University, and he is joining us by video conference. From the Canadian Centre for Policy Alternatives, we have Stuart Trew, senior researcher.

We have two others attempting to join us, who aren't connected at the moment. As soon as they can get their issues corrected, they will join us.

Welcome to all. We will start with opening remarks and then proceed with a round of questions.

Dr. Charlebois, I invite you to make a statement of up to five minutes, please.

[Dr. Sylvain Charlebois, Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab]

Thank you, Madam Chair.

Honourable members of the parliamentary committee on international trade, it is my privilege to present before you today as we deliberate on the significant strides our nation is making in global trade and diplomacy, particularly through the Canada-Ukraine free trade agreement implementation act. This landmark legislation not only fortifies our international trade relationships, but also opens new avenues for Canadian agri-food industries, which are pivotal to our economy and societal well-being.

Canada's agri-food sector stands at a crucial juncture, poised for transformative growth and international expansion. The implementation of this agreement with Ukraine, a nation with vast agricultural potential and complementary trade needs, presents unique opportunities for Canadian producers, processors and exporters. In this context, I wish to put forth three key recommendations that are instrumental in maximizing the benefits of this agreement for our own agri-food sector.

First, investment in agricultural technology and innovation should be prioritized. This agreement provides an avenue for Canadian agri-food businesses to access new markets and adopt advanced agricultural technologies. Emphasizing innovation will not only enhance the productivity and sustainability of Canadian agri-food businesses, but also position Canada as a global leader in agricultural technology.

We should encourage partnerships between Canadian and Ukrainian entities in research and development, focusing on sustainable farming practices, climate resilience and advanced food-processing technologies.

Secondly, it is imperative to strengthen supply chain infrastructure. The expansion of trade with Ukraine necessitates robust and efficient supply chains. Investments in transportation infrastructure, storage facilities and digital supply chain solutions are critical. This will ensure the smooth movement of goods, reduce logistical bottlenecks and mitigate risks associated with international trade. Enhancing supply chain resilience will also prepare our agri-food sector to effectively respond to global food security challenges.

Thirdly, I recommend the development of a comprehensive market access strategy. While the agreement opened doors, Canadian agri-food businesses need support in navigating the Ukrainian market. This strategy should include trade promotion activities, market intelligence services and guidance on regulatory compliance in Ukraine.

Establishing a Canada-Ukraine agri-food business council could be a strategic step in this direction, fostering bilateral trade relationships and providing Canadian businesses with the insights and networks needed to succeed in the Ukrainian market.

In conclusion, the Canada-Ukraine free trade agreement implementation act heralds a new era in our trade relations, offering significant prospects for the Canadian agri-food sector. By focusing on technological innovation, strengthening supply chain infrastructure and developing a comprehensive market access strategy, we can fully leverage the potential of this agreement, bolstering our economy and reinforcing Canada's position as a global leader in agri-food.

Thank you for the opportunity to present these recommendations. I look forward to a fruitful discussion on these matters.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Dr. Charlebois.

We go on to Mr. Trew for up to five minutes, please.

[Stuart Trew, Senior Researcher, Canadian Centre for Policy Alternatives]

Thanks very much to the chair and to the committee for the invitation to be here. It's my privilege to be here to speak about this important agreement.

I'm going to make only one recommendation today, which is that the committee should advise the government to remove the treaty's investor-state dispute settlement process from chapter 17. The inclusion of ISDS in the treaty, whether or not Ukraine requested it, is inconsistent with the goal of sustainable postwar reconstruction and redevelopment, and unnecessary for the purposes of attracting Canadian investment to the country.

Contrary to what you heard from Global Affairs Canada officials earlier in these hearings, there is nothing stopping the two governments from amending the treaty at this point to take out the ISDS provisions. In fact, this is what Canada did in the CETA negotiations in 2016, if you remember, in order to make sure that passed through the European Parliament.

What is wrong with ISDS and the model investment treaty that has been included in this agreement? It's come up at this committee before. It's one-way protection. This is accessible only to foreign investors. There's no ability in this treaty for states to file counterclaims against businesses like negligent investors, for example.

The contrast between this and the labour chapter is pretty stark. In the labour chapter, workers are dependent on the state to bring claims forward on their own behalf to uphold their rights in the treaty, whereas investors can bring their own disputes directly to arbitral tribunals.

The second point is that there are huge liabilities for states in ISDS. Awards from ISDS claims have grown enormously since the 1990s, when these treaties started to proliferate. Canada is currently facing a $20-billion award, for example, related to the non-approval of an LNG facility in Quebec. This is outrageous in the sense that it accounts for future lost profits. Ukraine will not be able to afford these awards if they are handed down in the future, especially in its current state and in its postwar state.

The third point is that there is too much room for interpreting investment rights. Even though Canada has done some work in this chapter and in its model FIPA to narrow down certain vague descriptions of treatment that are supposed to be granted to investors, there is still vagueness in this treaty. It will depend on how an arbitrator, for example, decides what is meant by manifest arbitrariness in public policies that happen to affect an investor's business interest in the country.

Finally, there is the chilling effect on climate measures and energy transition policies. The threat of huge awards can scare countries away from introducing new climate measures, which is the reason that a lot of European Union member states are pulling out of the Energy Charter Treaty and why the European Parliament itself is considering a withdrawal from that treaty.

Finally, Ukraine has strong domestic legislation in place for foreign investors, which protects against expropriation without compensation and even protects Canadian investors against changes in legislation that might affect the business outlook, including for energy firms. Ukrainian law is supportive of international arbitration as a means of handling disputes between the states in contract-based arbitration, which would be another matter. We don't need ISDS. You can still have contract-based arbitration for Canadian firms.

Instead of putting this treaty in place, which is a substitute for the rule of law and for strengthening anti-corruption measures in Ukraine, I think Canada should put its focus on those measures and continue to work with the Ukrainian government, the European Union and other allies on strengthening those efforts to weed out corruption in the political system. Nothing in this treaty will speed up or ensure that Ukraine's infrastructure needs are met sooner, more efficiently or with more public benefit.

I'll just conclude by saying that the whole agreement needn't be thrown out, but the investment chapter should be reviewed and the ISDS provisions excluded, much as Canada did when CETA was negotiated.

As it's currently written, ISDS is more likely to harm than help Ukraine's sustainable development goals during the war and after the war. This is a missed opportunity to start to dismantle the ISDS regime in general, as countries like Australia and now the European Union are starting to do as well.

Thanks very much. I also look forward to questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Trew.

Hopefully, we are now going to have the Quebec network for inclusive globalization.

I need to suspend for a moment while we check their connections to see if they are now working.

I will suspend for a moment.

[The Chair, Liberal, Judy Sgro]

I'm resuming the meeting.

For the Quebec network for inclusive globalization, we have Claude Vaillancourt, member and spokesperson, by video conference.

I'm very glad you were able to get connected, sir. Please, you have up to five minutes to speak to the committee.

[Claude Vaillancourt, Member and Spokesperson, Quebec Network for Inclusive Globalization]

Good morning.

Thank you for inviting us to appear before the Standing Committee on International Trade.

We represent the Réseau québécois pour une mondialisation inclusive, or RQMI, formerly the Réseau québécois sur l'intégration continentale, or RQIC. RQMI consists of labour and citizen organizations concerned about the need for fair trade. I am also a member of Attac-Québec, an association that advocates for physical, social and environmental justice.

Today, we would like to highlight some significant advances in the trade agreement between Canada and Ukraine, mainly regarding the chapters on the environment and labour. The agreement provides a response to many of our concerns regarding the need to prioritize environmental protection in the fight against climate change and better protection for workers.

However, we are still concerned about chapter 17, on investment. We have always been opposed to the mechanisms of the investor-state dispute settlement process, or ISDS, for the following reasons: they impede states' ability to regulate for the common good; they have a deterrent effect that influences the governments' willingness to regulate; they are very costly, as award amounts tend to run into the billions of dollars; the tribunals generally rule too frequently in favour of businesses that are their only clients; and they constitute a barrier to democracy.

For these reasons, we believe that this free trade agreement between Canada and Ukraine, more particularly, but also that between Canada and the United Kingdom, should be nullified, particularly since the actions brought under them could be even more unwelcome as numbers of disputes increase in times of crisis. Such actions could further destabilize a government already weakened by the invasion of its country.

Many countries, including New Zealand, Brazil, Ecuador and South Africa, are abandoning these agreements or limiting them as far as possible and are not being economically penalized. We would note that ISDS is one of the main obstacles to ratifying the Canada-European Union Comprehensive Economic and Trade Agreement, or CETA, as a result of the strong opposition it raises in many European countries. Canada has taken a first important step by not including the investor-state dispute mechanism in the Canada-United States-Mexico Agreement.

While we obviously admit that the investment chapter in the Canada-Ukraine agreement seems less harmful than many chapters in other, similar agreements signed by Canada, its implementation will nevertheless be problematic. The very nature of arbitration tribunals remains largely unchanged, and we believe the application of this chapter would be subject to numerous interpretations that would not always favour the general interest.

Your committee conducted a thorough analysis of this subject and published it in a report released in June 2021. You mainly heard from experts on the matter, and they were divided in their opinions. The people from the labour world, the international co‑operation community, the associative sector and various environmental organizations have a clear opinion on the matter. They have complained about the harmful effects of the ISDS process on numerous occasions. The Canada-Ukraine free trade agreement affords us an excellent opportunity to abandon tribunals that cause controversy.

We do not believe it would be a great sacrifice to remove the investment chapter from this agreement. In so doing, we would eliminate an interpretational risk, simplify its content, set a significant example for other nations and afford ourselves better protection for Canada's interests and citizens.

Thank you for your attention.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Monsieur Vaillancourt, we appreciate that.

We will go to questions, and we'll start with Mr. Martel, please, for six minutes.

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

Thank you, Madam Chair.

Thanks as well to the witnesses for being with us.

Mr. Charlebois, carbon pricing is mentioned in Bill C‑57. This is the first time it has been included in a free trade agreement. Do you think it's useful to impose a carbon tax on Ukraine since it's currently at war?

[The Chair, Liberal, Judy Sgro]

You are on mute. Please unmute yourself.

[Dr. Sylvain Charlebois]

I just did, Madam Chair.

Can you hear me now?

The problem is solved.

I ask myself the same question, Mr. Martel. We have to decarbonize the global economy, of course, but each country has its own economic reality.

Ukraine will be developing for some time, and a significant carbon intensity cycle occurs when you rebuild a country. I agree that the expressed wish to reduce Ukraine's carbon footprint is valid, but you also have to acknowledge that Ukraine will be spending a decade, or even two, focusing on intensive development. By imposing our own aspirations on another country, we may penalize it, which in a way would make the agreement less appealing for Canada.

Ukraine already has a carbon tax, and it's probably the lowest in the world. So we acknowledge that something has to be done in Ukraine, but I don't think we need to impose our own values, as a generally western country, on it.

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

Mr. Charlebois, there has been a lot of talk about food security since the war started in Ukraine.

Would you please tell us about the connection between access to energy and a country's food security?

[Dr. Sylvain Charlebois]

The invasion of Ukraine disrupted the entire world and the agri-food world as well. We've seen price rises for many staples such as wheat and barley. All of that has caused prices to surge, including the price of energy generally speaking. I'm not an energy expert, but the one often goes with the other. We saw that during the financial crisis in 2008, and the same thing is happening in Ukraine.

I think we have to acknowledge that Ukraine is essentially a prisoner of its own geographic situation, being located in a sensitive part of the world. Ukraine is often called the breadbasket of the world, but that's more the case for Europe. Consequently, Europe has been disrupted by the invasion.

Generally speaking, as I mentioned earlier, I think that Canada can play a leadership role on infrastructure, logistics and agricultural technology development. Ukraine won't be able to get that support without Canada, especially in the next 10 years.

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

Mr. Trew, according to the U.S. Energy Information Administration, nearly 70% of the coal imported by Ukraine in 2020 came from Russia. That report also notes that most of its previous natural gas imports came from Russia as well.

Do you think Ukraine will be vulnerable for as long as it's dependent on Russia for its energy?

[Stuart Trew]

I can't disagree with that statement, that it's in every country's interest to increase its energy independence.

I can't disagree with you on that one.

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

The reason I asked that question is that Canada could have addressed energy in this agreement. Absolutely nothing in it suggests to us that there was any discussion about energy. Energy is now crucially important there, since Ukraine depends on Russia's natural resources and on Putin, who uses the money he gets from energy sales to finance his war. Ukraine seems to be trapped.

How is it that Canada and Ukraine have never discussed energy security or energy per se?

[Stuart Trew]

Thank you for that question.

I don't know the answer.

Canadian trade agreements usually don't include a lot on energy—energy policy and energy security—outside of, say, the North American context, where there's a more integrated energy market. Why they wouldn't talk about it specifically....

The point we raised here is that the investor-state dispute settlement process in the investment chapter may actually end up frustrating Ukraine's ultimate decision on where it wants to go to secure its energy independence. Does it want to double down on oil and gas fossil-fuel development, for example, or perhaps further roll out more renewables in the country? That's another reason we recommend taking the ISDS out. It's only going to potentially frustrate Ukraine's ultimate decisions at that point.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Martel.

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

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Madam Chair.

You know, we have been standing with Ukraine since the start of Russia's illegal invasion, and we will stand strong with Ukraine when it is free once again.

This CUFTA legislation—the bill—supports the long-term security, stability and economic development of Ukraine while also ensuring there's high-quality market access to Canadian businesses. This will create good-quality jobs in both Ukraine and Canada.

Last week, we had the Ukrainian ambassador here. I would like to quote her. She said, “We believe that the modernized CUFTA will pave the way for Ukrainian companies and Canadian companies to work together.” She also emphasized a key thing that is important for Canadian businesses. I have another sentence I'd like to quote here. She said, “Ukraine believes partners in victory are partners in rebuilding.” That recognizes the great support Canada has been giving to Ukraine in this current war, and the promise that Canadian businesses will have a vitally important and significant role in rebuilding Ukraine.

Rebuilding Ukraine is a very long-term process. The current cost estimates are over $400 billion. Canadian companies have knowledge and expertise to use for their own benefit and for the benefit of Ukrainians. In fact, Ukraine's rebuilding is the single biggest rebuilding project in Europe since the Second World War. Obviously, all of this rebuilding will be done by the private sector, and Canadian companies can play a very vital role.

I have a question for the Agri-Food Analytics Lab and Sylvain Charlebois. You mentioned a Canada-Ukraine agri-food business council. That's an interesting concept. I think it's the first time I've heard of that. Canada has signed numerous free trade agreements across the world. I think it's with almost 51 countries, accounting for close to 60% of the world's GDP. Not many Canadian sectors make use of these free trade agreements, like the steel and aluminum sectors. Their exports are limited to North America only, with more than 90% of their production used for Canadian and American markets, as well as Mexico. They don't export to Europe or Asia-Pacific.

If there's one sector in Canada that uses every free trade agreement for the growth of that sector, Canadian businesses and the economic prosperity of Canada, it is the Canadian agriculture and agri-food sector. In fact, a small group of farmers have made Canada the fifth-largest exporter in the world of agricultural products, including agri-food.

The concept of a Canada-Ukraine agri-food business council is a very interesting one, not only for Ukraine and Canada. I think it could be refined further. We could have that with different markets. We could have significant co-operation with local markets, local businesses and the Canadian agriculture sector.

I would like to ask you to elaborate on the concept of this agri-food business council.

[Dr. Sylvain Charlebois]

Absolutely. When reading the act, I felt that it was critical for both Canada and Ukraine to make this act, once implemented, a priority and a focus. One way to do that is to establish a council.

We've seen councils impacting agriculture in Canada in a very positive way. I can certainly think of two examples, one of which is the Lobster Council of Canada, which is right here in Halifax. It has really made Canadian lobster a stronger commodity. It has been able to develop major markets. It's the same for the Canola Council out west.

I would say that if we are to make this an opportunity for both countries—

[Chandra Arya, Liberal, Nepean, ON]

I have limited time.

I want to mention that as we talk today, November 21, today and tomorrow we have the second Rebuild Ukraine Business Conference.

The first one, last time, was overcrowded by Canadian businesses and Ukrainian businesses participating. The conference that's happening today and tomorrow, the Rebuild Ukraine Canada business conference, focuses on agriculture, construction of infrastructure and the energy and health care sectors. It is very important for us to make sure that with the support of all political parties in our Parliament, we pass this legislation quickly to show our solidarity with Ukraine and convey to Ukrainians that we are there in rebuilding Ukraine.

Thank you, Madam Chair.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Arya.

I have Monsieur Savard-Tremblay for six minutes, please.

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

Thank you, Madam Chair.

Thanks to our guests for their impactful testimony.

Mr. Vaillancourt, I just want to make sure I understand your position. There will be a clause-by-clause consideration of the bill sooner or later, but we're conducting a pre-study now.

Do you think the committee should reject the chapter on the investor-state dispute settlement process?