Mr. Speaker, I move that the first report of the Standing Committee on International Trade, presented on Wednesday, May 26, 2010, be concurred in.
Changing gears a little bit, I am pleased to rise to move the concurrence motion on the report emanating from the international trade committee from just about a week ago.
I should mention that all members of the trade committee worked very thoroughly to examine the provisions of the buy American act and the government's response to this that is contained within the Canada-United States agreement on government procurement.
This is a little bit different from generally how the trade committee is involved, as you well know, Mr. Speaker, looking back at precedents, for example, the softwood lumber agreement; the EFTA agreement, sometimes referred to as the shipbuilding sellout; and the Canada-Colombia agreement that many people consider very controversial as a human rights sellout.
In all these cases the committee has had the opportunity, at least in part, to have hearings and hear witnesses before the implementation of these agreements. That is the important role that the trade committee plays.
It does not necessarily mean that all parties around the committee table follow the advice that witnesses clearly give them. If that were the case, the softwood lumber agreement or the softwood lumber sellout would never have been implemented in the first place.
However in this case, with the Canada-U.S. agreement on government procurement we, as a committee, were examining, after the implementation of the agreement, the benefits and certainly any of the potential negative impacts as well of that agreement.
Therefore, this is an important role that the committee has played. The committee members worked diligently to recover from witnesses exactly to what extent this agreement might have been beneficial or not beneficial for Canadians. It is important to note that the report that is produced and the recommendations that I will enumerate in a few moments are something that has been subject to a dissenting opinion of the Conservative Party.
Very clearly, I think it is fair to say that the findings that the international trade committee found, the evidence that was given by witnesses, is something that the Conservative Party and the Conservative members of the committee have found difficult.
Understandably, the government has already signed and implemented the agreement. I can understand that the Conservative members found themselves in a very difficult position because the witnesses presented evidence that might clearly show that there were concerns around the agreement. The initial news and initial information made available by the government, let us just say this, once we delve into the heart of the agreement, was not necessarily the facts in the case.
I will start of by speaking a bit about the background. Initially, we had buy American provisions in the American reinvestment and recovery act of 2009. This was an act that was presented in the U.S. Congress, which followed the election that took place in 2008 and the inauguration of a new administration in 2009. During that election campaign in 2008 there was much issue of the loss of jobs that had taken place in the United States under NAFTA.
Most Americans are earning less and what has happened is a funnelling up of income to the wealthiest 5% according to Foreign Affairs magazine. These are Bush administration officials who actually spoke to this issue. We have actually seen a redistribution of income upwards.
Because of that, Americans found that they wanted to have another look at NAFTA, voted for Barack Obama and a new administration that would take a different approach.
Therefore, this is not a surprise to Canadians who followed the American election. Very clearly, there has been a shift away from what many consider to be the right wing rhetoric of the past Bush administration.
Of course, in Canada we have had the same funnelling up of income. Most Canadians are earning less over the last 20 years. That is a policy issue, an economic issue, that all members of the House have to contend with. Most Canadians have actually seen their incomes fall over the last 20 years.
We hear figures cited in the House that simply do not take into account the devalued purchasing power of a dollar over time. We can try to say that in current dollars income has grown, or in current dollars exports have grown, but we have to compare apples to apples. In that case, it means dealing with constant dollars, and as I will come to in a moment, that means exports have fallen in a number of areas. It also means, when we compare constant dollars, that most Canadians earn less. That is a fundamental issue.
The buy American program was brought forward by the administration and new members of Congress. It was debated during the United States election. This is not the first time this has happened. The buy American act came into force back in 1933. It was the buy American provisions that helped lift the United States out of the depression.
In an ideological vent people will say that it was not that, that it was a variety of other things. Very prominent economists have been clear that the buy American provisions and the provisions of the new deal helped to lift the United States out of the depression. That has been a fundamental part of policy for some time. That has led to other acts, such as the Jones act, which protected the shipbuilding industry in the United States.
As the buy American act worked its way through Congress, some Canadians spoke out about it. This issue continues to be a constant problem. In this corner of the House we have addressed it by bringing forward solid legislation, but we have had nothing with which to bargain. There are no similar buy Canadian acts in place.
Subsequent to that the Conservative government entered into negotiations and the result was the Canada-United States agreement on government procurement. The questions the committee was examining what Canada gave up and what Canada obtained.
In the first case, we managed to obtain, on a temporary basis, access to a number of programs administered by the American recovery and new investment act of 2009 in seven key areas. As mentioned in the report, those programs are the United States department of agriculture, the USDA rural housing service, the United States department of energy, both the office of energy efficiency and conservation block grants and also the state energy program, the U.S. department of housing and urban development, the office of community, planning and development, both the community development block grants recovery and the public housing capital fund, and the U.S. environmental protection agency, clean water and drinking water state revolving funds.
Ironically, it turned out that these projects had already been allocated funding out of the ARRA funds, but the government managed to obtain the reallocation of those funds. Subject to contracts signed after February 17, Canadians could access those funds. We are talking about seven program areas. In a number of cases the allocation of funding had already taken place.
What did we give up? We gave up agreeing to provide U.S. companies with enhanced access to procurement of construction services by numerous provincial and territorial government agencies, crown corporations and municipalities until September 2011. As with Canada's permanent commitments outlined earlier, specific government bodies to which these temporary commitments apply vary from one province or territory to the next. The threshold of $8.5 million in Canada's WTO TPA commitments also applies to these enhanced access commitments.
We have a situation where we have gained access in some areas, some of which had their funds already allocated. On the other hand, we gave up fairly substantial access, temporarily until September 2011, but substantial nonetheless.
The question then is what the witnesses had to say, the people who brought forward by the committee to examine the benefits and disadvantages of this agreement.
I will read a couple of pages from the report. It is important that members of the House understand, after the committee members sat through these hearings.
We heard from several witnesses that the expected gains from Canada's partial exemption, the U.S. domestic content requirements in the ARRA, the American recovery and reinvestment act, are likely to be small. Not only have the vast majority of ARRA procurement funds already been dispersed, but the Canada-U.S. AGP opens to Canadian companies only a small fraction of what remains. I think that becomes obvious when we look at the small number of programs to which we actually gained access.
The committee heard numerous and differing estimates concerning the value of contract opportunities available to Canadian businesses as a consequence of the temporary commitments in the AGP.
A noted trade analyst, Scott Sinclair noted that of the United States $275 billion in procurement funds contained in the recovery act, the total budget for the seven programs to which Canada had secured an exemption was U.S. $18 billion. We are talking about considerably less than 10%. He also went on to say that, as of December 31, 2009, two-thirds of those funds had already been allocated.
This was his comment:
Canadian suppliers will therefore have an opportunity to compete for no more than an estimated $6 billion U.S. of federally funded stimulus projects, representing just 2% of the procurement funded under the recovery act. The rest falls outside the scope of this agreement.
We gained access to 2% of the procurement funding under the recovery act. That is a fundamental issue that I will come back to later.
Another witness, who is a trade lawyer with a very strong reputation in the community, is Steven Shrybman. He stated that even this figure was a generous estimate because it did not take into account all of the other carve-outs and exclusions in U.S. procurement rules to which Canada did not receive an exemption.
In his submission to the committee, Mr. Shrybman observed that under the Canada-U.S. AGP, the United States offsets, set-asides and local preferences remained in place. In other words, provisions were made to help support American industries, provisions that Canada does not have, and I will come back to that as I had mentioned, most of which were established at the state and local levels.
Mr. Shrybman noted that this meant that while the U.S. had agreed to remove domestic purchasing requirements as a condition under those seven federal programs, which I mentioned, it did not commit to have state and local governments remove their own barriers to Canadian bids on the very projects funding the seven listed programs.
This was a concern that was raised. As a result of that, the committee also heard that officials from Quebec department of economic development had estimated the total value of unallocated funds under the seven programs listed above to be $1.3 billion.
We have gone from the $275 billion of the total program to an exemption on a budget envelope of $18 billion of which two-thirds had already been allocated. That leaves $6 billion, but then when the offsets, set-asides and local preferences that remain in place are included, we come down to $1.3 billion. In other words, the government spin about this being access to a $275 billion project turns out to be less than 0.3% of that overall figure. It is outrageous.
There have been a lot of comments about the billion dollar boondoggle around the G8 and the G20, but we have a situation where we went in to try to negotiate $275 billion and came out with $1 billion. That is just access, it is not even contracts. This means Canadian companies, if possible, can bid on 0.3% of the overall American reinvestment and recovery act. Any Canadian would say that this is bad negotiating.
Carl Grenier said that this was the second worst agreement he had ever seen Canada sign. Carl Grenier, being the expert on the trade and softwood lumber file, said that the worst we had ever signed was the softwood lumber sellout. We all know in this case, following committee hearings, that the Conservative government knew it would cause a complete meltdown of the softwood lumber agreement. Tragically, in this case we are finding out after the fact that it was not $275 billion we access, but a potential in contracts of $1.3 billion and that is only if the system works.
Opponents of the AGP also argued that Canada's modest improvement in access to this procurement came at a great cost, and this is a key issue. We gained access to a $1 billion procurement market, possibly. How much did we give up?
Guy Caron of the Communications, Energy and Paperworkers Union suggested that Canada gave U.S. firms the opportunity to bid until September 2011 on provincial, territorial and municipal infrastructure and construction procurement worth an estimated $25 billion compared to the 2% of procurement funds still available. We have had other sources estimating the value of procurement to be closer to $33 billion.
What did we give up? Some $25 to $33 billion. The government is not quite sure how much because unfortunately it did not do its homework and the due diligence prior to signing this agreement. How much did we obtain? Access to about $1 billion.
In my province of British Columbia we are the “show me” province. That is why folks have reacted so strongly to the HST. It is not in the report, but we can only just put this out that this is crummy negotiating. This negotiating is embarrassingly bad when we give up that much in procurement and gain that little.
