Mr. Speaker, I am pleased to speak to this issue today in light of the circumstances affecting international trade and the United States of America's attempts at protectionism.
Let us reread the motion together.
That, in view of the growing protectionism in the United States, which is reminiscent of the counterproductive behaviour that led to the great depression of the 1930s, this House calls upon the Government to intervene forthwith and persistently, with the United States Administration, and the Congress, in order to protect Canadian jobs, and urge the United States to respect its international agreements including the Canada-United States Trade Agreement (CUSTA), the North American Free Trade Agreement (NAFTA), and the World Trade Organisation (WTO).
The notice of motion was submitted at least a day ago, before the Senate announced that it would not take such a hard line when it comes to international agreements.
We might be tempted to believe that the situation is resolved and that this is the end of the story. However, it would be very dangerous to let the American government get started with protectionist measures. This will do nothing to stop the United States from taking what I would call their protectionist measures even further. Measures viewed as admissible under the WTO or even NAFTA could enable them to keep implementing protectionist measures. In fact, some articles could legitimize the United States' actions and enable that country to defend itself and possibly even win in court. So we have to be very vigilant and not let them put one over on us.
In principle, when governments make purchases, companies from countries that have signed these agreements—like Canada and Quebec—have the right to submit bids. But that is just in principle. The two agreements include a number of exceptions, exceptions that say, among other things, that when it comes to contracts, governments can do whatever they want.
Take, for example, a contract to build a government building. Contracts valued below a certain amount are excluded. If I remember correctly, that amount is $5 million under the AGP and $5 million in constant dollars under NAFTA. That being said, all transport department contracts for roads, bridges and so on are excluded. If I am not mistaken, this is not about construction contracts per se, but about the purchase of the structural steel and rebar used in construction. That part is much less clear.
Construction contracts are a service, whereas structural steel and rebar are goods. It is likely that Canada will contest the American measure claiming that it concerns the purchase of a good, which is covered by the agreements involving Canadian businesses. The United States will say in its defence that the purchases are part of a construction contract, not covered by the agreements. At first glance, the Americans appear likely to win their case, as I was saying. Unless I am mistaken, most purchases will not be made directly by the federal government. The buyer will be either a state or a municipality or a construction company. In all of these cases, the buyer is not covered by the agreements. So the issue is not with the awarding of contracts, but with the awarding of a subsidy, which is not covered.
Will the subsidy be considered an indirect purchase by the arbitration tribunals, so that it would be considered illegitimate subterfuge aimed solely at enabling the United States to circumvent its commitments? It is hard to say. We are not familiar with jurisprudence that would enable us to guess how the international arbitration tribunals might decide. I am assuming that the two cases may be argued, although I am not a lawyer, and even though it seems to me that Canada's case could be very weak under the circumstances and in light of the limited pressure exerted by the Conservative government.
As the matter is very complex, we will likely get bogged down in a long, drawn out dispute. As a decision in this matter is likely to be made long after any contracts have been awarded, the legal avenue is of no interest. The matter must be resolved politically, and a request that the Prime Minister raise the matter when he meets Mr. Obama seems perfectly legitimate.
American protectionism and legislation, such as the 1930 Smoot-Hawley Act, together with the increased cost of transportation, reduced the flow of trade and protracted the 1929 crisis. Some provisions of the Buy American Act of 1933 continue to apply in the United States, in the case of government procurement, for example.
American protectionism in the steel industry was counterproductive. A study by the Institute for International Economics found that the Bush government's protectionist measures for the steel industry in 2000 were counterproductive. I have a text here that says:
In 2000, President George W. Bush implemented protectionist measures for steel imports in response to pleas from the unproductive big businesses in that sector. The effects seem to have been negative in the end because the measures saved 3,500 jobs but destroyed between 12,000 and 43,000 in steel-using businesses.
These situations could be catastrophic for the United States—although not in the short term—and difficult for Canada and Quebec. In the long term, protectionist measures could spread around the world. The first response from other countries is significant: when one country imposes protectionist measures, other countries follow suit.
Obama's stimulus plan proposes extending measures for American steel. This action would threaten Quebec's steel industry, which exports 40% of its production. In Quebec alone, 2,000 jobs would be on the line. The less stringent plan proposed by the Senate, which would add respect for international agreements to the controversial section, does not make this clause any less dangerous. Even though the clause is clearly protectionist and goes against the spirit of international agreements, it does not necessarily violate those agreements.
Purchases made by American federal authorities are subject to NAFTA, but in the United States, almost all of the large contracts in the transportation sector are administered by state or municipal authorities or by private business, all of which are excluded from the NAFTA chapter on government procurement. This chapter deals with federal funding, and so those projects can be excluded, despite the fact that it is a type of subsidy in disguise.
There is a huge risk. We are not in the time of barter anymore. Simple as things were, even back then people tried to pass off worthless items as being valuable. And so, when Europeans arrived in the new world, the aboriginals of the time were exploited and that has not stopped. Eventually, the financial market and high finance appeared and paper was created.
This is the system that has put the whole world in a difficult situation and deepened the current economic crisis.
Quebec is a trading nation. It has always supported the North American Free Trade Agreement. The United States is Quebec’s largest trading partner, and in these recessionary times, Quebec cannot stand to lose its access to the market of its most important trading partner. The Bloc would rather see a diplomatic solution than recourse to the courts as a way of resolving the dispute between Canada and the United States over protectionism. Although there is often a protectionist reflex in times of economic downturn, it is essential to keep markets open in order to encourage trade and economic recovery.
The Government of Canada has a solemn duty to put pressure on the United States and ensure that Quebec businesses can export to its markets. Although President Obama has apparently backed down on the Buy American Act, the government must keep up the pressure to persuade the United States to allow Quebec and Canadian companies to access the U.S. market.
Apart from these trade issues, the Conservative government has proved negligent in its management of the economic crisis. We will obviously be in favour of the Liberal motion.
As I was saying, Quebec is a trading nation. Our companies, and especially our cutting-edge companies, could not survive on just the domestic market. International exports account for one-third of Quebec’s GDP. If interprovincial trade is added, exports represented 52% of Quebec’s GDP in 2005. Protectionism is not in our interests, and that is why Quebec, and most of all Quebec sovereignists, massively supported the Free Trade Agreement with the United States and then NAFTA. The trade environment has worsened considerably over the last few years. Between 2003 and 2007, Quebec went from a large trade surplus to a $13 billion deficit. In 2007, every Quebecker therefore consumed $2,000 more than he or she produced. And that is not to mention our international trade balance, to which must be added another $5 billion deficit in interprovincial trade.
We obviously became a lot poorer last year. The steep rise in the Canadian dollar, fuelled by Alberta’s oil exports, reduced the competitiveness of Quebec businesses on the U.S. market, while at the same time a number of emerging countries were taking over world markets. Given the changes in the trade environment, our priorities will have to change as well. Our manufacturing industry was badly hurt by the worsening trade environment because it is more dependent on exports and more exposed to international competition than services are. The Bloc Québécois has long made access to international markets its most important trade priority. The changes that have occurred in the trade environment, especially the rise of China, have revealed cracks in the system. The major international agreements negotiated under the aegis of the WTO are not intended solely to liberalize trade but also to establish a certain number of rules and conditions that must be complied with in order to access world markets. This aspect of the agreements has been neglected over the last few years.
In order for us all to benefit from trade, we must do more than just liberalize it. We must also civilize it in order to have healthy international competition and clean up the terms of trade. If countries want to access foreign markets, they should have to abide by certain rules.
Take social dumping, for example:
Social dumping is a serious problem. Trading in a product manufactured in violation of major international agreements on labour, the environment or human rights is a form of unfair competition. It puts enormous pressure on our industry, gives offenders an advantage over countries that honour their international commitments and promotes the exploitation of foreign workers and environmental degradation. This development model is unsustainable in the long term.
The Bloc Québécois has outlined a series of international trade measures, including specific measures to restore balance and healthy competition to trade.
These measures include:
modernizing our trade laws to better protect our companies against foreign dumping;
no longer rejecting the findings of the Canadian International Trade Tribunal when it recommends implementing safeguards;
allowing workers to submit complaints themselves about subsidies and dumping to the Canadian International Trade Tribunal;
making the fight against social dumping Canada's top priority in negotiations at the WTO;
putting the emphasis back on multilateral negotiations at the WTO, because only then will it be possible to adopt rules to civilize international trade;
combatting social dumping by ratifying the following fundamental conventions of the International Labour Organization: the forced labour convention, the convention on the right to organize and collective bargaining, and the convention on the minimum age for admission to employment.
As I said earlier, the protectionist measures the United States is considering are in keeping with its Buy American Act, a vestige of the protectionist measures implemented in the wake of the great depression of 1930. Under that act, road construction, infrastructure construction, transit and airport projects that receive government funding are required to use American products. As a result, federal funding for road construction will be granted only if American steel and iron are used.
The U.S. government is getting around NAFTA by funding work carried out by the states, which does not come under NAFTA. President Obama's plan contains a provision that would extend the Buy American clause to all sorts of projects, with the result that all projects funded by the recovery plan would have to use American iron and steel. At a time of economic crisis, such a measure would threaten 2,000 jobs in Quebec.
President Obama announced that he was prepared to water down the clause. Early information suggests that the clause will be amended to indicate that protectionist measures must not contravene international agreements. Toning down the American bill will not solve problems affecting the steel industry in Canada and Quebec, but it will be much less damaging to Quebec industry than the Senate's initial bill, which wanted the Buy American clause to apply to all purchased goods.
We are at an important turning point in what I would call the fight against the global economic situation.
For some time now, our government has also had the means, not to circumvent the spirit of free trade, but to bring forward solutions to protect certain industries in Canada and Quebec. The government has failed to do so.
Now the U.S. government is preparing to introduce measures that will significantly restrict free trade with Canada, its closest trading partner, and, for all practical purposes and all things being equal, its primary trading partner, given Canada's size.
Protectionist measures imposed by the world's largest economic power, which is nearly on the brink of bankruptcy, would have a negative impact on the entire global economy and every person on this planet.