Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 9 - Evidence - December 13, 2006
OTTAWA, Wednesday, December 13, 2006
The Standing Senate Committee on Foreign Affairs, to which was referred Bill C-24, to impose a charge on the export of certain softwood lumber products to the United States and a charge on refunds of certain duty deposits paid to the United States, to authorize certain payments, to amend the Export and Import Permits Act and to amend other acts as a consequence, met this day at 2:35 p.m. to give consideration to the bill.
Senator Hugh Segal (Chairman) in the chair.
[English]
The Chairman: We meet today as the Standing Senate Committee on Foreign Affairs and International Trade for the purposes of considering Bill C-24, which received second reading in the Senate of Canada last night and was referred to this committee for debate and discussion in the report stage.
We are honoured to have with us the Minister of International trade, the Honourable David Emerson; and his Parliamentary Secretary, Ms. Guergis. I am delighted that you could make yourselves available on short notice to reflect on this piece of legislation and take questions from members of the committee.
I propose, minister and colleagues, that we invite the minister to make a very brief opening statement. This matter has been assessed in some detail in the other place, and we have had a general study in this committee with respect to the softwood lumber policy. The minister was very forthcoming but the bill itself has some urgency and importance and if we could ask the minister to reflect on that and then ask questions, then we can decide how to proceed relative to the actual committee consideration of the details.
Hon. David Emerson, P.C., M.P., Minister of International Trade: Thank you very much, Mr. Chairman. May I first introduce Andrea Lyon, my Assistant Deputy Minister for North American policy matters. She is also madam softwood lumber in my world.
I have speaking notes that were prepared for me, senators, but I think it is nothing that I have not said in the other place, as you like to say, already. I will table the draft speaking notes and just make a few quick comments about softwood lumber, Bill C-24, and why this is important and, I believe, somewhat urgent.
You will know that the lumber business is in rough shape today for cyclical reasons. The United States housing market has taken a turn for the worse and appears not to be getting better in a big hurry. The industry in the U.S. is feeling a bit of pain; the industry in Canada is feeling pain.
If you are familiar with this file at all, you will know that softwood lumber trade wars have been going on for the better part of 100 years. The latest series of spats have gone on for a couple of decades. This latest dispute is worse than all of the others because for the first time this dispute brings into play not only allegations of subsidies by Canadian governments of the Canadian industry but also allegations of dumping by the Canadian industry, a practice, which is really a corporate practice, and not one which involves any allegations of government policy matters.
The softwood lumber agreement that we have negotiated, I strongly believe is a good agreement; however, it is not a perfect agreement. Any time you have a negotiation, if you get perfection, it would be a strange outcome indeed. There are always little things that we would like to see improved about the agreement, but it does some fundamentally important things. It gets lots of cash into the hands of companies. That cash is flowing on an accelerated basis because the Government of Canada put in place a mechanism through Export Development Canada to speed up the flow of deposits. Roughly 97 per cent of the companies using that mechanism now have their money and that is being used to reinvest in mills, in technology, in acquiring companies, and in expanding Canada's lumber business as we speak. That is very good.
More fundamentally, however, from a longer term perspective, the softwood lumber agreement creates a framework in which the agreement can be further improved. There are committees to look at identified specific issues where we know we can make improvements. The agreement includes a dispute resolution mechanism that, for issues arising out of this particular agreement, will probably work in a more timely and effective definitive manner than chapter 19. We have protection for Canadian forest policies that were in place at the time of signing and, in addition, certain policies that were being transitioned in at the time of signing. I have heard MPs in the House of Commons indicate that if stumpage under a market-based timber pricing system were ever to decline, it would be contravention of this agreement. That is not correct. This agreement actually protects market-based timber pricing systems whereby timber prices can go either up or, more likely in the current market environment, down. That is protected by this agreement. We are protected because the American protectionists and the American government are prohibited from bringing trade actions on Canada's softwood lumber industry for the next seven to nine years.
This is a good agreement, which creates stability, and a framework from which we can plan and build. If we do not get this legislation through, I am very fearful of the uncertainty that it would create for Canada's forest industry going into 2007. That is why this has a tremendous amount of urgency. Companies have accepted it; they have supported it. Virtually all provinces have supported this agreement. Now is the time to close the book on it and get on with building the industry.
Senator Mitchell: Nice to see you, minister. I have a series of quick questions that I would like to put to you. Of the $1 billion that has been left on the table in the United States, $500 million will remain with the industry there. Is it true that the industry can use that $500 million specifically to develop markets and for other competitive advantages over our industry?
Mr. Emerson: The money that was left in the United States, which is about 18 per cent of the duties that were on deposit, is divided into two pots. One pot goes for meritorious initiatives, which would include market development for the industry in North America, not just in the United States. The $500 million that goes to the U.S. industry goes to the U.S. industry; that is the way it is. As unsavoury as many will find it, including myself, that was the price of the deal. However, we did get over $5 billion of cash back into the hands of Canadian companies. As we speak, those companies are investing and buying U.S. mills and mills elsewhere to help them build a more competitive global industry.
Senator Mitchell: This may have been a coincidence, but it seemed to be more than that. That is, a series of commitments by the former government to support the industry loan guarantees and environmental support — I think it was $200 million — have been discontinued. Is that a coincidence, or does that reveal that while the U.S. government may well be able to support its industry with subsidies and loan guarantees, Canadian federal and provincial governments will not be able to do so? Will we be limited in the kind of support and sovereignty that we can exercise over the support of our industry?
Mr. Emerson: Let me be clear. I was in the former government, as you know.
Senator Mitchell: We have not forgotten.
Mr. Emerson: A number of options were considered — without disclosing cabinet confidentialities — but publicly I was open about the different options, one of which was to buy the right to the duty deposits by the Government of Canada of Canadian producers as a way of getting cash quickly into their companies. There was musing about paying 50 per cent of the value of those duty deposits so they would at least get a certain amount of cash for survival purposes. The other option that became part of government policy at that time, and which was called for by various parties in the House, was loan guarantees. Loan guarantees, I can tell you, are very messy as financial institutions become involved and they have security demands. They have to work with each of the companies to secure their claim on the deposits. It was not a good choice.
What we have done here is actually produce, through the accelerated deposit payment mechanism of EDC, a way of getting cash into the companies. It is far superior to any of the proposals for loan guarantees or any of the other proposals.
It is no longer possible for the United States or Canada to subsidize its industries. I am sure that our agreement will be tested in the months ahead because, as you know, Canadian governments have put in certain initiatives that we will have to defend under the terms of the agreement.
Senator Mitchell: I know that the Canadian Lumber Remanufacturers Alliance is concerned that in areas under Option B, where quotas will be set at the minister's discretion, that process has not really been defined. Can you give us some insights on how these will be set and hopefully emphasize that they will be done using a set of principles that they would at least deem to be fair?
Mr. Emerson: Probably one of the only reasons why this agreement really saw the light of day was because we built in features that enabled flexibility amongst provinces in terms of how they would manage their lumber industry under this agreement. In particular, we gave them different options for situations of weak lumber markets. For example, if you wanted to have unlimited ability to continue shipping into the U.S. market, you could take Option A and have an export tax. If you were less concerned about volume and wanted to lower your export tax substantially, you could choose Option B. We have undertaken to consult with industry and provinces on how they would, in Option B, allocate the quota, which would be required to put that into play.
We are receiving advice and recommendations from the provinces. I have spoken with the Canadian Lumber Remanufacturers Alliance. I understand that association has an issue, which we are reviewing. I cannot tell you at this time precisely how or if we will be able to resolve that, but I do understand the issue and will be looking at that.
Senator Mitchell: The United Steelworkers are particularly concerned, as are many stakeholders, that many Canadian jobs will be lost; others are concerned about the impact of this on small, rural communities. Much of this comes down to the idea that value-added industry will be exported to the United States. A corollary is that Canadian companies that are receiving the $4 billion now are beginning to buy mill plants in the United States. Can you comment on that? What assessments have you done on the jobs that will be lost and the investment that will escape Canada and go to the States? Do you have the figures? Are you concerned about that?
Mr. Emerson: Let me say off the top that Canadian companies that want to be globally competitive really do not have a choice but to be looking at acquiring assets in other markets. That is how you create a global supply chain. If you do not do that, you will probably fail, which is more costly to the company and in terms of jobs than acquiring assets abroad or in the U.S. that will enable you to be globally competitive.
On the United Steelworkers' position on this issue, I find that there is a great deception being perpetrated out there that, somehow, if we did not have the softwood lumber agreement, we would be in wide-open free trade and happiness would prevail and we would be expanding like mad. Nothing could be further from the truth. We are in a bad market right now. There would be further appeals of the current softwood lumber case. We were aware that the duties in place today or that were in place before this agreement came into force were about to increase.
We also know that if the Americans would have — and they would have, we know with certainty — brought another case in this market, we would have been in serious trouble. We would have been back into a dumping case where our grounds for defence would have been far weaker. We would have been into preliminary duties again.
Preliminary duties are just a euphemism for a duty that allows five years while you fight it out in the courts and pay your lawyer. The job loss, in my opinion — and it is a strongly-held opinion, as you can tell — without this agreement would have been profoundly higher than with it.
On value-added, under the agreement, we continue to have the provision for reviewing how this agreement treats value-added and log exports, where we can put in place further regional exemptions. There are mechanisms where we can begin to work on a collaborative basis with the American industry, with our own industry, government to government, as well as industries looking at how we can improve how the North American industry works better over all.
Senator Mitchell: You make the point that companies have to be globally competitive — and I agree, absolutely. However, it is one thing to be globally competitive because you choose to do that as a company; it is another thing to have to be globally competitive because of an agreement that your government implemented that drives you to do that.
There is concern that this agreement sets a dangerous precedent in circumventing the NAFTA dispute resolution — that it did not work in this case, and now we have proven it for sure. In fact, we proved it at the time when we finally won in that U.S. tribunal. However, this agreement seems to confirm that this dispute resolution will not work and, therefore, NAFTA is in jeopardy and becomes significantly weakened for the future.
Mr. Emerson: I think, if anything, we have improved the prospects for Chapter 19. You must know that the U.S. Congress, and the climate of public opinion in the U.S. today, is running heavily against NAFTA. You must know that if we would have continued this dispute under Chapter 19 — and we would have continued it for another year or two at least under the old dispute case — that this would have created an awful lot of animosity in the U.S. and a lot more uncertainty in Canada.
We now have an agreement that has its own dispute resolution mechanism. Do we wish we did not have to have an alternative dispute resolution mechanism? You bet. I would love for Chapter 19 to be able to resolve disputes in six months or even a year, but it does not work that way. It takes years, in complex cases like softwood lumber, using Chapter 19.
Chapter 19 works well for cases that are not as complex. Lumber is unique because of the nature of Crown tenures in Canada. Chapter 19 works poorly for softwood lumber, but it works extremely well for other products that are not quite as complicated.
Senator Mitchell: It is interesting you should mention that there is a great deal of animosity or concern with NAFTA. We were all under the impression that your government's new open policy with the U.S. was going to fix that relationship problem, but obviously it has not.
Mr. Emerson: Again, everyone who is involved in a substantial way, as opposed to a political way, needs to and must understand that trade policies in the United States are not driven by the President; they are driven by Congress, and the laws of Congress. You can generate goodwill, and you can generate a sense of urgency and willingness for U.S. industry to be more compromising, but you cannot override their legal rights.
The problem with NAFTA, if I can say there is a problem, is that NAFTA is built on respect for domestic law. Chapter 19 is not like the WTO. It is not a body of non-American law; it is really a set of mechanisms that adjudicate trade disputes, but respecting U.S. law — or Canadian law, if it were a Canadian-initiated dispute. We are in a world where Congress is basically writing the law and shaping the regulations. Chapter 19 simply is a set of processes that allow you to arbitrate disputes based on those laws.
[Translation]
Senator Dawson: I would like first of all to thank Senator Mitchell, who kindly sponsored this bill at such short notice. I would like also to apologize to the people who wanted to intervene at either the Standing Committee on National Finance or the Standing Committee on Foreign Affairs and International Trade. Obviously, this being the end of a session, we must act. And in a spirit of cooperation that I share with my friends opposite, we are pleased to cooperate with the government.
We must tell the people that the terms of reference of this Senate committee still stand. We will examine the process, the whole issue of softwood lumber, because there are still some claims that are legitimate and demands to the federal government. Some people say that the minister may have rejected, in another government, offers that would have been better than this one. We will have the opportunity to discuss the matter; for the time being, let us focus on the matter at hand today.
The Chairman: Let me confirm that in our last interim report to the Senate, we underlined that the focus of our study was the softwood lumber policy and not the bill that we have before us. We did say that our recommendation to the Senate was to continue our examination and this is what our committee will be doing. You are perfectly right on this.
Senator Dawson: I wanted to reassure those who wanted to be heard and who, unfortunately, because of what transpired today, will not be able to do so, that they will have other opportunities to come and tell the Canadian Parliament what they did like or did not like in this process. Still, I wanted to reassure the minister that we will cooperate, but that there is still an enormous task to be done on this level. Minister, this committee intends to invite you to appear once more in order to hear your views on the next steps for this legislation. However, let me assure you that personally, I am pleased to cooperate. Not because we believe this to be the best process, but in a spirit of cooperation in this end of session, it is such a pleasure to work with the Conservatives.
The Chairman: Thank you.
[English]
Senator Stollery: Minister, is it correct to say that this is the third agreement?
Mr. Emerson: This is the fourth agreement and the fifth would be coming up if we did not have the present agreement.
Senator Stollery: In any case, we have been told this is the first time that our companies do not get all their money back. In the previous agreements, the companies got all their money back; in this one they do not. Is that right?
Mr. Emerson: In previous agreements, the disputes were different; they did not involve the dumping duties. In the last softwood lumber agreement, it was a pure quota agreement. This is a much more — if I can use the word — "liberal" agreement in that it gives opportunities for Canadian companies to continue to grow their market share.
This is a completely different agreement. It has been going on for a lot longer. In the negotiated agreement, I can tell you, the discussions have been going on around splitting the deposit at the 50 per cent level. Gradually, we have upped the take for Canadian companies from 50 per cent to what ended up at 82 per cent. It is a compromise.
Senator Stollery: However, it is actually the first agreement where they do not get 100 per cent of their money back.
Mr. Emerson: I think that is correct.
Senator Stollery: I would like to observe that when we talk about the lumber companies in Canada getting money because of what we are doing here, they are actually getting their own money. Nobody is giving them money; they are just getting their own money back.
One thing has not been answered but it has come up a couple of times. This committee is fairly knowledgeable about the softwood lumber dispute. We know that when lumber prices are rising in the U.S., we have less difficulty because the U.S. producers do not go after us so much because I assume they are making money. When lumber prices drop, that is when the trouble starts.
You are an expert; I am not. However, I do know that there is a collapsing housing market. With a collapsing market, lumber prices must also be going down in the U.S. If that is the case and it is a new Congress after January 1, we have a tradition, although it is not engraved somewhere, that we do not amend these sorts of things. They think nothing of throwing out agreements if they do not like them.
What is your response to the fact that we have what seems to be a falling lumber market — whether or not it is collapsing is a matter of semantics, but it is certainly falling — and, depending upon which financial writer in which you have the most confidence, it may be doing that for the next little while. We have a new Democratic Congress. We know that Senator Bacchus from Montana has always been one of our enemies in this department in that he has been a great promoter of U.S. lumber protectionism. It is a Democratic Congress. Where does that go this spring? Do you not think that will put pressures on all of this that we cannot anticipate this afternoon?
Mr. Emerson: Thank you for that question, senator.
I think there is a fair amount of truth in what you are saying, but I would observe that this dispute covered the strongest period of lumber prices in 20 years. To say that strong markets immunize you against trade actions in the U.S. is not entirely true. It may reduce the dumping margins where there is a dumping component, but it certainly has not eliminated the case.
You are absolutely right that a declining market is when protectionist attacks gain new virulence and the ability to make a case stick and to generate duty margins that are very high rises in a weak market and we are in a weak market right now. Basically, you are asking if the likelihood is there that the agreement would be terminated by the U.S. side because the Congress is now more protectionist and market conditions are worse. We have side letters committing the government of the U.S. not to terminate this agreement unless there is something that is almost egregiously unanticipated comes along. A decline in the U.S. housing market would not qualify. We have as strong assurances, as strong as we can get, that we will have a continued period of no trade action. When you think about the termination provisions of the softwood lumber agreement, they are better than the termination provisions in any of our trade agreements or of the Americans' trade agreements. We have as good a deal on termination as I have seen out there. Someone could correct me, but I have not been able to find anything better.
Senator Mahovlich: I had a meeting with the United Steelworkers this morning. They were not too positive on this deal, to say the least, and the job losses, in particular in British Columbia — and I think that is your constituency out there. We would like to see some positive news from this deal. As you said earlier, Canadian companies purchasing companies in the United States does not do anything for Canadian jobs. Am I missing something?
Mr. Emerson: I do not know that you are missing anything; I think the steelworkers are missing something. I think the NDP and the steelworkers are singing off the same song sheet. They are basically saying that if we did not have this softwood lumber agreement, we would be in free trade and the world would be fine. There would be no duties and everything would be just sweetness and light.
The truth of the matter, however, is that is not what would be happening. The current case that we are dealing with right now in softwood lumber would still be going on. It would be under appeal. There would be new calculations of the duties under the current case. Those duties rates would go up — we already know that. We probably would win the case and get our cash back in a year or two. We know with relative certainty that a new case was ready to go and we would be back into another cycle of litigation. You know what happens in these cases. When the case is first brought and preliminary duties are first brought in, they are at a high rate. In the case of Lumber IV that we have just come out of, the duty rates started at 27 per cent. After four or five years of litigation, we are getting them down into the 10 per cent to 14 per cent range. If there was another case brought today, I can assure you we would be looking at duty rates well north of 20 per cent.
On the issue that the union raises — and I am sure the NDP would raise the same issue — of buying mills in the U.S., I say what I said to Senator Mitchell, which is that lumber is a global business. There is lumber coming in from Latvia, from Germany and from Finland. It goes into almost every market in the world. In a global business, you must have a global supply chain. If you want a successful and competitive global supply chain, you must have producing and distribution assets in the different markets around the world. If our Canadian companies did not buy up assets in the United States, they would find themselves weaker and the result would be the loss of Canadian jobs.
I absolutely celebrate acquiring assets in the different markets because it strengthens our companies as global leaders and I think that is critically important, not just for the companies but for the workers who choose to believe that there is some other fairy land we could inhabit if we did not have this deal.
Senator Mahovlich: You do not feel that there was any finality to this litigation? They would just continue to play hardball?
Mr. Emerson: There is absolutely no doubt in my mind that the current case would have gone on for further appeals; we know that. The Americans have already indicated they wanted to appeal. The U.S. coalition was launching a constitutional case, which they have thrown out because of the softwood lumber agreement. We also know that they were prepared to launch a further agreement. I must tell you in all candour that people who think that this is a softwood lumber problem could be in for a nasty surprise because the same timber they allege is subsidized in the production of softwood lumber is also used to produce fibre board, pulp and a range of products. There is nothing to prevent the U.S. industry from bringing cases against those industries in the future. To not negotiate this and not have an agreement within which we can build a stable relationship within North America would have been a terrible blunder.
Senator Mitchell: As it is now, the export tax will be higher than the duty tax. How can that be?
Mr. Emerson: The agreement is that at lumber prices above U.S. $355 per thousand board feet, there is no duty.
As lumber prices fall lower in the market, the duty starts at 5 per cent in a region that has selected Option A, and then it rises at another threshold to 10 per cent and then to 15 per cent. We are now in a 15 per cent duty range. That money stays here in Canada, in the provinces from which the lumber is exported.
In essence it is a different way of putting a timber tax in which, if it were a timber tax put in by provinces, would not have made the newspapers. However, because it is a duty associated with solving this agreement it becomes a great clash of civilizations.
Senator Mitchell: The American-imposed duty was about 10 per cent.
Mr. Emerson: It was 10 per cent, going to 14 per cent.
Senator Mitchell: Fifteen per cent is more.
You mentioned this idea that somehow stabilizing the softwood lumber industry with this agreement is critical to avoiding the same issue with fibreboard, pulp and other products. What would stop the Americans from attacking on those products, given the success they have had with their attacks on softwood lumber?
Mr. Emerson: My own feeling is that the relationship has become so much more constructive and so much more positive that it would not be a likely outcome in the current environment.
If you look at Canadian trade policy and trade initiatives over the years, it is those sectors, like in the automotive sector and to some degree the steel sector, where there has been a north-south integration of the industry where you tend not to get these disputes. I believe that is where we are going in the forest industry.
Senator Mitchell: You are either right or you are Pollyanna; time will tell.
Obviously one of the critical things in trade is that we are not simply beholden to the United States. The development of other export markets is very critical, which brings me to the question of the pacific gateway, something you and I have discussed in the past. My concern is that there is a link. If we need to be developing markets elsewhere, one of the most significant international markets is China. Western Canada, Alberta and British Columbia need infrastructure. Your government has reduced the money that has been applied for infrastructure from the $591 million over five years to $200 million over five years.
A second component of that is the need to work on the Chinese market. Your government has actually not only neglected the Chinese market but has actually provoked the Chinese in many ways. That can be damaging in ways that we traditionally would not do. Everyone knows we should not do that. Are you concerned with that? Have you taken that up with the Prime Minister? Are you working on the Chinese market?
Mr. Emerson: I agree with you about our dependence on the U.S. market. I have said that since I have been in public life. An 85 per cent reliance on the U.S. market is a little heavy and we need to fix it, not by killing the U.S. markets, however, but by building other markets.
Senator Mitchell: Hence the gateway.
Mr. Emerson: The gateway, as you point out, is a critical initiative. You believe a bit too much of your Liberal colleagues' mythology around the $591 million.
In the Liberal budget, the $591 million was over five years, which is correct. Under the budgets and the program in place right now we are actually accelerating the spending of that money. We have kept the eight-year profiling of the money there and we know there will be some projects that will drag out probably more than five years in terms of cash flow. We do not have to renew the appropriation but we are accelerating the expenditure of money and focusing more of the money on hard infrastructure and policy initiatives.
As you know, I have pulled in a three-person team of private-sector advisors so that we get a good linkage of British Columbia interests with the Prairie interests in the designation of new projects.
Senator Mitchell: Can you give me an update on where the inland container port for Grande Prairie stands? Are you aware of that project?
Mr. Emerson: I am aware of the Grande Prairie proposal. There are a number of proposals. That would be certainly one that we would put in the hopper. We will conduct a pretty hard-nosed economic assessment of the merits of different projects, given that there is limited funding. There is other infrastructure money out there that could be used for some projects. Even if Grande Prairie did not qualify or make the cut under the gateway program, it may make it under a different program. I am aware of it. Grande Prairie is my home; it will get a fair hearing.
Senator Mitchell: I thought so.
Mr. Emerson: Incidentally, I did not answer in relation to China. Minister Flaherty and I are going to China in January. We have some very high-level meetings. I am intensely working the China file, if that makes you feel any warmer.
Senator Mitchell: Will the Prime Minister go to China?
Mr. Emerson: I am sure he will, but I do not know when.
Senator Eyton: We have a fund, and Canada is entitled to the largest part of that and the U.S. will appropriate some part of it. Can you fill me in on how that fund will work in terms of payment, dates and the interest component? I assume there is interest, and time is money, hence the question. What is happening with the payment and the interest component?
Mr. Emerson: The largest amount of the money — U.S. $5.5 billion, which is over Can. $6 billion will go to Canadian companies. Canadian companies have two choices: they can go to Export Development Canada — and many have — and they can get an accelerated payment of their cash through Export Development Canada simply by pledging their duty deposits to EDC. They do receive the interest accrued on their deposits until the date of payment.
Ninety-seven per cent of the companies that have used the EDC mechanism now have their money. Companies also have a choice — and some have selected it for financial reasons — to continue to wait for a direct payment from U.S. customs. In that case they let the money sit a little longer, it gets a little higher rate of interest than they probably were getting on their bank deposits. They are letting it sit, but it will come in through a process as U.S. Treasury unwinds those deposits. I do not know how long it will take, but it will start to flow soon, I am told.
Senator Eyton: Within the fund there was a deemed interest rate or a coupon rate on that, was there not?
Mr. Emerson: U.S. Customs has an interest rate which accrues on deposits in the event that the case is lost and the money is to be refunded. It is roughly prime rate.
Senator Eyton: You said that to date 97 per cent had taken their money and run. Would that have happened in recent months?
Mr. Emerson: In the last few weeks.
Senator Downe: Minister, you indicated you had side letters with the American government on the termination. Have those letters been made public?
Mr. Emerson: They are on the website, I am told.
Senator Downe: Is it on the departmental website?
Mr. Emerson: Yes.
The Chairman: The departmental website is where those letters can be found.
Mr. Emerson: We can get them to you if that would be more convenient.
Senator Downe: I can check the website. Thank you.
The Chairman: I do not have any other senators who wish to put questions so, with colleagues' permission I would like to express our thanks to the minister and to his officials and to the parliamentary secretary for their time this afternoon. We appreciate the forthright nature of your responses and your presence to assist us as we deal with the committee stage of this bill.
I would now like to seek your permission for us to consider the bill on a clause-by-clause basis.
Do I have the permission of the committee to do that? I would then further suggest, without in any way limiting discussion or debate or comments that may ensue, that we proceed in clusters, two, three or four clauses at a time. For example, we could proceed with clauses 2 to 9, giving ample time for people who wish to speak on those clauses or make observations.
After we referenced each clause, we would then seek approval of the committee before proceeding and moving on. We would do so in any fashion that committee members deemed appropriate; if on division or some other way, that would be fine.
I would now like permission of the committee to proceed to clause-by-clause and to consider the clauses in clusters if that is acceptable to colleagues.
Senator Corbin: That is fine. Could I give you and the committee advance notice that one of our senators will propose a set of observations to attach to the report so that you are not caught off guard?
The Chairman: That is fine. We will look forward to that happening at the appropriate time.
Having gained unanimous consent to proceed with the grouping of the clauses, can I get your agreement that we should postpone the approval of the title and clause one?
Some Hon. Senators: Agreed.
Senator Corbin: On division.
The Chairman: Agreed, on division.
Shall clauses 2 through 9 carry?
Hon. Senators: Agreed.
The Chairman: Agreed.
Shall clauses 10 through 17 carry?
Some Hon. Senators: Agreed.
An Hon. Senator: On division.
The Chairman: Agreed, on division.
Shall clause 18 carry?
Hon. Senators: Agreed.
The Chairman: Agreed, on division.
Shall clauses 19 through 63 carry?
Some Hon. Senators: Agreed.
An Hon. Senator: On division.
The Chairman: Agreed, on division.
Shall clauses 64 through 98 carry?
Hon. Senators: Agreed.
The Chairman: Agreed, on division.
Shall clauses 99 through 103 carry?
Hon. Senators: Agreed.
The Chairman: Agreed, on division.
Shall clauses 104 through 108 carry?
Some Hon. Senators: Agreed.
An Hon. Senator: On division.
The Chairman: Agreed, on division.
Shall clauses 109 through 126 carry?
Some Hon. Senators: Agreed.
An Hon. Senator: On division.
The Chairman: Carried, on division.
Shall Schedule 1 carry?
Senator Corbin: The schedule refers to exempt persons. Actually, they are the names of companies.
The Chairman: I suspect they are using the legal term where a corporation constitutes a person under the law.
Senator Corbin: That is not my question.
The Chairman: I am sorry.
Senator Corbin: Are these firms all from Quebec?
The Chairman: Are all the firms from Quebec? No, there are firms that are outside of Quebec I am told by officials.
Senator Downe: Number seven is Irving.
Senator Corbin: Irving operates in Quebec, too.
The Chairman: That is right but I do not believe they are exclusively from Quebec.
Senator Corbin: Why is there not an address attached to these firms?
The Chairman: I cannot imagine that it was done as a matter of purposeful exclusion.
Could I ask? I notice that there are officials who are kind enough to help us through this process. Senator Corbin's question was why the head office addresses of the firms in Schedule 1 were not listed in the schedule and is it normative to do so.
Could I ask that you introduce yourselves to my colleagues on the committee before you engage? I know that the minister has moved and that is certainly not Ms. Guergis at the far end of the table. Whoever amongst the officials would like to answer that question, will you introduce yourself first as a courtesy?
John C. Clifford, counsel, Trade Law Bureau, Foreign Affairs and International Trade Canada: Initially the schedule did include addresses but we took advice that it was possible that the addresses would be changed as companies are want to do and that it was more prudent to leave the addresses out rather than requiring amendments to the schedule when companies chose to change their addresses.
Senator Corbin: The names of companies also change.
The Chairman: Thank you for that. Are there any other questions on Schedule 1?
Colleagues, shall Schedule 1 carry?
Some Hon. Senators: Agreed.
An Hon. Senator: On division.
The Chairman: Carried, on division.
Shall clause 1 carry?
Some Hon. Senators: Agreed.
An Hon. Senator: On division.
The Chairman: Carried, on division.
Shall the title carry?
Some Hon. Senators: Agreed.
An Hon. Senator: On division.
The Chairman: Carried, on division.
Would now be the time to reflect on the observation? Senator Mitchell, did you want to address that observation?
Senator Mitchell: The copies of my proposed observations and the translation have been circulated. I have a couple of changes to make to the last paragraph.
Do I need to read this into the record?
The Chairman: No, I think everyone has a copy. By all means if you want to move that this observation be added to the bill, please do so. It will be seconded by Senator Stollery.
Senator Stollery: I am reading the observation and I have no objections other than the last sentence: "The committee plans to do a comprehensive review of the agreement in 2007."
I support Senator Mitchell's proposal but I do not like that last sentence because we already have an order of reference to study. I would like some advice on this. Does this not conflict with our order of reference? It is just the way it is done.
Senator Mitchell: I can answer that question. I am absolutely open to suggestions.
Senator Corbin and I have discussed this since the copy was distributed. We came up with this idea. I am not wedded to it, but I would change the sentence to, "The committee will continue its comprehensive review of the NAFTA agreement as well in 2007." Does that work?
The Chairman: Let me suggest that with respect to the fifth report that went to the Senate of Canada on behalf of the committee —
Senator Corbin: The interim report.
The Chairman: Yes. It stated:
To this end, your committee recommends that notwithstanding the Order of the Senate adopted on Thursday, September 28, 2006, the Standing Senate Committee on Foreign Affairs and International Trade be empowered to extend the date of presenting its final report —
— undertake further study on Canada's international business policy, in view of the increased importance of global trade for the Canadian economy.
That is all in the filed report but I have no difficulty, colleagues, with including the specific reference to continuing the study in support of Senator Mitchell's observation.
Senator Mitchell: Whatever wording you have.
The Chairman: Could you repeat it and could I ask you to move the entire observation and leave the last sentence? That will be seconded I take it my Senator Stollery?
Senator Mitchell: Senator Segal, do you want me to read the last sentence as you referred to it?
The Chairman:
These are among the issues that the Foreign Affairs and International Trade Committee plans to continue its comprehensive review of the agreement in 2007.
Senator Mitchell: Of the NAFTA agreement or just of the agreement?
The Chairman: Of the agreement in the context of international trade.
Senator Mitchell: As read, that is all right by me.
Senator Eyton: These are small points, but would Senator Mitchell consider on number one, that it is probably more accurate to say, "That some $1 billion has been left to the industry at the sum of $500 million which can be used."
We do not know the precise number.
I suggest number three should read, "This agreement may limit the support of the Canadian federal and provincial government." No. "May in future limit the support," because we are talking about the future.
Number four, "Many jobs and small rural communities in Canada may be in jeopardy in part because of this agreement."
Senator Mitchell: Yes.
The Chairman: The mover accepts those recommendations from Senator Eyton.
Senator Eyton: I would like to add in number five, the last line, "Dispute resolution process, thereby potentially weakening NAFTA." Again it is speaking of the future.
Senator Mitchell: Sure.
Senator Di Nino: As well as agreeing with my colleague Senator Eyton, I would like, on item number five, to delete the word "dangerous."
Senator Eyton: What about the word "troubling"?
Senator Downe: I do not think I agree with the last suggestion of Senator Eyton either.
The Chairman: We could edit this for a long time. The male life span is 78 years and the female life span is 82 years. I want to make use of time in a most respectful fashion, and we want to improve on that.
Senator Stollery: May I point out to the members of the committee that the majority has been reasonable in all of this, and I would not push the majority too far.
The Chairman: That is not unreasonable. Before we allow the Grinch to take over the meeting, could I suggest that there may be a constructive middle ground? This agreement sets a dangerous precedent in circumventing NAFTA, thereby potentially weakening NAFTA, which was the word recommended by Senator Eyton. I know Senator Downe has a problem with that. If the word "dangerous" was left in place, would we be comfortable with the final sentence dealing with "potentially weakening" as opposed to "absolutely weakening" and leave that balance in that context? I am making the proposal for consideration.
Senator Mitchell: Could we put "dangerous" in capital letters?
The Chairman: We could ask the clerk to italicize it.
I suggest, with respect to number five that we keep the recommendation of Senator Eyton, adding the word "potentially" between the words "thereby" and "weakening" in the end of that section, and not removing the word "dangerous," as was suggested, so as to respect the views on both sides of the room on the matter.
Senator Eyton: I would say more, but I am very afraid.
The Chairman: Do we have concurrence on that?
Senator Mitchell: Yes.
Senator Di Nino: On division.
The Chairman: Yes.
Senator Downe: Could we have the amendments read out, if you do not mind?
The Chairman: Yes, I would be glad to do that. With respect to item number one, the word "some" is added before $1billion and "some" is added before $500 million further on in that sentence.
With respect to number three, that "this agreement may," "in future" is added, "limit the support."
With respect to number four, "rural communities in Canada," rather than "are," "may be in jeopardy." "Rural communities in Canada may be in jeopardy."
With respect to number five, "dangerous" is left untouched, but after the word "thereby," the word "potentially" is added before the word "weakening."
That represents, to the best of my knowledge, Senator Eyton's additions to the wording proposed by Senator Mitchell for our consideration as an observation to be added to the report back to the chamber. Do we have agreement?
Senator Di Nino: On division.
Senator Andreychuk: I do not agree with the intent of the observations, because I think they go to the actual clauses within the bill. I am putting back on the record that this was never the intention when we started down the road of observations. As you well know, I have a motion before the Senate to look into this whole area of observations and their use, as they have apparently this year started to change from our previous practices. I want that noted on the record, and I will be opposed to the observations.
The Chairman: That will be noted on the record. We have the right, of course, to address this observation in any way the committee deems appropriate. If there is no further comment on the observation proposed by Senator Mitchell and amended by Senator Eyton, may I propose now that I call the observation and we see whether we can pass this on division?
Senator Stollery: Not on this side.
Senator Corbin: Could we have a vote?
The Chairman: A recorded vote on the observation?
Senator Stollery: So that we are clear.
The Chairman: I am untroubled by that.
Senator Stollery: I agree with Senator Andreychuk on observations in general, but this is a special case.
The Chairman: If colleagues wish to have a recorded vote on the observation, then let me invite the colleagues to so do.
I defer to the clerk.
Francois Michaud, Clerk of the Committee: The Honourable Senator Segal.
The Chairman: Against.
Mr. Michaud: The Honourable Senator Andreychuk.
Senator Andreychuk: Against.
[Translation]
Mr. Michaud: Honourable Senator Corbin?
Senator Corbin: For, as amended.
Mr. Michaud: Honourable Senator Dawson.
Senator Dawson: For.
Mr. Michaud: Honourable Senator Di Nino?
Senator Di Nino: Against.
[English]
Mr. Michaud: The Honourable Senator Downe.
Senator Downe: For.
Mr. Michaud: The Honourable Senator Eyton.
Senator Eyton: Against.
Mr. Michaud: The Honourable Senator Mahovlich.
Senator Mahovlich: For.
Mr. Michaud: The Honourable Senator Mitchell.
Senator Mitchell: For
Mr. Michaud: The Honourable Senator Stollery.
Hon. Peter A. Stollery: For
The Chairman: Senator Merchant, you have been replaced, for voting purposes, by your colleague Senator Mitchell.
Mr. Michaud: Yeas, six; nays, four.
The Chairman: I declare the observation passed and appended to the report in its report back to the Senate.
Colleagues, shall the bill with the observation carry?
Some Hon. Senators: Carry.
An Hon. Senator: On division.
The Chairman: Colleagues, shall I report the bill to the Senate with the observations?
Senator Downe: As early as possible, Mr. Chairman.
The Chairman: I declare the matter of the bill having been reported by the committee and we will make the report to the Senate at the earliest possible opportunity.
We were supposed to meet at 4 p.m. to discuss Africa. We will adjourn and look at the Africa report at 4 p.m., which is in camera.
The committee adjourned.