Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 7 - Evidence
OTTAWA, Wednesday, April 22, 2009
The Standing Senate Committee on Foreign Affairs and International Trade, to which was referred Bill C-2, An Act to implement the Free Trade Agreement between Canada and the States of the European Free Trade Association (Iceland, Liechtenstein, Norway, Switzerland), the Agreement on Agriculture between Canada and the Republic of Iceland, the Agreement on Agriculture between Canada and the Kingdom of Norway and the Agreement on Agriculture between Canada and the Swiss Confederation, met this day at 4:05 p.m. to give consideration to the bill.
Senator Consiglio Di Nino (Chair) in the chair.
[English]
The Chair: I call the meeting to order. First, welcome to the meeting. The Senate has this afternoon referred to us Bill C-2. We have been asked to undertake a study of this bill for recommendation to the chamber.
Appearing with us today a little later on will be the Honourable Stockwell Day, Minister of International Trade. Because of the votes that have been taking place in the House of Commons and some other responsibilities, he will be a little late, but I understand he should be here approximately half an hour from now.
We have with us today as well officials from Foreign Affairs and International Trade Canada, Mr. David Plunkett, Director General, Bilateral and Regional Trade Policy Bureau; and Mr. Ton Zuijdwijk, General Counsel, Trade Law Bureau.
Gentlemen, welcome. I understand Mr. Plunkett will be making some comments and then you will be prepared to take questions from our members. The floor is yours, sir.
David Plunkett, Director General, Bilateral and Regional Trade Policy Bureau, Foreign Affairs and International Trade Canada: It is a great pleasure to appear before this committee to take part in this discussion on the Canada- European Free Trade Association free trade agreement and the implementing legislation that was tabled last Parliament.
I am here primarily because I was the last chief negotiator when this was concluded. I say ``last'' because this started in 1998 and we worked out way through seven or eight chief negotiators before it was finally concluded. I had the honour of being there at the end.
Obviously, these sorts of things are very much a team effort. It is not just our department; it includes other departments, such as Agriculture Canada, the Canada Border Services Agency, Finance Canada and others, along with Industry Canada, obviously, because of the ships issue.
Following a few quick introductory remarks, we stand open to take any questions the committee may wish to put.
We believe that in the current global economic climate, closer economic cooperation is becoming more important than ever.
The Canada-EFTA agreement, or CEFTA agreement, is part of Canada's Global Commerce Strategy, which includes an aggressive trade negotiation agenda aimed at helping Canadian business compete in international markets and bring continued prosperity to Canadians. This is also our first free trade agreement since 2001, and our first such agreement with European countries.
The European Free Trade Association, EFTA, includes, as you said earlier, Iceland, Norway, Switzerland and Liechtenstein. These are developed, modern economies that offer significant potential markets for Canadian exporters. The EFTA countries are significant partners, with Canadian merchandise exports to the region totalling $4.2 billion and two-way merchandise trade valued at $13.2 billion in 2008.
This agreement has the potential to bring important benefits to Canadian exporters with the elimination of duties on all Canadian non-agricultural goods and the elimination or reduction in tariffs on selected agricultural products. Canadian manufacturers will benefit from lower-priced manufacturing inputs.
More broadly, we can assume that the Canada-EFTA agreement will benefit all regions of Canada. In 2008, Atlantic Canada exported $98 million to EFTA countries. Quebec exported $335.7 million worth of merchandise to EFTA countries, including $166 million in aircraft and aerospace products.
Ontario exported $3.6 billion worth of merchandise to EFTA in 2008, including $2.1 billion in nickel and nickel articles. Collectively, British Columbia, Alberta, Saskatchewan and Manitoba exported $181 million worth of merchandise to the EFTA countries in 2008. This free trade agreement will undoubtedly entice new companies to invest in Canada as their North American base and current investors may also expand their investment.
In addition, the Canada-EFTA free trade agreement also provides a platform for Canadian business to expand commercial ties with the EFTA countries and to tap into the broader European value chain. This positive initiative with the EFTA countries demonstrates the priority Canada places in both diversifying its export markets and pursuing new market opening partnerships with Europe, one of the most important economic regions of the world.
Throughout the negotiations, the government consulted with provincial and territorial governments, as well as with Canadian business stakeholders. The Canadian negotiators wanted to ensure that their concerns and interests would be fully understood and taken into consideration during these negotiations.
One of the liveliest discussions that I have been party to as part of this consultative process relates to the shipbuilding issue. We believe that the free trade agreement addresses the domestic shipbuilding concerns in a number of ways, including a 15-year phase-out for the most sensitive items — the longest phase-out period for a Canadian industrial tariff in all our free trade agreements — specific provisions on repairs and alternations, on rules of origin and on government procurement.
We anticipate Minister Day to arrive shortly, so I will leave it at that and open up for questions. I am joined by my colleague, Mr. Chummer Farina, from Industry Canada.
The Chair: Mr. Farina, we are glad you are here. Hopefully, you will be participating in the questions and answers that will come.
Senator Corbin: My questions will be brief. The first one is about the summary that is provided concerning payment by Canada of its share of the expenditures associated with the operation and the institutional aspects of the free trade agreement. Have you a figure you can throw at us with respect to these anticipated costs?
Ton Zuijdwijk, General Counsel, Trade Law Bureau, Foreign Affairs and International Trade Canada: Senator, I would have difficulty quantifying the costs because a lot of this would pertain to special expenditures like the setting up of an arbitral tribunal if it came to dispute settlement proceedings. The regular expenses of meetings between officials and ministries would presumably be paid out of regular administrative operations.
Senator Corbin: Yes, okay. That seems satisfactory.
I notice on page 2 that the purpose of the act is to establish a free trade area.
[Translation]
And, in French, it says ``pour établir une zone de libre-échange.''
[English]
How should I interpret the meaning of the words ``free trade area'' or ``zone'' in French? To me, a zone is an area contained within specific boundaries, but here you have Canada on one side of the Atlantic and you have these four countries spread across Europe. How can you properly refer to this kind of an agreement as a free trade area, because we are so separate from each other?
Mr. Zuijdwijk: The term ``free trade area'' was used to justify the establishment of this free trade agreement in terms of the World Trade Organization, WTO, in particular Article 24 of the General Agreement on Tariffs and Trade, GATT, and the corresponding article on the services agreement of the —
Senator Corbin: You are being very technical. I appreciate what you are saying, but to me, it is of the order of a faraway concept, whereas a zone is something I can figure out geographically.
Mr. Plunkett: As Mr. Zuijdwijk was indicating, much of this is the normal jargon in this world.
Senator Corbin: Yes, but jargon has to mean something.
Mr. Plunkett: The key point here is that it identifies which countries are eligible to take advantage of the preferential provisions that are set out in a given agreement.
Senator Corbin: Why not use the word ``partners'' instead?
Mr. Plunkett: That is a very good question.
Senator Corbin: I will leave it at that. Words are important. They have to mean something specific.
My next question is with respect to clause 7 on page 3, which states:
For greater certainty, nothing in this Act, the Agreement or the bilateral agreements applies to natural surface or ground water in liquid, gaseous or solid state.
Why is that clause there?
Mr. Zuijdwijk: That has been an extended clause in all of our implementing legislation of free trade agreements, and it is to clarify that bulk export of water is not intended to be included.
Senator Corbin: Why do you not say so in the bill? Bulk water is the object of a lot of controversy between Canada and the U.S., and in fact there is some private legislation on the floor of the Senate right now attempting to deal with that matter. Again, I guess I would have to accept your word for it. It is on the record.
The Chair: What you are saying is that this is a standard clause that you use to cover that area or that specific — I am trying to think of the right term — exclusion of a product that will not be included in the agreement, for the reasons that we know that Senator Corbin has questioned.
Mr. Zuijdwijk: That is correct.
The Chair: Thank you.
Senator Corbin: I do not see the need for that clause in this legislation. If we were dealing with the U.S., it would be an entirely different matter. We will leave it at that. I guess when you make these deals you attempt to cover all possible fronts.
I would refer you to page 16, under clause 31:
For the purposes of this Act, goods are imported from one of the following countries if they are shipped directly to Canada from that country:
You have NAFTA countries — the U.S. and Mexico — and Chile and Costa Rica. Why is that inserted in this specific accord? There must be a reason for that.
Mr. Plunkett: Our colleague from the Department of Finance was asked this question in a house context, and he indicated that basically this identifies where in the customs tariff the necessary changes have to be made. This is an evergreen list that is modified as we continue to add countries to this act. The additions here are Iceland, Liechtenstein, Norway and Switzerland.
Senator Corbin: So one day if we make a free trade deal with Colombia, Colombia would be added to the list?
Mr. Plunkett: That is my understanding. The next time you see this, the list will be longer.
Senator Wallin: On clause 7 that Senator Corbin referred to, I assume that your argument is you put those things in there so they are ruled out and cannot be debated at a later point or raised at a later point. We have seen that discussion before on the water front, so it is a new, preventive measure.
On the latter point raised regarding including the list of existing deals, because partners become party to the other deals, I am assuming that is a legal requirement.
My third quick point is something you may want to leave for the minister, but you may have some views. Because of the other bilaterals or our bilaterals that exist, was there any area where down-side or preferential treatment or any of those issues came up? Do we have a deal with Peru or the United States or Mexico where we saw some area of conflict? I am looking at the list of goods. It does not seem to me that there would be something, but there are questions like the shipbuilding issue and the use of government contracts. Is that an actionable item or might that be used by one of our other trading partners to say, ``Why are you doing it there and you cannot do it here if it is prohibited in this deal?''
Mr. Plunkett: As we go through any negotiation, we are very conscious of both what we have done in the past and what we potentially want to do in the future. I never leave home without lawyers because they have these concepts of forward and backward, most favoured nation. You can tie yourself up into knots very carefully. This applies across the board.
I will have a discussion tomorrow, for example, with our colleagues from Singapore as we are trying to move those negotiations forward.
We are stumbling over the issue of the applicability, both backwards and forwards, to specific clauses. We do go through that. Whether it is in investments, or goods, or whatever, we are very conscious of that, which is why these negotiations can take as long as they do, because you must be certain. Once it becomes a legal document, a treaty, you are stuck with the consequences, even if they are unintentional.
Senator Wallin: Shipyards, for example, which are supported by government procurement here, are specific. I take it you have already looked at that and you are feeling that ground is safe?
Mr. Plunkett: Yes, because procurement is not covered by the agreement, so we have taken on no obligations.
Senator Grafstein: First, I want to welcome Mr. Plunkett and his colleague Ton Zuijdwijk, from The Hague, a very important place. With all that international expertise, he now lends his expertise to Canada. I want to welcome you both, and the same for Mr. Fowler.
I want to compliment you on this bill. As I told you, Mr. Plunkett, you gave me your copy and I read it last night. I found it fascinating reading. You always learn something.
Before I raise two or three specific issues with this, could you tell us briefly where we stand roughly on other free trade agreements? What is in the pipeline and how close are we to some of them? You mentioned to me in our private meetings one or two. Perhaps you would put on the record what is in the pipeline close to fruition. You mentioned Singapore today.
Mr. Plunkett: This one is the farthest advanced, obviously. Colombia and Peru are in the House of Commons and starting through that process. We have concluded with Jordan. It is a goods-only agreement. We are exchanging draft material, text, with the Jordanians. There is a concept that I am now more aware of than I was a few months ago, which is the ``legal scrub.'' After the negotiators think they have finished their job, you give the text to the lawyers and they fix it.
Senator Grafstein: Or not.
Mr. Plunkett: Yes. Obviously, the agreements have to be equally authentic in English, French and, in some instances, a third language or, in the case of the European Union, about 23 or 24 languages. This is becoming a burden on the legal staff within our system. They have to make the agreements perfect and, because they are all equally authentic, they all have to say the same and mean the same. That takes time.
Those are the ones that are concluded and working their way through the process. We have had 13 rounds with Korea, and we are hopeful that agreement will conclude, but there are still a few tough issues that must be sorted out before that is doable.
Singapore is another one that had been hung up for a while. I am having a discussion with my counterpart tomorrow morning to see if we can figure out a way to move that one forward. We have had some very good discussions with the EU and we are hoping to see some progress there to be announced in the coming days.
We had hoped to conclude with Panama just before the Summit of the Americas. We are close, but we are hung up on a couple of agricultural items there. I would anticipate that that would be the next one we will be able to conclude.
We are engaged with the CA4, the Central America Four: Honduras, Nicaragua, El Salvador and Guatemala. That had stalled for a while, but there seems to be new life in it. I think the next meeting is scheduled for May.
The Caribbean is, frankly, quite frustrating, because it took a long time for the Caribbean to sort out how it wanted to deal with this. They had gone through an extensive negotiation with the European Union and I think they were, if you will pardon the phrase, licking their wounds and trying to figure out what hit them. We have made some progress there and I anticipate we will have a first negotiating round shortly with them. It is the same with the Dominican Republic, where we have a separate negotiation. They, too, went through the EU ringer and are still trying to sort themselves out after that.
Looking further down the road, we are hopeful that we can get something up and running with India in the fall. They are about to have an election or are in election mode right now, so we basically have to wait until they go through that process before we can re-engage with them. We have also started to talk to Morocco about a possible free trade agreement there.
You may have noted that Minister Day was in Japan a few days ago. We will sit down with the Japanese to see whether we can find common ground to move the bilateral relationship forward.
That is just the free trade agreement front. Obviously, there are other tools that we are using as well, for example the investment protection agreements, science and technology, and so on; we have a lot of balls up in the air. As I indicated, we are trying to pursue as aggressive a trade policy agenda as we can, in many regions.
We consulted with the business community; we tried to ensure that this reflects what the business interests want, and we will get as ambitious and comprehensive an agreement as we possibly can.
The Chair: That is quite an extensive list. I am impressed that you remember them all.
Senator Grafstein: I have a brief supplemental and then I will get to the heart of the bill. What about the Mercosur?
Mr. Plunkett: Yes. I have told many people that it has not escaped our attention that Brazil and others are the big parties of Latin America. We have had dialogue in the past, and my colleague was telling me earlier in the day that we are hoping to bring some life back into a bilateral economic dialogue issue here. We have looked at this on a number of occasions. It will be a challenge. There are many sensitivities on both sides that would have to be sorted out.
One issue we would have to face is whether Brazil, in particular, would be prepared to put services on the table. That is not 100 per cent certain. That would be of interest to us.
My understanding is that they have concluded but not yet ratified about 12 investment agreements. Investment is an area that would be important to us. Going through a huge process to get an agreement that we are not convinced would ever see the light of day involves resources issues here. Obviously, this is a huge market. We will continue to figure out a way to improve the economic relations with this area as this process unfolds.
My background from the WTO or GATT perspective is that I am a believer in building blocks. Although you cannot reach the full thing right at the beginning, if you can meet incremental gains and build up in a way that allows both parties to get mutual benefits, so be it. However, it is one that is constantly comes back to us, particularly in the context of the Americas strategy, and why you are not doing more with this huge entity. It is not without its challenges.
Senator Grafstein: Canada has a huge, historic relationship with Brazil, which is at the heart of it. Canada helped develop a number of industries before the turn of the century. I think it is important to deal with the smaller countries, but the big elephant on the block is the Mercosur. The EU has entered into an agreement with them. I am not sure what the context is, but they have an agreement of some sort, so that might be a route to follow.
Where are we on the EU with that wonderful, open-minded commission of trade at the EU? I am being sarcastic.
Mr. Plunkett: A number of us went back and forth to Europe over the last few months and we have made a fair bit of progress, which is reflected in the Canada-EU summit declarations that Prime Minister Harper issued — the latest one being in October of last year — where we set in motion a process to look at ways to see if we could, in effect, launch negotiations for a comprehensive economic partnership.
On June 5, after a lot of back and forth, we issued what the Europeans refer to as a scoping document, which is public. We were not quite sure what this was when we started, but it is their way of doing it. In effect, it is an exploratory process where we try to determine in a potential agreement what would be on the table and what would be off the table. This document was sorted out with the Europeans and was made public on June 5, and since that point both parties have gone into their respective systems to develop the documentation required to get a mandate that would allow for a formal launch of negotiations. We are hopeful that we will see some progress in this area in the very near term. Various steps must still be gone through, but we have made a lot of progress over the last number of months.
Senator Grafstein: Thank you for that.
I will give you the four areas of my questions. Mr. Plunkett is familiar with this because we had a meeting yesterday to talk about it, so he has notice of these. He might respond to my concerns about the agreement in hand.
First, why not services? If not now, when?
Second, agricultural goods: Why the delay on expanding the number of areas or pieces of agricultural goods? Our farmers are competitive and ready to export.
Third, the obscene provisions respecting the phase-out of tariffs as it applies to selected vessels: Why does it take so long when our major competitor is Norway and it has the same type of cost structures we do? Why the delay there?
Finally, a comparative analysis of the dispute mechanisms: How do they compare to NAFTA, which we have questions about? Is there an improvement here?
The Chair: May I suggest that we welcome the minister, who is just arriving? We have been joined by Minister Stockwell Day, Minister of International Trade.
Welcome, minister. We have had comments by Mr. Plunkett, and our colleagues have asked a few questions. Would you like to make a few comments to start with or just go on to the question period?
[Translation]
Stockwell Day, Minister of International Trade and Minister for the Asia-Pacific Gateway: I appreciate the Senate's interest in this free trade agreement. It is very important for our economy and, in my opinion, for our lives. It is a very important arrangement because, like other free trade agreements, it opens doors for our business people, our investors and our workers.
[English]
In a time of protectionism — or the risk of it around the world as we are in this global contraction — we have heard clearly from the G20 leaders that countries should resist this urge. We are going about making sure our economy is as vibrant as possible in a number of ways, pursuing trade agreements within the WTO structure, but also within other bilateral and in some cases multilateral areas.
This particular agreement, which allows tariff removal for industrial products and considerable reductions for a number of agricultural products, will give our entrepreneurs, our producers, our manufacturers, and ultimately our workers the opportunity to have more areas to market. As you know, with margins being much tighter in this time of intense downturn in economies, every cent, dollar and percentage makes a difference.
Last year, there was about $13.1 billion of two-way trade between these entities and Canada. When you average out the tariff removal, there is an immediate saving to our producers and our exporters of about $5 million, which in some cases can make the difference between staying alive and not.
The other factor is that this gives us a significant lever into the EU. As you are probably aware, we have completed the scoping exercise for an EU free trade agreement, and we are hoping to announce soon the beginning of formal discussions and negotiations.
I know that you are well versed on this particular free trade agreement. As much as I would like to talk about it at length, because I am kind of excited about it and the possibilities it brings, I will defer to your wisdom, your questions and your advice at this point. Thank you for your consideration.
The Chair: Thank you, minister. Senator Grafstein was in the middle of asking some questions, and he may want to repeat them.
Senator Grafstein: First of all, minister, thank you for coming. We have had a terrific report about the progress of your department with respect to all the free trade agreements. Some of us are Manchester liberals and believe in free trade, the sooner the better. If your department needs more resources, I think this is as important an economic front as the government can have in terms of diversifying trade, because we cannot rely on the Americans as we once did. Good luck to you on all these fronts, and you will find very receptive support on this side of the aisle. By the way, I had the great opportunity of reading the treaty last night. It is very interesting and well done.
I had raised four issues and concerns with Mr. Plunkett. The first is services: Why not services? If not now, when? Second, agricultural goods: We have hotly competitive farmers, so why the small number of applications of the various products for agriculture? Our farmers need more markets and are ready to compete. Third, ships: Why is there this obscene delay with respect to ships when our major competitor is Norway, which has the same cost structures we do? Why can we not compete with Norway? I do not understand that. Why is there the obscene delay of 15 years and no tariff reduction for three years? The fourth issue is dispute mechanisms, and this committee is very familiar with dispute mechanisms.
NAFTA has had its challenges. I have read the provisions in the treaty — your staff led me through some of them — and I think they are an improvement. However, we would like to know how effective they would be. Could you quantify for us what improvement in the dispute mechanisms there would be in this agreement as compared to NAFTA and the FTA?
Mr. Day: Those are all good questions. Regarding services, you asked why not, and when. The answer to ``why not'' is simply that discussion on this started about 10 years ago. We think that is a long time to be out there. Discussions were suspended for almost six years after 2000. We simply want to get this moving.
There is a provision that a significant discussion must be begun on the services aspect within three years. That is part of the actual provision. Services are important and we would like to see that come into it, but we want to move ahead. There is acknowledgement on all sides that we will get into the services discussion. That will come next.
As for agriculture goods, not all goods are going to zero per cent. For potato products, this is the first time ever with any country that there has been acknowledgement in that particular field. Some products, such as durum wheat, for instance, under certain amounts of quota will go in without tariffs. You get what you can; you look at the major exports and you start to hammer down the tariff lines. That is why there is a mixed bag of agricultural products.
We must keep in mind that Canada also has certain agricultural sensitivities, as you are well aware. We cannot demand a total sweep of their products when we still have sensitivities that are basically non-negotiable. We look for where we would get the most advantage and where our producers would be most helped by getting tariffs either reduced or eliminated. In some cases, it is zero, and from country to country it differs.
I think the tariff on beer is reduced to 50 per cent in some areas and totally in others. Whether that is a reflection of the drinking habits in one country or another, I cannot say. You drive hard and you get what you can in the various areas.
Senator Grafstein: Our beer is better.
Mr. Day: We do not question that, and we do not think anyone else should, either.
When it comes to ships, you used the words ``obscene delay.'' It is a long period of time, but we had special sensitivity with the shipbuilding industry. It is not unheard of to have long delays in ultra-sensitive areas, especially when the industries are huge.
As I think you know, there was broad consultation on this particular agreement. Many in the shipbuilding sector said they did not ever want to see an agreement like this; they wanted those tariff walls left. Others said they thought they could manage it.
To make it tenable and to realize the sheer scope of the shipbuilding industry, the size of an individual operation, and with all the competition going on worldwide, then to move too quickly to expose them to full tariff reduction or elimination, we had to come up with a consensus that worked. That is why, as you said, it was 15 years with nothing starting for three years. Divide that into two; there is one category of ships that will have this for 15 years and another category that will have this for 10 years. In the process, we exacted from Norway a commitment that they indeed are not any longer and will not subsidize their industry. I felt that was a major accomplishment.
Is 15 years the right number? Could it have been 14 years or 11 years? We also had to reassure the shipbuilding industry. We made some adjustments in our budget that would not violate the WTO and would put about $50 million into a series of enhancements that are available to the shipbuilding industry that would not be harmful to them. I think you are aware that for government procurement, military or otherwise, we still can provide protection for our own procurement purposes — the WTO allows it, as does NAFTA — so this will not apply.
We have laid out for them over the next few years about $8 billion in procurement. We think we are being adequately sensitive to the concerns of shipbuilding operations, for example the one in Lévy, Quebec. Some of these operations started maybe 100 years ago. It took a long while for them to take hold on the world scene, and they have been built up. Then we said, ``Okay, you will not have favoured status forever in all areas; we will start to phase this out, and this will be how long it takes.'' I appreciate that some people were understandably concerned about it being too long a time. Others did not want it to happen at all. That was the saw-off or the dispute settlement mechanism.
In principle, it is close to what we have with most of our free trade agreements. There are some subtle differences in the appointment process. First, the 90-day consultation period will stay the same. If nothing is resolved in the 90 days, then one side will appoint their arbitrator, the other side will appoint theirs, and both sides agree on a chair. If the other side should refuse to appoint — and that has happened on occasion — then we would call on the Secretary- General of the Permanent Court of Arbitration at The Hague to do the appointing. That is a difference. In addition, some of the terminology has changed. It has gone from ``panellist'' to ``arbitrationist'' or something. There are some wording differences. In general principle, it is still the same, with the modification that we would get someone appointed; and if the other side refused to appoint, we would go to the Permanent Court of Arbitration.
Senator Grafstein: You are familiar with the softwood lumber dispute; it cost $1.5 billion in legal fees. I would assume the mechanisms here will be much more cost-efficient?
Mr. Day: Yes, they will be. Processes have to be settled within a year.
Senator Andreychuk: Thank you, Minister Day, for appearing along with the officials. I must have the same exciting life that Senator Grafstein has in reading bills and treaties.
I have two questions on a broader basis. The arbitration dispute-resolving mechanisms are in line with other tribunals and trade agreements that we have signed, but they also take into account some of the experiences we have had. I think I heard the term ``new generation dispute-resolving mechanisms.''
In here, I believe that some of the verifications can be done by the EFTA countries, and we rely on them for verification of countries of origin, for instance. It all sounds very good when I think of Iceland and the countries I know, but is this being used as a template in the European negotiations? If so, will some of these verification reliances be extended into a European community that is rather broad, in-depth and different from the four countries we are dealing with here?
Mr. Day: Some of the EU templates, if we can use that term, or their matrix are already established because of agreements they have with other countries. In many of those cases, as we negotiate with the EU, we will demand parity. Several of the processes will already be in place.
I think there is general acceptance that best practices are recognized and followed, and we look for the ones that can lead to, as Senator Grafstein was concerned about, length of time. We will look to best practices and to what we can learn.
Looking at dispute settlements — for instance, there are the anti-dumping provisions and the anti-subsidy provisions — some people will point to the disputes themselves and try to say free trade is not working because we have disputes. The dispute is part of the working mechanism. As you know, it is like the referee in a hockey game. Just because the referee blows the whistle when someone is offside does not mean the game is not working; it just means someone has gone offside and a ruling is about to be made. We will draw on best practices.
I should add that if one of the countries should decide to join the EU, then they would bow out of this particular agreement because there would be inconsistencies. I do not know whether that has come up.
Senator Andreychuk: When we used to talk about NAFTA, we said perhaps the dispute resolving is long and difficult, but if we did not have it, we would still have the disputes.
When the EFTA countries' finance ministers were here, Senator Corbin reminded me that he and I were around the table when the ministers first came to kickstart this process some 10 or 15 years ago. They kept bringing up the benefits for Canada as an entree into Europe.
Where do you see an immediate effect — or do you — in our trade opportunities into the rest of Europe by using the EFTA mechanism?
Mr. Day: With respect to the immediate benefits, first, if you look at it regionally, the amount of business in 2008 for Ontario trade into EFTA countries only was a shade over $3 billion. That is a sizable amount of trade, much of the associated cost of which will be somewhat alleviated with these tariff reductions. Quebec was not quite as substantial with $335 million, but over $60 million of that amount was in aircraft-related trade, which will open up doors of opportunity. Further west, with higher transportation costs, British Columbia was about $56 million into EFTA, but much more of their product goes south to markets in the United States or west to the Asia-Pacific markets.
We can look at immediate dollar figures that make it easier for that product to get into these countries. One of the effects of that is on the consumer. Whether it is machinery or blueberries or french fries, once the product starts to flow into those areas, the ability for that product to be showcased is increased and the product is more in demand. Any time we have a more open door to trade and allow more product to flow in, it enhances the capability of that product to be sold in a larger market, should you have tariff reductions in the EU, for example.
Senator Andreychuk: Setting aside the agricultural difficulties, and we know that is a worldwide issue, the most sensitive area was shipbuilding. Did we make a fair trade-off? We know it boils down to horse trading. With this delayed, built-in mechanism for shipbuilding, which is the kind of agreement we should do and the kind of sensitivity we should respond to, did we strike a good deal for others because of that? Did we come out with the best deal we could make overall for Canadian industry and for creating a balance in shipbuilding?
Mr. Day: I am absolutely convinced we did. I can say in all honesty that I would not support a trade deal that I thought would hurt our economy or individual industries. We got a great deal for our shipbuilding industry. I do not want to be too effusive about it now because they might read about it in Norway and think we beat them on something. I do not want them to have second thoughts about the deal. A well-negotiated free trade deal means that there are benefits for both sides, and if the market is working well, it is not a win-lose but rather a win-win. This will be beneficial to us, and I am convinced that it will be beneficial to people in the other countries. Nations that trade well together prosper mutually, and nations that are closed or insular when it comes to trade always suffer economically. I feel good about this deal and good about the job that our negotiators did, including shipbuilding.
Senator Corbin: Have environmental, labour, human rights or charter rights been considerations in the negotiations of these agreements?
Mr. Day: They are referenced in the preamble. They were not given a side accord treatment as we have with Colombia or Peru, for example, because we are dealing with mature democracies that have recognized within their respective constitutions and work, labour and environment agreements that these are vitally important areas. We do not require the level of distinction of accords that we required for the Colombia agreement, where it is distinct and the International Labour Organization is mentioned and articles are clear. The mention of it in the preamble is sufficient to acknowledge mutual acknowledgement of the importance of human rights, environment and labour.
Senator Kinsella: To build on that last comment, Senator Grafstein will know that it was a Canadian, Ronald St. John Macdonald, who used to represent Liechtenstein under the European Convention on Human Rights.
I represent one of the provinces of Atlantic Canada. These kinds of initiatives with Europe are important to Atlantic Canada because Europe is just across the water from us. It speaks to the government's initiative in respect of the Atlantic Gateway. I congratulate the department and hope that its foot is well in the door of negotiations with the European community.
One considers that the westernmost port of Europe is south of Lisbon, Portugal, at seven degrees longitude, which is pretty close to Halifax's longitude. The whole paradigm of international shipping has changed with the move to Asia- Pacific. Shipping lanes will be totally different, and we see this from a regional point of view, so the current negotiations are extremely important to our future.
My question is on the machinery of government. At page 4 of the bill, clause 12 states:
The Minister shall designate an agency, division or branch of the Government of Canada to facilitate the operation of, and provide administrative assistance to arbitral tribunals established under, Chapter VIII of the Agreement.
Do you have in mind which agencies will be used?
Mr. Day: I do not have that in mind at this time. I am not predisposed in one direction or another, so your advice would be appreciated.
Senator Kinsella: My advice is to not use the Department of Justice. This is all about conciliation, arbitration and problem solving as opposed to litigation. I like what you said in the bill about a one-year timeline. In this bill and future ones dealing with the subject matter, we have to stay away from the American litigious-style model and use more conciliation, problem solving and arbitration.
Mr. Day: There is a reference in the bill that we can access the Canadian section of agencies related to NAFTA so you can deal with some of the people who are familiar with these processes.
What you said about shipping lanes is truly important. It is another reason to have these kinds of agreements to reduce, as much as possible, the burdens on producers and shippers, whether agricultural or manufacturing. In a time of downturn, I believe it is incumbent upon governments to lighten the load without actually telling a business that they will be successful. Obviously, we stay out of that. We need to do what we can to declutter the pathway to prosperity that a particular business or individual is pursuing, and that is why businesses need to be as nimble as possible. Things change quickly geopolitically. Who would have thought even five years ago that the Suez Canal as a shipping transit zone would become unattractive because of what is happening today? Who knows how long the piracy problem will exist? It has begun to shape the decisions of shippers and producers about where they will go. The costs at Suez were already high, which adds to the benefit of an Atlantic gateway. Looking to the future to 2014, the Panama will be doubled in capacity. The supertankers that cannot get through now will be able to sail through. It is difficult to predict geopolitically what will happen, but as a government, we can keep the load as light as possible on businesses and producers who are doing everything they can to prosper. Let us ensure they are as nimble as possible. Having free trade agreements that reduce tariffs is just one of a number of ways to do that strategically.
Senator Wallin: Thank you again for being here. Congratulations on this. I, too, am a free trader, and despite all its flaws, every morning I got up in New York after 9/11 I was grateful for NAFTA and a way to at least settle some of the disputes.
Senator Andreychuk said EFTA had always made a point about how good this was for Canada and that it is an indirect route to Europe. What about the flip side? This is an area where the U.S. actually does not have any preferential access. Was there any thought there or any response from the Americans, or any incentive on the part of the Europeans and the EFTA countries to actually do through the back door what is so difficult through the front?
Mr. Day: With the free trade agreements, we all watch each other. The most widespread opportunity for reduction of tariffs and these types of things is through a WTO process. However, there are so many countries involved, as we know. It is quite evident that it can bog down. Therefore, different countries start to make deals.
We are constantly watching for what kind of deal another country gets. If another country secures a free trade agreement, that actually helps a third country that is interested in getting one, because if countries A and B have some mutual interests, then you are also able to say, ``Okay, we will satisfy your interests, but by the way, you have to give us the same deal you gave the United States,'' for example.
Once you push one lever forward and get an agreement, you actually activate a series of mechanisms that raises the possibility that you will get access. Someone else does the hard work of getting an agreement and we come in and say, ``We will do this deal. By the way, we want exactly what you give the United States on beef access'' or whatever it might be. The ripple effect tends to be positive.
Senator Wallin: Is this significant enough as a deal that you would characterize it as ``strategic''?
Mr. Day: Very much so, yes.
[Translation]
Senator Fortin-Duplessis: I must congratulate you for introducing this bill because I feel that it is very important. We recently witnessed a clear attempt at protectionism in the United States where Congress insisted on a ``Buy American'' clause in the country's major economic stimulus plan.
Most Canadians clearly showed their concern at the potential impact that provisions like that could have on our companies and our business leaders; our government — of which you are part — worked day and night to have it toned down, if not eliminated.
With an economy dependent on trade, Canada has every reason to come together with its partners, be they in Europe, in the United States, or anywhere else in the world, so that trade can be kept as free as possible.
However, a sizeable number of the multilateral trade initiatives in which we are currently involved are at a standstill. In my opinion, Canada must reach bilateral trade agreements in order to sustain global competition. We can see that we have been successful wherever agreements between countries have been reached.
As many people say, Canada is a country whose economy depends largely on trade, so this is a step in the right direction. My question, Mr. Minister, is this.
Are you satisfied with the speed at which trade agreements are being negotiated and signed?
Mr. Day: Actually, the answer, in one word, is no. I am impatient with the speed at which huge bureaucracies move. It is not easy to reach an agreement in a very short time. In democracies, it is absolutely vital to consult all the domestic industries to find out what they think and to determine what effect an agreement would have.
Added to which, democracies have elections from time to time. It is a little ironic; it is easier to negotiate with a country that is not democratic because there are no elections and the same people are there for years. Just to be clear, I do not like undemocratic situations. But, from time to time, it is easier to negotiate with people who are in place for years.
For example, we are almost at the point of reaching an agreement with Panama, but they are having general elections. So we have to wait. The same is happening with India. So there are factors that prevent agreements from being put into place quickly. Such is life.
If there is a silver lining to the current financial crisis, it is that governments are being forced to look at free trade agreements. But an agreement takes time, two or three years, or more. The agreement we are dealing with today has taken us 10 years to discuss.
Senator Fortin-Duplessis: Thank you for replying in French, Mr. Minister. Thank you for making that effort. My congratulations on your excellent French.
[English]
The Chair: As my colleagues know, we have to vacate this room for another committee meeting. However, there are two members who would like to ask quick questions. I will ask them to put those questions to you for a response. I also know that your time is limited.
I would like to publicly acknowledge the positive cooperation we got from Senator Grafstein, the critic on this bill, and hopefully we will be able to deliver it to you in a short time.
Senator Mahovlich: I have a simple question, Mr. Minister. I am from Northern Ontario. We are all about mining up there. The price of nickel has collapsed and they are closing mines up there. Would these new markets and tariffs affect the mining and the minerals of Canada? Would they have an effect on the mines up north?
Mr. Day: They would in a positive way. As I had mentioned, Ontario has over $3 billion of trade into the EFTA countries. The majority of that is actually nickel. There will be tariff reduction there. As you know, other countries are coming on stream with nickel, even though it is a depressed market. In an increasingly competitive market, this helps the Ontario producers to be more competitive.
Senator Mahovlich: Even if a deal goes through with the EU, it would be better.
Mr. Day: Better on top of that, yes.
Senator Grafstein: Minister, over the years on this file, I have heard repeatedly from officials of your department and your predecessor about the lack of resources to complete these agreements. If that is the case, I would urge you to take money out of the stimulus package, put it into your department and increase staffing so that we can get this work done. In my view, this is the most important thing we can do on the economic front. I hope you would urge your cabinet colleagues to give you additional resources if you need them to complete the negotiation of these agreements. This is vital to us.
Mr. Day: I will quote you on that and I appreciate the support. It is a key point, as we want to pursue these even more vigorously. It takes many staff hours at a variety of levels, and resources become a factor. I appreciate that. I will use it to help push for more resources in that area. Thank you.
The Chair: Tell Minister Flaherty that Senator Grafstein has made a recommendation.
Mr. Day: That will pull it over the top.
Senator Grafstein: Not in my lifetime.
The Chair: Minister Day and Mr. Plunkett, we want to thank you and your other colleagues who were here. We appreciate your time and we will deal with this matter momentarily when we will go to clause-by-clause consideration.
Mr. Day: Thank you for your interest and for realizing the expediency of the matter. It will lead to an increase in jobs and that will be helpful in the present economy.
The Chair: As has been suggested by Senator Grafstein, I would like us to deal with the clause-by-clause this evening. Honourable senators, is it agreed that the committee move to clause-by-clause consideration of Bill C-2, An Act to implement the Free Trade Agreement between Canada and the States of the European Free Trade Association?
Hon. Senators: Agreed.
The Chair: Shall the title stand postponed?
Hon. Senators: Agreed.
The Chair: Shall clause 1, the short title, stand postponed?
Hon. Senators: Agreed.
The Chair: Shall clause 2 and clause 3 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 4 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 5 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 6, clause 7 and clause 8 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 9 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 10, clause 11 and clause 12 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 13 and clause 14 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 15 carry?
Hon. Senators: Agreed.
The Chair: Shall clauses 16 through 22 carry?
Hon. Senators: Agreed.
The Chair: Shall clauses 23 through 29 carry?
Hon. Senators: Agreed.
The Chair: Shall clauses 30 through 37 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 38 carry?
Hon. Senators: Agreed.
The Chair: Shall Schedules 1 through 7 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 1, the short title, carry?
Hon. Senators: Agreed.
The Chair: Shall the title carry?
Hon. Senators: Agreed.
The Chair: Is it agreed that this bill be adopted without amendment?
Hon. Senators: Agreed.
The Chair: Is it agreed that I report this bill without amendment at the next sitting of the Senate?
Hon. Senators: Agreed.
The Chair: Honourable senators, I thank you for that.
Is there any new business or questions?
Senator Andreychuk: My point is part of this business. I would like to thank Senator Grafstein, who has been involved with trade issues for a long time. I think his assistance in understanding the history and the background of all these agreements has made this possible here very quickly. I also want to thank the chair, who has worked closely in this. I think we had a collegial atmosphere and that is for the best.
We had our usual difficulties. We receive bills from the House at erratic times. If we can get this bill through, it will have effect because the other countries have already signed. It will come into force and will be a benefit for businesses immediately.
I want to thank the committee.
The Chair: Hopefully, the same comment will be made in the Senate when we report the bill.
Senator Grafstein: I want to respond to Senator Andreychuk.
I spent the time reviewing this bill and read the treaty. I want to tell you that the officials have been very helpful, because some of this stuff is quite complex. They put my mind at rest on a number of issues. It made my cross- examination better. I want to commend the officials. They have done a terrific job. As a template, in my view, this bill is an improved document particularly in terms of the dispute settlement mechanism. We are making progress on that front. This committee knows that has been a problem in the past. I want to commend the chair, the officials and the minister for this good effort.
The Chair: This is the mutual admiration society tonight.
Senator Grafstein: Non-partisan.
The Chair: This is how we should work all the time.
Senator Corbin: Regarding future business of the committee, what meetings have you in store for us?
The Chair: We will ask the clerk. We have had some uncertainty because of this bill. We have also had some difficulty in attracting some of the individuals we had identified as potential witnesses on our India-China study, if we can call it that. We are meeting on Tuesday.
Denis Robert, Clerk of the Committee: We are not. I was told to concentrate this meeting and the Tuesday meeting on this bill. As we have finished with the bill tonight, I do not have anyone scheduled for Tuesday. I have the Chinese ambassador coming to address the Russia-India-China study on Wednesday.
The Chair: I think some members are leaving Wednesday evening. However, we will have enough members here to meet.
The meeting is adjourned until next Wednesday.
(The committee adjourned.)