Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue No. 2 - Evidence - Meeting of February 24, 2016
OTTAWA, Wednesday, February 24, 2016
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 4:20 p.m. to study foreign relations and international trade generally (topic: bilateral, regional and multilateral trade agreements: prospects for Canada).
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: Good afternoon. This is the Standing Senate Committee on Foreign Affairs and International Trade. The committee is authorized to examine such issues as may arise from time to time relating to foreign relations and international trade generally. Under this mandate, the committee will continue to hear today from a panel of three witnesses on the topic of bilateral, regional and multilateral trade agreements: prospects for Canada.
We have asked our witnesses to come as we have looked at a number of trade agreements in the last number of years. Of course, the two on the horizon are the TPP and also the Canada-Europe free trade agreement. We thought that at this point, with a lull in the activity coming from the other side towards us, we would ask some experts who have been very much involved with trade issues to come before us to give us some of their opinions and expertise. We will have some questions after their presentations.
I am very pleased to have on our panel Ms. Debra P. Steger, Full Professor, Faculty of Law - Common Law Section, University of Ottawa, who teaches and carries out research in the fields of international trade law, international investment law, and international dispute settlement and arbitration. The professor has practised international trade, investment and competition law with major law firms in Canada and has held many senior positions. She was the senior negotiator on dispute settlement and the establishment of the World Trade Organization during the Uruguay Round and served as General Counsel of the Canadian International Trade Tribunal, just to name a few of her accomplishments and previous experiences.
Our second panelist, Mr. John Weekes, is Senior Business Advisor for international trade issues, Bennett Jones Ottawa. From 1971 to 1999 he worked in the Canadian government and held such positions as chief negotiator for the North American Free Trade Agreement and ambassador to the World Trade Organization, where he used to suffer delegations that I used to go to Geneva with and give, as I recall it, Trade 101 every time we appeared. We appreciated that.
Our third panelist, Mr. John Curtis, is Senior Fellow, C.D. Howe Institute and International Centre for Trade and Sustainable Development in Geneva and Executive Fellow, School of Public Policy, University of Calgary. In the Public Service of Canada for 35 years, Dr. Curtis was the founding chief economist of the Department of Foreign Affairs and International Trade, now of course called Global Affairs Canada, having earlier served in a number of economic policy positions in several departments.
As you can see, senators, we have an array of talent and experience at our witness table that we are very grateful for.
I don't know if there's any particular order that you wish to go into. If not, I will just turn to Ms. Steger to start. We have your opening statement. We will hear from all three of you and then proceed to questions.
Welcome to the committee.
Debra P. Steger, Full Professor, Faculty of Law - Common Law Section, University of Ottawa, as an individual: Madam Chair and senators, it is a great pleasure and an honour to appear before you this afternoon to talk about the topic of bilateral, regional and multilateral trade agreements. I am especially honoured to be on this panel with Ambassador John Weekes and Dr. John Curtis, two former colleagues of mine in the Government of Canada in the trade area, whom I have known, I'm pleased to say, for 30 years and who are very good friends of mine.
The WTO and the NAFTA, the two pillars of Canada's trade policy, are now already 21 and 22 years old. A lot has changed since the mid-1990s. Global value chains have changed the way businesses trade. The dynamics of the world economy have shifted with the rapid rise of the emerging economies. The major players in the trading system are now the United States, China, the European Union, India and Brazil.
What role should Canada play in this rapidly changing global economy? How best can we promote and protect our economic interests? Are multilateral or regional trade agreements the best option for Canada? Are the two different types of agreements complementary or contradictory? Should we continue to negotiate regional trade agreements and foreign investment protection agreements around the world, as has been our strategy in the past few years? Or should we refocus our efforts on the multilateral trading system and the WTO?
I want to make four key points to you today.
First, the World Trade Organization, the WTO, is not dead. Not by a long shot. Multilateralism, until recently, was always at the very core of Canadian trade policy. It must be again. The WTO rules and dispute settlement system are critical elements in the infrastructure of the trading system. There are issues which can only be negotiated in the WTO, such as agriculture and subsidies. Leadership by the developed countries is needed in the WTO. We can work with friends such as the European Union, which has always been a strong supporter of multilateralism. Commissioner Malmström recently introduced a list of subjects that she would like to negotiate in the WTO post-Doha. Doha is over. It is time to get on with the new agenda, which includes investment and subsidies, two subjects that Commissioner Malmström listed recently. We can work with the EU on these subjects and with the 22 Trade in Services Agreement participants on trade in services. Canada needs to ratify the WTO Trade Facilitation Agreement, which was agreed at the Bali ministerial meeting just over two years ago. Sixty-seven WTO members, including almost all developed countries and many developing countries, have already ratified this agreement, but Canada has not.
Second, regional trade agreements are about much more than trade in goods, trade in services and intellectual property. They go beyond the WTO. The new agreements, such as the Canada-EU CETA and the TPP, reach into areas of domestic regulation that the NAFTA and the WTO did not reach into before. I am talking about subjects such as labour, competition policy, environmental policy, natural resources, professional qualifications and food safety. These are just some of the subject areas that these new agreements, which are really economic regulatory issues, reach into. The full impact of these agreements cannot be measured in statistics. There's a delicate balance to be struck between reducing impediments that businesses face— not only at the border but also, more importantly, once they have invested inside countries— and diminishing the freedom of governments to regulate in the public interest. Ultimately, in my view, these new regional trade agreements, like the CETA and the TPP, which I have examined very closely, do not limit the sovereignty of governments to regulate. Rather, they help to ensure that principles of fairness, non-discrimination and due process are observed when they do regulate in these areas.
Third, investment agreements raise similar issues and therefore have been the subject of criticism. Proposals have been made recently, by the EU in particular, to reform investor-state dispute settlement by establishing a court with an appellate mechanism. In my view, this would be an improvement over the existing system. Moreover, I think it is important that Canada also move with the European Union toward negotiating multilateral investment roles in the WTO.
Fourth, we should ultimately, I think, be strategic in developing a trade policy for Canada. The choice is not an either-or choice. It is not either the WTO or regional trade agreements. We need both. The WTO should be the central pillar of our trade policy. We should, however, also pursue regional trade agreements and investment agreements when it is in our economic, political and social interests to do so. How do we determine this? We need to carry out comprehensive examinations before entering into negotiations of bilateral or plurilateral trade agreements. This should include economic studies and consultations not only with business but also with civil society and the public, taking into account economic interests and also consumer interests, environmental impacts, social concerns, foreign policy and other considerations. I want to emphasize one thing at the end that's very important, namely transparency— not only after negotiations have been concluded, but, more importantly, before they commence and during negotiations. Other countries, such as the United States and the European Union, have formal consultative committees that they use throughout the negotiating process and even before negotiations commence. We should also consider adopting such mechanisms to demystify trade and investment agreements and to provide real input into the negotiating process.
I would be happy to answer your questions after my friends have made their presentations. Thank you very much, Madam Chair.
John Weekes, Senior Business Advisor, International Trade Issues, Bennett Jones Ottawa, as an individual: It is a pleasure to be here. Honourable senators, I would like to commend the committee for undertaking this investigation on these matters, which I think are particularly important. I think it is good to begin at a general level rather than in the detail of the various agreements.
My quick answer to looking at the three agreements and the prospects for Canada is to say that I think all three types of these agreements have something to offer and we should take advantage of them where we can.
I am going to start with the multilateral, partly because I think a lot more attention has been paid recently to the regional and bilateral negotiations. In the interests of providing a bit of balance, although Debra has already done that, I am going to say something about the multilateral.
I will start with the outcome of the recent Ministerial Conference in Nairobi in December. Certainly following that meeting a number of observers have said basically the WTO's negotiating function is now— I don't know what to call it— dead, futile. I don't agree with that.
I would remind you that back in 1989, two years after the Uruguay round of GATT negotiations was launched and this negotiation led to the formation of the WTO, Lester Thurow, who was then the former dean of the Massachusetts Institute of Technology, Sloan School of Management, said on a number of occasions that "the GATT is dead.''
John Curtis, Senior Fellow, C.D. Howe Institute and International Centre for Trade and Sustainable Development and Executive Fellow, School of Public Policy, University of Calgary, as an individual: It is just a technical school, though.
Mr. Weekes: Of course, the GATT went on to score the biggest agreement in history in a trade negotiation, so I think you shouldn't write off the WTO too quickly.
It is still important and, as Debra has underlined, it is the bedrock of the trading system.
Institutionally, it is very important. From a dispute settlement point of view, all the more difficult international trade disputes are brought for adjudication to the WTO. This includes the country-of-origin regulation dispute that Canada had with the United States, the COOL dispute, Canada and Mexico, which finally— following successful completion of the WTO process— led to the U.S. Congress repealing this legislation last December. It is very much relevant to current things going on in Canada.
Effective trade monitoring is another major success of the WTO. It can be argued that this monitoring, which was intensified after the 2008 financial crisis, has played a major role in helping the world community to resist protectionism, which could all too easily have erupted in those difficult times.
Now, another point that not everyone realizes is that all regional and bilateral agreements borrow heavily from the WTO. You just need to read through the TPP provisions to see how many times the WTO provisions are called up or cited. Not only that, although the Doha round negotiations are clearly over at this point, the WTO is still central for a number of negotiations. Accessions, where more and more countries continue to join the WTO, including, since the formation of the WTO, three G20 countries: China, Russia and Saudi Arabia.
Some big agreements have just been improved in the recent past in the WTO. The Information Technology Agreement, which provides for duty-free treatment in information technology products, was completed at the Ministerial Conference in Nairobi. The Agreement on Government Procurement has, in the last year or two, been improved and enlarged. There are negotiations to eliminate duties on green goods, which are now under way in the WTO and which include China. The Trade Facilitation Agreement, which by some estimates is a potential benefit to the global economy of up to$1 trillion a year, is now in the process of ratification. The Trade in Services Agreement negotiations in Geneva, which Debra mentioned, although taking place outside the WTO, in Geneva, are all about how to improve the WTO agreement on services.
Debra also made the point, and I think it is worth underlining, that there are some subjects that do not lend themselves to negotiation in bilateral or regional agreements. Very important among those are subsidies, including domestic subsidies for agriculture. There's a growing awareness in Canada that the prospects for the Canadian agri- foods sector are impaired by massive foreign agriculture subsidies.
Subsidies are a tool which disproportionately benefits countries with huge internal markets. It is a much less effective tool in the hands of a country like Canada. Pursuing this at some point in the WTO to get better discipline on these practices is very much in Canada's interest.
The decision in Nairobi to ban export subsidies in agriculture is important, but it does not incorporate the ban into the formal WTO agreements and does not make that ban subject to the WTO dispute settlement procedures.
Another area not covered is trade remedies, which can't be negotiated successfully in regional or bilateral agreements. Trade remedies include anti-dumping duties and countervailing duties. Countervailing duties are a big part of where our problems with the United States on softwood lumber arise. I would underline that there's no provision in NAFTA, CETA or TPP that effectively deals with either trade remedies or domestic subsidies. These are only dealt with in the WTO.
The Nairobi Ministerial Conference has shown that the Doha Round, as originally configured, is not going to succeed. Frankly, that has been clear for some time. I don't think the international community properly prepared for the Doha Round. That could be the subject of discussion for another day because the round that was launched that became the Doha Round was really using the intellectual capital that was developed in the early 1980s for the Uruguay Round. It was really based on what the world looked like in 1980, not what the world was like in the 21st century.
I think that WTO members now have a chance to rectify this situation. I suggest that they, with Canada playing a leading role, should chart the WTO agenda for the next decade. There are a lot of issues which could be tackled. Some of those are mentioned by Commissioner Malmström; we could develop our own list. I would cite four major headings, without going into detail, to give you a sense of the breadth of what could be looked at. Global value chains hadn't really been appreciated at the time the Doha Round was initiated. Trade effects of efforts to reduce carbon emissions is a topical and big subject that has a lot of implications for how you deal with the trade rules in a system of new disciplines on carbon reductions. The impact of domestic regulations on international trade was a point cited by Debra that is arising in these new agreements, but that would certainly benefit from further effort at the multilateral level. The use of export restrictions and the security of supply of industrial and agricultural materials is something that is being looked at with increasing frequency in the WTO. There are an increasing number of disputes on these matters, and I would suggest that all four of these headings are ones that can be more effectively addressed when all members of the international community are represented.
Of course, old issues like reductions in domestic support in agriculture and trade remedies should be part of the new agenda as well.
I'm going to address one, what I call a myth. You often hear the story that the WTO has too many members to be able to permit an effective negotiation. False. The major reason the Doha Round was not successfully concluded was because there was no meeting of minds among the biggest trading countries, like the United States, China and India.
Let me turn to regional and bilateral agreements. I will take them together in the interests of time. We live in an international environment of competitive trade liberalization. Countries whose producers compete with Canadians in global markets are busy negotiating FTAs and in a number of instances are ahead of Canada. Canadians need at least an even playing field, and it would be better if they had the edge as new markets are opened up. Tariffs can be eliminated or significantly reduced more effectively in regional and bilateral agreements than at the multilateral level, although utilization rates are very low for many free trade agreements, presumably because of rules-of-origin difficulties. This should be looked into.
Canada should now focus, in my view, on the liberalization opportunities that could result from FTAs with India and China.
As Debra said, new agreements, like CETA and the TPP, have begun to address new issues relevant to trade in the 21st century. We need to be part of that process.
A couple of final points about better information for Canadian trade negotiators. I will start with statistics. This is not just for Canadian trade negotiators, but for Canadians more generally to be able to discuss what is really going on in trade negotiations and what is important for Canadian commercial and business interests.
In my view, there's too much reliance on old statistics that show only trade in goods, which is a diminishing share of what matters in Canadian foreign commerce. Very useful work has been done by the Conference Board of Canada, and I would note in particular a report last August entitled Spotlight on Services in Canada's Global Commerce.
Among other things that are of particular note in that report is the finding that services account for 44per cent of Canadian exports— I repeat: 44per cent— when their contribution to global supply chains is properly recognized through value-added statistics. Also, services account for 43 per cent of all Canadian products sold through foreign affiliates of Canadian companies.
Now I want to move from the Canadian example, briefly, to the global picture and to talk a little bit about the role of investment and why investment is so important. This provides the statistical underpinning of what Debra was talking about.
I would like to cite a couple of observations from the World Investment Report 2014, which shows sales by foreign affiliates as a share of global GDP. In 1990, these sales accounted for 21 per cent of global GDP. So 21 per cent of everything that was sold in the world was sold through foreign affiliates of multinational companies. That's pretty striking: 21 per cent. In 2013, the figure had gone up to 46 per cent — that is, 46 per cent of everything that is produced in the world, goods and services. Regarding exports of goods and services as a share of global GDP, in 1990 it was only 18 per cent. That's still a pretty big number, but a lot less than the share of sales by foreign affiliates. For 2013, the figure was 31 per cent.
I submit to you that Canadians and our negotiators need timely and improved data to be able to understand what these new realities in global commerce mean for Canadian businesses. I think that the government should work with Statistics Canada to ensure that Statistics Canada's work is relevant to today's needs.
Lastly, I underline what Debra said about the need to take another look at how the Canadian government structures consultations for trade negotiations.
I believe that the current system should be reviewed and strengthened to make it more effective. This system needs to be structured and implemented to encourage business and others to provide the best possible advice. It should also foster public confidence that the negotiating positions are based on the best possible information. To do that, the process needs to be transparent so that it is known with whom the government is consulting.
Thank you, Madam Chair.
The Chair: Thank you, Mr. Weekes. We will now turn to Mr. John Curtis.
Mr. Curtis: Thank you, Madam Chair and fellow members. I'm delighted to be here today.
I read last week's testimony by friends of mine, including the former Premier of Quebec as well as Dan Ciuriak and Eugene Beaulieu, and I have enjoyed listening to my two colleagues. I can't tell you how revolutionary it is, I would say to committee members, that a former trade negotiator would say we need statistics. This is unbelievable, but very helpful. The world is changing and moving forward.
I know the committee last week heard from my two economist friends— I'm a professional economist myself— about forecasting and forecasting impact. I would only caution the committee members to be very clear that we economists are in competition with astrologers in terms of who are the best predictors of the future. It is something you have to be very careful on.
I was going to take a slightly different tact because of the testimony you have heard already this afternoon as well as last week's testimony. It is absolutely clear, and my colleagues have confirmed this, that international trade and investment are absolutely key to the structure and performance of the Canadian economy, dating right from when the first Europeans arrived on our eastern shores and, since I'm a west coaster, presumably some from Asia arrived on our western shores. Trade has always been an element of the Canadian story.
The problem is the world is changing. That was alluded to by both John and Debra. It is changing in fact and also changing in public perception. I think we don't often recognize that is occurring. In terms of sort of the hard economics, it looks as if what we call in the profession "trade elasticities''— that is, the reaction of an economy and its growth to the volume of trade— is diminishing over time. We don't know why that is. We don't know whether it is the slow ending of integration and globalization or the aftermath of the recession 2008-09 or elements of protectionism, to which my two colleagues referred. We're not sure. The fact is that it looks as if the bounce that trade gives to any given domestic economy is lower than it was in the post-war period.
A lot of what you heard last week about how trade is great and how it contributes to Canadian growth is fine, but that's a 1980s and 1990s story. It isn't the story of this past decade and this current decade where trade is not contributing to economic growth. That's a bit of a worry.
Second, public perception is changing over time. This is reflected, I think, in the fact that fewer international trade economics courses are being offered at Canadian universities in the last few years. I note that with some worry. I note that business interests, commercial interests in Canada, are not pressing for new trade agreements as much as they might. They're focusing on either country X or agreement Y, but the whole pressure by the private sector is not there because their priorities have probably changed. They probably think the money is in the bank, so they don't have to worry about international trade, WTO, TPP, CETA and these other things that people have worried about.
The other thing I notice is that your colleagues — fellow politicians — and my former colleagues — government officials and international officials — and commercial interests and the media are focusing much more these days on domestic, economic, cultural, social, political issues. There's such a change in public perception. Trade isn't what it was in the 1980s.
If you say, "Well, I work on these trade agreements,'' people will say, "That's fine, but I'm really interested in something else.'' Climate change probably has removed international trade from the public's priorities. It is still there, but it is not the priority it once was.
The focus is on the domestic economy. It is a bit of a worry, not only for Canada but also if you look at the G20, the International Monetary Fund, the World Bank, any agency— with the major exception of the World Health Organization, thank goodness, and maybe international terrorism and money laundering, which are still multilateral— most of the public's attention and most of the government's attention tends to be domestic.
This is a worry for all governments— not to criticize us or others, but there's a slight change of focus. The problem is it is leaving room— it is leaving a vacuum. Yes, all those activities going on in Geneva and these various negotiating groups across the Pacific have now finished the TPP, but it is leaving room for other initiatives, particularly those led by the Chinese.
The Asian Infrastructure Investment Bank and the Belt and Road Initiative measures are filling in where the multilateral system writ large— not only trade but the whole system— is just not performing or not thought to be performing as efficiently and effectively as it was in the past.
I have only four recommendations and then I will leave you, if I might, Madam Chair, with my thoughts. My colleagues will probably agree that Canada has a long tradition of punching above our weight, if I can put it in those terms— sometimes based on statistics— on occasion.
Let me just run over these ever so quickly, if I may. One is that I think very clearly— and this committee could well recommend this— that both our outstanding agreements, the CETA, the comprehensive economic arrangement with the European Union, and the TPP should be implemented by Canada as quickly as possible. It doesn't mean that it's perfect, but in anything in public policy the enemy of perfect is good, and vice versa. I think these are basically important agreements for Canada. There are problems in each. I don't know if the committee wants to discuss them today, but the fact is that if we don't implement them, we will be marginalized with our most important trade and investment partners— the European Union, the United States and Mexico.
We must avoid being marginalized. That's point number one. Implement these things and get on with all the consultation that we should have and need. Ultimately, these agreements are not perfect, but they will provide the predictable rules and framework of rules and practices and behaviour. A lot of this is behaviour. It is the practice of the private sector dealing with each other where Canada can chart our future, our way forward.
The second thing I would propose is that we be very clear— and I heard this, I believe, from Professor Beaulieu last week— that we have got to get our Canada-U.S. economic relationship sorted out far better than we have. To some extent, the problems at the border are really taking away a lot of the benefits of NAFTA — for example, the delays and the difficulty of people getting across and sending goods across. We have all sorts of instruments out there. We have the Regulatory Cooperation Council and other things, but basically the Canada-U.S. relationship is not as strong as it should be. Therefore, our competitiveness and our productivity are being negatively affected. Related to this, I think we have to look seriously at an economic cooperation framework with China for more than an FTA. We should match the Australians with respect to what they did with China. However, I would argue, given Canada's size— relatively small compared to the others— that building on our Bethune and Trudeau the elder traditions and everything else, we can do much more with China than just a simple trade agreement. I think we can work in the G20 more actively together, work on governance matters and work on international financial matters as they try to internationalize their currency slowly, the renminbi. China is an important aspect in particular because in strengthening the Canada-U.S. relation we have to be aware, I think, that the major foreign policy issue of this century is U.S.-China relations. If we were able to assist both sides in our own way, quietly in our own interests, to advance that economic relationship with China, I think the world would be better off.
Third, we have to work more effectively between the public sector and the private, in particular, I would argue, in the areas of innovation. That came up last week. Let me point particularly to one area where I think we're really faltering on innovation— and it is not R&D and these other things you have already heard— namely, immigration of high-skill people. I hear stories from immigration lawyers in Toronto; from my own son-in-law, who was trained in Toronto but was unable to stay in Canada as a high tech person; and his cousin, also trained in Toronto, who wanted to stay Canada. There is story after story. I know doctors, Canadians having married Americans, and the offers were so slow in coming, immigration was so difficult, they end up at Arizona State University, rather than practising in Canada. This is atrocious, and what a loss to this country. That's my third point, private-public.
Finally, my bugbear is that I would hope for the longer term, well beyond the life of this current government and others, that this committee would urge the Government of Canada to announce and launch, at a pretty early date, a major arm's-length public policy research initiative, a commission of inquiry into Canada's longer-term economic future. Not just growth, and I know the Minister of Finance has announced an advisory committee, but a full-scale Macdonald commission 2.0. If any of you are older than I am, that's called a Gordon commission 3.0. A lot of us were brought up on those earlier commissions of inquiry into the economy. It brings everybody together— academics, business interests, church groups, immigrant groups. Everybody can be part of looking at this country and understanding better where we fit in the world, because the world changed. Technology, the Asian Renaissance, and frankly, we are so complacent that we sort of watch the world go by.
Thank you.
The Chair: You covered a lot of ground. We have got some commonality and some not-so-common areas and directions, so I think you have generated a long list of questioners.
Senator Johnson: You mentioned Dan Ciuriak; he was here last week. He raised a couple of germane matters. He mentioned that once innovative start-ups gain critical mass, they and their patents are gobbled up by larger non- Canadian firms. Could you comment on the state of IP in Canada and how we can best foster the growth of more innovative Canadian firms? I then have a follow-up with regard to the United States.
Mr. Curtis: It is always dangerous to take on Jim Balsillie, never mind Dan Ciuriak, who worked with me in what is now Global Affairs. Intellectual property is only part of the story. Innovation is not only related to intellectual property but is a very key element and part of our overall system.
He is right in bringing to the committee's attention the fact that there's real underlying debates going on, particularly in the United States, although they are a proponent of stronger intellectual property rights and enforcement, but there is a debate in the United States as to whether too much intellectual property is slowing down innovation, what we call "patent trolling.'' New Zealanders, to some extent, looked at the extension of copyright, which was proposed in the TPP, and they found that moving from 50 years' protection to 70 years' protection would cost each New Zealander $10 per year for a lifetime.
There is a cost to the intellectual property, and the question is, is it a benefit to society? In other words, is getting the books and technology worth the higher rent that one is paying, the royalties and the licencing? It is a question of balance. Society has to work out that balance, but it is a really active debate.
In the Canadian context, we are net users of the world's intellectual property. I don't think we need to be accountants and say that it is too bad we have the deficit, because sometimes it is cheaper to buy technology and movies than it is to create everything here. There's no question that it can be economically beneficial in the short term.
A certain amount of homegrown work is important, particularly because competition now is not rocks and logs and cars; international competition is increasingly ideas. That's intellectual property.
We have work to do. The government has to give serious thought as to how we can improve the basis of intellectual property in this country and not have our high-tech firms, of which there are 250 even in this city, once they grow, be taken over because either the tax system isn't favourable or the idea is not picked up.
I have a real bugaboo about immigration, if I may make one last case. We should think in terms of a Canada innovates act, part of which is innovation visas. Technology, skilled labour, venture capitalists, entrepreneurs, we grant them 10-year visas, not tied to any particular firm but just because they're trained and they can contribute to Canada's intellectual capital. Because that's where the world competition is, not so much rocks, logs and cars.
Mr. Weekes: Let me take a slightly different tack. I will start with Jim Balsillie because I think everybody has been reading what he said on these matters. I read and listened to several of the things he has said, and what strikes me is that it seems to me he makes quite a few good points about problems with Canada's innovation strategy. What I feel is missing is what this has to do with the Trans-Pacific Partnership. I don't see anywhere in his analysis where he makes a link or explains which provisions of the TPP are preventing Canada from having an innovation strategy.
I think he told Anna Maria Tremonti on "The Current'' that he had met several times with Minister Freeland, and I thought perhaps he should go and see Minister Navdeep Bains instead and talk to him about what his ideas are for how our innovation strategy could be improved.
IP just didn't suddenly pop up in the TPP for the first time. Actually, the IP provisions in the TPP add very little to the IP provisions in the WTO, the NAFTA or in the CETA. Yes, John commented on one where there's the extension of copyright and some differences on patents. Almost none of these would require any change in Canadian legislation.
Mr. Curtis: That's right.
Mr. Weekes: It is important for any innovation strategy that you have a sound basis of intellectual property protection because nobody will put the effort into doing the development needed to come up with a new product or idea.
It is a question of balance, as John Curtis, said that society needs to figure out where to strike the balance, and that has to be properly reflected in our trade agreements, and I think it is.
Ms. Steger: I agree with what John Weekes has just said. I listened to what Mr. Balsillie said on the CBC, and I read what he had to say. By the way, Professor Michael Geist in my law school has been outspoken as well on this issue as it relates to the TPP. Professor Geist was also opposed to the CETA when it came to the intellectual property chapter, but at the end of the day, he felt that the chapter that was negotiated by Canada was acceptable to him.
The two of them are opposing the TPP just because of what they see in the intellectual property chapter. I have the same response that John does, and that is I don't see in the TPP or CETA any major differences between what the obligations are in those chapters and the WTO, quite frankly, or in existing Canadian legislation.
Second, when you look at everything that is in the TPP, intellectual property is just one of about 20, 25 or more chapters. I don't think the whole agreement can be assessed simply on the basis of the intellectual property provisions, even if you didn't like the intellectual property provisions. And I don't think that the impact of the TPP on Canada's innovation policy can be assessed only on the basis of the intellectual property chapter. That's another problem with Jim Balsillie's analysis of the TPP and Professor Michael Geist's.
Senator Dawson: Thinking outside the box, Madam Chair, having the Minister of Industry come before the committee — we always think of the Minister of Foreign Affairs and the Minister of International Trade, but what he and Industry Canada want to do is as important as what Foreign Affairs wants to do.
When most of these topics occurred, neither one of these products existed. Where did they come from and where were they made? Global value chains are evolving so rapidly that the traditional way of looking at products and countries of origin has to be changed. I would like you to elaborate. Most of the products we will have in 10 years are probably not on the market yet.
I was reading the text in French, Mr. Curtis.
[Translation]
One Belt, One Road.
[English]
I thought I would read it in English and I would understand. It's about the Chinese and their Belt and Road Initiative. Can you elaborate? I have absolutely no idea about that. I might be embarrassed to be the only one who doesn't know, but I just have no idea what it is.
Mr. Curtis: I will do it quickly. This is the Chinese initiative to use their infrastructure investment bank, which is not only to support financial investment abroad but also their claim to territorial waters in the South China Sea. It is to maintain the openness of the Strait of Malacca for their oil in the years to come. It is basically the Chinese assertion of territorial sovereignty as well as their larger international legal rights, in their mind. That's one part of it.
The other part is to build a highway and railways from the western regions of China— Tibet through Afghanistan, Northern Pakistan and across Iran to Central and Eastern Europe. That's the old Silk Road updated. It's a major initiative on the part of the Chinese, which they have now started on.
What's interesting, if I may comment, is that this is going to get the Chinese involved much more in the domestic politics of all their neighbours than ever before when they don't like others interfering with them. They're going to find that they're going to be caught up in the practices of all those countries.
Mr. Weekes: If I may comment on the value chains. You are entirely correct. In a way, it's an important part of it and should be looked at. We really haven't studied it as deeply as we should in terms of its trade agreement implications; but one of them is certainly in the area of rules of origin. As the NAFTA chief negotiator, when I first heard about the TPP and the problem that had occurred with what the Americans had agreed to with the Japanese and then how Canada and Mexico were responding, I thought, "This is outrageous. How could the Americans have done this without consulting with Canada and Mexico?''
That was my first reaction. My second reaction was to think about how much the global value chains of the automobile companies have changed since we negotiated the NAFTA. When we negotiated the NAFTA in 1992, I recall that the Ford Motor Company wanted to have, I believe, a rule of origin for North American content for passenger automobiles. This is the content level that the automobile has to have to qualify for duty-free treatment when it crosses the border from one NAFTA country to another. They wanted that level to be 75 per cent or 80 per cent.
In the TPP, it has just been agreed that the level would be 45 per cent among all TPP countries. The difference is extraordinary. Although some companies are still saying that they don't really like it, the fact that a change of that magnitude could even be contemplated shows you how much things have changed.
This brings me back to my point about data. Unless we get the right kind of data and start producing statistics related to what is really going on in the world, we're going to have difficulty figuring out how to negotiate in our best interest.
Senator Dawson: One example of future considerations is smart cars. We'll have a computer composite that will probably have higher value than the motor and the hardware. We're not there yet because even on agreements with the U.S., we're talking about a car-truck crossing the border. We don't think about the fact that more and more they have computers inside, and Transport and Communications might be studying intelligent cars in the future. There's a future in that, and we're not there yet.
Mr. Weekes: My understanding is that the Apple iPad is designed in California and made in China. Actually, because of the intellectual property and design component in it, most of the value comes from the United States, even though the product is imported from China. This raises the question: What do the statistics tell you? The goods statistics show that this product in its full value is an import from China. But the lion's share of the value was exported to China and put into the product from the United States through intellectual property. Measuring these things becomes very complex.
I'm also told that most of the input in the Apple product assembled in China actually comes from other places in Southeast Asia.
Mr. Curtis: Malaysia.
[Translation]
Senator Rivard: My question is on the free trade agreement with the European Union.
We know that currently there is a spanner in the works holding up the ratification and implementation of this treaty, specifically the investor-state dispute settlement mechanism.
Isn't there a mechanism to settle disputes in other economic treaties that Canada has signed, including NAFTA or the upcoming TPP, and in other negotiations, or is this something new?
[English]
Mr. Weekes: The first investor-state dispute settlement provision in a major trade agreement is the one in NAFTA. We have agreed to these sorts of provisions before. It was one that we undertook with a certain amount of concern when we agreed to the NAFTA. How would this actually work out in practice?
I read a newspaper article the other day about what our chief negotiator, Steve Verheul, said in testimony in the other place before a committee about the state of those negotiations. I think he said that the negotiations were completed, but then he went on to say that some clarifications were being looked at in the area of investor-state dispute settlements.
Like what Debra Steger said earlier, indeed there are perhaps not only clarifications but also an effort to look at the possibility of advance implementation of some of the future work proposed in the CETA at the time the CETA would come into force. Frankly, those make sense. It makes sense to clarify the legitimate right of governments to regulate so that there's certainty about that and there isn't confusion in the minds of the public when a trade agreement is being approved that in any way the government is giving away its legitimate right to regulate.
As a non-lawyer, the idea of having a more professional, permanent body that would adjudicate these matters is a good idea, and for when mistakes are made, as they will be, it is very important to have an appeal procedure that lets the process take a second look at whether the right finding has indeed been made.
While this is a grain of sand in the CETA approval process, this is also an opportunity to look at how to make it better. What the government is doing I think is right. Let's not call it reopening the agreement because if we reopen the agreement all sorts of things are going to happen. "Clarification'' is a good word because basically that's the process that should be going on at this stage, not renegotiation, but clarification.
Ms. Steger: Canada has had investor state dispute settlement in every one of its free trade agreements pretty much since the NAFTA. Canada was the demandeur in the CETA. The Europeans didn't want it initially. We got it, ultimately.
I have to tell you that, in my opinion, the investment chapter in the CETA is really a model chapter for the future. It provides significant protection, much more than any other investment agreement, more than exists anywhere in the world for government's freedom to regulate in the public interest in several ways. I won't go into detail, but it provides tremendous protection for government's freedom to regulate in about five or six different substantive ways as well as in the procedures. It is, from a government's perspective, a very balanced new model that is really good for Canada.
The criticism in the past of investment agreements and investor state dispute settlement has been that these agreements and investment chapters, like in the NAFTA, are heavily weighted, biased, toward the investor and do not have enough substantive obligations and procedures that are in favour of the governments— provincial, federal and municipal. And this one now has an appropriate balance. That's because the Europeans and the Canadians see eye to eye on that issue, and so this is a very good model.
The TPP is not like that. The TPP is driven by the U.S. 2012 model, and so it does not have the same protection for governments to regulate in the public interest. I was looking at it again just today, before I came, and the language is not as strong as the CETA. The procedures are not the same as the CETA; again, it's based on the U.S. model. It's better than the NAFTA. Governments have learned from years of litigation, from years of cases, so it is certainly an improvement over the NAFTA. But it's not nearly as good as the CETA model in my view.
I made the point in my opening statement about the European proposal to create a court with an appellate mechanism rather than going to arbitration, which has been widely criticized. The Europeans have got that now in their latest agreement with Vietnam, and they have, I think, from what we read in the newspaper reports, proposed that with Canada. Our chief negotiator in the CETA, Steve Verheul, has hinted that Canada is considering that. That's the only issue that is being clarified or discussed in the CETA at this point.
The CETA has not been signed. It's at a different stage than the TPP. So they are apparently discussing this issue. We don't really know.
I do think it would be a good idea. This would be the first agreement other than the EU-Vietnam agreement that would have this new idea of a neutral court with real judges on it and then an appeals mechanism in investor state rather than arbitration with commercial lawyers. I think this would be a wonderful new procedure, but, as I said, the TPP does not have that.
Senator Cordy: Your presentations have been very interesting. At the WTO conference in Nairobi, both Minister Freeland and the American trade negotiator commented on the Doha Round negotiations.
Ambassador Weekes, you spoke about this as a process that was developed in the 1980s, so it would be about 30 years old, and a lot has changed in that period of time. Both said that we needed new approaches to it. Can you think of new approaches that you would need for 2016 or from here on in from 2016? Should Canada be a leader in terms of changing the way negotiations are held?
Mr. Weekes: That's a very good question. Indeed, I think Canada can play a leading role here. We have in the past, and we're a country that's been involved in a lot of trade negotiations. We have a lot of ideas. We have a lot of partners. And we're well respected in terms of our approach because sometimes if the big guys, the United States or the European Union or China, come out with a proposal, other people are a bit nervous because they're afraid they might get forced into this, whereas if we come out with some ideas it can often be seen as a constructive suggestion rather than a major assault. That's important. I think we have a real role. Certainly in the past we have had a major influence, including in the Uruguay Round of GATT negotiations in the 1980s and 1990s.
Yes, I think it is possible to think of issues that are important in 2016 that weren't really relevant when we launched the Doha Round in 2001 or when we did a lot of the work about the kind of trading system we wanted to see, which was back in the 1980s. There are quite a lot of ideas out there now about new issues that could be taken up. Some of those are in the United States Trade Promotion Authority that was passed by Congress and signed by President Obama last June. There is a lot in the statements made by ministers at the Nairobi conference.
Rather than launching immediately into a negotiating process, we need to think about what issues should be negotiated and have a discussion of that nature that could perhaps be broader than just inside the WTO. That would take a couple of years before, as a practical matter, we could really think of launching negotiations.
You asked about the process of negotiations, too, and there's one area where I feel quite strongly in light of the Doha experience that we should not in another round of WTO negotiations launch them on the basis of what's called "the single undertaking.'' The Doha Round was launched as a single undertaking. A single undertaking means that everybody would agree, all countries, the least developed, everybody, would agree to implement all of the things that were agreed in the course of the negotiation.
Now, this was decided at the end of the Uruguay Round; after everybody saw what had been negotiated, it was agreed to take the results as a single undertaking and to put them into a new organization, the WTO. That was very different. That was at the end of the negotiations, not at the beginning.
The single undertaking frightened a lot of the countries in the Doha Round of negotiations. Because they were worried about what they were going to have to accept at the end of the day, they were afraid to explore ideas, various options and possibilities.
So we need to back away from that and have an approach, frankly, more like the one that we used in the Uruguay Round, where we said we're launching the negotiation, it will cover all these areas and, at the end of the day, we're going to bring all this subject matter back together and look at what we have agreed upon.
But there was no thought at that time that everybody would sign on to all the results. In fact, my recollection— because I was there— is that people didn't think that would happen. But because of the way the negotiation unfolded over six or seven years, the circumstances changed.
So I think you could have a much more constructive negotiating process— that countries and their negotiators could be much more creative— if it were not started on the basis of a single undertaking.
Senator Cordy: It is easy to say and go along with it when you actually see it in black and white. That's a good point.
Mr. Weekes: In a way, I found, as ambassador to the WTO— this was during a period when we were fully engaged in relatively smaller negotiations, not a major round— that one of the problems was that you couldn't really organize a discussion in the WTO, as compared with the exercise of some specific WTO function. The only place where you could really have a good discussion was around a dinner table. People were afraid— other countries were afraid— that if they got into a discussion, they were going to get dragged into a negotiation. Not only that, but given the way the dispute settlement system had started operating, they thought that if they said something in that discussion, this might be taken down and used as evidence against them in a dispute settlement proceeding later on.
We have to look at how we approach the negotiating process with a bit more flexibility so that it doesn't seem too intimidating. That would work much better in the kind of multilateral environment we have in the WTO.
Senator Housakos: Thank you to our guests for being here this evening. It is quite an interesting presentation.
I agree and hear you loud and clear that the 1990s was a decade of tremendous economic activity in terms of trade growth for Canada. We saw the net benefits of all our trade agreements, especially in terms of NAFTA and Canada's relationship.
But it seems to me— and correct me if I'm wrong— that, in large part, the success or failure of our trade agreements is not so much related to the content of what was agreed upon in the agreement but rather the country that we're trading with and if they're experiencing great economic growth. If you look at the 1990s in the United States, their economy was growing in leaps and bounds, so we were trading our raw materials in leaps and bounds. Just a few years ago, China was growing exponentially and, of course, we were trading an abundance of our raw materials.
When we see a slowdown in general economic growth around the world and in particular with those trading partners, it has an adverse effect on us. For 150 years, Canada has been trade-dependent on our resources, and we continue to be, which is a part of my question I would like you to touch upon.
I would like you to comment on the element of competitiveness in our economy, domestically, in terms of our investment innovation that you touched upon a little bit— technology and research— particularly our investment in post-secondary education.
I look at some our trading partners, especially our largest trading partners, and they invest a large amount of money in innovation, research and development, and in post-secondary education. How are we going to compete in the 21st century with institutions— and I always use the example of the American universities, where they have tens of billions of endowment funds— and our top universities in Canada are competing with hundreds of millions of dollars?
So I was wondering what your perspective is on our post-secondary education, our investment in research and technology, and the state of our competitiveness vis-à-vis our trading partners.
Mr. Curtis: Perhaps we might make the senator the ex-officio president of Canadian Economics Association for next year, recognizing that, in fact, the growth of a trading partner does have much more to do with the growth of trade than any trade agreement or any exchange rate. A lot of research has indicated that. You can account for about 50 per cent of all trade growth just on the growth of your trading partner.
The key point you raised is about post-secondary education. I don't think, necessarily, it is that they're underfunded. Yes, the private sector is not contributing as much proportionately as the public sector, but our public sector R&D is really quite good, in a relative sense, compared to all other countries.
Our problem is that we can't hold them here, which is what I was saying before. We have not yet been totally successful in commercializing the research and ideas coming out of our universities. The University of Saskatchewan, for example, and Waterloo— there's wonderful work coming out. A lot of it is picked up and commercialized in the U.S., either with Canadians emigrating— remember, I know we're all taken by the refugee situation now, but 80,000 Canadians are emigrating per year from this country. Most of them are high-skilled. It is unbelievable. A lot of them have been trained at Canadian universities.
So the problem is not really education itself but making use of them and being a more attractive home for the kind of work where those things go on.
Perhaps you have seen, senator, that the head of Google— one being a Russian immigrant and one being an American drop-out from a well-known U.S. university— he was asked, "Well, are you getting most of your recruits for Google from Stanford, your neighbouring university, and from UCLA, Caltech and the other great American universities?'' He said, "No. Our second-biggest draw is from the University of Waterloo up there in Canada.''
So the problem is not funding for universities or our professors; our problem is making use of what we have, including bringing people in and commercializing their ideas in the private sector.
That might be too long-winded, but it is a real issue in my mind, which is why I raise something that is kind of delicate, which is the immigration of the high-skilled and entrepreneurs. But it is a serious question.
I will go back and make a personal statement again: My son-in-law, who works in high tech in Boston, says that all the people he recruits, in Boston, Houston and in California, in energy high technology are all Canadians.
Senator Housakos: Because Canadian companies aren't investing in the gems we have here— is that it? Or are the banks not aggressive enough in supporting innovation?
Mr. Curtis: I think it is the second as much anything.
Mr. Weekes: The only comment I have is one I shouldn't make, because it is more appropriate for you to reflect on this, but listening to this discussion, I'm thinking it does make sense to talk to the Minister of Innovation, Science and Economic Development.
Ms. Steger: My only comment with respect to the universities is that I can tell you that at my university— and I have some experience at the University of Waterloo, because I have had a relationship with the Centre for International Governance Innovation— is that over the last 10 to 15 years our universities have become better and better in their research capacity and with the professors that we have hired. That is certainly true at my law school. They're fantastic; they're world-class. The JD students at our law school are absolutely fabulous.
Where we have difficulty is in attracting top-quality graduate students, because we don't have the scholarships. This is probably the point that you are alluding to: We don't have the scholarships or the bursary money to attract the really top graduate students away from the American universities, which have that kind of money to attract the really top students in the world.
But do we have top faculty? Yes. Do we have top undergrad students? Yes. Do we have top-quality research taking place in Canada, which is the point Mr. Curtis is making? Definitely, there is world-class research taking place in Canada.
We don't have the ability, except for little pockets here and there. Waterloo, I think, is an exception because they have a lot of private money, or University of Toronto. There are a few pockets where there is a lot of private money, maybe. Other public universities do not have as much money to attract the top-flight graduate students. That's an issue that, perhaps, you honourable senators can focus on: Where can we find more funding for the graduate students?
Senator Ataullahjan: Thank you for this really interesting conversation that is going on.
I am going to take a bit of liberty. We keep hearing about China, and how China is doing in the business world. I wanted to ask you, Mr. Curtis, about the Pakistan and China trade corridor. With $46 billion investment, it is being billed as a fate-changer. From the mountains to the sea, it gives China access to the Arabian Sea, with the Gwadar Port. What impact will this have on worldwide trade? China is concerned because it imports 60 per cent of its oil and it passes through those waters in the ships. So what will the impact be on worldwide trade and China's influence in the world?
Mr. Curtis: The tentacles of China are extending over time. It is emerging as a competitive superpower to the republic to our south. It will change trade flows slightly, but these are not major developments any more than Russia being successful in opening a northeast passage in competition with our northwest passage will change that much in terms of statistics.
It is part of China's broader global footprint and its interests, and as I say, they will then become involved in the politics and foreign policy of those areas as well. There's a cost to China in doing that, but it means their risks are more diversified, and as good business people, that's a sensible strategy to follow, to diversify risks if at all possible. If the Straits of Malacca are cut off and if Canada can't get its oil and gas to sea — Pacific Coast or Atlantic Coast — then China has another option.
So it's relevant, but not huge in terms of numbers.
Senator Poirier: Thank you for being here and for your excellent quotes and for sharing the different options we are looking at.
There is a document that came out in November, and my question is for Mr. John Weekes and Ms. Steger. There are two different recommendations I wanted to ask questions on. I will ask two questions at the same time and let you have your turn in answering them.
In the recent paper both of you co-authored, you released a number of recommendations regarding the 21st century strategy for Canada.
The second recommendation discussed CETA and mentioned that it contains the most transparent provision for any recent trade agreement for settling disputes between investors and governments. Just recently some countries in the EU were concerned with this process. Would you care to elaborate on their concerns, and whether they can actually derail the agreement? That is the first question.
The second is with respect to recommendation 14. If I understood correctly, you suggested setting up a barrier-free common market within Canada so that you can fully benefit from the new trade opportunities. Has the business sector been vocal to support a barrier-free common market within Canada, and what can the federal government do to eliminate these barriers?
Ms. Steger: On CETA and transparent dispute settlement, what we were talking about is the investor-state dispute settlement in CETA, but it applies to other state-to-state dispute settlement as well.
CETA really sets a new model in that it calls for public hearings, which is new across the board, not only for investor-state dispute settlement but for any other state-to-state dispute settlement. It calls for all documents to be made public when they are filed in any dispute settlement. It allows civil society and other interested parties, the public, to make representations in all of these cases. It has a very high standard of transparency in any trade agreement.
This is new. We haven't seen this before. The rules for investor-state dispute settlement, even in the NAFTA, allow the parties to decide whether they want to open up particular hearings or let civil society groups, or others, make representations. It gives the parties a lot of discretion. Indeed the investor claimant gets to choose, in most cases, including NAFTA cases, what forum the investor wants to go to. They can— and this has been true in some very recent environmental cases — go to a forum that's completely closed. Therefore, environmental NGOs or other public interest groups might not be able to go into the hearing and hear what is going on. No one would get any copies of any documents. You might not even get a copy of the decision at the end of the day. That happens in some investor-state dispute settlement cases, depending on what forum is used.
So the CETA sets a totally new model in that from the very beginning of the case, everything has to be open completely to the public. There's absolutely no question about it. It is set out in the rules.
That's very, very important. We were just noting this was a really good new model. It is not left up to the parties, and it doesn't depend on what forum you go to. There's no forum that you can choose where everything is closed, and it is not up to the particular claimant to choose a closed forum.
I might note that the TPP is also like this. It has a very high standard of transparency, with open public hearings. The minute a document is filed in the proceeding, it becomes available to the public at large, and amicus curiae briefs — submissions by other interested parties, not just the parties to the dispute — can be filed.
This is a new standard. We haven't seen this before in trade and investment agreements. It is a good, new thing.
Mr. Weekes: I agree with Debra. She knows more about it than I do.
On the question of internal trade, these issues have been around as long as Canada has been, given our Constitution. As we get into these international trade agreements that are of increasing complexity and are increasingly intrusive in terms of domestic jurisdiction, we're starting to get into a situation where we might actually be giving partners outside the country greater rights in terms of benefits in certain provinces than those that are enjoyed by Canadians living in other provinces.
So this has really brought the whole situation back and required people to take a look at it. Certainly, business has been in the forefront of saying, "Look, if we're going to be doing this competition on a global basis, you have to make sure that at least in our domestic market, we can operate as if it's a single market.''
Almost all of the business community is in favour of this. I guess those elements of the business community that benefit from the segregation of the Canadian market, like in the supply-managed sectors — in agriculture, for instance — perhaps would take a different view on this.
Clearly this is an issue of real importance as we enter this new generation of trade agreements. I did talk to someone this morning who told me he had been at a meeting recently on the agreement on internal trade, because the previous government initiated a process for how to negotiate and update this, and so that process is continuing on.
I would hope that that process is undertaken seriously enough so that the result this time really makes a difference and puts Canadian businesses on a more competitive footing in the domestic market so that they can take on the world more effectively.
Ms. Steger: I want to add something very short to what Mr. Weekes has just said on this point about the common market within Canada. This is a very important point, because in the free trade agreements, like the CETA and the TPP, what it says is that the treatment that European exporters or businesses will get is the best treatment available in any one province in Canada.
It is true that a European business could get better treatment under the CETA than, for example, a business in Nova Scotia would get in British Columbia. I don't know if British Columbia has lower standards than Nova Scotia. I just used that example. Maybe that is not fair. John and I are originally from British Columbia so maybe that's not a fair example, but I was using our own home province.
This is true. It is unfortunate. It is a reason why if we're going to ratify it with the EU and the TPP with Japan and we already have the NAFTA, it is imperative for us to develop a common market within Canada.
Senator Johnson: I wanted to touch briefly on the Canada-U.S. economic relationship going forward. I chair the Canada-United States Inter-Parliamentary Group. I was in Washington again. I won't comment on the state of the American mind right now with what is going on, but it is pretty hot, heavy and incredible. I have been doing this work in the U.S. for so long on behalf of the parliamentarians, and we meet with senators and the House of Representatives every year on our visits. How much do they want to work with us in the future? How much can we work together to make it better? We talk to the elected legislators, and their take on Canada is pretty slim pickings when you walk into those offices and talk about everything we are discussing right now.
You mentioned the China piece as well, which we haven't got time to go into today, in terms of Canada making an assistance, but the Canada-U.S. is so critical, and yet we don't see the progress that we should.
[Translation]
Senator Rivard: Maybe the answer will be brief. Mr. Curtis, in your opening statement, you made a link between astrology and the economy. I'm not sure whether I'm addressing the astrologer or the economist in my question. You know that on June 23, in England, a decision will be made on whether Great Britain stays in the European Union. What will be the impact on the Canada-Europe free trade agreement if England decides to withdraw from the European Union? The impact will probably be the same with Scotland and Ireland. Do you think that Great Britain will decide to stay in the European Union? If it withdraws, however, what might be the impact?
[English]
Mr. Curtis: I would say, senator, if you want to visit the U.K. in the next couple of months, buy pounds now, even with the relatively low Canadian dollar. The pound is depreciating rapidly.
Regarding the longer term, if the U.K. were to withdraw from the European Union, it raises the Scottish question on the one hand, which could be more unstable. Perhaps my colleagues who have been involved in the legal side of trade negotiations could answer better than I, but my sense is that the U.K. would have to renegotiate all its agreements, particularly with the EU itself, which could take years, and then separately with everybody else; so it would be a long, drawn-out process, as energy, attention, money flows, as it already has over the recent years, from London to Frankfurt.
Remind me of the other question, senator.
Mr. Weekes: Canada-U.S. relations.
Senator Johnson: Minor detail.
Mr. Curtis: The answer to that is to remind you what former Canadian ambassador Gotlieb commented on when he said that Canada is number four in order of priority, and not a very important priority even at that.
It goes back to the tone that I raised before, which is increasingly inward-looking of all countries, less concerned about foreign interest. The Federal Reserve, for once, has had to worry about the headwinds internationally, and therefore is being rather slow in raising interest rates a second time next month. But the United States has great difficulty recognizing that it is part of the world community and increasingly is going to have to. They're coming to terms with that, but never mind the senators and the congressmen you meet, it makes them a little unhappy to think that they might still be in the top of the world but they have got competition. It is uncomfortable for them.
It is very difficult for us, partly because we think we're partly American ourselves. We're kind of schizophrenic. We get annoyed when you have to show a passport at the U.S. border, and we say that you're like us. If an American says that you guys are just like us, we're annoyed. We have a bit of a schizophrenic attitude.
I think it is very important, to come right to my point, that parliamentarians of both chambers here, never mind our media or academic community, and also importantly our business community, make it quite clear that we do have our own interests. Many of them run parallel to those of the United States, particularly making this continent more competitive, and they should work with us where it is appropriate.
We have to focus our domestic interests out so that we can deal with the United States and China. We're not lying on our backs saying to give it to us; we're saying that this is what we want, these are our interests, and let's see if we can make a deal, even though we're the smaller of the two.
Mr. Weekes: It is a big challenge. I did spend some time after I finished NAFTA trying to help manage Canada-U.S. relations. That was the reward I was given for negotiating the NAFTA.
In a sense, when we are dealing with what we perceive to be a legitimate grievance or Canadian interest, we go down to Washington, and we're kind of perceived as pleading on behalf of special interests, as if we don't really have any right to raise such a difficult issue.
Of course, they usually point out that actually the issue we have raised happens to be important to some of their domestic constituents. Not very important in terms of the overall interests of the United States, but these are problems that come with sharing a border.
To borrow a bit from what John said, we do have a lot of common interests with the United States, although as you pointed out, senator, it is hard to know what their interests are right at the moment, but all will become clear in due course.
We should try, of course, to continue to deal with these issues, when we need to raise the concerns that are of legitimate interest to us, but do so in a way that we situate them in a somewhat broader context of looking at how we work with the Americans in the North American context, in the global context, because we have a lot of shared values and interests. How do we help to export these? How do we support each other in terms of trying to incorporate these ideas into international disciplines? We support each other in the defence area, and I think to the extent that we can be perceived just being a helpful ally, it then becomes easier to raise some of the irritant issues and get a fair hearing.
It is instructive how responsive Prime Minister Mulroney was able to get President Reagan to be on a number of issues like acid rain and Arctic sovereignty that were important to us, but that was something that he could do partly because he was seen in the context of being somebody who of course was looking out for Canadians interests but was also very sympathetic with the United States on a number of other policy issues.
Put some of these irritants in a broader context where we have shared values.
Ms. Steger: On Brexit, let's hope it doesn't happen. But if it does, from a legal perspective it is an internal matter for the European Union and for their European law, and not so much a matter of international law. It is the EU that will sign the agreement with Canada, and the agreement has not been signed yet. Ultimately, it would have to be ratified by the member states that are going to ratify it, and if the U.K. is not in the mix, then I guess the U.K. would not be in the mix. But it is really a matter of their own internal law and not so much a matter that would affect us so much.
We will just have to see whether that would cause a crisis and the EU would feel that it can't move forward and sign any international agreements because this one hasn't been signed at this point. We don't know.
But perhaps they could, and then, as I said, it would be one less country to have to worry about ratifying it. That is maybe a positive way to look at it. I don't know, although I think things would be in such tremendous turmoil and upheaval internally within the EU that the likelihood of its being signed, moving forward and being approved by the council and Parliament is probably somewhat remote and would be problematic for us.
With respect to the United States, we have to wait until the dust settles after the election to see who is in power and what their trade policy really is because what we're hearing right now is depressing on both sides. They both are taking a strong anti-trade stance, and I hope they don't build walls on both borders, our side too, because we're hearing very anti-trade things, as I said, on both sides.
We have to wait until the dust settles and a president is elected, because both of the Democratic candidates in the primaries in 2008 also said they were against the NAFTA. President Obama and Hillary Clinton said they are against the NAFTA, and President Obama clearly is not against the NAFTA anymore, and he's been negotiating free trade agreements.
What is said during the primaries and what a president will actually do can be two different things, and I'm optimistic that that can be the case again. We will have to wait and see.
The Chair: Ms. Steger, Mr. Weekes and Mr. Curtis, thank you for coming. You will see the engagement that you have had with our senators. I have not had any questions, but if I started putting them to you now, I would clear the room of senators, and I would have my own private seminar.
There are many more areas that we would like to cover. We are going to continue our study, and perhaps we will have to call you back for a more fulsome debate on any one of the topics that you have raised.
You have put trade in an interesting perspective vis-à-vis our relations with other countries. We can't succeed in trade if we aren't succeeding with our broader relationship, and it depends on their economic state as much as it does on ours.
These are new areas and new initiatives that we have to reflect on rather than the purist trade country-to-country relationships we have had.
Thank you for your input today, and I know that the committee will benefit, and we hope that some of your good ideas, not the astrological ones, Mr. Curtis, but all the rest, will find their way through our report and our study.
Senators, we are adjourned until tomorrow.
(The committee adjourned.)