Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue No. 6 - Evidence - Meeting of May 5, 2016
OTTAWA, Thursday, May 5, 2016
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 10:30 a.m. to study foreign relations and international trade generally (topic: bilateral, regional and multilateral trade agreements: prospects for Canada); and to study recent political and economic developments in Argentina in the context of their potential impact on regional and global dynamics, including on Canadian policy and interests, and other related matters.
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: Honourable senators, the Standing Senate Committee on Foreign Affairs and International Trade 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 witnesses today on the topic of bilateral, regional and multilateral trade agreements: prospects for Canada. We have held several meetings on this topic, with academics, experts, government officials and stakeholders, and we will continue to do so in the coming weeks.
I am pleased that this morning we have a representative of the Canadian Manufacturers and Exporters, Mathew Wilson, Vice President, National Policy.
Thank you for coming before our committee. I know that you have presented before, so you know the drill, as we say, that you'll make a presentation and then senators would like the opportunity to ask questions.
Welcome to the committee. The floor is yours.
Mathew Wilson, Senior Vice President, National Policy, Canadian Manufacturers and Exporters: Good morning, senators, and thank you so much for having me before your committee. I have been here two or three times before and always enjoy the conversations.
First off, Canadian Manufacturers and Exporters is Canada's oldest and largest, most influential industry and trade association, and I'm pleased to be here on behalf of our 60,000 manufacturers and exporters across Canada and CME's 2,500 direct members. While CME represents some of the largest industrial players in Canada, more than 85 per cent of our network is small- and medium-sized, Canadian-owned enterprises, representing every industrial sector and every export sector, and are from all regions of the country.
Manufacturing is the single largest business sector in Canada. Canadian manufacturing sales totalled $571 billion last year, directly accounting for 11 per cent of Canada's total economic output. Manufacturers employ over 1.7 million Canadians in productive, value-added, high-paying jobs. Their contribution is critical for the wealth generation that sustains the standard of living of each and every Canadian.
Simply put, Canada's domestic market is just too small for manufacturers to thrive. Manufacturing is an export- intensive business. More than half of Canada's industrial production is directly exported, either as part of global supply chains and integrated manufacturing or as finished consumer goods in almost every product category. Manufactured goods account for 75 per cent of all Canadian exports and are becoming more important as natural resource prices remain weak.
While the U.S. market remains the top priority for most of Canada's exporters — largely due to integrated manufacturing supply chains — a growing share of Canadian manufacturers are looking to take advantage of new and emerging opportunities beyond the United States. This includes markets within the EU and CETA, South and Central America, and across Asia and especially with the TPP. However, while they are seeking these new market opportunities, they are also increasingly concerned about increased domestic competition in their home markets.
As such, for CME, while we support trade deals in general, we do not unilaterally provide blanket statements of support for any free trade expansion in a bilateral or multilateral environment. CME believes that trade agreements are only worth signing if they can meet specific objectives. Those would include the following: it creates a fair and level playing field for Canadian manufacturers to ensure that they have an equal opportunity to export to foreign markets, as our competitors have to import into Canada; it allows value-added exports from Canada and not just the export of natural resources; it improves market access for value-added goods and people; and that it does not undermine the existing integrated manufacturing supply chains developed through previous FTAs, especially within the NAFTA.
With this in mind, CME has supported all of Canada's recent free trade agreement negotiations. We understand in some cases that some sectors of the economy could be negatively impacted and that negotiators and the government should be working to overcome those negative impacts but that on balance the trade agreements will be beneficial for Canada.
However, in order for trade agreements to be truly beneficial, Canadian companies actually need to be able to take advantage of them. It is critical to keep in mind that export opportunities start at home and are supported by the strength of our domestic market first, the innovativeness of our private sector and the supports that Canadian exporters receive in accessing and succeeding in foreign markets.
To be blunt, Canada has a poor history of success in free trade agreements. Aside from the NAFTA and specifically the Canada-U.S. trade relationship, very few, if any, free trade agreements have led to an increase in exports in any goods, let alone from Canada's advanced manufacturing sector.
We must do things differently if we are going to succeed and grow. There are three priorities in this regard, from our perspective: a competitive business environment at home; a strong trade support network; and improved education and training of our exporters.
All trade agreements open the door to increased competition. We need to be ready for that competition. While the private sector is willing and ready to compete on a level playing field, our business environment is often not level. While our corporate tax regime is world-class, many other areas are not. Canadian companies still face higher input costs, a much more costly regulatory burden, higher labour costs and higher energy costs than our competitors. Meanwhile, domestic supports for investment in innovation and advanced technologies significantly lack those of our international competitors, including many of those we are signing free trade agreements with. We need to recognize that Canada is not an island and these trade agreements make us less so. Our business environment must be world- class at home if we are to succeed internationally.
Second, while our trade support network is strong, it can and should be significantly strengthened. Manufacturers and exporters need public sector supports to ease financing constraints and identify business partners in foreign countries that help drive Canadian sales abroad. It is critical that the government continue to invest in the Trade Commissioner Service, export promotion initiatives that match Canada's free trade negotiations and increase funding for trade facilitation such as the new CanExport fund and trade financing tools offered by organizations such as the EDC.
We need to do a better job of educating companies of offshore potential. Despite our success and high level of exports, very few Canadian companies are looking internationally. The number is around 10 per cent. We need to set up programs to educate companies on the new market opportunities and to increase our internal capacity and expertise in global trade. An export-intensive accelerator program, for example, similar to what's available in other markets, would help in this regard. Exporters need better foreign market intelligence and improved connections to international business partners that an expanded Trade Commissioner Service could provide.
In addition to these priority areas for CME, to support export growth potential, you had asked me to provide specific views on some specific recent hot-button issues in trade policy, including IP provisions, investor-state dispute settlement mechanisms and the inclusion of labour and environmental protections.
CME supports the inclusion of strong IP provisions in trade agreements. Theft of intellectual property either directly, in the form of counterfeit goods, or indirectly, drain investment from Canada's economy and deter business growth and investment. Any trade agreement pursued by Canada today must strive for strong and robust rules for the civil, criminal and border enforcement of IP rights.
On ISDS, investor-state dispute settlement, CME is a strong supporter of this. We think it is imperative that the trade agreements include processes for expeditious settlement of investor disputes. Especially in markets where legal systems are under developed, it protects Canadian investors when they're making their investment decisions.
On the inclusion of labour and environmental provisions in trade agreements, this is a much more difficult issue in many ways. In principle, CME believes that FTAs are a positive force that raise the wealth and standard of living for all participants and their citizens. Furthermore, FTAs should level the playing field between Canadian and foreign companies, including those areas of regulatory standards.
However, Canada cannot simply impose our regulatory standards for labour, environment or any other area on another country. This would be the same as Canada would never accept someone else's regulatory standards as our own. We should use FTAs to increase protections and bring them close in line with Canada, but we must be realistic that we cannot simply impose our standards and it will take time working with our partner companies to reach complimentary levels.
Thank you again for inviting me here this morning to discuss Canada's bilateral and multilateral trade agreements. CME recognizes and applauds the government's leadership in helping Canadian manufacturers and exporters grow their business in global markets through various free trade agreements over the years. However, we must remain focused on a principled approach to trade that grows value-added exports and does not undermine existing supply chains while implementing a strong support network that will actually allow companies to take advantage of new market opportunities.
Thank you again, and I look forward to the discussion.
The Chair: Thank you for covering so many topics. I do have a list of senators who now want to probe a little deeper on some of them.
Senator Downe: Thank you for your presentation, Mr. Wilson. I am particularly intrigued by your comments and your focus on the lack of success of many of these trade deals. You just have to look at the balance of trade and export numbers, and they fell again last month.
Mr. Wilson: Yeah, bad month.
Senator Downe: With the exception of the United States. You look particularly at Mexico. I think pre-NAFTA there was a $2 billion deficit. Now we're over 20 billion. Peru, Colombia, Jordan — all these deals are signed. Conventional wisdom is how good they are for Canada, how they contribute to our prosperity, but I think you identified in your presentation a host of possible solutions. If you could expand, you talked about the export promotion, more trade commissioners.
It's a lack of confidence for me when I see the export trade numbers. When I turn on my TV and see the EDC running these idiotic commercials with, "This pencil is made in India, your shirt is made in China, why can't you export," if that is the level of expertise and policy framework we're working in, we have a major problem.
You had some very good suggestions there, in my opinion. I am wondering if you could expand, particularly on the trade commissioners. Do you know how far behind we are compared to other countries in putting resources into driving our exports?
Mr. Wilson: That's a wide range of questions in there. On EDC's commercials, in part we're doing these things to shock companies who aren't exporting into even thinking about exporting, so I think there is some merit in those types of strategies. I think it's in the neighbourhood of 10 per cent of Canadian companies actually export; it might less than that. It's an incredibly small number any way you look at it.
For those companies that do export, the challenge or reality tends to be they're intracompany trade, so they are, let's say, auto parts manufacturers who are exporting parts as part of a global OEM supply chain. But most companies, if you looked at the percentage of Canadian companies that are direct exporters, it would be much smaller than 10 per cent. Probably only a couple of per cent of companies actually directly export. Most of them are through supply chains.
We're missing those opportunities. Companies just aren't taking advantage of it. Even where they are exporting through supply chains, they're not going the next step. So if a parts manufacturer is exporting to Michigan as part of a Ford or GM or Honda supply chain, they're not taking the next step and saying, "How can we supply you in Europe and Asia in your manufacturing operations there?" They tend to be regionally and locally focused.
When we look at what other countries have done to overcome some of this, there are some real good examples out there. Look at South Korea, for example. It's probably one of the best examples of an economy that developed rapidly over the last 20 or 30 years, heavily invested in advanced manufacturing technologies, automobiles and consumer technology in particular. They set up their entire government structure to support the growth of those sectors and those companies. They pinpointed the areas they wanted to be successful in and they created a government structure that would help them.
The Trade Commissioner Service, or the equivalent there, would be focused exclusively on a handful of companies and a handful of products to help these countries and then create the right environment and support.
We try to do things to cover everyone and blanket everyone so everyone is treated equally all the time. Sometimes that actually isn't for the best at the end of the day. Canada does have some really strong advantages in advanced manufacturing. Bombardier is in the news quite a bit lately, but our aerospace sector is world class; our automotive sector is world class. Most countries around the world would love to get their hands on our capabilities in food manufacturing and our safe foods, yet we don't export very much in food products.
If you looked at the largest industrial sectors in Canada and targeted some of those and created expertise in the government on how exactly they do need help, it would be a huge benefit.
The Trade Commissioner Service is fantastic, but they tend to be either market area experts or generalists, so they don't have a deep understanding of the sector or the companies they are dealing with, and it creates a lot of frustration in the private sector. It is not a knock against them; it's just a reality of the way the system has emerged over time. I think they need more internal expertise on the sectors and what the sectors really need. That would go a long way to overcoming some of those things.
Senator Downe: I think part of the problem is the policy void. The Government of Canada for a number of decades now has signed these trade agreements, and the end result has been, "We got that done; move on to the next one." It seems other countries are more proactive and prepared. They're waiting for the trade deal to be signed, and then they have their industries prepared to make a full assault, and that impacts their economy. I think we're missing that second part.
Mr. Wilson: I agree. Look at Europe, for example. We've been negotiating with Europe for a while, five or six years, something like that, and we're fully supportive of the CETA agreement, and we've been more aggressive in some ways than the government has.
We launched something called the Enterprise Canada Network, which was a linkage into a group in Europe called the Enterprise Europe Network, which is a B2B matching service for companies to share technologies and do joint research and trade directly with each other.
We launched that on our own, CME did, a couple of years ago, and it has been supported publicly by the government. They have promoted it and it's been going really well. On the other hand, the European commission is out looking for Canadian partners, basically doing tons of market analysis and providing B2B linkages. They're on the ground here on a regular basis and much more aggressive in terms of setting up for success. We've had these conversations with Foreign Affairs or Global Affairs, and they understand this as well. If we wait until that deal is implemented, we've probably lost already. We need to be mobilizing our businesses now to take advantage of those opportunities.
Canadian companies, and this is on them to some degree, need to do a better job of educating themselves on what the opportunities are. We as associations and you as a government also need to do a better job collectively on educating them on what those opportunities can be and then training them up to those standards.
It still amazes me, and I heard more commentary around this recently, in such a multicultural environment, with people from all around the world, how little we actually use the world to our advantage and those natural resources we have developed over the years.
The Chair: I will break my own rules and ask a supplementary. You used the example of Korea, saying that the government has taken a handful of companies and has really put the emphasis there. You also said that the European example is another one.
The trade services, as I understood them in foreign policy — I do not know about the 1960s — certainly through the 1970s, 1980s and into the 1990s, it was that we're there to give information, to explain the country and the political situation, but that they weren't to be agents for. We have now progressed beyond that to say we are facilitators and work hand in hand with businesses who reach out.
The next step I see is not sort of the capability of our foreign policy and trade commissioners; it's the political will. How do you choose which sectors in a country like Canada? You go from coast to coast and say we will pick this industry or that industry? I would say agri-food, you would say aerospace, but that would leave out a whole host of provinces and territories. How can we manage that kind of expertise and bring up our companies, understanding the political reality?
You can see it play out. Governments, often through our history, have not said they would sign on or off on a trade agreement because of the constituencies within the country. How do we overcome that impediment to put ourselves in the same position as a Germany or a Korea? The United States, of course, is a whole different situation.
Mr. Wilson: Korea is very different as well, given their corporate structure of only a handful of companies, and most companies are kind of part of a larger conglomerate. That is certainly a big difference from the Canadian landscape.
The fear in Ottawa is always picking winners. The problem with not picking winners is everyone is a loser as a result. Just look at the trade data. If you went through the trade data, there are only 10 sectors that are responsible for 90 per cent of our exports. Why not start there? I know you do not want to offend anyone, and the eleventh one might fall out of it, but at the end of the day, those will be the ones where you'll succeed.
There are two ways of doing it, as I see it. One is to look at those top sectors and have better internal expertise from the government. One thing that did change, when you talk about 30 years ago to now, 30 years ago, there were sector experts within the government. Industry Canada had them, as did DFAIT then, which is now Global Affairs. That changed dramatically about 10 or 15 years ago. They no longer had sector expertise within the government itself. Those people tended to retire, and they were replaced with generalists. That has a big impact on the relationship between the companies involved in those sectors and the government, and the government's understanding of what the companies are going through.
That is one kind of comment about improving that. It's not about the capabilities of the individuals; it's just the way the setup is. They're great individuals with a lot of talent, but it's just not the same expertise that would have been in place from people who would go from a company and be embedded inside the civil service, which used to happen a lot more.
On picking winners or losers, if we highlight the top 10 sectors — even if you wanted to do 15, but I would be better with five — if you pick a handful of sectors to start with and create export growth strategies for those, you could learn about how those strategies could be applied for everyone else. I'm not saying you should ignore everyone else. I'm saying start with a handful of your best-positioned companies to export. You will probably have a lot more success and you can do lessons learned.
The last thing is that we also need to be targeting specific sectors for growth through these free-trade agreements. The free-trade agreement with South Korea was 99 per cent about their ability to export automobiles into Canada. That's what it was about — and some consumer products — but it was about automobiles. It was a difficult discussion in Canada because we have a very large and important automotive sector. They targeted that sector and the market in order to be able to export those specific things.
If we're looking around the world at what the opportunities are, we should be able to analyze a country's need and our expertise, and match those a lot better. Often there isn't that connection. I think the foreign service often understands those needs, but it never gets back to the Canadian marketplace to identify the 20 or 30 companies in that marketplace and educate them. There's that disconnect between those two.
If you looked at those three things, it would help overcome some of those barriers that we currently have.
Senator Johnson: Good morning. We had a witness, Matthew Kronby, an international trade lawyer, who appeared before our committee and stressed that eliminating barriers to interprovincial trade would increase Canada's competitiveness and then, of course, help the country compete internationally. He highlighted the EU, a collection of 28 sovereign countries with a combined population of over 500 million, which has a mostly free internal market for goods and services. Canada, a single country with a population of just 35 million, doesn't.
What has been the overall impact of interprovincial trade barriers on the ability of Canadian businesses to trade internationally, and to what extent is the lowering of interprovincial trade barriers a priority for the Canadian business community?
Mr. Wilson: That's a tough question, isn't it?
First, let me state we're big supporters of both this government's and the previous government's agenda to eliminate internal barriers and create a true domestic marketplace. The reality is, though, that most of the barriers are in one or two key areas.
I'm sure you all heard about the court case in New Brunswick and the movement of alcohol. That's been a long- standing issue for spirits, wine and beer. That doesn't really have a huge impact; that's more of a consumer issue. Clearly, there are issues around marketing boards in dairy and other sectors that cause interprovincial trade barriers as well, but that's a limited impact on the manufacturing community.
The bigger issues tend to be around two things. The first is local procurement practices and whether companies can bid on procurement opportunities cross-border, which tends to be an issue — although, again, more of a domestic one than a global competitiveness issue.
Second, the movement of skilled professionals tends to be an issue. We still have a huge problem in certifying skilled professionals that move across borders. Even in the training of them, if you are training to be a welder in Newfoundland and you move to Alberta, you have to start your training over again.
Those types of things are the barriers that we focus on. We struggle in Canada to train enough skilled workers. Why would we not make it easier in a Canadian marketplace for those things to happen?
I have no idea what the costs are. I'm not an economist or lawyer, but if I were a good economist, I could probably make up a number. But the reality is that often those numbers are hypothetical, based on input-output tables, and not an examination of reality.
We're supportive. It comes down to those two issues for us. It's the domestic procurement and the movement of people, and the movement of people has a big impact on international competitiveness. If you cannot get the people, that's a huge challenge for industry as a whole for most sectors of the economy. We're limiting the mobility of people, unfortunately, from some places where there aren't great economic opportunities to other places where there are, because people have a hard time moving, and that undermines our competitiveness. That's the one we tend to focus on when we talk to government.
Senator Johnson: I know it's not as hard, even in the United States.
Mr. Wilson: I hear from companies it's easier to move between Canada and the U.S. than it is between provinces in Canada.
What are we going to do? That's a million-dollar question.
On the movement of professionals, this is all provincially regulated and typically heavily influenced by labour unions. I think you had somebody here from the labour unions, and we work closely with them. There are things that could be done there to modernize some of those rules. We work closely with the CLC and other union groups on these issues, and we also work the provincial regulatory bodies in the apprenticeship councils in each province. I think they are getting a better realization that we need to modernize our entire apprenticeship and training model for youth.
I had the privilege a couple of years ago of going to Germany on a mission that then-Minister Kenney did with a group of about 40 others, and we looked at the German training and education system. One thing that struck me was the freedom of movement within Europe. They have national, not regional or provincial, training standards. A welder is a welder, an accountant is an accountant and a lawyer is a lawyer. You don't have to go through provincial or state- level re-certifications, which is good.
The other thing that struck me is how they do the training. We tend to have ratios, so you have so many apprentices. The ratios are there to protect the existing workforce rather than create the next generation of workforce. We've seen changes in Saskatchewan where there has been a lowering of those ratios. You would have one apprentice for every three or sometimes seven journeymen, so some of those ratios are starting to lower. In Germany, there are no ratios. They have master apprentices and they can have as many people under them as they want.
Those are the types of things. We need to move some of those rules out of the 1950s and 1960s thinking of the world.
Senator Johnson: My province of Manitoba joining the New West Partnership with B.C., Alberta and Saskatchewan — that's the kind of promising progress?
Mr. Wilson: It should be, if they actually follow through on the commitments. I'm not so sure. From my understanding, our members are supportive of the New West Partnership, but I'm not sure it has eliminated as many barriers as we would like to see in some of these areas.
Senator Dawson: My question is a little bit in the same context of federal-provincial. Your association has provincial affiliations. I can imagine that the priority for the Quebec affiliation right now is Bombardier and looking at the aeronautical industry as the priority. As a national organization, I would think you would have to be a little shier in supporting Bombardier than they are. How do you combine the national interest versus the interest of your Quebec membership? There is a certain anti-Bombardier feeling in the country, in many circles. How do you combine the interests of your provincial wings, because provincial priorities sometimes are different from federal priorities? How do you handle that Canadian dilemma?
Mr. Wilson: It's interesting. We often compare ourselves to the way the government itself has to operate because of our structure, but we are a little different. Unlike the government and unlike other associations, we're one national organization; so a Quebec member is a member the same way a Newfoundland member is, the same way a B.C. member is. We are one legal entity under an act of Parliament, so there is no difference in opinion. We sometimes debate over some of those things and whether or not certain approaches are better, but we come up with national consensus positions internally with our members and have to find a tough balancing line sometimes.
We're not political. Everyone thinks they are unique. When you go out and talk to people, they are always unique in similar ways. There are often very easy pathways to what the outcomes are. We tend to look at the outcomes that everyone wants and work backwards from that.
For example, we are strong supporters of government support for Bombardier. Our Quebec office has the same statement that I would or the president of our association would. There is no difference. Yes, Bombardier is a Montreal-based company, but a huge part of their manufacturing operations are not in Quebec. They are Ontario- based, as you know, and in Kingston they have a subassembly that goes in to Montreal. They also have a rail car assembly in Ontario, which is going into the new transit system here and in Toronto and other places. We don't see Bombardier as a Quebec company; we see them as a Canadian success story.
In terms of the trade agenda, we need to make sure Bombardier is strong here so that they can play internationally. They are one of our few global brands that we have out there doing things. It's a truly Canadian company that is exporting and taking Canadian innovation abroad. It is important. It is not just for them; it is for their tens of thousands of suppliers.
Our positions are not different, and we are strong supporters of Bombardier. To put it on the table, they have been a member of ours for decades, but what they do is bigger than just them and bigger than just Quebec.
Senator Dawson: I will have to send a copy of your quote to Éric Tétrault to see if he agrees.
Mr. Wilson: He had better.
Senator Dawson: That's very Canadian.
Senator D. Smith: This will be my last meeting because I'm retiring next week, but I've certainly enjoyed all my colleagues.
The Chair: You are not coming to our meetings next week to have a perfect record with this committee? We were counting on it.
Senator D. Smith: I'm departing Wednesday morning. It's a long story, but I'm looking forward to it.
When we go back for several years — and I'm big on doing what we can to increase Canadian exports — a pattern I found frustrating is often when we would do these two-way trade deals, the statistics didn't go up. There was a pattern; they would go down. I have never figured out why, but that does seem to be a pattern. Are we not negotiating tough enough deals, or what is your thought on that? I've always found it frustrating when you get the two-way ones.
Mr. Wilson: That's the frustration generally. A large part of what we're focused on is how to help companies. There were odd circumstances — Colombia, for example — when at the same time we were negotiating a free trade agreement with Colombia, we were manufacturing in southern Ontario a type of vehicle. One company was exporting a type of vehicle unique to that market, and they would be bringing in parts from all over the world and assembling it and sending it to Colombia. At about the same time the deal was signed, that contract was up, and it was 75 per cent of our exports to Colombia. From a trade perspective, import and outbound, Colombia is not big. Some of those things can happen, which can throw the trade numbers off.
The ones I'm more curious about are countries like Mexico. Our exports to Mexico haven't grown at all. We signed NAFTA, and we're 20 years into it, and our exports to the U.S. increased double or triple over the same time. We have integrated supply chains and tons of Canadian companies investing down there, yet we don't see a huge outflow of trade to Mexico. Maybe it's bad trade data. Maybe it's being picked up by the U.S. and not by Mexico, I don't know, but that one is a bigger question mark to me than others.
Senator D. Smith: Trump won't help.
Mr. Wilson: That's not going to help much. The reality is trade deals are only a facilitator to what companies themselves are doing. If the companies are not interested in the market or don't have products to sell on that market, trade deals are irrelevant. It doesn't matter at all.
When we are signing these trade deals, are they being signed for political reasons — which is fine; I understand the need to do that — or are there true business reasons behind signing the trade deals? And if there is an opportunity, from a Canadian export perspective, to grow those market opportunities in foreign markets, I wonder whether we're picking the right partners to dance with.
Senator D. Smith: My last question is on the political thing. There is this referendum about to occur in the U.K. on whether or not they should pull out of the European Union, and it's quite a divisive and lively debate. Of course, quite a few people think that if they do pull out, that will further enhance and stoke up Scottish independence. When you see situations where it can get political, do you have any observations on patterns? The interprovincial stuff is very frustrating, and I really wish the provinces would just tear down those walls.
Mr. Wilson: We don't get involved in those types of things. Just generally, trade deals should be done on where businesses are trading and where they can grow their opportunities abroad. We shouldn't be looking at it from an import perspective so much as we should be looking from an export perspective. If you do a simple analysis starting with where we are exporting to today, where the companies are, and what the long-term trends are, it would give you some idea of where business is leading to. It shouldn't be on just what business is doing today. The government needs to be in a spot to lead by example.
For example, in Central South America, there is a lot of interest for Canadian companies because it is a lot closer than a lot of other markets. Some of them already have business dealings, and there is an opportunity to look at markets like Brazil. Brazil would be a market that a lot of Canadian companies would love to get into. The problem is there is huge corruption and political risk problems there.
I talked about investor state and IP protections because those are so important, but if we can create the right environment to lead companies to some of these larger markets, it would help.
Clearly, there are challenges with Russia, but a company like Bombardier sold a lot of planes into Russia, and now they are not able to get the market opportunities they want. We need to look at those opportunities and facilitate where companies are going, but also help them lead to where the markets are growing. Central South America and Africa would be other places, the developing nations, and if we can get in early, we can set the standards and the benchmarks.
That's what Germany does well. If you are familiar with the German system, they use their national Chamber of Commerce system to develop market opportunities more than the Trade Commissioner Service system, and they get in first, well before any trade agreement is signed, and the trade agreements tend to follow what the businesses are doing from the connections.
Senator D. Smith: I didn't get into corruption. I know it is a big deal.
The Chair: Mr. Wilson, you have covered a lot of ground, as you usually do, and answered our questions in the areas that we're concerned with. Your testimony today will be very helpful in our report and our look at the trade agreements that we have already signed, but also with the future trade agreements that currently are in the conversation. I appreciate your coming and putting your views forward. I had a whole bunch of other questioners, but we have to cut off, unfortunately, so perhaps another time.
I think it's appropriate we ended with a question from Senator Smith. This committee was counting on you coming back next week, but I understand there is a farewell, and we won't get into that. On behalf of the committee, however, Senator Smith, I want to thank you for your years and years of service to the Senate and particularly to this committee. You've been an advocate for your party; you've been an advocate for the Senate; and you've been an advocate for the issues that concern you. They are many, so I'm not going to list them.
What I appreciate from this committee is that you have always put your points of view across but you've always been able to discuss them and be part of a consensus. This committee has a track record of reports that, I think, stand us in good stead. Within the many years that I've been here with you, Senator Smith, there is always a thread of your thoughts in there. From a chair's point of view, I see those reports where you facilitated other people to be able to put their points of view across. I couldn't think of a better representative in the Senate and a better representative on behalf of the foreign policy community and this committee in particular.
I will personally miss all of the notes that you pass me, some of them to ask me when am I going to stop talking, when will we be through, but often they are to jog my memory about many other things, so I thank you for that personal support.
Senator Dawson: Send them from home.
The Chair: That will be appreciated.
Senator D. Smith: Thank you. I'll miss you all, and feel free to visit me when you're in Toronto.
Senator Downe: As deputy chair, I want to associate myself with the remarks the chair. Senator Smith is a prime example of a partisan who became a non-partisan member of this committee. He looked at everything with an independent thought, not that anybody on our side could ever whip him anyway before he became independent, but he was always of independent mind. The committee benefited from that position and also his tremendous experience in the business world and outside interests that he brought to this committee, and that is reflected in the reports. Like the chair, we're all going to miss you very much, Senator Smith.
The Chair: I think the other members can associate with our two comments. We will deeply miss you, but we more appreciate your contribution to the discourse and the recommendations that the Senate can provide for the government in foreign policy. Your experience will be missed, and you will be missed.
Senator D. Smith: Thank you.
The Chair: Honourable senators, we will begin our second session. We are here to study in this session the recent political and economic developments in Argentina in the context of their potential impact on regional and global dynamics, including on Canadian policy, interests and other related matters.
We have by video conference two individuals in their individual capacities — I want to call them experts, not individuals — on this topic. I'm going to introduce Cynthia J. Arnson, Director, Latin American Program, Woodrow Wilson International Center for Scholars, and Eric Miller, Fellow, Canadian Global Affairs Institute and Global Fellow, Canada Institute, Woodrow Wilson International Center for Scholars. The two of you are there together by video conference. Welcome.
Mr. Miller, you can go first.
Eric Miller, Fellow, Canadian Global Affairs Institute and Global Fellow, Canada Institute, Woodrow Wilson International Center for Scholars, as an individual: Thank you very much, Madam Chair and senators. I regret not being in Ottawa today. I'm here for the Canada-U.S. Regulatory Cooperation Council meetings.
Thank you very much for the invitation to appear, and it's a great pleasure to speak to you today about Argentina, a country with so much promise but has consistently failed to deliver peace, order and good government to its citizens.
The election of Mauricio Macri as president of Argentina last November offers a much welcome break from the populism and destructive economic policies of the Kirchner years. President Macri is again positioning Argentina as a constructive partner in hemispheric affairs, including in its relations with countries such as Canada. We should all welcome this development. His deliberate decision to cool Argentina's embrace of less than friendly governments, including Russia, Venezuela and Iran, has important and positive ramifications.
Undoubtedly, the most overt sign of President Macri's desire to turn the page on the past was his just completed move to settle with the so-called holdouts. In late 2001, Argentina defaulted on $132 billion in sovereign debt, and over the coming years, it addressed the claims of most of its creditors, but a small group of Argentine debt holders refused to settle for a substantial haircut. After a long legal battle, Argentina was left with few options but to settle with these claimants on favourable terms if it wanted to return to the bond market.
While criticized by some economists such as Joseph Stiglitz as setting a horrible precedent for other defaulting countries, President Macri correctly decided that he had to settle the debts of the past if Argentina had any chance of returning to a growth path.
Importantly for President Macri, Argentina's Congress agreed with him, suggesting that he had some political capital that will allow him to get things done. But what an agenda he is facing: kill runaway inflation, normalize economic policy, find sources of economic growth, improve competitiveness, enhance security, restore confidence in the political process, but in order to deliver on these and other necessary reforms, Argentina needs to substantially improve on its greatest handicap — governance.
To assess the future prospects for Argentina and to design an optimal Canadian policy, one needs to look briefly at its history. Many historians argue that the beginning of Argentina's descent came with the military coup of 1930. This legitimized will to power and men with guns as a source of political legitimacy in Argentina. This was followed in 1945 by the rise of Juan Peron and the canonization of his wife Evita, which fused hardcore populism with authoritarianism. By the time Peron went into exile in 1955, the country's institutions were severely compromised.
Then the country ambled forward until the chaos of the mid-1970s set the table for the coup of 1976 and the onset of the dirty war. When the generals returned to their barracks in 1983, the nation was traumatized and a whole generation that could have built the country was either dead or exiled.
By the 1990s, the country had entered a period of delusion. President Carlos Menem magically dollarized the economy and Argentina became an emerging market darling. The house of cards disastrously collapsed in the aforementioned 2001 sovereign default,t and out of this crisis emerged Néstor and Cristina Kirchner, with hyper- nationalism, authoritarian tendencies, friendships with anyone other than the United States, and dysfunctional economic policies that led to the sorry state in which President Macri found the country.
In looking back on Argentina's troubled century, it's hard not to be reminded of the line from the Bruce Cockburn song that says: The trouble with normal is it always gets worse.
So where to now? A major question facing Argentina and the hemisphere in the coming years is how President Macri fares and whether he even survives politically. The Kirchner supporters, who in earlier generations were the Peronists, have regularly taken to the streets since he took office. Past centrist reformers have not tended to fare well in Argentina.
President Macri's task will be none other than to change the fundamental trajectory of Argentine governance, economics and society. Canada has an interest in helping him to do this. That said, we have to be realistic about the exceptionally hard hill he has to climb and the ugliness that will ensue if he fails.
There are a number of Canadian companies that run successful operations in Argentina. By and large, however, they have successfully learned to manage the complex ebbing and flowing of the country and its politics. Unless one is prepared to take substantial risks, learn the system and take realistic steps to mitigate against the impact of a future return of Kirchner-like policies, they probably should look elsewhere.
Canada should, at a minimum, not be pushing Argentina as an investment destination. Governments sometimes underestimate the complexities of certain international markets, especially when they have a foreign policy interest in ramping up the presence of their nationals in the country.
Given Argentina's history, a few months of positive government, especially one that does not enjoy a majority in its national congress, is not enough time to make me in good conscience advise companies looking at investing that this time will be different. The experience of companies such as ScotiaBank, which had to write off substantial investments after the 2001 crash, is still quite fresh.
Realistically, the Macri government will have to show a track record of moving the economy in the right direction and successfully managing the impact of the Peronists in the streets if it is to secure the investments of those with less than a maximalist risk tolerance. That said, if President Macri cannot stabilize the Argentine economy and show tangible benefits from his policies of engagement with the outside world, he is likely to face grim prospects.
Canada could help the Macri government in a variety of ways. On the economic side, it could mobilize a combination of EDC pension fund and private capital streams to invest in intellectual property-intensive technology projects. Frankly, the outputs of these linkages will support economic activity but are movable if the nationalist policies and exchange controls return.
On the political side, let's look for some common projects on which to work in the hemisphere that will convey the message that Argentina is back. The public has to see that strong relations with North America and Europe yield greater results than its relations with Iran and Russia.
We can undertake a joint polar initiative, perhaps focused on climate science. Argentina's presence in the Antarctic meshes nicely with Canada's large presence in the Arctic. This would be both useful and present a way to deepen the Canada-Argentina relationship.
Canada has reasons to support the new Argentina but must be realistic that countries, like people, are never far from their past. In terms of prioritizing relations in the hemisphere, Argentina does not rank very highly. Canada should place a much greater emphasis on deepening relations with Mexico and the other Pacific alliance companies: Chile, Colombia and Peru. In order for this ordering to change, Argentina has to earn its way back to the table — a process that would take much time and patience.
Thank you very much.
The Chair: Thank you. I neglected to tell our panelists that your biographies have been circulated and, with respect to efficiency of time, the senators know of your wealth of experience so I haven't read it into the record at this point. Nonetheless we are very appreciate of your knowledge.
I will now turn to Ms. Arnson.
Cynthia J. Arnson, Director, Latin American Program, Woodrow Wilson International Center for Scholars, as an individual: Thank you very much, senator, and thank you to members of the committee for this opportunity. I do not have a prepared statement but will offer some remarks that will in some ways echo what Eric has just said and in other ways differ from them.
The principal task of the Macri government since taking power in December is to disentangle the mess that was left by 12 years of Kirchnerismo. This included entrenched stagflation, which was not an accident but rather inherent in the economic model of that government, eliminate price distortions, the lack of competitiveness, the isolation from international markets, litigation by previous bondholders, cut back on the printing of money and eliminating the numerous obstacles to investment and foreign trade.
I think the Macri government has moved with great speed and success on several of those fronts, putting in place mechanisms for greater transparency and fiscal accounts, particularly reporting of inflation, but given the magnitude of the disaster that it inherited, the adjustments are undoubtedly going to be difficult, politically painful and challenging for the government.
We're seeing the first demonstrations of that, quite literally and figuratively. On April 29, just before May Day, there was a major demonstration where unions came together to put pressure on Congress to make it difficult for companies to fire workers and reduce especially the bloated state bureaucracy that developed under the Kirchner and Fernández administrations.
I think the ambitious targets for reducing inflation, which is running about 25 per cent and actually has gone up about 7 per cent per month, the goal is by January of next year to have inflation in the 12 per cent to 17 per cent range, and all the way down, in January of 2019 in the 3.5 to 6.5 range, which is again very ambitious but not necessarily impossible given the quality of the economic team that Macri has put into place.
There is very much a message from the Argentine government as well as from the Obama administration in Washington that Argentina is back and that this is a new era of putting common sense and rationality into certainly the management of the economy, which is the third largest in Latin America. Colombia, I think, disputes the third place position after Brazil and Mexico, but it is nonetheless a country with enormous potential. Agricultural exports have actually increased since the beginning of the Macri government and the end of a very counterproductive political fight with farmers and large agricultural producers.
I would agree with Eric that the central challenges for this government are political. It is a government that has a minority, both in the lower house and in the Senate, but it has successfully, through dialogue and through a lot of time and effort explaining policies, managed on certain key issues, the most important one of which, I think, was the settlement of the deal with the holdouts, to put together coalitions that will support key initiatives. I think it's striking that some of the strongest supporters of the deal with the holdouts were the members of Congress, both House and Senate, from the Frente para la Victoria, the Peronist coalition that supported Cristina Fernández de Kirchner. There is an effort and a knowledge and an understanding by the government that it needs to build those coalitions behind key reforms.
Nonetheless, there are many factions of Peronismo, and, collectively, there is an interest in not being tarred with the economic pain that comes with the depth and the extent of the economic adjustment that needs to be made and in having the political cost of that being borne by the government and not by their various factions. I think you can see on certain policies that there will be unity among the different factions of Peronismo, but still the capacity to negotiate.
Along the lines of what the greatest challenge is for Macri, he has an absolutely impeccable team of economic advisers, people from the private sector, people who have come back to Argentina from being at the World Bank or at the IDB or in other places abroad. The political advice and the political team is, I think, less apparent, although not necessarily non-existent. He did have hands-on experience as the mayor of Buenos Aires, which is not an easy city to administer. I think one of the things that propelled him into the presidency was the sense that he had had quite a good administration that dealt with these various things.
It's notable that, even though Macri is considered a leader on the centre right, he is very conscious of the need to maintain policies of social inclusion and not do away entirely with the social safety net that was put into place and expanded, sometimes to ridiculous, irrational dimensions, under Nestor, Kirchner and Cristina Fernández de Kirchner.
I would disagree most pointedly with what Eric said before. I think that the political success of the government will depend on the economic success that it has over these next few years. The Argentine economy is expected to contract a little bit over 1.5 per cent in this calendar year. That's not terribly different from other countries in Latin America that are experiencing the sort of double hit of the decline in commodity prices and the slowing of growth in China and, in Argentina's case, a deep economic and political crisis in its largest trading partner and neighbour, Brazil. The external environment is an added source of challenge.
I think the way to make Macri successful and make this model of economic rationality much more appealing is precisely to help to reactivate the economy through investment and things that will stimulate growth, and I would agree entirely on discreet projects on climate change and dealing with polar initiatives. Buenos Aires is also one of the most successful innovation and technology hubs so certainly expanding all of those things, but encouraging Canadian companies to make productive investment that will create jobs, create capacity and allow growth to restore. That's the promise of the Macri administration — that you go through this short-term pain to make the fundamentals of the economy more credible and more stable, and then, from there, a return to growth and prosperity will come. I think the entire international community, but particularly Argentina's neighbours in the Americas, have an important role to play in making that happen.
As a final note: Since Canada is an important mining country and has a very important mining sector abroad, as does the United States, I think that those mining investments, to the extent that they are new or expanded, have to take into account all of the local realities and the issues of environmental and social sustainability that have become so conflictive throughout the hemisphere, less so, actually, in Argentina than in places like Peru, Chile and Bolivia. I think that getting it right from the beginning, even if it takes longer, through consultation with the local communities, through understanding the kinds of bargains with provincial governors, will be in the long-term interests not only of Canadian companies but also the long-term economic future of Argentina, on which the political future depends.
I will stop there, and I welcome comments and questions.
The Chair: I'm going to now turn to the questioners. You've been succinct, covering a myriad of issues. We need to address them all, so we're going to do it efficiently.
Senator Downe: I will try to be brief. Mr. Miller, your comments were most interesting, and, as a Canadian, when I look at Argentina, I often think of the road not taken. As you well know, between 1880 and the 1920s, 1930s, we had very similar, in many cases identical, economies, and we're in a very different place today.
I am just wondering about the assistance Canada can provide if the Argentinians are receptive to rebuilding the governance that you indicated has been a major problem in that country. As you know — I read it in all of the newspapers — Canada is back. Therefore, we have a role to play in the world. I'm just wondering: Do we have any role in Argentina where we can assist them?
I read with interest where the government of China has put their first satellite space station outside mainland China. It is going to be in Argentina and may already be constructed now. It could have some military use. I think the stability of Argentina is the best interest of our region of the world.
Do you see us having any assistance we can provide to them, and are they receptive to our assistance?
Mr. Miller: My sense is that there are some things that we can do, such as on the economic front. What I worry about is that, when countries become popular or attractive, there is a sense that the policy infrastructure encourages large numbers of Canadian companies to go in there, to invest and to look at things. But we have been down the road before where Argentina has been back, and so I would tend to proceed cautiously. Many of the people that I look at would tend to proceed cautiously.
On the investment side, among the things you want to look at are in the technology sector in Buenos Aires, looking at some interesting projects. There is great talent and great capacity there, and that's something that we can look at that delivers benefit to Canada but also delivers benefit to the local economy.
The challenge in terms of large capital investments is that if you put significant resources at play and the government changes or falls or somehow is defeated in the next election, then the prospects of being able to recoup any of that investment are very difficult. Those that have had some success are companies like Clearwater, but they're operating in the south of the country. They've built good relations with the local governors in the southern provinces. Essentially, they're in the equivalent of the maritime provinces of Argentina. They've built up a network of political supporters that have allowed them to prosper in those regions. Nobody in those areas, which are short on employment, has an interest in seeing their investments in the fish processing sector and fish extraction sector disappear.
I think, in many respects, when we're looking at what Canada can do, part of what we have to do in the hemisphere is to say, "Where should we put our scarce resources?" I think we should look at discreet projects.
We can look at things that Foreign Affairs can do on the democratization side. However, it may be better on that front, since this is a big and large-scale project, to look at partnering with some other groups internationally, such as the National Endowment for Democracy in the U.S. and so on, to look at something bigger and more scalable rather than something discrete and more focused, because the hill is just so big to climb.
Senator D. Smith: Dr. Arnson, this isn't really a fair question, but I can't resist asking it. You are an American. If, and I say God forbid, Donald Trump does become president, I do not know whether or not this 40-foot wall or all that stuff will happen, but do you have any thoughts on what sort of dynamics would occur? I know I was in a country in South America about a month ago, and the mere mention of his name and people would go ballistic, but what are your comments on what might happen if that happens?
Ms. Arnson: The Wilson Center, let me start out by saying, is a strictly non-partisan institution, so even though we as employees are allowed to have our own partisan preferences, they're not things we talk about publicly.
I agree with you that there is a great sense of alarm throughout the hemisphere that somebody like Trump would become president. I personally don't discount that, but I also think that it's highly unlikely. I think in the case of Argentina and other countries like the Pacific Alliance, the countries that are trying to get the economic fundamentals right and create a business-friendly environment will be the ones who will prosper under a potential Trump administration.
I don't think Latin America will be a focus of the administration, particularly. I think that many of the things that have taken place under the Obama administration will be rolled back, including the opening to Cuba, which will hurt the United States in the hemisphere.
Latin American policymaking tends to be an afterthought when the big strategic issues in the Middle East or Russia, Ukraine have been dealt with. I would suspect that the main thrust of the policy will be to have correct relations but not to encourage companies who would simply export U.S. jobs, in the vernacular of both Trump and Bernie Sanders, to take jobs out of the United States. I think there would be a return to a much more protectionist America, something that would look for good business climates but not things that would cause a factory that produces automobiles in the Midwest United States to pick up and go to Latin America.
That said, there are major U.S. companies, Ford Motor Company, for example, that have important manufacturing capabilities in Argentina. It's not an either/or kind of thing, and it is possible to export to a Latin American market through productive investment. Argentina has a huge population of its own. If you add the Brazilian market eventually, that also has enormous consumer potential, as do other countries. Argentina is interested in breaking out of its isolation regionally and has been talking to the Chileans and Peruvians and the Colombians about ways to increase complementarities with those countries.
I think things would be very different under a Trump presidency, which I continue to consider unlikely although not impossible. I think six months ago none of us would ever have predicted that he would be the Republican nominee, so reality has a way of surprising one, but I think in a national election he will most likely not prosper.
Mr. Miller: Senator, I would just add one thing. With Mr. Trump now the Republican nominee, it behooves Canada to start doing some planning for what a Trump administration might look like, as they would a Hillary Clinton administration. Part of that would be how we position our foreign affairs and trade policy in that context. It should be done anyway but, considering some of the significant policy shifts that Mr. Trump is proposing, that would be something we ought to look at.
To your question on the wall, one of the things that could get quite interesting is that Mexico currently interdicts more northbound Central Americans heading to the U.S. than the United States does, so Mexican cooperation with the United States on the migration question is absolutely crucial to the U.S.'s own ability to control its border. If that disappears, you get a very different ball game.
Ms. Arnson: Right, not to mention that there has been a negative flow of migrants from Mexico to the United States for some time, mostly dating from the 2008 economic recession. I agree there will be a lot of conflict on border issues.
I could add, though, while I'm thinking of it, that Canada has been a very strong supporter of the Organization of American States through a sequence of very high-quality ambassadors, and also I think a political commitment to regionalism in the hemisphere, and I think that should also be a focus of Canadian policy or a continued focus of Canadian policy in the hemisphere.
This is not the strongest institution, but it's under new leadership. There is a willingness to speak out against human rights violations in places such as Venezuela. I predict that Venezuela will be the crisis of the next several years, and having a strong regional institution like the OAS willing to and capable of playing a role in resolving that and helping to prevent violence and overcome polarizations will be an important foreign policy task in the Americas. I not only applaud Canada for the role it has taken over these last years but think that is an area to continue to invest in.
Senator Johnson: Thank you for your excellent presentations.
Two of Argentina's Latin American neighbours, Brazil and Venezuela, are in the midst of severe economic and political turmoil, although Brazil is likely in a better position to come out of this stronger. In terms of Argentina, what role can the new government play in bolstering regional, political and economic stability; and secondly, how could they assert themselves through the OAS, Mercosur and the other multilateral institutions?
Ms. Arnson: I think that President Macri has already begun to take a strong role in Venezuela. He did so during the campaign in the presidential debate, challenging his opponent Daniel Scioli to speak out against the imprisonment of prominent politicians like Leopoldo López. He has really taken the lead and broken the silence, if you will, of Latin American leaders vis-à-vis human right issues in other neighbouring states, and I think that has been very courageous.
There has been kind of a defensive national sovereignty, a sense that people shouldn't meddle, given the history of interventions by foreign powers in Latin America all through the 19th and 20th centuries. There has been this unspoken kind of pact of silence about taking a position about internal affairs in a member state. It continues to surprise me, given the kind of international solidarity that was extended to dissidents from Southern Cone dictatorships during the 1970s and 1980s that countries have not been more willing to speak out. I think Macri is to be applauded for taking this leadership role and really becoming a powerful voice from the hemisphere in pushing for political reform.
I think that the opportunities for Argentina to play a positive role within UNASUR are fairly limited. I think the OAS is potentially a better platform and venue for that. I think that there is a lot of hard thinking going on in Buenos Aires and elsewhere in Argentina about the future of Mercosur, about the fact that even trade levels among the member states of Mercosur are at the level of the early 1990s. This is not an alliance that has prospered. At the same time, Argentina under the current government has much more in common with the Pacific Alliance nations. with Mexico and with Uruguay that is a member that has a similar form of opening to international markets and a desire to trade robustly beyond the Mercosur alliance. So I think Macri is doing all the right things and is already playing an important and almost, in certain ways, unprecedented political leadership role in the Americas.
Mr. Miller: I would agree with that. I'm not sure that anybody could really save Venezuela. The situation is so dire and so challenging. But Macri has been absolutely right to put that on the table.
The challenge with Mercosur is it has essentially become a straitjacket. They have no trade agreements with anybody outside of their own region and themselves, and part of what Argentina — just like Brazil — would need when it comes out the other end of this crisis is access to markets. The real challenge is that their economies are not very internationalized or connected, and they're sitting down at the end of South America, kind of in a world unto themselves. They do have relations with China and others, but the challenge is that they're not on the trade routes and they're not part of the supply chains. They will have to look at how to rectify that, but until they do that, Argentina and Brazil, as the two leading economies within Mercosur, are both going to have to reconcile themselves to some flexibility within the Mercosur framework in trade relations.
[Translation]
Senator Rivard: Before you gave your presentations, I had written some notes so that I could ask you questions about inflation and the behaviour of mining companies. We see that inflation was at 27.4 per cent in 2015, and you said that over two years —
[English]
Ms. Arnson: We have no audio here, neither the French nor English. Either is fine; we just didn't hear anything.
Senator Rivard: In English, it's okay?
[Translation]
Ms. Arnson: It is the same thing in French.
Senator Rivard: Not in Spanish?
Ms. Arnson: I hear myself in French.
Senator Rivard: But you hear the French?
[English]
Ms. Arnson: Do you understand?
[Translation]
Yes.
Senator Rivard: As for inflation, Argentina is hoping to bring it down to 5 per cent over two years; it was 27.4 per cent in 2015. That will be difficult to do. We often see a Buckley's cough syrup add on television; it tastes awful but it works. That is an example —
[English]
The Chair: I'm afraid we're having real audio problems here. Now the English is not coming through, and the French wasn't coming through before. We're going to see what the technical hitch is.
[Translation]
Senator Rivard: I hope it is not the French that is causing interpretation problems!
[English]
The Chair: We have many malfunctions here.
Ms. Arnson: Maybe we can translate for members.
The Chair: It wasn't working at your end, and now it's not working at our end, so we will take a moment to see if we can straighten that out.
Senator Rivard: Madam Chair, maybe I can ask my question in French, translate it and —.
The Chair: But it's not working. We have to have both. It's bilingual. We don't go ahead unless we have both.
Senator Rivard: I will suggest that I will write my question. They can answer by writing.
The Chair: Good. Senator Cordy, we won't go ahead, but if we run out of time, would you be prepared to submit your questions in writing and the witnesses could reply?
Ms. Arnson: We would be happy to do that, to the extent that we're able to answer. It's a very hard question about expectations about inflation.
Senator Rivard: The other question is about the mines.
The Chair: We have had in the past difficulties when we video conference, and it is a question that we raise with the Senate constantly. They assure us that the video will work, the language translation will be there, but it fails us often, and we had the added problem of moving to another room, so I don't know.
I am told it is working, Senator Rivard, so could you put your question again?
[Translation]
Senator Rivard: My question was about inflation. The country hopes to go from —
Ms. Arnson: No, it is not working here. It's not working in Washington.
[English]
The Chair: I'm afraid, then, that we've run out of time. I will adjourn and ask both our senators if they can provide me with their questions. We will ensure that the clerk passes them on. We understand that maybe the questions will be difficult to answer but to the best of your ability if you could reply, we would appreciate it.
I thank both of our witnesses for being present, and I know the time constraints the witnesses are under. We very much appreciate your input.
Ms. Arnson: I thank you and members of the committee for your very thoughtful consideration of a critical issue in the western hemisphere.
Mr. Miller: Thank you very much.
The Chair: This meeting is adjourned.
(The committee adjourned.)