Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue No. 52 - Evidence - Meeting of October 24, 2018
OTTAWA, Wednesday, October 24, 2018
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 3:17 p.m. to study Bill C-79, An Act to implement the Comprehensive and Progressive Agreement for Trans-Pacific Partnership between Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: The Standing Senate Committee on Foreign Affairs and International Trade is meeting today to continue our examination of Bill C-79, An Act to implement the Comprehensive and Progressive Agreement for Trans-Pacific Partnership between Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, often referred to as the CPTPP.
We are pleased to welcome two witnesses to the committee today, whom I will introduce in a moment. I should tell the witnesses that I am not going to do a long introduction because we have your bios and we’re trying to be efficient with your time for your testimony. Before I do so, I would ask the senators to introduce themselves.
Senator Housakos: Leo Housakos from Quebec.
Senator Greene: Stephen Greene from Nova Scotia.
Senator Ngo: Thanh Hai Ngo, Ontario.
Senator Oh: Victor Oh, Ontario.
[Translation]
Senator Massicotte: Paul Massicotte from Quebec.
Senator Saint-Germain: Raymonde Saint-Germain from Quebec.
[English]
Senator Marwah: Sabi Marwah, Ontario.
[Translation]
Senator Dawson: Dennis Dawson from Quebec.
[English]
Senator Cordy: Jane Cordy, Nova Scotia.
The Chair: I am Raynell Andreychuk from Saskatchewan and chair of this committee.
We are pleased to welcome Mark Agnew, Director, International Policy at the Canadian Chamber of Commerce and Executive Director, Canadian Services Coalition. Mr. Agnew, I understand that you are appearing on behalf of both of these organizations today.
Also, by video conference from Vancouver, we have Don W. Campbell, Distinguished Fellow, Asia Pacific Foundation of Canada. And I will disclose that we have known each other for quite some time, Mr. Campbell.
I thank both of you for coming, and I will start the presentations in the order that I introduced you. Mr. Agnew, the floor is yours.
Mark Agnew, Director, International Policy and Executive Director, Canadian Services Coalition, Canadian Chamber of Commerce: Thank you very much, chair and members of the committee, for the invitation to come here to speak with you about Bill C-79 and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. This is my first time appearing before the committee, and I am glad to speak on the issue and introduce myself to all of you.
As the chair said, I am speaking on behalf of both the Canadian Chamber of Commerce and the Canadian Services Coalition. I am sure many of you are already aware of the chamber as Canada’s largest business association, representing businesses of all sizes across all sectors and regions of the country.
Perhaps you are less familiar with the Canadian Services Coalition, which is housed within the Canadian Chamber of Commerce as a group of our members focused particularly on issues pertaining to international trade and services. For the simplicity of today’s remarks, I will refer to the chamber synonymously as representing both groups.
The chamber is a strong supporter of the CPTPP as a means to help Canadian businesses diversify our export opportunities abroad. While we readily recognize that the United States will remain our largest trading partner for the foreseeable future, it is important to think about ways to reduce our dependence on the American market and not rest on our laurels even though the USMCA was recently concluded at the beginning of this month.
We see trade diversification as a game of inches, and that means taking advantage of every possible opportunity, including this agreement. Within the CPTPP there are a number of outcomes that I would identify as being helpful for Canadian companies accessing those export opportunities abroad, and I’ll enumerate some of those now.
The first and most visible one is the eventual tariff liberalization on a number of Canadian products, including industrial goods, forestry products and seafood, all of which are potential exports to the region. Substantial tariff liberalization or rate quotas will be created on a number of traditional Canadian export interests to the region, including beef, pork and grains.
Shifting to the services sector, the temporary entry chapter, which provides the ability for Canadian companies to enter the parties of the CPTPP and provide services, we see particularly helpful provisions there regarding company transferees and professionals and technicians. The inclusion of an e-commerce chapter was particularly notable in this agreement for the data localization provisions, which will ensure that, as a condition of doing business in a Trans-Pacific Partnership country, companies won’t have to create servers there, which is a big cost saving for a number of our major Canadian institutions.
There is a chapter on government procurement that will open up new procurement opportunities for Canadian businesses in markets such as Australia, Vietnam and Malaysia. I will add as a footnote that, given the outcome of the USMCA, the TPP’s procurement chapter will also govern Canada-Mexico procurement access.
The last element I would highlight is the customs and trade facilitation chapter, which will hopefully ensure that Canadian goods are expedited when they reach the border.
Within our broad membership base, however, I recognize there are Canadian companies that will face increased competition from this agreement. I think those have been identified to you in some of the earlier testimony that this committee heard. I would use this opportunity to mention that we need to have our domestic economic policy and our trade policy working hand-in-hand; and, as the chamber sees it, there are two primary tools, and those are tax policy and regulatory policy.
Shifting to say a word about the promotion of the agreement, this has come up both yesterday and when the minister appeared last week, and I put the chamber squarely in the camp seeing this agreement as a tool to help Canadian businesses rather than the end state. I would be happy to get into more detail during the Q&A, but we certainly need to work just as hard to help businesses be aware of the opportunities and be able to step through the door as we did spending the time negotiating the agreement to make sure we reach its full potential. The chamber represents both small and large companies, but we think there nonetheless needs be a focus on SME businesses as well.
My last point is the imperative of Canada being part of the first wave of six countries to ratify the agreement. What I would say here is that trade is ultimately a relationship between a buyer and a seller. It’s crucial that Canadian companies are first in the door to develop those early relationships with the people who ultimately buy our goods and services.
The second benefit of being part of the first wave of countries is that it will give Canada a leadership position in setting the future expansion of the TPP. We’ve heard of a number of countries that have expressed interest in the region and, for example, although a number of the ASEAN countries are included in the scope of the TPP membership, there are a number that are not but that we think potentially could be candidates, and that would be a way to get some low-hanging fruit in the ASEAN region while we are negotiating a separate, bespoke FTA with that bloc.
I look forward to taking your questions.
The Chair: Thank you, Mr. Agnew.
Don W. Campbell, Distinguished Fellow, Asia Pacific Foundation of Canada: Thank you very much for the opportunity to appear before you this afternoon on Bill C-79. I’m here today representing the Asia Pacific Foundation of Canada and also in my capacity as the Canadian national chair of the Pacific Economic Cooperation Council and the international co-chair.
The foundation and I personally have been strong advocates for Canada joining the TPP for some time, and I will give you three or four general comments that I think will put this in some context.
Canada, for the last 20 years, regardless of which government was in power, has in our view not focused on engagement with Asia at a time when Asia has become the engine of growth worldwide and power is shifting to that region. It’s an area in which we have a significant stake, and the negotiation of the CPTPP, along with the Canada-Korea bilateral agreement, are the first concrete expressions of economic engagement in a serious and meaningful kind of way, so I think that we should recognize the importance of this agreement in terms of doing this.
The factors that led us into the negotiations for the TPP were, first of all, protection of the gains we had with NAFTA with both the U.S., at that time, and Mexico during the TPP negotiations, and the departure of the U.S. has not diminished the importance for Canada. If anything, it has highlighted the importance for Canada to be a part of this high-level trade agreement.
Secondly, as some of you know, I have some significant experience representing Canadian interests in Japan and in Korea, and I think the Japanese market is a major preoccupation for Canada and tremendously important to us. Joining the TPP has been a way for us to gain access in a way we have not been able to do bilaterally with that Japanese market.
When I was representing Canadian interests in Japan some 20 years ago, our trade relationship was at about the same level it is now; at the same time, Australia — which was half our bilateral trade at that time — is now three times the trade. In terms of the Japanese market, I think we are now going to be able to be on a much better footing with the conclusion of the TPP and our membership in it than we have been in past.
This is not in any way to diminish the importance of the other members, fast-growing economies such as Malaysia and, indeed, other countries that have already indicated their interest in joining the TPP, including Korea — with whom we already have an agreement — the Philippines, Thailand and others. I think that in terms of gaining market access, it is an important agreement for us.
Basically, I think the recent negotiations for the USMCA — I prefer to call it NAFTA-plus — have highlighted the need for trade diversification. As was mentioned earlier, the United States is and will remain our most important trading partner, but we do need other avenues, and this certainly does provide that.
Finally, while it’s not in the text of any agreement, one of the important things that an agreement brings is an awareness in the business community and in the public of the opportunities that are there. A trade agreement, at the end of the day, can only provide the architecture for an agreement; it is up to the Canadian private sector to take advantage of the openings that are afforded by all of that.
I would also second what has already been said about the need for early ratification of the agreement, preferably this year since an early-mover advantage is very much in Canadian interests and certainly establishes our bona fides as a serious player in Asia.
The Chair: Thank you, Mr. Campbell.
Senator Ngo: Thank you, Mr. Agnew and Mr. Campbell, for your presentations.
My question is regarding Vietnam. Do you feel that the signed agreements — Canada and Vietnam signed seven agreements — offer enough protection to our investments, considering that Vietnam has taken drastic measures against some instruments we signed with them on March 8, 2018? I’m talking about the cybersecurity law passed over the summer, which requires any tech company to share the personal data of users in Vietnam with the government. Second is Decree No. 116, issued during the negotiation, to institute closing Vietnam’s market to import vehicles. Third is Vietnam’s poor labour conditions, since the deal, according to witnesses, watered down basic labour conditions.
Can you share your thoughts on whether the dispute resolution process that is in place will provide us with enough tools to reinforce the standards? Mr. Agnew and Mr. Campbell, please.
Mr. Agnew: Our initial reading of the agreement’s dispute settlement provisions is that they would provide us an outlet if these things are in violation of the trade commitments. Now, we have not yet gone through and taken the domestic laws and litmus-tested them against the text, so I can’t speak to the details of that.
I do know some of our members have expressed concern about the data localization issue in Vietnam, because as I said in my remarks, it does increase the cost for businesses. Certainly that is something we would like to engage with the government to provide us that legal support on whether or not these commitments they’ve made are compatible with the TPP obligations they have.
Mr. Campbell: I would say that Vietnam has the biggest challenges in coming up to the standards that are required in the TPP. It is the least developed of the member economies who are currently there, and I think it has been rather courageous on the part of Vietnam to venture forth on this agreement.
I’m not sufficiently familiar with the specific issues that you raised, but I think the side letter does provide us with some assurances. Obviously, Vietnam will have to work very hard and diligently on things like labour conditions to meet the labour provisions, which are an integral part of this agreement. We also have significant dispute settlement resolution provisions in the agreement.
Senator Cordy: Thank you to our witnesses for being here today. You both said that you’re in favour of the CPTPP and that it will be good for many businesses in Canada.
But, Mr. Agnew, you said we have to provide the tools for, particularly, small- and medium-sized businesses to promote trade and to use the CPTPP more effectively.
Mr. Campbell, you also spoke about the fact that businesses have to become aware of the opportunities that this agreement can provide for them. It was actually quite good, I thought, when you said that the bill itself is only the architecture, and we have to know how to use it, and businesses have to use it.
What role does government have in ensuring small- and medium-sized businesses do have the tools to use those opportunities and, as you said, Mr. Campbell, to become aware of opportunities that will now become available to them from opening up what is a huge market?
Mr. Agnew: There are three things that come to mind. First is domestic promotion here in Canada to ensure that businesses that are not thinking internationally right now know what’s out there. On that front, when it is being promoted domestically, we need to be cognizant that it is a fairly segmented product that we are promoting to businesses. The agreement is thousands of pages long, but if I’m in business making pens, I will care about only three particular provisions in there.
I think when we’re promoting the agreement, sometimes there is a risk of generalizing it too much. We need to remember it needs to be highly tailored for this specific audience because they need to know what the customs form in Malaysia is to get pens into the market, or what conformity regulations they have to be aware of for this product.
Second, the trade commissioners in the market need to provide the connection between our businesses and buyers, ultimately, because that is how the money flows. Someone has to buy the good or service at the end of the day.
Third, although we think the trade agreement is good for the Canadian economy, there are always regulations that come up that need to be dealt with, whether agri-food, sanitary or phytosanitary regulations, technical product regulations, things like what the senator mentioned in his question about a bagel standard.
We still need to work to make sure these things don’t inhibit our ability to take advantage of preferential tariffs because it doesn’t make a difference if the tariff is zero if there is a regulation that keeps your product from getting into the market.
Mr. Campbell: I would add that Global Affairs Canada has already implemented a program for small- and medium-sized enterprises, which is several million dollars in size, part of it administered through the Asia Pacific Foundation and part of it administered through the APEC Secretariat. So it’s a bit broader than just the CPTPP countries. This program is specifically designed to show the path for small- and medium-sized enterprises.
It has an additional benefit in that the majority of small- and medium-sized enterprises in Canada are run by women, so it plays into the role of women in international commerce as well.
Of course, I would underline what has already been said on the activity of our Trade Commissioner Service in the field, which is significantly involved with small- and medium-sized enterprises in identifying opportunities and in providing advice and counsel. At the same time, more work needs to be done here in Canada on the domestic side. This is a role for provinces, as well as the federal government, to get companies export ready, getting business plans that make sense and getting the right set of targets.
Senator Cordy: Thank you very much for those answers. We know that when we’re dealing with a trade deal, especially one with the magnitude of Asia and a country as large as Canada, there are sectors in the Canadian economy that will benefit more than others. Mr. Agnew, you made reference to that in your earlier comments.
Yesterday we had a witness appear before us who is from the auto sector and concerned about the auto industry in Canada being affected negatively. Have you given any consideration to that?
Mr. Agnew: Yes. The auto members are members of ours, and I would say two things.
First, we have seen the side letter but not the details of this dispute settlement mechanism that will be created as a result of that. Certainly, our expectation in what we have been getting signalled to us is that it will be a binding letter that is enforceable. We take the government at its word when it says it will be, and we think it’s important to ensure that it is.
Second, to emphasize what I said in my opening remarks, there is a wider domestic economic piece to this that we need to bear in mind, and that includes making sure that our regulatory and tax rules incentivize companies to make sure there is business investment staying here even when they are facing increased competition from other markets exporting into Canada.
Senator Oh: Thank you, witnesses. My question is along the same line as the auto industry.
Under the CPTPP, Canada’s 6.1 per cent tariff on imported passenger vehicles is eliminated over four years. Canada’s tariffs of up to 8.5 per cent on imported auto parts is eliminated upon entry into force.
My question to you is this: What will the impact be on the Canadian auto industry?
And also, at the same time, the Canada-Japan signed instrument on autos does not address non-tariff barriers to Canadian exports of auto vehicles to Japan. What do you suggest the Canadian government could do to address non-tariff barriers in this area?
Mr. Agnew: To answer your first question about the precise impact, we haven’t done the economic modelling, so I don’t know what the answer is in hard dollars and cents. But in terms of what the government should be doing going forward on non-tariff barriers, this speaks to what I was saying earlier about the Trade Commissioner Service needing to be on the ground, working with the embassy, working with other partners, to be lobbying governments on making sure that the non-tariff barriers are broken down for Canadian companies. The tariff provides only one piece of the puzzle. We need to have the non-tariff barriers dealt with as well for Canadian companies to take advantage of opportunities.
Senator Oh: Mr. Campbell?
Mr. Campbell: Obviously, breaking down tariff barriers does provide more competition. But in the case of Japan, you already have a very integrated automotive industry between Japan and Canada. I can’t comment specifically, but I don’t foresee any significant change there.
My understanding is that the side letter does indeed address non-tariff barriers in Japan. I can’t provide you with the specifics, since I have not seen the side letter, but I think the side letter between Canada and Japan — and indeed there’s a side letter with Malaysia as well — does address fair competition in Japan.
Senator Oh: Do you agree that most of the vehicles coming are coming in from Asia and not from here going to Asia-Pacific? Is that correct?
Mr. Agnew: Yes. My understanding is that we are likely to see perhaps more flows coming this way than we would the other way.
Senator Massicotte: First, I’d like to acknowledge Don. Nice to see you again. Let me take this opportunity to thank you for the years of service you’ve contributed to our country. Much appreciated. I’m glad to see you’re heavily involved in trade issues.
Let me talk to you a little about this issue. First of all, I’ll make an observation about the last question. We just got a presentation paper from the Japan Automobile Manufacturers Association of Canada. In there, and I presume it’s accurate, they say they build 40 per cent more cars in Canada than they sell to Canada. So we are a significant winner of their presence, which is literally contrary to the person yesterday.
Don, let me ask this question: We had a witness yesterday saying that, yes, there are some Japanese manufactured cars here, but there are Japanese manufacturers who don’t build cars here and will benefit from this agreement and pay no duty, and it becomes unfair competition. Obviously, we’re not talking about the big players like Honda and Toyota, because they’re producing a lot of cars here. What does that person refer to, and do you see a concern there that could be unfair?
Mr. Campbell: It’s a little bit difficult to see where the competition and the 6.5 per cent — by the way, we have a much higher barrier in Canada than the United States has had since their import tariff is 2.5 per cent, barring some outrageous action by Mr. Trump and possible section 232 action in the future.
But as you’ve mentioned, I think the large producers in Canada are producing the vast majority of their products here in Canada, and they have the vast majority of sales in Canada as well. I don’t think the reduction over time of that tariff is going to change that market share significantly.
Senator Massicotte: If I could, let me change the subject a little bit and talk to you about what we’re seeing. Let me summarize for you. If we look at the number of free-trade agreements signed more recently, in the last 10 years, including South Korea, and if you do a post-mortem on all those agreements, there has been no significant change in our trade pattern. We have not increased or gained from it. The exception is NAFTA; NAFTA 2 would be the same, I guess. I think there’s a lesson to be learned here. We can say it’s part of the architecture, and we can use our Trade Commissioner Service, but I suspect we have to change our aggressiveness like other countries and be proactive to really benefit from those trade agreements.
I think we’ve adopted an attitude to say, “We’ve got the deal done. Private enterprise, it’s up to you.” But obviously it has not worked. Don, you have a lot of experience in this. What would you recommend we do to make sure we take advantage of this agreement, and not only pay a bit of attention for a couple of weeks or a month but pay attention for years and change our culture as an exporter?
Mr. Campbell: That’s a very big question. I would say first that the NAFTA agreement signed in 1994, over time, particularly in the first 10 years of that agreement, brought on a significant number of additional Canadian exporters, and mostly small- and medium-sized exporters. In fact, if anything, I’m being a little bit critical here, but I think that the Canadian industry became almost too comfortable with the advantages that the NAFTA cocoon provided.
When you move beyond the United States, you’re often dealing with different languages, different currencies, different businesses practices. They’re tougher markets to penetrate. At the same time, the way in which business is done in 2018 is very different than it was in 1994. We did not have e-commerce. We did not have the digital economy. We didn’t have iPhones in the 1990s. It’s much easier now to be connected in ways that were not possible before, and that provides opportunities significantly for small- and medium-sized enterprises.
On the major agreements, we now have what I call the trifecta of the CETA, the Canada-European Union Comprehensive Economic and Trade Agreement, hopefully the CPTPP and the NAFTA. And we’re the only G7 country that is in all of these markets. The architecture, as I described it, is there. How we foster the culture that you speak of, to be looking elsewhere is a major task. At the end of the day, government can only do so much. We’re not a socialist economy. It’s up to enterprise to do this.
A lot of the developments that you find in the private sector come from peers who are already exporting, larger companies who could be in a position of mentoring, as well as government support. But we do need to adapt, to change the culture that we have, and we’re still a commodity-rich, commodity-export economy. This gets right back to the — I don’t want to call them domestic issues because they’re not domestic issues. They’re nationalist issues. That comes into the whole issue of productivity and innovation. These are very big issues that governments and industry need to grapple with in a more coherent way than we’ve been able to do in the past.
Senator Massicotte: Mr. Agnew, are there any comments you want to add?
Mr. Agnew: No. I think that covers it.
Senator Housakos: My question could be answered by both our guests today. It has to do with the fact that the CPTPP is such a comprehensive deal in the sense there are so many elements to it, so many countries involved. These countries do not have homogeneous economies. They’re very different in many senses.
Would you agree that there might be some economies that we have acquiesced to accepting into this deal as a compromise in order to get some other economies we wanted into the package? Would some of your members find parts of this agreement, or certain countries that we’ve signed on with in this deal, as potentially being very lucrative and others being somewhat of a hindrance to them in the Canadian market?
Mr. Agnew: I would say that not all the TPP countries are created equal, by any means. Where our members see the greatest opportunities are particularly Japan — top of the list — Vietnam, Australia, as well as Malaysia. Those are markets people look to for opportunities.
There’s a lot of inertia when it comes to international trade, and it takes time to develop those relationships. Even though there are markets that we’re not necessarily trading a lot in now, that doesn’t mean there is no potential for growth going down the road. It takes time for businesses to get to know buyers in the Asian market that will ultimately buy a good or service from them.
Senator Housakos: Can you give me an example or two of countries in here and what areas, sectors or industries they would be a danger to?
Mr. Agnew: Any trade negotiation involves give and take for the Canadian negotiating team. They have to look at where the benefits are for the Canadian economy. The government has done a good job in this agreement landing on the best compromises possible. We’ve already talked here, for example, about how the automotive sector will face increased competition. And in the supply management sector, we’ve made additional concessions as well.
But on the whole, I think it’s still a net benefit for the Canadian economy to be part of this agreement.
Senator Housakos: Mr. Campbell, do you want to weigh in on that?
Mr. Campbell: I would agree with everything that’s been said. I don’t see any of the countries as being a “threat” to Canada. As I said in my opening comments and as has just been repeated, Japan is a major focus of our interest and attention, even though they will be more competitive than some areas. We’re going to be much more competitive vis-à-vis other members of the TPP, such as Australia, in agri-food, beef, pork and seafoods — those sorts of issues. That’s because some of the countries in the agreement are, in some respects, natural competitors of Canada. Australia is a good example. This TPP puts us on an equal footing with Australia in other markets in the TPP, Japan being at the head of the list.
It’s obvious that some of the countries are smaller economies, but I’m quite excited, frankly, by opportunities in Vietnam and in Malaysia. Those are big populations. Their economic growth is coming fairly quickly. They are consumer markets.
So we shouldn’t underestimate any of the present members of the TPP.
Senator Housakos: The last question I have for both of you is this: Clearly, most of the free trade agreements that Canada has signed on to, including this one, are relatively new compared to the Canada-U.S. Free Trade Agreement, or NAFTA. Are Parliament and the Canadian government doing enough in terms of evaluating the successes of these agreements? Have they set enough of a barometer and benchmarks in order to review them at certain time frames in terms of their success, failures or weaknesses? Or is the government just taking for granted, particularly Global Affairs Canada, that there’s no such thing as a bad free trade agreement?
Mr. Agnew: We would certainly always welcome more evaluation from both the government and Parliament in the performance of Canada’s trade agreements. By highlighting them, we’re able to draw attention both to where there are opportunities for Canadian businesses and to where we need to up our game more. I alluded to this earlier, but in the instance of non-tariff barriers that have not resulted in trade agreements, an ongoing effort has to be made. Some of those have been mentioned here already. It’s important to continue to keep our feet to the fire on those and not coast, even once we have the agreements signed.
Mr. Campbell: It’s an interesting question. In many ways, it’s hard to evaluate trade agreements because trade agreements have been blamed for every star that falls, as Roy MacLaren said many years ago, and every flower that blossoms as well. Neither one of those approaches is terribly helpful.
You’re right: When you look, I think we now have 17 trade agreements involving 51 countries, the large ones being the CETA and the NAFTA. Most of these agreements, however, except for smaller countries, are fairly new in the making. A lot of them are less than five years old. It’s still very early days.
It would be useful to introduce a measurement and some discipline. At the end of the day, the measurement really is going to be in the statistics on increased trade in goods and increased trade in services, but it’s also difficult to attribute exactly why that happens.
I sometimes tell this story. When we completed the Canada-U.S. Free Trade Agreement, and we were starting the first preliminary NAFTA negotiations, I was on a plane. This is about 1990 or 1991. The guy sitting beside me on the plane said, “The Canada-U.S. Free Trade Agreement is the best thing that ever happened to my business.” I was quite intrigued by this because he was in the packaging business in Canada. He said, “Before the agreement, all of my contracts were in Canada. I’ve doubled my business, and all of the growth has been in the United States. I’ve just got my first contract in Mexico, and I’ve never even been there yet.” This was all within two years.
I said to him, “What was it in the trade agreement that was actually responsible for this?” At the end of the day, there was nothing in the agreement that had done it. What had happened was that, through the debate and discussion we’d had in Canada, he became aware of a U.S. market and took advantage.
The proselytization of the trade mentality is an important component of these agreements, aside from what is in them.
Senator Housakos: I can ask another question, if there is time.
The Chair: No. I have a list.
I wanted to ask a question before I go to the second round. To me, it’s a bit ironic that we struggled to get into TPP. We were not exactly invited in on the first negotiations. The United States and New Zealand had comments about our entry. We fought or negotiated our way into the agreement, and the U.S. has now pulled out. There’s talk they may re-enter at some point. Who knows?
Should the United States come back in, does the agreement disrupt anything we are doing in the new NAFTA? Will it enhance our negotiating position at that time, or is it negligible?
Mr. Agnew, are you in a position to answer?
Mr. Agnew: Yes. It probably would depend on what area you’re speaking to. As it’s been explained to us, the suspended provisions from the TPP would not be unsuspended automatically. The U.S. would re-enter and so be subject to a renegotiation. As a country that would be in there, I think we would have quite a lot of leverage at that point.
Depending on what products you’re talking about, there could be both risks and opportunities. The U.S. re-entering the TPP region would risk potentially displacing Canadian commodities where the exports are identical to ours, such as in the grains sector or the red meat sector. But there could be opportunities where we have an integrated supply chain to be able to export those into the market because we would be more likely to meet the rules thresholds to benefit from TPP’s preferential tariffs.
Mr. Campbell: If I could add to that, first of all, I think under the current administration, I don’t think there is much likelihood of the United States coming back to the CPTPP. As has been mentioned, there are suspended provisions of the TPP which — it would be difficult to persuade the current 11 members to accept all the provisions that they had previously done.
A rather interesting thing is if you look at the USMCA, it’s an interesting amalgam of the old NAFTA and provisions from the TPP. Intellectual property, for example, is included in that. A lot of the language is lifted right out of the TPP. From that perspective, it wouldn’t change things that much for Canada. The U.S. would be seen as a competitor, particularly in some of the agri-food areas, but I happen to think it would be a good thing if the United States came back and rejoined the international trading community. But I don’t see that happening in the near future.
The Chair: I do have a second round.
Senator Ngo: I want to follow up on the auto sector. How important is it for our auto sector to ratify this trade deal, given Japan’s imminent ratification of this trade agreement?
Mr. Agnew: The auto sector won’t ratify the agreement. The country will. I’m not sure —
Senator Ngo: Canada signed an agreement with Japan as well regarding the auto sector.
Mr. Agnew: Our understanding is that the dispute settlement details should come out shortly. We need to see details before passing judgment on that. Our hope would be that we will see those before the agreement enters into force.
The Chair: Mr. Campbell, do you want to comment on that?
Mr. Campbell: I don’t have anything to add to that.
Senator Ngo: Well, the side letter here, I have the summary, is that Japan confirms that the U.S. standards are adequate for vehicles sold in Japan. Canada, of course, followed these standards as well. Japan and Canada will develop a binding dispute settlement mechanism to make all rules are applied properly. This mechanism must be in place by the time both countries ratify the CPTPP. What do you think? Is this side agreement binding?
Mr. Agnew: If they have made the commitment to do it, then I think both parties made it in good faith that they will have the details before the date of ratification.
Senator Massicotte: Maybe I’ve been watching American TV or politics for too long. I’m starting to see ploys and games.
We were very late coming to the party, years late, and we allowed this agreement to take place and the negotiations, and we were not on side. I’m speculating, but is it because, if you look at a package, imports will be more than double what our exports will be, and you have close to half a million dollars every year in duties being collected? Maybe the Canadian government said then the status quo suits us well, we’re not a party to the agreement. But one could argue that once you see the deal being done, you basically have no choice but to join the agreement and get on side. That’s total speculation, but does it make any sense? Is that why we’re doing the deal?
Mr. Campbell: I would first comment on the reason why we were slow to the party. The reason we were slow to the party was relatively specific. It was our supply management regime. Both Australia and New Zealand wanted a commitment on the part of Canada that we would dismantle the supply management regime before we entered, and the United States bought into that discussion and argument. We had three countries out of the 12 then: Australia, New Zealand and the United States. I’m not giving inside information because I’ve been on the outside of this debate. The United States then had a change of position, and with that Australia and New Zealand reluctantly accepted that Canada would become a member, and there were no specific commitments or preconditions on Canada’s entry vis-à-vis supply management.
There was certainly some reluctance on the part of the government of the day, but to the extent that there wasn’t reluctance, we were being rebuffed for a significant period of time. There were others within that group, but I’m thinking particularly of Australia and New Zealand, who already had preferred access into the Japanese market who weren’t necessarily welcoming of Canada a priori in the negotiations.
I’m sure that one of the major considerations at the time, a little bit ironic when you think of it now, is that since about 2005 Canada has been of the view that we needed to modernize and renovate NAFTA, and there was no appetite in the United States to do that because NAFTA, for reasons that some of you will be very familiar with, was very unpopular. So Canada saw entering into the TPP with Mexico and the United States there, in a 21st century agreement, as a means of protecting ourselves and renovating ourselves for NAFTA.
There were a lot of these considerations that came into it. I think, even though I have been somewhat critical of Canadian policy towards Asia over the last 20 years, there was a view that we needed to be looking. That our economic future is going to be significantly more tied to Asia than in the past, and we needed to be a player.
Senator Massicotte: Thank you.
Senator Housakos: My question is a follow up to a couple of questions I had earlier. How do we judge trade agreements? Many business people will tell you a trade agreement will be judged on the basis of having a surplus rather than a deficit with your trading partner. Others will argue those are not the only factors one has to take into consideration. Many will say that once you have a surplus with a country it’s good for Treasury Board and good for creating jobs. Others will say that when you have a trade deficit, it’s bad for your Treasury Board and it will cost you jobs. If you look at the majority of the agreements Canada signed, regardless of which government signed them, we have trade deficits with most of those countries.
As a parliamentarian I think it’s important that we try to figure out what the parameters are for judging a success in an agreement and what the parameters for judging a failure of an agreement? And what do we do about it? As a government we have a responsibility to ensure it’s a fair and equitable evaluation. Invariably, you will have stakeholders that succeed. In any one of the trade agreements you will have winners in the marketplace. They will have success. You will also have people that are losers in the marketplace who get penalized and hurt, and often government won’t hear about them because they are bankrupt and are no longer members of your organization and others.
I know it’s not a question that has an easy answer to it, but I’d like to have more elaboration of your thoughts on that.
Mr. Agnew: I think there are a number of quantitative metrics to look at to get a holistic picture, be they bilateral export flows or investment stocks. There are less high-profile metrics that would tell a number of stories, such as the number of Canadian companies exporting to a given market, and certainly we would hope to see the number of countries exporting if a trade agreement is doing its job. There is also a need to ensure that qualitative information is included. There are companies that perhaps aren’t included in information for one reason or another, so making sure their impacts are captured in that.
Again, I think it’s a good thing for both Parliament and the government to take it upon itself to do a regular check-in to see whether the agreements are working. And if they’re not working, what action needs to be done to remediate that? Is it a case of non-tariff barrier issues that are preventing tariff equalization from being utilized? Is it an issue of raising awareness? And you have to look at all those factors as a whole to get a picture that will probably vary FTA by FTA.
Mr. Campbell: It’s an interesting question. First of all, Mr. Trump is the loudest proclaimer of the view that bilateral trade deficits are a bad thing. But almost any economist will say that it is not an issue of bilateral trade surpluses or bilateral trade deficits. What you have in a country that has an overall trade deficit is more consumption, which is being supplied by foreign producers. If you look at many countries in terms of growth, most countries that are in a stage of economic growth are actually running a trade deficit because they are taking advantage over time of the investment that the trade flows end up providing.
It’s much more complicated, and I am not the best person to describe it, but the issue of both trade and current account deficit is much more complicated than just trade in goods.
Second, 75 per cent of our economy today is services, and we’re very poor at capturing services flows. I was thinking the other day about the number of foreign students who are in Canada. There are at least half a million foreign students in Canada spending probably $40,000 to $50,000 a piece into the Canadian economy, providing jobs and consumer benefits. That doesn’t show up in the trade stats in any way, shape or form at all. So the situation is more complicated than just looking at trade flows, either deficit or the surplus.
There’s also a very valid argument being made that protection from competition does not make you efficient. You get it all the way back 200 years ago to David Ricardo on the theory of competitive advantage, that you produce what you’re best at even if somebody else can produce other things. There is a strong argument that the more open a trade relationship you have, the better place you are as a country and as an economy, rather than putting trade barriers in place or keeping trade barriers in place. We talk a lot about tariffs but, except for Mr. Trump, tariffs are almost irrelevant in most trade agreements. There are spikes, and we have taken care of those in the CPTPP. But successive rounds of the multilateral trade negotiations brought tariffs down from an average of 15 per cent to about 2.5 per cent.
Tariffs are not a significant issue today. The more significant issues are non-tariff barriers where governments put administrative measures in place that somehow impede trade. We’re pretty good in Canada doing that between provinces, not to mention internationally. But the point I’m making is that I think that we’ll end up with a healthier economy with competition rather than resisting competition.
Senator Housakos: Thank you.
The Chair: On that note, we’ve heard from our witnesses, and I think our deliberations on Bill C-79 have been enriched by the information we’ve received.
Also, I think ending on the comments we did reinforces some of what we said in our trade report that we filed in 2017 where we looked the issues. One was gathering information, and that we needed to have Statistics Canada start really collecting real data on trade agreements, not just the export and import flows, and particularly more emphasis on services. And with the value chains, it’s hard to talk about exports and imports because varying parts and varying inputs are now coming from around the world. The old in-and-out is one factor but not all of them, so I think we’re ending on a continuum of study of the real value of trade agreements.
The other thing that I heard today and that the committee reinforced in its report is that the trade agreement is the start. It is what you do with the implementation that is important. Government has a role, and Canadian business has a role.
Thank you for being here and being our concluding witnesses on the study of Bill C-79.
Honourable senators, we’re continuing the meeting of the Standing Senate Committee on Foreign Affairs and International Trade to complete our examination of Bill C-79, An Act to implement the Comprehensive and Progressive Agreement for Trans-Pacific Partnership between Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The committee has heard from witnesses, received letters and documents, and as well we have our previous trade studies. We are now at the stage where we could go through the bill clause by clause.
Senators, is it agreed that the committee proceed to clause-by-clause consideration of Bill C-79?
Hon. Senators: Agreed.
The Chair: Before we begin, I’d like make members aware that we have government officials from Global Affairs Canada in the room, should members have any technical questions to raise as we go through the bill clause by clause. I will look to you if you wish any further clarifications.
Senator Massicotte: I had a question I asked the minister, and I never got any answers last week. Should I forget about that?
The Chair: Should I put that to the rest of the committee? As a matter of fact, we will ask for follow up with the department. As you know, this committee always continues its examinations, so you will have further moments to get the requests. I’m sure the department would be pleased to respond in due course. Would that be sufficient?
Senator Dawson: They’ll be coming back for more.
The Chair: They will be back for more, no doubt. We’re just forewarning them that we have a continuing dialogue with them.
If at any point a senator is not clear where we are in the process, please ask for clarification. I want to ensure that, at all times, we all have the same understanding of where we are in the process.
In terms of the mechanics of the process, I wish to remind senators that when more than one amendment is proposed to be moved in a clause, amendments should be proposed in the order of the lines of the clause. To date, no comment has been made about amendments to me, but nonetheless, there is that option. If a senator is opposed to an entire clause, I would remind you that, in committee, the proper process is not to move a motion to delete the entire clause, but rather to vote against the clause as standing as part of the bill.
I would also remind senators that some amendments that are moved may have a consequential effect on other parts of the bill. It would be useful to this process if a senator moving an amendment identified to the committee other clauses in this bill where this amendment could have an effect. Otherwise, it would be very difficult for members of the committee to remain consistent in their decision making.
If committee members ever have any questions about the process or about the propriety of anything occurring, they can certainly raise a point of order. As chair, I would listen to the arguments, decide when there has been sufficient discussion of a matter or order, and make a ruling. The committee is the ultimate master of its business within the bounds established by the Senate, and the ruling can be appealed to the full committee by asking whether the ruling shall be sustained. As chair, I will certainly do my utmost to ensure that all senators wishing to speak have the opportunity to do so. For this, however, I will depend on your cooperation and ask all of you to consider other senators and keep remarks to the point and as brief as possible. I know this committee always does that, so it’s just reinforcing good practice.
Finally, I wish to remind honourable senators that if there is ever any uncertainty as to the results of a voice vote or show of hands, the most effective route is to request a roll call vote, which provides unambiguous results. Senators are aware that any tied vote negates the motion in question.
Are there any questions before we proceed? Seeing none, I will then proceed.
Is it agreed that the committee proceed to clause-by-clause consideration of Bill C-79, An Act to implement the Comprehensive and Progressive Agreement for Trans-Pacific Partnership between Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam?
Hon. Senators: Agreed.
The Chair: I see no negative comments, so it is agreed.
Shall the title stand postponed?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 1, which contains the short title, stand postponed?
Hon. Senators: Agreed.
The Chair: Carried.
Is it agreed, with leave, that the clauses be grouped according to the first sections and the three parts of the bill, as well as their divisions as described in the table of provisions of Bill C-79?
Hon. Senators: Agreed.
The Chair: Carried.
Shall the section entitled “Interpretation,” which contains clauses 2 to 5, carry?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall the section entitled “Her Majesty,” which contains clause 6, carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall the section entitled “Purpose,” which contains clause 7, carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall the section entitled “Causes of Action,” which contains clause 8, carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall Part 1, entitled “Implementation of the Agreement,” which contains clauses 9 to 13, carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall Part 2, entitled “Related Amendments and Transitional Provision,” which contains clauses 14 to 48, carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall Part 3, entitled “Coordinating Amendments and Coming Into Force,” which contains clauses 49 to 50, carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall Schedules 1 to 13, pages 85 to 270 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 1, which contains the short title, carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall the title carry?
Hon. Senators: Agreed.
The Chair: Shall the bill carry?
Hon. Senators: Agreed.
The Chair: Does the committee wish to consider appending observations to the report?
Hon. Senators: Agreed.
The Chair: Yes, agreed.
Hon. Senators: Agreed.
The Chair: I should say at this point that the steering committee has, with the comments that were made in the last meetings, indicated there was some wish for observations. We waited until we heard the witnesses. I do want to thank Marie-Ève Belzile, our clerk, and Pascal Tremblay who have done so much work on this bill during the summer, preparing and anticipating this bill. All of the coordination, the investigations and analysis of the previous TPP, as well as looking at the new CPTPP, was done by them for many hours, I must say. On your behalf, I want to thank and acknowledge them and all those that stand behind them. Thank you.
It has been a long process for us, and as Senator Massicotte pointed out, it is not going to end now.
We as the steering committee have the benefit of looking at some observations from Pascal, picking up the points we thought were important. We could go in camera, where I could read them out. We have a French translation, but it was on a slightly earlier formatting; so we do have it, but the most efficient way would be for me to read the comments. I think they’re in line with what we want; I don’t think you will find them too controversial. Or we can do so now and leave the authority for the fine-tuning and editing for the steering committee.
Senator Massicotte: I recommend, if we could, we — some of the steering committee got this a little while ago, and we have amendments to what has been drafted. To avoid this whole committee getting involved in a draft, I think you should summarize the points to see if there is agreement with the point. Let us do the drafting, but let’s hopefully get agreement of what we should be saying.
The Chair: Is there agreement from the committee to do so at this time? Okay. We will do it in public, not in camera. Agreed?
Hon. Senators: Agreed.
The Chair: I don’t think they’re controversial. They were comments we have all made throughout this process.
We wanted there to be some understanding that the Committee on Foreign Affairs and International Trade, in studying Bill C-79 and in the findings in the committee’s report entitled Free Trade Agreement: A Tool for Economic Prosperity, tabled on February 7, 2017 — in light of the study of the bill, and in light of our report, which was our pre-study of trade agreements, the committee would make the following observations. The first one would be that we accept from all of the information that we received from our witnesses and from our own analysis that if Canada is not among the first six countries to ratify the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, we would lose benefits for Canadian businesses. On that basis, we would be at a competitive disadvantage.
We stated that because we want the public and the government to know that we understand trade agreements and how they are negotiated, but we also continue to say from the Senate that we need time. Here we are again being told by the government to move quickly in such a way that perhaps we would have taken other options. But what we did is we took the option and sided with the fact that we do not want any company or Canada to be disadvantaged, and therefore we took that into account and that is why we are concluding today.
So that would be our first paragraph signalling that this will not always be the case. Previously, we have been told that we had a date to meet and we found out that it really wasn’t as urgent as they made it out to be. We’ve had, as I say, good analysis done and good interpretation, and we are convinced that being among the first six is where we need to be.
So that’s paragraph 1, and I think the prevailing mood is captured there.
We also stated that we understand the importance for Canada to be one of the six ratifying countries, but nonetheless, we reiterate that parliamentarians — and this is paragraphs 1 and 2, so I’m repeating myself — need to be factored into a very complex negotiation. We believe that we need to be notified of the regulations, as the public needs to know that the trade agreement itself and also the regulations that follow hinge, and they must be adhered to. Parliamentarians should be aware of this process, and our comments should be taken into account in that context because we’re reflecting what we heard Canadians say.
The third point we want to make is that the committee notes that the importance of regulations relevant to the implementation of an FTA underscores that the federal government should work closely with the affected stakeholders when developing these regulations. I think it’s important for business to have buy-in. Of course, I’ve already made the point that as parliamentarians we come onside and understand the agreements.
We also want to reiterate what we said in our report of 2017 on FTAs, that promoting trade is about much more than signing FTAs. In line with the recommendation made in that report of 2017, the Government of Canada should develop a robust FTA implementation strategy designed to help Canadian businesses maximize the benefits of CPTPP. Such an implementation strategy should be made available as soon as possible after the agreement enters into force.
That was our recommendation. We should know what the government intends to do so that we can play our oversight role and so that Canadians know what is expected of them. We continue hearing that businesses don’t know about it. It is incumbent on the government not only to negotiate an agreement but also to provide the information and the tools for implementation, and we need to know that. That’s underscoring our report.
Finally, the Government of Canada should also identify appropriate and fair federal measures intended to mitigate the CPTPP’s potentially adverse impacts, including transition programs for Canadian workers and industries negatively affected by the FTA.
We will perhaps put in more detail on that, but those would be our observations. I don’t think it should be a shock to anyone. We continue to say this, and we will continue to say the points that we make here. Is there agreement?
Hon. Senators: Agreed.
Senator Massicotte: Sounds good, but if you don’t mind, a delegating authority?
The Chair: That would be next. If they agree to the substance, then we need a motion that you delegate to — we will go to the — is it agreed that the report of this bill be — okay. We have about five options, so we’re trying to figure out which one we’ll do.
Is it agreed that the observations be adopted and that the Subcommittee on Agenda and Procedure be empowered to approve the final version of the report, including any necessary editorial, grammatical and translation changes required, and that the bill be adopted with observations?
Senator Massicotte: And submitted to the Senate as a whole tomorrow.
The Chair: Yes. That’s a procedural thing that we are taking into account: the delegation of authority to the committee for final observations, but also that we would agree that I report this bill, with observations, to the Senate.
Hon. Senators: Agreed.
The Chair: Tomorrow, if you wish that. It’s already been taken care of. I’ve warned her. That’s why we have so many options if we go this way or that way, and that’s why I wanted to thank them so much. We are delegating to the steering committee, or the Subcommittee on Agenda and Procedure, to fine-tune the thoughts that I’ve put. They’ve seen one draft. You have agreed to accept those observations with the proviso of the subcommittee. You therefore accept the bill with observations —
Senator Massicotte: Don’t open up the deal. They all agree.
The Chair: I always double-check. It keeps me out of trouble, and it will keep the two deputy chairs out of trouble.
Senator Housakos: Chair, there are no deals. We’re all independent here. I resent that comment.
The Chair: That debate will be longer than the trade debates, I think.
Thank you for the efficiency with which you have handled this. I think it is for the benefit of Canadians. We understand that not all perspectives were favourable towards the agreement, but we’ve taken those comments into account. I also want to thank all the government officials who have cooperated and been available to assist us in understanding. As you note, the appetite to continue that dialogue with you continues, so we appreciate that.
I definitely want to remind you that there’s no committee meeting tomorrow as a result of finishing today.
Senator Dawson: I understand there’s no meeting tomorrow, but future business for next week?
The Chair: All right. What is on the table for next week is cultural diplomacy. We are running short of witnesses, so we anticipate dealing with all the witnesses we have, and I will shortly be contacting the steering committee for where we go from here. We have a bill that we have yet to deal with, which may be coming to us shortly. I’m not going to pre-empt the right of the Senate to refer it to us, but I understand it will be coming to us shortly, and we will be dealing then with that. That’s the arms trade deal.
We also have on the horizon a few other bills that have come to our attention. The double taxation bill on Madagascar, I believe, will be coming here. I’m not sure if there is another one that may be coming.
Senator Dawson: Just an update on Canada-Israel free trade?
The Chair: It’s still there. We’re monitoring that every time there’s an alert that it’s coming our way. That is another that we can possibly make it, all subject to leadership and any senator wishing to speak to it, so we will be talking about where we go from here and any gaps in the cultural diplomacy.
Senator Bovey: I would think very soon.
The Chair: Yes.
Senator Bovey: I think we have good material.
The Chair: Yes. I think we’ve covered cultural diplomacy pretty fully. There may be some gaps, and then we can reach out to particular sources. Again, I should say that not all of the analysts are here, but they have certainly been contemplating the background sections and the witness sections right from the summer on. We’re not starting from scratch. We should then be at a point where we could have a meeting in camera to assess our progress and to see if there are any gaps, and then to seek from you what recommendations and what direction you want to go.
There have been discussions with the steering committee on that, and with Senator Bovey. Others have given me suggestions, and no doubt they’ve given others suggestions. We will be trying to wind that up rather quickly. I think if we can get it filed before Christmas, it will be very opportune for a whole host of reasons which I think are important in foreign policy.
I think that’s it. Any other questions? We are adjourned until next week. Thank you, senators.
(The committee adjourned.)