Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue No. 21 - Evidence - Meeting of April 6, 2017
OTTAWA, Thursday, April 6, 2017
The Standing Senate Committee on Foreign Affairs and International Trade, to which was referred Bill C-30, An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States and to provide for certain other measures, met this day at 10:31 a.m. to give consideration to the bill.
Senator Percy E. Downe (Deputy Chair) in the chair.
The Deputy Chair: We meet today to continue our examination of Bill C-30, an Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its member states and to provide for certain other measures.
We are pleased to welcome to the committee, from the Shipping Federation of Canada, Michael Board, president; and Karen Kancens, Director of Policy and Trade; from the Canadian Shipowners Association, Mr. Kirk Jones, Acting President; Mr. Serge Le Guellec, member; and Mr. Daniel Hohnstein, lawyer; from the Port of Sydney, from the beautiful island of Cape Breton, Marlene Usher, Chief Executive Officer,and the Honourable David Dingwell, P.C, legal counsel; and from Nunavut Eastern Arctic Shipping Inc., Frank Schiller, Advisor.
We are discussing a very important topic, and I would encourage you that all have a chance to air their views. Accordingly, I would ask our witnesses to have brief opening remarks, and I would also call on the senators, for the question period, to have concise questions and, hopefully, concise answers.
Without further delay, I give the floor to our first panellist, from the Shipping Federation of Canada.
Michael Broad, President, Shipping Federation of Canada: Good morning, Mr. Chair, and thank you for the opportunity to appear before the Standing Senate Committee on Foreign Affairs and International Trade on the subject of the Comprehensive Economic Trade Agreement and Bill C-30.
By way of introduction, the Shipping Federation of Canada, which was incorporated by an act of Parliament in 1903, is the voice of the owners, operators and agents of ships carrying Canada's imports and export to and from world markets. Our members represent over 200 shipping companies, which are involved in all sectors of shipping and call ports throughout Canada, from the Atlantic to the St. Lawrence and Great Lakes to the West Coast and the Arctic. Our association's overall objective is to work towards a safe, efficient, competitive and environmentally sustainable marine transportation system.
We would like to begin by expressing our strong support for CETA, which will not only generate additional trade in goods but also create new demand for transportation services that will have a positive impact on Canadian ports, trade routes and business overall.
We are particularly interested in CETA's chapter on maritime services, which liberalizes a number of activities that foreign ships are currently prohibited from engaging in under Canada's coasting trade legislation. More specifically, CETA will allow eligible EU carriers to provide feeder services between the ports of Montreal and Halifax, as part of a larger import or export movement, and to reposition their empty containers between Canadian ports on a non-revenue basis. We believe that the liberalization of these activities will create new opportunities for Canadian importers and exporters and increase the efficiency of the logistics network serving Canada's trade routes.
This being said, we do have concerns that the wording used in Bill C-30 to implement CETA's provisions on the repositioning of empty containers is too narrowly focused and unreflective of how the shipping industry operates and that this will significantly detract from the potential benefits of those provisions.
Our specific concern is that, under clause 92 of the bill, the only party that will actually be eligible to reposition its empty containers is the EU shipowner, who is defined as the party that has both possession and the use of the vessel. This definition of the shipowner is important because it essentially means that the only party that will be able to reposition its empty containers is the EU owner on whose ship the empties are being carried, which automatically excludes any other EU shipowners whose containers may also be on board the same ship as part of a vessel-sharing agreement.
Vessel-sharing agreements are used extensively in the container shipping industry as a means of reducing costs and managing excess capacity, and the fact that they are not recognized in Bill C-30 represents both a missed opportunity and a serious omission.
As an example of how these agreements work, a group of five companies might enter into an arrangement under which each company allocates one vessel to the Canadian market, with each vessel serving as the master carrier, or the carrier on whose ship the cargo is loaded on a rotating basis. Even though there is only one shipowner, that being the party with both possession and use of the vessel, on any given voyage, under this scenario, all five of the carriers who are parties to the agreement share operational control of how and when the vessels covered by the agreement are to be used. As such, they make common decisions on issues such as sailing schedules, service frequency, ports of call, port rotation, types and sizes of vessels to be used, addition and withdrawal of capacity, et cetera.
It is precisely this concept of joint operational control, which is so essential to how the container shipping industry operates, that is missing from Bill C-30, and it's missing because of the bill's very narrow definition of the shipowner, or the party with both possession and use of the ship, as the only party that may reposition its empty containers between Canadian ports. So under Bill C-30, as currently written, even if all five carriers in our example are EU entities, only the master carrier would be able to reposition its empties on any given voyage, with the other EU partners who also have containers laden on board the vessel essentially being ineligible to reposition their empties on that voyage and on any other voyages on which they are not acting as the master carrier.
By contrast, in the United States, where cabotage is governed by the Jones Act, which some say is much more restrictive than Canada's Coasting Trade Act, not only are foreign vessels allowed to reposition their empty containers between U.S. ports but so too are all of the partners in a vessel-sharing agreement, regardless of whether their vessel is serving as the master carrier on a given voyage or not. This is because the U.S. has long recognized the role of vessel- sharing agreements in the container shipping industry and, by extension, the operational control that this confers on the parties to the agreement with respect to the vessels being used.
We believe that, if CETA is to be effectively implemented in Canada and if Canadian exporters and other stakeholders are to fully benefit from the agreement's empty container repositioning provisions, then all of the partners in a vessel-sharing agreement that are EU entities should be able to benefit from the ability to reposition their empty containers.
Towards that end, we suggest that clause 92 of Bill C-30 be amended to provide that the positioning of empty containers between Canadian ports be carried out by eligible shipowners or operators, and not only by eligible shipowners as is the current case. Such an amendment would broaden Bill C-30's current threshold for empty- container repositioning to encompass all of the partners in a vessel-sharing agreement, in recognition of the joint operational control that they all share.
It's important to note that this amendment would not require any change to the definition of shipowner that is found in the text of the Coasting Trade Act itself but rather to the delineation of the parties that are eligible to reposition their empty containers between Canadian ports under the act. It would be a very targeted amendment that is integrally linked to a very specific activity.
The introduction of such an amendment represents the best means of ensuring that Bill C-30's provisions on the repositioning of empty containers are implemented in a way that reflects the realities of how the container shipping industry operates, for the benefit of a wide range of stakeholders, from shipping lines to Canadian importers and exporters, to the supply chain overall.
Thank you very much for hearing our views on this important issue, and we would be pleased to answer any questions the committee members may have.
The Deputy Chair: Thank you very much. We'll call on the Canadian Shipowners Association next.
Kirk Jones, Acting President, Canadian Shipowners Association: Good morning, chair and members of the Standing Senate Committee on Foreign Affairs and International Trade.
On behalf of the Canadian Shipowners Association, we would like to thank you for this opportunity to appear before you to discuss our concerns relating to the implementation of CETA in Bill C-30 as it affects the Canadian cabotage industry.
I am Acting President of the CSA, Canadian Shipowners Association, and Vice President, Government and Industry Affairs, for Canada Steamship Lines, a member of the CSA group. With me is Mr. Serge Le Guellec, President and General Manager of Transport Desgagnes of Quebec City; and Mr. Daniel Hohnstein, of Tereposky & DeRose, CSA's legal counsel for trade matters.
CSA represents the interests of a group of Canadian companies that supply cabotage services between Canadian ports in the Great Lakes, the St. Lawrence waterway, the Arctic and Eastern Canada using Canadian-owned, Canadian-flagged vessels crewed by Canadian seafarers. We transport millions of tonnes of bulk commodities, general cargo and project cargo every year. We provide Canadian industries and communities with reliable, safe, economic and environmentally sustainable shipping services. Our members constitute a vital domestic service industry and a major source of employment for Canadians, creating many high-paying jobs both ashore and afloat.
CSA's concerns today focus on clauses 91 through 94 of Bill C-30. These are the provisions that will amend the Coasting Trade Act to implement the market access concessions in the CETA to allow foreign vessels to supply cabotage activities in Canada without a licence that is normally required.
In the next few minutes, we'll briefly outline our concerns, which we have set out in more detail in our written brief. We welcome any discussion or questions on any of these points.
I would like to start by noting that Canadian seafarers are among the most highly trained and qualified anywhere in the world and, further, that our Canadian vessels are among the most advanced and well maintained. Both our seafarers and our vessels operate to the world-renowned Canadian standards of safety and environmental protection.
We've made tremendous investments in recent years to ensure that Canadian fleets are in full compliance with the uncompromising requirements imposed by Canada's regulatory regime for domestic vessels. We can and do compete on a level playing field with the other domestic carriers, always with safety in mind and with respect for the environment in which we operate. Ensuring that we meet these important standards necessarily means incurring significant operating costs.
Most countries in the world, including the U.S.A., protect their domestic cabotage markets from foreign vessels. They do this in order to maintain a level playing field for their domestic service suppliers. One of the reasons is that domestic vessels cannot compete with vessels under foreign registries that permit operators to pay extremely low crew wages.
Crewing costs are the majority of a vessel's day-to-day operating costs. The average monthly crewing costs of a vessel registered in Denmark or The Netherlands are a fraction of the average monthly crewing costs of an equivalent vessel registered in Canada. Opening Canada's cabotage market to such foreign vessels results in an uneven playing field to the detriment of the competitive opportunities of Canadian-owned, Canadian-registered vessels crewed by Canadians.
Prior to CETA, Canada's market had been protected by the Coasting Trade Act. It generally prohibits foreign vessels from engaging in the supply of coasting trade services unless and except they do so in accordance with a licence. A licence is generally only issued if no Canadian vessels are suitable and/or available to provide the required services. This rule is subject to certain exceptions, for example, for vessels conducting research or providing assistance in distress.
Bill C-30 expands the exceptions to allow foreign vessels to supply cabotage services without a licence. These include the transport of empty containers between any Canadian ports and feeder services, that is, the transport of cargo between the Ports of Halifax and Montreal.
Importantly, the negotiated outcomes of the CETA include specific requirements, conditions and limitations that apply to these market access conditions. They are found in the text of CETA itself, at paragraph 4, Reservation II-C-14 of Canada's schedule to Annex II. For example, only foreign vessels of first or national registries that satisfy the owner/operator requirements may supply continual feeder services, which means they can remain in Canada and operate indefinitely between the Ports of Halifax and Montreal. Foreign vessels of a second or international registry are only permitted to supply single trip feeder services limited to containerized goods. These rules have important implications for practical implementation.
It should be noted that the Government of Canada did not consult at all with the Canadian domestic cabotage industry before making the market access offers for cabotage services. The CSA first became aware of these negotiated outcomes after they had already been agreed. We therefore face a fait accompli.
Last year, however, the CSA participated in an administrative working group led by Transport Canada on the implementation of the negotiated outcomes. This was a valuable process for both government and industry. It provided insights that were helpful for the purpose of understanding the amendments to the Coasting Trade Act now proposed.
This brings about our two points.
First, the CSA understands that the negotiated outcomes of the CETA are a done deal and that they will be implemented. We note that the requirements and conditions on market access that I spoke of earlier are important elements of the outcomes. Canada secured these requirements and conditions in the process of negotiating market access. They are as important to implementation as the market access concessions themselves.
In our opinion, the amendments to the Coasting Trade Act in Bill C-30 as they are currently drafted are consistent with the negotiated outcomes in the CETA, including with respect to the requirements and conditions of market access. These provisions do not need to be changed or amended at this stage. Moreover, there should be no changes to Bill C-30 that would expand market access conditions beyond the negotiated outcomes in the CETA.
The Deputy Chair: If I could just interrupt for a moment. You're going a bit over your time. Please wrap it up so we can get to the other panellists.
Mr. Jones: The second point CSA is concerned about is the implementation of an effective monitoring and enforcement regime of the provisions of Bill C-30. We find that it is essential to ensure that there is full compliance with the conditions and requirements of the new provisions in the Coasting Trade Act. Until such a regime is in place, there will be nothing to discourage non-compliance with the requirements and conditions of the new market access exceptions under the Coasting Trade Act.
Currently, there is no information about whether, or how and when a monitoring and enforcement regime will be implemented or the availability of sufficient budget, personnel and other resources.
Again, we thank you for this opportunity and we welcome any questions or discussions on these points.
The Deputy Chair: Thank you. We now call on the Port of Sydney Development Corporation, please.
Marlene Usher, Chief Executive Officer, Port of Sydney Development Corporation: Thank you, Mr. Chairman and other distinguished senators, for allowing me to present today to this standing committee. It is important for me, as CEO for the Port of Sydney, that I come here and explain how Bill C-30 impacts on our port. To do this, I want to give you some contextual information about the Port of Sydney.
Significant investment has been made recently in the Port of Sydney. In 2012, the Government of Canada contributed $19 million toward a $38-million dredge of the Sydney harbour. In addition, $20 million contributed equally by all three levels of government will be invested in a second berth at our Sydney terminal over the coming year, 2017-18.
Although cruise ships are our main source of revenue, we also have commercial traffic. This year, our cruise ships will see an increase of 68 per cent, with about 90 cruise ships that will call on our port. As well, there are over 3 million litres of fuel that will be delivered to our wharf.
In addition to these activities, Sydney is poised to establish a mega hub container terminal where, in addition to rail, transshipment will be significant and very strategic to its success.
Why Sydney, you may ask? Sydney is the first port of call off of the great circle route. In fact, many of our cruise vessels en route to Europe call on Sydney for fuel because it is the closest.
There are no air draft restrictions and the water depth is at 16.5 metres. The site of this terminal was actually created with the spoils from the dredge that created a confined disposal facility.
In addition to that, there's a 500-acre green-field site. Adjacent to this site, there is a green-field site with another 1200 acres for a logistics park. This entire site is connected to the Trans-Canada Highway and to rail. The environmental approvals and the Aboriginal consultations are complete.
What is very important is this site is secure and away from the city centre. There is no congestion. Unlike many ports on both the east and west coasts of North America that are located near city centres, they are very congested. There is no congestion on our port. We will be able to move hundreds of thousands to millions of containers very quickly.
A private consortium known as Sydney Harbour Investments Partners has assembled the necessary pillars to develop the terminal. The funding is in place, all private sector funded.
The contract for the port terminal operator is in place. Ports America, the largest terminal operator in the U.S., will operate the terminal in Sydney.
Design and construction of the terminal will be completed by AECOM engineering and China Communications Construction Company, the largest construction company in the world. Their partner, ZPMC, will supply the cranes. Local construction companies and contractors will complete the build.
Before the shovel hits the ground, minimum volume commitments are required, and we are nearing completion on that aspect. It is expected that there will be shovels in the ground in 2018.
Our project, an East Coast Mega Hub, will be the driver for the creation of a true Atlantic Gateway. It will bring incremental traffic to the east coast of Canada.
With the anticipated significant increase in shipping in Sydney, this Canada-European Union Comprehensive Economic Trade Agreement is extremely important to us.
In particular, on page 77 of Bill C-30, feeder services, 2.3 and 2.4, the bill allows European Union vessels to provide feeder services between two named ports, Halifax and Montreal. My question is: Why would other ports have been excluded, such as Quebec, St. John, St. John's and Sydney and others?
All ports in Atlantic Canada should have the same treatment under this bill. Having all ports included in this provision would create a level playing field for everyone.
To clarify, I have met with federal transport officials on two occasions to discuss this issue. However, as the CEO of the Port of Sydney, I've never been consulted on any amendments to CETA.
My hope is that clauses 92(2.3) and 92(2.4) be amended to include all ports in Atlantic Canada.
Thank you very much.
The Deputy Chair: Thank you. For the final presentation, we turn to Nunavut/Nunavik Eastern Arctic Shipping and then we will go to questions.
Frank Schiller, Advisor, Nunavut/Nunavik Eastern Arctic Shipping Inc.: Thank you for this opportunity to speak with you today about Bill C-30 and the amendments to the Coasting Trade Act.
Over the last 15 years, I've had the great privilege of working for the executive team at the NEAS shipping group under Madam Suzanne Paquin.
NEAS is an innovative Canadian marine shipping and cargo services company with a legacy that goes back to the very start of Arctic resupply in Canada, and shareholders, including Transport Nanuk, which is a joint venture between Logistec Corporation and The North West Company, as well as Makivik Corporation and Nunavut local Inuit businesses. NEAS has grown and it currently operates a fleet of modern, Canadian-flagged and Canadian-crewed multipurpose ice-class 1 container vessels.
Since 2000, NEAS has pursued a re-fleeting strategy, with significant investments, including Inuit investments in Canadian vessels.
NEAS objects to the proposed changes to the Coasting Trade Act under Bill C-30, including, one, the repositioning of empty containers; and two, the feeder services between ports within Canadian waters.
Specifically, Bill C-30 provides EU shipowners not just with access but with preferential access to the Canadian coasting trade market, a valuable market including premium container and feeder services. The proposed concessions for EU shipowners create an unlevel playing field that competitively disadvantages and injures Canadian flag operations like NEAS moving forward.
Effectively, Bill C-30 provides an ongoing subsidy to EU operations in Canadian waters with permanent exemptions from Canadian labour and tax rules, exemptions that are not available to Canadian flag operations. This undermines the proper domestic competition and pricing in Canada's intermodal transportation market.
Conventionally, it's been accepted that Canadian flag vessels have higher operating costs as a result of being subject to regulatory and legal operating conditions not applicable to foreign vessels.
It is important for senators to keep in mind that Canada's shipping industry is not high cost, it's not uncompetitive and it's not inefficient.
Coasting trade in Canada is a high-value industry that employs skilled and trained Canadians. These are good jobs, good middle-class jobs, and we want to keep them. We want to continue on this sustainable growth path.
Unfortunately, however, with Bill C-30, EU shipowners will be able to operate in Canadian waters with foreign vessels flying flags of convenience from non-EU countries, crewed with non-EU foreign nationals that fall outside of EU collective bargaining. In simple terms, this means EU shipowners will access Canada's valuable coasting trade markets with non-EU foreign crews making as little as $1.26 an hour. That's according to credible labour studies.
It is notable that coasting trade market access provisions are not reciprocal for Canadian flag vessels under CETA or Bill C-30. Nothing is liberalized for Canadian flag operations in the EU. In fact, the EU countries continue to maintain tight protectionism surrounding their coasting trade markets. For example, Denmark and its territory of Greenland continue to maintain a monopoly for a state-owned shipping company with no access available to Canadian flag vessels or crews. Yet EU shipowners, including companies from Denmark, are demanding preferential access to Canada's high-value coasting trade markets, while offering nothing in return.
It's also notable that comparisons are made to the United States, where repositioning of containers is allowed, but it's notable that in the United States, that provision is only provided to countries who offer a reciprocal right to American operators, unlike what we're doing here in Canada.
Senators, please closely examine and consider the rationale underlying the proposed liberalization of Canada's coasting trade markets for EU shipowners. There are no policy grounds in the public interest to support these changes. None. In fact, Bill C-30's coasting trade amendments go against the purpose of CETA itself, including promoting the expansion of reciprocal trade and conditions of fair competition and economic relations between Canada and the EU, per clause 7(b) and (c).
The market concessions on coasting trade are based on negotiation errors and fallacies that could have been avoided with proper industry consultations. To be clear, there were no consultations with industry before Canada agreed to these changes.
Consider, for example, a recent statement by an official before parliamentarians on Bill C-30. They said, on the position of empty containers, "I have to say that we did not receive any objections to that particular provision. It was viewed as fairly non-controversial,'' the official assured senators and Members of Parliament.
This is simply not true. NEAS objected. What is being proposed —
The Deputy Chair: If you could wrap up.
Mr. Schiller: — is extremely controversial and has been the subject of contested waiver applications for years before the Canadian Transportation Agency.
CTA has consistently ruled that there are available and suitable vessels to do these services. Now NEAS stands to lose between $300 to$500 per container repositioned under CETA.
Effectively, Bill C-30 intervenes into what should be fair market negotiations and reallocates significant volumes of high-value cargo from Canadian flag operators to the EU.
We urge senators to look at this. We urge senators, independent Liberal and Conservatives, to support and strengthen the intent of CETA by deleting the relevant consequential amendments to the Coasting Trade Act at 92.2.
In closing, I think it's important that we not forget our values in pursuit of trade deals. The Prime Minister identified a key challenge for our time when he recently said: ". . . globalization doesn't seem to be working for the middle class, for ordinary people.''
I say forcing Canadian vessels and Canadian marine crews to unfairly compete in Canadian waters against foreign vessels and crews making as little as $1.26 per hour is not the kind of globalization we want.
The Deputy Chair: Thank you very much. We're going to have to cut you off there because you're way over time now.
Colleagues, I remind everyone that this session concludes at 11:30 because we have a second panel coming in, so we'll go through the list. When we get to the end of the list, if all senators have not had an opportunity, I'll simply ask them to ask their question and we'll get a written response to the clerk to distribute later.
Senator Eaton: I have two quick questions. I'm surprised Canada has made such a fuss over protecting cabotage for our own domestic airlines and they've kind of thrown you to the wolves.
What really concerns me, and this is to the Canadian Shipowners Association, is the fact that we don't know what safety standards those boats are going to bring to our very precarious shores, if you think of the Northwest Passage, the Arctic and the St. Lawrence River. What do you have to say about that? Will their safety standards be the same as ours?
Mr. Jones: I'm going to ask our legal counsel to answer that question, as he's looked at that before.
Daniel Hohnstein, Lawyer, Tereposky & DeRose LLP, Canadian Shipowners Association: Very good. I'll start off the answer and I'm sure my colleague, Serge, will have something to say as well.
We know that there are provisions in Bill C-30 that require the environmental protection and safety standards that are normally applicable in Canada to apply to all vessels that are operating in Canada under the CETA exemptions. I can take you directly to that provision.
Senator Eaton: I believe you. Everybody here has so many questions.
Mr. Hohnstein: Right. The key point is that Canadian vessels, in accordance with the requirements of Canadian regulatory standards, are optimized for use in the challenges and demands of Canada's waterways. This optimization includes features like bow and stern thrusters, redundant steering mechanisms and those sorts of things. In addition, our seafarers are particularly experienced in navigating Canadian waterways and, as I said, the challenges and demands specific to Canada's waters.
Senator Eaton: Will they ask, in certain situations, for Canadian pilots or experienced people to get on EU ships?
Serge Le Guellec, Member, Canadian Shipowners Association: The answer to your question is: Yes. When vessels do sail into controlled waters, they have to have pilots on board. The difference, of course, is that a pilot is responsible, for the navigation and control of the vessel, to the master. A pilot is never left alone on the bridge. The master and crew works with the pilot and keep track of what he's doing.
To do that requires an understanding of the waters in which you are sailing. Our Canadian seafarers have that understanding because they have been sailing there for a long time. Folks coming from abroad do not have that level of understanding and therefore, from a safety standpoint, there is a concern.
Senator Eaton: Thank you very much.
My second question is for NEAS. Mr. Schiller, when informed of the proposed changes under CETA, what did NEAS do to seek solutions? Did you seek reciprocal trade opportunities in the EU? For instance, you talked about Greenland, and you say that Denmark said absolutely not, and Greenland, for instance, is not considered reciprocal because it's out of bounds.
Mr. Schiller: When NEAS received notice from Transport Canada in January of 2014 and became aware that concessions were being made under the CETA negotiations on the coasting trade front, it immediately requested reciprocal access to EU feeder services, particularly going into Greenland.
We were told by Canadian officials that that was not possible and that it was not up for negotiation. We sought to secure a level playing field in terms of the second registries in use of foreign, non-EU crews, and we were told that was not possible.
We participated, along with other shipowners, in a working group. But as it progressed, it only became more apparent that there were no capacities to level the playing field and protect Canadian shipowners under the process that was adopted by Global Affairs and Transport Canada with regard to those concessions that were made.
We sought reciprocal rights and we were denied; we sought a level playing field in a very competitive market in Canada, and we were denied. We have been trying to work with officials, both at Global Affairs and Transport, really, since 2014, to get some kind of accommodation, and we've been unsuccessful.
From our perspective, we believe that the coasting trade concessions were not actually part of CETA, that these were a last-minute throw-in and that they are not core to CETA's intent or focus. We believe that senators can change the coasting trade provisions within Bill C-30 without in any way undermining the intent or the commitment of Canada to CETA. Thank you.
Senator Marwah: Thank you all for your comments. My question started off as one to Mr. Jones of the Canadian Shipowners Association, but I think it now extends to all of the organizations represented here.
Some of you have expressed concerns with different provisions of CETA, but we are where we are. There's little doubt in my mind that CETA has overwhelming benefit to Canadians and to Canada. It has already been ratified by the EU and is awaiting our ratification.
Given that, what can we realistically do at this stage that will help mitigate some of your concerns? We're not going to reopen the negotiations, nor are we going to start amending it so that we jeopardize what has been done. Now we have to think about what is realistic to mitigate the concerns.
I think the Port of Sydney suggested it be amended so that the same access is provided to all ports, as one solution. I don't know what the ramifications of that would be, but I'm going to look into it. What's a realistic solution to mitigate some of your concerns without starting from scratch?
Mr. Jones: I think the answer to that question is primarily the backbone of our intervention.
In a negotiation, there's a quid pro quo: we give something, and we get something. Our document suggests that we are where we are, it's a fait accompli, and you can satisfy our concerns by not expanding the negotiated outcomes of CETA beyond what they were.
Second, we would suggest ensuring that there is a monitoring and enforcement regime established so that the understandings of the giveaways during the working group are enforced. As an example, when an international operator is in Canadian waters doing feeder services, they're required to pay prevalent wages so that there is a chance for a level playing field if there's a Canadian operator who wants to engage in those trades.
Senator Marwah: I'm sure you've expressed those concerns to the government. What has the response been? Have they said no? Have they said yes? Have they said they will look into it?
Senator Cools: Can you make that quite clear to us?
Mr. Hohnstein: Certainly. The CSA was involved in an administrative working group regarding the implementation of the CETA last year. Transport Canada led, curated and organized those sessions.
We're not aware of the regulatory, monitoring and enforcement framework that needs to go into place before the CETA comes into force, and that includes the provisions of Bill C-30 that would amend the Coasting Trade Act to create these new exclusions for commercial cabotage services for foreign vessels under the restrictions and conditions. It is these conditions and restrictions that are actually critical to implementation. It's only the ports of Halifax and Montreal that are involved.
I think Steve Verheul last Thursday provided a very cogent response with respect to why only that corridor was selected. It was because, from the view of Transport Canada and the negotiator at that time, that would not impact the rest of the Canadian domestic cabotage industry, which is a protected industry and is and has been protected by the Coasting Trade Act. It was a way of providing some value to the European Union for what they were asking without damaging the Canadian industry.
If that condition — that limitation — on that corridor between the ports of Montreal and Halifax is expanded to include other ports, then we're starting to exceed the negotiated outcomes of CETA but we're doing it in a way that's going to harm the domestic cabotage service suppliers — that is, the shipowners who use Canadian-owned and Canadian-registered vessels and Canadian seafarers on board.
Mr. Schiller: If I can add for the benefit of senators, NEAS is not a member of the group that the CSA represents, and we do not share that view.
I think it's critically important for senators to understand that there is no narrowing or constrictions on the coasting trade liberalizations afforded under CETA. Specifically, the European Union will now automatically get any further liberalizations that Canada offers any other country in a future trade agreement without offering any reciprocal access. There are other ongoing trade negotiations right now, including, for example, TiSA, where most-favoured-nation status, countries under that agreement, could theoretically get the same access that the EU has. As we enter into NAFTA renegotiations, the Americans will very likely request the same liberalized access to our coasting trade market that we just offered to the EU.
Our view is that if senators and the government are not prepared to recommend amending the bill and correcting it properly, then appropriate, company-specific offset packages have to be available for those companies experiencing losses and damage. The loss of containers and the feeder services between Montreal and Halifax represents meaningful and measurable economic damage to Canadian shipowners, including NEAS.
Mr. Le Guellec: If I could, senator, I would like to add to that point. The Canadian industry has invested heavily in the last few years in new vessels. We did that on the basis of business models, where there is business for Canadian vessels domestically.
The Deputy Chair: I'd like to hear if other panellists have any comments as well.
David C. Dingwall, Legal Counsel, The Darius Group Inc., Port of Sydney Development Corporation: I'll pass the floor to Michael and then I'll go ahead.
Mr. Broad: I'd just like to set out a few facts here on the empty container positioning. All of the empty container positioning in Canada is now done by rail or truck, the vast majority by rail. It's ironic that because of the Coasting Trade Act, the railway gets the business. We can't even move our own containers from one port to the other. We don't charge anything; it's our own containers.
Canadian shipowners are not in this business now, never have been in this business. So the idea of carrying our own containers is basically to reduce the cost for Canadian exporters, particularly in Atlantic Canada where there are reefer containers that have to be repositioned by rail down to Halifax at a substantial cost. If our ships can do that, then that would reduce the cost for the Canadian exporter.
So realistically here, if anybody is going to be losing business, it's going to be the Canadian railways on empty containers.
Mr. Dingwall: To the senator's question, he's correct. The previous administration had great foresight in terms of beginning the process of this agreement with Europe. The current administration has followed up. We're now in the ninth inning, so to speak. The matter will be approved. Are there ways from a negotiating perspective to change this? The answer is yes. I think Mr. Schiller has offered some words there as well. There are the provisions of the joint committee, if you will, of the agreement that undertakings can be given and sought from the other side.
There are two points that I think are relevant for your particular discussion. The chairperson of this committee, on March 30, in response to Senator Downe as well as the chief negotiator, said the following:
Perhaps that goes to how you negotiate it. You seem to be negotiating on a responsive basis, where I would have thought you would have been anticipating changes in the future in flows and opportunities, et cetera. So we've now said that these are the routes that should be, and now we have an agreement based on that.
Second point: David Emerson, a former colleague of the Parliament of Canada, a former minister of the Crown, conducted a review of the Canada Transportation Act. He said the following on page 210 of his submission:
Shipping is the most cost-effective means of transporting cargo in volume, particularly for long distances. Consequently, port infrastructure and capacity are essential for countries wishing to successfully engage in international commodity trades.
World seaborne trade is expected to almost double, from 10 billion tonnes in 2014 to between 19 and 24 billion tonnes by 2030. Our submission here today is what the intent of the agreement is, which is to look forward, take into consideration not only the two or three that you wish to deal with, but have a level playing field for all so that in the future we can take advantage of those opportunities.
The Deputy Chair: I thank the panellists. I'll have to go to the next question. Again, any follow-up you have on any of these questions, submit it to the clerk and we'll distribute to all the members. There's an opportunity to get that out. I want to get to as many senators as possible because they all have different questions and a different perspective.
Senator Oh: Thank you, witnesses. One of the main concerns of the Canadian Shipowners Association is that the wages paid to the crews in some of the EU member states are much lower than our crew costs here. This makes Canadian vessels less competitive.
Do you know why the average crew costs of the vessels in Denmark and the Netherlands are just a fraction of ours? In this country, is the government subsidizing wages? Someone also mentioned they are only paid $1.26 per hour. How much are we paying our crews in Canada?
Mr. Jones: Our crew, for a middle-class licence, a watch keeper, is probably in the area of $60,000 to $75,000 per year for a watchman perhaps. They pay taxes in Canada.
Senator Oh: How much an hour?
Mr. Jones: It would be $20 or $18, somewhere in that area. The answer to your question is the vessels that you reference are under second registry, so the crews are assembled from typically Third World countries or countries with fewer labour standards. They don't pay taxes with their income. That's the answer.
Mr. Le Guellec: I think that summarizes it. I have no point to add.
The Deputy Chair: Senator Oh, do you have a follow-up? No?
Mr. Broad: I'd just like to know where that $1.26 an hour comes from because certainly the crews on our ships that come up the St. Lawrence River or call Vancouver or call Halifax are not making $1.26 an hour.
Senator Oh: Someone mentioned that figure just now.
Mr. Schiller: If I may, senator, it actually comes from research presented to the house standing committee in consideration of this bill, a policy alternative, I believe. It was also a presentation by one of the institutes, I believe. I can provide those studies, no problem at all.
I think that's really going back to the key point why some shipowners object to this because what is being sought for EU vessel owners is preferential access. Not only do they want to access the Canadian market on the same terms as Canada and Canadian-flag operations, they want better terms. They want the ability to use vessels and crews from outside the EU that are not subject to their collective bargaining. That's where you end up with these disparaging and low wages.
I think it's important for senators to note as well, the potential impact of the CETA provisions of reduction in container rates for Canadian importers and exporters was mentioned. There is no data on the record that supports that claim at all. In fact, container rates from EU companies are increasing. If there's any data that supports any claim that container rates will decrease for Canadians, we would welcome that information to be tabled so it can be reviewed. Our data is, in fact, that because of the distortions in fair market operations, this is going to ultimately increase costs for Canadians in importing, exporting and trans-Atlantic trade.
Senator Saint-Germain: I will speak French. I will give you some time, for those who need it, to put on the earpieces.
I want to first congratulate all of you for the quality of your presentations and the quality as well of your consultation before this hearing.
[Translation]
My question is more specifically for Michael Broad, President of the Shipping Federation of Canada. I first want to draw everyone's attention to your expertise and the fact that your industry, given its financial importance, would have justified a prior consultation. I am disappointed to learn that you were not consulted before the agreement was concluded. That said, we are now further along in the process — at the implementation stage — and you fully understand the limitations of what can be done at this point.
The agreement cannot and must not be changed, and you support this agreement. So you are proposing that a legislative amendment be made to section 3 of the Coasting Trade Act concerning the repositioning of empty containers. From a very practical perspective, we will definitely examine the issues with our legal experts, as you have done with yours. My very specific question is the following: from a practical perspective, can agreements with your counterparts be concluded in addition? I know that things are going well with your European Union partners, but would your counterparts, who are also your competitors, be interested in the same arrangements being made with them, in terms of transporting empty containers within European Union countries?
Mr. Broad: Do you mean in order for Canadian companies to have the same rights?
Senator Saint-Germain: Do they have the same problem? Could this Canadian solution also apply to Europe?
[English]
Is it a win-win situation for the maritime industry?
Mr. Broad: I believe it's a win-win. It's very practical, as you mentioned. Even the CSA, a number of years ago, agreed that it would be practical to allow the empty container repositioning. I don't see any harm to the Canadian industry at all. In fact, I think a lot of the fears are — I don't want to say overblown, but I think the concerns should not be so great. The Canadian and European governments have negotiated CETA. It's very restrictive. Even the empty container movements are restricted to EU owners only. Asian or South American owners cannot participate in that. It's very restrictive.
With respect to the feeder and transshipment regulations, they're also very restrictive. I don't see any damage to the Canadian owners who are not participating in this business.
Senator Saint-Germain: Thank you for your answer.
Karen Kancens, Director, Policy and Trade Affairs, Shipping Federation of Canada: If we could add one point on the restrictive nature of the empty container repositioning provisions, our point is that the way it's currently written in Bill C-30, not even all European shipowners would be able to benefit from that provision. When we talk to our European members about empty container repositioning, they say, "We don't think we would do it.'' Because of the way vessel- sharing arrangements work and because of the number of partners involved and EU partners who wouldn't be eligible, it would probably become so complicated that in some ways the provision, as it's currently written, would become meaningless. That's why we think it's important, at least, for the provision to recognize the way the industry operates and its applicability to EU operators.
Senator Cordy: I would like to reiterate what Senator Saint-Germain has just said. Your presentations have been excellent and filled with a lot of excellent information.
As a senator from Nova Scotia, I'd like to address my comments to the representatives from the Port of Sydney. First of all, I want to congratulate you on the significant improvements that have been made to the Port of Sydney: the dredging of the harbour, the establishment of the second berth and the wonderful Joan Harriss Cruise Pavilion, which is not only beautiful but functional and has that wonderful big fiddle in front of it that people now use as a marker when talking about where they should meet on the waterfront area in Sydney.
My question is related to the effect this will have on the smaller ports, particularly in Atlantic Canada. You made reference to the Halifax-Montreal corridor in your remarks, and you said that Sydney was excluded, and I would guess that perhaps Port Hawkesbury was excluded and a number of other smaller ports in the area. What effect is CETA going to have on the smaller ports in Atlantic Canada, but likely smaller ports across the country? Will you benefit from it, or will there be no gain, no pain?
Ms. Usher: We believe that we will benefit from it. There has been a lot of research and study by the Atlantic Canada Opportunities Agency into which goods and how export and import will be affected by CETA. We see a lot of incremental new traffic that will come to our ports, both for cargo and for container. Therefore, Port Hawkesbury, Saint John and Yarmouth — all of the small ports — there will be something for them. I think the biggest gain is anticipated to be in containers. Therefore, container ports such as Halifax and Saint John will also have a lot to gain.
Senator Cordy: Thank you. You've already made reference, so we might not want to add anything to it, but related to the crewing of the ships, your comment, Mr. Schiller, was that we kind of give up our values for a trade deal.
You also said that we could have crewing of ships in Canada that were non-EU ships. Are you suggesting that ships from other countries would register and have an EU flag but not be from the EU? Is that what you were referring to?
Mr. Schiller: Yes, this goes back to the comment that the reason the coasting trade amendments are deficient relative to CETA's objectives, because it doesn't just grant access; it grants preferential access for EU operators over Canadian-flag vessels. That's because in the EU, you can register your vessel in a second registry, flying a flag of convenience to a nation-state outside of the EU, and you can get non-EU foreign mariners to crew that vessel. The benefit of that for EU shipowners is that those non-EU mariners fall outside of collective bargaining of EU negotiations. So they can go and get a crew of Filipinos for a thousand bucks a day, basically, and that contrasts to $25,000 to $30,000 a day, easily, for crewing costs in Canada.
That kind of goes to why this is wrong. At the base of this, it is not about fair competition or free trade. This is about giving a very specific group preferential access to our market and allowing them to increase their profitability at the expense of Canadian service providers.
If I can make one final comment: It's been suggested there's no Canadian company making this service right now, so there's no harm, no foul. But that is incorrect. There have been Canadian companies that are set up to do this service. Transport Canada has invested tens of thousands of dollars in extensive studies looking at short-sea shipping between the Great Lakes and Montreal, Halifax and other areas. This is a growth market. These are premium, high-value coasting trade markets, and we're giving them away for nothing. One of the senators said —
The Deputy Chair: I'm sorry; I have to cut you off because we're running out of time.
Senator Cordy, do you have any more questions? Senator Woo and Senator Pratte have questions. I will ask them to ask their questions, and we'll have answers in writing from the panel sent to the clerk and we'll distribute them to everyone.
Senator Woo: I'll try to be brief. My question is principally for the Shipping Federation and the Port of Sydney, and it has to do with your plea to make modifications to the CETA agreement, essentially, as I understand it, by further unilateral liberalization — because from a negotiating perspective, these are concessions that we would give without asking Europeans for anything else — in the case of the port, adding Sydney to the list of designated ports; and in the case of the Shipping Federation, inclusion of other entities to take part in repositioning of containers and so on.
I'm just trying to think through that if one were to decide that this was a good thing, how would this be done? It's really an internal debate in Canada. We wouldn't have to reopen negotiations with the EU, is my assumption, but there would be obviously some opposition, maybe from the railway guys, who are not so happy — I don't know, and you could comment on that — and perhaps some shipowners and so on.
Essentially, my question is the feasibility of further unilateral localization on CETA, which would not affect our counterparts in negotiation but would have some domestic ratification. Could this be done? How could it be done?
Senator Pratte: Could you please, in providing to the clerk, confirm the impression that I had up until this morning that all Canadian laws — labour laws, environmental laws and safety laws — will apply to those European and foreign ships while those ships are in Canadian waters?
The Chair: Thank you, Senator Pratte. I appreciate Senator Woo and Senator Pratte's understanding. We looked forward to getting the answers from each of you or collectively. Send it to the clerk.
On behalf of the committee, I would like to thank you very much for your time today, your presentations and your interests in the questions. We were very impressed with what we heard. We thank you very much for your attendance.
In this second part of our meeting, we're continuing our examination of Bill C-30, An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its member states and to provide for certain other measures.
We welcome, from the Canadian Manufacturers and Exporters, Mathew Wilson, Senior Vice President; from the Canadian Horticultural Council, Rebecca Lee, Executive Director; and Mr. Ken Forth, Chair, Canadian Horticultural Council Trade and Marketing Committee.
Thank you for joining us today. I'll invite Mr. Wilson to make his statement first.
Mathew Wilson, Senior Vice President, Canadian Manufacturers and Exporters: Good morning, Mr. Chair and honourable senators. I'm pleased to be here on behalf of Canada's 90,000 Canadian manufacturers and exporters and our association's 2,500 direct members to discuss and fully support the act to implement the Comprehensive Economic Trade Agreement between Canada and the European Union.
CME is Canada's largest industry and trade association, with offices in every province. It has a chair at the Canadian Manufacturing Coalition, which represents 55 sectorial manufacturing associations. More than 85 per cent of our members are small- and medium-sized enterprises, representing every industrial sector, every export sector and all regions of the country.
Manufacturing is the single largest business sector in Canada. Its sales surpassed $600 billion in 2016 for the third consecutive year, and it directly accounts for 11 per cent of Canada's total economic output. Manufacturers employ over 1.7 million Canadians in highly productive, value-added, high-paying jobs.
Manufacturers are also directly responsible for the majority of Canada's exports. In 2015 and 2016, manufactured goods exports reached nearly $350 billion, an all-time record high, and accounted for almost 70 per cent of Canadian exports in that time. These exports create and sustain millions of direct and indirect jobs and are critical for the wealth generation that sustains the standard of living of each and every Canadian.
The reason that exports and international trade in general are so important is because Canada's domestic market is simply too small. In fact, 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 imaginable.
In 2016, CME embarked on an ambitious task to consult with our domestic industry on an action plan to double manufacturing output and value-added exports by the year 2030. This initiative, called Industry 2030, connected with roughly 1,250 business executives from coast to coast to ask their opinions and seek their direction on how we could help support the growth of their companies. While the reports and recommendations stemming from this exercise cover a wide range of issues, including skills, technology adoption and investment climate, a major pillar is focused directly on growing exports and helping companies find new customers in domestic and foreign markets.
From an export sales growth perspective, the U.S. market remains a priority for most of Canada's industry. However, a growing share of our members are looking to take advantage of new and emerging opportunities beyond the NAFTA, especially those countries represented by the EU. In fact, the EU market was deemed the second most promising market for growth over the 550 companies that responded to our online survey, with 24 per cent of respondents marking it as a key growth market. This is ahead of Mexico at 19 per cent and China at 18 per cent in terms of export sales growth potential.
Furthermore, as part of our study, we asked directly about the support for CETA and other free trade agreements, and 34 per cent of respondents believed the agreement would have a positive impact for their company, with only 3 per cent stating that it would have a negative impact.
The reason there's this level of support for CETA, and the reason why CME has supported CETA since the early stages, is that we believe the deal was between equal partners. CME has always clearly stated that no trade agreement is worth signing unless that deal meets three simple objectives: It creates a fair and level playing field for Canadian manufacturers and exporters, it allows value-added exports from Canada and not just the export of natural resources; and it does not undermine the existing integrated manufacturing supply chains developed through previous FTAs, especially the NAFTA.
It is this principled approach to trade agreements that we continue to support and believe that the CETA agreement follows. We also think the structure of the deal is a model for future trade agreements, including a potential NAFTA renegotiation, as it deals with many of the real issues of trade — the non-tariff barriers faced by manufacturers, including standards and regulations and government procurement, to name a few areas.
However, implementing the CETA agreement is only part of the issue that needs to be addressed. The other part is preparedness of Canadian companies to take advantage of the deal. To be blunt, Canada has a poor history of success in free trade agreements. Aside from the Canada-U.S. FTA, very few if any agreements have led to long-term significant increases in Canadian exports. Honestly, there is very little point in signing deals if Canadian companies are not leveraging them for growth.
Even when asking about support for CETA, 31 per cent of respondents said they didn't even know enough about the agreement to know whether it would be beneficial to them, which is about the same amount as said they were for it. This is despite years of media coverage, endless webinars, seminars and workshops. This is not pointing the finger at government; it is, however, a direct recommendation to increase support for Canada's exporters, to partner with the private sector and take aggressive coordinated action to support exporters.
To start with, we need to do a better job of educating Canadian companies of offshore potential and the services that are available to them. Despite our success and high level of exports, very few Canadian companies are looking internationally. We need to set up programs to educate companies in new market opportunities and to increase internal capacity and expertise in global trade.
An export-intensive accelerator program, similar to what's available in other markets, would be a good start in this regard. Expanded foreign trade missions to connect companies with foreign buyers to be supported with better funding models could support SME participation. Exporters also need better foreign market intelligence and improved connections to international business partners that an expanded Trade Commissioner Service could provide. Additional support should also be made available for private sector initiatives, such as the Enterprise Canada Network, a service that links Canadian and European companies through a global network called Enterprise Europe Network.
CME believes that with the right support network in place for CETA and other markets, Canada can double manufacturing output in value-added exports by 2030, the ultimate goal for our 2030 initiative, which is in line with the government's own stated goal for a 30 per cent increase in exports by 2025.
In conclusion, I want to thank you again for having CME here today to it express our support for CETA implementation. We applaud the government's leadership in helping Canadian manufacturers and exporters grow their business in global markets through agreements like CETA. But now we must ensure that we have the right investment structure and the right support mechanisms to help Canadian manufacturers take advantage of these new market opportunities. Thank you again. I look forward to the questions.
Rebecca Lee, Executive Director, Canadian Horticultural Council: Thank you for the opportunity to speak today. The Canadian Horticultural Council represents fresh fruits and vegetable growers across Canada and we have been doing for so for almost 100 years. Competitiveness is a high priority, so we look forward to increased opportunities through the implementation of CETA.
Yes, a free trade agreement that eliminates tariffs between Canada and the EU is important, but we need to make sure our products are not blocked by any technical barriers in the process. There are three critical technical barriers to trade we would like to address at this point.
First, Canada and the EU do not agree on maximum acceptable residue limits for many products. For example, Nova Scotia used to export apples to the EU but the province stopped doing so ever since the EU dropped its maximum residue limit for Diphenylamine, a common storage treatment for apples, to 0.01 parts per million. In Canada the maximum residue for this product is at 5 parts per million.
The problem isn't confined to apples. There are some figures in the footnote that can give you some other examples. And quite often, a default is used. Without harmonized maximum residue limits, the risk is often too high for growers to venture into new markets. A producer in full compliance of Canadian limits can have their crop rejected by the destination country due to residue violations.
The second main non-tariff barrier to trade with the EU is when a country outright refuses to import a commodity based on the existence of a product registered in Canada. An example here is France, which has banned the import of cherries from any country that has registered the insecticide dimethoate. The ban is not just on products that exceed maximum residue levels, even if it's set to zero. It's a ban on everything. In other words, a cherry grower who does not even use dimethoate is banned from shipping to France simply because the product is registered for use in Canada.
The third and last non-tariff barrier I will address is the fundamentally different approach of the EU to make regulatory decisions based on the simple existence of a hazard, whereas Canada looks at actual use cases to see if we can mitigate risk while continuing to use a product.
The EU approach would be the equivalent of refusing the use of electricity because of the risk of shock. We all know that if appropriate safeguards are put in place, the risk of electrocution is minimal.
We do not want to lose products that Canadian scientists and regulators have approved simply due to political pressures. Implementation of CETA must ensure that risk mitigation based on science is recognized in the registration of crop protection products.
In conclusion, despite the new markets created under CETA, our sector is concerned with non-harmonized maximum residue limits, the outright refusal of a commodity if Canada has particular crop protection products registered for it, and the EU's approach to making regulatory decisions based on hazard rather than risk. These technical barriers to trade will severely hinder Canada's ability to grow markets to their full potential regardless of tariff elimination.
Thank you for your time. I will now pass the mic to Ken Forth.
Ken Forth, Chair, Trade and Marketing Committee, Canadian Horticultural Council: Senators, the only issue I want to talk about today is the consideration of the Canadian government's ratification of ILO, Convention 98, as a requirement for the CETA agreement.
Convention 98 requires the right to bargain collectively with the right to strike. Current laws generally comply with C98, but Canada has robust labour laws that protect workers but adapt to certain circumstances in different regions and in different sectors, agriculture being one of them. The ILO has rigid and political requirements for C98 and is inconsistent with the more flexible policy-based approach taken by the federal government and our provinces across a wide variety of sectors, including agriculture.
For example, until now, governments of Canada have generally been freed to develop alternative labour relations models for sectors where the traditional system is considered to be inadequate or unworkable. Agriculture is one of those sectors. The Supreme Court of Canada itself has accepted that the Charter permits governments to implement non-traditional labour regimes that are compatible with the unique characteristics of farming.
In contrast, the ILO Committee on the Freedom of Association has found that the freedom of association requires that farm workers be entitled to a traditional form of collective bargaining, including the ability to go on strike. This finding is directly at odds with the Supreme Court of Canada's conclusions on the issue.
Examples of other divergence in Canadian law are minority unions, which do not exist in Canadian law — Canada requires a majority of workers to agree to a union to obtain certification — and compulsory arbitration, which is in variance with C98 while labour law in Canada requires it. It has been said the stakeholders — farmers — were consulted on this inclusion of C98. In Ontario, they were not, and across the country they were not.
In conclusion, based on what I've said and on the brief that I've supplied to you, there are important differences between basic features of Canadian labour law and Convention 98. These differences may have significant, practical implications for Canadian labour law in light of Canadian courts' increasing reliance on the views of the ILO supervisory bodies.
This is of particular concern in a non-traditional sector like agricultural, where ILO supervisory bodies would insist on the application of rigid and inappropriate collective bargaining principles that ignore the realities of Canadian farms and the conclusion of the Supreme Court of Canada in this area.
The bottom line is that farmers and farm families in the fruit and vegetable and other parts of agricultural would be in jeopardy. Thank you.
The Deputy Chair: Thank you all for your presentations.
Senator Woo: I have a question for the CME. You're a strong supporter of CETA and you've argued the case well of the importance of this agreement for Canadian exports. Many Canadians who support free trade in general would tend to measure the benefits of any trade agreement by the increase in exports that come from that agreement. However, I'd like you to say a little bit about the importance of increasing imports as well, particularly intermediate imports that your manufacturers, your members, require for further value added, which may end up as exports to third countries. Give us a bit of an education on the role of imports as an integral part of a successful trade agreement.
Mr. Wilson: I'm not sure how much education you actually need on this. It sounds like you know quite a bit about it already.
Canada isn't an island. We export. In order to manufacture pretty much any good, you're relying on a variety of inputs. Those inputs can be everything from raw materials to make steel, to auto parts or aerospace parts or even food implements, through to machinery and equipment that is used inside the factory. The inputs are really important.
Germany would be a really good example. Germany is one of the major suppliers of advanced manufacturing technologies, which is reshaping the state of manufacturing around the world right now.
To be able to remove the tariff from those products coming in to allow the workers who are installing those pieces of machinery and equipment to come in a lot easier without the current regulatory process they have will make it much easier for manufacturers in Canada to operate more efficiently.
We talk about exports and growing wealth purely from an export perspective, but the inputs on the other side of the equation are often forgotten.
Automotive is probably the highest traded product in Canada and the European Union right now and will probably have some of the biggest benefits, and part of the reason for that high trade is just in the automotive world alone. We have major auto parts manufacturers from Canada that operate in Europe and big OEMs operating in both countries. The ability to move parts back and forth to the supply chains in both markets would be a huge improvement for supply chain efficiency overall.
When we do talk about exports, it does matter on all stages, on the input side as well, because not everything is sourced domestically. It's an excellent point.
Senator Woo: Can you give an idea of the tariff rates on machinery and equipment coming from the EU, any ballpark?
Mr. Wilson: I have no idea. I apologize. The problem with it is that I don't know how many thousand lines of tariffs there are out there. I'm sorry. Probably the sector associations responsible, that have that machinery and equipment manufacturing, would know, but I don't know. I apologize.
The Deputy Chair: Mr. Wilson, in your presentation, you talked about our terrible history with trade agreements and how it has not led to an increase in exports.
It's an area I've been concerned about for some time, and I refer to the statistics from Industry Canada that show that, after many of these trade deals, our trade balance actually gets considerably worse, not better.
It appears that other countries are prepared for the deals and have targeted particular parts of the Canadian market and have great success. You look at the trade before we sign trade deals. For example, we have one with Korea that we signed recently. In 2015, our trade deficit was 3.1 billion, and, as of last year, it was 6.2 billion. It goes on and on. With Mexico, the year before we signed NAFTA, our trade deficit was 2.9 billion. Last year, it was 25 billion. It goes on and on. You look at Costa Rica. We went from a trade deficit of 126 million to 364 last year. There is also Peru and so on. There are very few of these trade deals, as you indicate, other than the American ones, where we've been prepared.
The question for me, for some time, has been: What is the Canadian government not doing, and what should they be doing to prepare our industries, our citizens, for these trade deals? I look, for example, and it's to laugh; the Export Development Corporation runs ads on TV, saying, "Your tie was made in Italy. Your shoes are made in France. Why can't you export?'' That's not a plan. That's silliness, a waste of time. In your opinion, what is the government not doing, and what should they be doing?
Mr. Wilson: I'm pretty sure that we've had this same conversation around this committee on another agreement a year or so ago. I'll say a couple of things.
It's really discouraging, for a group like ours, which supports the growth of manufacturing and export in the country, seeing us sign these free trade agreements and then really just seeing influx of imports and almost no exports whatsoever. Imports are good. We need imports to be able to run our operations in Canada, but we're not taking advantage of them.
There are a couple of things that we need to recognize first. One is that the structure of our economy is very different in Canada than what it would be in Germany or most European countries. We are way more heavily weighted towards very small companies. When I say very small, I mean under 20 employees.
Manufacturing represents 70 per cent of our exports in the country. Another 20 per cent is probably in energy products, oil and gas and other natural resources. You don't leave a lot of room for other sectors. The problem in the manufacturing sector is that somewhere around 95 per cent of all companies in that space have below 20 employees. They are not really looking to export to Europe that much. There's a big learning curve. If you go to Germany or France or Italy and some of these other nations that you see advertised, the companies are a much bigger size, and they are thinking globally from the beginning because of the type of market they are in.
One of the things that we've been a little bit critical of in the past of governments and, again, talked about around here is that we have this natural aversion in Canada to picking winners and losers. But look at what South Korea did. Their trade agreement and their trade strategy is targeted around two companies, Hyundai and Samsung. That is their trade strategy. They are looking to sign free trade agreements to make sure that they can export electronics and cars.
What's our trade strategy? What are we focused on? I don't know. I represent the exporting community, the group that exports most stuff out of Canada, and we try to a little bit here and there and across the country. I think I've argued here before that a much better approach would be to take a look at the sectors that actually have capacity to export. Target those sectors first and see if you can help to start growing those. Look at automotive. Look at aerospace. Look at steel. Look at chemicals. Look at where we are doing well already and see how you can accelerate those. Once you start seeing growth in some of those really key sectors, then you can start helping some of the other sectors along. But a lot of those sectors are not ready to export. They are very small companies that can't do it. That's, I think, our number one recommendation, start targeting companies a little bit better.
The other thing I would honestly say is that the EDC does a great job when we ask our members about it, and I'm not going to complain about what they do, but the criticism we often get around these services — and we can provide the committee with stats on what our members have said in our surveys about EDC or BDC or Trade Commissioner Service; we know how companies use them and what they think of them — is that most companies don't know they exist, in the first place, which is a problem.
The other thing is when they go to get help. The Trade Commissioner Service is a good example. The Trade Commissioner Service is really underfunded for what it's trying to do. They are trying to help all companies export everywhere in the world, and they can't do it. There's not enough money to do that. We've argued for a long time for investing more money. If we really are going to grow, invest money in Trade Commissioner Service. Get them to know the sectors that are capable and the markets they are working in. Right now, they are generalists because that's basically the funding they have, and a lot more could be done around that, I think.
Senator Pratte: My question would be for the Canadian Horticulture Council.
You raised the issue of technical barriers to trade, which is, of course, very important, a great problem in international trade. CETA puts in place a framework to try to deal with those issues. You do raise the question that, even if tariffs were to go down, these technical barriers may remain, even though there's a framework to try to deal with them. What is your suggestion — because there's no proposal in your brief — to the Canadian government to try to deal more efficiently, to try to get rid of those barriers to trade?
Ms. Lee: As you say, there was a mechanism put in place, and it probably requires a lot of work to be able to smooth out some of these differences.
There are a number of approaches that can be taken on. Some are multilateral. There are some that are various countries together or a bilateral approach. It's not just a problem with CETA; it's in general with free trade agreements. We have these issues of the MRLs especially.
A global joint review process could go on. When a country is reviewing a pesticide's active ingredient before it has even been registered, at the same time as reviewing the data on whether to register it or not, both countries could be reviewing the information at the same time and developing their MRL at the same time. Then, knowing ahead of time that there may be an issue, they could work it out even before the product is registered. That would be a way of aligning ahead of time on those products.
The development and use of international standards: The CODEX Alimentarius, CODEX MRLs, are accepted through the WTO. It could be a mechanism. It should be more utilized. It's been accepted by a number of countries but not necessarily put in place and applied. Leaning on international standards is a very useful and efficient way of doing that.
Finally, in a bilateral way — EU-Canada — there could be different approaches. If there is no MRL, for example, in the country of import, you could have provisions that allow for acceptance of the importing country or accept the CODEX one in the meantime. You could have short-form processes to establish a missing MRL, based on the other partner's data. You could have an interim marketing approach until the import tolerance of domestic MRL can be set. There are a number of different approaches that could be used to increase the efficiency of being able to promote trade, getting over these hurdles until something more long term is put in place.
Senator Pratte: Another question to Mr. Forth: I would ask a similar question on the ILO, Convention 98, because you deplore the fact that Canada has agreed to sign the convention, but you don't propose a solution. Since this is part of the agreement, we're here now.
Mr. Forth: I was under the impression they were considering ratification of C98.
Senator Pratte: You may know more than I do about that.
Mr. Forth: That's what our attorneys tell us. You should know more than I do about that.
Senator Pratte: Not necessarily.
Mr. Forth: It changes things drastically because Canada is a federation of states. It's not one country in a lot of ways.
A lot of the laws are provincial, and they've made those laws to work in their province to deal with certain sectors and regions. A lot of that will be washed away, and I don't know what agriculture will do at that point.
The right to strike sounds okay if you're Mister Car Company. Mister Car Company doesn't live at the car company, but we do. Our business, home and family are all in the same place, and a right to strike would be devastating. I have crossed over picket lines in buildings that were on strike when we weren't.
Could you imagine your 4-year-old grandson going to catch the bus and having to cross the picket line at your farm run by a bunch of people that maybe aren't even your workers because they bring different people in? It scares the heck out of most of us.
In answer to your question, if we can give the provinces some leeway into forming labour law to protect workers and to protect business, that would be the answer.
Senator Bovey: Thank you for your presentations. My first question has pretty well been answered. Dr. Lee, I was really interested in your presentation and thank you for it. I was going to ask what should be done to harmonize the residue limits, and you've addressed that to a degree. I don't know whether you want to add anything.
Moving on from that, in your third point, the hazard-based, in-or-out regulatory decisions, you talk about implementation of CETA must ensure that risk mitigation based on science is recognized in the registration of crop protection products. How do we do that?
Ms. Lee: You rely on the scientists. We have organizations in Canada, such as the Pest Management Regulatory Agency, the PMRA, that are fully reliable with their research. If they are given the proper data by businesses that are looking to register the products and they follow up on research that has been done and are able to cover all the bases from a scientific point of view, that information and the decision that comes out of that should be used as a basis for deciding on MRLs and whether to register the product in the first place. We rely on that for our food safety, our own consumer confidence in what we're going to be eating. Certainly the farmers want to know that they're going to be using a product that not only is not going to affect their health, it's not going to affect the health of the people they're going to sell to. They're the first who are interested in having this done in a proper way.
Our main concern is twofold: First, nowadays, with social media the way it is, and people getting a lot of their information that way, politics can often be swayed in order to satisfy consumer concerns that may not necessarily be founded on science. One thing is to, yes, listen to your constituents, of course, but also maybe educate them on the need to have decisions that are based on science.
What I was referring to there, the difference with the EU is that for some of these products, it's a yes or no. "There's a risk: We're not even going to entertain the idea of using it.'' That's what we would like to have negotiated. It's not a technically justified reason for saying no to a chemical product, any product. If you can base it on the science and you have the scientists talking to each other, they can work it out.
Senator Bovey: Do you feel there are enough scientists working in the field, and is there enough behind the ways for scientists to get their work out into the wider sector? Part of my question is as to the how. There's nobody who believes more in scientific research, or any research for that matter, than I. How do we get the results of that research into the common parlance?
Ms. Lee: That's a very good question. There is a backlog of product, certainly here in Canada, not only for new products to get on the market that are alternatives to the current ones, but also the ones that are being re-evaluated to see if they're going to be kept on the market. There is a very serious backlog of products, which does not make the job any easier.
If PMRA, in this case, or the organizations that support their research, is provided with more financial support, we could probably get through it a lot quicker, definitely. I would agree with that.
Senator Eaton: To follow on Senator Bovey, when you talk about the science, they haven't been very open-minded about canola, have they, or GMO products? Or has that changed?
Ms. Lee: My understanding is that they haven't been very open with that.
Senator Eaton: That's certainly a battle we've been waging for many, many years.
In your presentation, you talked about France, which has banned the import of cherries from any country that has registered the insecticide dimethoate. Is that simply not a political decision to protect their own farmers, fruit growers?
Ms. Lee: It could be, yes, a disguised barrier to trade, definitely. Any country that would have dimethoate, so it doesn't matter what you produce.
Senator Eaton: It could blow on cherries from the crop next door, couldn't it?
Ms. Lee: No; it's a question of country. If Canada has dimethoate registered, it doesn't matter if it's cherries, apples, peas or potatoes; it is the fact that it's registered.
Senator Eaton: To comply, we're going to have to unregister that pesticide?
Ms. Lee: Supposedly, that's what it would be, but that's not a technical justification for rejecting the product.
Senator Eaton: Because we have it registered, will they ban cherries we send them?
Ms. Lee: Right now, until that is resolved, cherry growers here aren't even going to try to send them. It's too risky.
Senator Eaton: Do you know how many horticultural products that will involve?
Ms. Lee: I've just given that example with cherries. I can find out.
Senator Eaton: Do you know from our end how many people that will cut out from export?
Ms. Lee: Any crop for which dimethoate is registered could be affected. I can look at the label and provide you with that information. The label of dimethoate will say which crops that is registered for. In theory, if their justification is that they don't want any product with dimethoate, then any of those products that are under the label would be affected.
Senator Eaton: Do we have any non-tariff barriers in this country against products?
Mr. Forth: That's a good question.
Ms. Lee: The only one I can think of — in fact, in the example of blueberries you have in your footnote — would be if there is an MRL that is different, it could be considered a non-tariff barrier. I would hope that PMRA, who sets those MRLs, has done it based on science, so they would be justified, but that is something that could merit looking into.
Senator Eaton: Thank you.
Senator Marwah: Mr. Wilson, I want to thank you. You've articulated something in your submission that has been around for a long time but has never been written down so well, which is how we as a nation under-leverage free trade agreements significantly.
The way I look at it, the role of governments is to negotiate trade agreements, to set a framework in place, to outline the regulations and to provide some impetus. Then it's the role of manufacturing and industry to leverage all of that and to drive exports, and imports, for that matter. Why is that not happening? I don't think it's on the government side. Are we just not a nation of risk takers? Why doesn't that happen?
Mr. Wilson: I talked about our Industry 2030 initiative going across the country, and I got to talk to about a thousand business executives. That issue of risk-taking and entrepreneurship really came through fairly strongly. We have a nation that invents a lot of really neat things, and we always have invented neat things, but we never really capitalize on them. We let other people capitalize on those inventions. The Governor General wrote a book about 150 great Canadian inventions, or whatever it was called. If you look at some of the details of that, it's often stuff we invent that other people commercialize and take global. I think there is something more to it than just kind of a talking point in terms of we don't look at it.
This goes back to the type of companies we have in Canada. Very small companies have a really hard time looking globally and going abroad. Most companies don't even trade between provinces or cities. They're usually developed to solve a problem locally that someone else has or maybe they had themselves. They've engineered something to fix it and then they developed a company and a product around it. They don't think about a grander scale in a lot of ways. I don't know why that is. Part of it may be the way we teach people growing up. We don't talk a lot about globalization or the benefits of trade in school. Maybe there are some opportunities to change the culture of future generations, but right now, by and large, we just don't have that risk-taking entrepreneurship.
I do agree with you in terms of it is the government's job to create the conditions for success and it's the company's jobs, whether they're in horticulture or manufacturing or services or any other sector, to take advantage of those. However, there are some things that governments are doing and can do better to help as well. Part of it is that training and education we talked a bit about before and helping companies understand what the opportunities are. In some cases, it means kind of holding the hands of companies to some degree to get them over that initial stage. That's why some of the programs the government has introduced over the last couple of years, for example, the high-growth acceleration program that came out of Industry Canada, or ISED now, and Global Affairs, have identified a handful — I think they are at 100 and they want to expand to 1,000 — companies as the right types of companies. I think those types of things can go a long way to changing some of the stats we talked about earlier, as well as growing a broader culture of entrepreneurship and helping those companies understand they can succeed when they go global. It's not an easy thing and it's not, as you point out, just on the government to do. It's on the private sector as well. It's a tough one for sure.
Senator Woo: For Ms. Lee on the question of TBTs, technical barriers to trade, in the EU, I wonder if the establishment of this new style dispute settlement mechanism, the idea of a permanent tribunal yet to be defined, might be a source of some hope for you in terms of adjudicating TBT-type problems.
At the heart of my question is whether you think some of these non-tariff barriers you're facing are interpretive issues that could be resolved by a panel, as has been the case. Many WTO panels have gone in our favour on questions of technical barriers to trade and phytosanitary issues. Do you hold some hope that this Canada-EU dispute settlement panel could be a solution to removing some of these non-tariff barriers?
Then I have another question for the CME.
Ms. Lee: I certainly hope that the settlement process can be made use of and that they support or make use of the tools out there in order to efficiently address the questions that are coming out. It will take time. We're talking about an immediate application of non-tariffs, but the industry is not going to be able to make use of that. Depending on how long it takes to resolve those issues, it may or may not be of interest.
Senator Woo: Thank you.
If I could follow up on the question of imports and deficits and so on, Mr. Wilson, you've testified before and you said again today that very few free trade agreements have resulted in increases in exports. I share with you and with the chair the concern about Canadian companies not being sufficiently entrepreneurial and aggressive about venturing into international markets.
Could you set the record straight on the performance of Canadian exports to Korea, our most recent free trade agreement, since its ratification to the current date? The most recent date, of course, is 2016. How have exports performed between Canada and Korea between 2012 and 2016?
Mr. Wilson: I'm happy you asked about Korea because I looked at Korea when I was writing my testimony,z and I had some commentary about the success of the deal. I actually looked at that one.
Our exports have actually gone up a little bit, but it's not the exports you want. The export of coal has gone up considerably. That has been the major increase in exports. If you look across the board — and this has been the problem, frankly, with most trade agreements — and at where we've grown, it tends to be in natural resources. You don't need a free trade agreement to export natural resources. South Korea doesn't have a lot of them; they need them from us anyway. If we're signing free trade agreements to export natural resources, then we have to rethink why we're signing free trade agreements; that is, if that's really what it's about.
I looked at the top 25 categories of what we export to Korea and the change between 2014 and 2016 over that two- year period — two years and two months or whatever it is since it's been in place. Every category of natural resources is up, which is fine, but there are almost no categories in the top 25 that are any value-added products whatsoever. The ones that are value-added, the manufacturing ones, are either flat or down, for the most part. There are a couple that saw slight bumps. Overall, it's up maybe $300 million over a two-year period, which isn't bad, but coal itself was up $150 or $200 million of that. It's just one product so it's not great performance overall.
Senator Woo: The increase is 25 per cent between 2013 and 2016. I think there would be those in the natural resource sectors who would beg to differ with you about the benefits of an FTA accruing to natural resource exports to the extent that Korea had punitive tariffs on Canadian agricultural products, pork in particular, which put Canadian pork and other agricultural exporters at a disadvantage vis-à-vis Australia and other countries that already had a free trade agreement with Korea.
Mr. Wilson: To clarify, when I'm talking about natural resources, I'm not talking about pork and agricultural products. I'm talking more about minerals and primary natural resources, just to be clear.
Senator Woo: There's a wide spectrum there.
Mr. Wilson: Yes, that's fair.
Senator Woo: In terms of the increase in imports from Korea, do you have any idea what share has been accounted for by intermediate imports, machinery and equipment?
Mr. Wilson: Unfortunately, I don't have those numbers in front of me. I don't want to speculate on exactly what that increase was. It sounds like you might have had a good report.
Senator Woo: It's more than 50 per cent. These are inputs that go into Canadian manufacturing and benefit your industry.
Mr. Wilson: Yes; absolutely.
Senator Pratte: I have a question for Mr. Wilson that is a follow-up. If we think about CETA and most of your members being SMEs in the manufacturing sector, could you give us concrete examples of sectors — and let's forget technical barriers to trade for a moment — where tariff reductions would be of particular benefit?
Mr. Wilson: I've heard from a wide variety of companies. Ag equipment manufacturers would be a good example, but I don't know the exact percentage. Regarding automotive manufacturers, I toured, when the deal was first announced, both Ford and Honda with the former Prime Minister, who talked about wanting to increase their exports by 25,000 vehicles a year each for the Alliston and Oakville plants. I talked to steel manufacturers and companies in services like SNC Lavalin. It's pretty broad-based.
When you're talking about reduction of tariffs, the tariff stuff tends to be ignored fairly quickly by the companies. It's more along the lines of what my friends here from the horticultural side of things are talking about. The tariffs you can deal with. You can figure out how to deal with a 10 per cent tariff on something and build it into your cost structure and everything else for a lot of products. If you're banned completely or the regulations change when you're in the middle of doing something, you can't figure that out. There is no way around it. Not even large multinationals can do it.
When this all started years ago and we were talking to the chief negotiator and folks in Ottawa at the time, our focus was entirely on the non-tariff barriers because we knew the tariffs would go away. That wasn't what was holding back exports. A lot of times it's the regulatory differences that create the problems for companies, and I know there are still some, including in agriculture and in pork products; I know there are still problems in those areas. Generally speaking, however, a lot of the non-tariff barriers will disappear from most sectors, especially in manufactured goods where there are regulatory differences. That's going to be the game changer for a lot of companies.
The other one, I think, is government opening up procurement markets in Europe. That's massive. Governments tend, rightly or wrongly, to spend more money than almost anyone else. We've got great companies in those areas, and the ability for them to get access in those marketplaces is huge. Likewise, obviously, there's going to be more competition here. That's fine. They'll deal with competition.
It's those things we tend to focus more on, because at the end of the day those were the barriers that were really stopping trade. Tariffs never stop trade; they just make it more difficult. It's the non-tariff barriers that make it more difficult. Hopefully that answers your question, at least a bit.
Senator Pratte: Are you confident that the mechanisms included in CETA will get rid of many of those non-tariff barriers?
Mr. Wilson: Until something goes through it, I guess I'm confident. At least it's better than the WTO provisions, in a lot of ways. They're a lot faster. The existing agreements out there for dispute resolution, as an example, even with the NAFTA, take way too long for businesses. You need something that's much more responsive to market needs and doesn't take two or three years to get through. We're much more confident with what's going to happen. Again, if it actually goes through, we'll see whether it's useful or not and does help business conditions.
Senator Pratte: Thank you.
The Deputy Chair: Thank you, colleagues. I have the last question.
Mr. Wilson, in your paper, you correctly identified the American market as the prime market. There is a host of reasons why Canadians find that easy, like geographic location, language, culture and so on, but the new American administration, which has been all over the media, is looking at balancing trade numbers exclusively. When they look at Canada, they'll see a problem. They may identify that, as you indicated, with South Korea it's coal and in America's case it's oil. In Korea, I noticed in one year that our trade deficit exactly doubled since we signed that free trade agreement. Our trade deficit was $3.1 billion and now, after one year, it's $6.2 billion.
If the Americans take some action on this trade imbalance, however they perceive it, what would be the result for your members? Will they be forced, in effect, to bite the bullet and look at other countries, investing in trade with Chile, Peru and Europe more than they do now? Will there be a silver lining? Are some people looking at that? For example, we have discovered the weakness of NAFTA is that 75 per cent of what we export goes to the United States and 80 per cent of what Mexicans export goes to the United States, so the United States has the ace card. Are your members being motivated by this public discussion to take action and be proactive now?
Mr. Wilson: That's a great question. Frankly, that's a discussion that needs more than the two minutes I probably have to answer it.
On the first thing, we export a lot to the U.S. for a very good reason. You mentioned a couple of them, like language, culture, and rule of law, which are almost identical to what we have here. The other reason we export a lot to the U.S. is because we're integrated, and have been not for 5, 10 or 15 years, but for 50 or 60 years we've been integrated, going back to the earliest defence procurement agreements back in the 1950s. We've been integrating our industries across every sector, whether it's food, auto, aerospace, defence, steel or anything else.
We export to the U.S. and our numbers are so high because we're sending stuff back and forth to build stuff together. We're not simply exporting cars to them. We're importing parts and exporting cars, and exporting parts and importing cars. It's a very different trade relationship than we have with Mexico and with the rest of the world. Frankly, it's unique in the world.
When we encourage our companies to diversify their markets, there's only so much diversification you can do. When you're an auto parts manufacturer in southern Ontario supplying five auto assemblers that happen to be within a three-hour drive of your plant, you can't all of a sudden start shipping to South Korea. It's a totally different ball game and, in fact, in most cases we only have the capacity to be able to ramp up and export. That's also a very limiting factor in terms of the ability to grow in those other markets. Again, it comes back to the industrial structure.
We're encouraging them, and I think a lot of companies are doing it but, again, they're limited by existing supply chains. There's more they could be doing with their dough.
To me, the second piece of your question is the more interesting one, on the trade deficit numbers. Canada has a trade deficit with the U.S., speaking overall, but it's all driven by energy. The trade deficit in manufactured goods, which is the U.S. administration is primarily focused on, is non-existent. I think they have a surplus of something like 2 per cent of overall trade if you look at numbers from USTR or the Department of Commerce numbers in the U.S. I'm not really worried about that number.
What I am worried about is a similar conversation in Canada. We've done the analysis, and I'd be happy to share it with you. If we look at the trade numbers that Canada has with the same countries the U.S. is talking about in terms of trade deficits, we have exactly the same problem the U.S. has. Our question to the government has been: Why aren't we having the same conversations? Are we okay with running a 60 per cent trade deficit with China, the same trade deficit the U.S. has? If we are, that's okay, but shouldn't we at least have a conversation about it?
Furthermore, if the U.S. is going to take action on it, we argue that we had better be working with the U.S. to take similar action. If the U.S. unilaterally goes off and does something, it makes Canada a pretty easy spot to start shipping stuff through. I'm not blaming the Chinese for anything here, but they seem to be the top concern for the U.S. If we're seen as that shipping point through which Chinese goods will access the U.S. market, we've got a whole other problem on our hands. It's really going to be a delicate discussion over the next little bit, but we do need to look at those numbers in Canada, too, and figure out how we can work with the U.S. because, frankly, we have exactly the same problems in most cases.
The Deputy Chair: Thank you. On behalf of all senators, I thank you for your presentations this morning; we appreciate your time and your patience with all the questions. We know how busy everyone is.
(The committee adjourned.)