Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue No. 23 - Evidence - Meeting of May 3, 2017
OTTAWA, Wednesday, May 3, 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 4:17 p.m. to give consideration to the bill.
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: Honourable senators, the Standing Senate Committee on Foreign Affairs and International Trade is reconvened in calling this meeting to order.
We are meeting 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're pleased to have a full panel today: Larry Brown, President, National Union of Public and General Employees is before us, as are Sujata Dey, Trade campaigner, The Council of Canadians; Hadrian Mertins-Kirkwood, Researcher, Trade and Investment Research Project, Canadian Centre for Policy Alternatives; and Archana Rampure from the Trade Justice Network.
Thank you for being before us. We have limited time and so the panellists have been advised to really hit the main points and we promise to read your briefs, those that have been filed, which carry the same weight as testimony here.
We want to have your interventions and then senators always like to engage in questions and answers.
Welcome to the committee. There was no particular order; this is what I was given on the sheet, so is there any other order as to who would like to go first, or shall I take them as I introduced you?
Sujata Dey, Trade campaigner, The Council of Canadians: I'll go first. My name is Sujata Dey and I'm the trade campaignier for the The Council of Canadians.
[Translation]
I can answer questions in French, but right now, I'll give my presentation in English.
[English]
The Council of Canadians is one of the leading groups on trade, with over 100,000 citizen members. It was formed in reaction to the first trade agreement with the U.S. In the past few years, on CETA, our spokesperson, Maude Barlow and others from the council, including myself, have been working in the European Union with civil society and lobbying EU and national politicians around CETA, as well as working on it at home.
We are honoured to be here at the Senate committee. I know this Senate committee, like us, has concerns about how free trade agreements are conducted and I'm pleased that this committee is doing its due diligence in examining the agreement, something that has been severely lacking from the beginning.
We totally agree with the recommendations of this committee that stakeholders should be in the process from the beginning. And yet with CETA, and now with the TPP and China negotiations and with NAFTA, it seems to be that many stakeholders are just an afterthought — to the detriment — to the types of agreements that we make.
So here we are at the end of the Canadian process to ratify CETA and in the middle of the European process. We are finally being asked our opinion after everything has been pretty much done and hermetically sealed. Our experience in Europe, however, is telling us that rushing this process is a bad idea for it is far from a done deal and likely to come undone by the 36 remaining EU states who have yet to ratify the deal.
Latvia and Croatia have done it, but the others are going to ratify it, as well. If you look at the French election, most of the presidential candidates, except for Macron, at the beginning had opposed CETA and is one of the last to do so. Emmanuel Macron has recently said that he will re-evaluate his position on CETA and put it to a committee of experts to analyze the details; and as well, a constitutional commission in France is looking at the constitutionality of CETA.
Staying on the topic of election pressures, Marine Le Pen moving against CETA and the unpopularity of the deal means it will face many hurdles. In fact, polls in most Western European countries show there is still opposition to the deal.
And then, of course, there's Wallonia. It still has many concerns around the investor state dispute mechanisms. Wallonia's concerns are not just the concerns of Wallonians, but of many Europeans and Canadians. Remember that there were many concerns from many governments previously, including Austria, Germany, France and in addition, the President of Bulgaria has said he will not adopt CETA.
In the last year, Wallonia, Romania, the French community of Belgium and Slovenia and Hungary have expressed opposition to CETA as it is. A referendum of the deal is planned in the Netherlands and four other Belgian regions have said they will vote against ICS, or the Investment Court System, coming to the ratification stage.
Given that public concerns have not been fully addressed, ratification of CETA will continue to be difficult. Many Canadians and Europeans are rightfully concerned that CETA is based on a blueprint for trade which gives incredible rights to corporations, protections on investments, patents, public services and regulatory harmonization with nothing in it for stakeholders such as environmentalists and civil society.
I have a brief that I will be submitting that addresses our very specific concerns within the text, and it's also available on our website.
We also have many concerns about the benefits of free trade agreements, which are often oversold. Without any industrial and trade strategies, a free trade agreement is absolutely meaningless, as this committee has noted.
The Parliamentary Budget Officer said that trade deficits in the EU would increase with CETA and that this deal would have marginal benefits, which is a far cry from the 80,000 jobs and thousands of dollars in our pocket that have been promised. This is particularly true in the case of CETA, where the majority of our trade exports in the EU are to Britain, and there has been no analysis of what Brexit means. There has been no answer either to the meagre compensation to farmers, the rise in drug prices or what will happen with the loss of protections for fishers and seafarers.
CETA and, indeed, the EU is a relatively progressive partner and thus we should have been able to come up with a deal different from the rest and one which reflects our common values. But it is not, and with trade becoming more and more important and an important access that people do care about, as we can see in the French and the American elections, there is an impetus to do something differently. As international trade becomes bigger, with more importance in the world and consequences unprecedented in equality and environmental destruction, there is a need for a different type of agreement, but first we have to let people in.
By not doing so, the Trumps and Le Pens of the world have a powerful argument that people are being left behind by international trade and that we should go to a time before trade, but that isn't the way forward. The way forward with CETA is to take the time, because the likelihood is that it's not over, and to do a trade agreement very different from the ones we have been copying and pasting for the last 30 years.
Thank you.
Larry Brown, President, National Union of Public and General Employees: I'm not sure that I can speak quite as fast as Sujata, but I can certainly agree with everything she said.
I want to pick up on the point that she made, which is that the benefits of the trade deal era are so much an article of faith. There is so little actual research done by governments getting us into these deals; we are expected to believe that freer trade is better because it's better. There is never any content to the argument. The benefits, as we have studied them, are vastly overrated and the downsides are almost entirely ignored.
Just yesterday, as we were preparing for this session, as you probably all know, the Parliamentary Budget Officer came out with a new report. There are a number of things wrong with that report, but one the things I found interesting was that there is a prediction that the average per capita income will go up by $220. There are two things interesting about that: For the entire process of the government trying to sell CETA, that figure was $2,200, so we are now looking at a tenth of what the government promised when they were negotiating the agreement in the first place. That's pretty significant.
The other thing about that $220 is that it's kind of like an average. Madam Chair, if you and I are in a situation where you get a $440 increase and I get zero, on average I have gotten a $220 increase, but that's not fair or equitable. That's what we're looking at.
The question under trade deals is what happens to the distribution of that money? We know from experience that under trade deals what happens to the distribution is that the income of working people is flattened. There has been wage stagnation as we got into NAFTA — it's very trackable — and while there has been a huge increase in our economy, it has not been shared equally and there is no reason to think CETA will somehow have a different result.
In fact, we have studies from the UN and Delft University that show the average Canadian earner will lose $2,460. That's another study that has more teeth in it than the one we saw yesterday, which was pretty thin gruel.
We had an economist called Jim Stanford, who is currently in Australia but did good work here, who said we will lose between 30,000 and 150,000 jobs as a result of CETA. The European Union parliamentary committee that looked at it said that the net impact of CETA is that there will be job losses in Europe, and probably in Canada too, if you follow the logic of their argument.
The only country-by-country assessment of the impact of CETA actually demonstrates 200,000 jobs lost in Europe. When we got into NAFTA, we were told there would be a huge increase in jobs, and Canada and the U.S. both lost jobs and Mexican wages went down. There is a whole lot of evidence saying the impact of these trade agreements is negative on working people and there is very little evidence to the contrary.
Instead of that, we're expected to buy into a belief system that these trade agreements are a good thing because they are against protectionism or they are the opposite of what Trump thinks. There is also some new reason that we should just buy into these uncritically, but we have looked at the facts and the facts don't bear out the notion that this is automatically a good thing.
Let me wrap up by coming back to my point that there is a whole bunch of negatives in the trade deals, as well. There are no labour rights and the labour rights in it are unenforceable; there is no protection for the environment and the environmental rights are unenforceable; there is danger to public services because there is a negative list, which means that we will probably never be able to develop a new public service in Canada, because under CETA we would not be able to afford to; there is the ratchet effect, which means that if you privatize, you can never go backwards.
There are all kinds of negatives there, and we are being asked to accept all these negatives for very little positive outcome.
I will end by coming back to where Ms. Dey started, which is to compliment the Senate for having taken the time to actually look at this trade deal and study it, instead of just being a cheer leader for a set of assumptions that don't bear out.
Thank you for your time.
The Chair: Thank you, Mr. Brown. I'll now turn to Mr. Mertins-Kirkwood.
Hadrian Mertins-Kirkwood, Researcher, Trade and Investment Research Project, Canadian Centre for Policy Alternatives: Thank you very much for the opportunity to contribute to this study. I would like to echo the sentiment that we appreciate the Senate is studying this agreement and Bill C-30.
The Canadian Centre for Policy Alternatives, which I represent today, is an independent non-partisan public policy think-tank based in Ottawa. We have nearly three decades of research experience in trade and investment agreements, with a focus on their social and economic consequences for Canada. We have published a number of reports and commentaries concerning CETA specifically over the past few years.
I'd like to begin by recognizing the importance of international trade and economic cooperation to Canada and the Canadian economy. I don't think that is in dispute. Unfortunately, however, in our assessment, CETA fails to promote a model of international trade and investment that is inclusive, sustainable and democratic. For these reasons, we have serious concerns about ratifying the agreement in its current form.
As you have heard from other witnesses, there is evidence that even the modest trade benefits projected in some CETA studies have been exaggerated. Other studies indicate the macroeconomic and trade impacts could be negative for Canada. Among other issues, as you have heard, there is reason to believe CETA will reduce the labour share of income in the economy, which means fewer jobs and lower wages even if the economy grows.
Perhaps more important, or at least to expand on what Larry introduced, there are a lot of non-economic impacts worth considering. CETA affects many policy matters that are only marginally related to trade, and too many of these policy trade-offs are negative for Canada.
I'll focus on three issues in my introductory remarks, but there are a lot of other ones we can discuss in more detail. First, the expansion of intellectual property rights for pharmaceuticals in CETA poses significant costs to the Canadian health care system. A number of provisions in Bill C-30, including patent-term restoration for brand-name drugs, will delay the entry of generic drugs onto the market. These changes — and it should be noted these are unilateral in that the EU is not making comparable changes — will eventually increase public and private drug expenditures in Canada by an estimated $850 million per year. To put that figure in context, the European Commission estimates that CETA will save European exporters about $700 million per year in tariffs. In other words, any benefits that Canadians receive from CETA in terms of cheaper consumer goods, assuming that those cost savings are passed on to consumers in the first place, may be largely or entirely offset by more expensive pharmaceuticals.
The second issue is the investment court system. Canada has a long and troubled history with investor-state dispute settlement under NAFTA. The system has been used repeatedly by multinational corporations and foreign investors to sue Canadian governments for measures taken in the public interest, including health and environmental regulations. If CETA comes fully into force, the system of special corporate rights will be extended to $400 billion worth of EU investment in Canada.
The investment court system, it should be noted, does include procedural improvements over the investor-state dispute settlement system in NAFTA, but the fundamental rights afforded to investors are similar in both agreements. Through the investment court system, CETA still elevates the rights of multinational corporations and foreign investors above those of domestic investors and ordinary citizens. Like NAFTA, this arbitration system may expose Canadian taxpayers to significant new financial liabilities and have a chilling effect on public policy.
It's worth highlighting, as Larry mentioned, how differently investment is treated in CETA compared to labour rights and environmental protection. Even though CETA does contain chapters on labour, the environment and sustainable development, the provisions in those chapters are largely not enforceable. For the most part, the "progressive provisions'' in CETA are window dressing for a classic free trade agreement modelled largely on NAFTA.
The third issue, again to echo Ms. Dey's comments, is that CETA is being hurried through the ratification process in Canada without adequate study or consultation. We believe that Bill C-30 warrants more extensive analysis and consultation than it has so far been afforded, especially given the uncertainty of the ratification process in the EU. There is simply no need to race ahead with this deal at this time.
One proposal for the Senate to consider is a sunset clause on certain provisions of Bill C-30. It doesn't make sense for us to lock in unilateral concessions if the EU does not fully ratify this agreement. If Canada ratifies CETA but the EU does not, a review of certain provisions in the bill or the bill entirely should be triggered, especially those changes to the Patent Act, which we expect to increase drug costs in Canada. However, it should be noted that a sunset clause like this is merely a stop-gap solution when a broader rewrite of the agreement is advisable.
That's all I'll say for now. Other issues I'd be happy to address include the movement of workers across borders, potential impacts on public services, domestic regulation. These issues are also addressed in our accompanying brief.
Thank you for your time.
Archana Rampure, Trade Justice Network: Thank you, Madam Chair. Like my colleagues, I wanted to begin by thanking you for inviting us to appear. We have been concerned about CETA; in fact, the concerns around CETA are what brought the Trade Justice Network into being. We represent environmental, civil society, student, indigenous, cultural, farmer, labour and social justice organizations. We've come together to highlight the need for a more sustainable and socially just international trade regime.
As one of my colleagues mentioned, we are not opposed to trade; we just want a better model of trade — one that works for us all.
Since we represent such a wide range of organizations, we share many of the concerns around intellectual property rights, labour and the environment, as you've already heard from my colleagues. I'm conscious of the fact I only have five minutes of your time, so I'm going to focus on procurement — on that particular chapter in CETA — and then touch on the potential impact of this chapter on the NAFTA re-negotiations that will be going on, and other free trade agreements.
On procurement itself, it's estimated that the Canadian procurement market is well over $2 billion in any given year, and I want to note that that's even before this current federal government decided to make massive investments in infrastructure spending. Given that, it should be no surprise that the EU's opening position during negotiations was that they wanted substantially improved access to public procurement markets in Canada. Their aim was "to achieve full coverage of central and subcentral government procurement in all sectors.''
It's clear that the EU got what they wanted. I wanted to quote from the pro-trade law firm Langlois lawyers: "Canadian commitments constitute the most comprehensive procurement commitments ever made by Canada at the federal-provincial-territorial and municipal levels.''
This means that the right of all Canadian governments to use procurement to further social programming has been drastically curtailed. This is what makes CETA a new-generation trade agreement. You might have heard that term used by those arguing for it. This new-generation trade agreement far surpasses the impact that NAFTA and other previous trade agreements have had on the Canadian economy.
I want to give more detail on this. Government entities that are covered by CETA — procurement, in particular — and in the federal government, this includes almost all departments and agencies, excluding only the security and intelligence agencies, Parliament and the agents of Parliament. I suppose you won't be covered by it, but pretty much everybody else will be. Subcentral entities are defined by each province and territory, and are a fairly exhaustive list. Other entities are broken down into two subcategories. One is Crown corporations, which include federal, provincial and territorial Crowns, as well as corporations or entities owned or controlled by municipalities — a huge list of public utilities, including airports, public transit, drinking water, wastewater and so on.
Goods and services are also listed in CETA as part of the procurement chapter. Nominally, this means all goods and services will include things like engineering, architecture, IT and consulting services, construction services — again, nominally including all construction.
I know some of you have backgrounds in politics at all levels, so you might be interested in the thresholds at which these commitments kick in. They range from a high of about $7.5 million for construction projects to a low of about $200,000 for procurement by the federal government and its entities of goods and services. Those are very low thresholds.
There are many issues with this, but I want to highlight two problems. One is that procurement has become so much more complicated when all tenders and processes now have to be open to any EU corporation that might want in on them. The second problem is that procurement has been one of the primary ways all levels of Canadian governments have encouraged local economic development. They have used this to diversify regional and sometimes natural resources-based economies. This lever of government is now being curtailed.
We believe very strongly that these rights should not have been traded away in CETA without public consultation input, and we are concerned that very little of this has taken place. Certainly, almost none has taken place at the provincial, territorial or municipal levels.
We are also concerned that having opened the floodgate in CETA, the federal government will find it difficult to keep procurement out of other trade agreements, including the TPP — or what remains of the TPP — and the upcoming NAFTA renegotiating process. I want to highlight this with a quote from President Trump's commerce secretary, Wilbur Ross. Speaking about what Japan had been prepared to put on the table in the TPP, Secretary Ross said:
A card laid is a card played. And even though that hand [the TPP] is cancelled, somebody has put something on the table in writing that is an agreed thing,'' he said. "It will be our intention to make it very hard for them to go back.
So I would suggest that we should all be very concerned about what this means for Canada.
We see no reason why the Americans would expect anything less of Canada than what they know we have offered to the Europeans and what we were willing to offer up in the TPP negotiations.
The other point to make around this is that we need to think about how much more eager Americans will be to have access to the Canadian procurement market than the Europeans, given that many of the Americans who, I guess, operate in this sector supply these same services just across the land border with Canada.
We hope very much that you will agree with us that this procurement chapter is a huge problem in the agreement. We urge you to seek amendments to this chapter in CETA to ensure that procurement at the subnational level is excluded.
For decades, that has been the position of the Canadian government and we see no reason to change that in CETA, especially given that we will be setting a precedent through CETA for future trade negotiations.
As I'm sure you're aware, there's a whole whack of trade negotiations slated to come up. We've been hearing about the potential Canada-China trade agreement. The NAFTA renegotiations, of course, change on an hour-by-hour basis sometimes, but they will be ongoing very shortly.
I want to conclude by repeating what I said at the beginning of my presentation, that the TJN also has serious concerns about other issues that range from the labour chapter to the environmental chapter and to the investor court system. On these topics, since we don't have the time to go through them in detail, we'd just like to be on the record supporting the changes and amendments recommended by my fellow panellists today. Thank you very much for your time.
The Chair: I thank all of our witnesses today for adhering to the time frame. That's been very helpful. I think you've done the job of putting your key points and positions forward. You've generated a long list of senators who want to ask questions. That's the admonition to my colleagues to put their questions quickly and perhaps to our witnesses to answer as efficiently as you can in the time. Then we'll be able to get all the senators in.
Senator Woo: I'll take the admonition seriously. I'll limit myself to one question, but if I could come back.
It's mostly for Mr. Mertins-Kirkwood. But others can chip in as well.
It gets to the heart of the objection that I think you have to this and other trade agreements, which is that the distributional effects are not positive. You've all said trade is good and you all buy into that. I wonder if you could help me understand what the transmission mechanisms are from a trade agreement that leads to, as you put it, a lower labour share of income in GDP. How does that happen and what is it about a trade agreement or what is the transmission mechanism that results in labour getting a smaller share of the pie over time? Is it due to some other forces in our economy, for example, competition policy? Could it be the tax policy in Canada?
We all agree income inequality is a big problem; it's maybe getting worse and have to do something about it. I don't understand exactly how free trade agreements contribute to it.
Mr. Mertins-Kirkwood: Thank you for the question. It's a very important question and I think a challenging one. I think if you asked 10 economists you would get 10 different answers.
The simple answer is that what free trade is designed to do is to make capitalism work more smoothly.
The problem is that capitalism is not really designed necessarily to benefit workers. It's designed to increase accumulation of capital, which may or may not benefit workers.
What's important is if you're going to go in this direction you need to have a supporting social safety net. That might be one of the key issues to look at.
What we don't have in Canada is adequate trade adjustments, for example. So we hear when the government talks about CETA or other deals there's going to be winners and losers, and then we just forget about the losers. There needs to be an adequate system to catch and support those people or those industries. I think if you're looking for just a simple economic mechanism, it is competition. But competition is not necessarily good for everyone. We need to recognize that.
I think the missing piece is having adequate social support, and part of our concern around CETA and other deals is that because these agreements include provisions around public services, labour rights and otherwise, not only do they increase competitive pressure on workers, but they also take away government's capacity to address those competitive pressures.
Senator Woo: Is it your view that trade agreements inexorably lead to greater income inequality, in particular a smaller share of labour income in GDP?
Mr. Mertins-Kirkwood: I don't think they have to. But I think free trade full-stop does if you don't have an adequate set of social supports around it
Senator Marwah: Again, I don't think I want to debate the benefits or the ills of free trade or whether it's this free trade agreement or CETA or any other. The issue is we are where we are. I think, at this stage, to say we want to stop this or renegotiate it is not realistic or, frankly speaking, responsible.
What other specific things do you think we should really focus on? We can't focus on saying it's bad for Canada. It's too late. You mentioned one. I think procurement is a very good idea. I shall look into that.
What other things can we even do at this stage?
Mr. Brown: We could give you quite a list. That's the problem.
Senator Marwah: A long list doesn't help either. If we have to pick three, what are the three?
Mr. Brown: I could give you a list and you can choose from it then. The negative list has to go because it's a danger to the development of new public policy in Canada, and Europe for that matter. The ratchet effect has to go because it means if there's a decision to privatize a public service that was clearly wrong, it can't easily be reversed. Once a public service is privatized, it's almost inevitable that it's going to stay that way because the ratchet effect says so.
The lack of any enforceable labour rights comes back to the question that was asked about what's the problem with trade agreements that force labour costs down. One of them is, if you remember, the example of Caterpillar. Not very long ago they said to their workers, "Take half your wages and half the benefits. We're going to cut everything in half or we're going to move to a right-to-work state. The workers said no thank you, and the company moved to a right-to- work state. They can still sell back into Canada, in the face of all of that, tariff free. Surely a trade deal that allows that is not in the interests of anybody in Canada, and there should be provisions in a trade deal that allow us to stop that.
I could go on, but there are things that are just egregiously wrong in this trade deal. And asking us to say which one of them is the most egregious, that is very difficult for us to do because we've looked at the trade deal and we know that there's a lot wrong with it.
Senator Gold: Thank you for your presence, and the degree to which you presented your positions very articulately and economically, which is appreciated.
Canadians invest in Europe; Europeans invest in Canada. I'm going to say I think that's probably a good thing. So if you have objections, as you do, to the dispute resolution mechanisms, would you nonetheless acknowledge on the one hand that there are improvements, as Mr. Mertins-Kirkwood did, to the existing investor-state regime? But more importantly, if you reject this CETA system, what would you recommend we put in place to protect Canadian investors abroad and the European investors in Canada?
Mr. Mertins-Kirkwood: I think the short, easy answer is that we think domestic courts are adequate. If you are a Canadian investor in Europe, you have full recourse to European courts to enforce your rights under European law and also under relevant provisions of these trade agreements. Likewise, we think Canadian courts are adequate for protecting the rights of European investors in Canada.
We don't think that there's a need for this extra judicial or even pseudo judicial system when we already have a court system in both economies that can adjudicate these disputes.
The basis for having ISDS in the first place is if you're trading with a country that doesn't have a reputable judicial system and you think there's going to be political interference in investment, then that was the justification for having this third party to arbitrate.
In the case of Canada and the EU, which are both well-developed economies with strong legal systems, there's no need for an additional system like ICS.
The Chair: Could I follow up on that? You're saying that Europe has a well-developed system, but Europe has recently come into enlargement with a lot of countries that are still in flux. While they have entered the European Union, do you believe that Canadian companies would have confidence in some of those countries that are being brought in to the European Union, and their institution structures?
What I read is that those structures and institutions are still fragile, still being developed. And if I were an investor, I would have to think twice because the umbrella of the European Union protects you to a certain extent, but not when you have to go to a national court.
Mr. Brown: If I could add to what Hadrian said on that question, there are two things that could be changed in the dispute mechanism that would make a huge difference.
One is reverting to state to state. That's the traditional model. That model provides some protection to prevent the oddball cases and to some extent ensures that individual investor rights don't trump — if I could use that phrase differently — the right of states to govern themselves.
State to state would be a better answer. The other thing, though, you have to look at is that the whole investor state mechanism is about the right of investors, period, nobody else. States don't have any rights under that system. People don't have any rights. So if a company violates the environment and sustainable development chapters, or violates the labour rights chapter, we have no right to challenge them, but they have still the right to challenge us.
If we're going to have some kind of international court-like system, it will only be fair if everyone has access to it. Right now it's a right only for investors. And there's something fundamentally wrong with that picture.
Senator Woo: You said that ISDS privileges foreign investors over domestic investors. I think what you mean is that they have access to a legal recourse system that domestic investors don't have. Is that essentially the point you're making?
So I understand that. But CETA, of course, does allow governments to regulate in the public interest, public health, environment and so forth. So you are absolutely right, a company can try to take Canada to court because it feels that it was unfairly treated and so on, but do you not think that the protections to regulate in the public interest make it quite clear that they will lose that case?
Mr. Mertins-Kirkwood: No. I think there's an important distinction. I think this comes up a lot in the context of the investment court system and ISDS generally. Having the right to regulate doesn't mean you're exempt from paying compensation to those companies.
So even in sectors like health and certain public services that are carved out, investors can still make claims for fair and equitable treatment and expropriation in those sectors. So the Canadian government may have the right to say we're going to impose a moratorium on this mining project. They have the right to do that, but they still can be legally obligated to pay X amount of compensation to an aggrieved investor.
Senator Gold: Why is that wrong if, in fact, the investor was promised equitable treatment and is then discriminated against? Because we're talking about circumstances where the foreign investor, I think by definition, is treated differently than its Canadian counterpart.
Mr. Brown: That isn't the way it has worked in practice, sir. In practice, it's been a right for investors that has expanded exponentially, and the right to regulate under CETA, if you look at it, is circular. You have the right to regulate within the scope of the agreement so it circles back to whatever CETA says you can do, you do, which is a bit of a circular argument.
We could give you a list of investor state cases that were premised on the notion of an investor being treated unfairly that have nothing to do with that.
The most recent one is the Bilcon case. With the Bilcon case, there was a group of people in Nova Scotia that were on an environmental panel established by the Nova Scotia government that said building a quarry in this location is wrong, it's wrong for the environment. How could that be discriminatory? Yet Bilcon won that case.
The notion that we're told is that this is a protection for foreign investors. What it does is it gives foreign investors more authority than even our governments have because they can challenge legitimate decisions of our government, and they have over and over again.
Mr. Mertins-Kirkwood: I would go back to what I said earlier. It's not that these companies don't have a right to compensation, but they're already guaranteed compensation under Canadian law and EU law. Then they have recourse to the domestic court system to enforce that.
So there's no need to have an extra system that gives them typically more leeway to claim extra compensation than they would domestically.
Senator Dawson: My question is on the same line as Senator Marwah. You said you are happy to have had the occasion, Mr. Brown, to have been heard. That's part of what we do here. We try to give an opportunity to people that were not listened to. We're not very happy about being involved at the last minute, but that's the situation we are in and we're living with it.
I'm personally going to be supporting the legislation, but as Senator Marwah said, tell us what you want to be able to say in two years, we told you so. Tell us now. We are the wise owls; we like to listen. We want you to be able to put it on the record because you are going to be read. We had a study that said we want to be involved earlier in the process. So we believe, and we want other people to be involved earlier in the process.
This time around, we're dealing with an issue where we're going to be passing it in the next while. What do you want to have on the record as being the minimum that you would have wanted changed? We would hope the next time around when we go through this process we will be able to make those comments during the process and not at the end.
Senator Marwah asked if you can you tell us the ones we'll regret having accepted.
Senator Marwah: And giving us a list of 30 items doesn't help because we can't change that. In a pragmatic sense, what are the things; that is the art of the doable. We are where we are.
Ms. Dey: I'm coming up with a few things. One of the things is that the investor court system is absolutely the key to a lot of the opposition we have to this agreement. Pairing it with obligations for corporations would be something that would be amazing. That would be one thing that would make it a very different agreement. That's not happening here.
Another thing would be some kind of evaluation system, because with a lot these trade agreements, we don't actually know if it created jobs. We don't know what happened. A way to monitor things like the regulatory cooperation system would be wonderful, a way to monitor what is happening with CETA, and also for further trade agreements. We're seeing it happening again with Canada-China, with the new TPP, again with NAFTA. This agreement is being created and by the time we get in there, it's way too late.
We understand; we're also in this process much too late. It's hard for anyone, five years later, to say, "Okay, here you go.'' And given the investor state dispute situation, if CETA is going to pass, it's going to be changed.
I cannot see that not happening. So at that point I think there need to be some recommendations about what that would be.
Those are things that can I see practically. For the long term, there has to be a very different type of agreement, but this is something that within the negotiations is possible now.
Ms. Rampure: Because I've spoken about national procurement, I won't go over that again. I do want to emphasize, picking up on a point Sujata made, that you might be coming in at the end of the study in Canada, but you're not too late to make changes to it.
The process that the EU must go through before this comes into full effect will be long and arduous. As Sujata said, there will be more changes, but there is nothing to prevent you from making a few amendments now and making sure that the provisional application of CETA doesn't allow things to happen that you will agree with us are problems.
The agreement, as we understand it, is that once it is through in Canada there will be provisional application of CETA. It does not go into effect in full. There is still legislative room to make changes to it. We wanted to put that on the table.
Ms. Dey: In its briefs, the Liberal Party of Canada has made a number of recommendations that would be interesting to follow up on quantifying what would happen with drug costs and the dairy industry and ensuring that those things are evaluated. Many here are former Liberals, independent Liberals, independents; those are things the government itself would ask for. Those are the things doable in the now.
However, for us there is a long-term project that needs to be happening, and that is how we start in a free trade agreement and the balance of rights we have in there, and that is a discussion that needs to happen very much, and I hope for a strong recommendation from this committee on trying to change that paradigm.
Senator Pratte: You talked about provisional application, and if we vote in favour of the bill and there is provisional application, the first thing that will happen is that tariffs will go down on both sides, obviously.
Is that a good thing, that tariffs will be drastically reduced on both sides and therefore Canadian goods will be able to enter the European market at practically zero tariffs on most tariff lines, and European goods will be able to enter the Canadian market at practically at zero tariff on over 95 per cent of tariff lines?
Mr. Brown: I will give two different answers. The first is that the average tariff between us and the EU now is 2.5 per cent. This is not a game-changer. I have met with committees out of Europe who talked glowingly about the greater access we will have to each other's markets. I have offered to take them to the nearest Volvo and Mercedes dealerships and IKEA store, and after they have done those tours, ask what is now being blocked from entry to Canada. There is not much. This idea that this is about expanding trade is pretty shallow. There are not a lot of barriers or stuff that is not now available to each country.
The other part of the question, leaving that aside, if this was a deal about tariffs, it would probably take two or three pages to cover, and I think the last time I checked it was 980 pages. This is not agreement about tariffs. If it was an agreement about what we used to think of as trade, it would be pretty short and tight, and we could debate whether or not those tariffs should be 0 per cent or 2 per cent. There is a ton of stuff in CETA that has nothing to do with that. That's what we're focused on.
Senator Pratte: I agree it is not only about tariffs, but it is in part about tariffs, and maybe the average is pretty low, but there are industries for which tariffs are important. It seems to me, in part, the way most of you seem to look at it is that it is only a one-way street. You talk about procurement.
It's true that procurement for some national governments would be open to European companies, but it is also true that procurement for some national European governments would be open to Canadian companies, and that's a huge market for Canadian companies and their workers. Is that not a good thing?
Mr. Brown: There is a study done by the Government of Canada that says that the number of companies that access international trade is 5 per cent of companies in Canada. So the notion that we are going to have a flood of small Canadian companies go over and enrich themselves by building bridges in Europe is a bit of a pipe dream.
There are European companies that are specialists in infrastructure, and they will come into Canada. The fundamental question we have is this: What is wrong with a government in Canada using taxpayers' money to benefit the Canadian population and economy? When municipalities, provinces or the federal government spend our dollars, some of it came out of my pocket and yours. They are allowed to spend it on developing the Canadian economy by buying local.
Senator Pratte: That is called protectionism.
Mr. Brown: Well, protectionism has an interesting reputation, doesn't it? At what point does protectionism mean that we can't sensibly use Canadian money to advance Canadian interests? Surely that's the question.
There is a guy called Donald Trump, who is in office next door, am I allowed to say he's a lunatic when the mics are on? He got elected because all this stuff we hear about the benefits of free trade doesn't work for working people. If it worked, he would not be in office.
Senator Pratte: I believe small, medium and large Canadian companies can succeed on the European market as well as European companies can succeed in the Canadian market for the good of Canadians and Europeans.
[Translation]
Senator Saint-Germain: My question is for Ms. Dey. I'll ask it in French. Am I correct in thinking that you understand French?
Ms. Dey: Yes.
Senator Saint-Germain: You recommend that public services be exempted from the scope of the agreement. Indeed, it's too late to implement such a recommendation. However, can you comment on the profits for Canadians, given the size of the public services market of European Union member countries?
You expressed many concerns about threats to the public health insurance program and other social services. My concern is very societal. I want to know how this fear regarding public health insurance and social services could be mitigated.
Ms. Dey: Thank you for your question in French. First, two things must be considered.
CETA was assessed by United Nations economists, who analyzed the number of jobs that will be lost in Canada. They estimated 23,000. They also said that, with the increase in competitiveness, the taxable amounts will decrease, which will result in less money available for public services.
We think it's important to keep this in mind. We must assess the inequality factors in the agreement. For example, if we're talking about taxation, are there mechanisms in the agreement that help prevent tax evasion and allow for fair treatment? There aren't any.
It's important not to simply assess things and say that 80,000 jobs will be created. We must also know how the agreement will affect the country.
Senator Saint-Germain: You said this study came from the United Nations. Can you provide it?
Ms. Dey: Yes, of course. The study was conducted by United Nations economists during their sabbatical.
Senator Saint-Germain: I'll get back to my question. How, today, in the context of an implementation bill, could we mitigate the risks you identified to maintain public health programs and social services?
Ms. Dey: First, we don't necessarily know, because an agreement is measured by exports, and the exports will increase. This means that Canada will be wealthier and there will be many more jobs.
In reality, according to the United Nations study I mentioned, an increase in exports doesn't necessarily mean an increase in the GDP. There's a link, but it's not very solid. Also, the wealth isn't necessarily distributed evenly. In the analysis of CETA, they said that each dollar for businesses means less money for workers.
When we conduct an assessment to determine whether the economic agreement is successful, we don't have any information. We don't have any monitoring mechanisms. If there's interest, it would be useful to do so in Wallonia, for example. We could conduct an assessment process with them. Then, we could measure the economic results and adjust CETA accordingly. At this time, we don't even know the results. As my colleague said, we establish each agreement by promising better productivity with NAFTA and much more wealth. However, we don't even measure the results. We don't know them.
Senator Saint-Germain: So, you're suggesting that the fiscal impact and the distribution of taxation by the government should be measured.
Ms. Dey: Exactly. The impact on public services and taxes should also be measured.
[English]
Senator Woo: Thinking about the politics of trade negotiations, I think you have all said you agree with some version of CETA. It has to take more time, negotiate carefully, make sure, implement, so forth. The bottom line is that you are saying, "Delay. Don't rush this through and change a lot of provisions and so on.''
Do you really think that, if we were to vote against this bill, re-open negotiations, essentially send a signal that we are kind of reneging on what we had agreed on, that will support the forces that are pro-trade, pro-progressive trade, rather than supporting those who are, in fact, wanting to shut their borders, the very people that you have excoriated, the Trumps of the world if you want to put it that way? I would see that as a much greater risk if we were to now send a signal that we don't like this agreement, want to go back to the drawing board, want to start renegotiating. I think the insular looking politicians in Europe will say, "We told you. This is exactly what we are saying, and we are with the Canadians. We don't want to deal.'' I'm speculating, but I would like to hear your reaction.
Ms. Rampure: Thank you. That's a really interesting question.
I do think that might be a short-term consequence, but, in the long-term, people need to actually see the benefits of free trade for themselves, and this deal will not help with that. As long as people don't see the benefits of free trade for themselves, as long as it doesn't actually result in better working conditions, as long as it doesn't result in raising everyone's incomes, we will actually continue the rise of xenophobia, which is behind a lot of the forces that we are seeing at work in Europe and in the U.S.
Senator Woo: So you are happy to put the pause button on free trade agreements?
Ms. Rampure: Yes, because we don't necessarily know that a new model of trade will create more acceptance, but we do know that pushing through with the trade agenda as it has been done over the last two decades will only inflame the situation further.
Mr. Brown: If I could just add one thing, I want to refer to comments made by our current Prime Minister when he was at the European Parliament. What he said there was something that I think you folks should think about. He said that this is the last chance that people have to really engage in these kinds of trade deals. Because, if CETA doesn't deliver, then we'll never be able to sign another one. Your concern sort of feeds into that, doesn't it? There's a heck of a gamble going on here. If we're right that there is real danger for working people and for farmers and for people who believe in the environment in this trade deal and if Prime Minister Trudeau is right, then that's a bad combination, and it's worth taking some time to make sure you get this right.
Now, there is one last thought that occurs to me.
The Chair: A quick thought, please, because I think Ms. Dey wants to reply.
Mr. Brown: This deal was negotiated by a former government, and it was latched onto by this government. It was not this government's deal, and they have sort of taken it on board. Even to say that, as a new regime, they should have taken more time to look at the deal makes a lot of sense to us, and they didn't do that.
Senator Woo: Thank you.
Ms. Dey: I was just going to say, very quickly, that you may not have a choice. The deal may, in its current condition, implode, and what better country formation to show what a progressive trade agreement could look like than the European Union because there are many people on that side. Instead of waiting for this train wreck, which is these trade agreements, to come out, why not do something positive, set an example where people could say, "Okay, here is a new model of trade''? Because right now, globally, it's not working, whether it's within United States, whether it's in part of Europe, in central Europe, it's not convincing anybody.
Senator Woo: Thank you.
The Chair: Thank you. This free trade agreement has been characterized by both the previous government and this government as a new concept for trade. So I wanted that comment made and reflected, but I want to underscore that this has been the dilemma, that parliamentarians did not have a role in the negotiations of free trade agreements. There are some valid reasons for that historically as we evolve, the executive arm versus the parliamentary arm, and so we are here looking at a free trade agreement that was negotiated by government. Bill C-30 is the implementing legislation for anything that has to be changed in Canadian law. So we're mindful of that, and I think that's how some of the questions have been phrased.
I want to remind the witnesses that this committee made a decision some months ago — in fact, years — to study free trade agreements as a concept. I would like to point you back to that report to indicate what we said, that, in today's time, there should be a role, or a different role, for civil society, et cetera. I'm mindful that this agreement had more input from provinces and from stakeholders. What we were doing in our report was broadening it to make it more inclusive in the future trade agreements.
We also said that there was a role for Parliament, and it should be much sooner. We should be apprised of what is going on so that we could have our input because we reflect citizens in a different way.
Finally, and I think most importantly, we said that we should know what the implementation strategy is, what outcomes they believe they will have, so that we could track them. So some of what you've said today is something that we've said before, and we are, in this agreement, at the point of implementation, practically. We have the step of Bill C- 30, and so I hope that you will see some of what you have said involved in there.
What we said was that free trade agreements are a tool for economic prosperity. We said that trade agreements, in themselves, do not produce the prosperity and that there are many more steps and that it is one aspect that is very important. So I think what I hear from some senators and others who have testified is that they believe this to be a modern, updated agreement, but it will not succeed if the implementation strategy and all of those things that you talk about, winners and losers and how it's implemented and those adjustments, are going to be there.
What we said in our report is we fully understood that some agreements are in progress and some are already finished, but nonetheless in future agreements we hope that all the steps that we recommended will be taken into account. In this particular case, we're going to focus as a committee, not necessarily in our study of Bill C-30, on implementation strategy fully. That's what we're on the route for. I hope we found some common ground on some of the issues. We respect your perspectives on trade agreements. We've heard from others and heard your message that you have been included. We've heard your comment and we'll include them in our ongoing deliberations.
I'm welcoming the second panel, David Wilkes, Senior Vice President, Grocery Division and Government Relations, Retail Council of Canada; next witness is Sarah Clark, Chief Operating Officer, Fraser River Pile and Dredge; and from Réseau québécois sur l'intégration continentale, Ronald Cameron, Coordinator and Jessica Olivier- Nault, Researcher.
I apologize for being late. You heard the admonitions for short interventions. Just your high points please, so we can engage in the question and answer period.
Welcome to the committee.
David Wilkes, Senior Vice President, Grocery Division and Government Relations, Retail Council of Canada: Thank you very much and thank you senators for the opportunity to appear before you.
Retail is Canada's largest employer with over 2 million Canadians working in our industry. In 2015, the sector generated over $59 billion in payroll and over $340 billion in sales, and our sector represents the retail component that excludes vehicle and gasoline.
Our members represent more than two thirds of retail sales across the country and include small, mid-sized and large retail businesses in every community across our land. The 45,000 store fronts we represent include retail categories such as department stores, grocery stores, electronics, bookseller discounters and online retailers.
RCC grocery members represent over 95 per cent of the groceries that are sold in this country. They provide essential services and an important source of employment in large and small communities, and they have strong, private-label brands as well as selling products in every food category.
Our bottom line from a retail council perspective that is we are a strong supporter of freer trade, whether through bilateral or multilateral agreements such as CETA. The reason in our opinion is straight forward. The free trade agreements remove custom tariffs charged on the goods we import. This allows retailers to offer more competitive prices to Canadian consumers. As the prices and competition increase in our sector, ideally it leads to increased sales volumes and associated level of economic activity and employment.
These customs duties in some cases are not minor. Shoes are one area of major retail items sourced from Europe. These items face duties of between 18 per cent and 20 per cent. Similarly most apparel is dutiable at 18 per cent. These duties are then subject to sales tax and as a result they typically increase the price of goods for those in that 18 to 20 per cent range by over one fifth.
Tariff elimination not only reduces prices but increases consumer choice. Goods that otherwise would remain uncompetitive become marketable.
Beyond retailers' support for reduction in tariffs, our grocery members are also very supportive of CETA provisions for increased importation of more than 16,000 metric tonnes of European cheeses. RCC is recommending that 100 per cent of this new cheese quota be directly allocated to retailers. This would provide significant benefits from the model that we're proposing, both to Canadian farmers as well as to Canadian consumers. Let me give you some highlights, first with regard to our farming community.
RCC is proposing that each retailer's share of cheeses that it is allocated be based on the previous year's sales of imported and domestic cheese. Linking future retailer allocations to sales within the entire cheese category provides a strong motivation to gross sales of both domestic and imported cheeses and, in our belief, provides a direct benefit to Canadian farmers.
Second, Canadian consumers' appetite is growing substantially, and indeed from an international perspective we consume less cheese than many other countries. Allocation of the cheese directly to the grocer would allow our members to ensure that the right product is provided to consumers at very competitive prices.
Retailers will not only be able to ensure that the quota is used to bring cheeses that are being sought after by consumers but, in our opinion, eliminate inflationary components that are in the current third-party quota system and take out, based on some of our members' estimations, 20 to 40 per cent in extra costs that are currently built into this system.
RCC members are looking forward to the ratification of the agreement and we strongly urge this committee to endorse that. As well, we would strongly urge the committee to consider the recommendation with respect to the allocation of cheeses directly to the retailer community.
I welcome the opportunity for discussion going forward and thank you very much for this opportunity.
Sarah Clark, Chief Operating Officer, Fraser River Pile and Dredge: Good afternoon. I'm the Chief Operating Officer with Fraser River Pile and Dredge, located in Vancouver, B.C. We have dredging operations throughout Western Canada and the Northwest Territories. Today, I am here to speak to you on behalf of an informal coalition of dredging companies that operate imports east to west. Representatives of these companies are here with me today.
We sincerely thank the committee for the opportunity to present our views on the consequences of amending the Coasting Trade Act as prescribed in Bill C-30.
We understand that the spirit of the Canadian-European Union Comprehensive Economic and Trade Agreement, CETA, reflects the wish of both governing bodies and both peoples to create better economic ties and a more prosperous future. We support the government's efforts to expand trade and make our economy as competitive as possible.
At the same time, we wish to express our concerns around the negative impact that CETA is poised to have on the Canadian dredging industry. We believe the amendments to the Coasting Trade Act as presented in Bill C-30 would unfairly advantage foreign dredging companies at the expense of Canadian firms and, ultimately, Canadian workers.
We would respectfully ask that the committee issue a recommendation in its report to ensure that EU dredging vessels are subject to the same high standard of operation as Canadian dredging vessels, and that any loopholes that could exist in subcontracting agreements for non-EU vessels are closed.
We are not afraid to compete. We do so every day in our industry, both in Canada and abroad. However, under CETA there is no reciprocity. There are no new markets that have been opened for the dredging industry. All we're asking for today is a level playing field.
I want to say a few words on dredging and the critical role it plays for Canada as a maritime and trading nation. The dredging of ports, waterways and industry facilities is absolutely essential to our national economy. Opening routes to Canadian and international shipping vessels brings consumer goods to Canadian markets and takes our export products around the world. Without dredging, ports in major cities across the country would be inaccessible to trade and transportation. Industrial operations, both coastal and inland, would not be able to operate.
Our dredging companies actively comply with rigorous government regulations concerning labour, environmental protection and operating standards while regularly submitting to routine major inspections by Transport Canada that are among the highest standards in the world.
Canadian dredging companies also provide good jobs with solid middle-class wages and are an integral part of local communities across the country. Our industry supports environmental stewardship, occupational health and safety, and supports thousands of middle-class families.
Unfortunately, all of these benefits may be seriously undermined by the proposed amendments to the Coasting Trade Act proposed in Bill C-30.
The proposed amendments open the Canadian market for dredging to European firms, while keeping the European market closed to Canadian firms. As I have said before, there is no reciprocity.
While this would normally be considered just an unpleasant by-product of doing business in the global market, several factors intervene to create a situation where foreign firms could gain a structural and market advantage over Canadian firms. If a level playing field is not enforced, Canadian dredging companies will face structural disadvantages when bidding on contracts as we pay market rates and benefits that reflect the skills of our crew members in Canada.
Foreign crews are typically compensated at about a third or less of these standards that we pay. For example, in 2015, the average monthly salary for a chief engineer on a Canadian vessel was US$15,000, while the same position on a Dutch crew was about US$7,000.
I would kindly refer you to the St. Lawrence Ship Operators Association information that we've handed out today, as well as the remarks made at this committee by the Seafarers' International Union.
As our salaries represent about one third of a vessel's operating costs, foreign companies could operate at a significant competitive advantage over Canadian companies, leaving Canadian seafarers out of work. In this scenario, the playing field in the domestic dredging industry is inherently uneven, to the detriment of Canadian companies and, ultimately, their employees and families.
We further understand that there has been pressure to broaden the definition of ownership under the Coasting Trade Act, which could have unintended consequences, such as allowing American vessels into our market through a back door created by CETA. In light of the very restrictive Jones Act in the U.S., we would respectfully urge the committee to further examine this issue.
Let me say a few words about the current process. Currently, foreign flagged vessels are required by the Coasting Trade Act to obtain a coasting trade licence. This process is structured to ensure foreign flagged ships adhere to the same laws and regulations as Canadian ships, including the payment of duties and following of shipping conventions, visa requirements and employment standards.
But even this structure has faced monitoring enforcement challenges, which is why we are recommending that one government agency have full accountability for ensuring compliance and enforcement. Under CETA, European dredgers will have greater access to our waters and greater opportunity for non-compliance.
This is why we must have one entity to administer this regime, just like in many other countries. Based on our experience to date, having single-agency enforcement dramatically increases the likelihood of compliance.
In summary, our coalition of Canadian dredging companies would respectfully recommend that the committee make the following recommendation: Whereas under CETA amendments EU dredging vessels must be subject to the same standards as Canadian vessels, we recommend the Government of Canada appoint a single department or agency to ensure compliance and enforcement of all applicable laws and regulations.
We thank committee members sincerely for their consideration of this recommendation and for the opportunity to present our views on the consequences of amending the Coasting Trade Act as prescribed in Bill C-30.
The Chair: Thank you, Ms. Clark.
[Translation]
Ronald Cameron, Coordinator, Réseau québécois sur l'intégration continentale: Hello, Madam Chair and members of the standing committee. On behalf of the Réseau québécois sur l'intégration continentale, I want to thank the committee for inviting us to this meeting.
The réseau is a coalition of about 20 social organizations in Quebec. Most of these organizations are unions, which represent over one million people. The réseau recognizes the importance of international cooperation, the exchange of goods and services, and the mobility of people.
However, if open markets provide more wealth, it must benefit everyone and adhere to the values of Canadians. The réseau believes that the Comprehensive Economic and Trade Agreement, or CETA, undermines the rights of Canadians, particularly the rights of workers who are already experiencing a decline in their living and working conditions. I'll give the floor to Jessica, who will review some key points.
Jessica Olivier-Nault, Researcher, Réseau québécois sur l'intégration continentale: The group of previous witnesses addressed many points in their presentations. I'll try to shed light on different points, even if it means cutting certain parts short.
CETA's scope goes far beyond international trade. Its mechanisms aim for an even greater liberalization of the economy and strongly undermine the democratic nature of our societies. By assessing it simply as a trade agreement, we'll misinterpret the issues, in particular the deregulation aspects involved.
Regarding the investment court system, remember that Canada is the most sued industrialized country under NAFTA's dispute settlement procedure. It has been sued 37 times. The cases currently in progress are estimated at $2.5 billion. With the investment protection mechanism implemented by CETA, and despite the recent interpretive statement, the wealthiest multinationals will still be able to sue Canada through a court that poses problems in many ways. This topic was addressed earlier. If you have questions, we can talk about it again.
The RQIC and its member organizations want you to know that we think it's totally unacceptable that a democratically elected government, which made a decision in the public interest, can face this type of legal action. In addition, the recourse mechanisms create a deterrent. The legislator takes into account the risk of legal action when legislating. Therefore, the legislator no longer legislates only based on the public interest or common good.
Regarding public services, CETA limits the governments' ability to create and regulate new public services, or to bring the services back into the public domain in the case of a failed liberalization or privatization process.
Earlier, Larry Brown defined the principle of the negative list, the status quo effect and the ratchet effect. I won't go over these definitions again. However, I want you to know that we think these three mechanisms are making liberalization the rule and public regulation the exception.
We urge you to recognize that a government must maintain its ability to regulate for the common good. For our governments and in the public interest, we must maintain the right to bring a privatized service back in-house if sub- contracting is more expensive and doesn't produce the expected results.
Many speakers have mentioned the protection of drug patents. I simply want to point out that the RQIC is extremely concerned about the increase in drug costs by approximately two to three billion dollars a year. Such an increase will certainly affect health services in the country. The increase in drug costs is bound to call into question the transfers, and how this matter can be managed.
I also have some comments on the opening of the procurement contracts of sub-central governments, another topic addressed earlier. CETA sets such low thresholds that clearly most orders will be accessible to foreign private businesses. Various assessments have been conducted, but we're talking about approximately 80 per cent of orders. By carrying out this major transformation, CETA will trap sub-central governments into awarding contracts to the lowest bidder. The sub-central governments will be deprived of a significant local and regional economic development tool. However, we think the governments must maintain the right to create procurement policies that contribute to local economic development; that help protect the environment; that respect workers' rights; and that take into account the desires, needs or particularities of the local communities in which the contracts are awarded.
Mr. Cameron: I want to say one more thing about cultural diversity. It's an important issue for the people of Quebec. CETA will affect culture. The culture was negotiated, chapter by chapter, when there should have been a general exception, since there are gaps. The first readings made us fear the worst, in particular with regard to the book sector. It could affect Quebec authors.
In closing, CETA will not solve the employment issue. We're concerned that legal proceedings will target social protections and our local procurement contracts at the expense of public policies and people. We therefore recommend that this agreement not be implemented, especially given the uncertainty in Europe regarding the issue. However, if the bill moves forward, the réseau and its members want a role in the monitoring mechanisms that will be established.
[English]
The Chair: Thank you to our witnesses. I have a list, starting with Senator Dawson.
[Translation]
Senator Dawson: I'll ask the same questions we asked the previous group regarding the recommendations you want us to provide in our report. These recommendations will allow you to say, "We told you so'' in a few years. I already said that I supported the agreement.
[English]
We have a very good representation of people for and people against.
[Translation]
I still want to hear about what you want to criticize us for in a few years.
[English]
Ms. Clark, in your case, we have at least three or four members of the Transport Committee here. Whatever happens here, which I think is quite obvious, we can at one time listen to your grievances concerning dredging and shipping.
First of all, I live on the St. Lawrence so I see how important your industry is. I see you every day. I do admit that if you go through my CV, I do have a past of having worked in the shipping industry, so I admit my bias.
I would say the same thing to you: We gave you the opportunity to be heard. Our first objective is to give that opportunity. We didn't have it early in the process and you are more or less the last ones to be heard. Maybe tomorrow will be the last ones.
You have a chance to be on the record to give your comments, but we have to be very honest. This is either going to pass or not pass; it will not be amended. If you want something on the record, I would appreciate you doing it the same way I asked the previous groups to do it.
[Translation]
Ms. Olivier-Nault: We must protect public services. To protect public services properly, which the agreement currently fails to do, we must eliminate the ratchet effect. We must renegotiate based on a positive list. We must ensure the new services aren't automatically privatized.
However, there's an issue with the state-to-state dispute settlement mechanism. We don't need to look further than the services. Our national justice systems are firmly in place. I want to reiterate that the national justice systems are able to fulfill the mandate given to the state-to-state dispute settlement mechanism. This mechanism, or the investment court system, since its name changed, has a procedural fairness issue. We could talk at length about all these issues, but these are the two points I wanted to bring to your attention.
Senator Dawson: The Quebec government supports the agreement. We can understand that you have demands. However, we're also listening to the other representative, the Quebec government, which participated more in the process than we did. The Quebec government was at the table, whereas the Senate invited you to speak at the last minute. I want to tone down your remarks a bit, because the Quebec government supports the agreement. Therefore, there can't be only negative aspects.
Mr. Cameron: There are debates in Quebec on the impact of the agreement, even in the National Assembly.
Senator Dawson: There are debates here as well.
Mr. Cameron: Yes. It's a central agreement involving the federal government with a European constituent. We think this agreement affects the distribution of jurisdictions in the federal government. If we've accurately assessed costs, the higher costs in the health sector should be covered. From that perspective, among the measures taken by the government, will there be more compensation in the federal transfers to the provinces for the health sector? I don't know where Mr. Couillard will stand on this issue. However, culture is an extremely important sector. Mr. Couillard, who wanted to fund compensation in the softwood lumber sector, should also compensate Quebec authors if they're affected by the agreement. I think the debate must continue so that we can measure the impact of the agreement on the distribution of jurisdictions in the federal government. The debate is extremely important.
[English]
Mr. Wilkes: If I may offer some thoughts to the senator's questions. I would say two things very briefly and succinctly. Whereas the tariff elimination that was indicated in the last panel takes effect immediately, I would ask for transparency and clarity as to when those tariffs will come off. Retailers will purchase their products many months in advance, indeed, already three to six months out now. So to ensure that the benefits of reducing the tariffs are passed along to consumers and there isn't, if you will, stickiness in the system, providing that clarity immediately so that the retailers can talk to the people they're importing from to make sure that those savings are realized.
Second, I think that this is an opportunity to take a step and do something differently, as I said, with respect to cheeses. We have worked very hard not only within our own membership but some of the smaller retailers represented by the Canadian Federation of Independent Grocers, and the system that we have developed as part of our submission on how the cheese could be allocated, how it can be benefit Canadian consumers, how there is protection built in for our own farmers, we believe that is a unique system, and I would encourage you to consider recommending that and really using it in the spirit in which CETA has been developed, to offer an innovative approach to providing benefit to Canadian consumers.
Ms. Clark: In response to the senator's question, our handout today has a very specific request around our recommendation. In order for us to be able to compete on a level playing field, we feel that enforcement of Canada's regulations must be strictly applied. Right now, when a ship comes in under CETA to dredge in Canada, there are three different agencies involved, and they're not necessarily coordinating. That's where we feel that things will fall through the cracks.
As a ship, you have to notify CBSA you're coming in, so they know you're here. You have to notify Transport Canada so they can determine whether you comply with the definitions under CETA to be able to get the exemption from the coasting trade licence. Then somehow, which is the area that we find that can't be explained to us, ESDC has to check whether your workers comply under the temporary foreign workers process and that you've been through the LMIA process, that you're paying a fair wage, which, as I highlighted before, would be the biggest hit to Canadians, if they are not complying.
That is why we believe the best way to do that is to have one government agency that coordinates across government to ensure those regulations and requirements are being met.
Senator Gold: We're dealing with some very large, almost philosophical questions and very particular ones. Allow me to be very particular and to ask a question about cheese.
If I remember correctly, we heard recommendations and submissions from cheese producers in Canada who made a strong case for receiving the additional allocation in order to protect the producers and to rationalize the offer of products to ultimately the consumer and food safety.
Would you comment? Of course, you're aware that's pretty much the current situation. Why is your proposal better for Canadians with respect to choice of products, cost of products and safety of products?
Mr. Wilkes: Thank you for the question. Indeed, in preparation for today, I had reviewed some of the previous comments, as you would expect I would have.
With respect to food safety, let me start at the end. Food safety is paramount. It's a fundamental obligation that the Canadian food industry has, writ large, from supplier all the way to retailer and then indeed informing consumers on how to properly store and handle their food.
I'm very proud to say that based on C.D. Howe research, Canada's food safety record amongst OECD countries was number one, tied with Ireland. So from a retailer perspective, it is something that we take seriously. I don't think dependent on where the allocation lies or rests will influence food safety. I certainly know from a retailer perspective it would be something that is reputational in its nature, so it can't be compromised.
I would challenge the view that one particular group within the supply chain would have a better approach to managing food safety. It's not something that is negotiable in our perspective.
As I said in my opening remarks, we are seeing more and more investment in the cheese category. We are seeing our retail members have things like cheese connoisseurs in their stories where they're working with the consumers directly on what type of cheeses go with what type of meals, providing education and knowledge about the types of cheeses that are available.
Our cheese consumption in this country is not as high as that of our American counterparts and many of the European nations. Some of the information that we looked at from Canadian Dairy Commission has suggested that we're well below other levels of countries with respect to cheese.
Providing product directly to the retailers, who are in contact with their consumers on a day-to-day basis, will allow and ensure that those demands from Canadian consumers can be satisfied through this agreement.
We don't believe there is a need for an intermediary between the consumers and those that are bringing the cheeses in.
As I said, the only other point that I would make is, once again, I had indicated in my opening remarks we believe this is an opportunity to streamline the supply chain, to provide efficiencies and to ensure that there isn't a cost built in by more people being engaged and involved throughout this supply chain. If it's imported directly by retailers who have the opportunity to ensure that the system is most efficient as possible, then I think you will eliminate costs as we've articulated earlier.
Senator Gold: Is it not a legitimate concern, however, that the effect of this will be potentially to hurt the domestic cheese producers whose soft cheese may now be subject to a much larger quantity of analogous soft cheese from Europe, when in fact if they enjoyed the quota, they could manage the offer of a variety of cheeses in a more rational way from their point of view?
Mr. Wilkes: I certainly understand their point of view, and indeed that was the comment that was made. Where we're coming from is the offer should be managed to benefit Canadian consumers. That was the intent of the agreement.
So we also have a responsibility to our own local producers. Indeed, Canadians have a strong propensity to buy local products, whatever they are, on an ongoing basis. That's why we challenged ourselves to say let's just not ask for the quota. Let's just not ask for the additional funding. Let's tie that to domestic production and provide an incentive for selling more domestic cheeses in order to take advantage of the new quota that's available.
As I indicated in my opening remarks, by allocating the cheese that you can bring in from Europe based on your total cheese sales, both domestic and European, it ensures that there's a very strong incentive to continue to partner with domestic cheese producers and to sell those products, if you so choose as a retailer, in order to bring in more European cheeses.
So we recognize the concern and we wanted to provide a solution that we thought was innovative so that there is motivation to sell products from both categories. Indeed, it's a catalyst to support the Canadian producers more than currently is in place.
Senator Woo: Thank you all for your testimony.
I have a quick follow-up question for Mr. Wilkes. Could you explain the formula again for the allocation of the quota? You assign the quota based on total sales of cheese, domestic plus foreign.
Mr. Wilkes: Correct.
Senator Woo: Across the different retailers who are interested in the quota?
Mr. Wilkes: Yes. The only point of additional clarification I would indicate is that in order to qualify under the formula that we suggested, you have to be in the retail business, no size restrictions, and have to be engaged in directly selling cheeses.
It is a retail-specific definition that we've also included in our proposal. But, yes, you've captured it correctly.
Senator Woo: I have a question for Ms. Clark on the dredging issue. I think it's been answered in your response to Senator Dawson, but I want to be clear.
You talked about the importance of having common standards for European dredging companies and Canadian companies. Then you call for a single agency. Is it that they are not common standards currently, or is the problem that it's not enforced and there is lack or compliance, or both?
Ms. Clark: Currently under the coasting trade licence, there is a very stringent notification process that a vessel is trying to obtain a licence. Once they are allowed to obtain that licence, there are a number of rigorous licencing requirements they have to do around vessel condition and safety requirements, environmental compliance. And what we see now, without those notifications going through Transport Canada, it will be quite fractured, and having to go to three different agencies that may or may not be tracking that vessel, there is more opportunity not to follow labour or safety requirements.
CETA also supports these European vessels being flagged in ports of convenience, and often those home ports will have standards that are substandard to what is required by Transport Canada, which are some of the highest in the world. While we have our vessels here, we will be inspected annually. We pay millions of dollars annually to keep our vessels in the conditions required by Canada, and they are for good reason. They are to keep people on board and the environment safe.
Senator Woo: I think what I hear you say is that if the system were fully enforced regularly and consistently you would not have differential practices because the same standards are being applied.
Ms. Clark: Right. That's why we are looking for one agency that is responsible.
Senator Woo: I'm not sure that's something this bill needs to take care of. I'm pretty sure it can be dealt with in a separate act of the government.
The Chair: To clarify, I understood you were recommending, as a recommendation, so that it could be properly looked at, and your concern is that the government take it seriously.
Ms. Clark: Yes.
The Chair: I appreciate you made that very clear at the start. It was very helpful to try and manage the process of Bill C-30. Thank you.
Senator Woo: It's a very good recommendation. I don't know that it affects Bill C-30 directly, but it's something that should be picked up in some other forum.
You make the point that you don't have reciprocity. Was reciprocity asked for and did the Europeans deny it to the industry?
Ms. Clark: We don't believe it was asked for. The dredging community was not consulted during the negotiations. What we understand is that the concessions given in the agreement were last-minute discussions and we were not consulted. We have been advised that any European state that currently restricts foreign dredging does not have to remove restrictions under CETA.
Senator Woo: There was a call for submissions during the consultation process, and the industry didn't put something in?
Ms. Clark: The industry was unaware of it.
Senator Woo: Thank you.
Senator Marwah: Thank you, Ms. Clark. It was a very concise submission you made. My question is the same as Senator Woo's, because you made a very unambiguous statement in here that says that the proposed amendments open the Canadian market for dredging to European firms while keeping the European markets closed to Canadian firms. There is no reciprocity for us going into Europe?
Ms. Clark: Not in the CETA agreement, no.
Senator Marwah: Why would it be specifically for them coming here? They have open access to our dredging and we have no access to theirs?
Ms. Clark: We have access to dredging in European countries that already allowed access, but any countries that did not, that was not changed. My colleague from Ocean Group in Quebec, they do dredging in the Caribbean and there are several countries they are not able to reply to tenders because of that.
Senator Marwah: They are prohibited by law there? Are you prohibited by practice or by law?
Ms. Clark: Just to give you a flavour of the dredging market, 80 per cent of the world dredging is done by four companies, two in Holland and two in Belgium. And they have vessels stationed all over the world, mostly in Panama, being able to be deployed from a central location.
The Chair: Clarification for me, the two countries you named?
Ms. Clark: Holland and Belgium.
The Chair: We don't have access to those countries?
Ms. Clark: No.
The Chair: So there is not reciprocity for those two?
Senator Pratte: Just to follow up and maybe close that chapter on dredging. As far as wages are concerned, if I understand correctly, because this is a point that has been made for cabotage and the same point is made now for dredging, if I understand correctly the point you are making on wages, according to CETA and the current situation, it would not be allowed for a European vessel to pay their crew half of what a Canadian ship pays. Your concern is that they would do so, but we won't be able to spot it and monitor it?
Ms. Clark: That is our concern. We know even now under the coasting trade licence regime, which is quite comprehensive, that is happening, and Seafarers' International did present at this committee, and they had the same concerns because they have proof that that has happened, and we do as well. Our concern is we won't necessarily know there are foreign ships coming without that coasting trade notification we receive on a routine basis. Informally, marine dredging companies have become part of the policing process, because of our knowledge of who is in the country and who is not.
Senator Pratte: That recommendation you are making for a single agency, has that been suggested to the government already in former years?
Ms. Clark: Yes.
Senator Pratte: What has been the reply? Has there been any opening to that idea?
Ms. Clark: Not thus far, no. We have been meeting on various levels within government. We participated in a working group over the past year, and we have brought these same concerns forward from the beginning and suggested that if the Coasting Trade Act was not being amended to reflect that recommendation that some other mechanism be put in place that would result in the same type of enforcement and monitoring regime.
Senator Pratte: In your mind, the proper way to do this would be to amend the Coasting Trade Act so that this agency would be created.
Ms. Clark: There is opportunity to do so. The bill requires a notification to the Minister of Transport. So the definition of that notification is still open to be defined.
Senator Pratte: Thank you.
The Chair: We've come to the end of our session. I want to thank all of the witnesses for coming forward and putting their perspectives on the table. We are caught in the same dilemma. Some of you heard me before. We are at the end of a process, not at the start of a trade negotiation. I refer you to our trade report of February for some of our recommendations. We're going to do the best we can to fulfill our mandate with respect to scrutiny of Bill C-30.
Thank you for coming before the committee.
Senators, we have a series of witnesses tomorrow, and that is the close of the list before us. Please review all of the witnesses that we have had. We have had these break weeks, and I don't want any of the testimony that we've had to be lost, in fairness to the committee. If you can review the testimony, we'll hear the final witnesses tomorrow, and we'll have to come to a conclusion on the study of Bill C-30 very shortly.
Thank you for your patience and for taking the time to study all of your witnesses. I feel like a teacher at the moment. This class is closed or this Senate committee is closed.
(The committee adjourned.)