Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue No. 38 - Evidence - Meeting of February 7, 2018
OTTAWA, Wednesday, February 7, 2018
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 4:15 p.m. to study foreign relations and international trade generally.
Senator A. Raynell Andreychuk (Chair) in the chair.
The Chair: Honourable senators, the Standing Senate Committee on Foreign Affairs and International Trade is called to order. I’m the chair, Senator Andreychuk, and I’m going to ask senators to introduce themselves.
Senator Ataullahjan: Salma Ataullahjan from Ontario.
Senator Housakos: I am Senator Housakos from Montreal.
Senator Oh: Victor Oh from Ontario.
Senator Greene: Steve Greene from Nova Scotia.
Senator Ngo: Senator Ngo from Ontario.
Senator Griffin: Diane Griffin, Prince Edward Island.
Senator Massicotte: Paul Massicotte from Quebec.
Senator Cordy: Jane Cordy from Nova Scotia.
Senator Dawson: Dennis Dawson from Quebec City, not far from Shawinigan.
Senator Bovey: Pat Bovey from Manitoba.
The Chair: Today, under this mandate, the committee has invited the Minister of International Trade and officials from Global Affairs Canada to appear in order to update senators on recent developments related to Canada’s international trade agenda.
This committee has been seized in reviewing many trade agreements in the past. Senators will recall that this committee recommended in its report entitled Free Trade Agreements: A Tool for Economic Prosperity that the government report throughout the negotiation process to the Standing Senate Committee on Foreign Affairs and International Trade and that the House of Commons Standing Committee on International Trade also be involved in this process in order that parliamentarians can serve more effectively as legislators in relation to international trade agreements.
As you will recall in our report, we put heavy emphasis on a new style of meeting the demands of the Canadian populous. They need to be involved. They need to understand the process of trade agreements, if they are going to, first of all, be accepting of the trade agreements and, second, benefit from them for the prosperity and economic development of Canada.
I’m very pleased that the Honourable François-Philippe Champagne, P.C., M.P., Minister of International Trade has agreed to come and update us on trade issues. More particularly, I had asked the minister to comment on the recent TPP negotiations and finalization, which I now have to remember to call CPTPP. Perhaps we’ll find some easier way to address that, but I think it is of great importance to Canada.
Also, minister, you were here and advised us about the urgency of putting through the CETA agreement so that the tariffs could come off last July. We did accommodate your schedule at that time, but we are interested in the ratification process in Europe. I understand that there are approximately seven countries that have ratified, and we’re wanting to know what that process is like and what the tariffs have done for Canadian business.
Certainly the emphasis is on trade and on TPP. Also, if you have any comments that you can make on NAFTA, we respect your jurisdiction and the foreign minister’s jurisdiction, but you play a key role in the policy of Canada, so we would welcome your comments on that.
Accompanying the minister is Mr. Timothy Sargent, Deputy Minister for International Trade; Mr. Bruce Christie, Associate Assistant Deputy Minister, Trade Policy and Negotiations; and Ms. Kendal Hembroff, Director, Trade Policy and Negotiations Division (Asia). I welcome all of you to the committee. You know we like to hear your opening statements, and then we would certainly want to place our questions to you. Welcome, minister and officials, to the committee. The floor is yours.
Hon. François-Philippe Champagne, P.C., M.P., Minister of International Trade: Madam Chair, thank you very much for having me. I really welcome the opportunity. We had a very good session last time, and I have been looking forward to updating you. I think on the trade file a lot has happened. I’m always happy to come back and share where we are.
Madam Chair, if you will allow me, I have a brief statement.
After that, honourable senators, I will be pleased to answer your questions.
Thank you for the opportunity to update this committee on our government’s trade initiatives in Asia, including the recently concluded Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and our ongoing exploratory discussions with China on a possible free trade agreement.
Let me start by introducing my departmental officials who are joining me today. We have Timothy Sargent, Deputy Minister of International Trade, whom you have already introduced, Madam Chair; Bruce Christie, Associate Assistant Deputy Minister, Trade Policy and Negotiations, and, more to the point, the chief negotiator for the CPTPP; and Kendal Hembroff, Director, Trade Policy and Negotiations (Asia Division) and deputy chief negotiator for the CPTPP. I would like to take this opportunity to thank them for their hard work. I was fortunate enough to be with them for some time during the negotiations and, I can tell you that they do Canada proud.
Canada pursues trade agreements that advance the interests of our middle class, and that create more opportunities for exporters and well-paying jobs at home. That is our top priority, and we make sure always to negotiate in the best interest of all Canadians.
For a trading nation like Canada, raising the standard of living for our middle class depends on robust international trade, and that means support for the rules-based order and the institutions that underpin it, as well as more high-quality trade and investment agreements between Canada and partners around the world.
Canada has shown that it is ready to be tough to defend our interests in order to get the best deal for Canadians because these deals have a lasting impact on our society. Moreover, a progressive trade agenda opens more doors, raises standards, and positions the middle class for success for decades to come.
When global investors look to position their future investments and capital, they want stability and predictability. That’s Canada. When the talent pool of tomorrow’s economy seeks a place to build their business, they want diversity, openness and all the creativity that comes from a society that embraces and encourages both. That’s Canada.
The progressive trade agenda is not only the right thing to do it is indeed the smart thing to do economically. As I’ve often said in the media, trade is a march to the top, not a race to the bottom. Canada is leading that charge, and while that takes more effort, it will pay economic dividends for the middle class for generations to come.
This is why on January 23 Canada and 10 other countries concluded negotiations for the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the CPTPP, in Tokyo, Japan. The Asia-Pacific remains an important region and a priority market for Canada, and obviously Canada is pleased to be part of the CPTPP, a trading block that represents 495 million people with a combined GDP of almost $14 trillion Canadian.
Canada has been intensely engaged in the new CPTPP from the first meeting of officials in May 2017 to proposing suspensions and changes to secure a better deal for Canadians.
Our position in the CPTPP has been informed by extensive consultations with Canadians. The Government of Canada conducted two sets of comprehensive public consultations with Canadians to seek their views on the original TPP consultations initiated November 2015 and a potential new agreement with the remaining TPP members without the United States. Collectively, since November 2015, the government has held approximately 250 interactions with over 650 stakeholders, including business and non-business associations, civil society organizations, think tanks, academics, indigenous groups, youth and the general public. Together, they represent millions of hard-working Canadians right across the country and every political stripe.
The CPTPP incorporates by reference the provisions of the original TPP agreement and suspends 22 provisions upon entering into force. The suspensions cover a range of areas, including important intellectual property provisions of concern to Canadian stakeholders. Canada was also able to maintain its policy flexibility with respect to culture, especially in the digital environment, and achieved important bilateral arrangements with Japan, Malaysia and Australia in the auto sector.
Further, the CPTPP advances Canada’s progressive trade agenda in a number of areas, such as labour, the environment, SMEs and transparency and anti-corruption. In fact, this agreement is Canada’s first FTA with enforceable labour and environmental chapters.
The CPTPP also contains a development chapter, where the parties affirm their commitment to promote and strengthen a trade environment that seeks to improve welfare, reduce poverty and raise living standards, as well as focus on women and economic growth, highlighting the importance that women should be able to fully access the benefits and the opportunities created by this agreement.
Once the CPTPP enters into force, it will become one of the largest free trade agreements in the world. In the area of goods, market access gains under the CPTPP will be significant, especially in the CPTPP countries with which Canada does not currently have free trade agreements and where tariffs, as we all know, remain high.
Gains from the CPTPP will benefit a wide range of sectors, including financial services, fish and seafood, forestry, agriculture and agri-food, and metals and minerals. Our exporters and investors will benefit from more transparent and predictable market access, and the potential gains from the CPTPP will increase as new countries seek to join the agreement.
This agreement will not only benefit Canada economically and commercially but also strategically, allowing Canada to diversify our trade and providing a platform to influence future trade rules in the important Asia-Pacific region.
I now turn to China. As the committee members will recall, Canada and China announced the launch of exploratory discussions on a possible free trade agreement in September 2016. To date, Canada and China have held four rounds of exploratory discussions. Canada and China continue to be engaged in these discussions in order to assess the potential for negotiating a comprehensive trade agreement.
In parallel with our exploratory discussions, the Government of Canada conducted public consultations on a potential Canada-China free trade agreement, from March to June 2017. Over 600 stakeholders and partners shared their views as part of this consultation. In general, Canadians told us that they see both opportunities and challenges associated with a possible Canada-China free trade agreement. Business in particular sees a free trade agreement as providing the opportunities to secure improved terms of access to the Chinese market, and identified a number of issues that they would like to see addressed in an agreement, including non-tariff barriers in areas such as intellectual property.
Some civil society groups, labour unions and interested Canadians have also raised the importance of addressing issues such as labour and the environment as part of our discussions with China.
As part of this governments commitment to transparency, a public report summarizing the views received during the public consultations was released in November 2017, a first for a trade consultation in Canada.
During Prime Minister Trudeau’s recent visit to China last December, Canada and China committed to continuing exploratory talks to ensure potential negotiations are based on a shared understanding of the issues to be negotiated as well as the scope and level of ambition of the negotiations. This is going to be a first for both sides. There are no templates that apply.
Canada is committed to taking the time required to make sure any future decision on whether to launch free trade negotiations with China is in the best interest of Canadians. Should we pursue deeper economic engagement with China, we will do so by creating more opportunities for the middle class. Progressive trade means that trade benefits all Canadians, puts people first and reflects our standards and values.
We remain committed to building a stronger and more comprehensive relationship between Canada and China based on regular and frank dialogue but will take the time needed to ensure that we get this right.
I would now be happy to take questions from senators, Madam Chair. Thank you.
The Chair: Thank you.
As a preliminary point, we did study the TPP, were aware of it and had documents. Since it has now been revised as CPTPP, I’m having difficulty finding where the changes actually are, short of having to read the agreements, which I think I’d have to take six months off to really comprehend.
Is there some way that we can see what we’ve been studying for quite some time and what these new changes are? I think that would be helpful for us. Through you, minister, perhaps your department can provide us with that or at least linkages to where we can find it.
Mr. Champagne: Sure, Madam Chair, we would be happy to do so. As you appreciate, if you would allow me just for a minute, when the United States decided to withdraw from the agreement, trade ministers about 10 months ago met in Lima, Peru. We were confronted with a decision: Are we all going back home? Are we just dropping the ball? Or are we committed to a free, rules-based trade arrangement in the Asia-Pacific region? We came to the conclusion that for many reasons, including trade and geostrategic reasons, it was in our people’s best interest to task our officials to come back with a number of options.
As you saw, to come back to your question, there were a number of suspensions that were proposed. Canada was probably chief among those to propose a number of suspensions, namely in the IP sector. Our approach was obviously to make sure that those sections that were included at the request of one particular party, if they are no longer party to the agreement, they should not benefit from those clauses to the MFN clauses under the WTO arrangements.
So Canada has been front and centre, I would say, in shaping what you see today as the revised CPTPP. There are 22 suspensions that have been agreed to by the countries, and we can certainly provide a table to facilitate the work. I’m told by the officials, senator, it’s already on the website describing some of the key ones. As you know, one of the things that we have been able to achieve — I want to say thank you to our Prime Minister, who stood up for Canadian interests. You may have noticed that we achieved a significant outcome for the cultural sector, which was one of our primary concerns, to make sure we could still invest, defend and promote the way we want our culture as Canadians. We got bilateral side letters from each and every country.
I would say on the auto sector, we were able to achieve something that has never been achieved before, which is the largest market access for Canadian auto manufacturers in Japan, removing non-tariff trade barriers with respect to safety standards. We achieved that in a side letter, which is enforceable. It is the first time the Government of Japan has given a side letter in the auto sector, which is enforceable, including a most-favoured-nation clause, meaning that if Japan was ever to give to the United States, Europe or any other country, for that matter, any better treatment, it would automatically apply to Canadian manufacturers.
The Chair: Thank you. I think from our point of view when we dig in, we need to know the original agreement we studied, which had heavy influence of the United States. We know the history of where Canada fit into that. Now it has been changed, so I personally will be looking for the unintended consequences of what we’ve left in there, what we’ve taken out and what that will mean for Canada as we progress. Thank you for saying that you will provide us not only the website but as much information as you can.
Mr. Champagne: Sure.
The Chair: You have generated an extremely long list, everyone in the room at the moment.
Senator Ngo: Good afternoon, Mr. Minister, and welcome.
Last month you highlighted the benefit of joining the CPTPP — and for this I congratulate the staff. In the previous version of the trade deal, there were many talks about including Taiwan in the second round of negotiations. This would make sense, since Taiwan is Canada’s eleventh-largest trading partner and the fifth-largest trading partner in Asia.
Could you tell this committee if the government will support Taiwan’s inclusion in the CPTPP discussions?
Mr. Champagne: Thank you, senator, for that question. What I can say to you is that obviously our discussion with respect to the TPP — which became, as you said, the CPTPP — has generated a lot of attention around the world. I’m aware that a number of countries, including Korea — and I’ve even been told that the United Kingdom has expressed some interest in potentially joining this CPTPP.
What I can say to you, senator, is there has been no discussion yet with respect to additional members who may want to join, because the focus so far of the trade minister has been to complete the task at hand, which, as you know, a date has been scheduled for signature in Chile on March 8. After that is obviously the ratification process. For the agreement to come into force, you would need six countries and 50 per cent of the signatories.
So I would say that for the time being, senators, there has not been much discussion, apart from us registering or recording the fact that a number of nations have expressed a potential interest, but there has been no discussion at the ministerial level on that.
Senator Ngo: During the negotiations on the CPTPP agreement, the United States and Vietnam came to a sub-agreement, better known as chapter 19, about labour laws for the people of Vietnam. If the CPTPP had gone into effect, this chapter would have held Vietnam responsible for upholding the rights and labour standards set by the International Labour Organization, so that the Vietnamese are treated with more decency than we see today.
Given that the United States is no longer part of the negotiations, and that Vietnam is still a signatory, would Canada consider the possibility of working towards a similar agreement with Vietnam?
Mr. Champagne: What I can tell you about the negotiations that took place in Da Nang, is that all countries, including Canada, insisted that Vietnam comply with the chapter on the rights of workers, because it corresponds to Canadian values. As you will see in one of the side agreements reached between various governments and Vietnam, Vietnam asked for an adjustment period. This would suspend any measures that could be taken against Vietnam by other signatories for a clearly defined period. Vietnam has shown remarkable interest in complying with the spirit and the letter of that chapter. However, Vietnam needs a little more time to come into compliance with the rules in effect.
There were also questions about the right of association and about some subsections in the chapter on workers’ rights. We must accept that Vietnam, just as every other signatory, will be required to comply with the chapter on workers’ rights. This is the first time in the world, certainly in Asia and Pacific, that a chapter on workers’ rights will be subject to dispute resolution, and will really have the force of law.
Senator Dawson: I am in a slight conflict of interest, since I was the chair of the Standing Senate Committee on Transport and Communications. The committee conducted a study on autonomous vehicles.
You are talking about our trade with Japan. The Asia-Pacific region is ahead of us. Traditionally, we have manufactured and sold automobiles. In the future, smart cars, the Googles of the world, and Tesla with its trucks, will not play by our manufacturers’ traditional rules. As we are standing up for today’s automobile industry, we should start to think about tomorrow’s automobile industry, which will involve nothing short of computers on wheels. That issue does not appear in these discussions, and, in my opinion, it is something that we should be interested in.
My second comment is this. Earlier, you talked about the 11 members. You indicated that there is no process to accept new ones. Which of the 11 members are our targets? Which ones should our business people be targeting under the terms of the agreement in order to increase their involvement in the market?
Mr. Champagne: Your first comment is music to my ears. For a long time, as I deal with those in the automobile industry, I have been saying we have to fight not only for today’s automobiles, but certainly for those of tomorrow. These agreements will be with us for decades. In the years to come, the value of a car will perhaps depend on its battery, or, in the case of autonomous vehicles, on its connectivity.
In my opinion, market access is important, even if Canadian manufacturers currently sell few vehicles in markets such as those in Japan, Australia or Malaysia. My role, as Minister of International Trade, is to ensure that we open up these markets. This industry is undergoing a massive transformation. Who can say exactly what it will look like in a decade, and how we will be exporting these vehicles?
I have been saying for a long time that we must look at what is being done right now. We must think about including clauses in these agreements that allow us to export to the markets of tomorrow.
One of the most significant advances with the CPTPP is Japan. Since I became Minister of International Trade, and even in my predecessors’ time, Canada sought out a bilateral trade agreement many times with Japan, the world’s third largest economy. Japan often answered that this agreement is the CPTPP. You can see that it is a very interesting opportunity for Canadian industry.
That being said, I think that there are enormous opportunities for Canadian industry in all sectors and markets that used to have high tariffs, particularly Vietnam and Malaysia. Take the example of Canadian exports of industrial agricultural equipment, valued at $500 million per year. We just opened up new markets, such as the services sector in Singapore, which was a rather hard market to enter.
We are now trying to lead a promotional campaign with entrepreneurs in different sectors of activity throughout the country to see where tariffs have been lowered, for example. We discussed fish and seafood. This is a huge market, and several of these countries still had very high tariffs. Generally, tariffs around the world are decreasing. However, we are increasingly seeing more non-tariff barriers.
Trade agreements like this one allow us to challenge these non-tariff barriers. This is exactly what we did with Japan, in the automobile sector, to not only ensure that the tariffs remain lower, but also that Canadian entrepreneurs can sell goods in these markets.
To answer your question, Japan, Malaysia and Vietnam are countries that are growing rapidly, and are very attractive to Canadian entrepreneurs.
Senator Housakos: Thank you, minister, for being with us. I’ll try to put a couple of questions into one, because the chair is quite disciplined here today.
My question has to do with Canadian competitiveness and also with what economic sectors the government is really focusing on. I think successive governments have had a strategy when it comes to trade; namely, to generally promote the “Team Canada” theory, to try to open up as many markets as possible and to find the markets with most growth to try and take as much advantage of that market as possible.
Recently, successive governments have looked at Asia-Pacific economies, which have primarily served the resource sector of Canada well. We are an exporting country of resources, and that’s a commodities-based market that’s price-driven. But when you start looking at industrial, manufacturing, high-tech or service sectors, they really have not gotten the benefits of these growing economies, particularly from the Asia-Pacific sectors.
We have trade deals now with the U.S. and made a trade deal with the EU. Those are the major trading blocks. But at the end of day, as much as we can become economically integrated with trading partners, it is a competition. Are our industrial and manufacturing sectors competitive enough from a production, labour perspective and corporate tax base perspective to be able to compete with these rigorously growing economies in the Asia-Pacific region?
What can Parliament and the government do to correct that? If you look at most indices, Canada over the last decade has been slipping in competitiveness in those areas with any of our trading blocs of countries. That’s more so with Asia-Pacific and less so with the EU. It’s slipping with the Americans, and now we see the administration in the United States is quite rigorous in trying to become more competitive.
There are a couple of questions in there. I hope, minister, you can answer them.
Mr. Champagne: Senator, you are raising a very important question for Canada’s economy. There’s no doubt that competitiveness is one of the key factors if we want to benefit from these markets.
As trade minister, for me it is certainly making sure we open up new markets. As I said to Senator Dawson before, some of these countries, as you well know, have some of the highest tariffs you can find, sometimes 30 or 40 per cent. You might be as competitive as you want in your own labour market or in technology or innovation, but they are, in fact, a closed market in one way or the other. These agreements, and in many respects with respect to goods, the tariffs will come down to zero at the date of coming into force of the agreement.
Certainly what we need to do as the Government of Canada, and each and every one of us as Canadians, certainly the Senate and this committee, is to promote these agreements. We have signed the CETA agreement. We have opened up a market of 500 million people in Europe, $3.3 trillion of public procurement. There are a lot of Canadians to be looking West. Now with the CPTPP, for me at least, we have positioned Canada for success for decades to come in one of fastest-growing regions of the world.
One of the fascinating things that I get from investors who are looking at investing in Canada is its stability, predictability, rule of law, and a very inclusive and diverse society. I will give you an example. Recently I met a young, quite successful entrepreneur from Korea who is in the video game industry, probably the largest video game company in the world. Its market cap is bigger than LG Electronics, and he created it five years ago. He said, “Minister, you didn’t ask why I’m coming to Canada. When I build in a game in Korea, I can only sell it in Korea. When I build a game in the U.S., I can only sell it in the U.S. When I build a video game in Canada, I can sell to the world.” This is an investor who came here with billions. He said, “For me, it’s a smart place to be.”
Certainly I would say it is about talent. Oftentimes I say it’s not the size of your population that matters but the size of your preferential market access. Today we have preferential market access to about 1.2 billion consumers. With the CPTPP, we will be adding 500 million. The size of your population is only relevant with respect to the talent pool you’re creating.
Other things which are making us quite competitive are the cluster on artificial intelligence; the e-mobility cluster we have been creating in Quebec; and the aerospace sector, which I know we are covering a lot of ground with. You may have seen when we did the Airbus-Bombardier alliance, Airbus named Canada as its fifth home country. The only country in the world which is a home country for Airbus and is not in Europe is Canada.
I remember having those discussions. Because we had the CETA agreement in place, they felt Canada was part of their own supply chain. This is a big supply chain which should benefit small- and medium-sized businesses across Canada.
We have covered a lot of ground, but your question allowed me to cover that. I’m happy to be more specific, if you want.
Senator Housakos: I appreciate all those answers. On the manufacturing side, are we going to be able to compete with the Asia-Pacific countries given our lack of competitiveness on some of the indices on that front? When it comes to high-tech industry, and especially when we are interlinked with the economy of the U.S. and Europe, we have gotten a lot of retombées économiques because of those integrations, but my fear is for our manufacturing sector, which has been decimated now for a number of decades. What can we do to make them more competitive?
Mr. Champagne: It goes back to two things, in my view. Minister Bains would have some views, as you would all have as Canadians.
It goes back to innovation. Innovation is a key differentiator which certainly can sell the products. When I travel the world, it is the green tech, the clean tech. I was leading the largest trade mission to India in November, with more than 150 small- and medium-sized business from Canada. I opened the tech summit in New Delhi. I can tell you that Canadian products are selling well.
Innovation will certainly be one of the key differentiators. The other one, which we could talk about longer, is data. Data is also going to be a key differentiator. I have even asked our officials to reflect on what should be the role of data in our future trade agreements.
Senator Bovey: Thank you, minister, for being with us today. I want to start with congratulating you and thanking you on the recognition of the importance of culture. The headline in a CBC article today, “Culture file important to Canada,” struck very positive notes in the hearts of many. But I’m not going to ask about culture today. Being a Manitoban, I want to ask about dairy farmers.
The signing of the CPTPP was noted in a headline today as being a sombre day for dairy farmers, as under the agreement the other 10 nations in the agreement will have market access that equals 3.25 per cent of Canada’s annual milk production. They are calculating that if dairy imports from TPP countries reach that level, it would represent a $246 million hit for the industry in Canada.
I have been told by them that producers will be giving up, in this agreement, the same level of market access negotiated before the United States dropped out of the deal. Is this true? Should the level of access be lowered with the withdrawal of the largest economy from the TPP negotiations?
Mr. Champagne: Thank you, senator. That’s an important question. I want to echo what you said about culture first. Certainly we are all happy, as Canadians, that we could achieve that.
Two days after I made the announcement on the CPTPP, I met about 30 representatives of the SM5 — the supply management five — and probably 10 of them were from dairy sectors of each and every province in Canada. The president of the Dairy Farmers of Canada lives about 10 minutes from my own house, so you might appreciate that I hear a lot about dairy farming. I welcome that. I even had lunch with him yesterday here in Parliament when they were on the Hill.
I met with them two days after the announcement, understanding that they have concerns and that we need to sit down with each other to understand the impact. As you know, because of the fact that the United States is no longer part of the CPTPP, there are questions about the full use of the quotas. There are few technologies today to transport fresh milk from a long distance, and one of the concerns was related to those that could be trucked across the border. We have started our discussions about understanding the impact.
The second thing is talking about next steps. I have met with them, if my memory serves well, two or three times since the announcement, to make sure, with Minister MacAulay, that we work together in understanding the impact and talk about next steps. We will continue to do that.
We are the party that has always defended supply management. We understand — and coming from a rural riding in Quebec, I understand — the impact of that in our society and communities. If you talk to them, you would probably find that they appreciate the very open and frank dialogue that I have with them as to what we could do with quota allocation and the fact that we also have a bit of time ahead of us to really chart the way forward together. We talk about signature in March, but, obviously, there is ratification.
We were able to establish a dialogue to look at it together and work seamlessly in looking at the impact and the next steps.
Senator Bovey: So they can be encouraged going forward?
Mr. Champagne: I met them again yesterday to say that we would continue with Minister MacAulay. I know they have had discussions with the Minister MacAulay as well. I think they appreciated that two days after the announcement, we asked for the meeting to say we understand there are probably real concerns, and we want to talk about them and chart a way forward together.
Senator Oh: Thank you, minister, for being here.
I think with the bumpy negotiations on NAFTA, CPTPP is very important. Coming from that region, it’s a huge blanket of developed and underdeveloped countries. There is a huge population.
Minister, as part of the conclusion of the CPTPP, the 11 remaining TPP parties agreed to suspend a number of provisions in the original TPP IP chapter, and Canada wishes to negotiate a better deal that protects Canada’s auto and cultural sectors. How close are the negotiators to a full agreement? According to GAC, a standing ceremony will be held on March 8, 2018. Is Canada willing to close the deal as it continues to pursue its progressive agenda?
Mr. Champagne: Thank you for highlighting that we stood up for Canadians. You probably remember Da Nang and the Prime Minister standing up with us and our negotiator, which I have to thank again, standing up for Canadians. Obviously, at that time, we felt that we had not obtained what we wanted in a number of areas. You saw that us standing up for Canadians in a very forcible manner allowed us to get a better outcome. We mentioned culture as one of them, and certainly on the auto sector. I say thanks to the Prime Minister and the team for standing up. We were able to get a better deal for Canadians. That’s what they expect from their team at the table — to be constructive and positive but to stand firm with them. These trade agreements are with us for decades.
Certainly what I can say is that in Tokyo two weeks ago, the team was able to firm up and improve the deal. What you find today in the text of the CPTPP, it has been concluded. We have concluded the negotiations. You’re right to point out that as far as I know the date of signature has been set for March 8 in Chile, and Canada will be there. I will be there to represent Canada to sign. After that there is the normal ratification process.
For Canada, it’s quite an achievement. You mentioned it. We’re opening up a market of more than 500 million people, 14 per cent of the world economy. It plays well with a progressive agenda. We have countries like New Zealand and Australia, which also have progressive governments. We’re talking with countries that are willing to engage with us on a very progressive basis.
I’m pleased it will also be the first chapter we have on small- and medium-sized enterprises. It is a good agreement for Canadians, and we should all take pride and make sure now we go abroad in different regions of Canada selling that.
For me the job is never done, senator, until we convert these agreements into jobs, into orders, into benefits for Canadians. Those are door openers. They’re good because they open up markets, but I keep saying to our officials that my definition of success is when we convert them into real benefits for Canadians, which is jobs and economic activity back home.
Senator Massicotte: Thank you very much for being here, Mr. Minister. I want to congratulate you. Canada has a small population, and we are very dependent on trade with other countries. We need to increase support for free trade. I believe that you have achieved great things with the countries in South Asia. Congratulations to you and your team!
There is still China, and I wish you good luck in your talks. It would be good for Canada to reach an agreement, but we need to see mutually acceptable conditions on the table.
For 40 or 50 years now, even at the time of Prime Minister Trudeau senior, we have been talking about diversifying our trade. Many reports have been written, and many have expressed interest in this regard. However, we still rely enormously on the United States. That country accounts for 75 per cent of our exports. However, this dependency is not always healthy. Our interests are not always fulfilled. We are very dependent on a single trade partner that is not always the most reliable one. Nevertheless, we are all sovereign countries, and we all have our choices to make.
These agreements are very important, and they are just beginning. This situation calls for sustained action in promotion and education to encourage Canadian businesses to export to these countries — which is not a given. It is easy to export to the United States. We speak the same language, and have similar cultures. I fully support you in your efforts. We can’t stop now.
I am the co-chair of the Canada-Japan Inter-Parliamentary Group. I know this country quite well. In fact, we have to go there soon. It is quite a closed society, but it has immense potential. This means that we must encourage it to trade. I cannot emphasize that enough. These agreements are laudable by all means, but they are just a first step.
Mr. Champagne: I completely agree with you. Canada represents 0.5 per cent of the global population, and only 2.5 per cent of global trade. Foreign trade is part of our DNA. We need to open the markets and participate in foreign trade if we are to ensure prosperity for Canadians now and in the future.
You are right. Since I became minister, my number one objective has been diversification. More than 70 per cent of our exports still go to our southern neighbour. I believe that this will always be the case, given the location and size of the American economy. However, Canadians increasingly understand that diversification leads to new opportunities. Our achievements in Europe are a great step.
Canada is the non-European country with the greatest access to the European market for services, goods and labour force mobility. It is important to look towards Asia and the Pacific. As you said, we can see that their population numbers are growing, and with them, the middle classes. This is why it was very important to position ourselves, as we did with the Pacific Alliance and in our discussions with Mercosur.
We were just talking about it. We had the opportunity to sign agreements that would open two large markets, Europe and Asia-Pacific. We now need to promote them. For most entrepreneurs, the natural reflex is to turn towards the United States. We need to adapt to new global realities while still preserving and modernizing what we have with the U.S.
In closing, we have the advantage of the first move in many of these markets. This comparative advantage is undeniable. You and I both know that entering new markets with the lowest tariffs gives us a significant advantage. We saw what happened with seafood, for example, and with regard to the free trade agreement with Europe. The fact that the tariffs fell close to zero gave Canada a significant comparative advantage. For the Japanese market, we need to have the same opportunity. Canada, as one of the countries that form North America with Mexico, has the advantage of being one of the first to benefit from lowered tariffs, not only for goods, but also for services.
Senator Massicotte: Congratulations and good luck!
Mr. Champagne: Thank you, Senator.
Senator Greene: Thank you very much for being here, minister, and also successfully negotiating the TPP. It is a remarkable and historic achievement. It will be wonderful for Canada for a long time to come.
My question has to do with trading relationships with the Republic of China, otherwise known as Taiwan. I was pleased to sponsor your government’s double taxation avoidance treaty in the Senate last fall. But I want to raise an issue with you regarding a topic I spoke about in the Senate more recently, namely, entering into negotiations with Taiwan for a foreign investment protection and promotion agreement — FIPPA. The Government of Taiwan is eager to negotiate such an agreement with Canada, and Canada has a number of similar agreements with other countries, including the People’s Republic of China, Hong Kong, the Philippines, Thailand, Vietnam and many others. Does the government intend to negotiate a FIPPA with Taiwan?
Mr. Champagne: Senator, thank you for that very important question. We have a broad-based agenda when it comes to opening markets. As you know, we’ve been pretty active in recent months, not only with concluding the CPTPP, which, as you would appreciate, has taken a lot of resources to get that to the finish line, but also launching exploratory discussions with the ASEAN countries. Also having exploratory discussions about a potential free-trade agreement with China and also India.
I would say our mind is open when it comes to the Asia-Pacific region. I’m aware of the issue that you are raising because it has been raised to me by representatives. What I can say is that we remain open-minded, but for the time being, I want to stress that we have had a lot to do in recent months to strengthen our relationship in the Asia-Pacific region. We still have a bit of work to do but I’m very aware of the request that you’re submitting. I’ve heard that from representatives.
Senator Cordy: Thank you very much, minister. It’s nice to have you before our committee and your enthusiasm is contagious. You certainly make a great salesperson for trade and investment in Canada, so thank you for that. As Senator Greene said, I think many people thought when the U.S. backed out of the TPP, it would be the end of the deal, so it’s nice to see how cooperation with other countries made it successful.
I’m going to follow up on Senator Bovey’s question about dairy farmers. I had a meeting with the Dairy Farmers of Nova Scotia yesterday, and they were very pleased with this government because of your policy on supply management. Then they saw what happened with eleventh hour deals for CETA and for CPTPP, and they’ve lost market share. After the first one, they lost market access comparable to what they do in Nova Scotia. After the second trade agreement, they’ve now lost market access comparable to Atlantic Canada. That’s significant for dairy farmers from a small province. They’re very much in favour of trade, by the way, despite this.
Their concern now is NAFTA negotiations and will dairy again at the eleventh hour become a trading door-opener, a football or a hockey puck, one way or the other that they will be hurt again? I know you gave good comments to Senator Bovey. How can I talk to the dairy farmers that I’ve met with many times over the years to give them a feeling of satisfaction that what’s done is done but they won’t be hurt again with the next trade agreement?
Mr. Champagne: I appreciate the question because we live the same reality. Like I said, the president of the Dairy Farmers of Canada lives about 10 minutes from my house. I have a large dairy farm section of my riding that is bigger than Belgium. I can imagine there are a number of them in my own riding. That’s why I wanted to meet with them immediately.
To be more specific to your question, the first time we sat with them was to really understand the impact. Now, like I said, with the United States not being part of the CPTPP, there are some questions about the quotas and the discussion was really about next steps.
What I did at the time we met with them — I think that should be a sign of a whole-of-government approach — was to make sure that not only did I have representatives from Agriculture Canada but the chief negotiator for the agricultural sector in Canada, which sits at the same table. I wanted to show that we were really open and transparent with our dairy farmers, because what they heard from me they also heard from the chief negotiator, who happens to sit at these tables when these discussions are happening.
For the time being, senator — I think there were representatives of Nova Scotia. I can’t remember because there were 10 or 15 representatives from pretty much every province. I can’t remember if there was specifically one for Nova Scotia. If they are concerned, I’m happy to meet with them again to continue the engagement. We have agreed with Minister MacAuley on next steps.
It may have come to their attention or maybe not yet. I met with the leadership of the Dairy Farmers of Canada and I was told by them yesterday that they are going on a cross-country tour to talk to their members. They may provide additional information. I think we’ll be happy to update them as we go with that.
Certainly, rest assured senator, I have the same concerns you have because those are my people as well. We wanted to be up front and transparent as to how we proceed, making sure we have the right people at the table, not just me as Minister of Trade — because you will appreciate my mandate covers a whole bunch of things — but that it was a whole-of-government approach with respect to their real concerns.
Senator Cordy: Thank you.
Senator Woo: Welcome back to the committee. I’m not actually a member of this committee, but the chair is very kind to recognize me. I’m an alumnus of this committee and I’m particularly interested in the topic that you are here to speak about.
Congratulations on the conclusion of CPTPP. I can imagine how challenging it is to conclude an agreement when we’re simultaneously negotiating or, as you say, exploring two other agreements that are intricately tied. It’s like playing three-dimensional chess. Solving one equation has implications for the other two as well, and I’m sensitive to how those effects play out. This gets to my question, and it goes back to the so-called second round of membership in CPTPP.
What is top of mind, of course, in the second round is not Taiwan and others or the U.K. even, which is kind of whimsical. What’s top of mind is the United States itself and whether they come back. I understand, strategically speaking, that we have mixed feelings of whether we want the U.S. back and the fact you have these suspensions may actually make it more difficult for them to come back because presumably those were the preferences given to the U.S. I’m making assumptions here; I don’t know if it’s true.
On the other hand, you mentioned the political importance of CPTPP and for that reason, we might in fact have a very strong preference for the U.S. to come back if for no other reason than to give them the chance to reintegrate and signal their commitment to multilateral trading and regional trading blocks and so on and so forth, not to mention the whole Asia-Pacific power shift.
Can you say something about whether there’s an accession clause or the rules of accession for new members, and what the thinking might be in your government about encouraging Americans to come back to the TPP?
Mr. Champagne: Senator, as you said, with the CPTPP, now that it’s taking life from the TPP, the world was looking down and now with the CPTPP being revived and negotiated, there is a sense of renewed optimism around it. You’re right to mention that many nations have expressed a desire to potentially join. Like you said, some have expressed it for a long time. I can think of Korea and others, the U.K.
It seems that the U.S. administration has made some remarks about potentially revisiting a decision with respect to that. You’re quite right that at this stage, like I said to the senator before, there has been little discussion among CPTPP members because achieving what we have achieved was already a significant step, keeping the unity, making sure that we would keep an agreement with high standards, that we would not defer to the lowest common denominator, that we would insist the gains we made on the progressive side would remain, that people would stick together. As you said, it has a lot of impact for the region.
I would say at this stage there has been very little discussion apart from some nations and some public remarks that have been made by some CPTPP countries with respect to their wish to see the U.S. re-engage. That’s what I’ve seen, but I can tell you at the ministerial level there has really been no discussion with respect to that. Certainly there’s an accession clause with respect to potential new members, which basically gives a veto to existing members as to who can join. As you would appreciate, the focus now is on getting to the finish line because clearly we have to cement what we have to achieve now.
Then there might be another round of discussions, but I can say to you very candidly that there has been no discussion so far about that, apart from public comments that have been made, which we can see in the press from all parts of the world expressing different wishes with respect to this agreement. The focus now has really been to try to cement what we’ve achieved.
Senator Woo: Just to clarify, the accession clause does not spell out a process for entry; it simply allows for any member to exercise their veto?
Mr. Champagne: What I can say, and I may ask our chief negotiator or deputy, if you want to get into further detail, is one thing that needs to be clear is that the suspension won’t be automatically lifted as countries return. At accession you need the agreement of all parties. That’s why I think ministers, and I believe rightly so, have focused on trying to, like you said, senator, or many of you have said, we have now said the text is finalized, let’s sign, let’s ratify and we will take it step by step. This has many implications for any countries that may want to join. So I think the discussion so far has been focused on that. Certainly there are provisions for that, but that would entail far more discussions among existing members.
I would say, senators, that’s why it was so important for Canada to be there. That was our way to shape the terms of trade in that part of the world. If Canada was not there, I don’t know but perhaps the text may look different today. For Canada to be there, is Canada helping shape the terms of the Asia-Pacific in the 21st century? By the accession clause and the terms of the agreement, we remain at the table as a key partner in one of the key regions of the world for the 21st century.
I think this is quite an achievement, because if you talk about the progressive elements and what Canada stood for, this has been respected in the agreement. By being at the table, as one of the first and the second-largest economy of the current CPTPP countries, it gives Canada quite a voice. We saw that if we push we can get a good deal for Canadians.
Senator Ataullahjan: Thank you, minister. First I want to compliment you on asking for a review of the helicopter deal with the Philippines. I thank you for that.
You say that the CPTPP is the best deal for Canada. How would you address the concerns raised by certain sectors? I’m specifically talking about the Toronto-based Automotive Parts Manufacturer’s Association who say this agreement moves Canada in the exact opposite direction of where the U.S. is headed, where the U.S. is asking for increased domestic content requirements and to keep Chinese parts out of North America. This deal reduces the requirements.
Mr. Champagne: Thank you, senator, for that question. It’s a very important question.
I think what we’ve achieved is a better deal for Canada. As you know, the negotiations took quite some time and I think what Canada has been able to achieve, if we compare the text of the TPP and the text of the CPTPP, I would refer you to an article of Jim Balsillie about the entrepreneurial innovators in our country which, through the suspension, we have achieved a far better outcome. We can talk about the cultural sector. We obviously talked about the auto sector and I’m quite happy to address that. As you can appreciate, I had a chance after the announcement to be in Hamilton, Burlington and Oakville having round tables. Again, I was at the heart of the auto sector manufacturing region of Canada.
What I would say, and I think our chief negotiator at NAFTA, Steve Verheul, has been very clear, CPTPP and NAFTA are separate tracks when it comes to the rules of origin. Clearly any parts manufacturer would want to meet the standard. Whatever is achieved in NAFTA will have to comply with the NAFTA rules of origin in order to be able to sell to the D3 manufacturers. One of the complaints that has always existed was basically that the Japanese market was closed to them; that through non-tariff barriers, mainly around safety standards, they were effectively not allowed to enter the Japanese market.
What we achieved with them, through a side letter, which we will make public as soon as we can, is the greatest market access that the Canadian auto industry has ever received with respect to the Japanese market. They got that through a side letter, and for the first time Japan has agreed, not for the claimant, should there be, to rely on the dispute resolution mechanism of the CPTPP, but having a separate one under the side letter specific for the auto sector and making sure for years to come or decades to come that we have a most favoured nation clause in it to make sure that should any other country in the world negotiate a better deal with Japan that Canadian manufacturers will be able to access that market.
That was one of the things that was of concern. The other thing is that obviously if you remove the United States from the TPP it’s very difficult to meet the rules of origin content just relying on Canadian and Mexican parts to be able to sell in other TPP countries without tariffs. That’s why we went out and negotiated side letters with Malaysia, and we’re about to finalize the one with Australia, to grant market access for Canadian cars in these markets, despite the fact that they could not meet the rules of origin content under the CPTPP rules, providing them market access.
I would go back to comments from senators. This is an industry that is evolving very quickly in terms of the content and in terms of the markets. One of the things we’ve been able to achieve is that they would have the greatest market access in the Japanese market today and what we have done — and I think you will see it when you see the side letter — is removing non-tariff trade barriers which have always been present and have basically prevented them from accessing the market. As you know, it was not the tariff that was the issue; it was actually all the safety standards and other types of regulations in Japan, which we have now cleared for Canadian manufacturers.
I appreciate this is not all they wanted. They would have wished for other concessions, but what I can tell them, and I’ve been very candid to the union and the parts manufacturers, is we stood up for them. The Prime Minister stood up for them, I stood up for them and we fought for them. I think they recognize we did so and were able to get the best possible deal under the circumstances for the auto sector.
The Chair: Originally the meeting was to be for one hour and we have gone over. Do you have time for a short question from my deputy chair, Senator Cools?
Mr. Champagne: Sure; definitely, senator.
Senator Cools: Actually, I am not asking a question. I wanted to thank you. I want to tell you I have a healthy and robust memory of big fights here in the Senate on the free-trade agreement and also on NAFTA. There’s a long history there of which I was a part.
The point of my intervention is to thank you and to say that I have been deeply touched by your energy and your enthusiasm for the work that you do. A man or woman must love their work if they will succeed in it, so I really want to impress upon you that you have impressed me with your direct control of these very challenging files. You clearly love your work and you thrive in its performance. I would say to you that Canada and Canadians are well represented by you and your colleagues, and I thank you again.
Mr. Champagne: Well, senator, I’m very humbled by your comments. I do it with passion.
I just want to reflect on the team that is with me — whether it’s Bruce, Kendal and our deputy — they have been fighting the fight for quite some time. You’re only as good as the team that is with you, and I must say, we are blessed to have some of the best in the industry. Whether it’s at the NAFTA table, at the TPP table or CETA, we are blessed as Canadians to have civil servants who stand up for us, respect our priorities and fight to the end to make sure we get a better deal. There’s no shortcut with that. There are no shortcuts when you do this internationally. I keep saying if you think it’s tough to negotiate with two other parties, imagine with 10 other parties, where everyone has their own interests.
Thank you for that, senator. We will reflect on that, senator, and I will pass on your good words to everyone on the team who has been working for many years in delivering that for Canadians. I thank you for your support to our outstanding team of negotiators and civil servants.
The Chair: I’m sure they’ll want those comments relayed about the time their assessments are coming forward; tangible results.
Mr. Champagne: They can use the record, right?
The Chair: I think they should. We did give you recommendations in the trade report. We are very pleased that you are supporting our directions and are working on them. I know that you’ve had difficulty in getting to this point as the previous minister did, it was whether we should be in or out of TPP. You had the job of saying, “Now that the U.S. is out, what do we do?” Thank you for coming and giving us this information. It’s extremely important. We hope this continues as a dialogue as we go to the ratification and the next steps.
Your job has been easy to this point. The hard part is the implementation strategy. I refer you to the fourth recommendation that says it would be helpful for Canadians if an implementation strategy was there. It is a way of engaging the public beyond the particular stakeholders to continue to reinforce the necessity of trade agreements for Canada.
I thank you for putting some emphasis on that. I assure you, your job is not done, but we are very supportive of your efforts to date and we look forward to the continuation of this dialogue.
If there are questions, put them to our clerk and then ask for written responses so that we do have a continuing dialogue.
Minister and all of the officials, thank you for being here and for the work you do. We will continue to follow your progress and give our advice. Hopefully we can continue this dialogue, not only with CPTPP, but with CETA perhaps NAFTA and all of the others.
Every sector in Canada has somewhere geographically of benefit to them. We need to weigh the consequences of all areas of Canada, all of the players in Canada because we have to go back to innovation, productivity, tax advantages, et cetera. So you are playing your piece and we are going to be looking to ensure that all of the other ministers are of the same mindset as you are.
Thank you for coming, on behalf of the committee.
Mr. Champagne: On behalf of the team, thank you for having us. You play a very important role. As we go on promotion, I think the Senate and this committee in particular can be allies to ensure all Canadians benefit from these agreements.
(The committee adjourned.)