THE STANDING SENATE COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE
OTTAWA, Thursday, April 13, 2017
The Standing Senate Committee on Foreign Affairs and International Trade, to which was referred Bill C-30, An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States and to provide for certain other measures, met this day at 10:30 a.m. to give consideration to the bill.
Senator A. Raynell Andreychuk (Chair) in the chair.
The Chair: Honourable senators, the Standing Senate Committee on Foreign Affairs and International Trade is 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.
I apologize both to the senators and to our witnesses for our delay. The previous committee did not vacate the room according to our schedule. Consequently, we could not set up for our video conference. I do apologize. I trust we will be efficient enough to get everyone's presentations and questions in. Such is life on the Hill. I apologize in that if we're slightly over the time, it may mean that we will move the other panel a bit also. We do want to get all of our panelists in today.
I am very pleased to welcome to the committee Pierre Marc Johnson, Chief Negotiator of the Government of Québec for the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and Counsel, Lavery de Billy. We also have Mr. Armand de Mestral, Professor emeritus, Jean Monnet Chair in the Law of International Economic Integration, McGill University, joining us by videoconference from Washington; and Jeremy de Beer, Full Professor, University of Ottawa - Faculty of Law; and Gus Van Harten, Associate Professor, Osgoode Hall Law School, York University. Welcome to the committee.
I will take you in the order that you are on the program. I will go to opening remarks, followed by questions. Mr. Johnson is our first witness.
Pierre Marc Johnson, Counsel, Lavery de Billy, as an individual: Thank you, chair, and senators around the table, especially those I know who are from Quebec. I will make my remarks in French and answer any questions in either of the two official languages.
Quebec wanted this agreement. The reason is that, for over 30 years, there has been broad political consensus that free trade is a good thing. I say “consensus” because unanimity doesn’t exist in democracy. However, even those who may oppose the agreement are ready to live with the result of the negotiations in general. At least, that’s the case for the elected officials. Second, Quebec is satisfied with the content of the negotiation with Europe.
I’ll briefly summarize the status of the situation concerning tariffs. The average tariff in Europe was twice as high as the Canadian tariff on goods. Second, Europe had very high tariffs on a certain number of products, and these tariffs will no longer exist. This was less true for Canada, except in the agricultural sector in terms of supply management, which survived the blanket application of this tariff elimination. Then, the rules of origin were relaxed. It’s obviously much easier for 28 European states that have 500 million people to produce just about any good than it is for 35 million Canadians to produce all Canadian goods on a territory such as ours, which doesn’t provide a certain number of products. Therefore, it was important to relax the rules of origin, meaning the inputs for goods. Some of these adjustments were made as a result of the negotiations.
Third, SMEs have faced a significant technical barrier when it comes to exporting to Europe. The barrier, which is proof of product certification, will now be changed. For a product to appear on the European market, it must not pose any environmental, health or safety issues. Canadian companies that were creating technical or technological products, or products in the construction and biomedical sector and in dozens of other sectors, needed to go to Europe to have the products validated based on European standards. These standards are sometimes different from Canadian standards for cultural, habitual or consensus reasons, or simply for protectionist reasons.
Our manufacturers can now go to a Canadian laboratory that will apply both the Canadian and European specifications when testing products to make sure the products don’t pose any environmental, health or safety risks. This was an essential aspect, and it comes on top of the tariff and the relaxation of the rules of origin.
Obviously, there are still issues related to other technical barriers to trade resulting from regulations. However, I think the establishment of a set of committees and Europe and Canada’s willingness to work together shows the only and best possible avenue under the circumstances, short of an alignment of all the regulations, which I certainly won’t see in my lifetime.
This agreement shows openness to government services and procurement. It goes far beyond an agreement on only goods, in terms of mobility in the business world or within a given company. Environment, sustainable development and labour committees have also been created. As is the case for science and technology, the committees will be places where Europe and Canada can work together. Quebec is happy about this.
Quebec is also happy to have been part of the negotiation. As a result of the openness of the chief negotiator and the Department of International Trade, not only did this presence and participation help clearly highlight the areas where the provinces need to change their legislation and the limits we’re imposing on these possibilities, but it also helped advance our interests period. This was very nice, since I can tell you our interests were heard.
Lastly, provincial participation allowed Canada to put forth an offer that was much richer than it would have been without the provinces’ participation when it comes to the aspects under their jurisdiction. I’m confirming that the Quebec government will implement this agreement as part of a legislative process that will first require a short debate in the National Assembly between now and June. The men and women elected to the National Assembly of Quebec will have the chance to speak briefly, and I’m sure the vast majority will express their support for the agreement. A number of legislative amendments will then be adopted. The amendments will enable us to ensure that our legislation complies with Quebec’s commitments in this agreement. Thank you, Madam Chair.
The Chair: We will now turn to Mr. de Mestral from Washington.
Armand de Mestral, Professor emeritus, Jean Monnet Chair in the Law of International Economic Integration, McGill University, as an individual: Thank you, Madam Chair. Like Pierre Marc Johnson, I’ll speak in French and I’ll answer questions in both official languages.
I have three quick comments. The first concerns the importance of CETA, the second concerns the importance of ratifying the agreement as soon as possible, and the third concerns the ways to follow up on the agreement.
I think, for the reasons mentioned by Mr. Johnson, this agreement is very important for Canada. This agreement opens Europe’s doors to Canadian trade even more significantly. It removes a certain number of barriers, and it grants us access to things that we couldn’t access before. So, it’s important for Canada.
I’m saying this as an observer of the approximately 600 free trade agreements that currently exist. I think, somewhat like NAFTA over 20 years ago, this agreement could serve as model for a number of other agreements that will be established around the world. I think this agreement has a new style, it includes new aspects and it covers new dimensions in a creative way. So, this agreement between Europe and Canada could really serve as a model for the future for many other states. I’ll give you an example. There have been criticisms in Canada and Europe regarding the resolution of investment disputes by private arbitrators. This agreement addresses these objections by making it possible for both parties to appoint an investment court that would have full authority to deal with this type of dispute. So, the agreement is important for Canada and is a model for the world.
Second, in my view, Canada must ratify the agreement urgently. For strictly political reasons, the European authorities have chosen to designate this agreement as a mixed agreement that requires not only the support of the European Union authorities who vote on the Council and in the Parliament, but the ratification of the 28 member states. There are still interests, in Belgium in particular, but also elsewhere in the European Union, that may delay the implementation of this agreement. I think the sooner the Senate finishes its study of the bill, the sooner the Canadian Parliament adopts the bill, and the sooner the provinces complete their study of the measures they must take, the better it will be. Canada should try to allow the European authorities to enter this agreement into force as soon as possible. I think it’s urgent.
Lastly, I don’t think this agreement should mark the end of the Canadian government’s work with its immediate partners, meaning Europe and the United States. They must now negotiate an Atlantic free trade agreement. Canada and the European Union have already laid the groundwork. The European Union and Mexico have had an agreement for over 20 years, and that agreement will be renewed soon. The United States and the European Union are currently negotiating the TPP, and Great Britain must find a new way to establish economic relationships with all its partners. Imagine the creation of a large market with the two parties, from both sides of the Atlantic. With this type of agreement, the parties on the North American and European sides could, in the future, face increasing completion from Asia. That’s why I’m suggesting that Canada shouldn’t stop after establishing this agreement with Europe. It should consider a new and broader approach. Thank you, Madam Chair.
The Chair: Thank you. I will now turn to our next witness, Mr. Jeremy de Beer.
Jeremy de Beer, Full Professor, University of Ottawa - Faculty of Law, as an individual: Good morning, honourable senators. My name is Jeremy de Beer. I'm a full professor at the University of Ottawa's faculty of law, but I'm here in my individual capacity today to testify based on my experience researching and writing about international trade, technology and environmental issues in general and about CETA specifically.
I have to begin by saying that I'm a strong supporter of international trade and, in particular, a supporter of CETA. I believe that, on the whole, it's good for Canada.
I hope that my support for CETA and my admiration for the people who got this done for Canada over a long negotiation process and in difficult circumstances at the last minute contextualizes and also sharpens my remarks that follow.
I have no problems with Bill C-30. It does exactly what it is supposed to do.
My concern is about Canada's strategy, or lack thereof, in respect of intellectual property, technology, innovation, and international trade. This committee's report last year touched on intellectual property, but the opportunity now exists to make the bold statements needed to ensure that we can offensively advance Canada's interests in future trade negotiations.
To start that process, we need to admit our past mistakes. Canada's failure to make innovation strategy a priority when these negotiations began around 2010 and 2011 put us entirely on defence. We were all placated by promises that the IP chapter was mostly or largely consistent with Canadian law. Now this committee is considering 50-plus pages of changes to the Patent Act and the Trade-marks Act, plus several more pages of consolidating or coordinating amendments and a 7-page schedule of 172 geographic indications that Canadians can no longer use to trade freely.
It's my duty today to warn you that the complexity of, for example, the new scheme for certificates of supplemental protection makes it almost certain that there are going to be unintended consequences and entirely certain that there will be many years of litigation over the interpretation and application of this scheme. So there are major changes to Canadian intellectual property.
Now, litigation also includes, as I wrote about in a special issue of the journal Legal Issues of Economic Integration based on our CETA research, constitutional litigation about whether some of these provisions impinge upon provincial jurisdiction.
It also includes more investor-state disputes, like the one Canada just defended against Eli Lilly over the principles of the common law and the sovereignty of the Canadian courts to invalidate useless patents. That Canada won that case should be a wake-up call for us about the dangers of this system. Weak cases will be brought, costing money and chilling our creativity to use the few regulatory flexibilities that we have retained. And CETA's dispute settlement procedures aren't good. They're just less bad than NAFTA and other agreements.
On the IP issues, Canada's negotiating team and the supporting officials from across government did very well not to give up much more, but they were handcuffed by the lack of a mandate to do things much differently. There was no offensive mandate on IP in CETA because there was no high-level strategy to know what to ask for.
IP experts, including myself, in this country are energized by the government's commitment in the 2017 budget to create an IP strategy within the year. We're willing to help and I hope this committee can convey that message. But it requires a complete reorientation in the way that we see and assess these kinds of international agreements going forward. These are much less about tariff-free trade than they are about global economic power structures, and our evaluation processes need to recognize that.
It also requires a firm commitment to make policy based on evidence and not rhetoric, and I'm pleased to see that departments including ISED are already commencing that process.
I've just published a review of methods and conclusions to make evidence-based intellectual property policy in the Journal of World Intellectual Property. I'm pleased to share that with this committee so you can see what tools are available to start that process.
I also endorse this committee's recommendation for greater transparency in trade negotiations. That echoes previous conclusions from my research, but I'll end with this: Consultations alone are not a substitute for forward-looking strategy. That's because today's most dominant lobby groups are not in the industries that Canada needs to nurture. The entrepreneurial companies that are most harmed by our stale international IP strategy can't participate because they don't yet exist, and they never will unless we create an international IP strategy that adopts fresh ideas to give Canadians a clear advantage on the global economic stage. I'd be pleased to elaborate on how to implement that strategy during questions.
The Chair: Thank you. We will now turn to Mr. Van Harten.
Gus Van Harten, Associate Professor, Osgoode Hall Law School, York University, as an individual: Thank you. I will be presenting in English, with apologies to my French-speaking colleagues.
The CETA has not been fully approved in Europe. I think there's probably quite a road to go before it would be fully approved. One of the elements not yet approved is the foreign investor protection mechanism, known as ISDS or ICS. This element is very controversial, and for good reason. I would like to explain briefly how profound a step this type of mechanism is.
Imagine that we were proposing the establishment of a new Supreme Court for Europe and Canada. The court would have the power to review virtually anything that our countries or regions did, at any level of government, whether in a legislative capacity, executive capacity or judicial capacity, meaning that even decisions of the Parliament of Canada approved by the Supreme Court of Canada may be challenged at this new body.
The new body would have the power to award potentially vast amounts of public funds to private actors. The awards would be enforceable against the country's assets abroad. There would be very limited or no possibility for review in any court. There would be no requirement for a claimant who is bringing a claim against a country to go through the country's courts first, where they are fair and independent and reasonably available. It would be by far the most powerful protections that exist in international law for any private actor.
This Supreme Court for the world, however, would not have judges on it. It would have private lawyers sitting as arbitrators or otherwise having a financial interest in the frequency of claims brought against countries.
The role of the court would be limited to the protection of property rights of foreigners only. This would solely be for the purpose of protecting property rights of foreign nationals. In effect, what that means is, because of the high cost of access, the property rights protected would be primarily those of very large companies and very wealthy individuals.
I suggest to you that is quite a profound decision to take, and that is just the decision that is being taken in the case of CETA if it were fully approved, including these ISDS or ICS elements.
I really would like to stress to this committee, please don't take this decision lightly. To me, it is Exhibit A in how trade agreements, under the rubric of “free trade is good” — which I agree with, but this is about much more than free trade — can rewrite the rules of the global economy to favour the wealthiest and most powerful economic actors at the expense of everyone else, in this case ordinary Canadians and ordinary Europeans.
By the way, Bill C-30 is approving the CETA on behalf of Canada, keeping in mind the CETA is not yet approved in Europe.
I have made a submission to the committee in a letter with some specific suggestions on how I think Bill C-30 could be modified to address some concerns flowing from what I've been saying.
What ultimately can be done about the situation so that we can allow access to international adjudication that's fair and independent and so on when there are sensitive disputes that really are not suited to being resolved in domestic courts in rare cases when that happens?
There should be four criteria, I suggest. First, it must be judicially independent. The ISDS, despite improvements in the ICS mechanism still proposed for CETA, is not fully judicially independent.
The second criterion: It should be procedurally fair, such that any parties whose rights or interests are affected by the outcome of the dispute have a right of standing in the proceedings. CETA looked like it might have addressed this issue back in the fall of 2015, when the European Commission proposed a mechanism to allow for third-party intervention, but that mechanism was not included in the CETA when it was revised a few months later. The CETA's mechanism is not procedurally fair.
The third criterion is that the mechanism should be balanced in the allocation of rights and responsibilities. If the thought process is that foreign investors cannot rely on domestic legal systems, likewise the victim of a foreign investor should not be expected to rely on a domestic legal system. Foreign investor rights and protections should also come with foreign investor responsibilities that are enforceable through the same process. CETA does not do this.
The fourth criterion would be, in my view, respect for domestic institutions, particularly domestic courts. There's a straightforward way to address this: by including a duty to exhaust local remedies where reasonably available. There should be little doubt that, on a systematic basis, Canada and Europe provide reasonably available domestic remedies that are fairer and more independent than the ISDS or ICS mechanism, but that duty has not been included in the CETA. That's quite an exceptional situation in international law.
I think it's good news, then, that the Europeans have objected to this controversial element of CETA. It is not currently approved in Europe. It looks like there are many steps yet to go, and I would suggest only to this committee to please perhaps consider making some kind of statement of concern that this element in particular is not only controversial but quite profound in its potential consequences for democracy, the rule of law and sovereignty, and I suggest that very humbly to you.
Thank you very much for this opportunity.
The Chair: Thank you. I have a very long list, so I'm going to appeal to senators to put short questions and perhaps shortened answers so we can get everyone in then.
Senator Dawson: I have a quick question for Mr. de Mestral. Mr. de Mestral, you said the agreement must be ratified urgently. Can you define urgently? Is it weeks? Months? The notion of urgency can be interpreted in different ways.
Mr. de Beer, you mentioned the unintended consequences. Could you give examples? If you mentioned it, you must have some idea of what it could be, and it was not defined in your presentation.
Mr. Johnson, when you appeared last year, we asked you a question concerning the comparison of the agreements. You had a somewhat pessimistic attitude regarding the Trans-Pacific Partnership. You were probably right. It’s a theoretical issue that we raised last year.
In light of the TPP’s failure, where should Canada focus its efforts, since there won’t be any agreement on the Pacific side? Last year, we asked you how these agreements could be compared. However, now that no more comparisons can be made, how can we obtain the maximum benefit from the agreement with Europe?
Mr. de Mestral: We’re talking about a ratification that will take place around July 1. In particular, given all the difficulties that resulted in the decision to adopt the agreement only provisionally, I’m suggesting that, since the Europeans took all the necessary steps for the agreement to enter into force provisionally, the Canadians should also respond as soon as possible. So, if the agreement could be ratified on July 1, I think it would be a good thing for Canada.
Mr. de Beer: The consequences of the complex 50-plus pages of provisions amending the Patent Act and Trade-marks Act are inherently unpredictable, and that's one of the concerns. I can't anticipate all of the ways in which parties will argue that these provisions ought to apply in their industries, and it's difficult to know what will happen in advance.
My broader point is that when we're told not to be concerned because there are not major changes to Canada's existing approach to intellectual property, that's simply not true, and we need to be wary of those kinds of claims in the future, because we really don't know what impact these will have.
Mr. Johnson: Regarding the TPP, I want to share a personal opinion that doesn’t necessarily reflect the Quebec government’s opinion. I think, by deciding to put an end to the TPP negotiation and the ratification possibility, President Donald Trump has dropped the free-trade flag, as we see it in Canada and the United States, south of the China Sea. We’re facing the possibility of a set of trade rules not applying to China. We want these rules and we’re constantly calling for them, like the Americans. In that sense, I would say it’s a missed opportunity.
There are domestic consequences for Canada. I was very aware of the fact that our colleagues, in particular in British Columbia and Alberta, were eager for us to finish with the European negotiation so they could focus on the Pacific issue. The market is huge on the Pacific side, and I can understand their disappointment. This means, in practice, the provincial governments and the Canadian manufacturing industries must invest a great deal in promoting exports to Europe. In the case of Quebec, this market has amounted to an increase of 5 per cent annually for over 10 years. I think there are opportunities for Quebec, and I’m sure it’s the same for many other provinces. A great deal of resources must be invested. I’m sure the Canadian government had set aside some resources for Asia. It would be a good idea to shift some of these resources toward our work on the agreement with Europe.
Senator Woo: Thank you, witnesses. Two questions, quick ones, the first to Mr. Johnson. Thank you for your testimony.
It's on the very small liberalization of the dairy sector, particularly the increase in extra quota of 17,700 tonnes. Do you have perhaps a personal opinion on the way in which this additional allocation should be divvied up in the industry, with a view to consumers enjoying lower prices for specialty cheeses from Europe?
Mr. Johnson: Strategically, it was beef or cheese. Canada has the capacity now to export some 50,000 tonnes of beef, also 75,000 tonnes of pork to Europe, with various conditions. There won't be any GMO or other concerns under European regulation because it will have to respect European regulation. Canada granted a doubling of the market share for Europe, if you look at the market as it is today, which is 3.25, and it's going to go to 6.5.
If you look at what the TPP provided for, it was an additional 3.5. It would have been a total of 10 per cent of the market, which is open to the rest of the world in case of fine cheeses, which would have meant the protection of the system that we have, which is the supply management system.
The reality now is that of compensation. In the case of the European concessions, the federal government has announced some 300-odd million in that field. The Quebec government believes it should be more. Second, it's extraordinarily concentrated on the idea that since a vast majority of so-called fine cheeses are made by the producers of Quebec, the allocation of these compensating resources should take that into account.
Finally, there's also the allocation of the importing quotas. If you're a cheesemaker in Europe, you don't decide to export your cheese. You need a Canadian who will say, “I'm going to import your cheese.” That choice is made by whom? It's made by organizations that are themselves, in many cases, cooperatives of milk production and cheese-producing outfits. So there's an element of the compensation which goes there. Why? Because it means that a given organization will import so many tonnes of cheeses from Europe. They will buy it at $20 a kilo and can sell it back at $43 if it decides to adopt a price which is that of our system. But in other cases, it will sell it at $23 a kilo instead of $43 because it will be in competition with another Canadian colleague who makes that kind of cheese, so it will offer the European cheese for a lower price.
In practice, I think the supply management system has proven that quality cheeses can reach consumers and that governments don't have to subsidize the milk sector. It's consumers who do it. That's the basic difference.
At a cocktail at the very beginning of the negotiation, the European negotiator told me, “Mr. Johnson, you're going to put on the table, I'm sure, the supply management system for cheeses in Canada.” I said, “We will, indeed, the day you promise me that you will not subsidize agriculture anymore in Europe.” That was the end of that.
Senator Woo: Thank you, Mr. Johnson. I calculated that $350 million in compensation works out to about $20 per kilogram of fine cheeses on top of the price of fine cheeses; and if in fact fine cheeses are imported by the way of the producers themselves, it strikes me we should not expect any reduction in the price of fine cheeses in Canada coming from Europe. Is that your assessment as well?
Mr. Johnson: There is in certain cases, depending on who is the importer. If the importer, let's say, doesn't make many hard cheeses, which are fine cheeses, he will put on the market the cheeses he will import from Europe at a lower price than those who make hard cheeses here in Canada, and the other way around — which is why, if you go to the Atwater Market in Montreal or some others in Toronto I know, you will find a variety of prices, although only for 6.5 per cent now, on a five-year basis of the market.
Senator Woo: Quickly to finish on this topic: The other channel of importation of fine cheeses from Europe would be the retailers directly as opposed to the producers of cheese, and that would be one option for some divvying up of the 17,700 tonnes of quota; is that right?
Mr. Johnson: I know the retailers would like that status. I'm not sure the Canadian government will be ready to grant it to them, because it's a way for compensating in opening up the system.
Senator Woo: Mr. de Beer, I'm really interested in your ideas on evidence-based decision-making for IP. Please share with us your article in the Journal of World Intellectual Property. Very quickly, give us some of the key metrics for evidence-based decision-making for IP policy in the pharmaceutical sector.
Mr. de Beer: One of the things we need to stop doing is playing the statistical horse race where we're constantly chasing a higher ranking, which is a result of measuring how many intellectual property outputs we currently produce and we need to radically rethink the way in which making intellectual property policy. I will give you a couple of examples.
One of the things we need to do is more actively promote flexibilities in international IP law and implement those into domestic law, and we need systems to measure the effectiveness of that.
We could explicitly support negotiations for a new agreement being negotiated right now in Geneva on a treaty to economically empower Aboriginal peoples by valuing their traditional knowledge. That's something we can do right now.
I think we need to confront some of the gender-based international norms and power structures, gender-biased international norms and power structures in science and technology. We need to use new tools, like patent pools and open and collaborative innovation strategies. The difficulty is the existing metrics that we use to assess IP policy, and even to assess the impacts of these international trade agreements, are not suited to those new strategies. So we continue to rely on these outdated approaches to assessing the impact of the policies when they don't reflect the types of strategies that we need in our own domestic interest.
Senator Woo: Please send us your article.
Mr. de Beer: I will.
Senator Gold: Thank you very much.
I’m pleased to have you here. In a previous life, I was a professor at Osgoode Hall. Along with Pierre Marc, I taught Ontario students the Quebec perspective of constitutional law.
I also want to acknowledge my friend and colleague from McGill, Armand de Mestral. I taught with him as well.
My question is for Professor de Mestral. I wonder if you would comment on Professor Van Harten's critique of the dispute settlement provisions in CETA.
There is a current system in place around the world that has been much discussed and criticized, and significant changes were effected to CETA with regard to the constitution of the tribunal and the rights of governments to regulate in the public interest. I wonder if you have some comments, and of course we'll give you a right of reply, only to be fair.
Mr. de Mestral: Thank you very much. I might say I'm in Washington to launch a book that deals with investor-state arbitration between developed democracies. Quite clearly, as Professor Van Harten's writings evidence very eloquently, there's some concern in developed democracies about the availability of investor-state arbitration. I think there are answers to this, and I think part of my answer to my friend Professor Van Harten is that the best could be the enemy of the good.
There are about 3,000 of these agreements out there. Many of them have investor-state arbitration. Most of them are made between developed and developing, capital exporting and capital importing, and arguably Canadian businesses doing business in countries like China need the protection that they would have potentially from investor-state arbitration.
Looking particularly at CETA, a great deal has been done to answer many of the criticisms. The procedural rules have been greatly changed to make them much more open. The tribunal system is one where the governments, not the parties, now name the judges. The judges will be chosen, again, not by the parties but by the Chief Justice. So there is a very considerable measure of judicial independence that will be exercised there. If you read the fine print in CETA, there's a big attempt to redefine and clarify what is meant by things like indirect expropriation or fair and equitable treatment. I think a lot is done in the CETA to answer the concerns that have been raised, particularly in developed democracies.
Finally, with respect to the question that all this could be left to domestic courts, I fear that is a rather debatable premise. Even in Canada, if you look at the 40 NAFTA cases, in only four of them would there have been a clear remedy before domestic courts on claims similar to those made in the NAFTA claims.
The bigger concern is, well, what happens in the courts or places where courts virtually don't exist in many countries around the world? In Canada and Europe, where we could probably get by pretty well without investor-state arbitration, if we abandon it, how do we turn to the rest of the world and say, “We don't need it, but, sorry, we're going to stick it to you still”? How do we justify and explain that in literally thousands of cases? That's my concern.
Senator Marwah: Thank you to all of you for your great presentations. They're very helpful.
I have a question for Mr. Van Harten. You mentioned in your letter that you wrote to us that you are in favour of an amendment that would guarantee reciprocity between when we implement our agreement and they implement theirs. But should we not recognize the fact that they do have 28 parliaments to go through, and they do have a process, and we've got a fair degree of assurance from the European Commission, who was here, saying they anticipate no trouble in getting it approved by the various parliaments? If we now say we have reciprocity, do we not begin the free trade agreement on a position of mistrust, that we don't really believe you and we must have it simultaneously? Because the benefits start the minute we write a file, the minute we pass this. So why would we wait?
Mr. Van Harten: On the question, we have to think about why CETA requires so many levels of approval in Europe. It's because it goes well beyond other trade agreements in the topics it covers. The European Commission, with all due respect, is not in a position to speak for the parliaments of all of the member states and all of the regions. I don't think it conveys mistrust but, rather, an understandable negotiating position that one would approve, to the extent the European Union and its member states have approved. So if one is approving implementation of an agreement, you only approve to the extent that your negotiating partner has also approved or is in a position to approve.
What I think is a little bit problematic is to assume now that this is just on the brink of approval in Europe. We've actually had lots of signing ceremonies for CETA already, and I think that's overly optimistic.
Senator Marwah: Isn't the proof of the pudding that they're willing to provisionally implement this the next day? That's proof that they really are serious about implementing it to the next level. Isn't it's semantics after that? They would not be implementing it if they hadn't a fair degree of assurance from their respective parliaments that this is a go.
I think, Mr. Johnson, you had a response as well. Let's hear Mr. Van Harten first and then I'd love to hear your views.
Mr. Van Harten: My point would be to provisionally approve in the manner they're doing it, and if it takes a two years for the investment element to be approved, or 10 years, there are trade agreements the European Union has that have been provisionally applied for many years. It looks like the question of the compatibility of the investment chapter with European Union law will be referred to the European Court of Justice. That will be something that will cause delays over there. The European Commission can't control what the European Court of Justice will do.
This is an outstanding issue in Europe. If the Government of Canada wants to approve the whole thing on the hope that all this will go through in Europe, then that's fine. It doesn't seem like a good bargaining approach to me; that's all.
Mr. Johnson: At this point, the European Commission has signed the agreement, the European Parliament has ratified the agreement, and the European Council, which is the regrouping of the heads of states or ministers of trade, has decided that once in Canada it's ratified, it will implement the CETA, except the chapter on investor-state and except the provision concerning the necessities for countries to provide themselves of penal sanctions in case of using camcorders in cinemas. The rest of the agreement, the whole thing, will be implemented.
In the case of Korea, it was implemented provisionally and it took five years to get the ratifications, which made of it a final treaty which falls then under a series of international rules. Meanwhile, it means that there's voluntary implementation by Canada and Europe. And I don't see any problem with that except that which Armand de Mestral mentioned. We're in a hurry here because Europeans have already accepted they would implement the treaty provisionally once we agree with them on the date.
Senator Marwah: I haveone other question for Mr. de Beer.
You have indicated some concerns on IP and innovation, which is really important because that to a large extent represents our future, and hence the provision that we need to put in place to protect ourselves. Whether you call it protection or taking full advantage, it doesn't matter.
Given the fact you have some concerns that we started off slow and we didn't put these things on the table at the outset, do you have any remedies that we should start thinking about that we should put into regulations since we can't the change the bill? What can we do in regulations, besides the outdated methods of statistical comparison you note?
Mr. de Beer: There are a number of areas where there is an opportunity to enact regulations to deal with outstanding issues in existing law that have little or nothing to do with CETA that we could be doing. For example, there is the area of provisions around copyright law. Right now there is a provision in the act that says notices can be sent by rights holders threatening allegations of infringement, and that leads to a potential problem of trolling, to send vague and baseless letters. We see this in patents but it's happening in copyrights, and it may also happen in trademarks based on recent amendments to bring Canada into line to prepare to implement CETA. There is a regulatory process there that can be considered to put limits on the types of notices that are enacted. We can create regulations to provide flexibilities to allow Canadians to innovate around technological protection measures and digital locks. That's another example.
There are a number of areas where the regulatory power already exists, but we don't have the overall strategy to decide how we're going to use those regulatory powers because we're stuck at the banal statement that intellectual property is really important for Canadian businesses and entrepreneurship. We have the understanding but it hasn't trickled up to the political level yet, and that's what we really need to do urgently.
Senator Cordy: Mr. de Beer, you said there are 50 changes to the Patent Act in the agreement, and you also said the dispute resolution within CETA is very weak. What effect will this have on Canada? Will this leave Canada wide occupy to expensive and very long hearings related to the dispute mechanism?
Mr. de Beer: Yes, both expensive and long domestic litigation over this new system of certificates of supplemental protection and, quite possibly, more international litigation under the dispute settlement provision.
There is one point I'd like to clarify. I said it was bad as opposed to weak, and that's quite an important issue because we hear this language about strong intellectual property, weak intellectual property. Frankly, that's not helpful language. We need a much more nuanced understanding of what that is. The same applies to the ISDS mechanisms. It's not weak; in fact, as Professor Van Harten said, it's extraordinarily strong, but that's precisely why it's dangerous.
Senator Cordy: That's a good clarification, thank you.
Senator Pratte: Mr. Van Harten, I have two rapid points: First, I understand that you obviously find the provisions of the agreement on investor-state dispute settlement unsatisfactory, but I would note and would invite comments on the fact that you do find, I have read, that CETA's revisions of the ISDS are significant and positive. My understanding is that you do find they are better than current agreements that exist.
You did talk about the fact that these ISDS provisions would constitute a loss of sovereignty. Bill C-30 at present says we would approve the agreement by adopting Bill C-30, and you suggest that we amend by adding that the agreement is approved to the extent it has been approved by the European Union and the European member states. In my view, that would be an abdication of sovereignty because we would approve the agreement only if the European Parliament approves it. Now Canada either approves the agreement or it doesn't approve. Our approval should not be conditional to the approval or the decisions of the Europeans or any other country.
Mr. Van Harten: I agree the ICS is less bad, but the problem is on judicial independence in particular. It has problematic loopholes. I will give one example:
It does not prohibit the members of the ICS roster or the investment tribunal roster from working on the side as arbitrators. We know in ISDS there are fully secret ISDS cases under other treaties. That means that the parties are not in a position to verify self-disclosure by the roster members on whether or not they are working on the side as arbitrators, where they may be paid by whoever potentially quite significant sums that would compromise perceptions of independence arising from the roster membership. There are a lot of devils in the details like that, loopholes that to me are relevant, for example, to Professor de Mestral's endorsement of ISDS or ICS, as much as I very much respect having discussed with him this topic for a number of years.
As for the concern about sovereignty, I take your point. I was trying to limit what I saw as a risky strategy of approving something here. On creative interpretations, you may be approving a mechanism of foreign investor claims against one party to the agreement where the other party has declined to assume that obligation. I was trying to protect against that out of a deep concern for Canadian sovereignty when it is subject to review by a tribunal of three lawyers, roster members not operating under a fully judicial process.
By the way, none of this touches on the other three criteria: procedural fairness, balance and respect for domestic courts. Where domestic courts are reasonably available, it's not an outrageous thing to expect a foreign investor to resort to them. I know I am responding to Professor de Mestral here, but if we're worried about countries that don't have reliable domestic courts, it shouldn't be that difficult for a foreign investor to show that it shouldn't be expected to resort to remedies in that country because they're not reasonably available.
I hope that helps to answer your question, and I very much appreciate the question.
Senator Cools: I would like to thank the witnesses for what I consider to be very excellent testimony.
Mr. Johnson, it's lovely to see you again. I had the pleasure of hearing you in a Senate committee many years ago, when both you and I were a lot younger. It's a pleasure to have you here. I thank you all.
Chair, as I was listening to the testimony, I thought that there is a lot here that we should take seriously and study in a thoughtful way, but I am reminded of many years ago — and I have been in the Senate for 33 years — around the time of the NAFTA agreement that a Senate committee undertook to continue to study. I think the reference was something to do with the implementation of the NAFTA agreement. I would like to propose to our committee and to you, Madam Chair, that perhaps we should look at doing such a task, where we maintain and sustain for quite some time the committee's interest and attention to the implementation of this extremely large, I think, and, I would say, important initiative. But, at the same time, I think many of us have very serious questions that are not easily answered, and I think we should make it our business to discuss this proposition.
The Chair: Senator Cools, that's why we undertook the trade study. It goes right to the heart of your question, and we have already put on the record that we will continue to monitor. We have signalled implementation being the key, so you're right in with what the committee said.
I want to thank all of the witnesses. We regret that we started a little late, so we did compress it, but you've handled it admirably. You put the key points on the table that we needed to hear. If we need any more information, we will follow up with you. If there are any other comments you wish to make to the committee, in any way, in reflection, please drop us a line, as they say, file a submission. We very much appreciate your experience and expertise. Thank you for coming before the committee today.
Turning now to the second panel, we regret that we are starting a little late. We had technical difficulties in setting up for the previous panel, which has delayed this panel, with the result that we'll all have to be very efficient. Perhaps, if we can't get all of the comments or questions that we need, we can have submissions and questions put forward for another day. We want to be sure we get the information that you wish to put before us and the questions answered.
I'm very pleased, now, to start this panel. We have, from the Canadian Labour Congress, Ms. Angella MacEwen, Senior Economist, Social and Economic Policy Department; from the International Transport Workers' Federation, Mr. Peter Lahay, National Coordinator; and Mr. Rob Ashton, President, International Longshore and Warehouse Union; and, from Unifor, Mr. Jerry Dias, National President, and Mr. Angelo DiCaro, National Representative; and from the Seafarers' International Union of Canada, Mr. James Given, President.
I understand there will be one presenter per organization, and I'm going to turn to them in the order that I have them here, unless you've decided otherwise. If not, I will just take them in that order. Ms. MacEwen, your opening statement please.
Angella MacEwen, Senior Economist, Social and Economic Policy Department, Canadian Labour Congress: Hello. Thank you very much for having me here today. I'm here on behalf of the 3.3 million members the Canadian Labour Congress, and we want to thank you for to opportunity to present our views on Bill C-30. We bring together national and international unions, along with provincial and territorial federations of labour, in all occupations, in all parts of Canada.
I want to start by saying that the labour movement is keenly aware that trade is and always has been an important feature of the Canadian economy. We understand that all governments have an interest in fostering open trade and fair trade. I want to tell you a little bit about why we think CETA is unfair and then what we would be looking for in a fair deal.
The first thing that we think is unfair in CETA is that it puts restrictions on local governments, and this is despite the fact that more than 50 communities, including Toronto, Victoria, Baie-Comeau, Sackville, Hamilton and Red Deer, have already sent a clear message to the federal and provincial governments that they wanted to maintain their buy local and other public spending priorities and that they should be excluded from the CETA deal. Local governments must maintain the right to attach social, economic and environmental conditions to public procurement. As it stands, CETA calls for unconditional access at all levels of government, rather than simply non-discriminatory or what's called “national treatment.” This deal goes beyond national treatment.
Pharmaceutical patents: I'm sure you've heard from others that one of the biggest concerns with CETA is the impact on Canada's health care system. On a per capita basis, Canadian drug costs are already among the highest in the world, only exceeded by the United States, and are among the fastest rising among comparable nations. Bill C-30 devotes 30 pages of amendments to the Patent Act, and these amendments further exacerbate the rise in costs. Analysis conducted by Professor Marc-André Gagnon and Dr. Joel Lexchin estimate that CETA's provisions will increase Canadian drug costs by between 6.2 per cent and 12.9 per cent, starting in 2023.
The previous federal government had committed to compensating provinces for this increase in cost, but that simply means that the federal government will ask Canadians to pay pharmaceutical companies through higher taxes or cuts to services elsewhere. It also doesn't take into account that some of this increased cost will fall directly on low-income workers who don't have drug plans. We know that the cost of pharmaceuticals is actually a barrier to people going to the doctor in the first place; if they think they can't afford the drugs, they just won't go. It ends up costing the health care system more in acute care costs when they eventually do go to the hospital.
The legislation on pharmaceuticals that is found in Bill C-30 is a good example of what is wrong with the outdated approach to trade being pursued through CETA. The increased competition from trade is supposed to lower prices for consumers, not increase them. I want to note that these changes to CETA will only affect drug costs in Canada and not the EU. As well, many EU nations already regulate prices in order to maintain affordability. We are told that nothing in CETA prevents Canada from doing something like that, but we see no indication that the federal government actually wants to do that.
Finally, what does the labour movement want from trade? First, we want unions and civil society groups to be consulted before, during and after negotiations. These cannot be token discussions to check a box but real conversations where negotiating positions are discussed and concerns are taken seriously.
Second, we need iron-clad protections for public services. One of the most important parts of the social safety net is universal public services, such as health care, education and clean water.
Third, we need agreements to give the same weight to corporate responsibilities as they do to corporate rights. Globalization can weaken the social contract where corporations are themselves far removed from the environmental and human costs of their actions. Therefore, agreements that protect their investment rights need to also enforce their responsibilities to their workers and the environment they operate in. This is only fair to corporations that are already acting responsibly.
Finally, we need to identify and compensate those workers, corporations and communities that will lose out from the agreement. Economists such as Stiglitz, Piketty and Dani Rodrik have warned about the inequality that can arise from trade if we don't do these four things.
Thank you very much.
The Chair: Thank you. I turn now to the International Transport Workers' Federation, but before I do, we were advised that Mr. Ashton was going to be here. I was just testing the group — no one has corrected me — but it's Mr. Terry Engler who is here. He is the President of the Local 400 Marine Sector Seafarers' International Union of Canada, ILWU. Now we have that corrected for the record.
Mr. Lahay, please go ahead.
Peter Lahay, National Coordinator, International Transport Workers' Federation: Yes, unfortunately Mr. Ashton flew all the way out to Ottawa, but he had to go home. His mother is gravely ill, so we wish our brother and his family well.
The Chair: As do we.
Mr. Lahay: Thank you.
I will try to be extremely brief. Part of the reason I have come along on this delegation is because for over 20 years, I have been representing foreign seafarers on flag-of-convenience and international trading vessels. I have had first-hand experience in the kind of life they lead on board, the struggles they have and the salaries and things they earn.
There has been a lot of talk before this committee about this wage, $1.26. I was the person who calculated that $1.26. It came off of an employment contract of a seafarer who was serving on the European Union flag vessel, a Cyprus flag vessel. That contract was taken off the vessel by my colleague Vince Giannopoulos from the Seafarers' International Union of Canada and the ITF out of Montreal.
I prepared a handout. If it's been distributed, you can follow along. It's just two pages. It has a picture of a ship on it. Then there is a wage scale that goes along with that. That ship is actually a real ship that was inspected by ITF inspectors last week in Europe. It's a German-owned mid-sized container vessel called the Venetia. She's Portugal-flagged, German-owned. The Portugal flag is actually Madeira Islands, a nice place to have a holiday or a tax holiday.
Those are the kinds of vessels we've been talking about that will be coming into Canada under the provisions of CETA. This wage scale is actually taken from the vessel. If you look at the top, you will see that the captain will earn $13.52 an hour; and a chief engineer, a position that would take probably a Canadian seafarer eight or ten years to attain, will earn $12.62 under this collective agreement. The people that Mr. Engler would represent — an able seaman, an oiler, an ordinary seaman — it's $3.22 an hour.
You can see in the final column their total wages. In order to earn those gross wages, the seafarers have to work on that vessel approximately 300 hours per month to attain that. They work on that ship for nine months a year, sometimes longer; sometimes they don't get off for 12 months.
As far as we're concerned, and my experience and all of our collective experience around the world, seafarers have been identified as among the most marginalized and isolated workers in the world. That was deemed by the International Labour Organization.
We think the government has a responsibility for a preponderance of caution when the implementation of CETA starts. We know that there have been some positions taken that call for enforcement. I want to speak about that for a moment. I probably work with Transport Canada marine safety more than anyone else in this country, at the highest levels in Ottawa and the marine inspector level in Canada's ports. I can tell you that they're overmatched by the number of ships. They're overmatched, undermanned and not qualified to be enforcing wage rates and wage entitlements. What I said earlier about being exploited workers, that's what they are. Seafarers won't complain, by and large, even if they are being exploited.
I'm going to close it off and pass it to my colleague. If there are any further questions on the life of seafarers and what we expect to see as this agreement takes life, I will be happy to answer those questions. Thank you.
The Chair: We're now turning to Jerry Dias of Unifor.
Jerry Dias, National President, Unifor: Good morning. I'm the National President of Unifor, and with me is Angelo DiCaro, National Representative and is our union's lead researcher on trade issues.
We represent over 310,000 members in 20 of the largest economic sectors in the country. We understand the importance of trade. I will argue between 85 and 90 per cent of all goods that our members manufacture are exported, so we understand the importance of trade. This argument that somehow the labour movement doesn't get it — that we're Neanderthals who don't get the importance of trade — let's not go there, because we understand better than anybody, especially as it relates to our members' job security.
The mantra for Canada for so long seems to be “a bad deal is better than no deal.” If you look at the numbers, historically we can't bargain ourselves out of a wet paper bag. We export our raw materials and natural resources and buy back finished products, and we seem to be quite comfortable with that, by the way. I just don't understand, philosophically, that if our preoccupation is about putting young people to work, how we will allow over 500,000 manufacturing jobs to leave the country.
Let's look at the numbers. For countries that we do not have a free trade agreement with, export growth for Canada is 6.8 per cent in the last 15 years. Imports to Canada are 4.7 per cent. Those are nations we don't have an agreement with. To show you our “expertise,” in areas where we have a free trade agreement with other countries, our growth in 15 years is 1.2 per cent, and imports to Canada 2.4 per cent. Korea, our latest tremendous victory, since January 2015: Korea's imports to Canada, up 47 per cent; Canada to Korea, up only half of 1 per cent. In the auto parts sector: Canada to Korea, down 13 per cent in a year and a half; from Korea to Canada, up 40 per cent. I can keep going. EU: our deficit right now in Ottawa, $7.6 billion a year; Germany is $4.4 billion.
We're here today to discuss CETA, perhaps the most comprehensive and contentious trade agreement ever negotiated by Canada. Unifor has been a long-standing critic of CETA. We followed its negotiations from the sidelines since talks began in 2009. Having never been invited to participate in discussions and never been consulted, we spent a lot of time piecing together scraps of information about the deal from leaked text and anonymous quotes.
What we found was troubling: lopsided trade imbalances that could cost us even more jobs, increased threats to our public services, patent rule changes that would increase drug prices — and drug prices are incredibly important to Canadians and important to us who bargain on behalf of our members because the escalating drug costs in our agreements further disadvantage us from an overall competitive point of view — restrictions on how governments purchase goods and services, a widening of import quotas impacting our dairy industry, special dispute settlement provisions only available to private investors.
A lot can be said about these items individually, and this is just a short list, but what I find particularly troubling is that we are here today discussing changes to our laws that would implement CETA. Frankly, it is not clear what exactly the CETA is or how it will benefit Canada. In fact, there has been no proper public consultation held to discuss the final CETA text.
The Standing Committee on International Trade held 19 hearings between November 2013 and June 2014, inviting witnesses to comment on an agreement in principle negotiated by the former Harper government.
After the full text was released in September 2014, CETA underwent a major transformation. The controversial investor-state dispute settlement system was revised in the winter of 2016. Although trade experts believe the new model didn't differ much from its original form, no public discussions were held in the so-called investment court system.
Prior to signing the deal, Canada and the European Commission developed an interpretive declaration in response to public protests, including in Europe, again never subject to parliamentary scrutiny.
Lastly and perhaps most significantly, Britain, Canada's largest trading partner in the EU, voted to leave the union. The U.K. is the largest export market for Canadian goods, representing almost half of all exports to Europe, and they are no longer a part of the CETA.
Despite all of these fundamental changes, the federal government has taken no further assessment of the deal, no reassessment if and how it will benefit our economy, no assessment of risk to Canadians, no independent assessment of how it will create jobs and prosperity. In fact, the most recent study of CETA found that the deal would likely increase income inequality and lead to tens of thousands of job losses within its first seven years. Rather than discuss it, we are here figuring out how to best implement the deal. It doesn't make a lot sense to me. At a time when trade has become a lightning rod for public unrest, the federal government's approach to CETA fully disappoints.
CETA consultation has not lived up to the government's own high standard of public engagement as conducted for the TPP. In fact, the CETA doesn't live up to this chamber's own standards, outlined earlier this year, for the development of strategic, inclusive and effective trade accords. CETA is a deeply flawed agreement. It may be an ambitious gold standard agreement, but measured to the standards of private investors and profit seekers, not working Canadians.
I urge this committee to reject the implementation of CETA. At the very least, I recommend the House of Commons undertake a proper consultative review of the CETA's final text, one that must include an analysis of investor-state dispute reforms, the joint and interpretative instrument, and the impact of Brexit.
I very much appreciate having the opportunity to speak with you and look forward to your questions.
The Chair: Thank you, Mr. Dias. We'll now turn to our final witness, Mr. Given, from Seafarers' International Union.
James Given, President, Seafarers' International Union of Canada: Thank you for having us here today. I'll start off by saying that seafaring is probably the first globalization victim we have ever had. With that said, no one supports trade more than seafarers and dockworkers unions because our livelihood is trade, but we cannot support trade agreements that destroy Canadian cabotage.
My name is James Given. I'm president of the Seafarers' International Union of Canada, and we represent the vast majority of unlicensed seafarers across the country. I'm also chair of the International Transport Workers' Federation Cabotage Task Force.
Our focus today is on sections 91 through 94 of Bill C-30. These are the provisions that will amend the Coasting Trade Act to implement CETA in Canada. The SIU strongly believes that weakening the Coasting Trade Act will be detrimental to the Canadian maritime industry.
Canadian seafarers are amongst the most well-trained and qualified seafarers in the world. Provisions in the Coasting Trade Act to support Canadian-flagged and Canadian-crewed vessels are vital to the survival of our industry. Without a strong Canadian domestic fleet crewed and operated by Canadians, our country would be dependent on foreign shipping companies to move goods to, from and within Canada, with no commitment to continue uninterrupted service.
No domestic Canadian maritime stakeholders were consulted during the CETA negotiations, so we find ourselves in a position in which Canadian shipowners and maritime labour are now left only to respond to the final outcomes of the agreement instead of having been invited to participate.
A few weeks ago, I participated in a very informative meeting with Mr. Steve Verheul from Global Affairs Canada, alongside other trade department officials and Transport Canada officials, and we came to a much better understanding of the process in which negotiated outcomes for CETA came about in regard to maritime. The problem is that should have been done four years ago.
Bill C-30 for the first time will allow foreign vessels to operate cabotage services and dredging services in Canada without first obtaining a coastal trade waiver. Provisions for this existed long before CETA, and they required no changes to the Coasting Trade Act as proposed under Bill C-30. Under the current Coasting Trade Act, a foreign operator may apply for a coasting trade waiver in order to undertake cabotage operations in Canada. Using this system, Canadian shipowners can object to the waiver if they are able to supply a Canadian vessel and crew to perform the work.
This waiver system already represents a liberalized version of cabotage. The SIU believes that this waiver system already in place in Canada has been proven to be a transparent and equitable solution to ensure Canadian shipowners have an opportunity to provide cabotage services prior to allowing any foreign-owned vessel market access to Canadian cabotage. Changing this process through Bill C-30 will harm Canadian interests only and serve only to benefit EU companies who have lobbied the government for greater market access. The proposed arrangement in Bill C-30 provides no benefit to the Canadian maritime industry.
The wage discrepancy between Canadian crews and foreign crews is substantial. The opening of feeder services and dredging services will allow vessels from the EU, countries such as Greece and Cyprus, unrestricted access to Canadian waters, employing crews of Third World nations who are paid far below the industry wage, even if their vessel is first registry with no national crewing requirements. There are examples we can provide of Filipino crew members onboard vessels flagged in Greece under first vessel registries who were operating in Canada's coasting trade inside Canadian waters who were paid as little as $2.34 an hour.
Second registries in countries such as Germany and France are considered flag of convenience and were intended to operate in international waters, certainly not in Canadian cabotage. They are not even allowed to operate cabotage in their own countries.
Thankfully Transport Canada and Global Affairs have assured us that changes under CETA will in no way allow EU shipowners to bypass the Temporary Foreign Workers Program, which would allow feeder services to operate between Montreal and Halifax. Foreign crew members onboard will have to obtain temporary foreign worker permits.
In the past few years, Canadian immigration services has been wrongfully issuing temporary foreign worker permits to allow foreign crews to remain onboard vessels performing cabotage in Canada. The SIU of Canada filed a lawsuit against the federal government resulting in a recent settlement that will see round table discussions take place between government and the domestic maritime industry to make sure this doesn't happen again.
While the Shipping Federation of Canada and the port council for Sydney have been asking the committee to further deregulate cabotage laws, the SIU contends that this request falls outside of the provisions of CETA and the scope of Bill C-30. As stated by Mr. Verheul from Global Affairs and previous committee testimony, no EU country was requesting access to these ports. The further liberalization of cabotage they have requested should not be considered.
Also as brought up by the Canadian shipowners, we are also concerned about oversight with these vessels operating in Canada. Establishing an effective monitoring and enforcement regime will be essential to ensure full compliance. In order for Canadian stakeholders to remain competitive, there must be a system to ensure foreign operators are strictly adhering to Canadian rules and standards, including labour and prevailing wage. These ships are currently covered by flag state law, which makes it hard for Canadian law to be implemented onboard these vessels.
Thank you very much for the opportunity to speak today and we look forward to questions.
Senator Woo: Thank you all for your presentations.
I have a question for Ms. MacEwen on the issue of government procurement for local levels for government and the problem you cite of unconditional access. Is it your interpretation that unconditional access means no national treatment? Because national treatment could still apply with unconditional access, which is to say that a municipality requiring environmental or health or corporate social responsibility-type provisions in a contract, as long as it applies it equally between a foreign and a local supplier, would be in compliance with unconditionality as well as national treatment.
Ms. MacEwen: Right. CETA actually has national treatment in it. What I meant is it goes beyond national treatment. So you can't have environmental regulations. You can't have a need to train a certain number of people. You can't have any of those types of clauses in local government procurement anymore. That's not allowed under CETA.
Senator Woo: I have a quick question for Mr. Lahay. I'm trying to get to your figures in the table here. These are U.S. dollars?
Mr. Lahay: That's correct.
Senator Woo: Then the calculation is gross wages or monthly wages?
Mr. Lahay: That's correct. The basic salary represents a 44-hour work week, and of course there's 4.33 weeks in a month. That's how you get to the hourly rate.
Senator Woo: You're using the basic rather than the gross, are you?
Mr. Lahay: Yes, that's correct. The fixed overtime is the overtime that is payable every month, and then of course there's leave and subsistence provisions and your total gross salary. For an AB, it's $1,150. That AB, that sailor, would have to work in excess of 300 hours to earn an additional hour of overtime, which is not unusual. Seafarers work minimum nine hours a day, seven days a week, nine to twelve months a year.
Senator Woo: To be clear, you're calculating the hourly wage based on the basic salary or based on the gross salary?
Mr. Lahay: The hourly rate is calculated on the basic salary, and the overtime is 1.25.
Senator Pratte: Coming back to those numbers and some of the other numbers and wages, I want to try to clarify some points. When mentioning wages as low as $2.34 or $2.41 an hour, my understanding — and I may be incorrect — is that, under CETA, or presently, when a foreign ship with foreign seafarers is in Canadian waters, they cannot legally employ seamen on their ship paying those wages. Under the foreign worker system, they have to pay the median wage paid in Canada. Is that correct, or is my understanding incorrect?
Mr. Lahay: This goes to the heart of what Mr. Given was saying, so I'll defer to him.
Mr. Given: You're exactly right. Under current immigration legislation and under the Temporary Foreign Workers Program, workers coming into Canada are to be paid the prevailing wage. When a ship comes into Canada, the ship itself comes in under a waiver from the NTA. The crew are still subject to the immigration process with temporary foreign worker. The basis of our lawsuit was that it was not enforced; there was no enforcement of that legislation. It goes right from the workers themselves. There was no MLIA done to see that there were no Canadians available, which last year there was, at 15 per cent unemployment. The wages being paid to crew members were the wages under their existing employment contracts, which were the $2.34. No one inspected the vessels to make sure they were being done. It's a ghost industry that everyone has ignored, and that's been a major problem. It could have created over 2,100 jobs in Canada last year — good-paying middle-class jobs — if that legislation had been enforced. The advisory group we're with meeting with, the purpose of that is to change that and have it enforced.
Senator Pratte: You have settled those lawsuits with the Government of Canada, and my understanding of that settlement is that you will work together so that the new system coming out of these negotiations will be able to enforce the system so that that doesn't happen again. Therefore, my understanding is that under the new system, under CETA, that will not happen again, and seafarers on European ships in Canadian waters will be paid the prevailing wage.
Mr. Given: That is our hoped outcome of that process, but it is not a guaranteed income. When you look at the changes that have been done for permits under 30 days for fast-tracking, all of that has to be worked out. In a perfect world, yes, the outcome would be that any foreign seafarer coming into Canada is paid the prevailing wage in order to try to level the playing field to take away that competitive advantage.
Senator Pratte: If that doesn't happen, therefore you could sue again?
Mr. Given: We could, if we can find an extra $2 million or $3 million; correct.
Senator Cordy: Thank you very much. Again, we have excellent witnesses today. It was interesting; last week we had a witness who said that we cannot give up our values for a trade deal. I think all of you have reiterated that today.
I'd like to go back to the comments that were made last week, and again today, that non-EU ships, with non-EU crews, may actually register in EU countries so that they will fall under the CETA agreement and then come to Canada, register and have a flag for an EU country. Have you heard that?
Mr. Given: If I may comment and then I'll pass it to Mr. Lahay, you don't even have to stretch it that far. If you look at first registry EU in some of the countries, their wage rates and working conditions are below the ILO minimum standard.
You then go to a second registry. Second registries were created in countries such as France, Germany and Norway in order for those vessels to compete in the international market. They cannot even return to run cabotage within their own countries; they have to switch to a genuine national flag. Why we would allow that to transpire in Canada, I have absolutely no idea. It has always been the flag of convenience system in order to hide your beneficial owner of that ship to register it offshore so that you can avoid taxation, social standards and everything else with your crew members. I'll pass that to Mr. Lahay.
Mr. Lahay: I would just say that Jim is absolutely right. Flag hopping is something that is very common. Sometimes a ship will have two or three flags in a two- or three-year period of time, and all they have to do is set up a legal entity. Of course, everything is registered offshore. If it's a Norwegian flag vessel, it still will have another registry somewhere else.
It's like the example I gave today with the Venetia, a German-owned ship flying a flag of Portugal, and it's really registered to the Portuguese protectorate of Madeira. I would add that in those cases, first registers and second registers are generally lower salaries and lower conditions sometimes even than flags of convenience, which the ITF has a pretty good handle on. We have a pretty high standard, or a pretty high international competitive standard, for vessels that are under flags of convenience. But we don't have such a good handle, and it caused quite a consternation among maritime unions and nations around the world of a race to the bottom.
That's what we always find in shipping. It's such a competitive industry. Everybody is looking for margins. You'll hear from the Shipping Federation of Canada that this will save the shipowners a lot of money, and that's true. But the shipowners would save a lot of money if they didn't have so much overcapacity as well. They don't govern themselves, so they expect that somebody else will create a false economy for them.
Yes, it's a complex world of wages and wage agreements that exists right now. We don't see any stop to that. I hope we've answered your question.
Senator Cordy: I'm also wondering: You did say that you've won the case that while they're in Canadian waters, they would be treated as foreign workers, so they would get the prevailing wage. But neither of you sounded extremely optimistic that that would be the case. Is there a way to actually enforce it or to monitor it to see whether or not crews coming into Canada under the EU flags would in fact —
Mr. Given: I don't want to say “won;” we settled the case. We have the working group and everything coming up in order to get it straight within maritime. We understand maritime is a complicated animal. It's different than working ashore; it's different from anywhere else. The problem is inspections on the vessels, and especially inspections on this, are few and far between. They haven't been done and there aren’t enough people to do them. It's hard for a seafarer of a different nationality to complain. If they were to complain to a Canadian authority, most likely they would be jailed when they got home and any money they received would be taken from them. It's something Mr. Lahay and I have dealt with over the years over and over again. There's no easy answer, but if the legislation is there, then yes, we have to try to enforce it as best we can.
Senator Gold: This question is directed primarily to Ms. MacEwen and Mr. Dias. Free trade and globalization is disruptive and has all kinds of consequences, some positive and some negative. You raised a number of issues around the impact on drug prices, and other things, and on the union movement and on workers generally. Could you comment first on the potential benefit to Canadians? Do you see any benefit for the increased range of goods and imports? It's true that we may export less and import more under certain arrangements, but when we import, that provides goods to Canadian citizens and workers. Do you have any comments generally about that? Then I have a brief follow-up question about dispute resolution.
Mr. Dias: We understand that more inexpensive imports for the purposes of the discussion could be seen as a true advantage for the consumer, but it also has to be balanced. We won't have the ability to purchase those goods if we're not working. That's why fair trade deals are so important. That's why we need to do a much better job bargaining to trade deals.
The issue for us is what do we get out of it? We understand the importance of cheaper goods. It's a philosophical argument which makes some sense. But we should at the very least be able to determine what it is we have to offer, what it is we can manufacture for the purpose of the discussion, and sell to keep people employed. As long as we're content just shipping our raw materials and natural resources to Germany, for example, and buying back cars and finished products, as long as we're content that somehow that's going to be the strength of our economy for the long term, then I guess that's an acceptable response. I just don't buy it.
NAFTA is a perfect example. Pre-NAFTA, we had a $12 billion trade surplus in manufacturing. Today we have a $120 billion deficit. I get nervous when everybody talks about renegotiating NAFTA. Why? Are we going to wait until we have a $200 billion deficit before a flag is raised that there's a problem? I'm not arguing what the advantage is for some things being imported, but I'm preoccupied that we don't have a strategy as to what it is we're going to export.
Ms. MacEwen: The economic idea of trade is that you normally lower the barriers or the tariffs and then that increases competition and lowers costs. People focus on what they're good at doing. But that's not what trade agreements do. I tried to highlight that with the pharmaceuticals, where we're actually implementing protectionist elements into trade agreements that benefit really large players and we are not lowering tariffs.
It also really irks me when people say we're opening markets. I complained about this at the supper table, and my daughter said, “You should bring some Brie into the committee meeting, mommy, and show them.” You can already get French cheese. It's a little more expensive than if we lower the trade barriers, but we're not opening markets.
The idea is we should be lowering tariffs. That's not what CETA does. CETA does a whole bunch of other things that captures specific interests like cabotage, pharmaceuticals and other intellectual protection. It's problematic to compare just trade and the economic idea of trade with trade agreements as we see them on paper.
We're lowering tariffs on German cars, French wine and cheese, and we're losing jobs at the lower end of the spectrum. That's where I'm talking about inequality rising. The study out of Tufts University said there's not a lot of economic growth. Wealthier people get cheaper German cars and cheaper wine, and poor people lose their jobs. That inequality comes out of not having a fair and balanced deal.
Senator Gold: You also alluded to the dispute resolution mechanisms. Do you nonetheless acknowledge that the CETA provisions in that regard clarify, to a greater extent than in previous agreements, the rights of Canada and the EU to regulate and to achieve legitimate policy objectives such as public health, safety, environment, public mores, social or consumer protection and cultural diversity — areas that had been much, rightly or wrongly, criticized in investment state arbitration generally?
Ms. MacEwen: I heard Gus Van Harten earlier, so I'm relying on his analysis somewhat. There's lots of language in CETA and the interpretive instrument that are lovely and convey the ideas that we would want to see in a trade deal, but when it comes down to it, that language does not override the actual rights of corporations to sue governments.
We were never concerned about the ability for domestic regulation. It's that it's expensive and uncertain for governments to do so because you are still opened up. This lovely language has a comma at the end that says that it is in no way different from what the rest of the agreement says. If it's there in a specific chapter, that lovely language doesn't override that chapter. In terms of the rights in CETA, there's a lot of smokescreen that makes it sound better than it is.
Senator Cools: I'm interested in the origin of these unfortunate sailors or sailing men who are earning these terrible wages. I know, for example, that some of the cruise ships recruit their staffs from Indonesia, and some of the cruise ships — I'm sure you know this very well — recruit them from the Philippines. Could you tell us a bit about these men? I'm assuming they're mostly men. What countries are they originating from? Do you have any idea?
Mr. Engler: Part of the deal is that they will go to a country and then they will go to another country that is willing to accept even lower wages and lower wages. It's part of the whole globalization. One of the important issues here is that these deals result in the loss of living-wage jobs. In terms of the maritime scenario, these jobs are gone.
I provided for my family by working on a tugboat for my career. Those jobs will likely be gone, and what they will be replaced by is people from any Third World country who are willing to work. People actually buy the jobs in a lot of these countries. They have their family put together enough money to purchase a job. It's illegal, but it does happen.
The most important factor here is we defend their rights. It's not like we are opposed to these people. Even at these wages that are described, they often have to come to an ITF inspector to be paid this pittance. It's not even just the wages. Peter Lahay in Vancouver found a seafarer on board a vessel who would have died of kidney failure. The captain wouldn't allow him to go ashore because that would have cost them extra money. They would have had to fly somebody back in and flown him home. Peter got him off the boat, and they discovered he was suffering from kidney failure. Had he not gone in on that day, he likely would have been dead.
The scenario is outrageous that exists on these vessels, and the ITF and my local and Jim's local union fight for those sailors, but it's not a scenario where you can win, because they'll go to the next lower-paid group in whatever country. There are all kinds of scenarios. There are Burmese, Chinese and Indonesians, and the Filipinos have been there for a long time. Often, they don't want the Filipinos because they have been there long enough that they're proud and take their jobs seriously. They're not as afraid. They're still afraid, but not as afraid as others.
We're both losing jobs that increase the gap between the rich and poor in our country. We're taking away the lives right now. We have worked with First Nations in B.C. We've heard from NEAS for the Inuit. These are jobs that are very positive for a lot of First Nations communities because you can live in your community and work. You can live wherever you want. We have members who work on the tugboats, one of whom lives in Texas and comes up when he works. You can live where you want and do those jobs, and these jobs will likely be gone if we continue the path we're on. Thank you.
Senator Marwah: Thank you, again, for your presentations. Each one of you — the Canadian Labour Congress, Unifor and the Seafarers' International Union of Canada — have expressed a fair degree of concern with CETA and the lack of consultation. I actually find it surprising and baffling you that you could get to this stage and not have extensive consultation, but that's beside the point.
We are where we are. I'm sure you understand that we are the tail end of an eight-year process, so to suggest or make a recommendation that we try to renegotiate CETA is just not practical.
My question to all of you is: What realistic steps can we take now to mitigate or help with some of your concerns? That's what I'm looking for. There are some suggestions made here; some are highly impractical, but some I think we can actually think about. What can we do in regulations? Regulation is something that the Government of Canada does control, but we don't control the bill. It's done, or, at least, largely done, I would think. So my question is: What do we do now? To say we have to renegotiate it is just not practical.
Mr. Engler: From my tug boat workers and seafarers local's perspective, basically, because the proposed amendments to CETA under Bill C-30 will not promote the expansion of reciprocal trade and conditions of fair competition, which were the purposes of Bill C-30 in the CETA deal, we ask that the Senate correct this by amending Bill C-30 as per the NEAS recommendations that were delivered to the Senate committee on April 6, 2017. I agree with Mr. Dias and Ms. MacEwen from the Canadian Labour Congress that the deal on the whole is bad, but that is one specific thing you can do for the marine side.
Mr. Given: I look specifically at Bill C-30 and at the chapter on maritime and cabotage. In order for CETA to come into force, the Coasting Trade Act does not have to be changed, so I don't know why anything would be looked at in changing the Coasting Trade Act.
Under the waiver system that already exists, if a European company wanted to come in and operate between Montreal and Halifax, they would simply have to apply to the Canadian Transportation Agency for a waiver for their vessel. Canadian shipowners then have the opportunity to say, “No, we will do the work.” There's nothing that needs changed, as far as maritime goes, to implement CETA.
Mr. Dias: To your point, Canada is a rush to ratify. Europe doesn't seem to be in the same rush. There are still a lot of discussions going on over the ISDS process. We're suggesting — and we ought not be afraid to do this — to put into place a comprehensive and exhaustive consultative review of CETA's final text. We really do need an analysis on the investor-state dispute reforms. We need a real analysis on the impact of the effects of Brexit.
I think being afraid of truly putting together an analysis to give us that type of information shouldn't be the rationale for plowing ahead. I think providing the information, the exhaustive analysis and a true investigation of the final text is a fair start, if, in fact, the ship is just too far down the ocean.
The Chair: We're over our time. Thank you for your indulgence in staying later. You have given us many different perspectives, avenues and suggestions that we will have to contemplate in our further studies. We have yet more witnesses to hear from.
In the meantime, if there is anything further you wish to add to your testimony, we would appreciate it if you could provide your written submissions to the clerk. There may be some other reflections that come out of the testimony today. If senators have any questions to follow up on, perhaps you can provide them to the clerk, who will give them to the witnesses.
We appreciate your indulgence in waiting, and we very much appreciate your testimony before the committee.