THE STANDING SENATE COMMITTEE ON FOREIGN
AFFAIRS AND INTERNATIONAL TRADE
OTTAWA, Thursday, February 25, 2016
The Standing Senate Committee on Foreign Affairs and
International Trade met this day at 10:30 a.m. to study foreign relations and
international trade generally (topic: bilateral, regional and multilateral trade
agreements: prospects for Canada).
Senator A. Raynell Andreychuk (Chair) in the chair.
The Chair: The Standing Senate Committee on Foreign
Affairs and International Trade is authorized to examine such issues as they
arise from time to time relating to foreign relations and international trade
generally. Under this mandate, the committee continues to hear witnesses today
on the topic of bilateral, regional and multilateral trade agreements: prospects
To date, the committee has held two meetings on this topic,
during which it heard from academics and experts. Today, the committee is
pleased to receive a presentation from government officials that will include
information on the different types of trade agreements, as well as information
on provisions included in these agreements, such as those relating to investment
protection and intellectual property.
On behalf of the committee, I welcome and thank Kirsten Hillman,
Acting Assistant Deputy Minister, Trade Agreements and Negotiations Branch and
members of her team. Ms. Hillman, we look forward to your presentation and
perhaps answers to our questions at the end. You now have the floor to introduce
your colleagues and make your presentation, and then we'll go to questions.
Thank you for coming today through the ice.
Kirsten Hillman, Acting Assistant Deputy
Minister, Trade Agreements and Negotiations, Global Affairs Canada: Good morning. My name is Kirsten Hillman and I am the Acting
Assistant Deputy Minister, Trade Agreements and Negotiations at Global Affairs
Canada. I am also Canada’s Chief Negotiator for the Trans-Pacific Partnership
I am joined by Mr. Steve Verheul, Chief Trade Negotiator for the Canada-European Union
Trade Agreement, and by Mr. Matthew Smith, Director, International Property
Trade. There are also other experts behind us who are available to reply to more
I am very pleased to be here and to have this
opportunity to provide you with general information on Canada’s trade and
investment agreements. You have expressed general interest and asked specific
questions on topics such as intellectual property and investment rules. I will
touch on these topics during my opening remarks and, of course, I will be
available to answer your questions after my presentation.
First let me start by talking a bit about the role of trade and
Canada has always relied heavily on international trade and
investment for its economic well-being. We're a large country with a relatively
small population and a high standard of living. We produce more in goods and
services than we consume, and as such, we sell our goods and services
internationally in order to maintain a strong economy.
In order to provide trade opportunities for Canadian businesses,
we work to maintain and increase access to international markets. This is
reflected in Minister Freeland's mandate letter and her commitment to increase
trade and attract job-creating investment to Canada by, among other things,
implementing and expanding Canada's free trade agreements globally.
Let me cite some figures for you. In Canada, one in five jobs
depends on trade. In 2014, Canadian exports of goods and services were
equivalent to just under one third of our gross domestic product. Over 40,000
Canadian companies export, most of which are small and medium-sized enterprises.
International trade also benefits Canadian consumers by increasing product
selection and lowering prices. We also know that companies that trade tend to be
more innovative and productive.
However, against the backdrop of slowing global economic growth,
it's important to continue to expand our trade network, strengthen our
competitive position and extend our reach to new markets. Canada employs a
variety of trade policy tools to do this. These tools include multilateral
negotiations at the World Trade Organization, bilateral and regional free trade
agreements, foreign investment protection and promotion agreements and air
These trade policy tools improve operating conditions for our
firms by committing countries to transparent, rules-based regimes. These help
establish a more predictable environment for trade and investment. Free trade
agreements, or FTAs, also open markets by eliminating tariffs and reducing other
Trade agreements, as I mentioned, can be multilateral or global,
like at the World Trade Organization. They can be plurilateral, which means they
include some but not all WTO members. Or they can be regional or bilateral,
concluded between one or more trading partners.
Let me start with the WTO. Canada is and always has been a strong
proponent of the WTO. This organization consists of 162 member countries and is
the central pillar of the global trading system.
The WTO has three principal functions. First, it's a negotiating
body that establishes global rules governing international trade. The agreements
negotiated under the WTO are renegotiated from time to time, and new agreements
can be added to the WTO agreements. The current round of negotiations, known as
the Doha Round, was launched in 2001.
Second, the WTO fulfills an implementation and monitoring
function. Under WTO rules, governments are required to notify the WTO countries
when they adopt or modify laws or regulations that might affect trade. With this
information, the committees established under the WTO monitor whether countries
are living up to their commitments.
Third, the WTO serves as a forum for resolving trade disputes and
enforcing the trade rules that countries have agreed to.
Now, multilateral agreements like the WTO are designed to benefit
all members through common principles of transparency, as I've referred to, but
also principles of non-discrimination, which require countries to treat all WTO
members equally and the same. Canada will always benefit heavily from a robust
global international regime at the WTO. However, concurrently with WTO
negotiations and advancing those agreements, many countries negotiate bilateral
and regional free trade agreements. Canada has FTAs in force with 15 countries
and has completed negotiations with another 40 countries, including the 28 EU
countries, via the Canada-EU Comprehensive and Economic Trade Agreement or CETA,
the Ukraine and the 11 other Trans-Pacific Partnership countries.
The CETA was concluded in 2014, and its rapid implementation is a
core priority for the government. Canada has also recently modernized its FTAs
with Chile and Israel and concluded an FTA with the Ukraine. The timely
implementation and entry into force of these agreements is also a priority for
Regarding the TPP, as you know, the government is engaging in a
full and open consultation process, including in Parliament and in committees
here and before the House of Commons committee.
Apart from FTAs, the government uses other tools and instruments
to improve access to international markets for Canadian businesses. Canada's
foreign investment promotion and protection agreements, or FIPAs, are bilateral
international investment agreements that provide a rules-based legal framework
that helps protect the investments of Canadian investors operating abroad.
Air transport agreements, ATAs, also support trade by governing
the opportunities for scheduled commercial flights between Canada and over 100
other countries. ATAs facilitate trade and investment and people-to-people ties,
which are essential to robust trade.
Allow me now to provide you with a general
overview of how an FTA is structured.
FTAs tend to follow a general format based on
WTO principles and common structures. General objectives are found in the
preamble and initial provisions. This is where parties articulate their common
vision. The substantive rules are then set out in distinct chapters. The scope
of Canada’s FTAs is varied. For example, some agreements only cover goods trade,
such as with Jordan, but most are more comprehensive, covering all aspects of
trade, such as CETA or NAFTA.
Certain chapters address trade in goods and
rules of origin, which are the rules that determine whether a particular product
can benefit from the tariff reduction. Other chapters cover investment,
government procurement, trade in services, regulatory matters, electronic
commerce, dispute settlement and a variety of other topics.
Since NAFTA, Canada has also concluded
environmental provisions in our FTAs. These rules include commitments by parties
to maintain high levels of environmental protection; to enforce domestic
environmental laws; not to relax or derogate from such laws to encourage trade
or investment; to ensure access to domestic procedures and remedies for
violations of environmental laws.
Similarly, Canada includes labour provisions in
trade agreements that seek to ensure that all parties respect internationally
recognized core labour rights and principles.
An FTA undergoes a number of steps from
conception to implementation. I would be happy to discuss the steps involved in
an FTA negotiation during the question and answer period.
Now, moving from the general to the specific, the committee has
asked about intellectual property provisions. Canada negotiates IP rules in
various international fora, under the auspices of the World Intellectual
Property Organization, or WIPO, as it's known, as well as in the context of the
WTO, through the committee discussions on the implementation and operation of
the trade-related aspects of IP rights agreement, which is the WTO agreement
governing intellectual property.
Canada's negotiating approach is driven by Canada's domestic IP
policy objectives. Canada negotiates rules that are compatible with Canadian law
and policy and that allow Canada to retain the flexibility to adopt new
intellectual property policies in the future based on the evolving needs of the
Trade-related IP rules differ from more traditional rules on
goods, services and investment, which are more focused on market access. These
obligations, like others that deal with behind-the-border issues, are
implemented through Canada's domestic regulatory system — in this case, Canada's
domestic IP system. Typically, they apply to both Canadians and foreigners as
they are implemented through our domestic law.
Another important difference is that Canada is unable to provide
preferential treatment to FTA negotiating partners due to WTO rules, which means
that all countries benefit from any new IP obligations that Canada takes on in
By pursuing rules in trade agreements that reflect Canada's IP
system, Canada is seeking to foster a fair, predictable and transparent
environment, familiar for Canadians when they're doing business abroad. This is
designed to create incentives for Canadians to innovate and expand into foreign
markets as part of the broader package of rules and mechanisms included in our
Now let me turn to investment. The investment chapters in
Canada's free trade agreements follow a very similar approach to that found in
our bilateral investment treaties. They typically include a set of
comprehensive, substantive obligations structured around the principles of
non-discrimination, fair treatment and protection from expropriation without
All of Canada's investment agreements and chapters include two
forms of dispute settlement: state-to-state dispute settlement and
investor-state dispute settlement. Under state-to-state dispute settlement, one
country can bring a case against the other on the basis that a treaty obligation
is not being respected. If a dispute arises and is not resolved through
consultation, it is referred to an arbitral panel that will render a binding
decision. A panel may then order a party to rescind the offending law,
regulation or policy or to amend it.
The investor-state dispute settlement mechanism is designed to
address claims by foreign investors against a host state for alleged breaches of
the substantive obligations found in the free trade agreement, if they have
directly caused damages to the investor or their investments. Under this
mechanism, if a country's law or policy is found to be inconsistent with the
treaty, the arbitral tribunals cannot force the government to change its law or
overturn it. Rather, they award monetary compensation to the investor.
The committee also requested an update regarding
Canada’s FTA with the European Free Trade Association, which includes European
countries that are not members of the European Union.
This agreement with Iceland, Liechtenstein,
Norway and Switzerland entered into force in July 2009. It is a first-generation
agreement, meaning that its emphasis is on tariff elimination, primarily for
non-agricultural goods. It did not include obligations in areas such as services
The parties committed to reviewing the current
FTA with a view to expanding its existing provisions to areas such as services
and investment. Canada and EFTA officials discuss the prospects for successful
expansion from time to time. A decision on whether or not to launch exploratory
discussions towards a modernized FTA with EFTA will depend on whether we believe
there are sufficient prospects for meaningful modernization. No decision to
explore modernization has been made at this time.
Madam Chair, that concludes my remarks for this
morning. I would like to thank the committee for this opportunity to speak with
you, and I look forward to your questions.
The Chair: Thank you, Ms. Hillman. You've done exactly
what we asked you to do, namely, to give us the overview of the agreements as we
look forward to perhaps working on the Trans-Pacific Partnership and the
European Free Trade Association should they come before us. This was an
excellent opportunity to take stock of what we have and to get your
There's only one point of clarification. Yesterday we had a
witness who said that the statistic-gathering capability for the government
looks to goods and services, but increasingly trade encompasses services, and
your statistics don't cover that area. When you tell us one out of five jobs, et
cetera, does that include the service sector of trade, or is it only goods and
Ms. Hillman: It's both. We do have some information that
we gather with respect to services trade. It's more difficult to gather in a
very reliable way. When goods cross the border, there are customs, procedures
and paperwork. Service is more complex. We are working on that, but yes, it's
intended to cover both.
The Chair: Just following up, the global value chain is
another thing that we've discussed and the fact that it's hard to trace what is
done in Canada and what is done elsewhere and transited to the third country, et
How are you thinking about trying to get the statistics of the
real activity of Canadians?
Ms. Hillman: Yes, absolutely. In fact, I think that's
something that we've been thinking about recently, as we have come to a point
with the EU negotiations, the TPP negotiations and others, where our traditional
models, the way we model our benefits, are not giving us the picture, as you
say, that reflects the benefit for the Canadian economy overall. We are working
with internal analysts and economists to come up with new models and also our
international partners because they are grappling with the same facts when they
want to assess their economy, how it's working and how they're performing in
trade. This kind of information is essential for everybody. There's a community
of international trade economists who are also working on this together.
One point of clarification: my one-in-five job statistic is
directly related to trade jobs. The boost of trade to the Canadian economy that
by its nature leads to job growth is one step removed. We're not counting that.
These are jobs directly related to trade. So, again, it's probably an
The Chair: Thank you.
Senator Downe: Thank you for your presentation. You've
covered a lot of ground. I'm particularly interested in an area that we don't
spend a lot of time on in this committee, but I think it's important, and that's
your air transport agreements. We're all aware of how many free trade agreements
have been signed in the last number of years and the negotiations for those
under way. What about air transport agreements? We constantly hear that Canada
is quite restrictive and difficult to negotiate with. How recently have we done
any significant air transport agreements with other countries?
Ms. Hillman: The air transportation agreements are being
negotiated, in fact, all the time. I'm just looking for my latest statistics,
but we have air transportation agreements under negotiation constantly. We are
in the process of trying to update and modernize currently. We finished with
Australia just a few months ago. We're working with some Caribbean countries.
We have over 100 agreements in place. These agreements get
updated; new agreements are not that common. We have a constant process of
talking to airports and carriers and businesses to see if they are continuing to
meet the needs of Canadians, Canadian businesses and the Canadian airline
sector, quite frankly. We also listen to other countries and what their needs
and requests are into Canada, whether they feel those agreements are meeting
It's on the basis of this consultation and interaction that we
determine which agreements should be updated and expanded.
Senator Downe: To clarify that, the domestic airlines set
the agenda? They advise you that the capacity is working? I'm not clear on that.
Or does the government say it's in the best interest of the country that there
be more competition, and therefore we're going to sign some of these agreements,
whether the airlines like it or not in Canada?
Ms. Hillman: Well, in all trade negotiations, and air
negotiations are the same — and all negotiations actually internationally,
period — we engage in broad consultations.
Senator Downe: Right. I understand that.
Ms. Hillman: We listen to the pros and the cons, who is
looking for more, who is looking for less, and we listen to our international
partners and what they're looking for.
Senator Downe: I'm sorry to interrupt you, but I'm not
clear on that. When you say who is looking for more and who is looking for less,
you're talking domestic Canadian airlines at this point?
Ms. Hillman: I was talking more broadly in the context of
what we do in consultations, not just for air agreements but for negotiations
In the context of air agreements, nobody is looking for less. We
have the agreements that we have. The question is, are the agreements continuing
to meet our needs? Whether the agreements are continuing to meet our needs will
depend on whether or not Canadian businesses, the users of airlines, feel that
they need more flights; on whether our international partners are looking for
more access into Canada; on whether carriers are looking for additional access
because they feel that they have the clientele to fly more often to country X.
All of these factors are taken into account. The Minister of Transport, with the
Minister of International Trade, sets priorities.
Senator Downe: This will be my last question, chair. I'll
go down for the second round.
How does that bump up against the principle of free trade, where,
if we opened up our country to more airlines, the competition would determine
who succeeds and who fails, as opposed to the government trying to determine
that? I hear constant complaints that it's difficult to trade with country X
because the connections are so terrible and horrendous. The other country wants
to fly into Canada. They're restricted. They're not allowed. What's the argument
against total open competition?
Ms. Hillman: Part of it has to do with capacity and
infrastructure, what the airports can handle, what makes business sense for
them. A variety of factors go into it.
Senator Downe: Put me down for the second round, chair.
Senator Johnson: Good morning. In the agreement between
Canada and EFTA countries — Iceland, Liechtenstein, Norway and Switzerland —
it's a goods-only agreement, with an emphasis on tariff elimination. Its scope
does not cover issues such as intellectual property, services and investment.
Can you tell me, please, what are the prospects for expanding the Canada-EFTA
agreement to be more comprehensive? And once the CETA is ratified, will we have
momentum to expand with EFTA? In which sectors do Canadian exporters continue to
face market-access restrictions?
Ms. Hillman: Right now, the EFTA, as you say, is focused
on tariff elimination for non-agricultural goods. The biggest remaining work to
be done with EFTA countries is on goods and services and the other elements that
normally are in what we would call a comprehensive FTA. On the goods side, it's
also agricultural goods.
In terms of the prospects of opening it and expanding it, I think
that question is under consideration right now. We know what we would like to
try to get out of it. We would like to expand it to a full FTA, covering all
areas, and we would also like to look at the areas of goods market access that
are not sufficiently covered. The question is whether or not the EFTA countries
have a similar complementary interest to us, whether they're willing to engage
in those discussions, and that is being discussed amongst officials at this
Senator Johnson: It's being discussed now. Okay.
Which sectors do the Canadian exporters —
Ms. Hillman: As I say, it's all the sectors. It's goods.
It's services. It's non-agricultural goods. It's across the board.
Senator Oh: According to the trade data available on the
Innovation, Science and Economic Development of Canada website, Canada had a
negative merchandise trade balance with 10 of its FTA partners in 2015. Its
overall balance with all of its FTA partners was positive, however, due to the
significant trade surplus with the United States. In short, does Canada benefit
from its FTAs other than NAFTA?
Ms. Hillman: I think the answer to that, from our
perspective, is that most certainly, we benefit from our FTAs other than NAFTA.
Looking at trade balance as a measure of the success of an FTA is likely not
going to tell you the full story. Many factors affect a trade balance. Really, a
trade balance is a snapshot in time as to how two countries are importing and
exporting at that precise moment in time. They're affected by many external
factors. Currency affects trade balances very significantly. For Canada, of
course, commodity prices have a huge impact on our trade balances. They can give
you, as I say, a snapshot in time of how we are trading with any particular
What we see is that our trade — bilateral trade with countries
with whom we have FTAs — increases over time. I think that it's important to
talk about bilateral trade, imports and exports, for the reason that the chair
was mentioning earlier. We're living in an environment where it isn't a straight
sort of mercantilist approach of imports are bad and exports are good. We live
in a world of supply chains and value chains. Often, it is, in fact, those
imports — high-quality, affordable, competitive imports — that Canadians
integrate into the products that they are manufacturing and making or into the
services that they're providing, which creates value for the Canadian economy.
So it's a much more dynamic picture than simply a snapshot in time, looking at a
trade balance on goods, for example. That's one piece of information that's
interesting to have, but it doesn't tell the whole story.
Senator Oh: Now, with the current low Canadian dollar, do
you see a surge in exports?
Ms. Hillman: It depends on the country. We also have very
low commodity prices in the energy sector right now. What is the trade profile
with a particular country? Exports may surge because of the lower dollar. They
may go up because of the lower dollar. But if it's a country with whom the bulk
of our trade is in the energy sector, of course, that will affect it in the
opposite direction. It's a whole relationship, if you will, that you have to
Senator Ngo: Twelve countries are participating in
the TPP negotiation with the signed agreement, and Canada is one of them.
The Obama administration reached the consistency plan with Brunei and Vietnam
through a TPP that will revolutionize the legal system to comply with the labour
union and child protection requirements. Can Canada's bilateral agreement
adequately safeguard labour rights in the TPP countries with poor labour
records, such as Malaysia, Brunei and Vietnam?
Ms. Hillman: Trade agreements are fundamentally about
economic relationships. In the context of negotiating trade agreements, we have
discussions with countries around many other issues. Labour issues are
absolutely one of them. What we find is that when we seek to engage more with a
country economically, become closer and more integrated, then our influence over
issues such as labour standards tends to grow.
To answer your question about whether trade agreements can
achieve this success, I think that they are one tool in our toolbox that we use
to try to promote sound labour practices in countries. But a trade forum is not
the primary forum in which we have these conversations. We have these
conversations through the ILO, through bilateral mechanisms, through other
mechanisms that exist in the international sphere. I think they're a tool that
helps. I think that we put a lot of attention into trying to make them as strong
and effective as we can. In the TPP, for example, it is the first time that
Canada has concluded an agreement with the labour chapter being enforceable
through trade sanctions.
In every context, we look at what we're doing in the trade
agreement and try to advance those policy goals as best we can with the tool
that we're working with. But, fundamentally, there are many other tools that
we're also using.
Senator Ngo: Shouldn't both be respected at the same time?
If that's the case, do you think the human rights can be elevated in the
negotiation objective in that trade agreement?
Ms. Hillman: I don't know if I'm here to give you my
personal opinion, but I think experience shows, for Canada, that engagement and
closer ties with countries are more effective in managing and working with them
to promote the values that are important to Canada — labour values, democratic
values, openness, diversity. It's through engaging with countries that we are
going to have closer partnerships and greater success. One way in which we
engage with other countries is through trade agreements.
Senator Ngo: Last week we had a witness say that trade
negotiations are not the ideal place to raise or resolve human rights or labour
issues. What do you think about that?
Ms. Hillman: That gets back to what I was saying at the
beginning of my comments. They're not designed to do that. That's not their
primary function. We have other mechanisms through the United Nations. We have
bilateral mechanisms that we use to resolve and have conversations and advance
human rights issues. We will always use those as the primary forum, because
they're designed as the primary forum for those issues.
The reason why we include some of these provisions — that is,
environmental, labour or others — in trade agreements is because, generally
speaking, as we engage more closely with countries and we trade more closely
with them and our people do business back and forth, these are important issues
to Canadians. We try to buttress, or help, or add to the efforts we're making in
other fora through efforts in trade agreements.
Senator Poirier: Thank you for the presentation. Canada
has had to make changes to its laws regarding the intellectual property to
comply with the agreement in the recent negotiations of the TPP and CETA. For
future agreements, in your opinion, what legislative modification could Canada
do in order to be proactive at the negotiation table instead of reactive?
Ms. Hillman: I think I would go back to my opening
comments on this. Intellectual property policy in Canada is first and foremost
domestic policy. It's about striking a balance between promoting innovation
through providing certain protections for innovators to commercialize and reap
the commercial benefits of their innovation, versus the interests of the user
community that will be looking for quicker or less expensive, I suppose, access
to these things.
International rules around intellectual property in the trade
sphere are about setting a predictable environment for our companies that have
innovations that they would like to commercialize and trade internationally, so
that they know that they're going to receive the same kind of protection abroad
as they receive in Canada, or hope to, and that that's enforceable.
We try to articulate internationally standards that make sense
for us domestically so that there's a predictable, consistent environment for
our traders. It's not really about changing anything domestically for the
purpose of international negotiations; it's about finding the right Canadian
balance, the right Canadian policy that our domestic stakeholders will abide by,
and then doing our best to provide them those same benefits when they trade, and
that same security when they trade.
Senator Poirier: Do these changes put Canada at a
disadvantage when we're negotiating? When we're comparing our intellectual laws
with other countries, how would you rate Canada? Is it well seen by other
countries or not?
Ms. Hillman: I think so. Every country has its own
balance. Every country tries to find a balance that they believe is best for
them. What we see in these negotiations is a fairly robust conversation, but a
kind of a coming together around, roughly speaking, where the international
community thinks these things should lie at this time. That doesn't mean that
every single stakeholder in Canada or any other country will be perfectly happy.
It just means that in this process of balancing, we try to find something that
works for us, as do others, and then we try to bring that all together.
Senator Poirier: For certain sectors like the
pharmaceutical sector, what is their position when it comes to these agreements
with the intellectual property? Are certain sectors against it? Are they for it?
What is the business sector's position?
Ms. Hillman: So the pharmaceutical sector in particular?
Senator Poirier: For example, yes.
Ms. Hillman: Again, there's a lively discussion. This is
primarily a domestic discussion first, and then it becomes an international
discussion as you take your domestic environment and work with it
In the pharmaceutical area, the innovative companies that are
creating new pharmaceuticals are interested in ensuring that they have
sufficient time after that has been placed on the market to recoup their
innovation costs and profit from them in order to incentivize them to keep doing
it. That's their perspective. The generic drug companies, on the other hand,
while I think they recognize that this is the perspective of the innovators,
they want to make sure that they are able to manufacture their product as soon
as possible. That's the tension there.
Are they satisfied with where we are? I think so, largely
speaking. Matthew is responsible for intellectual property negotiations for
Canada. Unless there's something you'd like to add, Matthew, often stakeholders
have different perspectives, but we have found ourselves in a position, in both
CETA and the TPP, to have made some changes, but not radical changes, to our
The Chair: Mr. Smith, will you add anything, or can we
move to the next question?
Matthew Smith, Director, Intellectual Property Trade, Global
Affairs Canada: What I might add is to build a bit on Ms. Hillman's comments
in the opening, where she explained that in intellectual property you are
looking at a situation where Canada participates in a global conversation
because you have World Trade Organization rules which say that you're not
granting country-specific preferences in intellectual property like you might
with a good between two countries, where you say we'll have a preferential
tariff rate between Canada and the United States, for example. These
conversations about the kind of balance and the kind of incentive structure
that's important to have successful, innovative companies by nature takes place
often in a global context. So you have Canada participating actively in
conversations about intellectual property at the World Intellectual Property
Organization in Geneva. There is a clear recognition, if you look at modern
trade agreements negotiated by Canada or negotiated by other countries, to refer
to that structure and to be using as a reference point the international
multilateral treaties, whether they're at the WTO or at this World Intellectual
The global nature of some of these large, innovative companies
that we've been talking about with respect to the conversation about
pharmaceuticals is looking at global markets as well. A lot of that debate takes
place in the domestic policy conversations of each country but is also something
that very much plays out multilaterally. That is perhaps a little different than
some of the trade conversations we've been discussing from the perspective of
I am going to take advantage of the presence of our chief trade negotiator to
ask a few questions on how negotiations have unfolded over the years.
Mr. Verheul, thank you for being here today.
We know that Quebec was represented by a former
premier, Mr. Pierre-Marc Johnson, who was here with us a few weeks ago. Did most
of the Canadian provinces participate as intensively as Quebec did in
negotiating this agreement? Without providing a comprehensive list, could you
tell us, aside from supply management, a big concern for Quebec, what were the
main concerns and issues you had to defend, that is to say issues which were
more provincial than national?
Steve Verheul, Chief Trade Negotiator (Canada-European Union),
Global Affairs Canada: When it came to negotiations and issues that affected
the provinces most particularly, Quebec was certainly more interested in the
negotiations than most. Quebec had a particular interest in culture, of course.
They had a particular interest in areas of government procurement. They had a
particular interest in goods that they tended to export, as well as some
services. We had long discussions on the procurement issues, in particular, as
they related to Hydro-Québec and other issues that were on the table.
With respect to other provinces, it was more of a regional issue.
Certainly in the East, there was a lot of preoccupation around the fish and
seafood sector. In the West, there was a lot of preoccupation around agriculture
and agri-food. For British Columbia, there was also preoccupation around fish
and seafood as well as agriculture.
We tended to have some of our more difficult discussions on some
of those areas. But cutting across more than anything were areas of provincial
government procurement and municipal government procurement. Those were the
issues that we probably spent most of our time on through the negotiations.
In other accords such as the Trans-Pacific Partnership Agreement, do you also
take into account… I suppose the Canadian government respects the provinces and
is familiar with their concerns, but in other accords that are being negotiated
or have already been signed, are the provinces really consulted, or do the
provinces, in light of their interests, convey their issues to you, as well as
the points they will not yield on? Do the provinces normally play a role in
Yes. For every negotiation, we have a very focused conversation with all of the
provinces and territories. We have a consultation process at every stage, that
is to say before launching the negotiations, when we analyze the partners who
interest us. We also obtain recommendations from the various sectors of the
economy, but the provinces and territories play a large role.
Subsequently, once the negotiations begin, we
have a team of experts in every province and territory who are a part of an
advisory group. They are kept abreast of developments at each stage, they have
access to all of the necessary information, and we also ask them questions,
because the provinces and territories are often the ones who have the best
understanding of the needs and desires of their regions in the context of the
talks. We consult companies, industry and the private sector, of course, as well
as stakeholders in the field of culture, for instance, but in other areas as
well. In short, the answer is yes.
Senator Cordy: We heard yesterday that service accounts
for 44 per cent of our trade. Could you let me know what kinds of services are
in high demand? I understand that may be increasing. Is there one type of
service that's way ahead of others? Could you give me a briefing on that?
Ms. Hillman: Canada is very competitive, and we often seek
particularly strong market access or openings in certain kinds of services.
Engineering services are significant, as are environmental, education and health
services. In anything that has to do with the energy sector and services
provided in the energy sector, we're very competitive. We have a lot to offer.
Transportation services as well, where we have strong stakeholder interest in
expanding international opportunities. Then in IT, high tech, there is very
strong interest as well.
Senator Cordy: How do you determine the number of
Canadians who are able to provide a service, or is every trade agreement
different in that you have to hire so many locals?
Ms. Hillman: You're talking about individuals. Openings
for services have different levels. There is the provision of the service, the
trading of the service in the marketplace, and provisions with respect to
getting Canadians there to deliver the service; and there are two different
In terms of providing services, such as financial services, take
a Canadian bank or insurance company that wants market access opening in
Malaysia so they can set up offices in Malaysia and provide financial services.
If in addition they want to take their executives to Malaysia for six months to
get that office up and running, then that is what we call “temporary entrant of
business professionals.” That's a different kind of commitment where not only
can Canadian firms go in and open a bank and provide financial services, as in
my example, but also they can take some of their executives from headquarters in
Canada, get them over there on the ground for a temporary period of time so that
they can hire staff and make sure everything is running and finalize contracts,
et cetera — two different things that are negotiated separately.
The first threshold is opening the market to the service sector,
period. Once you've opened the market to the service sector, there are different
modes of delivery of the service; and we negotiate those as well.
Senator Ataullahjan: I'm interested in following up on the
investor-state dispute settlements mechanisms. Your report notes that if a
country's law or policy is inconsistent with the treaty, the tribunal cannot
force the country to change its particular law, but, rather, money is awarded to
the investor who has been wronged. Who pays? How does the tribunal compel
payment? If the host country will not comply, is there a further level to
Ms. Hillman: The host country pays. Payment is compelled
through international treaties that we have entered into as a government with
respect to international payments of international awards. Your last question I
didn't hear because there was some noise over here.
Senator Ataullahjan: If the host country will not comply,
is there a further level of appeal?
Ms. Hillman: It's pursuant to the World Bank treaties, and
the treaties on compelling payment.
Senator Downe: You indicated the air transport agreement
that we signed with Australia. Do you happen to know what benefits there are for
Canada from that new agreement?
Ms. Hillman: I'm sorry; could you repeat the question?
Senator Downe: Under the previous discussion of the air
transport agreements, you mentioned that we just signed or enhanced one with
Australia, as the most recent example. I'm wondering what benefits there are for
Canada from that new agreement.
Ms. Hillman: That one had to do with opening more landing
slots in Melbourne, I believe, and I can double-check, to give Canada more
landing rights in Melbourne. The benefit there has to do with enhancing trade
and tourism opportunities, both tourism into Canada and opportunities on
Australia's side. I'm sure they're looking for Canadians to go there.
Senator Downe: The quid pro quo is that they receive more
landing rights somewhere in Canada.
Ms. Hillman: The specifics of that agreement I'd have to
check for you. It depends what they're asking for, yes.
Senator Downe: Are the landing rights owned by the airline
or by the Government of Canada? If, for example, airline X had the landing
Ms. Hillman: No, it's not the airline. Again, I can check
this for you, but it's the airport that has slots in its availability. It's
between the government and the airport.
Senator Downe: I'm just thinking that, for Heathrow and
Tokyo, for example, the slots would be very valuable. If an airline went broke,
those would be assets the Government of Canada could assign to another airline
as opposed to being owned and controlled by the bankrupt airline.
Ms. Hillman: I'd have to look into that for you. I'm
sorry. I’m really not an expert in that.
Senator Downe: Sure, if you could just let the clerk know.
I'm just wondering if it's a national asset or controlled by the individual
airline and we lose it if an airline goes broke and Tokyo gives its slots to
Ms. Hillman: As I said, I think it's the airport. Let us
check that and get back to you.
Senator Downe: You mentioned Australia. What other
agreements have you done over the past couple of years?
Ms. Hillman: We have a number in Europe that have been
done. The most recent ones, we updated Switzerland, Trinidad and Tobago, New
Zealand, Japan. We have a comprehensive agreement between Canada and the EU,
with all of its member states.
Senator Downe: How many do we have outstanding? If you
don't have this information, again, send it to the clerk. How many requests has
the government received from foreign airlines wanting to fly into Canada?
Ms. Hillman: It's not airlines. It's governments.
Senator Downe: Governments, I'm sorry, foreign
Ms. Hillman: As I say, we have 100 in force. We have
negotiating partners that have expressed an interest in the Caribbean, so
Antigua and Barbuda —
Senator Downe: I'm just wondering what the number is. If
you don't have it, you can send it. How many countries are requesting additional
landing rights in Canada? Could you send us that?
Ms. Hillman: I don't have that. Yes, for sure.
The Chair: Our good researcher indicates that the
Australia venture included Melbourne, or at least an expansion of Melbourne,
Brisbane and Perth. We're currently finding out what the reciprocal in Canada
Just following up on that, the government asks, and then there is
an agreement. But that doesn't necessarily mean that those slots are immediately
open or that that airline uses it. So I'm sometimes confused that we have had
rights to a particular country, but then the airline doesn't want to exercise it
because they have somewhere else to go. So, if you're going to reply to Senator
Downe's question via the clerk, could you include that concept that you have an
agreement but that the utilization may or may not occur?
Ms. Hillman: Yes.
The Chair: I would be interested because we've recently
started service into Turkey. We had some arrangements before that weren't
utilized, as I understood. Are those scrapped, and you start again? I think
we're interested in that issue. As Senator Downe pointed out, people say that it
is difficult to do business somewhere because of getting in and out of countries
or to them. Equally, within Canada, it's very hard for some businessmen to get
into my province of Saskatchewan because of the lack of availability on some
flights and timing, et cetera. This is an issue that we hear a fair bit about.
Just to pick up on something you might wish to look into, you're
talking about services and about the service sector, but then you're talking
about the ways that that service can be utilized. So it's a question. We hear
that it is difficult both ways, to get into Canada to continue your business —
It takes entirely too long and too much red tape to bring in a manager to open
up something — and equally, when we go into another country. I don't know if
there's anything helpful you can give us on the rules about the visa issue into
the service sector.
Ms. Hillman: Right. Thank you for your question. First,
may I say that, in relation to all of these on air transportation, we've taken
note of those, and we will get back to you on all of those facts. If you have
other questions that come to you, please send those along.
From a trade perspective, from a negotiating trade agreements
perspective, what we do in trade agreements in terms of mobility of individuals
who are going to go to a country to deliver services is that we negotiate the
facilitation of certain professionals with certain countries for certain
purposes. It's a very specific objective that we have. For example, we might
negotiate with Australia to allow for service providers in a professional sector
related to energy who have a certain education level, a certain number of years
of experience to enter that country on a temporary basis to fulfill their
contract, as long as they have a pre-existing contract. These are the kinds of
things that we negotiate in a trade agreement. Then, in a sense, that is stuck
in time. It provides predictability because you know that that professional, for
that purpose, with that kind of expertise, will be able to go and service a
contract, and businesses can plan around that.
They still have border formalities that are required, as do we,
in the partner country, but, in the trade agreement, you seek to streamline
those, to minimize those. But it's not immigration policy. We don't negotiate
immigration policy in trade agreements because immigration policy is something
that, generally speaking, governments want to remain fairly nimble.
I understand the comments that you're making because we hear
those from businesses all the time. We consult businesses all the time in the
services sector. As you say, they're an increasingly important generator of jobs
and growth in Canada — the services sector — so we speak to them a lot about
their goals and aspirations and challenges. Getting people to the right places
can be a challenge. There's only so much we do about that in a trade agreement.
A lot of that goes to the jurisdiction of our colleagues who are responsible for
Senator Ngo: China has been pushing very hard for the free
trade area of the Asia-Pacific, the FTAAP, as a way to effectively void the
impact of the TPP. Does Canada support expanded membership in the TPP to include
other countries, or do we just restrict it to the 12? If it does, is that
support limited to certain countries only?
Ms. Hillman: I think the first answer to your question is
that, with respect to the TPP, the government is in a period of consultation
overall and has not taken a decision on ratification. The government has signed
the agreement in order to continue the process of consultation and consideration
to make sure that, whatever the next steps may bring, we're part of the
conversation with the TPP countries, but that process is ongoing.
So, as it relates to new members, that's a bit of a premature
question, to be frank, for the government.
Senator Ngo: If that's the case, do you know of any new
developments from China on the FTAAP, to try to push to have that agreement?
Ms. Hillman: China and other countries as well in the Asia-Pacific,
under the auspices of APEC, have been interested in considering a free trade
area of the Asia-Pacific. That initiative is ongoing. I think that, to date,
Canada has been open to considering that and seeing what it could look like and
engaging in discussions on that. I don't think we're generally in the business
of closing the door to any idea that might be useful and helpful. There are many
members of APEC who are not negotiating with us in other ways, so it's a good
forum for considering it.
Senator Ngo: You mean that Canada, as a member of TPP, is
considering becoming a member of the China initiative?
Ms. Hillman: I guess my point is it's not a China
initiative. It's an initiative of APEC. It's a discussion that is happening at
APEC among APEC countries. China is quite interested in it, but many other
countries are quite interested in it as well. So it's not a China initiative per
In the context of those discussions, Canada is participating. We
have been considering the features of what an agreement or a project like that
could eventually look like.
Senator Ngo: Thank you.
Senator Johnson: Mr. Verheul, you did yeoman's work
representing Canada as our chief negotiator for the EU. We have heard from
Pierre Marc Johnson, who represented Quebec in the negotiations. Can I ask you,
sir, how was the experience working with the diverse interests of our provinces?
What did you take away from it for future negotiations?
Mr. Verheul: In the beginning it was a bit of an
adjustment because this was the first time we really engaged provinces and
territories in this kind of depth in a negotiating exercise. In fact, during the
initial stages of the negotiations, we had invited provinces and territories to
sit inside negotiating rooms to observe particularly on issues that fall under
However, I have to admit that when we first started the process,
I think most of the provinces and territories felt a bit uneasy about how it
would work. I think that includes Pierre Marc Johnson as the representative of
Quebec. We spent so much time together through the negotiations — in fact, we
would meet with the provinces pretty much for a full day prior to a negotiating
round. We would meet with them every evening after the end of a negotiating
session and had many conversations in between as well, plus I'd have bilateral
meetings with representatives. Over time, we really developed — it sounds a bit
strange to say — a real Team Canada kind of approach. We were a cohesive team by
the end. It was somewhat gratifying to even hear from some of the Quebec
delegation that may have had certain other sympathies that this was the first
time that they had seen federalism really work.
We spent so much time together that it became a real team and it
functioned as a real team. I think that was one of the successes of the
Senator Johnson: Excellent. Thank you for that, sir.
The Chair: I think we've exhausted all the areas of
concern that we had. Thank you for your update. As I say, I think it was
extremely helpful to let us look at the big picture and understand it. We'll
wait to get your answers on the other areas, and if there's anything else you
wish to add. I think it's important for this committee to be prepared for the
next wave of whatever may come our way in the trade negotiations but also to
take stock of what we've done and how it's changing.
Thank you very much for very concisely putting it forward, and we
very much appreciate your attendance today.
Senators, we are adjourned.
(The committee adjourned.)