THE STANDING SENATE COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

EVIDENCE


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.

[English]

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 for Canada.

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.

 [Translation]

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 Agreement.

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 complex questions.

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.

[English]

First let me start by talking a bit about the role of trade and investment-related agreements.

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 transportation agreements.

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 barriers.

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 Minister Freeland.

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.

 [Translation]

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.

[English]

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 Canadian economy.

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 an FTA.

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 trade agreements.

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 compensation.

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.

 [Translation]

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 and investment.

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.

[English]

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 perspectives.

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 services?

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 cetera.

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 underestimation.

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 their needs.

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 generally.

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. Thank you.

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 time.

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 country.

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 look at.

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 internationally.

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 regime.

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 Property Organization.

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 goods.

 [Translation]

Senator Rivard: 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?

[English]

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.

 [Translation]

Senator Rivard: 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 these negotiations?

Ms. Hillman: 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.

 [English]

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 components.

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 appeal?

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 rights —

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 somebody else.

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 governments.

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 was.

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 immigration policy.

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 se.

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 their jurisdiction.

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 negotiations.

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.)


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