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AEFA - Standing Committee

Foreign Affairs and International Trade




OTTAWA, Thursday, March 24, 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: Honourable senators, the Standing Senate Committee on Foreign Affairs and International Trade is meeting today pursuant to the order that authorizes the committee to examine such issues as may arise from time to time relating to foreign relations and international trade generally. Under this topic, the committee will continue to hear witnesses today on the topic of bilateral, regional and multilateral trade agreements: prospects for Canada.

To date, the committee has held several meetings on this topic and has heard from academics, experts and government officials. The committee is pleased to continue its study and receive presentations from two trade agreement and intellectual property specialists.

On behalf of the committee, I welcome, in person, Bernard Colas, Attorney and Partner at the firm Colas Moreira Kazandjian Zikovsky LLP; and, by video conference, Jim Balsillie, former Chairman and CEO of Research In Motion (RIM).

Members of the committee have received biographical notes on our witnesses, so, in order to allow sufficient time for questions, I'm not going to read out those biographies. I think the committee has done so.

Normally, we receive presentations, and then the senators will have questions.

Mr. Balsillie, I understand you were going to be here in person, but the weather precluded you from doing so, so we welcome you by video conference. I trust you can hear us.

We're going to turn to Mr. Colas first.


Bernard Colas, Attorney and Partner, Colas Moreira Kazandjian Zikovsky LLP (CMKZ), as an individual: Thank you, Madam Chair, for the privilege of appearing as a witness before your committee. I will keep my remarks brief, focusing on two points, and I will be speaking in French.

My first point is that it is time for Canada to re-engage within the World Trade Organization, or WTO. My second point concerns the importance of meeting major challenges and ensuring that our trade policy does not exacerbate those challenges, but supports them or, rather, the response to them.

It is indeed time for Canada to renew its contribution to the development of the WTO. Canada has the authority, expertise, capacity and credibility necessary for the job, and its efforts will only benefit the country in the long run.

As you know, Canada has signed an increasing number of free trade agreements in the past few years, particularly bilateral deals. This growing number of agreements undermines the credibility and relevance of the WTO, as well as its dispute settlement mechanism. That system, however, is still widely used, even more so than mechanisms provided for in bilateral agreements.

What’s more, the realization is setting in that certain issues, such as agricultural subsidies and the advancement of less developed countries, can be addressed only through multilateral means.

I am not dismissing the importance of bilateral agreements because they do have their place. They are particularly useful when it comes to giving Canadian companies preferential access to markets and diversifying ours. The provisions most commonly used by the companies I work with address the elimination of tariffs, mutual recognition, the liberalization of services, government contracting and the free flow of business people. Those are the most common provisions that companies use when taking advantage of bilateral or regional trade agreements.

Something else we are seeing in this new generation of agreements, including the Trans-Pacific Partnership and the Canada-Europe agreements, are provisions that could very easily be WTO provisions. Intellectual property provisions are just one such example.

Turning now to my second point, which builds on the need to re-engage within the WTO, I feel it is important not to lose sight of the fact that the world is facing some tremendous challenges that require urgent attention. Among those challenges are lowering greenhouse gases, reducing poverty and fostering sustainable development. You will no doubt notice that these challenges are quite different from those that gave rise to the WTO and trade agreements in the first place. Back then, the main challenge was tackling the protectionism that had caused the two world wars.

In responding to the challenges I listed off, as well as those I didn’t mention, Canada would do well to establish clear policies to address those issues and ensure that its trade policy is aligned with, if not contingent upon, the efforts to attain those objectives. Under its new budget, Canada’s government seems to be taking action to reduce greenhouse gases and build a green economy. The government should ensure, however, that those actions are not limited by its trade agenda.

With that in mind, my last point concerns the importance of carrying out credible economic, environmental and social impact studies, and committing to an open and transparent discussion of these issues both before and during trade negotiations. I have one last example. Canada could take a lesson from the European Union, which conducts independent and comprehensive sustainability impact studies. Another lesson Canada could draw from both the European Union and the United States involves the creation of formal advisory panels that play a role before and during international trade negotiations.

Thank you for listening, and I would be happy to answer any questions you have, perhaps more specific questions about issues such as international trade and intellectual property.


The Chair: We're going to turn now to Mr. Balsillie. Welcome to the committee.

Jim Balsillie, Former Chairman and co-CEO of Research In Motion (RIM), as an individual: Thank you, Madam Chair and esteemed members of the Senate, for your invitation to meet with the committee and present my views on intellectual property and the Trans-Pacific Partnership. The TPP is not a traditional free trade agreement. Rather, as the U.S. President Obama has said, it's a new partnership, in which: "The U.S. wrote the rules for the 21st Century knowledge economy."

The reason Mr. Obama refers to the TPP as rules is because, over the last 40 years, the global economy has shifted from generating wealth by making and exporting tangible goods to a world where wealth is made by making and exporting intangible goods, namely intellectual property.

In 1975, intangible goods were one sixth of the value of the S&P 500 companies, and, by 2015, intangibles were five sixths of the value of the same index.

After the Second World War, trade in intangible goods grew dramatically because protectionist tariffs were systemically lowered all around the world, and the global economy thrived because of it. It was a system where the member states agreed to reduce a tariff on sector or type of commodity. Ownership of these goods was rarely an issue. A car made in Ontario or oil produced in Alberta is unambiguously owned in Canada. A foreign buyer had to pay the Canadian owner if they wanted the product transported to their country for use there.

But the economy of intangible goods, unlike traditional trade, is governed by rules and restrictions that govern ownership of intellectual property. The intangible economy is the opposite of free trade. It is about rules and restrictions that grant temporary monopolies to those that own valuable intellectual property. These rules determine who is allowed to use what knowledge and how they're allowed to use it.

A practical example comes from the sector I built my career in. Today's smartphones are built from tangible goods, but the profit generated from them is dwarfed by the intellectual property that is captured in the form of patents. For context, today's leading smartphones contain more than 1 million patent claims.

Those who own the key patents reap, by far, the greatest marginal profits in the supply chain.

When a country ratifies a bilateral or multilateral agreement that governs intellectual property, it makes a commitment to enact those rules inside our domestic marketplace. These are very different kinds of commitments from traditional trade agreements in the past because they are now about how we commit to other countries and how Canada will operate its economy internally.

The TPP is about new rules for the protection of intangible assets. Accordingly, the TPP is a very good deal for the current large owners of intellectual property because it expands the scope, duration, administration and enforcement of what they claim as "owned" in other countries.

The U.S. and Japan are large exporters of intellectual property. Intellectual property contributes $3.5 trillion annually to the U.S. economy. Unfortunately, Canada is not a large exporter of intellectual property, but we import a disproportionately large amount.

Canada owns and exports very little intellectual property because we've never had a national innovation strategy. Canada never developed capacity for the 21st century global economy where wealth is generated by commercializing intellectual property.

If TPP was a straightforward 20th century free trade deal that reduces tariffs on most of what Canada wants to sell, then we would not have much to worry about, but TPP is not about accruing benefits of traditional free trade. In fact, the most recent modelling of the TPP shows that the agreement delivers negligible results in the realm of traditional free trade.

Credible studies show that:

. . . the TPP will generate an increase in intra-TPP trade of about 1.5% or US$40 billion. . . which would generate an increase in real GDP of about 0.074% for the parties, and a combined economic welfare benefit of about US$ 29 billion.

For such a small percentage gain in GDP over an extended period of time, why are the U.S. and Japan investing so much effort in the ratification of TPP?

As Nobel-prize winning economist and trade expert Paul Krugman has noted, most of the tangible goods already move tariff free. The same is true in intangible goods, where 97 per cent of world trade in information technology products already move tariff-free under the WTO's information technology agreement.

So what is TPP, if not about free trade? TPP is about expanding "freedom to operate" for winners in the innovation economy and restricting it for the rest.

Although it is often viewed as a legal issue only for lawyers to worry about, freedom to operate is a core strategic and risk-management factor for businesses in the ideas economy. Sophisticated ideas businesses use freedom to operate strategies from the onset of their R&D all the way to the commercializing and distribution cycles.

As CEO of a Canadian technology company that scaled globally from an idea to $20 billion, my principal focus for two decades was to expand our freedom to operate and constrain our competitors' freedom to operate.

Any Canadian idea business that's selling their intellectual property and scaling globally is governed by these ever-changing freedom-to-operate rules and regulations that sophisticated innovation economies create and modify to advance the prosperity of their domestic economy.

TPP wouldn't be such a bad idea for Canada if Canada had an innovation strategy that built our capacity to commercialize ideas and prosper under TPP and similar future agreements. As it stands, Canada went into TPP negotiations without ever consulting a single Canadian innovator and without a strategy for this critical aspect of an innovation economy called "freedom to operate."

None of the aspects that constitute an effective freedom-to-operate strategy are present in Canada today. We don't have prior art libraries, sovereign patent pools, bilateral and multilateral negotiation sophistication, provincial, federal or global judicial strategies, sophisticated standards or regulation strategies, or collaboration frameworks designed to commercialize Canadian ideas globally.

If Canada wants to build capacity for the 21st century global economy, then we will need all of these sophisticated capacities. They are critical infrastructure for the innovation economy, and we urgently need to craft them into our innovation agenda.

TPP is an agreement that further entrenches and expands current large IP owners' freedom to operate at the expense of smaller innovators. That's why the U.S. and Japan, two economies with sophisticated freedom-to-operate strategies and lots of intellectual property, are pushing so hard for TPP ratification. It will advance their national prosperity through collecting more IP economic rents from other TPP signatories like Canada.

Even our traditional industries will come under greater pressure because intellectual property rights are the currency for all innovators in all markets. The future prosperity of energy, mining and agriculture is already being increasingly shaped by innovation and management of intellectual property, and these forces will only increase over time.

For Canada, the best way to determine if TPP is good for our future prosperity is for the public to see the full costs of TPP, with particular attention paid to high-margin imports of intellectual property. We need to see how these high-margin imports stack up against prospective greater exports of our low-margin traditional goods.

It is imprudent to ratify an agreement without knowing if it actually benefits the Canadian economy. Thank you.

The Chair: Thank you, Mr. Balsillie. I will now turn to the question part of this meeting.

Senator Johnson: Thank you, and good morning, gentlemen. It is nice to see you today.

In this morning's Globe and Mail Blayne Haggart writes:

Economists are increasingly worried that these agreements — which we don’t fully understand — are locking in IP regimes that actively impede innovation. So says Nobel economics laureate Joseph Stiglitz, one of the pioneers of the economics of innovation. Milton Friedman, his ideological opposite, was similarly against copyright term extensions, which we have in the TPP.

How do we address the knowledge deficit and the impact on IP that Blayne's op-ed underscores? What is the role of the Government of Canada? Do you propose we demand a reworking of the TPP's intellectual property chapter?

Mr. Colas: Thank you very much for your question. I think it's very interesting.

It is very difficult to have an answer that says yes or no. The chapter on intellectual property is 75 pages long. Many of these provisions of the TPP make reference to other treaties. There is a scope of agreements worldwide. The TPP says, "Yes, I'm going to respect the WTO. Yes, I'm going to respect the World Intellectual Property Organization. Yes, I'm going to respect this." There is a reinforcement of what already exists.

The second element is that you have some elements that are an extension of protection. So maybe you want to focus just on the extension of protection, and I know that, in the European Union, they have a long tradition of extending the protection with regard to pharmaceutical drugs. Sometimes it takes so long to be able to commercialize a drug that the drug owner says, "Well, I've invested so much money in order to access the market. It took time for surveys and applications before I could have the approval of Health Canada or the FDA, and, therefore I need to have some extended protection in order to get my money back, the investment." So there is this extension. Sometimes it can be justified and sometimes not.

In another element, there was this agreement that many countries tried to craft. They did sign an agreement on counterfeiting. Because the European Parliament refused to ratify this agreement, the initiative was stopped. However, with the TPP, the U.S. tried to reinstate some of the provisions that were meant to reinforce the World Trade Organization provisions on intellectual property.

Therefore, it is now an obligation of all TPP countries to have criminal laws and other enforcement mechanisms in order to say that, if you steal a trade secret, you can claim damages and you can use the criminal system. If you counterfeit goods, there are also sanctions.

Finally, in this agreement, it says one thing, which is a good suggestion for Canada, that Canada should ratify the Madrid Protocol. As to the Madrid Protocol, last week I had two clients asking me: Can I file my trademarks worldwide? I said yes. It is going to cost you about $1,500 per country. If Canada had ratified, as it promised a long time ago — and the U.S. did so beforehand — it would have cost this company about $200 per country for filing trademarks worldwide.

As Mr. Balsillie mentioned, we're entering into a world without giving the means to our companies, and sometimes, should we give a bit more of the means to our companies, we will be able to take advantage of these agreements.

Mr. Balsillie: Thank you for your question. Yes, we should rework the IP section of the TPP. It enshrines those that are in a previously advantaged position of owning a lot of IP. Particularly troubling are the ISDS provisions. For the first time ever, IP is now in an ISDS provision, and the nature of the ISDS provisions under TPP, which causes concern in Europe, is that the panels now are hosted in the plaintiff company's country. So decisions on these matters will be in the foreign jurisdictions, not in Canada's courts anymore and not in our country. It's where five sixths of the money is now, so, yes, I have great concerns about the structure of this agreement and the fact that the IP is one long section of 85 pages but also permeates many other sections of the TPP, including the transparency section, the harmonization section and the ISDS section. It is the dominant economic element of this agreement, unambiguously.

The second part of your question is, you asked: What is the role of the government? I say the role of the government is the epicentre of an innovation ecosystem. I did business in 135 countries around the world over 20 years, and I saw that the successful innovation economies have a complete and sophisticated innovation ecosystem developed by the government, in partnership with the innovators. That is completely absent in the Canadian economy. We don't need an innovation strategy; we need a strategy to deal with the fact that we haven't had an innovation strategy for 40 years and so have a great deficit.

Our policymakers confused a science and technology strategy with an innovation strategy, and they are very different. So, yes, the government needs to craft a strategy, and it needs to be done in partnership with our innovators. It needs to focus on reversing this deficit and understanding that the multilateral and bilateral agreements we enter into are almost a central aspect of the infrastructure that we deal our innovators into.

Senator Johnson: It's kind of interesting, isn't it, that we haven't had a strategy for 40 years. Where should we go with this now? You said that freedom to operate in an ideas economy is the essence of it. How about elaborating on the freedom to operate in the field of intellectual property? Is there anything further you want to put forward in that respect?

Mr. Balsillie: No. I think that it's unfortunate that we confused the science and technology strategy with the innovation strategy, because science and technology is coming up with good ideas. Freedom to operate is the core issue in commercializing those ideas, so when we lament our ability to commercialize ideas, people who do not understand the principle of freedom to operate put forward false myths that are unsubstantiated, that Canadians are risk averse and that they are not outward looking. In fact, all facts and studies show that we're very entrepreneurial, very outward looking and very prepared to take risks, but we put them in the arena with one hand tied behind their back. This is an enormous gap in the public policy community of Canada, and they have a lot of explaining to do to the taxpayers in the innovation economy.

Senator Johnson: How, in a country like ours, can that happen, confusing science and technology and innovation? How has this happened?

Mr. Balsillie: That's a question for the policy community to answer.

Senator Johnson: It has been very hard for you.

Mr. Balsillie: I find it inexcusable, and I find our approaches are completely different from those of successful innovation economies around the world. That's why we keep getting fooled in these agreements. That's why we keep getting zero outputs. Canada has had zero outputs in its growth of innovation over 32 years, as measured by Statistics Canada, and everybody shrugs their shoulders and figures it must be in our DNA and then comes up with cultural excuses. No, it's an incomplete infrastructure. It's a catastrophic confusion of science and technology strategy with an innovation strategy and the fact that freedom to operate is a new concept being introduced to you in March 2016, when it was the epicentre of what I did for 20 years. It was the epicentre of my engagement with governments around the world commercializing BlackBerry. I think the policy community in Canada has a lot to answer for this.

Senator Johnson: Which country is doing it best, Mr. Balsillie?

Mr. Balsillie: I have great respect for how Germany does it, and it's very unique. If you notice, the CEO of Facebook is spending four days on a charm offensive in Germany, working with regulators precisely on his freedom to operate. I think the Japanese and the Koreans are enormously sophisticated in my experience, and I can go into great detail about how they do it in the realms I put forward in my comments here. America is obviously top of the class. Israel has created very sophisticated, unique freedom-to-operate strategies for themselves, as have the Swedes. Those would be the ones that I give greatest personal respect to from my personal dealings over 20 years.

Senator Johnson: Thank you very much to both of you.

The Chair: Mr. Colas, do you want to add anything on that?

Mr. Colas: It's the same approach: you adopt a policy and you make impact assessments, but real ones. If you read our impact assessments we make here in Canada — for instance, let's take the environment — we say free trade might have an impact on the environment; however, since we have good laws, there shouldn't be any impact. It will be mitigated. If you read the European Union impact assessment of the Canada-European free trade agreement, they tell you that there will be problems in the transport sector. They identify the issue and don't really try to cover it up.

If you want to have an innovation policy, you adopt the policy, and after that you see what the instruments are to enforce the policy and analyze the impact of it. We should not be afraid of hearing the bad news when ordering an impact assessment. Canada is sometimes afraid when it orders an impact assessment because it wants to sell the deal and get the support of voters. There is a political logic where we're talking about the future and where it is important to know what we sign before we sign.


Senator Rivard: My question is for Mr. Colas, but Mr. Balsillie may also answer.

In your presentation, you pointed to the growing understanding around the need to protect the environment in our pursuit of economic endeavours. One very important endeavour for the entire country or, at the very least, for Central and Atlantic Canada, is TransCanada’s Energy East Pipeline project. The federal government has given the project the go-ahead, but Quebec is preventing it from moving forward because the provincial government has now decided that its environmental watchdog, the Bureau d'audiences publiques sur l'environnement, or the BAPE, needs to review the project. So Quebec may say yea or nay; hopefully, we’ll find out someday.

Should we consider entrusting such reviews to a single body, or do you think it’s a good idea for the federal government to make a decision and for every province to then make its own decision based on similar standards? To tie the question back to free trade agreements, I would like to know whether projects are likely to suffer when it’s always necessary for the federal government to conduct an assessment, on top of another administrative tribunal.

Mr. Colas: I’m not an expert in constitutional law. Your question boils down to how Confederation is organized. From a trade logic standpoint, Ricardo’s old theory of comparative advantage prevails. If your product is cheaper, you will acquire more customers. If you have a fast and efficient way to transport oil, you can sell your oil for less and expand your market. In the world we live in, however, other factors have to be taken into account, factors such as the environment. And that’s where the political community must assume its role as an arbitrator, in other words, weigh the need to optimize production in order to sell against the risk of doing environmental damage and optimizing too much. So it all depends on what the government’s overarching policy is. Does it want to send the message that it favours sustainable development or that it supports trade without regard for the consequences, mainly on the environment?

In today’s world, it’s important to determine the values Canada espouses and the methods it needs to employ to achieve the objectives embodied by those values.

Senator Rivard: Mr. Balsillie, would you care to comment?


Mr. Balsillie: I only have one short comment, and that is that in the 6,000 pages of the TPP and how many million words, they never put in the words "climate change." This is going to shape how we run our economy in a world of factoring the environment, and yet the agreement is eerily silent on climate change. If you believe climate change is a central aspect of our values and policies, I find it incongruent that it is not mentioned in any way, shape or form or addressed in the agreement.


Senator Rivard: Madam Chair, I wanted to know, once our fellow senators have asked all the questions they deem pertinent, whether it would be okay —


The Chair: You would like to go on the second round, absolutely.

I just want to follow up. We used to have traditional trade agreements, Mr. Balsillie, and they were pretty simple, usually focused to goods, and they were pure trade agreements. At least that's what I grew up with. Then we expanded and expanded. If you will recall, the FTA and NAFTA were the first places we started talking about labour issues, climate issues, et cetera. The prevailing opinion was that you do a trade agreement, you can do other sidebar agreements, and you attack the issues of climate or labour in a different way. I think some verdict is still out as to how pure a trade agreement is or how much it is now more all-inclusive.

You're saying that we have no real national innovation strategy and haven't had one for 40 years. You've also made some comments generally on TPP and the lack of policy. Have you determined where this lack of policy is? Is it within government circles? Is it within the bureaucracy, not into that kind of policy development and giving the advice to the government of the day? Is it the responsibility of universities and think tanks? Is it that we've changed our society and governments look to answers differently because there's this instant communication, of which you were part of developing, that made it very easy for interest groups and others to input very quickly and strategically create a situation that a government responds to, rather than the thoughtful decision-making that was ever moving forward of the good old days? In other words, speed has done something to this. Where is the policy lacking today?

Mr. Balsillie: I think that's a very important question. I think we don't have very hard lines separating our post-secondary institutions, the political class, the civil service and the think tanks. There is quite a bit of interplay between them, so it's hard to draw a hard line. I think you ask a very fair question on that.

I think we have orthodoxy in this country that does not fit with how the world shifted. The way you look at hands-off free trade, open borders, in the traditional economy, innovation economies have sophisticated forms of infrastructure that are very different. That policy community was blind to that shift, and that's evidenced in the kind of policies and lack of strategy over the past 40 years.

The numbers of output simply don't lie. We've invested hundreds of billions of dollars in this country over several decades on innovation or science and technology, and we have zero growth in output. It's inexplicable, other than something is fundamentally wrong.

I do believe in careful examination of the root of that, and I simply bring to this committee my experience growing from an idea to $20 billion from Canada in 135 countries and how I had to build and use a commercialization infrastructure outside of Canada because it wasn't in the country. I think we have to look at that orthodoxy and its root for policymaking very closely.

I've seen quite a bit of very active interrelationship between think tanks and business associations and civil servants and politicians. It seems to move as a pack on this orthodoxy, and persuading them that there might be gaps is not the easiest thing to do when people are invested in an orthodoxy.

There are some very smart people in Canada who have a lot to say on this. It was mentioned in an earlier question about certain policymakers and academics who have been trying to get their voices into this for a long time. I think they're beginning to be heard. It would be very helpful to start to challenge that orthodoxy with the kinds of people like Blayne Haggart and Dan Ciuriack and David Wolfe and Danny Breznitz and those kinds of people who seem to be commenting a lot lately, Richard Gold and Michael Geist, and hearing a different view, and letting those that are holding the traditional orthodoxy explain their position besides their broad dismissal that it's evolutionary or that it's not that important or that it's just one chapter or that these people are stuck in with an issue. I think they should properly defend their position and properly articulate it and not just blithely dismiss those that don't absolutely agree with them. I don't think that's fair, especially in light of the fact of our outputs and the distinction between what I experienced around the world and what we've done in Canada.

The Chair: And that is different from our new look at the global value chains, if I understand you, or at least it's a missing link of that.

Mr. Balsillie: As to how you capture value, I tried to explain in my comments how you participate in a value chain. I think we're really talking about how you capture money in a value chain. The problem is that, when it's intangibles, one person can capture 99 per cent of the value but doing 1 per cent of the traditional work in a value chain. Vvalue chains are upended, and TPP is about restructuring global value chains in an ideas economy. If you don't understand how to be very sophisticated in that, you could be doing all the work but getting none of the money.

The smartphone world I was in is a perfect example. There are 400 components in an iPhone and they get $60 of the value, including tangible pieces. It's not just where you perform in the value chain; it's how you capture marginal profits in those value chains. That's 100 per cent a freedom-to-operate issue.

I encourage you to endeavour to understand that and to ensure that it's put into an innovation strategy and is fully inserted in our trade engagements because, the way I read TPP, the overwhelming economic impact of it is going to be freedom-to-operate advantages for the large IP incumbents, which are Japan and the U.S. It's about them getting richer because that's in their interests.

The Chair: Mr. Colas, you made a compelling case about the World Trade Organization and re-engaging more fully. I think the world tried that. There was great hope after the GATT rounds, et cetera, to go into the World Trade Organization, but, when you're trying to get the entire world to agree to an agreement, it's very difficult with all the varying countries. So it didn't move very quickly. Even this committee studied if not WTO, where? So bilateral and regional.

In TPP, this is the first time, in my opinion, that they have tied it so closely, again, to WTO. Your argument is that TPP somehow isn't the right way, WTO, and yet they're reaching for WTO standards. Could you elaborate a little more for me on what you mean on that?

Mr. Colas: Yes. In life, there are various phases, and I think the Doha development round is more or less put aside. The work program has nothing to do right now. So there's like a pause. So that's one aspect.

The second element is that Canada is traditionally worried about the common good, the community, and that's the language or the words that the world is waiting to hear, caring about the system, not only the local interest of some merchants. So the first thing is to be mindful of this preoccupation and this concern and to say it clearly.

The second element is that in WTO, you have this rule of consensus. There are many agreements that have developed, and they were plurilateral, so not unanimous but the ones that wanted to join. You have, right now, a negotiation on trade and services, TiSA, that is outside WTO but could fairly easily be put inside WTO. One way to put it inside is to ensure that the dispute-settlement mechanism uses the one of the World Trade Organization, and then there will be this junction between the agreement and the dispute settlement of WTO.

It's a long shot, in a way. It's not as easy as meeting a minister from Costa Rica and telling him we should have a free trade agreement. However, in the long-run, when Canada is there, Canada is a broker. Canada has a very important role to play. We should not abandon the WTO. I think there is great hope. People will realize how complex it becomes when you have rules of origin for Canada-U.S. For instance, the components you have in your iPhone or car that you want to sell to the U.S. might need to change if you want to sell to the European Union in order to meet the applicable rules of origin. You understand it becomes like a big spaghetti bowl.

The Chair: I think we understand that. The problem is how to overcome it by some consensus or agreement. That's the conundrum of the WTO.

The focus here has been on the TPP. We are also looking towards the CETA. I'm going to put my final question to both of our witnesses. You've concentrated on your difficulties in TPP. Are there similar or different difficulties in CETA, or is that just not your area of study or concern? I'll go with you first, Mr. Colas.

Mr. Colas: The negotiating process with CETA was much more transparent, and the civil society, the provinces and the people in general took a more active part in the negotiation.

In the European Union, these are countries that have the rule of law and more or less similar working standards and more or less similar environmental rules, so there is no shock. I think everybody welcomes this rapprochement with the European Union and also having the same approach with regard to standards and all sorts of elements that we can build up our relationship with. Therefore, I don't see any major elements that should prevent us from signing and ratifying this agreement.

The Chair: Mr. Balsillie, do you have any comments about CETA?

Mr. Balsillie: Yes, Madam Chair. Thank you for the question. I think we're dealing with a global economic system right now where there are no norms that are generally agreed upon in this realm of agreements. You have tremendous differences between Europe and the U.S. on TTIP, and they're resisting the standards that are being pushed in TPP. As well, China is also resisting these pressures.

You have three general structures that are contending and have different issues, and Canada is trying to broker relationships with all three of them. We have to be very careful with what becomes the norm, what becomes incompatible and what becomes contradictions.

I feel much more comfortable with CETA, although I have not read the document as deeply as TPP. What I found very encouraging is that they wanted changes to the ISDS precisely for the same reasons I have concerns with the TPP. They weren't worried about Canada but they were worried the previous version of the CETA would set a precedent for ISDS that they would be encircled to adopt for TTIP.

I like the precedents on ISDS for Europe. I don't think they're trying to overly reach into us in these marketplace rules. I think it's a very good precedent, but we could have very dangerous contradictions where we may sign up for TPP and a European company sets up a U.S. sub and decides to start a suit against Canada through the U.S. because they get more favourable litigation capacities. They will be able to arbitrage the worst of each agreement, and Canada will never get the best, and then we go to China and try to do that too.

We are playing a very dangerous game right now as a country. I don't think we've had a proper discourse. I don't think we've involved the experts. CETA standalone is a good deal, from my general understanding of it, but we have deep complexities here. They are much greater than FTA was for Canada 35 years ago, when we had a five-year study, a three-year national debate and an election over it. I have deep concerns that we have not properly scrubbed and explored the complexities of these agreements we're entering into when it's a one-way door. We really can't get out of them once we sign.

Senator Johnson: It's a fascinating discussion today. I was wondering about the conditions that Canada would be required to enforce Chinese patents, for example, if we want to do business in China, if we sign an FTA with China or if China sees the TPP. Would either of you answer that?

Mr. Balsillie: I think what is very important in the global patent war right now is that China is issuing about a million patents a year, not quite, and the U.S. has about 500,000. Everybody is claiming everything because they want to have freedom to operate for them and restrict others. It's precisely because China is afraid that they'll lose their freedom to operate and be a permanent underclass when they want to grow in the global value chain. If I would read the TPP provisions that give me great concern about how the others govern our internal marketplace, I would say with virtual certainty that those are the equal concerns that China has and would want these modifications.

Yes, we're into very complex rules here about how we're going to be governing the global economy, how these agreements are going to shake out and what's going to be okay in the U.S. versus what's going to be okay in China and what's going to be okay with Europe when Canada is a relatively small, open economy with insufficient infrastructure.

We've put ourselves in this hole, and we're entering into agreements that have enormous implications. You've hit on a very good and vexing question. Do we preclude doing the kinds of agreements we may want with China within TPP if they're uncomfortable with those? Will the Chinese do the very same strategy in Canada that I said the Europeans could do through the U.S., and are those blocked or are those allowed?

In my interplay with policy-makers, negotiators and politicians, I've not gotten confidence that these things have been thought through one bit.

Senator Johnson: Thank you. That is very discouraging.

Mr. Colas: No, it's not that discouraging. If you do business with China, there is one concern: will a Chinese partner copy you or not? Will this copy be sold in China or outside of China? Sometimes, if you want to do business in China, you will file a patent in China in order to secure your rights. Since China ratified the World Trade Organization agreement, it made enormous changes in respect of its intellectual property. It's not perfect, but the world is looking at China in order to make sure that the judges do their proper job, the police, and the whole system protects intellectual property.

You never only file a patent in one place. Usually you also file a patent in the U.S. So if the Chinese competitor wants to sell the stuff in the U.S., you call the judge in Delaware and they issue warrants. You understand there is a strong legal system in the U.S. in order to enforce intellectual property, and then you start negotiating with the Chinese counterfeiter. You need to strategize.

But to complement what Mr. Balsillie was saying, here in Canada we lack money. If you're an investor, you're in California, you just cross the street and you have a company to invest in. If you call Californians and say "Why don't you come to Canada and invest?" They need to take a plane and it's very long, so why should they bother? They have all sorts of opportunities. Here, we don't have enough risk capital, and it's risk-averse capital. The ones who have strong ideas and want to finance their IP development and innovation have a hard time finding proper investors. That would be part of the innovation in the policy.

The Chair: I know Senator Rivard has a question that is a little off the agenda but very important.


Senator Rivard: Mr. Balsillie, had you been in the room, I would have asked you for a private interview. I will ask the question anyway, but feel free not to answer, if you prefer.

Over a decade or so ago, you tried to purchase an NHL franchise with a view to bringing an expansion team to Markham or Hamilton. I am a Quebec senator from Quebec City. You will no doubt recall that Quebec City lost its hockey team exactly 21 years ago. We have a new arena now. You crossed swords with the NHL bigwigs, but to no avail.

If you had any predictions, comments or suggestions about how the situation will play out, I invite you to go ahead and share them.


Mr. Balsillie: I'm not familiar with the issue. I'm not familiar with the details of the issue, and I haven't had a call for several years. Sorry about that. But if that's your plan, good luck with it.


Senator Rivard: You would make a good politician. Thank you.


Mr. Balsillie: No.

The Chair: I think those are personal experiences that he wanted to share.

The input from both of you is extremely important. You've reached beyond some other witnesses who have addressed specific issues in TPP. The whole idea of the national innovation strategy and that perspective is extremely important in our study. We haven't come quite to looking at anything but the initial drafts. We haven't had the legislation come before us on TPP or CETA yet, but we thought it was important to canvass Canadian opinions and look at these agreements from all sides. Needless to say, there are people very supportive of TPP, and we have also received comments on the difficulties in TPP.

I wish we had more time, because the one other question I may have put to both of you is what happens if we don't. It's take it or leave it at this point. It's negotiated, and it's at that point. We all seem to be waiting to see what happens in the United States and a president who seemed to want it, but the candidates seem to have a different opinion. We'll see if they have the same opinion after the election.

We have some time to reflect on these issues. When we get to the legislation, it will be to make a determination, not a suggestion for amendment. But what we do have is a lot of scope of how to make something better, should we agree with it, and you've given us a lot of ideas about how we can strategize our report into something more productive for the Canadian community.

Mr. Balsillie, thank you for making the effort to try to get to Ottawa. Some of us will be trying to get out tonight, and we may have the same problem you have. Thank you for agreeing to the video conference. Mr. Colas, thank you for your depth of knowledge, particularly on the WTO and other issues. We've been very fortunate to have both of you before our committee, and we will take what you say into account.

The Standing Senate Committee on Foreign Affairs and International Trade is continuing its study to hear witnesses on the topic of bilateral, regional and multilateral trade agreements: Prospects for Canada.

We have had heard from other witnesses, and I won't repeat what I said when introducing the first panel.

We are pleased to have Matthew Kronby, Lawyer and Partner, International Trade, Investment and Foreign Business Transactions, Bennett Jones Toronto, by video conference. Mr. Kronby practices in the areas of international trade, investment, and regulatory compliance. He is very familiar with WTO, NAFTA and other trade agreements. We are pleased to have this expertise before us in our general study. Thank you, Mr. Kronby, for coming, for accepting our invitation. We like presentations but we also like questions at the end, so welcome to the committee.

Matthew Kronby, Lawyer and Partner, International Trade, Investment and Foreign Business Transactions, Bennett Jones Toronto, as an individual: Thank you, Madam Chair. Honourable senators, if you don't mind, I will begin with what I hope will be a short presentation that will leave lots of time for questions.

I want to begin by thanking you for inviting me to share my views with you today. I commend the committee for taking the time to consider this important topic.

Over the past month, you've had the benefit of hearing from and questioning numerous experts from government, from the private sector and academe who have addressed a wide range of issues relating to trade and investment agreements and how they advance or, from some perspectives, don't advance Canada's economic interests. I've had the benefit of reading the testimony of the previous witnesses, although I didn't hear this morning's witnesses.

In these opening comments, I will try not to cover too much of the same ground that the previous witnesses have covered. Instead, what I want to do is make five suggestions as to what Canada can do better in order to effectively negotiate trade and investment agreements and maximize the returns from those agreements for Canada. I base these suggestions on my prior experiences and observations in negotiations on behalf of Canada, and also on my ongoing dealings with clients and others in the business community who are affected by the agreements that Canada negotiates.

First, there is a need to deepen and institutionalize the process of consulting with Canadian businesses and other stakeholders at senior levels, both in the preparation for and during trade negotiations. The federal government used to do this through the international trade advisory committee and Sectoral Advisory Groups on International Trade, known as SAGITs, but those institutional processes fell by the wayside after the NAFTA.

While I don't generally see eye-to-eye with Professor Geist and what he has said about the substantive outcomes of the TPP negotiations, I suspect there is a lot of truth to his comment that, in those negotiations, Canada was at a disadvantage due to lack of coordination and lack of transparency between government negotiators and interested stakeholders.

I can tell you that, in negotiations in which I participated, including the CETA, getting the detailed information we needed from stakeholders about Canadian offensive and defensive interests was a continual source of frustration. Our chief negotiators in TPP and CETA, both of whom you've heard from, did superb jobs, as did their teams, but their jobs would have been considerably easier with better consultative processes in place like the United States and the European Union have and like Canada used to have.

Second, and as a somewhat related point, a number of witnesses have flagged that services trade is vitally important and that, in order to better manage how we approach in it trade negotiations, the federal government needs to develop better metrics for measuring it. I fully agree with that.

Third, to increase trade volumes, negotiations should put greater emphasis on regulatory convergence. It's certainly true that tariff elimination remains an important part of our recent trade agreements. Canada achieved some excellent outcomes in this area in both the CETA and the TPP, but most non-agricultural tariffs are already low. The average applied tariff rate on manufactured goods among WTO members is just 2.6 per cent. Eliminating residual tariffs can still be helpful, in part because of their cumulative effect on trade in the supply chain model.

However, there are major gains in market access to be realized by focusing more effort on regulatory harmonization or recognition of regulatory equivalence. I appreciate that this will be difficult, as the U.S. and EU TTIP negotiations illustrate, but when OECD studies estimate that technical barriers to trade affect about 30 per cent of international trade, and sanitary and phytosanitary measures affect over 60 per cent of agricultural trade, there is a huge potential upside to accepting this challenge. To be clear, this does not mean lowering our standards or a race to the bottom. It simply means that, where there is more than one way to achieve comparable outcomes with respect to matters like health, safety and environmental protection, that flexibility should be a part of our trade agreements.

Fourth, streamlining rules of origin: Our recent agreements, like the CETA and the TPP, have made good progress in improving the rules by which the origin of a good is assessed to determine whether it qualifies for tariff preferences in order to make those rules simpler and more flexible. However, rules of origin procedures under our various trade agreements remain complex and inconsistent. A 2011 WTO study noted that tariff preferences are often underused because onerous rules of origin procedures make the costs of compliance higher than the perceived worth of the underlying preference margins. Some studies have suggested that these compliance costs can run as high as 5 to 25 per cent of the value of the finished goods at issue. These costs and complexities are a particular barrier for small and medium enterprises, and it's worth examining some of the more ambitious fixes that are now being proposed, like doing away with most of our customs tariffs entirely.

Lastly, while I appreciate that the mandate of this committee is international trade, if we as Canadians want to maximize opportunities in our own markets and generate the scale we need to compete internationally, we need to eliminate barriers to interprovincial trade. The European Union, a collection of 28 sovereign countries with a combined population of over 500 million people, has a mostly free internal market for goods and services. Canada, a single country with a population of just 35 million people, less than that of Poland, less than that of California, doesn't.

One of your previous witnesses, my colleague Mr. John Weekes, noted that, as a result, we might be giving our foreign partners greater rights and benefits to sell their goods and services in certain provinces than are enjoyed by Canadians living in other provinces. John understated the case. It's not that we might be; we are. The CETA will do just that, for example, with respect to government procurement. It should be a source of deep embarrassment to our federal and provincial governments that, while we're asking other countries to open their markets to us, we won't fully open our markets to ourselves. I don't believe that our federal structure is so ossified that, with the right leadership at both levels of government, we can't achieve this.

Thank you again for giving me this opportunity to speak with you, and I look forward to your questions.

The Chair: Thank you. I should say, on your last point, a different committee, Banking, is looking at certain interprovincial issues, again, and we felt that ours mandate was in foreign policy. As the Senate, we're going to be addressing all of those concerns that you have placed. I appreciate the good cooperation that we have between the committees.

I want to play a bit of devil's advocate with you, having been posted in Europe. We can sign good agreements. For example, the European Union has good agreements within itself, but, when you get to politics, it's interesting how all of those are interpreted. Representing Canada in Europe, we start with the country we're in, and then they say there are European regulations. Then, phytosanitary issues come up, and is it European? Is it Portuguese? Is it Spanish? You find yourself not only with one series of bureaucracies but more than one to deal with. I'm not sure that I agree with you that their system works any better than ours.

The overriding question, in my opinion, is: What is your take on the agreements we've had and how politicized they are? We talk about the U.S. We sign agreements, and then we find that the political will goes elsewhere, and then we have to use our political will to rebut it, witness the cattle industry. It affected Japan and Korea for us, et cetera.

Mr. Kronby: If I may, starting with your point about the European Union, I'm certainly under no illusions that the European Union is a perfect open market. It isn't, and we've seen this in a number of areas, including, for example, with respect to trade involving genetically modified organisms.

However, at the same time, I could not forego the opportunity to emphasize that we in Canada, a single country, a small single country, really need to get our own act together if we want to be more competitive and better able to trade outside of our borders by improving and opening our internal markets. So that's really my point, but I'm certainly not suggesting that the European Union is perfect, nor can one expect it to be, given the nature of the beast.

With respect to your last point, if I understand your question correctly, you're suggesting that these agreements are simply a starting point. They then have to be respected and implemented in good faith, and that's certainly the case. It does require a considerable amount of goodwill, which is sometimes there in greater quantities than in others. We've run into problems under the NAFTA, for example, periodically, and at the WTO. But that's one of the reasons you have dispute settlement mechanisms of various sorts in these agreements, and those dispute settlement mechanisms, less so in the NAFTA but particularly at the WTO, have served Canada very well over the years, including with respect to matters like exports of beef to Korea and, more recently, for example, the U.S. country-of-origin labelling with respect to cattle and pork.

The Chair: Do you believe the dispute resolving mechanisms in TPP and CETA are moving in the right direction? They're somewhat different than we've had in the past. Certainly, I followed FTA to NAFTA, and that was an improvement. People talk about the delays and the difficulties, but the rebuttal always was that, if we didn't have them, we would be worse off. In TPP and CETA, are they valuable tools for modern-day situations?

Mr. Kronby: I think they are. There is always a problem. Speaking specifically with respect to the state-to-state dispute settlement mechanisms, there is always a problem in that they're forward looking, and this is an issue at the WTO as well. There's really no effective way that anyone has come up with yet of going back and disciplining countries or "disincentivizing" countries for measures they have taken. You can only challenge those measures prospectively and get prospective relief.

The TPP and CETA mechanisms, as far as I can tell, are quite good and address some of the problems we've seen in the NAFTA in recent years with getting rosters in place, constituting panels and being able to proceed even if one or more parties to the dispute is dragging its heels. I think these can be effective mechanisms.

Whether they are used much is an open question. I think we've seen in regional and bilateral trade agreements that they don't tend to get used as much as the WTO mechanism, for various reasons. To the extent to which there are additional and deeper obligations in the TPP agreement and the CETA that could become the source of disputes, then I expect we will use them periodically.

Senator Johnson: You pretty much covered the question I had, chair. I don't know if anyone else has a question in terms of the trade agreements. I don't right now.

The Chair: Then I will continue as the chair. There has been this feeling that there are parts of the agreement in TPP that are helpful and other parts that are not, for varying sectors and industries in Canada. Is it your opinion — perhaps I'm showing my own bias — that trade agreements have obviously some compromises in them and that the government of the day will need to take that into account? If there are changes to any sector, that there have to be some other supporting mechanisms to strengthen that growth area. It's not all or nothing in the TPP. It may be that we have to do other things and do them differently in Canada. You have pointed out one very positive one, the intra-provincial issues and regulations. Are there other mechanisms that you're aware of that we should be using, other than subsidies or that period that we allow people to get used to the new situation?

Mr. Kronby: I don't think it's any secret that there are always going to be winners and losers in terms of existing interests under free trade agreements. I have yet to see any negotiators who are so good that they can succeed 100 per cent in protecting existing defensive interests while achieving everything a country wants offensively.

Certainly the TPP and the CETA, like every other agreement, involve compromises, and not everyone will be happy with those. I think one of the advantages that we have in Canada and have had over the years is we understand that and we offer greater social safety nets for those who are displaced by some of the short-term consequences of free trade agreements in terms of additional competition from our trading partners than do some of our other trading partners like the United States.

At the same time, over the years, we've been prepared to recognize that certain sectors may need transitional assistance in order to help them adapt to more competitive environments. The example that is often raised, I think because it's a good example, is the support we gave to the wine industry at the time of the Canada-U.S. FTA and NAFTA in making it more competitive, changing its practices and enabling it to compete internationally. I think the results there speak for themselves. I'm certainly not averse to similar initiatives with respect to sectors that may be affected by the CETA or the TPP.

The Chair: I think I tend to agree with you on the wine industry. That is an example that keeps coming back as we keep looking more and more to our own market when we're talking about quality wines. That has been a very good by-product.

Senator Marshall: As you embark on trade agreements and finalize them and then embark on a new one, are the lessons learned fairly generic or does it depend if, for example, whether the trade agreement is mostly on goods and the next one is more on intellectual property? Are the lessons learned transferable from agreement to agreement?

Mr. Kronby: I think a lot of the lessons are learned. Certainly what I have seen in the CETA and TPP negotiations and the outcomes there is that the lessons have been learned by our trade policy officials and our negotiators.

To give a couple of examples, with respect to simplifying rules of origin, one of the things I mentioned, I think the lessons learned from the NAFTA did translate into improvements in the CETA and the TPP, certainly there. Another area where we definitely learned lessons is with respect to the investor-state dispute settlement mechanisms in both the CETA and the TPP, which reflect the lessons of the last 20 years with the NAFTA, particularly the lessons that we have learned as a respondent in investor-state dispute settlement cases, so yes, absolutely. We learn from previous agreements, regardless of whether we're talking about goods, services, investment or other issues. We learn lessons from previous agreements, and I credit Canada's negotiators for having done so.

Senator Marshall: After a trade agreement is in effect for five years, is there some sort of formal process carried out to look back and see how successful it has been so that we can firm up and learn what we did right and what we did wrong?

Mr. Kronby: I don't believe Canada has that process. I may be wrong there. I know some countries have an institutionalized process for doing that. I think it's a great idea. I think it makes a lot of sense.

Senator Marshall: It would be sort of like a sunset clause in legislation. After five years, we like to go back and see what impact it has had. I think it would work for trade agreements.

Mr. Kronby: I'm not sure a sunset clause is exactly what you're talking about, but certainly an automatic institutionalized domestic review mechanism, yes.

Senator Marshall: I know "post-mortem" is not the right word either, but I think it's along those lines.

The Chair: I think it's a review mechanism. We have not had those formally, but we do have many of them informally, and this is one of the committees that reviews and tracks those kinds of issues. We rely on our sources to bring in problems. Sometimes we study certain aspects of trade. We look at other countries and see whether we've lost or gained opportunities but, you're right, we don't have something regular.

Senator Marshall: Lessons learned is good, but I think it would be more advantageous if there was a formal process in place where we could look back and review.

Senator Beyak: I've been interested in interprovincial trade barriers for decades. I sat on committees in the 1980s, and I sat on Banking as a replacement a couple of weeks ago when Minister Bains was there and assured us that things would change, but history isn't very reassuring on that issue. I wonder if you have seen a model in Europe that we could perhaps emulate. Sometimes there's something sitting right there that's so easy and no one thought of it.

Mr. Kronby: I haven't seen a model. Europe, which is a collection of 28 sovereign states, is certainly very different from a federal country like Canada, as you well know. Each federal country that deals with these issues has to take into account the particular federal structure and constitutional regime under which it operates. Unfortunately, I don't have another model I can give you. I would be happy to consider that and get back to you. It's an interesting question.

The Chair: It would be helpful if you could give some thought to that. You can file it with the clerk of the committee, who will disseminate it to the committee.

Senator Johnson: Mr. Kronby, I have a question with regard to services, which is an important and growing part of our economy in Canada. What should Canada's priorities be for facilitating the export of Canadian services?

Mr. Kronby: Do you ask in terms of specific sectors or in more general terms?

Senator Johnson: Either, both. What is your view on that?

Mr. Kronby: I know that we have made some significant sectoral progress in terms of opening other markets to things like environmental and engineering services. Educational services have been something of a priority and should continue to be a priority. Those are areas in which Canada excels.

One other area, which is cross-sectoral, deserves more attention than it has received, although we have accomplished a fair bit both in the CETA and in the TPP in this area: the temporary movement of people, generally business people, to support business investments, sale of goods and the supply of services in other countries. That's an area that I think deserves continued attention.

More generally, though, the opening of services markets abroad by agreements like the TPP and the CETA has been rather limited. Most of the gains have not been in terms of new market access but in terms of effectively grandfathering and freezing existing barriers so that they can't be made more restrictive, which creates a certain degree of certainty, at least, for Canadian companies that want to supply services abroad. At the same time, it ensures that if those foreign markets liberalize in the future, those liberalizations will be locked in. I think that has been the achievement.

One thing I'm looking at now is the trade in services agreement, which is a pluri-lateral agreement being negotiated in Geneva but outside the WTO among a number of like-minded countries. It attempts to open trade in services beyond what the WTO has been able to accomplish through a general agreement on trade and services. It will be very interesting to see what kind of meaningful deepening of services trade that agreement achieves. Canada is very active in that agreement. Our negotiators there are looking at expanding market opportunities for Canadian companies across a range of service sectors with all or most of the parties to that agreement.

Senator Johnson: On the TPP, President Obama said they wrote the rules for the new knowledge economy. What is your view of how the TPP will fan out at the end of the day? There seems to be so many pros and cons. It's very complicated. We don't all fully understand every detail of it. You've had experience in Washington in your career as well and know their whole take on things. Could you give us your thoughts on where we will be at the end of the day on this?

Mr. Kronby: Well, I certainly hope that the TPP is ratified and comes into force. There's a lot of uncertainty out there, no secret, particularly with respect to the United States. Japan seems to be fully onside. As you probably know, for the TPP to come into force with the way in which the provisions are structured effectively, both the United States and Japan have to ratify it. It remains uncertain now whether and when the United States will ratify it. It's being held up by congressional politics and electoral politics — at the congressional level as well as at the presidential level.

We've seen this sort of thing before, to some extent, with previous agreements, all of which have been rather controversial. I'm still cautiously optimistic that the United States will ratify; but, at the same time, there does seem to be a shift in mood in the United States with respect to trade agreements. You don't have the same consistent support of Republicans and certain parts of the Democratic party that you used to have for trade agreements.

I'm not smart enough to know what the outcome will be there, but my view is that if the United States ratifies, then Canada certainly should ratify. It would be a serious missed opportunity for Canada if the TPP Agreement were to come into force and Canada were not part of it.

Senator Johnson: It will likely be under the next U.S. administration, we were told in Washington two weeks ago. It will be a while yet to work it through.

Mr. Kronby: That's right. There's been some talk over the last few months about the possibility of getting Congress to approve the TPP during the lame duck session after the fall elections; but I don't know how realistic that is any more.

The Chair: Mr. Kronby, thank you for putting a different perspective here before us with respect to the trade agreements and for some of your highlighted comments on the interprovincial issue, which needs addressing if we are to have competitive advantages in trade agreements. It was very kind of you to have read our testimony and come prepared not only to give your comments but also to reinforce or diverge from other testimony. It's extremely helpful. Thank you very much.

We are adjourned.

(The committee adjourned.)

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