Foreign Affairs and International Trade

Thursday, June 1, 2023

ELEVENTH REPORT

The Standing Senate Committee on Foreign Affairs and International Trade has the honour to table its

ELEVENTH REPORT

Your committee, which was authorized to examine the subject matter of those elements contained in Divisions 4, 5, 10 and 11 of Part 4 and Subdivision A of Division 3 of Part 4 of Bill C-47, An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023, has, in obedience to the order of reference of April 27, 2023, examined said subject matter and now reports as follows:

1. On May 10, 2023, your committee received testimony from Global Affairs Canada (GAC) and the Department of National Defence and the Canadian Armed Forces regarding the subject matter of those elements contained in Division 11 of Part 4 of Bill C-47. Your committee understands that Division 11 of Part 4 of Bill C-47 would amend the Privileges and Immunities (North Atlantic Treaty Organisation) Act in such a way to allow Canada to ratify the Protocol on the Status of International Military Headquarters set up pursuant to the North Atlantic Treaty (Paris Protocol).

2. Blair Brimmell, Head of Section, Climate and Security, Security and Defence Relations, GAC, explained to the committee that these amendments would enable Canada to implement the obligations contained in the Paris Protocol, allowing “the Governor-in-Council to make orders to provide legal status to the NATO Climate Change and Security Centre of Excellence.” Your committee understands that this Centre of Excellence, which would be headquartered in Montreal, would receive financial support from 10 other NATO member countries in addition to Canada and would work with a wide range of sectors and partners to fulfil its mandate.

3. On May 11, 2023, your committee received testimony from GAC, the Department of Finance Canada, and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) regarding the subject matter of those elements contained in Division 10 of Part 4 and Subdivision A of Division 3 of Part 4 of Bill C-47.

4. Division 10 of Part 4 of Bill C-47 would amend the Special Economic Measures Act (SEMA), the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) (Sergei Magnitsky Law), and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Your committee understands that the overall purpose of these amendments is to improve the effectiveness of Canada’s sanctions architecture, including by counteracting sanctions evasion and increasing information sharing among federal departments and agencies. Among other changes, Division 10 would amend the SEMA and the Sergei Magnitsky Law to establish criteria for when property owned by an entity is deemed to be owned by a person subject to an order or regulation made under these Acts. Division 10 would also amend the SEMA by adding “persons outside of Canada who are not Canadian” to the list of people and entities in relation to whom certain activities may be prohibited or restricted. Your committee understands that this amendment would allow for the listing of persons in third countries who assist a state sanctioned under SEMA under that primary state’s regulations, rather than making separate SEMA regulations for the third country.

5. Erin Hunt, Director General, Financial Crimes and Security Division, Department of Finance Canada, told the committee that Division 10 would also amend the PCMLTFA to require FINTRAC to disclose information to GAC when FINTRAC has reasonable grounds to suspect that money laundering or terrorist financing is taking place and when the information would be relevant to the Minister of Foreign Affairs’ sanction mandate. Ms. Hunt said the federal government will launch a parliamentary review of the PCMLTFA this year, which she indicated would include a public consultation aimed at examining ways to further counter illicit financial flows.

6. Subdivision A of Division 3 of Part 4 of Bill C-47 would amend the PCMLTFA. Specifically, the amendments are intended to strengthen Canada’s ability to combat financial crimes, including by improving information sharing between law enforcement and FINTRAC. The amendments also seek to strengthen the registration framework for money services businesses. Ms. Hunt explained that the use of unregistered money services businesses is a technique used by money launderers. She told the committee that the measures in Subdivision A would make it a criminal offence to structure transactions with the goal of avoiding triggering FINTRAC reporting. Ms. Hunt further noted that the proposed amendments would improve whistleblower protections for employees who report information to FINTRAC.

7. On May 17, 2023, your committee received testimony from the Department of Finance Canada regarding the subject matter of those elements contained in Divisions 4 and 5 of Part 4 of Bill C-47. During the same meeting, the Canadian Centre for Policy Alternatives (CCPA) and Trade Facilitation Office Canada (TFO Canada) provided evidence regarding the subject matter of elements contained in Division 4 of Part 4 of Bill C-47.

8. Division 4 of Part 4 of Bill C-47 would amend the Customs Tariff in order to renew, for a 10-year period, two preferential tariff programs for developing countries – the General Preferential Tariff (GPT) program and the Least Developed Country Tariff (LDCT) program. Both programs, which are set to sunset on December 31, 2024, would be prolonged until December 31, 2034. Your committee understands that the amendments contained in Division 4 of Part 4 of Bill C-47 would also establish a new program – the General Preferential Tariff Plus (GPT+) program – for a period of 10 years starting in January 2024.

9. Yannick Mondy, Director, Trade and Tariff Policy, Department of Finance Canada, explained that preferential tariff programs aim to support export-led economic growth of developing countries. She added that the Government of Canada proposes to establish the GPT+ “to build on Canada’s inclusive trade agenda with additional tariff benefits to the GPT program for countries that meet certain additional standards on human rights, environment, labour, and gender equality.” Ms. Mondy informed your committee that the Department of Finance Canada has been engaging with other federal departments to identify the international norms and conventions that would be used to assess adherence to, and compliance with, these standards. If Bill C-47 is enacted, the Governor-in-Council would be responsible for decisions regarding the framework to determine countries’ eligibility to the GPT+ program. During their testimony, Stuart Trew, Researcher, CCPA, and Steve Tipman, Executive Director, TFO Canada, encouraged the Government of Canada to study the effectiveness of its preferential tariff programs in supporting trade diversification and sustainable development. These witnesses also recommended greater harmonization of the rules of Canada’s preferential tariff programs with the European Union’s preferential tariff programs, as a way to simplify the use of these programs for private enterprises in developing countries.

10. Your committee understands that Division 5 of Part 4 of Bill C-47 would amend the Customs Tariff to indefinitely remove Belarus and Russia from Canada’s list of countries entitled to receive Most-Favoured-Nation (MFN) tariff treatment. Ms. Mondy told your committee that since March 2022, when Canada temporarily revoked MFN tariff treatment status for Belarus and Russia, “over 90% of the imports from these two countries have been curbed.”

11. Your committee has no objections to the amendments proposed in Divisions 4, 5, 10 and 11 of Part 4 and Subdivision A of Division 3 of Part 4 of Bill C-47, An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023.

Respectfully submitted,