STANDING COMMITTEE ON INTERNATIONAL TRADE
EVIDENCE
THURSDAY, FEBRUARY 20, 2020
The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)):
I’m calling the meeting to order, pursuant to the order of reference of Thursday, February 6, 2020, Bill C-4, an act to implement the agreement between Canada, the United States of America and the United Mexican States.
Mr. Colin Robertson (Vice-President and Fellow, Canadian Global Affairs Institute):
Chair, my remarks draw from my previous experience as a foreign service officer serving on the team that negotiated the Canada-United States Free Trade Agreement and the NAFTA, on my postings in New York, as consul general in Los Angeles, as first head of the advocacy secretariat at our Washington embassy and, more recently, as a member of the trade advisory committee to the deputy minister of international trade.
I encourage members to pass the legislation implementing the Canada-U.S.-Mexico agreement. Trade agreements are like riding a bicycle: Keep cycling and when you hit bumps make adjustments as necessary, but keep cycling. CUSMA is the best possible agreement under the circumstances. It’s not perfect, but for Canada it both preserves access to our largest market and preserves the North American platform incorporating Mexico.
The Canada-Mexico story gets scant attention but it’s the hidden treasure of the NAFTA story. Mexico is now our third-largest trading partner and, as we witnessed, a valuable partner and ally in recent trade negotiations with the Trump administration with not just the new NAFTA, but in reversing U.S. protectionism through country of origin labelling.
The new agreement is not perfect. lt is freer trade not free trade, but consider where we started. President Trump claimed it was the worst deal ever negotiated. Commerce secretary Wilbur Ross said it was for Mexico and Canada to give, and the United States to get. The Trump administration thought they had us over a barrel because we, Mexico and Canada, were much more dependent on the U.S. than they were on us. We each account for close to 18% of U.S. exports, while for us the U.S. takes almost 75% of our exports. For Mexico, it’s about 80%.
Trade generates two-thirds of our GDP, making us the 12th-largest export economy in the world. For the U.S., trade represents just 27% of its GDP. Mr. Trump well understood these asymmetries.
Despite these disadvantages, we updated the NAFTA with new chapters on digital trade, intellectual property, labour and the environment while keeping dispute settlement and supply management. At the same time we managed to drown investor-state provisions. The unjust steel and aluminum tariffs are gone. Our auto trade is managed trade. It’s a bit like that of softwood lumber, but we should be able to manage this to support jobs and more investment.
Thanks to the Democrats in the House of Representatives, our gives on patent protection for biologic drugs that would have raised health care costs for provinces were rolled back. The Democrats also secured better enforcement on environmental and labour provisions, all of which we had sought in the negotiations.
ln short, we have a high-quality North American trade agreement, something we sought to obtain through the trans Pacific partnership. lnstead, we now have an up-to-date Canada-U.S.-Mexico agreement with the advantage over the U.S. in trans-Pacific and trans-Atlantic markets through CPTPP and CETA.
This leads me to my recommendations. First, CUSMA is the result of an all-of-Canada effort involving the Prime Minister, ministers, premiers, parliamentarians and legislators, business and labour leaders all working with their American counterparts with complementary messages and purpose. This work must continue and become a permanent campaign. American protectionism is older than the republic, and it will continue no matter who is president. We need trade diversification, yes, but we cannot change geography. That geography gives us access to the biggest and most innovative market in the world.
Working Capitol Hill daily from my embassy, and through my experience at my consulates, I learned that just as all politics is local so is all trade. While we can’t make donations to campaigns, we can illustrate the jobs that Canadian trade and investment create by district and by state. We need to keep this data current. Importantly, you as parliamentarians need to keep reminding Americans of these facts, and do this through regular meetings with U.S. legislators—local, state and federal.
There are lots of opportunities, and not just the Canada-U.S. Inter-Parliamentary Group but regional conferences of state and national legislators, important forums like PNWER and NASCO, as well as the sectoral industry and farm group meetings. First, you need to be there to develop relationships and to make the case for Canada. Use your travel points to go to Washington, and I encourage you to adjust the rules for travel throughout the United States. As you will appreciate, nothing is better than a meeting on your home turf.
Second, with the trade agreement in place there is still unfinished business when it comes to regulation and infrastructure. The thicket of national, provincial and local regulations and standards needs to be harmonized or made complementary. CUSMA helps, but we’re also working on, through separate initiatives launched by the Harper government and Obama administration, regulatory co-operation and beyond the border. These have been continued by the Trudeau government and the Trump administration. They continue, but after the initial burst of enthusiasm, I’m afraid they’re now buried within our bureaucracies. Progress requires political oversight by this committee, including hearings to identify the roadblocks, raise consciousness and keep government noses to the grindstone. Your constituents will thank you.
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People and trade pass through our border points, as well as roads, rail, hydro and pipelines, bridges and tunnels, airports and rail stations. They need improvement. Too often they are choke points that hamper passage and productivity. Canada has an infrastructure program, but is it moving fast enough? This should be an area of close collaboration by all levels of government. Again, parliamentary oversight of the progress is essential. The U.S. administration and Congress are already talking about a trillion-dollar infrastructure program. We need to ensure it is complementary to our efforts, and because procurement is not part of CUSMA, leave it to governors and premiers to work out a procurement agreement as we did in 2010.
Harvard’s Belfer Center points out that North America is the next great emerging market, possessing abundant energy, a skilled workforce, technology and a big market. However, we need infrastructure.
Meanwhile, we enjoy first-mover advantage of the U.S. with the European Union and CPTPP nations, but only if we seize these opportunities. Our competitiveness depends on our ability to get goods quickly to market, whether in North America or across our oceans.
Third, we need to know more about North America, especially the United States. Diversification is a laudable goal, but for Canada, when it comes to trade and security, it will always be the United States and then the rest. Anyone in business will tell you market intelligence is essential, whether you are buying or selling. For example, how many of you can tell your constituents how many of their jobs depend on U.S. investment and trade? We can do it for the U.S., and the Business Council of Canada has created an interactive map that can pinpoint jobs by congressional district and state. Why don’t we have one for Canadian constituencies, and why not include TPP and CETA? People understand why trade matters to them.
Given our propinquity and innate understanding of the United States, why aren’t we turning this to our advantage? How many serious centres for the study of the U.S. are there in Canada? How many Canada research chairs focus on the United States and our trade? You will be disappointed in the answer.
I encourage you as parliamentarians to pass CUSMA. I encourage you to press for investments that serve our national interest.
In conclusion, we always need to keep in mind that Canada’s influence in the world is measured to a large extent by our understanding of the United States. By using our knowledge and relationships with Americans, our ability to leverage our influence in Washington and state capitals makes us a more desirable partner with the rest of the world, because they also have to do business with our often-complicated neighbour.
I’m going to go to Mr. Robertson.
Welcome, Colin. You and I have known each other for a long time. You made a curious statement. You said that this was the best agreement under the circumstances.
“Under the circumstances” sound like weasel words. Essentially, we didn’t get a better deal. We didn’t get a win-win. We got the best we could under a Donald Trump. Is that what you were implying with those words?
Yes, sir.
Thank you.
My next question is for the Canadian Global Affairs Institute. It is my understanding that you had a conference to discuss aspects of CUSMA with a range of experts, diplomats and consultants.
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Yes, we have an annual trade conference in Ottawa.
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What were the key messages from that conference about this deal?
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The conference was held while the negotiations were still taking place. We’ve had two, and in each case we discussed various aspects of the agreement and what Canada should be seeking. We had participation from the current trade team, including people such as Steve Verheul.
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Are you satisfied that most of those discussions are implemented in this agreement?
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Yes, sir. Trade negotiations are a give-and-take. Again, as I was saying in response to Mr. Fast, the circumstances were that the United States came in, and as Mr. Ross, the commerce secretary, put it quite succinctly, it was for Canada and Mexico to give and the United States to get. I think we did extremely well under the circumstances. We preserved that access to the U.S. market, which is vital, as has been pointed out by other witnesses, and we were able to add new chapters on labour and the environment.
It’s not a perfect agreement. I would just also point out that we shouldn’t expect a trade agreement to be the be-all and end-all for anything. We have, after all, the Paris climate accords, which I think are the appropriate vehicle to deal with climate. We have the International Labour Organization measures, which we abide by. Trade agreements should not be seen as the catch-all for everything, because then they sink.
Thank you very much.
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Mr. Robertson, I wanted to touch a bit more on the buy America provisions and the importance of procurement. You mentioned some of the ways in which Canada might consider trying to make up for what’s not in this agreement in terms of access to procurement.
I have New Flyer Industries in my riding, which produces a lot of buses and sells most of them into the United States. Buy America has affected jobs in Winnipeg because of the content requirements.
I was surprised recently when there was a meeting of governors and Canadian premiers, and Premier Pallister from Manitoba didn’t go and didn’t send anybody on his behalf. It seems to me that the province-to-state relationship is going to be important for businesses that export to the U.S. in terms of keeping jobs here in Canada. Could you speak to that a bit more?
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I think you’re correct. Premiers and governors, because they’re the level where the spending usually takes place, particularly when it comes to major infrastructure, want best value, and best value often comes from having a variety of vendors, not just those in your state or province. Having outside competition that has equal access will often prevent cartels in your own province or state, and, therefore, you get far better value for public money.
This was really the philosophy that was behind…. When I was at the embassy, we were trying to get a procurement agreement at the national level. It wasn’t working. We since have one through the World Trade Organization, but when the United States under the Obama administration was doing their big build as part of the post-recession effort to recover, we wanted access, as you put it, for New Flyer and others so we could sell buses and things into the United States.
We found that the best way to do it was by having premiers go down and meet with governors. Both saw an advantage. Both of them were charged with spending monies that came from federal governments, so they worked out a deal in 2010.
Okay.
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My next question is for Mr. Robertson from the Canadian Global Affairs Institute.
Thank you very much for your testimony earlier. To follow up on a question from my colleague the Honourable Ed Fast with respect to your statement, which I believe was that this is the best agreement possible under the circumstances, would you, having reviewed the agreement in its entirety, agree that it is a better agreement overall for Canada than the original NAFTA was?
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I think, grosso modo, it updates the original NAFTA, which was absolutely necessary. There are parts of it that are managed trade—and we talked about autos. There are pieces we would have liked, such as the procurement chapter, for example, but it wasn’t going to work. However, given the circumstances, it is the best possible agreement we could have negotiated, and we are much further ahead with it because it’s a kind of crown jewel. We have the CETA and the CPTPP, but the critical agreement for us is always having access to the United States. Now we have that security, under a very difficult and sometimes complicated administration.
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Thank you very much for that very political answer.
You mentioned the lack of statistics or estimates of the number of jobs in Canada that rely on trade with the United States, but there are some statistics. I’m thinking particularly of the percentage of our country’s exports that go to the United States. I wonder if you could speak to that.
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We do have statistics but we need…and you as members of Parliament, when you speak to your constituents, should be able to say, “Look, your jobs….” Again, we hear from Meadow Lake and we know the importance of trade, but people want to know specifically what it means. We can do this now down to the legislative and really the constituency level in the United States. We have the capacity to do it in Canada, and I think we should, because all members of Parliament should have access to those figures. I would include in those the importance of the European and Asian markets, because, I’d point out, we’re the 12th-largest exporting country.
Most people don’t realize how important trade is to our prosperity. That’s what pays for our health care and education. You as members of Parliament could be better equipped if you could get the statistics and make them available. They are readily available because we have the tools to do that with other countries.
Mr. Vance Badawey (Niagara Centre, Lib.):
Thank you, Madam Chair.
I appreciate the opportunity to sit on this committee today. As many know, I chair the Standing Committee on Transport, Infrastructure and Communities. The reason I’m here today is the crossover that this issue and all the trade issues have for both committees. It’s a pleasure to be here and to bring forward some thoughts on behalf of that committee.
First off, Madam Chair, I want to preface my comments by stating that I do anticipate the passing of CUSMA, which will in fact align with CETA and, of course, the CPTPP. That’s what I’m going to premise my comments on today with the witnesses we have before us.
There was a mention earlier by Mr. Robertson of the trillion-dollar procurement program that we must embark on. In fact, if Canada wants to and needs to invest in strategic infrastructure investments to strengthen our overall international trade performance, it’s imminent that we begin to work with our different committees here in Parliament, but more importantly with our partners, both in the public sector—municipal in particular—and in the private sector.
I will be bringing forward today to committee a few motions that will align with some of that direction, including a study focusing on current and anticipated labour shortages throughout the country, in particular as it relates to the transportation sector; undertaking a study on Canada’s rural digital infrastructure and prospective solutions to the gaps in wireless infrastructure deployment throughout rural Canada; looking at the gas tax; and, of course, once again, the need to work with our municipal and private sector partners, as well as our indigenous communities, to put in place strategic investments that align with our trade agreements such as CUSMA, CETA and the CPTPP.
I want to ask a question that is primarily for Mr. Robertson of the Canadian Global Affairs Institute.
With respect to your comment on the trillion-dollar procurement program, I’ll throw a question out there for you. I’m going to stop talking and allow you to comment on what I’ve just talked about and the importance of same. How important is it for Canada, as a nation, to work binationally in establishing our procurement and, of course, the strategic infrastructure investments that will align with and complement the trade agreements we have in place?
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I think it’s vitally important. When we export, we don’t know which port it’s going to go to. Sometimes from Saskatchewan it goes through the United States and out through Portland and Seattle, whereas American goods sometimes will come up to Canada. Integrating those, that infrastructure, as I said in my remarks, is vital, especially as the United States appears to be, probably in the next administration—whether Democrat or Republican and working with Congress—prepared to put in really big money. I mentioned trillions of dollars. In fact, it could come to a couple of trillion dollars.
We need to be a piece of that, both in the access to it in terms of procurement but also in linking up rail, road and air. Again, it’s that North American capacity we have to become the truly competitive platform for the world. We now have the pieces in place, but we need the infrastructure. I would applaud what you and your committee are doing and your suggestions on how we can move forward, and I encourage you to talk with your American counterparts, because what really will make this happen is legislator talking to legislator.
If I may, Madam Chair, I think that discussion has to continue, not only across standing committees here in Parliament but also across borders. Once again, I would be very interested to hear, in moving the yardsticks down the field to get ourselves to that goal line, what thoughts you and many witnesses have on those issues and also on what those strategic investments should be.
I’ll ask a question. With respect to, as you mentioned, rail, road, air and water, of course in my riding in Niagara we have the Great Lakes, which are binational. With the trade that’s going to be coming in from and out of the Midwest—a lot of it—especially in regard to going over to the EU and other diversified areas versus just the United States, we’re recognizing that the Great Lakes, and of course the St. Lawrence Seaway and the Welland Canal, will be used a lot.
What investments do you see with respect to binational investments, infrastructure investments among the rail, the water, the air and the roads, between both Canada and the U.S., as well as internationally?
I’m sorry, but I have to interrupt.
Mr. Robertson, could you give us a short answer? My apologies, but just a short answer, please, because you have 20 seconds remaining.
Okay. I’ll just say that NASCO, which is tri-country, has come up with a whole series of excellent recommendations, which I would refer to your committee.