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Standing Committee on International Trade



Thursday, May 10, 2007

[Recorded by Electronic Apparatus]



    We will now start our meeting number 62, which is dealing with a study of Canada-U.S. trade and investment issues and the security and prosperity partnership of North America.
    From 11 to 12 today, we have as our witnesses, from the Department of Industry, Alain Beaudoin, executive director, Innovation Partnerships Branch; and from the Department of Foreign Affairs and International Trade, William Crosbie, director general, North America Bureau, and Peter Fawcett, deputy director, U.S. relations.
    If you would go ahead, gentlemen, for up to eight minutes in presentation, and then we'll get right to the questioning.


    My name is Alain Beaudoin and it is my pleasure to be here today to discuss the Security and Prosperity Partnership of North America, the SPP.
    I am the Executive Director, Innovation Partnerships Branch at Industry Canada. Among my responsibilities, I am in charge of coordinating the prosperity pillar for the Government of Canada. First, I would like to give you a bit of background.
    The Security and Prosperity Partnership of North America was launched in March of 2005 as a trilateral mechanism to strengthen North American competitiveness and enhance the security and quality of life of the citizens of the United States, Canada and Mexico through greater cooperation and information sharing.
    In Canada, the Minister of Foreign Affairs has the mandate to manage our North American relationship, of which the SPP is one component. The Minister of Public Safety leads on the security agenda. And the Minister of Industry oversees the priorities of the prosperity agenda.
    While respecting the sovereignty and unique heritage, culture and laws of each country, the prosperity agenda of the SPP seeks to enhance the competitive position of North American industries in the global marketplace. It also aims to provide greater economic opportunities, while maintaining high standards of health and safety. To this end, the United States, Mexico and Canada work together with stakeholders to strengthen competitiveness, reduce the cost of trade and enhance the quality of life.


     Because of its trilateral nature, the SPP is a complex mechanism. It is implemented through the activities of trilateral working groups that are responsible for outreach with a variety of stakeholders within each country.
    The prosperity agenda is comprised of nine trilateral working groups in key sectors of economic activity. They are e-commerce and ICT; energy; environment; financial services; food and agriculture; health; manufactured goods and sectoral and regional competitiveness; movement of goods; and transportation.
    With input from stakeholders, working groups have agreed to work on a number of bilateral and trilateral initiatives to advance the prosperity agenda. All these initiatives have been made public. If you have not already done so, I invite you to look at the SPP website at It provides detailed work plans, and it documents the progress achieved so far in implementing these initiatives.
    Briefly, this is how the SPP works. Now the question is how Canada can benefit from it.
    As you know, key factors have fundamentally challenged the way global firms, including Canadian businesses, operate. Low-cost telecommunications systems and transportation and the availability of low-wage skilled workers in other parts of the world continue to profoundly transform business activities into global supply chains.
    There are advantages to this transformation. Even small and medium-sized businesses that use supply chain integration and technology can expect significant cost reductions in quality and time to market, but North American businesses are feeling intense pressure to remain competitive.
    While Canada is one of the most prosperous countries in the world, our prosperity depends, in large part, on our ability to access international markets. To remain prosperous, it is essential that Canadian businesses adapt accordingly and be able to deal with issues of supply chain management, such as seamless logistics. For Canada, these issues culminate at our border with the U.S.
    It is common knowledge that nearly $2 billion is traded each day between Canada and the United States. Our economies are highly integrated and increasingly work in a seamless fashion. For example, 34% of our bilateral trade is intra-firm and more than 77% is intra-industry. This has led to the emergence of integrated and globally competitive commercial platforms fundamentally rooted in North America.
    This is where the SPP can be instrumental. The SPP aims to enhance and encourage continued prosperous trade between North American countries while ensuring security.
    The SPP is but one part of Canada's positive and productive relationship with the governments of the United States and Mexico. The SPP is a non-binding partnership. It seeks to find practical solutions to concrete issues. It is one mechanism to ensure a strong relationship with our NAFTA partners, and it is not intended to duplicate or replicate existing mechanisms. As such, the SPP is not intended as a replacement for NAFTA, nor is it intended to serve as an alternative to existing trade negotiation mechanisms.
    At their last meeting in March 2006, the three leaders of Canada, the United States, and Mexico agreed to focus on five priorities to advance the SPP and ensure tangible results. They are strengthening competitiveness; emergency management coordination; cooperation on avian and human pandemic influenza planning; energy security; and ensuring smart, secure borders.


    This renewed focus reaffirmed the leaders' commitment to advance a positive agenda for North America.
    Achieving regulatory alignment within North America is one of the most important contributions to strengthening competitiveness. Through enhanced cooperation under the SPP, Canada, the U.S. and Mexico seek to make their regulations more compatible to reduce costs, by eliminating duplication and redundancies, and minimize barriers to trade. This is being achieved while ensuring continued high standards for health and safety, and protecting our environment.
    The leaders also agreed to create the North American Competitiveness Council, or NACC, to provide governments with advice and recommendations on ways to improve competitiveness.
    To build on this agenda, on February 23, Ministers Bernier, Day and MacKay met with their American and Mexican counterparts. They reviewed progress on the five priorities in advance of this year's leaders' summit, currently scheduled for August 2007.
    Ministers also received the NACC's report, which was released publicly. David Stewart-Patterson appeared before the committee recently and also provided you with a copy of the report in both official languages. This report made 51 recommendations in three areas: border-crossing facilitation, standards and regulatory cooperation, and energy integration.
    In conclusion, the SPP has been conceived as a step-by-step, practical approach to improve the way governments work together to enhance competitiveness, ensure our security and quality of life. All of this takes time and continued commitment.
    Thank you very much.


    Thank you, Mr. Beaudoin.


     Now we will go to the Department of Foreign Affairs and International trade.
    Mr. Crosbie, are you going to make the presentation?
    No, actually Mr. Fawcett and I do not have presentations. I gave a presentation a week or so ago. Basically, we're here to answer questions.
    Okay, very good.
    We will go directly to questions then.
    From the official opposition Liberals, Mr. Bains, for seven minutes.
    Thank you very much, Chair.
    Thank you for the presentation.
    Essentially, the purpose of this meeting—and we've been meeting frequently on this subject matter over the past few weeks—is to discuss two options. The two options that have come forth are, how do we improve the security and prosperity partnership, or do we need to abolish it altogether? It seems to be the school of thought in this committee that those are the two issues that are being discussed.
    I say that because we've met with various stakeholders—civil society representatives, unions—who've expressed concern that they haven't been involved in the process, that they haven't been consulted, that they've had to really force their viewpoints in the process by aggressively presenting their positions on this matter, and that they haven't been allowed executive-level permission to get involved. I believe that concern has been raised ever since this initiative was launched. This is not a new issue.
    How do we improve the process to include civil society, unions, and other stakeholders who have expressed concern, so that their views are taken into consideration in this process?
    Thank you.
    I think there's a bit of a mismatch between people's expectations of the SPP and the way in which governments have constructed the architecture. Governments have conceived of the SPP as a mechanism for departments and officials who have particular expertise to talk to one another about potential initiatives that governments could individually undertake.
    The thinking behind the SPP was always that it was a cooperative mechanism that was not binding of one government to another and that was not a negotiating agenda. Hence, governments perceived that the mandate to make changes or to consider and to talk to stakeholders would remain with the areas of expertise in our respective governments. So if it is a matter involving health, then Health Canada would be responsible for consulting with the stakeholders who have a particular interest in health. We did not create an architecture that was an umbrella for the SPP.
     For example, if the departments were consulting and they did not consult the're saying the onus lies with the departments to do this?
    If Canada wishes to make any changes to its laws, regulations, or indeed policy, then the individual departments and ministers who have a responsibility for those policies, laws, and regulations are the ones who would have to consult with the stakeholders.
    Take, for example, the recent issue that has come up with respect to pesticide standards. It's been reported that obviously we've got better standards, simply because we use less pesticide. Now we've harmonized with the United States, which in effect increases the level of pesticide use. That has ramifications for our environment and our health.
    This speaks to the point in the presentation that was made on page 2, where it says the aim of the SPP is:
—to provide greater economic opportunity, while maintaining high standards of health and safety. To this end, the United States, Mexico, and Canada will work together with stakeholders—
—and that's what I'm talking about, stakeholders—
—to strengthen competitiveness, reduce cost of trade, and enhance quality of life.
    How does this particular change in regulation enhance the quality of life? In your opinion, does it enhance it or does it compromise it? Yes, there might be benefits in terms of trade, because now the regulation matches up, but what kind of impact does this have in terms of the standards we set versus the standards the United States has? I would like your opinion on that.


    Minister Clement has responded to the article that was in the media about this, as is appropriate, because Health Canada is the lead department. They're the ones who need to defend, to explain any changes they intend to make.
    The three governments don't jointly consult with stakeholders. We leave it to our respective departments with the expertise to do so.
    The stakeholders, wherever they come from, are welcome to provide input and to communicate with the various working groups and the experts, or with the coordinators, such as me or the one on the security side or at Foreign Affairs, for example. We met with some labour groups, with the Canadian Centre for Policy Alternatives, in advance of the ministers' meeting in February, to try to explain to them what SPP was, what it was not, and to have a discussion.
    What we've said as well is that we would welcome continuing these conversations with them, and it would be our pleasure to direct them to specific working groups to talk about specific initiatives.
    In terms of better transparency and accountability—and I want your feedback on this—in your opinion, should any changes to regulations that are decided by the departments, pesticides, for example, be brought forward to the committee on a quarterly or semi-annual basis for review and public discussion for better public oversight? Is that a way to improve the process?
    The concern is that we always find out about this after the fact. My suggestion is that before any regulation is changed, those proposed changes be brought to committee for discussion and debate. Therefore, there's no element of surprise, and at the same time it allows the stakeholders to present their case in public.
    Is that, in your opinion, a way to improve the process? We have to find a solution, and I think that might be a viable one.
    With regard to your question in terms of transparency of the process, as I said in my opening remarks, and as I think Bill emphasized in his previous testimony, all the information pertaining to SPP has been and will be made public. We've made a report available to leaders; it's on the website. All the initiatives and the work plans of the various working groups have been made public and continue to be made public. They're available at all times.
    With regard to your question in terms of changes to regulations, the SPP is trying to increase cooperation among governments to have access to the best science possible for them to make decisions. If any regulatory changes take place following this particular issue, or another one, it would follow due process within governments. Governments remain sovereign in their capacity to make decisions on regulatory issues. Whatever regulatory changes take place under the umbrella or somewhere else, it would still follow due process in terms of public transparency, Canada Gazette, and calling for comments as well.
    The process doesn't change; it's the same process. Any regulatory changes would go through the usual process for regulatory changes.
     Mr. Crosbie, I know you were nodding while I was making my remarks. Do you have any thoughts on that as well?
    Again, we haven't conceded that the SPP be an extra oversight mechanism or filter through which Health Canada, for example, would have to determine the changes they decide to make to Canada's policies falling within their mandate. They're the ones who best know the stakeholders with knowledge or interest in a particular area. I think the onus would rest, and should rest, with them. It would then go through the appropriate parliamentary committee—I'm not sure which—so the people who follow those issues are able to provide input and oversight.


    So, in your opinion, it's good value-added to go through a committee?
    Thank you, Mr. Bains. Your time is more than up here.
    Monsieur André, for seven minutes.


    Good morning, and welcome.
    I would like to talk to you about a report put out by the Montreal Economic Institution on Canada-U.S. relations. This study, which was done by Manning and Harris, applauds the efforts being made by Canada at the moment to strengthen its military and defence capabilities, among other things. There is reference to strengthening our ties with the United States in the area of free trade. In this regard, the authors recommend:
That Canada's federal government revisit the decision not to participate in the ballistic missile program and not to broaden the mandate of NORAD.
That Canada and the U.S. work together to create a more open and secure common border for the movement of people and goods.
    The report also talks about eliminating the supply management system. It recommends:
Eliminating supply management and business subsidies; dropping ownership restrictions in transportation, telecommunications, and financial services; and allowing Canadian firms to become more productive and competitive in international markets.
    I would like to know whether you both agree with the idea of Canada being involved in the ballistic missile defence system and with the recommendation about abolishing supply management in order to strengthen our ties to international markets. What are your views on these issues?


    Gentlemen, that question isn't on the topic we're here to discuss today.
    Feel free to answer it, or not, if you choose.
    Monsieur André.


    Mr. Chairman, I would just like to say that in my opinion there is a connection between these international relations with the United States and the North American Security and Prosperity Partnership.


    As long as you make a link, Mr. André, that's fine. It's up to the witnesses, always, of course, to decide whether they stray from the area they were intended to come here to deal with.
    Go ahead, gentlemen, if you wish.


    If I understand correctly, you want to know what I think about the ideas put forward by these two authors.
    Are these issues being discussed in the context of the North American Security and Prosperity Partnership?
    I see.
    The subject of our discussion in the context of the SPP appears on our website. In my opinion, the issues you mentioned are not part of the partnership's agenda.
    Mr. Beaudoin.
    I agree with Mr. Crosbie. These issues are not part of the discussions.
    There is talk about further harmonizing our trade relations. Apparently there is an effort to reduce our tariffs and to further promote trade relations through the SPP. I imagine these issues are discussed.
    The issue of tariffs is an integral part of NAFTA, and that is not part of the SPP as such. As I mentioned earlier, the issues discussed among the three governments have been made public. I must also say that I have not seen the study that you are quoting.
    You talked about reducing the cost of trade, Mr. Beaudoin. What do you mean by that?
    I'm thinking of regulatory cooperation, for example. We want to determine whether we can work with our American and Mexican partners to achieve more compatible regulations among the three countries that would avoid delays at the border. Decisions could be made more quickly if there were joint recognition, cooperation and exchange of scientific data among the three countries.
    Countries are sovereign as regards decision-making and regulations. However, regulations are seen as an important issue for companies. The leaders have mentioned that they thought it was genuinely possible to increase competitiveness while protecting people, health care and the environment. This is the guiding principle of our discussions.


    How does the partnership deal with the issue of energy security, oil, and so on?
    I must confess that I am not an expert on that. The Department of Natural Resources is responsible for energy matters. I do not think I have the knowledge required to answer your question.
    But that is one of the mandates of the Security and Prosperity Partnership, is it not?
    It is true that energy is one of the issues discussed among the countries.
    Can you answer the question, Mr. Crosbie?
    Only in general terms, because it is up to officials from the Department of Natural Resources to discuss this issue with their Mexican and American counterparts. A number of issues have been raised in the discussions, such as the size of oil wells and the regulations regarding the tiles that are used. The effect is not to reduce our standards. Canada has to decide on its own safety standards. However, we do want to increase trade opportunities for energy products. The regulation of our electricity system is another subject discussed by the three ministers. Our website gives you a work plan on these discussions.
    Very good, thank you.
    Thank you, Mr. André.


     Your time is up.
    We'll go now to the government side, to Mr. Menzies for seven minutes.
    Thank you, Mr. Chair.
    Thank you, gentlemen, for your presentations today. It is a very interesting discussion, and I'm glad you do actually have a website where people can find the facts. I think that will be very helpful.
    I may appear to be deviating a little from your presentation, but there's something I want clarified.
    Mr. Fawcett, I see you are deputy director of U.S. relations. I'm going to tap into your wealth of information, if I can. You may not know, but we are in the process of discussing a motion at this committee, and I will suggest to you that I and my colleagues on this side of the committee find it factually incorrect. We're very concerned with this committee putting forward a motion that is factually incorrect. I would like your help with this. I won't read all of it, but probably the most relevant statement in it is:
—the Standing Committee recommend that the government quickly begin talks with its American and Mexican counterparts to exclude water from the scope of NAFTA—
    To clarify your expertise, if we can, you are and have been involved in U.S. relations for some time. Can you give us an idea of how many years?
    I've been working in this capacity since 2001. I participated in the amendments to the International Boundary Waters Treaty Act as it was in both the House and the Senate.
     And thereby you understand this implicitly.
    I do. I should also mention that I served at the Canadian embassy in Washington from 1988 to 1992.
    You are very knowledgeable on the issue, then, I would suggest. Thank you.
    We have a statement, which I read out at our last committee meeting, stating that NAFTA creates no rights to the natural water resources of any party to the agreement. Do you believe that to be accurate, and do you agree with it?


    I'm sorry, could you repeat that question, please?
    The NAFTA creates no rights to the natural water resources of any party to the agreement.
    There is a statement that was issued by the three parties to the NAFTA agreement in 1993—
    I'm reading from that.
    —but it's important that you look at the entire statement, because it is quite a good, comprehensive statement that the NAFTA does not create rights to water as a natural resource. Only when water becomes a commodity or a good is it governed by trade agreements. The full statement makes it quite clear.
    Okay. I just didn't want to take up a bunch of time. I can read the entire statement, but I don't think we want to take up the committee's time nor your time. I recognize the credentials you bring to this discussion, and I appreciate that.
    I guess, Mr. Chair, we can take this as proof positive that this motion that we shall be re-discussing is factually incorrect and would show a tremendous weakness in this committee if it ever went forward.
    Thank you so much for clarifying that. I appreciate the clarification.
    Mr. Menzies, that's a very interesting point, but it's not completely relevant to the issue we are dealing with today. Would you connect future questions and comments to the issue we are dealing with today?
    Mr. André and I are both on record as bringing something up.
    I will defer to my colleagues for the second part of the questioning.
    I do have one quick question, if I can throw one in. When we're talking about harmonization, and, Mr. Chair, you may call this irrelevant too, one thing we fail to recognize, and a subject on which there have been some questions in the House of Commons just recently, is chemical harmonization, the suggestion that to facilitate the free flow of trade—that is, in the agrifood sector—we may be reducing our standards to meet those of the U.S. I've been involved in this for many years in a former life. In fact, the Americans have higher food standards in some cases than we have.
    I would just like a quick comment on this—that harmonization of standards is not a bad thing.
    One of the key principles we're trying to address in the SPP is not whether the standards are higher or lower, because individual governments make that decision, but whether or not, when there are different standards, the reasons for those differences are ones that governments have thought through.
    You have three individual governments producing regulations in a myriad of areas. What we want to ask ourselves is whether, as we produce those individual regulations, we have thought through whether or not the regulations help the people who are producing things in North America to continue to produce them and exchange them, so that at least you would turn your mind as a government to whether or not a different set of regulations needs to be different.
    There may well be reasons why they need to be different, due to geography, different values, etc., but the differences may well not be ones that governments have actually thought about or considered, in terms of developing their individual national regulations.
    You have about a minute, Mr. Lemieux.
    Thank you for the presentation—an excellent presentation.
    I just wanted to highlight some of the things you said, because I think they really capture the essence of the SPP.
    One of the things you stated that I want to highlight is the fact that Canada is one of the most prosperous countries in the world, but our prosperity depends, on the most part, on access to international markets. So international trade is a win situation for Canada.
    You noted that $2 billion is traded almost each day between Canada and the U.S. It's important to know that as well. Again, that contributes to Canada's prosperity.
    Another key thing that you brought out is that the SPP is not intended to replace NAFTA; it's not intended to serve as an alternative to existing trade negotiation mechanisms. We've heard people call it a treaty—it's not a treaty—and a bunch of other very definitive terms, and it's none of those. So I appreciate you having brought those points out.
    We've heard from many witnesses that there are very secretive things going on, that the discussions going on are not public, the information is not public, that there's an agenda here that we don't see but they see. I'm wondering how you respond to that.
    I'm encouraged. I see this as a very positive initiative to encourage trade, which is good for Canada. It's good for our citizens, it's good for our companies, for our industry, for our prosperity. And then we have a lot of speculation—we discussed this at the last meeting—and a lot of what I said, this feeling that things are hidden, not well-known, secret agendas, etc. How do you comment on that?
    I'll ask Mr. Beaudoin.


    Mr. Lemieux, your time is up.
    Could you give about a 20-second answer, please, Mr. Beaudoin?
    Thank you.
    To answer your question, all the work plans, all the initiatives, are part of the website that we talked about. The three countries have respective websites. We have links to these websites on our own websites for the Government of Canada. The NACC recommendations have been made public, as we stated. Ministers met in February—this was a public meeting—and we're trying to be as transparent and as accountable as possible. As I said, we welcome input, advice, from various stakeholders, and the various working groups are responsible for working with their respective stakeholders to try to identify issues that are of interest to increase competitiveness, increase quality of life, and that's why we need their input.
    Thank you, Mr. Menzies and Mr. Lemieux.
    We will now go to the New Democrats, to Mr. Julian, for seven minutes.
    Thank you very much for coming forward. I appreciate having the government representatives here.
    This is the first set of hearings that we're having on the SPP, but this committee will be coming back to the issue, we certainly hope, because things haven't gone well for the government. They've had to separate civil society and government representatives because the rebuttals from civil society representatives have meant that it has been difficult for the government to get its point of view across. Also, we see that there are no televised hearings today because the government didn't want to get these issues out in the public mind—
    A point of order, Mr. Chair. Could you just clarify that the room wasn't available?
    Mr. Julian, just to clarify, the reason this meeting—
    It's totally inaccurate and false. I want a retraction.
    —is not televised is because the clerk was unable to find a room where we could have the meeting televised.
    That's just to correct you on that, Mr. Julian. Go ahead with the rest, and that won't come from your time, Mr. Julian.
    Thank you very much, Mr. Chair. I appreciate that.
    Let's come back to the issue of prosperity, because you've said—and other government representatives have said the same thing—that's what it's all about. Right? And we've seen the Statistics Canada studies that clearly indicate that 80% of Canadian families have actually seen a fall in real income since 1989, since the signing of the Canada-U.S. Free Trade Agreement.
    Now from another study this week, for Ontario—and hopefully Ontario MPs would take note of this—90% of Ontario families with children under 18 have seen a fall in real income since 1989; 90%. It ranges from $5,000, in constant dollars, to $9,000, depending on the income level. So when people say that the Canada-U.S. Free Trade Agreement and NAFTA have profited the top 20% or top 10% and that corporate CEOs and corporate lawyers are richer than ever before, it's backed by study after study.
    Now, the Conservatives will throw out some figures that they kind of make up on the end of a napkin, but basically the reality is that most Canadian families are poorer since 1989.
    I have two questions for you. As part of the strategy overall, trade strategy, industry strategy, why are you not addressing this growing prosperity gulf that is happening in Canada? Secondly, why do you believe more of the same medicine will lead us somehow into prosperity, when the same medicine, through the Canada-U.S. Free Trade Agreement and NAFTA, has led, very clearly, to most Canadian families being poorer and having less money to spend?
     Mr. Crosbie.
    Mr. Julian, I'm not a statistician. I'm not very good at analyzing figures. I know that the last time I appeared, my colleague, Tony Burger, came along with me. Happily, Tony is pretty good at analyzing figures, and I know he addressed this question with you to some extent.
    My own experience is that in analyzing gross figures such as that there are many different interpretations that can be brought to bear, both in terms of what story the figures tell you and also in terms of understanding how you explain the figures themselves. We did address it with Mr. Burger, and I'm sure he'd be happy to come back, because he does deal much more with the macroeconomic context.


    Thank you for that.
     He did admit—and it was the first time the government has admitted this—to the fact that Canadian families at the poorer income levels are actually getting poorer. Now, he said he hoped that would address itself. My concern, and I'll complete the point on that note, is that more of the same medicine is not going to lead to more prosperity; it's going to lead to an even larger prosperity gulf as our manufacturing capacity erodes.
    I'd like to continue on the issue of pesticides; Mr. Bains mentioned it earlier. We have a decision by the government to allow for greater pesticide residue in Canadian food. This is a food safety issue. There have been studies done. The 2006 study in the Annals of Neurology found that even low exposure to pesticides increases the risk of contracting Parkinson's disease by 70%. What the government is doing, in a very clear and unabashed way, by saying they want to harmonize or remove that trade irritant of more effective food safety regulations, is actually putting Canadians' health at risk.
    The United States has the weakest pesticide rules in the industrialized world. Why would it be in Canada's interest to lower our food safety regulations, to actually put Canadians' health in jeopardy, so that we can in some way harmonize our regulations with lower American standards?
    I'm not an expert in terms of pesticide residue limits, but the intent is not to lower standards. Minister Clement made a statement that appeared today. He quoted that no changes will be made unless a scientific risk assessment says it is safe to make the changes. Indeed, if there is any harmonization, it would be at the highest standards that would protect the health and safety of Canadians when it comes to pesticide management.
    We know that 90% of American standards, when it comes to pesticides, are lower than Canadian standards. The SPP, the security and prosperity partnership, in a 2006 report identified stricter residue limits as barriers to trade. You understand the dysfunction here. We have government pushing ahead with an agenda that essentially puts Canadians' health and food safety at risk, and the only justification for doing that is to eliminate a so-called barrier to trade.
    My concern, of course, and the concern of many Canadians is that we're accepting lower standards in a whole range of areas—lower standards for pharmaceutical testing, lower standards for food safety, lower standards for air safety—and the only justification seems to be that it's the SPP, that we have to adopt American standards, otherwise it's a barrier to trade.
    Can you name one area where higher Canadian standards are being accepted through the SPP process?
    All three governments have said that in terms of the SPP process the intention is not in any way to lower the health and safety standards we have in our regulations and in the policies we implement. Yes, as I mentioned earlier, part of the process of the SPP is to identify, when there are differences in standards, if those differences are ones that have been thought through, and why there are differences.
    Canadians, Americans, and Mexicans are very similar in so many ways. Is it always necessary, when it gets to labelling on a bottle of medicine, that we need to have a different label on the bottle of medicine? It doesn't take away from the health ministry, in the case of pesticides, the responsibility to ensure that where they set up the standards for Canadians, they meet the highest standards that they think are appropriate for Canadians. But they are being asked to talk to the Americans and Mexicans so that when there is a difference between the way we've set up our standards, and a difference between the Mexicans and the Americans, we have considered whether or not that difference is something we need to maintain.


     Mr. Beaudoin, go ahead, please.
    These conversations and these decisions are always based on scientific evidence. You have scientists cooperating in terms of what is the case for an issue, for example, and you have collaboration taking place in terms of best practices and methodology. They will keep what it is they need to know and how they can have access to that type of science they need in order to make their decisions. The decisions are the purview of sovereign nations. Each country will make a decision as to what they intend to do.
    The science indicates that more pesticide residue increases health risks to Canadians. The science indicates that when you study American regulation of pesticides, they are the worst and weakest regulations in the western world. For the government to move along that line of harmonizing necessarily means they're putting Canadians' health in jeopardy; there is absolutely no other explanation, and the only reason they give for putting Canadians' health at risk is to simply eliminate a trade irritant.
    You understand why Canadians are suspicious of this whole agenda: number one, it's not done in public; number two, it has very clear and dramatic impacts on things Canadians hold dear—the ability to put their family on an aircraft and believe that they'll be safe, the ability to take food from the supermarket and think that eating that food will be safe. There is no justification beyond eliminating barriers to trade.
    I'll finish with the final question, which is the whole democratic aspect of this. The government has refused to bring this issue before the House of Commons. These working groups are not taking place with any public consultation—
    Mr. Julian, I've allowed you two minutes over time already. You will have to hold off on that question until next time.
    We'll go to the second round.
    Mr. Maloney is next, for about three minutes. We're going to shorten it up a bit; hopefully we can get right around.
    Mr. Beaudoin, in your introductory remarks you referenced the leaders of the NACC nations agreeing to create the North American Competitiveness Council. There's reference to a report they did, which was given to the ministers and released publicly. It was a report dealing with three areas of recommendations.
    What I'm concerned with is border crossing facilitation. Are you in a position to tell us what those recommendations were regarding border crossing facilitation?
    The report, as I mentioned earlier, was made public. I understand Mr. David Stewart-Patterson handed out copies when he testified two weeks ago here, but border crossing facilitation involves issues that are the purview of public safety, so I wouldn't be in a position to comment.
    Border crossing is a bone of contention for me. We had the U.S. Department of Homeland Security several weeks ago nixing the border pre-clearance pilot projects that were in place, which had been strongly advocated by commerce on both sides of the border as being a step in the right direction.
    We have lofty ideals with the security and prosperity partnership. Everyone wants to cooperate, but when it comes right down to it, sometimes security of one nation trumps all other agendas.
    My concern is that talk is cheap, but action is really what we should be desiring. With all this talk, I'm not sure whether we're spinning our wheels on this. If we want to really strengthen our competitiveness and reduce the cost of our trade, why are the countries involved not sitting down and working out all these problems?
    It does not mean we're going to agree on everything. We won't agree on everything with the U.S. or with Mexico, but at least with this process we're engaged in a conversation through which we can be more knowledgeable about why we have sometimes chosen to go in different directions. We can choose, sometimes, to go in the same direction. Sometimes we may choose to do things differently, and that may be for good and valid reasons, but then there may be occasions when, through talk, we identify a way in which we can do things collectively.
    I think the border agenda still remains essentially a bilateral discussion between Canada and the U.S. and between the U.S. and Mexico. I would say there are successes and there are areas in which we can't agree. For us, maintaining that conversation, improving our understanding of one another and what we're trying to achieve, and identifying some common goals are essential. We would expect, I think, as neighbours, that we are engaged in a collective discussion about how we improve our neighbourhood. That's what we're seeking to do through the SPP.


     Thank you, Mr. Chair.
    Thank you, Mr. Maloney. That was a little over three minutes.
    We'll now go to Monsieur Cardin for three minutes.


    Good morning, gentlemen.
    As we know, and as you mentioned earlier, the important aspects of the partnership have to do with traffic at the borders, cooperation in the area of standards and regulations and energy integration.
    Before discussing these topics, I would like to speak briefly about water. You said, Mr. Fawcett, that water in its natural state, as a natural resource, would be excluded from NAFTA. That is what you said. However, is water excluded in all the forms in which it can be presented? When water is not in its natural state, it could come under NAFTA.
    Thank you for the question. I will try to answer it.


    I think the NAFTA statement issued by the three countries makes it very clear that water in its natural state is not a good or a commodity and therefore is not subject to any trade agreement. It is in fact a resource.
    The whole approach we've taken in amending the International Boundary Waters Treaty Act, which implements the boundary waters treaty between Canada and the United States, is to look at and deal with water as a natural resource, to protect it in its basin and to prohibit removals out of the water basin. It's an environmental measure of general application and is consistent with our international trade obligations.
    So I just want to emphasize that this is the approach we've taken to deal with water—as a natural resource, in its basin.


    You are referring to the context of the International Boundary Waters Treaty Act. There is some water that is not boundary water in Canada and Quebec. You said this: water as a natural resource in its natural state. So water that is not included in boundary waters, when it is not in its natural state, could be included under NAFTA.


    Let me give you the other side of that.
    Yes, when water is put in bottles, as an example, then it becomes a good and is subject to trade agreements. But let me also try to address the other question you raise. Yes, absolutely, when we amended the International Boundary Waters Treaty Act, this was specifically designed for the federal government to operate within federal jurisdiction. And it deals with boundary waters—for instance, the Great Lakes, the St. Lawrence River, the St. Croix and Saint John rivers in New Brunswick. But the Minister of the Environment worked with his colleagues in provinces, and in fact provinces have taken similar measures within their own jurisdictions to provide the same kind of protection for waters within their jurisdictions.
    Again, that's dealing with water as a resource, which is the fundamental element in our approach.


    So you say that bottled water becomes a commodity. So water in a very large bottle, about 65 feet by 10 feet in diameter, would become a commodity. Let us leave out boundary water; I am talking about water within the boundaries of Canada and Quebec. It would therefore become a commodity.



     I'm generally familiar with the area of provincial regulations and legislation, but I'm not an expert in it; the environment ministry has worked with their opposite members in the provinces. My understanding is that many provinces in fact have prohibited removal of water in containers over a certain size. They have tried to address the issue you're raising.


    But the other governments that signed NAFTA still have the option of challenging provincial laws. It is possible that people who challenge provincial or Quebec legislation on extraction may want to make water into a tradeable commodity. All the irritants in NAFTA that prevent the free trade of goods become subject to challenge to some extent. The possibility exists. People would like an express guarantee that water, not just in its natural state but Water with a capital "W", will be excluded from NAFTA. Then we could say that there is no harm in being extra careful.


     Let me try a brief response. I think the statement made by the three NAFTA parties in 1993 is quite clear. I think that stands on its merit. Further to that, we have then amended our International Boundary Waters Treaty Act to address this very issue by prohibiting bulk water removals.
    I want to go back to Mr. Menzies' question just briefly to say that in the time that I've been involved in this issue, since 2001, there have been no proposals for any bulk water removals or any projects that would address that issue. In fact, since that time, greater protections have evolved. The Provinces of Ontario and Quebec entered into an agreement with the eight Great Lakes states to amend the Great Lakes charter annex to, again, protect water in its basin. So not only do we have a federal level of protections, but we also have at the level of provinces and states in the United States a similar approach to protect water in their basins.
    Frankly speaking, Mr. Chairman, the biggest threats to our waters these days are not because of removals. The threats that we're facing are in water quality and invasive species. You may have seen even this week the major problem we have in the Great Lakes with hemorrhagic fever affecting all species of fish. This is not the first. In fact, there are 180 or more invasive species in the Great Lakes and in the St. Lawrence River that pose much greater risks to our water resources and the ecosystems and communities that depend on it.
    Water quality remains a huge issue. We're reviewing the Great Lakes Water Quality Agreement. The biggest threat, and there again it's no surprise, is municipal sewage treatment and a lack of full treatment that's affecting water quality.
    Thank you, Mr. Fawcett. I have to cut you off.
    Merci, Monsieur Cardin.
    Mr. Allison for three minutes.
    Thank you, Mr. Chair.
    I'd certainly like to thank my colleague, Mr. Julian, for bringing up the fact that Ontario is still struggling to get back from the NDP government we had in the early nineties and the fact that those studies started in late 1989 and moved on. We were driven so far behind that we almost became a have-not province. I can say that Mr. Harris came in, in 1995, and tried to correct it and provide a solution, and we had $25 billion cut in transfer payments from the federal government at that point in time, so I think all things considered—
    When you look at figures and how you want to spin them, I think it does remain that families are still trying to get back from the 1990s. It was that NDP government in Ontario that almost killed Ontario permanently. I do want to mention that and put it on the record.
    We've had some groups come in and talk to us and say we shouldn't be trading with the U.S. I guess my concern is always that no one ever provides a solution or provides another—I don't know whether they think we're going to get all our trade with Chile or where it's going to come from, because it's always just naysayers, etc.
    There are two points I want to question again. When we look at harmonization of pesticides, I would assume that one of the reasons we're looking at that is because our farmers—I know certainly in my area, and I know Mr. Maloney would maybe say the same thing--have concerns about the unfair advantage they have in not being able to compete. I would suggest that one of the reasons we are looking at the possibility of harmonization on some of these issues is we're trying to be more competitive. Have you been led to believe that this is one of the reasons, as we look at this issue of pesticides? Does it come from stakeholders such as farmers and other groups that deal with these things?


     Unfortunately, I don't know the specifics of the background as to why. As far as I can understand, the decision has not been taken. I read Minister Clement's statement earlier that any changes would be based on scientific evidence, according to the highest standards of health.
    These goods and services are crossing the borders. What percentage are small businesses and what percentage are large companies that are doing trade with the U.S. on a daily basis?
    I'd have to come back with the specifics on this question. I can't recall the numbers specifically. My apologies.
     I know other groups have said it's over 50%. I just want to know if that's the case with you gentlemen as well. One of the other concerns that people keep raising is that this is just for big business. I happen to know that within our own communities there are constantly issues of small businesses doing trade.
    Mr. Maloney and I sit in the Niagara Peninsula, where we have a lot of farmers, greenhouse operators, and individuals who do not own large businesses. They are trying to deal with this issue of getting across the border. So I share Mr. Maloney's concerns about infrastructure at borders. I believe that some of the negotiations in these talks would deal with actual infrastructure at borders. Is that not part of what this is about as well?
    Infrastructure at the borders is part of the SPP, as said earlier. If you would like more detail on what's going on under the security component, you may want to invite my colleague at Public Safety, who could provide you with more information.
    On your previous point, this would apply to all businesses. There would not be discrepancies or differences between big businesses and SMEs.
    Thank you, Mr. Allison. Our time for these witnesses is up.
    Thank you very much, gentlemen, for coming this morning. It is very much appreciated. We look forward to seeing you some time in the future.
    We'll take a short break as we change witnesses and go to the second part of the meeting.


     I would appreciate it if the next witnesses could come to the table. We want to have as much time as possible with the witnesses.
    We've had a request from Mr. Maloney to get a legal opinion from the Library of Parliament on bulk water imports and what is in place now.
    Mr. Maloney, if you'd like to say a few words on that, I could ask the committee if they'd be willing to accept that by consensus.
    Before I vote on this motion, the issue of whether bulk water is or is not included in NAFTA is complex. We've been discussing it for several days now. It came up in our meeting this morning, even though it wasn't the topic. I would like the Library of Parliament to review the situation and give a legal opinion. Is it or is it not included in NAFTA?
    Thanks, Mr. Maloney.
    Is there consensus around the table that we do that? Okay, then we will go ahead with that.
    We'll go right to the witnesses now so that we get the maximum amount of time possible with them. For this hour, from the Parkland Institute, we have Gordon Laxer, director; from Common Frontiers we have Corina Crawley and John Foster. Each group will have a maximum of eight minutes for a presentation. We'll begin with Mr. Laxer.
    Thank you for inviting me.
    Parkland Institute is an Alberta-wide research network at the University of Alberta in Edmonton. We're supported by over 600 individuals and dozens of progressive organizations. Parkland conducts research and education for the public good. My remarks are on energy and climate change implications of the SPP.
    I don't understand why Canada is discussing helping to ensure American energy security when Canada has no energy policy and neither plans nor enough pipelines to get oil to eastern Canadians during an international supply crisis. Canada is the most vulnerable member of the International Energy Agency—the IEA—yet recklessly exports a higher and higher share of oil and gas to the U.S. This locks Canada into a higher share under NAFTA's proportionality clause. Instead of guaranteeing the U.S. energy security, how about a Canadian SPP, a secure petroleum plan for Canada?
    While rising Canadian oil exports help wean America off Middle Eastern oil, Canada is shirking responsibility to Canadians. Rising Canadian exports are perversely leading to greater Middle Eastern imports to Canada. We import about 40% of our oil—850,000 barrels per day—to meet 90% of Atlantic Canada's and Quebec's needs and 40% of Ontario's. A rising share of those imports to Canada comes from OPEC countries and a declining share comes from the North Sea. So the rising share is from Algeria, Saudi Arabia, and Iraq. How secure is that?
    Many eastern Canadians heat their homes with oil. Yet we have no plan to send domestic supplies to them. Why not? In which NAFTA country are the citizens most likely to freeze in the dark?
    The National Energy Board's mandate is to promote safety and security in the Canadian public interest. Yet they wrote me on April 12, saying, “Unfortunately, the NEB has not undertaken any studies on security of supply.” This is shocking. I asked the NEB whether Canada is considering setting up a strategic petroleum reserve under its membership in the IEA. The NEB replied that Canada “was specifically exempted from establishing a reserve, on the grounds that Canada is a net exporting country, whereas the other members are net importers”.
    The IEA was set up, if you remember, by industrial countries in 1974 to counter OPEC's boycotting power. The 24 members must maintain emergency oil reserves equivalent to 90 days of net imports. Only net exporters are exempt from this. Canada shares this status with three other members. Britain and Denmark have been net exporters, but they have strategic reserves because they're members of the European Union. This leaves Norway and Canada. Norway doesn't need a reserve.


    Excuse me, Mr. Laxer. I don't very often interrupt someone making a presentation, but could you connect your presentation with the topic today, which is the study of Canada–U.S. trade and investment issues and the security and prosperity partnership? As long as the connection is made, that's fine.
    I'm talking about security for Canadians. We're talking about a security partnership. Are Canadians part of security? I'm talking about security for Canadians. Is that not relevant?
    A point of order, Mr. Chairman.
    Just a minute, Mr. Julian.
    You still haven't, in my judgment, made a connection to the topic today, which is the security and prosperity partnership of North America. We're not talking about energy security as such. So if you could make that connection as soon as you can in your presentation, Mr. Laxer, I'd appreciate that.
    Mr. Peter Julian: A point of order, Mr. Chairman.
    The Chair: Yes, Mr. Julian, I heard you. If you'd be a bit patient, please, I'd acknowledge you.
    He's making a very direct connection. Please don't interrupt him.
    Mr. Julian, wait until I'm finished, please. I was just pointing out, Mr. Julian, that I had recognized that you had a point of order, and I was making a statement. I was just asking you to wait until I completed that statement. Now you may go ahead with your point of order.
    Please allow the witness to continue, Mr. Chair.
    I don't think that's a point of order, Mr. Julian.
    I'm talking about security of energy supply for Canadians. If we're talking about security, then I think that's relevant.
    Mr. Laxer, if you are here to discuss the energy security of Canadians, then you are off topic of the study.
    I don't see that.
    We are here specifically to talk about the security and prosperity partnership of North America.
    Isn't it part of North America?
    Mr. Laxer, please wait until I'm finished.
    I'm sorry.
    If you make a connection to that, then I'm delighted to hear your comments, Mr. Laxer, but if you're here to talk about energy security as a general topic, without making that connection, then you're off topic for today. So I would respectfully just ask you to make your presentation on topic.
     I'm talking about energy security for Canadians, and I think we're part of North America.
    I'll let you go ahead, Mr. Laxer, and I'll judge whether I think you make the connection to the topic of today or not.
    Go ahead, please.
    Canada does not have a strategic petroleum reserve. Norway doesn't have one either, but it doesn't need one because it supplies its own citizens sensibly before it exports surpluses.
    Western Canada can't supply all of eastern Canadian needs because NAFTA reserves Canadian oil for American security of supply. Canada now exports 63% of our oil and 56% of our natural gas. Those shares are currently locked in place by NAFTA's proportionality clause, which requires us not to reduce recent export proportions. Mexico refused proportionality; it applies only to Canada.
    As well, we don't have the east-west pipelines to fully meet eastern needs. Instead, five export pipelines are planned.
    Although we have more than enough oil to meet Canadian needs, Canada is the most exposed of all IEA members. Meanwhile, the United States is doubling its petroleum reserve.
    Nor does Canada have a natural gas plan. At last summer's G-8 meetings, Canada began negotiations to send Russian gas to Quebec. It's very risky; Russia recently cut gas exports to Ukraine and Byelorussia for political reasons.
    Mr. Laxer, I'm going to cut off your presentation. I certainly welcome your answering questions, as long as they're on topic.
     You have a point of order, Mr. André? Go ahead.



    I have a point of order, Mr. Chairman. Mr. Laxer is talking about oil as a source of energy. One of the priorities of the North American Security and Prosperity Partnership is energy security. He started giving us some explanations about the accessibility of oil reserves. I think energy security is related to the theme of the North American Security and Prosperity Partnership, Mr. Chairman. I think Mr. Laxer is really talking about the subject on our agenda today. If you are not interested in that, Mr. Chairman, you can forget that.


    Mr. André, I've considered that. We are not here today to discuss energy security as such. We are here to discuss North American or Canada-U.S. trade and investment issues and the security and prosperity partnership of North America. The witness, even after I've given him an opportunity to do so, has not made the connection between his topic and, specifically, the security and prosperity partnership of North America.


    But one of the priorities is energy security, Mr. Chairman.


    I have ruled on that, Mr. André.
    A point of order.
     I will, as I say, go on to the next witnesses and allow them to make their presentation.
    Mr. Julian, you have a point of order.
    I challenge your decision, Mr. Chair. This is absurd.
    An hon. member: The challenge is absurd?
    This is absurd.
    Mr. Julian, of course, you are free to do that. I certainly will go ahead with a vote, if you'd like to do that. But I'm somewhat concerned that some members of the committee are putting aside the rules of committee a little too often—just putting them aside and instead trying to make a decision outside the rules of the committee, quite frankly. Of course, the committee is the master of its destiny, and you can do that, Mr. Julian.
    I will ask the question—and it's a non-debatable motion—shall the decision of the chair be sustained?
    We will go to a vote.
    Can you just clarify the decision of the chair that you won't let the witness speak?
    The decision of the chair was that the witness, Mr. Laxer, is off topic. The comments he is making are not relevant to the subject on the agenda under the orders of the day.
    But he's still able to answer questions?
    I have also ruled that I will allow him to answer questions, as long as those questions are on topic. That's my ruling, and Mr. Julian has challenged it, so I will—without debate—go to the question. Shall the decision of the chair be sustained?
    (Ruling of the chair overturned)
    The meeting is adjourned.
    An hon. member: What?
    An hon. member: Who is the vice-chair of the committee?
    [Proceedings continue in camera]
     At the committee’s official meeting of Tuesday, May 15, 2007, the committee agreed that the testimony provided et the unofficial meeting of Thursday, May 10, 2007, held from 12:18 p.m. to 1:05 p.m. in Room 701, La Promenade Building, attended by certain members of the Standing Committee on International Trade, be appended to the evidence of the official portion of the committee’s meeting held pursuant to Standing Order 108(2), on the consideration of Canada-U-S trade and investment issues and the Security and Prosperity Partnership of North America.