Good afternoon, everyone. We especially welcome our witnesses today.
As our witnesses and the people listening know, our committee is the international trade committee. Right now, we're in the midst of a study on the priorities of Canadian stakeholders having an interest in bilateral and trilateral trade in North America, of course, between Canada, the United States, and Mexico.
Our committee has been fairly active in dealing not only with Canadians and Canadian stakeholders; we've also spent considerable time in the United States. We travelled west to California and the State of Washington, and we were in the Midwest and also in the city of Washington.
Thank you for coming today. If you're new to coming in front of a committee, I'll let you know that we have French and English translation. You might get some questions in French. Also, we'd like you to keep your presentations under five minutes, if you can. That gives us a lot of time for dialogue with the MPs.
We're supposed to have somebody on video conference from the Women's Enterprise Organizations of Canada. If we can connect, we'll hear from them a little later.
Without further ado, right now we have with us Spirits Canada and the Organization of Women in International Trade.
From Spirits Canada, we have Mr. Helie and Mr. Westcott.
Folks, you have the floor. Go ahead.
Thank you very much, Mr. Chairman.
I'm the president and CEO of Spirits Canada. Joining me today to answer any questions you may have is my colleague, C.J. Helie, our executive vice-president.
The Canadian spirits industry produces amongst the highest value-added processed agrifood products made in Canada. Canadian distillers source locally grown cereal grains—barley, corn, wheat, and rye—and transform these into premium-branded consumer goods.
We often talk about the value that the international export of Canadian spirits, and of Canadian whisky specifically, brings to Canadians in terms of jobs and wealth creation. Open and free markets are not a zero-sum game. Canadian spirits manufacturers can compete with the best the rest of the world can produce.
Certainly, Canadian consumers have benefited from the elimination of import customs tariffs on spirits, the elimination of higher liquor board markups on imports, and the introduction of a very wide range of new products, including single-barrel American bourbons or reposado and añejo tequilas, product categories unknown to most Canadians before NAFTA.
While Canadian whisky has been a dominant player in the U.S. market since the American Civil War, we've actually enjoyed a 100-fold increase in the value of our exports to Mexico since the coming into force of NAFTA in 1994. That's a pretty dramatic improvement in our business.
With fully 70% of Canadian spirits production exported, international trade is essential to the health of domestic manufacturers and to thousands of Canadian companies, many of whom are classified as either micro-, small- or medium-sized businesses that provide essential goods and support services to us as manufacturers.
However, Canada actually exports very little Canadian whisky, the commodity. What we do export are brands of Canadian whisky, iconic brands such as Canadian Club, Crown Royal, Canadian Mist, Black Velvet, Alberta Premium, Forty Creek, and Wiser's, as well as a whole series of innovative new brands, such as Alberta Dark Batch, Lot 40, and, Crown Royal's best whisky in the world, Northern Harvest Rye, amongst many others. It's actually this branding and the Canadian value-add that distinguishes spirits from many other agricultural exports and even many processed agrifoods.
As I mentioned earlier, 70% of Canadian spirit product is exported. Relevant to today's discussion, our NAFTA partners, the U.S. and Mexico, account for 85% of that total, so saying that retaining open access to the NAFTA market is critical to the future of the Canadian spirits industry is actually a gross understatement.
NAFTA is critical to spirits, and spirits are critical to NAFTA's beverage alcohol trade. In fact, spirits account for over 65% of the value of beverage alcohol imports sourced from Canada by the U.S. and Mexico. NAFTA, in fact, has helped distilleries in Canada, the United States, and Mexico compete with products made outside of North America. People often miss that. That's a very important point.
After 20 plus years of NAFTA, our supply chains are very closely interwoven. We benefit from the mutual recognition of our respective signature products such as Canadian whisky, American bourbon, and Tennessee whiskies, as well as tequila and mezcal. We also recognize that after 20 years the agreement could use some improvements and modernization.
The priorities of the Canadian spirits industry for the renegotiation of NAFTA include the retention of duty-free access for all Canadian spirits to the American and Mexican markets, including maintenance of the current rule of origin, and the extension of the formal recognition of “Canadian whisky” as a distinctive product of Canada, which is to include Canadian rye whisky as well.
We've also tabled a joint proposal, along with our colleagues at the Distilled Spirits Council of the United States and Mexico's National Chamber of the Tequila Industry, for an annex to the “Technical Barriers to Trade” chapter, modelled after a similar annex under the TPP negotiations, to deal with various labelling, packaging, certification, and similar regulatory issues. We're working hard to get alignment between our industries across the North American footprint.
We've also requested the inclusion of additional disciplines for beverage alcohol state monopolies to ensure that things like product markups and fees are fully transparent, standardized, and applied equally on all spirits, regardless of country of origin.
In closing, I would simply add that despite the accelerated pace of negotiations we are experiencing in the NAFTA context versus more traditional negotiations, we are extremely pleased and satisfied with the outreach and the consultations being undertaken by both Global Affairs and Agriculture and Agri-Food Canada. We remain extremely confident in Canada's negotiating teams, and underline both their professionalism and expertise as best in class.
We would be happy to answer any questions you may have.
It's a pleasure to be here to discuss how OWIT embraces the modernization of NAFTA and efforts to make it more progressive. Thank you for the invitation.
I will be providing OWIT's opening remarks today. I am a board member of OWIT's Ottawa chapter. I work as a responsible sourcing programming manager for UL, Underwriters Laboratories, where I advise companies and brands on supply chain issues. I'm here today with Alma Farias, who will respond to the committee's questions. Mrs. Farias is a board member of OWIT's Toronto chapter. She is at the trade facilitation office for Canada as the Ontario regional representative. She also has a consulting practice to assist Canadian companies to access the Mexican market.
The Organization of Women in International Trade, or OWIT, is a global not-for-profit association seeking to advance women's role in international trade and business. With 2,000 members in 30 chapters around the world, OWIT members are professionals engaged in all aspects of international trade. Together, our members make a significant contribution to global economic growth.
OWIT believes that women are a valuable resource in trade. Women-owned businesses are an increasingly important driver of change in the private sector for broader economic development. Many studies demonstrate that women's economic participation contributes to higher GDP levels. In Canada alone, for example, women-owned businesses contribute $150 billion to the economy per year, and employ more than 1.5 million people. But around the world, and also here at home, women continue to represent an untapped economic potential. The current NAFTA renegotiations offer an opportunity to develop and build on this potential. Gender is an essential issue for trade and for NAFTA.
It goes without saying that in the 23 years since NAFTA entered into force, technological progress has transformed North American business operations. The context in which trade takes place today is vastly different from what it was last century. Critical trade issues must be addressed. A few topics that we discuss regularly, for example, are supply chain transparency and labour standards equivalency. On a forward-looking basis, we wonder how emerging and newly emerged sectors will impact women and men.
We know that trade agreements impact men and women differently around the world. This is also true here at home. For example, women in the SME sector are less likely to access the credit they need to increase their participation in trade and fully benefit from the trade agreements that Canada signs. Evidence suggests that even when a sector expands as a result of trade liberalization, women are less likely to experience wage increases and are more likely to remain small producers. This is bad for everyone. Innovation, Science and Economic Development Canada confirms that female-owned SMEs exhibit lower growth rates compared with male-operated enterprises.
In general, OWIT strongly supports the inclusion of a gender component in all future international trade agreements. OWIT also believes that specific actions must be taken in parallel with trade agreements to improve the participation and economic impact of women in trade.
This brings me to three issues that OWIT would like to highlight today in the context of current NAFTA renegotiations.
First, OWIT supports Canada's commitment to pursuing free, open, and progressive trade that benefits all parties. As such, OWIT supports increasing focus on gender in NAFTA. Although negotiations on this matter may be difficult, we encourage ambition. OWIT was inspired by the modernization of the Canada-Chile trade agreement, which will enable all parties to benefit from the agreement through a better appreciation of how women can participate in trade and the impact of trade on women.
OWIT sees the strong potential of a trade and gender chapter in NAFTA, and encourages Canada, the United States, and Mexico to develop a model of co-operation to address trade and gender issues. A framework for trilateral committees considering gender and trade would be the minimum de rigueur action to be taken to demonstrate commitment on this issue. OWIT encourages Canada's trade negotiators to be aware of the various ways in which women and men operating businesses can be impacted differently by any renegotiated provisions. A gender analysis would offer concrete information about the differential impact of NAFTA on women and men.
OWIT believes that in the context of NAFTA greater focus on SMEs would have positive gender benefits because of the significant involvement of women in the SME sector.
In particular, SMEs would benefit from a more harmonized regulatory network that simplifies the complex administrative processes of North American trade. OWIT believes that a gender analysis of the question of mobility of persons would reveal how modernization of this chapter would best benefit women, men, and families. OWIT points to the comprehensive economic and trade agreement as an example to draw on.
To further support a progressive trade agenda, OWIT recommends using the gender and trade tool box developed by the United Nations, which is the first attempt to provide a systematic framework for policy-makers to evaluate the impact of trade reforms on women and to identify gender inequalities prior to implementation of trade agreements.
On behalf of the Women's Enterprise Organizations of Canada, I want to extend our extreme appreciation for being included in your meeting today.
I'm also the CEO of Alberta Women Entrepreneurs. We are part of the Women's Enterprise Initiative, WEI, in western Canada, which is funded by Western Economic Diversification.
To talk a bit about the Women's Enterprise Organizations of Canada and to give you a context for our perspective in relation to international trade, WEOC, as we call it, is an organization that is formed nationally of members who work directly with women entrepreneurs. We are an organization to support other organizations in their efforts to help women entrepreneurs in Canada build the capacity and the access to the resources they need.
As many of us know, and as studies have shown, to this date, women-led ventures are still an underutilized resource. As the representative from OWIT mentioned so nicely, we are seeing that there is still considerable opportunity to engage women entrepreneurs, in particular in international trade, as a component to being successful business owners in Canada.
In relation to trade, we know that our entrepreneurs seek international opportunities in many cases but find that there are some barriers to becoming successful in international markets. One of the things we've observed in our 20-plus years of working with women entrepreneurs is that there are some systemic issues as well as some internal issues that are faced by women entrepreneurs in relation to their pursuit of international trade opportunities.
There are key areas that experts have looked at.
The first is the lack of resources and the lack of access to networks. By “resources”, quite often we mean capital. It's access to money that they need, whether it's private equity or debt financing or other forms of capital, to get them to grow and expand, in particular into international markets.
The second is access to decision-makers in those networks. Not only is there often an issue within our own provinces in getting to decision-makers to actually make sales and generate revenue, going into international markets creates an added layer of complexity. We know that there are some great resources available through the government, and we do encourage our entrepreneurs to access them, but there is still an ambiguity in awareness of those opportunities and how to best maximize them.
The third piece is the actual direct connection into those markets. We've been doing a lot of work on that in the western provinces in particular through a project on expanding international trade in western Canadian women-owned businesses. We want to look at how we can expand the opportunities for women to access new markets, to make the right connections and alliances, and, at the same time, to look at a holistic approach to get them the resources they need.
We've been working through this project with our women entrepreneurs to provide them with resources towards financing, equity capital, and leadership capacity, as well as direct connections through trade missions into markets. What we have seen since January 2015 is that our 138 firms in western Canada that have participated have generated over $70 million in leads. That's tremendous.
Has it translated directly into contracts? Not quite, which demonstrates that there is still a gap that needs to be filled in providing access to those contract opportunities and winning those contracts for women entrepreneurs. I'm speaking only from the western Canadian experience, but when looking at the studies, I believe that this translates to women entrepreneurs across the country.
In essence, we are definitely trying to increase participation rates in international trade. We see that there is an appetite when there is an understanding of the opportunities.
We know that trade agreements such as NAFTA, as well as bilateral trade agreements, provide more awareness of the doors that can be opened for Canadian-owned businesses, in particular for women-owned businesses, if there is a gender lens and gender focus on portions of those agreements—for example, with supplier diversity. How can we take the best practices of countries such as the U.S., for example, in their efforts in supplier diversity and look at how that could be complementarily used in Canada as well as Mexico?
There are organizations working in supplier diversity right now to encourage minority suppliers and business owners to access those contract opportunities. Through agreements like NAFTA, we can strengthen the position of our small and medium-sized enterprises to get access to those contracts.
On behalf of the Women's Enterprise Organizations of Canada, thank you so much for offering us the opportunity to share our perspective and join in the conversation. We hope to be part of this in the future.
First of all, beverage alcohol, no matter whether it's beer, wine, or spirits, is a global industry. Canada is part of that global industry and has a proud history of being one of the dominant manufacturers and suppliers and developers. As Canada is celebrating its 150th anniversary this year, Wiser's Canadian whisky is celebrating its 160th anniversary of continuous sale and production. Canadian Club celebrates its 160th next year. We've been here a long time and doing lots of things, but it's a global business.
We're very fortunate in Canada that we have a product that is unique to Canada. We're also very fortunate that our product has seen tremendous success. That's Canadian whisky. We have been the beneficiaries of some circumstances south of the border in the United States—the Civil War being one, as well as prohibition to a certain extent—that have opened doors for us to introduce our products to Americans. Americans have appreciated that. For almost 100 years, we were the largest-selling whisky, bar none, in the United States. In fact, in Texas today, more Texans drink Canadian whisky than any other whisky.
Can we make it? Absolutely. Have we been able to sell it? You bet. The question is, how do we do that?
It's a global business. The same guys who own the best whisky in the world, according to Jim Murray at the Whisky Bible, Crown Royal Northern Harvest Rye, also own Johnny Walker Black, Bulleit Bourbon, and Bushmills Irish Whiskey. As they're sitting at their global capex table deciding where investment should go from their company, with a fiduciary responsibility to make sure every dollar that gets invested is going to get the best return, Canada doesn't come out so well on that. That's simply because tax levels in Canada are literally the highest in the world.
What that translates into is much lower gross margins than those of our competitors in the United States, or in the U.K. in particular, and increasingly in Japan and a number of other countries that are coming on as whisky producers. There's no question that those are challenges.
I have been in the spirits business for 16 years—I was in the wine business before and in the beer business prior to that—and I would say that attracting that investment into Canada, into the Canadian business, and into the Canadian whisky category is becoming increasingly challenging. Frankly, some of our presidents talk about going to their global capex meetings, presenting very good cases for investment in the category or in the business here, and not being very successful versus their colleagues in Britain.
As I said, it's a global business. Those challenges are there. The tax measures in the last budget, as we made a point of telling people, are not helpful. At the same time, we're seeing the emergence of many new small distillers in Canada, just as we did in the beer industry and the wine industry.
We happened to be meeting with one of them shortly after the budget came out. That person, who is in Vaughan, makes an award-winning couple of whiskies. It's the Still Waters company. It makes Stalk and Barrel, which has won a number of awards. He basically said that they're small guys and they don't have a lot of economies of scale. That little bit of profit that they had forecast just as they were to go out and start looking for more a more senior level of investment was going to be taken up by the excise increases.
There's no question that there are a lot of challenges. I think I would say two things. We have demonstrated both tremendous confidence and tremendous success in maximizing our ability to deliver products that consumers around the world want, as well as developing supply chains, certainly with Mexico and especially with the United States, that allow us to do that. I made the point earlier that one of the things that NAFTA does for us is that it allows North American businesses—Canadian, American, and Mexican—to compete more effectively with other similar businesses around the world. That's critically important, particularly for a relatively small country like Canada.
Thank you so much for your presentations.
Crown Royal is bottled in my riding in Amherstburg, Ontario, and of course Wiser's and Lot 40 are right next door and Hiram Walker is in Windsor. We're certainly watching the geographical indicators around Canadian whisky closely to ensure there's that carve-out.
My questions are going to centre around the other guests here today. I really want to talk about this gender chapter.
I've heard you say that at a bare minimum it needs to be a trilateral committee, much like we saw in Chile, but I really want to talk about what the best possible scenario could be. There are things to be included, of course, such as pay equity, social supports for women, access to shelters, and domestic violence legislation, because when women entrepreneurs have the choices and the stability in their lives to be able to grow, I think it benefits all women across Canada. I'm hoping that those things are in there, but I want to ask you about access to capital.
You mentioned how limited capital is for women, as is the access to decision-makers. These are the real barriers that exist in our own country as well as when women are trying to trade. Beyond that committee, how can we entrench these into enforceable language in NAFTA? How do you view that?
I completely agree. In terms of what are some tangible pieces we could put in, definitely in the scope of supplier diversity, is there a way to create some numbers, some baseline metrics, and some goals around how to engage women-owned businesses in supply chains? Is there a way to show that transparency through numbers by looking at the best practices in the three countries and determining what the best baseline number would be, not only bilaterally or amongst all three countries, but even within our own country in terms of how women-owned businesses are part of the supply chain?
I also think the point about access to capital is very interesting. I do think we also require some metrics around access to capital. More than talking about the lack of capital, it's about actually measuring how much capital is getting into the hands of women-owned businesses that are growing and expanding internationally and participating in trade through NAFTA. How are they being capitalized? What are the results of that?
We've seen through our work with a small segment of women entrepreneurs—less than 200—the amazing ability they have to generate business with the right amount of holistic support, which, in our case, includes financing through our organization.
I'm a law professor at Osgoode Hall Law School. For about 15 years in my research, I've specialized on international investment law and investor-state dispute settlement, or ISDS. I'll limit my comments to the investment chapter of NAFTA, chapter 11, and will quickly note that international adjudication of disputes that involve foreign investment should, in my view, meet four criteria.
First, it should be balanced, in the sense that foreign investors should have rights and protections, but also responsibilities that are enforceable in the same way.
Secondly, it should be independent, in the nature of other judicial processes at the international domestic level.
Thirdly, it should be fair, in that all parties with an interest in the resolution of the dispute should have an opportunity to have standing in the proceeding, to the extent of their interest.
Fourthly, it should be respectful of domestic institutions, especially domestic courts, in the same manner as other international courts and tribunals.
I emphasize these four criteria because the conventional design of ISDS, including in chapter 11 of NAFTA, does not meet these four criteria. I think that is relevant to the mandate of this committee, in the sense that you should consider, when Canada engages in the renegotiation of NAFTA, that one of the benefits of a termination of NAFTA is that we would get rid of this flawed mechanism of international adjudication. Alternatively, we might have an opportunity to replace it with something better in the context of renegotiation.
I'm not offering a comment on the pros and cons of termination versus renegotiation as a whole; obviously, we don't have a lot of public information to work with on that. I think we should keep in mind that the removal of chapter 11, and especially the ISDS mechanism, would be something of a silver lining in the negative overall outcome of termination of NAFTA, and that it's preferable to call the U.S. administration's bluff on termination if the alternative for Canada is an unduly concessionary deal, because there are some benefits to NAFTA termination.
I'll end my comments right there and summarize: balance, fairness, independence, and respect for domestic institutions should be the defining criteria for evaluating ISDS or any alternative.
Thank you very much for inviting Oxfam to present to the committee today.
Oxfam works in 90 countries around the world to support long-term development and to provide life-saving humanitarian assistance, but we're also an advocacy and campaign organization committed to addressing root causes of poverty and inequality. We put women's rights and gender equality at the centre of everything we do, both here at home in our work and in our work in some of the poorest countries on the planet.
The government has taken a very bold step in adopting the feminist international assistance policy. To be consistent, the government also needs to review its trade and diplomatic policies to ensure strong coherence and a true feminist foreign policy. The renegotiation of NAFTA is an opportunity for Canada to support the inclusion of gender equality in the trade agreement so that women and men benefit equally from its provisions.
Women form the majority of the world's poor, and trade is widely recognized as a key tool for poverty reduction, but women workers, producers, and consumers have unique characteristics and face particular constraints. If we want to maximize the gains from trade for women, and also the contribution that women make to a country's economic and trade outcomes, then trade rules, trade agreements, and trade support programs must take into account the sectors where women work, the types of businesses they operate, the goods and services they produce and consume, and the trade and other barriers they face.
The underlying theme of our intervention today is that there needs to be a strong gender analysis in order to ensure that negotiators are able to get the best trade deal. Evidence gathered through a sound gender and poverty analysis, including through the collection of sex-disaggregated data, would improve the knowledge, analysis, and choices of the negotiators, policy advisers, and partners with respect to the impacts and benefits of NAFTA on gender equality. Building on this broad recommendation around gender analysis, we have a couple of specific recommendations, as follows.
First, the proposed gender chapter should be strengthened to maximize its impact. We strongly support the inclusion of a stand-alone gender chapter as a concrete symbol of the importance of gender equality in the NAFTA negotiation and as recognition of the gendered impact of trade.
The gender chapter found in the Canada-Chile Free Trade Agreement has been highlighted as the model for a similar chapter in the NAFTA agreement. That chapter is a useful entry point and has some great ideas, including support for initiatives such as building women's networks, improving labour standards, supporting the specific needs of women to help them take advantage of the trade agreement, and so on, but the agreement is weak, in that it lacks specificity of what it will achieve and lacks accountability due to the fact that it is completely voluntary.
To strengthen the chapter, it could profit from more concrete requirements and commitments that a NAFTA committee would have to report on. At a minimum, it should require a poverty and social impact analysis or a gender trade impact analysis to be carried out. The analysis would explore the possible gendered impacts and outcomes of the agreement, including looking at gendered value chains analysis. This analysis could lead to a better understanding of where the needs are and could target some of the suggestions made throughout the side agreement. The analysis would be very useful, too, in seeing if things are improving and who is winning and losing as a result of the trade deal. The committee could also ensure that there is adequate monitoring of the commitments.
Second, gender equality objectives should be addressed throughout the agreement, and negotiators need to look at both gender and economic inequality together. Again, as highlighted, the negotiators need to have adequate sex-disaggregated data and a strong gender analysis to understand the gender impacts and benefits of the various elements of the agreement.
While a key issue, it is important that the focus not be solely on issues related to women entrepreneurs and business owners. The labour chapter, for example, is important to review from a gender perspective, given that the vast majority of women work and women are concentrated in the lowest-paid roles with the least job security. In Mexico, for example, women make up the majority of workers in the maquilas. As a result, Mexican women have seen new job opportunities created since the introduction of NAFTA, but under exploitative conditions and with well-documented labour rights abuses occurring in that sector. The current labour provisions in NAFTA have failed women and should be strengthened in ways that would support greater real gains for women in the economy.
Finally, civil society needs more information about the negotiations in order to be able to analyze and contribute to debates and recommendations for the agreement. In particular, to ensure that gender equality is a strong component of the agreement, organizations that have expertise in gender and trade policy-making and negotiations should be included. Women's rights organizations and labour movements that represent women workers should be supported, including through funding, to be able to engage and to continue to analyze the impact on NAFTA.
Lastly, it would be useful to look at specific trade institutions within each country that could be strengthened from a gender perspective to support ongoing monitoring and improvement.
Good afternoon, members of the committee. Thank you very much for the opportunity to speak before you here today.
My name is Aylin Lusi, and I am the vice-president of public affairs for UPS Canada.
UPS is a global transportation and logistics company. We are also the world's largest customs brokerage service provider. We have a 110-year history of moving and delivering goods, and we have operated here in Canada for over 42 years. We very proudly employ 12,000 people across the country, and we move approximately 3% of global GDP each and every day.
As an organization, our ambition is to bring Canadian goods and services to global markets, and to bring international goods and services to Canadian citizens.
We see the ongoing NAFTA renegotiation process as an opportunity. It's an opportunity to further improve the flow of goods throughout the North American market. Today I would like to outline three recommendations that we believe will help to create efficiencies in the movement of goods between NAFTA partners: the improvement of customs processes, the alignment of border security processes, and continued investment in infrastructure at NAFTA borders.
I'll begin with Customs. While customs processes might not always attract the most attention in discussions on international trade, we are very firm believers that efficient customs are really the cornerstone of successful North American trade, particularly in an age with complex composite supply chains and, of course, the ever-increasing volume of cross-border e-commerce.
The WTO's trade facilitation agreement provides us with what we would consider to be a ready-made blueprint for improving the efficiency and transparency of customs regulations. We believe that this agreement could serve as a good foundation for NAFTA renegotiations.
More specifically, we would encourage the modernization of NAFTA certificates to allow those who are trading goods under NAFTA to use multi-year electronic certificates, as opposed to the current annual hard-copy format.
A second opportunity can be found in customs powers of attorney. We believe that electronic signatures, as opposed to the current wet-ink ones, could be permitted in order to clear goods through North American customs.
A third opportunity can be found in the single window initiatives of Canada, the U.S., and Mexico. These three distinct programs seek to achieve the same outcome of trade facilitation. UPS believes that NAFTA partners now have an opportunity to renew working together to align their respective single window initiatives, so that companies wishing to import from and into any NAFTA country are able to deal with more similar systems. Forums such as the Canada-United States Regulatory Cooperation Council might provide a helpful environment for this alignment.
Since Canada and the U.S. share the largest international border in the world, secure and safe trade will be a significant component of any discussion regarding NAFTA modernization. The three NAFTA countries' trusted trader programs all require companies to invest in their internal security and data-reporting compliance in exchange for expedited treatment at the border. We would encourage NAFTA partners to recognize one another's trusted trader programs, and move towards what we would call an “inspected once, cleared twice” model, where a shipment is examined by the entry country and is accepted as cleared by its NAFTA neighbour.
Finally, we believe that Canada and its North American partners must invest in world-class trade infrastructure in order to remain competitive. Upgrading infrastructure at points of entry and exit is vital to improving the cost and the time efficiency of cross-border trade. In addition, the removal of procedural barriers for certified carriers to use the existing free and secure trade program or express lanes at borders could help improve the flow of goods to market.
In order to ensure that these border processes have the desired effect of making North American trade more competitive, we would encourage a “one parcel, one policy” approach, meaning that the same parcel should be subject to the same customs duty and tax collection policies, regardless of the carrier of that parcel.
In conclusion, Mr. Chair, UPS shares the Government of Canada's commitment to help Canadian businesses realize their innovation, growth, and prosperity goals. We believe that the introduction of measures to facilitate cross-border trade will help to propel Canadian exports and enhance the capacity of NAFTA as a platform for growth. This will support a competitiveness strategy and, most importantly, it will support Canadian businesses, their employees, and their customers across the country.
Thank you very much.
Thank you very much for the question.
“Independent” and “fair” are fairly straightforward, but it should be a judicial process instead of a private arbitration process. It doesn't have to be called a court, but it has to be designed in a way that you have the conventional safeguards of judicial independence, including a roster system in which the members are appointed by the states parties to the treaty. The roster members would not be allowed to have conflicting roles on the side as counsel in these cases, for example. There would be an objective way of assigning cases to the roster members. That would make it independent—even if you didn't call it a court—in a judicial sense.
With regard to fairness, there should be an opportunity for other parties who have an interest in the dispute. It might be a provincial government or a municipality whose decision is being challenged. It might be an individual whose reputation is being impugned in the proceeding. In any fair adjudicative process, they should have a right of standing in the process. That's another pretty straightforward fix, if you design it in a way that's judicially fair.
As for being respectful of domestic institutions, the main point there is that there should be, in NAFTA chapter 11, a duty to exhaust local or domestic remedies when they are reasonably available. That is the rule elsewhere in international law. It's very odd that foreign investors are allowed to skip domestic courts entirely without having to provide any evidence that there's anything wrong with the country's court system. That's the primary way, I think, to ensure that conventional way of respecting domestic institutions. It's to require foreign investors to use a country's domestic courts first unless they can show that there's some deep flaw in the courts that should allow them to skip them.
For balance, I would admit that this may be the most challenging to implement, but in principle it's just the conservative point that if foreign investors need a special system to protect them because of some failing of domestic institutions in a country, then there should be a way to hold foreign investors to basic responsibilities within the same process. You shouldn't have really powerful rights in international law without some responsibilities that are enforceable in the same process.
Implementing that can take different forms. It could be something such as a preliminary step of having enhanced requirements for information sharing, where the home government of the foreign investor is obliged to share information about that investor in the home country. For example, if there's a prosecution for some kind of regulatory offence and there's an interest in accessing bank accounts of a foreign subsidiary and that kind of thing, building that into the system would help to make it balanced in the allocation of rights and responsibilities.
Those are some thoughts. I thank you again for the question.
On the independence point, there are a couple of gaps in the ICS. First, the members of the roster that was established still have a financial interest in the frequency of claims by foreign investors, so their remuneration is significantly dependent on one side bringing claims, which is not healthy for perceptions of independence in the process.
Second, they're not prohibited from working on the side as ISDS arbitrators under other treaties that allow for ISDS, some of which allow for entirely confidential ISDS proceedings. This means that even a disputing party before the ICS process has no way to reliably verify whether the roster member assigned to that party's case is working on the side or has worked on the side in a basically non-public arbitration process and has been paid lucratively in that context by an interested party. That's something that is easy to fix in the list of prohibited side activities, but for whatever reason was not in the CETA.
On fairness, there was a proposal in the original ICS proposal that the European Commission released in the context of the TTIP negotiations. About four months before the revised CETA text was made public, there was an article 23 that would have given a limited right of standing to third parties with an interest in the proceedings. That article, for reasons I'm not aware of, was removed from the CETA. From my point of view, someone, somewhere, consciously decided to keep ISDS unfair in its ICS iteration. That's a very precise failure of the ICS on the fairness point.
On domestic institutions and the duty to exhaust local remedies, CETA just doesn't incorporate that duty. It's a bit of a longer discussion as to why. It's the same thing with balance—
Thank you, Madam Lapointe.
Chair, I'm actually going to try to blend a question between three of our presenters: Ms. Delahanty, Ms. Rhodes, and Ms. Lusi.
We were in the U.S. just last week. We were at the Johnson Controls company. They make 75% of the world's batteries. For the most part, those batteries are recycled. My question to them was around whether they lobbied for the environment chapter, because that environment chapter is good for their business. They're able to get more recycled batteries and to bring in better best practices. They hadn't.
My question is for Ms. Lusi, and it will be around this gender chapter.
Also, for Oxfam, are you trying to get the private sector to help in terms of your lobby effort?
I would think that, for UPS, the more customers you have, the more business you do it's all good. Would UPS lobby for bringing forward a gender chapter, for strengthening a gender chapter, or for bringing in those best practices? Is that something you bring to the table, Ms. Lusi?
Okay. It looks like all the MPs are back in their seats and we have our new witnesses here.
Before I go ahead, we have some numbers here that I would like to circulate, but I need a bit of a.... They didn't have a chance to translate this, but if there are no objections.... We can translate them, because they're really good numbers, but if there are no objections, we'll circulate them.
We welcome our guests. I don't think our panellists are new to our international trade committee. As they know, we've done the European agreement, and we've done a lot of work on the TPP. Now we're right up to our eyeballs in.... We don't call it NAFTA. We call it “future trade between Canada, the United States, and Mexico”.
We're dealing with a lot of stakeholders. Also, our committee already did some extensive travel in the United States. We've done three major trips to the United States. We were hoping to go to Mexico last week, but our friends down in Mexico had a terrible earthquake, so we're going to link up with them later.
Without further ado, we have two gentlemen here with us today who are definitely not new to the trade file. From the Government of Quebec, we have Mr. Raymond Bachand, and from Lavery, De Billy, we have Pierre Marc Johnson, senior counsel.
Maybe we can hear from the Government of Quebec first.
I would like to specify that I am no longer with the Government of Quebec. I was Minister of Industry and Minister of Finance for Quebec for eight years. I work in the same building as before, but in a legal firm, at Norton Rose Fulbright, where I am a strategic advisor. I am the chief Quebec negotiator for NAFTA. So it is true that in this case, I represent the Government of Quebec.
I believe I have five minutes to speak to you very briefly about five points in NAFTA that are related to Quebec's objectives.
The table is in English and I am the one who prepared it.
It's U.S. numbers using U.S. dollars, and the source is the USTR.
The American administration is obsessed with trade deficits. This table shows that we have exchanges that total $600 billion overall with the United States. The United States has a surplus in services and a deficit where goods are concerned. However, if we remove energy, and the Secretary of Commerce Wilbur Ross says that energy
is a “blameless deficit”,
and so the United States have a surplus. They also have a slight surplus in agriculture, although it could be said that agricultural trade is balanced.
In parallel with the $600 billion in American trade, there are $622 billion in investment stocks, that is to say $353 billion in American investments in Canada and $269 billion of Canadian investments in the United States.
So those are two very integrated economies. Currently, this is under attack. The first objective is, as they say in Washington,
“do no harm”.
Can we continue in this manner? To give you a better perspective, I should mention that Asian competition did not exist in its current form 25 years ago, but today it is very strong. Protectionism is not the way to fight Asian competition; it must be fought through an even greater integration of the Canadian and American economies, and strengthening value chains, because then they will be more productive. If our economies are more productive, they will be more competitive, and that will be a win-win situation for both parties.
As for our main offensive interests—because we must also have offensive interests—first there is access to public procurement, if we want to strengthen our economies. Certain big American public business opportunities are currently closed to Canadian businesses. I am thinking of everything that is included in the Buy American provisions, which are being added to. That should be one of our first important objectives, as Quebeckers and Canadians.
And then, there is the temporary admission of tradesmen and professionals. All of our enterprises—I have done a lot of consultation in Quebec and in Canada, but also in the United States—want to increase the flexibility of this temporary admission. We have to avoid the word “immigration”.
Immigration is a four-letter word.
It is not immigration currently in the United States, but trade. When you sell equipment or computer services worth $100 million, technicians and professionals need to follow, to do the work involved.
Then I would talk about obstacles at the borders. For instance, there is a dual agricultural inspection, and also a dual biotechnology inspection by the FDA for pharmaceutical products. Could we not simplify our lives and have a single inspection, and recognize the inspection carried out by the other government? There is also regulatory co-operation and certification. Why do we need two certifications? Mr. Johnson might speak about what he managed to accomplish with Europe. Human beings are the same in Canada and the United States. We are not talking about dogs, cats or elephants. We are all human beings, and the standards in Canada and the United States are very high. These elements would make our enterprises more effective and productive, and strengthen our economies.
From the defensive point of view—and the watchword is “do no harm”—I would point to four things, but there are others. First, there is the protection of supply management, which is fundamental.
There is chapter 19 of NAFTA, but I will save that for the end.
There is also the cultural exception, that is to say Quebec and Canada's capacity to adopt their cultural policies and to have it declared that this does not violate trade agreements. That is fundamental in today's world.
The de minimis rule is a major one. Perhaps one of your witnesses spoke about that. It is connected to the $20 amount, that is to say the maximum value for which one may import goods electronically without having to pay duty or tax. We also have to make a distinction here between tariffs and sales tax. Europe has established two levels, a very high one for tariffs and a very low one for sales tax. The latter applies at a very low level.
For retail businesses in Canada, it's a matter of having fair rules of the game. In fact, when a client purchases a product from a Canadian electronics retailer, he pays 15% sales tax in Quebec. However, if he ordered merchandise of equal value, let's say $500, from an American electronics business, he would not have to pay that tax.
This makes me think of the former tax on manufactured goods. It was a bit crazy, because we taxed the products of Canadian manufacturers whereas imported products were not taxed. That tax was replaced by the GST.
I will conclude by speaking about chapter 19 of NAFTA, regarding the arbitration mechanism. In my opinion, Quebec's economy is under attack today. We have a vast free trade market. We have a zero tariff with NAFTA, a quota for textiles and a quota for supply management, but the softwood lumber sector has very high countervailing duties, of course. The C Series is the aircraft industry flagship, and represents tens of thousands of jobs. There is also supercalendered paper. There is an investigation about newsprint. There is also an investigation on steel and aluminum. Of course, we naive Canadians believe that the aluminum industry is secure and that we will be exempted. However, there is an inquiry into aluminum, and we don't know the results of that yet. If we add the softwood lumber file, that of the C Series, that of supercalendered paper, newsprint, steel, aluminum and there are more, it is like an open bar. Moreover, the American Commerce Department finds in favour of foreign businesses once every 10 years.
This is a hostile environment right now.
We have to change this because Canadians, Quebeckers and Americans are proponents of free trade.
Thank you, Mr. Chairman.
I'll do my three and a half or five minutes in French, and I will, of course, gladly answer questions either in French or in English.
I have little to add to what Mr. Bachand just said. I think he gave a good overview of our relationship with the United States and Mexico, and especially with the United States. He explained our defensive and offensive interests very well. I find it difficult to add anything because he provided a complete overview, in my opinion.
I can however talk to the current dynamic, that is to say about the different nature of negotiations between Canada and Europe, and the renegotiation of NAFTA. I would also like to speak about the provincial participation in that process.
Here is how the negotiations with Europe are very different.
Firstly, when we began to negotiate with Europe eight years ago, there was no agreement, whereas right now we are negotiating with the United States and Mexico on the basis of an almost 25-year-old agreement. The reality is not the same. So long as we have not renewed NAFTA, or so long as it is not repudiated by one of its parties, daily business goes on. It does not mean that some retailers are not anxious, given what they hear, or read on Twitter or elsewhere.
Secondly, in the case of the agreement with Europe, there was absolute determination on the part of both parties to come to an agreement. Both Canada and Europe wanted an agreement, even if things were complex, as shown by the 500 pages of text and the 1,000 pages of exceptions. This was not simple, and that is why the process went on for a certain length of time. On the European side there was a will and a determination to conclude an agreement with Canadians so as to further transatlantic trade. That is not the case with NAFTA.
NAFTA is being reopened in the context of the extremely negative political discourse of the new occupant of the White House regarding that agreement, which he described as the worst possible agreement imaginable.
Despite that, the appointment of Mr. Ross, who is very knowledgeable about U.S. trade policy, as the senior supervisor, and that of Mr. Lighthizer, a well-known, experienced lawyer and trade specialist, could indicate that we will be back in the land of reason.
I want to insist on the fact that any free trade agreement is based on reason, rationality, an understanding of macroeconomics and trade, as well as on a desire for reciprocal enrichment through trade.
How do we get there? There are two relatively easy ways, first through a better understanding of our respective economic systems, since they are slightly different; secondly, we need to agree that we will encourage greater free circulation of goods, persons and capital, with a few exceptions; thirdly, we commit to being disciplined, that is to say to changing the laws, administrative procedures and regulations to facilitate that free circulation of goods, persons and capital. After that, we negotiate the 1,000 pages of exceptions, and that keeps the lawyers busy.
I have two comments. I wouldn't compare the heavily subsidized—by some $20 billion—Boeing and how it built its strength through military contracts and then transfer that to anything else in the world.... I would contest that Bombardier was subsidized. I don't think that an equity investment in the C Series is a subsidy. It's a billion-dollar.... The Government of Quebec specifically, with lawyers, said, “We're not going to subsidize that and that's why we're going to equity.” They were criticized for doing that by people, but it was an investment at risk and with outside analysis of the worth of that.
The drama, if we can call it that, with the commerce department is that it doesn't take into account basically that.... This is not a neutral court. The commerce department is basically the lobbyist for American business. They make decisions which are, from our point of view, sometimes wrong. I was minister during the first softwood lumber trade dispute—we appointed Pierre Marc at that point as our chief negotiator—and we won in chapter 19. For most of the decisions by Commerce, we win at the end of the day.
This one is by Boeing, and we'll see what the courts will say eventually. They have no planes. The client, Delta, says, “Hey, Boeing is complaining about something it didn't make an offer on, because it has no plane to offer.”
I'm proud of our and the way he reacted in saying that enough is enough, and if we're going to be bullied, we're going to stand up, and we're not going to take it. Our kids shouldn't take it in schoolyards, and we shouldn't take it in trade either.
You are correct to say that electronic trade did not exist 23 years ago. The iPhone was created 10 years ago.
I once was Minister of Finance and I am now president of the Institut du Québec, which has just produced a report on e-trade. I think that for Quebec and all of the country, standardizing the rules of the game is what is important.
Competition is a very good thing, on condition that everyone is on a level playing field. That means that the Department of Finance of Quebec, of Ontario and of Canada are going to have to reverse the burden. Retailers and suppliers are going to have to collect the sales tax when a transaction is done through e-trade. This has to be transparent, and everyone has to be on an equal footing; that is fundamental. It requires reforms, but they are being done in Europe, Australia, Norway and elsewhere. It is doable.
In this way, we can create many more openings for e-trade. In the meantime, I think we have to be somewhat more protectionist, because things are totally unfair for our retailers. We are talking about tens of thousands of jobs that are going to change in any case because of what is happening with e-trade. If e-trade is done within Canada and everyone pays the sales tax, there is no problem. However, if someone from the outside does not pay the sales tax, it becomes a serious problem.
In my opinion, there are some controversial topics that we have to put in the centre of the table. Chapter 19 of NAFTA is one, and the cultural exception is another.
I was in the company of Mr. Brian Mulroney last week, as our offices are in the same hall in the legal firm I work for. We were able to discuss this. You will remember that at the time, under President Reagan, the cultural exemption issue was settled in the first week, and that of NAFTA's chapter 19 on the last evening. The cultural exemption in fact goes back to that period.
Mr. Lighthizer testified before the American Congress on July 17. He published a report of about 40 pages in which he lists all of the positions 30 days before the beginning of the negotiations. It is in fact interesting to see that the word “culture” is not mentioned anywhere in that report. It is not a priority for the American administration.
That being said, I am certain that at one point or another, the United States is going to ask for the abolition of the cultural exception. If not next week in Washington, it will be in November. Canada has to refuse. That is just as important for English Canada as for French Canada.
Everyone has to be on an equal footing, but we have to allow the government to occasionally subsidize or help cultural productions and our cultural industries. That is something that is now recognized by UNESCO. The cultural exemption issue is fundamental. We simply have to oppose its abolition.
On public procurements, I'm sorry. Why? Because the federal government does not have the capacity to impose that on the provinces, which is why the Europeans wanted us at the table. We were there, but also on issues related to education, health, access to the possibility of being present in the services sectors in these areas, where we explained why not.
In the case of NAFTA, my understanding is that the U.S. doesn't want the states in the U.S. to be present, so normally they shouldn't bother us with public procurements of the provinces, unless they give a commitment that the states in the U.S. will act with reciprocity.
In the case of TPP, it's something else. If we're talking about TPP-1, there was the presence of the provinces that were briefed. In the case of TPP-2, for me it's much more unclear as to how much the provinces can be briefed on what's happening in that unusual round, because of the decision of the United States to tear up the TPP.
On the rest, I think the presence of the provinces is a constructive element in any trade negotiation. Why? Because they can furnish both to the Canadian team, and sometimes to the other team, if the federal government judges it's worthwhile having these types of meetings, informally usually.... It's worthwhile so that people understand exactly what we're talking about on both sides and can commit in the same direction. That hasn't happened in TPP-2, but it is happening in a way in NAFTA, inasmuch as the quality of the briefing and the quality of the team at the federal level is absolutely exceptional.
I dare say I never thought I would see that today, but I think the Canadian team is better prepared than the U.S. team, with much less resources. In that sense, it's a good thing the provinces are there at every meeting amongst the Canadian delegation. Why? Because they can have an input on strategy. I saw it in CETA, not only on defending their turf, their constitutional attributions, or their interests in things that are a federal jurisdiction such as agricultural tariffs, but also in terms of strategy around the Canadian table. I think it has been used largely by Steve Verheul.