I call the meeting to order.
Good afternoon, everyone. Pursuant to Standing Order 108(2), we will commence our briefing on the ongoing negotiations of the North American Free Trade Agreement.
We'll get started very shortly, but before we do I want to welcome our witnesses here today and thank them both for being here. I know that you have been very busy, so the fact that you're taking some time out of your busy schedules to be here and just give us an update is greatly appreciated.
From the Department of Foreign Affairs, Trade and Development, I have Dany Carriere, who is the director of trade negotiations for North America, and Steve Verheul, who's the assistant deputy minister of trade policy and negotiations. Welcome, and it's good to have you here.
As I think you are no strangers to how committee works, we'll start with your opening statements, and then we'll move around the room over the next couple of hours, asking questions back and forth. It is not televised live, but there is a camera from Global TV, which will share the proceedings with other networks after we're done.
I'm going to turn the floor over to you, Mr. Verheul, to start with your opening remarks, and then we'll have some questions from our members.
Thank you very much. Good afternoon, everyone, and thank you, Mr. Chair.
I'm Steve Verheul, Canada's chief negotiator for the NAFTA negotiations, and, as mentioned, assistant deputy minister of the trade policy and negotiations branch at Global Affairs Canada. As you also mentioned, I'm joined today by Ms. Dany Carriere, who's the NAFTA chief policy coordinator.
Thank you for the invitation to provide the committee with an update on the NAFTA negotiations. I would like to take this opportunity to acknowledge the work of the committee in their hearings on NAFTA, including cross-country and international consultations. The feedback those reports provide is quite valuable, so thank you.
This is my first appearance before this committee since the negotiations were launched in August, so I will focus my opening remarks on a quick overview of the negotiating rounds we have had so far, followed by a description of where talks currently stand.
To start with, as you all know, negotiations to modernize NAFTA were officially launched by the three NAFTA ministers on August 16, 2017, in Washington, D.C. To date, five rounds of negotiations have been held in rapid succession. Each round brings together nearly 30 negotiating tables. They cut across all of traditional trade agreement topics such as national treatment and market access for goods, investment, cross-border trade in services, and government procurement, but also include newer modern trade topics, such as digital trade, good regulatory practices, and small and medium-sized enterprises.
Nearly two months ago, Canada hosted round 3 in Ottawa. Almost 600 national delegates in addition to nearly 300 journalists, 100 stakeholders, and 75 representatives from provinces and territories were present for the Ottawa round.
Following the first three rounds, the NAFTA partners were in a position to announce the conclusion of the competition policy and small and medium-sized enterprises chapters. At the end of round 4, as they did for rounds 2 and 3, ministers met to take stock of the negotiations. They decided, given the scope and complexities of the negotiations, to extend the period of time between rounds to allow more technical work and domestic consultations. Ministers also reaffirmed the goal of reaching an agreement in a reasonable amount of time.
Most recently, Mexico hosted round 5 in Mexico City, where it was announced that the sixth round of negotiations will take place from January 23 to January 28 in 2018 in Montreal, Canada, but before that, negotiators will continue their work in Washington, D.C., from December 11 to December 15.
As you know, Canada's objectives for these negotiations have been based on extensive ongoing consultations with Canadians, including businesses, civil society, labour unions, indigenous peoples, and academics. In total, the Government of Canada has met with over 900 Canadian stakeholders, including local communities from across the country, and we've been continuing to meet stakeholders alongside the NAFTA talks themselves and between rounds. In addition, the government has received over 44,000 written submissions through the Canada Gazette process, the NAFTA consultation website, and direct emails to the NAFTA consultations team.
These extensive consultations provide valuable opportunities for Canadians representing many of the diverse regions and populations of our society to give their perspectives on Canada's negotiating priorities.
In addition, to ensure Canada's positions are well informed, we've established a wide-reaching consultation mechanism that includes a steering committee and specific sectoral groups. The sector-specific groups include agriculture, automotive and auto parts, civil society, culture, energy, infrastructure and government procurement, labour, metals, services, and transportation.
We also work very closely with our provincial and territorial colleagues, who travel to the negotiation sites, where they are provided with regular updates on the talks.
Overall, Canada's goal is to make an already good agreement more modern and more progressive. We are seeking to ensure that NAFTA can fully address the challenges of the 21st century. That means cutting red tape, harmonizing regulations where it makes sense, and making the flow of goods and services more efficient and effective for our businesses.
We also believe that NAFTA needs to be more progressive and inclusive. Canada's is seeking to integrate into NAFTA strong labour and environment chapters, reinforce the right of governments to regulate in the public interest, strengthen collaboration on activities to promote gender equality through a trade and gender chapter, and increase participation of our indigenous peoples in North American trade.
To that end, in round 5 in Mexico, Canada tabled its proposed trade and indigenous peoples chapter. The chapter aims to provide greater opportunities for indigenous peoples to take advantage of the economic opportunities of a modernized NAFTA.
At this juncture, the NAFTA negotiations are unfolding on two tracks. The first is a traditional track where it will be possible to see real improvements to NAFTA in a number of areas, including telecommunications, good regulatory practices, customs and trade facilitation, sanitary and phytosanitary measures, sectoral annexes, financial services, anti-corruption, technical barriers to trade, and many others. These are the kinds of issues to which our stakeholders have attached the greatest importance. It is a message we keep hearing regularly during our consultations.
As in all negotiations, there are difficult areas where Canada will have different objectives and approaches from its trading partner. This is true for the NAFTA as well. This includes the value of binational panels for anti-dumping and countervailing duties, or chapter 19: the U.S. is seeking its elimination, while Canada is seeking to improve upon it. That said, difficult areas were anticipated.
Where things get really difficult is on the extreme proposals tabled by the U.S. at rounds 3 and 4. These proposals fall in the second track. They include a rules-of-origin package for the automotive sector, a government procurement dollar-for-dollar proposal, an unconventional approach to dispute settlement, and a sunset clause.
On rules of origin for autos, the U.S. is proposing a regional value content requirement of 85%, a 50% U.S. content requirement, and tracing of all inputs. This proposal is wholly unworkable and would not only be damaging to the Canadian and Mexican auto sectors but to the U.S. auto sector as well. Both Canada and Mexico have highlighted the negative impacts of the U.S. proposal for the U.S. and for North America more broadly.
In regard to government procurement, the U.S. has tabled a dollar-for-dollar proposal that would virtually eliminate Canadian access to the U.S. procurement market under NAFTA. Canada has rejected the dollar-for-dollar proposal as completely unworkable, and we will not engage on the basis of that kind of approach.
On dispute settlement, the U.S. proposal is an attempt by the U.S. to return to a pre-WTO era in which the biggest economies win over smaller economies. Enforceable trade commitments are essential and represent a critical part of any trade agreement, including NAFTA. Canada will not accept an outcome that does not respect this fundamental concept of effective enforcement of legal obligations.
Regarding the sunset clause, the U.S. is proposing that the agreement expire every five years unless the parties agree to extend it. Canada's position is that this would create an unstable business environment and hamper foreign investment in North America. We continue to oppose this proposal, as well as the other extreme proposals.
The U.S. has also proposed the complete elimination of Canadian tariffs on dairy, poultry, and eggs, without suggesting the elimination of their own. In some cases they have even greater protections on products such as dairy, sugar, sugar cane products, and others. This proposal is also unacceptable.
Even in the face of these extreme proposals, Canada remains committed to modernizing and improving NAFTA, and we will continue to engage constructively with Mexico and with the U.S. with the aim of reaching mutually beneficial outcomes for a modern NAFTA that will continue to serve our exporters for decades to come.
Let me be clear: while we will continue to engage constructively and bring suggestions and new ideas to the table, we will not accept U.S. proposals that would fundamentally weaken the benefits of NAFTA for Canada and undermine the competitiveness of the North American market in relation to the rest of the world. Canadian negotiators are working hard to continue putting together high-quality proposals in advance of the Washington intersessional period, and we are looking forward to hosting our Mexican and U.S. colleagues in Montreal for round 6.
Thank you, and I look forward to taking your questions.
Thank you very much, Mr. Chair.
As Ms. Ludwig and Mr. Masse mentioned, we were in the States last week. One of the themes we heard over and over again was basically “do no harm”. We heard that over and over again from the auto sector and the agrifood sector, but we also heard it from security.
There's an issue I'm trying to get my head around, and maybe you can help me out with it. When you talk to the Americans about security versus trade, it seems their perspective is they put security first, then trade. There seems to be a perception that Canada puts trade first, and then security.
When you're looking at NAFTA and at North America, with NAFTA we have better cybersecurity, better food security, better energy security, and better defence security for North America. I'm trying to think, what's in North America's...? What's in the best interest of the U.S., Canada, and Mexico?
I had a gentleman who is involved in the security sector. He said that theoretically you could have less trade with the U.S., and then Canada would have to look to other markets. I know the PM is in China now, so taking that example, if you have a weakness of Canadian enterprises, they are more susceptible to a takeover. That may be a cause for concern with state-owned Chinese enterprises. I asked a couple of the congressmen whether it was in their best interest to have state-owned Chinese enterprises on their northern border, as a hypothetical situation, and I don't think they had even thought about security.
My question to you—and again it's an opinion question—is this: is it in the United States' best interest, from a security perspective, to withdraw from NAFTA? Maybe you could thematically talk about cybersecurity, food, energy, and defence. Where's the win?