Thank you, Madam Chair.
Thank you for the invitation to appear before the committee today. We look forward to answering questions regarding the outcomes of the Canada-U.S.-Mexico agreement, or CUSMA, following my opening remarks.
The signature of the CUSMA on November 30, 2018, followed 13 months of intensive negotiations that brought together a broad range of officials and stakeholders, with a strong partnership between federal and provincial officials. That agreement achieved several key outcomes that served to reinforce the integrity of the North American market, preserve Canada's market access into the U.S. and Mexico, and modernize the agreement's provisions to reflect our modern economy and the evolution of the North American partnership.
On December 10, 2019, following several months of intensive engagement with our U.S. and Mexican counterparts, the three NAFTA parties signed a protocol of amendment to modify certain outcomes in the original agreement related to specific issues of state-to-state dispute settlement, labour, environment, intellectual property, and automotive rules of origin. These modifications were largely the result of domestic discussions in the United States. However, Canada was closely involved and engaged in substantive negotiations to ensure that any modifications aligned with Canadian interests. Throughout the negotiations, Canadian businesses, business associations, labour unions, civil society and indigenous groups were also closely consulted and contributed heavily to the final result.
To help better inform Canadians of the outcomes, documents have been made available on the Global Affairs website, including the text of the agreement itself, the amending protocol reached on December 10, a summary of the overall outcomes and summaries of all chapters in the agreement.
I want to start by recalling that the NAFTA modernization discussions were unique. This was the first large-scale renegotiation of any of Canada's free trade agreements. Normally, free trade agreement parties are looking to liberalize trade. ln this process, the stated goal of the U.S. at the outset was to rebalance the agreement. The President of the U.S. had also repeatedly threatened to withdraw from NAFTA if a satisfactory outcome could not be reached.
The opening U.S. negotiating positions were, to put it mildly, unconventional. These included a proposed 50% U.S. domestic content requirement on autos; the complete dismantlement of supply management; elimination of the NAFTA chapter 19 binational panel dispute settlement mechanism for anti-dumping and countervailing duties; removal of the cultural exception; a state-to-state dispute settlement mechanism that would have rendered the agreement completely unenforceable; a government procurement chapter that would have taken away NAFTA market access, leaving Canada worse off than all of the U.S.' other FTA partners; and a five-year automatic termination of the agreement, known as the “sunset clause”.
The U.S. administration took the unprecedented step of imposing tariffs on imports of Canadian steel and aluminum on purported national security grounds, but with no legitimate justification provided. The U.S. administration had also launched an investigation that could lead to the same for autos and auto parts.
ln the face of this situation, Canada undertook broad and extensive consultations with Canadians on objectives for the NAFTA modernization process. Based on the views we heard and our internal trade policy expertise, Canada set out a number of key objectives, that can broadly be categorized into the following overarching areas. First, we wanted to preserve the important NAFTA provisions and market access that we have into the U.S. and Mexico. We wanted to modernize and improve the agreement where possible, and we wanted to reinforce the security and stability of market access into the U.S. and Mexico for Canadian businesses.
ln her August 14, 2017 speech launching the NAFTA talks, Minister Freeland set out six objectives. The first was to modernize NAFTA. The second was to make the agreement more progressive in the areas of labour, the environment, gender and indigenous peoples, as well as removing the investor-state dispute settlement. It also set out to cut red tape and harmonize regulations, provide a freer market for government procurement, and to establish freer movement of professionals. Finally, it was to maintain items of special national interest, such as supply management, the cultural exception and dispute settlement for anti-dumping and countervailing duties.
In terms of the outcomes, with respect to preserving NAFTA, Canada maintained the CUSMA outcome preserving important elements of the NAFTA, including NAFTA tariff outcomes. In other words, we ensured continued duty-free access into the U.S. and Mexican markets for originating goods.
We preserved the binational panel dispute settlement mechanism for anti-dumping and countervailing duty matters, which is a key component of the overall goods market access package of the NAFTA and of the original Canada-U.S. free trade agreement. We preserved Canada's preferential access to the U.S. under the temporary entry for business persons chapter. We preserved the predictability and security of access for services suppliers and investors. We preserved the cultural exception.
Also, we preserved state-to-state dispute settlement and in fact improved upon that mechanism, including through the protocol of amendment, to ensure that Canada can rely on an efficient and effective mechanism to resolve disputes with the U.S. and with Mexico.
In the area of autos, changes were made to the rules of origin regime to encourage the use of more inputs from Canada, in particular by increasing the regional value content requirements for autos and auto parts and removing incentives to produce in low-cost jurisdictions.
Together with the quota exemption from potential U.S. section 232 tariffs on autos and auto parts, secured as part of the final outcome, these new automotive rules of origin will incentivize production and sourcing in North America and represent important outcomes for both our steel and aluminum sectors.
With respect to modernizing the NAFTA outcome, we have included modernized disciplines for trade in goods and agriculture, including with respect to customs administration and procedures, technical barriers to trade and sanitary and phytosanitary measures, as well as a new chapter on good regulatory practices that encourages co-operation and protects the government's right to regulate in the public interest, including for health and safety.
A commitment on trade facilitation and customs procedures has been modernized for the 21st century to better facilitate cross-border trade, including through the use of electronic processes, which will reduce red tape for exporters and save them money. We have new and modernized disciplines on technical barriers to trade in key sectors, designed to minimize obstacles for Canadians doing business in the U.S. and Mexico while preserving Canada's ability to regulate in the public interest. The agreement also includes modernized obligations for cross-border trade in services and investment, including financial services, telecommunications and a new digital trade chapter.
On labour and environment, we have made important steps forward by concluding ambitious chapters that are fully incorporated into the agreement and are subject to dispute settlement. These obligations will help ensure that parties maintain high standards for labour and the environment and that domestic laws will not be deviated from as a means to gain an unfair trading advantage. The outcome also includes a special enforcement mechanism that will provide Canada with an enhanced process to ensure the effective implementation of labour reforms in Mexico—specifically related to freedom of association and collective bargaining.
Finally, the outcomes advance Canada's interests toward inclusive trade, including through greater integration of the gender perspective and better reflecting the interests of indigenous peoples.
With respect to some other outcomes, in the context of the overall outcome Canada did make some incremental moves in relation to the U.S. objectives, specifically in the areas of supply management and intellectual property.
On supply-management sectors, we should recall that the U.S. made an explicit and public demand for the complete dismantlement of the supply-management system, but in the end we preserved the three key pillars of supply management, including production controls, import controls and price controls, and granted only minimal access to the U.S. The government has also been clear in its commitment to provide full and fair compensation to farmers in this regard.
On intellectual property, obligations cover a broad set of areas including copyright and related rights, trademarks, geographical indications, industrial designs, patents, pharmaceutical intellectual property provisions, data protection for agricultural chemical products, trade secrets, and intellectual property rights enforcement.
Certain outcomes will require changes to Canada's current intellectual property legal and policy framework in certain areas such as intellectual property rights enforcement to provide ex officio border authority for suspected counterfeit or pirated goods in transit, as well as criminal offences for the unauthorized and wilful misappropriation of trade secrets.
In other areas, Canada has transition periods to implement its commitments. For instance, on the obligation to provide a copyright term of life of the author plus 70 years, Canada currently provides a term of life plus 50 years, and has a two-and-a-half-year transition period to implement this obligation following the entry into force of the agreement.
Under the amending protocol, the parties agreed to remove the obligation to provide 10 years of data protection for biologic drugs, meaning that Canada does not need to change its existing regime in this area, which provides a term of eight years of data protection.
I'll just mention a couple of other notable outcomes. Faced with the U.S. demand for automatic termination every five years, Canada instead proposed a process that would lead to the regular review and modernization of the agreement. We settled on a 16-year term with a formal review every six years, after any of which the agreement can be extended for another 16 years.
We also addressed issues of concern to civil society, including those with respect to the removal of the energy proportionality clause and those introducing new obligations on privacy and access to information, and an exception for indigenous rights.
We no longer have trilateral investor-state dispute settlement for Canada. The U.S. and Mexico maintained only a very narrow set of investor-state dispute settlement obligations. Investor-state dispute settlement under the original or existing NAFTA will have a three-year transition period for investments made under that original NAFTA.
There is no government procurement chapter between Canada and the other parties. Canada maintains its access to the U.S. under the World Trade Organization's Agreement on Government Procurement, which was significantly more ambitious than was the original NAFTA chapter. We retain our access to Mexico via the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. We were unwilling to accept a “NAFTA minus” outcome on government procurement, which was all that was offered by the U.S.
In closing, I would like to underline that our objectives for these negotiations were informed by Canadian priorities and interests, close engagement and consultations with provinces and territories, as well as a wide range of stakeholders and the collective knowledge and experience of trade policy and sector experts across the government.
The views and information provided by stakeholders, including industry, labour, civil society and indigenous peoples and others, informed all of Canada's negotiating positions. The strong support for the new agreement expressed by industry and key business associations is clear evidence that we listened carefully to their views and advocated strongly for their interests.
That concludes my opening remarks. We would be pleased to answer any questions you may have regarding the agreement.
Thank you very much, Madam Chair.
Thank you very much, Madam Chair.
As this is our first committee meeting, I just want to say that it's an honour having you before us at our first committee meeting of this 43rd session. You have presented before at the former trade committee meetings and some of us who were part of the past trade committee have heard about your great work, and some new folks are just hearing of it. I'm sure they are aware of your great work as well.
I'm from Sault Ste. Marie, a steel town, and 60% of Algoma steel is exported to the United States. When Donald Trump put the section 232 tariffs on steel and aluminum—well, 25% on steel and 10% on aluminum—there was great concern in my community and across this country. A lot of people didn't think he was going to do it, but he did it and he used it on the grounds of national security.
I have always said that from my window there, I literally look across at the United States and I don't see any gunboats in the St. Marys River or any turrets. We have the longest undefended border. We have NORAD in North Bay, a shared defence.
It was insulting for Canadians, I think, for them to use that tool at that time. It was not only insulting, but also of great concern to people in Sault Ste. Marie. I'd walk into a Tim Hortons for donuts and the nervousness, not just on the faces of the steelworkers, but their spouses, their children, their parents was of really deep concern and it hurt badly.
I was proud of this Parliament's coming together, and of this trade committee that went down to Washington—united, all parties—and looked square in the face of the American legislators and said that we would not pass this until they lifted those section 232 tariffs on steel and aluminum.
I know there were many other committees that went down. I went down with the industry committee. I co-chair the all-party steel committee, and we did the same thing. That, I think, coupled with the dollar-for-dollar counterpunching we did above our weight, not only on steel and aluminum, but also on gherkins and sleeping bags and Jack Daniel's, I think, caught their attention and hurt them back a bit.
As well, we made a lot of changes to strengthen our steel remedy system: anti-circumvention, scoping, and hired 40 new Canada Border Service Agency workers specialized in forensics to do that.
In your opinion, Steve, could you please explain to us how important it was and how maybe other areas of this great country came together to work against those section 232 tariffs that were really hurting the steel and aluminum industry?
I wanted to go back a little bit to the cost-benefit analysis, or what we would call an “economic impact study”. Through you to the minister, I would like to express how disappointed we are—I think the opposition was unanimous—that the minister didn't even commission a cost-benefit analysis or an economic study until a few weeks ago, particularly when the Americans finished theirs in April 2019.
We have about three inches of reading here, and I think it would have been beneficial if we were given that in advance. The American legislators and decision-makers were given it before they had to debate it in their house and their senate. We're going to be given our cost-benefit analysis and economic impact study with the Canadian perspective after ratification. If we have anything that comes up that needs an amendment, we can't even really go back unless we send it back to the United States and Mexico. That is concerning.
The other thing is that when you mentioned the analysis, you said that the minister is changing the parameters of the Canadian studies so that he can defend the agreement. Frankly, the minister needs to know that we're not necessarily interested in giving the government an opportunity to defend the agreement. We want to know the truth and the impact that it's going to have on Canadian industry.
My NDP colleague was quite eloquent on the aluminum question, as he was in the House as well. What's the status today for auto parts, for example, and what is it going to be in the future?
It's the lack of transparency and disappointment more than anything else. I know she'll be here, and maybe she'll have an answer for us.
You guys know I'm from Oshawa. We had really bad news that our plant wasn't allocated new product. Even if I hear from the auto industry that they can live with the agreement, it's too late for my community. What I'm worried about is that the agreement puts in place rules of origin that can be significant red tape.
My colleague asked about the cost on cars and things like that. My concern is that we're heading down this road for North American integration, and for them to build a car here in North America there is a tipping point. With regard to the costs of making a car here versus the costs of one of these manufacturers making it offshore and then sending it over here, I think it's very important that we get the analysis of those costs and what they're going to do to the automotive sector. Because we certainly would like to see an agreement if we're going to be having jobs moving north, so to speak, I'd really like to know for my constituents what the advantage is of investing in Canada versus investing in the United States.
Martin, I know that you've done a lot of work on this. What's in this agreement that would incent a General Motors, Chrysler or Ford decision-maker to put a plant in Canada versus the United States, to keep jobs here?