Thank you and good morning, Madam Chair and committee members. I would like to thank you for the invitation to appear today to discuss the implications of CUSMA on Canada's dairy industry and on Vitalus specifically.
My name is Phil Vanderpol. I am the president and CEO of Vitalus Nutrition, a processor of value-added dairy ingredients.
Founded as a family business over 65 years ago, Vitalus is a leading producer of high-value, customized dairy ingredients for the world's food, beverage and nutritional industries. At our advanced facilities and FSSC 22000-certified processing plants located in British Columbia and in Manitoba, we process milk supplied by Canadian farmers into high-quality cream and butter, milk protein concentrates, and milk protein isolates that have superior quality, nutritional value and functionality.
Our products are used in multiple applications, such as nutrition bars, protein drinks, infant formula, baking, confectionary, dairy products, snack foods and much more. Vitalus supplies cream and butter to Canadian markets, and milk protein concentrates and isolates to both domestic markets and over 20 international markets.
In 2018, we expanded our B.C. facility and commissioned a new plant to produce Vitagos, a high-value prebiotic dairy ingredient also known as galacto-oligosaccharides. Vitagos is used extensively in infant formula, as well as digestive health products. As one of only a few plants in the world producing this product, Vitalus is the first to manufacture this type of product in North America.
Vitalus has a solid reputation and a strong brand recognition in the B2B marketplace. This is based on our unwavering commitment to quality, efficiency, custom capabilities and customer service.
At Vitalus, we've been able to capitalize on the growth in the nutritional value-added global dairy ingredients market. We have achieved double-digit revenue growth over the past three years, with the trend expected to continue this year. Our three-year compound annual growth rate on revenue has increased 49% from 2017 through to 2019, and we are forecasting continued growth into 2020.
We have achieved this growth by successfully expanding sales of our milk protein concentrates and isolates into global markets while also meeting the growth and demand for butterfat in the Canadian marketplace. This is evidenced by our export volume results from 2017 to 2019, which I will share with you. We have increased our export volumes in the last three years by 171% to Europe, thanks, certainly, in part to CETA; 132% to the U.S. market; 135% to the Middle Eastern and North African markets; and 65% to Asia. We have achieved this result by establishing long-term collaborative relationships with multinational food and beverage manufacturers around the world that value Canadian dairy ingredients.
As the second-largest food processing industry in Canada, the dairy sector contributes more than $20 billion annually to the country's economy. With Vitalus's export growth over the past three years, we are certainly contributing to Canada's achieving its growth targets in the agri-food sector. Between our two processing facilities, we employ over 200 highly skilled people, and we remain a proudly Canadian company.
Dairy processors, including Vitalus, have been motivated to continue the pattern of growth and move the industry—and Canada—forward. However, the pending implementation of CUSMA and the concessions that were made in dairy threaten to curb this growth and diminish the long-term competitiveness of the sector.
The Canadian dairy industry is experiencing a processing capacity shortfall that is expected to increase significantly in the near future due to a lack of sufficient investment in milk-drying plants. With pending plant closures as well, there may also be a decrease in the drying capacity for skim milk powder. Skim milk powder is generally produced to deal with the excess solids-not-fat that is produced as a result of meeting the butterfat demands within the Canadian market.
As you probably are aware, the domestic demand for butterfat continues to increase, and the lack of skim milk powder drying capacity already unbalances the system. It will only get worse going forward. With the implementation of CUSMA, skim milk powder and milk protein concentrates will be subjected to export volume caps, as well as an export tax on volumes over the cap, which will make it financially unfeasible to export.
It is important to note that milk protein concentrates over 85% in protein level and milk protein isolates are exempt from the export caps and tax. Building and operating a milk protein isolate plant, however, is a very costly endeavour with a long-term payback. The changes in the Canadian dairy processing environment, market demand for high-value dairy ingredients and pending CUSMA ratification have prompted the industry to work collaboratively to reach a solution for continued industry growth and long-term sustainability.
Vitalus has been part of the solution dialogue for the past two years. We strove to find the best solution for the projected excess solids-not-fat, specifically in western Canada, not just looking at the short term but looking at a plan that will help for the next 10-plus years.
We took into consideration the need for a staged volume increase in milk production to meet the needs of the Canadian market for butterfat. We also reviewed the geographical and environmental implications, as well as the handling of the by-products. Dairy producers and processors in western Canada are poised to invest in a long-term solution to address all the previously mentioned issues. However, we require tangible commitments from government to proceed.
We are specifically requesting that CUSMA not come into force until August 1, 2020. This will provide the industry additional time to implement the significant changes required to deal with the declining export volume caps placed on dairy. It will also provide the necessary time for Vitalus to develop additional milk protein isolate markets, products that are not subject to the export caps and tax.
We also require prioritization of export allocation volumes within the export volume caps to milk protein concentrates. By prioritizing milk protein concentrates, we will be able to make the additional capital investments required to convert skim milk powder and milk protein concentrate production over a sufficient period of time into milk protein isolates, which as mentioned previously, are not subject to export restrictions.
Our stakeholders will require assurances that the ramifications to the dairy sector have been addressed by this government, that promised compensation dollars to processors for all recent trade deals have been finalized and that it will defend our industry going forward.
Lastly, I want to emphasize that this made-in-Canada solution benefits the entire dairy industry and will contribute to Canada's prosperity by safeguarding current and future investments, jobs and the growth of Canada's dairy processing sector from the negative impacts of CUSMA.
Thank you for allowing me the time to present to you, and I welcome any questions you may have.
Chair, my remarks draw from my previous experience as a foreign service officer serving on the team that negotiated the Canada-United States Free Trade Agreement and the NAFTA, on my postings in New York, as consul general in Los Angeles, as first head of the advocacy secretariat at our Washington embassy and, more recently, as a member of the trade advisory committee to the deputy minister of international trade.
I encourage members to pass the legislation implementing the Canada-U.S.-Mexico agreement. Trade agreements are like riding a bicycle: Keep cycling and when you hit bumps make adjustments as necessary, but keep cycling. CUSMA is the best possible agreement under the circumstances. It's not perfect, but for Canada it both preserves access to our largest market and preserves the North American platform incorporating Mexico.
The Canada-Mexico story gets scant attention but it's the hidden treasure of the NAFTA story. Mexico is now our third-largest trading partner and, as we witnessed, a valuable partner and ally in recent trade negotiations with the Trump administration with not just the new NAFTA, but in reversing U.S. protectionism through country of origin labelling.
The new agreement is not perfect. lt is freer trade not free trade, but consider where we started. President Trump claimed it was the worst deal ever negotiated. Commerce secretary Wilbur Ross said it was for Mexico and Canada to give, and the United States to get. The Trump administration thought they had us over a barrel because we, Mexico and Canada, were much more dependent on the U.S. than they were on us. We each account for close to 18% of U.S. exports, while for us the U.S. takes almost 75% of our exports. For Mexico, it's about 80%.
Trade generates two-thirds of our GDP, making us the 12th-largest export economy in the world. For the U.S., trade represents just 27% of its GDP. Mr. Trump well understood these asymmetries.
Despite these disadvantages, we updated the NAFTA with new chapters on digital trade, intellectual property, labour and the environment while keeping dispute settlement and supply management. At the same time we managed to drown investor-state provisions. The unjust steel and aluminum tariffs are gone. Our auto trade is managed trade. It's a bit like that of softwood lumber, but we should be able to manage this to support jobs and more investment.
Thanks to the Democrats in the House of Representatives, our gives on patent protection for biologic drugs that would have raised health care costs for provinces were rolled back. The Democrats also secured better enforcement on environmental and labour provisions, all of which we had sought in the negotiations.
ln short, we have a high-quality North American trade agreement, something we sought to obtain through the trans Pacific partnership. lnstead, we now have an up-to-date Canada-U.S.-Mexico agreement with the advantage over the U.S. in trans-Pacific and trans-Atlantic markets through CPTPP and CETA.
This leads me to my recommendations. First, CUSMA is the result of an all-of-Canada effort involving the , ministers, premiers, parliamentarians and legislators, business and labour leaders all working with their American counterparts with complementary messages and purpose. This work must continue and become a permanent campaign. American protectionism is older than the republic, and it will continue no matter who is president. We need trade diversification, yes, but we cannot change geography. That geography gives us access to the biggest and most innovative market in the world.
Working Capitol Hill daily from my embassy, and through my experience at my consulates, I learned that just as all politics is local so is all trade. While we can't make donations to campaigns, we can illustrate the jobs that Canadian trade and investment create by district and by state. We need to keep this data current. Importantly, you as parliamentarians need to keep reminding Americans of these facts, and do this through regular meetings with U.S. legislators—local, state and federal.
There are lots of opportunities, and not just the Canada-U.S. Inter-Parliamentary Group but regional conferences of state and national legislators, important forums like PNWER and NASCO, as well as the sectoral industry and farm group meetings. First, you need to be there to develop relationships and to make the case for Canada. Use your travel points to go to Washington, and I encourage you to adjust the rules for travel throughout the United States. As you will appreciate, nothing is better than a meeting on your home turf.
Second, with the trade agreement in place there is still unfinished business when it comes to regulation and infrastructure. The thicket of national, provincial and local regulations and standards needs to be harmonized or made complementary. CUSMA helps, but we're also working on, through separate initiatives launched by the Harper government and Obama administration, regulatory co-operation and beyond the border. These have been continued by the Trudeau government and the Trump administration. They continue, but after the initial burst of enthusiasm, I'm afraid they're now buried within our bureaucracies. Progress requires political oversight by this committee, including hearings to identify the roadblocks, raise consciousness and keep government noses to the grindstone. Your constituents will thank you.
People and trade pass through our border points, as well as roads, rail, hydro and pipelines, bridges and tunnels, airports and rail stations. They need improvement. Too often they are choke points that hamper passage and productivity. Canada has an infrastructure program, but is it moving fast enough? This should be an area of close collaboration by all levels of government. Again, parliamentary oversight of the progress is essential. The U.S. administration and Congress are already talking about a trillion-dollar infrastructure program. We need to ensure it is complementary to our efforts, and because procurement is not part of CUSMA, leave it to governors and premiers to work out a procurement agreement as we did in 2010.
Harvard's Belfer Center points out that North America is the next great emerging market, possessing abundant energy, a skilled workforce, technology and a big market. However, we need infrastructure.
Meanwhile, we enjoy first-mover advantage of the U.S. with the European Union and CPTPP nations, but only if we seize these opportunities. Our competitiveness depends on our ability to get goods quickly to market, whether in North America or across our oceans.
Third, we need to know more about North America, especially the United States. Diversification is a laudable goal, but for Canada, when it comes to trade and security, it will always be the United States and then the rest. Anyone in business will tell you market intelligence is essential, whether you are buying or selling. For example, how many of you can tell your constituents how many of their jobs depend on U.S. investment and trade? We can do it for the U.S., and the Business Council of Canada has created an interactive map that can pinpoint jobs by congressional district and state. Why don't we have one for Canadian constituencies, and why not include TPP and CETA? People understand why trade matters to them.
Given our propinquity and innate understanding of the United States, why aren't we turning this to our advantage? How many serious centres for the study of the U.S. are there in Canada? How many Canada research chairs focus on the United States and our trade? You will be disappointed in the answer.
I encourage you as parliamentarians to pass CUSMA. I encourage you to press for investments that serve our national interest.
In conclusion, we always need to keep in mind that Canada's influence in the world is measured to a large extent by our understanding of the United States. By using our knowledge and relationships with Americans, our ability to leverage our influence in Washington and state capitals makes us a more desirable partner with the rest of the world, because they also have to do business with our often-complicated neighbour.
Thank you, Chair.
Thank you, Madam Chair and committee members.
We are in Meadow Lake, Saskatchewan, this morning. We are going to be representing the softwood lumber lack-of-agreement, as well as indigenous producers of forest products.
We represent the Meadow Lake Tribal Council, located in northwest Saskatchewan. We're the only major 100% indigenous-owned softwood lumber producer in Canada—that is NorSask Forest Products—and we have significant exports to the United States.
We recognize the current agreement. Of course, softwood lumber is not part of that agreement, but today we are making a representation that we cannot be forgotten in this process. We are uniquely important. MLTC's ownership and successful operation of a 150-million board foot sawmill, which is about a medium-sized sawmill in a Canadian context, with annual revenues of approximately $60 million, for over 22 years has been a wildly heralded benchmark of successful indigenous forestry and forest product manufacturing in Canada and internationally.
NorSask is a survivor. We weathered the multi-year U.S. housing market collapse in the mid-2000s. It is the only sawmill in Saskatchewan and through much of Canada that did not shut down during the period of 2007 to 2012.
We are continuing to be impacted by punitive U.S. tariffs. This successful forestry icon of stable indigenous economic development continues to be threatened by the effects of ongoing trade tariffs imposed by the U.S. on Canadian softwood lumber, which commenced in December 2017 at a rate of 20.23%. We encourage the federal government to continue support of the indigenous forest product manufacturing industry in Canada, and we recognize that the federal government does have a constitutional mandate to protect and enhance the economic well-being of indigenous peoples.
has indicated that no relationship is more important to him and to Canada than the one with indigenous peoples, and that it is time for a renewed, nation-to-nation relationship based on a recognition of rights, respect, co-operation, and partnership. Of course, this should include support of aboriginal or indigenous ownership of businesses such as NorSask.
The federal government is uniquely responsible. It is the agent responsible for resolving lumber wars and negotiating the deals of managed softwood lumber agreement outcomes on behalf of Canada. The Canada-U.S. lumber trade arena is dominated and influenced by the interests of the largest lumber producers in Canada. Of course, in the last few years, most of these large lumber producers have strategically expanded operations into the U.S. south. Independent indigenous lumber producers wholly based in Canada, such as ourselves, end up as collateral damage and are significantly disadvantaged in these trade wars.
On November 25, 2016, the U.S. Lumber Coalition filed a petition asking the U.S. Department of Commerce to investigate Canadian softwood lumber shipments with the intent of levying punitive duties and taxes, and in December 2017, this was implemented.
The parliamentary Standing Committee on International Trade in 2016 recognized in its consultations regarding negotiations around softwood lumber with the United States that they should include stakeholders that may have been overlooked in the past, especially aboriginal stakeholders and small producers.
It is our view that indigenous-owned lumber producers and exporters are disproportionately impacted by any trade action related to softwood lumber. Small indigenous lumber producers require special consideration and protection from this trade action.
Briefly, I will provide a few statistics on NorSask. We're 100% indigenous-owned. We're located in Meadow Lake, Saskatchewan. The shareholder is the Meadow Lake Tribal Council, representing nine first nations with a population of about 13,000 members. It's been 30 years of progressive ownership and economic growth in the forestry sector. We produce 150 million board feet of premium softwood lumber each year. Seventy per cent of this is exported to well-established customers in the midwestern United States. Our fibre source is fully certified to the highest standards in Canada and internationally, including those of the Forest Stewardship Council. We are a globally recognized model of a sustainable, indigenous-owned forestry enterprise.
I would like to say a few words on employment. Indigenous employment in Saskatchewan in the forestry sector is the highest in Canada at 30%, and in northwest Saskatchewan the percentage is 65%. This is a tremendous contribution to the local economy. We may be small in a Canadian context, but we are very significant regionally. In terms of a model of good outcomes, in terms of indigenous forestry, we're the high point in the Canadian landscape.
Here is a quote from Shane Vermette, our executive director of the Ministry of Energy and Resources in Saskatchewan. He said, “Saskatchewan leads Canada, and MLTC leads Saskatchewan, by far when it comes to lndigenous forestry business development, lndigenous employment in the forestry sector, and percent of annual allowable cut allocated to lndigenous businesses.”
Our markets are into the U.S. We are landlocked. We have very limited opportunity to get offshore, so the U.S. market is critical for us. We reiterate the need for a managed outcome to the current trade dispute.
Some of the issues I'd like to highlight are that the current U.S. trade action has been miserable for indigenous lumber producers. Despite weathering prior softwood lumber wars, and in particular the housing crash, the current softwood lumber trade action by the U.S. and imposed tariff regime has produced significant hardship for NorSask Forest Products. NorSask has made deposits related to these countervail and anti-dumping duties of approximately $11 million in the last three years. It is our desire that these funds be returned in their entirety to the Meadow Lake Tribal Council as soon as possible.
Our mid-continent location limits access to offshore markets. Saskatchewan is far from the Asian markets and we cannot compete with the Alberta and B.C. lumber producers with respect to these markets. NorSask needs ongoing unfettered access to its U.S. lumber customer base to maintain operations.
The other issue is the small volume of lumber exported to the U.S. from indigenous-owned lumber manufacturing facilities in Canada is clearly not a threat to the U.S. lumber producers and is not the cause of the current softwood lumber dispute. Indigenous lumber producers cannot be collateral damage in a dispute aimed at the larger producers in Canada, who incidentally have also managed to mitigate their situation by purchasing sawmills in the U.S. south.
Indigenous lumber producers generally are standalone enterprises that lack geographic diversity, business diversification into pulp, paper and other products, and market options enjoyed by our larger competitors and peers. NorSask, as an example of the sustained successful outcome of indigenous business development in the forestry sector, has required decades of thoughtful nurture and incubation, and this successful investment in economic development cannot be lost due to these trade actions.
For example, NorSask represents one half of 1% of Canada's lumber exports to the U.S. We're clearly no harm or threat, yet we're included in the same bucket that holds the rest of the producers. A solution to this would be that, in future arrangements with the U.S., indigenous lumber producers are exempt from tariffs, duties and quota limitations.
The special measures that we ask for are, first, that the federal government ensure that wholly indigenous lumber producers receive 100% of their tariff deposits back as soon as possible, which in our case is $11 million. Any profits generated from operations go directly back to the nine first nations and are used for housing and other underfunded aspects of their programs.
Second, we ask that the federal government provide accommodation to wholly indigenous-owned lumber manufacturing facilities in Canada that export to the U.S., such that they be excluded or not subject to duties, tariffs or quotas under any trade action for future softwood lumber agreements.
Last, we ask that the federal government continue to provide mechanisms for financial support to assist indigenous softwood lumber producers, so that they survive these lost revenues caused by these unfair trade actions.
Thank you, Madam Chair.
The Réseau québécois sur l'intégration continentale (RQIC) is pleased to have this opportunity to share its point of view on the Canada—United States—Mexico agreement (CUSMA). My name is Claude Vaillancourt, and I am president of the Association québécoise pour la taxation des transactions financières et pour l'action citoyenne (ATTAC-Québec). Accompanying me is Normand Pépin, union research advisor at the Centrale des syndicats démocratiques (CSD).
The RQIC has been in existence since 1985, but took its current name in 1994. It defines itself as a broad multi-sectoral coalition bringing together Quebec social organizations from labour and community groups as well as those involved in international development. RQIC member organizations represent more than one million people.
RQIC's objectives are: to propose a vision of development that respects social rights, workers' rights and human rights, and to promote democracy, participation, respect for the environment and the elimination of poverty.
In terms of CUSMA, we at RQIC can only be pleased for Canada about the chapter on foreign investment protection, the infamous chapter 11, being removed. It gave companies the right to sue states for government measures that could harm their profits, even if those measures were geared toward protecting people and the environment.
However, we are disappointed with the Canadian government's attitude in the negotiations, because removing chapter 11 was a requirement of the Trump administration, whereas Canada wanted to keep the chapter until the last moment. That chapter was nothing more than a threat to the sovereignty of states.
That is a strange attitude for a country that, of the three NAFTA members, was the one that was the most sued—41 suits out of the 85 identified under NAFTA—and whose governments had to abandon enacting any public policies for fear of being sued. The deleterious effect of this chapter is not just about the millions of dollars to be paid in the event of a conviction. It is also about the regulatory chill when governments dare not take action to protect or improve the lives of their people.
RQIC is also pleased about the removal of the energy proportionality clause, another of its long-standing concerns. This clause forced Canada to basically never decrease oil exports to the United States, which of course limited our energy sovereignty, a situation that is not good for any country.
In addition, RQIC can only celebrate the fact that the general exception for cultural products has been maintained in the new agreement. This exception ensures that cultural products will not be considered like other products in CUSMA, and it will enable Canada to put in place the necessary measures to protect our artists and their productions.
As for the environmental and labour issues, we have significant differences of opinion with Minister Freeland. While we agree that it was essential that those two issues be included in the agreement as a separate chapter rather than as side agreements with no functional enforcement mechanisms, we need more than that before we can call this agreement progressive. Minister Freeland was here a few days ago to state that CUSMA requires signatory parties to “maintain high levels of environmental protection and robust environmental governance.” What we are seeing instead is that CUSMA is not doing nearly enough to address climate change. Chapter 24 on the environment mentions some good intentions in this regard, but it remains insufficient and completely inadequate in terms of responding to the climate emergency in which we find ourselves. The words “climate change,” “warming” and “emergency” are actually absent from this chapter. There is no mention of the Paris agreement. There are no targets and no binding measures against the major polluters.
CUSMA continues to promote a type of economy based on massive exports and long routes, which favours major movements of goods and high consumption of hydrocarbons. There are no measures to support the energy transition we need. On the contrary, it will require new regulations that go against the immediate interest of some corporate polluters. Chapter 28 on “good” regulatory practices—we will come back to this later—will, in our opinion, have a deterrent effect that will place heavy constraints on governments wishing to adopt regulations to protect the environment and allow a shift to green energy.
As for labour, chapter 23, which addresses that topic, seems to us to be quite incomplete. Once again, we think there are some interesting good intentions with respect to forced labour, violence against workers, migrant workers, and discrimination in the workplace. However, implementing these measures seems very problematic to us.
Two days ago, again stated that the new agreement, CUSMA, includes ambitious and enforceable labour obligations to protect workers from discrimination in the workplace, including gender-based discrimination. However, the first texts released on October 1, 2018 stated that each party is supposed to implement policies that protect workers from employment discrimination based on gender.
A few months later, the final text instead stated that each party shall implement policies that it considers appropriate to protect workers. The reference to “policies that protect workers” was changed to “policies that it considers appropriate to protect workers against employment discrimination on the basis of sex.” This protection is now left to the good judgment of each party. The worst part is that Canada has agreed to allow the United States to shield its federal agencies' existing policies from this article, even if watered down.
In addition, it is mentioned that cases of violence against workers must have an effect on trade or investment between the parties, which we find difficult to demonstrate and far too restrictive, just like the entire chapter.
CUSMA also fails to solve the problem of competition between workers, nor does it put forward concrete measures to improve their working conditions. Only the auto sector is subject to a target of a production wage rate of at least $16 U.S. per hour, which is an arbitrary choice and clearly insufficient overall.
Finally, we come to the brand new chapter 28 of the new agreement on good regulatory practices, a chapter that was completely absent from NAFTA and that did not even mention last Tuesday. While the victory of NAFTA chapter 11 being removed was noted earlier, we must curb our enthusiasm in light of chapter 28. First of all, the title of the chapter is misleading, since the practices it highlights are not what they seem.
According to the CUSMA rules, the parties must make public each year a list of the regulations they plan to implement in the following year, in addition to being required to justify the need for new regulations and to make public all scientific studies and data consulted. That is not all. If the parties decide to conduct an impact assessment of the new regulations, which is strongly recommended, it should include an explanation of the need for the new regulation and the problem it is intended to address, a list of all other regulatory or non-regulatory alternatives that could be used to try to address the problem, a cost-benefit analysis of each of those different scenarios, and the reasons why the proposed solution is preferable.
It gets worse. Article 28.13 requires each party to adopt or maintain “procedures or mechanisms to conduct retrospective reviews of its regulations in order to determine whether modification or repeal is appropriate”. Article 28.14 requires the parties to provide the opportunity for any interested person to submit “to any regulatory authority of the Party written suggestions for the issuance, modification, or repeal of a regulation.” As a result, the doors are wide open for corporate lobbyists to attempt to directly influence those responsible for enforcing the regulations.
Deregulation is therefore the focus of the chapter on good regulatory practices, rather than regulation that could help to better protect the environment or the people.
Attempting to improve regulations or create new regulations will become so complicated that the only change left will be deregulation. There will be no need to be able to sue governments in this context, since discouraging governments from acting at the grassroots level is likely to prove just as effective, if not more so. We are really surprised that a Liberal government would support this type of provision, which makes any government action suspect in advance.
Thank you for listening.
My thanks to all the witnesses today. It was particularly interesting to hear about the reality of producers and workers in the softwood lumber sector. It confirms a number of our fears.
As a member of the Bloc Québécois, I will first address my questions to the representatives from Quebec. It is a pleasure to welcome groups from Quebec. Furthermore, I have previously worked in your network in Quebec. It is a pleasure to have you here today.
You said that chapter 28 on good regulatory practices somewhat mitigates the beneficial effects of eliminating the previous chapter 11 of NAFTA. In your opinion, it now remains to be seen whether we are trading four quarters for a dollar, as they say, or whether there is still some progress despite everything. I guess time will tell.
As you mentioned, the didn't actually talk about it when she appeared before the committee. However, I had asked Mr. Verheul, Canada's negotiator. According to him, there was no encroachment on sovereignty and, ultimately, it was simply in a spirit of reciprocity and to avoid any funny business by the U.S.
Can you see any merit in that interpretation?
This is about nation building. As the honourable member Blaikie pointed out, this is about building Canada. There should be no group left behind in this. There's a special group within Canada, the indigenous community, that is working very hard and very diligently to create economies, to be part of provincial economies. Trade action around softwood lumber puts a big wet blanket on all of this.
The impact to the communities is significant. As the big players in the industry generate profits, so do we, as we can, and those go directly back to the nine communities that make up the tribal council. The impact of these crippling duties is significant: $11 million represents $11 million that doesn't go back into education, into health care. Saskatchewan has, unfortunately, been in the news nationally around suicide. Suicide prevention is a big matter. With regard to infrastructure development, housing is always critically underfunded, and there's huge demand on that front. The demands and the needs are many.
Non-program funding and self-generated funds are critically important to first nations across Canada. Particularly in the Meadow Lake area, and with the Meadow Lake Tribal Council, generating these funds and getting them back to the communities annually is a significant part of what we do at NorSask. This is part business and part mission, and we need to have special protection around these measures.
Thank you, Madam Chair.
Thank you to everyone for being with us today.
I am always delighted to welcome Quebec witnesses to our committee.
My question is for Mr. Vaillancourt and Mr. Pépin.
I would like to discuss with you the cultural exemptions in the new agreement. You've already mentioned that the agreement protects and modernizes the cultural exemption. As you may know, there was still intense pressure on the and our negotiators to get rid of it completely or to weaken it significantly, but we kept it.
The cultural exemption protects our artists, as you mentioned, and preserves our Canadian content. As an MP from Montreal, I am particularly proud that our government was able to keep this exemption to protect our Quebec culture. Digital content will now be able to benefit from these same protections.
I'd like to follow up on a suggestion you made earlier in your testimony. Do you have any ideas about concrete measures we can take to make the best use of the cultural exemption, particularly to promote our Quebec artists and our French-language content?
Thank you very much, Madam Chair. I'll be splitting my time with Mr. Kram.
I'd like to follow up with Mr. Robertson. We've actually been asking for the economic impact studies. The Americans, as you know, put out their economic impact studies last April. The minister was here saying she couldn't do that, but no one around the table or in Canada believes she would sign on to an agreement of this importance without having some advice on how this is going to impact Canada economically.
Mr. Pépin, I think, brought up that it's very important that we have these numbers.
Mr. Vanderpol, I can't believe it. We had a witness yesterday, Mr. Geist, who's an expert on the IP side of things. He wasn't consulted. You weren't consulted. It's getting frustrating at this level that the minister obviously has this advice and she's not releasing it.
Mr. Vanderpol, how important is it to you that you have these economic impact numbers, as families make business decisions moving forward and the sector makes these business decisions? Do you have any economic impact studies you could share with the committee? We've been asking the minister over and over since December 12 to release the studies, or if she doesn't have a full study to release the advice she's been given so that we can make sure the support and programs are available for the families that are going to be negatively affected. Do you have anything you could give us?
Thank you, Madam Chair.
I appreciate the opportunity to sit on this committee today. As many know, I chair the Standing Committee on Transport, Infrastructure and Communities. The reason I'm here today is the crossover that this issue and all the trade issues have for both committees. It's a pleasure to be here and to bring forward some thoughts on behalf of that committee.
First off, Madam Chair, I want to preface my comments by stating that I do anticipate the passing of CUSMA, which will in fact align with CETA and, of course, the CPTPP. That's what I'm going to premise my comments on today with the witnesses we have before us.
There was a mention earlier by Mr. Robertson of the trillion-dollar procurement program that we must embark on. In fact, if Canada wants to and needs to invest in strategic infrastructure investments to strengthen our overall international trade performance, it's imminent that we begin to work with our different committees here in Parliament, but more importantly with our partners, both in the public sector—municipal in particular—and in the private sector.
I will be bringing forward today to committee a few motions that will align with some of that direction, including a study focusing on current and anticipated labour shortages throughout the country, in particular as it relates to the transportation sector; undertaking a study on Canada's rural digital infrastructure and prospective solutions to the gaps in wireless infrastructure deployment throughout rural Canada; looking at the gas tax; and, of course, once again, the need to work with our municipal and private sector partners, as well as our indigenous communities, to put in place strategic investments that align with our trade agreements such as CUSMA, CETA and the CPTPP.
I want to ask a question that is primarily for Mr. Robertson of the Canadian Global Affairs Institute.
With respect to your comment on the trillion-dollar procurement program, I'll throw a question out there for you. I'm going to stop talking and allow you to comment on what I've just talked about and the importance of same. How important is it for Canada, as a nation, to work binationally in establishing our procurement and, of course, the strategic infrastructure investments that will align with and complement the trade agreements we have in place?
Good afternoon, Madam Chair, Parliamentary Secretary Bendayan and members of the Standing Committee on International Trade. As I sit in my office right now at Windsor City Hall, what you can't quite see—you'll have to trust me, and you can pull up your Google Maps—is that about one and a half kilometres out the window behind me is the city of Detroit and the United States.
I want to thank you, because I think it's appropriate to have this opportunity to provide some comments on Bill , the Canada, U.S., Mexico agreement implementation act.
Now I don't need to tell anyone in the room that Canada is a trading nation, that our prosperity, growth and success are largely reliant on our ability to trade with other countries. I'm the mayor of the City of Windsor and also a member of the FCM Big City Mayors' Caucus. My community is home to 240,000 people, and we are set in a region of nearly 400,000 people. Our city is the largest border city in Canada. The local economy is intricately tied to that of Detroit, Michigan, and the United States.
We are home to the busiest commercial border crossing between the United States and Canada. In fact, the Windsor-Detroit border crossings handle more than one-third of all Canada-U.S. land trade over four points of entry: the Ambassador Bridge, the Detroit-Windsor Tunnel, the CP Rail tunnel and the Windsor-Detroit Truck Ferry.
The importance of trade with the United States to this area is further punctuated by the fact that one of our nation's largest infrastructure projects is under way, that being the construction of the Gordie Howe bridge linking Windsor and Detroit, Canada and the United States. This project has survived the test of time through four Canadian prime ministers and four U.S. presidents, representing Democratic, Republican, Liberal and Conservative parties. It has made it this far because smart people on both sides of the border understand the value of smooth and efficient border crossings and the value of trade for our economies and what it means for jobs. Nowhere is the value of secure, efficient and safe movement of goods and people so important than to the Windsor-Essex area, likely more so than anywhere else in Canada.
Windsor is proud to be the automotive capital of Canada and home to the largest cluster of tool, die and mould-makers in North America. Our two largest private employers are the Fiat Chrysler assembly plant, home to the Dodge Grand Caravan and Chrysler Pacifica, and the Ford Motor Company, which operates two engine plants locally.
Windsor-Essex is also home to the largest auto cluster in North America, with more than 300 local companies engaging in engineering, designing and manufacturing of cutting-edge industrial systems and products for clients across the globe. This is an industry that supports thousands of well-paying, highly skilled jobs, and one that comprises 30% of our regional GDP.
The auto sector is vital to the economy of Windsor-Essex, but it's also vital to the overall economy of Canada as well as various regional economies throughout the United States. Our local supply chains are still tightly integrated. Based on geography, businesses are able to take advantage of the best elements that all three countries have to offer. There is no better example that I can think of than this: Parts put into a car produced in Canada cross the border an average of seven times before that car rolls off the end of the production line. That, I think, is a great example of how tightly integrated our economies are.
The amendments to the new Canada-United States-Mexico agreement will help strengthen and protect well-paying jobs and will help our companies stay highly competitive in a global economy. That's truly how our employers compete, on a global basis. The agreement's updated rules of origin, increasing the regional value content threshold for cars up to 75% from 62.5% ensures that a higher majority of car parts, such as engines and transmissions, for example, originate in North America, in cities like mine.
The new agreement also introduces new requirements to help ensure that at least 70% of a producer's steel and aluminum products originate in North America. This agreement has the potential to generate increased automotive production in North America, of course, including cities and areas like Windsor-Essex, as well as additional sourcing opportunities for Canadian parts producers, many of which have local footprints in Canada.
I'm not going to sit here and tell you that this new agreement is perfect. It's not. Future revisions to trilateral trade agreements with Mexico and the United States should strongly consider better labour mobility for highly skilled workers, so that positions like robotic technicians, machine learning specialists and other new economy workers can seamlessly travel within the trade zone to meet the changing demands of employers as they and our economies evolve. The 8,000 people from my city who cross the border every day into the United States to work understand how important mobility is for their livelihoods and for that of their employers.
There's an old axiom taught in many law schools that says the best agreement is usually the one that leaves each party thinking they could have done a little bit better. There's no doubt that is the case in this negotiation and revision to our trade agreement. However, the incremental improvements achieved through the process far outweigh any negative aspects.
Political and economic environments juxtaposed with the benefits of this bill lead me to offer my full support to the federal government. On behalf of the people in Windsor—Essex, I encourage Parliament to move quickly to ratify this deal. I personally thank for her efforts on behalf of all Canadians.
Thank you, Madam Chair.
Thank you. I won't go through the paper in any detail. I'll just summarize some points.
Bill is an implementation measure. It adjusts Canadian laws to bring those laws into conformity with the agreement, with CUSMA, and it needs parliamentary approval, obviously, to make those changes to Canadian statutes. Those changes set out in the bill will allow Canada to ratify the treaty.
It's important to understand that the conclusion of treaties and their ratification is an executive act. It doesn't legally require parliamentary approval for the Government of Canada to ratify an agreement, but the policy for many years has been to submit major agreements, trade agreements in particular, to Parliament for parliamentary approval. Of course, before Canada can ratify any agreement, whether it's a trade agreement or otherwise, Canadian laws have to be brought into line with the provisions of the agreement. If Canada were to ratify an agreement and Canadian laws had not been made consistent with the agreement, Canada would be, as a country, as a state, in breach of its obligations under the agreement.
Let's come to Bill . I want to give you a bit more context about Bill C-4. There is nothing that I could see in Bill C-4 that is in any way inconsistent with the provisions of CUSMA. I have to say—and I think this is important in terms of context—that CUSMA is a done deal. The negotiations are over. This committee is not being charged with renegotiating or proposing renegotiating the CUSMA. It is done. The U.S. has ratified it. Mexico has ratified it. It is now Canada's turn to ratify the agreement. That requires that Canadian laws be changed and adjusted in some respects. In some cases, it's a matter of tinkering, but in some respects, Canadian laws and statutes have to be changed. That's what Bill C-4 does.
This committee, it seems to me, has three options.
It can approve Bill , possibly with some minor tinkering here and there. I don't think there's much that needs to be done in that regard, if anything. It can approve the bill as presented.
The second option would be to propose amendments to Bill with or without a recommendation that the treaty be approved. It could radically amend Bill C-4 to change its contents, making them inconsistent with what Canada has agreed to in CUSMA.
Third, it could refuse to approve Bill and refuse to recommend Canadian approval of CUSMA.
The latter two options or scenarios would mean that Canada could not ratify the agreement. This would be, in my view, an enormous setback for the country, and in fact would be without precedent. There has never been an instance in Canadian history where Parliament has refused to approve a trade agreement and to pass the necessary legislation. We know that in 1987-88 the original Canada-U.S. Free Trade Agreement was held up in the Senate after it had passed the House. An election was held and we know the consequences. A Conservative government was returned with a majority and the House subsequently passed the necessary implementing legislation.
In the case of the NAFTA, before it was presented to the trade committee or indeed tabled in the House, there were changes made to the NAFTA as renegotiated, because Canada, the U.S. and Mexico agreed that it would be necessary to add side letters to the negotiated text of the agreement. The NAFTA implementing bill was tabled in the House and was approved.
Canadian implementing legislation in other areas has been approved by the House. The European Trade Agreement—the CETA—and the trans-Pacific trade agreement have both been approved by the House. If any one of the negative scenarios that I outlined were to be proposed and approved by the House as a whole, I think the consequences would be disastrous. It would mean that the U.S. and Mexico would have ratified CUSMA, Canada would not have and, I assume, that Mexico and the U.S. would go ahead with the implementation and all of the other matters under the agreement. Canada would not be a party to that agreement. It would complicate things enormously in terms of supply lines and other matters. More than that, it would set back Canada-U.S. relations in a major way.
If this agreement, as I said—negotiated, signed, approved and ratified by the U.S. and Mexico—were turned down by Canada, legally, at least initially, the NAFTA would then remain in force as is between Canada and the United States. There would be serious doubts about whether the NAFTA would be continued by this particular administration under that scenario. The future of the NAFTA itself would be extremely uncertain.
The question then before this committee is what the consequences for Canada would be if Parliament, by following through with any such recommendation by this committee, were to refuse to approve the CUSMA and pass the necessary implementing legislation. That is the issue that you're faced with.
I know that in previous deliberations of this committee, suggestions have been made to reopen the NAFTA because one or another interest group is not happy with certain of its provisions. That is frankly a non-starter. The United States and Mexico, but particularly the United States, will not agree to reopen this agreement. It has passed the U.S. Congress. It's been ratified by the President, and the suggestion that Canada could go back to the U.S. government and say that it wanted to reopen this agreement is frankly a fantasy. It will not happen. Even if it did in the remotest of possibilities, even if the United States and Mexico were prepared to reopen the CUSMA because of Canada's insistence, we would have to look at starting negotiations again, going through all of the process of negotiating and putting on the table our starting position, and being prepared to make compromises, because, as Mr. Verheul said in his testimony, trade negotiations are questions of balancing concessions. Canada would have to put its starting bid on the table and be prepared to make concessions. This is, to me, the most unrealistic of scenarios.
It's still morning, so good morning.
It's Leo Blydorp here. I'm a farmer in Dufferin County, Ontario, which is around Orangeville. I started farming there in about 1995 and had a prior career in agriculture chemicals. I started off at about 250 acres and worked myself up to about 1,300 acres. I farm with my son and we have a number of part-time employees. I grow a number of crops that are covered by the agreement: canola, corn, oats, soybeans, winter wheat, hay and straw, and I have grown barley, white beans and quinoa in the past.
As far as the trade deal is concerned, there is really no change from NAFTA. Nothing has really changed for me. I'm a proponent of free trade, so we could go home from here, but it's been my experience that trade is never quite that simple, and it's never free, or fair or equal in my point of view. I want to spend some time going into that, if I might.
Just recently we've had this trade tiff with China—or the U.S. has—and we've gotten caught up in the crossfire, so I want to spend a little bit of time on that.
The U.S. has offered trade-distorting domestic support to their farmers, which our government hasn't seen fit to match. After the U.S. launched the trade war with China, retaliatory Chinese tariffs were introduced in June 2018, which saw the price of soybeans drop about 10% on the Chicago Board of Trade.
The Chicago Board of Trade also determines all of our prices in Canada, so most of the commodities, other than canola and barley, are traded on that exchange. Canola, which is a bit linked to soybeans because it's an interchangeable commodity for vegetable oil and for meal, dropped about 5%, but then it dropped about another 5% when we detained the Huawei executive Meng Wanzhou. Essentially, China stopped buying all of our canola. China was the biggest customer of canola. Most of the canola is grown in western Canada, but we do grow some canola in the area where I farm in Ontario.
The U.S. responded to the Chinese tariffs on agriculture products—primarily soybeans—in 2018 by introducing the USDA market facilitation program, or MFP. That gave U.S. farmers $12 billion in 2018 and $16 billion in 2019. I'm just quoting here from the fact sheet:
The [2018 MFP] provides direct payments to help...producers who have been directly impacted by illegal retaliatory tariffs, resulting in the loss of traditional exports....
The initial MFP rates are as follows:
...Soybeans $1.65 per bushel
Therefore, about 95% of that money went to soybean growers, and there was also a little that went to wheat. These are all crops that trade freely across the border and compete with what I'm trying to produce here in Ontario.
We have been impacted equally by this damage that was a result of the trade war between the U.S. and China, and we have not gotten any government support.
Then, for 2019, they changed the program a little bit, because I think they had some concerns about how different trade partners might react to it. They made it more or less directly linked to the specific crop. They changed it a fair bit to make it county-specific, but in the end, the average farmer in Illinois got another $21 an acre than he did in the previous year. That was cited in a weekly farm economics Gardner policy series, a paper that was authored by the University of Illinois and the Ohio State University.
What does that mean for me in Ontario? We grew 284.5 acres of soybeans in 2018 and had a production of 16,040 bushels. If you convert $1.65 U.S., that comes out to $2.20 Canadian. If you multiply that by 16,040 bushels, that was just over $35,000 that I didn't get that my American competitors did get. For corn, I would have gotten a little, $294, and for soft red winter wheat I would have gotten just over $3,000, for a total of $38,700 that I'm behind my U.S. competitor. In 2019, if I apply the same ratios, I would have had $51,580 out of that program if I'd had an address in Michigan.
During this time, there are considerable U.S. soybeans that come right into Ontario and are processed and exported through Hamilton, displacing Ontario soybeans. To date, our federal government has done nothing that I'm aware of to address this disparity in crop farmer support between Canada and the U.S., while it has paid compensation to other agriculture sectors.
Dairy farmers, for example, have been allocated $1.75 billion for trade injury that has not yet occurred and may not occur, or if it does occur, may be impossible to measure. That's from Agriweek, Canada's agribusiness authority since 1967. I don't have anything against dairy farmers, but I think farmers need to be treated equitably when there are trade issues.
I sat on a government committee for three years. I had the opportunity to travel to Ottawa about three times a year in 2015, 2016 and 2017. I was a federally appointed producer representative to the national program advisory committee. We met to discuss Canadian agriculture partnership programs. Much of the time was spent discussing business risk management programs, AgriStability in particular. This was largely an exercise in frustration for many of us producer representatives, as our input was never considered or implemented. AgriStability was changed in 2013. It became a much less useful program for stabilizing farm income, as the reference margin that triggered payment was reduced from 85% to 70%. Changes were also made on the eligible expenses used in the calculation, with a cap on certain expenses. Hence, many growers dropped out of AgriStability, as did I at the recommendation of my accountant.
The response from Agriculture and Agri-Food Canada staff was that our proposals would not pass the scrutiny of countervail and were likely to be classified as amber domestic support programs. I haven't seen any discussion at all from the federal government, or even from the provincial government, about whether the support offered in 2018 and 2019 by the American government in the USDA facilitation program would in fact be countervailable—I certainly think that 2018, because it was very specific and very regional, would be countervailable—or whether it would fall in any of the boxes that are amber, blue or green.
If we're going to have free trade, we need a government that will take a proactive approach in monitoring the domestic support programs of other CUSMA countries and determine both their impact on market price in Canada and their ability to distort trade. As an individual farmer I do not have the resources to do this or the expertise. I spent about a day trying to get ready for this. I don't know much about trade. I've just told you everything I know.
In terms of competitiveness, many of these things continue to creep on us. I'll harp on one more, now that I have the floor. I probably have a few minutes left.
[Witness spoke in Algonquin
I wanted to acknowledge all of you, myself and the territory before we begin. We have a brief set of remarks that we'll share, which I will start with.
Thank you, first of all, for the invitation to the national chief of the Assembly of First Nations to appear before your committee to inform the study of Bill . The national chief has sent his regrets due to other commitments, and we are pleased to be here on his behalf.
My name is Judy Whiteduck, and I am the director of the economic sector. I am joined by Risa Schwartz, our legal counsel on international trade matters.
The AFN is a national organization advocating for first nations citizens in Canada, which includes more than 900,000 first nations people, both living on reserves and in towns and urban centres.
First nations leaders direct the work of the Assembly of First Nations through resolutions passed at chiefs' assemblies. In 2019, the AFN passed resolution 37/2019, which was continued advocacy on Canada's international trade agreements to achieve economic reconciliation. It urged greater participation of first nations in international trade negotiations, and called upon Canada to include a trade and indigenous peoples chapter in future international trade agreements. The AFN has a specific chiefs committee on economic development, which includes first nations trade relations.
In 2017, the national chief was welcomed by to be a member of the NAFTA council. At an official level, Risa Schwartz and I also participate on the indigenous working group on international trade for the Canada-United States- Mexico agreement. While there is more to do, this work has resulted in the most inclusive international agreement for indigenous peoples to date.
I will now ask Risa to provide additional comments on CUSMA and to make a recommendation for an amendment to Bill as well.
With the ratification of CUSMA, Canada, working together with first nations, will be taking steps to make international trade more inclusive and more equitable for indigenous peoples, especially for indigenous women.
CUSMA didn't ultimately include a trade and indigenous peoples chapter, but the text of the final agreement mainstreamed many important provisions for first nations. CUSMA maintains Canada's traditional reservations, exceptions and exclusions in the areas of services, investment, environment and state-owned enterprises. It continues the WTO agreement on procurement carve-outs for indigenous businesses. It contains provisions that recognize the important role that indigenous peoples play in conserving the environment.
There is a new emphasis in CUSMA on co-operation activities to promote and enhance opportunities for indigenous businesses in the chapter on small and medium-sized enterprises. Indigenous peoples are the youngest and fastest-growing demographic in Canada, and opportunities for indigenous business means opportunities for women and for youth. There is a new provision in CUSMA for handcrafted indigenous textiles and apparel goods, which are now eligible for duty-free treatment.
Also, importantly, for the first time in a Canadian trade agreement, CUSMA includes protections for inherent and treaty rights through a new general exception in article 32.5, “Indigenous Peoples Rights”. The general exception clause is much stronger than we have seen in other agreements. This new exception clause covers the entire agreement and applies to indigenous peoples in all three CUSMA countries. It will allow all three states to take action to fulfill their legal obligations to indigenous peoples.
As well, we'd like to note that the investor-state dispute settlement will be phased out as between the United States and Canada. ISDS is a threat to indigenous peoples' rights. All these matters are groundwork for positive change.
Once CUSMA is ratified, we must work together to realize economic gains and to ensure these provisions are implemented in a manner that provides for greater economic equity for first nations. We note that the mandate letter for the includes that “at least 5% of federal contracts awarded” must be “to businesses managed and led by indigenous peoples”.
This commitment needs to be monitored by each federal department and reported upon to cabinet on an annual basis to ensure the target is being met. Progress in meeting the 5% target should also be published by the Government of Canada for transparency.
While CUSMA is an example of the difference it makes to engage with indigenous peoples at an early stage, there must be increased opportunities for first nations to participate directly in international trade negotiations, consistent with the United Nations Declaration on the Rights of Indigenous Peoples.
The Assembly of First Nations will continue to advocate that Canada move beyond engagement and invite first nations to the negotiation table; include trade and indigenous peoples chapters in all new or modernized international trade agreements; explicitly acknowledge the United Nations Declaration on the Rights of Indigenous Peoples in international trade and investment agreements; and ensure that a general exception to protect indigenous people's rights, such as the one in CUSMA, is a red-line item for negotiation agreements. Like New Zealand, Canada must commit to protecting indigenous rights in international trade agreements. This is not a matter that should be up for negotiation.
As well, we ask that Canada halt the negotiation of new ISDS provisions in new international trade and investment agreements and remove ISDS provisions when older agreements are being modernized.
Finally, we ask Canada to invest in programs and services needed for first nations trade networks and inter-nation trade so that additional capacity can be established in first nations trade policy and programs and services. We are also here today to recommend an amendment to Bill . The bill is missing a non-derogation clause. The non-derogation clause amendment was proposed previously by the national chief when he appeared before this committee during the study for Bill .
All implementing legislation for international agreements that have the potential to impact inherent and treaty rights must include a non-derogation clause. It is not just the international trade and investment agreements that can impact inherent and treaty rights, but also how the agreement is implemented through domestic regulatory and policy matters. A non-derogation clause will clarify that the act and CUSMA shall be construed so as to uphold existing aboriginal and treaty rights recognized and affirmed in our Constitution.
Chi-meegwetch for the opportunity today to present to the Standing Committee on International Trade.
Thank you, Madam Chair. Good afternoon to everyone.
It is my pleasure to be here on behalf of Canada's 90,000 manufacturers and exporters and our association's 2,500 direct members to support Bill , an act to implement the agreement between Canada, the United States of America and the United Mexican States, also known as CUSMA.
Before I begin, I would like to thank the efforts of the , , chief negotiator Steve Verheul and all of their staff for negotiating CUSMA. Being part of the process, we at Canadian Manufacturers & Exporters, or CME, understand how difficult these negotiations were. It was crucial to achieve a positive outcome for business and all its employees, and we did just that. As such, CME fully supports this bill and we urge the government and all parliamentarians to ratify CUSMA as soon as possible.
My goal today is simple. I want to explain why free trade is important to manufacturing and how CUSMA will improve on NAFTA. Why is free trade so important? Simply put, North American trade is the basis upon which Canada's manufacturing industry is built. Our sector alone employs 1.7 million workers in every community across the country.
In 2019, we shipped $455 billion of merchandise exports to the U.S. and Mexico. This represented 77% of our total exports to all countries that year. Two-thirds of these exports, worth about $305 billion, were manufactured goods. The numbers simply speak for themselves. You see, Canadian, American and Mexican manufacturers don't really compete with one another. Rather, we build stuff together: a continental manufacturing ecosystem bound together by integrated supply chains.
North American free trade is therefore a pillar of our national economy. It is why the manufacturing sector produces the bulk of Canada's exports. It is how the sector can compete against the rest of the world. This is why CUSMA, and NAFTA before it, are so important. Without these agreements and without integrated production with the U.S. and Mexico, we simply would not have the scale necessary to be a global player. Canada's ability to take advantage of any other trade deal is only possible if North America continues to manufacture together.
How does CUSMA improve on NAFTA? CUSMA preserves the integrated manufacturing operations that allow the relative free flow of goods and services among our three markets. Going into the negotiations, our members made it clear to us that the primary objective of Canada must be to do no harm to this integrated manufacturing economy. CUSMA accomplished this.
In fact, CUSMA preserves many of the key elements of the original NAFTA that were targets of the U.S. for elimination. This includes dispute settlement mechanisms and the business traveller visa exemptions. This was by no means assured at the outset, but there they are alive and well.
Importantly, CUSMA updates critical areas of NAFTA, dragging it into the 21st century. This alone will significantly enhance North American trade. For example, the new digital trade chapter recognizes now that the Internet is a thing and establishes a framework for e-commerce in North America. The customs administration and free trade facilitation chapter will also go a long way in modernizing borders throughout North America, enabling the free flow of goods.
Lastly, chapter 26, the new competitiveness chapter, has not garnered a lot of attention, but it is, in our estimation, one of the biggest accomplishments of CUSMA. Why? It sets up a framework for three sovereign countries to become a unified trade bloc. It will do this by promoting better coordination and integration of our manufacturing industries so that we can tackle global trade challenges together. This is a significant accomplishment.
We have consistently urged the government to start work on implementing parts of the agreement now, like chapter 26, that do not require legal changes. We should be looking to make early progress by establishing committees for North American competitiveness and good regulatory practices, as outlined in the agreement. This would show Canadian leadership, signal to our other partners that we take CUSMA seriously and let us hit the ground running.
Once CUSMA is the law of the land, we need to pivot toward helping manufacturers and exporters take advantage of the new deal. The U.S. is, and will always remain, our largest export market. We must leverage the excellent government resources like the trade commissioner service and Export Development Canada to help companies transition from NAFTA to CUSMA.
Limited access to the U.S. government procurement market is also a big challenge. We encourage the government to work with the Americans, on a bilateral basis, to open up this lucrative area for Canadian farms. This is how government can play a positive role in helping companies capitalize on CUSMA once it's enforced.
In the final analysis, CUSMA is a good deal for Canada, and given the very challenging negotiations, an impressive achievement. We urge all parties to pass this bill as quickly as possible. If you do that, I can assure you that Canadian manufacturers will return the favour by creating prosperity for all Canadians for years to come.
Thank you, and I look forward to the discussion.
Thank you to all the witnesses this morning. It's been very interesting to see the various dynamics, and I thank you for that.
Good morning, Mr. Mayor. Of course, I'm coming straight to you from Ottawa. By the way, folks, he is literally sitting in the Florida of Canada, and I will vouch that indeed behind him is Detroit.
You're welcome for that one, Mr. Mayor. I have a couple of questions for you this morning, sir.
First and foremost, thank you for representing FCM and the big city mayors. That's really exciting for this committee and me to see. I've noted that the FCM and big city caucuses are enthusiastic about the new NAFTA.
If I could be so bold to suggest it, Windsor—Essex is truly a microcosm of Canada, in that whatever Canada has to offer, quite frankly, we pretty much have the same thing to offer, be it the auto sector, agriculture, commercial fishing so to speak, mining, and the list goes on and on. We are very much in a unique situation here. We kind of have the pulse of what's going on from coast to coast to coast.
That being said, it certainly does appear—I'm speaking specifically to CUSMA right now—to be good news for the auto sector, of course, and it's good news for our region, both Windsor and Essex, given the importance of the automotive sector to our region.
Let me also say that we are the party of free trade, and we certainly do not intend to hold up this agreement. However, let me also be very clear that it's important that we do our due diligence. I don't know if you know this, but I would hope that you do. You'd be interested that despite repeated requests, we have still not received an economic impact statement. Why is that vital? We're getting down to crunch time. We need to make some very serious decisions, and quite frankly, it makes it very difficult to do our due diligence without that.
One example, to illustrate the kind of data that is needed, is an issue of significance for our region. Labour has supported the clause that requires 40% of cars produced in Mexico be completed by workers making at least $16 an hour, $20 Canadian. There's an assumption that automotive manufacturing jobs will migrate north, and that would be good news for us, of course, if that assumption proves correct. However, because of the lack of analysis, we don't know how many jobs are expected to be created in Canada. An economic impact study would provide a frame of reference for us to track those numbers.
Obviously, if the City of Windsor, as an example, were to do a P3-type of an agreement with someone, certainly staff and council would ensure that they knew the economic impact on the City of Windsor.
On behalf of the FCM, has the FCM done an economic impact statement of the new NAFTA, and does it intend to monitor the impacts going forward?
Mr. Lewis, it's nice to see you as well. I haven't seen you since you were sworn in, so congratulations to you and to all the members who were elected and re-elected.
To the best of my knowledge, the FCM has not conducted that particular type of analysis. From a high level, if we looked at the value provided to all cities by having an excellent trade deal and an ability to make sure that goods can continue to flow.... As you pointed out, there's no better place to look than the Windsor-Essex area, definitely a microcosm of Canada, but certainly a leader when it comes to the nature of trade and the reliance on trade between the United States and Canada.
I acknowledged in my remarks that, at the end of the day, there was no plan, no way to make this perfect. With the economic and political environment out there, certainly I think we understood very acutely in my conversations expressed to during the negotiations that there are people in the community who are very scared about what might happen.
Certainly the consideration we have as a community—and I'm sure FCM would echo this in many ways—is that, looking at General Motors' decision to close the plant in Oshawa and to reallocate work, if I consider the prospect of that happening in my community because there's more trade friction put into the system, the economic impact and what would happen to our local community would be very devastating.
FCM certainly is briefed on the high-level matters here. I think we all agree on many points, especially on the automotive front when it comes to the regional content value being increased, with the requirement for more North American production of steel and aluminum as well. Overall it presents a good value proposition for Canadians, Canadian businesses and jobs in Canada as well.
Thank you, Madam Chair.
Mayor Dilkens, I don't have any questions, but I know you're experimenting with Amazon's Ring doorbell and the Neighbours app. I look forward to seeing how that goes.
To the Canadian Manufacturers & Exporters, thank you all for your work in helping get this deal done. You said the government has a positive role to play. The government, in association with you and so many other Canadians, has successfully concluded this deal.
You mentioned that you expect your members to scale up and become global players, based on the strength of this agreement. They can use this agreement to increase their manufacturing capabilities and become global players. You also said you'd like to see your members competing with the rest of the world, with the strength of this particular agreement.
Yesterday we had some of your major members here: the association of steel producers and the association of aluminum producers. Their members—the entire aluminum industry and the steel industry—are focused only on the North American market.
It has been 15 years since we had a new smelter constructed here in Canada. For 20 years, steel industry production has been holding at around 15 million or 16 million tonnes. They are not investing to increase the capacity to become a global player, to compete in the rest of the world. They are content with going after this captured market. Is it the right approach?
Again, I'll answer the first part of the question first, but thank you very much for that question.
A lot of legislation does include non-derogation clauses. In fact, I believe it was a few a years ago that the Senate subcommittee looking at aboriginal issues recommended that all Canadian legislation include a non-derogation clause, across the board. That hasn't been implemented yet, but that was definitely a recommendation.
Because of article 32.5, which does in the agreement itself protect indigenous rights, it is important that it's not just CUSMA that has this protection but also the bill, because this bill will be changing Canadian laws and also creating policies to implement CUSMA. As we work with the new bill, we also should be aware that it might impact inherent or treaty rights. That's why there's the importance of having the non-derogation clause in the agreement and also in the implementing legislation.
Some may ask why it is important that you can't override the Constitution. You've made a comment on that, and I definitely agree, but I want to note that there is already a section in the bill as it stands about water. It clarifies that nothing in the agreement harms our “natural...water”. Whoever drafted this bill made the decision that it was important to clarify that our natural water is not impacted by the CUSMA—I agree to that as well—but there already is a clarification clause that I would say potentially isn't necessary. CUSMA itself says that.
Therefore, if it is important to clarify that our water isn't going to be impacted, it is also very important to clarify that the inherent rights of indigenous peoples are not going to be harmed. It's similar. You can't really say that the clause is unnecessary and then put in another clause that is also unnecessary. I would argue that both are necessary, for the same reason. We want to be certain that our water is protected. We also want to be certain that section 35 rights are protected in CUSMA but also in the implementation bill.
That is why we've brought forward this proposal.
We agree with you, and thank you very much for that. We will be asking over and over again so that all Canadians have that material.
With the same thing, I'm going to move over to the Canadian Manufacturers & Exporters.
First of all, thank you for all your work on this agreement, because what you said is very true. We're hearing over and over again that having this agreement is certainly much better than not having the agreement, so we're all committed to getting it passed and implemented to give certainty to business.
You highlighted the competitiveness chapter. I think it's chapter 26. I know with our government we were really moving towards convergence of regulations and harmonization, and we are hearing from your members. One of your members yesterday, for example, mentioned how, with the buy American exemption, we had an opportunity to leverage with this agreement and apparently it wasn't even brought up. With the softwood lumber agreement, we had a manufacturer earlier, a first nations manufacturer.... Again, we have no conclusion there.
We now have a more managed trade agreement versus competitive, especially with the auto industry. Mayor Dilkens brought up the importance of that and how the agreement is not perfect. Sadly in Oshawa—he also brought up Oshawa—it wasn't enough to save our assembly plant. There is a lot of concern moving forward.
We were moving towards convergence of regulations. The current government seems to be moving into a situation where we're having very unique Canadian regulations and costs. We've heard even today from Mr. Blydorp about the carbon tax and the uncertainty of how far that's going to be going up. Our transportation system, just-in-time delivery....
I was wondering, Mr. Arcand, when we're talking about investment in Canada, have you done any first economic impact studies you can share with us? Also, could you point out what in this agreement would encourage a large investor such as General Motors or Chrysler to make that investment in Canada versus the United States?
Thank you, Madam Chair.
Once again, I want to take this opportunity to thank you for allowing me to sit today on this committee. As most members know, I am the chair of the transportation, infrastructure and communities committee. One of the reasons I felt it was very important to be here today was to in fact speak about the crossing of committees that this issue does, especially with respect to the strategic investments in infrastructure.
The second comment I want to make before I ask a question is on the expectation. I think Mr. Herman hit it right on the head when he stated that we're moving forward. NAFTA, or CUSMA as we know it now, is something that's been negotiated by three countries. It's time to turn a page, move forward and look at the future of all three countries working closer together, and more importantly, to really look at the integration of our infrastructure investments, especially when it comes to transportation, whether it be rail, road, air or water.
The third thing I want to say is how imperative it is that those investments work toward strengthening our overall international trade performance.
With that all said, and moving forward with those investments, I want to ask a question to the mayor of Windsor.
Mr. Mayor, I'm a former mayor myself, just down the lake from you in the Niagara area. I can relate 100% with what you're doing on a daily basis with respect to being a border community, and of course the niches that are attached to your area—your area being auto and our area being steel, and other. With not only your mayor's hat on but also the hat of what you represent, the Federation of Canadian Municipalities, do you see and will you see strategic investments playing a major factor in strengthening our overall global performance in terms of trade? Do you see those investments being critical?
Lastly, what investments do you see being made in an integrated fashion with our U.S. partners to once again strengthen our international trade performance?