I'm calling the meeting to order.
Pursuant to the order of reference of Thursday, February 6, 2020, we are studying Bill , an act to implement the agreement between Canada, the United States of America and the United Mexican States.
For witnesses this morning, we have Maryscott Greenwood from the Canadian American Business Council, by video conference from Washington. Welcome and thank you for joining us.
Then we have, by teleconference, Jennifer Mitchell, a director on the board of directors at Music Publishers Canada.
From the Society of Composers, Authors and Music Publishers of Canada, we have Andrea Kokonis, general counsel, and Gilles Daigle, consultant.
We are waiting for some folks from the Fédération des chambres de commerce du Québec who have not arrived.
We will start now with Maryscott Greenwood from the Canadian American Business Council.
Thank you, Madam Chair and members of the committee. Happy Fat Tuesday.
Thank you for inviting me to speak with you today, and for allowing me to beam my testimony from Washington, D.C. It is an honour to advise parliamentarians on a topic as important for our two countries as the one under discussion, the most significant trade agreement on Earth, updated and modernized for the third decade of the new millennium.
You will recall that the new North American free trade agreement was first announced on October 1, 2018. As you've had a number of experts provide background on the elements of the agreement, I'm not going to take up your time with a recap of the history of the rather tortuous path that brought us to this moment. We know what made it into the deal and what didn't. We know that it didn't hit 100% of every constituent's wish list, including ours at the Canadian American Business Council, but a deal that doesn't fully satisfy any party is called a compromise, and compromise is the soul of trade.
Further, I think everyone acknowledges that CUSMA substantially improves not only our trade policies but also government relations in North America. It reaffirms our commitment to the rule of law, our commitment to our economic interdependence, and our belief that Mexico is a crucial partner in our shared prosperity. All three governments agreed that NAFTA needed updating, and frankly, the successful negotiations were a tremendous relief to business.
As you can probably guess, the Canadian American Business Council wants to see it become law sooner rather than later. I speak for businesses in both countries, and I am here to tell you that this new deal is a set of stable rules that we will be able to depend upon for years. Business loves stability. Business loathes uncertainty. You've probably heard that formulation before. A lot has been written about how companies and financial institutions have been sitting on capital since the 2008 meltdown, despite efforts by central banks to encourage spending and lending. It's because of uncertainty.
The global trade environment at the moment is volatile. Stable, mutually agreed-upon trade rules are reassuring. Don't we all want to see businesses confidently spending on growth and expanding commerce right here in North America?
As a former American diplomat to Canada, and someone who has woken up every single morning for the last two decades working on the Canada-U.S. relationship, it is my mission to know the pulse of both Congress and the White House on the issues of bilateral concern that affect our business coalition. Believe me when I tell you that we are in a rare moment today. If anyone thinks it's still possible to find leverage and rewrite CUSMA, I think they misunderstand this moment in time. We are truly at a point where the Parliament of Canada must say “yea” or “nay”, up or down.
That said, let me go a little bit further and tell you what I think would happen from a Washington perspective if the vote in Canada is "nay" and the deal goes down. You all know that the U.S. House of Representatives and the Senate ratified what we in Washington call the USMCA in December and January. Do you know how many bills have been introduced so far this session in Congress? There have been thousands. Do you know how many have passed the House? There have been nearly 500. Do you know how many have made it through the House and the Senate so far? There have been 91, and most of those were to name post offices or veterans affairs buildings. We really don't have much agreement down here on anything.
Do you remember when Speaker Pelosi actually tore up the State of the Union address, moments after the President delivered it on live national television? Well, she didn't tear up the modernized NAFTA, as some in her party would have wanted her to do. Instead, she led a comprehensive, thoughtful effort to pass it. The USMCA didn't just pass; it passed with overwhelming bipartisan majorities. In the current political climate here, that was an achievement.
Then, President Trump signed it into law at the end of last month, and as you know, President Trump doesn't always do what Congress asks him to do, so the stars in Washington have aligned.
Now let me put my advocate hat back on for a moment and speculate on what might happen if, now that the agreement has passed both chambers of Congress, has been signed at the White House and, importantly, has been ratified in Mexico, it were to fail in the Canadian Parliament.
As you have probably heard, President Trump instinctively tends toward protectionism. His slogan is “America First”. He has described himself as “a Tariff Man”. He doesn't react happily when he's embarrassed, which he certainly would be if the new agreement fails in Canada. He rightly regards the agreement as his signature legislative accomplishment in his first term.
His fallback would be tariffs. Canada, Mexico and the United States have already been through that unfortunate chapter. If trends in the current democratic primary race continue, President Trump's opponent this fall may well be Senator Bernie Sanders.
Senator Sanders describes himself, as you know, as a democratic socialist. Like other people on the political left, he not only dislikes trade deals, like the original Canada-U.S. Free Trade Agreement and NAFTA, but he has made his opposition to this new agreement plain. He, too, would prefer to rely on tariffs to protect what he sees as America's economic interests. Let's not forget that Senator Sanders was one of the few members of Congress who voted against the USMCA.
I imagine you can see where I'm going here. Does anyone really think it's a good idea to prod this president or his potential rival into a tariff war with Canada and Mexico? An irritated president, with the snap of his or her fingers, can thicken our international border, clogging traffic and giving businesses in both countries migraines. But given the size of our respective economies, I'd submit that the migraines would be worse in Canada.
As someone who speaks for leading Canadian and American businesses, I would point out here that our members already have a few headaches. There is the rather delicate issue of the rail blockades. And there are questions about the ability to site and fund new infrastructure projects, particularly in the energy sector, as you know.
I would suggest that rejecting the new trade agreement in this environment would amount not just to an unforced error but to a serious self-inflicted wound.
That said, let me take a more optimistic tack here just for a moment. Unlike the United States, Canada has, since the 1980s, seen free trade agreements as being in its crucial national interests. Given the relative size of your market, Canadians have had a greater interest than most in clear, transparent, agreed-upon rules, which is probably why Canada has had free trade agreements with Europe, Chile, Jordan, Israel, Costa Rica, Honduras, Korea, Panama and Peru.
Otherwise put, Canadian businesses have clear and preferential rules with markets representing trillions of dollars. Does it not make sense to update and pass an agreement with Canada's single largest trading partner? I dare say a long list of other countries would love to have preferential access to the American market at this point. Proximity without access is frustrating, to say the least. An agreement with the biggest market in the world is ready and available right now. Everyone is waiting.
The position of the Canadian American Business Council is that your choice is clear. The updated agreement strengthens a commercial relationship that has existed since the earliest days of our countries. The effort of the last three years has been intense, sometimes nerve-racking, but we are nearly there. Canadian parliamentarians have a simple question before them, and I submit that to ask it is to answer it.
Thank you very much.
I'm happy to take your questions.
Allow me to introduce myself. My name is Charles Milliard, and I am the president and CEO of the Fédération des chambres de commerce du Québec, or the FCCQ for short. Joining me is Kathy Megyery, vice-president of strategy and economic affairs.
I'd like to thank the committee for having us despite a few technical problems. We had a bit of trouble with the connection for our appearance this morning, so I thank you for your patience.
The Fédération des chambres de commerce du Québec represents 132 chambers of commerce across Quebec and 1,100 member businesses. The federation's members are active in every sector of the economy throughout the entire province. As Quebec's largest network of business people and businesses, the federation also serves as a provincial chamber of commerce, advocating for public policies on behalf of its members.
I want to start by saying that the federation welcomes the signing of the trade agreement between Canada, the U.S. and Mexico, which, as we know, puts an end to more than a year of business uncertainty. The prevailing uncertainty prior to the conclusion of the agreement was quite detrimental to business and investment in Canada. While the federation fully recognizes the importance of the new agreement, it has serious concerns about certain aspects that warrant rigorous federal oversight.
The federation recognizes that the agreement was unfortunately concluded to the detriment of our supply management system and Quebec's dairy farmers, who were to some extent sacrificed. That is true of the negotiations leading to all three of the major trade deals recently signed, the Canada–European Union Comprehensive Economic and Trade Agreement, or CETA, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP, and CUSMA.
In addition, despite the very clear calls of Quebec's aluminum sector regarding regional content rules, it will not see its fate improve under the agreement. Conversely, the steel sector, 53% of which is based in Ontario, obtained the protections it had been calling for. Going forward, interprovincial equity should be the guiding principle for any concessions the federal government makes in negotiating international agreements.
What's more, this agreement causes a third breach in supply management, thereby undermining the system's viability and long-term sustainability, especially for the smallest farms. Government announcements regarding compensation for CETA and the CPTPP were long in coming, and the payments have taken even longer, unfortunately. To date, dairy processors and poultry and egg farmers continue to wait for their compensation payments. Nothing has yet been announced in connection with CUSMA.
The FCCQ is calling on the government to swiftly establish the terms of the compensation program for dairy farmers and producers further to CUSMA. The federation also submits that Quebec farmers should receive compensation commensurate to the share of Quebec's agri-food sector in the Canadian economy as a whole.
As for the aluminum sector, the government must remain vigilant. Initially, CUSMA contained a provision requiring that 70% of steel and aluminum originate in North America. Accordingly, Mexico was supposed to purchase 70% of its supply from North America. However, a grey area in the definition would likely have allowed Mexico to continue buying cheap metal from China, as it has been for months now.
The flaw was corrected in the new version of CUSMA, but only for steel, not for aluminum. This new dynamic will impact Quebec's market share. American companies supplied by Quebec have already begun relocating operations to Mexico so they can pay less for metal. Consequently, we will probably lose more and more of the U.S. market as we watch metal processing capacity move to Mexico. The FCCQ is therefore calling on the federal government to ensure the industry maintains its competitiveness in a market that has just undergone a significant change, by engaging the Americans through all diplomatic channels necessary to force Mexico to play by the rules.
Under the provisions of CUSMA, Canada agreed to an increase in the duty collection threshold, the de minimis threshold, which went from $20 to $150 for duties. A longtime demand of online retailers in the U.S., the increase could lead to a spike in cross-border shopping, which would have obvious consequences for Quebec retailers and their employees. The higher threshold could prompt U.S. online retailers to start offering customers free shipping to Canada, something many already offer their customers in the U.S. The FCCQ is therefore calling on the federal government to pay close attention to the retail sector overall to ensure it can remain competitive with foreign companies.
Furthermore, the federation's members, especially small and medium-size businesses, share a common concern, one we want to convey to the government today: information on the benefits of these trade agreements is lacking. They feel the government should be doing a better job when it comes to the trade deals and after-sales service.
Although a number of mechanisms are in place, the information doesn't always seem to flow as effectively as our business network in Quebec would like. The government should be more proactive when it comes to educating companies about the benefits of leveraging trade agreements and conquering foreign markets.
Accordingly, it is necessary, in our view, to provide businesses with support as they enter the export market for the first time. It would also be a good idea to provide smaller businesses with more online support and high-potential companies with tailored support.
The FCCQ has always advocated the importance of diversifying export markets and leverages its network of well-established local chambers of commerce across the province to help Quebec companies discover the benefits of export markets and seize new business opportunities.
Against the current backdrop of American protectionism, it's important for Quebec companies to focus on other high-potential markets and increase their proportion of non-U.S. exports. As you know, 70% of Quebec exports last year were destined for the U.S.
Diversifying our trade partners is even more important considering the uncertainty caused by American surtaxes, which has taken its toll on our economy in recent years.
Finally, I want to highlight the fact that numerous products that are not compliant with current regulations seem to be making their way across the border, because the Canadian Food Inspection Agency is short on resources. With added restrictions, it's essential to increase the level of screening and analysis to make sure imported products adhere to the same requirements our products do.
Clearly, the purpose of Canada's regulatory framework is to foster better consumer health, but to do that, companies subject to the regulations must incur the associated costs. Harmonization is thus vital to the competitiveness of Quebec's agri-food industry. The FCCQ is recommending that the government increase controls and inspections by the agency to ensure imported products meet the same standards and rules as Canadian products.
Thank you. We would be pleased to answer any questions you have.
Good morning and thank you, Madam Chair and honourable members, for this opportunity. I'm sorry I'm not available to be there in person.
I've had the pleasure of owning and running a Canadian-owned independent music publishing business for almost two decades. I'm here today with Casey Chisick of Cassels, who is external legal counsel to both Music Publishers Canada and my companies.
I'm here to talk to you about the need to fully implement copyright term extension, in accordance with CUSMA, immediately, completely and with no conditions. This will allow songwriters to succeed and small businesses like mine to thrive. Quickly ratifying CUSMA and implementing copyright term extension goes straight to the heart of their and our creative and business efforts.
Bill would extend the term of copyright for a few works but would leave out musical compositions—otherwise known as songs. On behalf of Music Publishers Canada and the songwriters and composers I work with, I urge committee members to amend Bill C-4 to align Canada with its global trading partners by including all musical, literary, dramatic and artistic works.
Canadian music publishing is a $329-million industry, just one sector of the $53-billion creative industry. Music publishers are innovators. Their strong export strategies have allowed entrepreneurs like me to better compete internationally. A total of 67% of music publishers' revenue now comes from foreign sources, a dramatic increase from 28% in 2005. The key to dealing with changes in technology has been our ability to expand globally. In order to do so, we take financial risks and invest our time, energy and money in building the international careers of songwriters, including emerging songwriters.
For example, we signed 23-year-old Tom Probizanski, which allowed him to move to Toronto. We then paid for him to go to L.A. and Denmark to co-write, and we set up his co-writing sessions. We also paid for his blog and playlisting promotion so that he was featured in Clash magazine, Earmilk and various Spotify playlists. We were able to take these risks and invest that money only because I could rely on the income of several songs for which my companies hold the copyright—for example, Imagine by John Lennon; What a Wonderful World; My Way; Y.M.C.A.; Start Me Up by the Rolling Stones; Skinnamarink by Sharon, Lois and Bram; and even the theme to The Simpsons. But a number of songs will soon fall into the public domain because Canada's copyright legislation is not aligned with international standards.
Holding on to these valuable copyrights for an extra 20 years would translate into hundreds of thousands of dollars to pay for good middle-class jobs, reinvestment in the Canadian economy and Canadian songwriters, and the ability to scale our business and export our music to international markets. Immediate action should be taken to prevent countless valuable works from falling into the public domain between now and the end of 2022. Otherwise, we risk stifling innovation, creativity, export potential and growth for small businesses like mine. We also risk creating more confusion, as remaining out of step with our international trading partners continues to complicate licensing for users instead of providing any relief.
I would like to quickly speak about the industry committee's report on its review of the Copyright Act in the last Parliament. Some believe that copyright registration is needed in order to have a seamless transition. I respectfully disagree. Publishers and songwriters already register all of their works with SOCAN and CMRRA in Canada in order to be paid. A second government registration system would create nothing more than an unnecessary burden for copyright owners and the potential to introduce abuse into a system that already works very well to the benefit of creators, users and the public. Mandatory registration would also violate Canada's international treaty obligations, even if it only applies to the last 20 years of an extended term. It is a basic tenet of copyright law internationally that protection must be granted without formality.
In conclusion, adding another 20 years to the life of a copyright means a robust creative sector, more Canadian cultural exports, and the growth of many innovative businesses that have embraced the digital market.
It is long past time for Canada to catch up to its international trading partners in this respect. We urge committee members to amend Bill to include immediate implementation of copyright term extension, with no conditions. Music Publishers Canada has prepared draft legislative language to accomplish this, which we've submitted to the clerk for the committee's consideration.
I understand that SOCAN will be presenting shortly. We've read their submissions and are in full agreement with them.
Thank you again for the opportunity to speak to this important issue. Casey Chisick and I are happy to answer any questions you may have.
Thank you, Madam Chair and members of the committee.
My name is Andrea Kokonis, and I am the chief legal officer and general counsel at the Society of Composers, Authors and Music Publishers of Canada, or SOCAN for short. With me is Gilles Daigle, a lawyer with more than 30 years of experience in Canadian copyright law.
SOCAN is Canada's largest music rights society and administers public performance, communication and reproduction rights of authors, composers and publishers of music. We currently have more than 160,000 Canadian members and clients, and we also represent the repertoire of all foreign performing rights societies and several reproduction rights societies in the Canadian territory.
SOCAN is deeply committed to fair compensation for Canadian music creators and their business partners for the use of their work, under a protective regime in Canada that is in line with that of its biggest trading partners.
The new NAFTA has opened the door to implement an important and long-awaited change in the term of copyright—extending it from 50 to 70 years after the life of the author—and to do so immediately. Yet, despite the clear intention and wording in the new NAFTA, Bill as it now stands does not address basic term extension.
There is no valid reason for Canada to delay, yet again, term extension of copyright in our country. We therefore urge this committee to recommend, in the strongest possible way, that the necessary term extension amendments be added to Bill C-4.
As it stands, Canada's copyright protection term is not meeting the current international standard. This places our members and all Canadian creators at a disadvantage compared with our major trading partners. An extension to copyright term would increase Canadian investment and business in copyright-based industries located in Canada by removing disparities between Canada and other major economies.
The current term of copyright protection in Canada—life plus 50 years for creators of musical and other works—is out of line with modern copyright law. After the original NAFTA was ratified, the United States, in 1998, increased its term to life of author plus 70 years. In 2003, Mexico increased the term of protection to life of author plus 100 years. As part of the NAFTA renegotiation, we asked for provisions that reflected this new reality, recommending that the minimum term of copyright protection be life plus 70 years. Our position was supported by all major organizations in the North American music ecosystem.
While in Canada protection for musical works is life of the author plus 50 years, by contrast the majority of Canada's largest trading partners recognize a general standard of the life of the author plus at least 70 years. These countries include all of the European Union members, the United Kingdom, Australia, Israel, Norway, Switzerland, Peru, Brazil, Iceland, Japan and even Russia. Canada's current law is consistent with only the minimum protections set out over a century ago in the Berne Convention for the Protection of Literary and Artistic Works. The intention at that time was to establish a term of protection that was enough to benefit two generations of descendants of the creator of the work. With longer life expectancies, a term of life plus 50 years no longer reflects the underlying intention of that treaty. Around the time that Canada joined the Berne Convention, in 1928, the average life expectancy was 60 years. It rose to about 81 years between 2007 and 2009.
As a result, the current term of protection afforded under the Canadian Copyright Act is insufficient to cover two generations of descendants of a songwriter, and the current term is therefore out of line with the policy objectives of the Berne Convention. As mentioned, this has been recognized and remedied by Canada's major trading partners. Canada's shorter term is also out of step with the emphasis and value that Canada has otherwise placed on the creation of works, both domestically as part of our heritage and internationally as leaders of cultural exports.
Canadians authors and composers of music, and their publishers, can be at a disadvantage as cultural exporters because their works may be subject to lesser protections internationally because of Canada's outdated term of protection. This is unfair and most unfortunate, as Canada's laws should not place limits on the ability of Canadian creators to exploit their works around the world.
A longer term of protection in Canada would better allow music publishers to reinvest the revenues they derived from the exploitation of copyright-protected works in the discovery, support and development of songwriters and composers. Additionally, from a multinational perspective, longer terms of protection in a market provide incentives for foreign companies to invest in repertoire in that market. In both cases, providing for a longer term of copyright protection in Canada would strengthen domestic reinvestment in cultural development and diversity, as well as foreign investment in Canada's substantial local talent. There is no justifiable reason to further delay the implementation of the extension. The government should fulfill its commitment immediately.
When Bill was introduced in the House last year, replaced by Bill in this Parliament, SOCAN and other music organizations were disappointed to see that, while some copyright modifications were made in the implementation bill, the term extension was not modified. It is our understanding that Canada has two and a half years to fully implement all of CUSMA, but we strongly believe the term extension was—and remains—a key piece of the renegotiation in light of the same extensions that our trading partners have implemented in their own home copyright laws.
The embarrassing reality at the moment is that Canadian authors have the same limited copyright protections as creators from countries such as Iran, Liberia, Pakistan, Syria, Zimbabwe, Afghanistan, Angola and the Democratic People's Republic of Korea. Our members deserve better than that. All Canadian creators deserve better than that.
SOCAN, therefore, recommends that Canada amend the Copyright Act to extend the term of copyright protection for musical works to the life of the author plus 70 years, in recognition of current international copyright norms as well as the underlying intention of the Berne Convention and other such benchmarks for valuing intellectual property. Specifically, SOCAN recommends that the basic term of copyright be extended under section 6 of the Copyright Act, as well as the very few other provisions that need to be added.
As part of the submission that we have handed out, we have also included with the speaking notes the chart that Music Publishers Canada created to show where the amendments should be made.
Thank you very much.
Of course, there was no appetite from the Liberal Party to do that.
This will pass, and I want to make sure that you understand that we are not going to vote against it. That being said—and you would understand this too—Trump got elected by the Rust Belt states that felt neglected, that weren't included or thought about after the last NAFTA agreement, and I don't want to make that same mistake. We've had some 200 submissions to appear in front of this committee, and we were proposing March 5 to have it out of committee, which would have been during the break week, which means it would have hit the House at exactly the same time it will right now. The Liberal Party said no, and I can see why, because as we start to go through it, we start to see the economic analysis that the C.D. Howe Institute did. It said it will be a $10-billion hit for Canada. If you compare it to TPP, if we had all signed on as Obama wanted us to, it would have been a $4-billion plus. So there's lots to absorb.
When you're looking at this $10-billion hit, there are a lot of groups and organizations and companies that are negatively impacted. I'm not going to vote against it and they understand that, but they at least want a mitigation plan. They want to understand what it means for them and how the government is going to help them, and that's all we're trying to do here. So we will get through this, and I hope we will be in clause-by-clause by Thursday and it will be back into the House and then hopefully the Senate. Now, I can't control the Senate. That's a different can of worms, and good luck there.
One of the things we talked about before was the de minimis and the changes to the de minimis, going from $20 to $40. I know you probably wanted it to be $800, but it's not there. Then there's the tax-free status to $150, but a lot of people don't understand that Canada Post, which is the biggest carrier here in Canada, is not included in that.
Do you have any thoughts on that and why Canada Post wouldn't have been included and only private couriers were included in that scenario?
To your first question, absolutely, workers love stability as much as business owners do. We all have to figure out how we're going to balance our chequebook at the end of the day. We have to figure out how we're going to pay our bills, pay for our kids to go to college—and, in the United States, pay for health care. Certainty an ability to predict that you're going to be able to make it through to the end of the month and pay your bills is absolutely important to everybody, to every family—workers, ranchers, farmers, you name it.
In terms of how it benefits workers, in addition to business owners, it's interesting to note that for the first time in our modern history, the AFL-CIO, the big umbrella trade union in the United States, came out in favour of the USMCA, the new NAFTA. I also note that there are representatives of workers in Canada, including Mr. Jerry Dias, who have been strong proponents all along.
Whether it's for large manufacturers of automobiles, which is a huge part of our economy in Canada, the United States and Mexico, or some mom-and-pop shops, there is benefit, absolutely, to not only knowing what the rules of the road are, but also knowing how you address a dispute if you have one, which this agreement also has—at Canada's insistence, I would add. But it's just knowing what your cost of inputs are and that you're going to be able to keep doing what you do at the end of each month.
I, too, would like to thank all the witnesses for their varied and relevant comments.
My question is for the FCCQ representatives. I think the picture they've painted thus far is consistent with how the Bloc Québécois sees the situation. Far from being anti-free trade, we nevertheless believe the agreement, as it stands, contains some irritants.
You did a good job of explaining that, contrary to repeated statements, the agreement does not treat aluminum and steel in the same way, and that the bulk of the aluminum sector is in Quebec, unlike the steel sector, which is concentrated in Ontario.
You also brought up supply management and the fact that it took a beating further to the negotiations, as with so many negotiations in the past. You talked about the importance of swift and adequate compensation. That brings me to my question, since you are still in favour of ratifying the final agreement.
Yesterday, we heard from the Dairy Farmers of Canada, and I asked its representatives about an appropriate ratification date. They said no earlier than May 1, to comply with the coming into force date of three months, which would take us to August 1, the beginning of the fiscal year in the dairy sector.
Is there a particular date you would prefer, or do you also think it's urgent and should be done swiftly?
Sure. Thank you for that.
What I would note at the outset is the difference between our constitutional form of democracy and your parliamentary form. They're very different.
In the United States, our system was set up to have separate branches of government that truly have different power bases. They were designed by our founders to be really jealous of each other, and they have different authorities. The states came first in our system. Then when the federal government came, historically, Congress was set up as a check to the executive branch, and you really need both to get anything done.
As you know much better than I do, the parliamentary system is a completely different animal. It's different in a majority government, as you know, versus a minority government. I'm not an expert on the parliamentary system, and I wouldn't want to weigh in on the appropriate level of back and forth between the parties.
What I will say is that, in our system, even when you have the same parties in the White House administration as in Congress, they're still separate branches of power, and they have to negotiate with each other. That's a long-standing tradition here, so the Trump administration knew that it would have to negotiate with Congress because that was baked in ever since the founding of our democracy.
Thank you very much, Madam Chair.
I want to thank all the witnesses for being here.
I wanted to start off, too, by thanking Scotty. When these negotiations started, we all knew we were on a tight timeline. Whenever we went down to the U.S., you were always very quick to get good groups together so that we could get our input, and I want to thank you very much for that.
You mentioned in your opening that business loves certainty. We certainly are in agreement with that. We know that there has been a bit of a campaign in the U.S. saying that Conservatives are going to try to slow down this deal, but we want to be very clear with you: We're not. What we're trying to do is our due diligence.
It was very frustrating for us here in committee. Mr. Hoback actually wanted to do a pre-study on this last spring before the election. We were unable to do that. We knew that the U.S. International Trade Commission came out with some numbers saying that this deal would be a net positive for the U.S. and the number is about $68.2 billion.
We were just trying to get some Canadian lens on it. We were told before the election it was a win-win-win. We were told it was going to be a victory for Canadians, a positive. We've been asking the , and she's been very uncooperative in releasing any advice she's had. Just Friday, the C.D. Howe Institute came out and said this would be a $10-billion hit to Canadians' GDP. Even though that is a hit, they also commented that, if we don't have an agreement, it's going to be far worse, so we're in agreement with you that we do need to pass this and move on from there.
I was wondering if the Canadian American Business Council has any independent economic analysis that you might be able to share with this committee. As you heard, we're only going to get that information from the Canadian lens tomorrow, and we expect to go through clause-by-clause by the end of the week.
Do you have anything you could share with us, even today, or over the next couple of days, that would enlighten us somewhat?
I completely agree with you.
The question is, what are the possible scenarios? You as policy-makers quite rightly look at that. It's not just whether we like the new agreement better or whether we like it less than the current agreement. The question is what happens if you don't go along with this agreement that you've been negotiating for the last year. What does the United States do then? What does Mexico do?
You're right that the current situation is quite volatile. You can't underestimate the current occupant of the Oval Office in retaliation, in self-inflicted wounds in the United States, with the purpose of gaining leverage or punishing our partners and our allies.
It's the largest economic relationship in the world, and it hangs in the balance, quite frankly, with this agreement.
From a United States point of view, what the policy-makers look at is this: If we can't get to an agreement with Canada and Mexico, our neighbours and close allies, how are we going to trade with the rest of the world? As goes the U.S. economy, so goes the economy of our friends and neighbours.
We really are interlinked. There is quite a huge stake in our thriving together with this agreement.
Good morning. Thank you for your invitation. If I had received it sooner, I could have joined you.
The Chamber of Commerce of Metropolitan Montreal has been in place for nearly 200 years to represent the business community of Metropolitan Montreal. For 36 years, we've been connecting businesses to export markets. To do so, we're supported by the Government of Canada through Canada Economic Development for Quebec Regions. We raise funds from businesses and the private sector. We're also supported by the Government of Quebec.
This experience in international markets first led us to understand the importance of the American market. For decades, Montreal's business community has been acutely aware of the importance of American markets, both for their growth and supply and, in the case of many businesses, for the efficiency of their production chain. This chain is well integrated and it crosses the border in both directions. As a result, for more than 20 years, the Chamber of Commerce has supported the implementation of free trade agreements in a sustainable, strong and permanent manner. From our point of view, the agreement with the United States is obviously the cornerstone of our economic development.
Seventy percent of Quebec's exports are destined for the United States. We estimate that 20% of Quebec's GDP depends on this fluid trade relationship with the United States. Over the years, the number of jobs here directly related to trade with the United States has grown steadily. In many cases, these positions are very well-paying jobs, either in the Montreal region or throughout Quebec.
The free trade agreement that needed to be renewed and that became CUSMA was crucial. We supported this renewal from the beginning. In addition, nearly two years ago, we invited 24 chamber of commerce leaders from major North American cities—eight leaders from the United States, eight from Canada and eight from Mexico—to Montreal to discuss what we could do to ensure that the agreement was renewed. We were extremely pleased to see the progress made and, ultimately, the renewal of an agreement.
As part of the renewal of this agreement, we've heard that things could have been even better, particularly with regard to aluminum. Similarly, during the negotiation of the agreement with the European Union, issues arose among agricultural producers. We believe that no agreement is perfect and, in this case, we probably have the best agreement that we could have hoped for with the United States. We believe that some areas could have been improved, with regard to aluminum, for example. However, our challenge is to find out how we can help the aluminum sector and not in any way to block, reject or delay the implementation and ratification of the agreement.
Our message to you and to all politicians is that there's no ambiguity from the point of view of the economy of Quebec, the Montreal region and Montreal-based businesses, and that the agreement must be ratified without delay and implemented as quickly as possible.
Thanks very much to the committee on behalf of the CCPA for the opportunity to present here on the CUSMA ratification legislation.
The CCPA is Canada's longest-standing independent research institute. In fact, we're celebrating our 40th anniversary this year. From our earliest days, the CCPA has rooted its policy recommendations in values of social justice and environmental sustainability. That goes for our trade and investment research as well. We've been recently working internationally on the NAFTA negotiations with some friends in the United States and Mexico as well.
I'd like to start by agreeing with something that Michael Geist said to the committee last week, which is that the most important thing here is maybe not the implementing legislation itself, but the impact that the agreement is going to have on Canadians and Canadian public policy in the future. This is something that I think multiple witnesses have brought up as well.
At this point, Parliament obviously has little leverage to alter the CUSMA. Still, there are steps that Canada can take on its own without reopening the deal to enhance the treaty's positive features and to mitigate the harm from its worst. I'm going to briefly list some of those here today.
The first issue is making medicines more affordable. The original intellectual property rights chapter in CUSMA would have required Canada to increase data protection term limits on biologic drugs from eight to 10 years. Biologics are increasingly important for the treatment of Crohn's disease, rheumatoid arthritis and many other illnesses. The Parliamentary Budget Officer predicted that the original CUSMA data exclusivity extension would have increased their costs through public and private drug plans by about $160 million a year.
Thanks to U.S. Democrats, that change was dropped from the agreement. The Democrats also successfully removed provisions in CUSMA that would have facilitated patents for new uses on existing drugs—the evergreening issue—which blocks cheaper generics from hitting the market.
Canada should build on these victories to get serious about the high costs of medicines here in Canada. We can do this by moving forward on the proposals to improve the way that we regulate brand name drug prices. Health Canada estimates, for example, that simply by removing the U.S. and Switzerland from the basket of countries it uses to determine prices in Canada, we could save, on average, about $1.2 billion a year in drug costs.
Second, I think we should swiftly adopt a universal, single-payer pharmacare program, as recommended by the government's expert panel on pharmacare, since this would significantly reduce drug costs by increasing the bargaining power of public buyers. Both of these measures are already in the sights of the USTR, for example, which is looking to pressure Canada not to introduce these things, because their pharma industry will take the hit on them. So I think we need to move fast.
The second issue is on enforcing labour rights in the new CUSMA. As the committee has heard from several witnesses already, CUSMA's labour provisions are a significant improvement on NAFTA. The challenge to all three countries now is enforcement.
Beyond a commitment to receive and consider public complaints of labour violations in Canada, Mexico or the U.S., CUSMA's labour provisions are enforceable only through government-to-government dispute settlements. For a number of reasons, this isn't ideal. Governments can't always be relied on to bring cases forward on behalf of workers.
A way that Canada could address this would be to set up an independent, domestic complaint process that would allow labour unions, citizens and citizen groups to initiate complaints when international labour standards are violated. There should be an impartial body that could hear these complaints in the same way that impartial bodies hear procurement complaints under other parts of trade agreements. If they're credible, the complaints will move forward no matter what.
On environment and the climate emergency, we would say that the new NAFTA is decidedly less satisfactory. This reflects, obviously in part, the fact that we were negotiating with a climate-denying U.S. administration. Still, the CPTPP, the trans-Pacific partnership, and the EU trade deal are not all that much better on the environment, so not all of the blame can go on the obstructionism of the U.S. administration.
CUSMA's environmental chapter is technically enforceable through state-to-state dispute settlement, but again, what's the likelihood? Its obligations are so weak it really hardly matters. Outside of a few hard rules regarding matters like fisheries subsidies and wildlife trafficking, the chapter's commitments are mostly vague and voluntary. It also contains a gigantic loophole in the sense that it only applies to three federations, three federal states. It only applies to the federal level in all three countries.
CUSMA's most significant step forward on the environment was getting rid of ISDS, the investor-state dispute settlement process. Canada has faced dozens of ISDS cases, more than any other country in the NAFTA region, and many of those have challenged legitimate, lawful and non-discriminatory environmental and resource management decisions. The elimination of ISDS in CUSMA is indeed important, as told committee last week, and it should be precedent setting. The challenge now is how Canada removes ISDS from its many dozens of investment treaties with other countries.
I want to speak a bit about deregulation in CUSMA. CUSMA's chapters and annexes dealing with how governments regulate in general have gotten relatively less attention in all three countries than other parts of the agreement, yet they may prove to be as significant and controversial as ISDS became in NAFTA. Remember, we didn't know much about investor-state dispute settlement when NAFTA was signed or how it would operate. The same logic is at play with the good regulatory practices chapter, which, for the first time in any free trade agreement, locks in a very specific ideology about regulation, which says that commerce should reign supreme and precaution should take a back seat or be thrown to the wind.
Central regulatory agencies, for example Treasury Board here or OIRA in the United States, are required in CUSMA to ensure that federal agencies avoid unnecessary restrictions on competition in the marketplace when they're deciding on appropriate health or environmental protections. There is significant potential for multinational companies to abuse a new notice and review process in CUSMA, which requires regulators to seek and respond to any recommendation to modify or repeal a regulation that is set to create a burden on business.
Global producers of chemicals, pesticides, pharmaceuticals, GMOs, cosmetics, tobacco, food additives, etc., are continually disputing good science on the risks that their products pose to human health and the environment. Now under CUSMA, a government could be taken to dispute settlement, by another country on behalf of one of its industries for example, for sustained or recurring unwillingness to heed corporate complaints about public interest regulations. The so-far voluntary Canada-U.S. regulatory co-operation council, a process that is now enshrined in CUSMA, can lead to delays in removing known toxins, known carcinogens, bioaccumulative compounds and endocrine disruptors from consumer products due to pressures to harmonize across borders for the sake of commerce, again, built up into the good regulatory practices chapter.
As the CCPA's former executive director Bruce Campbell has expertly shown, such pressures led to the downward harmonization of rail safety standards in Canada and aviation safety standards, leading to the tragedies of Lac-Mégantic and the Boeing disasters. In theory, CUSMA's good regulatory practices chapter leaves the door open for government to regulate in a more cautionary, protective way, however the primary objective of the chapter is clearly to reduce the burden on business. In fact, regulatory co-operation is defined in CUSMA as, first and foremost, a means to facilitate and promote economic growth, not as a means to enhance public protections.
It's more important than ever, therefore, that Canada counterbalance the deregulatory pressures in this agreement and other free trade agreements by enshrining the precautionary principle in law. A directive reasserting our regulators' authority to give the benefit of the doubt to protecting public health; removing potentially toxic substances from circulation, plastics for example; protecting animal populations; etc., would fit most Canadians' understanding of what good regulation means.
In conclusion, CUSMA is a mixed bag, at least from a progressive point of view. But is it a model for future Canadian trade deals? We would say no, not at all. Canadians recognize that securing this deal was a defensive measure. Despite the new agreement, just like NAFTA, our access to the U.S. market remains precarious. The U.S. is the most powerful country in the world. It will do what it wants to do. There is no way out of this reality for Canada. Canada's challenge now is to find ways to work around and outside of CUSMA to improve working standards and environmental protections across North America, lower drug costs for Canadians, rapidly decarbonize our economy in line with the Paris Agreement commitments and fully recognize the UN Declaration on the Rights of Indigenous Peoples on a path to real reconciliation.
Thanks very much.
At full implementation, access granted under CUSMA, in addition to existing concessions pursuant to other agreements, will represent about 18% of our Canadian market. When considering the latest three trade agreements, Canadian dairy processors will lose $320 million per year on net margin once the agreements have been fully implemented.
On top of the market access concessions, CUSMA includes a clause that imposes export caps on worldwide Canadian shipments of milk powder, protein concentrates and infant formula. For example, for skim milk powder and milk protein concentrates, a cap of 55,000 tonnes will be imposed for the first year, and 35,000 tonnes for the second year.
Considering that, in the 2017-18 dairy year, Canada exported more than 70,000 tonnes of skim milk powder, there's no question that a clause in CUSMA limiting our exports worldwide will drastically impact Canadian dairy processors and domestic milk supply requirements from Canadian dairy farms. We estimate that the export caps could result in an annual loss of $60 million for dairy processors.
We also want to note the extremely peculiar aspect of imposing caps on Canadian exports of milk powder to all countries, including countries that aren't part of the Canada-United States-Mexico Agreement. This is a first in an international trade agreement, and a dangerous precedent for Canada.
One way for the government to mitigate the negative impact of the export caps is to ensure that CUSMA enters into force on August 1, 2020, or later, so that the industry operates an additional full year under an export cap of 55,000 tonnes.
We do several things, and perhaps we could do more. Of course it always depends on the funding. I would send a message that the federal government can play a role here.
First, at the entrepreneurship level, we try to put in place everything we can to have them “born global”, as we call it, which means that right from the inception and the development of their initial business plans, we incite and work with those SMEs to make sure they take into account the possibility of exporting, which means if they develop their website, to make sure it's transactional. From Quebec it can be transactional in English. Internationally we make sure that, if they hire people, they hire people with the intent eventually to develop their international markets. That's one.
Second, we have lots of training activities, and as part of those training activities, as I was mentioning, we have all those groups that we take to the border. It's really to explain it and make it as simple as possible for those SMEs to see the American market as part of their backyard, part of their growth area.
Last, we organize missions in the U.S., where we take SMEs.... Usually we do not take large companies—they don't need us—but we will take SMEs into the U.S., into the New York area or to Silicon Valley. There we facilitate with the personnel who are either from the delegation of Quebec, the embassies or the consulate. We work with them to make sure we develop those one-on-one contacts. The whole strategy is to make sure that, as quickly as possible, our SMEs realize that their growth opportunity is to have access to that market.
Now with the new—
I'd like to thank you for this opportunity to speak here today.
We are on a farm near Grunthal, Manitoba. That's about 80 kilometres south of Winnipeg. I am a third-generation dairy farmer. My grandparents came to Canada in the 1920s to start a new life and a family. My parents took over from their farm in the fifties.
Since the sixties, when supply management came into effect, their income on the farm stabilized. With this increased stability, they were able to expand their farm and support the family. Supply management allowed dairy farms to contribute to a vibrant community.
My brother and I and our families took over the family dairy farm, which is where we continue to farm today. The family farm made it possible for my brother and me to raise our families, continue to grow the farm, and continue to contribute to our local community.
Today, as the chair of Dairy Farmers of Manitoba, I am representing 270 dairy farm families in the province. CUSMA will have a long-lasting negative impact on Manitoba's vibrant dairy industry. The concessions granted are ongoing perpetual losses. CUSMA is not a beneficial agreement for the Canadian and Manitoba dairy sectors. Dairy is one of the top two agricultural sectors in seven out of 10 provinces. Manitoba is not one of those provinces; however, this still has a significant impact in our province, considering that dairy processing is the fourth-largest component of food processing in our province.
CUSMA allows increased access to foreign milk, removal of class 7, loss of sovereignty because of U.S. demand for oversight on the development of our future Canadian dairy policies, and a surcharge on Canadian dairy protein exports. There are deep local economic ramifications because of these concessions. The projected annual market loss for Manitoba in terms of additional market access is $8.4 million in revenue. The overall Canadian loss here is pegged at $190 million. That does not account for any implications due to the elimination of class 7 or the export restrictions. The American oversight into the Canadian dairy system is nothing less than a complete loss of sovereignty by allowing the U.S. to interfere in the development of future Canadian dairy policies.
In Canada, of course, we're losing 3.9%, or 100,000 tonnes, of our dairy market to foreign milk and dairy products. This means that when you look at Canada as a whole, losing 3.9% amounts to pretty much wiping out Manitoba's dairy industry.
The concessions agreed to in the CUSMA deal deeply impact the pillars of supply management, which are import control, production management and predictable imports. Like a three-legged milking stool, without one leg the stool falls. The impacts of CUSMA will not only harm the dairy industry in Manitoba, from farms to processors, but the long-term effects will also reduce our contributions to the GDP. Nationally, that's $19.9 billion. In Manitoba, that amounts to $582 million and jobs in the province, as there will be less need for locally supplied milk, which will be replaced by a foreign product.
The loss of our farm production will have negative ripple effects across rural Manitoba. If our family-owned operations were terminated, there would be less demand for many service providers, such as veterinarians, mechanics and nutritionists, as well as less dependence on other agriculture commodities, such as Manitoba-grown feed barley or even canola meal used on dairy farms.
However, those impacts do not cease in rural Manitoba. If less Canadian milk is being produced in Canada and is rather being imported from the U.S., our 12 processors would also be negatively impacted. The dairy industry across Manitoba sustains 7,955 full-time equivalent jobs. Those numbers would decrease. Additionally, this agreement halted new processing investment into Manitoba, as processors stopped to consider the impact on their operations and assessed the type of processing they could focus on in the future. It certainly has put the ice on some proposed investments. Therefore, the future of having another processor, or current processor expansion, is uncertain. Having increased dairy processing would lead to more sustainable jobs, ensure that more locally produced milk is processed provincially and increase Manitoba's GDP.
Furthermore, increasing access to our Canadian market will have a negative impact on dairy farmers' share of the domestic milk market, a share that was the basis for investment decisions for our dairy farmers and for many young dairy farmers getting into the industry. Those dairy products will displace what would have otherwise been Canadian dairy and products made with Canadian milk, even if imports don't meet the same standards for safety and quality that Canadian dairy farmers provide to Canadians under the national on-farm program we call “proAction”. This is about giving up that portion of the domestic market and the government's commitment to provide compensation for those concessions.
The oversight clause undermines Canadian sovereignty and Canada's ability to develop and manage Canadian policies without U.S. intervention. The U.S.A. will not need to provide similar levels of oversight into its system. This approach is yet another example of how CUSMA removes our competitive advantage and ties the Canadian dairy industry's hands to American decision-making. This should not be understated, and it will have a lasting effect on the domestic dairy sector. The sovereignty clause of CUSMA will undermine our ability to manage our own policies without American intervention. Having another country dictate our policies will tie our hands in our own industry by providing the Americans with the ability to intervene in our domestic policies.
The final aspect of CUSMA is the restrictions of Canadian exports. Canada has agreed to the U.S. demands to effectively cap Canadian exports of skim milk powder, milk protein concentrates and infant formula. Added together, these measures limit our ability to grow the Canadian domestic market. The export clause ensures that the Canadian dairy industry's hands are tied from both sides. Not only is our industry losing our market share, but it also cannot export due to aggressive restrictions and surcharges.
While the announced compensation package for the access granted for CETA and CPTPP was a first step in this regard, we are asking that the Canadian government provide dairy farmers, in the form of direct payments, the remaining seven years of full and fair compensation to mitigate the impacts of CETA and CPTPP, with that amount included within the 2020 budget's main estimates. We are also asking that the government deliver on its promise of full and fair compensation for the impacts of CUSMA.
Efforts to mitigate the impact of the export charges need to be made. This could be achieved through administrative measures with the United States, even after the ratification of CUSMA. These caps would set a dangerous precedent for any Canadian product that could be exported, as a means of limiting Canada's competitiveness in world markets. Therefore, we are asking that the Canadian government work toward an administrative agreement with the American government to ensure that the export charges contained in CUSMA apply only to exports to the U.S. and Mexico, and not worldwide.
lt is important to note that, should CUSMA enter into force before August 1—the beginning of the dairy year—the export thresholds for skim milk powder, milk protein concentrate and infant formula will see a dramatic decline of nearly 35% after only a few months. This would be another blow to the dairy market, which would not be able to benefit from a transition period. To enable a proper transitional period for the export thresholds, we ask that CUSMA not enter into force until after August 1 of this year.
ln closing, I want to highlight the increased risks and the need for more resources to monitor and enforce trade and standards at the border as the level of imports increases. The Canada Border Services Agency does not currently have the training, tools or resources to effectively monitor what is coming into Canada. For example, the artificial growth hormone rbST is allowed in the United States dairy sector, whereas it is currently illegal in Canada due to animal health concerns. We are asking that increased resources, tools and training be provided to CBSA to improve its effectiveness in dealing with border issues in a timely and transparent manner.
My name is Joel Prins, and I've been involved in the dairy industry my whole life. I grew up and currently farm outside of the small village of Warburg, Alberta, an hour southwest of Edmonton.
My parents, like so many other dairy farmers in our area, both immigrated from the Netherlands to Canada in search of new opportunities. In the mid-1980s, they were able to put aside enough money to put a down payment on a small dairy farm that consisted of 37 cows and 160 acres of land. From that point on, they worked day and night to make sure they could raise me and my three younger brothers on the farm.
As my brothers and I were growing up, we were taught many valuable lessons, from the importance of caring for animals to the importance of commitment and dedication to finishing tasks. In elementary school, my brothers and I would get up before school started and make sure to feed all the calves before racing back to the house to get ready to catch the bus.
It was no different after school. We would often run off the bus to go help our parents in the field, raking or baling hay, or in the barn, milking cows. You could say that dairy farming was instilled into my brothers and me from a very young age, and I learned that it was a lifestyle, not just a job. With that mindset, as my brothers and I got older, we were able to continue to grow the farm to the current 400 cows that we milk today.
The supply-managed system is the predominant reason we were able to thrive. Supply management allows farmers like my family to continue investing back into the industry, knowing that there will be stability into the future. It also ensures that we receive a fair price for the product we sell, and not rely on direct subsidies from the government for production, which dairy farmers in other countries rely on so heavily.
For example, European farmers receive €55 billion in subsidies per year, and Americans paid $4 billion in subsidies in 2009. Canadian dairy farmers earn their income from the market, not from the government. We appreciate the government's compensation programs to alleviate some of the impact of our reduced market, but if we had our choice, we would much rather have a domestic market that's not influenced by trade deals, with no dairy compensation programs.
Dairy farmers are also a big driver of the Canadian economy. The dairy industry continues to generate $20 billion towards Canada's GDP every year. Dairy farmers also greatly support our local rural economies. On our farm alone, we employ five local employees and create a lot of spin-off by purchases we make in the surrounding communities to help keep our rural economy strong.
Overall, the dairy industry employs over 220,000 Canadians, from the farm to processing to the retailer, and all the steps in between. Not only does supply management employ locals, but it allows consumers to have the knowledge that their milk is local and that they are supporting the farms in their backyard. In poll after poll, it's clear that Canadians support local dairy farms and locally produced milk. This is reassuring to many, as Canadian milk has some of the highest standards in the world. What's worrisome is that foreign milk coming into Canada through these trade deals does not need to adhere to the same standards for production.
On our farm, over the last two years, my family has been going through the steps of succession planning. My brothers and I are all starting young families of our own and want nothing more than to raise our kids on a dairy farm where we can teach them the values that they can only get from being on a farm. This succession planning required a great deal of trust in our supply-managed system and in the government, that they would continue to support our industry by standing up for it and protecting it.
We all took on millions of dollars of debt, which will take many years to pay off. However, lately we question our decision of taking on that kind of risk. It seems that our industry is continually being put up as a sacrificial lamb in order to make a trade deal complete. Starting with CETA, followed by CPTPP and now the CUSMA deal, supply management in Canada has been eroding away.
The current CUSMA deal alone is asking for 3.9% of our domestic market. When you add up the three deals, it equates to 18% of our domestic market by the year 2024, when everything is implemented. This market access dramatically impacts our farms and likely has a very minimal impact on the countries that have that increased access.
For example, 3.9% access for an American dairy farmer is hardly a solution to their overproduction problem. The state of Wisconsin produces more milk than all of Canada, so this small access for them doesn't help their situation and dramatically hurts our local farms. Not only does the trade deal increase access to our domestic markets, but it also requires us to limit our class 7 milk.
Other concessions included a worldwide export cap that limits Canadian dairy products from being exported globally. This is very worrisome, as the implications of this cap go beyond the three countries that the trade deal is negotiated around. Canada should be allowed to stand up for its own rights and trade implications in those countries instead of having our neighbouring countries dictate them for us.
Beyond the increased market access, the elimination one of our classes of milk and a global cap on exports, most concerning is the fact that the Canadian dairy industry will also need to consult the United States for any domestic milk class policy changes. This is a severe breach of our Canadian sovereignty. The Canadian dairy industry should not need the approval of an outside country to make changes to a domestic policy.
We feel this will impede our ability to adjust and react to market demands and to innovate. We will no longer have the ability to make decisions that serve the best interests of Canadians, since we will be required to consult with the U.S. before making policy changes. This policy does not serve the best interests of Albertans or Canadians. The economic effect of this clause is difficult to determine; however, one could assume that the U.S. will not support a policy that will see Canadians benefit in the face of the American dairy industry. Ask yourselves: Would the U.S. or Mexico have agreed to this if the roles had been reversed?
The CUSMA trade deal has many negative impacts on us as a supply-managed dairy industry. Even with the deal still waiting to be signed, there have been many ramifications. Processors have been reluctant to re-invest in Canada, with some even pulling the plug on new projects that were steps away from being finalized. These are missed opportunities for growth in the Canadian economy.
Even on the farm level, when speaking with fellow farmers, there's an uneasiness and reluctance about what to do next. I even had a few neighbours who decided to get out of the industry due to the increased stress that the trade deals brought upon them. They continue to point out that there are more trade deals to come and worry that we will be the final sacrificial piece once again. Even for my brothers and me, this trade deal has been weighing on our minds greatly. We just took over from our parents, and seeing our growth in our domestic market being given away every few years makes us discouraged and frustrated.
How does an industry survive if you ask it to stagnate or decrease in size in order for foreign countries to bring in their products? This will not continue to work over the long run.
In closing, I would like to say that dairy farmers just want to be able to make a living from their market, doing what they love to do without a constant threat that the government will continually sell them out in the next trade agreement. I personally want to be able to wake up 30 years from now and pass on a successful dairy to my son, and know that he would also be able to do that for his kids one day. I want to share the story of how our government stood behind our dairy farms and valued our contributions to this great country, but right now, I don't know if I'll be able to have that conversation, if we are continually faced with the roadblocks the government is putting up against our industry.
Thank you very much for the opportunity to speak here today to highlight some of the implications of CUSMA for my dairy farm, dairy farms across Canada and what the future looks like for our industry.
Thank you, Madam Chair.
My name is Matthew Flaman. My wife, sons and I are fourth- and fifth-generation dairy farmers from Vibank, Saskatchewan, near Regina.
Today I represent myself and 165 other dairy farmers in Saskatchewan. Thank you for the opportunity to offer my thoughts on the impact of the CUSMA deal on me.
Supply management has allowed our farm and my family to contribute to the local economy through using local employees, vets, ag dealerships and other services that are close to me. The stability offered by supply management has allowed me to have the confidence to invest in our farm, our community and our area. The concessions granted in the trade agreements now have created some uncertainty of the climate going forward.
Dairy farmers did not want to see concessions given, but they have been—3.9% on the CUSMA deal, and nearly 18% currently on the books. It is important for me that it's heard, in the words of our government, that “full and fair” compensation will be paid for the direct impact of these concessions. We've asked for direct payments, because we have had a portion of our market taken away. Programs that stimulate innovations are great, but they can be put in place at any time. They're not compensation for market loss.
We have received a payment so far from a previous European trade deal, and we've used it to improve efficiencies through cow comfort and ventilation in our youngest calf barn. We've also used it for funding the next generation, through succession planning.
I also want to speak about the export caps that have come into place through the CUSMA deal, which strike a nerve with me, not only as a dairy farmer, but as a Canadian citizen. As you've heard my fellow panellists say, these caps are unprecedented. To answer Mr. Prins' question, in my opinion, there's no chance that the U.S. or Mexico would ever let caps that were intended to be among three countries be spread out over the world. As a Canadian, this is very troubling for me, not just as a dairy farmer. The impacts go well beyond the dairy sector and can be used in any other industry in future trade negotiations. That scares me.
In conclusion, I want to say that dairy farming has given me a good life. It's given me a good opportunity to raise my family. It's given me an opportunity to put some local employees to work and put some young people through school. It's been a proud spot in my life. I want nothing more than for my business to thrive and for my sons to take over one day and also thrive.
I'm worried the industry is suffering a death by a thousand cuts. Not only are we giving up market access, but the export caps that don't allow us to move our protein concentrates around the world are an area of great concern to me, because they limit our ability to expand. If this continues to be the case, I'm not sure what advice I'll give my son in his endeavours to be a dairy farmer.
I appreciate the time you've given me. Thank you for this opportunity.
We appreciate the opportunity to address this committee. Being able to describe what is happening on the ground floor in our businesses can be mutually beneficial for this and future legislation.
I grew up on the farm too, but I ended up owning a pharmacy. I'm the owner of Tofield PharmaChoice. Tofield is a town about half an hour out of Edmonton. I also manage a medical clinic beside it, and I'm the standing president of the Alberta Pharmacists' Association. My opinions today aren't part of theirs; they are my personal opinions.
CUSMA has garnered much attention for changes to the auto and dairy sectors, as we have just heard. The standing committee should be concerned with provisions of the agreement that could have important impacts on pharmacy sectors, and in turn on my patients.
I understand the original CUSMA would have extended the term of protection for data resulting from drug trials from eight to 10 years for a subset of drugs known as innovative biologics. I'll explain what these are.
As pharmacists and patients, we're very familiar with small, simple molecules that have been produced in the past 50 years, such as acetaminophen, codeine and antibiotics. They're easy to duplicate, because we can make a generic product of them, and those products come out at about 25% of a name brand product. We have used these generics since they were introduced about 35 years ago, and I was there right at the start. The availability of generic product has increased medication availability to all patients and saved millions of dollars to private, provincial and federal drug plans.
A biologic is a product that's a little different. It's a large complex molecule, usually manufactured by manipulating living cells to produce a specific protein. The most common one everyone would know is insulin. There are many benefits to biologics, such as being a unique treatment option, either with fewer side effects or better treatment for a disease. Pricing for biologics can be anywhere from five to 10 times that of small, simple molecules. I refer to drugs as molecules.
Generic products of biologics are called biosimilars, because they are not identical to the product, unlike making a generic of a simple molecule. They're very close to the same and they produce the same results in the body for a particular disease. Many provinces treat them as substitutes, although they are not interchangeable, but in comparison they're going to save payers many millions of dollars annually. Biosimilars are here, and we're using them now across Canada.
Current Canadian law provides 20 years of patent protection, which is different from data protection. Patents are just like patents for products. Data protection is a little different. Because a drug needs to be researched, it takes a long time to get it on the market. A protection is offered to companies after the drug comes on the market, because the 20 years wouldn't cover their protection.
Unlike other patents, drugs must go through trials and testing to prove efficiency and safety, which uses a large portion of the patent protection period. Data protection begins when they start marketing the drug, and it effectively provides a minimum period of market exclusivity regardless of the patent status. Data protection will prohibit the use by drug manufacturers in obtaining market approval of the safety and efficacy of the drug. When a patent company tests a product in the generic area, if people were allowed to use some of that data to get their drug on the market, that's basically what this data protection is: It protects the drug for x number of years to allow them to make some money.
Before it was signed in December, the original CUSMA had an additional two years of data protection on biosimilar molecules. This is important because that extra protection would have increased the price of the products and extended the protection for an extra two years. From what I understand, it was changed back to the eight years on the signing day, which I think was December 10 or 11.
In Alberta, we have witnessed recent changes to our publicly administered drug plans that are transitioning patients from biologics to lower-cost biosimilars. These policies were specifically implemented to decrease government drug plan expenditures. The more prevalent the use of biosimilars in Alberta, the greater the cost savings for payers and patients. Alberta spent more than $238 million in the fiscal year 2018-19 on biologic drugs, and these costs are increasing every year.
Costs per patient for original biologics can be more than $25,000 annually, with biosimilar versions costing up to 50% less than the original biologics. Alberta's biosimilar initiative will save approximately $30 million annually, which can be invested in other health services for Albertans. CUSMA's data protection change would have worked directly against Alberta's ability to access affordable biologic drug therapy in the future.
Here are a couple of examples. For a patient arriving at my pharmacy counter, the average price for Remicade, which is a name brand biologic used for rheumatoid arthritis, would run that patient or a third party payer like Blue Cross or VAC $1,553 a month, compared with a biosimilar of $848 a month. This pricing is excluding any fees or markups, and this extrapolates into a savings of about $8,460 annually.
In another example, Lantus insulin costs about $100 monthly, in comparison with $75 for a biosimilar, a savings of $300 annually. The $300 seems like a small amount, but when it is multiplied by the number of diabetics in Alberta, which is increasing, the savings are substantial. The patient on a fixed income with no prescription insurance sees no effective difference between the two products and is using the savings to purchase maybe test strips to better control his diabetes and keep him out of the hospital. We have probably 20 to 25 patients in my pharmacy alone who are making that change.
Nationally, had they extended the data protection to 10 years instead of the eight, it would have cost us over $169 million in 2029. I talk about 2029 because the patents are just being taken out for products that are going to be available then, and those are the ones that CUSMA will affect. From what I understand, for the ones that are presently licensed, there'll be a grandfather clause.
Final terms in CUSMA allow data protection to remain at eight years, from what I understand, giving continued savings to payers such as my patients and third party private and public plans, like government plans, which will allow continued affordability to patients who visit my pharmacy.
I appreciate the opportunity to talk to this committee.
Thank you so much for giving me the opportunity to present as well.
My name is Gayleen Erickson. I am the owner of Guardian Pharmacy and the Tofield Medical Clinic in Tofield, Alberta. I have reservations concerning CUSMA and the effects it will have on my business ventures.
I would like to give some basic information on pharmacy in Canada and how drug shortages have been affecting my pharmacy and our patients. We've experienced many drug shortages, and these seem to be on the rise. Shortages are caused because of many variables and circumstances. These include plant inspections revealing contaminants, access to raw product ingredients, international demands for product and, most commonly, generic product pricing that is too low. Low prices make products more popular and less profitable to manufacture. Decreased profit can persuade manufacturers to discontinue production in favour of other, more profitable molecules, causing a decreased supply and demand buffer. Pharmaceuticals have expiry dates, and this limits the amount of product in the system.
All of these concerns lead to a very inelastic supply and demand system for pharmaceuticals. At any one time, drugshortages.ca will report approximately two thousand drugs being shorted. Currently, our pharmacy is unable to supply our customers with 60 common medications because they are shorted. Additionally, any arrangements made by private payers or government can cause extra stress on an overloaded system. Here are just a few examples of these shortages.
Pantoprazole was shorted after the main public payer in Alberta favoured pantoprazole as the preferred drug to be prescribed to all patients with gastroesophageal reflux disease, also known as heartburn or GERD. That was only to save money.
Metformin, a common anti-diabetic drug, became unprofitable because of price compression from many manufacturers, and they discontinued production.
In 2017, a group of approximately 20 to 30 injectable surgical drugs were shorted after the discovery of contamination in the only factory that produced and supplied these products to hospitals and pharmacies in Canada. We were unable to supply Beaver ambulance services with product that was crucial for their day-to-day operations. Many of these injectable products remain on allocation from our wholesaler today, limiting the numbers that any pharmacy can purchase.
Valsartan was shorted worldwide when a contaminant was discovered in July 2018 in a raw product used to make the tablets. This recall, combined with price compression, has resulted in supply issues to date for the whole class of drugs called ARBs—angiotensin II receptor blockers. The majority of losartan, irbesartan, telmisartan, candesartan and olmesartan molecules are in short supply as the process dominoes.
Canadian drug stores could not supply the citizens of Canada with EpiPens in the summer of 2019. News agencies reported that individuals should use expired pens in an emergency, while the U.S. did not experience any shortages but supplied pens at a higher price in a market with higher margin. Pricing decisions by the Patented Medicine Prices Review Board, the pan-Canadian pharmaceutical alliance and provincial programs can affect name brand and generic supply. Generic pricing is often based on brand pricing.
Pharmacists are deeply concerned about U.S. policies that would enable the additional exportation of prescription drugs from Canada to the United States. Drug importation by the U.S., both personal and wholesale, is neither practical nor sustainable. CUSMA has not addressed this major concern facing Canadian pharmacies. Government needs to be aware of these shortages and the effects they have on our industry and the well-being of all our patients. Recently, Bernie Sanders encouraged the American public to purchase their pharmaceutical supplies in Canada at cheaper prices.
We were here yesterday for question period and were quite concerned to hear a motion with regard to pharmacare. We have work to do on the present problems with pharmaceutical supply issues in Canada. Price compression, manufacturing issues and recalls are still causing major problems.
To conclude, we are having major pharmacy supply issues in Canada. These problems are being ignored. They are growing annually, and our patients experience the fallout. I would like to confirm that CUSMA does not force or suggest that we supply pharmaceuticals out of our supply chain without additional supply assurances. It is imperative that future supply models take into account what is happening right now, today, in pharmacies across Canada.
Thank you very much, Madam Chair. It is great to be able to join this committee this morning.
I want to thank each of the folks who have come to testify before us. I appreciate that there are three farmers, two business owners and a pharmacist. Your input is very valued here. I appreciate your making the trip and taking the time to share your expert opinions. Your opinions are valuable, and it is appreciated that you have come to be a part of this very important democratic process to ensure that Bill gets the review required.
I think there is large agreement across the country that free trade is important, that we need to have a strong trading relationship with our international partners, but the various perspectives that have been presented here today emphasize how important it is to have proper oversight and review of this legislation to ensure that Canadians understand the impacts.
My question will be focused on Mr. and Mrs. Erickson. Acknowledging the reality of free trade.... When it comes down to it, the role of a pharmacy as a part of the health care system is ultimately about making sure patients in this country have access to the care they need in order to get healthy, to be treated properly.
Does either of you have further thoughts about the impact of drugs being sold to the United States? Could you elaborate on how that affects your day-to-day operations? Also, for the benefit of committee members, help us understand what options there might be to address this in the future, so that folks can be aware of how serious an issue this is.
What you have to do is ensure there is supply. What they are doing now is negotiating the price down so low, providing only one supplier for some of the drugs, that if there is a contamination in that plant, it shuts down the entire production of that. Then you have to get back into the supply chain at the factory, so you may have to wait three months before that drug goes into production again. During that period of time, the pharmacies have to revert to other drugs, something similar, for their supplies.
It's like olmesartan and all of the ARBs. Now all of a sudden there is a whole group of drugs that are no longer suppliable because they can't be provided by the plants and the factories anymore, so it just mushrooms and compounds.
For some of the products, like metformin, there used to be a number of different suppliers, but now they have gone down to just one, I believe. That's all we have in the pharmacy. It's a very common anti-diabetic drug, and there's no one else supplying it, so if there's a contamination in that factory, we're done. Our customers, our patients, are without.
People don't realize the severity of this. We have had heart medications.... The ear medication is just a minor one, but when you go to your doctor and the doctor says, “I'm sorry. We can't supply it. Use vinegar and water”, and you're facing the possibility of hearing loss.... This happened to our son. That's why it's very close to my heart. It's happening all over.
There was a drug for women who had bladder control problems. It was negotiated down so low in price that the companies stopped producing it. There is no medication for this.
Thank you, Madam Chair.
Thank you to the witnesses for coming today.
I came across an interesting read while doing a little research. It's called “Dairy processing industry by the numbers”. I'm going to speak about the good side of things first.
Since 2008, there have been $7.5 billion in investments, $18 billion contributed annually to the Canadian GDP, 16% growth in dairy processing real GDP, 12,000 Canadian dairy farms supported by dairy processors and 24,500 Canadians employed by dairy processors, with an aggregate annual payroll of $1.2 billion.
Here are the negatives: a $670-million loss expected in return on investments resulting from CETA, $730 million expected of lost return on investments resulting from CPTPP, and hundreds of millions more in losses expected in return on investments resulting from the USMCA.
I found that very interesting.
I have three questions for anybody from dairy, whoever is the best fit to answer. The dairy processors have asked the Government of Canada to include a TRQ in the compensation package. Could you explain how this would compensate for the market loss as a result of the new NAFTA?
One way to prevent it is to let the market forces work for themselves.
In terms of compression, we've had the experience with generic products being compressed in price, or being controlled in price. We have manufacturers dropping out of the manufacturing business for certain molecules.
We are also getting into a situation where we have contamination in factories being picked up very easily. There are very sensitive tests now, so we're having factories shutting down because of it.
With that compression and lower amounts of stock, when we have a contamination, we have a major problem. It doesn't just happen to a single drug, such as valsartan. It has dominoed into all the other angiotensin reuptake blockers. About seven of them are short now because of one product, valsartan, being contaminated about a year and a half ago.
I say to let the market decide a little more. As pharmacists, we're scared that, with pharmacare, somebody is going to compress the prices even more and just say, “You know what? For metformin, it's going to be one company.” If that one company gets a contaminant, we are going to be looking for metformin. We're going to have trouble.
We need to keep a number of manufacturers in the loop, and we need to keep prices less compressed. That's how we can protect ourselves.