I'm happy to be able to provide some views. I should make it clear that I'm not representing any particular party or any particular interest. I've been asked to appear in my personal capacity.
To give you a bit of my background, I'm a trade lawyer by profession, but I used to be in the old Department of External Affairs. I've been involved in international trade at the GATT and the WTO, and in Canada-U.S. trade for many years. I deal regularly—every day—with trade policy issues.
I'll be very brief. This is a bill to implement an agreement that has been concluded, signed and ratified by two parties, the United States and Mexico. It is now up to Canada to ratify this deal. The deal is done. It is not open for renegotiation. It is totally impractical to think that the United States Congress would be prepared to change anything in an agreement that they have approved and the President has ratified.
What we're talking about here—and I think the committee understands this—is changes to Canadian laws to bring our laws into line, where necessary, with a concluded agreement. When you look at the clauses you are examining, you will find that they are consistent, at least in my view, with everything that has been agreed to in the CUSMA. The task is to approve legislation to make some adjustments, if necessary—and frankly, I don't think I see any areas where adjustments are needed—to bring our laws technically into line with what has been concluded in the trade agreement.
As I said, in every practical sense, the agreement is not on the table for renegotiation. What is necessary on Parliament's behalf is to enact legislation that, where necessary, brings our laws into line with what has been agreed to with the United States and Mexico. Some of these adjustments are purely technical. They are nothing more than some moderate tweaking of Canadian statutes to comply with the agreement. There are some substantive provisions, as you all know, dealing with customs matters, tariffs and rules of origin, but that's something Canada has agreed to in CUSMA and now it is up to Parliament to pass the necessary implementing legislation.
As a final word, if Parliament were to reject this bill or to refuse to approve the Canada-U.S.-Mexico agreement, it would be unprecedented and, frankly, would set our economic trade and political relations back many years. It would be an astonishing result if Canada did not proceed with ratification.
Those are my views.
Thank you, Madam Chair.
Good morning, 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'd like to commend the efforts of the , , Chief Negotiator Verheul and all 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 Canadian businesses and all their employees, and we did just that. As such, CME fully supports this bill. 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 dollars' worth 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 in 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—NAFTA before it—is so important. Without this agreement 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 and grow.
How does CUSMA improve on NAFTA? CUSMA preserves the integrated manufacturing operations that allow the relatively free flow of goods and services between our three markets. Going into the negotiations, our members made it clear that the primary objective of Canada must be to do no harm to this integrated manufacturing economy. CUSMA accomplishes 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 the dispute settlement mechanisms and 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 that the Internet is a thing, and establishes a framework for e-commerce in North America. The customs administration and 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 in our estimation it is one of the biggest accomplishments. 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 it can tackle global trade challenges together. This is a significant accomplishment. We have consistently urged the government to start work on implementing the parts of the agreement—parts 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 towards helping manufacturers and exporters take advantage of the new deal. The U.S. is, and always will remain, our largest export market. We must leverage such excellent government resources as 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.
This is how government can play a positive role in helping companies capitalize on CUSMA once it's in force—
Good morning, Madam Chair and members of the committee. My name is Dave Cassidy. I'm the president of Unifor Local 444 in Windsor.
Local 444 represents just under 10,000 active members working across a range of industries including gaming, long-term care, aerospace, energy and transportation. Of course, we also do auto assembly and make auto parts.
Our local represents approximately 6,500 workers at the Fiat Chrysler Windsor assembly plant, producing vehicles like the Grand Caravan, the Voyager and the Chrysler Pacifica. We also represent thousands more workers at nearby feeder plants, right down the supply chain.
I want to thank you for the opportunity to address you today with respect to Bill on the implementation of the Canada-United States-Mexico trade agreement. As the committee members will know, our union international president Jerry Dias took a very active interest in NAFTA renegotiations. I can tell you, coming from Windsor, that reopening, or even getting rid of NAFTA, has been top of mind for workers ever since that original deal came into force back in 1994.
I know the terms of NAFTA stretch beyond just the auto sector. It's a deal that touches nearly every good and service that crosses our continental borders, yet among them the auto industry seems to grab the headlines, and for good reason. Building and developing an advanced auto industry is lucrative business. It is also a tool for significant economic development. Canada is fortunate to have invested heavily in the auto sector. Every one job in auto assembly helps generate 10 others throughout the economy.
An auto assembly plant is like a centre of gravity for additional manufacturing investments. Supplier parts, whether seats, doors, wheels or other components, are intentionally located nearby to help meet production schedules and demand. This is exactly the case in Windsor where the auto industry is still a vital cog in the local economy, this despite years of devastating closures, plant reallocations, job outsourcing and layoffs.
In 1994 NAFTA changed the terms of trade and redefined the North American supply chain. It is no surprise that automakers and parts manufacturers started relocating production to low-wage Mexico or in some cases the low-wage U.S. south.
We used to have a $3.5 billion auto trade deficit with Mexico for cars and parts. The deficit is now nearing $30 billion. We expected this would happen. This is part of the reason Canadian auto workers have long been opposed to NAFTA. Over time and through our collective bargaining, we've managed to secure decent wages and benefits for our members doing very difficult, repetitive and skilled labour, but all that gets undercut as Mexican factories pop up and workers are paid a wage that's a fraction of what we earn.
I don't know if you know this, but a new Audi assembly plant located in Mexico, producing a $40,000 luxury SUV, for instance, will pay workers around $2.25 U.S. per hour. Canadian workers will not, and should not, have to compete with that. I'll tell you there is rarely a time when Canadian auto companies fail to point out these disparities when they're trying to lower our wages, trim our benefits or overhaul our pensions. This is NAFTA's effect on working conditions in Canada.
As I said, our union put a lot of time and resources into engaging in NAFTA renegotiations and working with federal officials to make meaningful changes. No one was under any assumption that tinkering with NAFTA would, by itself, undo decades of damage and neglect, but certainly, meaningful changes were made, and we recognize that.
Under CUSMA there is now a much higher threshold to determine a North American-made car than there was under NAFTA. Giving tariff preferences to carmakers that build a car actually made from North American components strengthens the integrity of the deal. This is far different from the approach the Harper government took when renegotiating the TPP wherein they committed to weakening the NAFTA threshold. Under TPP, which Unifor strongly opposed, more than half a car didn't have to be built in a trade zone to receive tariff preference.
It's good news that under CUSMA the trend is reversed. We think that this could help locate production of tier-1 and tier-2 suppliers into Canada as carmakers attempt to meet the new rules.
CUSMA also strengthens rules of origin on key component parts over and above the original deal. For the first time, there are auto rules of origin that apply to steel and aluminum resources, requiring OEMs to purchase at least 70% of these materials in North America.
Good morning, Madam Chair and committee members. Thank you for the opportunity to appear before you.
My name is Jonathon Azzopardi, past chair of the Canadian Association of Mold Makers. I am the current director of international affairs for the association and president of Laval, a mold and part manufacturer in Windsor, Ontario.
Our association is 100 members. There are 216 mold manufacturers in Canada, as well as 14,000 skilled workers, over 230 associate members and over 1,400 companies just in southwestern Ontario alone in manufacturing.
I have to start out by saying that I don't admire the position you're in. A committee that is asked to push through ratification that's already negotiated, but that's trying to put the structure together to be able to create a net to be able to capture those opportunities, does not have an easy task, but it is necessary. We're here to support the ratification of Bill , or CUSMA.
To be a manufacturer in Canada is not easy, but it is a privilege. It comes not without its many challenges. I won't take my time to mention all those challenges, but I will say that if you make things or grow things in Canada, exporting is critical.
I will take the 10 minutes—or the five minutes—to show you the ways in which this agreement can help us and create leverage or a springboard. I believe it is important that we start with a timetable. In 2015 Donald Trump, at the time the president-elect, announced that he was going to renegotiate NAFTA. I have to admit that when you fast-forward to 2016, when the president-elect became President, it sent a shock wave through our industry. That shock wave, through its uncertainty, real or unreal, caused a lot of disheartenment among workers and companies. At the time, our industry was under a great amount of pressure because it wasn't a fair trading relationship. Made in America was causing enough problems, not to mention the fact that 85% of our exports going to the United States were already under pressure from low-cost countries like China that do what we do at a fraction of our costs.
We have the blessing that this agreement was negotiated quickly. I believe our U.S. trading partner made sure that the rules were in their favour, but dragging out ratification can only hurt us more. We only lose more opportunities every day. Why is ratification important? It will dispel the uncertainty. You have to understand that we've been in this uncertainty since 2015, which is nearly five years, losing opportunities every day. You also have to understand that because of our cycles and our agreements with our clients, we won't see all of the bad news until five years after ratification.
The second reason I want to talk to you today concerns future investments. Future investments in Canada, because of this agreement, will fall very heavily on tiers one, two and three. It's very important that you understand that the further down the supply chain in the auto sector, the less likely you have to be in the United States. By moving this agreement forward, all assembly factories—over $20 billion in investments in the United States since 2016—will now become our new clients. That's if this ratification happens quickly.
The next point is that I represent the mold-making industry, which is typically a tier-two industry. This is very important. We must mirror our trading policies with our largest trading partner. For example, in December of 2019, a 25% tariff was imposed on molds coming into the United States from China. This is an example of where, if Canada is not adopting mirroring policies, we will become a dumping zone for Chinese products. It's important that, in stage two, upon ratification, Canada adopt mirroring policies for U.S. steel, aluminum and molds. Without doing this, without adopting these policies, you will begin to erode our manufacturing sector from the inside out.
The last point I'd like to make concerns our vulnerability regarding CPTPP. Without the new CUSMA agreement, I agree with David, this agreement is a disaster waiting to happen in Canada. CPTPP has no apparent value for Canadian manufacturers without CUSMA. It will not help us but actually hurt us, because we'll become a dumping ground for companies wanting to gain access to the U.S. If Canada does not adopt strong RVC policies, it will be an opportunity missed. We'll actually lose ground.
Canada needs to ratify CUSMA as soon as possible, and create protective measures to protect against this dumping by mirroring U.S. protective measures within our own country so that we can take advantage of this agreement fully. One way to protect this is to expand the list of products and strengthen the methods of calculating RVC. Mirror trading policies with the U.S. and get this agreement in place as soon as possible.
I'd be happy to answer all your questions and also to play an active role in helping you move this forward.
Good morning, Madam Chair. Thank you for inviting us.
Good morning, ladies and gentlemen members of the Canadian Parliament. Thank you for your interest in our aluminum industry. I am here to talk to you about it.
I am from Saguenay—Lac-Saint-Jean and I am the president of an economic research firm. Saguenay has the largest concentration of aluminum plants in the world. In a 50-kilometre radius, we have five aluminum plants, and they produce more than 1 million of the 3 million tonnes of aluminum produced by Canada. Canada is third globally among aluminum producers. In addition, our aluminum is the best, the cheapest, and it has the smallest carbon footprint in the world.
We have a large corporation, Rio Tinto, Alcan's successor. In 2007, Rio Tinto purchased Alcan, which had projects in Saguenay—Lac-Saint-Jean, including project AP-60 and the one focusing on completing the construction of an aluminum plant in Alma. Rio Tinto, as a trustee, is continuing the work in terms of commitments to carry out those projects. In July 2019, as the agreement with Alcan was to expire in 2020, Rio Tinto extended the agreement to 2025, giving itself until then to carry out those two projects. In fact, the corporation announced $300 million in investments related to those two projects—the one in Alma and the AP-60 plant. However, three months later, in October, in a dramatic turn of events, Rio Tinto told us that, in light of the new free trade agreement and the new provisions on aluminum, it would put those $300-million projects on hold.
We are working on this, but we are not alone. Rio Tinto and engineers are also working on it. These are large, high-quality projects that were developed over several years. Hundreds of millions of dollars have been invested in them to produce the best aluminum possible. However, owing to a CUSMA provision you are familiar with—the one on rules of origin, which means that aluminum is not treated the same as steel—we are losing our access to the U.S. market.
There are aluminum plants in the city of Saguenay. In the town of Alma, aluminum workers from Unifor and from the United Steelworkers, which represent plant workers, as well as Aluminium Valley Society, which represents the 4,000 individuals working in some 100 businesses involved in the broader aluminum industry, came together to fund a study to assess what would happen if CUSMA remained in its current form. The result is that it would put on hold the development of projects that could produce 850,000 tonnes of new aluminum that would be extremely beneficial in terms of greenhouse gas emissions.
The production of one tonne of Quebec or Canadian aluminum generates two tonnes of greenhouse gas, compared with 18 tonnes of greenhouse gas for each tonne of Chinese aluminum. Our aluminum production generates the lowest gas emissions in the world, as it is based on hydroelectricity in British Columbia and in Quebec.
The projects I mentioned would produce 850,000 tonnes of aluminum and would generate $6.2 billion in investment in Quebec in previously announced projects. An expansion project is planned at Aluminerie Alouette, which has invested $50 million in a prefeasibility study, but the study has been put on hold because of the new provision. The two projects that were already announced in Saguenay have been put on hold. The industry is very worried by that.
The world is complex—I don't have to explain this to you, as you work on complex files—and this industry is capable of managing the complex world it is part of. However, this new provision creates complete uncertainty in terms of the entry of any aluminum into the world going through Mexico. In fact, the current provision enables any aluminum to enter Mexico and to be considered as North American aluminum.
We already have an industry that employs 80,000 people in Quebec, and the projects underway could generate $1 billion in additional spending per year, without taking into account the $6 billion for the construction. They would generate 3,000 new entry-level jobs at an annual salary of about $80,000 each. This is an extremely important industry. So here is the straw that will break the camel's back.
The association president came here and told you that he supported the agreement reluctantly. He was saying that, at least, there was an agreement. Afterwards, he told you about a dozen elements that were missing from the agreement. They are extremely worried and they are putting projects on hold. So it is in the national interest to resolve this issue and to close this door.
Believe me, we are open to the world. We are a country that is involved in trade; that is clear. Our trade with the French, the British and the Americans has enriched us. We are for trade, but for fair trade. We are from North America, where there are companies. Let's take aluminum for example. Alcoa, the oldest aluminum company in the world is a company. Rio Tinto is a company. However, in the rest of the world, aluminum is not produced by companies, but rather by governments with legitimate political interests.
In Brazil, in India and in China, governments are using aluminum to create jobs, and they are dropping prices. They are dumping. We have affordable aluminum; they have political aluminum. If you let that aluminum in, there is no doubt that our industry will be unable to compete with a government like that of Dubai that will reduce prices.
That is why it is in the national interest to regulate the access of illegitimate aluminum to the North American market, as stated by the president of the Aluminum Association of Canada. We also support that proposal.
Thank you. I prepared for 10 minutes, but I will do it in five.
I'm Scott Smith. I have the privilege of representing the 160 employees of Honey Bee Manufacturing. I have with me Jamie Pegg, our general manager. We want to thank you for this opportunity to discuss these matters, specifically with regard to issues on the competition and copyright acts that are addressed by this committee.
We have manufactured for over 30 years, since 1979, agricultural equipment that attaches to major brands of OEM equipment—John Deere, Case, New Holland, AGCO and so on. We export our products. I would say that 40% of our output is consumed in Canada and 66% is for export, with 33% exported to the United States. We are exporting to about 26 different countries, but we face a challenge. The challenge we face is interoperability. Recently, with technical protection measures and so on, companies have started to use digital locks and keys to prevent us from allowing our equipment to interoperate with these major OEM brands. It's a form of protectionism that allows them to own and operate the entire value chain at the exclusion of independent manufacturers.
In Canada we have 1,400 manufacturers of implements that are attached to agriculture, mining, forestry or construction equipment. Of those manufacturers, 500 are for agricultural equipment. That agricultural equipment is primarily manufactured adjacent to small communities in Canada, rural communities, where the majority of that type of manufacturing takes place. It's a challenge for us to achieve the ability to continue to legally manufacture our product and sell it onto these platforms. The copyright act in the United States has provision for circumventing for the purpose of interoperation. The Canadian Copyright Act does not have this same term in the agreement.
We would like to see that ratified prior to the signing of the trade agreement so that we're not on that uneven footing that prevents us from competing legally in the marketplace here and abroad. The combines that we manufacture our equipment for are the same combines that are sold everywhere in the world. There's no variation. So a blockage here in Canada blocks us globally. That represents about $2.1 billion a year of exports on agricultural equipment from Canada, and about $1.9 billion of that is to the United States. If we don't have the opportunity to interoperate with the American platforms, which are the global platforms in this instance, it has a very serious impact on our communities.
We employ 160 people in a town of 300. Our employees come from an area with about a 100-kilometre radius to the east, west and north of us, with Montana on our back doorstep. Our employees come from all over the world, including from Syria, Germany, Venezuela and India, as well as locally. A lot of our employees are fourth- and fifth-generation farmers' children. This is something that we don't want to see die. It would be devastating to our communities.
At a minimum, we need to have a copyright clause that's the same as the U.S. clause that allows for the exception for interoperability adaptations. These types of adaptations are very expensive, and we would have to do it for every single platform. The preferred solution is, in the long term, a mandated legislation that ensures that equipment imported into Canada has open interoperability rather than custom reverse-engineering. For example, on one product it cost us between $800,000 and $1 million to reverse-engineer and create a workaround solution, or to complete a parallel system, to allow our equipment to interoperate with the OEM equipment.
The OEMs have not provided ease of access to this interoperability. The issue hasn't been a problem in the past. It has been straightforward, like plugging a keyboard into your computer, but as they go to these digital locks and keys, we're seeing already on several platforms that they have locked it down. We need to have their permission to do it. When they do give us permission and they do provide provision for our equipment, then say we are restricted to only selling this product to this market for this customer and no one else. That's not acceptable, and that's what we're looking to deal with here today.
You have our full comments in the papers we distributed, which you can review at a later date.
Thank you, Madam Chair.
Good morning, honourable members.
I'm very pleased to have received this invitation to be here today representing Fiat Chrysler, Ford, and General Motors of Canada. Our members operate four assembly plants, as well as engine and component plants. They invest billions of dollars in the development of zero-emission technologies and advanced vehicle safety technologies. We have about 1,300 plus independent dealerships right across Canada and we contribute to quality employment opportunities for over half a million Canadians.
Passage of the CUSMA is essential to provide certainty to the North American automotive manufacturers. The automotive provisions as well as the side letters that provide protection from U.S. section 232 tariff actions are critical elements to support automotive manufacturing competitiveness within the North American trade bloc. It's important to remember that, for the auto sector in Canada, the alternative to reaching this agreement would be cancellation of NAFTA, reimposition of tariffs on finished vehicles and parts, and likely section 232 tariffs on production material inputs. If we are anxious to see the final ratification, that is indeed why. Again, we want to thank the Canadian negotiating team for working so closely with us throughout the duration, and for ultimately ensuring that we maintain Canada's auto sector as an integrated part of the North American industry.
This agreement was, simply, existential to Canada's largest manufacturing and export industry. The agreement reinforces the long-established integration of the industry supply chain, which is absolutely necessary for its competitiveness, and the ongoing need for continued regulatory alignment of vehicle technical regulations with the U.S., which are integral to trade and the environment, while ensuring greater consumer product choice and affordability. The auto portions of the new agreement, including the rules of origin and the labour value content provisions, and the 232 side letters are things all our members support and can adjust to over a reasonable period of time so we will be compliant, enabling us to continue to enjoy duty-free access to the largest and most beneficial automotive market in the world.
As far back as 1965 with the Auto Pact, Canada's automotive industry and its supply chains have become deeply integrated with the United States, and, over time, with Mexico. Vehicles are built seamlessly on both sides of the border, resulting in deep integration that has led to a more competitive Canadian auto industry, greater consumer choice at affordable prices, and a strong North American trade bloc.
When the original NAFTA came into force in 1994, it provided a foundation for a strong, globally competitive trading bloc—you'll see I keep coming back to referring to it as a “trading bloc”, which is really critical. The geographic proximity of the three NAFTA partners facilitates the multi-billion dollar parts sector, and just-in-time supply chains were critical to the vehicle assembly operations in North America. They also created inherent transportation and supply chain logistics cost advantages.
Today the automotive industry represents the second-largest Canadian auto sector, with $54 billion in trade in 2019, which is about 92% of the total value, which was shipped to the United States. The United States is our number one automotive partner. It's absolutely critical that a trade agreement be in place to provide the foundation for Canadian automotive production and exports.
We must always keep in mind that Canada is, simply, one-tenth of a complex, fully integrated long-lead industry. Multi-billion dollar product plans and manufacturing investment plans generally begin over five years in advance of the start of production. Planners require regulatory certainty to make their decisions. They especially need for Canada to maintain fully harmonized safety, vehicle, GHG and criteria emissions standards with the United States. This remains imperative if we are to continue to be part of this fully integrated long-lead, large investment industry. Put simply, we did not work this hard to modernize integrated-rules trade in North America to then take our eye off the ball and drift away with unique or different regulatory directions. Doing so could put us back to square one and leave us on the sidelines.
Canada's officials must also maintain a high degree of engagement with counterparts in the U.S. and Mexico as we go forward. We cannot relax our efforts to ensure that Canada is sufficiently competitive to win future manufacturing investments that anchor much of the Canadian auto supply chain. Canada must have competitive—or more than competitive, actually—costs of auto operation in Canada, including investment incentives, carbon costs, competitive labour agreements, taxes that keep pace with the U.S., competitive electricity prices, and a competitive regulatory burden environment.
It's important to remember that the auto sector is going through one of the driest periods in its 100-year history. We need to work closely with all levels of government. We fully respect this committee's need to hear Canadians and to ask questions.
For 36 years now, I've been appearing before various House committees. We certainly understand that and we encourage you in terms of your mandate to make this happen. We've worked with all parties over the last two years to discuss the very complex issues involved, and we appreciate your interest in open dialogue.
I thank you again for this invitation, and I'd be pleased to answer any questions.
Thank you very much, Madam Chair and honourable members, for this opportunity. I'm here today with Casey Chisick of Cassels, who is external legal counsel both to Music Publishers Canada and to my companies.
I have had the pleasure of owning and running a Canadian-owned independent music publishing business for almost two decades. I'm here to talk to you about the need to fully implement copyright term extension in accordance with the Canada-U.S.-Mexico agreement immediately, completely and with no conditions. In doing so, small and medium-sized businesses in the music publishing sector and our songwriting partners are able to continue innovating, growing and exporting songs to the world.
Canadian music publishing is a $329-million industry, which grows every year because of innovative entrepreneurs who help create value from songs. In today's digital and globally connected age, songs, music and culture have no boundaries, allowing many Canadian songwriters to achieve international success because of the scale of opportunity outside our country.
The market in Canada is simply too small for songwriters and publishers to succeed only within our borders, so music publishers work hard and make investments to help songwriters expand and grow into international markets. In fact, two-thirds of music publishers' revenue now comes from foreign sources, which is a dramatic change from 2005, when only a quarter of their revenue was from these same foreign sources.
The key to dealing with changes in technology has been our ability to expand globally. Music publishers use their relationships in other countries, built over many years, to create opportunities for songwriters to succeed.
Music publishing is about championing a songwriter and a song through the lifetime of the writer's career and the song's copyright. We take a long-term perspective, and we work a lot behind the scenes to create value. We are the songwriter's partner. We not only make financial investments in songwriters; we also invest time and leverage our relationships to help a songwriter's career evolve.
This means matching people such as songwriter Jeen O'Brien with partners in lucrative markets like Japan to co-write singles that are released by other artists or used in TV, movies, commercials or video games. It means arranging co-writing opportunities for Dan Davidson in London, England, and China and financing radio promotion. Those efforts led to a top 20 Canadian country radio hit.
It means taking a risk to sign emerging songwriter Tom Probizanski, who moved to Toronto from Thunder Bay. We invested in him so he could go to Los Angeles and Denmark to co-write. He released an EP under the name of “Zanski” and we 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 in Jeen, Dan and Tom only because we could rely on the income of several songs for which my companies hold the copyright. These efforts were made possible by the value that we were able to create from songs such as 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 for The Simpsons.
This brings us to today. I would like to thank the government for agreeing in CUSMA to extend the term of copyright in works by 20 years. It is critical, though, that this be implemented completely, immediately and with no conditions, rather than waiting the 30 months that is allowable under CUSMA. Bill would extend the term of copyright for a few works: anonymous works, audiovisual works and so on. It would add an extra five years to the term of protection for performances and sound recordings, which was already extended in 2015, a welcome development to be sure.
However, the bill would not finish the job. It would not extend the term of protection for musical compositions known as songs. On behalf of Music Publishers Canada and the songwriters and composers I work with, I urge the committee members to amend Bill to align Canada with its global trading partners by extending the term of copyright protection for all musical, literary, dramatic and artistic works right now, instead of using the 30-month transition period.
Why is this important? Many works will fall into the public domain in the next 30 months. That will affect creators' and publishers' ability to reinvest in the Canadian economy.
As I mentioned, many music publishing companies are small and medium-sized businesses that rely on steady income from hit songs to develop new talent. For a small business like mine—
Thank you and good morning, Madam Chair and members of the committee.
Thank you for the invitation to appear before the committee today. We look forward to answering questions regarding the outcome of the new NAFTA agreement, following my opening remarks.
The signature of the new NAFTA on November 30, 2018, followed 13 months of intensive negotiations. It brought together a broad range of officials and stakeholders, with a strong partnership between federal and provincial officials. That agreement achieved several key outcomes. It served to reinforce the integrity of the North American market, preserve Canada's market access into the U.S. and Mexico and modernize the agreement's provisions to reflect our modern economy and the evolution of the North American partnership.
On December 10, 2019, following several months of intensive engagement with our U.S. and Mexican counterparts, the three countries signed a protocol of amendment to modify certain outcomes in the original agreement related to state-to-state dispute settlement, labour, environment, intellectual property, and automotive rules of origin. These modifications were largely as a result of domestic discussions in the U.S. However, Canada was closely involved and engaged in substantive negotiations to ensure that any modifications aligned with Canadian interests.
Throughout the negotiations Canadian businesses, business associations, labour unions, civil society and indigenous groups were also closely engaged and contributed significantly to the final result.
For the negotiations, we need to recall that the NAFTA discussions were unique. This was the first large-scale renegotiation of any of Canada's free trade agreements. Normally, free trade agreement partners are looking to liberalize trade. In this process the U.S. goal from the start of the negotiations was to rebalance the agreement in its favour. The President had also repeatedly threatened to withdraw from NAFTA if a satisfactory outcome could not be reached.
The opening U.S. negotiating positions were, to put it mildly, unconventional. These included a 50% U.S. domestic content requirement on autos, which would have decimated our auto sector; the complete dismantlement of Canada's supply management system; the elimination of the binational panel dispute settlement mechanism for anti-dumping and countervailing duties, which we've used extensively, particularly for products like softwood lumber; a state-to-state dispute settlement mechanism that would have rendered the agreement completely unenforceable; removal of the cultural exception; a government procurement chapter that would have taken away NAFTA market access, leaving Canada in a worse position than all the other U.S. free trade agreement partners; and a five-year automatic termination of the agreement, known as the sunset clause.
The U.S. administration also took the unprecedented step of imposing tariffs on imports of Canadian steel and aluminum, on the basis of purported threats to national security, for which there was absolutely no evidence of any kind of justification. The U.S. administration had also launched an investigation that could lead to the same result for Canadian autos and auto parts.
In the face of this situation, Canada undertook broad and extensive engagement with Canadians on objectives for the NAFTA modernization process. Based on the views we heard and our internal trade policy experience, Canada set out a number of key objectives, which can broadly be categorized into the following overarching areas. First, we wanted to preserve important NAFTA provisions and market access into the U.S. and Mexico. Second, we wanted to modernize and improve the agreement where possible. Third, we wanted to reinforce the security and stability of market access into the U.S. and Mexico for Canadian businesses.
With respect to preserving NAFTA, Canada maintained the NAFTA tariff outcomes, including duty-free treatment for energy products. We preserved the provisions on chapter 19, which is the panel dispute settlement mechanism for anti-dumping and countervailing duty matters. We preserved temporary entry for business persons and the cultural exception. We preserved and improved the state-to-state dispute settlement mechanism.
In the area of autos, changes were made to the rules of origin regime to encourage the use of more inputs from Canada, in particular by increasing the regional value content requirements for autos and auto parts, and removing incentives to produce in low-cost jurisdictions. Together with the quota exemption from potential U.S. section 232 tariffs on autos and auto parts, secured as part of the final outcome, these new automotive rules of origin will incentivize production and sourcing in North America, and represent important outcomes for both our steel and aluminum sectors.
With respect to modernizing NAFTA, we have modernized disciplines for trade in goods and agriculture, including with respect to customs administration and procedures; technical barriers to trade; sanitary and phytosanitary measures, as well as a new chapter on good regulatory practices, including for health and safety. That encourages co-operation and protects the government's right to regulate in the public interest.
Commitments on trade facilitation and customs procedures have been modernized for the 21st century to better facilitate cross-border trade, including through the use of electronic processes, which will reduce red tape for exporters and save them money.
New and modernized disciplines on technical barriers to trade in key sectors are designed to minimize obstacles for Canadians doing business in the U.S. and Mexico, while preserving Canada's ability to regulate in the public interest. We also have modernized obligations for cross-border trade and services and investment, including financial services and telecommunications, and a new digital trade chapter.
On labour and environment, we negotiated chapters that are fully incorporated into the agreement and subject to dispute settlement. These obligations will help ensure that parties maintain high standards for labour and the environment, and that domestic laws will not be deviated from as a means to gain an unfair trading advantage.
The outcome also includes a special enforcement mechanism that will provide Canada with an enhanced process to ensure the effective implementation of labour reforms in Mexico, specifically related to freedom of association and collective bargaining.
There were a number of other outcomes of note. On supply management sectors, I think it's important to keep in mind that the U.S. did make an explicit and public demand for the complete dismantlement of Canada's supply management system. In the end, we preserved the three key pillars of supply management—production controls, import controls and price controls—and granted only limited access to the U.S.
On intellectual property, obligations cover a broad set of areas, including copyright and related rights, trademarks, geographical indications, industrial designs, patents, pharmaceutical intellectual property, data protection for chemical drugs and agricultural chemical products, and border, civil and criminal enforcement of IP rights, including civil and criminal IP rights enforcement in respect to trade secrets.
Certain outcomes will require changes to Canada's current IP legal and policy framework in certain areas such as copyright, and here we will increase copyright terms of protection as well as provide criminal remedies in respect of rights management information.
IP rights enforcement will also provide ex officio border authority for suspected counterfeit or pirated goods in transit, as well as criminal offences for the unauthorized and willful misappropriation of trade secrets.
In many of these areas we negotiated transition periods to implement our commitments, and importantly, under the amending protocol the parties agreed to remove the obligation to provide 10 years of data protection for biologic drugs, meaning that Canada does not need to change its existing regime in this area.
The agreement also includes a new digital trade chapter that requires parties to have regulatory frameworks in place to address such things as privacy protections and fraudulent and deceptive practices, and we will work together to mitigate threats to our cybersecurity.
The agreement also includes commitments to address barriers to digital trade, such as provisions that ensure that companies and individuals can move information and data across borders in a reliable and secure manner while ensuring that legitimate privacy and security rights are protected.
Other notable outcomes include that we will no longer have trilateral investor state dispute settlement for Canada. We will not have investor state dispute settlement applying between Canada and the U.S. There will be no government procurement chapter in NAFTA with respect to Canada. We will maintain our access to the U.S. under the World Trade Organization's agreement on government procurement.
In closing, I would like to underline that our objectives for these negotiations were informed closely by Canadian priorities and interests, very close engagement with provinces and territories, as well as a wide range of stakeholders that we consulted on an ongoing basis.
This concludes my opening remarks. Alongside my colleagues, we would be pleased to answer any questions you may have.
Thank you, Madam Chair.
My name is Luc Boivin, and I am the president and CEO of Fromagerie Boivin. On behalf of our company, I thank you for inviting me today to discuss the bill to implement the Canada–United States–Mexico Agreement, or CUSMA for short, as well as the impact it will have on my business and the dairy industry overall.
I will be drawing your attention to the harmful effects CUSMA and the other trade agreements will have on my company and my region. Then, I'll recommend mitigation measures the government can take to help the industry as it tries to adapt to the new market landscape it now faces as a result of CUSMA and the other trade deals.
Fromagerie Boivin is a fourth-generation family business, founded by my great-grandmother in 1939. Back then, the cheese dairy was used to process the surplus milk from the family farm and other farms in the area. It produced aged cheddar for export markets. With the acquisition of Fromagerie Lemaire, the Boivin group now processes 40 million litres of milk to produce 4.3 million kilograms of cheese. The group employs 340 full-time workers. We produce fresh, unripened cheese under the Boivin-Lemaire label, as well as the Amooza cheese snacks, which are available across the country thanks to a deal we signed with a major Canadian company.
In addition, we operate the only drying facility in eastern Quebec, where we dry whey from Fromagerie Boivin, as well as Fromagerie Perron and Fromagerie Saint-Fidèle, in Charlevoix, which we also have shares in. Fromagerie Saint-Fidèle processes 10 million litres of milk for Canadian Swiss cheese and employs 45 people in the regional county municipality of Charlevoix.
Fromagerie Boivin is committed to continuing its investments and exploring new markets. Unfortunately, the uncertainty created by government decisions is a major hindrance to our investment plans. The current slump in Canada's dairy processing industry has had a disproportionate impact on remote regions, particularly where I'm from, Saguenay—Lac-Saint-Jean. The current system is conducive, not to milk sheds in remote regions for dairy processing, but to consumers.
When the trade deals are fully implemented, the market access granted under CUSMA and the others will be unprecedented, accounting for 18% of the Canadian market.
It would be naïve to think that dairy market access of 18% will simply mean lost volume for Canadian dairy processors. It is important to note that, unlike dairy farmers, Canadian dairy processors do not have access to regulated pricing when selling their products. Dairy processors sell their products in a marketplace rife with fierce competition, not just among dairy processors, but also among food processors.
The level of Canadian market access—I repeat, 18%—granted under the various trade deals signed by the Canadian government reduces profit margins and expected volumes for dairy processors. Those government decisions are behind the current slump, shifting the focus these days to disinvestment, closures and consolidation in the dairy processing sector.
Let's be clear here. There is a contradiction between proclaiming that you support supply management and, then, turning around and suffocating the dairy processing sector. Supply management can't be sustainable without a viable production and processing sector. It's often said that food processing hinges on a thriving agricultural sector, but I would also point out that, without a thriving food processing sector, agricultural production could not survive.
Let's talk about the $1.75-billion compensation package that was announced for dairy farmers. When I heard about it, I was very happy for my dairy farming friends, who are not just my suppliers, but also friends I play hockey with. However, more than six months later, nothing has been announced for dairy processors. That's an insult.
If the federal government wants to mitigate the negative impact of these trade deals, it needs to announce a compensation program for dairy processors as soon as possible. The time for empty promises is over. Now is the time for action. Such a program should have a component specially designed for small and medium-size businesses in Canada's dairy processing sector, businesses like ours, to meet our unique needs.
That means having access not just to technical expertise, but also to funding to help the dairy industry deal with this consolidation. The industry was sacrificed three times on the altar of international trade, and many will go out of business as a result. Closures have already been announced. Let's at least help them die with dignity, so to speak. That's what the government committed to doing.
The market access granted has led to the closure of 16 Canadian companies the same size as ours.
Now I will turn to solutions that go beyond financial assistance.
We need to seriously explore export opportunities, particularly for cheese curds, a product we, in Quebec, take great pride in. We invented it, and there could be opportunities to sell it abroad, but breaking into new markets is very tough.
Other mitigation measures include allocating import permits, commonly known as tariff quotas, to dairy processors. This is my heartfelt plea: stop issuing import permits to our customers, meaning, retailers and distributors. Does the government realize the impact decisions like that have on our markets? When the government issues import permits to distributors and retailers, it transfers product volumes in a sector developed by dairy processors through its investments in our customers. It makes no business sense. It completely dismantles the market, decimating our margins and creating an unfavourable investment environment.
Once again, I would ask the government to consider the unique needs of small and medium-size businesses in the dairy processing sector when it grants import permits.
In conclusion, this is what I'd like you to take away from my presentation.
A sustainable supply management system is not possible without a viable production and processing sector. The dairy products covered by the trade agreements are value-added products, such as cheese, yogourt and fluid milk, which generate the most revenue under the supply management price structure. Even more disturbing is the fact that supply management is attacking our sovereignty by accepting limits on exports. Before you know it, we'll be pouring huge quantities of skim milk down the drain.
I urge all the parties to remember our recommendations when they proclaim their support for supply management. The time for talk is over. The government must now put its money where its mouth is. Dairy processors need a compensation package and a program under which they are allocated import permits. The time for action is now.
Thank you, Madam Chair.
My name is Bruno Letendre, and I am the chair of Les Producteurs de lait du Québec, as well as a member of the Dairy Farmers of Canada board of directors. Thank you for the opportunity to address the committee today.
The dairy sector produces a stable supply of nutritious dairy products for Canadian consumers. As one of the top two agricultural sectors in seven out of 10 provinces, Canada's dairy sector is a driver of economic growth, and a leader in innovation and sustainability.
With over 10,000 dairy farms and 500 processors, the dairy industry has been a bedrock of Canada's rural communities for generations. In 2015, the sector's economic contributions amounted to nearly $20 billion towards Canada's GDP and $3.8 billion in tax revenues. In addition, the dairy sector sustains approximately 221,000 full-time jobs across the country.
In Quebec, some 5,000 dairy farms produce 3.37 billion litres of milk, generating a farm gate value of more than $2.6 billion. Dairy farmers and processors are responsible for 83,000 direct, indirect and induced jobs in Quebec and contribute $6.2 billion to GDP. Lastly, they generate $1.3 billion in tax revenue.
Canada's three most recent trade agreements were made on the backs of Canadian dairy farmers. CUSMA is but the latest example. The outcome of CUSMA negotiations goes far beyond dairy market access concessions, which alone represent 3.9% of Canada's 2017 milk production, in addition to the existing imports under the World Trade Organization, plus access already granted under the Canada– European Union Comprehensive Economic and Trade Agreement, or CETA, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP. CETA and the CPTPP represent 1.4% and 3.1% of the Canadian market, respectively. By 2024, total imports will be the equivalent of 18% of Canadian milk production.
CUSMA also requires consultation with the U.S. on any changes to the administration of Canada's dairy supply management system. A trade deal that forces a Canadian industry to consult with its direct competitor in another country over any administrative changes it might make domestically in the future sets a dangerous precedent, and in doing so, Canada is giving up part of its sovereignty.
The impacts of the recent trade agreements have created uncertainty, especially among young farmers, and could have a dramatic impact on investments in agricultural exports and processing. The agreements may also lead to job losses, with ripple effects in communities across the country. These impacts go beyond economic considerations; displacing Canadian dairy to grant increased market access creates additional uncertainty at a time when the mental health of farmers and rural Canadians continues to be a concern.
The has repeatedly committed to full and fair compensation to the dairy sector for the cumulative impacts of CETA, the CPTPP and CUSMA.
That commitment was reiterated in a motion unanimously adopted by the House of Commons in October 2018. It reads as follows:
That the House call on the government to implement a program that provides financial compensation to egg, poultry and dairy farmers for all the losses they sustain due to the breaches to the supply management system in CETA, the CPTPP and the USMCA, and that it do so before asking parliamentarians to vote on the USMCA.
On August 16, 2019, the federal government announced a $2-billion compensation envelope to mitigate the impacts of CETA and the CPTPP. This does not include CUSMA. Of the announced $2 billion, $250 million was provided previously under the dairy farming investment program. The remaining $1.75 billion will be paid out over eight years. The dairy direct payment program, launched in the fall of 2019, is expected to pay out $345 million to dairy farmers by the program end date of March 31, 2020. The remaining commitment of $1.4 billion needs to be confirmed as direct payments and be paid out over the remaining seven years.
Canadian dairy farmers, who are all impacted by the recent trade agreements and are best positioned to know their own needs, have indicated that compensation should come in the form of direct payments. This is consistent with farmers' recommendations from the mitigation working group established by the federal government after the signing of CUSMA and the government's commitment to listen to farmers on how compensation should be paid.
The announced compensation package for the access granted in CETA and the CPTPP was a first step in this regard. However, in order to fulfill its commitment, the government will also need to deliver on its promise of full and fair compensation for the impacts of CUSMA.
The Canadian government has repeatedly stated that it wants a vibrant, strong and growing dairy sector that creates jobs and fosters investments. Compensation is needed to restore confidence within the sector. The compensation will provide stability for dairy farmers to move forward. Our dairy farms aren't relocating.
The government's assistance will be spent and reinvested in the Canadian economy. It will also help ensure that farmers can continue to maintain investments at current levels in the development and adoption of innovative on-farm best practices and sustainable technology. A viable and sustainable dairy industry is key to the ongoing provision of nutritious and healthy dairy products at an affordable cost to Canadians.
Instead of compensation in exchange for concessions granted in recent trade agreements, Canadian dairy farmers would have preferred to have seen no dairy concessions. Therefore, the Dairy Farmers of Canada recommend that:
1- The Canadian government continue to 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, and that the total amount be included within the 2020 main estimates.
2- The Canadian government fulfill its commitment to fully and fairly compensate dairy farmers to mitigate the impacts of CUSMA, as per the recommendations made by the mitigation working group established by the government following the announcement of CUSMA.
Let's move on to export charges.
CUSMA also contains a provision imposing export charges over a certain threshold on certain dairy products, setting a dangerous precedent that could affect other sectors in future trade deals.
CUSMA requires any exports of skim milk powder, milk protein concentrate and infant formula, beyond a specified amount, to face an export charge that effectively equates to a worldwide cap on the export of Canadian dairy products. As a result, these products won't be competitive in relation to the products of other global players.
The impact of the export charges must be mitigated. This could be done through administrative agreements with the United States, even after the ratification of CUSMA. These caps would set a dangerous precedent for any Canadian product that may be exported, since the caps would limit Canada's competitiveness in world markets.
It's also important to note that the impacts of recent trade agreements aren't limited to dairy farmers. The agreements also affect dairy processors, which are key to the long-term sustainability of the sector, as well as to other supply managed sectors.
Therefore, the Dairy Farmers of Canada recommend that:
3- The Canadian government negotiate an administrative agreement with the American government to mitigate the impact of the export charges contained in CUSMA, which are triggered after a threshold on certain dairy products, such as milk protein concentrates, skim milk powder and infant formula, has been reached.
It's 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 sector, which wouldn't be able to benefit from a transition period. It's also important to consider that the impacts of recent trade agreements aren’t limited to dairy farmers.
Therefore, the Dairy Farmers of Canada recommend that:
4- The government establish a proper transition period for the dairy industry to adapt to the export thresholds, by ensuring that CUSMA doesn't enter into force until after August 1, 2020.
Unfortunately, the Canada Border Services Agency, or CBSA, doesn't have the training, tools or resources to effectively monitor what's coming in to Canada. These agencies must guard porous borders, which will become even more problematic as imports continue to increase.
Therefore, the Dairy Farmers of Canada recommend that:
6- Increased resources, tools and training be provided to CBSA to improve its effectiveness in dealing with border issues in a timely and transparent manner, particularly given the additional level of imports granted under recent trade agreements.
In conclusion, Canadian dairy farmers still maintain that any future trade agreement mustn't include market access concessions for the dairy sector.
The Dairy Farmers of Canada understand the importance of international trade for the broader Canadian economy. They're in no way opposed to Canada exploring or entering into new trade agreements, provided that such agreements don't negatively impact the dairy sector any further. With the support of the federal government, Canadian dairy farmers can continue to build on their successes, while contributing to the health and well-being of Canadians.
Thank you very much. Good morning.
As you heard, my name is Michael Geist. I'm a law professor at the University of Ottawa, where I hold the Canada research chair in Internet and e-commerce law, and I'm a member of the Centre for Law, Technology and Society. My areas of specialty include digital policy, intellectual property, privacy and the Internet. I appear today in a personal capacity representing only my own views.
As you know, the typical approach before a committee on bill study is to examine the bill, identify provisions to support and areas for amendment. In this case, at least for my areas, what really matters is not what is in the bill, but what's not. The most notable issues from a digital policy perspective, which obviously have significant implications for issues addressed by this committee, won't be found in Bill , by and large. Rather, they are found in CUSMA itself and they typically limit Canada's policy options for future policy reforms rather than require immediate legislative action.
This raises a significant challenge, since the flawed aspects of the deal can't be fixed in . Rather they require a change in a trade agreement that is largely presented as a take it or leave it deal.
I'd like to briefly discuss four issues along these lines, some of which could create costs that run into the hundreds of millions of dollars for Canada: copyright term extension, the cultural exemption, privacy and data protection and Internet platform liability.
I'll start with copyright term extension, and I know you heard about that earlier today. The IP provisions in the agreement raise some significant concerns, but none more so than the requirement to extend the term of copyright from the international standard of life of the author plus 50 years to life plus 70. The additional 20 years is a reform that Canada rightly resisted for decades under both Liberal and Conservative governments. By caving on the issue, the agreement represents a major windfall that could run into the hundreds of millions of dollars for rights holders and creates the need to recalibrate Canadian copyright law to restore the balance; for example, perhaps addressing some of the issues you heard earlier on digital locks.
The independent data on copyright term extension is unequivocal. It creates less access to works, higher costs for consumers and no incentive for new creativity. In the words of professor Paul Heald, one of the leading researchers on the effects of term extension, “it's a tax on consumers” with no obligations to benefit the public.
This committee's copyright review conducted an extensive review into the issue and recommended establishing a registration requirement to obtain the additional 20 years of protection, to mitigate against the disadvantages of term extension and increase overall transparency of the copyright system.
Term extension doesn't appear in because the government negotiated a 30-month transition period to address the issue. I think the government has rightly not rushed into term extension and we should be taking full advantage of the transition period to follow this committee's recommendation to establish a registration requirement for the additional 20 years. That would allow rights holders who want it to get the additional protection they're looking for, while also ensuring that many other works enter into the public domain after their term of protection expires after life plus 50 years.
Second, I'll turn to the cultural exemption. Much like copyright term extension, there is no reference to the cultural exemption in Bill . That's because the exemption doesn't require legislative reform. However, I'd argue that the exemption is one of the most poorly understood aspects of this agreement, at least in the areas I focus on.
Consistent with government claims, the cultural exemption covers a broad range of sectors with a near complete exemption for Canada. While the government has emphasized its broad scope, it rarely speaks of what the U.S. demanded in return, namely the right to levy retaliatory measures of equivalent commercial effect where Canada relies on the exemption. The retaliatory measures provision means the U.S. is entitled to levy tariffs or other measures that have an equivalent commercial effect in response to Canadian policies that would otherwise violate CUSMA, if not for the cultural exemption.
Since the provision does not limit the response to the cultural sector, the U.S. can be expected to target sensitive areas of the Canadian economy such as the dairy sector in order to discourage its use. That was the U.S. strategy recently when responding to a French plan to levy a new digital tax, which led to plans or threats to levy $2.4 billion U.S. in tariffs against French goods such as wine, cheese and handbags.
How could this play out in a Canadian context? The recent broadcasting and telecommunications legislative review panel report—the so-called Yale report—contains what I would view as many ill-advised recommendations on regulating the Internet and online news services such as news aggregators.
Should the government adopt the broadcast panel recommendations on content, the U.S. would have a strong case permitting retaliation with measures of equivalent commercial effect. Panel proposals that may violate the new trade agreement include requirements to pay levies to fund Canadian content without full access to the same funding mechanisms enjoyed by Canadian firms, licensing requirements for Internet services that may violate NAFTA standards, and discoverability requirements that limit the manner in which information is conveyed on websites and services.
I emphasize that I think this is bad policy that should be rejected. However, for the purposes of this review, note that the policy flexibility to enact reforms in this area is severely limited by the agreement, which establishes the possibility of retaliatory tariffs in the hundreds of millions of dollars.
Third, I'll address the digital charter and privacy. Limitations on Canadian policy also arise in the context of privacy and data protection. Unlike the cultural exemption, which permits violations of the treaty subject to those retaliatory tariffs, on the issue of privacy, Canada would run the risk of simply being offside its commitment under CUSMA.
Once again, there is no provision on point in —there's no need for one—because CUSMA prohibits certain privacy-related provisions, rather than requiring them. For example—and I know this came up in the previous panel—CUSMA includes a provision restricting data localization, which refers to measures requiring data be stored within Canada. It features a more restrictive provision than that found in the CPTPP. There are some general exceptions, but the Canadian government will be restricted in its ability to establish localization requirements under the agreement.
Those implications I think are far-reaching. Consider the wide range of policy issues with data right now: Canada's digital charter and its proposed privacy and data reforms, concerns about data sovereignty, AI-related issues and fears about the competitiveness of Canadian businesses in relation to Canadian data.
The Canadian government itself has established localization requirements as part of its cloud computing policy. Indeed, there is a recognition that data localization may be needed in some circumstances, yet under this agreement, Canada has limited its ability to regulate. The same is true on the issue of data transfers, as CUSMA also limits the ability to restrict them. As we enter into a discussion with the European Union about the adequacy of Canadian privacy laws, there are concerns that a data transfer provision could leave Canada between a proverbial privacy rock and a hard place, with the EU demanding certain restrictions and CUSMA prohibiting them.
Finally, I'll address Internet platform liability. A similar dynamic arises in the context of Internet platform liability, which raises the question of what responsibility lies with Internet companies for third-party content on their sites. The issue captures large players such as Google and Facebook, but frankly, almost anyone that offers user comments or content. There's no provision in on this either. Once again, the reason is that CUSMA restricts policy in the area, rather than requiring a new provision.
CUSMA includes a legal safe harbour for Internet intermediaries and platforms for content posted by their users. The rule is designed to provide Internet platforms with immunity from liability, both for the removal of content, as well as for the failure to remove content. Contrary to some claims, that does not mean that everything goes: sites and services are still subject to court orders and the enforcement of criminal law. Further, intellectual property rights enforcement is also exempted. However, some have now argued that the responsibility of Internet intermediaries should go further, with potential liability for failure to act, even in cases of harmful, albeit legal, content. I think that issue raises important freedom of expression concerns and questions about how we balance freedom of expression and speech with protection from harm.
The issue with and CUSMA is not to debate where Canada should land. The broadcast panel recommended liability for online harms, even if the content is legal. Others, including me, would argue that liability should rest with illegal content, but to create liability for legal content is to render Internet companies judge and jury over what remains online, thereby further empowering the large Internet companies, as well as limiting competition and freedom of speech.
The key point here is that there is a policy debate to be had, and under CUSMA, Canada has already committed to a position, one that restricts our ability to establish liability for third-party content.
I look forward to your questions.