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View Mark Eyking Profile
Lib. (NS)
Good morning, everyone. Welcome, you early risers.
Before we get into our pre-study here, I have a bit of a request. Colleagues, as you know, we're pretty close with the British and their trade committee, or their new-found trade committee, with what they're going through with Brexit and what they're trying to develop and what they're getting into with their own committee. They're very close to us and they visit us. They have reached out to me and they want to talk a little more, through a video conference, maybe. It will be very hard for us to do this in the next couple of days, with the time zones, but we can, if you want me to reach out to them.
Anybody from the committee is welcome to be in on that video conference, but maybe it should just be me and the vice-chairs, or whoever wants to be in. I'm going to try to pick a time within the next two days, and if it's good for you we'll do a video conference with them. They know our situation, that Parliament is winding down and they know the time difference. They just want to have a chat with us. I was thinking we could do that for a half hour. I think they want to get a feel on how our committee runs and what we're doing with our trade agreements.
Maybe the clerk could explain it a bit.
Brian Kingston
View Brian Kingston Profile
Brian Kingston
2019-06-18 8:35
Thank you, Mr. Chair and committee members. Thanks for the invitation to be here today to take part in your consultations.
As you know, the Business Council of Canada represents chief executives and entrepreneurs of 150 leading Canadian companies. Our members employ 1.7 million Canadians and are responsible for most of Canada's exports, corporate philanthropy and private sector investments in R and D.
It almost goes without saying that trade with the U.S. is critical to our prosperity. The Canadian economy depends on international trade, and the U.S. is by far our largest trade and investment partner. Trade of goods and services represents 64% of Canada's gross domestic product, with the U.S. being the destination for over 75% of our goods exports alone last year. As a result, the Business Council strongly supports CUSMA, NAFTA 2.0, USMCA—whatever we want to call it—and calls for the swift passage of Bill C-100, for the following four reasons:
First, it protects our market access. When these negotiations were first launched, we really had one overarching recommendation to government and that was “do no harm”. To avoid damaging employment, trade and investment, Canadian, American and Mexican businesses needed to retain their preferential market access and commercial opportunities in each country. By this measure, CUSMA is an overwhelming success. The resulting agreement is based upon reciprocal access and treatment, and no Canadian company will face new tariffs or other market access barriers into the North American market.
The second reason is the ability of this agreement to remove uncertainty from the economy. The ratification of CUSMA will eliminate significant trade uncertainty, which has persisted since these negotiations were launched. According to the Bank of Canada's recent monetary policy report, it is assumed that trade uncertainty will reduce the level of business investment in Canada by around 2.5% by 2021. Given that the U.S. remains a key market for Canadian firms planning to invest abroad, 65% of which were recently surveyed by EDC, we believe that reducing uncertainty in the relationship will be a significant boost for investment and the Canadian economy more broadly.
Third, the agreement modernizes NAFTA. CUSMA will improve the trade relationship by modernizing long-outdated elements of NAFTA. The agreement is based on the text of the TPP, which is our most modern free trade agreement. For example, it contains a chapter on digital trade that prohibits customs duties and other discriminatory measures from being applied to digital products. It also ensures that data can be transferred freely across borders. That's one example of the modern new chapters that were not in the original NAFTA.
Fourth, we believe that the agreement will enhance North American competitiveness. It includes important new provisions that will help Canada, the U.S. and Mexico develop a more productive and mutually beneficial trilateral relationship. As two examples, there are chapters on competitiveness specifically, and a chapter on good regulatory practices that establish committees meant to promote economic growth and strengthen regulatory co-operation. We're calling on the government to develop a robust agenda for these committees and start preparing immediately, so that when this agreement does come into force, we're ready to make progress in those areas.
Before I conclude, I want to comment on timing. Last week, a group of CEOs from the U.S., Canada and Mexico were in Washington to discuss CUSMA/USMCA, to meet with House Democrats, and basically to get a sense of how this is moving through Congress. The message was very clear: The window for ratification is closing extremely quickly. Once we get into the presidential elections of 2020, all bets are off, quite frankly.
Business leaders across North America support the swift ratification of this agreement to keep North America tariff-free, make the economy more vibrant and competitive, drive investment and support the creation of high-value jobs. We're expecting Mexico's Senate to approve the trade agreement this week. We believe that if Canada passes Bill C-100, it will send a strong signal to Congress that this agreement has support and should be ratified.
With that, thank you for the opportunity. I look forward to any questions.
Dan Paszkowski
View Dan Paszkowski Profile
Dan Paszkowski
2019-06-18 8:40
Thank you very much, Mr. Chair, for this opportunity to address the committee on the Canadian wine industry's perspectives on the new NAFTA agreement, also known as CUSMA.
The modernization or renegotiation of NAFTA was an unprecedented trade experience. Not only did Canada face a WTO challenge focused on U.S. wine access to B.C. grocery, but the U.S. wine industry also used this trade process to seek changes to almost every element of the original NAFTA, which could have been disastrous for the future of more than 700 wineries across Canada. As a nation, Canada is not only the world's fifth-largest wine importer by value and eighth by volume; it also ranks among the most attractive wine sales markets in the world.
With a growing wine culture across Canada, and a climate and soil in different parts of the country capable of producing world-class wines, the 2006 excise exemption that was established for 100% Canadian wines stimulated investment for more than 400 new wineries over the past decade. Further, it supported a significant demand for Canadian-grown grapes, which increased premium 100% Canadian wine production by 28 million litres per year. In 2018 this new and growing production contributed an additional $3.1 billion in annual economic impact to the Canadian economy, while supporting 37,000 jobs.
The NAFTA demands put forward by the U.S. wine industry were a David and Goliath scenario. With our future at stake, CVA maintained almost daily contact with the wine negotiating team at Global Affairs, providing every statistical detail and intelligence we could find while attending every round of negotiations to make sure our issues remained a top government priority. It was vital to get the record straight. By any metric, NAFTA has been a windfall for the U.S. wine industry, making it the number one wine importer to Canada, surpassing France and Italy, with import value increasing from $19 million in 1988 to $504 million in 2018.
As many of you will know, the changes implemented in the 1988 Canada-U.S. Free Trade Agreement were so significant that many did not think the Canadian wine industry would survive. To compete, we identified new grape varietals, replanted, invested in new technology and techniques, undertook viticultural research and created the VQA system. Today our premium wines represent a 10% market sales share across Canada, with a growing reputation in key markets around the world.
Given these significant changes that we have endured over the past 30 years, NAFTA has been less advantageous for our sector, with bottled wine export growth to the U.S. increasing by a mere $8.2 million, or 25,000 cases. Nonetheless, the U.S. remains a key export market, and we do see potential for growth. It's important to note that with imports owning 70% of the wine sales market in Canada, we continue to place the majority of our focus on growing wine sales at home. While we supported and welcomed free and fair trade with the U.S. and Mexico in the renegotiation, our key focus was to protect what was in the existing NAFTA while enhancing regulatory streamlining and modernization. This task was accomplished. CUSMA did not remove the benefits that were part of the original agreement dating back to 1988, and added the most comprehensive wine annex of any trade agreement negotiated anywhere in the world. We're happy with the wine-related text in CUSMA, and would support its ratification in lockstep with the United States and Mexico.
Having said this, it's important to remind all members of this committee that with CETA and CPTPP ratified and NAFTA renegotiated, 91% of wine imports into Canada now enter tariff-free. This is a major preoccupation for every wine producer in Canada, given that imports have captured roughly 75% of total wine sales growth in our country over the past decade. To take advantage of CUSMA, CETA, CPTPP and future trade agreements, we must support and protect the growth of Canadian wine sales both at home and abroad. For example, as of January 1, the Canadian Food Inspection Agency requires Canadian wineries to implement a prevention control plan to access a “certificate of free sale” to export our wines, a major and costly undertaking for small and medium-size wineries for a low-risk food product. The proposed amendments to the “Product of Canada” label claim will require 85% Canadian content, yet we accept the 75% threshold for “Product of U.S.A.” For more than a decade, Canada has permitted EU, U.S. and other World Wine Trade Group country wines to enter Canada using additives and processing aids not permitted for use by Canadian wineries. Canada must accept the scientific evidence from these countries to fast-track approval to ensure that Canadian wineries have access to the same wine-making tool kit.
Agri-food marketing program funding in Canada is restricted to export promotion, but cannot be used for domestic promotion, where Canadian wineries face our largest competition. Prohibition-era restrictions remain in seven of 10 provinces, and restrict direct-to-consumer wine delivery across provincial borders.
These issues must be addressed in the short term, to ensure we can take full advantage of CUSMA.
In addition, it's absolutely critical that the government focus immediately on resolving Australia's WTO challenge against Canadian wine measures. With the WTO dispute settlement panel well under way, a negative outcome would risk not only the benefits negotiated under CUSMA, but also place at risk 700 wineries from coast to coast, threatening jobs and investment in the future of Canada's highest value-added agricultural industry.
Numerous times the Australian government has publicly stated that it's open to finding a non-WTO resolution with Canada. The Australian wine industry has informed me that a resolution is possible, if Canada offers to remove the legislated annual inflation indexation of the wine excise duty implemented in budget 2017.
The Australian government has also alluded to its disappointment with legislated indexation in its recent WTO submission. What is clear is that the offer to repeal would likely end the WTO challenge. This would not stop the federal government from making future adjustments to the excise duty. It would simply return any decision on future excise duty increases to a vote in Parliament, as part of the budget implementation act process.
In conclusion, we fully support the passage of Bill C-100 and the ratification of CUSMA. However, if the Government of Canada does not offer to repeal the legislated annual excise duty indexation as part of a non-WTO negotiated settlement, we fear that the Canadian wine industry will lose not only the benefits we earned in CUSMA, but additional federal and provincial measures, which would place thousands of jobs, and hundreds of wineries, in every region of this country, at risk.
Thank you, Mr. Chair.
Mathew Wilson
View Mathew Wilson Profile
Mathew Wilson
2019-06-18 8:47
Good morning, and thank you for inviting me here, on behalf of Canada's 90,000 manufacturers and exporters and our association's 2,500 direct members, to support the ratification of Bill C-100 and the Canada-U.S.-Mexico trade agreement.
I would like to thank the Prime Minister, Minister Freeland, the chief negotiator and all of their staff, for their efforts negotiating CUSMA.
Being part of the process, we understand how difficult these negotiations were, and also how critical the outcomes were for Canadian businesses and all their employees. The negotiations were important because CUSMA is not simply another trade agreement. North American trade is the basis on which Canada's manufacturing sector and its 1.7 million employees operate. It is why the Canadian manufacturing sector is responsible for more than two-thirds of Canada's exports. It is how the sector competes against the rest of the world, at home and in foreign markets. It is critical to our future and current success.
As such, CME fully supports the ratification of this legislation, and urges the government to ratify the deal as soon as practical. The primary reason for immediate ratification is based on the opening statement. It is the foundation for modern manufacturing in Canada. CUSMA preserves the integrated manufacturing operations that allow the relative free flow of goods and services between the three markets, and that collectively build products for sale domestically and internationally. Going into negotiations, our members made it clear that the primary objective must be to do no harm to this integrated manufacturing in our economy—which has happened.
We believe CUSMA preserves many of the key elements to the original NAFTA, which were targets of the U.S. for elimination, not the least of which are the dispute settlement mechanisms and the business traveller visa exemptions.
Aside from preservation, CUSMA updates several key areas of NAFTA to bring it into the 21st century. For example, the new digital trade chapter recognizes that the Internet now exists—something the old agreement obviously didn't—and establishes a framework for e-commerce within North America. The customs administration and trade facilitation chapter will also go a long way to modernizing customs procedures throughout North America, better enabling the free flow of goods.
Last, my colleague touched on chapter 26, the new competitiveness chapter, which has not garnered much media attention, but is, in our estimation, one of the biggest accomplishments of CUSMA. It will set up a framework to allow the three countries to become a coordinated trade bloc. It will do this by promoting better coordination and integration of our manufacturing industries, so that we can tackle global trade challenges together. This is a significant accomplishment.
As CUSMA courses its way through each of the three countries' domestic ratification processes, we believe we should immediately get to work on implementing parts of the agreement 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 outlined in the agreement. This would show Canadian leadership, signal to our other partners that we take CUSMA seriously and enable us to hit the ground running, once all three countries ratify the agreement.
In the final analysis, CUSMA is a good deal for Canada, and, given the very challenging negotiations, an impressive achievement. Now that the unfair and punishing section 232 tariffs on Canadian steel and aluminum have been lifted, we urge the government to move forward with ratification as quickly as practical.
Thank you, and I look forward to the discussion.
Roger Pelissero
View Roger Pelissero Profile
Roger Pelissero
2019-06-18 8:50
All right. I like that.
Thank you, Mr. Chairman and committee members, for having us here today.
My name is Roger Pelissero. I'm a third-generation egg farmer from St. Anns, Ontario. Joining me today is Judi Bundrock, who is our director of international trade policy.
Egg Farmers of Canada is here to share our perspectives on the possible ratification and implementation of the new North American Free Trade Agreement, NAFTA, known here in Canada as CUSMA. I refuse to refer to it the way the Americans do. It's Canada first, then the U.S. and then Mexico. That's the way the countries line up, so CUSMA it always should be.
Egg Farmers of Canada manages the national egg supply and promotes egg consumption while representing the interests of regulated producers from coast to coast. There are over 1,000 egg farmers in this country, located in every province and in the Northwest Territories, which are dedicated to producing fresh, local eggs. In fact, surveys conducted by Canada's top polling firms confirmed that over 88% of Canadians say it's important that they purchase eggs that come from Canadian farms, and 89% of Canadians say they trust the quality standards of foods from our Canadian farms.
We understand the importance of trade agreements for Canada. Our sector has never opposed Canada entering into such free trade agreements. However, our members are disappointed with the outcome of the recent CUSMA. Canadian egg farmers are particularly discouraged with the access granted to our U.S. counterparts, since no specific request was made by the U.S. egg farmers for additional market access for eggs into Canada. In fact, they sent a letter to the United States Trade Representative indicating they were happy with the status quo and the current NAFTA agreement. While Canada's supply management system remains in place, CUSMA further opens up our domestic market to egg imports. This will have a lasting impact, particularly on our young farmers who are making a start in the industry, and on the vast majority of Canadian consumers who prefer to purchase Canadian eggs.
Our primary concern is the increased market access for eggs. The final CUSMA agreement grants the addition of 11.05 million dozen eggs per year at the end of a 16-year implementation period to the United States. These concessions, which are in addition to the requirements under the World Trade Organization and the recently announced comprehensive and progressive agreement for the trans-Pacific partnership, mean a total of 51.4 million dozen eggs will come into our country from the U.S. and other parts of the world. Let's not kid ourselves. It'll be the U.S., because it's very hard to transport eggs. They're a fragile product.
The combined impact granted in these recent trade deals is equivalent to 7% of our current domestic production. This represents the entire annual production from the Atlantic provinces in Canada. That would be all of New Brunswick, all of Prince Edward Island, all of Nova Scotia, and Newfoundland, each and every year, or the per capita consumption of eggs of 2.5 million Canadians per year, forever. They would not have access to Canadian eggs. This outcome will affect generations of Canadians and will result in billions of eggs that my fellow farmers and our children will never be able to produce. It will also affect the health and continued viability of rural communities across Canada that rely on our farms for much-needed jobs and support other businesses in the communities.
Most recently, we were pleased to see that the federal budget included measures for Canadian poultry, egg and dairy farms. With the announcement, the government has taken significant steps to recognize the challenges our farmers face as a result of trade agreements. These measures also recognize the vital contributions of the supply-managed farming sector to the health and stability of Canada's rural communities.
Over the past few months, I have been engaged in dialogue with the poultry working group along with my poultry colleagues. We are very much looking forward to Minister Bibeau's report outlining the mitigation measures for the CPTPP agreement in the coming weeks. Looking ahead, we are also pleased with the government's commitment to engage in further discussions to address the impact of CUSMA on Canadian farms and our industry.
While the process to finalize the CUSMA legislation continues here in Canada, and the U.S. and Mexico work towards ratification, it is important to note that how trade agreements are implemented domestically is just as important as the agreements themselves. In the case of eggs, the administration of the tariff rate quota, the TRQ, must not disrupt the existing competitive landscape and investments in the Canadian egg industry. We're particularly concerned about the provision specific to eggs which states that 30% of the import licences for shell eggs will be made available to new importers. This provision was not included in the CUSMA for any other supply-managed commodities. In our view, the TRQ should be allocated exclusively to those who are negatively impacted by the opening of the Canadian egg market to foreign producers.
In closing, we would like to point out that we are following the WTO activities as well as the Canada-Mercosur free trade agreement closely. We anticipate that these talks will continue to intensify throughout the year, and it would be our intention to remind our government that Canada's system of supply management and the food security of our communities should not and cannot once again be used as a bargaining chip in the negotiations. This goes beyond supporting supply management.
It's time for our Canadian government to start defending the system that delivers so many benefits to our farmers, communities, rural communities and fellow Canadians, because in the end, it's not just the stability of our farms that's at stake but also the ability of our rural communities to thrive.
I thank you for the opportunity to bring our views here today. I look forward to your questions.
View Dean Allison Profile
Thank you, Mr. Chair.
To our witnesses, as our chair mentioned, thanks for coming on such short notice.
I have three questions. I have a lot more, but maybe I'll get three questions in.
Mr. Wilson and Mr. Kingston, just give me your thoughts. You guys talked about being in the States recently. Where do you guys feel the Democrats are after having those conversations? The sense we get from reading the paper is that they're nowhere close. We appreciate the importance of getting this thing ratified, but the challenge is that it doesn't appear that they're anywhere near.
What arguments can be made to say that the Democrats want to give Trump a victory on this thing? Do you have any thoughts on that based on your conversations with Democrats?
Brian Kingston
View Brian Kingston Profile
Brian Kingston
2019-06-18 8:57
We met with a number of House Democrats, particularly those on the ways and means committee, who are looking at this right now. I was surprised, frankly, with the encouraging messaging. They seem to be genuinely trying to, as Speaker Pelosi has said, get to yes. When we were there, of course, the Speaker announced the four working groups looking at labour, environment, enforcement and IP.
It's strikes me that the measures and the efforts they're putting into this are genuine. They truly do want to approve this deal, but they have to find ways to address some of those outstanding issues. Importantly, labour has not come out and endorsed it, despite the President saying a few times that they have. The AFL-CIO has not endorsed fully.
I think the wheels are in motion to approve it. Where I'm worried is on the amount of technical work that needs to be done between now and July 26, when the August recess starts. There is a lot of work to be done, and I think that even if they really want to get to yes, it's going to be difficult to get it done in that time frame. If they miss that, then the next window is in the fall, and I think there's a real chance....
I'm still very much an optimist. I would not rule out it being done before August, but I think that more realistically it may happen in early fall.
View Dean Allison Profile
I get it. They're saying they'll get there, but they want to make a sea of changes. The challenge with us getting too far ahead of this thing is what changes they want. I could ask more questions on that, but I have to get to the eggs and the wine.
Mr. Pelissero, just to recap, on access you talked about an additional 11 million dozen eggs and 51 million under the WTO. Do we get reciprocal access to the U.S. based on that?
Roger Pelissero
View Roger Pelissero Profile
Roger Pelissero
2019-06-18 8:59
We do ship some egg product to the U.S., but under supply management we basically focus on the domestic market.
When you're competing against the average-sized farm in the U.S., where you have 50 farmers who basically own 330 million birds, you're competing against a farm right now that has maybe 25 million hens. Here in Canada the average-sized egg farm is 25,000 birds. It's a vast difference in scale. However, we will look at some of those things because of the trade agreements that aren't in the tariff lines, and we look forward to possibly shipping some product to the United States.
View Dean Allison Profile
Okay, good.
I only have two minutes left. The time goes by too quickly.
Mr. Paszkowski, I understand that you guys are saying you support CUSMA, in terms of how it is. The challenge you have is around the WTO challenge right now with Australia. As you said, we've seen over 400 wineries grow in the last decade or so, since we had a chance to look at VQA being excise-free.
Talk to us about the concern. This is a legitimate concern about what may happen under WTO in terms of our wine market. Explain that one more time.
Dan Paszkowski
View Dan Paszkowski Profile
Dan Paszkowski
2019-06-18 9:00
The concern we have with the WTO challenge is that they have come after us on a number of different measures, both federal and provincial, but they've clearly stated to us that there are three measures that are of significance to them. Number one is getting access to grocery in British Columbia. British Columbia has now offered them a letter that will take place and that follows suit with the side letter that is in CUSMA. The second piece would be access to grocery in Ontario. As all of you know, the Ontario government is amending its liquor system and will provide access for wine and beer sales in grocery and convenience stores, so we're currently waiting for the Ontario government to provide a side letter to Australia. We anticipate that will be coming soon. The third part of the equation, which the Australian industry has told us, is that if the federal government repeals simply its legislative portion of the excise exemption, they would drop the WTO challenge in its entirety.
It's critical to us to have that dropped because there's a lot of risk going through a panel process, which could devastate the industry. As I said, all of the things that we have protected in CUSMA would be lost if we were to lose a WTO panel, so it's a significant risk for us. We're hopeful that the federal government will take our advice and offer that to Prime Minister Morrison when Prime Minister Trudeau meets with him at the G20 meeting at the end of this month. That would bring this panel to an end.
View Karen Ludwig Profile
Lib. (NB)
Thank you, Mr. Chair.
Thank you to all the witnesses who are here today.
Mr. Wilson, as you well know, my riding is New Brunswick Southwest, which borders the state of Maine. I'm wondering if you could speak directly to the impact, opportunities and maybe challenges that the ratification of CPTPP, CETA and soon to be CUSMA have and will have for Atlantic Canada.
Thank you.
Mathew Wilson
View Mathew Wilson Profile
Mathew Wilson
2019-06-18 9:02
I think that, in your riding, companies like Irving, for example, are pretty significant employers. Obviously, they don't operate just in New Brunswick. They have massive operations across New England and in the border states. They move products back and forth constantly, whether it's timber coming into processing plants in New Brunswick to make paper towels or timber going back into the United States to make other products, plus a wide range of different consumer products that they're making. Anything that can modernize and streamline those operations to reduce by even a fraction of a percentage the movement of each one of those goods across the border.... You're talking about thousands of trucks a month that are crossing the border just for one company alone. If you can remove even a fraction of those costs for them, it's a significant cost savings that gets passed on to the consumer and allows the companies to invest more in their operations in Canada and the United States. That will be hugely important.
A lot of people think that we have to go to Europe and to Asia, and trade diversification certainly is really important, but for most Canadian companies—look right across the country and at a lot of small companies—very few of them even export. Only about 5% to 10% of Canadian companies export. While it's great to look at markets like China and Europe and the CPTPP, those are great markets but the U.S. is the best market to go to. It's the wealthiest market in the world. It's right next to us. In your riding, it's within a couple of footsteps across a bridge that I've crossed several times. We can't forget about the importance of that market.
As part of this agreement and what we're trying to do, and similar to what some of the other witnesses here said, this isn't just about building on, allowing the Irvings and companies like that to do more business. It should be about how we help more SMEs get into the U.S. market. That's why things like the SME business chapter and growth chapter—they're in the new CUSMA—can help those companies, whether they're Irvings or small chocolate factories that are right on the border with Maine.
View Karen Ludwig Profile
Lib. (NB)
I'll just add to that, Mr. Wilson.
This committee has studied the small to medium-sized enterprises, how to make trade real for them and also how they could take advantage of that.
When we were in Washington on the steel and aluminum tariffs, one of the messages that definitely resonated with me was when one of the members of Congress said that with regard to President Trump, his sensitivity is, similar to our egg farmers, leaving people behind. So, anytime we can pull people forward, I think that's an important element.
You mentioned the business traveller visa. If any one of you would like to speak to that as well.... What are the benefits of the reduction in red tape for the business traveller, considering how integrated our market is in North America?
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