[Translation]
Dear friends and colleagues, thank you for being here today.
[English]
I want to start by thanking our officials who are here: our deputy minister, our chief financial officer, and our chief negotiator on Mercosur. I'd like to thank them for their hard work and for also supporting us this morning in providing answers to all the questions of the members.
If you will allow me, Chair, I'll make a very brief statement and then take questions from the members.
[Translation]
I am pleased to be here this morning to discuss with the committee a possible free trade agreement between Canada and Mercosur, an economic bloc consisting of Argentina, Brazil, Paraguay and Uruguay.
I would like to take this opportunity to highlight the committee's excellent initiative in undertaking this study.
As you know, the government strongly believes that the global economy should enable the free flow of products, services and investments according to clear and transparent rules. This is essential for the economic prosperity and well-being of Canadians across the country.
Mercosur, with a population of over 260 million and a combined GDP of over $3 trillion, is an emerging market that is currently difficult for our business people to access. I think the committee has heard from stakeholders on this.
Historically, the Mercosur bloc has been less ambitious than Canada in its trade agreements. It has mainly concluded agreements covering only goods.
Over the past year, Canadians interested in this proposed agreement have shared with us their priorities for negotiations, some of which were brought back before this same committee.
Given its growing middle class and continued development of its services and infrastructures, Mercosur represents a myriad of opportunities to expand and develop our modest bilateral trade relationship, which stood at $8.9 billion in 2017, with Canadian exports of $2.3 billion and imports of $6.6 billion.
That said, simply eliminating tariffs will not be enough to realize the full potential of our trading relationship.
Canadian exporters would all tell you that access to a foreign market must be stable, efficient, transparent and, of course, predictable. No SME could or would run the risk of exporting its goods to the other side of the world to be delayed at customs, or of investing significant capital to gain market share in countries where technical barriers to trade abound.
[English]
Our government understands this and is ready to act.
The free trade agreements we are negotiating are not for the sole benefit of companies, whether they be big or small. Our agenda is specifically designed to bring more people into the equation and to give them the tools necessary to compete and win. As Canadians, we know that when we have a level playing field we know how to win. That's part of the Canadian spirit.
More than anything, small and medium-sized enterprises, the main job creators in Canada and the backbone of our nation's economic growth, need to benefit from the free trade agreements. We will negotiate a dedicated chapter on SMEs with Mercosur to guide co-operation between us, to share best practices, and to make information available and, above all, easy to access for small and medium-sized businesses.
I know that this committee has been hearing from a lot of people, but you will always hear me, Chair, talking about how we can make trade real for people, and how we can make trade real for small and medium-sized companies, which definitely need access to this market. We will also work together to raise awareness of the opportunities and the support available to those small and medium-sized businesses across our nation.
Women entrepreneurs, whose businesses mainly operate in the service sector, would benefit from an FTA that increases the predictability that their nationality and/or their gender will not be discriminated against when they engage in international transactions, such as, for example, when applying for permits or licences to provide their services on a cross-border basis.
Guided by the principles and objectives embedded in our progressive trade agenda, our potential free trade agreement with Mercosur will seek to ensure that all segments of society, including those traditionally under-represented—whether they are women entrepreneurs, our youth, indigenous people, or people from the LGBTQ community—will be able to take advantage of the opportunities and benefits created by the agreement. As I said in other fora, I want to make sure that everyone has a seat at the table.
Our government's approach is to ensure that increased trade and investments create opportunities for more people. That applies across the nation. We should be making sure that people in each and every riding in this country can benefit from what we're doing.
The status quo and the old approach to trade are no longer acceptable. We've seen good examples of that very recently. As I often say, trade should be a march to the top, not a race to the bottom. People have given us a broad mandate to engage in trade, but not at the expense of labour standards, environmental laws, or governance principles. Quite the opposite, Canadians expect of us that every time we engage, we raise the bar, whether it's about labour standards, governance principles, or environmental standards. That's how we're making a difference in the world.
At the same time, this initiative presents a strategic opportunity for Canada to further our political relationships and progressive trade agenda with a group of countries that we all know is increasingly looking to play a key role in that very important part of the world. It also supports these countries' efforts to promote good governance and build a better economic future for their citizens.
When I announced the launch of the FTA negotiations with Mercosur counterparts in Paraguay on March 9, we all agreed to work towards an ambitious, inclusive, and progressive FTA. As a matter of fact, I can confirm to you that we already started discussing—thanks to Ana, our chief negotiator—labour, environment, gender, indigenous peoples, and issues with small and medium-sized enterprises at the first round of negotiations, which was held here in Ottawa on March 20 to March 23. I had the chance to meet the chief negotiators from all of the countries and to try to inspire them to make to a difference.
In fact, my very first meeting after launching the negotiations in Paraguay was with trade union representatives. I must thank the Canadian Labour Congress for facilitating those discussions. I will say I was pretty proud, Mr. Chair, to be one of the first ministers of a foreign government to take part in these negotiations. We announced at the start of the negotiations that we would meet with civil society and labour unions. I did this in Paraguay, and I did it in Argentina before, engaging with labour and making sure that in these agreements everyone would be heard, because everyone deserves to be heard.
Back then, I also encouraged negotiators on both sides to consider innovative ways to make this FTA more ambitious and more progressive than any previous agreement negotiated by Canada or Mercosur. I wanted us to create, in other words, the new gold standard of agreement for the South American region. With Mercosur, we aim to secure a comprehensive, progressive, and inclusive FTA that will serve to diversify our markets and capture emerging opportunities for Canadians for decades to come.
In conclusion, this is the long-term vision we have with respect to Mercosur.
[Translation]
I would like to thank the committee for inviting me to appear today. I will be pleased to answer your questions.
:
Thank you for your kind words. I always try to be accessible despite all the travel, as some colleagues know.
I call it the diversification imperative. When I took the portfolio, the first thing was obviously realizing that the U.S. will always be our largest trading partner. More than 70% of our exports go to the U.S. because of the proximity of the markets and, obviously, the size of the U.S. economy.
At the same time, I think that Canadians now understand more than ever that Canada represents 0.5% of the world population and about 2.5% of global trade, so opening markets is just a smart thing to do. That's what we've done in Europe with CETA. As you know, on September 21, this agreement came into force, opening up a market of 500 million consumers and making $3.3 trillion in public procurement available to small and medium-sized businesses in Canada.
At the same time, we looked at the Asia-Pacific region, and the CPTPP for me was a way for Canada to write the rules of trade in the Asia-Pacific for the next couple of decades. That's pretty astonishing if you consider that, in the CPTPP, Canada is the second largest economy after Japan. We have been a key actor to make sure our progressive elements would be incorporated. If you look at the 22 suspensions, you will see Canada plays a leading role to make sure we rebalance the agreement in favour of, for example, the intellectual property rules we have in Canada, and with respect to culture, the environment, and labour. I think this is a great achievement for Canada.
At the same time, obviously, we're looking at the Pacific alliance, which includes the countries of Mexico, Chile, Colombia, and Peru. We already have FTAs with them, but we're trying to improve them, to modernize them for the 21st century.
With respect to Mercosur, if you took Mercosur as a bloc, that would be the fifth largest economy in the world, about 260 million people.
I think what we're doing is looking north-south and east-west to make sure Canada has preferential market access. I think this is a key differentiator. I can tell you that when investors talk to me, they do look at these agreements to see how they can access these markets. At the same time, it's our way to move the needle with respect to progressive trade. We did that with Israel, as you may have seen recently, modernizing the FTA and having the first ever gender chapter in the world that is subject to dispute resolution.
At the same time as we're expanding, we're moving the needle and making sure trade is in line with the values of Canadians and ready for the 21st century.
:
Well, that's a disappointing answer. I hear more people in my riding talk about concern about government abusing time allocation than I do people saying that TPP enabling legislation has to be passed by a certain deadline.
We'll have to agree to disagree on that, but I was hoping to get a commitment here today.
I'm also wondering why it is that workers should feel that they can trust your government when it comes to defending their rights in trade agreements. My understanding is that prior to the election of Donald Trump, you were meeting with representatives from the building trades who were highlighting important problems with chapter 12 of the TPP. The line at that time was that you agreed very much, but geez, it was too bad that the TPP was already negotiated and was a done deal. Then there was an opportunity to renegotiate TPP, and chapter 12 didn't change.
Chapter 12, of course, reproduces a lot of the worst abuses of the temporary foreign worker program. It's going to allow companies to bring workers in under all sorts of categories without any vetting, tracking, or standards assessment by Canadian governments, whether provincial or federal.
I'm wondering why it is workers should feel that they should trust you when you, at one point, or your government, certainly, were admitting the problems with chapter 12, and then completely passed up the opportunity to do anything about them when the negotiations for CPTPP came around.
:
Thank you for the question.
Ms. Renart will be able to speak to you in more detail about our meeting with the negotiators, but when we started negotiating, our basic principle was to have an ambitious and modern agreement that would serve as a model. We didn't just want to replicate what already existed, but to try to establish a progressive model agreement in South America that would set the tone. That is sort of what we have done in the case of the free trade agreement with Europe, the CETA, with regard to the chapters on the environment and labour law, for example. We have done the same about corporate social responsibility and the rules that will govern SMEs. In other words, we want to have an agreement in this part of the world that will incorporate the best elements that have been developed in international agreements.
The underlying objective is that everyone, both trade unions and civil society, feel that they are part of this effort to set the tone.
For example, Uruguay is a very progressive country. It was the first country in the world, along with Chile, to have a free trade agreement that included a chapter on gender equality. Canada was the second country in the world to do so, thanks to the Canada-Chile Free Trade Agreement. Now we want to inspire other Mercosur trading bloc countries to adopt the same practices. This would not only make it possible to have an agreement that meets the demands of civil society there, but also to set the tone.
As I said earlier to our colleague Mr. Blaikie, it was a great first to meet the unions and civil society from day one. As you can imagine, it was a great first for Paraguay that a minister from a foreign government met with the unions on the first day. It was the same thing in Argentina. It set the tone. Of course, these people talk to their national elected officials. In my opinion, the circumstances were right for this part of the world to have one of the most progressive agreements.
:
Thank you for the question.
Yesterday I returned from the OECD/World Trade Organization ministerial meeting, which was held in Paris over the last few days and where tariffs were announced. I can say that Canada has had a strong response to this very bad decision by the United States. Beyond disappointment, the reaction of global partners was to feel that the global economic order was under threat. In Paris, there was a rather serious feeling that, for the first time, national security was being used to promote protectionism. Obviously, this caused some emotion among the partners.
Canada and the European Union have worked together to send a clear message to their allies and partners to the south. Canada is not the problem; it is part of the solution.
As I have often said, a decision made on one side of the border will have repercussions on both sides. Let's take the aluminum issue as an example. Three major aluminum producers have plants on both sides of the border. Of course, what is rather unusual in the case of Canada and the United States is the integrated nature of supply chains. That's why the Canadian exception, as I call it, is unique: there are no other economies that are as integrated as ours. That's why Canada had a very strong response and argued that these tariffs would have an impact.
The retaliatory measures taken are the most significant since 1930, since the Second World War. In my opinion, the message is quite strong and it is certainly clear: Canada, while being an ally and partner of the United States, certainly cannot understand being charged rates based on national security.
In the steel sector, the Americans have a $2 billion surplus. Canada is the largest purchaser of American steel. Obviously, the whole issue of national security has no place in a discourse between Canada and the United States. The message we sent is that we will always be there to defend the industry and our workers.
We have invested nearly $30 million. A few weeks ago, the announced, to ensure or reaffirm the integrity of our border and our market, the addition of some 40 officers at the border to ensure that no steel or aluminum transshipments are made in Canada. Obviously, we will continue to work to protect our workers.
This is a very important industry in Quebec that, as I recall, represents 8% of exports. Yesterday, I attended the Aluminium Summit to reassure our partners that we will work together and will always be there to defend their interests.
:
That's a very good question, and I thank you for that.
I did meet with a number of people in the sector. We consult regularly, as you would expect. It's about the auto workers, and it's a very significant industry. The good thing you will know is that and I belong to the same department, so we're joined at the hip. Our deputy ministers serve both ministers, so whatever we do on one track is very well coordinated with the track on NAFTA. Those are separate tracks, but I appreciate the views you express.
What I would say is that what we've achieved in the context of the TPP negotiations is this side letter, which I think gives Canadian auto manufacturers the greatest market access ever in Japan. The good thing with that is also that it's subject to an evergreen clause, so whatever Japan would grant to any other country, Canada would benefit from. This is to address non-tariff trade barriers. It's not about tariffs; it's about making sure that the non-tariff trade barriers would be addressed with respect to safety standards in particular.
We have negotiated a pretty lengthy letter. It's more than 10 to 15 pages, if I recollect, in terms of trying to achieve the outcome. That was one of the outcomes, not the only one, but one of the outcomes that the auto sector had wanted from us. As a result, that would give the greatest market access we have ever achieved with respect to the auto sector in this important part of the world.
We also have one side letter, as you know, with Malaysia and Australia to make sure that we can get access to these two markets, despite the fact that they might not meet the rules-of-origin content required. We're going to continue. I think for us, to be honest, to be part of that first group of countries.... Why I was saying that ratification is essential is that, as you know, other countries have expressed the will to join, and having Canada in that first group of countries, making sure that the terms of trade in that part of the world take into account Canada's interests, is key. We're going to be continuing to work to perfect that and to work with the auto sector.
:
Indeed, I had a very fascinating tour of their facility there, looking at innovation and at how they contribute to all the innovation. I met with Magna's senior management.
By the way, Chair, let me just thank the committee for their work. When you meet people internationally and you come back with that feedback, it's very informative. We're trying to get as many data points as we can to inform our course of action.
The main discussion was really around Mercosur. They see particularly Brazil and Argentina as very attractive markets for the auto parts manufacturers. They see a lot of export opportunities. Obviously, they were sharing with me some of the non-tariff trade barriers they're facing, and were asking us to try to address them. These are very important markets. We know that. Our bilateral trade with Brazil is around $6 billion. Those are quite significant markets.
As we look at the uncertainty in some established markets, the opportunity or the possibility to expand in new markets is becoming quite relevant. To go back to the question from our colleague, I think you see people looking more and more to other markets as they see how the global trade environment will evolve with, for example, the section 232 investigation just recently launched on the automobile sector.
I think what you find from people in this sector is “eyes wide open”. They're looking at all opportunities that may present. We did talk about a number of issues around customs procedures, taxation, trying to facilitate that, and the willingness for them to invest more if they could get the certainty and predictability in those markets. Overall, I think the sentiment was encouraging us to push further in these negotiations and to try, I think like everything in trade, to be first. We need to open markets.
To go back to our colleague's question, whatever uncertainty may exist, when you open up new markets and you provide certainty, that's what business is looking for.
:
I think there are two parts to your question.
First, how can we help SMEs take advantage of the trade agreements? My famous phrase is that's about converting paper into jobs and prosperity. I think we all have a role. In particular, I think of the members of this committee. We should, if I may, always encourage you to talk about that. We signed CETA, which came into force. We now have the CPTPP. We're looking at Pacific alliance and Mercosur. We did Ukraine and Israel. There is still a lot of work to make sure that SMEs across Canada take full advantage of these agreements.
When it comes to FDI, clearly we created Invest in Canada because we wanted to be best in class, understanding that today's world is very dynamic. We know that we have organizations at the municipal level and at the provincial level that we're somehow trying to attract. As I keep saying, it's like when we go to the Olympics: we all put on the same jacket, the one with the maple leaf on the back. This was to have an organization that would coordinate the efforts being made by everyone to attract more, to have signature events, for example, and to make sure that we offer a concierge service. I keep telling investors to think of me as their concierge in Canada. But I'm not the only one. We have a concierge service to make sure that when they come, they can navigate through the different things, whether it's federal, provincial, or municipal.
This is the thing: we are in competition with a lot of people. When I go abroad, I make sure to talk about the superclusters. It's a great announcement. It's a great action we did. It's a great thing that Canada is investing in these things, but we need to make it known around the world. That's why you see artificial intelligence becoming the buzz term. I was at the C2 in Montreal and I was with Samsung Electronics at their hub in Toronto. We need to make these things known, whether it's on the Atlantic coast with ocean technologies or it's the other superclusters.
:
I will just say that we'll quote you on that when we refer to it.
What I can say is that, with respect to agricultural products, we heard from stakeholders who want us to open markets, for example, the pork industry. If I look at cereals and grains and animal feed, people want to export. We know that the tariffs are high. Our job is to make sure we open markets.
To your point, people understand that when you have a team, different people on the team work on different things. As for my goal, it's not about me; it's about Canadians, about your constituents. When we say we have preferential market access to 1.2 billion consumers, that's what makes the difference.
I agree with you. It may not be the largest trade bloc, but it's the fifth largest in the world. Somehow, I think, for Canadians...either we stay home and say we're satisfied with what we have...but you can't blame me for being ambitious and always trying to find a new market for Canadians. If I look at people in your riding, in particular, whether it's machinery or equipment, whether it's auto parts, whether it's forestry we're talking about...I come from a rural background. If you were to say this to the guys in the forestry sector, they would probably take exception to that because they want to expand markets.
It's not about me; it's about us. It's about Canadians. My job is to make sure we open as many markets as possible. With the deputy minister, and Ana, I think we have enough people to do all that at the same time, and I think we should all cherish that. It's not a political statement. As I said, we represent 0.5% of the world population.
:
First of all, thank you for your kind words.
With respect to CETA, you're quite right. In terms of lobster, we were faced with a 25% tariff. Whether transformed or frozen, it came down to zero over three years. You can see that this is really making a difference in the lives of families, workers, and fishers.
Some of the Mercosur countries are big exporters of fish and seafood. I think the reduction of tariffs should allow them to gain access to a market that today is not really accessible, to come back to Mr. Blaikie's comment. Every time you reduce tariffs and try to make Canada more competitive, you provide an opportunity. That's what we've done in Europe. That's what we're doing in Asia-Pacific. That's what we're doing in South America. I can say in front of this committee that we'll always look for opportunities to expand markets.
I keep coming back to this. If you're 0.5% of the world population and 2.5% of global trade, you need open markets. That's why, at the WTO this week, we were leaders. To your point, Mr. Blaikie, Canada was a leader in talking about reform and modernization of the world trade order. We depend on open markets for our current and future prosperity. I think we have the wherewithal. We have the civil service. We have all the experts needed to do all these negotiations at the same time and make sure we open markets.
With respect to fish and seafood, I think you will see positive news coming. The officials were telling me that the tariff we're facing currently is about 16%. So you start saying that if we can reduce or eliminate these tariffs, somehow we will become competitive. To Mr. Blaikie's point, you see that in the CETA on the fishery sector in Atlantic Canada. I think you know that better than I do, Darrell. It's really making a difference in the lives of families in this season and for the future.