EVIDENCE

Standing Committee on International Trade NUMBER 008 1st SESSION 43rd PARLIAMENT Monday, February 24, 2020 Le lundi 24 février 2020 Standing Committee on International Trade CANADA [Recorded by Electronic Apparatus] EVIDENCE February 24, 2020 Committee NUMBER 008 NUMBER 008 NUMÉRO 008 08 24 02 2020 2020/02/24 15:30:00 House Of Commons Comité permanent du commerce international Standing Committee on International Trade CIIT Chair The Honourable Judy A. Sgro 1 43

(1530) [ English ]

The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)) :

I'm calling to order this meeting of the Standing Committee on International Trade. Pursuant to the order of reference of Thursday, February 6, 2020, we are studying Bill C-4,

an act to implement the agreement between Canada, the United States of America and the United Mexican States. Welcome to all of our witnesses and to committee members. We're about to start another week of consultations. If we can get another 20 hours of consultation.... I'm glad to see that all our members are still anxious to keep going. I'm glad you're all here. As an individual, we have Wietze Dykstra. From the Canadian Federation of Agriculture, we have Mary Robinson, president, as well as Robert Friesen, trade policy analyst.

From the Canadian Vehicle Manufacturers' Association, we have Mark Nantais, president. From the Dairy Farmers of Canada, we have Jacques Lefebvre, chief executive officer; Pierre Lampron, president; and Christopher Cochlin, international trade legal adviser at Cassidy Levy Kent. We will start the opening remarks with you, Mr. Dykstra.

Mr. Wietze Dykstra (Dairy Farmer, As an Individual) :

Good afternoon. I'm a dairy farmer. I was invited to speak here by way of our local MP, Mr. Bragdon , but more on that later. I was born and raised in a city in Holland. You might have already guessed that by my name. My parents had no farm. For some reason I always wanted to become a dairy farmer. I knew I would never have enough money to buy any kind of farm in Holland. Because I wanted to become a farmer, I went to the agriculture school in the city where I was born. ln my final year at school, which would have been when I was 19, I contemplated where to go to pursue my dream.

At that time—this would have been the late 1980s—France and Australia were popular. Denmark was also a go-to place. I had heard in school that Canada was good to their dairy farmers, as they had some kind of system in place to ensure their dairy farmers were getting paid a fair price for the milk they produced. That was all I knew in 1986, but it was good enough for me to go on a big adventure. I bought my first plane ticket to go to Canada. I arrived in Halifax, Nova Scotia, not really knowing much English, and ended up working on a farm in Nova Scotia. Of course, I was very homesick.

I slowly started to find out that there was indeed a good system in place here, which I eventually learned was called supply management. True to the Dutch stereotype, I was not much of a big spender, focusing instead on saving money towards my goal of buying a dairy farm. I managed to save $700 a month of the $900 a month I was earning working on the farm in Nova Scotia. At the age of 25, I began looking around and found this nice working dairy farm in beautiful northwest New Brunswick. I indeed had enough money saved up for a down payment for that farm, and bought it in 1991.

Not coming from a farming background, my attitude might differ from some other farmers. I feel I'm also a businessman. In my opinion, profit is not a bad word, including in a farm setting. Why would I want to work pretty much every day for long hours and not make any money doing it? It's the same for my 23-year-old daughter, who hopes to take over the family farm someday. She now works full time on the farm and sees the political climate we are in. The trade concessions have gotten her very concerned. She feels that we, as dairy producers, have been picked on from all sides.

Over the years I have been following the situations that have occurred in Holland in respect to the dismantling of the Dutch quota system and all the hardship that it caused. I still talk sometimes to my agriculture school buddies about what they have had to endure. In no means was it pretty or easy. Canadian supply management, in my mind, consists of three pillars, like a three-legged milking stool: supply control, import control and a stable pricing system based on costs and markets. But the system only works if there is political will to safeguard the pillars.

If any one pillar is taken away, like a stool, the stool will fall over. This brings me before you today. All during the time the negotiations went on for CUSMA, when people asked me if I was concerned about the outcome, I would say, “No, I am not.” I always said I had full faith in our government to stand up and defend supply management. Unfortunately, I was proven wrong. I think I and most other dairy farmers were very disappointed when the final details came out. We have a system here that ensures the primary producer, the farmer, gets a fair price for his product.

By no means are we getting rich, but we're doing okay. I believe that farmers in other countries recognize that our supply management system does work well and that we do get a fair price for our product. I know for a fact that a lot of dairy farmers in other countries envy us. Unfortunately, it seems that rather than working towards improving their own system in their own countries, they are trying to compromise or infringe upon our system. I just don't understand that way of thinking of the other farmers in other countries.

All the magazines I read from south of the border put CUSMA as a great win for their dairy farmers. In my mind, that would mean we got the short end of the stick.

(1535) I have also read of farms south of the border that milk as many as 30,000 cows on one farm. That's equivalent to all the dairy farms in New Brunswick and Nova Scotia combined. Is that where we want to go? In my small community, I employ three people full time. One of them is my 23-year-old daughter. I also use land belonging to several of my neighbours, and at times even employ my neighbours as needed. I employ about six high school students to work shifts during milking, giving them experience in work ethic and some spending money.

If farming becomes too challenging due to these trade agreements, I and other dairy farmers might have to stop farming. Therefore, there would be essentially no economic activity left in our community. If Canadian dairy farmers are forced to abandon their livelihood, this would contribute to the ongoing decline of our rural communities. This might be why my local MP, Mr. Bragdon , asked me to appear before you. He is very aware of what will happen if farms keep disappearing from his riding. Remember that any kind of farming is, and has to be, a business.

Another side effect of this agreement is that we had a processor who was going to upgrade and expand a processing plant in New Brunswick. This processor now has indefinitely postponed this project due to uncertainty. We Maritimes producers are very concerned about keeping processing in our region. I now want to touch on the compensation package promised, and partly delivered, for CETA and CPTPP. I haven't heard anything about the remaining years and how it will be paid out. That in itself concerns me. The compensation package is bittersweet.

Most farmers, including me, received a payment in December of last year for those previous trade agreement concessions. As far as I am aware, no concrete timeline has been set for the next payments. We, as dairy farmers, have always prided ourselves on getting all our money from the marketplace. This is how the system is supposed to work. This is how it did work. The government trading away excess and then offering compensation is not what we want.

Having the supply management system tampered with by government trade concessions to the point where we're now looking for compensation should tell you how bad these concessions are hurting us. To be honest, the words “no more concessions will be made” sound a bit hollow to me, as this was the line all along. Of course, we're now getting concerned by the possible trade talks that will happen sometime with the U.K. I don't pretend to know all the precise details of the agreement. We as dairy farmers have DFC for that. You can probably stump me pretty easily with some in-depth questions.

But one thing that stands out to me in CUSMA is the oversight and export cap clause that this government has granted the U.S. I just do not understand how one country, that being Canada, can allow another country, that being the U.S.A., to dictate where and how much it can export to a third country. It's even more frustrating as our domestic market is being given away. In conclusion, if I could make any suggestion, it would be that compensation for all the agreements will help to maintain my farm and business and allow us to manage for my family's future.

As my business model was based on producing milk, I now will need the compensation money to keep the farm viable and profitable for my daughter. Keep in mind that the last 10% to 15% of the milk produced on any farm is the cheapest milk for the farmer to produce, and the most profitable. Having that share of the milk market traded away means we will need compensation funding to continue to innovate and adapt to this new market reality. Finally, anything you could do to prevent further concessions and limit the U.S.A.'s ability to oversee our system and limit exports would be positive for dairy farmers like me.

Thank you.

(1540) The Chair :

Thank you very much, Mr. Dykstra. We will go to Ms. Robinson with the Canadian Federation of Agriculture.

Ms. Mary Robinson (President, Canadian Federation of Agriculture) :

Thank you for this opportunity to present today on a trade agreement that is important to the success of Canada's agriculture community and industry. Agriculture is an essential part of the economic, political and social fabric of Canada and it is critical to the well-being of all Canadians. It plays a strategic role in and is the backbone of rural communities. Agriculture and agri-food make a significant contribution to the Canadian economy, directly providing one in eight jobs, employing 2.1 million people in rural and urban Canada and accounting for 6.7% of total GDP.

A significant part of Canadian agriculture and agri-food's growth and success is due to international trade agreements and subsequent export market development and sales. Canada's market is just too small to accommodate the growth potential of what has become a world-renowned, efficient and low-cost agriculture industry. Currently the industry relies on export markets for at least 60% of its output. Consequently, the industry is always on the lookout for additional profitable markets and easily awaits the outcome and potential opportunities of any and every bilateral or multilateral trade negotiation.

Having said that, it's equally important to recognize that our supply-managed sectors have built stable and viable industries without reliance on export markets, and it's important to ensure that they are not undermined and destabilized in any trade agreements Canada negotiates. The North American Free Trade Agreement has underpinned growth in agriculture production and processing not only in Canada but also in the U.S. and Mexico. It creates a market of 449 million consumers and generates agri-food and seafood trade of $289 billion. The benefits of NAFTA are undisputed and have been since its implementation.

Nearly 80% of Canada's total processed food exports go to the U.S. and Mexico. Canada is the number one supplier of agriculture goods to the U.S., and we have considerable potential to increase ag trade with Americans. With its growing middle class, the same goes for Mexico, where Canada is the second most important supplier of agriculture goods. Furthermore, integration between Canada and the U.S. is such that our respective industries have grown to rely on open borders to strengthen and feed each other. A specific state example points us to the $2 billion Canadian in trade we do with Iowa.

It exports close to $300 million in animal feed to Canada, imports around $170 million in live hogs from Canada, and then turns around and sends us $180 million in fresh and frozen pork. Trade and investment with Canada creates 100,000 jobs in Iowa. CFA, from the beginning, maintained that NAFTA did not need renegotiation, that changes and improvements could well be made within the agreement already in place. The priority of course was to maintain the benefits that Canadian agriculture was already enjoying.

In short, supply-managed sectors would not be undermined through market access concessions, achieve imported market access for our sugar beet producers, and advance regulatory alignment and domestic support equity. In reviewing the new agreement, CUSMA, it is evident that the open borders and subsequent market benefits from NAFTA remain largely intact. In fact, some additional benefits were achieved, but they came with a price, and some may say, far too heavy a price. It is clear that the Alberta sugar beet producers came away with the biggest gain.

Ever since the original CUSFTA, where the requirement to institutionalize TRQs at historic import levels was ignored by the U.S., our sugar industry has dealt with a very restrictive U.S. TRQ. In CUSMA, our access for sugar beets was more than doubled to a total of 20,000 tonnes. Central to the success of any trade agreement is the ability to reduce no-tariff trade barriers. This includes a process for regulatory transparency, co-operation and alignment. CFA applauds the efforts made by our government to include the provisions set out in

chapter 28 of the agreement, which calls for transparency and a process for communication and co-operation among North American regulatory authorities. The establishment of a committee on good regulatory practices composed of government representatives, including from central regulatory agencies, will enhance collaboration with a view to facilitating trade between the parties.

(1545) Canada tried hard to have the U.S. remove the requirement for Canadian meat imports to be reinspected when they cross the border, but to no avail. This issue should be one of the priorities on good regulatory practices to go before the committee. Canadian agriculture has built and developed a successful export industry, but its success is contingent on operating within a robust rules-based trading system. An important component of such a system is an effective dispute settlement mechanism. For that reason, maintaining

chapter 19 was critical and will be an important element in creating a level playing field. American farmers have long had the ability to sell and ship wheat to Canadian terminals just across the border and have negotiated prices reflective of quality. However, even though the price may have reflected the grade quality, the documented designation did not reflect the grade. This agreement calls for the Canadian grade to be assigned to the imported product with appropriate documentation. CFA has been assured this will not compromise our system of variety registration.

Canada paid a very high price for the conclusion of CUSMA renegotiations by conceding significant dairy, turkey, chicken and table eggs market access to the U.S. It's another economic hit in the wake of CPTPP and CETA with the accumulation of access concessions devastating supply-managed industries. For example, by 2024 the combined market access concessions made by Canada under the WTO, CETA, CPTPP and CUSMA will represent 18% of our dairy market. Supply-managed industries are anxiously waiting for government to fulfill its commitment to quickly and fully mitigate the impacts of these trade agreements.

As well, every effort needs to be made to eliminate all forms of TRQ circumvention—circumventions that escalate the volume of imports far beyond the negotiated TRQs. Two other issues in addition to market access concessions which cause alarm for the industry are the concessions Canada made with respect to policy development and export controls. Canada has agreed to consult with the U.S. before making changes to Canadian dairy policies. This is clearly a loss of sovereignty in Canadian policy development and one that should never have been surrendered.

Second, Canada agreed to cap dairy sector exports of milk protein concentrates, skim milk and infant formula to CUSMA and non-CUSMA countries with an applied export charge on exports over the cap. This is disturbing on several fronts. Canada has long argued against the use of export tariffs to regulate trade and it sets a dangerous precedent by allowing a regional trade agreement, and a party in that agreement, to control trade of another party to countries outside the agreement. Finally, it's a precedent that may have implications for Canadian export reliant agricultural sectors.

If Canada exports to other countries and out-competes U.S. products, the U.S. may try to use CUSMA or some other mechanism to manage and restrict Canadian trade to the rest of the world. In conclusion, CFA applauds government for its

part in consummating an agreement. The importance of profitable markets around the world for Canadian agriculture cannot be overstated. However, the CFA would implore government to negotiate successful trade agreements in agriculture without paying the heavy price we have in the past with access concessions in supply-managed domestic markets. Thank you.

(1550) The Chair :

Thank you very much. We will move to Mr. Nantais with the Canadian Vehicle Manufacturers' Association.

Mr. Mark Nantais (President, Canadian Vehicle Manufacturers' Association) :

Thank you very much, Madam Chair. Good afternoon, honourable members. I'm pleased to be here today representing Fiat Chrysler Automobiles Canada, Ford Motor Company of Canada and General Motors of Canada Company. Our members operate four assembly plants, as well as engine and components plants. They invest many billions of dollars in the development of zero-emission technologies and advanced vehicle safety technologies. We have over 1,300 independent dealerships across Canada, and we contribute quality employment opportunities for over half a million Canadians.

The CVMA has been a primary advocate of CUSMA, and we recommend passage of Bill C-4 without delay. The passage of CUSMA is essential to provide certainty to North American automobile manufacturers. The automotive provisions, as well as the side letters that provide protection from the U.S.

section 232 tariff actions, are indeed 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 was the cancellation of NAFTA, the reimposition of tariffs on finished vehicles and parts, and likely

section 232 tariffs on input materials. So, if we are anxious to see ratification, that is indeed why. We again want to say thank you to the Canadian negotiators for working so closely with us and ultimately ensuring that we maintain Canada's auto sector as a truly integrated part of the North American industry. This agreement was existential for Canada's largest manufacturing and export industry.

The agreement reinforces the long-established integration of the auto industry supply chain necessary for its competitiveness and, importantly, the ongoing need for continued regulatory alignment with the United States of vehicle technical regulations that 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, the labour value content provisions and the

section 232 side agreements, are things that all our members support and can adjust to over a reasonable time period so that we will remain compliant, enabling us to continue to enjoy duty-free access to the largest and most beneficial auto market in the world. Since the Auto Pact of 1965, 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.

The resulting deep integration has led to a more competitive Canadian auto industry, greater consumer choice at more affordable prices and a strong North American trade bloc. When the original NAFTA came into force in 1994, it provided a foundation for a strongly global competitive trade bloc. The geographic proximity of the three NAFTA partner facilities, the multi-billion dollar sectors, the parts sector and the just-in-time supply chains are critical to vehicle assembly operations in North America. It also created inherent transportation and supply chain logistics cost advantages.

Today, automotive manufacturing represents the second-largest Canadian export sector, with $54 billion in trade in 2019. Ninety-two per cent of the total value of that was to the United States. The United States is our number one automotive trade partner, and it's absolutely critical that a trade agreement be in place to provide the foundation for Canadian automotive production and exports in the future. We must always keep in mind that Canada is 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 Canada to maintain fully harmonized safety, vehicle GHG, criteria emissions regulations with the United States. This remains imperative if we are to continue to be part of this fully integrated, long-lead, high-capital-cost industry.

Put simply, we did not work this hard to modernize integrated rules of trade in North America to then take our eye off the ball and drift away with unique or different regulations. That could actually put us back to square one and leave us on the sidelines. Canada's officials must also maintain a high degree of engagement with their counterparts in the U.S. and Mexico. We cannot relax our efforts to ensure that Canada is sufficiently competitive to win future manufacturing investments that anchor much of the Canadian automotive supply chain.

Canada must have competitive, in fact, more competitive, costs of auto operation in Canada, including investment incentives, carbon costs, competitive labour agreements, taxes that keep pace with the United States, competitive electricity prices and competitive regulatory regimes. It's important to remember that the auto sector is going through one of the most dramatic periods of change in its 100-year history for auto technology and mobility business models.

We must work closely together with the Canadian industry and all levels of government to demonstrate that Canada is the best place anywhere to invest in the future of this important industry.

(1555) In closing, we fully respect the committee's need to hear Canadians and ask questions. We have worked with all parties over the last two years to discuss this very complex issue. We have been truly involved, and we appreciate your interest and open dialogue. We thank you for that, but we must ask you to ratify this agreement promptly. I'd be pleased to answer any questions.

The Chair :

Thank you very much. We will move to the Dairy Farmers of Canada, and Jacques Lefebvre, Pierre Lampron and Christopher Cochlin. Mr. Lampron.

[ Translation ]

Mr. Pierre Lampron (President, Dairy Farmers of Canada) :

Good afternoon. On behalf of the Dairy Farmers of Canada, I want to thank you for the opportunity to offer our perspectives on Bill C-4 concerning the Canada — United States — Mexico Agreement. I'm accompanied by Jacques Lefebvre, our chief executive officer, and Chris Cochlin, our legal advisor from Cassidy Levy Kent LLP. Mr. Cochlin is an expert in international trade. The vast majority of politicians in this country say that they support supply management. However, in the end, actions speak louder than words. Today, with CUSMA, supply management has never been more weakened.

There's no doubt that Canadian dairy farmers have been hit by the three most recent trade agreements. This is something that even the Government of Canada recognizes. When the imports already authorized under the WTO and the access previously granted under the Comprehensive Economic and Trade Agreement, or CETA, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP, are added together, these total imports will be equivalent to 18% of Canadian milk production by 2024.

CUSMA also gives the United States oversight over the management of our dairy system by requiring a consultation with them prior to any changes in its administration. Is this not an abdication of the independence of Canadian decision-making and our sovereignty? Have we negotiated reciprocity with the United States, given the non-tariff barriers that our products must face in order to enter the American market? The Prime Minister has repeatedly committed to full and fair compensation to the dairy sector for the cumulative impacts of CETA, CPTPP and CUSMA.

In terms of the first two agreements, at the end of 2019, we received a first instalment representing a little more than 12% of the total promised compensation. We await guarantees that the sums still to come are locked in. Once again, actions speak louder than words. This compensation doesn't include CUSMA. Some wonder why financial compensation is being offered instead of programs. First, our recent experience with programs set up to mitigate agreements with Europe hasn't been conclusive. Of the $250 million granted, almost 10% was allocated to the administration of the program by the public service.

This amounts to $22 million returned to state coffers for the administration of the program by federal public servants. The remaining sums benefited only a small number of producers. Second, the compensation formula announced in August 2019 is consistent with the recommendations of the mitigation working group created by the federal government after the signing of CUSMA. However, beyond the numbers, realities on the ground affect some 11,000 families across the country. My experience isn't unique, but it sheds light on why financial compensation is needed.

When my brothers and I took over the family farm some 30 years ago, we knew that the market was equivalent to the potential of Canadian consumers. We made calculations and projections on this basis. We determined that we could make ends meet despite the significant costs associated with acquiring a farm. The Canadian government will have ceded nearly one-fifth of our production to foreigners by 2024. We know now that our business plan didn't take into account the fact that our market would be conceded in this way.

If we had known this, my brothers and I would have given serious thought to whether it was worth it to take over the family farm. This would be true of any business confronted by a loss of nearly 20% of its market. However, since the concessions have been granted, we have a few recommendations. We recommend that the Canadian government continue to give 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.

We ask that the total amount be formally accounted for within the 2020 main estimates and that the government announce the amount of compensation for CUSMA prior to its entry into force. On the other hand, CUSMA contains a provision that imposes export taxes, above a certain threshold, on skim milk powder, milk protein concentrate and infant formula.

(1600) This threshold is draconian. In the first year of the agreement, it represents about half our exports for 2018, and then it declines. This export tax undermines the competitiveness of our products in relation to the products of other global players, including the United States. This provision sets a dangerous precedent for any dairy product that may be exported. In addition, if CUSMA enters into force before August 1, the beginning of the dairy year, the export thresholds will see a dramatic decline of nearly 35% after only a few months. For Canadian dairy producers, CUSMA presents a fourfold threat.

On the one hand, we've conceded more of our domestic milk production to foreign producers for products that will end up on our shelves. These products will be made from foreign milk whose production is directly and indirectly subsidized, which isn't the case here. This results in cheaper milk for foreign processors that export products here. This gives rise to the question of whether this unfair competition constitutes the dumping of foreign dairy products on our shelves. At the same time, we face export barriers for dairy products made with milk from our own country.

Add to that the fact that our border is porous and the government isn't in a position to test foreign dairy products coming into the country. It's important to note that these products aren't subject to the same production standards to which we adhere. Given the impact on our industry and the dangerous precedent set by the export thresholds, we call on the government to take mitigating steps. We understand that this could be done through administrative measures after the ratification of CUSMA, on a voluntary basis, without reopening the agreement.

When it comes to controlling our borders, the government must commit to giving the Canada Border Services Agency the resources and training to enable officers to fully play their roles. After our discussions with the union management, we're convinced that the officers expect nothing less. Canadian dairy producers are committed to the highest standards of sustainable production. This is done through the proAction program. These standards come with costs for farmers.

For example, unlike American producers, our Canadian producers don't use artificial growth hormones to increase milk production at the expense of the health of the cows. Instead of supporting our farmers so that they can maintain these rigorous production standards, the government has chosen to open its market to surpluses of foreign dairy products that don't meet our domestic standards. In conclusion, the Dairy Farmers of Canada understand the importance of international trade to the Canadian economy in general. They aren't opposed to Canada exploring or entering into new trade agreements.

However, let's be realistic. All countries have both offensive and defensive interests when it comes to trade negotiations. The United States, for example, has a long tradition of protecting their sugar, cotton and dairy sectors. Unlike in Canada, these industries receive production subsidies, directly or indirectly, from the American government. The defence of supply management has never prevented Canada from entering into an international trade agreement. Trade negotiations don't seek to pit one Canadian industry against another.

However, we firmly believe that access to the Canadian dairy market should no longer be the price of entry into these agreements. Despite the government's assurances, we remain concerned about what could be conceded in a free trade agreement with Great Britain. It's also important to consider that the impacts of recent trade agreements weren't limited to dairy farmers. The Canadian government should also provide full and fair compensation to dairy processors, in addition to Canada's poultry and egg farmers.

Lastly, the time may have come for a committee of the House of Commons or Senate, or even of both, to look into the possibility that foreign dairy products are being dumped in Canada. Your farmers aren't scared of international competition, provided that there's a level playing field. I'll be pleased to answer your questions.

(1605) [ English ]

The Chair :

Thank you very much, Mr. Lampron. Mr. Dhaliwal, on a point of order.

Mr. Sukh Dhaliwal (Surrey—Newton, Lib.) :

Thank you to the presenters. Fellow members of Parliament, I am speaking against my own intent of last week. Last week, I moved a motion that no motion will be entertained this week. There was some miscommunication in the wording. I had discussions with the Conservatives, and I'm sure the Bloc and the NDP will be fine if I could move a motion to clearly indicate that there will be no motions this week.

Mr. Randy Hoback (Prince Albert, CPC) :

Wasn't that agreed?

The Chair :

I think we already had that agreement that we would have no motions until we go into clause-by-clause—

Mr. Randy Hoback :

Yes, to clause-by-clause.

The Chair :

—and all members would be present.

Mr. Sukh Dhaliwal :

That's fine. I just wanted to make sure that we put in the wording that there will be no motions by—

The Chair :

There will be no motions by any members until we reach a point when we're ready to deal with clause-by-clause.

Mr. Randy Hoback :

With clause-by-clause you have to; there's just no way around it.

The Chair :

Exactly. Is everybody good with that?

Mr. Sukh Dhaliwal :

Thank you.

The Chair :

Thank you, Mr. Dhaliwal, for clarifying that. We will move to Mr. Berthold.

[ Translation ]

Mr. Luc Berthold (Mégantic—L'Érable, CPC) :

Thank you, Madam Chair. I want to thank the committee members for the opportunity to be here today to ask a few questions regarding an issue that has kept me busy in recent years. In concrete terms, I've enjoyed working very passionately with the people in the Canadian agricultural sector. I also want to thank you, Ms. Robinson. I was very pleased to work with you. Obviously, one issue has been of greater concern to us than other issues in recent months, especially in Quebec. That issue is dairy production.

Although there has yet to be an announcement on compensation for the new free trade agreement with the United States, we expected the government to tell us its intentions before asking us to sign the agreement. We haven't heard any news. We still don't know what will happen to the remaining seven years of compensation for the other agreements previously announced. We're also concerned about this issue. We expected that the dairy processors would receive compensation, but we've had no news on that front. There's still absolutely nothing for egg and poultry farmers.

You can appreciate why it's important for us, on the opposition side, to have the opportunity to ask you questions about this free trade agreement. That's why we want to thank you for being here to answer these questions. Last week, I was particularly surprised to hear the presentation given by Chrystia Freeland , Deputy Prime Minister, who was here at the Standing Committee on International Trade. I listened carefully to her presentation. In response to a question about the new export tariffs on milk proteins, such as skim milk powder or infant formula, Ms.

Freeland said that the supply management sector was consulted extensively regarding the imposition of export tariffs on powdered milk.

(1610) I would translate that as “consulté intensément.” You're part of the supply management sector, because you were the representatives of the Dairy Farmers of Canada. Do you consider that you were “consulted extensively” on the Canadian government's new approach?

Mr. Jacques Lefebvre (Chief Executive Officer, Dairy Farmers of Canada) :

Thank you for your question, Mr. Berthold. Throughout the negotiation, there were information sessions. There were also consultations on certain items. However, we weren't consulted regarding the magnitude of the export thresholds. These thresholds would apply beyond the signatory countries, along with the provision giving the United States oversight over the administration of the dairy system.

Mr. Luc Berthold :

We're stunned. This is different from the statements made by Ms. Freeland here in the committee and in the House of Commons, when she urges the opposition to move quickly. She told us that all the consultations were done, and that extensive consultations on exports and tariffs were held. I gather that the government didn't consult you on this issue. You've just made that quite clear. Was there any discussion on this? Were you advised that this option would be put on the table? Did you learn this, as we did, after the end of the negotiations?

Mr. Jacques Lefebvre :

The comment made be the Deputy Prime Minister concerned a fairly wide range of people. We're producers, but we aren't the only producers. As for us, the Dairy Farmers of Canada, we weren't consulted on these measures.

Mr. Luc Berthold :

Do you know whether other countries that have free trade agreements allow this type of agreement? Have you ever seen a country with which we have a free trade agreement be allowed to decide that we can't sell milk powder to other countries that aren't part of the agreement? Have you seen this in your field? Does this exist elsewhere in other agreements, or is this a first?

Mr. Pierre Lampron :

I don't think that I've seen this. That's why I mentioned it in our brief. The sovereignty of the country is really under attack. Perhaps our expert, Mr. Cochlin, could tell us whether he has seen any cases of this nature.

Mr. Christopher Cochlin (International Trade Legal Advisor, Cassidy Levy Kent LLP, Dairy Farmers of Canada) :

As far as we know, there are no precedents. As we've already heard, this is a first. Other agreements are somewhat similar, but the idea of applying export tariffs to sales in third markets is really new.

Mr. Luc Berthold :

Thank you.

[ English ]

The Chair :

You can ask a very short question.

[ Translation ]

Mr. Luc Berthold :

I don't have any more questions. You've answered my questions nicely. Once again, I deplore the fact that we're being told one thing and that, unfortunately, when we talk to the people directly concerned, we don't get the same answers. I would expect the minister to make clear and accurate statements when she appears before a committee and to tell us the truth. Madam Chair, in my opinion, there's an unacceptable gap between “consulted extensively” and “did not consult.”

[ English ]

The Chair :

Thank you, Mr. Berthold. Mr. Dhaliwal.

Mr. Sukh Dhaliwal :

Thank you, Madam Chair. Thank you to the presenters. I just want to make it very clear to you all that Americans were not concerned at all about supply management, but it is us as Canadians. Our government was able to preserve supply management within this agreement. Probably most of you agree but you did not necessarily get everything you wanted. My first question is for you, Mr. Lefebvre, carrying on with the conversation. When you said that you were constantly in touch with the negotiation, were you in an engagement when the negotiations were going on?

(1615) Mr. Jacques Lefebvre :

To address your first comment, we do react a little bit. We understand that U.S. Secretary of Agriculture Perdue indicated clearly that the Americans were not interested in supply management. They were interested in an innovation strategy that had been adopted in Canada. With regard to your point as it relates to being informed, yes, as those in many sectors do, we travelled to Washington and to Mexico City, and officials would brief us on a regular basis after the meetings. These were briefings. They were not consultations per se, but we were kept abreast.

Mr. Sukh Dhaliwal :

Ms. Robinson, you were here in 2018 and you have met many MPs as well. What is your experience when it comes to briefings and being in contact with...?

Mr. Robert Friesen (Trade Policy Analyst, Canadian Federation of Agriculture) :

I would have to agree with the comments that were already made. I attended the briefing meetings as well, and it's quite right that we were told what was taking place but were not consulted on whether or not something was a good idea.

Mr. Sukh Dhaliwal :

Mr. Chris Cochlin, when it comes to export threshold on particularly the skim milk powder concentrate, there was a supplier who was concerned that if we ratified the CUSMA right away, it would affect them if it weren't done in August. Is there a way to mitigate that?

Mr. Christopher Cochlin :

The agreement and the rights and obligations have been agreed to. That has been concluded, but of course anything is still possible at the administrative level after the agreement has been concluded. There is always a possibility for both sides to agree to further accommodations in terms of timing or enforcement. In contrast to what we see, for example, in the intellectual property rights space, for certain provisions in the agreement itself, there are transition periods provided for two and a half years or four and a half years for certain changes.

We don't have that in the dairy provisions on the export charges, but that doesn't necessarily mean those accommodations can't still be arrived at country to country at the political level between negotiators and the political decision-makers. I'm not saying that would be easy of course. None of the contexts of these negotiations, I imagine, were easy, but it is a possibility.

Mr. Sukh Dhaliwal :

My question is for you, Ms. Robinson. You mentioned that 18% supply management is affected by WTO, CETA, CPTPP and CUSMA. What, out of that 18%, is related to CUSMA?

Ms. Mary Robinson :

I think our friends at Dairy Farmers would be better to answer that question. Sorry.

[ Translation ]

Mr. Pierre Lampron :

That's fine. [ English ] For CUSMA, it's only 3.9% of dairy products.

Mr. Sukh Dhaliwal :

You say it's 3.9%. On the overall scheme of things, Mr. Lefebvre mentioned earlier that the U.S. was not concerned about supply management at all. By protecting or preserving supply management, do you still think that government has done its role to help the supply management sector?

(1620) [ Translation ]

Mr. Pierre Lampron :

Yes, supply management has been protected, but as I said, it has been undermined. In terms of the 3.9%, that's fine in itself, but the problem is that there was already the CPTPP and CETA, and there was already the WTO. It's that buildup that's the problem. We are really weakened. That's why we don't want any more concessions. It has hurt producers, and as you've heard in testimony, while supply management has been preserved, it has also been weakened. That's the state of affairs.

[ English ]

The Chair :

Thank you very much, Mr. Dhaliwal. We will move to Mr. Savard-Tremblay.

[ Translation ]

Mr. Simon-Pierre Savard-Tremblay (Saint-Hyacinthe—Bagot, BQ) :

Thank you, Madam Chair. Good morning, everyone. Thank you for being here and sharing your experiences and those of your respective groups. My colleague asked a question earlier about what the Deputy Prime Minister said. When she came to the committee, I asked her a question about the concessions being asked of the dairy sector and she said that producers understood the situation. However, your presentation shows that there is a lot of disappointment and irritation.

As you said, every time, they promise that there will be no breach; then, once an agreement is reached, they tell us that it's only a small breach; and when the breaches of all the agreements add up, you end up with a pretty big crater. Not only do you need compensation, but you also need to make sure there's never another breach. In fact, we, in the Bloc Québécois, introduced a bill earlier to ensure that there will never be another breach of the system. Let us hope that our colleagues will hear this appeal. Do you think supply management was well defended in the negotiations?

Mr. Jacques Lefebvre :

Thank you for your question, Mr. Savard-Tremblay. A lot of people say a lot of good things about supply management, but the reality is that when you concede almost one-fifth of your milk production to foreign producers and at the same time—exports being one of the tools that compensate and mitigate that loss—you are told that you will not be able to export beyond draconian thresholds, you find yourself in a vise. So we're stuck, both by the concessions on our production, and by our ability to export that could have mitigated the impact. Actually, as our president has said, supply management is as weakened as it has ever been in its history.

Mr. Simon-Pierre Savard-Tremblay :

Thank you for that very clear answer. Beyond supply management, there is also, as you rightly said, the issue of export controls. As far as this aspect is concerned, we know that, for you, the Dairy Farmers of Canada, the effective date changes everything. In fact, after the vote and ratification, it will come into effect within three months, and, for you, the dairy year begins on August 1. So the effective date changes everything. In this context, what would be the ideal date for ratification?

Mr. Pierre Lampron :

We're talking about ratification on May 1 for entry into force on August 1, the beginning of the dairy year, as you said. Since the ceiling is 50 tonnes in the first year, we start the second year right away—

Mr. Simon-Pierre Savard-Tremblay :

That would leave you only the summer to get through it all, which would be unthinkable.

Mr. Pierre Lampron :

That's it. We must already adapt and see how we will manage this. At least the industry would have more time to adapt.

Mr. Simon-Pierre Savard-Tremblay :

In your opinion, it would be ideal to hold off on ratification until May 1?

Mr. Pierre Lampron :

It would be very important.

Mr. Simon-Pierre Savard-Tremblay :

Perfect. Thank you, Mr. Lampron. How much time do I have left, Madam Chair?

[ English ]

The Chair :

You still have two and a half minutes.

[ Translation ]

Mr. Simon-Pierre Savard-Tremblay :

We still have plenty of time. We're going to have fun. Given the planned elimination of what is called class 7 in the agreement, do you have a strategy to try to compensate for that or deal with that?

Mr. Pierre Lampron :

In 2017, we found an innovative strategy to address dairy production issues with the government and dairy processors, our partners. Now we need to change our model. We have made proposals, but the solutions will have to come from the government. It is up to the government to respond to the abolition of class 7.

Mr. Simon-Pierre Savard-Tremblay :

You talked mostly about exports and supply management. Could you tell us a little bit more about the implications of that?

(1625) Mr. Pierre Lampron :

As you know, American production is 15% higher than demand, and their objective is to sell their products on the foreign market. On our side, with supply management, our production is limited to the Canadian market. In the CUSMA, we are responding to the Americans' strategy. They want to have access to other markets and we have allowed them to sell their surplus production in Canada. That is what hurts. For our part, we are focused on Canadian production.

Mr. Simon-Pierre Savard-Tremblay :

It's an issue that has been going on for many years. In the beginning it was about diafiltered milk proteins, and the creation of class 7 was a bit of an answer to that. It was a way of dealing with that, because at the beginning, it was said that diafiltered milk was not real milk and therefore the law didn't apply. The creation of class 7 was a kind of compromise

Mr. Pierre Lampron :

It was a way for dairy producers and processors to negotiate with the government to find a solution to the problems of product classification. Mr. Lefebvre, is there anything you'd like to add on this subject?

Mr. Jacques Lefebvre :

Yes. Thank you, Mr. Chair. We created an innovation strategy with dairy processors, and the government was well aware of the creation of this strategy. In fact, we were encouraged to do so. However, that strategy was conceded in the agreement with the United States and Mexico, which leaves us in the lurch today. What is certain is that our room to manoeuvre has been reduced enormously and we will have to abide by the concessions that have been made by the government.

[ English ]

The Chair :

Mr. Blaikie.

[ Translation ]

Mr. Daniel Blaikie (Elmwood—Transcona, NDP) :

Thank you very much. We have heard a few times in committee and even in the House of Commons that Canadians are paying more for their milk because of supply management. I think those were comments made by Mr. Arya. I was a little surprised, because the research says otherwise. I wanted to give you an opportunity to talk to us about dairy price competitiveness in Canada.

Mr. Pierre Lampron :

Thank you very much for your question. The price of milk, if we take the same standards, that is, milk without somatotropin, is equivalent in Canada and the United States. In fact, over the past five or six years, the price of dairy products has increased by 2%, while the price of the grocery basket has increased more. Countries such as New Zealand have seen a $0.20 increase in recent years, which we have not seen in Canada. I don't know what you've heard, but by any standard, we're very competitive in terms of retail prices.

Mr. Daniel Blaikie :

Thank you very much. [ English ] We understand it's going to take a little while longer for this deal to go through committee and the House. After that, it has to go through the Senate. By the time it clears Parliament, it won't be that long before the May 1 deadline. It's our view the government should wait in order to make sure the dairy producers aren't needlessly affected. If the implementation occurs prior to May 1, do you believe that government ought to account for that in the compensation package it creates for CUSMA?

Mr. Jacques Lefebvre :

Yes, absolutely. Our hope is that the government.... We presume that CUSMA will be ratified. Assuming it is ratified, our expectation would be that compensation would be announced at that time and would include the impact of the caps on the exports.

Mr. Daniel Blaikie :

In terms of other administrative measures that might be taken to try to minimize the damage that is going to be done to Canada's dairy sector as a result of this deal, we understand that it matters whether the quota is allocated to retailers or to processors. I've spoken to folks from the dairy industry about how that's playing out under CETA, and I'm wondering if you guys have similar concerns and suggestions for how the quota under CUSMA ought to be allocated.

(1630) [ Translation ]

Mr. Pierre Lampron :

Once again, thank you for raising this issue. The position of our transformer colleagues is simple: it is the same as ours. If all the tariff quotas are to go to the processors to prevent the destruction of the market, they are the ones on the market. There's a lot at stake. For example, when will these quotas apply during the year? We must not destroy the entire market, our products must be complementary to those already entering. Everything has to go to the processors.

[ English ]

Mr. Daniel Blaikie :

Do you guys have a sense of how much should be allocated to processors over retailers, or do you think it's not really constructed to have that quota allocated to retailers at all?

[ Translation ]

Mr. Pierre Lampron :

I believe 100% is to be allocated to the processors, people who are affected and who are in the marketplace. Our position is that these quotas really must go entirely to the processors.

[ English ]

Mr. Daniel Blaikie :

When we talk about the compensation package I have a further question. We've heard about compensation for producers and for processors. We've heard testimony at the committee that suggests that, as part of the package, there should also be some compensation for workers who are affected, whether it's pension bridging or training dollars to help them transition into other industries. I'm wondering if the Dairy Farmers of Canada has a position on whether those interests ought to be included in the compensation package.

[ Translation ]

Mr. Pierre Lampron :

Of course we have no objection if people feel affected by such a situation. At the moment, we do not have a firm position on this.

Mr. Daniel Blaikie :

Thank you very much.

Mr. Pierre Lampron :

If people are being affected, we can't object.

[ English ]

Mr. Daniel Blaikie :

Thank you.

The Chair :

Thank you very much. We will move to Mr. Carrie.

Mr. Colin Carrie (Oshawa, CPC) :

Thank you very much, Madam Chair. My first question is for Mr. Nantais. We get it. The agreement does provide certainty and protection against 232s. The whole idea of these agreements is so we can get costs down and align regulations and things like that so we can be more competitive as a North American bloc. I worry about the rules of origin. In some ways they are good, but, in other ways, the costs.... We know that manufacturers aren't afraid of importing cars into North America.

Where's that tipping point if the costs are too high here, if somebody just built that car in China and just shipped the whole vehicle over here? That's a worry I have since I come from Oshawa, where we just lost our assembly plant for whatever reasons. Manufacturers say it's like death by a thousand cuts, and that's what I'd like to talk to you about.

The agreement here, the new CUSMA, is supposed to work on alignment and making us more competitive, but since I come from a government that was working on harmonizing regulations across the sector, the current government is putting in all kinds of unique Canadian costs and regulations. We could talk about environmental considerations and costs such as the carbon tax. You mentioned the high cost of electricity. I hear that over and over again. You mentioned in your opening statement that we almost have to be more competitive here in Canada.

As the guy who represents Oshawa, where we just lost our assembly plant, I'd like you to comment. Is there anything specific in this agreement that would favour Canadian investment versus an investment in the United States? If I'm General Motors, Ford or Fiat Chrysler, why would I pick Canada versus the United States based on this agreement?

Mr. Mark Nantais :

That's an excellent question, Mr. Carrie, and all of those things you have said are absolutely true. These are considerations that have to be given due analysis and consideration. We do operate in a high-cost jurisdiction. We have signed other trade agreements where we don't have full reciprocal access to those markets. Certainly during the course of negotiations, we had discussions around what would happen if the cost of compliance and so forth exceeded the advantages.

It is true that all the multinationals that I represent under other trade agreements could, in fact, go abroad to manufacture their vehicles and simply ship them in, like all these other countries do, to Canada duty-free under those other trade agreements. These are all very serious considerations and risks, if you will. Absolutely. We do believe, though, that with the agreement as it stands, yes, there's probably additional complexity and some costs. The question becomes whether we can manage those costs.

All the companies now are giving consideration to those costs and complexities, how they report, and ultimately how they will factor that into their pricing and their production costs. We think they're manageable at this point in time, as they stand. We are adding more content, if you will, by virtue of this agreement, more regional content. Parts makers have said that's probably an advantage for them. Yes, we agree with that, but I will add the caveat that there are no guarantees. This agreement does not provide guarantees.

(1635) Mr. Colin Carrie :

That's why I worry if we're diverging now and having all these uniquely Canadian costs. I think time will tell, but I can keep my fingers crossed on that. My next question is for the Dairy Farmers. Monsieur Lampron, you said something like “had we known”. We realize that these are families. These are small businesses. This sector is being negatively affected. One of the things we want to do at this committee is our due diligence. We've been asking the government for impact assessment studies that have been done.

The Americans finished theirs last April, and they gave their lawmakers material about three inches thick to go through ahead of ratification. We were not given the same courtesy here, even though my colleague Mr. Hoback wanted to do those studies last spring. At the time the Liberals had the majority and we weren't able to do that. I'm worried. On Friday the C.D. Howe Institute gave its impact assessment for the agreement. Sadly, this looks as if it's going to be a $10-billion hit on our economy going through with this agreement.

One of the things we've heard is that the only thing worse is not having an agreement. It's going to be even worse than that. We're in a catch-22 situation here. I was wondering if you could comment on the openness and transparency of the government going through this process. The minister, rightfully, was here. She said that they consulted extensively. We've heard from the dairy industry, and pharmaceuticals of course, that they don't agree with that. She said that she was in front of committee 12 times. I think it was four times.

Before the election, she said that this agreement was going to be a victory for Canada and a win-win-win. Do you agree with that assessment? How would you rank the government on its openness and transparency on the way it managed this deal?

[ Translation ]

Mr. Pierre Lampron :

In fact, on my farm, my brothers and I felt that it didn't fit the model that we had before with supply management, the Canadian market and investing in promotion to grow the Canadian market, and so on. As far as transparency is concerned, I'm going to give the floor to Mr. Lefebvre, who can tell you how we feel as an organization.

[ English ]

The Chair :

I suggest that Mr. Carrie has run out of time. He was on a five-minute cycle, and we're at 5:50 at the moment.

[ Translation ]

Mr. Colin Carrie :

That's too bad.

[ English ]

The Chair :

You can get Mr. Carrie's information in later on. Mr. Arya, you have five minutes.

Mr. Chandra Arya (Nepean, Lib.) :

Thank you, Madam Chair. My first question is for Mr. Lampron. You said in your statement that the dairy farmers have been hit. What percentage of your 11,000 dairy farmers will go bankrupt due to this agreement?

Mr. Jacques Lefebvre :

Mr. Arya, if that is the measure for any agreement, then I'm quite concerned.

Mr. Chandra Arya :

I've been in industry. I know what it means when somebody says that the industry is going to be hit. I had a publication. We closed down. I couldn't stand the competition. Then I was in high technology. We see hundreds of high-technology companies going bankrupt. We use this term “the industry has been hit”. Every other sector faces complications. This is why they become strengthened, and they go and capture the market. Ms. Robinson, last year you tweeted that the U.S. sees a 24% increase in farm bankruptcies. You went on to ask what do you think is going to happen to Canadian agriculture. How hard is the agriculture sector going to be hit with this agreement?

Ms. Mary Robinson :

In terms of bankruptcy, agriculture is unique as an industry. It's important to take into account that we're talking about the entire fabric of rural Canada. We do more than just bring amazing GDP contributions from agriculture. We also—

Mr. Chandra Arya :

Absolutely, I agree; Canadian agriculture is really a great success. I see that you export to worldwide markets. It's not just limited to the North American markets. You compete with other global producers. When I see this tweet, I just want to understand whether this agreement is bad for Canadian agriculture.

(1640) Ms. Mary Robinson :

Canadian agriculture is so diverse and broad that I don't think you can give a blanket answer to that question. If you're a sugar beet farmer, you're probably pleased with this agreement. If you're a supply-managed farmer, you're probably not pleased with it. If you're the neighbour of a supply-managed farmer, you're probably not happy with it, because we are so intertwined that it's important that each of us be profitable. What we do in Canadian agriculture, to our best ability, is collaborate and make sure that we're all profitable and able to move forward.

Mr. Chandra Arya :

Thank you, madam. On the vehicle manufacturing issue, Mr. Carrie asked whether this agreement will increase investments in Canada vis-à-vis those in the U.S. My question is the same. When I say “investment”, I also use the word “capacity”. Will this agreement allow for an increase in installed capacity in vehicle manufacturing in Canada?

Mr. Mark Nantais :

As I said, Mr. Arya, there are no guarantees. We operate in a high-cost environment. We have to ensure that we are not as competitive as other jurisdictions; we have to be better than other jurisdictions. The question becomes: What if we didn't have this? The downside is far greater. It's almost as though if we don't have this, which is really just the price of admission....

We need all of these other factors to be considered, both federally and provincially, to make sure that we get our local costs down, to make sure that we can capitalize on the capacities, as we say, in our universities and the other partnerships and the new part of the business, which is in artificial intelligence and software and connectivity and so forth. All of these are moving forward in Canada now, given our expertise in those areas and the partnerships that OEM companies have struck with these universities and companies.

Mr. Chandra Arya :

I'm glad you brought up artificial intelligence. In Ottawa we are promoting autonomous vehicles, we are promoting the software that is used in the new generation of vehicles. We are investing heavily in artificial intelligence, although I sense that future investment will be more towards the R and D that can be done in Canada in these advanced technologies.

Mr. Mark Nantais :

Well, the answer to part of that question is yes. Again, it comes back to what it takes to produce profitably in Canada, given all the high costs we have to face.

Mr. Chandra Arya :

Let me ask you a blunt question.

The Chair :

Make it very short, Mr. Arya.

Mr. Chandra Arya :

It's very short. Quickly, is hard product manufacturing a sunset industry today?

Mr. Mark Nantais :

I would say not if we address many of these issues that I've identified.

The Chair :

Thank you very much. We move to Mr. Lewis.

Mr. Chris Lewis (Essex, CPC) :

Thank you, Madam Chair. Thank you to all of the witnesses for coming here today. I'm going to start my questioning, please, with Mr. Nantais. As you are obviously very much aware now, the Canadian government has not yet provided Parliament with an economic impact statement, despite being asked to provide one weeks in advance of these deliberations. That being said, the focus of my questioning is not on whether to ratify, but rather on the implementation side of it. I am hearing concerns expressed by businesses that there's a very short 90-day window between ratification and implementation.

The committee was advised that one of the most complicated elements of this agreement is the stringent rules of origin that must be met for products to qualify for duty-free market access under CUSMA, with significant impact on the auto sector. As a first question, sir, do you have any concerns about the short timeline between ratification and implementation? Are you aware of any proposals to negotiate a longer transition period, even up to January 2021?

Mr. Mark Nantais :

Starting with the latter, I'm not aware of any direct negotiations that fall into that category. At the same time, we've said that one needs a reasonable time to make sure that all of these systems and processes are in place. I think governments in all three countries need to take that into consideration.

Mr. Chris Lewis :

Thank you. Here is a follow-up question. As Mr. Carrie said, the C.D. Howe Institute did release an economic impact study. They say that the “negative elements outweigh the positives” and that Canada's real GDP will shrink by 0.4%. They have also expressed concerns about a potential thickening at the border. Do you share their concerns about the overall benefits and the potential for a backlog at the border?

Mr. Mark Nantais :

Is that question addressed to me, Mr. Lewis?

Mr. Chris Lewis :

Yes, sir.

Mr. Mark Nantais :

Again, our industry has been deeply integrated for many years. We've worked exceptionally closely with the Canada Border Services Agency. Following 9/11 for instance, we instituted FAST-related programs, so we address security. Customs and the border are an extension of our just-in-time delivery system so we have made many developments over time. We are in pretty fair shape. Canada has responded quite favourably in that respect, but if we do see a thickening, then that will have some very severe consequences not just in our industry, but in many other sectors as well.

(1645) Mr. Chris Lewis :

Thank you very much. How much time is left, Madam Chair?

The Chair :

You have two minutes.

Mr. Chris Lewis :

Thank you. Thank you for your comments, Mr. Nantais. I'm going to move to the dairy industry. I'm reading here from the same economic impact statement from the C. D. Howe Institute. Data from pages 12 and 13 and tables 8 and 9 show the impact on dairy from the CUSMA. Page 12 shows Canadian figures. Canada's dairy will lose 2.62% of sector and $699 million U.S. in its domestic market to the U.S. Wow. Given the negotiating dynamic and the tough spot Canada was in, what's left to do other than concede on these export caps? Are administrative measures really feasible?

Mr. Jacques Lefebvre :

The administrative measures are feasible. They are to mitigate the impact of the caps. I think it's important to understand, just to build on something that was said earlier, that the U.S. overproduces 15% in dairy, and their strategy—and they're very open about it—is to position themselves on the world market. What they've been able to achieve through this agreement is to eliminate competition coming from Canada. The impact of that is major, and the time frames to adjust to that are very short.

The minimum would be at least having year one apply starting August 1, to coincide with the dairy year, but when it comes to intellectual property, we see that the negotiations were granted some transition time, between 2.5 and 4.5 years. We look at that in dairy and say if we had to concede, it would have been nice to be able to transition over a longer period.

The Chair :

Thank you very much. Ms. Bendayan.

[ Translation ]

Ms. Rachel Bendayan (Outremont, Lib.) :

Thank you very much. Thank you for coming to testify today. My question is for Mr. Nantais. [ English ] In your statement, you said that the new NAFTA, Bill C-4 , should be ratified expeditiously, and I believe you also noted the importance of obtaining certainty. Is that certainty something that your members in the auto industry and the approximately half-million Canadians who work in the auto industry are asking for?

Mr. Mark Nantais :

Absolutely. Certainty enables decision-makers to make decisions about investments not just in Canada but in the U.S. and Mexico. Our Canadian manufacturers are now entering another cycle of new investment. If they don't have that certainty, these decisions will be postponed and that's simply a lost opportunity. If we don't get these investments this cycle, for instance, they probably won't come forward in the foreseeable future. That is the downside that I referenced in my remarks. Some would even suggest that if we don't make these investments now, they will never come to Canada again, unless we address this broad spectrum of the high costs of operating in Canada.

Ms. Rachel Bendayan :

Thank you. We also heard you mention that the auto sector represents approximately $54 billion in trade. Earlier in the committee's work last week, we heard the mayor of Windsor say that he saw potential for growth in the industry, particularly for auto parts suppliers and other smaller businesses in the value and supply chains. Do you see potential for investment in those areas in Canada?

Mr. Mark Nantais :

We can see scenarios where there would be potential expansion, if you will, or opportunities, but as I also said in my remarks earlier, CUSMA is simply the basis to move forward. It's the entrance fee, if you will, to continue doing what we're doing, but it does not provide that guarantee in the future unless many of these other things that I've mentioned, these other parameters, these other issues, get addressed as well. So yes, we agree with that, but if one is walking away here thinking it's guaranteed, we cannot say that.

(1650) Ms. Rachel Bendayan :

I understand. Perhaps with the time remaining we could touch on the importance of your members investing in zero-emission technology and where you see that going. Could you give us a short update on cars of the future?

Mr. Mark Nantais :

How much time do we have? A short response is.... Well, to begin with, let's start with zero-emission vehicles. Basically, they're electric vehicles or fuel cell vehicles, absolutely, and they're already in the market now at a pace that is unprecedented. There are many more new models and many more sales. I think that's a given, particularly when you look at the GHG emission standards that we have to meet. We can't meet them without electrifying the fleet. When we start getting into connected vehicles, and ultimately autonomous vehicles further down the line, obviously, we start getting into the shared economy.

Autonomous vehicles and so forth and shared transportation services again are very much of the future, but a little farther out. There are many things we have to satisfactorily address, I might say. We have in Canada this little problem called winter, and some of our sensors don't work that well when they're covered with snow and so forth, just as a practical matter. Even just on zero-emission vehicle technologies, I would say that literally hundreds of billions of dollars are being invested. Companies are definitely committed to seeing a return on their investment in that regard.

They are very much our immediate to mid-term future.

Ms. Rachel Bendayan :

You referred to billions of dollars in investments, including in Canada?

Mr. Mark Nantais :

Yes. Some of these other partnerships that I mentioned earlier in terms of software and sensors are very much a part of those vehicles. In other words, that's a component of the design cycle, or the design that goes into these vehicles, which is shared across these companies.

Ms. Rachel Bendayan :

Thank you.

The Chair :

Thank you very much. Mr. Savard-Tremblay, you have two and a half minutes.

[ Translation ]

Mr. Simon-Pierre Savard-Tremblay :

I'm speaking to Mr. Nantais of the Canadian Vehicle Manufacturers' Association. You federate all vehicle manufacturers of vehicles such as individual vehicles, but also manufacturers of other types of vehicles, isn't that right?

[ English ]

Mr. Mark Nantais :

When you say larger vehicles, I'm not sure what you mean by that. I represent Fiat Chrysler, Ford and General Motors. These are some of the largest traditional vehicle manufacturers in Canada and in North America in multinationals. Many of the things I've addressed today are things that all vehicle manufacturers, in many respects, support in Canada. I'm not going to speak for those others, but we have had discussions on a regular basis. Many of these issues are the same ones, and some of the solutions to these concerns are also the same ones that they support.

[ Translation ]

Mr. Simon-Pierre Savard-Tremblay :

So you're talking about efforts that are being made to reduce emissions. You're talking about efforts that are being made to, ideally, meet emission reduction targets, so the environmental concerns that the vehicle industry would have. In your opinion, would it have been desirable for the agreement to have contained stronger environmental standards?

[ English ]

Mr. Mark Nantais :

I would say no for this reason. When we talk about smog-related emission standards for instance, we've aligned with the United States. It is the most stringent national standard in the world. When we talk about GHG standards, it's also a very aggressive year-over-year improvement. Now, they may change—there's a very complicated issue unfolding in the United States—but we would continue to say that we must continue to align our regulations. That also applies to vehicle safety and technologies, where we are moving to a higher common denominator by aligning with the national standards of the United States.

In many respects, you really can't get better than that. There may be some examples in other jurisdictions, but when we talk about the integrated North American market, the need for scale and the integration of our market, these are things that.... Basically, if we develop technology that people can't afford, these technologies will not make it into the marketplace. That means we don't get the safety or environmental benefits. We need the scale to make sure that prices of these technologies are affordable for consumers, and that those consumers can have maximum choice.

If we don't have this, then, for one, many of these products may not come to Canada, and consumers, for affordability reasons, may not buy them either. Either way, we don't get the safety benefit and we don't get the environmental benefit.

(1655) The Chair :

Mr. Blaikie.

Mr. Daniel Blaikie :

Those were along the line I wanted to go in terms of talking about some of the implementation on the auto side, and the question of regulations between Canada and the United States. I'm also curious, because no one yet has talked about what was agreed to in the TPP with respect to auto. Is there any tension or friction between that and what was agreed to in CUSMA? How will that interact in the Canadian market? Do you have reflections that you would like to share on that?

Mr. Mark Nantais :

The CPTPP, which is what it ended being, is an agreement we didn't support. We didn't support it on the basis of having full reciprocal access to markets in the countries that are part of that agreement. Some of those countries, even while the negotiation was under way, were introducing more constraints and restricting access, such as Vietnam. When we negotiate these international agreements, we should be looking at it through the lens of what is good for our domestic industry. That's what these countries are doing.

If we can't gain full reciprocal access, which we have unsatisfactorily addressed to date, because of non-tariff barriers which they've introduced and continue to introduce, that is not helpful to our domestic industry. Ultimately, this could be very harmful to us. In the United States, that's exactly what the Americans are doing. They're negotiating these international agreements through the lens of what is helpful to the long-term viability of their domestic industry. That's what we need to keep in mind when we're negotiating these other agreements.

Mr. Daniel Blaikie :

Indeed. If the Canadian government isn't bargaining on behalf of the Canadian economy, I don't know—

Mr. Mark Nantais :

CETA was an improvement.

Mr. Daniel Blaikie :

—who we are bargaining for.

Mr. Mark Nantais :

If we didn't have CUSMA, and we couldn't operate as a fully integrated industry, we would not be competitive, globally speaking. It's very critical.

Mr. Daniel Blaikie :

Thank you for your comments.

The Chair :

Thank you to all of our witnesses for that very valuable information. We will now suspend for approximately two minutes before we convene the next session.

(1655) (1700) The Chair :

I'm calling the meeting back to order. We will continue our study of Bill C-4 ,

an act to implement the agreement between Canada, the United States of America and the United Mexican States. Welcome to all of our witnesses for our second week of hearings. From the Canadian Electricity Association, we have Michael Powell. From the Canadian Federation of Independent Business, we have Corinne Pohlmann and Jasmin Guénette. From the Chemistry Industry Association of Canada, we have Isabelle Des Chênes and David Cherniak. From the Retail Council of Canada, we have Jason McLinton. Mr. McLinton, we'll start with you.

[ Translation ]

Mr. Jason McLinton (Vice-President, Grocery Division and Regulatory Affairs, Retail Council of Canada) :

Thank you, Madam Chair and members of the committee for the opportunity to come and discuss with you Bill C-4,

An Act to implement the Agreement between Canada, the United States of America and the United Mexican States . RCC, the Retail Council of Canada, strongly supports Bill C-4 I will briefly introduce the RCC. The retail trade is the largest private employer in Canada. More than 2.2 million Canadians work in our industry. Recognized as the voice of retailers in Canada, RCC represents more than 45,000 businesses of all types, including department stores, grocery, specialty, discount, independent and online stores. The grocery members of the RCC are proud to be an integral part of the Canadian food system.

They constitute the final and direct link with consumers, offering Canadians the wide variety of foods they eat every day. (1705) [ English ] RCC is highly supportive of Bill C-4 . Canada is a trading nation. Free trade is essential to a modern economy, allowing Canada access to world markets for its exports and allowing retailers and consumers in Canada to access a variety of goods at competitive prices.

The renegotiated NAFTA, otherwise known as the Canada-United States-Mexico agreement, or CUSMA, preserves key elements of the previous free trade agreement and incorporates new and updated provisions that seek to address 21st century issues. Let me be clear. CUSMA is good for retailers and CUSMA is good for Canadian consumers. Specifically, I'd like to make comments on two points within CUSMA. The first one is the de minimis threshold.

Retailers in this country are pleased that the Canadian negotiating team delivered a deal that protected Canadian retailers from the most unreasonable demands made by the U.S. side. With U.S.-based online merchants and couriers pushing hard for an increase of the de minimis level to $800 U.S., it could have been devastating for retail merchants in Canada and to the over 2.1 million Canadians working in the retail sector.

This level would have created a tax and duty advantage for foreign shippers over Canadian retailers, essentially incentivizing Canadians to shop anywhere but in Canada, at the expense of those who actually invest and employ in Canada. Clothes, books, shoes, toys, sporting goods, consumer electronics and housewares would have been particularly hard hit, and these tend to be the areas in which small and medium-sized retailers specialize.

We're very pleased to say that the Canadian negotiating team did not cave in to these demands, and I would personally like to thank the Prime Minister , Minister Freeland and the Canadian negotiating team for the work they did in this area. The second area that I'd like to comment on is the tariff rate quotas for supply-managed goods. Through negotiation of CUSMA and other new trade agreements, such as the CPTPP and CETA, Canada has increased its TRQ commitments for supply-managed goods nearly threefold, and the landscape of Canadian industry and consumer demand has changed significantly.

RCC is supportive of the government's decision to conduct this comprehensive review of its TRQs for existing and new trade agreements, such as CUSMA. That said, if the purpose of these trade agreements is to bring competitive pricing for Canadian consumers, retailers must be given their fair share of duty-free quota under Global Affairs Canada's review, to maximize consumer choice and bring these better prices.

In particular, quota on products meant for final retail sale to the consumer should be allocated directly to retailers, rather than slicing the pie so thinly that each piece of the pie would be of negligible value, or allocating the bulk of ready-for-sale goods such as fluid milk, cheese and poultry up the line. Having fewer price takers along the supply chain will ultimately lead to more competitive prices for Canadians.

While quota cannot be allocated directly to consumers, it can be allocated to the people who are closest to consumers, and that is retailers, if Canadians are to see the full benefits of this deal. [ Translation ] In conclusion, thank you once again for the opportunity to present the perspective of food retailers and other retailers on Bill C-4 . I'll be pleased to answer your questions.

[ English ]

The Chair :

Thank you very much. Next is the Chemistry Industry Association of Canada.

[ Translation ]

Ms. Isabelle Des Chênes (Executive Vice-President, Chemistry Industry Association of Canada) :

Thank you, Madam Chair. It's an honour to appear before the committee today. [ English ] The trading relationship that Canada has with the United States and Mexico is a key pillar of our economy. The Canada, U.S. and Mexico trade agreement represents a step forward in that relationship and the Chemistry Industry Association of Canada and its members support its ratification with the passage of Bill C-4 . Canada's chemistry industry is a vital component of our economy and is the fourth-largest manufacturing sector, at just over $58 billion in annual shipments. Ours is also a very highly skilled industry.

More than 38% of our nearly 90,000 employees are university graduates, second only to the IT sector. These highly skilled employees are well paid with an annual average salary of $80,000. The chemistry industry also supports an additional 525,000 Canadians in indirect jobs. While few people give thought to the role of chemistry in the economy, more than 95% of all manufactured goods are directly touched by the business of chemistry. This includes key sectors of the Canadian economy, such as transportation, agri-food, natural resources and, of course, the municipal entities through water and sewage treatment.

In my brief time with you today, I want to share a few key points on behalf of Canada's chemistry sector. First, free trade has been an unquestionable benefit for our chemistry sector and nowhere is that more prevalent than here in North America. Canada's chemistry sector is highly integrated into international trade flows. Our industry exports nearly $40 billion of chemical products each year, second only to transportation equipment providers in the manufacturing space. On the other hand, we import just under $60 billion from other nations.

Taken together, the chemistry sector trades around 100 billion dollars' worth of products each year. With respect to our North American neighbours, approximately 76% of our exports and 58% of our imported chemical products come from the United States and Mexico, equating to over 65 billion dollars' worth of trade annually. Our members have offices and production facilities across Canada, including in B.C., Alberta, Saskatchewan, Manitoba, Ontario, Quebec and New Brunswick. Every single day these facilities trade hundreds of millions of dollars of products with our American and Mexican neighbours.

Every day they send hundreds of train cars from Fort Saskatchewan, Sarnia and Bécancour to facilities in Texas, Illinois, Ohio, Coahuila, Chihuahua and Mexico City. In return, these U.S. and Mexican companies send hundreds of cars back, picking up new products in Guadalajara, Louisiana, New Jersey and Washington along the way, and sending them to manufacturers in Red Deer, Toronto and Montreal. Thousands of trucks and train cars cross our three borders each day in a highly efficient and integrated manner. All of this has been possible through free trade.

My second point is that once it became clear that a renegotiation of NAFTA was imminent, CIAC wasted no time in articulating clear and concise priorities that would preserve and modernize North American trade. While it was important for us to maintain tariff-free access for chemical products into the U.S. and Mexico, we wanted to use this once-in-a-generation opportunity to modernize key aspects of the North American trade framework. Addressing non-tariff issues through free trade negotiations is a constructive way to ensure a common approach among trade partners, vital to a knowledge-based economy.

This means finding new ways to strengthen government-to-government co-operation, avoiding duplication and enhancing regulatory cohesion among trade partners. Just as important as enhancing the free flow and security of goods, the flow of ideas and information helps to strengthen our supply trains, improve our businesses and improve business certainty. Modern trade agreements go far beyond tariffs and it is crucial that these agreements evolve with the economy.

In a unique step, we collaborated with our sister associations in the United States and Mexico to offer tripartite recommendations to our respective negotiating teams on modernizations to the areas of rules of origin and regulatory co-operation. These two areas are uniquely critical for the trade of chemical products. CUSMA preserves and enhances the trilateral trade of chemistry products in North America.

It prevents new tariffs from being applied to chemical products, modernizes rules of origin by offering companies a clear menu of options for documenting the origin of their products, enhances regulatory co-operation with a sectoral annex intended to facilitate cross-border information and burden sharing to protect human health and environmental health, and strengthens Canada's world-leading risk management approach to chemicals management. Finally, it facilitates digital trade by ensuring that industry data can flow freely and securely across borders.

The chemistry sector has evolved significantly since the original NAFTA was adopted. Today, tens of billions of dollars' worth of chemical products are traded across our borders. CUSMA will provide for tariff-free trade of chemical products. It modernizes key areas vital to a knowledge-based 21st century economy and it strengthens Canada's risk-based approach to chemicals management. Finally, we'd like to thank the Prime Minister and Minister Freeland for their extensive engagement on the file. We can't say enough about Canada's negotiating team at Global Affairs Canada.

They proved that despite the tense rhetoric, you can achieve win-win-win outcomes. I'd also like to note the high degree of participation from the provinces as well. In the interest of time, I will leave it at that and welcome your questions.

(1715) The Chair :

Thank you very much. We will go to the Canadian Federation of Independent Business, with Ms. Pohlmann.

Ms. Corinne Pohlmann (Senior Vice-President, National Affairs and Partnerships, Canadian Federation of Independent Business) :

Thank you for the opportunity to be here today to share the perspectives of small and medium-sized companies on the trade agreement between Canada, the United States and Mexico. I'll be sharing my time with Jasmin Guénette, my colleague. He'll be starting off, and I will be ending the presentation.

[ Translation ]

Mr. Jasmin Guénette (Vice-President, National Affairs, Canadian Federation of Independent Business) :

Thank you, Ms. Pohlmann. The Canadian Federation of Independent Business, or CFIB for short, is an independent and non-partisan non-profit organization representing 110,000 small and medium-size independent businesses across the country in every sector of the economy. Our last survey on international trade dates back to 2017. We received 4,400 responses, and we used the data to publish a report containing many of our members' comments as well as real-life examples of issues they face when they engage in international trade.

We have a few copies of the report with us, so if anyone would like a copy, I can provide you with one after the presentation. We can also send it to you by email. It's important to note that more than 90% of Canadian exporters are considered small businesses. What's more, 31% of survey respondents said they had some experience with exporting, and 71% reported having experience with importing. Some engage in international trade only occasionally,

whereas for others, it's a regular, if not daily, practice. What matters, however, is that they be able to trade with others as smoothly and as swiftly as possible, regardless of how often. In addition, 63% of respondents import products or services from the United States, while 28% export to the U.S. Clearly, the figures aren't as high when it comes to trade with Mexico, but the country remains a major trading partner for Canadian businesses, and that trade is growing.

These figures show just how important our trading relationship with the U.S. is, while highlighting the need for clear rules and a predictable trading environment to make it easier to trade with our partners. We asked our membership what motivated them to engage in more international trade. It may be greater demand for a product or service, a desire to grow their business or a business opportunity. More than a third of members indicated that good trade deals influenced their plans to export products or services.

In 2018, we asked our members whether a new agreement between Canada, the U.S. and Mexico should include provisions specific to small and medium-size businesses, so we are pleased to see an entire

chapter devoted to them in the new agreement, recognizing their important role in the economy. As one of our top recommendations in connection with the negotiations, this is a positive step forward, one we hope will make it easier for small and medium-size businesses to engage in more international trade. I will now turn the floor over to my colleague, Ms. Pohlmann.

[ English ]

Ms. Corinne Pohlmann :

Thank you, Jasmin. We'll get into our priorities and recommendations. I want to say, first and foremost, that we encourage the government to move forward on ratifying this agreement as soon as possible. We have experienced a lot of uncertainty in international trade over the past few years, and this would help bring some needed stability with Canada's largest trading partner. In addition, we're very pleased to see a small business chapter, as Jasmin pointed out, included in this agreement, which recognizes the particular challenges small businesses face when it comes to trade.

If we want to see more small business engage in trade, we would encourage the government to move quickly on many of the ideas and principles found in the small business

chapter and throughout the agreement. While eliminating and/or lowering duties is important, almost more important to smaller businesses is to focus on making border processes easier. This includes improving how quickly trucks can cross the border but also finding ways to clarify and simplify customs processes and paperwork. In particular, things like the rules of origin can be a real challenge for smaller firms who may not have the expertise or resources to address issues that may arise in that area.

Also important, though, is to review things like trade facilitation programs such as FAST, C-TPAT and PIP and to make sure that they consider the needs of small and medium-sized companies when they're being designed, and making sure they're easy to access for smaller firms, as well. Too often they're really focused on the large firms and not on the small firms. I want to touch on a couple of small things. While we'd like to see this agreement move forward as soon as possible, we also know there are a couple of areas of concern.

We recognize that certain sectors may be hurt by some aspects of the agreement, and action must be taken to address those issues. For example, we know the dairy industry will see U.S. competitors gain greater access to the Canadian market. To deal with this, the government should provide a detailed transition plan, provide clarity on what compensation will be offered and provide assurances that these measures will work for smaller producers, as well.

As an aside, I should mention that our members in the grain and livestock industries are also struggling due to trade issues with places like China and India, so we would certainly welcome efforts to resolve those issues, as well. We're also concerned with the higher de minimis. While we agree with the Retail Council, we were pleased to see that the government sort of stuck to the ground and didn't go to the $800 that was being pushed by the Americans. We are still concerned that it is doubling the cost from $20 to $40 for tax purposes and up to $150 for duties.

Small Canadian retail businesses are already facing intense competition from online and international businesses, and we feel that some of these changes will actually make it worse. At the very least, we ask that government direct stronger enforcement of the rules by Canada Post and CBSA. The issue here is that the rules are in place but they're not being applied. We need to see stronger rules enforced and make sure that the rules that are in place are being properly enforced by Canada Post and the CBSA.

We would also encourage the government to look at ways that we could potentially offer other relief should this become an issue for smaller retailers on the ground here in Canada. These are the issues we hope to address today. We'd like to thank you for the opportunity, and we look forward to your questions.

(1720) The Chair :

Thank you very much. We'll go to Mr. Powell from the Canadian Electricity Association.

Mr. Michael Powell (Director, Government Relations, Canadian Electricity Association) :

Madam Chair, thank you for the opportunity to speak in support of Bill C-4 and CUSMA and how it helps Canada in the North American integrated electricity grid. CEA is the national voice of electricity. Our members operate in every province and territory in Canada and include generation, transmission and distribution companies, as well as technology and service providers from across the country. Our electricity sector employs 81,000 Canadians and contributes $30 billion to Canada's GDP. Indirectly, our sector supports essentially every job in Canada, as electricity is the foundation of the modern economy.

Electricity is at the heart of Canada's transition to a low-carbon economy. More than 80% of Canada's generation is already non-emitting, making it one of the cleanest grids in the world. In fact, the Canadian electricity sector has already reduced GHG emissions by 30% since 2005. Electricity will play an essential role as Canada transitions to a low-carbon economy.

The Chair :

Excuse me, Mr. Powell. Translation is asking you to slow down a little. I appreciate the speed, but the translators can't keep up.

Mr. Michael Powell :

The sector is uniquely positioned to help advance Canada's clean energy future and provide, as the throne speech aspires to, clean, affordable power in every Canadian community. Canadians and Americans share a highly integrated electricity grid, connected by more than 35 high-voltage cross-border transmission lines. Our members also engage in bidirectional electricity trade with the United States and work with American counterparts to keep the grid reliable and secure.

Trade integration forms the backbone of a highly positive and mutually beneficial cross-border electricity relationship, which provides economic, environmental, resiliency and security benefits to Canadians and Americans and contributes to affordable and increasingly clean energy for customers on both sides of the border. Overall, the binational integrated electricity system exemplifies the advantages of partnership and collaboration and benefits both countries.

In recognition of these mutual benefits, CEA and its U.S. counterpart, the Edison Electric Institute, submitted joint comments to negotiators on both sides of the border during the renegotiations. These joint comments highlighted our shared view that the existing cross-border trade relationship works well and the importance of preserving it. For more than 25 years, NAFTA has provided stability and predictability to our shared interconnected grid.

Its value is underpinned by NAFTA's guarantee of tariff-free electricity trade, and it is positive that the Canada-United States-Mexico free trade agreement maintains this integral guarantee. CEA also supports the greater integration and interdependence of North American energy systems and was pleased to see the inclusion of a CUSMA Canada-U.S. energy side letter on regulatory measures and regulatory transparency. Over 70 terawatt hours of electricity flowed across the border in 2018, representing an electricity trade relationship of over $3 billion.

Approximately 30 states engage in electricity trade with Canada each year, with Canadian exports to northern border states being particularly robust. This two-way exchange enables electric supply to meet demand in the most efficient manner, increases resilience, boosts affordability for customers and helps regions meet policy and business goals. Many Canadian and U.S. electricity companies own assets in both countries. Canadian export volumes are high relative to import volumes, as Canadian generating capacity generally exceeds requirements.

In 2018, net exports were 48.2 terawatt hours, which represented a net value of $2.4 billion Canadian. We have additional surplus supply as well as rich resource development opportunities. From a Canadian perspective, electricity trade provides system reliability and resilience and economic and affordability benefits. While exports represent a valued source of revenue for many Canadian electricity companies, that is only half of the story.

From the American perspective, particularly for northern border states, our electricity is an affordable, reliable, safe, secure, clean supply option that contributes to national energy security, environmental goals and economic success. Given our abundant clean electricity profile and rich clean resource development opportunities, Canadian electricity imports contribute to the shrinking of the U.S. carbon footprint and can also serve as backstop energy to support the development of U.S. variable renewable resources such as solar and wind. This relationship is more than powering homes and businesses.

National energy security has also been a major Canadian preoccupation throughout the negotiation of the agreement. The interconnected nature of the North American grid means that its reliable and safe operation is a shared responsibility. Canada and the U.S. have worked together to develop effective institutions in support of a safe, secure, reliable electricity system to the benefit of both Canadian and U.S. businesses and communities.

The Canadian electricity sector is an active participant in cross-border institutions and programs that aim to secure the grid, such as the Electricity Subsector Coordinating Council, which enjoys participation of senior government officials in the sector and electricity industry CEOs from both countries. The electricity sector and the government also participate in major cross-border security incident response exercises like GridEx, which was held this past November across Canada and the U.S. To this end, Canada and the U.S. work very closely on the protection of critical infrastructure.

Cybersecurity and physical security are top of mind for industry and government alike. While there is good collaboration between our governments and industries, there is always opportunity to strengthen cyber protocols. All things considered, there are further opportunities to leverage the positive electricity partnership between Canada and the U.S. The ratification of CUSMA will help provide the stability and predictability to our shared interconnected electricity system to help forward this valuable partnership.

(1725) We'll keep working to make North America the world's leading energy region by promoting energy security and affordability, strengthening energy and infrastructure protections and achieving environmental goals. Thanks for your time.

The Chair :

Thank you very much, Mr. Powell. We'll now move to the members and will start with Mr. Hoback.

Mr. Randy Hoback :

Thank you, Chair. Thank you, witnesses, for being here this afternoon. I appreciate it. I'm sure you're aware that we're doing extended sittings all this week. We're doing as much as we can to give the 200 people who want to appear in front of the committee a chance to talk about the impact of CUSMA, the new NAFTA. The concern we have is not the deal; we're going to approve the deal. The bill should go into clause-by-clause study hopefully on Thursday or Friday, and then it will be out of here. Now with regard to the Senate, that's a different story.

The Prime Minister will have to deal with them; that's his baby. However, as far as the House of Commons is concerned, we should get it through, which I think everybody wants to see. There are some concerns I want to bring in. I'll start with the CFIB. A lot of people will say to get it done, yet when you start telling them what's in the deal, they say, “Oh, I didn't know that.” You used a good example. You talked about the de minimis. It goes from $20 to $40, and then the duty is to $150. Do you realize that Canada Post doesn't qualify?

It is only a courier outside of Canada Post that would qualify for those types of situations.

(1730) Ms. Corinne Pohlmann :

Yes, and that's part of the reason we're a bit worried about the impact this is going to have. Canada Post is the one that's the real problem. It has never been the couriers. I think that the couriers have always done a fairly good job of collecting duties and taxes, even under the current rules. Canada Post never did, and now they're being exempted. I would suggest—and perhaps the Retail Council knows better than I do—that most shipments are coming through Canada Post.

Mr. Randy Hoback :

Yes, so the reality is that it's going to be $20 if you go through Canada Post, but if you go with another courier—pick one—then you go to the new rule. The weirdness in all of this is, why exempt Canada Post? The only profitable part of their corporation is the courier side of it. If you go to most of the business community, they think it's everybody. If you ship with Canada Post, you don't get it, and they go, “Oh, wait a minute, what else is in here?” That goes to why we need to have a little more time to go through this to the nth degree.

Hopefully in the implementation, maybe we can change that somewhere down the road. However, the Retail Council may not want to see it changed. You may want to leave it the way it is. Was that part of your strategy when you were doing the consultations, to—?

Mr. Jason McLinton :

Yes, we participated in the consultations extensively, as you know. Our members would like to have seen the de minimis threshold moved to zero. As you mentioned, in the renegotiated NAFTA or CUSMA, with any purchase you're making under that $40 limit for taxation and $150 for duties, you're essentially incentivizing those purchases to be made anywhere but in Canada. We would like to have seen that remain the same, or even lowered to zero.

That being said, there are the very practical realities of having to administer this thing at the border, as well as the pressure that the Canadian negotiating team was getting from the U.S. government. All in all, it's not something our members are ecstatic about, but they are very, very pleased to see where we did land on it compared to what had been the pressure that the negotiating teams were under.

Mr. Randy Hoback :

Yes, I know that the $800 would have had a devastating effect. Actually, if you look again at the cost of doing business in Canada versus the cost of doing business in other jurisdictions around the world, with carbon tax and everything else, it's quite a bit more to do business here. As you said, you take the de minimis and you increase it and the tax to $150, and all of a sudden you're competing against that American across the line who is selling something even in that $60—

Mr. Jason McLinton :

Ultimately, I think our members would have been fine with that if that same $800 tax break were given to Canadian retailers and consumers would have.... I can't comment on what that would have done to government revenue, but if you're going to give a tax break to retailers outside of Canada, you'd have to give that same tax break to retailers who are investing in this country.

Mr. Randy Hoback :

Okay. Michael, you talked about cybersecurity in the network. That's something that's really concerning right now as you go into the 5G networks. Whenever I've been down in the United States, it's funny that when you sit down with members of the House or the Senate, the first thing they bring up is Huawei and 5G and cybersecurity. In fact, I remember that three years ago at the governors conference, all they talked about was cybersecurity, without even talking about Huawei. Does this agreement give us the flexibility to pick whatever service provider we want for our 5G network, yet still keep that security where we need it to be?

Mr. Michael Powell :

Well, I'm familiar with the opinions of our friends to the south. The key thing that Canada is going to have to decide is that with the way we operate our electricity system—we move lightning through wires at the speed of light across North America—the equipment we have has to be as secure and reliable as possible. You can read in the newspaper and in public documents on a regular basis about some of the challenges that the supply chain offers, not just for regular things, but for some of the industrial control systems that are in place.

I think the key thing is that we need to make sure we're working collaboratively, not just here and in the United States, not just big companies, but also recognize that there are small operators as well that have to have access to technologies to make sure there is no weak part of the grid. The weakest part of the chain is where it's going to break.

Mr. Randy Hoback :

We met with the Japanese car producers today at their facilities here in Canada. They said that one of the hurdles they see right now in setting up a new plant for electrical vehicles or hybrids is that there's no battery manufacturer in Canada, in fact, in North America. Do you think we have the infrastructure in place, and that it will be in place? Do the rules under the new USMCA allow that infrastructure to be placed for electric vehicles, with the charging stations, the capacity and the hybrids? Do you see that becoming standard?

Mr. Michael Powell :

While we're concerned about the expansion of things like electricity infrastructure for EVs, it's less about trade relationships and more about some of Canada's policies internally. Things like the laws around electricity meters haven't been updated in decades, which makes it very difficult to install new electricity meters, both in homes and in businesses. We need to update those rules to make sure they're there and that we're able to do that. That's where we'll see the real opportunity for innovative companies to come in, as well as in places like condos and apartment buildings.

I think it's beyond the scope of where CUSMA is. How many are made in the United States I'm not sure, but there's a lot that Canada can do here with its own policies that will make it easier to roll out EV infrastructure for people and businesses.

(1735) The Chair :

Thank you very much, Mr. Powell. We will go to Mr. Sheehan.

Mr. Terry Sheehan (Sault Ste. Marie, Lib.) :

Thank you very much for your presentations. There were a lot of things for us to think about in your presentations. I'll go to the Canadian Federation of Independent Business first. You referenced the

chapter in particular related to small and medium-sized firms and the associated opportunities. I have a two-part question. First, how aware are small and medium-sized businesses that there is such a

chapter and opportunities? Second, what actions can the Canadian government take to increase awareness?

Ms. Corinne Pohlmann :

It's unlikely they're aware that there's a small business chapter; however, we're doing what we can in surveys to make them aware of the fact that there is a small business

chapter and, more importantly, what that actually means. That's the key. It doesn't really matter if there are a bunch of words as long as there's action taking place. I think that what the Canadian government can do is actually prove through their actions that they are serious about recognizing that some of the things that small businesses need when it comes to international trade are different from what larger businesses need.

They could be a bit more proactive in terms of getting feedback on how they could change custom processes to help them instead of, for example, creating portals whereby it's easier for them to access other government departments. Those kinds of things are going to be the best way to really communicate that to the small businesses, actually doing the things that need to get done in order for them to realize that opportunities are out there. That's not going to be as difficult as they originally thought it was going to be.

Mr. Terry Sheehan :

I used to work for the local economic development corporation developing small businesses. It's a very similar story throughout time. It makes sense. I had my own small business, and as opposed to, say, Algoma Steel in my riding, which does a lot of trade and has a whole department related to exporting and importing and whatnot, your small and medium-sized businesses sometimes have just one person or a couple of people. They're so busy doing their business that a lot of times they don't have those opportunities.

I also have the opportunity to be the parliamentary secretary for Minister Joly on the regional economic development agencies. One of the things that I'm trying to wrap my head around is how we can develop and use Export Development Canada, or places like FedNor, or FedDev—I'm not going to name off all the other regional economic development agencies across this country—to play more of a substantive role in inbound and outbound trade missions, in particular with the United States. What are your thoughts on that?

Ms. Corinne Pohlmann :

Organizations like EDC and the trade commissioner service for that matter are not well known either among small companies. In fact, when they do learn about them, they often feel like they're not really meant for them and that they're meant for bigger companies. We're constantly educating them ourselves to say, “No, actually, they're meant for you.” Again, I think it goes back to finding ways to make it easier. I'll give you an example. When you go to the Government of Canada website it's very difficult to find anything specific to small businesses.

It's very much focused on Canadians, which makes sense, but it's something that allows them to understand that there's a piece where they can go to get information that they need. It's not easy to navigate. That's where it starts. There are things that CBSA can do that are a little bit more focused on the information the businesses need to import or export. Even though they're more involved in the importing side, that's where small businesses go to get information. They go to the border folks. They need to also be able to have a more consistent message around what you need to do in order to export effectively.

Ultimately, they've talked about a single window for years. It is the idea that as a small business that wants to get involved in trade, you go to one place and you get all the information you need from all the different government departments. That still doesn't exist. Businesses have to figure out whether they have to talk to CFIA or the USDA or.... That's where these types of agreements can start working together,.

It's not only figuring things out on the Canadian side, but it's linking those to the American side, so you can deal with all of those other government departments in one spot instead of having to figure out which ones you have to deal with. That's what is really going to help small businesses get more involved in trade.

Mr. Terry Sheehan :

It's twofold. More education and training and outreach as well.

Ms. Corinne Pohlmann :

Yes, and simplifying the processes.

Mr. Terry Sheehan :

On simplifying the processes, the fact is that one of the things Minister Freeland noted was that the paperwork that needs to be done by all businesses in terms of crossing the border is significantly reduced with the new agreement. Hopefully, that will spur more activity as well.

(1740) Ms. Corinne Pohlmann :

That would be good.

Mr. Terry Sheehan :

It's said, depending on what stat you look at, that 75% to 90% of Canadians live within about 160 kilometres of the United States. It's not surprising, looking at your stats, that the United States is the number one place for imports and exports for this country. I have a question for the retail folks as well. What exactly can the government do to help support the retail industry? It's sort of the same question but more drilled down in particulars. I think about where the dollar is now.

It's such a great opportunity for our American cousins to shop for various things, whether it is physically coming across into border towns like Sault Ste. Marie and into Canada or doing it online. What advice would you have for us?

Mr. Jason McLinton :

Have a visitor rebate program. Canada is the only OECD country that does not have a visitor rebate program. Essentially, think about Europe and the VAT program and other countries. Japan has a really good model that we're looking closely at where consumers can go, shop and get their taxes refunded directly at point of sale. I think Canada absolutely needs a visitor rebate program in order to encourage more people to visit Canada, exactly as you've suggested. It wouldn't just benefit retailers. It would benefit others when people need somewhere to stay and something to eat when they're here.

Canada absolutely needs a visitor rebate program. If I may touch on your other question, small and medium-sized retailers come to the Retail Council of Canada for information. They trust us. We represent over 45,000 storefronts across the country and even some retailers that people might think are—quote, unquote—large retailers. Depending on the business model and in the