The Chair (Mr. Leon Benoit (Vegreville—Wainwright, CPC)):
Good morning, everyone.
We will now start our meeting number 62, which is dealing with a study of Canada-U.S. trade and investment issues and the security and prosperity partnership of North America.
From 11 to 12 today, we have as our witnesses, from the Department of Industry, Alain Beaudoin, executive director, Innovation Partnerships Branch; and from the Department of Foreign Affairs and International Trade, William Crosbie, director general, North America Bureau, and Peter Fawcett, deputy director, U.S. relations.
If you would go ahead, gentlemen, for up to eight minutes in presentation, and then we'll get right to the questioning.
Mr. Alain Beaudoin (Executive Director, Innovation Partnerships Branch, Department of Industry):
My name is Alain Beaudoin and it is my pleasure to be here today to discuss the Security and Prosperity Partnership of North America, the SPP.
I am the Executive Director, Innovation Partnerships Branch at Industry Canada. Among my responsibilities, I am in charge of coordinating the prosperity pillar for the Government of Canada. First, I would like to give you a bit of background.
The Security and Prosperity Partnership of North America was launched in March of 2005 as a trilateral mechanism to strengthen North American competitiveness and enhance the security and quality of life of the citizens of the United States, Canada and Mexico through greater cooperation and information sharing.
In Canada, the Minister of Foreign Affairs has the mandate to manage our North American relationship, of which the SPP is one component. The Minister of Public Safety leads on the security agenda. And the Minister of Industry oversees the priorities of the prosperity agenda.
While respecting the sovereignty and unique heritage, culture and laws of each country, the prosperity agenda of the SPP seeks to enhance the competitive position of North American industries in the global marketplace. It also aims to provide greater economic opportunities, while maintaining high standards of health and safety. To this end, the United States, Mexico and Canada work together with stakeholders to strengthen competitiveness, reduce the cost of trade and enhance the quality of life.
Because of its trilateral nature, the SPP is a complex mechanism. It is implemented through the activities of trilateral working groups that are responsible for outreach with a variety of stakeholders within each country.
The prosperity agenda is comprised of nine trilateral working groups in key sectors of economic activity. They are e-commerce and ICT; energy; environment; financial services; food and agriculture; health; manufactured goods and sectoral and regional competitiveness; movement of goods; and transportation.
With input from stakeholders, working groups have agreed to work on a number of bilateral and trilateral initiatives to advance the prosperity agenda. All these initiatives have been made public. If you have not already done so, I invite you to look at the SPP website at spp-psp.gc.ca. It provides detailed work plans, and it documents the progress achieved so far in implementing these initiatives.
Briefly, this is how the SPP works. Now the question is how Canada can benefit from it.
As you know, key factors have fundamentally challenged the way global firms, including Canadian businesses, operate. Low-cost telecommunications systems and transportation and the availability of low-wage skilled workers in other parts of the world continue to profoundly transform business activities into global supply chains.
There are advantages to this transformation. Even small and medium-sized businesses that use supply chain integration and technology can expect significant cost reductions in quality and time to market, but North American businesses are feeling intense pressure to remain competitive.
While Canada is one of the most prosperous countries in the world, our prosperity depends, in large part, on our ability to access international markets. To remain prosperous, it is essential that Canadian businesses adapt accordingly and be able to deal with issues of supply chain management, such as seamless logistics. For Canada, these issues culminate at our border with the U.S.
It is common knowledge that nearly $2 billion is traded each day between Canada and the United States. Our economies are highly integrated and increasingly work in a seamless fashion. For example, 34% of our bilateral trade is intra-firm and more than 77% is intra-industry. This has led to the emergence of integrated and globally competitive commercial platforms fundamentally rooted in North America.
This is where the SPP can be instrumental. The SPP aims to enhance and encourage continued prosperous trade between North American countries while ensuring security.
The SPP is but one part of Canada's positive and productive relationship with the governments of the United States and Mexico. The SPP is a non-binding partnership. It seeks to find practical solutions to concrete issues. It is one mechanism to ensure a strong relationship with our NAFTA partners, and it is not intended to duplicate or replicate existing mechanisms. As such, the SPP is not intended as a replacement for NAFTA, nor is it intended to serve as an alternative to existing trade negotiation mechanisms.
At their last meeting in March 2006, the three leaders of Canada, the United States, and Mexico agreed to focus on five priorities to advance the SPP and ensure tangible results. They are strengthening competitiveness; emergency management coordination; cooperation on avian and human pandemic influenza planning; energy security; and ensuring smart, secure borders.
This renewed focus reaffirmed the leaders' commitment to advance a positive agenda for North America.
Achieving regulatory alignment within North America is one of the most important contributions to strengthening competitiveness. Through enhanced cooperation under the SPP, Canada, the U.S. and Mexico seek to make their regulations more compatible to reduce costs, by eliminating duplication and redundancies, and minimize barriers to trade. This is being achieved while ensuring continued high standards for health and safety, and protecting our environment.
The leaders also agreed to create the North American Competitiveness Council, or NACC, to provide governments with advice and recommendations on ways to improve competitiveness.
To build on this agenda, on February 23, Ministers Bernier, Day and MacKay met with their American and Mexican counterparts. They reviewed progress on the five priorities in advance of this year's leaders' summit, currently scheduled for August 2007.
Ministers also received the NACC's report, which was released publicly. David Stewart-Patterson appeared before the committee recently and also provided you with a copy of the report in both official languages. This report made 51 recommendations in three areas: border-crossing facilitation, standards and regulatory cooperation, and energy integration.
In conclusion, the SPP has been conceived as a step-by-step, practical approach to improve the way governments work together to enhance competitiveness, ensure our security and quality of life. All of this takes time and continued commitment.
Thank you very much.
Hon. Navdeep Bains (Mississauga—Brampton South, Lib.):
Thank you very much, Chair.
Thank you for the presentation.
Essentially, the purpose of this meeting—and we've been meeting frequently on this subject matter over the past few weeks—is to discuss two options. The two options that have come forth are, how do we improve the security and prosperity partnership, or do we need to abolish it altogether? It seems to be the school of thought in this committee that those are the two issues that are being discussed.
I say that because we've met with various stakeholders—civil society representatives, unions—who've expressed concern that they haven't been involved in the process, that they haven't been consulted, that they've had to really force their viewpoints in the process by aggressively presenting their positions on this matter, and that they haven't been allowed executive-level permission to get involved. I believe that concern has been raised ever since this initiative was launched. This is not a new issue.
How do we improve the process to include civil society, unions, and other stakeholders who have expressed concern, so that their views are taken into consideration in this process?
Mr. Ted Menzies (Macleod, CPC):
Thank you, Mr. Chair.
Thank you, gentlemen, for your presentations today. It is a very interesting discussion, and I'm glad you do actually have a website where people can find the facts. I think that will be very helpful.
I may appear to be deviating a little from your presentation, but there's something I want clarified.
Mr. Fawcett, I see you are deputy director of U.S. relations. I'm going to tap into your wealth of information, if I can. You may not know, but we are in the process of discussing a motion at this committee, and I will suggest to you that I and my colleagues on this side of the committee find it factually incorrect. We're very concerned with this committee putting forward a motion that is factually incorrect. I would like your help with this. I won't read all of it, but probably the most relevant statement in it is:
||—the Standing Committee recommend that the government quickly begin talks with its American and Mexican counterparts to exclude water from the scope of NAFTA—
To clarify your expertise, if we can, you are and have been involved in U.S. relations for some time. Can you give us an idea of how many years?
Mr. Pierre Lemieux (Glengarry—Prescott—Russell, CPC):
Thank you for the presentation—an excellent presentation.
I just wanted to highlight some of the things you said, because I think they really capture the essence of the SPP.
One of the things you stated that I want to highlight is the fact that Canada is one of the most prosperous countries in the world, but our prosperity depends, on the most part, on access to international markets. So international trade is a win situation for Canada.
You noted that $2 billion is traded almost each day between Canada and the U.S. It's important to know that as well. Again, that contributes to Canada's prosperity.
Another key thing that you brought out is that the SPP is not intended to replace NAFTA; it's not intended to serve as an alternative to existing trade negotiation mechanisms. We've heard people call it a treaty—it's not a treaty—and a bunch of other very definitive terms, and it's none of those. So I appreciate you having brought those points out.
We've heard from many witnesses that there are very secretive things going on, that the discussions going on are not public, the information is not public, that there's an agenda here that we don't see but they see. I'm wondering how you respond to that.
I'm encouraged. I see this as a very positive initiative to encourage trade, which is good for Canada. It's good for our citizens, it's good for our companies, for our industry, for our prosperity. And then we have a lot of speculation—we discussed this at the last meeting—and a lot of what I said, this feeling that things are hidden, not well-known, secret agendas, etc. How do you comment on that?
I'll ask Mr. Beaudoin.
Mr. Peter Julian:
Thank you very much, Mr. Chair. I appreciate that.
Let's come back to the issue of prosperity, because you've said—and other government representatives have said the same thing—that's what it's all about. Right? And we've seen the Statistics Canada studies that clearly indicate that 80% of Canadian families have actually seen a fall in real income since 1989, since the signing of the Canada-U.S. Free Trade Agreement.
Now from another study this week, for Ontario—and hopefully Ontario MPs would take note of this—90% of Ontario families with children under 18 have seen a fall in real income since 1989; 90%. It ranges from $5,000, in constant dollars, to $9,000, depending on the income level. So when people say that the Canada-U.S. Free Trade Agreement and NAFTA have profited the top 20% or top 10% and that corporate CEOs and corporate lawyers are richer than ever before, it's backed by study after study.
Now, the Conservatives will throw out some figures that they kind of make up on the end of a napkin, but basically the reality is that most Canadian families are poorer since 1989.
I have two questions for you. As part of the strategy overall, trade strategy, industry strategy, why are you not addressing this growing prosperity gulf that is happening in Canada? Secondly, why do you believe more of the same medicine will lead us somehow into prosperity, when the same medicine, through the Canada-U.S. Free Trade Agreement and NAFTA, has led, very clearly, to most Canadian families being poorer and having less money to spend?
Mr. Peter Julian:
Thank you for that.
He did admit—and it was the first time the government has admitted this—to the fact that Canadian families at the poorer income levels are actually getting poorer. Now, he said he hoped that would address itself. My concern, and I'll complete the point on that note, is that more of the same medicine is not going to lead to more prosperity; it's going to lead to an even larger prosperity gulf as our manufacturing capacity erodes.
I'd like to continue on the issue of pesticides; Mr. Bains mentioned it earlier. We have a decision by the government to allow for greater pesticide residue in Canadian food. This is a food safety issue. There have been studies done. The 2006 study in the Annals of Neurology found that even low exposure to pesticides increases the risk of contracting Parkinson's disease by 70%. What the government is doing, in a very clear and unabashed way, by saying they want to harmonize or remove that trade irritant of more effective food safety regulations, is actually putting Canadians' health at risk.
The United States has the weakest pesticide rules in the industrialized world. Why would it be in Canada's interest to lower our food safety regulations, to actually put Canadians' health in jeopardy, so that we can in some way harmonize our regulations with lower American standards?
Mr. Peter Fawcett:
Let me try a brief response. I think the statement made by the three NAFTA parties in 1993 is quite clear. I think that stands on its merit. Further to that, we have then amended our International Boundary Waters Treaty Act to address this very issue by prohibiting bulk water removals.
I want to go back to Mr. Menzies' question just briefly to say that in the time that I've been involved in this issue, since 2001, there have been no proposals for any bulk water removals or any projects that would address that issue. In fact, since that time, greater protections have evolved. The Provinces of Ontario and Quebec entered into an agreement with the eight Great Lakes states to amend the Great Lakes charter annex to, again, protect water in its basin. So not only do we have a federal level of protections, but we also have at the level of provinces and states in the United States a similar approach to protect water in their basins.
Frankly speaking, Mr. Chairman, the biggest threats to our waters these days are not because of removals. The threats that we're facing are in water quality and invasive species. You may have seen even this week the major problem we have in the Great Lakes with hemorrhagic fever affecting all species of fish. This is not the first. In fact, there are 180 or more invasive species in the Great Lakes and in the St. Lawrence River that pose much greater risks to our water resources and the ecosystems and communities that depend on it.
Water quality remains a huge issue. We're reviewing the Great Lakes Water Quality Agreement. The biggest threat, and there again it's no surprise, is municipal sewage treatment and a lack of full treatment that's affecting water quality.
Mr. Dean Allison (Niagara West—Glanbrook, CPC):
Thank you, Mr. Chair.
I'd certainly like to thank my colleague, Mr. Julian, for bringing up the fact that Ontario is still struggling to get back from the NDP government we had in the early nineties and the fact that those studies started in late 1989 and moved on. We were driven so far behind that we almost became a have-not province. I can say that Mr. Harris came in, in 1995, and tried to correct it and provide a solution, and we had $25 billion cut in transfer payments from the federal government at that point in time, so I think all things considered—
When you look at figures and how you want to spin them, I think it does remain that families are still trying to get back from the 1990s. It was that NDP government in Ontario that almost killed Ontario permanently. I do want to mention that and put it on the record.
We've had some groups come in and talk to us and say we shouldn't be trading with the U.S. I guess my concern is always that no one ever provides a solution or provides another—I don't know whether they think we're going to get all our trade with Chile or where it's going to come from, because it's always just naysayers, etc.
There are two points I want to question again. When we look at harmonization of pesticides, I would assume that one of the reasons we're looking at that is because our farmers—I know certainly in my area, and I know Mr. Maloney would maybe say the same thing--have concerns about the unfair advantage they have in not being able to compete. I would suggest that one of the reasons we are looking at the possibility of harmonization on some of these issues is we're trying to be more competitive. Have you been led to believe that this is one of the reasons, as we look at this issue of pesticides? Does it come from stakeholders such as farmers and other groups that deal with these things?
Dr. Gordon Laxer (Director, Parkland Institute):
Thank you for inviting me.
Parkland Institute is an Alberta-wide research network at the University of Alberta in Edmonton. We're supported by over 600 individuals and dozens of progressive organizations. Parkland conducts research and education for the public good. My remarks are on energy and climate change implications of the SPP.
I don't understand why Canada is discussing helping to ensure American energy security when Canada has no energy policy and neither plans nor enough pipelines to get oil to eastern Canadians during an international supply crisis. Canada is the most vulnerable member of the International Energy Agency—the IEA—yet recklessly exports a higher and higher share of oil and gas to the U.S. This locks Canada into a higher share under NAFTA's proportionality clause. Instead of guaranteeing the U.S. energy security, how about a Canadian SPP, a secure petroleum plan for Canada?
While rising Canadian oil exports help wean America off Middle Eastern oil, Canada is shirking responsibility to Canadians. Rising Canadian exports are perversely leading to greater Middle Eastern imports to Canada. We import about 40% of our oil—850,000 barrels per day—to meet 90% of Atlantic Canada's and Quebec's needs and 40% of Ontario's. A rising share of those imports to Canada comes from OPEC countries and a declining share comes from the North Sea. So the rising share is from Algeria, Saudi Arabia, and Iraq. How secure is that?
Many eastern Canadians heat their homes with oil. Yet we have no plan to send domestic supplies to them. Why not? In which NAFTA country are the citizens most likely to freeze in the dark?
The National Energy Board's mandate is to promote safety and security in the Canadian public interest. Yet they wrote me on April 12, saying, “Unfortunately, the NEB has not undertaken any studies on security of supply.” This is shocking. I asked the NEB whether Canada is considering setting up a strategic petroleum reserve under its membership in the IEA. The NEB replied that Canada “was specifically exempted from establishing a reserve, on the grounds that Canada is a net exporting country, whereas the other members are net importers”.
The IEA was set up, if you remember, by industrial countries in 1974 to counter OPEC's boycotting power. The 24 members must maintain emergency oil reserves equivalent to 90 days of net imports. Only net exporters are exempt from this. Canada shares this status with three other members. Britain and Denmark have been net exporters, but they have strategic reserves because they're members of the European Union. This leaves Norway and Canada. Norway doesn't need a reserve.