Hon. Ed Fast (Minister of International Trade, CPC)
moved that Bill C-41, An Act to implement the Free Trade Agreement between Canada and the Republic of Korea, be read the second time and referred to a committee.
He said: Mr. Speaker, I am pleased to have the opportunity to speak today about the landmark Canada-Korea free trade agreement and to outline clearly why it should be implemented without delay.
Both the 2013 budget and Speech from the Throne are clear that this government's top priority remains the creation of jobs, economic growth, and long-term prosperity.
As an export-driven economy, Canada requires an aggressive international trade strategy that continues to open up new markets for Canadian businesses.
One in every five Canadian jobs is dependent on exports, and over 40,000 Canadian companies are active exporters around the globe. They include global leaders in a diverse range of sectors, from aerospace to ice wine and everything in-between.
In a competitive globalized economy, hard-working Canadians depend on freer and more open markets for their economic security. That is a reality that this government understands. We know that our Canadian companies can compete with the very best in the world and win anywhere in the world, and our Conservative government is committed to supporting them as they grow and succeed.
The global economy is rapidly evolving, and emerging markets in Asia and elsewhere represent significant untapped trade and investment opportunities. It is imperative that we keep up with the times.
That is why this Conservative government has embarked upon the most ambitious pro-trade plan in our nation's history. Increased trade means greater employment prospects, more prosperity, and more food on the table for Canadians and their families. It also means more choice and better value for consumers. It means better priced and higher quality input, which would allow our Canadian manufacturers to remain competitive in a fiercely competitive global marketplace.
Let me provide some historical context. Members may recall that a previous Conservative government had the vision to negotiate the Canada-U.S. Free Trade Agreement, followed by the North American Free Trade Agreement, which, of course, included Mexico. Members may also remember that it was both the NDP and the Liberals who loudly opposed both of those agreements, claiming that they would cause Canada to lose its culture, its health care system, its sovereignty over water resources, and that we would see our economy hollowed out and lose millions of Canadian jobs. In fact, the Liberal Party of the day even threatened to tear up NAFTA.
Of course, none of those dire predictions came true. Over the last 25 years, Canada's economy has added millions of jobs and attracted hundreds of billions of dollars of foreign investment. Our trade with the U.S. has tripled, and our bilateral trade with Mexico has increased more than sevenfold. The last time I looked, our health care system was intact, we still had full control over our water resources, and Canadian culture is alive and well.
My point today is that many of those same naysayers and anti-trade activists are trotting out the same old tired arguments against every new trade agreement that Canada negotiates. I want to assure the members that their dire predictions were wrong 25 years ago, and they are just as wrong today.
Prior to 2006, the previous Liberal government largely neglected trade as an engine of economic growth. In fact, during 13 long, dark years in power, the Liberals were only able to sign three small trade agreements, putting Canadian workers and businesses at severe risk of falling behind in the global marketplace.
However, there is good news. We have delivered on our commitment to dramatically expand economic opportunities for Canadians through trade and investment. Over the eight short years since our Conservative government was elected, we have successfully concluded free trade agreements with no less than 38 different countries. That number includes the most comprehensive and ambitious trade initiative in Canada's history, the Canada-European Union free trade agreement. This past summer, we announced that we had completed the text of that treaty, and later this week we will be celebrating that achievement.
However, make no mistake about it, our efforts on the trade file are far from over. The cornerstone of our pro-trade plan going forward is the global markets action plan, which we call GMAP. We released it last fall. The GMAP guides our government's activities on trade and investment. It is our blueprint for increasing exports and supporting Canadian companies in markets all around the world. The GMAP outlines a broad array of trade initiatives, from negotiations of trade and investment agreements, to extensive stakeholder consultations and revamped market access plans. Crucially, we have identified priority foreign markets and priority sectors of our economy that are most important to Canadian exporters, and we are focusing our energies and resources on those priorities.
Not surprisingly, countries in the Asia-Pacific region figure prominently in GMAP because of the growing importance of that region of the world. That brings me to the legislation before us today. This past Monday, I was pleased to sign Canada's first free trade agreement with an Asian country, namely the Canada-Korea free trade agreement. South Korea is a modern economic miracle. That country's economic growth over the last 30 years has been remarkable. Since 1980, South Korea's GDP has grown more than six-fold and its economy has experienced an average annual growth rate of 6.5%. Korea has become a technological powerhouse and its global conglomerates, many now household names within our own country, anchor key regional and global value chains.
Given the size and dynamism of South Korea and our long history as friends and allies, implementing this historic agreement should be a no-brainer. As I noted, the Canada-Korea free trade agreement marks Canada's first bilateral trade agreement in Asia and will strengthen our economic ties with an increasingly important country that is both a priority market and a natural and complementary partner for us.
This agreement truly represents Canada's gateway to Asia. Commercial engagement between Canada and South Korea is already significant. Last year, two-way bilateral merchandise trade between our countries was roughly $11 billion, and two-way investment is approaching $6 billion. However, there remains great potential to expand this important partnership and this agreement will help unlock that potential. Indeed, the Canada-Korea free trade agreement will, in a very positive way, forever transform the way we do business with each other.
All told, this agreement is projected to boost Canada's economy by nearly $2 billion a year and increase Canadian exports to South Korea by 32%, creating thousands of new jobs in every region of our country and across every sector of our economy. As significant as those numbers are, there is another equally compelling reason to get this agreement implemented as quickly as possible. The Canada-Korea free trade agreement will restore a level playing field for Canadian companies in the South Korean market, where our fiercest competitors, including the United States and the European Union, are already benefiting from their own preferential access due to their own free trade agreements with South Korea.
Canada cannot continue to idly stand by as our competitors' goods maintain an advantage over Canadian ones. Implementing this trade agreement without delay is the best way to support Canadian businesses and the hard-working Canadians they employ. However, one does not have to take my word for it: stakeholders representing every sector and every region of the country have been calling on our government to move with dispatch to get this agreement in place.
On March 11 of this year, in Seoul, Korea, I was delighted to witness our Prime Minister and South Korean President Park announce the conclusion of negotiations. In the days that followed, many different companies and business associations publicly congratulated our government on that achievement. During the latest milestone in the implementation process, the tabling of the text of the treaty in the House this past June, we again heard from Canadians. Their message to us was loud and clear, that this agreement needed to be brought into force as quickly as possible.
Canadians overwhelmingly support this deal and when we look at the agreement, that should be no surprise. Our Conservative government is firmly committed to only signing trade agreements that are in the best interest of Canadians.
Let us look at some of the details of this agreement.
This is a 21st century, state-of-the-art free trade agreement that is ambitious in reach and comprehensive in its scope. It covers virtually every facet of modern commerce, including trade in goods and services, business mobility, investment, government procurement, intellectual property, technical barriers to trade, the environment and labour rights.
The centrepiece of the agreement is, of course, the elimination of tariffs on virtually all trade between Canada and South Korea. In numerical terms, nearly 90% of Canada's exports will be duty free upon entry into force of the agreement, and over 99% will be duty free once the agreement is fully implemented. These numbers translate into concrete benefits and opportunities for Canadian exporters, importers, investors, manufacturers and consumers all across our country and across all sectors of our economy.
Canada is a nation endowed with a wealth of both natural resources and human resources. We have people with the creativity and skill to turn the natural resources into a wide range of industrial goods, including in the aerospace, rail, information technology, chemical and pharmaceutical sectors, to name just a few.
I am pleased to say that over 95% of Canadian industrial exports to South Korea will be duty free immediately with the remainder being phased out over a number of years. This agreement will also result in the immediate elimination of South Korea's tariffs on liquefied natural gas, which is a commodity that has great potential to become a key driver of Canadian exports to South Korea in the future, especially from the provinces of British Columbia, Alberta and Saskatchewan.
Then there is Canada's forestry sector. This sector is another key contributor to the Canadian economy. In 2012, the sector contributed over $20 billion to Canada's GDP and employed close to 250,000 Canadians, many in well-paying, high-skill jobs. This agreement will benefit Canadian forestry workers by eliminating tariffs on forestry and value-added wood products, while further diversifying our exports into Asian markets and reducing the sector's dependence on the United States.
I will speak for a moment about Canada's high-quality, premium fish and seafood products.
Canada's proximity to the Arctic, Atlantic and Pacific Oceans, the Great Lakes and other resources has allowed Canadians to develop one of the world's most valuable commercial fishing industries. This sector contributes more than $2 billion to Canada's GDP and provides over 40,000 jobs for Canadians in everything from fishing to aquaculture to fish processing. It is the economic mainstay of approximately 1,500 communities in rural and coastal Canada. We know the quality of Canada's fish and seafood products is second to none, and South Koreans are already showing a great appetite for our products.
In fact, shortly after the announcement of the conclusion of negotiations for this trade agreement, Korean Air Cargo launched weekly service to South Korea from Halifax and expected to transport a minimum of 40,000 kilograms of live lobster over the course of the last summer. Not only have these shipments helped to develop the South Korean market for fresh Canadian lobster, they have positioned South Korea as Canada's gateway for fish and seafood exports to other Asian markets, most notably Japan and China.
It goes without saying that in this free trade agreement, we have obtained a very favourable outcome for fish and seafood, one which eliminates 100% of South Korean tariffs, many immediately.
I do not have to remind my colleagues on the other side of the House, especially those from Atlantic Canada and the Pacific coast, that a vote against the speedy implementation of this trade agreement is a vote against Canadian jobs.
I want to also mention how this trade agreement will benefit our hard-working Canadian farmers and the more than two million people employed in the agriculture and agri-food industry.
In addition to Canadian beef and pork, Canadian icewine is becoming a hit with South Korea and throughout Asia. We want to promote those products. This trade agreement supports Canadian vintners and Canadian beef and pork producers to further expand their market share.
The tariff elimination package contained in this trade agreement represents a tremendous outcome for Canada, particularly given that South Korea's current tariffs are, on average, three times higher than ours. Beyond tariffs, the agreement also contains a wide range of commitments pertaining to non-tariff measures, which is an area that has been identified as a priority for our stakeholders.
The agreement includes ambitious outcomes on services and investment. This trade agreement includes a framework of reasonable protections that would result in a more secure and stable environment for investors in both countries. This will contribute to increased bilateral investment flows between our countries, creating more jobs, spurring creativity and technology, and linking Canada to global value chains.
Canadian investors are already recognizing the significant investment opportunities in South Korea, as well as its ability to be a potential test market for the larger Asian region. Just this past May, Canadian clothing brand Joe Fresh announced that it would open its first store outside of North America in Seoul, Korea. The flagship store in Seoul is only the start of its investment in South Korea, as the company plans to open nine more retail outlets in the capital by the end of the year.
The sooner this agreement is implemented, the sooner Canadians will start benefiting from the outcomes I have just mentioned, and the sooner Canadian companies can leverage the new-found market access into economic success. Our Conservative government will be there to support them every step of the way.
In addition to securing unprecedented market access for our companies, we are also supporting Canadian companies through our suite of trade promotion tools, tools such as Canada's trade commissioner service and the export financing and insurance products delivered by Export Development Canada. They are tools such as the government to government contracting support provided by the Canadian Commercial Corporation. There are many other tools that we are providing, including trade missions, which our government and ministers lead all around the world.
In short, we will be there to support our small and medium-sized businesses as they explore new opportunities in South Korea.
This trade agreement is comprehensive. It is high quality. It will create new opportunities for Canadian companies and contribute to our long-term prosperity.
I would remind my hon. colleagues of the robust outcomes across the board that this agreement would deliver. We owe it to our companies and we owe it to Canadians to ratify this agreement as quickly as possible. Early implementation of this free trade agreement will ensure that Canadians can quickly begin to reap its economic benefits, providing more choice for Canadian consumers and more prosperity for our nation as a whole.
Mr. Don Davies (Vancouver Kingsway, NDP):
Mr. Speaker, as the official opposition critic for international trade, I am pleased to stand to speak on behalf of the New Democratic Party on Bill C-41, an act to implement the free trade agreement between Canada and the Republic of Korea.
By way of background, Canada and South Korea first discussed the possibility of a trade agreement in 2004, and negotiations for a trade agreement officially launched in July 2005. In a testament both to the challenges that such agreements pose and to less than satisfactory diligence on the part of various governments, it took some nine years to bring this agreement to completion.
Notably, several trade agreements have been concluded by Korea and other partners over the past 10 years. A trade agreement between Korea and the EU entered into force in 2011, and a Korea-U.S. agreement became operative in 2012. As well, Korea and Australia recently concluded negotiations.
As I will expand upon later, these nations' agreements have played a critical role in shaping Canada's bargaining position. As major competitors with Canada, their advantage in securing preferential first entry to the Korean market has done substantial damage to Canadian exporters in a myriad of sectors.
The Canada-Korea free trade agreement was signed on March 11, 2014, and submitted to Parliament on June 12, 2014. Once in effect, the agreement will eliminate 98.2% of South Korea's tariff lines and 97.8% of Canada's tariffs. While many tariffs between our two countries are already quite low, there are a significant number of tariffs and other barriers to market that exist that will either be removed immediately upon this agreement's implementation or phased out over various periods of time.
The NDP uses three important criteria to assess trade agreements. First, is the proposed partner one that respects democracy, human rights, adequate environmental and labour standards, and Canadian values, and if there are challenges in these regards, is the partner on a positive trajectory toward these goals? Second, is the proposed partner's economy of significant and strategic value to Canada? Third, are the terms of the proposed agreement satisfactory?
New Democrats also evaluate trade agreements on a comprehensive basis to determine if they are of net benefit to Canada. In our estimation, we believe that the Korea trade agreement meets these tests.
I will deal with each in turn.
First, since emerging from authoritarian to civilian rule in 1987, South Korea has transitioned into a multi-party democracy with an active trade union movement, a diverse civil society, and freedom of expression. South Korea's so-called tiger economy has succeeded in rapidly industrializing the country and raising the welfare and incomes of the Korean people.
Today South Korea is a developed country, ranking 15th on the Human Development Index, the highest in East Asia. South Korea has developed social programs, sound rule of law, low levels of corruption, and high access to quality education, including having the highest level of post-secondary education participation in the OECD.
In recent years, South Korea has emerged as a global leader in environmental economics, investing billions in an ambitious green growth strategy aimed at improving energy efficiency while boosting renewables and green technology.
There is no doubt that South Korea is a democratic country that possesses admirable environmental and labour standards and shares important Canadian values, including respect for human rights.
Second, is the proposed partner's economy of significant and strategic value to Canada? South Korea is a G20 country with the 15th-largest GDP. It is the G20's eighth-largest importer. South Korea is Canada's seventh most important trading partner and our third largest in Asia, after the two larger economies of China and Japan.
In 2013, total bilateral trade between our two nations totalled nearly $11 billion. Canadian exports to South Korea totalled $3.4 billion, while Korean exports to Canada totalled $7.3 billion. In relative terms, Canada exports the same amount to South Korea as it exports to France and Germany. We import approximately the same amount as we do from the U.K.
South Korea is also a major part of the Asian global supply chain and is a gateway market for other Asian economies. As this is Canada's first trade agreement with an Asian country, it provides an important opportunity to gain advantages in the Pacific region and diversify Canada's export markets. Economic models predict that this deal is expected to increase Canadian exports to South Korea by 32% and expand our economy by $1.7 billion.
In addition, the Canadian and South Korean economies are largely complementary, meaning that most Canadian industries do not compete directly with Korean industries. As Korea has emerged as a world leader in renewable energy and green technology and needs energy and energy technology from Canada in return, we can increase our trade in these important sectors and, more importantly, build Canada's green technology sector.
Domestically, a trade agreement with Korea offers significant economic benefits to a broad cross-section of economic sectors in Canada that represent all regions of the country. In fact, this agreement is favoured by almost every industrial sector in Canada.
Sectors that support the Korea free trade agreement include manufacturing, heavy industry, aerospace and transportation, forestry and wood products, agriculture, beef and pork industries, agri-foods and food processing, energy and chemicals, fish and seafoods, financial services, and high technology.
In sum, South Korea is a large market that offers significant opportunities for Canadian business to gain a foothold in important Asian markets.
It is vital to note that Canadian exporters have lost some 30% of their market share in South Korea since 2012, when the EU and the U.S. implemented agreements and secured preferential access for their companies. These losses are estimated to total several hundreds of millions of dollars annually, and are mounting each year that U.S. and European competitors enjoy tariff advantages and increased market access to Korea.
The losses have been particularly heavy in the agri-food, seafood, and aerospace industries. These sectors sustain thousands of quality, family-supporting jobs with high rates of unionization. As an example, when Korea signed the FTAs with the United States and the European Union, Canadian aerospace exports to Korea dropped by 80%, from $180 million to roughly $35 million.
Yuen Pau Woo, former president and CEO of the Asia Pacific Foundation of Canada, and, in my estimation, Canada's leading expert on Asia-Pacific issues, said that Canada is:
||....an outlier compared to most of our industrialized country competitors, certainly in the G-7 and the OECD, and that puts us at a competitive disadvantage vis-à-vis countries that do have trade agreements with Asian partners. The best example of this competitive disadvantage is in the case of Korea, where we have been negotiating—as you all know—coming to nine years now. In the meantime, we have been overtaken by the United States and more recently, by Australia. Both of those countries now have margins of preference, particularly in the cultural sector, that put our exporters at a disadvantage.
Canadian exporters need a level playing field to compete in Asia and to protect the jobs they provide here in Canada. In the view of New Democrats, this agreement is essential to do so.
This agreement offers the opportunity for Canadian producers and exporters to increase trade with a modern democratic country with a high-income complementary economy. It will allow Canadian producers in a wide variety of sectors to more effectively access an Asian gateway economy that plays a pivotal role in global supply chains and offers entry opportunities not only to Korea but to other Asian economies.
It will level the playing field for Canadian exporters, who can compete with the best in the world when given the opportunity to do so on equal terms. It will permit Canada to deepen our Asian presence and diversify our trade patterns beyond the North American and European markets. There is no doubt that Korea is both a significant and a strategic economic partner for Canada.
Third, are the terms of the proposed deal satisfactory?
This is not the precise agreement that New Democrats would have negotiated. This deal includes investor state dispute settlement, a provision that allows corporations to launch legal challenges to government measures that they believe violate the terms of the agreement. They are permitted to file their suits not in domestic courts but in international trade tribunals that lack certain fundamental attributes of judicial independence and the rule of law.
This is something the New Democrats would not include in any trade agreement we negotiate. We believe such provisions carry excessive risk and are unnecessary when dealing with nations with independent and well-functioning judiciaries, which both Canada and South Korea possess.
There are also legitimate and well-founded concerns about the possible impact of this agreement on the Canadian auto sector. Knowledgeable industry actors, such as Ford Motor Company and Unifor, which represents most auto workers in Canada, have both expressed the view that this agreement will reduce domestic auto production and sales, and that South Korea adopts policies that serve to impair access to its domestic market.
In our estimation, however, when viewed on a comprehensive basis, this agreement is of net benefit to Canada. It benefits the vast majority of Canadian export sectors, and we believe that its weaknesses can be dealt with by effective Canadian government policies.
An examination of a few key sectors bears this out. This agreement is not only good for Canadian agriculture and the agrifood industry, it is essential. The agrifood sector represents 8% of the Canadian economy and is said to sustain one in eight jobs, or over two million jobs.
As stated, Canada has suffered significant losses in market share for Canadian agricultural exports to Korea following implementation of the Korea-U.S. deal in 2012. For example, Canadian beef exports to South Korea shrank from $96 million in 2011 to $8 million in 2013. Canadian pork exporters went from first to fourth in the Korean market. Australia, a major competitor of Canada in many agricultural products, is poised to bring their own agreement with Korea into force. As well, January 1, 2015, will see the next reduction in tariffs for U.S. and EU products, further exacerbating the harm to Canadian sectors.
The Korea FTA will progressively eliminate 86.8% of agricultural tariff lines and allow Canadian exporters to compete on a level playing field and recapture these markets. There are also impressive opportunities for Canadian grains, pulses and oils.
In aerospace, the agreement will gradually eliminate 100% of industrial tariffs. As such, there is general support for the Korea FTA among manufacturing sectors in Canada, notably Bombardier and other Aerospace Industries Association members.
According to Jim Quick, the president of the Aerospace Industries Association of Canada, South Korea is an important market due to its proximity to other major economies, including Japan, China and Malaysia. He said in the next 20 years, airlines in the Asia-Pacific region would account for 37% of global aircraft demand, or 12,000 planes worth $1.9 trillion. At the same time, half of the world’s air traffic would be driven by travel to, from, and within the Pacific region.
Similar opportunities lie in light rail and transit infrastructure. Global Canadian champions like Bombardier see important opportunities in South Korea to position themselves to tap this growth.
Canadian seafood producers on both coasts stand to benefit from the Korea agreement. Pacific seafood and fish product exporters are being out-competed in Korea by their Alaskan competitors due to the fully implemented Korea-U.S. agreement.
Current seafood and fish product tariffs in Korea for Canadian exporters are up to 47%, and most of these tariffs lines will be eliminated. Lobster farmers see growth opportunities in the Korean market on the Atlantic coast.
Canada's forestry and wood products industry, including newsprint, wood pulp, wood panels and other value-added products, contribute over $20 billion to Canada's GDP and employs over 230,000 Canadians, many of them in high-skill and unionized jobs. Canadian exporters to Korea are disadvantaged by tariff lines on Canadian wood products, which reach 10%. The Korea agreement will provide growth opportunities for value-added wood products. This will help develop good jobs in the vital Canadian value-added economy.
With respect to energy and green technology, New Democrats see sustainable technologies and renewable energy as key industries of the future. They are estimated to be a $3 trillion sector and we believe that Canada must position itself for this economic opportunity and environmental imperative. As stated, Korea is an emergent global leader in this area and encouraging sustainable trade and technology transfer is one of the most compelling parts of this agreement.
There are positive and negative aspects of this agreement in terms of the Canadian auto sector, and opinions on it are mixed. General Motors, Chrysler, Toyota and Honda all have automotive production facilities in Canada and support this agreement. Ford and Unifor are also significant stakeholders in Canada, but they do not. The Korea FTA will gradually eliminate Canada's 6.1% tariff on auto product imports from Korea over a three-year period. In turn, South Korea's 8% auto tariff will be eliminated immediately upon the Korea agreement's implementation.
Other positives include rules of origin provisions that recognize Canadian-U.S. integrated products without volume limits and an accelerated dispute mechanism that allows for monitoring of non-tariff barriers. This will permit disputes related to motor vehicle trade to be resolved in a timeline that is as fast or faster than the Korea-U.S. deal, and it could be used to obtain remedies to unfair trade barriers to Canadian auto exports into Korea. In addition, transitional safeguards exist in case of a surge in imports.
At the same time, there are legitimate concerns about the deal's impact on the Canadian auto sector. These concerns have validity, as more Korean imports will affect domestic auto sales to some degree, and South Korea has been cited for implementing non-tariff barriers that restrict access to its market.
It is also a fair criticism that this agreement does not go as far as the Korea-U.S. deal does in protecting domestic auto producers. Under that deal, U.S. tariffs are phased out over a longer period, five years, and there is a snap-back provision that permits the U.S. to impose duties if certain import and export numbers are exceeded. The Conservatives were unable to obtain these protections in this agreement.
What is without doubt is that the current 6% Canadian tariff on Korean-made automobiles is insufficient to meaningfully keep products out. Among other things, lower Korean labour costs and vertical integration savings substantial exceed the tariff. More compelling, Korean automakers service the Canadian market from U.S. plants, with more opening in Mexico within two years, and their products enter Canada tariff-free due to NAFTA in any event. Accordingly, between 40% and 50% of Korean auto products already enter the Canadian market tariff-free from the U.S., so the status quo is clearly insufficient to assist Canadian production.
It is clear that the Canadian auto industry faces a very competitive global environment. It is equally apparent that this requires more support form the federal government. In 2013, Canada failed to attract any of the $17.6 billion in auto investments that were made around the world, not a penny. Competing countries like China, Brazil and our North American trading partners are upping their games, subsidizing up to 60% of the capital investments required to establish auto plants.
New Democrats believe that more needs to be done to support auto manufacturing in Canada, to promote growth in the sector and to encourage the competitiveness of North American brands around the world.
Therefore, a New Democrat government would pursue strategies to strengthen the Canadian auto sector. These would include policies that would encourage Korean automakers to locate production facilities in Canada; assist Canadian automakers to better access Korean and other Asian markets; closely monitor non-tariff barriers and act quickly and effectively to resolve disputes; place substantial resources into trade offices and lead frequent trade missions to Korea; and work with industry and labour to create an effective auto innovation fund.
Both CETA and the China FIPA have provoked widespread public concern in Canada and New Democrat share those concerns.
Importantly, the Korea agreement differs substantially from those two agreements. Unlike the China FIPA, the terms of the Korea agreement are reciprocal. Unlike CETA, the Korea agreement does not apply to provincial, territorial or municipal procurement or crown corporations, where most Canadian procurement is located. Unlike CETA, the Korea agreement does not apply or negatively affect supply-managed agricultural products. Unlike CETA, the Korea agreement does not contain any negative intellectual property provisions, for example, pharmaceutical patents or copyright.
Notably, intellectual property expert, Professor Michael Geist has pronounced positively on the IP terms of the Korea agreement, calling it an example of a good agreement in this important area. While the Korea FTA does have an ISDS provision, it contains transparency guarantees and is fully cancellable on six months' notice. This is contrasted with the China FIPA, which binds Canada to ISDS for 31 years, and CETA, which appears to do so for 20 years.
Unlike the Conservatives and Liberals, a New Democrat government would involve a full spectrum of Canadian stakeholders, including industry and labour leaders in monitoring and implementing this deal. Unlike those two parties, the New Democrats would work diligently to eliminate non-tariff barriers and scrutinize the use of the investor state provisions very closely. Unlike those two parties, a New Democrat government would not hesitate to renegotiate or terminate this deal if meaningful market access is not achieved or the ISDS provisions are abused.
Overarching all, New Democrats want to deepen Canada's trade linkages with the Asia-Pacific region, something we recognize as essential to maintaining Canadian prosperity in the 21st century. We support breaking down harmful trade barriers, but believe government should provide the support Canadian industry needs to remain competitive in a more open world economy. We agree with such diverse voices as the Canadian Chamber of Commerce and the Canadian Labour Congress that the government needs to do more than sign trade agreements. It must promote Canadian exports, develop sound Canadian industrial strategies, invest resources in trade commission services, and participate meaningfully in regional and international bodies of all types.
The Korea trade agreement presents a vital opportunity to diversify Canada's economy and promote good quality job creation in Canada. We cannot let this opportunity pass.
While certain terms of the agreement are not what an NDP government would have negotiated, on balance we believe that the benefits of the Canada-Korea trade agreement are significant for Canadians. We will be supporting the legislation accordingly.
Ms. Chrystia Freeland (Toronto Centre, Lib.):
Mr. Speaker, I am very pleased, on behalf of the Liberal Party, to support this deal. We are going to be voting in favour of it.
Canada is a trading nation. We understand that, as the 11th largest economy in the world, it is absolutely essential for Canada to be fully plugged into the global economy, and that means doing trade deals.
We are also very pleased that we finally have a deal with South Korea, an advanced and exciting democracy. It is a great country for us to be doing business with.
What I am going to be talking about first is Canada's position in trade, our views on what we should be doing and what we see going wrong. Then I will talk about this specific trade deal with Korea.
Starting with why trade is important and what Canada's current position is, trade has never been more important for Canada or any other western developed economy in this 21st century. We are living in the age of globalization and countries that do not figure out how to plug themselves into the global economy are going to fail. They are going to fail their citizens and, crucially, they are going to fail to deliver the kinds of middle-class jobs and middle-class incomes that are at the centre of the Liberal approach.
For Canada, exports account for about 30% of GDP, and one in five Canadian jobs right now is linked to exports. That is why this is such an important issue and why the Liberal Party stands so firmly in favour of free trade and an expanding Canadian trade relationship with the world.
What I am very sad to note, however, as my colleague from Winnipeg has already alluded to, is that right now Canada is falling behind in trade. We hear a lot of glowing rhetoric from the other side of the House, but the reality is that we are not doing well in trade, and all Canadians are hurting because of it.
The Liberal Party believes in listening to businesses and to the people who are out there building our economy. That is why we paid so much attention to and are so worried by a report that was published this year by the Canadian Chamber of Commerce. The title of this report alone should worry us all. It is called “Turning it Around: How to Restore Canada’s Trade Success” . That really tells us everything. We used to be doing better than we are doing today, even as the rest of the world is getting better at trade and better at export-led growth.
When we look inside the report, it gets worse. I would like to read parts of it because it really paints a worrying picture of what is happening right now in Canadian trade. This is what the Canadian Chamber of Commerce has to say:
||...the increase in exports and outward investment has been slow in recent years, and diversification to emerging economies has been limited.
The Chamber of Commerce points out that Canada's falling behind its own lagging performance has come at precisely the time when the rest of the world has been surging forward. That is something we will see when we turn to speaking specifically about trade with Korea.
The Chamber of Commerce goes on to give some detail about what is happening. It says:
|| Despite more firms looking abroad, Canada is lagging its peers according to several measures. Over the past decade, the value of exports has increased at only a modest pace...This is despite significant price premiums received by Canadian producers of energy, mineral and agricultural commodities.
Now, here comes the crucial part. The Chamber of Commerce says:
|| If these price increases are excluded, the volume of merchandise exports shipped in 2012 was actually five per cent lower than in 2000 despite a 57 per cent increase in trade worldwide.
If we take out the growth in commodity prices, what we have seen is a 57% increase in trade worldwide over the past decade and Canada actually falling by 5%. We hear a lot of glowing rhetoric about trade performance. We have a lot of photo ops of trade deals signed. However, the reality is that the numbers reflect a Canadian economy that is performing more poorly in exports. This is also seen in the numbers my colleague referred to in mentioning the swing from a trade surplus to a trade deficit. Exports are an area that we believe is essential to driving growth and producing middle-class jobs. Economists agree with us.
This is a real problem. It is a huge issue for Canada. It is a huge issue for all middle-class Canadians.
Let us turn specifically to Korea. As I said, the Liberal Party is pleased and proud to support a free trade deal with South Korea. However, we have a real problem with the timing of this deal. The problem is that it has come too late. That lag has done real and quantifiable damage to the Canadian economy and to Canadian exporters.
In describing his pride in having secured this deal, the minister spoke earlier today about how this deal will “restore a level playing field”. He also said, “our fiercest competitors...are already benefiting from their own preferential access”. That is sadly true but not something to be proud of. We should be ashamed and sorry that our fiercest competitors are enjoying preferential access and that it has taken us so long to get this deal done.
The United States has already done a deal with South Korea, which was ratified by the U.S. Congress in October 2011. As far as I know, the current Canadian government was in office then. That agreement went into effect in March 2012. Again, the government was in office. We did not have a deal then and that hurt Canadian exporters, who were put at a disadvantage relative to U.S. exporters.
A deal with the EU has provisionally been in force since July 2011. Again, the current government was in office. It allowed a huge trading bloc to do a deal with South Korea, which really did serious damage to Canadian exporters.
Australia is smaller than us. One would think it would have less leverage, yet it has already done a deal. It did its deal in April 2014.
This has done real quantifiable damage to the Canadian economy and to Canadian exporters. We have lost 30% market share. The minister himself pointed out that our fiercest competitors already enjoy preferential access. They have used it and the loss to Canadian exporters is quantified at some $1 billion. That is serious damage to the economy.
While we are pleased and proud to vote for this deal now, our question is this. Why was it not done sooner and why did the government allow Canada to lose $1 billion? We could do a lot of good in this economy with another billion dollars.
The minister also spoke about how he is proud of this deal and how it is important because it will provide an essential foothold in Asia. That is a lot of boggle. We think it is very important now for Canada in its trading relationships to move to deal with the fast growing, emerging markets in Asia. However, we are gravely concerned that with the poor performance we have seen in Canada's trade negotiations with Korea, where I underscore we have lagged behind the U.S., the EU, and Australia, all of whom are our competitors and peers, we could see a similar lost opportunity in the absolutely crucial trans-Pacific partnership talks. Canada joined those talks late. They started in 2008. Again, the members on the other side of the House were in government. Canada was not at the table. Canada did not join in until June 2012. If we get to the party late, we have to deal with terms that are not of our own making, and so we start at a disadvantage.
The Liberal Party would like to assure Canadians, and also our friends on the other side of the House, that we will be watching Canada's performance in those negotiations closely. There is already some talk that Canada, in multilateral arenas of all kinds, is not seen as the most valued, the most co-operative, partner. Therefore, we will be watching closely.
I would like to assure our partners in the TPP talks and the Canadians who are so eager for that deal to get done that if the members on the other side of the House do not manage to get it done in the next 12 months or so, it will be a priority for us and we will get that deal done.
What is also essential for us to focus on, and where we would like to see much more performance, is a wider understanding of the other emerging markets that we should be going after.
We are glad to support the Korean deal, which we do without reservation, but the sad history of this deal is that because we started late and did the deal late, Canadian companies have suffered. Making up that 30% lag, that 30% loss, will require a lot of hard work by our companies. They are coming from behind.
We want to ensure that does not happen again. We would like to see the government much more aggressively pursue trade deals with other fast-growing emerging markets around the world; particularly, in Africa. That is a part of the world that is full of opportunity for Canada, for Canadian companies, and where a trading relationship can do a lot of good.
I would also like to see much more action from the government in an area where we see very strong rhetoric but, sadly, not always the action to match; that is, our relationship with Ukraine.
Most of us here were proud to be in this House when President Petro Poroshenko spoke to us and talked about how proud he is of the Canadian relationship with Ukraine. He also invited us to quickly conclude a free trade agreement with Ukraine.
Again here, I am sad to say, Canada is falling behind. Europe signed a trade deal with Ukraine last Tuesday. We like to call ourselves, Canada, Ukraine's best friend. Where are we on that file? It is time, really, for us to act. The message is the same. The rhetoric is okay. We really want to see action. We will strongly support and work with the government on a deal with Ukraine. That is something, surely, we can get some cross-party support on and act quickly and get it done.
We are very happy to support this deal. We think a free trade agreement with Korea is important. We understand the absolute importance of free trade for Canada.
We would like to see the government do a better job of actually focusing on the results. It is really important.
We have spoken in this debate already of the swing we have had from trade surplus to trade deficit. That is not a good report card for the Canadian export sector. That is the number we have to look at and we really have to focus on. A big part of the problem is that we are coming late to these trade deals.
I want to remind this House that the United States Congress ratified its deal with Korea in October 2011. It went into effect in March 2012.
The EU agreement has been in force since July 2011.
Again, even in Australia, which is smaller than we are, their agreement was signed on April 2014.
So, it is great that we are doing this deal with a strong democratic country in Asia. It is great for our exporters to now have access to those essential Asian economies. However, we really need to underscore, even as we support this deal, that it should have been done more quickly and that our exporters have suffered. They have lost $1 billion. They have lost about 30% of their market because, again, as the minister himself said, our fiercest competitors are already enjoying preferential access.
Nonetheless, it is better late than never. We are pleased to be supporting this deal. Korea is already our seventh-largest merchandise trading partner. It is a democracy. There are a lot of exciting technologies there. It is a great match for us.
We have heard particular enthusiasm from agriculture food producers, from the aerospace industry, and from spirits industries. We are hopeful that, thanks to this agreement, those Canadian exporters who lost out because their competitors enjoyed preferential access, while they did not, will be able to make up some of those gains.
We are going to be supporting them in that effort. We are glad that we finally have a deal that will allow them to do that.
However, again, we must not lose sight, even as we back this deal, of the fact that it has taken a long time to get there and that, going forward, it is really essential for Canada to not be following in the wake of the U.S., the EU, and Australia when it comes to doing trade agreements with emerging markets.
It is really important for us to be in the lead. When one is first at the table, one gets the best deal—and not only does the country get the best deal, but its businesses get the best deal. It can be very hard to unseat a competitor who gets in first because he or she enjoyed preferential access because his or her government was more on the ball.
On TPP, it is going to be really important for Canada to shift from this hostility, this sort of go-it-alone bullying approach that has characterized our attitude in multilateral organizations of late. This is a really important deal, and with this opening up of the Asian markets, about which we have spoken so much today, and of which we hope the Korean deal will be a harbinger, TPP is going to be where the rubber meets the road on that. It is an essential opening to Asia.
We understand the need for some closed-door negotiations in trade agreements. We get that. These are very complicated. TPP is particularly complicated because so many parties are at the table. However, it is important to note that we have started those negotiations at a disadvantage. We did not get there until 2012. Everyone else, apart from Mexico, was there from 2008. We had to agree to accept some of the terms that had already been laid out without us there.
It is really important that we play ball now, that we are involved and seen as productive partners. It can sometimes be appealing, and maybe make a testosterone-type person feel particularly good, to use harsh, bullying, tough-guy rhetoric when talking, perhaps in the House. However, we are only the world's 11th largest economy, and when it comes to trade negotiations we have to be co-operative and collaborative and earn the trust of our partners. I would strongly urge the members on the other side of the House to take that kind of approach—dare I call it a small l liberal approach?—when they sit down at the table at the TPP negotiations. This is really essential for the future of Canada's export economy. If the Conservatives want some tips on how to do that, we are happy to talk.
In closing, we do support the deal. South Korea is a powerful economy. It is a democracy. It is a great place for our Canadian companies to be doing business. We regret the fact that we have lost 30% of market share due to the slowness of the agreement being done. However, we are confident that the House will support the deal and that Canadian companies are strong enough to bounce back.
Ms. Laurin Liu (Rivière-des-Mille-Îles, NDP):
Mr. Speaker, I am very pleased to rise in the House to speak to Bill C-41, An Act to implement the Free Trade Agreement between Canada and the Republic of Korea. I will be sharing my time with the hon. member for Dartmouth—Cole Harbour.
I am very pleased to speak to this bill, especially as a member of the Standing Committee on International Trade. I had the opportunity to work with the hon. member for Vancouver Kingsway, our international trade critic, who did a great deal of work on this file. He consulted the stakeholders and did an excellent job on Bill C-41.
The NDP uses three criteria to assess free trade agreements. We assess such agreements on an individual basis. In other words, we do our homework on every free trade agreement. The first criterion is respect for democracy, human rights and environmental standards. Free trade agreements must be negotiated with countries that have high standards in these three areas or are in the process of achieving these objectives.
The second criterion for reviewing these free trade agreements has to do with the trading partner's economy. Is the economy of the proposed partner of significant or strategic value to Canada? Third, the terms of the proposed agreement have to be satisfactory.
Unlike the Liberal Party, which is ready to support free trade agreements without even reading them, the NDP feels it is important to read free trade agreements before taking a position on them. Having studied the free trade agreement with South Korea, we are proud to support Bill C-41 because the agreement fulfills those three criteria. South Korea is a democratic country with very high environmental standards that is of significant strategic value to Canada.
I would like to talk about South Korea's profile and our trade relationship with that country. South Korea is a world leader in environmental policy. Over the past few years, it has invested billions of dollars in an ambitious green growth strategy designed to improve energy efficiency and stimulate green and renewable technology. The Conservative government would do well to follow this innovative country's example.
South Korea also clearly complies with high environmental and labour standards and shares the Canadian values of human rights and democracy. Since South Korea has become a world leader in renewable energy and green technology, Canada can take advantage of this free trade agreement to boost trade in these important sectors.
South Korea is Canada's seventh-largest trading partner and the third-largest economy in Asia after China and Japan. Businesses in my riding of Rivière-des-Mille-Îles will also support a broader free trade relationship with South Korea.
In 2013, Canadian exports to South Korea were valued at $3.4 billion, while South Korean exports to Canada were worth $7.3 billion.
I would like to talk a little about my riding and the economic sectors that are crucial to the economy of Rivière-des-Mille-Îles, which is in the Lower Laurentians. As many people know, my riding is home to a number of world-class small and medium-sized businesses in the aerospace industry. Examples of those businesses include Patt Technologies and Metcor in Saint-Eustache, as well as DCM Aerospace and TMH Canada in Boisbriand. I am proud to say that there are 20 companies and 4,000 employees working in the aerospace sector in my riding.
I therefore welcome the measures in this free trade agreement that will boost this sector, which is so important to the Montreal region. The Canada-Korea free trade agreement will create more opportunities to access markets in the aerospace industry. In fact, as soon as this agreement enters into force, 100% of tariff lines will be duty free. Current duties can be as high as 8%. This, then, is great news for the aerospace sector.
I would like to quote a stakeholder in that industry. Jim Quick, the president and CEO of the Aerospace Industries Association of Canada, said:
|| Our industry depends on exports and access to international markets to remain competitive and continue creating jobs and revenues here at home. This agreement is imperative to restoring a level playing field for Canadian firms in the South Korean market, which is especially important given the considerable growth the aerospace industry will see in the Asia-Pacific region in coming years.
Clearly, the gains for this important economic sector have been thoroughly studied, and I support the measures in this free trade agreement.
Another sector that could also benefit from this free trade agreement is the wine and spirits industry. As I tell everyone who visits my beautiful riding, Rivière-des-Mille-Îles, we are home to the largest red wine producers in Quebec, and I am very proud to say so. In the Canada-Korea free trade agreement, tariffs on ice wine, which are currently 15%, will disappear. This is definitely good news for Quebec's wine producers.
As I have little time remaining for my speech, I would like to speak briefly about the part of this free trade agreement that concerns investor state disputes. There is a caveat with respect to the NDP's support for this bill. An NDP government would not have included this type of dispute settlement mechanism in a free trade agreement with Korea. Canada and Korea are both democratic countries with strong justice systems. It should be noted that Korea's main opposition party is also opposed to this mechanism. An NDP government would negotiate with South Korea in order to drop this part of the agreement.
Fortunately, unlike the Canada-China investment agreement, this agreement is not binding on the government for 31 years and can be renegotiated or terminated with six months' notice. That is good news.
I welcome questions from my hon. colleagues. I would like to say once again that I support Bill C-41.
Mr. Robert Chisholm (Dartmouth—Cole Harbour, NDP):
Mr. Speaker, like my colleagues, I am very pleased to stand in the House and speak about Bill C-41, an act to implement the free trade agreement between Canada and the Republic of Korea.
Let me start by saying how pleased and proud I am of my colleague, our trade critic, the member of Parliament for Vancouver Kingsway. He has been on this file for a couple of years now, and he has done a masterful job of carrying forward with the New Democratic Party vision on trade.
The member has analyzed any agreements that have been made public, which, by any stretch of the imagination, are few and far between. That member has done a great job, not only in examining and analyzing any details that we do find out, but also in speaking with people involved in trade from one end of this country to the other and around the world to help develop our policy.
New Democrats want a strategic trade policy whereby we restart multilateral negotiations and sign trade deals both with developed countries that have high standards and with developing countries that are on progressive trajectories. Countries such as Japan, India, Brazil, and South Africa are examples.
The precise terms of this agreement are perhaps not what we would have negotiated, but it is fair to say that we think that—surprise, surprise—it is not a bad deal on balance. We have some concerns about the agreement, but it is a deal that we think deserves to be supported.
Unlike the Canada-China FIPA, this agreement does not tie the government's hands for 31 years. It is unlike CETA, in which the investor state dispute settlement mechanism chapter would continue to apply for 20 years after cancellation of the deal. Under the Korea free trade agreement, it can be fully cancelled after six months.
It is important that members of this House, particularly the Liberal members, understand that it is important to make sure people use their heads when they are negotiating any deal and make sure that they understand what is contained within that deal.
As I said when I started out, we certainly support the idea of trade, but we need to think about it in a responsible manner. We need to approach it in a common sense fashion, as any democratic government would, to make sure it is in the best interests of the people of our country. For example, we need to make sure we do not make deals that tie the hands of sub-national governments, as happens with investor state dispute mechanism provisions.
We need to understand that we are a democracy, that we uphold democratic principles in this country, and that we are not going to give up those principles. We are not going to give up the rights of citizens and governments to make decisions over purchasing and over matters that are determined through democratic process. We are not going to cede those rights to corporations, either here or elsewhere.
What do we want? New Democrats want to deepen Canada's trade linkages with the Asia-Pacific region, something that we recognize is essential to maintaining Canadian prosperity in the 21st century.
We want the government to do more to support our automotive industry, for example. We understand that there are some concerns about the impact that reducing the 6.5% tariff will have on the automotive sector. We have to recognize that the automotive sector is under increasing global pressure as a result of competition, so the government should be participating actively with the automotive sector to make sure that it is providing the supports necessary to maintain a vital and vibrant industry that provides a lot of family-sustaining jobs.
We support breaking down trade barriers, but we believe that government should provide the support the Canadian industry needs to remain competitive in a more open world. We agree with the various organizations and individuals who say that governments need to do more than simply sign trade agreements. They must do more to promote Canadian exports, attract investments, and help Canadian companies penetrate the South Korean and other Asian markets.
Finally, we want a strategic trade policy, as I said earlier, whereby we have multilateral negotiations and sign trade deals with developed countries that have high standards and with developing countries that are on a progressive trajectory.
What do we have here, then?
As has been explained by my colleague, our trade critic, we have three main criteria for trade agreements that we look to in evaluating them.
First, is the proposed partner one that respects democracy, human rights, adequate environmental and labour standards, and Canadian values? I would suggest that South Korea is such a country.
Since South Korea emerged from a dictatorship in 1987, it transitioned into a vibrant, multi-party democracy with an active trade union movement, relatively high wages, a diverse civil society, and freedom of expression. In fact, in recent years, we could learn a great deal from a country like South Korea. It has invested billions in an ambitious green growth strategy aimed at improving energy efficiency as well as boosting renewables and green technology. It clearly respects high environmental and labour standards and it shares our values of human rights and democracy.
Second, is the proposed partner's economy of significant or strategic value to Canada? I would suggest that again South Korea passes the test.
South Korea is Canada's seventh most important trading partner and third in Asia, behind the two largest economies, China and Japan. In 2013, Canadian exports to South Korea totalled $3.4 billion, while Korean exports to Canada totalled $7.3 billion. We export the same amount to South Korea as we export to France and Germany. We import the same amount as we do from the U.K. This is Canada's first trade agreement with an Asian country, and it provides an opportunity to take advantage of the Pacific region, which is extremely important.
Third, are the terms of the proposed deal satisfactory? Again I suggest that in this case they are satisfactory.
With regard to jobs, the agreement will create a level playing field for Canadian companies and workers exporting to South Korea.
In agriculture, the free trade deal is essential. Canada has suffered significant losses in market share for Canadian agricultural exports to Korea following the implementation of the Korea-U.S. FTA.
In the aerospace sector, there is general support for a Korean FTA among manufacturing sectors, notably from Bombardier and from aerospace industry associations. The deal will gradually remove 100% of industrial tariffs, with an estimated value of $1.9 trillion in business to be generated by this sector of the economy.
With regard to seafood, there is a 47% tariff on Canadian exports to Korea. It will be eliminated. It is a big deal for seafood exporters in my community on the east coast and for exporters on the west coast as well.
With forestry and wood products, it is the same thing. This is a good deal.
However, I mentioned that there are concerns about the impact this deal may have on the auto sector. We are calling on the government to pay attention to those concerns. They are very legitimate, and we want the federal government to do more to support the auto industry in Canada.
We will propose solid, effective policy measures to strengthen the Canadian auto sector. It is a move that needs to happen, so I would indicate that to members.
We are using our heads when it comes to analyzing the trade deal. In this case, we give a thumbs-up.