CIIT Committee Report

SUPPLEMENTARY OPINION BY THE OFFICIAL OPPOSITION

CONSERVATIVE PARTY OF CANADA

PRIORITIES OF CANADIAN STAKEHOLDERS HAVING AN INTEREST IN BILATERAL TRADE IN NORTH AMERICA, BETWEEN CANADA, UNITED STATES AND MEXICO

The Conservative Party of Canada greatly appreciates the contributions of the witnesses who took the time to share their priorities for free trade in North America.

This supplementary report is offered to ensure that the voices of Canadian stakeholders are heard on their issues, and their priorities are presented in this report.

Maintaining the Benefits of NAFTA

The Conservative Party of Canada was listening to witnesses when they advocated a “Do No Harm” approach. The general sentiment of stakeholders from all countries is that their top priority is to maintain the current benefits of NAFTA.

This priority was consistently expressed heard from stakeholders, their consultations, and government consultations:

“Our first principle for the Canada-U.S. relationship, and the NAFTA negotiations in particular, is to do no harm. Canada must protect the framework of rights, benefits, and privileges that our companies and citizens currently enjoy under NAFTA.”

Andrea van Vugt, Business Council of Canada May 4, 2017

“…we must take extreme care to “do no harm” to the integrated NAFTA auto supply chain, which is extraordinarily beneficial and important to Canada's economy.”

David Paterson, General Motors of Canada Limited May 9, 2017

 “Yes, we've heard some common trends, I think, from many of the people we consulted, the different groups. One of the common trends was “do no harm”, to try to preserve what we already have access to in the negotiations.”

Catherine Gosselin, Department of Foreign Affairs, Trade and Development August 14, 2017

“The free trade agreement has been beneficial, and while there is always room for improvement, the starting point should be “do no harm” and we should be sure to preserve basic building blocks of free trade agreements, such as national treatment and redress for individual investors.”

Nick Schultz, Canadian Association of Petroleum Producers May 16, 2017

“The common thread in our discussions was that reopening NAFTA should do no harm. The NAFTA has largely benefited the food and beverage processing sector on both sides of the border.”

Norm Beal, Food and Beverage Ontario September 18, 2017

“In essence, while we support an enhanced NAFTA, I think we would certainly like the Government of Canada to take a “do no harm” approach. What we have is pretty valuable, and we'd like to sustain it and make it better.”

Clyde Graham, Fertilizer Canada September 20, 2017

“The U.S. chicken industry understands that NAFTA is of benefit to them. If they got a bit more access, would they say they liked it? Yes, but what's important to them, as Clyde has said, is to do no harm.”

Mike Dungate, Chicken Farmers of Canada September 20, 2017

“First, do no harm. Interrupting the $1.3 trillion in annual trade across our borders or reverting to the high tariffs that were in place prior to the agreement could endanger many of the millions of jobs that depend on trade in our three countries.”

John Murphy, U.S. Chamber of Commerce September 25, 2017

The clearly expressed priority of Canadians is to keep a Canadian trade agenda simple, effective and focused on securing access to markets, letting Canadians businesses play on a level playing field, and free trade with market economies.

The Conservative Party of Canada would like to stress that the federal government should not just adopt the slogan “Do No Harm” and pursue its own trade agenda that ignores the priorities of Canadian stakeholders and threatens to shut Canadian exports out of progressively more and more markets. Such an approach would be harmful to Canadians.

The Conservative Party of Canada recommends that in ongoing trilateral negotiations on the North American Free Trade Agreement, that the Government of Canada’s top priority should be to preserve the free trade environment which has benefitted all three nations.

Keeping Canada Competitive Internationally

The committee also heard testimony regarding domestic policies which add costs to Canadian businesses, and make Canada less competitive internationally. When asked about the impact of proposed small business tax changes, the Canadian Federation of Independent Business was clear:

Overall, it's tough to compete these days, and I think any new measures that increase the costs of doing business can be difficult for smaller companies to absorb. I would say it's not just the tax changes that have been recently proposed. Those certainly have an impact, but they are compounded with the increases we know are coming on payroll taxes, and the increases in some of the provincially mandated minimum wages.

There are a number of factors that are currently coming at small business owners across Canada that are scaring many of them in terms of understanding what they need to do in order to continue to operate their businesses. Many of them operate on very thin profit margins and this compounding of issues that are coming at them is what's scaring them. The most recent tax changes are something like a straw that breaks the camel's back kind of issue. It's almost like there have been so many in the last six to eight months.

- Corinne Pohlman Canadian Federation of Independent Business September 20, 2017

The small business tax changes proposed by the government were produced without adequate consideration of the negative impact they would have on Canadian businesses and Canada’s international competitiveness.

Changing the rules and adding to the costs of doing business can have deleterious effects on Canada’s economy. This is the same principle Canada’s chief negotiator mentioned when describing why Canada opposed the inclusion of a sunset clause in NAFTA:

I think few enterprises are going to be looking to make a long-term investment commitment in North America, and in particular in any of the three parties, if they don't have some assurance that the terms of trade are going to be predictable, and that they will know that years down the road, as their investment continues, they will be operating under the same business conditions as they were when they first started that investment. If they're looking at a prospect whereby the agreement ends after one of those five-year periods, all at once their investment is going to be very negatively impacted because the conditions of trade will change entirely.

Changing the rules of the game without warning, (and then changing the changes,) creates economic instability and uncertainty. For Canada to remain internationally competitive, the Government of Canada needs to do better.

The Conservative Party of Canada recommends that the Government of Canada conduct a full economic impact assessment of future tax changes to ensure that business costs are more stable and predictable.  

The Conservative Party of Canada recommends that the Government of Canada should make sure that Canadian businesses can operate in a fair, low-tax environment that will keep Canadian businesses internationally competitive.

Trading with Market Economies

Many witnesses stressed the importance of Canada’s other trading relationships, specifically the proposed TPP-11 trade agreement.

That is why the Conservative Party was troubled by the Prime Minister surprising trusted trading partners like Japan and Australia when he refused to attend trade negotiations at the APEC summit in November. This gesture was not well-received by our TPP-11 partners.

The current government has also sought closer ties to China, even as the automotive manufacturers before the committee complained of the impact currency manipulation had on Canada’s ability to sell cars.

Another source of confusion is the government’s dissonance on bilateral trade balances. For example, the Minister of Foreign Affairs acknowledges that “Canada does not see bilateral trade balances as a useful measure of the benefits of trade.[1]” Yet under their current leader, members from the governing party often complain about trade deficits at committee meetings[2], and in the House of Commons. [3],[4],[5],[6],[7],[8] The government should not tell Canadians one thing and then tell Americans the opposite.

As mentioned in paragraph 77 of the committee’s report, stakeholders in the automotive sector report that currency manipulation limits exports of Canadian vehicles. Canadian vehicle manufacturers would like the inclusion of a clause to prevent currency manipulation to set an important precedent.

As the prevention of currency manipulation is also a priority expressed by the United States Trade Representative, and no NAFTA country has engaged in currency manipulation, the inclusion of such a clause is easily achievable.

As the committee was tasked with reporting on the priorities of stakeholders, it would be wrong to neglect a clearly expressed priority of Canadian automotive manufacturers.

The Conservative Party of Canada recommends that the Government of Canada seek to join fellow market economies in a Trans-Pacific Partnership, and engage with non-market economies through the TPP platform.

The Conservative Party of Canada recommends that the Government of Canada seek to address currency manipulation in NAFTA and other trade negotiations, as suggested by Canadian manufacturers.

Conclusion

The Conservative Party of Canada will support efforts that advance free trade in North America and free trade amongst market economies.

Maintaining a positive working relationship with the United States and Mexico has been crucial for the success of NAFTA under previous Liberal and Conservative governments.

If the Government of Canada proceeds as recommended and seeks to enter an agreement with our TPP-11 partners, we must also maintain a strong working relationship with our Trans-Pacific trading partners. Ignoring our friends and trading partners in TPP-11 was not helpful, as the agreement would benefit Canada greatly, and would give Canada a stronger platform to deal with China. This approach would be more productive than the Prime Minister’s trip in early December.

For the good of Canadian jobs and our economy, the Government of Canada needs better management of our economy and our tax system. The government’s proposed tax changes and other increases to the costs of Canadian businesses can put our strongest job creators at a competitive disadvantage internationally. That reduces the job creating benefits of NAFTA significantly.

The Government of Canada should have a clear set of priorities for free trade negotiations that are based on the issues identified by Canadian stakeholders, so that we can preserve the benefits of the agreement for North America and preserve Canadian jobs.