Notes from Committee: Emerson at International Trade on softwood, free trade with Korea and Team Canada missions

International Trade Minister David Emerson was the witness at the June 5, 2006 meeting of the Commons Standing Committee on International Trade. Some excerpts:

On Canada’s trade performance …

Canada's trade performance and, indeed, our economic performance has been really quite good, if not stellar, the last few years. You'll see on Thursday that our exports are going to exceed $516 billion, I think, for the year 2005, which is a record. Our current account surplus is going to, again, be of record scale. When you look across the economy, we've seen a very, very strong macro-economic performance in Canada, whether you're looking at job creation, the unemployment rate, the growth in investment in retail sales.

Canada needs to negotiate more bilateral trade deals:

Over the last 10 years Canada has fallen behind in terms of launching bilateral free trade agreements with other countries. When you look at the United States and Mexico, you're looking at countries that have entered into a multitude of free trade agreements with other countries. The United States has 12 free trade agreements with 18 countries. Mexico has 13 free trade agreements with 43 countries. Australia has been aggressively forging free trade agreements. Canada has really only entered into one free trade agreement in the last five years and that was with Puerto Rico, so if you believe, as I do, that Canada and our prosperity is going to be fundamentally driven by international trade, we must re-energize and focus on a successful WTO round, but we also have to hedge our bets and be looking at more aggressive negotiations of bilateral free trade agreements because the free trade agreements of our trading partners are creating advantages for our competitors in third country markets, and we cannot sit back and simply allow Canadian companies to be discriminated against as a result of what has become a competitive proliferation of free trade agreements.

Conservative government announced in February it would re-integrate the departments of Foreign Affairs and International Trade. how much will that cost?

We think the cost or reintegration will run roughly half a million dollars and it will be absorbed within existing budgets. In terms of the benefits, I think the benefit is that we have a more integrated, a more seamless, more informationally efficient face on the world and feeder system to bring information back into Canada and serve our various constituencies and stakeholders.

What is the cost, so far, of arguing our softwood lumber case?

The Government of Canada has actually spent, by our estimates, about $88 million over the last 5 years on expenses. International Trade Canada is about $50 million of that, so there is some part of it that's accounted for in other departments.
    I should observe that when you look at the expenses incurred by the Canadian industry, by provincial governments and when you look at the expenses incurred on the other side of the border you're looking at hundreds of millions of dollars. That's not even including the managerial resource costs for companies of having to administratively comply with these investigations and legal cases.
    I would note particularly that that dumping case is extremely expensive in terms of company resources required to provide all the information that the department of commerce requires of them. It's a case that can go on and on for years, and those expenses persist for years. So the costs of litigation are extremely high, both in terms of management, in terms of companies and in terms of governments, federal and provincial.

Canada is looking at signing a free trade agreement with Korea but here’s a problem:

    John Maloney (Liberal-Welland): We have a significant trade balance, a deficiency now, with Korea of roughly $3 billion to $4 billion a year. This translates into job losses in Canada. Specifically, the auto sector is under stress domestically. In terms of the deficiency, I understand there are roughly 130,000 Korean vehicles imported and 400 vehicles exported–roughly 150 to 1. A free trade agreement is likely to exacerbate this trade deficiency.
    How do you intend to address the situation in light of the huge trade deficiency that we do have?

Emerson: Let me just begin by saying we are not proceeding with Korea with undue haste; we've been working on this for the past…over a year I think. We've been having consultations with industry.
    We are working closely with the automotive industry. The automotive industry, as you know, has been a happy recipient of hundreds of millions of dollars of taxpayer money in Canada. We've worked closely with them on environmental safeguards. I think we have brought the Canadian automotive industry to a position of competitive leadership in North America, and I think that's widely recognized now.
    If you look at the Canada-Korea relationship, you have to observe that Korea is going to be manufacturing a substantial number of vehicles in the United States. Those vehicles will have duty-free access to Canada under NAFTA. Eighty-five per cent of Canadian vehicles are actually sold in the U.S. So the amount of a competitive threat that the automotive sector faces in Korea is not as dramatic as is being portrayed …

    … The Canada-Korea potential free trade agreement does have the potential to offer substantial benefits to Canada, we've quantified them and modeled them, they're well in excess of a half a bill dollars, perhaps upwards into the $1.5 billion to $2 billion a year range. It's not that we're trying to get into a free trade agreement that is going to be harmful to Canada: quite the contrary.

Emerson doesn’t like the “Team Canada” trade concept:

I have to confess that I'm not a really big booster of big team Canada missions. There may be a place for them in terms of getting publicity in a given marketplace in terms of incremental value added, in terms of securing deals or joint ventures. I personally believe we have to be more focused, more selective, probably go in smaller better defined, more specialized missions where we're targeting on actually getting commercial deals done, getting specific objectives accomplished. In that sense it's going to be cheaper and you're going to have a much more precise sense of what it is you're trying to achieve. So that would be my general approach going forward.
    How much these things have cost in the past, I'll have to ask my officials to give you some idea. I've never been on one because even when I was in private industry I always thought that if you didn't go 10 times, let's say to China, to work out the details of a commercial arrangement, just going along with the Prime Minister and waving flags wasn't going to do it for you. So that would be my general approach.

Leave a Reply

Your email address will not be published. Required fields are marked *