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Free Trade Agreements: a Tool for Economic Prosperity

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Free Trade Agreements: a Tool for Economic Prosperity FREE TRADE AGREEMENTS: A TOOL FOR ECONOMIC PROSPERITY Report of the Standing Senate Committee on Foreign Affairs and International Trade The Honourable Raynell Andreychuk, Chair The Honourable Percy E. Downe, Deputy Chair SBK>QB SK>Q February 2017 CANADA For more information please contact us: by email: [email protected] by phone: (613) 998-0424 toll-free: 1-800-267-7362 by mail: The Standing Senate Committee on Foreign Affairs and International Trade Senate, Ottawa, Ontario, Canada, K1A 0A4 This report can be downloaded at: www.senate-senat.ca/aefa.asp The Senate is on Twitter: @SenateCA, follow the committee using the hashtag #AEFA Ce rapport est également offert en français FREE TRADE AGREEMENTS: A TOOL FOR ECONOMIC PROSPERITY TABLE OF CONTENTS ACKNOWLEDGEMENTS ........................................................................................................... iii ORDER OF REFERENCE ............................................................................................................. v THE COMMITTEE ....................................................................................................................... vi EXECUTIVE SUMMARY .......................................................................................................... vii LIST OF RECOMMENDATIONS ............................................................................................. xiii INTRODUCTION .......................................................................................................................... 1 CHAPTER 1: CANADA AND RULES-BASED TRADE LIBERALIZATION .......................... 4 A. Rules-Based Trade Liberalization ........................................................................................ 4 B. Economic Integration Through Comprehensive Free Trade Agreements ........................... 5 C. Canada’s Free Trade Agreements ........................................................................................ 6 CHAPTER 2: FREE TRADE AS A TOOL TO COMPETE AND SUCCEED INTERNATIONALLY ................................................................................................................... 8 A. The Need for Market Access ............................................................................................... 8 B. Levelling the Playing Field .................................................................................................. 9 C. Linking Canadian Businesses to Global Value Chains...................................................... 10 D. Global Value Chains and the “Trade-Investment-Services-Intellectual Property Nexus” 12 E. Trade as a Catalyst for Productivity and Innovation ......................................................... 15 F. The Committee’s Observations.......................................................................................... 16 CHAPTER 3: CHALLENGES ASSOCIATED WITH THE NEGOTIATION AND IMPLEMENTATION OF FREE TRADE AGREEMENTS ........................................................ 18 A. Concerns Regarding Canada’s Merchandise Trade Performance ..................................... 18 B. Canadian Workers and Sectors Affected by Trade Liberalization .................................... 20 C. Transparency and Consultations During Trade Negotiations ............................................ 21 D. Investor-State Dispute Settlement...................................................................................... 23 E. Intellectual Property ........................................................................................................... 26 F. Side Agreements on Labour Cooperation .......................................................................... 29 G. The Committee’s Observations.......................................................................................... 31 i FREE TRADE AGREEMENTS: A TOOL FOR ECONOMIC PROSPERITY CHAPTER 4: FOSTERING CANADA’S ECONOMIC PROSPERITY THROUGH TRADE . 36 A. Strengthening the Pillars of Economic Growth ................................................................. 36 B. Competing in the Knowledge-Based Economy ................................................................. 38 C. Connecting Canadian Businesses to Trade Opportunities ................................................. 41 D. Remaining Engaged in the Multilateral Trading System ................................................... 44 E. Informing Canada’s Trade Policy with 21st Century Trade Statistics ............................... 45 F. The Committee’s Observations.......................................................................................... 46 CONCLUSION ............................................................................................................................. 51 APPENDIX – LIST OF WITNESSES ......................................................................................... 52 ii FREE TRADE AGREEMENTS: A TOOL FOR ECONOMIC PROSPERITY ACKNOWLEDGEMENTS Canada’s ongoing economic prosperity is closely tied to our ability to maintain free trade agreements that leverage benefits, minimize challenges and grant Canadians businesses access to increased global opportunities. Over the past few decades, Canada negotiated and signed a number of new free trade agreements, including an ambitious agreement with the European Union. Trade negotiations are also currently underway with a number of other trading partners. As we continue to move forward with this trade agenda, it remains critically important that we negotiate and implement agreements that effectively respond to the needs of Canadians. It was within this context that the Standing Senate Committee on Foreign Affairs and International Trade undertook a broad study of free trade agreements. From February to November 2016, the Committee held 18 meetings and heard testimony from 53 witnesses. The present report explores the benefits as well as the challenges associated with free trade agreements. It also underscores the need of the Government of Canada in negotiating and implementing free trade agreements in a broader context of economic policy with greater consultation of Canadians. On behalf of the Committee, I wish to extend our deepest gratitude to the witnesses who appeared before the Committee to share their expertise. Their knowledge deepened our understanding of the complexities of comprehensive free trade agreements, and informed the recommendations included within the report. I wish to thank all Committee members as well as staff for thoughtfully engaging with all available materials. In particular, I would like to extend my appreciation to members of the steering committee, Senator Percy E. Downe, Deputy Committee Chair, and Senator Thanh Hai Ngo. I would also like to convey my appreciation to our analysts from the Library of Parliament, Pascal Tremblay and Natalie Mychajlyszyn, who worked tirelessly to consolidate the testimonies collected in order to produce a timely, pertinent and worthwhile report. A special thank you to our Committee Clerk Marie-Eve Belzile, as well as her predecessor Danielle Labonté, for their efficiency in facilitating witnesses and coordinating all administrative matters. Finally, I wish to thank our team of translators and interpreters, who expertly enabled our Committee to complete this study in both official languages. Within the context of an increasingly competitive global economy, Canada must remain timely and current in its approach to trade policy. It is the hope of the Committee that the Government of Canada will carefully consider the recommendations included herein, and that the insights iii FREE TRADE AGREEMENTS: A TOOL FOR ECONOMIC PROSPERITY shared within this report will assist in maximizing the benefits of international trade for all Canadians. Senator Raynell Andreychuk Chair of the Committee iv FREE TRADE AGREEMENTS: A TOOL FOR ECONOMIC PROSPERITY ORDER OF REFERENCE Extract from the Journals of the Senate, Wednesday, January 27, 2016: The Honourable Senator Andreychuk moved, seconded by the Honourable Senator Tkachuk: That the Standing Senate Committee on Foreign Affairs and International Trade, in accordance with rule 12-7(4), be authorized to examine such issues as may arise from time to time relating to foreign relations and international trade generally; and That the committee report to the Senate no later than June 30, 2017. After debate, The question being put on the motion, it was adopted. Clerk of the Senate Charles Robert v FREE TRADE AGREEMENTS: A TOOL FOR ECONOMIC PROSPERITY THE COMMITTEE The following Senators have participated in the study: The Honourable Raynell Andreychuk, Chair The Honourable Percy E. Downe, Deputy Chair and The Honourable Salma Ataullahjan The Honourable Anne Cools The Honourable Jane Cordy The Honourable Dennis Dawson The Honourable Nicole Eaton The Honourable Leo Housakos The Honourable Thanh Hai Ngo The Honourable Victor Oh The Honourable Rose-May Poirier Ex-officio members of the Committee: The Honourable Senator Peter Harder, P.C. (or Diane Bellemare) The Honourable Senator Claude Carignan, P.C. (or Yonah Martin) The committee would like to recognize the following Honourable Senators who are no longer members of the committee whose contribution to the study was invaluable: The Honourable Senators Johnson, Rivard and Smith, P.C. (Cobourg) Other Senators who have participated in the study: The Honourable Senators Beyak, Kenny, Lang, Marshall, Omidvar, Pratte, Raine, Unger, Wells Parliamentary Information and Research Service, Library of Parliament:
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