Third reading of Bill C-41, An Act to implement the Free Trade Agreement between Canada and the Republic of KoreaPublished on 25 November 2014 Hansard and Statements by Senator Percy Downe
Hon. Percy E. Downe:
Colleagues, I would like to acknowledge the work Senator Martin has done on this bill. As a Canadian of Korean descent, she was particularly interested in it. She contributed to one of the meetings we had at Foreign Affairs and closely followed the bill as it went through its journey in the Senate for the last day, today, hopefully.
The Standing Senate Committee on Foreign Affairs and International Trade has heard the testimony of several witnesses regarding the free trade agreement between Canada and the Republic of Korea. Once again, I commend the government for finally concluding an agreement with one of our major trading partners, a welcome change from recent agreements.
Witnesses who were supportive of this deal cited increased access for Canadian agriculture, seafood, wood, paper, coal and mineral products, among others. However, the committee heard testimony that other sectors of our economy may not fare as well, because Korea has a well-developed economy of its own, much like ours, and as a result, they don’t represent a market for many of our manufactured goods, largely because they manufacture them themselves. As a result, they prefer access to our raw materials so they can use them in their own manufacturing sector.
Manufacturing, however, is a vital part of Canada’s economy, employing millions of Canadians and providing livelihoods for many more. In recent years manufacturing has been a sector in decline. Since 2000, hundreds of thousands of manufacturing jobs have been lost in this country. Last year, for example, almost 12,000 manufacturing jobs were lost, mainly in Ontario and Quebec, as manufacturing jobs shifted to Asia and Mexico.
Senator Mitchell: Is this under a Conservative government?
Senator Downe: Some of it, but it is a long-term trend.
This manufacturing decline is particularly acute in our country, with recent media reports showing Canada experiencing the largest decline in manufacturing output among the nations of the industrial world.
Data from the United States Bureau of Labor Statistics show that for the period 2002-12, manufacturing output in Canada declined by 11.5 per cent, more than in Italy or Spain. In contrast, at the same time, countries like Germany, Norway and the Netherlands experienced growth in manufacturing output of between 12 and 20 per cent. Such growth pales in comparison with South Korea, which saw an increase of 77.4 per cent over the same time period. Clearly, anyone hoping to export manufactured goods to South Korea is going to have an uphill climb.
The obvious example of this is the auto sector, the sector that has the most concerns about the implications of this deal. Ford Canada, for example, has been vocal about its concerns. In fact, the CEO of Ford Canada has stated, “No Canadian manufacturer can compete. . .” with South Korea, which protects its manufacturers with measures that go beyond mere tariff provisions. One trade analyst has described non-tariff measures like penalties related to the tint on automobile windshields or on the frequency of remote door locks or even the selective use of tax audits. Others have noted the lack of a so-called “snap-back provision” in this agreement, which was included in the United States’ free trade agreement with South Korea, which simply means whereby American tariffs removed under the deal would snap back into place if South Korea violates the agreement. Canada was not able to negotiate that same provision in this deal.
Perhaps the basic problem when it comes to the automotive sector was articulated by industry expert and University of Windsor professor Tony Faria, who said:
We don’t, in Canada, build the type of vehicles that are much in demand in South Korea . . . . It’s not as if any trade deal we set up with South Korea is necessarily going to result in more vehicles being exported.
In other words, the current imbalance in that sector is unlikely to change. Honourable senators, it’s quite an imbalance. Statistics for last year provided by Industry Canada show that Canadian exports of motor vehicles, trailers, bicycles, motorcycles and other similar vehicles to South Korea amounted to $12.8 million. Our imports were $2.8 billion. For every dollar in exports, $218 in imports, and again, unlikely to change.
In fact, Jim Stanford of Unifor told the Standing Senate Committee on Foreign Affairs and International Trade that he estimated up to 30,000 manufacturing jobs could be lost in Canada as a result of this deal.
Of course there is more to this deal, and our economy in general, than automobiles, but the question of which sectors are set to gain and by how much in this deal speaks to a more fundamental issue, that of our exports and our trade policy in general.
Canada has been blessed with two things most exporting nations could only regard with envy, a wide range of abundant natural resources and a rich and eager market next door in the United States. Possessed of such advantages, Canada has come to rely heavily on our raw materials and our American neighbours, not out of laziness or lack of imagination, but rather because they are the strongest economy in the world. As well, they offer a certain security; an enormous market is only down the road rather than across the ocean. While factories and other businesses might close down and move away, forests, trees and oil sands do not.
As a result, various governments have sought to diversify our economy. From Prime Minister Diefenbaker’s proposal that 15 per cent of our imports from the U.S. should instead be sourced from the United Kingdom, through the third option of the Trudeau years, to the current government’s fondness for free trade deals, the desirability of relying less on the American market has been well recognized, even if the results have been mixed. But while the agreement before us today reflects that aspect of trade diversification, the other problem, the failure of our small- and medium-sized businesses to take full advantage of these agreements remains. And this problem is not one that can simply be cancelled like a tariff.
Honourable senators have heard me say this before, but free trade agreements cannot be an end in themselves. Important though they are, they can never be the only part of our export plan. Indeed, without proper preparation and follow-through, they can even cost our economy. Trade promotion is a difficult task, but a necessary one. Australia and the United Kingdom, for example, know this, and they both invest significantly more resources in it than Canada. Similarly, while whole-of-government approaches like the American National Export Initiative may serve as a model for us to follow, it would be useful to look at that, particularly since the American exports have increased by 50 per cent since 2009. So if Canadians are wondering why the American economy is improving so quickly, this is part of the answer.
So again, congratulations to the government for signing an agreement with such an important trading partner, but for Canada to be successful and maintain our standard of living, we have to do a much better job of assisting our businesses to become exporters. The Government of Canada has to follow the lead of other countries and put more resources, money and effort into assisting small- and medium-sized businesses in taking advantage of this free trade deal.
Thank you, colleagues.