Statement made on 09 June 2009 by Senator Percy Downe
Hon. Percy E. Downe:
Honourable senators, I want to join the debate about Bill C-24, an Act to implement the Free Trade Agreement between Canada and the Republic of Peru.
Peru is becoming an important trade partner to Canada. Our trade with Peru has increased in recent years. Our two-way trade totalled $2.8 billion in 2008. According to the World Trade Atlas, since 2003, Canadian exports to Peru have increased from $134 million to over $380 million in 2008, an increase of 186 per cent. In the same time period, Canadian imports from Peru have grown from $260 million in 2003 to over $2.4 billion in 2008, an increase of over 800 per cent. Overall, Canadian direct investment in Peru was estimated to be $1.8 billion in 2007.
Canada is also a major foreign direct investor in Peru's mining sector. In addition, key sectors of interest to Canadians other than mining include oil and gas, engineering, distribution services, financial services and information technology.
In the financial sector, senators may be surprised to know that the Bank of Nova Scotia is the third-largest bank in Peru. Given the outstanding reputation of Canadian financial institutions, increased relations with Peru will present new opportunities to expand in that area.
Negotiations for a free trade agreement with Peru started in 2002 when Canada held discussions on a potential agreement with a number of South American countries. These negotiations concluded with the signing of the Canada-Peru Free Trade Agreement on May 29, 2008.
This marks Canada's first free trade agreement in the Americas since 2001, when Canada completed a bilateral agreement with Costa Rica. It represents a good step forward in terms of Canada's engagement with South America.
This increased economic engagement is a step in the right direction for building Canada's relationship with Peru, and offers opportunities for its citizens to address important priorities, such as the reduction of poverty.
The free trade agreement includes chapters on service trade, investment protection and recognizes Peru as a developing country. Side agreements on the environment and labour were also negotiated with the trade agreement. These side agreements, honourable senators, have not been incorporated into the Canada-Peru Free Trade Agreement. Therefore, they are outside of the main agreement dispute settlement system.
The Canada-Peru Agreement on Labour Cooperation includes occupational health and safety protection and minimum employment standards, such as minimum wage and hours of work. Parties can request that a review panel appointed by both countries report and rule on a labour-related dispute. The panel determines the amount of any financial penalty, which is paid into a jointly managed fund. Both countries determine together, through a ministerial council, how to spend the money.
Considering the growing importance of trade with Peru, Canadians looked to the federal government to negotiate a strong and effective agreement to improve access to new markets and improve overall trade opportunities. However, questions are being asked about this agreement. Did the Government of Canada fail to negotiate an effective free trade agreement for Canada? Did the government fail in comparison to the trade deals negotiated by other countries?
While the Department of Foreign Affairs and International Trade will advise that 95 per cent of Canadian exports will be tariff-free and 97 per cent of Peruvian imports to Canada will be tariff-free as a result of implementing the agreement, I would like to advise senators that after a careful review of this agreement, you will discover that Canadians will not realize all of these benefits for quite some time. In fact, the tariff elimination schedule extends up to 17 years.
The Canada-Peru Environment Agreement does not allow for financial penalties for non-compliance. The United States of America negotiated with Peru to have provisions on the environment incorporated into their free trade agreement, making them subject to the main dispute resolution mechanism.
The government could have used this opportunity to show leadership on the environment, to show Canadians and the international community how important the environment is to Canada in the context of trade, but the government has not done this. It chose not to include cooperation on the environment in the actual free trade agreement.
Why has Canada not negotiated a stronger deal with Peru? As senators know, Canada is not the only country that has negotiated free trade agreements with Peru. The United States-Peru Trade Promotion Agreement was passed in Congress in December 2007. In November of 2008, it was announced that a China-Peru Free Trade Agreement was reached; and a Peru-Chile Free Trade Agreement was signed in August of 2006.
Trade negotiations are also ongoing between Peru and the European Union, Thailand and South Korea, and Peru is involved in the discussion to expand the Trans-Pacific Strategic Economic Partnership Agreement.
How does the Canadian agreement compare to others? I have already highlighted the weakness of the agreement on the environment, but another major area where our trade agreement falls short is in the protection of intellectual property rights, an important policy area for Canada. In today's global economy, the Government of Canada should do more to protect and enforce intellectual property rights.
Other governments seem to have made this a priority in trade negotiations, so it is unclear why the Canada-Peru agreement only reaffirms our commitment to the WTO trade-related aspects of intellectual property right agreements, which establishes the minimum standard of protection.
The Canada-Peru Free Trade Agreement has very few references to intellectual property rights and they are expressed in general terms. The agreement lacks any specific articles that would address the needs of Canadian exporters and importers, considering the diversity and complexity of intellectual property right issues.
Why did the Government of Canada not do more to protect intellectual property rights? Compare, for example, the U.S.-Peru trade agreement, which contains a whole separate chapter on intellectual property rights and requires that both countries ratify a number of international agreements concerning intellectual property rights. It has more detailed provisions addressing the specific issues related to digital products such as software and music, domain names on the Internet, copyrights, patents and other issues.
The U.S.-Peru agreement contains elements to improve protection of trademark, requiring Peru to develop an online system for the registration and maintenance of trademarks. The Canada-Peru agreement does not. The U.S. free trade agreement ensures that the first person who acquires a right to a trademark or a geographic indication is the person who has the right to use it. It criminalizes end-use piracy and it includes an article on enforcement. None of these protections is available under this weak agreement the federal government negotiated for Canada.
Even the China-Peru Free Trade Agreement contains provisions to protect intellectual property rights. Although the European agreement is still in the negotiation stage, we know that the two countries are working toward an ambitious plan that would include provisions on intellectual property and a dispute settlement mechanism.
The United States-Peru Trade Promotion Agreement also goes further than the Canadian agreement by including specific provisions for trade in textiles and apparel. In agriculture, the United States benefits from a shorter tariff reduction schedule and is not subject to Peru's Price Band System, which sets a minimum and maximum import tariff for goods adjusted to international price changes, putting the United States at a competitive advantage compared to Canadian producers.
An important industry for my home province of Prince Edward Island, the potato industry, is only one example of Canadian industries that are being put at a disadvantage when exporting to Peru. Tariffs on potatoes are eliminated immediately for the United States, but Canadian potato producers, with the exception of seed potatoes, have to wait 10 years to obtain the same benefit. Markets will be lost over those 10 years and it will be impossible to recapture that business.
Probably the biggest omission in the Canada-Peru Free Trade Agreement was discussed by the president of the Canadian Federation of Agriculture when he appeared before the House of Commons committee. He said:
. . . if another country negotiates something with Peru in the future, there is a clause in the agreement that the U.S. will obtain the same consideration. Canada was not able to put the same clause in our agreement. So if, for example, Europe obtains something better with Peru than what the U.S. has, the U.S. will have it. If Europe negotiates something better with Peru than Canada has, Canada will not have it. We did not include that part in our deal.
Honourable senators, another important issue in this debate is the recent decision by the government to decrease the number of countries of focus at the Canadian International Development Agency. While Peru has now been added as a country offocus by CIDA, other countries that desperately need development assistance are no longer Canadian priorities.
Cambodia, Kenya and six other African countries have been dropped by CIDA. These African countries were dropped so Peru could be added.
When making the announcement, the Minister of International Cooperation, Bev Oda, said:
While continuing to provide assistance to the people in greatest need, focusing our bilateral assistance will make our aid dollars go further and make a greater difference for those we help.
However, according to the 2007 development cooperation report of the Organisation for Economic Co-operation and Development, less than 1 per cent of Peru's gross national income comes from official development aid. It is a very different situation for some of the countries dropped by CIDA. In Rwanda and Malawi, over 20 per cent of gross national income comes from net development assistance. Why is the Canadian government linking trade with assistance?
What about Bill C-293, the Official Development Assistance Accountability Act, which passed the Senate in 2008. The act requires that international assistance contribute to poverty reduction.
Many Canadians have expressed their concerns about the government's linkage between trade and international development aid. Canadians are wondering if the decision to change CIDA's countries of focus has more to do with trade than it has to do with living up to the promise to assist the many citizens of the world who live in poverty. However, Canada's merits as a trading partner, the quality of Canadian products and our service expertise speak for themselves. International development funds should not be used to further trade goals.
The fact that the U.S.-Peru Trade Promotion Agreement came into effect February 1, 2009, means that Canadian exports are now at a competitive disadvantage in many sectors. For example, Canadian wheat exporters face a 17 per cent tariff on goods entering Peru, whereas U.S. exporters receive duty-free treatment.
That being said, it is very important that we consider this trade agreement carefully. In committee, we can have a full discussion about the agreement, including its many omissions, compared to the protection that other countries negotiated for their citizens. We can question why our government failed to negotiate a better deal for Canadians and why the government failed to negotiate a deal equal to that obtained by the United States and other countries. We should hear directly from stakeholders to learn how this deal will work for Canadians and how increased economic engagement through this agreement will address issues in Peru, including human rights concerns.
In conclusion, honourable senators, Canada deserves a first-rate free trade deal with Peru, not this second-rate package negotiated by the federal government. Let us work to improve the deal.