May 27, 1993

PC

Michael Holcombe Wilson (Minister for International Trade; Minister of Industry, Science and Technology)

Progressive Conservative

Mr. Wilson (Etobicoke Centre):

My hon. friend says "right on". That just shows how little he understands what we are talking about here, but I am delighted that he is in the House to listen to my remarks. I hope that he will listen very carefully.

Topic:   GOVERNMENT ORDERS
Subtopic:   NORTH AMERICAN FREE TRADE AGREEMENT IMPLEMENTATION ACT
Sub-subtopic:   MEASURE TO ENACT
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?

Some hon. members:

Oh, oh.

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PC

Michael Holcombe Wilson (Minister for International Trade; Minister of Industry, Science and Technology)

Progressive Conservative

Mr. Wilson (Etobicoke Centre):

I guess, Mr. Speaker, I said something that has twitched a nerve end.

Expanded trade and investment benefits all those who engage in it. By specializing in what we do best we

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improve our productivity and increase our wealth. I have said on many occasions that it is important for us to get as many companies as possible involved in international markets. That is what the free trade agreements we have entered into will do.

The reason I say that is if companies are involved day in and day out in meeting the world competition they are going to be better companies for it. They are going to be able to generate more business in Canada, more business internationally, and be there in a much stronger way as we go through the normal ups and downs that are bound to happen in any economy.

With free trade liberalization we both preserve and create jobs and improve the prospects for Canadian companies to compete successfully world-wide. As we improve our productivity, our competitiveness, in dealing first with the United States and now in the NAFTA with Mexico, it will put us in a stronger position to take on the competition in the Far East, in Europe, or in central and eastern Europe. This is an essential objective of a free trade agreement. This is the proven strategy for growth and for improvements in our standard of living here in Canada.

The results of the free trade agreement to date are powerful. The figures speak for themselves. Canadian merchandise trade surplus with the United States rose 13.6 per cent last year over the previous year. Our merchandise trade surplus with the United States last year was $17.7 billion. That compares with $13.8 billion in 1988, the year before the free trade agreement came into force.

Looking behind those numbers you can see that the exports to the United States were up 13.5 per cent last year in a year when the U.S. economy grew at about 5 per cent. So far this year we can see that the trend is continuing, as exports to the United States in the first quarter compared to the same period last year were up 23 per cent. It is clear that it is the export business that has been assisted in such a major way by the free trade agreement which is driving the recovery in this country out of the recession we came out of a couple of years ago.

Exports are the engines of growth in Canada today. A C.D. Howe Institute analysis shows that in the first three years of the free trade agreement, those products which are benefiting the most from this increase in exports are

those that have received the greatest amount of trade liberalization and the greatest reduction in their tariffs going into the United States market.

I have heard members opposite on a number of occasions say that what we should be doing is generating more value-added manufacturing. That is precisely what the free trade agreement is doing. As we drop the tariffs on value-added products going into the United States market, it creates a manufacturing base for us in Canada. That is why we have seen a substantial increase in value-added products going into the United States market.

It is interesting to see that in the very high-tech areas, like telecommunications or aerospace, such as our exports in the first four years were up something like 60 per cent, but coming the other way interestingly, the U.S. exports into Canada in these products were up about 12 per cent.

Clearly we have gained market share and the free trade agreement has been a veiy important element of gaining that market share.

We have all said on many occasions in this House that Canada is a trading nation and there is no doubt about that. But our goal as a government has been to protect today's markets and to open up the markets of tomorrow. It is with this aim that we are pushing forward with an ambitious result in the Uruguay round at the multilateral trade negotiations. We achieved this through the negotiation of the Canada-United States Free Trade Agreement and now we have consolidated and improved upon this by negotiating the North American free trade agreement.

Let us look again at what this agreement does for Canada. It improves the already good access that we have into the United States market. It gives us preferential access to a growing and dynamic Mexican market, a young market, a market that is growing faster than that of the United States or Canada. It is a market we should be in. I should say we are already because the publicity and the interest that the NAFTA has generated is already generating some activity in Mexico.

Our exports last year were up 35 per cent. We have seen an increase in business visitors from 1,000 in 1990, to 2,000 in 1991, to 4,500 in 1992 and that trend is continuing.

May 27, 1993

It also ensures that Canada remains a preferred location for investment, investment by both foreign investors as well as Canadian investors. As they see that we have this better access to the United States and considerably improved access to Mexico, they are being drawn into using Canada as a base for their operations for the total North American market.

Our wealth and growth prospects depend on access to world markets. We are a small market in terms of population. Our access to outside markets underpins our economy and standard of living, and that is why we negotiated the free trade agreement with the United States. That is why we have also negotiated the North American free trade agreement with the United States and Mexico.

The U.S.-Canada Free Trade Agreement laid a foundation for Canadian prosperity. At a time of rising protectionist pressures throughout the world, not least of which was in the United States, Canada is in the enviable position of having through the FTA preferential access to the United States market.

The NAFTA preserves the benefits of the FTA. It ensures that Canada remains a prime investment location and it provides continued protection for key domestic areas, including our cultural industries, public education, health and social services, including child care.

The NAFTA substantially expands the benefits of the FTA. After four years of experience with the FTA we had the opportunity to make improvements and broaden the coverage in such areas as intellectual property protection and land transportation. We now have clearer rules for regulating Canada-United States trade, and new market access in the U.S. in areas not covered by the Canada-United States FTA. These improvements give Canadian businesses new opportunities in the U.S. and Mexico and place Canadian business on an even sounder footing for expanding our exports in important offshore markets.

Let me review some of the major new areas covered by the North American free trade agreement. One is duty drawback. This provision allows Canadian exporters to be refunded for the tariff that is paid on business inputs, products that they use in the production of their own

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manufactured products that are later exported. This was to be eliminated under the Canada-U.S. Free Trade Agreement next January, but under the NAFTA we have extended this deadline for two years. More important, new rules give certain permanent duty drawback rights for exporters who do not meet the NAFTA rules of origin.

The NAFTA rules of origin improve on those of the FTA. They are clearer and more predictable. That is a real benefit to Canadian exporters and potential investors in Canada. For many products the necessity of calculating content has simply been eliminated and replaced by the more precise tariff shift rules.

For most products still subject to a content requirement, there are two possible calculations from which an exporter can choose, at least one of which is considerably simpler than the one that is available now under the FTA.

Regulations will be established to ensure that Canadian, U.S. and Mexican customs officials apply the rules uniformly.

Finally, advance rulings on the origin of goods to be traded within the NAFTA area will further minimize the uncertainties for traders and investors.

The NAFTA maintains and improves upon the FTA's dispute settlement provisions.

The right Canada achieved in the FTA to take final appeals of countervail and dumping cases to a binational, impartial panel is clearly recognized in the NAFTA. Business people who have been subjected to the U.S. trade remedies system tell me that this dispute settlement procedure is a key asset of the FTA and one envied by those who do not have it.

The NAFTA gives Canadian service sector businesses new access to the North American market. It expands to services the basic obligations of national treatment which has long been applied to goods through the GATT and other trade agreements.

A signatory country cannot require that a service firm from a NAFTA country establish or maintain a local presence as a precondition for access to its market; this means that Canadian firms can provide services to the U.S. and Mexican market from Canada.

May 27, 1993

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Under its temporaiy entry provisions the NAFTA opens up cross-border entry for over 60 professions. As Mexico continues to develop it will need professional consulting assistance in the areas of telecommunications, utilities, land transportation services and consulting engineering. These are all areas in which Canadians excel.

Additional benefits are achieved in financial services. Under the NAFTA Mexico's financial markets will be opened up to Canadian banking, insurance and securities firms. This will allow Canadian financial institutions to participate in the rapidly expanding Mexican economy, a promising market that was closed to us until the negotiation of the NAFTA.

In another improvement on the FTA the NAFTA financial services obligations are covered by the agreement's general disputes settlement procedures. The FTA did not include provisions on land transportation. This has been rectified. Under the NAFTA a Canadian trucker can now unload in the United States, reload there, go to Mexico and haul back a cargo to the United States and Canada. At the same time we have maintained our cabotage rights.

The investment provisions of the NAFTA are another example where the FTA provisions were expanded offering to Canadian investors a more secure footing in the North American marketplace and securing for the future, their preferential access to Mexico. For additional security, disputes between an investor from a NAFTA country and another NAFTA country may be settled at the investor's options by international arbitration. Canada meanwhile maintains its rights to review foreign takeovers.

Canadian businesses gain new intellectual property protection in the NAFTA consistent with international rules that have developed in the Uruguay round negotiations. As the Canadian economy moves into higher value-added, knowledge-based growth areas, this protection for copyrights, patents, trade marks and trade secrets will protect our ability to expand into the NAFTA area. This in turn will make us a more competitive and attractive place to do business and create higher paying jobs.

It will clearly attract more investment into Canada as we have seen in the pharmaceutical area where over $700 million of investment has been attracted into Canada because of those changes that have been brought about by this government, consistent with the Uruguay round and the NAFTA.

The government procurement provisions of the NAFTA significantly expand the coverage contained in the FTA. The NAFTA adds about $50 billion in covered procurement to what was already opened in competitive bidding under the GATT and the FTA. Canadian businesses will have the opportunity to bid on contracts from such major buyers as the U.S. Corps of Engineers and the Mexican Pemex Corporation which together buy over $15 billion in goods and services each year.

I know my friends opposite do not like to hear about these positive changes to the NAFTA compared to what we have now. These changes to the NAFTA are going to generate job and investment opportunities in Canada.

They are going to result in a change for the better in this country that will reduce the unemployment rate and improve the competitive position of Canadian business. I know that is a major disappointment to my friends opposite. They can see that as the economy improves their opportunities to come to this side of the House are long gone.

I am sorry to have to say that. That is why I see the number of long faces on that side of the House. These NAFTA achievements represent new opportunities open to Canadians in the United States as well as in Mexico.

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Subtopic:   NORTH AMERICAN FREE TRADE AGREEMENT IMPLEMENTATION ACT
Sub-subtopic:   MEASURE TO ENACT
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LIB

David Kilgour

Liberal

Mr. Kilgour:

Tell that to your constituents.

Topic:   GOVERNMENT ORDERS
Subtopic:   NORTH AMERICAN FREE TRADE AGREEMENT IMPLEMENTATION ACT
Sub-subtopic:   MEASURE TO ENACT
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PC

Michael Holcombe Wilson (Minister for International Trade; Minister of Industry, Science and Technology)

Progressive Conservative

Mr. Wilson (Etobicoke Centre):

We are going to have a little ceremony here. They are listening carefully to all the good things I have to say.

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PC

Steve Eugene Paproski (Deputy Chair of Committees of the Whole)

Progressive Conservative

The Acting Speaker (Mr. Paproski):

I am sure the hon. members want to hear the minister's statement on this important issue.

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PC

Michael Holcombe Wilson (Minister for International Trade; Minister of Industry, Science and Technology)

Progressive Conservative

Mr. Wilson (Etobicoke Centre):

Mr. Speaker, I think that is probably stretching things but I appreciate your support in getting a little order into this place.

These achievements are improvements on the significant accomplishments already in place in the U.S.-Cana-da Free Trade Agreement. They provide an even more

May 27, 1993

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solid foundation for our exports to markets beyond in Europe and the Asia-Pacific as I explained just a few minutes ago.

I have spoken about the improved rules in the NAFTA. We must not lose sight of its importance to Canadian companies that are looking beyond the United States toward Mexico and elsewhere.

The NAFTA opens up a new and dynamic market. Many Canadian businesses are already gearing up for the new opportunities in Mexico as a result of the NAFTA. Let me give you some examples.

The telecommunication firms see tremendous opportunities in Mexico. There are only 10 million telephones lines hooked up in Mexico today. Mexico has a population of 85 million people. We have about an 89 per cent penetration in Canada so that gives members opposite an understanding of the huge opportunity that is here.

Northern Telecom is already doing business in Mexico and SR Telecom has some great opportunities to penetrate into the rural areas of Mexico. I believe SR Telecom has a $13 million contract in one part of the country and a $23 million contract in another part of the country.

There is another company called Glenayre Electronics. It is another telecommunications company that is from Vancouver. Its comment last summer during the final stages of the negotiations was: "This NAFTA cannot come soon enough for us because we have such tremendous opportunities to penetrate into that market".

I tell that to my constituents all the time. They say to me: "Let us get on with this NAFTA legislation. Let us get rid of all this nonsense we hear from the opposition parties. Let us bring the legislation forward to eliminate the uncertainty and get down there and do some business".

Mexico plans to spend tens of billions of dollars- [English]

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Subtopic:   NORTH AMERICAN FREE TRADE AGREEMENT IMPLEMENTATION ACT
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?

Some hon. members:

Oh, oh.

Topic:   GOVERNMENT ORDERS
Subtopic:   NORTH AMERICAN FREE TRADE AGREEMENT IMPLEMENTATION ACT
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PC

Steve Eugene Paproski (Deputy Chair of Committees of the Whole)

Progressive Conservative

The Acting Speaker (Mr. Paproski):

Order, please. I would like to hear the hon. member's speech. He maybe out of order and I would like to know. Please.

The hon. minister has the floor.

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PC

Michael Holcombe Wilson (Minister for International Trade; Minister of Industry, Science and Technology)

Progressive Conservative

Mr. Wilson (Etobicoke Centre):

Mr. Speaker, people ask why the opposition parties do not agree with the things we are doing as a government. One of the clear reasons is they never listen. They do not listen to the facts about the NAFTA and the free trade agreement which are in the speech I have been providing for them today.

With our expertise in infrastructure projects in construction, in engineering, Canada is well poised to be a key player in this market.

Services are an area of comparative advantage for Canada and one in which Mexican demand will rapidly increase in the coming years. Canadian financial service sector companies are world class competitors and see significant opportunities in Mexico. Mexico is strongly committed to improving its environment and this will create a major market for the Canada's dynamic pollution abatement and environmental technology sector.

I am disappointed that I may not mention her name but one of the hon. members is not in the House. There is a company called Zenon in Hamilton which is one of the fine Canadian high technology companies involved in anti-pollution devices. I was at the opening and announcement of a major expansion it had. It is extremely interested in the Mexican market. I am sorry that the member I am referring to is not here.

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Subtopic:   NORTH AMERICAN FREE TRADE AGREEMENT IMPLEMENTATION ACT
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LIB

Stan Kazmierczak Keyes

Liberal

Mr. Keyes:

There are many members here.

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Subtopic:   NORTH AMERICAN FREE TRADE AGREEMENT IMPLEMENTATION ACT
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PC

Michael Holcombe Wilson (Minister for International Trade; Minister of Industry, Science and Technology)

Progressive Conservative

Mr. Wilson (Etobicoke Centre):

I appreciate that there are many members opposite here, including the members for Hamilton West and Hamilton Mountain.

Mexico's demand for manufactured goods includes office equipment, housing market products and other manufactured products and it will increase as Mexico builds its economy.

The automotive market in Mexico is projected to grow much more rapidly than the mature markets of Canada and the United States, providing new export and investment opportunities for Canadian automotive companies. If my hon. friends had read the report of what the president of Chrysler said at its annual meeting here in Canada about a week ago, they would have heard this man say there are major opportunities for Chrysler

May 27, 1993

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Canada to sell into the Mexican market. This is a very important fact for Canadian auto workers in Canada. The opportunities this man spoke about were virtually closed to Canadian automotive producers before Mexico agreed in the NAFTA to eliminate its automotive decree.

This is only a very partial list. Canadians can compete around the world and we can compete in Mexico. The NAFTA gives us an advantage over all non-NAFTA countries that allows us to take advantage of these opportunities in Mexico. It is an advantage we must seize.

Trade is not an end in itself, but it is a means to an end. [DOT]The ultimate end is prosperity offered by an efficient economy that generates the wealth necessary for Canadians to pay for the social programs they demand and expect to pay for such as public education, to create higher paying jobs and underwrite continued future improvements in our standard of living and our quality of life.

We are currently negotiating side deals on the environment and labour. Canada pressed for strong improvements in these areas during the original negotiations and I brought this forward in February 1992. We are fully committed to working with our NAFTA partners to promote the highest possible level of co-operation in these important areas. We do however have to get these agreements right. They have to work.

For that reason the Canadian position will continue to oppose the use of trade sanctions to enforce compliance. We will insist instead on mechanisms that promote co-operation and certainty instead of confrontation and uncertainty.

Some hon. members opposite contend that the government is losing its negotiating leverage by proceeding with Bill C-115 before the side agreements are concluded. The fact is that Bill C-115 is not relevant to the achievement of Canada's objectives in the side agreements. The NAFTA is a good deal for Canada with or without the side agreements, but we are working hard for good agreements on environment and labour co-operation. However, the value of NAFTA to Canada is not conditional upon the conclusion of these additional

agreements. All that delaying or implementing legislation would accomplish-perversely-would be to deprive Canadian businesses and their workers of the certainty needed to finalize plans for taking advantage of the many opportunities opened up by the NAFTA.

We are also not prepared to see Canadians misled by misrepresentations of about the NAFTA. We have been exposing these myths. We will continue to expose these myths. The NAFTA does not give the United States or Mexico any rights to exploit our water. Claims to the contrary are absurd puffery. Our 1987 federal water policy explicitly prohibits large scale exports of water by inter-basin transfer or diversion and nothing in the NAFTA or any other trade agreement forces Canada to exploit our water resources or to export our water. Until water enters commerce as a good, it is not covered by the NAFTA or any other trade agreement. The bottom line is that Canadian governments, both now and under the NAFTA, have the freedom of action required to regulate the exploitation of our water resources.

The NAFTA does not threaten Canadian jobs. I will tell what does threaten Canadian jobs: low productivity, recession battered markets, protectionist trade barriers, inflation driven prices, volatile exchange rates, inwardlooking business plans as well as inward-looking politicians. All of these are what threatens Canadian jobs. The NAFTA does not create unfair competition. Canada is already competing against low wage countries as well as high wage countries throughout the world. Their markets are our hope for the future.

Let me read something to my hon. friends opposite that they might want to listen to. It is a quote by C. D. Howe in 1948: "The times in which we are living-

Topic:   GOVERNMENT ORDERS
Subtopic:   NORTH AMERICAN FREE TRADE AGREEMENT IMPLEMENTATION ACT
Sub-subtopic:   MEASURE TO ENACT
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?

Some hon. members:

Oh, oh.

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Subtopic:   NORTH AMERICAN FREE TRADE AGREEMENT IMPLEMENTATION ACT
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PC

Michael Holcombe Wilson (Minister for International Trade; Minister of Industry, Science and Technology)

Progressive Conservative

Mr. Wilson (Etobicoke Centre):

My friends do not like to listen to a great leader from their party, C. D. Howe.

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?

An hon. member:

They do not even want to hear one of their own.

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PC

Michael Holcombe Wilson (Minister for International Trade; Minister of Industry, Science and Technology)

Progressive Conservative

Mr. Wilson (Etobicoke Centre):

"The times in which we are living call for initiative and resourcefulness. We must constantly be alive to the changes taking place in the world and quick to seize every opportunity that will build up our economy. It cannot be done overnight, but I am confident that with the co-operation of industry, of

May 27, 1993

government and of other organizations we can build toward a better Canada and a better world".

Those words are as appropriate today as they were appropriate in 1948. Canada can and must compete. Canadians can and must win in world markets. Canada must pursue a vigorous outward-looking trade strategy to maintain and enhance the prosperity and social benefits that our citizens enjoy.

If the great nation builders of Canadian history, like C. D. Howe, taught us any lesson it was to make far-sighted choices, confident of our strong position in the global economy, for the benefit of future generations. Our future generations deserve no less. This is precisely why we are here today in the final stages of debate on the North American free trade agreement.

.(1115)

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LIB

David Kilgour

Liberal

Mr. Kilgour:

What about the GATT?

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PC

Michael Holcombe Wilson (Minister for International Trade; Minister of Industry, Science and Technology)

Progressive Conservative

Mr. Wilson (Etobicoke Centre):

My loudmouth friend says "What about the GATT?" Let me tell my hon. friend about the GATT

One and a half weeks ago I hosted a meeting of the quad trade ministers in Toronto where Canada took the initiative to try to move this process along. We had a good meeting. We saw a narrowing of differences among the major countries and we can see that this is going to be a positive force leading up to the G-7 summit in Tokyo where we hope to present the leaders at that time with the prospect of a substantial market access package in industrial products and in services and to allow them to give us encouragement to multilateralize the process and complete the negotiations by the end of this year.

I mention that partly for my friend from Edmonton but also partly to make the point again that the North American free trade agreement, the free trade agreement of the United States and the Uruguay Round- these multilateral negotiations-are all compatible. As Arthur Dunkel has said: "There are two sides to the same coin".

It is important that we in Canada not lose sight of that. My friends opposite in both opposition parties have said that they support the GATT and the Uruguay Round. We do as well. That is why I hosted that meeting a week ago Friday. That is why we have been an active supporter

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and an active participant in the Uruguay Round right from the start of the negotiations.

However, we must also recognize that positive and strong regional negotiations and agreements, like the NAFTA and the FTA, can be a key part of the success of the Uruguay Round. What is being accomplished in the Uruguay Round in services has taken a lot of guidance from the successes that we have in the service negotiations in the free trade agreement with the United States.

It is the same in the dispute settlement process. A number of the things that were brought in the FTA have been mirrored in the GATT. This can give my hon. friends opposite an indication of what we are doing in these regional negotiations are a major benefit to the conclusion of the GATT round.

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?

Some hon. members:

Oh, oh.

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PC

Michael Holcombe Wilson (Minister for International Trade; Minister of Industry, Science and Technology)

Progressive Conservative

Mr. Wilson (Etobicoke Centre):

I appreciate very much the support and the encouragement of my friends opposite. I will be glad to go on for another 20 minutes if one would permit me.

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May 27, 1993