Achieving Canada-United States economic competitiveness through regulatory convergence--a common cause agenda.

• Author: Meyer, Paul
• Position: PROCEEDINGS OF THE CANADA-UNITED STATES LAW INSTITUTE HENRY T. KING, Jr. ANNUAL CONFERENCE on: THE CANADA-UNITED STATES REGULATORY REGIME: REVIEW, REFORM, RECOVERY: Cleveland, Ohio: April 8-10, 210

Session Chair--Paul Meyer

Canadian Speaker--David Fung

United States Speaker--Timothy Boyle

United States Speaker--Greg Wilkinson

INTRODUCTION

MR. MEYER: Good afternoon, everyone. My name is Paul Meyer. I am on the Advisory Board of the Canada-United States Law Institute. (1) I have only been on the Advisory Board for two years, but I go back a little further. In 1982, I was the Canada-United States Law Institute scholar at The University of Western Ontario. (2)

I work for a company called Towers Watson & Company, a $3.5 billion publicly-traded company (3) that was formed on January 1, 2010 by the merger of two of the world's largest employee benefit consulting firms, Towers, Perrin, Forster & Crosby and Watson Wyatt Worldwide. (4)

I am in-house counsel, (5) and my responsibility is largely to manage litigation and litigation issues worldwide in the countries where we do business. We do business in, I believe, forty countries around the globe, including the United States and Canada. (6)

Towers Watson is not involved in international trade, but rather our clients are large corporations and governments that work across international borders. (7) Two of our key service lines are tied to helping corporations and institutions manage their workforces on a global scale in terms of defining benefit plans. (8)

Before the merger, one of our predecessor firms Watson Wyatt provided actuarial or administrative services to twenty percent of the three hundred largest pension plans in the world. (9) We also do consulting for group and health benefits and investments for pension funds. (10)

That takes me to my topic, which is international data privacy regulation, a crucial issue for companies who do international business. (11)

Now I would like to introduce the rest of our panel. First we have Dr. David Fung, who is chairman and chief executive officer of the ACDEG Group in Vancouver, British Columbia. (12)

MR. FUNG: First of all, I am not a lawyer. I came here to learn about the issues that lawyers are discussing, because my job is to look into the future for where we should position our investment and capital. I would like to discuss some of the issues concerning how we are running international businesses and how the legal frameworks we use will have an impact on what we do and how we maintain our security and prosperity in North America.

I am on the Board of Canadian Manufacturers & Exporters. (13) I am the immediate past chair. (14) I am also on the Boards of Canadian Standards Association Group, (15) the Canadian Green Chemistry & Engineering Network, (16) and a number of transportation associations. (17)

MR. MEYER: We also have Timothy Boyle, who is counsel of trade regulation at Eaton Corporation. (18)

MR. BOYLE: Good morning. I am going to talk about a number of areas of regulatory convergence related to my focus at Eaton Corporation here in Cleveland. We do business in about 175 countries and have about 70,000 employees. (19) I am going to focus my comments on some fairly recent changes in Canadian competition law, and also in the area of anti-bribery and corruption. Lastly, I have some comments regarding securities law convergence.

MR. MEYER: Thank you. We also have Greg Wilkinson, who is vice president of public and government affairs at NOVA Chemicals. (20)

MR. WILKINSON: Thank you. I am also not a lawyer. I work for a small company (21) and am not an expert in any of these areas; in fact, I am not engaged in most of these areas on a regular basis. I think of myself as the customer for these processes.

It has been an interesting exercise for me to ponder how this system works for us, or against us, and how we influence it and engage in the process. I will talk a little bit more about that.

MR. MEYER: Thank you, Greg. My topic is on the disharmonies in managing international data privacy, particularly between the United States and Canada. (22)

Now we will hear from Dr. Fung.

CANADIAN SPEAKER

David Fung *

MR. FUNG: Thank you. Today I will be speaking about how businesses are running away from the legal framework that has been set up around the world. That is what we as business leaders do: we are risk seekers. If there is no risk, we are not interested because there is no money to be made.

On the other hand, we are not risk takers. We seek risk but then try to manage that risk. Our objective, of course, is to make money and make society better. To be innovators, we have to learn to fail frequently and fail fast. The worst thing to do is to have a project ninety-nine percent finished and then have to cut your losses. We survive by failing fast.

These are the characteristics of the different projects that we work on. As you can see from the slide, none of our businesses has only a single flag; each has multiple flags, meaning that our products are not produced in one country, but rather in many different countries. (23)

As lawyers, what do you do to deal with my product when I take a piece of lumber from Canada that would cost $1.00 if I were to sell it. However, I do not sell it, but ship it to China, and there it is cut up and made into finger-joint panels. Now the value has gone to $5.00. But then again, I do not sell it, but ship it to Germany and make them into panels for kitchens or a living room. Now the value is forty dollars. What is the origin of that product? Is that a product of Germany when it gets into the consumers' hands because it is being finalized in Germany? Is it a product of China because the joint panel came from China? Or is it a product of Canada because the wood originated from Canada and the process is managed by a Canadian company? I do not really know how trade lawyers deal with these issues.

We were one of the first companies that caused Export Development Canada to change its rules on insuring our United States receivables based on Canadian content, when we told them we had zero Canadian content. But we created substantial Canadian benefits because we were using the ports and railways of Canada, in addition to Canadian lawyers and bankers. (24) Also, when I made profits, I paid taxes in Canada.

We talked today about the issue of the oil sands, and I heard about legislation attempting to deal with the high carbon footprint of oil sands. (25) Those are things we as business leaders love to hear because it creates new risk. We are going to take wood from pine trees killed by beetles in British Columbia and turn it into wood pellets. We will then ship those pellets up to Fort McMurray and turn the oil sands into the greenest oil in the world; there will be no carbon emission at all using wood as the fuel to extract and refine the bitumen. That is the reason we love it when legislatures create new rules, because then we go and make more money.

As I mentioned earlier, when you harvest hardwood in North America, the yield is only sixty to seventy percent. (26) It is difficult to find any industry that is more wasteful than our North American hardwood industry. What do we do to solve this problem? We take what has been discarded, all those little short logs, and we ship them to China. In China, they are turned into furniture, and then we bring the furniture back to the United States to sell. Is that a product of China, when in fact the only component the Chinese added was the labor hours, which is insignificant? If it is not a product of China, do we need to satisfy the North American Free Trade Agreement's (NAFTA) rules of origin? (27) I ship the short logs to China, and then ship it back to Canada for the final stage of assembly. By satisfying the North American content, and the final assembly, this is North American furniture. (28)

As you can see from this slide, we decided that we are going to get into fish and shrimp fanning. (29) There are technologies we are bringing into place that will make these endeavors completely sustainable. No waste water, no waste discharge. It is a complete ecological cycle. But I am not going to tell you more about it because it is too early. I do not want you to go out and copy us.

In Canada we suffered as much as anyone during this past recession. (30) As you can see from the graph, (31) the United States imported more Chinese products than Canadian products, and the number of Chinese imports to the United States is steadily increasing. (32) Canada is no longer able to compete with China in terms of being the largest shipper of goods to the United States. (33)

Under NAFTA, (34) we have all done pretty well. But look at China; it did even better without NAFTA. (35)

China is rising rapidly and graduating half a million students in technology fields. (36) Even assuming half of those graduates are not very good, we are still in trouble in regard to competing with the Chinese in awarding bachelor degrees in technology and the sciences. (37)

We think they are stealing our technology. (38) Then we realize that China graduates more students with PhDs than the United States. (39) Pretty soon we will need to learn to steal their technology.

In addition, China has surpassed our auto market. (40) North Asia is now the center of auto production; this was accomplished by using a large amount of containers. (41)

If the United States imposed a duty on parts being imported into the United States from China, one of the major casualties would be the assembly plants of Caterpillar; its products would become uncompetitive in the global market. The Chinese would not be hurt by this because the beneficiary of that legislation would be Komatsu of Japan, which would take over the global market from Caterpillar and buy more Chinese parts. (42)

Bilateral trade is an obsolete concept. The Chinese get $4 for assembling the Apple iPod. (43) To assemble the iPad, they get $12. (44) Is it a product of China? In trade statistics, we show that $120 to $150 of an iPod comes into the United States. (45) And it is $250 per iPad coming into the United States. China merely added...