SINT Committee Meeting

SUB-COMMITTEE ON INTERNATIONAL TRADE, TRADE DISPUTES AND INVESTMENT OF THE STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

SOUS-COMITÉ DU COMMERCE, DES DIFFÉRENDS COMMERCIAUX ET DES INVESTISSEMENTS INTERNATIONAUX DU COMITÉ PERMANENT DES AFFAIRES ÉTRANGÈRES ET DU COMMERCE INTERNATIONAL

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, June 9, 1998

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[English]

The Chairman (Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): Colleagues, we are continuing a meeting of our subcommittee on international trade, trade disputes and investment regarding future negotiations of the World Trade Organization.

Today we have, as a witness from Industry Canada, Rob Ready, acting director of the international investment and services policy directorate.

Rob, we've talked earlier. Would you also introduce the people with you? Generally what we have is an opening statement of around 15 minutes, and then we turn it over to questions. I had assumed we had votes at 5.30, but I'm being told by the opposition that's not the case, unless they're not invited; I'm not sure. I'll check on that, but let's assume we have a little over an hour.

Mr. Robert Ready (Acting Director, International Investment and Services Policy Directorate, Industry Canada): Thank you very much, Mr. Chairman. It's a pleasure and an honour to be here today, to provide an update on the progress of the WTO negotiations on professional services.

Before I begin my presentation, I'd like to introduce my colleagues. With me are Mr. Vincent Sacchetti of the Department of Industry and Mr. Greg Rust from the Department of Foreign Affairs and International Trade. Together they make up the negotiating team Canada currently fields in the working party on professional services in the World Trade Organization. I'll be calling on them, I suspect, to answer some of your questions this afternoon.

My presentation today consists of several parts. First, I would like to describe the larger context within which the work on professional services is being carried out, by situating Canada's position in world trade in services and by pointing out some of the unique qualities of services trade. Second, I will briefly touch on the structure and benefits of the General Agreement on Trade in Services in the World Trade Organization. Third, I would like to outline the work that has taken place to date in the working party on professional services. Finally, we can get into a brief consideration of some of the issues that lie in the future.

I'll now turn to the first part of the presentation—Canada and world trade in services. Within the global economy, the significance of trade in services is hard to ignore. Commercial services currently account for about 20% of global trade, and are valued at more than $1 trillion U.S. in exports worldwide. Services trade today is two and a half times what it was ten years ago, fast outpacing the growth of merchandise trade and far outstripping economic growth as a whole.

As for Canada, services trade already plays an important role in our economy. Canada's trade in services continues to grow more rapidly than its goods trade, and significantly faster than the rate of growth in the economy. Between 1987 and 1997, services exports grew on average by 9.1% a year, and commercial services exports at the more rapid pace of 11.2% per year.

In light of continuing advances in information and communications technologies, the growing tradeability of services and the growth of the share of service industries in the economy, the prospects for more rapid growth in services trade are excellent.

Given the growing reliance of the Canadian and world economies on services trade, the upcoming multilateral negotiations on services in the WTO represent an opportunity for us to expand our trade, and in so doing to capture benefits that will contribute to jobs and growth for Canadians.

Before moving into the specifics of the work on services trade liberalization, it may be useful to touch on just what is so unique about services.

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Perhaps the major difference between goods and services in the trade context lies in the way protection is granted by governments to domestic industries. Industries producing goods are generally protected by the imposition of tariffs or other border measures such as quantitative restrictions. However, services are often referred to as “invisibles”. Someone once characterized services as any form of trade you could not drop on your foot. Essentially, because of the intangible nature of services, and as many service transactions do not involve cross-border movements, protection to service industries is not typically granted through measures applicable at the border.

As a result, service industries are most commonly protected by domestic regulations. These can include regulations on foreign direct investment and the participation of foreign service suppliers in domestic industries. Regulations may be applied on a discriminatory basis to natural persons providing services, thus treating them less favourably than domestic producers.

Consequently, rather than focusing on border measures, much of the work in services negotiations seeks to ensure that these types of domestic provisions do not have trade-distorting effects, or that they will be restructured to promote further liberalization.

Work on services builds on the results on the Uruguay Round of multilateral trade negotiations. The agreement that came into force in 1995, the General Agreement on Trade in Services, or GATS, established a basic framework of rules for liberalizing trade in services, and national commitments on market access for services produced by foreign suppliers.

In essence, the GATS is the first-ever set of multilateral, legally-enforceable rules covering international trade in services. The agreement has three fundamental principles. First, it covers all services except those provided in the exercise of governmental authority. Second, there should be no discrimination in favour of national providers—the national treatment principle. Third, there should be no discrimination between other members of the agreement—the most-favoured-nation principle.

Like the agreement on goods, and other international agreements, the GATS operates on a number of levels. There is of course the main text containing the general principles and obligations that I referred to just now. There are a number of annexes dealing with specific sectors, and of course there are individual countries' specific commitments to provide access to their markets. As with other agreements, the extent of Canada's commitments can only be assessed by taking all of these elements of the GATS into account.

I will now turn to the focus of the presentation today, the GATS mandate and the working party on professional services.

In its broadest definition, the WTO category for professional services includes a number of sectors: legal services, accounting, auditing and bookkeeping services, taxation services, architectural services, engineering, urban planning, medical and dental services, veterinary services, and services provided by midwives, nurses, physiotherapists and paramedical personnel. These various subsectors have been covered to one degree or another in the schedules of specific commitments of WTO members.

However, at the end of the Uruguay Round, it was felt that due to the specificities of the professional sectors and industries, commitments on market access and national treatment would not be sufficient to allow for effective liberalization of this sector. Professional services provided by accountants, lawyers, architects and engineers are particularly influenced by the types of domestic regulations discussed earlier. For example, despite the fact that the principle of market access meant that a foreign firm of accountants could now enter a host country, domestic regulations such as residency and nationality requirements, qualification standards, and foreign ownership rules can constitute effective barriers to the free flow of trade in this service.

The result of this situation was the adoption of the ministerial decision on professional services at the end of the Uruguay Round, which established the working party on professional services. Unlike the groups established to deal with financial services, basic telecommunications, and maritime transport services at the end of the Uruguay Round, the working party on professional services or WPPS was not conceived to negotiate new commitments in the area of professional services; rather, it will contribute to the development of additional rules that will make the GATS more operational for this particular sector.

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The decision on professional services stipulates that as a matter of priority, the working party shall deal with the accountancy sector. This is why all of the efforts of the working party to date have concentrated on this sub-sector. The accountancy sector was chosen as a priority, since this profession is the most integrated internationally and trade in accountancy services shows considerable potential for growth.

The WPPS mandate to focus on the accountancy sector requires that it make recommendations on the disciplines necessary to ensure that domestic regulations related to qualification requirements and procedures, technical standards, and licensing requirements do not act as disguised barriers to trade; are based on objective and transparent criteria; are not more burdensome than necessary; and in the case of licensing, do not serve as a restriction on the supply of the service.

The work program of the working party was also to address the issue of international standards and to develop guidelines for the mutual recognition of qualifications.

The WPPS began its work with this last element of its mandate, and in May 1997 agreed to a set of guidelines for mutual recognition agreements or arrangements in the accountancy sector. These guidelines are non-binding and completely voluntary. The guidelines provide practical guidance for governments and for negotiating entities entering into mutual recognition negotiations on accountancy services. Essentially they make it easier for parties to negotiate recognition agreements and for third parties to negotiate their accession to such agreements or to negotiate comparable ones.

Following completion of the guidelines, the working party initiated discussions on the development of rules or disciplines. These disciplines seek to add value to the existing GATS articles dealing with transparency, licensing, qualifications, and technical standards by going beyond what appears in the original GATS text.

For example, whereas the transparency text of the original GATS stipulates the establishment of inquiry or contact points through which members are required to make available information that may affect trade in services, the accountancy disciplines are more explicit. More specifically, the additional text of the disciplines calls for the availability of additional information on such things as names and addresses of competent authorities, and by this is meant the governmental or non-governmental entities responsible for the licensing of professionals or firms; the activities and professional titles that are regulated or that must comply with specific technical standards; the requirements and procedures to obtain, renew, or retain licences or professional qualifications; and, upon request, confirmation that a particular professional or firm is licensed to practise.

The disciplines further require that members inform one another, upon request, of the rationale behind domestic regulatory measures in the accountancy sector, and that when introducing measures that significantly affect trade in accountancy services, members shall endeavour to provide opportunity for comment and give consideration to such comments before adoption.

The work on the disciplines is now nearing completion, as members are comfortable with the text that has emerged. The working party, having reached a certain level of agreement on these disciplines, is beginning to examine how they will enter into legal force. And although it is not yet clear which members will agree to bind themselves to the resulting disciplines, Canada has indicated that in principle it is prepared to do so.

Canada's support for these disciplines is based on two considerations. The first is that Canada's market access interests are well served by these rules, which will begin to discipline some domestic practices, particularly in potential markets of interest, such as Asia and Latin America. Further, conclusion of these rules for accountancy will also facilitate the engagement of other professional service sectors of major export interest, namely engineering, architecture, and foreign legal consultancy services.

The second consideration is that the current draft would not require any modifications to existing domestic legislation or any changes in the manner in which professional licensing bodies treat foreigners. Canadian accountancy licensing regimes currently provide better treatment to foreigners than would be required under the draft international regime.

Within Canada, the licensing for the provision of accountancy services is largely self-regulated at the provincial level. Federal officials have consulted and continue to consult extensively with the provinces and the three national accountancy bodies. In fact my colleagues attended a briefing this afternoon with provincial representatives of the C-Trade committee. To date, the few concerns expressed by the associations and provinces have been addressed in the draft rules. The consultation process has also recently been expanded to include all 36 provincial accountancy associations.

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In sum, Canada continues to support the work of the WPPS, as the disciplines have value in providing a minimum level of treatment for Canadian accountants, particularly for individuals and small and medium-sized firms. Canada would like to see this work finalized by the fall.

Turning very briefly to the future agenda, if I may, the GATS specified that new negotiations on services should begin no later than five years after the WTO entered into force—that is, by January 2000. Among other things, this next round of negotiations will likely focus on the broader question of domestic regulation in services—precisely the kind of work the WPPS has been conducting for accounting.

In essence, the work will continually evolve and will serve as a basis for further work in the area of services. Other professions—engineers and architects—have been waiting on the sidelines for three years to get their turn. Once the accountancy work is complete, the working party will have to decide on how to deal with the other professional services. Members are still considering whether to proceed sectorally with some other sectors, such as architecture or engineering, or address horizontally all other professional services.

The experience of the WPPS has been that of a single-sector negotiation, and it has been argued that in such negotiations, liberalization benefits those who have the established services. While it could be argued that developing countries may derive the indirect benefit of, in this case, more stable accounting regimes, some believe the clear winners of increased liberalization in this kind of negotiation will be developed country accounting services, which will be in the best position to enter developing markets.

Proponents of this view believe that further multilateral or broad-based negotiations that generate greater opportunity for tradeoff offer the greatest incentive for future liberalization. Supporters of a sectoral approach—the kind that's been conducted with respect to accounting—however, appreciate the ability to tailor disciplines more precisely to the requirements of each profession. While it's early in the preparation for future negotiations in this area, ultimately the approach to be adopted in the future will most probably lie somewhere between those two extremes.

Ongoing work of the WPPS will also need to mesh with upcoming WTO services negotiations more generally. Issues that are likely to dominate the GATS 2000 agenda include securing greater liberalization and market access commitments for members, such as those achieved with the successful conclusion of the GATS basic telecom and financial service agreements.

GATS members are beginning now preparations for the upcoming round of comprehensive negotiations in 2000. Over the coming months, Canada will be consulting closely with provincial governments, service-providers, and other interested parties to define Canadian objectives.

That concludes my presentation. I apologize if it's gone on too long, but while the focus of this presentation was on professional services, I did want to provide a bit of context with respect to the GATS as a whole.

Thank you very much, Mr. Chairman.

The Chairman: Thank you very much. It certainly wasn't too long. Don't worry; in this place we let people know when they speak too long.

I will turn it over first to Mr. Penson.

Mr. Charlie Penson (Peace River, Ref.): Thank you, Mr. Chairman.

I'd like to welcome the panel. It's certainly interesting. This is a big growth area for Canada. There's a good potential for growth, and we do need to secure better market access. So it's going to be interesting to follow what happens if there's a future round at the GATT to see whether the service sector is rolled in.

You were talking mostly about accountants and their access. I'd like to have you give us an example of how a Canadian company would have access to some other country's market to do accounting of a business. Would they win a contract to do a business' accounting or whatever? And how would that relate to the residency aspect? Would they be there for six months? One of the areas of concern I have, if that happens and somebody is in another country for a period of time, is whether the partner would be allowed to work there. It seems to be one of the restrictions that is hurting us a bit. Is that something you've addressed or that we have a position on?

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Mr. Robert Ready: I think I will ask my colleague, Mr. Sacchetti, to respond to the detail of that question. I would like to comment on the introduction.

Whether or not a new round of trade negotiations comes out of discussions in Geneva and elsewhere, the GATT agreement itself specifies that services negotiations must be engaged before January 1, 2000. So there is a built-in agenda with respect to services that will see general negotiations on services commence by that date.

Mr. Charlie Penson: I'm aware of that, but there is also discussion, as you know, about starting a comprehensive round, and that might be one of the areas that's rolled in as part of it.

Mr. Robert Ready: Yes, but I would like to ask Mr. Sacchetti to respond to the detailed question, please.

Mr. Vincent Sacchetti (Senior Policy Analyst, International Investment and Services Policy, Industry Canada): Your question is a very good one, and it's a very difficult one to answer, because there are many components to it.

Accounting services is probably the most integrated sector of all professional services. They have been kept back from entering new markets because there is a host of barriers to keep them out. So the accountants have essentially worked around those barriers. You will note there is either a Price Waterhouse, an Arthur Anderson, or a Touche Ross right next to the McDonald's on every corner of every major city in the world. These have developed over time through circumvention of restrictions, for example going around such barriers as ownership restrictions to set up different types of structures.

Market access is not an easy one. The big four or the former big six are pretty well established around the world. The big problem for what we call the small ten and the medium ten is they do not have the resources to gain access to foreign markets. When you look at the landscape in terms of restrictions, you'll find out very quickly why there are restrictions on the types of legal form of establishments that are allowed.

There are restrictions on control and ownership of firms. There are requirements to be a citizen or a resident to become an accountant. There are restrictions on the number of foreign accountants that can be employed. There are restrictions on a number of new licences to be issued, and the list goes on and on. So it is very difficult, and over time the big six have found ways around these barriers and have established themselves in foreign markets. Most of the problems or the barriers I've listed still exist. They exist everywhere in the world, including Canada. Part of the work of this WPPS is to try to dismantle these barriers over time, and it will take time.

It still remains very difficult to access new foreign markets because there are not only limitations, as I have outlined, but there are also immigration requirements one has to meet. So there are many hurdles.

Mr. Charlie Penson: I'm aware of the hurdles, but we are trying to establish accountancy as the first area. You've just told us that's probably the one that has the best opportunity, but there are many other things Canadians are good at, such as financial services, engineering and so on—engineering specifically—that are right behind and need that kind of access as well.

What's the likelihood of getting the kind of access for a small Canadian firm to go into Boston, for example, and win a contract to do that accountancy without having to actually have a permanent office there? Is the residency of the accountants from a Canadian firm who would go down there and be there for six months, two months, or whatever part of that? Is that being negotiated?

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Mr. Vincent Sacchetti: Yes, it is being negotiated. It was negotiated as part of the Uruguay Round of GATT negotiations. As Mr. Ready mentioned, we are going beyond that now, but these specific issues I have outlined are not being currently negotiated within the scope of the mandate of the WPPS because they have been negotiated. Each member country of the GATS has deposited a schedule of commitments that provides market access as specified by their schedule. The results of the Uruguay round of services negotiation was largely a standstill, which means that what was in existence as of 1995 is still in existence.

Mr. Charlie Penson: But that means there are still restrictions?

Mr. Vincent Sacchetti: Absolutely.

Mr. Charlie Penson: Which we want to move beyond.

Mr. Vincent Sacchetti: Which we want to move beyond. But that will take time, and that will occur in the next round of negotiations.

Mr. Charlie Penson: What's your best guess of the likelihood of making a breakthrough in those areas in order to stop some of those restrictions or roll them back?

Mr. Vincent Sacchetti: In our view, the probability of success is much greater in a broader round. As Mr. Ready mentioned, one of the difficulties we have with the working party on professional services is that it is a single-sector negotiation. Hence, there are absolutely no trade-offs that can be made between sectors for goods, for example, or for relaxation of immigration policies.

I will give you a good example. During the Uruguay round of services negotiations, Canada gained some fairly significant market access in markets of interest to us because of our offer on temporary movement of people. Developing countries would first look at our offer on movement of people—that's where their interests lie—which permitted us to be demandeurs with respect to accessing their markets in requesting them to either bind or eliminate whatever restrictions they had in place. The prospects for liberalization and for greater access for Canadian service suppliers lie in a comprehensive round.

Mr. Charlie Penson: Mr. Chairman, I just have one short question and then I'll wrap up.

In agriculture, Canadian farmers are looking for a general round so that we can win something there as well. I'm just wondering who's going to be giving up. If in the services area we need a general round to get something out of it and if in agriculture we need a general round, there has to be some trade-off somewhere along the way. That's going to be a difficult area, is it not? If we intend to win or hope to win in all these areas, somebody has to give up access somewhere along the way to make it work.

Mr. Robert Ready: I guess the conclusion of a trade round depends on a satisfactory balance at the end of the day, and I'm certain that'll be found. But you're right: it's a difficult scenario as negotiations start to move more into those things that are part and parcel of your domestic regulatory environment, and services and agriculture are obviously two good examples.

The Chairman: Thank you, Mr. Penson. You might want to have your constituents contact our excellent consul general in Boston. I'm sure Mary would be more than happy to help them.

Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau (Repentigny, BQ): Good afternoon, ladies and gentlemen. I'm pleased that you were able to spare a few minutes of your valuable time to update parliamentarians on the work you've been doing. Your presentation was very interesting, but I found several aspects of it—and I hope my colleagues agree with me on this, but if they don't, so be it—somewhat disconcerting, in terms of the role reserved for parliamentarians in this process.

You have just given us a status report on the negotiations of the working party on professional services. We note in your submission that an agreement was signed in 1995 and that services account for US$14 trillion in economic activity. Aside from listening to your annual reports, what role do you see parliamentarians playing in all of this? Should they merely be informed of the work being done by negotiators and then go out and sell that to the public or should they play a different role?

If you answer that it is enough that we be kept informed of the work you're doing, then I find this diminishes the value of our work somewhat. Perhaps you could send us faxes or letters to keep us posted on the status of your negotiations.

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As far as the Multilateral Agreement on Investment is concerned, because and only because news of the agreement got out on the Internet, officials woke up and decided that perhaps it would be a good idea to "consult" with us. A subcommittee then examined this issue and drafted a report. I think it did a commendable job. It gave the negotiators some food for thought and possible avenues to explore.

At the time, I thought that this was a good way to negotiate international agreements and to keep public tension over such deals in check.

Your presence here today, while quite relevant and informative, only confirms to me that parliamentarians' role is merely to rubber stamp the decisions of the bureaucrats.

That is all I have to say. If you wish to respond, by all means do so. Otherwise, we can leave at that.

[English]

The Chairman: Mr. Sauvageau, sometimes the interpretation isn't the best. I assume you weren't saying that Mr. Ready's presentation was indecent.

[Translation]

Mr. Benoît Sauvageau: No, certainly not the presentation. I said that it was interesting, but that I found it somewhat disconcerting to be presented with a fait accompli.

[English]

I can repeat it in English if you would like. I think Canada is the most beautiful and the greatest country in the world, and it's a bilingual country. I can repeat it in English if you want.

The Chairman: No. The department has a role in terms of our request—

Mr. Benoît Sauvageau: I can ask my question more simply. What is the parliamentarian's role in the international negotiations, from your point of view?

The Chairman: Mr. Sauvageau, I think that is more a political question than it is a departmental question—

Mr. Benoît Sauvageau: He can answer it if he wants—

The Chairman: —and is one that you might want to address to the minister. We've asked these colleagues to come here today to give us an update in terms of the—

Mr. Benoît Sauvageau: Okay. Can I ask my question in another form?

The Chairman: Yes.

Mr. Benoît Sauvageau: Is it a good thing for you not to have the parliamentarians with you when you negotiate?

Some hon. members: Oh, oh.

Mr. Benoît Sauvageau: Is it understandable?

The Chairman: Mr. Ready, if you want to answer that, you're more than welcome to. I'm not sure of the relevance to the department.

Mr. Robert Ready: My answer was going to be along the following lines. I've not been in this business long enough to have much involvement with parliamentarians in the conduct of an international negotiation.

My recent experience has been with the multilateral agreement on investment, and I know that despite the twists and turns that negotiation has taken, the process that involved this committee and the consultations that we were undertaking with respect to the MAI proved to be very useful for Canada's negotiating position.

Mr. Benoît Sauvageau: Do you mean—

The Chairman: Mr. Sauvageau, I just might add, too, that we had an opportunity in Geneva just recently when a group of parliamentarians from all parties went to Geneva during the talks on the WTO. We found it very useful in terms of our political work and I'm sure that the department said it was useful to them too in terms of relating to the NGOs, those interested in these negotiations, and making sure that those points of view were put forward to the department.

I would agree with those who say that parliamentarians do have an important role to play in these sorts of things and that's why the government has invited parliamentarians on these sorts of missions. Whether or not we should be the negotiators.... I wouldn't think so. That's why we pay the departmental people.

Please go ahead.

Mr. Benoît Sauvageau: Thank you. That's okay.

The Chairman: Okay. Mr. Reed.

Mr. Julian Reed (Halton, Lib.): Thank you very much, Mr. Chairman. I think I interpreted Mr. Sauvageau's remark to mean that MAI failed.

Is that what you said?

Mr. Benoît Sauvageau: I have a great respect for the translator, but I think now that maybe it's important that I speak in English here, because you've understood nothing I've said.

Mr. Julian Reed: I'm sorry. I apologize for not—

Mr. Benoît Sauvageau: I apologize too.

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Mr. Julian Reed: Okay, that's fine.

There is and has been a thrust by the government recently to make negotiations more transparent and make the work of the World Trade Organization more transparent. I know that when our minister spoke at the opening plenary his thrust was to let the light shine on the WTO. As well, at the closing of the plenary, I had the honour of actually reinforcing that. He's quite serious.

At the same time, while a lot of developed countries agree that the time has come for more transparency, there are other countries in the WTO that aren't nearly as enthusiastic about that sort of thing.

Having been involved as directly as you have been with negotiations, is it going to be any hindrance to Canada or will it help Canada if we continue down this path to move towards more transparency in the negotiating activities?

Mr. Robert Ready: Mr. Chairman, just very briefly, I again have to refer to my more immediate experience, which related to the MAI. And frankly, the members of the negotiating team found the recommendations emanating from this committee and from other consultations very helpful at the negotiating table in terms of reinforcing the points that we had to make continually.

In that respect, I think the kind of transparency you refer to—which was part of the process of hearings on that negotiation and the kinds of processes that were embarked on, beginning with Mr. Fried's appearance before this committee, and then Mr. Gifford's, and now this appearance—can only help the preparation of Canada's negotiating positions and the reinforcement of those as they're delivered internationally.

Mr. Julian Reed: Up until this year, as you will know far better than I, negotiations on all of the bilaterals that have taken place in the past really didn't have much attention paid to them by the general public. It was sort of like the government was doing that and the government signed the agreement, and fine, on we went. But it has been the most recent explosion of communications around the world—essentially the Internet and that sort of thing—that has suddenly raised the awareness of citizens all over the world.

On the one hand, it has sort of created that Chinese character of danger and opportunity, where the same character is used for both: politicians feel a responsibility to respond to that need in a way that will not hinder your work and will hopefully help it and they also feel a responsibility to give confidence to people who are very often inculcated with fear rather than fact.

We're finding that at this stage in the development of that communication system, fear sometimes dominates, and it's our responsibility to overcome it. That's why I brought the subject up. I think we would appreciate hearing from you on an ongoing basis about whether we're helping or hindering the process.

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There's another question I wanted to ask. You talk about things like engineering and these services that Canada can and does provide now, to an increasing extent. But what I also hear you say is that the Canadian standards for some of these things are not necessarily accepted in all countries of the world. Did I interpret that properly? For instance, say an engineer from Canada might be accepted in China to do the Three Gorges project. Is it possible that a Canadian engineer might not be accepted in some other country, and that would impede our ability to export that service?

Mr. Robert Ready: That's quite a large problem with respect to professional services and ensuring that one country's regulatory authorities recognize the qualifications and credentials of Canadian and other service suppliers.

One of the first activities the working party on professional services engaged in was this process to develop guidelines on mutual recognition, although it focused on the accounting sector in this instance. This was done with a view to using that as a bit of a template or model for use by other professions as they develop mutual recognition agreements bilaterally.

Mr. Julian Reed: It opens up an incredible field. As I came out of agriculture college, I know that there's the question of whether a veterinary degree in one country is acceptable in another country. There are some that are interchangeable. If our guys get a degree at Cornell, that degree is acceptable in Canada, but there are veterinary degrees granted in the Dominican Republic that might or might not be acceptable in Canada or the United States, or maybe vice versa.

Mr. Robert Ready: I might say that the work in this area is likely further developed in terms of the processes that are in place under NAFTA. There is an annex in NAFTA that sets out a work program with respect to mutual recognition. The work program under that agreement is probably more engaged than anything at the Geneva end at this point.

Mr. Julian Reed: Thank you, Mr. Chairman.

The Chairman: Ms. Bulte.

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): I wonder if maybe you could just help to explain something to me. I know the veterinary question hasn't been addressed in negotiations. It's certainly something that comes up time and time again, especially from people from eastern and central Europe who have come to Canada.

I guess one of my concerns in all of this is that most of these things are provincially regulated. The licensing of veterinarians is provincially regulated. Lawyers and dentists are provincially regulated.

How does the process work if we're trying to take away these barriers that are really provincially regulated? I can't practise law in B.C. unless I'm called to the bar. How do we take those things into account at the WTO?

Mr. Robert Ready: I guess GATS itself recognizes the ability of countries to regulate their service sectors. That's the first point.

With respect to the Canadian case, this work on accountants and future work in professional services goes on with continuous consultation with provincial officials principally through the C-Trade mechanism, although obviously bilaterally and multilaterally outside of that forum, if necessary.

In addition, Mr. Sacchetti and Mr. Rust are in constant contact with the associations involved. They have a large role to the extent that they're self-regulating professions in this case. The federal government is in pretty much constant contact with provinces and associations in this area. As the agenda widens either by virtue of the next steps that the working party takes or in the context of a bigger round of negotiations, that kind of contact is going to have to be stepped up, obviously.

Ms. Sarmite Bulte: One of the things in the immigration and legislative review is not just numbers. One of the recommendations that was made by the consultant's report actually dealt with professions in encouraging our immigration system to allow the recognition of degrees. Is that something we would be looking to in other WTO countries, as well, or is it not something that would even be relevant in this?

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Mr. Vincent Sacchetti: The issue is a relevant one, as Mr. Ready mentioned. These are matters that are the responsibility of provinces, which were devolved directly to the profession. Most of the licensed professions are self-regulated; they are not regulated at the border. Hence, I do not suspect that immigration policy has anything to do with the issue of recognition, since recognition and licensing is the responsibility of a provincial association.

Where immigration issues come into play is to allow that foreigner access into the country. The issue of having his foreign credentials recognized by a profession is secondary. So they are quite distinct.

Ms. Sarmite Bulte: I understand that. Yes, I know there is a recommendation to allow people coming into Canada thirty days visa-free, but there is a special recommendation in the report, which I'm sorry I don't have with me, that actually deals with encouraging the acceptance of foreign credentials, especially in the case of veterinarians. Perhaps I can get it to you afterwards, but there is a special policy in that recommendation.

Mr. Robert Ready: We'll certainly look at that recommendation, but to the extent that it talks about the further elaboration or negotiation of mutual recognition agreements, that's certainly something that's on the Canadian agenda in all sorts of sectors to facilitate trade in services. So it is very definitely on the radar screen in that context. We'll look at the recommendation specifically, and if there is a follow-up we can do with your office, we will.

Ms. Sarmite Bulte: Okay, thank you.

The Chairman: Mr. Penson.

Mr. Charlie Penson: I'm still trying to explore the idea of what Canada's goal is here. I gather our goal is to be able to have access to provide services into other countries without actually having to go there and emigrate to the other country, to start with, and start up a physical presence with an office over there.

On engineering, for example, correct me if I'm wrong, but is that not our goal, to be able to go over and work on a project in Russia, Algeria, or the United States as an engineer without actually having to move to that country to do it?

Mr. Robert Ready: I would suggest that's one of our objectives. The GATS involves a number of modes of delivery, if you will, so another objective, frankly, is to facilitate the establishment of Canadian service providers in foreign markets as well, if that is the preferred means of doing business. To answer the question, I would say it is one of our objectives.

Mr. Charlie Penson: To follow that up, if they decide to establish a physical presence there, are you saying, then, that there are still some problems with investment rules and that type of thing that prohibit that from happening right now?

Mr. Robert Ready: As Mr. Sacchetti mentioned earlier, the commitments that members made coming out of the Uruguay Round essentially amounted to a standstill. So in effect there are a number of restrictions related to commercial presence, which is how the GATS treats the issue of investment, that still exist and that countries still have the ability to impose. They've simply said in their GATS commitments that they are not going to impose more or bigger ones.

The next round of service negotiations will see a negotiation that tries to reduce those barriers through the lodging of further commitments on the part of countries that maintain these commercial presence restrictions.

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Mr. Charlie Penson: You would have been in contact with the industry engineering associations, the accountants and all of that. What are they telling you they want that still hasn't been achieved as a result of the Uruguay Round? That's really the essence of my question. What's our position? What do we want out of this?

Mr. Robert Ready: I'll let both of my colleagues respond to that in detail, but they're after greater market access in markets where countries didn't make significant commitments the last time. We're looking at Asia and Latin America as the principal areas where countries were.... I don't want to say they were deficient in their commitments, but their commitments weren't of a sort that provided Canada with sufficient market access. We're looking for greater commitment from those markets. That's a little bit distinct from the work in this particular working party, which is really to elaborate on some of the rules with respect to that.

It's essentially an interest shared by the United States and European countries, where people with established service industries are looking to expand internationally.

Mr. Vincent Sacchetti: When you talk about liberalization in services, particularly professional services, you're looking at liberalization on a number of fronts. You're looking not only at investment but at liberalizing procurement markets. You're looking at establishing a competition policy regime that is fair. You're looking at establishing a regime that has intellectual property rights. We've discussed issues concerning immigration. So to get the Canadian service supplier into foreign markets requires liberalization on a number of fronts. We have attempted to do that in the Uruguay Round.

The next round will present us with new challenges. For example, in the Uruguay run we did not deal with investment in a comprehensive manner. We did not deal with competition policy. We did not deal comprehensively with intellectual property rights, for example. So this next round will present us with tremendous opportunities to correct what we weren't able to do in the last round, as we become more knowledgeable about how services operate.

You mentioned earlier the right not to establish. Mr. Ready mentioned there are a number of modes of delivery. If you could get a Canadian engineering firm to win a contract in China and not have to send any of its people there, that would be ideal. Again, it requires efforts on a number of fronts in order to achieve a package that will provide Canadian service suppliers with access opportunities, and not be continuously held back by these barriers.

Mr. Charlie Penson: So investment and competition policy, if they were rolled into a future round, would benefit our negotiations on the service sector. Is that what you're saying?

Mr. Vincent Sacchetti: Absolutely. At the Singapore ministerial last year in November, the ministers agreed to establish a number of working groups, including services in investment and services in competition policy. We're also looking at areas such as subsidies, for example, which may be a problem in the services sector. We're looking at safeguard mechanisms to allow suspension of rights in case of injury to domestic markets because more foreign service suppliers are coming in. These are all issues that have yet to fully mature in terms of discussion on where we need to develop rules to take these into account.

Mr. Charlie Penson: What are the accountants telling you about the possibility of rolling this sectoral into a general round instead?

Mr. Vincent Sacchetti: They are not unique, in terms of calling for greater liberalization. We have a relatively free services regime. We have barriers and we are working on liberalizing some of them. In fact, we have liberalized in a number of areas, including the accountancy sector.

If you look at engineering and architecture, we have one of the most liberal licensing regimes in the world.

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Mr. Charlie Penson: But I'm talking about access for accountants. What are they telling you? Do they want to go ahead in this sector just the way it is, or would they rather roll it into a general round and try to get more access in areas that compensation policy would enhance, and so on?

Mr. Robert Ready: Mr. Chairman, with respect to the work on accountancy, the hope is that the work on accountancy will conclude this fall. The shape and form of future negotiations in services will then build on that. Accountancy will be part of an overall process in securing greater commitments on behalf of our partners.

Mr. Charlie Penson: So we may get a deal in the accountancy sector and services prior to negotiations for a general round?

Mr. Robert Ready: The hope is that the discipline's work that we described this afternoon in the working party will be concluded and agreed on this fall. At the same time, of course, preparations will be under way for the more general round, but the hope is that at least the work on accountancy will be concluded, as a package, this fall.

Mr. Charlie Penson: You say that Canada is prepared to buy in, but you're not sure that there are many more countries that would be prepared to do that.

Mr. Vincent Sacchetti: If I may, Mr. Chairman, at this point in time we do not know which countries are prepared to bind. We have a good idea that most developed countries are prepared to bind. What we are looking for are bindings from developing countries where we have export interests.

The Chairman: Thank you, Mr. Penson.

I want to thank our presenters today.

We have a long road ahead of us and a little bit of time too before the negotiations start. We will be meeting again in the fall and doing more comprehensive meetings with different interested parties in both the agricultural and service sector. We'll probably have you back in the fall to give us an update as to what you know is going on in that area.

I'm not sure where you're coming from on your questions there, Charlie, but I thought of one thing. I know that in the last round, in terms of when we're at the WTO, one of the commitments by this government was that there weren't going to be any trade-offs between sectors. In that sense, having a more-encompassing round doesn't necessarily mean that a sector has a more of a chance of getting more out of it. That happens not only between different sectors, but also, as you know, in terms of negotiations in terms of commodities, where it was presented very strongly by all our ministers of trade and agriculture that they would not trade one commodity off against another.

Thank you once again.

Colleagues, we'll meet again next week in camera to talk about our future business. At that time, if there are interested groups in your community that you want to hear in the fall, please bring their names and give them to the clerk.

Thank you.

The meeting is adjourned.