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, March 9, 1999

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[English]

The Chairman (Ms. Sarmite Bulte (Parkdale—High Park, Lib.)): I'd like to call this meeting to order. Pursuant to Standing Order 108(2), this is an examination of Canada's priority interests in the FTAA process.

We welcome George Haynal.

Mr. George Haynal (Assistant Deputy Minister (Americas), Department of Foreign Affairs and International Trade): Thank you very much, Madam Chairman.

Before I say a few words to start us off, I'd like to introduce the colleagues who are here with me. Bob Anderson is the vice-president for the Americas at the Canadian International Development Agency. Paul Durand is the director general for Latin America and the Caribbean in the Department of Foreign Affairs and International Trade. And Mr. Bob Clark is the general coordinator for hemispheric summits within Foreign Affairs and International Trade. So since I'm surrounded by a great deal of experience in the hemisphere, I hope we can answer any questions the subcommittee might choose to address in terms of Canada's relations with the region.

Madam Chairman, it is my understanding that you'd like to focus this session on the context within which the FTAA is being negotiated, not the FTAA itself. You had a session last week with Minister Marchi, and an earlier one with officials, so we will try to focus on the big picture, if I can put it that way. So if you'll permit me five minutes for an introduction, perhaps we'll move into issues that are of particular interest to you.

There is a way of describing the nineties from a Canadian point of view. If this was not the decade of the Americas for us, it was certainly the beginning of the decade for the Americas. Canada's engagement in the hemisphere is now at an unprecedented level in historic terms. We are members and indeed leaders in most hemispheric institutions. We have relations with all countries in the hemisphere. We are driving in what I hope is a positive direction in hemispheric affairs and in intensifying bilateral relations in the region.

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I would say there were several reasons for this development and our presence in the hemisphere, a presence many Canadians probably don't have an appreciation of yet. One of the most important preconditions for this development was that enormous changes have taken place in the hemisphere. With one exception, every government in the western hemisphere is a democratically elected one now. Economic reforms have made possible a kind of economic relationship with the countries in this region that had not earlier been possible. The growth of civil society and the respect for human rights, though not universal and universally at the same level, has been startling and extremely important. The hemisphere has gotten its act together. It has some way to go, but our engagement is with an area that is ready to engage us on our terms.

The Canadian approach to the hemisphere has also seen some dramatic steps in the last ten years. Our decision to join the OAS ten years ago was an historic engagement with the leading institution of hemispheric policy making and coordination on a whole range of subjects. We have expanded our diplomatic representation through the hemisphere in the last ten years. We have had enormous numbers of political contacts; visits by Team Canada on several occasions; dramatically increased trade and investment, not least in Chile, with whom we signed a free trade agreement following the success, as it was seen, of the arrangement with Mexico in the context of NAFTA.

There has been a significant change, I believe, in Canadian attitudes towards the hemisphere. Many more Canadians are now travelling in the region than in the past. Spanish is the foreign language most in demand in Canadian universities, which is an extraordinarily important development. People-to-people contacts have been growing exponentially. In a very real way, I think this hemisphere has become our region. We are feeling much more at home here than we ever had in the past. Canadians in the private sector, in the university sector, in private life, and of course at the governmental level, have a natural region here, one that is probably envied by others elsewhere in terms of our access and our capacity to engage an enormous economic and social region of the world, and a very dynamic one.

Two-way trade in the hemisphere has been dramatic in terms of growth. It is now approaching $20 billion a year, double what it was five years ago, when it was only $10 billion. We are making sure that those trading in economic relationships are based on a solid footing. I've mentioned NAFTA to you. It brought us into a solid institutional arrangement with Mexico, and we have a similar free trade agreement with Chile. We have made approaches to MERCOSUR to attempt to engage them in a similarly institutionalized economic relationship. We have not waited for large steps such as the one you're focusing your attention on, which is the free trade area of the Americas. We are taking smaller but significant steps with a number of countries in the region. We have foreign investment protection agreements, double-taxation agreements, and trade and investment cooperation agreements that facilitate trade and investment contacts in the area.

This is an extraordinarily dynamic and growing series of economies, and although we have done extraordinarily well, our share of trade in this region is still a relatively modest 5%. We therefore have tremendous potential for future growth, and we are trying to exploit that potential. Having that growth ahead of us is not as daunting as it might seem, because we really are genuinely welcome in the area. I think this is the experience of virtually every Canadian who has travelled in the area. We are welcomed as an industrialized high-tech partner, a partner from North America with no ulterior agenda. Indeed, often we are seen as a constructive counterweight to American influence, which has had an historic role in the hemisphere.

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This last point is manifested in a number of ways. Certainly our independent foreign policy orientation is very well greeted and it enjoys a high level of support. Instances of that, of course, are the free trade agreement with Chile, and our leadership on regional and global issues such as land mines and other initiatives driven by the human security agenda. Every country in the hemisphere except Cuba and the United States has signed the landmines convention and is on the way to ratifying it. We also had 100% support for our Security Council campaign. Every country in the hemisphere voted for us, which is an extraordinary testament to our engagement. We have launched a dialogue among foreign ministers on the issue of drugs. It has received widespread support in the hemisphere in terms of drugs not just necessarily as an enforcement issue, but as an issue of human security that touches the lives of people in a multitude of destructive ways.

The list of our engagements goes on, and it is a region in which that sort of engagement of an independent Canadian kind is not only welcomed but is effective. It is effective because, among other reasons, the territorial disputes that used to bedevil efforts at ensuring that countries cooperate on the human security agenda are now all resolved. The last of the territorial disputes in Latin America, that between Peru and Ecuador, was resolved late last year. That was an historic accomplishment, considering how many such territorial disputes bedevilled relationships in the area only a few years ago.

There is tremendous progress toward economic integration in MERCOSUR, as you will have heard from my colleagues earlier on and from the minister. We can engage with MERCOSUR because the rules of engagement there are compatible with our own for the most part.

There's also a tremendously interesting process of summits that we are not only party to—and I'll conclude on that in a moment—but for which a mechanism exists for engagement. We have taken advantage of it because—I'll mention this now—we will be hosting and chairing the next hemispheric summit in this country, the third in a series.

We have had a terrific opportunity to make an impact, and I think we will do so over the next couple of years. The FTAA negotiations are one dimension of the way we are going to do that at the hemispheric level. And I should also cite that Canada will be the host not just to the first meeting of trade ministers negotiating the free trade area of the Americas, but also that of the OAS General Assembly, which is the supreme guiding body of the OAS. Foreign ministers of the OAS will be meeting in Canada in 2000 to plan for future cooperation. Of course, most importantly, we will be hosting the hemispheric summit, the first of which was called in 1994 by President Clinton in Miami. The second took place in Santiago, Chile, two years ago. And for the third, which will in a sense mark the millennium, it will be Canada's turn.

So we are as deeply engaged in this region as we are in any other, and more than in most. We have had an enormous receptivity to our presence. We have taken advantage of it on the economic, social, and security fronts, and I expect that this is only the beginning of a very fruitful regional engagement that may be, I hope, an enormously important part of Canada's international relations in the decade to come.

The Chairman: Thank you very much, Mr. Haynal.

[Translation]

Mr. Sauvageau.

Mr. Benoît Sauvageau (Repentigny, BQ): I'd like to ask a few questions.

You seem quite optimistic, Mr. Haynal, in your answers. I would like to recognize your colleagues, more specifically Mr. Durand, with whom I had the chance to participate in a mission.

Between you and me, the negotiations do not seem to be going as well as the optimistics say.

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Can you tell me where are the negotiation committees in their discussions on the free-trade agreement zone, namely on the implication of civil society that Canada promoted so vigorously in Costa Rica?

[English]

Mr. George Haynal: Thank you.

I'm at a disadvantage here. I believe the subject of the negotiations themselves for the FTA were covered in the earlier briefings you've had from officials who were directly involved in those negotiations. None of us at the table here are directly involved in those nine working groups. So if I may be permitted to come back to you with that information separately, I'd be delighted to do so, but I don't want to step on the ground of discussions that have already taken place.

[Translation]

Mr. Benoît Sauvageau: I will try to ask a question. Let's take, for example, countries of South America which are going through difficult economic times like Brazil, or other countries where opposition parties would say, during an election: "If you vote for us"—we've heard that in Canada during the Free-trade agreement negotiations "we will withdraw from those negotiations because we are against the FTAA". What will happen if, in the middle of negotiations, three or four countries of South America decide to withdraw after an election or face other economic problems like Brazil's?

[English]

Mr. George Haynal: The negotiations do not require unanimous participation by every country that is in the negotiations in order to proceed. They really have just begun. We're at the early stages of negotiating this agreement. So far, the subjects that have been taken up have not been divisive, and I would anticipate that they will proceed. As to how fast they will proceed, I think that is for the future to decide. I think the meeting that will be taking place here, over which Mr. Marchi will preside, will be an extremely important landmark in moving these negotiations forward to a substantial level.

These negotiations will be closely followed by the launch of the WTO round later this year, so I think they will make an extraordinarily important contribution. As the minister said when he appeared here last week, however, the initial focus is on setting up the negotiation structure on a solid framework with which everyone agrees; and on discussions on the facilitation of movement of business across borders, which I think enjoys a wide measure of support. So on the negotiations this year, by every indication—though I'm not an expert—the colleagues who are before me are proceeding on a very satisfactory plane, and the kind of contention that you're concerned about has not been in view.

I don't know if my other colleagues have anything to say on this.

The Chairman: Mr. Sauvageau, one of the things we brought these witnesses in for today was to try to give us a broader picture of what was happening in the Americas, more so than of the actual negotiations, but please continue.

[Translation]

Mr. Benoît Sauvageau: My last question is on the fast track of the United States. Are you as optimistic and, if we do not get that possibility, how will deadlines be extended or negotiations modified?

[English]

Mr. George Haynal: When he appeared before the subcommittee last week, I think the minister expressed a certain amount of skepticism that the fast track will be available quickly. As for whether that will affect the negotiations or not over the longer term, I think he was also quite optimistic that they would not. It is not unusual for the United States not to have fast-track authority at the beginning of a round of trade negotiations. Over the longer term, obviously, the lack of such a fast track would impact on the negotiations, but we're a long way away from the time when that would be an immediate problem.

Clearly, the lack of a fast track in the United States has not helped this process, nor would it help any other international attempt to establish new trading rules. Things seem to be evolving in Washington, but we'll have to wait to see how much they evolve, and how soon, on a number of fronts.

The Chairman: Mr. Speller.

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): Thank you, Madam Chair.

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Mr. Sauvageau, you weren't here last week when the minister was here. I know you had another important engagement. The minister, though, tried to outline for us that side of it, where the negotiations were. I think it was the feeling of the committee at that time that before we got into that side of it, the technical side, we needed to get an understanding of what is actually happening in Latin America and South America, what the politics are. Are countries fighting with each other? What impact is the current uncertainty in the world economies having, for instance, in Latin America, and what impact might that have on future negotiations?

Maybe I could start by asking Mr. Clark, who in a previous life was one of our ambassadors down there in Argentina, what impact the world economic downturn has had. We always hear about Brazil. What about some of these other countries, like Paraguay and Argentina? What impact is this having on them? How might this impact on their negotiating skills? I'll start off with that one.

Secondly, I know as a government we've indicated we're willing to help some of the smaller countries in this area deal with negotiating. I mean, we're talking about high-level negotiations. I think, Bob, it's through CIDA or so that we're helping them. Maybe you could explain to us what we're doing and the impact Canada is having in that area.

Finally, this is just a general question. Is anybody fighting down there? What impact is that going to have? Give me your sense of the dynamics. Who are the big guys? Who are the little guys? Are there disputes between any of them?

Mr. George Haynal: Who are the good guys and bad guys? Bob, do you want to start?

Mr. Bob Clark (Senior Coordinator of Hemisphere Summits, Department of Foreign Affairs and International Trade): Thank you.

I can relate more closely to the MERCOSUR countries and others in the southern cone region. The downturn that has affected financial markets and confidence in Brazil has of course had an impact on such countries as Argentina, which depends on the Argentine market for over 30% of their exports.

Mr. Bob Speller: Where's that?

Mr. Bob Clark: It depends on the Brazilian market.

But this is the end of at least four years of adjustments, restructuring, and reforms in all of those countries as they have responded not simply to the bad times, but also to the good times. And with the help of Canada, the United States, and other countries they have undertaken investment liberalization, which has increased the capital pools in Latin America to historic highs. They have undertaken tax reform, which has increased their revenues, lowered the rates, and broadened the base so that they are in a better fiscal position. As a matter of fact, although it's hard to believe, many of the provinces as well as the federal government in Argentina were looking at balanced budgets last year, and other countries were at least able to pursue those objectives.

With respect to their tariffs and all the restructuring and opening up to competition, they have been lowering their tariffs with respect to their undertakings and bindings under the latest WTO round.

They've been looking at more juridical security for investors and traders into their countries. With regard to privatization, there have been examples of privatization campaigns country by country in Latin America that are really not only historic in terms of their own time, but historic in terms of accomplishments throughout the whole region. Bloated corporate statist economies are now privatized, reformed, more competitive, and more open economies. In other words, they are able to withstand certain shocks. And with this has come reform in their banking system, not just letting in new foreign banking interests, but also reforming their banking regimes. There has been a restructuring of the banks that has led to a settling out, if you will, of banks. There's been a flight to quality—the capital flight. Those capitals, when they came back, came into those banks that could most sustain a long-term business plan, which means that your good banks became stronger. Your governments began to support good banking with good banking reforms. Generally, the financial system is in a more resilient shape today than it was, for example, six years ago.

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So in a word, Latin America is more resilient, more able to respond and withstand the shocks and turbulence of world capital market uncertainties and trade and investment ups and downs than they have been in the past. I think as a generalization that can be extended to most of the countries of Latin America.

Mr. Bob Anderson (Vice-President, Americas, Canadian International Development Agency): In response to your question, Mr. Speller, I think I would make a distinction between what I would call direct assistance to the question of preparing particularly the smaller states for negotiations on WTO or free trade, and some other initiatives that are related to it.

In terms of the direct, we have undertaken a number of initiatives in the last three years particularly focused on the smaller island states and smaller countries in the Caribbean, because we felt they were the ones who were the most possibly at risk in terms of being able to deal with the broader globalization and the free trade movements.

In the case of the Caribbean, I'll give you an example of two or three of the kinds of things we've done. We've had a project called the Caribbean trade issues project. Essentially what it was designed to do was help some of these smaller islands identify some of the main issues they're going to be facing and to help them develop some of their options and strategic choices. Another project, just as an example of support for trade-related matters through some of the regional organizations, was to provide some support so they collectively could, through their regional institutions, come up with some positions that would help them in their negotiating on the WTO.

Similarly, in the case of Central America we had a project for trade policy training to help them prepare for the WTO negotiations and eventually for free trade. The first phase of it was focused primarily on the agricultural aspects, because that was the key area of the economies that would be affected.

All in all, if we look at the direct stuff I would say we're something in the order of $4 million or $5 million, focused primarily in the smaller islands and Central America in terms of training and identifying options and issues. If we look at other issues that are very closely related to that, and by that I mean things like developing the regulatory frameworks, we've done a lot. And this is throughout the region.

Somebody was asking the question about what's been happening in the region in the last few years. It's a region, as George says, that's evolved extremely quickly. Virtually all of the countries have bought in to the Washington consensus in some form or other. That Washington consensus implies a whole series of sequenced reforms. What we in CIDA have tried to do is identify those kinds of reforms where Canada has some particular expertise, some comparative advantage, and where the countries down there have identified Canada as being one of their preferred suppliers of this knowledge.

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We have focused, for example, in the areas of regulatory frameworks associated with the hydrocarbons laws, using essentially the Alberta hydrocarbons law, and in the mining sector, where Canada has a lot of expertise in the regulatory environment and environmental laws. We get requests from virtually all the countries in Latin America in those three areas, and we've provided a lot of support on that.

That's indirect, but it helps set the rules of the game we're interested in. It helps them establish the rules of the game, so when they finally get into the negotiations they will be better prepared for them.

Finally, one more example is Chile, with which we've already entered into an agreement. One of the sectors in the Chilean economy that was most reticent, if you like, in the civil society part to enter into this were the smaller farmers. One of the things we have done at the request the Chilean government is set up their program for crop insurance along the lines of what we have, which is focused on some of these smaller farmers.

So we've done a number of things in areas that are related to trade. We've helped set up the rules and regulatory framework and targeted certain sectors. In that second category we've actually done quite a lot over the last four or five years—probably over $40 million worth of activities.

The Chairman: Madame Folco.

Mr. Bob Anderson: Paul Durand has an answer on the fighting battles. He's our fighting expert.

The Chairman: I apologize, of course.

Mr. Paul Durand (Director General, Latin America and Caribbean Bureau, Department of Foreign Affairs and International Trade): Fortunately and happily, all cross-border disputes in the region have been resolved. There aren't any threatened cross-border disputes. This is a tremendous credit to the changed governments that now rule.

At the beginning of the 1980s, Chile and Argentina had 24 unresolved border disputes, all of them fraught with the potential to break into open warfare. Of course they had military dictatorships at the time, which were ready to use their troops. They had a very militaristic approach to solving these problems. Now, 23 of the 24 have been resolved peacefully, and the last is on the way to resolution. That's just a good example of how they're dealing with their cross-border disputes.

The most recent one to be resolved, as Mr. Haynal referred to, was the Peru-Ecuador dispute, which had broken into war in 1995 and was resolved late last year. There are only a few very minor ones left that don't contain any potential for open warfare.

There are problems within countries, and this is due to a general deterioration of civil society. The best example, or the worst example, of that is Colombia, where the killing is going on at a terrible rate. Open guerrilla warfare is threatening the country, and no apparent resolution is in sight.

The development of a strong civil society falls within our human security agenda. We're trying, with our limited resources available, to address these issues by developing institutions, good judiciaries, police forces, etc., but it's going to be a very long haul.

So to answer your question quickly, there are no cross-border disputes, but there's quite a bit of violence inside countries.

Mr. George Haynal: In terms of the end of these disputes, we are now able to engage in cleaning up some dimensions of the horrors that were created in these disputes—for instance, clearing landmines in Central America that were the result of historic conflicts there, and helping with the effort to clear landmines in Peru and Ecuador. So the human security initiatives the government has undertaken on a global level have a very practical application in the region.

You were also asking about big and small, if I may just take that up for a moment. There are economies of a huge scale in the Americas. Brazil is the world's eighth-largest economy, or at least it was until their devaluation came along because of the recent financial crisis. It's nonetheless an enormous country, with well over 160 million people. It has a large modern economy integrated within MERCOSUR, which is a trading area that incorporates Argentina, Uruguay, and Paraguay into one large trading area. So these are very serious partners, very serious members of the international economic and political community.

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Mexico has an equally large economy that is roughly half the size of ours. It is a powerhouse that is struggling with a series of institutional challenges and doing so very successfully, modernizing the economy.

[Translation]

The Chairman: Ms.Folco.

Ms. Raymonde Folco (Laval West, Lib.): You talked about countries which elect their government. You gave us a very positive description of the situation in most of the countries of latin America and the aid that Canada gives in some respects. We still talk about economic and cultural agreements with countries that are different from Canada especially when it comes, for example, to the legal system which can sometimes be described as archaic compared to ours.

My question is the following: given social disparities in those countries, is there a possibility of common policies between Canada and those countries where, because of social disparities, a certain class of people work in difficult conditions and for low salaries compared to the salaries given to our employees in Canada?

[English]

Mr. George Haynal: The race to the bottom is always the great danger in times of economic stress. But what has happened in the hemisphere, and so far very convincingly, is because of some of the developments Bob Clark mentioned, the liberalization of economies has also meant that the acceptance of international rules of trade has been at a much higher level than in the past. State monopolies that had essentially abused market position are a much smaller feature of the landscape than they have ever been.

The acceptance of international responsibility for both fiscal management and economic management and international standards that are part of the package has been much more in evidence than in the past.

If I may give you a personal estimation of the trend, I think it is in the positive direction rather than the negative one. The conclusion of free trade arrangements also implies there are obligations on people that they have to accept not to dump or use comparative advantage unfairly. Rules have helped in that respect.

I would say our direct experience thus far has been positive in the cases where we've had free trade agreements of our own. More generally speaking, no one has yet engaged in a race to the bottom as a systematic policy choice. In any of the countries that have experienced stress, their immediate instinct and the instinct that has ruled has been to grow their economies according to rules and a process that is sustainable, rather than take the route of short-term competitive devaluation and dumping.

I don't know if anyone wants to add to that. The picture is not perfect. None of us wants to try to paint for you a picture of a rosy continent, but it's a matter of trends and historic comparisons. Those trends are all in the right directions.

Ms. Raymonde Folco: I came back this fall from Mexico, where I went to Chiapas for the state elections. We can say that Mexico is a democratic country and there is an election where everyone has the right to vote, but between the theory and the reality, considering the number of people who vote and the number of people who physically can vote, there's quite an écart.

Mr. George Haynal: There is.

Ms. Raymonde Folco: That's the kind of thing I'm talking about. We see that we're helping, in theory—and you've talked about $40 million worth of help, which is obviously a good thing. On the other hand, when you look at the reality of what's happening on the ground, that's where my question lies.

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Mr. Bob Anderson: Maybe I could just add to that, because I think your question is an excellent one. It gets right to the heart of a lot of the debates we have in the agency.

Getting back to what George says, the first thing is trend. If you look at the map of the Latin part of the Americas, if I recall correctly, only three or four countries out of the more than twenty that are there had elected governments in 1980. Every single one of them but one has an elected government today. I agree that they're not perfect, but I think that's a trend that's a very important one.

The other trend that you see, which we talked about on the economic side, is the huge increase in investments in the region. In terms of the reforms that these countries have been undertaking, usually in the beginning there were reforms related to economic stabilization and financial stabilization. Most of them have gone through those and have done a fairly good job. Some of the later reforms are the more difficult ones that take longer to implement.

I think the point you've made is that you still see these income disparities, you see levels of poverty. The Americas are one of the worst regions in the world for those large disparities in income. One of the main focuses of our projects at CIDA is to attack that very issue, but these are long-term projects, I think. The one key thing for that particular problem is education. If you were going to put money into one thing, that's the one single determinant that our research has found to have positive impacts. Of course it's going to take time before you see its impacts.

We're involved in a number of other activities that involve civil society. Again, there's the trend to consider. It used to be that the governments.... There were state-run institutions, and the state made pretty well all the decisions that affected most people's lives. Of course now there's a switch over to the more private sector, to things that are more market-driven and so on, and what everyone is beginning to notice now is the role civil society can play. In a lot of these countries today, in terms of the role the civil society is playing as compared to ten years ago, there's a huge difference. But yes, there's a long road to go down yet, and it's going to take time.

If you look at the statistics, the impact on poverty has not been dramatic yet, but there are two or three countries in which the trend is starting to change. The hope is that with targeted programs and education programs, with programs of credit and so on that are targeted at these, and with the strengthening of civil society, this will change over time. But it will take time, there's no question about that.

Ms. Raymonde Folco: You're talking about several generations.

Mr. Bob Anderson: For some of this, yes.

The Chairman: Before we go into a second round, I'd just like to add that at the main committee today, we actually talked about civil society and what it was. Mr. Blaikie, who is not here with us, questioned what this civil society is that we are talking about. Certainly in the briefing by some of the officials that we had earlier, we also talked about how our consultations with civil society are quite different from the other countries' consultations with civil society. In fact they don't want to even engage their civil society in their discussions. I wonder if you could comment on that.

And again going back to the main committee today, we talked about culture. In light of the SAGIT report about forming an international agreement, the feeling around the table was that the WTO really wasn't the place to negotiate that. One of the questions I raised was whether or not the FTAA would be a place where we could begin those sorts of technical discussions, and one of the comments that was made by one of the people present was that we really didn't have any allies there. Yet when you spoke, Mr. Haynal, in your opening words you talked about “our region” and how we were “genuinely welcome”. I wondered if you could comment on that.

Those would be my comments this time.

• 1620

Mr. George Haynal: On civil society, I think Bob started the discussion about our engagement in terms of ensuring that there is a sustainability in the virtuous trends that we have seen, and CIDA does much work in that respect. Education is clearly an extraordinarily important part of developing whatever a civil society is, as are institutions, as are the mechanisms of governance, as are the sustainable houses of democracy and culture of democracy. We're trying to be active on all those fronts, either directly or through the OAS.

I mentioned the OAS to you before, and I come back to this being our hemisphere in that sense. For instance, Canada was instrumental in the OAS becoming engaged in the promotion of democracy in the hemisphere through the establishment of a unit for democracy. We are engaged in supporting the growth of an independent and well-founded judicial system in a number of countries by giving support to the judiciary, which is an important part of a sustainable approach to building a civil society—and that's “a” civil society; this is not “the” civil society. There are distinctions that have to be made there.

In terms of the question of what civil society is and how countries of the hemisphere are prepared to engage in it, I'd like to turn to both of my colleagues who have extensive experience in South America and Central America. I think everyone is going to find their own way to engage civil society.

As Bob was saying earlier, the trend towards sustainable social structures and economies has been dramatically positive in recent years, but these are relatively recent phenomena. We are not talking about societies that have shared our history of the development of democratic institutions, of an independent judiciary, of a viable democratic structure, and of a respect for human rights. Many of these countries are countries of conquest. Their historic evolution has been that of conquered peoples without the same kinds of institutions and accepted traditions of democracy and respect for individual rights that we take as natural. Not all of them are, but I think there are differences that are visible in the way people approach the whole notion of civil society, of engaging power that is outside of the institutional framework.

But civil society is alive, well, and very dynamic in different ways in the hemisphere. In many societies, the church is a pillar of civil society, if you like. Independent media are now a feature of life in virtually every country in the hemisphere with the exception of one. Non-governmental organizations are at work in many fields. Educational institutions enjoy a large measure of independence. So I think we will find different ways to engage, and here is an area in which we are clearly able to lead.

And if I may just make this point, we do not have the burden the United States has on the issue of civil society. I think there's a high degree of suspicion in many places in Latin America of the engagement of non-governmental organizations from the U.S. They are often seen, rightly or wrongly, as having an agenda that is excessively disruptive to the social order in many countries that haven't known stability historically, and that are challenged to maintain order and to give progress to, for example, “the Brazilian flag”. It's a tremendous challenge. We do not face that same level of suspicion, so we're able to lead on the engagement of civil society probably in a way that the United States would not be able to.

Our non-governmental organizations are recognized as having no ulterior motives, as having straightforward agendas. Our own engagement on civil society as a government is respected. It is clear, and it is founded in the preoccupation for human security and values, and it is well understood to be so. So we're not moving at the same speed, but Canada is in a position in which it is able to accelerate that engagement of civil society in whatever way one chooses to define it. There are many definitions, as I'm sure you heard today.

In terms of culture, I'm not competent to speak about the trade negotiations on culture, so I would ask you to excuse me for not making that comment. But culture is clearly a subject that is of concern everywhere, although in different ways.

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Mexico, if I may just use one anecdotal example, is seen as a kind of cultural imperialist in the United States, oddly enough. Mexico is a generator of enormous volumes of Spanish-language television that occupies a large part of the United States' airwaves, and they export it elsewhere as well. They are deeply preoccupied with culture for other reasons, not necessarily for commercial ones at this point.

I don't know if others would like to add observations in this area.

A voice: No, that's fine.

The Chairman: Mr. Jaffer.

Mr. Rahim Jaffer (Edmonton—Strathcona, Ref.): Thank you, Madam Chair.

In the analysis that you gave us, you talked about the trends that have taken place in South America and Central America in terms of its democracy, openness, and free market from dictatorship. It's the same trend that I saw in Africa during my recent visit over there.

There are a couple of areas that concern me. The trends are fine, but what about them being sustained and insulated from rapid change? We can now see that in some of the countries in Central America the two-term presidents are trying to change their constitutions in order to go for a third term, etc. Are there independent institutions that can withstand these changes, political changes not impacting the whole of society in general?

The second thing that concerns me is the level of transparency in these countries, or corruption in the general trend of business or whatever. Has that been addressed as a major concern over there? Or is it a major concern?

And as the final question, as you know, business leaders have been kidnapped in Colombia in the last couple of days. I'm sure that in the longer term, when we are talking about the FTAA in the final analysis, security concerns will arise. As companies from Canada go there and as we have this free trade over there, is that going to be a curtailment?

Mr. George Haynal: Your questions are obviously interlinked as well, and each one of them is extraordinarily important. I'll try a quick lead, and then I'll turn again to the rest of this table, because there's a lot of experience here.

Can institutions withstand change? They're better able to withstand change than they were ten years ago or five years ago. Can they withstand radical shock? So far, the evidence is that they have been able to withstand radical shock. Consider the devaluation of the real as a radical shock to the Brazilian economy, for instance. The Brazilian political structures, as confusing and difficult to understand as they often are, have withstood it. The presidency has held. The rather delicate relations between the central government and the states, which are extremely tenuous sometimes, have been working. So far, the Brazilian institutions of state have withstood the test of an economic crisis, and there are other examples of this.

In terms of presidents wishing to run for third terms, I'm thinking of one instance in which your terrorism issue comes up as a very significant one. Not that long ago, President Fujimori faced a terrible crisis of terrorism. Not a few years ago, the only thing we were preoccupied with was the survival of any form of civilized society in Peru. They have managed to come through that. Will the political system there come to a shock? It's hard to say, but so far they haven't. I guess the only thing we can say is we're doing everything to help ensure that there is no such conflict between constitutional order and stability that anyone can evoke.

• 1630

Again, it comes to a trend. There are no guarantees except the ones we can give of our best efforts to help that happen, indirectly through investments, and through our work with the OAS and other institutions. On the issue of personal security, I'll turn to others. And I do not wish to belittle it; there's no way we should belittle it. Paul cited the example of civil war, which is what we have in Colombia, radical challenges to not just the civil order but to the very existence of personal security. It's a huge challenge, and it's a very difficult one for anybody to do anything about from the outside.

What you can say is that investment and economic growth would make a positive contribution where the issues of violence and terrorism are rooted in poverty. Where they're rooted in the abuse of power, assistance with ensuring that power is handled and managed in a fashion that is consistent with our values is also bound to help. We're also engaged in this, as Bob Anderson was saying.

There are no guarantees for the personal security of the individual investor who goes there that we can give, except the very limited guarantee that we're trying to do what we can to contribute to a more sustainable and peaceful environment, which the governments themselves are trying to stimulate.

I don't think we will ever see the period of government terror that we still remember as being a feature of life in Latin America not that long ago. That is gone. And the government terror that was at the root of much of the social ills of the region is now historic memory, with governments desperately trying to maintain a law-based form of order.

I think one can be skeptical that trends kick in fast enough in individual cases, but the trends are real and they are positive and fundamental.

The Chairman: Mr. Anderson, you had a comment?

Mr. Bob Anderson: I think it's a very good question, and there's probably not a very easy answer to it.

It seems to me what we're talking about here is you're trying to assess risks into the future a little bit. I think we go back to what George and Paul have been saying earlier: it's a region that in the last ten years has been undergoing tremendous change.

If I can relate it a little bit to the Canadian scene, let's pick one country, Bolivia, where they've undertaken in a period of two governments, let's say, major reforms, which include major changes to the constitution. Again, if we relate it back to our own, they've had major changes to the constitution; major changes in terms of devolution of power from the federal to municipal and state governments; major changes in the judicial reforms; major changes in terms of policy related to privatization of what used to be state organizations; major changes in educational reforms—I can go on and on. These are all things that are taking place very quickly as part of a sequence of reforms. It is in change, and not all countries are totally in the same sync. There are some that are ahead; there are others that are dragging behind a little bit. It's not homogeneous in that respect.

Whenever you're in change like that, obviously there are going to be some things along the way that are not going to go perfectly. But if you want an opinion of mine, I've been involved in Latin America now for 30 years and have watched it, and I would say quite confidently that I've never seen in those last 30 years a period in which.... If there are ducks getting lined up, they're getting lined up now. They're fragile, a little wobbly, but they're probably in better shape right now than I've seen in the last 30 years.

• 1635

I think that's reflected in the private sector, the market. If you look at investments today compared to investments ten years ago, ten years ago most of the capital flow was out of the countries up into Miami mostly, or Switzerland or someplace. Aid flows and private sector flows were roughly the same in 1980.

You look at it today, and private sector investments have gone way up, which to me means the market is reading this as now the situation is a little more stable and so on and so forth. It doesn't mean it's perfect. It doesn't mean that things won't go wrong at times, but at least in the Latin American part, the Central and South America part, I think conditions right now are probably as favourable as I've seen them in the last 30 years. I don't know if you people would agree with that. But it doesn't mean it's without risks, for sure.

Mr. Rahim Jaffer: On corruption, transparency.

Mr. George Haynal: Bob, why don't you talk to corruption first and Paul can get on to three-term presidents.

Mr. Bob Clark: I'd like to apply everything that's been said actually to the very important theme of corruption and transparency. Really, we have to look at it as we look at all the other themes from the point of view of trends and the systemic approach that Latin American countries and Canada and the United States are taking, for example, to corruption. Everything is interrelated. These countries have all been undertaking these reforms we've described to you this afternoon simultaneously. So some of the reforms are taking place at faster rates than others in different countries.

Privatization is having the effect of creating a situation where there is less incentive and there are fewer opportunities for corruption because there is far less government activity. The deregulation has meant there are far fewer civil servants to withhold something in order to grant a regulatory favour. Demonopolization has led to more competition and by its very nature has created the conditions where corruption is now exposed.

There are questions being asked and being reported in the press. The reason we in North America know about corruption in Latin America in far greater detail is because North American, Latin American, and Caribbean reporters are reporting on it. The United States and Canada have led international meetings on money laundering, on drug trafficking, and on juridical certainty.

One of the essences of the foreign investments that have been taking place in Latin America has been the importation, if you will, of these multicorporate ethics being applied in the business systems in these Latin American countries. In other words, some of the large transnational corporations simply will not enter into a country if they have to jump through corrupt means; and they make that known to the governments. I've been a part of some of those discussions that have gone right to the president.

It's a trend, and it's gradual. There's still a great deal of lack of transparency. There's still a great number of published reports on corruption. But the fact that many Latin American countries are inviting the RCMP to help them fight the battle of corruption, they're inviting the FBI, they're inviting European investigatory forces to help them fight their corruption campaigns are all positive indicators of what ten years ago they weren't even at the first stage of. They weren't even at square one. I think the evidence is that some progress, all of it in a positive direction, has been recorded and a great deal of work remains to be done.

• 1640

The Chairman: Mr. Durand, did you have something you wanted to add?

Mr. Paul Durand: I want to add something on consecutive terms. It's not, per se, an evil political act to have a third-term or a fourth-term president. We've had third-term and fourth-term leaders in Canada without that necessarily being an evil thing. But the record is mixed—

A voice: [Inaudible—Editor].

Mr. Paul Durand: I wouldn't comment on that, of course, but the record has been mixed in Latin America. Yes, in Argentina Menem got a second term; he may be jockeying for a third and he may or may not get it. In Brazil, Cardoso did get a second term. In Peru, Fujimori can, through his manoeuvring, run a third time. The difference now, from the past, is that when they get the constitutional right to run a third, fourth, or fifth time—

Mr. Rahim Jaffer: The constitutional right limits the term to two years. If Fujimori has been tampering with the constitution to go for another term, then what is the change? They're manipulating the constitution to carry on.

Mr. Paul Durand: In this instance, he is interpreting the constitution in such a way that he thinks he should be able to run for a third term. It's very questionable, I agree, but the difference is that now, as opposed to the past, he must face the people in what is going to be an honest, transparent election. That was not the case historically, and that's why they instituted the one-term principle, because they couldn't trust or rely on the fact that they would have honest, open, transparent elections. That has changed.

The other thing is that the record is mixed. Panama has an immensely popular president. He tried last year to change the constitution so that he could run again. He was massively defeated in a referendum. In Costa Rica they've never been able to get off the one-year term. Similarly, in Nicaragua, where they had a constitutional crisis three years ago, they did not change the term to more than one term.

It is mixed; it depends on the support a particular leader gets at a certain time. In all cases, the constitutional changes, with the possible exception of Peru and the interpretation, have been done constitutionally.

[Translation]

Mr. Benoît Sauvageau: Can you talk to us about the situation of Cuba, compared with Canada, in all those negotiations on the FTAA? Can we expect Cuba to be part of the negotiations? The Prime Minister and the Foreign Affairs Minister went to Cuba. What is the situation?

[English]

Mr. George Haynal: Cuba is a member of the OAS, but its membership is in suspension because it does not meet the criteria for active membership, which is to be a democracy. So Cuba is not part of these negotiations, not just as a matter of formality, but really it would be very difficult to see how Cuba could be a party to the FTAA, as it does not have an economy that is consistent with the principles of the FTAA. Until that happens, it's unlikely they will be able to participate in these negotiations or in this agreement.

I'm not sure if that answers the essence of your question. Would anybody else like to comment on Cuba more generally?

Mr. Paul Durand: I'd only add that you're referring to the Prime Minister at the summit in Santiago when he said words to the effect that, yes, he would like to be able to see the conditions where Cuba could be included in the summit process, but we haven't seen them. Those conditions obviously include transparent democracy, which Cuba doesn't yet enjoy.

[Translation]

Mr. Benoît Sauvageau: In Latin America and South America, there are already several treaties and agreements between the countries. We have the Cartagena Agreement, the MERCOSUR and the CARICOM. Countries that reach agreements and create groups in those regions of America keep on negotiating. For example, with MERCOSUR, the various countries are still negotiating to bring more countries to sign that agreement.

• 1645

Isn't there a problem when a regional agreement is negotiated simultaneously with a hemispheric agreement? Isn't there a risk of being entangled with these treaties and negotiations, especially in the face of power grabbing by countries like Brazil?

[English]

Mr. George Haynal: There could be, but there doesn't have to be a problem.

[Translation]

Mr. Benoît Sauvageau: How?

[English]

Mr. George Haynal: If the principles are inconsistent between the agreements that a sub-regional group negotiates and the principles that a wider group is trying to negotiate, obviously there's a conflict and a problem that needs to be resolved. But if the principles are consistent, there's not necessarily a conflict.

So far we have not reached the stage of attempting to negotiate MERCOSUR into a free trade agreement of the Americas. We have not yet reached that stage in the discussion. I would say that remains to be seen. At the same time, we also have the WTO that will be negotiated. There's no disagreement whatsoever that regional systems are going to have to be consistent with the WTO overall. That applies to sub-regional systems as well.

That's really the best answer I can give to you. The question is absolutely germane, but it has not yet presented itself in a practical way at this point. When and if it does, we will have a problem. So far there's no need to assume that it will be the case.

The Chairman: Perhaps I can ask a final question. You've talked about how the regions are undergoing tremendous change. What has prompted that change? How can we ensure that change continues? Is it too soon? We're talking about trends and we're hoping that things will continue. Is it too soon, or is the FTAA coming about just because we're going to have to be at the WTO, so this can be the trial run? Could you address those?

Mr. George Haynal: Why did the changes come about? I am not enough of an historian and a visionary to be able to do justice to that question beyond what we've tried to say here. I think there have been historic forces that have been at work, clearly in Latin America. The civil society, whether one necessarily is able to define it or not, has been liberated in Latin America by virtue of advances in information technology and through education. As Bob has said, free markets have demonstrably been more effective than state monopolies. The import substitution model bankrupted itself. So there were organic reasons for this progress. There's no question about that. Military dictatorships disgraced themselves, in some cases more horribly than in others, but as an institution, democracy has proven itself to be the best of all possible options, just through empirical evidence.

What I would draw as a conclusion from this is that the trend is essentially irreversible. You cannot go back to these things, because manifestly they failed. The control of opinion failed. The control of political institutions failed. The control of economies failed on the old models. In that sense, perhaps, though I find it difficult to give a worthy answer to the question of whether it's too early, I would say it's probably not too early, because the trend is so well established. If we wait, it may be too late, because there are no alternatives. The alternatives that exist are infinitely less desirable than the ones we see developing in the region. The alternatives are not necessarily what had been in the past. The alternatives may be a kind of breakdown in order and governance that nobody wants to see.

So my personal response to your question, Chairman, is that I think the process is timely and valid.

The Chairman: Mr. Durand.

Mr. Paul Durand: If I could add to that, essentially the reason is that they had tried everything else, and the dictatorships, the closed economies, and the statist models were all taking them further down into the abyss. They realized at the end of the Cold War that they had to adopt another model. It is the liberal democratic one. And as George said, there are no alternatives. So it would appear to be irreversible at this stage, at least not without bad times—irreversible in that sense.

• 1650

The Chairman: Did you have a question?

Mr. Bill Graham (Toronto Centre—Rosedale, Lib.): I have two.

I apologize for being late. You may have covered this.

Obviously we are having hearings on the WTO, as well as the FTAA, and the whole country is going to be going through simultaneously trying to come to grips with negotiations that are going on at the FTAA level and the WTO level, once those kick in. My question is about the resources of the department, on the one hand, to be able to handle two very elaborate and extensive sets of negotiations, in which there will be some convergences and some divergences, but which will probably require different negotiating people. Within that context, what's your feeling about the capacity of the Canadian industry and public to handle both these tracks at once? What's the interest on behalf of the Canadian public, as well, and the capacity to be able to deal with those? That would be the first question.

The second question is about civil society, which came up this morning in the WTO discussion. Can you tell us why the civil society envelope seems to be such an important envelope in the FTAA negotiations, whereas in the WTO negotiations it seems to be very low on the scale of interest? Is it just because the WTO is so much larger, there are so many more countries, and it's so diffuse that it's harder to get a coherent vision of what the civil society is when you get that many countries with oriental visions, western visions, etc., whereas at least in this context we may not be the same, but we're hemispheric, so there's more coherence in our positions? That's just a guess.

Mr. George Haynal: Those are both important and very practical questions. You would probably not expect me to say we have enough resources to do the job.

Mr. Bill Graham: I don't know if you would consider it some sort of a soft lob to the department: give us more money. But I know Mr. Axworthy wouldn't mind if you said you were totally lacking in resources.

Mr. George Haynal: I think we will be hard-pressed. There's no question about that. You can do anything if you have to. But this will be a big challenge, and we are not resourced for it. That's my own personal opinion, though. My colleague would be probably be in a much better position to give you an authoritative answer to that. We have to build up a team to manage these negotiations. But it has been done before, as Bob reminded me. We did the NAFTA and the WTO simultaneously.

I can say this without any fear of seeming to serve our self-interest, because I am not a trade negotiator, but we have an extraordinary group of trade negotiators in this country who have been through some extraordinary experiences, starting with, and not the least, the FTA, then NAFTA, and the establishing round for the WTO. That is my introduction to a brief response to your second question, Mr. Graham, about the private sector and whether the private economy is ready to launch into the WTO round.

I think we are fortunate, in that there are experts who have been through the negotiating system before but are now in the private sector, but I think the Canadian economy will want to get engaged very deeply. There is, of course, time for it. The WTO round has not yet commenced, and it will be a lengthy process. I think it will be a challenge to everyone to understand what is at stake and what the opportunities are. But I think we're better positioned to understand those issues for the fact that we do have a cadre of people who have been through trade negotiations of this kind before.

Mr. Bill Graham: I'm going to interrupt you there, because I know you're going to go on to the next question. Reversing it, what about other countries?

• 1655

I've heard, for example, that Chile is sort of ready for these negotiations because they went through an FTA negotiation with us, whereas other countries in the hemisphere don't know how to put their negotiation teams together and will have a lot of trouble being able to deal with this and the WTO. Maybe we'll be ready, but if our interlocutors aren't ready will that be a problem for us?

Mr. George Haynal: It may be. Bob mentioned earlier the kind of support we're giving some of our partners in terms of getting themselves ready to negotiate. Clearly it will be a big challenge, especially for smaller countries, to negotiate two such enormous far-reaching agreements. That would be my best guess, Mr. Graham.

I think it will be tough for them. I suppose each country will have to choose where to put their energies, depending on where the stakes are highest for them. But again, both processes can go forward without universal participation at the same level of intensity, which is a fortunate part of how this system works.

On civil society, if I may just venture an answer to your question, which is very much at the heart of many things we're worrying about these days, I don't know where the civil society volet will be on the WTO. I don't think that issue has yet been engaged in quite the way it has in the FTA, which is not to say it won't be. That would be my best answer to your reflections.

It is an important part of the FTAA discourse because some governments chose to make it so. It's a challenge others are having difficulty coping with, so it has become an issue at the level of principle. It has become an issue at the level of practicality, as we discussed earlier. I tend to think you're probably right that we can do that on the hemispheric basis more readily, especially in the context of this negotiation, which is not yet into highly technical, highly complex trade-offs among substantive sectoral issues. So in a way we've had the luxury of thinking about these issues at the beginning of the process, rather than being launched fully head-on into the substance of the issues.

Mr. Bill Graham: Thank you very much.

The Chairman: Mr. Calder.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much.

Mr. Graham touched on exactly what I wanted to talk about—the negotiating teams themselves. Any of the countries within the FTAA and the WTO that are politically stable, economically stable, and have expertise in trade and a vision of where they want to go can put in some pretty credible negotiating teams. I think we saw that in the Uruguay Round.

The other countries that don't have that won't be able to put in credible negotiating teams. They'll probably put in small teams, which is what we saw in the Uruguay Round, with no more than four or six people, and immediately one person will need to become an expert in anything from agriculture to processing to industry to the environment—you can see where I'm coming from here—and be up against teams of individuals on each one of those subjects.

The United States, for instance, pushed the position of tariffication in the last round and it basically ended up being adopted by the 117 signatories at that time. I'm concerned we may see that same thing develop this time again. I'm wondering what, if anything, we can put in place to make sure that doesn't happen. Obviously we won't be in as precarious a position as some of the third world countries. Maybe you could comment on that.

Mr. George Haynal: I don't think either of us knows how to cope with that. We're trying to help the smaller countries cope. They may have to pool their resources.

Mr. Paul Durand: Which they are doing, as in CARICOM under Sonny Ramphal.

Mr. George Haynal: I think people will have to find their own way into this as the reality dawns on us all. I'm not sure what better answer I can give you, except to take what you're saying as a very salutary warning. It's going to be a problem and we'll have to cope with it.

• 1700

Mr. Murray Calder: If the United States senses any weakness at all, they will try to jump in and run the show in any one of these negotiating theatres.

Mr. George Haynal: Absolutely. It's a natural instinct—or an unnatural instinct.

May I come back to one point that came up earlier on the matter of personal security? I think this is a really important point. I was trying to see if I had credible numbers here on relativities.

For 1997, I have a note that says 1.5 million Canadians travelled to the region, which was a very dramatic increase over the year before. I think well over 2 million Canadians spend time in the region now, which is a huge presence. I also asked how much of a consular problem this created.

Mr. Bill Graham: You're not including Florida in that region, are you Mr. Haynal?

Mr. George Haynal: Not yet, although one could be mistaken about where one is in some places in Florida.

There were about 3,000 consular cases out of those 2 million people who went to the region. So it's not insignificant, but in terms of personal security and Canadians being able to travel, work, and be in the region, it is surprisingly quiet and untroubled. This doesn't detract at all from your point; I just thought those numbers might be helpful in terms of perspective.

The Chairman: Thank you. I'd like to thank all our witnesses for coming this afternoon.

Thank you, my colleagues.

The meeting is adjourned to the call of the chair.