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]

Wednesday, May 5, 1999

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[English]

The Chairman (Ms. Sarmite Bulte (Parkdale—High Park, Lib.)): Good afternoon, ladies and gentlemen. I'd like to bring the meeting of the Subcommittee on International Trade, Trade Disputes, and Investment to order. Pursuant to Standing Order 108(2), the subcommittee is conducting an examination of Canada's priority interests in the free trade of the Americas area. We're delighted to have you all here today.

We'd like to perhaps ask each of you to begin with a statement, followed by questions.

Mr. Leduc, we'll start with you. I understand you're the assistant director of the international trade department of the Dairy Farmers of Canada. Welcome, and please begin.

Mr. Yves Leduc (Assistant Director, International Trade Department, Dairy Farmers of Canada): Thank you.

[Translation]

Good afternoon, Madam Chair, members of the committee, ladies and gentlemen.

[English]

My presentation will be partly in English and partly in French.

Dairy Farmers of Canada, the organization representing Canada's 24,000 dairy producers, is pleased to participate in the consultation process on the FTAA undertaken by the House of Commons subcommittee of the Standing Committee on Foreign Affairs and International Trade.

The next few years will be extremely intense with regard to the development and the enhancement of trade agreements. On the one hand, the next round of WTO negotiations on agriculture is about to begin, and on the other hand, Canada has already entered into the negotiations towards the creation of a free trade agreement in the western hemisphere. We understand that both sets of negotiations are extremely important and that anybody interested in trade development will need to pay attention to both processes. Despite the fact that they are conducted separately, one should keep in mind that both processes will influence each other. It is our view, however, that ultimately the WTO will have the biggest influence on what could be achieved at the FTAA level.

Dairy Farmers of Canada's interest in the FTAA debate is to ensure that the FTAA does not go beyond what was agreed to at the WTO or what may be agreed to during the next round of WTO negotiations, especially with regard to market access for dairy products. This being said, the FTAA could move further in areas such as export subsidies and sanitary and phytosanitary measures. Over the past few months, DFC has developed a credible and comprehensive position on trade. While this position was mainly developed with regard to the upcoming WTO negotiations, the underlying principles also apply within the FTAA context.

Those principles are as follows. First, further trade negotiations for agriculture should result in a better functioning of international and domestic markets for dairy products and contribute to the improvement of the incomes of Canadian dairy farmers. Second, the WTO should be the principal vehicle for the establishment of fair and effective trade rules. Furthermore, the trading rules established for the dairy sector in other agreements Canada may enter into must not go beyond the commitments and discipline established by the WTO.

Before I elaborate on the points that should be taken into consideration at the FTAA level, I would like to emphasize that the position that was developed by DFC regarding developing trade agreements like the WTO and the FTAA must be addressed in its entirety. The position DFC adopted in January 1999 is a credible and comprehensive package that must not be broken down into its components.

DFC supports the elimination of government-financed export subsidies and the establishment of fair and precise rules governing market access, only if over-quota tariffs are maintained at their current levels. We feel this must be repeated over and over again in order to ensure that our position is well understood.

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DFC supports the Canadian government's intention to approach the FTAA negotiations in a similar fashion as it approached the NAFTA agreement and other regional trade agreements, such as the Canada-U.S., Canada-Israel, and the Canada-Chile free trade agreements. The particularities of these agreements are that they prohibit the use of export subsidies when exporting into the territory of another contracting party and they recognize that tariff rate quotas are legitimate measures. The latter was successfully defended by Canada before the NAFTA panel in 1996, which recognized that TRQs resulting from the World Trade Organization agreement prevail under the NAFTA. Furthermore, any considerations related to the size of tariff rate quotas and over-quota tariffs have been excluded from the general provision of these agreements.

[Translation]

DFC would like to provide the following comments regarding the specific questions that will be addressed at the FTAA level.

Firstly, with respect to export subsidies, DFC supports the elimination of all government financed export subsidies and believes that this is an objective which can be pursued within the context of the FTAA.

It is important to note that all of the regional free trade agreements into which Canada has entered over the past few years encompass a provision prohibiting the use of export subsidies between the contracting parties. This principle needs to be retained in any future agreement Canada may enter into.

Secondly, regarding market access, consistent with the position adopted by the SM5 and the CFA, that is the five supply management agencies and the Canadian Federation of Agriculture, DFC believes that Canada's approach should be the same as in other regional trade agreements. Canada should seek the elimination, on a reciprocal basis, of all agricultural tariffs other than over- quota tariffs. This is also consistent with the policy pursued by DFC that in-quota tariffs be reduced to zero.

With regard to other issues such as the elimination of country specific allocations, DFC realizes that the WTO will continue to supersede the FTAA. This does not mean, however, that the FTAA could not serve as an initial step toward the realization of that objective. Access within the Western Hemisphere, other than what was allocated to non-FTAA countries, should be available to all rather than through country specific allocations

Furthermore, DFC would like to reiterate that it supports a position calling for a zero-for-zero agreement for those sectors where this is an option. Such an option could be pursued within the FTAA context if it is the wish of those commodities for which zero- for-zero is an option. It is not an option, however, in the dairy sector.

DFC also wants to reiterate that one of the key objectives pursued by trade agreements is to improve the functioning of international trade and increase the predictability of the trading environment. Therefore, in order to continue to operate an efficient supply management system in Canada, Canadian producers need to control imports. Tariff equivalents and tariff-rate quotas are the most important tools enabling Canada to limit the importation of supply managed products at predetermined and predictable levels. The tariff equivalents that were introduced in 1995 as a result of the Uruguay Round have permitted Canada to provide no more access than what it has agreed to provide.

Moreover, maintaining over-quota tariffs would be contrary to the WTO principle which states that the multilateral trading system is an attempt by governments to make the business environment stable and predictable. DFC believes that the WTO principle also applies in the context of the FTAA.

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The third area I wish to comment on is domestic support. Again, consistent with the CFA position, DFC is of the opinion that the limitation on domestic support expenditures is an issue which can most effectively be dealt within the context of the WTO. The Canadian agricultural industry competes not only on markets located within the Western Hemisphere, but also elsewhere in the world. Reduction of trade distortive domestic support should be addressed within the context of the WTO.

The fourth area I wish to comment on is sanitary and phytosanitary measures and technical barriers to trade. These are areas where progress can be made at the FTAA level. DFC insists that Canada pursue the negotiation of equivalency agreements which provide for mutual recognition of standards of similar or equal value among the contracting parties.

To provide you with an idea of the problem, the United States, for example, continues to restrict access to its markets through the utilization of health regulations such as the Pasteurized Milk Ordinance and the National Conference on Interstate Milk Shipments. All fluid milk moving from one state to another, either in bulk or consumer packages, including imports, is subject to inspection by U.S inspectors, otherwise entry will be refused. I would like to emphasize that the U.S., after several attempts, still refuse to grant equivalency to the Canadian inspection system which provides for the some of the highest quality milk in the world.

In conclusion, Madam Chair, DFC realizes that the creation of a free trade zone in the Americas could achieve positive results for certain commodities. This, however, is not the case for the dairy sector. If Canada wants to rectify some of the inequalities that resulted from the Uruguay Round, the FTAA is not the right forum. The rectification of these inequalities inevitably has to be addressed during the next round of WTO negotiations. And as I have mentioned, DFC is of the opinion that the FTAA process in the case of agriculture should move very slowly until the next WTO negotiations are concluded.

Thank you.

The Chair: Thank you very much.

[English]

Next we have Ms. Sally Rutherford, who is the executive director of the Canadian Federation of Agriculture. Welcome.

Ms. Sally Rutherford (Executive Director, Canadian Federation of Agriculture): Thank you.

Much of what I will say follows very closely what Yves has just pointed out. DFC is a member of CFA, and we've worked very hard over the last number of months to develop a trade policy, of which you have a copy, that covers the interests of all of our members, including Saskatchewan Wheat Pool, AgriCorp, KAP—Don Dewar, the president of KAP, is here with me this afternoon, and he also sits on our board—as well as the Canadian Pork Council and other organizations as well.

CFA does monitor developments in the WTO, the OAS, and other international organizations, as well as monitoring negotiation and implementation of international agreements.

We also monitor activities in other countries that affect the trade interests of Canadian farmers. We maintain a very active trade committee process, which works in close consultation with the government trade policy staff and develops trade policy advice for the government, which we're very proud to say is very often taken.

In terms of an overview, we believe that while the FTAA is an important exercise, it must not supersede the WTO effort. The various trade agreements that have established new disciplines have been positive, but despite this, our agricultural trade environment is far from perfect and the playing field is far from level.

The implementation of multilateral and regional trade agreements has created new export opportunities for Canadian products. However, the level of real access continues; particularly minimum access commitments continue to be lacking.

The level of export subsidies is restrained by WTO agreements, but export subsidies are still used and do adversely affect the volume and price of our exports. While the FTAA-related countries do not use export subsidies, other than the U.S., they are the recipients of export subsidies from, for example, the U.S. and the European Union.

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Despite limits and reduced domestic support spending, Canadian farmers have to cope with low prices and difficult markets without the level of financial support available to other producers in other countries, such as the EU and the U.S.A. Just for the record, for example, in 1995, Canada's total for amber support was only 15% of the WTO spending limit. For the U.S. it was 26.9% and for the EU it was 60.4% In addition, the U.S. provided blue box support equal to 30.5% of its amber limit, and the EU provided blue box support equal to 26.5% of its amber limit. Canada provided no blue box support.

Despite new disciplines on non-tariff barriers, some countries still have or are inventing new unjustified non-tariff barriers to our exports.

Canada must approach the FTAA agricultural negotiations in a cautious and thoughtful manner. The FTAA, if approached in a coordinated fashion with other negotiations, including the next round of the WTO negotiations, could help address current inequities in agricultural trade.

Our basic negotiating goals include increased access for Canadian agricultural exports and the establishment of clear and effective rules and standards that apply equally to all countries. We also believe that those goals must be pursued in a manner that will respect the domestic interests of Canadian farmers; identify the WTO as the principal vehicle for the establishment of fair and effective trade rules, while ensuring that all trade agreements and initiatives complement each other; preserve Canada's ability to maintain and establish orderly marketing systems; preserve Canada's ability to implement those domestic measures necessary for the stability and profitability of Canadian agriculture and not allow one commodity to be traded off to enhance the interest of another, nor to trade off agriculture, in general, for another industry sector.

Specifically, in relationship to the FTAA, CFA believes that in terms of market access, Canada's approach should be the same as in other regional trade agreements. Canada should seek the elimination, or reduction when elimination is not possible, on a reciprocal basis of all agricultural tariffs except for over-quota tariffs for supply-managed products. Any considerations related to the size of supply-managed TRQs or over-quota tariffs should be reserved for the WTO negotiations.

Canada must also give high priority to the elimination of technical barriers to trade, including unjustified use of sanitary and phytosanitary measures.

In terms of domestic support, limitations on domestic support expenditures is an issue that can most effectively be dealt with again in the context of the WTO. Canada should oppose any efforts to go beyond the WTO domestic support commitments.

On export subsidies, again Canada should seek the elimination of the use of export subsidies and that the CUSTA provision, which prohibited export of agricultural product by government entities at a price below acquisition costs, should not be duplicated in the trade agreements.

In terms of other agricultural-related questions, Canada should oppose any efforts to establish new rules governing the activities of state trading enterprises. Issues relating to STEs should be dealt with in the WTO. If the opportunity occurs, Canada should seek specific rules regarding the specificity of agricultural programs for the purpose of determining if a program is countervailable. The goal should be to establish rules that make programs that are generally available to agriculture non-countervailable.

In terms of investment, Canada should endeavour to ensure that investment provisions that may be included in these agreements do not inadvertently conflict with Canadian agricultural policies, programs and/or regulated marketing systems. CFA asks that Canada's investment negotiators consult us during the development of any investment provisions.

On competition policy, Canada should endeavour to ensure that any competition policy provisions are compatible with the manner in which Canada applies competition law to agricultural marketing bodies.

Under trade remedies, in terms of anti-dumping, it may be useful to seek more effective rules governing the use of anti-dumping action. However, Canada should not seek the elimination of the use of anti-dumping action, particularly in the case of horticultural products.

In terms of countervailing duties, if possible, Canada should seek rules that govern the determination of the specificity of agricultural subsidies for the purpose of countervail action.

In terms of safeguard, there is a need to develop measures that address the problems that the producers of perishable agricultural products suffer from in terms of surges of low-priced imports. CFA requests that they be consulted regarding any possible provisions related to safeguard measures.

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Finally, in terms of intellectual property rights, the question of whether a country should be required to allow the patenting of plants or animals is an issue that should be dealt at the WTO. Canada should oppose any patent provisions in these regional agreements that would limit Canadian options regarding the patenting of life forms, which would limit the conditions Canada might place on the patent of a plant or an animal.

With that, I'd like to thank you for the opportunity to make the presentation, and I'd be willing to answer questions when the time comes.

The Chairman: Thank you very much, Ms. Rutherford.

Next we have Elizabeth May, who is the executive director of the Sierra Club of Canada.

Ms. Elizabeth May (Executive Director, Sierra Club of Canada): Thank you, Madam Chair.

I should first alert you to the fact that you have an environmental presentation in the midst of an agricultural panel and that my remarks are much more generic. I wasn't able to reschedule to be with the other environmentalists appearing before your panel. Although I find the comments from the agricultural sector representatives extremely significant, I would just say that when you say that we have some of the highest quality milk in the world, I say we have the very best milk in the world because there's no bovine growth hormone in it. We can thank Alan Rock for that when we start out here.

As I said, my brief addresses the more generic issues around what has happened in the past with environmental concerns around the trading regimes and what we've learned from other trading regimes as we approach negotiations for the free trade area of the Americas.

We've been involved in this process for some time. We had an NGO forum that occurred at the same time as the Miami summit, back in December of 1994, meeting with colleagues from around the world, particularly, of course, from the Americas, from Latin America and the United States and Mexico, and sharing the same concerns, that we have seen trade liberalization used to erode environmental and labour standards.

I just want to pause to point out the great irony here. The very same governments that have committed their citizens to the terms of the General Agreement on Tariffs and Trade globally and to regional trade agreements such as the free trade agreement and the North American Free Trade Agreement, NAFTA, also committed themselves to environmental agreements for planetary survival.

The largest ever summit of world leaders took place in June 1992 in Rio de Janeiro, with commitments made to protect global climate from disastrous destabilization caused by greenhouse gases, to protect the world's genetic and species and ecosystem diversity, to increasing global aid flows to assist the developing world, and to the precautionary principle to ensure the protection of health and well-being of humans and our life support systems. But seven years after Rio, those multilateral environmental agreements, or MEAs, as they are called in WTO-speak, are notable for the failure of many governments to honour their commitments. I'd just pause to note that the detailing of that was done very well by environmental auditor Brian Emmett, in terms of Canada's failures.

Meanwhile, since 1992, the World Trade Organization, which did not even exist at the time of Rio, has achieved an impressive record of enforcing its trade regime. The new implementing agency for the GATT, created through the long Uruguay Round of multilateral trade negotiations, has been obeyed, and where failure to meet its terms is suspected, trade disputes and effective, swift, and merciless trade sanctions follow.

The WTO trading system was established by serious people. I do not wish to suggest that the environmental agreements were negotiated by people lacking in seriousness of purpose.

The issues of global survival entirely dwarf the petty mercantile concerns of the free traders. But the free traders got all the tools to ensure compliance. The environmental agreements are left with the tool employed by the Sierra Club Rio report card and the parliamentary commissioner: we have the power to embarrass, and that's all.

The imbalance between effective and forceful global trade rules and weak global environmental agreements would not be fatal if the trade issues and the environmental issues stayed neatly in separate boxes. But the world is considerably more messy than that. Environmental protection leads to regulation. If corporate interests fail to thwart an environmental regulation at the domestic level, the GATT and NAFTA provide another route of attack. One man's environmental regulation is another man's non-tariff trade barrier.

Environmental and public health issues are increasingly being arbitrated behind closed doors by people with zero—I emphasize zero—scientific competence to examine the dispute from an environmental or public health standpoint. Neither do they seek such advice, and of course since the process is entirely closed, environmental groups and others cannot achieve the role of amicus curiae, friends of the court.

So the result is entirely predictable. Every single time an environmental or public health action has been challenged through the WTO or NAFTA, the trading regime has ruled the measure to be trade-illegal—every time.

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The first was a Venezuelan challenge against measures under the U.S. Clean Air Act to reduce emissions for reformulated gasoline. The challenge was brought by the Venezuelan government, but the real pressure to change the regulation came from the subsidiaries of the same multinational oil and gas companies that had failed to keep the regulation out in Washington. The challenge to the WTO provided another route of attack. It succeeded, and as a result U.S. air is dirtier.

Since then, under the World Trade Organization, we have seen the tuna-dolphin case, the turtle-shrimp case, the beef hormone case, and under NAFTA the raw log export case—Canada cannot insist on controls against the export of raw logs to keep jobs in Canada and reduce stresses on our forests. Under the FTA, the salmon-herring case similarly said that Canada could not ban the export of unprocessed salmon and herring, even though it had importance in conserving fish stocks and protecting jobs.

Through negotiation, in order to meet NAFTA requirements, Canada has voluntarily increased the amount of legally permissible pesticide residues allowed on imported fruits and vegetables. Most outrageously, in response to a chapter 11 NAFTA challenge last summer, Canada repudiated its ban on a neurotoxic gasoline additive, MMT, despite evidence that it increased air pollution and was a threat to the brains of our children. Our government also apologized to the manufacturer and gave them $19 million in damages. In addition to loss of profits, they alleged an expropriation based on damage to their reputation in the House of Commons debates on passing a bill to ban MMT.

In some of these cases, Canadians have lost out on our environmental and public health measures. In others, Canada has argued successfully for the loss of such protection for others, as we are currently doing to knock out a French ban on asbestos. In the beef hormone case, for example, Canada and the United States jointly challenged the EU hormone-treated beef ban. Although none of the arguments are open to the public, from the final decision of the WTO panel it can be inferred that Canada argued against the precautionary principle at this level.

Even if we had not committed to the precautionary principle in writing several times at Rio, one would have thought the Krever inquiry on the blood supply in Canada would have created a healthy respect for the principle that you use caution when dealing with public health.

More dangerous to the planet than the individual measures that have been struck down is the chilling effect of these decisions. How many toxic chemicals will remain in use because bureaucrats or politicians fear trade retaliation or an investor suit under chapter 11. It is demonstrable that when the WTO even asked the question “Are multilateral environmental agreements GATT-illegal?”...the effect of asking the question was to weaken the hand of negotiators for meaningful environmental accords.

MEAs negotiated before 1990, the convention on the trade in endangered species, the Basel Convention on hazardous wastes, and the Montreal Protocol to protect the ozone layer, all used trade sanctions as an enforcement mechanism. Bear in mind there is no effective way to enforce multilateral agreements between parties other than by trade sanctions. You can't call in for NATO bomb strikes.

In NAFTA those agreements were specifically mentioned as not offensive to the NAFTA regime. In other words, within NAFTA we attempted to insulate them from trade disputes. However, they're not included in the GATT or excluded from the GATT. Thus, when the world community was negotiating Kyoto last December, effective dispute resolution and enforcement was off the table.

Canada actually took the position that if the Kyoto protocol included such measures, we would refuse to sign. There is absolutely no difference in policy or principle between the Montreal Protocol, which Canada championed, and the Kyoto Protocol. The only difference in Canada's position in 1987 and 1997 is that in the last ten years the trade agenda has become paramount. Nothing stands in the way of the trade monolith. No wonder the environmental community greets yet another round of trade negotiations for an FTAA with suspicion or worse.

I want to be clear that the Sierra Club of Canada does not oppose trade liberalization or globalization per se. But we now have abundant evidence of how it should not be done. We also have some examples of how it could be done.

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The essence of trade liberalization agreements is a reduction of domestic sovereignty. We can't protect our dairy farmers because we're going to see those supply mechanisms under assault all the time, particularly by the U.S., and we can't protect our health from things like MMT. So if the state's ability to protect its citizens is reduced, we need not cast those peoples and the biosphere to the faceless mercies of the global free market free-for-all. We could make some rules to ensure that the trading regime operates in ways consistent with sustainability and survival.

The approach is quite different in Europe when you compare it to the NAFTA regional agreements. In the European Union, where they recognize the disparate levels of wealth and environmental standards, the EU insisted on raising the environmental standards of its poorer members, such as Spain, and assisting them to meet those new challenges through resource transfers from north to south.

NAFTA would be fairer for Mexico if, while insisting that Mexico ban DDT, which we are insisting, we provided increased resources for primary health care, which would be more effective in preventing malaria than DDT is, but we are not providing that support. It's expensive to provide primary health care, and Canada and the United States are not helping.

Another feature of the EU that's lacking in other trade deals is the creation of a democratically elected parliament, complete with an environmental minister, at the regional level. Sovereignty was lost at the level of the nation-state, but rebalanced with an effort at the supranational level.

An aspect of NAFTA that must be repudiated is the investor protection provisions of chapter 11. Through these measures not only have Canadians lost democratic rights, but we have conferred those rights to multilateral corporations. The public outrage against the multilateral agreement on investment, thankfully, stalled a global version of chapter 11, but under NAFTA we have the MAI anyway.

Canada now faces three more chapter-11-based suits from U.S. companies that do not like our laws. The blatant anti-democratic nature of these investor rights is galling.

Trade Minister Sergio Marchi has tried unsuccessfully to get the U.S. to reopen the chapter. The U.S. trade representative has refused.

Canada must refuse to begin any new rounds of negotiations on the FTAA or a new round at the WTO until the grievous and outrageous acceptance of the current trading regime is corrected. Start with chapter 11. Trade agreements are too important to be left to the trade negotiators.

Thank you.

The Chairman: Thank you very much, Ms. May.

Last but not least we have Mr. William Miner, senior associate with the Centre for Trade Policy and Law. Welcome, Mr. Miner.

Mr. William M. Miner (Senior Associate, Centre for Trade Policy and Law): Thank you, Madam Chair.

I will make some general comments and reserve specific comments for the question period.

It is a privilege to be invited to assist the committee in its examination of agricultural issues in relation to the free trade area of the Americas.

As I stressed in my comments to the standing committee in early March, it's important to develop Canada's approach, in my view, on both a multilateral and a regional basis, as this reflects the reality of the way in which markets are developing today.

Some agricultural objectives and issues can be advanced through regional negotiations while others require multilateral solutions in order to be effective.

As market integration continues and more processed foods and food components move across borders, trade agreements can assist the process of adjustment to the new trading environment. Oilseeds and red meats are good examples of the sectors that are benefiting from the total removal of tariffs and the development of compatible standards and marketing systems through the NAFTA and FTAA process.

Some issues, such as the use of agricultural subsidies and state trading, can only be resolved through multilateral negotiations. While eliminating export subsidies or achieving global free trade for some sectors such as oilseeds and their products, or barley, malt and their products, requires a multilateral approach, a common position between Canada and the U.S. and among the countries of the western hemisphere will greatly improve our prospects of achieving success in reaching our ambitious export targets.

In preparing for further agricultural negotiations, it's important to recognize that the emerging policy environment is driving economies toward more openness, the integration of food systems, and greater competition. There is a need for flexibility in systems and in policies in order to allow for regional specialization and two-way trade or trade within the hemisphere.

There is also a need for greater attention to the consumer concerns and quality controls as trade becomes more specific and segmented with tighter needs with respect to the markets.

The opening of borders is an element of the policy responses of most countries in the western hemisphere to the current changes in the trading environment.

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Trade agreements respond to these trends and may in some cases act as a catalyst for achieving change. Further trade liberalization for the farm and food sectors can be expected in the WTO as well as in the FTAA negotiations.

Increasingly, agriculture is being brought fully into the regional trade agreements, although some exceptional treatment is continuing. Experience with NAFTA has demonstrated that sectors or issues that are partially set aside in the agreement often lead to trade problems later. Given the developments within the food sectors and the trade environment, it will become increasingly difficult, I believe, if not counter-productive, to continue exceptional treatment beyond a transitional period. If there is to be differential treatment, it's likely to be developed on a specific country-by-country basis, or a sector-by-sector basis, or perhaps a product-by-product basis, and for a temporary period.

In other words, I believe the objective of the FTAA, as it was in NAFTA and the FTA before it, is to establish a free trade area as quickly as possible. So what we are dealing with here is a question of time and possibly a differential treatment for transitional periods.

Undue delay in adjusting to these modern commercial markets is likely to prove costly in terms of less investment, a slower pace of restructuring, and less value added to both production and to sales.

A further consideration is the importance of working to develop effective trade rules for agriculture through both the World Trade Organization and the FTAA. The WTO negotiations should proceed I think and make progress in reducing tariffs, particularly peak tariffs, improving access through TRQs—tariff rate quotas—or removing or restraining that TRQ system for some products, abolishing export subsidies by an agreed date, dealing with other forms of export competition mechanisms—such as export credits—and strengthening and clarifying the rules of technical standards.

As is evident from the current situation in agricultural commodity markets, there is a need to further constrain the impact of domestic subsidies on production and trade. The criteria for acceptable forms of support, which are known as green box policies, should in my view be tightened and the protection from countervail and other trade challenges, which is extended through it in the peace clause, should be continued. But the WTO negotiations will not remove all barriers to trade unless this is done for selected subsectors such as oilseeds.

Experiences with regional trade agreements show that it's necessary to go further in several aspects to reduce cross-border problems and to produce the benefits that can be achieved through more open markets. The best scenario would be to use the FTAA negotiations to move issues in the WTO as far as possible and to agree among the countries of the Americas on how best to achieve conditions of free trade within the region while other regions catch up, and I might add while some other subsectors catch up as well.

This offers a strategy of taking advantage of the strengths and opportunities for agriculture and food processing in the western hemisphere, which are quite substantial, and in meeting global competition as well over the longer term.

It's also important to make progress on the additional issues affecting competition where it's necessary to go further in an FTAA or a free trade area than can be anticipated from a WTO round. Trade liberalization influences domestic farm and food policies to move towards greater convergence and to reduce trade conflicts across open borders. Progress in dealing with anti-competitive behaviour, whether it arises from corporate activities or state interventions, needs to be achieved for agriculture as well as for other goods. These issues are related to the WTO peace clause for agriculture and to concerns over subsidies, dumping and countervail, as well as unfair pricing practices. They are sensitive and complex issues, but nonetheless represent an area where the FTAA negotiators must seek to go further than has been possible in the WTO or in NAFTA in order to develop formal rules or perhaps complementary arrangements to underpin and smooth the way towards free trade in the Americas.

The countries of the Americas have an opportunity to advance their interests in agriculture and the agri-food industries through pursuing free trade among themselves and trade liberalization on a multilateral basis. I'm sure they can benefit from working together in the WTO negotiations as well as through eventually developing the FTAA itself and overall a stronger rules-based system to maintain and expand what is a vital sector to the economies of virtually all countries of the Americas.

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Thank you.

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

Colleagues, I'll open it up to questions. Mr. Penson.

Mr. Charlie Penson (Peace River, Ref.): Mr. Miner, I'd just like to pick up on the area of the peace clause you talked about. First of all, can you tell us what year that's due to expire unless it's renewed?

Mr. William Miner: It's due to expire in 2003. It is a nine-year arrangement.

Mr. Charlie Penson: If in the WTO there's a multilateral round that takes seven years, as it did last time in the Uruguay Round...I guess my concern is that the effect of domestic subsidies right now has been very detrimental to Canadian farmers into third countries—the European Union, as an example, dumping their excess onto the world market. In the event that we can't achieve anything substantial for quite a period of time, is it wise to walk away from the peace clause or to renew the peace clause during that period? Wouldn't that put pressure on some of these countries to have to comply with dumping charges?

Mr. William Miner: The comment that it will put pressure on countries is certainly correct if that peace clause were to lapse. It would mean a number of things, I believe. One that would be of concern to us as well is that protection for policies in the green box from countervail action would presumably not be effective unless renewed. In addition, the programs that are consistent with existing GATT rules in the agricultural sector, such as the subsidy commitments...if countries are consistent with it, they cannot be challenged under the peace clause against the general subsidy rules of the agreement. As a consequence, significant pressure would be placed on the European Union, for example, if that were to lapse.

So your assumption is correct. I think what one would need to do is perhaps make three judgments. One is, what is the net benefit or risk, if you like? How does that balance from the perspective of Canada? Secondly, what is the likelihood of being able to extend it without concessions while the negotiations proceed? Third, in the event that it cannot be extended and opens up, how much damage would that do to the negotiating environment, or perhaps what catalyst would it provide to the negotiating environment?

Mr. Charlie Penson: I think it's a judgment call.

Can you tell us what areas Canada currently benefits from in agriculture from having that peace clause, the green box area? Can you just explain a little bit as to what protection that provides to Canadian farmers right now?

Mr. William Miner: As far as I'm aware, the benefit that Canadian policy-makers would have today would be in relation to U.S. countervail in particular. That might be generalized to some other markets, but it's the U.S. market that usually attracts our attention when we plan programs.

There's also, I suppose, a possibility of a more general challenge under GATT, were that clause not there, with respect to other aspects of our programs, but I think that would be marginal.

Mr. Charlie Penson: I guess I see the U.S. challenging us with countervail right now on beef, for example. I think the trade panel just ruled against them. Are you aware of any specific commodities that we would be vulnerable on if the peace clause was not renewed?

Mr. William Miner: I believe in general our safety net programs are consistent with the green box, even though not in all cases that decision has been taken. It could be subject to challenge. On the other hand, other sectors, sectors not covered by the safety net, might have areas open to challenge.

Mr. Charlie Penson: Okay. Thank you, Mr. Miner.

• 1620

Elizabeth, we were out in western Canada last week with our committee and had a lot of groups discussing what the World Trade Organization should be putting forward, what our position should be, as well as the FTAA. I didn't quite understand whether you or your organization felt our environment was being damaged by having these international agreements and whether there was some danger in continuing to sign agreements that would make the environment more vulnerable.

Ms. Elizabeth May: Yes, that was exactly our concern, that the existing agreements.... There is the General Agreement on Tariffs and Trade, NAFTA, and the threatened Multilateral Agreement on Investment. We have good evidence now; it's no longer hypothetical. We have actual cases, and we know that the environment is damaged by the existence of these agreements, and our ability to regulate and protect public health as well.

Mr. Charlie Penson: The reason I ask that is the International Institute for Sustainable Development made a presentation to us in Winnipeg, and they argued that the use of subsidies—particularly in agriculture, but not restricted to agriculture—has probably been more damaging to the environment worldwide, and they argued for more liberalization of trade to stop that kind of practice.

For example, we have a farm in western Canada. We know what type of soil degradation has taken place in the last 100 years in western Canadian agriculture. A lot of people have suggested that it's because of government programs, government subsidies. The last one that I can think of is the GRIP program, which is the general revenue insurance program whereby farmers got more money to plant wheat every year than anything else and therefore farmed the program.

What do you make of their argument that over-production because of subsidies leads to higher nitrate levels and that type of thing?

Ms. Elizabeth May: The arguments are quite founded and they're not inconsistent with what I said, so I'm glad you raised that. The International Institute of Sustainable Development published an excellent book by Norman Myers called Perverse Subsidies, which examined the way in which—

Mr. Charlie Penson: Yes, he presented.

Ms. Elizabeth May: Okay. It presented the fact that subsidies to the energy sector help increase greenhouse gases and subsidies in the forest sector, and so on. It's not inconsistent to remove those subsidies and find international agreements to remove subsidies that have those perverse effects while at the same time ensuring that trade agreements don't provide the right to multinational companies to sue governments that complain of environmental regulations they just don't like, which is what happens under chapter 11, and also these efforts to harmonize at the border.

I gave the example of increased pesticide residues on Canadian crops. That was not dealt with as an environmental problem or a health problem. It was dealt with as a trade area. So when U.S. strawberries or whatever were turned back at the border because the levels of pesticides that were detected as residue were above Canadian limits, in other words too dangerous for Canadians, the response to that was to negotiate that Canada would allow greater residues and would in fact allow greater residues on our domestic crops as well. So it has had that weakening effect.

It's not entirely an easy piece to pull apart, and I'm glad you raised the issue of subsidies. In terms of the dairy field and agricultural concerns, we are concerned in the environmental movement. We've looked at the agricultural sector and have seen, as in forestry and fisheries, the industrialization, the large industrial agriculture occurring in ways that are also harmful to the environment, and also the centralizing of control—growing grain—to fewer and fewer companies, making it harder and harder for the family farmer to survive.

So we're concerned about that supply management side of things, but we don't see that in the same light as subsidies.

Mr. Charlie Penson: I just have a short comment. It's sort of a complex area, this agriculture one. For example, Europe is trying to restrict genetically altered canola. On the same side of it, at home here, farmers who are growing that are having to use less pesticides and herbicides to produce it because of the new technologies. It's a bit of a quandary, isn't it? They don't want it because they think it's harmful, and yet on the other side there are fewer herbicides used in the production of it.

Ms. Elizabeth May: We've talked to some farmers who have said that it hasn't, in their view, reduced the amount of herbicide used because it's—

Mr. Charlie Penson: I know from personal experience that it does on our farm.

Ms. Elizabeth May: In the European Union, on the beef hormone case, Canada argued, successfully, of course, at the WTO that the EU didn't have the right to keep out genetically modified beef in the beef hormone case. Yet in today's paper you can read that Dr. Margaret Haydon from within Health Canada, the regulators who approved Revelor H and those growth hormones in Canada, objected to the regulation and felt there was disturbing evidence that these substances could cause cancer in beef.

• 1625

So these are very tricky issues, especially when you get into genetically modified organisms, in terms of saying, how dangerous are they? Is a country justified in saying, well, until we have enough evidence to know these products are safe, we're not going to allow them in? The way the WTO operated on the beef hormone case was to say it's not enough to merely have a concern, or have good reason for your concern, or want to exercise the precautionary principle. If it isn't absolutely 100% necessary to protect the health of your population, and if you don't have the majority of scientific opinion on your side, you can't take that action. In the history of various things that—

Mr. Charlie Penson: But whose science?

Ms. Elizabeth May: The science is not Codex Alimentarius, which is a collection of multinationals. So this ability to regulate when you have a concern, especially...one can sympathize after the mad cow disease issue, where for quite a long time governments told everybody in Britain they were just fine to keep eating British beef. They're sensitive, and justifiably so, about the safety of their food supply system. Canadians are concerned as well. It's beginning to get into another area, but the trading regime is pushing genetically modified foods down our throats and trying to do the same in Europe.

[Translation]

The Chair: Do you have some questions for our witnesses, Ms. Debien?

Ms. Maud Debien (Laval Est, BQ): Yes, I have, Madam Chair. Good afternoon, Mr. Leduc, Ms. May, ladies and gentlemen.

Mr. Leduc, further to your concluding remarks, I have a question which relates more to the process than to the content. You stated in conclusion that the FTAA process in the case of agriculture should move very slowly until the next WTO negotiations are concluded. Am I to understand that you believe the FTAA negotiations should not proceed until such time as all of the problems at the WTO level have been resolved? Is that what you're saying?

Mr. Yves Leduc: No. The FTAA negotiations should wrap up by the year 2005. That is the deadline that has been agreed upon.

As everyone knows, ministers from WTO member countries are slated to begin their next round of negotiations in November of this year. We maintain that an agreement concluded at the FTAA level should not supersede any ones reached at the WTO level. Until such time as the WTO negotiations have concluded, we feel that to all intents and purposes, an agreement shouldn't be concluded at the FTAA level. This doesn't prevent negotiators from holding talks and moving forward on certain areas so that once an agreement has been reached at the WTO level, FTAA negotiations can move forward and wrap up as quickly as possible.

Ms. Maud Debien: I understand your position, but everyone knows that the negotiations, whether within the context of the Uruguay Round or GATT, have been going on for nearly 20 years. The next round of WTO negotiations promises to a protracted, arduous one, given that issues such as electronic commerce, investments, the environment and human rights will be on the table.

In your view, the FTAA negotiations should be equally protracted because you're suggesting we wait until WTO talks have concluded before we proceed on this front. We need to be realistic. Ideally, the WTO negotiations should be wrapped up within the next three years, but I doubt that will happen. It's all well and good to set the year 2005 as the deadline for concluding the FTAA negotiations, but I think we need to be realistic. I must question your very categorical stand. You believe the WTO talks should take precedence over the FTAA negotiations. We have a problem there.

• 1630

Mr. Yves Leduc: We agree with you that the WTO negotiations could well take longer than three years. I'll admit that we may have seemed somewhat categorical today, but there is still a way to get around this problem. Perhaps it could be made clear that for some sectors, including the dairy sector, some of the provisions included in an FTAA-level agreement could not supersede the provisions of a WTO-level agreement.

In today's presentation, we wanted to get across to you the fact that in some areas, the FTAA process could go much further than the WTO negotiations, including the zero-for-zero agreements for interested sectors and sanitary and phytosanitary measures.

Ms. Maud Debien: My next question is for Ms. May who represents the Sierra Club of Canada. During our cross-country hearings, witnesses representing NGOs repeatedly raised and stressed such issues as the environment, human rights and civil society. The people we heard from were deeply concerned about environmental protection.

Some witnesses called for the establishment of a new world environment organization which would work closely with the WTO, while others maintained that provision should be made within the framework of the WTO for mechanisms and rules aimed at ensuring consistent treatment of trade and environmental issues. I'd like to hear your opinion of these two options. Or perhaps you'd like to suggest another one.

Ms. Elizabeth May: That's a very important question, one on which all environmental groups can't agree. With your permission, I'll answer your question in English.

Ms. Maud Debien: By all means.

[English]

Ms. Elizabeth May: Thanks. The suggestion of the counterbalance...as I sketched out in the brief, there's a skewing of balance where the trade agreements work very well and are very effective and can be prescriptive, as in the trade agreements on trade-related intellectual property rights, to say not only will you not be allowed to do certain things in your country, but you will in fact put forward patent regimes. So they're very effective, and the global environmental agreements and domestic environmental protection are suffering as a result.

The suggestion for a world environmental organization is one that I think has a lot of merit. It initially came out of the Rio-plus-five discussions in Rio in March 1997, and recently it was endorsed by the outgoing head of the WTO, Mr. Ruggiero. I think it's because it has now been endorsed by Mr. Ruggiero that my colleagues are not so enthusiastic.

If we don't have a counterbalance that has a reliable dispute resolution function and allows a degree of professionalism, if you will, of capacity around global environmental agreements, governments will continue to try to lean toward the trade regime, which they can sort of trust, because it provides efficiency and is well run and well managed.

The current environmental agreements have taken the path of the United Nations environment program, which isn't even an organization at the level of the FAO in the UN—the Montreal Protocol, with a little secretariat in Montreal; the biodiversity convention, with a little secretariat in Montreal; and the climate change convention, with a little secretariat in Bonn. So they don't have the collective strength brought together the way the Geneva WTO is able to organize and run itself.

• 1635

If there was some way to ensure that the WTO, when it dealt with these issues, had some expertise and could say, well, this is a genuine environmental dispute so we should leave it alone and not bring in the trade regimes.... But I don't see that happening, particularly because the trade regime is sort of an ideology and isn't particularly open to the concept that there is anything other than a disguised trade barrier. The notion that they are genuine environment or health concerns doesn't seem to permeate. Personally, I lean towards reorganization at the global level, with a world environmental organization, because I think it would provide governments with a stronger understanding that these agreements can be respected. The current situation clearly doesn't work, and we're open to almost any effort at reform.

Mrs. Maud Debien: Thank you. Merci.

The Chairman: Mr. Blaikie.

Mr. Bill Blaikie (Winnipeg—Transcona, NDP): I'll try to be brief today, Madam Chair, because I can hardly talk; I'll let the witnesses do the talking.

It seems to me that the argument made by Elizabeth is an argument that was made before the committee by the Canadian Environmental Law Association on the WTO hearings, basically saying that every time the environment goes up against the WTO it loses. The cultural community said the same thing: every time culture goes up against the WTO it loses. And labour doesn't even get to go up against the WTO, so there's not even any jurisprudence in that area. It has its own ineffective organization, with no enforceability, just like a WEO might, or some analogy to that that might come to exist someday with respect to culture.

What happened along the way? You go back to the 1980s, to Brundtland, to Rio, where it looked like big breakthroughs were on the horizon. Then you get something else happening at the same time, the collapse of the Soviet Union, the free trade agreements, the triumphalist ideological momentum of the free market types, and all this accomplishment of the 1980s, like that old Simon and Garfunkel song, is just Slip Slidin' Away, and it's still sliding away. When does it stop? My question to you is, how do you carry on?

Just in respect of your comment about the differences between the United States and Canada on chapter 11, yesterday Sergio Marchi said before the whole committee that Canada and the United States see eye to eye, that there's no difference between the position of the Canadian government and the American government on chapter 11. I thought you'd be interested to know that it's only Mexico who stands in the way of changes being made to chapter 11. What it is that the Americans and Canada see eye to eye about would be very interesting to know. The minister certainly has a different view, and said so on the record, from what I even took to be the case, which was that there was some difference between the American position and the Canadian position. All this is by way of comment, which may invite other comment.

Ms. Elizabeth May: The only question was, how do I carry on? What has given, I think, and what should give all of us a lot of encouragement is that democratic civil society organizations and democratic forms of government still allow us to say “Enough”. I think the reason the World Trade Organization and the Uruguay Round have been so extremely effective—there are a couple of things within the system, and within the bureaucracy this may seem entirely simplistic. In the time I've worked in the environmental movement in Canada, which is really, unfortunately, a very long time, the people you worked with at Rio.... If you go back now to find the Rio negotiators from Environment Canada, they've all been moved to other portfolios, other departments. If you look around for the people who were there on behalf of CIDA, concerned with development issues, they've all moved to other things.

• 1640

The one place where you can always find a consistent cadre of career work—you're in it, you're lifers, and there's a consistency in the progression. They can do a seven-year negotiation at the Uruguay Round because it's the same people in it for life. And they've been very effective. They're not bad people. I think quite honestly a lot of them believe there's going to be a great—

Mr. Bill Blaikie: The bureaucratic equivalent of the politburo.

Ms. Elizabeth May: Yes. They believe in a great new world order, where it's going to be easier.... At the World Trade Organization meeting in Singapore, one of the negotiators got up and actually said if we remove the tariff barriers to telecommunications, someday every village in Africa would have a telephone and that would mean survival.

Mr. Bill Blaikie: They wouldn't be able to eat.

Ms. Elizabeth May: I wonder if they're going to call out for pizza or order bottled water. I mean, 30,000 children die every day because they don't have clean drinking water. Telephones in every village don't mean survival. I think they actually believe in what they're doing, but the problem is they don't understand the rest of the issues. They are not an appropriate place to divine and to decide all public policy issues.

So where I draw a great deal of hope and where I draw inspiration is from the public reaction to the MAI. I think that represented a putting on of the brakes for a lot of governments, and certainly for Canadians within the OECD who said no. I think increasingly we have to say we've now had this experience with trade deals; we were given all the razzle-dazzle PR, how great it was all going to be. We can see in some areas there may have been improvements; in other areas there are really serious problems, and we don't negotiate any more of these until we've fixed the problems. That's the main message.

The Chairman: Any comment, Mr. Blaikie?

Mr. Bill Blaikie: No, thank you.

The Chairman: Mr. Calder.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Madam Chair. I'm just going through the CFA brief here, and you have said in here that you feel the FTAA, if it's going to work underneath anything, should work within the confines of the WTO rules. I agree with that, because I cannot see us establishing a trade agreement for the Americas and the EU establishing trade agreements for Europe proper and whatnot. You're going to end up with a whole bunch of trade agreements and yet none of them really mesh together. So there is a real use for the WTO to achieve those universal rules of the global community.

One of the things I am concerned about, though, is the fact that when we negotiated this in 1993, the premise of the whole thing was that low prices would stop low prices. We know right now with the commodity war that is going on, the Europeans with the carry-forward clause...for instance, there's an EU subsidy attached to wheat of about $1.4 billion; there's about $444 million U.S.; in Canada, zero. I can run a number of examples.

We've basically played by the rules that were negotiated. I see the United States and the EU debated the rules as we went through this process. We're ahead of them right now on subsidy reduction.

The question is, when we go into these negotiations this time, what happens? Do we sit back and tread water while they catch up to us, or do they expect us to keep going farther than what they already have? I'd like your comments on that.

Ms. Sally Rutherford: I think at this point quite clearly we don't believe Canada should be prepared in advance to go in and give anything up. We certainly have to see the whites of their eyes in some respects before we make any agreements, let alone concessions. It's not just a strong feeling, but there is fact in that Canada has moved farther faster, for our own domestic reasons perhaps, to actually beat the commitments that everyone was supposed to have met.

The kinds of things that will continue to be most important to us are indeed the elimination of export subsidies and some market access issues. I think we need to have our shopping list and be prepared to seriously shop around in terms of what it is we're looking for before we're actually willing to make the purchase in the end. We can't go in and be prepared to lay on the table more concessions than we effectively have already made.

• 1645

Mr. Murray Calder: I know when we were down in the United States last month, the Standing Committee on Agriculture met with Congress and the Senate. We also had a chance to appear in front of the International Trade Commission. At that point, as a farmer I asked them what they wanted on the table, and of course they said everything. Where did they want tariffs and subsidies? They wanted zero. Then I gave them two examples: peanuts and sugar. We already have zero tariffs on those. I asked them whether or not they would be willing to take the tariffs on peanuts and sugar that they have in the United States down to zero, and we very quickly got into a “Yeah, but” situation.

It is going to be interesting for us as to how we address that problem, because the United States, from what I see right now, with the FAIR Act, Farm Aid, farm debt—they've pumped as much as $15.2 billion in 1998 into their farm economy. Quite frankly, we don't have the treasury to pump that much money in on a yearly basis. But therein lies the problem. Low prices will not stop low prices as long as there are subsidies and the subsidies still exist. That's it.

Ms. Elizabeth May: I have a wonderful quote from our former Canadian agriculture minister in the Trudeau government, currently in the Senate, Eugene Whelan, who said “These deals aren't about free trade; they're about the right of these guys, the U.S. multinationals, to do business the way they want, wherever they want.” So I throw in Senator Whelan's views from across the red divide.

The Chairman: Thank you.

On the MMT, I read your paper here, and yes, there may have been alleged expropriation, but that's not what the MMT case was decided on. It was based on an interprovincial trade decision that was actually brought by the Alberta government against the federal government to ban the MMT. The decision was not actually heard. My understanding is that it fell. When I read your paper here and you talk about a chapter 11 challenge, that NAFTA challenge...the decision to settle did not come out of that. It actually come out of the interprovincial decision; the banning of interprovincial trade of MMT was illegal.

Ms. Elizabeth May: If I may, Madam Chair, there was that interprovincial trade dispute, and there's no question that the banning of MMT was done in a convoluted fashion because of some internal problems in the workings of the Canadian Environmental Protection Act. But there's also no question that had it been on the basis of an interprovincial trade dispute, we would have had no reason to have given Ethyl Corporation $19 million, apologize to them publicly, which we should never have done, and said there was no evidence that their product was dangerous, which they will use in other countries to try to force the entry of that product there.

The chapter 11 challenge from Ethyl Corporation was made. It did allege loss of their profit, and they sought compensation for that, and they also sought compensation for damage to their reputation. On an interprovincial trade business, we should have replaced the bill with an effective ban. The settling and the fact that we put MMT back into gas...I think the evidence is very strong that it had more to do with chapter 11 than the interprovincial trade dispute.

The Chairman: Perhaps we can agree to disagree on that. I guess allegations can be made by anyone. Anyone can go down to the court and file a statement of claim for $125 and allege what they want.

But you did go to the fact that we went on about it in a convoluted way. Is there not a lesson to be learned in the way we should pass our environment...? Can't we see the positive side to this?

Ms. Elizabeth May: I'd feel very positive about it.... In the lead-up to the cave-in that happened last summer, once Ethyl Corporation.... They made a great amount of noise about the fact that they planned to file a chapter 11 suit. I should note again that one of the things we find offensive is that if the companies don't make noise about it, there's no requirement for public notice when the Canadian government is being sued by a U.S-based corporation. They could also be Mexican-based but they're generally U.S.-based. There's no requirement for public notice.

• 1650

In this case, Ethyl Corporation made a lot of noise about it, and Sergio Marchi, as environment minister, was confident that we had to remove this neurotoxin. In opposition years ago, Jean Chrétien spoke of it as an insidious neurotoxin that we should not be allowing in Canada. When the three-person arbitration panel was chosen and the meetings were being held, Marchi told us personally he favoured allowing the hearings to be opened up. They weren't really hearings; they were private, behind-closed-door panels. He was working to try to open them up, but the U.S. objected.

We were in frequent touch with Mr. Marchi's office to discuss the way this dispute was going to be handled and to seek ways that we might be able to intervene. When the decision was made to settle out of court with Ethyl Corporation to give them $19 million and to drop the chapter 11 suit in exchange, that violated everything about the actions of the House of Commons.

I meant to add there that when we were talking to Minister Marchi's office, we said what's the fail-safe? Suppose we lose that chapter 11 challenge. Is the government then prepared to come forward with a straightforward ban on MMT under CEPA, which we should have done in the first place? Nothing's been done to do that since. The will of the House and the Senate, and with royal assent, banned the neurotoxic gasoline additive in Canada. Even a cave-in was awful, and giving Ethyl Corporation $19 million.... If we put a fraction of that into medical research on what MMT does to the brain, that would be useful, but to give it to the manufacturer.... And we have not replaced that legislation. We allowed ourselves to abandon an important environmental regulation in the face of a trade challenge.

The Chairman: Thank you.

Mr. Penson.

Mr. Charlie Penson: That sort of opens up an area that I think needs to continued, because my understanding, Ms. May, is that under chapter 11 of NAFTA, the investment chapter, if any product can be shown to be harmful either to our health or to our environment, we do have the ability under that chapter to ban it. So if those actions had been taken for reasons that it was harmful to our environment...I think we need that protection. Therefore, it's a matter of being able to prove that it's harmful to our environment or harmful to our health. My understanding was that at the time they didn't have that kind of scientific background to be able to prove that, and therefore it wasn't done in a manner that would ban it, which would have been consistent with NAFTA, but they took this other approach, which didn't consequently stand up. Therefore, there was some bad advice in the way it was handled.

Ms. Elizabeth May: The MMT issue is a serious mess. There is no question that MMT is a neurotoxin. Manganese, in large enough doses, causes a disease called manganism, which looks a lot like Parkinson's. As a matter of fact, it's very hard to clinically differentiate. It's progressive. If you get manganism and then your exposure to manganese goes away, you continue to have brain disease. In lab animals there's been some good work that shows that trace levels of manganese cause a reaction in lab animals that would look like attention deficit disorder in humans. It causes increased aggression.

The other side of it was that Environment Canada had very solid evidence, which was also provided by the car manufacturers, that it was gumming up the diagnostic systems of the automobiles and causing increased air pollution.

Mr. Charlie Penson: What I'm after you to discuss is, isn't that allowed under chapter 11 of NAFTA? If that action was taken with a scientific background that it was a problem, wouldn't that—what I'm saying to you, I guess, is that it's not in violation of chapter 11 of NAFTA, the investment chapter, and therefore we need to distinguish between, in this particular case because we heard it hundreds of times as we were travelling around the country.... I don't believe it's accurate to quote what people are saying, that in the MMT case Canada did not have the ability...because of limitations of chapter 11. I don't believe that.

Ms. Elizabeth May: If it had gone to the end and we had a decision from the three-person body, it would be easier to resolve this. We do know that the language that was supposed to protect the environment in NAFTA doesn't and the language that was supposed to protect the right to protect the environment and public health within the GATT in article 20 doesn't. The language—

Mr. Charlie Penson: Could you help the committee by providing the sections you're concerned about so that we can examine them?

• 1655

Ms. Elizabeth May: But the history on these agreements is that although the language...article 20 of the GATT, which is supposed to say, well, of course, this is about trade regimes, we don't want to affect the right of sovereign governments to protect their public health or natural resources, and so on. But every time there's a trade dispute the notion that you can act to protect health has now been reduced by trade bodies to say it has to be absolutely necessary and everyone has to agree. So the lowest common denominator in terms of scientific opinion governs when the global trading regime will recognize that a country has acted legitimately on behalf of the environment—

Mr. Charlie Penson: Doesn't that point out that if we want that particular provision strengthened in either NAFTA or a future WTO round, we have to deal with that, but we have to be governed by what we sign at the moment? If it's not adequate, we need to move to correct that.

Ms. Elizabeth May: I agree with that, and chapter 11 and NAFTA aren't adequate and we should correct them.

Mr. Charlie Penson: Mr. Miner, you say in your paper that we need to proceed to make progress on reducing agricultural tariffs, particularly peak tariffs. I'm assuming you're talking about all the countries in the WTO. Can you give us any specifics that you're looking at?

Mr. William Miner: Essentially peak tariffs, where they are in place, are for those commodities where TRQs were established, and the tariff above the TRQ, the above-quota tariff, in some cases, for certain sensitive goods, in the minds of that country, are at quite extreme levels. We have some ourselves, as we know, in the case of dairy in particular. We have higher ones in some other countries, in rice in Japan, for example, which run up to several hundred percent.

I expect to see in the negotiation in the WTO an approach taken that will seek to have a harder cut or a deeper cut in relation to what I've called peak tariffs in my paper.

Mr. Charlie Penson: Thank you.

The Chairman: Thank you very much.

Mr. Yves Leduc: May I comment on this issue?

The Chairman: Please.

Mr. Yves Leduc: Thank you. With regard to those high tariffs, we don't believe it is the approach that should be taken as we are entering into the next round of WTO negotiations. It is true that Canada is maintaining high tariffs on certain commodities through tariff rate quotas. However, when we're looking at the access that has been offered through tariff rate quotas, we can observe that the access that has been offered by Canada, especially with regard to dairy products, is much larger than what has been offered by the U.S. or the EU.

So we believe the focus should be put on the access within quota and not on trying to eliminate those high tariffs, which in fact have been put in place in order to ensure that countries import a minimum amount of products into their country.

The Chairman: Thank you very much, Mr. Leduc, for that clarification.

On behalf of all of the members of the committee, I would like to thank all of our witnesses for coming, for their presentations, and for engaging in dialogue with us. Thank you very much.

The meeting is adjourned.