;

FAIT Committee Meeting

Notices of Meeting include information about the subject matter to be examined by the committee and date, time and place of the meeting, as well as a list of any witnesses scheduled to appear. The Evidence is the edited and revised transcript of what is said before a committee. The Minutes of Proceedings are the official record of the business conducted by the committee at a sitting.

For an advanced search, use Publication Search tool.

If you have any questions or comments regarding the accessibility of this publication, please contact us at accessible@parl.gc.ca.

Previous day publication Next day publication

37th PARLIAMENT, 1st SESSION

Standing Committee on Foreign Affairs and International Trade

EVIDENCE

CONTENTS

Tuesday, May 7, 2002

0900

The Acting Chair (Mr. John Harvard (Charleswood St. James--Assiniboia, Lib.))

0905

Mr. Gordon Gibson (Senior Fellow, Fraser Institute):

0910

0915

The Acting Chair (Mr. John Harvard)

Mr. Fred McMahon (Director, Centre for Globalization, Fraser Institute)

0920

0925

The Acting Chair (Mr. John Harvard)

Mr. Keith Martin (Esquimalt--Juan de Fuca, Canadian Alliance)

Mr. Gordon Gibson

0930

Mr. Fred McMahon

0935

Mr. Keith Martin

Mr. Fred McMahon

The Acting Chair (Mr. John Harvard)

0940

Mr. Yves Rocheleau (Trois-Rivières, BQ)

Mr. Fred McMahon

0945

Mr. Yves Rocheleau

Mr. Fred McMahon

Mr. Gordon Gibson

0950

The Acting Chair (Mr. John Harvard)

Mr. Gordon Gibson

The Acting Chair (Mr. John Harvard)

Mr. Gordon Gibson

The Acting Chair (Mr. John Harvard)

0955

Mr. Gordon Gibson

The Acting Chair (Mr. John Harvard)

Mr. Gordon Gibson

The Acting Chair (Mr. John Harvard)

Mr. Gordon Gibson

The Acting Chair (Mr. John Harvard)

Mr. Fred McMahon

Mr. Gordon Gibson

The Acting Chair (Mr. John Harvard)

1000

Mr. Fred McMahon

The Acting Chair (Mr. John Harvard)

Mr. Keith Martin

Mr. Gordon Gibson

Mr. Fred McMahon

The Acting Chair (Mr. John Harvard)

1005

Mr. Gordon Gibson

Mr. Fred McMahon

The Acting Chair (Mr. John Harvard)

1010

Mr. Rick Doman (President and Chief Executive Officer, Doman Industries)

Mr. Bob Flitton (Manager, Governmental Affairs, Doman Industries)

Mr. Rick Doman

1015

1020

1025

The Acting Chair (Mr. John Harvard)

Mr. Keith Martin

Mr. Rick Doman

1030

Mr. Keith Martin

Mr. Rick Doman

Mr. Bob Flitton

Mr. Keith Martin

The Acting Chair (Mr. John Harvard

Mr. Yves Rocheleau

1035

Mr. Rick Doman

The Acting Chair (Mr. John Harvard)

Mr. Yves Rocheleau

Mr. Rick Doman

Mr. Bob Flitton

The Acting Chair (Mr. John Harvard)

1040

Mr. Rick Doman

The Acting Chair (Mr. John Harvard)

Mr. Rick Doman

The Acting Chair (Mr. John Harvard)

Mr. Rick Doman

Mr. Bob Flitton

The Acting Chair (Mr. John Harvard)

Mr. Bob Flitton

The Acting Chair (Mr. John Harvard)

Mr. Bob Flitton

The Acting Chair (Mr. John Harvard)

Mr. Bob Flitton

The Acting Chair (Mr. John Harvard)

Mr. Bob Flitton

The Acting Chair (Mr. John Harvard)

Mr. Bob Flitton

1045

The Acting Chair (Mr. John Harvard)

Mr. Rick Doman

The Acting Chair (Mr. John Harvard)

Mr. Rick Doman

The Acting Chair (Mr. John Harvard)

Mr. Bob Flitton

The Acting Chair (Mr. John Harvard)

1050

Mr. Gordon Smith (Director, Centre for Global Studies, University of Victoria)

1055

1100

1105

1110

The Acting Chair (Mr. John Harvard)

Mr. Keith Martin

Mr. Gordon Smith

1115

Mr. Keith Martin

Mr. Gordon Smith

The Acting Chair (Mr. John Harvard)

Mr. Yves Rocheleau

Mr. Gordon Smith

1120

1125

Mr. Yves Rocheleau

Mr. Gordon Smith

Mr. Yves Rocheleau

Mr. Gordon Smith

Mr. Yves Rocheleau

Mr. Gordon Smith

The Acting Chair (Mr. John Harvard)

Mr. Gordon Smith

The Acting Chair (Mr. John Harvard)

1130

Mr. Gordon Smith

The Acting Chair (Mr. John Harvard)

Mr. Gordon Smith

1135

The Acting Chair (Mr. John Harvard)

Mr. Gordon Smith

The Acting Chair (Mr. John Harvard)

Mr. Yves Rocheleau

Mr. Gordon Smith

1140

The Acting Chair (Mr. John Harvard)

Mr. Gordon Smith

The Acting Chair (Mr. John Harvard)

1335

Ms. Joan Russow (Individual Presentation)

The Acting Chair (Mr. John Harvard)

Ms. Joan Russow

1340

1345

1350

The Acting Chair (Mr. John Harvard)

Dr. Joan Russow

1355

1400

The Acting Chair (Mr. John Harvard)

Ms. Joan Russow

1405

The Acting Chair (Mr. John Harvard)

Mr. Keith Martin

The Acting Chair (Mr. John Harvard)

Ms. Joan Russow

1410

Mr. Keith Martin

Ms. Joan Russow

The Acting Chair (Mr. John Harvard)

Ms. Joan Russow

The Acting Chair (Mr. John Harvard)

Ms. Joan Russow

Mr. Yves Rocheleau

1415

The Acting Chair (Mr. John Harvard)

Ms. Joan Russow

The Acting Chair (Mr. John Harvard)

1420

Ms. Joan Russow

The Acting Chair (Mr. John Harvard)

Ms. Joan Russow

The Acting Chair (Mr. John Harvard)

Professor Daniel Cohn (Department of Political Science, Simon Fraser University)

The Acting Chair (Mr. John Harvard)

Prof. Daniel Cohn

1425

The Acting Chair (Mr. John Harvard

Prof. Daniel Cohn

1430

1435

1440

The Acting Chair (Mr. John Harvard)

Prof. Daniel Cohn

The Acting Chair (Mr. John Harvard)

Prof. Daniel Cohn

1445

The Acting Chair (Mr. John Harvard)

Mr. Yves Rocheleau

Prof. Daniel Cohn

1450

The Acting Chair (Mr. John Harvard)

1455

Prof. Daniel Cohn

The Acting Chair (Mr. John Harvard)

Prof. Daniel Cohn

1500

The Acting Chair (Mr. John Harvard)

Mr. Keith Martin

Prof. Daniel Cohn

1505

Mr. Keith Martin

Prof. Daniel Cohn

Mr. Keith Martin

Prof. Daniel Cohn

Mr. John Harvard

1510

Prof. Daniel Cohn

The Acting Chair (Mr. John Harvard)

CANADA

Standing Committee on Foreign Affairs and International Trade

NUMBER 078

1st SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, May 7, 2002

[Recorded by Electronic Apparatus]

¿ (0900)

[English]

The Acting Chair (Mr. John Harvard (Charleswood St. James--Assiniboia, Lib.)): Members, I'd like to bring this meeting to order under Standing Order 108(2).

To begin this morning we have the distinct pleasure of welcoming two witnesses from Vancouver, both of whom are from the Fraser Institute: Fred McMahon, who is the director of the Centre for Globalization, and Gordon F. Gibson, a senior fellow with the institute.

I understand, gentlemen, that you will make your presentations back to back, and whatever time is left over within the hour allotted we'll use for questions. I understand you will start, Mr. Gibson.

Thank you again for coming. We anticipate listening to your remarks.

¿ (0905)

Mr. Gordon Gibson (Senior Fellow, Fraser Institute): Thank you for hearing us, Mr. Chairman, and good morning.

The work of your committee is very important. Canadians have rather mixed emotions about our interactions with the United States. We much value our commercial, cultural, and personal associations, yet we tend to worry about maintaining our identity in the famous elephant-mouse relationship. I was in fact working for Prime Minister Trudeau and was with him in Washington when he made that famous comparison, which I think remains very apt. Indeed, perhaps the poll figures on the front page of today's newspapers verify that once again.

A central issue in the maintenance of Canadian identity that bothers so many is thought to be the need for maintaining sovereignty, so that will be the focus of this brief analysis, this idea of sovereignty, particularly with reference to proposals for a common security perimeter and economic integration. I must say, in developing this I was able to profit much from the work of the Library of Parliament that had been submitted to this committee, which I appreciate getting an advance copy of.

If I may first define “sovereignty”--for the word is too casually used, in my opinion--simply put, sovereignty is a measure of the extent to which an entity is in charge of its own affairs. But I want to distinguish two kinds of sovereignty. One is national sovereignty, which is what most people think of most of the time. But it can be a very different thing, sometimes even opposed to the idea of individual sovereignty. Is “opposed” too strong a word--two sovereignties opposing each other?

Well, national sovereignty is an old idea, stemming from the times when countries were literally owned by monarchs. The Canadian Constitution is derived directly from this view, as are some of our more primitive political practices.

Individual sovereignty is a much more modern concept, its institutional form dating about 235 years in the United States, and of course imported into our country formally twenty years ago under the Charter of Rights and Freedoms.

National sovereignty, to capsulize, sees the people as subjects; individual sovereignty sees the state as a servant.

Some policies--the charter is obviously one example, and NAFTA is another at the international level--may simultaneously reduce national sovereignty while increasing individual sovereignty. Clearly, for example, under NAFTA, once the state no longer has the ability to impose tariffs and quotas, its power declines, yet the purchasing freedom of individuals is increased.

Therefore, my first argument to you as you go about your deliberations is that in any given context, when people worry about sovereignty, you must decide which sovereignty you are trying to protect.

I would argue that individual sovereignty is the more fundamental, whereas that of the state is not fundamental, merely instrumental in the service of the individual. However, it is almost second nature among legislators and public servants, as agents of the state, to be more solicitous of national sovereignty, since it is the source of their own power.

I might say in passing that the treatment of grey-market satellite dishes, which is much in the newspaper today, gives an excellent case example of the difference between national and individual sovereignty. When the Supreme Court of Canada comes down on the inevitable charter challenge, we shall see which prevails. My own suspicion is that the individual sovereignty of the charter will prevail, but of course that's up to the court.

With that perspective on the two kinds of sovereignty, I turn to the common perimeter discussion. Borders mark off areas of national sovereignty and govern flows of information, capital, goods and services, and people. Examining the impact of each, if the Canada-U.S. border were to be buttressed by a new common perimeter--I say buttressed rather than replaced, for reasons I shall come to--I think there is no current prospect whatsoever for border elimination.

As to information and ideas, or those things that flow across the border, the border is almost completely porous. The few barriers that exist are rapidly being dissolved by technology, whether we're talking about Shakespeare or hate speech, or Rembrandt or pornography. The only important exceptions are the hardware-based distribution networks of some of the cultural industries. By that I obviously mean book publishing, cable television, newspapers, and so on. A common perimeter then would change absolutely nothing in terms of the flow of information and ideas.

Financial flows are also essentially free, except with respect to investment in certain cultural, financial, or defence industries. Again, a common perimeter would change nothing at all.

Goods and services are more interesting. Legal goods and services move with considerable freedom, but there's still much to be done. I will address this under the heading of integration.

The illegal goods and services present the greatest challenge to the concept of a common perimeter. They guarantee that the border will not disappear within any reasonable time horizon. The Americans are intensely paranoid about drugs, and Canada is a major producer of drugs, particularly marijuana. We have a competitive production advantage in our legal and judicial system, particularly in British Columbia, where the plant has become, by far, our largest agricultural commodity. The U.S. authorities are prohibited by their own constitution from setting up internal checkpoints for drugs, but they will surely not give up the existing border checkpoint. So that border will stay there.

There is no way a common perimeter can have an impact upon the drug issue, unless Canada were prepared to adopt identical drug laws and enforcement protocols. This will not happen. Canadians will not stand for it. The border will remain. And Canadian sovereignty will not be impacted by this issue either. Incidentally, in the copy of Fraser Forum that Fred has given to you, I speak as well about the border control of what I call “terrorist materials”, which are also an important illegal issue.

The final issue of flow control is with respect to people. The Americans wish to upgrade their security--post-September 11--in terms of terrorists. They are very firm on this. The issue for us in Canada is simply to decide whether we exercise our own sovereignty over who is in Canada at any given time, to give the necessary reassurance to the Americans to permit Canadian residents to cross the border with traditional ease. Canada, of course, is not a country that is well suited to producing terrorists. We have to import them. These people may arrive legally as visitors, illegally as clandestine migrants, or somewhere in the middle, as undocumented or unauthorized refugees.

The issue for the Americans in determining the openness of their border for ordinary Canadians--in other words, our traditional ease to pass that border, as I call it--will turn on whether our own Canadian borders are as secure as theirs against clandestine migrants, and whether known newcomers, including documented and undocumented refugees, are sufficiently vetted. We will make the Americans feel comfortable on this issue or not. It's our choice. There is no issue of sovereignty here either.

In sum, the whole juxtaposition of a common perimeter and the threat to sovereignty, in my view, is phoney. There will not be a common perimeter for some things such as drugs. For the rest, the Americans have their interest, and we have ours. We will accommodate them or not. It's our choice.

The prospect of economic integration is equally straightforward, because it has mostly happened already. However, while we have suffered most of the costs of integration, we've not yet reaped all of the benefits. To do so, we are lacking common policies to eliminate, for example, country-of-origin rules--which would happen if we had a closer customs union than we have under NAFTA--an end to dumping and countervailing action, some harmonization of competition policy, enhancing labour mobility, and a common currency.

¿ (0910)

Of these, the latter is the most controversial, and I refer committee members to the work of my Fraser Institute colleague, Herb Grubel. Incidentally, as we speak, Herb is at an international conference in Kuwait hosted by Robert Mundell on this very theme, having to do with a common currency for some of the gulf nations.

In truth, the only issue here is whether we choose to manage the currency question or whether it manages us over the next decade by the way of so-called dollarization. For the rest--and by “the rest” I mean labour mobility, countervail action, and so on--the greater problem will be to overcome American objections about their loss of sovereignty. Americans, for example, have stoutly resisted attempts by Canada for the past ten years to define what subsidy means, because that would threaten their countervail sovereignty.

And that, I say, is all that is involved here in economic integration. With all respect to the authors of the Library of Parliament background paper produced for this committee, I say that harmonization of social or cultural policies would not in any way be required. They explicitly say that social policies would need to be harmonized. I don't believe that, let alone would political institutions need to be harmonized. Harmonization of tax and spending policy is already underway, and that trend would not be affected.

This returns us to the basic question, namely that of Canadian identity in these integrated circumstances and the issue of control of our own business within our borders. The various policies that are said to guarantee Canadian identity--and I do not think, incidentally, are the real guarantors--would not be affected by economic integration, not the CBC, not medicare, although of course the two medical systems are slowly converging in any event, not the hallowed practice of bribing various regions by way of spending in exchange for votes, not the Official Languages Act, not that famous red herring of the export of water, not the woeful absence of property rights in our constitution, not the prohibition of the death penalty, and not gun control. Remember, that border will still be there whatever happens. The Americans hate drugs, we hate guns, and that's the way it will be.

Our real Canadian culture, in my opinion, which is our political culture, would be quite unaffected except insofar as the hearts and minds of Canadians change over the years. In the end, I think that's what the politics come down to. There is concern on the part of some that an enhancement of our common perimeter--and I call it an enhancement of a common perimeter because much of that perimeter is already in place by way of NAFTA, NORAD, and so on--will facilitate Canadians voluntarily becoming more like Americans. The hidden agenda is that we should be denied that choice.

There are two problems with this. The first is the implied inferiority complex. Might not Americans become more like us instead? Consider the Clinton health initiatives or the recent decentralization of the American federation, which has been quite remarkable, both immensely important moves in the direction of Canadian practice.

The second problem goes to the very fundamental issue that in the end, sovereignty lies in the individual. In my opinion, nation-states are mere public utilities for the collective exercise of individual sovereignty. If our individual choices bring us closer to the Americans or them to us, who is to say that's wrong? In the end, the sources of worries over the impact of a more open border come down to an inferiority complex on the one hand or an elevation of the intrinsic value of the state over that of the individual on the other. Again, in my opinion, neither idea has merit.

Mr. Chairman, that concludes my presentation. Thank you for the opportunity.

¿ (0915)

The Acting Chair (Mr. John Harvard): Thank you very much, Mr. Gibson. We appreciate that very much.

We are going to turn now to Fred McMahon.

Mr. Fred McMahon (Director, Centre for Globalization, Fraser Institute): Mr. Chairman, my views and the substance of my remarks are in the Fraser Forum issue and the article with Herb Grubel, as well as in the other article on perimeter issues. I try not to use written remarks for such events. They make me even more boring than I naturally am.

It has never been more important in the last half century for Canada to engage the United States, and we probably have never in the last half century been less able to engage the United States than now.

September 11 was one threat to world peace and security. A far greater threat to world peace and security is now evolving in the elegant halls of the U.S. Congress. There has been a spate--as we are all well aware--of protectionist legislation. There's not just the softwood lumber issue--where many would argue the United States actually has a point--but the steel duties, and even more ominously, the agricultural bill, which massively increases subsidies.

We have to remember that this is the second error of globalization. The first lasted roughly from the end of the Napoleonic Wars to the opening decades of the 20th century. After the end of the Napoleonic Wars, leaders intentionally opened borders and pulled down barriers, in an attempt to develop connections between nations that would prevent some of the horrors of the Napoleonic Wars.

One remarkable thing is that the same forces that undermined the first era of globalization are now at work again. Nationalists and ideological groups, like today's Council of Canadians, undermined public support, and various nations threw up tariff barriers. A full-scale trade war broke out, culminating in the Smoot-Hawley bill that passed Congress in 1930. I fear we may be seeing the same sort of thing unfolding in today's Congress, which makes it more important than ever for us to engage the United States.

Why it's happening now is difficult to say. Perhaps the Americans are just getting fed up with nations that quietly expect the United States to protect them, and then loudly complain every time they do so. A few columns in the newspapers have said that George Bush is personally angry at Canada.

Certainly anybody who views the CBC and hears what some of our self-proclaimed nationalist viewers are saying, or reads some of the columns, would be astounded, quite frankly, by the hate language being directed at the United States. If this language you hear so often on CBC were directed at any visible ethnic group, we would label it as hate language and probably have the people in court on some criminal charge.

We very strongly need to engage the United States on trade, internal security issues, and external security issues. Canada's waffling in the lead-up to joining the American forces in Afghanistan was disturbing and confusing, although our troops there now seem to be doing a superb job. The Prime Minister's off-and-on statements about various immigration and refugee reforms have also clouded the air. We need to aggressively move ahead on trade.

I think Wendy Dobson is not incorrect when she calls for us to launch forward with some big idea to engage the Americans. I think we need to look at a common market, so goods can flow easily across the border. That is related to the security issue. We should build a common perimeter around that common market, so any goods security-cleared for Canada can move into the United States, and vice-versa.

There is no reason why such a common perimeter would have to stay on this side of the Atlantic or the Pacific. Through supply-chain control you could, in effect, move the North American border over to ports in Europe or Asia. These are all things we should be looking at.

On immigration and refugee policy, I would strongly urge you to read Martin Collacott's piece in the Fraser Forum issue you have. Unfortunately, Martin is on vacation with his wife and couldn't be here today. He writes very strongly and convincingly, as I suspect many of you know, about how Canada's immigration policy, in particular, has been used for political gain. I would challenge anyone on this committee to deny that. I think anyone in Parliament should be ashamed that is going on.

¿ (0920)

I think there are two models we can follow for immigration, and I announce myself agnostic on which would be better. One, which Martin recommends, is our old-style immigration policy where we put the future health and wealth of Canada first and select immigrants for economic reasons. Another model would be the more libertarian model where we basically throw open our borders, but do not extend welfare and other benefits to new immigrants. So anyone can come to Canada, but when they come here they have to make their contribution to Canadian society. This is of course very roughly the way immigration was handled in the earlier part of this century, when globalization itself was thicker in this regard--people were mobile as well as goods and services.

Now, I realize that second model is easier said than done, and that a number of issues would have to be addressed to do it, including, most importantly, security issues in letting in immigrants, a concern that largely did not exist in the 1930s. But either model would be a vast improvement on the sort of politicized immigration system we have now.

To very quickly wrap up, we've had more than six months--we've had about three-quarters of a year--since September 11. The United States, for whatever reason, is showing more protectionist sentiment, at least in Congress--I don't think in the public--than has existed since the passage of the Smoot-Hawley bill. Canada must use this time to start engaging the United States to safeguard our trade. We must lift our full share of the military burden, and we must join the United States in addressing very serious external and internal security concerns.

Thank you.

¿ (0925)

The Acting Chair (Mr. John Harvard): Thank you, Fred. I appreciate that very much.

Members, we have close to 40 minutes to go with questions. We'll start with Dr. Martin.

Mr. Keith Martin (Esquimalt--Juan de Fuca, Canadian Alliance): Thank you very much Mr. Chairman.

Mr. Gibson and Mr. McMahon, thank you both for coming here today.

As you both know, one of the difficulties we have in dealing with the United States, particularly down in Washington, is in really getting on the radar screen. We had one of the chief negotiators in the administration on the softwood lumber ask in the middle of our hearings, oh, do you have a majority government up there? This was very disturbing, to say the least.

Perhaps you could tell us how we could reverse this unilateralism and convince the Americans that with the stressors that all of us are going to face in the future, particularly in their own country, a multilateral effort is going to be to their benefit. In other words, how do we actually hook them into articulating what we want through their own self- interest?

Going to my second question, we're going to hear a great deal about anti-globalization from the anti-globalization foes, and one question they ask--and I suppose it's the bottom line--is what are we getting out of what we have already seen?

Do you think we need to improve the dispute resolution mechanisms we currently have in trade? Do you believe our failure to fully reap the benefits that Mr. Gibson suggested in his paper, our failure to actually achieve the benefits of the economic integration we've had so far through NAFTA, is due to political failure to deal with issues such as taxes and rules and regulations within our own borders?

Lastly, Professor Baxter from Vancouver gave us a very eloquent presentation, saying that because of the demographic changes within our country, and by extension our province, in the future, with the baby boomers growing up, there will be a massive contraction in the economic engine within the country. He suggested that our province alone will require 100,000 new people per year for the next 20 years. How would you propose we deal with that major challenge to the economic engine in this province and country?

Thank you.

Mr. Gordon Gibson: Perhaps I'll start.

Thank you, Dr. Martin. I'll try to make some observations in return. Your first question, as I understood it, is essentially how do we get on the radar screen down in Washington.

One of the difficulties, as one of our softwood lumber negotiators has put it to me, is that Washington tends to be a producer's town rather than a consumer's town. If it were a consumer's town, the obvious interest of the American consumer in softwood lumber would have solved that problem for us. But it's not; it's a producer's town.

The bottom line of all this, it seems to me, is a considerable enhancement of our diplomatic activities in Washington. When I look back to the time of the Gotlieb years, when Allan Gotlieb was ambassador for Canada to Washington, we were a very high-visibility country. Part of it was the personalities of the Gotliebs themselves. They maintained a marvelous salon. It was the place to be in Washington. Everybody can't do that.

It seems to me that we can devote a lot more resources to the kind of lobbying we do. Washington is very much a lobbyist town. There are some 20,000 registered lobbyists. We should just double and redouble our lobbying activities to make certain Canada is known, because we have a good product to sell.

Our common interests with the Americans are absolutely massive. Our genuine differences are very slight. What we have to do is make sure there's an understanding of those common interests. I'm normally one who wants the government to spend less money, but that to me is a clear case for the expenditure of considerably more money.

The second question was how we get better value out of our existing linkages with the United States through NAFTA and so on. It is an unfortunate fact--and figures from the Department of Industry verify this--that our relative standard of living compared to the United States has been falling for quite a long time, 20 years or more. How do we change this? I don't want to get too far out of my expertise, but I spoke with my colleague Herb Grubel about work he has done on currency. He makes a case, certainly to my satisfaction, that the continuing escape valve of the falling Canadian dollar has made it possible for the Canadian economy to resist adaptation to more modern times. It is always easier when a business can go on doing the same thing.

The way Canada has been behaving is sort of like a union hall, if you can imagine that, in which the president calls the members together and says, “I'll tell you what, fellows. We're going to keep our jobs by cutting our wages one percent every year for the next ten years. Isn't that a great idea?” That's really what Canada has been doing. I'm not saying any union president does this, but I'm making a national analogy. If instead the union president called them in together and said, “We have to work harder and smarter so we can keep our jobs and make more money to take home”, that's what we should be doing as Canadians, and I don't think we have.

Fred will speak more eloquently than I, perhaps, on many of the rather destructive so-called economic development policies and so on.

The final point was with respect to demographic change and the requirement for massive amounts of immigration. I used to buy that one. I'm not so sure I do any more. I wish our colleague Martin Collacott were here. I can assure you he has studied this very closely, and is of a rather contrary opinion. Much of it depends on how much of the immigration is targeted to Canadian productivity. Of course, much of our immigration is not. It comes in for other social reasons. If we make a shift in that mix, then we make a change without changing the numbers at all.

There are also other strategies, which other countries are clearly going to have to adopt, such as retirement age gradually going up and productivity going up. Other countries, such as Sweden, are underway with this prospect. Japan is clearly going to have to do it. Most of these older countries have a far greater problem in this respect than we have, and so far they are accommodating reasonably well without making marked changes in their patterns of immigration. Canada, of course, already has just about the highest proportionate level of immigration in the world.

Those would be my comments to your questions. Thank you.

¿ (0930)

Mr. Fred McMahon: You asked at one point about a dispute settlement mechanism. Clearly all the dispute settlement mechanisms, whether in NAFTA or the WTO, are ineffective now because of the time and cost involved in using them. They are there at the end of the day, but the time and the cost--and the even greater cost while the trade dispute is going on--make them far less effective than they should be.

Getting a dispute settlement mechanism that is truly effective is one of the areas where we should be approaching the United States with a big idea. We might be able to do this if we presented something that will grab their attention. You were talking earlier about how difficult it is to get their attention. We could present the common market, common perimeter idea as a large concept, rather than what we're doing now, which is nibbling at the edges here and there, on this security matter or that.

As for the benefits from trade, both the economic theory and the empirical evidence are unambiguous about this. We have to remember that the nineties was the decade of retrenchment in Canada. By the time Paul Martin had started to get the deficit under control, there was already a considerable amount of research. I point you to Alesina.... By the way, I'm worse than anybody at this table at names, so I will mispronounce any name that comes up.

Mr. Keith Martin: I've already mispronounced yours, so I'm way ahead of the game on you.

Mr. Fred McMahon: Well, Alesina and Perotti in a European economic journal were among the first to show that nations that reduced their deficits by cutting expenditures tended to grow through the period, while nations that got their deficits under control by raising taxes had stagnant growth.

In Canada, we've been suffering through bad economic policies of our own making. The kind of weak growth and high unemployment we've seen are entirely consistent with the domestic policies we have created.

Also, when considering the benefits from trade you have to look at the alternatives. Imagine that we did not have NAFTA, or an agreement with the United States. The types of disputes we have now would be small fish compared to what would be going on without a NAFTA agreement. Clearly, the Canadian market is not large enough to support the type of sophisticated, large-scale economic activity that is common in the world today. However, there is a lot of evidence that free trade, even within the confines of our bad domestic policy, has improved the welfare of Canadians when you look at trade patterns in already liberated sectors. The National Bureau of Economic Research in the United States recently released a paper showing that NAFTA has been a strong spur to Canadian productivity growth. And considering how weak Canadian productivity growth has been, this spur accounts for much of it.

¿ (0935)

Mr. Keith Martin: Some would blame a lack of productivity.

As you speak, Stephen Clarkson is in Toronto addressing a committee that would suggest--and I would disagree with him--that free trade has not improved productivity because productivity hasn't improved, as opposed to saying if we didn't have free trade, what would our productivity be? I'm just putting this in the context--

Mr. Fred McMahon: I would suggest that this committee check out real empirical research, rather than a column in the NBR. I can give you a reference later in the day to good research on this, but I'll have to look it up.

Also, what he is saying simply flies in the face of literally a world's worth of theoretical and empirical research, not just the research on Canada and the United States. He has to explain why Canada is the outlier, why it is the exception to everything known about and found in economic research. Quite frankly, it's an absurd position.

Finally, just on the demographics thing, once again we very much miss Martin Collacott. He makes an example of Sweden, which had the demographic situation we are now in about ten years ago, and has handled it differently. I suggest the committee could look at that.

The Acting Chair (Mr. John Harvard): I think we're going to have to issue a subpoena for this Mr. Collacott. Shame on him for taking a holiday.

If you feel it is important, you can always ask Martin to submit a paper to us. We would certainly be happy to look at it.

Mr. Fred McMahon: There was an article by Martin in that issue of Fraser Forum.

The Acting Chair (Mr. John Harvard): Mr. Rocheleau.

¿ (0940)

[Translation]

Mr. Yves Rocheleau (Trois-Rivières, BQ): Thank you, Mr. Chairman.

Thank you, gentlemen, for your presentation. I would like us all to discuss globalization, its meaning and the direction it is taking.

I agree, because we have no choice anyway, but to be in favour of globalization when it comes to trade. But when globalization as we know it means a decreasing role for governments throughout the world; when globalization means questioning social programs as we have seen in Canada, for example, with the treatment inflicted on the employment insurance plan, as a result of which, in a riding like mine, in Trois-Rivières, in 1990, 85% of people who lost their job were entitled to employment insurance and where that 85% has become 40%, thereby giving Mr. Martin access to $43 billion with which to eliminate the deficit and lower the debt at the expense of low-income earners, in my opinion; when globalization means diminishing the role of the UN in the world and reducing its power and influence; when globalization means might is right, quite simply, regardless of justice and in favour of the specific interests of one single country, that causes concern.

We know that globalization favours, at the end of the day, a very small number of countries, countries that are already rich and belong to the jet set. Is that not the globalization we are experiencing today? Are we heading in the right direction when globalization means acting in keeping with private interests at the expense of the public interest, the common good? When the concept of “citizen” becomes one of “consumer” and the world becomes nothing more than a market, is that what the Fraser Institute endorses and what you endorse as individuals? I would like to hear what you have to say to that. Personally, I think this is heading nowhere. We are in fact heading toward chaos.

Why then should we be surprised, unless we are to be totally hypocritical, by the terrorism occurring in this sorry world? It is a desperate reaction. When the EI surplus in Canada is used to lower the taxes of the rich, as Paul Martin did, because those taxes have gone down in Canada, contrary to what you say, is that what we should support? I would like to hear what you have to say about that.

[English]

Mr. Fred McMahon: It's quite remarkable, the number of myths attached to globalization.

Yes, taxes have gone down slightly in Canada. We're at about 40% of GDP, much higher than we were in the fifties, sixties, or seventies. In fact, government spending worldwide has never been higher.

A recent United Nations study, one that is consistent with other empirical studies, shows that when nations open their borders to trade and start making market reforms--and this is tremendously important, because we hear so much about dishonesty--government spending increases. It's not government consumption; government social programs increase when countries open their borders to trade. Again, if you're really interested in this, I can get you a reference.

As for inequality, first off, in the first era of globalization developing country inequality decreased. That's what you would expect as the capital-labour ratio moves in favour of labour in developing countries. The evidence these days is muddy, but there is no evidence at all that nations that open their borders to trade and adopt market reforms see an increase in inequality.

The evidence points--but not conclusively--in the other direction. One study of developing nations that opened their borders to trade found that roughly half of them experienced a decrease in inequality, roughly half experienced an increase in inequality, but in all nations the poor got less poor. In some cases they got less poor more slowly than the rich got richer, and in other cases they got less poor faster than the rich got richer.

Another recent study that looked at the whole body of this with very sophisticated econometric testing found indications that inequality was decreasing, but the authors, to be safe, said that wasn't statistically significant. Statistically significant, however, was that inequality wasn't increasing.

Let me talk about another myth that is used to batter away at open markets and market reform. We often hear that x number of years ago the rich nations were maybe eight times richer than the poor nations. Now we hear that the rich nations are 45 times richer, I think the common figure is, on a per capita basis than the poor nations.

Why is that? The nations that have failed to keep up are those that follow the anti-globalist recipe, those that have kept their borders closed and have refused to undertake market reforms, such as Laos, Cuba, and North Korea.

For nations that have undertaken market reforms, and this is unambiguous in the literature--and I wish people would read some of this stuff--incomes are rising, including incomes of the poor. The greatest poverty reduction program in the history of humankind by any measure has occurred in China since it adopted market reforms. The other nation moving very aggressively in that direction is, surprisingly, Vietnam.

In other words, all this is myth. Government spending, particularly social spending, increases when nations join the global network. Inequality does not increase. If anything, it decreases. Unambiguously, in those nations that adopt market reforms and open their borders, the income levels of all income groups rise.

¿ (0945)

[Translation]

Mr. Yves Rocheleau: I do not know want to get into a debate, but from memory, that is not what the UNDP report published by the UN said. In fact, if I recall correctly, all of the reports say that the rich are getting richer and the poor are getting poorer throughout the world. In my opinion, it is plain to see.

Let me give you the example of cocoa producers in Ivory Coast, who were poor to begin with, and are now in a situation where, because of all kinds of international manipulation, they have higher production costs than the price they get for their product. Currently in the world, there appear to be multiple examples of this kind, where invisible forces are manipulating economies, with no accountability whatsoever, and where governments are increasingly insignificant, powerless and sidelined, but nonetheless accountable to a discontented public in our democracies. At least, that is how I see things.

[English]

Mr. Fred McMahon: The UNDP supports trade. Granted, they sometimes say wonky things, but some of the research I was referring to is from the UNDP.

Yes, there are problems around the world, and I think it's important to tackle one thing. This is one of the reasons I said that what's happening in Washington is the greatest threat to world peace and security now. Agricultural barriers are a huge problem for third world nations. They impoverish those nations. Barriers are through tariffs, unofficial barriers, and subsidies. The UNDP claims that lowering the agricultural barriers in the rich world would produce more economic benefit for the third world than a doubling of foreign aid. The world is not perfect. The greatest area of imperfection is what we do in the agricultural area that victimizes the third world.

But, once again, in those nations that have opened their borders and adopted market reforms, the evidence, including from the United Nations, is that all income levels rise.

Mr. Gordon Gibson: I'll just add something to that, if I may, Mr. Chairman.

There's not a great deal that any of us in this room can do about the Ivory Coast, though I agree with Fred that the developed nations must remove their destructive protectionist agricultural policies, which would help places like the Ivory Coast and other developing nations.

But a more immediate question for us--and this is a cruel dilemma for those who are concerned about equality--is to consider the contrast between our richest province, Ontario, and the poorest state in the United States, which is Mississippi. Mississippi, their poorest state, now has a higher average income per capita than does our richest province. This is an example.

The Americans are a less equal society than we are. We are more equal. How much of a trade-off are we prepared to accept there?

The Americans spend, in the public sector, 6.5% of their gross domestic product on government-paid-for health care, which is about what we spend in Canada on government-paid-for health care. The difference is that they have a much larger GDP per capita.

So when you see what the engines of growth can do, when you consider that if there's a single clear economic lesson of the 20th century, it is that governments do not create wealth; the private sector creates wealth. Governments are there to be a regulator, to set a constant platform, and so on, but the making of economic decisions by governments is just such a proven failure around the world and through the 20th century that, to me, it's hardly debatable any further.

¿ (0950)

The Acting Chair (Mr. John Harvard): I'd like to ask a couple of questions, gentlemen.

Mr. Gibson, at the close of your text you say:

“So if our individual choices bring us closer to the Americans, or they to us, who is to say that is wrong? In the end, the sources of worry over the impact of a more open border come down to an inferiority complex or an elevation of the intrinsic value of the state over that of the individual. Neither idea has merit.”

My question in reference to that would be do borders not matter to you? Is Canada not worth fighting for, in one way or the other?

Mr. Gordon Gibson: I think that's putting the question in a way I would not put it. We are all citizens of or associated with various jurisdictions of various sizes--I with my family, with my local community, with my city, the regional district, the province of British Columbia, Canada, and then onward to NAFTA and the United Nations, and so on. Each of these jurisdictions has a service they can bring to the individual citizen, and I think the individual citizen should recognize and respect them for that, and respect them no further than that. I do not believe governmental organizations are anything more than public utilities. I don't think they have any freestanding value whatsoever.

That said, I think Canada is a useful public utility. I think it does rather more than it ought to do. It does less in some areas. For example, it's absolutely ridiculous that the Government of Canada has not used the authority implicit within section 121 and ended the interprovincial restrictions of trade we have in this country. So some governments should do more things, but by and large I think the federal government should do less, provincial governments should do less, and the private sector should do more.

None of that invalidates Canada, which is a useful thing. And if you're going to have Canada, you have to have borders--just as if you're going to have the city of Vancouver, you have to have borders. So I suspect that borders, territorial demarcation, are something that will always be with us.

I hope that answers your question.

The Acting Chair (Mr. John Harvard): I think it does, but I guess I could ask you a subsidiary question to that.

If through market forces, social forces, whatever kinds of forces, we had less of a border or no border and we were really just absorbed by the United States in all shape and form, would that matter to you?

You quoted Trudeau about the mouse and the elephant. He also said that Canada was a noble experiment. Would you not shed a tear if Canada more or less disappeared?

Mr. Gordon Gibson: I think it's really the choice of Canadians, and if that's the way the Canadians want to go, then that's fine; that's what will happen. I don't think that's the way Canadians--

The Acting Chair (Mr. John Harvard): You're not willing to speak fighting words on behalf of Canada. You're not going to stand up and say “This is a part of Canada I love; I'm going to stand up and fight for it.”

¿ (0955)

Mr. Gordon Gibson: You're putting words in my mouth.

The Acting Chair (Mr. John Harvard): I know, but you haven't said that, so maybe I'm looking for you to say that.

Mr. Gordon Gibson: What I'm saying is that I think Canada has useful attributes, just as I think British Columbia has useful attributes. One should always speak of and be in favour of useful attributes. As long as we're quoting Mr. Trudeau here, we'll come back to this: I also believe that strong nationalism is one of the most destructive forces in this world.

The Acting Chair (Mr. John Harvard): He didn't like nationalism either.

Mr. Gordon Gibson: No, he didn't. He didn't like it at all, and that's why I'm quoting him. We seem to be having a bit of fun sending him back and forth across the table here.

The Acting Chair (Mr. John Harvard): Long live Trudeau.

Let me ask another question. It can go through either of you, though I think it was you, Fred, who mentioned Wendy Dobson's name. In that article on behalf of the C.D. Howe Institute she mentioned the big-idea approach in order to, among other things, catch the American attention.

We had Reg Whittaker here yesterday, a professor from York University, and he disagrees with Dobson. He thinks that an incremental approach, something piecemeal-like, would be less risky than some big idea, whatever the big idea is--customs union, common market, common currency, or whatever.

I would frame my question something like this, though I don't know whether this is analogous or not. You hear the story about two lovers: they break up, there's a lot of emotion, and people advise one or the other not to do anything rash on the rebound. The word is “rebound”--that's the operative word.

Maybe Canada is on the rebound or the United States is on the rebound in the wake of 9/11. Even though September 11 is now several months past, is this a good time, if we're on the rebound, to be making or bringing forward big ideas, as suggested by Wendy Dobson?

Mr. Fred McMahon: We may have missed, actually, the best time to do that, right in the wake of 9/11. Suppose we had gone to the United States and said we share their security concerns and let's move forward aggressively with a common market and a common perimeter. At that point we would have caught their attention and their sympathy. The focus is now more diffuse.

As for the question of strategy, I suspect that the way we have to capture the United States' attention is through a big idea. We don't seem to be going very far incrementally. I also think, as I said, that this is a question of strategy that needs to be decided by people who actually have a better feel for what's going on in Congress, perhaps our representatives there. I would note that we got NAFTA and the free trade agreement by pushing forward with big ideas and that prior to both of those agreements Canada and Canadian trade with the U.S. were under threat from a thousand small cuts.

Mr. Gordon Gibson: This big-idea question is an extremely important debate. I personally am not sure which side to come down on; I'm thinking about it.

But let me come back to the currency union idea. Our colleague Herb Grubel, who I've just mentioned, has a big idea. He says we should have something called the “amero”, which would be like the euro but a North American currency. There would be a new reserve board. The Americans would have most of the members, Canada would have a member, Mexico would have a member, and we would have a new arrangement.

The alternative is not to do that. It is to say, well, we will just see what happens. We have seen what happens around the world, and it's gradually creeping dollarization. At the end of the day, in ten or twenty years, we will be using the American dollar, but we will not have the benefits the big idea could have provided, the continued seigniorage, some influence at least over the governing body, and the dignity of having some control over our own future.

There are times you must seize the moment or the moment slips away, and natural economic forces, which are immensely strong, prevail in the end.

The Acting Chair (Mr. John Harvard): The smart borders program, that 30-point plan, was that seizing the moment? I don't know whether you'd call that a big idea, though.

À (1000)

Mr. Fred McMahon: I think that was a good idea. I think it was appropriate to move forward with it. I'd like to have seen it in a larger context. The larger context isn't necessarily the grand idea itself. I would have liked to see it in a larger context of trade-related issues, but yes, it's good progress.

The Acting Chair (Mr. John Harvard): Dr. Martin has one question and I have one more, and that will be it.

Mr. Keith Martin: This is a quick one. I spoke to Herb also, Mr. Gibson, about the amero. I question whether we actually need to do that, as opposed to going and doing what Mr. McMahon suggested in terms of dealing with the other structural problems we have in our economy. Isn't the reason for adopting it to pursue dollarization for countries that don't have the fiscal and monetary discipline themselves to be able to be competitive? If we adopted the dollar, would we not be giving up monetary and fiscal policy controls to the Federal Reserve Bank?

Mr. Gordon Gibson: I don't believe so, because if you look at the monetary and fiscal policy of Canada, it is really not very distinguishable from that of the United States. We tend to follow the United States because we have to, because 86% of our trade is with them. The financial flows between the countries are so immense that we can't afford to get too far out of line, so they are already running our economic policy in that sense.

What we have done by maintaining our own currency is continued the use of a rubber yardstick, which has allowed our industry to be relatively lazy and not make adaptations that would have been forced had we had a common currency. So we get the worst of both worlds: we get to follow their interest rate policy and we get a declining industry.

Mr. Fred McMahon: I'd like to just quickly follow up on that. Like yourself, I'm agnostic on the amero idea, but it's quite interesting to look at the trends in productivity and the dollar. As Gordon was saying, a lower dollar means we become more competitive without productivity growth because we've cheapened our wages. What it also means is that labour becomes relatively cheap compared to the cost of capital investment, which is typically imported.

It's quite interesting: at the time when John Crow pushed up the Canadian dollar to fight inflation here, what very intriguingly happened is that our purchases of capital equipment rose too. I can't remember what happened to productivity, but I do know that again, as the dollar rose, our purchases of capital equipment rose, which is the spur to productivity. As I was saying earlier, we've had homemade policies that have created our economic problems, and one of them is the weak dollar.

As for losing sovereignty, which Gordon has pointed out is a slippery term in any event, all central banks in the world now have one single, unambiguous goal, and that's price stability. It's true of the Bank of Canada, it's true of the Federal Reserve, it's true of the new European Central Bank, it's true of the Bank of England, which was given its independence about four years ago. In other words, if we join with the United States, the purpose of monetary policy changes not a whit whether it's here or there. But I'm agnostic generally.

The Acting Chair (Mr. John Harvard): The word “harmonization” hasn't come up in this discussion, although I think it's implicit in at least some of the comments. I want to ask this. How far would you go in harmonizing some things, such as a refugee policy, the so-called third-country status for refugees?

We had a gentleman here, Greg Boos, from the Pacific Corridor Enterprise Council. You might know him. He was opposed to harmonizing our refugee policy with that of the Americans. The reason he cited against that was the experience back in the early 1980s, with some people of Nicaragua when the wars were going on there. He was suggesting that if we had had a harmonized refugee policy with the Americans at that time, 20 years ago, some Nicaraguans who found haven here in Canada would have never made it. These people came here and have made very productive citizens. What's your take on something like that?

À (1005)

Mr. Gordon Gibson: Of course during the Vietnam War we didn't have a harmonized policy on draft dodgers either.

Even under a very harmonized world, I think it remains entirely open to Canadians to determine what our refugee policy ought to be. The only thing that does need to be harmonized--if we want to retain our traditional ease of access to the United States--is not refugee policy, but rather security policy. In other words, it doesn't matter how many people from the rest of the world are here in Canada, as long as one can say with reasonable certainty that we've not been importing terrorists. If that's the case, we can bring in 50,000 people, or a million people a year, and there's no reason why the United States should care about that.

Mr. Fred McMahon: I have no substantive comments other than to mention that Martin Collacott will be producing a paper for the Fraser Institute around mid-summer. But I would also suggest to the committee--if it's able to arrange it--that it would benefit much from hearing his testimony in person.

The Acting Chair (Mr. John Harvard): Thank you, gentlemen. It's been most fascinating. We appreciate this hour you've spent with us.

Now we have the pleasure of welcoming two gentlemen from Doman Industries, a well-known company here on the west coast. Rick Doman is president and chief executive officer. With him is Bob Flitton, who is manager of governmental affairs.

As is usual, gentlemen, we start with prepared remarks by our witnesses, and we always leave enough time for questions. We have 45 minutes. You may begin.

À (1010)

Mr. Rick Doman (President and Chief Executive Officer, Doman Industries): Thank you very much for the opportunity to speak today on trade within NAFTA and international trade.

Mr. Bob Flitton (Manager, Governmental Affairs, Doman Industries): Do you have copies of our brief in front of you?

Mr. Rick Doman: We have a ten-page brief today that we are tabling with you. Rather than read the entire brief, I will highlight key points and in the following discussion cover important issues in more detail.

NAFTA is designed to expand trade and investment among Canada, Mexico, and the United States, assure access to mutual markets, and provide a rules-based system for international trade within the North American region.

Improvements are required to the existing NAFTA framework to improve trade relations between Canada and the United States. Further, Canada must immediately undertake a number of initiatives to mitigate the impact of the current U.S. softwood lumber dispute with Canada.

On April 2, 2001, the U.S. filed anti-dumping and countervailing duty petitions with the U.S. Department of Commerce, alleging the U.S. softwood lumber industry was materially injured by reason of imports of subsidized and dumped softwood lumber products from Canada. On May 2 of this year, the International Trade Commission determined that Canadian softwood lumber imports to the United States threatened the United States lumber industry. This decision will result in duties of 27.2% on all shipments to the United States, effective when the final countervail and anti-dumping duty orders are issued sometime later this month.

The U.S. lumber coalition petition against Canada does not conform to U.S. or international law, nor is it fair or equitable. In their arguments, the U.S. lumber coalition improperly uses cross-border comparisons, and claims, for example, that western Washington State has similar geography to coastal British Columbia, therefore presuming that logging costs should be the same.

The geographies are not similar at all, when it comes to logging. The American government constructs roads into logging areas on U.S. government lands. In coastal British Columbia and all other parts of Canada, the forest companies must construct their own logging roads. The U.S. case does not account for these substantial differences in costs. Logging costs are your highest costs, in terms of getting wood to sawmills.

The U.S. uses a Scribner-based system, compared to Canada's cubic metre or metric system, but they are not comparable at all. For example, the Scribner system on U.S. logs gives twice the overrun that the metric system gives on Canadian logs, making U.S. costs half of what they show when they present these to the WTO and NAFTA.

Other examples in recent statements are that Canadian provinces set timber prices at about one-third of market value, and the overwhelming majority of timber harvested from government land is old growth. There is absolutely no evidence to support these statements; they are incorrect.

The real issue is that the United States southern independent lumber producers are being squeezed out of business by the timberland owners because of increasing values of U.S. timberlands by blocking Canada out. It is reported that five of the primary financial contributors to the U.S lumber coalition own more than 23 million acres of U.S. timberland. They stand to gain enormous profits from this initiative, at the cost of the American consumer, the Canadian industry, and increased land values.

Mr. Rick Doman: Doman contends that the United States, in reaching these decisions, has breached a number of sections of chapter 11 of the NAFTA. The United States action against the Canadian lumber industry is also an attack on Canadian sovereignty and should not be condoned under international trade laws.

Producers of softwood lumber in other foreign countries, all competitors of Canadian companies, are receiving more favourable treatment from the United States, even though they are not part of NAFTA. They are not subject to arbitrary and discriminatory targeting of their softwood lumber exports to the United States.

The U.S. requires Canadian natural resources. About 30% of Canada's exports to the United States are primary products, compared to approximately 8% of Canada's imports. The United States requires hydro, energy, minerals, oil, natural gas, base metals, water, fishing and forest products from Canada.

U.S. investment in Canada has doubled since 1993, reaching $186 billion in 2000, or 63.9% of foreign direct investment in Canada. We believe much of this investment is directly attributable to U.S. acquisition of natural resources in our country.

This year, U.S. consumption is expected to be a record 56 billion board feet of softwood lumber. The U.S. industry only produces 35 billion board feet when it is running full out. It doesn't have any more trees to produce beyond that. Canada will ship about 18 billion board feet, of which only one billion will come from coastal B.C., approximately nine billion from the interior of B.C., and the rest from other provinces, mostly from Quebec.

Other countries outside the NAFTA, including the former Russian republic, the Scandinavian countries, eastern European countries, and South American countries, continue increasing their lumber exports to the United States while Canada is blocked by this group of U.S. lumber producers by these duties, at a time when U.S. lumber demand is growing and we continue to lose market share. The U.S. cannot supply its own requirements, as we've pointed out, yet it is harming Canada to the benefit of other, non-NAFTA, countries. This could be because the U.S. forest industry is also making investments in those countries and owns forest companies in those countries.

U.S. lumber sales represent potentially $10 billion in annual lumber sales for Canada, a very important number. Fifty percent of the Canadian supply is shipped from British Columbia, approximately 25% from Quebec, and the balance from other Canadian provinces.

The basis of the U.S. petition or claim against Canada is that the increasing Canadian share of the U.S. market is causing U.S. companies financial harm. Yet the 34% Canadian share of the U.S. market is virtually unchanged over the past five years, nor have we seen any evidence that supports the coalition claim of financial injury due to increasing market share. Ironically, with the duties the Canadian industry is facing, the Canadian industry will be in a non-profit mode, while profits of U.S. companies soar.

Forestry and house construction are key drivers of the North American economy. Placing tariffs on softwood will increase prices of softwood lumber beyond the capability of buyers of new American homes.

The U.S. coalition claims financial harm to U.S. lumber producers, yet many more American workers are negatively impacted by their actions. There were 217,000 payroll jobs in U.S. logging and sawmills in 1999, compared to seven million jobs and contractors in the U.S. wholesale and retail lumber trades and home building. U.S. lumber-consuming companies with more than 700,000 employees are currently running a campaign in support of Canada.

Estimates are that the softwood lumber dispute could impact 70,000 jobs in Canada--50,000 in B.C. alone.

À (1015)

With regard to the Byrd amendment, under this the United States will distribute the proceeds from anti-dumping and countervailing duties collected on imports of softwood lumber products from Canada to the U.S. domestic industry. The U.S. industry will receive a financial windfall from the Canadian lumber industry. If imports from Canada remain at recent levels and anti-dumping and countervailing duties are collected at the rates set forth in the department's anti-dumping and countervailing duty order, the U.S. lumber industry will receive more than double its profits of 1999, when the industry recorded a profit of $671 million U.S.

Chapter 11 obliges NAFTA countries to provide fair and equitable treatment. The Byrd amendment is unfair because it is tantamount to expropriation without compensation, and it is an incentive for the U.S. industry to bring this case against Canada. That is why they have been unwilling to negotiate. The Byrd amendment provides a strong incentive for U.S. producers, as I've said, not to settle and to resist any form of resolution.

The countervailing duty and anti-dumping regime of the United States permits the Department of Commerce to suspend a countervailing duty or anti-dumping investigation upon the conclusion of a suspension agreement with a foreign country. Doman met with the Department of Foreign Affairs and International Trade in mid-2001 and suggested at that time that Canada immediately propose an interim agreement consisting of a Canadian border tax on lower-value products until a long-term solution could be negotiated. Canada did not make this proposal to the U.S., despite a U.S. request to do so by special envoy Marc Racicot. That might have saved thousands of jobs and market share.

The Department of Commerce is required to consult with petitioners 30 days prior to the department's final determination. Thereafter, the department cannot propose or conclude a suspension agreement without the consent of the petitioners.

Early this year Doman warned Canada's Department of Foreign Affairs and International Trade that an opportunity existed until February 19, 2002, to provide the required notice to the petitioner, the U.S. Coalition for Fair Lumber Imports. Canadian officials disagreed with Doman on the importance of the notice, and the opportunity to settle without petitioner consent was lost. On March 21, 2002, Canadian-U.S. negotiations failed because of the intransigence of the U.S. industry. They had no incentive to settle.

Coastal British Columbia industry harvests many species and grades of timber, producing products for exports not only to the United States but also to Europe, Middle Eastern countries, Australia, New Zealand, Japan, China, and many other Asian countries. In order to economically produce timber, coastal sawmills produce lumber products for a combination of the above markets. With the softwood lumber dispute and without the key U.S. markets, economic synergies are lost, causing the industry to continue to lose global market share and harming Canadian exports.

Most competitive countries outside NAFTA do not have the same environmental forestry standards Canadian companies adhere to, which could potentially cause and probably has caused significant dangers environmentally to many parts of the world, such as Indonesia, Malaysia, South American countries, former Russian republics, and eastern European countries in particular.

There is also the concern of market loss to other products, including steel and plastic. Canada has the opportunity to successfully supply the growing global market demand for wood products. It is unfortunate that a small group of U.S. forest companies that have much to gain under the Byrd amendment can cause the Canadian industry loss of global market share, and not only in the United States.

Doman contends that the Byrd amendment unfairly allows the U.S. industry to win twice. Canadian companies are effectively fined, and then the fines are handed to U.S. companies that are competitors of Canadian companies. As we pointed out, U.S. investment is increasing in Canada, and they could use these funds to buy us out at discounted prices. The funds provide a war chest for the U.S. industry to continue and increase its action against the Canadian industry. It destroys any incentive on the part of the U.S. industry to resolve any softwood lumber disputes.

At the same time, the profits of U.S. companies increase dramatically while Canadian profits disappear. Canadian companies become more vulnerable to purchase by U.S. interests, as I've pointed out.

À (1020)

Chapter 19 of NAFTA entitles interested parties to contest the CVD final determination. The filing date was May 2. Doman was one of a number of companies, provinces, or associations that filed an appeal. The problem with this process is that hearings are unlikely to be scheduled for 12 to 18 months, during which time the duties are payable and moneys paid may be lost to U.S. industries. It is difficult to imagine that with the proper legal process Canada cannot win this dispute again. Canadian industry can only hope that Canada and the U.S. will successfully negotiate a new arrangement between now and May 23, the probable effective date for U.S. lumber duties.

The coalition holds the advantage. Doman Industries, with no other option than to protect the right of its stakeholders, including our employees and our customers, filed a notice of claim for relief and damage of $513 million U.S. from the U.S. government recently. If the U.S. is serious about free trade, they must be required to commence changes in the framework of the NAFTA agreement. The U.S. must be eligible to obtain Canadian natural resources only in the absence of unfair and punitive U.S. trade barriers. Meanwhile, Canada must take a stronger position in attempts to resolve this matter.

I'll quickly go through addendum A, and then we can answer your questions.

What can Canada do?

Canada can support companies in their legal actions under chapter 11 NAFTA. Only companies with U.S. assets qualify to file legal action. Once these are filed, Canadian and provincial governments may participate and successfully litigate, which benefits all Canadians.

Canada can implement programs of loans or loan guarantees to assist softwood lumber producers to pay these illegal duties while we dispute this illegal situation, appeal, and go through the review processes. Canada will eventually win the disputes and all moneys will be returned.

Doman has a legal opinion from our respected Washington trade lawyer that a program can be done on a commercial basis and therefore not be considered a subsidy. This will prevent loss of global market share to other countries. It will also prevent the devastation of many small communities and the loss of skilled forestry workers to other industries, which is occurring.

We could also recommence negotiations with the U.S. for a comprehensive and longer-term solution to the softwood lumber issue. We could pursue appeals or assist companies, provinces, and associations with appeals under chapter 19 of NAFTA.

We could also pursue complaints, which we are doing with the WTO. That takes up to two years.

We could encourage provinces to implement previously discussed reforms and seek a “changed circumstances” review of the CVD under 19 U.S.C. 1675(b).

Canada can review the legal implications of imposing a border tax equal to the amount of alleged subsidization, and seek either a “changed circumstances” review or a finding by the U.S. Department of Commerce of a program-wide change.

Thank you. If you have any questions....

À (1025)

The Acting Chair (Mr. John Harvard): Yes, we have approximately 17 to 18 minutes for questions.

We'll start with you, Mr. Martin.

Mr. Keith Martin: Thank you very much.

Thank you, Mr. Doman and Mr. Flitton, for being here today.

Quickly, for the record, in view of Mr. Pettigrew's comments about people not losing their jobs in this dispute, how many people, Mr. Doman, do you stand to lose out of your total population of employees in the current system, and how many people will be lost in the industry in the coming months if the situation is not resolved?

Does the Byrd amendment violate NAFTA?

Do you think we need to rewrite chapter 11?

My last question is actually a two-part question. In resolving this issue, do you think we need to be far more aggressive in using American lobby groups, such as the home builders, to advocate Canada's position? As you articulately mentioned, this situation is hurting American consumers and American home builders too. So it's a way for us to actually merge forces with American special interest groups, play the American game, and be a tougher, more aggressive lobbyist for Canadian interests through American interests.

Mr. Rick Doman: Great. I'll answer a few of those questions, and then I'll have Bob answer the rest from a legal perspective.

With regard to layoffs, we advised Minister Pettigrew last spring that we have 2,000 people laid off due just to the threat of U.S. tariffs because we could not build roads. In our business, you have to build logging roads three to four months before you log. With the threat of substantial U.S. duties, we knew we couldn't do that, so we had to curtail production.

Off and on, we've had 2,000 people laid off for one year now. And we will have up to 3,000 people laid off very quickly if there isn't some resolution to this matter--and that will be substantially after May 23. Just to clarify the point, we have approximately 4,000 employees working for us. As I said, 2,000 of them have been laid off for one year now, and this number will go up to 3,000.

It's very unfortunate, because business is very good. We can sell all the product we can make. Our customers want it.

And this is stopping us from selling into other countries as well. Under the B.C. Forest Act, we have to log everything in a cut area and 60% of the logs go into U.S. lumber products. Under the act, we have to log all of a cut area, but without being able to send 60% to the U.S., we can't log for the Japanese and European markets effectively. So we are losing market share there too.

So the U.S. lumber coalition has really harmed us in every way possible. It has harmed us overseas, in markets where it has no right to do so. For example, coastal B.C. only ships one billion feet into the U.S., yet it is trying to dictate our policies on our own sovereign forests. It is running our business and its ultimate goal is to buy us at discounted prices and force us to export logs, which will cost us a lot of jobs. That's where I see it heading.

On the question regarding how many jobs have been lost in B.C., I would imagine up to 10,000 jobs plus have been lost since this duty has been in effect--off and on, because it has been very inconsistent. Sometimes we have a three- or four-week window where we can ship. At times there has only been anti-dumping, and at other times only the CVD. But looking forward, our premier has stated that 50,000 jobs could be lost.

À (1030)

Mr. Keith Martin: Is the end-game that the American companies really want to buy up the Canadian share of market, as well as control of our timber rights here in Canada?

Mr. Rick Doman: It is that, but it's also more than that. In Washington-Oregon, the big companies were able to push the U.S. government into putting a lot of land into parks, and of course their private lands increased in value substantially.

The U.S. has 75% private land, 25% public. Canada has 95% public land, 5% private. The coalition is either trying to push us out of business in any way it can--perhaps ultimately to buy us--or to increase the value of its own private land.

I'll let Bob answer now.

Mr. Bob Flitton: Just very quickly, the Byrd amendment does violate NAFTA. The whole intent and purpose of the Byrd amendment is totally contrary to the principle of NAFTA.

Does chapter 11 need to be amended? I don't believe so. Removing the Byrd amendment solves that problem.

Your other question was on merging forces with the Americans. Canada should have done that a long time ago. We were asleep on this matter. Our political capability for dealing with the Americans on this issue is dismal.

Mr. Keith Martin: Thank you.

The Acting Chair (Mr. John Harvard): Go ahead, Mr. Rocheleau.

[Translation]

Mr. Yves Rocheleau: Thank you, Mr. Chairman.

My question will be along the same lines as those of my colleague. Yesterday we heard from a group of business people in the context of the Pacific Corridor. Mention was made of the idea of launching an information or awareness campaign with American consumers, to remind them that because of the new softwood lumber policy, the cost of building a new house could increase by up to $45,000.

What would you think of an awareness campaign that would involve home builders, retailers, consumers' associations, and perhaps, in a background role, the governments involved, namely, the governments of Canada, British Columbia and Quebec, which are most affected by this problem? Does the idea appeal to you in principle?

À (1035)

[English]

Mr. Rick Doman: It would please us, but unfortunately it's too late. We've waited a year now. We've had these duties in place. The damage is substantial. We have U.S. congressional and senatorial elections upcoming in the United States, and it seems President Bush just wants to avoid this whole subject of softwood.

It will be helpful, and we are pressing for it, and it would be good if everyone gets involved. But I can tell you I believe it's too late to stop this process. It's become politically involved. These companies seem to have a very strong presence, well connected with senators and congressmen. I don't know how they do it, but they seem to have tremendous influence.

I think, unfortunately, these 27.22% duties will effectively put a lot of Canadian companies, in the short term, out of business. We will lose market share to other countries. The price of homes will go up in the United States. The U.S. consumer is harmed, there is no question. I don't know if we can have a short-term resolution to this, because it seems it's gone too far. But it will be helpful.

I also would like to point out what Chairman Alan Greenspan pointed out last year to a senatorial committee on softwood lumber. He said duties will be harmful to the U.S. economy.

So I agree with you: we must do something; but it may be too late right now to stop this process.

The Acting Chair (Mr. John Harvard): Thank you, Mr. Rocheleau.

Did you have another question? Go ahead, please.

[Translation]

Mr. Yves Rocheleau: What do you think about those who say that the idea behind these countervailing duties is to make up for the fact that the weak Canadian dollar allows Canadian products to get onto the American market? So these countervailing duties, roughly 30%, would compensate for our weak dollar to some extent. Does that theory stand up?

[English]

Mr. Rick Doman: The Canadian dollar cannot be used under WTO or NAFTA. Currencies cannot be brought into play to use in trade arguments between countries. So this may be an argument, but it doesn't mean anything. It can't be brought into the question.

I do believe the U.S. lumber coalition is very greedy and has a lot to gain, and they'll throw out anything. Canada must defend itself better. We don't tend to defend ourselves against these people. And they do not represent the entire United States; they're only a small portion.

Mr. Bob Flitton: Let me add something very quickly.

We don't get lost in those thoughts, because the problem here is a greedy industry that's trying to increase its land values. Their motives are wrong; their legalities are wrong. It's like have a big brother who keeps beating you, and every time he beats you, you hand him a candy. He's just going to keep beating you.

Let's not look for ways to reconcile what they're doing. Let's stop it, because it's wrong; it's illegal. The problem is that in Canada we just haven't put our forces together to go down and fight it the way we should be fighting it, and that's in their own courts. There's been absolutely no legal action whatsoever taken by Canada against them in their own courts.

Thank you.

The Acting Chair (Mr. John Harvard): Thank you, Mr. Rocheleau.

I have a couple of questions, gentlemen. The pain you have sustained as a result of this dispute must be unbearable, and I certainly wouldn't want to see you endure even more pain. But perhaps my question would suggest just that. Given the situation, why don't you just basically tell your enemies in the United States to go and jump in the lake--“If you're going to treat us this way you're just not going to have our products at all”? Just simply lock them out. Just refuse to sell anything. What would be your response to that?

À (1040)

Mr. Rick Doman: First of all, if the entire Canadian industry shut down for a period of two weeks and didn't ship to the U.S., lumber prices would be up 50% to 100%.

The Acting Chair (Mr. John Harvard): In Canada.

Mr. Rick Doman: In the U.S.

The Acting Chair (Mr. John Harvard): Wouldn't that be one of the intended consequences?

Mr. Rick Doman: The unfortunate part about it is that we could lose market share.

The Acting Chair (Mr. John Harvard): Where?

Mr. Rick Doman: In South America, Scandinavia, eastern Europe, Russia, and the former Russian republics.

The Acting Chair (Mr. John Harvard): Walk me through that. Maybe I'm a bit thick on this. I heard you say that, and I'm not sure I understood you. This action taken by the Americans also has an impact on your markets elsewhere. How does that work?

You also mentioned the British Columbia Forest Act. Could you just explain that to me?

Mr. Rick Doman: Yes, I'll clarify that.

When we go into a cutting area when we're logging, we have to take all the logs out. Those consist of small, mid-sized, and big logs of various species. Out of that log we make products for the U.S., Europe, Japan, China, and other countries. We need the key U.S. markets. They consume 56 billion board feet of lumber a year. Our exports to Japan are five billion board feet a year. Out of that same log we have to make different grades for different markets. That's how we're so efficient, and that's how we've grown our businesses.

The Acting Chair (Mr. John Harvard): Is that dictated by the B.C. Forest Act?

Mr. Rick Doman: We have to take all the timber out of the area. We can't just take the old-growth logs out. We have to take the second growth out and different species or we will actually be breaking the Forest Act.

Mr. Bob Flitton: It's not only the act. It's the nature of the wood. It's the type of wood and the species of the wood. It's the synergy of bringing all these woods out together.

The Acting Chair (Mr. John Harvard): Let me take my hypothesis one step further. You can shoot it down, but it might help me gain some understanding.

If you were to stop selling product to the United States for a while, could you not take that product and sell it elsewhere, such as Japan or Russia?

Mr. Bob Flitton: You can't pick up the markets fast enough. Two things happen. When we stop selling to the United States, the United States will run off to other parts of the world and buy their wood elsewhere, and we're going to lose that market. The second thing is that they're going to turn to other products. They're going to go to plastics, steels, and other products that can be used to replace wood. Once a market is lost, it's lost forever.

The Acting Chair (Mr. John Harvard): But doesn't it really come down to a stark choice, Mr. Flitton, of either a slow death or a fast one?

Mr. Bob Flitton: If I were to quit eating for a week, I'd be awfully hungry. It's what the results are going to be at the end of the week.

I think if we wanted to take the kind of initiative you're talking about, Canada would have to take it, not one company, the whole country. If we're going to cut off wood, why don't we cut off hydro power, minerals, and all the other resources that go with it? It's hypothetical.

The Acting Chair (Mr. John Harvard): That's what they call linkage. That's tit-for-tat stuff, and I don't know if we can win that.

Mr. Bob Flitton: I'm not sure we can win by cutting off our leg, either.

How we need to fight this is legally. They are legally wrong. Even in their own court system they're wrong. If they did this to Canada under anything other than international trade rules, it would be the same as pirates on the high seas. They're getting away with it under the umbrella of trade law, and they're not being challenged.

The Acting Chair (Mr. John Harvard): You've challenged them in the courts.

Mr. Bob Flitton: We haven't had our day in court yet.

The Acting Chair (Mr. John Harvard: No, but you have initiated an action.

Mr. Bob Flitton: At a lot greater expense than what we can realistically afford. We have not seen the Canadian government coming up to bat and saying, can we participate in this and help you with it, because all of Canada is going to win if you win this thing?

The Acting Chair (Mr. John Harvard): I understand that one of your counterparts in Quebec also has initiated legal action.

Mr. Bob Flitton: That's correct, Tembec, and another company in British Columbia, Canfor.

The Acting Chair (Mr. John Harvard): Let's assume you win, and I would hope that you do win two or three years down the road or however long these actions take. Can't the Americans just come up with some other trumped-up allegation the day after and the whole damned thing just starts over again?

Mr. Bob Flitton: Not if you win correctly, not if you win big enough. You have to hurt. You have to make them stand up and realize that if they're going to keep doing this, it's going to hurt. Right now, every time they do it, we give them candy. We have to give them a disincentive.

À (1045)

The Acting Chair (Mr. John Harvard): Well, we'll have to lace the candy with something.

You were mentioning May 23, Mr. Doman. Can you think of an agreement, whether you want to call it an interim agreement or a long-lasting agreement, that could somehow be consummated between now, May 7, and May 23? You're talking two weeks and two days away.

Mr. Rick Doman: The two countries could have made a deal prior to February 19, because the U.S. lumber coalition didn't have the right to legally block it. It's more difficult today because they're looking at getting money from us now through the Byrd amendment, but a deal probably could be reached.

When I met with Governor Racicot in November, he really liked our proposal. We said “We understand that Canada is more competitive than the U.S. We don't agree that there's a subsidy. So if we put a tax in, which stays within Canada and is paid to the federal government, of 15% on all lumber shipped at $250 U.S. FOB mill per 1,000 board feet or less into the United States, would that be acceptable?” He was very positive on that, because lumber prices were about $220 mill at that point.

That would be a good deal, because it would allow for American companies at the low end of the market to keep operating. It forces some curtailment in Canada at the lower end of the market. When things are good, there's no tax because anything above $250 mill is at zero, and that's a price that's very profitable for the U.S. lumber producer. That's very beneficial and that doesn't hurt the U.S. homebuilder or consumer.

We presented that, as I said, directly to Governor Racicot, and he wanted Canada to put it on the table in November because he said upcoming senatorial and congressional elections and other factors may have an impact on these issues in the future. He didn't know, but he said there was a lot of pressure from these different factions within the U.S. So he was hopeful that Canada would put it on the table. We didn't.

I suggest we somehow meet directly with Governor Racicot. I personally put a call in to him yesterday to see if he is still involved in this process because I haven't heard his name mentioned lately. I suggest that somehow the two countries meet at a very high level and consider this proposal as an interim agreement that protects the U.S. lumber interests and the U.S. consumer. It has to be portrayed properly.

So I recommend that, but I can't do that as a company.

The Acting Chair (Mr. John Harvard): Do you have consensus with other companies in the Canadian industry?

Mr. Rick Doman: I think they would accept that proposal in three seconds.

The Acting Chair (Mr. John Harvard): What about the other side?

Mr. Rick Doman: Well, the problem is the Byrd amendment. They're collecting our money now.

The Acting Chair (Mr. John Harvard): We're going to have to wrap this up, but on the Byrd amendment, as I understand your explanation, the proceeds from the duties are not held in trust. They are distributed to the producers, right?

Mr. Bob Flitton: That's correct.

The Acting Chair (Mr. John Harvard): So let's say you win, Mr. Flitton, some time down the road, in a couple of years or whatever. This money is gone to the producers. How in the world do you get that returned?

Mr. Bob Flitton: I'm glad you realize it's an impossibility. How do you get it back? You don't get it back. It says right in our brief that it's lost. Legally, technically, you should be able to go and get it back, but you'll never collect it. It's lost.

Going back to your previous question, what's irritating about this whole thing is that Canada doesn't have a plan B. They've been saying to us all along, “Let us handle this. We'll deal with the United States, we'll get it resolved.” They didn't listen to us when we gave them recommendations. They've failed, and now here we sit. We have no further course of action other than legal action, and they don't have a plan B to get it resolved that we're aware of. It's very frustrating.

The Acting Chair (Mr. John Harvard): Gentlemen, thank you very much. This is a very difficult file, and we wish it were something quite different. We appreciate your time here with us. On behalf of the committee, thank you.

We'll suspend for about one minute.

(1044)

(1048)

The Acting Chair (Mr. John Harvard): Members, we will resume.

We have the pleasure now of welcoming Gordon Smith, the director of the Centre for Global Studies, University of Victoria. Of course he's former Deputy Minister of Foreign Affairs in Ottawa and was also a sherpa for Canada in previous G-7 and G-8 summits.

It's nice to have you, Mr. Smith, and we look forward to your remarks. You may proceed.

À (1050)

Mr. Gordon Smith (Director, Centre for Global Studies, University of Victoria): Thank you very much, Mr. Chairman.

It's a pleasure to be here. I appreciate the opportunity both to appear and to respond to your questions.

I was indeed the sherpa in 1995, 1996, and 1997, which includes, of course, the last time that Canada hosted the G-8 summit, in Halifax. I've had the privilege of appearing quite frequently before this committee.

I should note as well, because I'm going to make reference to this in my presentation, that I also chair the board of the International Development Research Centre, so I'm not an entirely objective observer when I make my comments on that subject.

One thing I would like to do, Mr. Chairman, is to commend what I really believe to be the excellent background material that has been prepared for these hearings. In my judgment, it asks the right questions, and I will endeavour to respond quite specifically to a number of them.

When I was contacted by the clerk of the committee, I was in Italy chairing a meeting on global challenges, on U.S. exceptionalism, on the heterogeneous nature of the G-77, but particularly on NEPAD, the New Partnerships for African Development, and what the G-8 should be doing in Kananaskis.

This work we were undertaking was in collaboration with the Commission on Globalization and the State of the World Forum. Both organizations are focused on the shaping of globalization, on ensuring more people benefit, and on meeting environmental and social needs that come along with globalization. Both are involved in promoting multi-stakeholder dialogues and cooperative efforts to promote better public policies and action.

After I received the e-mail inviting me to come here, I visited the Cinque Terre area of Italy. It's a remote, traditional coastal area with very steep hills that produces wine and olive oil. Interestingly, because the hills are so steep, one of the major challenges after all the terraces have been put in is to gather the produce. They've put in an ingenious technological solution, a little miniature funicular railway that would be perhaps a foot high.

As I was walking from one village to another--something I would recommend to you all--I came into a little town called Vernazza. I looked at this funicular railway, and right before me was some graffiti on the rail. “Down with the global economy”, it said.

Some hon. members: Oh, oh!

Mr. Gordon Smith: I was just stunned. Yet as soon as I entered the town, the first shop I saw was an Internet café, one of four Internet cafés in a village of a thousand people, and there were satellite dishes everywhere to be seen.

Those steep hills have all been transformed, as I was mentioning, through retaining walls and these laboriously built terraces. It's been estimated that more stone has been put into those retaining walls than is in the Great Wall of China. It gives you some idea of the scope of the investment. Yet at the present time less than half that acreage is now being farmed. Why?

This is the point I want to make here. It's because tourism now provides higher wages and a much better life for the individuals. That's what globalization is really all about. It's about a process of change and about ensuring that people and the environment benefit as a consequence. The key is one of adaptation.

I should also at the beginning like to say a word about what I understand to be globalization but not get into a long definitional question. I have a very broad concept of globalization. It obviously includes the economic elements, the interdependence, and the problem that losers may be outnumbering the winners. There's no redistributive mechanism that comes along with globalization, and there is no underlying social compact that makes the process of adaptation and adjustment less difficult. We can talk about those if they are subjects of interest to you.

There's also the environmental element, the fact that man is now degrading the global commons and the fact that we have no adequate way of funding global public good works such as environmental protection. There's a cultural dimension, one Canadians are very conscious of, which is the risk that culture becomes commodified and that prices are put on it, a constant problem in our relations with the U.S.

Finally, there's a security dimension, the fact that global threats range all the way from terrorism to nuclear war.

I want to frame my comments by saying that there is no question in my mind that globalization is happening. It's not something that can be stopped, but it does need to be shaped. It needs to be shaped so more people will benefit.

Interestingly, this was exactly the message that came out of the UN Millennium Summit, when more government leaders than ever before in history met in New York in the fall of 2000. There was also a counterpart event, which I participated in, since I was then out of government, organized by the State of the World Forum.

I'm now going to go through the points I'm leaving with the committee and will elaborate on some of them. I will make the points very directly, in the hope that if you are curious about them or don't understand them, we can come back to them in the question period.

To my mind, one has to begin with the reality that there is considerable skepticism that the prevailing form of globalization is now working well. I hope the committee will emphasize this and say to the G-8 that they must acknowledge this problem and provide some ideas as to what's going to be done to deal with that reality, the reality of those who are deeply disenchanted.

Let me say up front that I regret that in the lead-up to Kananaskis more is not being done to engage global civil society, the people I now spend a lot of time with. I don't mean here what I call the “usual suspects” from single issues who lobby, but those who are really concerned about the issues of globalization, its consequences for people and the environment, and the fairness of the way the process has been undertaken. I have found there hasn't been the extent of engagement of civil society I had hoped for.

À (1055)

I think it's critically important that there be a dialogue with those who have such concerns, if for no other reason--but there are other reasons--than to separate them from those who are hooligans and anarchists. Those people will always be there, and we'll see them in Kananaskis, I'm sure, or around Kananaskis.

I think it's also important, and this picks up some of the points in the background papers, that the committee acknowledge that Canada and other rich countries have not adequately opened their markets; they continue their subsidies--I'm recognizing that this is an explosive issue in Canada and I say this to a parliamentary committee--in the dairy sector, and more broadly in the farming area, and with respect to textiles.

It is critically important. What the African countries are clearly looking for--when one reads NEPAD, it's clear--is access to markets, the benefits from liberalization that we've preached to them. And they're finding they're not getting that access.

I think it's very important that in Kananaskis, with NEPAD, the G-8 must do more than just utter words. I've been involved in the drafting of these communiqués. The objectives and the targets may all sound impressive, but if there's no follow-up, there will be serious problems. That is what I was referring to earlier. There's a history of no follow-up, from the point of view of the south: Rio, the Earth Summit, the Uruguay Round, the commitments to 0.7% of GDP.

There is a high level of expectation in Africa, and in my judgment, if one can't make real promises that are going to be carried out into action, it's better to make no commitments at all. The commitments, otherwise, simply deceive people and end up creating more and more skepticism.

At this meeting in Italy, we were focusing, to quote from the head of the UN Economic Commission for Africa, precisely on how to develop “specific, time-bound” plans for delivery in a few selected areas. I think that's what is important this G-8 do: not address everything, but select a few areas and really make results happen.

I mentioned my chairmanship of the IDRC--an extraordinary Canadian institution, in my judgment. And of course the IDRC is deeply engaged in improving capacity in the south in a manner that is connected to those who take decisions. It's not just research that appears on the shelves of libraries, but actually is connected to the decision-makers.

With respect to NEPAD, it's important to underline that this has been drawn up by African leaders. The Africans said to us in Italy that they want to be able to develop their own criteria, use their own process of peer review, have us trust them, and indeed--and this is not a comment from me, so I should have it in quotation marks--“let Africans make their own mistakes”.

I therefore see a real problem that's going to have to be addressed with the approach the United States is taking. At the Monterrey meeting, as I think you probably all well know, President Bush very clearly outlined conditionality--American conditionality. The U.S. would apply criteria that would be the basis on which decisions about assistance would be given. That's going to be a problem.

I would also make the point that not all the countries in Africa are going to qualify for NEPAD. There is going to be a need in some caes--Zimbabwe is one that obviously comes to mind now--for humanitarian assistance. Not all assistance can be focused--and it's not only assistance, of course--on the NEPAD countries.

I want to say a word about terrorism, which is another item that's on the Kananaskis agenda. It's an area in which I've been doing some work. I chaired a meeting in Washington on the roots of terrorism. Here, I think, there are considerable risks, as I talk to people in the U.S., that the U.S. doesn't really want to address those roots of terrorism. Instead it wants to play the role it has been playing through the use of its air power, which was actually described to me--and I apologize for any disrespect this otherwise might sound like--as a “poop and scoop” strategy: one person does the bombing; somebody else comes along afterwards and cleans up the mess. That was actually used by a U.S. official in a private meeting I was at.

While it's clear, and I make this link back to development, that poverty and despair don't inevitably lead to terrorism, they certainly increase the risk. Of course another major element, and it's a major element of NEPAD, is the need to improve governance.

I also want to say a word about this issue of weapons of mass destruction. Again, from my conversations in the U.S., and I'm sure you probably all know this, they believe Iraq is somewhere between one and five years away from acquiring usable nuclear and biological weapons.

Á (1100)

Certainly it's my anticipation that the United States is going to act, quite possibly this year, and I think this will in fact turn out to be one of the most divisive issues in Kananaskis.

Again, my experience in the last couple of months, talking to Americans, is that if we want to tell the United States what not to do, we have to tell the United States what it should do to address that problem. Otherwise the United States is going to address it as it sees fit.

I want to underline as well, Mr. Chairman, that the feeling I certainly get in the United States is that the United States is a country at war. There's a feeling of vulnerability in the United States that we don't see reflected here. Obviously we are also at war, but there is really quite a different feeling in the country.

I don't intend to address today the North American issues that are before you, except to say that in my judgment, we should not have any illusions about the defence command structure issue. I want to put it very boldly. In my judgment, either we're part of it as very much a junior partner, or the U.S. will make decisions that will have an enormous impact on Canada, without our knowing what is going on.

Basically we're back to where we were when we decided to establish NORAD in Canada. We decided that since the United States was going to defend itself in any event, we were better to be part of that process than to be outside of it, and I think that's a critical issue for this committee to address.

Also, I was very pleased to see in the background material the interest of the committee in global governance issues. In my period as sherpa, when you had people sitting around a table not much bigger than this, just the eight leaders and the likes of me sitting behind them, I was struck how often global goverance issues arose. In the three years I was there, there were climate change, which was maybe not surprising, because Kyoto was coming; infectious diseases--that was after the Ebola virus outbreak; and transnational organized crime, where one leader, who's still around, as a matter of fact--not ours--said that transnational organized crime is globalizing much more rapidly than our capacity to fight it.

What all that means, to my mind, is that we need innovative new forms of governance; we need to look at the role networks can play. We have produced at my centre--and I will send this to the clerk later today--an inventory of best practices on how to increase transparency, participation, and accountability in global institutions.

The Minister of Finance asked us to look ahead 20 years at what the global architecture might look like, stating that governance is falling behind globalization--and later today I will also send a copy of that report.

Basically, the meeting we held in Victoria concluded that the world needs better ways of managing a whole variety of things, and some of these Mr. Martin is now pursuing. I'm thinking here particularly of the sovereign bankruptcy issue, but also others that I've flagged here in my summary, coordinating tax regimes and cooperating on competition.

But there is a huge problem, the problem of U.S. exceptionalism, and we've seen that in the last 24 hours. I'd be happy to come back to that point, but basically what Marc Grossman of the State Department stated yesterday, as to why the U.S. was going to “unsign“ its agreement to the International Criminal Court, was that the sovereignty of the United States would be excessively invaded by that.

What summits provide, in my experience, is a great opportunity for plain talking among the leaders. I believe Canada has an opportunity, if not a responsibility, to address the economic, social, and environmental problems that are posed by globalization, to address growing gaps in the world--Africa being particularly critical--and the need to manage better our growing interdependence in the world. That's globalization plus, or globalization in the broadest sense of the word.

We have to find innovative new ways that involve non-state actors--and I'm talking as somebody who has spent 31 years of his life as a state actor. The non-state actors are a reality out there, and I think one of the key things is the development and the role of networks that can involve state actors and non-state actors. I could come back to that, if you would like.

But we have to go beyond reaching elites. That's often what happens with civil society, if one talks to the heads of various NGOs. It's something we're trying to do, as a matter of fact, in the IDRC. In my judgment, we have the capacity in Canada to do much more in this area. It's an area in which the IDRC could play a significantly larger role, if we had more resources. But there are also other resources in Canada, think-tanks, which are involved in action.

Á (1105)

For example, we have a group in my centre at the University of Victoria that's deeply involved in the whole Convention on the Rights of the Child. They run training programs in the field on these issues. They're an important resource. There's also, I think--but then I might think so, wouldn't I, given who I am--an important resource in former public servants in Canada who can be used to help address these issues.

Mr. Chairman, in conclusion, I hope the committee will issue a strong report, with positive suggestions, and that we will find that those recommendations of the committee will be heeded by government.

Thank you.

Á (1110)

The Acting Chair (Mr. John Harvard): Thank you. And thank you for your good wishes.

Mr. Martin. We have close to a half-hour--a good 25 minutes, at least.

Mr. Keith Martin: Thank you, Mr. Chairman.

Thank you, Professor Smith, for being here today.

We could talk all day about the whole Pandora's box of issues you've opened up, but I'll start with the first issue.

In the face of a United Nations whose credibility has been seriously compromised recently, do you think a restructuring of international organizations in order to deal with the international issues we have to deal with is critical, and that the G-8 needs to start that process?

On the issue of the NEPAD, I question the commitment a number of the key authors of the NEPAD have, and I use Zimbabwe as a litmus test for their commitment to it. I wondered what you thought of their commitment to this wonderful document on paper. A South African said to me last week, “I think our African leaders need a tough love approach”. I wondered if you felt that what we require is a bar of conditionality, a minimum bar that will be required before we would actually offer to aid countries, on the issues of governance, corruption, good monetary and fiscal policy, an independent judiciary, legal protection for both domestic and foreign investors--key if they're going to attract the foreign investments they need to capitalize on the enormous resources they have within the ground to help the impoverished people who live on top. Do you think that's a wise approach to take?

Do you also think this is one thing the G-8 needs to do--that is, make a commitment to the reduction of trade barriers that are such an impediment to the development of these countries and, as you mentioned, create a small ongoing working group of representatives from the G-8 to implement whatever comes out of this meeting?

Thank you.

Mr. Gordon Smith: Thank you very much, Mr. Martin.

I think the reform of international institutions is of great importance. I think the process has to be an incremental one. If you look at when these institutions have been formed, they've been largely formed out of major conflict in the world, and I hope we don't need to go through that again in order to produce change in these institutions. It's one of the reasons why it's important to look at where we think the institutions ought to be going. That's what we tried to do in this report, as you will see, that looks out about 20 years. It's also why we have done this report specifically on increasing transparency, more openness in the organizations, participation involving civil society and the private sector, and accountability--a critical issue of these institutions.

There are a variety of things that can be done, and I think Canada is a natural leader in this area. The United States, particularly under the present administration, isn't. This provides us with the kind of opportunity that historically we have had, and I would hope we will play a leading role.

But it's not only the international institutions. There is also real importance in some of these new institutions that involve civil society--that involve the private sector, indeed--in their management. The UN AIDS organization, which you will know well, is one such example. We have to be prepared to be innovative, I think, in looking at these institutions. But I would strongly urge leadership.

Again, to come back to the point I made earlier--I did it very quickly--I found it striking, sitting around the table listening to those leaders for those three years from 1995 to 1997, how often they came back to asking, “How are we going to manage our increasing interdependence in the world?” They worded it in different ways, but that's a major interest. Let's hope we'll take a leadership role.

With respect to NEPAD, it's far from perfect. The process is far from perfect. Some people are indeed more committed than others. It's very much a South African-led process, with the Nigerians. There hasn't been the degree of engagement of civil society in Africa that one would have liked. This came out at a major meeting that CIDA organized in Montreal last weekend. The fact is the African leaders have all committed themselves to it, and I think it behooves us not to tell them how to do their own business. That's what I think is a really critical thing.

The message I had in Italy from my colleague Barry Carin, who was at this meeting in Montreal last weekend, said “Give us the chance to impose our own conditionality. I know it's not easy, but let us deal with our own problems. We know Zimbabwe is a problem. We know Mugabe is a problem, but give us a chance to do that. Don't babysit us.” That's what they're asking for, and I'm inclined to try it. I don't know whether it's going to work.

Á (1115)

Mr. Keith Martin: Should we participate in giving them money, without them actually getting control of or dealing with some of those critical problems?

Mr. Gordon Smith: They think they have established their own broad criteria, and they will have their own process of peer review. The bottom line is that if it doesn't work, I think we shouldn't. But where I differ from President Bush is that I think we should give them the benefit of the doubt for a period of time. That's my own judgment.

On the trade barriers issue, which I also had referred to earlier, I want to strongly underline what you said. This is very clearly the message that's coming not just from Africa, but more generally from the south. I don't need to tell a committee of the Canadian Parliament that there are all sorts of political difficulties in doing that, but to my mind, it's critical because these countries feel they've done what we asked them to. They've opened their markets, they've gone through an internal process of liberalization, they're encouraging investment. Investment isn't flowing to the extent they would like, but they're finding, in many cases where they have an opportunity to export to the rich north, that there are various kinds of barriers, and they certainly include subsidies as well as more direct trade barriers.

The Acting Chair (Mr. John Harvard): Thank you, Mr. Martin.

I will go now to Mr. Rocheleau.

[Translation]

Mr. Yves Rocheleau: Thank you, Mr. Chairman.

I have a number of questions for you, Mr. Smith. First of all, you said that there should be much broader participation by civil society in the Kananaskis Summit. In your view, could the approach used by the huge demonstration at the People's Summit in Quebec City, which was held at the same time as the Summit of the Americas in 2001, be used as a model, as regards the demonstrations by the people you call hooligans? Would you find such an approach satisfactory?

As far as Africa goes, we know that it was systematically exploited by the colonizing countries for years, and moreover, today, we are talking about Africa's debt; and yet it was Africa that suffered exploitation. Could we not advance the idea that Africa could at least have its debt eliminated, in light of its history? The idea would therefore be to completely challenge the principle of Africa having a debt. Is this debt going to private interests or public entities? I do not know that. That was my second question.

You raised the issue of bankruptcy of sovereign states. I would like to hear more about that. Is the sovereignty of states not called into question with the establishment of supranational entities such as the WTO, the FTAA, in the near future, and other such bodies that may be established in the future, which will further undermine the sovereignty of states? I would like you to talk more about American exceptionalism, about the fact that the United States has refused to sign the Kyoto Protocol and the Treaty on Human Rights. It has also failed to sign documents recognizing the international criminal court. How do you see the role of the UN in all of this? Is it not the major victim here?

Finally, I would like to ask you a more basic question. In light of the direction being taken by globalization, are we not heading down a pass that favours private interests at the expense of the common interest and the public interest? What key concept would mean that citizens would not be reduced to mere consumers?

Mr. Gordon Smith: Thank you very much for your questions, Mr. Rocheleau.

First of all, I must say that, in my view, the idea of having a separate summit for civil society does not work. I would even say that this emphasizes the fact that they are not involved in the process. In my opinion, we have to find ways of involving civil society in preparing for these summits, and not keep its representatives at a distance. In English, we would talk about the need for multi-stakeholder dialogues, that is dialogues with people from government, but also with people from civil society and even the business community. However, the idea of holding major summits in parallel, in my opinion, merely causes frustration. That is my response to your first question.

Second, the debt issue is absolutely fundamental. I am not an expert, but I think we have done a great deal bilaterally, but also to encourage the other members, of the G-7 rather than the G-8, in this area. This is very important, but some other countries are much more reluctant, particularly Germany and Japan. These two countries are somewhat concerned. They worry that if the debt is not paid off, in the future, this will mean that some people will not control their spending, because they think their debt will be eliminated once again. That is the position taken by Germany and Japan.

As to the issue of the bankruptcy of sovereign countries and the much broader issue of sovereignty generally, there are people in universities who have written some very theoretical books on the matter of sovereignty. In my opinion, sovereignty is not what it was a few years ago, because there is much greater interdependence among countries now. If we decide that a country's sovereignty depends on its ability to make decisions independently, that is becoming increasingly difficult. I was the ambassador to the European Union at the time. The president of the time was in Montreal, and he answered a question in a way that displeased a journalist, I think. Personally, if the word “sovereignty” is used with a different meaning... Obviously, it is an important word for us here in Canada; I am well aware of that. The fact is that interdependence limits the autonomy of all governments throughout the world. That is the point I wanted to make.

I think I will answer the question about American exceptionalism in English, because I am thinking of examples in English rather than in French.

[English]

In looking at American exceptionalism, I was amazed at how long a history it has. It goes back maybe 200 years--more than that. Benjamin Franklin wrote about U.S. exceptionalism. So it doesn't date just from the time the United States became a superpower in the world; it goes back much further.

The United States is a country unlike any other country. Its values are different from and better than other countries. Its role is to advance these values in the rest of the world.

This is linked to the question of sovereignty and the fact that the United States dislikes international organizations--and the United Nations above all--putting their noses into its own sovereign questions. It's linked, but in fact it's deeper than that.

Of course all of us think we live in a special kind of country, but in the case of the United States, it really believes it's a country of a different order and should not therefore be bound by the same rules. You see this in the Convention on the Rights of the Child, which I referred to earlier; in Kyoto, where the United States is going its own route on climate change; and in various arms control agreements now as well.

Á (1120)

[Translation]

I think your last question about private interest and public interest is absolutely fundamental. If we look at the people who are opposed to globalization, the anti-globalization protesters, what they say is that private interests are dominating everything. It is interesting to know that George Schultz, who has done rather well thanks to private interest, who has earned a great deal of money, has said that we need other ways of guaranteeing the public interests. When I spoke about global public goods, that is what I intended to say.

Countries have a government that can help people in distress, and is there to protect the environment or whatever, but there are far fewer entities of this type at the international level. We cannot afford to finance goods at that level. I consider this a very important point.

Á (1125)

Mr. Yves Rocheleau: A while ago, professor Rodrigue Tremblay, an economist from the University of Montreal whom you doubtless know and who was formerly a minister in the PQ government, appeared before our committee. With reference to the United States, he said that an old American concept is resurfacing and it is known as manifest destiny—I do not know whether there is a connection here to American exceptionalism. Do you see any connection?

Mr. Gordon Smith: Yes, that's exactly right. It's really the idea of manifest destiny.

Mr. Yves Rocheleau: What does that mean exactly?

Mr. Gordon Smith: Manifest destiny means that they have a role to play in the world. That they have a very specific role to play in civilizing the world, in promoting democracy and human rights and in indeed saving the world.

Mr. Yves Rocheleau: So, it's a God-given role?

Mr. Gordon Smith: Yes. You only have to listen to what President Bush says. He refers to God constantly in his speeches. He believes that God is with him and that the United States has a very special role to play in the world in defeating terrorism. Where does this role lie exactly? It seems to me that it is linked to the idea of manifest destiny. It is not exactly the same thing but they are linked, in any case.

[English]

The Acting Chair (Mr. John Harvard): When I hear you talk about American exceptionalism it sounds like a euphemism for an air of superiority, or “We know best”. Would it be unfair of me to say that?

Mr. Gordon Smith: No. I honestly believe there's that sense that the United States, by promoting its own values and its own role in the world, is doing it on behalf of the best interests of us all. Some of us may find it--

The Acting Chair (Mr. John Harvard): A little gratuitous?

Mr. Gordon Smith: Yes. There's an extraordinary book, written by a gentleman called Edward Luck, called Mixed Messages that has got the best single chapter on U.S. exceptionalism I've ever seen. To be frank with you, in the period I was Deputy Minister of Foreign Affairs I was not nearly as familiar with this concept as I am now. But if you read in the American literature, if you talk to Americans, it comes up.

The Acting Chair (Mr. John Harvard): I have three or four questions I think you can deal with quite quickly. I want to take advantage of your presence, given the fact that it so closely juxtaposes the visit of your former minister, Mr. Axworthy, who was here yesterday. He spoke, along with Professor Byers, among other things about the Northern Command.

I don't know whether you have any thoughts, and I wouldn't deign to try to reframe the arguments put forward by Mr. Axworthy, but I think what Mr. Axworthy and Professor Byers were saying was that the Northern Command at the very least raises a lot of questions for Canadians, and that before we say yes, no, or whatever, we have to answer those questions. And those answers come best through a public debate--something we haven't had yet. Of course they point out that the Americans want this up and running by the fall, and they want some kind of response from the Canadian government as early as a couple of weeks from now.

I would like to know your take on the Northern Command, if you've given it a lot of thought, and whether you would agree, if not totally, with Mr. Axworthy on the position he takes that we should at least answer some of the profound questions raised by the Northern Command.

The other questions I have on my mind, Mr. Smith, really have to with the African agenda at the G-8. What I would want to know is whether we, as Canadians--as a nation--should be advancing or proposing certain trade measures, initiatives that the G-8 partners should pick up or support. That would be number one.

With respect to our own aid program to Africa, what do you think should be the priorities, if the priorities are not constructed the way you would like them?

And on the question--and Mr. Martin raised this--about conditionality or the bar of conditionality, do you think we should be insisting on some kind of good governance, call it, before certain kinds of help are extended? Or do you think this so-called peer review under NEPAD is good enough?

And how do you think the $500 million we tacked on in the last budget should be used?

I think that will keep you going for five minutes.

Á (1130)

Mr. Gordon Smith: Thank you, Mr. Chairman.

On the first question, I absolutely agree with my former boss Mr. Axworthy that the question of the Northern Command is important and should be debated publicly. I don't understand quite why, but I don't see much sign of that happening. Where I would part with him, I think, is that--and this is what I was trying to say in my brief presentation--the reality is the United States is going to defend itself in whatever way it sees fit or sees required. If the United States is under attack, it will do it over Canadian air space; it will do it off Canadian waters; it will do whatever. That's why I made the analogy with the original creation of NORAD.

Whether one likes it or doesn't like it or finds it objectionable--it almost makes the point on sovereignty--fine; all of that I can grant. But it's a reality, and therefore my own feeling is I would rather see Canada a part of the process, where you know what's going on and can try to influence it, than outside it.

Do I find it a particularly happy choice we've got to make? No. But life is like that.

The Acting Chair (Mr. John Harvard): Mr. Byers did point out, though, or at least he expressed the opinion, that if we were to stand up to the Americans, really engage them on this issue, we would get a better result, as opposed to more or less caving in and saying “You're going to go that way anyway, so we're going to tag along”, or whatever.

Mr. Gordon Smith: Well, that's always the case, I think. I didn't finish that last thought.

The reason we want the public debate and deeper understanding is we want to know where our own interests lie. And then you want to advance the interests; you don't want to just sit back and take whatever they say is going to happen. I'm not suggesting that for a second.

All I'm saying is I think you've got to come at it in a framework that is in our interest. To hell with the Americans--pardon me--but it's in our interest that we are engaged, in whatever process is eventually established. So then we've got to look at where our own interests lie.

On your second question, I've been very impressed by what the federal government has done on the lead-up to the G-8: the whole appointment of these African personal representatives. Having that the same person who is the sherpa makes a lot of sense. The lead-up meetings have been impressive in their scope, the last one being this one last weekend, which was more with civil society. I think all that process is going along quite well and is engaging other Africans.

As I understand it, but I'm not privy to these things any more, the $500 million--and of course there's already some money in CIDA that is for Africa--is over three years. As I understand it, it's going to be, in effect, some sort of competitive process, a selecting of those areas the G-8 has identified out of NEPAD--that is, out of a sub-set of the total NEPAD agenda--and then looking at which of those should be funded. I think good governance is key. And here I will come back to underline the role I think the International Development Research Centre can play.

If one looks at the role the IDRC has played--and if I may, Mr. Chair, let me suggest that at some point you might want to ask the president of IDRC, Maureen O'Neill, who's in Ottawa, as opposed to me living in Victoria, to come before you and talk a little bit about what they're doing--I think quite a bit could be done there that would increase capacity and that ultimately will increase good governance.

With respect to conditionality, I guess all I can do here is just elaborate a little bit, basically to repeat what I said in answer to Mr. Martin. My own biases are very much to conditionality; let me start by saying that. I think when we give away the taxpayers' money in Canada, we ought to be making sure it gets the best possible value, that it goes to people who are going to use it in the right way. I come at this without a problem with conditionality--indeed, the opposite: I come out with a bias towards conditionality.

In this case, as I said earlier, you've got this extraordinary act of the Africans all coming together. They've all signed on to this NEPAD, some with varying degrees of seriousness, and they've said, “You people”--the donors--“haven't done a great job, and that's evident on the ground. So give us a chance; let us try to manage this.” I guess in this case I'm willing to suspend my own reservations about having unconditional aid. Let's work it through Africa. At this meeting I was at in Italy--and you may have other information--it seemed Zimbabwe will not be part of NEPAD. It will not be one of the receiving countries to NEPAD--that's their assumption--for a variety of reasons related fundamentally to governance.

Let's give them a chance. That's what they asked us for: “Let us make our own mistakes.” Well, let's try it and see how it works, because our own record has not been a brilliant one.

Á (1135)

The Acting Chair (Mr. John Harvard): Finally, on market access we've heard from a number of witnesses in the last couple of days how crucial it is for the developing countries to have far better market access to our market, the American market, and so on. I'm just wondering how suited we are as a country to take a lead on that particular issue, given the state of agriculture in this country and the fact that we have something called supply management. I'm wondering, how in the world do we say to the developing countries, and let's say Africa in particular, “Yes, we're going to lower the barriers, lower the tariffs”, when certain agricultural interests would just come down on us like a ton of bricks--maybe even two tons?

Mr. Gordon Smith: Yes, that's exactly what I was referring to. The Prime Minister has made certain suggestions. I don't have them in front of me, but my understanding is there is a process underway now to try to translate those into actions.

I guess the easy answer to your question, Mr. Chairman, is that unless we're prepared to do it ourselves, we had better not be out there advocating that others should do it.

But if you look--this is what the Africans have said--at the amount of money that is spent on agricultural subsidies around the world, if you put a quarter of that or a third of it into development assistance, you'd have all you need. You'd spend the rest on.... I know, politically this is difficult; it's difficult in our country significantly because of Quebec and the farm community in Quebec that is very dependent on the supply management system. It's not only in Quebec, I know, but we all know that gives it a special political dimension in our country.

So it's incredibly difficult, but if we fail to address this issue.... The Africans and the other developing countries thought they had a result out of the Uruguay Round, in terms of access to our market, and there's a terrible feeling of cynicism that they were misled. Well, if we mislead them again, as I say, I think the level of cynicism will go very high. But I have no illusions about the politics of it.

The Acting Chair (Mr. John Harvard): Mr. Rocheleau has just a short question.

[Translation]

Mr. Yves Rocheleau: Thank you, Mr. Chairman.

My question is to the former Deputy Minister of Foreign Affairs. In answering a question I asked her, the former minister admitted that 75% of the aid provided by Canada through CIDA came back into the Canadian economy by way of services. Do you find that normal? Do you think that is right? Is this not the type of change that Canada should be making to help Africa more?

Mr. Gordon Smith: That is another good question. I was also deputy mnister to André Ouellet at the time, and the two ministers emphasized the fact that the money comes back to Canada. On the one hand, this is a good idea, because it increases support for CIDA's budget, but on the other hand, you are quite right. We are spending much more. We are not giving recipient countries an opportunity to decide what they need. In English, we would be talking about tied and untied aid. Everyone says that untied aid is preferable, but the problem is that public support is required for aid and development budgets.

Á (1140)

[English]

The Acting Chair (Mr. John Harvard): Mr. Smith, I want to thank you. This has been most informative and fascinating, and we appreciate your efforts. Thank you.

Mr. Gordon Smith: Thank you for the opportunity.

The Acting Chair (Mr. John Harvard): Members, this meeting is suspended until 1:30 this afternoon. Thank you.

(1136)

(1330)

The Acting Chair (Mr. John Harvard): We want to resume today's sitting of the committee. As we move into the afternoon session, we have the pleasure of calling upon Dr. Joan Russow, former sessional lecturer in global issues, University of Victoria.

Joan, we're going to have about 45 minutes to listen to you and ask you some questions. You may begin.

· (1335)

Ms. Joan Russow (Individual Presentation): What I'm going to try to do is to follow through with the brief I've prepared, and every once in a while introduce responses to some questions raised during the two days of discussion here.

At the G-8 conference there will be a review on the progress achieved on the implementation of the United Nations Millennium Declaration. The UN Millennium Declaration was a reminder of a range of international obligations, commitments, and expectations. It was not a new document to supercede years of negotiated but neglected precedents. It should not be interpreted as a fresh vision, but more as a stark comment on the procrastination of the member states of the UN.

The Un Millennium Declaration must not absolve member states from years of unfulfilled obligations and commitments. Through the United Nations system for more than 55 years the members of the G-8--as well as member states of the United Nations--have incurred international obligations through conventions, treaties, and covenants. They have also made international commitments through conference action plans and have created international expectations through General Assembly resolutions.

These obligations, commitments, and expectations have been intended to serve the furthering of the global public trust as a public good. I would define that as the attaining of a state of peace, justice, and common security. Common security is the term used by Olaf Palme to extend the notion of security to include human rights, peace, environment, and social justice.

The Acting Chair (Mr. John Harvard): By Olaf Palme you mean the Swedish prime minister who was assassinated?

Ms. Joan Russow: Yes--hopefully not for that suggestion.

Common security also includes the promotion and full guaranteeing of respect for human rights, including labour rights; the right to unadulterated food; the right to housing; the right to universally accessible, publicly funded health care; the right to social justice; and the enabling of socially equitable and environmentally sound development. I use the latter term because it was introduced at the International Convention on Population and Development. It introduces the element of equity, and thus better expresses the concept of sustainable development than the concept of sustainable development alone.

Moreover, common security includes ensuring the preservation and protection of the environment; the respecting of the inherent worth of nature beyond human purposes; the reducing of ecological footprints and the moving away from the current model of over-consumptive development; and the instituting of a fair and just transition program for workers and communities affected by change.

This is a way of bringing those concerned about the environment and the labour movement together and creating a global structure that respects the rule of law.

Now, I feel this framework of public trust could be introduced to possibly address the issue of conditionality, to say that here we have in the UN system a set of principles that have been well established throughout the years of negotiations, that these could serve as a basis for conditionality, but that the implementation of these principles would be at the national level.

The year 1999 was intended to be the culmination of the decade devoted to the furtherance of international public trust law. Unfortunately, it became the culmination of international trade agreements that have served to undermine international public trust law. Rarely do members of the G-8 claim they have obligations and commitments under the international public trust law, but G-8 governments continually claim they have obligations under agreements that relate to military and industrial interests.

I'm going to look at the UN Millennium Declaration in the context of international public trust agreements because the point I want to make is that I think it would be unfortunate to look at the UN Millennium Declaration as being a new benchmark. It's really important for governments, for member states of the UN, to acknowledge that there have been years and years of unfulfilled obligations and commitments.

I have prepared a 400-page document--which I doubt anyone would want to read--and what I'm doing here is summarizing some of the document. The purpose of the document is to remind governments of their long-standing obligations and commitments, and that when they undertake to report on the implementation of the UN Millennium Declaration, they should not ignore the years of obligations not yet discharged, years of commitments not acted upon, and years of expectations not fulfilled. In this presentation I'll draw from this 400-page document, as I mentioned.

The UN Millennium Declaration is divided into several broad categories: peace, security, and disarmament; development and poverty eradication; protecting our common environment; human rights, democracy, and good governance; protecting the vulnerable; meeting the special needs of Africa; and strengthening the UN. I will examine each of these categories and give examples of statements from leading international groups and existing international precedents. I will then examine systemic constraints that have to be overcome if there is to be implementation of the UN Millennium Declaration and of international public trust law. I will conclude with recommendations for ethical governance.

In each of the categories in the UN Millennium Declaration there is an abundance of extant international instruments to undergird these categories. The first category is “Millennium Declaration Category II. Peace, security and disarmament”. It lists “Commitments made or obligations incurred to do the following”. Over the years governments have incurred obligations and made commitments to do a number of things, which I'm going to list very briefly now.

In 1972, at the United Nations Conference on Humans and the Environment in Stockholm, every member state of the United Nations made a commitment to eliminate the production of weapons of mass destruction. I believe the U.S. proceeded soon after that to redefine weapons of mass destruction as not including nuclear weapons.

In 1976 at the Habitat I Conference here in Vancouver, every member state of the United Nations made the following acknowledgment and commitment:

“The waste and misuse of resources in war and armaments should be prevented. All countries should make a firm commitment to promote general and complete disarmament under strict and effective international control, in particular in the field of nuclear disarmament. Part of the resources thus released should be utilized so as to achieve a better quality of life for humanity and particularly the peoples of developing countries.”

There were a number of NGOs that tried very hard to get that into the Habitat II document, but unfortunately there was resistance, from the U.S., primarily.

Through General Assembly resolutions, member states of the United Nations created the expectation that governments would do several things. First, they would demand that policies of states be directed toward the elimination of the threat of war, particularly nuclear war. This is a declaration of the right of all peoples to peace. Then governments should commence negotiations as a matter of priority in order to achieve agreement on an international convention prohibiting the use of or the threat to use nuclear weapons under any circumstances, taking the annexed draft as a basis.

This is from 1983. This is all documented in my submission.

Governments should reduce military budgets with a view to reaching international agreements to freeze, reduce, and otherwise restrain military expenditures. There's one resolution after another in the General Assembly on that.

· (1340)

There was a document related to the use of science and technology that said:

“Promote international cooperation to ensure the results of scientific and technological development are used in the interests of strengthening international peace and security, freedom, and independence, and also for the purpose of social development of peoples and the realization of human rights and freedoms in accordance with the Charter of the United Nations.”

Also, there was a recognition--this is a declaration called the Declaration on the Use of Scientific and Technological Progress in the Interests of Peace and for the Benefit of Mankind--“that while scientific and technological developments provide ever-increasing opportunities to better the conditions of lives of peoples and nations, in a number of instances they can give rise to social problems, as well as threaten the human rights and fundamental freedoms of the individuals”.

Also, going back as far as 1967, there was a very important outer space treaty that is being currently violated, and that treaty had as one of the provisions: “to promote that the exploration and the use of outer space, including the moon and other celestial bodies, shall be carried out for the benefit and in the interests of all countries, irrespective of their degree of economic or scientific development...”.

I've listed here a number of other agreements that I believe are relevant.

I would propose--I know this has come up several times during the hearings--that Canada withdraw immediately from all military engagement in Afghanistan and call upon the U.S. to go to the International Court of Justice to seek justice. There have already been six months or more of revenge, and I don't think Canada should support the U.S. in this. Canada should use its previous reputation internationally to urge the U.S. to go to the International Court of Justice. The campaign of revenge should end.

Also, I would suggest the Canadian government should repeal the Anti-Terrorism Act and initiate a consultative process at the International Court of Justice requesting an advisory opinion about potential violation of the International Covenant on Civil and Political Rights.

The UN Millennium Declaration section III is on development and poverty. In 1974 there was a very interesting document called the Declaration for a New International Economic Order, and it's quite a different order from what is being promoted at this time. This proposal for a new international economic order was encompassing a different concept of development. It was declared and the following expectation was created that member states of the UN would work “urgently for the establishment of a New International Economic Order based on equity, sovereign equality, interdependence, common interests and cooperation among all states, irrespective of their economic and social systems which shall correct inequalities and redress existing injustices, make it possible to eliminate the widening gap between the developed and the developing countries and ensure steadily accelerating economic and social development and peace and justice for present and future generations”. That was negotiated in 1974.

In 1992 at UNCED, every member state of the United Nations recognized that health and development are intimately interconnected, that insufficient development leading to poverty and inappropriate development resulting in over-consumption and coupled with an expanding world population can result in severe environmental health problems in both developing and developed countries. It's been shown over and over again, as you must know, that poverty is one of the primary determinants of health problems, as well as environmentally induced diseases.

In 1994, at the International Conference on Population and Development, the member states of the United Nations made a commitment to give a broader mandate on development issues than previous population conferences, reflecting the growing awareness that population, poverty, patterns of production and consumption, and other threats to the environment are so closely interconnected that none of them can be considered in isolation. I raise this because I remember that in the documentation that I received, it seemed as though the G-7 would discuss only poverty and the section on Africa, and I think they have to look at all the interconnected and interdependent elements of the UN Millennium Declaration.

· (1345)

In category IV of the United Nations Millennium Declaration, protecting our common environment, member states of the United Nations incurred obligations or made commitments to respect the inherent worth of nature beyond human purpose and secure nature from degradation caused by warfare or other hostilities. This was in the World Charter for Nature in 1982, ten years after the conference on humans in the environment in Stockholm. Every country in the world, except the U.S., adopted the World Charter for Nature.

In 1992 the U.S. refused to participate in Rio if any reference was made to the military, and they will probably not participate in the world conference on sustainable development if the military and the impacts of the military on the environment are included.

All member states of the United Nations made a commitment to do nothing on indigenous lands that would cause environmental degradation or be culturally inappropriate, and to invoke the precautionary principle, which affirms that where there is a threat of damage to the environment, lack of full scientific certainty shall not be used as a reason for postponing measures to prevent the threat.

The member states made the commitment to carry out an environmental review of anything that could contribute to loss or reduction of biodiversity; to provide socially equitable and environmentally sound development; to reduce the ecological footprint--this was developed by a professor at UBC and was introduced at the Habitat II conference; and to protect sites of universal value, which was agreed to at the convention on the protection of cultural and natural heritage.

I also want to refer to the two very important conventions that came out of Rio: the UN Framework Convention on Climate Change, and the UN Convention on Biological Diversity. There's been a considerable amount of discussion about the Kyoto protocol, but you rarely hear any discussion about the fact that Canada and the U.S. both signed and ratified the Framework Convention on Climate Change. Under that convention there was an agreement to invoke the precautionary principle, and an undertaking to reduce greenhouse gases to 1990 levels by 2000. There has been procrastination by both countries.

The protocol is linked to this Framework Convention on Climate Change. The protocol is not independent. And I think it's really important to point out that when David Anderson says he has not yet consulted with the provinces, when you look through documentation you find that in 1992 there was full consultation with the provinces, and they were present in Rio. In fact, there was a meeting in Whitehorse in August of the ministers of natural resources. They even passed a resolution urging Canada to ratify the convention. There was a meeting in Aylmer, Quebec, in November 1992 of environment ministers from across Canada, and they also moved a resolution urging Canada to ratify. So the provinces are fully responsible, and between 1992 and 1996 there was full consultation, not so much with environmental groups, but with industry.

I think this is the case. It's similar to the UN Millennium Declaration: a new document emerges and suddenly it supercedes all previous obligations. I think we have to remind the government that they are obliged to do that.

Similarly, with the Biodiversity Convention, if Doman Industries really wanted to address the issue, they would follow through with what Mr. Harvard said about just cutting off the U.S. completely. But then Canada has to take the high ground and say we're doing it for environmental reasons; we're doing it because we're obliged to implement the Biodiversity Convention.

· (1350)

The Acting Chair (Mr. John Harvard): I would just like to remind you that if you go through this entire text, there will be no time for questions. I can tell you that at 2:15 you will be finished.

Ms. Joan Russow: Okay. What time is it now?

The Acting Chair (Mr. John Harvard): It's almost 1:50. Those are the rules, that's all.

Dr. Joan Russow: I appreciate that, but I don't want to miss human rights and democracy. I think there has to be a strong campaign to get the U.S. to ratify the International Covenant of Economic, Social and Cultural Rights.

You'll have an opportunity to read this, so I'll move to what I perceive to be the systemic constraints preventing the implementation of international law.

The first constraint is the denial that exists alongside the recognition of urgency. I have a document I'm going to leave with you, and in it you'll see that I've gone through international documents and compiled statements from the past 30 years on the recognition of the urgency of the current situation. For example, here's a statement coming out of UNCED in 1992:

“Humanity stands at a defining moment in history. We are confronted with a perpetuation of disparities between and within nations, a worsening of poverty, hunger, ill health and illiteracy, and the continuing deterioration of the ecosystems on which we depend for our well-being.”

Also, after attending numerous international conferences, I've noticed an absence of political will, and often a process of weakening the agreements during the negotiation process is reflected--changing the language from “shall” to “should”; introducing concepts or expressions such as “as appropriate”. Also, I was very concerned in Rio to see how the U.S. continually removed the word “safe” whenever they were talking about safe and environmentally sound technology.

A major, major systemic constraint is institutional myopia or amnesia. Institutional memory related to principles from past precedents and related to obligations incurred in commitments is incredibly short. I've seen this at the UN when new agreements are being negotiated and people are talking about the issues as though they've never discussed them before. One that comes to mind is the commitment to aid of 0.7% of the GDP. It was still being debated at the women's conference, when it had been agreed to in the sixties and then again in Rio and through many other conferences.

There is also a misuse of precedents. I've seen the Holy See engage in that when it didn't want to include any new grounds in the human rights documents, so it said that it really should limit itself to those grounds listed in the Universal Declaration of Human Rights.

I've seen ratification avoidance, and I think this is extremely important. It happens so often. Countries rush to sign but then they refuse to ratify. When I was in New York, I went to talk to the treaty branch of the United Nations, prior to the Millennium Summit. I was pleased to hear that there was going to be a push at that time to get governments to sign what they hadn't signed and ratify what they hadn't ratified. I have referred, in my brief, to this means of evaluating; I have all the countries along the top and the different documents.

There is also a substantial problem in Canada. Canada will sign and ratify almost anything, but I think it's probably the fault of the Department of Justice, whose responsibility it is to ensure the implementation of international agreements. I have been in the court system several times trying to use international agreements. When I was in the B.C. court, it said that all the international agreements I referred to were not judicable within the courts of British Columbia. When I referred to the International Covenant on Civil and Political Rights in the Federal Court, it said there had been no implementing legislation in Canada, so I couldn't even refer to it. I was referring to a ground not enshrined in the Charter of Rights and Freedoms.

The Acting Chair (Mr. John Harvard): These are ratified treaties you're talking about.

Ms. Joan Russow: Oh, definitely, definitely.

The Acting Chair (Mr. John Harvard): Okay.

Ms. Joan Russow: The International Covenant of Civil and Political Rights was ratified, I think, in 1976.

I've also noticed--and I want to raise it as a serious concern--that there has been judicial disdain and disinterest in international law demonstrated by the judges. In the Clayoquot case, when one of the protesters mentioned the International Covenant on Civil and Political Rights, the judge said, “Well, that sounds like some international something or other”.

There is also disregard for the International Court of Justice. I was in The Hague when Yugoslavia took the ten NATO countries to the International Court of Justice in May of 1999. One NATO country after another stood up and said, “We refuse to accept the jurisdiction of the court”. There were four categories for accepting the jurisdiction. Canada usually accepts the jurisdiction, but it didn't in this case. The U.S. has--if it could be called a principle--that it will only accept a jurisdiction when it feels like it, essentially. They were in the court before and they did accept its jurisdiction initially--but they didn't accept the decision. This was the case with Nicaragua over land mines.

· (1355)

I want to conclude the section on systemic constraints with a reference to what I refer to as a “holier-than-thou-syndrome”. I've seen this referred to occasionally in the meetings here--namely, that we're not going to lend money to the south because of corruption. Well, I'd like to propose that we have to look very carefully at what constitutes corruption. I'd just like to refer to the Economic Development Corporation's Globe 2000 report, in which they state that the so-called developed countries decry the level of corruption in the so-called developing countries. It is interesting to note that corporate donations to political parties have not been deemed to be unethical, or to be evidence of conflict of interest, and even of corruption. It is ironic that it is illegal for Canadian companies to give money to elected officials outside of Canada because these “contributions” would be categorized as bribery, and elected individuals or regimes accepting these contributions from corporations would be deemed to be corrupt.

In Canada there appears to be a difficult-to-appreciate distinction between corporations giving money to political parties in Canada before they are elected and corporations giving money to elected members of Parliament after the election. Yet the former is described as donations, funding, or contribution. The latter is bribery or corruption. In many countries, both practices would be prohibited.

I then have a list of what I would call principles and statements for us to move towards ethical governance.

What's the time now?

¸ (1400)

The Acting Chair (Mr. John Harvard): It's 2:56.

Ms. Joan Russow: Okay, I'll finish this in four minutes, and allow ten minutes for questions.

One thing that is absolutely essential is to reduce the current global military budget of $850 billion plus--up to $900 billion--by at least 50% to correspond with the vision enunciated in 1981 in the General Assembly resolution calling for the reduction of military budgets. Then 50% of the savings in the military budget should be transferred to social programs, including in developing countries--again corresponding with the vision enunciated in several resolutions. The peace dividend could be immediately transferred into guaranteeing the right to basic needs, including safe and healthy food and water; affordable housing; universal health care; education; a safe environment and safe ecological heritage; social security; and work in a socially equitable and environmentally sound employment.

This could have happened after September. After September 11, the U.S. could have said, “We're going to the International Court of Justice to seek justice, but we recognize there have been reasons that could have generated this act against us”. Looking at and addressing sources of terrorism--such as the issues of poverty and environmental degradation, and violation of human rights--would go a long way to preventing terrorism, although it could not be said to prevent terrorism definitely.

Also essential is conferring a significant portion of the remaining 50% of the military budget into programs that support the work of the United Nations agencies, particularly programs that set up alternative structures to prevent conflict and war, through an international regime that respects the rule of law.

We should also ensure that corporations, including transnational corporations, comply with all international codes, social security, and international law, including relevant environmental law. Now, these are not my words. They were agreed to in 1995 in Beijing and in 1996 in Istanbul by every single country. That commitment was made to ensure that corporations comply with international law.

Furthermore, we should require the International Monetary Fund and the World Bank to comply with international standards. I know when the banks were formed there was a provision that they should not engage in any form of conditionality. But I think--without imposing too much on developing countries--the global community still has to function within an ethical framework.

I would advocate disbanding NATO and other military alliances, and dismantling the WTO. I would also prohibit discrimination in all grounds; the UN has numerous documents to support that. We should also move away from current patterns of over-consumption, towards socially equitable and environmentally sound development. Over and over again in the international documents, they refer to the problems created by the current model of over-consumptive development.

Institute a fair and just transition program for workers in communities affected by change. This is extremely important. There have been conflicts between labour and environmentalists over the years, and one way of bringing the two together is to ensure that when there are sunset industries, a transition program for workers is in place.

Cancel the debt. That should be brought up at the G-8 meeting.

I want to address the issue of the participation of civil society. When the UN holds conferences, it has a mechanism for the participation of civil society. Groups can apply for accreditation. I've been at a meeting where about 3,000 NGOs had access, and a parallel meeting was taking place. There was communication between the NGOs that had access to the main meeting and the parallel conference. But whenever trade agreements were involved, barriers were set up immediately, and it seems as though the G-8 is following a similar plan. I think that if we're going to look at serious issues involving civil society, there has to be a way for them to participate.

I did forget one thing about the UN that I definitely want to mention. I think the Security Council should be disbanded. I don't think it should be reformed, because it violates a fundamental principle enshrined in the UN charter, and that is sovereign equality. I think it would be an interesting case if Canada went to the International Court of Justice seeking an advisory opinion on whether or not the existence of the Security Council does violate the principle of sovereign equality. Certainly in that case, some countries are considered more equal than others.

Thank you.

¸ (1405)

The Acting Chair (Mr. John Harvard): Thanks, Joan.

We have 15 minutes for questions. Do you want to start, Mr. Martin?

Mr. Keith Martin: Thank you very much.

Thank you, Joan, for appearing in front of us today and listening to a lot of the interventions.

To the frustration of all of us and despite the myriad of declarations, accords, and agreements to protect everything from children to the environment, the United Nations has demonstrated itself to be a biased, utterly incompetent organization to deal with the major challenges we have. Whether you look at Sudan, the Congo, the Great Lakes region, Zimbabwe, Sierra Leone, Liberia, or Angola, and on and on it goes, it is unwilling or unable to deal with the mass murder of innocent civilians. So I would ask you one question: what should we do to put teeth into the declarations and accords that the international community has signed?

This is my last question. In my view, conflict today has less to do with interstate and intrastate conflict, less to do with philosophical differences and more to do with power that is used for pillage, and less to do with leaders pursuing an objective and more to do with kleptocrats who are masquerading as leaders. In your view, what should we do to mobilize the international community to basically deal with the challenges facing the poorest countries in the world, which, I would suggest, have nothing to do with corporate interests and globalization and everything to do with these brutal kleptocrats, who are using the power they have acquired for their own gain and that of their hangers-on?

Thank you.

The Acting Chair (Mr. John Harvard): Joan, if you take about five minutes to answer that, Mr. Rocheleau will have time to ask you questions. Go ahead.

Ms. Joan Russow: This is sort of a conundrum, because the UN is composed of member states. I think what is important is to address the issue of hypocrisy and to translate rhetoric into action.

What we see over the years is that the developing countries.... I prefer to use the majority world versus the minority world, and the majority world sees continual exploration. I definitely appreciate what you're saying. Many of the conflicts arise because of religious differences, philosophical differences and so forth, but I think we should start out at least addressing what we can address.

I think it's the same thing with addressing issues surrounding health and health care. Let's prevent the preventables, then try to get on with the really difficult issues. I think if we brought that about through the United Nations and through respecting the United Nations and the International Court of Justice, which I think is an extremely important vehicle, we would be able to eliminate a lot of the problems.

You say it's not caused by corporations, but I've done a lot of travelling and I've seen how corporations have set up industries in various countries and what they do. They use all the potable water so the citizens don't have water to drink. Throughout the world, corporations have been responsible for violating human rights, destroying the environment. I can think of numerous cases. You're thinking of specifics. Look at what happened with Shell in Nigeria in Ogoni, and someone mentioned earlier about Talisman in the Sudan.

I remember being at a conference once because I thought it was really important for us to monitor what Canadian companies are doing around the world and this was an international conference. One representative after another came up to me and said “Do you know what Canada is doing in Chile? Do you know what Canada is doing in Peru? Do you know what Canada is doing here?” This is something we can address. At one time I wrote a set of criteria for CIDA, I guess it was a form of conditionality, for corporate projects outside of the country.

I mean, we were supporting the flooding in China of the Three Gorges Dam. A lot of Canadians don't even know what Canada is doing, and this is just one country. What about the others? We're selling Candu reactors around the world. We were even going to sell Candu reactors to Turkey, with their earthquake problems.

Let's seriously look at what we're doing. We're living in very, very dangerous and serious times, and if Canada can play a leadership role and advocate the implementation of what I was referring to as a global public trust and a need for ethical governance, I think we can make at least a step forward. These are our problems.

I was living in Spain during Franco's regime, and the military couldn't have done very much there. It was a really, really difficult problem. This is what we have to make sure to avoid, that we don't become obsessed with security and intelligence--another misnomer--and create the sort of state that I remember living through in Spain.

You pointed to problems that are currently incredibly serious, but let's try to at least address the problems that we can address. How much money from the global military budget would it take to address the issues you've seen around the world, such as eliminating land mines--I know that was an issue you were really involved in--instead of spending more money on the military and depleted uranium? Look at what we are doing--

¸ (1410)

Mr. Keith Martin: How can we convince the U.S. to do that, Joan?

Ms. Joan Russow: Well, I think Canada could show leadership, and this is an opportunity for the G-8 to say enough is enough.

The Acting Chair (Mr. John Harvard): Didn't we show leadership? We signed the treaty.

Ms. Joan Russow: That's not enough.

The Acting Chair (Mr. John Harvard): It's leadership, though. Did we not have a foreign affairs minister who went all around the world and pushed hard?

Ms. Joan Russow: I know, I know.

The Acting Chair (Mr. John Harvard): How much more do you want? How much more do you want?

Ms. Joan Russow: Well, that was in that one stage, when we were dealing with that one particular issue. That was an issue in which Canada did take leadership. I think we've got to be relentless.

If there's one message that has come out in the two days I've been here, it is that there is a very strong concern about the intransigence of the U.S. and the way Canada is becoming a subservient neighbour. I think now is the time for Canada to really stand up for the public trust.

The Acting Chair (Mr. John Harvard): We have about seven minutes, so we have to give it to Mr. Rocheleau.

Ms. Joan Russow: I'll try to understand it in French.

The Acting Chair (Mr. John Harvard): You can put your receiver on, whatever is your choice.

Ms. Joan Russow: Yes, I'll try.

The Acting Chair (Mr. John Harvard): Whatever turns you on.

Ms. Joan Russow: Speak slowly, though.

[Translation]

Mr. Yves Rocheleau: Thank you, Mr. Chairman.

I would like to congratulate you, Ms. Russow, on your presentation, which is rather gloomy, but which, I think, is an accurate representation of the world situation in a number of respects, particularly as regards the environment. On Earth Day, about two weeks ago, I was listening to Jacques Languirand, who can be described as a humanist observer of the world scene. He said that the Amazon forest in South America was being harvested again at a rate of seven football fields a minute.

I read recently that cod and halibut had become so scarce in the Atlantic that dolphins had lost quite a lot of weight and that their ribs were starting to show. There is an imbalance because of the commercial fishery, apparently, not to mention global warming. So there is cause for great concern about the environment.

I very much appreciated your comments about corruption in underdeveloped countries. We do not hear about that very often. I think that as westerners, we adopt a very haughty approach. We know what happened in the Enron scandal in the United States: Enron bribed representatives of the two major U.S. parties. The Canada Elections Act sets no ceiling on the spending or financing of political parties. There are no rules at all regarding leadership races. Someone who is elected leader of the Conservative Party or the Liberal Party of Canada aspires to be Prime Minister, if that is not already the case, but there are no rules governing the leadership race. We do not know who provides this individual's funding. Consequently, this is very important for democracy.

I come now to my third comment or question. What do you think about introducing the Tobin tax or an equivalent measure?

Finally, I am not sure I understood you correctly, but you seemed to say that the International Monetary Fund and the World Bank are not complying with international rules. I would like you to comment on the steps they have taken with developing countries.

¸ (1415)

[English]

The Acting Chair (Mr. John Harvard): Joan, you have about four minutes.

Ms. Joan Russow: I'll speak first about corporate donations, because there's been a lot of discussion about how corporate donations influence grants and contributions, but there hasn't been sufficient study of how corporate donations affect the formulation of policy. I did an analysis of the 1997 donations to the major political parties. It doesn't surprise me that there's reluctance to really deal seriously with the issue of climate change. The major parties are all accepting money from the major greenhouse gas producers.

On the Tobin tax, I don't think it goes far enough. I'm asking for a reduction in the military budget. The Tobin tax is interesting, and is a measure that should be introduced. But I always thought the percentage was very low.

I'm not sure if I understood the question on the World Bank. I was discussing this with someone from the World Bank, who told me that when the World Bank was formed it was supposed to lend money without any conditionality. But there seems to be quite a debate going on within the World Bank about whether or not there should be conditionality. As I was suggesting earlier, one way of not appearing to impose too rigorous standards or conditionality is to encourage local control--but within a framework of overarching principles of ethical governance, which all countries should follow.

The problem is that the south can look at the north and see blatant hypocrisy. Often what happens is when money is being lent...and I remember this happened in Rio, where the U.S. was saying “Well, if we're going to give more money to the south, it's got to be conditional”. I was talking to a U.S. senator, who happened to be Al Gore, and I said “What does the U.S. mean? You don't have a health care system. You have people sleeping in the street. What sorts of standards and conditionality are you going to use?”

They were talking about the extinction of species, such as dolphins. That's where we have to look to the Convention on Biological Diversity. It's really interesting that again this seems to happen when we're getting a whole new document on endangered species legislation. Canada has already made a commitment to conserve biodiversity, which would include endangered species. So whenever we discuss the endangered species act, we have to put it in context of the obligations under the Convention on Biological Diversity.

The Acting Chair (Mr. John Harvard): We have about 90 seconds, and I'd like to work in one question. On your presentation today, Joan, I must congratulate you on your compilation of all these broken treaties and not-lived-up-to agreements. A lot of broken promises is the kind of history you have found.

One of the problems with the United Nations is that it's never been able to transcend national interests, particularly the interests of powerful nations like the United States. When a country or a set of countries ratifies something, in effect making a promise, and then doesn't act upon that promise, what sort of mechanism could you propose that would force it to live up to its promises?

¸ (1420)

Ms. Joan Russow: First of all, I would like to say that one thing I did appreciate in the Millennium Declaration is that it talked about strengthening the General Assembly. I mentioned earlier that I think the Security Council, which I have referred to as an affirmative action program for nuclear powers, should be disbanded and more power should be put in the hands of the General Assembly. I have noticed, after reviewing all the documents, that when there's a resolution going through, the General Assembly tips the balance in favour of the public trust. That is the only body where the U.S.... The U.S. absolutely hates the General Assembly because that's where the south has power.

What I have suggested--I have proposed this and circulated petitions at the UN over the years--is to establish what I refer to as an international court of compliance linked to the International Court of Justice. This international court of compliance would be a court where citizens could take governments and corporations for non-compliance with international law, so it would give power to the citizen. Right now, the International Court of Justice only adjudicates between states, and only if states are willing to recognize its jurisdiction.

I've had a lot of interest over the years in this proposal of an international court of compliance. It builds on the idea of the optional protocol to the International Covenant on Civil and Political Rights. The optional protocol does allow citizens, once they've exhausted all domestic remedies, to have an international remedy at the United Nations Commission on Human Rights in Geneva. So it does have some precedent, and I think that would be a very important way of proceeding.

Thank you.

The Acting Chair (Mr. John Harvard): We are slaves to the clock and the clock says we have to move on. Thank you very much. It's been fascinating. I wish we had more time.

Ms. Joan Russow: I've left the documents for you over there.

The Acting Chair (Mr. John Harvard): Thank you.

Ms. Joan Russow: It would be fun for the G-8 to say “Who's signed this? Who's ratified that?”

The Acting Chair (Mr. John Harvard): Now we're going to call upon Daniel Cohn. He's a professor of political science.

Professor Daniel Cohn (Department of Political Science, Simon Fraser University): I don't anticipate that what I have to say will necessarily exhaust my time.

The Acting Chair (Mr. John Harvard): Okay, you're driving. Any time you're ready, Mr. Cohn, go right ahead.

Prof. Daniel Cohn: Thank you very much for inviting me today.

Looking at your agenda, it appears that the members of this committee have received quite a bit of information and advice, and I don't propose to add too much to the pile you've already received. What perhaps I can do, especially as I'm very close to the end of your agenda for your visit to Vancouver, is offer some ideas on how you can frame the information you've received and think about your answers.

In helping myself to do this, I took the opportunity to look at the wonderful background papers that the committee staff and the parliamentary researchers prepared before your visit, and three questions jumped out at me. Like a good academic, rather than answering the questions for you, for the most part I will instead suggest ways whereby you can answer them yourselves, ways to perhaps give you a little extra information, but mainly give you ways to think about the information, which I'm sure you're all well aware of and have had reinforced for you by the number of excellent witnesses you've heard from across Canada, or will hear from in the coming days.

The first question would be, essentially, does the importance of our relationship with the United States hold the potential to interfere with Canada's other priorities, commitments, both within the Americas and throughout the world? In a blunt answer, I'll say yes. To understand that, I think you have to look at a couple of other questions. Again, I won't answer them as much as give you a way to think about them.

The second question is in what area is it most important for Canada to be able to steer an autonomous path, even if it causes friction within our North American relationships?

The third question is what are the key goals that Canada should pursue in terms of development of our North American relationships?

So why does our relationship with the United States hold the potential to create trouble for our other relationships? To understand why this might be more so in the future than it has been in the past, you have to grasp that Canada is not undergoing globalization directly. What we are undergoing is a process that can best be described as “regionalization”. We integrate with the United States and the United States reaches out to the rest of the world. Therefore, whenever we do something that would disrupt this path, our relationship with the United States, we're not just disrupting our relationship with the United States; we're disrupting our chosen path to the rest of the world in an increasingly internationalized environment.

The second idea you have to grasp is, what is driving regionalization? What is driving regionalization are our own policy choices to reduce the role the state plays in determining the life chances of ordinary people and the opportunities available for organizations and enterprises, and commensurately to increase the role that markets play in creating the life chances that we each enjoy and the opportunities available for organizations and groups. This is sometimes codified with the term “neo-liberalism”. We chose neo-liberalism as a general trend for Canadian policy and the markets that we've freed chose regionalization as the best way to organize their affairs.

So what does that mean? It means that if we disrupt our relationship with the United States, we're not just disrupting our path to the internationalizing environment, but we are also disrupting the basic freedom that we've granted markets as a principal tool of Canadian public policy over the last 10 to 15 years.

¸ (1425)

The Acting Chair (Mr. John Harvard): What is your definition of “disrupting” in this context?

Prof. Daniel Cohn: It's been a basic premise of Canadian public policy for the last 10 to 15 years that the state should step back, should grant the individuals more freedom, should grant organizations more freedom. They have chosen to regionalize. They've chosen that their best interests are served by developing closer networks across the border. When we engage in international relations that disrupt that, for instance by entering into international treaties that the United States might not necessarily agree with, we're creating tensions across that border and disrupting their freedom to go about their affairs. It's just that simple. So we're not just disrupting our chosen route to globalization; we're disrupting the freedom that's at the core of our public policy choices over the last 10 to 15 years. This is why I think that no matter how you look at it, our relationship with the United States is increasingly going to limit what we can do outside that relationship.

Now, what areas are the most important for Canada to maintain its autonomy and its freedom of action? Well, I'm not quite certain I can answer that. I will leave that to the wisdom of people such as yourselves and the researchers you engage. But I will suggest a way you can think about when and where it is important.

As was noted, regionalization is being driven by the choices we made to liberalize. Now, we can ask ourselves, especially in terms of markets, how do companies decide what to do? Well, what they generally try to do is attract the biggest market, and the way they do that is to identify an actor we can call “the median customer”. When they realize the needs of that median customer, they're likely to attract the biggest market and reap the biggest rewards.

In an integrating region called North America that median customer is not going to be a Canadian. If you think about that in a wider sense, think about regulation. What that means is that companies are going to meet the regulatory, political, and economic burdens they see coming from the United States first. If we choose to be different, we are going to have to pay the full cost of that difference ourselves, because they are not going to impose this burden on their median customer. That wouldn't make economic sense. We can indeed be different, but we have to choose to pay the price of our differences.

For instance, consider the Kyoto protocol. The Canadian government, in its wisdom--and I personally think it's a good choice--has chosen to go forward with this agreement. But you cannot expect Canadian business to transfer the cost of our agreement onto its entire customer base. They are going to impose the full cost of that onto us as Canadians. That will be a policy choice we have to choose to pay. As long as we're willing to choose to pay, we will probably have quite a bit of policy autonomy. However, that could become very expensive. Therefore, it's critical for us to know when and where it is in our interest to pay the price.

Now, if we think about our median customer again, something very troubling occurs. It's not really in anyone's interest to create research to meet the needs of Canada to determine when and where it's in Canada's interest to go its own way because we're not the median customer. The only way that research will be developed is if governments of Canada choose to finance it.

The Canadian government has made important reinvestments in our intellectual infrastructure and human capital: increasing scholarship income; increasing grants to the standing research agencies and to new foundations such as the Canadian Foundation for Innovation; and at the student end a very big one, which often goes unnoticed, increasing the tax exemption for student scholarships.

However, the pressures are going to grow and grow, because unfortunately, even with all that reinvestment, it's not keeping up with the needs of students to meet ever-higher tuition. Having told students that they should go out and be market employable and that they should consider their tuition to be an investment in job security, we can't then go and tell them, oh, and by the way, we want you to do research on a topic that only a small group of people known as the Canadian government is really interested in.

In this regard, you have to also consider one other thing. I like to call this the fact that we are domestic in a foreign sense to the United States. That idea comes from a book on Puerto Rico called Foreign in a Domestic Sense, and it refers to Puerto Rico's analogous relation to the United States. We're the opposite: we're domestic in a foreign sense. We're the foreign country most like the United States, and consequently it's easy for us to look at the similarities and not necessarily see the differences that are really important for our public policy.

When you add that into the notion of the median customer, we get this horrible problem where unless the governments are willing to fund people to deliberately look at what is different between the countries and those differences increase, becoming singly important because we're going to have to pay for them if we want to keep them, who's going to do that work?

¸ (1430)

I personally think this is the biggest risk, that we might lose the ability to know when it's worth paying for our differences and we'll either pay for things that we don't really need or we'll forget to pay for things we do.

The third question is what are the key goals that Canada should pursue in terms of development of the North American relationship? Again, I'm not quite certain I can give you an answer. However, I would suggest one thing. Just as the fact that we're domestic in a foreign sense creates problems, in that we often lose track of how we are dissimilar and why it matters, it also creates opportunities.

As your committee researchers have pointed out, there really isn't a Canada policy in the United States. Relations with Canada are handled at a variety of lower-level sites. In political science we call these policy communities. This is the notion that the political world in a big liberal democracy is too big, so what happens is decisions are delegated to groups of legislators, civil servants, and interested members of the public who come up with solutions, and then the role of the polity as a whole, the legislature or the executive, is either to ratify or reject them.

That's good, because what it means is Canadian politics and Canadian relations are often not political in the sense that relations with other countries are in the United States. In many cases, because what's of interest to us is settled inside a policy community where Canadians with similar interests deal with Americans with similar interests, knowledge, and ideas, it's easier to come to an agreement because it's not seen as contentious or confrontational. Members of other policy communities don't try to remove those issues.

If we think back to the Canada-United States Trade Agreement, the American polity pretty much delegated that to the trade and finance policy community. They reached an agreement with us and it moved through. Now consider that when Mexico acceded to the agreement, we changed it a little bit and called it NAFTA. All of a sudden red flags went up everywhere, because Mexico was seen as an issue that many different policy communities, such as defence, security, and immigration, all felt they had a role in determining.

And, interestingly enough, the worst policy and political debates often occur not between political parties, but between members of different policy communities, especially in a decentralized political system like the United States, where legislators have a lot of freedom to go their own way. I did a bit of research on this, and what I discovered is quite dramatic in terms of how much input various communities--the security, defence, and immigration communities especially--insisted on having with NAFTA as opposed to the Canada-U.S. Free Trade Agreement.

When you look at documents from the relevant Senate committees, which can be taken as proxies for the policy communities they deal with, such as the armed forces committee, the select committee on intelligence, and the justice committee, which has a hand in immigration, they outweigh the number of mentions of NAFTA and Mexico by 25% over that of the finance committee, which has principal responsibility for economic treaties. In contrast, in Canada, when we were negotiating the Canada-U.S. Free Trade Agreement, there was hardly a blip in mention of Canada and those communities.

So what does that mean in terms of our possibility for steering the North American relationship? It means that because we can reach liberalizing deals with the U.S. more easily than other countries, we probably have greater influence over those agreements than any country other than the United States, because what is going to tend to happen is we'll reach agreements with the United States that create a framework and then other countries will have the opportunity to accede to them, just as the core countries of the EU that were most similar and had the greatest interests created the framework and then other people joined in. Essentially, how we use that power is up to us.

¸ (1435)

I would suggest that if we want to have greater weight in world standings, we should indeed take account of the interests of our partners in the Americas, for whom many of these issues, like liberalizing with the United States, will have just as great an impact as for ourselves. But they don't have this luxury of an inside seat because they are seen as threats by many of the important committees that would want to block international openness.

If we could just think about immigration for a second--and I'll wrap up on that point, perhaps--we've had a lot of debate recently about our immigration policy vis-à-vis that of the United States. What we often forget here is that immigration issues are an even more pressing concern for Mexico and the countries farther south.

Now, there's been some talk about a North American perimeter. Of course, the easiest way we could get it, if we remember our notion of the median customer, is just to accept what the Americans have done, to essentially go from our Canadian outlook on immigration, which is sort of a human relations and human resources outlook--and we codify that by having immigration principally under the responsibility of the Minister for Human Resource Development--to the American outlook, which places a little more emphasis on enforcement. That's codified by the fact that their Attorney General is the cabinet officer principally responsible for immigration.

What would the impact be if, just for our convenience, we say, “We need this. We'll go along with what you want to ease the relationship, to increase our ability to regionalize, to increase our market opportunities. We'll go along with you”? Well, we would set up a very rigid framework that could create enormous problems for our other partners in the Americas.

I have no doubt that we're going to have to move some way to recognize American concerns, and it might be in our interest to. But I would suggest that we also, in thinking about the concerns of our partners in the Americas, might want to look for ways to work in their issues, perhaps by making such an agreement short term, or by leaving it flexible on a case-by-case basis with different countries. The details are totally up to you and other members of Parliament to decide, and of course the government and your civil servants will greatly assist you.

I guess that's the point I'm trying to make. When we make these choices, we have to recognize that in a sense, we're custodians of a power that other partners in the Americas don't have. If we are looking for a way to create a role, and perhaps to improve Canada's standing in the world and to pull more than our weight, as often is said, maybe we'll look at that as a way in which we can use that power to advance that position.

I've gone way over my ten minutes, so I'm just going to stop and open it up for questions.

¸ (1440)

The Acting Chair (Mr. John Harvard): I'll go to Mr. Rocheleau in just a second.

I was just thinking, though, as I listened to you, Mr. Cohn, that if September 11 had preceded the free trade agreement in 1988--in other words, if September 11 wasn't September 11, 2001, but say, 1987--it might have been a lot more difficult to consummate the free trade agreement, given the fact that concerns about immigration have been heightened considerably because of September 11.

Prof. Daniel Cohn: Definitely. When we signed the Canada-U.S. trade deal, the defence and security communities looked at the issue and said, “It's Canada. We don't have a stake in this. Leave it up to the foreign policy and trade people to deal with. We're not going to demand a say, other than over defence procurement to make sure we don't have to buy things we don't want to buy.” Fair enough. We had our culture locked out. But you're right; after September 11, they might have said, “Wait a second. We see an interest that's being jeopardized. We're not going to let you do this without our input.”

Just so you can see how September 11 has shifted events, it's worth looking at the September 10 edition of Business Week.

The Acting Chair (Mr. John Harvard): It was pretty optimistic, wasn't it?

Prof. Daniel Cohn: Yes. It was also one of the feature articles about liberalizing immigration with Mexico and President Fox's impending agreement with President Bush on a new immigration treaty.

¸ (1445)

The Acting Chair (Mr. John Harvard): I'm reminded that on September 10 Canada 3000 apparently had the best day in its history. Of course, now Canada 3000 is history.

Sorry, Mr. Rocheleau. Go ahead.

[Translation]

Mr. Yves Rocheleau: Thank you, Mr. Chairman.

Mr. Cohn, thank you for your presentation today. I would like for you to comment on three issues.

Firstly, how do you interpret Canada-U.S. relations? When the U.S. imposes countervailing duties on softwood lumber and on steel products, for example, that causes significant harm to the Canadian and Quebec economies and means that ordinary working people are in danger of losing their jobs. Where does all that fit into our relationship?

President Bush tends to forget Canada and his first trip abroad after taking office was to Mexico City rather than to Ottawa. However, tradition has it that any newly elected American president makes his first trip abroad to Ottawa. What does that mean for our relations?

Canada's immigration policy is currently being targeted, American journalists and politicians have pointed to the city of Montreal, when we know full well that the terrorists that perpetrated the attacks on September 11 were already living in the United States and all left American airports using American airlines to perpetrate their attack. Why then, is Canada being singled out? What does this mean for the relationship between our two countries?

Lastly, do you think that Americans believe that Canadian sovereignty really does exist, especially given the American attitude following the events of September 11? Or, do you believe that there is genuine wiggle room here?

[English]

Prof. Daniel Cohn: Thank you very much for those insightful questions.

On the topic of countervailing duties, I would like to bring back, if I can, this notion of the median customer. Consumers aren't just purchasers, they are also employees, and they also have emotional and familial relations.

One of the inevitable consequences of a relationship built to a considerable degree on the freedom of markets is that the smaller party often ends up suffering. The United States is going to use its trade power to its maximum. My father is a small-business person. When I was younger he had a dispute with a large supermarket chain, one of his customers. I said “Why don't you sue?” He said “If I sued, I would win, but I would also go bankrupt filing the lawsuit.” Regrettably, that is part of the problem with relationships built on market power when you're the smaller person.

You could make the argument about the countervail disputes: would it be any better without the treaty? Then we perhaps wouldn't even have the possibility of suing.

I'm not in a position to answer that, in part because the particulars of these cases are very much the preserve of specialists in economics and international law, other than to say that personally, I think we're getting the short end of this stick. But only the experts could tell you if this is a fair use of the trade power.

On the second point, using 9/11 as a ploy to undermine Canada's ability to trade with the U.S., I agree with you that this is something of a problem. This is in a way political science 101. When fate throws up an event, interested parties will pick it up and use it for whatever they feel is appropriate.

Recently there have been arguments about restructuring in the automobile industry and whether it's being based on economic rationality--or are they using September 11 as an excuse to do many of the things they already wanted to do in terms of reducing production in Canada? I'm thinking about the Ste-Thérèse plant, one of the most efficient plants in the General Motors chain. Instead of offering it a new product line, they said “No, we're just going to close it.” Off the record, there's some talk that maybe September 11 was being thrown out as an idea: “Well, there might be border disruptions. American senators and congressmen wouldn't understand if we laid off workers in the States. Therefore, I'm sorry, Ste-Thérèse; it's game over with GM.”

Sovereignty: do we really have it? I think if you define sovereignty in a legal sense, we have it. But if you define it as I think you're trying to do, which is as the freedom and autonomy to make up public policy solely in our interests, I'm not sure Canada ever had it. First with our colonial overlords and now with our economic superiors, we have a lot on our plate. And when we choose to act differently from those powerful global actors, we are going to have to pay a price.

If we do have autonomy, it exists in our ability to look at what it would take to act differently and ask, do we want to pay the price? There are many people in our business community who almost never want to pay the price. There are many people--and I'm sure you've heard from witnesses--who think our autonomy of action should always be paramount and are almost always willing to pay the price.

What I'm trying to suggest is, unless we have decent Canadian-made research and Canadian-made knowledge about what makes this country unique and what makes our relations with the United States or with other global actors difficult, to some extent that's based in an understanding of our very unique international position--and the same could be said about Quebec's very unique international and domestic position--it will be very hard to sensibly decide, is this a case where we want to pay the price?

I hope that answers your concern, sir.

¸ (1450)

The Acting Chair (Mr. John Harvard): Thank you.

I have a couple of questions, Mr. Cohn.

You've mentioned several times now these differences between Canada and the United States, and that ultimately we Canadians have to pay for those differences one way or the other. You mentioned the so-called “median customer”. I gather, from a business perspective--that is a Canadian business perspective--that the Canadian businessperson is not prepared to pass along those costs to the median customer in the United States, that somebody else has to pick up that cost.

I guess I have two questions around that. I'm wondering whether there's any better appreciation of Canada's having to pick up the tab, as it were, in the wake of September 11. Of course, the other thing is, I assume most Canadians really are not familiar with this particular problem you cite, and when we're asked to pay this price one way or the other--it just may show up in our tax bills, or whatever--we tend to resist. It may be good for us, but if we don't know it's good for us, we're going to complain.

I have two other questions. One has to do with NAFTA. As you know, NAFTA follows the free trade agreement. It's largely a commercial agreement to facilitate trade north-south. It really has little or no political or social dimension. I'm just wondering whether you think that NAFTA, perhaps, should be changed somehow to add a political or social dimension to it. If so, what kind of mechanism would you envisage?

The other thing is this “difference”--to use your word. It's true: I guess the Americans are the elephant and we are the mouse. Of course, the best example of this difference in power and its imbalance between the two countries is softwood lumber--at least I think so. It seems the Americans can just impose their will on us.

Is there anything we can do to come up with a counterweight? I remember former prime minister Trudeau always used to talk about his belief in counterweights, to balance things out. Is there anything we can do in this regard?

So these are my questions, Mr. Cohn.

¸ (1455)

Prof. Daniel Cohn: Thank you very much, sir.

You're absolutely right. The price of difference has gone up as of September 11--no doubt about it. The people in the United States have collectively reached a conclusion that people who don't agree with them on a wide variety of issues--I'm thinking specifically now of the International Criminal Court--are going to have to deal with their wrath on whatever topic, exacted however they choose. I don't think anyone seriously believes the United States is hostile to Canada, because on the vast majority of issues we're in total agreement. What we are fighting about are details.

But yes, there is a price. How do you convince the public to pay it? Well, I'm reminded of what R. MacGregor Dawson--who possibly wrote the first modern textbook on Canadian political science--said about the role of a minister. The minister sits at the junction of technocratic or bureaucratic knowledge and common sense. It's the minister's job to evaluate the technocratic and bureaucratic recommendations of their civil servants--and I guess we could throw in external advisers, such as myself--and try to coordinate them with public common sense. If the minister believes these opinions are out of whack with popular common sense, the minister either has to develop a strategy to change public perceptions, or tell his or her bureaucratic advisers to come up with a new plan.

I would suggest that the more detailed the argument or thorough the research, the easier it is to convince people to act--although on the surface it looks like it's going to be expensive--and the more willing they would be to pay the bill when they see the repercussions of not acting or not exercising our ability to go a different way, even if we have to pay the price.

In this regard, the Quebec government has done a tremendous job in explaining to the people of Quebec how the maintenance of Quebec's unique culture and language contributes to their lives, and how, even though there are periodic tensions or costs, they are costs well worth paying. Most people in Quebec now happily and gladly pay that cost, having been convinced of the merits of the need.

It's going to be very difficult to add political and social elements to NAFTA, in part because we didn't choose NAFTA in many ways. We chose to liberalize our society, and our society chose regional integration. After this was well underway, and we felt vulnerable--because we didn't have a treaty that guaranteed our rights with the United States to continue regionalization--we thought up the Canada-U.S. trade agreement.

It's very clear, as one of my European friends jokingly said after reading NAFTA, that it's not a document of government; it's a document meant to be a conspiracy against governments. I personally think that's very harsh, and wouldn't support that view. But the point--

The Acting Chair (Mr. John Harvard): But it does subordinate domestic politics to the discipline of the marketplace?

Prof. Daniel Cohn: That was the goal.

NAFTA didn't create our embrace of neo-liberalism as a polity. We voted for it starting in 1984, and some people would argue even earlier, starting with Mr. Trudeau, when he began to back away from the national energy policy. If you look at our political spectrum, it's incomprehensible that in five to ten years Canada could have a government that doesn't support neo-liberalism. The trade agreements flowed from that. A similar process occurred in Mexico, and a similar process occurred in the United States, as is well known, with the election of President Reagan.

There's an old saying that trade follows the flag. It's equally true that the flag follows the trade. As the difficulties with market relationships grow and problems emerge, there might be a desire to create some more institutions. When those windows are opened, we will have to seize them. We can possibly add political and social elements once the institutions are in place. But in the foreseeable future that will be very difficult.

Finally, there's counterbalancing Canada's great urge always to have friends when we go talk to the Americans. I would suggest that instead of waiting for other people to approach us, we should go out and start acting in their interests. I believe Prime Minister Chrétien initiated some issues like this when he went to Chile. Even though the Americans weren't interested in extending NAFTA, he said “We're interested in bilateral trade issues and liberalization of investment with you, and we're willing to start doing it”.

I think that in our dealings with the Americans, if we were to try as much as we feasibly could to incorporate the interests of other partners in the Americas, we would hope that down the road they would be equally willing to take account of us. It's hard to think of us as the strong party, but relative to the rest of the Americas in dealing with the United States, we are. They're the 900-pound gorilla. We're the 200-pound chimpanzee in the Americas.

¹ (1500)

The Acting Chair (Mr. John Harvard): I think Dr. Martin has a question before we wrap this up.

Mr. Keith Martin: I hope we're not the musical chimpanzee sitting there scratching its head.

Professor Cohn, thank you for being here.

The title of section 4 of your document is “Canada, Along for the Ride or Promoter of Inclusiveness in Hemispheric Integration”.

An underlying concern of many Canadians is that NAFTA is not working for us. Mr. Harvard mentioned the example of softwood lumber. There are also fish and agriculture and perhaps steel in the future. In your view, do we need a better dispute resolution mechanism? How do we make NAFTA more Canadian friendly, if you will?

Prof. Daniel Cohn: I think you're getting into the topic of how we can negotiate better terms with the Americans. I think the answer is, why should they?

Here I would like you to seriously consider what I've written about policy communities. There are many situations where Canadian politicians, civil servants, non-governmental organizations, and individuals have interests that are perhaps more similar to those of their counterparts in the United States than their counterparts' interests are with those of the United States government. They can't always come out and say that, because Americans are very patriotic and very wedded to the idea of America. It's a bond that comes before any relations with international people. On the other hand, there might be opportunities there.

Long before there was NAFTA, I would remind you, long before there were trade agreements, there was NORAD, where in our own interests as a sovereign country and in the American interests as a sovereign country and under a great deal of prodding by the militaries of both countries, we came together and said it's crazy, we cannot defend our airspace. This air defence community simply cannot do its job, and the politicians need to help them find a solution. I would suggest there are many, many, many policy communities like that, and that the way to enlarge NAFTA is not to enlarge NAFTA, it is to go after the side agreements that will eventually get incorporated into some new overarching treaty, if you can see what I mean.

This is what happened in the European Community. There was the European Coal and Steel Community and then different side arrangements developed outside of that. Eventually they had to stop and say there's so much baggage building up, we need to rationalize this new structure.

¹ (1505)

Mr. Keith Martin: With special interest groups really being the prime generators or a major force of policy decision-making in the United States by the lobby groups they utilize, would you say that campaign finance reform in the United States is probably the most democratizing thing they could do in that country?

Prof. Daniel Cohn: That would assume I understand the new law. I suggest you would need a special hearing with about 150 lawyers to understand their new bill, because it's not at all clear to me that there's been as much reform as in re-indexing the already existing deck chairs on the Titanic.

Mr. Keith Martin: If they adopted our system, I think it is a far better situation in Canada, where we have spending limits on our elections, very moderate spending limits, which enable us not to be beholden to any special interest groups.

Prof. Daniel Cohn: I would just observe that the Constitution of the United States has excluded that possibility without a specific amendment. The Supreme Court of the United States has ruled on that very clearly.

Undoubtedly, if you want to look at an ideal election law in terms of financing, our friends in the province of Quebec have been path-breakers in North America in correlating donations with voters. People get to vote; therefore, only real people should get to contribute and should get to spend money.

On the other hand, I think this is a bit of a sidetrack, because the real problem I think you're trying to get at is the autonomy of American legislators, and in many ways that is a product of their system. Even with campaign finance reform, it is still the individual senators and members of Congress in the House of Representatives who have to go out and raise the money for their own elections. With that goes the freedom to stick one in the eye of the President if the accommodation he's proposing for Canada undermines the specific interests of your home district. It's a classic example of why we need party discipline, because party discipline allows the executive to sometimes ignore regional interests for the good of the whole.

I'm not quite certain how campaign finance reform in the United States could deal with that, unless it were to impose a whole party structure that their institutions, with varying electoral cycles and different constituencies, is very unlikely to promote, even with reform.

The Acting Chair (Mr. John Harvard): This is a fascinating discussion and is something we perhaps should devote an hour to sometime. In some ways I think Canada has kind of had a bit of dumb luck or has stumbled into the kind of campaign financing that we have. I'm not suggesting it's perfect, and I think I agree with you that it should be the voters who should be contributing and not anyone else.

I've always believed that elections are the ultimate exercise in democracy, and it's an exercise of the people. It really should be the people who pay for that, and no one else. Yet to some extent, under our system we basically go to the highest bidder and ask, how would you like to finance this little thing called an election?

It doesn't make any sense to me. When I hear that in the States in the last senatorial election in New York State, Rick Lazio and Hillary Clinton spent $100 million between the two of them--$100 million.... And I think Mayor Bloomberg spent--

Prof. Daniel Cohn: I believe it was $71 million.

The Acting Chair (Mr. John Harvard): And of his own money. Now, you may question the American philosophy, but it's his money. They can do whatever they like with their own money.

¹ (1510)

Prof. Daniel Cohn: If we wanted to put a positive spin on it, we would say that it's refreshing to see somebody with the obvious means to ignore politics, so concerned about the interests of his fellow citizens that he's willing to invest $71 million. But it's very troubling, I agree. I believe, Mr. Chairman, you're very sensible to point out that things aren't perfect here either.

The Acting Chair (Mr. John Harvard): No, they're not.

Prof. Daniel Cohn: We have to accept the fact that business people are rational and that they will not spend money on politics unless they believe it is important to their shareholders' interests. If we give them the opportunity under our laws, they will do it, and you can't really blame them.

The Acting Chair (Mr. John Harvard): I've always pointed out that it's more than just a coincidence that in federal elections oil companies tend to contribute, while in municipal politics it's developers who contribute. You don't see too much of oil companies in city hall politics. Is that a coincidence?

Prof. Daniel Cohn: I don't think so.

The Acting Chair (Mr. John Harvard): Of course not. The expression they use is “We believe in the process”. Right? Well, they do.

Anyway, thank you. I enjoyed the little diversion we had here. I appreciate your comments, Mr. Cohn, and thank you for coming in.

Prof. Daniel Cohn: Thank you for having me here today.

The Acting Chair (Mr. John Harvard): Members, I think this spells the end of our session, because the B.C. Federation of Labour is a no-show. I don't know why, but we got the message from them that they wouldn't be able to attend. So with that piece of information, this meeting is adjourned.