FAIT Committee Report

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INTRODUCTION: PREPARING CANADIANS FOR THE GLOBAL TRADE CHALLENGE

"What Canadians are Saying"

...there is a great deal of anxiety among Canadians across this country about the direction of the global economy and the emerging role of the WTO. After hearing and reviewing much of the testimony presented at these hearings, I can safely say there is a profound and disturbing sense of unease among many Canadians today concerning the direction this country has been taking down the path of economic globalization.

...free trade has to mean more than production rationalisation for transnational oligopolies. While consumers and others can be liberated from local monopolies and other inefficiencies through trade, care is needed. The goal of a (true) free trade agreement is worth pursuit, but `the devil is in the details' of an agreement. The devil may even be in the main objectives if consumers and others are excluded from the process.

...we must provide for systematic co-operation with social groups, businesses and provincial governments. We will be turning to the provincial governments a great deal. Regardless of whether we are talking about the alcoholic beverage market, government procurement or Crown corporation purchasing, there will be a very strong demand, particularly from our American colleagues, to have greater access. In my opinion, we must therefore, right from the start, ensure that the provinces are on board and we must work closely with them.

...in order to ensure that the Canadian public feels that the WTO operates in an open, democratic and transparent manner that serves Canada's interest, public consultations such as the present one are laudable. Citizens' conferences, a democratic public consultation process already familiar in France, Denmark and Germany, might also be considered.

I am ... concerned about the fact that the WTO is closed to the general public and also non-governmental organizations. It only hears through its tribunals from governments who are in dispute. NGOs can only be heard if governments endorse their submissions which is not very likely to happen. This fact needs to be changed because the issues that are brought before the WTO have an impact on the citizens of the countries represented there, be it negative or positive.

Through the diminishing role conferred by economic dictate on the nation state, the globe is being reformed into a borderless world. Who voted for this? Rather than seeing this as being just a mechanistic evolution we can't do anything about, it's clear that this serves the interest of those with wealth and connections. Democracy as we know it is becoming irrelevant. The logic of how global corporate and financial leaders view the democratic process is that people exercise their franchise by consuming. Accountability is becoming based on purchasing rights, not voting rights.

One of the words we're bombarded with quite a bit in this discussion is the word globalization, which is an interesting word because it implies first of all that this process is somehow a natural and inevitable process.

...the particular forms which the process of globalisation takes on are not inevitable and predetermined givens, but rather the result of institutionalised processes and negotiations. The numerous parameters which accompany each new situation are political constructions which create constraints but also open new possibilities for change.

We need to take a step back and have a full and transparent examination of the consequences of this model of economic globalization.

...we've always taken the position we want to be at any table. We want to be involved in discussions. If we were drafting an international arrangement on trade around the world, we would draft it much different[ly] than what is being done today.

These trade policies will only serve to further disconnect our peoples from the land and resources by granting an interest in the waters, lands, forests, minerals, plants, fish and animals which sustain us to companies and investors who have never set foot upon our soil, who have never sustained and taken care of the land, who have no interest in the land aside from the money it can provide them.

It doesn't matter any more what Canadians think the Canadian cultural policy should be, or the Canadian environmental policy should be, where conflicts arise with a greatly expanded domain of international trade agreements that now deal with all kinds of things that have very little to do with trade, investment measures, intellectual property rights, and investment being among them....we have, in consequence of entering into these multilateral agreements, ceded parliamentary and sovereign authority to institutions that reside outside of Canada and that are not accountable to Canadians.

...we need impartial studies by independent researchers, to examine all the areas affected by our headlong rush into globalization - investment, employment, environment, food safety, health care, labour standards, national sovereignty, human rights and, above all, democracy.

Canadian sovereignty is under direct threat from Canada's ascension to bilateral and multilateral treaties in general and multilateral trade and investment protection agreements in particular...These agreements bind Canada into the indefinite future, but the process by which such agreements are negotiated is subject to no parliamentary oversight and is conducted by unelected officials with an exceedingly broad mandate conferred upon them by the Crown...

...I've been here for three hours and I haven't heard who's really gung ho on the World Trade Organization yet, and I'm wondering if this is the response you're getting across the country. And if it is, I wonder if it represents the response of the majority of Canadians. And if it does, I wonder if it's going to influence government policy at all.

...the Canadian government should strive for a transparent process in future negotiations that allows for the review of agreements by the public prior to ratification.

What I want from my government is not a slicker communications strategy, but a more fair and intelligent trade strategy.

Linking Trade and Canadian Foreign Policy Goals in a Changing
International Economic Environment

In announcing public consultations on future international trade negotiations under the auspices of the WTO and the FTAA, Minister Marchi affirmed that: "We enter into trade agreements to better the lives of our citizens."¹ There is little doubt that participating in the robust growth of global trade flows, increasingly governed under GATT/WTO rules since 1947, has contributed very substantially to the aggregate material wealth of the Canadian economy. From the data in Box 1, and as recently released in Opening Doors to the World: Canada's International Market Access Priorities 1999, Canadian trade performance appears impressive.

• A seventh consecutive year of record-setting Canadian export growth to over $367 billion in goods and services in 1998;
• Annual export and import growth of 8.1% and 6.4% respectively, far outpacing GDP growth, with exports now equivalent to over 38% of GDP - making Canada "the most trade-oriented country in the G7/8";
• Indications that the composition of trade is becoming more diversified, knowledge- intensive and value-added, with positive net effects on overall economic and employment growth;
• Even stronger increases in inward and outward flows of direct investment - the latter has exceeded the former since 1996; in 1998 inflows to Canada were $22.9 billion while Canadians invested a record $39.8 billion abroad - which will help to "pave the way for future trade";
• Similar indications of net benefits from these expanding two-way capital flows for aggregate economic and employment growth.

Notwithstanding the effects of the Asian crisis and continuing financial-market volatility which are dampening global output and trade prospects,² the Government's analysis forecasts another positive year for Canadian trade and investment growth in 1999. Clearly, in order for this to continue, it is vital to maintain and enlarge access for Canadian products, services, and investments in world markets. The submission of the Alliance of Manufacturers & Exporters Canada reflected a general view of Canadian business in identifying this as a central policy objective going into trade negotiations, along with non-discriminatory treatment within a "fair, efficient and effective" trading system based on "greater transparency in the implementation of rules."³ It was suggested that practical improvements to WTO structures and dispute resolution processes should be carefully thought out in order to keep the system abreast of the realities of the international business environment, while allowing Canadians to continue reaping the economic benefits from rules-based trade and investment liberalization.

A number of other witnesses from the private sector gave examples of Canadian export successes in highly competitive fields and identified barriers which they would like to see brought down further through new multilateral negotiations. In return, of course, Canada must offer a reasonable degree of reciprocal access to its own markets. Witnesses from business and industry associations, along with most agricultural organizations and trade policy specialists, were in general agreement that a new and wide-ranging WTO round is required in order to make progress on their priority issues. Leading U.S. trade analyst Jeffrey Schott went further in suggesting in his testimony to the Committee on May 12, 1999 that a more continuous approach to the negotiating process may be needed in order successfully to manage its ever-expanding agenda in coming years.⁴

Beyond such considerations, to which the Committee will return in Chapters 2 and 3, and in sectoral detail in Part II, the more fundamental question is: does this burgeoning commercial and negotiating activity meet the Minister's demanding test of making "better the lives of our citizens"? If not, what else needs to be taken account of in the trade policy development process, and how?

Under a system of transparent and impartial rules, the theory is that liberalized exchanges will encourage efficient resource allocation, productive specialization, and will increase collective welfare. However, a large number of witnesses during our hearings argued that the actual operation of the trading system and recent international trade agreements have left many people behind or even worse off. In other words, the terms and conditions of today's vast trade and investment flows were viewed as deeply problematic from a human and environmental standpoint. While many other factors are in play, it was repeatedly alleged that recent trade developments have coincided with increasing income inequalities, a fraying of social safety nets, accelerated ecological deterioration, and a weakening of governments' necessary public-interest role in protecting the rights of ordinary citizens and consumers within an increasingly integrated international marketplace that is often dominated by large corporate entities and still leaves much to be desired in meeting standards of fair competition. ⁵

Both trade policy experts and concerned individuals, supporters and critics of trade liberalization, agreed that an active Canadian policy response is required in shaping the international trade agenda so that it truly serves Canadian foreign policy objectives of shared prosperity, human security, and values such as the promotion of cultural diversity, human rights, and democratic development. The Canadian Council for International Cooperation and the International Centre for Human Rights and Democratic Development were among those who urged that the development of Canada's multilateral trade policies proceed in coherent integration with the fulfillment of Canada's United Nations commitments and obligations. It is worth noting that Renato Ruggiero's final public comments as WTO Director General (referred to by Canada's Ambassador John Weekes, who chaired the WTO's General Council during 1998, in his parting comments to the Committee on May 11, 1999), were precisely preoccupied by the need to construct new global approaches for managing such linkages - and accompanied by the suggestion that proposals for improvement be addressed by the forthcoming UN Millennium Summit.⁶ The Committee will come back to this subject in other parts of the Report and in the final chapter.

The first witness at our first roundtable on March 2, 1999, Professor Robert Wolfe, anticipated this reflection on the purposes and mandate of the multilateral trading system when he argued that the WTO ought to be a central instrument of Canadian foreign policy, given its post-war origins in a compromise forged between free trade and the welfare state, and the current imperative for a new global compact capable of widening the "circle of prosperity while maintaining social cohesion" (Evidence, Meeting No. 93, March 2, 1999). Yet the Committee subsequently heard from many doubting Canadians who perceive that the social bargain has broken down, and that current globalizing liberalization trends have gone too far in compromising "the right of democratic governments to manage economies and to regulate in the public interest." The Canadian Labour Congress brief, presented by outgoing president Bob White in Toronto on April 27, spoke for many when it drew from this the conclusion that:

It is time for WTO rules to be changed to restore a balance between liberalization, and protection for workers and for society as a whole against transnational corporations and the workings of global markets. ... Canada should not support new liberalization initiatives until a strong social and environmental framework is put in place, and this should be the central focus of the coming WTO round. (Submission, Canadian Labour Congress, April 27, 1999, p. 1-2)

The Government's 1995 policy statement Canada in the World correctly anticipated that "foreign policy will be driven more than ever by the domestic demand for a better, freer, and fairer international environment for trade." Given the changes in that environment which are simultaneously revolutionizing business practice and adding new issues on to the policy agenda, trade negotiators will be under tremendous pressure to accommodate a widening array of sometimes conflicting objectives. Experienced scholars and practitioners of Canadian trade policy who appeared before the Committee (Michael Hart, Ivan Bernier, Gilbert Winham, Peter Clark, Sylvia Ostry, to name but a few) all stressed that the WTO system and negotiating processes, and Canada's participation within these constantly evolving arrangements, will have to be more inclusive than ever before in terms of issues and actors. Nationally this means finding ways to work towards a common ground which allows the Canadian private sector to develop and prosper while also making progress on the social dimensions of trade. Globally, it means reforming and reinforcing the institutions of the multilateral system so that poorer and weaker members are not marginalized, and so that these institutions are in practice able to cope with rising demands from all quarters in an open, responsible and more democratically accountable way.

The Committee's first recommendations will accordingly address these primary challenges which are a precondition for maintaining broad public support and achieving successful policy outcomes. At this point, we make the obvious, but often overlooked, observation that trade policy structures in Canada and internationally will undoubtedly need increased capacity to take on these tasks, and that governments will have to commit substantial intellectual as well as material resources to their accomplishment.

Responding to the Globalization Debate

...What role can [the WTO] play, along with other international institutions, in developing a coherent approach to globalization? ...

This emerging global system is very new, but the vision behind it dates back 50 years. ... our globalizing world of falling barriers, rising trade, borderless technologies, and widening circles of interdependence is in many ways fulfilling that postwar vision. Trade has expanded fourteen-fold since 1950, while production has grown six-fold. A quarter of the world's output is now traded - compared to just seven per cent in 1950. Over one trillion dollars moves around the planet every day. ...

Globalization is transforming international relations, not just our economies. And this new system requires us all to adapt. ... while the new WTO is an essential part of the answer to globalization, it is not sufficient [since] globalization is raising a whole new set of questions about how to manage interdependence. ...

There are many criticisms of this globalizing world and the voices of concern often seem to prevail over the messages of opportunity. But no one offers a rational alternative to the main challenge, which is to improve the management of this interdependent world. ...

We are now seeing the rise of a world trading system - rules-based, not power-based - at a time when the call for an improved system of international governance is more and more insistent.

- Renato Ruggiero, "Beyond the Multilateral Trading System" April 12, 1999

Within this valedictory by the former WTO Director General are many of the seeds of an intensifying debate over the controlling forces of globalization to which Canadian policy must respond. Proponents of continued transnational market liberalization are acutely aware of a growing public backlash given, as Michael Hart's submission outlined in some detail, the increasing scope of its intrusiveness into domestic spheres of regulation with many of the conflicts being played out in the trade field.⁷ Indeed, that problematic domestic-global interface was a dominant theme running through the April 1999 Brookings Trade Forum on "Governing in a Global Economy" that included an important paper on the future of the WTO submitted to the Committee by another former senior Canadian trade official, Sylvia Ostry.

What are the stakes in this debate? Former U.S. official C. Fred Bergsten observes that a rapid increase in market integration and a fear of losing out in the global competition for capital has "induced virtually all countries, whatever their prior policies or philosophies, to liberalize their trade (and usually investment) regimes." In terms of domestic socio-economic impact, he frankly accepts that a rising dependence on trade spurred by globalization - an effect which should be even more pronounced within Canada - has been accompanied by "the stagnation of real incomes and a regressive shift in income distribution: the United States has created tens-of-millions of new jobs, but the median family income, despite a pickup in the last couple of years, is still lower today than a generation ago and only the top 20 percent of the population is unambiguously better off." The Committee heard similar statistics applied to the Canadian situation. Nevertheless, Bergsten argues that only a fraction of the problem can be blamed on globalization and that a retreat into protectionism - a real threat given Congressional unilateralist tendencies and U.S. trade and current account deficits that will likely reach record levels of more than U.S. $ 300 billion this year - would only make matters worse for everyone, domestically and globally.⁸ Some of our witnesses might take issue with that conclusion, but clearly the relationship of globalized trade to living standards and social equity at risk is a central issue. Equally clearly, very real economic insecurities and popular anxieties are being generated by the pressures and pace of the international economic changes which are already proceeding or promoted as part of a liberalization agenda.

What is the appropriate economic and democratic policy response? While there is much attention, as Opening Doors to the World 1999 puts it, to "getting the international rules right" at the WTO, Stephen Clarkson warned the Committee in Toronto that, without an adequate democratic process, international trade rules could end up entrenching, rather than replacing, power asymmetries. In short, they could be a "constitutional" cure that is worse than the disease.⁹ Michael Hart, while viewing an increasing scope for global regulation as compelling, also accepts the requirement for a set of rules "that provide national governments with the ability to exercise democratic oversight of the operation of the global market."¹⁰ Harvard University economist Dani Rodrik, the noted author of Has Globalization Gone Too Far?, whose work was cited by several witnesses, makes a persuasive case for incorporating into multilateral economic disciplines a sufficient flexibility for policy pluralism that is responsive to democratic judgments in different countries. He also argues the necessity of recognizing "a perception, often based on fact, that the rules of the international economy are being written by business interests, with labor, environmental groups, and nongovernmental organizations (NGOs) largely excluded from the process. ... As we think of reforming the governance of the global trading system, we would do well to think of ways to redress this imbalance."¹¹

It is precisely because the agenda of recent trade negotiations and GATT/WTO practices are seen as having privileged multinational enterprises over broader public interests that the Committee encountered some considered skepticism about the merits of new WTO negotiations. For example, the Canadian Environmental Law Association and the Sierra Club of Canada, both members of the Common Front on the World Trade Organization¹², were among over 450 NGOs endorsing a recent call for a moratorium on such negotiations pending a comprehensive democratic review of social impacts to date.

The NGO statement contends that the push for further liberalization and the inclusion of new issues by the WTO will only exacerbate the problems resulting from an acceleration of globalization processes.¹³ Nevertheless, given at least some faith in the principles of the multilateral trading system and its capacity for reform, there is a compelling argument that the WTO's defects and trade-related problems can only be addressed through new comprehensive negotiations involving the WTO. Indeed, this was the case put to us by Jeffrey Schott in outlining, as one of the rationales for a new round, the fact that:

... public concerns about the effects of globalization (including expanded trade and investment) on domestic production and employment, and on national regulatory policies in such areas as labor and the environment, threaten to undercut support for new WTO initiatives in the United States and other countries. Trade is now regarded as a necessary part of the solution to problems in these areas, even if trade pacts are not the primary channel of action. Simply put, governments will face increasing problems in sustaining political support for new trade talks if the trade-related aspects of these issues are not added to the WTO agenda.¹⁴

What the Committee draws from this fundamentally important debate is that the agenda for future WTO negotiations, whatever their timing and shape, must from the outset include a package of institutional and process reforms, about which we will have more to say at the end of this section and in Chapter 1.

Preparing for Seattle and Beyond: The New Politics of International Trade Negotiations

An extremely important consideration in preparing Canadian positions for the Seattle Conference is, not only the scope of an increasingly complex and contentious potential agenda, but the necessity to widen the circle of participants both internationally and domestically. When the previous Uruguay Round was launched in 1986, the GATT had fewer than 100 members, parliamentary attention was minimal, and the notion of "civil society" representation was foreign to official trade policy discussions. Even then, it proved very difficult to get consensus for negotiations to begin, and the whole unwieldy process nearly collapsed on several occasions. This time around there is much that is different and much else that is demanding to be accommodated.

In terms of how countries approach the negotiating context, they must take into account that there will be at least 134 Member States, and another 30 or so candidate countries, involved in the WTO's proceedings. In all, over 160 countries will be engaged so that one can truly begin to speak in terms of global negotiations leading to global rules. And all of these countries' governments will be challenged to come to grips with an expanding range of regulatory issues on how the deeper integration of open world markets can be made to adhere to stronger multilateral norms of fair as well as free competition - bringing into play values of environmental and social responsibility, consumer and public health concerns, respect for labour and other human rights, recognition of cultural pluralism, sensitivity to technological adjustment, and improvements in business practice, accountability, and corporate governance. As Michael Hart has written, "the trading system's basic rules and procedures will need to be upgraded to reflect the desirability of engaging all participants and concentrating on rule making rather than concession swapping." ¹⁵

In effect, this requires moving towards a global social compact around trade and investment issues that goes well beyond mercantilist bargaining among different sectors of the business community. As Hart elaborated to the Committee in Vancouver, in previous negotiating rounds, Canadian trade officials concentrated mainly on trying to find a balance between export and import interests. That will no longer work. The new political economy of trade negotiations, he emphasized, must finally pay serious attention to the concerns brought forward by the social critics and must address the equity along with the efficiency sides of the trade equation. Pierre Sauvé, an Organisation for Economic Co-operation and Development (OECD) expert on international investment issues now teaching at the Harvard Kennedy School, told the Committee that the demise of the Multilateral Agreement on Investment (MAI) was a "useful failure," not least because it demonstrated the need to pursue an early and intensified social dialogue in order to impart political legitimacy to intergovernmental negotiations. Pointedly he observed:

the coming of age of Internet-based policy advocacy by non-governmental organizations (NGOs), particularly those concerned with environment, labor and human rights issues (but also public interest groups concerned with consumer and development issues). NGOs cut their teeth as never before during the course of the MAI negotiations and their presence and voice will be a mainstay of all future WTO negotiations.¹⁶

These developments carry some large implications for how Canadian trade policy processes are conducted, which must necessarily involve other levels of government - not only provincial and territorial but also aboriginal peoples and municipal governments - legislators, and diverse "civil society" constituencies within Canada.

Gerald Shannon, Canada's lead negotiator during much of the Uruguay Round, drew the lesson that good preparation must include the following elements:

• There is a need to get a clear grip on Canada's strategic interests now, and that means close consultations with business, industry, and labour groups, as well as the provinces, and non-governmental organizations.
• Canada's approach to a range of public policy issues needs to be thoroughly aired domestically because it is important that Canadians understand what makes sense for Canada. (Submission, March 2, 1999, p.14)

However, a number of witnesses observed that this is precisely where past practice has been seriously deficient and where current practice continues to fall down. Many contended that a broader, more representative, and transparent process of regular consultation and feedback needs to be instituted. Elizabeth Smythe proposed to the Committee in Edmonton that an outdated and narrowly-based International Trade Advisory Committee (ITAC) / Sectoral Advisory Groups on International Trade (SAGIT) system be completely restructured since: "Increasingly trade issues cross sectors entirely and have implications for a great many Canadians. ... In addition, trade disputes and ongoing regional and multilateral organizations in a range of organizations mean that consultations need to be ongoing and cover the whole policy process from agenda formation through negotiation, to implementation and dispute resolution. "¹⁷

Professor Smythe added that a more integrated inter-departmental approach is required at the federal government level from the beginning. (Submission, Elizabeth Smythe, April 28, 1999, Edmonton, p.6) Better representation of other levels of governments - including municipal and aboriginal peoples' governments - was a point stressed by some witnesses. The importance of representing provincial interests in negotiations was highlighted in a brief to the Committee from David Cook of the University of Prince Edward Island. The Committee met with several ministers of the Alberta Government in Edmonton, who indicated their desire for an intensified and more formalized interaction with the Federal Government around these issues. That was also one of the messages communicated by the Western Premiers meeting that took place in late May.

With respect to representation generally from "civil society," which includes an extremely wide range of voluntary associations and citizen groups, many witnesses believe strongly that they are speaking to public-interest issues which must be addressed, and not merely on behalf of "special interests." For example, spokespersons for the Consumers' Association of Canada and the Public Interest Advocacy Centre indicated how consumer organizations and their international networks might be brought into revamped consultative processes with benefits for the creation of a fairer marketplace as a whole. Similar arguments were advanced by environmental and labour organizations, among others.

The Committee is aware that Canadian civil society organizations have been playing leading roles internationally in mobilizing critical concerns around new trade and investment agreements.¹⁸ We take to heart the challenge from Maude Barlow of the Council of Canadians during our first roundtable on March 2 that "there is an urgent need to develop real mechanisms for effective democratic participation in federal policy decisions regarding international trade, investment and finance. Unless this happens, peoples' anxieties and fears are bound to fester and grow." The Committee believes that such mechanisms must further equip ordinary citizens, not only organized pressure groups, to be able to be informed and be heard, and must further be connected to continuous oversight by elected parliamentary representatives who are ultimately accountable to those citizens in all parts of Canada.

Before elaborating more concretely on that fundamental proposition, it will be useful to summarize briefly a number of key messages which emerged from the hundreds of presentations which we listened to across the country and which should serve as touchstones for the next steps in advancing the Canadian trade policy development process.

What Canadians Told Us: Some Principal and Principled Public Messages

It is impossible to do full justice to the rich range of issues which were brought to the Committee's attention during several packed months of testimony. But our overall impression is that: (1) more Canadians are becoming more engaged across a broader range of trade and investment-related policies than ever before; (2) this trend is likely to be sustained; and (3) there is very little complacency even among those who are generally supportive of the liberalizing directions of recent years and the policies pushing for better market access on equitable terms. Certainly in agriculture and other commodities-based sectors, there was often a tone of urgency in the presentations. And in emerging areas, Meriel Bradford, Vice-President of Teleglobe, a true Canadian success story,¹⁹ suggested to the Committee that fast-changing business realities such as Internet commerce may necessitate a radical restructuring of how the international trade structures cope with an unwieldy mix of old and new issues: "Do we have the right boxes all lined up in the current WTO ... or do we want to rethink the global trading system? ... I don't know if we have our minds around that as a country. We certainly don't have our minds around it as international players." (Evidence, Meeting No. 112, April 13, 1999)

There were, to be sure, some deep divergences of view in approaching WTO negotiations in light of contrasting perceptions of the record of international trade and investment liberalization. Most witnesses with interests tied directly to trade focussed on the positive challenges to take advantage of opportunities for making progress through additional negotiations. Most NGO and individual witnesses were preoccupied by a non-commercial calculation of costs and benefits, and with ensuring that trade deals "do no (further) harm," as they saw it, in human and environmental terms. We are grateful to those critics who went beyond attacking the negative aspects of the trading regime as it now exists to offer thoughtful and constructive alternatives for policy consideration.

Notwithstanding these differences within Canadian society, which must continue to be exposed and tested through informed democratic debate, we have found important common themes which resonate throughout the testimony:

1. Getting international rules right matters but is no simple matter.

No one wants an anarchic power-based trading system. Canada would be one of the countries to suffer most from an absence of multilateral disciplines. However, who makes and enforces the rules, how, and for whose benefit, are critical questions requiring satisfactory answers in their own right.

2. Process counts at all levels.

It is not only that expanded participation in decision-making is desirable on democratic grounds. Who is present, and in what capacity, has a direct effect on policy determination and outputs. Processes which are exclusionary will lack legitimacy and will probably not produce good sustainable policy results either. Processes which polarize rather than build social consensus frustrate attempts at reform, and add to collective action problems in dealing with the challenges of globalization.

3. Values are important.

Canadians do not want to see an amoral international economic system in which "justice is the interest of the stronger." In a phrase, they are looking for "commerce with conscience." They expect that responsible international trade and investment rules will at least not contradict international standards of social justice, environmental sustainabilty, and human rights to which Canada subscribes as part of its foreign and domestic policy commitments. Ideally, trade agreements should make a positive contribution to the realization of those other objectives, recognizing that improving the conditions of trade is only one instrument among many.

4. Promotion of trade interests must be in the public interest.

Export promotion and the expansion of commercial opportunities for Canadian businesses are valid goals, but not sufficient in themselves. While the private sector is the most directly engaged in trade and investment activities, trade and investment policies must be made on behalf of all Canadians and must take adequate account of consumer and other public-interest considerations.

5. Policy choice matters.

In order for democratic deliberation to make a difference, there must be scope for policy alternatives internationally, nationally, and locally. While the international trade system needs to be governed according to certain fundamental principles to ensure order and fairness and avoid disruptive unilateralism, these should not seek to impose a "one-size-fits-all" ideological straitjacket on policymakers. This applies especially to areas such as culture in which diversity is of the essence.

6. Preparation matters.

There needs to be adequate time and resources devoted to determining Canadian trade objectives in consultation with all of the stakeholders, who in turn need the same in order to prepare themselves. Such preparation is, in effect, an application of the "precautionary principle" going into any important negotiations with other countries. It might also help avoid situations such as Canada's so far unsuccessful retroactive attempt to restrict the meaning of `expropriation' within the investment chapter of the North American Free Trade Agreement (NAFTA). Moreover, without a full and transparent preparation process, it will not be clear how the mandate given to Canadian negotiators serves the overall public interest.

7. Negotiations must be conducted in a fair and accountable manner.

Trade negotiation processes should not be decided by only a few of the most powerful players. This is especially the case in the WTO context in which agreements for the most part now constitute a "single undertaking" that will be binding on the majority of members representing smaller developing economies. Measures are needed to ensure that the rights and interests of all members are protected. As well, negotiating activities, while not necessarily conducted under the public eye, must be accountable to regular public scrutiny.

8. Transparency and predictability are critical to the functioning of the system.

Accountability is not possible unless the international trade system is an open one in terms of public access to information as well as commercial flows. Countries also need to be transparent about their trade and investment policies and activities. All participants need to know the rules clearly and have some confidence that they will be applied in a transparent and predictable way.

9. Trade impacts and results should be subject to regular review and evaluation.

It is not enough to reassure people that what is being negotiated in their name will be good for them. A healthy and humane trading environment is one which benefits society and minimizes any adjustment costs in the course of raising general economic welfare. Detailed knowledge is needed (e.g. of environmental or health effects) in order to inform better policy decisions, and this may require credible independent empirical studies which are made publicly available.

10. Effective enforcement of and coherence among international obligations will be essential.

The creation of a better global system of trade rules will break down if they cannot be implemented effectively or compliance is weak. Therefore the WTO structures must be up to the task. As well, it is crucial that the WTO's mandate be clearly defined in relation to that of other international organizations; furthermore, that international trade obligations be coherent among themselves and with those in other areas (e.g. environment, human rights) so as to avoid costly overlaps, gaps, and potential conflicts.

Towards Instituting a Long-Term Public and Parliamentary Trade Oversight Process

Returning to the Committee's earlier proposition: how can we ensure that these public messages will be heeded within an open and democratic trade policy process that facilitates citizen-government dialogue, promotes shared learning - rather than an unproductive contest of propagandizing "public relations" versus purely adversarial polemic - and thereby builds public consensus and trust?

Many witnesses, including experienced practising international trade consultants such as Peter Clark, emphasized the need to operate in new ways. Drawing on the lessons from the Multilateral Agreement on Investment's failure, Mr. Clark devoted much of his oral remarks on March 4 and a lengthy written brief, to overcoming the information, education and communications challenges which lie ahead. Indeed, this is an aspect of a wider debate about what is required to achieve true deliberative democracy in policy formation on complex subject matters.²⁰ He urged a proactive, candid strategy reaching out to many more Canadians than just the traditional stakeholder groups, including those who feel disenfranchised or aggrieved by prevailing trade trends. Clark added the important proviso that: "Effective and open consultations are a major undertaking - new and additional resources will be required to do it properly." (Submission, March 4, 1999)

Stephen Clarkson of the University of Toronto also made this a major theme of his presentation, arguing that "the Canadian government should put most of its efforts coping with process problems into increasing the representational and transparency sides of its own national participation in the various negotiation processes." Rather than the usual ideological official defences, this could include "practical guides informing interested citizens or organizations how they find out about the international trade regime's impact on their interests, and how they can represent these interests at the global and continental levels." (Submission, Toronto, April, 27, 1999) As Nola-Kate Seymoar observed in Vancouver: "if you change who is at the table, you will change the kinds of decisions that are made. We need government at the table, we need the private sector at the table, and we need civil society at the table." (Evidence, Meeting No. 121, April 27, 1999, Vancouver)

The Committee has much sympathy with these perspectives, having undertaken its most extensive public consultations in over a decade around these issues, and including its own primer on the WTO system as part this Report. We were also encouraged by those witnesses who recognized the concomitant need for a much stronger role for Parliament in the oversight of policy development, negotiations, and implementation processes. As Peter Clark put it, Members of Parliament are the elected representatives of civil society. The submission of the World Federalists of Canada, which focussed on filling the "democratic deficit" in the global governance agenda, also affirmed that parliamentarians "are more legitimate voices for the common interest" than particular NGO representatives. (Submission, World Federalists of Canada, April 27, 1999) Nonetheless, we acknowledge that multiple forms of citizen representation are desirable, and that in a variety of international and multi-level governance settings - which have tended in the past to be the preserve of an exclusive well-connected elite - more needs to be done to forge new connections among government, civil society, and parliamentary processes.²¹

In this regard we note with interest the Australian model of Parliamentary scrutiny of treaties referred to in a detailed argument submitted by Stephen Kerr (Submission, April 27, 1999), and the efforts underway within the European Union context²² that were cited by Pierre Sauvé and Ambassador Jean-Pierre Juneau (Evidence, Meeting Nos. 135 and 136, May 12 and 13, 1999).

In a sense, what is needed is a sort of domestic equivalent to what the WTO's Trade Policy Review Mechanism (TPRM) could become at the international level were it to function in an expanded and more publicly circulated, robust and critical way, as was recommended by some witnesses.²³ It is striking that although the WTO's "trade policy review" for Canada was released in December 1998 ²⁴, only one (Professor Eugene Beaulieu in Calgary) of the hundreds of witnesses before the Committee bothered to comment on it.

Of course, more than just posthumous input is needed; there must be opportunities for enlarged public engagement at all stages of the policy process from conception to execution. What the Centre for Foreign Policy Development is beginning to do on the foreign affairs and international security policy side needs to be developed for international trade and investment policies. With regard to actual negotiations, while the Committee has reservations about Dr. Seymoar's suggestion that non-governmental representatives could be included on a trial basis on future Canadian negotiating teams, we are inclined to agree with Dr. Asit Sarkar of the University of Saskatchewan that it could be useful "to establish a formal consultative process with the non-governmental stakeholders so that the negotiating team can obtain quick feedback during the various stages of the negotiation process." (Evidence, Meeting No. 127, April 30, 1999, Saskatoon)

For all of these reasons, the Committee believes that reforming the trade advisory system deserves consideration in order to sustain a more timely and constructive dialogue with Canadians around issues in trade and investment negotiations. Furthermore, it is essential in our view that this enhancement of the Government's consultative system be formally connected to an enhanced Parliamentary oversight role before, during, and following the negotiation of any future international trade and investment agreements.

Recommendation 1

The Government should review the existing trade advisory system in order to broaden its representation of societal interests, and to support the objectives of:

· conducting regular consultations with the broadest possible range of stakeholders within Canada in collaboration with all relevant Departments involved in policy formulation at the federal level; and

· initiating independent studies of significant matters relating to international trade and investment agreements; and

· providing timely information and feedback to Parliamentarians and citizens during all pre-negotiation, negotiation, implementation and review phases of international trade and investment agreements.

Recommendation 2

Parliament's institutions, and in particular this Committee, must also be able to examine fully all future trade and investment negotiations, most importantly at the WTO level, prior to Canada implementing into domestic law any binding agreements resulting from such international trade and investment negotiations.

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1^# Department of Foreign Affairs and International Trade, Press Release No. 22, Ottawa, February 8, 1999.

2^# The WTO in its most recent assessment of the global trade outlook suggests that the general marked slowdown in trade growth experienced in 1998 will likely carry over into weak expansion in 1999 (Press Release, Geneva, April 16, 1999).

3^# "Priorities for the Millennium Round of WTO Negotiations", Submission, Alliance of Manufacturers & Exporters, April 30, 1999.

4^# Jeffrey Schott's remarks were based on his introductory chapter "The World Trade Organization: Progress to Date and the Road Ahead," in the seminal volume edited by him, Launching New Global Trade Talks: An Action Agenda, Special Report 12, Institute for International Economics, Washington D.C., September 1998.

5^# Tony Clarke of the Polaris Institute made the point in his testimony of March 2, 1999 that 52 of the top economic entities in the world are transnational corporations and over two-thirds of the U.S. $ 7 trillion in global trade involves the over 45,000 transnational corporations (TNCs) which now exist; half of that occurring in the form of intra-firm transactions. Testifying on May 11, Ambassador Weekes pointed to "UN statistics [which] show that the sales of foreign affiliates of multinational companies now exceed the total value of world trade in goods and services." Given that trade and investment are now "virtually inseparable" in international business decisions, some investment and competition policy issues can hardly avoid being addressed by the trading rules.

6^# See "Parting Statement by the Director-General of the WTO H.E. Mr. Renato Ruggiero at the General Council Meeting on 14 April 1999" and its annex "Beyond the Multilateral Trading System", Address to the 20^th Seminar on International Security, Politics and Economics, Institut pour les hautes études internationales, Geneva, 12 April 1999 (available on the WTO Web site at http://www.wto.org ).

7^# Submission, Michael Hart, April 26, 1999, Vancouver.

8^# Bergsten, The Global Trading System and the Developing Countries in 2000, Working Paper May 1999, Institute for International Economics, Washington D.C. (This paper is based on his presentation to the WTO's March 1999 High-Level Symposium on Trade and Development in Geneva.)

9^# Submission, Stephen Clarkson, April 27, 1999.

10^# Hart, op. cit., p. 5.

11^# Rodrik, "The Debate over Globalization: How to Move Forward by Looking Backward", in Schott, ed., Launching New Global Trade Talks, p. 38. See also his paper for the Brookings Trade Forum, "Governing the Global Economy: Does One Architectural Style Fit All?" (April 1999).

12^# The CELA and Sierra Club submissions were made in Toronto while in Vancouver Steven Shrybman of West Coast Environmental Law presented a lengthy critical guide to the WTO which was prepared for the Common Front that also includes the Council of Canadians and the Polaris Institute.

13^# Statement from Members of International Civil Society Opposing a Millennium Round or a New Round of Comprehensive Trade Negotiations, April 23, 1999 (as attached to the submission of the Canadian Environmental Law Association, April 28, 1999). For an earlier NGO critique see also the Joint Statement on the WTO High-Level Symposia on Trade and Environment and Trade and Development which was appended to the Submission, Canadian Council for International Cooperation, March 18, 1999.

14^# Submission, Jeffrey Schott, Towards the Millennium Round, May 12, 1999.

15^# Michael Hart, "Negotiations in Prospect: Crafting Rules for a Global Economy," September, 1998, p.27.

16^# Submission, Pierre Sauvé, May 12, 1999, p. 4.

17^# Submission, April 28, 1999, p. 26. In addition to the overall International Trade Advisory Committee (ITAC), there are currently 14 Sectoral Advisory Groups on International Trade (SAGITs) covering the following areas: advanced manufacturing; agriculture, food and beverage; apparel and footwear; Canada/U.S. border issues; cultural industries; energy, chemicals and plastics; environmental [matters]; fish and sea products; forest products; information technologies; medical and health care products and services; mining, metals and minerals; services; textiles, fur and leather. There is also an SME (small and medium-sized enterprises) Task Force. SAGITs meet intermittently or in some cases rarely. There is no group on the "social dimensions" of trade.

18^# This is well documented by John Foster, who appeared before the Committee in Saskatoon on April 30 in Chapter 8 of the North-South Institute's Canadian Development Report 1999: Civil Society and Global Change (Ottawa, June 1999). That report points out that more than 12 million Canadians participate in some kind of civil society organization.

19^# The company announced a $5 billion expansion in May 1999 which could transform it into the world's largest long-distance telephone network.

20^# See, for example, Arthur Lupia, The Democratic Dilemma: Can Citizens Learn What They Need to Know? Cambridge University Press, Cambridge U.K., 1998.^# Analysing recent international experiences, John Hay has observed that "the relationship of MPs to NGOs and other participants in Department of Foreign Affairs and International Trade (DFAIT)'s public consultation efforts remains ambiguous and weak. ... Parliament's role in the transformation of policy-making has yet to emerge with clarity. NGOs tend to mention the Commons as an afterthought." ("International Summits and Civil Society," Canadian Foreign Policy, Fall 1998, p.102.)

21^# The EU Commission's second annual Report to the European Parliament on "EU Activities with the World Trade Organization" (Brussels, 1999) declares that "WTO members have a primary responsibility to develop, at the domestic level, procedures for consultation on trade policy-making. The Commission is convinced that organizations of civil-society are key stakeholders in the process of trade policy formulation. It is for this reason that the Commission has initiated a broad process of consultations with organizations of civil-society on issues relating to the preparation of a new WTO Round. This process is intended to complement and not substitute the process of consultations and cooperation among the Community institutions. In this context, the Commission attaches the outmost (sic) priority to consultations with the European Parliament on issues related to the WTO's work." (p.5)

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23^# See also the proposals for reform in Donald Keesing, Improving Trade Policy Reviews in the World Trade Organization, (Policy Analyses in International Economics No. 52, Institute for International Economics, Washington D.C., April 1998), which advances the notion of creating "national committees in key member countries, with the express purpose of identifying opinion leaders and others at who dissemination should be focused" (p. 52). The functioning of the TPRM is scheduled for review by WTO members in 2000.

24^# "WTO releases report on Canada's international trade policies and practices", Department of Foreign Affairs and International Trade", Press Release No. 295, December 17, 1998.