SINT Committee Meeting

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

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

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 21, 1998

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[English]

The Chairman (Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.)): I'd like to welcome colleagues back today from a couple of weeks' Easter break, and welcome Jonathan Fried, from the Department of Foreign Affairs and International Trade, who is the ADM for trade and economic policy.

I want to tell you, Jonathan, that I was at a meeting on the weekend with some trade officials who were praising you, not even knowing that you were coming here today. They just brought it up, saying that you were a great appointment and a great help to them as non-government organizations and business people.

Our mandate, colleagues, is to look at the World Trade Organization. As we all know, 1999 is fast approaching. In my constituency, like a number of members, I'm sure, particularly from the rural areas, I am getting a number of calls from interested groups, from different commodity groups, from a lot of the supply-managed groups that are now themselves starting to get geared up for a new round of negotiations at the WTO.

In terms of our study of this, I thought we would start off by getting a first-hand briefing from the department, from the people who will be involved in setting up Canada's position. This will give us an opportunity over the next few weeks and months to develop ourselves through consultations with different interested groups in agriculture and in the service sector and to get a sense from them of how they see Canada's position.

If you remember the last round of the WTO, our government gave a commitment at the time to negotiate, but said at the same time to have people on hand who were from different groups affected by the negotiations. And in fact a lot of them were in Geneva giving first-hand information.

Our goal here will be to get as broad a range of information as we can, not only from heads of commodity groups and leaders in their different sectors but also from individual Canadians who have an interest in this.

Over the years, all would agree, I think, that trade and investment—we just finished a study on the MAI—is becoming more of a public issue. Before it used to be done by a few trade lawyers and maybe a few people from the department, but now it's certainly more public and more Canadians have views on this. It'll be our goal over the next few months to get Canadians' views and to pass them on to people like you, Jonathan, so that you have a better understanding for your actions in terms of Canadians' views of these negotiations.

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So thank you for coming here today. I understand you have a few minutes to brief us. Then we'll open it up to questions and comments from members.

Mr. Jonathan Fried (Assistant Deputy Minister, Trade and Economic Policy, Department of Foreign Affairs and International Trade): Thank you, Mr. Chairman, and thank you in particular for your kind words at the outset. You create an even higher bar to meet in trying to respond to your interests and your needs.

I did have a chance to review my appearance today with Minister Marchi. He certainly welcomed and endorsed my participating with you at this early stage in your consideration of the upcoming trade agenda. With his guidance and with your blessing, Mr. Chairman, I'd like to view this very much as an orientation session for both of us. I am here to assist you in taking stock of the forthcoming trade agenda.

In turn, you can certainly help us as officials in the Department of Foreign Affairs and International Trade in improving our orientation to your concerns and your particular interests. I very much hope that this appearance is the first of what will be an ongoing dialogue between us. The minister, I myself and my staff value the input and the opportunity to have an ongoing exchange of views with you and your fellow members.

So I do sincerely appreciate the opportunity provided me, on behalf of Minister Marchi, to provide you with a bit of an overview.

I should also introduce my two colleagues, who are here to aid me in responding to any more specific questions you may have.

Claude Carrière is the director of the tariffs and market access division. He has served in a key role in the preparatory process for the negotiations for the free trade area of the Americas. He's Canada's chief negotiator for the accession of Taiwan to the WTO and wears several other hats as well.

Philip Stone, who our department managed to take from Agriculture Canada a few years back, is the senior policy adviser in the trade policy planning division and is depended upon by all of us to keep our eyes on the big picture, ranging from the OECD to quadrilateral trade ministers to the WTO agenda.

We should be joined shortly by John Gero, the director general for services investment and intellectual property and information technology trade policy. He's currently with Minister Marchi, and I apologize in advance for his lateness.

So with your permission, Mr. Chairman, let me take just a few minutes to give you the current lay of the land, if I may, across all continents before coming back to the World Trade Organization itself.

I do so against the backdrop of the global economic environment more generally. If we look around the world, we're certainly witness to much more active efforts aimed at further liberalization elsewhere in the world, both regionally and multilaterally, and including the southern as well as the northern hemisphere.

Europe, for example, as some members know from recent travels, is continuing its march towards a more perfect single market and even a common currency. The European Union is looking to expand both eastward and southward. In this hemisphere, if we look subregionally, we know about the countries of the southern cone who are seeking to consolidate a MERCOSUR customs union agreement. Central American countries are accelerating their work towards a customs union. Both the Andean pact and the Caribbean common market are being updated, and even in Asia, despite the current financial crisis, countries in Southeast Asia have reaffirmed their commitment to open trade and investment.

Against that backdrop, Canada's trade policy, I think, carries certain constants, and they've been reaffirmed by Minister Marchi on several occasions. Our jobs as his officials are pretty straightforward. We are there to promote Canadian exports, to promote investment and to improve our access to all the world's markets.

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We have distributed to you—and I believe Minister Marchi might have distributed to you, or your office at least, earlier—a copy of a publication called Opening Doors to the World: Canada's International Market Access Priorities 1998 report. I think this serves to highlight both the concentrated and focused efforts we're making on an ongoing basis to open doors, as the title says, for Canadian business abroad, but also to highlight the challenges we face in many of the foreign markets, and what constitutes a bit of an unfinished agenda.

This is the second year we have published a global assessment of our priorities. It also therefore serves as a bit of a benchmark for the government itself in meeting targets on an annual basis. This year's report does incorporate an assessment of how well we've done over the last 12 months in tackling the barriers we identified last year. It's distributed widely to members of the public. It's available on the government's and the department's web site, and it very much reflects the input we have received from interested Canadian business and firms, and civil society more generally, about the concerns they have regarding foreign markets.

If we are indeed somewhat successful in opening the doors—and I'd like to believe this report provides you with a reasonably positive assessment—then the other side of our department, Foreign Affairs, has the job of taking business through those doors through our export promotion and business development activities. You know about, and some of you have participated in, the successful Team Canada missions, and we certainly intend to maintain our Team Canada approach.

But let me turn specifically to the trade policy and trade negotiations agenda. I appreciate that ultimately you do want to look ahead to those very challenging negotiations at the end of 1999, but we have a full agenda between now and then, as well, and you might wish to reflect on the agenda in the interim as you continue your deliberations.

You will have known from newspaper reports that the Summit of the Americas meeting in Santiago, which just concluded, did initiate free trade of the Americas negotiations. Not only that, but Canada has received a vote of confidence from the other 33 countries that participated, and has been selected to chair the free trade of the Americas negotiating process for the next 18 months, including the hosting of a hemispheric trade ministers meeting in 1999.

The APEC trade ministers who met in Montreal last June and in Vancouver last November will be meeting again this June in Malaysia—Malaysia being this year's chair of the APEC process. On their agenda is picking up what we set in motion in Vancouver, which is to see if we can take advantage of opportunities for what is called early voluntary sectoral liberalization, the reduction and elimination of tariffs in key sectors, including certain ones of key export interest to Canada, such as fish and fish products, forestry, including pulp and paper products, and so on.

The newspapers also reported or confirmed today that Canada has commenced talks on possible free trade agreements with the countries of the European Free Trade Area, EFTA, as it's called, which is Norway, Switzerland, Iceland and Liechtenstein. This could provide into fairly affluent markets valuable improvements in market access for Canada.

In May, the Prime Minister will be meeting with Prime Minister Blair of the United Kingdom in his capacity as president of the European Community, along with chief commissioner Santer to review, amongst other things, bilateral trade issues, and to pursue our action plan for an improved framework for Canada-European Union trade.

Coming full circle, we will be in Geneva at a WTO ministerial meeting immediately following the Birmingham summit, May 18 through May 20. This is the second regularly scheduled ministerial meeting under the World Trade Organization; the first one took place in Singapore in December 1996. Some of you had the pleasure of participating in this.

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This will be a stock-taking meeting to see where we are on the so-called built-in agenda on the previously anticipated work program ahead of new negotiations to which you referred, Mr. Chairman.

Of course, overlying all of these developments is the constant in our trade relationships, which is the Canada-U.S. trade relationship, which accounts for 82% of our export trade and one-third of our gross domestic product. We are of course engaged in managing our bilateral relationship on a daily basis, but I should add that under the framework of NAFTA, trade ministers from the three countries, Canada, United States, Mexico, will be meeting at the end of this month to review developments under NAFTA.

All of that aside, I should add, Mr. Chairman, that we're a little busy as well managing on an on-going basis the disputes we sometimes face. Softwood lumber is in and out of the news from time to time. Canada has been on the offensive in opening markets. For example, we challenged import restrictions that Australia imposed on the sales of Canadian salmon.

We're on the defensive sometimes. The United States and New Zealand, for example, have challenged one aspect of our dairy marketing system: price-pooling and special classes of milk for export.

Now, I've described what sounds like a fairly full plate of bilateral, regional, and multilateral activities. Some react to that description and say that we're all over the map, and that there's no rhyme or reason to being everywhere all at once. I would like to share with you my view and that of the department, that there are some very constant principles that underline all of these activities.

First—I think this is very important in our view to remember—is that pursuing one or another trade agreement is not just an end in itself. It's not just to have an agreement to announce. It's a tool, instrument, and vehicle for advancing Canadian trade and economic interests. After all, increasing our sales abroad and the economic health of our firms creates economic growth and jobs at home that result from increased exports. Of course, opening our market creates inward investment and increased efficiencies because there are technology flows and the stimulus that results from increased import competition as well.

Second, if we can reach agreements in various regions of the world, it means we have reached a framework of a rules-based system. It's fair to say the Canada, as a middle power, always benefits more from a system based on rules than on economic leverage.

Third, to the extent that we can create a coherent rules-based framework, it means that Canadian traders and investors abroad enjoy non-discriminatory access to foreign markets for goods and services and our own investment. It ensures that if we're part of that framework, we remain attractive to foreigners looking for places to invest.

Fourth, as we compare regional and WTO efforts, we're firmly of the view our regional initiatives fully complement our multilateral efforts. This is for a number of reasons. Virtually all of our regional agreements incorporate the very basic multilateral rules that we want: non-discrimination and national treatment. As demonstrated by our record in achieving agreement with the United States, then Mexico, then Chile and Israel, we can often obtain results in a shorter timeframe regionally than multilaterally.

As a result, this means that regional initiatives often provide an extra impetus to move the multilateral agenda forward. For example, in NAFTA we made significant innovations in improving an effective dispute settlement system. We published that agreement in 1992, and brought it into force in 1994. Many of those improvements—timeframes, automatic deadlines, and so on—were borrowed by the rest of the world and put into the WTO agreement and made universal. So we can often lead the way multilaterally by beginning regionally.

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We of course are conscious of the need to ensure that our regional initiatives and those of others are consistent with the multilateral framework. It's one of the reasons that Canada participated in the creation of and has been very active in a new WTO committee called the Committee on Regional Trade Agreements, which maintains oversight of all of these virtually hundreds of regional agreements around the world to make sure they're not undermining the international system.

Now, Mr. Chairman, having given you that broad-brush lay of the land, it is perfectly accurate to say that notwithstanding these other activities, our main tool as Canadians for opening up markets around the world is the World Trade Organization.

We of course lived through a long and comprehensive Uruguay Round. There is a sense in the popular press that the WTO works in cycles: we finished the Uruguay Round in 1994, nothing's happening, we'll wait for new negotiations in 1999 or 2000.

The truth is actually to the contrary. The WTO is not only a set of negotiations but a set of agreements with an ongoing monitoring and surveillance process. So we are vigilant today in promoting full implementation by other countries around the world in living up to their WTO obligations, and if necessary, using the dispute settlement procedures where we have to.

As I mentioned in reference to Mr. Carrière's activities, we're also giving some priority to trying to broaden the reach of the WTO by making it more universal. We are giving high priority to the potential accession into WTO membership of such major traders as China, Russia, Ukraine, Vietnam, Saudi Arabia, and some 20-odd other countries who are standing in line.

Mr. Chairman, as you noted, members of the WTO, under this so-called built-in agenda, are already committed, as a result of the Uruguay Round, to new negotiations on agriculture and on services trade, beginning at the end of 1999.

There has been some debate, not only in the media but among the world's trade ministers, including public statements by Sir Leon Brittan of the European Community and others, that other issues will need to be injected into the negotiating mix in order to have adequate balance in these negotiations.

Sir Leon Brittan has called for what he terms a millennium round of comprehensive trade negotiations.

The United States in recent statements seems to suggest, based on recent experience, that it may be best to proceed sectorally: where there is enough interest and what you would call a critical mass of participation around the world, let's take those benefits and not have to build a round that will take seven years, with everyone waiting for results for that entire period.

Minister Marchi has suggested that there may be a middle ground, what he has termed a cluster of issues. If a millennium round takes too long and is too much to handle, and the Americans may be targeting simply that which is of interest to them by focusing only on sectors, it may be possible to build mini-packages, a cluster of issues that are of digestible size and that can lead to early and productive results.

In sum, this debate has just begun. What issues might be added to the agriculture and services mix is really something that will be decided over the course of the next eighteen months. Ministers will begin in earnest to have this discussion at this forthcoming WTO ministerial meeting in May. They will likely at that time instruct what is called the General Council of the WTO, which is the standing assembly acting on behalf of ministers, to conduct preparatory work throughout the remainder of 1998 and 1999, and to report back to ministers at their next meeting, which will likely be at the end of 1999, with options for decision, including possible areas that might be ripe for negotiation, in addition to agriculture and to services.

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If you look at what ministers are reviewing, it encompasses, I guess, four major elements.

First, it clearly involves continuing discussion on reducing traditional barriers—tariffs, quotas, import restrictions—border measures that create administrative burdens instead of facilitating trade. That's a very traditional border-oriented trade agenda.

Second, as these tariff barriers are lowered, Canada and other WTO members and our businesses have increasingly become concerned with so-called non-tariff barriers—labelling requirements, technical standards, sanitary and phytosanitary measures—that ostensibly are for legitimate reasons, but may in fact become disguised barriers to trade.

Third, as you mentioned, Mr. Chairman, the WTO now includes, in addition to the GATT, the General Agreement on Trade in Services or the GATS, and an agreement on trade-related aspects of intellectual property rights, or TRIPS. As you also noted, members are already committed to expanding the coverage of the GATS in new negotiations starting in the year 2000. The agreement on agriculture also has built in a contemplated new negotiation on agricultural issues, beginning at the turn of the century.

Fourth, at Singapore, ministers added an additional work program on trade and competition, trade and investment, transparency in government procurement, in effect building onto the services agreement other aspects of domestic economic regulation—investment, competition, procurement—that affect the playing field for doing business.

If I were to sum up this landscape that ministers are beginning to consider, and which I take it your committee will begin to consider, it's fair to say that the trade agenda is moving from the border increasingly inland, because in addition to the tariff and the related border issues, we now have issues such as standards, licensing and approval procedures, labelling, product certification, professional certifications—in effect, more broadly the regulatory framework for business.

Add to that our current work with the International Monetary Fund to help address the Asian financial crisis. Members of the IMF are generally agreed that free or open flow of capital hasn't been the cause of the problem. Rather, what has been lacking is an adequate regulatory or supervisory framework to maintain oversight over these capital flows. In some countries the problem has been exacerbated by what I guess I should say are somewhat less than transparent procedures for approving business deals or product transactions.

If you take all of this together—a focus on non-tariff barriers and the addition of services, competition and investment—on sound regulatory frameworks more generally, and on transparency, it means that tomorrow's trade agenda will be as much about strengthening markets as about opening markets. It becomes an agenda concerned with regulatory reform, with promoting non-corrupt governments, with creating a stable and predictable and transparent supervisory structure that creates a healthy environment for traders and investors but also for consumers.

In other words, the trade agenda is not about eliminating regulation. It's actually about strengthening effective regulation and the role of governments.

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So what are we doing, at least in the government, to get ready for these new negotiations in agriculture services and other areas?

Clearly, internationally we have to maximize our participation in the various preparatory committees. It's better that Canada participate now in defining the agenda, so that it reflects our interests, rather than waiting to be told what the agenda is by someone else.

That, in turn, demands that we develop, as much as possible, a domestic consensus in identifying Canadian interests. Given the breadth of the agenda that I described, it is certainly incumbent on us in the department to work across the federal government with other departments to assess fully the implications of these negotiations for various areas of domestic regulation.

Some of these areas now cross into areas of shared federal-provincial, or exclusively provincial, authority. As reflected in Minister Marchi's hosting of his counterparts, the provincial trade ministers, in February, that means that we must redouble our efforts to work cooperatively with our provincial colleagues to define our interests.

As recent debates about the Multilateral Agreement on Investment, or the one on food safety, have demonstrated, some outside the government have begun to ask whether we have it right.

In the eyes of some, the trade agenda is about opening up markets at all costs. Consumer groups, or some health groups, ask, are you pushing too far in trying to open markets, and are you forgetting about food safety?

If I read the literature correctly, political scientists would tell us that underlying some of these concerns is what they have now come to call “a democratic deficit.” In other words, who is accountable for decisions that regulate things that matter to us as citizens?

So when we hear debates about sovereignty or accountability, we understand them as reflecting some anxiety about transparency and about ensuring that there is accountability by those in a position to make decisions.

But I have tried to suggest in this opening statement, Mr. Chairman, that the trade agenda in fact is all about supporting more transparent, more democratic, fairer, and more inclusive and accountable decision making in all WTO member countries. That means that in addition to working with other departments of government, in addition to working with provinces, Minister Marchi is certainly committed to working not only with the business community, but with civil society more generally, to explain the trade agenda and to establish Canadian objectives.

We are working to improve our communications with all Canadians because, in our view, trade and investment liberalization does not undermine Canadians values, standards, culture, or the ability to regulate. It doesn't weaken Canadian sovereignty at all. To the contrary, being part of preparations for possible new negotiations allows us to ensure the protection of Canadian values, Canadian programs and Canadian interests.

So we have a challenging agenda ahead. It demands that we do our homework here in Canada. A concerted effort, a consultative effort, an open dialogue with you and the committee, and with Canadians more generally, are essential to our preparations for trade negotiations, both regional and multilateral.

As I said at the outset, Mr. Chairman, we very much look forward to working with you on an ongoing basis in conducting those preparations.

I am sorry for carrying on a bit longer than normal for an opening statement, but since this is the first of what will no doubt be several meetings on the full sweep of your future trade agenda, I wanted similarly to give you a reasonably comprehensive view of the challenges we both face.

As I said at the outset, we're available collectively to respond to more specific questions you might have.

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The Chairman: Thank you, Mr. Fried. That was very comprehensive. I am sure that as members of Parliament we can all find some questions for you.

Mr. Penson.

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

Welcome, John, Mr. Carrière and Mr. Stone as well. I appreciated your overview. It does raise some questions, as the chairman has suggested. More than that, I think it also identifies a few things that I believe needs to be done in order to build a bit more support domestically for advancing our trade agenda further.

I believe trade and investment have benefited Canada enormously, but I would venture to say that this view is not shared by everybody in the country. I also think that is partly because they don't know how it affects them.

The chairman—Bob—and I were at a conference with some U.S. and Mexican congressmen recently. One congressman from Missouri shared a view at that conference. He said he was talking to a group of workers at a factory in his home state. He asked about their attitude to NAFTA and the free trade agreement, and it was very negative. The workers' attitude was very negative. Yet most of the product they produced at that very factory was being sold to Canada and Mexico.

I think more work needs to be done. I would challenge our own trade department to do the research that is necessary to help us demonstrate, to drive this message home right down to the worker or the farmer out in the field, that this is a very beneficial deal.

At least there needs to be an assessment. I think it is very beneficial, and I think that is what our research will find. I guess if it's not beneficial, then maybe we shouldn't be in these deals to begin with.

It seems to me that in order to make further advancements, not just here but in the United States as well, there is going to have to be a time when we can demonstrate to our public that these deals are helpful to us. The bit of a surprise we got on the MAI was part of that.

There is this fear of globalization. As you suggested, every time we make an international deal some people think it is an attack on our sovereignty. But if we are losing a bit of sovereignty, if the trade-off is that we are benefiting from it, I think most people would think that would be a good thing.

So it seems to me there is a role for government to play in doing the assessment of the benefit to consumers. Maybe our businesses can do their own assessment of how it has affected them. But before we are going to be able to advance much further, I would think that we are going to have to build that public support. I am just wondering about your reaction to that sort of idea.

Mr. Jonathan Fried: Mr. Chairman, if I may respond, again on behalf of the minister, there is very little to disagree with. Carrying a negotiating position abroad means reflecting Canadian interests. In our democratic society, reflecting Canadian interests means reflecting what may constitute a domestic consensus.

We are weakened internationally if we don't enjoy support at home. It is the responsibility of government to educate and nurture that kind of consensus. We are trying on an ongoing basis to share information, the results of our studies and assessments on the benefits of trade and investment liberalization. We are committed to doing more.

As I said earlier, it is not simply a trade department agenda. For example, Agriculture will, of course, engage the interests of other departments and other levels of government. So I think we have a shared responsibility to maintain our efforts to explain the direct links between jobs and growth, on the one hand, and Canada's participation in a healthy international trade and investment environment, on the other.

Mr. Charlie Penson: There is one other area in this first round that I would like you to help me with...well, all of it. I am sure that Sam might want to get into this.

Our document here talks about opening doors to the world. There are certain sectors that still face a lot of impediments. Agriculture is one, especially European subsidies. Our Canadian grain, oilseed and cattle industries are essentially subsidy and tariff free. Yet they are facing markets, especially in Europe, where the access is prohibited. Not only that, but the European subsidies—dumping products on the world market at almost any cost to get rid of their surplus—is having a negative effect on commodity prices generally.

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I'm just wondering how you go about putting together a position to reflect the need to do something to help these people gain access in the next round at the WTO. Then on the other side we have supply management. Is there a way of separating out those issues?

If the government's approach to supply management is to keep the tariffs exactly as they are, don't hurt the ability of the agriculture sector, which is subsidy and tariff free—to try to open up markets in other parts of the world.

Mr. Jonathan Fried: Mr. Chairman, let me take a look back before looking forward. In our view—I don't mean to sound cute—we made significant progress in capping the cap and imposing some serious discipline on European subsidies and potential subsidies wars, as a result of the Uruguay Round. For the first time, in the agreement on agriculture we have much more explicit rules on agricultural export subsidies. We have formulas for calculating aggregate support and capping domestic support, and pointing it toward non-distorting ways of maintaining a vibrant agricultural community in all of our countries. At the end of the round countries recognized that this was a good start, and that they needed to take stock a few years hence to see whether those new, novel and very challenging rules were working effectively.

So in the new negotiations beginning at the end of 1999 we have the opportunity to continue our efforts to discipline some—I don't mean to single out European—foreign practices that are potentially distorting trade unfairly.

Regarding the position that Canada takes into those new negotiations, I can do no better than Minister Vanclief. On several occasions he has stated publicly that he does want to ensure that the Canadian position is a national position and reflects the interests of the agriculture community across the country. That includes not only producers, but the value-added sector as well. He is not going to stake out a position earlier than at a time when he feels he has a clear indication from the community across the country.

Minister Marchi has endorsed this and repeated this, and he is anxious to work closely with Minister Vanclief in this regard.

To that end, a number of seminars, workshops, dialogue sessions and discussion papers have been planned. Some have been circulated. Some workshops have been held. We in Foreign Affairs have been working with Agriculture Canada, along with some provincial governments, to develop further opportunities for workshops.

One was held in Saskatchewan under co-sponsorship last fall. Another one is planned both for Quebec and Alberta. One will be held in Quebec in February, and one will take place in Alberta later this year.

So I think you raised the right question, and one on which I take my cue from the two ministers. That is that it's an important subject on which to have a full domestic debate in order to ensure an appropriate Canadian position.

Mr. Charlie Penson: I will just finish, Mr. Chairman, with the suggestion that, yes, I certainly agree that there has been substantive progress made, while agriculture was not part of any rules up until the Uruguay Round of the GATT. So getting it under...is a major milestone. But I'm sure you will recognize that when they peg the subsidy level at 1986 levels, and then take a 15% reduction from there, there's still a long way to go.

I'm really supportive of the idea of trying to roll other things into a general round of some type. I don't think it's going to be easy to gain access for agriculture products or talk the Europeans into phasing down agriculture subsidies unless they can be seen to be gaining something as well.

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But just in the area of separating the sectors out in agriculture, I do want to tell you that the grain sector in Canada has moved far more quickly to subsidy reductions than was needed under our formula of the GATT. That largely was because of the transportation subsidy, but there were program subsidies that were eliminated as well. So essentially they're subsidy-free, and now they have some very big expectations and they're hurting very badly with depressed world prices right now.

So I would just encourage you to do your best to try to get that kind of access we need. It seems to me that if we can get a dollar-a-bushel reduction in European subsidies, the price of Canadian wheat will go up by a dollar a bushel almost overnight. So it's something, that kind of access, that we have to try to work hard to attain.

The Chairman: Ms. Bulte.

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): I have a number of questions, Mr. Chairman.

First of all, I'd just like to start by saying that I agree with Mr. Penson about the importance for our government to give the benefits of these international agreements and international investment. There's one criticism that came up time and time again when discussing the MAI, that it was used as an opportunity to reopen the whole free trade debate. If we can have that information so that we don't have to keep going over and over and over it again...because certainly that came up time and time again. It was just seen as an excuse to open that up.

Secondly, you talked about domestic consensus and the importance of getting domestic consensus. I noticed that the next ministerial meeting of the APEC countries will be in Malaysia. Part of the APEC consultations, which I know has been taken on along with the APEC economies, is also the women's ministerial meetings. In terms of the Women Leaders' Network, which is part of the APEC's economic consultations, does the WTO have anything comparable to that? Should it have? Again, I went to the Women Leaders' Network meeting of the APEC economies last September, and it was quite interesting on how trade and investment affects women around the world. That's the first question.

As for the second question, with respect to government procurement, my understanding was that there was already a general agreement on procurement. Are we talking about amending this or changing it?

Thirdly, in regard to the non-tariff barriers, I bring that to the table at this point because recently there have been articles in the paper about organic foods. The reverse of that is the labelling of biogenetically engineered foods. I know that there has been a lot of talk in the EU about that. I understand from speaking to people at our health ministry that this is one of their top priorities to look at as well.

The whole issue of labelling, not debating issues but the importance of customer information.... My concern is there was talk about removing those non-tariff barriers. How is that going to affect...and what do we have to do to get that in front of the agenda?

I'm all over the place, but you gave us so much information, I apologize.

Mr. Jonathan Fried: Let me try to respond to each of them.

In APEC, and now we're pleased to report in the free trade of the Americas context, we have formalized the structure for broader consultations beyond government with various aspects of civil society. APEC has a formal APEC Business Advisory Council and the women's network as well in the free trade of the America's context. Minister Marchi encouraged his colleagues, who ultimately accepted to have formalized consultations with civil society in the course of the negotiations.

The WTO per se has no formalized body of advisers or private sector or civil society links. Nor, unlike the UN, does it have formal status observer organizations. What it does have, and what Canada has been promoting, is a fairly open relationship with all non-governmental organizations, be they business or non-governmental, non-profit or non-business sector.

At the Singapore ministerial meeting, for example, with 120 trade ministers there, 350 different non-governmental organizations, business and non-business were registered and had access to ministers for a healthy exchange of views. The same principle will apply at the forthcoming ministerial meeting, but there's really no parallel kind of structure in a WTO context. I think, just to finish the thought, the notion is that each government itself should ensure that that dialogue is promoted nationally so that the views brought to the WTO table do reflect a full cross-section of domestic views.

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Ms. Sarmite Bulte: I understood that in APEC, coming in October, there's a special—not just a civil society—women's ministerial meeting, and I guess you're saying there's no equivalent to that in the WTO.

Mr. Jonathan Fried: No, and I think one aspect that may be worth reflecting on is that APEC, in terms of its objectives, has not only a policy orientation but a business development and networking orientation to become more familiar with our respective cultures on each side of the Pacific.

On the business development side, as you know from Minister Marchi having led a women's entrepreneurial mission to Washington and the mid-Atlantic states, we're certainly active in building women's networks for business development, business promotion, networking, and so on. The WTO's agenda is policy per se, and I hesitate to volunteer a suggestion that any policy issue is uniquely a woman's challenge that requires attention through that prism. They're of equal concern to all business and all sectors of society.

Ms. Sarmite Bulte: We'll debate that privately afterwards.

Mr. Jonathan Fried: On procurement, it's often said that the WTO is a single undertaking, that all members have undertaken all obligations. As it turns out, there are a few exceptions to that, and the Agreement on Government Procurement is one of the few that was open to separate signature. So despite the fact that there are 130 members of the WTO today, there are only 16 signatories around the world to the Agreement on Government Procurement.

A concern expressed by those who have chosen not to sign is that we're taking away their right to steer business towards their favourite local firms. Especially among developing countries, they think that's an important development tool. What we said in Singapore by endorsing a work program on transparency is, fine, we think our firms can compete even if you choose to show some preference for your local firms, as long as we know what the rules are. As long as you advertise and as long as you're transparent and as long as the rules are reasonably objective, it's a fair opportunity to compete.

So the agenda for transparency is not so much to rewrite the current procurement agreement as much as it is to take some of the basic principles of fair bidding and fair tendering and help other countries approach procurement without having to dismantle what may be targeted procurement practices just to have a fairer, more transparent system.

On non-tariff measures, I think it's fair to say, if I may, that you've identified exactly the challenge facing the trading community and one that I think is properly addressed in the Uruguay Round agreements. There are two agreements that are relevant. One is the Agreement on Technical Barriers to Trade, often called by the bureaucrats the TBT agreement. The other is called the Agreement on the Application of Sanitary and Phytosanitary Measures, or the SPS agreement.

What the WTO seeks to do is ensure that each government maintains the full, unimpaired right to legitimately look after the consumer interest and the safety interest, whether it's to avoid fraud, to provide legitimate information, to have well-informed consumers and so forth, on the one hand; or on the other hand, not to allow countries, in the name of consumer protection, to abuse that right and turn it into an artificial, disguised barrier to trade.

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To give you an example, Canadian scallops have long been exported to Europe, particularly to France. France, a few years back, developed a new labelling regulation by which European scallops caught in European waters could be sold in the grocery stores labelled as coquilles Saint-Jacques, but Canadian scallops had to be labelled pétoncles.

Now, pétoncles in Canada is a perfectly normal word for scallops in any of our grocery stores, but in the French that's used in Paris, the connotation means barnacles. Now, if you're a French consumer and you have a choice between barnacles and coquilles Saint-Jacques in the frozen food shelf, which one are you going to choose?

Now, the French said they were just informing the consumer. They had their scientists study scallops, and according to them, one species from Canadian waters was slightly different from those in European waters. We had our scientists look at them. They said, yes, biologically they're different, but in terms of taste, the impact on your stomach, the end use and every other conceivable use of a scallop, there's no difference.

So even though France might ostensibly say that it's to provide full information to the consumer, at a certain point nutrition labelling or information labelling goes beyond that to actually deliberately discriminate in trade without a legitimate consumer purpose. We ultimately settled that dispute with France, having begun a dispute settlement procedure.

The same discussion is unfolding regarding genetically modified or enhanced agricultural products and processed food products. Those who wished to have labels put onto these products are saying that they are simply trying to inform the consumers so that they have the choice between purely natural and that which has been scientifically tinkered with. Those who oppose the label would say that's only if it relates to some legitimate informational purpose, depending on the use of the product and its inherent characteristics.

That's something that has not been settled by dispute settlement yet. Europe has some draft regulations that may affect canola, soy, and maize products. They've also been concerned about a range of products that may contain beef tallow—this resulted from the BSE scare—which can affect everything from candles right up to pharmaceuticals, because tallow is used in gelatine.

Those in the United States who are major exporters of some of these products to Europe have been in ongoing discussions with them both, between trade policy officials and our scientific and veterinary officials, to try to reach some common understanding as to how these issues might best be approached. But ultimately the goal remains, as it has been in the WTO, to ensure the full respect for consumer disclosure and information, on the one hand, while avoiding discrimination that's unfair on the other hand.

The Chairman: Mr. Reed.

Mr. Julian Reed (Halton, Lib.): Thank you, Mr. Chairman.

I think Ms. Bulte really asked the question that I was going to ask, but I'll perhaps add one thing to it. This has to do with non-tariff barriers or covert subsidies, if you like, or however you describe it. Do we assemble an inventory of these things that we believe other countries are...? Is that all in here? Is the inventory in here?

Mr. Jonathan Fried: Yes.

Mr. Julian Reed: Okay. That's great. I appreciate that.

I have just one other question in passing. It's about genetically enhanced products. There's a great deal of it in which you would not be able to scientifically tell the difference. It's just impossible. If one canola gets mixed in with other canola, I would defy any scientist to say which one's genetically enhanced and which one isn't.

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Too, the other part of that equation is that genetic enhancement or genetic improvement has been a fact of life in Canada for many years. It has a little publicity right now, but really, if you go back to the history of grains, for instance, genetic enhancement is old stuff. So I guess the challenge is there. How do you deal with that in terms of trade?

Mr. Jonathan Fried: I think we're all agreed that it is a challenge, that the objective is to find the balance between consumers' safety and informed consumers by way of labelling, on the one hand, because we ourselves believe domestically that our consumers have a right to know, whether it's nutrition or ingredients, or additives, or what have you...and disguised barriers on the other.

The underlying principle of both the TBT and the SPS agreements is sound science. For example, in our recent challenge of the European ban on hormone-treated beef, which our cattlemen were concerned about, the Canadian and American argument was, all right, some of our farmers may feed some of our cows some hormones, but there's no science to show that the meat that results tastes differently or has any different characteristic, and thus it should be equally available to the consumer. So that shows you that science plays a key role in doing this.

The distinction that has been drawn by some between the 100-year-old splitting of seeds to create Red River number one a century ago and today's debate is the transgenetic nature of today's research; you're tinkering with species across each other rather than within. I'm not enough of a veterinary or plant scientist to be able to comment on that distinction.

Mr. Julian Reed: I agree, and I sympathize, but I'm just trying to figure out how we enter into trade, for instance, in BST-enhanced milk production. You won't find anything in the end product that will identify the cows that have been injected with BST. It's not even a hormone. It's simply something that occurs naturally in the animal, the quantity of which is enhanced.

Mr. Jonathan Fried: Of course, how we deal with these issues domestically is indeed as a scientific and consumer matter. Health Canada is still in the process of conducting a very comprehensive assessment based on reams of scientific evidence regarding potential impact, or lack of potential impact, of rBST, and, I take it, is still in the process of accumulating and assessing that data. That's number one.

Number two, we are aware of our domestic responsibility not just to educate Canadians about the benefits of trade, but to educate them to be informed consumers, to understand the role of science in improving our well-being. Some may still prefer organics. It's up to Health Canada and the government generally and our provincial counterparts to explain how we have an effective, safe system of regulation that puts healthy and safe food on your shelves and to explain whether it has additives, whether it lists the ingredients or not. We have an educational role as well.

Mr. Julian Reed: I guess part of going with this...and I won't belabour it, but with your indulgence, Mr. Chairman, let us assume rBST is made legal in Canada. I would not doubt for one minute that because of consumer demand there would be a demand for milk that is labelled non-rBST.

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If a country somewhere else wants to buy cheese from Canada, or we want to sell them cheese from Canada, and if there's pressure on the government locally by their own agricultural community not to allow the importation of Canadian cheese, one of the arguments that could easily be made in that respect is, “Well, you have some cows where rBST is being used”—you see?—“and we can't tell the difference, whether it is or it isn't, so in order to be safe we're cutting the whole thing off”.

Mr. Jonathan Fried: Mr. Chairman, as I said earlier, the hormones panel—the hormone-treated beef panel—gives you the best indication of how the trading system would deal with that kind of ban. If the ban is unsupported by sound science, it will not stand up to a WTO panel.

The challenge that I think we're discussing more cooperatively with our own scientists and with the Europeans is—as opposed to a ban, and as opposed to a voluntary company decision to label its product as it chooses—what if the government requires not only a label but a segregation of shipments, and your entire chain of shipments of genetically modified canola has to be separately warehoused, separately transported, separately bagged and separately shipped, because the consumer has an interest in making a free choice?

We tend to believe that tends more towards the trade restriction side than the legitimate consumer information side. Of course, rather than rushing to dispute settlement, we'd rather, through education and good dialogue, reach a common position with our European friends to keep trade flowing, and that's the subject of ongoing discussion between us, along with our American friends.

The Chairman: Thank you.

Mr. Penson.

Mr. Charlie Penson: There are just two things I have remaining. First of all, you've probably gone over all of this when you gave your opening statement, but I would like to have a list of remaining items besides agriculture and services that might be able to be rolled into a general round in a millennium round. I guess if the MAI gets stalled at the OECD, that might be one of them, but if you could supply that, I would appreciate it.

The other item was that I wanted to know if there is any cross-department discussion or strategy dealing with tariffs. I'm thinking specifically of things like the tariffs on the Japanese automobile industry of 6.7%, which they are trying to have removed. The problem I have is that we still have some tariffs against their product—cars, specifically—that they want removed. On the other hand, they still have substantial tariffs on things like canola oil, lumber—well, you know the list.

It seems to me that if industry is doing an assessment of whether that 6.7% should be removed completely, there needs to be some pretty good discussion between departments, because it also seems to me that's one of the few levers we have to try to achieve some gains with countries like Japan. I'm just wondering what kind of approach you take to this.

Mr. Jonathan Fried: In terms of potential other subjects for future negotiations, the potential agenda is as large as the WTO work program itself. There have been suggestions from some quarters, for example the United States, that even other areas might be added, such as electronic commerce, where there are no real multilateral rules governing Internet-based exchanges of a commercial nature.

As I said in my opening remarks, it is really for each of the WTO member countries to reach an informed decision over the next 18 months as to what kind of package of issues, if any, might be usefully added to the agriculture and services negotiations that are already scheduled. So it's an open question. We certainly have no preferred list in the abstract in advance, other than what would best serve Canadian interests.

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One area does stand out, however, as missing from the built-in agenda and from the preparatory work that's already in each of these agreements to continue an analysis and an information exchange, and that indeed is industrial tariffs. It's interesting to note that in all of the Uruguay Round agreements where we have a study of this, or a review of that, or preparations for new negotiations, there is no WTO-sanctioned work program for further reductions in tariffs on industrial products. Canada has certainly said in quadrilateral trade ministers meetings and elsewhere that we believe it's only natural that in any future negotiations we should look at prospects for further industrial tariff reductions as well.

On auto tariffs, as you know, this is one element that forms part of a comprehensive review of auto policy currently being conducted by Minister Manley. I think the Department of Industry has made clear, both at the start and throughout the process, that they want this review to take full account of all views on the subject, and they have made extra efforts across the country to consult with all interested stakeholders on the subject. That review, of course, is still in train. I'm not aware that Minister Manley has set a specific date by which he'll be reporting.

Mr. Charlie Penson: But my question was, is there some kind of strategy between the Department of Foreign Affairs and International Trade and the Department of Industry to achieve some kind of movement that we're looking for, that Canadian groups are looking forward to as a trade-off?

Mr. Jonathan Fried: Let me simply say, yes, there is a strategy. We work very closely with the Department of Industry, not only on autos but on all matters of common interest, including cross-sectoral connections.

Recall last year, for example, at Vancouver, our success in obtaining a package under APEC auspices of early voluntary sectoral liberalization that takes account of many of our industrial interests on the one hand, and the energy petrochemical and value-added equipment sector on the one hand, and fish and forestry on the other, where there are real Japanese barriers. So we remain, within the government, in very close dialogue with Industry Canada, and it's fair to say they're fully aware of the range of Canadian trade interests with Japan, well beyond the auto sector.

Mr. Charlie Penson: Getting back to the possibilities of things that could be rolled into a general round, would international competition policy be one of the areas the Canadian government is pursuing to try to get in there as well?

Mr. Jonathan Fried: We have supported an educational work program under WTO auspices on both trade and competition and trade and investment.

We believe trade and competition is important, because a market-oriented domestic regulation helps to ensure that one continues to enjoy the access one achieves at the border. By its very mandate, the WTO working group on trade and competition is to report on prospects for developing international rules or other disciplines in this area before ministers will next meet, by the end of 1999.

It's a little early to tell whether negotiations will be recommended. We're not racing to the front and saying let's negotiate now. We're saying let's have a healthy dialogue about the relationship between trade and competition policy. Once we all reach a better understanding of the interaction between the two, we'll be in a much better position to assess whether negotiations should be undertaken or what other further work might be pursued.

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Similarly, on trade and investment we were early supporters of a WTO work program on trade and investment in order to better understand the linkages between trade regulation and investment regulation. Our experience is that trade follows investment and that when Canadian firms invest abroad they actually tend to buy more Canadian products, which creates more export opportunities. And conversely, when we trade abroad it sometimes has a healthy result on investment. We need to have the rest of the world reach a better understanding of this connection.

And again, this working group will also be reporting in the course of the next 18 months as to what kind of further work might be undertaken.

We certainly believe that our efforts in the OECD in promoting a multilateral agreement on investment that meets Canada's bottom lines ultimately should be housed in the WTO. Why? Because Canadian investors who do business abroad deserve the assurance that their investments will be protected not just within OECD countries but around the world. And conversely, Canada, in offering the same protections, would remain an attractive destination for investment. As Minister Marchi has underlined, of course, it's not an agreement at any cost. It's an agreement that meets Canada's bottom lines, as he set out in his speech of February 13.

So to answer your question, these are possible but far from guaranteed subjects for future negotiation.

Mr. Charlie Penson: A competition law certainly could be timely considering that...if we're working to try to get China into the World Trade Organization, with all their state trading enterprises, I think it's probably going to be necessary to have some kind of parameters in terms of competition.

That concludes what I have to say.

The Chairman: Mr. Fried, I'm wondering if you can give us an update as to what happened during the Cairns Group discussions that were recently held.

Mr. Jonathan Fried: I might ask Mr. Carrière to give you a brief synopsis of the recent Cairns Group meeting.

Mr. Claude Carrière (Director, Tariffs and Markets Access Division, Department of Foreign Affairs and International Trade): Mr. Chairman, as you know, on April 1 and 2, Cairns ministers met. The meeting was preceded by a meeting of farm leaders from Cairns countries. The discussion at the Cairns Group was oriented towards finding and establishing as high a road as possible for agricultural trade negotiations and preparation, not only for the WTO ministerial meeting next month but also in preparation for the 1999 ministerial meeting and the launch of agricultural negotiations at that time.

There is a core in the Cairns Group, led very aggressively by Australia and Argentina in staking out positions on such issues as elimination of export subsidies, on which we share views, but beyond that, in establishing clear and advanced positions of negotiations on issues such as domestic support, reform and market access.

As Mr. Fried mentioned earlier, Minister Vanclief, in cooperation with Minister Marchi, is working towards developing an extensive domestic consultation process with stakeholders in the agriculture industry and in the agrifood industry, to avoid coming to definite positions until the domestic consultation process has taken place.

So at the Cairns Group, Canada was seeking to reflect the fact that we—and other countries, we know—are undertaking extensive domestic consultations. So we feel that the Cairns press release and declaration recognize the fact we have an incremental process of moving towards negotiations in 1999 and reflect that fact.

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Mr. Jonathan Fried: Mr. Chairman, we will be pleased to make available to you, through the clerk of the committee, copies of the Cairns Group communiqué as well the press release issued by Minister Vanclief at the conclusion of the meeting.

The Chairman: Gentlemen, thank you very much for bringing us up to date on those issues. It was a very thorough briefing.

Over the next few weeks and months we will continue to look at this issue. We'll be bringing in other departments. As you said, the agriculture department will play an important role, as will Industry Canada. We will also bring in different interested parties from across the country. At the end of it we will give you the benefit of what we've heard. Hopefully we can move forward over the next year to developing a Canadian position.

Colleagues, we're adjourned.