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 20, 1999

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[English]

The Chairman (Mrs. Sarmite Bulte (Parkdale—High Park, Lib.)): Good afternoon, ladies and gentlemen, and welcome to the Subcommittee on International Trade, Trade Disputes, and Investment. We are conducting an examination of the free trade area of the Americas, and we are seeking public consultation on what Canada's role should be at the negotiating table, what issues are important to us, and what it is we hope to achieve through the FTAA as we prepare separately for the WTO. I'd like to welcome all our witnesses this afternoon. Thank you very much for coming.

Mr. Campbell, if we could start with you, we'd be delighted to hear your testimony.

Mr. Bruce Campbell (Executive Director, Canadian Centre for Policy Alternatives): Thank you very much, Madam Chair. Thank you for inviting me. My name is Bruce Campbell. I'm the executive director of the Canadian Centre for Policy Alternatives.

The main point I'd like to make in this intervention is that as you look ahead toward the negotiation of a hemispheric accord by the year 2005, you should examine the last 10 years under the FTA and NAFTA. Where you've come from can be a useful guide to where you're going.

NAFTA is clearly the template on which the FTAA is being negotiated. Is this a good template? We now have a 10-year track record. What are the lessons of the past that we can draw on in order to avoid the mistakes of the future?

Such an assessment would be more useful than a feasibility study of potential impacts of the FTAA, because predicting the future is extremely difficult to say the least. Yet ironically, in the past governments have been more inclined to do this than to do an after-the-fact assessment. I think it has something to do with the fact that in the former you can construct the kind of world you want, with all the optimistic assumptions, and then the analysis of impacts becomes self-fulfilling.

Proponents promised us that the FTA would bring in a new era of prosperity, but 10 years down the road the picture is pretty grim—so grim in fact that only one decade in this century has been worse in terms of the decline in living standards and average income and growing inequality. So its been a kind of lost decade. Recall that the promise was for jobs and prosperity. It wasn't that we were to go through some terrible upheaval and we needed the free trade agreement to somehow insulate us.

Of course, it would be silly to say the free trade agreement is to blame for all our ills, but it has played a role and it bears part of the blame. And that's my basic point. It certainly hasn't delivered the goods it promised.

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Trade and cross-border investment have expanded greatly. This was expected. But trade is not an end in itself; it's a means to an end. Trade expansion may have been the ticket to greater prosperity for some, but not for the many. People by and large don't see how expanded trade has benefited them.

The argument at the time was that enhanced access to a larger market would rationalize production, create economies of scale and greater efficiencies, lead to the closing of the productivity gap—we're still talking about the productivity gap—and thus to more jobs and higher incomes. There have been major improvements in certain sectors and with specific companies, but productivity overall in the economy has continued to lag.

We've become more dependent on the U.S. market, and this makes us even more vulnerable to U.S. action against us for policies it doesn't like. We have become, as Margaret Atwood said, not just the tail, but the tip of the tail on the American dog, and therefore subject to severe whiplash. We're still very dependent on resources, and there's still a huge deficit in our technology trade.

Manufacturing employment, which had been stable throughout the 1980s, experienced a 13% compression by 1996, which despite improvement in the bilateral manufacturers' trade balance in most sectors was three times the drop in manufacturing employment in the United States. Meanwhile, employment in the maquiladora export-processing zone on the U.S. southern border exploded, growing 116% in the first six years of the decade.

Traditional sectors like clothing, textiles, leather, furniture, paper products, and primary metals were hard hit, losing between 20% and 40% of their workforce, but so too were winning sectors, for example, electrical, which lost one-quarter of its employment base.

We tracked the activities of five of the biggest producers and traders, five of the biggest corporations on the planet—the big three automakers, General Electric, and Dupont. Here's what they did as a group. They cut 16,000 jobs in Canada, they cut 80,000 jobs in the United States, and they added 55,000 jobs to their operations in the maquiladora.

While wages for workers in all three countries either stagnated or fell, revenues, executive compensation, and profits soared.

In the NAFTA model of integration, the competitiveness dynamic has been a key force driving the structural adjustment of the Canadian economy, harmonizing it with its much larger partner to the south. The rallying cry from business was and continues to be that we need to compete on a level playing field—similar taxes, UI, wages and benefits, unions, labour laws, etc. We have to ask ourselves if this competitiveness dynamic is a good model for a hemispheric agreement. How have our policies, institutions, and structures become more like the Americans' in the last 10 years?

These changes don't happen overnight. There's been a shift, sometimes fast, sometimes slow, but cumulatively the shift has been significant. For example, there is a reduced role for public enterprises; the Americanization of health care; similarly, a less-advanced harmonization in the education sector; the shrinking size of the public sector overall; and a drop in the level of social spending toward U.S. levels.

The UI program has been harmonized dramatically down to U.S. levels. There has been pressure to lower taxes to U.S. levels, both on the personal side and corporate side. We've heard much of this in recent years, and I suspect we'll hear more in the months to come. There's also been a weakening of labour institutions and standards, Canadian income distribution is starting to resemble more and more the U.S. income distribution, and east-west transportation and communication systems have been redirected north-south.

This competitiveness dynamic has also put a lot of stress on our fiscal capacity, and it has done so through three mechanisms primarily.

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The first is the acceleration of restructuring itself, which has meant plant closures and layoffs. Pressure at the bargaining table under threat of closure has meant concession bargaining, wage compression, and the increased use of casual or just-in-time labour. So as income stagnates or falls, the tax base weakens and so do government revenues. Combined with the pressure on the UI and welfare systems, the result is increased deficits and/or reduced spending.

The second mechanism that has caused fiscal stress is the intensification of bidding wars among governments—national and subnational—to offer subsidies and tax and regulatory incentives to transnational investors. This has also increased the pressure to crowd out social spending.

Finally, there has been the use of monetary policy to control wages, i.e., high interest rates creating unemployment. Policy-makers were concerned that wage increases in Canada in the late 1980s were out of line with their U.S. counterparts. This was especially important, in their view, under the competitive free trade environment. The result was monetary austerity, economic slowdown, government revenue loss, and a rise in deficit and debt in the early 1990s. Monetary austerity—and we're still living with that legacy—also induced an increase in the dollar and hastened the pace of adjustment, i.e., job loss, closures, bankruptcies, etc.

I know I'm going over my time. I don't know, Madam Chair, how strict you are. Maybe you could tell me how much time I have.

The Chairman: You've got about two minutes left.

Mr. Bruce Campbell: Okay.

The Chairman: That's so that we have an opportunity to hear from everybody and then ask questions.

Mr. Bruce Campbell: Okay. I wanted to say something about the link between NAFTA and the broader policy agenda. In other places I've referred to it as the “Swiss army knife” of the neo-liberal agenda, a kind of multipurpose tool. But I won't humour you with that.

I'd just like to make a couple of final comments. One is on the investor-state dispute settlement mechanism. That was not in the original agreement, but it was negotiated in the subsequent agreement and it's critical. As you know, it gives foreign investors the right to take governments to court, basically, to challenge policy. There have been four cases so far. The Ethyl Corporation case challenged the federal government for banning the import and interprovincial trade of the gasoline additive MMT as a potential public health and environmental hazard. The government subsequently retracted the ban and has paid out of court $20 million to Ethyl Corporation. There's also the S.D. Myers case, the Sun Belt case, and most recently, the Pope-Talbot case. They're at various stages of the process, but they're all challenging policy in a way that I think is worrisome. I think the mechanism is flawed. It should be dropped from the NAFTA and obviously not considered in the FTAA negotiations.

I have a final word about alternatives. Here I would refer you—and I brought a couple of copies—to a book we published called Alternatives for the Americas. We published it in English, but it's also available in French. It's the product of—this committee is travelling the country; it will be consulting civil society—a coalition of coalitions of civil society organizations throughout the hemisphere. It began with the Santiago summit about a year or so ago. It's reached this stage, and it's a working document. I think as an alternative to the direction we're headed in with NAFTA, it's worth having a look at. I'll give you some copies.

I'll also leave with the clerk a copy of a book that I and others were involved with. It was originally part of a study of labour markets under NAFTA for the ILO. Thank you.

The Chairman: Thank you very much, Mr. Campbell. Please feel free to file your brief with the clerk as well, so it can be circulated to all the members.

Mr. Bruce Campbell: They're notes. They're a little rough.

The Chairman: Then I would encourage you, if you do have the opportunity to finalize them, to please make them available to us. I'll look forward to hearing your Swiss army knife analogy.

Next on our list is Maureen Molot, the director of the Norman Patterson School of International Relations.

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Ms. Maureen Molot (Individual Presentation): Thank you, Madam Chair. It's a pleasure to be here and to be invited to testify on the issue of the FTAA. I'll begin our presentation and my colleague, Jean Daudelin, will conclude it.

Canada has been the foremost promoter of the FTAA since 1994. This statement examines to what extent this Canadian position is justified from the perspective of Canada's trade interests generally and also from the standpoint of its long-term relationship with the countries of the Americas. We will comment on Canada and the FTAA by posing a number of critical questions about the strong support Canada has provided for the FTAA since 1994. In essence, our presentation addresses the question as to whether the role we've played over the last number of years as a very strong promoter of the FTAA is justified.

Our comments are organized around four points: first, the place of Latin America in Canada's overall trade picture; second, the current prospects for the FTAA; third, whether Canada should continue to push energetically for a free trade area of the Americas; and fourth, a conclusion that makes some recommendations for Canadian policy. Each of the four points has some subcomponents.

It's our belief that it is not in the best interest of Canada and of Canadians to be such an enthusiastic promoter of the FTAA. This project has been largely hollowed out by political and trade developments at the global level. The prospects of its implementation are not good at the moment, and its continued promotion overburdens our trade negotiation capacity, does not help our relationship with most countries of the hemisphere, and could conceivably negatively affect our relationship with Brazil, the largest economy in South America.

To go back to the first item, the place of Latin America in Canada's trade picture, in a word it's a very minor relationship. About 2% of Canadian exports go to Latin America. In relative terms this proportion has not changed significantly for almost two decades. At one level this could be seen as a major accomplishment insofar as trade with Latin America has kept pace with the most explosive growth ever of Canadian exports. At the same time, the point is that the levels of our exports to Latin America are far from impressive. Moreover, a recent economic turmoil in the region as well as a major devaluation in Brazil will likely further diminish the import capacity of the region over the short term. Given continuing economic and political problems in other key economies in the region, including Venezuela, Colombia, Brazil, and Argentina, the mid-term prospects of that region becoming a significant trade partner for Canada are not very good.

In terms of Canadian investments in the region, the picture is perhaps clearer and somewhat more negative. In general, the part of Latin America in the global stock of Canadian investments abroad has declined dramatically since the beginning of the 1980s. The only country in which Canada is a significant investor is Chile.

The economic potential of Latin America does remain significant. For some companies and some sectors, access to Latin American markets currently is and could be important. A broad and complex trade agreement negotiated with 33 other governments over a period of years might not, however, be the most efficient way to help these niche players.

So, basically, I've argued that with regard to the role of Latin America in Canada's trade picture, the relationship is minor.

The second issue of relevance is Canada as a North American economy. Canada is more tightly integrated than ever before into the North American economy. This integration transcends trade relations and is in fact based on investment strategies and industrial structures that consider North America as a single unit. The most important manifestation of this integration is the massive level of intra-firm trade in the overall trade among Canada, the U.S., and Mexico. This North American economic unit is not likely to expand south beyond Mexico, and it will certainly not do so in the next decade. Continuing challenges within NAFTA have the potential to injure the Canadian economy and should be given priority in terms of resolution. In other words, from our perspective, among preferential trading arrangements, NAFTA is the key one for Canada.

The third point under the first general one is that the global multilateral system is the next priority. To the extent that Canada's trade interests can be protected by a rules-based regime that extends beyond North America, the global multilateral system is the only one that can be robust enough to contain our southern neighbour. Moreover, only at that level, namely, the WTO, can we deal with our relationship with the other major economic powers of the globe.

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The second major point is current prospects for a free trade area of the Americas. The first point under this is that there's little energy or pressure for it at the moment. We forget too often that the project of a free trade area from Alaska to Tierra del Fuego was formulated at the end of the 1980s by U.S. President George Bush at a time of strong competitive tensions among the world's largest economic powers and of a deadlock in the negotiations for global trade liberalization. The original logic of the FTAA was that of a fortress America to resist fortress Europe and fortress Asia-Japan.

That context has clearly changed dramatically. It changed with the conclusion of the Uruguay Round and the establishment of the WTO, which put to rest the prospect of the division of the world into three conflicting blocks. In the new context there is little need for further liberalization at the hemispheric level, as expressed most clearly in the relative lack of interest in the FTAA on the part of the corporate sector.

As I said a moment ago, the priority has to be the global multilateral trade negotiations to be launched next fall in the U.S., and there is little need or energy for other endeavours.

A second critical point in terms of understanding the current prospects for an FTAA has to do with what's going on in the United States and the whole issue of fast-track. Is a U.S. president going to get fast-track? We've seen efforts by President Clinton to get fast-track, which have not succeeded. Although fast-track is not needed to begin negotiations under the next WTO round, there is a symbolic component to having fast-track that is perhaps more significant as a result of the withdrawal by President Clinton of his request in the fall of 1997. Although there has been a bipartisan U.S. agenda for Latin America through a number of U.S. presidents that has as its centrepiece U.S. political and economic leadership in the hemisphere, congressional support for that agenda requires considerable negotiation to generate a legislative majority.

To the other countries in the hemisphere, fast-track is a signal of U.S. commitment to the process. Although phrased in terms of a grant of fast-track authority, in reality the debate is about more than simply trade. It's the need to define how active the U.S. is prepared to be in shaping the international trade and investment agenda and its preferred negotiating strategy. Is it regional or global? What's the interaction between the two? Moreover, an agenda now broader than merely the liberalization of trade investment and the economic difficulties of two key Latin American economies, Mexico and Brazil, is making many in the U.S. hesitant to move ahead. The fact that Mexico has experienced serious economic problems since the implementation of NAFTA, including the peso crisis and the current fallout from declining oil prices in the Asian meltdown, has reduced the interest in the United States in becoming more involved in Latin America.

I won't take more time to make that point, but I think it's clear that it's going to be very difficult for a U.S. president to get fast-track and that the current members of the House of Representatives in particular have a very domestic focus.

Another component with regard to the U.S. is its growing trade deficit. Again, time prevents me from going into a great deal of detail, but we do quote from an article in The Economist of a few weeks ago that points to a growing U.S. trade deficit, some $254 billion U.S. in 1998 and growing in 1999 on a month-by-month basis. There's apparently an article in a recent issue of Foreign Affairs that addresses the same point. The growing U.S. trade deficit raises all kinds of issues for members of Congress and reduces their interest in passing fast-track.

Ironically, the one part of the world with which the U.S. has a trade surplus is Central and South America.

Also relevant to the U.S. position with regard to the FTAA is the negative impact on the U.S. of the Asian economic crisis. All emerging markets are of less interest than they were. There has been a loss of confidence in Latin America. How Mexico, Brazil, and many other Latin American states manage their economies in light of the Asian meltdown may influence how attractive they are as potential partners in a preferential trading arrangement.

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At this point in time, and for a few more years at least, no one can give a clear answer to that question.

My colleague will now continue.

[Translation]

Mr. Jean Daudelin (Individual Presentation): Madam Chair, I will summarize the main points of the rest of the presentation in French. Unfortunately, we have not had the time to have it translated, but I will try to paint a picture for you in the language of Molière.

Beyond the problems created for the hemispheric integration by American resistance, the project does not have great support in Latin America. The most significant economy on the continent, Brazil, is not an advocate of the project and soon showed itself to be a critic of it. The Bush initiative was not greeted with enthusiasm. The Brazilians themselves had even announced that they would be the second-last to join the FTAA, just before Cuba.

There are many reasons for that. The first is that Brazil gives priority to MERCOSUR in its trade policy, which means its trade agreement with Argentina, Paraguay and Uruguay, in order to create the basis of an economic bloc that is relatively well- integrated. In addition, through parallel agreements, these countries have agreed to extent the range of MERCOSUR by signing agreements with Chile and Bolivia, and by negotiating others with Andean countries. Brazil has a very South-American strategy and does not look favourably on the hasty approach of the Clinton administration, and especially that of the Government of Canada, to impose a hemispheric scheme that would inevitably be dominated by the United States.

Moreover, the Brazilian public is not particularly enthusiastic. A team from the University of Sao Paulo recently conducted a survey of small, medium and large companies in the Sao Paulo region that showed quite clearly that if MERCOSUR is considered advantageous to Brazil, the free-trade zone of the Americas is perceived as a menace.

In addition, Brazil has a capacity or resource problem in terms of negotiation. Brazilian magazines recently highlighted that whereas the Americans could mobilize 50 or 60 negotiators for each issue, the 15 Brazilians had to negotiate all of them. There are therefore problems of capacity, political will, strategy and support, both in the private sector and in the unions and organizations in the civil society.

Moreover, you must know that Brazil had a significant economic crisis at the beginning or the year that caused very serious economic and social problems that are the government's absolute priority in terms of its political program, so that trade liberalization in its governmental context is very limited.

As for Mexico, the second largest economy in South America, it is not interested in the Free Trade Area of the Americas either. Mexico has paid very dearly for its guaranteed access to the American market and to the OECD at the time. Total liberalization, especially in the financial sector, is considered one of the causes of the peso crisis and of the financial smash of the first part of the 1990s. In addition, to the extent that this country has paid so heavily for guaranteed access to the American market, it is not really interested in seeing others get in, especially Brazil, which also has an automobile industry and which could be a dangerous competitor for Mexico.

Finally, beyond those countries, most of the economies in Latin America are rather small. We often forget, for example, that the Chilean economy is about the same size as that of the island of Montreal and that many other economies are smaller. These governments therefore have a very limited capacity in terms of negotiations and trade policy and must negotiate at the sub- regional, global and Free Trade Area of the Americas levels, and this places a heavy burden on them.

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Therefore both for Latin America and the United States the prospects for the Free Trade Area of the Americas are rather bleak. Must Canada continue to promote it as energetically as it has for so long? We have tried to look at the benefits, the costs and the more strictly defensive reasons for which it should do so.

As for the benefits, the one that is usually referred to is the possibility of acting as a counterweight to the influence of the United States in that area. The first problem is that the key country that would be a decent counterweight, Brazil, and the second one, Mexico, are not interested in the formula. It is therefore a little contradictory. If the strategy for promoting the Free Trade Area of the of the Americas is to create a coalition, we would need an agreement with the main members of the potential coalition, and that is not currently the case.

Another argument that is sometimes used is that of the sandbox, as it is designated in English, in other words a small practice area that allows for the discussion of certain issues that will later be discussed in the global multilateral context. It is an argument that has some merit, but given Canada's limited room for negotiation, we are not certain that the hemispheric practice is a good investment.

It is said that a third advantage is that it will help us improve our relations with the rest of the continent. We do not find this argument particularly convincing either because, as I said earlier, the two biggest countries are not very interested. The smallest countries are overwhelmed and the Andean countries, Venezuela, Colombia, Peru and Bolivia, which represent the third relevant group, are essentially in a political and economic crisis currently and are not likely to be interested in such a project at this time.

A last note on this topic. Canada seems to forget at times that the ultimate objective, from Latin America's point of view in this negotiation, is access to the American market and that Canada is not really in the picture in terms of the allure of the Free Trade Area of the Americas. What is wanted is access to the American market, and from Latin America's point of view, It is a little strange that Canada is promoting it so enthusiastically.

As for the costs, it is certain that it is harming our relationship with Brazil, which is already bad for other reasons, especially the aeroplane conflict with Bombardier.

In addition, in the context of our relationships with Latin America, it reinforces the image of Canada as a close ally of the United States. In a great deal of lesser issues, Canada finds itself on the same side as the United States: work standards, environmental standards, participation in civil society, which are all things we can agree upon, but which are not dear to Latin Americans.

We often present the Free Trade Area of the Americas as a way of defending ourselves. There would be three other threats: Europe, Mexico and especially the United States

In terms of the European threat, it is doubtful, given the importance of agriculture in the trade structure of Latin America and Europe, that the negotiations would go very far or very fast. Mexico is not a significant competitor for Canada. The only real danger would be effective negotiations between the United States and the Latin-American countries that would leave Canada aside, and we do not consider that a significant possibility.

Here is the conclusion. Without even questioning Canada's trade policy, as Mr. Campbell did a while ago, it is difficult to consider the Free Trade Area of the Americas as a valid objective for Canada. It seems to us that Canada has more to lose than to gain by promoting this project and that the government should perhaps even consider developing a strategy of retreat or a strategy of converting its current efforts into negotiations with the WTO, which would help many overburdened small countries and also help, without a doubt in no small way, our relationships with Brazil and Mexico.

Thank you.

The Chair: Thank you very much.

[English]

Ms. Screenivasan, please.

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Ms. Gauri Screenivasan (Coordinator, Policy Unit, Canadian Council for International Cooperation): Thank you very much for this opportunity. My name is Gauri Screenivasan. I coordinate the policy team at CCIC, the Canadian Council for International Cooperation, which is the umbrella group for Canadian development NGOs such as OXFAM and CUSO. We are here today with the Americas policy group of CCIC, which regroups about 40 of our members, churches, unions, and a number of specialized humanitarian agencies, that work with hundreds of partners in Latin America and the Caribbean.

I want to address the committee on three main areas today, and I think it's maybe following in suit a little bit some of the skeptical or pessimistic outlook we've heard in the previous presentations. First, we need to look at the hard reality of the growing disjuncture between the stated goals of the free trade area of the Americas and the actual social and political conditions in the region in which NGOs are working on a daily basis. Second, we want to look at the strategic opportunity for Canada to begin to address that gap. And third, what are key areas and proposals for how to do so, that is, how to improve the issue of the integration of trade and social development goals through increased policy coherence.

Eleanor Douglas, my colleague, the co-chair of the Americas policies group, will then speak to some specific illustrations in the Americas on these points.

So my first point is on the question of the current disjuncture between our goals for trade and in fact the actual conditions.

[Translation]

During the first two Summits of the Americas, in Miami in 1994 and in Santiago Chile in 1998, it was clear that the goal of the economic integration of the countries in hemisphere was to increase the standard of living of the populations, to improve working conditions for everyone and to protect the environment better. In addition the Declaration of the Santiago Summit shows that the fight against poverty is still the major issue for our hemisphere.

At the end of the first Summit of the Americas in Miami, the countries of the hemisphere adopted an ambitious 23-point action plan to ensure tangible progress, non only by stimulating trade, but also by fostering democracy, human rights, health, education, etc.

Despite a comprehensive framework, the planning for part of the program for economic integration and free trade dominated over all other issues. After the 1998 and despite the failure of the United States, who wanted to speed up the process, FTAA discussions went to a higher negotiation level. As forecast, these started under the aegis of Canada, and it is highly probable that an agreement on services to businesses will be reached before the year 2000.

[English]

On the other hand, concrete results from the social development commitments of the Summit of the Americas are much harder to find. The rest of the 1994 plan of action was divided up into different baskets of issues and monitored by something called the Summit Implementation Review Group, or SIRG, which despite 16 meetings since 1994 has yet to conduct a comprehensive analysis of progress made against social development goals announced in Miami. But the evidence is in fact already tallied. Disturbing hemispheric trends in human security and development issues in the 1990s, documented by reputable regional organizations such as the Inter-American Development Bank and the Pan American Health Organization, are summarized in the appendix to the brief in front of you. As examples, half of the region's 35 countries now show worse ratings in civil and political rights in 1996 than they did in 1992. Nearly 19 million children form part of the region's workforce, and per capita income has dropped by 15% between 1980 and 1990.

The Economic Commission for Latin America and the Caribbean, in its 1997 social development report, indicated that hopes that macroeconomics and institutional reforms would trigger vigorous growth have been frustrated and that despite economic growth of 3% to 4% in most countries in the region between 1995 and 1997, poverty in the Americas has in fact been increasing in absolute terms in the 1990s. What the statistics demonstrate is that the economic model of liberalized trade and more open economies, which is already applied quite extensively throughout the region, is simply not working for millions of citizens in the hemisphere. While a significant section of wealthy and middle-class people are benefiting, especially those more closely tied to the export economy, most citizens are increasingly excluded from the benefits of growing economies.

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So the Americas policy group would really like to highlight this contradictory trend in the way we see a growing social disintegration amongst working people and the poor that contrasts quite sharply with the growing integration of business and government superstructure in the hemisphere. And it's wide, depending on which statistics you focus on. You can show either really quite a rosy picture of economic integration in the Americas or one that is in fact quite discouraging.

The second point we wanted to speak to is what is the strategic opportunity for Canada's role in hemispheric integration over the next few years.

The point we want to make is really to note that Canada has honed its capacity for policy-making in the Americas at two levels. Certainly at the governmental level, since Canada joined the OAS ten years ago, our role in hemispheric affairs has increased dramatically to the point where we are now playing a leadership role. This is especially so in the next two years as we prepare to host a trade ministers' meeting in 1999, the OAS general assembly in 2000, and the third Summit of the Americas in 2000 or 2001.

But equally critical to reflect on for the committee is that during the same decade and in fact even before Canadian civil society organizations, including those in the Americas policy group, have broadened their relationships with partners in Latin America and the Caribbean, developing sophisticated hemispheric networks that deal not only with community development issues at a grassroots level but also with the national and international policy contexts.

Given the current cloud of public doubt then about globalization and the moment we're really in to rethink a number of economic policies, but also very much taking advantage of the current experience and relationships of the Canadian civil society relationships in the hemisphere and the Canadian government's position and leadership role in the summit process, we believe actually that Canada is positioned well to lead much more at a leadership level the issue of uniting the goals of hemispheric integration with social justice, making the Americas a kind of test case for a different approach to integration that prioritizes sustainable human development. As Finance Minister Paul Martin said last year, it took years to make globalization happen, but now we must learn to make it work.

So our third area then is how, poised in this way with strong civil society relationships as well as assuming a kind of leadership role politically, can we promote greater policy coherence to ensure that trade does in fact promote and achieve our development objectives?

There are a number of more detailed recommendations in the brief, but I want to speak to a couple of key areas for recommendation. The first is the way in which we can take this opportunity to link the design of hemispheric trade agreements much more explicitly to poverty-sensitive, inclusive human development goals. These goals must be built into the framework of agreements rather than added on, and there must be enforceable, accountable mechanisms to ensure that increased trade actually helps to reduce poverty and inequality and serves to raise the level of rights and standards.

The NAFTA side agreements on labour and the environment contain laudable goals but have been rendered secondary in both political profile and enforceability. The side deals really have been revealed as deeply deficient as tools for potential improvement of social and environmental standards.

Civil society organizations throughout the hemisphere have in fact been working to develop alternatives such as those summarized in the document. Mr. Campbell identified the document to which I refer, Alternatives for the Americas. There are a number of networks working on different approaches for policy mechanisms to achieve these kinds of ends.

In the course of the work, we began to compare and contrast, for example, the NAFTA model with other models of economic integration such as MERCOSUR or the Maastricht Treaty of the European Union. Although these themselves have many flaws, we suggest that Parliament, in preparing for the free trade area of the Americas, could benefit by examining the existing model of NAFTA as well as some of these other models, to look at the lessons learned. It would be useful to analyse which features of these existing trade agreements have in fact served to enhance the capacity for governments and societies to translate increased trade into—

The Chairman: Ms. Screenivasan, if I can just stop you, the translator is having trouble following you. If you can just tell her what page of your brief you're reading from, so that she'll follow you for the benefit of—

Ms. Gauri Screenivasan: It's not in the brief. It's in the speaking notes.

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[Translation]

Mr. Benoît Sauvageau (Repentigny, BQ): If we had had the document, there would not have been a problem. Is the document Canadian...

[English]

Ms. Gauri Screenivasan: I'm not reading from the brief; I'm reading from a shorter set of notes. I'm sorry, I thought you had a copy of those. I'll go much slower, and don't worry about reading from the brief.

I apologize to the committee. There was a mix-up in the document that was given to the translator. She has the much longer brief in front of her.

Let me wrap up and let my colleague take a crack at this.

The point we want to make is similar to what Mr. Campbell has said. Really, there is an important role that Parliament can play in looking at some of the lessons from the existing NAFTA model and other models, to identify both those aspects that have led to decreased capacity and effectiveness in protecting human rights and labour standards and those that have increased.

A second main area, in addition to the question of assessing the trade agreements we have to date, is really, as others have said, to put the trade agenda on a much slower and more careful track until we can bring more concerted action to bear on improving policy coherence for human development goals.

How can we do that? At one level, we think Canada needs to practise and insist on greater links between our trade agreements and commitments and this SIRG process, which documents our commitments on social development and human rights grounds, and to explicitly link those two processes much more, both at home in our own dealings and hemispherically. We recommend that Canada promote a much more comprehensive review of progress on those SIRG commitments.

We think there's another area that needs work: the question of reforming the international financial system, controls on flows of short-term capital, and debt cancellation issues.

Lastly, we think Canada needs to take leadership in recognizing the great diversity of economies and size and development levels in the hemisphere, again, as others have pointed out, recognizing that this diversity of development needs and size requires a differentiated approach to trading rules. Rather than working for a kind of one-size-fits-all hemispheric trade agreement, we need to be arguing for particular kinds of policies and trade and investments that better suit smaller economies—different timetables for those economies that have different levels of, for example, indebtedness; different diversity of their export base.

So those are some of the broader areas that we would recommend, and I'll ask Eleanor to speak to some of the specific issues in the Americas.

Ms. Eleanor Douglas (Co-Chair, Americas Policy Group, Canadian Council for International Cooperation): My name is Eleanor Douglas. Right now, I am one of the co-chairs of the Americas Policy Group.

A lot of these issues are ones that we are discussing with a whole series of partners in the region. I'm not here pretending to represent all those partners, but the discussion has been ongoing for quite some time, including the Alternatives for the Americas document that Bruce and Gauri have mentioned.

Gauri has brought out some of the overall general concerns we have about policy coherence. I'm going to try to relate that to some very specific examples from the region, and I'm going to use three different areas to do that: the area of human rights, the area of food security, and the area of good governance and a meaningful role for civil society. Throughout the presentation, there are a few recommendations we would like to put forward today.

In terms of human rights, one of the major concerns that we and partners in the area have is that trade is being promoted by governments and by Canada without first assessing the impact on people's basic human rights. One of the examples I'd like to use is the case of Mexico, which has been mentioned on several occasions this afternoon.

In order to become a member of NAFTA and the World Trade Organization, Mexico had to make sweeping changes to its domestic social legislation and practice, dismantling historic communal land systems, removing some supports for farmers for basic grains, lifting price controls on items of basic necessity, and allowing foreign speculative investors to move billions of dollars in and out of the country. What we're seeing with people on the ground in Mexico is that their human security has been worsened. Human rights have not been defended through this process.

• 1635

One of our concerns then, of course, is that we would like the protection of people's basic rights to be the overriding and overarching concern in any kind of trade agreement. One of the members of our organization from the Inter-Church Committee on Human Rights in Latin America said if being a member of NAFTA means we are no longer able or willing to speak out publicly in defence of human rights or peace in Mexico, then we have grave concerns about what might happen to other countries under the FTAA.

Coupled with the whole area of human rights, of course, are labour rights. Since the Canadian Labour Congress, which is a member of the Americas Policy Group, will be making a brief or has presented a brief, we're not going to go into labour rights in very much detail today, but just say that there has been a shift away from formal, protected jobs to informal, precarious employment with lower pay, fewer benefits, and less security.

One clear and recent example is the Van Heusen plant in Guatemala. Workers fought to unionize, eventually signing a collective agreement in 1998. That included raising wages from $5 to $9 a day and improving sanitary conditions in the plant. A year later the plant shut down. This is a discouraging message for all of the people working in these kinds of maquiladoras or factories.

One of the recommendations we would like to make here concerning the protection of human rights is that Canada and other countries in the region who have not done so should sign and ratify the American Convention on Human Rights from 1978 and the San Salvador Protocol on Economic, Social and Cultural Rights from 1988. We realize these are not perfect instruments, but they are a start, and we would encourage the Canadian government to take a close look at them and ratify them.

Concerning the San Salvador Protocol, ten countries have ratified the protocol to date, which is just one short of the eleven required for this instrument to come into effect. This is one of the issues we have been discussing in the Americas Policy Group, and it has the support of a number of member organizations. The recommendation is that Canada should sign and ratify the two instruments.

Under the area of human rights, we're also concerned about the rights of corporations being strengthened at the expense of governments being able to protect the basic rights of citizens. I suppose you have heard about chapter 11 of the NAFTA agreement. We would like to bring that up very quickly.

We support Minister Marchi's call to introduce modifications to NAFTA's chapter 11, but we would go even further. This chapter must be negotiated or renegotiated in its entirety. Any further investment agreements should reflect the need to protect governments' capacity to regulate and enforce policy in the public interest.

The second area we have looked at in terms of concrete consequences on the ground in Latin America is the whole issue of food security. We feel that this area has been hard hit by the process of economic liberalization. What is happening is that governments are promoting large-scale, highly technified export agriculture, such as flowers and fruit, for northern consumers while support for local producers, who are producing food for consumption at the local level, has been reduced or eliminated. Tariffs have been reduced, allowing the importation of subsidized, mass-produced food products from other countries. This has caused significant dislocation of small farmers and small food producers.

We have a statistic from Brazil that says nearly three million agricultural workers were put out of work due to declining prices for basic grains. Mexico, which is known traditionally as a producer of maize—of corn, sorry—is now importing significant amounts of corn from the United States, and this is rising, with a 120% increase in imports in one year.

• 1640

So our recommendation—I've also heard it mentioned—is that we need to go slower, that the negotiations need to be careful, especially concerning agricultural trade within the free trade area of the Americas. Canada should propose a balanced approach to agricultural trade within the negotiating group on agriculture, called NGOA, recognizing the right to food security and the need to support the small-farm sector.

The final area I will mention is the whole area of good governance and a role for civil society in the discussions around trade in the Americas. Certainly Canada has recognized the need for broader civil society participation in foreign policy. This has been clearly stated by the government. However, a number of NGOs relating to the Americas feel it hasn't yet been sufficiently open and transparent. A paper that was prepared for the Canadian Centre for Foreign Policy Development around the Vancouver and Santiago summits said that so far this whole issue of discussion has disappointed almost everybody—ministers and officials as well as the NGO community.

In order to have feedback from civil society, you have to go fairly slowly. You have to guarantee that information gets out to people, and you have to provide the resources so that people generally can understand what the issues are and can have the chance to provide meaningful feedback and constructive advice. In addition to improving public consultation at home on the FTAA, we're also hoping and wishing that Canada will promote greater public consultation in the hemisphere generally.

We also recognize that our trade minister, at the Costa Rican ministerial meeting in March 1998, encouraged colleagues in the region to set up a committee on civil society participation for the FTAA. However, what happened was not quite satisfactory. What happened was that a collection of suggestions came forward and they were collected in an office in Washington. This is what the NGOs have called the suggestion box; there was no real formal mechanism to discuss these kinds of suggestions. So we would urge Canada to make that process a consistent, permanent, and transparent one with colleagues in the region.

The last point is simply to say that Canadian networks are going to be holding a social forum before the November ministerial meeting in Toronto, and we would like to recommend, as a concrete step towards the goal of increased civil society participation and to facilitate further proposals at a hemispheric level, that the Canadian government provide some resources so that this forum for civil society can actually take place. We believe the Canadian Parliament also should play an active role not only in guiding our own government but in analysing and having an overview with colleagues in Parliament throughout the region about what is actually happening in the hemisphere.

My last comment is simply to say that it's only a very tiny minority of 800 million people in the Americas who really have heard and understand the whole process and the concept behind the FTAA. So we are urging that in order to build an informed public, we need to have the time, the space, and the resources to do so, and that it is important so that this informed public can help government actually shape what is best for all our societies.

Thank you.

The Chairman: Thank you very much, Ms. Douglas, and thank you all.

I'm going to turn to my colleagues right now. We do have a vote in half an hour, so perhaps I could ask my colleagues on the first round to take just five minutes. I would also ask the witnesses—

Mr. Richard M. Harris (Prince George—Bulkley Valley, Ref.): I'll be very quick.

The Chairman: —to perhaps keep their answers quick so that we can have a number of questions.

Mr. Harris, I'd like to start with you, please.

Mr. Richard Harris: Thank you for your presentations.

• 1645

When we're looking at free trade agreements, or in this case expanding to an FTAA agreement, one of the prime questions we as parliamentarians have to ask is, what good would there be for Canada to be a part of these agreements? It's my opinion that question is probably best answered by Canadian businesses, which would be seeking to take advantage of any new agreements to enhance their business by supplying goods or services to the member countries, and by Canadian consumers, because of the products that could be imported into Canada through trade agreements. Although I recognize your concerns about human rights and social issues, in my opinion trade agreements are simply about trading goods and services among countries. If it's a good agreement for Canada, we're going to hear from our Canadian business sector as well as our consumers as to whether or not they think we should be involved in trade agreements.

A free trade agreement with the Americas would certainly bring together some very diverse countries. Some of those countries fund their governments through high income taxes, as Canada does, while others, such as some Caribbean countries, have no income taxes and fund their governments primarily through high tariffs.

I think it'll be difficult enough to hammer together a trade agreement that will focus strictly on tariff and subsidy issues without trying at the same time to tackle the many labour and environment issues. I had the answer to my question earlier from you, Ms. Douglas, and maybe others could also comment on it. Would it not be preferable to leave labour issues to an organization such as the ILO or to add a side agreement such as what they have with the FTA? What would be wrong with either one of those two approaches?

The Chairman: Ms. Douglas, did you want to answer that?

Mr. Richard Harris: In other words, segregate the labour and social issues to side agreements, such as we have currently with the FTA.

The Chairman: Mr. Harris, is that directed to Ms. Douglas or to anyone?

Mr. Richard Harris: It's directed to any of the panellists who want to comment.

The Chairman: Who would like to comment? Ms. Molot.

Ms. Maureen Molot: I think your point, sir, raised two issues. One is what's in the interest of corporations. One of the things Dr. Daudelin and I tried to argue is that at the moment Canadian corporations aren't very interested in the FTAA because they don't do a whole lot of business in Latin America and, with some exceptions, are probably not going to. When this issue first was raised, there was some interest in the corporate sector. But as most of us are aware, corporations frequently have short attention spans. Most Canadian corporations are focused on domestic issues, as our newspapers are now suggesting with regard to taxes, and most of them don't pay a whole lot of attention to trade arrangements. That's point one.

Point two, in terms of their attention on trade, as we mentioned, we're coming up to the next WTO round. Many of us consider that to be a critical agenda for Canada in terms of a large number of issues being negotiated, but it's proving very difficult to get the attention of the private sector for that round. So if they're not interested in a round that is going to address a range of issues of enormous interest to them, how much less interested are they going to be in a free trade agreement with a region with which they have little interaction?

With regard to the side agreement issue, the point we tried to make is that these issues are causing great concern on the part of governments in many Latin American countries, and they would like to separate the economic issues from the labour, environment, and other kinds of issues. The difficulty is that now these have been joined together as a result of positions taken by Canada, the U.S., and many NGOs. I think that on that one the governments of most of the hemisphere would agree with you.

The Chairman: Mr. Campbell.

• 1650

Mr. Bruce Campbell: Very briefly, I think one of the good things about the debate this time around compared with the debate in the 1980s—and I was around for that very heated period in Canadian history—is that there is a more general recognition by government that so-called trade agreements are about much more than trade. They're about investment. They're economic constitutions, and in a sense they're by default social and environmental constitutions, especially the type we find ourselves part of. Basically, orientation is liberalization of capital and investment, and that introduces a very powerful dynamic on the part of corporations, which are able to move much more rapidly within the economic space. They're able to play one jurisdiction off against another. There are no common rules, so they're able to foster a kind of “race to the bottom” type of dynamic.

When you don't have a comprehensive set of rules but only partial rules, you get these kinds of pressures. The pressures affect the environment, human rights, workers, and communities. So what we're talking about here is not just businesses and consumers, but people, citizens, workers, and communities. They're all affected, and they all have a stake.

The Chairman: Mr. Harris, did you have another question?

Mr. Richard Harris: I just want to thank Mr. Campbell for his comments. I appreciate your views. However, I think in the real world international trade agreements are all about what's good for the economy of the countries that are involved. As Ms. Molot mentioned earlier, there hasn't been much interest on the part of Canadian business in pursuing this FTAA. Hopefully, the government is listening to that, and if they fail to see an interest on the part of Canadian manufacturers or providers of services, they're not going to or they probably shouldn't pursue it very vigorously.

I think ultimately the decisions are going to be made primarily from an economic point of view. When you're involved in trade agreements, in my opinion that's probably the single most important point of view from which to approach the benefits of any trade agreements.

We'll probably disagree on the benefits of the FTA, and that's certainly allowed.

I really don't have any other questions.

The Chairman: Mr. Harris, I believe Mr. Daudelin and Ms. Screenivasan would like to respond. Please do so very quickly as we're going to run out of time.

Mr. Jean Daudelin: I have just a brief comment. Gauri Screenivasan mentioned that it would be worth while to put the trade agenda on a slower track. In fact, I think the Canadian government could recognize that given that there is very little pressure and lots of resistance both here and in Latin America to the kind of agreement the FTAA appears to be, this is an opportunity to work more slowly on a broader number of issues, instead of promoting the agenda that is not receiving lots of support here and that is generating much resistance in Latin American countries and in Canadian civil society. I think one should see an opportunity there for the slower track, if you wish.

• 1655

Ms. Gauri Screenivasan: Just to follow up on that, you asked, if we are to pursue either social or human rights goals, what would be the role for the ILO, or for other side agreements. The point we were trying to make is that in fact we're approaching the FTAA, but it's really a much broader set of policies that we have to look at over the next few years than the trade agreements themselves. What I was trying to lay out earlier was that we've identified a whole series of issues that we are claiming are our goals for integration that relate to commitments on these very issues—social and human rights issues.

I think something like strengthening the International Labour Organization could be a very effective strategy within a strategy that looks at what the mix of policy instruments that we have to pursue these important goals are. The problem we are trying to identify is the situation in which the trade policy and the trade goals themselves, defined narrowly in economic terms, are given much greater political attention and weight and don't allow us to pursue a more thoughtful and coherent set of policies for how we achieve a series of outcomes.

But I would also point out, as Mr. Campbell did, that even in the definition of what we're pursuing at a trade level, our trade goals, in economic terms, as you say, we are pursuing not just the question of the trade of goods and services; we are pursuing them with specific economic outcomes that relate to issues of employment and increased income. So it is against those outcomes, rather than just measuring the widgets of goods going back and forth, that we also have to assess our economic policies.

The Chairman: Thank you.

[Translation]

Mr. Sauvageau, do you have any questions?

Mr. Benoît Sauvageau: Yes, Madam Chair, but if you will allow it, I would first like to make a comment to you and to the clerk and the staff through you.

It might be useful to remind our witnesses to present documents in both official languages, insofar as is possible, so that we could follow their presentations more closely. When we call other witnesses, we will be able to pay special attention to this aspect if possible. I am certain that Mrs. Folco shares my opinion, perhaps not on other levels, but certainly on this one.

[English]

The Chairman: Thank you, Mr. Sauvageau. We'll advise the clerk accordingly.

[Translation]

Mr. Benoît Sauvageau: Here are my two questions for the three groups of witnesses.

At different levels, you seem to be saying in the end we should withdraw from the Free Trade Area of the Americas. That is what I understood. If I misunderstood, please correct me. If each one of you believes that Canada should withdraw, what should be its fallback position? I believe it was Mr. Daudelin who said we should find a fallback position, but he did not define what it should be. So, according to you, should we withdraw from the negotiations or continue them?

Secondly, you talked about the role of civil society. I share your opinion about the role of civil society in these negotiations. You know that we also have some concerns as parliamentarians. Yes, civil society must have its say, but parliamentarians must also have one.

An organization has been created, the Conference of Parliamentary Americans, the COPA, where parliamentarians can intervene in the negotiation process. Some interveners would like the Organization of American States, the OAS, to take the baton from COPA. According to you, what should the role of parliamentarians be and what would be the best way to do it? Thank you.

[English]

The Chairman: Who would like to start it?

[Translation]

Mr. Jean Daudelin: As for the fallback position, we believe that Canada should not, as it currently is, be an enthusiastic promoter, not to say an aggressive one, of the Free Trade Area of the Americas. Canada can certainly not withdraw from the negotiations as they are currently devised. The process has started and it would be extremely embarrassing and costly to do so. We have not developed a strategy and we do not have specific positions. We could work on a strategy to convert the FTAA negotiating process into something else, for example negotiation groups for the WTO or something similar that would be the subject for discussion at the Canadian summit in 2001.

• 1700

Currently, there is a certain inertia in the process that would make it very costly politically to withdraw, although that would probably suit everyone. We are not saying that Canada should withdraw, but that it is not in its interests to promote it aggressively, as it has done since 1994.

Mr. Benoît Sauvageau: Thank you.

The Chair: Mrs. Screenivasan.

Mrs. Gauri Screenivasan: Regarding your question about the role of parliamentarians, we have not raised it verbally but it is in the memorandum. You are completely right in saying that it is necessary to develop strategies for the participation of civil society and to give parliamentarians a role.

We often say that free trade negotiations have a democratic deficit, meaning that citizens, directly or through their representatives, cannot have a say in the negotiations.

We don't have a specific idea on where parliamentarians could fit in the process, but it would be good if the Government of Canada developed a position and a role for parliamentarians on a hemispheric scale, a monitoring role and even one of approval of policies on interaction in the hemisphere. So we therefore agree that a role has to be found for parliamentarians, not only a monitoring role, but also a role in the policy development process.

Mr. Benoît Sauvageau: Thank you.

The Chair: Mr. Campbell.

[English]

Mr. Bruce Campbell: Just very briefly, regarding whether Canada should pull out, I think under the circumstances that would be my preference. I think the priority should be focusing on the many problems and flaws in the NAFTA. There's more than enough to do to address those questions, whether it's the side agreements, the investor-state issue, or the ongoing problems with dispute mechanisms. I think that should be the focus. I suppose in an ideal world, at least in my ideal world, I'd like to see the WTO take on more and more of those and eventually marginalize the NAFTA.

On the role of parliamentarians, or at least the role of Parliament here, I have just one suggestion, which would be to really beef up the capacity of Parliament, of the House of Commons and the Senate, to do the kind of research and independent assessment that is necessary, because it really doesn't exist. It's weak enough within the departments and never really... you can't really call it independent assessment. So my recommendation, my vote, would be to vote yourselves some more money to do some good, solid, independent research, maybe set up an independent... I'm using the U.S. model, the congressional model. They have a much better capacity to do that kind of work than we do.

The Chairman: Thank you.

[Translation]

Mr. Benoît Sauvageau: I would like some additional information. In the context of your conversion position, do you foresee negotiations with the regional blocs like MERCOSUR or the Andean Pact?

Mr. Jean Daudelin: I don't think it would be worth it. There are incredible internal tensions within MERCOSUR. As for the Andean Pact, you only have to look at the countries one by one: Venezuela is in a political and economic crisis, Columbia is in the process of dividing itself into three, and Ecuador is in a political and economic crisis; the only country that seems to be working is Peru, but I has some very serious problems. Therefore there is nothing in the short or medium term.

As for the OAS and the role of parliamentarians, your question is very important and clearly goes beyond the problem of trade negotiations. It is the whole problem of democratization of the process and of the development of foreign policy in Canada.

• 1705

Clearly it is necessary to integrate consultation mechanisms such as the Canadian Centre for Foreign Policy Development and committees such as this one in order to integrate Parliament's role with an increased participation from civil society. It is a much more general problem.

Mr. Benoît Sauvageau: Thank you.

[English]

The Chairman: Mr. Calder.

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

I think we have to take a look at the overview of everything here, and we'll start from the WTO and work our way down. Currently there are 134 countries involved in the WTO, with 30 more that want to join. Taking into account the fact that Canada's economy is 40% export, this is something we have to belong to; we have to be part of this.

I think the other thing we have to look at is the fact that the European Economic Community has finally come to an agreement on a common currency. It's called the eurodollar. The question is, if all those countries can come to an agreement on a common currency, how long is it going to take before they come to agreement on a common trade policy?

Two of the things we're probably going to hear from the United States—and the Standing Committee on Agriculture was down in Washington a month and a half ago. I was down there because I'm the vice-chair of that committee. We were asking these very questions. The United States may start pushing for a common currency on the North American continent and they may start pushing for a common trade policy. I think the FTAA definitely has problems in it, and that's what brought me into politics in the first place.

At the same time, I think there are a lot of things in there that are definitely fixable. It's not perfect, but then again, when we started negotiating the WTO in the Uruguay Round, originally starting with GATT, it took us nearly seven years to establish the goalposts we're dealing with right now.

This next round of negotiations we're going to start is basically going to be refining the rules we're playing by at the present time.

Quite frankly, I really can't see how we can back away from a process that has already started. Within the agriculture community at the present time we are currently working on establishing our negotiating positions and putting those forward to the government. The supply managed sector—I'm a farmer in my other life—has already established that, and those positions have been adopted by the Canadian Federation of Agriculture. They've already been made available to the government. So our negotiators know where we stand on these issues. At the same time, I think industry is probably doing the same.

You talked about section 301, the fast track in the United States. Quite frankly, if that thing is a stand-alone, I don't think it will go anywhere, but if it were part of an omnibus bill, there is a possibility of it going through, and it's a very important piece of documentation.

If you have any comments, that's what I see.

The Chairman: Who would like to comment? Ms. Molot.

Ms. Maureen Molot: With respect, I'm not sure what the question is.

Mr. Murray Calder: There is no question. It was a comment; it was an overview of what is happening.

Ms. Maureen Molot: Okay. The new WTO round is critical for Canada, no question. I think past experience has demonstrated that our capacity to have any impact on the outcome comes as the agenda for the round is being set rather than as the negotiations take place, simply because in global terms we're too small a player. The European Union already does negotiate as a group at the Uruguay Round and will do so in this next round, which, you're right, will take a very long time to play out. But the major negotiating partners will be the Europeans, the Americans, and presumably the Japanese.

It's certainly critical for Canada to play a role in setting that agenda, and obviously we're very much affected by the outcome. How quickly that all gets off the ground will in part be a function of whether the U.S. gets fast-tracked and whether that happens in Mr. Clinton's last year and a bit or whether it waits for a new president. You are probably aware that the Uruguay Round got started without fast-track, and as progress was being made, that was passed.

• 1710

One of the points we tried to make is that there's a difference between negotiating at a global level, in which a range of players have a stake and therefore there's an impetus to keep the negotiations going, and the kind of preferential trading arrangement in which players have different stakes.

Mr. Murray Calder: Just as a comment, one of the things we did find out when we were down in the United States is that there is a major concern right now about vertical integration. This might be something you're not aware of.

Ms. Maureen Molot: The Americans aren't concerned about their increasing integration with us?

Mr. Murray Calder: No, no. Within their food processing industry down there, their concern now about vertical integration is starting at the grassroots and working its way up through the political cycle.

Ms. Maureen Molot: Wrong. I don't think, with respect, that's a new concern in the U.S., since large agri-food businesses have been around for some time. It may well be that with the reduction in protection farmers see a greater precariousness in their own positions, but I don't think the vertical integration as such is terribly new.

Mr. Murray Calder: Well, what they are seeing is that there are fewer and fewer food processors there, and they're getting bigger. Therefore, at that point in time at the lower end of the agricultural cycle you're getting two feudal systems, basically. And there's concern now both in Congress and Senate.

Ms. Maureen Molot: To go back to fast-track, that's one of many things that feed into a reluctance to push forward. It's not that the inability to get fast-track is going to stop the kind of integration to which you refer, but people in effect strike out in that way and think that by focusing more internally and being constrained with respect to liberalization they'll somehow stop processes that are unfolding. I'm not sure that's the case.

Mr. Murray Calder: I could discuss it further, but I think Jean wants to comment.

The Chairman: Yes, but I still have Mr. Speller, and those bells are going to go off in about three minutes.

Ms. Gauri Screenivasan: I have a brief comment, really, on your comment.

You've laid out what is a fair scenario inasmuch as Canada is an active trading nation, the WTO exists, we must belong, and there's the question of how we can back off now. I'd like to comment that in fact the position of a number of development NGOs, the recommendations that we've just made... We wouldn't characterize it as backing off the trade agenda. What we see in fact is that the worst thing we could do is sit back and not work at improving the global trading regime. Our concern is that in fact the planet is in a virtual state of crisis. If you look at the numbers of people who are living in poverty, the levels of conflicts that are exploding, the deterioration of environmental resources, much of this is related to issues as specific as things like the vertical integration of the food industry and what that means for farmers at the grassroots versus the consumers of food.

There's a huge public questioning about how we address the concerns of ensuring, through our trading agreements, more stable employment for more citizens, widening the number of people who benefit from the trade agreements. So our view is that we need to actually engage urgently, but that part of the urgent issue for Canada's trade agenda is that we still don't understand well enough the way in which we can pursue economic and trade policy to ensure the kinds of social and political outcomes that we impute to trade policy: greater employment for greater numbers of people, higher living standards. Those aren't really the trends we see globally.

So we agree with you, it's not the time to back off, but it is the time to look seriously at rethinking both the process of trade negotiations and the way in which we approach the broader set of economic policies and social policy outcomes we're pursuing. We have to think about that carefully, and if we charge ahead on the same track of trade liberalization as we have had for years, that doesn't take account of the state of crisis we find in many of our societies.

The Chairman: Mr. Speller.

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): I apologize too for being... I'll be very quick, Madam Chair. I just want to thank the group for their presentations, and particularly their papers, which will actually take some reading after this meeting. I'll certainly go through them, and if I have any other questions I'll call you.

• 1715

It's certainly the goal of our government to consult as widely as we can with civil society. Certainly, as Mr. Sauvageau knows, the committee has been tasked with the role of going across Canada and trying to meet with as many groups as we can. You can understand the difficulty that is in such a large country. That's why we're trying to take as much time here in Ottawa getting together with groups such as yours that represent a coalition of different interests and views. I certainly appreciate your being here today.

I do have one question, though, and I know, Jean, you addressed it in your paper. Do you see any sort of role for Canada in terms of getting together with other smaller economies to offset not only the United States' economic power, but also the power it has within the regions? Would it not be useful in these sorts of agreements to coalesce with some of these smaller countries to trade ideas on issues such as human rights?

I know you and your organizations do that already. There's already that north-south coalition between different groups. I would see this sort of trade agreement as another way to do that. I'm wondering if you see that as a way to help bring together different views, not only in terms of economic views, but social views also.

The Chairman: Who would like to speak?

[Translation]

Mr. Jean Daudelin: We are working with an old myth. There is no way to have enough counterweights to the United States on a hemispheric scale. The only possible way is a system of restrictive global rules that the United States would be forced to adhere to. As for political counterweights, we have to put an x on that fairly quickly.

As for dialogue an even cooperation with small countries, CIDA already has training programs for trade negotiators, especially those in Central America. This is a certainly a very important contribution to the development of these countries' abilities and it is surely an avenue that the government could follow in the context of the WTO or in the context of a Free Trade Area for the Americas. The dialogue on other issues is already under way, as others have said, with the summit process and all those endless agendas. In fact, I have the impression that it is under way on a few too many negotiating tables for it to be taken really seriously.

[English]

Ms. Eleanor Douglas: The point you're making is a valid one. Certainly from the region you already see initiatives of the smaller countries that are somewhat fearful of being swallowed up in some of the processes. For example, the Central American countries got together to look at their trading relationships as a block, and in the south as well. If Canada could engage in that process and listen to what those concerns are, it would be constructive. It is a process that has already begun, and I believe Canada could be helpful in listening to those concerns.

The Chairman: Mr. Campbell.

Mr. Bruce Campbell: There are all kinds of possibilities for exchanges and coalitions around a whole range of issues. On the FTAA, as on the NAFTA, the essential arithmetic is that the United States represents 75% of the GDP of the region, so it has three times the combined economic might. All the rest of the 33 countries, or whatever, have the other 25%. Under those circumstances the opportunities for counterweights are limited.

• 1720

I felt the same way with the NAFTA. I think the WTO is the only forum in which that power is effectively contained. Canada should really focus on those kinds of coalitions in that forum. You could probably look at the example of the MAI as a forum in which, at a certain point, there was a coalescence of like-minded governmental interests that had reservations about the way the MAI was proceeding and the kinds of implications that were beginning to dawn on them. I think that was a forum in which those nations and groups could effectively stake out more progressive positions perhaps, but real limited possibilities in the NAFTA, in my view.

The Chairman: We'll have Mr. Daudelin, quickly, then Mr. Sauvageau.

[Translation]

Mr. Jean Daudelin: The issue of counterweights should not be interpreted too simplistically.

[English]

We should not have a simplistic reading of the issue of counterweight.

[Translation]

On many issues that are dear to the Canadian government, especially civil society and so on, there is a strong concordance of views between the United States and Canada. I am thinking of the issues of environmental standards, of work standards and of the participation of civil society.

In fact, the government of Canada is much closer to the American government that to those of the rest of the region. We can sometimes ask the question of counterweights, but not on all issues.

[English]

Mr. Bob Speller: I grew up as one of three boys, and I was always the middle guy. I was always the guy that helped my little brother against my big brother. Perhaps I see a role for Canada there too, to help some of these smaller, under-developed countries in that sort of bigger relationship.

The Chairman: Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau: Mr. Speller, Is Canada your young brother?

Mr. Bob Speller: No.

Mr. Benoît Sauvageau: Okay, sorry.

Mr. Speller was talking about civil society. In Canada, we may have a means of consultation that is agreeable and correct for certain individuals and certain groups, but we have been told that that is not sufficient. There are more than 30 other countries, and I would be curious to know how members of the civil society can influence their government in Columbia, in Salvador, and in other countries, and make presentations before committees such as this one. If we want to negotiate with 30 some different countries, we cannot say that we are nice, kind and gentle. We have to look at how things are done in those 30 some countries.

I will ask you a question to which you can answer yes or no. Do you believe that in our report we should recommend that the Canadian government should encourage parliamentarians to stay in an organization such as COPA, the Conference of Parliamentarians of America, to follow and influence the negotiation process? I do not know if you can or want to take a stand on this. You have done so for civil society. I am asking you now about parliamentarians.

Mr. Jean Daudelin: Just yes or no?

Mr. Benoît Sauvageau: Go ahead.

Mr. Jean Daudelin: I do not believe that COPA is likely to play a significant role, except in terms of information. I believe there are better ways to inform parliamentarians.

Mr. Benoît Sauvageau: Such as?

Mr. Jean Daudelin: Such as parliamentary committees, freeing up resources for research and better access to expertise and knowledge that is available in national corporations.

As for research abilities, there are international cooperation efforts that can be undertaken to give the parliaments of Latin- American countries the means to use available resources. I do not believe that COPA per se is a very worthwhile investment.

Mr. Benoît Sauvageau: What is the role of parliamentarians in this research investment? They are there only to receive the information?

[Editor's note: Inaudible]

Mr. Jean Daudelin: ...in the context of the political system. We have to integrate the mechanisms for democratizing foreign policy within existing institutions, parliamentary committees and so on.

Mr. Benoît Sauvageau: Agreed.

• 1725

[English]

The Chairman: Perhaps I could ask a couple of questions as well.

Ms. Molot, you were stating that the European Union votes as a bloc. They certainly seem to vote as a bloc. It's the same type of protectionism that the European Union seems to be embodying in its negotiations. Why is it bad for us to get our own hemispheric bloc to negotiate bloc to bloc? Why is it all right for the Europeans to have a bloc and not for us to find some allies?

Ms. Maureen Molot: It's a terrific question, but I don't think one can compare the hemisphere and Europe either in terms of similarity of levels of economic development or in terms of similarities of industrial structures.

First of all, the European Union, as we now know it, began in 1958, and the policies evolved slowly. Only as a result of some threats and difficulties, in effect, is Europe now able to negotiate as a bloc, and this is the result of enormous internal negotiations over some very complex questions such as agriculture.

It's virtually impossible to compare the European Union with what you see in the hemisphere, for a number of reasons. I've mentioned the differences in levels of economic development, industrial structure, and a range of other things. The other thing is that as powerful as Germany may be within Europe, it doesn't carry the weight relatively that the U.S. does in the hemisphere.

Furthermore, and perhaps I should have made this clear at the outset, within Europe there are institutions that allow for the formation of some kind of collective opinion. We don't have any such institutions within NAFTA, let alone within the hemisphere. In other words, what you're looking at in Europe is what we basically call a common market. I won't bore you with all the complexities.

What we have under NAFTA is a free trade agreement, plus it does not provide for any common decision-making institutions. What it provides for is a range of mechanisms for the resolution of disputes. And there is an enormous difference. Nor can I imagine Canada, the U.S., and Mexico, at this point in time, considering moving in the direction of what the European Economic Community outlined in the Treaty of Rome. It's just not on.

There was mention earlier of a common currency, and certainly this gets talked about from time to time, but this would provoke enormous debate. We don't have amongst our three countries common external tariffs. In other words, although goods move back and forth under NAFTA, we each have separate tariffs, for example, on automobiles imported from outside North America. We have different tariffs on a wide range of things. The concept of even establishing a common external tariff would provoke an enormous outcry with respect to loss of sovereignty, let alone anything as dramatic as formulating a common position for the WTO.

[Translation]

Mr. Jean Daudelin: That is a very good question because it highlights the difficulty of Canada's position in the WTO negotiations. There have to be certain interests in common. The only true block that Canada could belong to is North America. However, if there was a North-American block that spoke and negotiated with one voice at the WTO, we might hear a few background Canadian whispers, but the big voice would not come from here. That is Canada's dilemma.

[English]

The Chairman: Let me ask you another question. Let's take the Americans out of the equation, and I know you're saying we can't. What if we use the FTAA to build our allies in the issues we have discussed and in the issues we haven't discussed, such as culture? The Americans are not going to agree with us on culture, be it at the WTO, in the FTAA, or here. Do you not see the FTAA as an opportunity to find the allies in the Caribbean, in the small Latin American countries, where there is actually this ability to build our allies and then take those later to the WTO?

• 1730

[Translation]

Mr. Jean Daudelin: The problem is that the Americas are an abstraction. There is a well-integrated North-American cultural and economic block, to which Mexico is tied through economic links, but the real block is Canada and the United States, and this is increasingly so. The rest is an artificial construct. The Latin- Americans do not see Canada. They would not be happy if Canada won the World Cup, as I tell students. It is not part of the same block.

From this point of view, coalitions should not be made from a hemispheric point of view, but a global one. That is what Canada has traditionally done at the WTO: made coalitions that clearly go beyond hemispheric questions, that are based on converging interests that are stronger than those at the hemispheric level.

[English]

The Chairman: Thank you very much.

Unfortunately, we're at the call of the bell right now. I hope this is just the beginning of our consultations. You've come before us now, but please continue to share with us your ideas. You've heard some questions and I'd like to get your input as well.

I want to thank you for your presentations. Most of all, if there are new issues you feel you should bring to light to the committee, I encourage you to please do so. If there are additional papers you wish to submit, if there are other colleagues whom you wish to involve, please help us by bringing these issues to our attention.

Thank you all very much for coming.

This meeting is adjourned.