AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, December 4, 2001

• 0916

[English]

The Chair (Mr. Charles Hubbard (Miramichi, Lib.)): Good morning, everyone.

Pursuant to Standing Order 108(2), this morning we would like to welcome two of our trade negotiators from the session on the WTO dealing with negotiations at the fifth ministerial conference in Qatar, November 9 to 13, 2001.

Don and Suzanne, welcome to our meeting. We'd like to offer the floor to you now for a short presentation.

Don is the Director General of Trade Policy Bureau II, Services, Investment and Intellectual Property Bureau, and Suzanne of course is the Chief Agricultural Negotiator with the International Trade Policy Directorate of the Market and Industry Services Branch.

Suzanne, are you on first? How did you plan your presentation?

Ms. Suzanne Vinet (Chief Agricultural Negotiator, International Trade Policy Directorate, Market and Industry Services Branch, Department of Agriculture and Agri-Food): Don will just give the overview of what happened in July, and then I can supplement with the agricultural perspectives.

The Chair: Don, the floor is yours.

Mr. Don Stephenson (Director General, Trade Policy Bureau II, Services, Investment and Intellectual Property Bureau, Department of Foreign Affairs and International Trade): Thank you, Mr. Chairman.

[Translation]

I'm going to speak mainly in English. First, it is my mother tongue. Secondly, as I went from Culture to International trade only one year ago, it is already a foreign language for me. If I spoke French, I would be somewhat forced to translate twice. Of course, I would be very pleased to answer your questions in the official language of your choice.

I'm going to do the overview as quickly as I can.

[English]

I'm going to do the overview as quickly as I humanly can, but it might get past my ten-minute target.

With respect to pre-Doha, the “Battle in Seattle” that you may remember essentially had three causes for failure. The first was a lack of U.S. engagement or leadership in the process. They arrived in Seattle with another agenda, perhaps a domestic agenda, but in any event did not demonstrate the kind of leadership that the U.S. must demonstrate if we're to make progress.

The second was a lack of agreement between developed countries. That essentially means the U.S. and the EU, the two elephants, but that consensus then has to extend to other countries, the QUAD as it's referred to—Japan and Canada—and the rest of the developed world. But there was no agreement in the developed world about what the agenda for negotiation should be.

The third cause was that developing countries were not satisfied with the benefits they accrued from the Uruguay Round. They had begun to understand how a consensus organization works, that they are three-quarters of the members, and that if they're not happy, we don't have an opportunity to make progress.

• 0920

So I guess we learned some lessons from Seattle. Some would even argue that Seattle was necessary in a certain sense.

With respect to U.S. leadership, I can say that one of the striking features of Doha was U.S. leadership. It was striking in a couple of specific ways. First of all was the willingness they demonstrated early on in the negotiations to allow anti-dumping remedies to be on the table in the negotiations. This was a key piece for Canada, but it was also a key priority for the developing world. It created a momentum for other things to be dealt with at the conference.

As well, the U.S. worked with Brazil in reaching a compromise text on the intellectual property agreement and the issue of access to affordable medicines, which you may have read something about in the lead-up to Doha. So U.S. engagement and leadership was the first striking feature.

With respect to addressing developing-country concerns, I think we learned that lesson as well in Seattle. The preparatory process leading up to Doha was an extremely inclusive one. It allowed for a great deal of consultation and participation by all countries, including developing countries. There were several political-level discussions leading up to Doha, while there were not in the lead-up to Seattle. Countries north, south, east, and west could grapple with the issues at a political level and try to get at least clarity, if not resolution, before we got to Doha.

As well, the issues and concerns of developing countries were very much taken into consideration in the results, as I will describe in a moment, and in terms of the scope and modalities, how the negotiations will proceed. I think we very much have the round that Minister Pettigrew was calling for, a growth and development round. In the substance that comes out of Doha, we certainly have that.

In terms of consensus among developed countries on the round, our performance was a little bit lower with respect to that, but there were political-level discussions, as I said, before we got to Doha—one in Mexico City on the Labour Day weekend and one in Singapore—to try to get some clarity on the issues that ministers had to grapple with.

As well, we had a brilliant text of a declaration prepared by Stuart Harbinson. You will recall that going into Seattle we had 34 pages of heavily bracketed text. Even some of the brackets had brackets. Ambassador Marchi liked to say that Seattle was the failure of brackets. This is not a group drafting session; this is a political discussion of key issues. Mr. Harbinson laid them out very clearly for us, with almost no brackets throughout his process.

I guess it's fair to say as well that the failure of Seattle on the one hand and the events of September 11 and the impact they had on a slowing economy created a mood that had a lot to do with the successful result.

What happened? What did we get in Seattle? Well, we got our first priority, and that was agriculture. Agriculture and a strong, ambitious mandate for reform in agricultural trade was Canada's first priority, and I would say we got it. We got it in all three critical areas: export subsidies, domestic subsidies, and market access. Suzanne will give you the details in just a minute.

I would say, in case she doesn't, that Mr. Vanclief played a leadership role, particularly as one of the moderates in the Cairns Group, to keep those discussions from coming apart at the seams and to play the bridge builder in that discussion.

With respect to other things we achieved, perhaps not our second priority but a high priority was to get a discussion of the rules around anti-dumping. As you may know, and as some would claim in disputes such as softwood lumber, the rules around the application of anti-dumping measures are somewhat arbitrary and subjective. We're looking for a little more science in how they are applied.

With respect to non-agricultural tariffs, we also got a negotiation. This, by the way, will include issues that are very much of interest to developing countries—that is to say, the issue of tariff peaks and tariff escalations, which are sometimes the obstacles to market access for developing countries.

• 0925

We had a breakthrough on the environment. Never before has a ministerial declaration included negotiations on issues related to the environment in the WTO. For the first time, we have negotiations on the linkages between multilateral environment agreements and WTO rules. We also have a negotiation on market access for environmentally friendly goods and services.

We have a strengthened work program—not negotiations, but a work program—in a working committee on issues of clarification of the rules on labelling. By the way, the text is specific that it's labelling for environmental purposes, not all forms of labelling. As well, we have work in committee on the issue of precaution and its use in trade measures.

We have a recognition of the need for coherence in the work of the WTO and the work of other international agencies involved in environment. That language was proposed by Canada and accepted. We have a new monitoring role for the committee on trade and environment. They are to monitor all the negotiations throughout the three-year period of the negotiations and to report to the trade negotiations committee on all issues related to environment.

With respect to the issue I alluded to earlier, the intellectual property agreement, or TRIPS, and the clarifications of TRIPS provisions to allow greater access to affordable medicines for poor countries, particularly in respect of pandemics.... Ultimately, the text reads “In respect of all issues related to public health”. Despite what you read in the press, Canada was (a) not a big player in this debate; (b) was very active in the debate, proposing compromise language; and in the end, the result that came out of Doha, which is a compromise proposal, uses many of the proposals made by Canada in those discussions.

We got a commitment to negotiations on improving the dispute settlement system, how the panel and appellate body process works, including little difficulties in the drafting of the original agreement on how the sequencing of decisions is to occur. This will also give us a forum at which to press, as we always do, on issues of external transparency of the process to open up the dispute settlement system to more public scrutiny. This would ultimately help, not hurt, in terms of public support for the WTO.

We got agreement on what are referred to as the implementation issues. This was essentially the list of complaints by developing countries since the Uruguay Round. They are called implementation issues because some of those issues are about the difficulties the developing countries are having in implementing their obligations from the Uruguay Round, but also, in their own words, a rebalancing of the benefits from the Uruguay Round.

This created difficulty for developed countries. Obviously, we did not want to open up the delicate balance of rights and obligations that was negotiated in the Uruguay Round. Our strategy of making as many concessions as we could, without opening up agreements, ultimately succeeded. We have made some interpretations to existing agreements without opening them up. We have agreed to bring other implementation issues into the negotiations, where they fit. Finally, with respect to the outstanding issues, issues that would not fall into negotiations, we've agreed to a continuing process of study.

• 0930

We have a timetable for the services negotiations and the negotiations on the GATS, which began in February 2000, and have been proceeding apace but without a deadline. We're not likely to get to the serious part of requests and offers until there is a wider round in which to establish this schedule. The minister has also included in the ministerial declaration a reaffirmation of countries' rights to regulate in the public interest with respect to services, given the public concerns expressed around this issue.

With respect to other issues, the so-called Singapore issues, or new issues, are investment, competition, transparency in government procurement, and trade facilitation. The agreement in Doha provides, in effect, a more focused work plan and an agreement that a decision will be made at the fifth ministerial conference in about two years on whether to complete negotiations on those issues.

Coherence between the work of the WTO and other international agencies was also recognized in the ministerial declaration. This included the work of the International Labour Organization. Canada had pressed for stronger language to recognize the importance of working towards core labour standards, though I would note that there is 100% consensus in the WTO that core labour standards should not be brought into the obligations and disciplines of the WTO, at least not at this time.

But there was also agreement that the WTO has a role to play with other organizations, like the ILO, to promote core labour standards. We were hoping for somewhat stronger language than we got, and we'll continue to work in this direction.

We got a continued moratorium on customs duties with respect to e-commerce transactions until the fifth ministerial conference. We got new working groups, principally proposed by developing countries, to address issues of concern to them. A new working group was established to examine the issue of trade and debt. Another was established to examine the issue of trade and technology transfer.

Developing countries are disappointed with the level of technology transfer that has accrued to them from Uruguay Round agreements generally and the TRIPS agreement in particular. This committee will examine ways to try to promote such transfers.

A special study, not a working group, will be undertaken on the issues of particular interest to small economies, which largely fall into the same group of issues as those of the least-developed countries—but not always—and in certain ways have specific dimensions. The issues of small economies will also be examined.

Finally, with respect to developing-country issues, a new mandate has been given to the committee on trade and development to monitor the negotiations throughout the entire period of negotiation and to report to the trade negotiation committee on all issues related to development.

There is a recognition in the declaration of the importance of external transparency in WTO operations. This is something Canada has pressed for and pressed for specifically with respect to the declaration. I would say again that we have made enormous improvements in the WTO with respect to internal transparency, that is to say, the transparency to all members, including small, poor countries that don't have all of the same infrastructure we have with which to represent themselves in Geneva.

On the external transparency side, we have certainly made some improvements. In the agriculture negotiations, for example, all the negotiating proposals are available on websites; this has not always been the case. There are improvements we can point to.

With respect to the Doha process, I suppose there are cracks in the dam with respect to external transparency. All versions of the Harbinson texts leaked within about 120 seconds of their being published. Ultimately, it just proves it's easier to get forgiveness rather than permission with respect to external transparency. But still and all we're moving in the right direction.

• 0935

Let me point to three things in particular as the challenges we have ahead in delivering on this agreement. First of all, we have to meet a very ambitious timetable. These negotiations are set out over a three-year period, which is extraordinarily ambitious, particularly when you consider that some issues have been left to the next ministerial conference to decide whether or not negotiations are to be completed. If they are to join the negotiations in two years at the next ministerial conference, there will only be one year remaining to complete the negotiations.

With respect to how those issues will be dealt with, how to complete negotiations on them was left pretty much up in the air. Doha after all was an agreement to start a negotiation, not to finish one. But still and all it is going to be a busy three years.

Consulting Canadians is the second challenge. We have some new issues on the table. We have detailed positions now to take in negotiations. I would say that over the next six months in particular, as we start into those negotiations, the challenge of consulting Canadians will be a large one.

Finally, we have particular challenges in meeting the commitments we made in Doha—commitments that are all over the ministerial declaration—to provide technical assistance and capacity-building support to the poorest members of the WTO; to assist them in participating in the negotiations; to help them get comfortable with some of the issues that have to be decided at the next ministerial conference—competition, investment, procurement, trade facilitation and others—and to help them, as Minister Pettigrew says from time to time, to get the full benefit of their membership in the WTO. We have made very strong commitments in this regard in the text and it will be a real challenge to meet those commitments.

Thank you, Mr. Chairman.

The Chair: Thanks, Mr. Stephenson.

Suzanne.

Ms. Suzanne Vinet: Thank you, Mr. Chairman.

Very briefly, as Don has mentioned, agriculture was certainly central for us in going to Doha in terms of the objectives we had and wanted to meet there. Doha was very critical for agriculture in particular. We had started negotiations in agriculture back in January 2000, but we were doing so without a context or a deadline. So far the negotiations have been very slow and very superficial.

The general consensus among members was that we needed Doha to give a bit more energy and more focus to our negotiations, and that's exactly what happened. We're very, very pleased with the outcome of the Doha ministerial conference because now we do have a broader context within which we can negotiate. This means some countries quite reluctant to participate in the agricultural negotiations now see some benefits in other sectors of negotiations. And we're hopeful this will make them less reluctant participants in negotiations on agriculture.

The level of ambition is also an issue. What's really key about the Doha declaration—and the way Chairman Harbinson prepared the text on agriculture was really quite successful in reflecting what we've seen so far expressed by the various members in the current agriculture negotiations in terms of the direction and the ambition we're looking for as an outcome of these negotiations.... We're very satisfied that it sets the right level of ambition, but more importantly that it really sets the right direction in the negotiations. There's no backtracking, no going back to protectionist positions; it's really about levelling the playing field. This is the central message in the Doha declaration.

Critically, we also finally put in place deadlines for negotiations. We're looking at 2003 as a key deadline for agriculture; by March 2003 a chair of the negotiations would be expected to deliver a framework for how we could conclude the negotiations in agriculture.

They call it “modalities” in the text of the declaration. Basically it is a text that would say what changes to current rules we would be anticipating, what new rules we would want to be adding to the current agreement on agriculture, and what kind of formula for reductions we would be using to earmark some of the commitments countries would be making. That's a crucial turning point in the negotiations in that it really gives you an idea of what kinds of measures we're going to be looking at and implementing at the conclusion of the negotiations. It also gives us a structure for negotiations. We will be part of several other negotiating groups, and that's just going to facilitate things in terms of support to the negotiations.

• 0940

We're very pleased in particular as Canadians because the declaration is very compatible with our initial negotiating position. You'll remember that Ministers Vanclief and Pettigrew tabled a negotiating position on agriculture for Canada back in August 1999, and that is a position we have been promoting in the agricultural negotiations. One of the objectives we had going in is that we wanted to make sure all of the elements contained in our negotiating position would remain on the table as a potential outcome for these negotiations. We're very satisfied that the declaration allows us not only to negotiate our position aggressively, but also all of the elements contained in our negotiating position are there for us to negotiate for.

So 2003 is for modalities and 2005 is the overall deadline for concluding the negotiations. Is that a realistic deadline? We think 2003 is realistic, but it is also a very crucial deadline for agriculture. Having a framework for modalities for concluding the negotiations in agriculture will be very important in that finally it's going to give us the blueprint as to how we're going to effectively level the playing field for farmers. But it's also a very key element for developing countries, and I think they will use whatever we can negotiate in agriculture as one of the tests as to how serious developed countries are on delivering the development agenda.

So there are a lot of positive pressures on the agriculture negotiations for us to go forward in a very intensive manner and come clean in terms of what we're capable of delivering as part of these negotiations. It's a fairly optimistic agenda, but we're somewhat optimistic that we're going to be able to deliver on this.

That being said, there are a number of factors that will have a significant impact as to how intensely we can negotiate and how we can meet these deadlines. There's the whole dynamic around the complete agenda at the WTO, but there are also some external factors, which are not so small, one of them being the development of the U.S. farm bill. What the Americans do with the farm bill will have a significant impact on how seriously they can exercise leadership in the negotiations.

I'm sure you have followed the developments around the U.S. farm bill. It is very unclear what it is we're looking at. The administration and President Bush have given a lot of indications that they're not satisfied with the proposals from the Senate, which are currently being considered, and we're not satisfied with the House version of the bill. We'll have to wait and see what happens at the conference to find out what kind of farm bill we'll be looking at. But there have been strong messages that, ultimately, the kind of support the bill should provide for is the kind that causes less distortions to the market. We see that as a very positive thing, but we'll have to see what's delivered. Then we'll be able to assess how serious the Americans will be in relation to the negotiations.

There's one angle to this. If the President and the administration are not totally satisfied with the outcome, that will give them even more reason to become very aggressive in the negotiations and to look for the kind of outcome they say they're looking for. The U.S. negotiating proposal is quite compatible with the Canadian negotiating proposal. They're looking as well for significant reductions in domestic support, for example.

• 0945

So time will tell as to what that's going to look like. But we're going to have to count on U.S. leadership if we're going to be able to meet such tight deadlines.

The other key factor is the European communities. They have started the second phase of the review of the CAP, the common agricultural policy. That process started back in 2000. They've started making changes in the way they provide support to their producers, but we feel they haven't gone far enough in these reforms. So starting in 2002 they will be addressing further reforms to the agricultural policy in Europe. Depending on how far they go or the direction they take, that will also give us a very strong signal as to what kind of outcome we can be looking at in the negotiations.

So those two key players have some very important policy decisions to make in the coming year.

A new player is China. They will be a member as of the middle of December, so that means they will be a full participant in the negotiations. Just coming out of the accession negotiations, it's too early to assess how they're going to play their role in the negotiations. I think we can fully expect that they will play a significant role. The agriculture component of the accession negotiations was very key to their negotiations and the approach they took to the negotiations. All the signals are that they will be looking for significant reforms as well. We also have to appreciate that there will be a learning curve for them at the negotiating table, but I think over the next year we'll see how they actually play the role we fully expect them to play.

As I mentioned, I think the fourth very important factor in the next two years will be the developing countries. Developing countries consider agriculture to be key to their development, and they will be looking to developed countries to deliver on their promises and part of the promises that are embodied in the Doha declaration. I think a lot of it will come through the discussions on agriculture. So I think we'll be looking at what kinds of concessions we can make for developing countries that will satisfy them in going forward with the rest of the Doha agenda. That will be a critical element as to how well negotiations move forward.

All in all I think we're very pleased with where we're at. I think we have all of the right ingredients laid out in front of us. The dynamics or the mixing of these ingredients will determine how well we do in the negotiations, and the dynamics in the rest of the Doha agenda will be crucial. But we're fairly optimistic that by 2003 we will be able to deliver on the first deadline that has been set for us.

Don spoke about one other challenge in the upcoming year, which is consulting with the industry. As you well know, we have worked very closely with the agrifood industry in past years in developing a negotiating position and in promoting in this early stage of the negotiations Canada's initial negotiating position. As the work will intensify over the coming year, there will be an increased requirement on our part to work even more closely with the industry, because we're going to be defining the details of our negotiating position. So we're fully committed to spending a lot of time with the industry and making sure they understand the dynamics and the issues that are part of the negotiations.

I'd like to leave it at that, and I'd welcome questions.

The Chair: Thank you.

Howard.

Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance): I'm the only one here today from the Canadian Alliance, so certainly I will be the one to ask the first question.

An hon. member: Where are all the rest of them?

Mr. Howard Hilstrom: I don't know. At least the ones on the opposition side were on time. We won't go any further.

Some hon. members: Oh, oh!

Mr. Howard Hilstrom: We certainly want to start off on a pleasant foot today, as opposed to where we ended up last time.

• 0950

I'm a cattle rancher myself and a farmer. This is very encouraging to have this kick-off.

I was in Seattle. The impression I had there was that the NGOs were certainly interested in trade issues. I see that you've mentioned where they're going to have a part in this.

One of the biggest problems in the States was that the big labour unions were so opposed to so many of these trades.

Do the labour unions now have a part in these trade talks directly, or is it an indirect part?

Mr. Don Stephenson: No, they have no role directly.

The WTO is an inter-governmental organization. Countries are represented by their governments. There's no direct role for NGOs from any sector.

As I noted earlier, there's a good deal of difficulty in terms of encouraging debate of labour issues in the WTO, particularly with respect to developing countries. They are concerned that if they open up a debate on issues like poor labour standards, it can be used by developed countries as a barrier to trade, as a protectionist measure, and it can weaken one of their only competitive advantages, ultimately, which is their labour costs.

Mr. Howard Hilstrom: I would certainly agree with that, Don. I hope that is Canada's position.

I want to clear up one thing here. We had a good ruling the other day from the WTO in regard to our dairy exports in particular. We see the report that New Zealand trade minister Jim Sutton...he makes a statement that “Our preliminary view is that we will continue the legal challenge”. And this is supposedly a quote.

Are there any provisions for them to continue the legal challenge with regard to these dairy exports?

Ms. Suzanne Vinet: The view we're taking on this is basically that this is an appeal on an original panel. So it does in fact close this particular process.

Because of the nature of the ruling by the appellate body...they only basically rejected the findings of the first panel. There is always the legal opportunity for any country, including New Zealand, to start a new challenge. So there are technicalities as to at what step of the process they would start. Basically, they have the avenue of beginning a new challenge, but it would have to be that: a new challenge.

Mr. Howard Hilstrom: Our assessment, Canada's assessment, is that they really don't have any real grounds for proceeding now. I guess that's a judgment call so I won't expect you to answer that necessarily.

With regard to access, this is very important. I won't compare it to internal trade. I wish we had internal trade discussions on the go in this country as well as internationally, because I still can't take a load of my wheat, load it up on my farm in Manitoba, and drive into Ontario and sell it. We need to have better trade issues inside the country.

We also have Quebec, of course, with about 48% of supply and management in dairy production. Is that a fair business for this country? There are a lot of trade issues inside the country you have to deal with.

We can use chemicals in the west or chemicals in the east for crop production that we can't use in other provinces. You're not here to dwell on that. In your trade negotiations these domestic issues will have an impact. When you mention March 2003, that is going to be very close to the next election. I see the trade issues being a major factor in the next federal election.

Having said that, on the positions that are taken by the government in this consultation process, are you going to be consulting directly with farmers as opposed to perhaps with farm organizations in that? What's the nature of these consultations you're going to do as to changing our trade position as we go along?

• 0955

Right now the minister is saying that 1,010% of supply management isn't on the table, and you say that really it is on the table, that everything's on the table...on the tariffs coming down and perhaps market access going from 5% to 10%.... Is the Wheat Board on the table? Could you comment on that?

Ms. Suzanne Vinet: Those are very good questions. Let me talk about the process first.

March 2003 is when we have a deadline declaration that says we should have the modalities. The way I see it happening is the chair of the negotiations in the Department of Agriculture will likely have the opportunity to produce a set of modalities by March 2003. If history is any guide, not one country will be happy with the modalities the chair produces. The best we can hope for is that there are satisfactory bases to carry on the discussions of the draft modalities the chair would have produced in March 2003.

The next trade ministerial is at the end of 2003, so any difficult questions or issues might need to be resolved by ministers at the end of 2003. In a perfect world, if things unfold the way they could at that point, 2004 would be the year we would use to produce draft offers, and at the beginning of 2005 would be the conclusion. There could be delays depending on external factors.

So that's the optimistic scenario, basically.

Now, what's on the table? We're very happy with the declaration because it means the Canadian initial negotiating position does not need to be changed at this point. All of the elements we have in our position, all of the objectives we set out to accomplish, we can negotiate for in these negotiations. That includes the fact that we believe marketing decisions should be made in Canada, and this is embodied in our negotiating position. That means supply management is a Canadian decision and so is the Canadian Wheat Board. That remains the case in terms of what's in the declaration. We don't need to change our position on that.

On the issue of the Wheat Board, as you well know, the Americans have been very aggressive in seeking further disciplines on the Wheat Board, and yes, that is being discussed in the negotiations. We've taken a very credible defence of the allegations that the Americans are making in the negotiations. They haven't come up with any new arguments or any justification for their allegations or anything to back up what they're saying.

So there's been nothing new in terms of how the Americans have approached that issue in particular in the negotiations. And we keep maintaining that this is for us to decide on how we're going to organize ourselves to market our products. So there are no changes.

In terms of the market access specifically, we feel we have a very credible approach to the issue of market access. We're looking at all of the elements of market access, be it tariff rate quota administration issues, be it the fact that it's not a level playing field, that there are different levels of access between countries, that level of access has been provided on dissimilar, not similar products.

So there are all kinds of issues that we feel need to be addressed in these negotiations that are clearly well-elaborated in our negotiating position and that we're aggressively pursuing in the negotiations.

I can't predict what the outcome will be on these, but I think we feel very comfortable that we have an excellent negotiating position and that we're certainly going to keep on promoting it very aggressively.

Mr. Howard Hilstrom: So my time is over.

The Chair: Your time is way over.

Mr. Howard Hilstrom: They give such excellent answers; we enjoy this.

The Chair: Suzanne.

[Translation]

Mrs. Suzanne Tremblay (Rimouski-Neigette-et-la Mitis, BQ): Thank you, Mr. Chair.

Thank you for your presentation. However, I remain very, very skeptical and very concerned.

• 1000

I'm trying to read the ministerial declaration. I'm really pleased to see that you, as negotiators, find it clear, but paragraphs 13 and 14, dealing with agriculture, are quite obscure, and not just a little. We would need to be with someone who is able to tell us what it means exactly.

We see the following in paragraph 1 of the ministerial declaration that:

The multilateral trading system embodied in the World Trade Organization has contributed significantly to economic growth...

The wealthy have probably become wealthier but the poor have become poorer. We see the acceleration of the negotiations. Now that the economy is in a downward trend, we will want to accelerate them even more so that wealthy countries will become even wealthier.

We cannot take labour standards in consideration because it would be too complicated on the developing countries' side. It would prevent some from making a lot of money. How are you going to take that off people's mind? The negotiations in Qatar have been very quiet because there weren't too many demonstrators. The place chosen to hold the meeting was far from Seattle, where we had an easy access to the site. I don't know where the next meeting will be held but if there is another desert, we probably found it.

People are a little tired of all this. I mean the population. The population is not very pleased with these negotiations. Who was in Qatar, for example? The ministers and you. Who apart from this? Who was there among the delegations? Who was part of the Canadian delegation?

Mr. Don Stephenson: First of all, I'm not sure that we could say that, because of international trade agreements, the poor countries are poorer than before. I'm not an economist, but I would say to you that Kofi Annan namely publicly declared...

Mrs. Suzanne Tremblay: He is sold to the U.S.

Mr. Don Stephenson: ...that the poorer of the countries did not suffer from globalization but from a lack of it, which means that they don't take part in global trade. This is the problem. We could have an interesting debate on it.

As far as the choice of Doha as the site for the meeting, we even cannot accuse the WTO of having caused the problem which has been created by the civil society. The problem of demonstrators and of street violence was such that Qatar was the only country interested in offering to host the next meeting. We cannot cause the problem and then accuse the WTO of having caused it.

That being said, as far as public support is concerned, I think that opinion polls in Canada demonstrate that a very large number, in fact a majority of Canadians support international trade agreements. But they also agree that the 20 000 or 30 000 demonstrators who were in Quebec City streets had important and valid questions to ask, questions we will have to face in our international trade agreements. In fact, they are asking us to integrate our economic objectives

As far as the make-up of the Canadian delegation in Doha is concerned, there were first the two ministers, the heads of the delegation, Mr. Vanclief and Mr. Pettigrew, the public servants but in smaller numbers than usually, the representatives of some of the provinces, some provincial ministers and officials, members of the civil society, of the private sector, industry representatives, several representatives of the agriculture sector and some honourable members. Mr. Hubbard was with us. I think that it's about all. The Canadian delegation included some 60 plus people.

• 1005

Mrs. Suzanne Tremblay: Among those 60 plus people, what was the percentage of members of the civil society?

Mr. Don Stephenson: There was some fifteen members of the civil society. We could send you a list of the members of the Canadian delegation.

Mrs. Suzanne Tremblay: In the October 18th issue of the Western Producer, we find the following quote from the Minister of Agriculture:

I was assured that the federal negotiators will not harm the interests of grain and livestock exporters in the sole purpose of protecting the supply management system.

Could you tell me, as chief negotiators, what promise did in fact the federal negotiators make to the Agriculture Minister of Saskatchewan?

Ms. Suzanne Vinet: The Canadian position on the way to negotiate and on the objectives of the negotiations is very clear. This negotiation position is the result of two years of consultations with the agri-food industry throughout Canada, in all the sectors and in all the regions.

Our negotiation position reflects very well the agri-food industry's interests throughout the country. This is not a matter of choice between two sectors. This is a credible and strong position which is being promoted at the negotiation level.

The Saskatchewan Minister expresses concerns from time to time about the need for freer markets for some Western export groups, and it is in relation with this position that he made his comment. I don't want to say anything more about his concerns but I can assure you that the negotiation position of the government of Canada is very clear. It is important to recognize that it is the result of two years of consultations throughout the industry.

So this is our negotiation position in the WTO.

[English]

The Chair: Thank you, Suzanne.

Murray.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thanks, Mr. Chair.

I'm just listening to what you have to say here, Suzanne and Don, and my questions will be on three points.

You've basically set a timeline for 2005, but I remember back to the Uruguay Round. My question is, it's nice to set a timeline, but how achievable is it? Maybe you can give me a percentage for what you think is achievable there.

Also, as to the United States in the last round, their tactic was that when there were 117 nations instead of 142, they lined up 116 against us on the article XI aspect of it. It was supply management. So I'm wondering, have you been watching what their tactics are this time around? Maybe you could expand on that.

Finally, I will say one thing. We have a good, defensible position this time around. What support do we have out of the 142 right now for our position?

Mr. Don Stephenson: If I could, I'll take the easy part. With respect to whether 2005 is a doable target for the end of the negotiations, I think it's clear that it's not clear how these negotiations are going to end.

Some hon. members: Oh, oh!

Mr. Don Stephenson: Let me go back to the point I made that we have an agreement in Doha to start something, not finish it. We have in effect a rolling start for negotiations because there are issues that will require decisions at the fifth ministerial in order to really join the negotiations—investment, competition, etc. So in effect, we have a rolling start.

We also have an agreement in the text that we can have early conclusions to parts of the negotiations, that the results of those negotiations can be implemented whenever it is convenient, but that they will afterwards be brought into the single undertaking.

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There are several scenarios for how this can end. We can get a decision at the fifth ministerial that we're not agreeable to including investment, competition, and those other issues in the negotiations and then simply complete the negotiations without them. It's possible that with certain parts of the negotiations—agriculture, I would hope, services, and non-agricultural tariffs, certainly simpler issues like the dispute settlement understanding—you can complete the negotiations within a three-year period. It's a little ambitious, but it's doable.

The question is, what about those other issues that may or may not get rolled into negotiations as we proceed? It's impossible to predict how we're going to finish, but it is possible to suggest that parts of the negotiations, including agriculture—that's ambitious, but including agriculture—can be completed within more or less the timeframe that is provided in the declaration.

Ms. Suzanne Vinet: Regarding the second part of your question, what is really important to remember is that since we started the negotiations on agriculture back in 2000, the process has been rather slow and rather superficial. We were very much in good shape with the initial negotiating position. We've been able to table all the elements of our negotiating position in the course of negotiations.

What's been really interesting is that, depending on the issue we're dealing with, we have received quite a bit of support on various elements of our negotiating position. But because we're still very much at an early stage of the negotiations, it's very unclear as to which direction this is going to go and what part of the negotiating position we have is going to carry through to the end of the negotiations.

Overall, I think it is fair to say that we are perceived as having a very credible approach to the negotiations. We certainly have supporters, depending on the element of the negotiating position, and we're very much a voice amongst many when it comes to calling for the elimination of export subsidies. We're very much one voice amongst many when we're calling for a substantial reduction of trade-distorting support, and we're very much one voice amongst many when we're calling for substantial improvements in market access.

We find that in fact we're very much going the same direction or calling for the same kinds of outcomes as the Americans are on a number of issues. But again, that's very much at the broad level. When you start talking about how you're going to accomplish these objectives, that's when there is more than one way of meeting your objectives.

If you look at trade-distorting support, which is a key priority for our Canadian producers, we have a proposal on the table where, although it's highly compatible with the Cairns Group and the Americans' proposal, we're calling for some elements nobody else has called for, for example a cap on overall support. We're building a lot of support for that idea and that concept. It's not clear where that's going to land in the negotiations, but certainly we have been building a lot of support for many of the ideas we've put forward in the Canadian negotiating position.

Mr. Murray Calder: I see this on two planes, actually. I see the United States and the EU at the present time with their companion programs, which are green box, going toe to toe the same as they did in 1984, and each one is upping the ante, the United States with their farm bill.

I'm wondering first off, do we have any support from Europe on our trade position? Second, this is very detrimental to third world developing countries because they just don't have the finances to step into this, yet they're developing and they want to be able to play in the international market. What kind of support are we getting from them?

Ms. Suzanne Vinet: With regard to destroying domestic support, I'd say it's everybody against the U.S. and the EU right now. As for how you're going to further restrain what the Europeans and the Americans are doing, the details are what we're going to have to negotiate. There's a clear, clear message coming in the negotiations, and we share the same concern as developing countries.

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We're also saying that we can't afford what the Europeans and the Americans are doing and that we need to constrain that. That's why the Canadian idea was to put an overall cap on all types of support, including the green support, and that's been an idea that's been picked up by a number of developing countries.

One of the difficulties, though, is that developing countries see a country like Canada, or even Australia, which has low levels of support, as a rich country. We have the ability to provide support, so they also want to go so far as to limit whatever developed countries do.

That's what I mean. At the broad level, especially on trade-distorting support, I'd say there's a clear understanding that this is going to be one of the crucial outcomes of these negotiations. We have to level the playing field in a significant way to constrain the abilities of countries that are very rich and that can afford in an almost unlimited fashion to support their farmers to keep doing that.

The details on how we accomplish that are obviously what we are going to have to negotiate, but there's clearly a lot of support for how we've approached that issue in the negotiations.

The Chair: Thanks, Murray.

Dick.

Mr. Dick Proctor (Palliser, NDP): Thank you very much.

Let's assume January 1, 2005, is doable. Those rich countries you were just speaking about, Suzanne, are not in all probability going to negotiate something that would eliminate those support payments or subsidies immediately. What period of time do you realistically think we're talking about in terms of phasing those subsidies out? They're not going to be silly enough, as we were with the Crow rate, to do it in one year. So what kinds of timelines do you see?

Ms. Suzanne Vinet: There's been no mention yet of what kind of implementation period we would be considering. So far the negotiations have really focused on, for example, this concept of a down payment, especially when it comes to dealing with issues of trade-distorting domestic support. The Cairns Group in Canada has put forward ideas to the effect that not only should we seek significant, substantial reductions in that type of support, but maybe we should consider the idea of an early down payment in terms of the reduction.

There has been no real discussion as to the length of the implementation period, but if you look again at history, usually countries, depending on the nature of the programs.... If you just look at the Uruguay Round, we implemented results on average over a six-year period, so maybe that is something we can replicate in these negotiations. It's very much up for negotiation, and there's been no definitive discussion on that.

A lot of that will depend on what kinds of commitments countries are willing to make. If we're talking about a very significant down payment up front, maybe the countries will negotiate for a longer implementation period. If you don't look at a down payment, maybe you'll be looking at a shorter implementation period. All that will start happening as we intensify the negotiations and go deeper into the modalities, and those are the kinds of issues we'll have to address.

Mr. Dick Proctor: There's some feeling from certain sources that while we await the end of the negotiations and the phase-out, Canada will need to support its farmers in order for them to compete internationally. Do we continue to assume that Canada will have lots of room to manoeuvre if there is the political will to do that?

Ms. Suzanne Vinet: Coming out of the Uruguay Round, we had reductions laid out over six years, and that ended in 2000. We have right now, until we conclude a new outcome...the room that's there is the room we will have until we have a new commitment. I think we're at roughly $4 billion. I'd have to check the number, but basically that's the room we have available to us right now.

Mr. Dick Proctor: Again, Suzanne, you mentioned the chair of the agriculture sector at the negotiations. Who is that? What country is that individual from?

Ms. Suzanne Vinet: In the current process the chair, who's been overseeing the proceedings, is the ambassador from Thailand. As part of the overall structure, in January a decision will have to be made as to who will be the next chair.

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Mr. Dick Proctor: Don, you mentioned that Canada needs to help developing countries, poorer countries, and I wondered if we are working with all of them. Are we working with a specific group of them? Are other, more developed countries working with them? Are we covering off all of these folks? How does that happen?

Mr. Don Stephenson: I think the answer is both. We're working with international agencies to address the needs of all developing countries through discussions with the World Bank, with the IMF, with the WTO. The WTO has its own technical assistance program, and one of the issues we have to address now is the funding of that program. It needs to be increased.

I'm not an expert in this area, but we've been trying to get greater coherence in the approach of different international organizations through an approach that's called the integrated framework. It's a methodology for trying to assess the specific needs of specific developing countries and having an agreed plan for all agencies to use in terms of addressing those issues. As well, of course, all countries, including Canada, through CIDA, provide specific assistance to specific countries on request from the recipient country to address these kinds of needs.

One of the problems about meeting the challenge of the next two years...and that challenge is simply whether the developed world is going to have done enough for the developing world to say we think we're in a position to say we agree to expand the negotiations. Of course, there's actually the objective of really meeting their needs.

One of the big challenges is going to be coordination, because there will be a whole bunch of players playing a whole bunch of different roles at different levels, including domestic agencies and international agencies, and how we stitch that together is just now beginning to be discussed. This morning before I came here I had a teleconference with members of the QUAD countries—the U.S., EU, Japan—on exactly that subject of how we begin to get our minds around that. We're hoping to have discussions at the OECD early in the new year to help try to map it out a bit.

Mr. Dick Proctor: Good. Thanks.

The Chair: Thanks, Dick.

Rose-Marie.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Thank you, Mr. Chair.

Suzanne, in your opening statement you were saying that the meeting at Doha allowed the negotiators to negotiate more aggressively. How were the tactics changed from Seattle or Uruguay?

Ms. Suzanne Vinet: What I mean is that because we have had a success at Doha and we have a broader context, and deadlines and a structure, now we can focus on negotiating very aggressively our negotiating position, and the negotiations are going to intensify significantly. It's been very slow, and the negotiations so far have been at a very superficial level because we didn't have a deadline. We were negotiating without a context. We were all very committed to the process, but there were a lot of reluctant participants. Japan was participating but was not very engaged in the negotiations, as an example.

So it was very difficult to move to fast forward and see how we could come up with a very significant outcome. At least now, because we have the broader context and the deadlines, that means we're going to have to intensify significantly the negotiations. So the next 12 to 15 months will be very important.

Mrs. Rose-Marie Ur: You also stated that most other countries were against EU and the U.S. in their agenda, but if you add up all the other countries and Canada against the EU and the United States, our numbers are probably smaller than the EU and the United States.

Ms. Suzanne Vinet: I think it is clear that the agenda this time for the negotiations is that everybody is looking at the capacity for spending that the EU and the U.S. have, and nobody can compete with that. Nobody has the ability to subsidize the way they do. Furthermore, the way they subsidize does interfere with the market, so everybody is saying we're going to have to deal with this question. This is going to be a central issue in these negotiations.

Mrs. Rose-Marie Ur: You also stated that the U.S. is looking to reduce their domestic support. In the material provided, it is stated that under WTO, $19 billion was the maximum and they exceeded it quite substantially at approximately $32 billion. They're certainly going against WTO rulings, are they not?

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Ms. Suzanne Vinet: They're within their commitments, because the way they've done it is they have a significant increase in spending in the green category, in the non-trade distorting, and there's no limit on this. So the government can spend as much as they want in the green category, and that's certainly what they have done. This is why Canada has been proposing that we cap the level of spending, including on green support.

Mrs. Rose-Marie Ur: You also stated, and it was interesting.... A few of us have been to Taiwan a few times, and I believe now that China is a part, Taiwan is also a part of WTO, which is great to see. I'm sure many of us can recall visiting there, and certainly there are good opportunities there for Canada. You stated that developing countries consider agriculture a key element to their development. That is not what we saw in Taiwan. They were paving their Silicon Valleys because they certainly could secure more dollars for Taiwan that way than by agriculture. They certainly don't have the land mass to provide their population with food.

So how will that play out in Taiwan, or even China? How will China be a part of this because of, say, wheat from out west? How will it play out under WTO?

Ms. Suzanne Vinet: Taiwan, Singapore, or Hong Kong are clear examples of where agriculture is not going to be the key to their development. But the majority of the developing countries, including China, are very reliant on agriculture as a source of employment, and also as a means of feeding people and of creating income for their communities. This would be the majority of African countries and a lot of the Asian countries, including China. So this is going to be very important. To take China as an example, as a result of their negotiations for their accession, we will have improved access to the Chinese market. For example, for wheat we'll have better access.

But more importantly for China, what's really going to be significant for our exporters is that now China, one of the largest potential markets from agrifood exports, is subject to the same rules as everybody else who is a member of WTO. So if we're not happy with the way they're implementing some of their commitments or we're not happy with some of the measures they're taking, we now have recourse under the WTO, for example.

Another thing is that they have disciplines on what they can do. If they should become wealthier and they want to subsidize their farmers, they now have to do it within the rules that have been agreed to. It's not an unlimited capacity to support their agriculture. So it's very significant.

But for other developing countries, what they want is for rich countries, or countries that can afford to subsidize their farmers, to stop subsidizing and dumping surplus production in a way that hurts their own farmers. For example, the Americans are using food aid as an excuse to dispose of their surplus production in developing country markets and are harming the capacity of the local farmer in some of these countries to produce their own agricultural production. So in fact some of these countries are exporting their problems to developing countries.

This is going to be part of the key of the agenda for developing countries in the negotiations, food security and food aid, as an example.

The Chair: Thank you, Rose-Marie.

Rick.

Mr. Rick Borotsik (Brandon—Souris, PC/DR): Thank you, Mr. Chairman.

First of all, thank you once again for being here and for doing the exceptional job you did at Doha.

We as Canadians have a very small population and we sometimes maybe see ourselves as a little bit more important at the negotiating tables than we really are. But your comments today give me confidence that we do put our positions forward and very forcefully.

I have a couple of comments. You said, legitimately, that we're in a very good position now after Doha because all of the issues we wanted to put on the table to negotiate are there. All of the elements remain on the table, I heard you say. We're one player in a very large negotiating pool. There are other players out there.

Do the Americans and the Europeans, when they go home, also say to their politicians, “We have every one of the negotiating positions we started with now on the table and we're in a good position”? This isn't just us. Everybody left that meeting saying, “We now have all of the positions there for negotiating”. Is that not correct?

• 1030

Ms. Suzanne Vinet: That's correct. We all left saying this is win-win for all the members.

Mr. Rick Borotsik: For everybody.

Ms. Suzanne Vinet: But that's a very positive—

Mr. Rick Borotsik: I'm not saying it's not. Trust me, I tried to make that in my opening comments. That is very positive. Leaving Seattle and having nothing on the table was not positive. This was positive.

You also mentioned that the underdeveloped countries see agriculture as being their opportunity to become much more wealthy and have some opportunity in growth and developing themselves. Agriculture, to me, is very important as well, but I'm going to get away from that a bit.

You talked about Singapore, Hong Kong, and the rest, so there are other issues on the table than simply agriculture. We have, obviously, energy, manufactured goods, other commodities—we talk about softwood lumber now with the Americans—intellectual property. Are those the areas of the future that we, as Canadians, should also be looking at as an agenda for this negotiating table? Don't get me wrong, not more so than agriculture, but is that not another component you would look at as being important in the negotiating process?

Mr. Don Stephenson: I would certainly say so. Going into Doha, our view was that the greatest short- to medium-term benefit Canada could accrue from an agreement at Doha to wider negotiations was in the agriculture sector. But in the long term, I would say that new economy sectors are probably as important, because if you look at what is happening in the economy on the one hand, two-thirds of the economy is services. Only 12% of our trade is in services, and services trade grows faster than goods trade. If you simply extend that trend line out into the future, sooner or later it's going to be the majority of our trade; therefore, it is important to us that we know the rules, have rules, and like the rules.

So with respect to the future, as a new economy, I would say that an important objective for Canada is finishing the design of the rules for services trade, intellectual property trade, and all the rest.

Mr. Rick Borotsik: I couldn't agree with you more. In Canada, we're on the leading edge, if you will, to move forward in that area. Perhaps, in saying that, agriculture takes a lesser priority at that point. Again, I don't want this construed the wrong way, but obviously we do have a different economy and a growing economy. And I do appreciate, Suzanne, you out there fighting for agriculture, make no mistake about that.

I'd like you to expand upon what you referred to as a cap in overall support. We talk about the Americans, who can bend the rules with their programs, the $32 billion. We haven't done that. We have $2 billion worth of wiggle room right now that we haven't put into place for whatever reason. You want a cap on overall support. What kind of a formula are you talking about, or suggesting in your mind right now, where we would go forward to this negotiating table and say here's the formula for overall support for the EU, for the Americans, and for other countries, including Canada? What's the formula?

Ms. Suzanne Vinet: Basically, the concept we're looking at is that there are different categories of support, and for each one of them, where there are reductions that we've had to undertake—for example, on the ambers part where we have that room—we would want to continue having substantial reductions.

The Europeans put a lot of their support in what we call the blue box, which in fact does not have reductions attached to it. One of the important things we want to get out of this negotiation is that they should substantially reduce the level of blue box support they can put in. But then you risk having happen what to some degree happened with the Americans, this ability, when you have the ability to pay, to put a lot of that support into the green box that is minimally distorting or not trade distorting. You can increase support to your sector through that box.

There are some program issues that are very legitimate, because Canada also provides quite a bit of support in that box. For example, inspection, research, a lot of infrastructure, programs. There are very legitimate program issues related to the green box. But how do you make it so that you don't switch $1 of trade-distorting support and it doesn't become $10 of green support, and at those levels that it becomes—

Mr. Rick Borotsik: Suzanne, I'm going to get cut off in a moment and I have one other question, please.

First, you said you accomplished a substantial amount in Doha, and I agree. You also said there were fewer public servants there, not as many as you would normally take. Maybe there's a correlation to that and you should consider that.

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The last thing I have to say is that China is the wild card. You talked about it briefly with Rose-Marie. They're a huge market—huge. They're now new to the system and they don't understand the system as well. How do you see Canada being able to make sure our rules-based trade is going to be implemented and that we have the necessary remedies to stop them from perhaps doing some things they don't realize are breaking the rules?

Ms. Suzanne Vinet: We have worked very closely with the Chinese government and officials in helping them implement the agreement. We started a lot of technical work with the Chinese some time back in terms of how they should develop some of the new approaches and administering. For example—

Mr. Rick Borotsik: Are you worried about them? Are you nervous?

Ms. Suzanne Vinet: They're very important. We're not worried in the sense that we do believe they will do everything they can to fully implement. I think we have to be realistic that there will be problems on how they implement, simply because of the sheer size of the country. It's so huge. That means we have a vested interest in working very closely with them and helping them implement, and that is exactly what we're doing, as well as a number of countries. We're very optimistic.

The Chair: Thank you, Rick and Suzanne.

Larry McCormick.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington. Lib.,): Thank you very much, Mr. Chair, and thank you, witnesses, for being here.

We often hear that people are concerned across rural Canada, perhaps rightfully—I know you've heard this many times—the fear being that the future of one commodity within agriculture...I know it sounds like a broken record, but I am talking about the fear of the grain producers being traded off for supply management, or vice versa; the fear of agriculture being traded off for steel or softwood, or vice versa. It's not a new question, but I'd like to hear your comments on that. Then I perhaps have an additional question.

Ms. Suzanne Vinet: On the first one, in terms of trading off one sector for another, I think it's very important that we remember that the negotiating position we have has been developed in close consultation with the agrifood industry across the country and across all sectors. It reflects the Canadian interest in the agrifood sector. It's not a question of trading off against sectors; it's really about getting the best outcome possible, and I think the Canadian negotiating position does a very good job of reflecting broadly on the interests of the Canadian agrifood sector.

In relation to trade-offs between the agriculture sector and other sectors, in the end it's up to each country to decide where are the gains for them in agreeing to multilateral trade agreements. We welcome the broadening of the agenda, for example, because it will mean that some countries like Japan, who have been very reluctant to participate in the agriculture negotiations, will see enough benefits on the industrial side that they will now be willing to be more engaged. But that doesn't mean at the end of the day that we're going to trade off Canadian interests. The way that is outlined is straightforward. At the end of the day, we'll have to decide what's in our overall interest across all of the areas.

Mr. Larry McCormick: Thank you, Suzanne.

The ruling on Monday, and I'm sure even you will study all those words and letters.... I'm wondering what—I had the opportunity to hear the minister's answer a little bit—is the real story. What message does it send to the other supply management sectors? I mean, there's still going to be lots of caution in their approach, I'd expect.

Besides that, what will the other sectors feel that they hear, such as the grain producers and that? Everything is relevant and everything's tied together in some way. I'll give you the opportunity to answer. I know I missed earlier.

Ms. Suzanne Vinet: The other sectors should be very happy. It means that the case is now closed and any threat of retaliation is now dissipated, because this brings to a conclusion this process, this dispute, in the WTO. It doesn't take away, as the trade minister of New Zealand has said, that they may decide at some point to undertake a new case, but that's for them to decide, and we're not there yet. Right now, if we look at the current case, it does, in our view, close that round and takes away any right to retaliation that had been initiated by the U.S. and New Zealand. So that's very good news for the other sectors.

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The message the case gives us is that the U.S. and New Zealand were not successful in proving the allegation that the way we were exporting our dairy products constituted an export subsidy. Basically, that means we felt vindicated, since we've always said that we were respecting our obligations and that the way we do our exports of dairy products does not constitute export subsidies. So for us this case is closed at this point.

Mr. Larry McCormick: Thank you, Mr. Chair.

The Chair: Thank you, Larry.

David.

Mr. David Anderson (Cypress Hills—Grasslands, Canadian Alliance): Thanks for being here today.

State-trading enterprises are a bit of a problem, mainly because they're mandatory. The government runs trading institutions. If grain marketing was voluntary, would that remove the Canadian Wheat Board as a trade issue? If the government would allow farmers to voluntarily market their grain, either themselves or through the Wheat Board, would it take that out of the picture as an issue?

Ms. Suzanne Vinet: There is no problem with STEs. There are already rules that govern the activities of STEs. If you look at the example of the Canadian Wheat Board, we're clearly operating the Canadian Wheat Board within our international obligations.

The Americans have made numerous allegations as to what they feel is wrong with the Canadian Wheat Board, but they've never been able to back up these allegations. Whether moving to a different system would remove the anxiety of the Americans, I can't predict that. Clearly our position has always been that the existing international obligations and rules that govern the activities of STEs are well respected.

Mr. David Anderson: Why do we keep hearing then that it's one of the things you may be negotiating away?

Ms. Suzanne Vinet: No. I'm not negotiating anything away. I'm saying the Americans are certainly attacking and wanting to put more rules on the activities of STEs. Clearly, we're saying that if STEs or any other multinational or any other part of trade engages in some activities that are not within the obligations we have internationally, then there are disciplines attached to these activities. We're certainly willing to talk about any practical, real, or well-demonstrated problems around the activities of STEs, but there has been nothing forthcoming on the part of the Americans. How we organize ourselves to market Canadian agrifood products is clearly a decision we want to keep on making at home.

Mr. David Anderson: Well, if it does become an issue, I'd urge you not to hang too tightly onto that mandatory part of it. Let it go.

This is the second question. Given the incredible decrease in government support for our farmers since the last round of trade negotiations, are those decreases due to us having been out-negotiated at the last round, or are they due to a lack of government commitment to our farmers? We have far more room in our system to allow for support than we are presently giving on this. Is that correct?

Ms. Suzanne Vinet: The levels of support that were agreed to at the Uruguay Round reflect the years where support on the part of the majority of a number of governments was at its highest. How countries decide to drive their domestic policy, again, is a choice that's made in our respective countries. The Government of Canada, in consultation with industry, decided they wanted a competitive industry and opted for a policy direction that is different from what the Americans have in place. But it is nonetheless very effective for Canadian producers.

Maybe the levels that were committed under the Uruguay Round are such that it's much higher than what we actually have as government outlays under the amber category, but if you look at the types and levels of support the Government of Canada provides, we do support the Canadian agrifood industry.

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Mr. David Anderson: Is the loan deficiency program in the States a green program?

Ms. Suzanne Vinet: No, it's an amber program.

Mr. David Anderson: You mentioned earlier that the green programs cannot be trade distorting. Is that correct?

Ms. Suzanne Vinet: The current definition of a green program in the agreement outlines some criteria that were negotiated in the Uruguay Round that hopefully are minimally trade distorting or not trade distorting.

Mr. David Anderson: Can that program then continue at the current levels indefinitely?

Ms. Suzanne Vinet: Within the amber commitments we have now. For example, if we were successful in negotiating substantial reductions in the level of trade-distorting support under the amber box, maybe they would have to come down. It all depends on what level we negotiate.

Mr. David Anderson: It is distorting trade in one area. I know they're bringing corn from the States into western Canada and it's affecting our prices.

What message would you have for western Canadian grain farmers who are looking to wait five to ten years before any of the implications of these negotiations come into play in their lives?

Ms. Suzanne Vinet: I think that coming out of Doha the level of optimism has certainly increased. As I said before, now at least we have a deadline and a context. I think the deadlines that have been set by ministers are certainly optimistic, but at least we do have those deadlines. At least we're trying to deliver an outcome no later than 2005. We're better off than we were before we went into Doha. The negotiations are not going to resolve these issues overnight. That's clear; history tells us that. But we're certainly going to be working very hard to negotiate the best outcome possible for our producers and our exporters.

Mr. David Anderson: I guess I continue to have problems, not with you, but with the pace of these negotiations, because it's going to affect the next generation more than it will this one—if there are still producers on the land ten years from now.

The Chair: Thank you, David.

Mark.

Mr. Mark Eyking (Sydney—Victoria, Lib.): I have a similar question along the lines of what Dave just had. In the United States they call it AMS, the aggregate measure of support. Apparently, they're $10 billion over what they should be. What is the Americans' response on that?

Ms. Suzanne Vinet: Our analysis is that the Americans are well within their commitment. As I was saying earlier, there are three boxes—the green, the blue, and the amber. For each of these, they're doing exactly what they planned to do in the Uruguay Round.

Mr. Mark Eyking: They're not really doing anything out of whack then by supporting...?

Ms. Suzanne Vinet: I can assure you that we keep a very close eye on how they report the kind of spending they have and make sure they record it the right way. They are well within their obligations.

The problem is the levels that were agreed to at the Uruguay Round reflect the base fears of when the support was at the highest. Everybody, including Canada, started the reductions from a very high level. It's not coming down fast enough, and that's what we're going to resolve in this negotiation.

Mr. Mark Eyking: Do you have any numbers of where we are in Canada with this AMS?

Ms. Suzanne Vinet: In the AMS I think we're reporting around $700 million.

Mr. Mark Eyking: How much room would we have to move?

Ms. Suzanne Vinet: We have room. We could provide trade-distorting support or amber support right up to a level of $4 billion. I would have to verify the number.

The thing is we have shifted support from the trade-distorting support to the non-trade-distorting support, and our green support has increased over the years. Really what you have to focus on are the overall levels of support. We have an explicit policy direction that says we should be getting out of trade-distorting support into non-trade-distorting support.

In other words, we support smarter than what the Americans are doing. They may be throwing a lot of dollars into support, but I can assure you that we are watching very closely how they report that, and they're well within their commitments. That's what the problem is. They have the ability to shift into non-trade-distorting support but with huge sums of money. That's why the Canadian proposal says we would like to see a cap on that overall support and to make sure that what's identified as a green non-trade distorting is truly non-trade distorting. Again, we see this as one of the challenges of this round.

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Mr. Mark Eyking: Do you see the American Congress and the American public really wanting to reduce it by maybe a third?

Ms. Suzanne Vinet: The negotiating position for the Americans calls for substantial reductions in trade-distorting support—what's basically the amber box and the blue box. They're very sincere. I mean, it is a bipartisan negotiating position they've put forward. The way their system works, whatever farm bill comes out of the Senate and the House and to conference, we'll have to wait to see what it says. But, clearly, in the negotiations, that's what they're saying. We'll see. So far they've been able to provide some leadership, and hopefully they will continue to do so.

Mr. Mark Eyking: Thank you.

The Chair: Thank you, Mark.

I'll raise one minor point before I go to Suzanne. The Chinese, when they were there, were making at least statements privately about how their society and their country was to be changed through improved transportation methods, which would change their needs with agriculture and enable their cities to get better access to the rural areas. You probably were aware of some of the discussions that were going on.

Some of the questions here today were about rural development as much as about direct payment to farmers. What would be your impression of what's happening in China and some developing countries and how it might affect markets in the future for international trade in agricultural products? Could you make a statement on that, Suzanne?

Ms. Suzanne Vinet: Well, it's a vast topic, and in a short time I think it's difficult to do it full justice. It's clear that moving to a market economy will entail a lot of ramifications, not only in agriculture but in non-agricultural sectors—in terms of their urban policies and all of that.

But if I bring it down strictly to agriculture, the Chinese are making some significant concessions in the negotiations on accession. For example, typically, a developing country has the right, under WTO, to provide support, for example, up to 10% of the value of production. But the Chinese, realizing the impact that might have on world markets, have agreed to a ceiling of 8% or 8.5% of the value of production as a limit on their ability to support their agriculture. So I think they obviously have a very integrated approach to how they want to make the full transition to a market economy and to play in the world markets, realizing that whatever they do has significant impacts both on the export and on the import side.

The Chair: Madam Ur.

Mrs. Rose-Marie Ur: Thank you.

You indicated, when I asked a question on the U.S. about the $19 billion, that they actually paid $32 billion to the farms with their different boxes and their different approaches. Why do we, as Canadians, not use that same approach here in Canada and get more dollars into our agricultural sector? When you're negotiating, can we be as innovative?

Ms. Suzanne Vinet: Yes. Everybody is living by the same kind of commitment, but technically, under the WTO, there are no restrictions as to how many “green dollars” we can use to support farmers.

Mrs. Rose-Marie Ur: We have to be as innovative then too.

Ms. Suzanne Vinet: We have, to some degree, shifted a lot of our support into the green box as well. The green box—

Mrs. Rose-Marie Ur: Example?

Ms. Suzanne Vinet: For example, beyond the research and infrastructure, some of the programs we're doing around the environment—some of that support is coming under the green box, for example.

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Mrs. Rose-Marie Ur: You stated that the U.S. took the leadership in bringing forward anti-dumping and putting it on the agenda at Doha. We have a lot of problems in my riding specific to garlic. In those discussions, were there any improvements, any changes, to rules that would benefit our Canadian agriculture in that respect?

Ms. Suzanne Vinet: Well, that's what it would be about, right?

Mr. Don Stephenson: Yes, it's an agreement to start a negotiation on those issues; it's not a conclusion.

Mrs. Rose-Marie Ur: No, I understand. So what would we be putting on the table?

Mr. Don Stephenson: What we're looking for, generally speaking—

Mrs. Rose-Marie Ur: Because I'm meeting with garlic growers.

Mr. Don Stephenson: What we're looking for, generally speaking, are stricter rules on the use of anti-dumping countervailing measures and more of an agreed science as to how measures are designed and implemented. The assessment of the damages, for example, can be a fairly subjective and arbitrary process. So we'd like agreed rules on—

Mrs. Rose-Marie Ur: Will you take timeframe into consideration?

Mr. Don Stephenson: Certainly.

Mrs. Rose-Marie Ur: That seems to be the real problem. The issue is our Canadian farmers have the product, and this is being dumped. By the time we, in government, get around to understanding what's going on, it really is quite devastating to our Canadian producers.

Mr. Don Stephenson: We would certainly take timeframes into account.

Again, I'd like to make the point that was made earlier by Suzanne that, at best, results of these negotiations are likely in 2005. It's possible you would have an earlier outcome on something like anti-dumping rules, but I wouldn't predict it.

Mrs. Rose-Marie Ur: Thank you, Mr. Chair.

The Chair: Howard, briefly.

Mr. Howard Hilstrom: On market access, we agreed last time we would have the equivalent of about 5% of our domestic consumption. Is that accurate, and is it across the board, or is it only to specific commodities in the country the 5% applies?

Ms. Suzanne Vinet: The 5% was provided for in the guidelines. When the issue of article XI was decided, and that we wouldn't be able to use article XI but instead would “tariffy” all the non-tariff barriers—for example, convert quotas into a tariff value—for those products we “tariffied” or converted into tariff freight quotas, the guidelines provided that we should allow for 5% of the value of consumption for access at a lower tariff, for the “within quota”.

Those were guidelines. The agreement was interpreted differently by different countries. The baskets of products they use vary between countries. Within that basket you might end up with some products being given only 2% access but some products higher levels—on average 5%. There have been some problems in the sense that how it's interpreted amongst countries is very uneven.

Mr. Howard Hilstrom: Okay. So we don't have a position. Obviously, if things didn't work out very well in the last round, the way it was implemented, then we don't have a position now where we're saying to other countries, “Okay, we're at 5%. Now we're willing to move to 10%, or whatever, if you do the same kind of thing.” Is that our position?

Ms. Suzanne Vinet: The position is that it's caused a lot of grief to a lot of our exporters, and the Canadian position is we should bring everybody to a common end point. Let's say we all agree it should be at least 5%, where everybody should meet the 5% at the end of the day—and for comparable products. It has been an important issue for Canada, and our negotiating position is very clear, that we want to fix the problems we have found in this area of market access.

Mr. Howard Hilstrom: This understanding of market access.... We all use this term, and you know exactly what it means and everything. We talk about market access for canola into Japan, for instance: they'll only take seed; they won't take the grain. So this market access is....

Can you describe it a little better, as to how we can actually ask other countries for more access for any given commodity? Is it feasible to expect that this market access is going to allow us to export a lot more products without importing more?

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Ms. Suzanne Vinet: Yes. Basically it depends on the approach that countries agree to at the end of the day.

The way we're looking at it, we have different kinds of tariffs and we should take into consideration all of the elements. Market access is not just about the tariff level; it's also the conditions under which you accept imports, for example, for a country.

So if you look at our exports of pork to Japan, as part of this tariffication there's a system whereby if your imports go over a certain value or volume or there are import surges, you can snap on an extra duty, for example. That's becoming very problematic, so we want to tackle that on the export side. We have an interest there.

In some cases, you only have, very straightforward, just tariffs. That's the case with canola oil and seed into Japan. What's happening is not that they refuse to take our canola oil; it's just that they have such high tariffs on canola oil compared to canola seed. That's what we talk about as tariff escalation. What that does is make it cheaper for a Japanese importer to import seed rather than oil; the tariff difference between seed and oil is such that it favours importation of seed.

That's one of the issues we want to resolve in the negotiations. We want to quit having this escalation between the raw product and the processed product. So we have an approach in our position on how we want to deal with this.

The other thing is, where we have a minimum market access that we're supposed to provide, it's not a guarantee to import. It just says it's a commitment on the part of members that when you have a low tariff for a certain quantity and very high tariff for another quantity, you shouldn't impede the ability of importers to import at that low tariff. So there are issues around how we even administer the imports within the tariff rate quotas, and there might be issues as to the level of tariffs within that.

So if Canada is saying, well, we should go to very low tariffs, zero, we should make sure the administration is very straightforward. That will provide access, and we should at least have a common end point. For all countries, if they say they're going to offer 10% of market access, everybody should be at 10% for the same product. Nobody should be allowed to play games; they shouldn't impede that access.

Then it means we are providing real access, and you could increase the access, for example, of pork exports to the EU within their tariff rate quotas, up to, I don't know, a real 5% or a real 10%. That would be a huge opening of markets.

So I think in the approach we're taking, that we have in our position, that's why we decided that having just one way to tackle this issue is not the right way. You're better to try to have a variety of approaches so that you can open up the markets in a more practical way, in a more substantial way.

The Chair: Thanks, Suzanne.

Now Larry has a very brief share of the....

Mr. Larry McCormick: I'm sure we have time for only a very brief comment, but actually, Mr. Chair, my question is for the next generation of grains and oilseeds producers in this country. Of course, with the size of this great country, grain and oilseed is produced across it, but it's mainly in the prairies, and I'm really concerned for Saskatchewan and other areas.

Our producers have diversified, but market access and GMO or not, my question is this: will there be a market there for the next generation of grains and oilseeds producers? Will there be a market around the world for our grains and oilseeds? Is there enough market for all that we can do and what we've done in the past, so that our barley, wheat, and canola will not be in our elevators? Hopefully, long after subsidies...is the market there?

Thank you, Mr. Chair.

The Chair: I'm not sure if anyone is going to bite at that question.

Mr. Larry McCormick: Suzanne and Don, these two witnesses, see the world much closer than we do. There's no simple thing; I want to get your opinion only.

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Ms. Suzanne Vinet: Well, there's a market for food. We'll always want to have food, so there's no problem there. But our challenge is to make sure that the market is open, that farmers should compete on the basis of their comparative advantage, not on the basis of their government's treasury, and that the markets should be fair.

The Chair: Thank you, Larry, and thank you to our two witnesses. We probably could spend a few more meetings—

A voice: Years.

The Chair: —or years on this.

I've watched these two people in action at the discussions, and I guess they didn't get much sleep for those four or five days. I'm glad to see they are rested this morning, but as a Canadian, I couldn't help but be impressed with their work and also with the respect that Canadians as a whole had in terms of the negotiation process.

I know, Larry, that's a very difficult question you just asked. I think probably Canadian farmers have to get some answer to that, because in my gleanings, in talking with a number of countries, the fact is, agriculture in many developing countries is being improved.

Today we talked about services. You talked about a certain percentage of our trade in services. Other countries are very high in services, and goods are really a lower part of their trade.

In any case, I'm not sure who has that answer for us, but it is a very big factor for the future of Canadian agriculture: Is there a market internationally?

Only recently I read in the Globe and Mail where the United States is getting access now, or thinking of getting access, to Iran for their grains. Of course, that's one of our biggest markets. When this business about September 11 rolls around, it could affect the future of Canadian grain sales. So it is a very complicated issue.

Thanks for coming. You may be recalled, along with some of your confreres, to take and answer further questions.

With that, we will adjourn this part of the meeting.