FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, March 28, 2001

• 1830

[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call this meeting to order and welcome everyone here this evening. As everyone knows, we're doing a round table on the free trade area of the Americas.

We have the pleasure to have with us, from the Department of Foreign Affairs and International Trade, Monsieur Claude Carrière, director general, trade policy bureau I, chief negotiator, free trade area of the Americas; Monsieur Fréderic Seppy, deputy director, regional agreements, services trade policy division; and Monsieur Jean Benoit Leblanc, senior trade policy analyst, investment trade policy division; and I believe, from the Department of Finance, Mr. Charlie Seeto, director, financial sector, policy division.

Take ten or fifteen minutes, whatever you need, to make your introductory remarks, then we'll engage in a question and answer session.

Monsieur Carrière.

Mr. Claude Carrière (Director General, Trade Policy Bureau I, Chief Negotiator, Free Trade Area of the Americas (FTAA)): Thank you very much, Mr. Chairman.

Before talking to you about the FTAA, I will situate it in the context in which it is being negotiated, which is the Summit of the Americas process. The summit in Quebec City will be the third summit meeting, following Miami in 1994 and Santiago in 1998. The actual negotiations for the free trade agreement were launched at the Santiago Summit of the Americas meeting, and at the Summit of the Americas three weeks from now leaders will be receiving a report from trade ministers on the progress that has been achieved since negotiations were launched three years ago.

The FTAA is one element of many in the Summit of the Americas process, and it will be considered along with a number of other issues, principally the reinforcement of democracy in the hemisphere. The primary focus of the summit will be democracy and discussions surrounding a democracy clause, in order to send a very strong signal to the hemisphere that democracy is important, it counts, and it is necessary to address the old demons, which are beginning to appear in a number of countries. We've all read about Peru, and there have been concerns about other places as well.

The FTAA is also part of a thematic in the summit that deals with the creation of prosperity in the hemisphere in order that governments may generate the income and wealth to address the very important social issues being dealt with also in the summit under the thematic “Realizing Human Potential”. The “Creating Prosperity” theme also includes such things as building infrastructure, dealing with labour standards, improving our environment, and it addresses questions of finance ministers, who will be meeting next week in Toronto. Under “Realizing Human Potential”, the key issues of health, culture, gender diversity, gender equality, and cultural diversity will also be addressed.

The FTAA is a process of negotiation, a second generation free trade agreement, which includes goods, services, investment, dispute settlement provisions, competition policy, government procurement, and the like. Negotiations have been progressing under the instructions trade ministers provided to the negotiators in November 1999 in Toronto, at the meeting chaired by Minister Pettigrew.

• 1835

Our negotiating groups have produced draft chapters of an agreement, and they will be reporting to ministers on the progress they've achieved and seeking from ministers instructions on the next stage of the negotiations, under Ecuadorean chairmanship, which will begin after the meeting.

[Translation]

Canada will have two main objectives at the ministerial meeting in Buenos Aires next Saturday.

The first will be transparency: how to improve the transparency of the collective negotiation process for the free trade area. Minister Pettigrew will be asking his colleagues to make the negotiation text public in order to demystify the negotiation. In the meantime, the Government of Canada's proposals and negotiating positions were made public several months or even a year ago. Canada was the first to do this and was followed by the United States, which made public detailed summaries of their positions, and by Chile and Costa Rica who did likewise. We shall continue to encourage our partners to disclose the maximum amount of information at the national level as well as the collective level.

The second aim will be to reinforce the committee's mandate relating to the participation of civil society, which was an innovation three years ago. Its purpose is to create a permanent instrument for transparency as well as a means of dissemination and dialogue with civil society in the hemisphere. It is a big challenge. Our partners have lots of reservations but we think it that it would be useful to strengthen the role of this committee and we are endeavouring to do so.

There are other challenges as well. The small economies are concerned about the challenge they would face in a free trade area with countries like the United States. Ministers will examine their concerns and ways of helping them meet the challenges of the negotiation with technical assistance and will provide them with assurances that we will accompany them over the long term if they decide to make the necessary reforms to their domestic economy.

Lastly, we will discuss the timetable of the negotiations and the governance mechanism if changes are made to this timeframe. You may be aware of the fact that the Government of Chile has already suggested advancing the negotiation timetable and that certain countries support this proposal, notably the United States, Canada and many Central American countries, but others like Brazil and a number of Andean countries have reservations about this timetable and would prefer to concentrate on the substance.

For the time being it is difficult to forecast what the ministers' decision will be but this matter will be discussed.

The result of the meeting will be a ministerial statement and a contribution to the Summit Declaration to be issued in Quebec City. We hope that the ministers, at their meeting and later on at the Summit, will give impetus to the negotiation and that the new Bush administration will start sending clear signals of its interest in the progress of the negotiation and hemispheric economic integration.

• 1840

Mr. Chairman, my colleagues and I will be happy to answer your questions on the negotiation. If you have questions about the Summit, we'll do our best to answer them.

[English]

The Chair: Thank you very much for giving us a contextual briefing behind the FTAA. We'll begin with questions from Mr. Loubier.

Mr. Loubier.

[Translation]

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Thank you, Mr. Chairman. I'd also like to thank the Alliance for letting me ask the first question since I'll have to leave to catch a plane in a short while. I'd like Mr. Carrière to answer my questions.

Mr. Carrière, I have three concerns relating to this negotiation. Here's the first one.

You said that the process had to be made more transparent in order to demystify the negotiation. Do you not think that it is more than merely demystifying the negotiation? People are increasingly aware of the fact that negotiations are taking place in their name behind closed doors dealing with matters that will directly affect them in their economic lives, in their social and cultural lives. All sectors are affected. That is my first remark.

I have two concerns in relation to Chapter 11 of NAFTA. In this negotiation of a Free Trade Area of the Americas, is consideration being given to committing once again this monumental error of Chapter 11 on investments, namely, for those who are not familiar with this article 11, a provision allowing for the application of what is known as indirect expropriation? In other words, a company may complain because a government policy prevents it from making profits, because there are obstacles to investment, and it may claim compensation. There are already 10 cases of such complaints, if my memory serves me right. Will we be making this mistake again? Will this be systematized as was done in the draft MAI agreement, which was absolutely deplorable in this respect, or will we be adjusting our aim? That is my first concern. We must remember that when corporations receive compensation payments, taxpayers as a group end up footing the bill for such damages.

My second concern also relates to the finance sector and the tax system. Regarding the 34 countries we are negotiating with, the OECD recently published a report, as I remember it was last February or June, on what are known as tax havens, that is those countries where companies enjoy exceptionally favourable conditions. There is often a great abundance of numbered companies and tax levels are ridiculously low, 2 or 3% or next to nothing. So they do constitute unfair competition when it comes to the foreign investments of Canadians.

As a matter of fact, this problem is raised by the Auditor General in all his reports, including the last one, his legacy. Reference is made to only three Caribbean countries, if my memory serves me right, namely the Bahamas, Bermuda and another one whose name escapes me. Twenty-nine billion dollars of Canadian investment abroad is to be found there and strangely enough, their tax rates are non-existent or extremely low. How is this problem being considered? Opening up borders and allowing a much greater liberalization with respect to capital does not solve this problem but only exacerbates it.

There is also a UN report singling out these same countries that in some cases are not only tax havens, but are also very permissive when it comes to money laundering. Has any thought been given to the fact that free trade treaties are being signed with countries that are not doing what they should to avoid having money from drug traffickers, notably... We are not only referring to Columbia, because this is becoming universal. We are not only consumers here but also producers. This is something I learned at my own expense.

What is the position about the problem of signing a free trade agreement for the three Americas including certain countries that are not only tax havens, but also have very lax legislation relating to money laundering?

I would like to hear your answer to these three concerns.

• 1845

Mr. Claude Carrière: I will answer your first question about investment. Mr. Seeto will attempt to answer your question about financial services.

On the matter of investment, the government's position was very clear. There are certain elements in Chapter 11 of NAFTA relating to investor-State arbitration mechanisms that deserve some clarification. We have always been very clear on that point. The other elements of Chapter 11 work very well but for some years now, we have been attempting to convince our partners, Mexico and the United States, to make certain clarifications.

Recently, Mexico made it known that it was willing to sit down with us and start working on these clarifications. The American administration is a bit more reluctant, but we think the three countries will soon be ready to start working on this.

[Editor's Note: Inaudible]

Mr. Yvan Loubier: ...Mr. Carrière, to find in the agreement on the free trade area the same or similar provisions as those concerning investment in the MAI.

Mr. Claude Carrière: It's a bit early to say because we are in the middle of the negotiations, there are three or four years left. Some countries have proposed investor-State mechanisms but Canada has not, nor have the United States or Mexico, because we are working on clearing up certain aspects of this mechanism that deserve elucidation. We are not trying to reproduce this mechanism and the minister was very clear on this point, I think, when speaking before the Committee on Foreign Affairs and International Trade in this same room last week, and he also made the point on several occasions in written form. So we are trying to clarify the matter. Once that has been done, we shall see how this issue should be dealt with in the free trade area. We are dealing with one thing at a time.

Mr. Yvan Loubier: What do you have to say about tax havens?

Mr. Claude Carrière: As far as financial services are concerned, tax havens...

[English]

Are you able to answer some of these questions on financial services?

Mr. Charlie Seeto (Director, Financial Sector, Policy Division, Department of Finance): I was going to add that in the case of money laundering, there is the Financial Action Task Force on Money Laundering, which was set up by the G-7 quite a few years ago. They have developed standards for countries to detect and deter money laundering, and they have developed 40 recommendations. Last June they evaluated countries against these standards and came up with a list, as I recall, of 15 countries that did not meet these international standards.

So there is a process in place to identify countries that don't meet international money-laundering standards. There's a separate process going on in this area in regard to money laundering, to encourage countries to conform to the standards. Of the countries identified, many, since last June, have made good progress in putting in place at least legislation against money laundering.

[Translation]

Mr. Yvan Loubier: But the follow-up to the report of the Financial Action Task Force notes that there is a difference between adopting a policy and actual practice. At the FATF level, there are still doubts about the effectiveness of legislative measures adopted by certain countries. Reference is made in particular to the Bahamas and Bermuda and, I think, Liberia as well. There were still some doubts.

I am asking you if any ways have been found to encourage these countries to adopt real legislative measures that would prevent a greater liberalization in the circulation of capital from resulting in a situation favouring money laundering.

• 1850

I'd like to return to the subject of tax havens. Does the discrepancy in corporate tax levels in different countries, levels that are sometimes diametrically opposed... Here, for example, the average corporate tax level is 28 percent. In the Bahamas, it would be 2 or 3 percent at the most and there are two other countries where it is zero.

Is there any provision for a mechanism whereby tax conventions signed with such countries, and we have some here, would be attentively scrutinized and perhaps be subject to a review as part of a greater liberalization in the three Americas?

[English]

Mr. Charlie Seeto: Can I just add about the Financial Action Task Force that they are evaluating these countries. In the upcoming meeting in June they're proposing to take countermeasures against countries that have not made progress in improving their anti-money laundering framework.

I'm not very familiar with the issue of tax havens, but as I understand it, again there's a global process in train to deal with that issue. But I'm not able to speak to that issue.

[Translation]

Mr. Claude Carrière: There is something I might add, Mr. Seeto and Mr. Loubier. I previously mentioned that as part of the Summit, several activities were taking place, one of which being the meeting of the finance ministers of the hemisphere. The finance ministers will be meeting next week in Toronto and although I do not have their agenda, I know that one of the issues they wish to discuss is money laundering. They will deal with globalization issues as well as financial regulation in the hemisphere and at the world level. These issues will be discussed in the Summit. They will not be dealt with by the ministers of trade but by the ministers of finance. During the meetings of the finance ministers of the hemisphere, these kinds of issues will be addressed.

Mr. Yvan Loubier: I have one last point to raise that relates to my first remark. I looked through the free trade negotiations with the United States and the free trade negotiations with the United States and Mexico. I also experienced the eighth round of GATT negotiations resulting in the WTO, and every time I noticed increased tension in the population. There is an increasing number of groups getting organized and some of them at least do not understand the scope of globalization and what this phenomenon means. Others, quite legitimately, are fed up with getting stuck with decisions that end up creating problems, like this famous Chapter 11 under which the Federal Express company sued the federal government for several hundred million dollars. If my memory serves me right, the settlement was for about 20 million dollars paid out by the federal government in order to comply with the provisions of Chapter 11.

Don't you think that it might be a good idea not only to make certain cosmetic changes for the sake of transparency, but also to completely rethink the way in which you arrive at such agreements? It would be possible to have a formal continuous information process, for example, during the negotiation, where you explain the aims of the negotiation, what globalization is, and what the rules are supposed to achieve. This would be an attempt at civilizing globalization. Generally speaking, when we look at the WTO rules and the rules surrounding regional agreements, we see that the market forces are being civilized. These agreements are not entirely negative. Most of the time, they contain good elements.

Is there any reason to think that one day, we will be able to change this kind of procedure, that there will be more openness and not merely, as I said, an occasional consultation with certain members of civil society while negotiating positions themselves remain secret? I think that people today are sufficiently informed and want to know more because things are being negotiated in their name. We can understand why people are frustrated. This is not just groups of anarchists that are demonstrating in the streets. One day, it will no longer be possible to negotiate behind closed doors or to limit the negotiation to the 34 countries or, in the case of WTO, to 140 countries. The population will remain in a state of alert and incredible security measures will have to be deployed.

• 1855

Just look at the security perimeters that they had to establish in the Quebec City area to keep people away in case demonstrations get violent. It does not make any sense to attempt to improve the world and these agreements, to encourage development in developing countries and at the same time see such action being so keenly challenged as if it were a monster.

I would like to know your opinion on this. Don't tell me that the question is too political. What I am suggesting is something technical, namely negotiating techniques. That is the question I am asking you.

Mr. Claude Carrière: Don't forget, Mr. Loubier, that your question does contain some political elements.

Mr. Yvan Loubier: Yes, but your answers will never be political.

Mr. Claude Carrière: The government is endeavouring to provide the maximum amount of information possible on our negotiating positions and our proposals, in the area for which I am responsible. A year ago, the government made public on a Web site Canada's negotiating positions on the free trade area. Later on in the same year, we made public the government's negotiating positions with the WTO in agriculture. Last December, we made public the proposed texts for the free trade area and we put all our proposals on the department's Web site. Ten days ago, we made public and posted on our Web site our position with the WTO on the negotiation on services and our initial negotiating proposal.

There is always room for improvement, but we are attempting to provide the maximum amount of information possible on our positions and our negotiating proposals to ensure that Canadians are informed about what we are doing.

What we are unable to do is to make public the positions of other countries unless they authorize us to do so. We are trying to convince them to do so. If you consult our Web site, you will find out a great deal of information about the Canadian position on the negotiations concerning the free trade area. We attempt to keep this information up to date. We add to it as frequently as possible.

We also attempt to engage in a dialogue. On this very day, Ministers Pettigrew and Manley met about 60 representatives of various organizations from civil society, unions, the business community and the universities to find out what their views were and to engage in a dialogue relating to the free trade zone, the Summit and the negotiating process in the Summit.

The ministers have made a commitment, along with us officials, to continue to do so after the Quebec Summit. In Mr. Pettigrew's case, it was his second meeting. As for ourselves, we shall continue on this path. We are attempting to open the process up as much as possible and we shall continue to do so.

Mr. Yvan Loubier: Thank you, Mr. Carrière.

I apologize but I must leave now. You know that the budget is going to be brought down in Quebec City tomorrow. I've been asked to play a role, so...

[English]

The Chair: Thank you, Mr. Loubier.

Mr. Epp.

Mr. Ken Epp (Elk Island, CA): Thank you. I find this whole concept intriguing, and I have a couple of pretty pointed questions.

First, tell me whether my thinking is right—and don't judge me just because I'm talking about food. What we're talking about here is economic activity, and if you expand the area of economic activity, you get different ways in which the pie is sliced, but hopefully also you get a bigger pie. Is that, in general, true?

• 1900

Do you have any estimates on how this is going to affect the Canadian economy and the gross domestic product in this country, both in terms of what the share is but also in terms of its total magnitude?

Mr. Claude Carrière: That's a good question. We don't have direct estimates. However, I can give you a couple of figures that will give you orders of magnitude. As you know, 45% of Canada's GDP is represented by exports. Most of those exports go to the United States, which is part of the hemisphere. However, if we exclude the United States and Mexico from the equation, currently only about 2% of our exports go to the rest of the hemisphere, which accounts for about the same share, perhaps a little bit more, of imports.

Hopefully the FTAA will entice, incite, and encourage Canadian businesspeople to look at the hemisphere as a growing potential market. It is one of the only regions in the world today where Canada has gained market share over the past 10 years. So I would say that the impact on Canadian growth would be small but would be positive if we concluded an FTAA by 2005.

Mr. Ken Epp: Okay. Now, as you probably know, our parliamentary research bureau, which has just excellent people in it, has prepared some briefing notes for us. In those, it is indicated that 85%, 86% of our trade is with the United States, and if you include, then, the other two countries with which we presently have agreements, it goes up to 97%. That leaves only 3%.

What I'm asking is, if we bring more countries into the agreement, will that simply divert some of the trade we presently have to that country? In other words, I guess in a way I'm asking indirectly, does Canada have a capacity to respond to what should happen; that is, an increased demand for our goods and services? How quickly can we respond to that, or is it simply going to divert trade that we presently already do with Chile and with the United States and with Mexico? Is it going to divert it to the other countries with no net gain to us at all?

Mr. Claude Carrière: Well, my crystal ball is no better than anybody else's. We think this will lead to new business. It will lead to an increase in production and activity, but it will be a function of our businesspeople—whether they are prepared to go out and take advantage of new opportunities and make the investment at home in the productive capacity and the creation of employment. It will not be the government that will create that. It will be our businesspeople, but we will seek to maximize the opportunities for them to do that and to take advantage of that.

Mr. Ken Epp: Okay.

Some of the critics of free trade put forward the argument that if we open up into free trade with countries where, for example, the wages are much lower—maybe they have less expense in producing some of their products than we do for not only wage and labour reasons but also for other reasons—then what it's going to do is just simply drive the price of our commodity down. As a result, our workers will end up getting an even lower wage indirectly because right now we have our Canadian workers getting a lower wage by virtue of having a floating dollar, which is going ever downward. Is this going to be another pressure decreasing the value of our dollar?

I have asked a whole bunch of different questions in that group.

Mr. Claude Carrière: Yes. Well, we think increased trade generates economic growth and not the other way around. In fact, there is empirical evidence that NAFTA has led to increases in wages in Mexico, for example. There's evidence to suggest that in the Mexican northern border regions, wages are now comparable to the southern U.S. wages. What NAFTA is leading to now is a movement of investment into lower-income regions of Mexico to take advantage of a pool of workers that is not available any more at the northern border. So what actually happens is that wages go up, not the other way around.

• 1905

Mr. Ken Epp: Okay, but that's for our trading partners.

Right now, Canada is already experiencing an erosion in the wages Canadians make. I believe that's true. In terms of the Canadian dollar, the wages go up 2%; our dollar is down 35% over the last 15, 20 years. I'm thinking that, in a free trade area, you remove the barriers that prevent this free movement of goods and services; thereby you sort of equalize it. It's like having a big divider in the pool that keeps the water level here high and there low, and if you take that divider out, it's all going to be the same level.

So if you're going to be using FTA or FTAA to increase the wages in Mexico and in some of the other countries that are going to be drawn into this, doesn't it follow that our wages will then, of necessity, drop? Otherwise our own businesses won't be able to compete in that market, since, even though the others' wages are coming up, they're still substantially lower than ours?

Mr. Claude Carrière: Well, we're not negotiating wages. What we do is negotiate the removal of trade obstacles and provide opportunities for increased trade in both directions or within the region. The question of wages and other issues simply follows the natural elements of the market.

Mr. Ken Epp: I'm aware of that, sir. But my question is, have you studied or have you tried to project the effect on wages in Canada if we open up the borders?

Mr. Claude Carrière: Not to my knowledge, not in the department. We don't have the capacity—

Mr. Ken Epp: Really? Don't you think that should be done? Isn't that a pretty important factor to Canadians?

Mr. Claude Carrière: Yes, it is important, but it's not something we've projected in the department.

Mr. Ken Epp: Fascinating.

The Chair: Ken, perhaps I can piggy-back on your question there.

What kind of structural impact changes do you think will occur as a result of the FTAA?

Mr. Claude Carrière: As I said, Mr. Chairman, the trade with the hemisphere outside of the U.S., Mexico, and Chile is very small, and we would expect that any impact would be small in any direction.

The Chair: So you're saying there can't be that much of a correction on wages?

Mr. Claude Carrière: We have 2% of exports and about the same in imports, so the impact is quite marginal.

Mr. Ken Epp: Mr. Chairman, if I can, I'd like just to go back to this. What number did you say, 45% of Canada's GDP is related to exports? That's rather significant. That means that, on average, 45% of all human effort in Canada, which is culled from the labour force, which is paid wages, is dependent on our trade.

I like the idea that more trade would provide more jobs and hopefully increase the pressure on jobs, but there are also certainly some things that can be done better and more cheaply in these other countries, which is going to drive the wages and the demand for labour in our country down. Is that not a corollary in economic thinking or...

Mr. Claude Carrière: No. In fact, competitive imports into Canada have a positive effect on the economy. They stimulate competition; they increase choices; they stimulate innovation in the marketplace. So, no, they don't go together.

Mr. Ken Epp: Okay. Mr. Chairman, I have one more question on a completely different tack, and that's because of the area I represent.

I'm wondering about the impact on agriculture and whether, when you are talking about the free trade area of the Americas... And these talks also include—even though we already have an agreement with the United States—the United States in this larger picture, as I understand it. The impact to our agricultural sector could be hugely positive if we could finally persuade the Americans to treat their farmers on a level playing field with ours vis-à-vis government subsidies and that type of thing.

• 1910

Now I know that Chile produces quite a bit of wheat, and Argentina as well. Is Argentina being drawn into this as well?

Mr. Claude Carrière: Yes.

Mr. Ken Epp: Okay. If you look at all of those other countries, is it part of Canada's goal to hit these subsidies to make sure they are out of the picture so that we can compete on a level playing field?

If that were the case, then I would think there's room for a positive change for our agricultural sector in Canada. If that is not being done, then I think it's going to make our situation worse. So what is the stand that you have going into these negotiations vis-à-vis agriculture?

Mr. Claude Carrière: On agriculture we are seeking to operate on two fronts. As you know, we have agriculture negotiations at the WTO, in which we are seeking the elimination of export subsidies, a significant reduction in domestic supports, and improvements in market access.

In the hemisphere, our position is complementary to our position in Geneva. There are certain gains we think we can achieve in the hemisphere, particularly in market access and in the elimination of export subsidies. We think we have a better opportunity to deal with domestic subsidies in Geneva in alliance with many of the hemispheric partners in the Cairns Group, for example, again on export subsidies but also on domestic supports.

So we will be pushing for our interests, whether in the FTAA or in Geneva, to reform international trade in agriculture and to advance our objectives. And we'll be using the forum in which we have the best chance at succeeding with our trading partners.

Mr. Ken Epp: Okay, but is this on the agenda for the FTAA?

Mr. Claude Carrière: It's part of the agenda of the negotiating group on agriculture, for example, yes.

Mr. Ken Epp: And if you were to achieve results, would this be a goal that you could choose or on which you could make some incremental gains? If you were to get some gains for our agricultural sector in North America, then when you go to Geneva, now you have five times the clout.

Mr. Claude Carrière: Exactly.

Mr. Ken Epp: Mr. Chairman, I could go on and on, but I think it's fair to let someone else have a chance, and then I'll come back.

The Chair: Yes, absolutely. We know you can go on and on.

I'm going to go to Mr. Cullen.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chairman, and thank you, gentlemen, for your presentations. I have one comment that I would just like to put on the record, and it's a follow-up to a question of Mr. Loubier, and then a couple of questions.

Mr. Seeto talked about the Financial Action Task Force, which deals with money laundering. Mr. Loubier was talking about those jurisdictions where there's low tax or no tax, and presumably in the context of the FTAA he was referring to maybe some Latin American or Caribbean countries; I'm not sure. But of course there are some low-tax, no-tax jurisdictions around the world—in Europe, etc.

There is an initiative by the OECD. It's called the harmful tax competition initiative, and it's not really making judgment calls as to what taxes are too low, but it is pushing the envelope in terms of sharing of information and secrecy. Many of the developed countries are saying, we're concerned about tax evasion, and we'd like to be able to have more transparency in terms of information requests and, frankly, trying to break down some of the secrecy laws, which is a big job.

But there's another initiative as well, and that is called the Financial Stability Forum. I can't remember under whose auspices that is; it's either the G-7 or the... I'm not sure. Maybe Mr. Seeto would know.

Mr. Charlie Seeto: It was set up by the G-7.

Mr. Roy Cullen: The G-7. And it's basically trying to cut through different regulatory requirements and different regimes. So, in other words, if you have insurance companies in Canada, in North America, you might have some in the Bahamas, reinsurance companies... It's coming at it from the perspective that unless we know what's happening in these havens or whatever, it could have a destabilizing effect in terms of the financial markets, etc. So that's another initiative.

• 1915

I just want to put that on the record.

I know Mr. Loubier was talking about low tax and no tax, so those are a couple of initiatives. I'm not sure how they link, if they link at all, to the FTAA, but nonetheless...

I have a question, Mr. Carrière. How does the FTAA tie in with MERCOSUR, if at all? What is that linkage?

Second, given some of the strains in our bilateral relations with Brazil—and you mentioned that Brazil seems to be somewhat offside with the FTAA, if I was reading you correctly—how does that equate in terms of the Brazilian bilaterals with us, and MERCOSUR and the FTAA?

Mr. Claude Carrière: MERCOSUR is a partner in the FTAA negotiations and it is a customs union. They are trying to create a common market. It is formed of four countries: Brazil, Argentina, Uruguay, and Paraguay. They don't always agree, and in many cases Argentina and to a lesser extent Uruguay are perhaps slightly more enthusiastic about the FTAA than Brazil has shown itself to be over the past several years.

Brazil is not against the FTAA. It is trying to adapt to opening its economy unilaterally. It has done so since the early nineties following the Collor plan. It is a continental economy. It does not have a very strong dependence on international trade. It's been traditionally and historically a closed economy. So since the nineties they have done a lot of unilateral opening and their industrial structure is adapting slowly to that.

Brazil is trying to position itself. It isn't enthusiastic about accelerating the process, but it is becoming more used to the negotiation and is certainly looking at the negotiation more positively—that may be a bit strong—since the Bush administration arrived in Washington, because of the signals emanating from the Bush administration about the importance of the FTAA, of overall economic integration in the Americas, and its desire to show that it is interested in negotiating. It has signalled that it may be prepared to negotiate in anti-dumping, which it has traditionally resisted. It is signalling openness on agriculture, which again, it had been resisting.

So we think Brazil will be accepting these signals and modifying its position accordingly. Brazil is a very important player. It's quite influential in Latin America.

But there are other countries that do wish to see an FTAA—Argentina and Uruguay, as I mentioned—essentially as an incentive for Brazil to keep opening up its trade within MERCOSUR. It's an insurance policy.

Mr. Roy Cullen: Thank you.

I have one more question.

In the traditional north-south debate, when you start looking at free trade expanding into the southern hemisphere, the argument I have been exposed to in the forest products industry is that if we, for example, set an international standard in forestry it means that for countries like Brazil, or developing countries, given that they're in a different stage of evolution of development, if we apply that same standard it would be unfair. We might say, within the context of an FTAA, we are going to have these high environmental steps, and some of the southern hemisphere countries might say it's not fair because they're still developing.

So there is that kind of pull and tug in the sense that some of the northern countries would say they're under a lot of pressure; they're thinking that environmentally they should be moving that way, and they're not going to have a lot of tolerance, etc. It also comes up in labour standards.

I'm just wondering, conceptually, with the FTAA, how are you wrestling with that and how will it come out?

Mr. Claude Carrière: That's a very good question.

• 1920

On the whole question of labour and environment in particular, there is great suspicion on the part of developing countries that it is an attempt by developed countries to impose inappropriate standards on them to prevent them from developing. That's not true, of course. It is not our intention, but that is the perception.

The way we deal with it in part is again in the summit context. As you may be aware, Minister Anderson is chairing a meeting of his environmental counterparts in Montreal today and tomorrow. It's the first environmental ministers meeting in the hemisphere, and we hope it will be followed up in the future because there are regional or hemispheric issues that can be advanced.

One of our objectives is to begin a dialogue between environment ministers on how mutually reinforcing economic growth and good environmental management can be, and that we will achieve a positive linkage as opposed to a negative linkage that has existed for the past seven or eight years.

So this is more how we are dealing with it in general. There are narrow elements that we can deal with in a trade agreement that are related to trade along the lines of chapter 11, where governments agree not to reduce environmental standards in order to attract investment. We all agree we should not do this. So it's something that could be addressed in the FTAA in a positive manner, but we should focus environmental objectives in an environmental table under the authority of environmental ministers. Similarly on the labour side.

Mr. Roy Cullen: Thank you.

The Chair: Thank you, Mr. Cullen.

Mr. Nystrom.

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): I'd like to thank everybody for coming this evening and for your comments on the FTAA negotiations.

I have some questions similar to those Mr. Loubier was asking. There's a lot of concern under NAFTA, of course, about chapter 11. I think of the Metalclad case where an American waste disposal company wanted to develop a site in a Mexican community and the Mexican community didn't want it and they denied it. Metalclad, of course, sued Mexico and were awarded $17 million U.S. Now it's going to be appealed by Mexico to a tribunal in British Columbia.

Just today in the National Post, I think it was, I noticed an article where the Council of Canadians and CUPW are now taking the chapter 11 issue to the courts to see if it's constitutional; in other words, it's a constitutional challenge. That comes out of United Parcel in the United States, Mr. Chair, suing Canada Post, because Canada Post has Purolator as one of its subsidiaries and does its work through Purolator. They are suing Canada Post for $230 million, if I'm not mistaken. So there's a lot of concern about chapter 11.

I wonder if you can tell us what concern is being expressed in the negotiations on behalf of Canada about a chapter 11-like mechanism within the new FTAA. This is really a big issue in the country for a lot of people.

I'd like a bit more detail on our bargaining position as a government in terms of what you are saying on our behalf.

Mr. Claude Carrière: In the FTAA we have not made a proposal, and the reason we have not is that we are focusing on clarifying certain aspects of the investor-state mechanism of chapter 11. The new Mexican administration has signalled its willingness to begin work in that area, contrary to the previous administration, and we are hoping to be able to arrive at clarifying some of these elements this year.

Mr. Lorne Nystrom: When you say “clarifying”, what aspects need to be clarified from a public interest, Canadian point of view?

Mr. Claude Carrière: A number of elements, some procedural, some not. We have indicated that we wanted to clarify the question of indirect expropriation and the issue of transparency, where we wish to improve transparency of the process. For that, we need the agreement of our two partners to clarify the procedures to provide for those elements.

• 1925

Mr. Lorne Nystrom: When you say “clarify direct expropriation”, can you elaborate a bit on what you mean? Is there a particular position that you...

Mr. Claude Carrière: In our view, it is clear that the NAFTA standard does not change existing international standards in this area. There have been claims by legal counsel representing companies, investor-state clauses, that there is a change. We believe we can clarify that issue.

Mr. Lorne Nystrom: In your opinion, what is the appropriate balance between public and private sector interests in terms of chapter 11 and the investor-state provisions that go into agreements?

You have the private interest of a company like Metalclad, to use an example, or the case of United Parcel in the United States, which is now suing Canada Post. What is the appropriate balance between private interests, which are usually huge transnational corporations, and the public interest, which may be the Government of Canada, the Government of Saskatchewan, the Government of Mexico, or what have you? How do you balance those things? As negotiators, what kind of position do you take?

That's the question, Mr. Chair, for any of the four witnesses before us today.

Mr. Claude Carrière: Well, I could direct you to the written word. Quite recently, I think Minister Pettigrew provided a very detailed exposition of his view on that very subject in the National Post of March 23. I draw your attention to that. I certainly could not improve on that.

Mr. Lorne Nystrom: Does anybody else want to add to that? Mr. Seeto, Mr. Leblanc? No?

In terms of the farm sector from Saskatchewan, there's always concern in trade agreements about what's going to happen to the Canadian Wheat Board. We have four supply management marketing boards: the turkey board, the chicken board, the egg marketing agency, and the dairy commission. We have all kinds of different marketing boards across the country. Do you anticipate any change for them under the negotiations and talks about the FTAA?

Mr. Claude Carrière: We hope so. We hope to increase their market access in the Americas. We hope to agree that export subsidies are about the worst form of government intervention and that we should prohibit export subsidies.

We hope to work with them in Geneva to achieve that objective in the WTO agriculture negotiations. We would like to bring discipline to domestic supports in this area, particularly by the United States, but also Europe.

So, yes, we see some gains for Canadian agriculture in the FTAA.

Mr. Lorne Nystrom: What are some of the defensive issues you should be aware of? Some Americans often make the case that these—the Canadian Wheat Board, or particularly supply management marketing boards—are non-tariff barriers. Are other countries increasing pressure in those areas, in terms of the arguments they make?

Mr. Claude Carrière: I wouldn't say “increasing”, Mr. Nystrom. The U.S. view of the Canadian Wheat Board is quite well known: they've always indicated that they don't like the board. We've always asked them why exactly and they've never been able to explain if or how the board violates any international agreement. They make these statements, but have never been able to justify them.

So there may be some element of domestic politics in the United States in relation to the success our board has shown for our producers in the prairies.

The United States is also clearly looking for increased access in some of our supply-managed sectors. We have indicated clearly that we will continue to maintain the right of farmers to choose their marketing systems. We see no change in our position on that.

• 1930

Mr. Lorne Nystrom: Is there anything we should be aware of in terms of the education sector or health services? As you know from the controversy in Alberta a few months ago over Bill 11, there's increased concern that this might be the thin edge of the wedge in terms of opening a door for health care in this country—and not just private medicine or two-tier health care, but also foreign two-tier health care. That would have ramifications in terms of the NAFTA agreement and the FTAA.

I wonder if you can illuminate that a little bit for us.

Mr. Claude Carrière: Sure. You may be aware that some ten days ago, Minister Pettigrew made public the government's initial negotiating position in the GATS negotiation at the WTO. We have the same position in the FTAA—we try to be coherent from one forum to the next. We will not be negotiating our health or public education systems in the FTAA or the WTO. He was very clear on that.

Mr. Lorne Nystrom: What other public services does Canada want carved out of the agreements? You mentioned health, you mentioned education, and you're talking about maintaining the status quo of, or even making improvements to, the farm marketing boards, the Canadian Wheat Board, and so on. Are there any other sectors you see as a no-go zone, in order not to weaken their present position?

Mr. Claude Carrière: I think we specifically mentioned cultural industries and social services. But essentially we feel that the government should continue to have the right to regulate in its own areas, and we will continue to defend that right.

Mr. Lorne Nystrom: My last question will be on crown corporations—I guess because of the Canada Post issue now before the courts. I come from a province that has a lot of provincial crown corporations: SaskTel, SGI, SaskEnergy, SaskPower, and so on. But all provinces have provincial crown corporations. Is there any need to be concerned about their future, in terms of keeping the powers they have now?

Mr. Claude Carrière: I think the provinces will continue to have the right to decide how they want to run these corporations. There is nothing being negotiated that the government would accept that would have any impact on the right of Canadians to decide these things.

The Chair: Thank you very much, Mr. Nystrom.

We'll now hear from Ms. Barnes, followed by Mr. McCallum, and then we'll to Mr. Brison.

Mrs. Sue Barnes (London West, Lib.): Thank you, Mr. Chair. Thank you to the guests this evening. I've appreciated hearing your testimony.

Just to follow up, it was a nice overview to say that culture is excluded from negotiations and will be protected. We consider protecting our Canadian culture and Canadian content to be one of the very difficult areas. Let's take an example—our film industry. To another country it's an industry, a business, and a big business. So how do you go about defining in detail what really is a protected interest of Canadians?

Mr. Claude Carrière: In this case, I think we have clearly indicated that our position will be the same as the ones we've negotiated in previous free trade agreements. We will continue to exclude the cultural industry sector from the agreement, as we did in the NAFTA and the Canada-Chile Free Trade Agreement.

We've also signalled that we want not only a defensive agenda, but we also wish to promote the right of countries to have different cultures. We wish to do that, and the Heritage department, with the help of our department, in trying to define a new cultural instrument.

There is also a separate process on that issue, which Mrs. Copps is leading.

Mrs. Sue Barnes: That's why I'm asking, because there were issues you thought we were protected on. We had problems with split-run magazines; there were consequences. It's easy to give assurances, but when you get down to the details, there are problems. We have to be aware of that, because I think Canadian culture is something Canadians want to protect.

I'll move on to another area. You mentioned the side meetings with the environment ministers. I believe the labour ministers will be meeting at the same time. Would you also expand on that?

• 1935

Mr. Claude Carrière: Mrs. Bradshaw and her colleagues will be hosting the OAS labour ministers conference in Ottawa in October. Their objective will be to deepen cooperation on improving and enforcing labour standards in this hemisphere, and also to advance collaboration on implementing the 1998 ILO declaration on fundamental work rights.

We work with her people to advance that objective as well. I think this very week she has visited Chile, Argentina, and Brazil to prepare for the Ottawa meeting in October.

Mrs. Sue Barnes: Okay. I think the transparency issue is important to Canadians, and should be important to all the nations participating. In Canada, we all know what's being proposed: there are regular updates of information, and we're trying to get society still more involved. But how is that going in some of the other major player countries in this process?

Mr. Claude Carrière: In this area, I guess Canada and the United States share very similar views. But we're particularly pleased that Chile has also developed a very strong position on transparency and on the role of civil society. It has essentially accepted a partnership in the FTAA and in the emissary process. The Caribbean countries have also been very forward-looking in that area, and we're also pleased with that.

In the rest of the hemisphere, it varies. I think all the countries feel it is not only their right but their duty to consult with their own people—but some have better-evolved mechanisms for doing that than others. Some of them fear a collective process in which they feel they may be attacked by certain groups. In the United States, for example, there's particularly the AFL-CIO, and some other groups as well, that have traditionally been quite aggressive.

So we have to do deal with that fear and manage it. Progress is slow, but I think there has been some positive progress in transparency. Costa Rica, for example, has also put forward considerable information about its position. We feel that will happen in the Caribbean as well.

Mrs. Sue Barnes: Thank you very much. That's all, Mr. Chair.

The Chair: Thank you very much, Ms. Barnes. Mr. McCallum.

[Translation]

Mr. John McCallum (Markham, Lib.): Thank you. I am rather inclined to react to certain statements made by my colleagues on the other side but I don't think it's my role here.

As you say, I can ask you just one or maybe two questions.

[English]

I'm not sure to what extent you can answer my first question. I'm definitely in favour of the FTAA, but the countries involved are so different in size, wealth, and conditions that this seems to me a major challenge. Some of the issues raised already, for example, are chapter 11 and the labour and environmental issues.

Then there's the special question of Brazil, which in a way would rather be a big fish in a little regional pond than a smaller fish in a huge area. And tariff revenues are extremely important budget resources for some of these countries, so if you have free trade, they lose a huge chunk of their revenues.

Putting all that together, it strikes me as quite daunting.

One way of asking the question would be: given all those problems, what are the odds of getting an agreement between now and 2005? Another way of asking the question might be: which issues do you think are the crucial ones, the deal-breaking ones, and how might we overcome them?

• 1940

Mr. Claude Carrière: I'll answer the last question, because I'm not a betting man—I've been to the casino once, and I lost my $20.

I think the most daunting challenge is with the smaller economies, in particular those economies that have a very large dependence on tariff revenues. This is a challenge they face regardless of whether it's in the context of the FTAA, in the context of the WTO, in the context of further integration regionally or sub-regionally, or whether it's with the EU in the context of the new agreements post-Lomé convention.

Those countries have to decide they will institute a new mechanism to collect the necessary revenues to finance the social programs and other programs. We have been indicating to those countries, bilaterally through our official development assistance or collectively through the Inter-American Development Bank or other institutions, that we will help them put these systems in place if they decide to do that. They haven't yet come to that decision. We are prepared to work with them to help them address these challenges and to give them the time to put in place these new policies to adapt—quite a long time, as a matter of fact. They have to make those decisions.

That's probably the biggest challenge, along with the fear they have of dealing with big countries like us and the United States. Our job is to convince them they will be the ones to benefit the most. They can get perhaps a small slice, but a slice of a very big market, as opposed to the very small markets they have. It's scary for them.

Mr. John McCallum: I suppose it's not an all or nothing deal. If we fail to convince some of the smaller countries, we could still go ahead with agreements with some of the larger ones. Is that not right?

Mr. Claude Carrière: It's a bit premature to say at this point.

We prefer to indicate to them that we will work with them, we will address their concerns, and we will help them. At this point, it's premature to say how we will do so and how many countries would sign on. We would hope all of them. We still have a few years to go.

Mr. John McCallum: I have one last point.

It seems to me, even though the numbers are very small, the population is huge. You've been talking about that. If we take a longer-term point of view, given the high population growth and the likelihood of catch-up, these places will become larger and larger as they share the total.

It strikes me one shouldn't just dismiss it as trivial because of the numbers. This is supposed to be a longer-term venture.

Mr. Claude Carrière: Yes. The opportunities for us to participate from the ground up in the development of the continent are enormous. South of the Rio Grande, there are 500 million people, half of whom are 18 to 21 years of age. Soon they will be of prime productive age. We do have an opportunity to influence the development of their economies and their society.

Yes, from a hemispheric standpoint, it's enormous.

The Chair: Thank you, Mr. McCallum.

Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC): Thank you, Mr. Chairman. Thank you to all of you for spending some time with us tonight.

My first question is with regard to what processes you use to discuss some of these issues with sub-national, provincial, and even municipal governments. Clearly, trade agreements have an impact on these sub-national governments.

I would be interested in what structures are in place in these sorts of discussions to facilitate the discussions.

Mr. Claude Carrière: We have quite extensive mechanisms of consultation with the provinces. We have regular, at least annual, meetings between ministers responsible for trade in the provinces and the Minister for International Trade. A meeting held recently in early February was the latest one. We also have a committee of trade representatives that meets every three months, sometimes in Ottawa or sometimes in a provincial capital. For example, last fall we met in Halifax.

• 1945

We also have a conference call almost daily with a variety of provinces, sometimes with all of them and sometimes only with the ones who are interested in a particular issue. We have atelier seminars with them on themes or subject matters.

We have a separate process to consult between the Department of Agriculture and agriculture officials in the provinces in which trade people also participate. Sometimes we have joint meetings.

Provinces have access to information. We have a means to provide protected information to them. They participate in federal, provincial, and industry teams in dispute-settlement proceedings. For example, in the case of dairy, there is a federal-provincial-industry team developing the defence against the United States and the New Zealand challenge of our dairy program. There are very extensive consultative mechanisms.

Mr. Scott Brison: There has been some effort to demystify trade agreements and provide a little more information, which is probably helpful.

Have you looked at the Australian model for treaty negotiation in terms of domestic engagement, not just with sub-national governments, but also with the NGOs within the country now? I'm trying to remember what year it was introduced. Alexander Downer was the Australian Minister for Foreign Affairs at the time. It was a few years ago. I believe it has been quite successful and in Australia is considered quite positively. Have you looked at that? Are you aware of it?

Mr. Claude Carrière: I'm not personally familiar with that model. Perhaps the people in the department that administers our consultative process are. I personally am not familiar with that.

Mr. Scott Brison: In terms of the questions relative to chapter 11 and investor-state issues, in your defence of those provisions, you don't speak of national treatment and the benefits of national treatment and reciprocal national treatment for Canadian companies.

It's only reasonable to expect that if we are a Canadian company expecting our companies doing business in other countries are going to be treated fairly and will not be discriminated against based on the fact that they are Canadian companies, we would have to recognize and provide the same level of treatment to those foreign companies doing business on our shores. There's a balance that has to be addressed relative to the power of companies being able to sue governments and the principles of national treatment.

Why don't you defend chapter 11 more vigorously, based on those principles of national treatment and the importance of national treatment in reasonable trading relationships?

Mr. Claude Carrière: Perhaps we haven't done as good a job as we could have. On March 23, the minister most recently pointed that out.

We do have considerable Canadian foreign investment outside. In fact I think we're now becoming a net foreign investor. The due process of law in the host countries is a very important thing to ensure our investors have appropriate treatment in those countries.

• 1950

Mr. Scott Brison: Now, in some of the cases in Canada where foreign companies were suing the Canadian government, the legislation was very poorly designed. In fact, legislation designed to prevent something from happening—for instance, the MMT legislation—used interprovincial trade barriers in a way that was kind of circuitous. I guess part of the problem is that legislation designed in any country needs to be more rigorously designed to stand up to the challenges of chapter 11 or the challenges of national treatment and that type of thing.

To what extent are you aware of policies in Canada to improve the soundness, if you will, of our legislation, both federally and provincially, to try to ensure that our legislation is designed to stand up to some of these challenges and rigours a little more effectively? Because that, to me, would make more sense than always jettisoning the notion of national treatment. We should be trying to design legislation domestically a little better.

Are you aware of any efforts to do that? As well, what do you recommend?

Mr. Claude Carrière: As a department that's part of the governmental apparatus, we participate in interdepartmental discussions and provide opinions and advice on the implications of various initiatives. We also make ourselves available to other departments, and to provincial governments who so wish, to have discussions about plans or ideas they may have.

Mr. Scott Brison: So there is a mechanism in place such that if any department, provincially or federally, is about to design a piece of legislation, and wants to ensure that it will stand up to chapter 11-type provisions, they can contact you and you will assist them in designing that legislation in such a way that it is likely to be tenable?

Mr. Claude Carrière: I don't know if you're aware, but the Department of Justice has lawyers who are posted, in a sense, to various government departments, essentially as a means to have an overall view of what is happening on—

Mr. Scott Brison: But wouldn't it make sense to have the trade department involved?

Mr. Claude Carrière: Oh, we're part of that process.

Mr. Scott Brison: But there's also the provincial side. Again, it's important that there be a mechanism through which provincial governments can determine whether or not some of the legislative vehicles that are introduced are likely to withstand the test of national treatment or the investor-state provisions in chapter 11. It just would make a lot of sense if there was a better understanding of that.

I don't think legislation even... or I'm not aware, I guess, or I wasn't aware, of a better methodology internally within government, federally and provincially, to help governments design better legislation that may actually be able to withstand these challenges as opposed to simply putting our emphasis on the wrong syllable and attacking the principle of national treatment when in fact the difficulty is sloppy legislation.

Mr. Claude Carrière: We try to ensure that maximum information flows so that various players are aware of both developments and implications in terms of particular activities.

Mr. Scott Brison: Thank you very much.

The Chair: Thank you, Mr. Brison.

Mr. Peschisolido.

Mr. Joe Peschisolido (Richmond, CA): I first want to thank you all, particularly Mr. Carrière, for appearing in front of the committee.

I'd like to follow up on a question that my colleague, Mr. Cullen, asked with regard to our negotiating with Brazil and MERCOSUR. As you mentioned, MERCOSUR is a customs union, so they have a common external tariff. We don't, and we're negotiating a trade agreement.

• 1955

What happens if Argentina wants something and Brazil doesn't? Are we negotiating with MERCOSUR? Will that take precedence over it?

Mr. Claude Carrière: Yes, it would. Argentina, Brazil, and MERCOSUR would have to agree on the external position they would take. Sometimes their negotiations are harder inside than outside.

Mr. Joe Peschisolido: If I were negotiating for Brazil, Argentina, or MERCOSUR, I'd be very uncomfortable that there's a common external tariff for us, but not for the Americans or the Canadians. We might be able to strike a deal with another trade group or country that would then dilute the access we would have.

That being said, is that a concern they would have?

The second question is, what is the end game? I believe Mr. Cullen or one of my other colleagues asked that. Are we going for a trade deal only, or is this going to head up to a customs union?

Mr. Claude Carrière: The objective is a free trade agreement, the removal of barriers to commerce among the members of the agreement. We would not accept obligations on our external relations with third countries, so it would be similar to the NAFTA, where we remove barriers among ourselves but we retain our independence vis-à-vis third countries. That is the objective—a second-generation free trade agreement.

We'll need to take into account the level of development of the various players. There are some who are small, who are less developed, so the free trade agreement will need to take that into account. It is a major challenge, as I agreed on with Mr. McCallum earlier, but it's quite an exciting challenge to take on.

Mr. Joe Peschisolido: I would agree with that. You mentioned earlier that the Canadian position is that we'd be willing to give quite a bit of time to these other countries to implement a trade deal. Do I take that to mean there's going to be a staggering or transition time for when they would have to deal with their tariffs, vis-à-vis ourselves?

Mr. Claude Carrière: Yes, but we would do that on a country-by-country and product-by-product basis, as a result of a negotiating process as opposed to an ex ante agreement.

Not in all cases would all small economies need the same type of concession to take into account their particular needs. What we're prepared to do is to tailor any delay or transitional clauses to the particular needs of a particular country, which may vary from country to country.

Mr. Joe Peschisolido: That being said, is it our position that we want to open up the greatest number of areas—communications, agriculture...

Mr. Claude Carrière: Yes, we're seeking to increase opportunities for Canadians in the rest of the Americas as quickly as possible, taking into account the particular circumstances of our partners.

Mr. Joe Peschisolido: Speaking of our partners, I believe Mr. Cullen mentioned earlier the slowness of Brazil. Basically, if Brazil doesn't want to participate, it's not going to happen. If the American administration doesn't receive fast-track negotiations, or the ability to negotiate fast track, this agreement isn't going to happen.

You talk about domestic politics in the United States. I believe your counterpart in the United States was yesterday, and is today, shuttling back and forth chatting with a lot of congressmen and senators.

Given the parochial interests of very powerful senators, do you have concerns that what the Americans were not able to obtain in our free trade agreement, be it on softwood lumber, culture, or other issues, in the side deals or in the understandings that the administration will get from the senators in order to get fast track...

• 2000

Mr. Claude Carrière: We always monitor very carefully what goes on in Washington, but their interest in this case, in the context of the FTAA, is not northward. It is southward.

So they wish to demonstrate to Brazil, in particular before the visit to Washington of President Cardoso—I think he'll be in Washington tomorrow and Friday—that there is political commitment to negotiation of the issues of interest to Brazil and other countries in South America, and that this commitment exists not only in the administration but also in Congress.

I think what the administration is trying to engineer is a demonstration of that commitment and to regain some of the leadership in the hemisphere that they've lost in the past several years. If that happens, then countries that have been expressing doubts about their capacity to negotiate will no longer be able to hide behind that, and so I'm kind of hopeful that they will be able to show that and to show Brazil in particular that they do mean to negotiate in the hemisphere this year and over the next three or four years.

Mr. Joe Peschisolido: Also, Mr. Carrière, earlier on you mentioned a democracy clause. What's the nature of that democracy clause, and how does it impact on the actual legal implementation of a trade agreement?

Mr. Claude Carrière: The democracy clause is something that is being dealt with in the summit itself. It is aimed at being a demonstration by leaders and a strong statement that democracy is a prerequisite for participation in hemispheric activities such as the FTAA, but also the ministers of finance meeting next week and the ministers of environment meeting this week in Montreal.

Mr. Joe Peschisolido: So it's more of a statement of principles, a kind of feel-good—

Mr. Claude Carrière: But very strong, to reinforce democracy, to reinforce what has happened in Peru, to also send a strong signal that the hemisphere is a democratic forum, and you need those credentials to be at the table.

Mr. Joe Peschisolido: Okay. There are those, whom I don't agree with, who believe that expanding trade hurts civil society, particularly on the democratic side of it.

In looking at a country such as Chile, which has a free trade agreement with ourselves and Mexico, and I believe a membership in MERCOSUR as well, it seems to me that in the past several years Chile has become quite democratic in all the senses of the word. Could you comment a little bit more on the impact that you believe a trade agreement will have on countries such as Colombia, which I'm concerned about, and Venezuela in particular? You mentioned Peru earlier on as well.

Mr. Claude Carrière: There were, what, 19 military dictatorships in the Americas 25 years ago, and there aren't any today. There has been a very significant change, particularly in the past 10 to 12 years in the Americas, which has been at least simultaneous with a desire to change the economic model, to open up the economy and the society to outside influences.

We feel that economic openness leads to and helps reinforce openness to other influences and reinforces democratic principles. You've mentioned Chile. Mexico is another very good example, in which NAFTA has reinforced forces that were there but strengthened those forces, and now we have for the first time in 70-some years a new party in power in Mexico.

• 2005

So we feel the free trade agreement will contribute to reinforcing those forces for democracy, will improve the social situation of people in the Americas generally, and will help governments release resources that are necessary to advance those social objectives.

Mr. Joe Peschisolido: Mr. Chairman, I have one final question, if I may.

You mentioned earlier on infrastructure funding or investment that was part of the negotiations. Does that imply that Canada would be willing, above and beyond the moneys we already provide to the regional bank, to provide funds for a general pool of moneys to be distributed for road building and other things like that? Or is it more of the private sector bringing in investment to those areas?

Mr. Claude Carrière: I think it's more the private sector. I think transport ministers have met to discuss infrastructure needs generally in the hemisphere, so it's more the coordination of plans and activities in those areas rather than commitments of outlay of Canadian dollars.

Mr. Joe Peschisolido: Thank you, Mr. Carrière.

The Chair: Thank you very much, Mr. Peschisolido.

On behalf of the committee, I want to express to you our appreciation for giving us an overview and laying out the scope and potential benefits and challenges you face in the FTAA.

I understand that at the Quebec City summit you'll have basically three interconnected baskets—strengthening democracy, creating prosperity, and realizing human potential. When we're referring to creating prosperity, of course, we're talking about economic integration.

I'm just wondering, going into this major meeting, if you were to prioritize those three, which way would you do it?

Mr. Claude Carrière: Prioritize?

The Chair: Yes.

Mr. Claude Carrière: In the summit, the top priority is to reinforce democracy.

The Chair: It will be strengthening democracy?

Mr. Claude Carrière: Yes. That is the prime objective. It's too bad that Marc Lortie, the Prime Minister's Sherpa, isn't here for the meeting. At the summit itself, the formal opening will be the Friday evening, in which a number of leaders will speak, and then the meeting proper begins on Saturday morning. All Saturday morning is devoted to democracy, and that will be televised live, which is an innovation. It's never happened before, and it's designed to show the importance of strengthening democracy in the hemisphere. That is the top priority of leaders.

In the afternoon is a retreat by leaders, where there will be leaders plus perhaps one note-taker, I believe.

The next day, on Sunday morning, will be devoted to the other two themes: creating prosperity and realizing human potential.

So the maximum time will be focused on the democracy theme, which is the priority for the summit.

The Chair: It's interesting that you say it, but I think, just judging from what the reaction of public opinion has been, that everybody thinks this is only about economic integration and economic prosperity. But in fact now you're saying that the centrepiece is indeed strengthening democracy because you feel that's a necessary prerequisite for any kind of economic integration to take place. Is that correct?

Mr. Claude Carrière: Yes.

Mr. Ken Epp: But Cuba isn't in the equation.

Mr. Claude Carrière: Correct.

Mr. Ken Epp: I made my point.

The Chair: Mr. Epp feels he's made a point.

I want to, once again, express to you our sincerest gratitude for your presentation. It's been a great round table for us and will serve us well. Thank you. Good luck.

Mr. Claude Carrière: Thank you, Mr. Chairman, members.

The Chair: The meeting is adjourned.