SINT Committee Meeting

37th PARLIAMENT, 1st SESSION

Sub-Committee on International Trade, Trade Disputes and Investment of the Standing Committee on Foreign Affairs and International Trade

COMMITTEE EVIDENCE

CONTENTS

Thursday, January 31, 2002

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1540

The Chair (Mr. Mac Harb (Ottawa Centre, Lib.))

Mr. Bruce Campbell (Executive Director, Canadian Centre for Policy Alternatives)

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1545

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1550

The Chair

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1555

Mr. Bill Dymond (Executive Director, Centre for Trade Policy and Law)

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1600

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1605

The Chair

Mr. William Miner (Senior Associate, Centre for Trade Policy and Law, Carleton University)

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1610

The Chair

Mr. Peter Clark (President, Grey, Clark, Shih and Associates Limited)

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1615

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1620

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1625

The Chair

Mr. Bergeron

The Chair

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1630

Mr. Bergeron

The Chair

Mr. Rick Casson (Lethbridge, Canadian Alliance)

Mr. Bill Dymond

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1635

Mr. Bruce Campbell

The Chair

Mr. Bruce Campbell

The Chair

Mr. Rick Casson

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1640

Mr. Peter Clark

Mr. Rick Casson

Mr. Peter Clark

The Chair

Mr. Bergeron

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1645

Mr. Peter Clark

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1650

Mr. Bergeron

Mr. William Miner

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1655

»

1700

The Chair

Mr. Bill Dymond

The Chair

Mr. Peter Clark

The Chair

Mr. Pat O'Brien (London--Fanshawe, Lib.)

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1705

The Chair

Mr. Bill Dymond

»

1710

Mr. Pat O'Brien

The Chair

Mr. Mark Eyking (Sydney--Victoria, Lib.)

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1715

Mr. Peter Clark

Mr. Bill Dymond

Mr. Peter Clark

Mr. Bill Dymond

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1720

The Chair

Mr. Mark Eyking

Mr. Bill Dymond

»

1725

Mr. Mark Eyking

Mr. Peter Clark

Mr. Mark Eyking

Mr. Peter Clark

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1730

The Chair

Mr. Bergeron

Mr. Mark Eyking

The Chair

Mr. Bergeron

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1735

The Chair

Mr. Bruce Campbell

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1740

The Chair

Mr. Bill Dymond

The Chair

Mr. Bergeron

»

1745

Mr. Bill Dymond

The Chair

Mr. Peter Clark

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1750

The Chair

Mr. Bruce Campbell

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1755

The Chair

Mr. Pat O'Brien

Mr. Bruce Campbell

Mr. Pat O'Brien

The Chair

Mr. O'Brien

The Chair

Mr. Bergeron

The Chair

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CANADA

Sub-Committee on International Trade, Trade Disputes and Investment of the Standing Committee on Foreign Affairs and International Trade

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NUMBER 018

l

1st SESSION

l

37th PARLIAMENT

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COMMITTEE EVIDENCE

Thursday, January 31, 2002

[Recorded by Electronic Apparatus]

¹  (1540)  

[English]

    The Chair (Mr. Mac Harb (Ottawa Centre, Lib.)): Good afternoon, everyone. I will call this committee meeting to order.

    Pursuant to Standing Order 108(2), the committee is looking into issues affecting the WTO. We are doing an assessment of the WTO negotiating issues from a Canadian perspective.

    We have a very distinguished group of citizens expert in the field appearing before the committee today, starting with the Canadian Centre for Policy Alternatives, Mr. Bruce Campbell, executive director. From the Centre for Trade Policy and Law we have Mr. Bill Dymond, executive director. From the Centre for Trade Policy and Law of Carleton University we have Mr. William Miner, senior associate. And we have Mr. Peter Clark, president of Grey, Clark, Shih and Associates Limited.

    We will start the discussion with brief opening remarks, and then we'll open it up for an exchange between my colleagues and yourselves, and between yourselves. If, for whatever reason, Mr. Clark says something Mr. Dymond feels differently about, please jump in. I just want you to know that because the proceedings are taped as well as broadcast on a radio frequency, the minutes of this meeting will be very closely watched by our administrators, as well as my colleagues. So even though we only have three members of the committee here, lots of other people will be looking over what you have to tell us.

    We are interested in your words of wisdom, we are interested in tangible and specific things you think Canada should or should not do, we are interested in your thoughts, we are interested in hearing everything you have to say about the issue.

    While we need one opposition member in order to duly conduct our process in a fair and equitable manner, I'm going to make the executive decision of proceeding.

    We'll start with Mr. Campbell.

    Mr. Bruce Campbell (Executive Director, Canadian Centre for Policy Alternatives): Thank you very much, Mr. Chair. Thank you for inviting me here today.

    I should say at the outset that I'm not the expert, but the person who should be here in my place, the senior trade researcher, Scott Sinclair, is not available, he's out of the country. So I'm his stand-in. But hopefully, I can give you a pretty good overview of some of our concerns, some of the work we're doing on trade issues. I gather in the first part of the session it's WTO, and then in the second part it's NAFTA-FTAA.

    Most of our work is conducted in something we coordinate and house called the Trade and Investment Research Group. That brings together researchers in the NGO community across a broad spectrum of civil society. It includes participants from a number of policy research organizations. It also includes academics. It's about 30 in all, give or take. It's probably the main centre, certainly one of the main centres, of civil society critical research and analysis of trade and investment agreements. I'll leave with the committee a list of recent and forthcoming publications, so that you can get a sense of what we have done and what is planned in the coming months.

    I'm going to focus my opening remarks today on the GATS, the services agreement. It's there that we have major concerns, both as it exists currently and with reference to the negotiating round that began last year and is scheduled to wrap up now with the round itself at the beginning of 2005.

    Our main concern is the threat to public services. The GATS concerns services, services in general--and of course, most of an economy is services--so it's an incredibly important area. But within that broad realm, it's the public services that have taken most of our energy and interest. We're talking about the whole gamut, the threat to education, health, a range of social services, water management, and so on.

    Another area within that ambit would be the threat to domestic regulation in the public interest. It's an area we think deserves very close scrutiny. The agreement certainly covers domestic regulations. There are negotiations currently under way.

    The democracy implications of the GATS are a concern, through the entrenchment of privatization and commercialization. Once they're set, once they're entrenched, there is no going back, they can't be undone. That's the nature of the GATS, the constant one-way pressure to privatize and commercialize. So future decisions can't effectively be made, or if they're made, they're very costly. There are major disincentives against reversing the process in the case of a service that's privatized and turns out to be a fiasco.

    The other aspect of the democracy angle is the fact that decisions are made in far-away panels, in secret hearings. These panels can actually change public policy, so that's a concern to us.

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    There is a so-called exemption for public services. We hear a lot about that exemption, and there are great claims made for it, but in our view, it's got major problems, and it should be examined very closely. Your committee, as it conducts its proceedings over the coming year, may want to focus on that exemption in the exercise of government authority, because if it's interpreted narrowly, it doesn't, in our view, include very many public services. No one has actually said what would be included in any definitive way. There has been some statement that perhaps the Bank of Canada might be included under that exemption, but apart from that, most of our major public services are developed in a mixed environment between private and public finance or delivery, often in competition with private concerns. So the exemption is one area where we think there is a major weakness. There are ways that it could be remedied. You might want to look at some of those.

    We also think there is a need for a comprehensive review of Canada's regulatory framework and how it might be affected coming out of the negotiations on domestic regulations that are under way. As you know, there's a period of request and offer in the coming year; I think the deadline for request is in June and the deadline for initial offers is in March 2003. We don't think the government should make commitments in the area of education, health care, social services, waters, and a range of vital public services. It should take every opportunity to shield these services from GATS commitments.

    On health care, we think there's a need for a comprehensive assessment of the health impacts of our existing GATS commitments. One of our authors, in a study that was released about seven or eight months ago, made the finding that negotiators back in 1994 had included health insurance in the commitments. So there's a real problem there. The defence of that we've seen so far is not very convincing. That's another area that you might want to focus the study of the committee on. I don't know if that falls within your mandate or is the mandate of the health committee, but it's certainly an incredibly important issue for Canadians, and the government should take all measures to shield our health care system from GATS rules.

    There's been some lack of connection in the government's position with respect to exported services, including health services, because it's a big booster of commercialization, for other countries to open their markets to our health care exporters. On the other hand, it says the domestic health care system will not be open to foreign health care providers. There are some interesting contradictions.

    I think I'll stop there.

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    The Chair: Thank you very much.

    As you have indicated, Mr. Campbell, we are looking at both issues, the FTAA and the WTO. Maybe you could all make your comments on both issues, so we don't have to wait until 5 o'clock or 5:30 to embark on that, since we have the same witnesses speaking on both issues.

    With this, we'll move on to Mr. Bill Dymond.

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    Mr. Bill Dymond (Executive Director, Centre for Trade Policy and Law): Thank you, Chairman. I thank the committee for the opportunity to present some observations on Doha, and I will cover the FTAA at the same time, as you suggest. I did have the privilege of attending the Doha ministerial meeting, together with you and several other honourable members of Parliament and my old friend Peter Clark.

    I'd like to concentrate on two things, first, the significant differences between this round and previous rounds, and second, the implications for Canada. I think there are four significant differences that will bear upon Canadian policy and the way Canada manages this process in the years ahead.

    First, if you compare the launch of this round with what happened before, there is a stark contrast. The previous comprehensive rounds in the GATT system, the multilateral system, the Kennedy round in the sixties, the Tokyo round in the seventies, the Uruguay round in the eighties and nineties, were launched with comprehensive ministerial declarations that said what the negotiating agenda was, attempting to determine the terms and limits of what was negotiated. In Doha you really see a mix. You've seen some elements of negotiation, some elements of a continuation of a work program with no commitment, some elements where a negotiation is to occur after the next round of the ministerial, some elements where there is a mix. For example, trade and the environment has a part on which negotiations are to occur and another part on which studies are to be continued. So we don't have a comprehensive launch here. We have an accelerated work program with some elements of negotiation, including two, agriculture and services, that were, in effect, formally almost two years ago. That's the first significant difference.

    The second difference is that in those previous rounds we were talking about trade liberalization. Much of the way we talk about the WTO these days is in terms of trade liberalization. Those who are opposed to it, for example, my friend Mr. Campbell, and those who are in favour of it frequently use the language of trade liberalization, breaking down barriers to international trade. That's not what we're doing any more. For Canada the trade liberalization agenda is basically completed, apart from a few areas, including some aspects of agriculture. But with tariffs among industrialized countries now in the range of 2% to 5%, they're basically at a nuisance level. There are a few peaks out there that will be useful to get at. To proceed on this round with the same notion we had in the past, that our task is to break down barriers to world trade, I think is an error, and it's an error that would lead us down unhelpful policy tracks.

    What are we about? We're about trade regulation. We're about defining the interface between the private economy and national and global governance. That, essentially, is what the services agreement is all about, essentially what intellectual property is all about, essentially what an investment agreement will be all about. So it would be wise if we began to think, instead of about trade liberalization, particularly when we reflect upon the implications for Canada, about trade regulation and the consequences for domestic governance and our own ambitions in this country for more coherent and integrated systems of global governance.

    The third difference is development. Previous rounds--I'm thinking particularly of the Kennedy and Uruguay rounds--had a number of references in their launch documents to development: we are going to assist the development of developing countries through this round. They were more ritualistic than real. Why is that? Because in the previous rounds developing countries were not, in fact, very interested. They were operating economies based on an old model of import substitution and operating on command and control principles. So they weren't very interested, and they stood to gain from classic trade liberalization, by virtue of the rule of most favoured nation. Anything Canada and Europe would agree to in tariff or trade barrier reduction would flow automatically to developing countries.

    Now it is clear that we are going to be expected to stand and deliver. Developing countries have major issues on the agenda. Most of those issues fall within what I call the old agenda, textiles, clothing, agriculture, very sensitive subjects, very sensitive sectors in this country and in other countries, and we will no longer be able to get away with a result that basically ignores the interests of developing countries. They essentially have the blocking power to stop progress, and there is not sufficient consensus among developed countries to proceed without them.

    The fourth aspect--and here I must declare a conflict--is the emphasis on technical assistance. That is one of the things we do in the centre, and I wanted to make that clear to the committee. There are no fewer than 10 paragraphs in the ministerial declaration of 53 paragraphs that deal with technical assistance. Here again--and this is certainly the view of the department, as I understand it--is an area where Canada and other developed countries will be expected to stand and deliver. There were commitments made in the Uruguay round conclusion at Marrakesh, and they were not delivered upon. So much more will have to be done. The good news is that this doesn't cost very much compared to other areas of technical or development assistance. It's really not very expensive to provide this, but an awful lot of money could be wasted unless there is a coherent plan of what we are about.

    So technical assistance and development form together a large accountability issue, and two years from now, when perhaps this committee comes to review the results of the fifth ministerial meeting, the performance of Canada and other countries on these two areas will play critically in the result.

    A second point to talk about concerns the implications for Canada. You will recall the emphasis I put on rule-making, on trade regulation. This is not new from Canada. This falls fully within the tradition of Pearsonian diplomacy that we have pursued since the end of the war, when we emerged from being a hesitant, isolationist country into a role where we would assert leadership. There's hardly a country in the world that has not been confronted with a Canadian proposal for a rule on something. We are, in fact, the great Rotarians of the world. We join everything. We propose rules on everything. In the address Minister Manley made to the General Assembly in November he lists a long list of areas where new rules need to be made. To make new rules, you need ideas, and an important idea is the readiness of Canada, which we have always shown, to exchange our sovereignty, to exchange our right to domestic government in return for a larger result, controls and limitations on the behaviour of others. Doha falls fully within that tradition.

    The second implication for Canada is that a new round gives us the opportunity to achieve gains that are not available through bilateral relationships, for example, with the United States or regionally. Those fall particularly in agriculture, and I'll defer to my friend Bill Miner on that. Another area is dumping and trade remedy law. It may be possible, dealing bilaterally or trilaterally with the United States, to make progress there. I personally doubt it. I think the greater opportunity for progress, to achieve greater limits on abitrary and capricious U.S. action, lies in working with others and building coalitions. Those coalitions are really only available multilaterally in the WTO. Investment policy and competition policy, where the issue is managing a global economy through a nationally based competition system, is another area that seems to me to be ripe for multilateral negotiation.

    The third area of implication for Canada--and I've touched on this already--is the development challenge. There'll be hard decisions in sensitive sectors where there's a lot of employment, hard questions of adjustment. Developing countries have a comparative advantage in a number of areas. One of them is the availability of low-cost labour producing items of standard technology. They will look for us to get out of those sectors by reducing our trade barriers and to make room for them. This will be a very significant development challenge.

    Finally, we have to see Doha after Seattle. Seattle was a failure. Seattle brought the multilateral trade system into a state of paralysis. We have now restored a negotiating momentum, a negotiating atmosphere for treating our problems. We have opened the door, I think, in Doha for the United States to take the final steps and obtain fast-track negotiating authority, which is useful not only in Doha, but for some of our regional and bilateral objectives. So we have resumed forward movement. Nothing but good can result, but this is a long-term effort. The Doha declaration says we will conclude in 2005. If anybody believes that, I can sell them a bridge at a very good price. This is going to take a long time.

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    I come briefly to the FTAA. The FTAA is interesting to Canada from a number of perspectives. First, no one can doubt the commitment this government has shown to FTAA as part of the Summit of the Americas. The political commitment of the Prime Minister, the commitment of departments of government to the process, the ancillary negotiations with Costa Rica and countries of Central America leave no doubt as to where the government stands.

    What does that mean? It means, I think, that we are beginning to resolve an identity crisis we have in Canada. We are beginning to accept that we are, in fact, a nation of the Americas, with rights and responsibilities in the Americas, responsibilities that, until not so many years ago, we denied. We denied them, in part, because we sought fruitlessly to acquire an Atlantic identity, a Pacific identity, an Arctic identity. I think we have resolved now what we are. So there are major geopolitical implications in the whole summit process, of which the centrepiece has to be the FTAA.

    What is the FTAA? The FTAA is, in part, an educational process. You will recall that only five countries of the Americas, including Canada and the United States, were founding members of the multilateral trade system. Now all of them are in, but it is only recently that these countries have accepted that the multilateral trade rules bear on domestic policies. For a long time they tried to keep their markets closed. They pursued policies of import substitution. They used the variety of escape measures that are available in the multilateral trade rules, in fact, so as not to have any obligations at all. Mexico, which is now our prime partner in the region, only joined the multilateral trade system in 1986.

    If the FTAA makes sense, it has to be WTO-plus. If it is just the WTO, there is no point in proceeding, because there will be no advantages to any party in those negotiations from having a regional trade agreement that mimics what you find in the WTO. Many of the countries of the region already have enormous difficulties complying with their WTO obligations coming from the Uruguay round. The Doha poses a further challenge. I think it is reasonable to question whether, in fact, we will arrive at an agreement, but that is less important than the process of engaging these countries in the multilateral trade system, in the education and training we can provide, the examples we can provide of the benefits that flow from adherence to a system of rules.

    It deserves our support. We should have no illusions as to whether there is a final result in the matter of an agreement out there, but we should look behind the formality of the procedures and at the real benefits.

    Thank you, Chairman.

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    The Chair: Thank you.

    Mr. Miner.

    Mr. William Miner (Senior Associate, Centre for Trade Policy and Law, Carleton University): Thank you, Mr. Chairman. I'd like to thank you for asking me to attend.

    I'm pleased to assist the subcommittee in looking at both the Free Trade Agreement of the Americas and the WTO. My comments will focus on agriculture and food aspects of both these negotiations, since I see them as quite complementary, and Canadian interests can be advanced, in my view, more effectively if we develop our strategies for negotiations on both a multilateral and a regional basis.

    Mr. Dymond mentioned that the focus in the WTO is perhaps less on liberalization and more on adjusting policies. In agriculture--and he noted this--we have some exceptions. The last round in the WTO began the process, I think, of liberalizing the agriculture and food sector in respect of trade, but acknowledged that it was a small step forward and there was a need to continue. In fact, there was in the agreement a commitment to do so, which, of course, emphasizes that there's unfinished business in the agriculture and food sector.

    It's now widely recognized that the Canadian agriculture and food sector must compete in the continental market setting if it's to sustain itself and expand. This is already the reality for grains and oilseeds, for red meats, for most fruits and vegetables, and for most processed food products also. It is less so for poultry and dairy products, although even these sectors are gradually adjusting towards a continental basis of operation. Sugar, I think, is the outstanding example of an exception. This, of course, is due to the U.S. policies for that product.

    As national markets become more closely linked and a greater share of agricultural trade is in higher-value food components and processed products, the benefits of a free trade area with compatible regulations and harmonized standards will become increasingly apparent, I think, to all countries in the western hemisphere. Indeed, it will open some opportunities, perhaps modest in trade terms, in an FTAA for Canada, but significant nonetheless, especially so as this negotiation can influence the way the WTO discussions proceed. But a fully operational FTAA is unlikely to emerge, in my view, until the issues of subsidies and contingency trade protection, such as anti-dumping and countervail laws, are subject to stronger international discipline.

    Canadian farmers face a serious problem, as the members of the committee are undoubtedly aware, with the magnitude of U.S. crop subsidies, on the one hand, and the persistent threats by the U.S. and actions against commodity imports. Along with other CANZ Group countries, Canada is not only pursuing the elimination of export subsidies and the reduction or elimination of trade-distorting support in various forms in the WTO, they're also seeking constraints on the overall level of farm support. This reflects the fact, I think, that subsidization into the sector, to some degree at least, influences the level of production and, as a result, trade. Indeed, Brazil is objecting to negotiations in either venue until the U.S. is willing to negotiate not only improved access, but limits to farm support. Developing countries demand disciplines on anti-dumping laws. We share their concerns to some degree. Also, of course, they are seeking greater access, virtually as a basis for their full participation in the round.

    These are primarily multilateral issues, and will need to be addressed in the WTO. Some trade barriers can be negotiated on a regional basis, but full resolution of the basic policy issues requires multilateral rules and commitments, in my view.

    Progress in an FTAA context can be made in the areas of market access, food and technical standards, investment rules, I think, and customs procedures, but many of the more difficult trade problems are global. The inevitable conclusion, as I see it, is that Canada needs to develop its approaches and advance its interests, with respect to agriculture and food at least, both regionally and through the WTO. And if one looks at the specific issues that are being confronted, I think this becomes more and more clear.

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    WTO negotiations with respect to market access are necessary if we are to make gains in the key markets in Asia, the Middle East, and Europe, of importance to the agriculture and food sector. For example, only multilateral negotiations can unlock the virtual stalemate in liberalizing trade in sugar products. FTAA negotiations can make useful progress on access for most processed products, and this will provide an incentive for third countries to go further in the WTO. So it should have a positive impact in that regard. An FTAA can also be used to help countries reshape their farm and food sectors to better compete in the region and at the international level.

    If you turn to export subsidies, although FTAA countries could agree to abolish export subsidies in relation to each other's trade, the real problem is EU export subsidies. An effective WTO result is likely to require disciplines with respect to state trading and export credits, but I think these issues will arise in FTAA talks in any case.

    If you look at domestic support, all of the FTAA countries will want to constrain U.S. subsidy support to its agriculture. Even if the U.S. Congress is prepared to relinquish more of its farm support authority to international rules, the administration will insist on comparable commitments by the EU and other countries, such as Canada. So WTO negotiations are needed for significant progress on constraining internal support.

    If one looks at health, sanitary, and technical regulations, I think the FTAA can do much more in not only seeking to improve the trading conditions, but helping individual countries in the hemisphere adapt to what is needed in modern trade terms. Useful progress can be made on these issues, I believe, on a regional basis.

    Today we're more aware than ever of the need to improve and facilitate customs administration and border control for the movement of goods and services. As was demonstrated in Uruguay round, regional agreements can lead the way in the WTO, where strengthened multilateral disciplines are also desirable.

    If one looks at import protection laws, anti-dumping and countervail laws can be constrained regionally, in my view, but this is a difficult and sensitive area. It is unlikely that the U.S. administration would accept binding disciplines on these authorities, if at all, within the hemisphere, without getting comparable commitments from other major trading countries.

    It's encouraging, as I see it, that some progress is being made in both negotiations, but it's too early to comment on a possible outcome. Trade negotiations are a part, as I see it, of the response of governments to the ongoing trends of social and economic integration, which are driven primarily by changes in technology, consumer tastes, and lifestyles. Although recent concerns over national security and the flow of goods, services, and people across borders may slow trade liberalization, the basic trend is towards freer trade, and the integration of economies appears likely to continue. So I'm confident that Canadian agriculture and the food sector will benefit from a successful outcome in both the FTAA and the WTO negotiations.

    Thank you.

    The Chair: Thank you.

    We'll now hear from Mr. Peter Clark.

    Mr. Peter Clark (President, Grey, Clark, Shih and Associates Limited): Thank you, Mr. Chair.

    I was very pleased to see the assorted and assembled ministers in Doha reach an agreement to get the multilateral trading system back on the track, because it risked crashing and burning if we had another result like the one in Seattle. It's very difficult to follow experts such as those who have spoken before me, but I'd like to touch on a number of aspects of your work in a way similar to our discussions back when Ambassador Marchi was gearing up for the consultations at the WTO some time ago--this was, of course, pre-Seattle. At that time we had a number of discussions about the importance of the further discussions in the WTO for developing countries. The need hasn't changed, but what has changed is that the developing countries have persuaded more people, more countries, more ministers, generally persuaded the people who matter, that there is a need to remedy their situation. Their problems arise out of the fact that there are the same obligations for all, while there are differing abilities to implement the obligations or to even set up the systems that are required to deal with those obligations, which will get us, as we go through this, into the issue of technical assistance, of capacity building, or whatever the buzz word is this week for it.

    I was very impressed with the Canadian participation in Doha in that connection. The president of CIDA, a public servant with a distinguished career in a number of areas, Len Good, was there. While Minister Pettigrew kept joking, open up your cheque book, we need some money here, he was very actively involved. Over the course of the few days we were there he was getting involved in writing communiqués, he became a trade junkie--with no disrespect meant at all, of course, to Mr. Good. He got involved in it, he got caught up in it, and he was very helpful to the process.

    We do technical assistance in a slightly different way from the way they do it at the Centre, but we're both geared in the same way. We're not building Rolls-Royces for these countries, because they can't use them. We build them mopeds, we build them Chevys, because they just can't afford the rest. There's no point in spending $2 million through the World Bank or through somebody else to build an anti-dumping system for Jamaica that requires 120 people to administer it, because they don't have the budget for three. So the types of things my friend Mr. Dymond does and we do are geared much more to making these people operational with systems they can use. That's what they need. They need really practical advice, they don't need theoretical advice or us saying, here's our law, just adapt it to you. They don't have the resources, don't have the institutions, don't have the memory, don't have the experience. But they do need to have these things and they do have to use them.

    The other interesting aspect of your work is that your committee is not seen normally by the outside as an agriculture committee. I sat here yesterday listening to your first session, and there was a lot of discussion about agriculture, and when I read your terms of reference, they were all-encompassing.

    We do work with some of the provinces from time to time. I have a concern in Prince Edward Island--and this goes to FTAA and it goes broader--about potatoes. People pull these supposed phytosanitary measures and block potatoes, and you end up with mountains of potatoes on the island rotting. With that nice red soil there, you don't need that much compost. We don't need that.

    We have problems with phoney cases being brought against them on mussels, one species of mussels, instead of all mussels. There are hundreds of kinds of mussels, but they had a case brought against them on mussels.

    We work with Saskatchewan, they're concerned about wheat, they're concerned about potash, they're concerned about the precautionary principle when it comes to the use of uranium. We're the lowest-cost, largest producer of uranium in the world, yet we have to deal with all these issues, the precautionary principle. We need science-based rules. Precautionary principle is okay in its place, you shouldn't take risks, but there has to be some science-based system.

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    What I'm leading up to is, why aren't the provinces coming in here? This is the first round of consultations. There is a mechanism within the bureaucracy for consultations with the provinces and it works very well, but I think they should also be exposed to the politicians.

    The other issue is that the Canadian Wheat Board is continuously hammered by one senator after another in the northern-tier states. Why don't you talk to the Canadian Wheat Board? Why don't you bring them in to have a chat with you?

    These are the types of things we're getting at. As Bill said, this is a different type of negotiation, and from my perspective, because it's a development round, we're going to give a lot, and we should give a lot to restore that balance, but there are things out there of a very micro nature that only people specifically involved can tell you. We're happy to fix that, but we'd like to get this fixed. I met with the ambassador for the Dominican Republic last week--I bumped into him when he was with a friend of mine--and he said, we'd love to have a free trade agreement with Canada. I said I thought we would negotiate a free trade agreement with anybody who asked or anybody who even showed any interest. When you go into it, there are maybe a number of problems we have to fix too.

    I've been talking to your committee for a number of years on a wide range of issues, and I like the way you have a debate. It's a good, friendly debate across the table, with all the parties participating. You've got to ask some other questions, or ask some questions that are non-traditional. You sat here yesterday and said, we can't do this because of the textile and clothing industry. Why not? I'm not ignorant about the textile and clothing industry. My first job in the Department of National Revenue was to conduct anti-dumping investigations on textiles and clothing. My second job was as a textile negotiator in the Department of Finance. Then I went to Geneva. When I was there with Mr. Dymond, I was one of the negotiators who set up the multi-fibre agreement. I ran the apparel industry association. This stuff has been going on for 40 years. We can't just say we can't do it. We have to take a fresh look at it.

    One of the things about the FTAA is that it is, I think, a much longer-term exercise. We shouldn't put a lot of priority on that before we get through the WTO. I think maybe Canada-MERCOSUR would be a good idea, if we could manage that. Look at the way the Mexicans do it. The Mexicans go out and negotiate with people, and they don't focus on what can't be done, they focus on what can be done and set aside what's difficult to do. Then, as the relationship develops, the things that were impossible become difficult, then manageable. I think we have to try to take that look at it. If we wait for Canada-MERCOSUR, we're also going to have to deal with the rivalry in the FTAA between Mexico and Brazil, which is not going to be easy to deal with. We've got Mexico, we've got Costa Rica, we're dealing with other countries down there, we're looking at CARIBCAN. Why not look at MERCOSUR, because we're not a threat in the same way the Americans are to them? Maybe we should pick that off. We got into Chile early, so the Americans are playing catch-up. We're there. There is an advantage to being first. It's like putting a new product out. If you put a new product out first, other people have to play catch-up. Let's not play catch-up. Let's take a focused look and see where people want to go.

    With respect to anti-dumping, we hear lots of discussion. In a book I prepared for Mr. Dymond's association with a number of other people I commented that all anti-dumping systems are bad, and some are worse, and up there in worse, Canada and the United States are roughly in the same league. One of the problems we have is that we have always treated anti-dumping like a taxing statute, so we have the same mentality we have with the people who administer the Income Tax Act, and you really can't do that with an international trade statute. We have to take a different approach to anti-dumping. We do silly things. The attitude is, if you don't like it, sue us. It's a small market, so generally, it doesn't make much sense to sue people.

º  (1620)  

    I watched the opening of Parliament, and I saw you, Mr. Chairman, introducing a private member's bill encourgaging alternative dispute resolution in disputes with the government, which I thought was a great idea, because it should save the government money, it should save people who are dealing with the government money and create a different atmosphere. That's the type of approach we have to take to these problems. It can't always be a conflict. But we have to recognize that there are some things we do.... We invented anti-dumping in 1904. People copied it, and some of them got it better and some of them made it worse. It's just a very arbitrary system. We talk about arbitrary and capricious systems in the United States, but it's just as arbitrary in Canada at times. It's getting better, but making the place an agency didn't do any good, so....

    The only other comment I'll make on what Mr. Campbell said is that I'm every bit as concerned as he is about health care and other issues, but the fact of the matter is, the GATS is an agreement where you have a positive list of things that you put on the table that you are prepared to make commitments about. Traditional trade negotiations have negative lists, where everything is covered except what you take out.

    The only other comment on agriculture I'll make, as somebody who represents a lot of farmers from day to day, is that if we do not bring the United States domestic subsidy system under control, the only family farms we're going to have in Canada will be producing supply-managed products, with a few market gardens in Holland Marsh.

º  (1625)  

    The Chair: Thank you very much. These have been most interesting and most fascinating presentations.

    Colleagues, I think we will go with a round of questions first, and then we'll open it up for another round. If there are some comments from our witnesses, if they want to interact with one another, they are more than welcome to do so.

    With this--

[Translation]

    Mr. Stéphane Bergeron (Verchères--Les-Patriotes, BQ): On a point of order, Mr. Chairman.

    Out of consideration for the witnesses, I didn't want to raise this point of order while they were making their presentations. However, I must say that I would have expected the same courtesy to be shown to the members of the opposition. It would appear, Mr. Chairman, that contrary to a routine motion adopted by the Standing Committee on Foreign Affairs and International Trade, you chose to ask the witnesses to begin their presentations, even though no opposition members were present.

    I believe this contravenes the Standing Orders of the House and the practical rules of procedure of committees, which normally you have a duty to uphold. Moreover, as I indicated earlier, the decision to proceed reflects a lack of respect toward the opposition. I would have appreciated very much your waiting until we had arrived before asking the witnesses to proceed with their presentations.

    For the witnesses' information, we were not present when the meeting was scheduled to begin because the House of Commons was paying tribute, and deservedly so, to an individual who has dedicated many years to public life. That person is Preston Manning, who was bidding the Commons farewell. I felt we owed Mr. Manning the courtesy of being present in the House of Commons. We remained for the duration of the tribute, and we shouldn't be penalized here in this sub-committee for having the courtesy to remain in the House while tribute was being paid to Preston Manning.

    Accordingly, Mr. Chairman, let me say again that I am disappointed with the outcome. I would even venture to say that we have been treated with contempt in that you have failed to uphold the routine motion passed by the Standing Committee on Foreign Affairs and International Trade and have showed disregard for opposition members by failing to wait until we had arrived to begin hearing from witnesses. As such, I missed the presentations of Messrs. Campbell and Dymond. However, I did arrive in time to hear the last two witnesses, Messrs. Miner and Clark, although I can't say that I feel comfortable asking them questions, as you enjoyed us to do earlier, given that I missed some of what they had to say.

    Therefore, I don't think we're in a position to engage in a constructive, positive debate with the witnesses.

[English]

    The Chair: Thank you. I greatly appreciate your comment. In the same vein, we also have volunteers. None of them is charging the taxpayers any money. We have a huge tempête, comme on dit en français outside. Our witnesses arrived here at 3:15, some were a little earlier, and waited till about 3:43. I do understand that there was something taking place in the House of Commons, perhaps, but we had three members from the government side who knew also that the business of the House of Commons cannot stop just because there are some activities taking place in the House. It is a responsibility we have as public servants also to show some respect and courtesy to our witnesses. In that spirit, I decided to begin the proceeding, knowing full well that the minutes of the proceedings will be available to those who arrive later. Certainly, it's not to deny the member for the Bloc or any other member the opportunity to hear our witnesses.

    I think what's imperative for us as members of this committee to realize is that this is an important proceeding we're embarking on. The time had been determined as 3:30 for the committee to begin. Frankly, I have taken the risk in beginning the process. It may mean going back to the main committee in order to change the rules so that whenever any three members of the committee, alone or including the chair, are present, the proceedings have to take place.

    That said, Mr. Bergeron, you have an opportunity to ask questions of any one of our witnesses who are with us here, with the full understanding that you were in the House of Commons, but also I have the responsibility to show some respect to the witnesses who have come here ahead of time and who have volunteered their time to give us some of their views and opinions.

    So with that, I would suggest that we move on to Mr. Casson for questions. I just don't want to waste any more time, Mr. Bergeron, please. First, you are not a member of the committee, you're a substitute, I understand that. I just don't want to waste any more time.

º  (1630)  

[Translation]

    Mr. Stéphane Bergeron: That's irrelevant, Mr. Chairman. The fact that I'm substituting for another member is irrelevant and of no import whatsoever.

[English]

    The Chair: I just don't want to waste any more time, Mr. Bergeron. If you have any problem with it, you can raise it at the main committee when we go back there. We have very important stuff to do.

    Mr. Casson.

    Mr. Rick Casson (Lethbridge, Canadian Alliance): Mr. Chairman, I too would like to object somewhat to your starting without us. I know there have been other times when we have sat and waited for a quorum for different things. I would have liked that to happen today. But I accept your explanation. If Mr. Bergeron wants to take it further, that'll be up to him.

    I missed Mr. Campbell's presentation, but Mr. Miner and Mr. Dymond, I was able to hear what you had to say, and Mr. Clark. I'd like to, Mr. Dymond, get your opinion on what the difference between Seattle and Doha was. We understand that the developing countries felt a little left out, there were some problems there. The civil society felt they needed to be more involved. But was there a difference in attitude on the part of the developed countries towards the developing countries? How did it come to be that it worked better at Doha than at Seattle?

    Mr. Bill Dymond: That's a very good question.

    I think the most important factor was an understanding between the United States and the European Community on two or three important issues. That understanding was absent in Seattle. Ministers went to Seattle with an undigested mass of proposals, with no agreement between what we call the quadrilateral countries, Canada, Japan, the European Community, and the United States, on what the object and purpose of those negotiations were. Developing countries, then--and I would defer to Peter who was there, while I was not--found themselves in the invidious position where the big guys were trying to hammer out an agreement among themselves on some very basic questions, which agreement might be presented to them on a take-it-or-leave-it basis.

    Doha was much better prepared by the secretariat and by the delegations in Geneva. The U.S. position was much more subtle and much more ready to address the needs of other countries, including Canada, which was not the case in Seattle. And there was a recognition that some small adjustments had to be made to the decision-making process. We heard a lot in Seattle about the infamous “green room”, where some 20 delegations, chosen in an ex cathedra fashion, get together and meet continuously through several days, but nobody knows what's going on. This time there was a committee of the whole, which was in continuous session. There were chairs on the six major subjects, facilitators, friends of the chair, one of whom was Mr. Pettigrew, whose mandate was to report back continually to the committee of the whole. In practice, if not in the organization, the system was far more transparent, so that there were no surprises about what was going on. Mr. Clark and I were, of course, advisers to the delegation. We didn't get to go to the meetings, but by just being there. I certainly felt I had no lack of information as to what the main issues were, and I think that was generally shared.

    I think a third element is that nobody wanted to fail again. As Peter said, we were facing a difficult situation. Failure to launch is really very silly. Failure to conclude on the basis of fundamental differences between major countries, everybody understands that. Seattle was the failure to agree to talk. It's as if Parliament said, no, we're not going to talk any more--the word coming from the French parler. We couldn't afford that any more, we had to move forward. And I think that was the third element, the fear of failure, broadly shared across all the members of the organization.

    And you might also say China was coming in after considerable effort, exercised over five years, very detailed arduous negotiations to bring China into the World Trade Organization. To greet our Chinese friends with a failure to launch a new round of negotiations was quite unthinkable.

    So there was no single factor, but a combination of things and a readiness, in all parts of that room, to deal.

º  (1635)  

    Mr. Bruce Campbell: Could I just add a brief comment?

    The Chair: Sure.

    Mr. Bruce Campbell: As a complement to that, I think there was some real, if limited, negotiation between north and south. One example of that was the statement on the TRIPS agreement. I think that had a positive effect. There was a lot of brinkmanship and arm-twisting as well, but I think that movement played a role in a number of southern nations' decision to play along.

    I think the location and the September 11 effect marginalized mass demonstrations. I think there were just a handful of NGO representatives from around the world in Doha. There was relatively little media attention as well. So I think those are also factors.

    The Chair: Mr. Casson.

    Mr. Rick Casson: I'll move on to another part of this, the United States and European Union domestic support of their agriculture communities. They seem to be very creative in how they get that out. Whether it's through the aspect of multi-functionality or through the environment, somehow they get the money into the pockets of their producers. You commented, Mr. Clark, that if we don't do something about this, there will be no family farms left. I completely agree with you that something has to be done.

    Also, looking to the south, to our American friends, we have challenge after challenge, softwood lumber for instance. They just keep coming back time and again and creating havoc with our domestic industries, and in agriculture they do this as well.

    Is there a feeling among the people involved in the negotiations, either at the FTAA or WTO, that somehow our dispute settlement mechanism will be developed to circumvent this and put up some kind of a barrier so they can't be done--and this is how I see it--somewhat frivolously, at will? Is there something happening along those lines?

º  (1640)  

    Mr. Peter Clark: I tend to agree with Bill, we're looking not at four or five years, we're probably looking at eight years, and then another seven or eight years for implementation. The only way we can deal with it is through the dispute settlement mechanism and trying to challenge some of the things that are being done.

    The Americans try to structure their financial support as emergency support, as income support, as safety nets. The fact of the matter is that it totally distorts, and we have a lot of information published by the U.S.. For example, take their supports on grains. There'll be a tendency to plant soybeans, because the subsidy will give you, say, 3.5 times your incremental cost or your variable cost of producing. Corn will give you about 1.5 times your variable costs. So leaving rotation out of it, there's going to be a tendency to plant more soybeans than corn, and there's still a tendency to plant far too much corn. The only commodity cash crop last year in Canada that declined was corn, and that's because of the failed countervailing duty action in western Canada, because we didn't have support from central Canada for it.

    The only way to do it is challenge. Some of the groups who have built up a good information base on which American programs should be challenged are too busy defending themselves on yet another complaint about dairy subsidies. They can only deal with so many things at a time. It seems we never win. Even when you win, you don't win, because you've got to go back again. But until these negotiations are over--and that will be some time off--the only way to try to deal with it is challenge.

    Our big problem is we don't have deep pockets. Last year we did some research for the dairy farmers, which we shared in a couple of grains conferences in western Canada. We found that the subsidies that were granted, the financial support from USDA, in the year 2000 were significantly higher than in 1986, which was one of the base years, and was a record by $6 billion. And it looks like they'll be giving away more this year and next year. What they do is declare emergencies left, right, and centre. I would say that 50% to 60% of the agricultural areas in the United States over the last couple of years have been emergency areas, where they just pump money in.

    Mr. Rick Casson: I would make one comment, Mr. Chairman, before you go on, about that corn issue last year. This year in western Canada a lot of feedlot operators are bringing it up a lot and causing some concern. I don't know how much there is to bring, but the challenge didn't work last year, because our side couldn't get together.

    Mr. Peter Clark: I happen to know the case pretty well, because I represented the Manitoba growers. It was a combination of the farmers who also grew corn getting up and saying, hey, we're not injured, and we couldn't get any support from central Canada. The prices are no higher this year. Of course, when you bring in cheap corn, it drives down the price of feed-wheat and feed-barley as well. So it goes right across. While the duty was in, we were looking at increases of 50 cents or more a bushel, which is very significant, and we were looking at somewhat smaller, but also significant increases in the price of feed-wheat and feed-barley.

    So there were pretty good benefits from that, but our problem was back in 1968, when we developed the first anti-dumping agreement. We were concerned about the United States bringing regional cases, because they brought one against us on sugar, and it was trumped up. So Canada led the charge for very tough rules on regional market cases, and that's what jumped up and bit us there. We didn't have the support.

[Translation]

    The Chair: Mr. Bergeron.

    Mr. Stéphane Bergeron: First of all, I want to apologize to the witnesses for my brief digression a few moments ago. I would have preferred not to say anything, but today's topic of discussion is enhancing free trade, establishing a regulated system and imposing stringent rules for all participants with a view to protecting both large and small businesses. Just as it is important internationally, it's important for a Parliament to have rules of conduct. The person responsible for ensuring compliance with these rules is the Speaker of the House, who delegates this authority to committee and sub-committee chairs. Whatever legitimate or valid reasons the chair may have had for taking the position he took earlier, the fact remains that he has a duty to abide by and ensure compliance with the rules. As he suggested to us, we will indeed take this matter to the Standing Committee on International Trade and Foreign Affairs, so that we can conclude our discussion here today of this issue and finally start debating the subject at hand.

    That being said, I would like to focus on two issues. First of all, in his presentation, Mr. Clark alluded to the role of the provinces, a role the federal government seems to underestimate. It's important, if not fundamental, that the federal government seek out the views of the provinces on this international issue, particularly since in this era of global free trade, federal states have a duty to ensure that decisions worked out at the bargaining table are implemented. This might put federal states in a more delicate position vis-à-vis unitary or centralized states. Consequently, federal states may opt for more centralization, or may move toward increased consultation with federated states, thereby becoming more decentralized in the process.

    With globalization, the very nature of the Canadian federal state is called into question. Therefore, it's important to consider Canada's federal character within the context of current global negotiations if the freer movement of trade is to be achieved.

    I merely wanted to state my position. I don't know whether you want to comment.

º  (1645)  

[English]

    Mr. Peter Clark: Thank you. I think you've identified a very important issue, the way the world is moving.

    One of the reasons I made my comment about the provinces is that I'm a very strong believer that Parliament should play a much greater role in developing, your committees. We're moving in that direction. Your committees should play a much greater role in development policy. There's an excellent consultative process at the level of officials and at the level of ministers, but you don't seem to have a parallel at your level, and I think it's important for you to get involved in that decision-making.

    One of the other reasons for involving the provinces is an effort that has not gone as far as it should have over the years. I made a comment once. You had a discussion yesterday about the European Union: 40 years and they're still not perfect. I made that comment to somebody in Brussels once, and he said, yes, but you've been a customs union since 1867, and you still don't have it right either. That's very true in respect of the differences in regulation between the provinces. To be a strong international unit, we have to be a strong, unified national unit. Through more discussion and debate at every possible level--and yours is the area where I think you have the most to do and the most to gain--I think we'll come to these understandings. You're absolutely right, Canada is obliged under article 24, paragraph 12, of the basic GATT agreement to ensure that all its sub-national governments observe the rules. They can do deals which affect the provinces. They do consult with them, but there's consultation at various levels, particularly in agriculture, which I know is a concern. I think we have to go even further in getting it outside the agriculture committee for these discussions about labelling and other issues, which are very important to our agrifood business and other businesses. Don't just stick with the environment committee or the health committee, also have the people talking in here, so you have as broad an input as possible into your debates in Parliament and in your caucuses.

    I certainly agree with you that we do have to look after every part of the country. The best way to do that is to expand your scope and to invite people to come here and talk to you. That issue came out very clearly yesterday evening, and I can't disagree with it. I think it's very important, because as we get into services, as we get into investment, as we get into all these other things, the sub-national governments in many cases have the constitutional responsibility for them, so you can't do it without them.

º  (1650)  

[Translation]

    Mr. Stéphane Bergeron: Speaking of the agrifood business, it's rather ironic to see the United States indirectly subsidize the agrifood industry. You mentioned several ways in which the United States lend financial support to the US agrifood industry, but there are a number of others.

    For instance, it's a well-known fact that the United States use their military in certain instances to support their domestic agrifood industry. They argue that in the event of a major international crisis, they need to secure the food supply for the American public. On the one hand, we see the US invoke many different reasons for providing massive financial support to its domestic agrifood industry, while at the same time, it tries to destroy our country's supply management system, challenging it at every turn and doing everything possible to decimate it.

    My question is as follows. Recently, New Zealand and the United States went to the WTO to challenge the supply management system, claiming that it was an indirect export subsidy. Even though their claim was thrown out, the United States let it be known immediately that it would file an appeal. Given the new round of negotiations currently under way, what hope is there of maintaining the spirit, if not the letter, of Canada's supply management system? For the sake of our agrifood industry, should we maintain our supply management system in this era of globalization and enhanced international trade? If so, how can we protect the system as the negotiation process unfolds?

[English]

    Mr. William Miner: I can endeavour to answer your questions, but before doing that, I wonder if I can comment a bit on the question of U.S. subsidies overall, which is obviously part of your concern.

    It's certainly true that the Americans have increased substantially their support in the last three or four years, and they have got back to approximately, depending on what you include in the count, the level that was in place in the base period, the mid-eighties. One of the difficulties one faces in challenging this is that the types of programs they have in place to support are regarded as non-coupled, not directly linked to the commodities. It's true that there's an area of doubt here and some argument about it. However, on the basis of the notifications they have made under the rules, they are still below the level of commitment they took in the Uruguay round. On the other hand, if you look at the total expenditures that are going into the agricultural budget, you will find that the budget has, in fact, reached the levels it was at in the mid-eighties, and in some respects, it may well be beyond.

    What I'd like to emphasize is, first, the need for the committee, if they wish to examine this carefully, to look at the nature of the programs and the nature of the commitments. The manner in which the agreement is structured is that certain programs are regarded as trade-distorting, and a commitment is taken against them in an aggregate sense, all programs lumped together for all crops or production. This commitment you're not allowed to exceed, and it did decline over the transition period.

    In addition to that, there's a substantial area of so-called green programs, which are regarded as not trade-distorting or as minimally trade-distorting. Some might argue that if you put a high amount of subsidy into a sector, even in a non-trade-distorting manner, it's likely to have an impact on production, and perhaps on trade. I have that view. However, when you turn it around and say, can we get a commitment, then, in a trade agreement that governments will not exceed a certain level of support for their agriculture, I think it's clear that this would be a highly sensitive political issue to address, and consequently, the focus is on trade-distorting support.

    Emergency support, as long as you don't couple it with a commodity and link it to the current price structure and to the level of acreage, for example, as long as you make it general, in the sense that it shouldn't directly affect output and trade, is not regarded as subject to the commitment.

    I'd like to make one more comment, Mr. Chairman, in this regard. It's always concerned me that when people look at subsidies, they look at them only as a benefit. However, we all know that when you provide subsidies at the level the Europeans have done over many decades in western Europe and the Americans are now doing in respect of their grain sector, the benefit of those subsidies eventually becomes capitalized back into the structure of the industry, and as a consequence, in the case of crops, you usually find land values rising. If this continues over time, the competitive capability of that country is, of course, harmed, because your cost structure rises.

    So I wouldn't take as dramatic a view as my colleague Mr. Clark on the impact of the U.S. support. If you look at Europe, they've had it now for decades, and the fact is that they have a relatively high cost of production for most, not all, of their output. They must, if they are to go to world prices, somehow or other adjust their system downwards. The Americans will face the same need to squeeze out the benefit of the subsidy when they move to world price levels. I'm not discounting the problems farmers face competing in the short term with those kind of subsidy transfers, but with the long term, I'm less concerned and don't see the dramatic impacts some might suggest.

º  (1655)  

    On the supply management side a similar comment can be made. I'm certainly not going to suggest whether it's good or bad to maintain supply management. I'd have to be a dairy or a poultry man to do that. But basically, as you know, the quota values in the dairy sector and the quota values in the poultry sector have risen substantially and are currently at quite high levels. This reflects the benefit of the system, of course. Eventually, one finds that you can't compete, particularly with, let's say, cheese or other forms of dairy products, with the imports we are having to allow. If one is to have a trade-opening process through the WTO, in particular, or a free trade agreement in the Americas, one has to anticipate those tariffs coming down somewhat, if not being removed eventually, at least on the product, and there will be a need to compete for the product. When we face that challenge, we will have to determine how to get our costs down, so we can compete at world levels. That is gradually happening, I think. Currently, I believe, processing milk is sold at export prices if the product is to be exported. That's what I meant when I said we're beginning to see the effects of a continental market in the supply-managed sector.

»  (1700)  

    The Chair: Mr. Dymond.

    Mr. Bill Dymond: Thank you, Chairman.

    I would add one or two comments, without in the least disagreeing with my colleagues.

    I must say that whenever I hear a discussion about agricultural support, what may be done in a negotiating context, what is emergency and not emergency, and about supply management, I think I'm in a meeting of the Flat Earth Society. Once you accept the fundamental proposition that the earth is flat, you can have a rational discussion. If you accept the fundamental proposition that there ought to be, on a continuing basis, massive transfers of income from consumers to producers, massive transfers of income from taxpayers to producers, then you can have a discussion. We have tariffs in the dairy sector and in the poultry sector in the range of 200% to 300%. This is for a country that lives by exports. Who pays these tariffs? Consumers pay these tariffs.

    The first question I would submit to the committee is not whether we can maintain supply management in a negotiating context, but whether we wish to. A few years ago we were in a situation, and perhaps we are now in the dairy sector, where the value of the right to produce exceeded the value of other capital assets necessary to produce. What kind of a crazy system is that, if you're producing milk and your quota is worth more than the cows and the barn and the equipment that produces it? So the first question to ask is, do we want to continue with those transfers of income? Are we prepared to pay the consequences? The consequences, as Bill said, could be quite heavy. I'll just give you one example.

    We had an official from New Brunswick in a class we taught this week at the Centre, and when we had this discussion, she pointed out that New Brunswick had just lost a major investment by McCain's, a Canadian company, in a pizza facility--agrifood. They lost it to Maine. Why? Because they couldn't get the amount of cheese necessary at the lower prices to sustain production. We can't get it, so we miss the further processing, we miss moving down the chain of production into higher value-added. We lost it to Maine because in Maine McCain's can get all the pizza-quality cheese it needs at the price.

    So no one should be under any illusion. There are very heavy economic costs to be paid, there are very heavy distortions introduced into the agricultural economy, and there probably are, down the road in negotiations, limitations to what we can achieve for competitive Canadian agriculture at the price of maintaining supply management.

    Thank you.

    The Chair: Mr. Clark.

    Mr. Peter Clark: My comment would probably be slightly different. If financial support in the United States were driven by economics, what we've been hearing would make a lot of sense, but it's driven by politics. Farmers vote, and as long as they're supporting the party they supported in the last election, they're going to continue to get very significant support. Even if they change parties, they're going to get significant support. The fact of the matter is that financial assistance to farmers is a way of life in the United States. We looked at one state in the United States, Minnesota, I think it was, or North Dakota--one of the two. The average farm income was $37,000, average government support $40,000. That tells you the story.

    The Chair: Mr. O'Brien.

    Mr. Pat O'Brien (London--Fanshawe, Lib.): Thank you, Mr. Chairman.

    I agree with that last comment. They're milking the quota. Why wouldn't a farmer do that if the government is going to provide those kind of subsidies? I agree with that. I don't think you blame the farmers, but I think there's something fundamentally wrong with the system. I think some interesting questions have been raised here, with interesting political ramifications, but we'll see how they evolve.

    I think we should note, Mr. Chairman, that the only party that, I think, described itself as anti-globalization in the House isn't here today, and that's unfortunate. I hope we'll get all parties to come to these meetings; Thursday at 3:30 is not that deep into the work week. So I hope we'll see all the parties represented in the future.

    I want to go back to Mr. Clark's point on the EU, because I was the one who made that point, and it was important enough for me to repeat it and try it again, in case it was misinterpreted. Not Mr. Bergeron today, but on a number of occasions, at various committees and in the House of Commons, I have heard and taken up colleagues from the Bloc who seem to have this great affinity for the EU and want to make FTAA somehow into the EU, and they want to do it very quickly. My point yesterday was that I don't think this is what FTAA is all about. Even if we decide that's what we ultimately want it to do, the EU has evolved over 40 years. It's not perfect, and no one's suggesting that it'll ever be perfect. But my point yesterday, which I just want to repeat today, is that I don't think that's what we want FTAA to be, and even if it is, it's in its nascency, and it hasn't got 40 years of evolution behind it. I just wanted to repeat that, because it's a constant theme I'm hearing in this whole discussion.

    On the consultations with the provinces, that's an interesting idea, and I would be open, as one member of Parliament, to hearing from them. But it's interesting that I don't find many invitations from them to come and consult on matters of provincial jurisdictions that are of national importance, such as education. Having been an educator for many years, I think that's something important. If we're looking for a consultation, I would agree with that, but I'd hardly need to tell this panel that it should be a two-way street. I would hope that maybe someday we could see a national education plan for this country, and I'm not too sure how open the provinces across Canada are. As a former school board trustee, I'd suggest they're probably not very open to that.

    But Mr. Chairman, as for having provincial representation at this table for our discussions, I don't have a problem with that, as long as it's not misconstrued as suggesting that somehow they have a veto over the area of federal responsibilities, which, if anything, is growing smaller and smaller in this country. We're probably the most decentralized federation in the world, or one of the most, in my view. But that's an interesting notion. I'd be interested in hearing provincial members' views, but I wouldn't be interested in giving them any kind of added power over international treaties, that's for sure.

    I do have two questions, Mr. Chairman, for whoever would like to respond, because I've enjoyed all the witnesses' testimony.

    I wonder what the view is on the social fund for the Americas that somehow is being seen as a new idea from the President Fox, which is really not a new idea at all. To what extent should that be part of a trade negotiation, or should it be an add-on? How would you see that unfolding?

    And then it goes back to my friend Mr. Casson. Aren't we just realistically, as Canadians, going to always have to accept the fact that no matter whether we're into a rules-based trade system or not--we are, and we need that--the United States has 10 times our population, 15 times the size of our economy, and they will always, unfortunately in my view, take advantage of that situation to play the rules any way they want? There's no better example of that than softwood lumber. I hope that's not overly pessimistic, but I'd like to hear a reaction from the witnesses.

    Thank you, Mr. Chair.

»  (1705)  

    The Chair: Who wants to comment first?

    Mr. Dymond, then Mr. Campbell, and then Mr. Clark.

    Mr. Bill Dymond: First, the existing structure of international trade rules, whether encompassed in the WTO or the NAFTA, bears rather lightly on the provinces in respect of invasions of their jurisdiction. The problems we have had with the provinces in the past with trade matters have been where the provinces have tried to invade federal jurisdiction. For example, there was an incident in the 1970s where Ontario decided it would be a good idea to lower the provincial sales tax on automobiles, on the condition that the automobiles were manufactured in Canada. That was a violation of the national treatment principle, and they were told there were ultra vires on that. There was a similar case on gold coins. There have been endless cases on liquor boards and beer, where they devolved responsibility from the federal government to the provinces.

    That said, we have come close in the past, and we have certainly been willing in the past, with the consent of the provinces, to negotiate on matters of provincial jurisdiction. I'll give you one example, government procurement. Government procurement restrictions other countries are interested in are not those of the federal government. The federal government, aside from military equipment, which is generally not covered, does not buy many things of interest to foreign suppliers, but provincial utilities certainly do. There are lots of people who would like to get into Ontario Hydro, into Quebec Hydro, into Manitoba, Alberta, and so forth. The provinces traditionally said on that, with no disagreement from the federal government, what are you prepared to pay? We've never been able to get a price that we in the federal government would be satisfied with and could recommend to the provinces. I'm not a constitutional lawyer, but it would seem to me an impossible situation where the federal government would strike a deal that would tell Quebec Hydro what its procurement policies would be, without the consent of the Quebec government.

    There has never been any difference between the Quebec government or the Ontario government or any of the provincial governments on what that deal is. If there are benefits there, they will be accepted. There are areas in services regulation in federal states that, in many cases, fall within the jurisdiction of the provinces. Clearly, in our constitutional practice and the practice of other countries, the provinces need to be persuaded that the changes implied that Canada would accept would be of benefit to them and be consistent with the way they're going.

    Softwood lumber is an awkward one for the federal government, because the federal government must carry the case. The measures under challenge fall exclusively, in my opinion, within the jurisdiction of the provinces. So the provinces need to be persuaded to make the changes that are indicated, or they must accept the consequences of it.

    Quebec, I understand, after many years of adjusting the system, is very close to a regime with which the United States would be satisfied. British Columbia is a long way away. The federal government cannot, by itself, require those changes, implement those changes, and never would, in my opinion, accept obligations that imply them.

    On the social fund, I think it's appropriate to see it in a larger context than just trade. Even without free trade in the Americas, even without speculating on whether it'll succeed or fail, no one can deny that there are social problems of a huge dimension in Latin America to which a fund might usefully be applied. I would, however, insert this caution. What we have learned in this country, what the Americans and other countries have learned is that if you try to attach a fund to remedy distress caused by changes in the trade system, you will probably fail. First, it's basically unfair. What's the difference between a person who loses his job because of enhanced competition and a person who just loses his job? Generally, the administrators of these adjustment programs have found that they cannot disaggregate a trade problem from a general problem, and what you want to do in retraining, in regional systems, you want to do for general motives of economic development or social justice. It is invidious to make a choice between those who are harmed by trade or need assistance because of trade and those who need assistance for other reasons.

    Thank you.

»  (1710)  

    Mr. Pat O'Brien: I certainly appreciate those comments. I'm not sure if Mr. Dymond was here yesterday, but I tried to make some of those exact points. CIDA is putting significant money, by Canadian standards, now into the Americas, and it has for years, long before FTAA was on the table. I was more interested in any comments you had on the structure, but I think you've answered that. I appreciate that.

    Thank you, Mr. Chairman.

    The Chair: Mr. Eyking.

    Mr. Mark Eyking (Sydney--Victoria, Lib.): I'm a farmer, and we have a marketing board system on half of our farm, while the other half is non-supply-management. So I've travelled quite a bit through the States and visited farms. The dairy farms especially are in a lot worse shape than ours. They're not as prosperous, they don't have the same structure, and also the food bill is not any less. So I don't know about that system. If we open it wide up, if we put our marketing boards on the table some day and trade them off, I don't think we're going to get the benefits up there. We cannot house our animals outside, we can't put them outside. There's a whole bunch of variables, and I hope we never have to trade off, because I think it's one of the best systems in the world. There are a lot of other countries that are looking at it, and it doesn't seem to affect the trade as much. That's just a comment, I guess.

    I was thinking about negotiations. When you negotiate. you're usually trading. Do we have the tools? I'm trying to put it in a nutshell. Are we doing better than some other countries or worse? Do we have the right negotiating team? Can somebody give me a feeling? Is there a report card here? We send people to Doha or wherever. I know the Americans have a big economy and they're hard to deal with sometimes, but compared to Australia, when they're making deals and when they're trading, is it that we just don't have enough to trade off, so we seem to be coming up shorthanded a lot of times?

»  (1715)  

    Mr. Peter Clark: I think the general reputation Canada has in the international foray is that it punches above its weight. We haven't suffered at the last two conferences. Minister Pettigrew was one of the key people at Seattle. The reason Seattle failed had nothing to do with the friends of the chair, the chair just couldn't cope, in addition to the other problems. At Doha we were front and centre. We were doing a good job, we achieved our objectives. The meeting last week in Geneva to try to move things ahead was co-chaired by Canada and Brazil. We've got good people. They're well trained. I would say that one of the big problems we have at the Department of Foreign Affairs is that we do not have a system for dealing with trade that creates a career path for trade officials and trade negotiators.

    I know my friend Mr. Dymond is a former foreign service officer, a former distinguished ambassador to Brazil, and he's a long-time friend, but the fact of the matter is that once they get in there at the Department of Foreign Affairs, their objective is to get their butt in the ambassador's chair, and trade is just a step along the way.

    Mr. Bill Dymond: What's wrong with that?

    Mr. Peter Clark: That's right, that's exactly it. But we used to have a trade department that was separate. What's wrong with having the diplomatic input into the economic things? They don't have enough people. They get somebody who's good for two or three years, they move him out, and you don't have the continuity, you don't have the depth, you don't have the memory. I think that's important and we have to take a look at it.

    There's really nothing wrong with the way Foreign Affairs and International Trade is dealing with the issue, but there is a problem in respect of continuity and depth, and there are a lot of people there who are going to be moving on, as is the case everywhere else in the government. A lot of the people started their careers fairly early, they've gone through, they've got their time in, they're going to retire. We have to find a way to do capacity building of our own, not only in other countries.

    In regard to agriculture, I've been dealing with these issues. I worked for the Dairy Farmers of Canada. I have worked for the National Dairy Council as well. They're doing a pretty good job of protecting supply management. I can tell you, you're absolutely right. When I'm in Florida I pay more for milk than I do in Canada, and I pay just as much for butter.

    Mr. Bill Dymond: On one aspect perhaps the committee is already aware of, I did in fact spend time on international trade policy for the government, retiring only about a year ago. In the good old days, as I call them, la belle époque, of trade policies there were three and a half departments of government involved. There was the Department of External Affairs, as it was then; there was the Department of Finance responsible for the tariff; there was the Department of Industry, Trade and Commerce responsible for the export dimension. The half department was the Department of Agriculture, because they were only involved, of course, in agricultural matters. Now 24 federal departments and agencies are involved. Why? Because they have interests on the table. In the larger provinces this tends to be replicated. In the smaller provinces, of course, the scale is smaller.

    So the whole matter of trade negotiation, because of its intrusiveness, which we have welcomed and we will be looking for more of, into domestic government, has become a far more complicated affair. The trade minister must now deal with a much broader range of colleagues in the cabinet, not because people are trying to invade his turf, but because you can't talk about transportation services unless you talk to the Minister of Transport, you can't talk about health services, of concern to Bruce Campbell and many others, without talking to the Minister of Health. We didn't talk to the Minister of Health during the Tokyo round, why would we? We didn't talk to the Minister of Transport during the Tokyo round, why would we, except in a political sense? We certainly didn't talk to the department, because there was no mandate responsibility, no portfolio responsibility. This is a reality. It renders the complexity of management of the negotiations bureaucratically much more difficult than before.

    Of course, political management, which is your affair, has grown with this aspect. Imagine the point of view of the provinces when we first began to talk to them on trade matters about 20 years ago. Hardly any provincial representative knew anything about the matter. Only one or two did when they learned. Now the people who are the principal trade contacts in the provinces have to deal with the Ministry of Health, the Ministry of Transportation, the Ministry of Education. So it is a vastly more complex and difficult thing to manage than it ever was before.

»  (1720)  

    The Chair: Mr. Eyking.

    Mr. Mark Eyking: I guess it raises a question. I'm used to being in business more than politics, I guess, and we touched on the topic. If we're doing the best job we can trading or negotiating, should we--and I don't know if some other countries do it--be going more into the private sector to get negotiators? I'm not trying to say we don't have really good people on board, but when you're cutting a deal.... Take the lumber industry. How much money is involved in the lumber industry? When we were in Washington, some of the big lumber companies were down there and had real sharpshooters floating around. You wonder sometimes if we could have a better team, or a different type of team, or some means of having them more inclusive. I'm just throwing that out. Can we have a different sort of team sometimes? I'm alluding to the bureaucracy of this whole thing. Sometimes it gets way down and people are in and out. Maybe the person who's sitting there is going to get the same pay at the end of the day when he's negotiating, whether he's there or not. I'm just wondering if there should be a different spin sometimes in the people we send.

    Mr. Bill Dymond: That's certainly possible, but it doesn't take away from the basic fact that no negotiator operates without political authority. Every Canadian negotiator who is out there operates under an explicit or implicit grant of cabinet authority. We have a political system in this country where there's one boss. You're not on your own hook. So you can appoint someone from the private sector, someone from the bureaucracy, someone from Parliament, but the essential thing is the political authority you have. What is the grant of negotiating authority in our system that comes from the cabinet? What is your judgment of the political forces?

    Typically, those talents, perhaps because of inertia, have been found in the public service. They don't have to come from there, but if you bring someone from the outside, there is a huge learning curve for them to understand how to operate in the Canadian political system, because you're not there for yourself, you're there for your minister and for your cabinet, who will carry the political burden of what you do. So certainly, it is possible to bring people in, but the fundamental fact of Canadian negotiating practice is that we have a top down system of political authority and we operate under grants of authority given by the cabinet, exercised by the minister through the bureaucrats.

    Just to give you an example from my last incarnation in the government, having extensive contacts with civil society, civil society groups like Mr. Campbell's, although I never met him in that context, might want to discuss very important issues. For example, should Canada accept the principle of national treatment, that is non-discrimination in internal regulation of trade? I would always say, I am not going to discuss that with you, as that is a pillar of Canadian trade policy. I'm not going to discuss with you whether capitalism is a good way to run the economy. I'm not going to discuss with you the issue of a democratic deficit. You come to this committee, you go to your member of Parliament. My authority at that time, from Mr. Marchi, who was the trade minister, was confined to the particular mandate I had, and I would not and could not step outside that mandate to discuss quite legitimate issues of public policy that, nevertheless, were not my role as a public servant to discuss. And why? It's because of the nature of political authority in Canada.

»  (1725)  

    Mr. Mark Eyking: To raise another point, about the provinces perhaps getting more involved with these trade negotiations, we were in Brussels last year, and I read quite a bit about what happens over there, and it's a political nightmare. The things they have to go through to produce something or to print something or to trade. This poor guy, whoever represents the EU, going over there, must have all these aides around him pumping him. So sometimes I think it's better that you just have one Canadian or group. Wouldn't we slide into the same thing? If all of a sudden we're going to negotiate lumber and you have to talk to 10 premiers, wouldn't you run into the same kind of...? And what about the Americans? If they started doing that with 50 states, it would just be nuts.

    Mr. Peter Clark: I'll come back to your first question, and then go on to the second one. I'd like to approach it from a different angle.

    In fact, you do have a lot of input on specific issues. It doesn't really matter who the chief negotiator is, whether it's the minister, whether it's Ambassador Marchi, whether it's somebody who's responsible for the issue. The consultation process has become much more open and much more transparent.

    Let me give you an example, as you're interested in dairy. We're going into yet another dispute. We've got five committees. Every province is represented. There are all kinds of regional marketing boards. Dairy groups are involved. They have farmer representatives involved, they have association representatives involved, they've got specialized professional advisers involved. And all of it comes together.

    That's what happens on softwood as well. The provinces are involved in meetings, their industries are involved, the process is much more open. I don't think it's going to make any difference if you have a professional private sector negotiator taking the position of running them or not. In fact, when I have worked with corporate executives and exposed them to the process, they say, get me the hell away from this. Because you're dealing with 130 countries.

    Mr. Mark Eyking: Is it an aide or a messenger boy? You give him all this information and he goes to wherever.

    Mr. Peter Clark: The minister and cabinet give you your instructions, and it's up to you to use your wits to try to get them across. You're dealing with a lot of countries.

    My comment about the provinces--I wouldn't want it to be misconstrued--is that it would be useful to you, as a committee, to have a dialogue. I'm not talking about sharing power, I'm not talking about giving anybody a veto. They have a lot of information, and the benefits I see coming out of these negotiations are going to be micro benefits--macro benefits for the developing countries, micro benefits for Canada. We're going to have to pick and choose.

    You have to remember that we're already a totally open economy vis-à-vis our biggest trading partner--there's only about 14% left. And we want to expand that. Because we've got that relationship with the United States, if we challenge them and we win, they are much more inclined now to implement than they were in the past. Bill talked about provincial liquor boards. The U.S. state ADCs and their own regulations are just as dirty. When they challenged us, we challenged them. We got them on 41 states and Puerto Rico. They didn't implement, because it was a state problem and it was under GATT. But if we had that decision under the WTO, they'd have to try to do something about it. They're even trying to change the FISC--I don't know if they'll ever do it. So the rules do help us.

    I have always been a strong believer that your committees should be much more involved than they were in the past and you should have a bigger say. I think the work you're doing in this committee and other committees is turning out excellent reports, excellent guidance. People have different views within the committee, and they're expressed, so that people can take a look at what's happening. It's not all happening. Who reads Hansard, except some of us--we have to read Hansard? But if you come out with a report, it's got a cover on it, it goes on your website, people read it and become informed. And I think you'll be informing the people better if you have the broadest possible input.

»  (1730)  

    The Chair: Thank you, Mr. Clark.

[Translation]

    Mr. Bergeron.

    Mr. Stéphane Bergeron: I'd like to start off with a comment, given that I found Mr. O'Brien's and Mr. Eyking's comments about federal-provincial relations somewhat amusing. However, as the saying goes, just because someone laughs doesn't mean that it's funny.

    In fact, Mr. Chairman, I must admit that I'm rather concerned about the comments made earlier, particularly those of Mr. Eyking. I was saying that globalization will push federal states toward greater centralization or greater cooperation with federated states. However, after listening to the views of the people seated opposite, I get the feeling that instead of seeing more cooperation with federated states, they would prefer to see Canada become even more centralized.

    Mr. O'Brien said that he had no problem discussing international trade negotiations with the provinces, but that the latter should agree to sit down with federal officials to discuss education.

    As I see it, Mr. O'Brien does not have a firm grasp of the issue. By virtue of its Constitution, the federal government has the authority to negotiate international agreements with its trade partners. However, once it is seated at the bargaining table, the federal government also negotiates a host of other questions, some of which come under provincial jurisdiction. The federal government has no constitutional authority to impose on the provinces agreements relating to provincial areas of jurisdiction that it has negotiated with other trade partners.

    Once a trade agreement has been negotiated, the provinces, like the federal government, must pass the appropriate legislation to implement the trade agreements. If, perchance, a province decided not to pass such legislation, the federal government would be in a bind. Pursuant to the agreements, it would be required to proceed and implement the accord's provisions, including those that apply at the level of federated states.

    Having invited the provinces to the bargaining table in an apparent show of indulgence and generosity, the federal government should now understand that its real reasons for doing so had more to do with being pragmatic and expedient. Bringing the provinces into the negotiations provides assurances that they will indeed want to implement the terms of the agreements concluded by the federal government.

    Therefore, it's not a matter of the federal government wanting to be generous toward the provinces. Involving them in the process is ultimately more expedient.

    Having said this, I'd like to get back to...

[English]

    Mr. Mark Eyking: Are we witnesses here?

    The Chair: Let's move on.

[Translation]

    Mr. Stéphane Bergeron: Just like Mr. O'Brien and Mr. Eyking, I too want to preface my questions with a comment.

    Since Mr. O'Brien wanted me to touch on the question of the European Union, I'd like to approach it from the perspective of Mr. Fox's proposal to establish at some future point a development fund. I too would like to use the example of the European Union, although I'm well aware - just so that Mr. O'Brien doesn't bring this to my attention later - that this region of the world was ready for this union, given its socioeconomic and political makeup. The socioeconomic and political landscape is radically different in our part of the world, and this calls for a different perspective on things.

    This being said, when countries with potential markets like Portugal, Greece and Spain joined the European Union, Europe had the presence of mind to establish a development fund to ensure that the standard of living in these countries would rise and become comparable to that in other European nations. Thus, it would be possible for all EU partners to engage in profitable trading activities.

    In so far as establishing a Free Trade of the Americas Zone is concerned, there's no denying that the standard of living in Canada and the United States is radically different from that in Belize or Guatemala. Given that Canada is a trading nation and that these other countries would be potential consumers of Canadian products, in the event a free trade agreement is concluded with these nations, would President Fox's proposal be viewed in a favourable light? The latter called for the establishment of a development fund to help less developed nations in our hemisphere.

    As experts on the issue, given the European model, which is only an example, and given the situation here in this part of the world, do you feel there would be any advantage to establishing such a fund, in conjunction with the creation of a Free Trade of the Americas Zone?

»  (1735)  

[English]

    The Chair: Who will volunteer?

    Mr. Campbell, and then Mr. Dymond.

    Mr. Bruce Campbell: The idea of a development fund was raised during the NAFTA negotiations as well. I don't know if the government actually put it on the table. It was certainly something the opposition were pushing. They were pushing for a development bank. It didn't happen. They were looking at the European model. As you rightly note, the European model, the development fund concept, has been very important for smaller, weaker countries. Ireland, the so-called miracle country, owes a lot to those development funds. Whether it will be a serious issue on the table during the FTAA round I don't know. It doesn't seem to me at present that it's there.

    Of course, the European Union was conceived as a political project. NAFTA and the FTAA are very much in the commercial vein. There's not much of an institutional structure in NAFTA, nor is one envisaged in the FTAA. We're seeing in the case of NAFTA some real consequences of that. We've become much more vulnerable through our dependence on the United States, and that has happened over the last 10 or 12 years. Yet there are no institutions for common decision-making. So we have a continuation of the United States playing off Canada, the United States playing off Mexico. The United States is in control of the agenda. We're very concerned about being inside the perimeter and not outside the perimeter in a security sense, but also in a commercial sense.

    So to answer your question, I support the notion of development funds. I think they're critical in an integration agreement where you've got such huge asymmetry.

    I would just make one comment. You weren't there for my opening presentation. I basically focused on the issue of public services and the GATS. The GATS, the services agreement, is really crucial to what's happening at the WTO right now. That is where the action is. Major public services like education and health care are provincial jurisdictions, and they should be. They should be at the table. They should be consulted. They should know what the implications of what's going on are.

    There's a so-called exclusion for public services. Examine that exclusion. Is it effective? The Minister of Trade says it is effective. Many say it is not effective, it's very limited. I think it would be worth your while in this committee to examine that exclusion for public services. Peter Clark said this is just a bottom up agreement. I'm not the expert. The expert who should have been here couldn't be here. So I'm not going to get into an argument, but I know what he would say. He would say it's a hybrid agreement, a combination of top down and bottom up. So public services are already covered in important ways.

    As to the more intrusive aspects, where we put our commitments on the table, the Canadian government has already put health insurance on the table for provisions of market access and national treatment.

    So I think. as someone who's sensitive to provincial considerations, this committee should look very closely at how this services negotiation is treating public services, because there's a real danger of upsetting balance in public services between the private and the public sector. With the provision of health care, it's a mixed system. Education, to a lesser extent, is still a mixed system. There's a relentless pressure in the GATS to privatize, because, after all, this is about liberalization and commercialization in services. If you're going to have a market, you have to privatize, because public services aren't a market. So it's something I would urge you to look carefully at.

»  (1740)  

    The Chair: Mr. Dymond, do you want to add anything?

    Mr. Bill Dymond: I would urge you to look at it too, and then you'll find that there's nothing to worry about.

    May I answer Mr. Bergeron's question? I'll answer it in two ways.

    Is there a case for a fund? Yes. And it ought not to depend on having a free trade agreement. You ought to separate the two ideas. We have responsibilities down there. If there is a case for a development fund, it ought not to depend on signing a free trade agreement 4 years or 10 years from now. After all, in respect of the commercial benefits of Canada, if we could get all those countries adhering fully to their existing obligations under the WTO, there would be benefits and there would be a need for a development fund.

    Second, I think my friends in CIDA would say there already is one, it's called the Inter-American Development Bank. Countries like Canada and the United States already have development assistance programs down there. It may be a case of increasing them, it may be a case of refocusing them. The European development funds, in my experience, have been infrastructure funds. If you travel anywhere, you have massive autoroutes, massive rail networks, reconstruction of the ports. It's basically infrastructure for taking part in an integrated economy. Perhaps that's where it needs to go.

    Quite a lot is being done. More can be done. It ought not to be, in my opinion, linked to the fate of a negotiation. I think it has a case all its own.

[Translation]

    The Chair: Do you have one last brief question, Mr. Bergeron?

    Mr. Stéphane Bergeron: Very quickly, Mr. Chairman, I have a question concerning chapter 11 of the NAFTA.

    There was some talk of chapter 11 of the NAFTA being included in the Free Trade of the Americas Zone accord. It would allow private companies to take legal action against governments if they feel decisions made in the interest of the nations concerned are discriminatory. This would mean that policies which were democratically adopted by legislative assemblies and, of particular interest to us, by the Parliament of Canada, could be overturned.

    The Parliament of Canada may make a decision which is deems appropriate for the welfare of Canadians and subsequently, as a result of Chapter 11, a private company may challenge that decision if it feels it is being treated unfairly.

    In your opinion, shouldn't we avoid making the same mistake, that is including an undemocratic provision in a future Free Trade of the Americas accord?

»  (1745)  

[English]

    Mr. Bill Dymond: Would the committee be happier if the complaint came from another government? Remember what is at issue, why a Chapter 11 case arises. It arises in case of alleged breach of an obligation solemnly accepted by the Government of Canada. If Parliament enacts legislation contrary to such an obligation, you have a conflict, and the conflict has to be resolved somewhere.

    In my view, the most important question, whether it's investment or anything else, concerns the nature of the obligations the Government of Canada has accepted. Is that appropriate public policy? A second order of question is, who is likely to sue you? The matter is not less serious if you are sued by a company than it is if you are sued by the Government of Brazil or the Government of the United States. Public policy is on the table, legislation adopted by Parliament, recently or in the past, is on the table. So the heart of the matter there is not the nature of the litigant, because every trade agreement has dispute settlement, but the nature of the obligation.

    Second, I must confess that I lack patience for the argument that says there is something fundamentally wrong with a dispute settlement that can change government policy. I put it another way. That is the desire to get something for nothing. That is the desire to say we can affect somebody else's trade, we can prejudice a foreign investment, we can act contrary to our international obligations--and by the way, we are not going to pay anything for it, we are not going to take a hit, we are not going to take a judgment, we are not going to take an obligation to amend. That is the route to chaos. That is completely contrary to Canadian diplomacy over the last 50 years.

    It is far from certain whether Chapter 11 will be included in the FTAA, still less is it certain whether there will be a set of obligations governing foreign investment. But the public policy issue at the heart of it is whether it is right for Canada to agree to treat investment from Brazil, from Chile, from Surinam, from St. Lucia in a non-discriminatory manner. Is it right that Canada should agree that investment from Argentina should not be subject to performance requirements, inconsistently with the obligations of the agreement?

    There will be different views. I know my friend Mr. Campbell will have a different view on it. It's a legitimate view, it deserves to be heard. But I think you will miss the point if you have the discussion in terms of, all that really matters is whether you get sued by a company. I would argue that pledges, obligations, agreements entered into by the Government of Canada are very solemn affairs indeed and not to be accepted lightly. If the government and Parliament are prepared to accept them, that is the main issue, rather than who you get sued by.

    As for the FTAA, I think it is far too early to say what it's going to be, what the structure of obligation is going to be, whether it is going to be top down or bottom up, whether there will be investment rights and obligations requiring a Chapter 11. All this needs to be worked out. It's timely to discuss them.

    The Chair: Mr. Clark.

    Mr. Peter Clark: Look at it from another perspective. These investor state rights are contained in numerous bilateral investment treaties the United States has with many of these countries. Why shouldn't Canadian investors have the same rights?

    There was a lot of mythology built up around Chapter 11 because somebody decided to put the words “tantamount to expropriation” into the text and nobody knew what they meant. People said, let these tribunals determine what those words mean, and I think the one tribunal I've seen that's referred to this matter has just said, it's not an expansive definition, it doesn't create a great black hole that corporations can run to. If you look at the awards that have been made to date, there haven't been an awful lot. There was a dispute about arbitrariness with a building permit. One of the tribunals referred to the applicant as somebody who would say anything he had to to make his case.

    These tribunals are made up of well-respected international arbitrators. They don't just pick three people off the street and stick them in a room, it's a very complex process. Canada paid money to Ethyl Corporation on MMT, probably in part because they were challenged by the Government of Alberta under the agreement on internal trade and lost. They had to change anyway, so they looked at a settlement. A lot of people say they shouldn't have done that, they should have gone through to see where it came out. There are panels that have people of the calibre of Warren Christopher sitting on them and John Veeder, who's one of the most respected arbitrators in Europe. It's not just anybody that's doing this. These are people who have been involved in things like the Iran-Contra disputes. These are big disputes, these things happen everywhere.

    I've been to arbitration conferences in Geneva and in Toronto where people talk about the NAFTA Chapter 11 model. They're extremely interested in it, and after we have some experience with it, we may find it's not a bad thing. In fact, when I was in Quebec City, I heard the Prime Minister say very clearly, I like that, because Canadian investors, like SCN and other people, need protections around the world.

    We have to get past the mythology and look at the practicalities of it, because the Americans have all these protections, the same investor state rights are in their bilalteral investment treaties. We don't have the clout to go around and negotiate those treaties, so perhaps in the FTAA or somewhere else there is a need for something with adequate protections to look after the legitimate policy things you're talking about or Mr. Pettigrew is talking about.

»  (1750)  

    The Chair: Mr. Campbell, do you want to answer?

    Mr. Bruce Campbell: Briefly, it's in the draft text of the FTAA. It may not end up in the final agreement, but it's there now, and it's pretty much there in identical form. There's been no substantive.... You may recall that at Quebec the Minister of Trade wanted to have an interpretation that would limit its applicability, and I think he was overruled and somewhat embarrassed by the Prime Minister, who said it was fine as is.

    There are a lot of experts out there critical of investor state who I think you should bring to your committee to get both sides of the issue. This is one of the real hot flashpoints, because it's very concrete and it's very visible when people see a municipality that's stopped a waste dump being overruled by a NAFTA panel, or when, with an additive like MMT that is banned, the government has to back down and compensate the company. We just had a company suing the Canadian government for $100 million over the chemical lindane--maybe some of the other guests here know that case, but I don't. My understanding is that the banning of that substance was done under NAFTA negotiations. It had been banned in the States, it was banned in Canada, and subsequently, the company is suing Canada for having banned the substance under a NAFTA-type agreement. There are some 20 to 25 of these cases. UPS is suing the Canadian government for--correct me if I'm wrong--a billion dollars over the fact that Canada Post has a monopoly and therefore an unfair advantage in the courier service.

    So have a look. There are all kinds of them, and I think it would be worth the committee's while to really examine investor states in more detail.

»  (1755)  

    The Chair: You have a final question, Mr. O'Brien.

    Mr. Pat O'Brien: I'd like to thank the witnesses. You've given us a lot of food for thought.

    I have a couple of clarifications on Chapter 11 cases. Our government is involved in a grand total of five, so I think we need to talk about the real numbers.

    Mr. Bruce Campbell: Some of them may involve Mexico or the United States.

    Mr. Pat O'Brien: Yes, I understand that. I'm just making the point that we're currently involved in five. I can give you the exact quote of the Prime Minister: “relatively well”. He didn't say it was fine, but it's working relatively well. I guess that's a matter of interpretation if there are five cases. Considering all the trade we do, maybe that's doing relatively well.

    But I do agree that we should look at those things. I think the comments about the provincial consultations are very good. I support that. I certainly didn't use the word generosity. It wouldn't be generous to have those consultations, it'd be good public policy. And it would also be good public policy in issues like education. That was my point earlier.

    I was a municipal councillor for 11 years. I have to strike the note that we ought to be hearing from municipal governments as well, maybe through their national body, the FCM. I think we've had some recent examples in Quebec and other provinces where municipal councils didn't necessarily agree with what their provinces have dictated to them. So I think we ought to involve the most junior level of government in this country, and perhaps, in many ways, the most important one.

    The last point I would make, Mr. Chairman, is that I agree with Mr. Dymond on this GATS thing. It's frustrating to have to keep saying it, but I will. This is a nuance, but it's a very important nuance. As I understand GATS, it's not a matter of excluding health and education, it's that they are not included. We are not putting them on the table. That's not a matter of interpretation, that's a matter of statements by our government and a matter of understanding how GATS works and how it reads. If you don't put it on the table, it ain't on the table. It's not a matter of excluding it.

    The Chair: I take that as a comment.

    Mr. Pat O'Brien: Thank you, Mr. Chair.

    The Chair: I wanted to take this opportunity to thank our panel. I think you were absolutely excellent. You gave us, as my colleagues have said, a lot of good ideas and food for thought. You were frank, you were pragmatic, you were sincere, above all.

    Speaking of sincerity, to my colleague Mr. Bergeron I wanted to offer my sincere apology about having the meeting. He's quite right, we should not have had the meeting without the opposition, but as I said earlier, this is an isolated case. Our witnesses were here, and unfortunately, the House was still engaged. So I hope you will take it in that spirit.

    As well, I think I may have inadvertently given an impression concerning the fact that you are a substitute. You have every right, like every other member, and I appreciate the fact that you have taken the time to come in and join the committee in the hearings.

    I wanted to say to all witnesses, if you have any kind of a paper, a written submission, some thoughts from the past, the present, or the next few weeks, please send them to the clerk, because they would be very useful for us. The comment from Mr. Clark about inviting the provinces is duly noted. If there's agreement here, we will send an invitation to them. If they can't appear, we will ask them to send us a submission no later than March 25, because we have to complete our report in a very short time after that. Is that understood? We will send a notice to the FCM too.

[Translation]

    Mr. Stéphane Bergeron: Mr. Campbell has suggested that we have a panel discussion to hear from the supporters as well as the detractors of Chapter 11. This would help us gain a better appreciation of the eventual ramifications of including a chapter 11 in a Free Trade of the Americas accord.

[English]

    The Chair: Okay, we will do that if time permits. You want to raise it every time we have a panel. I am a strong believer in having a larger exposure, rather than having it focused, so if time permits, we will look at all options.

    The clerk is telling me we do have a panel on investments, so probably this is the perfect time for that to be raised.

    We adjourn. Thank you again.