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, February 21, 2002

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1535

The Acting Chair (Mr. Bob Speller (Haldimand--Norfolk--Brant, Lib.))

Mr. Robert Keyes (President and Chief Executive Officer, Canadian Council for International Business)

Mr. Clifford Sosnow (Chair, Trade Policy Committee, Canadian Council for International Business)

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1540

The Acting Chair (Mr. Bob Speller)

Ms. Kathleen Macmillan (President, International Trade Policy Consultants Inc.)

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1545

The Acting Chair (Mr. Bob Speller)

Mr. Elliot Lifson (President, Canadian Apparel Federation)

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1550

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1555

The Acting Chair (Mr. Bob Speller)

Mr. Gerry Barr (President and CEO, Canadian Council for International Cooperation)

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1600

The Acting Chair (Mr. Bob Speller)

Ms. Ann Weston (Vice-President, North-South Institute)

The Acting Chair (Mr. Bob Speller)

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1605

Ms. Ann Weston

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1610

The Acting Chair (Mr. Bob Speller)

Mr. Yves Leduc (Assistant Director, International Trade Department, Dairy Farmers of Canada)

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1615

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1620

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1625

The Acting Chair (Mr. Bob Speller)

Mr. Pierre Paquette (Joliette, BQ)

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1630

The Acting Chair (Mr. Bob Speller)

Mr. Robert Keyes

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1635

Mr. Pierre Paquette

The Acting Chair (Mr. Bob Speller)

Ms. Ann Weston

Mr. Speller

Ms. Gauri Sreenivasan (Policy Coordinator, Canadian Council for International Cooperation)

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1640

The Acting Chair (Mr. Bob Speller)

Mr. Clifford Sosnow

Mr. Yves Leduc

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1645

The Acting Chair (Mr. Bob Speller)

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

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1650

Ms. Ann Weston

Mr. Pat O'Brien

The Acting Chair (Mr. Bob Speller)

Ms. Lill

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1655

Mr. Gerry Barr

The Acting Chair (Mr. Bob Speller)

Ms. Kathleen Macmillan

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1700

The Acting Chair (Mr. Bob Speller)

Mr. Robert Keyes

The Acting Chair (Mr. Bob Speller)

Mr. Jack Kivenko (Member, Canadian Apparel Federation)

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1705

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1710

The Acting Chair (Mr. Bob Speller)

Mr. Gerry Barr

The Acting Chair (Mr. Bob Speller)

Ms. Ann Weston

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1715

The Acting Chair (Mr. Bob Speller)

Mr. Jack Kivenko

Ms. Lill

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1720

The Acting Chair (Mr. Bob Speller)

Mr. Jack Kivenko

The Acting Chair (Mr. Bob Speller)

Ms. Kathleen Macmillan

Mr. Yves Leduc

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1725

The Acting Chair (Mr. Bob Speller)

Mr. Elliot Lifson

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1730

The Acting Chair (Mr. Bob Speller)

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

Mr. Yves Leduc

Mr. Mark Eyking

Mr. Yves Leduc

Mr. Mark Eyking

The Acting Chair (Mr. Bob Speller)

Mr. Clifford Sosnow

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1735

The Acting Chair (Mr. Bob Speller)

Mr. Yves Leduc

Mr. Mark Eyking

Mr. Yves Leduc

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1740

The Acting Chair (Mr. Bob Speller)

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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 022

l

1st SESSION

l

37th PARLIAMENT

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COMMITTEE EVIDENCE

Thursday, February 21, 2002

[Recorded by Electronic Apparatus]

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[English]

    The Acting Chair (Mr. Bob Speller (Haldimand--Norfolk--Brant, Lib.)): Colleagues, perhaps we could begin.

    Ladies and gentlemen, I want to take this opportunity to welcome you here today as we do our study of the WTO negotiating position. I want to welcome back many of you, actually, because we've seen many of you before in other studies.

    We have a group of presenters here today. What we like to do in these is to have a round table to try to get a perspective from the community, from Canadians, as to their views on these issues. So what we've been doing in our study is to try to draw in as many people, and as many different aspects of Canadian viewpoints on these issues, as we can.

    We have the pleasure today of having a number of different groups. We have the Canadian Council for International Business; International Trade Policy Consultants; Canadian Apparel Federation; Canadian Council for International Cooperation; the North-South Institute; and the Dairy Farmers of Canada. So we have a mixture of people today.

    As you can well imagine, there is a large number of different groups from across this country who have wanted to come forward and present their views. We've tried to choose as we can from different parts of the country and from different interests. We certainly appreciate the fact that you've come forward here today to talk to us.

    I have a list here on the agenda. I think what we'll do is we'll start by going down the list. I'd appreciate it if you could, given the large number of people and the request from Mr. Keyes that we get out of here to watch something on TV tonight of national importance, hold your presentations to five minutes. We'll try for five or so, and the chair will be somewhat lenient in that for those of you who have prepared longer. But that'll give us a chance to dialogue, to answer questions, and to share our views and ideas.

    So I'd like to start today with the Canadian Council for International Business, Clifford Sosnow from Lang Michener, and Robert Keyes.

    Mr. Robert Keyes (President and Chief Executive Officer, Canadian Council for International Business): Thank you, Mr. Chairman. It's a pleasure to be here today to talk about the WTO and development, which I understand was the particular focus you wanted to bring to this specific discussion. I'm going to ask the chair of our trade policy committee, Clifford Sosnow, from Lang Michener, to make opening remarks. Then both of us will be prepared to engage in your discussion later.

    Just by way of background, the CCIB is the affiliate in Canada for the International Chamber of Commerce and for the Business and Industry Advisory Committee to the OECD. In my ICC capacity, of course, this is an organization that spans both developed and developing countries and the business communities in these countries, so we do focus a lot on the issues that are on the table for this discussion.

    With that, I'll turn it over to my colleague, Cliff Sosnow.

    Mr. Clifford Sosnow (Chair, Trade Policy Committee, Canadian Council for International Business): Thank you, Mr. Chairman, members of the committee. It's indeed an honour and a privilege to be here. I will have some brief comments to make. Those comments will be generally to talk about sharing the wealth, and our views on the developing country agenda, on capacity building, and on good governance and getting the right business environment.

    I appreciate that I have only five minutes, and so I will just sketch out some of our thoughts and we'll flesh them out later in Qs and As, in some of the questions that you have for us and the answers that we may have for you.

    As a first point, our view is that it is critical that developing countries share in the benefits of the multilateral trade environment, and that the business community feels that developing countries becoming fully integrated into the multilateral process is an important and welcome development, because the business community believes that in the long term it is in the interests of the entire international community to see that developing countries get their fair share of the pie.

    In this regard we applaud Canada's activities in the area of trade policy capacity building, such as the $1 million contribution to the UN Trust Fund on the Integrated Framework for Trade-Related Technical Assistance. We also applaud other capacity building measures in the WTO. We can talk about those later.

    I do think, above all, we have to recognize that business is the driver of any successful economy, that there is not a healthy economy in the world that does not have as its cornerstone a healthy private sector anchored in the rule of law. I think those are two important precepts that we can't lose sight of when we talk about helping the developing country agenda.

    From a Canadian perspective, I think we need to recognize that Canada does have to strike a balance between protecting its own interests and promoting the overall health of the global multilateral system. But in the business community's view, a system that freezes out the developing world helps no one, certainly no one in the long run. Recognizing that the developing countries now account for approximately three-quarters of WTO members, they do carry substantial weight in the organization. And for the new round to succeed, developing countries do need to feel confident that they can make dependable gains in access to developed country markets.

    Those are our general points on sharing the wealth with developing countries.

    WIth respect to the issue of capacity building and what is called a “coherence agenda”, our view is that we have long advocated that the WTO, the World Bank, the IMF, and other institutions must work closely together to assist the developing world in building its capacity to negotiate and implement trade agreements.

    Canada has demonstrated that it can provide technical assistance to support such capacity building. The business community sincerely applauds these efforts because it is consistent with the notion of the developing country agenda of participating to the fullest extent in the multilateral process.

    But I think it's important that we do avoid duplication in development. I think that the comments of Mr. Michael Moore, director general of the WTO, on this issue were apropros when he said last week that we need a maximum of cooperation and a minimum of duplication. We think that's the right track.

    We recognize that the WTO has a role to play in development policy, but it is not the World Bank, and it is not the IMF, and it is not UNCTAD, nor should it be. The WTO is a secretariat that was set up to administer a series of trade agreements. Its contributions to the development agenda should remain focused on that.

    I think we need to be careful about the expectations that we raise with the developing world in terms of what they can and cannot expect from the WTO.

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    Finally, on the issue of good governance and getting the business environment right, I think we all recognize removing trade barriers is not, in itself, going to create economic growth and social development. There has to be serious domestic regulatory and institutional reform, transparent governments, adequate physical and services infrastructure, tax reform to support social policy, strong macroeconomics, and, importantly, investor protection.

    We raise the last point about investor protection because, in our view, investment flows in developing countries is a win-win proposition. It brings capital, technology, and expertise, all of which are badly needed, to developing countries. It showcases Canadian expertise to the world. The business community does need to have confidence in order to invest. It means they need to be assured their investments can be protected, they will be fairly treated, and capital can move freely across borders.

    In our view, investment and technology transfers need to be backed up by policies of sound protection of investment and intellectual property. It's why the international business community puts investment issues at the forefront of international discussions.

    I'll stop right there. I think I have used up my allotted time. If members of the committee have questions for us, we're more than pleased to answer them.

    The Acting Chair (Mr. Bob Speller): Thank you very much. We appreciate the work you've put into it.

    Next we have the International Trade Policy Consultants. Kathleen Macmillan, welcome back to the committee.

    Ms. Kathleen Macmillan (President, International Trade Policy Consultants Inc.): Thank you, Mr. Chairman, members of the committee.

    I thought I would begin by giving an outline of my background so you know a little about my experience, and hopefully we can take it from there in terms of questions.

    I'm an economist by training. I've specialized in international trade issues and I've written for groups such as the Canada West Foundation and C.D. Howe Institute. I recently wrote a book on the WTO--actually, I have a copy here. It was meant to make me and my co-author rich because it was a primer for the Millennium Round, that round that never happened. So I have lots of boxes of books in my basement if committee members are ever interested.

    The Acting Chair (Mr. Bob Speller): Unfortunately, we're not on TV.

    Ms. Kathleen Macmillan: Yes, we're not on TV, so no more book plugs.

    Finally, I spent five years as vice-chairman of the Canadian International Trade Tribunal, so I know a little about dumping as well, and I'd be happy to answer questions the committee members might have about that.

    I mention my experience so you know right from the outset that my biases are evident. As an economist, I believe in trade liberalization. Economists tend to favour free trade because the evidence shows fairly unequivocally that reducing trade barriers enhances a country's income and that makes it possible to buy things like public health care systems and other things that matter to you.

    What I'd like to talk to you about today is the WTO and my concerns about the future for the multilateral trading system. The system has changed a great deal in the past decade, largely as a result of the Uruguay Round negotiations. Its membership has also swelled to some 142 countries, I believe, at last count. The accession of China will further change the institution in ways that we can only begin to imagine.

    There are concerns that the world trading system that has contributed so much to peace and prosperity since the post-war period is under some threat. The chief reason for this is the growing divide between developed and developing country members. And my concern is this. Unless rich countries like Canada work at achieving a better balance between nations of the world, we might bear witness to the demise of the WTO as an effective institution. That matters not so much for economic reasons, which are very important to countries like ours, but for reasons that go beyond economics.

    I think the September 11 events underline the importance of having global institutions work in an inclusive, cooperative spirit of compromise. So we need to demonstrate that the WTO, which is really a cornerstone of our economic system, internationally can work.

    On the cause of the north-south divide, I would say one of the big factors is that the countries of the south are fast losing patience with what they see to be hypocrisy on the part of the developed world vis-à-vis trade policy issues. They look at the persistence of high barriers in developed countries in textiles, clothing, footwear, agricultural goods. They also see things like our fair trade laws. They are recognizing that we are holding them to commitments with respect to intellectual property, with respect to trade-related investment measures and customs valuation. They feel we are preaching the benefits of open markets but we ourselves are retaining high barriers to goods that they are good at exporting. And even when we offer programs to alleviate duty on imports from third world countries we are selective. We restrict these programs to the very poorest of the poor and we leave out sensitive sectors from duty removal.

    As Mr. Sosnow just said, we need to give developing countries more resources to help them with trade adjustment, with technical assistance. We also need to give them more time to implement some of their commitments to the WTO. This is the right thing to do.

    According to the World Bank, if we were to freely open markets and eliminate subsidies, we could add something like $1.5 trillion to the income of the developing world. If we put that against the roughly $50 billion per year that rich countries spend on official aid assistance, it's quite clear that if we really want to help the developing world, we have to look at trade policy. The biggest bang for our buck is there.

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    So what can Canada do beyond using its considerable influence in the WTO to help achieve a better bargain between rich and poor? One place to begin might be in acknowledging the interface that exists between trade policy and international development policy and perhaps consider some meaningful reductions in our tariffs against goods that are produced in the developing world.

    So I urge this committee to reaffirm Canada's commitment to the WTO. It has done so much for our own economic prosperity. And I urge you not to take it for granted, but to see that we do our part as Canadians to ensure its continued success.

    The Acting Chair (Mr. Bob Speller): Thank you, Ms. Macmillan. Thank you for your presentation.

    Next we have the Canadian Apparel Federation. Welcome to the committee. We appreciate your being here.

    Perhaps you could introduce yourselves.

    Mr. Elliot Lifson (President, Canadian Apparel Federation): Mr. Chairman and committee members, we appreciate very much the opportunity to appear here this afternoon to assist in your deliberations. I know it's hard to come third, but I feel embarrassed sitting here after what I heard. I would like to make sure that we hear it all in context, what we're saying, so it's clear. It's not black and white.

    First of all, I'll introduce myself, Elliot Lifson. I am president of the Canadian Apparel Federation and vice-chair of Peerless Clothing Inc. I am accompanied by Mr. Jack Kivenko, vice-president of Jack Spratt Manufacturing Inc. and past-president of the Canadian Apparel Federation. Together we account for 70 years of experience in Canada's apparel industry. We are really young guys. We started at a young age.

    Our companies employ over 3,500 Canadians.

    Also in attendance is Bob Kirke, the executive director of the Canadian Apparel Federation.

    We understand that your committee is examining what Canada's negotiating position should be in the new WTO round, especially how our country can balance its commercial interests with its development objectives of supporting developing countries' desire for greater access to our market. Canada's apparel industry has a real stake in how that question is answered during the Doha Round.

    A few years ago at the outset of free trade with the United States this industry was labelled a sunset industry. Most people thought that the FTAA and subsequently NAFTA would simply kill off clothing manufacturing in Canada. To say the least, the rumours of our death have been greatly exaggerated. Many companies now ship more than half their production to the United States and many are market leaders in the products they produce.

    Some 95% of our production goes to the U.S. market. Our direct employment in the industry stands at approximately 100,000 people in over 2,000 companies. We export 40% of total production, over $3 billion annually, mostly to the U.S. market.

    Our industry supplies a complete range of apparel products and we compete with businesses and products from around the world in domestic and foreign markets. Nonetheless, international competition has intensified dramatically in recent years with the increased competitiveness of manufacturers in developing nations and trade liberalization under the WTO.

    Under the WTO Agreement on Textiles and Clothing, all apparel import quotas will disappear in 2005 and tariffs on imported apparel will be reduced. This will affect our domestic sales and export opportunities. Moreover, there is active consideration that Canada go beyond the terms of this agreement and provide additional concessions to least developed countries, LDCs, in the near term.

    We are against any immediate unilateral concessions on Canada's part. An abrupt elimination of tariffs and quotas on LDC imports would have a significant impact on certain sectors of the industry and undermine the industry's efforts to adjust to the new open market conditions already taking place as a result of the current WTO agreement.

    In particular, we are concerned that such a move would open the door to transshipment of goods from other countries that remain under quota restraint, and any concessions granted to LDCs would be requested by all other developing countries. As well, these measures would offer only temporary benefit to these countries--this is very critical--and do not address the long-term needs of the LDCs.

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    Their apparel industries only exist, in large part, because quota controls have diverted production from major producing countries like China to less productive ones like Bangladesh or Madagascar. In 2005 remember what's going to happen. All quotas are removed. This production will migrate back to the most productive countries, leaving apparel industries in Bangladesh and other LDCs decimated. This will happen with or without a set of concessions for Canada--temporary relief only.

    Whether the measures being discussed concerning the LDCs come to pass or not, this industry will face mounting import pressure from numerous low-cost suppliers. It truly is the case that the industry must refashion itself, and we need a clearly thought-out policy framework from the government to assist us in this.

    Our industry is concerned that the federal government's approach to our industry lacks coherence. We need to address a number of issues that have impact on our industry, especially tariffs on imported raw materials. Why pay tariffs on textiles not produced in this country that we use in production? We must address them before we open our markets any further.

    The key messages I want to leave are: first, Canadian jobs should not be undermined to meet development assistance goals, especially temporary ones; second, anything Canada does should focus on long-term benefit for LDCs; and third, our industry can be competitive, given a policy framework that supports Canadian production, and we've proved it.

    Mr. Chairman, these are my opening remarks. Mr. Kivenko and I look forward to the discussion, when hopefully we'll be able to answer your questions and provide more information about our views.

    Thank you.

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    The Acting Chair (Mr. Bob Speller): Thank you very much. You certainly outlined the importance of this issue to your industry and we appreciate that.

    Next we have Gerry Barr from the Canadian Council for International Cooperation. Welcome back.

    Mr. Gerry Barr (President and CEO, Canadian Council for International Cooperation): Thank you, Mr. Chair.

    The council and its members have been working for over 30 years to ensure effective Canadian contributions to international developments. By that we mean improving the lives of people living in poverty around the world. Our focus is on how to ensure our approaches to trade are supportive of and don't counter countries' and people's own efforts to direct their development processes.

    We have to remember that development is not a side issue in international trade. It's not a small aspect that Canada must remember to do a little bit for. It's a central premise of the purpose of international trade, as laid out in the mandate of GATT and the WTO.

    The fact is that not all countries are at the same starting post. Their peoples have different needs and problems. Ensuring the trade system works for the majority of countries and the majority of the world citizens, as well as for the rest of us, is a central political and ethical dilemma for the international community.

    That is what the Seattle debacle was all about: southern countries primarily walking away saying, “This isn't working for us”. The dynamic at Doha was very much affected by needing to address developing country concerns.

    I'd like to offer three principles that can help give us some guidance in bringing development merit to the Doha agenda.

    The first principle is the need for redressing the grotesque imbalance of power and development between north and south. To do this we must build a systematic bias in favour of improving the gains to developing countries from trade.

    If we're serious about the millennial summit's goals for the portion of people living in poverty by 2015—an issue of great concern to the Prime Minister—then we must not approach these negotiations looking only for what we can maximize for Canada in the negotiations.

    I'm not saying we shouldn't pursue Canadian export interests. Of course we should seek gains for Canada. I'm saying if we approach the negotiations as fundamentally about what everyone can best negotiate for themselves, as opposed to what is required to reduce the gap of wealth and income, there will be no development agenda.

    Concretely, this means moral and creative leadership from quad countries like Canada to support non-reciprocal concessions. It might even mean creative and enlightened unilateral concessions are required, not because Burkina Faso or Jamaica was able to hold a stick over our heads or force us to do something, or because we received something from them, but because simply and plainly it's the right thing to do. A very good example of this is the need to address the market access demands of the least-developed countries.

[Translation]

    The second principle is the need to determine by means of genuine, significant procedures, the range of development levels among WTO members. This great diversity is reflected in the economic needs and priorities of developing countries among themselves, but also as regards the developed world. Trade rules must take this into account.

    We must therefore recognize the characteristics unique to developing economies and clarify the varying degrees of openness among various countries and industries based on their capacity. In other words, a development program does not simply mean market access and increased trade for developing countries. In some cases, it means greater openness.

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[English]

    I'll give you an example of the need to allow developing countries rights to have access to trade instruments and protections different from those enjoyed by wealthy countries, based on their development needs.

    Most of the world's poor are rural. For low-income countries, which make up the majority of WTO members, agriculture accounts for 70% to 80% of the labour force, compared with 4% in high-income countries. Most of this agriculture is not even linked to international markets or trying to compete with others. But it is gravely undermined--and hence millions of livelihoods also--by the arrival of cheap imports, often from countries where agriculture is highly and unfairly subsidized, such as those in the EU.

    A number of developing countries have tabled a proposal, which is under current consideration in the agricultural trade committee sessions in Geneva, to create a development box in the Agreement on Agriculture. It proposes developing countries be allowed to spend more to support their farmers. It proposes that key food security crops in developing countries be exempt from market access commitments. It proposes that developing countries have access to affordable border measures to protect domestic agriculture from import surges. That kind of flexibility is reasonable and fair; it's good global public policy; it's oriented to development considerations. Canada should support it more than it has to date.

    A third principle for a Canadian development approach is to recognize that the inequities among WTO members mean we need to take account of the vastly different capacities among countries for effective participation.

    Let me focus on a pivotal issue--how to address the four new Singapore issues: competition policy, investment, government procurement, and trade facilitation. There's no question the majority of developing countries were and are clearly opposed to moving ahead to negotiation on these issues. It was only through a process that involved last-minute changes, extraordinarily late hours in the middle of the night, and overtired delegations that the language got into the declaration. On India's insistence, the chair assured the south that moving ahead to negotiations would first require explicit consensus of WTO members on modalities. We have to keep our word on that.

    So there are the three principles: address the global gap with non-reciprocal concessions; special and differential strategies with a development purpose need to be favoured; and we need to keep our promises on the prospect of a moderated pace with respect to the Singapore issues.

    Thanks very much.

    The Acting Chair (Mr. Bob Speller): Thank you very much, Mr. Barr.

    Now we have Ann Weston from the North-South Institute. Welcome.

    Ms. Ann Weston (Vice-President, North-South Institute): Thank you. It gives me great pleasure to be here.

    Just before I start my comments to this committee, I hope this committee will be able to take stock of some of the evidence that was given to the full committee on international trade after the Doha meetings. A number of us appeared before that committee. At that time we made a number of comments about the outcomes of the negotiations, and particularly what the implications would be for developing countries. In order to be relatively brief, I'm going to not repeat myself, but I do hope a number of those comments are referred to as you prepare your report, because I think there was a lot of good material presented--not just speaking for myself, of course, but by a number of other people from the government, as well as from outside government.

    The Acting Chair (Mr. Bob Speller): We have the transcript here and we're following it, so you can be assured we will.

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    Ms. Ann Weston: I'm going to reiterate a number of points the speakers here today have already made and perhaps challenge some of the others. But essentially my fundamental point is that it is really important to work in Canada and with other countries to bring a much more nuanced approach towards development into the World Trade Organization.

    What is of concern to me is that at present there seems to be a very narrow approach adopted in Canada, and perhaps in a number of other countries that, really, development is just an issue of time and money, and if we could just give countries a bit more time and some money in the form of trade-related technical assistance, all will be well and we can move ahead. Certainly that point of view, I think, was reinforced--I would say ill-advisedly--by Mike Moore's recent article in the Financial Times, which was already referred to, in which he argues that developing countries need technical assistance in capacity building in order to be prepared to take the next step--in other words, to accept the new issues, the Singapore issues--and to allow negotiations to proceed so that the Doha agenda will be completed by the year 2005.

    I would say that's the wrong approach. Really, what we have to recognize is that development is an issue of special and differential needs, in terms of dealing both with issues such as access to our markets and with differences in regulation and liberalization of developing countries' markets, and in the complementary action that's needed.

    Certainly I would like to call the attention of the committee members to the fact that even in the bowels of those organizations that traditionally have promoted trade liberalization in a rather sweeping fashion--namely the World Bank, the World Trade Organization, and some development agencies such as the British Department for International Development-- there have recently been published documents in which they recognize that a more subtle, even a different, approach to trade is needed that takes into account some of the characteristics of development in developing countries.

    For instance, on the issue of competition policy, the book that's been produced by the British Department for International Development is much more equivocal than Mike Moore. They argue that it's quite possible after examining the facts of the case--particular countries' circumstances--that a national government might conclude it's not in their interest to invest any more time or resources in developing a national competition policy or even in working within the WTO to establish rules in the WTO for competition policy. So we need to be much more careful in how we talk about trade and development.

    In terms of technical assistance, it is clear that technical assistance can help, both with addressing structural bottlenecks and with trade policy questions. More generally, as an earlier speaker mentioned, assistance might be needed on a much bigger scale to deal with adjustment issues.

    But the framework of the rules needs to be right. The WTO should help to create an enabling environment for the development of domestic enterprises in developing countries. It shouldn't be focused on imposing what I would call a singular approach. And certainly Canada must recognize the value of different approaches to trade, even where countries are at the same level of development.

    We're involved at the moment in a trade dispute with the U.S. in which we find ourselves being told that the way in which we've chosen to manage softwood lumber, for instance, or the way in which we choose to manage our wheat marketing, is not the way it should be--and, “Please, will you change it?” Clearly, we understand that's not always correct, and it shouldn't happen between the U.S. and Canada; nor should it happen within the context of the WTO. Just think how much more galling it is for developing countries to be told they have to adopt an approach considered appropriate by countries with very different, not to say higher, levels of development.

    So I would argue that our technical assistance should bolster countries' capacity to define their own strategic trade policy interests, not just to accept WTO rules or to interpret those rules in the way Canada has done. That means supporting the development of trade law departments within universities; supporting trade policy research networks, as IDRC has done, for instance; supporting informed discussion by civil society with the creation of regional negotiating capacity, as CIDA is doing in the case of the Caribbean. That's quite different from a lot of the technical assistance we sometimes offer, where we send our own trade experts--retired Canadian trade officials--to “tell it like it is” in Canada.

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    Perhaps what we need, really, is to begin to examine new ways of doing trade-related technical assistance, whereby we bring in people with the capacity to develop alternatives and to help developing countries themselves develop alternatives to the WTO rules. We need to help countries to protect their rights, to protect their economies, from dumping by other countries. And certainly there is an example, I think, already of Canada supporting the development, for instance, of regional machinery to deal with dumping in the Caribbean.

    I would like to argue that perhaps even the Department of Foreign Affairs and International Trade needs trade-related technical assistance. In other words, we need to give the Department of Foreign Affairs and International Trade, and some of the committees that advise the trade minister, the opportunity to learn about the problems of developing countries, the needs of developing countries, and why it is that in some cases they might need particular types of market access, or that in other cases the types of rules that we're going to be pressing for in the WTO aren't going to necessarily promote their development interests.

    Certainly, on a number of occasions, I've suggested that development expertise should be brought into what I call the innermost chambers of the Canadian trade negotiating bodies, the SAGITs, for instance, or the Team Canada advisory body. And already, within the interdepartmental process, we have CIDA beginning to do this and to bring some understanding of development into the interdepartmental negotiating process or discussion process. But CIDA's resources in this area are very limited. And so I would argue that it's very important for people on the outside to be brought into that process. And most appropriately, that would be in the context of the SAGITs, I would argue.

    There's also an opportunity, though, for perhaps this committee to organize round-table discussions where capacity is brought directly from developing countries.

    Over lunch today I had the opportunity of speaking to the Commonwealth high commissioners about the WTO and what happened at Doha. And in this discussion about trade-related technical assistance and what might we do in order to help the Department of Foreign Affairs and International Trade understand development, one suggestion was that perhaps some of the capacity that exists now in the Caribbean regional negotiating machinery should be brought to Ottawa for an exchange of ideas about how you do development-friendly trade rules and what might they look like.

    Finally, on the issue of market access, which has already been mentioned by a number of people here today, I think it would be very important for us to have another session at which we could sit down and really look at the facts and figures about market access. We would discuss what the costs would be to the Canadian economy and to particular sectors; do we have the capacity in Canada to help adjust; what has been the results of opening our market to Mexico, to Chile, to Israel; how much more of an impact would there be if we opened our market through removing tariffs on the very least developed, the very least able, if you like, to threaten our industries; and at what would the real impact be of removing the tariff on imports from those countries?

    I agree that the issue of the quotas is a different issue. But at the moment, as far as I understand, there's a proposal that Canada should follow the lead of the United States and the European Union in removing all tariffs and all imports from least developed countries. This is going to go to cabinet. There will be a notice in the Canada Gazette and then there will be the opportunity for us to engage in further discussions, no doubt, of this sort.

    This is the type of policy dialogue that we really need to have. And I think the format of the meeting today perhaps isn't going to be conducive to the very real exchange of hard facts and information that's needed in order to come to some sort of sensible conclusion over who's going to win and who's going to lose as a result of that.

    Thank you.

    The Acting Chair (Mr. Bob Speller): Thank you very much.

    As I said, you can be assured that we will look back and follow all those presentations that have been made in the past.

    Finally, we have, from the Dairy Farmers of Canada, Yves Leduc.

    Welcome, and welcome back to this committee.

    I have one question first, actually, before you begin your presentation. I'm wondering how the cows are enjoying the Olympics?

    Great commercial.

    Mr. Yves Leduc (Assistant Director, International Trade Department, Dairy Farmers of Canada): I think they're having a great time.

    I think all of us would have appreciated it if we would have won a few more medals. But I think the cows are enjoying their time at Salt Lake City.

    Mr. Robert Keyes: Are they good at judging?

    Mr. Yves Leduc: They are very good at judging. Canadians won the gold medal in figure skating. Have you not noticed that?

    Thank you, Mr. President, members of the committee. I will make a portion of my presentation in French and the latter part in English.

[Translation]

    First of all, I would like to apologize on behalf of Mr. Jean Grégoire, the first Vice-President of the Dairy Farmers of Canada and the President of the Fédération des producteurs de lait du Québec (Quebec milk producers' federation), who was supposed to have been here today, but was unable to make it.

    I would also like to apologize on behalf of my colleague Rick Phillips, who had to leave at the last minute to take part in an important meeting to prepare Canada's defence regarding a trade dispute between Canada and the United States and New Zealand with respect to milk exporting mechanisms.

    My comments today will focus chiefly on the WTO agricultural negotiations, but I will also make a few remarks on trade and developing countries, and on the Dispute Settlement Understanding.

    First of all, I think it is correct to say that after the ministerial meeting in Doha, the Dairy Farmers of Canada were satisfied that a new round of negotiations had finally been started. We had repeated on a number of occasions that we were in favour of a new WTO round of negotiations, because such a round has the potential to reduce or even eliminate some of the disparities that resulted from the Uruguay Round. Among other things, I am thinking of the market access issue.

    As you know, the market access issue is one of the crucial points in the negotiations, but also one of the elements essential to the maintenance of the supply management system in Canada. This is a marketing system that benefits not only Canadian dairy producers, but also Canadian processors and consumers.

    We therefore think that the approach put forward by Canada at the WTO on market access is credible. One of the objectives of the Canadian approach is to develop rules whereby the minimum access levels would be made the same for all countries. However, we stress the fact that this level must not exceed 5% of domestic consumption. The reason we say 5% is that this is the level that was agreed upon during the Uruguay Round, and there are still many countries that do not even offer this minimum access level. There are many good reasons for this.

    What do the dairy farmers of Canada expect from these negotiations? First, we expect that they will allow us to continue expanding our domestic markets in the context of an orderly marketing system, namely supply management. Secondly, we expect the negotiations to enable dairy farmers to earn a decent living. To do this, we need effective border measures, which is one of the three pillars of supply management. The other two are production discipline and adequate prices for dairy farmers. The three pillars are illustrated very well in the little folder I distributed.

    The preliminary results obtained from the Dairy Farmers of Canada's analysis of market access show that it is entirely plausible and credible to try to achieve a minimum access level of 5% of domestic consumption. Not only would this policy enable us to maintain the tariff rate quotas required for supply management, but it would also be consistent with the negotiating objective of achieving a substantial improvement in market access. The preliminary figures show that access for cheese would increase by approximately 80% or 239,000 tonnes. We are referring here to tariff rate quota access, which is the equivalent of about one quarter of the total world imports. It should be noted that there are 16 or 20 countries that still maintain tariff rate quotas on cheese.

    Let me mention the example of the hog industry as well. If all the countries that maintain tariff rate quotas were to offer minimum access equivalent to 5% of their domestic consumption, access would increase by 204% or 1.3 million tonnes. This figure is greater than the size of the hog industry in Canada or higher than Canada's pork exports.

º  (1615)  

    As I was saying earlier, although supply management is often criticized, it remains a marketing tool that benefits not only producers, but also processors. Some Canadian processors operate on both sides of the border, and according to the data we have, their profits are higher on the Canadian side than on the American side, which is supposed to be a free market.

    In addition, the supply management system is beneficial to consumers. The price surveys carried out by the Dairy Farmers of Canada in the past six years show consistently that Canadian consumers pay approximately 30% less than American consumers for their dairy products. Moreover, this is a marketing system or a program that does not cost the government a cent.

º  (1620)  

[English]

    The agricultural negotiation has now entered into the modality phase. The objective is to develop guidelines or rules, and hopefully this time these guidelines will become rules and will be incorporated into the final text. The objective is to develop guidelines or rules according to which WTO member countries will prepare their offers with regard not only to market access but also to domestic support and export subsidies. The Doha development agenda, as you are aware, is much broader than agriculture.

    Given that I'm only allowed a few minutes, I will address two other points, Mr. Chairman.

    First, on trade and development or trade in developing countries, I'd like to point out that Canada, as part of the Cairns Group, has recently tabled a statement on special and differential treatment for developing countries as part of the agriculture negotiation. In its statement, the Cairns Group recognizes the need for developing countries to have recourse to special and deferential treatment.

    While the Dairy Farmers of Canada do agree with this concept, we nonetheless disagree with the opening statement that suggests that an open international trading environment, free from distortion, is essential to address the concerns of developing countries related to food security, poverty, and rural development. We are far from being convinced that a non-regulated free trade system for food and agriculture is the solution to resolving international trade issues, at least in agriculture.

    The food and agricultural industry, as most of you are aware, is highly concentrated at both the processing and retail levels. If farmers are not given the necessary tools to counteract the power exercised by a small number of players at the processing and retail levels, whether it's in developed or developing countries, they will always be at the mercy of these large players.

    Developing countries that are trying to develop their dairy industry or other agricultural industry are in need of market stability rather than the instability observed on the world markets.

    I will leave it at that for trade and developing countries, Mr. Chairman.

    The final comment I would like to make is with regards to the dispute settlement understanding.

    As you are aware, Dairy Farmers of Canada and the dairy industry have been involved in a trade dispute that has lasted for at least four years now. The dispute is still not resolved. We are once again back before a panel at the World Trade Organization. However, we have learned from that experience and from that process, and we believe that Canada should seek to improve the transparency of the World Trade Organization and, in particular, the dispute settlement understanding.

    For instance, we have a number of suggestions that could help improve the transparency of this system to allow producer associations or commercial associations involved in any trade dispute to at least follow the work of the panels in Geneva. Obviously suggesting that could raise some concern, because there are some organizations that have bigger financial resources than others. If you were to allow these people to make representations themselves, it could create some big problems, because these organizations would be able to block the work of the panel, for instance.

º  (1625)  

    What we're saying is not necessarily to allow these people to make representatons themselves, but maybe to at least to seek the proceedings from the panel discussions, especially those inside the courthouse. We haven't had access to any proceedings. This would be at least one way to improve the transparency of the panel.

    I'll leave my comments at that. Thank you, Mr. Chair.

    The Acting Chair (Mr. Bob Speller): Thank you very much, Mr. Leduc.

    Ladies and gentlemen, thank you. We'll turn to questions now. This is a question were struggling with, how we balance our commercial interests with our development objectives. We can certainly appreciate your views on that. We have various different views, I think, around the table.

    We'll first turn to Mr. Paquette for a question. I will invite all of the panellists to take a shot at an answer. It doesn't necessarily mean you have to.

    Mr. Paquette.

[Translation]

    Mr. Pierre Paquette (Joliette, BQ): Thank you, Mr. Chairman.

    I would also like to thank our witnesses for their extremely rich presentations. Ms. Weston is right to say that the full committee has already started discussing this subject since the meeting in Doha. I also wanted to assure the representatives from the Canadian Apparel Federation and those from the dairy industry that we are very much aware of their situation and we are following developments with a great deal of interest.

    Since the subject was trade and development, I will restrict my comments to these major themes. I know that they are extremely broad, and that we could definitely spend a few weeks discussing them. However, when we talk about development, we are not talking about economic growth alone. I think we all agree on that. Necessarily, when we talk about development—and this point was made by a number of participants—we also have to talk about the values that accompany this development, values that speak to quality of life. In my view, considerations such as democracy, social protection, the protection of cultural diversity and environmental rights are fundamental.

    I think that Ms. Macmillan describes a certain reality in her book, which I have looked at briefly. That is that many countries in the south see the promotion of these values, which are not western values, but universal values that are mentioned in international conventions, as the manifestation of a certain neo-protectionist attitude on the part of the countries of the north. It is true that we may sometimes wonder about the sincerity of some western leaders in this regard, but the fact remains that when we talk about development, the economic growth which results from international trade must lead to gains in the social, democratic, environmental and cultural spheres.

    I would have liked some of you to go into the type of mechanisms that could be established. I agree with those who say that such mechanisms must not focus foremost on penalties, but rather on cooperation, and that this leads to certain responsabilities for northern countries in terms of resources and expertise. If you have further thoughts on this or if you are categorically opposed to this idea, please let me know.

    This leads me to a second point raised by Mr. Sosnow—the issue of investment protection. Chapter 11 of NAFTA provides a way of protecting investments that did not exist in the FTA and which was introduced because there was some doubt about the ability of Mexico to protect Canadian and American investments. Because of the way in which the chapter was drafted, this ultimately worked against the Canadian and American governments. This was not at all what the negotiators had in mind, as they themselves acknowledged.

    I am wondering what mechanisms can be established to protect investments if there is no rule of law in the countries receiving the investment. I am wondering whether the business community would not be better advised to focus more on promoting the rule of law in order to protect investment rather than to promote clauses similar to those in NAFTA, which have had all sorts of perverse effects which have been criticized left and right. I would also like to have your views on the type of protection we could suggest for investmens, without affecting the ability of governments to manage their affairs according to the needs of their people.

    Those are two of my main questions. I would invite anyone who cares to respond to feel free to do so.

º  (1630)  

[English]

    The Acting Chair (Mr. Bob Speller): Does anybody want to tackle that?

    Mr. Robert Keyes: Thank you, Mr. Chairman.

    You have raised a lot of issues, Mr. Paquette.

    Let me start from the general and go back toward the specific. With regard to the dilemma of how to make the growth of trade and investment work for everybody, there's no silver bullet or magic formula here.

    I'll just start, though, with the thought that there are expectations that you can do everything through the WTO. You can't do everything through the WTO. The WTO, as Mr. Marchi put it, isn't a Christmas tree on which you hang every ornament. It's a very important factor. Trade issues and rules and how they are administered are obviously critical in this equation, but they are not the only way to do things. I was at a session at the WTO a couple of years ago when this discussion was raging and I said, I'm afeard we're going to turn the WTO into the WNO, the world negotiating organization, because it was being held out as the only way to tackle these things. I think that various international organizations and agreements all have a role to play. Because the WTO works and has rules and discipline, it often gets held out as the only way to go.

    Investment issues are seen by the business community as being very important, as are a variety of other issues that have essentially started to creep into trade agreements. The border barriers issue of tariffs is being addressed through subsequent agreements, and tariffs around the world are coming down. There is greater and freer movement of goods. So there are other issues that come to the table, and investment is one of them. Intellectual property, competition, government procurement, all these issues come to the table.

    From where we stand, the issue of investment is a critical one for a number of reasons. Investment often precedes trade. Investment is a means by which you're going to transfer technology and by which skills are going to be developed.

    The guiding principle behind it is that if I am going to invest in a country, I want to be fairly treated. That's the central principle. I want my investments to have a measure of protection through the rule of law in those countries, and I want to have a means of recourse, be it an international agreement, international arbitration, or remedies within the particular countries. You can argue about the mechanisms and how you do that, but I think that's the central principle that people talk about.

    My colleagues in the business community of developing countries who I deal with accept that kind of principle. Some of them have problems with what goes on in their own countries. That is why they see the need for foreign investment protection agreements or embedding these rules somehow. But that's where people are coming from, and that's the reason for it.

    Chapter 11 is a whole other issue. I don't think the sky is falling with all the investment that goes on within NAFTA and for the very few cases that have been brought to it, some of them under very narrow, technical grounds. The world is not coming to an end over chapter 11. It has a rather nefarious reputation. Is it perfect? No. Are there things that can be done to improve it? Yes. But it's not as serious, I think, as a lot of people make out.

    Cliff, do you want to add anything to that?

º  (1635)  

[Translation]

    Mr. Pierre Paquette: I just have one brief comment regarding your principle of fairness towards investors. The problem is that foreign investors are given more rights than domestic investors.

[English]

    The Acting Chair (Mr. Bob Speller): Mr. Paquette, could we let Ms. Weston have a word first.

    Ms. Weston.

[Translation]

    Ms. Ann Weston: I was going to speak to the other part of Mr. Paquette's question. I don't know if they will continue discussing rules pertaining to investments.

    I was going to say that it is very difficult to begin discussions within the WTO on social provisions, work standards, etc. I think it is much more efficient to give the International Labour Office more funds and to try to encourage countries to respect the rights of their workers in many other ways. I do not think it would be very efficient to begin discussing these problems within the WTO where there is no one who has studied this. We may end up with contradictory results. Rather than helping workers in developing countries this would perhaps have more negative effects than if we had gone about helping them in another way.

[English]

    The Acting Chair (Mr. Bob Speller): Yes, go ahead. I didn't see that far.

    Ms. Gauri Sreenivasan (Policy Coordinator, Canadian Council for International Cooperation): That's okay.

    I'm Gauri Sreenivasan and I'm also with the Canadian Council for International Cooperation.

[Translation]

    I would also like to speak to the points that were so well explained by Ann Weston because this is a very interesting issue. We are trying to ensure that there will be beneficial results from the trade policy on a social level. Which strategy will allow us to ensure that?

    I think that comes back to the question of what we understand development to mean. Here, as in our community, we understand development to be a political process. It is really something that belongs to societies in their own countries. It is difficult to include in trade rules guarantees of positive results from development. We feel that the principle of development is that there must be room within trade rules for countries themselves to pursue development strategies.

    This is what I mean. For example, if within the agricultural or intellectural property rules, there is a model that really promotes only one type of agriculture, that requires that all countries guarantee more and more commercial trade of agricultural products, or, in the case of intellectual property, that requires that there be the same level of protection for patents everywhere, then there is no room for countries themselves to develop strategies that are adapted to their own situation.

    Therefore, we feel that the way to put development into the rules is to ensure that these rules do not require that all countries -- that are all different from each other-- achieve the same objectives at the same pace.

    We feel that this is a question of creating more room within the rules for different types of development strategies, rather than ensuring that the WTO's own rules provide for a specific type of development. I don't know if I have explained this clearly or not.

[English]

    On the other question of investment, I would just add that I think the point you raised is the key one. How do we assure a balance so that we have investment rules offering fair protection to commercial investors that don't overly restrict the ability of states to regulate? Our sense is that we need to learn from the lessons of the Free Trade Agreement of the Americas or from NAFTA and chapter 11.

    My colleague across the table feels that the sky has not fallen in yet and we don't really have enough cases to make us too worried. But really what we see to some extent is that the cases are just starting. It has taken a while for companies to be able to identify the way in which they can use chapter 11 to challenge national laws.

    The lessons from the limited jurisprudence that we have had are very alarming. The key is to say “That's the correct question--the balance”. What we see in the NAFTA is that it has gone too far. So the lesson is about how to ensure that if ever an investment agreement comes out of the WTO, we don't have these same kinds of rights, which provide too much power over governments' abilities to regulate.

    An example is offering some incentives to local companies over foreign companies, which is a sort of key development tool that all industrialized countries have used. So we're concerned about this.

º  (1640)  

    The Acting Chair (Mr. Bob Speller): Mr. Sosnow, and then Mr. Leduc.

    Mr. Clifford Sosnow: I think it is important not to get overly concerned about some of the higher-profile cases when we talk about investment rules, because the Prime Minister has said, reaffirmed by Minister Pettigrew, that we want to make any investment agreement a government-to-government framework. So in many ways that manages the issue of the ability to control the regulatory process.

    But I think it's important to recall, in raising Mr. Paquette's issue, that investment protections are just one part of the puzzle. There is the issue of social reform, tax policy, and non-corruption. There is a multitude of other dimensions, and frankly, investment rules are not going to solve all of that. But if we work on the proposition that trade policy is a manifestation of foreign policy, and foreign policy in itself reflects Canadian values, then if we draw the line between Canadian values and investment policy, we ask ourselves what has made sense in a Canadian context, and what has been good for Canada in terms of developing Canada?

    I think the general proposition is that non-discrimination is a general good and a general value that Canadians ascribe to, recognizing protection for certain sensitive areas. Whether those protections in current agreements are functioning in the manner in which they're supposed to doesn't detract from the view of protection of those sensitive areas, and we think that serves as a general model in terms of going forward.

    There's no easy answer, but we also recognize that the Doha Round is giving another two years to look at that issue in terms of policy analysis and development issues for the developing countries in order to help them evaluate.

    So again, we wouldn't urge this committee to come up with a magic bullet, because frankly, we don't think there is a magic bullet, but we do urge this committee to recommend...and this comes back to our earlier point of capacity building and technical assistance to help developing countries develop their own policy analysis as to what makes sense for them in terms of developing that agenda.

    I think we'll leave it at that.

    The Acting Chair (Mr. Bob Speller): Thank you very much.

    Mr. Leduc.

[Translation]

    Mr. Yves Leduc: I don't know if I will be answering your question directly, but I would like to add that for a little over two years now, the Dairy Farmers of Canada have been trying to establish a forum where dairy producers throughout the world can sit down at a table to discuss their concerns, their problems and what they need in order to solve these problems within their own countries or on the international market.

º  (1645)  

    One of the reasons this forum was established is that representatives from the Dairy Farmers of Canada are involved in various forums such as the International Federation of Agricultural Producers and the International Dairy Federation, and they realized that there was very little representation from developing countries. We thought that a forum of this type could enable more countries to get involved.

    The last round table was held in Brussels, where over 40 countries were represented, including about 20 developing countries. Those countries were able to take part in the round table because we established a special fund to help them do so.

    When we talk about trade liberalization, we often see the issue from the exporters' point of view. These people see it from the importers' point of view. They try to develop an industry within their country and they tell us that they cannot do so because they have to deal with very low-cost imports which enjoy export subsidies that come under the form of food aid, or simply because undertakings such as the New Zealand Dairy Board can compete with anyone or almost anyone, because it cuts prices in order to get into markets throughout the world.

    You spoke about the rule of law earlier. We talk about a regulatory framework. The reason the Canadian dairy industry has been able to develop as it has is that the Canadian government successfully established a regulatory framework that allows the various sectors of the industry to develop.

    At the WTO, developing countries have suggested a development box for agriculture to give them the tools they require to develop their industry. However, their proposal goes much further than merely exports subsidies, access to other markets or domestic support. When it comes to domestic support, most of these countries have no money to invest in their industry.

    This is how they see this development box. I think we should pay attention to this, because it is something concrete. When they talk about tools that will help them develop, they're referring to tariff barriers, but the WTO does not allow the introduction of tariff barriers. The WTO talks about reducing tariffs.

    So we seem to be facing a rather contradictory situation, depending on whether one is an importer or an exporter. I think we need to focus on this issue. The rules should be the same for everyone and should apply to all countries.

[English]

    The Acting Chair (Mr. Bob Speller): Thank you very much, Mr. Leduc.

    Mr. O'Brien.

    Mr. Pat O'Brien (London--Fanshawe, Lib.): I guess I'd like to hear an answer to the question that you sort of posed at the start, Mr. Chairman, on how we reconcile the two... protecting our industries. We don't want to see Canadian companies going out of business and we don't want to see Canadian workers losing their jobs. At the same time, we want to help these other countries.

    I think there's a fair degree of hypocrisy, frankly, coming out of Europe when they say these things...and yet maintain what's called the common agricultural policy, which is the single biggest barrier to free trade, hurting not only Canadian farmers but also many of these other countries. So far I haven't felt any need to bend to the knee and take any lessons from the Europeans, but I think we all have to work together on these issues. I've made that known before.

    Mr. Chairman, my question is to Ms. Weston.

    Having been grilled on softwood earlier in the House by my friend Mr. Paquette and by many other colleagues for far too long, I want to ask you for some clarification.

    You drew a parallel between the United States-Canada dispute on softwood and developing countries being asked to accept rules. I don't see the analogy, with all due respect. If countries come to a consensus on a multilateral trade agreement at the WTO, they come to a consensus, they willingly sign on. The problem with us and the Americans and softwood is that the Americans aren't respecting that agreement.

    So could you clarify your comments for me?

º  (1650)  

    Ms. Ann Weston: Yes. I suppose my point was really to say that in the case of softwood lumber, it's quite clear to Canadians that there are different approaches to managing one's resources, and that the rules might be different in the U.S. And that's all right; it doesn't mean to say we're having unfair trade. Yet in the context of the WTO, what has happened is that rules have been developed that seem to force countries to sign on, which perhaps preempts a recognition of the different circumstances and the different ways they have chosen or might continue to choose to manage their economies.

    I think it picks up partly on the point my colleague Gauri was making about different approaches to development. I'm just trying to argue the case that if Canada can understand that in this bilateral instance, then presumably it can also understand why some developing countries have difficulties with the tendency within the WTO to come up with a single approach. At least that's been the case in the past. We look forward to seeing some substantive results to the language about special and differential treatment that came out in the Doha declaration. There seems to be recognition now that different countries have different needs.

    Obviously we don't want a system of rules that is completely different for everyone, because that defeats the purpose of having a multilateral system. But we should at least have some differentiation and not always require everyone to behave in the same way. There are some areas of the WTO, such as the services agreement, where there was an attempt to build up, rather than impose down, a system that was completely uniform for all countries.

    Mr. Pat O'Brien: Okay. Well, thank you, Mr. Chairman. That helps. I guess I was a bit sensitive to the fact.

    And I agree with you, we try to recognize the different...I think our Africa agenda that the Prime Minister announced plays to the very theme you're talking about. But the reality is, if at the end of the day countries have gone through this process--I don't like your term “forced to sign”--and if they judge it in their national best interests to sign, they sign.

    But having said that, I acknowledge your point that there has to be a recognition that there are some major differences among these countries, and they need to have attention.

    I guess I just didn't like your analogy that much, because I think the problem is the Americans aren't respecting the rules they sign to.

    Sorry, Mr. Chairman.

    The Acting Chair (Mr. Bob Speller): No, that's fine. Thank you very much for letting us know that, Mr. O'Brien.

    Ms. Lill.

    Ms. Wendy Lill (Dartmouth, NDP): Thank you, Mr. Chairman.

    I'm very pleased to be here today. I'm sitting in for Svend Robinson, who is our critic for foreign affairs, and I can't pretend that I am an expert on the WTO.

    I would like to say to Kathleen Macmillan that I may in fact be quoting from your book right now, if your book is Doing the Right Thing: The WTO and the Developing World. I have been sort of boning up in the last couple of hours on some issues, but I wanted to just talk about the issue of the TRIPS, the trade-related intellectual property. I want to quote from Jagdish Bhagwati, who said:

The TRIPS does not involve mutual gain; rather, it positions the WTO primarily as a collector of intellectual property-related rents on behalf of multinational corporations. This is a bad image for the WTO.

    I guess I'm interested in the fact that many countries have had to buy into TRIPS, have had to sign on the dotted line in terms of intellectual property, and that many countries failed to appreciate at the time the tremendous burden involved in implementing intellectual property measures. We look at Africa. We look at the crisis around AIDS and how it is that countries are able to pay for the drugs they require.

    I guess I'd like to know where you think Canada can play a role in this. We have a major issue here about the pharmaceuticals. How will Canada be a broker in this issue? How can we improve the lot of countries struggling under this juggernaut of collecting intellectual property rents on behalf of multinational drug corporations or whatever?

    Whoever would like to speak to that, I would be very glad to hear you.

º  (1655)  

    Mr. Gerry Barr: I think this raises an interesting area of concern. More than one person has had the reflection that, in a sense, the TRIPS represents just the opposite of trade liberalization and free market, and it does, as you say, function as a kind of regulatory framework for the enforcement of monopolies, albeit time-limited, and this with enormous impacts on price points and access to medication.

    One of the issues, which was one of the great glamour issues at Doha, in a way, was the concession around intellectual property rights with respect to access to lifesaving and essential medicines. This was an enormous issue on the way in. Everybody knows about the South African experience, and Brazil. Although Uruguay Round documents had signalled some capacity for national governments to go to generic drugs in circumstances where they thought a public health interest was involved, no sooner was it on the paper than it was under attack. When Brazil tried to do this to respond to its HIV-AIDS emergency, the United States chased it on behalf of big pharma pretty effectively, pretty comprehensively, and by the time we got to Doha, the assurance, which was, of course, simply a political assurance in the original agreement, was pretty much in tatters.

    There was, therefore, a need to sort of relaminate, recoat, that commitment. And that was done. But while it was done with respect to most countries, it's interesting to note--I think the members would want to know this, too, and it's something that could be chased in the upcoming negotiations--that one of the features that was left out of the concession was that while countries got reassurances they could go to generics in order to address public health concerns in their own countries, those countries that did not have the capacity to manufacture their own generics--and here we might want to think about the world's 48 least-developed countries--did not get an assurance that they could receive generic exports from countries that did manufacture them.

    So while some countries were taken off this hook, others--particularly, poignantly, the least-developed countries on the planet--were left firmly on the hook. A discussion was scheduled for the coming year to review this question. So one of the things that Canada might do is seriously go to bat for the least-developed countries on this issue to ensure their capacity to receive the exported generic drugs.

    The Acting Chair (Mr. Bob Speller): Thank you.

    Ms. Macmillan.

    Ms. Kathleen Macmillan: That was an interesting question. Intellectual property is a tremendously complicated issue. I do work with developing countries that are anxious to become or have already become members of the WTO. They recognize quite often that it is very closely linked to the issue of investment. If they seek inward investment, which most of them do, they see an intellectual property regime as one of the prices they must pay in order to attract investors, which they see as a desirable thing.

    It is quite possible, however, that the WTO is not the best place to have an intellectual property enforcement regime. The reason it's there is that the WTO is the only international institution that has an enforcement mechanism in its dispute settlement scheme. So the WTO has become the Christmas tree that Mr. Marchi said it would never be.

    It has a lot of very new trade issues that are very peripherally related to trade and more related to issues of domestic sovereignty, policy sovereignty, and regulation that go to the very heart of a country's values. That is the situation we are faced with and it's hard to undo that. What we have to do is be very, very sensitive to that fact.

    We also have to look at policy coherence. We have to look at the way all the international agencies--which are typically little fiefdoms that are quite jealous of each other--can provide the assistance to help countries. If they want to develop an intellectual property enforcement regime, help them do it, and do it properly because there might be some instances where it is a very desirable thing to have.

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    The Acting Chair (Mr. Bob Speller): Thank you very much, Kathleen.

    Mr. Keyes.

    Mr. Robert Keyes: I have just a comment and a correction. One of my colleagues has just corrected me. I heard Mr. Marchi talk about this, but the Christmas tree analogy actually started with Renato Ruggiero, the former DG of the WTO.

    On another aspect of this TRIPS issue and protection of intellectual property, China's entry into the WTO, with concerns over patent and IP protection, is a major issue. How will these provisions be enforced in that country? There have been problems in the past. So it's not just the drug issue; it's a very broad and complicated issue that touches an awful lot of sectors.

    The Acting Chair (Mr. Bob Speller): Thank you very much. I want to bring the Apparel Federation people into this discussion now, and I want to quote from a couple of places, Ms. Macmillan, in the paper you gave us. When you talk about textiles and apparel, you say:

In their accounting of U.S. trade barriers, Hufbauer and Elliott termed textile and clothing import restraints "the Mount Everest of U.S. trade protection". The same could also be said for clothing and textile barriers levied by other countries in the developed world. A combination of restrictive import quotas under the MFA and high import duties levied by industrialized nations has frustrated developing country exporters for decades.

    Then you go on to say in another section:

While a variety of non-tariff barriers, such as Canada's import restrictions on dairy, poultry and other supply-managed commodities were converted to tariffs, the outcome of tariffication was, in the view of one observer, "scandalous".

    And you say:

Worse still, according to Hertel and Martin, is that new tariff rate quotas (TRQs) are less transparent than the previous quota regimes and they generate significant quota rents.

    I want to get back to my question, though, on how we balance these legitimate commercial interests against our objectives for development. To the textile people, if we go forward with these agreements, what's in place now to look after what you say are potential job losses? What should government be doing on that side also?

    Why don't I start with Mr. Kivenko.

    Mr. Jack Kivenko (Member, Canadian Apparel Federation): I think it's one of the burdens of somebody who's been in the industry for 30-odd, almost 40 years to have a corporate memory. I remember when we didn't have the quotas. I remember when we didn't have duties and duty rights that were pretty well agreed and couldn't be changed. I lived through those times, and I remember running up here to Ottawa almost on a monthly basis, probably more like on a weekly basis, complaining about the problems we were having and demanding that the government help us; otherwise we would disappear. And disappear we would; it was certain we were going to go.

    The other developed countries were facing the same reality, and every country in the world was figuring out another technique to protect its industry, whether it was in North Carolina or in Georgia or in northern France or in northern Italy or in southern Italy. Every country saw that their potential was draining and that everything was going to be made in some low-wage countries, probably Japan at the time.

    It was an impossible situation. The government didn't want to hear from us all these times. Today it was shirts, tomorrow it was belts, the next day it was pants, the following day it was t-shirts, and so on. It really was an impossible situation, because there was no uniform way around the world of providing some sort of stability to producers like ourselves and some sort of access to the suppliers from offshore.

    After a whole series of long negotiations, we ultimately developed the quota system, which provided some sort of stability to us. We knew we weren't going to have that part of the market because that's what was coming in. The rest, whatever little bit we had, was going to be Canadian and produced in Canada.

    The foreign suppliers knew I couldn't run up to the Department of Finance and say, “Hey, I'm not getting enough orders in pants. You have to slow it down”. No, I knew that x million pairs of pants were going to come in, and it seemed to be a somewhat fair situation. There was stability. There was enough product, particularly since I would make more if the demand was higher, and there was some sort of fair allocation. Each country received their share of quota.

    This went on for a long time, and a number of economists said it was scandalous. I'm quoting. It was scandalous that we had these systems that seemed more or less fair because all the countries in the world that were involved in this agreed to it.

    Under the WTO, we've agreed that the quotas are going to be eliminated. In two years' time, exactly two years from now, there won't be any quotas on garments coming into Canada. In fact, not only will there be no quotas on garments, but the duties are going to be down by about 30% from where they were about eight years ago. In the interim, we have been manifestly increasing the size of the quotas allowed to all these countries that had quotas, and we have eliminated quotas from a number of garments that were under quota.

    I'm picking only one. I'm picking men's tailored collared shirts, the kind that all the men are wearing here. We eliminated the quotas on most shirts a number of years ago as part of the gradual process through which we were going to achieve a quota-free situation. This was under great pressure of all the exporting countries. Do you know how many countries export shirts to Canada? In 1996, 59 countries exported shirts to Canada. We eliminated the quotas in 1997, and by the year 2000, the whole thing had changed. Supply of shirts has changed. All these countries that demanded access to our market have now given a big gift to China.

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    I'll give you just a few numbers. China now exports $105 million worth of shirts to Canada. They were exporting about $34 million worth of shirts in 1997, $25 million in 1996.

    As for the developing countries, Indonesia's market fell by $1 million; Thailand's market was even. When we look at some of the others, what happened to Pakistan? I don't quite remember the number; I'll get to it in a minute. What we find is Pakistan, with total freedom to export to Canada, is now exporting $2 million worth of shirts to Canada; under quota they were exporting $2 million worth of shirts to Canada. What happened to Portugal? They never had any quotas. Their exports to Canada went from $3 million to $1 million. Taiwan went from $5 million to under $1 million; El Salvador from $600,000 to $250,000; Nepal from $1 million to $91,000.

    In fact, what we find is that when quotas disappear, when you no longer need to buy from the least-developed countries, you won't buy from them; you'll buy from China. My prediction for two years from now is, learn to speak Chinese, because that's how you're going to be able to buy your garments; that's where they're coming from. They're not going to come from the least-developed countries, no matter what you do. No matter what advantages we give to them, we are going to be importing our garments from China.

    What does this mean to China? It is a terrific gift to China. They've got somewhere in the neighbourhood of 16 million people, maybe more, working in the textile and apparel industry. How many more jobs are they going to get as a result of being allowed to export all the garments to Canada? If they got all the jobs that exist in Canada right now, they'd get another 100,000 jobs. Do you think they will notice it? Nope.

    In fact, what could happen is that our industry will disappear, but nobody will benefit; nobody will be able to measure the benefit in any of the countries. The countries that really need the jobs aren't going to get them. The one that can't measure it probably will get them.

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    The Acting Chair (Mr. Bob Speller): Does anybody want to respond to that? I have another question, then, on that point.

    Mr. Barr.

    Mr. Gerry Barr: Just in general down this road, you've got here a very poignant kind of crosscutting issue where we find ourselves with free trade talk in our mouths, protectionist strategies in our back pocket, worries about the most vulnerable workers in the North American economy, and strategies that may have negative impacts not only in Canada but in other developing countries too. I think it presents an enormous challenge for those who are negotiating trade agreements. We need to start taking responsibility for the kind of economic framework we're creating.

    There are those who are vulnerable now, unable to export to the world's developed economies. They are saying they need access. I think it's important we believe them when they say that.

    There are workers in the north who are going to be displaced and negatively impacted by the kinds of flows we are setting up. We owe it to those workers to take account of the fragility of their position and put supports in place.

    There are those in the developing world who are going to have their circumstances changed as a result of these flows, too. We owe it to developing countries to help them plan and think about those who are vulnerable, and how they may be supported as well, faced with the adverse impacts of these approaches to the economy.

    We are creating or designing the architecture for a new global economy, and it has impacts in every single direction. We have to take responsibility for what we're doing. Parliamentarians in particular, I would argue, need to do that.

    The Acting Chair (Mr. Bob Speller): We'll go to Ms. Weston first, and then to Ms. Lill.

    Ms. Ann Weston: Thank you.

    I agree that this is a really difficult issue and we don't want to seem callous when we say that the clothing industry in Canada needs to open up. It's not that we don't recognize that there are problems of adjustments in Canada; of course we do. The problem is that we're asking developing countries to open up their markets and they need jobs too. At some point there has to be a shift of production around the world, and exactly how that's going to be managed, or whether this restructuring happens in an orderly way or not, of course, is what we have to be concerned about.

    I suppose one of the reasons there will be such an enormous shock in 2005 when all the quotas are removed is that a large number of the binding quotas are going to be removed in January 2005. We've had the opportunity since the Uruguay Round to lower that protection in a more orderly fashion, but we've chosen to leave the most binding quotas to the last. There are statistics that can show this.

    The issue of the economic analysis, and what do the numbers really tell us, I think is very difficult. Parliamentary committees inevitably reflect political pressures. There is something called the Canadian International Trade Tribunal, and I was just reminding myself that in fact the finance minister under our trade legislation has the mandate if he wants to ask the International Trade Tribunal to take a dispassionate look at some of these issues and to come up with what are the costs and the benefits to the Canadian economy of liberalizing so that we know exactly what the facts and figures are. It's much harder perhaps in some of these venues to really get the full picture, so maybe that's one solution.

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    The Acting Chair (Mr. Bob Speller): Thank you, Ms. Weston. That's actually part of what we're doing.

    Wendy, I think I'll have Mr. Kivenko respond first and then I'll go to you.

    Mr. Jack Kivenko: We're not suddenly going to find the quotas disappearing in 2005. What has happened over the 10-year period is that not only have some quotas disappeared, but all quotas have increased at an increasing rate. According to the calculations I made a number of years ago, by sometime this year or next year the size of the quotas will exceed our apparent market.

    So, in fact, we're going to be able to bring into Canada, before quotas have disappeared, more garments than we can use. The quotas will only somehow or other control from which countries we're going to bring them, and in the year 2005 we'll no longer have even control over which countries are going to bring them.

    When we negotiated this kind of arrangement, I was involved in the negotiations. I was a member of the SAGIT, I was over in the negotiations and I was advising the least-developed countries that this is not in their best interest. This is contrary to their best interest. Don't get rid of the quotas. Quotas guarantee you markets. At the time it didn't look as if it was ever going to happen anyway and that 2005 was a long way away; it was 10 years. Most of the careers of the civil servants who were negotiating this were long going to be over, as will probably mine be in the year 2005.

    They weren't thinking clearly for the benefit of their countries. The optics were to get to free trade. They were able to sell the idea that they were no longer going to be under control to their government, but they never thought at that point what they would do to be able to compete; and compete they will have to.

    Frankly, I don't have a solution for them. What is it that we're going to have to do? We're going to have to subsidize them to be able to compete with China so that they can export to Canada. This is going to be the height of ridiculousness.

    But it was not without our warnings, the warnings from people like myself who spoke up for the industry, and who said quota-free doesn't solve the problems; it introduces new problems.

    Ms. Wendy Lill: This is fascinating, and I'd like to ask you a couple of more questions on it.

    First of all, I want to get some sense of whether others agree with this scenario you put forward, that we may end up with China creating all of the dress shirts for the world. It is an interesting scenario. Then we could say that another country is producing the cell phones, and another country is producing the french fries, or whatever.

    Are we looking toward that kind of scenario? Is that a possibility, that countries will have to become so incredibly specialized, or do they find themselves in that kind of specialization? We already hear that traditional countries are losing their traditional livelihoods. They are being forced into growing rice when they used to grow bananas. There are all sorts of real distortions occurring that we know, just ecologically, are very foolish.

    You are raising another issue, which is part of this, though, the disturbing issue that all countries may in fact lose out to the one that has the largest number of employers. I guess I'm fascinated with the scenario you're painting. It's not a good one. I would like to know what other people think about it, whether there's validity to it, and where we go to avoid it.

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    The Acting Chair (Mr. Bob Speller): Does anybody want to respond?

    Mr. Jack Kivenko: I said there's validity to it. I don't want to get away from...

    Let me tell you, it's not only that China is going to export to Canada. Understand that India has signed on to the same kinds of obligations as we have. India is going to have to, in due course, allow China to export shirts and clothing to India. If the Indians can't compete in our market with China, and that's thousands of miles away, how are they going to compete at home? How are the Sri Lankans going to compete, and the Thais and the Vietnamese, and so on? They're not even going to be able to compete in their own markets.

    Consider that China's capacity is so huge, and they have the infrastructure because historically they produced for their billion and a half people everything they needed. They never imported these kinds of things. Their infrastructure to manufacture textiles, spin yarn, knit, cut, sew, and dye exists. It is not a big deal for them to take over one country's market after another's.

    Quite frankly, I don't think we or any others have come up with the solution, or even a proposal for a solution. I think we're going to start hearing demands for quotas from many of the small countries in their markets, and in our market.

    The Acting Chair (Mr. Bob Speller): I think I'll move on to Mr. Eyking, unless we want to get into a supply management battle.

    Unless, Ms. Macmillan, you want to respond, since I used a couple of your quotes.

    Ms. Kathleen Macmillan: Maybe, if I could, and I defer to the apparel manufacturers, they know their business, obviously. But at the risk of sounding like an economist, I will go ahead and sound like an economist.

    We do have a huge trade adjustment issue on a global scale that we are grappling with. Bringing China into the world economy for the first time in decades is going to unleash competitive forces. The argument could be made that removing the quotas will allow us to achieve, down the road, a system where access is based to a greater extent on natural comparative advantage, and to a lesser extent on artificial quota programs that were put in place decades ago and might have reflected, at that time, who the logical suppliers were in the world.

    We have another round of suppliers, China being the largest, and we are going to see that in our market. There is absolutely no doubt about it. That's something we're going to have to deal with from an adjustment perspective.

    Mr. Yves Leduc: One point I would like to raise, which I think I touched on in my presentation, is the issue of market power. If we look at the world market for dairy, we'll see that a handful of companies are controlling that. These companies that are present on the world market are also present on the Canadian scene.

    We now have five major dairy processing companies in Canada: Unilever, Nestlé, and Parmalat, which are three multinationals; Saputo, which is expanding very rapidly; and Agropur Co-opérative, which is currently having a debate as to whether or not they should change their co-op status in order to remain competitive within this environment.

    With regard to the world trade for dairy, for example, the amount of milk production traded on the world market is equivalent to about 5% of the total production. That is very small. However, it is that 5% that affects the price of milk received by the farmers in all of the countries where they don't have any tools to counteract the power exercised by other players in the marketing chain.

    I think we have a system that has provided stability. We do offer some access, and some people would like us to offer more. Why? Because we have a system where farmers have decided to collectively market their goods, thereby improving their power on the Canadian market. There are the New Zealanders, who would like to benefit from the fact that Canadian producers have disciplined themselves and by doing so are getting a better price today.

    We do not participate in the creation of large surpluses on the world market. Yes, there are tariff rate quotas. The over-quota tariffs could be argued to be significantly high. However, I think we have to be careful, because some countries are maintaining tariffs in the order of 25%, and that's sufficient to block any imports from coming in. It's all relative at the end of the day.

    Canada has offered access in dairy. We are fulfilling 98% or 100% of this access. Therefore, we're not blocking the access that has been offered, unlike other nations. Take the famous example of the TRQ for ice cream in the United States. They have allocated a portion of that TRQ to Jamaica. Do they produce ice cream? No.

    You're talking about transparency. I think Canada has been able to administer its TRQ in a highly transparent manner. I agree with you that it's probably not as transparent in other nations, but I think that at the end of the day it's farmers' market power that is at stake.

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    The Acting Chair (Mr. Bob Speller): Thank you very much Mr. Leduc.

    Mr. Lifson.

    Mr. Elliot Lifson: I just want to mention one thing. It's a difficult issue. I understand what Kathleen has mentioned, but I have a quote from her book from Mr. Mike Moore, who said, “It is shameful for their wealthy trading partners to continue to maintain tariffs and quotas...” Let's keep in mind that already the penetration into our country is over 60%, and it is increasing at a rapid rate. So imports come into this country already at these rates.

    What are we going to do about our domestic industry? We have already done things in order to be able to compete today. How do we make it a level playing field? It's very easy. We're business people. If we're not going to have our employees here, the people who produce are going to do it in the countries we're talking about. We're talking about sourcing and marketing, and that's what's going to happen.

    Keep in mind that the 3,100 people in our factory are in entry-level positions. We've changed our production. We've invested in making engineered suits. This allows us to take immigrants, the same people in other countries that we're talking about, into the entry-level positions in our company. They rise to certain levels and then leave.

    We hired 700 people this year. How many people can say that? What are we going to do? We've already opened our market to 60% and it's decreasing. We found a niche. We're competing. We export 95%. What are we going to do to our companies? You have to keep in mind that it's not a difficult decision to make. It's very simple to say you're not going to produce it here. We're going to still be in business. We're just going to source elsewhere.

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    The Acting Chair (Mr. Bob Speller): Thank you very much.

    I now turn to Mr. Eyking.

    Mr. Mark Eyking (Sydney--Victoria, Lib.): It's a very interesting scenario that Mr. Kivenko's talking about in the garment industry. My family is also in the farming industry and we have supply management.

    I was talking to farmers from New Zealand. I think there are four farmers in this cooperative in New Zealand, and they have about 5,000 cows each. They don't have to store their feed and let the cows out. Most of their products were going to Pizza Hut or one of the other big pizza companies in the world, and they were geared up and they figured they could produce cheese at half the price of Canada.

    I hope you're right and you're very optimistic, but I have a tendency to feel, especially with the big distribution and whatnot, that our agriculture industry, especially supply management, could go the same way as the clothing industry. McDonald's or whichever company needs so many million pounds of cheese. These companies, wherever, are going to put the quota out there and in 10 years' time when the tariffs are all gone we're going to be sitting ducks.

    I don't want to get into a debate on the issue, but you don't foresee that if it was wide open this would be a problem?

    Mr. Yves Leduc: Yes, I think there's no doubt that New Zealand is probably the cheapest place in the world to produce in. They export 95% of production. That represents roughly 40%, perhaps 50% of all the dairy products traded on the international market, and the international market is about 5% to 7% of total milk production, whether or not you're taking into account food aid.

    If we were to open the border tomorrow morning, obviously some large companies would be tempted. There are already some companies that are trying to source their dairy ingredients on the world market because they have been able to circumvent the tariff measures that have been put in place. This, in the end, is putting pressure on the prices the Canadian dairy farmers are receiving. However, at the end of the day I don't think New Zealand is able to provide the entire supply for dairy ingredients worldwide.

    Who would lose from that? It would be the farmers in Canada. I personally don't think that at the end of the day you or I would see a big difference on the price you're paying for milk or dairy products at the supermarket. You have three chains in eastern Canada that are controlling 80% of the retail.

    Mr. Mark Eyking: I don't see any change in the price of shirts.

    Mr. Yves Leduc: There would be a change in the price at the farm level, but as for you and me, I don't think we'll be in such trouble.

    Mr. Mark Eyking: So perhaps this so-called great future of free trade is showing some cracks. Unless we're going to be really good in certain products in the world...and that's when I think about the softwood lumber issue. We're so good, our mills are so good, we're so efficient, then all of that stuff is coming in and we don't seem to have that advantage going out.

    Anyway, it's quite a debate. I hope our agriculture industry is ready for it and I hope it doesn't get into the same problems as the apparel industry has.

    The Acting Chair (Mr. Bob Speller): Thank you very much, Mr. Eyking.

    Mr. Sosnow, did you have a comment on that?

    Mr. Clifford Sosnow: I want to shift the focus a tiny bit, because you did, Mr. Chairman, start off the conversation with the general question of how do we balance off the interests. I think there is both offensive interest and defensive interest, and I think what you're hearing right now is a couple of things. There's no vanilla fudge answer, and you have to look at things on a sector-by-sector basis.

    But that raises other possibilities. For example, in agriculture Canadian interests are fairly similar to developing country interests. Both have an interest in stopping the war of treasuries between the United States and the European Union and creating a level playing field, and having greater and stronger disciplines on subsidization. Both Canadian farmers and developing countries are hurting in respect to those issues.

    So part of the issue of dealing with the question of how we respond to both Canadian commercial interests and the needs of developing countries is, can we marry Canadian interests that are similar with developing country interests in a way that will create the win-win situation? We think Canada's position with respect to agriculture, stronger disciplines on subsidies, eventual reductions of domestic subsidies, and greater market access for products is one of those win-win situations.

    The other is in areas of technology transfer. I come back to this point because to me again it's the clearest example of a win-win strategy where you marry commercial interests, because increasing technology transfer in fact does help smaller economies, diversifies those economies, and creates a standard of living for those economies. And so the question becomes what needs to be done to increase that technology transfer?

    There was a committee set up in the WTO to respond to that. And so then does it become a question for Canadian policy to start developing recommendations that focus resources on that? Some of the thinking there is on reduction in tariffs and reduction in problems of business facilitation, again the question of investment disciplines, all those things that smooth the transfer of technology that helps developing countries create that higher standard of living but at the same time helps Canadian companies.

    Finally, with respect to the issue of textiles, the reason there was no response to Ms. Lill's question is that Mr. Kivenko and Mr. Lifson know their industry better than anybody else here in this room. I would throw the question back to the chair and to the members of the committee: does there in fact need to be a rebalancing of commercial interests and developing country interests? Has WTO not in fact developed that balance right now with the removal of the quotas in two years' time?

    There is one consideration that has been put forward by the ministers for the Council for Trade in Goods, and that's the whole issue of looking at the most favourable methodology of calculating quota levels. And again this might be something that Canada wants to present either as a positive noise or as something to further examine and study. And perhaps the people from the textile industry may have some comments to make to the committee in that regard.

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    The Acting Chair (Mr. Bob Speller): Thank you very much for those comments.

    Mr. Leduc, you had a final comment.

    Mr. Yves Leduc: I wanted to add an additional comment, Mr. Chairman, with regard to New Zealand in part. New Zealand appears to be the country, at least in the dairy industry, that is benefiting the most from tariff rate quotas. I think it's 35% of all of their exported butter that is guaranteed under guaranteed access. In the European Union, for example, they are the sole exporter of butter, and when they ship butter to the EU they get a premium of about $800 above the world market price.

    Mr. Mark Eyking: New Zealand gets that. The government gives it to the producers.

    Mr. Yves Leduc: Yes, New Zealand gets that. They have access at the EU domestic price, which is above the current world price. And if you were to eliminate all the tariff numbers that exist not only in Canada but also in the EU, I doubt that New Zealand would still be able to export at that price because I don't think the EU price would stay above the world price.

    The other thing I wanted to add is that the Canadian government is supporting supply management. Both Ministers Vanclief and Pettigrew have reiterated their support on several occasions, and as I pointed out, in order to have an efficient supply management system, we need to have those three pillars, which are border protection--i.e. the maintenance of tariff rate quotes--a decent price for farmers, and production discipline, which is the quota system that is in place.

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    The Acting Chair (Mr. Bob Speller): Thank you very much, Mr. Leduc.

    I think, ladies and gentlemen, we'll wrap it up there so Mr. Keyes can get to his very important 6 o'clock meeting.

    I do want to take this opportunity, though, to thank you all for coming out and helping us in this. I would like to encourage you too, if you've had other thoughts or other ideas that you want to leave with us afterwards, to please not hesitate to write us. I don't think you need to write a long book like Ms. Macmillan did, but if you could jot down a few ideas and notes, we'd appreciate that.

    Thank you very much.

    Colleagues, we'll call it a day.