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37th PARLIAMENT, 1st SESSION

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

EVIDENCE

CONTENTS

Thursday, April 11, 2002

1545

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

Mr. Brian Morrisey (Director General, Economic Policy Bureau, Department of Foreign Affairs and International Trade)

1550

The Chair

Mr. (Rick) F.S. Thomas (Director General, Manufacturing Industries Branch, Department of Industry)

The Chair

Mr. Darwin Satherstrom (Chief, Trade in Goods, International Trade Policy Division, International Trade and Finance Branch, Department of Finance)

The Chair

Mr. Rory McAlpine (Director General, International Trade Policy Directorate, Market and Industry Services Branch, Department of Agriculture and Agri-Food)

The Chair

Mr. Tim Miller (Senior Analyst, Trade and Development, Economic Policy, Canadian International Development Agency)

The Chair

Mr. John Duncan (Vancouver Island North, Canadian Alliance)

Mr. Brian Morrisey

Mr. John Duncan

1555

Mr. Brian Morrisey

Mr. John Duncan

The Chair

Mr. John Duncan

The Chair

Mr. Pierre Paquette (Joliette, BQ)

Mr. Brian Morrisey

Mr. Rory McAlpine

1600

Mr. Louis Gionet (Deputy Director, Trade Controls Policy Division, Textiles and Clothing Section, Department of Foreign Affairs and International Trade

The Chair

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

Mr. Brian Morrisey

1605

Mr. Pat O'Brien

Mr. Brian Morrisey

Mr. Pat O'Brien

Mr. Brian Morrisey

1610

Mr. O'Brien

The Chair

Mr. Tony Valeri (Stoney Creek, Lib.)

Mr. Brian Morrisey

Mr. Tony Valeri

Mr. Brian Morrisey

1615

Mr. Tony Valeri

Mr. Brian Morrisey

The Chair

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

Mr. Brian Morrisey

1620

Mr. Mark Eyking

Mr. Brian Morrisey

1625

Mr. Mark Eyking

Mr. Brian Morrisey

The Chair

Mr. John Duncan

Mr. Brian Morrisey

1630

Mr. John Duncan

Mr. Brian Morrisey

Mr. John Duncan

Mr. Brian Morrisey

Mr. John Duncan

1635

Mr. Brian Morrisey

The Chair

Mr. John Duncan

The Chair

Mr. Pierre Paquette

Mr. Brian Morrisey

Mr. Pierre Paquette

Mr. Brian Morrisey

Mr. Pierre Paquette

Mr. Brian Morrisey

M. Paquette

The Chair

1640

Mr. Tim Miller

The Chair

Mr. Tim Miller

The Chair

Mr. Tim Miller

The Chair

Mr. Tim Miller

1645

The Chair

Mr. Tim Miller

The Chair

Mr. Brian Morrisey

1650

The Chair

Mr. Brian Morrisey

The Chair

Mr. Pat O'Brien

Mr. Brian Morrisey

Mr. Pat O'Brien

Mr. Brian Morrisey

Mr. Pat O'Brien

Mr. Brian Morrisey

Mr. Pat O'Brien

Mr. Brian Morrisey

Mr. Pat O'Brien

Mr. Brian Morrisey

Mr. Pat O'Brien

1655

Mr. Brian Morrisey

Mr. O'Brien

Mr. Brian Morrisey

Mr. Pat O'Brien

Mr. Brian Morrisey

The Chair

Mr. Elliot Lifson (President, Canadian Apparel Federation)

1705

1710

The Chair

Mr. Jack Kivenko (Member, Canadian Apparel Federation)

1715

The Chair

Mr. John Alleruzzo (President, Union of Needletrades, Industrial and Textile Employees)

1720

The Chair

Mr. John Alleruzzo

The Chair

Mr. John Alleruzzo

The Chair

Mr. John Alleruzzo

1725

1730

1735

The Chair

Mr. John Duncan

Mr. John Alleruzzo

1740

Mr. John Duncan

Mr. John Alleruzzo

Mr. John Duncan

Mr. John Alleruzzo

Mr. John Duncan

The Chair

Mr. Pierre Paquette

1745

Mr. Jack Kivenko

Mr. Pierre Paquette

Mr. Jack Kivenko

Mr. Pierre Paquette

Mr. Jack Kivenko

Mr. Pierre Paquette

Mr. Jack Kivenko

Mr. Pierre Paquette

Mr. Jack Kivenko

M. Paquette

Mr. Jack Kivenko

Mr. Elliot Lifson

M. Paquette

Mr. John Alleruzzo

1750

Mr. Pierre Paquette

Mr. Jack Kivenko

1755

The Chair

Mr. Pat O'Brien

Mr. Elliot Lifson

Mr. Pat O'Brien

1800

Mr. Elliot Lifson

Mr. Jack Kivenko

Mr. Pat O'Brien

1805

Mr. John Alleruzzo

Mr. Pat O'Brien

Mr. John Alleruzzo

Mr. Pat O'Brien

Mr. John Alleruzzo

Mr. Pat O'Brien

Mr. Pierre Paquette

Mr. Pat O'Brien

The Chair

Mr. Bob Kirke (Executive Director, Canadian Apparel Federation)

Mr. Pat O'Brien

Mr. Bob Kirke

Mr. Pat O'Brien

The Chair

Mr. Elliot Lifson

1810

Mr. Pat O'Brien

The Chair

1815

Mr. Jack Kivenko

The Chair

Mr. Bob Kirke

The Chair

Mr. Bob Kirke

The Chair

CANADA

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

NUMBER 029

1st SESSION

37th PARLIAMENT

EVIDENCE

Thursday, April 11, 2002

[Recorded by Electronic Apparatus]

¹ (1545)

[English]

The Chair (Mr. Mac Harb (Ottawa Centre, Lib.)): Mr. Duncan, we are assuming you are in your seat. We are starting so we will not further the delay.

First I want to thank you for being here. It being 3:45, we'll start the meeting of the Subcommittee on International Trade, Trade Disputes and Investment of the Standing Committee on Foreign Affairs and International Trade.

We have a group of distinguished witnesses appearing here before us as part of our study of what is, pursuant to Standing Order 108(2), an assessment of WTO negotiating issues from a Canadian perspective.

What I thought we would do is first hear from our witnesses and then open the floor for any questions or comments. We will start with the Department of Foreign Affairs and International Trade, the director general of the economic policy bureau, Mr. Brian Morrisey.

Welcome, Mr. Morrisey, along with your team.

Mr. Brian Morrisey (Director General, Economic Policy Bureau, Department of Foreign Affairs and International Trade): Thank you very much, Mr. Chairman.

Mr. Chairman, members of the subcommittee, I am pleased to be here today to speak about the government's initiative to consult Canadians on providing duty-free and quota-free access to the Canadian market for most products exported from the least developed countries.

[Translation]

This initiative is being led by the Minister for International Trade, the Hon. Pierre Pettigrew. A formal notice of the initiative was published in the Canada Gazette on 30 March 2002. A discussion paper has been posted on the DFAIT website outlining the initiative.

[English]

The government, Mr. Chairman, wishes to obtain the views of Canadians on providing duty-free and quota-free access for the products from the least developed countries; on any economic or social effects for Canadians in doing so; and, where there'd be any concerns about adverse impact, on what measures, if any, may be appropriate to address this effect.

The government is proposing this initiative from several perspectives.

[Translation]

First, from the development perspective, it is the right thing to do. Addressing poverty in the poorest countries has been a long-standing concern of Canadians. Fifty years of development experience has shown that tackling poverty demands a comprehensive approach. Without economic growth, poverty does not decrease. Trade is one component of economic growth.

[English]

Second, it responds to international appeals for such action. The Doha declaration, which you are examining, Mr. Chairman, calls on countries to take further action in favour of the least developed countries. So do the UN Millennium Declaration and the Monterey Consensus.

The heads of the United Nations, the IMF, the World Bank, the WTO, and leaders among the LDCs themselves have called on developed countries to act. The fifteen member states of the European Union, Norway, and New Zealand have already done so. The United States has provided additional openings, though short of full duty-free and quota-free treatment.

Third, Canada, as a G-8 country, has taken a leadership role in addressing the plight of the poor and is carrying its fair share of the response, be it in debt reduction, the Global Health Fund, or support for African development, which will be prominent at the Kananaskis Summit. This is an opportunity to extend this role to trade for the least developed.

[Translation]

Least Developed Country status is conferred by the United Nations. It takes into account factors such as population size, quality of life, economic vulnerability and per capita gross domestic product.

[English]

These are the poorest countries in the world, where people usually live on less than $1 U.S. per day. Their infant mortality rates are among the highest in the world. Their life expectancy is shorter. These countries are not keeping pace with other developing countries. They are in danger of being even more marginalized within the world economy.

Within its existing scheme of preferences for developing countries, Canada currently designates 47 countries eligible for treatment under the least developed country tariff, the LDCT. Senegal has recently also become an LDC and it is intended to include it under this initiative.

Of the lines in Canada's tariff schedule, 90% already grant duty-free treatment for the exports of the least developed countries.

The initiative proposes to reduce the tariff to free on the remaining 10% of the tariff lines for least developed country exports, with the exception of the supply-managed products—dairy, poultry, and eggs—for which duty-free access within quota would remain.

¹ (1550)

[Translation]

The proposal also would remove existing quotas on the volume of exports from least developed countries entering Canada. Quotas only exist on certain apparel products from five of the forty-eight countries. Members of the subcommittee will recall that all quotas maintained under the WTO agreement on textiles and apparel will be eliminated as of January 1, 2005.

[English]

Mr. Chairman, LDC exports to Canada average approximately one-tenth of 1% of our total annual imports. Roughly one-half of those imports face duties.

In the year 2000 we imported some $370 million worth of products from these countries, roughly $200 million of which were apparel products facing tariffs in the range of 18% to 20%.

Mr. Chairman, removing obstacles to trade for the least developed countries can help create opportunities for investment and growth in their economies. It is not anticipated that this initiative will have a broad trade effect in Canada over the short term, but some Canadian apparel producers and workers will likely experience increased competition. The government wishes, therefore, to hear the reactions of Canadians to this proposal.

Thank you very much, Mr. Chairman and committee members.

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

From the Department of Industry we have Mr. Rick Thomas. Would you like to make some opening comments?

Mr. (Rick) F.S. Thomas (Director General, Manufacturing Industries Branch, Department of Industry): I don't have any comments to make at this time.

The Chair: Okay.

From the Department of Finance, Mr. Darwin Satherstrom, do you want to make any opening comments?

Mr. Darwin Satherstrom (Chief, Trade in Goods, International Trade Policy Division, International Trade and Finance Branch, Department of Finance): Not at this time, Mr. Chairman.

The Chair: Okay. From the Department of Agriculture and Agri-Food, Mr. Rory McAlpine, do you want to make any comment?

Mr. Rory McAlpine (Director General, International Trade Policy Directorate, Market and Industry Services Branch, Department of Agriculture and Agri-Food): No, thank you, Mr. Chairman.

The Chair: From the Canadian International Development Agency, Mr. Tim Miller, senior analyst, trade and development, do you want to make any comments?

Mr. Tim Miller (Senior Analyst, Trade and Development, Economic Policy, Canadian International Development Agency): No, Mr. Chairman, not at this time.

The Chair: Okay.

With this, I guess, we have quite a bit of time to ask questions. I want to begin with Mr. Duncan, if you have any. If not, we'll go to Mr. Paquette and come back to Mr. Duncan.

Mr. John Duncan (Vancouver Island North, Canadian Alliance): Thank you, Mr. Chair.

On the safeguards that are special to China, they have an expiry date. Can I assume that when those special safeguards cease to exist, the safeguards that apply to all other countries will continue to apply? Is that a safe assumption?

Mr. Brian Morrisey: Thank you, Mr. Chairman.

The answer would be yes, but I would note that the initiative we are talking about is for the least developed countries, and China and would not therefore be covered under the initiative I have spoken about this afternoon.

Mr. John Duncan: But we have safeguards that apply to all trading partners, so they would not be an exception to that.

¹ (1555)

Mr. Brian Morrisey: To make sure I'm understanding your question, sir, as you are aware, all quotas come off under the WTO agreement on textiles and clothing as of January 1, 2005, but other normal safeguard provisions available under the WTO would remain, and as you've mentioned, there is a timeframe for the special measures with respect to China.

Mr. John Duncan: Okay. That answers my question for now, Mr. Chair, and I would suggest you move on.

The Chair: Yes, go ahead.

Mr. John Duncan: I've had my question answered for now.

[Translation]

The Chair: Mr. Paquette, do you have a question?

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

Of course, I think that one cannot be against the initiative taken by the Canadian government. Indeed, in Doha, developing countries said clearly that they wanted to reopen negotiations, but on a reciprocal basis. They are under the impression that after the Uruguay cycle, developed countries did not keep their promises concerning the opening of their markets. So, in principle, I agree with this initiative.

Our big problem is the way our major partner is behaving in all of this, and I am referring to the United States. I will give you an example of a situation where, while we were in principle in agreement as to the opening of markets to developing countries, we experienced some serious problems; I am referring to the case of refined sugar. We are currently negotiating with four Central American countries. We signed a free trade agreement with Costa Rica and we opened our refined sugar market to the Costa Ricans. This posed no threat, as they have no industry at this time. However, it is a precedent that will probably become a part of the final agreement with the four Central American countries.

Our industry cannot compete with those countries directly because the resource in this case comes from Central America. So this means that we would be importing cane sugar into Canada, that we would refine the sugar and that we would send it back to Central American markets. It is easy to see that taking transportation into account, this would be unfair competition, even if our workers were paid the same salaries as Costa Rican workers. Our natural market would be the United States.

So if we really want to open up markets in a fair way, the Americans also have to open their markets to products from the least developed countries in order to ensure that our businesses, whether it be the apparel industry or refined sugar, will be able to find other openings that may correspond more to an upper-end market niche, such as markets in the United States.

What is the American position vis-à-vis the initiative you are proposing, and taking their attitude into account, would it be conceivable to phase in the opening of the markets by sector?

Another example comes to mind which was related to me by dyers in the textile industry in Montreal. The Americans concluded a specific agreement with certain Caribbean countries. They send their textiles there and clothing is made out of it; it is brought back to the American market at a much lower cost than what we can manage in Canada, where we use our textiles in our clothing industry and where we have nevertheless managed to keep our jobs. Here again, we are going to be facing a very particular situation wherein the Americans have organized themselves, in the final analysis, to not take their main partner, Canada, into account.

I would like to hear your reactions to this situation you did not mention in your presentation.

Mr. Brian Morrisey: Mr. McAlpine will answer your question on refined sugar and Mr. Gionet will then answer your question on clothing and textiles.

Mr. Rory McAlpine: Thank you, Mr. Chairman.

The government is well aware of the sensitivity of the refined sugar sector in Canada, and this is reflected in the positions we have taken in our negotiations with Central America, for instance, at this time. You are quite correct. The international refined sugar market is very complicated and comprises several distortions and subsidies, especially in the United States and the European Union. Canada's position is to promote the liberalization of the world sugar market in the context of WTO negotiations. It is well understood that our sector is at a disadvantage because of these distortions, and we are promoting this initiative globally.

In this context, it is thus necessary that we have the input of the Canadian sugar sector in order that we have a good understanding of its position and of the possible impact of opening up our market. This is why sugar is among the topics being discussed in these consultations. But we are in a good position to deal with these issues.

º (1600)

Mr. Louis Gionet (Deputy Director, Trade Controls Policy Division, Textiles and Clothing Section, Department of Foreign Affairs and International Trade: With regard to American policies, it is true that the Americans have made special arrangements with the Caribbean, but in the same act in which these special measures for the Caribbean are contained, in order to promote offshore processing, they also opened up their market to African countries, which does include the majority of least developed countries. Under the current American measure, African countries can indeed manufacture clothing in Africa and export it to the United States duty-free and quota-free for all types of textiles, and also benefit from a very open rule of origin. This measure was put in place for a period of three years. At this time, the American Congress is considering the possibility of extending this measure for an even longer period. I believe the period which was proposed to the American Congress and accepted by it goes to 2008. The Americans have taken a similar initiative. It is not as broad, but they have plainly taken an initiative which seeks to open their textile and apparel markets specifically to African countries, which includes most least developed countries.

The Chair: Are you okay, Pierre?

Mr. O'Brien.

[English]

Mr. Pat O'Brien (London--Fanshawe, Lib.): Thank you, Mr. Chairman. Mr. Morrisey, thank you and your colleagues for being here.

I may be stretching the terms of reference of your paper here, but if so, tell me. On the whole debate about TRIPS and whether or not there is the flexibility in it to allow the least developed countries to deal with their pandemics, what is your view? How is it evolving? Can you bring us up to date on how the whole situation is evolving? Or is it outside your frame of reference? If it is, I'll save it for another time. I thought it might have been.

On opening up our markets, which I think, as Mr. Paquette said, upon principle you would have to agree is going to be necessary if we're going to see the least developed countries truly benefit from globalized, liberalized trade, I agree it's the right thing to do, but there will be some adjustments needed.

Yet I wonder, is there a quid pro quo there? Is there any kind of requirement, or the thought, to at least encourage these countries to move towards also liberalizing their political systems? We know about the democracy clause in the FTAA, which I happen to support. I just wonder if there's any thought of any similar kind of at least understanding, if not a formal quid pro quo.

Mr. Brian Morrisey: Thank you, Mr. Chairman.

Mr. Chairman, the initiative the government is proposing is under our least developed country tariff. The tariff is a part of our broader generalized system of preferences. The GSP system, as it's called, was introduced in the 1970s by the developed countries. It is a unilateral initiative on the part of the developed countries. It is non-discriminatory and non-reciprocal.

As I mentioned in my opening statement, we already provide about 90% of our tariff lines at the rate of free under this LLDC tariff on a non-reciprocal basis. It would be the intention to extend the treatment to the remaining products, except for supply management. In that narrow context, we would not be seeking reciprocal measures. However, in the broader context, I think there are a couple of important things to note.

This initiative, as I indicated, was indeed called for in the Doha declaration. It was called for in an attempt to help integrate the least developed countries into the world trading system and to actually bring them into the whole Doha framework in a more active kind of way.

In that context, Mr. Chairman, we would anticipate the least developed countries would take on their fair share of the responsibility of the obligations the World Trade Organization sets out. We would see, therefore, their involvement in that way.

We would anticipate that the least developed countries should be prepared to make their own market access commitments within the capability of their economic circumstances in Doha market access negotiations.

Secondly, Mr. Chairman, I would draw reference to the Monterey Consensus, the document that came out of the United Nations conference in Monterey in March that was a blueprint document, a framework document. It was the first time we had the United Nations, the international organizations, and the countries themselves, together to address the conditions necessary to promote financing for development in the developing countries.

In the blueprint, you will see, I think for the first time, a series of commitments that the developing countries recognize they too must be prepared to meet, in addition to what the developed countries are expected to do to aid in development. In the commitments, you would find things like providing sound macro-economic policy, a stable environment, good governance, fighting against corruption, and opening the markets.

In the broader context, Mr. Chairman, when you look at this kind of initiative, it is intended to be a complement to the wider things the developed world is trying to do in partnership with developing countries to help them to foster their own development.

º (1605)

Mr. Pat O'Brien: My second question, if I have time, Mr. Chair, follows on something I think Mr. Paquette raised. I guess we're beyond considering an initiative. If I read the Prime Minister's comments in Africa, we're preparing to open our markets more to certain least developed countries on a unilateral basis.

What's the bigger strategy to see that it involves our other trading partners in the G-8? What efforts are being made to make sure, although this is a good action taken by Canada, it doesn't stop at Canada and indeed other countries follow suit?

Mr. Brian Morrisey: Mr. Chairman, the government is, of course, consulting on this initiative and seeking the views of Canadians on how to do it, etc. We will continue to wish to hear the views of Canadians so specific recommendations and decisions can be made.

In terms of a broader context, I indicated that the European Union already has taken action, as of 2001, to grant duty-free treatment on all products, with a few small exceptions.

Mr. Pat O'Brien: Is it the environment initiative?

Mr. Brian Morrisey: That is correct.

Mr. Pat O'Brien: It doesn't include agricultural products?

Mr. Brian Morrisey: No. It does include agricultural products.

Mr. Pat O'Brien: That's a pretty big exception.

Mr. Brian Morrisey: There are three exceptions to it. There are bananas, which are not being opened up until 2006—there's a long history to the banana because of the preferential regimes with the ACP countries—as well as sugar and rice, where the full opening will be in 2009. But there will be some phase-ins of quota levels up to that period. So that comprises all of your European members of the G-7.

We then mentioned what the United States has been doing in terms of the African Growth and Opportunity Act and also what they've been doing in the Caribbean initiative, although what we're really talking about here is the least developed countries, so you're talking of a subset of those American initiatives. But, no, the Americans have not gone all the way duty-free, quota-free, nor has Japan gone all the way duty-free, quota-free at this stage.

At the Kananaskis Summit, we would anticipate one outcome will be an Africa action plan, which will be the G-8 response to the African countries' own initiative, called the New Partnership for Africa's Development, the NEPAD. One component of the NEPAD that the African leaders themselves are stressing as being very important is the issue of market access.

So in that context, perhaps other countries such as the United States and Japan would see fit to do more. That, of course, is their own decision. This is a unilateral action that Canada would be taking, consistent with past policy.

º (1610)

Mr. Pat O'Brien: Sure. Thank you.

Thank you, Mr. Chairman.

The Chair: Mr. Valeri.

Mr. Tony Valeri (Stoney Creek, Lib.): Thank you, Mr. Chairman.

Just to pick up on what Mr. O'Brien was saying, you've described for us, Mr. Morrisey, essentially what the European Union, the U.S., and Japan are in fact prepared to do. But could you rate our initiative when you compare us to the European Union, the United States, and others? Can you actually rate our market access initiative when you compare it to others?

Mr. Brian Morrisey: I think that's a rather difficult thing to do, because we're not always comparing exactly the same things. But I think in a generalized kind of way it is clear that the European Union, in their initiative, is ahead of the United States, Japan, and Canada, because they have gone duty-free, quota-free. But again, you have to look at the specifics of their proposals in terms of rules of origin and other conditions that may apply to their normal schemes.

If you were to look at Canada, the United States, and Japan, I think it's fair to say that we compare quite reasonably, quite well, with those other two countries. Obviously the Canadian market is the smallest market, in absolute terms, of those four countries because of our population of 31 million, compared to 50-plus million in Europe and near 300 million in the United States. So we're a small market in that sense, but our provisions are generous. We don't attach conditions to our LDC tariff. We have generous rules of origin.

So you would have to look at the specifics of each country and what details they attach to their own schemes. The United States has a number of conditions that would be attached to their schemes: some quota limits, a volume of trade that would be subject to preferential treatment. We don't have those kinds of things. So when you put it all together, on the broad scheme of things, I think we compare quite favourably at the current stage with the United States and Japan in our GSP scheme.

Mr. Tony Valeri: Okay.

I understand there was also a report or a study prepared for DFAIT by Shannon and Associates that indicated the initiative, or the impact, in fact, on the least developed countries would be quite small. How do you react to that? Do you agree with that study, or are there parts of it that you're going to disagree with?

Mr. Brian Morrisey: That study was not done for DFAIT; CIDA asked for it to be done. It was a study of some private individual consultants. I understand they have provided it to DFAIT, and it has just been completed. I have to confess I have not seen the whole study yet. I've seen some parts of it.

So without associating myself with this study, because I don't yet have a specific view of it, on the question of the overall impact of this initiative on Canada, we certainly think that in the short term it won't have a broad impact across the country. The LDCs represent about one-tenth of one percent of our trade overall. That's one-one-thousandth. It's not a lot.

We exported over $400 billion in 2001. We're talking here in terms of $400 million plus, so we're talking about very small numbers. We don't see a broad significant impact on Canada, but we do acknowledge that perhaps in the area of apparel in particular there could be a localized effect, depending on a whole range of factors that are very hard to predict.

º (1615)

Mr. Tony Valeri: The subcommittee heard that the least developed countries would benefit from market access, as long as they had some type of advantage over developing countries, like China. But the impact would be temporary, and there would be a reallocation or a redistribution for a period of time.

Do you agree with that viewpoint?

Mr. Brian Morrisey: Certainly that's a point the least developed countries themselves are making to us. When you look at the fact that quotas are currently still in place—as you know, they will go in two years' time—and a tariff, they provide a measure of protection for the Canadian industry.

If you were to take the quota and the tariff away from the least developed countries, that would give them a clear margin of preference compared to the other developing countries, such as China, India, and Indonesia—the big suppliers of apparel to the Canadian market.

Certainly, on January 1, 2005, when the quotas come off, if the government were to take this initiative for the least developed countries, they would still not be subject to the tariffs the other developing countries would remain subject to, depending, of course, on the outcome of the Doha negotiations. We clearly anticipate a tariff to remain in place for developing countries after the conclusion of the Doha round. So the least developed countries would still have the benefit of that margin of preference over their developing country competitors.

It will depend on a whole range of factors whether they can take advantage of that or not. It will depend on whether Canadian importers wish to source from least developed countries. It will depend on their efficiencies. It will depend on their capabilities to meet quality, standards, time, etc., and it will depend on investors' decisions on whether to invest in those kinds of markets. So it's very hard to anticipate exactly what the impact will be, but there will be a standing margin of preference for them.

Thank you.

The Chair: Thank you.

Mr. Eyking.

Mr. Mark Eyking (Sydney--Victoria, Lib.): Thank you, Mr. Chairman.

Through trade with these least developed countries, our objective is to bring up their standard of living, and that will also give greater global stability, by distributing wealth.

How do you qualify for being one of those countries? Is it based on the average personal disposable income?

My next question is, when are they not an LDC country? When these countries start emerging... Maybe 50 years ago, we never figured Japan would be as strong as it is. Is there a point when we say, “Hold it now, they're getting a little ahead of us”?

My third question is, could there be another scenario where a country is claimed as being an LDC, people are only getting a dollar a day cutting bush, or whatever, and all of a sudden a big company comes in and makes soccer balls, and they still only get a dollar a day? Is there a fear of that, where the people are not really getting much better off, they're just changing jobs, and these companies might just switch from a developed country to an underdeveloped country?

Mr. Brian Morrisey: Thank you, Mr. Chairman.

With respect to your first question, there is a committee established in the United Nations called the Committee for Development Policy, which reports to the Economic and Social Council of the United Nations General Assembly. That committee meets on a triennial basis. Its last triennial meeting was in April 2000. At that time the committee looked again at the criteria it used in order to determine whether a country has least developed country status or not.

There is a range of criteria. One of them is a three-year average of per capita GDP. Right now, as of 2000, they set that limit at $900 U.S. per year as the cut-off point. That's the ceiling. As I indicated in my statement, many people actually live much lower than that level, but you have to get that high before the question of your eligibility opens up.

º (1620)

Mr. Mark Eyking: When it goes to $1,000, then you are not?

Mr. Brian Morrisey: Your second question related to the question of how you stop being least developed. How do you get out of this? Under those criteria, they take that $900 and say, we're looking at a 15% margin. That would take you up to $1,035 per capita GDP before they would say, “Okay, you meet the criteria and therefore you should be graduated out.”

There are three criteria, and you have to graduate out of at least two of them before you stop being a least developed country. The other criteria are an augmented physical quality of life index and, the third one, an economic vulnerability index. That one is based on your export concentration, on the instability of your agriculture production—which is used as a surrogate really for natural disasters, droughts, hurricanes, and those kinds of things—instability of exports of goods and services, your share of manufacturing services in GDP, and population size.

This is a very technical committee, made up of experts. It uses the international statistical experts. It's a very detailed process the committee goes through, and it makes formal recommendations to the United Nations. The committee is meeting this week, not in its triennial review but in its ongoing work, and is debating the issue of graduation and what criteria a country has to meet before you can say it is no longer least developed.

To my knowledge, there's only one country that has graduated, and that is Botswana. Senegal went the other way. Unfortunately, Senegal was considered to be least developed as of 2000.

As we understand it, the projection is it will take some of these countries 25 to 50 years before they'll get out of this status. It is a very long process.

You talked, in your third question, about whether benefits for the individual poor would get any better if there is investment and the like. My understanding is there are studies, including those done in the World Bank, that would indicate that generally, where you've seen economic growth in an economy, the poor generally benefit dollar for dollar. That is in a macro sense in an economy. The poor generally do seem to get certain benefit out of economic growth in their economy.

What we're saying here in terms of this initiative is that if you're going to deal with poverty, aid is important but not sufficient in itself. Poverty needs economic growth if you are going to help reduce it, and we're saying trade is an important component of economic growth. To the extent we can contribute through a trade perspective, we can hopefully improve conditions for economic growth. That doesn't guarantee you that growth will occur, but you are at least contributing to the conditions that may permit it.

º (1625)

Mr. Mark Eyking: Is political stability in the picture in any way, where even though they might have $1,000 per capita income, the country needs this...? Does the United Nations ever say this country needs a little...? Or the other way, where a country really has poor democracy... That doesn't come into the picture. It's totally economics, is it, when you're determining whether or not you're an LDC for trade purposes?

Mr. Brian Morrisey: I don't think it's ignored. In terms of your status as a least developed country, yes, it's those criteria that I set out, not necessarily your political stability. Some of these countries will be countries in conflict, for example, but they still have their least developed country status.

What I would say to that is the market will decide where there is political instability. As an investor and entrepreneur, I would certainly be asking myself the question, is this a country where I would wish to risk my capital by investing in that economy? Political instability, a poor investment climate, corruption, and those other kinds of things are certainly factors that one would take into account in an investment decision. That's why the Monterey Consensus is such a significant document. It recognizes those points. If you want the developed country to be investing, then the climate should be hospitable, and you should be taking steps to make it a hospitable climate overall. That's why you have to look at the whole picture.

The Chair: Next is Mr. Duncan, followed by Monsieur Paquette.

Mr. John Duncan: Thank you very much.

I think I'm on the same page now. Sorry about the first question.

I have a couple of things. One is a curiosity I've carried around for a while. We had this huge foot-and-mouth scare with beef in Europe. There are vast parts of the earth where that disease is rampant, including Asia. We don't seem to concern ourselves with that. There are no travel restrictions or anything else. It's just an accepted fact. We trade in small quantities of beef with various parts of the world. Why is this such an urgent factor in one part of the world and non-urgent in other parts of the world? How does the Canadian government view all of this? Or am I addressing a subject that maybe nobody's quite familiar with?

Mr. Brian Morrisey: I'm not sure if I got all of your questions. Firstly, certainly, the Government of Canada cares very much about the issue of foot-and-mouth disease. As we all know, when we came back from Europe, we all had to walk through special mats at airports to make sure our footwear was not contaminated, etc.

Secondly, there are very few countries that are eligible to export their meat, particularly beef, to Canada because of some endemic disease they may have, such as foot-and-mouth. So very few countries are able to do it.

Thirdly, for any country to be able to ship an agricultural product under this initiative, they are going to have to meet all of the appropriate standards that are in place in Canada as would be regulated and implemented by the Canadian Food Inspection Agency. So just the simple issue of providing a free tariff does not mean, therefore, that a country can ship its product to Canada. There are other requirements that would have to be met.

So I would suggest that the government does indeed care quite a bit about this. The safety of our farms is critical to us as a government and a nation, and this initiative, in my view, would well protect and preserve all of the safeguards that are in place in Canada with regard to agricultural products.

º (1630)

Mr. John Duncan: That's a good answer, and I'm still not sure why we had... I don't know if it's a different bug. We had major concerns—I think they were legitimate—about transmission through travel, and that's why we had the travel advisories and the special measures. I just can't square why we don't need those special measures and travel advisories for people returning from countries that have foot-and-mouth disease everywhere. That does exist in the world. It doesn't seem to have posed a problem. But probably this isn't the right time or place to address that. I just thought you might have an insight into my curiosity.

I'll move to the next question. It relates to the initiative you're talking about, which is market access for the least-developed countries and the fact that we continue to exempt the supply managed agricultural products. We do that in all of our international agreements, so at least we're being consistent.

But let's take the hypothetical case that for LDCs we remove that. Has anybody done an estimation of how much penetration there would be? What would the impact be? Are we protecting ourselves just because we're protecting ourselves, or would something very significant develop out of that?

Mr. Brian Morrisey: Mr. Chairman, we would not expect any significant development out of what you say is hypothetical. The reason I say that is that the countries already are eligible to provide these supply managed products free of duty to Canada under what's called “in-quota access”. That is, there is a certain quantity that it is permitted to be traded. The LDCs have simply not been able to trade in any kind of numbers under those existing in-quota access commitments.

Mr. John Duncan: So they don't meet the current quota.

Mr. Brian Morrisey: No. They don't have the capability to do that. And I would go back to the question of meeting the necessary sanitary and phytosanitary measures to ensure their exports meet the Canadian health and safety provisions under the CFIA.

What the government is looking into doing, Mr. Chairman--and is doing, I believe, to a certain extent--is trying to assist least developed countries to understand sanitary and phytosanitary measures and provide them technical assistance to bring their capabilities up to the standards the developed countries would have. So that can be one component.

And again, if you want to look at development in its broadest sense, if they don't have the capacity to meet your standards, they're never going to trade. So you also have to look at the question of whether we might do something to help them there as well.

So I wouldn't anticipate any impact at all if it were to be opened, on the basis of the current circumstances.

Mr. John Duncan: Okay.

Under the WTO accession conditions for China--I realize we're not dealing with an LDC--there was a requirement that within 30 days of their accession, they were to comply with providing all of their phytosanitary and sanitary standards. That 30-day timeframe has obviously passed. I was just wondering if you could confirm that they have done that. Would you know?

º (1635)

Mr. Brian Morrisey: I don't know the answer to that, I'm sorry.

The Chair: A good question for next Wednesday.

Mr. John Duncan: I was just trying to short-circuit--

The Chair: Mr. O'Brien took a note of it and he'll make sure to get back to you, hopefully, before then.

Monsieur Paquette.

[Translation]

Mr. Pierre Paquette: I have a very brief question, which I'm asking almost out of curiosity. I have always been a bit skeptical as to the consultation method the Canadian government uses in all of these cases. For instance, you said that a formal notice of the initiative was published in the Canada Gazette. This is not the publication that is the most widely read by the population. As for the department's website, I can assure you that very few of my friends are aware of it, but they know the Bloc Québécois international trade critic.

The same procedure, more or less, was followed for the Canada-Costa Rica Free Trade Agreement, and several groups, even some very large union groups, for example, were surprised to learn that we had signed an agreement with Costa Rica.

Firstly, I would like to know whether you will be taking other means to ensure that sectors that could be affected but may not be aware of the issues, will be informed of this consultation. Also, how many groups, businesses or business associations have up till now spoken out in the context of this consultation?

Mr. Brian Morrisey: Yes, you are correct: we used the Canada Gazette and also our website, but we also used our electronic means to communicate with close to 900 or 1,000 businesses, organizations and associations that deal with these matters, NGOs as well as producers and others, and we thus obtained electronic feedback from all of them.

Moreover, Minister Pettigrew will be meeting the sectoral groups who monitor international trade in the textile and apparel sectors. We have issued press releases and have also on occasion used other means to publicize our initiative through the press. We also got in touch with the provinces, in the context of—

Mr. Pierre Paquette: That is not a bad idea, for a federation. I want to know how long the consultation will continue.

Mr. Brian Morrisey: We began on March 7, I believe, with the provinces. We sent them all the documents and we are expecting their replies. There are a lot of—

Mr. Pierre Paquette: Is there a deadline for the consultation?

Mr. Brian Morrisey: May 2.

Mr. Pierre Paquette: Thank you.

The Chair: Mr. Paquette, is that all?

[English]

I have a couple of questions. One is for CIDA. Were this committee to recommend the opening of the market for least developed countries, how would that impact, for example, your programs in those countries? Do you see some benefit coming to those countries? How do you see it, in particular, say, in countries such as Bangladesh and others that depend to a large extent on textile export?

º (1640)

Mr. Tim Miller: Thank you, Mr. Chair.

It's the view of CIDA and the Government of Canada that although official development assistance is essential to the efforts of the international community to reduce poverty in developing countries, trade is of equal, if not greater, importance. We hear this often from developing countries and least developed countries.

The way CIDA sets up its programs bilaterally in most developing countries, including the least developed countries, is through a discussion with those governments, and it's done in a collaborative fashion. Basically most of our programs and projects in countries like Bangladesh are collaborative efforts between the Bangladeshi government and the Canadian government, through CIDA.

When those countries, and it's their choice, put certain priorities in certain areas, we attempt to respond to those priorities as much as we can through this process of collaboration. We sit down every several years and write collaborative papers together on development planning. What we're seeing evolve recently is that quite often these governments, including Bangladesh, are asking for specific trade-related technical assistance aimed at their export promotion strategies and aimed also at increasing their understanding in being able to negotiate trade agreements. In countries like Bangladesh, where it's really, I would say, at its infancy, we're increasingly—each year—having more programs helping them integrate into the world trading system.

As an example, we have an ongoing WTO trade-related project with Bangladesh at this point. In our information base, I'd say there are probably, over the last decade, about 200 of CIDA's trade-related, technical, capacity-building projects. Probably about 20% of those are in the least developed countries. The other 80% would be in the Chinas and Indias.

The Chair: When we talk in particular about an area such as textiles, probably the vast majority of people who work in that industry would be women. Would that not be the case?

Mr. Tim Miller: In Bangladesh?

The Chair: Everywhere; in most countries.

Mr. Tim Miller: There's a high proportion. I couldn't respond to whether it's more than 50%.

The Chair: More than 50%?

Say, for example, when International Trade is embarking on a program in order to facilitate trade between Canada and least developed countries—or all countries, for that matter, that qualify under CIDA—do you not define programs that fit in with trade facilitation? Mr. Morrisey was indicating that at the end of the day economic development is the key thing. Where do you fit? Do you really have some sort of mechanism, or is the structure rigid to the point where there's no flexibility in trying to modify an existing program to fit in and complement what International Trade is doing? I would be quite interested in your views on that.

Mr. Tim Miller: Many CIDA projects in developing countries are multi-year projects. Some are in trade, but a huge majority are in things like health and education. The way many of our projects or initiatives with these countries are structured, they use language with some flexibility within that multi-year exercise. Most of the trade-related, capacity-building projects we would do with these countries would, first, not be aimed at increasing trade specifically with Canada. They're usually aimed at helping these countries expand trade into the world. It's not specifically bilateral trade but world trade we're trying to assist them with.

Many of our larger economic projects have flexibility built into them, so if halfway through the project a country says, “Yes, you're helping us actually build some infrastructure here, but we want it more focused on the type of infrastructure that will help us to trade”, there's flexibility within the project. But I think the answer really depends on the type of project it is. If the project takes the form, as quite often it does, of training in economic policy, it's quite adjustable. If it's in terms of building a dam, or ports, or roads, it's usually a longer-term project, and you can't stop it.

º (1645)

The Chair: So obviously, when Europe, say, for example, removed trade barriers on least developed countries, you'd welcome that, because from your perspective it's creating opportunities for least developed countries.

Mr. Tim Miller: Yes, we welcome that.

The Chair: Okay.

I have a second question. I don't know, Mr. Morrisey, whether you could answer it, or the Department of Finance.

I recall back in the days of NAFTA when the whole debate was raging about, specifically, the textile industry. There was quite a bit of concern about the fact that once NAFTA took effect, it was going to have a very negative impact on the textile industry. I'm specifically interested in finding out what happened to the sector after NAFTA had taken place, as compared to before NAFTA. Where were we on trade figures in the textile industry before, and what happened after?

I'm concerned. If the figures show that the industry has been affected as a result of that, I think we really have to think through where we're going next on this issue.

Mr. Brian Morrisey: I take it when you use the word “textiles”, you're talking in the generic sense of both the textiles and apparel sectors.

The Chair: That's right, yes, in general.

Mr. Brian Morrisey: Just looking over some data, certainly in both sectors, the textiles and apparel sectors, following the negotiation of the free trade agreement with the United States back in 1988, which came into effect in 1989, we did see a significant drop in employment in those sectors. But you also have to remember that in those succeeding years we went into a very significant recession in Canada.

The bottom seems to have been about 1992. Since that time, in both the textiles and apparel sectors, there has been a restoration of employment, not back to the level, in either case, of the 1980s, but steady growth upward.

So, for example, in our consultation document that we have put on our website, we provide data dating back to 1992 on employment in the apparel sector in Canada. My understanding is that in 1988-89, approximately 120,000 people were employed in that sector in Canada. In 1992, that dropped to just under 76,000 people, based on Statistics Canada data that we are using. Since then, it has steadily grown to 93,000 people as of the year 2000. So we have seen a steady growth in that timeframe.

We've also seen growth in domestic shipments of the Canadian apparel industry, again from Statistics Canada data, from about $5.8 billion worth in 1992 to now $7.3 billion. It increased about $1.5 billion in what we're producing here in Canada in the sector.

I think it's also significant that in 1992 we exported $615 million worth of apparel, and in the year 2000 we exported over $3 billion worth. So there has been a significant growth in our capacity to export.

Approximately 95% of it goes to the United States, so we have taken advantage of the provisions that the free trade agreement and the NAFTA have provided us under that, obviously. The industry has shown itself to be competitive, quite able to adjust to find its niches in the market, and has taken good advantage of those possibilities.

º (1650)

The Chair: In other words, the export sector has increased in fact since—

Mr. Brian Morrisey: Yes, they have increased significantly, from $650 million to over $3 billion.

The Chair: Okay. About four times.

Mr. Brian Morrisey: Five times.

The Chair: About five times.

Mr. O'Brien.

Mr. Pat O'Brien: A few more questions. One is about the deadline. I think you answered Monsieur Paquette by saying the deadline for inputs is May 2. I wonder why that is and what happens with that input then. What's the next step?

Mr. Brian Morrisey: The next step will be to pull together what we've heard from Canadians, whatever interest they have in this, to make recommendations to the government. The government will then take its decision on what to do with respect to this initiative, whether to take specific action. I think, given the importance of the market access in the NEPAD that I spoke about and the fact that that will be discussed at the Kananaskis Summit, ideally we would hope to have some recommendations available to the government by that time.

Mr. Pat O'Brien: It is somewhat Kananaskis-driven, then.

Mr. Brian Morrisey: That provides an opportunity. And there are clear calls for us from the international community too.

Mr. Pat O'Brien: But this issue will continue to evolve, won't it, even through and after Kananaskis, I would think?

Mr. Brian Morrisey: That is quite possible.

Mr. Pat O'Brien: Right. Thank you.

On the issue of capacity building, it's been raised a couple of times today, and we certainly know these countries will need help in that area. What would be the vehicle? Would it be CIDA, or some other government arm or agency? Or has that been decided?

Mr. Brian Morrisey: Mr. Chairman, we certainly look to CIDA to provide the funding and policy assistance in the question of capacity building. We are using a number of initiatives that are open to us to deal with capacity building. For example, there is a program called the integrated framework for least developed countries that involves the six key multilateral agencies. This is now being acted on in coordination with the programs that governments undertake under the World Bank and the IMF. So we're now factoring trade into that.

Canada has been a major contributor to this IMF project, using CIDA funds and our grant aid. We have also provided assistance to the developing countries, enabling them to protect their rights and defend their interests under the WTO through an advisory centre on trade law. We have contributed, again through CIDA's good assistance, significant money for capacity building in the WTO context, through our APEC initiatives. The Prime Minister announced a $9 million program over, I think, a three-year period where we would again help our APEC colleagues who could benefit from capacity building.

So we're using a range of mechanisms. We will be calling on the international institutions as well to provide assistance. There are already institutions in place, the International Trade Commission, etc., in Geneva, that help. So there are many avenues. The secret will be to coordinate ourselves well so that we are effective and really can make a difference.

Mr. Pat O'Brien: Who will drive that coordination?

Mr. Brian Morrisey: Certainly, the Government of Canada is making every effort to insist on coordination. We are using all venues that we can, through our work in the integrated framework, through our work even in the OECD. We are very actively engaged with the WTO secretariat and we are pursuing it in virtually every multilateral context.

Mr. Pat O'Brien: It would be DFAIT, would it?

º (1655)

Mr. Brian Morrisey: Yes, we do that. That's correct.

Mr. Pat O'Brien: Okay, thank you.

Mr. Chair, picking up on one of your concerns, I think we all want to see this initiative go forward, but we're all somewhat nervous—maybe some more than others—depending on the constituency you represent. I don't know. And I understand that.

In terms of positive and negative impact on Canadians, I'd like to explore that with you. What are the regions where we might see a deleterious impact by this initiative? What are the demographics of workers that are potentially affected here in Canada? We've heard the idea of adjustment programs, but how far along are we with the development of specifics for such programs?

Mr. Brian Morrisey: When you look at the range of products with which we're dealing, it is our expectation that there is very likely little significant impact on Canada, with perhaps the exception of the apparel sector. One of the benefits will be potentially less expensive imports for the Canadian consumer.

We have shown, through successive rounds of trade negotiations, and particularly the FTA and NAFTA, that the Canadian economy becomes more efficient as we open our market. You're aware of how important trade is to our economy. We're the most reliant amongst the G-7--

Mr. Pat O'Brien: We can compete.

Mr. Brian Morrisey: We can compete. Exactly.

So opening markets does bring competition, which brings efficiencies. At the same time, it does bring adjustments. The one sector where you may see some need for adjustment is the apparel sector. Again, we don't know the impact. We want to hear about the impact from others, what they anticipate it would be, and we're looking at it ourselves. We certainly have not completed an analysis on that.

As you're aware, over half the apparel sector employment exists in the province of Quebec. Ontario would be next. I think we then go to British Columbia, Manitoba, and Alberta. It's where the industry is. The key cities are Montreal, Toronto, Vancouver, and then Winnipeg. It's where the employment is.

It's very difficult at this stage for us to determine what the actual employment effect is. In some of the markets there is a shortage of skilled people, skilled in terms of being able to do the sewing the apparel industry requires. We're upscale in many of our things. It will vary from market to market. There may also be other employment opportunities that can emerge from new initiatives as a result of the competition.

It's difficult at this stage to go beyond that, Mr. Chair.

Mr. Pat O'Brien: Thank you, Mr. Morrisey. Montreal, Winnipeg, Vancouver, and the other places you mentioned are all very important parts of Canada that we're concerned about--although I don't come from any of those great places. In other words, it's too early to flesh out exactly what the details of adjustment programs would be. The government is going to monitor it closely and have contingency plans ready as things evolve.

Is that what I'm hearing?

Mr. Brian Morrisey: We certainly will be watching very closely and will listen very carefully to what Canadians tell us. There are existing programs in place, as you know, that deal with questions of unemployment. We would look at the programs.

Are they adequate to respond to the circumstances that exist as a result of this initiative? If they're not, then I'm assuming the government would look at whatever else might be needed.

Mr. Pat O'Brien: Good. Thank you very much.

The Chair: Seeing no further questions, I want to thank you very much on behalf of my colleagues. Certainly you have given us a lot of food for thought. I greatly appreciate the fact that you came as a “Team Canada”. You brought all of the key players in the Government of Canada. It's our hope, as we move forward, that you continue to maintain this kind of cooperation and spirit.

We're going to move to our set of witnesses. We'll give our present witnesses a minute or so to move on.

» (1700)

» (1701)

The Chair: We'll start the next leg of our meeting. We welcome, from the Canadian Apparel Federation, Mr. Elliot Lifson, Mr. Bob Kirke, as well as Mr. Jack Kivenko. I understand we also have, from the Union of Needletrades, Industrial and Textile Employees, Mr. John Alleruzzo.

I thought the way we'd do it is you'll do your presentation, Mr. Lifson, as well as Mr. Alleruzzo, and then we'll open it for questions and comments.

Mr. Elliot Lifson (President, Canadian Apparel Federation): Mr. Chairman and committee members, we appreciate very much the opportunity to appear before you to assist in your deliberations.

My name is Elliot Lifson. I am president of the Canadian Apparel Federation and vice-chairman of Peerless Clothing Inc. I am accompanied by Jack Kivenko, vice-president of Jack Spratt Manufacturing, and past president of the Canadian Apparel Federation. Together we account for more than 65 years of experience in Canada's apparel industry. Even though we look very young, we are on the front line, and our companies employ over 3,500 people.

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

During our appearance before your committee on February 21, we expressed our concerns about what were then unreleased plans for the removal of tariffs and quotas on imports from least developed countries, LDCs. Since that hearing, the government has tabled a discussion paper on the LDC issue, and our purpose here today is to provide our assessment to the committee on the scope and impact of what is being proposed.

Clearly, the apparel market is in the process of change. Under the WTO Agreement on Textiles and Clothing, implemented in 1995, all apparel import quotas will disappear in 2005 and tariffs on imported apparel will be reduced. Canada has met its commitments under this agreement, and the agreement is having its intended effect of opening our markets to exports from developing countries.

Last year, apparel imports rose by over 10%. In the case of the leading apparel producer among the LDCs, Bangladesh, its exports to Canada grew at an average rate of 23% over the past eight years.

The government is proposing more for LDCs. The question is, is the government's strategy the right way to address the needs of the LDCs while taking into account the impact on our Canadian industry?

We believe that eliminating tariffs and quotas on imports of apparel from LDCs would offer only temporary benefit to these countries while undermining important segments of our industry.

The proposed strategy suggests that we are only catching up with what other developed countries have done. In fact, Canada's LDC proposal is more sweeping than what either the European Union or the United States have implemented. Given the much higher levels of apparel production in Canada, the impacts would be much more severe. Canada produces approximately 50% of the apparel purchased here—levels far in excess of those found in the EU or the U.S. when they implemented their LDC concessions.

As well, the government's proposal ignores some very basic realities. First, apparel industries exist in least developed countries in large part because of quota controls under the Multi-Fibre Agreement and the WTO. Once these controls are removed in 2005, production in least developed countries like Bangladesh and Madagascar, which are less productive, will migrate to more productive apparel producers like China. The apparel industries in LDCs will be decimated. This will happen with or without concessions for Canada. So what we may think of quotas...they really protect those countries in question.

Two, this proposal also ignores the fact that the apparel industry has within it some of the most mobile corporations in the world. Companies literally transport thousands of expatriate workers to production sites in countries that offer the market access they need. Precisely this type of activity has been on display in Madagascar and elsewhere in Africa recently. As a result, any notion that Canada's proposed measures will create a basis for long-term growth in LDCs is without merit.

The real beneficiaries will be well-organized transnational firms that move people and other productive resources around the globe at a rapid pace.

Third, the proposal ignores the need to impose very tight restrictions on transshipment to ensure production occurs in least developed countries and not in other countries under quota restraint. Without such restrictions, certain firms will produce in one country and then ship through a least developed country, evading quotas and duties. For decades firms have been finding ways around quota controls through such strategies.

» (1705)

Canadian government officials should be cautious about projections that these measures will have little impact, because the truth is very much the opposite. I believe very little has been done to actually assess the impact of these measures. If an assessment has been done, we would appreciate having a chance to review it. The only report we have seen that offers a credible impact assessment suggests that 25% of the industry would be affected. My associate Jack Kivenko may be able to provide greater details concerning the impact on his sector.

Four, closely related to the transshipment issue is the need to set origin rules that are consistent with our other trade agreements. Every trade agreement we sign includes a requirement that apparel be made from fabric produced in that country. These are essentially the same origin rules that Europe applies. Mr. Morrisey just referred to this. There's no doubt about it. There are rules of origin in Europe that are much stricter than those we have here. We strongly urge the Canadian government to set the same rules of origin for least developed countries while establishing limited exceptions with annual thresholds. American concessions to African LDCs are structured this way. Their ability to ship to the U.S. is capped at specific levels.

If the intention of the government is to assist African LDCs, the proposal should reflect that. Adding other LDCs, such as Haiti, Bangladesh, Cambodia, and Laos, makes the proposal far more sweeping and makes the transshipment a much more likely and vastly significant threat.

The current Canadian proposal provides the opportunity to remind the government that whether or not this proposal is implemented, the Canadian apparel industry will face mounting import pressure from numerous low-cost suppliers. The industry can refashion itself to compete in this changing environment, but we need a policy framework from the government that encourages investment. We continue to need real action to lower tariffs on imported textiles, as an example. Paying tariffs on textiles not produced in this country is crippling.

The Canadian apparel industry is still waiting for the government to keep its promise of helping it prepare for a changing world market environment. In the Canada Gazette, part I, of November 8, 1997, the government made the following commitment:

...the Government also announced that a federal committee was being set up to determine the longer term challenges of the textile and apparel industries. The review is to be completed before January 1, 2000, with close monitoring of all developments during the interim period.

This committee has never carried out that mandate.

Further, when the WTO Agreement on Textiles and Clothing was signed, the Canadian apparel industry was given the assurance that the Canadian government would not revise the terms of the agreement in midstream. It is now doing precisely that. Instead of assisting the industry, it is undermining it at a critical juncture.

The key messages I want to leave with you are these. One, we challenge the view that these concessions will have a substantial impact on the fortune of LDCs. Rather, larger trends beyond Canada's control will ensure a significant rationalization of the apparel industry among developing countries.

Two, immediate tariff concessions to major exporting countries would have a significant negative impact on jobs and investment in Canada.

Three, if the government proceeds with this proposal, it must phase in tariff changes, establish rules of origin comparable to what are being used by the EU, and police transshipment.

Four, the government must fulfil its commitment to create policies that support the industry in preparing for the new market challenges it faces.

Thank you.

» (1710)

The Chair: Mr. Kivenko, do you want to make a brief comment now or do you want to wait for questions and answers?

Mr. Jack Kivenko (Member, Canadian Apparel Federation): I never realized I was such a veteran until I sat before you and had Elliot point out that I've been doing this for almost 40 years, and maybe one year I am going to get it right. I have been not only working in the industry but making presentations to government committees for the greater part of the 40 years. Maybe now you guys are going to get it right. It's time. It's time that you start really listening to us before there will be none of us to come here and tell you that we need some help.

I spent some time thinking about what it is the government could do to help us. Clearly, this government intends to go out of its way to help people who didn't elect it, the people in all the other countries. The people who work for me, and who supply me, are the people who elected you. I think you must think in terms of whether it is going to be good for the people of Canada. You must consider to what extent will this be good for Canada, in addition to what extent you are going to pass on benefits to people in foreign countries.

I think it was terrific that we had an opportunity to hear that the Europeans are doing it, the Americans are doing it, and the Japanese are doing it. Do you know what they've given to the people of these 47 countries? They've given them, according to the Americans, the Europeans, and our government officials, access to markets of 750 million people. That's 750 million people, and they need this other 30 million people to make their soup thick. That can't possibly be the case, that the last little bit they're missing to enable them to develop and prosper is the duty-free and quota-free access to our market. It simply can't be.

In addition, our officials indicated a quota-free access to our market is really important. Understand that only six countries of the 47 they are talking about have any quotas whatsoever on their exports of apparel to Canada. The last time I testified here I didn't have all the data. Today I do.

When we removed the quotas from shirts, as we did a few years ago, three of the six countries that are LDCs were exporting shirts to Canada. Do you know what happened to their exports? They fell through the floor. Bangladesh exported $15 million worth of shirts in 1997, and by the year 2000 they were exporting $11 million worth. Nepal was exporting $1.1 million, and in the year 2000 they exported $91,000. Burma was exporting $2.2 million in the year 1996, and in the year 2000 they exported $50,000 worth. Do you know what that indicates to me? When quotas come off, the little countries lose their access to our market. It's exactly opposite to what the officials who were sitting here are suggesting to you. They are not going to get greater access to our markets because quotas are going to come off all the countries, and these poor people are going to lose their market in Canada and not get market in Canada.

Of course, the officials came up with a better idea. They said, let's take the quotas off and then give them a better advantage; let's take duties off. First we take the duties off the first 47 countries, and then which country is number 48, which one is number 49, and which one is number 50? Those countries are also going to be in very difficult shape. Before we turn around, we are going to be taking off all the duties off all the countries, or off most of them.

Once we start taking them off most of them, one of our best suppliers, China, is going to come along and say, “Hey, fellas, you treated us badly. You're giving advantages to all our competitors. You have to give it to us.” Do you know what? They're right. Before we turn around, we are going to have to reduce all our duties, which we have agreed to under the WTO. Now our officials are coming back and saying, we reduced it by the amount we agreed under the WTO, but that's not going to be enough; we have to do even more. Do you know what? To some extent our industry has been paying the price for Canada's accession to the WTO. Perhaps we have paid a high enough price.

» (1715)

When we have questions later, I'd like to suggest some of the things I think the government should do to enable our industry to survive, if not prosper, and realign itself, if not grow larger, in the face of what I think are misguided government policies.

So we're going to ask the government for new policies to offset the misguided policies they're recommending right now. It doesn't make a lot of sense to me, but I guess we'll have to do that.

The Chair: Thank you.

Mr. John Alleruzzo.

Mr. John Alleruzzo (President, Union of Needletrades, Industrial and Textile Employees): Thank you very much.

My name is John Alleruzzo, director of UNITE, which is the Union of Needletrades, Industrial and Textile Employees. I'm pleased to have the opportunity to make this submission on behalf of our members.

UNITE represents over 25,000 Canadian workers at approximately 240 workplaces. While our roots are in the clothing and textile industry, UNITE today represents workers in many different sectors, including auto parts, fibreglass, plastic, and photocopier manufacturing.

The face of UNITE is an image of diversity. Our members are black and white, Asian, South Asian, and latino. The majority of them are women.

UNITE traces its roots to the beginning of the century, when our founding unions, the International Ladies' Garment Workers' Union, and the Amalgamated Clothing Workers Union of America began organizing to combat sweatshop conditions in the apparel industry. Our mission remains the same today: UNITE bargains contracts, seeks to improve work standards, and builds workers' power in our economic and political systems.

UNITE's goals are to organize the unorganized; fight for our members' jobs by defending our contracts; advance the needs of working people through political action; and fight sweatshops through international solidarity.

Sweatshops, once thought to be a thing of the past, have made a comeback. In the clothing industry today, horror stories are not difficult to find. As a recent report from the International Textile, Garment and Leather Workers Federation states:

Most of the 30 million jobs in the sector worldwide are low-paid, insecure and often based in Export Processing Zones, where workers' rights are usually suppressed. Wages are frequently below subsistence level and falling in real terms. Overtime is increasingly obligatory and often unpaid. Millions of children are employed. Management by terror is common... Attempts to unionize are met with the utmost brutality, sometimes with murder. Rather than improving, the situation is worsening as globalization gathers force... The growing number of sweatshops across the industrialized world provides ample evidence of this.

Canadian workers have been hit by these trends. In the late 1980s and early 1990s, clothing manufacturers were hit by a deep and lasting recession. In the five years after the signing of the Canada-U.S. Free Trade Agreement in 1988, the industry suffered a staggering loss of 800 plants and over 33,000 jobs.

Contrary to predictions, however, the clothing industry did not disappear. Both shipments and employment stabilized and began increasing in the mid-nineties. Employment in the Canadian clothing industry grew from close to 76,000 in 1992 to 93,000 in—

» (1720)

The Chair: Mr. Alleruzzo, may I just make a suggestion? I think you're going through the submission you gave us. I'm going to ask my colleagues if it's possible to make it part of the proceedings, so you don't have to go through it. Then we'll spend the time asking you questions and getting answers, which will give you more of an opportunity. We'll save you going through it, if you would like. It's up to you.

Mr. John Alleruzzo: I came here and I would rather go through it. I think everybody else did.

The Chair: Please go ahead. It's your prerogative.

Mr. John Alleruzzo: Thank you. I know some of these things are repetitious, but as the labour representative, I think we should do it.

The Chair: I only wanted to give you the opportunity, that's all. Please, go ahead.

Mr. John Alleruzzo: The value of the domestic shipment increased by $5.8 billion to $7.4 billion.

Now all this has happened, I hear, and I heard, because the NAFTA was a factor. Actually, the factor for this is the weak Canadian dollar and not necessarily the free trade.

The question is not whether we will have an apparel industry, but what kind of an industry it will be. Will it be a source of good jobs or a haven for sweatshops?

We have documented cases of home workers manufacturing clothing in the city of Toronto earning as little as $2 an hour. Workers in hundreds of small contracting shops face routine violations of basic employment standards. A summary of Ontario Ministry of Labour inspections conducted in the clothing industry over a ten-year period from 1991 to 2001 reveals that every single inspection confirmed the violation of Ontario's minimum wage law.

While the clothing industry is highly fragmented, the Canadian retail industry has become increasingly concentrated. In the wake of free trade, American retailers, such as the Gap, Eddie Bauer, and Wal-Mart, have greatly increased their presence in the Canadian market. The highly decentralized nature of the growing industry allows more concentrated retailers to enjoy greater bargaining power when setting prices and delivery specifications over the manufacturers.

The retail industry now plays a dominant role in setting the conditions for government manufacturers. Retailers move production all around the world in search of cheap labour. Globalization of the industry has been fueled by the extension of multilateral trade agreements, particularly the World Trade Organization.

The limited tariff protection that clothing and textile workers once enjoyed is quickly disappearing. As a result of the old way of the General Agreement on Tariffs and Trade, the Multi-Fibre Agreement that provides a special treatment for clothing and textile imports was replaced by the Agreement on Textiles and Clothing.

Textile and apparel quotas negotiated under the MFA will be phased out by 2005. China's accession to WTO means Chinese products will qualify for enhanced access to the Canadian market. China is already Canada's largest supplier of apparel imports, accounting for 34% of apparel imports in 1999.

The global reach of the apparel industry is plain to see. Visit any department retail store in Canada—The Bay, Zellers, Sears, Wal-Mart Canada, Roots, Club Monaco, Gap, or Eddie Bauer. You'll find clothes from countries around the world. A huge percentage will probably come from China.

On a recent trip to the local Gap Kids store, a member of the Ethical Trading Action Group, of which UNITE is a member, identified labels from more than 35 different countries.

In their restructured and globalized garment industry, retailers and major brands are constantly searching for new opportunities to have clothes made at a lower cost. Countries such as El Salvador, Mexico, Bangladesh, China, and Burma are forced to compete over who will accept the poorest wages and working conditions, with the weakest labour, health and safety, environmental, and human rights standards.

As a result, governments everywhere are being pressured to weaken employment standards and legislation, deregulate the economy, and privatize labour standards and environmental regulations. Far from creating economic growth for developing nations, globalization and free trade are simply forcing sweatshop conditions for government workers around the world.

On a recent trip to southern China, a member of the Ethical Trading Action Group was told by a Taiwanese manager of a sport shoe factory producing for a U.S. brand that his company was now being pressured to move production to Burma. Labour costs were too high in China. He went on to explain that the total labour cost per worker, per month, was $100 U.S. in China but only $28 a month in Burma.

The problem with cheap labour as a strategy for attracting jobs is there is always somewhere cheaper for the jobs to go.

Canadian clothing wages are within the range of most industrialized countries that are members of the Organization for Economic Co-operation and Development. Our industry wages are, however, much higher than in developing nations. We have as many as 160 countries producing fashion goods for export. The downward pressure on labour costs is intense. This is a race to the bottom that we cannot win.

» (1725)

South Africa and Lesotho are the sites of a growing garment export and manufacturing industry where workers rights violations are common. The textile industry is now Lesotho's biggest employer, with more than 40,000 workers. But the Lesotho Clothing and Allied Workers Union reports that textile factories often ignore Lesotho labour laws, and the growth of export-based apparel manufacturing has actually resulted in increased exploitation of workers.

This export growth must be seen against the backdrop of the appalling working conditions in the textile industry, which are characterized by poor wages and unduly long working hours, Daniel Maraisane, a shop steward of Reflex Knitwear, one of the factories designed for export, recently told the BBC news.

A recent report released by the Ethical Trading Action Group highlights a serious labour rights abuse in three Hudson Bay Company supply factories in Lesotho. The ETAG approached the Hudson Bay Company last October to discuss these documented abuses of workers in their contract facilities. During the meeting, HBC executives said they will hire an independent auditor to visit the factories. We were told that we would receive a report indicating the steps they would take in achieving compliance with their own code of conduct. Instead, months later, they sent us a copy of a letter to another organization, a letter that did not disclose what actions were taken to address our concerns, and hinted that The Bay planned on cutting and running, abandoning the plants instead of pressuring the owners to improve working conditions.

The workers who have courageously spoken out against sweatshop abuse risk being victimized. I understand that the Retail Council of Canada is making a presentation in the near future. Maybe it wouldn't be a bad idea for this committee to ask them some questions concerning this.

In response to the spread of sweatshop abuse in the garment industry worldwide and also in Canada, an anti-sweatshop movement has emerged and grown dramatically over the past ten years. This new movement is made up of students, teachers, church members, non-governmental organizations, unions, and consumers. Increasingly, consumers are asking where they can buy clothes made under humane working conditions. The vast majority of Canadians would prefer to buy clothing that they knew was made under safe conditions by people who are earning a living wage.

In a just released Vector poll , 36% of respondents said that in the previous year or two they had refused to buy products that they felt were made in sweatshops. Among those aged 18 to 24, the much-coveted young market, this figure jumped to 43%. Almost six in ten Canadians said it was very likely—39%—or likely—20%—that they would boycott stores that sell clothing made in sweatshops. This poll also revealed that two-thirds of Canadians would pay $25 for an article of clothing if they were sure it wasn't made by children or in sweatshops, instead of clothing costing $20 that carried no guarantees about its origin.

It is clear that given a choice, the majority of Canadians would prefer to purchase apparel made under ethical conditions.

One persistent problem facing people concerned about sweatshop labour abuses is an inability to confirm where our clothes are made. The retail industry and their global network of contractors work hard to keep this information out of the hands of consumers precisely because they don't want to be held responsible for the conditions under which their goods are made.

Earlier this year, the Ethical Trading Action Group sent a letter to the industry minister proposing minor changes to the federal government's textile labelling regulations, requiring companies to disclose manufacturing locations in a publicly accessible database. We have repeated our request on many occasions, but so far he has refused to meet us.

» (1730)

Our proposal is simple, but the effect could be far-reaching. In order to sell clothes in Canada, companies would have to provide the public with the names and addresses of all production sites used in manufacturing their clothing. This information would not have to appear on the label itself. It could be available through the CA number database published online by Industry Canada. This would give consumers the capability to link particular brands and articles of clothing with the factories where the products are made. We'll be able to engage in practical and effective solidarity with workers who try to organize and improve conditions.

The final report of the Canadian Democracy and Corporate Accountability Commission endorsed this proposal. We have met with ministry staff, who have told us the proposal is technically possible. Requiring disclosure of clothing suppliers is a practical step to address sweatshop abusers, and also a popular one. The Vector poll I referred to earlier revealed that 84% of Canadians support disclosure of factory locations where apparel products sold in Canada are made.

During his tour of Africa, Prime Minister Chrétien spoke out in favour of democracy and human rights and urged African leaders to give a voice to their people. But today the voices of African workers have not been present in bilateral or multilateral discussions about investment, trade, and development assistance, nor have workers' rights, an essential element of human rights, been included in these discussions.

We believe a necessary condition of successful economic integration is respect for minimum labour and environmental standards. Workers in developing nations need the tools to negotiate their fair share of the free trade benefits. Our goal should be to elevate labour standards, not to incite a relentless race to the bottom.

Our experience with the NAFTA side agreement on labour has convinced us that labour rights will only have an impact if they are included as a core part of the agreement. None of the approximately two dozen complaints filed under the NAFTA side agreement since 1994 have led to any meaningful redress for workers. We recommend including in future trade agreements provisions requiring parties to enforce not only their own legislation, but also the International Labour Organization's core labour standards. Since most countries with whom we trade are already committed to respecting these standards, this cannot be seen as a foreign imposition.

We would further recommend that all core labour standards be subject to the same dispute resolution mechanism and remedies as other potential violations of the agreement. If we can protect intellectual property rights through international trade agreements, there is no reason we cannot do the same with labour rights.

Thank you very much.

» (1735)

The Chair: Thank you, Mr. Alleruzzo.

Mr. Duncan, do you have any questions?

Mr. John Duncan: Yes. My question is for Mr. Alleruzzo, and it deals with the sweatshop aspect of his presentation.

In other committees and other parts of my career, I've dealt with a lot of environmental standards, so I see some commonality. You're talking about consumers being very driven and wanting to buy on the basis that these have come from factories that do respect labour standards and so on, and they would like to have a simple and meaningful way of being able to measure that. I'm quite attracted to that part of your presentation, because what has tended to happen in some areas is this ends up leading to a certification process. That leads to not government or governments being the sort of institution that monitors and regulates this, but a third party, an independent verifier and a consumer-oriented watchdog. I think in many ways that has the potential to work better than governments.

I wondered how much thought your organization has put into maybe going in that direction. If not your organization, have you had any signal from the International Labour Organization that maybe they were heading in that direction too? They certainly have a large staff and a lot of resources at hand that you probably don't have.

Mr. John Alleruzzo: Actually, through the ETAG, which we are members of, about a year and a half or two years ago we were trying, with the help of the government, to have Canada implement codes of conduct that they would have applied all over, where merchandise was coming from, and also for Canada.

At this meeting we had, which was put together by the government, the participants were of course the unions and other organizations, including the church, and so on. The manufacturers were there, as were the retailers. We had a couple of meetings, but we were never able to conclude anything, really, mainly because the retailers were totally against that and they felt they would have their own codes of conduct.

Today they do exist. If you ask The Bay they'll tell you they do have a code of conduct. The thing is, these codes of conduct have to be monitored, and they also have to be audited. It's very important who does the auditing, because if it's not a third party that does the auditing, there's no use in having codes of conduct.

This is why we came up with this proposal now, the disclosure rules, which I think are very simple. There is already a label with a CA number, which is displayed, to make sure the interested party can, by looking at the CA number, find out where this merchandise is made.

We feel that whatever codes of conduct exist, it's going to be the consumer who will make that final decision. We feel the consumer has proven to be responsible, and we feel consumers want to buy merchandise that is made in shops where those workers are treated decently, where they have decent working conditions and they earn at least a living wage. This is why we are pushing for the disclosure rules.

» (1740)

Mr. John Duncan: But disclosure rules won't really work unless there's an independent authority making that judgment, because the average consumer has no way to verify whether that location is appropriate or not, do they?

Mr. John Alleruzzo: We believe we have that verification now. The ETAG does a lot of the checking on different plants abroad, and we think we will continue to do that. Plus, once we know about a plant, it's very easy to have somebody go and check it. As I said, we do that now; we have people actually travelling in Central America and in different foreign countries.

Mr. John Duncan: So if ETAG deems a plant to be non-compliant, what do they do? What happened in the case of Hudson Bay? As you pointed out, it's actually the workers...

Mr. John Alleruzzo: I think it's very simple. If these workers are working 75 hours a week and they only get paid for 50 hours, or if these workers, pregnant women, are forced to do their work standing up—

Mr. John Duncan: Yes, I understand.

Mr. John Alleruzzo: —and they don't get the minimum wage, then it's very simple; it's declared a sweatshop.

Mr. John Duncan: But you say they become the victim twice, then, so I do see that there is some difficulty here. Anyway, I won't belabour it. Thank you very much for your obvious concern. I'll pass on to whoever wants to pursue the next question.

[Translation]

The Chair: Thank you very much.

Mr. Paquette, do you have any questions?

Mr. Pierre Paquette: Firstly, I want to thank you for your presentations.

If I understood the position of the Canadian Apparel Federation correctly, what it wants, basically, is that we limit ourselves to the agreements that were signed at the last round of WTO negotiations on apparel and textiles.

You spoke about government aid. Since these agreements have already been signed, it seems to me that the future of the apparel sector in Canada and Quebec depends a great deal on the path the industry will choose. Do you have access to programs that allow you to occupy a more upscale niche than the clothing that come from developing countries? Are there any programs that exist at this time? Would this be an avenue worth exploring for the medium term? Sooner or later, tariffs and quotas are going to disappear and the only way I can see of ensuring the industry's survival is to ensure that quality will attract consumers and allow us to export.

» (1745)

[English]

Mr. Jack Kivenko: I think you should look around the room. If the people sitting here aren't our customers--I don't see anybody wearing haut de gamme here--where are we going to sell enough haut de gamme to be able to remain in business?

[Translation]

Mr. Pierre Paquette: This is a Canadian jacket.

[English]

Mr. Jack Kivenko: This one is too.

[Translation]

Mr. Pierre Paquette: I paid almost $1,000 for it. I think it is a top-of-the-line product. It's the only one I have like it!

[English]

Mr. Jack Kivenko: I can't afford one like that.

[Translation]

Mr. Pierre Paquette: You are not setting an example, gentlemen.

[English]

Mr. Jack Kivenko: Right. But the truth is, to be able to remain in business we have to be able to sell to everybody. That's what our business is. Haut de gamme sells to such a small number of people that I don't know anybody who wears it.

[Translation]

Mr. Pierre Paquette: I meant clothing of better quality than apparel that comes in from Bangladesh or elsewhere.

[English]

Mr. Jack Kivenko: Of course, that's what we do, but we don't sell the lowest price of the lowest price.

[Translation]

Mr. Pierre Paquette: I understand your position very well and I am willing to defend it, but I find that it is defensive because tariffs and quotas will eventually disappear, whether it takes 5, 10 or 15 years.

[English]

Mr. Jack Kivenko: Absolutely.

[Translation]

Mr. Elliot Lifson: Certainly, but consider this. The clothing we export to the United States does not come from Bangladesh, but the import of apparel from Bangladesh has an impact on our industry here in Canada. In Mr. Morrisey's reply to Mr. Harb's questions concerning the effect of imports and exports, we only talked about exports. Yes, that's true, but imports have increased twice as much as exports. This means that this year we are in the same situation as in 1980, but the difference is between the exports and imports. Yes, certainly, exports have increased, but imports into Canada have increased twice as much. The Canadian industry has shrunk by 25 to 35%.

Mr. Pierre Paquette: Mr. Chairman, I also have a question for the Union of Needletrades, Industrial and Textile Employees.

Firstly, I can tell you that I and the Bloc Québécois completely endorse the idea of having social clauses and of referring to the important conventions of the International Labour Organization. I know that not everyone here shares that idea, but in my opinion this is also a way of ensuring that in future the increase in international trade will lead to the improvement in the living and working conditions of populations as a whole, rather than leading, as you said, to a race to the bottom. You are quite correct when you say that a way has been found, finally, to protect intellectual property. It seems to me that it would not be that difficult with a little imagination and political will to protect people's working conditions.

That being said, I still would like to ask you a few questions.

I met with people from the textile industry in Montreal—I referred to this earlier—and according to what they said to me there is an excellent textile industry in Montreal, but the problem is that the clothing they produce costs too much. So they suggest that we follow the American example, that is to say to produce textiles in Canada or in Quebec, have the clothing manufactured in the Caribbean and then bring it back to Canada or the United States for marketing. According to them, if we cannot manage to find a way to produce less expensive clothing, we are going to lose the Canadian and American markets. That is their point of view.

On the other hand, the representatives from the apparel industry told us earlier that they absolutely had to have access to textiles without tariffs if they are to be able to face the competition. It seems to me that on both sides there is a will to overcome current difficulties that is quite legitimate but that will pit one party against the other.

You who represent workers from both the textile and apparel industries, how do you react to this type of behaviour? What we are witnessing, finally, it seems to me, is a war within an industry where greater mutual solidarity would probably yield better results.

Mr. John Alleruzzo: Naturally, there's always a big difference between the textile industry and the apparel industry. That has always been obvious. I think that things have been going well for a year in the textile industry. It invested thousands of dollars in upgrades. It is now able to compete with anyone in the world. Recently, the textile industry was particularly affected by the agreement between the United States and the Caribbean. You know that the spinning and knitting are now done in the United States.

This also affects the textile industry in Canada. As was just said, exports have increased, but 90% of exports are to the United States. This agreement with the Caribbean will cause a decline in exports.

The other complaint by the textile industry concerning clothing, particularly men's wear, is that the textiles are always purchased outside the country. I have been a member of the union for almost 35 years already. As a union we have been fighting imports since the beginning of the sixties, I would say. Japan began exporting in 1959. Afterwards, there were other countries. That was simply because it had become too expensive in Japan. Finally, at the union level, we told ourselves that globalization was the culprit. We aren't happy about it, but we accept reality. What can we do? It is going to happen.

Whenever there are negotiations on free trade or related issues, the worker is always excluded. For instance, free trade between Canada and the United States has had an impact. There have been a lot of plant closures, and other effects. This has also had an impact on the negotiations between unions and employers. As soon as free trade comes up, people naturally side with the employers, saying that they must be able to compete with the United States. These arguments were used to negotiate collective agreements that did not give workers the salary increases they should have had.

The same thing always happens with imports from other countries. Once again, if you look at salaries in countries such as Bangladesh or El Salvador or China, among others, you will see that it is impossible for an industry here to compete with such countries.

The only thing that has happened here in Canada is that the clothing industry, and in particular, the men's wear industry, has managed to penetrate the American market because of the good quality and the style of the clothing produced, because of delivery considerations, and naturally, because of the weakness of the Canadian dollar.

As a union, we believe that the apparel and textile industries will always exist here in Canada, particularly in Quebec and Ontario where they are major industries. However, insofar as the apparel industry is concerned, the average hourly wage of workers is approximately $10 an hour, whereas the average rate in the manufacturing industry is $16 an hour. There is a $6 gap, $6 less. This will not change. In fact things may get worse because of third world imports. We hope that working conditions, salaries, benefits will stay the same. I think that they will always stay at the level they are at now.

I don't know if I answered your question.

» (1750)

Mr. Pierre Paquette: I wanted to hear your comments. They will be useful to us in our work.

Thank you very much.

[English]

Mr. Jack Kivenko: I think it's important to understand that the Canadian textile industry, to the extent it exists--and it's not a very large industry any more--cannot supply the kinds of textiles the bulk of the apparel industry needs, and that a very large part of the textiles that are made here in Canada aren't destined for clothing. This is textiles; carpets are textiles; wallpaper and curtains are textiles. All those are the kinds of textiles that are successfully made here in Canada.

If we take all of those out of the production of the textile industry in Canada, you'll see that it is a very small industry, with very small potential to make the kinds of fabrics we need.

Our industry would love to buy from our neighbours. We do, to the extent it exists. To the extent it doesn't, I don't think we should have our hands tied behind our backs and let high duties exist on textiles that are no longer and can never be made in Canada.

One of the beauties of the suit industry, men's fine clothing, is that they are buying their fabrics from all over the world. Essentially the fabric for men's fine clothing isn't made here. One of the advantages they have when exporting to the United States is that they buy from all over the world, assemble the garments in Canada, and present an alternative to the kinds of garments that are made in the United States out of textiles that are still made in the United States.

» (1755)

The Chair: Mr. O'Brien.

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

I guess, first of all, I would react to a comment from Mr. Kivenko's interesting criticism of the government, that the government is going to help people who didn't elect it. Usually the criticism is other way around. That was an interesting comment, but I don't accept it. Indeed, it's our job. No government is elected, usually, in this country with even more than 50%, so even in Canada any government has to help people who didn't elect it. My vision is that this also extends to the international stage. Anyway, I had to pick up on that comment.

I want to ask Mr. Lifson a question. I appreciate you've given some very important and interesting testimony. The government is involved in a consultation process. You heard the government officials before you. Some of them are here taking note of your comments, I'm glad to see. We need to explore your concerns.

In that regard, Mr. Lifson, you said there's been no adequate assessment of the impact of these measures on your industry, or something to that effect. Can you give us specific proposals about what a proper assessment would look like, in your view? Have you got your assessment that you can share with us. Or have you already done one?

Mr. Elliot Lifson: I wish I had a crystal ball. I can only work on past experiences of what happened, and Mr. Kivenko reflected on what has happened in the past.

I want to relate one other thing as far as consultation is concerned. Yes, sure, members are sitting here and listening, but in all fairness, I can tell you there is a concern. Obviously, the concern is that nobody really understands the true impact of what could happen—not only looking at it in a pragmatic, straightforward fashion, but talking about transshipments.

Just to explain very carefully what we mean, it's very easy to take the label off a garment, change the label, and ship it to other countries. It has happened before, and it happens every single day. Needless to say, when you have an opening like that, it just opens it up, and we really don't have enough personnel to monitor it and police it.

But I can tell you one thing: right up to the ministerial level—and we have appointments with the minister himself—there needs to be reflection on the issues and the impact of this industry, because it is a very important industry. As somebody mentioned earlier—I think it was in reference to Finance when they were sitting here--it impacts greatly, especially in the province of Quebec.

Mr. Pat O'Brien: We understand that.

Mr. Elliott Lifson: That's critical.

Mr. Pat O'Brien: When I asked some of those questions, perhaps I wasn't clear. You said you don't have a crystal ball. Well, unfortunately, neither do we.

You were being mildly critical, I think, by saying there had been no proper assessment of the impact of these measures, so what I'm asking you to do is describe for me what you would consider to be a proper assessment.

¼ (1800)

Mr. Elliot Lifson: We'll give you an example.

Jack.

Mr. Jack Kivenko: Mr. Morrisey has said it's hard to tell what the result will be. In the first case, as far as I'm concerned, if you don't know what the result will be, then why would you go and do it? You'd better have an idea of what the result will be. And if he, who's advocating this, doesn't know what the result will be, why would you do it?

Quite frankly, I don't think the result they're even shooting for is what will happen. What they think will happen is that it will improve the lot of LDCs. I don't think that will happen. I think there will be a short-term move of merchandise production from wherever it is to the LDCs while they have an advantage, but shortly thereafter the advantage will be dissipated, and the production, as I've said three times, will be done in China, in India, and one or two other countries.

What effect will that have on Canadian companies? Well, if you were me, sitting here today and you heard that duties and quotas were going to disappear, would you spend hundreds of thousands of dollars on new production equipment? Not a chance. Would you spend hundreds of thousands of dollars on training your employees to improve their productive capability? Not a chance. Would you invest in new plants? Not a chance.

Chances are, we won't get better if we feel there's a good chance our industry will be flooded with a huge amount of imports under this program. And do you know what? We have good reason to believe that will happen, because every single time we've done this kind of thing this is exactly what's happened.

For instance, it happened with the shirt industry. Immediately after quotas were removed, more shirts were brought into Canada than we could use. The shirt industry, domestic and import, fell down to a terrible level. You could buy shirts for $8 in Canada.

So that is what will happen, and that's why I believe—

Mr. Pat O'Brien: No, I appreciate that. And although what you say will happen goes in a different direction from what officials say will happen, I do hear both groups say that we really don't have any way to demonstrate what positively will happen. I guess to some extent it's crystal ball gazing, and I appreciate that. I understand that.

I want to pick up, Mr. Chairman, on the ILO. Along with my colleague, Mr. Paquette, and others, I have kicked this around before. I've disagreed with other labour representatives, so let me do that again. And I have many good labour friends and representatives who helped to elect me and I hope will continue to do so.

The fact of the matter is, at this committee, when I put to Mr. Somavia, the head of the ILO, the question of whether he thought putting core labour standards into the trade agreements was the best way to proceed, his answer was no. He was then very complimentary--I can give you his exact quote, if you're interested--about the way in which Canada, through side agreements, had shown great concern for labour standards and the rights of workers. This is the head of the ILO, Mr. Somavia, in testimony before this committee.

When I was involved in the EU development ministers conference a year or so ago, they were very clear in their determination that labour standards, and environmental standards for that matter, should not be put into trade agreements, that they were most effectively dealt with in side agreements.

So these are not just my opinions. Of course, I share those views, having heard them so often from labour experts in different countries. I want to see what your reaction is to those experts.

¼ (1805)

Mr. John Alleruzzo: Well, I haven't heard that, so....

Mr. Pat O'Brien: I'm pleased to share it with you.

Mr. John Alleruzzo: I believe what you're saying, but the ILO comes up with this...they have some fundamental rights that are there. It's true that some of the countries have not ratified the convention yet; nevertheless, these fundamental rights that the ILO has passed should apply even to countries that have not ratified the convention. If they are members of the ILO, they should apply.

Mr. Pat O'Brien: Sorry to interrupt, but that's not my point, sir. You're saying put them in trade agreements; the ILO chair is saying don't.

What's your reaction to his opinion?

Mr. John Alleruzzo: Well, if he said that, I would disagree with it. There's no question about it, because we feel that labour, and also the CLC...I'm a member of the CLC. We feel they should be there. Again, the labourers really had no...every time there's talk of free trade, the only worry is what impact it has on the country, and on the retailers and so on.

Mr. Pat O'Brien: In fairness, the reason he and the others I've questioned about it say no is that it just makes it impossible to make the trade agreement. It's not even the most effective... It's not that Mr. Somavia, head of the ILO, doesn't care about workers' rights, obviously. He said in testimony before this committee that it can be very effectively done in side agreements, and he complimented Canada for proceeding. I have the man's direct testimony. I'm happy to share it with anybody. I think it's important that you understand the context for it.

Sorry, Pierre?

[Translation]

Mr. Pierre Paquette: You'd have to reread his testimony, that is not quite what he said.

[English]

Mr. Pat O'Brien: I can't hear the translation.

Mr. Pierre Paquette: [Editor's Note: Inaudible]

Mr. Pat O'Brien: Mais non, monsieur, I'm happy to give you the—

The Chair: Okay. Mr. Kirke wants to jump in. He has a word of wisdom.

Mr. Bob Kirke (Executive Director, Canadian Apparel Federation): I'm just trying to respond to an earlier comment you had. The Shannon study that the National Post seemed to have access to did say that 25% of the industry would be directly affected, and it was in categories such as trousers, knitwear, and underwear. I think that's a reasonable departure point, and we're collecting information from our members about how they see things. So I think that's a reasonable thing.

There was a lot of discussion earlier when the officials from Foreign Affairs were speaking about...you know, it is true that it doesn't have the same impact in each sector of the industry. The suit industry has one set of strategies; there are others in other sectors.

But I think there will be significant impacts. We're going to bring them to the attention of the government, and we're not fully aware of them at this time.

What I would say, just to follow up and maybe come back to a point the other member made, is that--

Mr. Pat O'Brien: With all due respect, Mr. Chairman, it's my turn to ask questions. My colleague can get his turn later on. But if you could address yourself to my question...

Mr. Bob Kirke: Yes. I was simply going to reflect the fact that we do speak about the textile industry cumulatively, and I think Mr. Kivenko's point was that there are two industries here. And in reference to this set of issues, it is the apparel industry that will be absorbing very considerable impact if the government makes these concessions to the full extent they're talking about.

Mr. Pat O'Brien: That's great.

What I'm asking you to do...and I accept that opinion. I accept it as an opinion. But what I want to see—because it's important input—is if you can help demonstrate that this opinion is fact. Mr. Lifson said he doesn't have a crystal ball, and neither have I. I'm a layman. I'm not a businessman and I'm not into industry. But I will have to make a political decision on this at some point and I want to be as informed about it as I can. That's the purpose of these hearings.

I'll conclude with that, Mr. Chairman. I have to get to another function. But I thank the witnesses, and I look forward to more quantification of those opinions.

The Chair: Just before we lose quorum...

Mr. Lifson, you can make your comment, then I have a question, and then we will adjourn.

Mr. Elliot Lifson: I want to direct this back to Mr. O'Brien. I appreciate the fact that you're sitting...and I appreciate also that you said “a political decision” because it is a political decision.

An hon. member: Of course it is.

Mr. Elliot Lifson: You have to balance everything out. We've got to understand.

In our factory we have 3,000 employees. These are not skilled people, as was mentioned earlier. These are entry-level positions. We're talking about two things here. I understand that we want to be magnanimous in the worldwide picture, but let's keep in mind that the same people we're talking about—if we're talking about people—are employed in our factory. We take them off the street, we train them to become viable citizens who can earn a living, and then they move on as they move up the level. These are people who would be unemployed if we closed our factory; they're entry-level positions.

If we want to do something for the people, let's do it for the people—keep in mind politically—here in this country. If we want to do something for a country, which is also a magnanimous gesture, let's teach them how they are going to survive after 2005. Let's not upset the apple cart for a period of two years, upset our whole industry, and not really do anything for those countries.

So on the people skills, on the people issues, and on the country issues, I hope I've answered it.

¼ (1810)

Mr. Pat O'Brien: I appreciate what you've said, but I want to see more facts that this initiative--and I don't mean now but I'd like to get it from you at the committee-- will not do anything to benefit the LDCs. We fully share your concern about Canadian workers. That's why I posed questions today to our officials about adjustment programs, if you recall because I think you were here. That's a common concern shared by all of us. We're not about to take an initiative as a government that we think is proper with LDCs and then do nothing to acknowledge that there could be problems for our own Canadian workers. That's why we asked about adjustment programs.

The Chair: I have a small question.

First, the quotas for 2002 have already been set now, so nothing is going to happen for 2002 anyway. So notwithstanding anything this committee might do, if it were to turn around and tell the government “Please proceed and remove the tariffs and quotas from less developed countries”, if that were to take place, it would be 2003.

The concern Mr. Kivenko was raising, as well as yourself, Mr. Lifson, would take a matter of 24 months. What we're talking about here is a possibility of mobilization of a huge magnitude, and knowing the systems that exist in these less developed countries, we know it isn't going to happen that one of those major companies would go in and set up shop in those countries and start shipping products to Canada.

You also made a comment about the deficit, the trade figures, when I asked Mr. Morrisey about the state of exports. In fairness to Mr. Morrisey, he clearly stated that there has been an increase in exports, I think fivefold. I'm going back to 1992, which is 10 years. I'm not going to go beyond that. That's basically when NAFTA and all of those agreements kicked in, around that time. Statistics Canada figures state that in 1992 imports from all countries were $2.874 billion and exports were $615 million. In the year 2000, imports from all countries were $5.308 billion and exports were $3.042 billion.

We did a little mathematics here and it came out something like this. In 1992 the differential between imports and exports was $2.259 billion. In the year 2000 the differential was $2.269 billion. So basically, when you look at the differential between imports and exports over those 10 years, really nothing has happened. But one thing that did happen over those 10 years, and after the trade had kicked in... Employment in Canada over the 10 years, starting in 1995, was at 75,700, and in the year 2000 it's 93,152. Domestic shipments started with $5.8 billion in 1992 and moved on to $7.38 billion in 2000.

All I'm trying to say to you here is that the industry seems to be quite aware of the need for adjustment, and frankly it's because of your leadership.

I appreciate, on behalf of my colleagues, the sincerity with which you came forward with your comments and the way in which you have presented your case. My question is quite simple. Presently, with the least developed countries exporting to Canada in both clothing as well as textiles, under the guaranteed quota access, do they hit the ceiling? Are they really exporting to Canada to the maximum, or is there still some room there?

¼ (1815)

Mr. Jack Kivenko: Most of those countries are not hitting their quotas.

The Chair: So in your assessment, if we were to remove the tariff--

Mr. Bob Kirke: That doesn't mean to say there aren't very substantial exporters that are quite capped by quotas and have extensive, quite enormous, productive capacity to increase exports. That is acknowledged in the background, I believe.

The Chair: I was in Bangladesh... Sorry, go ahead.

Mr. Bob Kirke: I take your comment in the spirit it was intended. I think our exports have been very strong, whether it's the low dollar, as Mr. Alleruzzo has pointed out several times... There have also been investments in technology. Mr. Lifson's factory is truly state of the art, and Jack's is also a state-of-the-art facility.

I guess I wanted to come back to the issue of what the word “adjustment” means. I don't think we are here to say, “We're going to close our factories; help us.” What we would present to the committee and to the government as a whole is that there are trade measures that can be implemented to allow us to remain competitive, with some concessions made to those countries.

The Chair: Our officials are here as well as our government director, Mr. O'Brien, and I'm sure they have taken note of your point.

I want to thank you on behalf of my colleagues. It being 6:20, I know we are going to lose quorum because my colleagues have another commitment and we need at least three members on the committee to proceed. If you have any other statistical information or any other documentation you would like to share with us or with the department, please feel free to do so. I hope we will continue to hear from you and to see you involved in this very important issue in this very important industry.

With that, we'll adjourn. Thank you.