[Recorded by Electronic Apparatus]
Tuesday, April 30, 1996
.1552 
[English]
The Chairman: Order.
I'd like to welcome Minister Eggleton on behalf of the members of the committee. It's the first time the minister has had an opportunity to come before this committee.
When your colleague Mr. Axworthy came before us, he laid out such a heavy program of ideas about what this committee might be doing, we decided afterwards that we'd call ourselves, instead of the Standing Committee on Foreign Affairs and International Trade, the "Permanently Sitting" Committee on Foreign Affairs and International Trade. So if you're as aggressive in terms of what you see this committee might do, we'll be forever sitting.
Welcome, and thank you very much for coming. I know you'll want to start by speaking to us, and then we'll put it open for questions.
You'll recall that this is a matter about the budget, but the minister also will answer questions about where we're going on our negotiations on anti-dumping and countervailing duties in the international trade matter. There may be other trade questions the members want to ask.
Hon. Arthur C. Eggleton (Minister of International Trade): Let me thank you very much, Mr. Chairman and members of the committee, for this opportunity to be here today.
Let me introduce, if I might, the people with me. Rob Wright is the deputy minister for trade; Jim Judd is the ADM for corporate services in the department; Tom MacDonald is the director general for U.S. trade; and John Fried is director general for trade policy.
Mr. Chairman, I welcome this opportunity not only to report to you on the government's progress but also to receive your input and suggestions on how we can do better in terms of our international trade operations.
[Translation]
The basic goal of our trade policy is very simple, but often forgotten: it is to provide jobs and opportunities for Canadians.
[English]
The basic goal of our trade policy is very simple but often forgotten: it is to provide jobs and opportunities for Canadians. Sometimes that simple truth gets lost in the details of rights and remedies, in the minutiae of agreements and negotiations - countervail and anti-dumping and all of that - but it is a truth we must always keep before us, that trade is about jobs for Canadians.
I don't need to remind this committee of the importance of trade to our economy. International trade generates one out of every three jobs in Canada and accounts for about 37% of our gross domestic product. That's up, in a period of four years, from 26% of GDP. So if we were a trading nation then and we said we were, we're an even bigger trading nation today.
.1555
In recent years our trade performance has been nothing short of spectacular. Canadians from coast to coast can be very proud of what they have achieved. The most recent edition of the Canadian Economic Observer declared "Canada is the strongest exporter in the G-7". This is rightly a source of pride, but it must not become an excuse for complacency.
The successes of the past impose upon us the responsibility to maintain and exceed that performance in the future. If we are to continue to offer quality jobs to Canadians, we must continue to set our sights higher. And we are doing just that.
One of the reasons for our strong trade performance is the success we have had in liberalizing trade, whether it's through NAFTA, the WTO or various other fora. By levelling the playing field for Canadian firms, our trade policy successes have allowed many seasoned exporters to take on new markets. It has also meant many Canadian businesses can export for the first time.
Given the opportunity, the initiative and imagination of individual Canadian firms have found ways to compete, and compete profitably, in the global marketplace. They are the authors of their own success, and their achievements are benefiting all of us in Canada.
But we must continually expand our exports, and to do that we need to dramatically increase the number of companies exporting and encourage current exporters to go after new markets. We have set ourselves a goal: to double the number of companies exporting by the year 2000.
There's also the other side of the coin. Just as Canada must increase its exports to others, so too must we attract quality, technology-rich, foreign, direct investment to this country.
[Translation]
More than one job in ten and more than half of Canada's exports are directly due to international investment in Canada.
[English]
More than one job in ten and more than half of Canada's exports are directly due to international investment in Canada. Foreign investment brings the latest technologies to Canada and increases Canadian subsidiaries' capacity to compete in global markets. All regions of Canada benefit from these investments.
Members of this committee know foreign investment will not flood into Canada without effort on our part. The competition for such investment, I can tell you, is keen, so we must be both aggressive and strategic in our efforts to attract and retain it in Canada. We have the best country in the world in which to invest, and we can never stop getting that message out.
It is absolutely essential to offer foreign investors an investment climate that is second to none. That is why we remain committed to deficit reduction, for example. That is why we are working to eliminate regulatory burdens and barriers to interprovincial trade and to end disputes and regulations that restrict the flow of business and business people.
Today I would like to very briefly share with you our government's priorities for international trade and then discuss how we see the main estimates facilitating these priorities.
To ensure the continued development of our trade, we have identified three key priorities: first, to effectively manage our most important trading relationship, that with the United States; second, to liberalize trade around the world based on clear rules and level playing fields, and to this end we are working through the World Trade Organization; and third and finally, to ensure that Canadian companies realize the benefits presented by the global marketplace. This means championing Canadian companies abroad, helping companies find new markets, assisting with financing where appropriate and attracting new investment to Canada.
.1600
These priorities were not just pulled out of thin air. They are the result of extensive consultations with Canadian industry and with our partners in the provincial governments. We will continue in this collaborative manner as we proceed to implement these priorities.
It should come as no surprise that our trading relationship with the United States should be our first priority, because over 80% of our exports - over 80% - go to that country. In fact, there's$1 billion in two-way trade between Canada and the United States, $1 billion each and every day. We are each other's biggest trading partners.
The relatively stable and predictable trade environment created by NAFTA and the WTO has encouraged an enormous expansion of Canada-U.S. trade. Our exports have risen 90% over the past nine years under NAFTA and the earlier FTA.
Over time, we have been able to bring more and more of the bilateral trade relationship with the U.S. within the scope of agreed-upon trade rules. But as recent experiences have shown, we still have a way to go in building a fully rules-based trade relationship with our American friends.
For example, we will continue to make the case that anti-dumping and countervail laws have no place in a free trade area. While we have not yet convinced the United States of this, we will keep working toward a bilateral trade relationship free of such trade remedy laws. This will be a key objective as we work to expand and tighten the North American Free Trade Agreement.
The recent softwood lumber dispute, of course, is a case in point. The agreement we reached was the best that could be achieved in a bad situation. We were facing a real threat by the U.S. to impose countervail duties on every piece of softwood lumber Canada exports to the United States. The agreement we reached with the U.S. on April 2 commits the United States, in writing, not to launch any trade actions such as countervail duties on our softwood exports for the next five years.
This is good news for Canadian lumber companies who support this agreement. It's good news for them, as they will not have to face U.S. trade actions, actions that would have resulted in both high tariffs and payments by Canadian lumber companies of millions of dollars to the U.S. treasury.
Under the Canada-U.S. agreement on softwood, we continue to have secure access to the U.S. market at a level of exports that is at least as much as, if not more than, our average level of softwood exports to the U.S. in the years 1992, 1993 and 1994. As a result, the Canada-U.S. agreement will preserve Canadian jobs.
These principles of rules-based trade and freedom from countervail also animate our approach in other multilateral and regional fora, such as the WTO and the Asia-Pacific Economic Co-operation forum, APEC. We are also engaged in regional liberalization discussions where these are deemed important to Canadian interests. They include the negotiation by the year 2005 of a free trade area of the Americas, participation in APEC, which I just mentioned, and efforts to pursue a Canada-European Union action plan.
Bilaterally, we're negotiating free trade agreements with Israel and Chile, the latter as a bridge toward its eventual accession to NAFTA.
As we move toward a rules-based trading system, differences over definitions of things such as dumping, subsidies and countervail are to be expected. We recognized this under NAFTA and established a working group to address them.
With all of our efforts, with NAFTA, the WTO and regional agreements, we have tried to establish the access to foreign markets that Canadian companies need. But access is only half the battle. Canadian companies must be made aware of the opportunities available to them. They must be supported in their efforts to create beachheads in these new markets, and the benefits of investing in Canada must be communicated also to foreign investors. We're taking action in all of these areas.
Canadians are well aware of the Prime Minister's highly successful Team Canada missions abroad. The latest mission to Southeast Asia underlined the merits of the united approach, leading to some $9 billion in new contracts for Canadian firms. This is on top of the approximately $13 billion generated by two previous Team Canada missions, in China and in South America.
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This government has no intention of stopping there. As was indicated in the Speech from the Throne, the Prime Minister will be taking to the road again to drum up more business for Canada.
These missions show just how much Canadians can achieve when we work together. For every billion dollars of that $20 billion and $21 billion created on the Team Canada missions, 11,000 jobs for Canadians are created.
Now we must borrow the same approach at home in order to increase the number of companies trading abroad to get to that figure of doubling by 2000.
To this end, we've built a domestic Team Canada, an ongoing Team Canada, in partnership with relevant federal departments - there are a lot of federal departments involved with trade - and agencies and provinces, and of course the private sector.
The mission of the domestic Team Canada, the ongoing Team Canada effort, is simple: help existing exporters find new markets and ensure that all Canadian exporters have access to the best possible intelligence, the best possible market information about the world marketplace.
Over the next three months all of the partners - the federal level, the provincial level, and the private sector - will be determining on what sectors and what markets we should be focusing. Team Canada's task will be to identify, prepare, and assist companies with export potential to develop their interest in foreign markets.
We're going to become more proactive about this, even set up an account executive kind of system to go after companies to get them out into the market, to get them to export. We're going to help them gain access to all export assistance programs and facilitate their export involvement.
In order to get the biggest bang for our buck, our direct funding assistance for international business development will be targeted, and it will be targeted to dynamic small or medium-sized companies.
The final ingredient for export success is access to competitive export financing. This often determines whether a firm can export or not. In times of diminishing resources, when government can no longer afford to provide all of the funding that it would like or that companies may need, we need to become more creative, more imaginative in our approach. The old ways of the old days, when export orders were purchased with highly subsidized export financing, must give way to new forms of risk-sharing with the private sector.
We understand these new realities and are working through the Export Development Corporation to expand the export finance system by leveraging public and private sector resources in new and innovative ways.
We are also looking at ways to encourage Canadian financial institutions, the banks and such, to become more involved in export financing. Some of the banks have already begun to develop strong relationships with EDC, and we want to see these relationships grow into true risk-sharing partnerships.
Before turning to the main estimates, let me just give you a quick snapshot of the recent meeting of the quadrilateral ministers in Kobe, Japan. As you may know, the Quad, as it's more commonly referred to, is an informal forum of ministers responsible for international trade, and they are from the European Union, Japan, the United States, and Canada. This is an important forum for Canada, as it gives us the opportunity to deal as an equal with the world's leading trade powers.
At Kobe we discussed our expectations for the Singapore meeting of the World Trade Organization coming up in December, in which trade ministers will come together. We agreed to work together on several initiatives for further trade liberalization at that meeting. These include the negotiation of an information technology agreement, possibly accelerating tariff-reduction commitments under the Uruguay Round, and exploring options for further tariff reductions.
The Quad ministers agreed that a successful outcome in Singapore is important. This will be our first meeting under this new regime since the Uruguay Round. It's important in order to further the credibility of the WTO, strengthen the WTO, and to confirm the health of a trading system that began with the GATT nearly fifty years ago.
.1610
Turning now to the main estimates, I would point out that, like the rest of the government, we are operating in a much tighter fiscal environment. Given the importance of trade to Canada, our challenge is to act as prudently as possible without limiting the opportunities for Canadian companies abroad. We have diminishing resources but an expanding operation.
The department's main estimates are $1.37 billion for 1996-97; that's the Department of Foreign Affairs and International Trade. Of this amount, $313 million will be spent on international business development and trade and economic policy activities. This figure includes the budgets of the international business development and trade and economic policy branches at headquarters in the Pearson Building, as well as approximately $190 million budgeted at the posts at missions abroad.
The first phase of program review - something I remember well from my previous incarnation in the cabinet - assigned our department the task of reducing our budget by $44 million in 1995-96, rising to $121 million in 1997-98. Of that, about $31 million will come out of international business development and trade and economic activities.
This $31 million savings will be achieved by reducing funding to the program for export market development, or PEMD, as it's also known, by cutting fifteen Canada-based positions abroad and by reducing the program for international business development. We will also require private sector firms that participate in trade fairs to bear a portion of the costs. We do now, and we may have to ask them to take an even greater share of the costs.
As announced in the most recent federal budget, the Department of Foreign Affairs and International Trade will have to contribute another $32.6 million towards deficit reduction efforts beginning in 1998-99, program review two. How this is to be done is now the subject of a comprehensive departmental review. Perhaps Lloyd Axworthy also mentioned that to you. He and I will report back to you on the results of this review at a later time.
As a close to these remarks, let me say Canada's reputation as a trading power is well established and is continuing to grow. Canadians have demonstrated their ability to take on the world and win. As a government, our role is to solidify the gains we have made, open new markets to Canadian enterprises, encourage more Canadian companies to sell abroad and continue to market Canada as a wonderful place to invest. To those goals I pledge my best efforts, and I know I can continue to count on your support.
Thank you.
The Chairman: Thank you very much, Minister.
I would just remind everyone that we have one hour. Our practice when we have ministers is to have ten minutes each on the go-around, so the first round will take thirty minutes. If you can either share your first time or cut it down a bit, it would help others get in.
Mr. Sauvageau.
[Translation]
Mr. Sauvageau (Terrebonne): Thank you, Mr. Minister, for having agreed to come before the committee. As my colleagues from the Bloc Québécois pointed out earlier, we would very much have appreciated a specific meeting on countervailing duties and anti-dumping. We hope that you will be able to return in the very near future, if your schedule allows, so that we may discuss those duties exclusively. May I remind you that such meetings had already been scheduled last June and December.
I have two brief questions for you, and then I will give you the floor so that you may answer them.
On page 7 of the French version of your statement, there seems to be an error in the figures. The paragraph reads as follows:
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- The Department's Main Estimates are $1.37 billion for 1996-97. Of this amount, $313 million
will be spent on international business development and trade and economic policy activities.
This figure includes the budgets of the international business development and trade and
economic policy branches at headquarters, as well as approximately $190 million budgeted for
missions abroad.
Secondly, I have a question about the anti-dumping and countervailing duties working groups which were set up under NAFTA and the FTA to examine trade actions. In principle, the objective of those working groups is to bring about harmonization in those areas within a reasonable period of time.
In the past few years, the United States have increasingly resorted to trade action such as anti-dumping and countervailing duties as non-tariff barriers against Canadian products.
Indeed, the freeing up of markets between the United States and Canada and the gradual abolition of tariffs on a number of products have given rise to a new form of American protectionism. That aspect of our trade relations with the United States is becoming a growing source of concern or an important problem for Canadian businesses that wish to have access to that vast market.
Mr. Minister, can you explain why there have been no concrete results on that front yet, since the stakes are very high, in spite of the fact that the deadline for an agreement had been set at December 31?
Could you also tell us whether, like the Minister of Finance, you are considering the idea of introducing a law, in the near future - let's hope that it will come sooner than the conclusion of the first agreement - similar to the American law on countervailing duties and anti-dumping?
I hope that you will have time to reply to those questions in the minutes remaining.
[English]
Mr. Eggleton: Thank you.
Your first question was about the figures, the reconciliation from $313 million plus $190 million up to $1.37 billion. What happened to the rest? The department is a combined department; it's Foreign Affairs as well as International Trade. The balance of it are those items that come under the jurisdiction of my colleague, Lloyd Axworthy. They of course deal with our missions abroad, peacekeeping and a whole host of other Foreign Affairs responsibilities.
So the $1.37 billion is our combined department figure, but then we've broken out the figures you've cited as being specific to the International Trade component.
With respect to the matter of American protectionism and trade remedies, countervail, etc., there seems to be a pattern. We hear a lot more protectionist talk during an American election year, which of course come often enough, but at the end of the day, we'll probably go back to a more normal pattern of discussions come next year. Nevertheless it is an ongoing issue of dealing with trade remedies in any year, not just an election year.
A trade remedies group was established at the time we signed the NAFTA, at the time the government approved the NAFTA, in which we indicated we wanted to, as I talked about in my remarks, eliminate the idea of countervail and anti-dumping duties. They do not fit with the free trade agreement. They should not be there. We don't want them there. But the Americans have held on to their right to be able to invoke those measures when they feel it is in their interest to do so.
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So the trade remedies working group was to see if we could make some progress. Some progress has been made and will shortly be reported. We have a draft report. It has not been finalized, but I expect it will be finalized and issued very soon.
It certainly isn't going to go, I must tell you even now, the distance either I or the government would want it to go. So we don't see the publication of that report, when it comes about, as being the end of the subject. There will still be more effort needed to reduce or eliminate the use of trade remedy laws in the NAFTA agreement.
You've also asked about the opposite end of things, our getting a little more aggressive, perhaps, is the way I understood the question in terms of countervail, tit for tat or whatever. That will be under examination through the Special Import Measures Act review that will be undertaken this year. It's not under my jurisdiction. Import restraint measures, or countervail, is under the jurisdiction of the Minister of Finance together with the Minister of Revenue.
The three of us have gotten together and talked about this. It obviously has some impact in my area as well. We've talked about it, and there will be a review undertaken. I couldn't tell you the exact timeframe of all that at this point in time, but it will certainly be an opportunity to look at whether we want to make any changes in those particular provisions.
I would hope we wouldn't have to resort to that, but it certainly is an option for us to examine, and that will be part of the review discussion.
The Chairman: Mr. Mills.
Mr. Mills (Red Deer): Thank you, Mr. Chairman.
I'm going to follow my Bloc colleague and ask three questions. I hope you can get them all answered.
First of all, I think we all recognize that the U.S. is 80%, give or take, of our trade. We also realize that there are weaknesses in NAFTA and FTA. Obviously, in the red book those were recognized. Four areas were emphasized. One was a subsidies code, two was an anti-dumping code, three was a more effective dispute resolution mechanism, and four was the same energy protection as Mexico.
I would like the minister to just briefly elaborate on how we're making out there. I'll make a comment also that the softwood lumber fiasco seems to me to be an example of something that obviously you were trying to prevent, but it didn't work very well.
My second question basically relates around the supply management issue. It's a hot one between Canada and the U.S. Many people are interested in it. If we were to lose that dispute, I would like to know the minister's intention about complying, whether we would comply. Some have suggested we drag it out and maybe buy time that way. I think the implications are quite serious.
The third question relates to the estimates. You've suggested in your presentation that the department focus its resources on high-growth and high-potential market areas. I found it, then, kind of unusual when we were looking through the estimates that funding to the Asia-Pacific area will drop by $7 million and funding to Europe will rise by $8 million. That seems totally contradictory to going to the market areas.
If I have time for any more questions, I have more, but there are three.
Mr. Eggleton: I'm sorry; you asked about softwood lumber as well, did you, or did you just use it as a passing reference?
Mr. Mills: In terms of softwood lumber, I know in my constituency people are just totally upset about it. They're small producers with a big problem because of the quotas. Where the big guys have the quotas, the little guys are going to be cut right out and will not have a market for their softwood lumber.
Mr. Eggleton: So you're asking about the quota system.
Mr. Mills: I'm just saying that obviously we have a problem if we had to come to an agreement like that.
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Mr. Eggleton: With respect to the areas you talked about - subsidies, anti-dumping, and dispute settlement - those are part of the trade remedies working group report. Those were part of what they were examining up until December. So we'll be reporting on those shortly.
As I indicated in my previous response, while we've made progress we still have some distance to go. I think that will be borne out in the report. I'll have more to say about that when the report will be ready to go. It's in the draft stage at this point in time.
With respect to energy, that has not been under examination, but at the time of the NAFTA signature a statement was made to the effect that our national interests would not be overruled by NAFTA. That's a statement the Prime Minister made at the time. So that Canadian interest will continue to be observed.
With respect to softwood lumber and the matter of the industry, I must say first that the industry has been at the forefront of urging us to prevent a countervail and sign an agreement with the United States. They've said that they don't want a countervail. They wanted to have the agreement that we signed.
That doesn't mean that some of them, having gone past that stage, are now not going to be concerned about the quota system. They are. They're all going to be concerned about that.
Mr. Mills: Take it out on the little guys.
Mr. Eggleton: I understand that.
We're going to put a process in place that will involve consultations, by and large through different associations and to a great extent looking at what historically these companies have exported, the pattern that these companies have in their exports to the United States.
We're going to be consulting with them. We're going through the process. We're setting it up now.
Of course we'll be consulting with the provinces.
Hopefully, at some time in late June we'll be able to come out with the information on who will get what under the formula.
So we will go through a very extensive consultation process.
As much as we can, I want to mirror what we've been doing so that we will be fair and reasonable in how we will treat all of the exporters. As I've indicated to you previously, given our focus on small and medium-sized enterprises, we'll particularly want to pay attention to the kinds of companies you are concerned about.
Mr. Mills: Many of them have been selling through the big guys and thus now they are going to be cut off. That 10% will cut off the little guys, not the big guys.
Mr. Eggleton: There are primary exporters, there are remanufacturing companies, and then there are wholesalers. So there's a lot to work out here in the system.
Fortunately, we have within our government operations an export control regime that is quite experienced at doing these kinds of things in other areas. I talked with them the other day and I feel confident that they'll be able to do this in a fair and reasonable way. I'll be monitoring it quite carefully.
With respect to supply management, this of course deals with dairy, poultry, chicken. We have a chapter 20 NAFTA panel hearing going on now with respect to supply management.
What will happen if we lose?
First, we're not contemplating losing. We know we have a strong case, and we are in accordance with the rights and obligations under the agreement and the way we are proceeding is consistent with the commitments we also made at the WTO with respect to tariffication. We feel that we're going to win.
Depending on what the result will be, of course we will respond accordingly at that time. But right now we're just out to win.
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With respect to the estimates, you talked about the growth in Europe and the reduction of the budget in the Asia-Pacific. Again, I have to point out that this is a combined department - Foreign Affairs and International Trade. As you know, much of our peacekeeping effort has been in Europe, so it's relevant to the Foreign Affairs side of things.
We continue to put a lot of emphasis on trade with Europe and we are developing an action plan, as I indicated in my remarks. Next year we're going to be putting a very particular focus on the Asia-Pacific. We will take over the chair of APEC next year; 1997 is our year to chair that organization and we are going to make this Canada's year of the Asia-Pacific. There will be not only trade but cultural and many other aspects of that year to help increase awareness of Canada's identity with the Asia-Pacific, and Canada's identity throughout the entire country. There's greater awareness on the west coast than there is perhaps on the east coast, but there are opportunities for all Canadians.
So we will try to increase that awareness for all Canadians. We will try to increase the awareness of the opportunities for trade in the Asia-Pacific. From the standpoint of trade, we will be putting considerable focus on the Asia-Pacific.
The Chairman: I know you meant to include Toronto in that, Minister, as being Canada's most important Pacific Rim city given the size of our Asian population.
Mr. Eggleton: You can get away with saying that a lot easier than a former mayor of Toronto can.
The Chairman: Thank you, Mr. Mills. Mr. Speller.
Mr. Speller (Haldimand - Norfolk): Mr. Chairman, both opposition parties asked questions along the same lines I was going to. I want to thank the minister for coming and Jesse for allowing me to ask my question.
I was pleased to hear the minister say that the Special Import Measures Act would be looked at. Although it's under Finance and Revenue, I'm sure that to fulfil the requirements under there they need the strong support of your department. With how you spoke today, I'm sure you will give them that strong support.
I've talked to you quite a bit about the fact that in my own riding the Canadian steel industry is very important. I've spoken with you, as have other caucus members, about concerns with the whole question of anti-dumping and the requirements Canadian companies have to suffer through when dealing with a case in the United States compared to what American companies have to suffer through - or not suffer through - and are required to produce in terms of information for cases here in Canada. I don't want to reiterate what was said, but obviously the paperwork burden is one of the factors, when you have to submit ten copies of a 331-page submission compared to two copies of a 78-page document.
I was happy too that you talked about the working groups and their importance and our commitments in the red book, as mentioned by Mr. Mills, to try to deal with these problems through the working groups.
Mr. Minister, if the working groups don't produce some solutions to these problems - and you seemed to suggest that they weren't going to go as far as we had hoped - I'm wondering if we now take certain actions against the Americans in terms of making sure that our anti-dumping rules and regulations are similar, that the reporting requirements especially are similar. I can't see that hurting any domestic industries. I think it would be a burden more on the U.S.-based law firms that seem to be directing this whole trade file from Washington.
The Chairman: It's more money for them because they have to file those documents too.
Mr. Speller: That's right.
With the working groups one of the goals was to reduce trade irritants. I'm wondering what solutions the working groups came up with for solving these trade irritants, creating greater transparency and finally simplifying the trade remedy laws, making sure they are simple laws so that companies don't need all these Washington-based lawyers to represent them on these cases.
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Mr. Eggleton: First of all, I should re-emphasize that the working group with respect to trade remedies has not published yet. There is a draft, as I've pointed out, but it's not yet final. We're still looking at the matter. Certainly from what I've seen, I don't mind telling you that I think we still have a long way to go in what we want to achieve. I can't tell you anything more than this at the moment, but hopefully that report will be available to you very soon.
With respect to what we do about this steel dispute - in fact, about any dispute - if we don't get what we want ultimately through a committee like the trade remedies working group, then certainly we might have to look, subject by subject, to try to improve the rules-based system and to try to eliminate some of these countervail and anti-dumping possibilities.
I would hope steel is one in which we can do that. We have a lot of steel that flows both sides of the border. Really, they are just like the automotive industry, which actually is a big recipient of this steel. It should be able to flow in a very free trade fashion, just as the automobiles do.
That would be my first effort, to try to see if we can eliminate this irritant on steel as opposed to creating still another irritant by saying through SIMA, or whatever other measures, we're going to make you as miserable as you make us. I don't think that is going to accomplish much at the end of the day. We are a small part of their market. They wouldn't feel that measure to the extent some of our domestic industries would.
Remember, the automotive industry - and I've had them in to see me - the automotive parts industry, in particular, where Canada has been particularly successful and has created thousands upon thousands of jobs, would be the ones filling out the 300-page reports. We would have, in fact, a situation that is irritating to Canadian business and could be putting some of them in jeopardy.
So I don't discount the possibility. I know Mr. Telmer has said, for example, let's use it as a bargaining position. Certainly the examination under SIMA gives us an opportunity to have a more thorough look at it. But I would hope our first effort would be to try to get rid of the irritant.
Mr. Speller: Thank you.
I was pleased also that you mentioned the whole question of supply management. At our last meeting a question came from the Reform Party, if the chairman will remember, on this whole issue. The Reform Party was not in agreement with us in terms of our position on that, in taking a strong position, as supported by actually all the supply-managed commodities. I think you should be thanked for taking that position.
When we look at other sectors like that, I think that can be seen as a way in which industry can work together with government in terms of creating positions and so on. Are there other examples of that within your department, other sectors that come in and actually work with the department in terms of putting the position forward? It seems to me that at the end it really comes out to be a much stronger position. I think it's one the Americans have certainly listened to. The way I look at it, anyway, it's one we will win.
Mr. Eggleton: I agree with you. We're out to win. We have a good case. We consult with that industry and the dairy and poultry farmers. We are in frequent touch with them. In fact, I spoke to some of them recently. The Minister of Agriculture, a very strong supporter of the supply management system, is in frequent contact, and we are putting forward a case that is strong and I think is going to win. I hope that all parties will support our effort in that regard.
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The consultation process is an important one for trade. We are not there to advance trade for the sake of government policy needs. We are there to develop policy that's going to help our industries.
The best way to determine what's going to help them is to consult with them. So in all of the major sectors where Canadians have opportunities to sell products or services abroad we have what we call SAGITs, the sectoral advisory groups for international trade.
We get a cross-section. We have in steel, in lumber, and in many other different areas groups that we consult with. I know the interest that you and many other members of the Liberal caucus have in many of these subjects for which groups have been formed, some of them with different parties also involved, in trying to make sure that this department of this government is getting the right message in terms of what the industries out there need to help expand, to help open new markets.
That will continue under me, as it has under my predecessor.
[Translation]
Mr. Bergeron (Verchères): Mr. Minister, like Mr. Sauvageau, I would like to welcome you and express the hope that our meetings will be more numerous in the future.
Further, I too deplore the fact that our meeting on the countervailing duties and anti-dumping working groups was postponed several times and replaced by meetings with officials from your department. They were quite pleasant people, but we wanted political perspectives on this issue and we failed to obtain them.
Today we have the opportunity of meeting with you on that question, but unfortunately, the Main Estimates were added to the agenda of the same meeting, while the time set aside for the meeting remained the same. The effect of that is that it is impossible to go in depth on either issue since, finally, one must deal rapidly with all of the questions that come up.
You mentioned the possibility that the government might consider an amendment to the Special Import Measures Act, but you don't seem convinced of the relevance or the usefulness of such an amendment. However, you are considering the possibility of making those changes.
It must be understood that where the steel industry is concerned in particular, it would certainly be in our interest to tighten up our anti-dumping and countervailing duties laws in our bilateral relations with the U.S. Also, those duties can have an impact on our relationship with a third country.
I will give you a concrete example of what I mean. Recently, a steel company in my riding drew my attention to the matter of Turkish steel imports. Those imports were to go to the United States, but the United States have laws and regulations that allow them to impose dumping duties of almost 20% when the steel concerned is dumped in the U.S.
So, you can imagine that the Turkish boat will not be unloading its merchandise in the U.S. in order to avoid the 20% dumping fees. It will prefer to unload its cargo in Canada.
In the absence of a similar law, Canada runs the risk of becoming, eventually, a type of dumping ground for imports that never made it to the United States because of the American law that is much stricter than the Canadian law.
I would like you to keep this kind of situation, which involves a third country, in mind.
That being said, I would like to ask a fairly brief question on the Helms-Burton bill. As it seems increasingly probable that that bill will be passed by the American Congress, a type of psychosis has developed in Canada, one which has been widely cultivated by our colleagues of the Reform Party who have reacted noisily and have demanded that the government strike a bilateral panel on that issue.
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We know for a fact that the Canadian government has undertaken negotiations with their American counterparts on the provisions and application of the Helms-Burton Act with regard to Canada, once that bill has been passed by Congress.
Can you inform the members of the committee on the state of those negotiations with American authorities on the application of the Helms-Burton Act to trade relations with Canada, and to Quebec's trade with Cuba?
[English]
Mr. Eggleton: First of all, with respect to the comments you and your colleague have made about previous efforts to have the Minister for International Trade here to talk about anti-dumping and countervail, as you know, there was a cabinet shuffle, so I take it the change might have resulted in this being put back to the point where it's now here, combined with the matter of the estimates.
However, I'm happy to come back again to talk further about that. In fact the issuing of the report on trade remedy from NAFTA might be an opportunity to further focus on those particular matters.
Secondly, you seem to think I'm not convinced of the usefulness of SIMA. I think we have to have SIMA. We have to have the ability to take protection for our industries if there is in fact dumping going on here. We watch the thing very closely when it comes to third countries. For example, in steel we have a monitoring committee together with the Canadian industry, so we watch carefully the third country possibilities there. We can certainly apply our anti-dumping rules in those cases, if there is any dumping going on, even coming through that kind of route.
You said maybe I wasn't quite as convinced. My comment really deals with the steel particularly. We're a very small part of the United States export market, and quite frankly, our putting on an anti-dumping measure would not necessarily gain the success we would want to have. But I don't rule it out, because, as Mr. Telmer has said, we can use it for bargaining purposes, and perhaps we can. So I'm leaving that open.
What I am saying is I would prefer to negotiate peace. I'd prefer to negotiate a situation whereby we could send the steel back and forth. There's a lot of that happening now just in the automotive industry, because we have the same players on both sides of the border. In fact, in steel we have a lot of the same players on both sides of the border. A lot of people are exporting to themselves, in effect.
I'm prepared to consult with the industry and the auto manufacturers - the auto parts people have already been in to see me - to see if there's anything further we can do with it. If we can't, okay, we have SIMA and maybe even other measures we could take. We're certainly prepared to examine all of that.
With respect to Helms-Burton, just last week we completed a day of consultation. Under the NAFTA challenge process, chapter 19, you start a procedure by a consultation. The consultation was held last week. It's not complete. We are still looking for more information. At this point we don't know how the Americans are going to apply the law with respect to title IV.
Title IV deals with the question of access of Canadian business people and executives, plus their families, I might add, to the United States. They could be denied access at the border. We expect there will be some sort of list created. We're not sure who will be on the list and we're not sure exactly how it's going to be implemented or when it's going to be implemented.
We've asked further questions arising from the consultation. Once we get that further information, we will determine what to do next. But certainly if we cannot come to any satisfactory arrangement with the Americans in terms of the application of this law, then it would be within our right to ask for a NAFTA chapter 19 panel.
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The Chairman: Mr. Assadourian.
Mr. Assadourian (Don Valley North): My third question was asked by my colleague from the Bloc Québécois, but I have a question on page 2 of your comments, Mr. Minister.
You said that by the year 2000 the exporting companies will be doubled. Could you give me a number for how many companies we have now? How many do you expect to have?
The other question is that many of the SMEs are going bankrupt because of the banking situation. They are calling in loans unnecessarily. Are you in contact with the Minister of Finance or the Department of Finance to help these small companies to export goods and maintain the jobs here so we won't have too many bankruptcies and a deficit in that regard?
Mr. Eggleton: We have approximately 5,000 companies now, so we want to double that to 10,000.
It's interesting to note that about half of all the exports we do, half of this thing that's 37% of the GDP, is from 50 companies. So there's a lot that we can do to get additional exporters. A lot of those 50 companies are in major industries: softwood lumber, the forestry industry, the energy industry. Of course the biggest would be the automotive industry.
There's a lot of room for growth, and that's why I say we need to become more proactive to help get companies that are not now exporting to export.
We have a number of programs. For example, a company might feel comfortable with starting its exporting program with the United States, even the neighbouring states. We have a program for neighbouring states. There may be some that are doing that. We'll try to persuade them to go to the Asia-Pacific region or Europe or other parts where their products would sell well.
So in order to get into a doubling we need to become more proactive.
Of course, in addition to that, we need to focus on small and medium-sized businesses and on getting a lot more of them to export.
With respect to the banking, the Export Development Corporation is trying to deal with the banks, the financial institutions, with respect to this matter. We're trying to encourage them. EDC is trying to get into risk-sharing arrangements with banks. We've got a lot more work to do, and I'm happy to consult with my colleague, the Minister of Finance, on whether he has any ideas on how we might advance that.
We are making some progress. When I've been on trade missions of late, officers of different Canadian banks.... For example, I was recently in Greece, and the Bank of Nova Scotia is quite active there. So I think we can get a lot of banks interested in export opportunities for Canadian companies, investment, helping to participate in those kinds of endeavours and financing endeavours.
I think these banks, as they get more experience abroad, are coming to recognize more and more of the trade opportunities we have, and I think we can get them to facilitate to a greater extent than they did before.
The Chairman: Mr. Mills.
Mr. Mills: A point of clarification first. You mentioned that auto parts producers would have to fill out a 300-page report. Did I get that right?
Mr. Eggleton: I am saying that if we provide the same kind of regime as the United States does with respect to anti-dumping measures, if we provide the same kinds of control mechanisms as they provide, which involve filling out a lot of forms, then we could have for importing of steel by Canadian companies.... If we tried to make it as hard for their steel to get into our country as they try to make it for our steel to get into their country, we could have a lot of Canadian businesses put through a lot of additional paper burden.
Mr. Mills: I think there would be some dispute on that. I don't think we need to get into that now, but at least there's some disagreement on that fact.
Let me ask a question about the rescheduling of debt that has gone on. Would you bring us up to date on the nature of that debt rescheduling?
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One other thing is the Special Import Measures Act. Is anything happening there in terms of the special rules and conditions and so on? Is a change going to happen?
Mr. Eggleton: Is it debt rescheduling?
Mr. Mills: No, I'm sorry. I'm firing questions at you quickly because I've learned the ropes here.
The Chairman: You're dumping your questions.
Some hon. members: Oh, oh!
Mr. Eggleton: Okay, keep going and I'll try to answer as fast.
Mr. Mills: I have three questions for you. You've answered one. I want to know about debt rescheduling under the -
Mr. Eggleton: Okay, I answered one, but honestly it would. We say we're trying to reduce the paper burden for Canadian companies, but there are a lot of different kinds of steel. Some of our auto parts manufacturers need to buy both domestic and imported steel. That's because perhaps certain parts are constructed with certain kinds of steel. Remember, it's used on both sides of the border. It goes into the automotive industry and will be used for cars that go to both sides of the border. So in some cases, to get a particular kind of steel they would have to import some. This is a Canadian parts company.
If we want to make it as difficult for that steel to get into this country as they're making it for ours to get into their country, we would add volumes to the paperwork, as I think was pointed out. That is a problem and they've indicated to me that it's a problem. They came in to see me specifically about that kind of thing. Notwithstanding that, we may still have to go to that kind of procedure, but that's certainly not my first choice.
Now, on debt rescheduling for developing countries, and I take it you're talking about under CIDA, that does not come under my jurisdiction. Sorry.
Mr. Mills: Okay.
Mr. Eggleton: The third question was....
Mr. Mills: The third question was on the Special Import Measures Act. I think there has been a promise of a review of that whole thing, changes to the rules, the procedures and all of that. When is that going to happen, or is that going to happen?
Mr. Eggleton: I don't know that it has been officially announced, but I believe it is going to happen. It's due for review. Again, it doesn't come under my jurisdiction; it comes under the Minister of Finance and the Minister of National Revenue. I believe it will be starting shortly and that there will be a full consultative process. My deputy assures me that's the case.
The Chairman: Thank you, Minister. Is there any suggestion that this committee would be involved in that review rather than the finance committee?
Mr. Eggleton: That would be up to the Minister of Finance and the Minister of National Revenue. You should perhaps make your case about it.
Obviously I'm interested in this as well because it does impact upon trade in general, even though it's imports and directly that's his responsibility.
Mr. Mills: That's something we've heard quite a bit about from various businesses that testified before us. They were quite concerned about that.
Mr. Eggleton: You should perhaps take that up with the Minister of Finance in terms of the venue for the public consultations.
The Chairman: Mr. Dupuy.
Mr. Dupuy (Laval West): My question is a fairly general question about Canada-U.S. trade. When the free trade area was created between Canada and the United States, it is well known that the Liberal Party had some concerns about things to come. We said along with many, many other people that we could expect a very significant expansion of bilateral trade, and indeed it happened. The figures I have indicate that between 1989 and now our exports to the United States have about doubled, which is an extraordinary performance.
We said at the same time that our relative share of the world market was going to continue to decline, and we've proved to be right. While our share of the U.S. market has grown, our share of the world market has declined. Even more significantly, the Canadian domestic market has declined in relative importance vis-à-vis the United States.
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If you look at the investment side, what strikes me is the size and rhythm of Canadian investment in the United States. We've reached the point where Canadian investment in the United States is about half the American investment in Canada. What does that mean? It means there is industrial restructuring and integration between the two economies. That leads me to my question.
I remember our European friends, when we were signing the free trade agreement with the United States, were saying when two major industrialized economies go into free trade, as we seemed to be anxious to do with the United States, we'd see that it really doesn't quite work. They said we would have to travel the same way they travelled, that is, to move eventually to an economic union, which basically means harmonization of economic policy and fundamental trade policies.
My question is whether our European friends were right. If we are indeed facing the phenomenon of integration on a North American scale, should we not look at policies to cope with this integration rather than look only at the trade aspects? Naturally it means more negotiations with the United States, and it means on our side a willingness to contemplate a greater degree of harmonization. But the trade disputes largely reflect the fact that we've been dealing in our relationship with the United States with trade only rather than with the wider process of economic integration. As you have said, it's increasingly interesting to see that we're dealing with the same players, south and north - another manifestation of economic integration.
To come back to my question, do you think our European friends were right when they said if we put our fingers in that cog we'd end up moving more and more toward harmonization and an economic union?
The Chairman: You have two minutes, Minister, you'll be happy to know.
Mr. Eggleton: If that kind of thing is possible - and there are many other aspects of it to consider - it certainly is a long way off. We're meeting our economic goals under the FTA and NAFTA. Even though we have irritants, 95% of all of the trade flowing between Canada and the U.S. - and that includes services as well as goods, and investments - is no problem. It's hassle-free. It's occurring on a day-to-day basis without problems. That's 95%. I think that's very impressive. It's a very significant achievement between two countries that are each other's largest trading partners.
But we need to make progress in terms of being able to cut down on the trade irritants and increase the market access opportunities. We will continue to do that. The trade remedies working group was an effort to try to cut down on those irritants, to try to improve the rules-based system. We still have quite a distance to go, and we may not achieve it all directly with the United States through NAFTA. We may do a lot more through the World Trade Organization, through multilateral negotiations. In fact, there is some strength in numbers when we can deal with a number of other countries to help bring about a greater rules-based system that the Americans are also going to be part and parcel of.
So I think we continue to advance in those lines. We certainly have on our agenda opportunities for more free trade in the Asia-Pacific, in the Americas, and to open up better trade opportunities with Europe as well. I think all in all these need to be brought into focus in terms of our efforts in the multilateral world-based system at the WTO.
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A rules-based system that increases our access and liberalizes our markets is our goal, and that will be achieved both in a multilateral sense and also in our continuing discussions to improve upon our relationships with the United States in economic matters.
Complete economic union is a long way off.
The Chairman: Madame Debien.
[Translation]
Ms Debien (Laval East): Good afternoon, Mr. Minister, and welcome. In listening to you earlier, I had a few moments to think. I took a few notes, and these are comments that I would like to share with you. In making these remarks, I may also be influenced by my colleague Mr. Dupuy.
There is an old saying that you have to be very careful when you lie down with an elephant. Canada, which depends on the U.S. for 80% of its exports runs the risk of seeing its freedom and its flexibility curtailed, as you know better than anyone, I think. In spite of its real economic effects, NAFTA may bring about a reduction in Canada's political sovereignty and the weakening of the power of the federal government. As we saw in recent events involving softwood lumber, and you said as much yourself in your statement, the agreement we reached was the best that could be achieved in a bad situation. We are facing a real threat by the United States.
You may think that my comment has nothing to do with the topic of our discussions this afternoon, but I think the opposite is true. You may find this comment unexpected from a member of the Bloc Québécois, but I think that NAFTA may also weaken English Canada's historic and cultural identity.
I feel quite at ease in saying this, all the more so since Quebec culture is completely different from American culture. You will understand that I a referring here to the culture that is becoming the culture of business, the global culture, in fact, as a certain Mr. McLuhan would have said.
We know that what differentiates Canada from the U.S. basically, is Canadian culture. Someone said that the real threat to Canadian culture was its commercialization, along the lines of the American model of course. And, in this regard, there were dramatic cuts to the subsidies to publishing companies, the CBC, and Radio-Canada International in the last federal budgets.
If Canada wants to avoid falling out of bed because the elephant has become too big and is taking us too much space, should the federal government not, among other measures, fight to bolster Canadian culture? Basically, this is a question that comes to mind: what is there to protect, if not Canadian culture? If all that matters is money and trade, all Canada would have to do is join the United States. In one stroke, it would become rich.
[English]
The Chairman: You have one minute to make us rich, Minister.
Some hon. members: Oh, oh!
[Translation]
Ms Debien: While protecting Canadian culture.
[English]
Mr. Eggleton: The best way to build our country, all parts of our country, is to have a strong economy to be able to create jobs, and that's exactly what I think we can do in terms of trade opportunities.
In terms of the United States, we've done very well under NAFTA and in the creation of a strong economy, or certainly a stronger economy, because of that. The domestic economy has been sluggish, but the trade portion of our economy has been quite strong and has been carrying the economy for the last few years.
I mentioned 37% of our GDP is trade. Most of that - 30% - has to do with trade with the United States, so we have created a lot of jobs through that trade effort.
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Culture is exempt under the NAFTA, but that doesn't mean it isn't a trade irritant. It is a trade irritant, and it's one that's growing. It is important for us to defend Canada's right to maintain a cultural identity and to be able to have Canadians speak to other Canadians and to the world about issues that are important to us, about what we care about.
The split-run magazine issue is a good case in point. In the magazine industry, the majority of magazines on the bookstands come from the United States. It's a vast majority. More than 70% of what you have on the bookstands comes from the United States. You can even get Sports Illustrated.
Somebody suggested this had to do with banning Sports Illustrated. Not at all. It's not an issue of Sports Illustrated. You can get it still as a foreign publication, just like all the other foreign publications. The problem is they want to put Canadian advertising into it, and they can do it rather cheaply because it's all prepaid. The editorial content is all paid for in the American publication. They want to be able to do that.
That takes away business from the Canadian magazine industry, and given that we have such a small market here, if you take away that kind of advertising, you undermine the viability of the Canadian magazine industry. That is an important part of our culture in terms of being able to express what Canadians are all about.
The president of Time Warner, the publication company that puts out Sports Illustrated, said - and I think this is indicative of the way a lot of people in the United States think, unfortunately - this isn't a matter of culture; this is a matter of making money. Well, maybe it is to him and maybe it is to a lot of other people south of the border, but to us it's a matter of preserving our cultural identity.
When it comes to culture, we have one of the most open marketplaces in the world. In what you see on TV, in films, in magazines - any of those things - you will find a dominance by the United States of somewhere between 70% and 95%. All we're trying to do is preserve a little bit of our identity. Indeed that is one of the main goals, the main pillars, of our foreign policy. The third pillar is in fact to promote our cultural identity and promote Canadian values, and part of how we express it is through those media.
So yes, that's important to us, and yes, we're going to fight to make sure we can maintain viable Canadian industries in all of those areas.
The Chairman: Thank you, Minister.
Mr. Flis.
Mr. Flis (Parkdale - High Park): How much time do I have?
The Chairman: Five minutes, if the minister can stay an extra couple of minutes.
Mr. Flis: Okay.
Mr. Minister, you mentioned in your presentation that given the opportunity, individual Canadian firms with initiative and imagination have found ways to compete, and compete profitably, in the global marketplace. You said they are the authors of their own success, and their achievements are benefiting all of us.
There are farmers out west who have done exactly that. When we family-farmed out west, we took our grain by horse and wagon to the nearest elevator and then it was transported by rail elsewhere. Some of these farmers have now built their own elevators and do not have to rely on the railway system and do not have to rely on a monopoly, the Canadian Wheat Board. Right now they can sell their wheat directly to a purchaser and get $1.50 a bushel more than what they're getting through the Wheat Board.
I don't know if you've had talks with your colleague, the Minister of Agriculture. Is it time to look at whether the Wheat Board, which was necessary in 1935, is necessary now? Is it time to eliminate the Wheat Board, from a trade perspective?
Mr. Eggleton: Well, you finally got me stuck here.
An hon. member: Good question, Jesse.
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Mr. Eggleton: The Minister of Agriculture has a grain review panel. That's true, he has. We had a dispute with the United States, which we did resolve, so there is an open marketplace again. As part of that review, there were a number of recommendations. I recall this was a binational group. The recommendations have now gone to a grain review panel, which will be reporting to the Minister of Agriculture. So I take it that issue will be addressed, and I would certainly invite you to make that point to him.
Mr. Flis: We are putting together a report on helping SMEs penetrate the export market. We seem to get hung up on whether CIDA Inc. should remain under CIDA, responsible to the appropriate minister there - or should CIDA Inc., because it's promoting trade, be transferred to your ministry? I wonder if you could give the committee some guidance as to the direction we should go on that.
Mr. Eggleton: CIDA Inc. of course is involved in the promotion of trade, combining it with aid opportunities. It does some very good work and we get a lot of payback for the investment that goes into it.
Ironically, it has about $65 million in that program. Our program for helping small and medium-sized businesses, the PEMD program, has $11 million. So they have about six times more money than we have for trade promotion for small and medium-sized enterprises.
Maybe we could get together with them and talk about how we might better coordinate this endeavour, because we want to put that additional focus on small and medium-sized business.
The Chairman: You've overextended your time, Minister, and I thank you very much.
I had a couple of questions. I wonder if I could just leave them with you and somebody could respond by correspondence, rather than taking your time now, since we're over the time.
The first question relates to a study that we're presently conducting into the Arctic. We will be studying Canadian foreign policy in the Arctic in depth for the next few months. Could your department advise us as to the types of expenditures it sees in expanding and encouraging trade in arctic goods, particularly trade within the arctic region itself? That would be helpful to us. We'll probably want quite a bit of information on that, because we should look at the budgetary nature of what we're trying to study.
The second question relates to your observation about international trade. You made the point that 37% of our GDP is related to trade. My understanding was that 37% of our GDP relates to exports, and therefore I've always used the figure that 70% of our GDP is related to trade, because you have to add the imports onto it, too, which takes it to a much higher figure. I'm curious to know if your department agrees on that.
Thirdly, you said that 95% of our exports to the United States are hassle-free. That is obviously true. When your department is looking at inbound investment not from the United States but from other countries, have you any handle on the degree to which the 5% hassles inhibit that inbound investment? To put it quickly, will a British person, sitting in London and analysing where to place his plant, say, "Am I going to put it in southwestern Ontario or am I going to put it in Michigan, because I've looked at those trade cases and, while they're only a 5% risk, why would I risk $500 million in Ontario rather than put it in Michigan and just ship the goods the other way?"
To what extent do the trade remedy actions in the United States represent an inhibition to foreign investment in Canada - that is the question, really - and is there any way we can measure it? I appreciate that that's very difficult, because how do you know what influences people's negative decisions? I just wondered if the department had anything on it.
I'm sure the other members will be interested, too, but, rather than my keeping you here, someone could write us.
Mr. Eggleton: We'll get you that response.
The Chairman: Again, thank you for coming and for your offer to come back, perhaps when the report of the working group on trade remedies will be in. It might be helpful for us to examine that in depth, as well.
We appreciate your coming and your willingness to testify.
This meeting is adjourned until 3:30 p.m. tomorrow.