[Recorded by Electronic Apparatus]
Wednesday, March 12, 1997
.1534 
[English]
The Chairman (Mr. Michel Dupuy (Laval West, Lib.)): We have a quorum, colleagues, and I think we can proceed with our meeting.
Before we plunge into our session with our witnesses of the day, I would like to raise with you a small problem of timing and obtain your advice regarding it. Next week we would normally schedule a meeting of the subcommittee at 3:30 p.m. I have been informed, however, that the Standing Committee on Foreign Affairs of the House will hold a joint meeting with the foreign relations committee of the Senate in order to meet a group of parliamentarians from Ireland. That session is expected to last about an hour.
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The alternatives we have before us are that regardless of the meeting of our senior committee, we will hold our subcommittee meeting as usual - and we have a very full program for doing so - or we will say that we will attend the senior committee for an hour and then convene here for what would be left of the time - that is, an hour.
I will tell you quite frankly that as chairman of this subcommittee, I would rather spend a lot of time on subcommittee business, which would mean, of course, that we would not be attending the meeting with our other colleagues. So I would like to have your views on this now that I'm on record as saying that I prefer to hold our regular meeting.
Mr. Sauvageau.
[Translation]
Mr. Benoît Sauvageau (Terrebonne, BQ): Excuse me, Mr. Chairman.
The Chairman: I apologize; I will briefly repeat what I said. Unfortunately, we have a schedule in conflict next week. The Standing House Committee on Foreign Affairs and International Trade has planned a joint one-hour session with the Standing Senate Committee on Foreign Affairs, during which we will playing host to a group of Irish parliamentarians. We could still attend this session and have our regular meeting but for one hour only or else we could apologize to our colleagues on the Standing Foreign Affairs Committee for our absence and hold our subcommittee meeting as usual. I have said that I would prefer the second option because we have a heavy workload and it would be unfortunate to waste some of the time available to us. I would invite you to comment on this. I am in your hands.
Mr. Benoît Sauvageau: What representatives of the Irish government will be attending? Will their Minister of Foreign Affairs be in attendance?
The Chairman: I do not believe so; I believe that this is simply a group of parliamentarians from the Irish Parliament.
Mr. Benoît Sauvageau: If the other subcommittees are getting together on Wednesday afternoon, we will have the same problem. If all of the subcommittees were to decide to take the second option, there would not be any members participating in the full committee.
The Chairman: I have no information on this, but it seems to me that we are the only ones with this schedule in conflict.
Mr. Benoît Sauvageau: I don't think there will be any problem with our meeting here on Wednesday afternoon next week.
[English]
The Chairman: Mr. Cullen.
Mr. Roy Cullen (Etobicoke North, Lib.): That's fine. Go ahead with the business of the subcommittee.
The Chairman: Very good.
Do you have a view?
Mr. Herb Grubel (Capilano - Howe Sound, Ref.): I do not feel that I should be speaking for the regular member on this committee. I'm only substituting for him today.
The Chairman: Very good. I'll speak to Mr. Penson personally to explain the situation.
With three members now accepting to have the subcommittee meeting, we have a quorum and we can then proceed. So the meeting will take place as usual.
I should apologize for this short diversion to our witnesses of the day. Today we have an interesting session, colleagues, on chapter 20 of the dispute settlement process. We have with us, from the NAFTA Secretariat, Ms Cathy Beehan. You will already have had the opportunity to meet, from the University of Ottawa, Professor Donald McRae. We also have, from the Department of Foreign Affairs and International Trade, Mr. Dan Daley, general counsel of the trade law division.
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Ms Beehan, the floor is yours.
Ms Cathy Beehan (Canadian Secretary, Canadian Section, NAFTA Secretariat): Good afternoon, and thank you very much.
[Translation]
Mr. Chairman, I would like to thank you for inviting me to participate in the subcommittees discussions on the dispute settlement process under chapter 20 of the North American Free Trade Agreement.
[English]
As you've indicated, I'm the Canadian Secretary of the NAFTA Secretariat, Canadian Section. I would note at the outset that my mandate, together with my American and Mexican counterparts, is only to administer the dispute settlement provisions of the NAFTA. Therefore, I will be pleased to review how the NAFTA chapter 20 provisions operate, and to provide factual information on the application of them to date. However, I cannot offer comment on the substance of any dispute, and must be appropriately circumspect on the details of the dispute settlement provisions, which are the responsibility of the parties to the agreement.
I'd like to take a few moments at the outset of my presentation to review for you the origins of the NAFTA Secretariat.
In 1988, under the Canada-United States Free Trade Agreement, or FTA, a Binational Secretariat was established to administer the dispute settlement provisions of that agreement. The Binational Secretariat consisted of two offices known as national sections, with one in Ottawa and one in Washington, D.C. Under the NAFTA, a similar secretariat was established with national sections in each capital. Canada and the United States simply renamed their existing national sections to the NAFTA Secretariat, Canadian and American sections respectively; and Mexico established its national section in Mexico City. The secretariat is therefore comprised of these three national section offices, and is mandated to administer the dispute settlement provisions of the NAFTA.
I would highlight that my agency is an independent body created by Order in Council. Together with my American and Mexican colleagues, we are the neutral administrators of the NAFTA dispute settlement processes, and we report to the NAFTA Trade Commission. If you'd like further information on the NAFTA Secretariat, Canadian Section, I would be pleased to provide to committee members a copy of our departmental outlook report to Parliament.
To close this introduction, and before I begin my presentation on the chapter 20 government-to-government dispute settlement provisions of NAFTA, I would like to quote a passage from the well-known Harvard best-seller Getting To Yes. I believe this passage underscores the role of the NAFTA Secretariat that I have just described:
- In 1964 an American father and his twelve-year-old son were enjoying a beautiful Saturday in
Hyde Park, London, playing catch with a Frisbee. Few in England had seen a Frisbee at that
time and a small group of strollers gathered to watch this strange sport. Finally, one
Homberg-clad Britisher came over to the father: `Sorry to bother you. Been watching you a
quarter of an hour. Who's winning?'
Turning to the chapter 20 settlement dispute process, the steps set out in chapter 20 are intended to resolve disputes by agreement, if at all possible. Arbitral penal proceedings are initiated only when all avenues to a negotiated resolution have been exhausted.
When do you use chapter 20? Chapter 20 dispute settlement applies, with certain exceptions, to all disputes regarding the interpretation and application of the NAFTA. Disputes that can be brought under both the NAFTA and the WTO may, as a general matter, be settled in either forum, at the discretion of the complaining party. However, once dispute settlement procedures have been initiated, the forum selected shall be used to the exclusion of the other.
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The process of dispute settlement begins with government-to-government consultations. Any party with a substantial interest may participate in these consultations. Since 1994 there have been twelve requests for consultations under chapter 20. In addition, at the time of entry into NAFTA, Canada and the United States agreed that certain matters that were the subjects of consultation under the FTA's chapter 18 - the former, similar process under the FTA - were deemed to now come under the provisions of the NAFTA.
If the consulting parties do not resolve the dispute through consultations, a party may request a meeting of the NAFTA commission, which is made up of the trade ministers of the three parties. If the NAFTA commission is unable to resolve the dispute, a consulting party may call for the establishment of a five-member arbitral panel. At this time, if it considers that it has a substantial interest in the matter, a third party may join as a disputing party and with full rights of participation in the process. Alternatively, the third party may join as a participating party only, with more limited involvement in the process.
To date, two arbitral panels have been requested. In July 1995, the United States requested that a panel be established to resolve the dispute over tariffs applied by Canada to certain U.S.-origin agricultural products - and this is popularly referred to as the supply management or dairy dispute. In January of this year, Mexico requested a panel on broom-corn brooms.
So we're at the panel stage. To choose a panel under article 2011 of chapter 20, an arbitral panel is established using a unique reverse-selection process. Under the process, each disputing party selects two panellists who are citizens of the other disputing party. The fifth, the chair of the panel, is selected by the disputing parties, and may be a citizen of any country. Panellists are normally to be selected from a roster established pursuant to the provisions of article 2009. To date, however, the chapter 20 roster has not been established. While panel selection should normally be completed within thirty to forty days, in the absence of a roster it took six months for the parties to select the panel in the supply management proceeding.
Pursuant to article 2012, model rules of procedure for the chapter 20 panel process have been negotiated and agreed to by the NAFTA governments. I believe a binder from the NAFTA Secretariat has been handed out to committee members. For your reference, you will find a copy of the model rules at tab 11.
Under these rules of procedure, the parties may submit written submissions to the panel. At least one hearing will take place in the capital of the party complained against. For example, in the supply management proceeding, the hearing took place in Ottawa.
Rule 35 of these model rules of procedure states:
- (b) the panel's hearings, deliberations, initial report and all written submissions to and
communications with the panel shall be confidential.
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In terms of the outcome of the panel, it is to present an initial report to the disputing parties, ideally within four months of the request for an arbitral panel. In the one chapter 20 panel completed to date - the supply management panel - the initial report was issued approximately twelve months from the date of request for the arbitral panel.
Disputing parties may submit written comments to the panel on the initial report. The panel considers these comments and issues a final report, ideally within thirty days of its initial report, or approximately five months after the original request for the panel. In the supply management panel, the final report was issued approximately four months from the date of the initial report, or sixteen and a half months from the date of the request for the arbitral panel.
You will notice that the time periods referenced in the supply management proceeding are longer than the ideal periods set out in the agreement. The delay was partly the result of the length of time taken to appoint the panel, and the extended time periods also partly reflect the application of the model rules relating to translation. Under these rules, a participating party may request the translation of written submissions and panel reports. To accommodate these provisions, rule 54 of the model rules states that time periods are suspended to allow for translations.
Unless the NAFTA commission decides otherwise, the panel's final report is made public fifteen days after it is presented to the NAFTA commission. Under the equivalent FTA process - chapter 18 - there were five panel reports, and all were made public. In the supply management proceeding under NAFTA, with the agreement of the parties, the final report was made public the day after it was presented to the commission.
As for implementation of the final report, the disputing parties under the agreement are to reach agreement on the resolution of the dispute after receipt of the final report. The resolution normally shall conform with the determinations and recommendations of the panel, if there are any. Article 2018 states that, wherever possible, the resolution shall be non-implementation or removal of a non-conforming measure.
Where a panel reports that a measure is inconsistent with NAFTA, and where no agreement has been reached to resolve the dispute, the aggrieved party may suspend benefits of equivalent effect. In short, this is a retaliation provision. Where retaliation is employed and a party believes the measure is manifestly excessive, the retaliatory measure can be reviewed by a panel. Such a panel is to present its determination within sixty days of panel selection, or within another time period agreed upon by the disputing parties. In practice, parties do seek to reach agreement based upon the panel report, thereby avoiding such retaliatory measures. For example, the suspension of benefits provision was never employed under the FTA.
To conclude, I began with an American anecdote. I would like to end with an Hispanic proverb, which says, for those of you who might not speak Spanish, ``The pleasure of disputes is in making peace''. In NAFTA, as in life, this is true.
[Translation]
Thank you, Mr. Chairman.
[English]
I'll be pleased to answer any questions you may have.
[Translation]
The Chairman: Thank you very much, Mrs. Beehan. I will now turn the floor over to Professor McRae.
Mr. Donald McRae (Professor of Common Law, University of Ottawa): Thank you,Mr. Chairman.
[English]
Mr. Chairman, I would like to make some comments this afternoon that arise out of my experience as a panellist under both the free trade agreement's chapter 18 and NAFTA's chapter 20. I chaired the first dispute under chapter 18, the salmon and herring case. I was a member of another chapter 18 dispute on non-mortgage interest. I was also member of the NAFTA chapter 20 dispute on supply management that Ms Beehan just referred to.
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I've also sat on a chapter 19 dispute on softwood lumber injury and chaired the first dispute settlement panel set up under the United States-Israel free trade agreement.
As a starting comment, I think in general the processes in chapters 18 and 20 work remarkably well. Panels composed of nationals of both states have shown that they can work collegially and are not divided along national lines. I think the system has worked well, both where the panels are composed completely of nationals, as under chapter 18, and where there is a non-national chair, as under chapter 20.
I think it's important to remember that panels are made up of members appointed ad hoc. The dynamic of an ad hoc panel is somewhat different from that of a court with judges with security of tenure.
In any particular case, a panel can be made up of individuals who may have served previously on panels and individuals who are completely new to the process.
I think the key to the panel process lies in appointing individuals who are able to function effectively in that kind of environment. Much depends in the panel process on the way panel members interact at both the personal and professional levels.
Panel members are meant to be legal and trade professionals. They have a responsibility as professionals to their own personal integrity, but they also have a responsibility to the dispute settlement process as well.
In my experience, panel members do recognize this. They know that the process will work most effectively if they work as a group and not as five separate, autonomous individuals. They know that the process is best served if they can reach unanimity in their decisions and I think they work collegially to try to reach that goal.
In doing so, in the actual operation of the panels, nationality is simply not a factor, so that while reverse selection is being referred to and may have some political appeal, in my view it really has no impact on how panel members actually behave.
I would also like to say that I think a critical factor in the effective functioning of panels has been the kind of environment created by the NAFTA Secretariat and the support given by it. A secretariat can play a major role in taking five individuals who may or may not have had much contact with each other before and quickly making them become comfortable with each other in a relationship of confidence and trust that might otherwise take a considerable time to build.
In this regard, NAFTA panel members have been exceptionally well served. I've sat with panel members who have had domestic, North American and international experience, and they all agree that the level and professionalism of the service provided by Cathy Beehan and her staff is simply unparalleled.
I've worked frequently with the NAFTA Secretariat in Washington and although their resources are more limited, the level of professionalism there is also extremely high. I have not worked with the Mexican secretariat, but I know that the secretariats work together so I expect the same is probably true there.
I'd like to comment on certain specific areas if I may, Mr. Chairman. These are issues related to confidentiality, issues relating to experts and scientific advisory boards, the initial report recommendations and the permanent tribunal. Maybe I won't get through all of these during my time with you today, but I will make some comments on some of them at least.
First of all, on confidentiality, I think there's no doubt that there is a need for confidentiality in many aspects of trade disputes. And of course where one is dealing with a process that involves ad hoc panel members, I think the problems of conflict of interest are of particular importance. These issues are taken seriously by the parties, by the secretariat, and by panel members.
But I wonder whether the question of confidentiality is perhaps taken a bit too far. In supply management, the names of the panel members were confidential until the final report was submitted. The first submissions of the parties are public, although some of the supporting documents are not. The hearing was in private and the transcript is confidential. The post-hearing written pleadings are partly public, but all subsequent proceedings are confidential.
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Now, I think it is somewhat bewildering, to say the least, to try to find one's way through what is confidential and what is not, and I think when confidentiality is raised to this kind of level on matters of public interest, then the obvious is likely to happen, and in supply management it did happen - that is, leaks occurred. The names of the panel members were leaked. But confidentiality requirements prevented panel members from acknowledging what in fact existed already in the press.
This is particularly confusing because the press had mixed up the nationality of two of the panel members, and yet confidentiality prevented the panel members from acknowledging (a) that they were members of panels, and (b) that there was an error in the designation of their nationalities.
There were also press reports on some of the written arguments but no press reports on others. Then the initial report of the panel was in fact leaked, and so it became public.
As a result, I wonder if the perhaps excessive concern for confidentiality really achieved its objectives, and I also wonder if excessive concern for confidentiality does much for the long-term credibility of the panel process. I think transparency is a goal in international trade regimes, and I think some of that transparency might be applied to the dispute settlement process as well.
Now, of course it is not realistic, I agree, to expect the parties to be able to control all leaks. In three of the cases that I've been involved in the initial report has been leaked. But I think the parties perhaps could reduce the incentive to leak and could add greater transparency to the process by relaxing some of the confidentiality rules. Obviously, identifying the names of panellists is a fairly simple step.
But chapter 19 might be looked at as a model. Under chapter 19 proprietary information is confidential, but the rest is open to the public. I'm not suggesting that there's an automatic parallel between chapter 19 and chapter 20, but I think that at least the chapter 19 process might be a starting place in reviewing the question of whether or not there is too much confidentiality and not enough transparency in chapter 20.
Let me turn now to the question of expert and scientific review boards. I think that to explain the comment I'd like to make here one has to keep in mind that there are probably two kinds of questions that panels have to deal with. One kind of question might be described as a fairly narrow, legal, interpretative kind of issue, that is, for example, whether non-mortgage interest is included in the direct cost of processing under article 304 of the free trade agreement, which was the issue in the non-mortgage interest case; or whether the incorporation of agreements negotiated under the GATT incorporates the tariffication process under the Uruguay Round into the NAFTA, and that was the issue in the supply management case. I think these are the kinds of interpretive issues that lawyers are specially equipped perhaps to deal with.
But I think that there are other kinds of questions that come up in trade disputes that are not strictly interpretive, narrow, legal issues, although they may present themselves in that guise. These questions, I think, involve the application of a much less precise standard. I think some examples of these are found in the exceptions under GATT to both GATT and NAFTA obligations, such as whether or not a measure is primarily aimed at conservation or is necessary to protect human, animal or plant life or health. I think it also arises under article 3 of GATT when the issue is whether or not a particular product is a like product. I think in all of these cases there are issues that involve perhaps scientific, perhaps social, perhaps technical or other kinds of judgments.
.1605
That kind of issue was really at the centre of the salmon and herring case, and was involved in part, but to a lesser extent, in the UHT milk case. I think it is interesting that both of those cases are probably the two most frequently criticized decisions under chapter 18.
I think the problem is highlighted where one has this intersection of trade rules and environmental rules. Can a panel of trade officials or trade lawyers really be expected to make a judgment about the conservation rational or impact of a measure? Do they have the necessary expertise to do that?
In salmon and herring, under the free trade agreement the parties simply put fisheries experts on as members of the panel. There was no provision for other kinds of expertise. It was simply added to the panel.
In NAFTA, as Ms Beehan has pointed out, there is the possibility of scientific review boards and of experts. I think the problem with the provisions in NAFTA is that these are under the control of the parties. The panel can only appoint experts if the parties don't disapprove, or the panels can have a scientific advisory board if the parties agree. I think it puts too much of an onus on the panel to try to decide whether or not the parties might agree to their setting up such a body.
The experience of the World Trade Organization, at least in the initial cases, is that where that possibility exists, the panels do not ask for them to be set up.
I would suggest that where an issue is going to be before a panel and involves matters of judgment that are not purely textual interpretive questions, then there ought to be automatically a panel of experts or scientific advisory body established by the parties. That is, in each case where a panel is going to have to make some kind of assessment of scientific or advisory matters, I think the parties should from the outset establish such a panel, make such a panel of experts or a scientific advisory board available. I do not think it should be up to the panel to have to take this initiative.
Let me turn to the question of the initial report, as was mentioned by Ms Beehan. The panel must provide an initial report setting out the facts, argument and determination. Then a party may submit written comments on that report.
I think the question arises as to the nature of those comments. What can be included in the comments at that stage? Do the parties have the opportunity at the stage of the initial report essentially to re-argue the case, to introduce new evidence, to introduce new arguments? In other words, having seen what sort of arguments are likely to be successful before the panel, can they introduce a whole series of new arguments, present new evidence, and essentially bring new material to the attention of the panel?
Of course, the confidentiality rules prevent any analysis of what actually has happened in the chapter 18 and chapter 20 cases, although the parties can look at that themselves.
I think the treaty itself does suggest that the comments that can be made by the parties can in fact be quite far-reaching. What NAFTA provides is that in response to those comments, the panel can request the views of any party, can reconsider its report, can make any further examination it deems appropriate. This suggests to me that perhaps the parties did contemplate that new arguments or new evidence might be appropriate at that time. What is the point of holding a hearing unless there are new arguments or new evidence? But if it is true that it is possible to make new arguments or new evidence, then it seems that perhaps there have to be some limits on that.
The limited time provided for the post-initial report phase suggests it's meant to be a very short time. That is not really compatible with the idea of substantial new arguments or substantial new evidence.
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It seems to me that's perhaps a matter to which the parties ought to give some attention. Otherwise, at some stage a panel may be confronted with the fact that it may have to rule that a party has really raised issues that are not appropriate at that stage, but a panel would have to do that without any clear criteria on when or where it would make that judgment.
Alternatively, if the panel doesn't rule in that way, it may be faced with essentially new arguments, new evidence, a new hearing, and essentially a new case starting at that phase.
I think there is a further issue with the initial report, which I'd like to refer to. That is, under the existing provisions of NAFTA, a panel can simply ignore the comments of the parties and issue its initial report as its final report. It obviously has to consider them, but the initial report can become the final report.
In a similar procedure under the World Trade Organization, which is referred to as the interim review stage, after receiving the comments of the parties the panel must then, in its final report, comment on the arguments raised by the parties in the interim review stage. It seems to me that such a provision there again promotes transparency in the process, and it's perhaps an approach that could possibly be taken under NAFTA.
I have two further questions I would like to raise briefly, Mr. Chairman, if I may. One is the need for recommendations. In addition to making findings of fact and the determination of the issue, unless the parties stipulate otherwise a panel can also make recommendations for the resolution of the dispute.
I would suggest that the ability to make recommendations is somewhat inconsistent with the adjudicative role of the panel. I think the task of the panel is to decide whether a provision of the treaty has been complied with or not. It's not to mediate the dispute between the parties.
I think the option of making a recommendation reflects the fact that chapter 18 of the free trade agreement simply carried forward what existed in the GATT dispute settlement process. The idea of a recommendation by a panel reflected the ambiguity under GATT of whether or not GATT dispute settlement was really an adjudication or really a conciliation.
I think that ambiguity no longer exists in the World Trade Organization, and I think it no longer exists in NAFTA. If it existed at the early days of the free trade agreement, I think it no longer exists under NAFTA.
It's interesting to note that in the GATT-World Trade Organization practice, the recommendation, although it still exists, is purely a formality. The panel, having made its decision, simply recommends that the offending measure be removed.
Moreover, in the supply management case, the power to make recommendations was not included in the panel's terms of reference. In other words, in supply management I think the parties wanted the panel to decide on the law, not to suggest other ways of resolving the dispute. I think that is the correct approach.
It seems odd to me for a panel on the one hand to determine what the legal rights are and then recommend that the dispute be resolved in a different way from its determination of the legal rights. So I would suggest that the recommendation power of a NAFTA chapter 20 panel is outdated and is really unnecessary.
My final comment relates to an issue that is raised from time to time about whether a permanent tribunal should exist rather than the ad hoc panel process under chapter 20, and sometimes the issue is raised with respect to chapter 19 as well.
I think there are some obvious advantages of having a permanent tribunal. It would avoid some of the time delays in the panel selection process that Ms Beehan referred to. It avoids some of the time delays that occur, again, in supply management when you try to coordinate the schedules of five people living in a variety of places, on different continents. It would minimize, although not eliminate completely, the conflict of interest issue.
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I think it would also ensure that expertise was developed consistently amongst the panel members and that some kind of institutional memory could exist apart from the institutional memory of the secretariat.
At the same time, there are clearly some disadvantages. Governments may not want to commit themselves to particular individuals for any length of time. They do so when they put people on the roster, but they're not committed to using the people who are on the roster. They may want the freedom to choose individuals simply on a case by case basis. And they may not want to commit to the cost of a permanent tribunal.
Perhaps more importantly at the present time, it does seem to me to be a bit unnecessary to create a permanent dispute settlement tribunal when one is running approximately one case a year, although in thinking about this issue, I think that perhaps the World Trade Organization appellate body provides some kind of intermediate model, because on the appellate body, individuals are selected for a fixed term - four years - and during that time they have to commit themselves to devoting themselves full time to an issue when it arises.
The time limits under the appellate body are very constrained. They have 60 days from the time an appeal is lodged to reach a decision, which can be extended to 90 days, but when they're not sitting, members are free to do other things that would not involve a conflict of interest. I will point out that the appellate body has been particularly busy. It's already handed down four decisions. It has another waiting and no doubt has others that are about to be appealed. I think there would have to be a much busier chapter 20 agenda in order to justify anything other than the present ad hoc panel system.
Thank you, Mr. Chairman.
The Chairman: Thank you very much, Dr. McRae.
Mr. Daley, would you like to add to these presentations?
Mr. Daniel D. Daley (Associate General Counsel, Trade Law Division, Department of Foreign Affairs and International Trade): Thank you, Mr. Chairman. I'm left without a lot of ground to cover, given the excellent and comprehensive nature of the two preceding presentations.
I will start by confirming, from my own personal viewpoint, the observations of Professor McRae that under the stewardship of Ms Beehan the Canadian section of the secretariat really is an example of excellence in the resolution of disputes, as it is in the other aspects of its work.
I should comment briefly on some of the deficiencies in the current system that Professor McRae has identified. Certainly, in the one chapter 20 panel that has been completed to date, supply management, the Canadian government became acutely aware of some failings in a procedural sense.
Currently, at the officials' level, we are reviewing the supply management experience with a view to preparing some proposals for improvements, in a number of cases at the level of the model rules of procedure, and perhaps in other cases at the level of amendments to chapter 20 itself. In any event, those proposals would have to be shared with and agreed upon by Canada's two NAFTA partners.
We are aware that the system is not perfect. Certainly, the difficulty of ad hoc panels in reaching decisions on procedural issues that are not dealt with in chapter 20 itself or in the model rules of procedure is a matter that Canadian officials are well aware of.
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The NAFTA chapter 20 system certainly departs from the WTO and its GATT predecessor in the sense that we do not have a secretariat that is as activist. I don't mean that in a critical sense in any way, but the role of the secretariat is much more confined in NAFTA dispute settlement than it is in the WTO.
As Professor McRae observed, ad hoc panellists have difficulty bringing an institutional perspective to individual disputes. There has only been one dispute so far. It's very hard to develop a body of detailed procedural rules based on the small number of disputes we've had. Second, if there continued to be a high turnover of panellists, let's say, it would be difficult for the panellists themselves to develop a perspective on these procedural issues.
So that's one factor being borne in mind in the review of the NAFTA chapter 20 procedures in light of the supply management experience. Of course the testimony will be available and we will certainly take Professor McRae's testimony into account, in addition to other sources we have, in the conduct of the review of the procedures.
Changing the topic slightly, I would like to comment on some aspects of NAFTA chapter 20 on which I have some personal observations to make based on personal experience.
I would like to discuss briefly the strengths of the NAFTA in the area of dispute avoidance. What we've talked about in this meeting to date are the procedures from article 2006 on consultations through the commission and through a panel. But in fact there is a whole world of activity carried on in the NAFTA, under chapter 20 essentially, that has to do with resolving problems, current and anticipated, at the officials' level in a consultative way and with a view to avoiding the need for formal dispute resolution.
This has to do with the institutions - the committees and working groups - that exist in the NAFTA, and it also has to do with chapter 18, which imposes a number of transparency and procedural disciplines on the NAFTA parties.
Chapter 18, accompanied by a number of other provisions of the NAFTA, requires that the parties publish not only their laws but directives and that they issue advance rulings, for example, in the area of rules of origin. These all have to do with ensuring that the affected private parties are aware of what the rules are and have a chance to order their affairs to take those rules into account, that they have an opportunity to comment on changes to the rules before they come into effect, and essentially that the systems operate in a way that is conducive to real free trade and investment as well.
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Some very important bodies are established in the NAFTA, such as the Committee on Trade in Goods, the Working Group on Rules of Origin, and a number of technical bodies. All of these have to do with allowing the NAFTA to evolve, with allowing the concerns of NAFTA parties to be aired and given full consideration, and with heading off disputes. I've witnessed and been a part of the effectiveness of those bodies.
For example, I prepared and presented arguments to the Committee on Trade in Goods in my first experience, thinking I was really preparing in advance an argument to be used before a panel. Much to my surprise, the first time I did this, the delegation of one of the other NAFTA parties, which would have been the party complained against in a panel, reflected on the arguments we put forward and came back agreeing with us. They agreed essentially that the position that United States officials had been taking to that point on a matter that had to do with a very important duty drawback and deferral issue, one that had very significant implications for Canadian industrial policy.... They agreed with us and the U.S. policy was changed. This happens all the time.
The fact that those bodies are so busy and that there have only been two requests for a panel so far under chapter 20 certainly suggests to me that by and large the system works exceedingly well and that there is a large commonality of interest and of commitment on the part of the NAFTA parties in ensuring that the system works effectively, fairly, and as it was intended to.
That's my observation on the working of dispute avoidance in the NAFTA.
The Chairman: Thank you, Mr. Daley.
Mr. Sauvageau.
[Translation]
Mr. Benoît Sauvageau: Good afternoon, Mrs. Beehan, good afternoon gentlemen. My first question is for Mrs. Beehan.
First of all, you must be very flattered by the comments made by your two colleagues, comments that were pointed out in the introduction of your brief. Unfortunately, I do not know you well enough to add to this. However, I do not doubt these comments for a moment.
You raised several points in your presentation. First of all, you talked about the neutrality of the secretariat, which must be above reproach. There are no problems with that.
You said that there had been 12 requests for consultation under chapter 20 of NAFTA since 1994, namely, three years. This number seems to be quite small in my opinion. Is this really a small number under this chapter?
In your presentation, you also said that 16 months elapsed between the time that the initial report was tabled and the final report was produced. This seems to be a relatively long period of time in my opinion. Do you think that we could shorten it?
You did not, however, and perhaps this is owing to your neutrality, make any critical comments as to what type of improvements you would like us to recommend in our study in trade disputes, particularly with respect to NAFTA chapters 18 and 20.
I'd be curious to find out whether or not the 12 requests are reasonable, whether the response time is, in your opinion, normal, and whether or not you would like to see any changes made based on the experience you have acquired working in the field over the past few years.
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Mrs. Beehan: Thank you, Mr. Sauvageau.
[English]
Perhaps I could start with your second and third questions and somewhat combine them.
With regard to the delay, which was considerable, in completing the supply management chapter 20 case, as I indicated, the parties in that case took six months to name the panel initially. I believe that if the parties can reach an agreement on the consensus roster that is called for under chapter 20, then it would go a long way to alleviating any delays in future chapter 20 panels that may be established. So if I have a change or recommendation to make, it would be to encourage the parties to agree on the roster under chapter 20 along those lines.
Other delays in the process under chapter 20, as I also indicated, in part can be explained by the need for translation in that particular case. Under the Canada-United States Free Trade Agreement and with our facility in Canada being very familiar with using two languages and translating into French, we did not have delays related to translation. This, however, was the first application of using the dispute settlement process and using three languages, so it took considerable more time to have the submissions in the final report ultimately translated. We might gain some efficiencies with experience in relation to translation. But I think the main delay in that case was the six-month time period for selecting the panel.
With regard to your first question as to whether or not 12 consultations since 1994 is high or low, I don't know that we have much to compare it with. Under the Canada-United States Free Trade Agreement the then Binational Secretariat did not have a list of consultations. The provisions were slightly changed in that when consultations are requested, our office has to be notified. So we have no prior list under the free trade agreement. I can't tell you how many consultations in a two- or three-year period might have previously been requested. Maybe my friend from Foreign Affairs would have some details along those lines.
But from a personal perspective I don't consider 12 requests for consultations on a new agreement among three parties that deals with very complicated matters to be high at all or certainly unusual. I think that, as Mr. Daley has pointed out, one of the telling points is that with all of the transparency and preventive measures that exist in the agreement, only 2 of those 12 requests have ultimately ended up at the panel stage, which I think is exactly how the agreement was designed to operate.
[Translation]
Mr. Benoît Sauvageau: Very well.
The Chairman: I apologize for interrupting your questions. I will turn the floor over to you in a moment. The points you raised lead to other questions as well.
[English]
Can you throw any light on why the governments concerned find it so difficult to establish a chapter 20 roster? It's a number of years now. Why is it that a roster was never put together?
Ms Beehan: I'm certainly not privy to the discussions regarding the establishment of the roster. That is the responsibility of the three parties to the agreement. I can tell you that under the prior chapter 18 FTA process, the rosters were national ones. So Canada selected names to be on its roster, and the United States selected names to be on its roster.
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This was changed under NAFTA. Under chapter 20 one roster is to be established. They call it a consensus roster. I guess they've had a difficult time reaching consensus.
I don't know if Mr. Daley would like to elaborate further.
Mr. Daley: Mr. Chairman, in any trilateral exercise of this kind where the consequences could be significant and where there are - how should I put it? - a broad range of factors that are brought to bear, even on selection of the candidates within each party, it is admittedly a halting process.
The parties are, however, focused now on the need to get this work behind them. They are acutely aware of the consequences for expeditious treatment of disputes of not having the consensus roster in place, and they are working on getting a roster.
I can only say that there have been complications, at least in the United States and Canada, and that we're now working very hard on getting the roster. It's a situation where the imminence, let's say, of a specific dispute makes the agreement on a roster more necessary and also makes it more difficult once specific interests are in play.
We need a period of tranquillity in our relations, during which we can proceed in a non-contentious way over agreement on a roster.
Certainly, at least since early 1995, there hasn't really been a period when there hasn't been a specific dispute in view. Once you have a specific large dispute looming, it just makes it harder to get agreement.
The Chairman: That's a good explanation as far as it goes, but when there are commitments in a treaty -
Mr. Daley: Oh, yes.
The Chairman: - it is a bit surprising that the parties involved have not been more diligent in furthering their obligations under the treaty. However, I don't want to dwell on this point.
On the question of translation, we're familiar in this House with the problems of translation. Must all documents be translated into three languages? Are there improvements in your own secretariat, such as funding, number of persons, translators attached to, etc., that would relieve part of the problems created by this translation problem?
Ms Beehan: In answer to that question, Mr. Chairman, there are a number of steps. Not all documents have to be translated into all three languages. At the beginning of the panel process under chapter 20, the parties have a right to elect whether they want their language rights applied to that particular process.
For example, if the next dispute we have is between Canada and the United States, is not a matter that really touches upon Mexico, and Mexico is not interested and doesn't participate in the dispute, then it might be a case where it would take place either only in English or only in French and English. If it's a dispute that occurs between Mexico and the United States, for example, and Mexico reserves its right to have the hearing in Spanish and to have the documents translated, if Canada is not participating it then might be in Spanish and English only.
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It happened with the first panel, a dispute between Canada and the United States. Mexico did choose to participate and it was the first time we applied all three languages. I do believe that while the hearing room ended up a little bit crowded with booths sufficient for French and English and Spanish ongoing, the interpretation process worked very well.
But in the final translation of documents, some of the responsibility falls with the parties and some falls with the secretariat ultimately. So it's the parties' responsibility, for example, to have their own submissions translated. The secretariat is responsible for translation of certain documents, including, for example, the final report. We do not have the facility within our own office. It is something that would be contracted out.
The Chairman: Thank you very much.
[Translation]
Mr. Sauvageau, the floor is yours again.
Mr. Benoît Sauvageau: I forgot to ask you a question, Ms Beehan, but I will get back to it a little later on.
Mr. McRae, you talked about the composition of a panel. Do the current criteria - Mr. Dupuy talked about this a bit - pose any real problems which we should be preparing to deal with such as, for instance, the appointment of Canadians and Americans if these are the two countries concerned.
You also talked about non-confidentiality after the fact. Right now, it's confidential, but you talked about possibly making public, if I understood you correctly, the names of the people sitting on the panel.
I can foresee the following problem. Let's take the agricultural sector as an example. If the panel is dealing with an agricultural problem, the panelists may be known in the agricultural world. What about the lobbying that could go on for the six or twelve months period during which the proceedings take place? If I have understood correctly, keeping the names of the panelists confidential could protect its members from this problem.
I would also like you to elaborate on your opinions with respect to the confidentiality of the initial report as compared with the final report. Up until now, it has been confidential. You have also given us to understand that it may be made public. If this report were made available to the parties, a new debate would ensue. And if this were the case, the final report would never be completed because we would have a new deal. When would it all end? Did I understand you correctly? Did you really say that the names of the panellists may no longer be confidential and that the report may also no longer be confidential?
[English]
Dr. McRae: I was certainly not suggesting that we go from what I described as perhaps overly concerned with confidentiality to a completely open system, but let me take the question of the names of the panellists, for example. I think my concern is, in part, a concern that in reality these issues become known. Given that they become known in fact, it may be simpler to be open at the outset.
I agree that the possibility of lobbying is one of the main concerns. In the panels I've sat on, even though many of the names were known publicly in advance and known to the industries involved, I've never had any experience of lobbying and I don't think any of the panel members I've sat with have had any experience of lobbying, so I suspect it may not happen.
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Given that since the names become known even though they're kept confidential, lobbying is still going to occur if it is going to happen at all. I'm not sure the issue of lobbying is a major problem. There is lobbying in one sense all the time, because while a dispute is going on, one can read in the paper of positions being taken publicly by the industry on that particular issue. So there is in fact that kind of public information.
[Translation]
Mr. Benoît Sauvageau: Could you provide me with some clarification and tell me whether or not today, when somebody is appointed to the panel, there is a rule or a standard stipulating that the appointment must be kept confidential? Is there a rule or are names normally kept confidential because of convention? Usually names are not disclosed, but we could also... Do we have to abide by some rule or standard?
[English]
Dr. McRae: Maybe Mr. Daley can answer that question.
Mr. Daley: Yes, there is a formal rule in the rules of procedure that the identity of the panellists is to be confidential until the final report has been published.
[Translation]
Mr. Benoît Sauvageau: Mr. Daley, would you prefer to maintain or relax this rule?
[English]
Mr. Daley: I've taken on board the comments Professor McRae has made. I think we have certainly seen that although supply management was a highly politicized and very contentious dispute with high stakes, it was perhaps not terribly typical. It was a dispute with somewhat greater media interest and media coverage than one would normally expect.
Certainly, we did see a breakdown of the requirement of confidentiality, and the panel members were placed in an awkward and perhaps unfair position. So that would argue for greater openness. The absence of direct lobbying or direct contact by the affected industries, for example, would suggest that perhaps it's a rule that isn't fully justifiable. That's one of the many issues currently under review.
[Translation]
The Chairman: Perhaps you could keep your questions for the second round, if we have time.
Mr. Benoît Sauvageau: All right.
[English]
The Chairman: Mr. Grubel.
Mr. Herb Grubel: Thank you, Mr. Chairman.
As you know, I'm a substitute here, and in order to be able to put into perspective the testimony we've heard today, I wonder if you could quickly summarize for me the reason for holding these hearings. Have they been stimulated because of some troubles that have shown up, and at whose initiative? What is the frame of reference of these hearings?
The Chairman: I can be very brief on the question. Our parent committee, the Standing Committee on Foreign Affairs and International Trade, considered in its wisdom that it would be appropriate to have several subcommittees to focus on issues of common concern. One of the set of issues is obviously trade disputes. So the parent committee decided to create this committee with a reference - and we'll be glad to provide you with the full text of our mandate - to study how trade issues arise from trade agreements and how they are resolved through trade settlement mechanisms. So this is basically what our hearings are all about.
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We've had already very extensive presentations, both from officials and from people who have dealt with and built up experience with trade issues. Our hope is, elections permitting, to produce a document that would bring together this experience. Hopefully we'll be able to pass some judgments on the presentations and make recommendations.
Perhaps, if the time allows, I will be inviting Mr. Daley to indicate to us some of the other things he has in mind for improving the dispute settlement mechanisms, because this is basically what this committee is about. I would very much like to see us among his allies in pushing some interesting views on the improvement of trade dispute settlement.
Mr. Herb Grubel: Thank you, Mr. Chairman.
This certainly is a different perspective from the one I had when we had the hearings on SIMA, the Special Import Measures Act, where it was no secret that there had been pressures from certain industries in Canada to re-examine this and that some departments in government wanted to have an opportunity for these issues to be aired in the way they are being aired now. In other words, I don't see anything obviously wrong with our experience in NAFTA and the way it is, perhaps, with SIMA, without judging the case on SIMA.
You have a comment? Yes, please.
Mr. Daley: I would like to note that while the system is fundamentally sound, it is not perfect, and we are working on improving it. We certainly would welcome the participation and input of the subcommittee, among others.
Mr. Herb Grubel: Thank you very much. Under those circumstances, I have a couple of questions of Dr. McRae.
One of them is, for all these rules that now exist that you wish to have changed, have you looked into the rationale for their existence in the first place? What in your experience led you to believe that the assumptions that underlie the construction of those rules are false?
Secondly, I'm wondering what is required in order to bring about the changes you have recommended. Would we have to open up NAFTA negotiations, with all three governments having formal agreements on changes in procedures and things of this sort? Or is it simply a matter of the secretariats agreeing amongst themselves? How difficult is it to make those changes?
Dr. McRae: If I can take the second question first, most of the things I'm suggesting really involve the parties themselves simply agreeing on some modifications. Maybe they can be done with changes to the rules of procedure rather than any changes to the treaty itself.
As for the rationale for the changes, it depends on which change one is referring to. If one looks at the question of confidentiality, the rationale for confidentiality is fundamentally sound. It's a question of how far one takes confidentiality and how one balances transparency. This is a debate that's existed in the trade area for quite a long time. There have been a lot of questions about the high degree of confidentiality and some proposals for transparency.
In respect of the scientific review boards, it is an issue the parties ought to think about, because the kinds of issues that are coming up in the World Trade Organization show that environment, health, and issues of that kind are going to be coming before panels more and more. That's something, again, that the parties in their discussions, as Mr. Daley has mentioned, ought to be taking into account, because there are some deficiencies in the way the World Trade Organization is dealing with some of these issues.
As for other matters, such as the recommendation, I think the parties may in fact in practice be doing what I was suggesting in terms of the recommendation.
The initial report issue involves the parties talking about what they mean by it, because the treaty is simply not clear on what in fact is the proper scope of parties' responses to the initial report.
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Mr. Herb Grubel: Perhaps I could clarify what I had in mind with respect to confidentiality. Two possibilities come to mind for the rationale. It could be to protect the commercial interests of private parties - something proprietary. It could also be to avoid excessive lobbying.
I wonder whether there are other reasons that underlie the decision in the drafting of the treaty to put in this provision of confidentiality. There might be different responses to satisfy different perceived needs for confidentiality, depending on what it is. For example, commercial confidentiality could be protected in one way, and one could protect the individual panel members from excessive lobbying by simply saying, ``Treat these people as if they were judges: don't talk to them'', or something of this sort.
I'm just wondering whether there were other rationales than those I just mentioned, and whether you agree that there might be different methods for dealing with each of the objections.
Dr. McRae: I certainly agree there are different methods of dealing with the objections. One of the primary issues is the commercial interests involved and the need for confidentiality.
Maybe I can explain that in the chapter 19 process, the need to protect the commercial information, the proprietary information, is such that the parties produce two versions for the panel. They have a confidential version and a public version, so the panel members have the confidential version with the propriety information in it and the public version with the proprietary information blanked out. That is a way of promoting transparency by then having a public hearing under chapter 19 where only the non-proprietary information is made available. In that way one can preserve both the confidentiality and the transparency.
In chapter 19, where the opportunities for lobbying would be just as great, there is no confidentiality in respect of the panel members. I suspect that in addition to the factors you have mentioned, another factor may be that there are at stake interests involving the governments that are not directly private, commercial, proprietary information, but that the governments themselves do not wish to have in the public domain. That also may be a matter that encourages a degree of confidentiality.
Mr. Herb Grubel: Well, in those those cases, I'm totally in favour of transparency.
I have one final question. In your mentioning of technical expertise, you stuck with health and environment. You never once mentioned economics. As an economist, I am very disappointed.
Some hon. members: Oh, oh!
Mr. Herb Grubel: Thank you, Mr. Chairman.
The Chairman: Thank you. Mr. Cullen.
Mr. Roy Cullen: Thank you, Mr. Chair. How much time do we have? I do want to leave some time for Mr. Daley to elaborate on some ideas he might have.
The Chairman: We usually run to 5:30 p.m.
Mr. Roy Cullen: Okay.
Mr. Herb Grubel: But we have a vote.
The Chairman: Oh, yes, of course, so it will be 5:15 p.m.
Mr. Roy Cullen: Okay. Thank you.
My first question is to Professor McRae and Ms Beehan. It has to do with this issue of the technical or scientific advisory panels. My thinking would be in line with what you espouse, that often these panels need that kind of expertise, because if you're looking at non-tariff barriers and trade and environment issues, they're often technical and scientific questions.
If we pursued your line of attack, Professor McRae, that perhaps a NAFTA secretariat would propose certain scientific and technical support, would the debate be centred on whether we're prejudging what the NAFTA panellists might deem appropriate? If that would become an issue, how do we get around that to make sure these panels have access to that kind of scientific, technical, or even economic expertise?
Dr. McRae: At the moment a panel could say they would like expertise or they'd like a scientific review board established, and it would be a matter for the parties to decide whether they agreed to that.
.1700
Mr. Roy Cullen: But you indicated some reluctance to do that.
Dr. McRae: I think the panellists may be reluctant to tell the parties they would like information independently of what they have provided. If one thinks of a court as the parallel, courts accept the arguments and the material provided by the parties. In the common law system, the court does not go out and get its own, separate information. It relies on the parties to give that.
I think that kind of thinking probably would make a panel reluctant to say: ``We're not satisfied with what the parties have given us; we want to act independently of the parties'', and then go back to the parties and say, ``We would like to act independent of you by setting up this board''. That, I think, is an inhibition in the panel's going about independently.
Therefore, the option I was suggesting was that it be recognized at the outset that this is a panel that is dealing with environment, health...I'm not prepared to go as far as economics, I'm afraid. That may raise separate questions.
Mr. Roy Cullen: Good for you.
Dr. McRae: But this is a panel that involves these kinds of issues. There will be a scientific review board established for this panel. So the panel knows at the outset that there's a body there.
It would be the parties that would have to do that rather than the secretariat. This is not a role the secretariat normally would have. Then one would have to work on the details as to who chooses the members of that board.
But that was what I had in mind. Right at the outset the parties would say that this panel is being set up with a scientific review board.
Mr. Roy Cullen: Okay.
In regard to the question of confidentiality, I would like to pick up on Mr. Grubel's questioning there. In terms of information that is proprietary to companies, I think most reasonable people would agree that should be confidential. I guess I would tilt, in terms of my thinking, to having the information more accessible.
You mentioned another category. You didn't draft the treaties, I guess, but maybe Mr. Daley would comment on what drives the confidentiality provisions, other than the proprietary information, which clearly needs to be confidential. What drives that requirement?
Mr. Daley: I guess there are three grounds for confidentiality in the proceedings. One is obviously what we've already referred to, the need that seems to have been felt during the negotiation of the model rules procedure, the need to protect the panel members from lobbying. Second, there's the inevitable inclusion of government confidential documents in the proceedings, and third, the frequent inclusion of commercial confidential documents.
We've heard now that there are some doubts about the rationale for and advisability of keeping the identity of the panellists confidential until the final report is published, but the need for the maintenance of confidentiality in other respects would persist.
Mr. Roy Cullen: What I mean is that we all have a feeling sometimes that, well, if I had my druthers, I'd keep this confidential, but when push comes to shove - and I think this is what we're talking about - there has to be some rationale rather than just a feeling that it be kept confidential.
About disclosure of the panellists' names, I think Professor McRae indicated that their names often come out beforehand in any case. He indicated it's his experience that lobbying doesn't take place. You seem to express also the fact - and I'm sorry I'm interjecting here - that other panellists, in your experience, have relayed the information to you that they don't seem to have had contact with any lobbyists. Is there no way to design rules to say that lobbying of panellists would not be permitted during a panel process?
.1705
Mr. Daley: There is a code of conduct for the panellists, and it deals with a broad range of issues.
Mr. Herb Grubel: Obviously, they can't solicit offers for money.
Mr. Roy Cullen: Are we sure, though, Professor McRae? I don't want to divide this into a U.S. versus Canada sort of issue, but in the United States they have very much a proactive kind of mentality when it comes to lobbying. For U.S.-appointed panellists, could you say categorically that they are not lobbied?
Dr. McRae: Anything that I say categorically I can only say for myself. I really can't say it for anyone else, Canadian or American, I'm afraid.
Mr. Roy Cullen: Well, you gave the impression that, over coffee or something, you'd had some discussion about this, and that your general impression was that the panellists weren't -
Dr. McRae: My impression is that it does not occur at all. I've not seen any hint of it. My impression also is that there is much more public discussion of these issues in Canada when the panel is in process than there ever is in the United States. These are important issues to Canada in a way that they're not important to the United States; therefore, my guess would be that the likelihood would be perhaps less in the United States because it wouldn't be a big issue before the public eye. On the other hand, again in terms of private lobbying, I can't answer that.
Mr. Roy Cullen: So you couldn't say categorically one way or the other.
Could you describe the process? Please excuse me for asking a layman's type of question, but first of all, when you go on to these panels - and you obviously have a lot of experience with this and have served a number of times - from the point of view of your professional creditability, is it a big pecuniary item? Do you make a big fortune at doing this?
Dr. McRae: If you asked a practising lawyer that question, you would get an answer that is much more extreme than mine. You're asking a professor; therefore, we do get paid for it, yes. It is a level of $400 Canadian a day, which I gather is closer to what practising lawyers might receive as appropriate for much less than one day. It's therefore not regarded as being well paid at all.
Mr. Roy Cullen: So it's not necessarily something you would pursue vigorously.
In your experience, once they're assembled, the panellists work really collegially in really trying to get at the truth, etc. I take at face value that this is what you're saying, but just to elaborate on the example I gave, if I was an American appointee and the panel decision went against the American interest, would it be likely that I'd get back on the roster or be reappointed? Can you elaborate on that? It's a very simple question.
Dr. McRae: All I can say is that in my experience, I've sat on panels that have decided for Canada, and I've sat on panels that have decided against Canada; I've sat on panels that have decided for the United States, and I've sat on panels that have decided against the United States.
Mr. Roy Cullen: And you're still getting appointed.
Dr. McRae: Well, I may not be appointed any more. Maybe my luck has run out - or my misfortune, depending on how one views it.
Mr. Roy Cullen: Okay.
I'd like to leave some more time for Mr. Daley to comment on some of his views on areas in this process that might warrant some improvement from the perspective of the department.
The Chairman: I think it would be useful. We have about five minutes before the bell starts ringing, Mr. Daley, so the floor is yours.
Mr. Daley: It would be somewhat premature for me to comment in anything other than general terms. Certainly during the supply and management panel proceeding, however, there was a perception within the Canadian government that there were some significant deficiencies in the procedures in the sense that the procedures were being employed in a way that was somewhat frustrating to the Canadian side.
.1710
Subsequently, we have received suggestions for possible changes to the procedures, but it really comes down to a trade-off between ensuring that both or all of the disputing parties have fair opportunity to state their cases, to receive a full hearing of their arguments and a full airing of the issues, and the need for expeditious proceedings.
If the NAFTA procedures could not guarantee a reasonable degree of speed, then in many cases - as you heard from Ms Beehan - there is a choice of forum and with respect to many of the NAFTA disciplines, although the NAFTA goes beyond the WTO in many respects, there are certain shared disciplines between the NAFTA and the WTO agreement. Up to a certain point, the complaining party can choose between the two fora.
We've also heard that the WTO procedures are quite speedy, so if the NAFTA procedures were not similarly expeditious, there would be a risk that the NAFTA forum would be neglected.
Besides that, there are many cases where we have significant interests at stake that can only be resolved within the NAFTA or that can only be protected or advanced in the NAFTA, so we have an interest in seeing that the system works well.
So the issue, then, is what provision there should be for written submissions. What's the role of the hearing? Professor McRae has referred to the scope and the role of the comments of the disputing parties on the initial report. All of these issues make up a bundle of elements in the broader issue of what provisions for the making of arguments are fair to both sides in terms of allowing a full hearing and making sure, on the other hand, that the process does not drag on.
It's those trade-offs that are being considered right now in light of our experience in the supply management dispute and also in light of the procedures in the WTO, because we have a certain amount of experience now with how things work, having been party to several disputes in the WTO under the dispute settlement understanding there.
We're looking at the two fora, the two procedures, and trying to decide how best the procedures should be structured.
The Chairman: Would you also comment on how to improve the dispute prevention mechanisms.
Ms Beehan: Mr. Chairman, might I intervene at this point while Mr. Daley thinks about your question?
Before you leave the chapter 20 dispute settlement provisions, and with regard to your questions and interest on the confidentiality issue, I would like to refer you to an exchange of letters with regard to the confidentiality matter, appended to the rules of procedure in the binder I provided to you.
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You will note that in that exchange of letters, there is an enhancement in the transparency in certain areas that did not exist under the prior FTA chapter 18 process, relating to certain things like the submissions of the parties, which under this process may now be made public.
So as an example, just as a reference, this exchange of letters is important.
The Chairman: Thank you very much.
Mr. Daley: My first observation would concern chapter 19 rather than chapter 20. As members of this subcommittee sitting in the full committee have heard, for example, in consideration of the bill to implement the Canada-Chile Free Trade Agreement, it's the policy and the commitment of the Government of Canada to eliminate the application of trade remedies within the free trade area. Certainly it's a very important element of the work program of the NAFTA to ensure, first of all, that chapter 19 works as well as possible and then ultimately to eliminate the need for chapter 19, which is a significant achievement but not the ultimate objective.
Concerning other elements of the work program, it's a question of ensuring that the committees and working groups are kept busy, that they are taken seriously by all three of the parties to ensure that irritants do not accumulate, do not sit and fester to the point where they become formal disputes. It's our experience that once formal consultations under article 2006 are engaged, the parties have a certain dispute settlement mindset rather than dispute avoidance, and so the real work on dispute avoidance takes place at a less formal level and at a lower level, let's say.
That system seems to work well. It's just a question of ensuring that the parties continue to take it seriously and to devote the necessary resources to it and that it's given sufficient prominence, let's say, in the trade policy agenda.
The Chairman: Thank you.
Are there any further questions?
[Translation]
Mr. Benoît Sauvageau: I would like to ask Ms Beehan a question, Mr. Chairman.
Earlier Mr. McRae told us about the possibility of setting up a standing tribunal. He talked about the positive and negative aspects of creating such a tribunal. I would like to know whether or not Ms Beehan views the creation of a standing tribunal of this type in the same way that Mr. McRae does.
[English]
Ms Beehan: I have only worked with these ad hoc panels, which I've worked with now for five years, and in my experience the interest, effort and dedication that all of the panellists who have served on the prior chapter 18, which is now chapter 20, and those who appear on our extensive list of panellists under chapter 19 have brought to these panels has been extraordinary and has resulted in some very fine, solid, good decisions and reports.
With regard to the arguments Professor McRae has made in favour of there being a permanent tribunal, I don't think I would have arguments to make against those. I think it's a very difficult choice. Maybe the economic and financial costs would weigh very heavily, though, against the side of a permanent tribunal.
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I do not feel the quality of decisions and reports that might ultimately be produced would be better than the very good decisions and reports of excellent quality we have now or sufficient to justify the enhanced cost.
Mr. Benoît Sauvageau: Thank you.
The Chairman: Mr. Cullen.
Mr. Roy Cullen: Mr. Daley, I think I heard you say that the WTO secretariat is more activist. I may have misheard you, but I wonder if you could elaborate on that. If you did say that, what does it mean in this context? Do you think there's an appropriate level of ``activism'' required, or do we differentiate between, let's say, a WTO environment and a NAFTA environment?
Mr. Daley: In a trilateral agreement, I certainly hope, for economic reasons, we wouldn't have the size of secretariat that exists in the WTO system. Because we wouldn't have the frequency of disputes, we just can't accumulate a body of experience on substantive or procedural issues to the same extent as that which exists in the WTO, drawing to a large extent on the experience of the GATT.
The WTO secretariat is activist in the sense that it has a very large research element. It provides a great deal of support on substantive issues to panel members. It tends also to play a significant role in the writing of reports. The NAFTA secretariat just isn't conceived of in those terms. It provides secretarial support in a narrower sense.
Frankly, although there are advantages to the WTO system just because of its longevity and the experience on substantive issues and on procedural matters that has been accumulated, in many respects it could be said that the NAFTA system is preferable because you don't ever have the suspicion in a NAFTA proceeding that the secretariat is really writing the report. The report is very clearly strictly the work of the panel members - not that I wish to imply that WTO dispute settlement panel members don't take their work seriously and ultimately take the responsibility for the report.
Certainly the accumulated experience of the WTO secretariat is a great asset, and it can also in some respects be a source of rigidities in the system, let's say. There's a certain mindset on certain issues in the WTO that is perhaps institutionalized in the secretariat to a certain extent.
So that's the difference between the systems.
Mr. Roy Cullen: I have one final question. With respect to this consensus roster, could you elaborate on how exactly, in an ideal world, that is intended to work? Presumably these are individuals nominated by Mexico, Canada and the U.S. to develop a roster. How big would the roster be, and would it change over time? If a dispute came up, would the parties then be limited to pull panellists from that roster? As well, is that roster fixed?
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I agree with the chair's comments earlier, that it's time we got on with it, but how would it work in a perfect world?
Mr. Daley: Article 2009 of the NAFTA governs the appointment and reappointment of the roster. Quite embarrassingly, the article provides that the parties shall establish the roster by January 1, 1994, and maintain the roster of 30 individuals, and that the roster members shall be appointed by consensus for terms of three years, and may be reappointed.
There is provision for the appointment of panellists from off-roster, but such an appointment is subject to a pre-emptory challenge, a challenge without cause. So it's much easier, obviously, to appoint a panel from the roster.
Mr. Roy Cullen: Thank you.
The Chairman: This has been a very fascinating session. Next week we will study NAFTA chapter 19, so we'll be back to familiar subjects.
In the meantime, Ms Beehan, Dr. McRae and Mr. Daley, thank you very much for your very helpful presentations. We'll take them into account in our final report.
The meeting is adjourned.