EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, October 29, 1996

.1607

[Translation]

The Chairman: I now call the meeting to order.

Ordered, That Bill C-61, An Act to implement the Canada-Israel Free Trade Agreement be now read a second time and referred to the Standing Committee on Foreign Affairs and International Trade.

That is the House's order.

[English]

We have with us the minister. Given the fact that he has a short time and can give us about half an hour here, he has suggested that we take his comments as read. I think the members will agree to that. Then if the minister can make a brief opening statement, we can go straight to questions.

Hon. Arthur C. Eggleton (Minister for International Trade): I'm happy you have taken my official text as read. It's similar to the remarks I made in the House at second reading. They are points that I think are quite germane to the matter under discussion. By taking them as read we'll have a little bit more time for questions.

I do want to mention one matter. I have a letter, which I will file with you, from Natan Sharansky, the Minister of Industry and Trade for the State of Israel, in which he indicates the support and cooperation of the Israeli government with respect to the implementation of this agreement in the areas of the West Bank and Gaza that are under the jurisdiction of the Palestinian Authority.

As you know, we have offered the provisions of this agreement to those people who live in the area of the Palestinian Authority. It's one that is quite welcomed by business people in that area. They believe it will help in terms of their economic development and job creation.

I think that's important for Canada. It's important because it is a major contribution towards the peace process. In helping the economic prospects for the people of the West Bank and Gaza we help to further the opportunities for peace and security for all of the people in the Israeli territory.

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Our ambassador has also had discussions and communications with the Palestinian Authority. As a result of that, there will be in early November seminars held for Palestinian business leaders as a means of explaining how this agreement will positively affect them. Their response to date has been quite favourable towards the agreement and quite favourable towards participating in the seminars.

With that and with the other comments in my official text, Mr. Chairman, and the comments I've made in the House, I would be happy to take questions from members.

The Chairman: Thank you very much, Mr. Minister.

[Translation]

Mr. Paré.

Mr. Paré (Louis-Hébert): Welcome to the Committee on Foreign Affairs and International Trade, Mr. Minister. There is great concern among a certain number of social and economic stakeholders over the deterioration of environmental conditions, labour standards and social conditions. It is relatively easy to establish the relationship between the so-called neo-liberal trend and the situation they describe. Every time a bilateral or multilateral international agreement is signed and environmental issues and minimum labour or social standards are not taken into account, we get the impression that this is something of a lost opportunity.

However, the Canada-Israel Free Trade Agreement does not address these issues. I was about to say that the Canada-Chili agreement adheres to minimum standards that have been somewhat placed under cover. On these issues, couldn't Canada have exercised leadership, which it clearly does not want to exercise?

[English]

Mr. Eggleton: This agreement, I should add, is very similar to agreements, and the structure of agreements, with the United States and the European Union. So that has been a guide for us. At the same time, Israel has relatively good labour and environmental standards, so it is not the same situation we are dealing with in the Chile agreement inasmuch as we already have a labour and environmental agreement in NAFTA. Chile is negotiating with us on a bilateral basis because of its interests in Canada, of course, and also its interest in joining NAFTA.

Therefore, in the discussions with Chile we use the NAFTA agreement as the template for discussions. In the case of the Israeli free trade agreement, the guideline, as I mentioned, was the other free trade agreements the Europeans and the United States have.

Please bear in mind that one of our key objectives in this agreement was to create a level playing field for Canadian businesses that are currently disadvantaged in relation to their American and European counterparts. This agreement levels the playing field.

[Translation]

Mr. Paré: Mr. Minister, I can understand that, because of competition, Canadian businesses do not wish Canada to negotiate bilateral clauses that would put them at a disadvantage.

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Aren't we caught in a vicious circle if no one wants to take the initiative on these major issues in bilateral or multilateral agreements? The WTO may not be any more inclined to take the initiative if no country seems interested in opening the way in these fields.

[English]

Mr. Eggleton: I think we've covered the issues that are of concern to Canadian businesses. Indeed, in the environmental area Canadian businesses want to have access to the Israeli market. We have a lot of expertise to offer in that area. This will give them access to work with Israeli counterparts in terms of advancements in environmental technology and the application of the technology.

But as I said at the beginning, we currently have some very high labour and environmental standards in Israel. Israel, of course, has other difficulties it has to deal with in terms of the issues of peace and security, but in many respects it is a very advanced economy, a very advanced country, with regard to its social programs and social benefits. In the labour and environmental area, I think its standards are very high. So I think the free trade agreement is quite compatible.

[Translation]

Mr. Bergeron (Verchères): Mr. Chairman, if you would permit me to take over from my colleague for Louis-Hébert, I have two questions to ask. I'm going to ask them together,Mr. Minister.

For some months now, in fact since the referendum, senior Liberals have constantly been repeating that the economic difficulties in Quebec are due to political instability. So it is fairly surprising to see the government so satisfied to have reached free trade agreements with countries such as Israel and Mexico, which are experiencing fairly serious political problems. There is no Chiapas in Canada, no occupied territory; there is no Intifada in Canada or in Quebec. It is fairly surprising to see this openness and the same Liberal leaders expressing satisfaction in the House during the debate on the Canada-Israel Free Trade Agreement with the signing of that agreement.

Mr. Minister, you will remember - if not personally, perhaps you have heard reports - that, last year, we held a special meeting of this committee on the Israeli shelling of South Lebanon. At that time, we asked your representatives whether the government intended to suspend negotiations with Israel during that time, when that country was shelling civilian populations and openly violating the international borders of a sovereign country.

We were told at that time, in April 1995, that the negotiations were effectively suspended. What we learned not so long ago from the secretary to the Minister of Foreign Affairs is that the negotiations were not suspended, but that the agreement was ready to be signed in March 1995, one month before we put the question to your representatives, Mr. Minister.

We are currently concerned at seeing that this agreement has not only been reached, but that it may possibly enter into effect next January 1, in the midst of a fairly explosive social situation in Israel. This leads me to my question. The free trade agreement between the European Union and Israel is being cited as an example. The agreement reached between the United States and Israel is being cited as an example. However, there is no provision in the Canada-Israel Agreement similar to the first article of the agreement reached between the European Union and Israel which concerns respect for human rights. With your permission, I will read it:

Relations between the Parties, as well as all the provisions of the Agreement itself, shall be based on respect for human rights and democratic principles, which guides their internal and international policy and constitutes an essential element of this Agreement.

You will pardon my surprise, Mr. Minister, at seeing that political stability, social stability, respect for human rights and respect for democracy are not at all among the government's concerns in reaching a free trade agreement with the State of Israel.

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Mr. Minister, since there is some question as we speak of the free trade agreement between the European Union and Israel, you are aware that we are particularly concerned about the potential impact of the Canada-Israel Free Trade Agreement on the Canadian swimwear and lingerie industry, on the Quebec industry in particular.

You are aware that Israeli producers have direct, duty-free access to European fabrics under the free trade agreement entered into by the European Union and Israel. Do you intend to establish a transition period to allow for adjustment measures or to take action to reach an agreement permitting free access to European fabrics such as Israeli producers have? That is my first question.

This is my second. In light of the current political and social situation prevailing in Israel, would the government be in favour of suspending implementation of this free trade agreement pending actual resumption of peace negotiations? I will limit myself to that for the moment, Mr. Minister.

The Chairman: We have virtually no time left.

[English]

Mr. Eggleton: First of all, with respect to when this agreement was initialled by the negotiators, I believe you mentioned January 1996. In fact, at that point in time we were contemplating a visit of the Prime Minister of Israel of the day, Mr. Peres, to Ottawa, where the agreement would be signed.

[Translation]

Mr. Bergeron: Allow me simply to clarify a point, Mr. Minister. I was not talking about the time when the agreement might come into effect. At that point, in April 1996, we were talking about the possibility that negotiations would be suspended and we have learned very recently that the negotiations were already completed in March 1996. Of course, the agreement had not yet been signed at that time, but it was ready to be signed, as you pointed out. At that time, in April 1996, we were told that the negotiations had been suspended pending the outcome of the Israeli election.

[English]

Mr. Eggleton: No, I can tell you that from the time I became Minister of International Trade in January, we had virtually completed the agreement at that point.

It was a question of getting the parties together for a signature. That could not be arranged when Mr. Peres was unable to come. Then an election ensued. There was never any suggestion that we were going to suspend the agreement or the signing of the agreement; it just became a circumstance of the Israeli election and a change of government.

Prior to that, perhaps my staff could comment.

Ms Ellen Stensholt (Senior General Counsel, Department of Justice): I understood that you referred to a period in March 1995.

Mr. Bergeron: It was 1996. I made a mistake.

Ms Stensholt: Okay.

Mr. Eggleton: There was no problem in March 1996, as I said. I've just given you the chronological order of the proceedings, and that's the whole case.

Let me move on to other things. You talked about why there aren't provisions for human rights, etc., in this agreement. This agreement, as is typical of trade agreements, deals with items of tariffs, rules of origin and other such matters.

That's not for one moment to say that we're not concerned about human rights matters anywhere in the world. It's not to say that we're not concerned about the peace process in the Middle East and the Israeli and Palestinian relationship, as well. No, our actions in that area quite clearly show how strongly we feel and how engaged we are in these matters. We're engaged in committees in terms of this peace process. We chair a committee in terms of refugees.

I don't see that pursuing an agenda of human rights is somehow contradictory to pursuing an agenda of the liberalization of trade. I think they're very complementary.

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It's just like in Cuba. We say that engagement, getting in through trade to give us an opportunity to raise these issues, is important in Cuba. We criticize the United States policy of isolation as the other side of it.

Naturally you can extend that to any other country and say this is how we are able to carry out our efforts on human rights. We will continue to do that, just as we will continue to support the peace process in the Middle East. We strongly urge the parties to continue their dialogue, to cool this current situation down and to get on with the matter of the peace process.

This is very much a complement to that. It is a support for that. Through improvement of economic conditions we help to strengthen peace and security in the area.

Let me move on to the next point you made, one having to do with clothing. Specifically, you mentioned swimwear and the importing of certain materials from Europe in connection with that.

This shows how responsive the government is to industry. We consulted with industry throughout. In this particular case the company involved wasn't even part of the industry association. When we consulted we got no negative feedback about proceeding with removal of the tariffs immediately, but subsequently to that a non-member of the group that was consulted came forward and we responded positively by saying we would allow for a two-and-a-half-year phase-out of the tariff on swimwear, to respond to one company. We felt they had a legitimate concern, and we said that concern could be dealt with in that two-and-a-half-year period by approaching the Canadian International Trade Tribunal and addressing them on the issue of the 19% tariff that exists for their fabrics coming from Europe.

We've outlined that for them. That is in fact a procedure... They may have liked for us to have handed it to them on a silver platter, perhaps, but I think they are accepting of that direction as a means of dealing with their problem.

So we've been very responsive and consultative in the process of coming to this agreement, and I think it's one that should proceed now. We signed an agreement with the date of January 1. Mind you, it's subject to the parliamentary process, subject to approval through the House and the Senate. But January 1 is when I think it should come into effect, so we can end the disadvantage Canadian businesses have in dealing with Israel.

Remember, this is a two-way street. This is not being done as a favour to Israel. This is being done because it makes business sense for both Israel and Canada and for the Palestinian Authority.

The Chairman: Mr. Flis.

Mr. Flis (Parkdale - High Park): Thank you. I apologize for coming in late.

Mr. Minister, on October 3 you said:

It remains Canada's intention to extend the same benefits to the Palestinians that Israel will enjoy under the free trade agreement. Canada intends to conduct discussions with Palestine officials to examine the next step in this process.

Today in your opening remarks you say this important legislation will do much to cement our ties with Israel and open up new areas for cooperation and mutual enrichment. Can you honestly say that by pushing this legislation to be implemented by January 1 both sides will have equal treatment and the same kind of bilateral relations and multilateral relations will be enhanced if this is passed? Or are we jumping the gun? Should we hold off until we see a little more action in the peace process?

I don't recall where Canada has signed free trade agreements where even boundaries are in dispute. What boundaries are we talking about here? The 1967 boundaries? Where are the West Bank, the Gaza Strip? Where is east Jerusalem?

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Before we move ahead with this legislation, I think we have to be very clear on what boundaries we're talking about. Are both sides eventually going to be treated equally and fairly? I think we have to address those issues before moving to clause-by-clause.

Mr. Eggleton: As I indicated earlier, I have filed a letter with the committee from the Minister of Industry and Trade for Israel, Natan Sharansky, who makes it clear that the Israeli government supports the extension of the benefits to the Palestinian Authority. They would administer the agreement with respect to the Palestinian Authority.

So essentially we're talking about the boundaries of the State of Israel as they are today and the boundaries of the Palestinian Authority as they are today. There are, of course, other issues relevant to boundaries that are part of the peace process. This does not enter into that discussion, but as I indicated earlier, I see this as a strong support for the peace process, and it helps to bring economic improvement to both the people of Israel and the people of the Palestinian Authority.

Indeed, the Palestinians have been very positive about this. The business people have been quite positive about the prospects for jobs and economic growth and have indicated that they're willing to participate in seminars which our ambassador and our team of people in the mission in Israel are going to be putting on, in the Palestinian Authority areas, I might add, early in November. In fact, seminars with respect to being able to take advantage of the matters will be held in Gaza City and in Ramallah.

I think proceeding with this now, for January 1, does a number of good things. It will increase the prospects for trade and investment between our two countries, and that leads to jobs and economic growth here in Canada. It removes a disadvantage that Canadian companies presently have by not having a level playing field, because Israel does have free trade agreements with the United States and the European Union and with some other countries as well - Turkey, the Czech Republic and Slovakia, I believe - so this gives them access.

I have been told of very specific circumstances where businesses have partly manufactured a product here in Canada and sent it down to the United States to have most of the substantive manufacturing done so that it could then be sent as an American product to Israel in order to take advantage of the free trade agreement. That means we're losing jobs here in Canada, so that's another reason why I want it to go into effect on January 1. It will help to strengthen jobs and growth here in this country.

And finally, just to repeat it, the other advantage is that it's going to help the Palestinians as well as the Israelis. It's going to help them in terms of their jobs and economic growth prospects, and they need that to help bring about peace and security for them as well.

Mr. Flis: With that assurance, Mr. Chairman, let's move ahead.

The Chairman: Thank you very much, Mr. Flis.

Mr. Loney.

Mr. Loney (Edmonton North): Further to the question Mr. Flis posed, may I ask you, minister, whether Bill C-61 is limited to the pre-1967 boundaries? Could you be precise in saying what areas it does not cover?

Mr. Eggleton: It covers the entire area, the boundaries of Israel today. The agreement that the Israeli government has with the Palestinian Authority would mean that it is also extended to the areas under the jurisdiction of the Palestinian Authority, which are in the West Bank and Gaza. Those are the boundaries we're talking about.

But that is in no way a commentary on whether those boundaries should be where they are vis-à-vis the wars and conflicts of past. Those are issues, just like the issue of Jerusalem and the jurisdiction of that city, for which we have strongly supported the idea of the parties at the peace negotiation table working out the resolution.

Mr. Loney: To be more precise, are there areas that are excluded?

Mr. Eggleton: Do you mean within the boundaries of the State of Israel today? I don't think so.

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I guess it's important to note here that given we are talking about an agreement on trade, which deals with the issue of tariffs, it applies in their customs territory. It applies in the territory over which they have customs control, which includes the Palestinian Authority's territory. That's why it's important to have this letter of support from the government, and specifically from the minister of industry and trade.

Mr. Loney: Thank you.

The Chairman: Thank you, Minister.

[Translation]

Mrs. Debien.

Mrs. Debien (Laval-East): Good afternoon, Mr. Minister.

Mr. Eggleton: Good afternoon.

Mrs. Debien: You told us earlier that the Department had negotiated a gradual reduction for the swimwear and lingerie industry under the Canada-Israel Agreement. This gradual reduction in tariffs should be spread over a two-and-a-half-year period.

However, you know perfectly well that if the industry were not satisfied with the entire issue of access to the European textile market, it would have to appeal to the Canadian Foreign Trade Tribunal. As you know, actions before the Canadian Foreign Trade Tribunal are very complex, bureaucratic and complicated for an industry that already has problems.

I would like to know whether, by negotiating free access to the European textile market, we could enable the swimwear and lingerie industry to solve its problems in large part. Are you prepared to undertake to negotiate free access to the European textile market for this industry, which risks breaking up into little pieces if the Department does nothing?

[English]

Mr. Eggleton: I think the appropriate procedure for them to take is to go to the Canadian International Trade Tribunal. They have to make a case that this is in fact important to them in terms of their ability to compete in the Israeli market, because if we just say it should be eliminated, then a couple of things come up.

First of all, we're talking about an independent tribunal, and telling it what to do is not what the government should be doing in an independent tribunal.

Secondly, if it isn't a properly made decision, the industry that could well be hurt by this is an industry based in Quebec. So with just a removal without an examination of the facts, we could in fact cause some damage to other swimwear manufacturers in the province of Quebec, as well as those in other parts of Canada, and to other parts of the Canadian textile industry.

[Translation]

Mrs. Debien: Mr. Minister, what I asked was not that the Department intervene before the Canadian Foreign Trade Tribunal, but whether the Minister and the Department were prepared to negotiate free access to the European textile market for the Canadian textile industry.

[English]

Mr. Eggleton: That's a completely different matter.

[Translation]

Mrs. Debien: Absolutely.

[English]

Mr. Eggleton: Sorry, I thought you were talking about the other -

[Translation]

Mrs. Debien: That was the gist of my question.

[English]

Mr. Eggleton: Okay, well that's completely different from the free trade agreement with Israel.

Let me say in a very general way that we do want to liberalize trade, we do want to bring trade barriers down wherever we can. We already have enormous undertakings to do that with respect to free trade in the Americas by 2005, and the APEC endeavour for the Asia-Pacific for 2010-20. And we've wanted to enter into an action plan with the European Union that would again lead to the very kind of thing you're talking about, tariff reductions. We have a little bit of a problem there at the moment, in that because of our fish policy one country has been blocking us. Nevertheless, we hope we can get back to discussions about the action plan soon, because that would give us the framework to be able to do the kind of thing you're talking about.

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So we're pursuing liberalization of trade wherever we can. We think that's to our benefit. We're a trading nation. A third of our economy is related to international trade. We want to access more markets. If we can get more markets for the Canadian textile industry, wearing apparel industry, then we would love to do that.

The Chairman: Mr. English.

Mr. English (Kitchener): Welcome, Minister.

In your departmental release of October 3 it's stated that it remains Canada's intention to extend the same benefit to the Palestinians as Israel will enjoy under the free trade agreement. Further in the release it says Canada intends to conduct discussions with Palestinian officials to examine the next step in this process.

I have three questions. First, have discussions taken place with Palestinian officials? Second, are there any documents from Palestinians along the lines of the letter from Minister Sharansky? Third, in light of the fact that the European Union has extended benefits to the West Bank and Gaza, and as I understand it the United States has done the same thing under their free trade arrangement, since we have followed their agreement in many ways, why didn't our agreement follow it in that respect as well?

Mr. Eggleton: In respect of what? I'm sorry.

Mr. English: The extension to the West Bank and Gaza for the Palestinians. At this point, why is it in the future rather than in the present?

Mr. Eggleton: It is in the present. It's in the bill. As soon as the bill goes into effect, if it's implemented at the date designated in the legislation, January 1, it would be in effect on January 1 for both Israel in total and the area under the Palestinian Authority - the same provision, the same date.

Mr. English: Have we had discussions with the Palestinian Authority to this point, or Palestinian officials?

Mr. Eggleton: Yes.

Mr. English: What has their reaction been to this free trade agreement at this time?

Mr. Eggleton: They are positive about it. They believe it will be helpful to them. It has been talked about in their business communities. They are aware of it and they are quite positive and supportive of it.

These are discussions that have gone on partly between our ambassador and the Palestinian Authority. I've seen one letter from them. It's very minimal in its comment, but it says they are looking forward to the seminars that are being held. This is going to be an opportunity for them in the governing authority, as well as for the business people, to learn more about how this will apply to them.

Mr. English: I haven't been to Israel for many years, but my impression from reading the news releases recently is that the border is in fact closed, certainly to people, because of the situation occurring there recently, and secondly that goods do not move well across that border. Is this an impediment to realizing the advantages from this kind of agreement?

Mr. Eggleton: There are obviously difficult times in the peace process. I'm not an expert on when the borders are open and when the borders are closed, but I would take it that when high security risks are determined, that generally keeps the borders a little more tightly controlled. But what we have here with this agreement is the support and the offer to facilitate the movement of goods, as per the agreement, through the customs process into the Palestinian Authority, on the same basis as it would be for the rest of Israel. Of course we also want the peace process to succeed and advance the cause of peace and security so in fact there will be fewer of these border closings, and we hope none.

Mr. English: I quote The Globe and Mail with reluctance after Question Period today, but in The Globe and Mail on October 17 there was an article by Robert Mahoney of Reuters, ``Crumbling Pact Slows Israeli Economy''. It mentions that Israel, as the regional economic powerhouse, stood to gain the most from the Oslo Agreement, but in fact growth is slowing.

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Jonathan Kolber, president of Claridge Israel Inc., the Israeli arm of Charles Bronfman's Montreal investment company, said foreign investors are sitting on their money waiting to see whether the climate of confidence created by the peace process can be salvaged.

I wonder if in our discussions with the Israelis we are indicating to them that we are concerned about the economic future of their economy and indeed of the whole region because the peace process seems to be coming to a halt at this point.

Mr. Eggleton: I think Israelis are quite well aware of the fact that the ticket to peace and security for them is also the ticket to peace and security for all of the other people in the region of the Middle East.

There are numerous agreements the Israelis have entered into with surrounding countries that are helping promote economic development and are bringing about cooperation with these countries, as we are as well. We're not confining our operations in the Middle East to this free trade agreement with Israel and also applying it to the Palestinians. We're working with Jordan, with Egypt, with other countries, Saudi Arabia and the area, with respect to advancing trade opportunities, advancing their goal of becoming part of the World Trade Organization, the WTO. Israel understands that, and Israel has numerous agreements.

I was in Israel in 1992 and I was amazed by the dynamic economy they have there, how innovative they are, and how well they've been able to develop their industries. I think there's a lot we have in common with them. In fact, we have a foundation, the Canada-Israel Research and Development Foundation, into which we put some money and Israel put some money.Mr. Rothschild, who is here and speaks later, heads that up and will tell you all about it. It has a lot of success stories about a dozen matches it has been able to bring about in the high-tech area between companies in Canada and companies in Israel. I think it's indicative of how advanced their economy is. It's the most advanced economy in the Middle East and has all the greatest potential for growth.

There is no doubt that part of making sure that's brought about is to be able to successfully deal with bringing about peace and security through the process that is now well established and should be continued to be carried out by the parties to the peace process, and we are there in a supportive role.

Mr. Loney: Thank you.

The Chairman: I would ask one follow-up question to that, Minister. I must say I congratulate you on the effort the government made to make sure this would be extended to the Palestinian areas. I don't think one would have been particularly happy if it had worked out where that would not have taken place. It would have been difficult to see how that would have furthered the peace process. So this is a very positive step, and I think the letter from Mr. Sharansky is a very positive step that we're pleased to receive before the committee. I suppose one will watch with anxiety to see the other shoe drop, which would be that of the Palestinian Authority.

Without getting too technical, really what we're looking at here is a question of a rule of origin. We Canadians will consider that goods manufactured in Palestinian areas are as if they were rule of origin in Israel itself for the purpose of being admitted into Canada. The Israel authorities have in turn said they'll let them pass freely through their territory to get access to Canada. In turn, as I understand the letter is saying, Canadian goods will be considered by the Israelis as passing through their territory into the other parts presently occupied by them as if they were destined for Israel. So this is really a sort of rule of origin application issue on both sides.

I suppose the concern one might have would be that in the present climate, if the present government of Israel, which is obviously taking a stance that is considerably different from that taken by its predecessor in respect of the negotiation of the process, were to use the technical application of these agreements as a way to obtain its will in the occupied territories, then in fact this agreement would not be perceived as advancing the peace process but in fact as giving an extra arm for the use, if you like, of another form of economic force over people who are unable to defend themselves. What would be the position of the Canadian government? Where will we go to assure ourselves that will not be the case?

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That's probably the problem that is bothering people. If we are confident that problem is not there, I'm sure there would be no problem whatsoever with the agreement. I think everybody recognizes in the long term this is a wonderful thing. It's going to benefit everybody in the region. We just want to make sure it works the right way to do that.

Mr. Eggleton: First of all, in your description of how goods would pass through the Palestinian Authority area, through Israel in general, into Canada, back and forth, under the rules of origin, the comment is absolutely excellent. I think it well describes the situation this agreement calls for.

About what happens if there is a change of position vis-à-vis what is said in this letter, I don't think that's likely. I don't think it's in their interest to do that. It would certainly set the peace process back to do such a thing, to use this as an instrument. It would also be facing the same kind of concern not only from us but from the Europeans and the United States. They would be taking on a lot to reverse this, because there are a lot of countries they have free trade agreements with. So I don't believe they would do that. I believe what Mr. Sharansky says is clearly an indication of the support he and the government, under Mr. Netanyahu have on this trade agreement.

A binding dispute settlement panel process is also provided for in the agreement should there be any difficulties with interpretations of the agreement. We wouldn't hesitate to use that. But quite clearly Canada wants this agreement to apply equally, equitably, to the Palestinian Authority as well as to all portions of Israel.

The Chairman: Thank you, Minister. That's helpful.

I don't see any other questions, so unless you have something further you would like to add in conclusion, we will...

Mr. Eggleton: Just to say once again that this substantially removes tariffs. It eliminates tariffs on virtually all industrial goods, with a phase-out in two areas, swimwear on our part and cotton fabrics on their part. On many of the agricultural products tariffs are reduced substantially. I think there's a lot of room for cooperation in the high-tech and biomedical areas. Canada has expertise in a lot of things Israel would like to have and vice versa. There's a lot of opportunity to see a very substantial growth in trade and investment opportunities. As we always say, that leads to jobs and growth for Canadians.

The Chairman: Mr. Minister, Mrs. Gaffney would like to try to catch you while you're here.

Mrs. Gaffney (Nepean): He told me I can have only a little question.

Mr. Minister, if we compare the Canada agreement with the American agreement, are there any similarities or differences? Did you try to pattern our agreement after the American agreement?

Mr. Eggleton: We used the American agreement with Israel and the European agreement with Israel, yes. After all, part of our purpose here was to level the playing field for Canadian businesses that are disadvantaged by those agreements. Those were carefully examined and were a guidepost in our negotiations with Israel.

Mrs. Gaffney: But were there any clauses that are different from ours?

Mr. Eggleton: We're better on agriculture, which is always good. It's always tough to get better agreements on agriculture, but Ralph Goodale just won't let me stop short of getting the best possible deal.

The Chairman: In fact, our understanding was that for a long time the agricultural provisions were one of the principal hurdles of getting the deal done, weren't they? So you were satisfied we got the best deal we could?

Mr. Eggleton: Absolutely, and we're working on that with Chile too.

The Chairman: Madam Debien is going to send you to Brussels very quickly for the swimwear manufacturers also. You have a heavy travel schedule ahead of you. Make sure you buy your bathing suit in Montreal on the way through.

Thank you very much, Minister.

[Translation]

One hon. member: In Laval.

The Chairman: In Laval, excuse me. We must not ... [Inaudible-Editor]

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[English]

We have Mr. Rothschild from the Canada-Israel Industrial Research and Development Foundation with us now. Welcome, Mr. Rothschild.

Members, let me draw everyone's attention to the fact that we're running an hour late. There's a serious question of votes in the House this evening, which may or may not be interrupting our work.

Mr. Rothschild, I assume you're going to make about a 10-minute opening statement and then you'll be open to questions. It may well be that if we can cut our questions down a little bit we could move on, get the next witness, and see if we can catch up on our time. If there are important issues to pursue... I'm not trying to cut anybody off. It's just that we are running an hour late at this point.

Mr. Rothschild, sir.

Mr. Henri Rothschild (President, Canada-Israel Industrial Research and Development Foundation): Thanks very much, Mr. Chairman.

The Canada-Israel Industrial Research and Development Foundation - and I'll use the acronym, CIIRDF, because it'll save time - was created as a result of the Canada-Israel MOU signed in 1993. In effect, both countries signed a memorandum of understanding that had the enhancement of industrial research and development ties as a major objective.

A major part of that MOU involved the creation of a fund - as the minister mentioned just a moment ago - that would invest in industrial R and D projects involving firms in both countries. For a period of three years, $1 million per year from each side was invested. In order to deliver the MOU's objectives and to manage this fund an organization was created. It was to be non-government, arm's length from government, physically located in Canada and bilateral or binational in character.

The deal between Canada and Israel was that the chairman would be an Israeli. That Israeli is the chief scientist in the Israeli Ministry of Industry and Trade. The president would be a Canadian - and that is yours truly - and there would be a binational board of directors representing three people from each country. By 1994 the foundation was up and running.

What is our job? It's basically three things: to market the merit of R and D partnership in both countries; to set up a technology matchmaking service; and to invest in projects, as I just mentioned.

I'd like to speak to three issues now. Hopefully that will provide an important context or a relevant context in your deliberations. First, what have we achieved in two and a half years? Second, what have we learned? Third, what does this have to do with free trade between Canada and Israel?

The Chairman: That's the one we're here this afternoon for.

Mr. Rothschild: Yes, and this way I'll make sure I have all my time.

First, as the minister mentioned, we've invested over two-thirds of our program money - almost $4 million - in twelve projects. These twelve projects represent about $9 million worth of bilateral R and D activity. These projects are of high quality, having undergone a rigour and scrutiny rarely seen in such program activities. Even if only one-quarter of the commercial benefits are realized, we expect they will result in over $300 million worth of sales and create between 100 and 150 high-quality, high-paying jobs. That's not a bad investment. And remember, these are repayable contributions.

Second, we've established formal working relations with regional agencies of the federal government, with ACOA, with FORD-Q, with Industry Canada, with commercial representatives in the embassy of Israel in Canada and the embassy of Canada in Israel, and with the National Research Council, all in order to establish a true nation-wide technology-partnering matchmaking service. We've held information seminars in all regions of Canada and in Israel.

Just to give you an example, last year we held a seminar in the Halifax area with over 75 representatives of the high-tech industry in attendance. We now have 20 active matchmaking files in Atlantic Canada. Similarly, we have 10 active files in the province of Alberta alone. In January we hope to hold a matchmaking partnering seminar in Quebec, focusing on biotechnology and telecommunication.

What have we learned? I think the most important thing we've learned is that this kind of R and D partnership is important for Canada, with any partner. Why? Because it's part of our economic agenda to be both more innovative and more global in our orientation. On this there is a national consensus that cuts across all political stripes and between federal and provincial governments. We all have that objective in mind. Our companies need to invest more in technology, to be more innovative and to be more global in their orientation.

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Secondly, as the World Economic Forum noted last spring when it gave Canada a pretty good report card, if we have one weak spot in this country, it is that we don't have enough R and D partnerships. Our companies don't tend to do the kind of alliance building that other countries do. This is an area of comparative disadvantage for Canada. These are some of the things we have to do more of.

The other thing we have learned is that Israel is a superb partner for Canada. I'd like to explain why.

[Translation]

First, to explain the benefits that Israel offers for Canadian businesses, we must analyze and explain Israel's remarkable economic performance.

Israel has a broad and diversified technological infrastructure. Its technological abilities are in the forefront of progress in important fields for Canada and other countries such as telecommunications and biotechnology related to the health and environmental industries.

The country's labour force includes a percentage of engineers and researchers that is among the highest in the world.

[English]

In terms of R and D indicators, Israel has superb, even unique, credentials, which are reflected by one of the highest R and D per GDP percentage investments in the world. This is an important indicator to try to understand the comparative advantage of a country in a knowledge-based economy.

In terms of the quality of the R and D, to add to its quantity, Israeli research is among the most cited and the most partnered research in the world. Indeed, Israeli research teams are exceptional in the degree to which they are linked to those of western Europe, eastern Europe - and there's a particular uniqueness there - the United States, and increasingly the Far East. These technology crosswalks are accompanied by commercial ones. By any standards, Israel is an ideal industrial technology partner for Canada.

The other thing we have learned is that there is much interest in all regions of Canada to enhance commercial relations with Israel, not only because each country offers high-end markets - small as they might be - to the other for technology-based industries, but also because closer technological ties translate into joint commercialization and market complementarities. Put in other words, an Israeli technology partner helps penetrate markets in third countries.

Finally, what does this have to do with free trade? In this final point I want to indicate my views from the R and D perspective - because this is the only perspective I bring to this table - of why free trade with Israel is good for Canada.

Free trade helps us market technological collaboration by placing Canadian firms, especially SMEs, on an equal footing with those of the United States and the European Community, both of which have free trade agreements with Israel. This will enhance Canada-Israel industrial research collaboration and two-way trade in technology products, which now face tariff barriers not encountered by these competitors.

I want to stress here that in all of this, all of these terms - partnership, collaboration, joint commercialization, two-way trade and even three-way trade - these are all segments of the same technology-trade spectrum of activities. Their divisions are being increasingly blurred.

In conclusion, Canadian trade policy needs to create new opportunities for our firms. The highest areas of growth and promise - that means growth with jobs, and more importantly, growth with good jobs - are in the high-end tech-based industries. It is clear that Canada-Israel partnership, collaboration, and two-way trade in such fields is in our interest and can benefit the entire region's commercial outlook. In our view, there can be no downside to this kind of agreement.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Rothschild.

Just as an observation, there seems to be one thing you glossed over in terms of the comparative advantage of Israel that at least those of us who visited the country were very impressed with, and that is the technological capacity of the population base and the brains that are there. When we heard about the Russian immigrants who had come in recently, combined with the highly trained nature of the Israeli population, this would presumably factor in greatly as to why Israel is so successful in R and D, I would presume.

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Mr. Rothschild: I thought I had mentioned it briefly. But you are correct, in investment in R and D, the Israeli investment as a percentage of GDP has remained consistently in the 3% area. One of the easiest ways to have a high percentage of R and D per GDP is to have a lousy GDP. Israel has maintained a high level of GDP - in fact, the GDP growth has been quite remarkable in the last five or six years - and has kept it in the 3% area, which is very high: over twice Canada's investment on a GDP basis.

About number of engineers and scientists per labour force, again it's among the highest in the world.

From a technological point of view, it resembles a Pacific Rim country more than any other kind. It has made consistent investments in R and D, and that investment has been bolstered, as you quite correctly mentioned, by the arrival of a large number of immigrants from the former Soviet Union, who themselves have an exceptionally high education level.

The Chairman: Thank you.

Mr. MacDonald.

Mr. MacDonald (Dartmouth): Thank you very much, Mr. Chairman.

Mr. Rothschild, thank you for informing us of the success story. As you are well aware, because you did mention ACOA and the other regional development agencies you are trying to partner with to ensure the economic benefits that are accruing in Canada with this type of program are spread in the regions.

I have two questions for you. One deals with whether or not firms that are owned by Palestinians would qualify for this type of partnering. The second thing is whether or not you're aware of any similar programs in Israel that would encourage the R and D types of investments, and indeed developments and subsequent jobs in the Palestinian areas within Israel. The experience we've had in Canada is that it's not necessarily a good economic policy just to let the market dictate. Sometimes there have to be vehicles that are viewed by some as being somewhat interventionist, such as ACOA and FORD-Q, as well as FedNor and Western Diversification, to make sure industrial benefits, jobs, and growth take place in the most disadvantaged areas.

When I look at the Israeli state and the Palestinian areas, it's quite clear to me that one of the impediments to long-term stability and peace is the fact that there is a disparity within the region, primarily in the Palestinian areas. So I'm couching my question in a Canadian context. My question is whether or not -

The Chairman: To me it sounds like a maritimer talking.

Mr. MacDonald: What I want to find out, because I simply don't know this, is whether the Israeli government recognizes that long-term peace and stability will take place only when there is even economic growth throughout Israel and the Palestinian territories, and whether it has programs to encourage the type of partnering we're doing between Canada and Israel.

Mr. Rothschild: First of all, obviously I cannot answer for the Israeli government. You might have to put that question to them.

Mr. MacDonald: The reason I ask you is that you have a greater window on this than anybody at this committee, because you're the president of this foundation, which is doing very important work with the Israeli government on R and D partnering.

Mr. Rothschild: First of all, about involving Palestinian companies, the agreement is between the Government of Israel and the Government of Canada on project funding.

About matchmaking, nothing stops the foundation from involving Palestinian industrial research databases in our matchmaking services. This kind of involvement could happen tomorrow, with no change in the rules or by-laws of our foundation. I would agree with anyone who says it would be a very constructive move on everybody's part.

About any Israeli programs that involve the Palestinian industrial R and D community, I'm aware of two programs. One is an element of the U.S.-Israel industrial R and D foundation, which is called BIRD, for Binational Industrial R and D. It now has a component that is a trilateral initiative. I understand so far it has met with nothing but success.

I'm aware of programs within Israeli universities which are focusing on actively promoting technological development in the Palestinian areas and collaborative work that's occurring there.

Palestinians are among the most educated and technologically capable people in the Arab world. There is no reason why the whole area can't rival the Pacific Rim with technological capability - no reason at all.

Mr. MacDonald: My final question is whether or not the Canada-Israel Research and Development Foundation has entered into any discussions with your Israeli counterparts to see if there is a role to play and has tried to encourage this type of success story you've had within the Palestinian areas.

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Mr. Rothschild: It would be inappropriate for us to enter into negotiations with Israeli counterparts because, as I obviously was not clear in explaining earlier, we are a binational foundation. We don't have Israeli counterparts. We basically have a split personality, if I can use that term. We're an instrument of both governments and have, I think, proven that we're able to deliver on a number of worthwhile objectives. For this reason, if both governments decided that this instrument could be used in more innovative, creative ways, we'd be willing and ready to do that.

Mr. MacDonald: I have a final question. The foundation would not be adverse to the suggestion that it at least be looked at.

Mr. Rothschild: I can only speak for myself, and not the board of directors, but I can tell you that I would not be.

The Chairman: Thank you, Mr. Rothschild.

[Translation]

Mrs. Debien.

Mrs. Debien: Good afternoon, Mr. Rothschild.

Mr. Rothschild: Good afternoon.

Mrs. Debien: At the start of your remarks, you said that two-thirds of the Foundation's funds are currently allocated to 12 research and development projects for a total of $9 million. Is that in fact what you said?

Mr. Rothschild: I said that the value of the projects was $9 million, but our investment is less than that amount.

Mrs. Debien: What are those projects, what are they about and what are their implications for Quebec?

Mr. Rothschild: I can give you some special documentation on that. More than one-quarter of the projects are in Quebec. In general, the economic sectors that dominate not only among the projects in which we have made a financial investment, but in our partnership service, are the biomedical and telecommunications fields, including software.

In Quebec, I can even name you the companies, if you are interested.

Mrs. Debien: I would appreciate it, yes.

Mr. Rothschild: There is Biochem Pharma, Therapeutics Division, in the Montreal area, which is in a partnership with a small company in Israel that is a spin-off of the Wiezmann Institute for the development of a hepatitis C vaccine. There is the Vapor company in the Montreal area which manufactures automatic doors for Bombardier; that's an ultrasound system for better door automation. This is the kind of project in which we invest.

Mrs. Debien: Thank you.

Mr. Rothschild: You're welcome.

The Chairman: Thank you very much, Mr. Rothschild. Your remarks were very valid and very useful.

[English]

Our next witnesses are from the National Council on Canada-Arab Relations. With us are Professor Kubursi, who comes from McMaster University, and Mr. Lynk, who is the secretary treasurer.

Welcome, Professor Kubursi and Mr. Lynk. Thank you for coming before the committee. I think you may have heard my earlier remark that we are running a little bit behind time. I'm not trying to be abrupt or anything, but we'll just try to keep the train chugging along here. If you would like to make an introductory comment and then leave it open for questions, we'd appreciate it. Thank you, gentleman.

Mr. Michael Lynk (Secretary Treasurer, National Council on Canada-Arab Relations): I'm Michael Lynk. I'll start off. I believe a copy of our presentation has been passed around to the members of the committee.

We're very thankful to the committee for having invited us to speak to it today on the subject of Bill C-61. Our commentary will be primarily based on aspects of international law and on economics as they relate to Bill C-61. We have some specific recommendations where we think the bill has, in our minds, some serious flaws.

Taking a cue, I think, from the minister's remarks earlier on this afternoon - both from his statement and from the answers he was giving to questions being asked - I read that there is a strong link between economics and politics, particularly in the Middle East. I don't think this legislation can be analysed in any other way than to bind those two together.

It's important to draw the attention of the committee to aspects of international law, particularly with respect to the law applying to occupying powers on occupied territory. You'll note in our presentation, with respect to pages 3, 4, and thereafter, that we do give a very brief run-down of the way in which international law winds up applying to Israel, to the occupied territories, and to the Palestinians. These realms of international law derive from the Hague Convention, the Geneva Convention, and numerous UN resolutions that continue to apply to Israel today and have applied since 1967. Those include the acquiring of territory through military action or war; the transferring of civilian population onto occupied territory; and the imposition of collective penalties to the population of the occupied territory.

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We note on page 5 of our presentation that the imperatives of international law have once more become a highly indispensable and relevant litmus test to the progress of peace in the Middle East. We draw your attention to a number of areas where current policy of the Government of Israel is in conflict with the tenets of international law, including the heightened drive to build new settlements and thicken existing ones; the expansion of the settler road system throughout the West Bank; the prolonged and highly disruptive closures of the Palestinian-administered territories and the resulting destruction of the Palestinian economy - matters of which Dr. Kubursi will speak to you more about in a few minutes; and the very clear indications from senior current Israeli government officials with respect to their positions on all of the very important final-status issues that are about to be discussed at some point in the near future between Israel and the Palestinian Authority, including Jerusalem, settlements, borders, refugees, use of water, and Palestinian sovereignty.

We point you to our footnote on page 4, where we quote from a recent statement by the Government of Canada with respect to its attitude towards the Middle East. It's a position that the National Council on Canada-Arab Relations wholeheartedly endorses. It says:

Canada does not recognize permanent Israeli control over the territories occupied in 1967 (the Golan Heights, the West Bank, East Jerusalem and the Gaza Strip) and opposes all unilateral actions intended to predetermine the outcome of negotiations, including the establishment of settlements in the territories and unilateral moves to annex East Jerusalem and the Golan Heights. Canada considers such actions to be contrary to international law and unproductive to the peace process.

I just draw your attention, then, to the end of the presentation that we have submitted, and specifically to pages 10-12. We have some specific recommendations with respect to Bill C-61. First of all, I want to note that the NCCAR is not opposed to a free trade agreement with Israel, but it does take the position that the free trade agreement as negotiated - Bill C-61 - in its present form is detrimental to the peace process. We think the recommendations that we are suggesting would enhance Canada's position with respect to international law, and would enhance the peace process.

The first comment we have is that it should contain a clear provision with respect to human rights, international law and democratic principles. We quote on page 10 that in the treaty on free trade between Israel and the European Union, which was signed in December 1995, the very first article of that agreement actually does include just such a provision. We've quoted the explicit reference to human rights and democratic principles that it contains, and that particular article constitutes an essential element of this agreement. And we have copies of the EU-Israel treaty if any of the members of the committee would like it.

Second of all, we think the bill should be amended to include a staged implementation of the bill, commensurate with positive progress and verifiable results with respect to the peace process and to the respect for international law by Israel.

Thirdly, we wish to see an explicit provision in Bill C-61 that forbids the import into Canada of any goods made or produced on Israeli settlements in any of the territories occupied by Israel, together with an effective means for verifying compliance with this provision.

I must say I was less than satisfied with the statements made by the minister earlier on during questioning when he was asked about the borders of Israel. It would appear, at least in his mind, that the free trade agreement applies to all territories currently controlled by Israel.

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We remind you that Revenue Canada had recently de-listed a charitable foundation in Canada because it was shipping funds to the occupied territories. Canada takes the position that those territories are occupied and international law applies there. It would be quite destructive of the peace process if, as part of this agreement, there were an unverifiable, unregulated entry into Canada of goods made or produced in whole or in part on those settlements.

Fourthly, we call for the implementation of a parallel free trade agreement with Palestine and the Palestinian Authority as well. But I do want to point out one thing, which I think Dr. Kubursi will elaborate upon. It's one thing to implement with Palestine a parallel agreement to what Canada is proposing with Israel, but you're talking about two vastly different types of economies. Quite frankly it would be much more productive, given the destructive nature of Israeli closures to the Palestinian economy, if there were more active action with respect to Israeli positions taken on closures of the Palestinian economy, rather than any free trade agreement we could sign with the Palestinian Authority.

Lastly, we ask that this bill be withdrawn from the government agenda until such time as these recommendations and concerns have been properly addressed in the legislation.

Dr. Kubursi.

Professor Alif Kubursi (National Council on Canada-Arab Relations): Thank you,Mr. Chairman.

I'm very happy to be here to take issue with some of the statements the honourable minister has put forward here and to give some evidence to substantiate some of the statements made by my colleague.

With exports representing over 40% of the gross domestic product of Canada and with much more trade, over 70%, with one country, it's understandable, laudable and commendable that Canada would pursue trying to open its markets and to guarantee access to traditional markets. But it's totally indefensible that we would do so at the expense of some long-cherished objectives and some very important precedents and conventions of international law. Indeed, it is important that Canada would try to have a level playing field with respect to the Israeli market, but it's unreasonable that Canada would not guarantee the same level field to the Palestinians.

Far more important than this and perhaps more legitimate to us is this question. To what extent is Canada sure that some of the products that will come under preferential treatment here are not produced on expropriated land that would use water that's denied to the Palestinians and is not using labour that is exploited at less than fair market pay?

It's also crucial here not to equate with impunity the ability of Palestinians to take advantage of the fact that we're allowing illegal settlements in areas under occupation to get the benefits of this system, this preferential treatment and this new agreement.

The most important aspect we'd like to address here is that economics is not the only and cannot be the only major justification for this free trade agreement. Surely the two-way trade between Israel and Canada, which is in the neighbourhood of $450 million, is not that large. Canadian exports to Saudi Arabia alone are over $500 million. Canada exports to more than 50 countries multiples of what it exports to Israel, whether it's Korea, the Philippines, Thailand, Brazil, Chile or Columbia. The list is long.

The question is why hasn't Canada singled out some of these countries for expansion of trade for a level playing field and why has it concentrated on Israel? In our opinion the peace process, the new arrangements after Oslo, must have been a very important justification and reason. It's here exactly where we take issue.

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What's really happening here is that the Palestinians - and not only the Palestinians but other Arabs - were promised that the peace would bring them substantial benefits, be it in terms of increased trade, increased investment, more international tourism, the ability to reduce military expenditures, the invitation to foreign investors to come to the region to take advantage of these vast markets, and now with more stability, that peace would bring more dividends.

What's really happening here is the Israelis have derived enormous benefits. They've opened the Far East, from which they have been excluded for many years. They have been able to bring in foreign investment in the neighbourhood of $1.6 billion, when they have not been able to get $200 million in the past few years, and the pledged values have exceeded $2.5 billion.

Now here comes the free trade agreement, which is another plum that Israelis are getting from this peace process, and what do the Arabs and Palestinians have? Unemployment in Gaza is 70%. Unemployment in the West Bank is about 40%. The area is totally locked in a primary blockade, and a secondary, tertiary one, in which even within the occupied territories people are unable to move. People are dumping their produce - as you can see in one of the pictures just from yesterday's major newspaper in the Arab world. People are dumping right at the border point, because they're unable to sell it. They have no ability to establish and build a port or an airport so they can have contact with the rest of the world.

Even if we were to grant the Palestinians - as indeed we heard the minister say he is intending, and it's there, and I'm not so sure about how these things are there where there are no provisions in any way in the agreement about this... But how on earth do we really expect that the Palestinians would avail themselves of the advantage of the free trade agreement if they are blocked, if everything has to be under the complete and full control of the Israelis?

They can't have their own land, more than 70% of which has been expropriated. They can have no claim to their water. Some 800 million cubic metres of water is gathered under the hills of the West Bank into a common aquifer, which the Palestinians are denied access to because they cannot dig a single well below 15 feet, whereas the Israelis have full access to it.

Look at the free trade agreement itself. The minister in his statement, and in some of the documentation they have, would show that Israel has exported to the tune of $6.9 million worth of agricultural products, primarily vegetables and fruits. These are water-intensive products. Isn't it ironic that a water-poor country would export water-intensive products to a water-rich country, using water that it does not really have the legitimate right to use, and has denied other people the legitimate right to use?

Are we really here giving a plum to Israel that will maintain and sustain the exploitation of this water - which is non-renewable, by the way - under the common aquifer, basically threatening a fragile ecological system?

This is not just purely encouraging a government that has been in transition, has increasingly made more blocks in the way of the peace process. We are giving economic rewards to its intransigence. We are giving increased access to its exploitation of a fragile environment, and increasingly allowing it to export at prices that are now textbook cases of the diversions from scarcity prices, which invite reckless waste, and which will maintain and sustain this exploitation and over-exploitation of resources that don't belong to it.

I would not really like to belabour the point. Economics is surely an important aspect here, as the minister said, but it's not the only one. Far more important are the fundamental issues of human rights, issues of giving plums to people who are in the process of making peace when they have really been rewarding the party that has blocked peace, and encouraging non-sustainable practices, particularly in terms of a very important and scarce resource like water.

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Fifteen of the twenty-two countries the World Bank has designated as water-poor or stressed are in the Middle East, and the poorest among them is Palestine. And this is at a time when these people have been denied their lawful, legitimate right to what is their share. This is now known without exception around the world as disputed water, but in fact and fundamentally it is Palestinian water.

Thank you.

The Chairman: Thank you very much, professor.

Madame Debien.

[Translation]

Mrs. Debien: It was Mr. Lynk, I believe, who suggested earlier that four provisions be added to the bill that would aid the peace process and understanding between the two countries. One of those provisions concerned human rights.

You heard the Minister's reply earlier, as I did: a free trade agreement is not the place to insist on this kind of provision. We find Canada is very reluctant in this area, despite the clear example that my colleague Stéphane Bergeron gave concerning an agreement between the State of Israel and the European Community in December 1995 in this area. Article 1 of that free trade agreement clearly states:

[English]

Relations between the Parties, as well as the provisions of the Agreement itself, shall be based on respect for human rights and democratic principles, which guides their internal and international policy and constitutes an essential element of this Agreement.

[Translation]

We can only agree with you on this subject. The Minister's reply certainly did not take into account this important agreement that had already been signed.

[English]

Mr. Lynk: Mrs. Debien, I can only agree with you. With respect to that, you'll notice that on page 10 of our brief we actually cite the very same clause from the European Union agreement. In his answers to questions with respect to other free trade agreements, the minister did say that they looked at the United States-Israel free trade agreement and the European-Israel free trade agreement to ensure that there was a level playing field.

We think the best way to establish this level playing field, particularly with respect to any free trade agreement with Israel, would be to include this very clause with respect to human rights and democratic principles that you have cited to us from article 1 of the European Union agreement. With respect to international law and the fragility of the peace process, with Israel at this time you cannot separate economics and politics. You cannot separate trade from the fundamental aspects of human rights.

Prof. Kubursi: I want to add one thing. The honourable minister mentioned that we trade with Cuba and this is the same. It's not.

[Translation]

Mrs. Debien: But there is no free trade.

[English]

Prof. Kubursi: Yes. Ce n'est pas la même chose, because with Cuba the intention of the Americans was to blockade completely.

There is trade between Israel and Canada. Actually, in 1995 trade increased substantially. There were 37% more exports in 1995 than in 1994 and 32% more imports. In fact, if there really are any impediments, I'm hard-pressed to know where they are. How could we possibly explain this major increase? If there is any reason for this increase, it is that it's part of the dividend I have talked about that Israel seems to be deriving from the new peace, for whatever sort of real peace it is. In fact, the situation is totally irrelevant in terms of comparison with Cuba.

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What you're really talking of here is not about having trade or not having trade. This is not the time maybe to reward the government, which has been in transition and has been increasingly creating facts that are injurious to the Palestinians. Bypass roads are being erected on a daily basis. Settlements are increasing. It is the declared intention of the government to increase these settlements. It's the declared intention of the government to roll back and change the very premises that drove people to the peace table in Madrid, which was ``land for peace''.

We're not talking about not having trade. We're asking you to please, at this moment, not give the Israelis such a reward. Make sure this trade, if there's going to be a reward for progress toward peace, has some systematic and deliberate choices for pairing this progress toward peace with the increased dismantling of trade barriers and tariffs. Let's have provisions to make sure that Canada does not give preferential treatment to Israeli exports entering our markets that have been produced on expropriated land and on water that is priced below the scarcity price and stolen from the Palestinians.

Mr. Flis: I wonder if either Professor Kubursi or Mr. Lynk could explain to the committee about the National Council on Canada-Arab Relations. What's the membership that you represent? Are you reflecting before the committee the views of Canadians of Palestinian descent, or are you also reflecting the wishes and aspirations of the Palestinians at home?

I'm getting a double message here. The message I'm getting from both of you is very strong: kill this bill, or at least put such conditions on it that it will never get through. The message I seem to be getting from people in the Middle East is that this is a positive move and they want equal treatment. If this works, hopefully Palestine will also get a free trade agreement.

I connect that also with the work this committee did on small and medium-sized businesses. We heard from many Canadians that we cannot put our eggs in one basket. We have to be searching for new markets. I think this is another area of the world where we are opening the doors for the SMEs.

I'm wondering if we could have a response to that, Mr. Chairman.

Prof. Kubursi: I would like to address a couple of questions with Mr. Flis and allow my colleague to maybe discuss the national council.

There are three basic points I would like to get across. First, if there is going to be a similar treatment of the Palestinians, it would be important, necessary and fundamental for Palestinians to be involved directly. There is no mention or evidence here to suggest at the moment that the Palestinians have been consulted or that they have had an input into this agreement.

If indeed they're going to be included in it one way or the other, then we would like to see some sort of input to see to what extent they consider this agreement to be in their favour. We would like to see what sorts of certain provisions, exceptions, amendments, additions, subtractions, or whatever, would be required here to protect the Palestinian nation's economy.

Indeed, you can't put the Palestinians under the same tariff and tax regime that applies to Israel and make it applicable to the Palestinians. They are two different economies at different stages of development and with different capacities and resources. It would not be at all in their best interests to be under one regime with the Israel economy. Indeed, I would feel that the Palestinians, if they were consulted, would bring a lot of provisions to the table.

So what we're really saying here is for you to not take that bill in its present form. If it is indeed intending to bring the Palestinians in, then please bring the Palestinians in. Let them represent themselves and let's not really always keep the Israelis operating as this paternalistic occupying force that's dictating to the Palestinians. That's the first thing.

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Secondly, if you really want to bring some advantage to the Palestinians, then by God, let's also address the real situation. It doesn't mean that we change the laws. When the Palestinians are in fact unable to move from one village to the other, it doesn't make any sense that they would be given free trade access. They have no port and they have no airport. The produce is rotting. They're throwing it across the borders because they can't really produce it. It doesn't really make any sense for the Palestinians to have any free trade when they cannot have the land on which to produce things. It doesn't make any sense for them to produce anything when they can't really get to water. There are less than 100 cubic metres per person for the Palestinians, while the Israelis enjoy 400 cubic metres per person. In some of the settlements, the per person rate is 1,800 cubic metres, and this is really for all uses.

I am really suggesting here that if we would really like to get a meaningful participation, a reward to the Palestinians, an inducement, an enticement, an incentive for greater participation and peace, then let's indeed make it more meaningful. Let's have some results on the ground. Results on the ground would require that you address much broader issues in ways other than going just purely through the Israelis by allowing them conduits and channels to bring products from Canada into the Palestinian market, or from the Palestinian market into the Canadian one.

The issues are far more serious, far more important, and indeed would require that we study them at length. This hasty, quick, fast track may not be in the best interests of the Palestinians. We're calling upon you, Canadians who are concerned about peace in the region, to have some symmetry and firmness, some compassion, enticement and rewards for the Palestinians as they embark on this long process of peace, which so far and for so long has not produced results on the ground in the way the people have hoped and wished for, and would still wish to produce.

Mr. Flis: Thank you.

Mr. Lynk: You had also asked about the National Council on Canada-Arab Relations. It has existed since 1985. It has a membership of Arab Canadians from across the country. There are approximately 300,000 to 325,000 Arab Canadians in this country today, and I would gather that the position we are taking today with respect to this bill would represent the informed opinion not only of the Arab-Canadian community here in Canada, but the informed community of any segment of opinion you would wish to find in the Arab world as well.

To be very clear, the National Council is not against trade, and we're not against a free trade agreement with Israel. We're against the free trade agreement as it is presently constituted because we think it presents a detriment to peace - and I can only echo the comments of my colleague,Dr. Kubursi, with respect to that.

There is no symmetry in having a parallel Palestinian free trade agreement under the current circumstances. There have been more closures in the West Bank since the 1993 signing of Oslo I than there ever were in the period prior to that. Every single day that there's a total closure in the West Bank, the anemic Palestinian economy loses $6 million. With respect to trade, that's probably much more than we could try to encourage in a year between Palestine and Canada under the terms of any sort of free trade agreement that we could do.

With respect to Israel, the best thing that Canada can wind up doing for the Palestinian economy, and the best thing we can wind up doing to encourage peace, is to make very clear representations to stop these kinds of economic closures, to stop the interference with the Palestinian economy. By far, that's more useful than a Palestinian free trade agreement, which we are in favour of but which is basically small peanuts beside the kind of destruction that closures cause.

Mr. Flis: I've been in the area a few times. I know of the concern over lack of water, of infrastructure, etc., you're speaking of. But when Canada signed a free trade agreement with the U.S., it was a bilateral agreement. We then extended that to NAFTA. Now we are expanding that to include Chile and maybe other countries. Do you not see the same evolution happening here, with it starting as a bilateral agreement and then moving into a trilateral and maybe multilateral agreement for the entire region?

Prof. Kubursi: Indeed, the WTO - the new GATT agreement - and all the trade rounds that have come about recently are all moving in that direction. They are increasing as much as possible the pressure for multilateralism instead of just purely bilateral relations. These are indeed welcome.

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These are forces you cannot stand in the face of. They tend to be part of the global economy and the way it's evolving. But what we're really saying here is yes, indeed, these may be the trends, these may be the forces and there are lots of win-win strategies so people can get gains from trade, but we have to make sure these gains from trade are shared equitably and that the conditions are conducive to empowering people to take advantage of them.

Far more important at the moment for the Palestinians and for the cause of peace is not promulgating agreements for free trade as much as allowing the Palestinians to have sovereignty over their lives and an economy they can nurture and develop. The present circumstances of occupation and the continued delays in the peace process are undermining that economy and sapping any energy it has.

It's costing this anemic economy, as my colleague mentioned, $6 million a day. In this economy, per capita income is a small fraction of what the Israeli per capita income is. Israel now is at about $16,000 U.S. to $17,000 U.S. per person. The Palestinian economy in Gaza is at less than $1,000, and in the West Bank it's only $1,800.

So let's really make sure peace comes about. Let's make it peace that will give these people dignity and the power to perform and pursue the developmental objectives. Then let the trade agreements be part of this.

Right now you're giving the advantages and the fruits of free trade to the Israelis at a time when they should not be rewarded. You're not using that plum with care and with determination to enhance, improve, speed up and broaden the peace process.

The Chairman: Thank you.

Mr. Paré.

[Translation]

Mr. Paré: There is an old saying: ``Better late than never.'' It is unfortunate that we did not receive this information a little sooner. I am not sure that the parties would necessarily have been aligned in the same way at second reading.

Mr. Kubursi, you have drawn a certain number of parallels between Canada-Israel trade and other similar trade between Canada and other countries, including Arab countries, which represent more trade than that between Israel and Canada. You suggested that Canada hastened to enter into a free trade agreement in order to send Israel a positive signal with respect to the peace process. If that was Canada's intention, would it not have been more logical to say that we have an agreement that will enter into effect when the peace process has achieved its end?

[English]

Prof. Kubursi: I agree with you totally and absolutely, and this is really the gist of our argument.

You cannot see this free trade agreement in purely economic terms or for the economic flows, because I mentioned the volumes are not that substantial. They're very small in comparison to the total trade bill Canada has, and in comparison to the kind of trade and the volumes of trade we have with umpteen other countries, particularly in the Pacific Rim and Latin America.

So this agreement must have something to do with the Oslo agreements and the peace process. Indeed if it was born into these agreements in this context, this context has changed, so I think this agreement should not come about until we really have peace. It would then be a true, meaningful, substantive and contextual agreement.

The Acting Chairman (Mr. Dupuy): Are there other questions? Mr. Assadourian.

Mr. Assadourian (Don Valley North): My name was on the list.

The Acting Chairman (Mr. Dupuy): I'm sorry.

Mrs. Gaffney: There's a list over there. I think I'm next.

The Acting Chairman (Mr. Dupuy): I have Mr. MacDonald, Mrs. Gaffney and thenMr. Assadourian.

Mr. Assadourian: You can reverse the order if you want to, Mr. Chairman.

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Mr. MacDonald: Thank you, Mr. Chairman.

The debate so far this evening has shown how difficult some of these issues are with respect to the Middle East and more particularly the relations between the Palestinians and the Israeli government. I for one have always had some concern about the progress of the peace talks and about the attention to the rights and obligations under international law and how they've been executed in the region.

One of the concerns I have at this point - and I'm going to echo Mr. Flis - is we seem to be hearing some conflicting messages here.

The government is seized with the reality of the situation. After the general elections took place in Israel, the peace process seemed to be derailed. Certain things have happened that are not in the interest of Israel, the Palestinian state and indeed relations between the two and the rest of the world.

But the people in Israel, through a democratic process, elected a government that may or may not be doing things in the best interest of the economy and the people of Israel at this point in time. It was a very close election.

The Canadian government has always believed that any benefit that would accrue through a free trade deal with Israel must be also extended to the Palestinian lands, the occupied territories. Indeed there have been negotiations and discussions going back almost, I guess, to January of last year.

Although the Palestinian Authority, from the correspondence I've seen, has always raised the issues, and raised them as fervently as you two gentlemen have today, there is also a recognition that anything that is done that will assist in the further development of the Palestinian economy is in the best interest of the Palestinian state, the PLO, the Palestinians and also the prospects of peace in the region.

So it's almost a catch-22 here. Do you decide to wait until things get better? Hopefully they will get better quickly. Or do you go ahead and try to maximize the benefit in the occupied territories?

The message we seem to be getting back from the Palestinian Authority is this clearest message you have given, but it's a parallel track. The arguments are being made, but at the same time they are clearly indicating that they are interested in having the benefits extend into the Palestinian territories.

In other words, we would rather see the peace process go ahead. Everybody would like to have that done. We would like to see the outstanding issues resolved. Everybody would like to see that done. They wish the elections had turned out differently. Some wish that were the case. But in the event that things continue to go on, which they do, and the linkages are made, at the end of the day, if there's going to be any type of deal, they're going to try to maximize the benefit.

So we're continuing our negotiations with the Palestinian Authority. It's being done in good faith by both sides to see if this indeed is something that should be done. I should note that the Palestinian Authority is talking to us. Continue to make the tough and realistic points you've made.

Whether or not it is in the best interest of the Palestinians, at this point in the history of that region and of the peace negotiations, to go forward and sign the deal, which will give Canadian businesses equal footing in the Israeli market...

This deal first and foremost is about giving a level playing field to Canadian businesses. There's a larger macro-political play going on here, and it's a very serious one, but the deal was negotiated first and foremost to give Canadian-produced goods better access to that market, as the U.S. has done and as the European Union has done.

If that's the premise with which we approach this and if then we attach the requirement that it must apply equally in the Palestinian areas - and the Palestinian Authority, after making their points, are negotiating with us - what does that mean? Is this a different message I'm getting, or is it just that the message is complex and we have to understand that the Palestinian Authority is perhaps pursuing this on a policy track and on an economic track?

Prof. Kubursi: I can see exactly your concerns and I sympathize with the kind of dilemma we are all in. This is a complex situation, and one is not likely to solve it by simplistic assumptions and responses.

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There are three things we were trying to emphasize here. First, it would be nominal, vacuous and not substantive to now have the same agreement extended to the Palestinians in the present prevailing circumstances of occupation, because the benefits would be asymmetrical. The Israelis would derive a lot more benefits from it than the poor Palestinians would.

Secondly, if it's ever to happen, it would make a lot of sense to get the Palestinians to speak for themselves, to make their own kinds of representations as to their own side of the issue. As you know, trade is a two-way street. It's not really for one party. It's for both parties and both should be parties to negotiations. At the moment, I don't see the Palestinian input into this agreement. It's not there.

There is another element that is very crucial. We don't seem to have touched on it. I would really like to take the opportunity to put it on the table here. What sort of signal are we sending to the rest of the Arab world? Is it that Canada is now trying to favour Israel and would not really give the same type of accord to other trading partners?

Canada trades substantially with Morocco, Tunisia, Saudi Arabia, Jordan and Egypt. What are we really saying here? Is this the most opportune time to come without peace - and without having reached that time when the region can act as a collective - and favour one party and not give similar symmetrical treatment of the others? If this is creating a level playing field for Canadian business in Israel, it's denying them a level playing field in the rest of the Arab world where perhaps you really have more substantive rewards to get.

Mr. Lynk: If I can just add to what Dr. Kubursi has said, I lived on the West Bank for six months in 1989 while working as a lawyer for the United Nations. I was there most recently in January for several weeks to observe the elections with a number of your colleagues as part of the Canadian government delegation.

I've talked to a number of Palestinian businessmen, a number of people who have ideas for manufacturing, for exports, for imports and so on. If you ask them what they want as businessmen, if you ask them what they want with respect to how this economy's going to grow and how they are going to attract investment, they say they would like to have agreements with Canada, with the European Union and with the rest of the world.

But if you ask them what the single most pressing problem is - and even if I would ask them what the top ten problems are - it all comes down to the pervasive control that Israel exercises over their economy. Israel has the ability to shut down the boundaries around West Bank and Gaza, the ability to deny the import of goods, and the ability to deny permits to go through two non-contiguous territories, the Gaza and the West Bank. All of the current significant economic problems rest with the current state of the occupation and with the slow or anemic pace of the peace process.

I think that echoes what I said before. Far better than what we could ever achieve in terms of boosting the Palestinian economy by signing a free trade agreement with them would be concerted pressure - in the various ways that Canada and others of its partners can - in order to be able to speed up the peace process, to bring down those barriers and to end the occupation.

Mr. MacDonald: I want to thank you for that, but I have a bit of a final comment, because a question was raised about whether or not the Canadian government is giving preferential treatment to Israel over other Arab states. I've asked our departmental officials that question - and some are sitting here tonight - and the response we get is that indeed, that is not the case, that Canada is extremely interested in accelerating some discussions with other Arab states in the area. However, I think Israel is the only state that has passed the benchmarks for signing a free trade deal with us at this point in time.

Prof. Kubursi: Yes, but you see, I can respond to this immediately, to your esteemed colleagues here, and to my friends too. If indeed this situation is not giving preferential treatment to Israel, why then do we need the preferential treatment of a free trade agreement? Things would have been fantastic and equal. We don't need it at all, and we're wasting your time and ours.

A voice: Hear, hear!

The Acting Chairman (Mr. Dupuy): Thank you.

Mrs. Gaffney, then Mr. Assadourian, and then we'll have to...

Mrs. Gaffney: I have never had the pleasure of going to Israel, unlike some of my colleagues. I have wanted to go. I certainly have an interest in what is happening, both in Israel and with the Palestinian people.

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But I'm really bothered with some of the responses. As Mr. MacDonald said, there are very conflicting reports coming from you, opposed to what the department and the ministry had to say. If you're saying if Canada is negotiating bilaterally with Israel it in turn will hurt the economy of Palestine, what you are really telling me is that Israel and the Palestinian Authority must be looked at as one unit, one body. You can't dismember one part of the body and expect the other part to function properly. I want you to respond to that.

In the second paragraph of your comments, Dr. Kubursi... The only question I asked the minister was whether Canada's agreement with Israel was any different from the Canada-U.S. agreement; did we follow all the same patterns with that agreement. His response was yes, except for agriculture. Yet here in the first sentence you say that is not the case. You say Canada, unlike the U.S. and unlike Europe, has not granted this preferential access to the Palestinians. You have really contradicted what he has told me.

I'd like you to respond to this particular area.

Prof. Kubursi: There are a number of issues here. You raise some very interesting and insightful aspects of it.

First, the Palestinians and the Israelis have signed the Paris Protocol. The Paris Protocol is almost stronger than a free trade agreement. In some sense it has lots of elements of a common market, so to speak, which is a step forward, because it allows free mobility. But what has transpired on the ground, what has happened on the ground, is not really in that spirit and is not implemented.

Indeed, at the moment you can't grant one part of the body something you don't grant to the other. But it's not a transitive relationship. You don't really do it on a logical basis: if A is greater than B and B is greater than C, then A is greater than C. In this case we want to make sure that on the ground, not in logic, these things are there.

At the moment I don't see in the free trade agreement any provision that says the Palestinians have equal access to the Canadian market. Where is it? If you can show it to me I will be more than happy to accept it.

The other aspect which is important here is that yes, my colleague told you one fundamental thing in the European agreement that's not in the Canadian one. The preamble of the whole thing asks for the protection of human rights, that it should really be in accordance with the general principles of international law and democratic principles. We don't have any of these statements here.

There are also quite a few provisions in the European agreement that would go to the rules of origin to ensure the Palestinians are not denied access. The Israelis have always wanted the Palestinians to export through Israel. The Europeans have given the chance to the Palestinians to export directly. At the moment it doesn't seem to be practical, because the Israelis have made sure the Palestinians don't have a port and don't have an airport. Every time, any place, they are going to go they will have to go to the Israelis. Israel still has a veto power over the economy of Palestine.

That's why it doesn't make sense to give the Palestinians anything as long as they are under occupation. It makes a lot of sense to give the Palestinians, a poor country, access to a rich market such as Canada when they are free, when they have the resources, when they can take advantage of it. At the moment it would be nominal, it would be vacuous, and in many respects it would raise false hopes, because in reality there is nothing.

The Chairman: Mr. Assadourian.

Mr. Assadourian: I made a point in the last discussion we had, Mr. Chairman, that one week is a very long time in politics in North America, one day is a very long time in politics in the Middle East. Coming from the Middle East, I can testify to it.

I have a few questions for clarification. First, a few weeks ago we had a meeting of the foreign affairs committee involving Mr. Michael Bell, the ambassador for NATO. He said the policy of the government is to consult Canadians of various ethnic origins regarding their ancestral homes not joining NATO. I wonder if any consultation took place between the Government of Canada and the Canadian Arab community and the Canadian Jewish community before the signing of this free trade deal.

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Secondly, can you tell us what stage this deal is at in the Knesset, the Israeli parliament? Has this been approved or not? I don't want to be Mr. Negative, but what happens if the peace treaty doesn't go through? What happens to this deal from now to January 1?

Prof. Kubursi: You raised three questions. I can speak only personally.

Mr. Lynk: I can speak on the first one. We found out through the newspaper, I think at the same time as a lot of members of Parliaments did, that the agreement had been signed in July of 1996. We found out no sooner than this. We were not consulted beforehand, nor have we been since.

Prof. Kubursi: On the second question, I don't know about the Knesset.

Mr. Assadourian: Maybe the department officials can tell us what stage we are in.

The Chairman: I'm sorry, Mr. Assadourian; I don't like to interrupt you, but that's a question on the knowledge of the internal constitution of Israel. I don't know if these gentlemen are familiar with that.

Mr. Assadourian: Maybe the department officials can give us something.

The Chairman: Yes, somebody might be able to answer that, but only an Israeli constitutional lawyer could tell you the degree to which the international agreements have to be applied or implemented by their national parliament. Some countries don't have to do that at all, and others do. Canada is sort of half and half.

Prof. Kubursi: What if peace doesn't come about? This is really what our war is about. This is an agreement that was born in the womb of peace. If peace doesn't come, this would be a very difficult situation. That's why in my opinion it is hasty to move into a situation where it was rooted in peace before peace has come about. It would make a lot more sense. It would be more defensible. It would be more durable, more sustainable, if indeed it comes as the crowning of a peaceful achievement.

The Chairman: Thank you very much, gentlemen. We appreciate your evidence. I have to tell you as committee chair that the amendments which you recommended we look at go well beyond the bounds of what we as a committee are entitled to do at committee stage. The types of amendments that can be entertained at the committee stage must be within the spirit of the bill and tend to be rather technical in nature. Your amendments tend to go much further than that, but they're interesting food for thought.

I just want to thank you as a former professor of public international law. It's nice to know somebody is looking at public international law, but I'm a little bit skeptical about the proposition you make on the European Union analogy. My problem is that the European Union agreement, which we all have a copy of, has a reference to all the rights to which you've referred, but to my knowledge the European Union is still going on applying its free trade agreement with Israel at the moment. Obviously they don't pay any attention to whatever they said in their agreement, so why would it make any difference if we did the same?

I would rather not have it in the agreement than put it in and then ignore it, but that's a question of tactics. We'll all have an opportunity to look at that. I think everybody in this committee shares with you your concern that this agreement be applied in a way which is constructive to the peace process, and we're grateful to you for your very constructive observations.

Mr. Lynk: Thank you for your time.

The Chairman: I'd like to suggest that we take a five-minute break to get sandwiches, gentlemen, because we will be here for a while yet.

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The Chairman: Could I have order at the back of the room, please.

A voice: Send the bouncer back.

The Chairman: Where are the gentleman with the big mace and the man with the sword when we need them?

I'm going to start the hearing again. We're back in session. Thank you very much.

We're very pleased to have Mr. Shimon Fogel with us now. Mr. Fogel is from the Canada-Israel Committee. Mr. Fogel, welcome. Thank you very much for taking the time to be with us this evening.

Mr. Shimon Fogel (Director of Government Relations, Canada-Israel Committee):Mr. Chairman, I am mindful of the time, which is why I'll perhaps just offer a few introductory remarks. If there are any questions afterwards - and I'm not at all sure there will be - I'll be pleased to answer.

By way of an aside, and with your indulgence,

[Translation]

Honourable members, I am just learning French. So it is somewhat difficult for me to express myself in that language. Following my presentation, however, I will try to answer your questions in French, if necessary.

[English]

I had come, Mr. Chairman, with the expectation of really identifying a few dimensions of the free trade agreement that I thought were exciting and held out promise, but some of the discussion over the course of the meeting thus far prompted me to reflect on a number of things. That said, perhaps I'll deviate from what I had expected to say in order to offer just a few comments on some of the things that relate to issues that have arisen.

At the risk of sounding somewhat melodramatic, I'll recall that it was exactly a year ago today that we marked the death of the late Prime Minister Yitzhak Rabin. To provide some kind of context on where the Canada-Israel Committee is approaching this from, I would like to share with you just for a moment something on an event that occurred here in this city on that very night.

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On the night we gathered to memoralize Mr. Rabin, a number of speakers addressed the audience of more than 2,000. All the comments by all the speakers were deeply appreciated by the gathered, and many of them were very moving. But the press has recorded, and accurately so, that the strongest response was for a newly arrived PLO representative to Canada who had the courage to come forward. I think credit is also due to the organizers, who invited him to come forward. If you were in that room a year ago you would have been moved to tears, not only because someone like Yitzhak Rabin had passed but because he did leave a legacy. That legacy was one of hope for Israelis and Palestinians and it was a moving tribute to his contribution to the peace process.

We are a year later now, and as many have mentioned, a number of tensions have increased and new ones have arrived. It may be true, as has been pointed out, that there have been more closures in the occupied territories since Oslo I. It would also be true, and tragically so, that more Israelis have been killed at the hands of terrorists since Oslo I than in the 20 years previously.

I raise this not to exchange tits for tats, but rather to convey that we are looking collectively at a complex set of circumstances and issues. No one can lay claim to absolute truth, and there is any variety of perspectives that would comment on any particular development.

Perhaps this is a useful context in which to suggest that no Canadian initiative is a zero sum game. Arrangements with Israelis are not mutually exclusive, leaving out Palestinians. Interventions and initiatives that Canada undertakes on behalf of Palestinians, like the almost $70 million that has been pledged over a period of five years, don't come at the expense of Canada's bilateral relationship with Israel.

I think the Canadian perspective is that the greater the Canadian involvement in the region, the more contacts they have, the broader those contacts and the more more meaningful they are, the greater Canada's chance of constructively influencing developments in that part of the world. Having said that, I think it's important to note a couple of objective realities.

Number one, we have to look back on the genesis of this particular agreement. It was not a political reward to Israel, which I will get to in a moment, but an assessment by the Canadian Prime Minister based on information and advice he received from various departmental officials, as well as from the Canadian embassy, who were looking at the issue of trade not just in the Middle East but globally. The current Canadian Prime Minister saw some disturbing anomalies in terms of the bilateral trade relationship that Canada had with Israel versus other trade relationships, discrepancies and tariffs and so forth that he was hard-pressed to explain.

Soon after the current government was elected, he met with then Israeli Prime Minister Yitzhak Rabin. It was at that meeting that our Prime Minister raised the issue of exploring the possibility of engaging in a free trade agreement in order to allow Canada, as the minister stated earlier, to play on a level playing field. The interests of Canada at the time, as I think they are now, revolved around trying to ensure greater opportunities in the international trading world for Canadian exporters, and to the extent that engaging Israel in a free trade agreement would help open up for Canada a region with a 200 million plus population base, I think it was very attractive.

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I think we have to be very careful when we lump political issues in with economic issues. It's not that it's not legitimate to do so. I think those who presented just before me, who presented a perspective that said you can't divorce political realities from economic considerations, can make a very compelling case. It is, however, not the one that Canada makes. Canada has adopted as a philosophy a very different approach to how it engages the international community on issues of trade, human rights and the whole spectrum of bilateral relations.

Unlike the Americans, who I think have adopted, at least with respect to the Middle East, the notion of dual containment, we talk about constructive intervention. That is and consistently has been Canada's foreign policy, over not just a long period of time but throughout the entire international community. It would explain why we have Team Canada missions going to the Far East, to China. It would explain why Canada has a significant trading relationship with a country like Iran, and it explains why there is an effort to distinguish between economic imperatives that will help advance Canadian export interests and Canadian intervention in the peace process.

If the government has distinguished between the two, it hasn't done so at the expense of one or the other. I think we can look at Canada's record of involvement in the peace process, specifically with respect to support for legitimate Palestinian aspirations, and say that as a country we are second to none in terms of our commitment. As chairs of a particularly contentious committee on the multilateral track of the peace process, we have put ourselves right in the centre of that set of negotiations. It cannot be said that a particular trade agreement is being advanced at the expense of other considerations if Canada is square in the battle of ensuring the rights and trying to shape a successful model for Palestinians to give expression to a full sense of identity, of achievement and the like.

I would also like to remind the committee, because this has come up on a number of occasions, that the proposition that engaging in a free trade agreement with Israel is somehow a reward for Israel is simply not the case. Recall that this agreement was first broached - with all respect to his memory - with a man who had just become Israel's Prime Minister, and who was most noted for coming up with sarcastic poems that talked about if they throw stones, we will break bones.

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It was well prior to the commencement of Oslo that Canada and Israel started exploring this particular agreement. I think it's equally important to note that long after this immediate chapter of Middle East history is concluded, hopefully when Israelis, Palestinians, and all others living in the region have moved toward a completely constructive and harmonious relationship, this agreement will still be there. It will reflect that Canada does not isolate a particular period of time and determine the future of Canadian exports on the basis of incidents in some kind of vacuum.

Let me just conclude on a note of hope, which I hope I was able to convey at the beginning.

I was delighted, but did not know beforehand, about the note from Minister Sharansky to our Minister of International Trade with respect to Israel's commitment to ensure that the free trade agreement was extended, as I think Canada had hoped it would be, to the Palestinians and areas under the Palestinian Authority.

It would be our hope - it is certainly our recognition - that without meaningful progress in the material well-being of the Palestinian community, there is no hope for peace.

Ultimately, people have to measure issues like food on the table, clothing, and health care for children, and then hope for the future. It's our genuine hope that the kind of statement Canada is making in the free trade agreement with Israel is not just that it wants to enhance its bilateral relationship with Israel, but rather that it sees this as simply an additional entrée into that region of the world in the hopes that it will help provide greater prosperity there, as it certainly is our expectation that the free trade agreement will provide this for Canadians and Canadian companies.

With that by the way of initial comment, I'll turn it back to you.

The Chairman: Thank you very much, sir.

Mr. Morrison.

Mr. Morrison (Swift Current - Maple Creek - Assiniboia): Welcome, Mr. Fogel.

You mentioned that there can be no permanent peace in the Middle East without economic stability and some prosperity for the Palestinian people. I think we all probably understand that very well. But I would like you to comment on what Professor Kubursi told us. How are you going to have economic progress for the Palestinians as long as they are under such strict restrictions that they cannot move about to move their goods, save at the will, or whimsy maybe, of Israel's government? How can the Palestinians profit from this agreement if Israel's government will not permit it?

Mr. Fogel: I think that's a fair question. I think it also reflects at the moment the reality on the ground for Palestinians living in the territories.

There is a flip side to that, which is that the situation with which they're confronted did not evolve out of nowhere. Israel has some legitimate and compelling security concerns. It has a responsibility to ensure the safety of its own citizens.

While I'm not sure that this is the place to engage in a lengthy discussion about it, I would make the general point that nothing in the Middle East in general, certainly nothing in the Arab-Israeli conflict, remains true in some kind of permanent fashion. Things are incredibly fluid, and situations do change, sometimes more quickly, sometimes less so.

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In the latest poll that's come out of Israel, not just the majority but an overwhelming majority of Israelis, something upward of 80%, still endorse the principles enunciated in the Oslo agreements. I think this is a young government with a particular perspective but one that's also still struggling to define itself and figure out how it's going to approach the Palestinians as partners.

I think in that context one can't draw a conclusion that the situation confronting Palestinians today will last for any long period of time. I have to tell you that it was so at various points during the course of the last Israeli government too, the one that entered into the Oslo agreements.

Mr. Morrison: For the moment we seem to have a catch-22. You can't have economic prosperity without peace and you can't have peace without economic prosperity. It's an endless circle.

Mr. Fogel: Maybe I should clarify then. When I say that peace requires prosperity as a necessary ingredient, chiefly among Palestinians, I'm talking about enduring peace. I'm not talking about securing a peace agreement or signing a piece of paper.

Prosperity for Palestinians will not come overnight regardless of what happens tomorrow. Given the level their economy is functioning at, that will take years and years. It will take a lot of support from the international community and it will also take a lot of support and cooperation from the Israeli government. That's not a peace that one achieves overnight or with the initialization of a particular agreement. I think we do have to step back at times and take a longer view of what we can contribute in order to help achieve those long-term goals.

Mr. Morrison: Would you say there is a will on the part of the Netanyahu government to bring about permanent peace, aside from a Roman type of peace? Is there a will there to accommodate? Mr. Rabin is dead.

Mr. Fogel: I think what Israelis were conveying when they elected the Netanyahu government, or more precisely Mr. Netanyahu as Prime Minister, was that notwithstanding their commitment to the peace process, they had abiding concerns about their security, which was quickly becoming an untenable situation for Israelis to live in.

I don't think we have a mutually exclusive proposition there either. I think Israelis would like to see a series of confidence-building measures that allow them to feel that the Palestinian Authority does indeed control its population, that Israelis can really take buses without being worried about being blown up, and that on the strength of those kinds of things they'll be able to advance in meaningful ways in the peace process.

With respect to the current government in Israel, I take them at their word when they say they're committed to peace. They didn't convey or communicate that to me, but they did do it to some of the most important partners in the international community, who I think will hold them accountable for that. So I do think that commitment is abiding.

Mr. Morrison: Thank you.

[Translation]

The Chairman: Mr. Paré.

Mr. Paré: In answering Mr. Morrison's question, you said that the Middle East peace objectives are necessarily long-term objectives. I'm not sure that the situation will let us wait for those long-term objectives to be achieved.

.1845

I believe you absolutely have to look at what the situation was. Ultimately, I am probably in a poor position to talk about it, but I will go out on a limb all the same.

If we look at the path the Palestinian organization has taken toward peace, with regard to the Israeli presence there, with regard to the path toward peace and toward acceptance of Palestinian authority by Israel, I get the impression that there is a very great discrepancy between the paths of two groups.

I am inclined to think that the road taken by the Palestinians to get Arafat to agree to enter the peace process is infinitely more important and has been infinitely more difficult.

I don't think that we'll be able to wait for long-term objectives to be achieved if, each time we approach a peace process, there is always an Israeli prime minister who questions everything. He makes nice speeches and is in favour of the peace process, but actually, in reality, he acts somewhat as though he were not interested in peace.

I find this is playing with fire. Thinking that the objectives over there can be long-term objectives is to take the wrong tack. I know it is difficult to achieve full, perfect peace, but signals will have to be given quickly, failing which the Palestinian authority will not manage to control the energy that will sooner or later emerge. If we don't quickly reach conclusions that show the Palestinians that peace is beneficial, we are necessarily going to fall back into entirely foreseeable excesses.

I'm extremely disappointed that this working session did not take place sooner. Now I have a better understanding of why the negotiations between Canada and Israel were conducted in secret, without the Canadian public being aware.

I'm not sure that the outcome would be the same if Canadians in general, and I don't even mean Arabs who are Canadians and Jews who are here, were able to distinguish between these things and to remember that Canada's trade relations can operate on a complete parallel to the issue of human rights and democracy. That is entirely consistent with Canadian policy. With all due respect, we did not need you to come and tell us that. We hear it regularly from the Minister who preceded you at this table.

[English]

Mr. Fogel: Well, there wasn't, I think, too much of a question there. But I will suggest that you wouldn't have heard it only from the minister, you would have heard it from Gerry Shannon, the former Canadian Ambassador to GATT and subsequently the WTO, and you would have heard it from Dennis Browne at the Centre for International Trade Policy, both of whom would suggest that there are appropriate fora for pursuing specific issues.

Human rights has its own infrastructure, whether at the UN or within the foreign affairs departments of our country and others. I respect your suggestion that things could have evolved differently had the sequence of events been different, but I think that in its foreign policy review Canada staked out a particular direction its foreign policy was going to take, and I think this is simply consistent with that generic approach.

The Chairman: Any other questions?

Thank you very much, Mr. Fogel, for your very thoughtful and considered and balanced remarks.

.1850

Before you go, let me explore one question with you, because those of us who are struggling with this issue have to struggle with the larger issue, and then there's a narrow issue of the agreement itself, which is probably where we should be - we may be allowing this debate to step well beyond the bounds of the agreement.

If we bring the agreement into the context of the peace process, we've heard the concern that it will reward the government of Israel for certain conduct, that it may encourage the government of Israel to behave in a way that would not be constructive to the peace process. But in Israel itself, from what I've been reading, it's very clear that there are other voices, apart from just the government's voice, on this issue. It's a very complex society, like our own, where there are lots of people who are committed to the peace process and who are presently struggling with that issue too.

What is the effect of this agreement on them? If we asked an Israeli peacenik, would they say, as the professor did from the Palestinian point of view, don't do this at this time - it's a mistake? Would someone in favour of the peace process in Israel who felt it was endangered by the present situation say we shouldn't do this at this time, or would they say no, this is going to encourage us to move faster to peace?

It's an awfully subjective question, I know, but can you help us sort of reflect on that?

Mr. Fogel: I suggested a moment ago that the overwhelming majority of all Israelis still have faith in the Oslo accords and our strong performance at the peace process. That would certainly be the case of almost half the population that did not support the current government but rather other parties, most of them to the left, including of course the Labour Party that initiated the Oslo accords.

I think that Israelis in their own minds, though, do make the distinction between issues related to security and those related to economics and other spheres of life. You will see, during the more difficult times like the ones Palestinians are currently experiencing, increased and intensified activity on the part of that group you were asking of, in reaching out to their Palestinian neighbours and contacts and trying to ameliorate the kinds of circumstances they're facing. But they would not, I think, conclude from that that Canada should withhold entering into some kind of trade agreement as some kind of punitive measure to the Israeli government. I mean, we don't see it as consistent with Canadian policy. Israelis would wonder at it as well.

The Chairman: Thank you very much. You see, we've started... Sorry. Mrs. Gaffney.

Mrs. Gaffney: I'm sorry. I've got a quick question I wanted to refer to a statement that you made.

Mr. Fogel: I never made it.

Mrs. Gaffney: You said - and I might not have it down exactly as you said it, but it's pretty close - you said Israel has a responsibility to ensure the safety, security and success of its own businesses.

Mr. Fogel: No, when I talked about Israeli responsibility to ensure the security, I never mentioned the word ``success''. I talked strictly about the security of its own population.

Mrs. Gaffney: Okay. All right, we'll take out success.

But what that tells me is that if you have a high-tech company in Israel and a high-tech company on the other side, in the Gaza Strip or wherever, owned by a Palestinian, the success of that Israeli company would be at the exclusion of the Palestinian company. Am I right or wrong?

Mr. Fogel: I can't tell you whether you're right or wrong. I can tell you that that's not at all what I was referring to. What I was referring to was that in the context of the peace process, the paramount concern among Israelis is that of their personal security, and that this government has staked out as its primary imperative or agenda item the protection of the personal security of Israelis.

With respect to what you're raising, where you'd have competition between an Israeli company and a Palestinian company, I don't think that would be likely, simply because of the undeniable reality that their economies are at different levels and focus on different things. So I don't think you'd find a situation in which there was an Israeli high-tech company that was competing with an Arab or Palestinian high-tech company in the territories.

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What I can tell you, though, is that there are dozens and dozens - Dr. Rothschild, who was here earlier, would be able to provide you with an inventory - of joint initiatives between Israeli and Palestinian companies in the high-tech field in which sometimes manpower doesn't have to be extensive. We're not talking about sophisticated factories like GE; we're talking about software companies and the like in which there is that kind of cooperative enterprise or engagement.

Frankly, from a Canadian perspective, when we're going to choose a company with which we're going to do business, there will be a whole set of criteria we'll use in order to determine whether we'll go with one or the other. We do that everywhere, including here at home. So I would suspect that the decision-making will be on the part of the Canadian company or buyer, rather than on the other side.

The Chairman: Let's follow what you're suggesting. I think this follows up with what some of us heard when we were in the region. It may well be that you envisage a sort of production of elements that might be produced in Israel but there would be inputs coming in from the occupied territories, the Palestinian territories, because of a comparative advantgage in labour rates or some other form of comparative advantage they might have. So the whole package becomes almost like a Canada-U.S. auto parts type of thing, whereby you get a mixture of something that contains -

Mr. Fogel: Yes, I think there's a very real dimension of that.

The Chairman: Thank you very much.

[Translation]

From the Centre d'études arabes de Montreal.

[English]

and from the Canadian-Arab Federation...

Perhaps we could get Mr. Mahmoud here. Do you want to come to the table as well? You have two witnesses?

[Translation]

From the Centre d'études arabes de Montreal, we have Messrs. Rachad Antonius and Jawad Skalli.

[English]

From the Canadian-Arab Federation, we have Muhammed Mahmoud.

A voice: Is he from Alternatives? Where does he go?

A voice: He isn't on my list.

A voice: I think I put him under the centre by mistake.

[Translation]

The Chairman: He does not belong to the Centre.

[English]

A voice: He's also with Alternatives. He's representing Alternatives.

The Chairman: Very well. Okay.

[Translation]

Mr. Paré: I find the witnesses are somewhat penalized by being grouped together and forced to sit at the same table, unless you tell me we are going to extend the time proportionately. If we don't do that, we are not meeting a kind of moral commitment we made toward our witnesses when we informed them of the times when they would appear. We did not do so with the previous witnesses, but perhaps that was not possible. In any case, I'm wondering about this manner of proceeding.

The Chairman: You find that we are penalizing them, but they agreed that we could start like this. We could extend the time. We will give the Canadian-Arab Federation time. After the other two witnesses, we'll see how we're doing for time. Is that all right?

[English]

So why don't we hear -

Mr. Speller (Haldimand - Norfolk): Mr. Chairman, we always do this. We always have different groups that come together. We might lengthen the time a bit, but I don't think there's any disrespect to what they're going to say by putting them together.

The Chairman: I didn't take Mr. Paré's comment to mean that it was disrespectful to the witnesses. I think it was about the time limit.

[Translation]

If I understood correctly, Mr. Paré, it was about the time limit, was it not?

[English]

Again, we can go ahead, or we can have Mr. Mahmoud come to the table to hear him as well. We can ask questions of the three of them.

Why don't you come to the table? We'll hear you, and then we'll ask questions. We'll make sure that if we go over 45 minutes, we'll be willing to work. We're here to work.

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Mr. Speller: Mr. Chair, before the witnesses start I must inform the chair that I have to leave at some point. I know Mr. Sauvageau isn't here to hear it, but I must leave and go to another meeting at some point. I do have a legitimate reason for doing that. Thank you.

The Chairman: Very well. Thank you for that.

Mr. Antonius.

Mr. Rachad Antonius (Centre d'études arabes de Montréal): Would it be possible forMr. Jawad Skalli to start? He would be much briefer than I will. He would represent Alternatives.

The Chairman: By all means. Brevity is always to be preferred with the committee.

[Translation]

Mr. Jawad Skalli (Centre d'études arabes de Montreal): Ladies and gentlemen, on behalf of Alternatives, an action and communication network for international development, I would first like to thank you for the opportunity you have afforded us to express our views on the issue of the Canada-Israel Free Trade Agreement.

A number of other speakers before me have spoken to you about the crimes committed by the State of Israel against the rights of Palestinian people, against the rights of the Lebanese people, against the rights of all the other peoples of the region, of human rights violations, violations of international conventions, in particular the Geneva Convention and of its total contempt for the U.N. resolutions.

While I fully share the views that have been expressed, I will not reopen this point. I am not going to make you suffer a repetition of the same thing. Instead, I will strive in my remarks to state a few analytical points in support of three ideas that I would like to put to you.

First, I find that the proposed free trade agreement would be contrary to the principles of Canada's foreign policy. Second, it would be contrary to Canada's economic, political and security interests, and, third, it is perceived - and this is not in the conditional, but rather the affirmative mood - by the 300 million Arabs and the 300,000 Canadians of Arab origin as an act of hostility and contempt against them given the time at which it comes.

This agreement is contrary to the principles of Canada's foreign policy. I believe earlier speakers have demonstrated the origins of this agreement and their remarks may be taken as true. This agreement arose in the middle of the peace process, during a period of hope when the dominant idea was that the region was discovering new paradigms, that we had gone beyond the logic of confrontation, that there were prospects for peace. Despite the extremely limited progress in this process, it has created momentum; it has created a certain attitude among the various players, thus permitting considerable hope.

I won't be telling you anything new by saying that this process has been stopped in a brutal, abrupt manner by the recently elected Israeli government, which is fundamentally a coalition between a religious fundamentalist party and another party of extremist military hawks whose dream is to wage another war in which they can conquer new territories.

How did this refusal come about? It came about first of all through the backpeddling on the Palestinian people's right to self-determination and to its own state, which Mr. Peres ultimately recognized at the end of his mandate.

So what occurred was the massive resumption of the settlement process and thus the expropriation of Palestinian lands and property, further provocation over Jerusalem - you all heard of the tunnel that was dug at a time chosen to provoke a Palestinian response and to find a pretext to crack down on the Palestinians - the total refusal to negotiate in good faith with Syria over Golan, with Lebanon over occupied South Lebanon, the continuation of the never-ending attacks against the civilian population of South Lebanon on the pretext that there are groups resisting foreign occupation, groups that are exercising their right to resist as recognized by all the international conventions which Canada supports and approves, and, lastly, the total refusal to enter the phase of negotiations on the final status of the issue of Palestinian refugees, which is highly relevant to the theme of the sitting today.

It is highly relevant because the solution to this question will depend on the legitimate ownership of commercial property, lands, factories, etc., the owners of which are still living and are still in refugee camps today.

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Only after an agreement is reached with them on ways of compensating them or of enabling them to return home will it be possible to discuss the matter legitimately with a state that truly represents what it claims to represent, where the victims of these expropriations will recognize in some sort of process that, yes, they feel they have been sufficiently compensated that they can accept the legitimacy of the power in place over their own lands.

This new fact has already destroyed the hopes that a large portion of the Arab populations had placed in the peace process.

I would like to speak to those who consider themselves close friends of Israel or to those who consider themselves close friends of the Palestinians, or to those who simply consider themselves as friends of peace. If we really want to work for peace, there is only one thing to do now, and that is to bring very great pressure to bear on Israel for it to comply with international law so that we can reach a peaceful solution because never in history have we seen or will we see in the Near East a people agree not to defend its rights through violence when all roads to a peaceful solution have been hermetically sealed against it.

The patience of all peoples has its limits and we should not be surprised - this is not desirable and no one wishes for it - if the stalemate and absence of any prospect for a peaceful solution leads to a new outbreak of violence in the region, of which no one will be able to say what the consequences will be in terms of economic losses, human losses and losses in general.

Why put pressure on Israel? Because there is a sacrosanct universal principle in every peace process, in every negotiation. Mediation is required. The principal role of mediation is to even out a power of relationship. When negotiations take place between a strong party and a weak party, if there is no mediator to strengthen the weak party and to tone down the claims of the strong party, solutions and agreements cannot be reached.

However, with the U.S. monopoly on the negotiation process, we are witnessing a type of mediation that strengthens the strong party and weakens the weak party, thus transforming the negotiation process into a process of diktats through which a strong power can dictate all rules and outcomes to the weak power, which has no other means than to turn toward Europe or toward Canada, hoping that they will one day be able to play their role as a counterweight to U.S. influence over the peace process.

Consistent with its traditional position as a neutral peace facilitator, Canada must absolutely not help strengthen the position of the aggressor party in a conflict that is not about to be resolved.

The message sent by Canada with the signing of this agreement in the current context is a message encouraging arrogance and intransigence in a government of extremist hawks. It is a message that rewards the violation of law.

This agreement would be contrary to Canada's economic, political and security interests. I don't think I will insult this committee by explaining how good perceptions are a positive factor for economic and political cooperation.

As a result of its image in the Near East, Canada is not seen as a protagonist in the conflict. No one in the Near East considers Canada as an enemy in the present conflict and that is due to the fact that, despite a host of attitudes that are open to criticism, it can ultimately be said that Canada has somehow been able to maintain a neutral position, at least in official and formal terms.

One of the main benefits of this position, and not the least, is that Canada has been completely spared by the violent action groups that proliferate in the region. The only case in which Canada has been a victim of terrorism related to the Near East question was the assassination of the Canadian engineer Gerald Bull by the Israeli secret service. Apart from that, Canada has remained sheltered from all the events shaking the region.

By weighing these things in the balance, Canada is not displaying either foresight or precaution. Although there's nothing automatic and absolutely no force has threatened Canada to date, I wish to emphasize the danger inherent in the fact that certain forces in the region could begin to consider Canada as a party to the conflict and, consequently, as an enemy. It is not Canada's role to be an enemy of anyone whatever in the region. Canada was known instead as the country of peacekeeping forces and as the facilitator of peace negotiations.

In economic terms, while the idea of free trade with Israel was founded on the notion that such trade was not incompatible with free trade with other, Arab countries, with the other countries of the region, it arose at a time when this was not incompatible, that is to say last year or two or three years ago.

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In a context of normalization in the region, it was possible to say that it was not absolutely contradictory to develop one's relations with Israel while developing others with the Arab world.

Today, in the specific circumstances in which we are speaking, and I hope we will be able to change our attitude, this is absolutely incompatible. Even states completely dependent on U.S. diplomacy, such as Saudi Arabia, Kuwait and the Emirates, will be obliged to re-institute the Arab anti-Israeli boycott under the pressure of public opinion at home, simply because Israel is doing nothing, absolutely nothing to facilitate any normalization whatever of the Arab world with them. No people accepts normalization on the basis of its own spoliation, its own humiliation.

And the Arab countries are no exception to this rule. They are in favour of peace with dignity, but absolutely not for humiliation by accepting Israel's diktats on the pretext that it is allied with the world's greatest power.

Lastly, as a member of an organization that includes members of the Arab community, I would like to emphasize the extent to which the majority of the 300,000 Arabs in Canada feel truly rejected and scorned by this gesture which, regardless of how it is viewed by those who made it, is interpreted as a gesture of partiality in a conflict in which the responsibilities now seem to be fairly clearly established, with the Netanyahu government on one side. It is precisely that side that is being given an incentive to intransigence.

I hope your committee's recommendations will not endorse the signing of this treaty.

Thank you very much for your attention.

The Chairman: Thank you very much, Mr. Skalli.

Mr. Antonius.

Mr. Antonius: I would first like to thank the committee for affording us the opportunity to express our views in these circumstances. I will try to be very brief.

I would like to address three points in my remarks. First, the proposed free trade agreement runs counter to the very principles of Canada's foreign policy and undermines that policy. Second, it provides support for a very aggressive policy. That support should therefore be reconsidered. Third, I will speak very briefly about its effects both internationally and locally here in Canada.

I would like briefly to recall Canada's official position as stated in the press releases of the Department of Foreign Affairs.

I quote the official Canadian document:

Canada does not recognize permanent Israeli control over the territories occupied in 1967 (Golan Heights, West Bank, East Jerusalem and the Gaza strip) and is opposed to any unilateral measure designed to determine the outcome of negotiations in advance, including the introduction of settlement in the territories and unilateral measures to annex East Jerusalem. Canada considers these measures contrary to international law and harmful to the peace process.

I'm going to skip the other two points.

Lastly, when, by its resolution on the applicability of the Fourth Geneva Convention to the occupied territories, the United Nations held that certain actions by Israel were unjust, Canada, like virtually all its Western allies, supported it.

I cite this in order to emphasize the fact that Canada considers that the Fourth Geneva Convention applies to the occupied territories. This Fourth Convention is currently being violated systematically.

I would like to elaborate a little bit on these points.

First, Israel's present policy violates international law in East Jerusalem and in the occupied territories. As an example, I would like to cite article 49 of the Geneva Convention, which states:

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[English]

The Occupying Power shall not deport or transfer parts of its own civilian population into the territory it occupies.

[Translation]

So this settlement policy violates international law and the Geneva Convention, which Canada recognizes and considers it applies in this instance.

Supporting this Israeli policy at this juncture undermines the very basis of Canada's policy as projected here.

What we are ultimately asking is simply that Canada apply its own policy, nothing else.

As you know, not only is there support for Israeli policies, but Canadian taxes are being used to finance projects in the occupied territories, which Canada considers are being illegally occupied.

The last time I had the opportunity to speak to Mr. Axworthy on this point, I mentioned to him that I had documents on this. They are here, if anyone wants to see them. They are letters of solicitation mentioning the place where these sums of money will be spent and which expressly state that they are tax deductible and that they are going to Canada Park, which is in the territories occupied after 1967.

Canadian taxes are therefore being used to support projects, some of which are of an economic nature, which are in the territories that Canada considers are illegally occupied.

It must be kept in mind that, viewed against the Oslo Agreements, the present Israeli policy is a policy of apartheid, and I am carefully weighing my words, Mr. Chairman. I asked that you circulate the text of an analysis of the legal aspects of the Oslo policy, in which this point is developed.

I would like you to consider very briefly the map of the Oslo Agreements. The small dark green dots are towns and villages under direct Palestinian authority. They are small fragmented points, somewhat like the Bantu homelands.

Prior to the Oslo Agreeements, when there was a closing of the territories, all of the territories were closed. A peasant could go to his field to pick his tomatoes in order to eat. Today, when a territory is closed, the entire territory is closed. These little green points that you see here are isolated from one another. A peasant cannot go to his field and he cannot go to the neighbouring village if he works.

The economic pressure under the closings has thus been 10 times harder to bear since the Oslo Agreements than previously. This is well documented. This map is taken from the December 1994 issue of Le Monde Diplomatique and the texts of the Oslo Agreements explain very clearly what is happening there.

As you know as well, Israel has introduced a bypass roads construction policy. These bypass roads are reserved for the exclusive use of Jewish settlers. When there are closings, they do not apply to them. This means that it is not the territories that are closed, but rather a population. It is people's status and religion in this case that determine whether or not they can travel on these roads and whether or not they can leave their territories. It is this policy that this free trade agreement will support.

New housing is reserved for the exclusive use of the Jewish settlers. Even non-Jewish Israeli citizens do not have access to it. This means that this is an openly racist policy. It targets people on the basis of their religion and gives them different rights depending on their religious affiliation. This applies not only to Palestinians in the occupied territories, but also to Israeli citizens in the interior.

I find that this human rights situation in general, which is analyzed and summarized in the document distributed to you which was produced by a Palestinian human rights organization, must absolutely be considered when treaties such as the one here proposed are drafted.

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There are other points that I could develop, but I would like to be brief. I will therefore stop here. I could add many details to support the points that I have made.

Lastly, very briefly, I would like to speak about the negative effects of this proposed free trade agreement for Canada, both for foreign policy and trade and the situation of Canadian citizens.

Internationally, as pointed out earlier, Arab governments will be unable to disregard this treaty in the present circumstances. A few years ago, Canada conceived the notion that the development of economic relations, the strengthening of the economy of all the peoples of the region, was a positive support for peace. This is not a zero-sum game, as was said earlier.

On the contrary, the development of economic relations on both sides could contribute to peace. This is what justified many Canadian actions. This is no longer the case today.

Lastly, we spoke of this treaty's effect on Canadian citizens of Arab origin. The message that is being sent to them by a treaty such as this is that ... I'm going to digress a moment.

The vast majority of Canadian citizens of Arab origin act like Canadian citizens with respect to Canadian politics and adopt no single position one way or another.

The message that is being sent to them by this treaty is that they must shift their electoral weight to bring pressure to bear on the government so that it takes their aspirations into account. I believe this is very negative, Mr. Chairman.

The message that must be sent to all citizens is that we are citizens, period, and that ethnic or religious coalitions must not dictate people's voting behaviour. This point must be taken into consideration when principles of foreign policy are formulated.

I thank you and I am prepared to answer your questions.

The Chairman: Thank you, Mr. Antonius. I know you shortened your presentation because of the time. However, I am certain that you will have the opportunity to come back and answer questions. You will give us the details at that time. Thank you very much.

[English]

Mr. Mahmoud from the Canadian Arab Federation, please.

[Translation]

Mr. Muhammed Mahmoud (Director, Canadian-Arab Federation): On behalf of the Canadian-Arab Federation, a pan-Canadian organization - and the only one - that represents all Canadian-Arab organizations, I have the honour of addressing you as part of the proceedings of the parliamentary committee on the foreign trade agreement between Canada and the government of the State of Israel.

Nearly 27 years ago, a young boy of seven was driven from his home. This young boy was not Palestinian. He was Syrian. He was driven from the Golan by Israeli defence forces, which had taken the initiative of attacking another country and driving away its civilians.

In 1987, I asked a French friend - you will have guessed that I was that young boy - who was going to Israel to photograph my village, the place where I had spent my childhood and had left all my hopes. He came back empty-handed because the Israelis had razed the village and replaced it with fields where they grew products for export to Europe, France, where I was studying at the time.

These defence forces attacked other Arab countries in order to occupy other lands so that Israel would have an increasing position of strength. I come back to the present.

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If I understand the actions and concerns of the government of my country, the one I have chosen - I was told it was a country of justice, freedom and equality, but perhaps it was lacking fraternity - to promote economic, political and cultural relations with other countries, something that I honour, it is understood that these actions must be taken in a general context consistent with Canada's ideals, democratic traditions and principles of justice.

It must also be understood that it is hard for us to understand the initiative of this treaty given the choice of the time of its implementation, when the present government of the State of Israel is doing everything to undermine the peace efforts that were initiated by the former Israeli prime minister, a war hawk who had ultimately concluded that war served no purpose and would solve no problems in the Middle East.

We therefore have a government that is making every effort to stop the peace process and the implementation of the agreements signed between the former government of the late Mr. Rabin and the Palestinian national authority.

But how could I fail to see this parallel, when everything points to it? Earlier, we circulated a photograph from an Arab newspaper - the caption may not have been translated - showing two Palestinian peasants throwing their fruit that had rotted in the sun into a garbage can because the Israelis had closed the road that would enable them to export their goods and products.

So once again we are hungry, and once again in Palestinian territory, all for the benefit of Israeli farmers, of Israeli subcontractors, who are earning money on the backs of these poor Palestinians.

If I understand correctly as a Canadian citizen, the Team Canada tours - and I encourage some of the Prime Minister's actions in meeting the economic challenges of the late twentieth century ... It is hard for me to understand the reasons for this agreement, which concerns only a very small market relative to the vast market of the Arab countries, which are only asking for this kind of agreement in order to export to Canada and to import.

Last year, there were discussions between Lebanon and Syria on the one hand and Canada on the other so that those two countries could export 500,000 washed cotton T-shirts to Canada, if you please. At the end of these discussions, they were only able to ship 300,000 T-shirts.

I read somewhere in the text of the draft treaty that Canadian markets will be totally open to Israeli cotton exports.

This agreement will put money in the till of a state that does not hesitate to kill civilians, as is the case in Lebanon, as is the case in Gaza, as was the case very recently, roughly three weeks ago, that does not hesitate to block a peace process that has given rise to so much hope in the Arab countries, which have lost almost everything, among the Palestinians who have lost almost everything and who ultimately agree that this peace process should be implemented. They have accepted the minimum, whereas they live in miserable conditions that we in Canada cannot imagine, and I am weighing my words.

Believe me, we cannot imagine what the Palestinians are going through where they are now. We cannot imagine how 1.5 million Palestinian refugees are living in misery every day, with open sewers, no drinking water, no plumbing facilities, no streets. Nothing. They merely live, or they simply survive.

So this is a state that is mistreating an entire people, one in which hundreds of thousands of individuals are deprived of the necessities of a suitable existence for human beings.

In these conditions, let us look at the peace agreements and what they have given the Palestinians. The Palestinians must export, because Israel has allowed them to export, but through Israel. That was in 1991. That means they can export to the EEC, provided Palestinian goods flow through Israel, that they be labelled Made in Israel and exported to the outside world. This means the Palestinians do not exist.

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[English]

In order to export, Palestinians must go through an Israeli agent. They are unable to deal directly with outside partners.

Something else comes to mind. In the wake of the Oslo peace agreements, it was decided to build an airport and a port in the Gaza strip, and Canada was to take part in those two projects. Equipment worth $35 million US have been rotting in Gaza for two years now. Israel refuses to clear the shipment through customs or to allow it to be sent back simply because it doesn't want to give Palestinians even a smidgen of autonomy.

Another analogy comes to mind. This treaty will bring more money to the Israelis and to the current government, the Likud government. Remember that the Likud, some of which members at least were asking for Yitzhak Rabin's destitution, initiated the peace efforts in the Middle East and that Mr. Rabin's widow has refused to shake hands with Mr. Netanyahu, who had come to Mr. Rabin's funerals - remember this - , the current Prime Minister of Israel.

The analogy I suggest is this. If you put more money in Israel's hands, you will encourage the Israeli fundamentalists, those who killed Rabin, those who still want to drive the Palestinians out of their homeland and out of the al Aqsa mosque, those who want everything to be returned to the Jews and who want all Jews to come back to Palestine from every corner of the world. This will give a new impetus to the other fundamentalists, the ones from the other side, because once again their populations will be totally deprived of everything. It's a perfect setting for sprouting ideologies.

Encourage one side and you will encourage the other side as well. Put more money here, deny an equivalent amount to the others, and you will fan the flames of conflict. This is what I wanted to say.

We ask you to delay the implementation of the agreement and to link its future implementation to the observation, by the Israeli government, of all the clauses in the Oslo agreements, however insignificant, and to a resumption of the peace negotiations with Syria and Lebanon, whose territories have been occupied for years by the military forces of Israel.

Remember the bottom line: the Palestinians suffer every day, in all aspects of their life; they are deprived of everything and they endure. Recently, I went to a festival of Arab films in Montreal, where the hopes of Palestinians who don't know what to do anymore were put on screen. They had hoped for a durable peace in the region, they wanted to finally live free from oppression and from Israeli occupation. But at the end of the day, they still see nothing on the horizon.

They were expecting to discover the wonders of peace that were promised them by so many people and so many states. They see nothing coming. Do you realize what that means? Don't bring despair to people who have had such hopes. Don't ask them to accept without protest when you give nothing to one side and everything to the other side, the side of the aggressor, the one that took their land. The free trade agreement between Canada and Israel embodies this attitude.

Thank you.

The Chairman: Thank you very much. Mr. Bergeron.

Mr. Bergeron: I listen to your comments and your presentations with dismay, since at first we were in favour of the principle of a free trade agreement with Israel, since we are, fundamentally, in favour of free trade in general. We consider that it's imperative to abolish all tariffs and to open up the markets with our trading partners. However, these trading partners must be seen to respect the values we cherish.

I had an exchange, a few minutes ago, with the minister of International Trade. I don't know if you were present. I asked him the following question: Considering the circumstances, considering that the peace agreement is not respected and that the state of Israel openly infringes on the rights of Palestinians, could we possibly delay the implementation of the agreement until after January 1st, 1997? The minister didn't give me an answer.

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[Translation]

What I understand of the process in which we are engaged is that the federal government can enter into international agreements without requesting Parliament's permission. There is no ratification process in Canada. The agreement itself is ratified when the federal government signs it.

Our existing process is simply to pass the bill implementing the agreement, that is to say the bill that will amend the Canadian statute so that it accommodates this agreement that the federal government has signed.

We are not authorized, as Parliament is, to suspend the implementation of the bill on our own or to suspend the implementation of the treaty. I do not know whether you have a suggestion, an idea that could help us convince the federal government to suspend the treaty's implementation on its own.

From what the Minister told us earlier, I understood that the treaty is signed and that the planned date of the treaty's implementation is January 1, 1997. Ultimately, what parliamentarians are being asked is to take note of the fact that the treaty has been signed and is to enter into effect on January 1, 1997.

Our hands are somewhat tied at the moment to the extent that the opportunities for intervention are rather limited. At first glance, at least, I feel somewhat at a loss.

Mrs. Debien: Except for the report.

Mr. Bergeron: Would there be an opportunity for us to intervene through the report?

Mrs. Debien: Through the government.

Mr. Bergeron: Well, I don't know whether you have any suggestions or comments to make on that account, but I must tell you I am somewhat confused about this.

Mr. Skalli: With respect to a signed agreement that would not be implemented, the Israeli government would be the last government to take exception to such a thing. One year ago, it signed agreements which it questioned six months later on the pretext that another election had been held.

I believe that Canada signed this agreement in a very specific set of circumstances and I give credit to the officials who negotiated it and to the political team that carried it through. This was done in a context in which they wanted to act in such a way as to facilitate the establishment of peace, to further a process that was already under way.

I believe that these politicians and officials are able to understand that things have changed very suddenly and that the sort of thing that facilitated an appeasement process yesterday is now throwing fat on the fire. You must have the political courage to stop and say that at least we are going to leave that in abeyance; we are not going to implement it right away; we are going to wait.

If we do not cannot have the courage to set conditions and say that we will not implement it until they have done such and such a thing ... Even without going that far, we can say that the situation is not conducive to it. And additional questions have been raised. Once again, I'm telling you that the Israeli government has proven to us that it does not take exception to a signature at the bottom of a document. It showed us what it did with it.

Mr. Paré: We have heard about the very important, even vital, issue of the use of potable water on a few occasions today. Is it possible that you were describing to us the use of water that is reserved for Palestinians, as opposed, for example, to the Jewish settlers in the occupied territories? Are there any figures to illustrate this?

Mr. Antonius: Very briefly, since this is not the main issue of the discussion, we can say that, here again, the residents of the occupied territories, depending on their religion, have a differential right to water. The Jewish settlers are entitled to dig wells as deep as 600 meters in order to draw water.

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I should explain one thing. The water on the West Bank essentially comes from rain water, which accumulates in the aquafers at some point during the year. On average, the Palestinian wells are at most 200 meters deep. So they are nowhere near as deep.

The Israeli settlers are entitled to dig wells as deep as 600 meters, something that is denied to Palestinian land owners.

In the Oslo Agreements, the issue of water is not definitely resolved, but, for the moment, quotas have been issued and, once again, these are different. I have the figures here somewhere, but I don't think they are very relevant. Broadly speaking, we can say that the Israeli settlers have access to twice or three times as much water, perhaps even much more, as the Palestinian farmers.

Thus, from a purely economic point of view, if you are a free-trader, you see that everyone must be given the means to farm in the same way, and this is not the case.

If you are interested in seeing more specific documents, I could send them to do. I have them.

The Chairman: Mr. Mahmoud.

Mr. Mahmoud: Mr. Paré, you were surprised earlier by the fact that there was no first consultation before first reading.

I have figures on water. On average, the Palestinians in the occupied territories of the Gaza strip consume 35 litres of water per day. That is the equivalent of two flushes of our Western toilets.

Israeli citizens are entitled to 175 litres of water. That means a ratio of one to nine. This gives you an idea of the difficulties of the Palestinians - a Palestinian mother, a Palestinian cleaning woman - have in meeting their essential needs every day.

In these circumstances, you are not entitled to a minimum level of comfort. There is no minimum level of comfort. This is not a Palestinian standard. It is a standard which the Palestinians cannot enjoy because they know nothing about it.

[English]

The Chairman: Mr. Morrison.

Mr. Morrison: Thank you, Mr. Chairman.

Gentlemen, I think all three of you perhaps attach more importance to this treaty than it's worth. I don't believe it's quite as significant a document as you are indicating to us. However, I understand your passion and I do respect your judgment on this matter.

I am a free-trader tried and true. However, I must say some of the things we have heard here today have swung me over.

This is more of a comment than a question. I tend to take the tract of Mr. Bergeron that we should be moving a little bit slowly on implementing this thing. It doesn't have to be done tomorrow morning at six o'clock. Let them sort out some of their affairs in the context of Israel and Palestine before we muddy the waters with our little stick.

This is my opinion. I don't ask for a reply. I just wanted to get it on the record.

Mr. Antonius: I would like to comment, though, if you'll allow me.

I agree with you that the treaty does not have the importance objectively that it seems to be given. However, it is a symbol on the one hand, but it is also one element in a global policy.

I always felt that the expressed written policy of the Canadian government on the Middle East was excellent - the way it's written, the way it's formulated. The way it's implemented goes 180 degrees against the way it's written. That's what I want to say here. This treaty is one more sign that the way we implement the policy goes against the stated principles.

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On the question of Jerusalem, for instance, it is stated in three different places in the official policy that the Government of Canada does not recognize annexation of Jerusalem. However, when we have the Jerusalem march in Montreal, it gets funding from the municipal governments at least, and maybe also from the federal government, and certainly it gets political support from various parties. That goes against the stated policy.

My only request here is that the stated policy of the Government of Canada be implemented. I'm claiming that the actual bill...

This is one element. It's not that important, I agree with you, because it's just one thing among many others. But the main point I'm trying to make is that the implementation of our policy on the Middle East goes against and undermines the stated principle.

My only request to this committee is, beyond this bill, please look at the stated policy. Look at the actual situation on the ground, at what the maps are saying, and draw your conclusions and your policies.

Mr. Morrison: Actually, I'm sorry, sir, but we are not here to get into macro-politics; we are only dealing with the treaty.

I now have a question, since we're becoming engaged here. If the treaty contained guarantees that the Palestinian people in Gaza and the West Bank would benefit equitably from it - that they would not be hindered from active participation in this free trade arrangement with Canada, through border controls by the Israelis, through closing of the areas and so on - would it then be acceptable to you on the basis that at least it does represent some progress? Would you accept it or not?

Mr. Antonius: Yes, if it fell within a global policy of economic development for everybody in the area. The area I'm talking about is Israel and the occupied territories, for the time being. If we restricted ourselves to just that, I would be in support of it.

But this would mean exports from Palestinians would have to be subjected to the same constraints as exports from Israelis, if we believe in the principle and the logic of free trade. This means Palestinians who want to import equipment to manufacture anything should be allowed to do so.

It was asked earlier, what if there is competition between Palestinian high-tech companies? There are no Palestinian high-tech companies, for a very simple reason: Israel is blocking the entrance of high-tech equipment. Even equipment donated to a hospital by an Austrian charitable organization has been rotting in the sun for the last two years, under the excuse that it is high-tech and therefore dangerous and so should not be allowed in.

If we put guarantees and we check that they are respected, why not? I believe - and I've been taking this stand since long before dialogue on peace became the fashion, in the 1970s - that dialogue on peace and mutual recognition between the Palestinians and the Israelis is the only possible road forward. This is still my stand: mutual recognition and symmetric rights. If the trade agreement contains that, that's good. But it doesn't now.

Mr. Morrison: Thank you.

[Translation]

The Chairman: Mr. Mahmoud.

Mr. Mahmoud: You fail to understand Israel and Israeli policies. Remember that Israel had a war in the south last April and went to shell a power station in Lebanon 160 kilometers to the north.

Israel will not permit another party in its entourage to compete with it either economically or militarily. We must not forget that. We must not forget that fact. It is an essential fact of Israeli superiority, initiated by the spirit of the state itself.

You spoke of passion in your remarks. It's not only passion. It's the reality of the situation. We cannot fail to say that. We cannot forget all these facts that we see every day. They are there. They are facts, sir.

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[English]

The Chairman: Mr. Loney, and then Mr. Assad.

Mr. Loney: Mr. Chairman, could the document with regard to water use be presented and tabled?

The Chairman: By all means.

Mr. Antonius: May I point to the fact that there's a much deeper and better study financed by the IDRC, and therefore by the Government of Canada. Some excellent Canadian researchers have spent two years researching the water issue and have issued a very important book on this. It's available, and of course I'm willing to provide this.

Mr. Loney: Could you provide us with a copy of that, please?

Mr. Antonius: Yes. It's called Watershed, by Steve Lonergan. If you want, I can forward a copy. I don't have it here, but I can certainly send it.

Mr. Loney: Thank you.

The Chairman: The committee is in regular contact with IDRC, because they come before this committee as part of the estimates. So we will pursue that.

Mr. Antonius: That's why I mentioned the book. It's a very important book. They spent two years studying the issue.

The Chairman: Thank you for that recommendation. The water issue is clearly one that is huge, when we have considered the geopolitical dimension in that area. I agree it is both a contentious and very difficult issue.

Mr. Loney: Mr. Chairman, can we have that tabled?

The Chairman: The witness has been good enough to say that he will leave his map with us. So our researchers will also obtain the IDRC book to which he was referring. It will be available to members of the committee, if you want it. The Library of Parliament will also have it.

Mr. Assad.

[Translation]

Mr. Assad (Gatineau - La Lièvre): I have a brief question.

Mr. Skalli, have you already visited or even lived in the occupied territories in the Middle East?

Mr. Skalli: I have visited the occupied territories on a few occasions, but I have not lived there.

Mr. Assad: I have always hesitated to accept invitations to go visit the occupied territories. I was too afraid of coming back not only affected, but enraged. However, I have read considerable testimony.

Mr. Skalli: You would be.

Mr. Assad: I don't doubt it.

The Minister seemed to say that we are defending human rights and so on. That seemed a little weak to my mind.

In any case, some businessmen apparently demanded from the Department that there be this agreement with Israel because the United States has one and Canadian businessmen would benefit from trade agreements.

I ask myself the following question. The Middle East includes a number of countries, and I get the impression from your testimony that some businessmen have an extremely narrow vision. They are going to succeed in turning a larger number of countries from that part of the world against us simply over a trade agreement with Israel.

Consequently, in trade terms, it seems to me that it is not as advantageous as the Minister would lead us to believe to literally drive away customers from that part of the world in order to keep one.

Mr. Skalli: In any case, I think pressure can be exercised on Arab states, particularly when they are in a situation of weakness, like Kuwait or the Emirates, for them to accept a particular policy that favours Israel.

With privatization, it is no longer states that make the economy, but increasingly ordinary citizens. I can tell you that, if, for example, there is a policy of the government of Kuwait or Saudi Arabia that does not take exception to our being able to have privileged relations with Israel, the individual businessman with whom you are going to sign the contract for Kuwait or Saudi Arabia has national pride and feels humiliated by the fact that you have preferred to favour your relations with Israel. Why? Let us be quite clear: the Israeli economy's trade potential relative to Canada is, pardon me, virtually negligible.

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We are talking about the Israeli economy as though it were a very highly developed economy. In reality, it is an economy that has a high tech industry in the military sector, which has a few high technology sectors here and there, but which in other respects is precisely a Third World economy, which produces poufs, shirts, aluminum objects, household utensils and that sort of thing. That's the Israeli economy.

Why is the Israeli per capita income $16,000 a year? Even before starting to produce anything, they receive $5,000 per capita per year from international aid, mainly U.S. aid.

It would be fairer to say Israeli per capita income is $10,000 a year rather than $15,000 a year if you want to reflect what they actually produce. From that $10,000, we would exclude the military sector, where they would be more Canada's competitors than customers or partners because they have nothing to sell you in that sector and we don't have much to sell them. We are more in competition with them. This doesn't really represent a very attractive market for the economy.

Can the same be said of the Egyptian economy, for example? Can the same be said of the Iraqi economy once Iraq has begun to rebuild? You have to look a little further than a few months' notice, even a few years' notice. Potentially, it is clear we are headed on a completely wrong course by favouring...

I would like to return to one point. It is true that we are discussing the agreement's symbolic value, that the scope of this agreement is not extraordinary. But everything in the Middle East turns on symbols. Through this free trade agreement, we are now intervening in the Israeli-Israeli debate, and we are intervening in favour of the Israeli extreme right. There is a debate today in Israel in which Mr. Peres and his friends are saying, ``Thanks to us, thanks to our policy of openness, thanks to our peace policy, we have been able to promote economic development, to develop trade with the world and normalize economic relations.'' And there is Mr. Netanyahu who is saying, ``I can obtain the same things as you without making any concessions.'' And we are telling Mr. Netanyahu, ``Yes, you are right, you don't need to make compromises for peace. We'll give you what we gave Mr. Rabin and Mr. Peres.''

Is this the message we want to send? Listening to all the parliamentarians and to our governments, I don't get the impression that this is the message we want to send, but that we are saying this is the message we are sending because there is this debate in Israel today. We are a party to that debate. We are strengthening the Israeli extreme right against those we call our friends in Israel. Please, don't be my friend, but do support me.

The Chairman: Thank you very much, gentlemen, for having expressed your views and opinions to the committee.

[English]

We have the last group of witnesses. We have Professor Sigler from Carleton University. We have Mr. Shawky Fahel from the Kitchener-Waterloo Arab-Canadian Association. We also have Mr. William Janzen from the Mennonite Central Committee, who asked at the last minute if he could briefly join in as the last witness.

Professor Sigler, welcome. Thank you very much for coming, sir. Mr. Fahel and Mr. Janzen, thank you very much for coming.

Perhaps we'll just take everyone as they appear on the list. We'll start with Professor Sigler and then we'll hear from all three witnesses, and then be open for questions.

Professor John Sigler (Individual Presentation): Thank you very much, Mr. Chair. I am going to be mercifully brief. I have listened very carefully to the debate, and many of the same points would simply be repeated. I'm also very interested in the views of my colleagues here, if they have something new to add.

Let me just say my first remarks have to do with timing. It's quite clear we're dealing with a very politicized process that took place in a good professional environment quite outside the politics of when it was going to come up here for endorsement. My judgment would be that even in the case of the European Union and the United States, they wouldn't put this through now.

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Having said that, we've just come in at an extraordinarily awkward moment in terms of the political process. I think there are serious questions as to why the government decided to bring it forward for signature on July 31, at a time when there was so much uncertainty about the policies to be followed by the new Israeli government, which is pretty much in confrontation with nearly every other government, including its former friends. The same is true with Washington, if you look below the surface. So the timing is extremely awkward.

What you just heard will look like a symbolic act of Canadian interference in this political process. I don't think it happens that way, it's just because of the timing. The way you're asked to rush through this is enormously surprising to me, since it's clear from looking around the room that the occasions to discuss the fascinating economics or politics of the Middle East are so rare, and it all comes up here even though the focus is quite narrow.

I have one particular point that has bothered me about this agreement. I know it has already been discussed, so I'll put it in slightly different terms. It seems to me that there is a contradiction in Canadian policy that this committee could look into for clarification, quite outside the context of this endorsement procedure.

Revenue Canada recently instituted a careful set of procedures for stopping the charitable status of donations to Israeli settlements in the West Bank and Gaza. There has been a very active campaign by a whole stream of Israeli visitors to raise money for these settlements. Up until now they were being given the same charitable exemption status. Revenue Canada has taken the very careful position that these settlements, under Canadian foreign policy, are illegal, and therefore we should not give charitable status for donations made to those settlements.

Under this trade agreement, as you've just heard, the question of what is Israel and what is made in Israel is not defined. It means, as I heard the minister say, that things made in the Golan Heights and in the West Bank settlements are now eligible, under this ``made in Israel'', for tariff-free status, so you're benefiting economic enterprises that are regarded as illegal by the Canadian government. So you have one policy by Revenue Canada and a quite different policy here.

My question was whether we ever got a legal statement from the legal division of the Department of Foreign Affairs and International Trade on the implications of the definition of ``made in Israel'' for Canadian foreign policy. I think there's an extraordinary contradiction there.

My last point has to do with the simple technical details. I don't know, so perhaps it's a question to be pursued. Since 1985 U.S. officials have had a great many difficulties with the Israel-U.S. free trade agreement. I hope the professionals who conducted this looked into that long list of grievances and dealt with them. Some of them are covered after January 1, 1996, by the new World Trade Organization procedures, but some are not. The basic American grievance has been of deciding what the tax will be on an imported agreement - not a tariff. This is a sales tax and they put the price on. It even has a name in Israel - the TAMA procedure. This has caused all kinds of discrimination for the Americans.

The point also made on the American side is that under this agreement Israel runs a substantial surplus with the United States, and the United States has a substantial deficit. On the other hand, Israel runs a substantial deficit with Europe. So the concern was that the Israelis were using the trade with the United States in order to cover some of their losses in terms of trade with Europe.

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If I look at the statistics here, the tiny Canadian figures do show the same imbalance, over a considerable period of time, that the United States has undergone. So it doesn't look like there's any net economic advantage for Canada in this, particularly when you see how small the size of the trade is involved here. One ends up with the conclusion that we're dealing with a highly politicized agreement. In economic terms, I'm sure it was not a Canadian government priority.

Thank you.

The Chairman: Thank you, Professor Sigler.

Mr. Fahel.

Mr. Shawky Joe Fahel (President, Kitchener-Waterloo Arab-Canadian Association): Mr. Chairman and members of the committee, when I am asked to address somebody I usually say my name is Shawky Fahel and I'm a Canadian, an Arab, a Palestinian and I carry an Israeli passport. That's enough to give you claustrophobia.

I've heard talk here for the past three hours. I wrote a speech that I was going to address to you, but like my colleague here, I'm going to be brief.

As an advocate of free trade - I say an advocate because Roy MacLaren initially embarked on the implementation of free trade with Israel - I wrote the minister a letter, and I'm going to read you his reply. This was in December 1994:

Thank you, Mr. Fahel, for your letter of October 24, 1994, in which you expressed support for a potential Canada-Israel free trade agreement.

He goes on to mention that the Right Honourable Prime Minister had announced for us to embark on that. We are all for free trade.

A few things have happened. I was privy to the signing of the first leg of the free trade agreement in Toronto in July. At the signing, Mr. Sharansky talked about extending free trade to the Palestinians. I heard the minister, here today, talk about extending free trade to the Palestinians. We don't need to talk about extending it, we need to take action.

From what I am hearing today, this agreement seems to be going through - I might sit here and say we should delay it 24 hours or delay it four months. Free trade with Israel will give Israel economic benefits in the region.

We can say we're going to extend free trade to the Palestinian people. Even if we do, that is all immaterial, because Israel has to accept free trade between it and the Palestinians. They have to allow the opening of the borders that are costing the Palestinians $9 million a day in losses. They have to allow the fruits and the vegetables to flow.

I'll give you a simple example. I was talking to Faisal Husseini yesterday. He addressed this committee and talked about economic development last year and spoke to the Jewish community here in Ottawa. He said the Jordanians were sending a wheat shipment to the Palestinians, to the West Bank. The Israelis held it for two months, and when they released it, it was bad.

The Saudis contributed meat, through Egypt, to the Palestinians. The Israelis held it for a couple of months. By the time they let it go, the temperature had gone bad and the meat had rotted.

We have a duty as a country. For the past 50 years we have been known as the best and most respected country in the Middle East, and that goes back to our late Lester Pearson - bless his soul - and his Nobel Prize for what we have done in that region. We have always maintained a fair approach to the Middle East. Maybe we ought to consider extending a free trade agreement, like the one the minister mentioned earlier, to Egypt, to Jordan or to the Palestinians.

We have to be fair. As Rotarians, we ask whether it is fair to all concerned. Is it beneficial to all concerned? Is it beneficial to the Palestinians? Is it beneficial to the Israelis? Is it beneficial to us, as Canadians, because we have to be concerned that jobs are created and that we in this country will benefit from free trade, whether with Israel or anybody else.

The only thing I can say is that the timing of the agreement is off because of what has transpired in the past three months. We do not want to give the current Israeli government any weaponry to think that by signing this agreement with them we're giving them carte blanche.

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I would like to call on our Minister of Foreign Affairs for that matter to maybe issue a declaration saying that if we accept and sign this free trade agreement, we are not condoning in any way, shape, or form what the Israeli government is doing, so that they do not use it as a weapon. I think that can go a very long way with the Arab countries. I met with some ambassadors today and I think each and every one of you here should know that the Arab countries are very respectful of our stand as a government, with Mr. Axworthy's speech at the United Nations and our releases in the past three weeks.

I'd like to end by saying that we're all here as humanists, not as an Arab, not as Jew, not as a Canadian, not as a black, not as a white. We have a duty here to stretch out and to extend our arms and see what we can do to make sure that this experiment in reconciliation between Arab and Jew, between two adversaries, which started on September 13 with the hands that shook the wall, the hand that shook the cradle, will not falter and will not fall. It is our duty and our government's duty to lean on the Netanyahus of the world and say we need to continue the peace process. We cannot allow it to suffer.

Free trade agreement or no free trade agreement, we have a bigger picture. And it's very unfortunate that Ross, the American negotiator, went back. Unfortunately, from what I heard today talking to Jerusalem, there has been no progress in the past three weeks of extensive negotiations. We're sitting here and we're talking about the free trade agreement.

I read something today that was written in Ha'Aretz. Ha'Aretz is one of the Israeli magazines in Tel Aviv. I just want to share a little note here. It says:

Some columnists took to sounding alarms. It's lovely that people cry for Yitzhak Rabin and gather in public squares to light candles and sing sad songs.

Amnon Dankner wrote that in Ha'Aretz.

Who is lighting candles and singing songs for the victims of the next war that is about to break out? This is the larger picture and it's our duty to see that it never happens. We have to see beyond our noses, each and every one of us. There are Jewish colleagues here and Arabs and Palestinians. It is our duty in this community, as Canadians, to reach out to each other, to extend our hands and get together and see what we can accomplish in this country.

In September and October of 1993, External Affairs arranged the first roundtable talk after the handshake in Washington between Arab and Jewish businessmen in this country, and it went a long way. This is the kind of spirit we need. It is up to you, after you hear the testimony here, to decide whether to delay that agreement or not, but let us not fall short of seeing the larger picture of what really is happening in the whole Middle East.

Thank you very much.

The Chairman: Thank you, Mr. Fahel.

Mr. Janzen.

Mr. William Janzen (Director, Ottawa Office, Mennonite Central Committee): Thank you very much, Mr. Chairman.

I represent the Mennonite Central Committee, which is a small humanitarian agency. We've been active with the Palestinians since 1949.

Earlier this month I had the privilege of spending a week in the Palestinian territories, and I heard many very moving stories about the tragic disturbances of late September in which about 70 people were killed and 1,600 injured. In conversations with several Palestinian leaders I asked them about their views of the Canada-Israel free trade agreement. They said they are not against the principle of free trade, the free flow of economic goods and activity, but in its relations with the Palestinians, Israel has violated that principle in drastic ways.

They proceeded to explain that in ways you have already heard here today. First of all there were the closures, which prevent people from getting to jobs, whether in Israel or in other Palestinian towns, which prevents the Palestinians from exporting their products, which prevents Palestinian investors from setting up factories because they don't know whether supplies will be able to come. The free flow of economic activity is being seriously violated and people have become impoverished. Some of the people in Gaza are almost destitute.

There is another level. If it were only closures, they could be lifted rather easily, but there's the question of policy. I came across a rather large map that communicated it rather vividly to me.

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This is a map of the West Bank, not Gaza. The white areas are those areas that are under exclusive Israeli control. The yellow areas are the areas under joint Israeli and Palestinian control, and inside the yellow areas there are small blue circles and those are under exclusive Palestinian control. They constitute 3% of the West Bank territory. Admittedly, that 3% of the territory constitutes more of the population centres. Nevertheless, the closure prevents a healthy interaction between those centres and the surrounding territories.

The map does not show the network of roads, nor the settlements that have been built there, but taken together the map suggests something. It has some troubling similarities to the system of Bantustans that once characterized South Africa. Canada at the time strongly rejected that system, and I think it should reject anything that is somewhat similar to it now. It is very far from the contiguous Palestinian territory that was envisioned in the earlier peace process, a contiguous territory that was also supported by the UN resolutions that have been the cornerstone of Canadian policy for many years. Without a contiguous Palestinian territory, it will be virtually impossible to develop a Palestinian society, a Palestinian economy, and to build the infrastructure that is necessary.

I and my organization take no pleasure in raising these objections. Like most people in the western world, we want security for the Israelis, but that desire will not meet with long-term success if the rights and well-being of the Palestinian people are not regarded as equally important.

As I listen to the stories of people there, which were really quite moving, I reflected on the history as I understand it, and it does appear to me that the western world has asked the Palestinians to make a series of major concessions. In 1947 the western world, with substantial participation from Canada, proposed a partition plan, thereby asking the Palestinians to give up a part of their homeland so that the State of Israel could be created. In 1948, when that state was proclaimed by unilateral action, its borders were substantially larger than the 1947 plan, but the western world recognized those borders and in a sense again asked the Palestinians to recognize them, thus giving up more of the land.

In 1967, when Israel took over considerably more land, the West Bank, the Golan Heights, East Jerusalem, Gaza, the Sinai, then the world said no, you cannot have this territory; acquiring territory by force of arms is wrong, it should be returned. But gradually more and more settlements were built. Roads were developed and resource utilization systems developed. And now we are at a time when the world is again asking the Palestinians to make another concession for these settlements, these roads, the system of Israeli control.

At some point I think we need to recognize that this may not represent the seeds of peace for the long term that we all desire and which is in the interest of all the parties there and here.

Thank you.

The Chairman: Thank you, sir. Mr. Penson.

Mr. Penson (Peace River): Thank you, Mr. Chairman.

I'd like to welcome this panel here. I will start by saying that Canada has long led the charge for free trade and trade liberalization, and I certainly agree with that concept. Back in 1992, when the Uruguay Round of the GATT was finally resolved after about seven years, the conditions that existed at the time in the Middle East were somewhat different, as we all know. At that time some 120 countries signed the free trade agreement, the GATT, and went on to establish the World Trade Organization.

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I'm wondering about two things. One is how this free trade agreement between Canada and Israel has brought about change in terms of advancing that. We certainly know that political events in Israel and Palestine have deteriorated greatly in the last few months, and it's of great concern to me and to our party. But if we were to consider setting aside the implementation of this bill for some time, how would we measure when is an appropriate time to move to advance free trade further between these two countries?

Are the conditions that existed at the signing of the GATT in 1992, when we had some hope for peace, the appropriate type of political atmosphere? I'm looking for some type of a measure as to how we could advance and move this process and help our committee out.

Mr. Fahel: Do you want to take that, John?

Prof. Sigler: Let me respond very briefly. You used the phrase ``between two countries''. The problem here, which I try to illustrate, is that Israel is a very exceptional country because we don't know what its borders are and we have considerable controversy over those borders. So that already raises a very significant difference from any other free trade agreement, where it's quite clear where the boundaries and sovereignty and economic responsibility lie.

Because of this problem of borders, many questions come up. For instance, if manufacturing takes place in that, what are we supporting? Are you pre-judging and getting into an acceptance of an existing political set-up, which I frankly think is the Israeli motivation in this? I don't think it's an economic one under the World Trade Organization. It certainly follows very carefully those new procedures. It's primarily directed at tariff barriers, but it also deals, since January 1, 1966, with the non-tariff barriers as well, but in a very carefully restricted area. Services are not part of this agreement, as you know. It's a very carefully defined set of goods.

Mr. Penson: Can I explore that a little bit, Professor Sigler? Back in 1992, when all of the member countries decided that Israel should be part of the World Trade Organization, or the signing of the GATT, those conditions existed whereby you had a joint use of one country with two major groups aspiring to develop self-determination. If those conditions existed when all of the member countries signed it in 1992, what is different except for the deterioration that's taken place - a serious deterioration, which everybody has noted - in the peace process? I'd like to follow that up.

Prof. Sigler: Just to follow up very quickly, and I think it was indicated here earlier, these negotiations began in an aura of great optimism about the rapidity of success of this peace process, in which economic integration would follow rapid mutual concessions. That simply hasn't taken place. It was stalemated before; now it's even being set back. Surely there's fault on both sides. I don't want to deny that, but it's also true that entering what looks like only an economic agreement in fact has tremendous political consequences, and since Canada is such a small player, and you've seen the tremendous irritation of the Arab community in Canada, what's the point of this?

Mr. Penson: I'd like to follow up, and maybe the other members of the panel can help me out here.

It seems to me that there's been a very strong argument made here today for delay of implementation of this agreement by Canada, and I wonder if you can help us to decide what the criteria should be. We could just wait and see if the peace process is back on the rails. I understand that, but to set it aside indefinitely until that happens - is that what the recommendation is this evening?

Mr. Fahel: I'd like to comment first of all about the economic side. I attended the world economic summit for North Africa and the Middle East in Casablanca and I was in Amman, Jordan. I had the privilege of talking to very many Israeli leaders, including Shimon Peres, and he said to me in Amman, Jordan, ``this is the new Middle East''. The Crown Prince of Jordan said in Amman last year, and I'll use his quote here:

The world, and this region, are changing... either join it or be left out; and enough countries and people want to join in to make it happen.

.2025

There was tremendous economic change in the whole region up until the new government was elected in June in Israel. Do we delay it? Is there a good time? Is there a bad time?

We heard the minister earlier. Somebody else talked about how strong the Israeli economy is and said the Israeli economy will get a lot stronger by opening a lot more missions across the world, and training with more people from across the world after the peace treaty and what have you.

The Israelis have failed to realize something. If anybody read The New York Times two or three weeks ago, there was a write-up talking about who the hell would like to invest a penny today in Israel, let alone the rest of the Arab world. Israel is experiencing a tremendous backlash. We have the Bronfmans in this country. I'd like to ask Charles Bronfman if he is willing to go under the conditions that exist today of tremendous uncertainty, when the Syrians are talking about holding manoeuvres on the border for the first time in umpteen years.

What about the time? When is a good time and when is a bad time? Naturally a good time was when things were positive, when things were happening, when the Arabs and the Jews were getting together in an economic bloc for the first time. They were talking about trade. There were billions of dollars. I wrote something about peace and stability when I came back, encouraging Canadian companies to be very aggressive, to go and pursue contracts over there, not to leave it to the Americans, Japanese and Europeans. We're always complacent. We're always the last boys in the block. We can't sell anything in our own backyard.

We have tremendous opportunity over there, so when is a good time and when is a bad time? If we create trade, for every billion dollars in trade we create 11,000 jobs in Canada. So I think the timing is bad.

What has been happening on the ground over there in the past three or four months? If you are selling condominiums and building new settlements, you can't have your cake and eat it too. We have to find the reality and Mr. Netanyahu has to realize the Palestinians are his partners in peace. When he does this, I think we can accomplish a hell of a lot.

I hope I answered or touched on some things.

Mr. Morrison: You did. We wanted to carry it.

Mr. Penson: I guess my only comment would be if you're waiting for a perfect time, it never exists there. I read your point well: it is a very critical time in terms of the peace process and we need to get it back on track.

Mr. Janzen: I would just like to add there needs to be a greater recognition of economic justice for the Palestinians. This has to be a key criterion. When this is disregarded the way it is at the present time, then it would not be time.

The Chairman: Mr. Flis.

Mr. Flis: I thank the witnesses, because they're getting very heavily not only into the content of the bill but the timing of the bill. I would like to return a bit to the content.

Professor Sigler, you pointed out it was a contradiction in Canada's domestic and foreign policy when the Revenue Canada minister delisted a Canadian charitable organization that had forwarded funds to Israel activities in the occupied territories. A previous witness, the National Council on Canada-Arab Relations, recommended an amendment on page 11 of its presentation under item 3:

That the CIFTA/Bill C-61 contain an explicit provision that forbids the import into Canada of any goods made or produced on Israeli settlements in any of the territories occupied by Israel, together with an effective means for verifying compliance with this provision.

In your professional wisdom and experience, if such an amendment were brought in, would this bill be more acceptable and more timely to meet the January 1997 timeframe?

Prof. Sigler: Let's be very practical. This would be totally unacceptable to the Israelis. This is a negotiated international agreement, so even though it would be a desirable position from the Canadian point of view, it just isn't going to happen. If this were to be brought up as a last condition, there wouldn't be any agreement.

Mr. Flis: My other question is -

Prof. Sigler: Now, should there be an agreement right now... I was only arguing there shouldn't be.

Mr. Flis: Let me get back to timing, then. Should this bill just be put on hold for a year or whatever? When the leaders of two countries have agreed to negotiate a free trade agreement and we are putting it off for a year, what kind of a message are we sending to the Middle East then?

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Prof. Sigler: There is the old international law principle rebus sic stantibus - as long as the conditions remain the same. The argument here is the conditions are no longer the same as when this negotiation took place. Clearly, under those principles you can invoke the idea that the conditions are no longer appropriate and we will wait until such time as they are.

Mr. Flis: I have no further questions.

[Translation]

Mr. Paré: This is more a brief word to comfort Mr. Penson. Mr. Penson said, ``Will there be an ideal moment?'', but he recognizes at the same time, that the moment, today, is critical. I am telling him that even if we don't find the ideal moment, at least let us not choose the critical moment.

The Chairman: You have to express that in terms that Mr. Penson understands. You can't plant seeds in a hurricane, in a storm.

[English]

You see, we can thank you gentlemen for coming here. You finally brought friendship and collaboration between the Bloc and the Reform, which we've been spending all year on this committee trying to do. It has taken a lot of turmoil in the Middle East to bring us to this point. I thank you for it.

Mr. Assadourian.

Mr. Assadourian: Thank you, Mr. Chairman.

When I came in this afternoon, I was confused. Now I am more confused. By the time we leave this place, we're going to be extremely confused. So let me ask you the questions, since I'm confused now.

You said earlier, Mr. Sigler, there was a free trade agreement signed with Israel and the U.S. two years ago. Which year was this?

Prof. Sigler: The U.S.-Israel free trade agreement was negotiated in 1985. It has been in existence now for eleven years. It came from a very political process as well. It came from the Reagan administration, which was really very pro-Israeli government at the time. So the process was heavily political to start with.

In the process of this agreement, there have been a great many problems that have been renegotiated at various moments. They have to do with, primarily, objections on the American side to discriminatory procedures inside Israel against American imports. In the American view - this would be their negotiators' view, wouldn't it? - they have been completely open in letting the Israelis in. Therefore the practice, in terms of the implementation of the agreement, has been very asymmetrical.

Mr. Assadourian: Okay.

Prof. Sigler: In the European agreement, which began in 1975, there have been frequent interventions on grounds of discrimination against Palestinian -

Mr. Assadourian: Do you mean 1995?

Prof. Sigler: The European Union's agreement was in 1975. The Americans' agreement was in 1985. The Europeans' agreement goes back to 1975. That one has frequently run into difficulties on the larger question we're dealing with here of the Palestinians, particularly on this business of whether or not Palestinian production would be allowed into Europe. The Europeans put very strong requirements on the Israelis. They would not renew the agreement unless the Israelis permitted Palestinian agricultural produce to go to Europe. The Israelis, in implementing it, would take the citrus fruit from Gaza and let it sit for two months before allowing it to be loaded, so it would be rotten.

Again, there is a long history of this kind of internal discrimination, which both the European free trade people and the Americans know very well.

Mr. Assadourian: That was before the second element came in, which made things more confusing.

Prof. Sigler: That's right.

Mr. Assadourian: This is the Palestinian-Israeli peace agreement.

Prof. Sigler: The Europeans didn't start with it, but they put a Palestinian component in.

Mr. Assadourian: I'm saying that now that we have another uncertain element in the political future, would this agreement we have with Israel be more complicated to administer than the one between the U.S. and the Israelis?

Prof. Sigler: Because of its narrowness and the relative smallness of the amount of trade involved, I think not. If you look at Europe and the United States, they are Israel's major trading partners. Canada is way down the list both ways. So we're talking about a very small range. One half of 1% of Canadian trade is with Israel. We're talking about tiny stuff.

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In addition to that, we now do have the World Trade Organization non-tariff barrier bid in as of 1 January, so many of the earlier European and American grievances against non-tariff barriers in Israel have now been eased. So the Israelis are better team players than they were before.

Mr. Assadourian: Okay.

The other point I want to make is this. It says it remains Canada's intention to extend the same benefit to the Palestinians as to the Israelis.

Let me give a hypothetical example. Two companies manufacture mikes, one in Israel, the other in the occupied West Bank or Gaza Strip, and I want to ship goods from Canada to a company in the West Bank. These goods or supplies will go to an Israeli port. Israeli port customs will look at it and say ``Well, we don't think this should go through, because we think it might have military components to it''. So they stop the order there.

Is there a guarantee that the company in the West Bank or Gaza Strip will have the same footing as the company in Israel to do business in Canada? If there is such a guarantee, where is the guarantee? If there is not, how can we claim Israel and Palestine will enjoy the same treatment in a free trade agreement?

Mr. Fahel: I'm going to answer that, Mr. Assadourian.

Earlier, when Mr. Flis was talking to the minister, he asked whether the Palestinians would have equal treatment, which means would they benefit from this free trade agreement the same as the Israelis?

To answer your question, no. The Israeli company is going to benefit more than the Palestinian company. The reason is, as I expressed earlier, the closures.

Somebody mentioned a very good point earlier: point of origin. What this committee can do is insert some changes to the agreement so the point of origin with the Palestinians is from the Palestinian side and it does not have to go through Israel. Maybe in the beginning, for the first six months, we will have to go through the Israelis, but our government would stress that particular point.

That's very crucial. It's very crucial for economic growth. It's very crucial for the Palestinian company to become competitive. It's very crucial for the growth of any economy.

There's something else I'd like to add. I received this today from the Jerusalem media and communication. It talks about the West Bank and Gaza getting free trade status from the United States. I'll just read the paragraph here:

Legislation signed earlier this month by President Bill Clinton will essentially extend duty-free treatment to products imported from the West Bank and Gaza.

They are giving the West Bank and Gaza the same treatment, adding Palestinians to Mexicans and Canadians as the lucky holders of barrier-free access to the United States market.

We can help the implementation. We can help the Palestinians. We can help the competitiveness of Palestinians if the point of origin is the West Bank and Gaza rather than having to go through Ashdod, Haifa or what have you. That is an important point.

I hope I've shed some light.

Prof. Sigler: What would have to happen is that these negotiations - which are now stalemated on what's called the final status arrangements, having to do with how trade arrangements are to be implemented between a Palestinian entity... Whatever emerges from that will have to be dealt with.

As it is now, all kinds of military regulations are on this. A requirement of some 90% of Palestinian production has to be carried in Israeli trucks.

So there are all kinds of discriminatory measures inside that will only be a product to be resolved in these negotiations, which have now been put off, but the earlier Oslo agreements were that they were supposed to be in those negotiations now. That was my question about timing.

It's perfectly well to extend this, but in point of fact, if there is no export port, how could it possibly work, other than by looking at the whole Israeli administration of the territories?

Mr. Assadourian: Thank you.

The Chairman: Thank you.

[Translation]

Mr. Bergeron.

Mr. Bergeron: I have a very brief question to put to Mr. Fahel. You spoke of a letter that you apparently received from Mr. Eggleton, the Minister of International Trade. Would it be possible to obtain a copy of that letter?

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[English]

Mr. Fahel: It was not from Mr. Eggleton. I received the letter from Mr. MacLaren. It wasMr. MacLaren who originally embarked on the negotiation of the free trade agreement with the Israelis, and Mr. Chrétien in November 1994, I believe, had asked our parliamentarians to endorse it. I do have a copy here of Mr. MacLaren's... I'll gladly give it to somebody here.

While I have the floor, Mr. Chairman, I would like to take a very brief moment to thank you all here. This is a very late night.

The Chairman: It's a Waterloo coup d'état.

Some hon. members: Oh, oh!

Mr. Fahel: I also would like to thank the minister for his efforts. He said here tonight that he strongly urges that we cool the current situation down. That keeps on ringing. I think we have to thank the minister, all the staff, and all the people staying here. Canadians don't realize how hard you politicians work. We have to send them a message.

An hon. member: Hear, hear!

The Chairman: I accept Mr. Assadourian's motion that this will be an illuminated part of our record, which we will distribute.

Mr. Loney.

Mr. Loney: Professor Sigler, could you inform the committee what's been happening with the Gaza air strip?

Prof. Sigler: As you know, the Canadian government is deeply involved with this, as are all the Europeans, and that's all blocked totally on the air strip on Israeli security grounds. The planes are sitting there. We have finished our contracts. There have been some substantial Canadian contracts, but absolutely nothing is going to happen. The same thing is true of the port, which was also put into the Oslo agreement.

That's why I'm saying it's all fine, but the implementation is still stalled in these talks. If you said we're going to go ahead with one of the partners now, you just simply say that we're rewarded in advance before the negotiations are completed.

Mr. Loney: Thank you very much.

The Chairman: I'd like to thank the last three witnesses. Since most of the witnesses who have been good enough to come today are still with us, I'd like to thank everyone before we let our panel go and decide what the next procedural move will be. I'd just like as chair to make a couple of comments.

Professor Sigler, you sort of suggested that there's a great rush to all of this. Let me suggest to you that we've heard today extensive discussion about the geopolitical framework within which this agreement finds itself. The committee's role, normally, when adopting clause-by-clause or considering the legislation to implement the agreement isn't debating whether the agreement is a good idea or a bad idea. That is debated in Parliament. Our job is to examine the legislation to make sure that it conforms with the will of Parliament in ensuring that it is implemented.

However, in view of the sincere desire of all the members of the committee to understand better the issue... I do assure you that many of us have had the opportunity of travelling to the Middle East and of following these issues clearly. I think every member of this committee is anxious to ensure that what we do will not in any way impede the peace process.

We've heard clearly the evidence from some who believe that this agreement would be a fatal mistake at this particular time. I think every witness before us has told us that free trade that will benefit the prosperity of everybody in the region has to be a good idea. What we have to try to wrestle with is whether at this particular time it's going to be detrimental or not. Obviously the minister has made it clear that the government's position is that it will try its best to make sure that it is. There are other very informed sources that have made it very clear - and I think yours is the last one - that the timing on this is just awful.

That is what we will have to wrestle with, but we will also have to wrestle with the technical provisions as to whether or not the bill itself properly implements the agreement. That's really the job of the committee now.

Again, I'd like to thank both the witnesses and all the members for their patience and for the time they've put in to coming. We can perhaps release these witnesses and then turn our attention to what our next step should be.

Thank you very much.

Mr. Assadourian: Perhaps Mr. Flis had a -

Mr. Flis: I had a point of order. I can raise it after the witnesses leave, unless you would like me to raise it now.

The Chairman: Perhaps you should raise it now, because I think Mr. Assadourian is going to propose a five-minute break. It might be that your point of order will alleviate that necessity.

Mr. Flis: Yes. Mr. Chairman, I think we've heard excellent and powerful testimony today on both sides of the issue. I for one would like to take all of what we heard tonight and reflect on it, rather than go clause by clause tonight when everyone's tired. As I say, we've heard excellent and powerful testimony.

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I would recommend that we adjourn now and come back another day for the clause-by-clause, Mr. Chairman.

The Chairman: I see Mr. Morrison nodding, and Mr. Penson, and

[Translation]

Mr. Bergeron has already indicated to me that he was open to this suggestion.

[English]

I don't see anyone objecting to that point of order, so you may get more than a five-minute break, Mr. Assadourian. I certainly think that's a very intelligent suggestion.

However, members, the only thing I would ask you to bear in mind is that, as you recall, we will be travelling to Russia and Scandinavian countries next week. Therefore, we will have to do the clause-by-clause on Thursday. I've asked the clerk, with the possibility that this will take place. We'll do it on Thursday afternoon and keep ourselves available for Thursday evening if we have to. We'll have to get the bill dealt with before we travel. Thursday is the only day we have to do that. That's the consequence of that.

Mr. Dupuy has suggested that we might want to, prior to actually going into the clause-the-clause, have a discussion or debate among ourselves as to the principles we've heard today. So I would suggest that we set aside the first hour to review the issues among ourselves. We'll then move to clause-by-clause.

We're adjourned until 9 a.m. on Thursday, when we will have the briefing on the trip to Russia. For those of you who are going to the Scandinavian countries, you may not decide to come to that.

[Translation]

Thank you very much everyone. We will meet again at 9:00 Thursday morning.

The committee adjourned.

---

CHECK AGAINST DELIVERY

NOTES FOR AN ADDRESS BY

THE HONOURABLE ART EGGLETON,

MINISTER FOR INTERNATIONAL TRADE,

ON THE OCCASION OF THE STANDING COMMITTEE ON

FOREIGN AFFAIRS AND INTERNATIONAL TRADE

ON BILL C-61, AN ACT TO IMPLEMENT

THE CANADA-ISRAEL FREE TRADE AGREEMENT

OTTAWA, Ontario

October 29, 1996

Colleagues,

This important legislation will do so much to cement our ties with Israel and open up new areas for co-operation and mutual enrichment.

Around the world, opportunities for trade are increasing and barriers are coming down.

In this new, interconnected and interdependent world, no nation can afford to hide itself behind walls of protectionist tariffs or duties.

Canada understands the dynamics of this new world. We understand the need to liberalize trade and to break down the old ways of the old days. And, as a nation with a relatively small population, we understand the need to look to markets beyond our borders. In fact, Canada is more dependent on trade to produce jobs and economic growth than any other developed country in the world.

In recent years, trade has become the lifeblood of our economy. Our exports have exploded and now account for one third of our gross domestic product [GDP].

Canadian exporters would not have had this kind of success if, every time they knocked on doors around the world, they were met by hostile tariffs and duties. But, because of arrangements such as the North American Free Trade Agreement [NAFTA], their access has been assured. That is why we are working hard to expand the number of countries that will open their doors and their markets to our exporters. One of these is Chile, which Canada is working hard to have eventually included in the NAFTA.

And because we know the potential of Latin America and the Caribbean, we are one of the nations leading the effort to create a Free Trade Area of the Americas [FTAA].

Israel has also realized the benefits of freer trade. That is why it has signed free trade agreements with the United States, the European Union, Turkey, the Czech Republic and Slovakia.

What could be more natural, then, than for two countries that have actively pursued free trade around the world to now secure the same with one another?

The ties between Israel and Canada have always been close. Canada's historic links with Israel have always been based on co-operation and mutual respect. To the bonds of friendship can be added those of commerce, and to the benefits of friendship can be added the benefits of investment.

Canada and Israel have been working to establish closer economic ties. In 1994, Prime Minister Chrétien and Prime Minister Rabin met to begin negotiations on the Canada-Israel Free Trade Agreement. After two years of fruitful negotiations, that agreement was signed on July 31 of this year.

Why did Canada agree to a free trade agreement with a small country like Israel? Because now Canadian and Israeli companies will have immediate, direct, duty-free access to each other's markets for virtually all industrial goods. And both sides will benefit from the reduction or elimination of tariffs on agricultural products.

Perhaps even more importantly, this agreement will place Canadian companies on the same footing as their competitors from the United States and the European Union, both of which, as I've said, already have free trade agreements with Israel. Prior to the Canada-Israel FTA, a Canadian company wishing to export to Israel could have faced high Israel duties.

I have heard reports that Canadian companies in that position sometimes manufactured the product in the United States and shipped it duty-free to Israel under the terms of the U.S.-Israel Free Trade Agreement. We want to keep these jobs in Canada, and the Canada-Israel Free Trade Agreement will allow us to do so.

Israel is an important and expanding market for Canada. Even in the difficult circumstances in which Israel finds itself, it boasts a high standard of living and impressive economic growth. Residential construction is booming, unemployment is low and foreign investment is surging.

At present, trade between our two countries is modest but growing. Two-way trade last year grew to $450 million ' up 37 per cent from the previous year. I believe that with the signing of this agreement, and the opening up of each other's markets, those figures are going to grow significantly.

Israel offers a vast number of opportunities that will be of particular interest to Canadians. High-technology goods, telecommunications, power and energy projects, oil and gas exploration, and the agri-food, fish and environmental sectors ' all of these have excellent potential for Canadian companies.

For these reasons and more, we are very pleased that the new government of Israel has chosen to pursue this free trade agreement with Canada. And we were honoured that Natan Sharansky, Israel's Minister of Industry and Trade, was able to sign this agreement in person in Toronto last July.

Mr. Sharansky is a man who has demonstrated a courageous and tenacious determination to persevere and to triumph. He is a man who personifies Israel's determination to work for peace and for the creation of a new and dynamic Middle East ' a Middle East that embraces change and expands opportunities.

This agreement comes at a crucial time for Israel and the other countries of the Middle East. Recent events in Gaza and the West Bank are of great concern to all of us. We deeply regret that more Israelis and Palestinians have lost their lives. We have urged the leaders of both sides to explore every option, exert every effort and examine every alternative in order to prevent further violence.

There are some who say that in the face of recent events in the Middle East, our introduction of this legislation should be delayed. But we believe that this agreement strengthens Canada's presence there, and constitutes a declaration of our confidence in the peace process, as well as an investment in our common future. Furthermore, we are moving forward with Bill C-61 to bring the free trade agreement into force, since we believe it would create jobs for Canadians ' it would be good for Canadians.

We are encouraged by the pledges from both Palestinian and Israeli leaders at the Washington Summit to renounce violence, and we welcome the resumption of the bilateral discussions. It is our profound hope that these negotiations will lead to the speedy implementation of the interim agreements and, in particular, the redeployment of Israeli forces from Hebron.

For over 50 years, Canada has been a staunch supporter of the pursuit of peace in the Middle East. It was, after all, a Canadian ' Lester B. Pearson ' who originated the first true United Nations peacekeeping effort, in 1956, and who won a Nobel Prize for his efforts during the Suez crisis.

And it is a matter of pride, not only to this government but to our country, that Canada has served in every UN peacekeeping operation in the Middle East since that time.

Today, Canada is also leading more directly in the peace process, by agreeing to chair the Refugee Working Group in the multilateral track of the peace process. This working group seeks to improve the living conditions of refugees and works to find a comprehensive solution to the refugee issue. We also participate in the four other multilateral working groups, and have played a particularly active role in the fields of water and regional security.

Canada is also a member of the Ad Hoc Liaison Committee, which co-ordinates international assistance to the Palestinian Authority.

And we have been, and continue to be, generous with our development assistance. In fact, our contribution to the United Nations Relief and Works Agency [UNRWA], which channels assistance to the Palestinians in the Occupied Territories, averages $11 million per year. And our total assistance to the Middle East has averaged $50 million annually for the last five years.

But our efforts don't stop there. We have, for example, recently committed ourselves to help rebuild Lebanon. In July, we announced the creation of a liaison and advisory group that will provide support to the private sector in its participation in this rebuilding effort.

This group, composed of both private- and public-sector representatives, will work to co-ordinate and mobilize Canadian businesses so that their efforts will be of maximum benefit and effect.

Our commitment to the reconstruction of Lebanon stands in a long tradition of support for the independence, sovereignty and territorial integrity of that country. This commitment flows from our conviction that all of these elements must be in place if there is to be a truly lasting peace in this region.

Moreover, while it is true that this agreement is with Israel, Canada has offered to extend its benefits to goods produced in Gaza and the West Bank, and Israel has accepted our offer. We are discussing how best to achieve this through consultations with the Palestinian Authority.

And we stand ready to examine ways to enhance trade with other Middle Eastern countries as well. It is our intention to expand our trading relationships with the entire Middle East. We already have a significant trade with that region ' over $2.5 billion in export of goods annually, with a surplus in our favour of about $500 million. When you add in trade in services, the total trade picture is over $3 billion a year.

Looking at individual countries within the region, two-way trade with Saudi Arabia stands at over $1 billion. Our exports to Lebanon are growing and now exceed imports; our trade surplus with the United Arab Emirates exceeds $190 million a year. And trade with Jordan continues to rise, particularly in the area of oil and gas exploration, where there are a number of projects involving several companies from Calgary.

In short, the Middle East represents a rich market for Canada, and the signing of the Free Trade Agreement with Israel represents a major step toward realizing that potential.

The next step for Canada is the one before us now: to pass this legislation. Once the Agreement is in place, the torch will pass to the private sectors in both countries to make it work, and work effectively.

Colleagues, Canada and Israel have enjoyed a strong friendship. It is based on shared democratic values and common hopes. Now, it is time to develop the economic potential of our relationship and, in so doing, support the efforts of Israel and its neighbours to build a just, lasting and comprehensive peace.

It is our belief that this agreement will help to strengthen those ties and to realize those hopes.

Thank you.

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