[Recorded by Electronic Apparatus]
Wednesday, March 19, 1997
.1537 
[English]
The Chairman (Mr. Michel Dupuy (Laval West, Lib.)): We have a quorum. The latest information about our vote is that it will be postponed until 5:30 p.m., so we'll have to interrupt our session when the bell rings. But we have a good deal of time ahead of us and we'll make good use of it.
Today we focus on chapter 19 of NAFTA. We have with us, from the law firm of Osler, Hoskin and Harcourt, Mr. Cheng; from Tracon Consultants Limited, Mr. Goodwin, the president; and from Grey, Clark, Shih and Associates Limited, Mr. Peter Clark, who is not a newcomer to this committee.
I will start with the first person on my list and invite Mr. Ronald Cheng to take the floor.
Mr. Ronald C. Cheng (Lawyer, Osler, Hoskin and Harcourt): Thank you very much, Mr. Chairman. Thank you for the invitation to appear before you today. As you indicated, I understand the very focused subject for our discussion is chapter 19 of formerly the free trade agreement and now the NAFTA.
I don't have a formal paper to present to you, as have had some of your previous witnesses, but I do have some notes, as a bit of an aide-mémoire, which I have given to your clerk for distribution. I'm sorry, but due to time constraints I haven't provided it in both English and French.
There are three issues I would like to address very briefly. First, I have some general observations on chapter 19, including the fact that there is, I think, general agreement that the process has been effective. Secondly, from a practitioner's point of view, the procedures established by the chapter can be seen as somewhat of an evolution in administrative law in Canada and the other countries involved. Thirdly, there are some areas for you and your committee members to consider that might strengthen the process and perhaps even improve it.
As to the general agreement that the chapter procedures have established procedurally expedited reviews of trade remedies decisions, I think that's agreed to by all parties. This may be even more true when compared to the traditional domestic judicial review procedures in the United States than here in Canada.
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Therefore it's been said by some that if the procedures have proven to be of more benefit to Canadian and Mexican private parties who have had access to them, instead of facing the traditional U.S. judicial review proceedings, than they have been to American private parties relying on domestic Canadian judicial review proceedings. To some that general proposition is demonstrated by criticisms and challenges perhaps to chapter 19, emanating principally from the United States rather than from the other signatories to NAFTA.
The best example of this may be in fact the three extraordinary challenge committee applications by the U.S. in the cases of which you are all aware of course - the pork, live swine, and softwood cases - all of which involved alleged subsidies of Canadian exports to the U.S.
However, if you turn briefly to page 2 of my notes and the table there, which lists the requests for chapter 19 review and the results, you will see that arguably there has been a more even result from reliance on chapter 19 proceedings for both Canada and the United States than is suggested by those three significant cases to which I've referred.
As you can see from the table, while there have been significantly more requests for review involving U.S. decision-makers - 36 as compared to 28 - the success rate on reviews has not been significantly higher for Canadian private parties challenging U.S. decision-makers than for American parties here in Canada.
Specifically, six Revenue Canada decisions on dumping margins have been heard by chapter 19 panels. All six have been remanded and have resulted, as you can see from the table, in some change in duty rates. By comparison, 21 U.S. DOC dumping or subsidy margin calculations have also been considered by panels, and 16 of those have resulted in changes in duty rates; five have not. In other words, all of the Revenue Canada decisions reviewed have resulted in changes in duty rates and only three-quarters of the DOC decisions reviewed under chapter 19 have resulted in changes.
Another general observation on chapter 19 that has been the subject of discussion is the almost inevitable comparison of chapter 19 with the 1994 WTO dispute settlement procedures. Several brief comments on this may be relevant to your deliberations.
It's clear chapter 19 and WTO procedures are not interchangeable in their present forms. The government-to-government nature of the WTO procedures obviously makes it analogous to the chapter 20 NAFTA dispute settlement process rather than chapter 19. In fact this may well be a good reason that the chapter 19 procedures have been utilized far more often than the chapter 20 procedures.
The second distinction is that NAFTA panels review whether decisions are acceptable under the domestic law, as you know, of the decision-maker. The WTO procedures are to establish whether decisions comply with the international WTO criteria, which are not always the same.
To me, a good example of the difference between the two is the question that has in fact been considered by chapter 19 panels in the past: whether those decision-makers, in whatever country, who determine if injury has resulted from dumped or subsidized imports may or must cumulate the volume and effect of dumped imports or subsidized imports from all exporting countries.
The WTO code says the decision-makers in question may cumulate. So does our post-WTO Canadian legislation. But the post-WTO U.S. legislation says they shall cumulate. The answer to whether the decision of a U.S. decision-maker who cumulates is acceptable cannot be the same when tested by a WTO panel, compared to a chapter 19 panel, with their different jurisdictions.
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There is also a related example. As many of you know, negligible or de minimis dumping or subsidy is excluded from dumping or subsidy injury findings under the WTO code, depending on certain arithmetic criteria. Those are essentially the same under Canadian and U.S. trade legislation.
However, U.S. legislation also contains a further provision that says such negligible imports do not have to be excluded if the U.S. decision-maker finds that they ``will imminently account for more than negligible'' volumes or margins of dumping. Again, it's clear to me that a panel reviewing whether a U.S. decision is consistent with U.S. law compared to whether it is consistent with the WTO code may well arrive at opposite decisions.
Finally, a significant difference between the WTO and the chapter 19 review procedures is that the appellate body from the first review cannot remand back to the reviewing panel in the case of the WTO to expand or to clarify its decision. It can only overrule or affirm that decision. To the contrary, as you're aware, the chapter 19 extraordinary challenge committees do have the jurisdiction to remand the decision of the binational panel for further review.
The second issue of the three to which I referred at the beginning is the institutional evolution, if you will, in administrative law that I feel is represented by the chapter 19 procedures.
For one of the first times I can recall, in Canadian law in any event, an application for judicial review of an administrative tribunal's decision is to what is essentially another administrative tribunal rather than to a pure judicial institution.
The very nature of the chapter 19 panels was to require review by a body of experts rather than by the domestic court judiciary of a signatory country who might be less expert in the field. As you know, most of the panellists have been lawyers, but they were required to be trade experts. The NAFTA of course added a requirement that judges or former judges were to be added to each roster to the fullest extent practicable.
As a practitioner I find it interesting that in legal circles, administrative tribunals have been traditionally justified on the basis that decisions in specialized areas require experts more than jurists. The chapter 19 panel results suggest that more expert tribunals being subject to review by other experts rather than jurists is to be encouraged.
The table to which I referred you earlier on page 2 of my notes demonstrates that even expert decision-makers can be wrong, or at least should be subject to having to justify their decisions and make them more transparent to others equally knowledgeable in their field.
The table, if you will refer to it briefly again, shows an interesting aspect of the chapter 19 proceedings.
Whether it's U.S., Canadian, or Mexican decision-making, more decisions affecting the calculation of dumping or subsidy margins - which I guess one could say are more empirical decisions and therefore more capable of verification and perhaps therefore more expert - have been the subject of requests for panel review than have the injury decisions by the authorities, which relate perhaps more to materiality, causality, or other legal principles.
Of the so-called empirical decisions, 53 have been requested, compared to 18 decisions on injury. Out of the 53, 30 were decided, the others having been withdrawn or had no decision handed down.
Of the 30, 24 were remanded to the decision-maker and only six have been affirmed.
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As I mentioned earlier, in Canada all six panels involving Revenue Canada decisions have resulted in remands and changes of duty rates, whether those changes were significant or not.
The DOC doesn't have a much better record. Of the 21 cases decided, three-quarters, or 16, were remanded, and some change of duty resulted in 15 of those. One of those 15 was the live swine subsidy, which is the one we're all familiar with, where there was a significant reduction of duty. The last and 16th case essentially removed the finding of any countervailable duty in the softwood lumber case.
As I mentioned, there were three subjects; this is the third. I wanted to look very briefly at suggestions on how the chapter 19 procedures might be improved. If only due to the publicity on the softwood lumber case extraordinary challenge proceedings, I think we're all more aware of allegations of bias and the emphasis on the possibility of conflict of interests of panellists as well as counsel who appear before them.
As a practitioner, this is something with which I have to live every day, not only in that forum but also in others of course. It's generally agreed to be a fundamental problem for any dispute resolution process as to how the issue can be approached, if not eliminated from affecting the process.
Only an independent, shall I call it, self-sustaining judiciary is unlikely to be subject to allegations of bias. However, in the NAFTA context that may not be realistic to try to establish and financially support. This was certainly true at the time the agreements were negotiated, but I don't know what the view will be in the future, given the increasing emphasis on and awareness of the problem.
In any event, it may be possible to improve the situation by utilizing three-person rather than five-person panels as well as by maintaining smaller national rosters of potential panellists, on the assumption that the fewer people involved, the less likely are challenges on the basis of conflict of interest.
Finally and very briefly, studies and commentaries on chapter 19 have also focused on whether the process has created legal precedents that are separate from the domestic legal precedents established by the courts of each party. It will not solve the problem, nor will it remove uncertainty completely, but making the decisions of panels binding on future panels might remove an element of the uncertainty about this so-called separate body of precedent.
Thank you, Mr. Chairman.
The Chairman: Thank you, Mr. Cheng.
Mr. Goodwin.
Mr. D.J. Goodwin (President, Tracon Consultants Limited (Ottawa)): Thank you, Mr. Chairman.
I've contributed a paper and I'd like to speak to some of the points I've tried to make in my paper. My focus is basically the cost to the public and the private purse in going before a panel and what it means to both Canadian exporters and Canadian importers in accessing the panel. Also I've commented, as Mr. Cheng did, on the types of people who should be on the roster for the panel and the problems with that right now.
I've presented the paper, trying to answer the question that was asked of us to provide a critical analysis of the way the system works. My critical analysis is from an administrative point of view.
The purpose of chapter 19 was to provide a court of easy access to appeal decisions of the administrations on trade issues. Easy access has at least four different meanings: one, low cost; two, prompt decisions resulting from that access; three, impartial decisions; and four, decisions based on knowledge and experience. We have to look at how Canada's business can access those four principles.
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Canada's economy and its recent economic growth and development have really been fueled by exports. The Canadian growth in employment also has been shown to be traditionally growing in small and medium-sized businesses. It's those businesses, the small and medium-sized businesses, that need access to this court. These are the companies that should be benefiting from this easy access principle.
I believe it's well agreed that the binational panel system has worked for Canadian exporters. Canada has seen successes in lumber, baler twine, corrosion-resistant sheet, red raspberries, and other things, such as frozen pork.
The decisions issued in cases of both Canadian and U.S. panels have satisfied two of their criteria, these being the prompt decisions and the impartial decisions. I think we can agree on that. The paper I have filed addresses the other two points and outlines what I believe to be a deficiency with respect to panel cases in the remaining two criteria: first, the principle of low cost, and second, that the decision should be based on knowledge and experience. The key word there is experience.
First let's address the low-cost aspect. Panel cases have a significant dollar cost for the appellant, for the governing agency, and for the panel secretariat. Small and medium-sized exporters to the U.S. will be faced with very large legal costs in proportion to the volume of sales they may enjoy in their business.
Conversely, a U.S. exporter to Canada will incur similar costs in a Canadian case, but the cost for a U.S. producer or exporter is likely to be a smaller proportion of that U.S. producer's business than it is of the Canadian producer's business. U.S. exporters, therefore, are likely to be more inclined to step up to the plate in the final inning of a trade dispute.
In addition, we must consider the cost to each government in responding to an appeal. The financial panel process, which includes both secretariat costs and the Revenue Canada or CITT costs, is higher as a percentage of the Canadian federal budget than it is as a percentage of the U.S. federal budget. The dollar costs are about the same, but in proportion Canada's is much higher. So the cost to Canada, both to the public purse - that is, the government - and the private purse - the companies - is proportionately higher for a Canadian company than it is for a U.S. company.
I've outlined in an attachment to my paper the administrative record procedures that Revenue Canada must go through in developing its administrative record for a potential panel case.
Now let's turn to the fourth criterion, and the second one I have problems with, and that is the decisions based on knowledge and, the key word, ``experience''. In the last two or three years we have seen a move towards Canadian panellists being drawn from the ranks of academia rather than the trade bar, or as the NAFTA said, primarily from among judges. I don't think there is a judge on the roster. Maybe somebody can help me there.
There is little dispute concerning the knowledge of these academic panellists. However, these people lack hands-on experience in administration of a Revenue Canada decision or of a tribunal injury decision.
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We have seen the trade bar representatives, in several instances, decline to participate in a panel, or, at least in once instance, withdraw from a panel, due to alleged conflict of interest. The conflict arises when a panellist sits in judgment of a CITT decision but at the same time appears before that same CITT on another case. The choice of appearing before the CITT or sitting as a panellist comes down to an economic decision for that panellist. Where is his money going to come from? Where is his greater revenue going to occur? It's going to occur from appearing before the CITT.
In conclusion, I do not have a magical solution to the problems of cost or experience, but my paper does suggest creation of a more permanent body of panellists for the secretariat. In addition, I suggest that a comparison of Federal Court procedures to Revenue Canada administrative record preparation procedures and to the appellant filing procedures will demonstrate that really Federal Court cases, which the panel was supposed to replace, are less costly both to the private purse and to the public purse.
These two perceived problems are worthy of consideration and changes brought about to them will make the panel process a court of easier access.
Thank you.
The Chairman: Thank you very much, Mr. Goodwin.
Mr. Clark.
Mr. Peter Clark (Consultant, Grey, Clark, Shih and Associates Limited): Thank you, Mr. Chairman.
I come at this from a somewhat different perspective, one that must be rather more restrained, since I am a panellist under chapter 19, under chapter 20, and in the WTO. So I can't really discuss cases or the thought process that goes into reaching decisions, but I can comment on what I've seen in the record to date and on a number of comments that have been made about the system.
A number of people have expressed concern that their expectations have not been realized by the panel process. That's perhaps because they didn't read the agreements very well at the beginning and didn't realize they shouldn't be expecting as much.
The process was designed essentially to replace judicial review in Canada and the United States using similar procedures and standards of review. The difference was that the judges or the panellists would be drawn from trade experts, professors, and, as the United States insisted with respect to NAFTA - this was not a Canadian initiative - more retired judges, which is something they haven't been able to produce.
The development of the chapter 19 process in the trade agreement was not subject to months and months of negotiation. It was a last-minute solution after Mr. Reisman had walked away from the table, saying he had to have something to deal with subsidies and trade laws. This was the solution that was addressed. It didn't change the standards of review.
One of the reasons you may find people saying there should be less deference given to the administering authorities in both countries is that practitioners and academics tend to be closer to the issues - some academics. For instance, Mr. Sauvageau is very knowledgeable in these things, and he's a former academic. They tend to be more interventionist than judges, who develop an attitude and an approach to dealing with agencies such as Revenue Canada or the Department of Commerce.
As well, the U.S. courts tend to be more interventionist than Canadian courts in these matters. The most recent exception is the case of pasta, where there was in fact a remand to our tribunal based on the facts, which is highly unusual. I'm not sure whether it was facts or poor drafting that got it sent back. We will eventually find out.
I consider that we're much better with the panel process than without it, and I don't say that because they pay me the princely sum of $400 a day to sit on these panels, which is less than I usually make before breakfast. It's not a place to get rich.
The process is very useful. It has become bogged down with conflict perceptions that differ from country to country. I think both my friends before me have addressed that issue.
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Not only do you have to be holier or more chaste than Caesar's wife, but I have found that through the panel process, a number of people who I felt were very honourable and upright people are assumed to be scallywags of the worst order when it comes to sitting on a panel.
It's excessive, but we are dealing with the United States as part of this process, and those are the perceptions we have in the United States. Unfortunately it's something we seem to be importing ourselves.
For example, one can't be under contract to the government - or you can't have a partner acting for the government - and sit on a panel. To me that seems ludicrous. Even in situations where I have been under contract to the government, I have vigorously disagreed with them on many things. I don't think one can be bought in that sort of situation, but we'll have to see where we go.
In fact the panel process has been less onerous on Canadian institutions than on the U.S. institutions. That's because the standard of review tends to be more rigorous in Canada. Even in the case of Revenue Canada, the panels sometimes provide a very high level of discretion, a standard of patent unreasonableness. In the Canadian legislation there is more discretion than delegated authority, which is a little bit harder to get at.
The case was raised about Canadian panellists who appear before the Canadian International Trade Tribunal, sitting in judgment on the tribunal's decisions. There is a way to avoid that: you can just sit on American panels, which is what I did.
Having read a lot of the studies and reports of these panels, I perceive that the agencies in Canada, particularly in the early days, tend to have taken the process more seriously than the U.S. agencies have.
I wouldn't say Revenue Canada is clean in their implementation. They don't treat the decisions of panels or the findings of panels as precedents. They tend to embrace the ones that make the law more restrictive and ignore the ones that make it more liberal.
My saying that is not something new. Revenue Canada has heard me say it before. There should be much more weight given to the panel findings, and they should be precedential.
There is a danger in opening up the panel process, because we can't change it unilaterally. We have to negotiate it with the United States, and now with Mexico. The danger is we may lose it. The Mexicans aren't terribly happy with the process either, because of some of the findings against them.
Mr. Cheng has provided you with some useful statistics of changes. I would only note that in some cases the changes in duty have really been de minimis.
If you're dealing with the calculation of a dumping margin on a cost-plus basis, you're dealing with a zero-sum game, because if your costs go up, your profit goes down, and you come out to essentially the same number at the end. So those changes have sometimes been less than 1%.
In at least one case, and possibly two, when Revenue Canada followed the remand instructions, the dumping margins actually went up. This is sometimes a function if people are arguing points of principle without calculating the costs or the eventual outcome, and that is simply poor preparation.
There was a suggestion that the WTO is more like chapter 20. I would agree with that, because the WTO really gets at the root of the problem, whether or not your legislation is consistent with your international obligations.
When you're dealing with a chapter 19 panel, what you're assessing is whether or not that legislation has been properly applied, whether or not that legislation is consistent with your international obligations.
So if you have a problem that goes to the essential issues that are covered in the anti-dumping code under the WTO, the answer is to get very quickly into a dispute settlement process in that organization, because they can make the whole thing go away for one flaw.
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When you're going through the process under chapter 19, unless you are very fortunate, you are not going to have the injury situation reversed. I haven't seen too many cases where they completely eliminate the margin of dumping or countervail. It can happen, but it's very difficult, and when it does, we always seem to have an extraordinary challenge, which once again puts the whole agreement at risk in the minds of Congress.
Costs of panel review are lower than judicial proceedings in the United States and higher than they are in Canada. I certainly agree with my friend Mr. Goodwin on that.
I would look at it from another perspective, though. The reason Canada wanted this special mechanism was to protect our exports to the United States, to safeguard our access to the United States to prevent it being taken away by arbitrary and capricious measures. So you can turn around and look at the situation from the perspective of an exporter, not in terms of the size of their company or the cost as a total percentage of their resources, but in terms of the fact that the United States market is generally eight to twelve times larger than ours, and ours is proportionately smaller. The cost burden on an exporter to Canada, per unit of exports, is much higher than it is for a Canadian exporter going into the United States.
Mr. Goodwin is right when he says small companies can't afford the process. Well, the fact is they can't afford the court process either. That is a very big flaw in both of our systems, but it's not going to be addressed by changing this process.
The WTO process is not perfect, because they too have become preoccupied with conflicts. If you examine who is appearing before the WTO, who are the panellists, in most of the cases you'll find out they're Swiss, Nordics, or New Zealanders, all of whom are clean and neutral and run some of the crookedest trade regimes in the world. Nonetheless, these people are the judges.
Canadians and others, of course, are too dangerous to be appointed to these panels. They're obviously lackeys of the European Union or running dogs for the United States. That's a process we're going to have to fix, because it's going to lose credibility unless you can really broaden the range of people who have input.
In summary, there could always be tinkering with the process under chapter 19 to try to improve it. The danger is that if we open up chapter 19 to negotiations with the United States, given the mood of Congress over NAFTA in particular and over U.S. sovereignty, given Helms-Burton and other issues that are being litigated either in the WTO or under NAFTA, and given the dissatisfaction with the results of chapter 20 on dairy and poultry, we may get into a logjam in Congress that will leave us empty-handed.
Perhaps it's better to be content with what we have, as imperfect as it is, than to risk losing it.
Thank you.
The Chairman: Thank you, Mr. Clark.
As you probably noticed, there has been a change in the timing of the votes again. The bell started a few minutes ago. It's the half-hour bell. We can carry on with questions for about 15 minutes and then we'll have to break up. There is a further vote later on this afternoon. It's supposed to follow quickly after the first vote with another half-hour bell. We'll check whether this is indeed going to be the schedule and we'll decide then whether to adjourn or reconvene before the end of the afternoon. We therefore have about 12 minutes or so for questioning.
Mr. Sauvageau, the floor is yours.
[Translation]
You have about 10 minutes.
Mr. Benoît Sauvageau (Terrebonne, B.Q.): Yes, but I have to give him half of my time, isn't it so? I can take 10 minutes if you want but that wouldn't be very fair to my Liberal colleague.
The Chairman: I think it would be very nice to share that with Mr. Cullen, in case we cannot reconvene later on this afternoon.
Mr. Benoît Sauvageau: I can be that way sometimes. Enjoy it.
Mr. Clark, thank you for your nice comments. You have talked about certain similarities between chapter 20 of NAFTA and the WTO tribunals.
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We have already talked about that with other witnesses who came here. We were wondering if it would be possible to eliminate the NAFTA tribunal and refer all trade disputes to the WTO tribunal. This is my first question. Here is my second one.
Prime minister Chrétien has talked, in Miami, of the creation of a huge American free-trade zone by 2005. When we finish, in 1998, the study of our trade dispute settlement process among three countries, Canada, the U.S. and Mexico, will we be left behind for the other trade zone?
I will wait for your answer. We'll see after that if there is enough time for my two other colleagues.
[English]
Mr. Clark: I'll try to be as quick as I can to give you time to speak to my friends.
The problem with moving up to the WTO the dispute settlement of the nature we have in the NAFTA is that in concluding the dispute settlement provisions during the last days of the negotiations in Geneva, the Americans inserted a clause that would prevent the people from looking at dispute settlement in the WTO, particularly with respect to anti-dumping, and from re-litigating the cases. They want them to look at consistency with the agreement. They don't want them to weigh facts.
I doubt very much that the WTO panellists are going to respect that, but there is a difficulty with how far you will be able to go in the WTO in actually rehearing a case and weighing the evidence. That's going to be a problem.
With respect to the broader free trade agreement of the Americas, the type of dispute settlement we have in the NAFTA would be difficult to apply, but not impossible. It would require some changes, but there are very few countries that have open systems like Canada's and the United States', and to a lesser extent, Mexico's.
Most of the Latin American countries have modelled their anti-dumping and countervailing duty systems on the European Community's model, which is an administrative model where everything is done by the same agency and it is not done in the sunshine. These are administrative procedures that involve primarily negotiations with the exporters to try to get them to accept an undertaking to either limit their exports or raise their prices or both.
We shouldn't lose sight of what we're doing in NAFTA. We should try to expand the NAFTA. We should certainly try to avoid the U.S. creating a hub-and-spoke relationship with a lot of countries. I don't think the difficulties we have in dispute settlement, spreading right through the Americas, are hopelessly beyond our ability to cope with. What it really requires is for a lot of these new countries to adopt more open procedures. Even with the closed European-type system, the Brazilians have been very open and very fair in judicial review of their own anti-dumping actions and indeed have thrown several out.
I hope that answers your questions.
[Translation]
Mr. Benoît Sauvageau: That was fast but I think so. I will read the transcript and I will tell you when we meet again, but I think so.
Mr. Cheng spoke in his presentation about a permanent tribunal, if I understood right. Would you be in favour of creating a permanent tribunal within NAFTA? There would be other rosters but there would be one permanent tribunal.
Mr. Cheng, in your first suggestion, you talked about an independent judicial forum. Were you thinking, when you mentioned that, of a permanent tribunal within NAFTA?
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[English]
Mr. Cheng: Certainly, Monsieur Sauvageau, the idea of a permanent decision-making body has been touted. I don't think Mr. Clark or I would have any problems with permanency. The only difference between that and the existing system is the fact that people can be added to the rosters and they are appointed periodically, as opposed to a permanent tribunal.
It's very important for you to consider whether a permanent tribunal is to be an independent, separate judicial body in the sense of one that is funded, one that has permanent appointees, one that is established much as the secretariat is now, but with, shall we say, salaried decision-makers rather than ad hoc panellists made up as the requirements arise. Certainly the fact that it may be tripartite now, rather than binational, American and Canadian, is not a problem, nor would it be a problem if there were seven or eight countries involved.
I don't have any other comments. Perhaps Mr. Clark does.
Mr. Clark: I don't think that's going to create a problem. I still have a preference for using experts to do these things.
I should clarify the question you were asking about the WTO. In trying to do it quickly, of course, I didn't give you the whole answer. In my view, there is less of a constraint on the appellate body, or the second level of review, in the WTO in looking behind the facts, looking at the facts, and doing the type of analysis a NAFTA panel does. We haven't had any experience with that yet, but we may well have.
Quite frankly, I don't see how some of those second-level appeals are going to be addressed without more facts.
Mr. Benoît Sauvageau: Merci.
The Chairman: Mr. Cullen.
Mr. Roy Cullen (Etobicoke North, Lib.): Merci beaucoup.
Merci, Monsieur Sauvageau.
Mr. Cheng, as I understood it, you said it's possible you could get a decision out of a NAFTA panel that would be inconsistent with a decision out of the WTO. If that's the case, would the parties then be inclined to look at where they might get the type of decision they're looking for and go to that place to get decision they're trying to achieve?
Mr. Cheng: I suppose the simple answer is yes. On the other hand, the distinction between chapter 19 and chapter 20 and the WTO, as I have mentioned, is that one is government-to-government and the other is a private party situation. Essentially the ability of a private party under chapter 19 to take a problem that it faces to the final chapter, if you will, is a very strong distinction. In fact I mentioned to you that I think that's very much a reason chapter 19 has been used far more than chapter 20.
I interpret your question also to be asking whether I was saying there could be a distinction. I was simply trying to illustrate that since you're applying essentially two different sets of laws, you will end up with two distinct situations and two distinct answers. That's all I was trying to say.
Mr. Roy Cullen: In your estimation, is that something we should be concerned about or interested in?
Mr. Cheng: I don't wish to have misled you in the sense that I don't think chapter 19 as a starting point really can validly be looked at in the same context as the WTO. What I'm essentially saying is that we have a closed circle, if you will, within the NAFTA. I was observing in my remarks that others have said why bother with chapter 19? Why not go to WTO and just forget about chapter 19? I was trying to make my point that you cannot do that because they are not alternatives.
Mr. Roy Cullen: I think that was the rationale of some earlier testimony we had. I thought I had understood that when you made the same or a similar point. I just wanted to clarify that, so thank you.
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In terms of the choice of panel members, the choice of economists or business persons hasn't really come into this discussion. I know it's perhaps a little bizarre to bring this up, but in the choice of panellists, has it ever been considered that panellists would include business people or economists?
I looked at the softwood lumber case in the last go-around, when the U.S. producers alleged that log exports were a subsidy. It seems to me that was fairly technical. Well, it was contrived, but in addition to that it's a highly technical economic question or business question.
Perhaps you could give me some idea of the distinction between having panellists with that background and bringing in experts in this area from time to time. Is the way it's struck now, with essentially lawyers and academics and perhaps judges, the way the panels should be struck, or should we be encouraging business people and economists to be panellists as well?
Mr. Clark: I'm not a lawyer and I sit on panels, and the Department of Finance paid me for 14 years as an economist. There are people on the roster who are not lawyers. That was something Canada fought very hard for.
They do bring a different perspective to the process, but if you're in a situation where you can't relay the facts and you have to look at the consistency of the application of the law, then there are limits to what that type of experience can bring, although it is useful.
Mr. Cheng: I just have two quick observations in connection with your question about the experts. Essentially I agree with what Mr. Clark was saying. The forum at which the experts would appear would not really be at the appellate level but would have occurred at the trial or the decision of first instance, at the hearings in front of either the CITT or the ITC, for example, or even Revenue Canada or DOC.
Again, hopefully I'm not sounding too flippant, but any business person with enough particular knowledge about the softwood industry, for example, would certainly have been even more likely to be accused of bias than either of the panellists, who already attracted enough attention.
Mr. Roy Cullen: In some sense that is the dilemma, the catch-22. The more knowledgeable individuals, whether they're business people or lawyers, essentially would be disqualified. Is that right?
Mr. Clark: The more successful you are the more likely you are to be challenged, because the more clients you'll have.
Mr. Cheng: The other interesting thing, while we're all talking about bias or the appearance of bias, is that technically, aside from the very vigorous statements in connection with bias out of the softwood Extraordinary Challenge Committee, I'm not familiar with any other official pronouncements on what constitutes even the perception of bias sufficient to consider removal of a panellist.
In my recollection, there was one panellist who resiled from a panel due to a situation developing where he was acting on a subsequent case, not in front of another panel, but in front of the International Trade Tribunal. There have also been arguments presented, both at the International Trade Tribunal here in Canada and at the binational panels, as to allegations of bias.
Without delving into the legal niceties, essentially there has never been a formal pronouncement of any position, aside from the single judgment in the Extraordinary Challenge Committee. Those standards were set and were very extreme, in most people's views. They also were in the dissenting opinion, so really they carry not as much weight as a majority opinion. Therefore right now it's open for all of us to come up with standards, if that's what the parties wish to do.
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The Chairman: Mr. Cheng, much to my regret, I have to remind my colleagues that we're on our way to a vote. I will have to bring this session to a close, because I'm told we'll be held in the House of Commons for the second vote, which will follow the one that is going to take place now.
I'm sorry we have to curtail our afternoon, but I wish to express our thanks to our three witnesses. We shall meet again after the Easter recess, on April 9.
Thank you very much.