FAIT Committee Meeting

STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

COMITÉ PERMANENT DES AFFAIRES ÉTRANGÈRES ET DU COMMERCE INTERNATIONAL

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, March 24, 1999

• 0904

[English]

The Acting Chairman (Ms. Sarmite Bulte (Parkdale—High Park, Lib.)): Good morning, ladies and gentlemen. I'd like to call this meeting of the Standing Committee on Foreign Affairs and International Trade to order.

Pursuant to Standing Order 108(2), the main committee is conducting an examination of Canada's trade objectives and the forthcoming agenda of the World Trade Organization. At the same time, the Subcommittee on International Trade, Trade Disputes and Investment is conducting an examination of Canada's priority interests in the free trade area of the Americas.

This is our third meeting in the first of a series of public hearings by the committee that are being held across the country on key aspects of Canada's trade policy.

• 0905

At a time when countries are facing some very crucial choices and decisions through the complex negotiating processes being conducted multilaterally under the offices of the World Trade Organization, they are developing regional agreements such as the proposed free trade area of the Americas.

In undertaking these wide-range studies and public consultations on Canadian interest in both the WTO and the FTAA negotiations, the committee and its trade subcommittee strongly agree with the Minister for International Trade, Sergio Marchi, on the necessity to provide Canadians with more opportunities to have input into the positions the Government of Canada takes going into such negotiations.

This week while one half of the committee is holding hearings in the Atlantic provinces, the other half of our committee is having similar hearings in Quebec. In the last week of April, the committee will again divide its two groups to be able to conduct extensive hearings in Ontario and the western provinces.

We hope to benefit from as wide a cross-section of Canadian opinion as possible and to reflect that in reports to be tabled in Parliament before this summer, in advance of major international trade meetings taking place later this year.

Leading up to this stage of the cross-country consultations, the committee in February heard first from the minister and his officials. Following that, during March, we had seven very successful initial round tables in Ottawa with presentations from over 40 witnesses covering a very wide range of systemic and sectoral corners.

Minister Marchi stated in his opening presentation to us that international trade has now become a local issue. What happens as far away as the negotiating table has consequences right here at the kitchen table, in the other domains of daily life. As this trend deepens as a result of globalization, the making of trade policy cannot be left to only a few officials in back rooms, but needs to engage the whole society and government at all levels.

The members of the committee therefore welcome these hearings as one step toward contributing to that goal, and we encourage more citizens in all parts of Canada to participate to give us their best ideas and to follow the progress of the parliamentary study process in the coming weeks and months.

[Translation]

I bid welcome to our guests and sincerely thank them for receiving us today.

[English]

Before we begin our consultations, what I would like to do is try to set how our round table will function today. What we'd like to do is try to get a real dialogue going.

We'll start with Professor Winham. I want people to just raise their hands and let me know that you want to say something. We want to try to get the real dialogue going.

[Translation]

Both languages are appropriate, and I invite you to speak the one of your choice.

[English]

So welcome, and we'll start on my right with Mr. Speller.

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): Thank you for the introduction. I'm Bob Speller. I'm a member of Parliament from southwestern Ontario, Haldimand—Norfolk—Brant. I'm also parliamentary secretary to the Minister of International Trade.

Mr. Sarkis Assadourian (Brampton Centre, Lib.): I'm Sarkis Assadourian, a member of Parliament from Brampton Centre. I'm also a member of the foreign affairs committee and a Liberal party member.

Professor James McNiven (Public and Business Administration, Dalhousie University): I'm Jim McNiven, a professor at Dalhousie University in the faculty of management, a former Deputy Minister of Development for Nova Scotia, and a former member of ITAC.

The Acting Chairman (Ms. Sarmite Bulte): Welcome.

Professor Gil Winham (International Trade, Dalhousie University): I'm Gil Winham, a professor at Dalhousie University in the Department of Political Science. I also teach in the law school. I serve on chapter 19 panels under NAFTA and I've had a long-standing interest in international trade.

The Acting Chairman (Ms. Sarmite Bulte): Welcome, Professor Winham.

Professor Hugh Kindred (Law School (Trade), Dalhousie University): I'm Hugh Kindred. I'm also a member of Dalhousie University. I'm in the faculty of law. I teach international law and sometimes trade.

Ms. Wendy Lill (Dartmouth, NDP): I'm Wendy Lill. I'm the member of Parliament for Dartmouth. I'm the critic for persons with disabilities and also for arts and culture for the New Democratic Party.

[Translation]

Mr. Daniel Turp (Beauharnois—Salaberry, BQ): I'm Daniel Turp. I'm the member of Parliament for Beauharnois—Salaberry, the Bloc Québécois critic for Foreign Affairs, and a member of this committee.

[English]

I'm also a professor on leave from l'Université de Montréal, and I'm very happy to be back in Halifax. The last time I was here was when Hugh Kindred was organizing the Jessup International Moot Court Competition. When was that, Hugh?

Prof. Hugh Kindred: It was 1984. We did it again this year, but you didn't come.

Mr. Daniel Turp: No, I couldn't make it.

Ms. Anna Lanoszka (Individual Presentation): I'm Anna Lanoszka and I'm a doctoral candidate at Dalhousie University in the Department of Political Science. For the past four months I've been working on a special project at the accession division in the World Trade Organization in Geneva.

The Acting Chairman (Ms. Sarmite Bulte): Thank you. Welcome.

Mr. Darrel Stinson (Okanagan—Shuswap, Ref.): I'm Darrel Stinson, member of Parliament for Okanagan—Shuswap in British Columbia.

• 0910

I'm also formerly with the North American culture group at Dalhousie University, and I was lecturing at Dalhousie on a part-time basis in the MBA financial services program and at the Institute for National Economics at Georgetown University in Washington.

The Acting Chairman (Ms. Sarmite Bulte): Welcome. My name is Sarmite Bulte, but everybody calls me Sam. I'm a member of Parliament for Parkdale—High Park in Toronto. I have the honour of chairing the eastern tour, and I'm also the chair of the Subcommittee on International Trade, Trade Disputes and Investment.

Welcome, Professor Winham. Please start.

Prof. Gil Winham: Thank you, Madam Chair. As the minister has said, trade is a local issue. I recognized this fully when a few years ago Mr. Rod McLeod from Molson Breweries—he was the CEO at that time—brought his leading unionist to my office to query me about the GATT. Of course the reason was that Molson was involved with a beer case at that time, or caught up in this. This was an entirely different level of government that Mr. McLeod wanted to get a handle on. So I think the minister is absolutely correct when he labels trade as a local issue.

Madam Chair, as you know, and as your committee knows, the WTO is preparing for a new negotiation in the year 2000. It is my judgment that Canada should press for a broad agenda in this negotiation and should participate fully in it.

Madam Chair, I have prepared some remarks, which are before you, and I will speak to those in an abbreviated fashion because we have a number of people at the table who want to speak.

The background for this new negotiation takes place in the context of globalizing world economy, and this will inform and place constraints on any sort of new negotiation. When we speak of globalization, we speak of a growing trade interdependence, that is to say, an increasing ratio of trade to gross domestic product. Keep in mind that as this happens, this means economies become externalized and therefore much of our economy earns its livelihood from outside the country's borders.

A second indicator of globalization is global finance, which has become a major factor in today's international economy. It has produced largely an open market and therefore enforces a certain market morality in the international economy that is, in my judgment, inescapable.

Another indicator of globalization is foreign investment, which has internationalized production, and is as much as any factor responsible for the increasing integration today of the international economy.

All of these factors lead to movement toward a larger scale, which is in some respects an opportunity for us all, but also it is terrifying to many people in our domestic economies. This is similar, in my judgment, to the movement toward larger scale that occurred late in the last century and the early part of this century as a result of movement toward capitalism. Governments at that time were called upon to manage the economic damage that a movement toward capitalism or a movement toward larger scale could create. The result in our domestic economies was the formation of a mixed economy, which is largely ubiquitous now in the developed world. I would suggest the analogy to the movement toward a mixed economy today is a movement in the international system toward a rules-based trade regime and an effort to try to manage the inexorable movement toward the larger scale of economic relationships that we have before us.

Important in the establishment of a rules-based regime is the World Trade Organization. What is the World Trade Organization? Largely it is a set of rules. It is a movement toward a universal trade regime or trade organization. It is also critical in the sense that it involves a single undertaking, that is to say, when countries join the World Trade Organization, or when they participate in it as original members, they accept virtually all of the undertakings of the regime, which are included, as you will have seen, in the fairly large volume recording the agreements reached at the Uruguay Round negotiations.

• 0915

The dispute settlement system is the cornerstone of that arrangement. It's critical because, in any system of rules, it is necessary to be able to enforce those rules and ensure that all members follow them.

The rules today are an issue in a number of fairly large disputes that have occurred. I speak of the banana dispute between the Europeans and the Americans, but also the periodical dispute that we have between Canada and the United States. These disputes claim to play the issue of the interpretation of dispute settlement panels and how they will be implemented. All this goes to article 22 of the dispute settlement understanding, and I think it will be an important issue in the coming negotiations. I would argue that Canada should press for greater legal clarity regarding implementation than article 22 now provides.

Madam Chair, one of the concerns facing any new negotiation today is the context of financial instability that we have seen over the last two years, particularly in Asia but also in developing countries. I would suggest that financial instability and debt raise the question of whether further liberalization is the correct action to be taking at the present time.

Much of the concern has to do with the issue of how to handle international finance in an open system of economic relationships, but it seems to me that one thing is clear: in an era of uncertainty, we would do well to try to promote an open system of international trade. An open system of international trade is critical for developed countries in order to be able to maintain domestic production. It's even more important for developing countries, as they need to earn foreign exchange in order to service the debts they will already have incurred. As we've seen recently, as Central American nations were meeting with the president of the country to the south of us, they made the argument to President Clinton that it was necessary for them to maintain access to markets. I think that statement is true for all of the developing countries in the World Trade Organization.

I am sure you'll be aware that the upcoming negotiations have a built-in agenda. It deals largely with agriculture and services. There are people here who will speak more authoritatively than I do on agriculture and on services, but I would suggest that Canada should support the negotiations that are upcoming in these two areas.

Both of these negotiations represent a target of opportunity. In agriculture, not only do we have international agreements, but we've also had domestic reform in countries over the last five years. They have largely moved towards decoupling farm assistance from commodity price supports. In that area, this will give an opportunity to further reduce export subsidies or credits, which Canada should move towards, and also to try to move towards increased liberalization in those areas that have been tariffied under the Uruguay Round negotiations.

On services, we have a new legal code that was negotiated in the Uruguay Round, and it provides for a process of making national service access commitments. I would suggest that the priority in the services area would be to expand the market access commitments that are already undertaken. For one thing, we could move towards full sectoral coverage in the services area. Secondly, we could move to liberalize those access commitments that have been previously taken, or will be taken in the future in this area. I would suggest that Canada's interests continue to lie with an expansion and liberalization of trade in services, much as they lay with the formation of the services regime in the first place in the Uruguay Round.

• 0920

There are also new issues that will come into play, in my judgment. If the Tokyo Round and the Uruguay Round were any guide, what we see is that a negotiation gathers momentum after it gets started, and it adds new issues. One of the new issues will probably be investment. We've seen that there has been a major effort to try to negotiate investment and an MAI under the OECD. It did not succeed for some reasons that I indicated in my paper. I would suggest that the time is now ripe to bring investment negotiations into the WTO, where it should have been from the outset, in my judgment. The reason is largely that it will include developing countries, which of course make the negotiation more difficult, but will make the results more valuable. For one thing, a negotiation in the WTO will take advantage of the dispute settlement system there, and that will allow for the implementation of agreements reached much more easily than if they were reached in the OECD.

There will be a problem in how to negotiate investment in the WTO. I would expect developing countries will prefer to start on a minimal basis, moving from the terms agreement reached in the Uruguay Round, whereas developed countries may prefer a more maximal basis, perhaps taking advantage of chapter 11 in the NAFTA, which is a more extensive agreement. I would suggest that Canada could have a balanced approach, perhaps trying to bring both these sides together in the upcoming negotiations.

Another set of issues likely to come up is environment and labour. These are the “trade and” issues—trade and environment, trade and labour. They will be contentious, because the developing countries take a position opposing the negotiation of these issues. On the other hand, major powers, such as the United States or the Europeans, have strong lobbies that may make it necessary to include these. One has to keep in mind that trade liberalization ultimately rests on public and popular support, as the minister well knows. Therefore, I think it is necessary to bridge the differences between these two groups in any upcoming negotiations. I believe Canada could have a hand in this for reasons I have outlined.

Finally, Madam Chair, I would say that there are concerns about the disproportionality of the agenda I have seen raised in various writings about upcoming negotiations. That is to say, the agenda disproportionately raises the concerns of developed countries, but not so much those of developing countries. I would argue that unless a package in a new negotiation is reasonably balanced between these two sets of countries, it will fail. It will fail because developing countries are no longer on the periphery of negotiations; they are central to trade negotiations. The Uruguay Round changed that.

So as I conclude, I would suggest that Canada should work to ensure sufficient proposals come forward that will eventually lead to a balanced agreement in the negotiations.

Thank you, Madam Chair.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much.

Professor Kindred, did you have a statement or an opening remark that you'd like to make?

Prof. Hugh Kindred: I don't have a statement, Madam Chair, but I did scribble some notes down. I can read those if that's what you would like me to do.

The Acting Chairman (Ms. Sarmite Bulte): Of course. Could you share those with us, please?

Prof. Hugh Kindred: I certainly will. They're of a rather general character, and I hope they will fit around Gil Winham's comments. I think you'll find some allusions. I reviewed your extensive list of questions that came forward with the proposal for this round table, and I thought I might make a few comments around about five of them.

The first comment is about the WTO's central objectives and Canadians' interests. I'm going to say that I think the core goals of the WTO have been too exclusive to date. The agenda is getting larger and larger, as Gil has said, but to what end are we working at this?

• 0925

Much of the experience of GATT, and therefore into the WTO, has obviously been driven by freer trade, and that depends on the common belief in a market economy paradigm. I just want to point out that such a belief expresses a choice. There is nothing inherently right or wrong about free or fettered trade. Though I have no doubts about the benefits of freer trade, I question the extent to which the WTO has concentrated almost exclusively on this and has thus belittled what I simply call the social and civic expectations, the environmental, labour, and other human rights issues that are on the agenda, as Gil mentioned. We don't know how to handle them too well.

I think this imbalance between economic values and the social concerns is a matter of concern, because we are supposed to be living by principles and standards of sustainable use and development. We've adopted them not only in our own society, but in the world community. However, I think those principles are hardly recognizable in the practice of the WTO yet. I think there is room here for Canada to strive in the negotiations to make this set of values central to the objectives of the WTO; that is to say, make these social concerns as significant as the free trade goal and not leave them on a subsidiary level. The question is how to do that. Coming to that, I'd first of all like to comment on the scope of the WTO's mandate, as I call it.

We've seen this broadening progressively from the trade in goods to trade in services, to TRIPS and TRIM and so on, as Gil has just mentioned. Of course, there's also this whole range of new topics coming on the table. But first, it seems to me that the danger is that some of these human activities and concerns are not best regulated by market-driven disciplines, which are the central method of the WTO today. When it comes to trade and environment, trade and labour, or cultural diversity, you can subject these things to the market forces of free trade, but I think the results are not likely to end up where Canadians put their interests. In fact, I think the market can destroy those kinds of social concerns.

A problem is that the WTO's market-driven discipline is essentially a choice of no human regulation, but all these other areas of human concern that impinge on trade require affirmative regulation. It's a different mechanism of working. For example, environmental protection is unlikely to occur through a market economy unless there is a substratum of regulation that influences the behaviour in the market. Let me put it this way. I think Canada should argue against the WTO advancing into these fields that are not truly trading activities and not best regulated by market disciplines. Yet I've just urged that these environmental, cultural, labour, and human rights concerns should be central to the WTO's objectives.

As for how that works, just as trade in goods is governed by the expertise of the World Trade Organization, environmental protection and labour, etc., should be regulated by their own separate, sectoral agencies. Those exist, of course, at things like UNEP, the International Labour Organisation, and others. What I'm arguing against is the WTO going forward and raiding these organizations in the way in which I think it effectively raided WIPO, the World Intellectual Property Organization, over intellectual property matters.

• 0930

There's a lot wrong with those organizations in different ways, but I'm arguing the point that they're the relative experts who should be the central regulators of these interests. They should, however, be forced to borrow on the trade issues in the context of the WTO. It seems to me there has to be a mechanism by which the WTO can be made to pay more respect to the work and the regulations of these other specialized agencies in fulfilling its own mandate.

One fact, one cardinal principle of this notion, is sustainable development. It's one that we believe we operate it on, and it's the idea of integrated management to resources and activities. That's what we're talking about here. I suspect the way to achieve such integration within the work of the WTO is maybe to amend some of its basic approaches and even its constitutional documents. Crucially, that's the GATT, 1994, and I'm thinking in particular of article 20, which is the exceptions clause, as you may know. I characterize it by saying that in dispute resolution panels it's sort of an afterthought that those panels have had great difficulty applying to actually protect the values to which it refers, including public morals, human health, environment, and things like that.

I think there's scope here for Canada to initiate a reconsideration of this article, with a view to turning it into a positive recognition by way of reference to the operative standards of the other specialized agencies in their appropriate areas. Turn it into a positive recognition of the ranges of values that should be protected in each of these trade decisions. That's a thought about bringing these issues together in an effective management way, I hope.

I had another comment on what I call the mode of WTO negotiations. That's something again that Gil touched on, but this is a different sort of reflection. I think successive rounds of negotiations under the GATT have been too exclusive. I'm not aware that the WTO makes much use of observers, but that's a very widespread practice in the United Nations. If I'm right about that, I think the WTO foregoes a whole range of important viewpoints and useful participation as a result of that.

You're probably aware of the recent major international conferences to negotiate a whole range of normative standards for human activities in the 1990s: the 1992 United Nations Conference on Environment and Development at Rio; the 1995 Beijing conference on the rights of women; the 1998 Rome conference to establish an international criminal code. These have all used and demonstrated the significance and valuable influence of civil society representation at these meetings.

It seems to me that not only should large parts of the WTO negotiations—I don't say all, because maybe some things like tariff bargaining are really essentially something between individual governments—cover these major areas of new initiatives, but I think the WTO negotiations could be much more transparent and publicly accountable. Not only that, but the assistance of informed opinion outside of government should be welcomed as helpful.

NGOs, non-governmental organizations, are obviously worthwhile sources of informed input, but there's another source that I don't think there has been much thought about. It's consistent with my call for a more integrated management of trade issues amongst related specialized agencies, and it is the intergovernmental organizations that are already directly responsible for the special concerns of human rights that ought to be considered in negotiating trade issues.

Here in Canada we've had a long experience of going to international fora while having to cooperate with other governments, such as our provincial governments, and with civil society representation. So we're very well placed to urge this positive change in the process of negotiation at the WTO, which would be beneficial to all of us.

• 0935

Incidentally, as a side comment, I agree with Gil that the dispute resolution system has been thoroughly regularized under the WTO, and that's been a good thing, but it also misses the opportunity to receive a broad range of useful inputs to its decisions.

States party to the WTO may join in the process, which is launched by complaint, but no one else can intervene. I suggest there's room here for participation as amicus curiae, as friends of the court, of these intergovernmental organizations whose sectoral responsibilities impinge on the particular trade dispute at hand. They could contribute effectively to making much more integrated and sustainable decisions.

I have a few specific comments on the question of what should Canada's position be. I have thought about the issue of competition policy. Competition policy is something that the WTO should adopt as soon as possible. I should just step back a bit and explain how I get to that.

The essence of the free trade regime is the prohibition of discriminatory national regulations of trade transactions. As trade gets freer, then the international market becomes less and less regulated. Ultimately, hypothetically, obviously, international trade can operate in a regulatory vacuum, but this is a situation that no industrialized society would tolerate, not for a moment.

Every one of our diverse economies has long had competition law that provides a substructure for fair trade internally. It's a notion of law to prevent unfair trade practices. Out of the goodness of competition policies internationally, what's there to stop some of the manipulated gyrations we see in the markets, especially in the money markets, global monopolies, predatory pricing on a world scale, and a whole range of well-recognized abuses of the free market.

At present, the only controls on the international markets as such are the extraterritorial application of national regulations. I don't have to tell this company anything about how much Canada has suffered at the hands of American anti-trust laws to understand that this is not an approach that holds a solution for the growing global problem.

Equally, I suspect that even the largest of Canada's financial institutions and commercial corporations won't have much chance in what I call the global competition of an unregulated global free market. So developing Canada's interests to press for the development of a global competition policy... we're in the WTO to complement this dismantling of the trade barriers, but saying we want it is different from actually trying to achieve it.

Achieving a workable competition policy is going to be difficult. First of all, one would expect it would be built by the state governments that already have national policies. Further, they have to come together. National competition laws being based on diverse economic policies have in fact often tended to contradict each other. One state's free trade is another state's unfair advantage, this kind of problem, so the task of actually agreeing upon a globally uniform set of competition standards isn't going to be easy.

• 0940

Secondly, if you think about it, unlike the market-driven movement of trade, which is not having regulation essentially, competition policies only operate through administrative regulations. Think of our own bureau of investigation and competition policy inside the federal department. International competition policies are going to require the establishment of a major international institution of investigation, prosecution, and enforcement. It will be complex and expensive, as the European Union's attempts at the regional levels have shown us. The process is quite different from any of the kinds of responsibilities the WTO has had to date.

I don't think we can allow the difficulties to put us off. Canada, amongst other nations, simply can't afford to be without it.

Another area you listed here was what Canada's position would be on electronic commerce and information technology. This is obviously an important new development in the manner of processing trade. It is clearly in Canada's interest to promote the awareness and use of the new trading environment amongst Canadians. Happily I know that the Minister of Industry is already vigorously doing that.

On the international level, where the WTO is at play, I foresee two major concerns. One is what I call a problem of international connectivity. Just as trade by paper transactions depended on the development of international postal service in the last century, so the free flow of electronic commerce beyond the millennium will rely on efficient information technology. As with other media like the post, the telex, and the telegram, we have found that we need a global electronic network that will require uniform technical standards and an international monitoring agency. I don't think that's a part suited to the WTO. It needs a much more technological body.

I won't say anything more about that. It's not the central discussion today, but it's something that obviously Canada has an interest in promoting.

The second foreseeable problem does relate to the WTO more directly, and that's the risk of monopolization of the medium, that is, potentially of the means of trade. The current anti-trust suit in the United States, and I'm talking about the Microsoft issue, tested the possibility of this happening on a global level as well. Such monopolization would be against the interests of Canadians and most other people and could be curtailed by the WTO. Just as the anti-trust laws, the weapon of choice at the moment anyway in the United States... so the new competition policy, which I just spoke about, needs to be fashioned by the WTO. It could and should be made to include modern regulations that seek to prevent unfair trade practice in this new electronic medium. I think it should be included in that task.

At this point, my written notes have run out. I could add a comment about intellectual property and Canada's position there. In recent years it's become a growth industry in the sense that there are more and more types of property that are being invented and then protected, and these are the operative words, as it were.

We've been changing the use of that language. It seems to me that so far as these new products fit the models of well-recognized property interests in human inventions, there's no objection. The computer software is one of the new materials. It has presented quite a number of problems of categorization under the traditional legal regimes because it's not particularly well adapted to the new media. It's basically the same sort of thing as a better mouse trap. It's a human invention to do something in a better way. So that ought to receive appropriate protection.

• 0945

I'm much more worried about the circumstances in other fields where we've created new property out of existing materials. Here is a very simplistic example that helps to illustrate this. A prospector discovers the medicinal uses of a herbal plant that has been used by the local people for centuries. They then manage to take it back to their own country of origin and patent it, or use it in a certain way so that they can patent it, and thus they create a property in this kind of thing.

I tend to think that in certain circumstances that's quite a reversal of free trade. That's a denial of free trade; that's locking up the trade in a sense.

The local, often indigenous, people who used this thing for hundreds of years had no control over it at all. Everybody knew how to use it. Everybody had access, it was there, and there was no regulation. That's free trade. Those who create a property in it by the use of the intellectual property regimes then prevent access to it by others, except on their terms of trade. This obviously touches a sensitive point, but there are real risks for biodiversity and there is a failure to respect methods of sustainable development as well. We have to address this in any discussion of TRIPS and anything beyond it in the next round of WTO.

The Acting Chairman (Ms. Sarmite Bulte): Professor, perhaps we could stop there and move on. We can come back for questions.

Prof. Hugh Kindred: All right. Fine. I have to say that the last point is foreign investment in financial systems, and I think that's the most important issue of the lot. It's not something the WTO is going to take on, but that's the thing we ought to pay the most attention to right now.

The Acting Chairman (Ms. Sarmite Bulte): Thank you. We will come back to you on that.

Prof. James McNiven: I didn't know Brian was going to be involved in this.

He and I were colleagues at NAPG for an awfully long time, and I hope I'm not going to steal whatever he has to say.

I want to approach what I have to say from a personal point of view. I spent 20 years in university and 12 years not in university. I met up with payrolls in the private sector, which is an interesting experience, and ran a government department in economic development.

So what I have to say is sort of academic and sort of not. I want to give you a picture of the way I see the world trading regime, which you may or may not get, but it will be very simple and very quick.

The idea to keep in mind is that GATT was created in the 1940s and 1950s. It wasn't created for this purpose, but it ended up being a purpose of, in a sense, economically organizing the non-communist world for production, trade, and basically also in a building sense, bulking up one side against the other side.

The other side came up with COMECON, which was a failed attempt for a whole bunch of national socialists. They called themselves socialists. National communist regimes, national socialists—this sounds like Nazis, but I don't mean that. All nationalist regimes that were socialist and had walls between them basically tried to figure out how to fight the walls without breaking the walls. It didn't work.

The WTO is GATT in the 1990s. That's all it is.

I've been married 35 years, and 25 years ago we were worried about the kids and now we're worried about the grandchildren. It's different, but it's still the same.

What was great through the 1950s, and plodded on through to the 1980s... we find a WTO that is the 1990s version of a 1950s version of the 1890s version of something.

• 0950

Inside that—keep that in your head—were three groups of countries that seemed to be coming together in what might be called GATT-plus or WTO-plus. In other words, we all agree on WTO or GATT, but we're going to do more than that. It's like clubs; it's like all of you saying you're members of Parliament, but you're Liberal members or you're NDP members, okay, so you're members plus. You're in a club. One of these clubs has been formed into something called NAFTA, another one has been formed into something called the EU, and the other one hasn't really been formed, but we keep talking about east Asia, which would include the Chinese coast, in about 100 miles, but wouldn't include the rest of China. I realize that sounds weird, but things are happening in China.

These three clubs have started developing their own internal rules, if you will, their own internal relationships—or at least two of them have. In that sense, if you want to look at NAFTA and ask where NAFTA comes from, well, NAFTA is FTA-plus. But FTA is really nothing more than the 1950s special status that we had with the United States, to go back in history. The whole idea was that when the United States whacked foreign countries for some real or supposed injury, they'd say, hey, but we don't count Canada as foreign. Everybody in Canada would breathe a sigh of relief, and we'd go on doing what we were doing.

Again, after 47 years the world sort of changes, but you want to keep the same relationship, so you create something new. So we had a 1980s version that fit the Reagan agenda. I think the way it was couched was that this was the way the U.S. would be happy to see it. I don't think it hurt us, but at least it gave us a chance for special status, so that they can still go out and whack somebody and say, yes, but Canada doesn't really count in this. I think that was good for us, and I'm happy to have been associated with trying to push that thing through, at least at the provincial level, and to see some things happen afterwards.

From the point of view of NAFTA, well, that was the U.S. concern about Mexico. I'm going to come back to Mexico in a minute. The whole idea of NAFTA was that the U.S. had a lot of concerns that if it didn't do something about Mexican economic development it was going to end up with Mexico, literally. I'll come back to that in a few seconds.

So we end up with NAFTA. We're still running off Ronnie's agenda here, Mr. Reagan's agenda, because he had an idea that something from Point Barrow to Cape Horn would all be one and a greater thing, and that seemed like an idea. I don't think the U.S. right now has any particular interest in it. I don't think they have any particular interest even in NAFTA. If it suddenly died, no one down there would spend a lot of time crying about it. I think the sentiment is increasingly protectionist, but we have the law, we have the protection, we have our special status for the 1990s, as we had for the 1950s, and we'll weather this one.

But I don't think the thrust is there for an FTAA. It's a nice idea. I think the funny thing is that Canada has picked it up, and it's partly because of Liberal party philosophy about multilateralization as opposed to the U.S.-Canada relations. There seems to have been, over the last 20 years or so, a kind of positioning of political parties here. Do you go broad scale or do you go narrow scale? That's the way I see it.

So FTAA looks like a nice idea, and it would be good if you could get it. I think, though, that if you ask yourself do governments lead or do they follow, well, basically in things like this governments follow. The FTA legitimized what was already happening. It didn't matter, we didn't have to have an FTA. We'd still have got it. It just wouldn't be written down and we wouldn't have a rule of law. We'd have capricious American decision-making instead of some kind of rule of law that people like Gil try to keep going.

This could have... I mean, I don't know how he does it. I couldn't stand listening to all this stuff. I've been in a few royal commissions and stuff like that, and frankly, being on your side of the table is a real pain. I know this is all going down on paper, but I don't care any more.

Anyhow, I think the FTAA is an attempt to lead into something rather than to follow into something, because I don't think the integration is there in the western hemisphere as yet. So we'll have to see what happens on that particular side.

• 0955

I have this picture of these three blocks of the WTO, and the NAFTA attempting to be the FTAA. The thing to keep in mind is that among those three areas of the world I mentioned—east Asia, North America and western Europe—close to three-quarters, if not four-fifths, of all world trade takes place. Basically, if we want to get really blunt about it, the rest of the world does not copy into this whole thing. This is réelle politique; it's not nice stuff.

We Canadians talk with nice words, and I guess I've lost the delicacy. But essentially the rest of the world accounts for roughly 20% of world trade—maybe 25%. I said I was including 100 miles of the coast of China, but the rest of China is in the other part. So as a consequence, bringing people into WTO is a good thing, but I don't really think, when we get down to it, it will be according to the rules of the third world; it will be within the rules of the major people who have the major investments in the whole trading system. I don't mean foreign investment; I'm talking about the big three blocks in the negotiations, who have all the concerns, the worries, and the things to win and lose. Those are the people who will end up making the rules and the rules will be made for them.

We talk about the WTO, but let's start with the FTAA first. I'm not convinced we're likely to see an FTAA, for all the good words. I try to take away the good words and look at the realities underneath. I think we will find this will go on and be discussed and kicked around. I'm not sure where the great impulse is, even in Latin America. But I don't see any great integration of economies going on north to south, outside of Mexico.

NAFTA, on the other side, is a very important thing. I spent my graduate years working in the area of international development. I remember in the sixties, people kept saying we should have trade, not aid; we shouldn't just give them money, we should trade with them. Outside of the trading examples that created the Four Dragons in Asia, here is the world's biggest experiment in developing a country through trade rather than aid—Mexico.

Let me give you an idea of the seriousness of the situation. I spent the last month in Tucson. It was better than here; it was warm and pleasant. In the month of February, the papers reported that the Tucson district border patrol returned 55,000 Mexicans to Mexico. That's how many they caught. The total for 1998 along all 2,000 miles of the whole border of returned people was 1.5 million. If you figure that half made it and half didn't, then three million people tried to cross and 1.5 million ended up as illegals last year—and three million is 3% of the Mexican population.

If you opened the border for 10 years, the United States would be half Mexico—it would be Mexico, or Mexico would be the United States—simply because all the population movement is there. It's absolutely astounding. The patrol is ubiquitous along the border. That movement is coming because people want work. These are good, decent people. They are people who want to work, and they'll work at anything. They'll send their money back home. You think, gosh, what a terrible thing.

Recently the BBC reported on a number of rafts and boats that were sunk in the Mediterranean by a storm. They contained Moroccans and Algerians trying to get into Europe. The reason the Turks aren't invited into the EU is because the Turks constitute 50 million Mexicans, just like Mexico constitutes 90 million Mexicans, if I can say it in those funny words.

The Malaysians are sending people back, as are Singaporeans. As fast as they come across the strait from Indonesia, they turn them out. This is a global phenomenon and it is revolutionary. It is an explosive phenomenon that's going on, this international migration of people—international mobility. It's almost like the Romans manning the walls at the end of the Roman Empire—how do we keep these Germans out?

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We have an interesting problem. I say “we” because we're so insulated from it by geography, but we're dragged in with the United States and other countries. I think you're going to see in the FTAA that one of the questions will be “What do we do with all these people?” If we don't do something for them there, then we'll have to do something for them here. That's a very interesting one.

There are two other things I want to point out in this. One is it might be a useful idea, if we're concerned about the FTAA, to start teaching Spanish along with French and English. Buenos dias muchachas. With all due respect, something like four times as many people in the world speak Spanish as speak French, simply because the Spanish colonized all of South America.

Mr. Daniel Turp: The Government of Quebec is making Spanish the third language.

Prof. James McNiven: The only place in Canada that's taking Spanish seriously and really trying to promote relationships with the Spanish-speaking countries is Quebec. Whether it's Quebec universities or the Quebec government, there just seems to be that consensus, which is to their credit.

We either learn Spanish or have real problems in the future. What we do on that side is the indicator of how serious the Canadian government is about this, other than just signing agreements.

There is one last thing I want to mention on the FTAA. Is Canada the western hemisphere's attic or gateway? David Crane brought this up a few years ago. We're turning into the attic. That is, “I'll throw it up there; they'll take care of it.” We're not turning into the gateway. I don't want to push partisan politics, but some of it is taxation; some of it is simply productivity problems; some of it is problems with how we organize our own industry, competition policy and otherwise.

When we say trade is domestic as well as international, we have to take a look at that. We need to have better advantages, and I don't just mean cost advantages based on exchange rates. We need to have better advantages than the U.S. presents right now if we want to be the gateway. If we want to be the attic, we're doing fine and we'll always get our little piece, but that's what we'll be.

I think some of the Mexican negotiations with the EU are suggesting the gateway concept is getting more difficult for us.

On the WTO, we clearly want to widen the membership; we want to have as many people in the WTO as possible. I would agree with Hugh about the business of competition policy; it's a very difficult one. I think something must be kept in mind when we talk about things like predatory pricing or monopoly pricing. Microsoft isn't on the dock in the U.S. because it priced itself too high; it's because it didn't price or because it kept the price low.

The case of John D. Rockefeller led to the anti-trust laws in the 1880s, not because he exercised monopoly pricing, but precisely because he was exercising monopoly. The whole thrust of competition policy is to keep a system open to innovation, by not allowing the big people to close off the little people from being able to innovate successfully. We have to keep in mind that competition policy has to keep the pot boiling.

That's way too much about the pricing issues, but I really think that's a critical and important one.

In terms of the WTO and investment, forget it. When the so-called MAI was proposed for the OECD, I remember being on the ITAC when they were talking about this. I sort of chuckled to myself and said “DOA—MAI/DOA, dead on arrival”. I had nothing to do with groups opposing it—blah, blah, blah. The point is, if you look at the two functions of trade and investment, trade is cooperative. If I trade with you, we both benefit. We both win. We can have a win-win situation. Investment is competitive. If I get the pot, you don't.

There's a whole different thing here. It's nice to say they ought to have rules for investment, but investment is a jungle. The WTO tried it. Within a few months, one of the German states decided to give $300 million or $400 million to Volkswagen and somebody took them to the WTO—I think it was the French. The Germans told them to get stuffed and that was the end of it.

The same thing has happened in Canada with the internal trade agreement. I was there at the very first meeting of discussions on the internal trade agreement in 1985. It was signed, but it was dead the day after—well, it wasn't even alive when it was signed. So we flounder along on this stuff, because frankly no one is going to accept a real discipline. Maybe they'll sign the paper. Maybe I'm wrong, but I don't think they will accept a real discipline on investment incentives and investment approaches.

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Mr. Daniel Turp: Why?

Prof. James McNiven: Because if I get the plant, I get my name in the paper, and if you don't get your plant, you get your name in the paper. There's not much more to it than that. The amount of investment in terms of job creation relative to actual total job creation in a province or a state, or whatever jurisdiction, is probably 1% to 2%. But the political importance has expanded immensely, so it's like 90%.

Let's say Canada loses a Bombardier plant to New York. There it is. There are questions in the House and everybody's flying around with it. If you look at the loss, it's 300 jobs. Nova Scotia right now has somewhere in the area of 400,000 employees. So what is 300 jobs? Frankly, nothing, statistically. Statistically, and I've done probably the only work on this subject I've ever found, the average jurisdiction in a normal economy in a normal year loses 7% of its employment. So we lose 30,000 jobs a year in Nova Scotia. It's like magazine subscriptions. We have to find 35,000 to increase the 30,000 we lost. That happens most everywhere. When we get job growth, we get net numbers. So, 300. But think, what if Bombardier did that? What kinds of howls would there be in Quebec, in Canada, in Parliament, in the Quebec parliament?

The point is that this stuff is very important politically, so we're all going off to make rules on it so that the choice will be left to the vagaries of the corporate decision-maker. I don't think so. That's the same all the way around the world right now. It's identical. Whether Germany, Japan, Indonesia, it doesn't matter. You might as well just start right off saying investment negotiations, yes, let's do them, but put DOA on the top of it before you even start. It will save you a lot of trouble, because that's how it's going to end up. I'm just giving you my personal opinion.

So for the WTO, if you ask what should be the scope and the limits of the WTO, I'd say whatever you can jam into it, because we don't have many other places that might be able to get something done. I realize we run a risk there of messing up the scope. But what we really need is a WEO or something like that, an economic organization.

Competition policy, I agree with it.

Agriculture is like investment. You're not going to get very far with it, because agriculture again is not very important. Isn't that awful? Agriculture is not really important in terms of the number of jobs, the size of the economy, etc., in a national economy, except in the third world. But it has immense political importance. So as a consequence, the governments are not going to give up the ability to help their farmers. And I don't see any reason for them too, either, but that's another story.

Ms. Wendy Lill: What about things like health care?

Prof. James McNiven: If you're talking about Canada, we're busily privatizing our health care as we go on. We're not building it two-tier, where we have a public hospital and a private hospital. What we're doing is if you see all of the medical practices as a spectrum, all the way from heart surgery down to general practitioners, along that spectrum pieces are dropping out. Governments are pushing them out. For the collection of blood from people who are out in the suburbs or something and can't get in to the hospital, it used to be that the hospital system would send a nurse out to go get the blood samples. Now it's all been privatized. There are little bits and pieces all the way along the system. And the governments are just retreating from all of these and letting small entrepreneurs and others do them.

So for that matter, one being they're competing with the private sector, I think we've moved down to 70%, 60% public funded, 40% private funded. The U.S. has gone from something like 20% or 30% public funded to 40% public. So they're 40/60; we're 60/40—something like that. We're moving in different directions, but it's definitely the way it's going because of budgets. I don't think it has anything to do with ideology, but I think governments are saying, if we can push this off on the insurance system...

• 1010

I was on the board of directors of Blue Cross for six years and I watched this stuff. Every time you turn around the provinces drop something off the system, and Blue Cross is supposed to pick it up, but of course not raise their rates too, but we did.

The Acting Chairman (Ms. Sarmite Bulte): Professor McNiven, can you wrap up so that we can hear from Mr. Russell?

Prof. James McNiven: I'll finish up quickly.

Also on property, yes, it's very important, I agree. Investment, as I said, no. Competition policy, definitely, yes. On the labour thing, I think we focused on the labour side as a problem of exploitation of child workers, low wages, and things like that. I don't have a problem with that, but I'll tell you the big one that's sitting out there like a big whale under the water is the mobility problem, and we're not even looking at it; we'll wait until it surfaces. But I tell you, if you sit in Tucson for a month... and it's surfaced; it's huge.

I'll quit there.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much.

Mr. Russell.

Professor Brian Russell (Business School, Dalhousie University): Thank you, Madam Chairman, hon. members of the committee.

Let me begin by associating myself with Professor Winham's comments about globalization and how the world is changing, and perhaps elaborate on them a little bit and then talk about how the WTO and the FTA, in my judgment, fit into that context.

From a Canadian point of view, it seems to me that the world in the last 20 years, and even 10 years, has changed a tremendous amount, largely as the result of what nobody can seem to come up with a better name for than “globalization”. At one point in my life I decided to think about what constitutes globalization, what do we really mean when we're talking about that, and I came up with what I call seven factors of globalization, which are the increasing free movement of services, investment, capital, knowledge, people, ideas, and goods, coupled with the proliferation and the broadening and deepening of international institutions. I think this is where the WTO and initiatives like the FTAA fit into this context. For a medium-sized open economy like Canada, I looked at the numbers the other day, and Canadian trade in 1998, I think, constituted about $600 billion—that's imports and exports, about 50% of each.

For a medium-sized open economy like Canada, an organization like the WTO is absolutely critical to its long-term economic success. Canada cannot survive successfully in the world of the national policy any more. While arguably perhaps a national policy and the policy of John A. Macdonald were perfectly appropriate at the time when they were implemented and for some time thereafter, the days of closed borders and high tariffs, trade restrictions serving national markets, are over.

Canada needs, and has to a considerable extent recognized that it needs, to take initiatives on a global scale and to open foreign markets to Canadian goods and services. The reciprocity to that is to open Canadian markets to foreign goods and services as well, because trade is a two-way street. From an economic point of view, actually the justification for exporting is simply to pay for imports, to buy the things you don't produce in your own country that you need. One way of getting money to do that is by selling things you do produce.

So both exports and imports are part of this equation, and the WTO is a critical part of keeping that flow of exports and imports coming and going, which is particularly important for an economy like Canada, which, because of its relatively small size, cannot generate the kinds of economies of scale that larger economies and populations may be able to.

I'll say a word about why I think that's even more the case with a region like this one in Atlantic Canada. Atlantic Canada is a region that has a population of about 2.2 million to 2.3 million people spread over a fairly large amount of territory, larger than many countries in the world. In order for an area like that to be economically successful, free and open markets are even more important than they would be for an area like southern Ontario, Quebec, British Columbia, and Alberta, which have larger population bases.

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Let me talk a little bit about the specifics of the WTO negotiations and why I think they're important to Canada, and a little bit about areas, many of which have been touched on already by my colleagues.

First of all, your mandate I think specifically raises the issue of agriculture. It seems to me that agriculture has a long and tendentious history of being a very difficult area to negotiate in trade negotiations, largely for the kinds of reasons that Jim is talking about. Politically, it's extremely sensitive even though it's a relatively small part of the economy. There's the whole mentality many countries have that you need to be able to produce enough food to be self-sufficient. Family farms seem to have some significance to many people, and that of course raises many issues about open agricultural markets.

Open agricultural markets, I think from a Canadian point of view, cut both ways, and I think because of the difficulty in negotiating agricultural concessions in a trade negotiation, the best you can hope for from a Canadian point of view are two things. One, and this is less important than the second thing, I think, is that we should continue to push for the reduction, the phased reduction, that is, over a period of time, of tariffs that have already been bound in the Uruguay Round. Two, and I think this is more important, Canada should really push for the elimination of export subsidies in agriculture—total elimination.

Export subsidies are already illegal under the WTO in every other area but agriculture, but Canada is faced with the situation where major international countries or federations, quasi-federations like the European Union and the United States, make extensive use of export subsidies in the area of agriculture and displace what would otherwise be Canadian export markets by the use of agricultural export subsidies. So while agreeing to reduce agricultural export subsidies would mean agreeing to reduce or eliminate all of them, the net benefit of that to Canadian farmers would be substantial in the gaining of new export markets that previously have been going to heavily subsidized European and U.S. producers. Obviously, both the Europeans and the Americans have deeper pockets when it comes to playing the subsidy game, so it's a bit of mug's game for a country like Canada to be forced to deplete the public treasury in order to try to compete with that.

So in agriculture I'd say that's probably the most one could hope for, and it's a position I would advocate and that in my judgment would be good for Canadian agriculture.

On services, I agree with Gil Winham that we need to broaden the services agenda. The Uruguay Round made a major step I think in bringing services within the scope of WTO, but we certainly need to look to broaden that. The financial services agreement that was negotiated the year before that began to do this, and I think we need to look at some other areas and again push forward in broadening the services agenda.

I'm somewhat more optimistic than Jim is about investment in the WTO. I think he's right about locational incentives, but I think there are other areas for direct investment for which significant disciplines or openness could be sought. I don't know whether or not—clearly, and everyone has suggested this, it would be a very difficult negotiation to bring investment within the realm of the WTO simply because the interests of the developed countries and the developing countries appear to be somewhat different. That being the case, I think it would be a worthwhile thing if at least the direct investment side of it, leaving aside the location incentives issue, could be brought within the realm of the WTO, and I think there will be significant attempts to do that.

That also touches on another issue I want to raise and that I think should be important in Canada's thinking about the WTO negotiations. This is the whole issue of enforcement and implementation. Gerald touched on it. What you find is that many of the agreements that were negotiated under the Uruguay Round, which came into effect in 1995, in fact haven't been implemented by many of the signatory countries. The intellectual property is a notable area of laggardness, for example, but it's much broader than that. The whole issue of implementation and how you enforce implementation and make sure that countries actually do what they commit to do when they sign these agreements, it seems to me, is a real hole in the current regime of the WTO.

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From a Canadian point of view, I think it's clearly in Canada's interests that if people are going to sign agreements, they do what they say they're going to do.

So I would argue, I think quite forcefully, that the issue of implementation and enforcement needs to be addressed at the WTO, and we need to begin to look at putting some real teeth in some of those provisions.

I think it extends into the area of dispute settlement as well, as the banana case and the current U.S.-EU dust-up on growth hormones in beef also indicate. When a country is actually implementing a panel report that has gone against it, we need to know whether that implementation is adequate or whether it isn't; we need a faster and more efficient way of deciding that. So I would argue that those should also be issues that Canada pushes forward.

On the issue of competition policy, I think it is true that competition policy needs to be addressed in the WTO. I don't think it needs to be addressed in the manner of coming up with a sort of global system of competition policy. I think it needs to be addressed in the context of putting a set of boundaries around national rules, which imposes some degree of harmonization on the national rules.

I think the classic example of what the problem is here is the Boeing-Lockheed merger in the U.S., in which you had two U.S. companies merging and the European Union saying “We're not going to let you operate in Europe unless you comply with our particular competition policy rules.” In that situation, you are battling competition policy authorities from the EU and the U.S., and that could happen in lots of other countries as well. So it seems to me we need to come up with some sort of overarching structure.

Countries still need to make their own individual national policy decisions, but much as is done in the area of anti-dumping and subsidies, for example, we need to put some overarching rules in place that lead toward a greater degree of harmonization and understanding and mutual transparency with respect to those competition policy rules.

That brings me to another subject that I think is important to Canada and hasn't been discussed here, and that's the anti-dumping.

If you want to talk about what's really important to Canadian interests, let's face it, what's really important is trade with the United States; 80% of our trade is with the United States.

One of the largest problems that Canada has in the context of its trade with the United States is anti-dumping suits. It's a huge problem. Many other countries share this problem, and it seems to me there's a natural coalition out there in the context of WTO negotiations to try to push the U.S. to do something to at least restrict the sort of totally random, politicized nature of the process of making anti-dumping determinations in the United States.

From a Canadian point of view, that should be very high on the list of priorities, and I think the building of that coalition is an important part of achieving any sort of success on this issue, because the resistance to it in the United States will be absolutely through the roof. So I think the issue of anti-dumping and competition policies related to that need to be fairly high on the Canadian agenda.

That also relates to one of the questions I notice is asked here: How do you bring developing countries with smaller or weaker economies? How can Canada's national interest and the interests of smaller and weaker economies be safeguarded?

What you'll find is that for many of the “smaller and weaker economies”, one of their largest problems with the United States is anti-dumping. If you look at what average tariff levels have done over the last 50 years, we have had average tariff levels go from 40% to 3%. Tariffs are no longer the tool of protection.

The age of the tariff is over, as Michael Hart says, except in agriculture. These contingent protectionism tools, like anti-dumping, like subsidies, like a whole other range of tools that are being used, are now the tool of choice to protect your national economy and keep out foreign imports. This is hurting developing countries as well as developed countries, and so it seems to me that some sort of movement on some of these issues is increasingly important.

In the interests of time, let me confine my remarks to one more issue, which is the issue of standards.

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My colleague Tony Schellinck at Dalhousie University and I did a paper recently in which we looked at the use of standards as a means of conferring competitive trade advantages on countries and on companies around the world. One of the things we found is that countries, particularly the European Union, are extremely active in using their national regulatory policy at the level of standards—and this is particularly important in the area of high technology—as tools for (a) blocking foreign imports, and (b) conferring competitive advantages on their own companies that are not available to others.

It seems to me that the issue of standards needs to be addressed quite forcefully by Canadian negotiators in the WTO. The Uruguay Round, as a result of the agreement on technical barriers to trade, began to address this issue. There's much more work that needs to be done in terms of harmonization, mutual recognition, and a whole range of other potential policies that need to be looked at.

I'll say only a couple of words about the FTAA, which, Jim may be right, may not happen. Certainly I think he is right that there isn't a lot of impetus behind it in the United States, but politically it's pretty hard to get around the fact that 34 countries met in Miami in 1994 and signed an agreement and said they were going to negotiate a free trade agreement by 2005, and the heads of state signed this agreement. People are committed on paper to doing something, and in fact there are negotiating groups in place now. Actual negotiations are ongoing as we speak. How engaged people are in those negotiations is a very good question, but they're there; they exist.

Trade negotiators generally tend to feel that, well, we have five or six years to negotiate it, so I'm not going to worry about it too much; come to me in June 2004 and maybe something will be happening. There is that tendency to let things go. Trade negotiators are probably the greatest procrastinators in the world when it comes to that kind of stuff, but the process is there.

I think there are some significant gains for Canada, less so in terms of the economic gains—and I think those are there—but more so in the ability to build, again, some useful coalitions in the hemisphere to try to counterbalance the weight of the United States in some of these areas. I think the political benefits of something like this might actually outweigh the economic benefits. Usually it's the other way around when talking about trade negotiations.

So I think Canadian movement on the FTAA is important, although it may be some time before we start to see significant results.

I will conclude with that.

The Acting Chairman (Ms. Sarmite Bulte): Great. Thank you very much.

Ms. Lanoszka.

Ms. Anna Lanoszka: I'll be very brief, on agriculture. I think we all agree here that agriculture is historically quite a problematic area of international trade.

The Uruguay Round agreement on agriculture sought to actually bring order to this very highly distorted area of international trade. Of course, many critics say that agreement did not go far enough, but even if the agreement represents a small step on the route to liberalization of agriculture, it's still quite significant, enough, I will argue, as nearly all agricultural tariffs and their bounds. Most importantly, new rules have been agreed to for dispute settlement on sanitary and phytosanitary measures, which actually touches upon the standards issue, so I won't really go into it.

Agreement on agriculture was conceived as part of a continuing agenda, and it's a part of the building agenda for the next round of negotiations. As we approach a new round, I would like to identify the highest areas for consideration that I argue should be of particular importance for Canada with respect to its agricultural policy.

The first area has to do with the overall dynamics of that approaching round and includes identification of the main actors and also a recognition of a significantly different international climate for conducting new negotiations, different from the way it was in 1986 when the Uruguay Round commenced.

The second area relates to the unfinished business from the Uruguay Round negotiations.

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The final one identifies the most problematic issues currently facing Canada with respect to its WTO obligations.

Regarding point one, I suggest the starting point for what this new round may bring should be examination of the dynamics that shaped the Uruguay Round agreement, particularly with respect to agriculture. We know that at many points during the Uruguay Round, agricultural issues almost brought the negotiations to a standstill, if not a total collapse. This should teach us something, and careful examination of how we approach agricultural issues, how important agriculture is, might help us to set the agenda for the future.

In the context of a more complex negotiating agenda, as the speakers previously mentioned, the new round is likely going to include environmental issues, which are directly linked to agricultural issues.

In identifying the major actors, Professor Winham mentioned—and it was mentioned by other speakers—that developing countries already played quite a significant role during the Uruguay negotiations. This was quite unprecedented. I argue that they will have to play an even more important role in future negotiations, which means we should really identify their needs and demands, which falls into a different category. What's important for developing countries is that they be convinced that it's worthwhile for them to accept the further liberalization in agriculture, which means they have to be convinced they're getting their fair share of the gains. If not, that might be, again, a stumbling block in the future negotiations.

This issue acquires particular significance when it comes to accession negotiations at the WTO. Whether to allow the acceding country to become a member under preferential terms, with a developing country status, has been a sticking point, not just with respect to China and Russia.

Having regard for the progress of the incoming negotiations, it might be advisable for Canada to understand and to draw appropriate conclusions about the place the agricultural sector plays in the overall economy of the acceding country.

In reference to the comments made by Professor McNiven, for example, Poland is beginning to conduct accession negotiations with the European Union. In Poland, the agricultural sector accounts for about 35% of the labour force. So apart from the political issue, I think it's a highly economic issue as well. I will point out in my last point that it touches on the employment issue in Canada as well, especially due to the recent financial crisis that affected, quite significantly, the demand for agricultural products from the Canadian prairies.

Mr. Daniel Turp: What's the percentage in Canada of the agricultural labour force?

Ms. Anna Lanoszka: It depends where.

Mr. Daniel Turp: For Canada as a whole. You say Poland is 35%.

Ms. Anna Lanoszka: I'm not sure.

Prof. James McNiven: The poorer the country, in terms of GDP, the more reliant on agriculture as a proportion of the economy.

If you go across the border from Poland to Germany, it drops radically. Eighty percent of our employment in this country is services.

Mr. Daniel Turp: So it's about—

Ms. Anna Lanoszka: But if you go to France, again, it rises significantly.

In Canada—I will bring this up in my last point, but maybe it's more appropriate to bring in the statistics now—130,000 families rely on government support in only three provinces—Manitoba, Saskatchewan, and Alberta.

Market instability is a very important issue for developing countries and least-developed countries for various reasons. For example, in the context of the recent financial crisis and decreased export demand that caused prices for agricultural products to fall, the response in developed countries like Canada might be the increased demand for subsidies, in terms of subsidizing farmers' income, but in developing countries and least-developed countries it might be a matter of survival. The lack of income from some of the agricultural products resulted in a significant number of the population falling below the poverty line—poverty meaning $1 a day per household.

• 1035

So market instability is quite important, and if developing countries are going to take part in the next negotiations on agriculture, that might be the reason they want to do so. Also, we learn how the market instability changes and how to predict it. For example, in 1995 world food prices were approaching the lowest level in decades, and then we had a sudden surge in the prices.

So I would argue that what Canada should understand is that the most appropriate approaches to dealing with the problem of market price instability would be to actually push for the next negotiations, having in mind how important the agricultural sector is for the developing countries in terms of the level of national and household welfare.

Regarding point two, the unfinished business of the Uruguay Round agreement, one of the major criticism, of course, states that the agreement on agriculture did not actually liberalize trade in agricultural products at all; it didn't really improve the market access. Even if market access for agricultural products is now governed by a “tariffs only” policy, the process of tariffication resulted in tariffs of such a high level that to even visualize free trade in agricultural products is really quite difficult. Non-tariff border measures are replaced now by tariffs that provide substantially equivalent levels of protection, with access opportunities being maintained or expanded for current minimum-access tariff quotas.

In short, then, the principal deficiency of the agreement on agriculture is its failure to address the high level of border protection. Even if the agreement codified the application of domestic support, it still allows for the substantial subsidies. I argue that this is very problematic. Why? The subsidized exports themselves tend to depress the world price, which again increases the required subsidy. Cost-benefit analysis shows that, for example, in the case of Europe's common agricultural policy, the combined cost to consumers and taxpayers actually exceeds the benefits to producers.

The Uruguay agreement on agriculture still accomplished three things. First, it converted all non-tariff barriers and unbound tariffs into bound tariffs. Second, it prohibited new export subsidies and cut existing ones. Third, it began to tackle the domestic subsidies, which in effect protect farmers against foreign competition.

This, I argue, provides the starting point for new negotiations. Some of the tariffs that have taken over from quotas are clearly set at impossible levels: 300% on butter in Canada, 550% on rice in Japan, 215% on frozen beef in the EU. Further liberalization is urgently needed, not only because tariffs and subsidies remain high and they beg for new subsidies, but because the countries joining the WTO include big agricultural producers with very large state-owned agricultural enterprises, such as China and Russia. This is the sticky point. Agriculture is very sticky in terms of negotiations.

There are also positive signs, but still the difficulties should not be underestimated. Under positive signs, the recent Farm Act in the U.S. took some steps towards uncoupling support for farmers. However, efforts to reform the common agriculture policy in Europe really seem to fall, and approximately two weeks ago the recent attempt to do so fell.

• 1040

Again, on the positive side, New Zealand and the Cairns Group, which by the way Canada belongs to and is a founding member of, tried to put together the agenda for the next negotiations. They have five points here: they tried to put agricultural trade on the same basis as trade in other goods, they called for the total elimination of export subsidies, they called for more discipline in the use of export credits, they called for cutting tariffs and improved discipline on domestic support.

In regard to point three, about Canadian problems with respect to the WTO obligations, I would like to point out to you recent events. One is the WTO's recent ruling on the Canadian dairy industry. The second one has to do with the recently announced aid package for farmers, which actually is called a farm bailout, which could total $1.5 billion. This year income across Canada is expected to be down by 20% to 30%, but this is really a distorted figure when we look at the three provinces I previously mentioned, Saskatchewan, Alberta and Manitoba. Farm income actually fell somewhere between 50% and 70%, so this is quite significant. The predictions are quite bleak. Even more subsidies may be actually required.

There are several problems here. The subsidies, I argue, constitute a vicious circle. The more you grant, the more seems to be needed. Also, as the Cairns Group rightly indicated, we really lack discipline in the administration of domestic support. Many of these farmers are heavily in debt and it was relatively easy for them to obtain credit in the first place. It may be worth while to look into this.

Another problem has to do with the financial instability in the world market. As I said, we do have an interconnected world economy, and the depressed demand for our agricultural products inevitably causes us to be in trouble. In a sense, we have to ask for some international coordination to agriculture issues. We don't seem to be able to resolve these problems on our own. But that goes back to my earlier point about international marketing stability.

In conclusion, we lost the case of the dairy industry. I have a memo here that the Canadian government is going to consult the provinces as to what to do about it, whether or not we should appeal it. As I argue, I think it's worth while to consider that export subsidies are really not the way to address these problems, but I'm not sure it can be addressed unilaterally, without coordination with the international organization of the WTO and other members and dairy producers. By the way, when talks collapsed in Europe, one of the points on the agenda was the reform of the dairy industry, and this unfortunately is not going to happen.

In conclusion, it is important to note that the successful initiation of the new round of trade negotiations among the 134 members—not 133, as is on the memo here; on February 10 Latvia became the latest member—may depend on how agricultural issues are approached. Canada, as a member of the Cairns Group, has a major role to play in setting the agenda and in helping to reach an agreement that would have to keep in balance the needs of both the developing and developed countries. It will definitely be of crucial importance to push for progress on liberalization in global agricultural trade while keeping in mind the domestic sensitivities.

• 1045

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Ms. Lanoszka.

Okay, colleagues, we'll move to questions. Mr. Turp.

Mr. Daniel Turp: I'd like to make a suggestion, Madame la présidente. We heard all kinds of interesting things, and it is great that the people from Dalhousie are giving their precious time to the Canadian people. Go back to the president of the university and tell your deans that this is a public service on your part.

But let me try to break it into a few topics and maybe then we could have that time—

The Acting Chairman (Ms. Sarmite Bulte): Please.

Mr. Daniel Turp: —and make it perhaps dynamic.

One, WTO negotiations—observers, civil society, the agenda, several specific points that might help to make that kind of dialogue.

Two, settlement of disputes. There are things that probably need to be said on that, and very little was said. We heard Don McCrae a few days ago, and he said different things.

FTAA, culture—no one talks about culture, so it's probably—

A witness: I'm talking to that with respect to—

Mr. Daniel Turp: Okay, but I think it would be interesting to be specific.

Prof. Hugh Kindred: I guess I've distinguished between economic trade issues and a whole bunch of other concerns we have.

Mr. Daniel Turp: Maybe that's should be it—environment, labour. But that's ultimately part of the agenda.

The last thing is mobility. I think that's really one thing we haven't heard about at all at this point in time, and I think that's something we should discuss because of your concerns on what this means.

The Acting Chairman (Ms. Sarmite Bulte): What I'd like to do, though, is not put the FTAA separate. I think the FTAA provisions, especially when talking about negotiating civil society in the agenda... The FTAA have actually established a consultation with civil society. We talked a little about where civil society fits in. The FTAA is trying very hard to put civil society in, and the smaller economies, the developing countries, are having problems in actually reaching out to civil society because they don't necessarily want to reach out to civil society. So if we're talking about civil society and having engaged them, I think we should look separately at that in terms of the FTAA as well.

Mr. Daniel Turp: I would think the FTAA in terms... is it something that's going to work? Is it real? Is it what cabinet—

[Editor's Note: Inaudible]

The Acting Chairman (Ms. Sarmite Bulte): —

Mr. Daniel Turp: I agree that all this civil society stuff is not only WTO, it's FTAA—

The Acting Chairman (Ms. Sarmite Bulte): The FTAA is actually trying very hard to engage civil society. They have put together a separate web site and a separate civil society group. So that's something new, and I believe—and, gentlemen, correct me if I am wrong—the WTO doesn't have that engagement.

Mr. Daniel Turp: I'd just like to recap: WTO negotiations, settlement of disputes, culture, environment, labour, FTAA... those five topics. Maybe we could try to discuss more openly these five topics. Would you agree?

The Acting Chairman (Ms. Sarmite Bulte): Yes, absolutely.

Mr. Daniel Turp: Could I start with the WTO negotiations?

The Acting Chairman (Ms. Sarmite Bulte): Yes, please do.

Mr. Daniel Turp: This has been brought up by people in Ottawa already—civil society participation. There was a meeting last week of the WTO bringing civil society into discussions in their environment and development—

[Editor's Note: Inaudible]

Mr. Gerry Schmitz (Committee Researcher): ...on trade and environment and then on trade development. There were many NGO participants involved in it for lots of reasons.

Mr. Daniel Turp: So they started doing it, but the criticism was that it's not part of the system like in the UN, where they have observer status.

You add one interesting thing. There should be intergovernmental organizations in the process as well. My question is how should that work? How should that be done in the forthcoming negotiations if they are to start after the Seattle meeting? Should the representatives of the regional trade agreements, such as NAFTA or MERCOSUR, also be in that big forum where negotiations take place?

• 1050

Mr. Bob Speller: Also, could you comment on these groups and how the dispute settlement process would actually play out?

Ms. Wendy Lill: I'd like to ask another question about something Hugh Kindred referred to. I've picked up that there has always been exclusivity around this kind of discussion about the GATT and the WTO, whereas the United Nations always had observers, and there are many other ways in which people can actually have input at that level. The New Democrats, as you may know, have a lot of problems with this whole inevitability of the WTO discussions at this point. Many people believe a moratorium might be useful in order to give everybody some time to really look at exactly where we're going and what are the costs at this point.

So my question would be, what about another forum? What about the UN as a place where we could start looking at some of the major issues, such as labour, environment, human rights, and culture? You're looking at alternative forums and courts for these things. Where would they be?

The Acting Chairman (Ms. Sarmite Bulte): I'm going to go back to what I said, and that is that they're trying to put this process in place in the FTA, and if that works for them, can we take that to the WTO? We talk about a civil society. Again, what's the definition of a civil society? I've been told by business to not forget that business is part of civil society, but they seem to be left out of the consultations.

Sarkis, do you want to add something before we go into this section?

Mr. Sarkis Assadourian: I was going to make a point to Professor Winham. In the last paragraph of your presentation you say that unless the package in a new negotiation is reasonably balanced, it will fail. When you said that, did you mean specifically Russia and China and some South American countries that are not members of the WTO and that, basically, you're telling us it's going to fail because not everybody's on board?

Prof. Gil Winham: No, Mr. Assadourian, that was not my intent. My intent was that the countries that are now members of the WTO will be, by right, participating in a new negotiation, and that does not at this point include China or Russia. It seems to me that we have to have a balanced position in order for a negotiation between these countries to succeed.

Things that I was referring to, which I did not include in my remarks or in my paper because of time, would be, for example, tariff negotiation. It seems to me that despite what Michael Hart has been quoted as saying, that tariffs are no longer relevant, they certainly are relevant for developing countries, and access of developing countries to developed countries is certainly a relevant issue. Therefore, I would think that new liberalization in this area would be important for developing countries.

For textiles, which no one has mentioned, the deadline—as I recall from the textile and clothing agreement from the Uruguay Round—doesn't really fall until 2004, so there is an organizational reason for developed countries to ignore the problem. It seems to me that would be wrong, because that was always one of the important issues in the Uruguay Round. It served as a quid pro quo and a trade-off for the commitments developing countries made in the area of TRIPS and in the area of services, particularly the new issues, which we as a developed country certainly wanted to push.

On the issue of anti-dumping, which my colleague, Brian Russell, has raised, it seems to me that developing countries are often the targets of those actions by developed countries, so some moderation on the rules and even some attempt to have a new rules negotiation would, I think, be one that would help to equilibrate the balance between the issues that come forward.

Keep in mind that one of the things developing countries really had at stake in the Uruguay Round was the creation of the dispute settlement system, because it assists weak countries to have a rule-based rather than a power-based system. It was in our interest as well, and we pushed it. Also, just the very establishment of the World Trade Organization was an important practical and symbolic victory for the developing countries, and do keep in mind that the U.S. resisted the establishment of the WTO right down to the last minute.

• 1055

Those issues are behind us. Therefore, those things that helped to balance the package in the last negotiation are no longer there. We need new issues, and the point of my paper was that I think the Canadian delegation should be attentive to this and should seek out those kinds of issues.

Mr. Sarkis Assadourian: But almost two billion people are out of the established WTO now.

Prof. Gil Winham: Yes.

Mr. Sarkis Assadourian: How could that thing function properly when you have two billion people, 1.1 billion or 1.2 billion in China alone, influencing the policy-making of the WTO?

Prof. Gil Winham: First, it can function efficiently for those countries that are members of it. But, secondly, I completely agree with you that the organization would be stronger if it were universal. So I would completely support the movement, which now exists, to bring China and Russia in through the accession process.

The problem, however, with accessions—and we have our expert here who has worked on this—is that if you bring countries in that don't have market structures and particularly countries that because of their size can make a real impact on the organization, then you could end up having problems with the organization.

When you look at some of the countries that are now acceding to the World Trade Organization, it's interesting to see how far the WTO has progressed in terms of establishing an effective rules-based organization. When you look at a country such as Jordan, for example, which is now in the process of acceding, you realize that they have a long way to go before they ante up to the level that now is expected of WTO members. The same thing is true of China and Russia.

If Jordan were to come in and not meet all of the standards, it would have relatively little impact on the organization, but if you bring in China, which does not have at this point in time a transparent system in many areas of its internal rules, then you would have a problem, I think, organizationally that you would not have when you bring in smaller countries. Having said that, I think the move to bring in China is the correct one, and the organization will be stronger when it happens.

Mr. Bob Speller: Do you think it will slow down the process, though, in the future?

Prof. Gil Winham: I'm sorry, I'm not clear on what you mean.

Mr. Bob Speller: You have a process for change. Once you bring them in, it creates a problem initially, but also if you're looking to changing them further, a country like China, with all its weight, will make it a lot more difficult.

Prof. Gil Winham: The answer is yes, and the reason I think that is because of what exists now. I spoke of an investment negotiation. The big issue now will be between the developed and developing countries. If you brought in China, they would probably be in a position similar to what India now has, and it would slow things down. But it would be better in the end to have a universal organization even if you have to proceed more slowly, in my judgment.

Mr. Daniel Turp: What kind of participation will the candidates to accession have in the negotiations? Will they be observers invited to participate?

Prof. Gil Winham: I think you should ask my colleague.

Ms. Anna Lanoszka: They can attend all the meetings except the bilateral meetings on the negotiations, which are—

Mr. Daniel Turp: There are 134 members, and you told me there are 33...

Ms. Anna Lanoszka: There are 33 acceding countries.

Mr. Daniel Turp: So 167 out of the 191 countries will be there.

Prof. Gil Winham: Yes.

The Acting Chairman (Ms. Sarmite Bulte): I didn't hear what you said, Ms. Lanoszka. What would their role be?

Ms. Anna Lanoszka: The countries that are presently engaged in the negotiation process can participate in the general council meetings as observers, although they really have very little effect in terms of influencing that.

Mr. Sarkis Assadourian: My colleague, Wendy, mentioned that we should have a UN type of look when it comes to the organization of the WTO. But I think the WTO is a big victory for smaller countries, because some of the bigger countries in the UN have veto power. I don't think you're going to go too far in the UN if you take this negotiation to the end, but if you go to the WTO, every country is basically equal and nobody has veto power. Am I right?

Prof. Gil Winham: You are absolutely right.

Mr. Sarkis Assadourian: So the WTO is a different venue where they can discuss this much more openly and on an equal footing.

Prof. Gil Winham: The WTO operates on a base of consensus, which means—and it's even spelled out now legally—that all parties at the table have to agree. That means that if you don't agree, you can leave the table and be outside, and they can have consensus of the ones that are left. That's an important legal mechanism to allow for dissension in the ranks.

• 1100

Mr. Sarkis Assadourian: There are no veto powers.

Prof. Gil Winham: Everybody has a veto power that says if they are at the table and they do not agree on the basis of consensus, then the issue fails. Keep in mind that during the Uruguay Round negotiations, several developing countries—Latinos—broke down a Montreal meeting—it was a very important meeting at that time—simply because they disagreed with the exception being made by the developed countries on agriculture.

Mr. Daniel Turp: I guess that's why some people put so much emphasis on doing things at the WTO level now, because that's the organization that can be modelled or changed, where something can happen through the organization itself, and not by ILO and UN and others. But is that possible?

I don't remember who told us this, but it's GATT; it's a successor of GATT. GATT has a culture; GATT has a way of working. Can it really change to get into its... at the table—observers and other international organizations?

The Acting Chairman (Ms. Sarmite Bulte): I think Mr. Russell has a response to that, and Mr. McNiven.

Prof. Brian Russell: It seems to me the issue you're raising is a completely valid one. Let me step back a second. Jim is concerned about Canada becoming the Arctic of North America. I'm concerned about the WTO becoming the basement of trade policy, in the sense that your basement is where you store all the stuff you don't know where else to put. There are a lot of issues that seem to me to have been brought into the context of the WTO because nobody else knew where to put them. There wasn't any other effective way of dealing with them. The WTO, particularly now, looks incredibly attractive for any issue you don't know how to deal with because it's got a binding dispute settlement mechanism.

So if you don't know how to deal with an issue and you want to get some sort of decision made, put it in the context of the WTO and eventually you can get a panel decision out of them.

So from that point of view it looks very attractive. However, it seems to me that a lot of issues are being brought into the context of the WTO now, and that would certainly include labour, which don't fit very well with the culture of the WTO.

And if you've ever been to the WTO headquarters and seen the... The WTO prides itself historically on being a small, efficient, kind of clubby atmosphere, and trade has always been this neat little esoteric thing that was off to the side of economic policy-making, from probably about 1945 to sometime in the middle 1980s, when it started to change. Now, all of a sudden, trade is central, and the culture I don't think has adapted.

So regarding these issues of whether they can change, yes, they can change, but what you're talking about here is a major change in cultural... Just look at what's happened there in the last two or three years. They now have a web site. A lot more of the documentation is published; it's available. There have been steps taken, but there's a long way to go. And it seems to me that the things such as what Hugh was talking about—amicus curiae briefs and that sort of thing—would be very helpful, for example in the dispute settlement process, in terms of opening it up.

But there certainly is a long way to go, and they don't have that much experience. It's a learning-by-doing process they're going through.

The Acting Chairman (Ms. Sarmite Bulte): Mr. McNiven.

Prof. James McNiven: I suppose I could claim my historic roles, being the odd guy out here.

Frankly, the more people who get into the WTO, the more stuff gets dumped into it. Yes, you end up with the basement effect.

What will happen is, where the real trade—and that's why I started, and I'll go back to it again—between the three major areas of the world is 80% of the world trade, or 75%, something in that order... So, okay, put Latvia in, put South Africa in, put Russia in, put China in. So the real work is done. There's more trade impact from that proposed registration or stopping everybody at the border in Detroit to ask them a question. There's more trade impact in world trade by that one little motion by the U.S. Congress than from a whole lot of things that go on in the WTO.

So we have to keep it in perspective. Let's keep in perspective that if the WTO can't handle the big, sticky issues that the major players want handled because there are all kinds of other people getting in there, they'll go off and handle them themselves. What will happen then is the real discussions will move to the EU-NAFTA kind of relationship, rather than the other.

So I'll just mention to keep in perspective that if the WTO can't organize itself to meet... There are just too many people at the table, and we're talking about more. It will all get done behind closed doors in Washington or Brussels.

• 1105

The Acting Chairman (Ms. Sarmite Bulte): Ms. Lanoszka.

Ms. Anna Lanoszka: I think, surprisingly, the WTO is dealing quite well with the magnitude of the issues. I don't think the problems are rising proportionately to the number of members. On the contrary, certain issues are actually being smoothed out.

During the Kiribati negotiations, for example, the issue of sugar subsidies came to the table. It was very interesting and came at almost the final stage of the negotiations. By the way, when we talk here about veto and the mechanics of accession, when the acceding country conducts the negotiations, any member of the WTO can join the negotiations at any point and bring demands and questions on the agenda.

This is exactly what happened during the Kiribati negotiations, when the sugar suddenly became a big issue and Cuba wanted to have a big say in this. Cuba, up to that point, had not been a member of the working party, but it was allowed. It was quite an extensive process, and it even included a media frenzy and non-governmental organizations got involved.

Surprisingly, everybody started talking about sugar and that had quite a positive effect. Not only was sugar addressed in the context of the Kiribati negotiation process and the Kiribati Republic eventually became a member, but it actually helped to bring some problems of the sugar industry to light.

So I'm not sure I agree with the argument that more members mean more trouble. Sometimes more members may help to address some troubles that were either forgotten or hidden from the light.

There was another issue here—

Prof. James McNiven: If the WTO cannot take care of the issues amongst the major trading partners, the issues will simply devolve to bilateral or—

Ms. Anna Lanoszka: But my argument is that it does.

Prof. James McNiven: That's all I was trying to say.

Ms. Anna Lanoszka: For example, as we know, the executive branch of the European Union resigned a week ago. The European Union is effectively without its executive hand. Maybe that proves that addressing the issue on a regional basis is just not going to happen. It's more effective and more doable to address it on the multilateral, mainly international basis.

Mr. Daniel Turp: But the resignation was not related to those issues. It was more related to fraud and the way the commission worked.

Ms. Anna Lanoszka: The banana dispute actually showed how ineffectively the European Union represents the interests of the European Community when it comes to trade.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Kindred.

Prof. Hugh Kindred: In this discussion we're missing an important point about what I call the legal power of the WTO. There are different intergovernmental organizations in the world to deal with different aspects of human activities. The UN is just a rubric for a whole cluster of bodies. So labour matters are substantially dealt with by the International Labour Organization, environmental things are dealt with in the United Nations environmental program, health matters are dealt with in the World Health Organization, and trade matters are dealt with in the WTO.

These are all international intergovernmental organizations that states can join and participate in. But the WTO, in the manner of its working, is quite distinct from the others. In the first place, you can't just join without being allowed to join—this is your business about accession. You're only allowed to join when you meet a certain level of standards in your national administration about fulfilling the obligations of the WTO's disciplines. With any other organization, you can join, pay up, and participate in meetings as you want.

The next step is that the WTO meets in negotiations—it's an all-round thing with all members—finally reaches a consensus, and then what they agree upon is binding and enforceable on every member from that time. It's enforceable to the extent that any member state can take you to a panel and through the dispute process have an award against you, and then take measures against you if you don't comply. That is totally different from all these other organizations that go into negotiations. You can consent to the negotiations, you can finish up with the treaty, and you can voluntarily participate in the treaty or you can stay out of the treaty and still be a member of the organization.

• 1110

Whether there's any enforcement of the treaty or not depends upon the treaty and mechanism. Certainly there isn't any enforcement through the organization itself. So the WTO is the worst out of practically all of the international specialized agencies, including the UN bodies themselves, apart from the Security Council, but that's peace and security and has nothing to do with all these other issues. The WTO is the one body that if you join, you're forced to comply or things happen to you. That makes it so totally different.

Mr. Bob Speller: Even if they do comply...

Prof. Hugh Kindred: Probably, yes. That's the legal authority for the thing. The next thing we don't want to lose sight of is this political context step. Who draws up the agenda? Those with the major economic interests in the world, like the United States, obviously.

Their leaders can see that if you can take a matter into the WTO and get it decided according to the way you want it, then it's going to happen around the world because it's enforceable.

I tried to say, and Brian reiterated a moment ago, that the culture in the WTO has been a market-driven culture. The idea is to dismantle trade barriers and not to have regulation. That's why you need only a small secretariat, because there's nothing to regulate. You're actually just checking out the people who have taken the barriers away.

In every other area of human endeavour, whether it's mobility in labour organizations, standards of work, competition policy, or environmental protection, you have to have regulations that say, this is how you must do it, and you have to have people who go around to see whether you're fulfilling the regulations. That adds to a big bureaucracy. That's why the other organizations tend to be much larger and less wieldy and less effective, because they can't have the same compulsion.

As I see it, and this is getting more political than legal, the United States have decided very conveniently therefore, and have been driven certainly in the last two decades or more, to drag into the WTO every matter that is related to trade in which they would love to see this free market climate working. It was done. We started that way with GATT just for goods. Why did we have services added?

There are a number of developing countries, particularly Brazil and India, the big departing ones, as it were, that didn't want this at all. Others in the industrialized society want a free trade in services, whether it's in banking services or investment services. In other words, they want a market in which you can go and compete without any national restrictions.

The developing countries, believe it or not, had to give in on it because in this context of how the WTO works, there was more to lose by not signing up to the Uruguay Round... the advantages they'd get out of it, than standing out and refusing to let a free trade system in services go ahead.

In the same sense, we have TRIMs and TRIPS. What's TRIPS? TRIPS is trade-related intellectual property rights. It's not the whole of intellectual property; it's just those bits of intellectual property that those who brought it forward are interested in getting this protection for.

They've taken this subject matter, as I suggested earlier, out of WIPO, the World International Property Organization. This organization was set up to organize these matters and it's more ineffective. It has lots of problems of its own, partly because it's tried to find uniform standards through actually administering regulations.

• 1115

The bit that has been dragged into the WTO is the bit that created these new properties, and it is part of the WTO so it will not be subject to regulation; it will be subject to free market driven. You create the property. You say it's part of something you can trade in. You put it under the WTO disciplines that say let the markets run the matter and get the regulatory systems out of it, and you've now compelled the world to adopt that system for all those things you've now included... hence, to become trade-related intellectual property rights. They're not interested in bringing into the WTO the things that aren't there for you to trade, the things you cannot trade, because it isn't a market interest.

To conclude, we have to bear that legal compulsion of our political agenda very much in mind on the question of why we've got to where we are and where the next round will take us, unless we inject some other values and try to change the culture, as Brian was just stressing, of the way the WTO works.

The Acting Chairman (Ms. Sarmite Bulte): Wendy Lill.

Ms. Wendy Lill: We have to look at the political context as well, and I'm very concerned about the political context. We as MPs have been told about the very tenuous position that our national government representatives may have when you have something like the MAI in place.

Would you agree that trade deals such as this can in fact overturn the legislation from our Parliament. When I look at this Bill C-55, I think our Minister of Heritage in fact managed to produce a bill that seemed quite WTO-proof, but it didn't seem to be American-proof. Even as we were all standing up there giving our yeas and nays, the deals were still going on in Washington. So we know very little of this is being discussed here. We've been talking for three hours, but no one is talking about the fact that the Americans are the big player here and then there are many little ones who are falling off the map and their needs aren't being met.

Prof. Hugh Kindred: That's a simple matter. The way the process works in that case is not because America is big or small or we're smaller than some countries. As a sovereign state we make our own laws, but we are bound to fulfil the international obligations that bind us. Therefore, if there are certain standards in the WTO that bind a country, we have to give effect to them. Daniel can bear me out on this; this is standard international law.

The breach of an obligation to say we couldn't do it with our international legal system is no defence in an international arena. So you can sit in Parliament and write a bill that says one thing, but if it contradicts the obligation internationally, Canada is still in breach and the consequences of that breach can still flow. So the WTO process can find Canada in fault even as Parliament is trying to pass legislation.

Prof. James McNiven: Congress does that all the time.

Some hon. members: Oh, oh.

Ms. Wendy Lill: What happened around the MAI was what you call your civil society... the hundreds of thousands of Canadians who woke up and realized, wait a minute, you mean there's another body on top of our government, which we thought we were in fact electing and had some power, that's taking charge. I understand what you're saying about the importance of the international level, but isn't there necessary a complete buy-in on the part of the nations and the civil society within the nations towards this exercise? We all know it certainly hasn't happened yet.

Prof. James McNiven: I'd like to get to this civil society thing, to quickly answer your question. If the Canadian government, whatever piece of it you want to call the Canadian government, signed some kind of an agreement, then in fact the national government has agreed to it. To say that it is over your head is not quite accurate, because you don't have to sign.

Mr. Daniel Turp: My friend is saying the government can sign it, but the parliamentarians have no real say on that.

Prof. James McNiven: That may be a fault in our system.

The Acting Chairman (Ms. Sarmite Bulte): We have to translate this, so it has to be one at a time. You can alternate, but you are all talking at the same time.

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Prof. James McNiven: If I could just finish, that may be a fault of the way we organize our government, but, hey, no government is perfect.

I would like to talk about the civil society thing that you brought up in the context of the FTAA. Very quickly, inside the trade side of Foreign Affairs—and this goes back at least to my first consultation meeting with the trade people back in 1981, so this has gone on for a long time—there has been a continual consultation with provincial governments and other people on the trade side. We then adopted a Mexican invention before NAFTA. Actually, we started playing with it around the time of the FTAA, but it really got going after that. We brought industry groups into so-called SAGITs, sectoral advisory groups for international trade. Over top of that was an ITAC. I was on the fisheries SAGIT for about four or five years, and Gil has been on ITACs, but I don't know if Hugh's been on any.

The point I'm trying to make is that, over time, I think a reasonably effective transmission mechanism has been developed for industry concerns in different areas in terms of directing them towards the trade bureaucrats. The trade bureaucrats will come to the meetings and they will report what's happened. There's a dialogue, and I think there's a feeling of interest there. I've been off the ITAC for about eighteen months to two years, so I'm not sure how things have been going since then, but they're going.

Why try something new when you have something that works? Why not go to the Foreign Affairs side of Foreign Affairs and International Trade—the cookie pushers instead of the fishmongers, as some of us call them—and simply say to the cookie pushers that it would be a good idea, in the FTAA context—we're not talking about unorganized individuals when we talk about civil society; we're talking about interest groups, because otherwise it doesn't work—to get some equivalents for the FTAA. You already have the trade ones, and you don't need the business side because it's already there. Why not get the various groups that would have an interest in FTAA concerns and put them together into some kinds of sectors? I don't want to throw out names for these sectors, but set up the same kind of regime.

The Acting Chairman (Ms. Sarmite Bulte): Please do.

Mr. Daniel Turp: Is that happening now?

Prof. James McNiven: I don't know, but it seems to me that it makes perfect sense, because you have it on one side. But remember, on the culture and trade side, with the old ITC and now DFAIT, the culture there has always been to consult with the industry. It has always been either that or consulting with provincial governments. As I say, I go back to Bob Johnstone in 1981, at my first meeting, and they had been going on before that. Maybe the culture is not there on the cookie pusher side. Sorry, but we are kind of—

The Acting Chairman (Ms. Sarmite Bulte): Just for a point of clarification, I believe it's not on the Foreign Affairs side; it's again on the International Trade side where there is actually a civil society web site that has been set up by the Canadians in the role of chairman of the FTAA.

Prof. James McNiven: You see, it shouldn't be there.

The Acting Chairman (Ms. Sarmite Bulte): But that's a good point.

Prof. James McNiven: It should be on the Foreign Affairs side.

The Acting Chairman (Ms. Sarmite Bulte): I don't want to stop the dynamics here, but Mr. Winham has been waiting very patiently to say something. He keeps looking at me every time I pass him by. To keep the dynamic going, maybe everybody can cut their interventions to a minute or a minute and a half, because we still have a lot to go through.

Professor Winham.

Prof. Gil Winham: Thank you very much, Madam Chair. I'll try to be brief.

On the point about the periodicals case, I would just simply say that the issue on the case that we lost in the WTO was not lost on any new rules. They were GATT rules, and largely article 3. Article 3 was approved by the Canadian Parliament. As an outsider in this process, I would assume, frankly, that the reason we are now negotiating with the Americans, who are doing nothing other than pushing their legal rights—granted, they are a big power, but that's what they're doing—is because we know we have a weak legal case. We know we have agreed to the rules. We haven't applied the rules, and I think these rules were part of the Uruguay Round negotiations that were implemented by Parliament.

The Acting Chairman (Ms. Sarmite Bulte): You speak about the rules—and you can jump in here very quickly—and Professor McNiven talked about SAGITs. The cultural industry SAGIT came down on culture in February, and they recommended the creation of an international agreement to address culture specifically, to acknowledge culture, not simply goods and services, but again we're now into a new sector.

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Is this something that's workable? And where should it be done, at the WTO, or should it be started at the FTAA?

Prof. Gil Winham: I doubt that it would be done at the WTO, because I don't think there are enough like-minded countries that would join with us to do that. The Mexicans wouldn't be interested, nor the Argentinians, and so on and so forth.

Mr. Daniel Turp: Apart from the French...

Prof. Gil Winham: Exactly.

Ms. Wendy Lill: Would the Americans be interested in that?

Prof. Gil Winham: I think probably not.

Therefore, I would support it, but I don't think it would happen at the WTO.

The point I really did want to make—and this goes back to Mr. Turp's comments—is what should be the role of civil society and groups of this sort at WTO negotiations?

I would say that I have to regard myself as a strong institutionalist, and I don't have any difficulty as a Canadian supporting that position. I'm pleased that we have a strong institution in the WTO, and I would say that it serves our interests, plus the greater interests of the world community, to bring people together in trade rather than having them fighting with each other. Insofar as trade promotes that, I'm pleased for it.

Part of the institution is that we have our governments, which are liberal, representative governments, in the west, particularly, and other governments, that go there to negotiate. Those governments have always been impacted upon by interest groups. Usually they've been business interest groups, but governments have usually—and our government has—attempted to set up and structure the inputs that have come from groups. They've done this with business groups, but with labour groups as well.

Now what we have is different kinds of groups that are coming forward to want to be part of the process, and yes, of course we should hear from them. This is relevant to this committee's work as to how you advise the negotiating team for Canada. Yes, of course they should set up information exchange so that they know fully what Canadians feel in terms of trade negotiations.

Should they, however, set up procedures whereby, as my colleague has said, groups would be direct observers at negotiations between countries? I don't think so. I think that's what we have a Department of Foreign Affairs to do. We are a democratic country, set up under rules of representation, and I think what we do is ask our foreign affairs department to represent us at these negotiations. If you were to have people sitting directly in the negotiations, I think you'd no longer have a functioning international organization. As an institutionalist, I would argue that this serves our interests and we don't want to break it down.

The same thing is actually the case with dispute settlement panels. I serve on dispute settlement panels in the NAFTA context, and we routinely have open procedures when we are in hearings. Therefore, any person can come and make representation and certainly can participate in the process, and amicus curiae arrangements can be done.

That's not done at the WTO now. The Americans have argued that it should be done, and I think that probably could be done as well.

But then, in the NAFTA context, once the hearing is over and the panelists repair to their quarters to make a decision, should groups be part of that as well? No, I do not think that would be appropriate, nor do I think it would be appropriate in the WTO context as well.

The point I'm making is that there are many ways in which we can broaden the political process, but we still have to maintain some kind of order and structural decision-making in order to have effective institutions.

Mr. Daniel Turp: What about Parliament? Mr. Russell, you said earlier that Parliament, the representative of the people, gets to adopt implementing legislation. Well, everything has been decided; everything you have to implement is on the books. You can't change one iota of the text; you have to implement. So in that sense, what's the role of Parliament?

Prof. Gil Winham: Mr. Turp, I would argue that this goes more to the structure of government that we have in Canada, namely the parliamentary structure, than it goes to the nature of the agreements that are being shaped.

If we were Americans, we would have a congress with an independent power relative to the executive. Then, of course, there would be more capacity for the parliamentary side to be able to enter changes into legislation, of which the executive side would have to take account. But here, with a parliamentary government, and a majority government as well, we have a different system. Therefore we are limited.

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Prof. James McNiven: Think of it this way: we have permanent fast track.

Mr. Bob Speller: That's the question, really. The question he's asking is whether or not Parliament or Congress should okay a deal after it's been on the table. We do it afterwards, but we don't make changes to it.

I think what you're asking is whether or not Parliament should be able to make changes to it as it goes through, because that's what you argued on the MAI.

Mr. Daniel Turp: Well, the Americans—as you know, Hugh—have tried to create a situation where the government can still negotiate, and not be prevented from negotiating by parliamentarians involved in wanting to change a line of a negotiated text. So they have their fast track. You can't adopt or reject a treaty, but at least they are involved at the end of the process. Our Parliament is not involved—

Mr. Bob Speller: But we are; we have to implement the treaty.

Mr. Daniel Turp: That's after everything has been done, and we have no say on the content. So that's why it's difficult. As Mr. McNiven said, we have a system where Parliament doesn't have a role.

Mr. Bob Speller: No, it's no different from Congress.

Prof. Gil Winham: Yes, actually it is quite different, in the sense that Congress, having an independent power, can let the executive know that if it negotiates this or that, it will not sell to Congress. Therefore, what you have is a power that exists during the negotiation process because of the power you have at the end of the process.

Mr. Bob Speller: And that's within their own process.

Prof. Gil Winham: But that is part of the American separation of powers system. We have a unity of power system under a cabinet; therefore parliamentarians like yourselves simply have less of a role in the process. And I don't know how much of a role when it's for bigger things.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Russell wants to say something.

Prof. Brian Russell: It seems to me that what Gil is saying is exactly right. What you're addressing here is a systemic issue.

I'm not necessarily one who would say that what we should do is adopt the American system of republican government. There are a lot of things wrong with the parliamentary system, but there are a lot of things right with it too. If you see some of the stuff that goes on in Washington on a daily basis, you realize it's a whole different ball game.

It seems to me there is some opportunity for Parliament to participate in this process. I mean, what are we doing here? And what is this committee doing? It seems to me this is going somewhere. The committee will produce a report, someone will look at it, and it will go into the negotiation process some way or another.

Parliament's ultimate sanction in a majority government situation is that if you don't like the legislation you vote against, and if enough people agree with you, the legislation doesn't pass and the thing isn't implemented. But you cannot negotiate an international agreement with 134 countries and have every country going back to their domestic legislatures and wanting to change every single line of the negotiation. There will be no WTO; there will be no international agreements under those conditions.

Mr. Daniel Turp: You suggest, Mr. Winham, that the consultation and the input of civil society—that's what I understand—should be done mainly at the national level. But as we see in what happened in Rio, you have these parallel summits of NGOs because they're not given the possibility of making some input to the negotiation process, or at least a debate, in the big forum itself.

Don't you think we have to also provide a role for civil society in the international process? It's not sufficient to do it at the national level—not observer status, or some right to speak in the negotiations or in the bigger forum. I don't think it's enough at the national level.

Prof. Gil Winham: Well, you've pegged me correctly. I believe it should principally occur at the national level, where we wrestle out our issues of public policy, but at the international level I have more confidence perhaps than you do of civil society's capacity to act like business.

Business has always attempted to try to impact international trade negotiations. The Europeans know this richly, because they had to deal with farmers who wanted to impact international trade negotiations as well. And there's no reason why the World Wildlife Foundation can't do exactly the same. That is to say, go to where the negotiations are being heard, in Geneva let's say, and then try to speak to critical delegations and impact those delegations with the concerns they have at the same time as they're making representations to national governments as well back in the capital. And I think that will happen in this next negotiation. We clearly don't have to set up particular structures for it to happen.

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The Acting Chairman (Ms. Sarmite Bulte): Mr. Winham, before I go to Mr. Stinson, who has also been very patient—

Mr. Darrel Stinson: It's a lot more interesting to hear the footage coming from this other side.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Winham, in terms of what you were saying about how business has already been active, is there a role for civil society at the trade ministerials?

For example, we have a trade ministerial on the FTA coming up in October-November, where the special business meeting forum will be held before that meeting. Is that perhaps where the civil society could have more of an effect, not as part of the negotiating table, but at these ministerial-type meetings?

Prof. Gil Winham: I think in any kind of political run-up to a major negotiation, or major ministerial meeting, yes, you will have businesses there and you will have, I suspect, representatives of civil society if they're doing their jobs. And I see no reason why they shouldn't do that. This is what business has always done.

The Acting Chairman (Ms. Sarmite Bulte): The problem with it being a parallel meeting at the time when things happen is it is marginalized and isn't really part of the process. I don't know how you overcome that.

Mr. Russell.

Prof. Brian Russell: It's interesting, we're sitting here talking about whether civil society should be involved in these negotiations or should they not, and what levels should they be involved at. To me it's a moot point. Civil society is going to be involved in these things.

That's what we found out at the MAI. That's why there is no MAI right now, because civil society says if you're not going to let us in by the front door, we're going in the back door. And to the credit of the people who were involved in that, many of whom I disagree with heartily, they did a damn good job of what they were doing and they were extremely effective.

What I think people in the trade policy community and international institutions community have to realize, and are beginning to realize, is that the days of tea and scones in Geneva are probably just about over. Things are going to have to be opened up some way or another.

Prof. James McNiven: I would like to throw something in here, though.

I don't want the National Anti-poverty Organization representing me. I don't want the women's organization representing me. I don't want the wildlife federation representing me. I don't want United Way representing me. I want you and you and you representing me. That's who I vote for. I can at least contribute to voting you in or out. I can't do anything about those groups. They're as unrepresentative as the business groups are. They're just representing other types of interests.

I'm not putting down those interests. I don't want Tom d'Aquino and guys like that representing me either. But the point is we vote, we have a structure whereby everyone has a chance to vote for certain types of people. All the other structures are... I don't want the Presbyterian Church representing me, I don't want so on and so on. So that to me is where the buck stops.

So have these people of all types, business, civil society, whatever you want to call them, come to the table to try to pressure elected representatives and/or the people responsible to them, the bureaucrats. Fine. But when the door closes, the deal has to be made by you people, because you're the only ones I can get at, and I'm speaking for a lot of other citizens.

The Acting Chairman (Ms. Sarmite Bulte): Go ahead, Darrel.

Mr. Darrel Stinson: The only problem with that is the misinformation that gets out there into the public and the scare tactics that are used.

Prof. James McNiven: That happens in everything.

Mr. Darrel Stinson: You have to address it, though.

Prof. James McNiven: Yes, but you address it. I'll listen to you.

Mr. Darrel Stinson: Yes, you will.

The Acting Chairman (Ms. Sarmite Bulte): Professor Kindred, the chair, and then Professor Winham.

Prof. Hugh Kindred: I had no idea when I mentioned civil society that I was going to hit such a hot button. But I don't use that term much. I used it here because I thought it would be a familiar one.

I think of it in terms of NGOs and IGOs. An NGO is any organization of any interest group, whether it's business, environment, politics, or women. It's a group of individuals who are not the state, don't represent the government, who stand for themselves. An IGO is an intergovernmental organization. I guess I'm with Brian here and basically at a general level in disagreement with Gil and James about the participation of those interest groups and the older kinds of NGOs.

• 1140

In the first place, I think Brian is quite right. If they're not let in the front door, they'll be there at the back door. But I think there are advantages to letting them in the front door. There has to be an organized system. I just mentioned the UN because it's had one for many years. It's been developing and it's not consistently practised in different UN bodies, because no one's quite known how to handle this as it's been growing.

This is a process of having observers. The whole idea is the organization, in this case the WTO, has to set up a kind of office to register those who will be granted the status of “observer”. You can have all sorts of criteria for who you're going to let through the door and who you're not going to let through the door. And the next thing is when you become an “observer” you can have a whole range of different rights or not rights of participation according to the organization's wish.

I mentioned the three big conferences in the nineties because they have been very influential in the development of the involvement of NGOs. And as Daniel Turp mentioned, it was at the first two, the Rio Conference and the Beijing Conference, where this whole NGO observer system was set up as a sort of alternative forum, side by side.

There were 35,000 women at the alternative one out there stuck on the outskirts of Beijing and 4,000 representatives in town. That is marginalization. But we are now going beyond that, because at the Rome Conference, the NGO representation was right there in the conference room. They don't get to make the decisions, whether in public or private, because they are not voting members. That's one absolute line: the observer doesn't get that much. But the question is, how much access do they have, not only to people, but to provide papers to spread the information around and to affect the negotiations?

In the Rome Conference on the International Criminal Court they had enormous influence, to the extent that many of the delegates there, especially from the smaller countries that didn't have particular expertise on international criminal law, relied upon the coalitions, the organized groupings of NGOs, for day-to-day information about where the negotiations were going, because they couldn't be in six rooms at once, but the NGOs had people in six rooms at once. And what were the political imperatives of being stuck in the corridors? Whether this is good or bad, I'm just trying to explain the degree of involvement that now goes on.

Why I think this sort of thing would be valuable to the WTO is because, as Brian was saying and I've been trying to say too, there has been a monoculture of market-driven ideas that doesn't handle well environmental issues or labour mobility or cultural diversity. And the representatives who go to talk about these matters from governments tend to support the trade market culture of the organization.

So you need to bring in others with expertise in those areas, and not just non-governmental organizations but representations from the intergovernmental organizations that are responsible for those matters in their own organization, which the UN also does. The observers can be anybody who they accredit, and they are regularly members from intergovernmental organizations and other international associations.

The Acting Chairman (Ms. Sarmite Bulte): Now Ms. Lill, Mr. Turp, and Mr. Winham.

Ms. Wendy Lill: What you were saying was very useful, and I was actually going to ask a question on the civil society, about these enormous masses of mobile labour now. We have huge immigrations of people looking for work. How are they represented at the table? What does this all mean in terms of the clubby little group who are meeting around the table? Again, that's an issue I'd love you to answer, and then I'm afraid I'm going to have to run in about three minutes.

Prof. James McNiven: Those people are not represented, period. They are not even represented by the NGOs, because these are people who aren't being driven by the kind of agenda we're talking of, they're just being driven by the need to make a decent wage, and in many cases send the money back home. I think it's a horrible social problem that's just explosive right now, whether it's off Florida, off Mexico, off Malaysia, off Spain, off Italy, or coming across from Turkey to Europe. It's a huge issue. And the interesting thing that's going to happen with the Poland accession, if and when it comes to the EU, is what happens to the labour mobility within that.

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The Acting Chairman (Ms. Sarmite Bulte): Mr. Turp.

Mr. Daniel Turp: I agree with Hugh Kindred on how it should be done, because, Mr. Winham, I don't believe you can exclude NGOs, the civil society, or even the business community from the forum where the deals are made, where the trade-offs are made. That doesn't happen at the national level. You have the negotiating positions, you have governments that have some idea of what their civil society wants, but you have 130 or 160 people who are negotiating, dealing, making things happen, and civil society wants to be there where things are happening and decisions are made. And although decisions will, at the last resort, be made by governments, by our representatives, still they need to be influenced, I think, to have the input at that level.

In fact, what happened in Rome, as Hugh mentioned, I think would answer a question that was put to us last week by the Canadian Council for International Cooperation when they said these small states can't participate fully in negotiations. They just can't. They don't have the money, the people. They need to be advised by some people, and the NGOs play that role. And I'm sure it's going to be the same thing at the WTO for smaller countries; they'll be advised by maybe the business community itself.

So I think that's very important point, but I would like to bring in another topic, culture, labour, and environment, in a more concrete way. In the NAFTA we created side agreements, the two side agreements on environment and labour. Is that the way to go at WTO when it comes to labour and environment issues? Should there be distinct agreements like we had with distinct settlement dispute systems? How could it be brought together? And what about culture? Could we come back to the idea of culture? Should we try to have a cultural exemption? Should we put in article 20 some kind of revised, rethought—like you want to revise a few—cultural safeguard clause? How should the Canadian government and its negotiators bring the subject into the negotiations?

The Acting Chairman (Ms. Sarmite Bulte): For your information, I want to let you know we have ten minutes left, so we should keep our answers short and our questions a little bit shorter too.

Prof. Gil Winham: I was next on the list.

The Acting Chairman (Ms. Sarmite Bulte): Yes, you were.

Prof. Gill Winham: I want to respond to exactly what you said. On the first point about civil society, I think we need some sense of proportionality here, and maybe use the structure we have in Canada.

If I could put in terms of Canada what you said about the international system, about where are the deals finally cut, I would have to say that's cabinet. And I don't have any access to cabinet, nor do the people who I drove past who have placards in the street who would like to have access to cabinet. They're not in cabinet either. So we have to have, ultimately, a structure to be able to make decisions. I think if we apply that commonsense principle that we use domestically to the international system, that will help us to guide how we should structure international negotiations.

On the second point, about culture, particularly environment and labour, and should we follow the principle that we used in NAFTA, what we did in NAFTA—and keep in mind that those were tag-on agreements and they were largely motivated by politics, by the election of the Democrats in the United States and largely an American agenda—essentially is to set up procedures whereby there would be some check on whether or not we were implementing the laws we already had on the books. That was driven very largely by the American belief that the Mexicans had laws on the books that they weren't implementing and that was the source of many of the environmental problems in North America.

I'm not sure that's the best way to go. If we bring environment and labour into the World Trade Organization—and it was never my idea to begin with, I deal more with trade than environment or labour—I think we ought to bring it in on an honest basis, and that is to say we will make deals that will be important.

• 1150

For example, there is an issue of whether or not you will get a WTO waiver for trade sanctions that might be mandated as part of a multilaterally reached agreement, and the big issue there is whether or not those obligations for trade sanctions will bear upon WTO members who weren't part of that agreement. So in order to work out this mechanism, you would need a waiver.

Now, the developing countries will resist that, and they will go down with all guns blazing. It seems to me that the only way you could bring that in, which would be important to European and American environmentalists, would be to have new trade liberalization in favour of developing countries in order to sweeten the pie for an otherwise bitter pill. That, I think, is a way to bring the issue in honestly and to make genuine commitments to the environmental groups, and in exchange, genuine commitments to those who are harmed by the process of negotiation on that point.

Similarly, on labour, there are many in the western world who would like to see some kind of international rules on the use of child labour. I think that's going to be very difficult. I'm not sure that as a Canadian I can tell Indians at what age they can put their kids out to work. I will point out that this recent business about Tyrell Dueck in Canada shows the difficulty we have in applying national rules to family situations. So are we really going to go out and create international rules to apply, let's say, to Indian family situations? It is very difficult.

If we do that, maybe we could do it in the way of approaching it as a quid pro quo; that is to say, if we are going to make rules that specify ages in terms of the people who are producing the goods, then maybe what we could also do is think of educational assistance programs, because a country like India doesn't educate its young people at the same standards we have in Canada.

So if you're going to bring that kind of an issue into the WTO, I would recommend that it be brought in on the basis of trade-offs that would make it appealing to those countries that are most likely going to be hurt by the application internationally of what are really our standards.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Russell, do you have a comment on this?

Prof. Brian Russell: I was just going to comment on a couple of those points. I agree with Gil entirely, and in the good Canadian tradition of being a helpful fixer, let me see if I can come to some sort of... What you're saying, it seems to me, about civil society is right. There is a point of intervention beyond which NGOs and non-voting and non-decision-making groups cannot go. There has to be an executive authority somewhere and some degree of confidentiality. To take the Canadian example, are we going to let the Canadian Labour Congress or the Business Council on National Issues sit in on cabinet meetings?

Mr. Daniel Turp: They already do.

Prof. Brian Russell: Arguably, I suppose.

It's a question of finding where the right level of civil society intervention is. But it seems clear to me that you need some, and maybe the FTA process you're talking about is the beginning of feeling our way around to how that might actually work.

On the environment and labour issue, it seems to me that environment to some extent is already in the WTO. If you look at the dispute settlement cases, there are lots of environmental cases coming in. The concern is that the environment is not being properly weighted in terms of its importance with the trade considerations. Having gone as far as it already has, I personally would favour some movement at this point toward bringing environment more fully within the WTO, probably along the lines Gil was suggesting.

I think labour is a different issue. There's this problem of putting everything in the basement, which I think Hugh mentioned in his paper. I'm not sure that labour as an issue in the WTO agreement is one that has a proper or even a useful place there. Maybe there are other places, such as the ILO, where this kind of work ought to be done. Then there ought to be more cooperation between the WTO and the ILO in terms of coming up with some sort of central policy on this. It may already be too late, but it seems to me that perhaps labour's place is not in the WTO agreement itself.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Mr. McNiven and Ms. Lanoszka.

• 1155

Prof. James McNiven: On the environment and labour issue, I think we should not be looking at this in a total global situation. I don't mean to ignore that, but I don't think that's the critical thing.

We really ought to do something, and where we should be doing something is inside NAFTA. What we should be doing there is looking at how we can be of help. I'm not talking about foreign aid, but it may come to where we're actually of some assistance. We should be looking at how we can be of some kind of help to Mexico on environmental things, and I don't just mean selling them environmental goods and things like that. We should be looking at this as being a great experiment. This is the EU taking in Turkey, which it won't do. But we have it, and we now have to make it work. We either make Mexico work, or what we have to do is say, sorry, there are 3 billion of you out there who are poor and who are going to stay that way, and I hope you like it. Then we wish that nothing bad will happen to us. Either we make a go in Mexico or we don't. If we don't, we have nothing credible to say on world development. On the environment side, we should be coming in there with whatever we can do to be of help. I think that has to be us saying, from one neighbour to another, what can we do to help you out?

On the labour side, maybe we should look at our immigration thing and tilt it toward NAFTA instead of wherever ours is tilted toward, if it's tilted at all right now, and make it a little easier to inform some of the people who might be migrating to the U.S. that we might have some place to make for them. We take in about 0.5% of our total population a year, so you could take in another 100,000 or so. Frankly, you're not going to be taking in bad people.

Mr. Daniel Turp: They could come to Nova Scotia.

Prof. James McNiven: It would be great. Nothing that another million people in Nova Scotia couldn't do for its economy. I should also mention that demographically these provinces, including Quebec, will decline in population over the next decade or two, literally decline, so we need people.

The Acting Chairman (Ms. Sarmite Bulte): Ms. Lanoszka and then Professor Kindred.

Ms. Anna Lanoszka: I would like to comment on the culture of the WTO. I think this is not being properly addressed here. What we are underestimating here, it seems to me, is the impact developing countries are actually having on the WTO. Even if we talk about civil society and interest groups, we really do talk from the western perspective. I really hate to use that term, but we do. I witnessed this with my own eyes, and it's astonishing how much the developing countries are changing the agenda of the WTO. I don't think Geneva becomes irrelevant in itself. I think the developing countries are attracted to the WTO for the reason that for the first time it's a forum based on the rules. The rules are much more attractive to its alternative, which is power. Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Professor Kindred.

Prof. Hugh Kindred: I quite agree with that. We keep talking about black and white turf, but things are shifting. I would just have stopped it all by saying the balance isn't yet right. Finally, on this point of side agreements or other agreements, agreements deal with things that are not essentially trade. Having said this, I disagree with Professor Gil on civil society.

I agree on the approach he's taking on labour. The WTO can't deal with the whole international agenda. It's a trade organization. It can't decide on labour issues and so on. The ILO would be the right place, if it could get its act together. There are, in fact, international conventions in the ILO on child labour, for instance. So you make your agreements, whether they're on culture, labour, or the environment, in the relevant organization that deals with that subject matter.

The problem and the issue is how to bring those rules to bear in the decision-making process of the WTO so that the WTO in either its negotiations or its panel decisions doesn't just go ahead and make decisions according to its own rules and disregard all these other regulations that are related to the particular topic. How do you bring the two together so that the compulsory decision-making process of the WTO includes the regulatory standards for labour and environment that are being developed elsewhere?

Mr. Daniel Turp: You incorporate them.

Prof. Hugh Kindred: You have to write something into the GATT structure and the process that says that the bodies have to incorporate these obligations. I was talking about article 20, and Gil was talking about negotiations and trade-offs. Those are the things that have to be done, and that's what we need to approach in order to make it work.

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The Acting Chairman (Ms. Sarmite Bulte): Thank you very much. Unfortunately, we are out of time.

Mr. Daniel Turp: Could I make a specific demand of Hugh?

Could you write something on article 20? Do you have something in your paper on article 20?

Prof. Hugh Kindred: Yes.

Mr. Daniel Turp: I'd like to read that, because that's a very important issue, how article 20 should be revised, if it should be, and how it would change.

Could you write something for us on that?

Prof. Hugh Kindred: Yes. I thought about it last night.

The Acting Chairman (Ms. Sarmite Bulte): Professor Kindred, could you perhaps do that and provide further suggestions?

It doesn't have to be today or tomorrow. We have been asking all the witnesses who appear before us to remember that this is just the beginning of our consultation; the lines are open. We have been encouraging our other witnesses to submit further briefs. They are to speak to other members of their organizations or individuals to bring their concerns forward.

I would like at this time to ask you, and I hope we can count on you to help us further with our study. Again, it has been very educational, and I hope we can call upon you to assist us in the process as it comes and as we listen to other witnesses.

Again, I repeat, this is just the beginning of our communication and of working together, and I encourage to continue this partnership as we forge ahead in the next few months. Thank you very much to all of you for being here.

The meeting is adjourned until 1.30 sharp. Members, you have to check out of the hotel now.

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The Acting Chairman (Ms. Sarmite Bulte): I'd like to reconvene the meeting of the Standing Committee on Foreign Affairs and International Trade.

We welcome Mr. Bradfield here with us this afternoon. Thank you for coming, Mr. Bradfield. You could start, and then my colleagues could ask you questions. We have about a half an hour.

Mr. Mike Bradfield (Individual Presentation): [Professor] Okay. Do you all have a copy of my document now?

The Acting Chairman (Ms. Sarmite Bulte): Yes, thank you.

Mr. Mike Bradfield: Rather than read the document, what I will do is quickly go through and highlight the basic thrust of the presentation. Then if you have questions, we can deal with questions rather than me give you a lesson in economics, which you don't want.

I start the document by talking about the function of trade, because much of the popular and political debate on trade is around the job creation effects of trade.

Who was the famous author who said a rose is a rose is a rose? Well, equally, trade is trade is trade. The reason we trade is literally to have trade.

We export in order to finance our imports. We don't export to create jobs, and that's a crucial thing, as far as I'm concerned, in terms of policy debates, because the political imperative is in fact often presented as the need to create jobs. But you have to recognize that the way the international system works, with the exchange rate and all, an expansion of exports leads to us getting more foreign currency, which raises the Canadian exchange rate and then allows us or encourages us to buy more foreign goods. If all we were doing was selling our goods to foreigners and not buying anything from them, then we're essentially dealing in foreign aid, not trade, because we're not getting anything back. The way we benefit from foreign trade is by the imports.

So I'm arguing, then, to begin with, that yes, we want trade, but we want trade because it enhances our position as consumers, not producers. In fact, international trade theory is based on the assumption that the economy is at full employment. We all know that the Canadian economy in fact hasn't reached full employment for more than about five years in the last forty, so a theory that's based on full employment is a theory you have to be careful with when you're trying to develop policy from that theory.

The second point I would make is that much of what we call free trade is not free trade. We had the so-called the free trade agreement with the U.S. We have the NAFTA. The point there is simply that while those trade agreements kind of let us under the U.S. umbrella, it's still the U.S. rules that trade is governed by, both in those regional trading blocs, as well as when you get into negotiations and things like the World Trade Organization. Obviously the Americans have an awful lot of political power and try to enforce their view of the world on the rest of us.

In the regional NAFTA-type agreements, what we're basically dealing with is agreements that allow us to have a say in the dispute resolution mechanism, but that's within U.S. law. They don't change U.S. law. And one of the fundamental U.S. laws is that an industry that feels it has been affected by foreign trade can appeal for protection.

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The theory of trade is that when you liberalize trade, that allows you to produce and export more of what you do well at, in order to import more of what you do less well at. So in the theory of trade, by definition, there will be disruptions to particular sectors, which are the losers from trade, and there are gainers from trade. So as long as the U.S. sticks to the rule that says they can protect an industry that is affected negatively by trade, then that gives the U.S. the ability to stop anything that is really effectively liberalizing trade.

So again, as with the job thing, we have to be careful in believing that we have free trade and that we're liberalizing things dramatically. What the NAFTA and the FTA did was lower some tariffs, which were coming down anyhow, and were by and large quite low in the Canadian-U.S. trade, which of course represents 80% of our trade, and didn't gain many advantages in other areas, other than perhaps the dispute resolution mechanism.

The next point I go on to in the paper is the question of the liberalization approach that follows the Multilateral Agreement on Investment approach, which is to argue that we need to liberalize trade by giving corporations more rights.

The fundamental thing to recognize is that corporations are legal fiction. They exist only because the state says they exist. The state is the body that makes them legal. Corporations are not citizens. Corporations were set up originally in order to accommodate the need for limited liability for the shareholders so that corporations could raise funds and not have the shareholders liable for all the corporation's debts. That's the rationale for the corporation.

My concern as an economist with the kind of liberalization approach that wants to have more rights for corporations is simply that the corporation does not have citizenship; it's a legal fiction. Citizens have rights, not corporations. Corporations have the protection of limited liability for their shareholders, but corporations themselves should not have that kind of protection. Many of the pushes, for instance, with the MAI are to relieve corporations of any responsibility.

So I'm saying, from a legalistic point of view, the rationale for the corporation is a limited liability, but only for the shareholder, not for the corporation. Therefore, trade liberalization should not involve granting more rights to corporations. In law, they don't need it, because that's not what they were set up for. In economic theory, they shouldn't have it, because economic theory says that corporations act in the public interest only when there are very strict economic conditions, what we call a perfectly competitive market, and in economics, what's generally called “the free market”.

But “the free market” is a bit of a semantics game. A free market means a privately owned market that's free of government interference. Economic theory says the reason you don't need government interference in a perfectly competitive market is because you have the competition from so many producers that no individual producer can affect the market in terms of the price, and so on, when you're dealing in the international field, in particular. But generally in our economy, it's obvious that we do not have the conditions for a perfectly competitive market. Therefore, we do not have the conditions for a market free of government interference.

Corporations have huge amounts of power. They have huge amounts of economic power when they're dealing with suppliers of raw materials, with their labour force, with their own customers, and obviously, when they're dealing with political jurisdictions.

I happened to get by e-mail the other day, after I'd agreed to come before the committee, a resolution that's going before the U.S. House of Representatives, being placed by someone called Bernie Sanders. One of the things it talks about is the disparity in power between corporations and countries. It says the total wealth of the world's three richest individuals is greater than the combined gross domestic product of the 48 poorest countries, and they represent a quarter of the world's states. So you have this huge disparity of power, not just economically when the corporations deal with their unions or their suppliers, but politically when they deal with political jurisdictions.

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You have recently voted on Bill C-55. You know what kind of political pressure the corporations can put, either independently in their own right, or indirectly by getting their government to go to bat for them. So the economic theory of free trade and free markets, with corporations free to do whatever they want, is a theory that just doesn't fit the economic reality of not only Canada but of the world, because corporations have so much power.

The basic proposition I'm dealing with is we grant citizens rights, citizens elect governments, and those governments legalize the legal fiction of a corporation. We should not think of trade liberalization as a process of giving corporations either power independent of governments or even power over governments. For instance, there are some proposals in the MAI with respect to corporations suing the government. The case of the Ethyl Corporation is one that once again the House of Commons dealt with in the fall, I think. So the basic proposition is an economic theory that conditions just do not fit the reality we actually face in Canada.

The other point is a more practical point. Given their power, corporations don't need any more rights. They exercise so much power now they demand subsidies from governments, and not just poor governments. In the third world they demand subsidies from the wealthiest of governments and they get them. In Europe, for instance, the average automobile plant built there gets $100 million worth of subsidies from the political jurisdictions in which it locates. So corporations get subsidies in the form of direct grants. They get subsidies in the form of tax concessions, what we call tax expenditures. They get subsidies in terms of labour legislation and environmental legislation that gets waived once it's in place.

There was something on the CBC not long ago about the Government of Ontario not enforcing much of its environmental legislation. Well, that's the sort of thing the corporations want. So I would argue that corporations use their political power practically to enforce their positions, enhance their positions and increase their profits, but that's not necessarily good for either their workers, their suppliers, their customers, the environment, or the people they deal with.

The WTO is now the likely venue for something like an MAI, with further trade liberalization. The next section of the paper goes on to talk about what would happen if the WTO went ahead and adopted it. Would Canada be in trouble if we refused to recognize it? We would have difficulties, but I would argue it wouldn't break the bank, and in the long run we could handle it quite nicely.

The final part of my paper deals with capital flows. The point there is that in economic theory you need to match your trade liberalization with capital liberalization, because the financial capital flows are presumed to finance the trade that is expanding as you liberalize it.

The problem now, which I'm sure many witnesses have presented to you, is probably something like 97% of the capital flows around the world are not to finance trade but are speculative flows, and as speculative flows they tend to be destabilizing. One can talk about types of speculation that are stabilizing, but we've had a number of crises in the last four or five years that show how destabilizing these things can be. Therefore one has to look very clearly at the liberalization of capital flows and ask whether it has gone too far.

The interesting thing is that a number of economists who have argued for more liberal capital flows—Jeffrey Sachs and Paul Krugman are the two I'm thinking of in particular—in light of the recent Asian crises have changed their minds quite dramatically and said that things have gone too far.

I have a quote in here from Sachs that

...international financial markets are intrinsically highly unstable; or to put it another way, the East Asian crisis is as much a crisis of Western capitalism as it is of Asian capitalism.

What he's getting at there is one of the explanations for the Asian crisis was the so-called crony capitalism that was going on in Asia.

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And what Krugman recognized before Sachs was that crony capitalism is not restricted to Asia; it goes on in all systems. And even with this underlying freedom of capital movements, aided by the technology, to move massive amounts of capital almost instantaneously, you've got a situation that is inherently unstable. And they've finally come around to saying okay, clearly capital controls are necessary.

One of the object lessons that Brian MacLean cites in his study is that while you have Argentina and Brazil getting themselves into exchange crises, Chile, which already has capital controls, has been by and large inoculated from that. So controls such as those Chile has, a Tobin tax, or various things like that are necessary to remove at least one layer of that speculative capital that is so damaging to countries because it can affect their exchange rate and their financial institutions literally overnight.

So that's the fast thumbnail of the presentation.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Bradfield.

Just before opening this up to questions from my colleagues, you said of the MAI in the WTO that we could deal with it quite nicely. We don't need it? Is that what you're saying, that we don't need the MAI—or that we can deal with it under the WTO?

Mr. Mike Bradfield: I'm saying if we were to have an MAI, I would start with an entirely different assumption. The assumption of the people who were calling it the bill of rights for international capital was that capital needed to be freer, including freer of responsibility and regulation. I would argue that since international capital flow and international trade in general do not fit the model that argues for free trade, if we're going to negotiate a multilateral agreement on investment, it should start not with how we free up capital, but rather how we make capital serve the public interest.

So I would argue that you would start with something like a universal declaration of human rights, and say the economic system should be serving society, not society serving the system. Somebody said capitalism is a good servant but a terrible master. The problem with the MAI as it was originally intended was that it was going to free up the corporations. I would argue that we should reverse the process and talk about the obligations and responsibilities of the corporation. If you want an international agreement on investment, it should be putting those regulations in place, because we need that international regulation of a system that's gone badly awry.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Mr. Stinson.

Mr. Darrel Stinson: Yes. I just have a couple of questions here.

I know there was a lot of concern out there in regard to the MAI. I have a little bit of a problem, which has nothing to do with the politics or anything else. But as our population gets older, as we get wiser, maybe, we come to the realization that we have to also take some responsibility toward our retirement. So a lot of our people out there have invested in RRSPs and investments that were put overseas, and there's a great concern with the people coming up to retirement that maybe their funds need some way of being protected. They looked at the MAI as a guideline along that channel. So what would you say to them?

Right now even the government is looking at investments in regard to... Our pension plan is putting some of that money offshore. So I have concerns that unless you have agreements on things that parts of the MAI address, without that type of agreement you may be gambling way too much with our future.

Mr. Mike Bradfield: I would argue it's just the reverse, because with the MAI you're gambling the future even more.

First of all, the danger in... One concern I would have with the way you phrased the question is in fact... I've got a footnote in the paper to this effect. One of the problems in economics is the use of terminology. For instance, there was a popular claim during the discussions about the MAI that every billion dollars' worth of foreign investment creates 42,000 jobs.

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The use of “investment” in that context is the assumption that you have real investment—machinery, equipment, factories—and that foreign investment is coming in and setting up a new factory that will employ people. The 42,000 jobs is probably overestimated, but there would be jobs created. The problem with the word “investment” is that the investment may not be that kind of real investment; it may be simply financial investment.

Clearly, speculative investment doesn't create jobs; it moves into an economy. It may simply buy financial paper. It may buy corporations that are already there and may even close them down so it can destroy jobs. One of the primary problems is the instability caused by so-called investment—i.e., financial investment, particularly speculative investment. When it moves massively into a country it drives the exchange rate up. This makes it difficult for that country to sell its exports, so its export economy and its export sectors are then reduced, causing unemployment. So that kind of financial investment in fact destroys jobs; it doesn't create jobs.

Mr. Darrel Stinson: Yes, but perhaps on the other side, could not some of that money be used in research to further the product and the value of the product?

Mr. Mike Bradfield: Again, you have to be careful with the use of the language. The money that gets used for research is presumably the money of direct investment, which is not speculative. The direct investors are a different group of people, by and large, from the speculators. If you simply have Canadians buying Indonesian bonds because they think there's a good rate of interest there, that is not necessarily doing anything for individual Indonesians. It doesn't do anything for individual Indonesians unless those Canadian funds to buy those bonds are then used back in Canada to buy something the Indonesians want. One thing they could buy is either our research expertise or our products that contain the results of our research expertise.

With financial investment, as opposed to real investment, you have no guarantee of any real results from it and there is some concern about the stability questions in terms of the exchange rate, both when the money goes in and when the money floods out. Let's look at the variant then.

Mr. Darrel Stinson: In regard to exploration in the mining sector, we have people all over the world who put money into that investment, and it does create jobs.

Mr. Mike Bradfield: Okay, but that's real investment. It's not speculative.

Mr. Darrel Stinson: Mining is speculative. Bre-X tells us that.

Mr. Mike Bradfield: On the question of prospecting jobs, as long as the mining exploration activity is not in itself a tax boondoggle but real, then that's real investment, and yes it creates jobs and it opens up possibilities and that's desirable. As I say, 97% of the international capital flows are speculative. The Japanese have a word for it; they call it zaiteku.

Mr. Daniel Turp: Are you suggesting that in these WTO negotiations there is some debate on speculation and some tools to deal with speculation? Is WTO the forum where there could be debate on the Tobin tax or other ways to deal with the speculation?

Mr. Mike Bradfield: It has the same forum because it's the same problem of language. If people at the WTO are developing measures for controlling real investment, but they word it so that it also covers speculative investment... The MAI talks about investors. Investors include speculative investors. The MAI suggests that governments should compensate speculators for any losses you might be able to generate when you protect your currency. So the WTO has to be at least one of the venues where these things are discussed, because you have the real component and you have the financial component. You want the benefits of the real component, as Mr. Stinson suggests, and you don't want the disadvantages of the financial component. So you have to make the package that puts forward the real component to protect you from the financial speculation.

Mr. Daniel Turp: Does that mean, in your opinion, that there should be a negotiation on investments in the WTO and that one of the matters to be negotiated is speculation?

Mr. Mike Bradfield: Definitely.

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Mr. Daniel Turp: And what would be the other issues? Because you've tested things... rights of corporations should not be part of the discussion package because they already have rights or they shouldn't have rights anyway. Don't you think that would be part of the deal, of the trade-off, that they are recognized with some rights and also perhaps some obligations and responsibilities? They are in other forums.

You know that at the UN they're trying to do that... the transnational corporations and declarations that never happen. It just doesn't work. Do you think it could work in the WTO?

Mr. Mike Bradfield: The reason it would work more in the WTO in terms of actually getting something done is because the corporations have a much clearer stake in what comes out of the WTO than what comes out of the UN. Unfortunately, in our world commerce talks louder than principle, and the UN is talking about principle and the WTO is talking about commerce. So basically what you have to do is say to the WTO that if you want your commercial interests then you have to recognize your social, public responsibility. Don't let them have the commercial interest unless they do recognize their responsibilities.

As far as I'm concerned, the MAI was basically a licence for corporations. It wasn't one of giving them responsibilities; it was one of giving them absolute freedom.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Assadourian.

Mr. Sarkis Assadourian: You stated that corporations have no rights, that they are legal fictions, and that citizens have the rights. We have witnesses here from corporations who represent more people than I represent in my own riding. They have more impact on the citizens themselves, their own workers, than I do as a politician and a member of Parliament. How could you say that they have no legal rights, that they are legal fictions? At the end of the day, if I don't listen to these corporations and do my best, they could turn around and shut down a factory and go somewhere else or just totally close down. What happens to me as a citizen or as a state?

I can't follow the logic. If you could explain it I would appreciate it, because if we have ten witnesses today, and only two individual citizens, as in your case perhaps... Corporations are fundamental to our economic well-being.

Mr. Mike Bradfield: Yes, but you have to be careful with that. What I'm saying is that corporations do not have citizenship rights. They should not have freedom of speech, because, for instance, the tobacco industry...

Mr. Sarkis Assadourian: They must have freedom of thought, no? They decide what they're going to do with their money.

Mr. Mike Bradfield: The tobacco companies argued that constraining tobacco advertising to keep them away from young people infringed upon their freedom of speech. I'm sorry, I will admit that corporations have commercial freedoms and commercial rights, but I don't think they have the citizenship right of the freedom of speech because that should be reserved for citizens. When you say corporations come to you representing thousands of people, the chief executive officers of corporations in economic theory represent the interest of only one group, and that's the shareholders. They don't represent the interests of the workers, they don't represent—

Mr. Sarkis Assadourian: Shareholders are citizens too, right?

Mr. Mike Bradfield: Shareholders are citizens too, and as I say in my paper, shareholders have every right to use their citizenship rights, but I don't think they have the right to have two sets of citizenship rights—the right as an individual and the right to act through their corporations.

I suggest to you it is a very dangerous political dynamic when the corporations can demand citizenship rights and go from being a creation of the state to in fact wanting to be not just equal to the state but in things like the MAI also having power over the state. They already have that power when they come and threaten you as a member of the House of Commons that if something doesn't happen in their favour, they'll pull their plant out of your riding.

Mr. Daniel Turp: It won't give them money.

Mr. Mike Bradfield: That's a reckoning out of their power.

Mr. Sarkis Assadourian: You're referring to the Bloc Québécois campaign?

Mr. Daniel Turp: We don't accept money from corporations.

Mr. Sarkis Assadourian: Except our present corporations...

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Mr. Mike Bradfield: That would be part of the principle, that if they don't have citizenship rights, they shouldn't be able to make donations to political parties. They already have massive power, as you have said. It seems to me that in a democracy one wants to restore a balance and take power away from the corporations and make them operate in a way that is in the public interest. But when they are testifying before any legislative body, however they may dress it, they're there for their own self-interest, to maximize their profits.

The point in economic theory is if you don't have the market conditions for a perfectly competitive market, you have no guarantees that what's in the private self-interest of the corporation is in the public interest.

Mr. Sarkis Assadourian: You tell factory workers in Nova Scotia, Ontario, Quebec, or B.C., “Listen, you have all the rights, but the corporation doesn't represent you.” The person likes to keep his job. It doesn't matter who represents him. He has to feed his own family. This is what you're telling me: theoretically it's crap; in practice it doesn't work.

Mr. Mike Bradfield: The practicality is that if you continue to turn power over to the corporations you will never change the fact that people are beholden to them. If you begin to constrain the corporations to act in the public interest, and if you begin to look at the fact there are alternative ways of organizing an economy—for instance cooperatives owned by the workers that aren't going to move because the workers own them—you will be no longer beholden to them.

I'm suggesting you essentially must have a fairly broad perspective of what the economy is supposed to do, what the political field is supposed to do, and how corporations should serve those two things. If they don't serve those two things, then you make them serve them.

Mr. Sarkis Assadourian: But broad perspective means not excluding the corporations.

Mr. Mike Bradfield: It's not excluding them, but keeping them in their place. They're a legal fiction—powerful, but a legal fiction.

The Acting Chairman (Ms. Sarmite Bulte): Thank you, Mr. Bradfield.

Ms. Lill for one last little question.

Ms. Wendy Lill: First of all, I have to apologize for being late, but I was under the impression we were starting at two o'clock. Someone told me there was a sign outside saying it was at two o'clock. So I apologize, Professor Bradfield, for not being here.

Am I hearing you correctly that you are trying to spin out the idea that a corporation has citizenship rights?

I want to tell you a story about what happened to me yesterday. A man from a telephone company came to my house to try to fix my telephone. He told me he couldn't fix it because it actually wasn't the telephone company's responsibility any more. He told me I could get an electrician in or fix it myself. He went through various kinds of scenarios—a very stressed-out man. He finally said to me, “I can't fix this because the company doesn't care about you any more. It just cares about the shareholders.” I couldn't believe it, but that's the truth.

So this seems to me to be a rather interesting point of view. Are we talking about shareholders? Are we talking citizenship? There are hundreds of thousands of citizens in this country who are very interested in what's going on at the trade tables, and they are not having anything to do with it. To say that corporations are representing them—if you think that telephone repairman felt represented by his company—is absolutely wrong.

[Inaudible—Editor]

Mr. Sarkis Assadourian: —

Ms. Wendy Lill: I'm serious. I'm sitting at this table with you, but I think I'm putting forward a really critical point, that citizens are not corporations. There's a very big difference.

Mr. Bob Speller: I don't think that's what Mr. Assadourian said either.

Ms. Wendy Lill: This is an interesting debate. It's almost like we should strike another committee to talk about the concept of citizenship and rights. I don't think anybody at this table is really—

Mr. Daniel Turp: The problem is that corporations already have rights. They are, because of their legal personality, analagous to individuals who have rights. So if you want to change that, you have to change the very pattern of recognizing rights and being in the position where corporations, like individuals, want more and more rights. Recourse is in front of international bodies to complain about expropriation and other things like that. It's not as simple as just saying “those citizenship rights—no rights”, because they already exist. We have to curtail them or not add to them.

The Acting Chairman (Ms. Sarmite Bulte): I doubt if he could answer that in a closing comment. We could take Ms. Lill's suggestion to bring this to a fuller debate at another committee level. I mean it very seriously.

I have to watch the time, so would you just sort of reply to that.

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Mr. Mike Bradfield: The reply is that you're simply reinforcing my point. In the international bodies, the starting position has to be that corporations already have too many rights, and we just have to start making them have responsibilities; whereas things like the MAI assume that in order to “liberalize trade” we have to give the corporations more rights and fewer responsibilities.

I'm arguing as an economist that it flies in the face of what economic theory tells us about how corporations behave in the type of economy we have, where they already have more power than economic theory considers to be healthy for the public good, even though it's maybe very healthy for corporate profits.

Would you like me to file the two e-mails I got?

The Acting Chairman (Ms. Sarmite Bulte): Yes, please.

Mr. Mike Bradfield: They're quite substantive reports.

The Acting Chairman (Ms. Sarmite Bulte): We'd like that very much.

I'd like to thank you very much for coming, Mr. Bradfield, and for your presentation. I'd also like to repeat, as I've told every other witness who has appeared before us, the doors of communications are open. This is just the beginning of our consultations. We'd appreciate it if you could keep us apprised of things you feel should be brought to the committee's notice. In the same way, I hope we can draw upon you and your expertise to help us undertake this task. Thank you very much for coming.

Mr. Mike Bradfield: Thanks for hearing me.

The Acting Chairman (Ms. Sarmite Bulte): Okay. Our next witnesses are Brian O'Neil, program coordinator with Oxfam; and two representatives from the Canadian Federation of Students, the Nova Scotia component, Penny McCall-Howard and Ian Sharpe. Welcome.

We have exactly 46 minutes, so please try to keep your presentations to five to seven minutes each maximum, so we will have 30 minutes for discussion and to answer some questions. Would that be acceptable?

Mr. O'Neil.

Mr. Brian O'Neil (Program Coordinator, Oxfam Canada): We'll try.

The Acting Chairman (Ms. Sarmite Bulte): Okay. Please start.

Mr. Brian O'Neil: I was struck by the fact that this committee is conducting hearings across the country, and I noted there was a tremendous amount of citizen interest about a year and a half ago about the multilateral agreement on investment. There was certainly a call going from here, there, and everywhere about public hearings to be held across the country on that, and they weren't held.

I would assume maybe there's some kind of relationship to the fact that there are committee hearings right now taking place related to the World Trade Organization and the free trade agreement.

The Acting Chairman (Ms. Sarmite Bulte): I can confirm that is the case.

Mr. Brian O'Neil: Well, in the essence of the MAI, clearly the government got involved. You've only got it partially right this time around, in the sense of notification to people in this country about these issues. I would suggest that if people had a chance to be alerted about these issues, they would be just as interested in the WTO and FTAA as in the MAI.

I only found out about this by accident because of my connections with the sort of in-crowd—Professor Timothy Shaw, who's with the Canadian Institute of International Affairs here in Halifax. I think it was his idea that this should be spread beyond just a certain number of people who might be deemed to have an interest in issues such as the corporate sector. So it was through his intervention here in Halifax, going back to Ottawa, that I was notified as somebody who's always been known in this community to express an interest in these issues. But all kinds of other people in this community are interested in these issues as well. Yet we only heard on March 15 that the committee was coming to town a week later.

• 1415

So I think this is better than the MAI, but really only marginally so. It won't be quite enough if, when this committee wraps up its work, it says or wants to say with some kind of confidence that you consulted the Canadian people. It hasn't happened. So I think a lot of improvement is needed in this regard.

I'll try to highlight in my presentation some of what I have written. I want to address what we at Oxfam see as being a major concern in how Canada proceeds with foreign affairs in the economic sphere—namely, that the primacy of commercial interests relegates the critical social and environmental impacts of economic activity to a woefully inadequate subordinate level.

The Canadian government has expressed concern about the inability of many underdeveloped nations to adapt to economic globalization. That needs to be more practically reconciled with the government's support for trade and capital liberalization, because I often read, especially in many CIDA documents, that we're concerned about countries in the south adapting, and so on, yet overall there's this overriding expression of support for trade and capital liberalization. It certainly appears that the former—that is, the concern for underdeveloped countries—takes a back seat to the latter. I think it could frankly be regarded as little more than an aphorism. There are many ways one could enunciate this relegation, but one needs look no further than Canada's commitment to official development assistance, which, in real terms, has shrunk by about 50% over the past seven years, and that is quite shameful.

In critically examining how Canada currently prioritizes the foreign economic envelope, I will present a perspective on the problems of segregating economy from other aspects of global life and ask the committee to examine the profound and far-reaching commitments that this country made long before proposals for new trade agreements were put on the table.

To jump quickly to the point I'm making, I look at page two of the text, that what has been taking place with economic policy in this country and also how this country guides its economic outlook globally is based on economic globalization. Indeed, there had been a number of policy and legal frameworks that have helped to guide this economic globalization process. Canada has been four-square behind this. We have, first of all, structural adjustment programs in many countries in the south, the 1988 free trade agreement and the 1993 NAFTA, the Uruguay Round of GATT and the subsequent formation of the World Trade Organization in 1995, and many other efforts to look after trade and investor rights.

What is striking about all the ongoing efforts being put into legislating trader and investor rights is the pitiful lack of energy applied to entrenching and applying, both here and globally, the most important international agreements of this century. And I was interested to hear what Professor Bradfield had to say, because there were certain points of confluence here.

First and foremost is the Universal Declaration of Human Rights. In Oxfam's mind, and as I mention in the introduction, which I didn't read, we have a real concern about basic human rights, and this arises from what we see with economic globalization. The second covenant we're concerned about is the International Covenant on Economic, Social and Cultural Rights, the protocols of which have been signed by 136 countries, including Canada.

Those two covenants long predated structural adjustment programs and international trade deals. Indeed, we say it should be mandatory that all subsequent economic-related agreements have to comply or have to be filtered through both the letter and spirit of the Universal Declaration of Human Rights, the International Covenant on Economic, Social and Cultural Rights, and other covenants dealing with issues and rights related to women, children, labour, the environment and social programs—and you could name all of these various international or U.S.-sponsored fora that have taken place. But instead, what we are presented with as a view of the world is a highly competitive economic engine, which of course spews impacts that are far-reaching in all spheres of global activity: social, cultural, and environmental.

Through the diminishing role conferred by economic dictate on the nation-state, the globe is being reformed into a borderless world. What I and many others want to know is who voted for Canada to be diminishing its role as a nation-state is this so-called borderless world?

• 1420

Arguably, what we say is that it's because it seems to serve the interests of those who have a primary interest in gleaning profit from trading and investing globally. I realize that it involves in a minuscule way more than just a few, but primarily it is the few who are ordering this at the top.

There are two points I want to make about this globalization process, which always seem to be forgotten. We're told that increased trade is going to provide some kind of bounty, because if we have increased trade we're going to have increased economic activity, and if we have increased economic activity it's going to, yes, maybe initially benefit a few, but ultimately it will all trickle down. Let me we say that there are two fundamental points that are factually based with which we dispute this.

First of all, if you want to look at the most recent statistics on global economic growth, in the World Bank group's Global Economic Prospects, which was produced in December 1998, it showed very clearly in the table on page 2 or page 3 that global economic growth, annualized, in the 1980s was 3.1%. For Latin America and Africa the 1980s were called the lost decade; but even given that, even given a deep recession here in Canada in the early 1980s, etc., we had 3.1% annualized. From 1991 to 1998, we had 2.3% annual economic growth annualized. And this is during an expansion of world trade; this is when deregulation has been pushing forth four-square, and yet we have a reduction in it.

As a matter of fact, I have my little addendum of what I missed, what the computer took away, which is the third-last paragraph on the page I have highlighted, “The Borderless World”. In other words, despite the intensified deregulation of national economies and the expansion of trade in the 1990s, economic growth has actually declined. Indeed, this has been the trend since the early 1970s, when the Bretton Woods system of fixed exchange rates collapsed. That's also documented. There are some interesting papers that served as a background to Prime Minister Tony Blair last year about documenting exactly how that process has been taking place.

At the same time that this is happening, we also find the tremendous gap growing between the rich and the poor. One of the best recent documents about that at a global level is the United Nations Conference on Trade and Development report from September 1997. The United Nations developed a program that also deals with this gap that's growing. According to the UNDP, the wealth of the richest 225 people in the world is equal to the annual incomes of 47% of the poorest humanity, almost 3 billion people. So we had this equation, with the wealth of those 225 being equated with the annual incomes of almost 3 billion people, and that's growing.

I refer in my report here to a study by Merrill Lynch last year whereby they say that the mega-rich, the wealthiest people in the world, are expected to have their wealth increased by 10% annually for the next three years, which was as long as their forecast went.

Here in Canada you have the same thing. Finance Minister Paul Martin might throw up his arms and say “It's too bad because the gap between the rich and the poor is growing. I guess it's just globalization. Gosh, what can you do?” I'm sorry, but we say there is an awful lot that can be done.

One way or the other, what we have in this country, according to the most recent statistics on income by size produced by Statistics Canada, in 1996... And I tried to get more recent information on this; I wonder why they aren't doing it, because this is very interesting. In 1996, the latest information we have, it showed that the top 20% saw their incomes increase by 1.8%, while the bottom 20% saw their incomes decrease by 3.1%. In other words, we don't just have the gap growing between rich and poor. We have the rich literally getting richer and the poor literally getting poorer.

If you want to look at the situation of about the 47 or 50 poorest countries in the world, their real incomes per capita have declined since the early 1980s. So this engine still keeps on going and people will sigh, “The system is bringing us along and we can't do anything about it”. I think there are a lot of things we can do about it. There are some ideas in this paper.

I want to finish by making a couple of comments, because I think it's useful for the committee to hear this.

• 1425

Some of your committee might sigh at our exhortations for Canada to take a stronger role in linking, and indeed we would say prioritizing, human development and environmental concerns in multilateral fora, especially those that deal with economic issues. After all, you might think or you might say that Canada is quite a small country on the world economic stage.

I'd like to counter this sentiment, which might, indeed we think does, serve as a basis for a lack of political will in addressing these concerns at the G-7, the UN, the Bretton Woods institutions, the WTO, the OECD, etc. We at Oxfam hear constantly, and I really want to emphasize this, both from other Oxfams—and there are 11 of us all over the world—and from our partners in the south, how incredibly influential this country is in international affairs in a way that is strikingly disproportionate to its size. Having recently secured a seat on the UN Security Council only adds to this influence.

Canada has done a good job in recent years with regard to global human security issues, including the ban on landmines. However, I would like to remind the committee that this initiative came from non-governmental organizations and Oxfam Canada was part of that. It's allowed us to broaden our concern for human security into the sphere of global economic activity.

Yes, we need to have a global rules-based economy. This is something that is constant that I read from documentation coming out from this committee, from CIDA, etc. We have to have a rules-based economy. But we're saying that first and foremost why not have the rules being based on the first things that Canada signed onto, like the International Declaration of Human Rights, the International Covenant on Economic, Social and Cultural Rights, like UNCED, like the rights for children, etc?

Thank you very much.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. O'Neil.

We'll go over to Ms. McCall-Howard and then Mr. Sharpe.

Ms. Penny McCall-Howard (National Executive Representative, Canadian Federation of Students—Nova Scotia Component): Wonderful. Thank you very much.

My name is Penny McCall-Howard and I'm the national representative for Nova Scotia for the Canadian Federation of Students. The Canadian Federation of Students represents 400,000 college and university students at about 65 institutions across Canada.

Ian, would you like to introduce yourself?

Mr. Ian Sharpe (Executive Member, Canadian Federation of Students—Nova Scotia Component): Sure. I'm Ian Sharpe. I'm the representative to the Nova Scotia component of the CFS from King's College in Halifax. I'd like to apologize for any informal mistakes I make, because I was just newly elected and I'm still—

Mr. Sarkis Assadourian: Congratulations.

The Acting Chairman (Ms. Sarmite Bulte): We're pleased you're here, so please proceed.

Mr. Ian Sharpe: Thank you.

Ms. Penny McCall-Howard: Thanks very much.

While the majority of the work we do is not necessarily in the area of international trade or foreign affairs, we certainly make an attempt, for example, to go to international conferences about education with our elected representatives on a national level and certainly have an interest on how international trade policies affect the social programs and specifically for secondary education programs that are delivered in Canada.

We were very interested in many of the measures in the Multilateral Agreement on Investment. Since many of those negotiations seemed to have been moved now to the World Trade Organization, and hence this consultation, we consequently have an interest in what's going in the World Trade Organization. So we understand that this is part of a new round or the beginnings of part of a new round of talks that will be completed in January 2000.

Mr. Ian Sharpe: These talks at the WTO pose a threat not to be lightly dismissed. The World Trade Organization has in its past overturned environmental laws, laws that protect food safety, laws protecting cultural diversity and public health. It has lifted the European Union ban on beef hormones and forced the American Clean Air Act to withdraw its clauses that constituted an illegal barrier to trade.

These and other examples make it clear that the WTO's philosophy is to benefit trade and investment liberalization at the expense of social and environmental goals on the part of individual governments. The only ones to benefit from this are transnational corporations. Those who are hurt are individual citizens of the countries involved.

Ms. Penny McCall-Howard: On the relationship between international trade liberalization and education, first of all, we are by no means an opponent of international cooperation per se.

• 1430

Brian mentioned the International Covenant on Economic, Social and Cultural Rights, which Canada signed in 1976. From our perspective, it is interesting, illuminating, and disappointing that although as part of that covenant there was a clause where Canada committed to the progressive introduction of post-secondary education free from economic barriers, since 1976 we've seen fees increasing in institutions across the country. Just in the last 10 years they've increased by 150%. There has been $7 billion cut out of the Canadian budget for post-secondary education and training. So we see this as being an example of where Canada has fallen short of its international obligations and its obligations to its citizens.

One of the negative effects of the current round of trade liberalization discussions is unfettered access by private corporations to students and the educational environment and their having an influence in the classroom and on the curriculum that is taught. I think there are plenty of examples of that happening right now at the level of elementary and secondary education.

Another effect is the additional threat of privatization bringing about limits on academic freedom. There have been some fairly striking examples of this in the post-secondary education sector in Canada, most recently and most strikingly in Toronto where the pharmaceutical company funding a woman's research tried to prohibit her from publishing negative results and consequently a whole—

Mr. Sarkis Assadourian: That took place at Toronto's Hospital for Sick Children.

Ms. Penny McCall-Howard: Yes. The University of Toronto ended up getting involved in that as well. The faculty association ended up defending her. We see private control over research as being a large threat to public health and safety and academic freedom in Canada.

Investors in educational products, such as private companies delivering education, may be able to refuse to pay corporate taxes that support a public education system on the grounds that system would compete with the interests of the corporation. For example, if a program were being offered at both a private trade school and a public community college in Nova Scotia, there might be an issue there as to that being some kind of illegal encouragement of competition on the part of the government. We would simply say that the Nova Scotia government would be responsible for offering that program in a publicly accountable way by offering it through the public education system.

Other effects would be the potential for international lawsuits by corporations of individual institutions or governments for the imposition of regulations on corporate investors or donors, and disallowing governments from favouring a public over a private institution. Again, I refer to the example of the private trade schools. I'm not sure if you've heard about it, but most recently in Atlantic Canada, a whole bunch of them went bankrupt. They took the students' money and closed their doors. We feel it's very important that we maintain our investment in the public education system in Canada and that it not be put at a disadvantage to private training schools.

Other effects would be disallowing the promotion of Canadian content in curricula and restricting institutional use of purchasing guidelines favouring local or domestic manufacturers.

Mr. Ian Sharpe: The federation's stand is that education and an educated society are imperative to the continued health of Canadian society. I assume that also would be the stand of most students, whether or not they are members of the federation. An educated society is also regarded by economists as something that's good for the economy.

Privatization of education threatens the freedom of expression and measure of accessibility Canada has achieved in its system. Any measures to inhibit these gains should be opposed.

In addition, in the uncertain global economic climate, it is more important than ever to ensure Canada's ability to protect its people from the worst effects of a slowdown. Multinationals are not interested in the protection of human rights or of the citizenry. They're only interested in profit. Governments must play the role of protector. It is, in fact, their mandate.

• 1435

Ms. Penny McCall-Howard: As for specific recommendations, we believe Canada should oppose the negotiation of a new trade deal as part of the millennial round of the World Trade Organization talks, given the background of the kinds of measures that have been implemented in the World Trade Organization in the past and what we feel is the general agenda of this kind of trade deal; insist on a wide-ranging assessment of the effects of trade liberalization, including the economic, social and environmental impacts; insist on Canada's rights to create meaningful jobs for its citizens, to impose and to improve environmental regulations, to protect Canadian culture, to protect Canadian social programs, especially education, and in general, to protect its citizens over the interests of big business.

There is one other fairly specific point. We feel that something we should be promoting is the free movement of students between countries and the elimination of barriers such as differential tuition fees for international students and education. Recently I mentioned the environment of massive funding cutbacks to post-secondary institutions across the country. In the face of that gap, international students have often been looked at simply as a source of revenue, a place where they can make up for cuts.

Most recently in Nova Scotia, the extra fees that institutions charge for international students have been deregulated, allowing institutions to charge them whatever they want, and potentially to charge them more than it costs to actually deliver the program.

It is our position, and we also believe it should be the government's position, given the rhetoric around the importance of education and the importance of international understanding and cooperation, that the movement of students and the possibilities of international study should be something that's fostered and not something there are additional barriers to or something that's exploited as well.

We would be happy to answer any questions.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much.

Mr. Turp.

Mr. Daniel Turp: Thank you very much.

On consultations, I think you're quite right to suggest that because of what happened last year with the MAI, the government, like other governments, has decided that it didn't want to be caught again in not consulting people while they were negotiating. I said what I thought, that I think it's a good idea to consult, and start at the beginning of the process, before there are deals that are about to be signed.

That was the case in the MAI. The reason there was all this excitement was because of the MAI, because it was almost a done deal. Well, we're doing it a bit in advance now.

There have been problems, and I think we should be very honest about that, and not putting these announcements ahead of time or enough ahead of time so that there could be more people here. I think it was not the intention, not to have as many people as possible.

Mr. Bob Speller: There's a difference also, and sometimes the public doesn't realize this, between the parliamentary wing and Parliament's consultations and the government or the executive wing and their consultations.

The minister put out his letter of consultation back in February. In fact I'm surprised that Oxfam Canada wasn't aware of it. I think we had other Oxfam representatives at the committee once.

The committee one, in terms of this tour, was done by the committee or the parliamentary wing, much later, and these are the results.

Mr. Daniel Turp: But my question on that issue is to be meaningful, what form would you like these consultations to have in the coming months when the negotiations will be started and things will be happening? I expect that you don't think this is enough, just at the very beginning of the process, or even before the beginning. What would you like to see in terms of consultations during the WTO process of negotiating all these deals?

Mr. Brian O'Neil: It would depend on where we're talking about in Canada, and I guess we're talking, for the most part, about urban locations.

• 1440

In some cities in the country there are well-established networks of community organizations. There might be social planning councils, and so on. We don't have a social planning council here. The way the structure operates... I'm not sure how to make the distinction between executive or parliamentary committee kinds of structures in Ottawa, but it's almost as if, appended to these committees, you need to have people who are experienced and sensitive to community development. So when there is going to be a consultation process taking place, it will automatically bring in people with this kind of understanding or expertise on community development, if you really honestly want to engage citizens in the country, to advise how to let people know.

In Halifax we don't have any social planning council, but there are networks of community organizations. So if there were some kind of established process in Ottawa of somebody wanting to find out what kinds of networks, coalitions, or whatever existed in Halifax that were interested in social and economic issues and had an international or a linked domestic and international kind of focus, it would be known. Then people could be contacted here and the ball would get rolling.

Mr. Daniel Turp: But when should that happen? Should this committee come back to Halifax in 18 months when the negotiations have started and there are maybe some new documents? Should we do that during the process of negotiations, or do you expect that we only come at the very end when the deals are done and written? When do you think you should give some opinions and have an input on what's happening?

Mr. Brian O'Neil: First of all, Mr. Turp, can some concern not be given to the way this process evolves or begins in Ottawa that therefore wants to be connected to places across the country?

I just sort of mentioned, off the top of my head, some kind of community development aspect because there has to be some way of relating people who are elected by and accountable to the citizens of the country, doing things in a way that is very user-friendly, especially to people who are more marginalized in our community.

Let's face the facts: if you went out and talked with Jane or Joe Public right now about a parliamentary committee being here, etc., they would say it was pretty heavy stuff. There is a kind of intimidating aspect to that right away, because it's Ottawa-based, etc. So I'm saying you have to do it from Ottawa differently right from the outset.

In terms of an ongoing process, once you have that done, so notification is given and people are actually encouraged to be involved in it as it goes from place to place, then you work out whether it should be every three months, every six months, or whatever.

The Acting Chairman (Ms. Sarmite Bulte): Ms. McCall-Howard, would you like to respond to that question?

Ms. Penny McCall-Howard: I remember when I was in grade six there was an election fought over the free trade agreement with the United States.

Mr. Daniel Turp: November 1988.

Ms. Penny McCall-Howard: Yes. I also seem to remember that the Liberal Party ended up changing its position on that rather rapidly once it was elected.

I think this is an issue that should be put to the general populace. I'm very glad that these consultations are happening. I'm honoured to have the opportunity to present here, but I don't think this is enough of an avenue for public involvement if we're going to be talking about these kinds of far-reaching agreements and measures.

Mr. Daniel Turp: I have a question about education.

The Acting Chairman (Ms. Sarmite Bulte): Very quickly.

Mr. Daniel Turp: On education, you can't only blame international trade; you can blame government on what they're doing about fees.

In Quebec, the government froze the fees in two elections in a row, but it has increased them a little bit. It has different fees for foreign students, because if you didn't you would have all these Americans coming to McGill. It wouldn't be fair, because you can't go to study in the United States for a year.

Mr. Sarkis Assadourian: For $4,000.

Mr. Daniel Turp: That's a big problem.

I think it's great that you raised these issues. What do you have to do so governments do not use this trade liberalization movement to privatize education? What has to happen? Governments that want to do it—and some do want to do it—will use international trade law as is in the making now to say you see, we can do it, and people want us to do it. So how do you link that?

• 1445

Ms. Penny McCall-Howard: That's a very big question.

The first thing to recognize is that we're looking at post-secondary education in Canada. We're already operating in a largely privatized system. As it is, there is a large degree of government funding still involved. There are public accountability mechanisms. In Nova Scotia the majority of institutional funding is now from fees that students pay. So technically, I suppose, that is private. The student assistance system, which allows 50% of Canadian students to go to school, has largely been privatized since 1995, when the risk-sharing agreement was signed with various chartered banks.

That's such a very big question. I don't even know really how to answer it.

The Acting Chairman (Ms. Sarmite Bulte): If you wish, you could think about it, go back to your federation, and then please submit a separate brief to the committee specifically on that issue. We would welcome it, as opposed to putting you on the spot here. Think it through and get it back to us.

Sorry, Ms. Lill.

Ms. Wendy Lill: I want to thank you very much for coming.

Brian O'Neil, you're putting forward a very important concern on behalf of Oxfam, which is an international organization dealing with millions and millions of people. And you have raised the issue of what about agreements that were struck before the WTO. You're talking about the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights.

There is a lot of legitimacy to it, apparently, but there is a fundamental question about whether we should even be involved in this new round of negotiations and whether we should instead take a breather. Perhaps we should take a look at where the last round of negotiations have got us, where the WTO has got us. And you have some astounding statistics here in terms of world economic health.

We have some really different ideas around this table. We have some people who believe that corporations have citizenship rights. I don't think the two students sitting at this table believe that. So it seems to me that we have a lot of talking to do. As a member of the New Democratic Party, in this particular instance I would say let's have a moratorium on WTO negotiations and let's take a look at where we are now.

I just throw that out to you. What kinds of corporate citizenship rights are there, in your estimation? I'd like to know from all three of you.

Mr. Brian O'Neil: As I mentioned in my paper, Oxfam is increasingly involved in advocacy work, and we've focused on what we call basic human rights. These were the social and economic rights, which I derived from both the Universal Declaration of Human Rights and the international covenant. This didn't happen in a vacuum, and we said it would be a good idea for us to do it. We're getting that from our partners overseas. We're also getting it from the people in Canada who say this seems to be a situation of entrenchment, whether it's legal or whatever, of corporate rights, or trader rights of investor rights, incredibly so.

In the meantime, we see these other statistical phenomena on the rich getting richer and the poor getting poorer. Somebody's doing well from this whole thing, and an awful lot of people we see and walk the walk with aren't doing very well at all.

We looked at first principles, first steps, first agreements. Everybody thinks they're wonderful. And we hear politicians say nice things about them every once in a while. As Mike Bradfield said, principles are one thing, but where they're related to benefits under the WTO or whatever is something else. In a sense, we want to get to the situation of the legal entrenchment and application of these prior agreements and covenants that we supposedly think are a wonderful idea. Let's put them first; let's filter all the other things through that. Having rules is a great idea. Rules-based—we hear it all the time. Let's look at first rules.

Mr. Daniel Turp: How do you do that?

• 1450

The Acting Chairman (Ms. Sarmite Bulte): Please keeps your remarks brief, because we have two more speakers.

Mr. Brian O'Neil: First of all, I think the International Covenant on Economic, Social and Cultural Rights is quite a good document in the sense that, as Penny referred to, you can't backtrack. You reach a certain level of the provision of these rights, and unless there can be seen to be extenuating circumstances whereby your economy is actually deflating, where it's going into a recession or whatever, you can't backtrack on the provisions that have already been made. You have to at least stand still or increase them.

I'm not denying that in terms of the application of all of these and in terms of reaching an agreement at an international level about the application of these, there wouldn't be difficulties. I haven't looked through the WTO stuff, but I imagine it must be several volumes thick. The NAFTA is 1,100 pages or whatever, and there are all kinds of appended documents. When people want to have a go at providing a legal framework for what otherwise might have seemed decades ago to be incredibly extenuating, complicated kinds of deals, they'll do it. I'm saying that there hasn't been the political will to establish the filter of social, economic, environmental, and cultural rights through which all these other things would go, and I'd love to see some kind of effort directed at that.

This is not being facetious, but we have a big organizational structure taking place in secret at the OECD for the multilateral agreement on investment, and given the tremendous amount of wealth in the world, why wouldn't there be the idea of a multilateral campaign or committee or a serious multilateral effort to eradicate poverty? But there isn't a political will for that.

The Acting Chairman (Ms. Sarmite Bulte): Mr. O'Neil, with regard to Mr. Turp's question, we'd appreciate it if you could give some thought to how we go about implementing those prior agreements and provide that input to the committee.

I have to move on, because we have literally five minutes left. Mr. Speller and then Mr. Assadourian.

Mr. Bob Speller: Thank you, Madam Chair.

I want to thank you both for your presentations here this morning.

As I said earlier, this has been part of a process that was started back in February by our government. A lot of it probably was, as Mr. Turp has said, in response to some of the problems that were created out of the whole MAI situation in terms of the feeling among not only Canadians but also around the world that there wasn't enough consultation.

It's certainly the belief of the government that if we're going to go into these trade deals, it is probably best to know first what Canadians are thinking. If you're going to put forward the interests of Canadians, it's important to get out and talk to Canadians, not only those in urban areas, as you mentioned, but also those in rural parts of Canada, where I'm from.

Ms Lill indicated—and I want to ask her a question—that there have been groups before us that said we shouldn't be at the table at all. In fact, there was one group before us before today that actually said that. I know you haven't been involved in the previous meetings. In fact, I think the New Democratic Party was at one previous meeting out of seven or eight.

We've probably seen about 30 or 40 witnesses who represented all kinds of groups across Canada. These witnesses have really been national in scope, and so what we're trying to do now is to get out into the regions. Unfortunately for you, this is our first trip out into the regions, so we have some logistic problems that certainly need to be addressed. But as I said, we've only heard that really from one other group. In fact, the Council of Canadians said that we should be at the table negotiating.

You and the Canadian Federation of Students say you “...oppose the negotiation of a new trade deal as part of the Millennial round of WTO talks”. Are you talking about a deal on investment or the whole trade thing? You seem to suggest at the beginning of your paper that the reason we're in this next round is because of investment. In fact, there's no agreement yet to include investment in this round. The only two areas that are already included in this round are agriculture and services. They're two areas that were mandated from past negotiations, so we have to negotiate in those areas. So I would ask you, Ms. McCall-Howard, is it the investment aspect you don't want involved, or do you want Canada not to be at the table at all?

• 1455

Ms. Penny McCall-Howard: Well, from what I understand of the agenda of the World Trade Organization and the types of rules and regulations it has passed in the past, even in the vein of agriculture and of what aspects of social services it has dealt with—although I don't believe they have been very extensive at all—those rules and regulations have largely been a case of increasing the privatization of those kinds of industries. What is often referred to is the free flow of capital investment, etc., in various different forms and in various different sectors of the economy.

As I said, I'm no expert on international trade, but the effect we have seen these things have, not only on especially the education sector, but also on the coalition work we do with various other social justice and anti-poverty organizations—including Mr. O'Neil's—and the effects they have had upon citizens not only of Canada but across the world is to increase the degree of poverty, increase the various avenues of exploitation, increase the gap between the rich and the poor.

Mr. Bob Speller: So you're suggesting that it is actually the deals that have been the cause of this.

Ms. Penny McCall-Howard: The deals don't come out of a vacuum, and they're a means to an end. I don't think there are pieces of paper dropping out of the sky to make these happen. Certainly when they are negotiated and ratified by the various member countries, that allows for new things to start happening in those member countries.

Mr. Bob Speller: Just very quickly, there are others who would say it's the smaller countries that would benefit from these sorts of deals, from a rules-based system. If you didn't have the rules, it would be the Americans and the larger countries and corporations that would run the day.

The Acting Chairman (Ms Sarmite Bulte): Thank you, Mr. Speller.

Mr. Assadourian, you have time for a very short question.

Mr. Sarkis Assadourian: There are a few points I want to make quickly.

I would like to congratulate the students for being here. I think it's very nice of you to participate in the system. However, I have some concern about the presentation you had today.

First of all, I want to make a correction. My colleague says I asked for human rights for corporations. What I asked for was freedom of expression and freedom of thought for corporations to come speak to us today. I think that's a fair expectation. I don't know why my friend does not.

On the second page of your presentation, you mention that they are all interested in profits. It seems to me that you agree with the NDP that “profit” is a dirty word. So that's my first question.

The second question is my concern that you say that Canada should oppose the negotiations first of all, but in the same breath you said to work to insist on changes. How could you oppose the negotiations and not participate, but then insist on changes if you're not there?

The third point I want to make we discussed earlier: the lack of consultation with members of Parliament and the government. I think your local member of Parliament has the right all the time to call public meetings, to consult the citizens, to send those little questionnaires. You can go to your local member of Parliament to talk to him or to her and to bring up your point of view. So consultation is always there. If it's not being used, maybe the system is not perfect, but it's the best system we have. You can always use the offices of your local member of Parliament to pass on messages to the government or whatever it may be.

So those are my concerns. Maybe you could address them quickly, because the chair says we have to go fast.

Ms. Penny McCall-Howard: Your first question was whether “profit” is a dirty word.

Mr. Sarkis Assadourian: Yes, that seems to me to be what you're saying.

Ms. Penny McCall-Howard: Well, if you're looking at the interests of a publicly funded, publicly accountable, acceptable, post-secondary education system, yes. I don't believe education should be run for profit. The example that we've seen—

Mr. Sarkis Assadourian: So you're specifically talking about universities, and not in general. Why are we ashamed of making profit? That's the question.

Ms. Penny McCall-Howard: Is this what this consultation is about?

[Inaudible—Editor]

An hon. member: —

Mr. Sarkis Assadourian: Oh, okay, all right.

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Ms. Penny McCall-Howard: Second of all, in the second bullet there's a word that describes a wide-ranging assessment of the effects of international trade liberalization. That's what Ms. Lill referred to in terms of taking stock of where we are, of where this has led us before we embark further, and then in terms of insisting on Canada's rights.

I don't think the World Trade Organization, being the World Trade Organization, is the only venue for international cooperation. I think there are plenty of other venues for international cooperation. The World Trade Organization is not the world's equality organization or the world's international elimination of poverty organization; it's the World Trade Organization.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much.

Mr. Daniel Turp: Where are you studying, and in what field? That's for both of you.

Ms. Penny McCall-Howard: I'm a student at Dalhousie University and at the University of King's College, in marine biology and contemporary studies, which is a more theoretical and philosophical.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Sharpe.

Mr. Ian Sharpe: I'm also a student at the University of King's College. I'm in the administration and arts program, with no major right now.

The Acting Chairman (Ms. Sarmite Bulte): Just before we conclude, I thank you all for coming. Thank you very much for your presentations and briefs that you filed with us.

Mr. Sharpe, I just want to also say that for your first time, with your new election, you did great, so keep up the good work.

Some hon. members: Hear, hear.

The Acting Chairman (Ms. Sarmite Bulte): There's another thing I want to add. I just want to address what Mr. O'Neil has said about the consultations.

As Mr. Speller said, we're experiencing growing pains. This is the third meeting of the first series of public consultations. We have taken your comments, and they are duly noted. However, as I stated to Professor Bradfield and to other witnesses, please, we are here to open up the lines of communication. This is not the end of the communication. We're here to start a dialogue, not end a dialogue. Again, we hope you keep the committee apprised of concerns that may come up. Please help us to go into your community. Do the community development for us, and let them know.

There is a notice on the website on both the FTAA and the WTO for consultations and questions that we ask. We ask to use your community and to let them know that we welcome submissions from all Canadians. We want their best ideas, and we want to hear about their own experiences and what's important to them.

Mr. Bob Speller: Also, have your Nova Scotia MPs come out to the meetings. That would be helpful. Then you could avoid—

The Acting Chairman (Ms. Sarmite Bulte): Yes.

Mr. Daniel Turp: And could you ask your national federation to send a brief? I understand it didn't come to Ottawa.

The Acting Chairman (Ms. Sarmite Bulte): So we welcome your comments. Please see this as just the beginning. There's still follow-up to be done, but it's incumbent on both of us to make sure the partnership works. Thank you very much.

This meeting is adjourned.