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]

Thursday, April 15, 1999

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[English]

The Chairman (Mr. Bill Graham (Toronto Centre—Rosedale, Lib.)): We're late, so I'm going to start the meeting. I apologize to the witnesses.

We have Physicians for a Smoke-Free Canada and the Canadian Council of Professional Engineers.

Thank you very much for coming.

I'm very interested to see how Physicians for a Smoke-Free Canada are going to work this into the WTO. When we were in Quebec, the Société des alcools du Québec came before us. I kept thinking, what do they have to do with the WTO? They managed to work it in.

So Ms. Callard, you go first, and then we'll hear from the Council of Professional Engineers.

If you could keep your interventions to around 10 to 15 minutes maximum, then we'll get more time for questions.

Ms. Cynthia Callard (Executive Director, Physicians for a Smoke-Free Canada): I want to thank you very much.

Even outside the door, the question was raised, “What the hell does trade have to do with you?” In a way it's an odd question, because in fact trade issues preoccupy a good deal of my working day, because tobacco companies are all multinational companies. Even though the brands we smoke in Canada are domestic brands, they're all owned and operated by multinational corporations, so the rules that are set internationally define activities and constrain what domestic governments can do.

I'm not going to take very much of your time reminding you about the problems of tobacco use. You probably all know it kills one in two smokers and it's the largest cause of preventable death in Canada. But you probably think that in Canada actually smoking is getting better. I will admit there are fewer and fewer people smoking, but it's not a problem we're solving; it's a problem we're displacing.

Tobacco use is skyrocketing in the developing world. The World Health Organization estimates that within the next 20 years, more than 10 million people will be dying every year from tobacco use.

I'm here for two reasons. One, I want to encourage you to make sure that certain provisions are in any future trade agreements signed with Canada, and I always want to encourage you to look at other trade agreements Canada could enter into.

Health is a global issue. We've dealt with most infectious diseases, but the problems of health are now largely non-communicable diseases, which are nonetheless communicated diseases, lifestyle diseases: tobacco use, alcohol use, consumption of fats, etc. These are all usually driven by products and marketplaces that encourage their consumption.

Tobacco is particularly a multinational problem. Only five corporations control 70% of the global tobacco sales. Five corporations control 70% of the sales of a product that currently kills 3 million people a year.

The current trade deals are really a problem for us in tobacco use. They don't curb smuggling. They don't track smuggling. They don't stop tobacco promotion from crossing borders. They don't stop tobacco companies from expanding into vulnerable markets.

Tobacco is a very unusual commodity. There's no safe level of consumption of tobacco. There's no safe level of sales of tobacco. It's a zero-sum game. If it's good for public health, it's bad for tobacco companies. It's not like most other industries, where you can regulate a balance between the competing interests.

The trade agreements, as I mentioned, don't stop smuggling. Of all cigarettes that are exported in the world, 30% are smuggled; they end up in the hands of smugglers. That's 6% of total consumption, but 30% of exports disappear. We know in Canada exactly how dangerous that can be and how easily it can get out of hand, and we know the problem of not having international agreements that help control it.

If trade agreements aren't helpful in controlling tobacco, they are helpful to tobacco companies. I'll give you a few examples.

GATT was used by American tobacco companies to come in and demand that Thailand and Japan open up their markets to U.S. tobacco products. But the U.S. tobacco products weren't the same as the cigarettes that were being sold in Japan and Thailand. They were more aggressively marketed. The Marlboro Man came in. They were marketed more aggressively at young people; they were marketed more aggressively at women. They were also different products. They had higher pH levels. They delivered different nicotine contents. They were more addicting.

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So whereas before, the smoking rate for women in those countries was 3% or 4%, it quickly went up after the GATT was used to open the market to international companies—up to about 20%.

The second example, which is closer to home, is the NAFTA. In 1994 the current government rolled back the price of cigarettes and promised to look at plain packaging of cigarettes. You'll remember that the Standing Committee on Health had hearings and recommended plain packaging, and that the Department of Health did a review of it and recommended plain packaging.

But during those reviews before the standing committee, despite the abundant evidence that was there, Phillip Morris and R.J. Reynolds—the people responsible for the Marlboro Man and Joe Camel, but also for Export “A” and Craven “A”—said that if plain packaging were put into Canada, they would use the expropriation provisions under NAFTA to demand compensation.

I'm sure you've heard from many other witnesses the issues around investment protection and that once you expropriate, you have to compensate. No problem; you're allowed to expropriate if it's in the public health interest, but you have to pay.

We haven't heard of plain packaging since. That threat was enough.

I've asked the clerk to circulate a legal opinion that was provided to Robert Parker by a law firm, although not from a lawyer, about NAFTA and plain packaging, which—

The Chairman: It says, “I am not a lawyer and this opinion is not a legal opinion.”

Ms. Cynthia Callard: That's what I said: it's from a law firm, but it's not from a lawyer. But it is an opinion about it.

The Chairman: We've had Mr. Clark before the committee, and we respect his opinion.

Ms. Cynthia Callard: This document wasn't passed to me from Mr. Parker. That's why I left the front cover on. I went over to the British American Tobacco depository, which is now open to the public as a result of a court case in London, and pulled it open. It demonstrates that they do look to the trade agreements in order to be able to stem domestic policy.

Our current government is no longer considering plain packaging, but they are considering plainer packaging, and I've circulated a copy of a package of cigarettes that's been proposed by the Minister of Health. You'll see that they intend to increase the size of the health warnings. An argument can be made that this an expropriation of the package face. You see, the whole package face on a pack of cigarettes is currently a trademark. It's an expropriation of it, and therefore it's not allowed under a trade agreement.

We need trade agreements that will allow domestic health policy without worrying about having to pay compensation to foreign companies on a basic issue. We need an agreement under the World Trade Organization to respect the right of governments to act in the public health interest.

A third example is the MAI. We did ask for a legal opinion on what the impact of the MAI would have been, and we got a clear analysis that the investment protection provisions of the MAI would have made it very difficult to put in federal and provincial restrictions on tobacco advertising, because there would be a compensable expense. Health warnings such as these would be considered a compensable expropriation.

Also, litigation such as that being proposed in British Columbia would be a violation of minimum standards of justice, and they could commence an investor-state dispute. We were also informed that the Tobacco Fee Act in British Columbia and its licence fee are an unreasonable measure that impairs a manufacturer's business, and could be the basis of an investor-state dispute.

Even our test methods would trigger the general treatment provisions, because they're above international standards, and could trigger an investor-state dispute.

The bans on kiddy-packs are an expropriation of property rights. Bans on advertisements such as on this coffee cup or on this hat, which is sold to children—a Players racing hat—would also be considered a compensable activity. The governments could come into this.

So it's on the basis of our NAFTA experience, our GATT experience, and the opinion we have of the MAI that we make some recommendations to this committee that we hope they'll take to the government.

We'd like to see a moratorium on investor-state dispute mechanisms until the impact on public policy is better understood. We'd like to see a moratorium on investment protection rights until the impact on public health is better understood.

Is NAFTA a threat to plain packaging? Is NAFTA a threat to bans on advertising? If so, let's determine it—there are different opinions—before we proceed further with more rules along this line.

We want to maintain Canadian sovereignty over domestic health policy. We don't want to trade away the ability of governments to ban tobacco advertising, to sue tobacco companies, or to demand healthier packaging and labelling.

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We'd also like for this committee to recommend administrative policy that is healthy. The United States government has now told all of its embassies to stop promoting tobacco. The Canadian government has not done similarly. We want Canada to stop selling tobacco to the Third World. We want the Canadian government to direct its embassies and trade officials to cease any tobacco promotion efforts.

The third thing we'd like to see is support for an international framework convention on tobacco control. You may not have heard of this before, which is a great problem for me, because the Canadian government has been one of the strongest supporters of an international treaty on tobacco use. But it isn't work that's being done by the foreign affairs committee or the foreign affairs department; it's work that's being done by the health department. This should be one of the trade priorities and one of the priorities in terms of international agreements.

We need an international agreement that will deal with the international aspects of tobacco use, that will properly control smuggling, and that will establish clear protocols to allow governments to do what's needed to stop cross-border advertising and to coordinate statistical and research efforts.

I'm very proud of the fact that the Canadian government has been at the forefront of this international initiative. I'm very concerned that these objectives are not being rolled into larger trade objectives or given priority concern by Foreign Affairs.

I urge this committee to recommend to the government that it make sure all the trade agreements will result in a healthier and more prosperous Canada.

Thank you.

The Chairman: Thank you.

Just very quickly, because we're going to go to the others and then we'll get to questions, could you give us an example of how Canadian embassies abroad promote tobacco products? You said you want our embassies to stop promoting them. What are they doing now to promote them?

Ms. Cynthia Callard: We sell a fair amount of tobacco. In fact Mr. Speller probably is well aware of the numbers. I know many of his constituents are looking to Third World sales to make up for the difference.

Tobacco use has been declining in Canada and tobacco sales have been declining, because they use less and less tobacco in the cigarettes here. So especially eastern markets and eastern European markets have been a target for Canadian tobacco growers, who have been included in some of the trade missions.

The Chairman: Oh, I see. It's not the cigarettes themselves; it's tobacco. Thank you.

Ms. Ryan-Bacon.

Ms. Wendy Ryan-Bacon (Vice-President, Canadian Council of Professional Engineers): I'd like to thank the committee for allowing us to appear before them.

The Canadian Council of Professional Engineers has taken a stronger interest in international activities over the last several years. We weren't particularly involved in earlier trade negotiations, but we have had a number of international activities connected to the trade negotiations. So for this round, we're quite interested in maintaining a close relationship with the various government departments to bring the views of the engineering profession to the negotiations.

What I thought I would do this morning is very quickly give you an introduction of the Canadian Council of Professional Engineers, tell you how it fits in with the regulation of engineering in Canada, and describe some of our international activities in support of the international trade negotiations that are going on.

The Canadian Council of Professional Engineers, CCPE, is a federation of the 12 provincial and territorial licensing bodies that represent about 150,000 professional engineers in Canada. In order to practise engineering, you must be licensed and registered. Of course regulation is at the provincial level, so you must be registered with the association in that area.

Our two main interests concerning international trade negotiations are the evaluation of foreign engineers who come to practise in Canada, on either a temporary or a permanent basis; and second, improving international mobility for Canadian engineers.

The first interest, the evaluation of foreign engineers, is strictly within the mandate of our provincial associations. They are the ones that have the legislative authority to issue licences. However, CCPE plays a key role in setting standards and guidelines and in ensuring that the associations are following similar rules and that internal mobility is facilitated.

The second interest, improving international mobility, is strictly within CCPE's mandate. The provincial associations' main concern is regulating the profession within their jurisdictions, and of course internationally they don't have the same authority, so CCPE takes up that role.

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In Canada engineering is regulated to ensure that the public interest is protected and that engineering services are provided only by appropriately qualified professionals. This is primarily accomplished through the rigorous admission standards and the enforcement and discipline activities of each of the 12 associations.

The main admission requirement, from an academic point of view, is graduation from an accredited program, if you're accredited in Canada. They also have an examination program for foreign engineers. There's an experience requirement of four years, of which at least one year must be in what we refer to as a Canadian environment. There's also a professional practice exam, which every engineer must pass. Then of course there are language, references, and continuing competence—an area that some of our associations have just started to make mandatory, and that others are looking very seriously at.

So when foreign engineers come into the country, these are the kinds of benchmarks we're comparing them against.

In addition to the regulatory agencies, there are a number of other engineering organizations. I'm not sure whether they will be appearing before this committee or not. The Association of Consulting Engineers of Canada I think may be appearing or may be submitting a brief. They represent the business interests of the consulting engineering community, whereas the Canadian Council of Professional Engineers and our provincial associations are really looking at it from the regulatory aspect.

There's also the Canadian Academy of Engineering and the Engineering Institute of Canada. We each have our specific mandate. We do try to keep abreast of what each is doing to make sure our interests are coordinated.

CCPE's primary mandate is to foster a common bond and link between the associations. The underlying reason for that is internal mobility of engineers—making sure that engineering in Alberta is practised to the same level and standard as engineering in Nova Scotia.

We have several activities. The primary activity is the accreditation board, which accredits undergraduate engineering programs in Canada, so that a graduate of one of those programs meets the academic requirements for the practice of engineering. The associations aren't bound to accept those recommendations of accredited programs, but in practice they do, and that has become the benchmark for comparison of individual engineers who come from other countries.

We also have a qualifications board, which looks at all the other admission requirements for the profession. Again, the guidelines of that board have become a benchmark for the associations in admitting Canadians as well as foreign-trained individuals to the profession.

We also have a human resources board, which develops a profile of the engineering profession in Canada, and we have an international affairs committee, a fairly new committee that was formed to really pull our international activities together.

We see a number of benefits in the international activities. The first one is enhancing the national and international profile of the Canadian engineering profession and thereby improving mobility for engineers and their access to global markets.

We have a number of agreements in place already. Some of them I guess really aren't related to the trade negotiations. I'll talk about a couple of agreements and then I'll talk about NAFTA.

We have an agreement with an organization called the Accreditation Board for Engineering and Technology in the United States. It is an accrediting body. We've had the agreement in place since 1980. Because of the movement of engineers between Canada and the United States, what that did was allow Canadians access to the licensing system in the U.S. without additional years of experience required.

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That agreement and other international contacts were broadened into what's called the Washington accord, which has been in place for about 10 years. Again, it's a recognition of accreditation systems. It primarily allows individuals who are graduates of accredited programs to enter the licensing system of one of the other groups at a certain level, rather than having to do additional requirements. It's a comparability of the education processes.

The countries involved in the Washington accord include Canada, the United States, Ireland, the United Kingdom, Australia, New Zealand, Hong Kong, and South Africa. The reason those countries are included is that they had accreditation systems in place for engineering programs. A number of other countries are starting to develop accreditation systems, and as they become established and if they meet the same standards as the others, they will be eligible for admission as well.

Canada and the United States had been in preliminary discussions under the Canada-U.S. Free Trade Agreement, trying to come to further agreement, other than the conditions that were in that agreement. Those negotiations were overtaken by the NAFTA negotiations, and in 1995 we were able to come to an agreement between the three countries at the national level on a certain protocol for the issuing of temporary licences.

We were quite proud of that accomplishment. However, the implementation has been difficult.

Each of the countries is abiding by the provisions of NAFTA itself in terms of the openness and transparency of the regulation system.

What our agreement tried to do was level the playing field. Each of the countries—Canada, the United States, and Mexico—has its own licensing system and its own admission processes. What we were trying to do with our mutual recognition agreement was determine the subset of engineers that could be considered competent and at the same standard.

We've had some difficulty in trying to implement it, I think because in the United States it's regulated as it is in Canada. There are 55 jurisdictions, and like in Canada, they determine their admission requirements. So implementation is stalled, but we're still hopeful we can work on that.

Last year we signed an agreement with France, and we're just waiting for the final approvals on the French side before it will be implemented. That will allow engineers who have the title ingénieur diplômé in France and who have the appropriate amount of experience to get registered without examinations in Canada.

So when foreign engineers come into Canada, these agreements provide a mechanism for our associations to have the confidence that these individuals do have the education required to practise engineering in Canada, and that it is comparable to what we expect of our own engineers.

For the individuals coming in, it's a much more straightforward process. If we do not have agreements in place, they are subject to a set of examinations, and those examinations can range from anywhere from three or four exams to perhaps 10 or 12 exams. So there's a benefit there for both our associations and the candidates coming in.

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For our engineers going around the world, not all of the other countries have a regulatory system like Canada's. We're probably unique in the breadth and depth of the regulation of the industry here. For our engineers going abroad, these agreements give them higher visibility and open up more markets for them. These agreements can also give the countries they're working in confidence in their level and their abilities.

I've talked about some of the agreements we have in place. Other discussions and negotiations are going on to come to more of these kinds of agreements. We see this as the way of the future. We're involved with an APEC engineer project, which is trying to develop standards and a framework for the mobility of engineers within the Asia-Pacific region. We've also had some preliminary discussions with a group in Europe—the acronym is FEANI—again, trying to come to some agreement on a common basis for the transfer of engineering services.

In conclusion, the Canadian Council of Professional Engineers is very interested in these negotiations. We're in support of liberalizing trade in professional services. We have been working closely with Industry Canada and the Department of Foreign Affairs, bringing the views of the engineering profession to them and taking their message out to our associations and our engineers.

Thank you.

The Chairman: Thank you very much.

I have just one quick question about what you do. All the work you do, say in the French agreement and even within NAFTA, would be directly related to the professional qualifications and recognition of the members, but the whole issue of immigration permits and everything is still there. The French person may be qualified to come here and practise, but they're still going to have to jump through the immigration hoops.

Ms. Wendy Ryan-Bacon: That's right. It's strictly the regulatory qualifications.

The Chairman: You're just looking at professional recognition and stuff.

Ms. Wendy Ryan-Bacon: Yes.

The Chairman: Immigration remains another potential hurdle.

Ms. Wendy Ryan-Bacon: Yes.

The Chairman: Okay, thank you.

Mr. Penson.

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

Welcome, guests.

I'm interested, Ms. Ryan-Bacon, in how these agreements you're talking about fit within the World Trade Organization service sector. Are they requirements that have to be met within the WTO service agreement that exists already, or are you suggesting it's something that needs to be included in the WTO service sector?

Ms. Wendy Ryan-Bacon: No, they don't have to be included. My understanding is that the language of the agreements is to make the regulatory systems in whatever countries open and transparent and to make sure that if there are requirements to get a licence, they are based on competency issues and not artificial barriers.

These agreements go one step further. I know Industry Canada has looked at our agreements as a good way to improve access. But as long as the regulatory system in another country is open and transparent, that gives us the access we need to go into those countries and try to facilitate a mutual recognition agreement.

Mr. Charlie Penson: I'm still having difficulty understanding. If no agreement such as the agreements you're talking about were signed between Canada and Chile, just as an example, would the basic service agreement of the WTO provide access for both countries' engineers to work in the other country?

Ms. Wendy Ryan-Bacon: It would depend on the systems in place in the various countries.

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Let me use the NAFTA and the U.S. example, and even our ABET, our first agreement. In the United States, the requirements to get licensed are graduation from an accredited program, four years of experience, and 16 hours of examinations. Prior to the ABET agreement, for an engineer from Canada who was a graduate of a Canadian accredited program, that didn't mean anything for that individual going into the States.

They did have another set of rules that said if you're not a graduate of an accredited program, you have to have eight years of experience. So there was still access for Canadian engineers to get into the United States, but it was a much more onerous route, and there's some question about whether the extra four years of experience was really a competency-based requirement or not. So with that in place—-

Mr. Charlie Penson: Are you suggesting it was just basically a restrictive barrier that may not have been necessary?

Ms. Wendy Ryan-Bacon: Yes.

Mr. Charlie Penson: Okay.

Ms. Wendy Ryan-Bacon: Under NAFTA and with the agreement that was reached under NAFTA for engineering, the U.S. still has that requirement for education, experience, and examinations. What our NAFTA mutual recognition agreement tried to do was say, okay, if you are already registered in your home country and you have graduated from an accredited program in your home country and you have 12 years of experience since graduation, then we will let you in with a temporary licence, without having to go through each of the little black boxes in whatever other country. So for Canadians going into the United States, that would mean they wouldn't have to do the examinations and they wouldn't have to have their experience validated through the U.S., because we had already done that in Canada.

So what these agreements do is recognize that there is a formation process that is a rigorous mechanism and it's done to similar standards. It may not be the same, but after a certain number of years, that—-

Mr. Charlie Penson: What about Canadian engineers working on a project that a Canadian company would win in Thailand, for example? Would you have to have this agreement in place before they could operate there?

Ms. Wendy Ryan-Bacon: Again, I'm not familiar with the particular requirements in Thailand.

Mr. Charlie Penson: I'm just using it as an example. If there's no bilateral agreement in place, what is the process then? That is my question.

Ms. Wendy Ryan-Bacon: Then they're at the mercy of the country they go into. If there's no regulatory requirement in that country—and most countries don't have a regulatory requirement—Canadians can do that.

But by having a bilateral agreement in place, if there is an appropriate organization, presumably being a member of that organization carries some weight in that country. So if Canadian engineers are applying for jobs or working in that country, the agreement will give the employers in that country a level of confidence in Canadian engineers. It improves the market accessibility.

Mr. Charlie Penson: I have just one further question. You talked about the need to improve international mobility for engineers. Can you give us a little bit more on what you're thinking there? What is the problem?

Ms. Wendy Ryan-Bacon: The main problem is trying to identify any of these artificial barriers or protectionist policies that may exist. In some countries there's fairly good mobility. From CCPE's point of view, we're just trying to make sure the international market is as open as it can be for our Canadian engineers.

Mr. Charlie Penson: And you're working with the department in order to identify those problem areas so that negotiations can improve them?

Ms. Wendy Ryan-Bacon: That's right.

The Chairman: Thank you.

[Translation]

Mr. Sauvageau.

Mr. Benoît Sauvageau (Repentigny, BQ): Ms. Ryan-Bacon, although you may already have done it, I would like you to indicate to us what your specific recommendations are with respect to the service agreement, in order to improve the mobility of engineers and to facilitate their work. I don't think this matter in under WTO jurisdiction but if it affects the service agreement, could you tell us how and explain your main recommendations?

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[English]

Ms. Wendy Ryan-Bacon: In terms of making it easier, that's an issue that our sister organization, the Association of Consulting Engineers, is probably looking at—more of the business aspects of that. As I said earlier, our interest is in the regulatory aspect, the qualifications, making sure there aren't any artificial barriers in saying whether someone is qualified to practise in that country or not.

[Translation]

Mr. Benoît Sauvageau: These regulatory barriers that you mentioned at the beginning of your statement, are they established by Canadian provinces or a Canadian association?

[English]

Ms. Wendy Ryan-Bacon: As far as Canada is concerned, some of our provinces have residency requirements, which are slowly being removed, residency being a barrier that isn't related to competence. But other than that, the Canadian engineering profession is probably a pretty good example of being fairly open.

Our associations do have mechanisms for granting licences to foreign engineers on a temporary basis. A number of our associations do not have the residency requirement any more, so foreigners can become members and get a licence to practise in Canada.

[Translation]

Mr. Benoît Sauvageau: Thank you.

Mr. Daniel Turp (Beauharnois—Salaberry, BQ): Ms. Callard, I would like to ask you a question about tobacco. I read the non legal opinion that you submitted. You mentioned the GATT panels and the way they work. You criticized their lack of transparency and so on. Do you think these panels form a mechanism or procedure that, with regard to this industry and your claims, will prevent a country like Canada and some of its provinces from proposing measures such as more neutral packaging in order to discourage smoking? You are explicitly condemning GATT and its mechanisms. Why, specifically?

[English]

Ms. Cynthia Callard: It's absolutely a threat, both on process and on substance.

The process by which panels are decided under NAFTA or even under GATT and the way expertise is developed aren't viewed by the broad health community as embracing social issues in the same way as something you can measure more closely—whether a car is sold cheaper than its cost of production or so forth. There's no appeal, for example, under a NAFTA or an MAI investor-state process.

The MAI and NAFTA are much more threatening than GATT, because under GATT, the country has to take it, so you actually have an appeal to a government. But under NAFTA or the MAI—and if the WTO were to go the same process of an investor-state dispute—you could have the companies go to an arbitration panel, with secret hearings, secret testimony, and no appeal, and not really have a firm basis on which the decision would be reached.

What are the criteria? What is evidence? How can you demonstrate that a ban on international car racing will have an effect on people smoking? The standards of evidence are not friendly to that. The burden of proof is unnecessarily heavy on the public interest. That's why we're so concerned about the investor-state dispute.

The other thing that letter demonstrates, quite aside from the substance of the argument, is the willingness of that sector to fight measures. Tobacco companies don't take legislation lightly, and they don't take it lying down. They fight. They're fighting the current federal law. They're fighting British Columbia laws. They're not really happy with the Quebec laws.

We have two provincial governments—Quebec and British Columbia—that are very aggressive on tobacco. We have a federal government that has good, solid policy. Those are all being disputed. So you know that if you give them additional access to dispute under WTO, they will use it.

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The consequences of them using it are not only that they might win under the panels, but also that governments get scared and say it's not worth fighting for. For us, that's a very big threat.

[Translation]

Mr. Daniel Turp: Should the agreements include health provisions similar to a cultural exemption? There is a safeguard clause that can be invoked, but is it enough? In the future, should there be a kind of very specific exemption related to health?

[English]

Ms. Cynthia Callard: You get into the nuances of exemptions, whether they're carve-outs or so forth.

We did recommend under the MAI, and we would under the WTO, that there be a blanket exemption for health measures. Under NAFTA there are exemptions for health, but they don't apply to the investment protection. So it's important not only to have the exemptions, but to have them with a broad enough sweep that they will protect against all the measures.

The exemptions in NAFTA were not adequate. They did not cover the investment protection measures, because under the investment protection, you're still allowed to take these expropriative measures, but you have to pay compensation. It's the compensation that makes it too expensive.

If the Quebec government thought they had to pay expropriation rights for their sponsorship bans, they couldn't have afforded to have done that. These are the most valuable trademarks in the world, next to Carlsberg beer. The Marlboro Man and so forth are very valuable property. To expropriate the right from that is very expensive.

[Translation]

Mr. Daniel Turp: Okay. Thank you.

The Chairman: Thank you.

Mr. Cannis.

[English]

Mr. John Cannis (Scarborough Centre, Lib.): Thank you, Mr. Chairman.

Thank you, panel.

I want to start off by making a comment to Wendy and her organization. I'm pleased to hear that there seems to be this cooperative climate to advance and liberalize opportunities. I just hope maybe the veterinarians' association, which I'm sure a lot of us have heard about, can start getting their act together and express this climate of cooperation. We have heard from many people coming from other parts of the globe who are finding such difficulties in trying to practise their profession.

So I commend you on your initiatives and continued success.

My questioning was more for Ms. Callard.

You indicated that smoking is down in Canada. I'm very pleased to hear that. Do you not think your association and all the associations responsible in that area should start getting that message out in a positive way? Every time we hear these messages, they seem to be more negative—doom and gloom, etc.—whereas we know very well that this government, in the last mandate and this mandate, has made initiatives in terms of financial contributions and support to try to curb smoking as much as possible.

When we do get good results, my view is that if we talk about these achievements—as you said, smoking is down in Canada—we can at least say we're headed in the right direction.

I was concerned when you said smoking is on the rise in Third World countries, and now what we're concerned with is the lifestyle diseases, if I may quote you. I have a bit of a problem there. Maybe you can clarify. You used some specifics, such as alcohol, tobacco, and what have you. I'd hate to see us, 30 or 50 years down the road, get into an environment where our daily lives are controlled.

You can address the problem of tobacco with advertising; it's a great idea. But what do you do when it comes to cars, for example, or clothes or entertainment—reading, movies, magazines, etc.? Those are all part of the lifestyle diseases, in my view.

So what do we do? I think my colleague, Mr. Turp, talked about cultural exemptions, where all of a sudden it's not just an isolated issue that we focus on this package. If it were, great; we could really work on it. So please elaborate for me, if you can, on how we address these other problems.

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When you get a young person or an individual in a Third World country, for example, or in North America, watching an Elvis Presley movie or a Steve McQueen movie or—I don't know too many recent ones—a recent artist who's performing on stage or on television or in the movies and he does pour a drink, or he does drive a very high-powered automobile and has an accident, or he is lighting up a cigarette, or he's reading a certain magazine, or he wears a certain style of clothes.... I have a bit of a concern there, as much as I empathize with what you're saying and as much as I think we have to always stay on guard to try to protect our people.

Ms. Cynthia Callard: I have a constructive suggestion.

Mr. John Cannis: Please.

Ms. Cynthia Callard: In November I was privileged to go with the World Health Organization to Kyrgyzstan, which is one of the world's poorest areas. People there don't have very much, but they are so thirsty to find out how the world works. When I arrived there, I was talking to some young girls—14- and 15-year-old girls—and they wanted to assure me that they knew all the lyrics to the Backstreet Boys and they'd watched Titanic 15 times.

Two products were advertised there: Carlsberg beer and Liggett & Myers cigarettes. Advertising was swamping them in their desire to come up.

I don't think we can stop that, and I don't think we necessarily want to. I don't think we want to get into dictating what people should desire or like. But I would recommend two things: to be conscious of the impact and to cooperate in dealing with it.

In Kyrgyzstan 30% of their cigarettes are smuggled. Like most of the places in the world, they don't have stores like we do. They have people selling on the streets. They're fed by smugglers. We were meeting with the government there. The government was trying to get curbs on this. They were going to the U.S. embassy and other places, trying to track the shipments down so that they could lay charges. They were getting no cooperation.

Again, I'm re-pitching the concept of an international agreement on tobacco that deals better with smuggling. The measures they were trying to take, such as having prices at a certain level so that they could at least curb it a bit, were being undermined by a lack of cooperativeness.

We have to be aware and we have to work together.

The Chairman: When we jacked our price up, 50% of the cigarettes sold in Toronto were smuggled cigarettes too. I know, because I saw them in my riding all over the place. They were totally out of control. So it's not just Kyrgyzstan that has this problem.

Mr. John Cannis: That did explode in 1993 and 1994. I happened to be in Greece in 1996, and I observed something you said: these kiosks that sell tobacco. First of all, it's regulated as to who can and who cannot sell tobacco. What really impressed me was that no matter which kiosk one found oneself at, the price of that package of cigarettes was the same. Whereas here in Canada, or in Toronto anyway—and Mr. Chairman, you hit the nail on the head—at that time, you could go from store to store and it could vary from 50¢ to $1 a package back then. Then of course the underground economy was veering in different directions until we took the initiative to lower things as we did.

Maybe what you suggest, a standardization in pricing, would help. What's your opinion on that?

Ms. Cynthia Callard: It's an important element to have controlled.

Whatever way is effective. It's not effective if they're smuggling. We have to work at it.

The Chairman: I think you'd agree that the GATT can't control either smuggling or pricing. Let's not load too much onto the GATT.

Ms. Cynthia Callard: That's why we're looking for an international framework convention. The World Health Organization has lots of background on this.

The Chairman: Yes, that's where we have to focus for this type of health measure, not move it into trade rules. You're right; we have to do it. But I'm not sure the GATT is the place.

Madam Bulte.

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): Thank you, Mr. Chairman.

My question is for Ms. Ryan-Bacon.

You were saying that when foreign-trained professionals, in this case engineers, come, they need to take certain exams—sometime three, or sometimes maybe 12. Isn't that tantamount to being discriminatory?

I mention it because Mr. Cannis mentioned it with the veterinarians. The rules for the foreign-trained veterinarians are such that they can't even write the exams. The costs of the exams are so outrageous that they'll never qualify.

When you say your association has different sets of exams and different numbers of exams if they're not coming from a country that has signed a bilateral agreement, isn't that in a sense a non-tariff barrier to being able to practise engineering in Canada?

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Ms. Wendy Ryan-Bacon: That's a good question, and I hope the answer is no.

When a foreign-trained engineer comes to Canada, if we have an agreement in place, that means representatives from our associations have looked at that system and we judge it comparable to our own.

If that doesn't exist, the academic background of each individual who applies for a licence in Canada will be looked at in detail. What is in that background determines the number of examinations. If it's from a university that is relatively well known, we have a list in our office and we have a set of criteria. They're fairly simply criteria, but they tend to establish whether it's a bona fide university or not.

So if someone comes from one of those universities with an engineering degree and the association looks at that engineering degree and sees things in it like they would see in our own, then chances are that individual would be assigned what's called a confirmatory program, no matter where they registered in Canada. The reason for a confirmatory program is a validation of the level of their educational background.

For candidates who don't come from one of those universities or who come from a program that is a very narrow specialization, there may be a requirement for more examinations. Our qualifications board produces a syllabus for each of the main engineering disciplines. So when that candidate comes forward, the association will compare that individual's academic background with what is in the syllabus. If it's a fairly close match, again, it will probably be a confirmatory program. If it's very divergent, then the association will determine that in order to practise in Canada, you have to write more examinations.

The basis for the accredited program in Canada is a certain breadth and depth of subject matter and the level of that matter. That's what they're trying to compare against.

Ms. Sarmite Bulte: So you would say that falls within national treatment then.

Ms. Wendy Ryan-Bacon: Yes.

Ms. Sarmite Bulte: By the comparison between the two.

Ms. Wendy Ryan-Bacon: The other aspect is it's still possible in Canada to get an engineering licence without having an engineering degree. In Canada or anywhere else, if you're a graduate of, say, a chemistry program, you can apply for admission to the profession, and they will compare it with the syllabus. They'll see what you have taken and they will say, here are the other exams you have to take. It's a very long and onerous process, but you can still do it that way.

Ms. Sarmite Bulte: Thank you very much.

The Chairman: I have a question on the point about mutual recognition, which obviously you people are doing a lot of work on. I can see that with the United States, where the standards and experience are similar. Did you find that with Mexico it was more difficult, by virtue of their different system?

And taking that experience, how do you see our FTAA? If we go into the FTAA, do you see an opportunity for there to be, throughout the hemisphere, some greater degree of mobility in, say, the next 10 years? There must be tremendous disparities in the educational quality.

I know from looking at the European Union that this is one of the great problems. You talk about free movement of doctors. Well, then somebody has to determine who's teaching what in what medical schools, what the quality is, who's going to control the quality, and all that.

If we get into the FTAA, do you think there's a reasonable chance that maybe engineering would be one of the professions where we'd start to see some freedom of movement?

Ms. Wendy Ryan-Bacon: It probably is.

With Mexico, one of the difficulties under NAFTA was exactly as you say: there's a huge disparity between what is an engineering degree and what isn't.

In Canada we're fortunate, with our university system and our accreditation system. We like to think there's a very narrow band of fairly high standard for our engineering programs. The U.S. is a little bit different. They have a fairly high standard, but it's a bigger band from the worst to the best.

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Mexico is huge. They didn't have an accreditation system in place for their engineering programs at the beginning of the discussions. By the end of the discussions they had started one. In the last few years they've been starting to accredit programs. They've looked at our process; they've looked at the U.S. process. They've observed our visits; we've had visitors go down there and help them. So we're fairly confident in their accreditation system.

We're still looking at it. We haven't gone as far as saying their system is comparable to ours. They need a little bit more time and experience with it.

We see this moving further into Latin America as well. Several years ago we had some money from CIDA to help us with a project to create a framework for accreditation systems in Latin America, and we had very good success with that. We know a number of the countries are really looking towards accreditation systems to identify those programs that are at an international standard.

I just came back from Costa Rica. They had specifically invited us to go down and look at two of their universities. One is a public university that has a good reputation in the country, and the other is a private university that they weren't sure about. I guess they had their own suspicions about the quality, but they wanted an outside, independent look to see the benchmarking of their two programs. So we're doing that. They're very interested in the accreditation and the internationalization of their profession, and they recognize the difficulties they have with the disparity.

The Chairman: Thank you very much.

We're waiting for Mr. von Finckenstein, so we have two minutes.

Mr. Penson was on the list.

Mr. Charlie Penson: There are the academic standards that Canadian universities have for engineering degrees and then there are the practical standards that some companies have as well.

My son is a petroleum engineer. Upon graduation he was hired by a Canadian company out of Calgary. I think he thought he was going into a pretty high level in the executive, but for his first job, they sent him to Tulsa, Oklahoma to learn how to drive a truck. So they wanted some practical experience. They start them out at the bottom in order to give them some practical experience. And a lot of the training actually occurs on the job as well. Isn't that true?

A voice: That's right.

Mr. Charlie Penson: How many of these international bilateral agreements has Canada signed on the engineering side?

Ms. Wendy Ryan-Bacon: At the moment, just four.

Mr. Charlie Penson: Can you tell us who they're with?

Ms. Wendy Ryan-Bacon: Well, there are four agreements, but there are more countries than that. Three of the agreements include the United States. One is with France. Through NAFTA we have Canada, the U.S., and Mexico. And then the Washington accord includes the United States, Canada, the United Kingdom, Ireland, Australia, New Zealand, Hong Kong, and South Africa. Then the Asia-Pacific is much broader, and we're working on that, but that's not a signed agreement yet.

Mr. Charlie Penson: Thank you.

The Chairman: Thank you very much. We're going to move on to our next panel, but we appreciate your evidence very much.

We have Mr. von Finckenstein here for just 45 minutes, so we should take advantage of his presence.

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Thank you very much for coming, Mr. von Finckenstein. It's very good of you to spend some time with us.

You may know that Mr. Penson, Mr. Speller, and I were at the WTO Singapore meetings and then back in Geneva as well, and we're quite aware that the issue of competition law is becoming a hot subject in the trade. It's become a trade law subject now as well as competition law, so we'd be very interested to hear what you have to say about where we're going on that.

Mr. Konrad von Finckenstein (Commissioner, Competition Bureau, Industry Canada): Thank you, Mr. Chairman.

I'm somewhat intimidated testifying before you, given your knowledge of this area and your reputation in the field, especially when you tell me you were in Singapore. You're probably more intimately acquainted with these issues than I am.

The Chairman: I will quickly demonstrate to you that you have nothing to fear.

Mr. Konrad von Finckenstein: I have an opening statement. Do you want me to start with that or wait for your colleagues? I believe it has been distributed to your colleagues.

The Chairman: I think we should get going.

Mr. Konrad von Finckenstein: Okay.

Thank you for inviting me to talk to you about WTO and competition. I have with me Patricia Smith, who is the deputy commissioner of international and economic affairs; and Dominique Burlone, who's the assistant deputy commissioner of international affairs.

There's a pretty good chance that competition will be part of the next round of the World Trade Organization talks. We are in favour of it, and the purpose of my speech today is to tell you why.

The mandate of the commissioner of competition is to maintain and improve the efficiency of markets so that businesses and consumers can enjoy the benefits of a healthy and dynamic marketplace. This manifests itself primarily in competitive prices, product choice, and product innovations.

Our activities involve promoting conformity, combating anti-competitive behaviour, reviewing mergers, making sure that participants in the market have access to accurate and adequate information, and advocating pro-competitive solutions before federal and provincial tribunals, boards, and commissions.

The increased interest in multilateral rules in competition policy is related to the multi-market effect of anti-competitive activity. We see more and more that business ignores borders and does business regardless of where the borders are. So does anti-competitive activity; it follows legitimate business. Therefore, as an antitrust agency, we have a great deal of interest in developing multilateral competition rules.

Let me set out the reasons it would be appropriate to have multilateral competition rules.

There's a growing appreciation of the complementary role competition law can play in the process of trade liberalization. The existing rules in the WTO deal with government-sanctioned obstacles, both at the border and within the borders, but they do not deal with private anti-competitive conduct. Private anti-competitive conduct is the domain of competition agencies, but private anti-competitive conduct can have the effect of denying entry to market, and it can have a very great impact on the economies.

Two, the WTO is really an ideal forum. It has, as you know, over 100 members. We have consistently argued before the WTO for the adoption of sound competition law in the various agreements, but also in the WTO working group. By doing it at the WTO, you get significant economies of scale. It's also a good platform for education of the underdeveloped nations and the nations that are on the way to development, to point out the benefits of an effective competition regime.

Trade, as you know, is linked to investment. They really follow one another. They are twins. Wherever we trade, we usually invest, and people who trade with us also invest in Canada. We want to make sure that when our investors are abroad, they have the benefit of an objective and predictable competition policy regime there. The only way to ensure that is to make sure our trading partners all adopt an open, transparent competition law system. The WTO gives us the ability to try to do that.

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The fourth reason is that it contributes to the fairness of trade if everybody has a sound competition law. If some partners do and some partners don't, then you have the ability of gouging your domestic market in order to cross-subsidize your exports. That does happen and will happen. The only way to combat it is to make sure everybody starts on the same basis, and that means everybody at home as well as abroad has to worry about competition.

As I've mentioned before, commerce increasingly ignores borders, and so does anti-competitive conduct. We have to ensure there is good cooperation between competition authorities. It's essential for smooth functioning, and it's also essential to make sure we don't have jurisdictional conflicts and we don't get into each other's way when we investigate some of these criminal conspiracies.

Those are the reasons we should have a competition negotiation at the WTO.

Some work has been done to date. Several of the WTO agreements dealing with standards, technical barriers, and the most recent one on basic telecommunications have large competition components in them. Actually the telecommunications agreement, where I was personally involved in the negotiation, turned all around competition and what would be the rules in the domestic markets.

The NAFTA and the Canada-Chile Free Trade Agreement contain competition provisions. Also, at the OECD, several recommendations have been adopted, one on hard-core cartels, another on a framework for common merger pre-notifications, and a third regarding cooperation between member countries.

Finally, we have some bilateral agreements. Canada has an agreement on cooperation with the Americans, which has been in place for over 10 years. It is used daily and works very well. It allows us to ensure that we work in harmony. You've seen some of the recent and very spectacular cases we've had under that agreement. As well, this summer we will sign a bilateral agreement with the European Union, which will provide for the same type of cooperation. But all of this is haphazard. There's not a full spectrum of it. What we are really suggesting is that there should be a concerted approach.

What do we mean when we talk about a concerted approach? Conceptually what we are saying is we need an agreement on the basis of the TRIPS—using the same concept as the trade-related intellectual property agreement, commonly known as TRIPS. This would mean a trade-related anti-competitive measures agreement, or TRAMS. As you know, the trade world is full of acronyms—TRIPS, TRIM, etc.—and now you'd have TRAMS.

What would a TRAMS agreement contain? In our view, number one, it would contain an obligation to adopt a sound competition law with appropriate scope and independence for investigation and adjudications. Key provisions would be: a provision against cartels and criminal conspiracy; a provision for merger review; a provision for abuse of dominant position; an advocacy role for the competition authority to make sure competition is considered in the various policy fora; a protection of confidential information, because you can't run a competition regime unless you have that; and finally, access to effective deterrents, be they monetary or criminal.

There also has to be a commitment to transparency, national treatment, non-discrimination, and procedural fairness. You cannot run a competition system on less. If it doesn't respect national treatment and transparency, the point is lost totally.

Lastly, there should be mechanisms to facilitate and enforce that cooperation. And of course, if there were such a TRAMS, it would be subject to the WTO dispute settlement agreement. That means a country would be obligated to set up a system along those basic procedures. If they didn't, you could take them to the WTO and say, for example, they should have adopted a merger review and didn't, or what they have doesn't really correspond with their obligation. The WTO, if it found against them, would force the country to take the necessary steps to implement such a system.

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That's basically how TRIPS works right now on intellectual property: you have to adopt a patent regime, and these are the rules for the patent regime. If you don't, you can be taken before the WTO dispute settlement, which is what's happening to Canada right now, because they feel our laws on pharmaceuticals are not in accordance with the basic principles of the WTO.

But, I hasten to add, the dispute settlement should not be used to determine how a country applies its own law or to review individual decisions. It should be just an obligation to adopt a framework and implement it, etc., but the actual running of competition should not be subject to international dispute settlement, because that's very germane to each country, depending on its economy, its priorities, and its view of doing business. I don't think one can or should bring it to a common denominator.

So that basically is what we believe should be in a TRAMS. Going that far would be a significant achievement and is something the next round of the WTO should envisage.

It will be difficult and it will take time. Why? Because a lot of countries don't even have a competition regime right now and need to be convinced.

Secondly, there's not really consensus on goals and objectives as to what should be in the substantive packages I mentioned—cartels, mergers, standards, etc. A lot of work needs to be done there.

And of course we would not want to see anything that weakens our existing system. We would want to make sure it's not a race to the bottom and the lowest common denominator, but is an acceptable standard that everybody will adopt.

There's also some concern that competition law should not be getting mixed up with trade remedy laws, specifically anti-dumping. Those are really quite different regimes. We have to ensure that competition authorities deal with competition issues and with market excess issues if there's a competition issue. If there is no competition issue, we won't deal with it, even if it means perhaps the Canadian company here is being disadvantaged. Competition is neutral in terms of nationality.

Lastly, as I mentioned, the dispute settlement mechanism has to be limited to the implementation and should not extend to the review of individual decisions. If we get such an agreement, it will very much promote the proliferation of competition regimes. It will provide for convergence of procedures. It will further help the integration of world markets, enhance corporations, and help overall trade and investment.

Let me just say a word of caution. As you know, the Department of Foreign Affairs and International Trade is consulting on this issue. What I just laid out for you is our view as a competition authority and our contribution to their consultation. It should be in no way read as the government position.

Thank you. I'll gladly answer any of your questions.

The Chairman: Thank you very much, Mr. von Finckenstein.

Mr. Penson.

Mr. Charlie Penson: Thank you, Mr. Chairman.

Welcome, Mr. von Finckenstein and your group this morning.

You've identified a very important area that needs to be looked at in the next round of the WTO. Particularly if we have countries such as China, which has so many state trading enterprises that are largely monopolies, acceding to the WTO, there's a need for some transparency.

The other concern I have is something you talked about: the area of cross-subsidization. Good competition policy may be a way to allow countries that are not really even in favour of it, but that face domestic pressures to do it, to blame it on the international agreement they've signed in order to see a way out. We've seen some examples of that in the last two agreements we've signed, in both the WTO and NAFTA. It might take a little bit of heat off countries in terms of domestic policy and allow them to do what they really would like to do all along, but can't, because they face those kinds of pressures. That's just a comment I would make.

I was at a conference in Miami this year on Latin and South America. There was some suggestion that the existing competition law of some countries right now is so cumbersome that it actually is a form of trade barrier or barriers to doing business, in that it takes two to four years to go through a merger process. Therefore some kind of international agreement, with a timeframe and some tight rules, would improve that a great deal and make it easier to invest in other countries. I'd like your comments on that.

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Mr. Konrad von Finckenstein: I've heard the latter point too.

Countries' ingenuity in devising trade barriers is unlimited. If you can turn a competition regime into a trade barrier, there will be some countries that will try to do that.

As I mentioned when I outlined the features of a TRAMS, I specifically pointed out that the procedural aspects are very important. It has to be transparent. It has to be open. You have to have a right to make submissions. It has to be non-discriminatory. And of course you also have to have certain standards in terms of what is an appropriate length of time for a case, etc. Otherwise you can kill investments by drying out their pool, and you should be not be allowed to do that under the guise of a competition regime.

So if we had a TRAMS along the lines I suggested, those points could be addressed.

Mr. Charlie Penson: What about countries such as China, with all their state trading enterprises? Is it going to be a difficulty, if they come on, to introduce the international competition policy?

Mr. Konrad von Finckenstein: State trading companies raise the whole issue of exceptions. What exceptions do you allow? We have exceptions in Canada. The Americans have some.

Mr. Charlie Penson: Yes, although I'm not happy with those.

Mr. Konrad von Finckenstein: Exactly.

Hopefully, as part of the international negotiation and as part of the give and take, the trading off, etc., some of those restrictions could be attacked.

In Canada right now state trading companies are not subject to the competition regime. For instance, the Wheat Board is not subject to the Competition Act and therefore can act in defiance of it. Is that something we want to maintain? And coming back to your earlier point, could we use the pressure of international negotiations to deal with some of those issues?

I don't mean to single out the Wheat Board. I'm just using it as an example.

Mr. Charlie Penson: The point I was making with China is it looks as though there's a possibility they may be in on this round or before the next round starts. Because there are so many state trading enterprises there, doesn't it focus the debate a little bit more on the need to address that issue? That's the point I was trying to make.

Ms. Patricia Smith (Deputy Commissioner, Competition Bureau, Industry Canada): I can't comment directly on China, but this was discussed in the WTO working group on trade and competition, and obviously there were very different views. This is probably not an area that will be discussed in the working group or in any eventual agreement on competition, if one comes to it, but will be done in a separate working group on state trading enterprises.

Certainly a lot more work will be done. Member countries in the working group on trade and competition asked that a lot more work be done on the effect of competition on all types of enterprises. So we will participate in that, but we are far from having a consensus on the issue of where it should be discussed and the outcome.

Mr. Charlie Penson: Thank you.

The Chairman: Madam Bulte.

Ms. Sarmite Bulte: Thank you, Mr. von Finckenstein, for joining us.

I wonder if you could elaborate a little bit more on how you were involved in liberalizing telecommunications. Yesterday we also heard from Meriel Bradford of Teleglobe about how the deregulation of the telecommunications industry has created the Canadian global success story of Teleglobe. Is there a way to use that example of liberalizing telecommunications to bring competition? We see it in Teleglobe. That's my first question.

Secondly, now we're also pushing the FTAA. What can be done at the FTAA in terms of this competition policy?

Mr. Konrad von Finckenstein: In terms of telecom, as you know, this sectoral negotiation was a leftover from the WTO and went on a separate track, because the timeframe of the WTO did not allow them to finish the General Agreement on Trade in Services, so the subset for telecom was left for separate negotiations.

As those negotiations proceeded, it became clear that the biggest issue was really how to bring competition into the domestic markets, most of the domestic markets being controlled by what's called PTT—post, telephone, and telegraph systems. Even if you allowed foreign entry, they would face this gigantic incumbent that would have an overwhelming market power and would therefore be able to nip any competitor in the bud.

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So finally, in order to make this real, the parties agreed on certain regulatory principles, which were negotiated at great length. Each party that acceded to the WTO basic telecom agreement first of all would accede to these principles and then would go through the various services and point out what exceptions or reservations they had, for how long, etc.

But what we really wound up speaking about mostly was, what should our regulators do and what should they not? What restraints can be put on regulators, telecom being a very regulated industry, so as to make sure the regulations are non-discriminatory and pro-competitive?

So we were sitting in Geneva and talking about trade, but everybody was really talking about competition and how to bring about competition. The Americans said they had such-and-such, and some nations said, “Yes, on paper, but in practice it doesn't work. You're holding us up on other things we want to introduce, but we don't know how.”

As a result of that came these regulatory principles. It was the negotiations that really provided for how each country will deregulate its markets to allow competition and what safeguards they will put into their system to foster competition. This was on a sectoral basis in network industries, where it is key.

The question is, do you want to do that sectorally, sector by sector? That's one approach. Or do you want to do it globally, have a competition agreement along the lines I suggest, and then in each sectoral negotiation add to it or detract from it, depending on what you agree on? That's one of the choices the negotiators will have to decide.

Ms. Sarmite Bulte: And can you comment on the FTAA and our role?

Mr. Konrad von Finckenstein: Ms. Smith is very familiar with that. She's our chief negotiator.

Ms. Patricia Smith: Technically Dominique is our chief negotiator. He's the one who's in Miami more than I am.

I look at the FTAA as a microcosm for the WTO. You have the whole range of economies there: the large economies, such as the U.S., and also St. Lucia. What we gain from the FTAA is experiencing the whole dynamic of these negotiations.

To date we've had only two negotiation sessions. If you want details on this, Dominique can provide them, but largely we've been setting a work program for the remainder of the time and establishing what studies need to be done.

Probably the greatest benefit that will come out of the FTAA negotiations is these studies, in particular studies on the impact of competition and trade policy on the smaller economies. The interesting example is always St. Lucia, which keeps asking why they need a competition policy when they have 40 companies. Why do they need a bureaucracy set up to deal with these 40 companies? So we're going to have to look at how the micro economies, the small economies, can be integrated into a plurilateral agreement.

Ms. Sarmite Bulte: Thank you.

The Chairman: That's helpful. It reminds me that the other day I met a legislator from Gibraltar who told me that because of the European directives, they have to adopt in the Gibraltar legislature a law on dealing with spills from chemical plants into rivers. As he pointed out, they have neither a chemical plant nor a river, but they're a member of the European Union, so they still have to adopt the law. This is what happens when you get into—

Voices: Oh, oh!

The Chairman: Maybe I could ask a couple of questions before I turn to Mr. Penson.

Mr. von Finckenstein, you pointed out in your introduction something important. You want to make sure, from your perspective, that this area of competition law remains discrete and does not get mixed up with anti-dump and countervail as being two forms of market access restrictions.

Yet, going back to Singapore, my recollection is that the way we got going down this road is that when a lot of countries were talking about competition, they were really talking about market access and about the U.S. and European anti-dump rules, which are becoming stricter and stricter. There was a trade-off. The Americans said, let's talk about competition rules, because we can talk about monopolies that way.

Is it in our interest in Canada to use, to some extent, the competition negotiations as a way of somehow levering some constraints over the American and European excesses in their uses of the trading rules, countervail and anti-dump? Or is it in our best interests to just accept the American idea that these should be discrete? That is my first question.

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Then the second question goes to your issue of the way in which these rules can be used to avoid the extraterritorial application of laws. As you know, we've had problems with the Europeans applying their law to Canadian manufacturers, particularly the pulp wood case and some other cases, and U.S. extraterritorial application of their laws of course is famous.

Do you think the negotiations will be successful in setting some ground rules so that we get less extraterritorial overlap of application of domestic laws?

Mr. Konrad von Finckenstein: On the first point, the discreteness of anti-dump and antitrust, I appreciate that the Singapore resolution had its origin in anti-dump. I think it's facile to say you'll replace anti-dump with antitrust. The problem here is that anti-dumping and antitrust use some of the same expressions, but they have very different meanings. I don't think you can replace one with the other.

In one you are trying to protect a domestic industry—that's the whole name of anti-dumping—against what is perceived to be unfair competition. But you are looking at a specific competitor. As I said in my opening, with antitrust, we try to make sure there's a competitive system. We don't care whether the players are domestic or foreign. We want to make sure there's healthy competition, which then benefits consumers overall.

In market access, you have a certain overlap. You can have a problem of market access that is not government-sanctioned, so it's private anti-competitive contact. Let's say a firm tries to come to Canada and finds there is concerted action against it, not government-sanctioned, but private. Then we can certainly look at it, and if indeed the concerted action against that company is anti-competitive, then we can take action.

But if you have a fully competitive Canadian market and somebody tries to come in but can't come in, because the product isn't competitive or because the Canadian consumer is not willing to buy the product, but there is no concerted anti-competitive action against them, there may be a very solid market barrier, but there's nothing we can do about it. Our jurisdiction only applies if the system of competition doesn't work.

That's the problem. Most of the anti-dumping issues really are not anti-competitive issues. They are issues of domestic industry feeling the heat of competition and feeling it is unfair competition.

If it's unfair in terms of the Competition Act—let's say you have predatory pricing or something—of course we can step in. But if they stay within the realm of the boundaries and it's very vigorous, very intense competition, but legitimate competition, there's nothing we can do about it.

The Chairman: Can I ask a quick follow-up question to that? Obviously within the NAFTA framework, if we get more and more integrated....

If you look at the European model, they gave up anti-dumping rules, and the trade-off was that because there was so much integration, you had to go to a European-wide application of competition rules, because it didn't make sense. Dumping no longer applied between the European nations by virtue of the rules.

We hear a lot of that talk in the NAFTA context, but that doesn't seem to be really going anywhere either, does it? Is that for the reasons you just gave us?

Mr. Konrad von Finckenstein: The Europeans of course have a common market. They have no internal boundaries. We do still have internal boundaries. We have a free trade area.

Also, I philosophically agree absolutely with the Europeans: there is no need for an anti-dumping regime in a fully liberalized market. Once the NAFTA has removed all barriers, I don't see why you need it.

That doesn't mean necessarily your domestic industry agrees with it, and a lot of industries enjoy protection by virtue of anti-dumping regimes, so it may be very difficult to dismantle it. And as you know, the Americans are absolutely uninterested in negotiating anti-dump. So if you link anti-dump and antitrust, I think it's dead on arrival.

The Chairman: Certainly our congressional colleagues are telling us to forget it.

Mr. Konrad von Finckenstein: You can deal with anti-dump in terms of procedure. As you did in the last round of the WTO, make it procedurally more fair. Make it tighter. Give less leeway to the local administration to apply it.

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We've done that in other areas, for instance in the NAFTA, in the customs area. American customs used to have extreme latitude in determining the rule of origin. Even under the FTA there was that. Then under the NAFTA, we agreed on joint rules and joint interpretation. They are endless, very complicated, and very long, but they are so tight that the freedom to move for the U.S. customs administration is really very limited. Therefore, through these rules now in effect, the barriers on customs issues at the border have been largely eliminated.

You can probably do something along the same line in anti-dump—agree on very tight, precise procedural rules and thereby limit the power of the anti-dumping agencies to make decisions in favour of domestic industry.

In terms of extraterritorial application, we have basically the same view as the Americans: we have jurisdiction over anything that affects the Canadian market, and they have jurisdiction over anything that affects the American market.

To avoid extraterritorial application, the concept has been developed of positive comity, where basically, if you have an action that affects both markets, the place where the main activity takes place, where the evidence is, should do the investigation and deal with it.

The EU and the U.S. have signed a very elaborate agreement on positive comity, basically saying if there's an antitrust problem in both, let's determine who should, and then you ask the other agency to look at it. You defer, you hold back your own investigation, and they then use all powers to deal with it and try to resolve it. Whatever solution comes up, you accept, there always being a proviso that you reserve the right to step in if you feel that whatever solution they come up with doesn't address the issue at all. But that's a deliberate way, by both nations, to avoid extraterritoriality.

We are in the process of negotiating the same thing with the Americans.

Positive comity, which is discussed a lot at the OECD, may be a way to avert extraterritoriality. Taking the issue head-on and trying to negotiate your rules on extraterritoriality is not likely to succeed, because it will be seen as too strong an invasion on your national sovereignty.

The Chairman: Are the positive comity provisions that you refer to between the European Union and the U.S. part of the Madrid accords? Did it come out of that agreement? Or was it a joint agreement?

Mr. Konrad von Finckenstein: No, it's a separate accord between the antitrust agencies, and we will gladly provide you with a copy of it.

The Chairman: That would be helpful. Thank you.

Mr. Penson.

Mr. Charlie Penson: It's hard not to deal with this dumping issue. I know that's not why you're here, but it really is quite annoying. In the cattle industry, for example, you're probably aware that Americans have taken a dumping action against Canada. Yet when the border states in the United States were provoking this action, some of the cattle producers from Texas and Oklahoma were pointing out that, yes, Canada was dumping, because they sold below the cost of production, but so were they dumping into Mexico.

As more and more countries start to use the dumping legislation against the United States, maybe that will be a way of resolving this issue, because they'll get a lot of their own medicine.

But trade liberalization is what we're talking about here. We have a number of agreements that have accomplished that, and we're trying to move it forward even further. But doesn't that also raise some problems for competition law domestically?

I'm thinking of a case such as the nitrogen fertilizer producers merger in Canada, and I'm sure it applies to a lot of other organizations. They say in order to be big enough to compete internationally in these new markets out there, not just the 30 million Canadian market any more, they need to have a bigger size. And I guess the banks would be part of that argument. But doesn't that raise the question of how you can accomplish that and facilitate that without incurring problems at home, in terms of lack of competition?

Mr. Konrad von Finckenstein: No, I don't think it does. You mentioned the banks, and that's a perfect illustration of the issue involved. If there is domestic competition, then I don't see any problem with letting mergers proceed and letting people bulk up, if they feel they need to do that to compete internationally.

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But if you have barriers to entry, as we do in Canada for banks—considerable ones, both regulatory and economic—then you cannot allow a merger to proceed completely, because you will have a domestic monopoly or duopoly in an uncompetitive market. So it's a balancing.

As the markets get liberalized, as there is competition from abroad, you can allow domestic firms to merge and to adopt a bigger and bigger size, as long as it doesn't impair the domestic markets. But to allow the impairment of the domestic market and to allow a domestic dominance for the purpose of export markets is foolhardy, and the proof is that nobody who is uncompetitive at home is actually terribly competitive abroad.

An organization, in order to really compete, needs to have, in its whole culture and its whole way of doing things, a competitive approach and a competitive strategy and business philosophy. You can't divide so that here you're this giant who sits safely on this market, and on the other hand, on the outside you are very competitive.

So when we do merger review, we carefully look at what are the barriers to entry? If we let this merger occur, what will be the effect on Canada, and what are the barriers? Is somebody else likely to come here? If the barriers are high, you tend to say no, the merger can't go ahead. If the barriers are low, you will allow it.

Mr. Charlie Penson: I understand what you're saying about if the opportunity exists for the competition to come in. But what about the case of, say, the fertilizer industry, where the opportunity exists, but nobody has taken advantage of that, and therefore you get a pretty heavy domination by one company? Even though the opportunity is there for other companies to come—there are no restrictions, no barriers, to them coming—for some reason they haven't done that. Therefore it does tend to mean you're dealing with one company as a result of it. How does that work?

Mr. Konrad von Finckenstein: I'm not familiar with the fertilizer industry, so all I can do is generalize.

You have to look at first of all what's happening in the industry. What are the trends? Are there substitutes? Do you or do you not have an issue of competition from new means or new fertilizers—for instance, the whole issue of using generic fertilizers as opposed to artificial fertilizers, etc.? You have to really understand the industry.

Then you look at the trends. Effectively you're in the forecasting business. You try to make relative assumptions of what will happen. If you see there is something moving in, if it is a staid, mature market and it's not likely to change, and if there's not likely any new entry, then probably you would turn against the merger.

Mr. Charlie Penson: Well, I don't want to deal with any specific one initially anyway, but you've answered the question. As long as that opportunity exists through market access, then that would be the determining factor.

The Chairman: I'd like to follow up on Mr. Penson's question.

All antitrust legislation seems to have a derogation for export cartels, or whatever you want to call them. Yet they never seem to work, partly for the reason you've pointed out: it's very hard to segregate the international market and say you're going to be a cartel over there and somehow compete properly in the domestic market.

Do you think this accord that will be drafted will somehow address that? Because there's a sort of intellectual inconsistency or hypocrisy in saying we're going to protect our own consumers from competition, but if we want to get together and beat up the foreign consumer, go ahead. It seems to be inconsistent, anyway.

Mr. Konrad von Finckenstein: I agree with you; it's hypocritical. I hope the TRAMS agreement would address export cartels. There's absolutely no rationale for them. Even the economic rationale is questionable, because if they really work, the product will find its way into your country through the back door, so you don't achieve the very thing you wanted to do. You wanted to gouge the foreigner out there but have a competitive market, but if the cartel works well abroad, the product has a tendency of seeping in.

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So I don't think you can justify export cartels, either in terms of economics or in terms of our trade philosophy. It's an area that needs to be addressed.

On the other hand, every country is guilty. We have relatively few. Some countries have many more, and it will be a difficult issue to address.

The Chairman: That's interesting.

Thank you very much for coming, sir. We appreciate very much your advice and that of the members of the Competition Bureau.

We're adjourned until 3.15 this afternoon. You'll recall, members, the ministry is going to be speaking about Kosovo and estimates.