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 22, 1999

• 0913

[English]

The Chairman (Mr. Bill Graham (Toronto Centre—Rosedale, Lib.)): I now call the meeting to order.

Members, continuing our series of hearings on the WTO, we're pleased to have with us this morning the Canadian Fertilizer Institute, the Fisheries Council of Canada, the Canadian Egg Marketing Agency, and the Canadian Pulp and Paper Association.

Gentlemen, would you be good enough to take maybe 10 minutes each to start, and then we'll open it up for questions. We have until noon, so you have 10 or 15 minutes, within that framework, going in the order listed.

Mr. Larson, would you like to start with the position of the Canadian Fertilizer Institute?

Mr. Penson is here with us, and you realize Mr. Penson is a great expert in this field—and it's not the chemical kind of fertilizer that he's good on.

Mr. Charlie Penson (Peace River, Ref.): I'm used to dealing with a lot of it around here, Mr. Chairman.

Mr. Roger L. Larson (President, Canadian Fertilizer Institute): Thank you very much, Mr. Graham.

Good morning, committee members.

• 0915

As was mentioned, I'm Roger Larson, president of the Canadian Fertilizer Institute. With me is Paul Lansbergen, CFI's communications and member services officer. We are here today to impress upon you what challenges and opportunities lie ahead for Canada's fertilizer industry in relation to the upcoming WTO millennium round.

In a nutshell, the fertilizer industry's trade objectives include advancing the APEC fertilizer early trade liberalization proposal to the WTO and supporting China's accession into the WTO. We'd like to give an overview of the CFI and the industry to put these objectives in a better context. So I will move right into a brief description of our industry.

I'm getting feedback here. I'll just pull the plug for now. Excuse me.

The Chairman: You don't know the number of times I've wanted to do that around here.

Mr. Roger Larson: I'll try not to inspire you in that direction this morning, Mr. Graham.

The Chairman: It's not the witnesses who cause me to want to do it.

Mr. Roger Larson: The Canadian Fertilizer Institute is an association that represents the manufacturers of nitrogen, potash, phosphate, and sulphur fertilizers, as well as the major wholesale and retail distributors. Our manufacturing members have plants and mines centred in Saskatchewan and Alberta, but also in Manitoba, Ontario, New Brunswick, and British Columbia.

Canada is the world's largest potash producer and exporter, with a 40% share, approximately, of world trade, and is also a major producer of nitrogen fertilizers, supplying 25% of North America's nitrogen fertilizer needs. Potash ore is the raw material for potassium fertilizers, and nitrogen fertilizers are based on natural gas as a chemical feedstock.

Canada is not globally competitive in the other major nutrient, phosphate fertilizers, which are produced from phosphate rock and sulphuric acid. We supply approximately half of our domestic needs from a mine in northern Ontario. Sulphur, which is recovered from processing sour natural gas, is a major fertilizer raw material. It is used to produce sulphuric acid for phosphate fertilizer production. Canada is also the world's largest supplier of traded sulphur, with an approximate 40% share of world trade.

The contribution of our industry to the Canadian economy includes $2.5 billion in domestic sales. Our annual international trade consists of $3.2 billion worth of exports—that's at point of export—and $500 million worth of imports. There is a further $250 million of sulphur exports. Our sector employs approximately 6,000 Canadians in manufacturing and approximately 6,000 in retail distribution and farm supply. Moreover, we generate many further jobs. For example, in the transportation sector, fertilizers are the third largest commodity shipped by Canada's railways. So we're directly responsible for a number of ancillary jobs.

Another perspective is production volume. Our industry produces approximately 24 million metric tonnes of nitrogen, phosphate, and potash, of which we export 18 million tonnes. In addition, there are 5 million tonnes of elemental sulphur exports. Overall, Canada supplies 12% of the world's total fertilizer material needs to over 70 countries.

I would like to highlight the greater importance of our industry than just the pure economics of international trade in fertilizers. Our member companies produce and distribute the four basic nutrients for plant growth. Without these nutrients, we would not be able to feed as much of the world's population as we currently do. In fact, 25% of the world's food production is directly attributable to the use of commercial fertilizers. In Canada, that figure grows to a 40% increase in crop yields.

CFI launched a public awareness campaign last year, entitled “Food for our Future”, and we have copies of our program if you'd like to take a look at it. “Food for our Future” highlights the need for sustainable agriculture, producing food in an economically and environmentally sustainable manner. We must keep in mind that arable land is a shrinking resource. There is simply no other way of achieving the multiple objectives of our society: protecting wilderness areas for wildlife and recreation, freeing large portions of our population for other economic activities, and meeting the world's growing demand for quality food diets. Fertilizer does in fact feed the world.

• 0920

Within the international trade objectives, we have three specific issues. They are APEC, WTO in general, and China's accession into WTO.

In 1997, Canada nominated the fertilizer sector for EVSL, or the early voluntary sectoral liberalization initiative, within the APEC accord. This joint nomination by Natural Resources and Industry Canada was one of 15 that were chosen by the APEC economies. Under the Canadian proposal, all most-favoured-nation fertilizer tariffs, or MFNs, would be eliminated in four equal annual stages and bound in WTO schedules at zero.

The rationale for the nomination is sound. The Asia-Pacific region is a significant user of fertilizers, accounting for an estimated 67% of total world fertilizer consumption, with a larger than average growth in Asia, particularly India and China.

We had hoped for better progress last year in APEC. It now appears that we have an excellent chance to rejoin the first eight sectors referred to the WTO last November. That is why we are here.

CFI requests that this committee recommend to the government that it continue to drive the advance of the fertilizer nomination from APEC to the WTO, and that the nomination be part of its negotiating agenda for the WTO millennium round.

We have broad support both within Canada and abroad. In fact, we recently met with the New Zealand High Commission, which is chairing APEC this year. It appears that New Zealand would very much like closure on the EVSL and would like to see all six remaining sectors advance to the WTO.

The Chairman: Excuse me, Mr. Larson, regarding the initials, what was the acronym?

Mr. Roger Larson: WTO?

The Chairman: No.

Mr. Roger Larson: EVSL, early voluntary sectoral liberalization.

Coincidentally, New Zealand is a significant market for Canada's fertilizer producers. Fertilizers currently enjoy duty-free access, or low tariff rate access to both developed and developing countries. Within the APEC region, many economies have already bound their MFN tariff rates at zero or apply low or zero rates of duty. Major exceptions include China, which is a major world market, and Japan. These currently low tariffs have led us to conclude that a zero-for-zero tariff initiative is currently an achievable objective for the fertilizer sector.

I'd like to talk about the WTO millennium round for a moment. We do foresee some challenges in this round. The European Union may be reluctant to liberalize on agricultural issues, including fertilizers. The EU has tariffs on fertilizers, which are to protect industries within the former colonies. Oddly enough, we are not part of that crowd, but then again, neither is the United States and they're a former colony as well. While we do enjoy a zero tariff of potash into the EU, their tariffs on Canadian and U.S.-source phosphate fertilizers do impact on Canadian corporate interests.

At the same time, our trade is hampered by non-tariff barriers. These include quotas, import licensing, and non-harmonized standards and other technical restrictions. We support initiatives that will eliminate these barriers.

We hope to obtain similar benefits, though of a much greater magnitude, from China's accession into the WTO. China is our largest offshore market for potash. China, with its ever-expanding population, is a tremendous opportunity for Canada's fertilizer industry. In fact, it is possible that we could more than double the $260 million in potash exports that we exported to China last year.

Late last week, CFI was pleased to hear promising news from our Canadian negotiators that China may grant greater access to its domestic market as a condition of accession. CFI is optimistic that China and WTO members will agree on mutually beneficial terms and that another key player in world markets will enter the WTO. To expand on this a little further, China's accession into the WTO may not only present new expanded trade opportunities, but also create a more stable international trade market for fertilizers.

In 1997, China placed an embargo on urea fertilizer, a major nitrogen fertilizer, which has had a significant negative impact on world markets for urea and other nitrogen fertilizers and, consequently, on Canada's nitrogen producers. With China a member of the WTO, the market should be more stable, providing Canadian producers greater security.

• 0925

In summary, the strongest supporters of free access to fertilizers have been the agriculture community and the wider agri-food industry, based on their knowledge and appreciation of the vital role played by fertilizers in increasing food production. We have appreciated this support throughout the Canadian agricultural community, including past and present federal agriculture ministers.

The fertilizer EVSL nomination through APEC, developed jointly by Natural Resources and Industry Canada, is important to Canada. APEC is meeting in June. The opportunity to advance it to the WTO for Seattle in November should not be missed. Furthermore, it is essential that Canada maintain its leadership role in advancing trade liberalization for this industry sector by advocating its inclusion as a zero-for-zero initiative in the new WTO millennium round.

Thank you, and we welcome any questions you might have.

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

We'll go now to the Fisheries Council of Canada, Mr. Bulmer.

Mr. Ronald W. Bulmer (President, Fisheries Council of Canada): Thank you, Mr. Chairman and committee members.

I apologize for not having met your one-week lead time date for material. I did bring over 20 copies, and I hope they've been distributed to you. My remarks are really going to be just on the main recommendations on pages 1 and 2. So perhaps if you had that open and pinned your questions in the appropriate categories, it might help keep us organized for the future.

The way I've tried to structure this presentation is to respond to some of the specific questions posed in the material that was made available to people who wished to be witnesses in front of the committee.

To jump into that, let me start by saying that the first thing I want to reflect on is the importance of trade in the seafood industry. In our industry we are over 80% export oriented, and last year that was worth about $3.4 billion. So in relation to the Canadian average, we are far more export oriented than most industries. We focus on three key markets: the U.S.A. is about 61% of those exports, Japan is 20%, and the EU is 10%. Those three account for over 90% of the total. The remainder goes to some 70 other markets around the world. Therefore, survival in the seafood industry means the ability to export competitively. The industry remains a key economic engine for coastal communities, in particular the Atlantic region. Seafood processors are free traders by nature and by necessity, and therefore we support the launch of a new, comprehensive, multilateral round of WTO negotiations.

Second, in addressing the issue of the scope of WTO negotiations, there is no question that in our industry we continue to face a number of barriers, including both tariff and non-tariff barriers, which are outlined in the paper. Therefore, we recommend tariff removal, with a particular focus on the European Union's high tariffs on seafood followed by the ASEAN markets, and we see it as being key for the future of seafood trade expansion.

We continue to support and promote the dispute settlement provisions of the WTO, as it is in the best interests of Canada and our industry to provide the legal framework to solve commercial disputes that will arise in these and many new areas of trade barriers. We quote the recent win in the WTO after 16 years of finally getting wild salmon carcass exports into the Australian market, and it was only through the final WTO solution that this was achieved, as an example.

The third area is this issue of globalization and investment in trade negotiations. Certainly all industry in Canada is changing, and that includes seafood. Just since last year we've seen major U.S. companies come in and buy corporations, and Iceland has come in and bought corporations in Canada. So we're no different from any other industry in Canada.

• 0930

The competition in this business is certainly world scale. There is no question that production of finished products follows cost-efficiency. It is the market that can provide cost-efficient production that accesses the raw material, makes the products, and in the end is the successful exporter.

The industry supports open borders to investment in our industry. We also note in the paper that since the last round, bilateral trade negotiations have benefited the seafood industry. I refer specifically to NAFTA, the Chilean free trade agreement; the Israeli free trade agreement; and, even now, the ongoing negotiations with the EFTA markets. We think all are beneficial to our industry.

The government needs to continue an open dialogue with Canadians leading up to and during the new WTO negotiations. It needs to rely on Canadian business to develop negotiations that reflect the true globalization that is going on in all business.

In seafood, it must protect Canada's sovereign control over the conservation and management of its fish resources, prevent any linkages between access to foreign markets and investment or gaining access to Canadian resources. One of the ways to achieve that is to continue to safeguard the Canadianization of harvesting policy, which we maintain as a government, and that would be one way to ensure sovereign control of our resource base, which is the critical element, as opposed to investment in the actual industry.

The fourth area I wanted to touch on was sectors in a new negotiation round. We noted particularly in Minister Marchi's February 9 presentation to this committee that he had proposed as a middle ground the concept of clusters of issues and sectors in any new round of negotiations.

We want to make the point that in any new WTO round seafood negotiations should not be linked with agriculture. Other than the fact that we are foods, that is probably where the common base ends. We see agriculture as having a lot of unique structures and problems, some of which will probably be presented here this morning.

We feel that if in the end the decision is to go this cluster route, a more like-minded cluster of sectors that should include seafood would be to link us with other natural resource sectors, such as mining and forestry. We're all trade dependent, we're free traders, and we're all very much involved in this linkage of trade and the environment, etc. So we see a lot of issues we have in common with other natural resource groups, as opposed to the agricultural category.

Finally, I just want to touch on specific seafood sector objectives that we would see for a new WTO round. I thought I would just highlight that in the Uruguay Round we really went into it with three key areas for seafood, and number one was this debate on internal subsidies in this industry on a worldwide basis. We feel that subsequent to that round, a great deal of these have been eliminated. Our second area was market access. As I've already mentioned, that continues to be a problem, with a key focus on the EU and ASEAN markets. In the Uruguay Round the third big issue was the sanitary and phytosanitary rules.

As we go into this round, we see that many technical barriers to trade remain that impact on seafood. Therefore, striking down high tariffs on seafood in the key markets of the European Union followed by ASEAN markets remains a priority in any new WTO negotiations. Because seafood is such a two-way traded product, I would note that Canadian tariffs on these same products—you might almost say unfortunately if you were a negotiator—coming into Canada are actually de minimis at this point. Therefore, you go into negotiations with very little to trade off in terms of facing somebody who has a 20% tariff on shrimp into the EU versus almost a zero tariff on shrimp coming into Canada.

Trade sanctions is an area we touch on in the paper. There are some groups that see these as being linked to environmental issues. We would not want to see that become a lever for restricting trade. We feel that regional cooperation mechanisms, and in seafood there are many—NAFO to manage stocks outside the 200-mile limit in the North Atlantic, ICCAT to manage tuna that are outside the 200-mile limit—continue to work better. We would like to see continued work in the WTO committee on trade and the environment, which can lead to a greater common understanding of these issues rather than allow them to be a direct linkage between trade levers and environmental issues.

• 0935

Finally, I'll just repeat that Canada must remain firm on its no-linkage policy between negotiating foreign market access and access to resource harvesting in the Canadian economic zone.

Thank you.

The Chairman: Could you repeat that last part, Mr. Bulmer?

Mr. Ronald Bulmer: We want to continue our existing policy of not allowing there to be a linkage between gaining access to a foreign market and the foreign market getting access to our raw material—fishing inside our zone.

The Chairman: I understand what you're saying. NAFO and....

Mr. Ronald Bulmer: NAFO manages the stocks. Canada may make some allocations to people to come inside, but it is a sovereign decision. It isn't a trade-off for a tariff reduction in somebody's market so you can sell the finished market.

The Chairman: I understand. Thank you, that's very helpful.

We'd like to turn to the Canadian Egg Marketing Agency next, Mr. Currie.

Mr. Félix Destrijker (Chairman, Canadian Egg Marketing Agency): Thank you, Mr. Chairman. My name is Félix Destrijker. I chair the board of the Canadian Egg Marketing Agency. I have with me Neil Currie, our chief executive officer.

Mr. Chairman, as we usually do in our national organization, we work in both languages, so I request the authorization to make my presentation in French.

[Translation]

Thank you, Mr. Chairman.

The Canadian Egg Market thanks the Committee for the opportunity to present its views on the multilateral agriculture negotiations. Our views are consistent with those of our colleagues in the poultry and dairy sectors. Egg farmers in all provinces joined producers of turkey, chicken, broiler hatching eggs and dairy products to develop a joint position on trade.

The Agency, or CEMA, was established in 1972 to restore order to egg marketing in the country. We represent approximately 1,300 egg farmers producing 430 million dozen eggs every year within Canada's egg marketing plan.

The egg business has been good to Canada. Egg production adds approximately $460 million to the Canadian economy annually, $620 million together with our partners in the grading and processing sectors. Canadian egg farmers purchase over 700,000 tonnes of grain a year valued at over $200 million. The Canadian egg sector creates 4,000 full-time jobs. In addition, egg farms support and are supported by a host of enterprises from small business operators, such as veterinarians, to larger equipment manufacturers and retailers.

Building a Canadian egg industry has taken a lot of hard work. For a quarter century, egg consumption in industrialized countries declined. That's starting to turn around. For us in Canada, the turnaround began about three years ago when we started to see per capita increases in consumption. So, we're riding high on a wave of economic growth. But it is a fragile and relatively small industry that's riding the wave. A stark contrast in size is seen when we compare our industry to that in the United States. The national flock size in the US is 270 million. In Canada, it is about 18 million. Fifty-nine producers in the United States have one million or more laying hens. Canada has no producers with at least a million hens. One producer in the US puts out almost as many eggs in a year as all of Canada's egg farmers. In this continental context, Canada's egg industry continues to need a stabilizing structure, one that has predictable limits on access to our domestic markets.

• 0940

Canada's position on agriculture trade should be consistent with governments' fiscal policies. We frequently talk about this or that industry's competitiveness. We should also be talking about the ability of governments to compete. Canada has determined that it simply cannot compete fiscally with the two largest trading blocks. We must decide what Canada's response should be to what is really happening in world trade and what is likely to happen. Deciding whether a particular program is right or wrong, good or bad, can often result in idealistic discussions that derail us from developing realistic, beneficial responses to complicated problems.

I'll talk about domestic subsidies now. The two largest players in the negotiations will want to continue to subsidize their agriculture sectors. The United Sates and the European Union have used green subsidies to their full advantage. Together during the last round, they negotiated a blue box to exempt their subsidy programs from the rules of reduction. While they have taken with one hand, they have given with the other. It is unlikely Canada can compete in a subsidy war with the United States and the European Union. For these reasons, CEMA strongly supports a cap being placed on total domestic support.

Government-financed export subsidies must be eliminated as they are clearly the most trade-distorting of all. Canada recognized this and the need for fiscal restraint and eliminated its export subsidies following the last round. On the other hand, the two trade superpowers continue to use export subsidies at levels which can be called obscene. For example, together, the European Union and the United States account for 99.4 percent of all the world's subsidized poultry exports and 92 percent of all the world's subsidized egg exports.

Increasing market access is a legitimate trade goal, one that, if achieved, will benefit Canada's agriculture. It is clear, however, while countries speak of supporting open trade, few are willing to walk the talk. Simple tariffs remain high in some cases. Where tariff rate quotas were established, restrictive in-quota tariffs remain. These in-quota tariffs should be reduced to zero. This a very real, pragmatic way to achieve real access that has already been committed to the benefit of Canadian agriculture.

Another good way to free up access is to develop rules on the administration of tariff rate quota. Manipulating TRQ administration so trade is restricted must be stopped. Non-tariff barriers to TRQ, such as country-specific allocations and commodity aggregation, must be prevented using clear rules. This can and must be done without restricting the right of a country to determine the market segment that should receive the imports. By advocating increased trade through zero tariff on in-quota access and disciplines on TRQ administrations, Canada is in a good position to insist that over- quota tariffs be maintained.

Canada will have to work hard to ensure sound science is the basis of sanitary and phytosanitary rules. The European Union has made it clear it will preserve its agriculture base by restricting imports in whatever way possible. Eco-dumping, genetically modified organisms and livestock stocking densities are issues that have become near and dear to the hearts of the EU's citizens and governments. Clearly, governments intend to pursue SPS measures as trade barriers to the benefit of their domestic industries. Rules must be maintained to prevent arbitrary trade distortion.

During the last round of negotiations, Canadian farmers were fortunate because they could count on the support of our governments. We worked closely with Members of Parliament who helped ensure that our interests were heard. As we prepare for this round of talks, we look forward to similar cooperation. CEMA believes Canada can make significant gains in this round for its agriculture sector. There are very real ways to open up access and ensure a fair, rules-based trade.

• 0945

Thank you again, Mr. Chairman, ladies and gentlemen members of the committee. We will be happy to answer any questions you'd like to ask us.

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

[English]

Now we have the Canadian Pulp and Paper Association, Mr. Neuheimer.

Mr. Joel Neuheimer (Manager, Market Access, Canadian Pulp and Paper Association): Thank you very much, members and chair, for the opportunity to come and participate in this very important process with you this morning.

Founded in 1913, the Canadian Pulp and Paper Association, CPPA, is the national association representing most of the pulp, paper, and paperboard producers in the country. The CPPA pursues common objectives in public and operational areas such as sustainable forest management, environment, resource and technology, taxation, and trade practices.

CPPA members are committed to the development of an industry that is socio-economically and environmentally sustainable on a long-term basis.

As a long-time proponent of global free trade in forest products, CPPA welcomes the opportunity to communicate its views on the role of the World Trade Organization and the scope of future multilateral trade negotiations.

Throughout the years CPPA has worked in cooperation with the Government of Canada, especially the Department of Foreign Affairs and International Trade and Industry Canada, to negotiate global free trade in forest products. While this partnership has increased access to international markets, more work remains to be done.

In 1998 Canadian forestry shipments were valued at approximately $50 billion Canadian, 80% of which was exported to over a hundred countries around the world. This trade generates one million direct and indirect jobs and supports over 300 rural communities and makes the largest contribution to Canada's balance of trade: $30 billion Canadian in 1998.

Market opportunities are expected to abound over the next decade, given that world consumption of paper and paperboard is expected to reach between 425 and 475 million tonnes by the year 2010, an increase of more than 150 million tonnes from 1996 levels. However, without increased market access the Canadian industry will not be able to benefit from this growth, and its future, as well as that of the Canadian economy, will be jeopardized.

Given the importance of trade to our economy, the Government of Canada has a responsibility to educate the Canadian public about the benefits of the WTO and free trade for our society. Strong international trade rules will make Canada an even stronger trading nation and allow us to continue to compete with competitors around the world.

Without the security of a strong international trade rules system and increased access to global markets, the forest products industry and the Canadian economy in general are at serious risk. That's why every Canadian should support a strong multilateral trade rules system and a strong governing body such as the WTO.

However, due to the success of the WTO in opening world markets, many groups representing labour, environmental, and social interests have begun to accuse it of being an undemocratic institution with extraordinary powers. At the same time, these very groups are pushing to have the WTO pursue and promote their interests. We believe this sets a dangerous precedent.

The WTO is not an institution for global governance, and it does not exist to solve all of society's ills. It simply governs how the nations of the world conduct their trade affairs. It is a member-based organization that works to guard against trade discrimination between countries and encourages economies to provide for the social needs of our society in complete cooperation with environmental priorities.

The WTO must be allowed to continue as a trade-based organization, and its members—that is, national governments, including Canada—have a responsibility to ensure this.

It should be kept in mind that the global community has the United Nations environmental program to serve its global environmental interests and the International Labour Organization to serve its international labour policy needs.

• 0950

The WTO, in its capacity to further facilitate international trade, is the ultimate vehicle for the Government of Canada to achieve the goal of global free trade for pulp and paper products. Canada's priority objectives in future WTO negotiations should be to eliminate all tariffs on pulp and paper products around the world and to work toward building a better system to avoid the use of any non-tariff barriers to trade.

The Uruguay Round of multilateral trade negotiations, which resulted in a zero-for-zero agreement on pulp and paper products, was a major achievement, but the implementation period is too long, and Canadian exporters still face tariff barriers in the EU and the world's greatest markets for increased growth in the future, Asia and Latin America. In fact, close to 10,000 tonnes, or one-third of Canadian pulp and paper shipments, are destined for regions where tariffs remain an issue. On average, tariffs add an estimated cost of $20 per tonne to Asian shipments and $50 per tonne to Latin American shipments. Therefore, CPPA believes that the Canadian government's main objectives on the tariff front in relation to the WTO and any future negotiations it may carry out are clear and straightforward.

Based on the Uruguay Round's zero-for-zero agreement, which will see all participants go to zero tariffs on pulp and paper products by January 1, 2004, negotiations should seek to accelerate implementation, ideally to January 1, 2000, of the current agreement, which includes Canada, the United States, Japan, New Zealand, Korea, Hong Kong, Singapore, and the European Union, and expand participation in the agreement to other key trade partners—for example, China and India, as well as several Latin American countries.

Work to accelerate implementation is already well underway. Canada, the United States, and New Zealand are currently leading an effort within the WTO to achieve free access to markets within the Asia Pacific Economic Cooperation forum, or APEC, which you've already heard a little bit about this morning. Forest products too is one of the sectors that's seen a lot of work in APEC that is now actually at the WTO.

Previously referred to as “early voluntary sectoral liberalization”, this initiative is now known as “advanced tariff liberalization”, or ATL. It supports the complete elimination of all pulp and paper tariffs by the year 2000. Given that efforts to conclude an EVSL deal last year within APEC were unsuccessful, these negotiations, now known as ATL, have been moved to the WTO with the intention of reaching a deal by the end of 1999.

We believe it is essential that agreement on this initiative be achieved this year, so that its benefits are not lost. Successful conclusion of a deal on accelerated trade liberalization prior to the next round of multilateral negotiations would leverage efforts to expand participation within the next round. If, however, agreement is delayed and the initiative becomes part of a round of larger negotiations, the leverage to expand participation will be reduced. Implementation schedules will be extended, and the Canadian industry will continue at a competitive disadvantage in world markets.

Based on the philosophy that trade and environment should be and can be mutually supportive, the Canadian pulp and paper industry is deeply concerned that the integrity of the rules-based world trading system is at risk if jurisdictions have the latitude to use environmental measures as a means of imposing unjustified non-tariff barriers to trade. Non-tariff barriers are technical regulations or requirements that can provide for discriminating treatment of imported foreign goods versus domestically produced goods. Examples of such measures can include environmental labelling and a certification of sustainable forest management.

CPPA emphasizes that it is not opposed to environmental labels and standards. In fact, the industry supports such efforts as long they are developed and used in a fully transparent, non-discriminatory fashion and according to proper and sufficient scientific evidence. However, recent cases at the WTO indicate that the rules with respect to process and production methods and technical barriers to trade need to be clarified and possibly amended. In particular, CPPA believes that the Government of Canada should seek to clarify or if necessary strengthen obligations under the agreement on technical barriers to trade, or TBT.

The TBT agreement as it exists is subject to a wide range of interpretation in areas such as standard-setting, environmental labelling, and sustainable forest management certification. And not all WTO members agree on what the rules mean. This issue is critical for an industry that ships products into more than 100 markets around the world, where different process and product standards can come into play.

• 0955

Clarity on the application of current TBT rules to environmental standards—for example, environmental labelling and sustainable forest management certification—should insist on the highest possible environmental integrity and trade neutrality for these types of measures. This type of approach could ultimately allow for the harmonization, equivalency, and/or mutual recognition of these types of standards around the world.

However, aside from any clarification or amendment that might be necessary to WTO rules, such as the TBT, CPPA believes the current GATT articles, including article XX, do not need to be amended in any way. We believe they are fundamental to the continued efficient and effective functioning of the WTO system and they provide adequate scope for countries to take any necessary measures to protect the environment.

CPPA is grateful for the opportunity to put forward its views on the WTO and the future multilateral trade negotiations that will take place within it, expected to begin at the end of this year. Canada is a nation built on trade, and this next stage of multilateral negotiations is vital to the future of the forest products industry and the continued prosperity of Canadians.

We hope the views and positions outlined in this paper will be useful as we work together to ensure that Canada retains its status as the world's premier exporter of forest products. Thank you very much.

The Chairman: Thank you, sir. That's very helpful.

Before I turn to questions, members, with your permission I would like to take as having been presented the position of the Horticultural Council. You were given a paper by them, but Mr. Dempster phoned us this morning, and because his father died—I believe it was last week—he was unable to be with us today. With your permission, I'd like to just accept his paper and we'll include it amongst our research papers, and we'll let him know that at least the committee got his paper.

Thank you very much. I appreciate that.

[Editor's Note: Statement provided by Mr. Dempster reads as follows:]

THE CANADIAN HORTICULTURAL COUNCIL

To The Standing Committee Foreign Affairs and International Trade

To Honourable Members

HORTICULTURAL TRADE ISSUES

I appreciate the opportunity to be here today and will briefly summarize some of the key issues of significance to the horticultural sector in Canada for this next WTO Negotiation to meaningfully benefit this sector. Some of these issues do not require a wait until what could be a 5-7 year negotiation process. Indeed, not every issue requires any negotiation at all, perhaps implementation is the key; at the WTO level or within Canada.

These key horticultural issues encompass a broad range of issues at the bilateral trade agreement, WTO level, and indeed some Canadian domestic policy issues. Previous negotiations have tremendously affected the ease of access of foreign horticultural products into the Canadian market. At the same time, insufficient attention has been given to either WTO rules and their operation, or indeed internal policy adjustments required to provide the horticultural sector with a level playing field with other countries.

Horticultural Trade Issues can be broken down essentially into six broad areas as follows:

1) Phyto-Sanitary & Sanitary:

Effective timely dispute resolution through the NAPPO and the WTO and acceptance of international science based standards. This is of primary importance to this sector if we are to achieve access for primary horticultural products, which will not be subjected to the political vagaries of our trading partners. This too means Canada must adapt a more in tune acceptance of the same international standards they purport to encourage. Notably, the PMRA is a real example of a Canadian institution that articulates Canadian sovereignty in a global trading reality. For horticulture this is unacceptable and unrealistic. This example, if emulated for other regulatory processes such as biotechnology, novel foods, irradiation, etc. denies Canadian producers with tools accepted elsewhere, and threatens our exports with the use of technical barriers to trade. These issues warrant immediate attention and do not necessarily require a full WTO negotiation.

We fear insufficient focus is being given to making the rules work in a timely and consistent manner—consistent in that once a dispute issue is resolved scientifically, the latest election or political action simply doesn't undo the agreement.

2) Market Access:

The Canadian industry may well seek elimination of all tariffs on horticultural products to zero with a comparable commitment from all other countries under the WTO. Any increased tariff access on horticultural products into Canada should achieve tariff gains for horticultural exports. Canadian tariff elimination should also be contingent and linked to real progress on pesticide harmonization and equitable domestic support programs within Canada; two of the identified failings for horticultural producers of previous trade negotiations.

Tariffs to our exporters are far larger—e.g. 32% on carrots in Taiwan. Also, Canadian tariffs are calculated on a f.o.b. basis, versus foreign countries using a delivered basis—a significant difference.

All quantitative restrictions to trade on horticultural products should be eliminated, or tariffed immediately and reduced to zero over the post WTO adjustment period.

Any and all foreign licensing systems which restrict or limit the access of authority to import horticultural products should be eliminated, unless such licensing regimes are linked to systems which are in place to adjudicate on commercial disputes. Eg. Licensing and arbitration, PACA, for fresh fruit and vegetable commerce.

Specific objectives identified to date for increased export access are apples, processed sweet corn, and potatoes and potato products, frozen blueberries, onions and carrots.

3) Non Health Standards:

Under the WTO, the government should seek the elimination, or acceptance of equivalency, of all non health trade standards which impact import movement of horticultural products by any country, including U.S. marketing orders. Further movement on non health Canadian horticultural regulations should not occur until the Canadian industry is assured that foreign trading partners provide our sector with national treatment. It should also be noted that, while other countries may extend us with national treatment, it means nothing if the export market won't let Canadian products in through unfair phyto, labelling, or import licensing. Therefore caution should be used in negotiating any of these access issues.

For the fresh fruit and vegetable sector, the WTO governments must accept international equivalency or harmonization in nutrition labelling.

For the fresh fruit and vegetable sector, WTO governments should not introduce any new labelling requirements which introduce unnecessary health or environmental claims which are meaningless, unenforceable and simply disguised technical barriers to trade.

4) Trade Remedy:

Anti-dumping - The issue of producer status needs to be resolved for semi-processed and finished processed products. Producers must have standing.

Safeguard (Surtax) - A more time sensitive, price sensitive safeguard needs to be developed for the horticultural sector. Such a surtax could be implemented within days of significant import price collapse, especially for highly perishable products.

5) Export subsidies:

All export subsidies should be reduced to zero—there aren't any for Canadian horticulture and yet the sector competes in our domestic and export markets with subsidized product.

6) Domestic Support:

The green category of programs needs to be more clearly defined, and dispute systems need to be put in place to ensure that governments do not alter their support through disguised means, e.g. environmental support. Canada should not reduce its domestic support further until other countries match Canadian levels.

Within Canadian domestic support, governments must address the inequities that exist across the agricultural sector, and even within specific sectors between the provinces. One generic program based on NISA availability across all horticultural sectors, with crop insurance as a companion program is desired. Where crop insurance is not available or not suitable, SDRM should be provided as an option.

Government needs to refine criteria for disaster type relief programs which have minimal costs. Such programs would be triggered infrequently, hopefully not at all. Assistance should also not be provided if alternative measures such as safety nets and/or crop insurance are meaningful, effective, affordable and available; or in situations where individuals have not taken appropriate steps to safeguard their operation. Disaster relief should also be available for commodities where returns are significantly affected by unfair trade practices in foreign countries, or where Canadian trade remedy measures fail.

These then are the combination of key trade and policy issues impacting upon horticulture. Several of these do not need to await the WTO, and could be resolved earlier—at least the CHC will continue to press for these changes. The pursuit of tariff removal without adequate attention to the resolution of key regulatory issues which impede producers is only part of the equation of achieving export growth.

We hope our views assist the government in effective trade policy development, and internal policy adjustment.

Dated: April 22, 1999

The Chairman: So we'll have questions. Mr. Penson.

Mr. Charlie Penson: Thank you, Mr. Chairman. Welcome to the panel members.

Mr. Bulmer, I noticed you said there should not be linkage, particularly with agriculture and your industry. I see Statistics Canada still kind of lumps farming and fishery together, and I've often wondered why that would be the case. I don't think there is really that much in common.

There's a significant sector of agriculture that doesn't want to be linked to agriculture in these trade talks as well, by the way.

Essentially you're talking about the need for market access for your products, and I gather from this that you're very much in favour of Canada participating or expanding this round into a general round rather than just the sector-specific ones that are mandated at the moment. Agriculture and services are the only two, and therefore that's your position, I guess, that we have a general round including the concerns that you have.

Mr. Ronald Bulmer: Yes, Mr. Chairman, we feel that for our industry there were not that many gains made in the Uruguay Round, although I noted some things have been achieved since, and some bilateral negotiations have assisted the industry. But we still face very high tariffs into the European Union—20% on cooked and peeled shrimp, as an example.

What you have to do every year is beg on hands and knees to get...somebody mentioned the system of TRQs, which is okay if you happen to win this year and you get your tariff reduced for one year. But it's hard to make a $20-million plant investment to make that kind of product when you don't know if 12 months from now you're going to be back facing a 20% tariff, compared to your competitors in Iceland and Norway who are at zero, and you lose the business and the market. Therefore, it's very hard to make investments on these sorts of temporary relief measures, which countries can use very arbitrarily to the benefit of their own industry or their own consumers.

We would like to see a new round. We would like to see fish as a sector, but if it has to be in a cluster of sectors and issues, we would like to stay with those people who are driven by free markets and open market and strong investment in their industry.

• 1000

I hope that gives you the reason we think we're more closely related to some of the other natural products than the agricultural products, which we know, God bless them, have a lot of issues and a lot of problems to face in this upcoming negotiation.

Mr. Charlie Penson: The other question I would have for you is this. You talked about winning the wild salmon case after 16 years. I gather that the new process of the WTO dispute system you would regard as far better than the old one, and therefore the ability to have a win...is that right?

Mr. Ronald Bulmer: Well, we didn't put it through the old system. We had tried for a number of those years to seek a negotiated government-to-government settlement. But I will say we found the system to be very fair and very legalistic, and it was very science-based, because of course they were making claims of risk to their domestic wild fish if they allowed carcasses imported. So we finally got it to the WTO and we found the WTO process worked well.

I might say—though not Canada—that a number of other seafood issues have been brought forward, such as shrimp turtle against the United States, where they were embargoing shrimp from a number of countries. I'd say most of the settlements in the seafood category in the WTO process in the last five years we have found to be fair and logical. You don't win them all, but in most cases the right side of the issue won.

Mr. Charlie Penson: Mr. Larson, you talked about the need to have a more open market and have China as part of the World Trade Organization, and that playing by the rules would allow your companies better access, possibly double sales of potash into China. What kind of barriers are you facing there now? Are they tariff barriers? Could you describe what the problem is?

Mr. Roger Larson: Tariffs to China are relatively low. Our issues with China tend to be the fact that they are a huge part of the world market in fertilizers. For example, until 1997 they were importing between four million and six million tonnes of urea per year. Canadian production of urea is about four million tonnes. So when they put an import ban on the imports of urea, the impact on world trade in urea was dramatic. I think total world trade that year in urea was something like 21 million tonnes, and they were in the order of one-fifth of it. When the wall went up, all of this urea didn't have a home any more and it had to look for a new home. Consequently, the world markets crashed.

The major producing regions of the world, such as the Arabian Gulf, which has a very low-cost feedstock of natural gas available, and they're also very close to port in the Arabian Gulf, would be the first ones to react by looking for another market for their products. Economies such as the former Soviet Union would have foreign currency objectives in their trade, and would consequently respond to any changes in the market by buying the market any way they needed to, including taking advantage of devaluations to lower their prices even further.

Mr. Charlie Penson: Mr. Larson, speaking of that particular area of nitrogen-based fertilizer or urea, I've heard from a number of fertilizer dealers and farmers in western Canada that they perceive a problem. Canada, in order to compete internationally and supply these markets, has formed bigger and better companies. Agrium, I guess, is a case in point. Some of these people are suggesting that it's kind of a conflict in a way, because in the process those companies now control something like 70% of all of the nitrogen sales of that company in western Canada, and therefore less competition exists in Canada. How would you address that?

Mr. Roger Larson: I would say to our farmer customers that Canadian consumption of urea is about a million tonnes, a million and a quarter tonnes per year. And any one of several companies operating in Canada could supply the entire market out of one or two plants. We export probably 70% of the total production of urea. When we expand a plant or build a new plant, its focus is primarily export. The Canadian farmer is benefiting from having an extremely efficient world-class plant on their doorstep, with very good transportation economics and companies that are very motivated to try to compete for their business—

• 1005

Mr. Charlie Penson: I understand that.

Mr. Roger Larson: —right within that market. I would suggest it's the best deal in the world.

Mr. Charlie Penson: I understand these plants are there and manufacturing in world-class facilities, but others would argue that, yes, that's true, but there's only basically one supplier, Agrium, at the moment. Therefore they have the ability to set the price domestically as they like. It's very difficult because where distributors had more than one source to supply them before, now it's down to...well, it's essentially one. Therefore, the validity exists to put up prices accordingly.

Mr. Roger Larson: I've heard that comment because of Agrium's relative size, but keep in mind that, for example, Western Cooperative Fertilizers owns two plants in Medicine Hat that could by themselves supply the entire prairie market, that Saskferco in Belle Plaine, Saskatchewan, produces a million tonnes of urea per year out of just that one plant. Simplot in Brandon is just putting into completion a new plant that is in the order of another half a million tonnes of production per year. The idea that it doesn't really matter...Agrium's production is focused on supplying their markets in the prairies but also in western United States, going down as far as Iowa.

In conclusion, it is a free trade industry. Imports are tariff free, no barriers to entry. Any distributor or any farmer can go down to Minneapolis and pick up a semi-load of—

Mr. Charlie Penson: It's a long way from Minneapolis to...country in Alberta, though.

Mr. Roger Larson: —Russian urea and bring it into the market. I understand the truckers might give you a very good back-haul rate because they're hauling some grains down to Minneapolis.

Mr. Charlie Penson: Okay. Just a final question, then. I understand you're looking for some tariff reduction with the European Union in the fertilizer sales area as well. So you're looking for an expanded millennium round to have more items on the table as well.

Mr. Roger Larson: Yes, that's correct. I think our experience in the last WTO round, which I wasn't a participant in, was that it was probably the European Union that kept fertilizers from making progress in the Uruguay Round. It's not necessarily so much the tariffs they have, but the fact that it's difficult to get the fertilizer sector on the table as long as you have a major economic unit like the EU not supporting negotiations in that direction. And yes, we do find some of their practices...both tariff and non-tariff such as technical standards have had a definite impact on, I would say, North American fertilizer companies in terms of trade.

Mr. Charlie Penson: Thank you.

[Translation]

The Chairman: Mr. Sauvageau.

Mr. Benoît Sauvageau (Repentigny, BQ): I wish to thank our witnesses for their presentations.

I'd like to begin by thanking The Canadian Egg Marketing Agency, a national agency, for tabling a document in both official languages. I am very grateful to you. Indirectly, I invite the other witnesses who represent national agencies to do likewise.

Having made my point, I'd like to ask the representatives of the Canadian Pulp and Paper Association a few questions. Someone was whispering in my ear that I should ask you your opinion about the film L'Erreur boréale, but I wouldn't dare do so; I'd be too embarrassed.

• 1010

In the short brief you presented, you say that, having witnessed the successes at the WTO, some interest groups would like the WTO to discuss social and environmental issues, and you say that “this sets a dangerous precedent,” that it represents a danger.

Do you maintain that a dangerous precedent was set when, in Singapore, the possibility of including rules respecting the International Labour Organization and human rights was raised during the WTO discussions? You don't seem to make any link between trade and human rights or trade and the environment.

Do you think that when a standard is not observed, the International Labour Organization or the United Nations environmental program has the same success and the same powers as the WTO, including the settling of disputes? My question was directed to the representatives of the Canadian Pulp and Paper Association.

Mr. Larson, you are in favour of China joining the WTO. Is your support unconditional or conditional?

[English]

Mr. Roger Larson: I'll respond to your question on China accession. Without doubt, the accession has to be with conditions. If we look at history and—

Mr. Benoît Sauvageau: Which one?

Mr. Roger Larson: Do you want the explicit conditions we have asked for in terms of fertilizer? We have asked for their tariffs to be bound to zero, or a very low rate; that import quotas and licensing be eliminated; that the fertilizer industry have the opportunity to establish distribution channels within China; and that we not have to continue with state trading.

Right now, SINOCHEM is the only organization that is allowed to import fertilizers into China, and we would like to have distribution and marketing rights within China, so our companies could establish their distribution networks, compete directly and sell directly to Chinese fertilizer companies—local distribution companies, and that kind of thing.

Mr. Benoît Sauvageau: Merci.

Mr. Roger Larson: Is that what you were asking?

[Translation]

Mr. Benoît Sauvageau: Yes, thank you.

Mr. Joel Neuheimer: Thank you for your questions, Mr. Sauvageau.

[English]

To answer your first question, I'm happy you asked it because it will allow me to clarify what we intend to present here today. There is a link, obviously, between labour and trade and environment and trade.

If I can use the environment as my example to illustrate my point, as you know, the World Trade Organization has a committee on trade and environment that's been working for several years now to clarify how environmental measures can be implemented and serve their environmental objectives, yet do so in a manner that is not trade discriminatory. We certainly support that work. We've been an active participant with the government in trying to move the agenda forward on environmental labelling. We're not opposed to environmental labelling; we just have some conditions we'd like to see countries use when they're crafting and implementing those types of programs.

So there is a link, but the point we're trying to make is the WTO can't be the world trade, the world environment, the world labour, and the world fill-in-the-blank organization. Its concentration, focus and mission is trade liberalization, and we think it works very well. We really don't want to see its capacity and ability restricted at all, through having to solve some of the other social and environmental problems that have been brought to bear on it.

• 1015

Certainly there are going to be considerations made. Certainly the multilateral trade body is going to work in cooperation with bodies such as UNEP and the ILO, so countries will ultimately arrive at situations that will resolve those concerns, whatever they may be.

We're saying you can't count on a trade body to solve your environmental and labour problems. We believe those respective multilateral organizations on environment and labour are better equipped than the WTO to address those issues. So please work together on cooperation, as the WTO has begun to do with its committee on trade and environment.

It regularly exchanges information with different multilateral environmental agreement secretariats, such as the Convention on Biological Diversity and different conventions like that. We support and encourage that. What we're saying is don't lose your focus. We believe the Government of Canada should push to have the WTO maintain its focus and not try to go out and solve all these other problems within the context of its discussions. It would be better equipped to do so outside of those discussions in the appropriate multilateral fora.

To try to answer your second question perhaps a bit more quickly, if I heard correctly, you asked whether we believe UNEP has the same power as the WTO. Well, UNEP has had a very difficult time. They've struggled a great deal. Resolving multilateral and environmental questions is very difficult, as you know. There are great north-south differences in the world, and the developing countries have quite different agendas when it comes to discussing those issues.

So in terms of recent success, I'd have to say no. The WTO is a much stronger, much more successful multilateral organization. Unfortunately, UNEP hasn't enjoyed the same success. But there's nothing stopping the governments of the world, including Canada's, from trying to revitalize UNEP to hopefully have it work more effectively in the future. We would fully encourage the Government of Canada to do such a thing.

We would also encourage the government to resolve some of these cross-cutting issues on the environment front. For example, the UN has a Commission on Sustainable Development that meets on a regular basis, where countries of the world can meet and discuss these issues in concert. So we would encourage the Government of Canada to pursue those types of questions in discussions and fora such as those.

I hope that answers your question. Thank you.

[Translation]

Mr. Benoît Sauvageau: In order for your brief to reflect your opinion faithfully, should we delete the sentence: “This sets a dangerous precedent?” You seem to be in favour of the negotiations that have been under way for the past few years. What you say does not quite reflect what you have written.

[English]

Mr. Joel Neuheimer: No, I'm sorry. Maybe I didn't explain myself clearly enough. I believe it's a dangerous precedent to have those interests overtake the trade agenda. Certainly they should be dealt with in concert. You can't ignore those issues; they're too important, and they have very serious links to trade. I will ask you to keep that line in there because I believe it's very important for Canada. You've heard here this morning from a number of representatives—I've heard 80% trade a couple of times.

Trade is vital to our interests. We need to make a success of these future negotiations. We need to make a success of negotiations between now and when those negotiations begin. So in order to achieve that kind of success, don't let the trade liberalization agenda be hijacked. We're trying to address these other issues. It will be too difficult, and I think you'll have too difficult a time achieving any success at all and you may lose a significant opportunity to improve the Canadian economy.

The Chairman: Let me piggy-back on that question, Mr. Neuheimer. You're giving a balanced approach, which I think is fair and intelligent. We'll just take environment for the moment, because it obviously concerns your industry the most. You've recognized that the environment issues must be addressed, but you say we'll go through the UNEP. We will have to struggle with that issue when we're drafting our report here. What is the coherence between these requirements and a recognition that in a global society these will have to be balanced out?

We don't want to destroy the WTO by loading everything in there, so you take your environment issues and we're going to strengthen UNEP. We'll have to strengthen the ILO to deal with the labour issues, etc. But at some point there will have to be some way, when there's a conflict between the norms that are laid out in the environment or the labour vis-à-vis the norms that are being laid out in the WTO, for somebody to be able to determine which of the two values will prevail. I think that's Mr. Sauvageau's point, that everybody here is trying to come to grips with that.

• 1020

So what do you tell us about how to have an institutional framework to allow those values, our values, which are obviously preservation of the environment and proper values, to prevail and have trade liberalization? We obviously want all of these at once—

Mr. Charlie Penson: And the enforcement issue, while you're at it.

The Chairman: And the enforcement. This is really at the heart of what we have to come to grips with.

I apologize to the other members for jumping in here, but we're all—

Ms. Colleen Beaumier (Brampton West—Mississauga, Lib.): You've asked all our questions, so we're finished.

The Chairman: Well, no, we're off again.

Ms. Colleen Beaumier: I thought perhaps Mr. Sauvageau could have asked a question. I could have given him the answer.

The Chairman: I apologize.

Can you help us with that from an industry perspective? Don't let these members answer your question for you. They'll confuse you.

Mr. Joel Neuheimer: I'd certainly like to try to help answer that question, but, Mr. Chairman, certainly you and the other committee members have an enormous challenge in trying to resolve those concerns. Those are the things that everyone around the world who is concerned about trade and the environment is concerned about.

At the recent symposium that the WTO held, which Canada sponsored and was an active participant in, the director general of the World Trade Organization, in fact, in his remarks pitched the idea of having a world environmental organization to maybe give some greater strength to addressing environmental issues. While it's a very interesting idea that should certainly be considered, I would suggest to you that you do not need to go out and create something new. You already have an existing mechanism within the UN system, known as the Commission on Sustainable Development, where governments meet to resolve these very issues.

I'm not sure about the CSD's ability to have the type of teeth that we all might like to see it have, because it's a difficult process. Again, you have north-south considerations, and you have countries that are big traders and countries that are not. So it's a very difficult situation with which governments are grappling.

One of the ways that I think the whole situation could improve is if other governments around the world follow the example that the Canadian government has set in the past and I certainly believe will follow in the future. That is, when we go to a WTO meeting or any sort of multilateral meeting, the various departments within the bureaucracy—for example, Foreign Affairs and International Trade, Industry Canada, Environment Canada, and Natural Resources Canada—meet interdepartmentally to hammer out a position that Canada takes to these meetings.

You'll have to take me at my word, or you can ask a lot of the bureaucrats who go to those international meetings, but what happens quite often is that they show up and find that other countries haven't done the same thing; they haven't distilled the national interest into one common position. Their position will quite often depend on who is in the chair for that country at the time. So if it's the minister of economic affairs or finance or trade, or if it's the minister of the environment, you may often get one very narrow point of view.

That presents a great deal of difficulty in resolving those issues on the multilateral front, and Canada, at this recent symposium, I believe as part of their position, recommended that countries do a better job of that. I believe that's a good suggestion, and so I hope governments of the world take Canada up on their offer.

But anyhow, I would like to clarify that you already have an existing mechanism where you can discuss and seek to resolve some of these great challenges that you have in front of you. I think the idea is to try to look at better efficiency in those existing mechanisms. Part of the way forward there is just better coordination between the different governmental departments in different countries, and so on. I think you get my point.

As an industry, we are strongly in favour of seeking to achieve sustainable development and we've tried to put ourselves on the path towards sustainable development, but we don't have all the answers. It's an ongoing process; it's a work in progress. So just as we've sought to do on this whole area, we would similarly encourage others to follow the same path, including the Government of Canada.

Thank you.

• 1025

The Chairman: Thank you. That's helpful.

You're quite right, and we've heard it a lot about our own departments—the fact that we'll get the finance minister saying one thing at one conference and the environment minister saying another thing at another—

[Translation]

Mrs. Maud Debien (Laval East, BQ): Mr. Chairman, is there any time left?

Mr. Benoît Sauvageau: I'd like to give my three minutes remaining to Maud.

[English]

Hon. Mrs. Sheila Finestone (Mount Royal, Lib.): Give it to Maud.

The Chairman: You had over 10 minutes when I interrupted.

[Translation]

I promise I'll give you a chance to speak a little later, Mrs. Debien. We still have an hour and a half.

[English]

Anyway, Mr. Penson left before I could pass on his recommendation to the witness that if the Commission on Sustainable Development has no teeth, we'll allow NATO to enforce it. It's the only enforcement mechanism in the world—

Ms. Colleen Beaumier: Absolutely.

The Chairman: —so we'll turn to it.

We have to get back to our questioners here or I'm going to get in serious trouble with the committee.

Mr. Reed, sir.

Mr. Julian Reed (Halton, Lib.): Thank you very much, Mr. Chairman. I'd like to ask my question to Mr. Destrijker.

The question of not being able to compete because of subsidy, and so on, around the world is the big challenge—the big mountain, I guess, that has to be climbed at WTO. I've always felt, and farmers will tell me, that if the playing field were level, any Canadian farmer could compete in a world situation, whether he be a dairy farmer or a poultry farmer, and so on. I wonder if you could give us some sort of scenario that would tell us under what circumstances you could compete. What would level the playing field?

I realize it's a complex question and I suppose there's no simple answer, but perhaps you could give us some guidance as to how that playing field could be levelled.

Mr. Neil Currie (Chief Executive Officer, Canadian Egg Marketing Board): I'll summarize very briefly perhaps, sir, that if we had perfectly functioning markets and absolutely no government involvement in agriculture, the playing field might be level. That, of course, is unachievable other than in theory.

I think the point was made earlier this morning that agriculture is somewhat unique and has not been grouped with other sectors. We have our own agricultural agreement.

As noted in our brief, the situation we're currently facing is one of domestic support from treasuries of Europe and the U.S. in particular, export subsidies from those two blocs again. Notwithstanding our hopes from this next round, it will be a significant period of time before any of that is reduced, particularly in Europe. It seems that the more we speak of the potential for reduction in export subsidies and domestic support, the more creative the community becomes in terms of supporting its agriculture, introducing new methods vis-à-vis environmental issues, with respect also to the new phrase “multi-functionality of agriculture”, and therefore justifying support. So I'm not optimistic that we could ever achieve anything that you might consider a level playing field per se.

If it were achievable, in theory, the supply-managed producers are somewhat unique in the world in that our choice is to diversify across the country. Our choice is to manage our supply through small holdings. We have undergone a period of consolidation within the farms and supply management, mainly in response to the pressures of this government and other economies in the world to be more competitive. But it is still our policy choice to diversify across small holdings, and in that sense perhaps the playing field will never be level for us, because we choose not to be agribusiness; we choose to be smaller farms in a supply-managed or orderly marketing environment.

So although the theory suggests that Canada can compete, it's very unlikely that will come about in practice in agriculture, at least in our sector, because of the issues of other government policy and because of our own policy.

• 1030

Mr. Julian Reed: I think what I'm looking for here are goals. I appreciate what you say about the achievability or unachievability, but it seems to me that unless you have a vision out there you'll never be able to put it on a track. And there are some areas in which it has been said that Canada is 10 years ahead of the rest of the world, or most of the world, in terms of tariff reduction and so on. And there's some argument to say it's time to let the rest of the world catch up. But somehow out there, there has to be a vision, there has to be a vision for intensive farming production of poultry and so on, because if we're going to go down a road, we have to go towards that vision. We can't throw up our hands and say it's unachievable so we'll wrap ourselves up and do whatever protecting we can do. And I guess that's what I'm trying to get at: what is the vision?

Mr. Neil Currie: I'll maybe let you be the judge of whether it's achievable or not. The vision is to maintain the tools we require to preserve the orderly marketing system that we've chosen as a matter of domestic policy. We have presented, along with our associates in supply-managed industries, a fairly aggressive and quite specific position for this particular round, which we feel will address many concerns across Canadian agriculture, if not all of those concerns. It is consistent with the position of the Canadian Federation of Agriculture, which consists of both exporting interests and supply-managed interests. But for our particular needs, we very much enjoy and recognize the benefits of orderly marketing as a domestic policy choice and we'd like to preserve those tools necessary for that.

Mr. Julian Reed: Mr. Chairman, I have a question for Mr. Larson. As a matter of curiosity, you said China put an embargo on nitrogen. How widespread was that embargo and what might have precipitated it?

Mr. Roger Larson: The embargo was total. Their imports went from about 4 million tonnes of urea per year to zero. What precipitated a lot of it, I believe, was that between 1990 and 1995 China embarked on a construction program of building urea plants in China, and these would be turnkey world-scale nitrogen fertilizer facilities. Basically you lay down $400 million, and 18 months later somebody hands you the keys to a new plant, the same plant as you'd build in Saskatchewan, or Alberta or Ontario.

So they built these new plants, and I think everybody's market expectations were that as they brought new world-scale production on stream they would close their old uncompetitive, inefficient and polluting plants; things like ammonia bicarbonate plants that are probably late 1930s or early 1940s technology. It's not economically viable, it's not environmentally acceptable, and if you look at labour cost, production cost, efficiencies, these plants should have been closed years and years ago.

Probably for foreign exchange reasons as much as anything, instead of closing these inefficient plants down, what they did was put the embargo in, which is very disruptive of world trade. And it is why we argue so vehemently that if China accedes to the WTO they must do so with rules. Once they're inside the WTO, the opportunity to have another market that acts like India often does in terms of dealing with trade proposals will be a problem. Then we have two inside the WTO, and that's going to create even further trade negotiation problems.

• 1035

If I may, I have a thought on the previous discussion that went on about other agenda items, such as labour and environment being part of the WTO. And it is that 42% of Canada's gross domestic product is based on international trade. That's a huge part of our national income.

Quite often what we face in terms of barriers is not a tariff barrier, it's a non-tariff barrier. That can often be something that from our perspective looks more like a darned good excuse to block entry than it does anything legitimate. Any time you include something other than a very precise numeric measure, such as tariffs going to 1% or to zero or quotas being lifted—you can measure those things. How do you measure the more subjective qualities that come in with labour and environmental discussions?

I agree that these are extremely important issues that need to be dealt with in an appropriate fashion. But if you start tying these things into trade negotiations.... If we have trouble with non-tariff trade barriers today—for example, in exporting beef into the EU—what kinds of problems are we going to have in the future if some of these ideas are brought in? I would suggest that the potential for it being done to us is much greater than the potential that we're going to do it to somebody else, when we consider that 42% of our GDP is based on international trade.

That was a long-winded comment. Thanks for your patience. Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Larson.

[Translation]

Mrs. Debien.

Mrs. Maud Debien: Good morning, gentlemen.

Mr. Larson, you said that arable land was decreasing. We know that's so here, in Canada and Quebec, and throughout the world. You linked this question to the importance of developing sustainable agriculture. Please forgive my ignorance if I am wrong, but it seems to me that in most cases, the industry produces chemical fertilizers. If that is so, how can you reconcile chemical fertilization with sustainable agriculture? Is the industry currently making any efforts to produce organic fertilizers?

Mr. Bulmer, you said that sanitary and phytosanitary measures were very important for the European Union and that they constituted trade barriers. I'd like you to give me an example concerning fisheries and these sanitary and phytosanitary measures used by the European Union.

Mr. Neuheimer, on the last page of your text, you say that article XX of the GATT should not be amended in any way. I'd like to know what this article XX is about.

I'll make one last comment, which is similar to those of my colleagues, Messrs. Sauvageau and Graham. Your text also indicates that the World Trade Organization should not become a global institution that settles all the world's problems. I would point out to you that the World Trade Organization is becoming the most powerful organization in the world. I think it should have a social conscience. That was a comment.

• 1040

[English]

Mr. Joel Neuheimer: That's a very good question. The GATT articles are really the 10 commandments, if you will, of the WTO system. They came out of the original General Agreement on Tariffs and Trade in 1947, when it all began. Two of the key articles, apart from article XX, that are probably useful to understand are articles I and III. Those pertain to most favoured nation treatment. Article III states that foreign goods should not be discriminated against versus domestically produced goods. The basis for how that's determined is that if they are physically the same, then there should be no discrimination.

So if this pen is made in Canada and in Indonesia, and I don't like the way their labour laws are in Indonesia, I cannot discriminate against this pen.

An hon. member: Can't you discriminate as a consumer?

Mr. Joel Neuheimer: No, as a country, as a government, I can't restrict imports of this pen coming in from Indonesia if I don't like their labour practices.

The real key part to article XX is an exemptions clause that would actually exempt you from being responsible for either one of those provisions in articles I and III. The committee might want to research this later just to make sure I'm not misleading you here. Somebody in the bureaucracy might know better.

Basically article XX will let you out of those two obligations if you have a good enough reason. It allows you to do so if you are seeking to protect human health, and I believe the other one is exhaustible natural resources. The environment could be in there as well, although I'm not sure. That's something you'll probably want to clarify as well to make certain.

The thing is that with this kind of latitude and scope, we believe you have enough ability as a government, wherever you are in the world, if you're a member of the WTO, to implement such measures. The key, though, is that you aren't doing so in a discriminatory manner. If you're going to apply such a measure, you have to do so in the least trade-restrictive manner. So you really have to go about it very carefully. That is something that I guess members would work on together if you had a good enough reason to be making that exception.

There are several multilateral environmental agreements. Some of these agreements actually include discriminatory trade measures that could be enacted against WTO members who would contravene those first two key principles I tried to outline. Those agreements have never been challenged to date. So really the precedent does exist, then, if you will, that if you want to take certain measures to protect, let's say, the environment, you can do so as long as you have a multilaterally agreed agreement.

I hope that clarifies the point, then.

Mrs. Maud Debien: Thank you.

Mr. Ronald Bulmer: Let me address the issue first a little more broadly than sanitary and phytosanitary. Really, you start out with technical barriers to trade other than tariffs. The best example recently in our industry is the one I used whereby Australia said “Wild salmon in Canada potentially have a disease called whirling disease; we've never found it down here and we're afraid that your dead salmon carcasses will jump off the counter and swim out and spread it.” But there's no scientific basis for that. So for 16 years we were not allowed to sell anything but canned salmon in one of the highest-priced salmon markets in the world. Now, that's a science-based disease as opposed to sanitary and phytosanitary.

But you could move on to the next one, whereby the European Union, as an example, has its food directive 814 of the entire list of things that must happen in a food plant in the EU. And that list may or may not be exactly the same as what you have in Canada. If they decide that you can't shovel ice into the hold of a boat in Europe with a shovel that has a wooden handle, then they'll just say you can't export fish over here unless your directives and your controls over the plant look identical to ours. As you know, you can become very quickly very arbitrary when you make domestic changes in those sorts of food regulations.

All I'm saying is that—

The Chairman: It would be required that it be a European-manufactured shovel.

Mr. Ronald Bulmer: A shovel with European wood or Canadian wood or whatever.

• 1045

But the bottom line is that you have to be very careful. If you take the 20% tariff off shrimp, which has been keeping Canadian shrimp out, it may suddenly be replaced by three or four rules about what happens in a plant domestically. They may say that unless our plants are exactly the same as theirs, the product still can't come in.

You have to be careful in these negotiations that you don't end up reducing tariffs and then leaving the door open so people can substitute other kinds of regulations that achieve exactly the same thing. The solution really has to be science-based. That ultimately has to be your only defence—if somebody can prove the wood handle has a scientific base for having implications to the fish product you want to export.

That's exactly how we won the Australian salmon case. In the end, they couldn't find any scientists in the world, Australian or otherwise, that could defend the position that this disease was going to suddenly reach out from frozen fish and infect wild stocks off the Tasmanian coast.

It has been and continues to be a very difficult area. It is something we have to be very aware of in any negotiations. We have to make sure we don't leave that door open and close off trade because we're just totally focused on the tariff side of the issue.

Mrs. Sheila Finestone: Has scientific base become a norm in the negotiations and definitions when you do a dispute mechanism undertaking?

The Chairman: Mrs. Finestone, that is not a clarification; that is a day's lecture.

Mrs. Sheila Finestone: That shows my ignorance.

The Chairman: No, that's the beef hormone case. That's where the whole argument is.

Mrs. Sheila Finestone: Would you please note that question? I will ask it in next round.

The Chairman: One minor person's phytosanitary protection is another person's trade barrier. Somebody has to arbitrate, and beef hormones was the one. The Europeans said “Do you mean the WTO panel is going to tell us our people will have to eat something we believe causes cancer, and somebody else says there's no scientific evidence for it?” You get a board and a panel and....

I would highly recommend—in part 16—you take these books with you. The discussions of all the various ways in which these have come up are really in there. Our witnesses are kind of dealing on some cases, but they are hugely complex. We've tried to reduce them down to what we can and put it on the website as well. It's in your book.

You're quite right that ultimately, when you get into these arguments, somebody has to arbitrate who's right and who's wrong. That's why we have this elaborate dispute resolution mechanism in the GATT. Maybe the salmon case in Australia was capable of being resolved under the system, but when you get to beef hormones or some of the other cases, they're very difficult to resolve. Basic values are at stake, so some societies say “We don't care what the GATT says.”

Mr. Ronald Bulmer: It was resolved, but for 15 years I would have sat here and said it couldn't be resolved, because it took 16 years from the first challenge to finally get it ruled.

The Chairman: But do you think under the old rules of the GATT it never would have been resolved, because the institutional framework wasn't there? Under the Uruguay Round rules, the WTO rules, you had an enforceable mechanism so you got it finished, right?

Mr. Ronald Bulmer: We didn't GATT them under the old system, so I can't absolutely say we wouldn't have won, but we were very pleased with the process under the new WTO. We can go that far.

The Chairman: Mr. Larson, you wanted to add something to Madame Debien's question as well. Then we will go to Madame Beaumier.

Mr. Roger Larson: Madame Debien's first question was on sustainable agriculture and arable land, and chemical versus biological fertilizers.

Madame, if you can excuse my lack of adequate French, I'll try to address your question quickly.

There's a common misunderstanding here as to what is a chemical. The answer is everything, if we look at the periodic table. I'd like to note that fertilizers are as natural as any other biological fertilizer, when you consider where fertilizers come from. Phosphate fertilizers are basically dinosaur bones that were laid down several hundred million years ago. Potash is found in ancient sea beds of an ancient sea that used to cover all of western Canada and virtually all of Saskatchewan. With nitrogen fertilizers, we take nitrogen from the air and process it into a form that is available to the plants.

• 1050

So I would be happy to spend some time, perhaps away from this committee, talking about sustainable agriculture. Perhaps somebody like Mr. Pickard, who's an expert in agriculture and a former chair of the agriculture committee, can help this committee in this area as well.

Yes, we are losing our arable land. We're losing it because of growing populations. A very simple Canadian example would be southern Ontario. Look at the expansion of Toronto. That's prime agricultural land that is being lost. It's not the rocks of the Canadian Shield, like we have around Ottawa, that are being lost; it's prime agricultural land. If you look at a country like China, that is happening at a many times greater rate because of their incredibly huge population density.

Malthus said the world's caring capacity for population was something in the order of one billion to two billion people. He was a 19th century philosopher and basically said that at that point the world would starve to death. We have something like five billion to six billion people today on this planet and we're feeding them better than people were fed in the 19th century because of modern agriculture. That means using the best land we have available and farming it as efficiently as possible. That is what sustainable agriculture is all about.

I'd be happy to talk to you about it, as I said, outside of the committee. Thank you.

The Chairman: Thank you very much. T hat's a very interesting answer. All those ground-up dinosaur bones will haunt us in our sleep.

I'm told there'll be a vote in 30 minutes, so we only have 30 minutes left. I have Madam Beaumier and Madam Finestone on the list.

Madam Beaumier.

Ms. Colleen Beaumier: Thank you. I will be picking up a little bit more on what my colleagues across the way have done. Your report says Canadians should be accepting, embracing and encouraging the WTO, but it isn't very transparent to most Canadians.

I understand what we're talking about now is accessibility of Canadian products to foreign markets. However, you have to convince me before I can convince Canadians how exploitation by a Canadian developer going to a third world country and not having any guidelines for environmental standards or labour standards—

[Translation]

Mr. Benoît Sauvageau: Have we been told there will be a vote?

The Chairman: We're awaiting a phone call on that.

[English]

Ms. Colleen Beaumier: Do we have a vote? All right.

How can I tell Canadians that lack of labour and environmental standards for Canadian investors in foreign countries is going to benefit them? Do we need a tax to cover refugees from deforestation that causes famine, as in Ethiopia? Do we need a special tax to control environmental disasters? I just don't see how you can operate one separate from the other.

I understand that you're talking about accessibility to foreign markets, and I agree. We can't go into China, and you gave the example of the pollution in China. But should we not have standards for countries and investors who are going into these foreign countries, in order to be allowed accessibility back into the Canadian market?

The Chairman: Before you answer that question, Madam Finestone, I don't whether your question was in the same vein and whether you'd like to maybe—

Mrs. Sheila Finestone: I gave my time to Madam Debien, so I'm not asking questions.

• 1055

The Chairman: You don't have a question.

Mrs. Sheila Finestone: No.

The Chairman: Okay, fine.

Members, I suggest that we should be ready to leave here at 11.05 a.m. at the latest. That will give us six minutes to get up there to vote.

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): It'll take a little bit more than that.

Mrs. Sheila Finestone: I can't do it in six minutes.

The Chairman: Okay—

Ms. Colleen Beaumier: That's my first question.

The second one refers to the openness and transparency and whether or not the dispute mechanism is fair. Do you feel that it's fair?

Mr. Joel Neuheimer: I'm going to get another opportunity here to answer first, but I'll try to be as quick as possible. Maybe I'll take your last point first on the dispute settlement mechanism, which is a new mechanism as of the last round that was concluded. In my opinion it is working very effectively. I think countries are very happy to use it because of its effectiveness. It's not perfect, but I think it is effective.

Is it open and transparent? Again, I think there's a difference between the way the Canadian government operates and perhaps some of the other governments of the world operate. I believe the Canadian government would be open to any submission that would be made to it going into any kind of WTO case. Would other countries of the world be open to that? I'm not so sure. That would probably be an area where the governments that are the members of the WTO could probably follow a Canadian lead. You might have a tough time telling constituents in Canada that globally everyone is completely open and transparent. But I think Canada has a good story to tell, so I hope you would tell that story.

On the standards question, international standards are becoming an increasingly important thing for us. Obviously, in our area and in environmental standards we've seen a lot of work by the International Organization for Standardization, ISO. I think that's a very valuable precedent to set for other areas of consideration as well. So I would recommend that as a suggestion to pursue your global standards question for different interests.

With regard to transparency of the WTO in general, this is a brand-new and very critical topic. I'm sure if you asked the negotiators who were part of the Uruguay Round, you would find that their consultations were wrapped up in maybe half a day. This time the greater range of stakeholders is much more interested because of the evolution we've seen in the organization and the types of questions it's discussing.

But I believe it's moving in the right direction. Really, there was no need in the past for the organizations that do a lot of outreach, but it is doing that now in response to the concerns I think you're trying to bring to the table here.

Just to give you a few examples, confidential documents the governments use in WTO discussions and negotiations are being de-restricted on an increasingly frequent basis. Canada is a very big supporter of that notion. So are the Americans. There are certain countries that have problems with that. Mexico I would cite as an example. So there remains some work to be done there as well.

But the WTO has also done a really good job on outreach by having symposiums where they've invited everyone who is interested to come and participate in informal discussions about the issues that are being taken up so that they can make their contributions to the discussion. They've had four such symposiums over the last year and every year in Geneva. They've also done regional work for those unable to attend discussions in Geneva.

So I think we are seeing a lot of progress on this by the organization. I think it is possible to be transparent and accountable to the general population.

There's one point I would like to make, a distinction, a line in the sand, if you will, that I think you need to draw as a government. Do you allow people who are not part of the cabinet into one of your cabinet discussions when you make a decision? I think the answer is probably no. In other words, when the WTO is having a cabinet-type discussion or is involved in formal negotiations, should everyone be allowed in the room? I would say that the answer is no. It should be just like a cabinet discussion. It should be ministers making decisions. I think that is necessary in order to make a number of the decisions the organization is being asked to make.

Thank you.

Mr. Ronald Bulmer: Let me give you one very specific example that I think any Canadian would understand.

Kenya proposed that cod be put on the endangered species list under CITES, which would prevent all trade in cod. Now, a Newfoundlander might say that's probably not a bad thing to do until our cod comes back. If you're a Norwegian with 700,000 metric tonnes of cod to sell, you really don't want to see it on the endangered species list, because from your point of view it's less than endangered.

All we're arguing is that you must be very careful you don't go into these negotiations and create a whole bunch of new mechanisms and linkages, where the trade lever is what people always get their hand on and say stop the trade. It might even be justifiable in a particular zone or region, but you stop world trade in these sorts of things.

• 1100

So that's why I think industry keeps arguing that we should be sure we're very cautious about handing trade environmental issues over and using the lever to stop trade in all categories. That example would have stopped all the Alaskan cod, all the Norwegian cod, and all the Icelandic cod from being sold, even though it was being urged by Kenya, backed by Greenpeace, under the Newfoundland cod problem. That's a good example whose complexity any Canadian could grasp.

Mrs. Sheila Finestone: I'm leaving. Goodbye. I can't walk that fast.

The Chairman: Mrs. Finestone is leaving, and most of the other members have left because they feel they can't walk that fast.

Ms. Colleen Beaumier: Are the bells going?

The Chairman: The bells are going at this time, yes. I understand we have another 10 minutes, approximately. However, most of the members are going, so I think we're going to have to break. I apologize for the break.

Ms. Colleen Beaumier: That was a very good point you made.

The Chairman: It was very helpful. That type of analogy helps us to understand that there are linkages but it's a matter of how you manage the linkages. That's what we have to try to focus on in our report as to what we want to recommend to the government.

Thanks to all of you for coming here this morning. It was a very helpful panel. Thank you very much.

Mr. Joel Neuheimer: Thank you very much.

Mr. Ronald Bulmer: Thank you very much.

The Chairman: Remember, members, the briefing session on Kosovo at 3:15 p.m. today.

We're adjourned.