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 29, 1999

• 0905

[English]

The Chairman (Mr. Bill Graham (Toronto Centre—Rosedale, Lib.)): I call this session to order and thank the various witnesses for coming before us this morning.

I see, as has quite often happened in these hearings, the witnesses outnumber the members of Parliament. But as I was explaining to some of you, we've split our committee in half. Some of us are out west, some of us are here in Ontario, and some of us have to stay in Ottawa to maintain a corporal's guard in the capital.

However, I can assure you that your evidence will be taken to the whole committee and melded into the evidence we're getting. We had to split the committee up or we never would have had this done by June.

I think everybody here is familiar with what we're trying to achieve by getting the opinion of Canadians as to what factors we should take into account in our WTO negotiations. If you have anything to say about the free trade of the Americas, we'd be interested in that as well. We're doing separate hearings on that, but it obviously relates to our views on trade generally.

Thank you very much for coming, and thank you particularly to Ms. Lowry from Kellogg, who I gather will be our host at lunch today. There have been many ribald jokes amongst the committee members as to eating cornflakes for lunch, but anyway, we'll see what happens.

We'll start then with Ms. Curry from the Food and Consumer Products Manufacturers of Canada.

Ms. Laurie Curry (Vice-President, Public Policy and Scientific Affairs, Food and Consumer Products Manufacturers of Canada (Toronto)): Good morning, and thank you for this opportunity.

The Food and Consumer Products Manufacturers of Canada welcome the opportunity to offer our trade priorities and recommendations for the upcoming World Trade Organization multilateral agricultural negotiations.

Our comments will be based on the objective of encouraging greater domestic competitiveness and increasing our opportunities for export growth.

With me today is Christine Lowry, vice-president, nutrition and corporate affairs from Kellogg Canada, one of FCPMC's member companies.

The food and beverage industry in Canada purchases 45% of all agricultural commodities sold from farm gate. We want to work with producers to drive unnecessary costs out of the system and ensure that all members of the supply chain benefit from strong returns. For the farm sector to survive in Canada, it is critical to have strong customer relations. The Canadian food processing sector is the farmers' largest customer, and we must work together.

The global situation is changing fast, and to retain our per capita level of exports and to stay competitive, we must move toward a zero tariff environment and eliminate non-tariff trade barriers.

Processed and further processed foods are critical to growing Canada's agricultural exports. The growth of this sector will be a determining factor in whether Canada's goal of doubling our exports to $40 billion by 2005 is reached. This target was set in July 1998 by the federal-provincial ministers of agriculture, based on the vision of the Canadian Agri-Food Marketing Council or CAMC.

CAMC has acknowledged that the success in meeting the export target depends on reversing the ratio of processed foods versus commodity exports, so the value-added goods make up 60% of the exports, versus the current 40%. The FCPMC is working to eliminate both tariff and non-tariff barriers to achieve this goal.

Here's the situation of the industry at a glance. FCPMC is the national industry association representing over 170 Canadian-operated companies that manufacture and market an array of food and consumer products that are sold through retail, grocery, drug, convenience, mass merchandise, and food distribution channels. FCPMC members account for more than 75% of total sales in these sectors. We are pleased that later today you will have an opportunity to get a first-hand look at how one of our member companies operates when you visit the facilities of Kellogg Canada Inc.

The Canadian food and beverage industry is an important component of our national economy. In 1997 the industry generated over $15 billion annually in GDP, which is over 12% of Canada's manufacturing GDP. I mentioned earlier it purchased 45% of all Canadian agricultural commodities and also produced exports valued at $11.5 billion. It employed 250,000 Canadians directly in every region in Canada. In addition, our sector creates three times that number of jobs through indirect employment across Canada.

A positive outlook for our sector is by no means certain. There is potential for the consumer products manufacturing industry to face a no-growth scenario in Canada, and we are clearly at a crossroads. Growth is possible, and government decisions will help determine the eventual outcome.

• 0910

What has the potential to limit growth? There are really two major areas that if left unchanged will limit growth. The first is the current regulatory environment that is diminishing industry competitiveness and growth. I just want to make it clear that we are not asking for elimination of regulations, but simply for the updating and modernization of our regulatory environment.

The second area is the reduction and future elimination of non-tariff trade barriers. The use of non-tariff trade barriers as protectionist measures inhibits our ability to take full advantage of Canada's reputation as a producer of high-quality food and agricultural inputs. For example, in Canada we cannot make health claims for food products, nor can we enrich our products to the same levels as in the United States, our major trading partner.

FCPMC supports maintaining a science-based set of rules for trade as a key objective for Canada. In areas such as the sanitary and phytosanitary measures and biotechnology, the consideration of non-scientific factors would allow countries to engage in discriminatory and unjustifiable trade actions with regard to food products.

So where does free trade fit in? Our companies believe that NAFTA's free trade has opened up valuable business opportunities on a North American basis. Currently, 85% of our total trade is with the United States. Export growth is a priority with our members and a very high priority with Canadian-owned companies.

The Canadian government has not reacted proactively to the opportunities made available by free trade. In other words, Canada is not moving fast enough to seek common standards or mutual recognition of our regulations with our major trading partner, the U.S.

Fundamental reform of the trading environment is not only desirable, it is inevitable. The government has set a course for trade liberalization that highlights Canada's strength in agricultural production. The recent experience with low world commodity prices underscores the need to increase valued-added manufacturing in Canada to generate more favourable returns to our own producers and fully exploit the major economic benefits of value-added production.

However, to create market access opportunities for our value-added products, we must be open to reducing tariffs to imports. This trade-off is necessary to expand our market access opportunities.

For Canada to recapture lost ground as a major agricultural exporter, we must become more competitive at home first. We recommend five actions. First, we must shift from a strictly farm-gate agricultural policy focus to one that incorporates all links of the agricultural supply chain.

Second, we must actively seek reduction and elimination of agricultural tariffs through the WTO, not only on commodities but also on processed food. Take a look at wheat barley versus beer, as an example.

Third, we must plan for the transition to tariff elimination now. We need to ensure that Canada's producers can adjust to a new trading environment.

Fourth, we must recognize that Canada's major export market for food is the U.S. and look for opportunities through NAFTA to ease North American barriers to trade now in order to set a strong example for the WTO.

Fifth, we must actively press for the maintenance of science-based rules for trade in food products, particularly for sanitary and phytosanitary measures and products containing genetically modified organisms.

What will be the result of some of this action over the next decade? As food manufacturers, we believe we can double our food and beverage exports from the current $11.8 billion to $20 billion by 2008 due to enhanced competitiveness. We could also have a 38% increase in incremental sales of agricultural products, which would take us from the current $13 billion in 1998 to $18 billion in 2008, and we could add an additional 35,000 to 72,000 high-paying jobs.

FCPMC believes there are significant opportunities to grow Canada's manufacturing in food and beverages by embracing change and working with producers to ensure a highly competitive agrifood sector. We believe the economy will surely grow by taking on this challenge.

Thank you once again for the opportunity to share our comments. We look forward to participating in the dialogue.

The Chairman: Thank you very much, Ms. Curry.

We will go next to the Ontario Soybean Growers' Marketing Board. Mr. Brandenburg.

• 0915

Mr. Fred Brandenburg (Secretary-Manager, Ontario Soybean Growers' Marketing Board): Thank you, Mr. Chairman. It's good to be here. I certainly appreciate this opportunity to meet with the standing committee, and we appreciate you coming to southern Ontario.

Mr. McCreery is our vice-chair, and we pulled him out of the field today to come meet with the committee. I'm certainly glad he was able to make it.

I just wanted to give a little bit of background on the Soybean Growers' Marketing Board. We were established in 1949, so we are celebrating our 50th anniversary this year. We represent over 25,000 soybean growers in the province of Ontario. Our mission is to develop and promote a sound industry business environment that will allow Ontario soybean producers the opportunity for a viable and profitable ongoing return.

Soybeans are the largest acreage cash crop in Ontario. In 1998, Ontario farmers produced over 2 million tonnes of soybeans, which represents 85% of Canada's production. We are a member of the Canadian Alliance of Agri-Food Exporters, so we do certainly support fairer and freer and more open international trade through the establishment of regional trade agreements and through the WTO.

Now a few words on our soybean marketing system are in order, because it does differ from some of the other marketing systems in the country. Canadian soybeans are treated under a free market system. There are no import tariffs on soybeans; there are no other controls, no import quotas. It's a totally open market. Also, our board does not assume ownership of soybeans or do any producer price pooling, so we have a very different structure of marketing board than many of the other boards in the country.

Our board powers are limited to licensing soybean buyers in Ontario and also to negotiating an annual marketing agreement, which lays out the terms and conditions of sale. Canadian soybean prices are based on world market values. Producers are free to sell their soybeans at any time to any licensed grain dealer in Ontario, or they can even sell directly into export markets if they wish. As well, our grain dealers, after they purchase soybeans, will resell them to domestic processors or for export.

Over the past 20 years, the production and export of Canadian soybeans and soybean products have increased sharply, and during that same period soybean imports have decreased by 60%. I have a table here just to outline some of the changes we've seen take place. Soybean production has more than quadrupled in the last 20 years, and that's due in large part to markets being available. Also, we have to give credit to our federal government in the research and development of soybean varieties that can be grown across southern Ontario, and now into Quebec, and we expect in a short period of time we'll see soybeans being a significant crop in the prairies and in eastern Canada. So we certainly want to give credit where credit's due.

Soybean exports have increased by almost 900%, again due to the increased production, but also due to a fair bit of market development. Again, we've had quite a bit of help from the federal government there. A lot of our market development efforts have been to develop markets for a higher-value soybean, mainly in Asia. We've also seen quite a large market develop in Europe in recent years. Those are actually for a premium-priced soybean. We're earning a better price than we can on our domestic market. As I mentioned, soybean imports have dropped. Our domestic use has increased almost 200%.

We've seen soyoil exports increase by almost 800%. That factor has really come into play since the Canada-U.S. Trade Agreement. Soy oil exports were virtually non-existent before CUSTA because of export subsidies on vegetable oils provided by the European Union and by the United States. So our Canadian domestic processors were left fighting over our domestic market, which isn't that big. With the opening of the U.S. market, we've seen soyoil go to the U.S., and also canola oil. Soy oil imports haven't changed much. They've stayed relatively flat.

• 0920

Soymeal exports have increased about 50% and soymeal imports have also increased, and that's a reflection of our livestock markets across Canada and how they've grown, and how they value soymeal in their feeds.

As far as our goals for WTO negotiations are concerned, we worked together with the oilseed processors and other oilseed producers and put together a position paper on our goals for WTO negotiations. It's called “A Vision Statement of the Canadian Oilseed Industry Trade Policy and Negotiating Objectives”. We've endorsed that paper, as have the Canadian Canola Growers Association, the Canola Council of Canada, and the Canadian Oilseed Processors Association. I've attached it as an appendix. We did forward that to the committee two weeks ago, so some of you may have had a chance to read through that paper. In the rest of our paper we'll just try to highlight some of the aspects of that paper and focus specifically on soybeans.

The foundation of the oilseed industry vision for trade is what we call a zero-for-zero level playing field proposal. Zero-for-zero calls for the complete elimination of all barriers to market access and all export subsidies for trade in oilseeds and oilseed products. This proposal has been unanimously supported in Canada by all members of the oilseed industry, and it's also supported by a large number of WTO member countries that are producers and exporters of oilseeds and oilseed products.

The pursuit of the zero-for-zero proposal on oilseeds and oilseed products is an attempt to effectively eliminate the adverse trade-distorting effects of protectionism and allow comparative advantage on production efficiency to prevail under trade rules that are fair and equitable to all industry participants and also enforceable under the WTO. This is the objective of the Canadian oilseed industry in this coming WTO round.

Now I'll talk about a few specific areas. Market access is a very important one. The oilseed industry seeks the elimination of all tariff and non-tariff barriers to market access in order to expand its potential to produce, process, and export oilseeds and products. The zero-for-zero trade policy proposal seeks the elimination of all market access impediments and the elimination of escalating and discriminatory tariff regimes. It also seeks to achieve the transparent, uniformly applied regulation of the import licence and quota controls under fair, equitable, and enforceable WTO administration.

The Government of Canada has taken the position that export subsidies on agricultural products should be eliminated. The oilseed industry in Canada supports that position in its zero-for-zero proposal, seeking the end to all export subsidies and differential taxes that impact the export sale price of commodities and distort fair, equitable trade. In addition, the use of export credits and tied food aid must be disciplined and subject to clear, enforceable WTO rules. We certainly feel that at times some of these export credit programs are really disguised export subsidies.

On domestic support, we feel the Canadian negotiating position must rebalance the provisions for exemptions and reductions in domestic support. Some of the specific objectives should include WTO rules that provide for a consistent approach in defining green programs. We think we've seen that green definition stretched a fair bit by some countries. We'd also like to see a capped level of support for green programs, and we want to see a further reduction in the level of permissible spending on trade-distorting domestic support.

We would like to see the total elimination of the blue box category for domestic support programs. Also, we'd like to see maximum levels or caps on commodity-specific support programs.

We feel sanitary and phytosanitary measures must continue to be science-based to prevent the use of SPS as non-tariff barriers to trade. Certainly we're very concerned about what's happening in the area of genetically modified organisms, or products that have been genetically modified, and we would certainly like to see those rules based on science so that they do not become a trade barrier. We've seen certainly some difficulties in Canadian exports and other exports because of GM concerns.

• 0925

However, the Ontario Soybean Growers' Marketing Board does not support reopening the WTO agreement on sanitary and phytosanitary trade. The main reason for that is we're afraid other countries will try to introduce measures that would not be science-based.

In terms of the impact of a zero-for-zero level playing field system, there have been a number of economic analyses of the world oilseed sector, and they strongly support the vision of the Canadian oilseed producers and processors. In 1998 Agriculture and Agri-food Canada conducted a study called “Trade Liberalization of the International Oilseed Complex”. The conclusion reached was that under all the scenarios they examined, Canada's oilseed producers and processors would gain from trade liberalization. For some easy numbers, they felt that average world prices for vegetable oils would increase about 6%, and about 2% for protein meal and 2% for unprocessed seed.

In 1999 we've already seen a study released by the George Morris Centre in Guelph; it's called “Net Benefits to the Canadian Economy of Increased Agricultural Trade Liberalization under the WTO”. It indicates that farm net revenue for both soybeans and canola would expand significantly under zero-for-zero, and processing industry revenues on both domestic and export sales of canola and soybean meals and oils would also grow.

The study projected two different scenarios. One was the elimination of these controls over 20 years, another under 10 years. That study projected an annual net benefit of $32 million per year for the soybean sector under a 20-year phase-out. However, if we could see a phase-out over 10 years, we would see a benefit of $75.5 million per year. In the canola sector—our companion oilseed in Canada—the benefits would be $161 million annually under a 10-year phase-out, or $486 million under a 20-year phase-out. Total oilseed net benefits then for both the canola and soybean sectors would be $192.7 million per year under 20 years, or up to $561 million per year if we can do this over a 10-year period.

Clearly Canadian soybean growers, canola growers, oilseed processors, and the Canadian economy will benefit through full trade liberalization under the zero-for-zero level playing field proposal. We urge the Government of Canada to place a top priority on achieving the zero-for-zero objectives in the next round of WTO negotiations on agriculture.

On behalf of the Ontario Soybean Growers' Marketing Board, we do thank the standing committee for this opportunity to present our views.

The Chairman: Thank you, Mr. Brandenburg.

We'll go to the Ontario Wheat Producers' Marketing Board.

Mr. William McClounie (General Manager, Ontario Wheat Producers' Marketing Board): On behalf of the Ontario Wheat Producers' Marketing Board, I would like to thank you for the opportunity to present the concerns of our producer membership to the committee. I'm William McClounie, general manager of the Ontario Wheat Producers' Marketing Board. I am also a member of the SAGIT committee in the agriculture and food sector.

Today the presentation will be a joint presentation. Jim Whitelaw, marketing manager of the Ontario Wheat Producers' Marketing Board, will be commenting on end-use certificates. I'll be commenting on our issues and concerns in regard to the WTO. The issues and points raised by Mr. Brandenburg in his presentation are supported and endorsed by our organization. The beauty of alliances with producers growing similar crops is that we have very common issues and very common concerns.

The presentation I'll address to you will highlight the value and the importance of Ontario agriculture to the Canadian economy. Then I'll also focus in and spend a bit of time highlighting the Canadian Alliance of Agri-Food Exporters. The full brief has been presented to you, and I'm just going to highlight for you this morning.

• 0930

A comment made about our organization is that we are very different from the Canadian Wheat Board. We represent 18,000 wheat producers in the province of Ontario. We're a single-desk seller. We market all wheat on behalf of producers, buy wheat from producers, operate pools, and we sell wheat on behalf of producers. Jim Whitelaw's main job is to do that selling. Our crop value is about $200 million per year. The profile of our crop is that about 40% of it is used in the domestic milling market, 48% to 50% is sold into the U.S. market, and the balance sold in the offshore market.

So our dependence on exports to the U.S., mainly, and to the offshore is critical. Our dependence on our value-added customers in the Ontario industry is also critical. We have a significant value-added in flour, bakery, and biscuit manufacturing in the province.

So Ontario agriculture and exports are critical to the importance of the economy of the province, but also to Canada. Within Ontario we far exceed any other province. According to Ag Canada information provided for January to February of 1998, Ontario was responsible to almost 30% of the Canadian agrifood exports. This represents 40% more than the next biggest province, Alberta. Ontario exports were up 9.5% for 1998.

Canada was obligated to reduce amber support by 20% in the base period of 1986-1988. This was a result of our negotiations in the Uruguay Round. I think you're well aware that Canada has far exceeded the obligations of domestic support, and has made that reduction of 85%. Canada does have some significant programs, amber programs, that are of importance particularly to Ontario producers, these being NISA, crop insurance, and market revenue. These programs are vital to the survival and the support and continued growth of grains and oilseed producers in Ontario in maintaining income support, and also to provide product for our value-added customers.

In terms of the advice our groups can provide to the negotiators of the Canadian position, it's that Canada should align itself very strongly with the Cairns Group. This will achieve, and is achieving, similar goals. The priorities for future trade expansion should emphasize value-added products. The value-added represents a much greater opportunity for growth and for added rural employment.

Trade in agrifood products made from genetically modified crops—and Mr. Brandenburg identified that earlier—can and will be the major issue in the next round. Where that discussion should lie, whether or not it's within the SPS agreement or a totally separate agreement, has yet to be determined. The genetically modified products, GMOs, again are of major concern. As far as end-use certificates are concerned, Jim will address that. I'll just go through the rest of the position paper.

The Canadian Alliance of Agri-Food Exporters—I think you're all aware of that organization and group—is an affiliation, an alliance, of major primary producers and value-added organizations identifying concerns of exporters. In terms of their importance to the Canadian economy, in 1996 agrifood exports totalled $18.8 billion and accounted for 7.1% of the total Canadian exports. As a small example, in Ontario our profile of exports has changed dramatically in the last ten years, where our production was typically one-third in the domestic market and two-thirds in the offshore market, with a bit sold into the U.S.

Our profile has changed dramatically, where, as I mentioned earlier, it's 40% domestic because of the increased capacity of Ontario mills and the growth in our value-added in exports to the U.S., selling raw product to the U.S., and selling into the offshore market.

As far as operating principles for negotiations are concerned, it's very clear negotiations should be as comprehensive as possible. Broad negotiations should be taken to get some significant breakthroughs on behalf of the Canadian agriculture, in particular Ontario agriculture.

On the issue of market access, we believe there should be a maximum possible increase of minimum access requirements. We believe there should be elimination of in-quota duties; a maximum possible reduction of tariffs outside of TRQs; a maximum possible reduction, and no new application, of tariff escalation, which can be a hindrance to value-added products; and also clear and effective binding rules on TRQ administration.

• 0935

On export subsidies we agree, as do all organizations across the country, that export subsidies should be eliminated. This will be a major issue in negotiations, especially with the EU. Our organization faced export subsidy losses to our producers in the late 1980s where we were selling product for about $40 a tonne less than our domestic price in the export market as a result of competing with export subsidies. Effectively we're reducing income of producers; effectively producers, out of their own pockets, are subsidizing the sales into competing markets.

As far as domestic subsidies and domestic support is concerned, we should seek further reduction in the level of permissible spending on trade-distorting subsidies. As was pointed out earlier, though, Canada has reduced domestic support levels by 85%. So we've gone a long way in reducing our domestic support to Canadian agriculture.

On SPS rules, we agree with what Mr. Brandenburg has indicated, that there should be clear rules on SPS and also on products of biotechnology.

I know time is of the essence, so I'll stop there and turn it over to Mr. Whitelaw. He is going to address end-use certificates.

Mr. Jim Whitelaw (Marketing Manager, Ontario Wheat Producers' Marketing Board): Good morning.

Since 1987, with the free trade agreement pertaining to article 705, for market access for grain and grain products, in the original spirit of the agreement, Canada alone had an end-use certificate. It was primarily to prevent the possibility of U.S. grain entering Canada and going out through as Canadian exports.

In 1995 there was a drastic change to the agreement. As far as Canada was concerned, it still maintained the end-use certificate, whose only function was again to keep U.S. grain out of Canadian exports. It was not monitored as far as compliance to the mills if wheat was brought in. It was deemed that if the declaration was that wheat was going to a domestic processor, it was subject to audit. There was no further monitoring.

With the change in 1995, the U.S. now had an end-use certificate, which was a document that had to be presented from the exporter side in Canada, filed with the proper authority in the United States, and then the further purchaser of this wheat would also have to file within a certain number of days, declaring usage. Originally there was no encumbrance on the parties. Since March 1995, though, the customers we sell to in the United States advise me that they're putting at least eight hours a week into filing documents solely on the Ontario wheat they're purchasing, and this seems to the board to be an encumbrance.

Taking it from there, in the United States the position to withdraw an end-use certificate, if Canada withdraws, is supported by the National Association of Export Companies and the National Grain Trade Council out of Washington. I've met and been party to both groups.

The Ontario Wheat Producers' Marketing Board—I won't speak on any conditions of wheat exporting from the west, only from Ontario—does not sell wheat in the United States through the grain trade. The Ontario Wheat Producers' Marketing Board does sell direct to value-added users in the United States, who in turn supply millions of kilos of products to Canadian consumers. What we are talking of here is a trade balance of Ontario wheat going into the manufacturing sector in the United States, directly into the manufacturing sector, and coming directly back into Canada.

It should be sufficient. Each country has a right to monitor imports and exports, as are accomplished now through our border crossings and our collections at those sites. To have this secondary encumbrance is not necessary at this point. The original border crossing collects enough data supplied to Ottawa, to Statistics Canada, to monitor any situation as far as, on the U.S. side, wheat coming in, or, for Canada, wheat going out and coming in, that the end-use certificate, as I say, is a secondary document that almost appears to be a trade barrier, as far as Ontario is concerned, if you are a small operation in the United States.

• 0940

The Ontario Wheat Producers' Marketing Board sells to over 38 end-users in the United States, some of which are relatively small, in New York, dealing in such things as pretzels and so on that don't have the staff and the ability to complete this documentation day in and day out and have it filed within the mandatory ten-day limit.

I guess if there's one reason to be here before this committee, it is to have Canada seriously consider, for the next round of negotiations, the removal of the end-use certificate on Canada's part, and, if necessary, have more monitoring at the border as far as customs collecting the necessary data. Having two documentations on one grain when no other exports of corn or soybeans in and out of Ontario to neighbouring states has this puts a burden on both our agents that take it into the States, and especially on our customers, the end-users, who buy it in the neighbouring states.

The Chairman: Thank you.

Before we go to the next presenter, Mr. Whitelaw, could you speak to me afterwards about that? There's a meeting of the Canada-United States Interparliamentary Group that...I don't know if Jean sometimes goes to them. I don't know, Jerry, if you go to them, or anybody else. I think, Maud, you've sometimes gone to the Canada-U.S. meeting, but that's the type of issue we discuss.

Most of these things start in Congress, so if we could get that issue onto the program of one of those groups—we have three groups that meet and discuss different issues, but one of them is Canada-U.S. trade issues and non-tariff barriers. If we could get an alliance of congressmen from the northern states who would help us get at that, that would be very helpful. But we'll need some actual sort of one-pager items. I get it in your brief, but if I can get a one-pager and somehow get it onto the agenda for this year's meeting in Quebec City in May, I think it could be helpful.

Mr. Jim Whitelaw: We'll do that.

The Chairman: Okay.

Next is the Ontario Corn Producers' Association.

Mr. Dennis Jack (First Vice-President, Ontario Corn Producers' Association): Thank you for the opportunity to make this presentation this morning. I'm Dennis Jack, first vice-president of the Ontario Corn Producers' Association. With me is Terry Daynard, executive vice-president.

The Ontario Corn Producers' Association represents 21,000 farmers who grow and market corn in Ontario. The value of the crop grown averages nearly $1 billion annually, including corn fed on farms as well as corn marketed commercially. Although as much as one million tonnes of grain corn have been exported from Ontario in some years, our association prefers to export processed corn products, of which there are many thousands. The largest exports include corn sweeteners, paper and cardboard products, for which cornstarch provides both the sizing and the glue, beverages, prepared foods, meat and other livestock products, and many other consumer products, such as toothpaste, cosmetics, pharmaceuticals, even automobile parts.

Since the Canada-U.S. border is completely open for corn shipments, corn moves simultaneously across the border in both directions, just as it does between American states and Canadian provinces. The U.S. is the largest importer of Ontario-grown corn and corn products and the largest exporter of corn to Canada. However, Ontario corn is exported to several other countries on a regular basis. Ontario corn farmers are used to competing directly with the dominant corn-producing country in the world.

Ontario is Canada's largest producer of both agriculture and food products and the largest exporter of agrifood products. In addition, exports represent a higher percentage of the Ontario gross domestic product than for all agricultural provinces to the west. It is most appropriate for the Standing Committee on Foreign Affairs and International Trade to discuss trade issues in London, Ontario, the centre of the most important and intensive area of agrifood production in North America.

The impending millennium round of trade negotiations in agriculture is highly important to Ontario farmers. Relative to the myriad of issues that will be on the table, the Ontario Corn Producers' Association would like to emphasize the following.

• 0945

High priority must be given to the expansion of markets for Canadian agrifood products internationally. This is especially important for exports of value-added commodities. While exports of bulk agricultural commodities such as grains are also important, the global export demand for grains has not grown in two decades, unlike the situation with value-added products.

Canada is a small player internationally and should seek to increase its influence through alliances with other similar countries. The Cairns Group is ideally suited for this purpose.

Export and blue box subsidy programs in agriculture must be terminated. The European Union, in particular, has used both types of programs extensively since the completion of the Uruguay Round in 1994, to the detriment of Canadian farmers.

Major attention must also be paid to the U.S. domestic subsidy programs, especially for grains and oilseeds. Despite claims by the U.S. Secretary of Agriculture to the contrary, and a major agrifood trade conference in Ottawa 10 days ago, there is ample evidence to show that these subsidies act as a direct price support program, have increased dramatically in the past six months, and are having a major influence on American farm crop-planting plans.

U.S. government support for corn growers is far larger than for equivalent farmers in Ontario. I'd like, if I could have your permission, to give you an aside, some insight that I have into U.S. support programs, which may or may not be as significant as European support programs.

I'm a farmer in southwestern Ontario. I have a brother who farms in the mid-south of the U.S., three hours south of Memphis, Tennessee, in the Mississippi delta. He farms approximately 4,000 acres. His favourite uncle, Uncle Sam, supports his farming operation at the level of $80 U.S. per acre on an acreage slightly in excess of 4,000 acres. I don't know how your math is, but if you take the $80 U.S.—the exchange right now would probably make that equivalent to $120 Canadian—for 4,000 acres, that is almost equivalent to half a million dollars that the U.S. government puts into his farming operation.

That may not be trade distorting, but it certainly provides that operation and many other farming operations in the U.S. with an opportunity to generate a profit and carry on. What it really does is put the hurt on the competition, and the competition in this case is us.

Although some have suggested that increased efforts should be made in the next trade round in better defining distinctions between amber and green income support programs in agriculture, all income support programs have some influence on production and marketing. A better approach might be to continue to provide limits on overall levels of domestic income support or aggregate measures of support for agriculture, with the green designation being reserved for programs such as research, quality control, environmental improvements, and the like.

Non-tariff trade barriers are a large and growing concern for Ontario farmers, especially when they have the potential to become major trade barriers based on sanitary and phytosanitary concerns not supported by good science. It is important that Canadian producers supply agriculture and food products that meet individualized customer wants, but it is equally critical that government barriers to importation be based on state-of-the-art science. This is of special concern for trade in corn and corn products produced using biotechnology—technology that offers major potential as a means of improving food and environmental quality and for increased global food production, while lowering costs of production.

The Sanitary and Phytosanitary Agreement on agriculture reached as part of the Uruguay Round provides a solid basis for international trade. Priority must be given to means to ensure adherence to this agreement, not changes to the agreement that weaken it. Non-tariff barriers should not be allowed to become the common-place substitute for duties or used as a means of restricting international trade.

• 0950

Present anti-dumping rules, by which products are classed as dumped if sold below cost of production, make no sense in agriculture where price fluctuations are cyclical and prices may be below so-called costs of production for extended periods of time. This can be the basis for unreasonable trade actions.

For example, with the present low corn prices, Canada is probably dumping corn in the U.S., and the U.S. is doing the same here.

In addition, efforts should be made to continue to strengthen proof-of-injury requirements with both anti-dumping and countervailing duty disputes. Canada is very rigid in this regard. Other countries, especially the U.S., should be obliged to demonstrate similar diligence.

Thank you very much for the opportunity to make this presentation. Mr. Daynard and I would be pleased to answer any questions you may have.

The Chairman: Thank you very much, sir. Thank you for the rather telling illustration. That's the type of thing that brings these issues home to us, when you understand the real-life application of it.

I suspect if your brother were farming in Europe, he might be getting $150 an acre or something, if we're looking at the numbers right.

Mr. Obhrai.

Mr. Deepak Obhrai (Calgary East, Ref.): Thank you.

Gentleman and ladies, thank you for coming and giving your presentations.

We've been hearing quite a lot of diverse information that has come in reference to WTO, especially your agricultural industry.

This biotechnology issue—these GMO products—is, I suppose, going to become a major issue in the future here, so perhaps you can tell us what your association's view is on this. I see you're asking for science-based rules, and you feel there are going to be some trade barriers here. Perhaps, since it impacts your industry in agriculture the most, you could use some more information and knowledge from someone who really knows about this subject in detail.

Ms. Laurie Curry: I think the important thing to know is that the SPS agreement and SPS measures have been in place now for four years. So it's had four years of application already. I think that's important to know. And that's ensuring that the SPS measures are based on science and not used as disguised means of restricting trade. I think that's the basic premise, because what the debate and some of the dialogue right now is about is whether biotechnology is under the SPS or not. We believe it is, and that for the past four years issues around biotechnology have been captured under the SPS agreement. So we are saying it should be maintained under the SPS agreement, because the SPS agreement is the only agreement in which decisions must be based on science. So we think it should be dealt with there, versus potentially a new measure.

The other important thing is that we are recommending the SPS agreement not be reopened. We feel that if the SPS is reopened, it would be similar to opening up the legislation. Once you open up an act, everything is open for debate. So what we are saying now is, do not reopen the SPS agreement. We think what is probably required at this point in time is reinforcement of the application of the SPS based on the fact that it must be based on science.

So keep the SPS agreement in place. Biotechnology should fall underneath that. What we probably need right now is some interpretive guidelines to ensure the application is appropriate.

Mr. Deepak Obhrai: One of the concerns we heard about biotechnology and everything is the possibility of...as it is going to be licensed, the seeds and everything. And you are in the industry that is impacted heavily—the growers' association. Would that not, in turn, become a major...? What would be the future trend? There seems to be a lot of opposition to that.

• 0955

Mr. Terry Daynard (Executive Vice-President, Ontario Corn Producers' Association): I'd like to comment on this from the farmers' perspective.

It's an enigma. I agree completely with the comments that Laurie made on the SPS agreement. The difficulty is not the agreement; it's getting adherence to the interpretation of the it.

Biotechnology is an enigma. You have to distinguish, we think, between what the trade rules should be and what we should do in terms of what our customers want. In fact, we're going through a fairly intensive process, as we speak, here in Ontario, trying to sort out means by which we can allocate corn and separate it out for customers who have particular needs. Some of our processors in North America have announced that they want certain requirements to meet European import standards as they stand at the moment, and we're going to work with them 100% to meet those. And I suspect we'll be compartmentalizing corn more so in the next short period of time.

At the same time, though, the technology offers so much potential. It offers major opportunity in the environmental area. We have seen enormous opportunities to cut back on pesticide use through the use of biotechnology. We see the opportunity to eliminate some fairly serious natural toxins that exist in farm crops and that crop up from time to time. We see the opportunity to change the nutritional characteristics of crops. We simply can't ignore those opportunities, because there's going to be market demand for that as well.

We're up against a bit of a media frenzy at the moment, primarily coming from Europe and primarily as an after-effect of the mad cow disease situation, which was handled very poorly over there. So we feel we have to argue for what we believe is good science, good-quality food products, and needs to meet consumer demands down the road. At the same time, we have to concentrate on providing different types of commodities for what the customers want.

As far as the concerns from the farmers go, there are concerns in terms of the changing nature of the industry. Some fear it and some welcome it. There's a good level of competition out there. There are signs that good levels of competition will be remaining, but certainly the industry is changing in a hurry.

Mr. Deepak Obhrai: Thank you very much.

[Translation]

The Chairman: Ms. Debien.

Ms. Maud Debien (Laval East, BQ): Mr. Brandenburg, at the beginning of your presentation, you told us that the soy bean marketing system was very different from other systems. You said that in the case of soy bean, there were no tariff barriers or quotas, and that markets were completely open. You said that there had been an incredible 900% increase in soy bean exports. A little further on, you told us it was essential that tariff and non-tariff barriers be eliminated. I understand from this that the soy bean industry is rapidly expanding and has practically no problems, but then you mentioned eliminating tariff and non-tariff barriers. There seems to be a contradiction here. Were you talking about your industry in particular, the soybean industry, or rather about agriculture in general? That is my first question.

My second question is for Mr. McClounie, who talked about market access. You said that minimum access should be increased. Were you talking about the famous 5% that was negotiated during the Uruguay Round, the 5% which Canada has respected unlike some other countries? When you said that market access should be increased, were you talking about this 5%, or in other words market access equivalent to 5% of domestic consumption? Yesterday some people spoke to us about an increase of 10% or 15%, although others told us that Canada has already done its share in this regard, but that the United States and the countries of Europe had interpreted this 5% rule to suit themselves. Would you like to see this 5% market access increased?

• 1000

I have a question similar to the one Mr. Graham asked on certificates. This is the first time we have heard about this aspect of international trade. I would have to say I do not know very much about it. Could you give us a brief explanation of what is involved?

With respect to sanitary and phytosanitary measures in Quebec, researchers have spoken to us about the dangers of recombinant DNA. When we talk about genetically modified organisms, we are talking about recombinant DNA. These researchers gave us the example of some grain varieties sold to certain developing countries which completely wiped out their local crops. They therefore asked us to indicate in the SPS Agreement that recombinant DNA could be a pathogenetic factor. Would you agree with this statement?

My final question has to do with supply management. I believe it was Mr. Jack who said that domestic support should be defined and limits established for income support programs. I do not think you were talking about supply management. I would like to know your position on supply management. There would appear to be an agreement among all agricultural producers, in Canada and in Quebec, to maintain supply management.

Those are the questions I have.

[English]

The Chairman: Okay, who's going to start?

Mr. Brandenburg.

Mr. Fred Brandenburg: On the first question, I would be happy to clarify. On soybean imports into Canada, there are no tariffs and no controls at all. It's a free, open border. The same situation exists for soybean meal. There is a tariff on soybean oil, not a very high level, but there is one, and our industry would be happy to have that eliminated.

However, in the attachment to our document, on page 6, we have a listing of a number of countries and what we would like to see happen. In many other countries they do have tariffs on the imports of either oilseeds, which may be soybeans or canola, or other products. Some countries also have quotas or they have state-controlled importing agencies that very tightly control the trade in oilseed products. In our proposal, those are the types of controls we would like to see eliminated.

We would like to comment on a couple of your other questions. On the market access question, in the oilseed sector, I guess margarine is the one related product, further upstream or downstream product, where there was a total prohibition on margarine imports into Canada before the last GATT round. That prohibition was changed to tariffs. There are tariffs at a very high level over that 5% minimum access amount that's allowed. But our industry, again, would like to see that totally opened up. That 5% can be extended to 100%, as far as we're concerned. So we're open on that one.

I would like to comment also on the supposed dangers of genetically modified organisms. In Canada, we feel we have a very good regulatory system that we have lost confidence in. Any of the products that have been released in Canada have been very thoroughly tested. Certainly there have been times where certain dangers have been identified, and those products have not been released for production and consumption. That's the kind of system that we feel needs to be maintained. We would like to see that extended in other parts of the world, that things are very closely tested and monitored and only released when we have a very strong level of confidence.

• 1005

The Chairman: Mr. McCreery.

Mr. Liam McCreery (Director, District 7 (Oxford, Brant and Hamilton-Wentworth), Ontario Soybean Growers' Marketing Board): I would like to add to that on the GMO issue, on the trade barriers, and on market access. This chart on page 2 has shown the tremendous growth in the soybean industry in Canada. Up to about five years ago, most of that growth was in the province of Ontario. Right now the tremendous growth we're seeing in Canada is in the province of Quebec. A lot of those beans are used for what we call topping up loads that are going to Europe. Some of those beans grown in Quebec this year will be GMO beans. I'm sure there were GMO beans grown in Quebec last year.

The Chairman: GMO?

Mr. Liam McCreery: Genetically modified organisms, part of biotechnology. We would hate to see our European market, which is our largest export market for our Canadian beans, be taken away because the Europeans are saying they don't want GMOs. The reasons they give us are not based on science. That would have a profound effect on Quebec growers, on Ontario growers, and on Canada as a country. That hammer is there right now.

I'll try to put this properly. Canadian canola going into Europe has been banned. There's a moratorium on it for the next two years because of concerns about GMOs. We want it to be based on science, not on emotion.

Am I explaining it correctly?

The Chairman: Yes. We've had this discussion at various other hearings, so we're getting on track.

Mr. William McClounie: Thank you, and thank you for the questions of clarity. I appreciate that. I'll address the questions pertaining to market access. You had some other questions within your statement that others will address, and I'll reserve comment about supply management until Mr. Jack addresses it.

With regard to minimum access, I totally agree with the comments you've made. Canada has met its obligations of the notorious 5% and more and other countries have not. The key with market access is that it's a guideline. It isn't a regulatory means of adherence; it's merely a guideline. The other concern was aggregated versus disaggregated. Our suggestion has been that the aggregated commitment should be taken, not the disaggregated.

The position of SM-5 has been that there should be a clean minimum access—clear rules, clean access—and they agree with other countries going to 5%. We made the statement here about increasing the minimum access. That would be good if it's possible, providing that first goal is met, but there has to be a vision to look down the road—can minimum access be increased, provided everyone else is on a level playing field with other countries? When it comes to over-quota tariffs, which is kind of the cap of the lid for supply management, I think the SM-5 believe that cap should be maintained; it should not be reduced.

I'll stop there and turn to Terry or Dennis to answer questions.

Mr. Terry Daynard: I'm going to comment on a couple of things. Our organization has no position on supply management. It's not part of our industry. We're totally open. We've operated with an open board for as long as we can remember. Supply management in poultry and dairy are good customers of ours. I would say we sell significant quantities of corn to dairy farmers and poultry farmers in the United States as well. It's basically not for us to talk about somebody else's industry.

At the risk of overkill, I'd like to bring the GMO thing back to some corn examples. Obviously I've worked in Canadian agriculture for a fair period of time, but I have worked in Mexico as well. Statistics supposedly say that in Canada about two million people a year suffer some kind of food sickness. It's not related to genetically modified organisms or pesticides. It's natural contaminants in food, pathogens, microtoxins, and so on.

• 1010

Our problem is nothing like it is in the third world. One of the major problems that affects corn in the third world is aflatoxin. It's deadly at parts per billion. It's formed by natural organisms that grow on corn at higher temperatures. It's a liver carcinogen. Statistics show thousands and thousands of people die from this per year.

We have others. We have fusarium-type moulds that damage corn and wheat here, and are serious. We've spent 50 years of breeding by natural means trying to get rid of it and we haven't been able to. With biotechnology we're on the verge of having material that should be 100% free of this thing.

I've looked at insecticide use here. If you buy sweet corn in Canada, the odds are it's been sprayed with an insecticide because people don't like worms in their can of sweet corn. We can eliminate that with biotechnology. We can move to far safer herbicides. We can now use the kinds of herbicides you buy in Canadian Tire, not the kind of stuff we have to have special licences for because of biotechnology. I think when you're taking risks and benefits into account, you have to take those things into account.

Having worked in Mexico for a while, it bothers me when I see well-fed people in the developed world condemning some of those people to continue to live at subsistence-type agriculture when the tools might be there to offer them a higher standard of living and a little bit more food production from the limited resources they have.

[Translation]

The Chairman: Thank you.

Ms. Maud Debien: Just a comment, if I may. I was not bringing up the whole question of genetically modified organisms again. I simply wanted to let you know that many witnesses have spoken to us about their concerns, and that these concerns, whether or not they are well founded, also exist in the minds of the general population.

[English]

The Chairman: Ms. Augustine.

Ms. Jean Augustine (Etobicoke—Lakeshore, Lib.): Thank you, and good morning. I'm really very pleased. I learned a few things this morning. I learned that soybeans are the largest acreage cash crop in the province of Ontario, and a few other pieces of information. At least there was one bit of benefit, Mr. Chairman. I'm going away with a couple of pieces of information.

The Chairman: How many soybean producers do you have in Etobicoke, in your riding, Ms. Augustine?

Ms. Jean Augustine: Anyway, I'd like to ask a couple of questions. One is to Ms. Curry. Looking at the recommendations you made on page 6, I just wondered if you could speak a bit more to recommendation number 4. You ask us to look for opportunities through NAFTA to ease North American barriers to trade now, so that we can set a strong example. I just wondered if there is some way you can give us some clues as to where you think those opportunities might lie.

My other question, Mr. Chairman, has to do with the issue of.... Since I heard that for corn and soybeans there are open borders, the question soaring around my head is, how do we identify country of origin? These things are coming in and back and forth. Is there labelling? What are the effects so far? Are you pushing for labelling, or is it just open in terms of country of origin? How would China's accession to the WTO more or less reflect your industry at this point in time or skew the entire discussion that so far you have put before us?

The Chairman: Mr. McCreery.

Mr. Liam McCreery: I'll start with the China accession to the WTO. We're very excited by that. We see that as a huge potential market for high-value soybeans in Canada. Ontario—I'm speaking for Ontario today—soybean growers are very proud of their identity-preservation system. That means a specific variety that has specific traits for a specific market. By doing the extra work, the farmer gets a premium and the exporter gets a premium.

• 1015

Having the Chinese accession to the WTO opens up a huge market. We have access to that market to a small extent presently through Hong Kong, but there are non-tariff barriers to actually getting into the Chinese mainland. So anything that will allow us to get our high-quality product to market is excellent.

Mr. Terry Daynard: On the question of origin, it really gets almost impossible to do that when you get into commodities like soybeans and corn, because nobody—at least in Canada and the United States—eats grain corn or soybeans before they are processed and go into a myriad of products. Sometimes they are a major component of a product. Beer is 50% corn. It's also in all kinds of other commodities. For example, the clothes you're wearing have corn built into them. Cosmetics have corn in them. The ink in the pen you're using may have soybeans in it. We're working at trying to make the pen out of corn too, but that's down the road.

It also moves back and forth. Corn moves across the bridge between Ontario and Michigan like it moves between Indiana and Illinois. There are trucks on the bridge going in the opposite directions at the same time carrying corn. It's all blended together here, and essentially that's the way we want to operate.

So when you start to label it as to country of origin, it's hard to distinguish. The corn kernels are all the same. In many cases it's a minor component. I should emphasize it's on the value-added. We're trying hard to attract major industries into southwestern Ontario. One of the reasons you can attract them here is if you take a map of North America and draw a circle for a 300-mile radius, a fair chunk of that is in the United States. You can point out that they have access to Canadian products and access to American products. If you start becoming too nationalistic about that approach, they'll think maybe it would be safer to build that plant in Toledo.

So we really are strongly committed to thinking North American-wise, because then we can be part of the U.S. corn belt and get all the Canadian advantages. We have more competitive labour costs, better social policies, it's a nicer place to live, and so on. So anything that tends to distinguish between an American and a Canadian product makes us nervous.

The Chairman: Ms. Curry.

Ms. Laurie Curry: This is in response to the first question on the barriers on a North American basis. There are really two ways we talk about the barriers. The first would be what we call inside-the-package barriers, or inside-the-box barriers. Then there are on-the-box barriers.

Inside-the-box barriers are what we call formulation barriers. This really means whether you can make a product for the North American marketplace that has one recipe or one formulation of the product. If you can't offer one recipe or one formulation of the product, it means you're in a position of having to shut down your production line or having split-runs of a particular product, with some for Canada and some for the U.S.

This holds true not just for companies that are multinational-based, but for Canadian-owned companies as well that opened up when the NAFTA agreement was signed and can produce products for the U.S. marketplace. To give you an idea of those in-the-box or formulation barriers, there are things like being able to add the same vitamins and minerals to the same levels to your products, north and south of the border. It's being able to add the same sweeteners and other ingredients, such as food additives or colours, to the same levels. So those are the in-the-box barriers or the formulation barriers.

The other one is what we call on-the-pack or on-the-box barriers. This gets into labelling claims and what you can say about a product. So it's what you can add to a product and then how you can talk about that product. There are things like health claims—being able to link food to diseases, like saying calcium may reduce the risk of osteoporosis.

• 1020

A recent example is that we're now adding folic acid to flour in this country, to the same level as the U.S., yet we can't talk to potential Canadian moms about the fact that having increased folic acid in their diets could reduce the risk of neural tube defects or spina bifida. So it's being able to talk about those types of things, as well as nutrient content claims of fat-free and low sodium products. The criteria are different north and south of the border.

Those are really the two categories of difference. I don't know, if there's an opportunity, if Christine wants to add to that from a company perspective. Maybe there'll be an opportunity later.

The Chairman: Thank you. Is that all right? Yes, that sort of covers it.

Okay, Mr. Pickard.

Mr. Jerry Pickard (Chatham—Kent Essex, Lib.): Thank you, Mr. Chairman, and thank you, ladies and gentlemen, for coming today. You certainly represent a very different industry. Most people don't really realize, as Terry and Dennis pointed out, that Ontario is a huge agricultural production province—larger than the rest. Quite frankly, our value-added is tremendous. We certainly have more at risk in Ontario, in our trade agreements on agriculture, than any other province in Canada. Most people don't realize how much bigger we are in the trade industry.

I think the biotechnology question is a tough one. It's unfortunate that the first major issue in biotechnology that came down was bovine growth hormone. That has created a feeling across the consumer sphere that there is a problem with biotechnology. But let me assure you, biotechnology has been going on in Agriculture Canada labs for years. Biotechnology has been going on in the industry for years, and we've developed products that are competitive right around the world.

Terry, I was really pleased to have you point out some of the advantages. But I'm disappointed that in all of the things you pointed out about value-added, biotechnology, and the corn industry, you didn't touch on ethanol. Terry has been one of the bigger promoters of ethanol in the province of Ontario—as well as Dennis. I think that's been extremely positive.

I'd like to focus on the amber box, because it is an area of control I'm concerned about in how we're going to deal with that. It was mentioned by William that NISA crop insurance and market revenue insurance are things we have to keep. They're very valuable to the Canadian agricultural industry, and I think we may be challenged by the U.S. on those three programs.

Has the industry developed a strategy to deal with the ministry at the negotiations. I think it may be an upfront issue that will have to be dealt with. That's my first question. What's your feeling about the strategy to deal with it?

The second question I have is on the end-use certificate. I was interested, Jim, in your presentation on the end-use certificate and the validity of identifying American products for export in Canada. Have you had the opportunity to discuss that issue with Lyle and his department? What was the response from the minister in that regard on the end-use certificate? I think your argument is a very valid one there. When it comes to trying to sort that out, Bill's suggestion about trying to work it out with the Canada-U.S. group is important. But if the minister has moved that agenda forward, it is important for us to know that as well.

Mr. Liam McCreery: I'll try to address your first question, Jerry. I'm sure Terry will jump in after and give a much better explanation from a guy who should be planting corn today.

Under the Uruguay Round, Canada limited itself to an AMS commitment—AMS is the aggregate measure of support. Since the Uruguay Round was completed, as a country we have been around the 15% level of the total subsidies we've been allowed to give our farmers.

• 1025

So you talk about what strategy do we have as producer groups when it's really what strategy do you have as a government. You have a huge opportunity to go into the next round and say let's reduce the aggregate measure of support for all countries by a huge amount. If we reduce it by 80%, that would still give Canada room to increase its support for its farmers.

Mr. Jerry Pickard: If we actually do the reduction, do we still have room for our programs?

Mr. Liam McCreery: Compared to the Uruguay Round, we had a commitment of 100%. We are at 15%. So if we use the Uruguay Round as the measure of where we're going to reduce from, we can reduce by 85% and still be where we are today.

Mr. Terry Daynard: You can put it another way. You could increase the agricultural support five times in Ottawa for Canadian farmers and still not come up to the limit that we negotiated in the WTO round. In terms of strategy, you recognize that the big players are going to be the United States and Europe—especially Europe. Europe is increasing the use of agricultural export subsidies at the moment very dramatically. They've just announced something called Agenda 2000, which is a strategy for increasing the amount of subsidies. They're going to reduce their food prices, but they're going to offset them with higher levels of subsidies that could even take them above what was negotiated in the Uruguay Round.

There are going to be major difficulties. We've already pointed out that we have major difficulties in the sanitary and phytosanitary areas of concern with Europe that are likely to get worse before they get better. The United States is a concern. The United States has a fairly clean record compared to Europe in this area, but they have fairly deep pockets. Of late, they've increased their levels of agricultural subsidies very dramatically, especially in the area that we represent, grains and oilseeds.

We have a two-faced strategy. Number one, we have to survive in the short term, which is one of the clear reasons why we've asked for the maintenance of the kind of support levels we have, and with fairly good cooperation, of late, from Ottawa and Toronto, which we appreciate. In the longer term we think the best strategy is perhaps some kind of an international agreement to lower internationally the levels everywhere. With what resources you have in the Canadian treasury, you can help us compete with that.

You're very correct in pointing out that we forgot to mention ethanol, and we should have. It's a super value-added product. It's a growth opportunity. It's been a major success story in southwestern Ontario. It's a $140 million investment in Chatham with the potential for that to double. There is a rapid growth in consumer demand for this product, particularly in Ontario and Quebec, and in western Canada as well. It's a major export opportunity. We only have to look as far away as Detroit to see a city that uses a lot of ethanol-blended gasoline, and we could supply it from here. It's being driven by environmental concerns and huge opportunities.

This city as well, London, from our perspective, is a corn town. It's the home of John Labatt's, the major brewers, which is a huge user of Canadian-grown corn. Casco Inc. is one of the world's state-of-the-art plants for corn processing, about four miles south of here. It has gone through a major expansion. In fact, they're under construction as we speak. They have the potential to double their business. We have a close relationship with their head office in Chicago, Corn Products International.

We've lost a little ground with Kellogg's in the last few years. They used to mill corn here and they had a close relationship with the farmers. I believe most of that corn, but not all of it, is coming from Illinois at the moment, but we'll get it back. We also have our eye on a bigger Kellogg's plant in Battle Creek, Michigan. We think eventually we're going to come up with a superior product and we can get that business too.

Anything you can do to help us would be appreciated. Put in a good word for us when you visit Kellogg's at lunch today.

Mr. Jim Whitelaw: Mr. Chairman, on the end-use services, there are some questions left unanswered.

• 1030

First of all, that end-use certificate is a secondary document. All the statistics on wheat in Canada and the United States that I receive come from Statistics Canada and Agriculture Canada through Canada Customs. There's no information provided through this documentation, the end-use certificate.

It's the same in the United States. All the information that is distributed through the United States on wheat going into the States is from U.S. Customs, not through documentation.

We are talking about a separate document. There are 400,000 tonnes of Ontario wheat going into the States; on average, there are 1.4 million tonnes of Canadian wheat. For every truckload, you must have a certificate. It must be presented to the U.S. Customs with your U.S. Customs documentation. That certificate goes to Kansas. The receiver of that one truckload has to keep the wheat in isolation and he has to forward the documentation immediately to Kansas with follow-up documentation on its usage.

So there is a lot of paper transaction; it's very cumbersome for something that shouldn't be in that sense.

The drastic change came about this year. Up until now, it was a civil documentation filed once. I won't read it word for word, but this additional information, which is set out in page 2 of our document is very difficult. It involves inspections by the grain commission on the Canadian side, subject to inspections on the U.S. side. It's a whole new area.

On the second point, I always like to speak to Etobicoke because it's a nice place. Up until the free trade agreement, up until 1987, if you went into your local store and bought a box of cereal, it would say “Product of Canada” or “Product of the U.S.”. You may not be aware, but since 1987 it's no longer true.

I won't name a cereal that's based around the table, but I'll take a competitor. Do you know the one that Mikey likes? Can you think of the commercial? If you buy that box, it says that if you have a problem with the cereal, dial 1-800, and it's a number in Canada. That's a U.S. product, but you would not know that. Labelling of the usage of Ontario wheat...we're proud to have Ontario wheat go into these U.S. facilities, make a product and come back. I picked the worst cereal because that's an oat-based cereal.

That's how product packaging is becoming on the shelf. You will not know whether it's a product of the U.S. or a product of Canada. You'll buy it because you like its taste, texture, looks, or your kids want it. That's fine. We want the trade in the raw part to be the same as the trade in the finished product.

Lastly, the board has made many presentations to Lyle and most recently to his unit that deals in that area. We'll make new submissions based on what the U.S. has put in place for the modification of end-use certificates for the current time, for April 1999.

Mr. William McClounie: I have a few follow-up points. First, on the end-use certificate, the reason for it to be in place is to ensure that Canadian wheat does not enter into export channels, and it should be used on export programs.

Secondly, as Jim pointed out, the additional onerous information through customs was an agreement between Canada and the U.S. to gather more information on Canadian wheat exports, now our imports, into the U.S. because of the concern of pricing. In our case, our stocks are sold directly to processors so that (a) it does not enter into export channels, and (b) there's no concern as far as pricing is concerned, because it's obviously very transparent.

Lastly, we have a tendency to use lots of terminology. I want to make sure my terminology is correct on the issue of market access and put it on the record. When we talked about aggregate and disaggregate amounts on market access, minimum access commitments should be in as disaggregated an amount as possible, which means product specific versus sector wide. In certain cases the level of individual tariff lines should be considered. The aggregated commitments permitted in the Uruguay Round, and that was the point raised earlier, have enabled some countries to do some blending of access. Thank you.

The Chairman: Thank you.

• 1035

Ms. Laurie Curry: I just want to add a comment in terms of the ingredients of the North American supply model and then get back to the formulation barriers and why they're so important. If you take a look at a company like Kellogg's today or General Mills, which is the company you're referring to, their first order of business in terms of their competition...General Mills' first competitor is not Kellogg's sitting here. It's General Mills worldwide.

If you're operating in Canada right now, you're not trying to be able to supply 30 million Canadians; you want to be able to get the business and supply 300 million Canadians and Americans. That's why the formulation barriers are so important. If you can't justify and win that business on a North American basis, you might not stay in business. That's where the plank comes back in terms of why, for the manufacturing sector, these formulation barriers are so critical to the growth of the industry.

Mr. Jerry Pickard: I very much support that. In my riding, Heinz has been for years pushing the fact that their biggest competitor is Heinz, United States, not another company. Quite frankly, consistency is important for them or they can't compete on a worldwide basis.

I'm very pleased to see the zero-for-zero proposal because that seems very consistent with all the agricultural groups that we've talked to. That's a very positive point. It looks like the industry has come together and it is working together in a much better fashion on certain issues that are extremely important to the industry. I'm pleased to see that.

The Chairman: Thank you.

I'll just ask one quick technical question and one rather philosophical question, and then we'll terminate the panel. On the technical question, we heard the corn producers saying what their value-added export products would be, like beer, so I can understand that. What are the value-added export products of wheat? You don't export bread, do you? I guess you could export a lot of frozen products. Would it be bread and bread goods that are frozen in some way?

Mr. Jim Whitelaw: Most people are quite surprised at the amount of export/import. For efficiency, we mentioned worldwide. A company that may be focused in Canada and the U.S. will say that the Canadian operation makes these four lines of biscuits. The U.S. operation will make these six lines and then they interchange them. We import nearly 40 million pounds of cookies—sorry for the pounds, but that's the way they have it in Statistics Canada. We export probably 45 million pounds of cookies and biscuits. So there's this grand openness, where a company in Battle Creek makes a certain line and a company in London makes a certain line and they interchange. That's the efficiency of the company, and that should be encouraged.

As far as other value-added products are concerned, yes, there have been some very good inroads. As I mentioned, we have a certain type of wheat that withstands freezing and thawing, and we have made great inroads there.

We have companies that the Government of Ontario is trying to attract and build here as far as pretzel manufacturing and things of that nature are concerned to enhance trade. You're probably aware that everybody loves pretzels, but we don't manufacture them.

The Chairman: We're going to start, I take it.

Mr. Jim Whitelaw: We're going to start.

Mr. Terry Daynard: In our organization we would like to put an increased emphasis on the value-added products that really aren't in the marketplace right now, but they might be five to ten years out.

How do you attract the $50 million pilot projects to try something out? We have examples, and I'm sure you could use them in all of them. In our case we're looking down the road at making replacements for plastic out of carbohydrates, with corn obviously being a good source of that. There are pilot projects globally, and we'd like to attract those here. There's a big market right now, but we anticipate, with the emphasis on the environment and so on down the road, that this is an area we could really cash in on, big time, for a global marketplace.

It's partly a trade...it's anticipating as well for where we'd like to be. It's one area that we're spending a lot of time on. We like the business environment, so if they're going to put it somewhere in North America, put it in Ontario.

The Chairman: That comes back to our ethanol debate. How do you get the proper government framework or environment to encourage that development?

• 1040

My next question is, as I say, philosophical. The National Farmers Union—

Mr. Jerry Pickard: Let Fred talk on value-added too, because in the soybean market value-added is....

Mr. Fred Brandenburg: In the soybean industry most of the value-added is still at the commodity sector. The soybean is crushed for the oil, which goes into cooking oils and margarines and that sort of product, and the protein is very high-value protein supplement for livestock feeds mainly. We are exporting what we're calling value-added soybeans—quite a few to Asia for making food products such as tofu, soy beverages, and a whole range of other products. I guess we have the same issue as was raised by Dr. Daynard: how do we get some of those industries to locate in Canada? Why not export the further value-added products? We have a long way to go yet.

The Chairman: I don't have time, unfortunately, but I think we have to come to grips with what is really a big question. Yesterday we heard from a great number of groups in downtown Toronto that are really upset about the nature of the trade organization. They feel it's destroying society, that we're losing our roots; really many problems are attributed to trade organization. Some people say we should even get out of the WTO, get rid of it. It's like the MAI debate. I can't go into it in detail, but these are serious concerns that people have.

Interestingly enough, in Winnipeg we had a farmers' group, the National Farmers Union, that came and told us the same thing. They said, look, farm values have not gone up, they've gone down. Trade has done nothing for us. The average farmer is poorer than we were before. This whole globalization of trade is destroying us.

Now, every one of you who have come here are saying the traditional thing—let's make the system work better, let's get better access for our products, that's the only way to prosperity.

We were getting the other message and that was the only message we got. Is there a National Farmers Union here in Ontario?

Mr. Jerry Pickard: Yes.

The Chairman: I presume they'd take the same position?

Mr. Jerry Pickard: I'm not certain. Terry would know.

The Chairman: Could someone advise us of that? It seems to me we're really seriously missing a dialogue between the people like yourselves who see the merits in continuing to build the system and those who see it as destroying a way of life. Unless the real people, real farmers like yourselves, talk to other people, it's not going to work if it's just constantly coming from you to us as politicians and then going back out to them.

Admittedly, as politicians we have to act as the filters, but it seems to me those people are really only going to be persuaded if they can sit down around the farm table with you and say, hey, I understand now, your prosperity depends on this. But they aren't persuaded of that. They're persuaded that there's some conspiracy out there that only the big multinationals are benefiting from all this, that your real farmer isn't benefiting in any way. How do we deal with that?

Mr. Terry Daynard: The National Farmers Union is a legitimate national farm organization. They tend to be dominant in western Canada. We have a process in Ontario for so-called registered or certified general farm organizations, and the National Farmers Union has not been certified here. I'm hoping someplace along the line you will talk to the Canadian Federation of Agriculture, which represents a far larger grouping of farm groups.

The Chairman: There's somebody coming this afternoon from the National Farmers Union.

I have Mr. Curry, Mr. McCreery, and then Mr. Whitelaw.

Mr. Terry Daynard: I was going to say they are a pretty small group here. There are two approaches I guess the farm community has taken. We've looked at that within our groups. Number one, you can whine about how terrible it is, that the world changes and you have to be more competitive. There's nothing unique about this in agriculture. You look at everything else, what's happening in the automobile industry, what's happening in the computing industry. Or you can take the view that the welfare of your members and the people you represent depends on your being able to build a better mousetrap, better products, and thinking globally how to do that. I guess we're just satisfied that here in Ontario we have all of the tools, infrastructure, and so on, that we should be able to excel on that basis.

Certainly multinationals play a large role. We have strong farm organizations in Ontario too, to help offset that to some degree, and sometimes we're at each other's throats and sometimes we work very cooperatively. But to wish the world would go back to the way it was in 1950 or 1960 is just not possible. Therefore, figure out how you're going to survive in the next century and not the last one.

• 1045

The Chairman: So Cargill may be a problem, but it's not ruining your...you're going to deal with it. Okay.

Ms. Curry.

Ms. Laurie Curry: I was going to add a comment that in terms of our observation, what's been missing is a vision for the future of the total agrifood sector. That's probably why we don't have the rallying point. Quite frankly, even as manufacturers, we very much have focused from the manufacturer through to the retailer through to the consumer, and I think we need to look back on the chain to make sure we're all working together collectively toward where the future is going to be.

Even the whole focus of WTO when you look at it going into it is very much focused toward primary agricultural commodities. I think that's why our comments today are focused on how you shift beyond that. If we know the growth is going to come from the value-added and we know we have to shift from 60% current exports being commodity to 60% being value-added, how can we work together to be able to achieve that so that it's profitable for all areas within the chain?

The Chairman: Quickly, Mr. McCreery.

Mr. Liam McCreery: Thank you, Mr. Chair.

You are touching on philosophy, and that's an interesting exercise. But from the soybean growers' point of view, in Ontario, we export one-third of our crop. If we decide to be myopic and look into Canada and have Canada become a self nation, we've got a third of our crop that we have no place to put. I think—I know—if you look at all of Canadian agriculture, we produce more than we need in Canada. So for us to look inward and to be against trade is just not practical.

If philosophically, as Canadians, we decide we don't want to trade, our politicians have to be the brokers in that process and have to understand that our lifestyles are going to deteriorate very, very rapidly. Of the G-7 countries, there's no other country that depends more on trade than Canada. For us not to look outward to trade is just not practical if we want to maintain our standard of living in Canada.

The Chairman: Right.

Mr. Liam McCreery: I think to be fair, the people who have problems are not against trade; it's that the system doesn't recognize other values like human rights, labour standards, and a whole host of other very important issues, which get lost in focusing exclusively on the commercial aspects of trade. I think that's a serious concern we have to address.

The Chairman: Jerry.

Mr. Jerry Pickard: If I might, just for one second, I believe that every gentleman and lady here understands that there are regional concerns in all kinds of organizations, including the National Farmers Union, that may have differing viewpoints than the broader national organization of that group. Certainly, as Terry pointed out, CFA is the largest farm organization in this country and the most recognized umbrella group. Their input is there and they are very outward looking at trade. So there's no question that the majority of the farm community would look at a differing viewpoint than what we heard from a regional group in Winnipeg the other day.

The Chairman: That's interesting. Thank you.

I think we're really going to have to draw to a close because we're now running ten minutes over.

Mr. Whitelaw, you get the last word.

Mr. Jim Whitelaw: The last word in all this is communications. We're trying to improve our communications to the people who are involved in trade. As a quick example, I was talking to a primary producer the other day and he was talking to me about couscous and asking me why we are importing this couscous, this Asian thing. I said, no, you're growing it—couscous is made out of wheat. So it's this whole communication in trade that we need to focus on.

The Chairman: Thank you very much. You've been very helpful. We appreciate you. You've been a very interesting panel.

I see Mr. Plumptre in the room, so could I ask him to join us at the table? We'll just take a one-minute break and then we'll start with Mr. Plumptre.

• 1049

• 1054

The Chairman: I'd now like to welcome Mr. Plumptre from Scotiabank. Mr. Plumptre, you understand what we're doing, so I won't make a long introduction. We won't ask what Toronto bankers are doing down here, but I can assume Scotiabank has big clients in London as well.

Mr. Timothy G. Plumptre (Senior Vice-President, Trade Finance and Correspondent Banking, Scotiabank): We do, indeed. Thank you, Mr. Chairman. Good morning, ladies and gentlemen. The reason I'm here is because I thought I might have more time to speak to you than if I had addressed you yesterday in Toronto, and I'm here anyway for a student gathering tonight.

• 1055

Thank you very much for this opportunity to appear before the standing committee. My name is Tim Plumptre, and I'm responsible for Scotiabank's global trade finance business. I'm a former director of the Canadian exporters' and importers' association, and I'm the current chair of the Canadian Bankers Association's foreign trade advisory group. I've also served briefly on a U.S. Department of Trade advisory group on FTAA priorities before the first Miami FTAA summit meeting. Some of the ideas I want to present to you today went forward to the U.S. team. So who knows? You may hear these from them also.

This morning what I'd like to do is to share some thoughts with you on what I believe should be included in Canada's priorities in the FTAA negotiations and other future trade negotiations. These really come under the heading of the scope of what these negotiations should include. The issues I want to raise are based on what our customers have told us, as well as on my own experience, and I lived and worked in eight countries over twenty years before coming to Canada.

Let me begin with a brief overview of Scotiabank's credentials in this area. Our bank has been involved in international trade since its foundation 160 years ago. Today our international offices, including our joint ventures, number almost 700 and span more than 50 countries. Apart from our dominant franchise in the Caribbean, Scotiabank's international presence includes the most extensive Canadian branch network in Latin America and Asia. In Asia we're in 10 countries, where trade finance is our core business, and we're in more than 30 of the countries to be included in the FTAA. Here in Canada we have more than 100 people in eight specialized trade offices across the country, with about 20 of this team directly involved in advising and problem solving for our customers and account officers.

Over the years, and in all these places, Scotiabank has thus accumulated a great deal of experience in helping its customers in their trade business, especially small companies, which, historically, have been our market focus. At the risk of stating the obvious, we support our customers in two related aspects of their business: getting paid and, where appropriate, financing their buyers so that they can get paid.

There are some practical issues of getting paid that I'd like to discuss, and I'm hopeful that these issues can be addressed, if not solved, in future trade negotiations.

Unfortunately, risk and payment factors are often overlooked during governmental trade negotiations, which usually centre on market access and tariff issues. However, ignoring the importance of these factors can have an adverse impact on Canadian exporters, and especially on small and medium-sized enterprises, the SMEs.

Let me explain why this is. I think everyone will agree that there's really no point in selling into a foreign market unless you're confident you're going to get paid. This is particularly the case for small businesses, which do not have the geographic reach or bargaining power of bigger firms to follow up on payment problems. There's not much point in our statesmen negotiating tariff reductions, etc., and signing free trade agreements to new markets if potential exporters cannot sell there confidently.

Has any thought been given to this? That's a rhetorical question. I don't know the answer, but I suspect not.

In several of the countries the FTAA will include, risk and payment factors will likely be a problem. Several of the smaller, weaker economies in Latin America are barely acceptable as risks to commercial banks, and the Export Development Corporation, EDC, which is required under its current mandate to be profitable, is understandably selective.

This is a particular problem with Canada vis-à-vis the U.S., for example, given that trade and investment are closely linked. The U.S. equivalent to EDC, Ex-Im Bank, will tend to have a much more aggressive risk appetite in certain markets where U.S. investment is much bigger, and it's therefore more strategic to the U.S. to assist those economies when they're otherwise in difficulty. An example of this was the reaction in the U.S. to assisting Korea with food credit during the Korean crisis. When they basically scooped the market, especially for meat products, EDC matched their terms, but it was reactive rather than proactive. So this is an ongoing problem.

• 1100

My recommendation to address this issue is that EDC's mandate be reviewed and realigned to make it more of an agent of government trade policy. This, as I said, is more the case with other export credit insurance agencies abroad. Alternatively, EDC's Canada account arrangement could be broadened to meet this need. But what's the point of government signing trade treaties to include countries like Nicaragua and Ecuador if exporters cannot sell there because access to credit is a problem?

Many small businessmen have come to Scotiabank in dismay after participating, and often at taxpayers' expense, in a ministerial trade mission to some remote corner only to find that financing the contract they thought they landed was nearly impossible. Another way to address this issue might be for our negotiators to look at the arrangements prevailing under the ALADI agreement between the four MERCOSUR partners: Argentina, Paraguay, Uruguay, and Brazil. MERCOSUR has a risk offset, or clearing arrangement, between the four central banks.

In this way, for example, an Argentine seller of wheat to Brazil who receives a letter of credit issued by a Brazilian bank does not have the expense of asking for confirmation for that letter of credit from his Argentine bank. However, if the Argentine seller does want a confirmation, the Argentine bank will be willing to do so more cheaply; this is more cheaply than say a Canadian bank for a Canadian exporter. This is because if the Brazilian bank does not pay, the Argentine bank gets paid by the Argentine central bank, which in turn settles with the Brazilian central bank. Incidentally, when Brazilian risk is as expensive as it is today, Argentine wheat suppliers have a huge financing cost advantage over non-MERCOSUR suppliers. In fact, the drop in Canada's wheat exports to Brazil reflects this.

Our biggest business in Canada is financing grain exports to Latin America, so we follow this extremely closely. The Argentine suppliers have had a very big advantage for just this reason, the cost of the finance—apart from others. I would suggest that this central bank arrangement could be expanded to cover trade payments within the much larger FTAA region. If Canada is not prepared to take a risk on their central banks, why are we signing a trade treaty with these countries?

There's yet another way of alleviating the payment risk. Canada, and every country except Cuba in the FTAA region, is a member of the Inter-American Development Bank, the IADB, where our respective directors are the governors of our central banks or their deputies. As an alternative to the above suggestions, maybe the IADB's role could be expanded to include trade risk clearing between its member central banks. Possibly its subsidiary, the Inter-American Investment Corporation, could have its activities expanded to include a credit risk insurance division.

With the hard copies of this presentation, I've left some flyers that explain what the Inter-American Investment Corporation is.

This could be used by the member countries' export credit agencies, such as Canada's EDC, as an automatic reinsurance window for risk they do not wish to take in connection with their exports to other member countries. The IADB, in turn, would resolve this with the central bank of the country where the default occurred, if one ever did. In fact, default on trade obligations, especially on letters of credit, is extremely rare.

I table this for your consideration. I would add the caveat that if this does not happen, the FTAA may well backfire on the weakest members. When access becomes easier to the five or so biggest and lowest risk economies in the region, these, plus the U.S. and Canada, will focus on each other and ignore the smaller markets if there are credit risk problems.

My next point also deals with risk mitigation, or the protection that exporters require when selling abroad. Let me first give you some context for this. Basically there are four methods of payment used in trade financing, each reflecting the different risk or confidence level that the seller has of getting paid. Starting with the least risk, which reflects the highest confidence level, these payment methods are: open account terms, documentary collections, documentary letters of credit, and cash in advance. The last is currently a prerequisite of at least six countries, the riskiest ones in the FTAA region, but it's not normally available in good markets.

Any exporter will tell you they would much rather sell on open account terms whenever possible rather than under a letter of credit. It is much simpler and cheaper, even when combined with credit insurance on their open account receivables. This is the fastest growing sector, I believe, of EDC's business. Both importers and exporters hate letters of credit, which cover the majority of Canada's SME export sales outside the OECD countries, which is essentially the countries in the FTAA region.

• 1105

The Canadian banks, incidentally, advise about 50,000 export letters of credit annually received from overseas banks for a value of about $10 billion. This is the core part of our Canadian trade finance income. So these remarks do not come to you from self-interest, and will probably land me in trouble with my colleagues, but anything that can reduce the proportion of trade under letters of credit and increase the proportion on open account is good for exporters. This is especially true for the smallest exporters, which are not always equipped to comply with the sometimes onerous requirements of a letter of credit and often don't properly understand them anyway.

Free trade agreements have exactly this effect if properly followed through on the credit side. For example, after the signature of NAFTA, a huge proportion of exports from Canada and the United States to Mexico switched from letters of credit to open account terms, and the two export credit agencies, Ex-Im Bank and EDC, generally had the risk appetites to ensure these open account receivables if that was required, and in many cases it wasn't.

Furthermore, since MERCOSUR was created, a much higher proportion of trade within the region is on open account, as both buyers and sellers, liberated by reduced tariffs, have come to know one another better. But at present few exporters would be prepared to give open account terms to buyers in the weakest countries in the proposed FTAA region. Indeed, exporters there are hard pressed to obtain confirmed letters of credit, that is, ones where the Canadian advising bank is prepared to guarantee payment.

We had a case yesterday when one of our trading customers in Winnipeg came to us with some large contracts in Guatemala. We don't have limits for Guatemala. I shouldn't comment before I've asked them, but I suspect EDC will not be able to provide as competitive terms to support that as the U.S. supplier will be able to do, quite simply because U.S. investment in Guatemala is very much greater than Canadian. So a Canadian grain seller is likely to be disadvantaged in that case.

Quite often the commercial risk on the foreign buyer is good. These buyers in Guatemala, for example, for all I suspect, have probably been importing North American grain for 50 years without any payment problem. It's the country risk, the political risk, that is the problem, normally related to the lack of ready access by the importer to foreign currency. A greater willingness to ensure open account receivables where the commercial risk is acceptable would go a long way to alleviate the problem in tandem with laying off the political risk through one of the four methods I outlined above.

Keep in mind, incidentally, that Canada's exports to the 20 worst-risk markets in the FTAA region would be minimal as a proportion of the total, even if you exclude our exports to the U.S. So this is not as big as it may sound—I'm talking about the total risk to the high-risk countries—and is insignificant against the trade growth the FTAA is expected to generate.

So if we really want to help our exporters, and particularly the SMEs, to sell into the FTAA region, we need to remove some of the constraints on getting paid and help them sell on open account terms. This is going to take government underwriting of some of the worst risks, at least initially to prime the pump. This is after all what export credit agencies were created to do as agents of their respective government's trade policy, to supplement private sector risk appetites and on affordable pricing.

Now you're going to say, never mind EDC, why don't the banks do this? We do. We have credit limits for confirming letters of credit in over 100 countries, and most of those 50,000 letters of credit I mentioned earlier are confirmed by the Canadian banks. The confirmation is when the advising bank, in our case the Canadian bank, steps in and effectively provides a payment guarantee in the event that the importer's bank in the foreign market is unable to pay.

• 1110

Our levels of foreign risk are watched very closely by the Office of the Superintendent of Financial Institutions and the stock analysts, not to mention our shareholders and depositors, who include all of you. There is a limit to how much foreign risk we can take, and it stops well short of what is needed. This is where governments come in to supplement private sector resources.

Looking at it from another perspective, China offers a good example of what happens to SMEs when their confidence of getting paid, and that of their banks, is not as high as it should be. Hardly anyone in Canada sells to China on open account. Even with a letter of credit, an exporter has much more risk, as does his bank if it is prepared to relieve him of it. This means higher finance costs and a much lower focus by exporters on this enormous market that politicians have been busily developing for them. Why is this? There are two reasons.

First, Chinese banks, which are virtually all government controlled in one form or another, will not request that their LCs be confirmed as a matter of national pride. This probably won't change with WTO membership for China, but it might. This in and of itself is a major disincentive to small exporters, who do not feel comfortable, quite rightly, in taking Chinese bank risk, especially in view of another factor, which is that sometimes Chinese banks do not conform to internationally accepted standards for letters of credit as set out in the uniform customs and practices for letters of credit published by the International Chamber of Commerce in Paris.

At the Scotiabank we have first-hand experience of this. One of my team is the Canadian representative on this and also sits on the ICC's panel of experts to adjudicate on letter of credit disputes. In fact, he's in Paris today doing this.

Chinese banks are notorious for finding trivial discrepancies, like one or two letters misspelled in a document, as an excuse for not paying an LC, usually at the behest of their customer, who has decided he doesn't want the goods or he's gone bust and can't pay for them.

So exporters accept an unconfirmed letter of credit at their peril. In most cases, this means they simply turn their back on the market or try to have their bank assume this risk on an undisclosed basis, which, if successful, is very expensive, because it's very risky for the bank. The reality is that the banks are more likely to do this for their big corporate customers who have the clout with the importers to prevent some of the nonsense I mentioned—trivial discrepancies. Unfortunately, it's the smaller, first-time SME exporter who is far more likely to get the runaround from the Chinese importer and the bank, so the banks are less likely to give him what we call “silent confirmations”.

I certainly hope this problem will be resolved if and when China joins the WTO. We would support the Canadian government's efforts in that direction. Joining the WTO will oblige China to adhere to the guidelines of the International Chamber of Commerce, and for all banks and exporters, especially the smaller ones, that cannot happen soon enough. If this occurs it will probably contribute more to increased trade with China than tariff factors.

I hope these points of view from a trade banker's perspective are helpful. Obviously, we do well when our customers do well, so we would like them to have the fewest problems possible in getting paid for their foreign sales.

Ladies and gentlemen, thank you very much. I would be happy to take any questions you may have.

The Chairman: Thank you very much, Mr. Plumptre. That's quite a new perspective. We haven't had that perspective of the trade-finance.... We're putting a chapter in the report on the relationship between the trading regime and the IMF and the World Bank; in other words, the international financial architecture. But I think your point is well taken. We probably should also have something in there about the need to have financial mechanisms to make the trade flows work or we're wasting our time. So that's very helpful.

Members, we only have about twelve minutes because I want to keep this session to half an hour. So we'll keep our questions short.

Mr. Deepak Obhrai: Thank you very much for coming. I join with the chairman in thinking we're getting an excellent perspective in consideration of your experience. You sure highlighted some excellent points here on problems. It's good what you've highlighted, but in retrospective to your own banking responsibility on the market opportunity available for your banks, and I refer in particular to EDC and its mandate.... You asked for a review of its mandate as an extension of the trade policy of the government, by which I presume you would mean they take more insurance risk as well. We have had representations from the private insurance companies who want to take that portion over. Why should the EDC do that? The Canada account may come under NOC in the WTO. It did come under this conflict we had with Brazil.

• 1115

I can understand you saying that you have a limited role to take a larger risk because of your shareholders and so on. In the same breath you're also saying that the risk is not that high, really, since our exports are with the U.S.A.—the majority of them. So there seems to be a little contradiction.

What I want from you is, what's your view on these questions I've raised with reference to EDC?

Mr. Timothy Plumptre: You're quite correct, Mr. Obhrai, in that there does seem to be a paradox in what I said, on the one hand that the risks are fairly low and on the other hand that the banks aren't willing to take them. This is a discussion I have with our credit department every day.

EDC's role is slightly different from other export credit agencies. As you're obviously well aware, its mandate is under review at present. Because it is expected to be self-sustaining and “profitable”, it tends to be more selective about the risk it takes—to keep its losses to a minimum. Other export credit agencies act more as a direct agent of government policy, and we have seen this on several occasions. On occasion this runs them into greater losses. This is considered the cost that government policy is prepared to run in supporting exports. Ex-Im Bank in the States, for example, has an annual budget for what is effectively subsidizing U.S. exports. One uses the word with caution, but that's basically what it is.

The Canadian government has not taken that decision. It has tried to have it both ways—to run an export credit agency that at least breaks even and to support exporters at the same time. Our view—and the banks have made this clear in our submissions to the hearings on this—is that this is a paradox, because if it could be done profitably, the private sector would be doing it.

This comes back to your point about the insurance industry's submission to take over the credit insurance business of EDC. They're only prepared to do that on commercial terms. Obviously they're commercial agencies; they're not interested in doing business that isn't profitable. The underlying function of these agencies originally was to do business that the private sector didn't want to do, which by definition means it's not likely to be a very brisk business.

Ex-Im Bank in the States, for example, is only allowed to intervene if there is no private sector alternative. It's written into their mandate. They cannot compete with private sector alternatives. So I don't think privatizing EDC's insurance business and giving it to commercial carriers would solve the particular problem I'm addressing, which is coverage for high-risk markets, which the commercial market probably wouldn't want to address, at least on commercial terms.

That leads us into the whole area of, well, if it isn't profitable on commercial terms, maybe we shouldn't be doing it. But then we shouldn't be including them in free trade agreements.

Mr. Deepak Obhrai: I have one last question.

The Chairman: Very quickly.

Mr. Deepak Obhrai: In reference to what you have said, in reference to EDC becoming profitable and the highlights you have indicated on this thing, probably the role of EDC does not exist in the current new market and it can be done by other smaller government organizations. EDC is a huge corporation. In view of these changing things, would you agree that EDC probably has no role?

Mr. Timothy Plumptre: I think that's something of a leading question, if I may say so. EDC certainly does have a role—or something like them. There's no question EDC have much greater risk appetites than the commercial market, especially in medium-term financing. But in other areas, that support is evident in other countries through guarantees to the commercial banking sector to get the commercial banks involved, rather than actually doing the funding and lending themselves. EDC's primary role is to take risk, which either the insurance market or the banking market doesn't want to take. If we're going to have a competitive export structure, as long as other countries do that, we have to do that too.

• 1120

So I don't think they can be abolished completely with regard to taking the risk. I have differing views on whether or not they should be doing the funding, but that's really a separate issue, I think.

Mr. Deepak Obhrai: Thank you very much.

The Chairman: Thank you.

[Translation]

Ms. Debien, do you have any questions?

Ms. Maud Debien: No, I do not think so.

The Chairman: Ms. Augustine.

[English]

Ms. Jean Augustine: Mr. Chairman, I too want to say that this is an excellent perspective put on the table for us. We heard from, I think, a representative from a legal firm who spoke to us about the issue of competition law and a whole series of policy directions that they think are important to iron out as we go into the next round.

I think you made an excellent point here, and this is by way of comment, that China's accession will also bring to the table a whole set of issues that we need to deal with. If we are talking about small business, small entrepreneurs, getting into that international playing field, I think it's important that we have some rules on the table that would mitigate the risks they take as they go out.

This morning I was intrigued by the earlier presenters. What I got from a couple of the statements made is that the whole issue of the value-added and other things that happen with their goods—we somehow do not want to identify the Canadian element, but look at it in a broader perspective. I think as small businesses and others getting into the playing field, as we get into the next set of discussions, it's important that issues you bring up, which are presently not agenda issues or concerns...those issues are important—to get out there, to take risks, and to meet commitments. I think that's important for small business. That is by way of comment.

The Chairman: Mr. Plumptre, where's the status of the EDC review at this time? I know it's been said that at some point we'll end up with it before our committee, but I don't know....

Mr. Timothy Plumptre: I confess I've lost track.

The Chairman: It seems to be an ever-receding....

Mr. Timothy Plumptre: I think the report has...sorry.

Mr. Deepak Obhrai: I think the report is coming out in mid-May.

Mr. Timothy Plumptre: I understood it was going to be subject to a parliamentary review, so probably nothing is going to happen till October. I think the scope of the review—it was the banks, actually, who managed to insert the five-year review clause because of the extended powers that EDC was being given. It was originally intended just to examine how those new powers were being implemented. In fact, the scope of the review was extended as the discussions went on into really a review of the entire mandate. But I believe we're shooting for September, October, somewhere around there.

Mr. Deepak Obhrai: The first draft should come out in May, and then the minister will present it to Parliament. And you're right; it will probably end up here in the fall.

The Chairman: Yes.

In terms of the MERCOSUR arrangement, we will have an opportunity to get into that type of thing, I guess, if we get involved in that review. But that's a very interesting thing. Presumably in that arrangement it's the central banks, but here you'd replace EDC with the central bank function. The EDC would do a deal with the central banks of these various countries, and then allow people to operate on an open account rather than on a letter of credit situation.

Mr. Timothy Plumptre: Yes.

The Chairman: Okay, that's very helpful. Thank you. That was a very interesting presentation.

Mr. Timothy Plumptre: Thank you.

Mr. Deepak Obhrai: It would be helpful if you elaborated more in detail—

The Chairman: No, I'm sorry, we're running 30 minutes behind now.

Mr. Deepak Obhrai: All right.

The Chairman: Keep an eye on your watch and where we are on the order paper, and then you kind of know what we're doing. I don't like to interrupt, but we really are running behind.

Thank you very much, Mr. Plumptre. We really appreciate that.

Mr. Timothy Plumptre: Thank you.

The Chairman: Is Mr. Warren here? Could you just come up, sir, and join us at the table? Thanks for coming. We're sorry to keep you waiting for so long.

• 1125

Mr. Gil Warren (Co-Chair, Political Action Committee, London and District Labour Council): You're welcome.

My name is Gil Warren. I brought with me Bob Sexsmith, who is also willing to take questions and participate. I have a speech that is about 10 minutes long, and I'm quite happy to answer questions. I have a little bit of an introduction as well.

First of all, I'll introduce the other person who's with me. Bob Sexsmith is a past president of the London and District Labour Council and the former plant chair at Prototool, a UAW, United Auto Workers, unit at the time. That plant was closed in 1984 after a corporate merger. Bob is a member of the Canadian Auto Workers retirees and a local leader in the co-op housing movement. I was pleased that he was able to join me today.

My name is Gil Warren. I'm speaking on behalf of Rick Witherspoon who is the president of the London and District Labour Council. Rick had another prior commitment and was unable to attend today. He asked me to speak in his place.

I am a member of Lodge 756 of the International Association of Machinists and Aerospace Workers. I'm on the executive board of the London and District Labour Council and also on the executive board of the London Social Planning Council. I'm also a member of the London Coalition for Fair Trade.

I have one comment to start, in terms of notice for these hearings. We only became aware of them two weeks ago. A week and a half ago I phoned the staff person of the London North Centre MP, Joe Fontana, who was not aware of these hearings. Many community groups would have sought standing if they had been aware of these hearings. In fact, this afternoon at lunch time there's a demonstration outside this hotel by the London Coalition for Fair Trade, and they're going to include a videotaped speaker's corner for the organizations that wish to speak but did not have the time or the resources to speak today.

In terms of my presentation, I'd like to—

The Chairman: You might tell those people that if we have an extra hour this afternoon, and if they want to come in here, they're more than welcome. This is a serious problem. If you come and say to us....

We sent out notices. We've done our best, apart from running very expensive advertisements in the local press, which frankly are far beyond our budget. We just can't do that. We tried to do that in the last big hearing and it cost us hundreds of thousands of dollars to go all across Canada. And we're trying to cover all of Canada.

Mr. Gil Warren: Do you have an extra hour on your agenda?

The Chairman: We tried to get a lot of the NGOs, like Ms. Barlow's organization, the Council of Canadians, to kind of feed out to people. So I'm not blaming anybody. It's just that it's kind of a disappointment, because you're not the first person to tell us.

Mr. Gil Warren: Do we have an extra hour, then, on the agenda?

The Chairman: Yes, we could—

Mr. Gil Warren: Well, I would be happy to speak to them at lunch time.

The Chairman: If you want to speak to them, we could add some more people. We're interested in hearing people. So if we can make time this afternoon, between 2.30 p.m. and 3.30 p.m....

Mr. Gil Warren: Okay, I know others would be delighted to speak, and I'm sure there would be one or two who would be willing to do that.

The Chairman: I appreciate there's a problem of preparation, so I understand that.

Mr. Gil Warren: On your agenda for this afternoon from 1.30 p.m. to 2.30 p.m. there are three groups listed, and they're participating this afternoon. But there are other people as well who were really keen to speak.

The Chairman: Add them and we'll just make that a two-hour rather than a one-hour session.

Mr. Gil Warren: I'll do my formal presentation, and then we can get on to the questions. It's being distributed now.

The Chairman: Yes.

Mr. Gil Warren: I am here to speak on behalf of the 25,000 members of the London and District Labour Council, and this includes Ingersoll, St. Mary's, and St. Thomas. We have a very large labour council.

The position of the London and District Labour Council on the World Trade Organization, WTO, negotiations and the free trade area of the Americas, FTAA, deal is very similar to the position outlined by Canadian Labour Congress President Bob White in his speech to you on April 27. The workers of London want improved world trade, but the benefits must flow to working people, not just the wealthy elite.

• 1130

WTO rules are weakening governments and dismantling the democratic rights of workers to control their future. We must return to a balance between the interests of workers and world corporations. Trade deals create havoc on local cities and economies, as we saw in London when free trade arrived in the early 1990s and we lost thousands of well-paying, secure, and unionized jobs, like those at Northern Telecom.

Our governments have thrown thousands of workers on the scrap heap. In the question period, I would be happy to talk about some of the impact of free trade on London. There should have been, and still should be, a government commitment to full employment, not a target of 8% unemployment. There should have been, and still should be, a commitment to free collective bargaining, not back-to-work legislation and social contracts. There should have been, and still should be, a commitment to decent social programs, not deficit mania.

If these commitments had been made, ordinary working people would not have had their lives ruined while people like Bill Gates made their obscene $60-billion fortunes. Bill Gates of Microsoft is one of the people who has pushed hardest for these trade deals. He has a virtual monopoly on computer software technology and has fought hard to make international property rights a key issue. He stands to benefit even more from future deals, and competing software companies will remain shut out.

We do not support any new trade deals until these problems are dealt with. The central focus should be a strong social and environmental framework with the full participation of non-governmental organizations, NGOs, trade unions, and the United Nations. The Labour Council of London also believes there has been far too much emphasis on improved trade that has not yielded the promised jobs and prosperity. There is far greater opportunity for job creation in the local community. Community economic development designed by local people to meet local needs has far greater potential to realize jobs and the redistribution of wealth.

The London and District Labour Council has been working very hard for many years on community economic development. This includes the $12 million TolPuddle Housing and Labour Co-operative and the Twin Pines Housing Co-operative, as well as setting up worker co-ops and a community loan fund. We have also worked with local groups like Life*Spin to set up community-based non-profit businesses.

There is great potential here, but the whole initiative has been badly hindered by either a lack of government support or erratic government support at both levels, federal and provincial. City councils can also return to their traditional roles of promoting local community economic development such as hydro and transit commissions and fighting to retain existing industrial jobs when owners retire or world corporations try to maximize profits by closing local factories.

For the remainder of my time today, I would like to touch on two topics that are rarely discussed but are vital background information that you need, as members of Parliament looking at the issues of trade. The first issue is how wealth is being distributed upward in an economic system that has become a welfare system for the wealthy, privileged, and powerful. Lining the pockets of Paul Desmarais, the father-in-law of the Prime Minister's daughter, is not helping the 55-year-old London factory worker who has been laid off for the last 10 years.

A striking example of how insane our economy has become is the financial state of your friend and ours, Bill Gates, owner of Microsoft. He has rapidly become the richest man on earth. His fortune is currently around an unimaginable $60 billion. How much money is that, really? Gates has seen his net worth increase over the last year by $2 million per hour. Two million dollars per hour! No one is worth that. There's something very, very wrong with the economic system that is being set up here. This is not social justice. This is not fair trade. Bill Gates already has enough money to buy every national football, basketball, baseball, and hockey team, and be able to sustain them all.

• 1135

The United Nations says that in developing countries, the cost per year of providing education, health, food, safe water, sanitation, and reproductive health care would be $40 billion. This is less than 4% of the combined wealth of the richest 225 people in the world. Bill Gates could solve this problem of world poverty for the first year for $40 billion and still have $20 billion left over. Why is this information not getting out into the mass media and the public debate about world trade?

Here is a final statistic on the issue of the growing gap between the rich and the poor. This is happening in Canada and also in the third world. The 225 wealthiest people in the world have a combined wealth of over $1 trillion. This wealth is equal to the annual income of the poorest 47% of people, 2.5 billion. Two hundred and twenty-five people versus 2.5 billion. This is outrageous.

The last issue we would like to talk about is the matter of official economic statistics, and we feel this is an area that should be carefully attended to. We have some questions we would like to leave with you. We hope you would truthfully answer these questions before you proceed with any more trade deals. These questions are based on the work done by New Zealand economist Marilyn Waring, who is one of the very few women economists in the world. Why is that? Could it be that the traditional male-dominated economics profession has been set up to justify the power and privilege that men already have? Is economics designed to justify the present system? The economic statistics used by Statistics Canada and the United Nations are very incomplete and miss what is going on in much of the real economy. Why is it that paid work counts but unpaid work does not?

We all have this image of the unemployed person sitting on the couch doing nothing, but all the unemployed people I know are really busy in the community. If they have any kind of financial support, they're out there volunteering. Why is the unpaid work of homemakers, students, the unemployed, and seniors not counted? Why is there no economic value to having and raising children to become the new workers? Why is the air and water used by corporations to make money considered to be free? Why is there no economic cost to the depletion of resources and pollution? Why is it that when finance minister Paul Martin was obsessing about our $600 billion debt, he never counted in the even greater value of the current assets of the federal government? This accounting system you guys have in Ottawa is nuts. What is the real value of the roads and the bridges and the buildings, the airports, the parks, and the crown-owned land and water? Those assets are far greater than the $600 billion debt. Why isn't that in the equation?

What's the value of the food in our gardens or the time we spend building the social net of our communities? What is the value of preventing a murder from happening? What is the value of preventing a teen from starting a life of crime? It's not in the economic statistics. It's not in the trade deals. It's not in the calculations.

These are the questions that must be answered before we proceed with more trade deals.

In conclusion, the London and District Labour Council wants to repeat its opposition to having the failed multilateral agreement on investment, the MAI, moved into the WTO. Any new negotiations should be used to build a social framework around current WTO rules.

We need democratic reforms to WTO rules and a strong workers' rights clause. The Canadian government must be able to regulate in the public interest; the environment and public health and safety must be regulated by our government.

What we are talking about today is part of the setting up of a world government. That government should be of benefit to the majority of working people and not the already powerful and privileged.

We hope you will give our ideas close attention. Thank you for allowing us to speak, and we would welcome any questions.

• 1140

I want to add one more thing. Members of our labour council include the Grain Workers Union. There was a spokesperson here from Kellogg's management first thing this morning. The president of the local spoke with me yesterday. He really wanted to get standing but was unable to because of work and things like that. The position of the workers at Kellogg's is not the same as the position of the management who spoke to you today.

I don't know if the committee is aware of this, but the Kellogg's plant here in London has been here for 100 years. It's a very large plant and employs hundreds and hundreds of people here in London. There's an issue with the workers around vitamin fortification. Under the current laws in Canada you're not allowed to add vitamins to a product. In the United States you are allowed to do that. You'll see a lot of American products that say “vitamin fortified”. The concern there is that under current Canadian law you're not allowed to add things if you're not sure what the medical effects will be. That's why we've had that law. So the cornflakes that are made here in London are under the current Canadian law that says you cannot add iron or calcium or anything else. It's just what's naturally in the product.

The American Kellogg's company has a plant in Battle Creek, Michigan, which is only a couple of hours away from here, that's running way under capacity right now. Kellogg's has been closing down plants around the world because of a lack of demand. That American plant, if it were allowed to send its vitamin fortified products into Canada...from the perspective of the workers at Kellogg's, they feel this plant could be threatened. So they're very concerned about the current legislation in terms of the difference between Canada and the United States.

The way I look at the WTO material I have, it seems to me that the WTO would be going away from the idea of a country being able to say you can't add vitamins or other things to a product. It's the same as the food and drug...and other things in Canada. There's this assumption that you have to be able to prove it's safe, whereas in the United States, and in the rules being proposed for the WTO, you have to be able to prove it's harmful.

Anyway, that was a concern of the workers. It's a complicated issue, but that's sort of boiling it down as simply as I can.

Just briefly—

The Chairman: Mr. Warren, would it be fair to say that probably within the workers' group itself there would be those who would say we should be moving faster in Canada to allow the fortification so that the plant can compete on a world basis, and others who would be saying we should be more hesitant? What do the workers want? Do they want—

Mr. Gil Warren: The Canadian plant is the only plant that is producing around the world according to Canadian law. Their feeling is that if the law is changed, then that Canadian plant is vulnerable. That's the feeling of the leadership. I'm sure there are some workers who agree with what's-her-name here this morning. There always are.

The Chairman: But the present one would be more caution: let's not add anything; let's let the regulatory process run its course.

Mr. Gil Warren: That's correct. The workers support the current regulatory process.

The Chairman: Very good. That's what I wanted to know. Thank you.

Mr. Gil Warren: Bob will speak just briefly, and then we'll do questions if you want.

Mr. Bob Sexsmith (Member, London and District Labour Council): Thank you for allowing me to join Gil this morning. As Gil has said, the plant I was employed in for 25 years was closed in 1984. Having had a serious interest in this community, and coming from a labour background, I have tried to assist people who have become unemployed. One of the things I try to do is help them get re-employed and change their careers, whatever they might have been involved with before, because lots of time there is no longer a job for them in that particular field.

To protect their health...I've become involved in the environment movement and I work within the community to try to correct some of the harmful effects of industries that were located in this town and have now left. Those buildings are now being converted into shopping malls or whatever, and some are being converted into housing. I am trying to make them aware, and the regulators at the local level, that these building sites have to be inspected for environmental hazard.

There have been a number of negative impacts that I have seen from free trade and from the mergers of companies within Canada prior to their being bought up by an American firm or a European firm. That has created some serious and negative impacts on jobs and the living standards of working people, and I believe they have to be protected. The government policies you may recommend have to reflect this concern for Canadians. I'm not just flag-waving or saying we shouldn't be competing world-wide or with any other company. I think we can compete, but we do need those back-up policies from the government that protect and enhance the quality of life in Canada.

• 1145

I think there are a number of things I could talk about from a local sense, but that doesn't mean I'm not internationally aware of what's going on. I have to do a lot of background reading in order to make the case locally. I'm one of those people, I guess, who think global and act local. I think that's where I can be beneficial.

Having retired on medical grounds, I'm not able to go out and do the physical work I did in years past, but my mind and my mouth still work, and besides, my wife likes me to get out of the house. So I really think my involvement in the community has been useful.

I certainly will take any questions. I can talk on the issues of housing and the environment, IJC hearings on the Great Lakes, and the pollution that comes across our borders by air or water. I'd be pleased to address some of these issues, but I don't speak as a scientific or economic expert.

The Acting Chairman (Mr. Jerry Pickard): Thank you very much, Bob. I can assure you that many of our spouses would like to see us out of the house, probably more often than we'd like to think.

I'm going to go to the first questioner.

Mr. Deepak Obhrai: Thank you very much for coming and giving your point of view here. We do take points of view seriously. We've heard from a lot of labour organizations, and generally I think we do have an idea of where the labour movement is coming from with reference to stronger worker rights, human rights, and environmental protection—to be taken into consideration.

Many of the other witnesses who have come have indicated either to take a pause in WTO negotiations and see what the impact has been.... What would you say your organization's stance is? Are you asking that we take a pause here to look back on the WTO? Do you see the WTO actually having a role to play in promoting trade? We've also heard that if you're not part of the negotiations...if you don't join the train, the train is going to leave the station without you. Do you think we should take a pause? Do you think the WTO should...?

Mr. Gil Warren: We feel there should be a pause in the process. We still haven't recovered from the effects of the free trade deal and the NAFTA deal. We're very concerned about making trade deals with countries like Chile, where thousands of workers were killed by the government. So the working class has been weakened, and then these free trade deals come along.

In terms of the issue of getting on the train or not, in the world of politics a week is a long time and things can change totally. I feel this emphasis on world trade and world trade deals is not going to last. As I noted in my speech, I think community economic development is far more important in terms of creating jobs.

The labour movement is not opposed to greater trade worldwide. We're not pushing a protectionist position, but we're saying that trade has to be balanced with the interests of workers. But I really do feel it's been oversold in terms of job creation and the benefits to the average person. Yes, the world corporations are benefiting tremendously, and a few rich people, like Bill Gates. In London, we've seen factories close.

In the early 1970s, when I started out in the workforce in London, it was very easy to get a job at 3M or at Ford. You could be laid off from one and in a week you got a job at another. Now Ford doesn't hire; 3M doesn't hire. You can't even get an application in. So for a young worker in their 20s now, there is no work, except at McDonald's or something like that. So I don't see the benefits.

• 1150

I see an economic cycle that is now at its peak. There has been an increase in employment, but they haven't been good factory jobs by and large. They've been service sector jobs. So, yes, there has been some increase in employment, but I don't see it as flowing very much from better trade. I see it as a regular business cycle. I see the cycle about to go down again, and there will be more mass unemployment. Each time the cycle goes down, more and more people get left behind. So we're just not seeing the benefits getting down to local people.

Our focus at our labour council is on building housing co-ops and working on worker co-ops and community-based businesses.

Mr. Deepak Obhrai: Thank you.

The Chairman: Thank you very much.

Madame Debien.

[Translation]

Ms. Maud Debien: I would like to thank Mr. Warren and Mr. Sexsmith for their intervention. I would like to continue along the line of thought of my colleague Obhrai. We have been told by many groups, labour organizations and representatives of civil society that the Free Trade Agreement, NAFTA and the GATT Uruguay Round did not achieve the desired results, in spite of the fine principles of social justice and distributive justice announced when they were introduced. As you know, we have been asked to stop and think. I think this is a movement that is pretty much irreversible. I am an opposition member and we would like to convince the Canadian government to assume a role of leadership during the upcoming WTO negotiations so that questions of public interest such as working conditions, social clauses, environmental clauses and all questions pertaining to human rights will be included. This is the message we have received from representatives of civil society and labour organizations.

A little while ago you referred to the Canadian Labour Congress and the brief presented by Mr. Bob White, whom we met a few weeks ago and also this week. Of course, when we asked Mr. White whether Canada should take part in the WTO negotiations, he did not say that we should not participate, but rather that we should do so if certain conditions are respected.

This was a comment rather than a question as such. I do not know whether you share this opinion, but I feel that this is the way the government should proceed with respect to the WTO.

[English]

Mr. Gil Warren: As I said, we do support the CLC position. If there are going to be negotiations, we want to see a social framework and an environmental framework. So we're saying yes, we will participate in negotiations, but we have severe reservations about the whole process.

Our feeling is that nothing is irreversible. Don't tell me that. This is the real world, and if there's the political will to do something, things are reversed. I've seen it happen. I've seen cuts to health care spending by the federal government, and I've seen them reversed. When the cuts came, I was told it was irreversible. It's politics, and I know how it works. So we'll see how it works. The French government killed the MAI. Everybody told me a year ago that the MAI was inevitable. So we'll see what happens.

We're willing to participate in the process. That's why we're here today, and that's why we're making our views known. But we just think that so far these trade deals have been one-sided. They've been in favour of the business elite. Those are the people who were consulted, and we're happy finally to get some consultation from the rest of the public.

Mr. Bob Sexsmith: If I might add, Madam, I find that having started my involvement in the sixties and being concerned about social policy and government policies and the directions they were going in to build this country into what it became...I believe it has slipped considerably since the first of the nineties. Many of the things I thought were government policy and would never be changed have been changed, and I'm now fighting the same battles I fought to get the original government policy put in place.

• 1155

I agree with Bob White that, yes, you have to be involved in world trade. But if Canada cannot become part of this race to the bottom, as many corporations seem to be doing by going to South America and the Latin American and Asian countries in order to reduce or negate their obligation to pay a reasonable wage in the country in which they want to market their products.... So I think there has to be a strong dispute resolution thing there that would allow Canadians to protect Canadian values and the inherent right to be as great a country as we are.

I really find it most harmful to the 45-year-old worker and up, because when they become unemployed because of some bottom-line decision by a corporation somewhere in the world, what really happens is you lose family stability and the stability of our communities. You really do find that now when the older worker becomes unemployed, he is seriously affronted by the changes in government policy since the early nineties to what we have today. It really bothers him that he can't get health care for his children, his wife, and himself when he goes after these things. We thought we had a national medicare system. We seem to be moving toward more privatization in health care and in housing. We're having a real problem with the fact that the upper levels of government, both federal and provincial, seem to have withdrawn from being a serious force in developing a national housing strategy and policy.

During the fifties and what I might call my misspent youth, I rode the rails and hitchhiked from coast to coast, both here and down south into the United States. You used to have to pray to get a bowl of soup in those days. We're getting back to that now, because we don't have government policy. We're transferring it to someone else, and you have to go in and meet their conditions, whether they're charities or whatever.

So if you want to go this route to the WTO, please put back into it a strong negotiating team that can set up a dispute resolution thing that actually considers Canadian goals and objectives before that decision is made and that may be contrary to what they would like.

I'm trying to protect the Canada I know at the local community level. You folks in Ottawa who negotiate these national deals have to do it. I'm more than willing to be consulted or to come before you to make local views known so that you can have that to reflect in your decisions. But please, I implore you, put some things in this agreement that protect what we have come to know as Canada and allow us to be returned to the nation that many of the immigrants coming into this country thought they were going to see. It's changing out there at the local community level, and it's not for the better. So I implore you to put those safeguards in.

I like the old GATT thing where if you're going to market something in this country, you build a plant in this country and employ Canadians to do the work. Maybe that's an old thought, but I really think it has a lot of merit. If that could be reflected in some way in what you negotiate, those old GATT ideas of saying, if you want to sell it here, you build it here, I think that would help us all from coast to coast. Thank you.

The Chairman: Thanks.

Mr. Pickard.

• 1200

Mr. Jerry Pickard: Thank you, Mr. Chairman. Bob and Gil, I want to thank you both for coming forward and bringing your concerns to us. Your concerns are echoed by many other people and organizations that have come forward. So you're not alone in the viewpoints you present.

Bob, I'm particularly touched by the point you make about the 45- or 50-year-old worker who has been displaced. Many of my colleagues and I from ridings across this country talk to people every day. We see this happening to constituents and we have concerns. So don't think we are in Ottawa negotiating deals. We're here to hear your viewpoints. We're here to take your viewpoints and other people's viewpoints back to Ottawa and make recommendations. So your input's very valid.

Gil, you mentioned Paul Martin's $600 billion. It may not seem to be a really down-to-earth important issue, but if you examine it just a step further, the problem the $600 billion creates is it's a debt. On the debt, we're paying interest. When we start paying 7% interest on it, that's $42 billion. That's a huge amount of our revenues. It takes away from our ability to fund social programs and do the things government must do.

So it is critical that we try to contain as much of that mortgage as possible, so we don't have an outflow of huge amounts of our tax dollars on an annual basis for things we don't want to spend them on. I would rather—as well as every person at this table, I think—see those dollars spent on security programs for our average citizens. That's the reality of where I would like to see them go. Unfortunately, we have arrived at a point where that debt has caused our ability to do certain things to be limited, and we hope it can be corrected.

Secondly, I think we're in a very difficult position of trying to balance what is going to be prosperous for all the citizens of the country, yet guarantee we can move on in the future and do well. I agree that through the 1990s we've seen tremendous restructuring of production in plants. You're correct that some operations very clearly produce a lot more material with a lot fewer workers. That has caused, and continues to cause, a major problem.

But I would suggest that in the last five years at least we have increased the number of jobs in Canada. That is a reality. They may not be the best jobs possible. I look in this area and I see the auto industry doing extremely well and some of the other industries doing very well. It's very true that all industries aren't keeping pace with that. But I have never looked at 8%, 7%, or even 4% unemployment as being acceptable. I have always believed—and I think most of my colleagues around this table believe—that zero unemployment is the best goal. We're continually doing everything we can to try to make certain at least more jobs enter Canada. It is a tough task.

I know you hear corporate interests, and they may very much differ from the way you perceive the world. So we have the task of trying to sort out those issues and make some reasonable recommendations that take everyone into account.

I did wish to respond to a couple of the points. Creating a dialogue back and forth is pretty important for us.

Mr. Gil Warren: Can I respond to that?

The labour movement's perspective is that the problem we have with unemployment is a lack of demand for our manufactured products. Our labour council has two auto worker plants in it—the CAMI plant in Ingersol and the Ford Plant in Talbotville. If people are underemployed, part-time employed or unemployed, they're not buying cars. We see the fundamental problem in our economy as being a lack of demand.

• 1205

We in the labour movement want to see a full employment economy. We haven't had that. We have one million people unemployed. You may say you want zero unemployment, but the CLC talked to Paul Martin a couple of years ago and we have a letter from him and his officials in the department saying they're worried that if unemployment goes below 7%, inflation will go up and that will create a problem. When we say the Liberal government wants 8% unemployment, that's where that idea is coming from.

We had a full employment economy in the 1970s. It was the priority of the then Liberal government that everybody worked. But now we're tolerating one million unemployed and that's our concern. There's been a great fight by this government and the previous government for a policy of zero inflation, and that's meant unemployment. But it's a tradeoff; you can't have both. We're saying we'd like to see 2% or 3% inflation in the economy because it would lead to more employment. We can tolerate the inflation, but we can't tolerate the unemployment.

We also feel the dollar should be kept down. There's a whole package of economic policies that have been proposed in the alternative federal budget put forward by community groups. It says the emphasis on worrying about the inflation rate is wrong and we should be focused on high employment. We also say if there were a full employment economy, we'd be able to pay off the debt because more taxpayers would be working. The debt would go away with a full employment economy. We see the debt as a symptom of a “not full” employment economy.

The final thing is that the local auto industry is doing quite well, but we're concerned about the next downturn. This is southwestern Ontario and it's very dependent on the auto industry. From the shop floor perspective, we see the impact of government policies.

When the previous Mulroney government was in power and had the high dollar policy, we were devastated in southwestern Ontario in terms of trying to sell into the U.S. But the prosperity we're seeing in the auto industry in Ontario right now is because the American economy is doing well and we're selling into the American economy. I don't see it as federal government policy that's creating those jobs; I see it as the prosperous American economy that's doing it.

We have a fundamental difference in how the economy should be run. I know, as an individual, you probably want to get employment as low as possible, but we're saying if you pursue a very low inflation policy and keep worrying about the debt, you'll end up in a situation where you'll be tolerating unacceptably high unemployment. We didn't have one million unemployed in the 1970s, so what's changed in the economy? I think a lot of it is federal government policy.

The Chairman: We'll certainly make sure these views all go into our report, I can assure you of that. Obviously we're not going to solve all the problems of the WTO or the world, but we'll certainly do our best to try to get those out.

We're going to wrap up, but we'll be back here at 1.30 p.m., absolutely. I hope you'll speak to your colleagues. Maybe we'll see them on the way out. We can add a few more people to that panel if people want to come.

Mr. White's presentation was very effective the other day, you mentioned, and I think it has all of us thinking a great deal about these issues.

I don't know, Gil, who told you the MAI was inevitable. Obviously you didn't follow what was happening before our subcommittee that looked at it. It was pretty clear after we started hearing it that it was not going anywhere. As for France stopping it, I was in France and gave Mr. Jack Lang, who was the chairman of their foreign affairs committee, a copy of our report. He said, “Well, your people were responsible for stopping it”. So I think we did something about it. The committee was pretty effective in dealing with that issue. People's voices did get through at that time, there's no question about it.

Mr. Sexsmith, thanks for coming. You may not know it but my riding of Toronto Centre—Rosedale has the largest number of cooperatives in Canada. I was very pleased that Tuesday night was the 25th anniversary of the Co-operative Housing Federation of Toronto, and I actually got an award from them for helping them. I was their speaker, so it was a great evening. I work quite closely with the co-ops because I believe they create a sense of social stability, particularly in our urban centres. That is very important for us. I'm sure you're doing other types of work here in this type of society, but in downtown Toronto, in Jean's riding and in my riding, they're very important.

Mr. Bob Sexsmith: I want to thank you for that, Mr. Chairman, and I wonder if you could help me. I know you helped with the lobby to retain the federal co-ops from the download to the provincial government and ultimately to the municipalities. I wish you would talk to the minister and ask him if he would consider restarting some of the co-op funding through CMHC, because that's another area.

• 1210

I know it's lunchtime, but you're into my area. That's where I live and sleep, so....

The Chairman: That's the next battle. We got through one. Now it's time to turn to the next one. That's the nature of life, isn't it?

Mr. Bob Sexsmith: I'll remember that. I'll look forward to seeing new co-ops.

The Chairman: Okay. We'll be back at 1.30 p.m. sharp.

The meeting is adjourned

• 1211

• 1338

The Chairman: I'd like to call this session to order.

Presenting to us this afternoon are some members from the Guelph chapter of the Council of Canadians and from Oxfam Canada.

As some of you may know, we spoke to some of the people who were outside this morning and who were concerned they hadn't had a chance to be heard. We're going to try to extend this session an extra half hour or 45 minutes, whatever it takes. So some other people may come and join us around the table.

I would ask you to perhaps keep your original presentation to about 10 minutes. That way, we'll have some time for questions at the end.

We'll start with the Council of Canadians, the local chapter. I understand there are three people from that.

Do each one of you want to speak or just one person?

Mr. Dennis Gaumond (Vice-President, Guelph Chapter, Council of Canadians): I think it's mostly going to be me, but this gentlemen is going to say something at the end.

The Chairman: Great. Thank you very much. Go ahead, Mr. Gaumond, and welcome.

Mr. Dennis Gaumond: Thank you.

I'm here representing the Guelph chapter of the Council of Canadians.

I'm going to read this paper. I hope you don't mind. I'll do my best to do it slowly and clearly.

First of all, we'd like to say that we applaud this initiative, and we welcome the opportunity to make our views known. We sincerely hope the government strives to maintain a dialogue with its citizens and to act in ways that are truly beneficial to all of its citizens.

We wish to express our feelings regarding the renewed multilateral trade talks going into the World Trade Organization as well as the FTAA process, but we feel we cannot do so properly without first commenting briefly on the concept of free trade and the situation we are currently in with NAFTA.

We wish, therefore, to make this presentation in three parts. Part one will deal with the current situation, part two will deal with the World Trade Organization situation, and part three will deal with the FTAA situation.

• 1340

First, the concept of free trade as it has been sold to the general public is, in our opinion, inaccurate. Basically, we've been told that free trade is an opening of borders between nations, allowing commerce to flow freely. In reality, we feel it is a means by which commerce or trade can be conducted free of government regulation.

In other words, we feel that all free trade initiatives to this point have been for the betterment of large corporations who feel a sense of responsibility only to their shareholders.

These corporations have shown very little concern for the environment, the culture, and the general well-being of the common citizen. It is a well-known fact that their only motivation is to increase their own profits.

We've been told that the benefits of free trade will trickle down to all levels of society. In fact, we believe these agreements have caused a deterioration in the quality of life for the vast majority of people around the world.

The profit motive and the concept of continual economic growth at all costs are quite literally bringing our planet to the brink of destruction, and we cannot condone any agreement that facilitates these methods.

Scientists and experts have been warning us for years and years, and yet pollution levels are unprecedented. Ozone is depleting. Oxygen levels are depleting. The list of very serious problems goes on and on.

Any future trade agreements, we feel, need to be based on the Universal Declaration of Human Rights, which marked its 50th anniversary last year. In 1974 the United Nations passed the Charter of Economic Rights and Duties of States, which established that the state itself has both the right and the responsibility to intervene in the market in order to ensure that the economy serves the needs of the people and the earth.

We need trade agreements with more regulation rather than less. We need trade agreements with long-term scope and that address our problems, protecting the environment and striving to alleviate the suffering of poor and oppressed people around the globe. We need to change.

We are very concerned about NAFTA, particularly with chapter 11. We are very concerned about the recent situation with Ethyl Corporation successfully suing our government for millions of dollars in lost projected profits because our government was trying to protect its people from harm.

This is an outrage. Since that uncontested decision, which has set a new precedent, there are several other suits in the works, not the least of which is Sun Belt Water Incorporated's demand for more than $300 million in lost profits. That's a lot of money. They feel they are entitled to this money because they were refused permission to export billions of gallons of B.C. water.

We now have a situation where our government is powerless to protect its citizens, its resources, its culture, etc. Are we going to give away even more power in future agreements?

We are very concerned about our water. Large corporations are pushing hard to sell water with little or no regulation from elected governments. We fear that under NAFTA we will be powerless to stop them.

The global water situation is an enormous problem that needs to be properly and thoroughly addressed. At this point, trade agreements are only concerned with profiting from these tragic situations. What's next? When our air becomes too polluted, will they sell us clean oxygen?

Another area of trade that needs to be changed is the trade in currency. This is the process by which untold fortunes are made by speculators manipulating the currencies of entire nations. What looks like mere numbers moving around on paper translates into enormous hardship for the common people affected. Entire nations are thrown into poverty. Economies and markets are made extremely unstable and volatile by this process. The current situation in the Pacific Rim and the recent situation in Mexico are among the many examples of this phenomenon.

We applaud the recent passing of a private member's bill in Parliament proposing to implement a Tobin tax. We hope future trade agreements will address this very serious situation.

Every day, $1 trillion changes hands because of currency speculation. None of it is taxed. The Tobin tax proposes to take a mere 0.1% of that astronomical amount of money and put it to good use.

I will now move on to part two, which deals with the transferring of talks about a multilateral trade agreement to the World Trade Organization in the United States before the end of this year.

We have serious reservations about the World Trade Organization. They have, in their five years of existence, a very poor track record in terms of protecting human rights.

• 1345

The WTO has consistently set aside social and environmental goals in favour of greater trade liberalization. They have overturned domestic laws designed to protect clean air, endangered species, food safety, cultural diversity, and public health.

They recently ordered the European Union to lift its ban on beef containing artificial hormones, citing the ban as an illegal barrier to trade. The U.S. government was forced to withdraw provisions of its Clean Air Act because the World Trade Organization claimed it violated trade rules. In Canada, a World Trade Organization panel struck down measures taken by Ottawa to protect our magazine industry from split-run American publications.

We believe the World Trade Organization's only design is to help large corporations with little or no concern for public interest.

The aspects of the MAI that we find objectionable are too numerous to be mentioned in detail here. We feel that future talks should not resume on the existing bases established in Paris. Any future negotiations should include clear performance requirements and regulations regarding the fair expropriation of corporate assets to serve vital community needs. It is crucial that a just forum be established for the resolution of disputes whereby citizen groups and all levels of government have the right to sue investors for violations of investment codes.

Rather than expound on these points now, allow me to refer you to a paper entitled “The Citizens's Alternative to the MAI”, which has been drafted by experts in citizen groups from around the world. A synopsis of this paper has been included in my written submission to the standing committee.

We are also very concerned about the transparency of these talks, based on the very high degree of secrecy during the recent MAI talks in Paris. The public needs to be informed of these negotiations that so hugely affect its well-being. Negotiators need to bring public concerns to the table. We cannot stress that point enough.

I will now move on to part three.

The current plan to extend free trade to central and southern America via the free trade area of the Americas is of great concern for all of the reasons already mentioned. The original free trade agreement was sold to the Canadian people by the Mulroney government, largely through the use of misinformation and promises. We were then told by the Chrétien government that NAFTA was merely an extension of that agreement into Mexico. Meanwhile, they quietly inserted the now notorious chapter 11 into the agreement, which has since caused the previously mentioned atrocities.

Such clauses have enormous consequences, and yet most of the public are totally unaware of them. This must never happen again.

What new clauses are going to be snuck into the FTAA? It is the government's responsibility to keep the public informed. The mass media, who prefer to feed us a diet of trivial distraction, must be forced to give high priority to such important matters. We need to have total transparency. Again, we can't stress this enough.

Once again, we applaud this effort to hear from the public, and we hope to see an increase in such efforts. We urge the government to make every effort to undo NAFTA, especially chapter 11. We urge the government, in all further trade talks, to negotiate in total transparency, to resist the pressures of corporate power structure, and to adopt policies that ensure the long-term benefits of all citizens.

Thank you.

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

I have just one quick technical question. Can you give us the name of that case you referred to about the Clean Air Act? You may not have it with you, but that's one I haven't seen referred to before.

Mr. Dennis Gaumond: I'm not sure of the question.

The Chairman: You referred to a WTO panel that set aside part of the U.S. Clean Air Act as being a non-tariff barrier to trade or something like that. I was just wondering if I could get the reference to that case.

Mr. Dennis Gaumond: The details of it, you mean?

The Chairman: Yes, if you know them.

Mr. Dennis Gaumond: I'm not sure what the details are.

The Chairman: Fine. Our researchers will look it up.

Mr. Dennis Gaumond: I'm basically quoting something that was handed down to me.

The Chairman: I just thought maybe if you had it with you, I could go and look at it. But we'll get it from the researchers. Thank you very much. Sorry to bother you.

Mr. Barron.

Mr. Robert Barron (Member, Guelph Chapter, Council of Canadians): Mr. Chairman, ladies and gentlemen, members of the committee, my name is Robert Barron, and I also am a member of the Council of Canadians from Guelph. As well, I'm a broadcaster for Radio CFRU at 93.3 FM at the University of Guelph.

I'd like to address a couple of major concerns that add to the concerns represented by my colleague, Dennis Gaumond.

• 1350

First of all, I'm concerned about the way in which some of these agreements and trade treaties have been negotiated in the past. Second, I'm concerned about protecting specifically water under NAFTA and other trade agreements.

First, under negotiations, it concerns me that in the process of negotiating such interests as labour and consumer rights, people seem to have been overlooked. I would think that since the Canadian people, by their labour, have produced the goods and services for export, and since Canadian consumers have spent their hard-earned money to buy the goods and services imported to this country, it therefore would be only fair to give them 75% representation at any negotiating table and to give the government 15% representation and corporations only 10%.

I believe this would represent a more fair and balanced view of the interests involved in this. I think this is supported by Hazel Henderson, who is working on the United Nations committee on economic development with Premier Gorbachev. She came up with her own unique model of the world's economy, showing that the private enterprise sector represents about 10% of the whole economy, government spending about 15%, and the love economy, which she represents, represents the remainder, or 75%, of the world's economy. It includes such things as volunteer work, I guess the underground economy, and all of the other forms of spending that go on.

So this is one of the main concerns I have, the way they've been negotiating, excluding these very major interests involved here. I would like to see to it, and recommend, that this be addressed in the future.

My second main concern is under water protection. A couple of things have come to my attention. I made representation to another committee talking about Bill 107 here in Ontario, the Water and Sewage Services Improvement Act. That has since passed.

In addition, I'd like to point out that the Government of Ontario has produced this new document, called Ontario's Living Legacy, which is the proposed land use strategy for Ontario. This is a free document that you can receive from the Ministry of Natural Resources if you request it.

Hidden under the different lists of priorities here, there's one that specifically does affect such things as water. It starts off making major lists of the new provincial parks they'd like to protect, but hidden under this list of things is also this: “...providing greater certainty for resource industries in accessing such things as natural resources.”

It concerns me that having passed an act for water and sewage privatization, this new document in policy will represent the sellout of water as a commodity, which under the NAFTA provisions would allow free access for foreign countries to our water resources.

I would like to specifically request that the Attorney General's office inspect the act, Bill 107, plus these documents on policies, to see if they contravene federal statutes protecting water. If so, please have those statutes repealed.

Thank you for considering my considerations.

The Chairman: Thank you very much for that helpful suggestion. We'll pass that on.

The next spokesperson is Sue Langlois, a member of the National Farmers Union.

As you may know, we had some members of the National Farmers Union before us in Winnipeg the other day.

Ms. Sue Langlois (Representative, National Farmers Union and Catholic Rural Life Conference (London)): Thank you.

Well, I'll begin the way this is written:

Honourable members, ladies and gentlemen, my name is John Langlois. Thank you for the opportunity to present my views and the views of the National Farmers Union and the Catholic Rural Life Conference of the diocese of London. I'm not an executive member of either organization at the present time. I am just a pinch-hitter today as I have been very active with both groups in the recent past.

Well, clearly, I'm pinch-hitting for the pinch-hitter. I'm sorry.

The Chairman: You seem a little nervous there.

Ms. Sue Langlois: He got tied up.

The Chairman: Your husband?

Ms. Sue Langlois: Yes.

The Chairman: At any rate, we're glad to have you with us.

Ms. Sue Langlois: Thank you.

To go straight to the point, this will be a presentation in favour of more protectionist trade policies.

Mr. Dan Glickman, the U.S. Secretary of Agriculture, called for “free global trade in agricultural good...an open trading system and reliable markets”. The United States wants, and, according to Glickman, “will seek more discipline and greater transparency in the monopoly activities that these government run agencies engage in”.

The United States is expressing their intent to destroy the effectiveness of our most valuable marketing mechanisms, the Canadian Wheat Board and our supply management system in dairy and poultry, so that they can have greater access to our markets. Supply managed production in Canada is geared to domestic consumption, so exports are limited to 2% to 3% of the domestic requirement.

• 1355

This small surplus is included to ensure the filling of the domestic market at all times. Under import licence, processors can source markets outside of Canada if particular grades of products are not available. Overall, for producers, processors, and consumers, supply-managed commodities have been the most stable and profitable of any agricultural sector.

We see globalization as the willingness of countries to put their citizens at economic risk, in a position vulnerable to international competitiveness, in the often mistaken belief that, all things being equal, they can be competitive. But all things are not equal. In Canada we have climate disadvantages that make livestock buildings more expensive than those in many U.S. areas. We have higher energy costs and higher taxes, and support programs for agricultural commodities that are much lower than those in the United States.

Finally, we deserve to have commodity prices that reflect adequate margins to support a standard of living in keeping with current Canadian standards. Please don't ask Canadian farmers, like the employees at Maple Leaf and Quality Packers in Ontario, to take reductions of 40% in income. That was a result of ruthless globalization.

The family farm under a regime of less protection will continue to be pressured to survive and to develop large-scale and industrial models for production where 80% and 90% of production comes from 10% to 20% of producers.

Government programs continue in the United States grain sector, making a mockery of a level playing field. We continue to have a market revenue program that is essentially a floor price. Subsidy programs are being reduced, eliminated or tailored to meet present government goals of selective austerity and compatibility with international trade agreements.

Free trade sounds great, but in a free market with access, producers lose any priority to their own domestic market. Corn producers in Ontario should be delighted that we have several new and expanding plants for the industrial processing of corn. However, Ontario producers are not the major beneficiaries of these plants, in spite of considerable government investment in their facilities.

As an example, the new alcohol plant in Chatham uses mostly American corn. Casco in London, which produces fructose sugar from corn, imports most of their corn from the United States.

Do we not have sufficient corn right here to supply these companies? Yes, we do, but with free trade, that corn can be sourced anywhere. No great attempts are made to source Canadian corn or to provide any incentives to deliver to these plants. In fact, we are often discriminated against, because they claim we cannot provide the required volume.

I assure you, given the appropriate market signals, corn can be sourced here in Ontario. In this current crop year, 20 million bushels of corn have been imported into Ontario from the U.S. It can be assumed that the majority of this was for industrial use.

When Ontario corn is displaced by U.S. corn, there is an increase in transportation resources needed to bring corn in. We believe we must reappraise the purpose of international trade. We support a much greater respect for an individual country's agricultural market and their producers. Trade should be supplementary to a country's ability to produce goods domestically. No trade should be undertaken without consideration of the impact on domestic producers.

We presume that the reason for international trade is to lower prices to consumers, but during unprecedented low pork prices to farmers last winter, prices to consumers were relatively unchanged from the norm. We must question who really benefits from free trade if it is not the consumer or the farmer.

We would like to conclude by suggesting some ethical policies that should be incorporated by the World Trade Organization.

The first is self-reliance in basic food needs. A non-predatory agreement would recognize and respect each nation's right to produce the basic needs of its population, to provide food security without infringement.

In this regard, the United Nations General Assembly resolution 39/166 of December 17, 1984, says this:

[The resolution] calls upon the international community to support the efforts of the developing countries facing constraints in the development of their food and agricultural production to enable them to achieve self reliance.

Two, on the right to an orderly marketing mechanism, a multilateral trade agreement that has the best interest of all parties should include the right of each country to maintain orderly marketing mechanisms, which can include import and price controls. The assurance of preferential access to one's domestic market is not inconsistent.

• 1400

In this regard, the UN General Assembly resolution of December 12, 1974, states:

Every state has the sovereign and inalienable right to choose its economic system as well as its political, social and cultural systems in accordance with the will of its people without outside interference, coercion or threat in any form whatsoever.

In support of this, the OECD produced guidelines for transnational corporations in 1976. It says:

Enterprises should:

(a) take fully into account established general policy objectives of the member countries in which they operate

(b) in particular, give due consideration to those countries' aims and priorities with regard to economic and social progress....

With regard to the right to sectoral minimum pricing agreements, in food production there is a need to recognize as legitimate any collateral agreements between producers in each country setting minimum prices. The right of countries producing common commodities, cooperatively setting just prices for their producers, should be encouraged.

Finally, may we remember that we're all part of the human family and that cooperative and complementary trade can be beneficial for all if practised with respect for our autonomy as nations and respect for our people and their dignity.

Thank you.

The Chairman: Thank you very much, Madam Langlois.

We turn then to Oxfam Canada, and Cecily Nicholson.

Ms. Cecily Nicholson (Spokesperson, London Branch, Oxfam Canada): Let me start by saying thank you for the opportunity to speak.

I suppose the disadvantage of going third is that I'm going to be repeating some points that have been made previous.

If you would bear with me, I'm going to begin with a brief reference to economic history.

Some two centuries ago—1817, to be precise—David Ricardo, building on the ideas of Adam Smith, established the law of comparative advantage, the fundamental rationale for free trade. Ideally, the wealth of two trading partners could be maximized if each country specialized in the production of goods in which it had the greatest amount of efficiency. This neo-classical theory is still an underlying tenet to free trade theory.

An important question to ask is what happens to the country that enjoys no absolute advantage in the production of any commodity? Many would argue that the rhetoric expressed in support of free trade clearly represents a justification for unequal exchange between more-developed countries and lesser-developed countries, an exchange that is unequal due to differences in technology, wages, and rates of exploitation.

Even if free trade can be shown to increase wealth—and surely some wealth has been created—free trade and comparative advantage say nothing about distributional justice within and between society. Free trade only enhances the mobility of capital to move from high-wage to low-wage regions, thus driving down wages under the threat of capital mobility. For example, General Motors can threaten to abandon Canadian production sites in favour of lower-cost American or Mexican sites. There are numerous examples.

Now I'll tell you a bit about Oxfam. Oxfam is a non-profit international development organization that is dedicated to ending world poverty and concerned with promoting a just society. Oxfam is intrinsically related to human rights, and believes every individual has the right to food, shelter, health care, education, a livelihood, a safe environment, protection from violence, equal opportunity, and a say in the future.

The Canadian government has clearly and publicly espoused the exact same beliefs, and has become a member of many international and regional legal agreements saying precisely that—for example, the United Nations bill of rights, which includes the Universal Declaration of Human Rights, the International Covenant of Civil and Political Rights, the International Covenant of Economic, Social and Cultural Rights, as well as the 1984 Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, the 1989 convention on the rights of the child, and the 1995 platform of action on gender equity.

While significant effort has already gone into creating a universally respected rules-based system—this is in the form of structural adjustment programs in the south, free trade and NAFTA, the Uruguay Round at GATT, the World Trade Organization, and of course the proposed MAI and FTAA—these agreements are concerned primarily with protecting trader and investor rights. Little effort has been put into entrenching and applying the aforementioned international agreements on human rights.

The globalized economy is about establishing a new set of rights, corporate rights. Corporate rights are being assigned greater legal protection. They have greater power because they can wield the threat of economic sanction.

• 1405

NAFTA and the establishment of the World Trade Organization are a means to an end, an end that is not only taking precedence over UN law but is also counterproductive to the establishment of human rights.

In the world today, of the top 100 economies, 50% are mega-corporations wielding a significant amount of power, power that often supersedes that of a sovereign nation.

There are two blatant examples of corporations overriding legislation and national sovereignty under NAFTA. First of all, Ethyl Corporation, which has already been mentioned, launched a $250 million suit against the Canadian government for legislating a ban on a gasoline additive they considered a toxin, which was agreed upon by the U.S. Environmental Protection Agency, limited in use in the United States, and actually banned in the state of California.

Second, a U.S. hazardous waste management firm, Metalclad, has launched a $90 million suit against the Mexican government, also for expropriation, because the site they intended to use for hazardous waste was declared part of an ecological zone.

These are two points demonstrating the power corporations can have under free trade agreements and also how easily and how quickly human rights can be eroded, the human right in discussion here being the right to a safe environment.

As the globalized economy takes shape, we are seeing the negative effects of a more liberalized trade policy, as wealth is becoming increasingly concentrated into fewer individual pockets. There exists a significant amount of rhetoric concerning the need for our nation to further liberalize trade and hence expand free trade agreements.

The proponents of globalization continue to maintain that if trade and investment are allowed to operate unhindered throughout the world, economies will grow, and the benefits are bound to trickle down to everyone.

However, up to 1998, according to the World Bank Group's Global Economic Prospects, published in December of 1998, the annual world economic output for the 1990s had averaged 2.3% compared with 3.1% for the 1980s.

In other words, despite intensified deregulation of national economies and the expansion of trade since the early 1970s, when the Bretton Woods system of fixed exchange rates collapsed, economic growth has actually declined. Furthermore, we can see evidence of rising inequality in the world economy, as the gap between the rich and the poor is widening. Here are a few statistics.

The income share of the poorest 20% of the world population has fallen from 2.3% in 1990 to 1.1%, and it is still falling.

The richest 447 people in the world have the same net worth as the bottom 50% of the world's population, more than 2.5 billion people.

A mere 0.3% of world trade involves the least-developed countries. This represents a drop of 50% from two decades ago.

Developing countries lose more than $60 billion a year from agricultural subsidies and barriers to textile exports in the industrialized nations.

Here in Canada, one in every six people lives in poverty. This has gone up from one in seven from 1989.

The former federal government pledged to end child poverty by 2000. In fact, since 1989, child poverty has increased in the realm of 60%. To put it another way, 14.5% of Canadian children lived in poverty in 1989. In 1996 that number had risen to 21%, and today somewhere in the realm of 23% of Canadian children are living in poverty.

Youth fare no better. Official unemployment for youth is somewhere around 17%, although many argue it is upwards of 25%. That's to say nothing about the quality of jobs that youth are occupying, being grossly overrepresented in the service sector and being primarily part-time workers. The average income for youth since 1985 has fallen by 23%. Between 1985 and 1995 tuition has risen by 134.4%, and student debt averages $20,000.

There are now more food banks in Canada than there are McDonald's restaurants.

In 1997, 20% of families with the lowest incomes experienced an income decline of 3% in the previous year, while the top 20% had a gain of 1.8%.

Clearly the trickle-down theory of economics is not working. It has never been an effective means for economic development.

• 1410

In conclusion, I am a young Canadian who foresees a very bleak future for Canada. I think we're at a point of crisis, and I think the answer to this crisis is not the expansion of free trade but a reconsideration. It hasn't worked thus far, and it will never benefit most members of society.

It's truly damaging to the cause of human rights, especially those of the most marginalized and disempowered people—children, youth, women, aboriginal people, and in general the world's poor.

Trade should not be dictating the establishment of human rights. Rather, human rights should be informing the structure of trade.

Thank you.

The Chairman: Thank you, Ms. Nicholson. Oxfam often appears before the committee in Ottawa, so we're quite familiar with many of the members of your organization, who have come before us quite a bit. It's nice to see you here, though.

I guess that's it for everybody in this group. I'm sure we have questions.

Mr. Obhrai.

Mr. Deepak Obhrai: Thank you.

Thank you to the witnesses for coming here to give your perspectives to us. We listen to a lot of witnesses and we hear a lot of points of view, so it was nice of you to come here to present your points of view.

For us, it's quite a challenge—let's put it that way—when this happens. I mean to say, one of you alluded to the corn growers. We had the corn farmers association here this morning, and they were asking, to be very blunt with you, for free trade, or asking for barriers to be removed so they could access the markets.

I can understand the concerns you have explained. In my view, no blank cheque should be issued to say that everything is fine. We have to take the concerns of environment, labour, and everything else. I think what we are grappling with is how to address all these things in here.

Your submissions do make quite good points. I don't know what to say except thank you for giving your points of view.

We have heard from your council. We heard from them in Toronto and everything, and I think we know enough.

This is not an attack here, Ma'am, but you say there are now more food banks in Canada than there are McDonald's. I come from Calgary, and I know there are 2 food banks there but about 25 to 30 McDonald's. I think it might have been more appropriate to say there has been a rise in the number of people accessing food banks.

Ms. Cecily Nicholson: That's a statistic drawn right from Oxfam material, a reputable anti-poverty organization.

Mr. Deepak Obhrai: Yes, well....

Ms. Cecily Nicholson: Certainly in some areas there aren't—

Mr. Deepak Obhrai: No, I'll agree that all stats indicate there has been a rise in number of those going to food banks.

Ms. Cecily Nicholson: Yes. That is the general point I was trying to come across with.

Mr. Deepak Obhrai: Having said that, there are a lot of conflicting views. I think one of the major questions that maybe all of you would have to address—and this seems to be the underlying theme in what we hear from others as well—is multinational corporations. I mentioned other small-scale businesses or industries, including the agricultural association and the restaurant association, which have smaller businesses. For all the submissions members of civil society have presented, the target has been the multinationals.

I think that is fair enough. But what we are also seeing is a lot of other groups, other Canadians, who want this opportunity to explore. I think maybe in your submission you would probably have to take that into account.

That's all I have to say.

The Chairman: Would anyone like to respond to that?

• 1415

Mr. Thomas.

Mr. David Thomas (Member, Guelph Chapter, Council of Canadians): I appreciate your comments, sir. I think one has to be cognizant of the fact, though, that Canadian companies are seeking opportunities to sell more products and services, to find new markets for their goods and services, but there are two sides to each coin. If we're concerned about foreign corporations dictating to us what we can have with regard to environmental, labour, and public health standards, we have to be concerned about our own Canadian companies doing the same in other countries.

In other words, there needs to be a process and a framework for regulating trade to ensure that countries have the ability to govern in the public interest for their countries and also to set minimum standards for a lot of these areas that aren't the lowest common denominator of standards.

In other words, if we have a law banning a certain type of gasoline additive because it's toxic, it should be our right as a sovereign country to pass those types of laws to act in the public interest. It shouldn't be the case that, well, we have to remove that law because Mexico or Honduras or some other country doesn't ban that. In other words, there would be a lowering of standards to the lowest common denominator. I would just ask that all of you in your deliberations keep those things in mind.

The purpose of your power as elected representatives is to make laws that are in the public interest. However, these days the corporations are able to speak very loudly, and we fear that our voices sometimes get drowned out.

We thank you for this opportunity today, but we ask you to keep in mind that it is the public interest that should come first over the special interests of business groups.

Thank you.

The Chairman: Ms. Langlois.

Ms. Sue Langlois: When I was talking about American corn being dumped into Ontario, I think it's just as valid to talk about how, in agriculture as a whole, we as Canadian farmers have no right to be dumping our pork into the Dakotas or into Minnesota or into the other American states that border us, thus disrupting their economy. We have a responsibility to produce enough for our own economy, and if there is a need for export, to then produce that as well.

We don't have a right to just go flooding other peoples' markets. I think we really have to keep that in mind. It is just not a free-for-all. We would be totally irresponsible if we did that. We don't do that in our own private lives.

I'm not coming up with any great examples, but you know what I mean. There has to be a balance.

Just because we have, right here in southwestern Ontario, the best land in the whole country for producing corn, it doesn't mean we should just do the fencerow-to-fencerow thing if that isn't a responsible action to take.

When I say we need protectionist policies, we need to be protectionist; we don't need to be insular in the sense that we are the only ones who count, because that's not true. The very way we can be most responsible to ourselves is to make sure we are treating other countries in a way that they can be responsible to their people as well. I don't think Japan should have to quit growing rice if rice is what keeps their mountains in place just because the United States wants to dump rice in there.

The Chairman: Ms. Nicholson.

Ms. Cecily Nicholson: I'd just like to make a point in response to a comment you made, sir.

A very significant amount of Canadians, and certainly ones you're going to hear from, and have already heard speak, are going to be very much in support of liberalizing trade in the interest of increasing foreign investment and so forth. But I am trying to express a voice. I'm trying to represent some people.

Oxfam is an anti-poverty organization. We work primarily with marginalized and disempowered people, people you will never, ever hear speak. That's most people in the world.

• 1420

That's just a small point. Of course you're not going to hear that. They're not going to get to a forum like this, and they're not going to get politically represented because they're too busy doing other things.

Mr. Deepak Obhrai: It's good of you to come and represent them, to tell us that point of view. We take that quite seriously. I'm just saying we have to challenge you—

Ms. Cecily Nicholson: And I'm challenging you back.

Mr. Deepak Obhrai: Oh, oh. Thank you.

The Chairman: Mr. Barron was going to add something, and then I'll go to Madam Debien.

Mr. Robert Barron: Thank you, Mr. Chairman.

I would just like to say that there seems to be these days a confrontation between the concept of essential public services versus private enterprise. This to me represents a conflict of interest that is clearly outlined under law, and under major social agreements.

Please notice that I didn't say “free” trade, or “free” enterprise but “private” enterprise. My observation is that there's no such thing as free enterprise. The cost has been terrific. Everybody should realize that laissez-faire means anything goes: Lo and behold, everything went south of the border down Mexico way with NAFTA.

I'm concerned that with the increasing negotiations and agreements we'll continue to erode these things. Such things as health care and essential services like water and power and education are becoming privatized. They are considered to be expendable for the sake of economy at the discretion of people we don't even see very often. They are faceless names that are influencing public policy because of their enormous financial resources and their contacts. They're very influential lobbyists, and we don't really know their names or even see their faces.

So I'm concerned about this major trend. We've heard people talking here about the massive impacts that seem to contravene agreements that Canada has been party to, starting with the United Nations Universal Declaration of Human Rights. A Canadian lawyer actually wrote that up, and we should be enormously proud of it, but it seems to me that especially in the past ten years most of those things have been terrifically eroded. That concerns me profoundly.

The Chairman: Thank you.

[Translation]

Ms. Debien, do you have any questions?

Ms. Maud Debien: Good morning, ladies and gentlemen. We have met with the representatives of many NGOs. They have informed us of their concerns which are quite similar to yours.

I personally believe that what you are saying is true. We are told that the FTA and NAFTA have not lived up to expectations, in spite of the promises which were made. This is a statement which I think the committee has heard from numerous witnesses. As you have realized, the gap between the rich and the poor, between rich countries and poor countries, is growing ever greater. We are very concerned about this situation.

Some countries seem to manage quite well, and others less so. For example, I am thinking about the maquiladoras in Mexico, where NAFTA has had disastrous results.

What should be done? I have to admit that we do not have a solution. At least I do not have a solution. As the chairman was saying, we are here to listen, to hear what you have to say. I would like to mention something which has to do with Quebec. You will realize that I come from Quebec and that I am a member of the Bloc Québécois. One of my young Bloc colleagues left the House of Commons carrying his chair over his head. I think you all saw this gesture of protest on the part of this young man. He forced Quebeckers to examine their thoughts in depth.

• 1425

Since January, indeed, the Parti Québécois government, along with the Bloc Québécois, has been examining the impact of globalization on Quebec. All year we have been adding to our information, thanks to evidence which we have received from people like yourselves. Our examination is underway, at least in Quebec, and I hope the work will proceed at the federal level with the help of your contribution.

That was a comment rather than a question, because I very much share your concerns.

[English]

The Chairman: It's not a suggestion that you all pick up your chairs and walk out of here. It won't have quite the same impact it did when Mr. Tremblay did it.

Voices: Oh, oh.

The Chairman: Mr. Gaumond.

Mr. Dennis Gaumond: I have a very brief and straightforward question.

Do you believe chapter 11 of NAFTA needs to be repealed?

[Translation]

Ms. Maud Debien: Are you speaking about chapter 11, on investment?

Mr. Dennis Gaumond: Yes.

The Chairman: Of NAFTA.

Ms. Maud Debien: We have heard some very divergent opinions regarding the chapter on investments. We know that the MAI negotiations failed because of pressure from civil society, which did not want this question raised at the WTO. For my own part, I feel that such investments will have to be controlled in one way or another, because they exist. Transnational capital fluctuations occur regularly.

There is the Tobin tax, which might be one way among others to control capital fluctuations and this question of investment. This problem will have to be discussed somewhere, because it is a problem. But where? I do not know. Various witnesses have pointed to various solutions, one being to create another organization to manage this problem rather than referring it to the WTO. Some others suggested merging financial institutions and the UN. Various proposals have been made, but which one is the best? I have to admit that I do not have the required expertise to decide on the matter, but the question must be resolved. The problem must be resolved, but where? If you have a solution, perhaps it could be added to what we have already heard.

[English]

The Chairman: It was a precise question about chapter 11 of NAFTA itself.

I don't know; you're probably following this fairly closely, Mr. Gaumond, and you may have seen that the Government of Canada is obviously concerned about this.

I used to teach international trade law so I've been associated with this thing for some time, and I think it would be fair to say that chapter 11 has created problems that nobody was thinking about when it was drafted and put in there. I think it's the hope of everyone that even the American government....

You may know of the case Loewen is bringing against the American government, claiming that the whole state of Tennessee's judicial structure and everything is contrary. So they're going to have to face this.

You know, the United States is the most litigious society in the world. When the American lawyers get onto this, they too will be suing like mad all over the place. I think there'll be pressure on the United States government. At the moment, I understand, the difficult one is the Mexican government.

I can assure you, this is an issue that is being very closely followed in Ottawa. I can't speak for the government, but I can tell you, from what we hear as a committee and what we hear as members, there is definite concern, and there's a definite attempt.

• 1430

It would be fair to say, however, that people are concerned that by reopening completely chapter 11, you'd lose the other benefits that are there. Particularly the Americans would come back to us and say, sure, we'll give you chapter 11, but now we want you to get rid of the cultural exemption, or something like that.

However, believe me, it's on the table. I don't think there's any question about that. It's a concern. We didn't like paying that kind of money to advocate; nobody did. But don't forget, that was paid because two provincial governments in this country wouldn't adapt the necessary legislation. If they had adapted that legislation, we would have been able to keep our legislation because it would have been non-discriminatory. It was the discrimination thing that caught us.

We were hoist on the petard of our own constitutional problem in this country and the unwillingness of two governments to come to the aid of what was an important issue in the country. Let's not forget that as well.

Mr. Dennis Gaumond: Can a make just a brief rebuttal to that?

The Chairman: Yes.

Mr. Dennis Gaumond: It's not really a rebuttal, it's just a comment.

One of the things I mentioned when I read the thing was the media response to things. To me, the transparency of these things leaves much to be desired. When this issue came up last June, it rippled through the press and was gone. I really think it's the government's responsibility to really speak loudly.

I mean, this is an unprecedented outrage. It should not have rippled through the press in a matter of a couple of days. I feel the government we elect should be assuming responsibility to make sure that the people of the country are informed about this thing. I think the degree of outrage would have been enormous if that had happened.

The Chairman: That's helpful. I think it's one of our jobs as a parliamentary committee to try to do that, too, but I hope you appreciate that we have a lot to deal with in addition to trade matters. We deal with Kosovo and a lot of other things. We're trying to deal with as much as we can. But certainly as a parliamentary committee, both opposition and government members, we do try to hold the government's feet to the fire on a lot of issues that are not necessarily comfortable for them.

We just did a report on nuclear disarmament with a lot of recommendations that are making a lot of people uncomfortable, but that's how we do it. That's what we try to do.

I think Mr. Pickard and then Ms. Augustine would both like to make some interventions before we move on.

Mr. Jerry Pickard: Thank you very much, Mr. Chairman.

We've heard many people bring up the MMT issue. I could probably say that everyone around the table agrees that it is not a satisfactory situation, and it is one that none of us are happy with. So that has been the case, and pretty well everyone around this table has spoken to it.

The point I want to make is that your voice is very important to us, and we feel that your input is important. We have heard many groups across our hearings espouse many similar concerns that you have brought forward. There's no question that we are listening, and listening very carefully.

Our job is to listen, to be as transparent as possible, and to take your concerns, as well as the concerns of all others that we hear, back to Ottawa and make recommendations or at least make the concerns that we've heard from people across the country available to those people who are dealing with these issues. So rest assured that what you're saying to the committee will be taken back and will be reported. I think that's extremely important.

I do want to touch upon a couple of things that have been talked about beyond the sovereignty issue and the public interest, which I think is often a problem in trade negotiations. The sovereignty issue certainly is highlighted by the MMT issue. That's one we are all cognizant of.

Sue, you brought forward the issue of corn. The ethanol plant is in my riding. I see that Canada and the United States trade more back and forth in corn because there is no border barrier. Corn can flow into the United States and flow into Canada with no tariffs.

The corn association, which is made up of all the corn farmers, is very pleased that we do have a tariff-free border. They point out that with regard to the corn going back and forth between Canada and the United States—in particular, Ontario and Michigan—we are the largest purchaser of American corn going anywhere, and the United States is the largest purchaser of Ontario corn.

• 1435

The reality, then, is that there is a very good flow back and forth in that commodity. Ontario is doing extremely well on the value-added side as well.

When we look at corn product going back and forth, you will know, as a farm person, that there are all kinds of different qualities of corn. Corn of very low quality might be used in an ethanol plant and corn of very high quality used in a Kellogg's plant.

As a result, it's both the quality of corn available and the price that would make a difference. If Michigan had a lot of low-quality corn, it might go into the ethanol plant for the ethanol plant's production, so Canada is then buying the U.S. corn. At the same time, Kellogg's or another plant may need high-quality corn, and Ontario's production would go to the States. That has balanced very well.

As a matter of fact, I think in the area of a billion bushels of corn is produced and sold back and forth. We could have up to that potential of sales back and forth. The farm community seems to tell us very clearly that this is a satisfactory process.

I totally agree with your comments on supply management. That has seen the most stable, best-managed production in Canada, absolutely.

Every person around this table has listened very carefully. As a matter of fact, at the national level and at the provincial level we've heard from supply management people who have come in and made it very clear that one of their major problems is that they have formulated what I would suggest is a new plan, which in some degree is under attack. They laid that out to us yesterday. They were very clear that they want zero-zero tariff. They're very adamant about gaining a small percentage of market share in the United States.

What's happened in the past is that Canada has been almost like a boy scout, and we've given up market share. That has hurt us. The United States has basically kept their market share and not lived up to the agreements that are there.

What I'm hearing from the supply managed sector now is that they, along with many other commodities, have developed a plan in order to make sure that in the future their industry is sustainable and protected to the limits we need to protect them. I think their plans coming forward are very good.

I really believe the message you're giving us right now is the message that people are important, and to take into consideration the people side of this whole issue. That is clear. It's been made clear by many different organizations.

I've made some comments about a few things that have been mentioned, but I believe one of the major tasks we have is balancing that people concern and making sure it's dealt with in our final report.

So I thank you very much for coming. We certainly will be cognizant of the issues you've brought forward.

The Chairman: Jean, do you want to add anything?

Ms. Jean Augustine: Mr. Chairman, I'll be very brief, knowing that we're right up against the clock.

I want to take the opportunity to say to Ms. Nicholson that I am Oxfam's member of Parliament. I do the advocacy work among parliamentarians for the Ottawa group. So I'm very pleased to see you here.

I also have been working hard on basic human rights and the ten points that Oxfam is working on at this particular point, ensuring that those issues come to the table and that it's part of whatever discussion does take place.

We've heard from so many NGOs and members of civil society expressing some of the very issues you've placed before us here today. We're here to listen. We're here to make recommendations. We're here to go back with some recommendations.

• 1440

I want to say to you, Mr. Barron, that the issue of water is a very important one, and the discussion around that issue is continuing. We thank you for your intervention, bringing that major issue to our attention this afternoon.

That's all I have to say, Mr. Chairman.

The Chairman: In closing, I think it's been clear...as we've listened to so many groups that have expressed ideas like your own. Some groups have said they want to fix the system that's already there. Whether it's the Canadian Labour Congress or yourselves or people empowering themselves against poverty, nobody seems to have any problem with liberal trade providing it's destined to be good for society as a whole.

The problem is, the trade system at the moment is not recognizing the issues that relate to the environment, human rights, culture, labour standards and so many other things, including the poverty gap, which is growing, and these types of social issues.

I guess what we have to try to struggle with is whether there is a way we can recommend that Canadian negotiators try to ensure that the international governance structures are able to deal with these, which is one of the problems. The WTO seems to work for the trade side, but nothing else seems to be able to get its act together in terms of global governance.

If they don't and then we fall back, I think it was Mr. Thomas' point, then we at least have to keep the national structures in place to guarantee that social protection is there.

Those are the types of issues we're all grappling with and will try to deal with in our report. I think those are the questions we have to deal with. You were very helpful in focusing us on them. Thank you for coming.

I agree entirely with Jean, Mr. Barron. Believe you me, water is something we're all keeping an eye on.

Years ago, when I was still a professor, I had a graduate student who studied a proposal that the United States had about draining the Great Lakes and building an actual conduit from the Great Lakes all the way over to Arizona and California. You can imagine where we would be if that type of project were undertaken. They border on the Great Lakes, so it's their water and our water. It takes two to tango when you get into these things.

So it's certainly not an issue that's going to go away, and I think we're all on your side on that one.

Thank you very much for coming. We appreciate it.

To the next group, thank you very much for joining us. I hope you'll be more comfortable in here than outside. Maybe you would be happier outside, actually. We wouldn't mind getting outside and getting a little fresh air ourselves. Maybe there should be a clean air act for politicians to get away from musty rooms.

Perhaps I'll take you in the order in which you're on the paper here. I appreciate that none of you had an opportunity to prepare a formal presentation. You've heard what we've been discussing up to now, so just add anything you feel you would like to add to that, and then we can have a bit of a dialogue.

Mr. Anderson, perhaps you would start first. Then we'll just go to the others at the table.

Mr. Jim Anderson (Individual Presentation): Thank you, Mr. Chair, ladies and gentlemen, members of the committee, and brothers and sisters.

As you say, I wasn't really prepared for today. I got hit with this just a couple of hours ago. After you've heard what I have to say, though, maybe then you'll realize why I've come down today.

I am an employee at the London Health Sciences Centre and a member of the Service Employees' International Union, which is prevalent in hospitals across the country. Every day I see first-hand the negative impact free trade has had on health care. I have tried to find some positive results, but right now have been unable to.

• 1445

It's been a difficult time for me over the last few months. As I go through, you'll find out why.

What I find is an underlying move for insurance companies to basically turn health care into a for-profit industry. I look at the profits that other industries related to health care and that medical and pharmaceutical industries are making, and I begin to struggle; I wonder why those profits are not turned back into health care.

I've gone through the process of being restructured over the last ten years. I've been involved in all of the impact it has had in London, with the London Health Sciences Centre restructuring commission and the whole works. Over the last ten years I've been a union steward at the university campus, and have been involved right from head to toe.

I thought we were moving positively, and I was expecting better solutions from the current federal government, being a Liberal government. I'm not surprised by the provincial government's attitude towards health care. It seems to be going towards a two-tiered system, like that of our American brothers and sisters. I struggle with that.

I've had a double experience in this. Not only do I work in health care but my wife has also just spent basically five months in a hospital in London with a medical condition. Luckily enough, it was the same hospital I worked in. The nurses did a wonderful job. All the support was there medically. It was a rough five months, and we're still not over the....

I get really concerned about what's happened. As I say, I've been in health care since I came to London in 1973. I worked at University Hospital and saw the fantastic caregiving opportunities. I was really encouraged by it all.

In the last ten years, I've seen it depleted, basically. I have major concerns. I was able to participate and be there for my wife first thing in the morning, at lunch breaks, at coffee breaks and then in the evening without any extra costs—for instance, paying $7 a day for parking. It really gets to one's heart when you think of what people have to go through. I was lucky. I didn't have to pay for parking. Seven days a week I was there, for five months. I would hate to have seen that bill at the end of the day.

That's an example of what's happening.

The nurses are run off their feet. I was able to help out. In fact, the nurses said I should go for my licence after that, instead of being a millwright looking after the air conditioning.

To sum it up, in general, the cut, slash, and burn attitude created by free trade with regard to health care has to stop. We have to have more dialogue. We have to proceed with a consensus model of some description towards the changes in health care.

Free trade was the start of this, and we have to be aware of what's happening. I want to see more dollars rolled back into health care from the federal government. The American way is not the right way. Obviously with the HMOs and everything, when you read all the dialogue that's coming out of America, Bill Clinton has personally said he'd rather have the Canadian system tomorrow.

But what's happening to our system? It's going the other way. That is my concern.

Thank you for your time.

The Chairman: Thank you very much, sir.

We'll turn then to Randy Pedersen of Greenpeace, London Branch.

Mr. Pederson, sir.

Mr. Randy Pedersen (Representative, London Branch, Greenpeace): I apologize, because I didn't have time to really get a presentation together. I have just a few things I'd like to say on behalf of Greenpeace.

We don't know a lot about the current negotiations going on. First of all, then, it would be good to get as much information to the public as possible about these types of hearings and about the negotiations that are happening. The information we do have is based only on what's happened in the past.

• 1450

I'd like to reiterate, without exhausting the topic, the point about the MMT. When we see these sorts of things it makes us immediately skeptical of free trade.

I'd also like to say that Greenpeace isn't opposed to globalization. They support things like the Kyoto climate summit, an international forum where countries can get together and present concerns about such things as fossil fuel emissions and toxic waste. This type of globalization Greenpeace will support, but any kind of globalization that's going to put industry before the environment and before people, Greenpeace has opposed. They will continue a strong opposition against that type of globalization.

That's essentially all I can say today on behalf of Greenpeace.

The Chairman: That's very effective. It's exactly the principle we've heard.

You'll appreciate that the actual negotiations haven't started yet. The purpose of these hearings is that Canada will have to go in November to a meeting that has already been set by the WTO. When the last Uruguay Round completed, they agreed that they would do another round on agriculture and services. So the train has already left the station. The decision that will have to be made in Seattle coming up is whether or not it'll become a comprehensive round, or whatever its nature will be. So nobody really knows, and quite often these things go on for a long time.

With regard to the purpose of these hearings, Minister Marchi has said, look, I want the parliamentary committee to go out across the country and hear from Canadians to get us—that is to say, the cabinet—a report by June so that they can give instructions to the Canadian negotiators in time for the fall session. That's what we're trying to do, to fit the timeframe.

If you want to look at our parliamentary website, it's “www.parl.gc.ca”. We put 21 different discussion papers onto our website, the general parliamentary one. From there, if you go to the Standing Committee on Foreign Affairs and International Trade, you'll find our information. We'll be adding more stuff on there. Hopefully it'll be helpful.

Mr. Randy Pedersen: That's good to hear.

The Chairman: We try to be as open as we can.

Mr. Randy Pedersen: I have to admit, I'm a bit of a skeptic about these types of things. When we see something like the MAI getting as far as it did, you know....

The Chairman: I think the MAI was a wake-up call for a lot of us.

Mr. Randy Pedersen: I hope so.

The Chairman: I don't think that was going to help Canada.

So that's a good point.

Mr. Kuhn.

Mr. Al Kuhn (Individual Presentation): Good afternoon, Mr. Chair, and honourable members.

I'm here representing myself in terms of my concerns regarding international trade, specifically in the Americas.

First of all, I'd like to thank you for the opportunity to be here. I'd like to figure out, though, why we didn't find out more information about this beforehand, and why it wasn't in the media. I listen to radio programs during the day.

I've just finished school, so I have some time, and I'm here, having some fun. I appreciate the time. If I had heard about this beforehand, I would have been able to develop a presentation. Of course, I don't have one right now, so I might just end up rambling on. But I do have a couple of points I'd like to make.

Of course I'm scared about Ethyl Corporation and their lawsuit in Canada. I'm concerned about such things as shipping used plutonium across our border to be reprocessed into some of our car plants in Canada. How will a trade agreement like NAFTA affect that?

On section 11, I've read bits of it. I have never read the whole text of NAFTA. I remember looking at the text itself, and it's quite massive for me as a student.

I'm concerned about things like chapter 11. Where does the culpability lie, and our sovereign powers? Can we regulate such things as shipping nuclear waste across our border, or are we going to be culpable for not allowing the shipment of nuclear waste across our border?

• 1455

It's things of this nature that ordinary Canadians aren't necessarily informed on but would be concerned about if they were informed, perhaps by unbiased representation, or maybe a government publication. I'm not sure what would be the best way to inform the public about issues, but I know everybody watches TV, and some people do listen to the radio, to some good programs. Maybe there could even be a public service announcement of that nature.

Now, maybe I didn't catch that, or maybe I didn't see it, but I'm pretty sure I haven't.

Another issue I'd like to talk about is human rights. With trade agreements, in terms of some of the issues regarding economics such as multi-corporations, some of their concerns sometimes override human rights concerns. If you look at an economic scale, using our basic form of economics, we don't include human rights in it. We don't include environmental rights in it. These are bottom-basic human rights as well. Clean air and clean water are basic human rights.

Why are we trading with different countries that we know have poor human rights records? As a democracy, we as Canadians, not corporations, are supposed to be the policymakers. Why are we trading with countries that support human rights abuses? Is this a form of economic imperialization? Are we exploiting workers for goods that are causing hardship not only to themselves but also to environments?

We have to look at the environment as a whole. Such global environmental problems as global warming or ozone depletion or things of that nature affect us here as well. I have some questions here.

I think that's probably about it from my point of view. If I had been given the opportunity to be forewarned or something like that, I would have appreciated that, as a concerned citizen. But I appreciate the time, and I thank you very much for allowing me to speak at the forum.

The Chairman: Thank you very much for your comments. You asked at the beginning why it wasn't in the media. That's our question too. We sent news releases to everybody.

Mr. Al Kuhn: I see.

The Chairman: I think it's not something the media considers newsworthy. Until you guys turned up with your placards, we weren't getting any news.

Thank you very much, by the way. Some of your placards were very helpful. Maybe when we go to the next town they'll say, “Oh, gosh, there's a riot”, all turn up, and finally see we're doing something serious.

I mean, this is a very interesting point. In an earlier session somebody said that one of the problems is that citizens have a lot of trouble finding out about these issues, because there are not good discussions about them in our media, be it televised or print media.

I mean, you can get it, but it's hard work. We do our best. That's all I can say. I'm sorry you didn't know more earlier, but we'll try to constantly update our ability to communicate with people.

Our last spokesperson is Ms. Hatzipantelis.

Ms. Maria Hatzipantelis (Spokesperson, London Coalition for Fair Trade): My name is Maria, and I'm here representing the London Coalition for Fair Trade, an ad hoc committee formed about two weeks ago, probably less. We found out about these hearings and wanted to do something and be involved.

We thank you very much for coming and getting us in off the street and letting us come in and talk.

Unfortunately, we don't have a prepared speech, because we didn't think we'd be allowed in. So we don't have anything. But I do have a few comments I'd like to make on behalf of the coalition.

We feel that our communities have suffered the consequences of the model imposed by the Canada-U.S. free trade agreement and then NAFTA, which was the first international trade deal to grant foreign corporations the right to sue governments if the legislation got in the way of their profits. I think many of my colleagues on the panel today have mentioned different cases that we're all concerned about.

Agriculture, industry, social programs and other aspects of our national life have been hit hard by these agreements. The FTA and NAFTA have changed the face of Canada.

• 1500

As a local example, just to let you know, at the moment thousands of our brothers and sisters who work with Bell Canada are on strike, fighting for their jobs. Operators must either take a 40% wage decrease and move to a different city or face the consequence of losing their jobs. That is why they're currently on strike. That's the Communications, Energy and Paperworkers Union of Canada, Local 46, here in London, Ontario.

That's just one local example of trade agreements and things that we see here.

As well, under the World Trade Organization, trade liberalization continues to have an appalling record. It's a model that strives relentlessly to reduce social and environmental standards to, we feel, the lowest common denominator and then seeks to reduce those standards even further. As a result, we see increasing poverty in most of the world. Our flora and fauna of the earth are at risk. This includes our air and water. Other people have talked about that in more detail.

While trade liberalization has undoubtedly benefited the rich and the powerful, it has damaged the quality of life and democratic rights of most Canadians. For many more in the world, economic globalization has had far more dramatic consequences.

I'd like to bring up one example that I think is a little fitting, considering how Canada is currently going to go into negotiations for the free trade area of the Americas. I have just a few comments from the committee for social justice and human rights in Chile. Unfortunately, they could not be here themselves. They're ordinary citizens who needed to be at work and couldn't get or take the time off to come and speak today. They're sharing their experiences of what free trade meant in Chile in 1973.

Basically, Chile was the free trade experiment in the seventies. It was not well received by the citizens at all. It had to be imposed under a military dictatorship. It led to the dismantling of social safety nets. It led to an increase in abundant cheap labour. It led to a decrease in labour laws. It led to a decrease in the safety of workers and the safety of citizens' rights and the safety of environmental regulations.

I think we are all familiar with the situation of Chile during those times. I think that's one really important example that we cannot forget when we go into negotiations for an agreement for all of the Americas.

As well, we can go further throughout the world. Within parts of southern Africa, I personally have seen, from my own experiences, the consequences of trade and international agreements and things like that. I've seen farmers working in fields growing cotton while their families starve because they need to grow cash crops to support their government's policies of free trade, policies of international trade. It disturbs me. It disturbs the coalition.

We speak out on behalf of these citizens who unfortunately can't be here and can't tell the Canadian government what they would like to see. They also can't tell their own governments in these places what they would like to see. We would like to speak out in solidarity with our brothers and sisters around the world to say that we will not support any free trade agreements that do not put the rights of citizens and the people of this world before corporations.

We understand that you are here to make recommendations, but recommendations have been made for 50 years now, and nothing has happened. We would like to see some action. We don't want recommendations, we want action, and things being put right. I don't know how much longer we can really take these agreements before we all just rise up and....

I don't know; I think people are getting tired. We can't afford any more of these agreements.

That's all I have to say. Thank you for the opportunity.

The Chairman: Not at all; thank you very much.

By the way, on written submissions, I appreciate that nobody had a chance, but if you wish to put something down and send it to us, our research directors will take it in and absorb it before we write our report, as long as you get it to us within the next 10 days, because that's our timeframe. If you want to send in a written submission, by all means, do.

Ms. Maria Hatzipantelis: Where would we have to send them?

The Chairman: Mrs. Hilchie will give you her card. She's the committee clerk.

Are there any questions?

• 1505

Mr. Deepak Obhrai: Yes. I just want to make a comment.

Ms. Hatzipantelis, I'm not arguing with what you're saying, but let me ask you to think on this for a minute. You talk about Chile. You talk about Africa. You see, Chile was a dictatorship, and many countries in Africa have been one-party states, have been dictatorships, have been military dictatorships. Irrespective of what you want to call them, they have been running on closed economies. Closed economies tend to breed corruption. As they breed more and more corruption, sure, I'm not going to say that some multinationals did not take advantage. They did take advantage of that, as you're talking about.

What I found out when I recently went to Africa—and I'm from Africa, so I've seen all this process going on—is that with the advent of globalization, and markets opening up, extremely strong pressure fell on the political leaders to open up their economies to this globalization, which could only be sustained by putting down, cutting down, or changing the political system.

The political system I witnessed was quite different from the political system I knew. They were forced to go into multi-party democracy. They were forced to look at the rule of law, which all of you are talking about. They were forced to open up the press, which became an opposition, which in turn resulted in what all of you are saying here are the goals required—the rule of law, taking care of social justice, social needs. That's taken place. It's amazing, but it has taken place. The pressure came from the outside, because their economies were going down and down. The populace finally said, okay, enough is enough; how low are we going to go?

You said Chile, and I'm giving you an example. This has happened, and I've seen it.

The blame also lies with the political system in Third World countries. The blame lies, strongly lies, there as well. Unless they can come up with a political system that has three separate components, the way we do in Canada, separate judicially, separate executively and separate legislatively, where change takes place, nothing happens.

Mr. Randy Pedersen: To change these political systems, we shouldn't be supporting trade with those governments.

Mr. Deepak Obhrai: The reality, my friend, is that this is what did it. That's the reality, my friend.

Mr. Randy Pedersen: The reality is...?

Mr. Deepak Obhrai: That because of their closed economies and everything, they were able to maintain for so long, but the closed economies brought their level down....

To put it bluntly, they made the state weak—well, the president said it—and the state had no more power to negotiate. The state had become very weak.

Ms. Maria Hatzipantelis: I'd also like to throw out a few points.

I don't claim to know enough about the current governments of many African countries, but I visited a few just a few weeks ago.

• 1510

Is it not also globalization that has enforced decreased workers' rights in those countries? I mean, yes, a lot of people have benefited from globalization, but it's the same 225 people in the world who have the same net worth as 45% of the world's population. I do not think that is right. That does not ease up the equation.

As well, opening up their boundaries and globalization and more trade and things like that have also cost those countries, or some of them, a lot of their national industries. I think food is one of the major industries that has suffered for trade. What is the use of growing food and then exporting it so that you can pay some type of debt that you owe some world organization when your people are starving? Those governments are now being forced to choose between their own people and the effects of these trade agreements and foreign investment and different things in their countries.

I don't see that globalization is this wonderful thing that has caused these things. Perhaps, yes, it is the opening up of borders that has helped many of the countries, but I think we also need to seriously and critically look at the negative effects it has in order to ensure that new trade agreements do not bring out the same thing.

Thank you.

The Chairman: Madam Debien. No?

Ms. Augustine.

Ms. Jean Augustine: I would like to thank the presenters for coming in and expressing their points of view. I think it's very important that you be heard. I think we can go back, as a committee, and say that we heard from the man and woman on the street, literally.

Thank you.

The Chairman: Thank you very much.

I think you probably heard what I said to the last group. We're trying to grapple with this issue, and the big issues of global governance and national sovereignty and so on.

You raised the issue, Mr. Kuhn, of why we trade with countries we don't like. My feeling is that when we trade with countries, we're trading with the people in those countries, not the government. We have to try to make sure the benefits get to those people, and that's what we look at.

So we make distinctions. We've often heard about and look at the problem of Burma before our committee. People say, well, don't trade with Burma, because you're not going to benefit the people; all you're going to do is benefit the SLORC, of course.

We trying to open with, say, China. It's more mixed; you're also benefiting people.

So you have to look at the circumstances and work on it and see what you can do, where you're being good and where you're being harmful. It's very complicated, but it's helpful to have everybody's opinion, and we'll take yours.

On this issue of the WTO, I think we're very clearly getting citizens' opinions that the WTO itself has to be modified or attenuated in some way that takes into account these broader social concerns or it's going to lose its constituency in the world to be able to do what good it does do. It does some good, but it's going to lose the ability to do that if it doesn't address these other issues, the environment and these other social issues.

So we'll certainly be taking that message back. You know, we're one government of 134 governments in there, so it's not our thing to run, but I hope other governments and other countries will be doing the same type of soul-searching we're doing to come up with these similar issues.

Thank you very much for coming. We really appreciate it.

We're adjourned until tomorrow at 9 a.m. in Windsor, members. The bus will be leaving at 3.30 p.m.