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]

Tuesday, September 29, 1998

• 0909

[English]

The Chairman (Mr. Bill Graham (Toronto Centre—Rosedale, Lib.)): Call to order.

Members, please, no hilarity. We're here to talk about EFTA. This is not a subject of amusement. As you can see by the fact that we have Mr. Speller as one of our witnesses, this is a serious subject.

• 0910

Before we begin, let me just address a couple of housekeeping issues.

You'll note that there's a vote at 10.30 today. I understand there will be a half-hour bell, so I'll break us off about 10 minutes beforehand to enable us to get up to the House. If we move through this quickly, we may be able to complete this before the bell.

Secondly, as you know, Mr. Mills brought a motion before the committee yesterday—I believe the Bloc indicated they supported it; Mr. Robinson has written me about it—involving the APEC summit. You know that motions take a 48-hour notice. Therefore the earliest it could possibly come up would be this Thursday, but I just want to put everybody on notice to the fact that if, as is expected, the whips file the new memberships of the committees in the House today, then as a result, as a committee we are functus and don't exist. We'll have to reconstitute ourselves, and that takes 48 hours, so that matter will have to go over into the next week. Everybody's very interested in it, so I just wanted to let you know that's a strong possibility.

Without anything further, Mr. Speller, did you want to lead off, or Mr. Klassen?

Mr. Bob Speller (Parliamentary Secretary to the Minister for International Trade): I will.

The Chairman: Okay. Mr. Speller.

Mr. Bob Speller: Thank you, Bill, and welcome back, colleagues. I'm here today to talk to you about an initiative that's been undertaken by our government dealing with setting up a free trade association with the EFTA countries.

For those of you who don't know what the EFTA countries are, it's the European Free Trade Association, and it involves the countries of Liechtenstein, Switzerland, Norway, and Iceland. I'm coming to you today very early on in the process, because I've always felt, as a member here for the past 10 years, that committees such as this should get on early. I say that to let you know there aren't a lot of hard facts on the table that we can give you today.

What I want to do is give you an idea of how this process is going. I will then turn it over to John Klassen, who is a director general in Foreign Affairs and International Trade, to give you an idea of our trade situation now with the EFTA countries.

This process started out of a speech given by the Prime Minister a year ago October in London, where he broached the idea of Canada having free trade, or some sort of increased trade relationship, with these EFTA countries. Shortly after that, these countries met and unanimously agreed to move forward with such an agreement.

We sat down with the countries, because we hadn't had any formal trading agreements with them outside of our WTO agreements, and signed some trade cooperation agreements with the countries and agreed to sit down and explore the possibilities of what a free trade agreement would look like.

In doing so, Canada first wanted to go back and consult Canadians, because it's important for us to get a view of how Canadians feel about such arrangements, and also frankly to get an idea of where sensitivities may be, so that when we go into negotiations, we know exactly what are the important areas of concern for Canadians and we know those areas that should be highlighted.

So over the last couple of weeks Mr. Klassen and I have travelled to different parts of the country and held hearings with groups of Canadian business people, labour people, people with concerns in the environment, and sat down with them to hear their views and ideas on this.

Also, the Minister for International Trade, Mr. Marchi, has sent out over 400 letters to different groups and associations across the country to get their views and ideas—again, these groups include labour groups, environmental groups, groups such as Maude Barlow's group, etc.—to get a sense of how they feel on this issue.

To date all of the responses have been very positive, and in fact the responses I received from these cross-country hearings have been very positive also in terms of opening up a process in that area.

• 0915

You hear a lot about what this EFTA is and what it isn't, and I'll have Mr. Klassen get into these issues later, but for us in Canada it fits in well with our international trade agenda.

As you know, our agenda is multifaceted. We have a very strong trade relationship with our neighbours to the south, which constitutes 82% of our trade. Those of you on the trade side would know that in fact 42% of our GDP depends on international trade. It's a very important aspect of our economy and in creating jobs.

APEC is another area. Although it is not a free trade area, it is an area that is trying to open up in terms of trade, and for Canada it's an important aspect. In fact, as you know, we hosted the APEC summit here last year and continue to discuss that issue.

Our trade with our neighbours to the south we hope will be extended through a free trade association of the Americas, and Canada is in charge of the working group there now over the next year, trying to put the agenda together in which we can expand our trading relationships in that area. I hope this committee will take a look at that in the future and try to get a sense of where Canadians want us to go in that area. I see that as a large component of our work over the next couple of years.

Obviously our trading relationship with the European Union is always ongoing. We're always having discussions with them, trying to find ways in which we can expand that trade and open that trade a lot more. Certainly that's an important aspect there.

This is where EFTA fits into this. EFTA includes a number of small countries, but countries that are very similar in scope to Canada. Their GDP is about 75% of Canada's, but when you take into account the population size and that, it's a very good area for Canada to expand into. These are countries that have very similar labour laws and very similar environmental standards to ours. In fact a number of them are higher than ours.

The government felt that, in an effort to take all our resources out of what seems to be one basket—as I said, 82% of our trade is with the United States—we would explore looking into other areas in which we can open up a trading relationship. That's why we're here today.

This is very early on in the process. Negotiations have not started. I just want to get a sense from members of this committee of how they feel about Canada moving in this direction.

I will turn it over to Mr. Klassen to give you a better sense of what our trading relationship now is with these EFTA countries.

Mr. John Klassen (Director General, General Trade Policy Bureau, Department of Foreign Affairs and International Trade): Thank you, Mr. Graham and Mr. Speller.

I would propose to explain a little bit about what EFTA is, how it is constructed, and also to talk a bit about what this free trade agreement would not be. There have been some stories in the media that frankly are a little confused, so we should be clear in understanding what it is we're aiming for and what this agreement will be able to do for us.

I can then talk a bit about the discussions we have had—preliminary discussions—with the EFTA countries in order to consider the scope of an agreement. Then I'll say a bit about our bilateral relations and conclude with some thoughts on why it's worth while to pursue such an agreement with the EFTA countries.

The European Free Trade Association is exactly that: it is a free trade association. It is not a customs union, such as the European Union. The main difference in this is that the European Union has a common external tariff, whereas the EFTA countries do not.

• 0920

If you export a glass to France or Germany or Italy, you pay the same tariff; it doesn't matter which country of the union it goes into. If you export this glass to Norway, Switzerland, or Iceland, you pay a different tariff, because each country maintains its own tariffs vis-à-vis third countries. Nevertheless, the EFTA countries do negotiate as a group, so when one discusses with them, one has a group negotiation.

The EFTA countries in fact have 13 other free trade agreements existing, 14 if you count their special relationship with the European Union. These agreements are largely with countries in the Mediterranean area, North Africa, and Eastern Europe. An agreement with Canada would be the first free trade agreement for EFTA with a country of our size and development, and certainly the first across the Atlantic.

As I say, the relationship with the European Union is special in the sense that EFTA has a free trade arrangement with the union, but they go beyond that in something called the European Economic Area. What this essentially does is confer upon EFTA the community or union regulations to do with the freedom of movement of goods, people, services, and capital.

More and more the EFTA countries, although they are not formally part of the European Union, have taken on or are taking on union legislation in a number of important areas. So in fact they have a complex council structure whereby the EFTA countries have some look-in on the development of legislation.

EFTA of course used to be much larger than it is. As Mr. Speller said, it's now four countries. I think in its heyday it had about nine or ten members, but all those other members have decided, for good reasons or for whatever reasons, to join the European Union. At one time EFTA did include Great Britain, Spain, Portugal, Austria, Finland, Sweden—a number of countries.

Some ask if we think EFTA will continue to decline in size—will the current members join the European Union? I think not, not in the foreseeable future. The Norwegians have had two or three national referenda in which they have rejected membership in the European Union. Iceland is fiercely protective of its fisheries resources and would not join the union for that reason. The Swiss have also rejected membership, in a referendum. And Liechtenstein is tied very much to the Swiss through an economic union that would make it virtually impossible for them to go it alone in that sense.

It's important to understand that a free trade agreement with EFTA would not be a back door to the European Union. I've seen this commented upon in the press. In fact it cannot become simply a transit point for goods from Canada to go into Norway and then enter the European Union. Similarly we would not become a simple transit point for goods from EFTA through Canada into the United States. This is why you have rules of origin that accompany free trade agreements: in order to preclude that kind of circumvention, if you will.

It is also not at this point a precursor to a free trade agreement with the European Union itself. As Mr. Speller said, we are in the process of having a look at the broader range of our relationship with the European Union and trying to find ways to improve that and develop our trade relationship, which is now characterized by a number of disputes in the trade area. But at this point certainly our trade arrangement with the European Union is the WTO, the World Trade Organization, and we should seek to expand or improve upon those relationships more broadly in the context of a new round of trade negotiations or further comprehensive multilateral trade negotiations.

I mentioned that we have had some initial discussions with the EFTA countries. We did this with the purpose of examining the possible scope of an agreement between us.

The 13 free trade agreements that the EFTA countries have, which I mentioned earlier, are fairly simple free trade arrangements. They basically deal with the elimination of industrial tariffs on all industrial manufactured goods, the elimination of tariffs on fisheries products, and tariffs dealing with processed agricultural products.

• 0925

This is an important distinction that the EFTA countries make. They draw a line between what is considered a processed product and what is a non-processed product. Non-processed agricultural products are dealt with through bilateral negotiations, so we would sit down individually with Norway, Switzerland, or Iceland and negotiate on that portion of agricultural trade, but then those bilateral agreements would become part of the larger free trade agreement. This is the way they have conducted their 13 free trade agreements, and we have agreed to approach ours in a similar way, largely because, frankly, we all have a number of sensitivities in the agricultural area.

In talking to our EFTA colleagues, we have said that we note that their free trade agreements are fairly simple and straightforward. Our experience, certainly with the NAFTA and with the Chile agreement in particular, is with an agreement that is much broader, much more complex, and that reaches a lot further in terms of the issues it tries to deal with. We have said to them that we certainly do not see replicating NAFTA. Frankly I don't think the bilateral relationship between Canada and EFTA could bear the weight of something as complex as NAFTA.

Nevertheless we have said to them that we would like to explore the possibility of going beyond just the simple elimination of tariffs. Are there things we could do, for instance, in the area of trade in services? Are there things we could do in the area of investment, trade, things that affect foreign investment, government procurement, intellectual property, or dispute settlement? All these elements that are in the NAFTA or in the Chile agreement we think should be at least explored—not, as I say, with a view to replicating the NAFTA, but more with a view to seeing if there's some way we can go beyond just the basic agreements.

One innovation we have suggested to them is that we consider trade facilitation per se. This would be an innovation in a free trade agreement. No free trade agreement I know of deals specifically with the question of trade facilitation. This is an area of increasing activity multilaterally, particularly in the World Trade Organization, the WTO, and we think there could well be value in exploring with our EFTA partners ways to put into legal commitment—into a legal language, as you would have in a free trade agreement—some of the things we're trying to achieve multilaterally in trade facilitation.

When I say “trade facilitation”, what I really mean is various sometimes rather technical things one gets into that are basically designed to facilitate the movement of goods across a border. So you're talking about enhanced electronic use of customs clearance, pre-shipment inspection arrangements, post-entry audit—some rather complicated issues, but all things designed to reduce or eliminate the red tape that is always involved in exporting and importing goods.

As I say, a lot of work, a lot of thinking, and a lot of discussion are going on at the multilateral level on this issue. If we can, we would like to see what we can do bilaterally as a kind of demonstration or a leading by example, if you will. Our EFTA partners have responded quite positively to that, so that is an area we will want very much to explore with them.

Mr. Speller mentioned that 82% of our trade goes to the United States. The EFTA countries face a similar structure or constraint, in a sense. About 67% to 70% of their exports go to the European Union, and as I mentioned earlier, they have this complex arrangement with the union through the EEA.

What this means is that in negotiating a bilateral agreement between Canada and EFTA, we are not going to do anything that will upset the way we do trade now with our major partners. For instance, rules of origin, as I mentioned earlier, are always an important part of a free trade agreement. These are rather complex arrangements that have to be put in place. We have a certain way we do rules of origin, and this is geared largely to our major market, which is the United States.

• 0930

In discussions with EFTA, we're not going to implement some kind of new rules-of-origin system that's going to upset the bulk of our trade to our major trading partner. And they have the same constraint when they think about the European Union. So there's a certain parallel, if you will, between us—the thought that we have to keep this very much in mind.

We have not yet launched what I would call formal negotiations. Our timing is to try to do that towards the middle of this month.

In looking at the trade and investment relationship that now exists between us, we have a total trade volume of about $5.6 billion between Canada and the four EFTA countries. We have a substantial trade deficit in that total; it's about $1.3 billion of exports and $4.3 billion in imports. But a large part of the imports is accounted for by Norwegian oil. We import a lot of Norwegian oil—about $2.5 billion worth in fact—on an annual basis. So if you take out the oil, then the trading relationship is a little more in balance.

The principal Canadian exports to the EFTA—and I think some information has been provided to you—are largely based on resource products, if you will. They are agricultural products, aluminum ingots, soybeans, potatoes, machinery parts, horse meat, etc. We are major exporters of horse meat to the EFTA countries.

When you look at the foreign direct investment, you get a different picture. The EFTA countries have now invested close to $5 billion in foreign direct investment in Canada, and 21 of the top 25 companies in EFTA are investors in Canada. They invest in a much broader, or perhaps I should say a more sophisticated, range of sectors. They are in oil production, pharmaceuticals, food processing, metal smelting, and machinery manufacturing. So already they're aware of Canada, and a number of them have significant investments in our country, as I say, in some more sophisticated areas.

One of the benefits that we see of entering into a negotiation of a free trade agreement, frankly, is what I would call simply a demonstration effect. We noticed this in particular when we negotiated the Chile agreement, for instance. One doesn't have to do much to bring the United States to the attention of Canadians, but when we negotiated the Chile agreement in particular, there was very much a demonstration effect in the sense that business people became more aware of the possibilities—became more aware that there may be some new opportunities in this market in particular—because they appreciated that we were improving, or trying to improve, terms of access into those markets.

This demonstration effect is one of the benefits we expect to see as we enter into negotiations, and it works on both sides. We already have some anecdotal evidence to that effect. A joint venture was recently set up between an Icelandic company and a Newfoundland company on fisheries trade, and the Icelandic side have told us they did this very much with a view towards the free trade agreement that they expect we will negotiate and complete.

Although, as I said, the agreement does not provide us with back doors into the union or the United States, what it does provide is an opportunity for joint ventures. This is really one of the areas where we hope—and this fisheries agreement between these two companies is a very good example—companies can come together, establish a joint venture, and then take advantage of the fact that we do have preferred access into the United States market and they do have preferred access into the European Union market.

Again, one runs into the rules of origin and all that sort of thing, but private sector people tend to be inventive if nothing else, and we're quite confident that in fact a number of joint ventures could benefit from those sorts of arrangements.

• 0935

The demonstration effect we hope will also play into the investment side of things so that particularly EFTA companies will continue to look upon Canada as a good place to invest in the broad range of sectors they are already in.

Another important effect of an agreement would be to equalize our terms of competition in the EFTA countries, because they have these 13 free trade agreements—because they have already this relationship with the European Union. Canadian exporters are quite disadvantaged in the sense that all their other competitors have some kind of preferred access into the EFTA countries. To the extent we can level the playing field, that will be of some benefit.

There is also a benefit in reaffirming our transatlantic links. As Mr. Speller outlined, we are very active in the Asia Pacific area and we're very active in Latin America. We have a leadership role in Latin America in particular. We have the NAFTA, which dominates our relationship with the United States and dominates our thinking on a day-to-day basis. We have not been that active in that sense vis-à-vis Europe.

Europe in general remains a very important trading partner, a very important source of foreign investment, and this kind of agreement, which would be the first transatlantic free trade agreement, can serve some useful purpose in that sense.

We can also move much faster in an EFTA free trade agreement in terms of bringing benefits to Canadian producers and exporters. The FTAA process is going to take a longer period. A new set of multilateral trade negotiations, if it begins in the year 2000—which is the way things are moving—is going to take a considerably longer period of time, plus implementation. And in both of those, the wild card of the U.S. fast-track authority is hanging over the prospects of those negotiations.

A free trade agreement with EFTA is something that is totally within our control, totally within our authority. If we can begin negotiations this month, we are perhaps optimistic but nevertheless confident that we could complete the negotiations by maybe the middle of next year, which would see implementation by, say, January 2000—you have to always go through your legislative processes. If we could do that, there would be immediate benefit to Canadian producers, exporters, and investors in that region.

In the consultations that Mr. Speller and I had across the country, the concerns that Canadians raised with us in those various groups centred on a number of broad issues.

One is the question of intellectual property rights. There is a strong desire that we not go beyond our existing commitments in terms of intellectual property.

There is also a concern about trade remedy law. As some of you may know, in the Chile agreement, we excluded the use of anti-dumping measures between Canada and Chile. This is a measure that a number of industrial sectors do not support and would not like to see us replicate.

Supply management in agriculture of course is a concern, and it is one we are very sensitive to. It's fair to say and reasonable to expect that nothing in this agreement will in any way undermine, undercut, or weaken the supply management regimes. In fact we are in close discussions with the Canadian Federation of Agriculture and its subsidiary bodies, and they have some rather interesting export interests in a number of supply-managed products that they would like to explore vis-à-vis EFTA. But they do not want to see any changes in our overall access commitments in those sectors.

As for rules of origin, those who have to deal with them don't want us to make life more complicated. We will certainly do our best in that respect.

Also, there have been some queries about the investor state provisions. This is, as you know, an issue of some sensitivity at the moment, so there is a question about how we would manage that in a free trade agreement with the EFTA countries as well.

Perhaps I'll stop there, Mr. Graham, and throw it open to any questions for Mr. Speller and me.

• 0940

The Chairman: Thank you very much, Mr. Klassen. That was a very helpful overview of the situation.

I have Messrs. Penson, Sauvageau, Bouchard, and Bachand.

Mr. Penson, please.

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

I was interested in hearing of the advances you envision by having this kind of agreement. It seems to me that every time we enter into a trade or investment agreement, we should be trying to advance things we want to see on the larger scale in trade and investment liberalization around the world. This is a good opportunity to try to achieve some kind of model we can take to other trading partners and say, “Look, it's working in these areas.” We've already done that with Chile in the dumping case, as you mentioned, and on the trade facilitation side, that's a good move.

But in your consultations across the country, which you mentioned, it's easy to get sidetracked by interest groups that may not represent the overall Canadian position. I know that consumers largely aren't represented or organized very well, but there certainly is a consumer interest involved that needs to be considered.

I'm just wondering how you would intend to advance trade liberalization in areas such as agriculture and investment, two areas that Canadians need some movement on. A lot of Canadian investment is not currently being protected in countries where we don't have any agreements, and agriculture is another area where we have substantial sectors of our agriculture economy that are tariff- and subsidy-free but are still facing severe domestic and export subsidies in Europe, for example, and in some of the countries you're talking about, such as Switzerland and Norway, even though they're not part of the European Union.

We have to try to advance our cause here, and I don't see that happening if we're listening to vested interests, in some cases too strongly. Can you comment on that?

Mr. Bob Speller: Yes. First I'll talk about the process part of it and then I'll let Mr. Klassen talk about the specifics of agriculture and investment.

We've tried to open up the process as much as we can. As I said, the minister sent out some 400 letters across the country. We've gone across the country in the last couple of weeks to major capitals, talking with different groups. We also have a web page on the Internet specifically on this, with an open letter asking for all Canadians who want to to write in their views on something like this.

So we've been trying to open up the process as much as we can to listen to everybody and not just listen to those who are against or, say, the business groups that are for. We plan to take all these views prior to going into negotiations and use them in setting up a negotiated process.

As I said earlier, for those who came in late, to date the views have all been very positive about moving forward. There were some concerns, and Mr. Klassen expressed those concerns. So in terms of a progression of our international trade, I think everyone sees that this fits very well into moving Canada forward.

John, did you want to answer on agriculture and investment?

Mr. John Klassen: Yes.

You raise a very good question. Certainly when we look at the agricultural side of things, we will want to have a look at the question of subsidies, for instance, and how that has an effect. However, as you may know, we are committed under the WTO to enter into agriculture negotiations in 1999. Effectively that means 2000; I don't think much will happen in 1999 itself in terms of negotiations.

A considerable amount of work is under way now to prepare for those negotiations to begin, let's say, in early 2000. Frankly, I think it's within that forum that we will have the greatest impact on trying to get a handle on domestic subsidies, for instance, and the effect those have on Canadian exports.

• 0945

But to the extent that we can, where we think there might be this sort of demonstration or example effect, yes, we will have a look at whether there is scope for doing something with the EFTA countries in a bilateral agreement that would set an example or set a certain standard for subsidies. Frankly I'm not sure that's going to be possible given the broader context within which we are addressing agriculture, and where most people are putting their direct efforts. Nevertheless it is something we will look at.

In terms of investment, for instance, we believe this agreement should contain an investor state provision. There are some queries about the investor state provisions we have, for instance, in the NAFTA agreement at this point.

We do not anticipate difficulties with the EFTA countries. We certainly have no history of difficulties with the EFTA countries. They have very well-developed, dependable, honest judicial systems. But if we were to, for those reasons, say we don't really need an investor state provision with EFTA, we would be setting an example that might be used against us in the future when we do want to negotiate foreign investment and protection agreements. We have 24 of these now around the world, all of which include an investor state provision.

Mr. Charlie Penson: I'm sorry to interrupt, but that's exactly my point. I think we need to be showing our cards a little bit—what we expect in the future—and trying to move this whole trade and investment portfolio forward.

Mr. John Klassen: Exactly.

Mr. Charlie Penson: That was my point. By asking for those kinds of negotiations in this small agreement, if you like, that's essentially what we're doing: we're showing the world what we would like to have as a model. That's why I was asking the question.

Mr. John Klassen: The challenge now in terms of investor state under NAFTA is to try to define more clearly the interpretation of what is meant by “investor state” and what is meant by “expropriation”. Through an agreement such as we hope to negotiate with the EFTA countries, we may be able to move some way down that road. We may be able to move towards those kinds of definitions that would serve us well in the broader circumstance.

So we do have that broader circumstance in mind very much, as well as having a look at how we can use this agreement to further those broader interests, if we can, by setting the example of what can be done.

Mr. Charlie Penson: Other than the non-processed side of agriculture, which is the big one, as you know, what industrial tariffs are substantial, from Canada's point of view, that we would like to see reduced?

Mr. John Klassen: The EFTA countries don't have that much by way of what I would call substantial tariffs. Their average industrial tariff is pretty low, as Canada's is. They have a few peaks. In some of the areas in which we are already exporting, which I mentioned earlier, we are facing tariffs. They may be only 4%, 5%, or 6%, but as I said earlier, all of the competition has free access to the EFTA area, because EFTA has this network of free trade arrangements. So to the extent that you can eliminate even a 4%, 5%, or 6% tariff, that is a benefit to Canadian exporters.

We heard on our trip about a few very specific tariffs that some companies are concerned about—ice cream, for instance. A major producer in Newfoundland faces a 35% tariff into Iceland and would like us to eliminate that tariff. There's also a concern with jewellery and other products into Switzerland.

The starting point will be the elimination of all industrial tariffs. There may be some exceptions. There may be a need to look at some longer phases. But the starting point will be to clear the board.

Mr. Charlie Penson: And how does the MFN, the most favoured nation, relate to this?

Mr. John Klassen: MFN does not apply when you have a free trade agreement, if your agreement is considered acceptable under the rules of the WTO. Under the old GATT, it allows for the establishment of free trade agreements and customs unions. If you meet the requirement, the very basic requirement is that the agreement should cover substantially all trade. If you do that, then you have an argument that says you do not have to extend the benefits on an MFN basis.

The Chairman: Monsieur Sauvageau.

[Translation]

Mr. Benoît Sauvageau (Repentigny, BQ): Mr. Speller, Mr. Klassen, welcome to the committee. Thank you for your explanations and for the interest you have shown for the opinion of the members of the committee.

• 0950

I have a few questions for you. If you don't have time to answer all of them, perhaps you could send us your answers in written form.

Mr. Bob Speller: Yes.

Mr. Benoît Sauvageau: Right at the outset, Mr. Speller and Mr. Klassen, you emphasized the importance of involving the committee as soon as possible. I am a bit surprised by that and I will explain why.

Mr. Chrétien made this announcement close to one year ago, in a speech he gave in London. I would be very surprised, in spite of all the respect I have for Mr. Chrétien, if this had been an ad lib announcement which was not in his text. It must have been thought out in advance. I would like to know the framework or the conditions surrounding that announcement by Mr. Chrétien and what negotiations preceded it a year ago. I would like to know something about the content and frequency of preliminary discussions, and who took part in them.

I think that like myself all the members of the committee would like to know where Bob went. I assume his visits were made on behalf of the committee, even though we were not informed. Where did he go to meet people? Which Quebeckers did he meet with? To whom were the 400 letters sent? I don't believe any committee members were on the mailing list for that letter. In any case, I did not receive your letter, Mr. Klassen. I would thus like to know who's on that list. Perhaps you could send the copy to the committee so that we know how many of those 400 letters were sent to Ontario or other provinces.

You said that it was very important to take the opinion of the Canadian population into account. At the same time, we are negotiating the terms of the free trade zone with the Americas. What consultations do you intend to hold with the Canadian population concerning the free trade zone of the Americas which is presently being negotiated? We know that these are not preliminary discussions.

I would also like to know why priority is being given to EFTA and not to MERCOSUR, or CARICOM or to the European Union. It might be interesting for the committee to know why.

What guarantees will be taken insofar as Liechtenstein is concerned, which would be a money launderer's heaven? During negotiations, will this fact be taken into account: the committee does not want dirty money earned in Canada to be laundered in Liechtenstein the wake of a free trade agreement. I'm sure that you will be able to answer that question.

We are told that the government wants to conduct consultations. How does it intend to do that? By sending 400 letters to 400 national businesses and by telling us that consultations have been held? What form will these consultations take? When will they begin and who will be consulted?

If the EFTA is the sixth most important market for Canada, what are the five others? If they are the European Union, APEC and America, perhaps there is no seventh market. Is it the sixth out of six, out of 30, or out of 100?

Would it be possible to know where the foreign investments made by our northern European partners have been directed, and in what sectors? If 90% of the investments went to western mines, there may be another interest involved. I would like to know where direct investments in Canada have gone and I would also like Mr. Klassen to tell us how many replies were received to the 400 letters sent out. If you receive 22 replies, that says something, doesn't it? If you receive 400, that's a good sign. Would it also be possible for you to tell us something about the content of the replies? If that isn't a state secret, could you inform the committee about the replies you will be receiving?

My last comment is a question: in light of your research, could you tell us about the development of exchanges with Israel and Chile since the signature of the two free trade accords? Has our trade with Israel and Chile increased, decreased or remained at the same level? I have no further questions. Thank you.

• 0955

The Chairman: Mr. Sauvageau, may I make a suggestion? If Mr. Klassen can't answer all of your questions, perhaps he could send us some written replies.

Mr. Benoît Sauvageau: Yes, I asked him to do that.

The Chairman: I believe all of these questions are relevant and of interest to all the members of the committee.

[English]

I don't think that's the commencement of the vote. That's just to go in for prayers.

Mr. Bob Speller: Mr. Sauvageau, I know what you've been doing all summer now: saving up these questions to ask when you first came back.

Let me try to go through them, and as I said, I will try to get you the information if I can't give it to you today, particularly the list of names. I didn't bring my book. Maybe Mr. Klassen has the names of the groups we met with.

As for where I've been, we met in Toronto; we met in St. John's, because of the trading relationship between Newfoundland and these countries; we met in Montreal, as I said; and we also met in Vancouver and Calgary. These seem to be the centres of where the most activity is between the EFTA countries and Canada.

This all started out of a speech, as you said, given by the Prime Minister in London, and that was during a time when we were starting to redevelop and redefine our relationship with Europe. I don't know if you remember, but President Clinton was there at the time, and he was trying to develop a free trade deal with North America. We were there trying to show the Europeans the directions we wanted to go in, and this was one of the areas that seemed to be glaring and sitting out there, an opportunity for us to get together.

A number of people had said they wanted to get into these countries but were stopped by either barriers or other technical barriers to trade, particularly in the area of trade facilitation. We just felt—and I know the Prime Minister felt at that time, and he can speak for himself—that in our trade agenda, that was an area we should be exploring anyway.

I've talked to you about this before, but this is very early on in the process. This isn't really like the consultations that will take place later on in the process, once we have more to consult about.

I don't remember, in my 10 years here, government ever coming to a committee such as this so early on in the process. Having been in opposition, having sat on that side, I felt it was important, particularly in the trade area, that we get this information out to people early on. That's why I got the briefing material out to your offices early—it should have been in your offices Friday—so that we could have a discussion more on the concept rather than on the meat and potatoes, because it just isn't there right now. We're trying to give you our views and ideas of where it would be of benefit to Canada.

As for the letters, they were again primarily to groups that have an interest in trade in this area, but they were also to labour groups, groups such as the Council of Canadians—groups that may not have the same views as the business community.

In terms of the numbers back, I'm not sure. I can find out for you how many out of the 400 have come back. But I would suggest to you that many of those who would not write back would probably not have too many concerns with it. Generally people let us know, as politicians. I think you'll agree, if they have a concern or a problem with something, they'll let you know first. Those who don't respond, it's probably no big deal to them.

Mr. Benoît Sauvageau: Maybe they didn't receive the letter.

Mr. Bob Speller: In terms of members, this is your letter. I felt, and I let the minister know, that I wanted to talk to the members firsthand.

Mr. Benoît Sauvageau: August 21 was our letter?

• 1000

Mr. Bob Speller: Well, the process hasn't started yet, Mr. Sauvageau. I felt it important, rather than sending you a letter and having you respond, that I come to you and hear firsthand your views on these issues. It was my view to do that. I felt members should have an opportunity early on to be heard in committee on the public record about this, rather than just through correspondence. That's why members never received a letter, because frankly, I wanted an opportunity to do it firsthand. I thought it would be more important to the committee that way.

The Chairman: I'm sorry to interrupt, Mr. Speller, but the 10 minutes for Mr. Sauvageau have now run.

Mr. Bob Speller: Okay.

The Chairman: I just wanted to ask Mr. Bachand if he'd be good enough to allow Mr. Calder to ask a brief question of the witness, because he's supposed to be in the House at 10 o'clock.

If he could ask his question quickly, then we'll come back to you. He doesn't intend to be more than a minute or so.

Mr. Bob Speller: Just to finish up, though, I've written down your questions and I will respond to you. It's on the public record; I can take if off the Hansard.

The Chairman: And everyone will get copies of the answers to those questions, because they're relevant to all of us as we go down these issues.

Mr. Bob Speller: Sure, yes.

The Chairman: Thank you very much.

Mr. Calder.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Chairman, and thank you very much to my colleague.

What I'd like ask here is this. We know that next year, in August 1999, we're going to be back at the negotiations. About 130 countries will be around the table.

In 1993 we took the approach of what I'll refer to as a flat line. We were going to reduce our tariffs and subsidies by 15% and basically set a base at 85% by 1999. With that strategy we thought commodity prices would improve, because other countries wouldn't be causing overproduction by subsidies. Well, we know that's not necessarily the case, because commodity prices right now are at historic lows. So obviously there must be some countries out there that still have subsidies at near-1993 levels. I'm wondering how our negotiators are going to approach that problem.

One of the other things I'm interested in is this. When we do these negotiations— I watched the problem that erupted with the dairy sector, for instance, on butter oils. Quite frankly, a couple of countries figured out how to circumvent the rules and came up with a product that they're able to come in and dump in this country. I'm wondering how we're going to address those problems, because these are definitely problems that have been tried in the past and will be tried in the future.

Mr. John Klassen: Thank you.

The negotiations on agriculture that you refer to won't be in August 1999. I think we won't see real negotiations until early 2000. The process is really leading towards what we call the third WTO ministerial meeting, which will be hosted in the United States, and they've now set the date for, I think it's November 30 to December 2.

So the work program that's under way right now in Geneva under the WTO is really to build towards the policy recommendations in all sectors that will be given to ministers for that meeting at the end of November, which will, we think, in effect set the framework for a new multilateral round of trade negotiations.

Within that context, we are already committed, as you said, to negotiate on agriculture. We are already committed to negotiate on services. We are already committed to also follow up on a number of points that came out of the Uruguay Round. The idea is to take those commitments, build on them more broadly, see what ministers can agree to next November, and then go into a new series of multilateral trade negotiations.

To come back to your specific points, because agriculture is already a commitment, already extensive work is going on in Geneva under an agricultural committee that is looking at this whole broad range of issues and trying to define what exactly are the issues and what exactly we should be aiming for in some kind of negotiation. And now it's taking on more and more of a negotiating objective, if you will, because people are aware that we're coming towards that in 2000.

These are exactly the sorts of questions you're raising about subsidies. We continue to have considerable concerns with domestic subsidies in the European Union and in other areas as well, which under current WTO rules are “legal”, and yet they are having a pernicious effect on some important Canadian products elsewhere in the world. We are addressing all of those, and we would hope to address more broadly those kinds of effects in a new round of trade negotiations.

• 1005

As for the butter oil question you raised, as you know, that was dealt with through a separate process. In fact the process is still ongoing. It's before the CITT again for a ruling on tariff classification. These are all the sorts of things we will examine.

Agriculture is also one of the best examples at the moment—because we knew this was coming—of very broad consultations across the country. There are intensive consultations with the agricultural sectors in Canada. In the spring there will be a major federal-provincial-private sector conference on agriculture, dealing specifically with this question of what are our objectives in a new round of trade negotiations and how we're going to pursue them.

Mr. Bob Speller: Also, it would be very useful for this committee to look at that whole question. I know in the last Parliament, the trade subcommittee was looking at the question of the WTO and the upcoming negotiations. It may be time, depending on your idea of an agenda, to move it to this full committee, at least for some time.

I know there are a lot of other issues, but it's an important issue, and it's one that particularly the agricultural community and some in the service community would like to talk about. I've talked with our trade reps in the parties, and they certainly see that.

Also, in response to Mr. Sauvageau, we'd like to look at the whole question of FTAA and where we're going. Again, that may be one we want in either the trade subcommittee or the full committee. Or we may want it partly in the full committee for a time and then back to the trade subcommittee to do consultations.

So certainly these are two areas that keep coming up, and it would be very useful for this committee to look at them.

The Chairman: I think it's agreed by pretty well everyone I've discussed it with that those two items will be given to the steering committee to discuss as to where it would be appropriate for them to be. I lean with you—maybe we should look at the WTO in the whole committee—but let's discuss that in the steering committee and see where we might go.

Mr. Klassen, just before I turn to Mr. Bachand, since this committee will shortly be getting the SIMA bill to consider, tell us, how did the butter oil issue come before the CITT? Was there a complaint by Canadian producers of dairy products that this was violating Canadian tariff law? I can see where there might have been a complaint under the free trade agreement or something, before a bilateral panel, but I don't quite see how this one got before the Canadian International Trade Tribunal, which is a domestic tribunal. Can you help us with that?

Mr. Charlie Penson: It's called a diversion, Mr. Chairman.

Some hon. members: Oh, oh!

The Chairman: My question, or the butter oil—?

Mr. Charlie Penson: The tactic.

The Chairman: Oh, the tactic. Oh, okay. Well, you're always closer to these issues than I am, Mr. Penson. You're making butter oil in your basement, are you?

Mr. Charlie Penson: Right next to my wine.

Some hon. members: Oh, oh!

Mr. John Klassen: Very simply, the problem from the point of view of the domestic interest was that butter oil was not classified as a supply management type of product, so it had no quota limitations. It was able to come into the country free of quota. There was an argument from domestic interests that it should be reclassified into a tariff line that would impose quota limitations.

The view of Revenue Canada, having looked at it in considerable detail, was that they could not justify the reclassification and that we would be subject to trade dispute challenge by the exporters if we were to so reclassify.

So the government decided to ask the CITT. The CITT has this mandate. The government can ask it to do special studies in a wide range of areas, in fact. So it asked the CITT to study what sorts of options are open to the government to respond to this issue. There were lengthy hearings; they went on for what must have been a month or more. I appeared before the group, as did a wide range of people. The interests were all there; the council was all there.

The CITT came out with a lengthy report in which were listed various options, and one of those was tariff reclassification. The government asked the CITT again, gave it a second mandate, to look specifically at the question of tariff classification: Can one justify reclassifying butter oil without running afoul of our international trade obligations? So that's where it lies for the moment.

The Chairman: It got before the CITT as a general reference, not as a tariff complaint, though.

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Mr. John Klassen: No, it was a general reference in order in council from the government.

The Chairman: Thank you very much.

[Translation]

Mr. Bachand.

Mr. André Bachand (Richmond—Arthabaska, PC): Mr. Sauvageau covered a lot of ground with his many questions. I'm very anxious to hear about the details of the investments of these countries in Canada and into which sectors they went, exactly. I can say right now that Norway invested a great deal in Quebec, in Bécancourt among other places, with Norsk Hydro. Indeed, Canada is going to become the second or third producer of magnesium in the world following this investment in a nice part of the country, in my riding.

An hon. member: There are investments even if we are referring to—

Mr. André Bachand: Yes, a billion dollars, colleague.

An hon. member: In spite of the uncertainty.

Mr. André Bachand: In spite of the uncertainty. I'd like to ask a technical question before we go any further. I was mayor at that time, Mr. Chairman. I'd like to obtain a bit of information about Norway. This is a matter that interests me personally; I'm sorry to talk about a local or regional matter.

On the topic of magnesium, there's seems to be a lack of details. I'd like you to inform me. We've heard about exports by Norway to Canada. Magnesium and Canada's main exports to Norway have also been raised. We know that Norway does not have any magnesium but does do processing and further processing. I would like some more specifics on that issue.

In replying to Mr. Sauvageau's question it would be interesting to obtain details on products that are imported, exported and manufactured following those countries' investments in Canada. For instance where Norway is concerned we know that there is a great deal of competition in the forest equipment sector and that Canada is attempting to develop that export market. However, it faces certain tariffs that are not to its advantage. So, I would very much like to have some specifics on those products. I also urge you to keep the committee informed about these matters.

Of course the government is a government and you do things without necessarily talking about them to a large number of people. However, if there are officially appointed negotiators it might be important that we meet them and obtain more details right from the outset. I don't know what structure the government intends to adopt during the negotiation process. Will there be external or internal negotiators? Who will they be? It might be good for the committee to meet them. It would in fact be very important.

Mr. Speller was telling us that this is quite a long process. Will there be other meetings during the year? I hope that we won't be reading in the newspapers that an agreement is about to be concluded with those countries without ever having been consulted.

I'm going to conclude with that, because I know you won't really have time to answer all my questions. I would simply like you to give me some explanations on the more specific question concerning magnesium.

[English]

Mr. Bob Speller: Thank you, Mr. Bachand.

Just to let you know, Mr. Klassen will be the negotiator, so that's why I've brought him today. He will be the person there.

In terms of detailed products, we'll give you what we can today and then we'll try to get you other information that we don't have. I think Mr. Klassen has most of that information there now. I apologize; I'd hoped that most of that information was in the information we sent you, but if not, I'll try to get you that detailed information.

[Translation]

Mr. John Klassen: I have noted Mr. Sauvageau and Mr. Bachand's questions. We have almost all of that information. We have the list of persons invited to the consultations Mr. Speller and myself held in cities in Canada. We have a list of EFTA European investors who have invested here, in Canada. We have a list by province and by sector. We can give you all of that. We can also answer your questions concerning the EFTA.

• 1015

As to your question about magnesium, I will have to check. I will have to do some research, but I will be able to answer it. I am the negotiator, but I have a big team. I am not alone.

The Chairman: I intend to adjourn the meeting at 10:30, which means we still have 14 minutes. We still have a few minutes, Mr. Bachand.

Mr. André Bachand: Mr. Chairman, I'm going to let my colleagues, speak.

The Chairman: Very well. Before giving Mr. Turp the floor,

[English]

perhaps I could just ask a quick question myself, Mr. Klassen. When you describe the Chile process, you talk about Israel and various others. We've seen these—

[Translation]

Ms. Raymonde Folco (Laval West, Lib.): Excuse me. The information I have on the vote differs from yours. I am told that the vote will be taking place at 7:30.

The Chairman: No, the vote will take place 30 minutes after the bells began ringing and they began ringing at 10:14. So we have until 10:44, madam.

Ms. Raymonde Folco: I'm sorry.

The Chairman: No problem.

[English]

I think other questioners will come back to this a lot in the committee. How is this all working out within the matrix of the WTO? Is this going to be trade-enhancing or trade-distorting vis-à-vis our WTO obligations?

When you get the list of things, such as trade in services or IP—intellectual property investments—these are all WTO issues. Does the government see the negotiation of agreements such as this one as a way of advancing our general position in the WTO and therefore pushing the WTO to a greater trade liberalization in those areas? Is that part of the game plan?

Or are we going to get such a confusing set of different rules of origin out there that nobody's going to be able to figure their way around them? When I used to teach trade law, that's one that drove everybody crazy: the rules of origin. Now you're going to set a new set of rules of origin. You dealt with it. It drives Mr. Turp crazy.

Mr. Daniel Turp (Beauharnois—Salaberry, BQ): I didn't teach it. It was too complicated.

Some hon. members: Oh, oh!

The Chairman: Because his students would revolt when he tried to teach it.

There will be new rules of origin, so I'm just wondering where we fit within the overall game plan. It's a little bit what Mr. Penson was suggesting too. Do we have an overarching game plan as well as this one?

Mr. John Klassen: Thank you, Mr. Graham. I agree wholeheartedly on the rules of origin, and I'm delighted that I have experts in this area who go off in their expert sessions and then come back and report, because trying to get your mind around rules of origin can be detrimental to your health.

The Chairman: What about the exporters and importers?

Mr. John Klassen: Yes, exactly.

To answer your broad question, Mr. Graham, yes, we very much have a broader strategy in mind. The government's overall commitment is to broader trade and investment liberalization. Certainly the WTO is the primary focus of our efforts, because that is the World Trade Organization. The rules we set there and the greater liberalization we can achieve through the WTO benefit us no matter where we're going to export around the world, except for where we have regional free trade agreements.

We do not see regional free trade agreements as inimical to the World Trade Organization. This is a rather hotly contested point these days, as you know. Something like 25 or 30 free trade agreements are before the Committee on Regional Trade Agreements in the WTO, for approval within the terms of, as I mentioned earlier, the WTO conditions.

These examinations tend to be, frankly, not terribly satisfactory, and what the working party often ends up with is that some members thought this was not in conformity with WTO obligations, other members did, and therefore the thing goes ahead. There is no instance of an agreement being denied by the WTO, and I'm not sure how you would enforce that anyway, if you tried to.

• 1020

Nevertheless, for instance, when we negotiated the NAFTA, we went much further in services trade than the WTO had been able to do at that time. The WTO multilateral system looked at that and said, “Well, it is possible. The NAFTA structure has shown us a direction.” An agreement with EFTA is certainly going to be much more modest than the NAFTA, but as we've talked a bit about here, there may be some instances where we can try to do that as well.

Our overall thrust is trade and investment liberalization. Our primary resource commitment is to develop the work program and the policy recommendations for the WTO that I talked about earlier, in gearing up for what we think will be a new round or a new series of multilateral trade negotiations. But if at the same time we can take advantage of some other specific and quicker opportunities to assist Canadian exporters and investors, then we should, if it's not too great a drain on our resources and whatnot.

As I say, with EFTA, if we could have implementation in the year 2000, that's much faster than we'll see out of the WTO or the FTAA or anything like that. So it's worth the effort at this stage.

The Chairman: That's helpful. Thank you.

[Translation]

Mr. Turp.

Mr. Daniel Turp: Firstly, Mr. Speller, I find the process interesting. Of course we have certain reservations and questions to ask of you but this may be further to lessons learned from what happened in the case of the MAI. You will remember our criticism when the MAI debates were going on here and at your subcommittee. We felt that individuals, groups and parliamentarians themselves had not been adequately consulted. All of that seems to have borne fruit because the process you have initiated seems to be headed in the direction of a democratization of the treaty process, and of international trade agreements in particular.

There are probably other lessons you could draw from that experience. I agree with my colleague Sauvageau that it might have been a good idea for you to send your letter to the members of the committee and to add the members of the committee to your mailing list, as well as the names of other parliamentarians you know are interested in a trade agreement such as that one.

What I would also like to know is what will be happening net, in a more specific way. As the negotiators are before us I would add that it would be desirable for Mr. Klassen to come back during the negotiations to present the results, but what do you intend to do toward the end of the process?

Certain initiatives may be submitted to you this year and we believe that before a treaty is signed and ratified Parliament should always be consulted and should, indeed, even approve steps undertaken by the government of Canada before authorizing, signing and ratifying any treaty.

I would like to know whether you have thought about this, Mr. Speller, with Minister Marchi. Aside from that, this summer I was a little critical of steps Mr. Axworthy undertook which you are no doubt aware of. He wants to negotiate a North American community. He wants to broaden NAFTA, even politically.

Mr. Chrétien has for his part sent us a letter. We all received a letter at the end of the spring or the beginning of the summer concerning the ETAA. I received one as did my colleagues but we have not yet seen the minister or his parliamentary secretary do what you are doing for us today, even though the work concerns a much more important treaty, the one which will lead to the creation of the free trade area of the Americas.

I would like to know, generally, how you view the procedure leading to international trade agreements of this type, to enlighten us and help us with our positions and the recommendations we will be making on this issue.

• 1025

I have a second question, a bit more technical this time. Since the agreement will be concluded with three of the four States that are members of the European economic space, does the European Union have some rights insofar as some of the questions to be negotiated between Canada and the EFTA member States are concerned?

[English]

Mr. Bob Speller: I'll let Mr. Klassen deal with your second question, the technical one, simply because he can explain it a lot better than I can.

In terms of the process, though—and I think you will agree, particularly those of you who were on the MAI committee—we went through a process there where we really learned how to get out and consult. We had to do it. And I say “we” because we were given that, since those who were negotiating MAI at the time felt there wasn't enough transparency. In fact Canada was the lead in that area in saying, “We need to go back and let Canadians know more of what's going on.” So at that time we opened up the process.

You can criticize whether or not it was done in a timely fashion or whether or not more time should have been taken or whatever, but at that time we as a committee felt very strongly about the processes we should go through. We put that in our recommendations and called on the government to be more open on that. That's why I've taken those recommendations and tried to put them into this deal.

To let members know, the Canadian cabinet has not yet even seen this. They've not agreed to move forward. This is how early in the process we are. Cabinet has not yet met and agreed to move forward with this. This is why I wanted to come—

Mr. Daniel Turp: There's been no memorandum to cabinet?

Mr. Bob Speller: No, there's been no memorandum to cabinet yet. This is very early on in the process. That memorandum to cabinet will come forward probably in October at some time, but we wanted to get these consultations in first, even before we went to cabinet. That's an important aspect to this process.

We will continue in the process. We will continue to keep this committee up to date on the negotiating process—either this committee or the subcommittee; I'm not sure which—and it will come back to this committee once it has been negotiated.

In terms of the FTAA, you're right: it is a much larger agreement. Minister Marchi has indicated in a letter to the chair of the committee that he wants to move forward quickly with cross-Canada consultations on FTAA. He thinks it's important, particularly given the fact that Canada is at this time the lead in setting up the process for FTAA. Canada, of all the countries, is more open to a more transparent system. We will certainly be pushing our position as lead of the negotiating process in that.

I hope this committee will play a very important role in finding out the views of Canadians, informing Canadians, and working with Canadians in putting forward a position, not only on FTAA, but as I said earlier, also on the WTO, which comes together over the next couple of years.

My knowledge of the minister's view on all this is that he's very open to trying to be as open as possible. That's why we've come so early in the process, even before it's gone to cabinet, to get the views of members of Parliament on this.

As for the technical—

The Chairman: Can you give us that answer in about one minute?

Mr. John Klassen: Yes, sir.

I just might clarify that there is a memo to cabinet with a negotiating mandate that has to be considered by cabinet. Once we have that approval, I as the negotiator have the mandate to negotiate, to sit down with our EFTA friends.

Mr. Daniel Turp: So it was sent to cabinet, but it's not yet been considered by cabinet.

Mr. John Klassen: That's right.

Mr. Bob Speller: It's not going to be considered until October.

Mr. John Klassen: October 1, in fact—this Thursday.

Mr. Daniel Turp: Who sent the memo? Was it Minister Marchi?

Mr. John Klassen: Yes, Minister Marchi.

The Chairman: We have a vote coming.

• 1030

Mr. John Klassen: Your question about the droit de regard of the European Union is a very good question, and in fact they have woken up to the fact that this is happening. We know they've had some discussions with the EFTA countries already, because they have some concerns about rules of origin; about whether we agree on certain standards, such as mutual recognition or something like that; and about what effect that has on their agreements with the EFTA countries. They have some concern about intellectual property as well.

They don't have a droit de regard in the sense that they could dictate anything to us in terms of the negotiations, but we—and even more so, EFTA—have to be sensitive to that relationship they have. As I said earlier, the EEA really does set the framework within which they have to negotiate.

So we will probably discuss this with our EFTA friends. It will probably be part of the negotiations. They may say, “Well, we can't do that, because they have this problem with the union” or “Our agreement with the union sets this kind of constraint”—I'm not sure what. It is an issue we have to be aware of. And as I say, the European Union itself has woken up to it and is raising some questions.

Mr. Daniel Turp: There won't be any observers from the union in the negotiations?

Mr. John Klassen: No, no.

Mr. Bob Speller: Mr. Chair, I just want to say in conclusion that we will continue to be as open and transparent as we can in this area. I will try to keep all members up to date as to what is happening with the negotiations.

This process is important for members of Parliament to give a view to the minister as he moves forward in first of all getting it through cabinet and then starting the process of negotiations. That's why we wanted to come to this committee prior to it going to cabinet and prior to moving forward with the negotiations.

I want to thank all committee members for their questions. Answers that I couldn't give today and some of the technical stuff we will send to the committee members.

Thank you, Mr. Chair.

The Chairman: Thank you, Mr. Speller.

Subject to the observations of Mr. Turp, Mr. Sauvageau, Mr. Penson, and all the members, I think we're all very pleased to see a movement towards more consultation prior to negotiations and discussions. This is something that obviously arose, as somebody pointed out, from the MAI debate, but it's an ongoing discussion that will occupy us on the political level, quite apart from the technical merits of various agreements. So that's very positive, and thank you very much for arranging this.

We're adjourned until Thursday morning at 9 o'clock to discuss the draft report on nuclear policy, but subject to the fact that if between now and Thursday morning the whips file new memberships of committees, then we'll have to meet and reconstitute ourselves. That takes 48 hours, so it would then be next week before we could do that.

Thank you. The meeting is adjourned.