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, March 2, 1999

• 0910

[English]

The Chairman (Mr. Bill Graham (Toronto Centre—Rosedale, Lib.)): Members, I wonder if we could get going, because we have a heavy schedule this morning. I'd like to remind you that this is the first of our series of round-tables on the subject of the future WTO hearings, which will commence possibly in November of this year.

I'm going to ask if Professor Wolfe would go first and then I'm going to ask Ms. Barlow, Mr. Clarke, and Mr. Herman to go second.

[Translation]

I will remind the witnesses that, in our committee, we attempt to keep the initial remarks to about 10 minutes, because our members have a lot of questions to ask. Since we all received a huge briefing book, we are very well prepared and have many pertinent questions. I would therefore ask our witnesses to limit their first series of remarks to 40 minutes.

Professor Wolfe.

[English]

Professor Robert Wolfe (School of Policy Studies, Queen's University): Thank you very much and thank you for inviting me to be here. It's an honour to speak to you and an honour to speak in the company I find myself in.

I understand that the central questions for today's hearing are about Canada's role in the WTO and our objectives for the next round of negotiations. I want to address three issues. First, is the WTO an appropriate or sufficient institutional response to fears and hopes about globalization? Second, is a new comprehensive round of negotiations necessary? And third, given that my answer to the first two questions is yes, I want to conclude with some suggestions on what Canada should be doing.

My first answer begins with a truism: Global governance is a responsibility we cannot evade. The point was recently made by Kofi Annan, who said:

underestimated its fragility. The problem is this. The spread of markets outpaces the ability of societies and their political systems to adjust to them, let alone to guide the course they take.... The industrialized countries learned that lesson in...the Great Depression...and they adopted social safety nets and other measures, designed to limit economic volatility and compensate the victims of market failures. That consensus made possible successive moves towards liberalization, which brought about the long post-war period of expansion.

The Secretary-General says our challenge today is to devise a similar compact on a global scale.

In its first 50 years, the GATT helped create the conditions for the global flows of goods, services, and ideas that, by bringing people closer together, undoubtedly contributed to peace as well as to prosperity. It forged a compromise between free trade and the welfare state. Now we have to widen the circle of prosperity while maintaining social cohesion at home.

The boosters and the critics of globalization agree that the WTO constrains domestic policy choice. The boosters think shaping the evolution of the consensus about good policy is valuable. The critics think the WTO inappropriately values the views of multinational firms over those of citizens. This is the democratic paradox of global governance.

Participation in governance of the trading system requires finding an accommodation with other countries, which will inevitably constrain our policy options. It should not require an abandonment of national policy choice and it should not be done in secret. The WTO is an appropriate institution, but in some respects it's no longer sufficient.

It may seem puzzling that work on a new round is under way at a time when mistrust of globalization is at high levels and when the results of the last round have not been fully implemented. This puzzle is addressed in the answer to my second question: What sort of round do we need?

The next round of negotiations will be defined, as was the last, by the triangular tension between the old issue of agriculture, the new issue of trade in services, and the increasing integration into the global economy of developing countries.

Take the first point of the triangle, farm trade, the oldest form of trade in goods. WTO members are required, under article 20 of the agreement on agriculture, to begin new negotiations in 1999. The peace clause, which is article 13 of the agreement, creates an incentive. It restrains the use of things such as countervail against agricultural subsidies, but only until 2003. Extending the peace clause will be easier if the new negotiations are successful. Canada will want to negotiate seriously in the interests of our food exporters, but that will have implications for import-sensitive sectors. Skirmishes are starting again. Failure in the round could mean that when the peace clause expires, the farm war will start again.

• 0915

The second point of the triangle, services, is the newest form of trade. Further liberalization here matters to both producers and consumers of services. Failure to keep working on the framework for regulating this expanding domain could both hurt growth and be a source of conflict among governments.

The third part of the triangle, the full integration of all states into the trading system on a fair and equitable basis, should be a major foreign policy objective for countries such as Canada. Developing countries, including the transition economies, want to assume more of the benefits and obligations of membership and full participation in the system. If they don't feel part of the process, they can block it. If the round doesn't consider issues of importance to them, it cannot and should not succeed.

None of these three domains can be avoided and none is self-balancing. Agreement at one point of the triangle will be possible only with trade-offs involving the others. Each point of the triangle will have other issues added to it. When the minister appeared before you, he provided an extensive list of possibilities: investment and competition policy discussion will complement services; discussion of regulations and standards is relevant in different ways to trade in goods, to trade in services, and to developing countries; further liberalization is possible for other goods sectors.

This is complex. Members naturally want rounds that are shorter, and they want to harvest the results when they're ready. My argument is that this triangular logic requires a comprehensive round, not a set of clusters. Such a round is likely going to take four years, and in my written statement, which I think has been circulated, I try to elaborate on my reasons for that argument.

So I now come to my third question: What should Canada seek to achieve in this round? Our first objective should be an agreement involving all three points of the triangle. Our second objective must be to use new trade negotiations to improve Canadian productivity, for example in advanced technology goods, while at the same time smoothing the path of structural adjustment in older sectors. Our third objective should be to resist the trend towards seeing the WTO as a master agreement that can regulate all domains of international economic life.

Many groups will tell you that incorporating environment and labour standards in trade agreements should be our priority. Kofi Annan takes a different tack. In his Davos speech, he observed that there's enormous pressure to load the trade regime with restrictions aimed at reaching adequate standards in the areas of human rights, labour standards, and environmental practices. He agreed that the concerns are legitimate, but he argued that because globalization is fragile, more harm than good can be done to global prosperity by creating new restrictions on trade and new impediments to investment flows.

Universal values have already been defined by international agreements in these areas, including the Universal Declaration of Human Rights, the ILO's declaration on fundamental principles and rights at work, and the Rio declaration of the UN Conference on Environment and Development in 1992.

The Secretary-General has launched an interesting initiative to encourage business to embrace and support these values. The trading system can and must balance social and economic objectives, but sometimes that will require deference to action taken in other formal and informal organizations or within states.

I'd like to briefly mention the substance and process of electronic commerce, because it illustrates how the WTO works. Technology creates the possibility for new forms of business that cross borders. Members of the WTO have first to understand what these new entities are before they can discuss how to assimilate them into the norms and principles of the trading system. The process has been going on for years, as countries grapple with these issues.

The objective is neither an absence of rules nor unified global regulation of the Internet. International trade negotiations are misconceived as rule-making. Negotiators discover or recognize emerging rules in a process of international accommodation before they're able to write them down.

The same process should now be followed in the domain of culture. We should look for ways to go beyond the exemptions approach, which has been a source of confusion and difficulties. What's needed is a debate within the WTO about the legitimate public purposes that can be served by national regulation of cultural industries.

The Cultural Industries SAGIT has recommended that we should seek to negotiate a new cultural instrument. One model for such an instrument might be the reference paper that was negotiated as part of the agreement on trade in basic telecommunications services. It's a set of guidelines for how countries should adapt their domestic regulatory framework to the trading system. It doesn't require that each country have the same regulations, but it does ensure that those regulations will be consistent with the norms of the WTO.

• 0920

Finally, Canada should continue to show leadership on institutional matters. Much has been done to make WTO information more readily available, but more needs to be done to involve elected representatives in the organization. The WTO has the explicit institutional structure that the GATT lacked, but with over 130 members, none of the new bodies that were created in the Uruguay Round can function if all discussions involve all members all the time in attempts to reach consensus in public. Major decisions usually emerge from a series of smaller meetings of ministers and officials, but this traditional technique may have reached its limits.

I have proposed in the past that the WTO needs an executive committee not unlike the UN Security Council. I'd be happy to expand on this proposal if that would interest the committee.

To conclude, Canadian foreign policy and domestic economic policy would both be well served by the launch of a comprehensive round of negotiations in the WTO. We will need to stress further elaboration of the agreement on agriculture, strengthen the GATS, integrate developing countries, bring cultural policy into the WTO, and improve the institutions of the system.

Thank you.

The Chairman: Thank you very much, Professor Wolfe. You covered a lot of ground in a very short paper. That was a very helpful introduction. I'm just sorry that Mr. Penson wasn't here when you announced that there's a peace in the present agricultural war. I think he's a full believer that the war is ongoing, and he's one of the principal spear-carriers in it. He'll have a chance to ask you about that when the time comes.

I'll go to Mr. Herman next and then I'll go to Ms. Barlow and Mr. Clarke, if that would be all right.

Mr. Herman.

[Translation]

Mr. Lawrence Herman (Trade Lawyer, Cassels, Brock, Blackwell; Individual Presentation): Thank you, Mr. Chairman. I'm pleased to appear before you this morning and to share some comments with you. I'm somewhat embarrassed that I didn't prepare a brief like my friend, Professor Wolfe, but I will still make a few brief remarks.

[English]

I don't have a paper, as Professor Wolfe has. It's a part of the disability of practising law and trying to do too many things at the same time.

The Chairman: You're not suggesting you're not paid for this, and that has something to do with it.

Some hon. members: Oh, oh!

The Chairman: There are a lot of lawyers around here, Mr. Herman, and they're very cynical in this committee about—

Mr. Lawrence Herman: Well, we get our pay in many ways, and I get great spiritual satisfaction, as I always do, from appearing at this committee, Mr. Chairman. As a former practitioner yourself and an expert in public international law, I think you'll appreciate the comments I'm going to make.

I'm going to make my comments from the legal perspective, because that's my discipline and training, but I also will inject into the brief remarks I make some of my experience as a former Canadian diplomat and representative in Geneva a long time ago, when the GATT was a much simpler place than the WTO is now. Mr. Hines, who is assisting the committee, will appreciate those remarks, since he had a similar experience, I think.

The state of affairs that Professor Wolfe described is a given: globalization, interdependence, and integration of national economies. The externalization of national economies, with, as some point out, 40% of economic activity being directed to external trade and investment, requires rules to govern those activities. My optic, if you like, as a private practitioner and sometime public international lawyer, is on the need for the international community to develop and govern itself by the rule of law.

The WTO agreement is—and it is important to always remind ourselves of this—a multilateral treaty that governs human activity. And I would argue that the WTO agreement is the primary international organization and international treaty governing the relations of nations.

• 0925

I say “arguably” because some might say the UN charter and the United Nations as an institution is the paramount international organization. But I would argue—and I'll come to the reasons for it in a moment—that the WTO agreement has become the world's primary integrating institution that establishes and administers rules of law unlike anything we have known in human history. I don't want to sound unduly dramatic, but as a public international lawyer, when you survey the development of international law over many centuries, there really is nothing like the WTO agreement.

As public international lawyers, we always struggled with the notion that international law is not really law because it lacks a fundamental element to it, and that is dispute settlement with a sanction that can enforce the rules. It is the case that the UN charter does not have sanctions the way we know them. It operates through international consensus and through the comity of nations. It does develop norms, but the norms are enforced only through a very complex consensus-building system.

The WTO agreement, for better or for worse, contains a built-in sanction mechanism. Through the dispute settlement understanding, states can be called to account, and through what is commonly called retaliation, obligations under the treaty can be enforced. That to me, as a lawyer, says a lot about what the WTO is as an institution and what the WTO agreement is as a multilateral treaty.

Important implications for Canada flow from the attributes of the WTO as an institution. Some of these have already been addressed in the testimony of the minister and his officials, and I think you'll be hearing more of this in comments from others.

It seems to me that as a broad issue, it is in Canada's interests to ensure the primacy of the rule of law internationally, to enhance the role of the WTO as the central organizing institution in human affairs today. The same way that Canada has been at the forefront of developing rules related to human security, such as the Landmines Treaty and the agreement on the International Criminal Court, in the area of international trade and business relations, Canada has a major interest in seeing that the WTO as an institution is furthered and the rule of law is enhanced.

There are certain problems inherent in the WTO process that have to be addressed, and it is in Canadian interests to do that. This committee has a vital role to play in educating the Canadian people as to the role of the WTO and as to Canadian interests, and I welcome what is being done here. It is a very important exercise, and I wish you well on your future endeavours in that regard. But there is some way to go to promoting transparency in the WTO processes, and by that I mean ensuring that Canadians understand what the WTO is all about and that Canadians are demystified as to the nature of that process.

• 0930

Some steps have already been made institutionally within the WTO, for example. There's some way to go, but Canada, in concert with like-minded states, has proposed that the dispute settlement process be made more transparent and that the public be given much greater access to documents, pleadings, and arguments that are part of the WTO's dispute settlement process.

I do not believe—and I'll be quite frank about this—that transparency means the same thing as accessibility. I do not believe it would further the interests of Canada or enhance the rule of law internationally to have interest groups or private persons taking part in WTO dispute settlement processes. That does not mean the state cannot convey the views of those interest groups, but I do not believe it is consistent with the notion of the WTO as an international institution.

Nor do I believe that the dispute settlement procedures would be enhanced, furthered, and made more efficient by allowing private parties access to that system. That is not a retrograde position. I happen to believe state-to-state dispute settlement functions well. I also believe we have some way to go in developing a level of experience with the WTO processes, and it is probably too early to make certain judgments about the efficacy of those processes.

I talked a minute ago about the challenges to the WTO dispute settlement process. Canada and other countries must have some concern about the undue legalization of the dispute settlement process. And to a degree—and I don't know whether other of my colleagues share this view—I am somewhat dismayed over the degree to which the appellate body in the WTO is reviewing in great detail both the facts and the law in hearing appeals from panel decisions. The undue legalization of that process is a challenge for Canada.

Let me very quickly raise a few issues of process that I believe are of some public concern and of concern to Canadians.

You're looking at the clock, Mr. Chairman. I hope I haven't—

The Chairman: Sorry, I didn't mean to be rude to you. It's just I noticed there's a significant difference between the clock at the back of the room and the one at the front of the room. If the clock at the back of the room is right, you're way the hell out of order, and if this one's right, you're well on track. So since you're somewhere in the middle between the two, we'll assume you're on track.

Mr. Lawrence Herman: I have to tell you, Mr. Chairman, since I was the first person in this room this morning—

Voices: Oh, oh!

Mr. Lawrence Herman: —I noticed the difference in the time, but I thought it was by design. One keeps you ahead of the hour and the other keeps us behind the hour.

Some of these issues I'm not going to talk about at this point. We can deal in questions with the substantive issues for negotiation in the millennium round. The minister talked about the theory of clusters and the importance of certain items, as Professor Wolfe has addressed, such as agriculture. But let's leave that aside for a moment. Let me just briefly raise some additional challenges that are important for Canada and for Canadians in the broader context of ensuring that the WTO's processes are enhanced and made more effective.

Regionalism is a challenge for the WTO. Regionalism versus multilateralism is a challenge—how we incorporate regional agreements while at the same time ensuring that the WTO remains the primary, paramount international institution.

Secondly—and this is of concern to Canadians—we have to find a fairly quick way of getting Russia and China into the WTO. It won't happen before the next ministerial at the end of the year, but universality is under some assault because China and Russia, two of the major economies of the world, aren't in the system.

Thirdly, Canadians must be concerned about the EU and U.S. dominance of the multilateral trading system. Canadians must be concerned about U.S. unilateralism. It is a challenge for all Canadians to ensure that, as a multilateral institution, the WTO is not subject to the unilateral policies and/or measures of the two dominant trading blocs.

• 0935

Let me stop there, because I've gone on long enough. We can get to some of the substantive issues later in the discussion.

The Chairman: Thank you very much, Mr. Herman. That's very helpful, from a legal perspective.

Ms. Barlow, could you go next, please?

Ms. Maude Barlow (Chairperson, Council of Canadians): Thank you very much. I'm very pleased to be here, especially on the opening day of these very important hearings.

Over the last year, the Council of Canadians has been involved in a set of public hearings across the country. We launched a nationwide citizens' inquiry on the Multilateral Agreement on Investment, but also on economic globalization, trade, and the whole package. Formal hearings were conducted in eight centres across Canada, and 15,000 Canadians participated, either directly through the hearings or by submitting their own written comments and proposals.

Based on my own experience, I can tell you there is a great deal of anxiety among Canadians across this country about the direction of the global economy and the emerging role of the WTO. After hearing and reviewing much of the testimony presented at these hearings, I can safely say there is a profound and disturbing sense of unease among many Canadians today concerning the direction this country has been taking down the path of economic globalization.

Take, for one example, last week's ruling of the WTO—it's an interim, but it looks as though it's going to stick—which in effect declares that Canada can no longer develop its own industrial strategy unless it's tied to military production. We also know of course about the magazine dispute, and Charlene Barshefsky is on record as saying that will just be the tip of the iceberg; then it's film and copyright and everything else.

We need to understand that American trade officials are annoyed about the role Canadian NGOs played in the MAI. They have taken the gloves off on culture, because they want to use Canada as an example. I don't think that much of our culture is really left for them to attack. I think this is more because they don't want the door open for other countries.

I wanted to share with you the following salient themes and messages that emerged from our citizens' inquiry.

The first was democratic rights. Everywhere the inquiry went, we were struck by the persistent appeals that were made to the fight for people's basic citizen rights. People are sensing a real loss of their democratic rights as citizens in our country. We were told over and over again that the rights of corporations have taken the place of the rights of citizens.

Many, many of our witnesses referred to the Universal Declaration of Human Rights and the UN covenants and charters, emphasizing the fact that these documents are no longer being taken seriously when it comes to operations of the WTO and related institutions of the new economy. The way I understand the WTO, it's really an instrument to deregulate international or national domestic rules, and it's really a guide or a set of lists about things governments can no longer do.

The second is trade liberalization. The fallout from free trade was a constant refrain we heard over and over throughout the inquiry. Stories were shared about the damage done by the FTA and NAFTA to farm communities, fishing villages, and factory towns. We heard about the negative impacts of free trade on our social programs and the public sector.

Obviously people were very concerned about the cultural implications of the WTO's rulings, but also about the chapter 11 cases, such as Ethyl's challenge to Canada's ban on the use of MMT in our gasoline, the Sun Belt Water challenge, the challenge by S.D. Myers, and so on.

While trade liberalization may benefit the rich and the powerful, it has been the cause of increased pain and suffering for the vast majority of Canadians. People genuinely feel that Canada has surrendered much of its national sovereignty and political will as a nation-state to regulate the operations of transnational corporations in this country.

I would just remind us that since the day the Canada-U.S. Free Trade Agreement was signed, there's been a 60% increase in child poverty in this country. That is the highest growth in child poverty in any industrialized country in the world. I'm not suggesting it's only trade, but I am suggesting that trade liberalization and globalization have played a very important role.

• 0940

Third, we heard about a need to protect the commons. One of the constant and urgent cries heard throughout the inquiry was for the protection of the commons of this planet—the air, the water, the oceans, the wildlife, the wilderness, the forests—for the sake of future generations. Not everything should be treated as a commodity to be bought and sold in the marketplace, yet this is what people see happening through the WTO and the global economy.

It matters little what international commitments are made to preserve the commons by cutting back on greenhouse gases or preventing the sale of bulk water exports, if the measures taken are considered to be disguised barriers to trade and therefore ruled out of order under the WTO. What people seem to fear most about economic globalization, besides the loss of their jobs and their livelihood, is the destruction of the commons itself.

I want to comment very specifically on the environmental provisions of the WTO. The WTO can strike down domestic environmental laws that do not conform to WTO rules. We've had several of these very important cases, one on shrimp that's killing Asian sea turtles, one on tuna that's caught in non-dolphin-safe nets. Domestic environmental standards that are lower than the global average are safe. Those that are higher are at risk of being challenged as non-tariff barriers to trade. So the move is towards the lowering of the common standards.

There is an exception, which is called article 20, but it is guided by a little thing called the châpeau, which has been interpreted to say that article 20 can only be used in a non-discriminatory fashion and cannot be used as a disguised barrier to trade. The key ruling of the appellate body in the shrimp-turtle case said that article 20 exceptions must be limited and conditional, and it was under the châpeau that article 20 was not allowed to be used as an exception. It seems to me the châpeau tail is wagging the article 20 dog in this case.

The Chairman: The hat is on the wrong end of the article.

Voices: Oh, oh!

Ms. Maude Barlow: Further, the WTO does not recognize the supremacy of multilateral environmental agreements, or MEAs. And CITES, the Convention on the International Trade in Endangered Species of Wild Flora and Fauna, has been violated through the WTO.

I want to also say on this that Canadian water is at risk under the WTO. It is included because it's included in the GATT definition of a good. The particular article we're most concerned about is article 11, which prohibits the use of export controls and eliminates quantitative restrictions on imports and exports. A ban on water exports could be challenged, not only under the NAFTA, but under the WTO.

The fourth concern we heard was about community control. In response to the gravitational pull towards globalization, a strong counter-pull in the direction of localization and the need for greater community control was also expressed in our inquiry. From the testimonies we heard, there is a strong resentment about the loss of national standards and the failure of the national government to maintain adequate levels of transfer payments.

In the new global economy, too much power has been transferred into the hands of transnational corporations and global institutions such as the WTO. As a result, there appears to be a distinct loss of faith and confidence in our national government as the defender of citizens' rights and needs, and a corresponding desire to strengthen institutions for local control, including, if need be, the creation of community parliaments that are much more representative and participatory.

The fifth concern we had was that civil society has a major and vital role to play in shaping Canada's policy positions with regard to international trade, investment, and finance. The problem is that citizens' organizations and movements in this country have been virtually excluded from any effective participation at this level.

I have to take exception to the notion of my friend, Mr. Herman, that interest groups have not been at the table. Indeed, the Chrétien government tends to take its marching orders on these public policy matters from the Business Council on National Issues. Just two weeks ago, for example, International Trade Minister Marchi and his provincial counterparts met behind closed doors with the BCNI and other big business associations to discuss, among other things, what steps should be taken by governments to consult with the public about the WTO and related matters of economic globalization. No other sector of society, certainly not the Council of Canadians, as the largest public advocacy group in the country, was invited to share advice.

There is an urgent need to develop real mechanisms for effective democratic participation in federal policy decisions regarding international trade, investment, and finance. Unless this happens, people's anxieties and fears are bound to fester and grow.

• 0945

I would like to quote for you from the Financial Times. An unidentified WTO official said:

[The WTO] is the place where governments collude in private against their domestic pressure groups.

Finally, the Council of Canadians, based on the findings of the citizens' inquiry, submits that the Government of Canada should withdraw its support for a new round of negotiations. We are not saying withdraw from the WTO, but we feel a total halt should be placed on any new issues.

Investment should not come before the WTO. If investment does come before the WTO, which is the proposal, it's no longer just going to be state to state, as Mr. Herman talked about, but investor-state. Also, just exactly what we've had under NAFTA, which is corporations suing the Canadian government for environmental laws under chapter 11, will be multilateralized in the WTO.

We have very deep concerns about culture. The Americans have said they're going to renegotiate even the tiny, little, one- or two-line protection for cultural exemptions in the GATT, which is inadequate in any case. They've also said they want to open up intellectual property right law. We're looking at copyright. They're talking about new broadcasting negotiations. I want to remind us that broadcasting in the United States is protected, because it's part of national security. It's not considered so in Canada. So where their broadcasting would be protected, ours would not.

These are huge issues potentially coming up at the upcoming millennium round. We are urging the Canadian government to work with other governments and citizens' groups around the world to assess what has happened to date before launching into a whole new round. We deeply believe it is time to talk to Canadian people and peoples around the world and to examine alternative trade strategies designed to improve the economic, environmental, and social living conditions of people, not only in this country, but around the world.

Thank you very much.

The Chairman: Thank you very much, Ms. Barlow. That's very helpful. Your remarks are very much a compendium of the evidence you received when you went across the country. Did you produce an actual formal report as well?

Ms. Maude Barlow: Very, very soon. What we received was so much that we're a tiny bit behind. We received literally thousands of—

The Chairman: So when it's digested and everything, you'll be able to let the committee have a copy, will you?

Ms. Maude Barlow: We sure will. You'll be the first to get it.

The Chairman: Thank you very much. We appreciate that.

Mr. Clarke.

Mr. Tony Clarke (Director, Polaris Institute): Thank you, Mr. Chairman and members of the committee.

The Polaris Institute is committed to the task of assisting citizens' organizations and movements in developing new skills, tools, and strategies for bringing about democratic social change in this new age of economic globalization. While I realize that the government is seeking input for Canada's position regarding a new round of the WTO, I will argue here that a new round of global talks on expanding liberalized trade and investment should be suspended for the following reasons.

First, most of world is still reeling from the shock waves of the Asian financial meltdown, which, having spread to Russia and Brazil, has now become the centre of economic turmoil in both Europe and Latin America. After all, the neo-liberal agenda that is the cornerstone of the WTO is largely responsible for this financial collapse.

The massive deregulation of financial institutions, coupled with new electronic technology, has allowed currency traders to move billions of dollars around the world in a single day, speculating in hot money and suddenly withdrawing their portfolio of investments at the slightest sign of a downturn in money markets. Under these conditions, governments are no longer able to adequately regulate fly-by-night capital movements in and out of their own countries for the sake of their own economies.

With the world's financial system on the brink, even some of the most ardent free trade advocates publicly recognized that there is a real need for capital controls and for governments to step in and regulate money markets.

• 0950

But a new round of WTO negotiations will surely exacerbate this crisis, especially if investment liberalization is added to the agenda. I remind you that the investment agenda being proposed does include portfolio investment, and therefore, along with government procurement and competition policy, will further accelerate this process that has brought us to the precipice in terms of the world financial system.

Secondly, the World Trade Organization and related institutions responsible for managing the global economy today are experiencing their own crisis of legitimacy. We heard a bit from Professor Wolfe and to some extent from Mr. Herman that there is unease out there, and last May several world leaders attending the 50th anniversary celebrations of the GATT in Geneva, including President Clinton, warned that the WTO and its member countries were in danger of losing touch with civil society in pushing ahead too fast with their neo-liberal agenda for economic globalization.

Having lost his bid for the renewal of fast-track authority in the U.S. three times, Clinton knows his trade agenda has deeply divided the nation, as he acknowledged in his recent State of the Union address.

Similar warnings were issued a few weeks ago at the World Economic Forum in Davos, Switzerland by UN Secretary-General Kofi Annan and especially by Egyptian President Hosni Mubarak, who declared:

Our global village has caught fire.... The time has come for us to rethink the direction our planet is taking.

In short, there are increasing signs of a lack of confidence in the new global economy and its managers. Since the WTO has emerged as the premier governing institution of economic globalization, it will bear the brunt of this crisis of legitimacy.

Third, most Canadians know precious little about the five-year-old World Trade Organization, which is rapidly emerging as the closest thing we have to a world government on this planet. On that point I do agree with Mr. Herman. To be sure, many Canadians are aware of the controversial rulings issued by the WTO against Canada, notably the edict to stop this country's split-run magazine policy. What baffles most Canadians is, how can a global body such as the WTO tell us what we can and cannot do in developing our cultural policies, or for that matter any major public policy law or program?

Few Canadian parliamentarians, I submit, let alone citizens, are aware of the fact that the WTO has not only judicial powers but legislative powers as well. In effect the WTO has a mandate to strike down any laws, policies, or programs of any member country that do not conform with its trade rules. This in turn constitutes a direct assault on democratically elected legislatures. And if the investor-state mechanism is added to the WTO through forthcoming negotiations on investment rules, then foreign-based corporations will have the tools they need to tackle the laws, policies, and programs made by democratically elected parliamentarians as well.

Fourth, the WTO has been designed to manage the global economy primarily in the interests of transnational corporations rather than the citizens of its own member countries. Over two-thirds of the $7 trillion in world trade in goods and services today involves transnational corporations, half of which occurs in the form of intra-firm transactions.

Given the fact that 52 of the top 100 economies in the world are corporations rather than nation-states—a year ago we were talking about only 51; now it's 52—and given the fact that there are over 45,000 transnational corporations operating in the global marketplace, there is little doubt that TNCs are now the driving force behind the WTO and its neo-liberal agenda.

• 0955

It is bodies such as the International Chamber of Commerce, reinforced by big business associations in the so-called Quad countries or regions—such as the U.S. Business Round Table, the European Round Table of Industrialists, the Japanese Keidanren, and the Business Council on National Issues in this country—that determine the real WTO priorities. Here in Canada it has become increasingly clear that the BCNI works closely with DFAIT and PMO officials behind closed doors in determining this country's positions on international trade, investment, and finance negotiations, with little or no input from any other key sector of Canadian society.

Fifth, the WTO agenda for the so-called millennium round of negotiations proposed for the Seattle ministerial will be established in the interests of particular corporate players in each sector.

Let's just take agriculture, for example. The key corporate players may be Cargill, ConAgra, Archer-Daniels-Midland, or a host of other major agriculture business players. That's who we're dealing with. In services it may be IBM, American Express, or McDonald's.

In intellectual property rights, the very fact that they're going to open up the intellectual property rights to include the patenting of all life forms is being pushed by W.R. Grace and corporations such as Monsanto. That's what they want. That's where their business future lies.

In telecommunications it could be AT&T, Microsoft, Hitachi, or Sony that one's dealing with. Or if we're looking at financial services, we don't know whether we're dealing with Citibank, Barclays, or Mitsubishi Bank. And when it comes to government procurement, it could be Lockheed Martin that wants to have access to a whole area of social security inside and outside our countries, or Columbia/HCA that is knocking on the door in terms of health care, etc.

In all of these cases we are dealing fundamentally with corporate players who are setting the agenda. When it comes to the negotiations themselves, governments primarily act on behalf of these corporate interests in their own respective countries. The needs of citizens and the public interest play little or no role in the process whatsoever.

In conclusion, the WTO and the neo-liberal model of economic globalization totally bypass civil society. In preparation for the Seattle ministerial, therefore, the Chrétien government should take the position that a moratorium be put on all WTO negotiations for further trade and investment liberalization until such time as member countries have been able to adequately and critically assess: one, the economic, social, and environmental impact of the WTO neo-liberal agenda for globalization over the past five years; two, the corporate model of the WTO and the exclusion of civil society; and three, alternative options for managing the global economy.

Thank you.

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

Mr. Shannon, you've been able to join us, so you get the role of sweep-up man.

Mr. Gerald E. Shannon (Shannon and Associates): Thank you, Mr. Chairman. I appreciate that.

The Chairman: We're trying to keep our introductory remarks to about 10 minutes to allow lots of questions from members.

Mr. Gerald Shannon: I apologize for being late. I had understood we were to start at 10 a.m., not 9 a.m. Perhaps that's my Geneva training.

In any event, having served as the Deputy Minister for International Trade at the beginning of the Uruguay Round negotiations and as Chief Negotiator for the concluding years, it's a real pleasure for me to be here today at the opening phase of consultations for the next round, which I gather is being called the millennium round.

It's important to bear in mind at the outset that successive multilateral trade negotiations have produced a rules-based system that has served Canada, because it allows us to enjoy a relatively even trading field internationally.

A system that began with efforts to launch an international trade organization as part of the Bretton Woods agreements in the immediate post-war years came to fruition in 1994 with the creation of the World Trade Organization, an outcome that had much to do with the determination of Canadians and some others to see it finally happen. This process and these successive rounds of trade liberalization have been a major factor in spurring Canadian and international trade and economic growth.

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Naturally there are problems resulting from the founding of the WTO, its dispute settlement system, and the specific trade rules and individual sectors. I shall try to deal with these in the context of my comments on the next round and on what our objectives should be. In general, however, the system that has emerged in this half-century of progress is strong, as is the outlook for future trade liberalization.

The Uruguay Round, begun in 1986, is the principal building block for what comes next, and I hope you'll bear with me in taking a brief look at the issues and outcomes of those negotiations. It was a long, arduous process, in part because it brought in services and trade-related intellectual property as issues for negotiation for the first time, and agriculture was finally dealt with as an issue for negotiation, not just for discussion.

The number of contracting parties has grown markedly, up to 133 today, each with its different economic interests, making it truly a global negotiation. The issues themselves have become more complex, because they're rooted in national legislation in each of the participating countries. It should not be surprising, then, that it took seven years to produce an outcome, including one failed ministerial near the end of the negotiations.

For us the round required dealing with some sensitive economic, regional, and federal-provincial problems, which in effect meant that, just as in other countries, a way had to be found to reconcile conflicting interests. In agriculture, to take the obvious example, we, along with the U.S.A. and other grain-producing countries, led the fight to eliminate or significantly reduce export subsidies on grain products. While these efforts were not nearly as successful as we would have liked, for the first time, agricultural export subsidies were reduced, and the stage is set in the next round for further reductions in this area.

For Canada, we face significant challenges to our restrictions facing imports of supply-managed products, mostly dairy and poultry, where we run strict quantitative limitations on allowable imports. At the insistence of the U.S.A. and some others, these quantitative restrictions, along with those of others, including Japan on rice and the Americans themselves on a variety of commodities, were turned into very high temporary tariffs—a process called tariffication—which are scheduled to come down over time, while the minimum import requirement of the product in question is raised over time.

On tariffs affecting market access for Canada and its goods abroad, we made a major effort to move to zero tariff levels across the full range of industrial products, and in concert with the Americans, the Japanese, and some others, produced a list of sectors to which zero tariffs now apply. Unhappily, the list does not include some sectors of key importance to Canada, such as some forest products and some minerals. It will be important to re-establish this initiative in the next round.

On services, with the exception of services affecting the cultural industry, negotiations did not pose many formidable problems for Canada. The end result in some of the more difficult service sectors in any event was to accept a framework agreement establishing the application of such rules as most favoured nation and national treatment, but it was left to the contracting parties to establish through negotiations the sectors to which these principles would apply. In effect it was a good start.

For the balance of the service negotiations, the outcome was positive from a Canadian vantage point, although in areas such as financial services, important countries, such as a number of the Asian APEC countries, refused to make meaningful concessions. Thus the early focus on this sector in the next round.

Naturally, Canada did not list the cultural sector as one where we were prepared to make commitments, so it was effectively left out of the Canadian offer and uncovered by the services agreement.

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The round also produced a valuable outcome on trade rules covering areas such as subsidy countervail, safeguards, and others, all of which will need to be revisited in the millennium round.

Finally, the major outcome, along with the establishment of the WTO itself, was the creation of a binding dispute settlement system to which all countries, including the U.S.A., agreed to be bound. This system applies to all areas covered by the number of agreements under the auspices of the WTO. It was tested early and often in the first years of the WTO, including resort to the appeals process, and to date this system has been effective.

The next round is scheduled to begin in December of this year. Signatories to the last round have had four years to implement its results, and obviously the quality of the implementation varies, but enough has been done by most so that we can move ahead in the expectation that lagging countries, mostly developing countries, will catch up. Moving forward is particularly important in agriculture and in trade-in-service sectors, because in both of these areas, there is unfinished business from the last round. Thus these will be front and centre in December.

I'm aware that in previous meetings of this committee there has been discussion of whether another comprehensive round, or mega-round, is likely or desirable, or whether we should rather negotiate on a sectoral basis, as some have advocated, or produce negotiating clusters, which would be designed to provide an early harvest of results and the expectation of more to come.

My experience, having been to the Uruguay Round, is that a sectoral negotiation by its very nature cannot succeed, because it's impossible to find a balance of concessions within a limited number of sectors. It takes a whole economy being on the table to make a deal.

With respect to clusters of issues being negotiated together, the likelihood, in my view, is that this will be strongly opposed by developing countries and probably a number of developed countries as well, who will be reluctant to be asked by the U.S.A. or others to pay now for concessions that Washington might need to fend off Congress, in the expectation that they will be paid in equal coin down the road. For this reason, I share the misgivings many have over the cluster approach, and indeed I believe the only way to go is a full-fledged mega-negotiation.

In the next round there will be potential big pluses for Canada, as well as risks and challenges. Bear in mind that the negotiating environment itself is changing. Happily, the role of the director general, hopefully chaired by Mr. MacLaren, and a small WTO secretariat remain a constant—a high-quality operation. But the negotiating atmosphere now reflects the growing role and sophistication of a number of key developing countries, such as India, Brazil, Singapore, Argentina, and others, for whom the WTO now is the most important multilateral economic forum globally.

This marks a change from the past, when the process was dominated by the major players, including the U.S.A., and the developing countries wrongly focused their attention on ideological as opposed to practical trade concerns. Today these developing countries are major, formidable players in the multilateral arena.

The question of Chinese and Russian accession in the near future could also have a major impact in the context of these negotiations. Chinese accession to the WTO has been a very complicated process, dominated not just by the problems China appears to be having in adapting their regime to a market-oriented organization such as the WTO, but also because of many major competitive concerns on the part of most developed markets about the impact Chinese exports can have on our markets in areas such as consumer electronics as well as textiles and clothing. Indeed, the major developed countries themselves also want to gain an advantage over their competitors as China's vast market opens.

I submit there's also a need in this round to differentiate between the requirements of relatively advanced countries such as Brazil, Korea, and Mexico—which, one can argue, no longer need special and differential treatment, or developing-country treatment—and reserve this status for those countries, particularly in Africa, that are at a lower level of economic maturity.

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Finally, the context of the next round will also have to be sufficiently supple to deal with areas where trade policy concerns intersect with investment as well as with broader policy concerns, notably the environment, human rights, and in particular labour rights.

On our approach to the next round, we'll have to take into account the changing shape of the Canadian economy. In particular we need to ensure that the outcome is favourable for our newer fast-growing sectors of the economy with major global growth potential—that is, high-tech areas, biotechnology, communications, and a broad range of service sectors.

At the same time, we'll have to ensure that the interests of the more traditional sectors of the economy, such as processed agricultural products, manufacturing industries, as well as mining and forest products, are taken care of. This might be done in the context of advancing the zero tariff negotiating technique we deployed in the Uruguay Round.

We'll need to look very carefully again at trade rules, particularly in the areas of subsidy countervailing duties, safeguards, dumping, and others, to ensure our interests are kept in the forefront of this important part of the negotiating process.

Agriculture will be back, and the Canadian negotiators will require instructions on whether we're going to fight the last war all over again with respect to protecting the dairy and poultry industries, or whether there are better places to spend our negotiating chips. I think there are.

At a minimum we can expect our negotiating partners to want to significantly reduce tariffication levels for our key agricultural import commodities. Some, such as our colleagues in the Cairns Group, will want tariffication removed entirely so that only normal tariffs would apply. Similarly, it will be a challenge to achieve even greater reductions in agricultural export subsidies than they managed the last time around. Clearly this prospect would be enhanced if Canadian negotiators did not have their hands tied behind their backs because of the supply management problem.

Culture will also be back. We can expect the U.S.A. to try once again to establish rules and disciplines that will be disadvantageous to Canada and to some others. We'll need to stay in close touch with like-minded countries, such as France, for example, on this issue and avoid entering into commitments in this area with respect to future service negotiations.

Efforts to broaden the WTO to address such issues as environment and human rights will be tricky.

On the environment, a major effort has been made in the World Trade Organization to see to what extent—

The Chairman: Excuse me for interrupting you, but we're way over our time of 10 minutes.

Mr. Gerald Shannon: Oh, I'm sorry.

The Chairman: I wouldn't interrupt you if you were just at the end of your paper, but you're not, so is there any way you could summarize? We have the paper in front of us.

Mr. Gerald Shannon: Do you? Oh, I see.

The Chairman: Yes, and we'll catch you on the questions.

Mr. Gerald Shannon: All right, fine. I'll put these in together.

Issues such as environment and human rights are tricky. I don't mean to denigrate these issue areas, because they're of terrible importance. The thing really is not to allow a situation to develop whereby protectionist concerns, which otherwise are legitimate in the human rights and environmental fields, in fact serve as deterrents to international trade.

On labour rights, I would just add that no one would argue in favour of child labour, but once again, it's important to discern what it is we're talking about. Those who propose a major agenda issue on labour rights should be required to spell out with great precision what it is they have in mind and which of the ILO standards they plan to tackle.

Out of deference to some others here, I'll just say a quick word on investment. There is a growing desire on the part of many countries, developed and developing, to deal with investment issues in the WTO. My own view is that our interests as Canadians would have been better served by launching investment negotiations in the WTO rather than in the OECD, where we had a lengthy, highly contentious, and divisive debate, in many cases generating more heat than light.

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In the case of the World Trade Organization, we have the opportunity to be closer to the centre of concerns, given the fact that developing countries now want investment capital but would look very closely at the provisions put in place to govern its flows.

Finally, on our leverage in the round, clearly we've always been worried, as Canadians, about the EEC and the U.S.A. getting together and solving things for the good of all of us. That's an even lesser prospect now than it was, given the growth of the developing countries. It's critical that we remain part of the Cairns Group, because that's where the major decisions are taken that guide the flow of the negotiations.

It's critical that we get a clear grip on our strategic interests now in the negotiations, and that is what makes these consultations so valuable. The multilateral trade negotiation environment is a place where you shake hands and you count your fingers afterwards. It's not good enough to wait for the agenda to be shaped by others in the hope that Canada can play its traditional broker role. This is a sure recipe for getting rolled.

Thank you, Mr. Chairman.

The Chairman: Thank you. I'm going to start counting my toes as well as my fingers. We appreciate that.

[Translation]

We were expecting a sixth witness, from the Conseil du patronat du Québec, but he had to cancel this morning's appearance because he is to attend a meeting with the provincial premier. Mr. Garon sent his regrets. He will, however, appear before us in Montreal.

[English]

So then if we could pass to questions, I have Mr. Penson, Madame Debien, and Mr. Blaikie.

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

I'd like to welcome the panel here this morning for the kick-off of our committee's study of the WTO and what Canada should be looking for in the next round. I really appreciate hearing from Mr. Shannon a bit of a history of the Uruguay Round, because it is important to understand the background to this in order to launch into a new round or even into the sectoral approach. Hearing how it actually works from somebody who was on the ground in those negotiations is important.

Mr. Shannon did say, and I think Mr. Wolfe also referred to the fact, that there need to be trade-offs, and there's probably a need for a general round in order to achieve that. I have two or three questions, and maybe I'll just list them and then stop and let them be answered.

I would agree with the approach that there need to be trade-offs, especially in things such as agriculture, where the European Union essentially has to be giving up a lot in order for Canada to gain. Agriculture is one of those areas where there was only a modest start last time around. Farmers in the grain, oilseed, and beef sector are looking for some significant gains this time. What could be put on the table in a general round that would be attractive to the European Union in order for them to give up things in some of the agricultural areas for Canada to make gains? That is one question to the panel, for Mr. Wolfe and Mr. Shannon in particular.

Mr. Herman also talked about what is in the current WTO and what the process is. I'm interested in what the WTO might become. Mr. Herman said we have some sanctions in the WTO; we can use retaliation. Charlene Barshefsky has suggested that when the WTO makes a ruling, perhaps the winning country should have to live by that ruling and not be able to change things, such as legislation on split-runs, for example. I'm wondering whether that's a possibility in this next round.

My other concern is duties. Say in the softwood lumber dispute, if Canada were to drop the softwood lumber agreement and then get hit with a countervailing duty, and if we were to take that to the World Trade Organization, my concern is that even if we win, our industry may have to pay duties for several months, which they may not be able to get back, even if we win the case. Is there a prospect that we could advance that so that if there were a win, there would have to be compliance, and therefore duties would be refundable?

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Mr. Gerald Shannon: Perhaps I could start, Mr. Chairman, and I'm sure others will jump in.

Many of us were disappointed by the extent to which the Europeans did not give more on agriculture the last time around. Their difficulties are obvious to all concerned. They've built in layer upon layer of protective levies, tariffs, and export subsidy schemes, which are difficult to get at. We did, however, for the first time, largely because of their own internal fiscal needs.... The crunch came for them too, whereby they could no longer afford to maintain that rigid regime and they were prepared to begin the process of reform. That will be sharper as the European community expands to bring agricultural countries such as Poland inside their tent. It will make things even more pricey for them than they are now.

What can we offer them? How do we wheedle concessions from them? There are a number of ways we can. For example, they, like the Americans, have an interest in our market for certain agricultural products. One of them is cheese. They've been under quota now for years and years on dairy products generally, but certainly on cheese, so we have some negotiating coinage there to use.

We have broad interests in the European market in metals such as zinc and aluminum, which are very important. With the French, those are two factors we could bring to bear in our ongoing negotiations with them.

We're not devoid of things to play with. For example, when we finally concluded the procurement agreement last time around, we signed onto that agreement solely on behalf of federal government departments; the provinces and major municipalities decided not to join us. I think that was a mistake on their part, but they decided that way. Nonetheless there's a prospect here. If we were prepared to look at a broader contribution by us on procurement, we would have better access to a number of entities inside the European Union for procurement, which could be attractive to us.

In short I would say that in a broad negotiation, you can do a lot of things. Some may not be directly in a sector you're addressing, some may be elsewhere, but when you sum up the balance of concessions you've achieved and given, at the end of the day you try to make sure you can hold your head up with some pride. I think we did.

I personally wish we could have done more on European subsidies, but the fact of the matter is, we ourselves did have our hands tied behind our backs because of supply management. There's no question that at one point we were frozen out of negotiations between the U.S.A., Europe, Japan, and, God bless them, Australia, because the Americans didn't want us at the table reinforcing the Japanese supply management processes on rice.

There are lots of ways of getting at an issue, and I would argue that if this time around we accept that we need to have a new regime in place for sensitive domestic products, then we could probably do a better job for our principal agricultural export interests.

The Chairman: Are there any other comments on this?

Mr. Charlie Penson: Can Mr. Herman and Mr. Wolfe also deal with that question?

Prof. Robert Wolfe: Let me simply echo what Mr. Shannon has just said. In a comprehensive round, there are opportunities for give and take throughout the ensemble of the trading system that end up in a balanced result for both sides.

Certainly the Europeans would like action from us on cheese. We might also like some action from them on forestry. They might like action from us on tariffs in the automotive sector, they might like something from us on intellectual property rights for pharmaceuticals, and so it goes. Throughout the relationship, there are things we want and there are things they want.

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If you have a comprehensive round, at the end of the day you can look at it and say, “Well, there's enough there that makes our participation in the global economy more rewarding and that helps us improve the productivity of the Canadian economy. Let's do the deal.” If you try to look at it sector by sector and ask if it's a good deal just for beef producers, it may not be, or maybe it will be, but that is much harder.

On Charlene Barshefsky, let me simply repeat what I said in a letter to the Globe and Mail a month or so ago, when she started talking about how when you win, you win. It's not like that in Washington. Allan Gotlieb's rule was bang-on. There are two rules about politics in Washington. The first rule is it's not over until it's over, and the second rule is it's never over.

That's true to some extent in dispute settlement. When you have a dispute where there's an agreed basis for getting on with things and all you're worried about is the interpretation, then you can have a reasonably expeditious dispute settlement process and you can get on with implementation. When you have something in an area where there's not an agreed basis for international cooperation—and culture is one of them—then disputes don't necessarily implement themselves very quickly and you get all the sorts of problems you alluded to.

Mr. Lawrence Herman: I have just a couple of comments.

On the dispute settlement issue and the right of a party that wins a decision in the WTO to withdraw concessions, understand of course that the rule is that the withdrawal of concessions, or “retaliation”, can only be to the same level as the damage done to the trade of that party. In other words, while spokespersons for the USTR claim the right to withdraw concessions against a whole range of Canadian products in the current magazines dispute, clearly international trade law does not allow them to do that. At most they could withdraw concessions to restore the balance of any advantage that might have been lost to U.S. advertisers. Many figures have been quoted in the press, but it certainly isn't the hundreds of millions of dollars that USTR suggested.

By the way, on that dispute, we have to be careful to not claim that the sky is falling, because firstly, countries claim the right to challenge Canadian measures. Whether they do so or do so successfully is another matter, but it behooves all of us not to run for cover just because somebody in the United States or elsewhere says if Canada does thus and so, they're going to challenge that in the WTO. There is a long way to go between a putative claim and a successful outcome to a dispute. So we have to be careful about the Chicken Little syndrome.

[Translation]

I don't know how to translate this expression into French, but I think you understand what I mean.

[English]

Secondly—and this gets to Mr. Penson's question—there is a grey area in the WTO agreement, in the dispute settlement understanding, dealing with the implementation issues. That is a matter that is not easy to resolve. It is part of the current so-called bananas dispute between the United States and the EU.

This is something that has to be addressed in the WTO to resolve this issue about what happens when a panel issues a decision and the losing party doesn't implement it or doesn't implement it in a satisfactory way. I hope, in the context of Bill C-55 and the discussions with the U.S., some ad hoc solution will be found whereby Canada could get a relatively quick decision from a WTO panel as to whether Bill C-55 is compliant.

The final point I want to make is this. Canada is a frequent player in the dispute settlement process at the WTO. We win some; we lose some. It's the nature of the game. We may lose some. It doesn't mean it's the end of the world. It doesn't mean that because the United States lost on the sea turtles case, they are therefore bereft of any possible legislative recourse in regulating this issue. It just means they lost that particular dispute.

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The other point related to that is that there are thousands or millions of regulations in force internationally, governing trade, protecting the environment, and regulating the health needs of local populations, that are not challenged. You have to be very cautious about claiming that a dispute in the WTO on a given set of facts has unleashed the forces of laissez-faire liberalism, without recourse on the part of the nation-state.

The Chairman: We're into 14 minutes now, and—

Mr. Charlie Penson: There's one question he didn't answer, and I'd like it in writing, if nothing else.

The Chairman: Okay, but we'll have a chance for a second round. I'm confident of that, Mr. Penson. What is it you—

Mr. Charlie Penson: On the duties.

The Chairman: Maybe you could give a written answer to that, if it doesn't get back. We should get to a second round, but we're now into 15 minutes instead of the 10.

Ms. Barlow, I saw you indicate there's something you'd like to say, and I'm sure it's on the environmental point. Can you either do it very quickly now or assume that you'll get a chance to get a swipe at that one?

Ms. Maude Barlow: I'd really like to take on two things that have been said here.

First of all, on the magazines, yes, the penalty is supposed to be proportional to the amount being challenged, but the U.S. hasn't respected that. They're threatening with $6 billion worth of challenges against other Canadian sectors. They know full well that they shouldn't do that under either NAFTA or the WTO, but it won't matter. What will happen is they will retaliate, and then we will have to go to the WTO or NAFTA to try to recoup. We're in a situation with a much bigger country that I believe will do that first. If they had intended to be proportionate to the damage they see with magazines, they would have made their threat smaller. So I want to make that point.

I also want to make a point about this notion that it's about countries winning or losing. In the sea turtles case, the sea turtles lost. It doesn't matter that the United States won or lost. The issue is not about nation-states fighting and losing some issues. The issue is that we are losing our ability to protect the environment. I do hope we'll get back to this, but I want to make a very strong plea for us to think beyond competition between nation-states and start thinking about the devastation to the world's environment and what we are doing at the international levels to protect or not.

All of the multilateral environmental agreements have no enforcement measures. The trade and investment agreements—such as NAFTA, the WTO, and the now-defunct MAI, but the investment provision may come to the WTO—have profound and strong enforcement measures. That's the difference. When the environment comes up against enforceable trade rules, the environment loses. This is about sea turtles, not countries.

The Chairman: Thank you.

Madame Debien.

[Translation]

Ms. Maud Debien (Laval East, BQ): Ladies and gentlemen, good morning and welcome to our committee.

First of all, I would like to ask Mr. Wolfe three short questions and, if I may, Mr. Chairman, Mr. Loubier will then take over.

Mr. Wolfe, in your address, the first issue that you raised with us was: Is the WTO an appropriate institutional response to fears about globalization? I would like you to respond to this by outlining the results obtained to date at the WTO, essentially with regard to Canadian interests.

Here's my second question. Everyone knows that there are structural and operational problems at the WTO. I'd like you to elaborate on the institutional reforms that you mentioned earlier. You said that you would come back to that subject.

Thirdly, you also told us that not all aspects of life could be regulated at the WTO. I'm not asking you which ones should be covered, but which ones should be excluded. Those are the first three questions. Mr. Loubier will go on from here.

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Ms. Barlow and Mr. Clark, you spoke of the possibility that Canada could suspend its participation in the WTO for this ninth round of negotiations.

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Are you aware that, if Canada decided not to attend this round—those who are absent are always wrong—and if it happened that agreements on culture, water or social rights were negotiated in this round that were unacceptable to Canada, then Canada would have to suffer the consequences of not participating? It might also be disastrous for Canada, because we export 40% of our national product. That's my first question.

Here's my second. Mr. Shannon, you said that instructions had been given to Canadian negotiators as to whether they should keep fighting the battle of the GATT eighth round over poultry and milk as well as the one over Western grains and oil seeds, or whether they should stop fighting and go on to other negotiations. Since Canada has made more concessions than all the European countries and other nations like the United States with regard to subsidies and opening up its borders, don't you think that what we should be doing is drawing attention to the concessions that Canada has made in the last four years, while other countries haven't done anything?

My third question could be answered by Mr. Herman, Mr. Wolfe or Mr. Shannon. What should we expect on the issue of culture? I believe I recall Mr. Herman saying that we needed to go beyond exceptions and have more specific rules that could allow Canada, for example, to defend its cultural uniqueness in the face of American hegemony.

I will ask one last question, if I may, Mr. Chairman, although I have tons of them. Moreover, I think I'll come back, because it's very interesting here. It's much more interesting than the Finance Committee.

Mr. Shannon, we met a few years ago in other climes. You said then that we had to take into account, in this round of WTO negotiations, a wider range of activities, going beyond trade. We are talking about human rights and legislation concerning labour and the environment. Could you see a WTO agreement that might include provisions that are much more explicit than the current ones for these areas of activity, so that they would become parameters that are as restrictive as the subsidy rules at the WTO?

That's all, Mr. Chairman.

The Chairman: That's all?

Ms. Maud Debien: Eight questions. It only took four minutes.

The Chairman: All the time is up; there is no more time for the answers.

[English]

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): There were seven questions there, and it's hard to—

[Translation]

Ms. Maud Debien: Yes, in four minutes!

[English]

Mr. Bob Speller: I know that, but this is a very difficult area for a lot of people to understand, and to get seven questions at once and try to formulate all that within a five-minute period I don't think is fair, nor is it good to help us understand the issues. I can't even remember the last two or three questions. Let's do it a little bit more slowly.

The Chairman: Let's try to work our way through. I propose this. There are about seven minutes left for answering. I'm going to suggest, Monsieur Loubier, that

[Translation]

if there's enough time, you can have a turn in the second round.

Mr. Yvan Loubier: I'll ask the same questions.

[English]

The Chairman: Yes, you'll get a second chance. We have until noon.

I think you're right; we don't want to get too many questions on the table at once. There were three questions from Madame Debien. Why don't we start with those? They were directed to Mr. Wolfe, I think, and then Mr. Herman.

[Translation]

Mr. Robert Wolfe: If I may, I'll answer in English.

[English]

Those are really interesting and challenging questions. I could certainly take all the time left to try to think my way through them and then try to answer them.

The first question is really interesting: What have we got out of the WTO for Canada? Probably the biggest thing to say is that it's our trade agreement with the world. In some respects it's our trade agreement with the United States. It structures how countries understand what it means to have things crossing the borders. It structures what we think a tariff means and what we think dispute settlement means. So when Canadian companies do business with companies in far-off parts of the world, it is the rules of the WTO that structure important parts of that relationship.

More concretely, the area I've studied at some length is agriculture, where we—Canadians generally and the Canadian government—were in a real mess in the 1980s. Billions of dollars were being poured on the ground in farm subsidies. There were disputes with many of our trading partners.

Through the Uruguay Round, as Mr. Shannon laid out quite ably, we resolved that farm war. It's a ceasefire. It's not peace, as the chairman was pointing out earlier, but we do have a ceasefire in the farm war, and we did do that in the WTO. So from that standpoint, Canadians generally and in many particular sectors get a lot out of participation in the WTO.

• 1040

I want to move to your third question: What aspects of life do you regulate through the WTO? You regulate commercial transactions across borders and not much else. In regulating commercial transactions that cross borders, what you're really trying to do is sort out who should regulate in what domain and how different sources of authority—including different states, but also other sources of authority—should recognize each other's legitimacy and give each other some room to manoeuvre.

There are things that take place only within states and that do not easily affect transactions that cross borders, and they are simply not appropriate for the WTO. That's a very abstract answer. A more detailed answer would take me some time to think through.

[Translation]

Ms. Maud Debien: A concrete example.

[English]

Prof. Robert Wolfe: Something concrete? In my paper I suggested that maybe we should think of doing for culture something like the reference paper that was a key part of the agreement on basic telecommunications. The reference paper says that within certain domains, you regulate telecommunications any way you want. If you want to have a universal service norm, you have a universal service norm, and if you have some domestic tribunal, have whatever domestic tribunal you want, but make it one that other people can have access to.

So there are ways in which the WTO can help countries understand each other and sort out how domains work. That's an example, but I'm conscious of the chairman's worries about time, so I should perhaps not pursue that at this point.

My proposal on institutional reform is to create something like the interim committee or the development committee of the World Bank and the IMF, a smaller committee of ministers that would meet much more often than once every two years—at least a couple of times a year. It would have public meetings and public documentation. It would not be a decision-making body, but an oversight body, a policy-making body, a place to think about the direction of the trading system at the political level, in public, and frequently, which would help preserve a sense of momentum but also make how the organization thinks and works more accessible to the general public.

I'll stop there.

The Chairman: There's a minute or so left. Does someone want to take a crack at a response to Mr. Loubier's first question, and then we'll come back to his other questions the next time around?

Mr. Clarke.

Mr. Tony Clarke: I want to make it quite clear that we're not talking about Canada opting out of the WTO and walking away from it. What we're saying is that a play-making is going on about the new round that's taking place right now and over the next number of months. Whether or not there will be a new round, whether or not there will be a so-called millennium round, whether it will be a mega set of negotiations or it will work in a different way, this is the time in which those decisions are going to be made.

There have been enough warnings out there and enough problems out there about the whole agenda for economic globalization, and even some of the leading figures in the world today are raising questions. Maybe we ought to slow down a minute and say let's stop for a moment and ask ourselves whether or not we have to go headlong into a round that is going to include 10, 12, or 15 different major items on the table. This is a moment when some real leadership is called for.

It is absolutely wrong to say that a lot of developing countries want to jump into the basket and move into a new round. Quite the opposite is the case. They do not want to, because they've seen so many problems with the last five years. Therefore we need to—in their view, and I think in our view—evaluate what has happened over the last five years, really, critically evaluate its impact and its implementation.

Just 12 months ago, the United States was not keen at all about moving into a mega-round. Now it's changing its mind, and the big plays are going on between the EU and Japan with the U.S. on this. But that doesn't mean there isn't an awful lot of manoeuvring room that could be moved on. The question is: Where are we as a country, and do we not recognize what Ms. Barlow was saying about what has been going on across this country, with the incredible unease and angst out there about the way in which this agenda is unfolding on the global scale? Institutions such as the WTO are at the forefront of that.

• 1045

The second thing is, it's really important that we understand in this discussion the difference between GATT as an agreement, a body of trade rules, and the WTO as a political institution with political power and political clout.

What happened in all the rounds of negotiations of the GATT that Mr. Shannon, Mr. Herman, and others can refer to, right through the last 50 years.... Those are trade agreements that have been reached stage by stage. What happened in 1994 was something fundamentally different. Not only did we have a Uruguay Round of negotiations for a trade agreement, but also the world created something called the World Trade Organization, with enormous political clout.

It's that political institution, which has had five years of experience and has raised a great deal of problems, that we have to take a critical look at. I urge the committee to make a distinction between those two and to understand how important it is to focus on what the WTO is as a political institution. That's what we need to be aware of here.

The Chairman: Thank you very much.

Monsieur Loubier, we'll be able to come back to your questions in the next round.

Mr. Assadourian.

Mr. Sarkis Assadourian (Brampton Centre, Lib.): Thank you very much. I'll make my questions very short.

Since the collapse of the command-and-control communist economies in the 1990s, and with the start of WTO negotiations over the last five years, we have had 133 countries join the WTO. About 50 or so have not joined, such as Russia and China, which you mentioned earlier.

For the last 60 or 100 years probably, we've been subsidizing corporations here in Canada and the west. Now we are asking these countries not to subsidize their own companies because it's against international “norms” to subsidize Russian or Chinese farmers.

If I were a leader of one of those countries, how would you expect me to react to this, when you tell me not to subsidize? I'd say, “You've subsidized for the last 100 years. Now why have you turned the tables against me? I cannot subsidize my own farmers. They are hungry, very soon they'll be dying, but you ask me not to subsidize them.” We are playing unfair games against Third World countries by penalizing them or telling them not to subsidize. That's my first question.

The second question is this. Ms. Barlow and Mr. Clarke mentioned that globalization is a threat to our society and to the Canadian “way of living”. How can you prevent globalization when Bell Canada, for example, has the right to buy a German company, a German company buys Chrysler, and GM buys a Japanese company?

No longer are the interests of countries at the WTO; the interests of corporations are. What's the difference between corporations now, or the way they will be in the next century, and states in the 20th century?

When you go there as a country—Canada, Germany, or whatever—you don't present the interests of your own people, but the interests of the corporations you represent, the ones that happen to be in your geographical boundaries. That's the issue we have to deal with, because as we go to globalization, we're going to compromise something of our identity as a nation, as Canadian.

That's the balance we have to strike. Where do you draw the balance between the rights of workers, who have jobs and make money—which corporations provide—and the state's job to defend the identity and territorial integrity of a nation? That's the balance we have to strike if we can.

The Chairman: Thank you for those two very short questions, which will require only a two-minute answer.

Mr. Sarkis Assadourian: Three minutes and 50 seconds.

The Chairman: I'm not suggesting they're not good. They're excellent questions. Who's going to take them on?

Mr. Tony Clarke: I think we both will.

I have a few quick responses to your very important questions.

First of all let's be very clear that when we say globalization and the effects on Canadians, we want to make distinctions too. We recognize that this is a world that is globally interdependent. We know we're interconnected in a whole variety of different ways and that that's the way in which the world has moved. We know that.

What we're trying to say is that we're also creating institutions that are facilitating that process and could end up really destroying people's capacities to develop the economies that will meet their own basic needs. Therefore the whole question of the tension between what is global and what is local is a very important part of this whole discussion.

• 1050

Therefore any country that is going to participate in world institutions such as the WTO has to learn what it means to develop new mechanisms for dialoguing and working with their own communities and their own citizens and strengthening those local economies so that they don't get totally crushed in the overall process. This is part of the tension and the dynamic that's going on.

On the question of corporations, your point is extremely well taken. The real players are the transnational corporations, and governments go to these forums, such as the World Trade Organization, and end up defending our own corporate interests in relationship to other corporations. That's the name of the game. That's the problem. The problem is we are losing touch with the needs of citizens. We're losing touch with the needs of people.

Where your argument begins to break down, however, is with the assumption that most of the world's people are employed by the big corporations. That's not the case. It's smaller companies and small and medium-sized businesses that employ by far the most people in the world today. They are the biggest job-creators. Yet the way we are rearranging the system—especially with your first point about the fact that governments can no longer provide subsidies to small businesses and local businesses, or at least that's the direction in which things are moving—makes it extremely difficult to build up that local, domestic economy and therefore build up small and medium-sized businesses, which are the main employers.

We are working against that very objective by putting such an emphasis on creating a world investment, trade, and finance system that facilitates the movement of transnational corporations and forgetting about the small and medium-sized businesses that are the backbone of real employment in our own countries.

The Chairman: Mr. Herman.

Mr. Lawrence Herman: On the question Mr. Assadourian raised about new members joining the WTO, there clearly have to be transitional mechanisms to allow them to adjust to the new reality, and that's under negotiation now. Of course subsidies are only condemned internationally if they permit a product to be exported at the disadvantage of another country, so domestic subsidies are not under attack. But there have to be some transitional arrangements.

Secondly in that regard, for Canada, we want to make sure that Russia and China treat our people, goods, services, capital, and so on in a non-discriminatory fashion, and the rules have to be applied across the board so that Canadians are not subject to arbitrary measures in foreign markets.

On Mr. Clarke's point about Canada closing the door to a new round or not going full speed ahead into a new round, there will be a new round on agriculture. That is part of the deal. Mr. Shannon pointed out that we don't have a great amount of leverage within the agriculture sector to bargain a good deal for Canada. So if it's only on agriculture, our leverage is limited. Mr. Shannon pointed out that if we have a broader, more comprehensive round, then Canada will have some leverage in dealing with the agriculture negotiations.

Agriculture will be negotiated. It's on the agenda. What we're talking about is Canada's approach to maximize our leverage. What Mr. Clarke is suggesting, it seems to me, would reduce or minimize our leverage.

Finally, it is true that the WTO is not the same as the GATT, but I find it troubling to hear somebody suggest that international institution-building works to Canada's detriment. The whole point of Bretton Woods and the aftermath of the Second World War was to build the United Nations and other institutions such as the World Bank, the IMF, and the International Trade Organization, which is now the WTO. I'm surprised to hear the suggestion that there is some inherent flaw in the creation of an international institution.

It doesn't, Mr. Clarke, answer all of the needs. There are limits to what that institution was designed to do. But it does accomplish a great deal, and it is part of the development of public international law and institution-building that I think is quite remarkable. We have to be very careful about criticizing these efforts and this development, which, as Mr. Shannon pointed out, has been very beneficial to Canadians for the last 40 years.

• 1055

The Chairman: Thank you.

There are a couple of minutes left in this session. Did you have a very short question, Mr. Assadourian?

Mr. Sarkis Assadourian: I think Ms. Barlow wants to respond to the question.

The Chairman: Okay. That will use up this session and we'll go into a different round the next time.

Ms. Maude Barlow: There are so many things to answer here, but I guess I'll just stick to this last point.

We're not at all opposed to Canada being part of international institutions. We're very positive about Canada being involved in international environment agreements and international work through the United Nations. We would like to see a very different international body to deal with trade.

I want to give a little bit of history first. It's important to remember that the GATT came out of a failed attempt, 50 years ago, to introduce into the world a new international body that would oversee trade, but also with environmental—well, not so much environmental at the time—labour, social, and human rights concerns. Out of the Universal Declaration of Human Rights came the desire to introduce into the whole international trading and economic system a set of rights.

The United States opposed this, and all that was rescued from it was the trade aspect of it, which was the GATT. So the GATT grew as the other areas disappeared, and then the GATT led to the creation of this World Trade Organization, which still only looks at one part of the equation.

Our point is not that we don't want Canada to trade or that we don't want fair rules for our companies and for our products abroad. That's not the point we're making at all. What we're saying is that as that process took place, the only sector our government and other governments dealt with was the transnational corporate sector, the business lobby. It has left all these other concerns out, and now we're trying to scramble to find ways to deal with it.

Tony is not saying we should pull out. What Tony is saying is that Canada could play a role now, as I think some other countries are going to do and as our groups are calling for all over the world. It's going to be very coordinated. We're going to have a big citizens' millennium in Seattle. We will be there and we'll have a wonderful show. We think we're going to be more interesting than the official show.

What we are saying is that civil society of the world must be heard now. No longer can these negotiations be taking place behind closed doors and serving one sector of our economy. It's skewed, and people, small farmers, human beings, are hurting.

The Chairman: Thank you, Ms. Barlow.

We're going now into our second round. I'm going to keep everybody to their five-minute limit, so ask short questions and give short answers.

A voice: [Inaudible—Editor].

The Chairman: Five-minute periods is what we get. If you take five minutes to ask your question, your time is up.

I'll go back and forth across the room, so Mr. Penson first, then Mr. Calder.

Mr. Charlie Penson: I hope the clock didn't start when you were still talking.

The Chairman: Never.

Mr. Charlie Penson: Thank you.

The Chairman: I stop the clock when I talk.

Mr. Charlie Penson: I have two points. One has to do with a question I asked Mr. Herman in the last round, on which I really would like to have some input from the panel members, and that is the dispute settlement mechanism at the WTO. Even if you win, you often lose due to the fact that you may not be able to collect back the duties that were assessed you as a result of a trade action.

Let me just use the example of the hypothetical case of Canada discontinuing the softwood lumber agreement when the anniversary date is up. If that were to happen and the United States put a countervail on our forest companies, and then the Canadian government took this to the WTO, even if we won there, it's my understanding that there may be duties that would not be refundable over whatever period of time until that decision was made. Is there some way we can advance this process? If I'm wrong here, I'd sure like to know, but if it's accurate, is there some way we can make some gains this time around so that if you win, at least those duties are refundable as a result of the win?

The second point I want to make has to do with Mr. Clarke.

I would be really surprised if there weren't a lot of agriculture people in Canada who would be very disappointed in the idea you're putting forward that Canada not participate in this round of the WTO. Agriculture producers in the grain, oilseed, and beef sectors—essentially tariff- and subsidy-free—are looking for some big gains in market access and a scale-down of subsidies and tariffs, especially in the European Union, which spent $60 billion this last year. It's been very destructive for our farmers. So that doesn't seem consistent with an agriculture point of view on this.

• 1100

Those are the questions I have.

Mr. Gerald Shannon: Mr. Chairman, may I try the lumber question?

If in fact we decided not to pay the export tax any longer, the Americans would then put in place allegations of subsidy and charge duties. We'd have a right to go to the WTO and launch our case. If we won our case, then we would have an equal right to ask for return of funds spent after the decision was taken by the Americans to launch their case. In other words, you can regain what you feel you lost illegally. You cannot recoup what you paid willingly in the form of an export tax.

But once the WTO had decided that the Americans had no basis for subsidy countervail charges, from that point on they would be expected to refund—

Mr. Charlie Penson: Can I ask for clarification? Would the duty that would have to be paid in the meantime, until that decision is made, be refundable from the time the WTO makes the decision?

Mr. Gerald Shannon: Yes.

Mr. Charlie Penson: Or would it date back to the original application? That's the point.

Mr. Gerald Shannon: Maybe Mr. Herman knows more than I do, but my assumption would be that the funds would be refunded to the point when the Americans took what we regard as an inconsistent act—that is, an act inconsistent with their obligations under the WTO.

The Chairman: So, going back to your point, Mr. Herman, this then is the first time we've ever had an international institution with a court that can actually levy damages and make a country pay those damages—make a monetary award?

A voice: No, it can't.

Mr. Lawrence Herman: No, it doesn't do that. A panel will adjudicate the consistency of the measure with the WTO agreement. If the measure is found inconsistent, the losing country then is subject to implementing by correcting the measure, or, on the other side, withdrawing concessions if the party doesn't implement it.

The Chairman: In other words, the retaliation thing.

Let's get this straight. Don't let the committee here think the WTO panel is saying, “X country owes Y country $300 million; send a cheque.” It's not. It says they owe them, and then they have to try to find a way to take it out of their hide. Mr. Penson's point is exactly right, because when we had the fight with the United States over the chips, you remember, what were we going to retaliate with? We tried computer parts; that didn't work. We ended up retaliating on Christmas trees or something crazy.

That's the retaliation problem you're getting at, right, Mr. Penson?

Mr. Charlie Penson: Yes.

The Chairman: So this hasn't solved that problem. It's not a monetary award.

A voice: No.

The Chairman: Okay. We're clear on that point then.

Mr. Penson had directed one other question to Mr. Clarke, and then we'll move on.

Mr. Tony Clarke: First of all, I take your point very seriously that agriculture is supposed to be dealt with and that there was a commitment to go ahead with a new round on agriculture. I understand that.

We were making the point that there's an awful lot more they want to go ahead with, such as intellectual property rights, investment, government procurement, competition policy, and a whole range of things, let alone a forestry code that's being brought in, a fisheries code that's being brought in, and on and on. We were saying let's draw the line and say, “Hold it. Wait a minute. Let's look at what's happening out here. Let's review and evaluate what's gone on.”

Within the agricultural community itself, there are players—yes, Canadian players—who want this round and who want to get something out of it. There are also some players who are really afraid of this round and of what's going to happen, dairy being one of them. To listen to Mr. Shannon say, “Well, maybe we could just forget about marketing boards and move on”.... That's one of the major Canadian institutions of fairness that we would be giving up in this round if we went ahead at the pace that may be happening.

Before we go plunging ahead in anything, whether it be on the agriculture front or anything else right now, we should take a hard look at not only the gains and the pluses and the minuses, but what this will do in the overall picture regarding trade liberalization in general. We have to really take the time to work at those things.

It seems to me that if we continue to allow ourselves simply to jump on the bandwagon and move with the rush without thinking critically about what's happening, we're going to be walking into—

Mr. Charlie Penson: It's hard to think critically. They're going down the tubes these days.

Ms. Maude Barlow: But this isn't going to save them.

Mr. Tony Clarke: Yes. Maybe you should get rid of the FTA and NAFTA.

• 1105

Ms. Maude Barlow: Farmers all over the world are in trouble. Family farms all over the world are being destroyed by economic globalization. They thought only the great, big, huge farms, such as hog farms, were going to work, and now those aren't working either. This is the wrong model. It's the wrong model for the world. It's the wrong model for the earth.

Mr. Charlie Penson: It's the wrong model, all right.

The Chairman: We're going to now go to Mr. Calder.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman.

You'll be happy to know that during riding week, the Standing Committee on Agriculture spent from Monday to Thursday in the United States talking to the Senate and Congress about just exactly what we're talking about here today.

The Chairman: Were they trying to get them to get rid of their sugar marketing—

Mr. Murray Calder: Well, we went through a whole bunch of things.

I will cite three points in the conversation we've had this morning that I think are very relevant.

There is a lot of concern in the United States right now about a North American trade position versus a European trade position, especially with the inception of the Eurodollar, which they're watching very closely. There's also some concern about the carry-forward clause that was negotiated in 1993 with the European Economic Community, which I have a problem with.

They had their Agricultural Outlook Forum while we were down there, and we attended that also. One of the undercurrents that I found very interesting is there's a lot of concern about vertical integration in the agricultural community down in the United States.

When we were there, we also met with the International Trade Commission, and at that point in time I raised the issue that Angus Reid had just finished a poll last week saying that the United States is 10 years behind Canada right now in subsidy reduction. I'm very curious. Mr. Herman, you say we don't have a lot of leverage in agriculture. The fact is we are 10 years ahead of the United States in subsidy reduction. Are you suggesting that we just keep on going 10 years ahead of them all the way through?

When I challenged the International Trade Commission on this, they said they want to deal on a level playing field. I said, “Well, in my situation, a level playing field is when we are both equal. That seems to be level to me.” At that point in time I found them becoming very nervous on their position. They were saying they wanted everything on the table, and then I started challenging them about sugar beets, for instance. With our sugar industry here, we have a zero tariff, and they don't. Are they going to take that to zero?

My question is just very simply this. With the fact that we are leading right now in subsidy reduction, how do the other countries catch up to us? Do we tread water while they catch up, or do we keep going ahead in the lead, which I feel is unfair?

The Chairman: Mr. Herman.

Mr. Lawrence Herman: Well, we're talking about a couple of different things.

First of all, our relative position on subsidies in the agriculture sector vis-à-vis the United States is one thing, but we're talking about a round of multilateral negotiations where countries are going to put offers on the table and some deals are going to be concluded.

The point I was making wasn't whether we're behind or ahead of the United States. The point I was making was that in a multilateral round, if we're only dealing with the agriculture sector, Canada will have considerably less leverage than in a broader-based round, where the negotiations are a process of buy and sell, give and take, and cross-sectoral bargaining.

Mr. Murray Calder: But I am a farmer in my other life, a chicken farmer in fact, and what you're saying means a lot of difference to me.

Mr. Lawrence Herman: Well, I'm only talking about the negotiating process, and that's the way it works.

The Chairman: Mr. Wolfe, you were going to add something to that.

Mr. Calder has brought up a question that troubles us all. When we go into negotiations, suppose Canada had adopted zero tariffs on everything and we'd become the world's greatest free traders. We'd go into the negotiations and what would we have? We'd have nothing to give, so we would get nothing in return, presumably.

It seems to me that Mr. Calder is addressing the fact that the guys who go in here with the biggest clout are the ones who have the biggest problems, and they impose all that on everybody else, instead of the reverse. Is Mr. Calder right in that assumption, and if so, what can we do about it? I think that's the question.

Is that right?

Mr. Murray Calder: That's exactly it.

• 1110

Prof. Robert Wolfe: The first point is that if you're going into a room with an 800-pound gorilla, it isn't the WTO that creates the 800-pound gorilla. Geography gives us the United States as our neighbour. History gives us their attitude to what they think are subsidies and what they don't think are subsidies. At least in the WTO we get an awful lot of other people at the table who can help us talk to them. That's my first point.

My second point is technical. I'm not quite sure what they mean by Canada being 10 years ahead of them. In the agreement on agriculture, everybody tabled their new tariff offers and their commitments, and timings were built into that. There have been something like 800 notifications in the committee on agriculture at the WTO where countries are trying to review everybody's progress and implementation. I don't know if we've been going faster than we said we would at the end of the Uruguay Round, and I don't know if the Americans are going slower, but it would surprise me if that sort of imbalance existed.

I want to say—

Mr. Murray Calder: Excuse me just for a minute. One of the things the United States was not aware of—and I'll make you aware of it also—is that the average Canadian consumes $216 a year of American products on the average. The average American consumes $31 Canadian on the average. They weren't aware of that. Our question at that point in time was, quite frankly, “Why are you knee-jerking around one of your biggest customers, your second-biggest customer in agricultural products, right behind Japan?”

The Chairman: Excuse me. The numbers you gave, Mr. Calder, are numbers in consumption of agricultural products?

Mr. Murray Calder: No, across the board.

The Chairman: Okay.

Sorry, Mr. Wolfe.

Prof. Robert Wolfe: Those are interesting numbers.

Mr. Murray Calder: Pardon me; they're for agriculture.

The Chairman: That makes more sense. Okay, thanks.

Prof. Robert Wolfe: So that's not counting the Canadian-built minivan they drove in to get to the hearing where this point was made.

Voices: Oh, oh!

A voice: I think we do well.

Prof. Robert Wolfe: Yes, in some forms of trade with the United States.

I want to come at this question of subsidies. The big issue with subsidies is who's paying them. If you're a chicken farmer, the OECD would argue that you're getting some subsidies. If the House of Commons and the Senate, the Parliament of Canada, says you should be subsidized, that's great. The Canadian people said they'll pay you a subsidy. The question is, do we charge the rest of the world for it? Part of what the WTO is trying to do is say the answer is, “No. If you in Canada want to subsidize a particular sector, find a way to do it at home. Don't export the cost of the subsidy to other countries.”

The United States may be a bit more reluctant than other countries to play at that game. We might be a little bit ahead because the subsidies cost us so much and we've been, for good or bad, trying to get the deficit down. That's part of what we've been trying to do. That's one principle.

The other principle relates to what goes on, let us say, in a developing country. A question was asked: What do we say to the leader of a country who wants to keep subsidizing their small farmers? Well, in an awful lot of developing countries, they haven't been subsidizing their small farmers. What they've been doing is subsidizing urban consumers at the expense of their small farmers. A lot of what's going on now in changing policy is saying, “Let your own rural producers compete for your own urban markets.” Part of simply moving it towards this so-called neo-liberal agenda is simply moving in that direction. It's not a bad thing.

The Chairman: Thank you very much.

[Translation]

Mr. Loubier, you're back.

Mr. Yvan Loubier: Yes. I'll come back to Mr. Calder's question, because I consider it very important.

I would like to talk about the commitments that Canada made in the area of agriculture, like the other GATT member countries, in the eighth round, the Uruguay Round. We undertook to reduce, by a certain percentage annually, the subsidies that were causing trade distortions and even to eliminate some of them.

We increased access to markets, either by lowering customs tariffs, which replaced quantitative restrictions on imports for poultry and milk with customs tariffs, or by opening up the tariff- free market, to American products mainly. We are the most open country, if we look at the level of imports coming into Canada from the United States and Europe. We are the country that has made the greatest effort to cut subsidies, compared to Europe, the United States, Japan or any other country in the world.

The question I asked earlier follows on Mr. Calder's question. In one full round, will consideration be given to the fact that Canada already has some credits on its balance sheet with respect to lowering subsidies and opening up markets, in the agricultural sector in particular, or do we have to start from scratch again? Even though there are more subsidies and protectionist measures at borders in Europe, the United States, Japan or elsewhere than in Canada, will we start over again as if nothing had happened, as though everyone were on an equal footing?

• 1115

Will we do as we did during the Uruguay Round, that is, offer a little more than what the other countries are going to offer, and tear the country apart?

Mr. Wolfe, you have gone through this situation with Mr. Shannon. The East and the West got into a fight. It was milk and poultry against grains and oilseeds. Despite the fact that we currently have a positive balance sheet, are we going to rekindle our internal quarrels and start again in the same manner as during the eighth GATT round?

Regarding the second question that I asked earlier, Mr. Shannon spoke of greater flexibility in the upcoming negotiating round, in order to take into account human rights, labour rights and environmental rights. Can we expect that the millennium negotiations will see the start of efforts to bring together these aspects of human life, which could in the future become as important as compliance with subsidy rules? In other words, will compliance with environmental standards, labour standards and human rights also become an obligation that can be enforced by means of countervailing duties or the removal of all WTO concessions, as is the case now for other trade rules? Is that where we're heading? If so, it will be a good thing for humankind.

[English]

Mr. Gerald Shannon: On the first question, sir, you don't start ab initio on subsidies. Credit is given where credit has come. This process is an ongoing process. If in fact we have made more concessions than others have—which I tend to doubt, but if we have—then that would be taken into account in looking at where we go from here.

A lot of attention has been paid to the Europeans, and I must tell you, if you're looking for villains of the peace in the last negotiation, start there, with the long-standing practice of European subsidization of a whole range of products, which has hurt us both in our market and externally. The Europeans recognize that, and fiscal priorities have driven them to deal with it, so a bargain is being struck.

In terms of the United States, there's no question they have the same kinds of problems we have. Some of the subsidization they've put in place has been to counter the Europeans; some of it has been simply to serve the flavour of the month in Congress, quite often at our expense. But the main point I want to make is that we need to measure the trade negotiations on subsidization reductions over a longer period of time.

On the question of our supply-managed products, I know my comments did cause some reaction, but I want to say this. I spent a lot of hours in the last round dealing with Canadian interests on this issue. I went through it up and down. We discussed it in various groups involving western Canadians and eastern Canadians. There's no question we have a problem on our hands.

My suggestion is we've reached the point where we should recognize that our policy in support of supply management hurts first and foremost the Canadian consumer.

Secondly—and this is where it hurts us—we are going to find ourselves in a shrinking group of countries espousing import restrictions on a fairly narrow range of products.

Thirdly on that point, nobody wants to go bare naked into negotiation. I'll point out, however, that New Zealand and Australia have removed a great number of the restrictions they used to have on agricultural trade, and they're doing very well, thank you very much, in world markets.

The second question was: Is this a prelude to the WTO getting into other areas, such as environment or human rights? These are at the front of everyone's minds, and should be; these are important issues. Whether a trade agreement, being a contractual document, is the right vehicle to deal with these issues is problematic.

Agreements are being struck all the time in the area of environment, for example, that deal with particular problems. The problem usually is enforcing the undertakings people give. The WTO is a trade mechanism that has its own enforcement provisions. If you try to apply those to environment, about which the WTO knows very little, then you're doing yourself a disservice. What you have to do is bring agreements in the environmental area up to the same level of enforcement as we've succeeded in doing on the trade side.

Thank you.

The Chairman: Thank you. That was helpful.

Mr. Reed.

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Mr. Julian Reed (Halton, Lib.): Thank you very much, Mr. Chairman.

I don't want to get into a debate on the merits of supply management. We have very quickly zeroed in on one of the most contentious issues of trade. I will only comment that it is the domestic consumer who pays for supply management, and on the other hand, the argument is made that the consumer benefits in certain respects because of supply management. The farmer also benefits in certain ways because of supply management, because the farmer is not working for ADM the way the chicken farmer is in the United States. The farmer is still his own independent entity. To a certain extent, that's true.

Because tariffication has come in, my dairy farmers tell me it has allowed them to have time to readjust the way they conduct their operations. Certainly in the dairy business, that can happen and take place. I'm not so sure the same opportunities present themselves in poultry and these other intensive types of operations, because the efficiencies that supply-managed farmers are exhibiting are very, very high. So to suggest that because of supply management, they're not as efficient as somebody else is rather a non-starter. But at any rate, that is a debate that will enter the next round of negotiations, and it will certainly be a difficult one.

I didn't think I'd find myself agreeing with Tony Clarke, but he did mention something about small companies and the fact that small companies are the biggest employer we have. I would also say that small companies are the largest number of transnationals we have. To suggest that small companies are somehow confined to Canada and are the targets of the influences of W.R. Grace and ADM is also a non-starter, in my view.

I happen to have a little bit of familiarity with the mining exploration business through a brother who's been in it for nearly 40 years now, and there are about 700 mining exploration companies in Canada, many of them transnationals. They're set up in South America, in South Africa—they're all over the place—and the average complement of personnel is 15. You can hardly call that a big company.

The other comment that should be made on that is, in terms of trade—and this should be in the subconscious, I think, when negotiators are working—the opportunity always has to remain.... Large companies were once small, so the opportunity always has to be there for small companies to receive the same protections as large corporations and also to have that same opportunity to grow in the new, globalized world.

The fear that we are being controlled by large corporations has rather a skewed set of reasoning to me. The fact is that every corporation, whether they have 15 or three or 10,000 on their staff, needs to have the same kind of consideration, because the future is the future.

The question I want to ask is this. We say that somehow we don't have a lot of bargaining room at these trade negotiations. It seems to me we have a lot of bargaining room. The bargaining room, in my view, is that if we're ahead in our subsidy reductions, don't we have that option of equalizing the playing field in the other direction?

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The Chairman: You have exactly three seconds left to answer that question.

Voices: Oh, oh!

The Chairman: There were quite a few ideas in there. If you can make it quite short, take a couple of minutes, and then I'm going to go to Mr. Tremblay.

Ms. Maude Barlow: I want to repeat the original position that I stated this morning: this isn't about nation-states competing with each other. I would like for us to start thinking about what we're doing to the earth.

Canadian mining companies have among the worst reputations in the world. I have no idea about your brother or what company he's working with, but everywhere we go in the world, we hear, “Why are you people letting your mining companies come into our communities and do what they're doing?” We have a rebel reputation as international outlaws, because we have such low standards for how our mining companies behave in other countries.

So I don't want any agreement that helps our mining companies to go into South America or the Philippines and kill people. That's not what this should be about. We should be establishing international agreements that establish rules and regulations under which all these corporations operate, and every country in the world should have the right to implement and maintain strong, strict environmental enforcement. The WTO as it is constituted now is designed to cut down those regulations.

So this isn't about giving our great Canadian mining companies an opportunity around the world. I invite you to look at the statistics on what we're doing on global warming or the devastation of the world's water. Over 1 billion people have no access to clean water in this world. By the year 2025, two-thirds of the world are going to be living under conditions of severe water stress.

We have the wrong models here, Mr. Reed. What we're saying is that this WTO is promoting and protecting that model at the expense of indigenous farmers, small farmers, family farmers, ordinary citizens, social programs, the poor, and the environment of the world.

I absolutely agree with Gerry Shannon that we shouldn't be trying to put side deals into the WTO. We need enforceable environmental agreements. But it is very clear that the multilateral environmental agreements are not given precedence, in fact are overruled, by the WTO. We're already had rulings on this.

When Lawrence Herman says it isn't a free-for-all, I would remind us that the WTO is very young. All of the environmental standards of the world could potentially be challenged one day, particularly if we place the investment provision under chapter 11, like chapter 11 of NAFTA, where all the corporations of every WTO country in the world could sue any government for any new environmental law it brings in that it can consider harmful to its needs.

So I would really beg us to think beyond the borders of our country and to realize that if we really are living in a globalized world, we're responsible for the earth on the other side of the world. It's not just our own businesses that we should be considering.

The Chairman: Mr. Wolfe very quickly, and then I'm going to move to Mr. Tremblay.

Prof. Robert Wolfe: I want to say two things in response to Mr. Reed's comments.

On farming issues, what kind of farming do we want in 20 years? It's going to be more productive; it has to be. That is, productivity has to increase, because it's going to increase in the whole economy. How are we going to get there in farming? Trade agreements can be part of that process. We can't pretend that the structure of farming we have now is going to stay the same for 20 years, because no part of Canadian industry is going to be the same in 20 years. The OECD is telling us as a country that productivity is important.

Second, small companies benefit more than big companies from the trading system. Big companies can negotiate deals in any market they want to offer. If Bill Gates has a problem in Canada, the Prime Minister can probably make five minutes in his schedule to hear from him. That's not the case for small companies. So a lot of what this system of rules does is create a level playing field for small companies. It may not be the best playing field—that's why new negotiations may be needed—but small companies benefit.

There are other points I'll make, but maybe in a subsequent answer.

The Chairman: Thank you.

Monsieur Tremblay.

[Translation]

Mr. Stéphan Tremblay (Lac-Saint-Jean, BQ): This is the first time that I have participated in meetings of this committee, and I see that the debate is really taking place on two levels. A few minutes ago, Ms. Barlow attempted to establish a connection between globalization and destruction of the environment and increased poverty. However, I have the impression that there is also a debate over how to become more competitive within the World Trade Organization and how to defend our interests as best we can. I support the position of my colleague Loubier, who said, a few minutes ago, that not attending the WTO could be disastrous for us.

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My question is addressed to Ms. Barlow, Mr. Clark and perhaps even the witnesses sitting on this side of the table, who haven't said very much about the links between poverty and globalization. I have the impression that this issue is a source of concern to Ms. Barlow and Mr. Clark, who went so far as to hold consultations across Canada and found there was very serious concern, which I too share. I have questioned myself about this issue and I haven't yet adopted a position on it.

Ms. Barlow or Mr. Clark, could you imagine the World Trade Organization's one day becoming the supranational authority governing not only trade but also control of investment and labour and environmental standards? By discussing only trade, we limit its field of action enormously. Do you believe that the WTO should have more roles? If not, which institution should examine all these issues that, in my opinion, it is crucial to address?

You said that civil society seemed to be excluded from all these talks. I would like to know how you would envisage a civil society playing a larger role in all these issues. Thank you.

The Chairman: Ms. Barlow and then Mr. Wolfe.

[English]

Ms. Maude Barlow: I'm going to give some statistics on economic globalization.

[Translation]

Thank you for asking this very, very important question.

[English]

The 1998 United Nations Human Development Report, an annual report on poverty in the world, said the following.

The disparity in the level of income between the top 20% and the bottom 20% of the world's population is 150:1, and doubled in the last 30 years. The world's 225 richest individuals have a combined wealth equal to the annual income of half of humanity. The three richest people in the world have assets that exceed the combined gross domestic product of 48 countries.

The richest fifth of the world's people consumes 86% of all goods and services, while the poorest fifth consumes just over 1%. Wealthy Americans and Europeans spend substantially more every year on pet food than the total needed to provide basic health and nutrition for everyone in the world. Americans spend more on cosmetics every year than the total needed to provide basic universal education.

Europeans spend $11 billion a year on ice cream, $2 billion more than the estimated total needed to provide clean water and safe sewers for the estimated 1 billion people now without access to either. More than 5 million people, most of them children, die every year from illnesses caused by drinking poor-quality water. While billions go to bed without clean water, the average North American uses 1,300 gallons of water every day.

The Chairman: Let me stop you there, because Mr. Tremblay's question is a very important one, and we need time to deal with it. We've heard these statistics a hundred times in this committee.

Ms. Maude Barlow: That's a part answer.

The Chairman: The question is whether the World Trade Organization is responsible for those problems.

Ms. Maude Barlow: No.

The Chairman: That is the question.

Are you telling us that Canada shouldn't be there, and that if we don't go there, these problems are going to go away, that Americans are not going to spend $60 billion a year on pet food? We know that. We know it's crazy. But some people are going to come here and tell us the World Trade Organization is going to in fact improve the world in a way that will get rid of those problems. I presume Mr. Clarke is going to tell us it's not. We have to figure out which one of those two things we're going to buy into and recognize at the same time that maybe we have to have an environmental accord that's more enforceable, etc.

That's the question. We've heard that. Now tell us why we shouldn't be at the World Trade Organization if those are the problems of the world.

Mr. Tony Clarke: Let's take up Mr. Tremblay's question. The larger question is: Globally, can we work at the whole problem of poverty and reduce poverty in a systematic way, and can we overcome the human rights problems and begin to deal with the environment in a more comprehensive way?

If the question is whether there is a need for a global institution and a way of doing that, the answer is yes. Is the WTO the model for doing that? I would say absolutely not.

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Does that mean there isn't another model? We seem to have abandoned what the United Nations was all about to begin with and what it was set up to do in its various components and mechanisms. What's happened is the United Nations has unfortunately been subsumed under the World Trade Organization. The World Trade Organization is the driving engine of economic globalization today.

My concern is this. Mr. Tremblay's questions could be fundamentally addressed if in fact we started to rethink where we have been over the last 50 years with these institutions, why it is that the Bretton Woods model started in a certain way, why we are even thinking of a whole different approach that Ms. Barlow referred to earlier in a comment, and how we got off track and ended up going in this other direction altogether and therefore are now down the road where we really cannot address these problems. We cannot address these issues.

When you talk about trade liberalization, finance liberalization, and investment liberalization, you are not setting in motion a model that's going to redistribute the wealth of the planet. It's the exact opposite. It will not allow that to happen. The fact is what's going on here of course is the freeing up of capital to move wherever it wants to move, but at the same time it's also creating a concentration of capital in fewer and fewer hands and a concentration of wealth in fewer and fewer hands.

If we really want to get at the problem Mr. Tremblay addresses, we have to talk about new institutions and a new model, or at least look at the United Nations and ask ourselves how to start shifting the balance of power back from the World Trade Organization to the United Nations.

The Chairman: Thank you.

Mr. Wolfe, I'm going to give you a chance to take a crack at this question, and then I'm going to go on to the next questioner, because this is a huge area.

Prof. Robert Wolfe: I think you can see from the reaction of all three us wanting to get in here that while this isn't meant to be a debating forum between the two sides of the panel that's been called, we don't agree with what's just been said. That is probably obvious and doesn't need saying.

I want to say quite strongly—and it's really important to understand this—the WTO is an anti-poverty organization. That's what it's for. That's what it's accomplished with the GATT in the last 50 years. The world is a richer place and the wealth of world is a lot better distributed than it was 50 years ago.

Ms. Maude Barlow: That's not what the UN says. These are their own statistics. They say it has doubled in the last—

The Chairman: You had the floor. Let Mr. Wolfe answer the question.

Prof. Robert Wolfe: I didn't interrupt you. Let me carry on. Okay?

The Chairman: Don't worry. I'll do the policing. You guys just give your answers.

Prof. Robert Wolfe: In terms of what Canada can do, I wish I had the facts on this point, but it's—

Ms. Maude Barlow: I wish you did too.

Prof. Robert Wolfe: I wish you would not interrupt me. That would be kind.

The Chairman: Yes, please.

Prof. Robert Wolfe: It would be interesting to see how much progress we've made in implementing our commitments on textiles. Most industrial countries haven't made a lot of progress. That's one of the reasons developing countries have real concerns about the next round. We bought some of their participation in the last round by our commitments on textiles. They're good at textiles. In a lot of textiles, we're not very good.

As some of you know, I was once in the foreign service. My first posting was in Bangladesh. We've poured hundreds of millions of dollars into Bangladesh. One of the best things we've done for that country is buy t-shirts and men's dress shirts, and we should be doing a lot more of that, because that gives them a chance to integrate into the world economy.

That's actually what globalization is about. It's about all these new technologies. It's also about a whole bunch of countries that in the early post-war years weren't part of the trading system, and now they are part of the trading system. That creates all kinds of disruptions. It causes problems in the areas of human rights and environmental agreements. We have to deal with them, but the bottom line is these countries have to be bigger participants in the trading system. That's what the WTO can accomplish. That's why it's an anti-poverty organization. That's how we address those concerns.

The Chairman: Well, that's the debate. Thank you very much. That's very helpful.

Mr. Speller.

Mr. Bob Speller: Thank you very much, Mr. Chairman. We were just getting into some good debate here, and unfortunately our time is somewhat limited. I do want to take this opportunity to thank our panel. Each of you have brought forward some very interesting ideas.

Mr. Shannon, I know you were Chief Negotiator last time. On the question of supply management, which I heard coming up again and again, it's my understanding that we dealt with the issue of supply management last time around. I don't know why we keep talking about it around this table. It's not a question that's on the table. It's a domestic marketing system that we choose to use here in Canada, and it has nothing to do with distorting international trade. So I find it interesting that the issue keeps coming up. I don't think we should be talking about that issue, frankly, because we dealt with it last time around.

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In terms of the other issues, I want to thank Ms. Barlow and Mr. Clarke for their presentations. Both of them were interesting. I've noted your concerns, and as you know, as chair of the MAI committee last time around, essentially the themes are basically the same. They're interesting. Certainly they're themes that we as a government need to take across the country as we consult Canadians on this issue.

You talked about civil society, and I just want to assure you of our commitment to get out there and talk to Canadians. This is only one process here. I know the minister has plans to consult extensively, not only leading up to the meeting in Seattle in December, but certainly over the next two, three, or four years—however long it takes. We can't have a trade policy internationally that does not reflect the views of Canadians. It just won't work. I know it's our commitment here in this committee—and I'm sure all members would agree—that we want to get out and speak to not only big business and not only labour groups or organizations such as yours, but individual Canadians who might have concerns on how we trade.

I just wanted to respond to that one point of yours, because it's important for people to understand that their points of view are important to us as a government, and we intend to get out there and try to explore all the ways we can to hear them. As you know, given parliamentary budgets and such, it's difficult sometimes for parliamentarians to get out on the road, but we plan to do this. Any help you can give us in terms of referring us to people you know in particular areas where we will be travelling will be useful to us. Also, I look forward to hearing your report from your discussions, because that will help us in ours.

The Chairman: Thank you. I take that as more of a comment than a question.

Mr. Gerald Shannon: Mr. Chairman, may I comment on the supply management issue?

The Chairman: Very quickly.

Mr. Gerald Shannon: Yes, very quickly.

What we did in the last round was change the basis of protection for those industries that are supply-managed. In effect we took away.... Well, it was taken away from us; we didn't volunteer this. At the end of the day, quantitative limitations on the importation of these goods were replaced by extremely high tariffs, up over 200%.

So at the border, very little change was noted. The only change noted would have been a very marginal increase in the amount of products allowed in at the low end of the tariff spectrum. So this really does give an opportunity to start the process of adjustment, one would hope, for supply-managed sectors and the production of competitive industries in, for example, U.S. and other markets.

I happen to think that our dairy industry, and I know it's true that our processed food industry and poultry products, are doing very well and the outlook is not bad at all. But the point is, the issue won't go away as long as you're looking at a tariff level now that's in the hundreds of percent range.

Mr. Bob Speller: I think you would agree, though, that the domestic marketing of our products is something for the Government of Canada and the people of Canada to decide on, not an international body.

Mr. Gerald Shannon: Mr. Speller, I don't disagree that how we do our business is our business. What I'm saying is that under the system as it has evolved, the process in trade negotiations is to liberalize trade—that is, to allow a greater degree of trade and to allow countries to have their competitive advantages where they can find them.

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My own view—and this was borne out in the last negotiation—is that we're not situating ourselves to take advantage of export opportunities, because of the domestic regime we have in place. If we keep supply management, God bless us; keep it. But bear in mind that you can't have that on the one hand and have open trade in those goods, because it won't work. That's the trade-off you have to make.

You can decide that the period of time we have to look at these very high levels of tariff is the time to try to rationalize our production and rationalize our interests in this sector.

The Chairman: I just want to remind members that we're going to have a whole afternoon consecrated to agricultural issues next Thursday, so we should be able to get into that more thoroughly at that time.

I have six people on my list and six minutes to go. So if we're going to have a chance, I'm going to turn next to Mrs. Finestone and then go to Madame Debien, who had a very short question.

Mrs. Finestone.

The Hon. Sheila Finestone (Mount Royal, Lib.): Thank you very much, Mr. Chair.

An hon. member: That's the wrong clock.

The Chairman: Okay, sorry. We're better off than I thought we were. But I'm still confused.

Okay, Mrs. Finestone. Don't take the liberty of going for 15 minutes because of the clock.

Mrs. Sheila Finestone: I'll certainly try not to.

The question I want to ask is with respect to the creation of a new instrument that has become such a powerful influence in the world and on what happens in that world. Is there not some need at this point, when we've done this institution-building, to have some really concrete evaluative process that's a constant flow?

You've done some evaluation, which gives us a baseline, but in the long run, if you don't have a built-in evaluation system, you have no way of knowing if the inputs have been worth while and if the outputs have been costly or effectively good, bad, or indifferent. I find it rather amazing that there is no discussion about how you evaluate the impact of this new instrument.

If it grew out of GATT, fine, and if it grew out of something else, such as Bretton Woods, who cares? The question of how it impacts on Monsieur et Madame Tout-le-Monde in the long run is most important at this table and to the people who serve as members of Parliament in this room, so that we can guide our minister in our concerns.

If we have no baseline evaluation done and cannot tell whether Mrs. Barlow is right or Mr. Herman is right, or whether Mr. Wolfe's analysis is right versus Mr. Clarke's, how are we supposed to know? We have no facts and figures except quotes from the UN, which are totally outside the actual issues we're going to be discussing: agriculture and services.

And quite frankly, as my last point on this, isn't procurement part of services? So wouldn't it be part of the discussion?

I just find it very hard for me personally. To the people around this table, how can I make an enlightened decision when I don't even have any baseline information and data from which I can draw conclusions a mere four years down the road?

Having visited southeast Asia, Russia, and China and knowing what's now going on in the world, I'd ask why we are pushing ahead before we see a little bit of the evolution of those countries and a little more international stability.

Mr. Lawrence Herman: Mrs. Finestone, you've raised some very good points. Let me try to answer this way.

First of all, there's a wealth of information, more than you could possibly digest, on the WTO. The best thing to do is to have your staffers check out the WTO web site. In the WTO's annual report, there's a huge amount of information on what the WTO has done. It publishes an annual report. The WTO engages in a trade policy review mechanism. There's a lot of information. Sometimes it's difficult to put it all together, but the annual report that the WTO issues each year contains baseline data on the increase in world trade over the course of time. That in itself tells you something.

Mrs. Sheila Finestone: Does it show what the gross national product is in various countries and how it's impacted on the daily lives of people?

Mr. Lawrence Herman: Well, you have to go one step beyond that analysis and look at individual country experience, but there is a lot of information. The Canadian government puts out a lot of information on international trade. This has to be synthesized. It can't be put into a nice little package that we can present to you today, but there is a lot of information out there. I'd suggest that one of the best starting points is the 1998 WTO annual report. The U.S. government puts out a lot of information on the effect of the World Trade Organization.

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Let me comment very quickly. It's unfortunate—understandable perhaps, but unfortunate—that the WTO has become a lightning rod for a lot of discontent and anxiety that Canadians have with globalization. I don't think it's properly directed or should be directed to the WTO as an institution, which was designed to do other things.

Mrs. Sheila Finestone: Are you saying it has a public relations face that's a little confusing?

Mr. Lawrence Herman: Well, it may have, and that's something the current director general has been attempting to deal with.

We're in an information age where the Internet and e-mail access to information have enormously educated the public. Some of the international institutions, such as the WTO, which were shielded from direct public scrutiny, are just now becoming used to that fact.

The WTO as an institution has some way to go. It is not a perfect institution. But it behooves this committee to be very careful about pointing all of the world's ills at the WTO as if the WTO has a conspiratorial agenda run by the multinationals, which I submit is just not the case.

The WTO is a multilateral institution that grew out of the process of institution-building after the Second World War, and it was designed for certain things. It wasn't designed to deal with all the world's environmental ills or human rights ills. Maybe, as Gerry Shannon was saying—

Mrs. Sheila Finestone: Excuse me.

Mr. Chairman, I didn't ask Mr. Herman that. I specifically asked about baseline information. I'm glad he gave us some direction, and I hope the committee will be able to put the information together. I really feel it is important for us to understand where we are and where we're going.

Lastly, are there international agreements? You say it's only one. What other international agreements take precedence? Which club do I go to? Do I go to NAFTA? Do I go to the WTO? Where do I go to get a decision, given the circumstances you've been talking about and the powerhouse that this has become?

That's why you need some evaluation. What's the frustration? What's the fight? Where are the differences?

The Chairman: I've heard the world system described as a multi-tiered pagoda in which nobody can find the room into which to go, Mrs. Finestone. That was in a previous hearing we had on this subject, in a more romantic presentation.

Mr. Lawrence Herman: I can tell you that Bill Graham's former students would say he has all the answers, so we should ask him.

Voices: Oh, oh!

The Chairman: That's because I left the law school a long time ago.

Mrs. Sheila Finestone: It's very helpful to have him as chairman, I can tell you that, but we also have to wonder which side we have to balance.

The Chairman: Mr. Wolfe, very quickly, and then we're going to go to Madame Debien and Madame Augustine.

Prof. Robert Wolfe: One of the hardest things to do is to decide whether anything in government is a good thing or not, and it depends on what you think the purpose was.

If you want a baseline for the WTO and the GATT system, look at the world in 1946 and 1947, with poverty and threats of renewed conflict, and look at the era of growth and stability that some parts of the world have enjoyed. You'd have to say this system has a lot of accomplishments to it.

If you want to look at what's happened in the four years with the WTO, people say there have been 125 disputes, way more than the GATT, and this is really significant. During that period there has been $20 trillion U.S. in world trade and only 125 disputes. There are thousands of environmental regulations in the world. Only a few have caused disputes. So something about the system is working. That being the case, why do we have to move?

I just want to return quickly to the triangular tension as I described it in my prepared remarks. Ms. Barlow is quite right: for large parts of the world, the benefits haven't appeared yet. They aren't properly integrated into a prosperous world economy. The system has to keep moving forward. Adjustments have to be made. More people have to be brought into the system as full participants. You can't necessarily do that just by bringing them into an existing system. To some extent, the reason they're not in is that the system doesn't accommodate them properly.

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The kinds of things we call services are changing very rapidly. If we don't keep the system moving forward, those domains of life will actually start escaping the system, you'll start getting parallel tracks, and you'll get fragmentation. So there's no option on those sorts of things; the system has to keep moving forward.

Finally, agriculture isn't stable. A ceasefire is in place, but there are time limits that will make that ceasefire self-destruct if we don't move forward. I hate to invoke TINA, but to some extent we don't have an alternative. A series of interlocking forces requires the system to keep moving forward.

The Chairman: Thank you very much.

[Translation]

Ms. Debien.

Ms. Maud Debien: I would like to come back quickly to the matter of including or not including human rights, and social and environmental clauses in the WTO talks.

We know that the WTO is in the process of becoming the most important organization on the planet. It has powers to regulate and to impose sanctions, which the UN does not have. Even though we would like to bring all these issues before the UN, the UN has no power to impose sanctions or to regulate.

Everyone knows very well that, in our day, human rights, the environment and social clauses are directly related to trade issues. I believe that the WTO has the duty to concern itself with these matters, to take positions and to regulate these areas. Otherwise, we might as well give up completely on the whole question of human rights and social and environmental clauses. That's just an observation.

My question is very short and concerns the exception clause for rural communities. As you know, under this WTO exception clause, the Canadian government and the provinces are currently allowed to provide subsidies to certain businesses or certain sectors of economic activity in the provinces. Do you think that this exception clause should be maintained at the WTO?

Mr. Yvan Loubier: And that it will be maintained?

Ms. Maud Debien: Will it be maintained?

[English]

The Chairman: Mr. Shannon.

Mr. Gerald Shannon: With respect to the so-called social clause of issues, bear in mind that in the GATT you're dealing with a secretariat of 500 people, no more. When people talk about this huge organization, in fact it's not; it's a secretariat for the member states.

If the member states want more attention to be paid to some other issues, they'll have to take on expertise in those areas, because it doesn't now exist in the World Trade Organization. That's not to say, though, that people who represent countries in the WTO are not concerned about social issues. Obviously they are. We're all human beings. To the extent that issues can be refined for debate in various WTO fora, that is to the good. But you must bear in mind that you would not expect a group of technicians, in many cases, in a discipline such as trade, to be properly trained to deal with a whole bevy of other issues that are beyond their competence.

There's nothing wrong with a debate on the issue, but if you're looking for enforcement, it seems to me the enforcing body should have more of a constituency than the GATT and the WTO have for those purposes.

On your question about subsidy, if you're talking about non-trade-distorting subsidies, you can do what you want. The WTO doesn't regulate that. A non-trade-distorting subsidy is one of those that don't have to be looked at at all. It's the trade-distorting subsidies, which impact adversely with respect to exports or imports, that are the problem.

The Chairman: Mr. Wolfe, and then I'm going to go to Madam Augustine.

Prof. Robert Wolfe: Taking the second question first, the rural exemption, as you call it, is the so-called green box in the agricultural agreements. There's no reason that can't continue, but it's subject to the peace clause. It's protected from attack right now as an inducement to further negotiations. So you can't avoid further negotiations if you want to protect the green box.

On the social clause, the big mistake people make is to think the WTO has enforcement capacity. It doesn't. It can't enforce anything. People comply with the WTO because it's in their interest to comply with the WTO. There is a balance of rights and obligations. By and large, people comply because it works. If you start loading things on to it that weren't part of that bargaining of rights and obligations, the system will collapse.

Mr. Herman can correct me if I'm wrong, but the WTO almost never authorizes sanctions. People comply because it works.

[Translation]

Ms. Maud Debien: [Editor's note: Inaudible]

Mr. Robert Wolfe: That never happens.

Ms. Maud Debien: That's another matter.

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The Chairman: Thank you.

[English]

Ms. Augustine.

Ms. Jean Augustine (Etobicoke—Lakeshore, Lib.): Thank you, Mr. Chairman.

The thrust of my question was dealt with by Madam Finestone, but I want to thank you for the very interesting and thoughtful presentations. They have left me with a lot of questions and more avenues to pursue.

I have been trying to figure out, on the WTO structure chart, how all of these pieces would work and where the social issues would fall. Mr. Chairman, maybe we'll have some opportunity to study the chart and the structure of the organization.

I want to direct my question specifically to Mr. Clarke and Mrs. Barlow.

You talked about the lack of confidence in the new global managers of the new global economy, and you talked about the need for a new institution and a new model. Yet at the same time I think I heard you say we should not walk away, we should not opt out, but what we need to do is find some manoeuvring room and evaluate. I'm just trying to see how you can put all of this together—new institution, new structure, no confidence, and at the same time manoeuvre into a position where Canada can have some influence in slowing down the process, as you say, and asking for that review. Can you spend just a minute or so clarifying that for me?

Mr. Tony Clarke: I thank you for that. That's a very important question.

In terms of what we were trying to say about new institutions, obviously to walk across the street into another doorway and say we're going to create a new institution just can't happen overnight. And it may not be the way to go. It may very well be that we have in place on the international scene, through the United Nations, the kinds of mechanisms we need to deal with the kinds of issues we've been talking about.

The problem is we need the time to look at that and we need to look at it in a comprehensive way. This requires that we recognize that there is a great deal of anxiety, not just in this country. Believe me, it's not just in this country. It's happening in a number of European countries. It's happening in the United States. The very fact that fast-track can be turned back three times with this popular president is an indication of the groundswell of reaction that exists within the United States to these various problems. The same thing is going on in many of the developing countries.

What it would mean is, before we rush headlong ahead into this next round of negotiations—before we go ahead in agriculture and services and before we add 10 more things that need to be negotiated—maybe we should just stop for a minute. Maybe we should just evaluate where we are, pick up Ms. Finestone's kinds of questions, and have every nation take a year or two to really assess this situation. Every nation should ask where they're evolving and where they're going.

And each country should enter into dialogue with civil society. In this country, hearings are important, but we are also going to have to create some new mechanisms in this country to allow civil society to express itself in relationship to international trade, investment, and finance issues.

One way to go might be to really think seriously about a mechanism we've used in this country from time to time: a constituent assembly. Maybe there needs to be a way in which we bring people from different walks of life into a dialogue to really look creatively at these kinds of issues and ask, not just for 1999 or 2000, but for the next 10 years, where are we going and how are we getting at these issues? How do we dialogue with Canadians about this on an ongoing basis, not just when a certain crisis arises every five or six years?

This is the kind of thing we're talking about. We don't have all the answers, but we are trying to explore and search with fellow Canadians about this. We're also doing this on an international basis. One of the things that's been so clear from all of this is that we are finding ourselves working a great deal on an international basis with social and popular movements in other countries that are going through the same process as we are.

The Chairman: I'd like to finish that observation, Mr. Clarke, though we're going to have to wind up, because we're well over time.

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I'm a little bit astonished that we've sat all morning and heard tremendous.... It's been a terrific presentation. The panel has been very good. It's forcing us to try to come to grips with the problems out there, which are immense. But so much of what you've talked about are governance issues. We've heard that this is the most important institution in the world today, it's the one that works, it has enforcement to it, the UN isn't working, but this is working, etc.

Nobody, however, has suggested, as the Europeans did when they created a trade organization that was going to have huge integrating features to it, that we could establish a parallel democratic institution—that is to say, a European parliament. None of the speakers here this morning said what this institution needs is a parliament. It seems to me that is one of the things we could be doing as a committee and as a country.

If we want to do something about the WTO and have a practical suggestion, we should be going into these negotiations saying, “This body needs a governing parliament to accompany it the way the Europeans have adopted a European parliament, recognizing the huge integrating forces that are going on.” But nobody seems to talk about it.

I'm a little nervous, Ms. Barlow and Mr. Clarke, that from your side, you don't like the idea of a parliament, because you feel parliaments don't represent the NGOs the way they should. And I'm a little nervous that from the other side of the room, they don't want to see a parliament in there, because they don't want people representing other interests and the experts getting in and mucking around in this complicated world.

Nobody seems to want elected representatives to be a part of this. They just want, for other reasons, their own players to be in there. Is that a fair comment?

Mrs. Sheila Finestone: Mr. Chairman, I know we are short of time, but I have an additional question. I want to know how the bloody thing works. If you have 130 countries—

The Chairman: We're going to have a briefing on that.

Mrs. Sheila .Finestone: Excuse me. I want to know about the mechanics of negotiation among 133 nations.

And my last observation is that the Inter-Parliamentary Union ought to be the United Nations' parliamentary wing. I just thought you should know that. I've been moving in that direction.

The Chairman: Disregard all references to the Inter-Parliamentary Union, but the rest is—

Voices: Oh, oh!

The Chairman: Very quickly, Ms. Barlow, do you agree or disagree—

Ms. Maude Barlow: I have one last comment. I don't think anybody on our side said we would be opposed to any kind of representation such as that. That's a very big step you're talking about.

The Chairman: If I can interrupt your comment, Mr. Speller and I went to the 50th anniversary, and there was an NGO promoting a parliament for the WTO. There were only three parliamentarians at that meeting, and they were all Canadians. The American congressmen didn't go to it, and none of the other congresspeople or parliamentarians who were at that 50th anniversary bothered to attend that session.

It bothers me that there seems to be such a total lack of interest at the parliamentary level in an institution that, we are all agreed around this table—whether we agree or disagree with whether it's doing the right job—has immense power.

Ms. Maude Barlow: As a closing comment, if I could, I would like to add to what Tony said in relationship to Ms. Augustine's concerns.

We should take into account in this analysis the more than 500 free trade zones that have been built up around the world. Mostly young women and mostly women in developing countries are living and working under absolutely the most appalling conditions you can imagine. These free trade zones are very connected to these international trade agreements and to free trade. These free trade zones are part of the issue of poverty, and they're also zones in which it's expressly accepted that labour rights and environmental rights of the country don't have to be adhered to.

The last thought I want to leave you with is that an awful lot of us in the civil society area are beginning to talk about what shouldn't be in trade agreements. A lot of us are beginning to say that water, air, culture, seeds, and genes should come out of trade agreements altogether. I think you're going to find a growing movement within our side saying, “If we're going to have trade agreements, let's be clear about what they're allowed to deal with. What are the human and environmental issues that must be democratically governed and protected?” There's a way for some kind of compromise if we can start to have that kind of dialogue.

The Chairman: Thank you.

Mr. Wolfe, then Mr. Shannon, and then we're going to go.

Prof. Robert Wolfe: You're now getting to what is really the biggest problem facing international organizations, and it's not just a WTO problem; it's not just a trade problem. Global markets are a lot bigger than political authorities. Political authority is based on communities, it is local, and there are lots of reasons to think it should be local. Somebody said we should be deciding our supply management policies in Canada. I agree with that.

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The way to think about the WTO is not as an all-inclusive organization that has a great deal of power and can tell nation-states what to do. It's worth thinking about the WTO as an organization where what we seek to do is reconcile other sites of authority, to understand the scope or the domain of where people, states, organizations, or firms have authority and where they don't; and to respect that authority, to see it as an organization for reconciliation, not as a place for making authoritative decisions.

This means you want it to be more politically accountable. I've suggested that what you want to have is greater involvement of ministers. But trying to see it as all-inclusive and trying to get lots of political authority vested in the WTO is probably not easy and is probably the wrong way to go.

The Chairman: Mr. Shannon, 20 seconds.

Mr. Gerald Shannon: I'd like to say something quickly in response to Mrs. Finestone's question.

Bear in mind that the WTO really is run by ministers. The chair is a minister. It meets at ministerial levels as often as the ministers want it to, which is more and more frequent now than in the past.

The structure is a bunch of standing committees, the chairs of which are selected by all of us, as member countries. There are free-standing committees, such as the committee on the environment, for example, which has been going now for several years, trying to get to the root of how you deal with the intersection between trade and environment.

The whole process is bottom-up in that governments, through their representatives, put their best case forward and then negotiation begins. And as issues come closer to a close, more senior officials and ministers then come in and take over the process.

Mrs. Sheila Finestone: Are there 133 people there?

Mr. Gerald Shannon: In practice, no. It ends up, in practice, that you have perhaps 35 countries. That will be the group that at the end of the day will have much to say. A good many of them will be developing countries and a good many will be developed countries. But they'll be doing so not necessarily as spokespersons for groups, but for their own national interests.

The Chairman: Thank you very much.

I'm going to have to bring this session to an end. I want to thank all the panellists for a very helpful, very stimulating morning.

This is the beginning. The members have said they want to make sure we understand. It's a very complicated process, and we will make sure we get briefings on how it actually works. I agree with that.

Thank you very much. We're adjourned.