FAIT Committee Meeting

STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

COMITÉ PERMANENT DES AFFAIRES ÉTRANGÈRES ET DU COMMERCE INTERNATIONAL

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 4, 1999

• 0935

[English]

The Vice-Chair (Ms. Colleen Beaumier (Brampton West—Mississauga, Lib.): I call to order the Standing Committee on Foreign Affairs and International Trade.

This morning we have with us members of the Alliance of Manufacturers & Exporters Canada. This is further to our study of the World Trade Organization that we're reviewing now for Foreign Affairs.

I know that Peter Clark has appeared before our committee, but I'm going to review basically how we run this. I don't know how many of you are making presentations, but we generally start with our participants making a statement and then we go to questions, and we limit it to 10 minutes per person.

Who would be starting? Is there one person basically...?

A witness: There's four groups here.

The Vice-Chair (Ms. Colleen Beaumier): Oh, there are four groups? I'm sorry.

We have with us Pamela Fehr, policy analyst for the Alliance of Manufacturers & Exporters Canada; and Jayson Myers, senior vice-president and chief economist. We have Dr. Robert Kerton from Consumers' Association of Canada; Peter Clark from Grey, Clark, Shih and Associates; and David Runnalls from the International Institute for Sustainable Development. Welcome.

Who wants to start? Jayson Myers.

Dr. Jayson Myers (Senior Vice-President and Chief Economist, Alliance of Manufacturers & Exporters Canada): Thank you, Madam Chair.

[Translation]

Good morning. I am Jay Myers and I am Vice-President and Chief Economist of the Alliance of Manufacturers and Exporters of Canada.

[English]

The Alliance of Manufacturers & Exporters Canada is very pleased to participate in this opening discussion of some of the overarching issues as Canada prepares to join forthcoming negotiations with the World Trade Organization.

Our 3,500 member companies and their 4,000 affiliates are of course at the forefront of international trade, and they represent almost every sector of Canadian business, from agriculture and agri-food through to services across all manufacturing sectors. They represent 75% of the country's industrial output, 95% of our exports of goods and services, and 90% of business sector R and D activity in the country. These companies are at the forefront of global competition and the changes that competition means for Canadian business. They're investing and expanding their operations in commercial activities and new markets around the world, but at the same time, they're becoming more and more dependent on goods and services, on capital, on skills, and on information that they're importing and sourcing from international sources.

So our membership certainly does recognize the importance of globalization, the importance of rules that govern our international trade and investment relationships around the world, and they view this upcoming round of negotiations within the WTO as very important indeed.

Our members tell us that trade liberalization poses a number of challenges to their business, but at the same time it offers them more opportunity than they've ever had before. Last summer the alliance carried out its annual strategic issues survey among its membership. We had 572 companies respond to the survey, a real cross-section, I think, of the Canadian business community and export community, and a fairly accurate reflection of the size of Canadian business as well. Over 85% were small companies, and that I think is very indicative of the growing number of exporters that are small companies and that also have a stake in the WTO. The results are pretty instructive.

With respect to NAFTA in particular, 64% today view free trade as more of an opportunity for their businesses, while 5% view it as a threat. Now, that has changed, I have to say, over the past five years. Five years ago something like 30% of Canadian companies would have viewed free trade as a threat to their business, and probably 40% as an opportunity.

• 0940

I'm afraid you'll have to excuse me. I'm off to India and I've received some tetanus, polio, typhoid and hepatitis A shots yesterday, so if I feel a little fevered here, it's for good reason.

Seventy-nine percent of companies support the negotiation of a free trade agreement with the Americas, while 76% feel that Canada should enter into such an agreement with Europe and 58% would support free trade with APEC. Certainly there is much more support among the business community here for expanding free trade relationships on a regional level and also, I think, expanding access into markets around the world at a multilateral level at WTO.

We also asked companies what they thought had been the effect of free trade upon their business. This has been interesting as well. Of course a number of companies—56%—say they're selling more into the United States, 42% are purchasing more from the United States, and 17% are investing south of the border as a result of free trade. More companies are doing business with Mexico also, but of course you'll understand that this is a relatively small portion of the total. But 48% of our members—and this is surprising—also tell us that as a result of free trade they're selling more within Canada, 37% are purchasing more from Canadian suppliers, and a full 43% say they're expanding their business within Canada because they have more open market access now across North America. Very encouragingly, 20% report that they are doing business outside of North America as a result of NAFTA. They're purchasing more in the way of goods and services and technologies from other countries—from Europe, from Japan—as a result of free trade here in North America.

I think that really does show that free trade—first of all, the free trade and more open market access—generates economic growth. It also shows, I think—and this is what we believe to be a principle of where Canada should be going forward in trade negotiations—that we should be looking for win-win solutions here. I think the experience we've had with NAFTA, and with WTO to the extent that it opens up markets—is a win-win for all Canadians. We're also very sensitive to the fact that this is not an easy win-win, that a tremendous amount of restructuring has gone on at the same time, but in the long term free trade, more open market access, is good for the Canadian economy and good for Canadians.

I should also say that while 72% see the United States as the market for future business growth.... Particularly for small companies, the focus is very much on the economic relationship with the United States and very much on the trade problems that exist with the United States—problems such as the Buy America program, such as some customs problems at the border and, yes, even the threat of retaliation by U.S. trade authorities that arises from time to time and unilateral trade action by the United States. All of that is seen to be a threat in terms of our bilateral relationship, but other multilateral problems and issues are also arising. That simply reflects the fact that Canadian companies also increasingly see other markets outside of North America as prime markets for their business.

Over 15% of our members identify markets in South America—particularly Chile, Argentina and Brazil—in the European Union, in Southeast Asia, in China, and in Mexico. These are also prime markets for Canadian companies, either for reasons of expansion or for exports, or indeed for imports and joint ventures. We are looking more and more at a global economy, I think, even from the point of view of small business here. For that reason as well, the WTO negotiations are particularly important.

The findings of our survey are backed up, of course, by Canada's export statistics themselves. Since 1989 Canada's exports of goods and services have doubled in real terms, in constant dollar terms, while domestic demand has risen by less than 20%. It is the export market that's creating the economic growth in this country.

• 0945

Today the market for Canadian manufacturers is primarily outside of Canada: 65% of the total value of industrial production in this country is exported today, and probably around 55% of that flows into or through the United States. About 60% of all of the manufactured goods purchased in Canada are imported into this country. Our exports of commercial services such as computer and software services, engineering and architectural services, R and D and technology transfers are all growing by more than 20% a year. At the same time, Canadian businesses are investing record amounts in the establishment of new business operations abroad, and that outward direct investment today is what will eventually lead to more export opportunities on the part of Canadian producers.

The point is that the Canadian economy has prospered as a result of trade liberalization, but we also have a growing and very important stake in ensuring open access for Canadian businesses in markets around the world. I think that should be the primary focus of Canadian trade policy as we enter into the next round of WTO negotiations, opening up access to markets not only for goods producers but, of course, for service producers as well. We don't want to minimize the impact international competition has had, and continues to have, on Canadian business. There's been extensive restructuring across the economy, and it hasn't been easy. Many companies have gone out of business because they've been unable to compete. But today I don't think there's any going back. Globalization is a fact of life for any business operating in Canada. The international competition today is not something just in export markets; it's right down the street today, and we have to deal with that.

As the record of the last 10 years has shown, Canadian companies cannot simply rely on cost competition alone. Our advantage is specialization, the degree to which we can add value, that we can specialize our products and services, that we can customize those products and services, the degree to which we can add value to customers. That's what's incredibly important today, and that also means domestic policy has to be brought into line with our trade policy to make sure we have the best innovation, the best environment, the best climate for investment here in Canada. That's a very important part of our success on the international stage.

It's in that context that I think we should look at Canada's participation in the upcoming round of WTO negotiations, and I think it does take on a special significance. We have an increasing stake in the rules governing international trade in goods, services and investment because of the importance of direct investment of services, of innovation. We have a stake in extending negotiations beyond the traditional scope of international commerce covered by WTO rules to build a more secure and certain framework for the treatment of services, intellectual property, and investment activity. Almost every aspect of domestic policy today has implications for international trade and investment, as well as for global issues related to the quality of the environment and, of course, respect for human rights. I think we have to ensure that our domestic policies are in line with our commitments to WTO, and we acknowledge that to the extent that environmental and other social issues affect international trade investment, they should also be an integral part of forthcoming WTO negotiations.

Let me very quickly respond to some of the key questions you've raised in the discussion.

What has Canada achieved under the WTO so far? Basically, we've built a set of rules governing international trade in goods and the beginning of international agreements on the treatment of services, particularly telecommunications and financial services, government procurement practices and intellectual property.

The problem is, though, that these achievements today don't go far enough to respond to the problems Canadian exporters are facing in world markets or in the changing nature of competition itself. We think there is much to do yet. I am continuing the work of the WTO in lowering tariffs, eliminating export restrictions and export-related subsidies in the goods sectors that are covered by WTO so far, but also strengthening accountability and dispute resolution mechanisms within the WTO itself. The four primary areas of interest for the alliance in expanding the scope of WTO rules are the treatment of services, agricultural and agri-food products, intellectual property rights, and government procurement.

• 0950

We think Canada's negotiating priorities should be based firmly on the actual problems Canadian companies face in doing business in international markets, which may not necessarily be covered within the WTO agreements themselves. But the first stage for preparing for these negotiations should be a general survey of Canadian exporters to identify outstanding problems. Some of these problems I think can be dealt with on a bilateral basis, on a regional basis. Some of them can be dealt with on a WTO basis. But it's important to start at the ground level and work up to identify the actual business problems as the basis for identifying defining priorities.

There are a number of principles that we think Canada should champion in WTO negotiations. First of all, Canada should champion more open access to world markets for Canadian exporters and investors; assurance of a level playing field for Canadian companies operating abroad; greater certainty with respect to the application of WTO rules and regulatory governance within member states; greater transparency in the treatment of trade and investment; more expeditious resolution of trade disputes; focusing on WTO's role as a body governing rules for international trade and investment; acknowledging that WTO should deal with environmental and social issues insofar as they affect market access and the treatment of trade and investment; and strengthening the capacity of other international institutions to deal with government with global, environmental and social issues.

Finally, how should Canada approach the negotiations process? In summary, we believe this should be done first of all with a very good understanding of actual business problems and current business conditions; second, with the strong backing of Canadian business and particularly our exporting community. I have to tell you that is going to be a difficult challenge in itself. Many small businesses would not be able to tell you what WTO stands for, let alone tell you how the issues that are being negotiated in the forthcoming round of WTO negotiations affect their business. So I think there has to be a very strong communication strategy, a strategy of engagement built into this process of defining priorities for the government as we proceed in WTO negotiations.

I think we have to have a strong mandate of priorities championing Canadian exports and investment abroad, a strong focus on WTO's basic role in setting the rules for international trade, and recognition that domestic policies have to be designed in line with Canada's WTO commitments. I know that's very broad and we can get into the specifics later in the discussion today. But let me say that the alliance is committed to assisting the Department of International Trade and this committee in identifying the problems and priorities of our members, of exporting companies across the country. We'd be delighted if your committee would accept our invitation, as you travel across the country, to meet with our members. We'd be very glad to host you within our divisions at the provincial level so you can hear from our exporting companies firsthand on what their trade problems are.

Thank you.

The Vice-Chair (Ms. Colleen Beaumier): I think that would be very useful for all of us.

Dr. Kerton.

Dr. Robert Kerton (Chair, Trade Committee, Consumers' Association of Canada): Thank you very much, Madam Chair. I'm Bob Kerton from the Consumers' Association of Canada and from the University of Waterloo. I've also served as chair of the board of the North-South Institute, which as you know has done some very able research on third world components of your discussions.

Hon. Sheila Finestone (Mount Royal, Lib.): Just a second, please, Dr. Kerton. Do you have a paper?

Dr. Robert Kerton: Yes, I do have a paper. It should be distributed.

[Translation]

There is also a French version.

[English]

The Consumers' Association of Canada is a national organization made up of a liaison of local and provincial organizations across the country. We have a history that dates to 1948, and much of our earlier activity was in the trade area. In fact, the association fought very hard to have the tariffs on children's shoes removed through the 1940s, 1950s to 1960s, and on children's clothing. We also participated in the free trade debate. I think perhaps we were a voice of reason in a discussion that had been polarized between people who thought free trade was the greatest thing since sliced bread, and those who thought that doom and disaster would eventuate.

We belong to the international organization called Consumers International. This is a group of consumer organizations from over 160 countries. Many of these countries are in the developing world. CI maintains an office with considerable expertise in trade in the United Kingdom. In my own experience, I worked with that organization in the Asia Pacific office for some time in the 1980s.

• 0955

We're especially pleased to be here because it's so rare—I think this is unique—for a citizen's organization to be asked to appear before the committee. We've argued, unsuccessfully, that there should be some method for getting citizen input into the discussions of WTO, and that the system that's dominated by experts leaves out some really crucial elements.

So I want to address two components, one about—this is from your document—how Canada's national interest and the interests of smaller, weaker economies can be safeguarded, including those in the financial system; and secondly, whether the domestic consultation process can be improved. I want to make some specific recommendations. Those are in the handouts.

But just to indicate why it's so important to get some consumer orientation and discussion, I ask you to look at the sheet I've handed out, which gives the data in English and in French on some problem exports. If you're used to—

Mrs. Sheila Finestone: Excuse me, I think we'd better get the sheets.

Dr. Robert Kerton: Good idea.

Let me preface it by saying that we've had consistent problems throughout the movement from the domestic economy where you grew your own yams and ate them, where you didn't cheat yourself, to a situation in the 1700s where we began, mostly in the U.K., to develop systems for making sure the products that were exchanged in the marketplace wouldn't kill you. So we developed a whole lot of institutions in the western countries, like the Food and Drug Administration, that can guarantee that most of the things that are actually exchanged are good for you, or at least don't harm you. They may be useless, but they're not absolutely harmful.

The World Health Organization did a study of 111 developing countries to see how many of that group had a functioning protection agency that could guarantee that imports of pharmaceutical products and agricultural products were in fact safe. The conclusion was that only 9 of the 111 developing countries had a health agency that was effective, that had any kind of lab or scientific expertise that could tell whether a product was harmful or not.

This harms consumers directly because, if I take an example I was involved with, clioquinol was distributed by a major multinational, and it blinded and paralysed—lower limb paralysis—more than 20,000 Japanese in the 1970s. In the 1980s when the Consumers International was trying to get it off the marketplace, it was still available in more than 60 countries, and it's still available today. The major producers agreed to withdraw it since it didn't have many benefits and had great harms, but it was taken up by others.

Take a look at the table 2 that I've distributed. Let's look at India. I'm very proud to be a member of India's national consumer research institute. India has 44 products that are non-steroidal, anti-inflammatory drugs. Of those, 13 are on a list that the World Health Organization puts out as being essential drugs. That's a very useful list. But if you look at the far-right column, 20 brands out of 44 are banned in industrial countries. So you say, wait a minute, we're looking at a marketplace here that has 44 products on it, 20 of which are actually banned by countries that have health protection agencies that work, so why would we be trading goods like that?

I draw this to your attention because it illustrates why you have to have some consumer input into these trade discussions. If you look at the other table, table 1—this is my own study from 1990 I'm quoting here-and you look at the last total there, banned and hazardous products by product category, there are 8,063 products that are actually exchanged in the world that are banned in countries that have effective ministries for consumer protection. So you say, why on earth would we be distributing products like that? This list has been updated. The 1994 list gives 11,000 products that are banned. And to get on this list it must be a product that is actually in exchange. In other words, if you withdraw it from the marketplace it goes off the list.

• 1000

So when you look at extreme documents like the multilateral agreement on investment, you ask, where on earth in the MAI is there any statement that people are responsible and that they'll be delivering products that actually work, products that aren't banned? Where is the balancing side of it? You can't get the balancing unless you get some consumer input.

I might point out to you that Canadian exporters are actually harmed by this. If you're exporting products that do work, the last thing you want is to try to compete with a whole lot of noise in the marketplace and products that are harming people—not giving the marketplace a black eye. So that's the reason for participation.

I'll skim through the document I've handed out. The participation methods I outline on page 1 range from this tokenism and Peeping Tom approach through to full membership, and of course we know the ITAC committee has one consumer on it. All of the people who've looked at that committee with a public-spirited point of view say that this one representative is swamped by the other interests there. There are official studies that recommend increasing that.

It's the same with the sectoral advisory committees. Those sectoral advisory groups have very few public representatives on them. I'm not sure that's the only way we should be going.

What I've done in the next section is to say, suppose you wanted to look at these trade agreements as if they were a consumer product, like a tire; you're going to test the tire. If you're going to test the tire, you have to know what it is you want to see in a tire. Is it wear, or durability? You have to identify the characteristics. If you ask that question, it's very helpful—I've given some of that on page 5 in the English document.

You would identify that a good trade agreement would have tariff reduction. More importantly, it would talk about reducing non-tariff barriers. It would avoid trade diversion. It would have some arrangement for passing along the gains to consumers, an effective dispute mechanism, and consumer participation.

If you identify what you want to see in a document, then you can rate the documents, and you don't get the same answer that the zealots conclude, either pro or against these agreements.

So what shall we do to improve consumer or citizen representation in trade discussions? I think the most useful suggestion is the first one I recommended, the use of the Canadian Standards Association model. The CSA, in Canada and elsewhere, absolutely requires representation by all affected groups on any of its standard-setting exercises. The result is that this is the one area in trade discussions where consumer input has been successful, and Canada is something of a leader. We've provided some international leadership because of the arrangements we make there. That's something we should be doing with all the rest of our agreements.

The second problem is the free rider problem. It's quite impossible to finance these public interest interventions.

I'll give you an example. Last summer the CITT, the Canadian International Trade Tribunal, had a hearing on baby food, and there wasn't any way to finance a consumer participation into that. So what do you have? You have the big firms arguing with and against each other. From my point of view, there's a really important consumer issue there. The CITT, in its preliminary ruling, had created a monopoly. So you ask, why on earth are we using the public institutions of Canada to create a monopoly? It's still in place.

I stayed up from about 10 p.m. to 4 a.m. one night and wrote a brief, and presented it on my own. This was an unfinanced brief, of course. Making the argument about competition again, I found out there was no way to finance my trip to Ottawa to appear before the hearings. The next thing that happened was that I got a subpoena—it's not the first time that has happened to me. Now I have my regular job that I'm trying to do, and I have to appear before this hearing in Ottawa to make an oral presentation. So I did that. But I point that out to you to say, look, it's tough when you have no funding for public interest intervention. The fact that it happens at all defies economics. Every time I do anything like that, I lose time, and I usually lose financing too.

• 1005

On the third problem, foreign affairs and trade ministry measures, I'm not really recommending something to you, I'm asking for your help. I think this committee has a lot of experience and some astuteness in how to create some consumer and citizen participation in the trade process. So I'm asking that when you come to your final report you think about ways of recommending not only that your committee make arrangements to have reliable research of consumer opinion, particularly from the third world countries and Consumers International, but also from Canadians, who are certainly affected.

Also, consider how you can get something to work with the department itself so that this is regular input. Some people recommend that Foreign Affairs and International Trade create a consumer unit whose responsibility during their working day is to look after those kinds of consumer inputs. That would prevent the absurdity of the multilateral agreement on investment coming out with absolutely no citizen input in it, no balance whatsoever.

So that would be one recommendation. I'll leave it to you.

On the fourth one, increased representation in ITAC and the SAGITs, that might have some use.

The fifth one is enhanced standing for the office of consumer affairs. In Industry Canada there is a small office that does look after consumer affairs. They don't have any finance either for themselves to intervene in trade discussions or for other groups to.

So let me conclude there. Thank you very much. I can't tell you how surprised I am to have received the invitation. Having written some things over the years asking for consumer input, to have it actually happen is a total surprise to me.

The Vice-Chair (Ms. Colleen Beaumier): Actually, Dr. Kerton, I have to tell you that this has been terrific. I don't think we've had before us anyone who was representing the consumers and bringing up issues that many of us have questioned in the past but the the answers to which have been sort of glossed over. I think I speak on behalf of many of us here in saying that we really appreciate your presentation.

Dr. Robert Kerton: I'm very happy to be here. I know solutions can be found that actually make everybody better off; it's just that if you don't ask for some participation, you get this eccentric view that all that's involved is somebody who can finance participation in Ottawa and lobbying, and so on.

Thank you very much.

The Vice-Chair (Ms. Colleen Beaumier): Thank you.

Mr. Clark.

Mr. Peter Clark (Grey, Clark, Shih and Associates): You don't have my paper yet because I revised it in light of discussions I listened to on Tuesday morning, and I will try to answer one of Mrs. Finestone's questions in my presentation this morning about how the system works.

Mrs. Sheila Finestone: Really?

Mr. Peter Clark: While my written presentation is fairly extensive, I thought I'd touch on a few things this morning with respect to how the system works and with respect to a number of the things you've seen in the papers these days about the WTO and how it affects Canadians in a rather specific way.

I would like to say that I was pleased to see the consultation process extended in the way it's being extended, because if there's one thing we learned from the MAI debate—it really wasn't a debate; it was the minister trying to play catch-up with people who were debating—it was that we really do need informed discussion of these issues with all elements of Canadian society.

I don't know what the term “civil society” means. I've been trying to figure it out, and in my view we're talking about all Canadians. Somebody said ordinary Canadians, and I said there's no such thing as an ordinary Canadian. Canadians aren't ordinary; Canadians are different. But the buck really stops with you guys. You represent Canadians. You represent civil society, and I'm glad that the structure is going to permit you to have the input and to go across the country.

What I've been telling people I represent—and I represent farm groups, provincial governments, foreign governments, business corporations—is that international trade is an issue that has moved from the boardroom table to the kitchen table; and wake up and smell the coffee, because if you don't, you're going to lose. I think that's the best message that my friends in the media can send out to business groups, that if those of you who are benefiting from international trade don't come to these committees and tell your story, then somebody else's story is going to set the agenda.

Why is the WTO important to Canada and to Canadians? First, there are 6 billion consumers out there in the world and we haven't even tapped them yet, and if we're not at the front lines, somebody else will be.

The second thing is that we are the only country that has totally free access to the United States market, our biggest market that accounts for so much of our trade. But every time the United States sits down at the table with somebody to negotiate a free trade agreement, whether it be with ASEAN, in the Caribbean, or the Free Trade Area of the Americas, they're diluting our access, which we've already bought and paid for. We've become competitive on a Canada-U.S. basis. We have to use that competitiveness to continue to grow and to prosper.

• 1010

The key words for your consultations have to be productivity and competitiveness. If we aren't productive and competitive, then we're going to move back in the ranks of world trading nations. The OECD has sent us a message. They say that we look pretty good now, but five or ten years down the road we may not be quite as good. If our dollar strengthens to where it should be, we're going to have even more adjustment problems. So we have to play the game.

I'm not going to get into a lot of statistics. The fact of the matter is that it should be blindingly obvious that a country like Canada that has a very small market has to export to survive, and we need rules that make sure the game is a game of right and wrong and not of big and little. It still is a game of big and little, as we see in the newspapers this morning.

So in terms of the discussion, transparency is of paramount importance. I recommend that all submissions to you should also be made available in an electronic version, and they should go on your web site. I found that the review committee that's examining the Export Development Act has done this, and it's extremely helpful to be able to go to their web page and see what everybody said. This is essential. If you're going to have small groups within society that aren't funded the way businesses are providing informed, meaningful input to you, they have to have access to what other people are saying. They have to deal with facts and not myths.

The other morning Mrs. Finestone asked how the negotiating process works with 130 countries. Some of the countries that are the most interested in an issue will file discussion papers that express their views. The secretariat combines a number of discussion papers into broader discussion papers, which are discussed in a broad group. Differences are identified, and further discussion papers are prepared, which the secretariat turns into negotiating texts. Those texts will contain a variety of options on particular issues. Then these differences are refined in further discussions in smaller and smaller groups until they result in a consensus text or a text that is close to consensus. Then the groups get together and try to narrow down the differences and come up with a clean text that everybody can buy.

As a practical matter, in past negotiations that process has been largely driven by the United States and the European Community, with more input from Japan and Canada than from other countries. Ambassador Shannon told you the other morning that developing countries are going to play a bigger role in the process this time around, and he's absolutely right. It's not going to make the process any faster, but what it will do is make it fairer and more responsive to the needs of smaller countries.

I worked in the GATT and WTO environment for many years. I'm a strong supporter of the system, but there are problems with it. One of the problems is that it favours developed countries over developing countries and big countries over little countries. In this context you can't really characterize Canada as a little country because we're a major trading country. But we still do have problems in that process, and we are going to have to stand up even more for our positions. The process you're going through, which will identify priorities and concerns, will much better equip us to make our views known very early on in the early discussion papers. Canada really has to be active at that stage if we're going to survive.

I'm going to switch around a little bit to dispute settlement. A number of members of Parliament from different parties have asked me why Canada does so badly in dispute settlement under the WTO. My answer is that we really don't do all that badly, and let me tell you why.

First, we get less publicity for what we win than for what we lose. We had a dispute with France over how we could designate our scallops when they're sold in the French market. We won that dispute but we won it at an interim stage, and France, not wanting to be embarrassed by the loss, settled with us. The panel never made a final report, so there was no publicity. So we won one, but there was no publicity. We won another dispute with Australia over health and phytosanitary regulations affecting our salmon exports. We won a major dispute with the United States under NAFTA that went right to the heart of supply management in the dairy industry. That was one where everybody expected us to lose and we didn't.

• 1015

If you look at disputes like the current dispute on dairy, where I'm actually representing the National Dairy Council of Canada, and the dispute over magazines, where I'm not representing anybody, the government really had no choice but to pursue these issues. The policies in one case predated the WTO. In another case we feel very strongly that farmers should have the right to work collectively to sell their milk for export. We think that's a rational thing.

The report, which I have seen and I can't discuss in detail except to describe as an abomination, is something that will be appealed.

But you're all elected, and whether you're in government or opposition you know, as politicians, if you have a difficult policy issue, you can't tell your constituents you're just going to cave in and you're not going to fight, if you have an opportunity to fight. So we fight the difficult ones as well as the easy ones. We're going to lose some of the difficult ones, but to lose is not necessarily a slam dunk.

Mr. Manley has been talking about his Technology Partnerships Canada program. Ms. Barlow the other day said it would mean Canada could no longer have an independent industrial policy. Balderdash. That's not true. I can't discuss that report either in any detail, but as a practical matter, that panel said the Canadian government can't subsidize the development of products that are primarily for export markets. It's a de facto export subsidy. Mr. Manley doesn't agree and he's going to appeal it.

It did not say we cannot use the Canada account to finance nuclear reactors. That panel didn't even look at nuclear reactors. It did not say that Mr. Manley could not use TPC, which is a very imaginative program, to finance the development of emerging technologies, new materials or environmental technologies. It dealt with a specific issue.

The panels deal with countries when they go over the line and lead them back to the line. They don't throw them out entirely. Fiddle and fix is a legitimate way to deal with these things.

On the magazine issue with Bill C-55 and how Canada chooses, in effect we're really talking about how we subsidize our magazine publishers. We're being threatened by the United States. Yesterday the United States pulled the trigger, sort of in limbo style, against the Europeans on bananas.

My friend Mr. Myers has expressed how his members are concerned that the trigger may be pulled against them, but Canada is following a WTO-consistent approach. The simple explanation is that the WTO, in its initial report, did not say we couldn't protect our cultural industries in a rules-consistent way. The Canadian government has a legal opinion that Bill C-55 is WTO-consistent. I've read the Canadian schedules to the WTO for the services agreement, and we have no obligations with respect to advertising services. Under the WTO and NAFTA, the United States can't unilaterally determine whether or not a Canadian action or policy is inconsistent; it has to be done through dispute settlement.

I've travelled several times to Arizona and I've gone to Tombstone and Boot Hill. There are grave markers there marked “hung by mistake”, and that's American trade policy. U.S. threats of retaliation are vigilante tactics. They're outside the rules. Those tactics are not acceptable and can't be acceptable to Canada. The Canadian government just can't grovel and wring its hands every time Charlene Barshefsky or Ambassador Giffin floats a new threat in the newspapers.

If Canada caves in to threats from the United States or if the Europeans do, we will lose all the benefits we gained out of the Uruguay Round that harnessed the U.S.'s ability to make these threats and use them, as they did on beer and we did back to them.

The WTO issue is not whether or not the Canadian magazine industry should be protected, the issue is whether or not what we're doing is consistent with the rules. We have the right to have another panel look at what we're doing to tell us whether or not we're doing it.

I've gone over my time, Madam Chair, and I'm sorry. I'd be happy to answer any other questions.

The Vice-Chair (Ms. Colleen Beaumier): The one thing you said that was so interesting—and I'm speaking for myself because I'm sure other committee members are much more informed and more intelligent that I am—was when you were talking about bringing it down to the kitchen table. I think that may have made us all perk up a little. We get snippets here and snippets there, and when we're dealing with people who have been negotiating and working on this for years, many of us feel a little out on a limb somewhere, not really knowing. I think you've hit the nail on the head, and it's very exciting to know you recognize this.

• 1020

Mr. Peter Clark: If I can just take an extra minute to respond to that, in preparing my clients and in preparing the notes for the consultation process—we did have some discussions with Minister Marchi about this—I decided, given the experience with the MAI, I really had to expand my network. I talked to everybody I could. I talked to waiters in restaurants. In my business you spend a lot of time talking to television cameramen while they're waiting for the feed to come through from Toronto or somewhere else, and they are pretty astute about the issues. They'll ask you questions that are pretty penetrating, which might not occur to me, as someone who's specialized in the area, or to you, who have a different perspective on it. Those are the people you really have to talk to.

I have to say I always enjoy listening to Maude Barlow because she has a perspective. I agree with some of the things she says and I don't agree with other things. But I was extremely disappointed in listening to Tony Clarke. He was just saying “Stop the world, I want to get off”, and it isn't going to happen.

The Vice-Chair (Ms. Colleen Beaumier): Thank you.

Mr. Runnalls.

Mr. David Runnalls (Interim President, International Institute for Sustainable Development): Thank you very much, Madam Chair. Mr. Clark has given us a rather hard act to follow here, I must say.

I should explain that I'm appearing at rather short notice, and what you'll see in front of you, I believe, is the material I prepared for the use of the translators. I don't intend to read from it.

I am the interim president of the International Institute for Sustainable Development. It's a non-profit organization with headquarters in Winnipeg. Our job is to work on and promote issues of sustainable development.

I gather, Madam Chair, we will be the hosts of your public hearings in Winnipeg later in April, and on that occasion we will take the opportunity to give you a more complete brief.

What you will see before you are my notes plus another document we have prepared for next week's high-level symposium of the WTO in Geneva on trade and environment. I will speak generally to those papers you see in front of you.

IISD has consistently supported trade liberalization as an issue. This may not sound like a revolutionary event, but for those of you who know the views of the Canadian environment and development communities on trade and trade liberalization, this makes us almost an endangered species. Some of the suggestions I will make later on are designed to hopefully make us a bit less endangered, by making the WTO more open and environmentally friendly.

It's our contention that these kinds of changes are not only crucial to the future of sustainable development but also central to the continued legitimacy of the trade system. I would suggest to you it's not just in Canada that the environment and development communities are suspicious of trade liberalization. It's very true now in western Europe and the United States.

I think it's fair to say, and I would say this quite strongly to my colleagues, the WTO has been one of the major success stories of the post-war world. This success poses two dangers for the WTO. One is the tendency to overload the institution. Because of its success and the quasi-judicial nature of its dispute resolution system, there is a tendency to push more and more issues into the WTO. It is ill-equipped to cope with some of them, and the whole issue of investment and rules for investment is an area in which the WTO should tread with extreme care.

There is also a tendency to think that because of the WTO's past success, more of the same is the right answer to new issues. The WTO is designed to address a specific agenda. It essentially is designed to produce and enforce rules for the exchange of goods and now, as our colleague from the Alliance of Manufacturers and Exporters pointed out, a number of other things, including services and information technology. It has a very large unfinished agenda. That large unfinished agenda relates to some of these new issues it has taken on, and it relates to what's called the built-in agenda in the WTO—agriculture, intellectual property rights and the like.

• 1025

I think addressing investment as an issue could well be a danger to the WTO system as a whole. I would suggest perhaps five things in response to your query as to what Canada could usefully do on these issues in the WTO.

The first is the need to mainstream sustainable development in the trade organization. In the preamble to the WTO agreement, Madam Chair, there is a very nice phrase. That phrase is quoted in my testimony, but it essentially says that the WTO should conduct its business while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development.

Unfortunately, Madam Chair, the WTO has done little in its first four years to ensure that its actions match these aspirations to ensure that trade liberalization leads not just to enrichment for some but to sustainable development for all. I would suggest that there might be an interesting suggestion here from the Canadian government: that the WTO and the new director-general, who might well be a Canadian, should do what the Secretary-General of the OECD, Donald Johnston, did on taking office.

On taking office, Mr. Johnston commissioned a group of 14 eminent men and women to recommend ways to include sustainable development and build it into the mainstream of the WTO. That committee has now reported to the secretary-general, and its recommendations are now being implemented as a way of ensuring that the OECD lives up to its commitments in the area of sustainability. I would suggest that this could also be done by the new director-general of the WTO, and Canada would be in an ideal position to make such a suggestion.

My second suggestion relates to the points Mr. Clark was making about the need to make the WTO into a more open organization. The WTO is easily the most opaque international organization in existence. Its meetings have been closed to outsiders, to civil society. Its dispute resolution panels meet in camera. There is limited, if any, opportunity to present amicus briefs. The only contestants allowed in the room are the governments involved in the dispute itself. The decisions are released in a very haphazard fashion. You will see that any decision involving the United States is instantly leaked to the press by the Office of the United States Trade Representative, usually before it can even be translated into the official languages of the WTO.

In my view, Madam Chair, what this all leads to is a real threat to the legitimacy of the trading system. There have been a number of cases, not the least of which involve shrimp and turtles—there's a lingo to this as well—that have absolutely enraged the environmental community in the United States. I've just come back from Europe, where there is still public debate on the front pages of the newspapers about the beef hormone dispute. A number of other issues have arisen in such a way that they are decided by panels that are seen to have made their decisions in complete privacy and secrecy. I think this situation is a threat to the ability of governments to get the next round of negotiations through their legislatures. With the multilateral agreement on investment, we saw how irrational public reaction can sometimes be to an agreement simply because it's done in secret. If you can't see it, you can imagine anything about it.

The fourth was mentioned by Mr. Kerton. It's a greater focus by the WTO on sustainable development in developing countries. The WTO roster now includes a significant number of developing countries. As Mr. Clark pointed out, they are at a disadvantage in the negotiations. They are quite often not victims of the negotiations, but not beneficiaries to the same extent as the developed countries are. I think Canada, which has a substantial relationship with a number of developing countries, has an interesting potential role to play here in assuring both that developing countries can play their proper part in the negotiations, and that there are provisions that are made to stick in areas that are important to developing countries: textiles, agricultural exports and the like.

• 1030

The fifth, I would submit—and here I think we are in a very good position—is the search for win-win solutions to bring the trade and environment communities closer together. Here I would suggest to you that subsidies are the best way to go. Agricultural subsidies particularly have a real capacity to both be environmentally disruptive and trade distorting, so I think there is a real potential here for an alliance between the Cairns Group in Canada and the environmental community in Europe, which, with the new German government in power, is a very powerful force to push for the removal of both trade- and environmentally distorting subsidies.

I would submit to you as well—and this is something that would take a number of years to develop—that there will be a need for an overall agreement on trade and environment as part of the WTO. I would suggest to you that this will need to happen if only because of the level of public opinion in western Europe and, to an extent, in the United States. We will find increasingly that consumer groups and governments themselves will seek to legislate against or boycott products that they feel have not been produced in an environmentally sound fashion.

At the moment these are again the WTO rules, but if these are done on a voluntary basis, they are not followed. I would suggest, as in many of these things, a rules-based system is probably better than no system. At the moment, a disproportionate number of the cases that go before the dispute resolution mechanism of the WTO involve environmental issues. That number will rise considerably unless we can find a way, over time, to develop a set of rules to govern environmental labelling; environmental restrictions, government procurement policies that are disguised as environmentally friendly; and government climate change procurement policies, which a number of European governments now have. If we don't have a set of rules to govern these, we are likely to be the victims of them.

As our next recommendation, I would suggest that Canada should look into this whole question, as proposed by Sir Leon Brittan, of an environmental analysis of the potential impact of trade negotiations. We've done this before. We did it for the NAFTA. We do economic analyses of the impacts of trade agreements on a regular basis. There's no reason we can't do them for the environmental impacts of trade agreements, thus saving us considerable headaches down the road, Madam Chair.

Finally, I'd like to come back to this question that I mentioned at the beginning, and that is the matter of investment. With the failure of the multilateral agreement on investment in the OECD, there is considerable support, led to an extent by Canada, to move the investment discussions to the WTO. We think this would be a mistake for a number of reasons, but the principal reason is that the requirements of an investment regime are structurally different from those for the liberalization of trade in goods.

Productive investment has a long-term time horizon, sometimes up to fifty years, and can involve numerous changes over the lifetime of an investment, responding to new technologies, changing market opportunities and an evolving understanding of the consequences of an investment. A foreign investor basically becomes a citizen of the host country, and with these rights come obligations. The basic WTO principles of most favoured nation and national treatment are simply insufficient to ensure that investment is handled in a fair and equitable manner.

In conclusion, I'll give you one example to illustrate that, Madam Chair. If you have a river system with five pulp and paper mills on it, the fifth pulp and paper mill, under standard Canadian environmental policy, will have tougher standards than the previous four. That's just the way it works. It has to do with the carrying capacity of the river. If the fifth mill is owned by a Canadian company, it will have no recourse. If it is owned by an American company, I guarantee you that they will be before the dispute resolution mechanism claiming this is not national treatment, it's discriminatory treatment, because the previous four pulp mills, which may well be Canadian, have had to respond to different standards. And there's a whole list of these that one can pick out from the realm of very standard environmental policy, which would make it extremely difficult to try to apply what are fairly rigid WTO rules on national treatment and non-discrimination.

• 1035

I think I've used my time, Madam Chair. I thank you very much for the opportunity to appear before you. I think what you are doing is perhaps one of the most important things that can be done for trade agreements in the future, which is to open the windows and let the process become more public, to get to the stage where people have an opportunity, as Mr. Kerton said, to appear before you and make some of these points. Otherwise I fear we will have a negotiation we will be unable to get...or at least the U.S. will be unable to get it through its legislature, simply because there is so much pent-up public dislike of the WTO and its rather difficult to comprehend decision-making process.

Thank you very much.

The Vice-Chair (Ms. Colleen Beaumier): Thank you. It was a hard act to follow, but you didn't miss a beat.

Mr. Penson.

Mr. Charlie Penson (Peace River, Ref.): Thank you, Madam Chairman, and I'd like to thank the panel for being here this morning to help us in our deliberations for the WTO future round and what that might look like.

I noticed several people talked about the need for better understanding of our trade agreements, better understanding of what business wants in these kinds of agreements. I was at a conference in Mexico this spring with elected representatives of the United States, Mexico and Canada, doing an assessment of NAFTA, and there was pretty much general agreement that until we build an awareness, until an awareness starts to exist, of the benefits of trade and investment liberalization, it's very difficult to move forward again.

I thought it was telling—and I certainly find this in my own constituency as well—that one of the congressmen from Missouri said that he had been to a plant in his riding, and just about everything this plant manufactured was sold into either Canada or Mexico, but in talking to the workers there he learned that essentially there was a great deal of resistance to any trade agreements with Canada and Mexico, to the NAFTA. I thought it was pretty telling, because they owed their jobs to that very agreement, to those exports, and yet there was hostility.

I think that type of problem exists in Canada as well. We've seen a bit of it in the MAI discussions, and I think until we can move forward from there, we'll have a difficult time to make new gains in trade and investment liberalization. There have to be some people who are convinced that this is better for them, that it's going to be a gain, in order to do that.

But a substantial portion of our economy has not been benefiting from trade liberalization. The agriculture sector was largely left out. It was brought under for the first time in the Uruguay Round in 1993, and only a modest start was made in agriculture at that point. I can tell you, coming from western Canada, that a lot of people had expectations created that we're going to see some significant progress this time around—and need it, by the way. They're in very bad crisis mode as a result of large subsidies, especially out of Europe, where it was $60 billion last year. It's very tough to compete against that.

I wanted to get to the question, essentially, of how we can gain credibility at this next round of talks if on one side we are protectionist ourselves in a big sector of our agriculture sector—not only that, but some of the stuff with our exports, EDC for example, our export credit—and yet we are at the table saying “We need you people to open up your markets, better access, lower subsidies, lower tariffs”. We're not walking the walk here ourselves in Canada in some of these critical areas. I put it to the panel, where are we going? What's your assessment on what the best method is of resolving that issue?

The Vice-Chair (Ms. Colleen Beaumier): Mr. Myers.

• 1040

Dr. Jayson Myers: Maybe I can take the first crack at it.

I agree, I think there is a communication problem even in the business community and on the part of Canadians generally, not only about what the benefits of free trade are but about what Canada can gain by entering into negotiations in the WTO, what the issues are here. Part of it is, I think, entering into negotiations within the context of existing agreements within the WTO framework, so it becomes a bit of a policy discussion and it moves away from the kitchen table discussions that we've talked about; it moves away from the real live business problems, what Canadians are looking at in terms of jobs, where their jobs could be coming from, and dealing with some of the changes that are going on within the Canadian economy itself in terms of restructuring and competitiveness.

So there is a communications problem. I think it's a challenge for all of us to listen more closely to Canadians and what their concerns are, but also to make sure we can communicate that our participation in WTO is a multilateral set of negotiations that we're looking at in terms of agriculture, for instance; that we're not simply dismantling our own systems here in Canada and opening up competition to other nations that are then competing on the basis of existing systems. We have to communicate that what we're trying to do is get at the dismantling of protective subsidies, of restrictions on the market, of other types of technical barriers to trade that other countries are using to restrict the access of Canadian products into their market. We have to move this from a domestic debate into one about what we can achieve multilaterally. I think that's a very important part of it.

But the other thing you raised is let's make sure we have our own domestic policies in line with where we're going multilaterally. We still have in this country restrictions on commerce between provinces that don't make any sense if we're trying to open up trade internationally. We have in this country regulatory problems at all levels of government, competing layers of regulation, duplication in regulation, and a lack of mutual recognition of standards. If we could apply that type of principle internationally, we might actually begin to facilitate trade on an international basis and probably be able to protect Canadian consumers in terms of environment, social, health and safety measures, and have an even more effective regulatory system if it's more efficient and more open. And we do need greater transparency here at home if we're talking about transparency abroad. So let's make sure we do have all of that.

Mr. Charlie Penson: If I could follow up a little bit, my question to you is on the credibility of Canadian negotiators of our Canadian position. If we are over there with 300% tariffs in some sectors of our own society, how credible are we in asking for access into other markets, to knock down tariff barriers and subsidy levels? Don't we have to be consistent? Don't we have to be credible at these talks?

Dr. Jayson Myers: I think we can come very credibly by saying that this is on the table, and that we're looking for an opening of markets elsewhere and for other countries also to be lowering their barriers at the same time. I think it's a part of our negotiating strategy, and a fairly strong part. Certainly, as you're well aware, within our constituency there is no uniform view. I'm very aware from the agricultural and agri-food industry that they would like to see an opening of the agricultural market as quickly as possible. And I think in the long term, from the point of view of what would make Canadian agri-food business more competitive, more productive, going more into a higher value-added product, open markets are essential for every agricultural sector in this country. The problem is that if we open the market and our trading partners are still practising restrictive policies or subsidization, I'm not so sure we're on the level playing field we need to build the industry here at home as well.

• 1045

Dr. Robert Kerton: I bear some scars because I participated in the discussions on the egg hearings. It's a difficult problem. Perhaps it's less severe now because there are so few farmers left who receive the subsidy you're talking about. The dairy issue is a sensitive political one. There are 35,000 farmers with some substantial political clout.

In the egg hearing in which I appeared, a formula had been created that was supposed to represent the cost of production of eggs. In the process, they calculated the time it took to collect the eggs, and instead of using the wage they actually paid, they inserted the industrial wage because it gave them a higher number when multiplied by the number of hours. They argued that successfully before the National Farm Products Council.

I was subpoenaed to a hearing in Regina as a result of this stance, and I had to pay a colleague to cover my classes while I went out there in a snowstorm. Eventually, the National Farm Products Council recognized it was improper to use the fudged number, so they ordered a small reduction in the price of eggs Canadians had to pay. That saved Canadians millions of dollars over the years. But it's fairly difficult to try to explain that to Canadian beneficiaries of these reductions in the 300% tariff and to people who stand to lose a lot because of the reduction of that tariff. You people in the political arena appreciate it well.

My thinking is there are a lot of third world consumers and consumers in other countries who would be allies of some Canadian firms in these regards. We've done some things to reduce the use of cloth from Bangladesh with the free trade agreements. This is not a wise thing to do because it makes their standard of living worse. But I think the forceful injection of international consumer interests into the discussion can enrich it, in the sense that some of the beneficiaries of these exchanges can actually understand when they're better off and when they aren't.

Mr. Peter Clark: Mr. Penson, there aren't too many clean nightgowns in Geneva. Everybody's dirty to some extent, and trade-offs are made. Not everybody is clean. Australians and New Zealanders tend to be very sanctimonious about their agricultural regimes. In other areas they don't stand up too well to scrutiny under a microscope.

It's natural to have people challenging you on something that's particularly sensitive in terms of your own policies or where you may be different, but at the end of the day there are clear decisions that have to be made. You don't really get as much for your concessions if you signal that you're prepared to give in too early.

Mr. David Runnalls: Could I just add one thing to that, Madam Chair? I think the point we're missing is the first point Mr. Penson made, that in the middle of the Goldilocks economy, where the United States has the best of everything—low unemployment, low inflation, and finally substantial income growth—you can still appear in numerous factories that are doing extremely well and find people very worried and very suspicious of the effects of globalization.

I've just come back from two weeks in Sweden, which is traditionally a relatively open economy. You see exactly the same worries there. My institute is located in Winnipeg. Manitoba, probably on balance, gets more out of the free trade agreement than almost any other province. Winnipeg has a diversified manufacturing base and it still has a large agriculture constituency. Yet it is quite clear that people are very worried about this. There's a general sense of unease in the light of the Asia crisis and the need to compete. If you mention productivity enhancement, people get nervous, particularly organized labour.

I suspect this round of trade negotiations will not only be a difficult one but will be very hard to sell unless we can demonstrate some real concrete advantages to Canadians, people in the third world, and other participants in the negotiations. The old days when a bunch of guys would sit together in Geneva, or more likely when Charlene Barshefsky and Leon Brittan would be locked in a hotel room for twelve hours to come up with an agreement, may not work any more.

I think your observation in Missouri has a lot of analogues in Tokyo, Stockholm, Winnipeg or Vancouver. This is a process that's beginning to make people nervous. When you have a significant political constituent player, at least one that's well organized—and here I mean the environmental crowd—basically set against trade liberalization, it will be quite difficult to begin to get a number of these agreements through, even if you can get them negotiated.

• 1050

The Acting Chairman (Hon. Sheila Finestone): Mr. Runnalls, and all the rest of you at that table, I think this is a very important part of the discussion. I'm just curious whether you are going to give us some suggestions for how we are going to get the civil society—and I'll use that in its broadest sense—like you and me and everybody else who lives in Canada informed and more comfortable.

Mr. Charlie Penson: I have a suggestion.

The Acting Chairman (Mrs. Sheila Finestone): Go ahead, please.

Mr. Charlie Penson: It deals with a business in your own home town, Mr. Runnalls. The furniture business was supposed to be one of the businesses that couldn't survive under free trade. It was supposed to be distressed very badly. A company out of Winnipeg thought they should diversify their operation into the United States because eventually they would grow the United States side of the operation and phase out the Canadian operation as it eventually died off. Ten years later, it's been exactly the opposite. They have done extremely well by making the adjustments they needed in their Winnipeg operation. They are now closing the North Carolina U.S. side of the operation.

It just seems to me those kinds of success stories have to be told. We can compete by making the structural adjustments we need. They are doing very well.

The Acting Chairman (Mrs. Sheila Finestone): Yes, Mr. Clark.

Mr. Peter Clark: I have a number of examples of just what Mr. Penson was talking about in the paper I'm presenting to you. I can run through some of them.

In the free trade agreement with the United States, beer was an exclusion from the liberalization. Now the brewing industry is in the forefront of people trying to knock down trade barriers all over the world because they've adjusted and they want to export. The wine industry was supposed to be devastated; now they're exporting to Europe. The auto industry has grown by leaps and bounds in Windsor. Astra Pharma of Sweden is investing in a pharmaceutical plant in Mississauga to export to the western hemisphere.

I used to be the president of the Canadian Apparel Manufacturers Institute many years ago. People thought they would be gone under free trade, but their exports to the United States are very high—in the billions of dollars now. Software and computer services are all over the world. We're exporting satellite equipment. We're exporting billions of dollars of frozen french-fried potatoes. The processed food industry in North America that was supposed to be devastated is now growing.

We have the success stories. There are many local heroes out there who are very reticent about talking about their successes. It will be important for you to bring them into the room so they can tell you and their friends, neighbours and employees about how important open markets are to them.

The Acting Chairman (Mrs. Sheila Finestone): We should have these hearings televised by CPAC.

Mr. Peter Clark: It occurred to me that in some areas you might want to have a phone-in segment with them—talk radio.

The Acting Chairman (Mrs. Sheila Finestone): With you gentlemen there.

Mr. David Runnalls: I think there's another question as well. For those of you who followed the debate on the MAI, the public debate changed quite dramatically after the Department of Foreign Affairs released the negotiating text, and after the minister appeared before a subcommittee of this committee and talked about the Canadian position.

That was absolute heresy for trade negotiations. You never disclose the text until the very last minute and you don't hold public discussions with people on what they think of it. But it seems to me if more light is allowed into this next round of negotiations, so people don't operate largely on the basis of rumour and x number of web sites set up by Lord knows who, it will make a big difference.

A trade negotiation is a sensitive negotiation and not everything can be made public, but not everything needs to remain secret. A lot of the suspicion that grew around the MAI was simply because no one had any certain idea what they were actually talking about. I would suggest here that Internet communication, which can be a boon in some ways, will certainly open up these discussions. How it opens them up will be dependent on to what extent governments release official text. Otherwise, you'll get things that have been bootlegged by Ralph Nader's organization, European agricultural organizations, or whatever drifting around, and the opposition will coalesce around those documents. They may not bear any resemblance to the real negotiating text.

• 1055

We're looking at, I hope, a completely new style of trade negotiation that is more open and where there is more public discussion as the negotiation goes on. I think that's a way of getting a greater degree of buy-in on the part of the public, so they don't suddenly discover something at 1 a.m. on the last day of the negotiation.

Dr. Robert Kerton: The larger issue David's talking about is credibility, and credibility is not held by some of the people who are marketing some of these arrangements. The web hasn't helped, as David indicated. In 1989 there used to be a list of 400 consumer boycotts, which was run out of Seattle. You could pretty well find out what was worth supporting and what was worth opposing with your consumer purchases. But now if you look up consumer boycott, you'll find more than 5,000 entries on the web. Many of them are confusing things that have been added by somebody with an axe to grind. It could be producers, misguided consumer groups, environmentalists who are well informed, or environmentalists who are not well informed. The need now is for credible sources.

Trade agreements that pop out of an invisible bag full blown are never going to be credible. We have to know in advance if it's subsidizing pesticide exports. People in the third world are very suspicious about some of these genetically engineered products that are designed to get the farmers purchasing the seeds again and again.

There are quite a few issues that actually need to be aired, and unless we find some method of injecting some broader public discussion into it, people will start off with an absolute distrust of the source.

The Acting Chairman (Mrs. Sheila Finestone): Thank you.

[Translation]

Ms. Debien, please.

Ms. Maud Debien (Laval East, BQ): Good morning, gentlemen.

Mr. Myers, during you presentation you said that negotiations under the auspices of the WTO should include all questions concerning human rights, social or social rights clauses as well as matters concerning the environment. Yesterday, we heard witnesses who told us the opposite. I'd like to know why the Alliance is insisting that all these matters be included in the WTO negotiations.

My second question is also for you, Mr. Myers. During your presentation, you said that the Alliance was ready to help the Department identify the problems that would come up. Mr. Clark, along the same lines, said that Canada should clearly define its priorities and set out its concerns. I would like you to tell us about those concerns and worries as well as the priorities that Canada should clearly identify and define at the outset.

I'll now make a comment rather than putting a question which is in the same vein as Mr. Penson's question. In view of all these manifest concerns of society and all kinds of different groups towards globalization, as Mr. Penson and Madam Chair were asking, what concrete means should the Canadian government take to inform the public? There was talk of CPAC, the Internet and phone-in shows. I think the answer is here, with Mr. Kerton. I for one think that consumer associations are the thing nearest to the consumers and their needs and that businesses are generally there to respond to the needs of consumers. Ideally, of course, one of the major mechanisms would be to have a national or international consumer association participating in the WTO negotiations. But I'm probably dreaming in technicolor. However, at least for what concerns us here, I think the consumer associations are the privileged tools the government should use to inform the public about what the WTO is, about the state of the negotiations and the interests and priorities of all Canadians. We have that tool, but we unfortunately never use it enough. That was more in the way of a comment than a question.

• 1100

[English]

The Acting Chairman (Mrs. Sheila Finestone): It strikes me that

[Translation]

you're quite right. I'd like to hear what the witnesses think. Mr. Myers.

[English]

Dr. Jayson Myers: Let me start by focusing on the environmental and human rights issues. I think these are important issues for Canadian business. Good environmental standards, good environmental practices, good practices in human rights and social rights, this is good business as well. Canadian companies that are doing business around the world are really at the forefront of pushing these very high standards in what they're doing.

Let's take a look at WTO with regard to what that organization is intended to do, which is really to develop rules governing international trade. Let's recognize the fact that environmental standards, technical standards, and issues about human rights today are becoming and are being used by governments as potential trade barriers. They are being used today by a number of governments to exclude Canadian products and services from their markets. That's where our greatest concern lies in terms of opening up markets. These are some of the issues that I think should be discussed in the context of WTO.

But I think we also have to be very careful in how we look at and deal with environmental issues and human rights issues. The objective of the WTO is not to promote environmental protection and social and political development around the world. It's a body that develops rules for international trade. Let's keep the focus on that particular part of what the WTO does, but let's also recognize that these issues are important. If we're talking not only about engaging Canadians but also about making sure there is political support in other countries for what is being negotiated in WTO, then I think we have to deal with environmental and human rights issues.

I think we should be looking at win-win situations here. It's in the interest of all Canadians. It's in the interest of environmental groups and of business for the Canadian government to be pushing for more transparent regulatory processes for the effective implementation of and compliance with existing regulatory standards around the world, and that's what we should be championing. It's in everyone's interest to see that.

One thing I'm very concerned about is that the debate here in Canada between business and environmental groups, for instance, as to whether we should be dealing with environmental issues or strictly business issues really isn't getting us very far at all. Let's see if we can come up with a win-win situation. I think the government should be really pushing types of solutions like that, and in my view, greater transparency is a very important part of more solid corporate governance and governance structures around the world.

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Secondly, you were mentioning identifying problems. We were talking to small business as well as large companies. I think it's very difficult to engage them by saying to them what the issues are that the government is looking at in terms of its new WTO negotiations. It's very difficult to engage even CEOs who have been involved in trade policy discussions for a number of years by asking where they would like to see WTO negotiations going, and what the big policy items are out there. Everybody will come up with the same list, and everything will be structured in accordance to the outstanding agreements that are out there in WTO negotiations. It's better to start by asking companies or Canadians what their major concerns are.

We're surveying our companies on a regular basis, so I can tell you where some of the outstanding concerns are right now: things like procurement practices in the United States, licensing fees, technical barriers to trade, customs problems, market access problems at the border. Outside of North America, there are problems of legislated restrictions on imports, quality standards, very regulatory standards, subsidies and so forth. Some of those can be dealt with very effectively in WTO negotiations. Others should be dealt with in bilateral negotiations. Still others can be dealt with in regional negotiations. But it's important to know what the problems are if we're going to engage business, if we're going to engage Canadians, and it's important to work from the kitchen table up.

I'll say one more thing, and then I'll pass it to my other colleagues here.

In terms of communication, I think we need to engage Canadians in this debate. We were speaking before about the tremendous advantages that Canadian businesses have gained internationally, and we can see that on the export side in manufacturing. In 1989, the skeptics of free trade said manufacturers were going to be devastated in Canada. Today, we have seen half a million new jobs created. There are more jobs created in manufacturing today than there were in 1992. I come from Mr. Calder's riding, and I know the furniture industry in that riding has been.... There are very few furniture manufacturers there, but their situation really does focus the attention on the need to become more innovative, the need to become more productive, and the need to translate that back to ordinary Canadians.

The Acting Chairman (Mrs. Sheila Finestone): Thank you, Mr. Myers.

[Translation]

Would other witnesses like to answer Ms. Debien's question before the 10 minutes are up?

[English]

Mr. Clark, and then we will move over to Mr. Calder.

Mr. Peter Clark: I think the questions that you raised about establishing priorities can be addressed if a number of procedures are followed. I think it's essential to have these negotiating texts and discussion papers available to all Canadians. Certainly I believe Minister Marchi is sympathetic to putting Canadian discussion papers on his web site. At the Seattle meeting, he would certainly have the support of Charlene Barshefsky, because she said so. He could argue that all discussion papers from all countries, as well as the negotiating text, should be made available on that web site, so that people can follow them. If we operate in a vacuum, we're going to fall victim to exactly what Mr. Runnalls suggested: speculation and concerns about secrecy.

With respect to setting our priorities, there are two things I'd like to say. Firstly, we have done this in the past and we've done it very effectively. With respect to the Tokyo Round, the officials did catalogue very extensively the concerns of Canadians in terms of their objectives. We also have to look at their concerns about the things they don't want touched or addressed in the context of these negotiations.

You then run into the problem of resources. There has been a substantial downsizing of the public service, but it has been done in a more or less indiscriminate horizontal way. People have been cut equally in every area, without any real regard for where the priorities are. We have a situation now—and I hate to say this in the Standing Committee on Foreign Affairs and International Trade—in which, for the bright people who go into the Department of Foreign Affairs and International Trade, it's not in their interest to become trade specialists, because they all have their eyes on the ambassador's chair at the end of the day. It's true. I talk to them, and I have the frustrated ones sending me resumés every week because they don't see any future for themselves in the Department of Foreign Affairs and International Trade in the trade area. There's also a differentiation between the diplomatic staff and the non-rotational staff, which is bad for morale.

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We're losing people, so you might want to look at going back to a system in which there is more coordination, or more of an organization that's focused on both industry and international trade. I think you'd find broad support for that in the business community. Maybe you could expand the remit of your committee.

This is really essential. You need more resources. You can't just beef up the negotiating team to negotiate the agreement; you have to have people there with institutional memory and experience to monitor the implementation of the agreements and to represent you in fighting the disputes. This is one of the biggest problems that we have. We have all these highly trained people, but we then disperse them into other parts of the government, where they never use their experience again. It's fine to build the machine, but you can't just roll it into the garage when the negotiations are over. You have to keep it maintained, and that's going to take money and resources.

The Vice-Chair (Ms. Colleen Beaumier): Thank you.

Mr. Calder.

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

Last week, the Standing Committee on Agriculture and Agri-Food had the chance to go down into the United States. When we were down there, we had a chance to talk to Larry Combest, who is the chair of the congressional standing committee on agriculture. We also had a chance to talk to Senator Richard Lugar, too, on the Senate aspect of it.

We voiced our concern to the U.S., and one of the things I found was their basic lack of knowledge about what we as Canadians are doing up here in Canada. They were quite surprised when we started voicing the fact that we're their second largest customer in agricultural products. We're second only to Japan. They were quite surprised to find that, for instance, Canadians consume $216 a year of U.S. products, while Americans only consume $31 of Canadian products each year.

We got into this even more deeply. When Mr. Penson starts talking about barriers at the border and of TRQs at 300%, those barriers only exist once the Americans have gone over the percentage of access that we've given them to our domestic market. That's when they kick in.

Mr. Charlie Penson: It's 4.5%.

Mr. Murray Calder: No. Actually, for chicken, for instance, it's 7.5%, Charlie, so you're wrong on that.

Mr. Charlie Penson: Okay.

Mr. Murray Calder: But our access to their markets is not as high, so we're already ahead of them in that respect. Also, in 1994, once the TRQs were set, we agreed that we would lower them by 15% by the time we got back to the negotiations in the year 2000, which we've already done. In fact, there was a recent Angus Reid poll that came out that said Canada is ten years ahead of the United States in subsidy reduction.

My first question, then, would be what we can do as a country that has played by the rules, that has lowered its barriers, while the ones around us have not. Do we tread water and wait for them to catch up to us? They keep talking about this level playing field. Jayson, you talked about open market. I feel that has put us into a bad situation right now coming into these negotiations. We've played by the rules, but the other ones haven't. Take a look at the United States, with the FAIR Act, the Farm Bill, or the farm aid package that saw them pump $15.2 billion into their agricultural community in one year. Well, we've done nothing like that here.

There's another thing we heard when we were down there too. There's a lot of concern about vertical integration within that country. It's starting from the grassroots, and it has now worked its way into the political community. You have talked about the environmental issue here. Corporations have decided that, through vertical integration, they are going to grow thousands of cattle and thousands of pigs in one area, because it works into their corporate plans. Underneath the old system of the family farm that was basically supported by marketing boards, those numbers are distributed over a large area. Obviously there are some major environmental issues there, and I would like your comments on that.

Dr. Jayson Myers: Again, maybe I could start off.

I would start with the first point that you made, Mr. Calder, about Canada being ahead in terms of market liberalization. I think that just means it's all the more important for the Canadian government, when it comes to the negotiating table, not to be looking behind in terms of how we could still be protecting our industry, but to be pressing our negotiating partners even harder than ever to open their markets. It's not in fact that we're ahead, that we've had troubles where other countries are going, removing their market restrictions or their subsidies. It seems to me that is again a very strong reason we should be pushing them in this multilateral forum to do that.

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Mr. Murray Calder: I want you to clarify that statement. When you make a statement like that, that we have to push our trading partners, that they have to open their borders up more, are you saying that we keep opening ours up more and hope they'll follow that lead, or...?

Dr. Jayson Myers: I'm saying that the WTO negotiations are the opportunity we have to negotiate on a multilateral basis for the multilateral dismantling of some of these restrictions and subsidies, particularly on the agricultural side.

I agree with what Mr. Clark has said. We shouldn't be going into this by giving up beforehand some of the key negotiating strengths we have, but I think this is the forum where we should be pushing multilaterally for a multilateral elimination of some of these restrictions, or at least a reduction of these restrictions. That's what these multilateral negotiations are all about.

On the domestic policy side, and on the agricultural side particularly, I think what we do domestically should be aligned to what we're trying to achieve on a multilateral basis. If it makes sense in some cases to reduce our own restrictions, if it makes sense to reduce the tariffs in certain industries, then I think those reductions should be seen in the context of what we're trying to achieve on a multilateral basis. But, again, this is the opportunity for us to press very, very strongly for other countries to be removing their restrictions, to be eliminating some of the subsidies they have in agricultural areas.

The Vice-Chair (Ms. Colleen Beaumier): Mr. Kerton.

Dr. Robert Kerton: I have two suggestions. First, in most countries in the world the local consumers association has been an ally of, let's say, cheaper shoes in Jamaica, for example, and that sort of thing. So there is a dimension there. But in the U.S., the Consumers Union, which is a very effective professional operation of 500 people, with highly effective engineering tests, is not at the leading edge internationally in that it's probably the most financially strong national consumers organization that's still a little behind in understanding the trade issue. So I think it would be a great help to Canadian exporters if the U.S. Consumers Union could get a firm grip on the trade issues, as most other consumer organizations around the world have done.

The second point I'd like to make is completely different, and I'm asking you to think, let's say, 10 years down the road. One place we are going to have effective leverage is with an international competition policy, because right now national governments can abuse.... Let's say they'll go to bat for their tobacco industry, or whatever firm it is, and get regulations that suit the industries doing the lobbying. But we face some problems in many industries where an international competition policy would dilute the influence that you're worried about. It would put some limits, let's say, in telephones, with the cooperative agreement. The international companies can create a cooperative agreement now that is quite contrary to consumers interests in any country, and there's no penalty for that.

Thinking farther ahead, Canada can provide some important leadership in trying to get some international competition policy framework of rules—this is very much along the lines of WTO—asking, what could you do that's fair, and what selling tactics and telemarketing, and so on, are unfair? Some of those dimensions of competition policy will be important to increasing the ability of Canadians to succeed in a fair marketplace.

The Vice-Chair (Ms. Colleen Beaumier): Thank you.

Mr. Clark.

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Mr. Peter Clark: Thank you.

Mr. Calder, one of the realities that we unfortunately have to deal with is that they use general tariff-cutting approaches to agriculture and to everything else. You've identified a very real problem. The fact of the matter is that there are disparities, and one of the reasons these disparities continue to exist is because we haven't challenged some of them.

I did a study for the Dairy Farmers of Canada in about 1992, assessing all of the subsidies available to the dairy industry in the United States directly and indirectly. They asked me to redo it last spring. This is several years after the introduction of the WTO, and we found out that the subsidies had actually gone up while they were supposed to go down. There was a greater concentration on exports.

The big problem, as I'm sure you know because of your agricultural background, is that those agreements are written so that the U.S. types of subsidies through the tax system and the other mechanisms they use are clean, and the subsidies that Canadians and others use, which tend to be more selective, are not.

One of the issues we've been discussing within the dairy group since we've been put through these panels by the United States...and it's interesting that the reason we're being put through the panel on the export classes of milk is because it's what California does and essentially what is done in some parts of the Northeast Dairy Compact. Dairy farmers in the United States went to USDA and said “We want to do what Canada is doing. They said, “No, we don't want to do it because we're afraid Europe will do it, so we're going to challenge Canada, and if Canada wins, then we'll do the same thing for you.” They're looking at Europe, and they're challenging us.

Coming back to the comment about Jamaica, I've just spent some time in Jamaica for CIDA, working with the Jamaican government on their implementation of the WTO, and yes, the Consumers Union there did prevent protection on footwear, and there's no more footwear industry. Right now they're being devastated in their horticulture industry, their beef industry, their dairy industry, and any other industry you can mention, and they're having to send troops into the tourist areas because people can't work on the farms.

The developing countries have taken it really in the neck because they don't have the people available either in Geneva or at home to staff up all of these meetings. The rules are set so that they help the bigger countries. In the case of Jamaica, before the round even started, they were stripped naked by the IMF of any types of protection that we could use to tariffy. So they had no restrictions, no quotas they could tariffy.

When the markets in the United States turn down because they can't ship it out to Asia, they just back into the Caribbean and destroy these people in very short order. So we have a problem because of the nature of the market that we have; they have an even worse problem. While the developing countries are taking a more active role, there's a differentiation between the Indias and the Brazils and the others who have the bureaucracies to cope and the little people who really don't, and unless those people get organized, it's going to be even worse for them, and if they do get organized, it's going to be a very long round.

Mrs. Sheila Finestone: What you just said is very discouraging.

Mr. Peter Clark: But it's the truth. That's the way it's negotiated.

The problem is that most of the negotiations were settled in the last two weeks in rooms where the United States and the Europeans were the prime players. Japan and Canada were called in from time to time, and from time to time they'd bring in India or Brazil to deal with developing country issues. That's the way it was done. It can't happen any more.

The Vice-Chair (Ms. Colleen Beaumier): Mr. Runnalls, can you comment on this fairly briefly?

Mr. David Runnalls: I would reinforce what Mr. Clark just said and give you some sense of the disparity amongst the sizes of the delegations.

The WTO, for example, has some 25 or 30 committees at the moment. Every country is a member of every committee. A country like India, which has the third largest scientific establishment in the world and a very large diplomatic corps, has a permanent delegation of no more than about ten. Most countries the size of Jamaica might have one person.

You know from your own experience how complex those negotiations are. You're suddenly an expert on trade and textiles, agricultural policy, technical barriers to trade, and pesticide use, and that's a one- or two-person delegation. That's why the playing field in the negotiation is so totally uneven.

Peter Clark is quite right. The last round got decided by Mickey Kantor and Leon Brittan, with help occasionally from the supporting cast, but most of the delegates to the WTO, or then the GATT, never saw the final text until it was released.

Mr. Peter Clark: If I can add something to what Mr. Runnalls said, at least half or very close to half of the members of the WTO don't have any permanent representation at all in Geneva. In fact, if you called for a quorum, they wouldn't have one.

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The Vice-Chair (Ms. Colleen Beaumier): Mr. Penson.

Mrs. Sheila Finestone: Excuse me, could I ask a point of information? I don't understand something.

The Vice-Chair (Ms. Colleen Beaumier): Certainly, go ahead.

Mrs. Sheila Finestone: When you say, Mr. Clark and Mr. Runnalls, that all these countries receive the final text, is there no input on the final text? Do not get it as a final text and then have the right to reply?

Mr. Peter Clark: Technically, they do. I've been through them. You do see the final texts. But for the final texts they have three or four months—and they go off to some place like Marrakesh—for the minister to endorse everything that's come out of the final meetings. In the last case it was in Geneva in December, and then they went off to Marrakesh in April and then they finalized them all. They had four months to look at them.

But as a practical matter, if you're in Geneva for a developing country, you may be called ambassador extraordinary and plenipotentiary, but you're chief cook and bottle-washer as well. You might have one support person with you and you have to handle the United Nations, the WTO, all of the specialized agencies in Geneva—and there's a dozen of them—and there's just no way. You have to pick and choose and you can't be expert in anything.

So they give them the agreements, which even to the experts are very difficult to read. They don't know what the implications are. They have to rely on organizations like the UNCTAD or the UNDP to provide them with general overview information on them, but even that information is too massive for them to digest.

Mr. David Runnalls: If I may, Madam Chair, we're talking about an agreement that's quite big. This is not seven or eight pages. It needs a truck.

Dr. Robert Kerton: There's a paradox there. If it were a free trade agreement, one page would say “free trade”, but the other 2,200 pages in the agreement are restrictions and agreements that make somebody better off.

Mr. Peter Clark: But we're better of with that than without it.

Dr. Robert Kerton: Let me suggest, just to be optimistic—

The Vice-Chair (Ms. Colleen Beaumier): Please, we have to get on with it. This we'll have to save for another time.

Mr. Penson.

Mr. Charlie Penson: I'm not sure that it does, because I'd like to pick up on it as well. With all due respect to the panel, there are countries still joining the World Trade Organization.

Mr. Clark, you were probably there for the 50th anniversary in Geneva. There's a big delegation from lots of these countries attending, and while they may not have the expertise that Canada or the United States have, nobody's holding a gun to their head. Obviously they believe it's in their best interest to belong. And we are seeing evidence of that with several countries already.

But the main point I want to ask of the panel here is in terms of our discussion of the WTO and where we should be going. We have two sectors where there are negotiations that must take place: services and agriculture. Is it in Canada's best interest, in your view, to stick to the sectoral approach or some other approach in order to achieve what we want? Is it better to have a general round in order to get more options on the table, for example? I'd like to hear your views on what might be the best strategy Canada might take forward in terms of achieving our goals.

Mr. Peter Clark: Mr. Penson, I agree that they're there, and you know they were there when we were in Singapore together. The fact of the matter—and you probably don't know it—is that nearly half of the countries couldn't afford to go and their transportation and accommodation had to be paid for out of the general budget so that you would have quorum and you'd have everybody in the chairs. That's a shame. I'm not saying that the thing doesn't work or it's bad, I'm just saying the reality of the process is that it's dominated in such a way that the smaller you are, the less you're going to get out of it.

Mr. Charlie Penson: But that's the same in anything in life.

Mr. Peter Clark: I agree with that, but I'd like people to understand that people are getting into difficulties in these countries and it's going to be harder to continue to that. That's why I said to Mrs. Finestone that it just can't continue to happen like that. I'm not saying that it won't continue to happen like that, but it shouldn't.

In terms of the negotiating mandate we should have, it should be as broad as possible. I don't know where this idea of clusters came up. The fact of the matter is that if you do that or you do sectors, it's going to be the sectors that the United States and the European Union are interested in that are going to get negotiated, and the others won't. You do need a big package to have enough in it to make it attractive to everybody. And from our perspective, the United States is going to target a number of things that are very sensitive to us. They're already sent out their signals, and we have to target things that are sensitive to them.

Mr. Myers talked about some of them. We have to deal with state procurement, we have to deal with small business and minorities set-asides in procurement in the United States, and we have to deal with the locational incentives that are offered at the state level in the United States, which are terribly skewing investment decisions in North America. We have to go after their sacred cows as well. So I think you need a broad negotiation to do that.

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Mr. David Runnalls: I would support that for the same reasons. One of the hopes, Mr. Penson, with the creation of the WTO was that by having a continuing organization you might not need the sorts of rounds that take seven and eight years. The experience with the environment, and the committee on trade and environment, over the first four years of the WTO is that if you do negotiate on a sector, there aren't enough trade-offs to make a deal. So essentially I think the reason they made literally no progress on the environment is because the developing countries who opposed progress were in favour of more open access and more market access. That wasn't on the table. So you got a whole series of these mini-negotiations that were almost doomed to go nowhere.

The Vice-Chair (Ms. Colleen Beaumier): Yes, Mr. Myers.

Mr. Jayson Myers: I would add as well that I think when we're talking about engaging businesses in the process and identifying some of the problems, because of the integrated nature of business today even for manufacturing and for exporters of products, the importance of services, the importance of telecommunications, of intellectual property protection, of technical standards and so forth, from a business perspective these problems are not easily isolated into particular areas of negotiation. I think from the point of view of engagement and making sure we're covering those areas that are of the most relevance to the Canadian manufacturers, it's essential that we at least start off with a very general round and as broad a negotiating mandate as possible.

The Vice-Chair (Ms. Colleen Beaumier): Thank you.

Dr. Kerton.

Dr. Robert Kerton: There are two pieces of good news if you look and say, where did we ever have any success at this kind of thing? I'm not disagreeing with anything that's said about the process; that's in fact what I say too. But when the UK joined the European Union, the rules of the community that were changed at this time said there must be a consumer unit set up within the director general. So DG 17 had ongoing expertise dedicated to consumer interests. So there was quite a span of time there where the discussions of that regional trade group did in fact incorporate consumer groups.

It's wishful thinking to think that we could get WTO obliged to create some unit that considers regular consumers in it. But if you look at the second success with the Canadian Standards Association, you can say there's a process in international trade where we've had some success. The method obliges the people to consider consumer interests and they have to be participating from the start. So whether you're talking about a food safety standard or a standard for child toys and things like that, in fact the standard is significantly better because of this input. That's a method. So it's led me, for one, to propose that there should be some consumer protocol. If you have some trade agreement coming forward, you have to establish how it is that you consulted the consumers in these.

Mr. Charlie Penson: The public interest that was introduced in the SIMA legislation, would that aspect be what you're talking about here, a recognition that has to pass the test of public interest?

Dr. Robert Kerton: There's something good about having a council examine these things, but you don't really have a financed public interest that's able to appear. So we've gone so far down to the market mentality that anything that's sold is good and so on, there's not right now any expertise that could be marshalled to appear before these boards. So if you think of it internationally, you'd say—

Mr. Charlie Penson: Dr. Kerton, there's not the expertise? Is that what you're saying?

Dr. Robert Kerton: Yes, that's what I'm saying. Whenever one person appears for the national consumers association, it's a volunteer.

Mr. Charlie Penson: But the expertise must be out there. It's just that they're not organized and there's no financing. Is that not the problem there?

Dr. Robert Kerton: Yes, that's true. The expertise is silent and rarely appears. The CITT hearings are an example of the kind of problem. It's there. You can have a public hearing. We rarely do it, and when we do it we don't have anybody with the expertise financed to appear. It's a useful process, though.

Mr. Charlie Penson: I'm sorry, to clarify in terms of what you're suggesting for the WTO process, would you be talking about a public interest component, or what are you talking about exactly?

Dr. Robert Kerton: Yes. It's not quite as hopeless internationally. We do have a financed group, Consumers International, with ongoing expertise in trade negotiations right down to the clauses. So in the Canadian solution here, we would be better off as Canadians if there was some method for that input to appear in WTO negotiations.

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The Vice-Chair (Ms. Colleen Beaumier): Thank you.

Mr. Pickard.

Mr. Jerry Pickard (Chatham—Kent Essex, Lib.): Thank you very much, Madam Chair.

I listened with a great deal of interest, and I certainly have to agree with a few of the panel's comments. One of the comments I think very clearly points out that we need a lot more communication, a lot more openness and transparency within the world trade process.

However, I realized that the other side of the coin is that some of these issues are so complicated and so controlled by the larger interests that it is very difficult to deal with an issue, and open and transparent means when you realize 90% of the say comes from two larger groups and the rest of the countries fight like hell to get a little bit of their ground protected. That's a difficult scenario.

When it comes down to agriculture, and agriculture was focused on, I certainly have my viewpoint that tariffication is a good thing for Canada. I have absolutely no question that tariffication was placed there...we aren't or weren't an export industry in the feather industry, in the egg industry, in the milk industry; we were building an industry that was self-serving to this country. There's no question about that. Our goal was not to export to the United Kingdom, to Australia, to anywhere else in the world, but was to build an industry that was self-sustaining and protective of the Canadian consumer. I would suggest that in fact it was built there for the Canadian consumer as well as the producer.

When it came to the fact that we placed tariffication in, you're right, there were horrendous tariffs placed on certain products, but they were placed there in order to protect an industry that had other protections in its place.

I guess there are some balances here. We have to look at national interest, consumer interest, and then compare that to international interest and trade interest. When we figure that every country of the world has its own areas of protection, its own means by which they protect their national interests...and yes, we can point to the United States and quickly suggest that we haven't challenged them on tariffs, we haven't challenged them on mechanisms they've put in place for their goods, but we're always very quick to go back to our agricultural area, and that's one of my concerns.

I have a concern that you look at one area where we've said, hey, hands off, we've put extremely high tariffs in, and it's for a very specific national purpose, and that is to make sure we have production and stability in that area of the market. I agree totally that transparency, openness, more ability to trade in most products is a great advantage to Canada, and I think we've done well in our trade negotiations. I think we've done well in our move forward. But certainly we're not dynamic. We have to join with other countries. We have to form coalitions. We can't act on our own. Even if we have the expertise, we don't have the power. And we're running an uphill battle all the time with the larger trading partners.

I think to give a different viewpoint, when Mr. Clark suggested everybody is a little bit dirty, I would suggest everybody has national interests. I would just phrase it a little differently.

The reality that comes into play here in my mind is that we are an awful lot better off with written agreements, with agreements we can work in, with agreements where we can move and push and cajole our trading partners a little at a time, to move us onto a plane where we can actually challenge them in a court if we feel we're being unjustly treated.

So in all of this process, even the gloom and the doom I've heard from the panel—and I've heard a lot. I think it's damn good for Canada, and I think we're moving ahead pretty solidly. From my viewpoint, maybe we should be stressing the great achievements we've had in trade with our international partners, where we stand today in sending goods from Canada to the United States in comparison to where we were 20 years ago, and where we stand in our ability to trade as equal partners to other countries. Quite frankly, I think we're doing that, and we're doing that well, but we still need to protect a little bit of Canadian interest as well.

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I'd like some comment in that direction, because it's not a gloom and doom story. I think it's a positive story, and I think we had better emphasize where we can gain more positives, not the difficulty it is to work with the monsters we have to deal with. That's my viewpoint.

The Vice-Chair (Ms. Colleen Beaumier): I think you're going to have to make a very short comment because Mr. Pickard just took up his entire time by making a statement. So if you could just briefly respond to that....

Mr. Jayson Myers: We should be focusing on the achievements, and there have been some tremendous achievements among our exporters there. I think it's that type of message that has to come across if we're going to engage Canadians. I would hope what we would do is use that type of message in order to...and the government would clearly come out with a mandate or a set of objectives that we should be pressing for in WTO negotiations and build a very strong consensus of support behind that, that these are the objectives we're trying to achieve. A part of those objectives has to be putting in place rules, not necessarily the content of the rules, but just making sure the rules are there in the first place.

Mr. Jerry Pickard: Mr. Myers, do you have objectives that you can incorporate into that and move us in that direction? That's where I think you have to be coming from.

Mr. Jayson Myers: I think you'll get a copy of our remarks here. We made some of those objectives clear in that statement earlier on.

I am a little concerned, though, about some of your comments about agriculture. Even though I'm from Fergus, my background isn't in agriculture; it's looking at what has gone on in manufacturing.

The problems we've seen after the free trade agreement...the companies that closed production were largely companies that were supplying the domestic marketplace. They were companies with a high cost structure. They were not competitive. They were really, as you said, servicing the domestic market.

You were talking about the problem of vertical integration in the agri-food industry. Across the board, we're seeing—and Canada really does suffer from the problem.... We have small producers. We have to do something in order to make sure those producers are innovative enough, are going up market, up value, and I think opening markets is an important part of that.

So I don't think we should even look at agriculture as clearly only domestic policy. We have to make sure we have an agricultural community that is also in a position to be innovative and adding value. I think in those terms there has to be some balance between the domestic and the international.

Mr. Jerry Pickard: I totally agree. A second comment, though, I suggest, is in the area where there is—

The Vice-Chair (Ms. Colleen Beaumier): Mr. Pickard, please, your time is up.

Mr. Tremblay.

[Translation]

Mr. Stéphan Tremblay (Lac-Saint-Jean, BQ): Mr. Clark, before you said that we couldn't interrupt things. I think that it can be said that some good things are happening presently and that more open access to the market does offer rather unbelievable possibilities, as is the case in my own riding.

However, you also talked about what Tony Clark and Maude Barlow said as well as the concerns the population in general has about the phenomenon of broadening access to markets. Mr. Clark and Ms. Barlow seemed to make a link between economic growth, which is probably due to the possibility of more exports, and that's something I'm quite happy about, and a rise in poverty, which seems to be increasing year by year. Can a link really be drawn between those two things as Ms. Barlow and Mr. Clark seemed to be indicating?

[English]

Mr. Peter Clark: Thank you, Mr. Tremblay.

I heard the discussion the other morning when Mrs. Barlow was quoting you and statistics about three people having more money than any number of other countries in terms of their personal wealth, and the disparities in distribution of wealth. My comment would have been that the WTO is not the cause of all the problems and the WTO is not the answer. If we really want to get rid of a lot of these problems and disruptions we're having, maybe we should get rid of stock markets and electronic transfers of funds and just all look in on ourselves. We could go back to the stone age in terms of financial transactions. That's what's causing the problems. It's being able to move money around.

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International trade itself is not really causing problems. I don't know how somebody who was living on sub-subsistence agriculture at one time and is now working in an factory is worse off. They may not like working in a factory. When I was at university I was a golf pro and I enjoyed that very much because I never had to wear a tie. Then when I graduated I had to wear a tie, so my own quality of life went downhill, but in other ways I'm sure it didn't.

So I really don't think we can use those general indicators Ms. Barlow and Mr. Clarke gave us to make any assessments here. We really have to find benchmarks and go out into our own communities. I've been dealing with industries over many years from when I worked very closely with the apparel industry. We worked with other industries in the lumber business and the knowledge business that are being built up in various parts of Quebec, and they're benefiting from free trade. They're into Massachusetts, Vermont, Georgia and other states. They're doing very well with the open markets. They're not afraid of anything. The problem is they're so busy doing things they're not telling anybody about them, so I hope when you go through Quebec they will come to the committee and tell everybody how important trade is to them.

Dr. Robert Kerton: It would be much easier to explain the great virtues of trade if family income had been rising over the last ten years; it was virtually stagnant throughout that time.

If I could, I would probably banish the words “free trade” so no one could ever use them. But the last agreements we signed required Canadians to pay monopoly prices for pharmaceuticals, so your standard of living and the cost of health plans are affected by all of these so-called free trade arrangements. When you look at what consumers were supposed to get out of free trade from the 1980s, at the time the Economic Council did its estimate it thought Canadian goods would have access to all the municipalities in the United States and that beer and milk—the things that really mattered to consumers—would all be included. As it turned out, virtually everything that was very important was excluded.

So we don't want to pretend that what we got in this thing that was called free trade was in fact free trade. It was not. There are still benefits to exchange, and I think Peter's right. We've seen more benefits in the exchange of real goods than in the financial sector, where some major international institutions are missing, which we need to establish.

Mr. Stéphan Tremblay: I know there are advantages, but you don't talk about the fact that poverty is growing. That's what I'm trying to understand. Is there a relationship between these things? That's what I'm trying to understand.

Dr. Robert Kerton: If we achieve a big increase in exports by polluting our environment and we all end up unhealthy, we will have more trade and it will show up in the statistics, but we won't really be better off. So to some extent I agree with the skepticism you express.

It's entirely possible for exchanges to make people better off, but we have to consider some of the points David is making. If an activity harms the environment, you shouldn't be using your national lobbyists to try to get the trade rules to protect that kind of industry. It doesn't really have a long-run future, and that's probably true for some important industries, maybe tobacco. So the negotiations you look forward to over the future have to be handled a whole lot better than the ones we handled before, where anything that was important to people was excluded.

The Vice-Chair (Ms. Colleen Beaumier): Mr. Clark.

Mr. Peter Clark: One of the things I don't understand about Quebec—and I've been involved in analyzing the economy there over many years—is why the apparel industry is doing so much better than the textile industry, where there is virtually no labour content left. I don't think it has anything to do with free trade. It's a phenomenon I really can't understand. These things are really just not easily explicable, based on whether or not there's a tariff.

The Vice-Chair (Ms. Colleen Beaumier): Mr. Runnalls.

Mr. David Runnalls: It would be a mistake to assume there are no losers from free trade and everybody is somehow a beneficiary. One of the principal errors of the WTO process is to assume that trade liberalization automatically benefits all players in the game. There are certainly plenty of examples in developing countries that I'm aware of where a section, quite often a substantial section, of the population has clearly been placed in serious economic difficulty as a result of trade liberalization. In fact, Mr. Clark mentioned some of them earlier.

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I don't think that means that trade liberalization is on balance a bad thing. I think one of things that's gone wrong with the process is that there's an assumption that the WTO only deals with trade liberalization and that it doesn't deal with the consequences of trade liberalization, in the same way as there's an assumption built into the WTO that it only deals with the effects of environmental policy on trade and never deals with the effects of trade policy on the environment. It throws up its hands and says they're not competent to do that.

I would submit that's an intellectual cop-out, and that sort of distinction is completely incomprehensible to the average Canadian. I don't see how you can go to your constituents and say “Oh yes, the WTO certainly looks at when environmental policies are causing trade difficulties, but it never looks at when trade policy causes environmental problems because that's not its business. Somebody else does that.”

I think it's an equal mistake to say that everybody always benefits from trade liberalization and there aren't any losers, and if there are, they're somehow the business of somebody else—the welfare system, the foreign assistance system, and so on and so forth.

As I said at the beginning, we believe that on balance, trade liberalization is a good thing, both for poverty reduction and for environmental improvement, but only if it's accompanied by the kinds of measures that ensure it does that.

Dr. Jayson Myers: Monsieur Tremblay, I would address that very briefly.

There is a problem: a growing disparity in income and a growing disparity in terms of the performance of businesses in Canada. But the problem is not in those areas that are open to international trade. In fact those are the sectors where incomes are growing very rapidly and where employment is growing very rapidly as well. Manufacturing today employs more Canadians than it did back in 1989. Incomes in that sector are growing more rapidly than in any other sector of the country. The problem is in community services, personal services, in those areas of business that employ people on a part-time basis. The problem is in the skills of employees and so forth.

It would be easier to make the case for open markets if we hadn't seen per capita real income of Canadians drop by 12% since 1989. That is a problem. But it tells me that just means that we have to have our public policies all aligned behind where we're going internationally as well as domestically—that we have to take a very serious look at education, at our tax policy, at policies that attract investment into this country. That's where I think the major challenge is.

My impression is that as governments and as associations representing either consumers or businesses or other types of social interests, we still have not realized that Canada is operating in an international market and that we must deal with some of the problems at a public policy level domestically.

The Vice-Chair (Ms. Colleen Beaumier): It's 12 o'clock and we're supposed to be finished, Madame Debien, but if you could make it brief....

[Translation]

Ms. Maud Debien: I'll be very brief. Madam Chair, a lot has been said about chickens and eggs and I'd like us to talk about culture a bit.

You know that presently each country negotiates its exceptions or cultural exemptions piecemeal during WTO meetings. What should Canada's strategy be? Should it be to pursue these piecemeal negotiations on cultural exemptions? Or should it put the whole matter on the table and debate the question once and for all and come to an agreement with all the countries at the table? First of all, is that possible? Strategically speaking, how should Canada deal with that matter: just put everything on the table or continue asking for specific exemptions? I'm putting that question for whoever might want to answer it, fully knowing that I'm addressing... [Editor's note: Inaudible]

[English]

The Vice-Chair (Ms. Colleen Beaumier): Who's going to start?

Mr. Peter Clark: I have spent a fair amount of time in Geneva since last October on dispute settlements, and I have talked about this issue to a number of people. I have found a great deal of support for Minister Copps' resistance to the United States. I found it from Asia and I found it from South America and also from Europe, where there's naturally a concern.

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I found that it was most focused in the area of films. People are very concerned that American culture is being exported around the world through films. In Asia and to a certain extent in South America, people feel that American values are being transmitted. In Asia in particular, they feel this is breaking down family relationships and that the traditional family values are being diluted through exposure to these films that glorify what in many cases they consider to be undesirable aspects of American life.

I feel there is a constituency out there that should be exploited and should be explored. I think the broad solution, rather than a piecemeal solution, is the appropriate one. I've found through my dealings with the United States that every time you deal with them on an individual issue it's like being nibbled to death by ducks: you die slowly. Each little piece, you lose. So I think the broad approach is the best way.

Dr. Robert Kerton: There is a different strategy. I think that's very important, but what we do with cultural policy quite often is to subsidize the inputs. If you think of the difference between inputs and outputs, what we really want is culture; that's the output. If it is the case that we subsidize some Canadians to make a film, you ask if the values put in there will turn out to be Canadian. I guess we all think that, because that's what we do.

But in some sense I would like to play jiu-jitsu on the Americans. I would like to say we're interested in outputs, and every time a movie teaches somebody that a gun is the solution, every gratuitous murder in a movie incurs a tax—a dollar per incident. Therefore you would be emphasizing the outputs that you don't want and you would have a tax. Now, this tax can be neutral across the goods of any country. It doesn't matter if it's an Indian film or Thai film or American film. It's therefore WTO-compatible, you see. So that is a way to try to use the American argument to address it when they're talking about things that are supposed to be just an export.

The Vice-Chair (Ms. Colleen Beaumier): Yes, Mr. Myers.

Dr. Jayson Myers: To put culture into a larger context, I don't know if the existing problems in the magazine issue would exist if, for instance, advertising split-runs were covered under an agreement on dumping that would cover services, for example. I think expanding negotiations in various other ways may to some extent answer some of the problems that are outstanding, at least on the business side of cultural industries.

Also, when we're trying to exempt a broad area like culture from negotiations or from coverage of WTO rules, and do so in a piece of legislation that comes at this another way, there are some implications for trade policy that are maybe contained in that legislation. I would be very concerned, for instance, about the provisions that would extend extra-territorial application of a law when all of Canada's trade policy objectives seem to me to be focused on eliminating some of the extra-territorial aspects of U.S. law, particularly with our relations with Cuba.

I would caution the way we approach cultural matters to make sure that what we're doing on one side, even if we're asking for an exemption, we're not shooting ourselves in the foot on where we're trying to go in our overall trade policy objectives either.

The Vice-Chair (Ms. Colleen Beaumier): I have many questions, and I certainly hope we'll have the opportunity to meet with you again on our rounds across the country. This has been extremely informative. Unlike my colleague, I didn't see any doom and gloom. I just saw a more realistic approach. I think everyone is determined that the World Trade Organization is potentially very good, but we have to look at the realities. I for one really appreciate all of the presentations this morning. Thank you very much.

The meeting is adjourned.