FAIT Committee Meeting

STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

COMITÉ PERMANENT DES AFFAIRES ÉTRANGÈRES ET DU COMMERCE INTERNATIONAL

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 2, 2000

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[English]

The Chairman (Mr. Bill Graham (Toronto Centre—Rosedale, Lib.)): Colleagues, continuing our study on the Caucasus, we have first Mr. Cutler and Mr. Leclaire from the university setting and then Phil Rourke from the Centre for Trade Policy and Law at Carleton.

Mr. Deepak Obhrai (Calgary East, Canadian Alliance): Mr. Chair, I have a point of order. I have a motion that I would like the committee to discuss.

The Chairman: Colleagues, our vice-chair has requested that we call Grace White, who's been appointed to the board of directors of the Export Development Corporation. It's the standard form of Order in Council appointment. It's been the tradition of the committee that we generally call Order in Council if somebody from the opposition or from the government wants to do it. I don't think anybody would have any problem with that.

Mr. Deepak Obhrai: For June.

The Chairman: Yes, we'll shoot for June, but I've already spoken to Mr. O'Brien and explained to him that if we have a real problem with June—we have to get legislation through and we have various other things—we might have to put it off until September. But we'll try to do it in June.

Mr. Deepak Obhrai: No problem.

The Chairman: I take it that agreed to and there's no problem with it. We'll do it. We'll get it through.

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I'd like to welcome Mr. Morrison back to the committee. He sat here for many years giving us the benefit of his sage counsel, and now he's going to risk life and limb going to the Caucasus.

Mr. Lee Morrison (Cypress Hills—Grasslands, Canadian Alliance): I'm hoping to stay there.

The Chairman: The last time you went on a trip with us, it seemed to me you had been doing some weird form of development work there some years before.

If we can get going, we'll start right away with Mr. Cutler.

[Translation]

Mr. Robert M. Cutler (Research Fellow, Institute of European and Russian Studies, Carleton University, Individual Presentation): Mr. Chairman and honourable members of Parliament,

[English]

I have a map, which I have put on the screen, so in the question period, if you have questions about the pipelines, I'll be very happy to address them.

It is impossible to cover the pipelines even superficially in the ten minutes I am allotted to speak, so I have prepared a statement on a slightly different topic, and invite your questions later concerning pipelines or any other aspect of the region.

I have been asked to be a reference person for you on pipeline feasibility and politics. Pipeline issues are extremely complicated in the Caspian region. As other witnesses have told you, this is a region full of potential for Canadian companies concentrating in natural resource extraction, and especially energy, but also precious metals.

I want to talk to you now about initiatives underway to overcome the obstacles that have, in general, prevented resource development over the last decade. Then during the question period I will be happy to give you any specific information you request about pipelines and negotiations over them.

An international initiative is now underway to motivate the creation of a south Caucasus community. This is a plan to create transnational and international institutions in the south Caucasus, in support of the reconstruction of the region taking place at the same time as the definitive settlement of the territorial conflicts that have plagued it for the last ten years. This initiative has not yet been publicly announced, and I can give you more details of it privately.

I can tell you that it is a multilateral effort, with broad international expert-level cooperation involving participants from the Caucasus region, Turkey, and the Balkans, as well as Russia and Europe. It projects the creation of a south Caucasus community that will work together in the first instance with the Organization of Black Sea Economic Cooperation, later extending that cooperation to the Caspian region at large.

Canadian diplomacy complements that strategic diplomatic initiative and may be easily integrated into it. It behooves Canada, in pursuit of its interests, to seek such participation at this early stage. There are two aspects in particular that I wish to bring to your attention.

First, the south Caucasus community will include a regional parliament. Such regional and international parliaments have proliferated in the last decade, to the point where there are now two dozen of them in the world. However, nowhere in the world—not in Europe or North America—does there exist any institutional resource to which regional and international parliaments may turn for training and support on a regular basis. However, Canada has such a resource that may be developed for this purpose, starting with the regional parliament that will exist within the south Caucasus community.

You are familiar with this institutional resource. It is the Parliamentary Centre. As you know, the Parliamentary Centre holds regular training and development sessions for parliamentarians around the world. The Parliamentary Centre, I submit, should be given the means to undertake a comprehensive program of both training and research on international parliamentary institutions—or IPIs for short—because there is little, if any, systematic knowledge about these brand-new institutions, as a whole. The program may be given on a continuing basis, for these IPIs are becoming a fixture in world society. They will influence, indeed they have already influenced, the evolution of trade, development, and the norms and structures of the international system.

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There are nearly two dozen such international institutions in the world today. IPIs have given birth to a new form of diplomacy called parliamentary diplomacy. This represents an important middle ground between the traditional level of interstate diplomacy and a new level of transnational cooperation among grassroots non-governmental organizations.

IPIs are developing into an important societal oversight mechanism on traditional executive-based diplomacy. They also establish ongoing transnational relationships that restrain old power politics, where civil society and NGOs are underdeveloped and politically constrained. In such a manner, they prepare a middle ground for interstate cooperation.

Moreover, a large handful of regional and international parliaments have recently taken root in Central America and South America. Such a program of IPI training may certainly include Central America and South America, which are important partners in the hemispheric creation of free trade areas, customs unions, and regional integration. IPIs are crucial nodes in the expanding network of inter-NGO relations and relations amongst NGOs, states, and international institutions.

I have described this whole development in greater detail in one of the two short supporting documents I have submitted for your consideration. It is in Canada's interest to get in on the ground floor of this new development. The Parliamentary Centre represents the ideal instrument for doing so, with work on the south Caucasus community and its regional parliament, in the first instance.

It may next be expanded, together with the necessary research component, to cover the phenomena worldwide and especially such Central American and South American integration organizations as the Andean Parliament, Central American Parliament, Amazonian Parliament, and Mercosur Joint Parliamentary Commission, to name but a few.

Second, as the south Caucasus community expands its range of activities and transforms the organization of Black Sea economic cooperation into a Caspian-wide forum, it will establish a networked series of coordinating centres, collectively to be known as a EurAsian Oil and Gas Association—EAOGA—for gauging progress on the projected Black Sea-Caucasus and later Black Sea-Caucasus-Caspian cooperation forums, with special attention to energy extraction, development and marketing.

One way to look at EAOGA is to see it like the European coal and steel community as dedicated to the development and management of strategic natural resources after the end of a war—here, the Cold War. However, it would be an institution adapted to the complex system of international relations of the 21st century.

EAOGA will not be a new bureaucratic organization and will not reduplicate the activities of other structures. EAOGA will be a lean and mean network embodying the new security concept of cooperative energy security. EAOGA will motivate a synergistic and pragmatic rapprochement of the international energy agenda with the international environmental agenda, as well as comprehensively legitimizing international involvement in managing the conflict over Caspian resource development, in a manner heretofore absent. EAOGA will not create an international bureaucracy or supranational authority. It will be normatively based on the Energy Charter Treaty, an already existing international agreement.

As you may know, the International Development Research Centre, IDRC, houses on its website the secretariats of a number of modest international institutions. It is natural, given the established strengths of IDRC's activities, that it lead Canada's integration into this emerging networked institution.

It is not suggested that IDRC seek to fulfill all the functions of so ambitious, but necessary, an institution as EAOGA. Rather, it will network with other centres of EAOGA coordination, focusing upon its own institutional strengths, particularly the integration of work on environmental issues in the region, as these are related to questions of energy resources within the normative context of sustainable development.

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Research on the international environmental agenda shows how the international community can succeed at this through multilateral cooperative institutions. The EAOGA idea suggests how to apply this insight to the international energy agenda. EAOGA will be an international, transnational and multinational coalition, having a strategic multifaceted perspective. It will be a dedicated association of governmental, non-governmental and intergovernmental institutions that will rally all levels of world society, so as to safeguard cooperatively their own economic security, with respect to energy projects.

The IDRC's unique contribution would be in such established fields of its expertise as peace-building and social integration in post-conflict situations. It is logical to mandate the addition of a specific Caucasus profile to this already-existing programmatic activity of the IDRC.

These two modest proposals I make are best implemented with assured funding over the course of several years, but the overall budgetary commitment is modest, with a very high relative return. This region is extremely important as regards the future evolution of the international system in the 21st century. Therefore, Canada has the opportunity to make special contributions, building upon its established credibility in matters of multilateral cooperation. It is a fortunate situation that this possibility coincides with the pursuit of Canada's particular economic interests, as well as its general interests in human security.

Thank you.

The Chairman: Thank you very much, Mr. Cutler. We appreciate that.

We will now pass to Mr. Leclaire.

Mr. Denis Leclaire (Individual Presentation): Thank you very much. My name is Denis Leclaire. I am the director of international activities at Saint Mary's University in Halifax.

Saint Mary's University will be receiving funding from CIDA to undertake a three-year project in the Caucasus entitled “Management Training for Small and Medium-Size Enterprises in the Caucasus”. I just returned about ten days ago from a two-week mission to Armenia, Georgia, and Azerbaijan. In addition, yesterday at Saint Mary's we were fortunate to welcome ten Uzbeki trainees, who are spending two months in Halifax to get exposure to the mechanics and philosophy behind MBA programming.

Today I'd like to very briefly talk about how Canadian universities can be agents of change in the Caucasus and in Central Asia. I'd like to provide a little more detail on what our project will be in the Caucasus, our recent trip to the region, and a few issues around that. I'd like to talk to you a little about the Uzbeki project and some of our challenges there. Finally, I'd like to raise a couple of key issues relating to the region, and the ability of Canadian universities and other Canadian entities to do work in the Caucasus and in Central Asia.

For those who don't know, Saint Mary's is located in Halifax. We're a medium-sized institution and we're extremely active internationally. Over 10% of our student body is international, and for our university it represents between $6 million and $8 million a year in revenue, so it's extremely important. We're involved in a variety of projects in four continents. We tend to focus on areas relating to governance, business and management training, environment, English language training, and training areas dealing with gender and gender equality.

Canadian universities large and small can play a major role in the transformation process taking place in the countries of the former Soviet Union. Canadian universities have requisite geographical and sectoral expertise, as demonstrated here, and can act as agents of change to build capacity and change attitudes and strategies that are in place in many of the countries in Central Asia. Capacity-building is what Canadian universities do well at internationally, and capacity-building in such sectors as management training, governance, gender, and the environment is required to create a new ethos in areas such as the Caucasus.

As I mentioned, I travelled to the Caucasus in early April with the director of our business development centre at Saint Mary's. We flew to Yerevan and spent a few days there, drove to Tbilisi, which was about five hours, and spent a few days in the Georgian capital. From there we went on to Baku at the border; that was about twelve hours. For those who are making that trip and are interested, during the question period I would be happy to answer any questions relating to logistics, travel conditions, border issues, a few bribes you have to do along the way to make things work for you, and road conditions.

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Perhaps I can make some general observations about Armenia, Georgia, and Azerbaijan. Again, it's certainly not my area of expertise, but I found it extremely interesting and extremely challenging. I guess the first thing that struck me was how sophisticated, how well trained, how well educated the people are, and how much they really know what it is they want and where they want to go.

Most people, and especially westerners, know that when we refer to the period since the late 1980s and early 1990s as the transition period, with the demise of the U.S.S.R. and the disintegration of the socialist bloc, there has been introduced in the new international thesaurus.... And those of you who have worked in international business for many years know we live on acronyms or on little sayings. These are now the countries in transition.

When we talked in Armenia, Georgia, and Azerbaijan about what transition is and how this is a relatively new phenomenon, people were quite polite. But I realized it really only was politeness until I spoke to the director of the Azerbaijan Women and Development Centre, who is one of our partners in the project. She said “I'm 73 years old, and all my life I've been living in one transition period or another. We have always had to adjust just to survive. With just a little bit of assistance, this adjustment period may be the easiest of them all.” I do think that's quite true. It's the people in the region and my colleague here, who knows far more than I do of the history there, who have been through a great deal. This one could be a piece of cake compared with the ones in the past.

Having said that, I think it's worth listing what has been attempted with different degrees of success in the Caucasus since the early 1990s. They are trying and have tried to establish democratic states. They have tried to form civil societies. They are trying to create systems of socially oriented market economies and they are trying to become integrated into the international economy. All of this is being attempted by people who have for all intents and purposes no training in these areas. Certainly they have no local role models. So just looking at the project we're trying to do in the Caucasus, the concept is that we're trying to serve as a catalyst for accelerating the development of the small and medium-sized enterprise sector in the Caucasus and assist in the transition of segments of this sector to a market-based economy.

Our partners we're going to be working with are locally based organizations. We were very much told.... My friend Phil here suggested quite strongly in certain areas that we stay away from the government sector, which we did quite strenuously. So we're working in Armenia with the Union of Manufacturers and Businessmen of Armenia, which is a professional association of 5,000 members, quite sophisticated. The president of the association owns a semiconductor company and has his PhD from a university in Moscow, knowing again exactly where he wants to go.

Our partner in Georgia is Tbilisi State University, which is itself in a transition period of its own from a very centrally controlled organization and university to trying to westernize as quickly as they possibly can, again having a lot of expertise left over from the other system.

Finally, in Azerbaijan our partner is a grassroots organization. It's the Azerbaijan Women and Development Centre that I mentioned before. They do a lot of work with women in the rural areas, which is a challenge in itself. However, if I understand it correctly, Azerbaijan is probably the country with the highest level of graft and corruption, so our strategy there was to try to work at the grassroots level.

Activities and projects will aim at strengthening business development centres that make up these organizations. The components will be quite straightforward. Delivery of practical management and business courses will be at very much the practical level. We'll be doing a lot of work on the Internet with electronic mentoring with selected companies in the three countries. We shall try to get a buy-in from some of the people in the region. We're going to have a study tour of parts of Canada, looking at how we handle business development in Canada. We're going to have some of our colleagues from the Caucasus do job shadowing in Halifax, and then we will hold small regional conferences to encourage regional cooperation.

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In addition to better preparing small businesses to cope with the demands of a market economy, the project will facilitate networking and collaboration and serve as a catalyst to develop common business ethics and standards in the Caucasus. That's what we're trying to do over the long term.

We've also been encouraged and are trying to serve as a link between businesses in the Caucasus and the Canadian private sector, professional associations, NGOs, and universities in Canada.

Our first activity is slated for late August. We'll be starting with the basics by talking about such concepts that seem quite natural to us but are very different for a lot of people there, about what is a free market and what is a market-based economy. There are a lot of misconceptions there, as there are here in Canada.

Finally, I would like to talk about our Uzbeki project. It's also an interesting one and is linked to what we're doing in the Caucasus. With the Canadian Bureau for International Education, and again with CIDA support, we've been asked to provide two months of training for ten Uzbeki trainees. The idea, again, is related to management training but this time at the MBA level. Here as well there seem to be similar problems as in the Caucasus. The people are talented, they're very well trained, and they're extremely sophisticated. Now they want to function within a market economy but they don't really know what that is. Therefore, the request from the Uzbeki authorities was to provide training that would allow their young, bright talent to better understand what management training is all about.

Finally, some issues. The first one will come as no surprise. From my limited experience, and certainly doing a lot of research, Canada is all but invisible in the Caucasus. This is especially true in Georgia and in Azerbaijan. In Armenia, we have a little bit more profile and a bit more awareness through the diaspora. Certainly the competition are the Europeans and to a great extent the Americans. They're investing heavily in the region. They have a great deal of profile. And relating to the other issue, they're also killing us from a university perspective on the whole visa issue.

Visas to Canada, either to visit or for student authorization, are much more difficult to obtain than to the U.S. or to Europe. Even with projects funded by CIDA or other donor agencies, Canadian immigration officials mostly—and I must say in this case in Moscow—have put up some barriers, time barriers, administrative barriers.

I can give you an example. For the Uzbeki project, which is only eight weeks long, it took six weeks to get visas and then someone from Tashkent had to fly to Moscow to pick up the passports. There certainly wasn't a lot of facilitation there as far as helping to get the people into Canada.

It's interesting that at a time when we are encouraged to do work in the region by one government agency, CIDA, and are encouraged to recruit international students to Canada by DFAIT and by Industry Canada, we often end up with larger difficulties with visas when trying to encourage students to come to Canada. This is especially the case in the former CIS countries.

Anyway, I'll leave it at that. I wish you good luck and a safe trip. Do enjoy it. The people are extremely nice and are interested in establishing links at all levels.

The Chairman: We'll go to Mr. Rourke now.

Mr. Phil Rourke (Program Director, CIS and Eastern Europe, Centre for Trade Policy and Law of Carleton University): Thank you, Mr. Chairman.

I will touch on the following points: who we are at the Centre for Trade Policy and Law; the local context in which we work in both the southern Caucasus countries and in Russia and Ukraine; the main features of our programming in the region; and some of the lessons we have learned by working in the region over the last five years.

First, who we are: The Centre for Trade Policy and Law is a non-profit, independent think-tank based at Carleton University and the University of Ottawa. We specialize in providing research, training, and advisory services on trade policy and trade law issues.

We were established ten years ago, with a mandate to promote greater understanding of trade issues, encourage graduates and other professionals to get into business and careers in international trade, and to contribute to the knowledge base in Canada and around the world on international trade issues.

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We were established initially by a grant from the Government of Canada. That grant continued for several years and has now been phased out. All our current programming is based on funding for specific projects.

What I think makes CTPL unique in Canada and around the world is that we provide very practical solutions based on years of experience and independent research on how to develop and implement effective international trade strategies for countries that are interested in becoming further integrated into the international trading system. What we found both in Canada and around the world is that there's a great need in transition economies and in developing countries for this kind of advice.

Our services are mainly based on our experts at both sponsoring institutions, the Norman Paterson School of International Affairs at Carleton and the Faculty of Law at the University of Ottawa, as well as the experience of our associates who are mainly former senior Canadian government officials who worked directly on trade issues during their careers, either at DFAIT or in other trade-related departments.

We are currently working in more than 15 countries around the world and have worked in about 40 countries since 1989. In the CIS region we work in Russia, Ukraine, Azerbaijan, and in Georgia and we are currently investigating the possibility of being involved in Armenia.

In these countries we are involved mainly in multi-year projects that are focused on two things: short-term technical assistance on international trade issues and longer-term assistance in building up local capacity and expertise so that these countries can participate more effectively in the international trading system.

I think our international partners have so far been interested in working with us for two specific reasons, and I think this is relevant to your work here. First, it's our Canadian perspective. Canada is a smaller economic power. It doesn't have an imperial legacy of pure global interest. Because of that, our experience in the international trading area is more relevant than the experience of larger developed countries such as the United States or the countries of the European Union.

Second, our approach both in the short-term and in the longer term of capacity-building and our focus on practical solutions is more appropriate to the local conditions, practices, and cultural sensitivities than most other donor-sponsored projects in this particular area.

At CTPL we also have a strategic interest in working internationally. First, the experience we gain in working in these countries helps to build further to our knowledge base on trade issues. Second, the partnerships we develop promote longer-term interests for both our partner institutions, both universities here in Ottawa And third, the experience helps us to realize our longer-term strategy of building international network of CTPLs around the world so that we can continue to work in these countries and learn from this experience beyond the limits of our current technical assistance projects.

Another thing I'd like to talk about is the context in which we work in this region. Our most significant experience has been in Russia over the last five years. I think some of this has relevance to our work in the south Caucusus, where we've been engaged for the last year.

Last year your committee studied Canada's interest in policies related to our participation in the World Trade Organization. As you know, effective participation in this organization requires an enormous effort on the part of not only Canadian federal and provincial governments but also the effective participation of a growing trade policy and law community within Canada, trade consultants, customs brokers, law firms, financial institutions, think-tanks such as CTPL, business, and other interest groups. All of these organizations support the work and review the work of the Canadian government. There is also a very informed and organized civil society that is increasingly demanding a role in the process of developing and promoting Canada's trade interests around the world.

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This whole effort involves hundreds of people, extensive and ongoing coordination, and a business, government, and civil society culture that is receptive to change, can accommodate and respond to new developments and pressures, and can pass on the lessons and experiences to successive generations in order to keep the process going.

However, in the countries that you're currently studying, both the market-oriented, democratic culture and the institutions required to sustain specific government initiatives and reinforce this culture are only beginning to develop. This is occurring within the context of very difficult economic circumstances in some of these countries, ongoing political instability in some of the countries, unpredictable and sometimes very dangerous or difficult geopolitical manoeuvring, and some very intractable social problems.

Still, the people on the ground press on, as Denis was mentioning earlier. Just as he is, I continue to be amazed by the energy and the determination of our partners to make a difference, but echoing something that Denis said, as one of my friends in Russia once said to me, “Phil, it's sometimes impossible to work when you live in a society in permanent crisis, but we have to continue nevertheless.”

The Chairman: That's why we never get any work done around here.

Mr. Phil Rourke: Well, then you'll understand when you meet the.... These countries recognize the need for assistance and can benefit from the experience of Canadians and others. At the same time, their experience over the last 10 years with statements about change, with the large and ambitious technical assistance programs that have not always had the intended effect, and, as they recognize themselves, with the folly of many of their own government's actions and policies, have taught them that the transition to more of a market economy and a democratic future is a long one.

There is a Russian proverb that says the steadier you go, the farther you get, and I think that's part of what's happening in terms of the changing of the mentality in these countries.

While this is going on, donor countries such as Canada are going through a transition themselves, I think, in their thinking about their involvement in this part of the world. We in the west began the 1990s with the view that the process of reform in the former Soviet Union was a short-term process that could be overcome by matching western experience, technology, and money with the skills, resources, and determination of a people who had been liberated from the Soviet past.

But as the decade wore on, this theory became increasingly at odds with the practice and the experience. Still, we pressed on. Our partners continued to make the right statements and took enough positive steps to rationalize the continuing involvement of this view while we were witnessing what we were told was going to be the end of history. Finally, with the August 1998 financial crisis, this whole approach came crashing down upon itself and we began the process of going through the pieces for clues of what to do next.

From my reading of some of the previous testimony before this committee and some of the questions that have been raised, this search continues, both within our government and in the work of your committee, I think.

Where CTPL fits in all this: this is the context in which we have been working in these countries. In Georgia and Azerbaijan we are involved in multi-year projects funded by CIDA to build institutional capacity so that local experts have the knowledge base, tools, and international contacts and experience to assist their respective governments to accede to the WTO and to participate effectively once they become members.

Our work involves training programs; strategic advice on trade policy and trade negotiation issues; establishment of local CTPLs modelled on what we do here in Canada; access for our partners on our international network and trade databases through our web-based information system, much like, I think, what Denis is doing with his electronic mentoring system; and assistance in building a local and regional network of private and public sector trade experts to assist both governments and effective participation in the international trading system.

At the present time, we are also investigating, with CIDA, ways in which a regional approach to trade policy capacity-building can assist in closer regional cooperation and thereby assist in the peace-building process in the region. What we are trying to do is to find issues where there are common interests, to develop activities around those common interests, and then to build from the success of those initiatives.

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To give a concrete example, we deal a lot with the details of trade legislation in our work. Most legislation in these countries is based on Soviet-era legislation. Since each country is at a different stage of translating this legislation and modifying it to local conditions and to commitments made within the WTO accession process, a sharing of information, experience, and approach can be a mutually beneficial exercise.

In addition, where possible, we involve our Russian partners in our project in the southern Caucasus. Our experts in Moscow used to work directly on the legislation. They have also worked with us longer, and therefore can help us explain to our partners in the region how this CTPL model, as we call it, can assist in developing local capacity. By providing assistance where required, we have been able to achieve, I think, some very concrete results. By adopting an escalating approach to joint activities, we hope to contribute to longer-term political and economic stability in the region.

Finally, in Azerbaijan we are also testing out a new idea, working with the Government of Norway in an approach of joint cooperation on technical assistance. We found that the Norwegians and the ambassador there in Baku, like ourselves, are very interested in doing some work in the accession area, but they're very concerned about minimizing the risks and some of the problems that can arise in working with great distances and different cultures.

What we're trying to do with a think-tank in Norway is to complement efforts and share financial and other resources in order to achieve a number of very concrete results. We are currently developing a set of joint activities around the oil and gas industry that would promote the development of WTO-consistent regulations and standards in the sector, promote Canadian and Norwegian joint cooperation in oil and gas in the region, and then to build longer-term domestic support in Azerbaijan for membership in the WTO.

Finally, I would just like to look briefly at five lessons we've learned by being involved in this part of the world over the last five years.

First of all, we've found that we have to understand cultural differences. We've found that it has been much more difficult to get a working relationship with our partners than we had first anticipated. We've found, to differing degrees in these countries, that it takes one, two, and maybe even three years to develop the kind of business relationship that we're used to here in North America. But once you develop that relationship, you can begin to see some results.

That then leads to the second lesson, which is that you have to think in the longer term. In our experience to date we've found that local partners are wary of developing relationships with outside organizations that are interested only in short-term results.

Local partners tend to spend a lot of time testing out a relationship with outside organizations, and only after many of these tests do they begin to make serious contributions to the partnership. In fact, in Russian there's even a word for it, nashi, which is similar to the French word nous, which means “us”, but it's even a stronger word, and means “one of us”. You constantly go through this process of being tested as to whether you're one of them or not—you're never quite one of them—and this process can take a long time.

The third lesson is to find committed partners that share your goals. This might seem obvious, but I think it's a point that needs to be stressed, because I've seen, just in my brief experience there, many projects where the different levels of commitment to the project on both sides can have a really dramatic effect on the achievement of results within the project.

Fourth is to focus on practical work with discrete outputs. We've worked on joint work plans and joint activities much like what Denis was describing. They're very practical issues that focus on what they have to get done, both in the short and longer term, and more often than not just in the short term. If you focus on these kinds of projects, you do tend to get better results.

Finally, as Denis also was saying, you have to focus where possible on non-governmental organizations. These help to ride the different waves of government and political instability, some of the difficulties that can arise. If you work with a local partner, I think you can get some better results.

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That's our presentation. I understand the group of you who are going to the southern Caucasus will be visiting our project in Tbilisi. Two of our experts will be there, who some of you may know, because they worked on your research staff when you were doing a WTO project. Roy Hines will be there. He's been working with us, and specializes in trade remedies issues. We're assisting them to develop their trade remedies legislation. That's in Georgia.

The second is Chris Maule, who is a former director of the school that sponsors us, and one of your previous researchers. One of his areas of expertise is e-commerce and telecommunications issues. The Government of Georgia is trying to figure out a strategic plan in this area.

So they're in town. You'll be meeting with them and our partners at the ministry of trade, and I think you'll enjoy meeting them very much.

Thank you.

The Chairman: Thank you. Give them advance notice that we'll expect them to write at least one of the chapters of the report before we get there. So get them working on it.

Before I turn it over to questions, there was one thing that struck me as not inconsistent, but I didn't quite understand it when in your presentation, Mr. Rourke, you talked about working with NGOs. At the beginning of your presentation it seemed to me you were talking more about training government bureaucrats, that they lack the governmental capacity for the WTO. Then you said you're trying to build.... This seems to me to be rather different, and the second idea is somewhat more ambitious than the first. Are you trying to do both at once?

Mr. Phil Rourke: Yes. What we found when we began working in Russia is we were working directly with the ministry in the traditional way of training projects and so on, and it was focused on large numbers of people, with technical and specific training. That didn't work very well.

It worked well in terms of how many people were involved and dividing up the money spent on it and so on, but it really didn't develop the local capacity. So what we've tried to do in Russia—and we've been successful—and we're now trying to do in these countries is to first work directly with these ministries, find a group that can then set up an organization like ours in these countries, and then focus on a small group of people who are close to the ministry, but also separate.

In these two countries we haven't found specific people who have already set up an organization, so it's a little more difficult. Maybe that's where the inconsistency is.

The Chairman: Would the government then turn to a group like that to help them draft the implementing legislation, or something like the WTO obligations and things like that?

Mr. Phil Rourke: That's right. It also provides a focal point for other donor agencies to target their assistance, and we've seen that this works quite well.

The Chairman: Thank you.

Mr. Obhrai.

Mr. Deepak Obhrai: Thank you, Mr. Chair.

Thank you for the presentation.

This morning we had a presentation, and after listening to that presentation I thought I was doing a good thing by not going. It was quite different from the presentation you have made, and I can understand that.

Mr. Bernard Patry (Pierrefonds—Dollard, Lib.): Put an X on this.

Mr. Deepak Obhrai: Thank you. I'm getting a pat on the back from the opposition.

They highlighted the political situation of the country and gave an in-depth analysis of the problems the whole area is engulfed in, which was fair enough. They stated that—and I'll quote one of them—“5% of the problem is associated with oil politics and Russia, and 95% of the problem is internally generated among themselves in their ethnic conflicts, in the pulls and tugs of such a highly diversified and undeveloped area”.

That left a very strong impression that there was a very long way to go in this region, and how it will work out in the end we don't know, considering Canada's dwindling resources. As a matter of fact, one of them even spoke to the fact that there was not even enough.... He said there was oil, but it isn't really the huge thing. It was there, but it's of no comparison to just Saudi Arabia itself.

• 1625

I can understand these things happening. A lot of resources and money have been poured.... I'm not stating to you that they should be abandoned or that we should get out of the area or anything. No, I'm not suggesting that.

One of them did mention the fact that the best approach was to build from the bottom up, from—I always have difficulty with the term “civil society”, as to me there's no civil society—I would probably say the NGOs there, and move up into the development from there.

You guys are up in the front line, I can understand. Regarding your pipeline issue, I don't even know whether any of these pipelines will go ahead, after I listened to this morning's presentation. You are developing small businesses and those things. That's very good. But I think it will be a small step—one small step, a giant leap, you know.

So I really don't know what to say, frankly speaking. All I can see from your presentation about the business of providing the framework to teach the government to go into WTO is that I think there's probably a long way to go before they are anywhere close to the WTO if the political instability carries on.

So what would you tell us, all three of you? We are looking at quite a lengthy period of time before we see real concrete progress in this part of the world.

The Chairman: Dr. Cutler.

Mr. Robert Cutler: Yes. You evoked the issue of the pipelines and the quantities. Let me address that. Also, I will address one or two of your other remarks.

As you know, in the early 1990s the United States government was the source for the idea that the Caspian was equal to a new Saudi Arabia. Since then, skepticism has become very fashionable, and the traditional skeptical view, or the skeptical view that has been in vogue now for several years, is that the Caspian region is approximately equivalent to the North Sea.

My work suggests that this is an overly skeptical view, and that even if it were correct that the Caspian were equal to one times the North Sea, this is still significant. It is significant because the consumption of oil is going to increase in the world. It is significant because it will be—there's nothing else that can be—the motor of the development of these countries and the economic growth that will satisfy the basic needs of their populations.

What is needed is the proper channelling, execution, and implementation of the energy development, so that the benefits are equally distributed, for example.

• 1630

Now, one of the reasons this skeptical view took hold, in addition to the fact that the view from Washington was overly exaggerated, was that, first, as you may know, the price of oil influences the amount of oil that is there. When people quote numbers of barrels, what they mean is the number of barrels you can get out of the ground and sell at a profit. If the price of oil goes up, then you can spend more money to get the oil out of the ground, and there's more oil there, more of what they call “proven reserves”. The price of oil, as you know, declined in the last year or two to $10 to $15 a barrel, but now it's up above $20 and it's going to stay there for quite some time.

I might also just mention that there are large sections of the Caspian Sea that have not yet been explored. The data exist. The Soviet energy ministries did world-class technical inventory of the natural resources of the Soviet Union. The hydrological data exist and the engineering data exist. What people are doing now is drilling the test wells to see whether these prove out.

In the last two months in the north Caspian, one in the Russian sector and one in the Kazahkstan sector have proven out beyond expectations, as has the Shah Deniz gas field in the Azerbaijan sector of the Caspian.

So I'd caution you against accepting uncritically a fashionable skeptical view only because it is not, for example, the view that the Americans tried to propagandize in the early nineties. The Caspian will be a major energy field—not like Saudi Arabia, but it doesn't have to be like Saudi Arabia. It will be between three and five times the North Sea. That is enough to sustain the interest that countries and companies have shown in the last ten years.

I would briefly address your point on the civil society. Of course the civil society, or what is called the civil society, is important. I agree with you that it is something of a misnomer. When it was first translated into Russian, as gragedamkoe, it had no meaning. People didn't understand it. I agree with you; it's better to talk about NGOs, for example, than civil society.

People and organizations will continue to assist the development of these organizations. However, the European Union, for example, over the last three to five years has had a democracy tranche within its activities. They have come to the conclusion that this is all very well and good, but in Brussels at the European Union they feel a major diplomatic initiative is now necessary, because after five years there is relatively little progress. Progress will be slow at the NGO level, and progress will continue, but that does not exclude the necessity for a major diplomatic initiative, either.

The Chairman: Mr. Rourke, very briefly, because we're now at the end of the ten minutes.

Mr. Phil Rourke: Okay.

Two things. On the short-term technical assistance in the area of WTO accession, WTO accession is about consolidating the market reform process and about diversifying trade relations and participating in the international trading system. As a member, that's why Canada supports these types of things.

Georgia is about to become a member. They just passed their legislation in parliament. Armenia is waiting to solve a political problem where the approval is being held back because of the conflict with Azerbaijan. Azerbaijan is not a priority to the same degree because it's not a priority of the President of Azerbaijan. Until that changes, I think you have to work at a different level.

• 1635

In terms of the longer term, you're right: it's the next generation we have to focus on. When we select the people who participate, we do try to select younger people within government ministries and within the private sector. They tend to be more ethnically diverse and there's a better gender mix. These are the people who will carry it forward. I agree with you that it will take at least a generation or so to get to what we hope they will achieve.

The Chairman: Mr. Leclaire.

Mr. Denis Leclaire: I just want to point out.... I don't know if your other witnesses have dealt a lot with the students, but I spent a lot of time with MBA students in Georgia and these students are as plugged in to the Internet as any North American student. I think that's going to make a huge difference in terms of demanding certain things. As Phil is saying, I wouldn't underestimate the younger generation there because they want to move extremely quickly and they know what's going on in the rest of the world.

The Chairman: Thank you.

[Translation]

The Chairman: Mr. Rocheleau.

Mr. Yves Rocheleau (Trois-Rivières, BQ): Mr. Cutler, I read the document appended to your testimony where you refer, among others, to the problem that exists between the Kazakhstan authorities and the Chevron corporation. As a member of the delegation going to Kazakhstan, I would like to know whether you think the people we will be meeting will raise this subject. Is it considered to be a serious and important issue in that country? If so, do you have any opinion about the responsibilities of each of the parties? Has there been any breech of obligations on the part of either of the two?

Mr. Robert Cutler: Relations between Chevron and the Kazakhstan government are far more harmonious now than they were five or seven years ago. I don't know whether you'll be making a field trip to Tengiz. If so, I hope you will have an opportunity to meet the persons in charge of the company and to talk to the people exploiting these resources. It is my feeling that information you get from the Kazakhstan government will not be as relevant as what you will learn from consulting people in the field.

You are quite right in noting that in this article of mine, published last year and based on previous research, I said that at the very beginning, when they started developing the Tengiz resources, there were problems of mutual misunderstanding. Western companies often had trouble fitting in to societies with collectivist traditions, even in newly independent countries. I gave some examples in the article so I will not repeat them and I must say that Western companies have made a great deal of progress. They have had to learn new ways of doing things and even come up with new methods of management and new forms of intra-cultural and multinational organizations. We are not talking about international organizations, although there are representatives of several countries belonging to the group of decision-makers.

Because of their interest in the market, they have had to learn the right way of going about things and they have managed to do so. I think it would be an interesting question for you to raise in your trip to Kazakhstan. I should note that the problems mentioned in this article are not as serious as they were two or three years ago at the time when I was doing the research.

Mr. Yves Rocheleau: In your presentation, you talked about the creation of a southern Caucasus community and said that this initiative had not yet been made public. Why is this the case? Is it just a theoretical project? Are there certain people opposed to it? Is there any resistance to the creation of a southern Caucasus community?

• 1640

Mr. Robert Cutler: No, it's still at the development stage. I was talking about it this morning with those responsible for the initiative. It is not a secret. There is a political research centre in Brussels which is, in fact, the main think-tank for the European Union. I am a member of one of its groups that prepared a document now in its sixth draft. We will soon be posting it on the website of the centre to inform experts and decision-makers and to hear their input in order to improve it. Because it has not yet been published on the centre's website, I mentioned that this initiative had not yet been made public. But it is certainly not a secret.

Not only will the creation of a southern Caucasus community require great co-operation on the part of the European Union, but it will also need the involvement of members of this centre, including the former EU ambassador in Moscow, as well as the Parliamentary Assembly for economic co-operation in the Black Sea, among others. There are many interests to be reconciled and this is what I was thinking about when I said the initiative had not yet been made public. It still needs fine-tuning and at the present stage, greater discussion would be useful. It will be taking place in the very near future.

Mr. Yves Rocheleau: Is the purpose of this project to protect and develop local interests or rather to protect and develop Western interests?

Mr. Robert Cutler: When the people from Brussels and the European Union talk about Westerners, they include Europeans, whose interests are sometimes significantly different from those of North Americans. The big pipeline from Azerbaijan to Turkey is an example of the different viewpoints of the two transatlantic partners.

First of all, the interests of local stakeholders must be reconciled and an effort made to promote a definitive solution to the Karabakh conflict. This is a necessary condition for any peaceful development of the southern Caucasus region. It is not a matter of choosing among the interests of different groups but rather of finding a way for them to be made complementary.

Mr. Yves Rocheleau: Thank you.

The Chairman: Mr. Patry.

Mr. Bernard Patry: Mr. Cutler, I'd like to thank you for your excellent documentation. I will continue along the same lines as my colleague Rocheleau.

This morning, we heard from witnesses who presented a different point of view from the one you have given us this afternoon. They showed us graphs indicating the progress towards democracy, so to speak, of the southern Caucasus countries. We cannot really say that there has been an improvement in the past 10 years. We were told that there was an election held in Georgia that could be described as acceptable from the point of view of Western standards. In Armenia, things are going more or less well whereas in Azerbaijan, it is an outright autocracy; there is a government, but there is no democracy. You are aware of the present problems in Armenia and the fact that members of Parliament wish to dismiss the President, to get rid of him. You know that in Georgia, President Shevardnadze escaped a number of attempts and there may be a change of president in Azerbaijan as well.

As my colleague noted, you suggest that we promote the creation of a southern Caucasus community and ensure that this community will have first of all a regional parliament. How can a regional government be set up when the members are appointed? In these countries, there is no question of imagining that the members of the government might be elected when it is hard enough to ensure that members of Parliament are elected. That strikes me as being something quite difficult. How can a regional government be created when things are still on a very shaky footing in these countries?

• 1645

Mr. Robert Cutler: Perhaps I did not express myself clearly. I am not talking about a regional government. In the 1960s, for example, there was a regional Parliament.

Mr. Bernard Patry: A regional Parliament.

Mr. Robert Cutler: Yes, a regional Parliament. The proposal now being discussed provides for direct elections and defined constituencies with seats reserved for minority ethnic groups such as the Adjars and the Ossets in Georgia. The intention is to promote direct elections and to give the regional Parliament advisory powers since there would not of course be any regional executive. Although it is not my idea, I consider this proposal to be in keeping with the idea of an intermediary level between the so-called civil society and the executive level, since it allows for representatives of the different peoples without a threat to anyone. There is no forum in the southern Caucasus where representatives of the three states can meet today in order to engage in a peaceful discussion of any subject and attempt to agree on some type of co-operation. At the beginning at least, it would be an institution allowing representatives of the people to consult each other without going through the executive.

Judging from my past research on international parliaments in general and international parliamentary assemblies—something quite different—I think it can be expected that this institution would devolve mechanisms to other sub-institutions and specialized sub- groups to deal with particular issues identified by regional MPs in their discussions.

This particular project calls for a direct election. I made other suggestions, that strike me as a bit more practical. Nonetheless, it was decided to go along with proposals that strike me as being more difficult to put into effect. If the main disputes such as the problem in Karabakh are resolved, then they will be able to start off anew.

You asked me how these proposals could be implemented. It can be done through a direct election probably monitored by a group of agencies acting as observers, including the European Organization for Security and Co-operation, there are many such organizations active nowadays. That's how the proposals could be put into effect. Did I answer your question, Mr. Patry?

Mr. Bernard Patry: I think it's an excellent idea. If we want to bring about a certain kind of democracy, then in my view this should be done through parliamentarians rather than governments, which tend to be more autocratic. When parliamentarians are elected, it is easier for them to take measures that will have the effect of modifying certain practices in the medium or long term on the way to democracy. I think it is an excellent idea. I did however wonder whether it might not be premature to implement such proposals at the present time in view of the many conflicts there are in this region. For example, Armenia refuses to have any dealings with Arzerbaijan. Although the idea seems excellent, I was wondering if it was really feasible.

Mr. Robert Cutler: We can start doing something and then we'll see.

Mr. Bernard Patry: Yes. Thank you.

Mr. Robert Cutler: I thank your for your appreciation.

[English]

The Chairman: Let me just follow that up, professor. You refer in your paper to some two dozen institutions. Are you referring to institutions like the IPU, the NATO parliamentary assembly, and the OSCE parliamentary assembly, as well as to items like—

• 1650

[Translation]

Mr. Bernard Patry: The Parliamentary Assembly of the Francophonie.

[English]

The Chairman: Yes, exactly.

[Translation]

We always bring up our own hobby horses, don't we, Mr. Speaker of the Parliamentary Assembly of the Francophonie?

[English]

Is that in the two dozen—

Mr. Robert Cutler: Yes.

The Chairman: —or are you referring simply to regional parliaments like the Parliament of Central America?

Mr. Robert Cutler: For technical definitional reasons the two dozen refers to the regional parliaments.

The Chairman: So that's Parlatino and things like that.

Mr. Robert Cutler: And the ASEAN Inter-Parliamentary Organization, the Union of African Parliaments, the Arab Inter-Parliamentary Union and the Baltic Assembly and so on and so on.

I'm aware of the existence, as you are, of the IPU and the Assemblée and the Commonwealth Parliamentary Association and

[Translation]

there will soon be a large association for Spanish-speaking countries.

[English]

But for technical reasons I didn't include them. However, I would say that if we were to include those then we can talk of 30 or 32 of these sorts of things. Because there are also other on-the-edge liminal sorts of cases. For instance in South Asia, the SAARC, the regional cooperation council there, has a parliamentarians conference, but it's not an organization and it's not a union and there are other initiatives. Just last year in Teheran, the Organization of the Islamic Conference established a parliamentary union with 40 or 50 different parliaments.

So the answer to your question is that the 24 refers exclusively to regional organizations, including the North Atlantic Assembly and the ones we have named. In addition, there are cousins they have of the same family, and if we include those then we get even more: we get three dozen or more, depending on how wide we want to cast the net.

The Chairman: And of course you're probably aware that we're looking at forming a WTO parliamentary assembly as well, which is a pet project of Michael Moore, the present secretary general, and a group of us who were in Seattle. You suggested there would be an intermediary between civil society, and I'm not too sure what. But why are not parliamentarians themselves representatives of civil society?

Mr. Robert Cutler: They are. When they come together in groups of parliamentarians they form a corporate body that is distinct from civil society and that has its own special characteristics. And because they're elected they have special distinctive possibilities for action. That is all I was suggesting.

The Chairman: Thanks.

Mr. Leclaire, may I ask you a question about these special SMEs, small and medium-sized enterprises, and the work you're doing to encourage development of SMEs in the region? Are you focusing on export potential of SMEs, or just trying to create the existence of SMEs in the—

Mr. Denis Leclaire: No, initially it's more the creation or the strengthening of existing SMEs. The export side of it is I think quite a number of years down the road. Having said that, I guess the definition of SMEs is sometimes open to interpretation, of course. I know here in Canada we talk about an SME that has a profit margin of.... Small enterprise would be anything under $1 million, medium enterprises $1 million to $10 million, and then large is.... But that's very arbitrary.

The Chairman: The EDC has its own definitions for its purposes, and different organizations have their definitions. I wondered, because when we were doing our study into SMEs and export potential we referred to how Canadians who represented the diaspora of various countries represent a potential link for export purposes, whether it's the Chinese community in Toronto and Vancouver or whether it's the Armenian community with Armenia, etc. I wondered whether in your work you were using, to some extent, Canadians of origins from those countries to both help set them up and also maybe establish direct links between corporations here and corporations in the region.

• 1655

Mr. Denis Leclaire: Yes, we definitely will be making use of them, especially on the Armenian side. But I detected a little bit of a danger—and maybe because we had an Armenian Canadian who was helping us out in Armenia—that there may be a tendency to limit themselves just to Armenian Canadian business. What we're trying to do is maybe to expand that beyond this particular network, because it's a comfortable niche over the long term, so maybe it's better to move beyond that fairly quickly.

Again, I come back to the point I was making to the gentleman, which is that the power of the Internet in this region is immense, and the power of the Internet as far as business is concerned is immense.

The Chairman: So if by going to one group you get the advantage of a cultural and linguistic entree, you then may find it becomes constraining at a certain point in the development and maybe stops it from going beyond that?

Mr. Denis Leclaire: Absolutely. Yes.

The Chairman: You're finding the Internet is particularly useful for.... We hear a lot in the committee about how the Internet is going to enable people in development areas to jump over years of development, jump over the process that other countries have had to go through. Do you believe this will be the case in the near future?

Mr. Denis Leclaire: Very much so. There is a fairly sophisticated software industry in Yerevan right now, with a number of American joint ventures—Silicon Valley. The labour costs are extremely cheap and the level of training is relatively high. Although the Armenians seem to feel that their level of involvement in the computer industry is state of the art, when we went and visited the USAID people they felt it wasn't quite that good. Because one has to consider that the training the Armenians would have received would not necessarily continue to be on the leading edge. But who is on the leading edge today anyway? It's hard to say.

But there clearly is a real understanding at a certain level. While technically they are probably as good as if not better than many parts of the world, one of the areas in which they do need help is that they have a problem in making use of the Internet for business purposes and especially for marketing. They're horrible marketers, absolutely. That's one of the areas in which we want to provide some assistance.

The Chairman: We heard that because there's a large Turkmen population spread throughout the region that in fact Turkey and Istanbul tends to be a centre of relations for small and medium-sized business throughout this whole region. Is it your experience that there's a great deal of influence, or...?

Mr. Denis Leclaire: Maybe I'll go to Mr. Cutler in a second, but the experience was that for Armenia, especially at the level we were dealing with, they feel pretty cut off from a variety of different markets and they want to re-establish themselves. I'm sure you've been given the statistics that in 1990 Armenia ranked 47th in the human development index and today they rank 87th, I think. They'd like to get back to that standard of living where they were. So there's a lot of convincing, a lot of work that needs to be done. I think they want to re-establish their markets but on a much broader base. This was true among the people I talked to.

Mr. Robert Cutler: The Turkish presence in the region in an economic sense is mainly through foreign direct investment in such sectors as construction and so forth. As you may know, Turkey is at present in the process of seeking to implement an economic plan that they have agreed to with IMF to restructure their own domestic economy so that they do not have as much experience in the fostering of SMEs as do the members of the European Union or Canada. So the ties with Turkey are cultural and they are economic through foreign direct investment, but there is relatively little cooperation on the grassroots level for SME promotion, relatively little.

The Chairman: So in terms of what we heard some years ago in Turkey about the famous suitcase trade that contributed greatly to the Turkish economy, it was largely with Russia, was it, rather than with the Caucasus region?

• 1700

Mr. Robert Cutler: Yes. Even so, that's not SMEs, properly speaking. It's the suitcase trade.

The Chairman: Right. It's trades.

Thank you all very much.

Mr. Rourke, we wish you well in your role in training people in that region about the WTO the way you and your colleagues have trained this committee about the WTO in the past.

Thank you all very much for coming. We appreciate your evidence very much.

Colleagues, I just want to say that I'm going to put out a press release about our trip to the Caucasus. I'll send it to all of your offices. If some of you have some particular personal interest in it, you might want to issue your own press release. On behalf of the committee, I'll just put out one saying what we're trying to do in terms of complementing Canadian government policy in the area and understanding our resources there.

Thank you very much for coming. We're adjourned until Thursday morning at 9:30.