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]

Wednesday, April 28, 1999

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[English]

The Acting Chairman (Ms. Sarmite Bulte (Parkdale—High Park, Lib.)): Good morning, ladies and gentlemen, and welcome to the Standing Committee on Foreign Affairs and International Trade. Pursuant to Standing Order 108(2), the main committee is conducting an examination of Canada's priorities as we enter the World Trade Organization negotiations. In addition, the subcommittee on international trade is examining the priorities of Canadians as we strive to reach an agreement of the free trade area of the Americas.

The public hearings our committee is holding across the country on key aspects of Canada's future international trade policy come at a time when countries are facing some critical choices and decisions through the complex negotiating processes being conducted both multilaterally under the WTO and in developing regional fora such as the proposed free trade area of the Americas agreement.

In undertaking these wide-ranging public consultations on Canadian interests in both the WTO and the FTAA, the committee and its trade subcommittee strongly agree with the Minister of International Trade, Sergio Marchi, on the necessity to provide Canadians with more opportunities to have input into the position the Government of Canada takes going into these negotiations.

In March the committee travelled to Quebec and to the Atlantic provinces. This week, while one-half of the committee is holding hearings in three western provinces, the other half of our committee is having similar hearings in Manitoba and Ontario. We hope to benefit from as broad a cross-section of Canadian opinions as possible and to reflect this in a report that we hope to table before the beginning of the summer, well in advance of the major international trade meetings taking place later this year.

Leading up to this phase of cross-country consultations, the committee in February heard first from the minister and his officials, and after that we had a number of successful round tables convened in Ottawa prior to the start of these hearings. By mid-April, more than 100 witnesses had made substantive presentations to the committee, addressing a broad range of critical issues and concerns, and in our last two days in Vancouver we heard from an additional 70 witnesses.

As Minister Marchi stated in his opening presentation to us, international trade has now become a local issue. What happens as far away as the negotiating table has consequences that reach right to the kitchen table and into other domains of daily life. Now, as this trend deepens as a result of globalization, the making of trade policy cannot be left to only a few officials in back rooms, but needs to engage the whole of society and governments at all levels.

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Members of the committee therefore welcome these hearings as one of the steps in contributing toward that goal. We have been truly impressed by the quality of the testimonies and the written submissions beyond the formal hearings. But this must be an ongoing learning and listening process.

In that regard, I'm proud to announce that our committee has added to our Internet site a series of discussion notes with questions for public consideration.

I'm also pleased to announce that in our report we are planning to include a citizens' guide to the WTO. We encourage citizens in all parts of Canada to continue to participate and to follow the progress of our parliamentary studies process in the coming weeks and months.

With that, I'd like to welcome you this morning to the meeting. I'd like to start by having my colleagues quickly introduce themselves.

Mr. Penson.

Mr. Charlie Penson (Peace River, Ref.): I'm the MP for Peace River and the trade critic for the official opposition.

[Translation]

Mr. Benoît Sauvageau (Repentigny, BQ): My name is Benoît Sauvageau and I am an MP from Quebec and the spokesperson for international trade.

[English]

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): I'm from central Ontario. I'm the vice-chair of the Standing Committee on Agriculture and Agri-Food, and in my other life I am also an active poultry farmer under supply management.

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): I'm the parliamentary secretary to the Minister of International Trade. I'm a member of Parliament from southwestern Ontario.

Ms. Colleen Beaumier (Brampton West—Mississauga, Lib.): I'm a member of Parliament from near Toronto, but definitely not Toronto.

Mr. Murray Calder: I believe you're next door to me.

Ms. Colleen Beaumier: That's right. I am the chair of the subcommittee on international human rights.

The Acting Chairman (Ms. Sarmite Bulte): Good morning. I have the privilege and the honour of chairing these western consultations. I am also the chair of the international trade, trade disputes and investment subcommittee, and I am a member of Parliament from Toronto, the riding of Parkdale—High Park.

Ms. Colleen Beaumier: Nobody's perfect.

The Acting Chairman (Ms. Sarmite Bulte): I'd like to take this opportunity to welcome Mr. Grieve and Mr. Makaryshyn. We'd ask that you begin, and that will be followed by questions and answers. Good morning and welcome.

Mr. Willie Grieve (Vice-President, Regulatory Service, BCT.Telus): Good morning, Madam Chair and members of the committee. Thank you for this opportunity to address the Standing Committee on Foreign Affairs and International Trade. I'm vice-president of regulatory affairs at BCT.Telus, and with me is John Makaryshyn of the BCT.Telus government and community affairs department.

Recently formed by a merger between Telus and BC Telecom, BCT.Telus is Canada's second largest communications company. Through wholly owned subsidiaries and joint ventures, we employ 25,000 Canadians and manage assets of nearly $9 billion. BCT.Telus companies provide voice, data, visual communications, information, and advertising services.

We welcome the opportunity to comment on the significant issues facing the Canadian government in the upcoming WTO ministerial conference. As the Honourable Sergio Marchi indicated when he appeared before you, 40% of Canada's GDP is tied to exports. If you include imports, trade might represent as high as 75% of our GDP. Minister Marchi stressed that Canada cannot afford to be a bystander when it comes to generating the rules of the trade game, given the importance trade plays within our economy. We agree with the minister.

Canada's modern communications infrastructure is the product of policies that recognize the importance of a competitive framework that encourages companies to build the infrastructure needed to connect Canadians to each other and the world.

To further strengthen Canada's industry, a number of issues need to be addressed. The topics I would like to discuss today fall into three main categories: electronic commerce, foreign direct investment, and telecommunications competition and regulatory policies addressed in the WTO negotiations on basic telecom services.

First, electronic commerce. As you are aware, over the last few years we have seen an explosive growth in the World Wide Web via the Internet. We've also seen a corresponding growth in the use of electronic commercial transactions. E-commerce significantly reduces many of the costs associated with conventional methods of trade, and it also saves times for consumers. E-commerce holds the promise of increasing trade for Canada as a whole, strengthening the Canadian economy, creating job growth and a higher standard of living for Canadians.

One conclusion flowing from the OECD ministerial conference in Ottawa last year was that electronic commerce will flourish only if there is a predictable legal framework in place. How electronic commerce is dealt with by the WTO is important. The Canadian government has taken a leadership position in promoting a stable international legal environment that is transparent, non-discriminatory, flexible, and technologically neutral.

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While there are many issues related to electronic commerce trade that are germane to the upcoming WTO trade negotiations, I'll briefly highlight our recommendations in two areas this morning.

Customs duties. In their 1998 ministerial declaration, the WTO ministers made a political commitment to refrain from introducing duties on electronic deliverables.

We recommend the Canadian government support efforts within the WTO to make permanent the current practice of not imposing duties on electronic transmissions.

Privacy and electronic authentication and cryptography. We support the Canadian government's proposed privacy and electronic authentication legislation, Bill C-54, and its cryptography policy.

We recommend that the Canadian government work to ensure that trade agreements are consistent with Canada's policies in these areas as well as the OECD guidelines on privacy and cryptography. This will ensure that the policies of other countries do not become obstacles to international trade.

Now we'll move to foreign direct investment. Beyond setting the right ground rules to address the trade-related issues of electronic commerce, the rapid growth of the global communications infrastructure depends on a continued international commitment toward open market policies that encourage competition and investment. Open markets enable competition, stimulate innovation and economic development, and benefit consumers.

To this end, we support continuing efforts by governments to liberalize foreign ownership rules in the telecommunications and broadcasting industries. Continued efforts to liberalize investment rules will benefit Canadians and encourage facilities-based investment in Canada and other host countries that promote competition and investment.

Conversely, countries that seek to limit foreign investment or access to domestic markets will slow development of their domestic infrastructure and deprive their economies of access to products and services at competitive prices, ultimately undercutting their own competitiveness and quality of life.

To effectively achieve Minister Manley's connectedness agenda and to go beyond to make high-speed Internet services and emerging e-commerce applications available to Canadians, we need to encourage international investment in facilities in Canada.

In regard to telecommunications competition and regulation, we believe it is important for the Canadian government to step back and take another look at the way in which the WTO addressed telecommunications and regulation in the agreement on basic telecommunications.

We believe that by including telecommunications in the negotiations on trade in services, important differences between telecommunications services and other types of services have been missed. The result is that certain concepts and ideas expressed in the reference paper, which was designed to provide common standards against which member countries could measure the success of their market access commitments, could actually be interpreted in a way that inhibits the development of competition.

So that there is no misunderstanding about this, we do support the objectives of the reference paper to facilitate competition and market access in telecommunications.

Our concern, however, is that the reference paper seems to attempt to import many ideas, concepts, and mantras from the United States, many of which found their way into the U.S. Telecommunications Act of 1996 and have been the subject of court action in the U.S.

Indeed, there's a growing body of academic literature that recognizes the fundamental mistakes made by the U.S. Congress and the FCC in introducing telecommunications competition in the United States. This literature recognizes that many of the telecommunications competition policies pursued by the U.S. Congress and the FCC are in reality not based on competition law, but economics principles, and as a result have the effect of denying the benefits of competition to consumers and the economy.

Indeed, the CRTC rejected many of these U.S. policies for the same reasons in its landmark local competition decision in 1997.

Our concern is that the Canadian government ensure that the United States not be permitted to impose its will on the international community by forcing interpretations of the reference paper that will serve to prevent Canadians from realizing the full benefits of competition in telecommunications.

This can be accomplished by ensuring that the definitions outlined in the reference paper for concepts such as interconnection, essential facilities, and other concepts such as “major supplier” are interpreted in a manner that permits competition to arise in the provision of telecommunications facilities as well as telecommunications services.

Canada has come a long way in the development of competition in telecommunications facilities and services. We should not sit idly by and allow our successes to be undermined by unprincipled interpretations of what is fundamentally a pro-competitive document, the reference paper.

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We therefore recommend that the Canadian government seek clarification of the reference paper and, if necessary, revisions to it in order to advance the Canadian government's policies to promote competition in both services and facilities in the telecommunications industry.

In conclusion, we encourage the Canadian government to take the lead at the ministerial conference to encourage member countries to further and deepen their commitments to competition, open markets, and policies that encourage infrastructure investment.

Madam Chair and members of the committee, thank you for the opportunity to appear today and provide our views on the upcoming ministerial conference. We'd be happy to respond to any questions.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Grieve, and thank you for your recommendations.

Mr. Penson.

Mr. Charlie Penson: Thank you, Madam Chairman.

I certainly welcome the guests here this morning. I gather from your presentation that you would like to see an expanded WTO round. Right now two negotiations are mandated, that is, services and agriculture. A lot of people are pushing for an expanded round. Does your wish list fall exclusively under the services area? How would you like to see the WTO proceed?

Mr. John Makaryshyn (Government and Community Affairs Department, BCT.Telus): We're not looking for an expanded carve-out for, say, e-commerce or other areas outside of the normal framework agreements within the WTO process. Existing agreements such as the GATT, the trade-related aspects of intellectual property, TRIPS, and other areas are able to deal with a lot of the issues around e-commerce.

That having been said, if there are areas the WTO ministers are able to quickly agree on, such as the agreement to not impose customs duties on electronic transmissions, we would certainly encourage that.

Mr. Charlie Penson: You talked about competition and regulation. Would an expanded international competition law be what you're looking for in those areas?

Mr. Willie Grieve: Our principal concern in this round is that the reference paper itself not be interpreted in a way that focuses just on services. You'll recall that in my comments I made reference to the fact that telecommunications has been included in the negotiations on trade in services.

But there are really two parts to it. Telecommunication services are services. They're not goods, but they're delivered through physical networks, physical facilities. All of the discussion at the WTO and much of it in Europe and the United States—in fact, the United States' policies intentionally go in this direction—focuses on people using other people's infrastructure to deliver services, rather than focusing on a need for people to invest in infrastructure in order to reap all the benefits of competition. Apart from the foreign direct investment area, our concern is not that we get into some negotiation outside of the services round, but that we understand that when you are dealing with trade and telecommunication services, it's only half of the equation. By dealing just on that side of the equation, you can actually shut down real competition because you're shutting down competition in the facilities.

Mr. Charlie Penson: So the answer would be that you're looking for more than just a negotiation in the services area.

Right now two mandated negotiations have to happen in the year 2000 under the WTO agenda. One is in agriculture and the other is in services. A lot of people are saying we need to expand that and that Canada should go to the Seattle ministerial this fall and ask for a bigger round with more things on the table.

My question to you is, again, can that be accomplished just by going down that single track of the service sector negotiations with no expansion, or should we be looking at placing other things on the table? Can your concerns be addressed within the confines of services negotiations alone?

Mr. Willie Grieve: I think our concerns certainly on the reference paper and to the extent that foreign direct investment affects the delivery of services can be addressed in the negotiations on services. But, once again, I don't think that when you're looking at trade in services you can separate from that the understanding that services are delivered through physical assets. It is possible to shut down the benefits of competition in services by not looking at services and facilities.

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I'll just give you a quick analogy, which is in the paper. Consider a country that has only one airline company, and they decide they're going to open the market. The trade negotiators get together and say, okay, what are the terms of entry? Basically, the terms of entry would be that you get access to the airport and the landing slots. Nobody would ever think of saying that the incumbent airline in the country has to provide its planes to the new entrants. They're going to go get their own planes. It's the same with accounting firms. If you had a monopoly accounting firm and you're going to open up the market, you're not going to ask the monopoly accounting firm to provide its office space and computers to new accounting firms.

Yet this is exactly what has happened in telecommunications. New entrants come in and they say, I want to deliver my services but I demand that the government, the regulators, insist that I get to use your facilities to do that at a low regulated price so that I can arbitrage your system and make money off your facilities. What happens is that we don't get the benefits of the investments in new technologies that we should be getting. The U.S. policies have gone down this road, and it's the U.S. policies that have dictated the types of words in the reference paper.

We think the CRTC and the Canadian government are golden on this in the way they've rolled out competition in Canada and that it's consistent with the reference paper. Our concern is that in this round of negotiations the United States not be permitted to push further to try to impose its kinds of interpretations and its approach on Canada so that it shuts down all of the good things we have been doing here and that we're still working hard to do. That's our concern. When you're looking at services, don't forget that they have to be delivered through facilities, and in telecommunications this is a big issue.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau: Good morning, gentlemen. Thank you for having presented your report in French. I appreciate it. It is worth noting because it does not happen often. I think that it's a good idea.

I have two small questions. The first concerns the first of your four recommendations. If I get it wrong, please correct me. You said:

We recommend the Canadian government support efforts within the WTO to make permanent the current practice of not imposing duties on electronic transmissions.

Can customs duties be imposed on electronic transmissions? Is it physically possible, and if so, how?

[English]

Mr. John Makaryshyn: That's a good question. You may not be able to actually impose such tariffs on electronic transmissions. Just to be clear, we're not talking about the delivery of tangible goods that have been ordered over the Internet, for example, but actual electronic transmissions, such as sending a fax or an e-mail over the Internet. That's a very good point. Even if it were attempted, it's not clear that it would actually be possible to fit that type of a customs duty on to that type of transaction.

[Translation]

Mr. Benoît Sauvageau: Thank you.

My second question concerns foreign investment. In your report, you state:

To this end, we support continuing efforts by governments to liberalize foreign ownership rules in the telecommunications and broadcasting industries. Continued efforts to liberalize investment rules will benefit Canadians and encourage facilities-based investment in Canada and other host countries that promote competition and investment.

If I have understood this properly, you are saying that barriers should be eliminated to attract investors to invest in telecommunications, radio, etc. Aren't you afraid of direct ownership under such a policy? For example, Americans could own Canadian radio and television production networks and, after a while, they could change the programming and the Canadian content would disappear.

[English]

Mr. Willie Grieve: I think we should start by distinguishing between the programming and, once again, the infrastructure used to deliver the programming, everything from fibre optic cable to over-the-air spectrum.

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Our proposal at this time—and there's a sort of timing element here, so I'll take you through this—is that foreign direct investment in the infrastructure required to deliver broadcasting types of services, as well as telecommunications and all communication services, be liberalized. The foreign investment rule is there.

Under the Telecommunications Act, Canadian ownership and control rules are based on the ownership of transmission facilities, and under the Broadcasting Act, the government's direction to the CRTC is that in order to be a licensed broadcasting undertaking, you must have certain levels of Canadian ownership.

At this time we wouldn't object in any way to the government maintaining foreign ownership, or to foreign investment restrictions on programming undertakings, as opposed to distribution undertakings. There are two reasons for that. First, with respect to the distribution undertakings, the Internet and all kinds of new media are growing rapidly. They're exploding. Use of the Internet grows exponentially—it almost doubles every year. What is being demanded more and more is broadband access to the Internet—high-speed access.

In the CRTC's new media proceeding earlier this year, we predicted that within five to seven years we would see a significant erosion of the advertising revenues and generally the ability of the government to control what goes into Canadian homes, the way it does today through the licensing process.

First of all, Canadians are demanding investment in infrastructure to deliver high-speed services. This is expensive and we can't be left behind. We don't have all of the resources in Canada to build a number of competitive networks ourselves. We don't have all the capital here to do it as quickly as we would like to. We could probably do it over time, but time is of the essence right now. So we believe foreign investment in Canada would help finance the kind of network we need for the delivery of high-speed broadband types of services through the Internet to Canadians over the next five to ten years.

We look at your concerns about the broadcasting industry more as concerns about programming and getting Canadian content available to Canadians; making sure there's meaningful Canadian content there. There are two points to be made there. First, the current regulation of broadcasting in Canada is based on the assumption that it's a closed system and can't actually be regulated. We believe it can be regulated the way it has been, with licensing, conditions on Canadian content and Canadian investment, and the definitions of Canadian content. That can survive for awhile.

The problem is we've built up this huge and very successful Canadian broadcasting industry—production industry, music industry, movie industry—that's doing very well, based on this structure of the broadcasting industry. The Internet is coming, and we're not going to be able to control what's on the Internet. So for a period of time we need to make sure we allow the Canadian industry to transform itself, so it goes from being the broadcasting industry it is today to a new media industry that will have to compete on a global basis, because we're not going to be able to control what's shown; what is brought into Canadian homes. They will be able to click and go wherever they want.

The trick is, how do we get Canadian content on the Internet? The good story is, a great deal of Canadian content is already there, so we just need to transform the industry and make sure that any programming we consider to be culturally significant that wouldn't otherwise be produced is somehow funded.

The Acting Chairman (Ms. Sarmite Bulte): Thank you, Mr. Sauvageau.

Mr. Calder.

Mr. Murray Calder: Thank you very much, Madam Chair.

Willie, you said in your presentation that e-commerce needs a legal framework internationally, and it also needs safeguards applied internationally. I would agree with that, considering that with e-commerce right now you can't even sell a bedroom suite effectively, if you followed what happened with Sir John A. Macdonald's bedroom suite.

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The problem domestically right now for the Government of Canada, as the Internet keeps growing and growing, is we're seeing the meshing of the Broadcasting Act and the Telecommunications Act. They're rubbing against each other more and more all the time. If we're going to achieve what you're talking about here as legal framework and safeguards internationally, we first have to solve our own domestic problems and then move out.

The question is, after we've solved our own domestic problems, how do we establish an international standard that all countries will take and deal with? That international standard will obviously have to take in everything from censorship to safeguards on commerce. We know right now it's not working. If a 13-year-old can jump into the system and put out an outrageous bid of $900,000 for a bedroom suite and have that work through the system, obviously the system doesn't work. If we're going to start carrying on e-commerce, how do we make that work internationally?

Mr. Willie Grieve: It's never easy to try to get alignment. It's not easy to get alignment between provinces or telephone companies, so getting alignment among different countries around the world will certainly be difficult. One of the things we've discussed quite a bit internally is that different countries are in different positions in their development.

We talk about universal telephone service in Canada and the need to ensure that, but we already have a telephone system. In Poland, when they decided to open up their market, they auctioned off areas and asked people to come in and build a telephone system because they didn't have one in many areas. Some countries are completely different.

That transcends all of this. We have to understand that the principles that are put in place have to be sound, but if you start getting down into the details too much in dictating to countries how they will actually achieve those policies or bring themselves from where they are to those policies, it will be very difficult. You won't have a lot of success in trying to impose the means of getting there.

Mr. Murray Calder: The other thing I see that will have to be incorporated into this negotiating framework is a safeguard. Countries like the United States, with all kinds of money, can bring in specialists to deal with just e-commerce, industry, agriculture, culture, or whatever you want. But a third world country that doesn't have the same budget as the United States will bring in only one negotiator to deal with e-commerce, industry, agriculture, and culture. That's one individual.

I don't know whether or not they have individuals who are that good, and that's the problem I see. Countries that have wheelbarrows full of money to go into these negotiations will basically have their way in how it should be run.

I wonder if you have any comments on how we can work to achieve international rules and laws that will deal effectively and fairly with everybody.

Mr. Willie Grieve: I think it goes back to the same principle. In international trade, when you're dealing with countries that are starting at different places and have different resources available to them, you have to start with some fundamental principles in order to put rules into place. You have to make sure that when you have these agreements, you don't get too far into the details of how to actually implement them in a country. Each country is different, with its own history and technological development and its own concerns to look after.

I think the trick really from Canada's point of view... I'm getting back to the reference paper just recently discussed. It's the same kind of thing.

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The reference paper, for the most part, is a principle-level document, but in the odd place it slips into the American model of going down a whole bunch of layers—or it appears to go down a bunch of layers—in application. So I think the trick to all of this is to keep it at a highly principled level, with general principles. If you need specific definitions of things, so people can understand what they are, that's fine. But actually telling each country how to achieve the end goal will get you into trouble and make it difficult to continue.

Mr. Murray Calder: Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Speller.

Mr. Bob Speller: Thank you.

Thank you, gentlemen, for your presentation. It's a nice presentation because you point out specific areas in which you want some changes.

I just have one question. You talk about the reference paper and concepts such as interconnection, essential facilities, and major supplier. What do they mean?

Mr. Willie Grieve: The short answer is there's a big body of literature on the meaning of each of those. The interesting thing is they evolve. But to put it in very basic terms, interconnection is defined in the reference paper as connecting the networks of two companies. For example, MetroNet Communications comes into Calgary to offer local telephone service. Their customers want to call customers on the Telus network. The two networks have to be interconnected so that a Telus customer can call a MetroNet customer and vice versa. That's basically what interconnection comes to.

It has also been interpreted much more broadly to include things like unbundling, which is a different concept, where you take piece parts of a network. You allow one competitor to come in and perhaps build its own lines this far and then decide, “For this distance I don't want to build, I want to force the incumbent to give me their network”, and then they continue from there with their own network. So they get piece parts of the incumbent's network or someone else's network.

The question is not whether unbundling is good or bad. The question is whether mandating unbundling or forcing someone to unbundle where they wouldn't otherwise do it in the market is bad. That's the whole background to the U.S. Supreme Court's reason for overturning the FCC's decision on that point.

Mr. Bob Speller: So the unbundling is the connecting, or not connecting, the jumping over—

Mr. Willie Grieve: You have to connect.

Mr. Bob Speller: That's called unbundling.

Mr. Willie Grieve: Interconnection is the exchange of calls between two competing networks. Unbundling is where you connect to certain parts of the other person's network, just to use that network for your own purposes.

Mr. Bob Speller: What are essential facilities?

Mr. Willie Grieve: It's a competition law concept. It's a concept that would, in telecommunications terms, require that a company unbundle or provide this piece to one of its competitors, so the competitor could use it to compete with the incumbent, only if that piece couldn't be economically provided, self-supplied, or bought somewhere else. So it's like a bottleneck. In fact, bottleneck and essential facilities are used interchangeably.

So if it's something no one else has and no one else can provide for themselves in the market, and the refusal to supply it would actually shut down competition and create a monopoly, that's an essential facility and it has to be unbundled and provided to all the competitors, whether it's in telecommunications or any other industry.

Mr. Bob Speller: Major supplier.

Mr. Willie Grieve: My understanding is it's a European term for the concept in North America of dominant supplier, or a supplier with market power—someone who can influence prices and dictate prices, quality, and outcomes in the market because they're so big. There are limits on the supply side of the equation in getting into the market. There's no competition in facilities or on the inputs into the industry, so they can dictate the prices; they can dictate the terms of entry into the market by other carriers. The competition law deals with market power and dominant status and anti-competitive conduct of those types of companies.

• 0940

Mr. Bob Speller: So that I have it clear in my mind, what you're saying is how these are interpreted influences competition and...

Mr. Willie Grieve: Yes. Just very quickly on major supplier, the way the reference paper is worded could be interpreted to mean that anyone who owns or controls an essential facility would be defined as a major supplier. It says “in the market”. It doesn't explain what it means by “market”.

So theoretically you could say a company that owns one essential facility in Grande Prairie in Canada all of a sudden is considered a major supplier throughout Canada and has all of these obligations under the reference paper. Well, that doesn't make any sense to us, but it is the kind of thing the Americans and some of the Europeans might impose. In fact I know some Europeans would like to impose that kind of thing on some of the companies in the United States that I would not consider major suppliers or dominant carriers. So the interpretation of that is very important.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much again, Mr. Grieve and Mr. Makaryshyn. Thank you so much for your very important paper and also for raising some very important issues during our question-and-answer period. Thank you very much for joining us.

Mr. Willie Grieve: Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Next I'd like to call upon Professor Mirus, Professor Chambers, and Ms. Smythe.

Welcome to our committee.

Professor Mirus, I understand you're the director of the Centre for International Business at the University of Alberta. Welcome. I would ask you to start this panel discussion, please.

Mr. Rolf Mirus (Individual Presentation): [Professor and Director, Centre for International Business, University of Alberta] Thank you very much.

Ladies and gentlemen, it's a pleasure to be here. I will address eight points I have prepared in writing. I may not exactly read them.

The Acting Chairman (Ms. Sarmite Bulte): Professor Mirus, your papers will form part of the public record whether you read them or not, so we'd actually prefer if you'd summarize. That way we'll have more time for questions and answers.

Mr. Rolf Mirus: Very well.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Mr. Rolf Mirus: My colleague and I are here as representatives of the economics fraternity or the research fraternity, so we're looking at some evidence. The points we'll be making are broad and not as specific as the BCT-Telus presentation you have heard, but they provide perhaps a useful backdrop for some of your questioning.

The first point I want to make is that trade in general has been good for Canadians. It has been good for all Canadians of all walks of life, the poor and the rich. Many people are obsessed with the trade balance. The benefits from trade really come from the volume of trade. So we must get away from being obsessed about exports exceeding imports. The most important thing is that trade take place, because imports and exports make cheaper goods available to Canadians, and therefore we all benefit. That's a very general point, and it should not be forgotten.

• 0945

Number two, Albertans in particular have benefited from the recent trade liberalization under the FTA, the NAFTA, and the WTO. When you look at the little table in our submission, you'll see that Alberta exports have increased by 236% between 1988 and 1998. Alberta's exports would have increased even more if it hadn't been for the drop in oil prices last year. Alberta is the export leader among the western provinces, with $30 billion in exports, almost $17 billion more than in 1988.

My third point is that Alberta needs diversification of its export markets because we're still very heavily concentrated on the U.S. market. Liberalization on a broad scale, as is envisaged under the mandate for the ministerial conference in Seattle and beyond, is a good thing. Alberta is the western province most dependent on the U.S. market and therefore would benefit the most in terms of diversification of its markets from further trade liberalization at the multilateral level.

Now what's surprising—my fourth point—is that Alberta has developed a value-added industry, a value-added industry that makes the province less prone to cyclical boom and bust. The number of value-added industries, such as meat processing, paper and paperboard, machinery, electrical equipment, precision instruments—believe it or not—aircraft and parts, and furniture, have really blossomed in this province. The increase in exports in this category has been over 800% in the 10 years since the FTA. The FTA and NAFTA have created a competitive industry out here, which helps cushion the blows of the cyclical boom and bust of the resource industries.

It is now crucial that we address the non-tariff barriers that remain. Border measures and differing standards are serious obstacles to market access for the typically smaller Alberta manufacturers.

Further, multilateral trade liberalization, especially reduction of non-tariff barriers, would provide more market opportunities for these Alberta exporters. Not only would well-paying jobs be created, but the provincial economy would become less cyclical yet.

While there are irritants in NAFTA with our trade partners, Mexico and the United States, some of these irritants pale in comparison to the problems Alberta agricultural exporters in particular face at the multilateral level. We've listed some tariff schedules that Alberta exporters encounter and they are horrific. There are tariffs of 100% and 200% in some situations.

Our schedule lists Taiwan, South Korea, and Japan with 35% to 50% tariffs on beef. Tariffs on pork in Korea and in the Philippines are 25% and 40% respectively. And on the story goes, with dried peas and beans in Korea, India, and Bangladesh at 30%, 100%, and 200% respectively. In general, agrifood processors encounter high tariffs: fertilizer at 10% in Australia; sulphur at 40% in Morocco, India, and Indonesia; and man-made fibres facing high tariffs in much of Asia.

We believe that Alberta exporters need meaningful increases in market access under the WTO. We need the elimination of all agricultural export subsidies, as these tend to distort true efficiency. We need a gradual but progressive reduction of trade-distorting domestic subsidies and we need the reduction in non-tariff barriers to trade. For example, we need sanitary and phytosanitary standards that are based on science, not on some kind of black box. These requests would enable Alberta exporters to avail themselves of the opportunities that NAFTA- and FTA-induced specialization have created.

• 0950

I will briefly talk about trade in services. The Western Centre for Economic Research—my colleague, Professor Chambers, and his research staff—did a study on Alberta service industries. Of the six industries studied—oil and gas services, environmental services, software and computer services, architecture, engineering, and construction services, transportation services, and health care services—the first four, that is, the exception being health care services, were all at 20% to 40% in terms of their sales dependent on exports.

Alberta service producers see opportunities out there. They're planning for further exports and they would benefit from greater export opportunities under liberalization. Most of these sectors saw very good growth potential in trade liberalization. This is particularly evident in their planning for the newly accessible markets in Chile and Mexico. Over 30% of the respondents to the survey were planning activities in these two countries. We therefore infer that WTO-wide liberalization of trade in services would benefit Alberta service providers in these five sectors and quite probably in a number of others.

My following two points pertain to foreign direct investment. You may have read in the paper recently that Statistics Canada published that Canada's inward and outward investments recently have been holding the balance. Our research indicates that in a liberalized trading environment, foreign firms locate facilities in Canada because their special skills, that is, technology, trademarks, or other skills, when combined with Canadian inputs, enable them to complete effectively.

A snapshot of foreign investment in Canada from 1996—these are CALURA data, under the Canadian Corporations and Labour Unions Returns Act, under parliamentary authority—shows that $350 billion in majority-owned foreign assets in Canada generated operating revenues of $343 billion and operating profits of almost $21 billion. On average—this is an important point—their profitability is approximately 50% higher than that of Canadian-owned firms. So the foreign-owned firms, when coming to Canada, can act as models for Canadian firms in terms of the technology, the management style, and the skills. They're 50% more effective so they bring best practices. Therefore, Alberta tends to welcome foreign direct investment.

But—my final point—by the same token, Canadian firms with unique skills have opportunities to start and operate facilities abroad, both in the industrialized countries, the OECD countries, and in the developing countries. In some cases, a Canadian company's survival may depend on a service or component production facility abroad. It therefore makes sense to us to have a rules-based approach for both inward and outward direct investment.

We believe, therefore, that a multilateral agreement on investment should be pursued at the WTO level, at the multilateral level, at the widest possible level, not just at the OECD.

Ladies and gentlemen, thank you for the opportunity to present our views. You will hear from many groups, including pleas from special interest groups. Please keep in mind that trade liberalization brings gains for all segments of Canada's society and that the poor tend to benefit most from access to cheap imports. Trade liberalization has an adverse impact on some, which is regrettable, but granting protection represents a tax on all Canadians and encourages lobbying over efforts at improving one's products or services.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Mirus.

Professor Chambers.

Mr. E.J. Chambers (Individual Presentation): [Professor and Director, Western Centre for Economic Research] I'd be glad to answer questions.

The Acting Chairman (Ms. Sarmite Bulte): Ms. Smythe.

Ms. Elizabeth Smythe (Individual Presentation): [Professor, Political Science, Concordia University College of Alberta] Thank you very much.

I want to thank Madam Chair and all the members of the committee for the opportunity to appear before you on this important issue. My remarks are going to be based on my own particular research as a professor of political science dealing with the negotiation of investment rules at the WTO and the OECD. Some of you may recall that I did appear before the subcommittee during the MAI negotiations.

• 0955

My most recent research has been dealing with Canada's involvement in the working group on trade and investment at the WTO. I was there in Geneva in December doing some interviews, so I hope I can bring some of the views of how this issue looks at the WTO from the perspective of other WTO members and officials.

I want to focus on two aspects of the questions you raised for the mandate of your committee. Those are, one, new issues or sectors that should be Canada's priorities in any future negotiations at the WTO; and two, how these negotiations should be conducted, particularly in terms of transparency and consultation, both here in Canada and at the WTO.

I want to say at the outset that I want to be clear that I do believe it is in Canada's interests to support the idea of a rules-based international economy. I also believe the appropriate venue to negotiate trade rules is the WTO. However, we also have to recognize that the level of integration of economies worldwide, the extent of trade dependence, and the integrated nature of production do mean that you can't separate trade and investment. So again, I accept the notion that the two go together.

However, globalization has also had another impact. It has been accompanied in the past two decades by a number of factors that some economists have argued are undermining the very legitimacy of the rule-making process domestically and internationally. That is the fact that the underpinning of post-war trade and investment expansion coincided with and was part of an expanded role for states in cushioning the adjustment costs of a more open international economy and redistributing those benefits more equitably within individual countries and economies.

So when we discuss the need for rules at the WTO, we must ask three critical questions. Who writes the rules? What should the rules be? Who benefits from a particular set of rules?

I think it's critical in all of our WTO negotiations that we find a balance in those rules that allows for greater openness and participation of all countries in the global economy, but preserves a role for states in ensuring social cohesion, protecting the environment, and preserving cultural identity.

I want to talk, then, about the question of what's already on the WTO agenda. We're all very aware already, I'm sure, that key issues of agriculture and services are what are called part of the built-in agenda of future negotiations. These are areas that you've already heard are critical to Canada's interests, and I would certainly concur with that.

A range of other issues, however, some of which will be very controversial, may be raised by WTO members and, if they generate a sufficient consensus, could be part of the future round of negotiations. Two of these are issues of trade and the environment and labour.

I won't go into these at length, because they aren't my own areas of expertise, but I think you all understand that in some cases those concerns are driven by the fact that WTO rules have appeared to some to undermine domestic regulations, and in other cases they are a political reality. The European Union and the United States cannot embark on future negotiations unless they address these issues.

I want to focus in particular on the question of what else should be on the agenda. Many Canadians are unaware that Canada has, in cooperation with the European Union and Japan, been attempting since 1995 to persuade WTO members to negotiate on multilateral investment rules. Yet there has never been a clear indication of what kinds of rules Canada seeks to promote or negotiate at the WTO. This is surprising, given the controversy the MAI draft generated.

According to Canadian government officials, we need the MAI to show that Canada welcomes foreign direct investment and to protect Canadian firms investing abroad. Despite the failure of the MAI, however, we've had an increase in Canadian foreign direct investment abroad of 17% in 1998 alone. Those are Statistics Canada figures. Half of Canadian foreign investment is already covered by the NAFTA, because it's in the United States, and Canada continues an active program of bilateral investment agreements to cover other countries.

The one flaw we were told about with the MAI was that it did not cover non-OECD developing countries, a growing area of Canadian investment.

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Canada has argued that it is necessary to have these rules to protect Canadian investment abroad. They've also made an altruistic argument that such investment is necessary in order to benefit developing countries, who would receive increased flows if investment rules were liberalized. The reality is, however, that most of the investment flows outside the OECD go to ten large countries, a vast majority going to China alone. The reality is that FDI is driven by economic opportunities and the balance of risk and return, and that many small, struggling, least-developed economies have liberalized investment rules to no avail.

In the case of the MAI, the draft provisions were drawn in large part from bilateral investment treaties and from NAFTA. There is a consensus now among OECD officials, the C.D. Howe Institute, the Washington Institute for International Economics, and Canadian officials themselves that parts of the MAI and the NAFTA dealing with investor protection and state-investor dispute settlement are in fact flawed and could have the unintended consequence of limiting legitimate state regulation in the public interest.

We have approached our NAFTA partners to solve the problem of chapter 11 to no avail. Since we haven't solved the problem of chapter 11, what sort of investor protection are we now seeking at the WTO?

I want to also make a couple of other points. Investment rules are already being addressed in a limited way at the WTO. There is within the TRIM agreement a five-year review and evaluation that is due to be undertaken by the end of this year. The United States is already complaining about the incomplete implementation of TRIPS. India is complaining that TRIPS is too restrictive on its development agenda. It seems prudent to me to evaluate and build on the existing TRIPS agreement before we launch any new negotiation on a broader agreement.

Secondly, the GATS covers investment in a number of sectors. GATS recognizes one of the modes of delivery of services to be the right of establishment, in essence, foreign direct investment. As additional sectors are negotiated and liberalized through the GATS, additional foreign investment will be covered by its rules in areas such as transparency and non-discrimination.

The advantage of the GATS, however, is that it is what is called a bottom-up rather than a top-down approach. Unlike the MAI, with its rigid set of obligations and limited reservations, the GATS allows states to control the pace and scope of liberalization in keeping with their social and economic objectives.

So my first recommendation is in essence that Canada not support the inclusion of broad investment rules in the WTO for this round. I'll make several other points about why Canada should not support that effort. One of them is the significant developing-country opposition to this endeavour.

A lot of our witnesses have already mentioned the question of the limited capacity of some developing countries. The United Nations Conference on Trade and Development has recognized this limited capacity and has engaged in a two-year study on the multilateral framework on investment and the ways to build capacity among the least-developed countries to negotiate. This report is due to be presented to UNCTAD X in early 2000. I think it would be prudent before we launch any negotiations at the WTO that the least-developed countries are able to benefit from this capacity-building exercise.

My second recommendation is that we have a much broader, more representative process of consultation on trade and investment before we undertake future negotiations in this area. I make a point that the ITAC/SAGIT system of consultations is now outdated and unrepresentative. Trade involves much more than trade, as we are now increasingly aware. There's no question that as a result of the MAI experience, the current trade minister has been much more receptive to public input and consultation.

This process needs to be much more institutionalized, however, and should not rest on the discretion of a single minister. The old model, both at the interdepartmental level and at the sectoral consultation level, is simply outmoded.

Secondly, I want to underline the need for a stronger role for Parliament in this whole process. One of the most positive aspects of the MAI experience has been the role of this committee and the subcommittee, which were able to generate very broad debate on this issue. I think this should be seen as a precedent, one that needs to be institutionalized and supported with more resources.

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Third, I think it's very important that we see greater transparency and specificity in what Canada's doing at the WTO. The process of consultation must be an open and legitimate one. This is more than just a fancy website. Groups or organizations need to know that what they tell government and what government tells other groups is available for all to see. Providing special access for particular groups will only erode trust and promote cynicism in the consultation. Finally, I want to suggest that Canada express much more strongly for transparency and openness at the WTO itself, that it become a model of openness by timely release of its own documents that it tables at the WTO.

I want to be realistic. There's no question that the inclusion of investment on the agenda of the WTO could occur, despite the lack of enthusiasm of the United States for such an effort and despite the opposition of developing countries. It could simply come as the result of a deal. For example, the European Union is arguing that if countries expect movement on agriculture it must have a broader basket of issues to negotiate, including investment. Therefore, it may be that Canada has no choice but to negotiate investment rules.

My fourth recommendation is that if the Canadian government is in a position where it must negotiate investment rules, then it must, this time around, give equal weight to measures that ensure the rights of states to legislate, to regulate, to preserve cultural identity, the quality of the environment, and to ensure social cohesion. Give that equal weight to the weight it gives to the interests of incoming and outgoing investors.

I apologize, my presentation cut off my final quote. I want to show that I'm not ignoring the work of economists. I want to highlight comments that a U.S. economist, Dani Rodrik, has made in challenging some of the conventional wisdom and injecting a cautionary note about the need to ensure the legitimacy of continuing liberalization. He argues in a recent essay that

The main challenge that global capitalism faces today is maintaining domestic political legitimacy for open economic borders. Without that legitimacy global capitalism becomes simply unsustainable—a truth we ignore at our peril.

Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Ms. Smythe. Thank you for your very balanced and thought-provoking paper.

Mr. Penson.

Mr. Charlie Penson: Thank you.

I guess I was remiss earlier in not welcoming our own standing committee to my home province of Alberta, one that I think is leading the way in a lot of issues, such as tax reduction in this country, which allows our Canadian companies a little bit of a competitive edge.

I want to thank the panel for their presentation. Mr. Edwards and Mr. Mirus, I really think your presentation is something we need a lot more of, and a lot more general awareness of the benefits, if there's any downside to the trade agreements we have signed. I just want to make the case that we are also hearing a lot at this committee from people who think this is a very bad idea, and some who would even want to roll back the free trade agreement. I certainly agree with you, Mr. Mirus, that this is a benefit to all people. I think in an open economy such as Chile's, poverty levels have been greatly decreased as a result of a market economy in the last few years.

I certainly agree with this business of consultation Ms. Smythe has talked about, but it does have its problems as well. Our committee is doing these hearings both in Ottawa and travelling across the country. In Winnipeg on Monday there were so many who came out that because of our time constrains we had to limit the presentations to five minutes. And although they do have a paper that we are able to consider afterwards, it's a bit of a problem, in that a lot of people want to come and make presentations. If we're going to do it on the basis of institutionalizing this, we have to come up with some kind of better process. I want your comments on that.

I was at a conference of Canadian, Mexican, and American legislators in Mexico last spring, talking about ten years of NAFTA, of free trade agreement. All of us sort of came to the conclusion that in order to move forward with more investment and trade liberalization we have to demonstrate to our public how it has benefited all of us. It's not just good enough to say that companies have benefited; the public has to benefit as well. And I believe they have.

• 1010

An American congressman from Missouri was saying that he was touring a factory in his riding that manufactured product that was almost entirely exported to Mexico. So those very people working there owed their jobs to the trade that was involved. Yet when he talked to them on an individual basis, almost all of them were against the trade agreement with Mexico, or any trade arrangements. I think that's the difficulty we face.

I'm just wondering how we can... I think this is a good start. We have to show the benefits. Have you any thoughts on how that can be done in a way that would be more accessible to Canadians?

The Acting Chairman (Ms. Sarmite Bulte): Who would like to start? Professor Chambers.

Mr. E.J. Chambers: The question is a very important one. I certainly don't have any simple answer. I don't think there is either a simple or a single answer to that particular question.

It does seem to me that a lot of the discussion that revolves around trading arrangements and free trade arrangements is associated with issues of income distribution and obviously issues that reflect labour market difficulties of some households and some segments. I think that's a very mistaken point of view, to say that there are income distribution problems... Certainly you'd be blind if you didn't acknowledge that there were income distribution problems in Mexico and there are income distribution problems in the other North American economies as well. But it would be absurd to say that because income distribution problems are associated with free trade agreements, therefore one relates to the other.

I think there are other, much broader issues. The rapidity of technological change and the ability of training and the educational system to adapt in some meaningful way to technological change is really the critical issue here. There's no doubt that what we tend to see, of course, is a lot of publicity related to plant closings or to plant restructurings, but we don't see very much publicity with respect to new openings or with respect to new developments.

I think there's no question that trade is beneficial. I think the great challenge, of course, is to assure that the gains of trade have some acceptable and reasonable distribution across all members of society. There's no simple single answer to that question. I've sort of sounded like a professor here, but I think profoundly that those are the issues.

Ms. Elizabeth Smithe: I just want to follow up.

I think I agree in large part with what Mr. Chambers has said. I want to just refresh your memory that in a sense, when we talk about NAFTA and we talk about its impact and people's lack of awareness of their own interests in trade, I think we have to remember that NAFTA coincided with a couple of other things. I'll just remind you that one of them was a very major change, for example, in employment insurance. We went through an enormous restructuring in Canada in the past decade, and we did it coincidentally with a very drastic downsizing of the public sector and an erosion of what we might consider the social safety net.

I'm not questioning that there were real legitimate concerns about deficit and debt. My only point is can you be surprised that people are insecure? Can you be surprised when I opened the paper last week and Northern Telecom had a very blunt message for Canadian workers: If you don't accept pay cuts and you don't accept our conditions, we're heading south. So there has been an inculcation of real insecurity of people about their future, which has coincided with further liberalization.

I quite agree that you cannot drive a link between the two. It's simply invalid. It isn't empirically sustainable. But can you really be surprised at the level of insecurity? That's why my point was that you must accompany globalization with a clear understanding that there is a role for government in ensuring a more equitable distribution of those gains and preserving important aspects of social cohesion and cultural identity.

• 1015

Mr. Charlie Penson: My next question is on the issue of non-tariff barriers, which was addressed by Professor Mirus. We're seeing that in the agriculture sector with the beef hormone issue, and we're seeing it with the issue of the genetically modified organisms, of which canola is a good example. I was just in Montana talking to U.S. senators, and there's one senator who has a bill there and wants to label USDA beef, and any other beef coming in would not get that label and therefore would supposedly not be bought in the United States. There's that kind of movement afoot. The WTO last time addressed the issue of non-tariff barriers, but we still have this problem. On the beef hormone issue, the European Union has lost that case but has still not complied.

How do we address this in order to get compliance or a better dispute settlement mechanism so that they can't continue this process?

Mr. Rolf Mirus: I will take a stab at that, and it's not going to be a very satisfactory answer. These problems have been there. The only way to deal with them is to pursue them. It will be a long hard slog. For example, American beef in Japan, Canadian beef in Japan, and different labelling systems... Our beef producers argue the beef is better than U.S. choice; our triple A or double A is better than U.S. choice. Refuge has to be taken in some broader principles, not getting lost in detail. We were hearing from BCT.Telus in the background, don't get lost in detail because you'll never get anywhere.

In terms of some broad principles, the Europeans have dealt with it among themselves. Here there were ten, eleven, fifteen countries that had to come to grips with different standards among themselves. So it is a slow, long, painful, up-and-down process.

Mr. Charlie Penson: In terms of genetically modified, I see you're suggesting that it be kept on a scientific basis. There are some who have come before our committee and said science takes a while, and some of this stuff is approved over a short period of time, so we don't know the effects. How do we deal with this in order to keep within that kind of framework, decisions based on the best scientific evidence?

Mr. Rolf Mirus: As an economist I would have to pull back from that issue. I do not feel comfortable talking about science. I think that's an issue for the scientists. There has to be a balance of prevailing opinion, as there does in most areas. As for dispute settlement, I think we're a lot better than we used to be. The WTO has a lot more clout. You've seen decisions. Some of them haven't been comfortable for Canada, if I can mention the Bombardier case, the recent one on the Technology Partnerships Canada program. But we're getting there, and if you don't play by the rules, you're going to pay a price.

As for less developed countries, as my colleague Professor Smythe commented, historically less developed countries and small countries tend to gain the most from trade. They tend to gain the most also from foreign direct investment in terms of best practices. So self-interest dictates that they come on board. Again, I'm arguing for the widest level WTO. Small countries like Canada, like the less developed countries, have no chance going it alone against the big bullies, the U.S. and Europe, especially in foreign investment.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Speller has a direct follow-up question.

Mr. Bob Speller: My question is on the whole question of precautionary principle, and I think it's a very good question. I wonder if the other two would comment on that, because it's a question we're facing all the time from a number of groups that say, yes, science is good and it should be based on science, but...

Ms. Elizabeth Smithe: We're not talking science. I think we're talking regulation. Regulation is the defining framework in which that science is... Again, this is not really my area, but we have two different philosophies of regulations. I think one is the precautionary and the other is the risk-based. They are different philosophies. I think you're quite right. It's going to take a lot of difficult negotiation. I don't think it's a question of hard facts; I think it's a question of regulation.

• 1020

Mr. E.J. Chambers: Let me comment about that. It took a long time, much of this century, to get tariffs down to their current levels, and fortunately we certainly took a long-run view of that in the last 50 years, and that's really important. I think the non-tariff barrier issue is one that the Canadian government should insist on being on the table. I think it needs to be on the table continuously at these negotiations, and it should not be limited exclusively to agriculture.

The fact of the matter is that the more sophisticated your exports, the more value-added you have in your exports, the more issues of standardization and harmonization come into play. And in talking with Alberta exporters, and we've done a good deal of that in recent years, you will find that issues of standardization and issues of harmonization are considered by them to be more important than tariffs.

The substitute, obviously, for tariffs as a protective device is non-tariff barriers of various kinds, and the imagination is unlimited with respect to what you could do in this regard. But it clearly is in the country's self-interest, particularly when one is trying to increase the valued-added content, the sophistication of Canadian exports, to get that on the table and to keep it on the table consistently and over the very long haul.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Mr. Charlie Penson: I have a short question, and I see my chairman is going to limit me with the answer. If we don't have time, I would appreciate maybe even a written answer.

In regard to the sea change that's taken place in terms of direct foreign investment, for Canadians are now investing more outside of Canada in the last two or three years than they are inside Canada, I'm wondering if there's anything you can tell us about why that trend is happening.

Mr. Rolf Mirus: In a recent study, we found that this is not uniformly the case, and I'm talking about foreign direct investment, direct investment that confers some control over productive assets. That's to say, even there, there are two different issues in the statistics: 10% foreign ownership and ultimate foreign ownership, or 51% over 50%. Looking at the majority-owned foreign ownership issue, Canadian firms have gone out and foreign firms have come in, but there have been years when we've had more foreign firms coming in than Canadian firms going out.

Minister Marchi is concerned about the recent trend to go out, but I do not find that alarming in the historical context. For example, Canada still maintains a significant share of world inward investment. Considering how much growth there has been in China and South America, we should expect that these regions would attract some foreign direct investment and that therefore the share in the world's foreign investment for countries such as Canada and the U.S. is shrinking. For both Canada and the U.S., the share of inward investment in the total of the world is shrinking, and Canada is not alarmingly different in this trend from the U.S.

So I can assure you, I am not worried; I'm sleeping. I am more worried about my income tax return coming up.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much.

Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau: Ladies and gentlemen, welcome. Thank you for being here.

My first question has to do with health and phytopathology rules. You said, as my friend and colleague Charlie noted, that these should be based on science.

Mr. Mirus, you say that you are an economist and that you do not want to comment on scientific matters. I am not expecting an answer, but I wonder: is science neutral? Europeans give one version and Canadians another. It is perhaps an interesting comment, but I was wondering.

In your table under point 2, you proved with numbers that the Free Trade Agreement with the United States and NAFTA were profitable for Canadians. I have a question for you. If you have the answer you can tell us right away; otherwise, send it to the Committee. Could you send us the same table, but for the years 1978 to 1988, namely the 10 years prior to the Free Trade Agreement, so that we can see to what extent there has been an increase in exports? That is my first comment.

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You state, with figures to support your case, that it has been beneficial to Canadian exports and you say later on, but without any tables or numbers, that it was also beneficial to poor Canadians. Could you prove this with a table similar to the one you use to prove that it had a beneficial impact on exports? If so, I would like you to give us the figures for 1978 to 1988 and for 1988 to 1998, to illustrate what the situation was during the 10 years prior to NAFTA, as well as for the 10 years after NAFTA was signed.

As we have been in Edmonton for less than 24 hours, I will risk asking my third question. Otherwise, I would have been afraid of being sent away. You say in point 4 of your second paragraph that it is essential to eliminate or reduce customs tariffs and that border measures represent serious barriers.

As you know, we are in a period of major economic alignments, market alliances and globalization. Staying at home may appear rather retrograde to some people. In view of the very close ties between Alberta and the United States in terms of trade and so on, did you in your studies consider the annexation of your province by the United States? If not, why not?

[English]

The Acting Chairman (Ms. Sarmite Bulte): Professor Mirus, why don't you start?

Mr. Ralph Mirus: We didn't include the figures for 1978-88, and we could do that.

The Acting Chairman (Ms. Sarmite Bulte): We would appreciate it if you could.

Mr. Ralph Mirus: The trade liberalization came in 1988 with the FTA, and so we focused on that. But it can be remedied. My guess would be that we would not have seen that kind of an increase in trade figures that we've seen since 1988.

The second point was with respect to science.

[Translation]

Mr. Sauvageau, I am sorry that I don't speak French well.

Mr. Benoît Sauvageau: I don't speak English well.

Mr. Rolf Mirus: I never learned French at school.

[English]

The second point was with respect to science. Clearly, science is not value-free. I'm arguing for something that reasonable people can agree on, and we see that Europeans and Americans do not agree. They have to continue working on this. There will be more evidence, and the balance of the evidence may well shift.

In the grand picture of history, the beef hormone time is a very small one. I work a lot with China, and I've been coming to think beyond my own lifetime—a long time.

With respect to the third issue you raised, namely the poor, there is quite a bit of literature in economics that trade restrictions have hurt the poor disproportionately. Let me tell you why. Canadians are responsible, through government policy that was unwise, for creating millionaires in Hong Kong. There are a large number of millionaires in Hong Kong who have been achieving their wealth on the backs of poor Canadians.

This is another story that's well-known, but it comes about like this. We limit the imports of cheap textiles, which poor Canadians consume in disproportionately large numbers. It stretches their budget. By limiting the imports of these cheap textiles, say shirts, we've created an artificial scarcity in Canada. So the price of these goes up. When the price of these goes up because only so many can come in, the foreign producer makes the extra profit, historically. This has now been changed in that the quota allocations have been changed, but historically it has been the case. So the foreign producer of cheap shirts in Hong Kong says “Why work? Why not just sell my right to ship these shirts to Canada, and to other developed countries for that matter? Ship them there and let somebody else do the work.” So these foreign quota owners sold their rights to ship x shirts to Canada, sold them for millions of dollars and retired. Somebody else produces the shirts. In a way it's just like taxi licences.

• 1030

So that's how we have, on the backs of poor Canadians, produced millionaires in Hong Kong. Frankly, when I go there I resent it.

That's not the only story. Sugar in the United States, car import quotas—these make the imported commodities artificially expensive, and to the extent, and there is evidence, that these commodities or products are used by poor Canadians, they pay a high price. For them the high price is much more important than for a wealthy person.

Mr. Benoît Sauvageau: Okay, and the last one.

Mr. Rolf Mirus: Your last question I forgot.

The Acting Chairman (Ms. Sarmite Bulte): The annexation of Alberta to the United States.

Mr. Rolf Mirus: I do not... annexation by the United States?

The Acting Chairman (Ms. Sarmite Bulte): No, Alberta joining the United States.

Mr. Rolf Mirus: I do not believe this will happen in my lifetime.

[Translation]

Mr. Benoît Sauvageau: That is not what I was asking you. Many people say that staying at home is a rather retrograde position to take in an era of major economic alignments and big markets. You are very closely bound to the Americans and you proved it in your tables, and you ask for the elimination of border barriers. Taking it further, I am asking you whether you studied the question of annexation, and if not, why not.

[English]

Mr. Rolf Mirus: I may have misunderstood. I live in Canada. I come from Germany; I'm an immigrant from Germany. I studied in the United States, and I live in Canada. I'm happy here.

Mr. Benoît Sauvageau: That's a good reason.

Mr. E.J. Chambers: Let me answer that question. I personally think Albertans have no interest in joining the United States. Let me talk just for a moment about that issue.

What that free trade agreement has done is permitted Alberta business people to take advantage of a free trade agreement in a relatively benign environment, so they have learned exporting skills in a situation where rules and the rule of law are pretty firmly established, and that has been a tremendous benefit to Alberta exporters.

In other words you're learning; you're increasing your capability as an exporter in a relatively benign environment that is more than a hundred times the size of the Alberta market. That I think, not the question of political union or anything of that sort, is what's at stake here.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Calder.

Mr. Murray Calder: Thank you, Madam Chair. Based on what I've been listening to here, I think from an overview of this whole thing with the global economic community, which is basically what the WTO is, the underlying rule is if we are to compete we must be competitive. Would you agree with that? You would. Okay, fine.

The Acting Chairman (Ms. Sarmite Bulte): Put “yes” in the transcript.

Mr. Rolf Mirus: That's a yes.

Mr. Murray Calder: In essence, and this follows up exactly what Elizabeth said with Nortel... for instance, wage cuts and the reason they want to see that is because of the programs we have here domestically within Canada. We have a health care system that is different from other countries. We have social programs within this country that are different. Of course, all those are incorporated within the wage structures, so there becomes an overhead cost that probably doesn't exist in the United States or other countries like that, or not comparatively.

I guess the question is then, if you agree with that first rule, if we are to compete we must be competitive, does that mean to say that we're eventually working toward having international standards that deal with health care and social services? Obviously if one country has higher standards within those two sectors, they're set into a situation where they might not be competitive. Any comment?

Ms. Elizabeth Smithe: I just have a quick comment. If we are to compete, we must be competitive. I think we have to be careful about what we mean by being competitive. I could make an argument, for example, that Indonesia is highly competitive because of its very low labour costs. Now, I would need to add that it had very low labour costs because it beat up and killed people who created free trade unions. Is that what we mean by competitive?

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Mr. Murray Calder: Well, in that situation, if they have very low labour costs, ergo they must have a lower standard of living too.

Ms. Elizabeth Smithe: But my point simply is that most of the population has very little voice about that standard of living and distribution of income. Why do we see one thing as dumping, for example, and we don't see another? We see subsidizing the cost of a certain production of some commodity in Canada and exporting it as dumping. We don't see the repression of labour as dumping or an export subsidy. My point is it's in the perception of what is competitive.

My second point is that I wasn't saying that Northern Telecom was incorrect in its analysis; it's extremely correct in its analysis. Its analysis is quite valid—capital is mobile, labour is not; therefore capital has more power than labour in a bargaining situation. Therefore, because I have more power, I can force labour to provide more concessions. Where did that mobility come from? It came from countries liberalizing their rules on things like investment. Northern Telecom can leave. Why? Because of things like NAFTA.

I'm not saying that's not a good thing, that it doesn't promote efficiency, that it doesn't promote lower costs, that it isn't ultimately beneficial. My point was simply that in creating a situation where capital is more mobile, you are creating a power imbalance, and there must be some compensating factor if you expect citizens and ordinary working people who are not mobile to embrace liberalization.

Mr. Murray Calder: But we're also seeing another... I'll give you a different example from that of Nortel. When the federal government did away with the WGTA and the FFA, for instance... we in eastern Saskatchewan and Manitoba have created the situation now that those grains are not really economically viable to head out to the Vancouver ports. But we could sell those grains in a different fashion. We could sell them with a pigskin wrapped around them, or a beefskin.

When the McCain family bought out Maple Leaf Foods from Hillsdown Holdings, immediately what they did, because they're looking at an international market, is they took on their labour and said “Look, you're going to take a 40% wage cut so we can competitively start shipping our value-added products internationally”. Now, that's exactly what's happened, and in essence they've set up a chain reaction domestically within this country, because Quality Packers, in fact, in Ontario had to do the same thing or they weren't competitive.

This is the issue. I'm saying right now as we move into this, we might be getting into the situation that all standards are going to have to be the same internationally or we're not competitive.

Ms. Elizabeth Smithe: Yes, I think we are going to have to resolve some differences in standards, and my thought was that we have to both work at that at the global level, and we also have to recognize that there is a role for the state within this process, of facilitating adjustment.

Mr. Murray Calder: Yes.

Mr. Rolf Mirus: I just want to add a comment to my colleague's point.

When you look at the low wage rates in, for example, Indonesia, the reason for the low wage rates is low productivity. So in fact when you adjust for the output produced by Indonesian workers, they are not competitive with American workers. In 1990 the adjusted-for-productivity wage rate in Indonesia was higher than in the United States, on average.

So the fallacy, when people talk about these low-wage countries, is that they forget because they're non-economists, non-specialists, that the wage rate is one thing, but what the worker on average in these countries produces per hour should be taken into account. When you adjust that, then you talk about real wage costs, unit labour costs, and it's a very different picture that emerges. By that picture, Germany is 25%, 40% more expensive to produce in than the United States, and you see there's not much foreign investment going into Germany. So that was one point I wanted to add.

With respect to pressures for harmonization of standards, we extend in the high-tech industries, in the high brain-power industries; that there is a worldwide market; labour is mobile. It is unfortunately the case that unskilled labour is not mobile; it doesn't have the alternatives. We have positions at the university, in the business school and in other fields, but we've been unable to fill ,them because our Canadians... Stephen Sapp, Ph.D., in Northwestern University... we're trying to get him here, but he's got a better offer from the States. My son studies in the States, and I'm worried he won't come back. That's the reality of the labour markets at the high end. Mobility is there, too, not just capital.

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Mr. Murray Calder: Do I have any more time?

The Acting Chairman (Ms. Sarmite Bulte): Yes.

Mr. Murray Calder: I want to switch gears very quickly, then, and go into tariff and subsidy reduction, where Canada is definitely a leader. We are ahead of the other countries.

Last month the Standing Committee on Agriculture and Agri-Food appeared in front of the International Trade Commission in Washington. I asked the question, what do you want on the table? The answer was, everything. What's your ultimate objective? Their ultimate objective is zero tariffs and zero subsidies. I then said to them, we have no tariffs on sugar or peanuts in Canada. Does that mean you're going to immediately take your tariffs down to zero to match what we have?

The question is, seeing that we are ahead, how do we address this issue? Do we tread water and wait until the rest of the countries catch up to us, or do we keep taking the lead? How do we address that discrepancy?

Mr. Rolf Mirus: I just want to make a quick and not very helpful comment on that. All countries have skeletons in their closets. We have difficulties internally in Canada with supply management, and we have beef producers who are champing at the bit to get into the markets. So to some extent this is an internal political turmoil, and therefore I do not think it will happen quickly. To some extent it's also a negotiating strategy by the Americans to simply bully and demand, and we have to be judicious in our responses.

Mr. Murray Calder: I will caution you about supply management. The Americans have beautiful examples dealing with peanuts, cotton, sugar, and the eastern dairy—

Mr. Rolf Mirus: Yes, but we don't know enough about what the 50 states have at the local level in terms of investment incentives and so on. We don't have the resources to do all that research. The devil is in the details here. You're quite right.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

[Translation]

Mr. Benoît Sauvageau: I want to make sure I understood correctly.

Mr. Mirus, did you say that you could not supply the tables on poverty because of outside influences? Are you going to provide them?

[English]

Mr. Rolf Mirus: No. I said that there is evidence in the economics literature that trade restrictions have hurt the poorer segments of society, and I gave a story about—

[Translation]

Mr. Benoît Sauvageau: That is not the question. I am asking whether you will supply us with tables on poverty trends in Canada from 1978 to 1988 and from 1988 to 1998.

[English]

Mr. Rolf Mirus: No, I cannot give you evidence on the elimination of poverty. I think that is not my area. But I'm aware of some evidence that suggests that if it had not been for Canada's social programs, our income distribution would have deteriorated.

[Translation]

Mr. Benoît Sauvageau: How can you say that it helped poor people if you cannot prove it?

[English]

Mr. Rolf Mirus: I think it can be demonstrated. Professor Chambers, my research associate, and I are engaged in a study to determine how the tariff cuts and the decreases from the international trade liberalization, the lower prices we have experienced, have affected the prices of commodities we import. It's very difficult, long-winded research, because you have to look at by how much the tariff schedules have been decreased and also whether they have been fully decreased by that amount or even more. So the information is not easy to come by, but we're trying to get that information. We don't have it now.

[Translation]

Mr. Benoît Sauvageau: Do you mean that it's not true when people say that there are 500,000 more poor children in Canada over the past five years? That it's a mystery or a Statistics Canada aberration?

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[English]

Mr. Rolf Mirus: I think that is not an issue I am prepared to address, because the definition of poverty is a very tricky concept, and people do not agree on what is poor.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, panel.

I just have some concluding comments. I think I understand where Monsieur Sauvageau was going. When you started your presentation, I heard you say there's no question that trade is beneficial and that there is no relationship between the increase in poverty right now and free trade. We heard quite the contrary out west. We heard that trade is detrimental and that it has increased the gap between the rich and the poor. Again, I heard your comment, Ms. Smythe, that we can't look just at trade. But those are some of the questions we're being challenged with as members, and I think it's important that we are in a position to address them. Unfortunately, we're out of time.

Ms. Smythe, on the problem with chapter 11, I have to concur with you. We heard from media reports of the meeting of the free trade ministers on Friday that the Mexican trade minister's response that we should mount a public relations campaign did not play well. I can tell you that. Again, I want to look at how we can address those problems of chapter 11, and we'd appreciate any guidance you could give us.

Also, we'd like your comments and assistance on how the government can ensure the equitable distribution of the wealth that is a benefit from trade, so that message can get out to people as well. We would appreciate your assistance.

Again, thank you very much for coming. Thank you for your presentations. Thank you for taking the time to answer our questions.

Again, as I stated in Vancouver, this is the beginning of our consultations. We hope this will become an ongoing dialogue between you and the committee. We encourage you to submit further submissions as issues and concerns come to your attention. Thank you very much.

Next I'd like to call upon Shawna Vogel, a member of the Board of Directors of Economic Development Edmonton, to take a seat.

Ladies and gentlemen, can I please ask you to take your seats so that we can begin. We are on a fairly tight schedule. If we're able to commence quickly, we will have time to ask questions.

Welcome, Mr. Edwards and Ms. Vogel, to the Standing Committee on Foreign Affairs and International Trade. I understand, Mr. Edwards, that you'll be introducing Ms. Vogel.

Mr. Jim Edwards (Spokesperson, Economic Development Edmonton): Yes. Thank you, Madam Chair. I appreciate this opportunity.

I note that the Minister of International Trade, the Honourable Sergio Marchi, has stated that international trade has become a local issue. In fact, when I led a delegation to London, England, and met with High Commissioner MacLaren last summer, it was remarked that they didn't very often see local delegations. I think there will be much more of it. Whether or not we move in the direction of city-states globally, the fact is that each economy, regional, municipal or provincial, is competing globally. That's the reality, that's the challenge, and that's the joy of it all.

With me is a director of the private sector board that governs Economic Development Edmonton, an organization wholly owned by the City of Edmonton but which earns 60% of its revenue through operating a research park, a conference centre, and having a mandate for business and technology development and also for the development of tourism in this region.

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Our director is Ms. Shawna Vogel, who is a well-known lawyer in trade practice with the Edmonton firm of Cruickshank Karvellas.

Ms. Vogel.

Ms. Shawna Vogel (Member, Board of Directors, Economic Development Edmonton): Thank you.

Thank you very much for the opportunity to speak to you. My remarks are quite brief. I will not be taking up too much of your time. There's a very brief one-page written summary of my remarks, which you have in front of you.

I first want to tell you that Alberta and the City of Edmonton truly support trade liberalization. More and more, our economy is taking advantage of international opportunities. We use international opportunities to cushion us from the boom and bust we have experienced as an economy that has been dependent primarily on commodities and natural resources.

Our economy is becoming more sophisticated and we are looking for more opportunities in which we can do more than simply sell our natural resources. We are looking for opportunities in which we can provide expertise internationally in developing those resources. As well, we are diversifying into new sectors of industry. We look to the international marketplace as an important aspect of the growth of our economy.

Indeed, although it's not on my summary here, Economic Development Edmonton has identified a number of sectors in which it believes Edmonton will see growth, and we plan to channel our efforts in those sectors.

One of them is the knowledge-based sector. We have what we call a 7-25 program. Currently our economy in the greater Edmonton region is 7% knowledge-based industry, and we are looking to grow that to 25%. The market for knowledge-based industry is immediately global. We're not necessarily looking at selling our services in Alberta or even in Canada. The international markets are crucial to our growth.

I've mentioned services. I believe that services are a key sector for us. The NAFTA trade-in-services provisions have been very important to Alberta. The GATS has been very important. We want to see growth in trade in services and growth in trade liberalization in the service industry. That's the good news.

Now I'd like to turn to what I see as one of the most significant impediments to trade and services. I'm going to focus on Canada and the U.S., but I think this problem is not just a Canada-U.S. one. It is a problem between Canada and other foreign countries: it is cross-border travel, cross-border movement of business people.

The NAFTA, for example, provides that you do not need a commercial presence in the U.S. in order to carry on business there. That is an illusion. The fact is—and as I will explain to you in some examples—we are in a position where, to truly operate and sell our services in the U.S., we are forced into setting up a U.S. subsidiary or a U.S. branch. The U.S. immigration department is always a challenge. I am an international business lawyer and my practice is just booming in the area of trying to get business visas to the U.S. for our people who want to travel there. It is a nightmare.

Just to give you a few examples, I can't tell you how many business people have been told by the U.S. immigration department, whether it was at Edmonton International, at the Calgary international airport, or at the Sweetgrass border, that they were taking jobs away from Americans. This is the first line they receive.

No, we are not taking jobs away from Americans. We are applying for visas. Under the NAFTA, we are entitled to these visas. We are not taking jobs away from Americans, but this is the attitude we're faced with.

The U.S. immigration department treats our business people in an aggressive and harassing manner. Indeed, I had one client who was applying under the professional category—or as it's called in the U.S., the T-N1 category—as a management consultant and was told by a U.S. immigration official in Calgary, “I know what a management consultant looks like and you don't look like one.” I'm not sure what a management consultant looks like, but apparently this fellow didn't.

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Oh, excuse me, do we have a management consultant here? Probably that's what a management consultant looks like. Had we only known—

Voices: Oh, oh!

Ms. Shawna Vogel: I should state that I totally understand that Canadian and U.S. immigration departments and immigration departments around the world do have to be careful about who they let in and do have to follow rules and regulations. My point here today is that we have negotiated a trade agreement that provides for entry and it's not being enforced. I think when we're negotiating trade agreements and amendments to trade agreements with countries in the future, we should be mindful of our U.S. experience and ensure that when we're negotiating we put in adequate remedies or buffers to ensure that they are enforced.

I mentioned that Edmonton is focusing on the high-tech, knowledge-based industry. This industry, perhaps, apart from the construction and oil and gas industry, incurs the most difficulties in sending people across the border. It's a puzzle, a mind-bender, to try to figure out how to send people. There are a couple of categories—management consultants or systems analysts—under the professional category, but it doesn't necessarily fit with the day-to-day reality of our businesses.

There's another category I wish to mention. As part of the growth of our economy, we see a demand in emerging economies for western knowledge. We want to supply that knowledge. It's a great opportunity for us. In the U.S., we also see that demand for knowledge in certain sectors that we have expertise in. It is almost impossible to obtain a visa for a Canadian business person to provide training services in the U.S. There just doesn't seem to be a category, and the U.S. immigration department will tell you that they don't know how to deal with that person.

Finally, we wish to encourage cross-border sales of goods. I think it's encouraging that we see some companies developing regions for their goods, which will be perhaps the “Pacific Northwest”—Alberta, B.C., and a Pacific northwest state. This is a great thing. The problem is that if that U.S. company hires a sales agent in Canada and asks that sales agent to represent the company in that whole territory, there's no visa category that will allow them to travel into the United States to make those sales calls.

So again, we have a lot of practical problems in having our people take advantage of the NAFTA. As I said, what it boils down to is that we end up having to set up U.S. subsidiaries and establish U.S. branches in order to transfer our people. So indeed, we do need to have a commercial presence. That's all I wish to say about the U.S. immigration issue.

On services generally, when we're looking at negotiating trade agreements, there are a number of provisions that I believe would really help our businesses. I believe that we really have to seek to eradicate government regulations that favour domestic service providers or that treat domestic service providers from some countries more favourably. I'm talking about MFN treatment, and I think that although it's a staple and a fundamental of trade agreements, it's a living reality and we have to address it.

I mentioned restrictions on transferring personnel, but we also need to look at restrictions on transferring equipment necessary to complete a project. As well, it's become clear to me through my own practice that in a number of countries the inability to obtain government information on rules and regulations on trade in services is still a real problem.

Finally, we would like to see technical requirements being addressed, that is, those standards that are not based on qualifications or performance and prevent a service provider from obtaining the necessary certification or licensing.

The last thing I would like to touch on is trade in goods. You'll see two charts attached to my one page of notes. The first one shows the 25 largest agricultural export categories in Alberta, which still face tariffs. Although I've spent a lot of time on services, agricultural exports are key to the Alberta economy and certainly even in the Edmonton region. These agricultural exports still face tariffs, and we would urge you to seek a reduction or an elimination of those tariffs.

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The final attachment shows the 25 largest non-agricultural exports still facing tariffs. Again, we urge you to seek reduction and elimination of these tariffs.

That's all I have to say. Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Edwards, is there anything you'd like to add?

Mr. Jim Edwards: On the question of being what you seem, I want to report that your clerk made an observation as we came in. She paid me the ultimate compliment. She said I looked like a member of Parliament.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Edwards, I understand that you are a former member of Parliament.

Mr. Jim Edwards: I'm a former chair of a standing committee of the House of Commons, so I particularly want to welcome you to Edmonton. I recognize that budgets are leaner than they once were, but I congratulate you for taking the committee on the road and learning from various parts of the country what these problems and challenges are. We'd be very pleased to answer any questions the committee members have.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much. Before I start questioning, I want to tell Ms. Vogel that yesterday we heard from the Cascadia Institute, the Discovery Institute, and the Pacific Corridor Enterprise Council, with the same concerns about cross-border problems. We also heard from Dr. Dorothy Riddle of Service-Growth Consultants, who expressed many of the same concerns you have. Those are echoed very much based on our presentations yesterday, so I thank you for reinforcing that.

Mr. Penson, we're very limited for time, so we'll allow two to three minutes per question. If we have time for a second round—

Mr. Charlie Penson: I can't introduce myself in two minutes.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Penson, I don't think you need an introduction.

Mr. Jim Edwards: You need no introduction, sir.

Mr. Charlie Penson: Well, thank you.

I'd like to welcome Economic Development Edmonton to the committee. You have raised some very important issues.

As a general statement, though, I would have to say that it seems to me a lot of the problems you're facing in terms of immigration and cross-border issues are problems that still exist but can be worked out under an environment of the free trade agreement, and it seems to me that in today's environment it would be very difficult to do a free trade agreement with the United States and Mexico. I'm glad it was done when it was, because it seems to me that it has been a great benefit and these things can be worked out.

My background is agriculture, and I am certainly aware of the problems. It seems to me that the tariffs we are facing are largely not into the United States; it's an expanded World Trade Organization negotiation that needs to resolve a lot of those into Europe, Japan, Korea, and so on.

There are two mandated sections that have to go through negotiation this year—that is, services and agriculture. I gather you're calling for a more expanded round so we can deal with other issues at the same time.

Ms. Shawna Vogel: I am, although I have in the past and continue to advise the Government of Alberta on a variety of trade issues, and I'm certainly cognizant that the wider you make a round, sometimes the less likelihood of achieving anything. We made some progress on the agreement on agriculture, but I do believe there are still many issues to be resolved, and at the risk of not making any gains because it's too wide a round, I would see about trying to widen it first.

Mr. Charlie Penson: The reason I ask that question is because there's a lot of people who believe countries like the member countries of the European Union would have a difficult time giving up in the area of agriculture if they couldn't show that they're making some gains in some other areas, and therefore the need to have international competition law, intellectual property, and services all in the negotiation.

Ms. Shawna Vogel: I think that's true, and I think we're seeing with the variety of international and national groups trying to deal with electronic commerce, for example—and it's an area we want to look at before electronic commerce itself overtakes policy. There may be a trade-off there. That's an area on which we haven't focused. We see the OECD and certainly the U.S. and other countries focusing on that, and I would like to see a wider round, of course. I see what happened with the multilateral agreement on investment and what happened when we widened it, so there's always the risk.

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Mr. Charlie Penson: Okay.

In Winnipeg on Monday the canola council suggested that if they were able to get zero for zero—in other words, canola oil treated in the same way we treat canola seed into Japan and Korea, and so on—it would mean about a $4-billion increase for Canadian farmers. Have you worked through any numbers here on the total of the industrial and agricultural tariffs that are still existing and what that might mean to our economy here in the province?

Ms. Shawna Vogel: No, I haven't. I'm certain that the Alberta Department of Agriculture would have that information, if you would like me to ask them to forward it to you.

The Acting Chairman (Ms. Sarmite Bulte): If you could find that information for us and file it with our clerk, we'd appreciate it.

Ms. Shawna Vogel: Okay, we'll make a note of that.

To summarize, essentially you are asking what it would mean if we achieved a zero for zero on the items listed here.

Mr. Charlie Penson: Yes.

I guess my three minutes are up.

Ms. Shawna Vogel: I'd like to say one more thing on agriculture. At the risk of the agriculture experts getting angry at me, I do think if we're going into a wider round on agriculture, we have to realize that supply management is going to be on the table too.

Mr. Charlie Penson: Yes.

Mr. Calder is out of the room right now, but I'm sure he would have some comments.

Mr. Bob Speller: Ms. Vogel, what was that you said about supply management?

Ms. Shawna Vogel: I said it would obviously be put on the table by other countries if we had a wide agricultural round. I think we can continue to see pressure from other countries on our supply management.

Mr. Bob Speller: I'm not sure how—

Mr. Charlie Penson: Even if we only have a second negotiation on agriculture, it will be on the table.

Ms. Shawna Vogel: If I was another country and I was worried about my own agricultural negotiations, what I'd have to give up, I'd sure try to force you to put it on the table.

Mr. Bob Speller: In terms of supply management, it's sort of the internal managing of one's commodities. As long as it's internal, I'm not sure what interest that would be to other countries. That's a separate issue. Tariffs are a separate issue to the supply management.

Ms. Shawna Vogel: It all gets rolled up into one when you're from the European Union and Canada is asking you to reduce your tariffs. I think the European Union certainly responds back and says, well, 300% tariffs.

Mr. Bob Speller: How important is supply management in Alberta?

Ms. Shawna Vogel: I would say it's probably a more significant issue in Quebec than it is in Alberta for dairy. I think you have some agricultural representatives talking to you here, do you not? Have they not been on the agenda?

Mr. Charlie Penson: We're meeting with the Alberta government.

Ms. Shawna Vogel: I would actually rather defer to them.

Mr. Charlie Penson: Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Ms. Beaumier.

Ms. Colleen Beaumier: I want to get back to the issuing of visas. Are the rules the stumbling block, or is it the general protectionist attitude of individual Americans, more than the government?

I know in Ontario, when free trade first began for manufactured products, they'd be turned back at the border because the “Made in Canada” sign wasn't to the liking of the person at the border, more so than with the government.

In B.C. last summer they had trouble getting their fresh blueberries across the border. They were stalled there with no legitimate ruling on it, I suppose waiting for them to rot before they got them across the border.

So is it the rules, or is it the enactment or enforcement of the rules that's the problem?

Ms. Shawna Vogel: I'm sure we've experienced border problems with goods in Alberta. Meat going across the Sweetgrass border has been a real problem. I think that one was at least a year and a half to two years ago.

I would say it's both. I would echo Mr. Penson's comments that I believe there was every good effort made in the negotiation of the FTA, and then ultimately in the NAFTA, to provide for visas. I think we're seeing with experience that the way our economy is developing, there are a number of categories that are... The subtleties of the way the temporary entry chapter works has caused problems. But there is no doubt that there is, I would say, a pervasive attitude of the immigration officials: Keep them out unless you have to let them in.

Ms. Colleen Beaumier: Okay, thank you.

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The Acting Chairman (Ms. Sarmite Bulte): Continuing in that vein, one of the comments made yesterday was that under the temporary entry chapter, in the group of professions listed, there was a problem with management consultants and systems analysts, because unlike a lawyer or a professional engineer, you cannot back up your profession by certification. So in trying to resolve this issue, do we need a definition of what these things are? Would that help, as opposed to leaving it to the discretion of the individual immigration officer?

Ms. Shawna Vogel: I would like to see a second look taken at the professions list. “Management consultant”, for example, is defined in two ways. In the temporary entry chapter itself, you can be a “management consultant”—and I put that in quotations—or somebody who is going down to the U.S. to consult in a specialty you've worked in for five years.

I know that U.S. Immigration, in their handbook or their regulations, when they're analysing “management consultant”, look at it more in the first vein—that is, what we would traditionally see as someone going into a company to consult on the way they manage that company. I think U.S. Immigration would have more difficulty with the idea of someone consulting in their area of specialty, but it's been lumped into the management consultant category. So that's one of the difficulties with that category.

As for systems analyst, Immigration has, and I think correctly, interpreted that as someone who is looking at the whole network of a computer rather than doing data entry. The problem is, for example, I have clients who develop computer software games. When they want to send people down to work with the customer who has asked them to develop this game, the person may not always be doing systems analysis, but may be doing other aspects of the computer consulting and services industry that are not captured. So those are two problems that come about from the lack of definition.

I must say, though, I have had a problem with a lawyer. The lawyer category you would think would be easy; you'd simply show your degree. The problem is you're also required to comply with any local licensing regulations. I had a situation—and this is not uncommon—involving an in-house counsel to a multinational oil company who was based in Calgary but once a month would go down to Houston to spend a week with senior management, and indeed was providing legal advice while they were down there, but certainly not legal advice on the laws of the U.S. or Texas.

U.S. Immigration said to me, “Show me that that person is going to comply with the Texas licensing requirements.” I then dealt extensively with the law society in Texas, and they said to me, “Well, you don't need to be licensed here.” So I was in this catch-22. I kept saying to them, “I have to have a piece of paper from you. This is the only way I can get my fellow in.” But they kept saying, “Well, you don't need to be licensed here. You're not practising law here, in our view.” So that's a difficulty.

The Acting Chairman (Ms. Sarmite Bulte): So are these issues and definitions we can look at as we negotiate the free trade area of the Americas agreement, which is going to enhance possibly the list and also the number of people able to come in under temporary entry?

Ms. Shawna Vogel: My thought was that would be the forum, and that's why I presented those remarks to you today. I certainly don't want to reopen the NAFTA for negotiations. I don't think that would be a smart thing. However, it also might be an opportunity to consider establishing a Canada-U.S.-Mexico working group on temporary entry—maybe there is one; I'm afraid I don't know—to deal with some of these problems. Some of the problems we're experiencing will be reversed as well. Our Canada immigration department has to interpret these sections too, and U.S. people may be having problems.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much.

Once again, thank you very much for joining us, Mr. Edwards and Ms. Vogel.

Again, if there are any other issues, or if there's some issue you've dealt with that you'd like to delve deeper into, or if any changes come up that we should be made aware of, please don't hesitate to contact our clerk and submit additional information. In fact, as I stated, this is the just the beginning of the consultation process; it's not the end. We hope this dialogue will be continuous, and dialogue means it works both ways.

Thank you very much for coming.

Ms. Shawna Vogel: Thank you for the opportunity.

[Translation]

Mr. Jim Edwards: Thank you, Madam Chair.

[English]

The Acting Chairman (Ms. Sarmite Bulte): Next I'd like to call to the table the Canadian Dehydrators Association, please.

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The Acting Chairman (Ms. Sarmite Bulte): Welcome, Mr. Benoit, to the Standing Committee on Foreign Affairs and International Trade. I understand you're representing the Canadian Dehydrators Association. We welcome your presentation and hope we can have some questions as well.

Thank you for joining us.

Mr. Garry Benoit (Executive Director, Canadian Dehydrators Association): Thank you very much for giving me the opportunity to do this.

I'd like to outline the views of the dehydrated alfalfa industry on the upcoming round of the WTO negotiations. The comprehensive consultation process, of which this is part, is one of the few encouraging signs about the current situation. Ours is an industry in crisis, in large part because of competitors' subsidies.

Since we have provided a detailed submission, I would like to take a few minutes to introduce our industry and to draw your attention to the major issues of importance to us.

On a national basis, more than 80% of our industry's production is exported. We represent 29 processing plants, give or take; it changes by a few every now and then. Most of the production is in Alberta—in fact about 60% of the production is in Alberta—and most of the remainder is in northeastern Saskatchewan. There are a few small processing plants in Manitoba too, and we have about four or five members in Ontario and a member in Quebec. So the big volume of our production is in Alberta and Saskatchewan.

Our annual exports have reached 700,000 tonnes, with a dollar value of about $130 million. Some of you know the industry is located mainly on the periphery of the prairie growing area. Our plants create more than 1,000 skilled jobs in these rural communities, they provide more than $13 million in direct wages, and indirect spinoff benefits are worth another $67 million a year. The dehydrating plant, often with widely held ownership, is often the main industry in a community.

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Now for example in Alberta, the processing plants are fairly predominant up in the Peace River country, where we've got a situation where there's not a really large livestock base, and alfalfa is a very beneficial crop in the rotations of that region. It's very beneficial for the soils and it's a good diversification option, so alfalfa is an important crop. Often these processing plants were initially started because farmers were looking for diversification options, some new crops they could grow to get them away from just the wheat syndrome. Processing of alfalfa has been a very good industry for those kinds of regions.

We also have plants in Alberta just north of Edmonton, and we have processing plants in the irrigation area of southern Alberta. So we have the full range of operations.

Just to give you a refresher on the typical scenario, in the northern regions, we're taking fresh-cut green chopped material from the fields 24 hours a day from June until October. That would be brought into the processing plant the same day it's cut, at about 65% moisture, and processed to capture the nutrition at the maximum content and condense it into an exportable format. Even if the weather is not cooperating, you're able to make good-quality forage and capture the nutrients right at their peak without any deterioration from the rain and the sunshine, etc. So we get a good-quality product to serve our very discriminating markets, such as Japan.

We've been held up by successive governments as the model for value-added industry on the prairies, producing the world's best quality products in the most cost-efficient manner.

We deeply regret that our success is starting to unravel. The main problem is a European Union subsidy of well over $100 per tonne. It's important to note that this isn't an export subsidy as such. It's a subsidy paid directly to the processor on every tonne that he processes and moves from his plant.

European producers have been selling highly subsidized products into our major Japanese market and other markets over the last year. This has forced prices down to a current level that is $50 a tonne lower than it was in March 1998, when these offers were first being made.

So these have definitely brought our prices down very rapidly and wrecked our markets, basically.

Regarding our views on the upcoming WTO round, again, as we have been telling government for more than a year, the Canadian industry can't wait several years for a negotiated trade deal that may or may not help us. We can't survive for any length of time while the international price of alfalfa is below the cost of Canadian production because of subsidy-created surpluses.

Our plants are cutting back production, and there will be continuing loss of employment and negative economic impact in the areas the plants are located.

Minister Vanclief has raised this issue with the EU commissioner and ambassadors, and a démarche has been delivered to the European Union. Unfortunately, it's clear that government's efforts have been unsuccessful.

Let's assume we succeed. Let's assume we find a way with government help to survive and that there are enough plants in business in 2001, 2002, or 2003 to benefit from the WTO round. What is our association's advice to government with respect to the specific negotiation we're talking about here?

Clearly, the negotiations must produce substantial results without dragging on for years. Canada must work with other countries to assure the focus is on trade liberalization and reduction of trade-distorting subsidies and barriers. I don't think trade negotiations should be about a bunch of protectionism. It's about getting the barriers removed and really getting trade liberalization.

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We recommend an early show of good faith by the signatories that would include a continued phase down of subsidies and tariffs during the negotiations and immediate self-limitation on the export of highly subsidized products that are damaging industries in competitor member countries. I think it would be a good start to continue with the phase down in subsidies and tariffs with at least the same degree of aggressiveness as we had for the years the last agreement applied to.

It was a mistake in the last round to give trade-distorting agricultural subsidies a free ride. I refer to the protection provided against recourse to a serious prejudice action under the GATT subsidies text until 2004, providing the country is meeting its subsidy reduction targets. Negotiators incorrectly expected that the subsidy reductions would provide sufficient relief so as to make this exception acceptable. The cuts on subsidies must be much deeper and must be commodity specific.

The next round must eliminate both export and processor subsidies. In addition to the problems created by the EU dehydration subsidies, we are adversely impacted by European and American grain and oilseed export and domestic subsidies. We've created an overall global glut, which is subsidy created, that just makes it very difficult for Canadian farmers and grain farmers in general, including the producers of our crop.

I repeat, our major trade problem today is not the export subsidy. It's a subsidy paid directly to processors rather than farmers, and it is paid when alfalfa is moved from the plant. This kind of subsidy is particularly distorting because it encourages production and marketing despite marketing conditions. The result in Europe is a huge and growing surplus, which, as I mentioned, is now seriously impacting our markets.

Europe is our immediate problem, but the Europeans are not alone in offering processor subsidies. The United States Department of Energy is offering a processor subsidy that encourages burning alfalfa stems to generate electricity. As a result, this program places subsidized high protein leaf meal on the market. It threatens to expand the U.S. dehydrating industry considerably. If the energy program proves to be uneconomical, as we expect it will, new high-capacity plants will have been built with these subsidies and will be on line to compete directly with our industry. We're talking about a quantity that's greater than the total American dehydration production and equal to the Canadian annual dehydration production. New capacity is going to be brought onstream in Minnesota. We're talking $43 million in subsidies to this one operation.

I will very quickly summarize our recommendations. They are as follows: one, deep cuts commodity by commodity to trade-distorting domestic subsidies, such as the EU dehydration subsidy to processors; two, ensuring that foreign dehydration subsidy programs are not richer than subsidies for feed grains and other feed ingredients, which we feel they are, and we feel this is probably the richest subsidy situation you can find in Europe; three, an expansion of the definition of agricultural subsidies to cover programs funded through other government departments, such as the U.S. Department of Energy, that serve to increase production and exports; four, controls on trade actions taken for harassment purposes. We were dragged through the mud by the U.S. on a section 302, I believe it was, because it was felt the Western Grain Transportation Act was giving us the advantage in the Japanese market.

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We recommend the elimination of trade-distorting effects of central purchasing agencies and deep cuts in tariffs. We favour the zero-for-zero approach for dehydration; it's been talked about much by other groups. Over the last few years, the natural advantages that Canada's dehydration industry enjoyed have been wiped out through trade-distorting subsidies of other countries. Whether we are able to address those practices effectively in both the short and the longer term will determine the future of our industry.

Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Benoit.

Mr. Penson.

Mr. Charlie Penson: Thank you.

Welcome, Mr. Benoit. I can certainly appreciate your concerns. I have a very large dehydration industry in my riding. Probably the biggest dehydrator in all of Canada, in terms of grain product, is located in my riding, and I certainly see the benefit.

You made an excellent point in talking about a model industry. First of all, the Government of Canada has suggested that farmers should diversify, that they should not necessarily be planting wheat all the time, but looking for other commodities. It's a product grown for the dehydration industry that really works to benefit good agricultural practices in an industry where we've seen soil degradation in western Canada deplete topsoil reserves by about 50% since agriculture began approximately 100 years ago.

So here's an industry that has these good practices building up soil, and once you've developed this specialized industry, now you see it being threatened, largely because of European subsidies—not specific to Europe, but certainly that's one big area.

If this negotiation takes four or five years, even if we're successful in negotiating down these subsidies, can your industry last that long? You just told us you're subject to $50-a-tonne subsidies that are hurting your industry out of the European Union into the Japanese market.

Mr. Garry Benoit: I said over $100. It's ranged between a low of $117 and a high of $180.

Mr. Charlie Penson: Oh, I'm sorry. Okay.

Mr. Garry Benoit: So it's very major. It's often higher than the total price of our products, if they leave the processing plant.

Mr. Charlie Penson: Well, the question still stands.

Mr. Garry Benoit: I didn't want to over-exaggerate, but the actual calculation varies with the ECU, and it's a specific number of ECUs, and the last calculation I did was $117.

That is the question we're wrestling with, and it's compounded by the Asian financial crisis. They're looking to use every lever they can to get prices down on everything they buy.

Can we survive, and for how long? We've already seen a couple of plants that haven't survived out of the 30, one in the Peace River country and one in Ontario. You're going to have some that have other problems or whatever—I can't blame it all on the European subsidy—but we are an industry that's been lean and mean. Having to compete with that kind of subsidy, we've already been squeezed at many points in the past, and one of the squeezes was when we lost the Western Grain Transportation Act; we gave up the entire thing all at once. When you're export-dependent, and when that was working in a positive way for us, it was a major adjustment we were going through, and then to get this on top of it... We're going through difficult times.

Also, our processors are out there farming the land and working the fields for the three- to four-year period required for processing alfalfa. They do all the field operations. We made the case that because of that, we should have been included in the income disaster program to help us survive. They have all of the investment in the equipment, and they're out there doing the field operations. They could lay out their books and show their incomes have fallen below the 70% of the previous three years, even where there were already difficulties, such as in the Peace.

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It would have been a very easy thing for government to have just helped us survive, helped keep more of the industry around during this period by including us there. They didn't, so we haven't had much assistance to help bridge the—

Mr. Charlie Penson: I want to just get into the area you were talking about a little bit. I think you were talking about waiving the trade law aspect in the original negotiations, so dumping would not apply as long as the agriculture was brought under the Uruguay Round. Then there was this built-in agenda for trade negotiations for 2000. My understanding is that trade law, like dumping and countervail, would not apply during that time. Is that what you're referring to?

Mr. Garry Benoit: Yes, there was an exemption with respect to the disciplines of—

Mr. Charlie Penson: I just want to clarify. You said if you'd had that protection, you could have taken an action against some of the foreign suppliers that were dumping into markets you had supplied. Is that what it was?

Mr. Garry Benoit: Yes. It would have given us at least some hope for some tools to get at it. It's a third-country situation—countervail. Because of the high European subsidies, they were getting product and wrecking our Japanese markets. We would have had some recourse or some hope for recourse.

Mr. Charlie Penson: So the question coming out of that would be if we're not able to make progress on the subsidy side, our committee should be making recommendations that we discontinue the waiver of this trade action policy beyond 2004.

Mr. Garry Benoit: That's correct.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Calder.

Mr. Murray Calder: Thank you very much, Madam Chair.

Good morning, Garry. I just have a few questions.

You note in your third point under short-term relief that you need a bridge. Yours is a very interesting industry. It's one we've dealt with in the Standing Committee on Agriculture. You're putting forward a finished product, a value-added product that you basically want to have considered as a primary product. Would I be right in saying that?

Mr. Garry Benoit: We do the complete integrated operation, I guess, from the field operation, but we take it one step further to the value-added process.

Mr. Murray Calder: But you still want it to be considered as a feed component similar to grain. You've actually taken alfalfa, stripped the leaves off the stock and come up with a pelleted feed that's high in protein, but you still want it to be considered as a primary feed.

Mr. Garry Benoit: It is used as a feed ingredient, even though it is a processed product.

Mr. Murray Calder: Yes. To a certain extent therein lies the problem for us. Within the value-added you have a processing entity and the primary producers that are feeding that, but sometimes the primary producers are the processing entity. That's the problem we've been trying to deal with.

You say you need a bridge. What would this bridge be?

Mr. Garry Benoit: The obvious bridge would have been inclusion in the income disaster program.

Mr. Murray Calder: The AIDA program.

Mr. Garry Benoit: Yes. Our operations are farming the land, and if they don't have an income problem because they can't show their incomes have dropped below 70% of what they were, they don't qualify. There could have been just simple inclusion.

As it turns out, probably most of our Ontario and Quebec plants are filing. There was a technicality that left us out there because our larger plants in the west don't file as farm income, whereas our smaller plants in Ontario and Quebec file as farm income, so they would just qualify. It's sort of a technicality.

I think a little bit of creativity and flexibility... There was a lot of worrying about opening a new can of worms. I don't think there is anybody else really parallel to us that would have an income disaster because of European subsidies and all the same reasons—the Asian crisis, export-dependent, that would have—

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Mr. Murray Calder: It definitely made it difficult for us, and I think we're still dealing with this issue of what pigeonhole to put you in.

When the WGTA was done away with, $1.6 billion was put out to the farmers. Did your people get any of that money?

Mr. Garry Benoit: Yes. They figured it out on a sort of level kind of basis. It worked out to something between two and three years of the increase to their freight bill because that was paid to the processors. So there was an adjustment period.

That's history now, but it was greatly appreciated. We worked hard as an association to see we weren't left out in that case. It's our uniqueness. We always fall in that very difficult zone where we have to make the case that we have all these parallels and we should fit. So yes we did, and we were grateful for that.

Mr. Murray Calder: So some of that money was probably put toward upgrading and making your industry much more efficient than it was in the past.

Mr. Garry Benoit: That's correct. A lot of creative things were done, such as increasing their loading slots to 50-car loading slots, and that kind of thing.

Mr. Murray Calder: So basically we're down to this business that the Europeans are subsidizing their processors by $100 a tonne and basically taking away markets you established in Japan and the United States. Do you have any idea of any trade challenges we could launch against the Europeans? It seems to me, from what you've described so far, it's a very unfair trading practice.

Mr. Garry Benoit: We've scoured the waterfront on that. They had a situation where, with their persistent subsidy, they were expanding at a tremendous rate. They happened to catch a base period they used that was very high. They tripled their industry because of these subsidies. They caught some very high years that they used as a base period. They did their GATT-required reductions below those ridiculously high levels they used as the base. So technically, legally they've done the subsidy—

Mr. Murray Calder: One thing the Europeans negotiated in 1993 was their carry-forward clause, which I have a bit of a problem with. Would that have any effect on your industry? In very simple terms, the carry-forward clause meant if there was a year when they didn't use a subsidy they could carry it forward into the next year. In fact, there are two years they could carry forward. They will have to use them in 1999 and 2000 because we negotiated a use it or lose it type of rule. It could translate into something like—if you take a look at wheat, for instance—37.8 million tonnes that would have this extra subsidy attached that they haven't used. Would that affect your industry?

Mr. Garry Benoit: It wouldn't affect it directly, because the European processor gets a fixed level of subsidy whether the market's good or bad, up to a certain ceiling of 4.4 million tonnes. He gets what he can from the market, plus this subsidy for processing. So the system is different and I don't think it directly affects us.

Mr. Murray Calder: Okay. So domestically we will have to get a better definition for your industry that we can work with in the negotiating—

Mr. Garry Benoit: We would rather not have subsidies.

Mr. Murray Calder: Yes. I hear you there.

Mr. Garry Benoit: But what do you do when you're—

Mr. Murray Calder: But it's a fact of life right now that we're dealing with.

Mr. Garry Benoit: Yes.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Benoit, for coming to address the committee. If there are any additional issues that come to light that you would like to share with the committee, please feel free to submit further briefs or opinions to us. We'd be happy to have them form part of our report. Thank you again for coming and thank you for sharing your concerns with us today.

Ladies and gentlemen, the meeting is adjourned until one o'clock sharp.

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The Acting Chairman (Ms. Sarmite Bulte): Okay, Mr. Murray, are you ready?

Mr. John Murray (Member (Yellowknife), Alternatives North): Is everybody here?

The Acting Chairman (Ms. Sarmite Bulte): We have one drifting in, but I don't want to wait, because you've come all the way from Yellowknife.

I want to welcome you. Excuse our tardiness for starting, but we will give you your full allotted time. On behalf of the Standing Committee of Foreign Affairs and International Trade we welcome you, and we look forward to your presentation this afternoon.

Mr. John Murray: Madam Chairperson and other honourable members, and the honourable public too, I'm giving a presentation to the Standing Committee on Foreign Affairs and International Trade for Alternatives North.

The debate on free trade should not be thought of in terms of a battle between the left and right. Although many people commonly designated as socialists oppose free trade, so do some very intelligent billionaires, such as the politician Ross Perot in the United States and Britain's Sir James Goldsmith.

Much of the old characterization of ideas of left and right has become irrelevant in terms of extreme changes that have taken place during my lifetime, the Second World War and a series of almost constant hot wars, cold wars, ethnic strife, and religious wars. Then there's the potential for environmental disasters brought on by the atomic age, the destruction of the ozone layer, and global warming. In addition, we have the disruption of traditional economies, family life, and traditional cultures by free trade and the globalization of the world economy.

As a long-term student of history, I've been appalled at the numerous crusades and jihads that should be ancient history but continue to be current events. These ugly events have been joined by class wars involving massacres of kulaks and nobles, and communards and intellectuals.

These blots on history typically came from the mass dissemination of narrow ideas by what psychiatrists call “right people”—in other words, people who are convinced their opinions are always right. A lot of the evils of the past few centuries are connected to fanatics who think only in economic terms. Some forms of capitalism and communism have much in common, in that the economy is everything. Often the economy is measured in terms of the GDP, or GNP in some cases, which is a measure of the amount of money changing hands in a country.

If people are living happily on a farm producing all they need, if a housewife stays home to care for her family, if a native family lives adequately by harvesting game for their own needs, nothing they do is measured in a calculation of the GDP. Only when traditional cultures are disrupted or destroyed and people's goods and labour are sold for money are they considered of value. Even when the actual producer gets little cash, if goods are sold numerous times for profit by middlemen, then goods are treated as having value for the GDP.

I'm not arguing that money has no use, but there is no way of correlating a country's or an individual's happiness with either the solely money value in GDP or the value placed on national income from international trade.

For example, suppose thousands of miners are laid off because of falling mineral prices, and thousands of farmers go bankrupt because of foreign commodities prices. They may have to sell their properties, pay moving expenses, and possibly accept lower-paying jobs as labourers in factories or work in service industries. These industries may prosper, and this is fine for the GDP and the economy, if we think in those terms, but miserable for the dislocated individuals.

Another example is that personal disasters for millions brought on my ethnic cleansing in Rwanda or in the dismantled Yugoslavia, the dropping of atomic bombs, the Gulf War, and every environmental disaster from Three Mile Island to Chernobyl, or the Love Canal, have been good for somebody's GDP and the economy because of mass movements of people and eventual new construction.

As well, high crime rates provide huge benefits to drug dealers and jobs for prison-builders, guards, police, judges, lawyers, caregivers, and so forth. These ways of raising the GDP are not beneficial to most of the individuals involved, and are often bad for the environment, destroy whole societies, and sometimes destroy the governments involved.

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Overall, most of the free trade schemes being devised seem to be more ideas of right-thinkers. Most governments of the more powerful and economically advanced countries, like the U.S., Britain, and Canada, seem to have a lemming-like urge to rush into the MAI without adequately consulting the people. Consultation should mean more than a few hearings. It should involve educating the public in all that is involved in various free trade schemes. From the elementary school children to adults, all will eventually be affected.

If the public has been educated on the consequences of various forms of free trade, including dissemination of information developed by NGOs, then people should have the opportunity to vote for their choice. I think that most Canadians would not want free trade with countries that persecute trade unionists, ethnic minorities, or religious dissenters, or have plainly unstable or dictatorial governments.

Certainly Canada's past record on trade is nothing to be proud of, pushing sales of nuclear reactors that can be used in weapons research and production to potentially warring states like India and Pakistan, or to dictators in Argentina, Indonesia, Romania, and China. The idea that government should not subsidize anything but their arms industry—and this is a typical type of thing that comes up in free trade agreements—is appalling. And the idea that environmental, labour, and human rights standards may have to be lower for a level playing field is equally appalling.

I have two personal preferences for subsidies that would not fit with the mentality of the MAI or the FTAA. For the western Arctic, I feel that the $250 million environmental cleanup that will be necessary for the decommissioning of Royal Oak's Giant Mines in Yellowknife should be used as follows. The miners in NWT who are facing lay-off at the closing of the mine should be given training in cleanup techniques and then encouraged to form a cooperative company for cleaning up this and other mines using the $250 million. And $250 million for a mine cleanup I don't think would be too unusual for the territories.

In Nunavut, Inuit people should be given exactly the tax breaks as are currently received by treaty Indians. Adequate money should be set aside to put a doctor or two in every community, regardless of cost. Adequate money should be paid to nurses, and enough nurses should be in each community to make life bearable enough for nurses to stay. The people of Nunavut should be educated in all of the job and business possibilities that exist elsewhere in Canada and then they should be asked in what areas they want to work, given the training necessary, in their own communities. After training, the Inuit should get a corporation tax holiday for four or five years on any business they set up.

If you think this is too extravagant, be sure to take a good look at how extravagantly neglectful the federal and territorial governments were of the Inuit people in the past, and of course the same goes for the Dene natives, Inuvialuit, and Inuit who are now sort of stuck in the western territories.

I wanted to limit the amount I put together on paper in my speech, so I do have another whole slew of articles I've written on things like the Green Plan, Canada's north and native issues, and the Kiggavik mine, a potential uranium mine for the north, and so on. So if any of you are interested, you could look at these, too.

The Acting Chairman (Ms. Sarmite Bulte): If you could give a copy to the clerk, the clerk will then ensure that copies are distributed to us. I'll ensure that this takes place as soon as she comes back.

Mr. John Murray: Okay. Here's something I'll pass out now so you can look at it. It's a sample of NWT needs compared to our national needs: the NWT suicide rate is double that of the rest of Canada; for one period there was nine times the national rate of spousal homicide in the NWT as in the rest of Canada. There's a bunch of other things like that. I'll pass them out to you. If you have any questions I'd be glad to respond.

The Acting Chairman (Ms. Sarmite Bulte): There's Christine, our clerk. Mr. Murray has some documentation. It's a package of articles he's written.

Mr. John Murray: I expect you have some questions.

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The Acting Chairman (Ms. Sarmite Bulte): Yes, we do. I'm going to open it up for questions. And again, Mr. Murray, thank you for coming all the way from Yellowknife to be here with us today.

Maybe, for openers for questions, one of the things this committee is trying to do is to involve civil society in our process. That's one of the reasons we are here. Certainly Minister Marchi has stated that things that affect trade issues are becoming local issues, to the point where what we do at the kitchen table and what we have at the kitchen table is a result of the decisions that have been made internationally, and now it's time to move those decision-makers into the back rooms and to engage society. That's part of the process we're in here today.

In your paper you actually state that consultation should mean more than a few hearings. Can you expand on that? How can we engage? One of the things you also said was about including dissemination of information by NGOs. That was also something we heard about in Vancouver loud and clear, the need to do some independent research. We had academics today who brought research. One of the questions that arises is how do we ensure that the research is independent? What other specific ideas do you have as to how we can more meaningfully engage civil society?

One of the things we're very proud of doing—and I know everybody doesn't have the Internet—is putting the discussion papers on the Internet. One of the things we hope to do to educate the public is to include a citizen's guide to the World Trade Organization so that people start to learn. It's not just learning from the media, but learning from a little booklet. So I think those are steps in the right direction of what you're specifically talking about, but can you elaborate, because I think this is key and core to our point. How can we ensure that the consultations are effective and that we get a chance to learn, also remembering that we have limited time and resources to effect these things?

Mr. John Murray: I'd say that as far as resources go, what could happen with free trade to Canada would involve a lot more cost and resources than anything you could possibly spend on hearings or educating the public of what it's all about. My own background is that I've been on and off a teacher for about 23 years, teaching every grade from kindergarten to grade 12, plus adult education—all sorts of courses. I've taken hundreds and hundreds of courses from other people, so I'm very familiar with the education process. Just putting stuff on the Internet isn't necessarily the best way of getting things across.

If you take most of the natives in the north, they're not going to have the Internet, and probably what would be put on, particularly by government agencies, would be in a language that would be incomprehensible to them. I'd say perhaps what you really need is to sponsor a school curriculum, including elementary and high school and so on, and pay some extra money for it to have the general public familiarized with all the ideas of contemporary economics, free trade and so on.

The things the public does not know are absolutely appalling. I'm sure there are loads of people in the territories, and I've met lots of them, who don't know really the difference between municipal government, territorial government, and the federal government. Some of them even going to vote in elections don't really quite know who they're voting for, or what's the federal government or the territorial government or what in the world.

I think people need to understand a lot more about government. People have to understand a lot more about economics, a lot more about the environment, a lot more about free trade. For the average person in the territories, they just don't have enough information.

The Acting Chairman (Ms. Sarmite Bulte): I don't mean to usurp all the questions here, but I think one of things you're talking about, the Northwest Territories and Nunavut, do you see any benefit to using these agreements we enter into to promote access for northern or Arctic products to rest of the world, the products that have been made by indigenous people? Do you not see that we could use these agreements to let the world know about the wonderful things that are happening in the north?

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Mr. John Murray: I think it's getting far too large an economic deal, like the whole thing with global free trade and globalization, compared to what the natives need.

I've been through enough native communities in the eastern Arctic as well as the western Arctic, and I've lived on Indian reserves in northern Ontario and other things like that, in small native communities all over the place. What the natives in the territories need is not some huge international agreement, but some sort of real encouragement to participate in the Canadian economy. They've been thoroughly left out. Politicians and economists love to talk about level playing fields. These people are nowhere near the playing field; they're not even on it. They've been left out economically for the past century. The education that government has given them has been appalling. It has driven people out of schools. A lot of people in the eastern Arctic don't have an education beyond grade five or six because with the history of so much abuse in the residential schools, they didn't encourage children to go to school.

Most of the improvements you hear about in education levels now are sort of artificial: let's just shove a few more kids through school. But they're not getting educated to the proper grade levels they should be at. They're not being educated in their own terms. There isn't enough money going into education in the natives' own language—the Nootka and Dene languages, Slavey.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Calder, you had a comment.

Mr. Murray Calder: John, you're an educator. It's my understanding, on what you have in here about Nunavut, that within the education system up there, for approximately the first four years minimum—and it goes higher than that—to protect their heritage so that it isn't forgotten, they're taught primarily in Inuit. Am I right in saying that?

Mr. John Murray: Yes, they're starting that, but in a way, it's fairly inadequate. The Inuit teachers are not getting paid enough.

I've met some of the craft teachers who are teaching traditional crafts in the school. They're paid much lower than most of the non-native teachers because most of them haven't gotten enough education yet. So it's a matter of really putting enough money into educating the Inuit to educate each other. Otherwise, they're just at the low end of the pay scale and don't always have enough training to teach others.

Mr. Murray Calder: I don't want them to lose their heritage or their ancestry or their history, but aren't they putting themselves at a disadvantage if it's mandatory that for the first four years minimum it's Inuit? How many other countries in the world or businesses are going to use Inuit as a base language? Isn't that putting them at a disadvantage?

Mr. John Murray: You would think so, but I think if it were done right, it wouldn't. In most of the smaller communities the main language is their own native language, whether it's one of the Dene languages or Inuit languages. So when they go to school, there's usually too much of a culture shock if they go from speaking a native language to suddenly speaking just English.

I think a number of experiments have been done by Sylvia Ashton-Warner and other people in New Zealand, and so on, with Maori natives, where they seem to be much better off if they're educated in their own language for the first few years of school so that the parents and children and the elders in the community who don't know English very well can sort of be in communication with the children. Then if they taught all the same subjects, math and all the rest of it, as they get older, they should get into more English and other languages.

Mr. Murray Calder: That's exactly my point. If the primary language to start with is Inuit, and yet internationally the world language is English, I would say they're at a disadvantage right off the bat.

Mr. John Murray: Think of another group, not that long ago even, in my lifetime. Quebec was at a real disadvantage compared to the rest of Canada. Incomes tended to be quite a bit lower, and so on. Not enough Quebeckers were getting into the professions. They took a number of steps to push themselves forward, and generally a lot of people in Quebec make sure they learn their own language first. Although it's not the predominant language of North America or South America or of Europe any more, they want their children to learn their own language for their culture, and then of course it's a good idea to get into the other main languages.

• 1330

Mr. Murray Calder: But quite frankly, when you start comparing the Inuit language to the French language and/or the English language, you're comparing apples and oranges here.

Mr. John Murray: Yes.

Mr. Murray Calder: Because with Nunavut, if it weren't for government money going up there, which constitutes between 80% and 90% of their economy, there wouldn't be 25,000 people up in that area. It would be back down to what it normally was historically, which was around 2,000 to 3,000 people.

Mr. John Murray: It might have been a bit higher than that. But let's face it: most of the people there are not immigrants; they're Inuit.

Mr. Murray Calder: That's right; they're natives.

Mr. John Murray: Of the people there, 85% are Inuit, so they'd be there anyway. If you talk to any of those people, it's almost incomprehensible to me and probably to you how attached they are to their communities. I've talked to a number of people in the Keewatin recently, and they're so attached to their communities. A lot of them hate being out of the community for, say, more than a few months at a time. They don't really like the idea of getting jobs in other communities and so on.

It's going to be a very difficult type of thing. The way I see us handling it is, unless the federal government wants to be spending billions and billions in welfare payments to Nunavut over the next 100 years or so, you're going to have to see to it that those people get a really good education. I think they need education far more than jobs, even if it means doubling the money you're giving them now for say five or ten years.

In the long term, everybody in Canada is going to be better off if the Inuit, and some of the Dene too, get a much better education, and skills they want to use and could possibly use in their own communities. I've seen communities where there's, say, 75% unemployment, and there's just a constant influx of non-native carpenters, plumbers, and everybody else going into these communities and doing work that has to be done, because the people there aren't trained well enough. They hate leaving their own communities to get their training too.

Mr. Murray Calder: That comes down to the bottom-line question as to whether or not the Inuit want to join mainstream Canada. The ones who have have done quite well. The ones who don't... We already know what their history is.

The Acting Chairman (Ms. Sarmite Bulte): I apologize, Monsieur Sauvageau, for passing you over.

[Translation]

Mr. Benoît Sauvageau: I am somewhat stunned. Comments by one of my colleagues during a sitting of the Committee in the East were already quoted. I don't know if they will come up, but I have rarely heard anything worse in terms of paternalistic and petty statements.

With all the respect due to my colleague Mr. Calder, I think that at the very beginning of the story, there were no more than 2,000 in the North. Perhaps more than that. After making a visit to the Polar Circle with the Foreign Affairs Committee, and having seen the living conditions of people there, one can hardly think that 23,000 people went up there just to receive unemployment insurance from the federal government. Saying something like that in committee... You said that there were 2,000 and that there are now 23,000, and that 90% of the budget comes from the federal government. What does that mean? One and one make two. It's not hard to understand what you said, and that's just about what it amounts to.

That said, I do not share this opinion and wish to move on to something else. And it must not be forgotten that the area was used as a dump. What are those big radar stations up there called? Perhaps you can help me Mr. Murray, as you are from the North. Dumps were set up all over the place to contain waste from the Canadian and American Armed Forces. It is not fair to the people up north of the 60th parallel that we should be sending garbage up there, Mr. Calder. The people who are there are living in a manner that is consistent with their history, their growth and their mindset. I think that they deserve respect and that we should see to educating them from Grade 1 to Grade 4 not from the standpoint of a superior language, but using the language of their own history. If English is the language of superiority, there is a great deal of inferiority in Canada, Mr. Calder. I am sorry.

• 1335

Now, a report was prepared about the circumpolar visit two or three years ago, after a lengthy tour of your communities. The problem of revenue in these communities was seen and several recommendations were made to improve trade among circumpolar populations, including in terms of construction, if my memory serves me right. You have expertise in construction and infrastructures that we no longer have in the South.

I am wondering whether you heard about this circumpolar report, concerning countries sharing the 60th parallel. How was it received in your community? When I asked to speak, I had intended to intervene in a humorous vein, but I changed my mind after hearing the recommendations. I wanted to say that you are asking the government to inform and educate the population, but that the population also has something to say. It needs to show an interest. I have a little joke that was sparked by my colleague on my right. You say that people often do not know the difference between the federal government, the provincial and the territorial government. You have perhaps clarified things for me. I was asking myself why the Liberals had been elected, and you have perhaps answered my question. Thank you.

It's only a joke. I have a great deal of respect for them.

[English]

Voices: Oh, oh!

The Acting Chairman (Ms. Sarmite Bulte): Mr. Murray, would you care to respond?

Mr. John Murray: Yes, okay.

I'm not too familiar with the latest in the Circumpolar Conference findings, because I haven't been going to those. Generally just the native people from the territories go to those.

I agree with Mr. Sauvageau quite a bit on what he's been saying. It seems to some people that the native population is expanding a lot. The things people tell me, non-natives, are really horrifying. Some of them are supposed to be leftist, too. They say, “Oh, it's just a time-bomb up here with the birth rate and so on; the native population is increasing so much.”

The book Eco-Wars points out that when the Europeans came to the Americas, there were about 50 million natives here, and most of them got exterminated in one way or another, a lot of times deliberately. A lot of it was disease, with the new diseases brought in. The archaeological record shows huge cities all over North America, even in places such as Louisiana, Mississippi, Kansas, and areas like that. There were cities of a couple of square miles or so, let alone Meso-America, with the Aztecs, Mayas, etc.

Most of those people got exterminated by the European invasion. Talk about a holocaust. The first real holocaust was the extermination of the native peoples in America by disease, being forced into slavery in mines, being really badly mistreated, plus outright wars, which were only a part of the process.

As far as it goes, 50 million people managed to survive here way before we came here, and if we hadn't come here, they'd still be surviving quite well. They would probably have increased and reached maybe a higher level of civilization than they were at. But they got set way back. In some communities in the Northwest Territories, such as in the Mackenzie Delta, 80% to 90% of the people got exterminated in the 20th century by diseases such as smallpox epidemics. Whole tribes were absolutely wiped out, and that eliminated a huge sector of their culture and society. Their shamans, their chiefs, their elders, and so on were mostly killed off, and it was hard to put things together again.

So just in the name of justice if nothing else, we ought to see to it that the... I've been talking mostly about Nunavut, but the Dene and Métis natives in the western territories need the same sort of help.

• 1340

People have been doing things. If you see where your federal money goes in the territories, a lot of it has been used in the wrong way. It's like a coffee filter. Say the grounds are the valuable thing, and you put the filter in there. The trickle-down stuff is just a little of that. A taste of it gets down towards the bottom of the pot, and the grounds stay up in the top in that filter.

Yellowknife I'd say is one of the most cliquish towns I've seen, with everybody with their hand in everybody else's pockets. You could put $10 billion more into the territories than you're putting now, and if you give it to the same people who have been handling it in the past and don't carefully audit what's done with it, it's going to be just as badly misused.

You can see school systems in some of the better-kept towns in the west compared to the eastern Arctic, and it's just horrible in the eastern Arctic.

[Translation]

Mr. Benoît Sauvageau: That's the problem. What is the solution?

[English]

Mr. John Murray: What is the solution? I'd say if you're giving money to the territories, make sure it's going where it's needed.

I can think of one way, right off the top, that the federal government could increase a lot of poorer people's income. You know the rangers? They're the native groups who are given rifles and ammunition and a very small salary to be a little part of an army of the north, for sovereignty and that sort of thing. If you just, say, tripled their pay, this would go into the average poor person's hands.

Don't talk to hospital committees; talk to nurses and doctors and ask them why they don't want to stay in small communities such as Baker Lake, Chesterfield, and so on. It's absolutely horrifying, if you've been to those communities. If you ever got really sick and there were a snowstorm going on, so you couldn't get a plane out for a week or two weeks, and say you needed a heart operation or you just had a stroke or something, what do you have there? You have maybe a couple of nurses at the most.

At least half a dozen communities in the Keewatin should have a doctor and don't have any doctor. They just maybe come in once a month, and a different doctor each time in some cases. The nurses move in and out constantly. I've talked to enough nurses, and the conditions are just too bad to stay in most communities.

So health care is third world or even worse. I'm sure you could get around to most parts of India or China much more easily by road and such. In the eastern Arctic, it's just isolation, nothing but planes in and out. Most of the money for medicine goes to flying people out to doctors rather than flying doctors, nurses, and so on into the communities.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Murray and Monsieur Sauvageau.

Unfortunately we're out of time. Thank you again for taking the time to fly all the way down from Yellowknife to address the committee. We really appreciate it. If you wish to share any additional concerns with us, by all means please feel free to send them to the clerk, and they'll be distributed accordingly.

Thank you very much, Mr. Murray.

Mr. John Murray: Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Next I'd like to call upon the National Farmers Union, represented by Jan Slomp and George Calvin.

Welcome to the Standing Committee on Foreign Affairs and International Trade. I understand you're here representing the National Farmers Union. Please begin, and then we'll have some time for questions and answers. We've allocated you half an hour.

Oh, yes. Someone just reminded me that we saw the president of the National Farmers Union yesterday in Vancouver.

Please make yourself comfortable.

Mr. Jan Slomp (District Director, National Farmers Union): Thank you, Madam Chairperson.

Thank you, committee members. My name is Jan Slomp. My family and I emigrated ten years ago from Europe to establish a dairy farm in central Alberta. We have really enjoyed living and working in Canada since. Our 80-plus cow dairy farm provides work and income for two families at a sustainable level.

• 1345

The Canadian supply management system has worked for western Canada, as well as for all of Canada. A reasonable return for labour and investment gives us the obligation to produce our daily quotas also in periods when it is tougher to realize that. At times when production is easy to obtain, our fair return gives us the obligation to limit the production to the standards of consumer demands. Our system doesn't have to resort to taxpayers' revenue for surplus removal, like in the United States or in the EC. The supply management sectors don't need income disaster programs either.

Our Canadian supply management system is going to be under attack at the upcoming WTO round. I would like to urge the Canadian trade negotiators to stand up, to really stand up, for supply management in the way we know it. No change to the system should be negotiated without proper consultation with the affected supply management sectors beforehand.

In general, I would like to urge you, as a committee, to really take note of the NFU submission that was made yesterday, I believe, in Vancouver, about the WTO and the FTAA negotiations' impact on farmers' orderly marketing agencies, safety nets, and agricultural programs.

In conclusion, I would like to leave you with a few questions and comments that may help you determine what your objective during the trade negotiations should be. Where does Canada gain when it doubles its agrifood exports while it leaves its agricultural producers with a net realized farm income that is 19% lower than 10 years ago across the board? Some sectors are really far below that.

Did you know that the State of California has a supply management system for dairy that is similar to that of Alberta? The system is not given the name supply management, and what we call “quotas” here are called “compacts” there. The price system is, however, a duplication, or almost a complete duplication, of our Canadian system. More U.S. states are contemplating this system.

Did you know that the Canadian import of foreign dairy products is 4% and the United States' imports are at 3% and the EC imports at 2.7%? China's policy of food self-sufficiency is their cornerstone for sustainable rural development. Their agricultural output during the last 20 years has been growing at 6.7% per year. It is keeping up with their national demands. Canada has seen its agrifood imports also double during the last 10 years. Why do we let stable, well-paying domestic markets slip away and pursue more market access in volatile, limited-paying foreign markets? Whose interests are we serving?

Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Calvin, do you have anything to add?

Mr. George Calvin (District Director, National Farmers Union): Yes, but I do not have a written report.

The Acting Chairman (Ms. Sarmite Bulte): Fine. It doesn't have to be written. Feel free to submit a written report afterwards. Even if you have written reports, we sometimes prefer that you highlight just the concerns and make the key recommendations, the message you want us to take back to Ottawa.

Please, Mr. Calvin.

Mr. George Calvin: Right.

Until we arrived here today, we were under the impression we only had ten minutes between the two of us, so we do have more time than we had planned.

The Acting Chairman (Ms. Sarmite Bulte): Yes, you do.

Mr. George Calvin: And that's good.

The Acting Chairman (Ms. Sarmite Bulte): We want to leave some time for questions too, because we find that works best.

Mr. George Calvin: That's good.

I want to impress upon the committee that we have to protect our orderly marketing system, supply management industries, and the Canadian Wheat Board. We cannot get rid of these things and expect to compete with other large corporations around the world. Take Ontario, for instance. We've been told that farmers in Ontario can haul grain across the border any time they like. People here who want to get rid of the Wheat Board tell us that, and we know it is not true.

• 1350

The Ontario Wheat Board is a single-desk system, the same as our Canadian Wheat Board, which we must keep. If farmers here think they can get rid of the Wheat Board and still compete, I'm afraid they're living in dreamland. There are farmers in the United States who want to bring grain into Canada to market through the Wheat Board. There are farmers in the United States who want to have a system like our Canadian Wheat Board. We've been told by U.S. farmers, “If we had a system like yours, we could spend more time farming.”

There's a lady, an MP from southern Ontario, I believe, Mrs. Ur. I talked to her in Calgary when the Standing Committee on Agriculture and Agri-Food was there, and she made a point. If memory serves me correctly, she said she and her husband were in tobacco production, and they quit and went into a market gardening type of operation. She said “We have a marketing board. If we had to do all the marketing ourselves, we wouldn't have the time.” The same thing applies here.

Large U.S. companies want to destroy the Wheat Board, because the Wheat Board stands in the way of them making profit. So we have to make sure we protect it.

Jan mentioned exports. From 1975 to the present, our exports of value-added products have increased five and a half times. Farm income in that period has reduced 25%.

In the negotiations, we don't want the federal government to trade off our orderly marketing system in order to gain markets in other countries where we sell into cheap markets. All that will do is hurt us. We should spend more time filling our markets here in Canada, where prices are higher. We don't want to trade off the good things we have in order to do that.

I also want to mention the Estey report. One of the things in the Estey report was that we should remove the freight rate cap on grain shipments. That would be wrong. The cost of shipping grain was to come down for the next six years, and I believe the figure was about $40 million, but there's no control after six years. I'm afraid. I wouldn't want to give the railways free reign, because they're pretty hard to deal with.

I have a railway going through my farm, and I tried to deal with the railway one time on the right-of-way. There's a problem with weeds, and the fence along it is falling down. I wanted to take that fence down and work a strip, because trains will sometimes set a fire. I've had it happen twice on my farm. After several letters back and forth, I gave up in disgust. The fence is still there. Fortunately we haven't had a fire lately.

You have a handout from the County of Athabasca. I just received it in the mail yesterday, and it pretty much describes the situation. I thought we'd include that just for your information.

• 1355

I don't know if there's much more I can say. Oh, there was one other thing in the Estey report. Estey recommended removing the Canadian Wheat Board to port, not having the Wheat Board involved in transporting grain to port. That would be wrong, one of the reasons being that any extra money gained through blending grades here on the prairies would go then to the grain companies and the railways, but not to farmers. The Wheat Board has to stay involved right from the farm.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Calvin, and thank you again, Mr. Slomp.

We'd like to open it up to questions. Mr. Penson, please.

Mr. Charlie Penson: Thank you.

Thank you to the witnesses for coming here. I was in Winnipeg on Monday at committee hearings while the rest of this particular group was in Vancouver, so I didn't hear the Vancouver presentation from the NFU, but I did hear the presentation in Winnipeg.

I heard this argument as well, Mr. Calvin, that exports are up in the agriculture sector but profits are down. As somebody coming from an agriculture background myself, I certainly know what you're talking about. But it seemed in Winnipeg they were trying to draw a linkage to the fact that the trade agreement, bringing agriculture under trade rules in the Uruguay Round, really hadn't been beneficial to agriculture at all. I guess if you look at net farm income, you could conclude that.

Considering that agriculture was only brought under trade rules for the first time in 1993 or 1994 in the Uruguay Round and had never been a part of trade rules before, there was a recognition at that time that they wouldn't be able to achieve a lot in the first round, but the idea was to get them started under agriculture trade rules and try to phase down tariffs and subsidies worldwide, because Canadians would be able to compete better on the basis of production and have some kind of comparative advantage, rather than competing with treasuries of other countries and other unions, such as the European Union and United States.

So I would just put it you that the benefits haven't been there because there was only about a 15% reduction of subsidies and tariffs during that first six years. And they started at a very high point, the highest point of subsidies I think ever in the world, based on the 1986 year. But the expectation and the hope was that once we got started in the next round, which is scheduled to take place next year, we could make some significant progress.

Therefore I'm suggesting that while we agree that we haven't had any benefits, the potential is there for a lot. We have been hearing in the committee from a lot of grain, oilseed, and beef producers, for example, saying they want reduction in world subsidies and tariffs and better market access for their products. What would your comment be in regard to my question?

Mr. George Calvin: Well, I'm not sure I can give the answer you're looking for or if I understand it fully, but—

Mr. Charlie Penson: Well, just give the answer you have.

The Acting Chairman (Ms. Sarmite Bulte): Yes, please feel free to express your opinion. That's what this is all about.

Mr. George Calvin: Right, okay.

As far as beef goes, yes, I know there are people who think we should get rid of subsidies, but it seems to me we would get rid of them here in Canada, and yet the U.S. wouldn't, nor would the European common market. In the United States they subsidize their farmers far more than we are subsidized here, and yet they have different names for things. The same thing happens in Europe. That's one thing that bothers us.

The cattle industry wants to get rid of subsidies, but when a subsidy comes out, they have their front feet in the trough just as fast as anybody else. A program came out here; I forget the name of it. I won't say where I got this information, but I'm sure it's right; otherwise I wouldn't tell you. There were cattlemen who got as much as $100,000 out of that program. Well, they like subsidies too.

So it's a difficult one to deal with. We just have to be careful that we are protected, because we are such a minority in the population of Canada, something like 3% or 4%.

Mr. Charlie Penson: Yes, well, I don't think there's any disagreement so far.

Mr. George Calvin: No.

• 1400

Mr. Charlie Penson: If other countries are subsidizing heavily and do not want to cooperate, that's the difficulty for it. But wouldn't the best sort of solution for Canada, which has a large land mass far from ports and so on, be to compete on the basis of production rather than those subsidies that exist in other countries?

Mr. George Calvin: Yes, perhaps. I won't necessarily disagree.

Mr. Jan Slomp: To live with the idea that we can dismantle world subsidies in agriculture in other countries and set an example in Canada with low subsidies... I believe our subsidy in agriculture in Canada ranks below Turkey's. We really set an example for low subsidies in agriculture in the trade world.

But if you expect that example will follow suit in Europe and the U.S., I'm afraid you're living in an absolute dream world. I have at least ten friends farming in Europe. They are up in arms because their prices are going down due to compliance with the WTO, and the upfront subsidies are going up.

These farmers work 60 to 80 hours a week to make a living. Their prices are going down, yet their subsidies are coming up-front. But they're not called subsidies, they're agreed—they're nicely paid out up front.

The problem is that politically these proposals are now already unacceptable. So if we in Canada, with our great example of how we want to pursue this thing worldwide, think we can manage to get the rest of the world to follow suit, we're absolutely living in a dream world.

Mr. Charlie Penson: Let's not prejudge that. I think the example you used is that Canadian farmers have very few subsidies compared to the rest of the world. I think I would agree with that. But what do we have to lose, if that's the case, by going to these negotiations and asking other countries to phase down their subsidies? As you know, the European Union, with its 15 member countries, has largely been off limits to Canadian farmers. But even worse than that, in the cases of grain, oilseed and beef, their overproduction is dumped onto third country markets where we normally have to compete for supply. We have to compete with products at fire sale prices by depressing our prices. So what do we have to lose by going there—

Mr. Jan Slomp: Maybe we don't give them subsidies, but we give them market access in Canada. For example, in dairy in the last round we got 4% imports and we all anticipate that the U.S. is an open market. We cannot export into the U.S. market.

Mr. Charlie Penson: Now we're starting to get to the nub of the problem, I guess. We have at least two competing interests here. We want market access and subsidies phased down for our grain, oilseed and beef, but we don't want to disturb our supply management—that's essentially what you said—in this next round.

Mr. Jan Slomp: My point is why are we pursuing new markets abroad that are lower paying, and sacrificing domestic markets that are stable and are paying?

Mr. Charlie Penson: I guess the answer would be that there are several different components of this agricultural industry. That's where the committee and the Government of Canada are going to have some difficulty in this next round. So for the people who have grain farms who are seeing historically low prices over a 20-year period, I don't disagree with Mr. Calvin at all that there's a very serious problem. But it seems to me that sector would gain if we could achieve some reduction in subsidies worldwide in this next round.

So we have one sector that is gaining—I know this was the story—and you're saying don't disturb the supply management sector in the process.

Mr. Jan Slomp: That's right. I believe you shouldn't trade off one sector for the other. The international market for dairy products is always and will always predominantly be a dumped market.

Mr. Charlie Penson: I'm just not sure that's a credible position for trade negotiators. But be that as it may, I understand your position.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Calvin wanted to add something.

• 1405

Mr. George Calvin: The U.S. export enhancement program, which you're well familiar with, hurt us a lot. Of course, the EU subsidies hurt us too.

Mr. Charlie Penson: They're still selling barley into southern Alberta feedlots. The Export enhancement program subsidized barley into our feedlots, by the way.

Mr. George Calvin: Right, and the subsidies they get are more than our total price.

Mr. Murray Calder: Go ahead, Charlie.

Mr. Charlie Penson: All I'm saying is it points out the reasons why subsidies are a bad thing and hurt us. I don't think we have that agreement.

Mr. George Calvin: If everybody will do the same, it might work.

Mr. Charlie Penson: That's right.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Calder.

Mr. Murray Calder: Thanks very much. I'll just pick up where Charlie left off.

You gentlemen may not be aware, but in my other life I am a chicken farmer, so I have a vested interest in this already.

When the WTO was being negotiated in 1993, the philosophy was very simply that low prices would stop low prices. We know that's not true because working with that philosophy, you cannot produce something at a loss for a long period of time before the bank owns you. That's simply it.

We know there are subsidies that are being brought in from Europe. We know in the United States, for instance, through the FAIR Act, the Farm Debt Act, and the farm aid package, about $15.2 billion was injected into the farm communities in the United States last year. In fact, Congress themselves questioned their own wisdom on what they had done with these farm aid programs because they ran into some problems they hadn't really figured out themselves.

First, for your information, George and Jan, Bob Speller and I are co-chairs of what we refer to as the SM-5 caucus now, so we have put all five supply managed groups together. They have put together a concerted trade position that has been accepted by the Canadian Federation of Agriculture. I'm very happy about where we're at right now. If the NFU hasn't seen that position yet, I suggest you get it.

You were talking about Estey report. I was on the task force for the Canadian Wheat Board when we dealt with Bill C-72 so we could make the Canadian Wheat Board more transparent—the 15-member board of directors, five being crown and ten being elected. I think that has taken the Canadian Wheat Board into the future. It's given us the transparency and addressed a lot of the issues that were out there as to why it was not working. I agree with you, it is working now.

I would like your input. You've already voiced a number of points you feel we're a little weak on, but we're right back to this issue of a definition of what the heck is a subsidy.

The United States decided they'd do it a different way. If you take a look at the way they maintain the Mississippi River system, for instance, they have their army engineering corps training in the Mississippi River system. Of course, that's not a subsidy. If we did the same thing with the St. Lawrence system, it would be.

I wonder how we're going to get around within these negotiations so we can get a common set of rules on how we develop trade, what a subsidy is and the whole nine yards. On the dairy issue, for instance, we gave them 4% access to our market, but because of phytosanitary-type rules with yogurt and ice cream, for instance, you don't have the same access into the United States. Considering the fact we have one of the highest food standards in the world, as far I'm concerned that's bunk.

How do you see us getting a level set of playing rules, which I don't see right now?

The Acting Chairman (Ms. Sarmite Bulte): By the way, you have five minutes to answer that question.

• 1410

Mr. George Calvin: We talk about a level playing field all the time, but it's something we never seem to get, as you just said, and I really don't see where we will. You mentioned how they use their waterways and that's more of a subsidy, yet it's not called a subsidy.

Our legislators here have to be firm in everything they do to protect the farmer and our orderly marketing system. I really don't have an answer—maybe Jan does—as to how we can get that level playing field.

The U.S. is a pretty big country, the EU is a big group, and I don't know if we can control them. It seems so far we have not been able to. I can't say much more than that.

Mr. Murray Calder: Just on that point, would the control come from the global economic community, instead of us trying to control something that is ten times our size?

Mr. George Calvin: Perhaps. I'm not sure.

Mr. Jan Slomp: We can only surrender more control. There's no winning. We have to make absolutely sure we don't give in to something where there is nothing to win. It might sound protectionistic, but I'm afraid that's the only way to keep the Canadian end up.

Mr. Murray Calder: I agree with your statement right off the bat that we are definitely ahead of the other nations in subsidy reduction. Now we're faced with a quandary. Do we tread water while the rest of them catch up to us? Is that an acceptable trade position? Do we keep proceeding—this gets into a boy scout type of thing, which I have a real problem with—with the agenda as it was agreed, while everybody else is not necessarily playing by the rules and they've decided to debate the rules? As we proceeded, they debated. It has put our own agricultural community in jeopardy now just because of that position.

Mr. George Calvin: We can't keep doing away with things here unless they're doing the same thing. They have to catch up to us. That's about as simple as I can put it.

The Acting Chairman (Ms. Sarmite Bulte): That's a wonderful way to put it.

Mr. Slomp, do you have an ending comment you'd like to make?

Mr. Jan Slomp: If the trade negotiations are taking place with the Canadian position in this atmosphere, I'm not so worried.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much for your comments.

Yes, Mr. Calvin please.

Mr. George Calvin: Just a comment. I really didn't say anything about myself. You know my name. I have a wife and two sons who have flown the coop. We have a farm at New Norway, which is south of Camrose.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Slomp, where is your farm?

Mr. Jan Slomp: It's in Rimbey. As far as I can see, it's one of the most ideal places in Canada.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much for coming. I understand you had a long drive to come here to address the committee. We really appreciate your presentation.

As we've been saying to our witnesses, if there are other issues that come to your attention—Mr. Calvin, you talked about the Wheat Board, the freight and the Estey report—that you feel the committee should be informed of, please do not hesitate to contact us. You know the committee members here. You can always feel free to send us something or call us. Part of the dialogue is two-way. We're also here to listen and learn from you, but we can't if we don't have that continuing dialogue with you.

Mr. Sauvageau, you wanted to have the last word.

[Translation]

Mr. Benoît Sauvageau: I simply wish to add that the Agriculture Committee also tabled a report on WTO negotiations.

[English]

The agriculture committee made a report on agriculture and WTO issues. Maybe you can take note of that report.

The Acting Chairman (Ms. Sarmite Bulte): Again, you can always input into that.

Yes, Mr. Calvin.

Mr. George Calvin: I'm sorry, I didn't quite hear what the gentleman said.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Sauvageau said the Standing Committee on Agriculture and Agri-Food has tabled a report in the House of Commons on the World Trade Organization. We would encourage you to get a copy of that. Again, Mr. Calder is the vice-chair of the agriculture committee. You can give your comments to both them and our committee.

Thank you again for coming. We really appreciate it.

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Mr. Jan Slomp: Thank you.

Mr. George Calvin: Thank you very much.

The Acting Chairman (Ms. Sarmite Bulte): I'll call Mr. Gary Leithead from the Alberta Forest Products Association to the table, please.

Mr. Leithead, welcome. I understand you are a spokesperson for the Alberta Forest Products Association. Welcome to the Standing Committee on Foreign Affairs and International Trade. We welcome hearing your submission. We've set aside half an hour to 45 minutes so that you can make your presentation and we can also ask questions.

Mr. Gary Leithead (Spokesperson, Alberta Forest Products Association): Thank you. My presentation won't take anywhere near 45 minutes, so I'll go through it, and I'll certainly be prepared to respond to any questions you may have.

First of all, I would like to give you a little bit of background on the Alberta Forest Products Association, who we are, and then I'll get into the specific issues we'd like to raise before the committee.

The Alberta Forest Products Association is a forest industry association that represents the vast majority of lumber, panel board, pulp, paper, and secondary lumber manufacturer-producers here in the province of Alberta. The core purpose of the AFPA—that's the acronym for the Alberta Forest Products Association—is to provide a single voice for the Alberta forest products industry to create a supportive business environment to ensure the long-term viability of member companies, to promote sustainability of the forest resource, and to provide support to members through specific services.

Like essentially all forest companies in Canada, all AFPA members export their products. Of the total $4.5 billion worth of forest products manufactured here in Alberta in 1997, 51% or about $2.3 billion were exported. When we look at this in a Canadian context, out of $71.4 billion worth of products manufactured in Canada, exports amounted to 55% or about $39 billion worth. I guess the bottom line of this is to illustrate the importance of trade to the success of individual companies here in Alberta, to the industry, and to Canada as a whole. Clearly, the forest industry is by far Canada's largest industry.

Given the importance of trade to our members, we take this opportunity to provide the committee with our recommendations on positions that Canada should take as it enters into the next round of negotiations on the WTO.

The first issue is the issue of subsidies. It was interesting to sit in the back listening to the questions surrounding the whole issue of subsidy. So I'll provide our views as well. There's no question that ongoing problems exist with subsidies. In particular, though, our focal point is the definition of subsidy and the problems that creates. While the last round of negotiations provided greater clarity in definition, problems still exist and work still needs to be done in this arena.

Just as an example, the United States uses every avenue possible, in our view, to expand the definition to suit its purposes. This is particularly evident with the ongoing contention that export restrictions constitute a countervailable subsidy. I'll use an example from the B.C. forest industry. Apparently you were in British Columbia yesterday, so you might have heard about this, I'm not sure. British Columbia has a restriction in place indicating that logs cannot be exported from crown land. The U.S. maintains that although this is not a financial subsidy, the fact that this restriction exists reduces the cost of logs to the B.C. industry, so as a result the B.C. industry is subsidized. Therefore, the Americans pursue this issue with the folks in British Columbia.

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As I understand the subsidy definition from a Canadian perspective, there has to be a financial benefit, if you like, provided to the industry in order for it to be deemed to be a subsidy. How you define “subsidy” is the bottom line of the issue. That's an example we're somewhat familiar with. We haven't been challenged on that issue from an Alberta perspective, but I use the example from British Columbia to illustrate the point.

It is our recommendation, therefore, that a priority for the negotiators would be to further pursue clearer definition of subsidies, ensuring that export restrictions are explicitly determined not to be a countervailable subsidy, thereby ensuring that the United States lives up to its WTO subsidy agreement obligations.

The second issue I'd like to raise is the issue of customs classification procedures. The forest industry has had and continues to have serious problems with respect to unilateral moves by the United States to change customs classifications of products. The recent examples are the whole debate about the pre-drilled stud issue between Canada and the United States, and even more recently, the example dealing with the rougher-headed lumber. As a result of these examples, it is clearly necessary to improve international rules related to customs classification procedures, including provisions for multilateral review, and most importantly, binding international rulings that require domestic customs authorities to comply with those directives.

The next issue is general access conditions. The reference point here is Asia. In Asia, tariffs and other important import restrictions still play a prominent role in inhibiting the expansion of trade in forest products. The Asian market for forest products is significant, as the recent downturn in the Asian demand for forest products and the effect it has on sales from Alberta and Canada has demonstrated. Canadian spruce, pine, and fir lumber still has a 4.8% tariff when it enters Japan. This places Canadian lumber exporters at a disadvantage compared to the Japanese industry, which in many cases continues to import duty-free raw spruce logs. Spruce logs, when manufactured into lumber, are a direct competition to the spruce, pine, and fir lumber we export to Japan.

Another area—I won't go into it, but I'm sure you heard a lot about this in British Columbia—is the whole issue of the current softwood lumber agreement between Canada and the United States. The bottom line of that is that it's arguably achieving the objectives the U.S. set out in relation to reducing lumber imports from Canada, but at the same time, it's producing extreme hardship on our industry. Again, rather than go into a whole bunch of details on the softwood lumber debate—and there are many years of history there—suffice to say that continued Canadian focus on eliminating any tariff and other import restrictions is needed.

The next issue I'd like to pursue is the relationship of trade agreements to environmental measures. The forest industry in Alberta and in Canada has a good environmental record, particularly when compared to competing countries. Our industry strives to improve its efforts in this arena through initiatives like the Alberta Forest Products Association's forest care program. This program is designed to improve the environmental performance of member companies and at the same time communicate this performance to the public of Alberta. Our members strongly support this program and realize that our industry depends on a healthy environment. Although the industry continually works on improving its performance, there should be no link between environmental provisions and trade and investment agreements. Linking the two only provides critics another venue to harass Canadian exporters.

Mechanisms already exist to deal with environmental issues. The side agreement on environment under NAFTA, entitled the North American Agreement on Environmental Cooperation, is an example. These issues should remain separate and not be used as a mechanism to restrict trade.

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The final issue I'd like to talk about is forest certification. The issue of certifying forests as a measure to ensure resource sustainability continues to gain momentum. Much of the discussion is promoted by countries that see this as a way of gaining market share for their own industries. Meanwhile, the level of confusion increases at the producer-customer level—and, I venture to say, at the political level. Individual customers may see the need to obtain certified products, and individual producers may see a need to react to their customers' needs and become certified.

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However, to date there is no common understandings on what certification means, what standards are to be adopted, etc. As a result, governments should not use certification of products as a form of import restriction. Canada needs to ensure that competing countries do not impose certification requirements as a form of trade barrier.

Those are the few points that we've tabled for your consideration. We'd certainly be prepared to entertain any questions you may have.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Leithead, for your very detailed and very specific recommendations and issues that your industry faces.

I'll turn it over to questions now. Mr. Penson.

Mr. Charlie Penson: Thank you.

Welcome, Mr. Leithead. I appreciate your brief as well.

I certainly don't have any disagreement with the majority of your recommendations. I think we need to be moving for a better definition of subsidy at the WTO. That might be hard to achieve, but we still need to work towards that. Where I do have a problem, I guess, is when it comes to the softwood lumber issue.

Mr. Garry Leithead: So do we.

Mr. Charlie Penson: Yes. Well, I noticed you said that it has produced “extreme hardships” for the forest industry.

Mr. Garry Leithead: Yes.

Mr. Charlie Penson: It seems to me that Canada does better under a rules-based system like NAFTA or the free trade agreement or the World Trade Organization. Everybody might have been led down the garden path a little on this softwood lumber deal, where we thought we were going to have five years of peace with the Americans in the forest industry, and we see with the reclassification that it just isn't so. But what I'm having trouble with is why would the industry—I mean, this goes back three years—agree to be put under a supply management system with quotas, to take a market-driven industry that had probably the fewest subsidies of any industry in Canada and put it under a quota system managed by officials in the Department of Foreign Affairs and International Trade who probably didn't understand the industry very well to start with?

I know a mill in my riding with 50 employees, which had been in business for over 50 years, essentially was not going to get any quota on the basis that they were out of production that year because they were retooling their mill, a $2 million expansion. They had bought new forest products allocation, and they just about went under in the process of trying to pry some quota out of the department.

My question is essentially this. As you say, we have very long history of softwood lumber disputes. Why don't we let this take a course that hopefully would tend to resolve it by letting it go to the World Trade Organization once the softwood lumber agreement expires? If we are hit with a countervailing duty as a result of that, if the Americans say at the end of this, “You guys are subsidizing, and we're going to slap you with a duty as a result of it”, why not take it to the World Trade Organization, where there are 134 member countries and the decision is largely taken out of the hands of the two combatants and dealt with by an independent group? Have you any thoughts on that?

Mr. Garry Leithead: Yes. I guess maybe in a clinical world, that process would be a logical way to go. The softwood lumber issue is almost like a soap opera; you go from the highs to the lows and there is the emotional roller coaster associated with it.

We took the Americans to task when the countervail duty was in place. They changed their definition of subsidy, and as a result, the feeling when we entered into the current softwood lumber agreement was that because the Americans had changed the definition of subsidy, our opportunity to obtain free trade in lumber was significantly diminished. I think at the eleventh hour... and they were tough negotiations. I was down in Washington at two o'clock in the morning haggling over softwood lumber.

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I think the concern that drove the industry and the Canadian federal government into the managed trade approach to things was that because we couldn't get the Americans to settle down and agree not to change their subsidy rulings, we were going to continually be harassed on continual claims of subsidy and all the rest of it because they kept changing the rules. So at the eleventh hour, we cobbled together the current softwood lumber agreement, under the misguided belief that this was going to give us five years of peace and that during these five years we could get many of these subsidy issues and things like that resolved, so that we could enter into a phase of peace on the whole softwood lumber file.

Mr. Charlie Penson: Mr. Leithead, one of the things that I think the experience has taught us is that the historical background you've given is true; the Americans largely changed the rules, which meant that winning at a NAFTA dispute panel was highly unlikely, and therefore there was a lot of pressure. But at the same time, at the World Trade Organization the Uruguay Round had just been concluded. There was a much better process in place than the old GATT. When I talked to people in the forest industry at the time, some of them didn't even realize that. They thought they were working under the old GATT—five-year resolution and so on.

So because of the problems that have been experienced in this current five-year agreement, my question to you is, given that the WTO has certainly changed and there's a quicker resolution there than there was before, wouldn't it be preferable, at the end of this, to stop this nonsense of having quotas and a managed industry? You know, warehouse it. The big American companies are not expanding in my riding, in Peace River country, where they have operations; they're expanding in Saskatchewan. That's outside of the softwood lumber agreement, and that's the kind of game that gets played. So if we can get back to a market economy, wouldn't that be the preference?

Mr. Gary Leithead: No question. We're free traders; we believe in free trade. But the history of the softwood lumber file just—

Mr. Charlie Penson: But what about letting the WTO decide if we are subsidizing or not?

Mr. Gary Leithead: There are risks there too.

Mr. Charlie Penson: Like what?

Mr. Gary Leithead: The definition of subsidy in itself. Unless that is nailed down and the countries all agree on what those definitions are and they're prepared to live with them, even the fact... So we put our case before the WTO, and there's a downside risk to Canada because, arguably, we have some subsidies out there in the forest sector. We have to be careful how we enter into that, because if we don't resolve the definition of subsidy first, we could set ourselves up for a major problem if we put our case before the WTO.

Mr. Charlie Penson: So you're not confident that under the current definition of subsidy Canada would win a case there?

Mr. Gary Leithead: Not with the flexibility that the Americans have in what appears to be their ability to change the definition at their beck and call.

Mr. Charlie Penson: Thank you. That's good.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau: Thank you Mr. Leithead, for your presentation.

Contrary to what we heard yesterday about an industry that is similar to yours in British Columbia, your comments are rather reassuring. I would like to ask you some questions about the paragraph in which you spoke of relations between the environment and your industry. You say that we have a good environmental record compared to other countries. I say that we could replace the word "country" by the word "provinces". I would like to ask you for a few more details about the program through which you inform people about the use of the forest and also ask you whether the program can be exported to other Canadian provinces. In other provinces, you do not appear to receive such good press as here. I say "appear", because we are only spending a day here.

[English]

Mr. Gary Leithead: If you folks are familiar with the Canadian Chemical Producers' Association, they have a program called “responsible care”. It's a national program. Our program was kind of templated after the responsible care program.

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We argue that it's a made-in-Alberta opportunity to do two things: to improve the environmental performance of the industry and at the same time communicate the results of that performance to the public of Alberta. The philosophy is that if you accomplish those two objectives, it reduces government's need to sort of be in your face and put on a bunch of restrictions or put prescriptive approaches to environmental performance and stuff like that in front of the industry.

That's the objective of it. I will provide copies of the forest care program to the members of the committee so they can take a look at it at their leisure. We've suggested that, yes, the program should be transportable, and we are certainly more than happy to entertain discussions with any industrial group, whether it's the forest industry or any other industry, for that matter, that wants to take a look at the program. We believe it's a good program. It's certainly a made-in-Alberta type of program, but clearly it could be expanded beyond that, as the original template of it came from the Canadian Chemical Producers' Association responsible care program.

[Translation]

Mr. Benoît Sauvageau: Are there people from civil society who sit with you in connection with this program? How does consultation proceed, or how is information transmitted to the public?

[English]

Mr. Garry Leithead: Sorry, I didn't get the first part of it. The civil society...

[Editor's Note: Inaudible]

A voice: ...environmental groups.

[Translation]

Mr. Benoît Sauvageau: Are there...

[English]

Mr. Garry Leithead: Oh. Yes, although these folks come and go. When the program was initially set up there were 17 people—a cross-section of publics from Alberta—involved in the establishment of the program. There were at least two environmental organizations involved at that stage. One of those environmental groups decided they didn't want to be participants in the program any more and stepped aside, but the other one is still there, and we continue to meet even though the program first got started in 1992 or 1993, I think.

We continue to have what we call stakeholder sessions with these original stakeholders in order to provide them with updates and ask for their direction and stuff like that as to where the program should go. So yes, we did have public involvement, including some environmental organizations.

[Translation]

Mr. Benoît Sauvageau: Thank you.

[English]

The Acting Chairman (Ms. Sarmite Bulte): Mr. Speller.

Mr. Bob Speller: Thank you, Madam Chair.

Thank you very much for presenting here today. I just want to follow up on something. Generally Charlie asks this one. I know there are some members of Parliament who are asking the government to scrap the deal now. Would that be the position of your organization or do you foresee it going through until the end? I'm sure you're aware that the government has taken the customs issue to the World Customs Organization, which will be actually meeting in May—

Mr. Garry Leithead: Yes.

Mr. Bob Speller: —and we're certainly challenging the Americans on every move that they have made so far.

Secondly, you are very strong in terms of your words about how detrimental that agreement has been. As you said, though, it was industry driven when it came in, but would it be your position, then, that we should scrap the deal now?

Mr. Garry Leithead: I think the biggest problem that we're having now, in spite of the fact that we have managed trade and the fact that we have the duties and things like that for anybody who wants to export into the U.S. beyond what their quota levels are, the people who are arguing... I wouldn't argue this as an AFPA position, but it would be my view of the folks who would argue to scrap the deal. The argument to scrap the deal is coming from the folks who don't have quota. That's not an issue with the Americans. The quota allocation was the implementation part of Canada's part of the deal.

So I think before Canada entertains the notion of scrapping the deal with the Americans, they may want to take a look at the quota allocation system first to see if there can be some resolution brought to the issues here in Canada.

Mr. Bob Speller: As you know, those consultations have really started and the industry itself is meeting to talk about those issues too.

Mr. Garry Leithead: Oh, yes. We're meeting in Alberta as well.

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Mr. Bob Speller: That's right.

Thank you.

Mr. Garry Leithead: Sorry, but did you have a second question?

Mr. Bob Speller: You sort of answered the second question too. Is there a need... Did you want to scrap the deal now, and secondly, did you want to have a similar deal? I think what I heard you say was that as long as the allocation system was fair...

Mr. Garry Leithead: Yes. As far as scrapping the deal currently, I think we maybe need to revisit the allocation system.

The industry is currently having discussions as to what is going to happen in 2001, when the current agreement expires, and yes, we're having the debate in Alberta—similar to what's happening in B.C., Ontario, and Quebec. My hope, quite frankly, is that at the end of the day—and relatively soon—the industry in Canada can, collectively, come together with what is hopefully a consensus to provide some direction to the federal government as to what we should be doing in relation to this whole issue. Now, maybe that's optimistic, but—

Mr. Bob Speller: That's our wish also.

Mr. Benoît Sauvageau: Like the agriculture sector...

Mr. Garry Leithead: In relation to...

Mr. Benoît Sauvageau: To the federal government having one position.

Mr. Garry Leithead: There's only one position in agriculture?

Mr. Benoît Sauvageau: Yes.

Mr. Garry Leithead: There might be a couple.

Some hon. members: Oh, oh.

Mr. Garry Leithead: But anyways, that's the idea.

The Acting Chairman (Ms. Sarmite Bulte): I have two more on the list for the first round.

Madam Beaumier, and then Mr. Calder.

Ms. Colleen Beaumier: When you were talking, your last sentence was that there's no common understanding of what certification means. I'd like you to explain certification to me in regard to what the lumber industry says it means.

Mr. Garry Leithead: Okay. The issue is sustainable forest products. The philosophy is that people who are seeking certification want to be assured that we're not basically mining the forestry resource. Forests are a renewable resource, we argue, and we replant our forests to make sure that there's a perpetual supply of forests available for future generations, whether those forests are used for forest products or parks or environmental goodness—the whole nine yards. The bottom line is that consumer groups and customers want to be assured that at the end of the day we are truly a sustainable, renewable industry.

So we have to measure that. The confusion comes with respect to how you measure it. What system do you use to measure and what system do you use to communicate to consumer groups, customers, or whoever's interested that we are indeed truly sustainable?

Currently there are three initiatives. The Canadian Standards Association—CSA—approach is one. Another alternative is the ISO 14000 series of forest sustainability. The third is the Forest Stewardship Council, which is a certification initiative that's promoted by the environmental community.

So there are three certification initiatives out there. They all have their good points. They all have their bad points. When there are three different certification initiatives, it's automatic that there will be confusion out there. What we're recommending is that government stay out of the debate. Let the industry and the consumer groups resolve this issue. All we suggest is that you give it some time to evolve and come to fruition. The industry is making its representations relative to which initiatives they think they would like to be certified under.

I might add that with our forest care program, we see a potential—not full—dovetailing of the two initiatives. We audit the performance of our companies as part of our forest care program and we see at least partial equivalency with all three of the national or international certification initiatives that I alluded to earlier. We see some linkages between our made-in-Alberta solution and the international scene.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Mr. Calder.

Mr. Murray Calder: Thank you very much, Madam Chair.

Garry, I'd like to go to your first issue, which is subsidies. The statement that you made was:

To further pursue clearer definitions of subsidy, thereby ensuring that export restrictions are explicitly determined not to be a countervailable subsidy and thereby ensuring that the United States lives up to its WTO subsidy agreement obligations.

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In essence, I think what you're saying to me is how do we establish an international definition of “subsidy” that the U.S. can't change? Basically, we have approximately 134 countries in the WTO right now, and another 30 want to join. Quite frankly, I agree with your statement. So let's go back to the definition of a subsidy. Subsidies that we have in agriculture, in forestry, in industry, or in whatever, all the way along, are all different. Yet we're saying that we should be looking at a universal definition of a subsidy. Is that achievable?

Mr. Garry Leithead: I think that in some aspects it arguably could be. For example, with respect to direct financial subsidies, we should be able to get agreement on something like that. If you're providing a straight cash subsidy for some industry to do something or to produce at a certain level, whatever the case may be, it's easier, I think, to track it. The fact that the government paves highways is arguably a subsidy. If there were no roads you obviously couldn't transport your product to a competing country, so as a result you wouldn't have to worry about that industry... You can chase these things until you're... there's no end to it after a while. It becomes almost a ridiculous exercise if you pursue the very broad view of subsidy.

I know it's very difficult. I'm not suggesting that this is easy. But if we somehow try to get people to focus on the direct subsidy thing as a starting point, maybe we can bring some sense to this.

Mr. Murray Calder: I agree with you in that respect. We're talking about an issue of policing here, if you want to get down to it.

I'll use the Mississippi example again. If Canada had a government grant that went to the St. Lawrence system each year, the United States would immediately say that is a subsidy system but the fact that they train their military engineers to maintain the Mississippi River system is not a subsidy.

So now we get to the issue of policing. How do we police something like that? Obviously it is a subsidy, but just underneath the definition, being able to skirt around it. If we come up with an international definition, are we actually causing ourselves more grief than we already have?

Mr. Garry Leithead: I think it has to be brought to the international stage. The reason I say that is that Canada needs the U.S. as a trading partner more than they need us. If we get into a rock-throwing contest, they have a bigger pile of rocks.

Mr. Murray Calder: Yes.

Mr. Garry Leithead: So the only avenue, I think, is to link up with like-minded countries in the WTO, get as much lobbying effort or support as we can behind a common definition that Canada can live with, and then rally the forces around that and try to get at least the attention of the Americans. For Canada to go one on one with the Americans is a futile effort. I think the WTO can certainly provide an avenue whereby our profile and the opportunity to improve on the subsidy definition can be optimized.

Mr. Murray Calder: Basically the same way the Americans did in the last round, when they had 116 out of 117 countries agree to “tariffication”.

Some hon. members: Oh, oh!

Mr. Garry Leithead: Well, yes. We have to keep trying.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Penson, you had another short comment.

[Editor's Note: Technical Difficulty]

Mr. Charlie Penson: ...pin down this subsidy issue a little better. I've always thought that it's better for people who know the issue better than we do to not just identify the problem but to bring a solution as well. What would your association like to define subsidies to be in the forest industry area? I think it would be helpful if the forestry associations could supply that to the department for the upcoming round, because you certainly know better than we do what the problems are in the industry.

Mr. Garry Leithead: I don't have an answer for that, but we can certainly consider that and get back to you.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

A last question, perhaps, Mr. Leithead? You have been talking about the work you have been doing in your sustainable development forest program, yet in your paper you state that there should be no link between environmental provisions and trade and investment agreements. But you're already practising sustainable development...

• 1455

Mr. Garry Leithead: That's right. That's from an industry perspective, industry to industry. The government doesn't need to have a role in certification, because if governments do that, what they can do—and the Scandinavians are a good example of this—is position environmental restrictions as a way of supporting their industry.

So we have to be very careful about how we enter the environmental debate. It becomes just another area that governments—not all governments, but certain governments—can use to restrict the flow of products and therefore protect or shield their industry from competition.

The Acting Chairman (Ms. Sarmite Bulte): Okay.

Thank you very much. Your presentation was very informative, very specific. Thank you for helping us look at the whole issue of subsidies and for helping us try to grapple with some of the issues facing your industry.

Thank you very much for coming.

Mr. Garry Leithead: Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Colleagues, I know this will be frightening, but we're actually running a little early. Let's take a five-minute break.

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• 1514

The Acting Chairman (Ms. Sarmite Bulte): Colleagues, we'd like to resume our consultations.

We're delighted to have with us this afternoon Dr. Raj Pannu, a member of the legislative assembly. Most importantly, he is the trade critic for the New Democratic Party of Alberta.

We welcome you, Dr. Pannu. Thank you very much for coming and for taking the time from your very busy schedule to see us.

Dr. Raj Pannu (Member, Legislative Assembly of Alberta): Thank you, Madam Chair, and members of the Standing Committee on Foreign Affairs and International Trade. Good afternoon to all of you.

From our little caucus of New Democrats in the Legislative Assembly of Alberta, I extend you all a warm welcome to our beautiful province and its capital city.

• 1515

My submission to you is very short. I have, I understand, only about five minutes, and then you may have some questions. I would be very happy to address those.

I'm going to go right into the text and read it into the record, with your permission, Madam Chair.

The Acting Chairman (Ms. Sarmite Bulte): Yes, please.

Dr. Raj Pannu: The proposed multilateral agreement on investment, known as MAI, being negotiated at the Organisation for Economic Co-operation and Development, or OECD, recently died a well-deserved death. It was a bad deal for Albertans and Canadians. It was an agreement that heavily favoured transnational corporations at the expense of democratically elected governments legislating in the public interest.

It now appears that the MAI has not left us but plans to change residences from the OECD to the upcoming round of the World Trade Organization negotiations.

Since 1994 we have been living under the North American Free Trade Agreement. NAFTA was the first international trade deal to grant foreign corporations the right to sue governments if legislation got in the way of their profits.

We have witnessed first-hand, and are all painfully familiar with, the scenario that unfolded between the Canadian government and the U.S.-based Ethyl Corporation. The threat of a demand by Ethyl Corporation for $350 million in compensation from the Canadian government for profits lost due to the banning of a toxic substance, a gasoline additive known as MMT, saw our government overturn a ban on that toxic substance, putting a large corporation's interests and profits ahead of public safety. Again, this was a mere threat. Obviously, this is an agreement that favours the rights of foreign investors by allowing them to challenge local measures that violate their international right.

To enter into talks so soon after people around the world have resoundingly announced their disapproval of the MAI talks shows the intensity with which corporate interests are driving this agenda. The talks were suspended in the face of public opposition. However, I would sincerely hope that the federal government is not planning to register the MAI into some kind of witness protection program by packaging it up, changing its name and address, and relocating it somewhere else in the world, hoping that the same public who so vehemently opposed the agreement will be easily fooled into thinking that it is some new and improved better deal.

The postponement of MAI negotiations has provided the House of Commons standing committee with an opportunity to dissect the flawed pieces of the MAI and improve upon them. The federal New Democrats have already urged the government to develop new forms of local governance that can hold global corporations accountable to the common good.

Canada needs an enforceable, rules-based, global economic regime that requires all countries and corporations to adhere to the core labour standards of freedom of association, free collective bargaining, prohibition of forced labour, elimination of child labour exploitation, and non-discrimination in the workplace. Similar standards are required in the area of environmental protection.

Very early on in the MAI negotiations, the people of Alberta, and certainly Canadians in general, recognized that the MAI sought to put profits ahead of people. While I and my federal colleagues are not opposed to rules, we are against a rules-based economic regime constricted to benefiting giant corporations, giving special status to the rights of investors.

We cannot condone an agreement that gives inappropriate status to transnationals. We cannot condone an agreement that would bind Canada for 20 years.

NAFTA has a six-month notice period for termination. Under the terms of the MAI, Canada would need to give five years' notice, followed by the requirement to honour existing obligations to existing foreign investors and companies for another 15 years.

The following are my three recommendations; one, that NGOs be formally included in the Canadian delegation during the upcoming round of WTO negotiations; two, that the federal government take the position that any further liberalization of investment rules must be included in the millennium round of WTO negotiations; and three, that the federal government work with other WTO member countries on implementing a tax on currency speculation in line with the motion recently approved by the House of Commons.

• 1520

That's the end of my formal remarks. I would be happy to answer questions.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much.

Dr. Pannu, just before I turn it over to my colleagues for questioning, you stated in your point of information that this is an opportunity to dissect the MAI. Are you aware that last year a subcommittee actually conducted hearings and produced a report on the multilateral agreement on investment that was tabled in the House of Commons?

Dr. Raj Pannu: I haven't seen the report. I wasn't aware of the proceedings of the committee on that particular issue.

In my province, we encouraged our government to do the same at the provincial level, but without success. There were several large rallies in the city, well attended by Albertans and Canadians concerned about the nature of the MAI. There was very strong opposition publicly expressed by lots of Albertans, and we were very much part of that expression of opinion.

The Acting Chairman (Ms. Sarmite Bulte): I would urge you to get a copy. It was chaired by Mr. Speller, and members of the committee included Mr. Penson, Mr. Sauvageau, and me.

Dr. Raj Pannu: I would appreciate a copy very much.

The Acting Chairman (Ms. Sarmite Bulte): The tabled report was quite a detailed one.

I didn't mean to start the questioning.

Mr. Penson.

Mr. Charlie Penson: I just want to say, Dr. Pannu, that there are Canadian multinational companies operating as well. I'm sure you're aware of that.

In fact, when I was in Chile a few years ago, I saw that quite a few of our mining industry companies were located in Chile. We now have more direct foreign investment outside Canada than we have direct foreign investment inside Canada. If Canadians are reaching out and becoming business people in other parts of the world...

In some parts of the world there's no protection for those companies in the event there is an expropriation there. I want to remind you that a lot of these Canadian companies that are operating are publicly traded companies. Canadians have investments, mutual funds and stocks and bonds, in those companies as well.

I'm just wondering if your opposition to the MAI is basically on the scope of it rather than the idea. Do you think there are any circumstances where Canadian companies should be protected in the event of an expropriation? If they have that protection, my understanding is that one of the basic concepts would be to have a dispute system where it would be resolved in a timely manner rather than running on for 15 years to decide who's right on the issue.

Do you have any problems with that context?

Dr. Raj Pannu: First of all, that's a very good question. In my presentation I referred to “foreign” multinationals. My concern—and I express the concern of lots of Albertans on this—is with the growing power of multinationals, be they Canadian or foreign, vis-à-vis democratically elected governments. The issue really is one of who has the power to set policies that directly impinge on public interest.

So I'm not any less concerned about the power that a Canadian multinational might enjoy in Chile as a result of MAI than I am about Ethyl Corporation holding sway in Canada. All of us, as democrats, must first and foremost ask the question of what, in the changing international economic environment, will be the relationship between democratic and public power on the one hand and private multinational/transnational power on the other.

To me, that is the crux of the issue. The others are details.

Mr. Charlie Penson: I would agree with you. I think you've indeed identified that as a dividing line, if you like.

My understanding, though, is that the so-called Ethel Corporation case revolves largely around Canadian legislation that was introduced to ban the use of MMT not on the basis of health concerns, or not on the basis of environmental solid evidence—they stayed away from that because they couldn't seem to prove their point—but rather on the importation of MMT into Canada and its ban with regard to crossing provincial borders. Essentially, provincial governments were the ones who took this case to court and defeated the federal government on it.

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Dr. Raj Pannu: I have no sympathy with those provincial governments that engaged in this action in order to protect, perhaps, their provincial territorial right vis-à-vis the federal government. We live in a complex political federation in which the powers of the federal Parliament are, I think, very finely balanced against the powers of provincial governments and assemblies. So I recognize that fact. But the fact remains, sir, that an MMT ban could be achieved in California but could not be achieved in Canada, for whatever reasons. And that should be a matter of concern to all Canadians, particularly to those of us who carry awfully serious public responsibility.

Mr. Charlie Penson: But, Mr. Pannu, my understanding of the chapter 11 section, which we belong to in NAFTA, the investment chapter, is that it does not restrict Canada from banning a product if there's evidence that it harms our environment; there is not a problem with governments banning it based on a health problem with it. But neither of these circumstances were the case in that particular instance.

Dr. Raj Pannu: You have now drawn my attention to provincial governments taking action. I'm unfamiliar with the nature of that action taken by the provincial governments that defeated the federal government's attempt to ban the movement of MMT across interprovincial borders, so I cannot really engage you in any fruitful public discussion on the issue.

Insofar as NAFTA's application of chapter 11, there is obviously room for debate on this. Certainly, the critics of NAFTA have, I think, put a different interpretation on that chapter, and other provisions of NAFTA would bind the hands of signatory governments to matters such as the one that involved Ethyl Corporation.

Mr. Charlie Penson: But we could be in agreement, I would suggest to you, that if there's a problem with a product based on harm to our environment, or based on harm to any Canadian's health, governments should have the right to ban that product.

Dr. Raj Pannu: Precisely. And only elected governments, democratic governments, should have the right to do that.

Mr. Charlie Penson: I agree. But I just suggest to you that you might want to check it out. I think that right exists right now under chapter 11 of the agreement we have on investment with Canada, the United States, and Mexico.

Dr. Raj Pannu: I'm certainly willing to take another look at it.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

[Translation]

Mr. Sauvageau.

Mr. Benoît Sauvageau: Good day Mr. Pannu. It was a pleasure meeting you. I have a few questions to ask you, but I will begin by making a comment about the Tobin tax, because you spoke about it at the end of your presentation.

I would like to remind you the New Democratic Party presented a motion in the House of Commons to amend the definition of the Tobin tax to make it a tax on financial transactions rather than a tax on speculation in exchange rate variations. If the NDP motion is passed in Ottawa, when you go to the United States and convert $100 Canadian into US funds, which will give you very little cash, you will be taxed because it is a financial transaction. That was not what the Tobin tax was. I want to point out that that was the motion moved by the New Democratic Party in Ottawa.

My comment concerns your first recommendation. You want representation for NGOs in negotiations. You are a parliamentarian and you know that one has to be cautious when offering things like that. What NGOs will be represented and how many people will there be? How will they be chosen? On whose behalf will they speak? For example, if the Council of Canadians were chosen, along with some unions and an environmental group, would this be enough, and would these be good choices? Might not other NGOs complain?

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It may not be easy, but I am going to attempt to find a solution, because solutions are needed. I am going to ask you what you think.

Suppose that prior to WTO negotiations, a Canadian consultation process were to be set in motion to which NGOs would be invited to state their case to the negotiators. That would be a first step. Hence all NGOs could come and meet us. Is that okay so far?

In a second stage, a report would be tabled including recommendations reflecting the suggestions made by NGOs, and the report would be given to the negotiators, and they would be told that this is the basis they are to use to determine what is negotiable and what isn't.

In a third phase, during the negotiations, which could last two or three years, then by means of a similar public consultation process, NGOs would be kept up to date on the progress of negotiations, and following negotiations, when the final report was in, parliamentarians would be asked to deliberate upon the report to decide whether it should be signed or not. Do you believe that this process would make it possible to achieve the objectives of your first recommendation?

[English]

Dr. Raj Pannu: You have put before me a whole number of suggestions and I need to be careful that I don't respond to them in a hasty manner. I'd certainly like to respond in a preliminary way, therefore, to some of the things you have said.

Certainly, I think the modalities of how NGOs could be represented on the Canadian delegation, for example, are simple. You mentioned three important NGOs, three groups of NGOs. One would represent the union movement, the second one, as you mentioned, the Council of Canadians as an organization, and there was a third one you mentioned—

[Translation]

Mr. Benoît Sauvageau: The environmentalists.

[English]

Dr. Raj Pannu: Yes. In any case, you mentioned three. I think the representation of the input of NGOs, as you have proposed to be enlightened by this committee, I think, is a good thing. There is no doubt about that. But I don't see that as necessarily mitigating the need for NGOs; in other words, some voice from within the civil society itself to be represented on its own on the delegation. The question then becomes, how do you do this?

[Translation]

Mr. Benoît Sauvageau: Okay. You are speaking of representation from civil society. I agree. It is a good idea to set out the problem, but we are trying to find a solution together.

The Council of Canadians, of which Maude Barlow is president, represents over 20,000 Canadians. We met representatives of this agency in Vancouver. In Vancouver, we met 70 witnesses, each of which represented 70,000, 20,000, 80,000 or 50,000 people. We thus listened to the opinion of approximately 250,000 people. I asked the authorities of these agencies what was the consultation process they used for input from their members. We have been accused of consulting in a rather biassed manner, but they did not tell us how they consulted their members. We met spokespersons for over 200,000 Canadians. I therefore think that we have the position of over 200,000 Canadians.

Is that not how NGOs ought to be consulted? If not, how ought they to be consulted?

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[English]

Dr. Raj Pannu: Obviously, you raise some question about whether or not 250,000 voices were adequately represented in the presentations made by people who claimed to represent them, and that's a good question. Would you rather have a national referendum or a plebiscite on this? If you really are interested in listening to every voice in Canada with respect to the WTO, perhaps you might want to consider a national plebiscite on the issue of WTO or MAI. I certainly would encourage you to think of that.

In my view, there are means short of going to a national plebiscite that could be used. I think you have to rely on the statements made by representative organizations that they speak on behalf of their members. Should you have reasons to be concerned about the authenticity of such claims, then surely a national plebiscite might be the route to go, rather than simply saying we will not listen to these organizations or we will not consider their representation on the national delegation that will go to wherever it goes to negotiate WTO terms.

[Translation]

Mr. Benoît Sauvageau: I agree. If you are suggesting a referendum or a plebiscite on the WTO, then we are into futurology, so to speak. The referendum would be won by the people who want free trade. Then, the NGOs would be able to say that they had been unable to fight on a level playing field because of the financial resources available to multinationals, major corporations and governments who are in favour compared to the more limited financial means of other groups. Could this not place us in a box?

[English]

Dr. Raj Pannu: I don't think you will face a dead-end situation. In a democracy there's always room for debate; there's always room for disagreement. But following disagreements that are addressed according to rules agreed upon by all who take part in such debates, I think those who lose out have to live with the loss. I don't think you will find organizations, if they are invited to participate in such a plebiscite... I don't see why it shouldn't. If it is in the public interest that a plebiscite is to be held, if that is the premise, holding a plebiscite would indeed serve the broad-based public interest. Then this committee would, I'm sure, like to consider empowering these NGOs to have financial means to put forward their point of view fully and comprehensively, just as multinational corporations might do it on the basis of their own resources.

It's a question of facilitating democratic debate and democratic discourse on this. And if—I assume; I have no reason not to—your commitments to such a process are strong, then finding public resources to permit and enable NGOs to take part in such a national exercise, I think, would not be an impossible task.

[Translation]

Mr. Benoît Sauvageau: A report was already tabled by the Government of British Columbia, which conducted a study of MAI and tabled a report. These are not biassed questions, because I do not want to look bad. According to you, were British Columbia NGOs consulted?

[English]

Dr. Raj Pannu: I have not the slightest idea, so I can't help you with that information. I do not know.

[Translation]

Mr. Benoît Sauvageau: Okay. If the Government of Alberta had accepted this consultation, would all Alberta NGOs have been consulted?

[English]

Dr. Raj Pannu: It's a hypothetical question, but if I were to be part of that exercise... and I must share my experience with you. Last year I was part of an all-party public hearings committee on justice in the province. We spent four months going around the province listening to everyone who wanted to come before us to provide their advice. The whole process worked wonderfully well.

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On the basis of that experience, had the Government of Alberta listened to our advice and set up such a public hearing body, then surely we would have received input from all the NGOs that were interested in participating. And I think the process would have been to their satisfaction, just as the process I referred to with respect to public hearings on justice would have enjoyed a very high level of satisfaction from all the participants.

[Translation]

Mr. Benoît Sauvageau: Thank you for your forbearance, Madam Chair.

[English]

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much.

In conclusion, Dr. Pannu, I hear your recommendation to the federal government is not to put investment on the table. I certainly want to assure you that investment is not on the table yet. That agreement will be discussed at the Seattle conference which the ministers will be holding in December, so it's not a done deal that investment is going to form part of the WTO negotiations.

With respect, just as a point of clarification here, where you say to enter into talks so soon... the talks for the WTO in the 1999-2000 round were decided upon in 1994, prior to there ever having been an MAI. So it will still be up to the ministers in Seattle to determine whether investment is put on the table at that time.

Dr. Raj Pannu: Thank you, Madam Chair. I understand the process has been underway since 1994. I also know that the WTO is a much bigger forum that brings together countries from all across the globe... where India might well be represented—I'm not sure about China. Those governments, at least, if not their societies, have very serious concerns about the WTO arrangements.

We as Canadians have an opportunity to play a leadership role in shaping the new global order that is gradually emerging and being forged. We need to look not only at the interests but also at how we can protect and enhance the interests of our own multinationals that are now located in Chile and wherever else.

In fact, let's also look at the Chileans and their futures and the Indians and their lives and their interests, because only by addressing in this comprehensive way the interests of corporations and investors as well as citizens across the world will we be able to create a global system that's just, peaceful, and stable.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much for that eloquent concluding statement. And thank you very much for taking the time to come out and meet with the committee.

Dr. Raj Pannu: Thank you very much.

The Acting Chairman (Ms. Sarmite Bulte): We have been able to encompass our last witnesses into a panel, so we'll let the witnesses speak to us so that we don't have to rush at the end.

I'd like to call to the table now Ms. Elizabeth Reid and Dr. Bill Blanchard of the Alberta Friends of Medicare Society. In addition, I would like to call Mr. David Parker of the Edmonton Friends of the North Environment Society to the table, and Mr. Brian King.

I propose that we let all our witnesses present, and then we can ask questions. This gives us a better time to concentrate on our questions rather than chopping them up. It's a more efficient way of doing it.

Welcome to the Standing Committee on Foreign Affairs and International Trade. We're delighted that you could join us today. We look forward to your presentations. I see you have written material as well, so feel free to address the committee in any way you want, either with your written material, with additional comments, summaries, whatever you feel is best. I'm in your hands.

Ms. Elizabeth Reid (Chair, Alberta Friends of Medicare Society): We're all for efficiencies, too.

Dr. Bill Blanchard is with me here today from the Friends of Medicare; he's our chief researcher. While we do have written material that we've sent to you before and we do have a brief today, not knowing what the timelines were like, we really welcome the opportunity to be able to engage in some dialogue with you about the issues we're here for today.

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I also want to say I really appreciate all of you public servants taking the time... I know it's not easy going back and forth across the country and sitting in hotel rooms. I'm really glad we can conduct our affairs in Canada the way we do because it's a lot of hard work, and I take my hats off to all of you. Thank you for it.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Ms. Elizabeth Reid: Bill and I are here wearing two hats: first, as ordinary Canadian citizens with a concern about recent trade agreements, and secondly, as representatives, specifically, of the Friends of Medicare. We believe these trade agreements have a profound effect on Canadian lives. That's partly why we're here. It's not the normal thing we do at the Friends of Medicare.

As ordinary Canadians, we believe that historically the process of negotiation and implementation of these all-encompassing trade agreements has really been very swift. They're very large; they're very complex; they've really constituted what we think of as grand experiments. While they may have brought some real benefits to trade, we believe they've also involved the abdication of significant amounts of our national sovereignty.

So we're concerned about that, and we don't know if Canada has really stopped long enough to think about the second part of what we're getting out of these trade agreements.

As a result, through you, we'd like you to urge our government to call a time-out to further extensions of existing agreements. A sufficient time should be allowed for a thorough study of the effects of this loss of sovereignty. Ordinary Canadians need an extensive opportunity to voice their concerns. Ordinary Canadians may want to place limits on how much sovereignty we're willing to trade for trade.

The implications of these decisions are of such a magnitude as to involve, we think, a need to involve all Canadians.

I overheard a little of the last part of the conversation you had with Dr. Pannu, and I hear it's a concern for you. So it's something we need to look at.

The second hat that Bill and I are wearing today is as representatives of the Friends of Medicare. We're a non-profit voluntary group composed of all kinds of community groups and individuals who are dedicated to the preservation and enhancement of our public health care system. In Alberta that's particularly important, in case you haven't heard. In fact, our group has existed for 20 years in Alberta, so it's not something new. It seems to be an ongoing issue in Alberta.

In this role our focus narrows to the effects of these trade agreements and to what effects they may have on medicare. We may be bringing you some information. We're very concerned. Our Canadian health care system, unique in the world, is seriously threatened by these agreements. We'll try to point out how.

For example, under the existing World Trade Organization TRIPS agreement, Canada is now denied the sovereign authority to return to even a modified system of compulsory licensing. For 70 years this was very effective in controlling Canadian drug prices. While compulsory licensing may not be the only effective tool for controlling drug prices, it has a very useful role to play. We're now denied, as Canadians, a sovereign authority to employ this tool. We can't do that.

Of even greater concern to us, though, is the potential threat of NAFTA. We met just a few months ago with the provincial health minister, and he assures us there's no problem with NAFTA. We're not reassured.

The section in NAFTA that presumably provides protection for medicare is notoriously ambiguous, and I quote from chapter 11, where it says:

Canada reserves the right to adopt and maintain any measure with respect to the provision of public law enforcement and correctional services, and the following services to the extent that they are social services established or maintained for a public purpose...

Then it goes on to list income security, social security, public education, etc., including health.

The operative ambiguity here is in the phrase “to the extent that they are social services established or maintained for a public purpose”. We are not the only ones who have expressed very real and serious concerns about this provision.

Dr. Bryan Schwartz, a law professor at the University of Manitoba, has argued that it is far from clear how a NAFTA dispute panel would interpret “social service delivered for a public purpose”.

• 1550

That this concern is reasonable is borne out by the interpretation offered to the State of Oregon by a U.S. trade negotiator. He said the reservation would not apply even if government services were “supplied by a private firm, on a profit or not-for-profit basis”. The folks in the U.S., of course, are a major concern for us here.

Perhaps medicare in its present form has some protection under NAFTA, if only from historical precedence. However, are you aware of the potential far-reaching changes to medicare coming from Alberta? The current provincial government is persisting in its attempts to establish legislation for private, for-profit hospitals, the infamous Bill 37.

This is in the face of strong opposition from the citizens of this province. If this legislation is passed, and once these private hospitals are then established, medical care in Canada will undoubtedly be interpreted as a business. Then the very large multinational health care corporations will move in.

This mistake in NAFTA needs to be corrected. It hasn't been challenged yet, but once we open the private, for-profit hospitals, it will be challenged. So can we go back and correct that? We certainly want to urge you not to repeat this mistake in any new trade agreements. We're not alone in this resolve.

The Government of Manitoba was so concerned about this sort of provision in an earlier MAI draft document that it formally passed the following resolution in its legislature, and I quote:

Be it resolved that this Legislative Assembly is opposed to the MAI in its current form; and

Be it further resolved that the Legislative Assembly of Manitoba urge the federal government to ensure that any MAI include an explicit detailed unbound reservation protecting Health, Education and Social Services...

In conclusion, for the reasons in our written brief and in what we have talked about today, we urge you to do two things.

First, we urge you to reduce the pace of future negotiations. Allow ordinary Canadians time to assess the value of the trade-offs between the increased trade that we all enjoy and the loss of sovereignty that has inevitably followed. We believe these decisions are at the same level as those for changes in our constitution. They truly require the consent of all Canadians, and there are many ways we could, of course, talk about that, as you were doing earlier.

Secondly, we want to make a strong point here, and we would appreciate hearing your questions on it afterwards. Whenever new deals are made, no matter what else, there needs to be a complete and unequivocal carve-out of health and other social services that we Canadians value so highly. These areas should simply be untouchable, and we don't think they are the way NAFTA is written.

Thank you, and we welcome questions when we get to that point.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much. I'm sure there will be questions. Perhaps you can assist us in trying to solve some of the problems you've raised.

Mr. Parker.

Mr. David J. Parker (Spokesperson, Edmonton Friends of the North Environment Society (EFONES)): Thank you.

I reiterate what Ms. Reid said. I've tried to be elected twice myself to the Green Party. Having seen how much work you people have to put in, without being in front of TV cameras and so on, I have much admiration for all that time and effort. I don't think I would be able to do it and stay married.

I'll read my presentation. I don't like doing this, but the ideas don't come as easily if you're not prepared.

For the last two decades the universally accepted theory of economic policy-makers has been that free and open markets lead to universal prosperity. In the same period we have seen discrepancies in earnings between the rich and poor widen to levels inconceivable in the 1960s. The national economies of about half of the world's population have collapsed. Approximately 750 million people exist in starvation.

In the face of these incontrovertible assertions, the predominant conclusion seems to be, continue to do more of the same.

The freedom of movement or any restriction of international capital is leading to corporate dominance by a few select entities and the destruction of small, indigenous and sustainable economies. The ultimate outcome of this mania of globalization must end in catastrophe, the nature of which we can only speculate upon.

The complacent belief is currently that the economic collapse of Southeast Asia was an unfortunate blip and the inherent dynamics of the totally open free market theory will lift all boats. We've been hearing this for some decades now.

• 1555

Like global climate change, this hypothesis is akin to the ostrich placing its head in the sand when threatened. Simply because the solution is unpalatable and entails risk is no reason to ignore it. During crisis, risk is essential to achieving solutions—and the crisis I refer to is an environmental crisis. I realize that even after all these years there are still only a small minority of us who are deeply concerned about the environmental crisis. Heaven only knows when it will achieve centre stage.

The first point I want to make in terms of this is on the Tobin tax. The first step, and one that the Canadian government should be commended for, is the acceptance of the parliamentary motion to “enact a tax on financial transactions.” The time for such a tax is long overdue, and were it in place two years ago it might have averted the debacle of last summer. A small tax on international transactions would penalize short-term capital investment while having hardly any effect on long-term investment.

Short-term and untied investment encourages governments, where democracy is scarce, to build unneeded infrastructure, purchase weaponry, or embezzle the capital through nepotism. For most of these investments, the population receives no net benefit and is almost universally adversely affected, since the debt remains. Western corporations, not western people, benefit by selling weapons, nuclear reactors, dams, sweatshop factories, industrial, agricultural, and toxic waste to these countries and subsequently pulling out at the slightest whiff of a depreciation in earnings, as happened last summer with Southeast Asia.

Then there is the problem of national sovereignty. Total dominance of the marketplace by capital is eliminating the ability of national governments to act on what they view as the best interests of their citizens. If a sovereign nation believes a certain product or business practise will prove detrimental to its population, the corporate entity can trump any effort at legislation.

MMT is an example—and I'm glad I came in for the end of Dr. Pannu's presentation, because it seems I'm covering a lot of the same things. You'll be familiar with the recent case of an American corporation successfully suing the Canadian government for disallowing a product it deemed dangerous. The same product is banned from many of the states of the same corporation's home country. How much power is to be divested from nationally elected governments to multinational corporations in the name of free trade?

Secondly, on bovine growth hormone, currently, and thanks to intense public scrutiny, this product is still not allowed in Canada. The sole raison d'être of recombinant bovine somatotropin, which is BST, is to increase milk yields at enormous costs to the health of the animal and suspected risk to the consuming public. Since there is an oversupply of milk and milk products today, why are we even considering the use of such a chemical? The adverse effects of the drug are currently unknown, since the research is not being done or has been suppressed.

Thanks to the diligent and courageous efforts of certain scientists at Health Canada, important evidence of coercion and possible bribery has been brought to light. Can we be assured that the profit margins of the Monsanto Corporation will always remain subservient to the well-being of the people of Canada?

Another issue relates to Caribbean bananas. A recent depressing portent of things to come was the outcome of an international court decision to allow the European community to purchase bananas from the Caribbean. The environmental practices of the Caribbean producers are far superior to the Central American states, where the vast majority of bananas come from, but resulting from these more sustainable practices, the costs are higher.

Under the modern rules of international trade, the cheapest product beats all others, regardless of environmental or social costs. The philosophy of cheapest production and no allowance for environmental costs destroys ecology and social harmony and is counter to the practice of sustainable development.

Regarding genetically modified foods, Indians are fighting to preserve their traditional agricultural methods in the face of efforts to make them dependent on genetically engineered seeds. The ancient practice of using seeds from previous crops will no longer be available if the intentions of transnational corporations are fulfilled.

The intent appears to make the indigenous farmers reliant upon terminator seeds, which cannot self-regenerate. The minuscule income of these village farmers will not be adequate to cover the cost of the annual purchase of fresh seed. After becoming dependent, the vast majority will be forced off the land and join the burgeoning populations of urban poor.

Will British consumers be forced to accept genetically engineered food against their will and better judgment? Will they be allowed to at least have their genetically engineered produce labelled as such? Will research brought to the attention of the public by government scientists be permitted to adversely affect the profit margins of the corporate elite? Alternatively, is the experiment with our health to continue, using supermarkets as the laboratory?

• 1600

Another issue is sustainable forestry. North American ecological forestry groups have been very successful in convincing European wood processors to boycott old growth timber. Can we be assured that these positive responses to deforestation on the continent will not be wiped out by the new rules of free trade? Precedents already exist for such regressive trade practices. A successful boycott of dolphin-free tuna was ruled as an unfair trade practice, and consequently the practice remains.

As to the benefits of free trade, not all trade restrictions have adverse ecological consequences. There is potential for the elimination of unfair trade practices rulings to reduce the amount of subsidization of ecologically unsound production. The European community and the U.S.A. have long held a war of wheat subsidization, which has resulted in excessive overproduction and the loss of the small sustainable farm.

Modern animal husbandry, with its intensive methods, should be challenged on the environmental costs it engenders. Environmental costs are seldom factored into oil production when one considers such issues as climate change, oil spills, urban smog, wilderness loss, and the suppression of ecologically sound alternatives—wind power, solar power, and so on.

In conclusion, it must be realized that the world's six billion people cannot be allowed to live at the excessive consumption levels of Canadians. Recent research tells us that such a state of affairs would require an additional five planets. It is essential for the western nations to become cognizant of the fact that we can maintain an excellent lifestyle, and indeed an improved one, while developing a sustainable society. By the simple elimination of waste and excess, which do not contribute to additional well-being, we can give ourselves time to begin the arduous task of addressing the current environmental crisis.

Trade practices can be a very effective tool in the task of influencing a sustainable society, if used correctly. If trade legislation remains in the ambit of those primarily motivated by profit, we will not achieve this goal. Long before any collapse in the ecology of the planet occurs will be the economic upheaval. Ecology can exist without economy, but the reverse is not true.

I would put forward the recommendation that trade be subservient to the objectives and ends of sustainable development in all future legislation—and I realize that sustainable development is still being developed as a concept, what it really means.

The Acting Chairman (Ms. Sarmite Bulte): Thank you very much, Mr. Parker.

Actually, you've raised some very important questions for us to address. Thank you very much for doing so.

Before I open it up for questions, there is one thing I want to bring to your attention. In one of your recommendations, you stated that there should be an explicit, undetailed, unbound reservation protecting health. This subcommittee, of which there are four members, actually did an examination of the multilateral agreement on investment last November. That report was tabled in the House of Commons last November. It was under the chairmanship of Bob Speller. That was one of the committee's recommendations and has been accepted by our government. So I want to let you know that.

Ms. Elizabeth Reid: Well done. Wonderful.

The Acting Chairman (Ms. Sarmite Bulte): I wondered if you knew that. Please feel free to take a look at the report, but actually, Minister Marchi is on the record as endorsing that recommendation.

Ms. Elizabeth Reid: May I ask a question, then? What about the provision that's there in NAFTA?

The Acting Chairman (Ms. Sarmite Bulte): We've looked at the MAI. You've raised a rather important question, but our recommendation was—

Ms. Elizabeth Reid: Around MAI. Okay, got it.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Penson.

• 1605

Mr. Charlie Penson: Well, we'll deal with that provision in NAFTA, but just before we do that, I just want to say that I see you've addressed an important concern, that you're friends of medicare in Alberta and you've suggested there's a great need for that. I just want to point out that Alberta isn't the only place that has had problems in health care, especially with depleting resources in the last several years. We know that federal health and social transfers were reduced from $18.5 billion to $11 billion, although some of that has been restored now. That was spread across the country.

Ms. Elizabeth Reid: Indeed.

Mr. Charlie Penson: I'm just wondering whether you have a chapter also in Saskatchewan, where they have had to close 40 hospitals in the last few years. That's a rhetorical question.

Anyway, let's deal with the substance of your concerns with NAFTA. What I want to ask is about chapter 11, the investment chapter in NAFTA, which you referred to as being ambiguous. It also stems from the free trade agreement with the United States, which goes back to 1988, so it has been over ten years. Have you any indication that there has been a problem with the so-called exemption for social areas that are set out in the agreement?

Ms. Elizabeth Reid: Well, I think I need to back up and in fact address the comments you made earlier. Certainly we know that across the country everyone has been suffering with health care. The particular thing I was alluding to is more the pressure that we believe medicare for all of Canada is under because of the actions of our provincial government here. I understand that Ontario, since they elected their most recent provincial government, are instituting many of the same types of strategies. So it's not that everybody hasn't been suffering. Obviously they have.

As for our concern around NAFTA, no, we're not aware of it, but we know this provincial government has made enormous efforts. The College of Physicians and Surgeons endlessly put on their agenda the topic of what can be done to enable private for-profit—by any other name—hospitals to begin functioning in Alberta. Reading that provision... we've given some documentation of others who have commented on it, but I don't think we really need to go to any expert. You just need to read it to say that it's only to the extent that they're established for a public purpose. Well, a private for-profit hospital exists to make a return on investment for the investors. So as soon as we have one of them open here, I would suggest—and it's our belief—that it will open that section of health care to move in.

We know we have an underfunded health care system in Canada. It's been that way, as you say, since the major cutbacks happened to the transfer payments. We're still very underfunded. We know from looking at other jurisdictions that when you have an underfunded public system, that's when your two-tier system starts to develop. Once the first private for-profit hospital is there, the others will be close behind. Then we end up with...

I don't want to sound alarmist, but we only have to look to Australia, we only have to look to Britain. A number of physician members of Friends of Medicare have told me, “I left Britain on purpose because I saw what was going on there. Why are we doing the same thing here now?” These are their words.

Mr. Charlie Penson: Yes. It seems a little hypothetical to me, though. What if the Government of Alberta decided to take over all the farms, including my farm up in Grand Prairie? Isn't that sort of putting this step before us in a hypothetical way? I guess I'm going back to the free trade agreement itself and NAFTA. If the health care system stays as it has for the last 30 years in Canada, for the basic rule, would you agree that the exemption in this agreement, in chapter 11, serves that end goal, which is to keep an exemption?

• 1610

The Acting Chairman (Ms. Sarmite Bulte): Dr. Blanchard.

Dr. Bill Blanchard (Chair, Research Committee, Alberta Friends of Medicare Society): Can I comment on that? I think that under current conditions, if they are maintained as they are, simply the tradition of medicare in Canada will be protected under that provision. Our concern is that if things change, which they are most likely to do if the Government of Alberta continues with its plan, there's simply no question in our minds, if you read the history of this government over the last four years, that both in words and actions, they are absolutely determined to introduce a large component of private medical care in Alberta. If things change, why should we take a chance on this ambiguously worded reservation?

I know you have a lot of things to read. You keep getting more and more paper dumped on you. But do you have a copy of Dr. Bryan Schwartz's examination of NAFTA?

The Acting Chairman (Ms. Sarmite Bulte): It was cited in the MAI report.

Dr. Bill Blanchard: I have a copy here. It's the only copy I have, but if a copy could be made, I'd be happy to provide you with it. I think it's a real eye opener.

The Acting Chairman (Ms. Sarmite Bulte): No, we have it, Dr. Blanchard.

Mr. Charlie Penson: Dr. Blanchard, just to continue on this—

Dr. Bill Blanchard: But the point is—and maybe I'm overemphasizing—why should we take the risk? If we can develop a definition of the reservation that is clear and incontrovertible, that health is untouchable, then we're not taking that risk.

Mr. Charlie Penson: That's fair.

You seem to be aware of the provincial government's involvement in all of this. When this health care system was put in place some 30 years ago, the federal government was funding roughly two-thirds of the amount of health care. We have a bit of a different system here in Alberta, whereby consumers also pay a premium. In any case, there's a certain amount needed to run the health care system. In that same debate on health care going back 30 years ago, I think the federal government said that their proportion would never fall below 50% of the total. Now, it seems to me, it's about 11% or 12%.

Aren't you missing an important element when you're critical here? Funding has dropped, and yet there are two levels of government involved. The federal government has certainly moved out of health care funding to a large degree.

Dr. Bill Blanchard: Yes. My position—and I think it's the position of Friends of Medicare, but I may be overstepping my bounds—is that the real danger to medicare in Canada is not from underfunding. That's a critical factor and it is a danger, but it's not the major danger. The major danger is privatization.

Mr. Charlie Penson: But the proportion, the percentage, has changed dramatically.

Dr. Bill Blanchard: Oh, sure. Yes, we agree, and certainly that should not have happened.

Ms. Elizabeth Reid: And we've certainly made a lot of representation to the federal government about that, and continue to do that, and we continue to dialogue with them.

I'd just like to back up to when you asked this question a little earlier: isn't it going a bit far to think this is going to be a problem? We closed a lot of hospitals in Alberta too a few years ago, and one of them, Grace Hospital, a charitable hospital that was built with tax dollars as well as with donations through the Salvation Army, was closed. That has now been leased by a for-profit organization, and it is in essence a private for-profit hospital. It does everything that a hospital does, and it's a private for-profit organization. It's there waiting. It's already doing some work on contract to Workers' Compensation and so on.

So to say that it's overstating... They're ready, and it is the health resources group that has been making representation to the College of Physicians and Surgeons for the last two years to get them to change the policies and the regulations, never using the word “hospital”, so that they can begin functioning in this way. So I don't—

• 1615

Mr. Charlie Penson: Maybe a little bit more federal money into the contribution would—

Ms. Elizabeth Reid: It would tremendously help the situation, indeed. We wouldn't have privatization. We wouldn't have anybody lining up or making noises if we had a properly funded public system. And in Britain, in Australia—if you look around the world—the public systems get bad and you get the strong private for-profits when you continue to underfund. We have the resources. We can do it. We need to make that political choice.

Mr. Charlie Penson: Okay.

Mr. Bob Speller: And this is coming from the Reform Party.

Mr. Charlie Penson: Absolutely, you'd better start to listen.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Sauvageau, it's your turn.

[Translation]

Mr. Benoît Sauvageau: I have a question for you, Ms. Reid. I want to make sure I understand. I sometimes have the impression that I'm out in left field. In your presentation, you say that the primary role of the federal government is to transfer the taxes that we all pay as Canadians to the province of Alberta. Its second role is to negotiate Chapter 11 of NAFTA, because the provincial government cannot negotiate Chapter 11 of NAFTA with respect to health care. Have I understood correctly so far? That's all?

[English]

Ms. Elizabeth Reid: I think there's a tremendous role for the federal government in terms of leadership. It's the federal government that has the vision. Your colleague spoke about 30 years ago. I would actually augment that to say that health care/medicare in our country is an ongoing process. It seems to me it's in a constant state of change, as it must be, because what we understand about health care constantly changes.

The role of the federal government is profound in terms of its ability to be a leader and to hold the vision up that we have a contract with each other, as a society, that no one will go without health care if they need it. Today on the news we hear the physicians in Calgary have made a decision to hand a piece of paper to their patients when they give them an appointment to go and see a specialist or to get a procedure done. What they're doing is covering themselves for their legal liabilities in case the patient doesn't get this service before they die. It's absurd. We are dreadfully underfunded.

I respect Mr. Rock in many ways, but I do not believe that he or the federal government has been speaking out anywhere nearly strongly enough to hold up what this contract is that we have with each other, so that the provinces will find ways to do it.

[Translation]

Mr. Benoît Sauvageau: Except for fiscal transfers, shouldn't the province perform the leadership role?

[English]

Ms. Elizabeth Reid: The reality is that in Alberta, this provincial government has a very strong ideological belief that private, for-profit is better. So what they're doing is finding all kinds of ways to privatize anything and everything they can. I know other jurisdictions across the country have done this also. But when we begin privatizing health care and the provision of hospital services, and finding all kinds of policy and jurisdictional ways to do it, a small group like ourselves—well, we're large and we're small, but we're citizens who have no staff—who are struggling to try to respond to these endless attempts in ever so many forums that are ultimately so... I believe there is a very strong role for the federal government in terms of moral suasion.

Mr. Benoît Sauvageau: Okay.

The Acting Chairman (Ms. Sarmite Bulte): Thank you.

Mr. Speller, and then Mr. Cullen.

• 1620

Mr. Bob Speller: Thank you, Madam Chair, and I want to thank the presenters for their thoughts. Just to follow up on what Mr. Penson was saying, Madam Chair, I was somewhat surprised at some of his comments, given the fact of the position of the Reform Party in terms of private medicine. Some of the members of the Reform Party were talking about an overhaul of the Canada Health Act—scrapping the Canada Health Act. I'm sure the numbers he talked about were numbers that didn't reflect the changes to the tax points either. They were just talking about the dollar amounts in terms of health care.

I did want to talk a bit about one of the points both of you made in terms of Ethyl Corp. I'm not sure—I know you relate it to chapter 11—but it was my understanding that the federal government in the end signed an agreement with Ethyl Corp., and that the decision didn't go to a court or a body to be resolved. As a result of a decision by what's called the Agreement on Internal Trade, which is a group that was set up by federal and provincial ministers to deal with interprovincial trade barriers... That group looked at the reasons the federal government had banned the cross-border trade and the importation of MMT, and they ruled at that time that it wasn't legal within Canada. It had nothing to do with chapter 11. There were no grounds through which the federal government could do it.

Prior to doing that—and Minister Copps was at the helm at the time—they sent the whole issue to Health Canada. Health Canada ruled that at this time there wasn't any medical evidence under which Canada could legally put on a ban. In fact, the next thing they did was go to the automakers to see if maybe there was some way there. The automakers said, yes, it gums up the system. So we took that argument before the Agreement on Internal Trade, and when the people said, well give us the proof, the automakers said, well, we're still developing the proof; we actually don't have it now. The federal government was stuck with a case of, well, you know, you've banned this for a reason. Where's your proof? There wasn't proof. Unfortunately, there wasn't the proof on the health side, and I've seen a lot of the reports. In fact there are a lot of good reports out of the United States that show some detrimental effects. Unfortunately, Health Canada, the doctors and the scientists, couldn't confirm that in fact we had grounds to ban it for those reasons.

As a result, the federal government settled the issue with Ethyl and we're in a situation now where in the meantime, they're out looking for the health reasons to ban it. If those health reasons come in, then it's the position of the federal government that we will move ahead with the scientific evidence to do exactly that.

Mr. David Parker: Does that not indicate a deficiency in legislation, then, that you people are trying to investigate and consequently put legislation in place so that a government of a sovereign country can, even on very limited evidence, make decisions for its population and those decisions will stand? That's not your mandate? Am I wrong there? I saw you shake your head.

Mr. Murray Calder: I'll answer that.

Mr. Bob Speller: Go ahead.

Mr. Murray Calder: It's not necessarily that there's a deficiency in the legislation or anything like that. It was the fact that we were led to believe there was science that could prove the fact that it was environmentally sensitive. Then when we went to ask for the science, the science couldn't be delivered to us and we were out on a limb. That's it, in a nutshell.

Dr. Bill Blanchard: I want to understand. I think this is really a two-way process. We need to be educated as well. Certainly, we're not experts in any of this stuff. But you're saying that one of the reasons they couldn't do this was simply because they didn't have the authority. Is that right?

Mr. Bob Speller: No, they didn't have the scientific evidence.

• 1625

Dr. Bill Blanchard: Okay. Then my comment would be to take the analogy with drugs, for example. In a sense, the manufacturer of a drug who wants to put it on the market has to prove that it's not harmful and that it does what it's supposed to do. If you take that as an analogy, I don't see any reason why a sovereign government couldn't ban this—

Mr. Bob Speller: But this isn't a drug. No, your point is taken. I'm just trying to explain to you the process under which... because it seems that a number of groups are coming forward and saying this is clearly under chapter 11 and the federal government had to cave in to it. But it had nothing to do with chapter 11.

In fact, any company now within Canada can take the federal government to court, or any level of government to court, if they don't feel that... Any foreign company can, as can any Canadian company.

Dr. Bill Blanchard: So it had nothing to do with NAFTA at all.

Mr. Bob Speller: No, not at all.

Dr. Bill Blanchard: Okay.

Mr. Bob Speller: As you know, we've banned lead in the past and had the scientific evidence to do that. As a result of that evidence, we were able to do that.

I know you've talked about California and sort of the American... California is the only one I know. There might be others in the United States. Under the rules, Ethyl can take them to court if they want. They wouldn't do it under chapter 11; they could do it under American law. One of the problems they've had is that because it was banned in California long before that, they never ever had it there. So it isn't like they have a law. They've just never been able to put it there.

But right now—and I'm just going by memory—Ethyl is now required under the EPA to do studies on it. And they're in the process of doing those studies in terms of the health effects. Once those studies come forward, then Ethyl may take California to court. I don't know if they will.

Dr. Bill Blanchard: I wouldn't want to push this too far because perhaps we shouldn't be using that as an example. But if it had nothing to do with NAFTA, why did the government then pay reparations for lost profit?

Mr. Bob Speller: They paid reparations because, like any other company, Canadian company or whatever, Ethyl was already in business in Canada. As a result, they'd lost that business in Canada because of a decision of the federal government that was then found not to be a proper decision. As a result, they settled on that basis. It had nothing to do with the chapter 11. And it was something that any prior company could do. I mean, any company within Canada has that right.

Mr. David Parker: Comparing it to other issues, as I did in my submission to climate change, the science of climate change is still inconclusive. Does this mean that a foreign corporation can say you can't use fuel-efficient methods and solar panels and so on, based on the same assumption?

Mr. Bob Speller: No.

Mr. David Parker: Surely the legislation has to be tightened up such that grounded fears... You say they're not there yet. But why did the Government of Canada ban it in the first place if there weren't some fears there? Do you know what I mean? If there weren't fears in the first place, how did the whole issue get to that point?

Mr. Bob Speller: There was certainly an understanding by the ministry at that point that there was scientific proof in a couple of other areas, which unfortunately didn't pan out.

The Acting Chairman (Ms. Sarmite Bulte): Mr. Speller, I think Mr. Sauvageau just wanted to ask you something. I don't mean to interrupt, but it's a continuation.

[Translation]

Mr. Benoît Sauvageau: I have a question for you Mr. Speller. Notwithstanding the scientific clauses and evidence that we may or may not have, after the Ethyl company was banned from selling MMTs in Canada, were Canadian companies allowed to sell MMT-based gasoline additives?

• 1630

[English]

Mr. Bob Speller: Yes, they could. You couldn't transfer it between provinces or employers.

Mr. Benoît Sauvageau: That's quite a problem.

Mr. Bob Speller: Yes. They could have done it in Alberta. That's why the Alberta government was actually the government that challenged it and won at the board on internal trade.

Mr. Benoît Sauvageau: So it was not for the American company to defend; it was bad for the Canadian company to produce this same product.

Mr. Charlie Penson: It was Ethyl that was producing it.

Mr. Bob Speller: That was Ethyl, but there was no other way the government found... The government made a decision. They wanted to ban it, and the only way they felt they could do it was to do it that way.

Mr. Charlie Penson: Which turned out to be illegal.

Mr. Bob Speller: Yes, because of the agreement. They didn't have the basis even then to do it, not to say that the federal government wasn't interested in it. In fact, they're doing the studies themselves, both healthwise... and the studies from the car manufacturers were supposed to be in a year ago, but I think they're supposed to get them in by the fall, and then they might have the grounds on which to do something.

The Acting Chairman (Ms. Sarmite Bulte): Obviously, you've all raised a very important issue.

Mr. Penson has a point to add to the discussion.

Mr. Charlie Penson: My understanding is that in California, when MMT was banned, there was a replacement additive that was used instead. Now they've found they have a problem with the replacement additive that is manufactured here in Alberta, and the company in Alberta is now going to be out of business, or greatly threatened, because they were manufacturing the replacement additive. My understanding is that they're finding out that MMT is not as serious as what they used to replace it. So it's a bit of a vicious circle.

The Acting Chairman (Ms. Sarmite Bulte): You've raised, obviously, very important issues that need to be discussed.

Mr. Calder, you had something to say.

Mr. Murray Calder: As a quick postscript to that, being a supporter of ethanol, I would prefer that we would use alcohol-based... as an oxygenate within fuel, which would go a long way to solving this problem. And it would mean more corn production, more wheat production, and everything else like that, and brewers grain, which goes along with it.

Mr. David Parker: To say nothing about the benefits of producing food to drive cars.

Mr. Murray Calder: Well, you have the totally green cycle at that point, using alcohol as an oxygenate within the fuel. The byproduct you get from that production is brewers grain, which goes back into pork and beef and dairy, and the byproduct from those industries is basically manure, which is fertilizer to grow more corn. So if you wanted a green cycle, there it is.

Mr. David Parker: I never realized we'd get to such picayune issues, but the fact that we're using food to feed cattle to produce protein at a rate of 1 in 15 or 1 in 20 is another entire waste.

Mr. Murray Calder: Yes. But then again, if you want me to, I can get into feed conversions and everything else like that, but I don't think we want to get that technical.

One thing I do want to talk to you about, though, is... Basically, in your submission you talk about BST, which is bovine somatotropin. You also talk about genetically modified foods.

With the issue of BST—as I said before, I sit on the Standing Committee on Agriculture and I was one of those who voted against the implementation of BST. One of the researchers at Monsanto, Dr. Elliot Block, actually came forward with the paper that we used to eventually get the three-year moratorium on it right now, in which he stated that there hadn't been enough studies done on prenatal primate testing.

I will tell you that this BST has been tested to death in the United States since 1985, but we found that this was the one issue that it hadn't been effectively tested on. Therefore, we were able to get the moratorium.

• 1635

The other thing was the terminator seeds. I agree with you there also, that this effectively stops the farmer from brown-bagging. What I mean by that is that he can use the seeds from a brand-new seed that seed companies have put forward. What they're trying to do with the terminator seeds is to be able to recoup their research costs and everything. That's what I see.

I have a problem with both of those, but my question is, within this... As we get into the global economic community, biotechnology is obviously something we can't turn our backs on. When we look back to 1970... we talked about 1995 and how we were going to feed five billion people on the face of the earth and the fact that we were 3% short of production limits at that time. Well, surprise! When 1995 rolled around and the World Food Economic Council met in Washington to take a look at Vision 2020, we were already sitting with a population of nearly six billion, and we are in fact at six billion. We were dealing with the issue then of how we were going to feed eight billion people on the face of the earth by 2020—and I think we can upgrade that figure to 2010, when we'll probably reach that figure. So biotechnology becomes very, very important for agriculture in the future and its ability to feed the people on this planet.

I would like your vision, your input, as to how this should be incorporated into these discussions, because obviously it's going to be a very important component.

Mr. David Parker: I'm sure you've got a lot of numbers there to back up your assertion that there's a shortage of food in the world, but again, to reiterate what I previously said, the processing of protein through animals to feed the world... World Watch magazine has said that's a non-starter. It's impossible. We cannot feed the world with a diet like the North American diet, with meat and fish and so on. We have to go to a plant-based diet.

The other point is that the problem of so-called oversupply of food for the rest of the world is basically because of redistribution. We take vast quantities of the food of the world for western countries and consequently deprive the third world countries, plus the fact that these indigenous food manufacturing cultures—the multinational corporations with their intensive methods—are putting them out of business. Again, it comes back to whether we want to bring these people up to our standard of wasteful consumption, or is it natural that they should remain subsistence farmers for some time into the future until we can perhaps stabilize the population?

Mr. Murray Calder: I would disagree with you on your analogy right off the bat, because I will get into feed conversions. If you take a look at the advances we're making within this country with aquaculture, feed conversion within fish, for instance, is 1.2 to 1. In other words, for every 1.2 pounds of feed fed, there's a pound's worth of meat that's converted out of that. Within the poultry industry right now we're currently working on 1.385 to 1, and that's all been done because we have over the years genetically changed and made these two, fish and poultry, much more efficient on the conversion of feed.

The other thing that you have to incorporate in there, David, is the fact that all of our industries are responsive to what the consumer wants. If you're telling me the consumer is going to be satisfied with eating cereals and nothing else, I don't know about that.

Mr. David Parker: Of course, there are other aspects—fish production, for example. Fish farms are notorious for breeding disease and introducing disease into indigenous fish and destroying the ecology of the river systems into which they're introduced—intensive agricultural farming of animals, immense amounts of runoff into the water table of substances that cause eutrophication and contaminate the water table with nitrates and so on.

• 1640

The meat, if we continue to produce it in such intensive methods, is full of anti-bacteria, hormones, plus the fat content. You say there's weight for weight, that we get more weight out than grain to put in, but what about the nutrients, the actual nutrients from the plant food versus the nutrients from the meat? I would say we lose a considerable amount in terms of that. The problem in North America is obesity, heart disease, stroke, and cancer, all of which can primarily be related to the North American diet.

The Acting Chairman (Ms. Sarmite Bulte): Gentlemen, I'll have to ask you to wind it up, as we're almost out of time. We shouldn't continue the discussion.

I want to thank you for coming.

A very quick thing, Dr. Blanchard. I've been nicknamed the clock witch.

Dr. Bill Blanchard: The guillotine.

It's a quick question. You mentioned before that this complete carve-out had in fact been incorporated—

The Acting Chairman (Ms. Sarmite Bulte): With the recommendation that the subcommittee on international trade made to the minister, which was accepted by the department and the Prime Minister. That related specifically to the MAI. So that would be our negotiating position should we decide in Seattle to make investment part of the—

Dr. Bill Blanchard: Would that carry over to the WTO and the FTAA as well?

The Acting Chairman (Ms. Sarmite Bulte): Yes.

Dr. Bill Blanchard: Is that available on the net anywhere?

The Acting Chairman (Ms. Sarmite Bulte): Absolutely. It was tabled in the House last November.

Dr. Bill Blanchard: So I would be able to find it somewhere on the net, is that right?

The Acting Chairman (Ms. Sarmite Bulte): Yes.

Dr. Bill Blanchard: Good. Thank you.

The Acting Chairman (Ms. Sarmite Bulte): Again, thank you very much for coming. I'm sorry our time is so short. We're trying to see as many people as we can.

Again, as I have said to all the witnesses who have come before us, this is not the end of our consultations; it is the beginning of the process and it is an opportunity to meet one another. If you have concerns in addition to issues and questions you have raised, please do not hesitate to either contact the committee through the clerk or each individual member of the committee. This is an ongoing dialogue. It's not the end of a dialogue. It requires that we communicate with one another.

Thank you very much for coming.

The meeting is adjourned until 8.30 a.m. in Calgary.