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, December 2, 1998

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[English]

The Chairman (Mr. Bill Graham (Toronto Centre—Rosedale, Lib.)): I'd like to call this session to order.

Minister Marchi, we're very pleased to welcome you. Perhaps we could get started, because I know members are anxious to hear what you have to say. We look forward to these remarks because we have accepted your challenge to have a look at the WTO and start hearings on that subject early in the new year. We consider this to be the first hearing we'll have on the future of the WTO and the trading system in general.

As you know, the subcommittee is going to be looking at free trade in the Americas, so we look forward to your comments on Canada's trading position in general and on how you see our strategies for both free trade in the Americas and the new trading negotiations, which we all assume will take place following next November's WTO meeting in the United States.

Thank you very much for coming.

Hon. Sergio Marchi (Minister for International Trade): Thank you very much, Mr. Chairman, for your words of welcome. It's a good opportunity to be back before this committee. I also am appreciative that you have taken up what is not necessarily my challenge but is, I think, Canada's challenge with respect to the WTO, because Canada certainly cannot be a bystander when it comes to generating the rules of the trade game, internationally speaking. I'm looking forward to what your committee has to say.

In addition to my trade critics across the table, I'm accompanied this afternoon by my deputy minister, Rob Wright, and by my assistant deputy minister, Jonathan Fried. I'm also responding to the committee's request to try to give a broad and brief overview of some of the trade and investment agenda, both promotion and policy. Behind me are two screens that hopefully work well and will aid us in getting through what is a large and complex field into a rather focused discussion so that I can then entertain your questions as well as comments.

Mr. Chairman, with your permission, I'd like to begin this presentation. You will find that this presentation, which is also before you in booklet form, is called “Canada, Community and Commerce”, and has four sections: one, the record; two, the trade and investment promotion; three, the trade and investment policy side; and lastly, a chapter we call “Trade, Investment and the Public”.

Of course, I'm told that tomorrow afternoon my senior officials will again be before this committee to perhaps go beyond what we are able to accomplish today and to look into any of the details of this presentation.

When we look at the record, it needs to be said that both the trade and the investment agenda have played very heavily in our first government's mandate and continues in the second in terms of getting our financial house in order.

Growth in exports has certainly outpaced the growth of our economy in every single year since 1992. You know the statistics as well as I do. Forty percent of our GDP is tied to exports. If you throw in imports, it probably is over 75%. This is by far the highest percentage in the G-7 club. I think the United Kingdom comes in second at 28%. The average is 18%. Canada has done extremely well.

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Not only has it done well, but it has also touched all regions and provinces across the board as well as our territories, particularly—if you look at the graph—Quebec and Ontario.

If you look at the ratio, which suggests that every billion dollars of exports sustains or creates up to 11,000 jobs, then, clearly, of the 1.2 million jobs created by the private sector, over 400,000 of them have their origins in our country's ability to do trade and commerce.

The next slide shows us what is no surprise to any one of us: the United States is by far our largest source for our exports, at 82%. It clearly, I think, is a natural phenomenon, given the FTA and the NAFTA. It is something that we shouldn't necessarily fear in terms of putting so many eggs in one basket. If you look at the rest of the world and at Italy, for instance, it has almost 70% of its trade in the European Union. Increasingly, if you look at the MERCOSUR countries and the degree to which they trade with one another, and if you look at the Asia-Pacific reality, the challenge for us is the increased intra-trade between those countries.

When you have the FTA and the NAFTA and the United States being the largest economic market in the world, it is no accident, obviously, that many of our Canadian products and services find themselves in that marketplace.

The Asian crisis has obviously contributed to a slowdown of our exports in that region. At the same time, the imports from that region into Canada have increased. If you look at the differential between last year at this time and now, this year we've dropped, nationally, from roughly 9% in terms of exports to Asia to about 5.6%.

One can say that on a national level, we've been able to have a buffer against this crisis. On a regional level, those of you from British Columbia and Alberta will know that obviously the bite is much more severe, because in the case of British Columbia, over 30% of its economy is tied to the Asia-Pacific world. We are also seeing, of course, that in Latin America the contagion is having an effect. And obviously, all eyes are on Brazil, because Brazil is to Latin America what Japan is to Asia in terms of generation of GDP.

The next slide is a snapshot of the role of investment, both incoming to Canada as well as outgoing around the world by our companies. What you will see is that obviously that investment is important to economic growth and to job creation. In fact, one can argue that foreign direct investment ends up creating more jobs than the trade quotient, and that investment leads trade and clearly is creating trade, even though the two are inextricably linked.

But the investment coming into the country in terms of our market share—not real numbers, but market share—has gone down. We have a market share of the world's foreign direct investment that has gone down from roughly 9% to 4% since 1980. If you look at North America in 1980, we had 25% of the investment going into North America. It was coming through Canada. That's gone down to roughly 16% as of 1996. So we need to be concerned about the market share and how we can begin to reverse that as a country.

The good news is that Canadian companies are extremely aggressive in also finding marketplaces for their investments and that also creates spinoffs for job creation and R and D in Canada. In fact, last year was the first time that Canadian companies invested more in the world than the world invested in Canada.

I think we need to be concerned about that issue. We can discuss that at greater length later. I think that in the next few years we have to do for investment what the Team Canada concept has done for trade in the last five years, and we have to recognize and have a debate about the role of investment and how that obviously improves our economic bottom line.

Looking ahead to the next page, yes, the picture of the economic focus of the world is obviously one of concern, but at the same time, we can't talk our way into a recession or a depression.

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Notwithstanding some of those forces, North America and western Europe—touch wood—look quite well by comparison. Canada, according to the graph before you, will still lead the G-7 in growth next year and, it is expected, also in the first year of the new millennium.

We obviously can't rest on our laurels. The world is a more competitive place. We obviously have to try to do more and to do things better. But I think we should not get absolutely depressed and destroy market confidence or consumer confidence by simply picking up on, perhaps, the doom-and-gloom picture. We also have to guard against that kind of talk because of the 40% GDP tied to our exports.

The message is that we can still look for opportunities in our export growth. For instance, members of the national association of manufacturers and exporters, at their annual meeting in Calgary, were terrifically robust in their of opinions about the next couple of years. Only 10% of their membership polled across the country actually talked about a decline of any serious kind in the next two years. So there was a lot of confidence among the exporting community.

On the promotion front of the picture, I would say that the basic challenge is for us to expand Canada's trade culture. There are five areas listed for you. The first is to continue to encourage and facilitate more small and medium-sized firms to get into the export business. As you know, only 10% of our small and medium-sized industries do it directly. Many of them are providers for our major companies that do the exporting, but 10%, for me, is a number that we can clearly grow substantially.

There is a myth out there in some quarters that you have to be a big company to be successful, and I don't think we should buy into that, particularly because all of us go around our country saying—and it's true—that small businesses are the backbone of our domestic economy. If they are, and if they're the engine of job creation, why should they stop at our domestic border?

Second, we need to expand the export base. We have to move from the traditional market of selling our goods to the whole new world of services. How do we also export our public sector expertise and experience? How do we market our culture? How do we also market international education? There's a shift taking place, from goods to services, and that shift also means that we, as a group of ambassadors and trade commissioners and consul generals across the world, will have to equip ourselves with the new world of services.

It will also mean that as a country, we will have to, sooner rather than later, begin to track services. Not many countries do that, including Canada, and we've been discussing with Statistics Canada how we can measure the services provided by Canadians around the world so that we can get an accurate picture of what is happening and can reflect public policy on the right numbers rather than on guesstimates.

The third area, of course, is expansion of our export markets, putting people on the ground where we don't have them, whether it's Team Canada missions, ministerial missions, sectoral missions or private sector missions. We can begin to expand our presence, particularly in the growing markets of the world, and create a larger Canadian presence. It will also mean working more closely with our provinces, because ultimately, as we say, there is one taxpayer, and there is also one exporter. And that one exporter wants a Team Canada approach from the different levels of government.

The fourth area is improvement in the whole question of export financing, particularly as we are encouraging more small businesses to get into the business of trade and exports. How they can get financial assistance is, I think, a function of how successful we will be in expanding the trade culture.

Clearly, EDC is going to be key and central in that equation. EDC has been asked by myself and my predecessors to be more aggressive on the assistance to small and medium-sized businesses. In terms of business done, since 1997 the volume is up almost 25% in terms of assistance to small and medium-sized businesses, and in terms of the client base, their number of clients from small and medium-sized firms is up 20%. They're clearly moving in the right direction.

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The fact that we also are doing a parliamentary review this year is good timing, because while EDC is very much a good-news story, I think, that also gives us an opportunity of reviewing where we have to go from here and what kind of new product lines EDC can put in the window so we can achieve these policy goals of the government and of Parliament.

I also think that while we're talking about mergers in the banking industry, we should also be asking the commercial banks what they do about following the export community around the world, particularly since the traffic is increasing, particularly since they're doing much better, and particularly since many of our exporters would like to do business with a friendly Canadian banking institution. The key area there is to get the banks inside the export tent and keep them there, despite the clouds that roll in from time to time, and not have them necessarily run for cover and abandon the exporting community.

Also, we should be looking at what we do with private financial institutions like NORTHSTAR, which have been created specifically with the intent of assisting as their mandate small and medium-sized firms.

Lastly, following from an earlier slide, I think we should be looking to augment our market share of foreign direct investment, which means, how do we go about selling Canada aggressively? And how do we sell it accurately? How do we demystify some of the myths that persist about the nature of our Canadian economy?

How do we get our database on-line with those in the United States, for instance? When they're looking to find ideal cities or municipalities for multinational corporations, they will tell you that the fact our databases are not on-line means that many Canadian cities and municipalities are not in the batter's box.

How do we also take advantage of the advantages that Canada has to offer vis-à-vis the United States? How do we make people think first about Canada when they think about investing in North America?

One of our major advantages over the United States is labour. I don't think enough people know that and I don't think governments are doing enough about saying that we have a supply of labour, that our labour, by and large, is better trained and educated, and that studies will reveal that our labour is more loyal to companies than labour in the United States is. We have terrific advantages to sell. I think these numbers on investment are telling us that the time is here to do that selling.

Having said all that, the overriding objective, of course, is to serve Canadians better and to serve the Canadian export community better. That's why we put the Team Canada Inc. concept in place. It's not even a year old and we have on-line all 20 departments in the federal government that have something to do with trade. That pleases me, because when we started the exercise we only had three.

So I think the discipline of the federal government under the umbrella of Team Canada Inc. is coming to the fore. There is nothing more frustrating to an exporter dealing with government than getting three different songs or getting passed on to other departments. I think the one-stop shopping is coming together.

The provinces have bought into Team Canada Inc. as well. We have a private sector advisory board. We're looking at how to streamline, how to have one telephone number. Also, as you move across the country, in Nova Scotia, for instance, you have the federal government and the provincial government not only housed under the one roof; when you phone that office you get a live body responding and you have the ability to have that call go either provincially or federally. I think that has to become the rule and not the exception as we move into this one-stop-shopping concept.

We're also trying to move more of our trade commissioners out into the world. Right now we have 50% of them at home and 50% abroad. Because of the increased traffic around the world by Canadian businesses, I want more trade commissioners out in the world meeting our companies, trying to open doors for them, and helping them sell their services and their goods.

On the policy front, again, there are no real surprises. The United States is clearly our key relationship, and we need to put that in context: a growth of 1% in our exports to the United States is as much trade as we do with the countries of Germany or China.

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How we harvest the uncultivated fruit between the United States and Canada is still very important, particularly if we're to push small businesses. What better place to put their toes in the export waters for the first time than in the United States? That's why we have these special border-to-border missions encouraging this kind of activity.

Also, since you are in politics you will understand this: when there are troubling times, each of us is taught by our respective party to play to our strengths. In my case, when the winds are blowing against us, I go to the Liberals, and I make sure I try to do as best as I possibly can. Bill Blaikie probably does that for the NDP, and so it goes along the horseshoe in this room.

In a similar way, when things are not looking as rosy internationally, it pays for us to play to our strengths in the United States, and not to overlook, particularly when you go to the deep south, the new world of potential that exists for Canadian services and goods.

Clearly there are challenges. A number of you have raised that. Ninety-five per cent of our trade with the United States is very efficient and hassle-free. The so-called last five yards are always the toughest, but there are always the same sort of culprits: agriculture, lumber, culture, and, obviously, some of the protectionist pressures the Congress finds itself under.

With the fifth anniversary of NAFTA next year, I think it gives us a good opportunity—and also because that meeting is happening in Canada—to review what I think has been an overall success story while at the same time taking a look at the challenges of NAFTA in the next five years. That offers us an opportunity, I think, to share that story with Canadians at large.

Our next slide talks about the Americas. I think you well know that our Canadian businesses are very bullish about their prospects in the Americas, and with good reason. We're well positioned there. We're well regarded as a country. We don't carry the baggage other countries do. We have agreements with Mexico and Chile. We have an arrangement with MERCOSUR and we're working with the Andean and Central American countries as well.

When the Prime Minister went there in January with Team Canada, it was the largest, most comprehensive mission up to now, and that's not by accident. I think people recognize that kind of growth potential in the Americas. If you look at the Free Trade Area of the Americas project, Canada is not only a member, Canada is a leader. We're currently the chair and we will be hosting the next summit. The next OAS summit will be in Canada in the year 2000. And the Pan American Games come to Winnipeg next year. There is a lot of activity and Canada is very much in the centre of that. Despite some of the economic spillover from Asia, if you take the long view, Canada is going to do extremely well in the Americas, in my opinion.

On Asia-Pacific, as I mentioned, the APEC meeting that was just completed in Malaysia was a tough meeting from the perspective of liberalized trade. I was disappointed and I said as much. I think part of the disappointment was the great success we had in Vancouver last year, where we had a package of nine fast-tracked sectors.

Last year, over the one year that the Prime Minister designated Asia-Pacific, I thought APEC was an institution with clear objectives. Regrettably, in Malaysia, APEC became a process, and we talked and there was a lot of paper. It was disappointing that we couldn't push the trade liberalization further. I think the economic crisis certainly weighed on the economies around the table in a much heavier way. Regrettably, the Japanese were inflexible, and so what you had was perhaps a plan B in selling those sectors to the WTO as as opposed to having been able to push that file within APEC.

Again, notwithstanding the one APEC meeting—and we'll have to rev it back up in New Zealand—we need to take the long view of Asia. It's a great region. The world can't afford a failure in Asia-Pacific. Canada has invested for over 20 years in Asia. It's like the bamboo plant: you plant it and you don't see anything for years because it's setting roots underground. Then, all of a sudden, it sprouts and it sprouts quickly. I think that is a metaphor we should apply to Asia.

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And I think we saw it in China. Some of the members around this table went with the Prime Minister on that trip. And despite the Asian flu, China was doing reasonably well. The currency was stable, and they said to us very clearly, repeatedly, that they were not going to devalue. One can imagine what would happen if they did. Also, they're going to probably come in at 7.5% economic growth this year. Their target was 8%. They feel they can do 7% next year. We went to the city of Dalian, which is absolutely a booming place. There are areas in Asia, and in other countries as well, where they are beginning to turn the proverbial corner, and I think Canada's growth in that region will once again take off.

With respect to Europe, the European Community is our second-largest trading partner. It is a big, wealthy region of the world. It's also sometimes a tough place to do business for our Canadian companies, and one needs to be frank about that. We run a traditional deficit with Europe. Last year it was in the order of $7 billion, I think, so our main objective is to revitalize our relations and to try to have a more accessible market for our goods.

We don't run a deficit because our products are substandard; I think we run a deficit because sometimes our companies run into closed doors. We're trying to do open those doors in that Canada-EU partnership.

I'm also advocating that when Europe looks to North America it sees a NAFTA community, not just three different neighbourhoods. I think Europe should be seen to be negotiating with all three of us at the same time. Otherwise, I think, Europe can pick and choose from the trade menu as it sees fit. I think that's a disadvantage for NAFTA and an advantage to Europe.

I think our Canada-EFTA trade negotiations will help. Symbolically as well as substantively, they will indicate that Canada, while doing well in the United States and in Asia and Latin America, has not forgotten Europe, that Europe is not in our past when we talk Canada-Europe, but is still very much part of our future trading relationship.

The Chairman: Mr. Minister, I don't want to interrupt you but I'm getting a little bit nervous just because I notice we're only about two-thirds through and—

Mr. Sergio Marchi: So I'll have to pick up the pace?

The Chairman: —I have quite a few members who want to ask questions. I know you're always willing to come back. I'd like to hear what you have to say, myself, and I know most members would. Maybe you could tell us you—

Mr. Sergio Marchi: I'll try to quicken the pace. I was told I had 30 minutes for the presentation, which started late, so I might be five minutes over—

The Chairman: Great.

Mr. Sergio Marchi: —but I'll try to put the foot to the gas pedal. And if you wish, I can try to stay a little beyond 5 o'clock.

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

Mr. Sergio Marchi: The World Trade Organization is obviously crucial to Canada as a middle power because we win by the establishment of rules. We usually don't do as well when there are no rules and we're going up against some pretty big countries. Clearly, the WTO is important to us. Traditionally we've always been able to shape and influence the agenda of the WTO beyond the kind of economic might as license would have it.

There are new negotiations coming next year on services and agriculture, in the year 2000. It hasn't been quite defined in terms of the shape or the size as well as the pace, but Canada should be there. I'm indebted to you, Mr. Chair, and to the committee members, for the committee's agreement to help identify what those interests are and to engage the Canadian public and the Canadian business industry.

The WTO is clearly more than trade. It talks about and advances regulatory reform, transparency, good governance and democratic development. It's increasingly important that we also bring in and engage developing countries so that the family can be an extended family. Really, the larger it becomes, not only does it become a little more complex, but it becomes, in the end, I think, more viable in trying to establish international rules by which all countries, big and small, will be governed.

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Again, with us going into the WTO next year, the Canadian interests and priorities, particularly on sensitive matters like agriculture, are absolutely crucial, so your role is crucial.

Obviously you can discern from this quick presentation that our government is active in many fora, and while we're active in many different places, our negotiating priorities remain the same: firstly, to try to shape the rules; secondly, to try to get access for our companies; thirdly, to promote those Canadian companies; and fourthly, to try to also establish the standards for protecting the government's ability to regulate in the national interest.

Having said that, our last part of the presentation concerns the Canadian public and our outreach. While 70% of Canadians, roughly speaking, support both the Free Trade Agreement and the NAFTA, they do have concerns, and they exhibit them. Whether it's in the area of sovereignty concerns, the area of human rights or the area of social programs, they do have concerns that manifest themselves. And while they support trade very actively in any public opinion survey that you look at as a function of jobs and economic growth and of being a country that is too small to simply generate it from within, we also have to ask ourselves how we engage as a country.

And ultimately, in all of these fora, whether it's the WTO or the FTA, we have to ask ourselves how those entities engage the public. How do we deal with civil society? Quite frankly, Canada, in all of those fora, is a leader in broadening the debate. We're not part of the gang that is pulling down the chain on civil society. In fact, we're on the other end of the rope.

So I think we need to reassure the Canadian public that trade does not dilute national standards, that trade can also be an opener and a bridge to societies that have been closed. We need to convince them that we also should and can and do export our values when we export our products and our services, and we need to convince them of how we can influence these various bodies by being engaged at the table rather than running away from the table.

And so, I think, partnering with the public, the provinces, business, the NGOs, labour— how Parliament responds to the issues as you are grappling with those issues is increasingly important. I think we need to recognize that in today's world the process leading to a trade deal is, in the end, as important as the substance of the trade deal. And sometimes, if you don't have the good process, you don't get the buy-in, and if you don't get the buy-in, you don't have an effective trade deal.

I'll stop there, Mr. Chairman. I look forward to the comments.

The Chairman: Thank you very much, Minister. I appreciate that.

Mr. Penson.

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

Welcome, Minister, to our committee, and welcome to your deputy ministers.

Mr. Chairman, I thought it was an interesting and creative approach of the minister to describe the drop-off in exports into the Asia-Pacific area as an advantage for Canada because we didn't get beat up quite so badly as a result of the Asia-Pacific problem.

I do recognize, Mr. Chairman, that our trade is leading the way in growth. I think that's going to continue to be the case. I'm happy to see Canadian investment growing.

There are a few concerns I have, though.

Minister, you've talked about the SMEs and the need to grow that export opportunity. I agree with you. When we had our committee hearings on the SMEs, I got out of it that there were three things, sir, that they were asking for in order to grow into that export market. They were asking for lower taxes—a lower cost of doing business, if you like—and less regulation. Specifically, interprovincial trade barriers were hurting them. You might comment on that, if you would.

I was also happy to see your commitment and your government's commitment to a rules-based trading system, something that Canada has fought for for a long time and has been very successful with, by the way.

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But I do want to ask you this. When rulings are for us, I guess we're happy with that, but when they rule against us at places like the World Trade Organization, I think it's important to accept those rulings, if we've made the case as best we can, and to accept the spirit of those rulings. My colleague from the heritage committee might have more to say about that if he gets a chance on the second round.

Some hon. members: Oh, oh.

Mr. Charlie Penson: But I think the main area that I want to ask you about today, and the one that there is some immediate urgency about, is the agricultural issue, which was largely unresolved at the Uruguay Round. A modest start was made. Everybody recognizes that it's a very difficult area. We see the need for some emergency aid in Canada right now because of the massive subsidies worldwide.

I'm really interested in how you might ratchet up this process. I know there's an agriculture round due to start next year. Is that the best approach—to have a sectoral round? I guess our committee will be asking witnesses the same thing. But how long can we sort of wait and have, it seems to me, Band-Aid solutions while our farmers are getting beat up on very badly out there in the international scene?

We've made a lot of gains, but there are still things to be done in services, in industrial tariffs and in intellectual property, in all of those areas. Is there enough that could be rolled into a general round? What's your thinking in terms of some kind of a general round that might enable us to get gains and get some disciplines put around this agricultural maverick that's hurt us so badly over the years?

Mr. Sergio Marchi: Thank you, Charlie. You asked three things. Firstly, on the SMEs, I think the issues that you've identified, the three of them, are on the list of concerns or issues of importance. I don't think it's an exhaustive list, by any means.

Certainly the whole issue of taxes came through loud and clear, I think, when we were in Calgary for the export awards and for the alliance annual meeting. I heard about corporate taxes, as well as hearing increasingly about personal income tax. And of course, Minister Martin started that process in the last budget, and I think we need to continue on that, not only for the SMEs, but for Canadians in general.

They've also talked about interprovincial trade barriers and trying to make those regulations and the weight and the burden of them a little more efficient, given that SMEs don't have the kind of resources at hand that some of the larger companies do.

Interprovincial trade has always come up on our Team Canada missions, and it's always made for an interesting forum when the Prime Minister and the premiers are up at the front. In the last go at it, one province held things back. Otherwise, we might have been able to break that log-jam. They have other concerns, but obviously the three that you've touched upon are issues that I've also heard about.

In terms of the rulings of the WTO, I find that Canada, by and large, does play by the rules quite well. In fact, sometimes we get criticized from within Canada for being so honourable. But I believe that you set up rules and you set up an organization, and you must abide by those rulings.

And if your friend gets a second round, I'm sure he's going to talk about the publications ruling that we lost at the WTO. If you look at that ruling, the WTO asked us to do away with four different elements, and we have complied in full. We didn't cry. We didn't bellyache. We didn't delay. That's not the case, for instance, with the beer decision against the United States some time ago. They haven't implemented one iota of that ruling.

So Canada—

Mr. Charlie Penson: The spirit, though—

Mr. Sergio Marchi: No. We have to do more than just the spirit. We have to respond when we win or when we lose. If you allow countries to pick and choose, you don't have the foundation for that organization and you really don't have the spirit of the rules, which is important to Canada.

On the agricultural issue before the WTO, as to whether it will be sectoral or folded in, for all intents and purposes, the round on agriculture next year really won't get off the ground until late next year. It will probably start in earnest in early 2000. My guesstimate, Charlie, is that it would probably be folded in with negotiations on a number of sectors.

The debate is, do we go sector by sector or do we go for this huge, Sir Leon type of round of seven years when we've been negotiating pretty intensely for the last 10 years and some countries are fatigued or intimidated?

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Some countries want to consolidate. We've advocated that perhaps we can have a Canadian cluster approach, where you have enough important sectors, beyond cherry-picking—which is one sector at a time—because there are big winners and losers in that. Rather than going down this seven-year path again, is there enough on the table so that people can see wins for their countries? It would lessen the pressure on a sector like agriculture if, in fact, there were other issues in sectors complementing it.

My guess is that eventually it would be rolled into a negotiation of other sectors, but that hasn't been defined, and it probably won't be until the ministers of the WTO meet in the United States in late fall of next year.

Mr. Charlie Penson: Minister, have you explored the option of trying to work with like-minded countries? You're aware that the Cairns Group is being very active in calling for trade liberalization and an end to these subsidies and tariffs.

I would suggest to you, Mr. Minister, that even the United States, which has massive subsidies, is essentially responding to a systemic European problem. They have their own reasons, of course, for those subsidies, but it seems to me that in order to try to get some help for our desperate farmers here we need to work with like-minded people. Are you interested in exploring that option with some of your counterparts, especially those in the United States?

Mr. Sergio Marchi: I had written down the words “Cairns Group” as my third point and I had overlooked it. You're right. Not only are we interested in exploring it, we're actually doing it this week in Argentina. The Cairns Group is assembling to take a look at the whole grains industry and how we can bring some sanity to it on the eve of this subsidy war between Europe and the United States.

I think the United States has avoided the mechanism of their export enhancement program. We are appealing to them to continue to resist. And by exerting influence and pressure in the Cairns Group or any other like-minded body, that's where middle powers can also have clout, some influence and some say.

You asked me the questions in the House of Commons. There are a lot of things we are doing. We are talking to the Americans and the Europeans. Ultimately, short of being the chair of the European Commission, we will try to bring as much pressure to bear as we can to say that commodities are low enough without aggravating the lives of farmers around the world by getting caught in this subsidy war.

So I agree with you that the WTO is one avenue, but we can, obviously, in the four that we are members of and leaders in, try to exert as much leverage as we possibly can. In Argentina this week, Canada is part of that group.

Mr. Charlie Penson: The last thing I will say is just a short statement. I think most people in Canada realize that we can compete on the basis of production. Canadian farmers can compete on the basis of production with anybody in the world, but we cannot compete with the treasuries of those other big blocs. Therefore, there's an urgency to this request that I'm making, in that Canada simply can't play this game to the extent that it would take to keep our farmers in business.

Mr. Sergio Marchi: Charlie, we're taking different tracks, different approaches. You know that the Minister of Agriculture, in co-operation with the government, is looking at a package for Canadian farmers. That's one track. We have a track that is very active with the Americans and the Europeans. In a few days, we will be having the Canada-European summit in Ottawa. It is uppermost on our list. We are players at the WTO and we are players in these other like-minded associations.

We're not just looking at it unidimensionally. We are trying to bring as much suasion as we possibly can muster to the equation. Ultimately, it will take good faith and reasonable people on the other side of the ocean to make it go.

The Chairman: Thank you. Monsieur Sauvageau.

[Translation]

Mr. Benoît Sauvageau (Repentigny, BQ): Mr. Marchi, Mr. Fried and Mr. Wright, it is a pleasure to meet you. I have a whole series of questions, Mr. Minister. If I don't have the time to ask all of them, or if your answers require more time than I am allocated, I will submit them in writing, and I will expect to receive your written replies in the future.

My first series of questions concerns human rights and the upcoming negotiations, be they at the WTO or in the context of the European Free Trade Agreement or in negotiations with other countries.

• 1620

Yesterday, a Senate committee tabled a report on human rights and trade. This committee tried to study the subject. We almost got it, but at the last minute it was dropped. Nevertheless, a Senate committee has tabled a report on human rights.

In this report, there is one recommendation that specifies that the Canadian government should apply a much stricter code of ethics than the code that has been voluntarily adopted by Canadian companies. It also stated that government assistance should be linked to compliance with internationally recognized, minimal standards with respect to human rights. This is one of the highlights of the report.

Last week, accompanied by Mary Robinson, the United Nations High Commissioner for Human Rights, the Prime minister celebrated the 50th Anniversary of the Universal Declaration of Human Rights. The declaration states, and I quote:

Everyone has the right to work, to free choice of employment, to just and favourable conditions of work, and to protection against unemployment.

With respect to the Senate report and this joint celebration of the 50th Anniversary of the Universal Declaration of Human Rights, I would like to know how you intend to show respect for these two principles in future negotiations with the WTO and all the other negotiations, including free trade with the Americas or Europe.

My second series of questions concerns the EFTA. A first series of negotiations were held in Ottawa from October 14 to 16 for an EFTA. I would like to know the outcome of this first negotiating session, and I would like to know whether other official meetings have been planned.

A deadline was set for the middle of 1999. However, Mr. Minister, you have at the same time spoken very eloquently of the need to thoroughly consult the Canadian public. Can you tell us how you intend to bring about this miracle in such a short time.

Why were the Canadian and Quebec public informed after the fact, since an advisory committee had already been created, and, as far as I know, it consisted only of Mr. Speller, who had carried out a cross-Canada consultation during this summer. You sent out 400 letters to we don't know who and we know nothing of the answers.

In as far as possible, could you answer this question?

As for Bill C-55, which concerns the magazine trade, you had dispute with the Minister of International Trade, Mr. Eggleton, while you were Minister of the Environment, concerning the Ethyl Corporation. You had an exchange of letters, and it was discussed in the House, as I recall. I would like to remind you of this. And now, you seem to have a slight difference of opinion with Ms. Copps. Perhaps it is only a matter of perception, but that's how it appears.

In view of the fact that Bill C-55 constitutes a very real threat, what do you propose to do to prevent the threat from being realized? I am thinking of the Americans.

Finally, do you intend to exempt Time Canada from the proposed legislation, even if this is contrary to the cultural industry in Canada, so as to be able to propose a compromise to the Americans in this matter?

I will give you the time to answer these first questions, and then I will ask more questions later. Thank you.

[English]

Mr. Sergio Marchi: Let's start with the first question on general human rights as well as code of ethics and the Senate report.

• 1625

Firstly, I'm very interested in the Senate's report. I'm looking forward to going through that and understanding what is behind some of the recommendations. It's obviously an issue that is terribly complex. It's also a government-wide issue. I don't think the onus should be simply placed on the discipline of trade or a department of trade, whether in Canada or anywhere else in the world.

I think that is a government-wide policy, whether it is a foreign policy or your CIDA development policy, also incorporating a trade policy, because I think that, in essence, is your international policy, how you stand in terms of the international community.

We certainly have supported a number of private initiatives in terms of coming together with a code of ethics and conduct. In fact, I attended a number of those meetings early in my mandate. I know my colleague, the Minister of Foreign Affairs, Lloyd Axworthy, has also been active on that front. We support the kind of private initiatives whereby industry is rallying to the establishment of this code.

I think it also needs to be said, in a fair way, that by and large in my travels outside of Canada, when I meet with other government officials and when I meet with Canadian companies, Canadian firms are jumping a higher bar than they have to locally. So there is already an export, to a large degree, Benoît, of best efforts, whether that company comes from my province, whether that company comes from Quebec, whether that company comes from Western Canada, whether it's involved in mining or high technology. By and large, they win praise from the local governments and local authorities.

So there ought to be a recognition that we're not starting from ground zero, that we can build on that reputation. And in the end, in trade, that reputation will help us more than it will hurt us.

How do we apply that to the WTO or the FTA? Certainly on the WTO, when we went to Geneva for the 50th anniversary in May of this year, part of our statement was that the WTO also has to change the way it does business internally, that it has to engage the international constituency much better, have speedier decisions and have more transparency and openness.

And that wasn't something that only Canada said. I know that my American counterpart spoke quite eloquently about that as well. So we realize that the WTO sometimes is rather far away, rather intimidating. It's a good organization that could be made better for a community that clearly is becoming smaller by the day.

How do we do it with the Free Trade Area of the Americas? Again, Canada has been at the leading edge of creating this committee for a civil society, which could and should be working better. We're going to Miami next week to address the conference which is looking at the Free Trade Area of the Americas. One of our points is that we still have a challenge in front of us on the civil society.

And it is a clash of different business cultures. Canada and the United States wouldn't dream of signing on to the Free Trade Area of the Americas unless there has been engagement with the people. Many countries in Latin America feel that only the governments should decide, and we are of the opinion that such a world is behind us, that in the world today, as I said earlier, the process is as important as the conclusion.

On NAFTA, I don't accept the assumptions that you've made in the preambles to your questions on NAFTA, Benoît. Our Prime Minister signalled publicly more than a year ago that he was interested in having a Canada-EFTA partnership. He signalled that in Europe. The European countries accepted that, took up the offer, and signalled their intent.

Our department then began the consultation with the Canadian business community. We released many letters in terms of sending those letters to those industries, eliciting whether they think it would be a good idea and asking if there would be concerns. The response was as close to unanimous as you will get. We also had a number of public hearings in a number of cities, chaired by my parliamentary secretary, and again, basically, those who came to the meeting gave it a thumbs-up.

There was also a full briefing to this committee of the kind of engagement and consultation that we did. My understanding in reports from this committee was, again, that the committee gave its endorsement and a thumbs-up.

• 1630

And only after all of that process, Benoît, did I take the whole issue of negotiating a mandate to the federal cabinet, where it was approved and where the committees and negotiations have started. I'm going to ask Jonathan Fried to give you an update on where those negotiations stand. I know they started and started well and that there are good vibes on both sides, but I will allow Jonathan to give you the specifics that you ask for.

Lastly, on the whole issue of C-55, you talked about a difference between me and my colleague, the Minister of Heritage. You know that this issue was announced back in July. I addressed the four outstanding requests that the WTO made of Canada when Canada lost, and I did that in full. At that time as well, Sheila Copps announced the domestic policy based on services of advertising in publications.

What I said very clearly in the article in The Financial Post, aside from the headline, which I don't think reflected or depicted the quotes, was that this is a policy of the Government of Canada, that this is an issue that the Americans must accept. We have completed our response to the WTO, and the Americans need to recognize why we are doing what we're doing on the issue of culture as it relates to magazines, because this is for a domestic audience. Our magazines don't sell—unlike Céline Dion or Margaret Atwood—around the world. They are for Canadians by Canadians. The Americans need to recognize this.

I also said that if there are constructive amendments that can be made which do not undermine the intent of the bill, why should it be seen to be too late in terms of dealing with our issue with our friend, neighbour and partner? That's what I said.

Yesterday, Madam Copps was in touch with the Ambassador of the United States, again asking what the constructive elements or the amendments are. I understand that the committee has made four amendments. One of them is to refine the grandfathering of Time, which is the other answer to your question. Time and Reader's Digest have already been grandfathered up to now, and that has been extended simply because that would be the fair and the right thing to do.

But once again, she went back to the ambassador and said, “Give me the constructive amendments.” And in essence, the amendments weren't forthcoming—except for removing the bill from the House of Commons, which we refuse to do. It's not a question of making us look unrealistic or impolite. I think this is for domestic policy concerns, and if there is a way to bridge any differences without gutting the bill, why should we close the door?

The fact is, it takes two to tango. You can't say that a constructive amendment is to say, “Yank the bill from the Order Paper.” I don't think that's constructive. We stand behind this bill, and it's been out of committee and in the House of Commons.

The Chairman: Great. We're going to have to move on, but you said Mr. Fried was going to respond something.

You're coming here tomorrow, Mr. Fried. I wonder if you could pick that up as the first thing or as one of the items you address tomorrow, because we're well over Mr. Sauvageau's time, even with the liberty given with the extra few minutes for his translation problems.

Mr. Blaikie.

Mr. Bill Blaikie (Winnipeg—Transcona, NDP): Thank you, Mr. Chairman. I have just a quick question for the minister. There's a lot that I would like to discuss with him if we had more time.

One of the things I don't find in the presentation or in anything you've said so far is any indication—and perhaps there's been an indication given somewhere else that I'm not aware of—that the government and yourself, as the Minister for International Trade, are trying to revisit, either in the context of NAFTA or in the upcoming FTAA negotiations, the adequacy— even from your point of view, because you know how I feel about the investor-state dispute settlement thing—

• 1635

But certainly in the light of the proceedings that have come out of that chapter—I think it's chapter 11—with respect to Ethyl and Myers, etc., apart from scrapping it altogether, which is not the position, which would be my position, are you seeking to refine definitions of expropriation and other notions in that process, which, it seems to me, even people who are defenders of these agreements might have some concerns about?

Mr. Sergio Marchi: Firstly, on the whole question of the investor state, when we discussed it and you mentioned that your position was to scrap it altogether, we need to keep in mind that when we speak of an investor state that means in Canada as well as for Canadian companies abroad. And I wouldn't scrap it as readily, also because there are more Canadian companies investing more around the world than the world is investing here.

Mr. Bill Blaikie: But it only exists in NAFTA at the moment. It doesn't exist around the—

Mr. Sergio Marchi: Oh no, not at all.

Mr. Bill Blaikie: You were trying to put it into the MAI, but—

Mr. Sergio Marchi: No. Investor states are also part of the foreign investment protection agreements that we sign with countries. We have 24 or 25 of those and we continue to negotiate.

When we talk about investor states, we also want to ensure that in countries with judicial systems much less developed than ours—ours is as good as it gets anywhere in the world—our Canadian companies abroad can also take advantage of investor-state law rather than the laws of the jungle.

Having said that, I've already signalled to my counterparts in the United States and in Mexico that when we get together next year for a NAFTA commission meeting, for the fifth anniversary, I think we should look at the whole investor-state issue. My deputy has already met with his two counterparts to discuss that.

There is, as I understand it, a buy-in from both of those countries on two bases. One is, is the intent of the investor state what it was intended to be? Around the table at the MAI, when the MAI was still ongoing—negotiations have ceased at the OECD—we certainly brought a restriction to the interpretation of the word “expropriation”: that it should not mean and should not translate into national governments having to put down their standards on whatever issue or policy. In the discussions with the United States and the Mexicans, we have said we'd like to refine the investor-state interpretation.

We also have signalled that the whole issue of the investor state is public business, and public business should be reflective of the right to know. I've been somewhat frustrated by the fact that this investor-state issue is not as transparent as I think the agenda of trade in this world of ours ought to be, so we've also asked how we can make it more transparent.

Why is it that people should not be told which companies are triggering an investor state, whether it's a company against us or whether it's a company against the United States or Mexico? Given all the privacy legislation and the whole thing of publicly traded companies, is there a way of making it more transparent? We've already triggered that discussion.

We also have to be careful. If you actually want to get into amending the investor-state definition in that chapter, I think that's a little more precarious, because then, I think, it opens up that chapter. And the Americans, for instance, who don't like the binational panels because they say that undermines their sovereignty, would like to wipe that away. In the end, we would be hurting ourselves rather than helping ourselves.

So how can we work on the investor state, both on the interpretation as well as the transparency, without opening it all up?

Mr. Bill Blaikie: Without the binational panels you just have free trade one way. The Americans would make their own— This is what they do now anyway.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Blaikie. Maybe we could ask Mr. Fried tomorrow when he's speaking, because there's a lot of talk, Minister, as you know, about this issue of the expropriation definition, and maybe we could get into that in a little more depth in the committee.

Mr. Bill Blaikie: I'm sorry to run, Mr. Chairman. I have a Board of Internal Economy meeting that I'm already late for.

The Chairman: All right.

• 1640

I thought Mr. Blaikie's question was going to be directed towards the allegation of Loewen, that in fact it's the United States judicial system that's corrupt in Alabama which has led to his investor-state claim against the United States down there.

Mr. Assadourian, ten minutes.

Mr. Sarkis Assadourian (Brampton Centre, Lib.): Thank you very much, Mr. Minister, and welcome again to the committee.

On page 2 of this presentation, you talk about the record. There are five export destinations: the U.S., Latin America, Japan, EU, and others, in a comparison between 1992 and 1997. Everywhere it went down, except to the U.S., where exports went up, and to Latin America, where it remains the same. Is there any particular reason why we went down in those two or three areas? It's quite important for us, I think. We have to supply our export and imports over and above the U.S. Is there any particular reason for those figures to go down in those countries? That's my first question.

Second, you never mention any trade with the former U.S.S.R., the CIS countries. Russia has a population of about 250 million. Now they're having their problems, but do we have any policy for the future to explore this market further to promote trade?

My final question is just about an update on the Helms-Burton bill. Where do we stand on that? Is there anything new in that situation?

Thank you.

Mr. Sergio Marchi: Thank you, Sarkis.

Firstly, why is trade up with the United States? That's part of a trend. In the 1960s, we had 60% of our trade with the United States. In the 1970s, it was 70%, and now, as we close the 1990s, we're into the low 80% range and growing.

I think there are a couple of reasons. Firstly, the U.S. economy, in the last six years—touch wood, probably—for both mandates of Mr. Clinton, has set economic records. They've been growing tremendously well. They are the economic superpower, and we have unprecedented access as a result of the Free Trade Agreement and the NAFTA. So that trend line, that increase, is clearly as a result of all of the things taken together. And where Canadian businesses find it very efficient, perhaps because of the closeness to and similarity in some of our business culture, they're doing well.

Many Canadian companies take the view that if it's not broken, why fix it? If you can sell not only to northern states but also to the southern states in and around Georgia, why not? New exporters often take a dip in the American market first before jetting off to more exotic faraway countries.

There are a lot of reasons why we've seen the increase, and we will probably continue to see it.

Now, I also share that view of diversifying. I don't think we should be fearful of the Canada-U.S. success story. We should also be exploiting Canadian opportunities in those other markets. I think the Asian crisis clearly answers a question, both in the Asian marketplace and, to a certain degree, in terms of Latin America. But again, if we take the long view, I am confident about the potential for a Canadian positioning within those two markets.

In regard to Europe, I mentioned that in a sense it's the best and the worst of worlds. It's the best because it's a rich market; it's number two as a European community for us. But we could be doing a lot better. I believe that we can open up that European market a little more. Canadian businesses, certainly the smaller ones, are sometimes much more frustrated in the European market than in the Latin American market, for instance. And that's not something I'm making up. This is something that businesses will tell you. So it's anecdotal, but I think it's worthy of our attention nonetheless.

I didn't mention Russia because I ran out of time even by mentioning the few things that I did. But clearly, the eastern European— the coming down of the wall creates a new marketplace. Some of those countries were already looking west even while the wall was up, countries like Hungary and the Czech Republic. And our Canadian companies are doing very well.

The Prime Minister, as you know, was to lead a Team Canada in January. It was decided to change that and postpone it because of the economic situation. He took this decision in conjunction with the premiers. It's a position that, by and large, I think, is supported by businesses.

• 1645

Notwithstanding that, the Prime Minister will be in eastern Europe in late January, in the Ukraine and Poland. We will be visiting with the German chancellor and then going on an investment promotion mission to the economic forum in Davos. That part of the world is certainly not forgotten, by any means.

With respect to the latest on Helms-Burton, I'm not sure anything new is bubbling, but I will ask either of my officials to bring you—and me—up to speed on any new wrinkles.

Mr. Sarkis Assadourian: No news is good news, basically; is that it?

Mr. Jonathan Fried (Assistant Deputy Minister, Trade and Economic Policy, Department of Foreign Affairs and International Trade): With our embassy in Washington and supporters in the United States, we are assessing the makeup of the new Congress.

Of course, Senator D'Amato, one of the champions of very strict sanctions, was defeated in the last election. There are a number of proposals that were made in the last Congress to provide more flexibility in U.S. sanctions policy. There are private sector coalitions of American and foreign companies that are looking for a better balance in terms of an ability to do business, while reflecting, on the other hand, what any country might insist are national interests.

As we approach the new legislative season in the United States, we will, with our U.S. allies, be looking for opportunities to possibly address the outstanding issues of the Helms-Burton legislation in a manner that may still avoid having recourse to further steps in our dispute settlement process under NAFTA, which remains outstanding. We still have the right to pursue our NAFTA complaint, should the need arise.

Mr. Sergio Marchi: What I should have also mentioned, Mr. Chair, that my deputy minister reminds me of, when I tried to answer the question about the business vis-à-vis the United States, is that in the last year we have been down with Asian markets and some Latin American markets, but over the five-year basis of that chart, the numbers are up in Asia and Latin America. When you make them as a by-product of the pie, given the American numbers, it tends to distort them. If you are looking at the vertical silos in Latin America and in Asia, our numbers are up. When you look at the pie chart, you get a distorting factor because of the United States numbers. The pie is bigger and that's smaller.

Mr. Sarkis Assadourian: Okay. Thank you.

The Chairman: Thank you.

We have a few minutes, so we'll go to Ms. Bulte.

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): Thank you, Mr. Chairman.

Thank you, Minister. I was pleased to see that in your presentation you talked about public concerns and public outreach, and you looked at the new elements of trade policy so that we're not just going to be looking at trade and goods, and trade and services. It's going to be trade and “other”. It looks to me like we have a trend going on to look at almost the social impact of the agreements that we're going to be signing with respect to trade.

One of the things I noted that is missing from this list of concerns over health care, education, environment, natural resources, etc.—and I know it's not all-inclusive—is culture. One of the things with respect to even what you've heard, to Bill C-55, is that we seem to be negotiating agreements—like NAFTA—with cultural exemptions, which is terrific. But lo and behold, we are always being taken to trade dispute panels as a result, even though we have exemptions. What is the department going to do to address this whole area of culture, especially as we head to the WTO?

Mr. Sergio Marchi: You talk about the social impact. And clearly, as a government, we need to talk about the economic dividend as well as the social dividend. For instance, I thought the Prime Minister's recent trip to China was a good illustration of that balance. Some of my colleagues, like Inky, were there. We obviously had a good economic agenda. Our businesses, the 200 of them represented there, signed some very significant contracts, and we deepened the commercial relationship.

But at the same time, the Prime Minister addressed a university audience, at Tsinghua University, which is their version of MIT, and talked about the rule of law, talked about human rights, and answered questions.

We inaugurated a China-Canada parliamentary group—the first time China has done it with any G-7 country—where they discussed quite openly, in broad daylight, issues of human rights, rule of law and, as I've also been told, an elected versus an appointed Senate.

We went to the poorest province, to the city of Lanzhou, where we saw what a difference CIDA was making in the lives of people.

• 1650

So I thought that was a trip that talked about the economic as well as the social dividend. I think that increasingly needs to be the way, and I would suggest that's how we do it in the cumulative when we talk about Canada, not just in trade, but also in how CIDA functions and how our foreign policy functions.

On culture, you talked about how we have an exemption in NAFTA but are still brought to the trade disputes. And therein lies the challenge. For instance, at the MAI table, there was no question about a cultural exemption. That was never in question for Canada. Now, I noted that people didn't believe us, but that is the fact.

We have the exemption in NAFTA, but the periodicals decision came from the WTO, not from NAFTA, and it wouldn't have come from the MAI. It comes from the WTO, because the WTO now is silent on the world of culture.

And one of the first things that I did when I was on the job as trade minister was to also see how we could advance this agenda at the WTO. And people say, “Well, that's a tough sector to do that in.” Yes, it is. But is agriculture an easy sector for us next year? Is trade and the environment an easy sector to deal with at the WTO? Is trade and labour an easy sector to deal with? Of course not.

So let's not say we can't do it because it's difficult. We ought to do it because it's the right thing to do. And Canada believes that. And I, as the trade minister, have advocated that—without any other individual asking me to do it. Increasingly, countries are more concerned about promoting their identities as well as protecting them, because we're in the advent of high technology, where you can download culture tomorrow. And countries that thought they had a different language and a different history that served as protection clearly see a different world. And why should we have a world of one culture anyway?

So the question that I think the WTO needs to put on the agenda for the next negotiations, which I've advocated with Mr. Ruggiero and with other ministers, is that within the Canadian so-called cluster, I would hope and envision that the rest of the world would agree to try to square the circle on culture.

And there the exercise is to define legitimate protection versus illegitimate protection for trade and culture. What are the no-travel zones? It's not because we're afraid to trade. The Americans don't need to give us a lesson on trading. Forty per cent of our GDP is tied to exports. Per capita, we do more trade than they do. I think we are better internationalists than they are. They are much more powerful than we are—I didn't say that we are like them on the power scale—but they don't need to teach us lessons on how to trade.

So if we look at squaring the circle on culture, it's not because we are afraid of trade. It's because we're proud of who we are, and we are also recognizing the reality that we happen to live next door to the giant that speaks one of our two official languages, that pumps its pop and culture into Canada and around the world. And is there a way for the WTO to say, “this is a no-travel zone” and “this is absolutely fair game”?

If we get those rules, I think we will have satisfaction in the sense that for us culture is part of our identity and not just business—it's a different bottom line—and satisfaction in defining the areas of culture, like Telecom and other issues, which are very much part of the business of international trade and commerce, and where we can actually do very well and not think that we could lose.

I think that's possible and I think we will build up allies as we go through that. It's not easy, but I think it's the right thing to do, and I think it will come. Whether it comes soon or whether it comes a little later, in the end, I think, the issue of culture vis-à-vis the international community and the people's concern of maintaining their national identity is a concern.

As well, that's the issue in Europe with the euro. People are concerned about the advent of the euro as well as excited. They're excited because it could hold incredible potential, but they're concerned about what a unitary monetary policy means in terms of domestic identity and domestic politics.

The Chairman: Thank you very much, Minister. You said you'd stay an extra few minutes, so we'll keep you for two more rounds of five minutes each.

Mr. Mark

• 1655

Mr. Inky Mark (Dauphin—Swan River, Ref.): Thank you, Mr. Chair.

Mr. Minister and staff, welcome.

Your comments this last round and your presentation certainly have framed my questions very well. You've shown that trade is the backbone of this country and that we depend on it, daily, for a billion dollars a day.

One of the problems with Bill C-55 is essentially what you just said: it's a question of culture versus trade. Most people would agree that this whole bill is not even about culture but about trade. In fact, the worst part of this bill, in my own opinion, is that it has split our own industry into two camps—the publishers and the advertisers. That's the sad part about it, which tells me that obviously there's something wrong with the bill. The bill needs more attention. You've also read in the papers that the Americans do want to retaliate. These are possible realities.

Considering what's at stake as a trading nation depending on the 40% of our GDP that is trade, I want to know whether your department has or you have done a risk analysis on this bill, because I believe it would be foolish if, as a trade minister, you wouldn't consider the ramifications of any piece of legislation, not only this piece of legislation. What is the risk? Is it worth it? What's the cost to this country in terms of jobs over social policy, if that's what it is?

Mr. Sergio Marchi: Firstly, Inky, it's not trade legislation and it's not my legislation. So when you ask if I have done the cost-benefit analysis, I think we have to keep the process in mind.

As I said earlier in answer to Charlie's question, when we lost the case at the WTO, we did respect the decision. I responded to the four areas in full. Madam Copps, in terms of the concern and the interest in national magazines— And the kind of growth that has come in the last 10, 15 and 20 years should be a sense of pride for Canadians, generally speaking. I think Canadians are proud that they find Canadian magazines on their shelves.

It wasn't always the case. And to this day, most of the magazines sold at the stands are foreign magazines, and 99% of them are American magazines. When you put together both magazine sales at the stand and subscriptions, there is still a majority, I believe, of foreign magazines sold. This is not a question of not allowing American or foreign magazines into Canada.

In that article, the author also talked about how you're making it an offence to do certain things. Well— the president of Sherritt International can't even cross our so-called friendly border or he would be arrested. Helms-Burton is something that wants to nullify— and the Iran-Libya Sanctions Act and so on and so forth.

This bill does not exclude the possibilities for foreign magazines in Canada. In fact, they dominate the market, and we are silent internationally. The magazine policy is aimed at sustaining, from the heritage department's perspective, a Canadian magazine industry for Canadians, by Canadians. That is the genesis of it.

When we talk culture, that's a very broad issue. Magazines make up one part of culture. But don't take the side that somehow we are wrong and we should feel guilty and we should hit ourselves or cane ourselves. There has been a cultural divide between the Canadian and Americans, which has transcended myself at the trade department and ourselves in Parliament. It's been around for a long time, and we take a view of culture that is different from the one that the Americans are interpreting.

• 1700

Now, I also said, and I also happen to believe, Inky, that if there were to be amendments that can speak to this gulf, as you said, between the publishers of the magazines and the advertisers, which would perhaps reflect some of the concerns of people in the United States, if we could find those amendments without losing the mission statement the bill was intended for, we are prepared to hear that. I said it quite clearly, and Madam Copps said last week that she would invite those kinds of amendments. She's told me that she has met with the American ambassador a number of times, as late as yesterday morning.

But because they say a constructive amendment is the yanking of the bill, we can't, Inky, simply say, “Aye, aye, skipper.” That might be your policy, but it sure as hell ain't going to be ours. And in the end, we would expect the Americans to abide by the rules of the game, and, if they have concerns about that, we would expect them to take a look at that area or take advantage of the World Trade Organization's structures. I don't prepare for things that haven't happened. Should they happen, we will take stock of the situation at that time.

But I don't think we should be mixing freely, as I think you have in your comments.

Mr. Inky Mark: Well, I'm as much of a nationalist as anyone, Mr. Chairman, and I know that Canadians tend to buy Canadian. That's not the issue. The issue here is as I said: are you willing to pay the price? I'm trying to make a reasonable judgment on this whole issue—and I've said this to my heritage committee—and it's not easy, because I know that we are so dependent on our neighbours. Are we willing to pay the price? And I want to know what that price is that we're going to pay—if there is such a thing.

Mr. Sergio Marchi: But our government is willing to do the right thing for this magazine industry. I'm also willing to look the Americans in the eye and say, “We have the best relationship, but that doesn't mean that you take advantage of it.”

When we had the blockades with respect to the trucks a few months ago, we did take action. And people said that if we took action through NAFTA and the WTO, we'd be made to pay. But you can't start from a position of weakness. You can't negotiate while you're blinking, and you can't negotiate by saying, “I hope you don't do it, because if you do it, I might not do it.” You say, “These are the reasons why we did what we did.” We lost at the WTO; we changed the structures. This bill is very different. We do it for national purposes and national aspirations and we are within our rights to do that.

We can engage with the Americans as well as with other companies, but we can't be seen to be doing things just because other countries see the world in a different way. We are the Americans' best customer too. This is a two-way street, this $1 billion a year. So I say to the Americans, “Look, we have 80% of our eggs in your basket, but we are your best customer too.” And you don't go treating your best customer as if you're kicking sand in his face. It's not Japan, not Europe, but Canada that is their best customer, their best friend and their best ally. Therefore, respect should be both ways, and if you have respect one way, my friend, you're going to blinking with the Americans until you're out of office.

Mr. Inky Mark: I don't disagree, Mr. Minister. I think what you said is correct.

The Chairman: Time on that.

But Mr. Minister, just so everybody on the committee understands the process, surely it's clear that after the bill goes through, if the Americans want to complain they'll have to go either to the WTO or to a NAFTA panel. And it's after one or the other of those panels have ruled that you'll be able to assess what we have to do, but you can't start, as you say, running for cover now. We're talking a year or so down the pike before any reaction, I presume, in terms of a panel route.

Mr. Sergio Marchi: Yes.

The Chairman: The Americans are going to play by the rules too, because if they retaliate against us before waiting for that, we'll have a challenge against them. It's impossible.

Mr. Sergio Marchi: No. Our Prime Minister said it best.

A voice: He always does.

Mr. Sergio Marchi: Friendship is friendship. Business is business. And to be good friends also means having the ability to look the other person in the eye and to agree either to disagree or to talk and engage constructively. And 95% or our trade with the Americans is in that camp. It moves surprisingly well.

For the biggest relationship, you would think we would have a lot more problems, but we don't. They are the usual ones. I'm not trying to underestimate or devalue the currency of those issues, but they're in the minority.

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When it comes to fish, lumber, agriculture, and culture, the lesson for both Canada and the United States is this: how do we engage constructively? Why are we sending our officials today and yesterday to Washington? Why were they in Ottawa two weeks before? Because that is the way you engage, we think, rather than blocking trucks.

That was also my attitude on culture in terms of magazines. That's why I don't think it's bad judgment to say that if there is a way for constructive discussions that will lead to amelioration of the bill vis-à-vis the American magazine industry without affecting our policy of growth for our Canadian industry, why shouldn't we talk to them?

If that was the case, why did the Canadian publishers have a meeting with the American ambassador a few days ago? It's not wrong for them to meet with the American ambassador to work things out. Why should it be wrong for the trade minister to be seen quoting in one article the ability to talk? But not from a position of weakness, not from a position of waving the white flag, from a position that we are the best partners that each other has— Is there a way to work it out? If there isn't, we take our respective roads. The beauty of NAFTA and the WTO is that there is an adjudication based on independence, not on might, based on who is right, not on who is bigger, and based on who marshalls the arguments. We will live by that kind of rule.

Mr. Inky Mark: Thank you, Mr. Minister.

The Chairman: Thank you very much, Minister. We did really go well over our time. Maybe we'll have to come to a conclusion now, because we have to move into our other study, which we have to try to complete this afternoon.

Mr. Minister, thank you very much.

[Translation]

Mr. Benoît Sauvageau: May I ask him a few questions?

The Chairman: Pardon me?

Mr. Benoît Sauvageau: The Liberals were entitled to two questions, and I have only asked a single one.

[English]

The Chairman: We said until 5 o'clock. It's 5.10 and we have to get the nuclear report done.

[Translation]

Mr. Benoît Sauvageau: But he said he would stay a few minutes longer.

[English]

The Chairman: He's here. He has stayed.

Well, if Mr. Reed is next— But then I'm going to have to shut it off after Mr. Reed. I'm not going on to another round after that.

Mr. Julian Reed (Halton, Lib.): I'll forfeit my time, Mr. Chairman, and in the interests of—

The Chairman: Okay. Since it's the Liberals' turn, we'll go to Mr. Cannis.

Mr. John Cannis (Scarborough Centre, Lib.): Mr. Chairman, my question is a very quick one.

The Chairman: Okay, Mr. Cannis.

Mr. John Cannis: Thank you.

Minister, you talked about Team Canada Inc. and the Team Canada concept, the one-stop shopping. I want to get your views on what you think when provincial or municipal groups go out on these trade missions. I think what sells best—and I'll quote you on this—is that we sell ourselves as a group, as a nation. When these groups go out individually and sell themselves, is that as effective? Or is it as effective as what we have embarked on with the Prime Minister's first initiative on Team Canada trade? What's your view on that? Should they not be getting the blessings? We also have representatives abroad from various provinces who are there marketing their province's goods and services.

Mr. Benoît Sauvageau: So what's your view of that?

Mr. John Cannis: I'm asking the question.

A voice: What's your point of view?

Mr. John Cannis: I'm asking the question.

What do you think of that, Minister?

I'll close with this question. You said we need more trade commissioners abroad. Is it a fact that we don't have enough qualified people? I think one reason we've had success is that we've had representatives abroad who are qualified people. Do you see us increasing these numbers abroad, whether it be in Europe—as you've said in the past, we must not overlook Europe—in order to improve our trade? And how do we overcome that?

Mr. Sergio Marchi: John, on your question of provincial and municipal trade missions, I don't think there's anything inherently wrong with the increase in uptake of trade missions beyond the federal realm. For instance, in our province, they have their trade minister, Mr. Palladini, and he obviously does trade promotion. You have municipalities all over the country that are twinned with cities elsewhere and are reaping the benefits of the synergies, municipality-to-municipality, in terms of trade and commerce.

When the Prime Minister went to Italy, among the best meetings we had were with the mayors, I found, because, by and large, the political and economic revolution in Italy these days is happening at the municipal level.

So I don't think that is wrong, because they're pushing an aspect of Canada. I think the challenge for us today, which is epitomized by the Team Canada Inc. approach, is to have an overall management on behalf of a coherent team-wide strategy.

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For instance, I think the federal and provincial governments ought to tell each other in advance where their missions are going well so that we can build on each other's missions. When they go, they call upon the ambassadors and the trade commissioners in the field, which are all federal anyway. I think the real emphasis should be on management, coherence, and a strategy whereby we can piggyback on each other.

For instance, after a Team Canada visit to Latin America, Al Palladini went into two of the four countries we visited. That's smart, because there are boulders to push over the hill beyond the Team Canada visit. If we can work smarter that way, we will work better, and I think Team Canada's concept is that we work best when we work together.

On the issue of trade commissioners abroad, we have a very good trade commissioners corps. When we compare ourselves to others, we rank high. And I'm not saying this because I'm the trade minister—I mean, I'll come and go—but our trade commissioners corps does have a tradition of good service. The question is, I feel, that we don't have enough of them in the field who are prepared to meet an increasing number of firms from Canada that are going international. We'd like to go from a 50:50 split in Canada and in the world to a 30:70 split, with 70% of the trade commissioners out in the world and 30% of them at home, for export, ready.

It also means we will have to work better with our provinces so we can work together on making companies export ready, because you don't want to encourage a company that doesn't have the market intelligence or doesn't have the contacts in a particular part of the world. In the end, that would result in turning them off trade rather than turning them on. Sending more commissioners into the field abroad will mean we will have to pick up the slack, in part by a federal-provincial co-operation that is even better than the one we have now.

The Chairman: Thank you.

[Translation]

We have three minutes, Mr. Sauvageau, and I shall interrupt the Minister after exactly three minutes.

Mr. Benoît Sauvageau: Perfect. You must have been very good in filibusters when you were in the opposition, Mr. Minister. I shall try to simplify my question. One of the recommendations contained in the Senate report issued yesterday, proposes that the Canadian government adopt a more rigorous code of ethics than the current voluntary code. Do you agree, yes or no, with this recommendation?

[English]

Mr. Sergio Marchi: Firstly, I don't know what you're talking about with respect to filibusters. I'm trying to answer the questions that are posed to me. I don't come here as often as I might want to. I've extended my stay. As well, you've bunched up all your questions at the front rather than one-on-one. So I think if you're prepared to throw the filibuster, you're prepared to swallow it as well.

Secondly, I don't think the issue of code of conduct or of human rights is a question of yes or no. I don't think it's the simplicity of black and white. It's a complex issue, this world of ours. Trade policy and foreign policy and developmental aid policy are intertwined, so who is the trade minister to say yes and no when it involves other cabinet colleagues and, ultimately, the Prime Minister, who is the captain of Team Canada and of the foreign policy?

I've mentioned to you that I'm already working, as is my foreign minister, in terms of—

Mr. Benoît Sauvageau: Studying—

Mr. Sergio Marchi: —developing and helping business develop that voluntary code of conduct, and I think you will find a receptiveness in the Canadian business community as well. Perhaps the next challenge is to put the business community elements as well as the NGO community together so we can begin to talk about that economic agenda as well the social agenda.

[Translation]

Mr. Benoît Sauvageau: Would you agree to have the committee review this matter? Since the answer cannot be simply "yes" or "no" and it is more complicated, should there be a committee review?

[English]

Mr. Sergio Marchi: I have enough trouble telling my deputy minister what to do without telling the committee what to do. I am not the person who should be giving the committee orders.

[Translation]

Mr. Benoît Sauvageau: —

[Editor's Note: Inaudible]

[English]

The Chairman: We can bring it up at the steering committee about the possibility of a study.

Thanks, Minister. Since you did pick up on the SMEs and exports, if I can once again bring up the work of the committee, just remember that we did do a report on this subject, and I think there were some very useful recommendations in there. I think they tie in with your department's thinking. I think the members of the committee were very interested in that and I notice that in regard to some of the themes you pointed out, particularly finance and taxes, those issues are all reviewed very thoroughly in that report.

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We certainly are watching how that develops, because all the members of the committee who participated in that are very interested in it. We agree with you that this is an area where we get the biggest bang for our buck—because that's where it is.

Thank you very much for taking the time to come to see us.

Mr. Fried is going to be here tomorrow. Mr. Sauvageau asked a few questions. And you're right: he did try to catch you in ten minutes by then throwing forty minutes' worth of questions at you. There were a couple of questions on EFTA, on the negotiations and the consultations. If the answers to those could be brought tomorrow it would be helpful. We'd appreciate that.

Members, I'm not even going to adjourn. We're going to move into the next meeting, because if I adjourn, you'll all go away for two minutes. We are now moving in camera, so I'm going to ask everybody not involved in the committee to leave. I guess we do have to suspend for five minutes.

[Editor's Note: Proceedings continue in camera]