AGRI Committee Meeting

STANDING COMMITTEE ON AGRICULTURE AND AGRI-FOOD

COMITÉ PERMANENT DE L'AGRICULTURE ET DE L'AGROALIMENTAIRE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, February 24, 1998

• 0908

[English]

The Chairman (Mr. Joe McGuire (Egmont, Lib.)): Before we begin the meeting this morning, I have an invitation from officials of the World Trade Organization, who are in town on March 24. They want to meet with our standing committee and the Standing Committee on Foreign Affairs and International Trade.

The Standing Committee on Foreign Affairs and International Trade has agreed to meet with them. It's Tuesday, March 24, 1998, from 9 a.m. to 10 a.m.. That would effectively take the place of a regular meeting, if you agree to do that.

Is there agreement that we should meet the officials from the World Trade Organization?

Mr. John Harvard (Charleswood—Assiniboine, Lib.): Is it a joint meeting?

The Chairman: It's a joint meeting.

Mr. Chrétien.

[Translation]

Mr. Jean-Guy Chrétien (Frontenac—Mégantic, BQ): I am in full agreement that we change the schedule we had all agreed to. However, Mr. Chairman, is the 24th not the day we had planned on meeting with officials from the Canadian Food Inspection Agency for the purpose of taking an in-depth look at the scrapie problem with sheep. If that is the case, my preference would be that we move that meeting ahead rather than back.

[English]

The Chairman: No. For Tuesday, March 24 or Tuesday, March 31 we have tentatively scheduled officials from the Canadian feed industry and medicated feed.

It is not on lamb, but we have scheduled lamb for March 19.

So is it agreed that we meet with the World Trade Organization?

Some hon. members: Agreed.

• 0910

The Chairman: Okay.

[Translation]

Mr. Denis Coderre (Bourassa, Lib.): Given the concerns regarding scrapie in sheep and so as to avoid creating a psychosis in this regard, I would ask that our discussions regarding scrapie be held in camera.

It is my hope that you will all agree. Indeed, the industry has shared with me its concerns regarding the way in which we will be dealing with this issue. Furthermore, we will have to be very careful so as to avoid creating any psychosis. If my colleague Mr. Chrétien would speak with the Union des producteurs agricoles and the industry, he would know exactly what I mean.

The Chairman: Mr. Chrétien.

Mr. Jean-Guy Chrétien: I have been sitting on the Agriculture Committee for three years and I have been working for more than four years on the scrapie issue. Indeed, people in the Department of Agriculture and in the Inspection Agency have been saying that we should not talk about it so as to not create public panic. And now the problem is exploding in our faces. It is making the headlines and everyone is talking about it except us. I therefore am in complete disagreement with you. As a matter of fact, we have nothing to hide.

[English]

The Chairman: Mr. Harvard.

Mr. John Harvard: Thank you, Mr. Chairman. I understand where my colleague is coming from, but I think this is the kind of subject that should be dealt with at the steering committee.

The steering committee is designed to select the issues or subjects that we want to deal with at full committee. I would suggest that if we have any questions as to format and form, we just deal with it at the steering committee and leave it at that.

The Chairman: Well, committee members, we do have witnesses here this morning. I think if we're going to continue the conversation on future business, we should do it at a later time, at our next steering committee. We'll get it straightened out at that time.

We do have witnesses here. I'd like to go to them and proceed with this morning. The next steering committee is our first Tuesday back. We'll take that up and any other topic we'd like to discuss for future business. Okay?

This morning I'd like to welcome witnesses from the Department of Agriculture and Agri-Food, pursuant to Standing Order 108(2), consideration of the multilateral agreement on investment and its impact on agriculture.

So this morning we have again Mr. Mike Gifford and Paul Martin, two gentlemen we're getting to know very well. From the Department of Foreign Affairs and International Trade we have Mr. John Gero, who is replacing Bill Dymond on your schedule. He's director general of trade policy.

So welcome, gentlemen. We'll take your statements and then we'll go to questions. Mr. Gero.

Mr. John Gero (Director General, Trade Policy Bureau, Department of Foreign Affairs and International Trade): Thank you, Mr. Chairman. First, let me apologize on behalf of Mr. Dymond, who couldn't be here.

As you said, I'm director general of the trade policy bureau dealing with investment issues such as the MAI.

I thought as an introduction this morning I'd give you a broad outline of the purposes and objectives of the MAI and talk about the current state of play so that you're up to date on what is happening. If you would permit me, I would then touch on a number of agricultural issues.

The MAI negotiations started almost three years ago as a means of trying to rationalize a whole series of bilateral investment protection agreements. Currently, there are something like 1,350 different bilateral investment protection agreements globally. Canada is a signatory to about 25 of those and is negotiating on about another 25 others. But there was a thought given that it may be better to rationalize them and have one multilateral agreement. That's why these negotiations are taking place in the OECD among 29 countries.

In essence, the main Canadian objective throughout these negotiations has been to replicate what we have in the NAFTA, both in substance and in the context of the exceptions that are included in the NAFTA disciplines.

• 0915

As you know, NAFTA has a state-of-the-art investment chapter, and our view was that this could be extended to the other members of the OECD. Our mandate from the government was to replicate it, but not to go beyond the terms and conditions of the NAFTA.

Furthermore, with regard to our two NAFTA trading partners, that is, Mexico and the United States, it's important to bear in mind that from our perspective the NAFTA would remain as the agreement dealing with investment issues between ourselves and the United States and between ourselves and Mexico. On our part there is absolutely no view of reopening the NAFTA in this context.

There have been a number of wide-ranging series of consultations taking place throughout the negotiations. As you are aware, the Standing Committee on Foreign Affairs and International Trade held hearings last fall and issued a report in December. We've had continuing consultations with provincial officials. You may have seen that last week Minister Marchi had a federal-provincial ministers meeting in which the MAI was also discussed.

There have been a whole series of discussions with the private sector and non-governmental organizations, including the Canadian Federation of Agriculture, to discuss the issues that are contained in the draft agreement on investment.

Clearly, given the width and breadth of these kinds of discussions, there has been a continuing dialogue with 19 federal departments and agencies, obviously including Ag-Canada, in this regard.

Let me briefly touch on where we are now. You will have seen that last week there was a meeting in Paris of the negotiating group of the MAI, and a number of developments happened in that regard. So let me touch on where things stand in essence.

You will have seen that just prior to that meeting Minister Marchi issued a statement in which he outlined the Canadian position. He also noted that, of course, from our perspective, it would be very useful to have a multilateral agreement on investment, but clearly not at any price. He outlined the bottom lines that are important for the Canadian government. He emphasized that from our perspective what is important is the right deal and not the question of timing. To the extent that this could be done by April, that's well and good, but only if it meets the requirements of the Canadian government.

What became evident in Paris last week was that a number of other delegations were in a similar position. I don't know if you had a chance to see statements issued by French ministers and the French prime minister that were similar to the kinds of comments Mr. Marchi made here in Ottawa a week and a half ago.

The United States in particular has taken the view that they do not believe this agreement will be completed by this April.

The European Union is certainly of the view that while they would like to see this settled by April and would like to stay with the April deadline, if possible, they clearly have a number of negotiating issues that are very important to them, including a fairly significant carve-out for their regional economic integration exercise in Europe.

Along with us, of course, they are seeking some assurances from the United States that one would try to put certain disciplines on their unilateral use of extraterritorial measures, such as the Helms-Burton Act.

In essence what was agreed in Paris is that we will continue the negotiations, but I think it has become clear to everybody that the negotiations are not going to finish this April. There will not be a signable text. Indeed I suspect there won't even be any agreements in principle at that time.

It is not yet clear how ministers will wish to handle this issue at their ministerial meeting in April. As you know, there's an annual meeting at the ministerial level at the OECD, and that meeting will take place in April. They will review the situation in the MAI and where the negotiations stand and will make some decisions at that point. I think it's too early to tell at this point what those decisions will be.

• 0920

That in essence is the situation at the moment in the context of the negotiating dynamic in Paris. There will be a further meeting in March and another meeting before the ministerial in April, but as I said, I'd be very surprised if there would be concrete results by the April ministerial.

Let me turn to agriculture for a couple of minutes before we take questions. From my perspective, I want to make sure you understand and that I can reassure you that from the Government of Canada's perspective, our objective is not to exceed any of our current international obligations in the field of agriculture. I believe the Canadian Federation of Agriculture has been given those explicit assurances. In his speech on February 13 the minister said Canada will not accept an agreement that adversely affects Canada's supply management regime.

There have been a number of discussions on the effect of the MAI on marketing boards, on land use issues, and on monopolies such as the Canadian Wheat Board. What I can tell you is that certainly our instructions as negotiators are to replicate what we have in the NAFTA, including all the exceptions in any possible future MAI. Therefore, as I said, we would not exceed our current international obligations in the field of agriculture.

I'll stop there, and both my colleagues from Agriculture and myself would be happy to answer any questions you may have in that regard. Thank you, Mr. Chairman.

The Chairman: Do you have anything to add, Mr. Gifford?

Mr. Mike Gifford (Acting Assistant Deputy Minister, Market and Industry Services Branch, Department of Agriculture and Agri-Food): I think Mr. Gero has covered it, Mr. Chairman. I'd simply note that Mr. Dymond and his colleagues from the negotiating team have twice briefed the agricultural SAGIT and have met on a number of occasions with the trade committee of the CFA during the course of these negotiations.

The Chairman: If we're not going beyond what we have already agreed to in NAFTA, why is everybody getting so upset about what you're doing at the negotiating table? Ms. Barlow was in Charlottetown last night on her cross-Canada tour ringing alarm bells. What are we going to be doing that warrants this?

Mr. John Gero: There are two concerns that have been expressed. One is by those who are of the view that globalization is bad and therefore we should do everything possible to try to hold back the tide of globalization. I'm not sure what they would have as solutions in that regard, but in essence there are those who are opposed to the MAI in principle because it's an international agreement. Therefore, they're worried about Canadian sovereignty in that context.

The second is that people have looked at various early negotiating texts and are worried about various paragraphs that may be contained therein and the implications of those paragraphs. These are perfectly legitimate concerns in that regard, and that's why we've been trying to hold consultations with as many interested parties as possible.

There are two reasons. One is to make them aware that of course negotiating texts are just that. What usually happens in these kinds of negotiations is that everybody puts forward texts that favour their positions. Therefore if you look at initial draft texts, which you may see as three or four different options of texts, some of them clearly would have detrimental effects from a Canadian perspective if they were ever accepted or if we ever agreed to them. I want to underline that they are just that: negotiating texts.

I think what we've been trying to do in meetings we've had with the private sector and the minister, in the context of his testimony in front of the Standing Committee on Foreign Affairs and International Trade, is to try to reassure people of the Canadian bottom lines, the things that are very important to us, and the substantive issues that from a Canadian perspective would not be acceptable to us if they were in any kind of final text of a multilateral agreement on investment. Hopefully we're managing to do that in a number of cases. I would say those are the two reasons that concerns have been expressed with regard to the MAI.

• 0925

The Chairman: I guess that raises the question of why these things are in the text if you didn't have the instructions to go beyond NAFTA.

Mr. John Gero: Because the text is a compilation of a number of different countries' positions. In any negotiation, initial consolidated texts attempt to provide every country's position so that they reflect the various positions that may be available in the context of the negotiations.

There are a number of texts in the draft consolidated texts that are available now on the Internet, and in fact there was a new one issued a couple of weeks ago. Unfortunately, the OECD has only produced an English version of that so far. Hopefully within the next week or so there will be a French version as well. They merely reflect different negotiating positions. Clearly some of them are unacceptable, and we've noted that in the text. There are various footnotes reflecting the various positions.

The Chairman: Mr. Benoit.

Mr. Leon Benoit (Lakeland, Ref.): Thank you, Mr. Chairman. Good morning, gentlemen.

I have a comment on why there may have been such a negative reaction to this. I think part of the reason is the government really hasn't done a very good job of informing Canadians that it's going on. It's been going on for years. Just having a press release every now and again might help, even though it might not be read. At least you could show that you've been telling people what's going on. Doing that over the years certainly might have headed some of this off.

The Reform had a supply day motion on this. I think that's what the member opposite was probably talking about yesterday. The idea is to bring the issue to the attention of the public.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): What's the position today, Leon?

Mr. Leon Benoit: I would like to ask you to give your analysis of the potential benefit to agriculture if this agreement is signed. Would it be somewhat close to what the present positions are?

Mr. John Gero: I think there are two, and they're not necessarily unique to agriculture in that regard. Clearly Canada, as an open economy, has benefits from very substantial foreign investment flows into the country as well as foreign investment flows out of the country.

What this agreement would do is twofold. One, it would create a beneficial investment climate in Canada for sectors like agriculture to attract foreign investment and create jobs and growth and increase those in Canada. Secondly, because you have a multilateral agreement, which provides open investment climates and investment protection in other countries, it ensures that Canadian investors investing in agricultural sectors in those countries and in a number of other countries in OECD member states would be assured that their investments are fully protected in that regard.

Mr. Leon Benoit: I guess I'm asking you whether there has been any analysis done on how it might net out. Could it be beneficial to agriculture as compared to other industries, both in Canada and around the world? Do you see it really having any impact on investment in agriculture, in Canada, and in other places in the world?

Mr. John Gero: From our perspective, it would be beneficial to the agricultural sector both in Canada and in other countries to the extent that it increases investment flows in both directions, both in and out of the country. That creates increased economic activity and increased jobs and growth in Canada.

Mr. Leon Benoit: So you have no idea of how it might impact Canada relative to other countries.

Mr. John Gero: We have not done a comparative analysis as such, no.

Mr. Leon Benoit: Are there any negatives to Canadian agriculture that you can see, other than that it might encourage investment? There are some pretty attractive investments in countries around the world in agriculture, especially countries that were formerly a part of the Soviet bloc, which have great agriculture potential that isn't developed. Do you see any negatives at all for Canada as a result of this deal being signed if it's signed somewhere close to the positions that are taken now?

• 0930

Mr. John Gero: I think if we obtain our negotiating mandate and make sure that to the extent we need certain exclusions we obtain them—and that certainly is the view of the minister—it would be very beneficial to Canada. I wouldn't see any downside to this agreement. It would be only beneficial.

Mr. Leon Benoit: Where would the minister then see the foreign investment in Canadian agriculture coming from?

Mr. John Gero: My guess is from any of the member countries of the OECD.

Mr. Leon Benoit: The position taken by the department and the minister has been let's just free up and give some security to investment around the world in agriculture and see what happens. There really hasn't been any kind of an evaluation of the—

Mr. John Gero: I think from an investment promotion perspective we have a very active investment promotion program, in the context of Team Canada visits abroad. As you've seen in the last couple of years, a number of businessmen, including a large number of agricultural sector businessmen, have travelled on Team Canada visits, in the context of foreign investment opportunities abroad.

In addition, there's a very active investment promotion program abroad to attract foreign investment to Canada of a very detailed nature. Virtually every one of our embassies has investment promotion teams attracting foreign investment into a number of sectors, including agriculture, in Canada. There is a detailed look at company-specific and sector-specific mechanisms to ensure the inflow of foreign investment into the Canadian agriculture sector and to provide opportunities for Canadian foreign investment in the agricultural sector abroad.

The Chairman: Mr. Gifford.

Mr. Mike Gifford: Mr. Chairman, I will simply note that historically Canadian agriculture, like the rest of the Canadian economy, has attracted most of its foreign investment from the United States.

There's a substantial amount of U.S. investment in the Canadian agrifood system. Over the years there have also been substantial investments from Europe, particularly the U.K., France, and more recently Italy—for example, Parmalat in the dairy sector.

In more recent years we've also been receiving new investment from Asia, initially from Japan but more recently from Taiwan. Certainly these investments flow into Canadian agriculture. We've always had a world-class primary agriculture, but in some of our processing sectors for many, many years we've had basically a branch plant economy, with very small plants trying to serve a domestic market. What we're getting with this new foreign investment from offshore is the establishment of world-scale plants to make our processing sector world class, like our primary producing sector.

The Chairman: Mr. Chrétien.

[Translation]

Mr. Jean-Guy Chrétien: Before asking my question, I would like to ensure that I have followed and well understood what you stated in your opening remarks. You said that 1,350 bilateral agreements have been signed up until now and that Canada has ratified agreements with 25 countries. There are however 29 countries. Could you tell me which are the four countries that have not signed an agreement with Canada?

[English]

Mr. John Gero: No, there are two different classes.

We have tended to sign bilateral foreign investment protection agreements largely with developing countries or with countries in a period of transition, such as the old Soviet Union and the new states that have been created from it.

The OECD countries, which are the 29 around the negotiating table, have tended not to negotiate bilateral investment protection agreements among themselves.

We now have NAFTA investment protection with the United States and Mexico because of the nature of the agreement. We also have similar provisions in our bilateral free trade agreement with Chile, but there are very few foreign investment protection agreements among the members of the OECD. That was one of the reasons the multilateral agreement on investment was thought to be of great benefit. At the moment, among the 1,350 that exist among all those countries bilaterally, none of them are with themselves. They're with other countries outside the 29.

• 0935

[Translation]

Mr. Jean-Guy Chrétien: As far as agriculture is concerned, since that is the subject we are dealing with here this morning, you are aware that Canada has decided to protect three major sectors in Canadian agriculture, namely eggs, poultry and milk. Could you tell the members of the Agriculture Committee to what extent, at the present stage in the negotiation process, these decisions are being respected?

I am thinking, for example, of Unilever, the large multinational that is playing a major role at the present time. In Quebec, there are various cases before the courts, such as the Unilever case regarding the colour of margarine. These multinationals that control everything could eventually, through these framework agreements, impose their views on the entire world.

I am also thinking of Monsanto with its BST. We have succeeded in preventing its entry into Canada, for the time being and for the next few months, but it is my belief that we will not be able to resist this multinational for too long before it succeeds in convincing certain members of the party in power that the acceptance of BST would be a useful and important move for the country.

That being said, could you tell us if we should allow ourselves to sleep with both ears shut and not worry about eggs, poultry and milk?

[English]

Mr. John Gero: Well, I certainly wouldn't want to affect your sleep. I can't give you any more of a guarantee than what the minister gave to the Standing Committee on Foreign Affairs and International Trade. He said then he would not accept and Canada would not accept any agreement in the MAI that would adversely affect Canada's supply management regime, which comprises those three sectors you just talked about.

Clearly, from his perspective and the government's perspective, if this is a bottom line issue for the Government of Canada and if there is something in this agreement that would adversely affect those sectors, I take it from that statement that Canada would not become a party to such an agreement.

I don't know if you have anything to add to that.

Mr. Mike Gifford: Simply, Mr. Chairman, I'd like to make the point that I think it's a categorical assurance to the Canadian agrifood sector that we would not agree to wording in a new multilateral investment agreement that adversely affected the supply management sector or any other of Canada's orderly marketing systems, including the Canadian Wheat Board. That's the bottom line.

[Translation]

Mr. Jean-Guy Chrétien: My final question does not relate to agriculture.

The Francophone side of me gave a jump earlier on when you said the report has not yet been translated. I wish to speak out against this lack of respect towards one of the as yet official languages of the country. I do hope that you will correct this error of negligence by asking our highly qualified staff to do a little bit of overtime so as to translate these official documents.

[English]

Mr. John Gero: I couldn't agree with you more. Not only is it an official language in Canada, but also it is an official language of the OECD. We've brought this...not only ourselves, but also other colleagues for whom French is their working language. This is a very significant lack in the OECD development.

As I said, their excuse is that this literally came off the press just last week. They're working diligently on trying to get a French text out as well. We've pressed them very hard to make sure we have both documents available as quickly as possible in Canada, because we recognize the importance of that document being in both languages.

[Translation]

Mr. Jean-Guy Chrétien: You know, I hear this kind of excuse every day.

[English]

The Chairman: Mr. McCormick.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you very much, gentlemen, for being here.

A lot of people on the street and many Canadians have not studied this, and there is a perception or fear that multinational companies will have the same legal right as a Canadian individual and the country of Canada. I'm just wondering if you'd like to give me your opinion on that.

• 0940

Another very basic question concerns the fact that under NAFTA we would keep the same agreement with the United States and Mexico as we have, and everything in place. Why then do we need the MAI?

Third, with the United States pulling back, what effect do you think this will have on discussions past the deadline?

Thank you, Mr. Chair.

Mr. John Gero: I guess a number of issues.... There has been a lot of discussion on investor-state, particularly as a tool for dispute settlement. Should that exist at all?

As you may know, investor-state dispute settlement has been a feature not only of NAFTA, but of virtually all the 1,350 bilateral foreign investment protection agreements. It is clearly needed more in the context of those countries where the domestic legal system is not as strong as it is in Canada and in a number of other developed countries.

It provides an opportunity to lift the dispute from the domestic court system, which may not be adequate, to an international arbitration. But the idea is that it would keep the same level of dispute.

At the moment, for example, in Canada and a lot of the other developed countries, all corporations, be they foreign or domestic, have the ability to take the Government of Canada to court, under Canadian domestic law and into the domestic court system, should the Government of Canada seize some property and not compensate them. The concept of a corporation taking the government to court for unlawful taking—if I may use that as an expression—is nothing new in the context of our legal system. It is new in some other countries where we have investments and where the legal system isn't as developed.

Therefore, the concept of investor-state enshrined in an international agreement is merely to ensure that countries that don't have the same level of domestic legal systems as we have in Canada could be brought up to that through the international agreement. But as I said, from a Canadian perspective, any investor can take a Canadian government to court in the Canadian court system for unlawful taking and lack of compensation. All the investor-state through the MAI would do is to provide a parallel track that may or may not be used, as the case may be.

In the context of the U.S.A. and Mexico, yes, it's true that NAFTA provides the investment guarantees that we have with the United States and Mexico on a reciprocal basis.

Clearly there are a number of other countries in the OECD for which NAFTA doesn't provide the same level of agreement: Japan, the European Union and a number of other countries in Europe, and Korea, which is now a member. The view is that this would also be very beneficial. There is increasing Canadian investment to those countries and, similarly, an increasing flow of investment from those countries. As Mike said, though, the preponderance of investment flow continues to be with the United States, but there's an increasing level.

Second, it is not intended that when it's agreed on, MAI would be a static agreement. Certainly we've made the point very clearly that we would hope that a number of countries that are not members of the OECD would join the MAI. For that reason there are already five observer countries that are sitting around the table—Argentina, Brazil, Chile, Slovakia, and Hong Kong—and the hope is that they would become even initial signatories to the agreement.

In addition, there has been a wide-ranging outreach program to a number of other countries, trying to entice them to participate in the context of the MAI negotiations and possibly take up membership in it.

Third, the question you asked is, what effect will U.S.A. reticence have? The effect it clearly will have is that it will mean there will not be an agreement in April.

Clearly the United States is an important player in these negotiations, and the fact that they've indicated that they did not think it will be possible to reach agreement by April will mean that there will be certain delays in that regard. How long and in what context is difficult to predict at this point. That's obviously going to be one of the issues that ministers will consider at the OECD ministerial in April.

• 0945

Mr. Larry McCormick: I would expect and concede that a lot of things will hinge on what the United States brings forward over the next year and how aggressively that is done. Is there a chance of other companies or other countries agreeing and signing without the United States? Is there an alternative to the MAI or do we just have to keep working to get the best possible agreement?

Mr. John Gero: I guess there's always an alternative to the MAI. You have to recognize that, unlike for Canada, for a number of other countries the MAI is an important tool in their investment relationship with the United States. We already have an investment agreement with the United States, but no other country besides Mexico does. Therefore, from their perspective, an MAI without the United States would be significantly weakened in that regard.

Mr. Larry McCormick: Thank you.

The Chairman: Mr. Proctor.

Mr. Dick Proctor (Palliser, NDP): I have just a couple of general questions first of all. From your remarks, Mr. Gero, I think you continue to think that there will be an MAI agreement, if not in April then some time down the road.

Mr. John Gero: I guess my crystal ball is as good as anybody else's. I think what is clear is that there won't be an MAI in April. That's becoming more and more evident. As to whether there will be an MAI further down the road, that's very difficult to predict at this point in time.

Mr. Dick Proctor: While you still have your crystal ball.... There are only 29 countries that are members of the OECD. In the event that there is an MAI signed at some point, how do you see such an agreement impacting on the five observer countries and a number of other countries? Will that be some kind of a stick or carrot that will be held out to other countries wishing to enter into agreements with any of the 29 signatories?

Mr. John Gero: I think there are a number of ways it will happen. As you know, from our perspective the MAI has never been considered as the end result needed on investment. Canada has very much been a proponent that the MAI is merely a stepping stone to a more global agreement on investment in the context of the WTO.

We pushed very hard at the Singapore ministerial to start a work program in the WTO on investment, which was achieved. There's a working group looking at investment in the WTO. In terms of how it would evolve, whether there is an MAI or not, my view is that eventually there will be a WTO investment agreement in that regard. From our perspective that's very important, because from the perspective of Canadian investment abroad a large number of countries that are targets for Canadians as foreign investment opportunities are of course not members of the OECD but more widely, globally.

Mr. Dick Proctor: Thank you. My specific question on agriculture is, how do you perceive that an MAI agreement in Canada would affect provinces that have restrictions on foreign ownership of agricultural land?

Mr. John Gero: There are two responses to that. First of all, at the moment the Canadian position in Paris is that the MAI does not cover the provinces. At the moment this is a commitment at the federal level only.

We continue our consultations with the provinces. As I said, the minister had a meeting of ministers at a federal-provincial level last week. Should we all decide, ourselves and the provinces, that an eventual MAI would be beneficial to the provinces in that regard, they could be included. My presumption is that they would be included in the same way they're included in NAFTA, which is again with a full list of exceptions included in NAFTA, which in essence carve out from the disciplines the kind of provisions that are in provincial legislation as well as federal legislation in the context of land use and so forth.

My view is it would not affect the current provincial legislation in that regard at all because we would continue to maintain those as exceptions in the MAI, just as we've done in NAFTA.

• 0950

Mr. Dick Proctor: Thank you.

The Chairman: Mr. Borotsik.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman.

We talked about agriculture. It's nice to have you here. Just how important is agriculture at the table? We had the minister basically lay out what our parameters are, saying that the state trading enterprises, the supply management, the CWB, are not to be touched. That is a parameter that's been dealt with.

How important is agriculture at the table with respect to the other industrial sectors—auto, financial, technology? Are we halfway up the list on importance when we're sitting at a negotiating table with the MAI?

Mr. John Gero: My perception after doing trade negotiations for the last 20 years is that agriculture is never halfway up; it's right at the top.

Mr. Rick Borotsik: That's very encouraging.

Mr. John Gero: And it continues to be there. Even though one isn't discussing it in the context of what we do about the agricultural sector, because they're not sector-specific.... All of the negotiators—the Canadian, American, and European negotiators—look at each of these provisions, which are general in nature—they don't single out agriculture as such—and try to figure out how it affects their own agricultural provisions.

My discussions, both with my European and American colleagues, show that agriculture is certainly on the top of everybody's list of important issues.

Mr. Rick Borotsik: That's very encouraging and I'm pleased to hear you say that. Looking at the parameters that have been set for your negotiating team, do you not find that some handcuffs have been placed there? We know that other jurisdictions and other countries are questioning the supply management side right now, particularly the 301 that's going against dairy right now and the audit that's going to be called for the CWB.

Do you not find that you're handcuffed in those negotiations when the parameters have already been set for you by the minister or by the department?

Mr. John Gero: I don't think we're handcuffed at all. On the contrary, from our perspective it's relatively easy because we have a clear set of instructions. We know exactly where our bottom lines are and that's what we're negotiating to, so I don't think they are handcuffed at all. I think our instructions on agriculture are clear and I don't think affect our ability to negotiate.

Mr. Rick Borotsik: But you don't have a lot of room to move.

Mr. John Gero: In any negotiation, countries negotiate to their economic interests. You talk about room to move, but if room to move means we're going to get agreement but it will have an adverse effect on a Canadian economic sector, then why would we think of moving?

Mr. Rick Borotsik: There's always give and take in negotiations. When you give in negotiations, usually there's take in another area, and that's what I'm getting to. There are advantages that we have here in Canada with respect to other industries. Is there no give and take on that at the negotiating table with the other countries?

Mr. John Gero: There's a certain amount of give and take in any negotiation, but for any negotiator there are very clear lines below which they cannot go. That's been clearly enunciated by the minister in front of SCITFA. As the minister said, we don't want a deal at any cost; we want a good deal for Canada.

So our instructions are very clear, particularly on the agricultural front, from the minister's statements. Clearly, there is no give in that kind of position.

Mr. Rick Borotsik: So it's definitely etched in stone, and that's as far as you can go.

Mr. John Gero: I can't go any further than the minister's public statements in that context.

Mr. Rick Borotsik: I appreciate that.

Mr. Mike Gifford: Mr. Chairman, I have something to add.

U.S. concerns about market access for dairy and poultry into Canada, or their concern about Canadian dairy export pricing practices, won't be addressed in an international investment agreement; they'll be addressed in a WTO.

Mr. Rick Borotsik: That's true.

Mr. Mike Gifford: So that's not an issue.

In terms of the importance of agriculture, I'm sure nobody in this committee needs to be reminded about the fundamental importance of the Canadian food processing sector. It's the third largest manufacturing sector of the Canadian economy. It's highly dependent on investment flows. Therefore, from that perspective, agriculture is right up there with the other large industrial sectors of the economy.

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Mr. Rick Borotsik: That's very encouraging to hear. Thank you.

The Chairman: Mr. Harvard.

Mr. John Harvard: Thanks, Mr. Chairman.

I have only three or four questions. Maybe I can run them off and the gentlemen can answer them.

First of all, chances are if we are negotiating, say, 29 separate bilateral agreements, Maude Barlow wouldn't be as exercised as she is now.

Even if—and I realize the current negotiations are not with the same countries with which we have bilateral investment protection agreements now—the MAI were no better, say, on balance than what we have now in the 25 separate agreements, is it still better to have one omnibus agreement as opposed to 25? That's number one.

Second, if the MAI were to be consummated, would it be better for Canadian investors wanting to invest abroad or for foreign investors wanting to invest here?

Third, I think the Ethyl Corp. suit hangs over our heads. If Ethyl Corp. were to win, I think it would have a very chilling effect. Is it your estimation that there is nothing in the MAI that would inhibit our government from regulating in the area of agriculture in the way we do now? You know, we have regulations with respect to protecting the quality of meat, poultry, and so on. Do you see anything in there that would stop us from regulating the way we do now?

Finally, with this possible delay—and you're more or less saying there will be a delay—is there then a possibility that the MAI negotiations would be folded into the WTO? If that were the case—because then you'd have a lot more countries involved—would we then be talking about a possible agreement maybe three or four years away?

Those are my questions.

Mr. John Gero: Well, let me try to answer them one at a time.

On the first one, I think to the business community having one set of laws that applies to 29 countries is always a lot easier than having 29 different, separate agreements. They may all have generally the same language, but some may be a little different. Therefore, having the confusion of 1,350 bilateral investment protection agreements is never as good as having the one agreement that applies to all the countries in the world.

That's why a WTO agreement is much better than having individual, bilateral agreements on agriculture and so forth. In the bilateral give and take there's always a comma here or a change of word there, and then the business community asks which agreement applies in a certain context. It's a lot easier from a “doing business” perspective to have the one rule apply to everybody.

On the second question, is it better for abroad or here? I guess if you have one set of rules, you'd have equivalent treatment both for Canadians abroad and for people investing in Canada. That's what in essence one's trying to accomplish. Through an investment protection agreement you're trying to create a level playing field for everybody. So it's not a question of better or worse; it's to ensure that everybody understands the rules and everybody plays by the same rules.

A number of things have been said about Ethyl. What I can tell you in this regard is that the question of expropriation and wrongful taking has been out there for hundreds of years. This is not new to international law. Never has it been contemplated that expropriation provisions, which have existed forever, would have the effect of limiting the government's ability to regulate, be it in environment, in agriculture, in any other sector. In theory, if you take Ethyl's complaint to its logical conclusion, which is that any time the government does anything that adversely affects the bottom line of a private corporation, in theory all our income tax laws would be deemed to be an expropriation, because every time you raise the income tax by 1%, you have an adverse effect on a corporation's bottom line. I certainly don't think it's ever the intent of an expropriation provision to have it effect the regulatory powers of the government.

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That's very clear in the OECD. Everybody understands that, and certainly the intention is—and there have been a number of discussions because of the Ethyl case—to make it crystal clear that the expropriation provisions do not apply in any way in the context or limit the ability of governments to regulate in any sector in any way, shape or form.

Finally, what's the prognostication for the MAI? I think it's entirely possible that either a completed MAI or an incomplete MAI will eventually roll into WTO negotiations on investment. My guess is your time line of three to four years is likely optimistic, because we're not talking about even the concept of having a new WTO set of negotiations, in whatever form, for another year or two at the minimum. Then I suspect there will be a number of years of negotiations. So I think it would be pushed out even further than that.

Mr. Larry McCormick: On a point of order, I just want to confirm with the previous speaker that the government is within its rights to lower taxes again today in the budget.

The Chairman: You'll have to ask Paul Martin.

An hon. member: He's here.

An hon. member: Go ahead, ask him.

The Chairman: Mr. Hoeppner.

Mr. Jake Hoeppner (Portage—Lisgar, Ref.): Thank you, Mr. Chairman.

Just for the record, I think I should mention that in 1993, when we were talking about the free trade agreement, Maude Barlow and the Liberals were on the same side. So the picture does change once in a while. Maybe before we're finished with this MAI the Liberals will join the Reform, with their attitude toward it.

Mr. Gifford, you were talking about provincial and federal jurisdiction. Property rights fall under provincial jurisdiction, I think. How does that affect the investment area? How can these multinationals circumvent a federal agreement when the provinces control the property rights?

Mr. Mike Gifford: The NAFTA does apply to the provinces as well as to the federal states, but the case of land ownership is basically a written exception in the provisions of NAFTA. So those provinces that have land ownership requirements may continue to have them.

Mr. Jake Hoeppner: I'm looking at value-added industries like pasta plants and flour mills coming into the area. I just look across the border from where I farm and there are 13 pasta plants in North Dakota, which is a very big issue over there. If we have more free trade and if the wheat board is made more accountable, we will get back those industries we've lost. I'd hate to see the multilateral investment agreement not address that specifically, because there could be problems.

Mr. Mike Gifford: Decisions to make an investment in a pasta plant in western Canada won't relate directly to the proposed investment agreement in the OECD. Today there are investments taking place. There are groups, including producer groups, looking at the possibility of establishing pasta plants in western Canada. The NAFTA provisions on investment, if they do anything, would encourage foreign investment rather than discourage it. So I really don't quite see the point.

Mr. Jake Hoeppner: In North Dakota a lot of the plants—maybe not all of them—are farmer-owned. They can invest with their grain, which we can't do in Canada. So why would the other countries come in and build these plants if there's that kind of advantage to the Americans in creating these plants, with farmers themselves financing them, more or less?

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Mr. Mike Gifford: I guess all I can do, Mr. Chairman, is venture the opinion that since the termination of the WGTA, there has probably been more investment in the food processing section in western Canada than there was in the previous fifty years.

Mr. Jake Hoeppner: I hope you're right, but I know we have other areas where the playing field isn't quite level. You see one of them when you look into the harmonization of meat inspection and chemical inspection. That is always a sore point between the Americans and us, and I don't know whether it's fully resolved yet. I can see that also creating some problems with investment in Canada if those harmonizations don't take place. On that basis, my question would be whether we can afford to not sign the MAI.

Mr. John Gero: I think the government's been pretty clear. We would like to have an MAI. It would be beneficial to Canada in that regard, but we have certain overriding considerations. To the extent that we manage to safeguard those overriding considerations, then obviously Canada would join a multilateral agreement on investment.

I think the minister has also made it clear that if our bottom lines are crossed on a whole series of issues—which he outlined in his speech on the 13th—then absolutely Canada could agree not to sign, because the question is whether or not it is going to adversely affect Canadian interests.

So, yes, you would sign if it's beneficial to Canada, and no, you wouldn't if it's not.

Mr. Jake Hoeppner: I'm thinking back to the GATT agreements, when the Liberal government—and the Conservatives to some extent—said it would not bargain away article 11 on supply management. Reformers said that couldn't be done, that we would have to go to tariffication. I guess we were right in that instance, even if we're wrong according to the Liberals a lot of the time.

But I think this is what you're fighting right now with this multilateral agreement on investment. You can't really afford not to bargain some things away, or else you will lose a lot more on the other side of the equation. Am I wrong?

Mr. John Gero: I think we're negotiating there for the interests of Canada. From our perspective, I think the minister has certainly outlined where he thinks there are benefits and where he thinks there may not be.

The Chairman: Thank you very much.

You mentioned the European Community objecting to Helms-Burton. Is Canada also pushing to have that law eliminated before we sign any investment agreement?

Mr. John Gero: Absolutely. We and the Europeans have been the strongest voices in trying to ensure that if you're going to have a multilateral agreement on investment, it needs to have provisions on secondary boycotts and conflicting requirements in jurisdictions, and it needs to put some limits on the ability of countries to take unilateral measures like Helms-Burton or the Iran-Libya Sanctions Act. In fact, I think the text currently in the draft consolidated text is a Canadian draft. So, very much so, it's a very important issue from our perspective in the investment agreement.

The Chairman: Thank you.

Mr. Steckle.

Mr. Paul Steckle (Huron—Bruce, Lib.): I'm going to outline my questions and then perhaps you may want to respond to them.

I would like a little more clarification in terms of what involvement the provinces are going to have. We talked about land ownership, the sovereignty of land. We think of the provinces of Prince Edward Island or Saskatchewan as particular provinces that have unique situations relative to the rest of Canada. I would like a little clarity there, because obviously we're signing an agreement that I know the provinces are interested in. But they are concerned, and it was my view that the provinces were somehow going to be party to it. They weren't going to sign, but they were going to be in agreement to the signature being put to this agreement. That is one of my questions.

Also, there is the fact that we find NAFTA will take precedence in terms of certain aspects. Likewise, I'm sure the European common market countries would also find that their agreements should equally take precedence over this agreement, as would probably Asia-Pacific if there are indeed agreements in that part of the world.

Another question would be the five-year, twenty-year type of thing, and not being able to opt out for five years. After five years, you are still required to remain in for fifteen. Why such a long term, given the fact that there are different terms applied to NAFTA and the WTO?

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Then perhaps, finally, tell us if you can, for the benefit of all of us here, in layman's language, why Canada should have a multilateral agreement on investment. We're constantly being asked, and all of us would like to have at least some simple statement that we can take back to our constituents, where we will share the same kind of time with our constituents as Maude Barlow and her interests do. So if you could, please, in layman's language, give us something we can take back to them.

Mr. John Gero: Let me try to take one at a time. With respect to the role of the provinces and the involvement of the provinces, as I said earlier, at this time the offer that's on the table from Canada does not include the provinces.

But we have very closely involved the provinces throughout this negotiation. We have our regular federal-provincial officials' meetings on the MAI, virtually quarterly. We report to them on each of the negotiating sessions and they have all the documents. They're fully consulted on the developments and have been throughout the negotiations. They're fully aware of all the changes and every comma and every dot over every “i” in that regard.

As I said, we've reserved judgment at this time on whether it is worthwhile to have the provinces in, and that's an open question. To the extent that the provinces will be covered by the MAI, then obviously, through close cooperation with the provinces, we will need to ensure that they have the same kinds of carve-outs the federal government has, in the context of their own provincial legislation. It's very important, as has been raised, in the context of land ownership, for example, which is largely a question of provincial jurisdiction.

Thirdly, there are a number of issues under discussion in these negotiations that are virtually directly within the competence of provinces, issues such as labour, and clearly, as the minister has outlined, even the Canadian federal position as to what would happen in an MAI in the context of provisions on labour is being negotiated in very close cooperation with the provinces because of their legal competency on those issues.

All I can tell you is that we've been working very closely with the provinces, as I said, at both official and ministerial levels. Clearly they have concerns, just as we have concerns on a number of issues. They're very similar in that context. And we will see, as things develop, whether they will be in, and if they're in, what precise exceptions and exclusions we would need to include in the text to ensure that none of their policies, practices, and laws are affected adversely.

Mr. Paul Steckle: If I might just jump in on the point of British Columbia declaring itself an MAI-free zone, how would that apply in that particular context? Would you comment on that in the context of the question?

Mr. John Gero: I guess it's feasible that the provinces wouldn't be in, in which case British Columbia wouldn't be covered by the agreement. For example, we are members of an agreement in the WTO on government procurement, which binds a whole series of federal entities to ensuring that national treatment is provided in the bidding process so there is no favouritism in the context of giving a Canadian bidder a preference over a foreign bidder.

But we've taken on obligations in WTO at the federal level only. The provincial entities are not covered in that agreement, so the provincial entities can continue to discriminate in that regard and they do so. Nobody has recourse under our WTO obligations on government procurement because we haven't taken on those obligations. So it is feasible for the Government of Canada to X out the provinces from an agreement. We've done so in the past and can continue to do so.

As Mike and I pointed out, in the NAFTA they're in; they're part of the obligations. But also, the provinces are not included in government procurement in NAFTA. It's possible to construct the agreement in such a way that provinces are not included in an investment agreement in that context.

Let me go on to your second question about how NAFTA will take precedence. NAFTA will take precedence in the context of our relationship with the U.S. and Mexico. It clearly doesn't take precedence with the 26 other countries of the OECD. The context of what will happen in the European Union is a more open question mark because the European Union—wait, let me go back one step.

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We have not attempted to carve out the NAFTA from the disciplines of the MAI. The Europeans, on the other hand, haven't merely said that between ourselves this is going to be the case and it will be the precedent. They've gone one further. Through what's called the regional economic integration clause, they've attempted to carve out the whole of the European Union from large chunks of this agreement in the context that they would continue to be allowed to discriminate among themselves without providing the same treatment to countries outside.

Clearly, in the context of 29 countries, if 15 of them are in essence lifted out of the agreement, there are some concerns about that. Therefore the concept of how this agreement will play in the context of the European Union is still very much under discussion. If you read some of the concerns of the United States about this agreement as to why they don't think it may be feasible to conclude it by April, one of the first items in any statement they make is that they're unclear about the level of exceptions the European Union may be constructing for themselves.

As for the five-year or twenty-year issue, the question arises in the context of investment. Opting out is only vis-à-vis existing investments; it wouldn't be in the context of new investments. If a company invested under a certain set of conditions and subsequently the government decided to change those conditions as a result of their pulling out of the MAI, for example, then shouldn't the existing conditions under which the company arrived in that country or made an investment apply?

I guess the view in the context of the MAI is that to the extent there are existing investments that are already in place, you have to provide a length of time in which in essence the investment can be amortized under those existing rules they entered into the investment with. That's the nature of the provision.

Why should Canada have an MAI? The answer is twofold. Most likely more than any other country in the world we have a very open economy. Not only in the trade context but in the investment context, we depend on the flow of goods and the flow of capital investments, both inward and outward. If you look at the latest investment figures, you will see they're virtually equal. There is as much investment coming into the country as going out of the country, so we're virtually in balance as to whether we're a capital importer or an exporter. To maintain that free flow is very important to our own economic well-being.

You have a small company in a small town that exists there and those jobs are created there because of that foreign investment coming into Canada, which would not necessarily have come in. If they were not secure enough in the investment climate of that region or of that country, they would go somewhere else. At the moment there's a capital scarcity and everybody is hunting for investment precisely to ensure the jobs and growth in those countries.

Why would you support foreign investment abroad? For exactly the same reasons. The minute a company goes abroad, chances are their ties back in their home country create jobs and growth in ancillary services and ancillary product providers in that context. Secondly, given globalization, the ability of that Canadian company to keep up with the competitive forces that are out there is aided very much by their ability to locate in another country and another market to ensure their own growth in a global environment. So that's in the context of the economics.

There's also a very important concept in another context. Canada is sort of a middle power. It doesn't have the ability of the United States to take a baseball bat and whack people over the head every time they don't do what would be of benefit to us.

From a Canadian perspective, for many decades we've valued that it's always beneficial to us to have the rule of law. It's better from a Canadian economic interest point of view to have very precise international rules in the trading environment and now the investment environment. Having everybody live by those rules is what gives us certainty and predictability, because we don't have the baseball bat. We're not particularly effective users because we don't have the economic clout to be able to do that.

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The Chairman: Mr. Gero, I'm afraid I'll have to stop you. We're way over time with these questions.

Mr. John Gero: My apologies.

The Chairman: We'll just ask one or two questions, because with the battery here we can go on forever.

Mr. Chrétien.

[Translation]

Mr. Jean-Guy Chrétien: I found the questions of my friend Paul Steckle very interesting and I also appreciated your answers which have clarified a number of issues.

However, I would like to return to provincial jurisdictions and remind you, first of all, that Canada signed in Kyoto agreements to reduce the level of greenhouse gases. In this regard I must point out that provinces have been consulted very little but you know very well that Canada will never be able to implement the commitments it signed in Kyoto without provincial support.

Let me give you just one example. Let us suppose a multinational company arrives in Quebec with all its dollars and wants to buy up a large number of farms. In Quebec we have an agricultural zoning legislation. They could say under the Multinational Agreement on Investment that the agricultural zoning law does not apply to them and that they can do whatever they want, like subdividing, building houses or even building a mountain on agricultural land for skiing. This may sound far-fetched, but you get my drift. Do we have a guarantee that provincial jurisdictions will be fully protected?

[English]

Mr. John Gero: Absolutely. There is nothing in the MAI that in any way, shape or form restricts the passage of domestic laws in whatever shape or manner you wish to have them, either at a provincial, municipal or federal level, be they in the context of zoning, health standards, vital sanitary regulations, etc. The only provision in the context of the MAI says that if you do that, you should do it in a non-discriminatory manner. This means you should do it and provide a national treatment. If you have agricultural zoning, then it applies not only to a Canadian investor, but also to a foreign investor.

Even within that, as we've said on a number of provisions, we've taken exclusions such as land use provisions when there is clearly discrimination in a number of provincial jurisdictions in which they say, no, this land is reserved for local use. So I can be categorical in saying there is nothing in the context of the MAI that would stop any jurisdiction from being able to have whatever laws it wishes to have vis-à-vis standards or land use or so forth.

The Chairman: Thank you very much.

Mrs. Ur.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): Thank you, Mr. Chairman.

I'd just like a point of clarification on your briefing this morning. Maybe I misunderstood when you said you had just briefed the agriculture people on the continued discussion. Are they not part of the discussion continually on MAI?

Mr. John Gero: Yes, we have regular sessions with the CFA. I think my notes indicate the last one was on January 27.

Mrs. Rose-Marie Ur: Well, CFA's fine, but what about the government department?

Mr. John Gero: Agriculture? They're involved on a day-to-day basis.

Mrs. Rose-Marie Ur: Right.

I was also glad to hear you say you won't accept an agreement that affects supply management. I certainly hope that is actually what we are doing here. What safeguards are you using, or how are you protecting supply management in this discussion?

Mr. John Gero: I think one would have to go through all the various provisions of the MAI, but when one looks at the questions of what the disciplines are that they are intending to have in the context of Canada, and to the extent that they would have or could be deemed to have an effect on the way we carry out our supply management system, we will want to make sure the text itself is of such an order that it no longer does that, so you change the text. Alternatively, if it looks like one isn't going to be able to change the text, if it looks like the text will stay the same, then we will have reservations for Canada saying that vis-à-vis that paragraph, it doesn't apply to our supply management provisions.

So either way, those are the two methodologies that one uses to ensure that, in essence, our obligations internationally as part of the MAI will not have an effect on supply management and the way we do things in Canada.

Mrs. Rose-Marie Ur: I hope the government has learned a lesson through the WTO in terms of what's happening with butter, oil, and sugar. We did not have the foresight, I guess, to see that this perhaps could be brought up. We did not have a clause in there that might be more applicable to an easier review than what we're doing at the present time.

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This kind of provision may be something that could be addressed through MAI so that we're not so fixed in our agreement that there isn't any flexibility on possible provisions within the MAI.

Mr. John Gero: I think that's right, but bear in mind that the MAI deals with investment only. It doesn't involve trade in goods or services. So it doesn't touch on trade in goods and services in that regard. It's strictly on disciplines, on investment flows.

Mrs. Rose-Marie Ur: Right. I can appreciate that. I'm just looking at the clause aspect, at our having some kind of flexibility.

Canada's position has remained the same throughout these negotiations. We want a deal that serves Canadian interests, and we are continuing to advance our negotiating objectives...together with like-minded countries.

Who are the like-minded countries the minister refers to in this?

Mr. John Gero: Well, it depends on the issue. For example, in the context of Helms-Burton, as I said, it's us and the Europeans, and virtually every country, against the United States. In the context of culture, for example, it's us, the French, the Belgians and the Spanish against, say, the Americans and the United Kingdom and Germany. So depending on the issue, the alliances change, but it depends on the economic interests.

In the context of agriculture, agriculture itself isn't a topic as such, so it's not a question of who are or are not our agricultural friends. Agriculture is in the back of everybody's mind when, for example, they discuss monopolies. Those countries that have various state-trading enterprises are clearly those that want to make sure that the text as it relates to monopolies does not affect their state-trading enterprises in agriculture, for example.

Mrs. Rose-Marie Ur: The delegations agree that they have to pursue their dialogue with the non-member countries, the five countries you listed. Is it hindering the process when you have 29 countries dealing with MAI? What is the advantage to having five other countries put their opinions in when we don't have 29 that can agree so far?

Mr. John Gero: The advantage, from a Canadian perspective, is that we would like to see as many people sign on to an investment agreement as possible. Clearly, it's easier for countries to sign on the earlier they start participating in the process.

Yes, it's difficult with 29. It's slightly more difficult with 34. In the WTO we're up to 115 to 120. It becomes more difficult in that context. But our basic goal eventually is to have everybody in the world sign on to a common set of investment rules. That's why we think it's very important not only to have the observers but also to create an outreach to those who aren't part of the discussions so that they understand what the discussions are all about and could eventually become parties to such an agreement.

Mrs. Rose-Marie Ur: We have the minister's statement—he says it quite often, and I certainly believe in it—that, “We want the right deal at the right time, not any deal at any time”. Those are great words, but can you clarify what they really mean? What's the goalpost? What are the criteria? What is this “right deal”?

Mr. John Gero: That point has two parts to it. One is that the minister was saying there's nothing magical about the April deadline. To the extent that we can get a good deal by April, great. To the extent we can't, then those goalposts move further out so that more time can be taken to develop, in essence, the right deal.

What is the right deal from a Canadian perspective the minister has also stated in his speech. He indicated a number of things for which it wouldn't be a right deal for Canada, including on supply management.

So that's the context in which that sentence should be taken.

Mrs. Rose-Marie Ur: Thank you.

The Chairman: Mr. Proctor.

Mr. Dick Proctor: Mr. Gero, is there anything in the proposed MAI around capital flight? You talked about investment flows, but one of the things developed countries are increasingly concerned about is the fact that international corporations move their money around and have it in safe havens, paying taxes basically nowhere.

Is there anything that would give comfort to people who feel that this should be rectified? The Tobin tax is something we've heard about in recent years, but not much recently. Is there anything in the MAI that would deal with this, or is it strictly investment flows?

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Mr. John Gero: No. We've been very careful in the context of the MAI to make sure that whatever we do does not conflict with either the GATT's new agreement on financial services or the way the IMF operates, for example. So there are the normal balance of payment safeguards built in, to the extent countries need to take action, which at one point hinder investment flows for fiduciary reasons, etc. So those are all covered.

Mr. Dick Proctor: In my other non-related question I want to come back to the provinces again for a minute. We talk about them almost as if they're a monolith, but when we think about it for a second we realize they're not. Mr. Steckle talked about different provinces that have different land uses.

We could also think of a province that might try to get away with a two-tiered hospital and then an American HMO comes in, or a school board might decide to have Pepsi Cola sponsor the school board or something of that note. Is this not the thin edge of the wedge once a corporation is in Canada and then says “We're here in province X but we can't get into province Y because its rules and regulations are different”? Isn't this just a creeping-up-on-them theory?

Mr. John Gero: No, because the reservations Canada would take federally and presumably provincially, if the provincial governments were party to the agreement, would in essence ensure we could adopt and maintain any measure. That means we can not only currently have measures in areas of social services, health care, and education that are inconsistent with the agreement, but we can reserve the ability to take new measures that would be inconsistent in the future in these areas. That's very important from a Canadian perspective.

Therefore, in that context, the fact that there are different provincial systems is immaterial. If we've reserved the ability of provinces to adopt and maintain measures in the social services, health care, and education sections, then the fact that company may be able to exist in New Brunswick but isn't able to operate in Ontario is immaterial because there are no obligations on Ontario to provide access to that company. It certainly wouldn't be able to use the MAI disciplines as a means of opening up the Ontario market for its investment.

The Chairman: Thank you.

Mr. Calder.

Mr. Murray Calder: Thank you, Mr. Chairman. I found this very interesting this morning. We've talked a lot about how we're protecting supply management from the MAI, but what in the MAI could damage supply management? Is there some way it would affect TRQs?

Mike, you mentioned we have a primary producer here in Canada that is world-renowned. I agree with that, but our processing is not quite world-renowned.

The United States is not necessarily satisfied with the text right now. I always think of an individual down there that is sort of a nemesis for the poultry industry up here by the name of Mr. Tyson. When you say our processing plants are going to increase in size, are we looking at the U.S. model of Mr. Tyson? I know how he is world-renowned.

So what in the MAI could affect supply management and how? You obviously have been protecting supply management. What issues have come up in the negotiations of the MAI that were going to affect supply management?

Mr. Mike Gifford: One potential area is performance requirements. If investment comes into Canada, our government would say, “All right, in order to allow you to invest in Canada we will require that you export x percent of your production”. Those kinds of performance requirements, depending on how they're phrased, could raise concerns about the ability of a provincial marketing board or the federal agency to run an optional export system, for example, whereby production is limited for domestic use but if the product is produced for export it's on an unlimited basis. How the relationship between the marketing board and the processor.... Right now there's nothing in the MAI—and certainly the supply management agencies and the CFA have looked at it very closely—that in fact would impact on the supply management agencies, but they're looking at areas where it could conceivably do that.

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That's why, certainly before any Canadian government signed off on an agreement in Paris or perhaps in Geneva later on, we would certainly go through each and every provision where there is a potential implication for, let's say, a single-desk seller.

Certainly in terms of monopolies, there's nothing in the NAFTA—and we're going to replicate that in the MAI—that prevents a country from maintaining or introducing a new monopoly. That's basically a sovereign right of the government.

So again, with respect to worst case scenarios, or whether the wording could be construed to mean this or that, or whether it could inhibit the ability of a single-desk seller to basically regulate...those are the types of concerns.

Mr. John Gero: To avoid that last possibility, which is whether something could be construed as being...certainly, we—the Europeans and a number of other countries—have looked at, for example, the performance requirements article to make sure we include language that would in essence not do that, and thereby, by reference, sort of try to have deference from the MAI to the WTO agreement on agriculture in order to make absolutely sure that none of these provisions can be construed in such a way in the future that could be deemed to be detrimental to our interests.

Mr. Murray Calder: You're telling me, then, that there is the possibility, depending on how the phrasing is set up, that there could be interaction with the WTO as to how we do our phrasing; it could be in the blue box, the amber box or the green box. Is that what you're telling me?

Mr. Mike Gifford: Those, Mr. Chairman, relate to domestic subsidies, domestic support. I guess what we're saying is that at the margin there is a concern that wording that's not directly directed at agriculture could nevertheless have an agricultural impact, particularly in the case of orderly marketing, because orderly marketing is basically predicated on government regulation. Our concern is that the wording not in effect constrain the ability of, say, a provincial marketing board or federal or national agency to basically make regulations that are necessary for the operation of that orderly marketing system.

I think that's what the CFA and the supply management agencies are concerned about. That's what we're concerned about, and that's why every time there are changes made in the text in Paris we look at the various sections that might impact on agriculture through that kind of a lens, to see whether or not they could adversely constrain us from running either provincial marketing boards or national agencies.

Mr. Murray Calder: Going through this, one of the concerns that I have right now is about the poultry industry. Because the general population of Canada is aging and is worried about cholesterol, we have a glut of dark meat within the system, and therefore the industry is now trying to come up with an acceptable export policy. Obviously when this starts, the processing companies are going to be looking at international markets, and they'll probably be going after international contracts.

My concern is that there has to be a tracking system in place so that can we track this product to make sure it in fact does leave the country. If it doesn't leave the country, within this country it will affect domestic pricing. In that situation that's why we have TRQs, so that the farmers are in a situation where we can make sure production is not in a surplus situation, thereby depressing the farm-gate price. That is my concern.

So how would MAI affect an export policy, given the concerns I've just given you?

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Mr. Mike Gifford: Depending on how the prohibitions or disciplines on performance requirements are worded, right now the wording is such that it doesn't give us a problem. In the course of negotiations, that wording could change. All of a sudden, instead of not covering supply management, it could. I think that's why all the stakeholders are monitoring the word changes to make sure you inadvertently don't end up with a provision that, although it wasn't aimed at agriculture, had the effect of limiting the government's ability to regulate.

Mr. Murray Calder: Okay, thank you.

The Chairman: Mr. Hoeppner.

Mr. Jake Hoeppner: Thank you, Mr. Chairman.

I'd like to go back to the provincial issue somewhat. I know the provinces are quite interested in this. Are all the other municipal, city or state governments excluded, like the states in the United States? I know that if you go to Moscow, the mayor of Moscow is probably more powerful than the federal government itself. Are they all excluded from these investment agreements?

Mr. John Gero: Different jurisdictions have dealt with this differently. A number of federal states in Europe have fully included their sub-federal entities without a great deal of reservation. The Americans have done a really interesting thing. They've said it covers the states, but if you look at their exceptions list, they have basically carved out anything of substance that has any effect on the states. That's opposed to what we've done, just saying it doesn't cover the provinces at all.

Clearly, different people have taken different approaches. Basically, the substantive bottom line at the moment between our position and the American position, although we've used different methodologies, is that neither one of us has the sub-federal entities covered.

Mr. Jake Hoeppner: That's interesting.

The other thing I was really interested in was your statement about performance requirements. How do you set them up? What are the conditions, or what are the guidelines or goalposts for these requirements of performance?

Mr. John Gero: There are a number of them, and these are usually conditions of investment. Both in the context of the WTO and in the context of NAFTA, there are a number of what are called prohibited performance requirements. That is, you can't say you're allowed to invest here as long as x percent of your input is Canadian content. That's against both the existing NAFTA and existing WTO provisions in that regard.

The list is, in essence, what the conditions are that are performance requirements or what the conditions are that you can place on the investor to invest and that in some way discriminate between a foreigner and a local in that regard. That's what performance requirements intend to do. As the NAFTA did and as there are provisions in the WTO on what's called trade and related investment measures, what the MAI does is prohibit those kinds of conditionalities to investment.

Mr. Jake Hoeppner: I just have one more short one.

Are these multilateral investment agreements similar to what the United States did at the turn of the century with the antitrust laws that gave unfair competition to certain industries or banking industries?

Mr. John Gero: No, they don't really touch on competition policy or antitrust laws as such. They deal with investment policy more so than they do with antitrust laws.

Mr. Jake Hoeppner: Don't you have to coordinate them, though, or does it not—

Mr. John Gero: Obviously, in looking at this one very carefully, one makes sure one doesn't do any damage to existing competition laws, either our own or those of the United States or any other country.

Mr. Jake Hoeppner: Thank you very much.

The Chairman: Mr. Gero, we have a huge body of property that's used by the provinces in Canada, and that's the 200-mile limit. What implications does the MAI have on that 200-mile limit?

Mr. John Gero: I wouldn't think it has any limitations, in the context that one of two things happens. Either their current provisions are non-discriminatory, in which case they're not affected. To the extent they may have any discriminatory provisions within the 200-mile limit, then obviously those would be the kinds of things that we would take exception to. I'm sure we're guarded in the NAFTA in that regard. If that's what you're referring to, there are certainly a number of fisheries exceptions in the investment chapter of the NAFTA, for example. They would be replicated in the context of the MAI.

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The Chairman: If things changed, if the MAI negotiations overlapped into the WTO and there were wording changes in the WTO, that would then affect the MAI investment conditions.

Mr. John Gero: We would have to look at it. If you have a scenario where, say, a year from now there is an MAI, and five or six years from now there is a WTO agreement, unless there are specific provisions to carve out the MAI—and I doubt there would be, because it would be basically a similar kind of agreement, only with larger members—then usually, in that kind of context, according to my lawyers—and I'm not a lawyer—under the international law of treaties, it's usually the latter treaty that applies.

That's why, for example, even in the context of an MAI, for us to ensure that NAFTA is in essence the applicable treaty between the United States, Mexico, and us, we will have to make specific provisions in that regard, either through side letters among the three of us or other provisions.

The Chairman: We'll conclude with Mr. Harvard.

Mr. John Harvard: I have a two-part question.

First, I think the Maude Barlow crowd tries to leave the impression that if we were to consummate an MAI, we would never be in a position to, say, correct a mistake, or go back. What I mean by that is, if we were to allow companies to come into an area where now only a monopoly exists, and then a mistake was discovered, or if a policy change was effected, we couldn't go back to a monopoly, because even if we had the legislative power, the cost of compensation to those companies that were in the field for some time would be absolutely prohibitive.

Two, along the same lines, these people would say that if, say, the people who grow canola or rye decided to use the services of the wheat board to sell their commodity, those private companies now engaged in that business would be allowed to have compensation. The compensation for actual loss or future revenue or profit losses and so on would be so absolutely prohibitive that, even if you had the legislative power, you couldn't do it. The cost would be too high.

Can you answer those two questions?

Mr. John Gero: Sure. From my view, I don't think the MAI makes one bit of difference in that kind of context, because Canadian domestic law would apply. In that context, if it would be permitted under Canadian domestic law, then I don't think the MAI would have any more stringent disciplines. It might provide a different forum for resolving disputes should disputes arise, but I would imagine, under Canadian domestic law, if the Canadian government, through legislation, in essence put a company out of business, and that company would in essence cease to operate because the Canadian government, or any provincial government, did that, then most companies would have recourse in domestic courts to be compensated for the ending of their business.

Mr. John Harvard: Even if it was done on a non-discriminatory basis?

Mr. John Gero: I don't think it has anything to do with non-discriminatory or discriminatory in that kind of context. I guess the question is whether that would be deemed to be an unlawful taking under Canadian law. If the government would be deemed to have done unlawful taking and not compensated that company, then it would be a liability under Canadian law.

Mr. John Harvard: How would that differ, then, from the Ethyl Corp. case? I mean, we've passed a law that in effect puts that company out of business, as far as Canada is concerned.

Mr. John Gero: No, it does not do that. It affects their business in some context, but we haven't taken Ethyl Corp., Ethyl Canada, out of business. We've ended one of their product lines, MMT, but Ethyl Canada continues to operate on a number of other product lines.

Mr. John Harvard: But you could say the same thing—and I'm not trying to be argumentative here—about Cargill, or ADM. If they were in the business, for example, of selling, say, canola, and the canola growers decided to put their commodity under the wheat board, that doesn't end the entire business of ADM or Cargill or any other large corporation. They would lose just one infinitesimal part of their operation.

Mr. John Gero: Mike, you might want to answer that in a different context.

I recall how, for example, a number of years ago there was an issue in Ontario about whether the Ontario government was going to introduce an auto insurance scheme and whether that would therefore then eliminate all the automobile insurance companies from Ontario. There was a lot of toing and froing as to whether or not that was legally possibly for the Ontario government. It had nothing to do with any of our international obligations; it just had to do with domestic law.

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I'm not a lawyer, so I can't give you the chapter and verse on what the government can or cannot do under Canadian law vis-à-vis how it in essence ceases a company's operations through legislation. Mike, can you answer in the context of agriculture?

Mr. Mike Gifford: Mr. Chairman, I guess the hypothetical question is if canola was placed into the Canadian Wheat Board and it became an export monopoly, as wheat and barley currently are, what right would a company have that's currently trading in canola?

It doesn't matter whether there's an investment agreement or not. Under Canadian law presumably the company would have to demonstrate to the Federal Court that they've suffered financially as a result of...instead of being able to take a position on canola, basically they're going to act as an agent of the board and work on commission. So presumably somebody has to make the argument to the Federal Court that somehow the profit situation of the particular company has been adversely affected.

If memory serves me right, Mr. Chairman, there are a number of examples from the past. I believe there was a private firm, a commercial fishery, in Lake Winnipeg, for example. Then the freshwater commission came along, a monopoly single-desk seller, and basically that firm went out of business. They appealed successfully to the Federal Court for compensation, if I recall the history correctly.

I don't think there's anything unique about this. Obviously, it depends on the severity of the impact on the individual firm in question. If it's at the margin, then perhaps the compensation is more in principle than the big ticket item. If the firm is literally put out of business because of the decision of the government to create a monopoly, then presumably they would have a stronger argument before the Federal Court. I would suggest, Mr. Chairman, it depends on the severity of the economic consequences of establishing the monopoly.

Mr. John Harvard: Then let's take on the Cargills.

The Chairman: Mr. Martin, do you have anything to say on taxes tonight, or—

Mr. Paul Martin (Acting Director, Multilateral Trade Policy Division, Market and Industry Services Branch, Department of Agriculture and Agri-Food): It's entirely secret, I think.

The Chairman: Thank you very much. This has been a very informative morning both for ourselves and I think for the industry. We probably should have done it earlier. Thank you very much for coming in.

The meeting is adjourned.