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37th PARLIAMENT, 1st SESSION

Standing Committee on Foreign Affairs and International Trade

EVIDENCE

CONTENTS

Tuesday, February 26, 2002

0900

The Chair (Ms. Jean Augustine (Etobicoke--Lakeshore, Lib.))

0905

Ms. Aileen Carroll (Barrie--Simcoe--Bradford, Lib.)

The Chair

Ms. Carroll

The Chair

Mr. Brian Lee Crowley (President and Director, Atlantic Institute of Market Studies)

0910

0915

Ms. Carroll

Mr. Brian Crowley

Ms. Carroll

Mr. Brian Crowley

Ms. Carroll

Mr. Brian Crowley

Ms. Carroll

Mr. Brian Crowley

Mr. Michael MacDonald (Senior Fellow, Atlantic Institute of Market Studies)

0920

Mr. Perry Newman (Former Adviser on International Trade to Governor of Maine; Atlantic Institute of Market Studies)

0925

The Chair

Mr. Rocheleau

Mr. Brian Crowley

Mr. Michael MacDonald

0930

0935

Mr. Perry Newman

The Chair

Mr. Peter Stoffer (Sackville--Musquodoboit Valley--Eastern Shore, NDP)

Mr. Stoffer

0940

Mr. Brian Crowley

0945

Mr. Michael MacDonald

0950

Mr. Brian Crowley

Mr. Michael MacDonald

Mr. Perry Newman

Mr. Michael MacDonald

Mr. Perry Newman

The Chair

0955

Ms. Carroll

The Chair

Ms. Carroll

Mr. Peter Stoffer

The Chair

Ms. Carroll

Mr. Michael MacDonald

Ms. Aileen Carroll

Mr. Brian Crowley

Ms. Aileen Carroll

1000

1005

The Chair

Mr. Baker

The Chair

Mr. Baker

The Chair

Mr. Peter Stoffer

The Chair

Mr. Peter Stoffer

Mr. Brian Crowley

1010

Ms. Aileen Carroll

Mr. Brian Crowley

The Chair

Mr. Peter Stoffer

Mr. George Baker

The Chair

1015

Ms. Carroll

Mr. Baker

The Chair

Mr. Brian Crowley

The Chair

1020

The Chair

Professor Reginald C. Stuart (Department of History and Politics, Mount Saint Vincent University)

1030

1035

1040

Ms. Aileen Carroll

Prof. Reginald Stuart

1045

1050

1055

The Chair

Prof. Reginald Stuart

The Chair

Mr. Yves Rocheleau

Prof. Reginald Stuart

1100

Mr. Peter Stoffer

Prof. Reginald Stuart

The Chair

Mr. Peter Stoffer

1105

1110

Prof. Reginald Stuart

The Chair

Ms. Carroll

1115

Mr. Peter Stoffer

Prof. Reginald Stuart

1120

The Chair

Mr. Baker

The Chair

Prof. Reginald Stuart

The Chair

1130

Professor Ian McAllister (Professor, Economics and International Development Studies, Dalhousie University)

1135

1140

1145

The Chair

Mr. Rocheleau

1150

The Chair

Prof. Ian McAllister

Mr. Rocheleau

Prof. Ian McAllister

1155

The Chair

Mr. Peter Stoffer

Prof. Ian McAllister

Mr. Peter Stoffer

Prof. Ian McAllister

The Chair

Ms. Carroll

1200

Prof. Ian McAllister

The Chair

1205

Professor Teresa L. Cyrus (Economics, Centre for Foreign Policy Studies, Dalhousie University)

1210

1215

The Chair

Mr. Rocheleau

Prof. Teresa L. Cyrus

1220

The Chair

Mr. Peter Stoffer

Prof. Teresa L. Cyrus

Mr. Peter Stoffer

Prof. Teresa L. Cyrus

Mr. Peter Stoffer

Mr. George Baker

Mr. Peter Stoffer

Prof. Teresa L. Cyrus

Mr. Peter Stoffer

Prof. Teresa L. Cyrus

1225

Mr. Peter Stoffer

Prof. Teresa L. Cyrus

Mr. Peter Stoffer

Prof. Teresa L. Cyrus

The Chair

Mr. Peter Stoffer

Prof. Teresa L. Cyrus

Mr. Peter Stoffer

The Chair

Prof. Teresa L. Cyrus

The Chair

Prof. Teresa L. Cyrus

The Chair

Prof. Teresa L. Cyrus

Mr. Stoffer

1230

Prof. Theresa L. Cyrus

Mr. Peter Stoffer

The Chair

Mr. Baker

Prof. Theresa L. Cyrus

Mr. Baker

Prof. Teresa Cyrus

Mr. Baker

Prof. Theresa L. Cyrus

1235

Mr. Baker

Prof. Theresa L. Cyrus

Mr. Baker

The Chair

1255

Professor Sandra J. MacLean (Department of Political Science, Centre for Foreign Policy Study, Dalhousie University)

1300

1305

1310

The Chair

Mr. John Harker (Consultant, Harker Associates)

1315

1320

1325

The Chair

M. Rocheleau

The Chair

Prof. Sandra J. MacLean

1330

The Chair

Mr. John Harker

1335

The Chair

Ms. Carroll

1340

Ms. Carroll

1345

Mr. John Harker

1350

Ms. Aileen Carroll

The Chair

Ms. Aileen Carroll

The Chair

Ms. Aileen Carroll

1355

The Chair

Ms. Carroll

Prof. Sandra MacLean

Ms. Carroll

1400

Prof. Sandra J. MacLean

Ms. Carroll

The Chair

Mr. John Harker

The Chair

Prof. Sandra J. MacLean

1405

Mr. John Harker

The Chair

Ms. Carroll

The Chair

Professor Michael Bradfield (Department of Economics, Dalhousie University)

1420

The Chair

Mr. Rick Clarke (President, Nova Scotia Federation of Labour)

1425

1430

1435

1440

The Chair

M. Rocheleau

The Chair

Prof. Michael Bradfield

1445

1450

1455

The Chair

Mr. Baker

Prof. Michael Bradfield

Mr. Baker

Prof. Michael Bradfield

Mr. Baker

Prof. Michael Bradfield

1500

Mr. George Baker

1505

Prof. Michael Bradfield

Mr. Baker

Prof. Michael Bradfield

Mr. Baker

Prof. Michael Bradfield

Mr. Baker

Prof. Michael Bradfield

The Chair

Ms. Carroll

Mr. Rick Clarke

1510

Ms. Carroll

The Chair

M. Rocheleau

The Chair

Prof. Michael Bradfield

1515

1520

The Chair

Mr. Rick Clarke

The Chair

Mr. Peter Haydon (Editor, Maritime Affairs)

1525

1530

1535

1540

1545

The Chair

Mr. Peter Haydon

The Chair

Mr. Rocheleau

Mr. Peter Haydon

The Chair

Ms. Carroll

1550

Mr. Peter Haydon

Ms. Carroll

Mr. Peter Haydon

Ms. Carroll

Mr. Peter Haydon

The Chair

Mr. Peter Haydon

The Chair

CANADA

Standing Committee on Foreign Affairs and International Trade

NUMBER 059

1st SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, February 26, 2002

[Recorded by Electronic Apparatus]

¿ (0900)

[English]

The Chair (Ms. Jean Augustine (Etobicoke--Lakeshore, Lib.)): Good morning. We're very pleased to be in the wonderful city of Halifax, here in the province of Nova Scotia, the province associated with some of the members around this table.

We want to begin by welcoming our witnesses. As the committee continues with its studies of two very important agendas facing Canada in terms of its role in the world and in North America, committee members are eager to hear from citizens across the country on key foreign policy challenges in the G-8 and in the North American context.

Canada is in the position of being president of the G-8 this year, and host of the G-8 summit, which will take place in Alberta in June. The major priorities for that summit have been identified as: improving the world economic situation; building a new partnership for Africa's development; and pursuing the international fight against terrorism. Canada is putting a particular emphasis on advancing an action plan for Africa.

The committee has been asked to report its findings and recommendations to the government by the end of April. Seeking input from Canadians is central to this purpose. This week, while one group of members is in Quebec, another group is hearing from the public in Atlantic Canada. In early April, committee members will be travelling to western Canada and Ontario to complete our cross-country hearings.

Given time and budget considerations, we are also using this as an opportunity to hear the views of Canadians on how they would like to see our North American relationship evolve. All aspects of Canada-U.S., Canada-Mexico, continental, and trilateral ties are on the table for discussion as part of a longer-term study. This is the beginning of the dialogue, and we will be reporting later this year.

More information in regard to both studies can be found on the committee's website. We invite additional input from all Canadians. Please note that input should be submitted by mid-April for the G-8 study and by the end of June for the North American study.

With us around the table this morning are members from four parties in the House. From the Liberals, we are joined by Aileen Carroll, Parliamentary Secretary to the Minister of Foreign Affairs, and member of Parliament for Barrie—Simcoe—Bradford; and the Hon. George Baker, the member from Gander—Grand Falls. Yves Rocheleau is the member of Parliament from Trois-Rivières for the Bloc Québécois. Mr. Peter Stoffer, of the New Democratic Party, is the member for Sackville—Musquodoboit Valley—Eastern Shore. I am Jean Augustine, member of Parliament for Etobicoke—Lakeshore, and chair of the committee.

I would like to welcome the witnesses before us. From the Atlantic Institute—

¿ (0905)

Ms. Aileen Carroll (Barrie--Simcoe--Bradford, Lib.): Is Bill Casey, our Nova Scotia Tory, coming?

The Chair: No, Mr. Casey has another appointment and will therefore miss being with us today.

Ms. Aileen Carroll: Thank you, Madam Chair.

The Chair: The witnesses this morning are Mr. Brian Crowley, the chair of the Atlantic Institute for Market Studies; Mr. Michael MacDonald, a senior fellow with that organization; and Mr. Perry Newman, a former adviser on international trade to the Governor of Maine, Mr. Angus King, whom most of you would remember.

Welcome. You have some time to present to us this morning, and your presentation will be followed by questions from the members. Please proceed.

Mr. Brian Lee Crowley (President and Director, Atlantic Institute of Market Studies): Thank you, Madam Chair.

Please allow us to be the first to welcome the committee to Halifax. We're delighted to see you here to carry out this very important work on behalf of the Parliament of Canada and all Canadians.

We're here to speak to you about a concept we call “Atlantica”. Mindful of the short time we have, we're each going to speak for just a few moments on the theme of Atlantica, and then we'll be glad to respond to committee members' questions.

For a century or more, geography has shaped the destiny of this corner of North America in a way that was largely beyond the control of the people who live here. As far as we're concerned, that era has ended, but we are only just beginning to understand how we can seize control of our lives again in this region. The corner of North America that I am referring to is not just Atlantic Canada; it also embraces the sliver of the United States that reaches from Maine through New Hampshire and Vermont and into northern New York State, as well as major portions of Quebec, centred around the eastern townships, and the south shore of the St. Lawrence river valley.

This wedge of territory, which some are now calling Atlantica, has been outside the charmed circle of North American prosperity for many years, and the reasons for that exclusion from North American prosperity are of course buried deep in our history. Especially after the Americans rejected reciprocity and Confederation was born, the continent was divided into two national projects. Each sought to open up its half of the continent on an east-west axis; each had a funnel on the east coast that caught the energies of Europe and channeled them towards the conquest of the continent.

Montreal, of course, the second most important commercial city of the British empire, was our point of contact. The urban eastern seaboard in the United States from Boston through New York, Philadelphia, and Washington was the American equivalent. If you look at a map, and we happen to have circulated a map of this region, you will soon see that in a world of two half continental national projects, or national enterprises, organized on an east-west axis, Atlantica is, in a certain way, the reef around which the movements of people, capital, and innovation surged, one heading north, the other south.

But continental free trade and globalization may, we think, put an end to the isolation of Atlantica. The east-west axis for development of North America is being supplemented by a drive to stitch back together the old north-south trade routes that had flourished across the continent before 1867. The U.S. will spend over $400 billion U.S. over the next few years on priority highway construction.

By the way, I've distributed the map that shows the high-priority highway construction routes in the United States. Almost all of the money being spent in the United States, you will notice, is on north-south routes, such as the North American super highway running from Winnipeg to Mexico City.

For the moment, none of that money is earmarked to fill in the obvious gaps in Atlantica's transport infrastructure. The connections from St. Stephen, New Brunswick, to Bangor and then to Montreal, or to northern New York and then Toronto, Detroit, and points south, are still laughable. Yet St. Stephen-Calais is the eleventh most important road crossing linking the world's two largest trading partners. Over 300,000 trucks from Canada enter Maine every year, a number that has doubled in only five years.

For years, Canada and the United States turned their backs to each other at Maine's border with Quebec and New Brunswick. Maine's transport infrastructure was starved because, as it was surrounded on three sides by Canada, it looked to American transport planners as if you couldn't get anywhere from Maine. Under, of course, the half continent model, the transport problem of the Atlantica states was to join the party to the south. Our problem, in this part of the world, was to get around Maine. In the free trade era, Maine and the northern New England states are looking east-west, not south, because that's where the nearby Canadian free trade partners are. We are shipping containers to Chicago and natural gas to Boston.

The greatest obstacles to realizing the dream of a highly integrated regional economy at the confluence of Europe and North America are chiefly political. NAFTA reduced, but by no means eliminated, the economic effect of the border, and those economic effects have been exacerbated by the events of September 11 and the security concerns that they very legitimately raise.

If Atlantica is to escape the role of geographic backwater to which the last century relegated us, the coalition, in our view, that we must build, is a cross- border one. Just as many European regions, such as Scotland, the Flemish area of Belgium, the north of Italy, and the Basque region of Spain, have seen European integration as the key to escaping the dead hand of tired and inward-looking national governments, so people on both sides of the Atlantica border are increasingly seeing this region as a powerful, international counterweight to the benevolent indifference with which our respective national governments have often treated this region's component parts.

The consciousness of Atlantica's international synergy is already rising. Many American politicians, including five senators from the Atlantica states, have endorsed a call for Washington to examine the transport infrastructure in the quarter reaching from Halifax through northern New England and New York state.

¿ (0910)

But Canadian residents of Atlantica have their part to do too, and that's part of what my colleagues, especially Michael MacDonald, will speak to in the rest of our presentation. I'm going to turn it over to Michael now.

¿ (0915)

Ms. Aileen Carroll: I have two documents. Are you giving an overview?

Mr. Brian Crowley: I'm giving an overview.

Ms. Aileen Carroll: So I'm not missing the piece of paper--

Mr. Brian Crowley: Absolutely not.

Ms. Aileen Carroll: In that case I won't interrupt again.

Mr. Brian Crowley: I assumed, perhaps wrongly, that since we had distributed a document in advance, I didn't need to recap it. I'm giving an overview of what we want to say. I hope that's acceptable to the committee.

Ms. Aileen Carroll: No, no, that's great. I was just going to go along with you if I had it. Sorry to interrupt. Please continue.

Mr. Brian Crowley: No, not at all.

Michael.

Mr. Michael MacDonald (Senior Fellow, Atlantic Institute of Market Studies): Thank you very much, Madam Chair, and welcome back. I should say welcome to Atlantica. My remarks will be very brief. I'm the Senior Fellow at AIMS and I'm leading this initiative. I want to spend a short time so I can turn it over to Mr. Perry Newman before our question period.

For about 50 years now we've been trying, in this part of the country and in Canada in general, to attract the attention of the Americans in terms of investment. Well, for the first time in 50 years, Americans in the northeast zone are now very much interested in us. This northeast zone, by the way, is southeastern Quebec, the Maritimes, and Newfoundland. Here's an initiative really that brings this part of Canada together, focused on the northeast trade zone of Maine, New Hampshire, Vermont, and northeastern New York.

What's the access? The focus is on two things that happen to be in Canada—the port of Montreal and the port of Halifax. Atlantica exists internationally between these two points.

The main principle, which is common but not discussed very much, is that basically in this decade small economies will max out—even our own country—unless we have new regional arrangements. Our economies will max out. They can't grow any more. There's going to be a fixed life. What we see in terms of southeastern Quebec, the Maritimes, and Newfoundland is that Atlantica, as an economic zone, really allows the economies of all the different parts of this part of Canada and the U.S. to operate together between the two polarities I mentioned in terms of transportation.

One thing we have discovered is that our major challenge is transportation. Basically it is a boring subject, but it happens to be the spine of the economy. If you can't get from the ports of Montreal and Halifax easily to New York or Chicago, you're not doing business, period. If you look at the northeast of the United States, you will see that the spaghetti junction of highways and railways does not work in our interest.

What are we going to try to do in the next three years? For the first time, Atlantica, with our eastern provinces and the northeast zone, will develop the intellectual capital or the legs on which this region can stand. In trying to attract the attention of the Americans for 50 years, we never had the intellectual capital that explained why regional economies work. They were all one-shot deals--trade missions and ventures or what have you. Yet what has happened basically is that in the last 20 years Canadians and Canadian companies have become major investors in the northeast of the United States. Let me name you a few names—McCains, Irving Oil, Irving Forest Products, National Sea Products, Alliant Communications, and recently a dramatic purchase by Emera or Nova Scotia Power of Bangor Hydro-Electric.

Can you imagine a family in Quebec or Nova Scotia with the following economic scenario? Foreigners put the gas in your car, foreigners own your electricity, foreigners control the Internet, and foreigners basically control the highway stops where you stop for gas. We'd never tolerate that. Well, that's what's going on in Bangor today. Canadians own all those basic parts of the infrastructure. What we have to do is change our head here. We are moving in on them; they're not moving in on us when it comes to the northeast trade zone. It's very strong.

First of all, we're going to develop the intellectual capital that will allow us to think regionally and internationally.

Secondly, we're going to put together an international team of leaders, with Quebec and the Atlantic provinces and the northeastern states--and I've mentioned northeastern New York--to really sustain this movement.

So that's what we're up to.

It's a very complex project. One of the main things we have to contend with is something called the border. What's the border? First of all, I would urge you to think in terms of land, air, and sea. That's the border. For some Canadians, 50 years ago the border was a kind of blanket that we wrapped around us and it protected us. Well, it ain't there no more.

So what should a border be in an age of NAFTA, the global economy, and electronic communications?

I headed up the Greater Halifax Partnership here for five years, the economic development agency of our city. One of our biggest problems to international investment was the Department of Citizenship and Immigration and the border. They kept stopping and demanding out of international investors questions such as these: “What are you here for?” “Oh, I'm here to look around.” “Are you going to work when you're here?”

Finally, I'll leave you with one image of Canada. Canada is one of the only countries in the world where, as you enter the country, you meet tax collectors. The tax collectors who are sure to make you pay your GST on the pantyhose you bought at Filene's Basement will then refer you, if they think so, to the Department of Citizenship and Immigration. How shameful! You could enter our country through the Department of Citizenship and Immigration and then pay your taxes as you go along. That's how the priorities in this country are wrong.

So, basically, we've been at this for 50 years or so. It finally changed. In many ways we are in the driver's seat, and it is Canadians who are leading the whole Atlantic initiative.

I want to turn it over to our American colleague, Perry Newman.

¿ (0920)

Mr. Perry Newman (Former Adviser on International Trade to Governor of Maine; Atlantic Institute of Market Studies): Good morning. Thank you very much for the opportunity to appear before you this morning. I'm grateful also to my colleagues on the panel, Messrs. Crowley and MacDonald, for their courtesy and assistance in this process.

By way of background, let me take a moment to give you a little biographical information that's relevant to my appearance here today. Currently, I am the president of an international business development firm in Portland, Maine, called Atlantica Group.

Prior to forming Atlantica Group in 2000, I served as the State of Maine's first director of international trade, having been appointed to that position by Maine Governor Angus King in 1996. In that position my responsibilities included developing business, export, and investment policy initiatives of an international nature that would strengthen and grow Maine's economy.

In the course of my work in state government, it became clear to me early on that there were in fact two Maines within our state. The southern part, with its higher population, superior road and air infrastructure, and proximity to Boston, was more prosperous and dynamic. The northeastern part of the state, which comprises a far larger land mass with sparse population, has a comparatively weak and vulnerable economy.

While recognizing these geographical realities—our relative isolation, low population, large land areas inadequately served by transportation infrastructure—we continue to believe that closer economic ties to Canadian economic centres would be of significant benefit to the people of both Maine and Atlantic Canada.

Atlantic Canada and Maine, and indeed much of northern New England and even upstate New York, have a great deal in common: historical connections, economic connections, and strong political connections as well. Among the commonalities that challenge us are a lack of population, to which I alluded a moment ago, and a comparative lack of economic opportunity that typically accompanies a diverse and vibrant, more populous area.

As each of us considers important issues of trade, security, and so on in the context of our shared continent, I would suggest that any efforts we can collectively make to facilitate economic intercourse between Atlantic Canada and New England will be of great benefit to citizens on both sides of our border. We need to take aggressive steps to enhance economic activity that work to make our region a functioning, transnational market of linked population centres. Absent these linkages, our individual markets are far too small to achieve their potential.

By way of example, there is currently a clear and detrimental lack of adequate east-west road connections between Maine and indeed states and provinces to our west, and between New Brunswick and Nova Scotia to our east. This lack is so obvious that, notwithstanding recent improvements to our principal east-west route, trucks carrying goods to and from Ontario and Quebec to our west and New Brunswick and Nova Scotia to our east actually choose to circumvent, that is to say, avoid, Maine altogether, rather than navigate the twists and turns of our current infrastructure.

The lack of a good road costs Maine people economic opportunity. It costs Atlantic Canadians time and money. It prevents all of us from linking our population centres more effectively.

Roads and infrastructure are critically important. In my state, 65% of all jobs are located within 25 kilometres of our principal interstate highway, I-95, and 65% of all Maine people live within 25 kilometres of the highway. Highways lead people to jobs and encourage employers to invest in facilities along their footprints. It's no coincidence that economic opportunities are poorest in areas of our state and indeed in northern New England, where good roads do not exist and people cannot get their goods or themselves to market.

This is but one example of the ways in which northern New England and Atlantic Canada can work together to establish closer connections of great mutual benefit.

Would it not benefit each of us to be able to get from place to place more effectively? Would it not benefit each of us to have more immediate access to potential new markets? Would it not benefit each of us to create an infrastructure that recognizes the transnational nature of our economies and reflects those realities when decisions are made that impact upon the region?

I am hopeful that policymakers and lawmakers on both sides of the border, at the state, provincial, and federal levels, will redouble their efforts, now ongoing for many years, to take concrete steps to facilitate the development of an economically vibrant region, whose metropolitan areas are more effectively and efficiently linked to each other than is currently the case.

Atlantic Canada and northern New England are similar in so many ways, regrettably not all of them positive. Indeed, our economies have tended to lag behind the rest of our respective countries in times of economic growth and have tended to suffer first when our economies have slowed.

By taking steps to create new economic paradigms, by taking an aggressive and creative regional approach, we have a unique opportunity to emancipate ourselves from the strictures and impediments of our geographical limitations and, literally, to begin the process of building a new and more vibrant economic future.

Thank you for your courtesy and attention.

¿ (0925)

The Chair: Thank you very much.

We will now start with our questions. We'll go to Mr. Rocheleau, please.

[Translation]

Mr. Yves Rocheleau (Trois-Rivières, BQ): Thank you, Madam Chair.

I would like to congratulate you for your brief, your vision, because I think that not only are we talking about a project, but also, about a vision. So, first, I would like you to elaborate on these boundaries, if you will allow me this expression.

I have three specific questions. Mr. MacDonald, when you speak about the vision you have for the international ports of Montreal and Halifax, I would like you to tell us if anything would change if two competing ports became complementary.

Second, how are the New England governors and the Quebec and Maritime premiers, who regularly meet for a statutory conference that I believe started several years ago, reacting? How are the political leaders reacting to your project?

Finally, third, what do you think, hypothetically, given the weak Canadian dollar, of a common Canada-United States currency, or eventually, a Canada-United States-Mexico, but at least a Canada-United States currency, within the context of your vision, your project?

Mr. Brian Crowley: Thank you for these extremely pertinent questions. I will start with the issue of regional borders. I must admit that the borders are not very delimited. In fact, we are trying to keep them relatively fluid for the time being, because we believe that there is still a certain amount of regional delimiting to be done. We can easily see which regions are central to this vision, as you have stated so well, but we are waiting to deepen our own knowledge of the region before setting up a too-rigid boundary around it.

It is clear, however, like I just mentioned, that there are certain regions that obviously belong to the region that we are talking about. Such as Newfoundland, Nova Scotia, New Brunswick, Prince Edward Island, the three northern New England States. I will come back to this point later.

We are certainly talking about a part of the State of New York, which is an economic region that is distinct from the rest of the state, and of course, a very important part of Quebec: Estrie, certainly Bois-Francs. We could even make Trois-Rivières an honorary member city, if its citizens would like. There is also the south shore of the Saint Lawrence, of course. We believe that this represents a coherent region with very clear economic ties and interests.

I mentioned that I wanted to come back to the issue of New England because you mentioned-and rightly so-that there is an annual meeting of the governors of the New England States and the five premiers of the Eastern Canadian provinces.

It seems to us, or it has appeared so up to now, that one of the challenges facing the region is that New England does not constitute a homogenous block, but on the contrary, that the south of this American region is totally oriented to the south, to the City of New York, and toward the southern urban centres. This is much less the case for the three States on the Canadian border, which have a much more international orientation. This is why we are talking not so much about a coalition with New England as such, but rather about an effort to define a new region based on the common interests of these jurisdictions within the region.

Now, to reply to your question regarding the ports and the port infrastructures, I will turn things over to my colleague, Michael MacDonald. We will then come back to the issue of a common currency.

[English]

Mr. Michael MacDonald: Merci.

The question of the ports of Montreal and Halifax is a very important one to this discussion. Basically, Montreal and Halifax are competitors, and always have been. However, for the most part they now are in two distinctive markets. Halifax is focusing on the post-Panamax container shipping, which cannot access the St. Lawrence and Montreal.

I would invite you to consider the post-September 11 view of the port of New York. This will cause, I think, in terms of congestion and security, a huge increase in trade to our two ports if we are ready to receive it. And I would say that I don't think we are yet; we have to change our head.

What we are offering here, especially in terms of Quebec, is a new vision. We want Quebec to join the east and ignore the west, because that's a much more positive, creative section. Actually, you're one of our allies.

I must tell you, in my own experience I have always thought north-south. I couldn't get to Boston and New York... As you begin to talk about a new corridor, which would go essentially from the New Brunswick border through Maine and Vermont to Sherbrooke, this makes sense, because this is the top of the T-bar of 95.

If you want to know what's happening in Canada, just look at this and weep. This map, which was done in conjunction with Transport Canada, is the new NAFTA map. Basically, southeastern Quebec, the maritime provinces, and northeastern New England are not there. We don't exist economically, and we have to do something about this. The easiest thing is to cooperate with the Americans in a new east-west corridor.

There is one thing we need your help on. It's one of the reasons we're here today. The Americans have done quadrant studies of transportation throughout their whole country in terms of the next five to ten years. They have not yet completed the northeast section, because the northeast goes up into Canada, with northern Maine. So to do this, they need the cooperation of a small group of people called Transport Canada.

¿ (0930)

What they want is a partnership where we put a little bit of money into this, not a big amount, so we can sit at the table with our American allies and discuss the NAFTA transportation needs of Atlantica--of Quebec, the Maritimes, and eventually Newfoundland. So we need your help on that, to get our country at the table. We're not there yet.

The New England governors and eastern premiers have endorsed this, but they don't have the tools or the intellectual capital or the regional strategy to do this. We're going to develop this with Quebec, the Maritimes, Newfoundland and Labrador, and the northeastern states we've mentioned. We're going to develop an international team of leaders and the intellectual capital, the legs to carry this regional economy forward, and that's why we're taking this approach.

On the weakness of the Canadian dollar, “the dollarette”, it's a mystery. I think it's like growing up. You eventually have to leave home.

Thank you.

Perry wanted to speak to the question of political leadership.

¿ (0935)

Mr. Perry Newman: Thank you.

[Translation]

I am sorry, but my French is somewhat weak. It is preferable that I speak in English.

[English]

Having participated when I was in state government with Governor King in the annual conference of the New England governors and eastern Canada premiers, we began to explore in greater detail and with a greater sense of mission the notion of regional cooperation. But I think it's fair to say that, quite naturally, those efforts reached a point at which they could not be taken any further because of the quite understandable political limitations placed upon elected officials.

In other words, it was very difficult for someone in one state or province to advocate an economic development initiative that might benefit more immediately another state or province at the expense of one's own; therefore, there was a sense that we know this is good for the region and overall regional economic health and will help all of us, but I'm concerned as to how it will affect me and my constituents in the short run.

So I think it's fair to say that there is overall support for regional initiatives. The New England governors and eastern Canada premiers have been meeting for more than a quarter century, and a number of excellent initiatives of a cooperative nature have emerged, but I think a greater vision supported by the intellectual capital and the foundation that Mr. MacDonald was referring to will be of immeasurable benefit in giving our elected officials the ammunition, if you will, they need to adopt a broader picture. In my opinion, we haven't had yet a binational vision that provides us with the basis for taking bolder steps.

Thank you.

The Chair: Thank you.

Mr. Stoffer.

Mr. Peter Stoffer (Sackville--Musquodoboit Valley--Eastern Shore, NDP): Thank you, Madam Chair, and I thank AIMS for their presentation. As always, they're very concise and to the point, and I've always appreciated that from them.

You mentioned concerns about the benevolent behaviour of... although you didn't say central Canada, I assume that's what you're looking at, towards Atlantica. I wonder if you could expound on that a bit, the reason being that yesterday in Newfoundland we heard that there's a perception that central Canada or the Government of Canada will give up economic activity or some economic opportunities in Atlantic Canada to support those of central Canada.

A good example of that is the recent EFTA talks with Norway, Liechtenstein, and Switzerland regarding shipbuilding and marine products. There's the perception that, because there's a trade imbalance right now with those countries, Canada doesn't like to be in that type of position, and that we would give up, for example, aspects of shipbuilding to increase either telecommunications or pharmaceuticals, or other avenues that benefit, more or less, central Canada. So I'd like your opinion on that.

What do agencies like ACOA and the Quebec diversification fund do to benefit subjects such as we're talking about now?

As well, we have great difficulty, for example, in New Brunswick discussing whether a road should be a toll highway or should be private. I'm quite astonished that Bernard Lord would make a promise to get rid of the tolls, which he did, which saves $15 million a year in terms of toll fees, but he put a 2¢-a-litre tax on all consumers. Now it's $30 million a year they're taking in. So I'm wondering, in this sort of transportation route, would you be looking at a government-funded initiative between two levels of government, or would it be more a private sort of user-fee highway and railway construction model that you're thinking of?

Also, in terms of this map, which I find quite astonishing, recently we had discussions...and as you know, Madam Chair, we have a highway here, called Highway 7, that goes through the eastern shore. Last year a bus company wrote the Province of Nova Scotia a letter saying they are no longer coming up here because of the condition of that road. It's quite astonishing, when half of that road goes through my riding. We've been screaming about the condition of that road and saying, “If you build it, they will come”—that old baseball adage.

I'd just like your comments on what I've just stated.

Thanks for your presentation.

¿ (0940)

Mr. Brian Crowley: Thank you very much for those questions. You've raised a number of questions. I'll try to speak as briefly as I can to some of them. Then Michael might speak to the regional development agency point, in a moment.

On your general point about what you heard in Newfoundland yesterday, I understand that concern. I have to say that part of what has led us to think about Atlantica is a sense that Canada is undergoing some very major changes, and those changes are not going to be reversed or rolled back.

What I have in mind, in particular--and I touched on this in my opening remarks--is that of course in 1867 when we created Canada and put in place the national policy, the national policy was a tariff barrier at the border, a national east-west infrastructure, a freight rate structure that favoured central Canada, and a tariff barrier that forced the creation of a lot of jobs in central Canada. In the words of Ernie Forbes, the famous maritime historian, the effect of Confederation was to push the Maritimes a thousand miles farther out to sea. In terms of access to its markets, we were cut off from our traditional markets in New England.

In the 1980's, a conscious decision was made by Canada to dismantle the national policy. We got rid of the freight rate structure and the tariff barrier. We moved into an era of continental free trade.

Everybody will make their own assessment of the policies the federal and provincial governments put in place and the effect of those policies to try to build the economy of this part of the world, whether we're talking about the Maritimes or Newfoundland. In my assessment, those policies were not very successful. Certainly relative to the rest of the country, we have not enjoyed the prosperity others have.

On what underlies what we're trying achieve here and the contribution we're trying to make to this idea of Atlantica, we think the removal of the national policy and the moving into an era of free trade creates an opportunity for people in this part of the world to reconstruct some of the bases of prosperity we enjoyed before the national policy was put in place. Any economic historian will tell you this was a very prosperous region, but of course that was then and this is now.

We have to decide whether we're going to take advantage of the opportunities this changed policy offers to us. There are no guarantees we'll be able to do so successfully. But clearly, the old strategy of looking to Ottawa and a transfer system to underpin our prosperity is dead. I think it died with the dismantling of the national policy. I think it died with the dismantling of the tariff barrier. Many of those things underpin the transfer system on which we have come to depend so much.

I think we need new strategies. We're trying to fire the imagination of people in this part of the world to think about what the strategies might be: strategies of less dependence; strategies of more self-reliance; and strategies of building markets with our neighbours to the south, building on the common interests and economic potential we have.

Those would be my overview comments.

Michael, do you want to speak to it?

¿ (0945)

Mr. Michael MacDonald: In looking at this issue, you have to remember 1867, 1812, and 1776. They are the three dates that really determined our economic fate.

In terms of your question, Mr. Stoffer, about the tradeoffs you heard about in Newfoundland for a central Canadian policy, look at the auto pact that did so much for Ontario. If you want to see tradeoffs from the fifties, the history has not even been written yet.

The impact, Mr. Baker, on the fishery, for example, is yet to be told on how we relate to, let's say, New England.

Basically, the difference between the fifties, sixties, and now is we're awake and very carefully watching, with our colleagues in Quebec, the movements. It's why you've had the phenomenally negative reaction to the recent free trade balloon with the five states.

However, this is the problem. This is a country for which a major part of its GDP depends on trade. We have to be free traders, but we don't have to be stupid. I think it's the major difference today. We're watching, we're aware, and we're being very careful.

I think the most important thing is all the ideas and intellectual constructs are one thing, but the main issue goes back to access and therefore roads. You're absolutely right. If you don't have roads, even in this electronic age, you don't go anywhere.

It's why we want to burn this Canadian map into your imaginations. This is a Canadian map, although it's through the U.S. It connects Canada to Mexico and the NAFTA markets. Prima facie evidence of what we're talking about is in the map. It's not connected to southeastern Quebec. It's not connected to the Maritimes and therefore not connected to Newfoundland. This is a very important map. This was developed in cooperation with our senior bureaucracy in Transport Canada in Ottawa.

The final point in terms of the border—I know you're interested in the border—is that we already have pre-clearance at a number of our airports. The model is already there. But the recent statement by the FBI and the Americans about the port of Halifax is very important. Basically all those containers out of Halifax are going to New York. Unless we have security assurance in the port of Halifax, the Americans have threatened to close down our port. Now that's the reality. If you close down the transshipment of containers from Halifax to New York, we're out of business. Basically, pre-clearance by Americans or pre-clearance by Canadians there is not really significant. It's already going on. So our border has taken on a whole new image.

The final thing is the Canadian government now is focusing very much on the issue of congestion. I would beg you... The border problems are more than congestion at Windsor-Detroit for trucks. The border is a whole economic imperative. We have to get Transport Canada and Foreign Affairs and International Trade thinking beyond congestion. Congestion is an important thing, but this border... And by the way, the fault, dear Brutus, is in us. You go through our airports. You'll see how the border functions and Immigration Canada. Go through our airports. We have to do something beyond congestion. The issue then is transportation in the whole spectrum.

¿ (0950)

Mr. Brian Crowley: If I could, just very briefly, because I don't want the honourable member to think I'm not answering his question about how we see the highway being paid for, it's a very important question.

I need to say that AIMS is a public policy institute. What we are proposing is to do a program of work on this idea and develop a number of policy proposals. Because of the timing of this committee, we wanted to come and talk to you about what we want to do but have not yet done. So it would be premature for me to answer that question, because we haven't done the work to answer it. However, it's very high on our list of priorities, and we hope to have some suggestions in due course on that point.

Mr. Michael MacDonald: If I might just add one thing, Mr. Stouffer, our American colleagues are very much thinking about a toll road, because it would be a mainly private-sector-funded highway. I don't think the Canadian government is going to invest in a highway in northern Maine. Because of the binational nature of this road... Perry, maybe you could comment on this better than I.

Mr. Perry Newman: We've done a number of off-the-cuff studies of how the road might be paid for. We're talking, I'm assuming, about the road that goes across Maine from Calais-St. Stephen to--

Mr. Michael MacDonald: Sherbrooke.

Mr. Perry Newman: Yes, and the estimates that have been bandied about are about $1.2 billion U.S. for the cost of that road. That's a significant amount of money. A great senator, Everett Dirkson, many years ago said a billion here, a billion there, pretty soon you're talking about real money—although I think at the time he may actually have said million, which gives you an idea of how dated the remark is, and I shouldn't admit that I know when he said it.

The cost is about $1.2 billion U.S. to build that road, which is a significant amount of money. Now the way roads of this nature are paid for in the U.S. typically is roughly 80% to 90% federal funding and the state comes up with the balance. For the state of Maine, which is a small economy, as I have belaboured the point in my remarks, that's a significant sum of money at a time when we have a newly discovered deficit in our budget and so on. However, with even modest tolls, and I'm talking about maybe $5 to go the entire length of the state, a significant portion of the state's portion could be paid.

I don't believe it's a question of money that's keeping this road from being built. I think there has been an historical aversion to it, because no one has been able to say adequately what the real tangible economic benefit for the state of Maine and northern New England would be. They keep hearkening back to the fact that we are a small economy, our neighbours have small populations, and so forth. What's the economic development benefit? What's the bang for the buck and what's the value?

Now, by taking this regional approach and undertaking some more sophisticated economic analysis of the bigger picture, I think we have the opportunity to demonstrate what the real economic development benefit would be of this road that links heretofore separate economies together. In other words, we've never really looked at the big picture in the appropriate context.

If you were only connecting Maine as an island, from one side to the other, this road probably wouldn't be worth the investment. But connecting population centres, trade centres, ports, and so forth with this new vision in mind will have an explosive economic development effect, I think.

One final remark, if I may. The main turnpike, which is not indicated on the map, runs basically from New Hampshire up to Augusta, on Interstate 95. It has just celebrated its fiftieth anniversary since completion. People had said that it would never pay for itself, that there would never be adequate traffic on it, and that it was just an economic development boondoggle. In fact, it took about 30 or 40 years for it to reach its current level of traffic, but without that road right now, I would weep at the economic situation in Maine.

Similarly, I think it may take a while for the economic development benefit of the road we're talking about to be built to achieve its maximum impact, but there's no question in my mind that it would benefit all concerned. And it's not a question of money, it's a question of will.

The Chair: Thank you.

Before I move on to the Liberal side, I just want to put it on the record that our clerical people tried very hard to get the Halifax Port Authority to present before us, to answer some of the points that were made in terms of pre-clearance and things that happen at the port. Somehow we weren't able to get them out, and we weren't able to get the authority to give us the details.

¿ (0955)

Ms. Aileen Carroll: Excuse me, but are they going to submit a written submission? Have we requested that, possibly?

The Chair: Yes.

Ms. Aileen Carroll: Given the 20-point smart border agreement between Governor Ridge and John Manley, I think it would be really good if we could get--

The Chair: Something written from them, yes.

Ms. Aileen Carroll: It could go into the record and help us with our report.

The Chair: That's right.

Mr. Peter Stoffer: They also talked about those meetings between the state governors and the eastern premiers. If they have minutes of those meetings, or any concerns, I think that would be helpful as well.

The Chair: All right.

Ms. Carroll.

Ms. Aileen Carroll: I always jump in early.

At any rate, just to be here and to listen to this is an excellent opportunity. Indeed, as you've pointed out, the history is there. Professor Forbes was so right; it moved us a thousand miles out when we signed up for Confederation. Always, though, even in an embryonic manner, in the era of ships, when we owned the transportation routes, being on the ocean, that sense of region existed between New England and the Atlantic provinces. What you're doing is building on it.

One could say that we should have moved faster, earlier, but sometimes the worst events, such as September 11, as God-awful as they are, can kick-start things like this. In many ways, I think what's happening now is that we are compelled to look, because of security, at an integration that maybe we had a discomfort level with before. In my view--and I'm just one member--that is a very positive outcome.

What you've touched on, and Peter has as well, is what the American government has asked for. And they're going to do more than ask for it; they're going to demand that piggy-back shipping, to use an old term, or containerized shipping, arrive security-cleared. It's not just the port of Halifax. It's not being aimed at us. Listen to me; I'm home for half a day and it's “us” again.

So it isn't aimed here. Knees are shaking all over the world as ports envisage what the costs will be for them. It is going to be a huge cost.

At any rate, so much of what you're saying I find very exciting.

My question is, why is it a dilemma...? If the U.S. hasn't done a northeast quadrant study, why do you need to come to the Standing Committee on Foreign Affairs and International Trade to ask whether you can sit down with Transport Canada? I mean, that seems to me to be a given for anybody who's developed it.

Perhaps we'll let them answer first, and then I'll listen to my NDP colleague.

Mr. Michael MacDonald: I think the issue, Madam Carroll, is that we just need some help. I'm not saying we're against this; it's just inertia. I mean, the map tells the story of the level of interest.

But to get back to your point in terms of the port, you must remember that Boston is a feeder service into Halifax. The whole northeast looks northeast. It doesn't look south to New York. And I would say that after the tragedy of September 11, access into the port of New York, in terms of security and congestion, is really working in the interests of Halifax and Montreal--very much so.

The other thing too is that you must remember that Nova Scotia gas, through that one pipeline, which runs through New England to Boston, and a proposed second pipeline, a submarine pipeline, which would, in effect, join together the gas fields of Newfoundland, the Cabot Strait, and Sable Island into New York, is re-translating the whole notion of economic union, of our unity.

Basically, Canadian oil and gas is now an issue of homeland security. It is not just an issue of natural resources. I think the challenge for us as Canadians is to change our heads and realize the new significance and importance of our resources, our ports, our roads, and our access to the sea.

I'll give you one little anecdote. About ten years ago the American military met in Chicago to discuss an important issue they had faced in the Gulf War, and that is, they could not disembark a division quickly enough on the Atlantic seaboard. They could from San Diego on the Pacific seaboard. And so they looked at all the ports in the U.S.A. and none of them was adequate. The only port that was adequate to disembark a division was the port of Halifax.

Ten years ago the politics were such that this would have almost been impossible to discuss, let alone do. It is not impossible today, so things have changed radically for us.

Ms. Aileen Carroll: Go ahead, Mr. Crowley. It's you we're here to listen to.

Mr. Brian Crowley: I'd like to speak a little about the port and then very briefly about this map again, if I may.

I think the port is an interesting example of part of what we hope to do in our work on the Atlantic at the institute. One of the things we're going to be doing is looking for imaginative projects that we can try out in this region that can be a test case for the country. I think the port of Halifax is a beautiful example.

As you may know, I believe several U.S. customs agents have just arrived in Halifax. They are going to be working with the Department of Citizenship and Immigration on inspecting containers as they arrive. For instance, we'd like to see the port of Halifax become a test case. When those U.S. customs agents agree with the Canadian customs agents that a container has been cleared, we suggest that this container can then move anywhere in North America without ever being inspected again. That's not going to be the case now. When that container leaves Halifax, even though U.S. customs agents will have signed it off, it can still be stopped at the U.S. border and inspected again. We want to suggest that this is not necessary.

Ms. Aileen Carroll: In discussions that surrounded Governor Ridge's visit to Ottawa, the sense I had from accompanying officials was that they indeed want to accomplish what you're suggesting. They don't want it to be stopped again. They're looking at a level of security clearance that will allow what you—

Mr. Brian Crowley: I don't think we're there yet.

Ms. Aileen Carroll: No, I'm not saying we're there yet, but I would think it's in the American perspective to get there. I think it's going to be a great segue into Dr. Stuart's presentation. We have to be careful not to get our knickers in a knot on definitions of “sovereignty” that don't apply, but then we could go way down a road on that.

Atlantica—that's a great name, but it makes me nervous. It reminds me of Atlantis. Was that not this mythical city that sunk? But it's Atlantica, not Atlantis, anyway.

Mr. Michael MacDonald: A Nova Scotia portfolio...

Mr. Brian Crowley: We're trying to refloat it.

Ms. Aileen Carroll: Absolutely. And it's a great point that you're talking about. Let us not recreate dependency down here; let us become a part of what you're describing so very well.

I think where you're going is excellent; I think it's so historically rooted. Sometimes you look at it and say this. Why did it take us so long to get here? I know for members of Parliament on all sides that when we see a focus it seems terribly Upper Canadian in scope. It's sometimes great. What happened right after September 11 on that Windsor-Detroit corridor...the facts are that 87% of our trade goes to the U.S., and a horrendous percentage of that 87% goes across that border. Time-sensitive...there had to be a tremendous full court press. So I would say do not be too concerned.

À (1000)

We got things running once we conveyed to our American neighbours that we were meeting the security bar. In fact, we're way above it and could send that perception. Then I think a calm prevailed. Again, the wider focus is now back in place.

There was a need for an immediate response. It doesn't mean you should ever take our feet away from the fire.

Anyway, yes, I know.

À (1005)

The Chair: Thank you.

I'll move on to Mr. Baker.

Mr. George Baker (Gander--Grand Falls, Lib.): I don't have any questions, Madam Chair, only two observations. Following the witnesses, I'd like to bring up a minor point--it's not a minor point; it's a major point concerning television coverage of the proceedings.

Normally, the rules are pretty clear. Although we're politicians, we don't allow the press to tape portions of the meetings that go on. In other words, the rule is you either tape the whole thing and present it, or you don't tape portions. It is rather ridiculous when you get to the point where you have seven hours of meetings. You have a great network, like CPAC, in the room, and they're not permitted to tape portions.

I'd like to address it very briefly for one minute after. I have the unanimous consent of the sitting members, apart from the chair, right now, to bring it up following these people.

I have two observations. Number one, it's the first time I've heard the honourable member say this, and I think it's on the record: “I have to be careful of what I am saying”, she whispered a moment ago.

Madam Chair, that was never heard prior to her becoming the Junior Minister of Foreign Affairs.

An hon. member: Here, here!

Mr. George Baker: It's number one.

Number two is this observation. As I listen to the witnesses, the important thing is that the committee has a function at this point. It is the lead-up to the G-8 summit in June and the decisions to be made by the Government of Canada. Of course, the important thing is the transcript of this meeting will be gone over with a fine-tooth comb with several departments of the Government of Canada.

The important point I think you're making in the record of this meeting is, as the Prime Minister says, we want direction from this committee and from the witnesses concerning strengthening economic growth between Mexico, the United States, and Canada.

This is a primary way to strengthen economic growth in North America. I think it's your main point.

The Chair: Thank you, Mr. Baker. I think you have summarized nicely.

In reference to the media, they could tape according to this, but they have to go until there is a natural break in an entire session. We stop at the end of witness statements, and then it's the break they can go to.

Mr. George Baker: Following the witnesses, I'd like to make one point. I think Mr. Stoffer has asked to make a short point, for 30 seconds each, following the witnesses, if we could.

The Chair: All right, Mr. Stoffer.

Mr. Peter Stoffer: Yes. I was astonished, Madam Chair, when in Newfoundland yesterday there wasn't any media at all, not one. Usually when a committee of the standing committee of the House, or even a subcommittee, goes to Newfoundland, they're there in a full court press. There was no one.

I checked the papers this morning. There wasn't even a hint that we were there. Today, normally we would have The Chronicle-Herald, The Daily News, ATV, and all the news channels here as well. They're not here.

Either a press release wasn't done, a media advisory wasn't done, or the media for some reason decided this is not an important issue. I find it astonishing, because of oil and gas and everything else.

I'll give Mr. Crowley credit too. Wherever he goes, there's a camera following not far behind.

I did have a very quick question, Madam Chair, if I could sneak it in.

The Chair: Go ahead.

Mr. Peter Stoffer: This is a map of roads and rails. If this was an air service map, you would see a very serious lack at the Halifax airport as well with the issue of pre-clearances.

A lot of my Liberal colleagues, Dominic LeBlanc and others, have raised concerns. When the United States doesn't like something, for example, with potatoes from P.E.I. and the recent mussels concern, they'll tie us up in court. Gerald Keddy has mentioned Christmas trees as well.

We do everything according to the book, as the Boy Scouts or Girl Guides we are. When the United States says they don't like this and are going to tie us up in court, as they're doing on softwood, we have to spend millions of dollars fighting it.

How do we get around it, Mr. MacDonald? That's the question.

Mr. Brian Crowley: I have two things, if I may. First of all, I'd like to draw the committee's attention to the importance of this map, not just the lines that are drawn on it but what it symbolizes. This map is extremely eloquent.

If you think about it, whether it's Canada or the United States, for well over a century we have spent all our energies building east-west, building national infrastructure to link the parts of these countries. It would be the same if you looked at a map of Canada. Every one of these corridors touches either the U.S.-Canada border or the U.S.-Mexico border, with the exception of one that goes east-west. This is the embodiment of a decision that's been made to create a continental infrastructure.

The main job now is to build a north-south infrastructure. The one thing I would draw to your attention is that the one piece of infrastructure to draw together that continental network we're talking about, that is not north-south but east-west, is right here. In order to tie together the Canada-U.S. continental infrastructure in this part of the world, you have to think east-west and not north-south. It's the only part of North America where that is the case.

À (1010)

Ms. Aileen Carroll: Also, let's not forget Mexico. Canada is busy attempting to develop a Canada-Mexico line within the triangle, not just Mexico-U.S. and Canada-U.S. We are competitors for foreign investment. Indeed, this is not to leave the Americans out, but we need that third bilateral connection, because there's a lot we can build there if we're really going to be looking at a very well-developed North American continent.

Mr. Brian Crowley: Michael said he didn't think it was very likely that the Government of Canada or taxpayers in Canada were going to spend money on a highway in Maine. I would point out that the U.S. government's legislation does allow it to spend money on infrastructure outside its own borders.

A voice: The Alaska Highway.

Ms. Aileen Carroll: Joint infrastructure is costly.

Mr. Brian Crowley: Let me now come to Mr. Stoffer's question about trade disputes. I think this is a vital question.

My view, for what it's worth, is that in a trading relationship in which 50% of the production of our private sector in Canada is exported to the United States, and only 25% of America's GDP is exported throughout the world, let alone to Canada, we are always going to be unequal with the United States in trade matters. It's always going to be the case.

As the junior, weaker partner that is more dependent on the U.S. than the U.S. is on us, we must always strive to move trade issues into a rules-based arena. That was one of the primary motivations behind the free trade agreement. If you don't have a treaty in which there are rules set down and in which you know how you're going to resolve disputes, you are always at the mercy of the more powerful partner. That's why the free trade agreement was an important step. I'm not saying that therefore when there are disputes and we use that dispute settlement mechanism we always come out the winners, but we are in a far better position to manage our trade relationship with the United States as a result of the free trade agreement than we would be without it.

Can the dispute settlement mechanism be strengthened? Of course, but I must say I think Canada has done pretty well out of the dispute settlement mechanism. We win more than we lose. I think the fact that we have the Americans committed to a rules-based treatment of trade disputes is a huge advantage for Canada.

The Chair: Thank you.

I'd like to speak to the fact that we've sent out press releases. The clerk has assured me that we blitzed the media with e-mail and we sent releases to all the media in Atlantic Canada.

Mr. Peter Stoffer: As important a subject as this is, Madam Chair, it's astonishing.

Mr. George Baker: I wonder, though, Madam Chair, if the clerk wouldn't agree that as far as the rules are concerned, the chair really can do whatever the chair wants, with the unanimous consent of the committee. The committee gives the chair herewith unanimous consent to allow CPAC to do whatever they please in the room during our hearings.

Some hon. members: Oh, oh!

Mr. George Baker: The chair, being such a liberal person...

The Chair: They don't have blanket consent to do whatever they wish; there are some guidelines under which we operate. That is, they keep the camera in one steady position. It is all spelled out in the rules. We operate according to the rules. They start at the beginning and they end when there is a natural break. They must have the camera located in one part of the room so that it is not being moved around from person to person. Under those conditions, yes.

À (1015)

Ms. Aileen Carroll: We can't have a natural break if we go to Dr. Stuart.

The Chair: Yes, there is a natural break now.

Ms. Aileen Carroll: Can we begin now?

The Chair: Yes.

Ms. Aileen Carroll: I want to say I think it's a shame that these kinds of ideas, which are dynamic, and will continue to be throughout the day, and our being here in Halifax to engage locally this kind of incredible input is being missed from the media perspective. This is a shame. This is what happens when we get out of Ottawa and get on the road, and it's not being conveyed to people.

Mr. George Baker: The only problem with all of this is that the rule--and it's been passed by Parliament, which is supreme--is that you can't carry a portion of this meeting unless you carry the entire portion. Can you imagine the evening news carrying the portion that goes on for an hour?

This is why I say, Madam Chair, that the committee is really a master of its own destiny under our rules. The committee can, if it so wishes, throw out those rules and say they will allow the media to come in and tape a portion for the evening news. This is why a committee operating under this structure can get no television coverage. That is not the purpose of our being here in the first place, because, as you say, Madam Chair, we are here with a purpose leading up to the summit. But it's a shame that the local media are not allowed to take portions of this committee, yet we try to communicate what we are doing.

It's very unfortunate because, as you say, the level of witnesses here today is truly startling, and it's a shame that we couldn't just make a blanket rule. But I'll leave it up to the chair. The chair of course makes the rules.

The Chair: The chair, at this point in time, rules that at the appropriate break, which would be the one after this, the cameras can continue to roll until another break. The press is also entitled to whatever interviews they want to do with witnesses outside of the room, at the back of the room, or wherever, on a one-to-one basis, or, in the case of Atlantica, all three might be interviewed. But this is outside of the ambit of the committee itself.

I have one question that I leave with you. For the benefit of the work we have to do in terms of documentation, I was going to ask, if time permitted, whether you see the existing NAFTA institutions being adequate to meet the transportation and infrastructure challenges you have identified, and whether we need to go beyond NAFTA, and what should be the respective roles of national governments, state governments, or provincial governments in that regard?

Maybe you can mull that around in a one-pager to us, and that would be most helpful.

Mr. Brian Crowley: By all means. We'd be delighted.

The Chair: Thank you very much. Thank you for being with us this morning.

Mr. Brian Crowley: Thank you very much. Thank you for listening so attentively and for the invitation to be here.

The Chair: It's a natural break.

À (1020)

À (1025)

The Chair: We'll start again with our witness from Mount Saint Vincent University, Professor Reginald C. Stuart from the Department of History and Politics.

Dr. Stuart, we're very pleased to have you with us. Thank you for sending us your recommendations, which the committee has had for a while and which I'm sure we've all read and highlighted. Please proceed.

Professor Reginald C. Stuart (Department of History and Politics, Mount Saint Vincent University): Thank you very much, Madam Chair, and I'd like to thank the committee for finding a place for me to come. It's a new experience for me and I'm looking forward to it. Professors are quite accustomed to declaiming at length, but I will try to curb my enthusiasm.

Just for your information, it has been of some interest to me that in the years I've been teaching Canadian-American relations there has been a steady increase in the enrollment. This year I was surprised to see it mushroom from 25 to 45 over last year, which for a small institution is a pretty good enrollment. I would like to think, of course, it's my magnetic personality, but it's probably the response to events in the news.

You deserve to know a little bit about me. I have degrees from the University of British Columbia and a doctorate from the University of Florida. I have been studying Canadian-American relations in a historical context for about the last 15 years or so. My last book was on that subject. It was published in 1988. I've done a number of cross-border studies, and I'm working on a fairly substantial one now that I'm calling “Dispersed Relations”, which is an attempt to see the Canadian-American relationship not only as state-to-state relations but as provinces to states, as Mr. Crowley and his colleagues just pointed out, as regional linkages, and also as the linkages of peoples and cultures and values and societies.

I'm convinced we have, in many respects, alternate versions of what has become this settler society in North America that has evolved over a couple of hundred years. Drawing stark distinctions between the two countries is certainly possible in some ways but extraordinarily difficult in others. Many Canadians have American family members. We are an intermingled people.

I begin on that kind of foundation. Based on the studies I've done, I would say too that scholarly research certainly supports what Mr. Crowley said about NAFTA and the attempts of NAFTA, just with the caveat that what NAFTA does not do, and which I suspect not even a customs union would do, is remove domestic politics and the constraints and the dynamics of domestic politics from the equation. This is the point at which you get figuring out the softwood lumber case, which strikes me as a beautiful case study in Canadian-American relations because of so many players--provinces, regions, interests, and so on--and the simple structure of Congress and how it works in comparison to the structure of Parliament and how it works, and then how the two federations work. It's a very complicated business to which there are no easy answers.

I wondered at first about the relevance of my statement when I made it up. But then it strikes me, as I listen to Mr. Crowley and your questions, that it's important for the committee to have the kind of general statement that I and many of the witnesses before you last November made. I think of Charles Doran and Christopher Sands from the United States and Stephen Randall from Calgary and Denis Stairs from here. There is a whole range of them--people I know or whom I've read. It's important to have those too. Even if I repeat what they say here, in building a consensus that's what I suspect you'll need to do--to see what themes emerge in common from what people have to say.

Your work is very important and as a close student of cross-border affairs, I think it's very urgent too. My perspective, generally speaking, sits in a realist camp.

It seems to me that in the days after the shock wave of 9/11 hit our border crossing points, many minds, as I say, became focused—to borrow from Samuel Johnson—from the sure knowledge that our economy might well be hanged in a fortnight as American authorities constricted the border points to bolster their national security. They've highlighted what in effect became two conversations going past each other between the two countries. One, from the American standpoint—and one can certainly understand this—was security. The ghost of Ahmed Ressam was in the air. That, plus suspicion, was quite enough to have the kinds of fingers pointing north that we saw, that somehow Canada was a source of easy entry for the sort of people who had hijacked those aircraft. It proved to be untrue. There was no evidence to support it, but it was an atmosphere of fear and suspicion that led to it.

À (1030)

So various minds became focused. Our concern was to keep the border open so that goods, those on legitimate business, innocent tourists, and people visiting families could move. From their standpoint, it was “bolster that border so that we can protect ourselves”.

I think the kind of framework I've tried to develop for my current project can help us to understand some of what I suspect are going to be comments—we've already heard them in Parliament and seen them in the press—that is, concerns about a loss of sovereignty if Canada were to develop a more open border system.

When Mr. Graham was your chair, he said in his press release announcing this committee's work that everything should be on the table—customs union, dollarization, and so on. With regard to dollarization, the economists will argue that one out and we'll see how it goes.

The customs union may be a more realistic consideration. It may well resolve many of the border problems, as it's clear that both countries are putting more and more resources into that border. What you have is a kind of rush going there in money, personnel, and bolstering. I had a website clipping from The Washington Times on how the border forces, if you like, of various kinds, including INS, are being augmented. More money is being asked for, and of course bureaucratic politics gets tied up with that on the other side. We are putting more and more resources into this border. The Americans might be able to afford to do that, but Canada will very quickly reach a point where it can't, just because of the asymmetry of our resources. They will fight against it as well in the U.S. system.

I think a framework can perhaps help us to focus our discussion and our analysis of these problems.

It seems to me, based on the studies I've seen, along with my book on U.S. expansionism and British North America in the 19th century, that really we're looking at integration on cultural, social, and economic levels that dates back to the early 19th century. It starts to become apparent around the 1850s and 1860s.

Our first free trade agreement was in 1854, if you think of “our” as the provinces of the time. The provinces had no powers in foreign policy, but the British negotiated a treaty with Washington, which was purely a provincial-American affair, and each provincial assembly had to ratify that treaty before it could come into effect for that province. It was a very simple thing that was dealt with in a few pages.

The structure I've set up talks in terms of culture, which has a very wide meaning for me. In one sense it addresses all ideas and ways of life in your society, including common assumptions, values, institutions, place of the family, and habits of mind. Culture can also, of course, be used to refer to what we would call high cultural artifacts—the performing arts, creative literature, and so on. But I think a sharp distinction has to be made between the mass culture of modern times and what we would call popular culture, which is often regionally based. So something like the country music or the celtic revival in the Maritimes finds a ready audience in different parts of the United States where's there's a similar ethnic background, as an example.

I think as far as the national identity is concerned, that traditional signifier “we are not Americans” has pretty much faded, from the remarks I've read, in particular since 9/11. There was a little spasm of anti-Americanism, what's called the blow-back thesis, meaning that somehow the United States had gotten what it deserved. It was interesting to see that not only columnists, experts, academics, and commentators condemned this—Robert Fulford was particularly eloquent, I thought, in that regard--but that letters to the editor in newspapers in Vancouver, Calgary, Toronto, here, and elsewhere condemned this kind of outlook, saying this was not constructive and that it bespoke to the worst side of our character and not the best. I think there has been a muting of these views ever since.

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Culturally, it seems to me...in other words, there is a great deal of similarity, but not necessarily integration. We don't have the same culture, but I would argue that we have alternate versions of a North American culture, and they're alternate versions that are shaped by our particular heritage. Ours has different elements from those in the United States.

Nevertheless, we share a broadly common culture. Both our legal systems come out of the Anglo-Saxon heritage. We both have traditions in common law. We both have traditions about presumptions of innocence, burden of proof, and reasonable doubt. We both have systems in which we separate the judiciary; we have an independent judiciary in both systems. We now have traditions of judicial review and so on. So there are very many ways in which our societies are similar, comparable, and parallel. They're not necessarily converging and not necessarily integrating, but I think they are intermingling.

In terms of social similarities, I think all of us have probably travelled in the United States. I've lived there on and off for a number of years and months, doing research and so on. In a New York cartoon published recently, a man in a restaurant leans across the table and says to another, “There's something not quite right about you. Are you Canadian?” What that suggests is the ways in which we can move very easily between the two societies without ever being detected. I think Tucker Carlson, the CNN fellow, referred to us as being like aliens. We can move around and we're wearing American skins, but occasionally something will happen, we'll get scratched, and it will show.

I think things like that show the comfort level that exists. That would not happen if any of us went to Mexico, to any African state, or to any part of Europe, where we would very likely be mistaken for Americans. I think we underestimate how much Europeans simply see us as North Americans, and I know friends who have travelled to Japan have said the same thing. A kind of equation is made between the two in people's minds, so I think there's a real similarity there.

So far, I've not been arguing that we're culturally and socially integrated, but we are very similar. On an economic level, I think there's no question that we are integrated. There are post-NAFTA studies like Steven Blank's “The United States and Canada: The Emerging Architecture of North America”. On Washington's Center for Strategic and International Studies website, Christopher Sands had an extensive piece in which he talked about one economy and two systems.

All of the remarks you heard from my colleagues—known to me or not—last November argued fundamentally the same thing. We have integrated economies: 87% of exports, 73% to 75% of imports, and getting up to 35% to 40% of our gross domestic product, are dependent. But “dependent” is not the right word. Because we have such heavily integrated economies, words matter. When we use a word like “dependent”, it creates this image of a parent-child relationship. It's not. It's an asymmetrical relationship, as Mr. Crowley just pointed out. It probably can never be anything else.

On a political level, we have two jurisdictions. We have ways to exchange between those two jurisdictions, but we do have quite distinct political systems. On your question about the softwood lumber and mussels issues, Mr. Stoffer, what NAFTA cannot do is erase the domestic political systems, and it makes no pretense to do so. Mr. Crowley is absolutely right that the rules-based system was the very best way to go, because it removed a wide number of issues from the table. Setting up an elaborate system, going through the NAFTA tribunals, and so on, has actually discouraged a lot of these things from coming forth, or so the academic research seems to tell us—and the World Trade Organization rules tend to do the same sort of thing. But the rules also tend to show that you win some and you lose some. Sometimes your case is strong and you're able to get somewhere, sometimes you're not.

With the United States, the forces of asymmetry can come into play, so you may have to win your case a few times. Then again, I believe we still are supporting our Quebec company in Mexico with subsidies, as I read in the paper this morning.

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Ms. Aileen Carroll: Is that Bombardier?

Prof. Reginald Stuart: Bombardier, yes. I'm not arguing the case, but I believe it is.

There's no question that we're integrating, but we cannot get rid of those two political systems, which are markedly different.

In my paper I cited this colleague of mine. He taught Canadian affairs and I taught U.S. affairs at the University of P.E.I., and he always seemed to hold me personally responsible every time the United States did something he didn't like. When the fisheries treaty was negotiated during President Carter's term—this was when Prime Minister Trudeau, I believe, was in power, but I can't remember because there was a bit of flipping back and forth—he said, “Does this mean when we negotiate with the United States we have to negotiate with the American Senate?” And I said, “Well, yes; have you read their Constitution?” Now, he hadn't read the Constitution, and here was someone teaching Canadian history who had not read the U.S. Constitution.

I keep telling my students, how can you understand our relationship if you don't understand the United States? You have to understand Canada, but you can't understand it just in isolation like this. I suspect he's read it by now.

I have two other points here. At this stage it seems to me—and I don't know if there will be a fade factor—Americans are extraordinarily focused on the border at all levels of their administration. There are numberless articles in U.S. newspapers that show this. Even if they don't mention Canada, that focus is there and it's constant. This is something the committee and our government should attempt to take advantage of, not from the standpoint of leverage, but from the standpoint of mounting—it was Denis Stairs who mentioned this—a substantial public relations campaign in the United States. It seems to me we have an advantage there.

The other point, it seems to me, is that Canada now is an open book 24/7: twenty-four hours a day, seven days a week, anyone can go and visit all of our newspapers on the websites. They can see everything that is being said. They don't need a C-SPAN or a CPAC; they can go and visit. The can pull things out.

As to the woman who made her remarks out in Vancouver very shortly after 9/11, with all respect to her motivation, I must point out that this was very widely reported in the United States. Now, you obviously cannot stifle free speech, and everyone has a right to their opinions, but that gets reported and it's very easy for Americans to misunderstand something like that. It requires a constant effort to find out what is going on out there on the web.

Americans know more about us now, I think, than they ever have. Ten years ago this would not have been the case. Two years ago or six months ago you could hardly find Canadian stories in American newspapers, and I scan them regularly: L.A. papers, the Denver Post, Washington and New York papers, The Boston Globe, and The Miami Herald. You could hardly find a story on Canada that wasn't a sports story. Now, when the Prime Minister rearranged the cabinet, it appeared in American papers.

The Washington Post now has a Canada page in which it lists stories, and this is a widely read and widely visited newspaper in the United States. It lists Canadian stories, domestic political stories, and not just sports stories. It lists them. It has links to the House of Commons, to parties, to parts of Canada, to Canadian newspapers, to tourism sources—naturally—and sports channels, but it has links. The New York Times is another example. I know there was a tax squabble and they repatriated their correspondent from Toronto, but I believe The Washington Post still has a correspondent here.

My point is that Americans know more about us all the time. We are much more open books to one another than we ever were, and it's another of the ways in which, if there's not a cultural integration, at least there's a common looking in on each other's society and what we're talking about.

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It seems to me again we have to take some advantage of it, not by manipulating the news, not by putting out false stories, but by trying to build on the attention that the American administration and all of those American states that are up at the border have, because their economies are integrated with us in far greater ways than the United States has integrated with Canada.

Thomas Courchene from Queen's—you've doubtless either spoken with him or read his work—has pointed out how Ontario and the neighbouring states in effect have become an economic region that straddles the borders.

These are all points that we have to take into account and that I would urge the committee to do—to move a step beyond what Allan Gotlieb discovered a few years ago, namely, that Canada had to become a species of domestic lobby with the American government. The traditional state-to-state relations of relying upon the President, relying upon the Secretary of State, relying upon those kinds of linkages simply was inadequate. Why? Because there was virtually no department of the American government that could not in some way or other affect Canadian-American affairs and relations in trade.

Many of our citizens have discovered this attempting to go down to the United States and perhaps misreading... A good rule is, don't joke with U.S. customs inspectors. But some people don't always follow that rule. They wind up in some difficulty because of it. A number of our citizens have come up against that.

With regard to a change in transportation regulations, in insurance and licensing regulations, there has been quite a furor at the Mexican border with the United States over this as well. It can affect Canada severely. It sounds humourous and there were cartoons to that effect about Allan Gotlieb during free trade, but it's perfectly true. It's not just the administration Canada has to influence; it's members of Congress. The most important person in the softwood lumber issue was Max Baucus, the senator from Montana, the chair of the Senate finance committee, not George Bush.

It seems to me—and I'm sorry, I hope this doesn't sound like the good professor instructing—that it's very important to understand how the American political system works—who has power, how they get it, how they keep it, who their friends are, what the blocks are—or it looks like some maverick senator venting spleen, looking towards re-election, and picking on Canada. This is not to justify the American case, but it is to say that Canada needs to take a much more ground-level approach in its management of cross-border relations in the future.

I think Allan Gotlieb began that process. I know that Raymond Chrétien and Michael Kergin have carried that on. I think at one point in the softwood lumber debates these staffers at the Canadian embassy even sent the congressional staffers pizzas with little Canadian flags or beavers or something on them, just by way of trying to do that—to keep the personal relations going. You know far better than I do how personal politics are.

From my perspective, I believe that if there were anything to the argument that having the same or similar popular, or mass, culture would lead to Canadian-American absolute integration, as a number of scholars in international affairs and economics and Canadian politics argued in the 1960s and 1970s, we would have been there a long time ago. A man named Samuel Moffett identified that in his doctoral dissertation for Columbia University in 1907. He pointed this out—how American they were. A man named William Stead, who ran a magazine in London called the Review of Reviews, said the same thing. There was an Americanization of the world. He meant it in late 19th century terms. But when he came to Canada he was struck by how similar to him Canadians and Americans were.

If we were going to be amalgamated with the United States, it would have happened, in my view, if there was anything to that argument. It has been going on long enough that it would have happened. Well, it hasn't. Canada has retained its political independence. It seems to me that through the work of Lester Pearson and others in External Affairs, and in its various name changes down to DFAIT, we have maintained an independent voice for Canada in the United Nations, in the World Trade Organization, and in the International Labour Organization—any number of those organizations that you could mention.

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Even with the OAS, the Organization of American States, Canadians were fearful that if they went into the OAS, the Americans would expect them to fall in line. This would create problems. They would alienate Latin Americans or, if they sided with the Latin Americans on an issue, it would lead to difficulties in Canadian-American relations.

A colleague of mine, who works in the Halifax area, did a special study of the OAS in Canada and published a book on it. It wasn't true. It never happened.

If I have a general point here, anticipatory fears, rather than fears based on evidence and fact, seem to take hold of our imaginations so often.

I think it's why the term “sovereignty” has such traction in Canadian politics. Whatever we do, we can't compromise our sovereignty. If we compromise it in one way, then it will tumble like a house of cards and Canada will be lost. I don't for a moment believe it's the case.

I'm sure you have all followed the Maclean's year-end polls that began, I think, in 1990 or 1989. Every year, in one way or another, they deal with the issue of how Canadians see themselves vis-à-vis Americans, and how they see their country vis-à-vis the United States.

The polls, Compas, Ipsos, and others, that have come out in recent years suggest ordinary Canadians have far more confidence in their sense of independence, difference, and identity from Americans than many of the so-called spokespersons for Canadian sovereignty. They very often, as I think the studies of the Massey commission showed, did a lot of worthy work, without any question. To an extent, it was captured by a relatively small group who argued you had to have support.

The government support for culture, I agree, is important. I've benefited from it, and I know many others who have. I think it's important. I wouldn't for a moment argue to get rid of it.

It was captured by a group who believed if you did not do this, Canada would disappear; Canadian culture would disappear.

Again, I think there are different kinds of cultural products at the ordinary level of the person who watches television and may not read Margaret Atwood or Robertson Davies, but instead reads a Harlequin romance. Many of them are written by Canadians, incidentally. The question of sovereignty is simply not an issue. They are quite comfortable and confident in their sense of identity. In sovereignty, they do not fear losing these things. I would tend to agree with them. I think the evidence of the last half of the 20th century shows it isn't so.

Any pressure that could have led to it was during the cold war. It didn't happen. There were enormous pressures on Canada to conform by the American administration. It was fixated on the Soviet Union in the same way it has become fixated on the terrorist groups in the last six months or so. They obviously studied more about them previously. It's come into public view, I think, more in the past few months.

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The Chair: Professor, I'll ask you to summarize so we can go to questions. I think the interaction would be beneficial.

Prof. Reginald Stuart: My final statement would be that the border may be symbolic. It may be a border of the mind. It's a zone where Canada and the United States transact their living. It's a place where people go back and forth every day. I think the historical evidence shows Canada's sovereignty has been relatively secure.

The possibility of the United States annexing or taking over Canada in the 19th century has existed far more in the minds of some of our historians, and in the minds of British policy-makers and provincials, than it existed anywhere I could find when I did my book in the United States, once you get past the war of 1812. Even there, I would argue it's much less clear. We won't go back there.

The Chair: Thank you.

We'll go to questions now.

Mr. Rocheleau.

[Translation]

Mr. Yves Rocheleau: Thank you, Madam Chair. Thank you, Mr. Stuart, for your testimony. I have two or three questions in one.

When you state in your brief that “target groups composed of parliamentarians should be created”—Canadian-American, of course—, that there should be “an advanced customs union”, and “binational teams to inspect goods at point of origin, control centres within the borders”, and that “binational identity cards should be created”—United States-Canada—and that there should be “binational private interest groups”, I ask myself what true interest do Americans have in terms of binational organizations. I think that the United States, more often than not, ignores us or has ignored us, as Canadians, that they ignored Canada, and that since September 11, they are much more concerned with a Canada that they believe to be more of a threat, a danger, and a discomfort coming from the north, as if they were being tickled on the soles of their feet. First, I question the true interest of the Americans, especially since, second, their culture, as a people, does not lead them to be magnanimous or cooperative with a small country like Canada. In my opinion, the United States is dominant, imperialistic and authoritarian, and has no desire to consider us as partners. We are merely a tool. Canada is a tool; we see this with the G-8. I think that the United States takes Canada for granted. We saw this in Mr. Bush's omissions in complimenting the military successes, and in the fact that he visited Mexico rather than Ottawa immediately following his victory. Therefore, I would like you to comment on this.

I would like to finish by making one small point. As for Canadian culture, it seems to me that it is more threatened than you lead to believe. We hear that the CBC attracts much lower audiences compared to what the American shows are achieving, while in Quebec, it is exactly the opposite: Quebec shows have very high ratings because we feel special in North America, while Canadians in the rest of Canada feel that they are increasingly North American.

[English]

Prof. Reginald Stuart: Thank you. I'll try to separate some of your points, as you've put a number of them together there.

First of all, on one level the United States is an empire. You should bear in mind, however, that Canada is a member of the G-8 because Gerald Ford insisted we get into it. That's where it came from. It didn't come from the G-8 inviting Canada. The President of the United States got us in there.

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Mr. Peter Stoffer: It was the G-7 then.

Prof. Reginald Stuart: Yes, it was the G-7 back then. I can't remember if Italy was a member of it at that time or not. But at any rate, it's now the G-8, and that's how we got there.

With respect, I would take issue with your view that the United States has been a domineering power. There is no question it has a great deal more muscle, in almost every respect one can think of, than Canada or any other country now.

In 1968—it might have been 1969-70—Richard Nixon, with his treasury secretary, John Connolly, set up a system of surtaxes and payments because the United States had a dreadful balance-of-payments problem—it still does—with Canada. I keep hoping they don't notice this balance-of-payments problem. They never seem to mention it very much in any of their remarks.

Mr. Trudeau's government, when Ivan Head was his principal foreign policy adviser, at first assumed there had been a mistake there. The Americans said there was no mistake. I think John Connolly put it as, “No more Uncle Sugar”. He was a tough guy. He was a Texan, like LBJ.

So the Trudeau government got busy talking to its counterparts down in Washington--Robert Bothwell covers this rather nicely in a number of places--and eventually there was a meeting between Mr. Trudeau and Mr. Head and Mr. Nixon and Mr. Kissinger. I believe Henry Kissinger was the national security adviser at that time.

At any rate, they talked about this, and the upshot of the meeting was that Henry Kissinger said, well, don't worry about it, and they ended up taking care of it. What they did was shift it so that it became an export tax based on the tariff. The tariff at that time was zero in most of the items they were talking about, so an export tax on zero was zero.

The Americans solved it. Why? In large part because Mr. Trudeau and his advisers were able to point out to the Americans the same thing that Canadian members of Foreign Affairs were able to point out to the Truman administration when the Marshall Plan was being discussed: that it was in the interests of the United States financially to accommodate Canadians because Canadians bought a great deal of their services and their goods. In the case of the Marshall Plan, sufficient political support came about to have Marshall Plan dollars spent in Canada as well as in the United States, although there was very strong congressional support for only having those dollars spent in the United States. But of course Canada had long ago, during the war, not had any payment for what it had contributed to Britain during the Second World War, so these dollars were extremely important to Canada. Canada had a trade crisis in 1947-48 because of this.

So those are two instances that I would cite for you where the United States really has been accommodating as an administration.

Now, it varies from administration to administration; it depends upon what's going on. I watched Mr. Bush's speech, and as soon as it was over, I thought, wait for the editorials, Reg; for sure there's going to be all this commentary.

I do think, as many commentators pointed out in the aftermath of Mr. Bush's speech where he neglected to mention Canada, we tend to fix on these symbols and omissions rather too much and play them up at times. Yes, he didn't mention us. Yes, he should have mentioned us. Whether it was deliberate or not, I have no idea, but it might well have been.

Yes, Mr. Bush went to Mexico. Well, he's from Texas; he knows Mexico. It's the only country he had been to. He speaks Spanish. We're strangers to him, just like Texans and Arizonans are strangers to us, unless we happen to winter there. We know Mainers; we know people in Washington state or Idaho, if we grow up in British Columbia, but we don't know southern Californians or people from Alabama or Missouri either.

So I saw nothing particularly wrong with that, and as for this tradition, I think it has only really been since about 1990 that some President made his first visit to Canada. So it's not a tradition at all. The press plays this up.

The Chair: We'll have to go on to Mr. Stoffer. Thank you.

Mr. Peter Stoffer: Thank you, Mr. Stuart, for your presentation. I liked the fact that you added a touch of humour and wry salt to the conversation.

When you're talking about us as parliamentarians having basically a cup of coffee with our American colleagues to talk about interests in common, I can't help but think about Rick Mercer when he's talking to Americans and the fact that people in Little Rock, Arkansas, think we have a rhinoceros hunt in Saskatchewan and we should ban that, and they sign petitions--in a humorous sense.

But one point you made, sir, and I found this out myself, was the fact that it's not the President of the United States who's the most powerful person in a particular state; it's the governor of that particular state. If you look at, for example, the fishing wars we've had with Alaska over aquaculture, salmon harvesting...

Recently, over the last four years, I tried to get a Canadian citizen out of a California jail. I thought going through Raymond Chrétien, the ambassador at that time, was the way to go, and I found out that it wasn't. The warden of that penitentiary and the governor of that state decide whether this man gets out or not. The President has no influence or bearing on it. Even our own consul general, Kim Campbell, couldn't do anything about it. She tried, but it couldn't be done. Unfortunately, the man passed on.

Á (1105)

It just shows you where the real power is in the United States in terms of the regional basis. But my concern, sir, is, have you no fear at all or concerns at all when companies like Wal-Mart come in and Eaton's go out, MacMillan Bloedel get bought out by Weyerhaeuser, and Tim Hortons is bought by Wendy's, and the fact that a lot of Canadian companies based in Canada issue their financial reports in American dollars? Don't you think there is, as Mr. Rocheleau is saying, an underlying influence, slow but sure, as David Orchard once said, whereby you won't notice the takeover? It will just happen one night, overnight.

My question to you then is, would you support the adoption of U.S. currency for us to maintain financial wherewithal with the Americans?

Á (1110)

Prof. Reginald Stuart: I'm not an economist and I'm not Robert Mundell or Milton Friedman, and they disagree over these matters. So I don't know that I have anything positive to add to that.

My only comment on dollarization is that I suspect that the emotional quality of having currency as a symbol of independence will have great weight in the discussions, perhaps more than the economic arguments will.

I think there's a simple reason why a lot of what you say happens, that again it falls back on the asymmetry of the financial resources of our two countries. What is the purpose of a company? Is the purpose of a company, a private organization, to be a symbol of the nation? European countries are getting out of the airline business because they can't afford them. They're not flying national airlines any more. We almost lost one here.

If the purpose of a private enterprise corporation is to return funds to its shareholders, if it is to make a profit for itself and to employ people and to do well, then I'm not sure. We have ownerships all over the place ourselves; the world is criss-cross these days. And I agree with you about Eaton's. I shopped at Eaton's when I was a boy. I still keep some of my old Eaton's ties as souvenirs. But no, in a way, I'm not worried about it. Why? Because these stores are serving Canadians. Just as I applaud the success of Roots in moving its marketing into the United States, I think there is all kinds of evidence of cross-border merchandising and so on. We notice the Americans coming in more than they notice us coming in.

I don't recall if Mr. Crowley and his people mentioned it, but I would note the Irving presence and others in Maine, and some of the same sorts of statements can be made.

I think we really do have, Mr. Stoffer, an integrated North American economy, and I think that extends to cross-border binational firms and mergers that have taken place over the last 15 or 20 years or so. To me, those are the grounds on which we have to view it rather than imparting a kind of emotional, patriotic significance to these companies. I think if we're going to impart emotional and patriotic significance, we should put it where it's important, on the flag and our positions in international affairs, and not on who owns what, because I think that's enormously difficult to sort out.

The other point is, of course, that per capita Canadians have, over the last 20 years, invested far more in the U.S. than the U.S. has in Canada.

But what I've said is meant as an explanation rather than a refutation of your view.

The Chair: Ms. Carroll.

Ms. Aileen Carroll: Thank you, Madam Chair.

Dr. Stuart, I, like my colleagues, thoroughly enjoyed what you've brought to these hearings, and I think your insights and the things you've highlighted are very valuable indeed.

I'm going to hearken back quickly to Denis Stairs' recommendation in the fall, which you've mentioned, that we need to build on the personal relationships that exist, and we need to mount a publicity campaign in the United States. That is not an easy undertaking, of course, which I know you would recognize, given the diversity of media in the United States.

It was interesting—if I can just quickly say this—I was in Washington with my boss, Mr. Graham, at his first meeting with Secretary of State Colin Powell. It was in the midst of the media frenzy concerning the Canadian skaters. When we sat down to our working lunch, the first thing Colin Powell said was that he completely supported our skaters for the Olympic gold medal. It was very relaxing and so on, but it indicated an example of what was going on in the United States.

Later, our ambassador commented that there was no way they could ever engender that kind of focus on Canada that was just happening. And we could discuss for a number of hours, I'm sure, why it was happening.

I agree with Denis Stairs that we need to mount that kind of publicity campaign. I'm very cognizant of the cost and difficulty of doing so.

I think you make an excellent recommendation on the first page of your recommendations to create focused parliamentary and congressional liaison groups. I think that's very important. We do have a Canada-U.S. Parliamentary Association. I think they do good work...more the Canadians going to the States...

When you say, though, that we don't head out without knowing the American political system better than we do, I think that's an excellent recommendation. I think the complexities and differences need to be appreciated by those of us who would go down to encounter and influence on all of what was said.

I would like to comment on your comments on the European perspective of North America and the cultures that “intermingle”, which I think is a very good word.

I often go to Strasbourg to take our delegation to the Council of Europe there. Canada, as you know, has observer status in Strasbourg. Frequently, parliamentarians of eastern and western Europe comment to us that they have a comfort level with Canadians. This is not to imply negatively toward the Americans, but they see us as more akin to them than they do the Americans. What I mean to say is they're not being anti-American at all.

Prof. Reginald Stuart: Yes, I understand.

Ms. Aileen Carroll: They're saying they enjoy this commonality with us. So I find that interesting, too.

What we'll have on the transcript from the discussion is going to be very worthwhile, so I don't need to add to it further.

Á (1115)

Mr. Peter Stoffer: I have a question in terms of the relationship with the U.S.

The Chair: Yes, I'm in his territory, so I'm being very generous to him.

Go ahead.

Mr. Peter Stoffer: Sir, in terms of relations with the U.S. and their politicians, I've heard many times that 80% of elected U.S. officials do not have a passport. I find that a very frightening statistic when ours is much higher than that.

So we're basing, for example, the recent concerns of the Middle East and Afghanistan on...and you said it yourself that Bush only visited Mexico...so his world view. Now, of course, he's visiting more areas as the President. When we're dealing in a global situation, as we are now in terms of the economy, the movement of people and ideas, and the Internet, it's frustrating to know that 80% of the elected officials of the most powerful nation on the planet don't have a passport. So they're very insular in their thinking.

I wonder if you could comment on that.

Prof. Reginald Stuart: Well, I share your concern. I think it doesn't speak well. I think a few factors would account for it. One, we are in North America. We are separated by oceans. Two, I suspect it depends upon whom you are talking about. People in financial, commercial, and industrial sectors have passports and travel a great deal. This is the level which, I've argued, we are most integrated on, which it's most appropriate to use the term “integration” on. Those people travel.

The Americans are everywhere with their embassies, their consuls, their representatives, and their CIA and whatever. So on some levels the Americans are really quite engaged.

I never believed the fear that the U.S. was going to become as isolationist as it was in the thirties.

We could have another discussion on that one.

Á (1120)

There's also that critical mass of the United States. If you go to New York, people don't go outside New York. Go to Toronto and a lot of people don't go outside Toronto. Go to L.A. and that's a world unto itself. It's the critical mass that tends to hold their attention. They do see themselves as a world unto themselves, but I agree with your point. I suppose there are lengthy historical explanations we could develop to explain why, but that's about all I can say in response.

The Chair: Thank you Professor. Professor Stuart, you focused your recommendations to us very nicely on the binational, Canada-United States relationship, but our study and/or reflection is more trilateral and includes Mexico. I wonder if you could, if we can give you some homework here, focus a bit on how that relationship can develop. Where does Mexico fit into the picture? How can we extend some of the recommendations you've given us to include Mexico?

I'll just leave you with this. I'm not really looking for an answer from you right now, but recommendations are to be made by the end of June in this respect. Maybe you could reflect on the discussion here.

Mr. George Baker: What else is on the itinerary?

The Chair: It's the end of April for the G-8, for the North American study. We're also heading to Washington the first week of...Washington and also Mexico.

Again, any comments in that respect in that area, any recommendations you might have, would be helpful to us.

We thank you so much, and continue the good work.

Prof. Reginald Stuart: Thank you very much.

The Chair: Thank you.

We'll have a break.

Á (1120)

Á (1125)

The Chair: We will continue hearing from our witnesses. Dr. Ian McAllister is a professor of economics and international development studies from Dalhousie University.

We were pleased to receive your note saying you will talk about capacity-building in Africa. You will throw some light on other experiences you've had in the continent in light of our study around the G-8.

Dr. McAllister, please.

Á (1130)

Professor Ian McAllister (Professor, Economics and International Development Studies, Dalhousie University): Thank you very much. By the way, I don't know whether you got it, but I did distribute a chapter from a new book I've just finished on experiences in Ghana and Zimbabwe.

The Chair: Yes, we have that.

Prof. Ian McAllister: One might say that's fundamental to my credentials for even being here.

I made the mistake of being on VIA Rail over the weekend. I shouldn't say it was a mistake; it was a pleasure. But I bought George Grant's Lament for a Nation at the McGill bookshop on Saturday. The trouble with being on a train for that long a period of time is that you have the book and you read the book on the train. Of course, it's a wonderful book. I had forgotten how really perceptive it was. Having read it so freshly, though, the problem I'm having is that it makes anything I'm going to say seem awfully trite, and I realize really how prescient he was. That was the thing that really hit me. You would almost think he'd written it for this committee, it's so up to date in some ways.

I'm going to concentrate my comments today on three themes. They're all connected with Africa. I should emphasize that I'm not an African expert. In fact, as my daughters routinely point out, I'm really not an expert on anything at all.

I've had the privilege of spending a total of about two and a half to three years on that continent over the last 25 years. The longest single time was nine months. That was in Ghana. The rest of the time was added up over some 40 or so visits to different parts of Africa.

Two main sets of activities took me to that continent. Between 1985 and 1987, I coordinated—with counterparts, I'd emphasize, first from Ghana and then from Zimbabwe—training programs for the senior and middle management of their respective public servants in the broad fields of development planning, project planning, and management public finance.

Over 400 officials from those two governments participated in quite extensive courses that we held over three-month periods. Always a part of the course was in the field on projects. It was quite interesting to see public servants from Ghana, sometimes for the first time in their lives, actually visiting coca plantations, although 70% of the foreign exchange of Ghana was coming out of coca. It was amazing how often we were in fact enabling public servants of that country to see projects in the field that they had never seen. That was an interesting by-product.

In addition to the 400 people in the main courses we ran, there were some 500 or 600 officials who participated in less extensive courses. They may be one-week or two-week sessions. Some of the public servants also came over to Canada to courses we taught here, with enormous help from the Privy Council Office. There was also a special course, which I called “Demystifying the World Bank”, which we held in Washington.

So that's the basis of one set of my observations. The basis for the second set of experiences in Africa stems from my role in the late 1980s and early 1990s, when I headed the development department of the International Red Cross federation in Geneva. In that capacity, I was particularly involved on the African continent, with problems in Ethiopia, Kenya, Uganda, parts of southern Africa, parts of west Africa, and peripherally. I say “peripherally” because I wasn't in and out of these places. We tended to meet in middle areas—Somalia, Liberia, and Libya.

The third theme I'm very briefly going to touch on is African students in Canada, particularly from my role at Dalhousie, where for one of my students I started the Master's development economics program. The idea I had emphasized for that program came out of our work in Ghana, and it shows these two-way benefits that can come. It was suggested initially not by me but by a Ghanaian counterpart in Ghana, who was a graduate of Williams College in the United States, which set up the program at the suggestion of the World Bank. We set it up some 20 years ago, and I'll talk a bit about it because I think it has some potential interest for the African situation.

To try to be succinct, I'm going to, if I may, hit half a dozen points from all this. I want to make sure you have plenty of time to shoot questions at me, and please don't hesitate to interrupt if you think I'm talking absolute garbage.

We should recognize that Africa is a continent of very many contrasts, both of opportunities and of tragedies. The point I'd like to dwell on is that it has had many success stories, and some of these, despite the relatively stop-start Canadian aid programming, have been associated with Canada.

From my own experiences in Africa, when I was not always representing Canada but, as I say, the Red Cross, Canada tends to be well respected. I think it's well respected thanks largely to the number of Canadian school teachers, CUSO volunteers and others who have roughed it in the field and have shown enormous loyalty and have made great friends with our African colleagues. I think one might say they've made small differences here and there. They haven't been grandiose projects, but they have developed very constructive relationships.

I think the other reason, of course, is that it hasn't hurt us not to be Americans. It hasn't hurt us not to be viewed as a colonial power or completely under the shadow of the United States. I'd emphasize that. I can think of a number of situations where people were much more positive about trade negotiations and working with us when we were in outright competition with the United States. They said, no, we prefer to work with Canada. I can cite cases where Canada gained from that attitude.

So the first point is to be quite positive at the start, not just negative.

The second point I'd make is that capacity-building for development is really a very long-term process. Yet many Canadian projects, including those in Africa, have been relatively short term, and by “short term” I mean up to about five or six years. If you look at the analysis that has been done on them, you'll see that they have been appraised according to quite short-term criteria. I think that as a result of this, significant opportunities are frequently being ignored or foreclosed on. An example, I think, is people connections. People connections are not routinely maintained over the long haul in some of our African linkages. People get to know each other well for a while, but then the connections die off, and our high commissions and so on don't keep them up. I think we need a longer view.

The third key point I'd make is that large amounts of Canadian and other aid funds are routinely being allocated to so-called capacity-building, not least in societies undergoing the stresses of complex disasters, yet much of the lessons learned documentation remains really at an anecdotal level. It's drawn from very short-term and limited kinds of post-project reports.

I've been looking at a lot of capacity-building stuff recently, not just on Africa but on this whole business of peace-building, and our horizons have tended to be really quite limited in the analysis we've been doing. I've been noticing that the institutional memory side of many institutions, including Canadian universities, is really pretty thin. It's surprising how true it is of Canadian universities that so little of the experiences they've had in Africa as well as elsewhere has actually been written up and made available in the form of publications. Universities talk about publishing or perishing, but actually they're not very good at writing up their own experiences in the field.

If it's true in universities, it's even more true in the case of big NGOs. My own experiences from the International Red Cross side of things have been that we really have not been very good at learning from our experiences over the long haul.

Á (1135)

To give a concrete example and to anchor it in this region, I'll use the example of Dalhousie. Dalhousie worked for ten years in Ghana and Zimbabwe between 1975 and 1986, and yet we really, honestly have no clue about the longer-term impacts, nor does CIDA, of what we did in terms of the impact of that training.

We had lots of studies done while we were there. I think you might say it was a really good project in terms of documentation while it was running, and CIDA was excellent in supporting it while it was running. But immediately we finished the contracts, the writing stopped. And with that kind of capacity-building it's often only really about ten years later that one is going to have much of a clue as to what impact was made. If that's true of those Dalhousie cases--and I think those are in fact among the better projects Canadian universities have been involved in--it's true in spades time and time again in other organizations. I think this business of longer-term assessment is terribly important if we're going to get any better at this.

The fourth point I'd make, if I may, is that Canadian universities and other institutions, from my experiences, tend to work in competition with each other, in their Canadian regions as well as when they're overseas. I believe from my own experiences there's far more scope for constructive cooperation. When it does happen, the results can be very positive. I'm going to cite from Dalhousie's experiences.

We had actually excellent relationships with the federal finance department, with the federal Treasury Board, with what was then called the Federal Business Development Bank, and through both the excellent Canadian and also Ghanaian and Zimbabwean directors with the World Bank. This relationship generated what I call a thickening of the programs, and a number of important additional benefits for all parties were involved because of this cooperative approach. Too often, from my own exposures to Africa, projects have been treated by the organizations involved as if they're their own personal properties, with keep-off signs, almost, to other organizations not to meddle, single-disciplinary mindsets, and single-organization mindsets. There's an awful lot lost as a consequence. When there is cooperation, I think it pays off. That is the point I make. I don't think it has been encouraged enough either by our funding agencies or by the institutions themselves.

The fifth point I make is particularly focused on the International Red Cross movement in Africa. I think it's fair to say that the movement has very mixed capabilities and pressures are constantly there, especially in the African continent, to tackle immediate disasters at the expense of longer-term capacity-building. It's particularly problematic in some of the more vulnerable regions of Africa--I'm thinking especially of parts of Angola, Mozambique, and so on, where access to longer-term funding is very difficult to get in a sustained fashion. The mindsets of many African national Red Cross societies--and if you can say this for them, you can say it for the other NGOs--are relatively short term. They are swamped by such crises as AIDS, human rights abuses, wars, urban decay, and in many communities they're awfully close to starvation conditions.

If one is going to work to help these organizations be more effective, it's fine to say they need longer-term funding--they do. But with the longer-term funding, they need help in strengthening their professional capacities. It's something of a chicken-and-egg issue, as I see it. Money by itself is not a solution. They're very fragile organizations and they're often working with a great deal of corruption in the government sector to contend with. This too often spills over into their own organizations as well.

So if one's going to help some of these institutions--and I believe it's very important to do so as one tries to broaden governance in some of these regions--one has to recognize that it's not simply a money issue, it's a strengthening of their professional capacity issue.

Á (1140)

That takes me to the last point I'll flag, if I may, which is about the Dalhousie MDE program. The idea came out of Africa, and I really would emphasize it. Yes, it was modelled substantially after ideas from Williams College and from the London School of Economics, but the idea came from an African.

Since it was set up about 20 years ago, about 200 students have now graduated or are currently registered. That's over a 20-year period, and it's on target. Of the students, about 50 have come from Africa, and of those 50, my guess is that about 30 have gone back to Africa. From exposure to the African students in this very applied, oriented program, I just wanted to extract three points.

First of all, my impression is that it's much harder than it used to be for African students nowadays to get funding to join our MDE program. If you can say that about our MDE program, I think you can say it about most programs. African students seem to be encountering much more difficulty in getting funding to come to Canadian universities. It's a reflection of the problems back home.

My second point is that proportionately, few Canadians in the MDE program now go to Africa as part of the program. We used to have quite a few go to Africa as part of their field learning experience. Now I see that, particularly helped by funding agencies like CIDA, they are going to eastern Europe particularly and occasionally to southeast Asia or the Caribbean. My perception from one program--and it's a fairly comprehensive one at Dalhousie--is that we seem to be having fewer graduate students going and learning about Africa in some of these programs because of, again, the way the funding is going.

The third point I'd make is that there do seem to be fewer African students returning to Africa than when I first started this program. At the beginning almost everybody was going back. Now I find fewer seem to either want to go back or go back. Perhaps efforts are needed to help them more than used to be necessary. I think a lot can be accomplished by rather a little. For example, if they're going back, we could give them a scholarship, as it were, over maybe a longish period so they could access journals to keep up professionally. We could give them a travel grant once every three years or something to attend an occasional conference. Small things like that can mean a huge amount to some of these people.

I am quite convinced from having, as I say, been in and out of the continent that some of Canada's best ambassadors and best trade commissioners are not the excellent people we produce at DFAIT--and I'm not saying anything negative about them, because my experience has been very good. I think some of our best ambassadors and trade commissioners are in fact those Africans who come over to Canada, who've had good experiences, who go back to their own country, and who feel a loyalty to this country and follow it up.

The question is not so much whether they follow it up, it's more a question of, are we doing enough to follow it up? I believe there's a high payoff if we do.

Those are just a few points I wanted to make. I appreciate your taking the time to listen to me. Please shoot me down.

Á (1145)

The Chair: Thank you very much, Professor.

We'll just go around with our questioning. Mr. Rocheleau.

[Translation]

Mr. Yves Rocheleau: Thank you, Madam Chair. Thank you for your presentation, Mr. McAllister. We can feel how it has been enriched by your experience. This can be felt.

I have a two-part question. The first part deals with paragraph 2 in your brief, for which I have the translation. In the last sentence you state:

We only have a very limited knowledge of the long-term impacts of Canadian assistance that has supposedly contributed to strengthening capabilities in Africa or elsewhere.

What interests me especially, what I would like to know...are you alluding to CIDA when you mention Canadian assistance that has supposedly contributed...If we asked you to tell us within two minutes what you think, generally, about CIDA's activities in Africa...I would appreciate it.

You mentioned African students who study here, in Canada and Quebec, and who go back home. You alluded to corruption. What interests me is to know if over the past several decades the level of business has increased thanks to the ever increasing education of Africans who study here, as well as in Europe. Is there any improvement, or is the situation still quite problematical, not to mention frightening?

Up to what extent, as we were told, should the aid or funding that will be eventually sent to Africa, be oriented towards the NGOs rather than to the governments, which, we should be aware, constitutes a certain violation of sovereignty? This is a lack of respect or recognition towards governments, elected or not, towards the structure that Africans have given themselves. I find that we are on thin ice, in my opinion, to give blank checks to NGO's, besides, and recognize them as our representatives.

Á (1150)

[English]

The Chair: Professor.

Prof. Ian McAllister: Merci, monsieur. Those are good questions. I'm going to start with the second one because it's very fresh in my mind and then I'll go back to the first one, if that is all right. I may have to have you prompt me again on the first one.

The first point I would make is not to have as much confidence perhaps as sometimes the public would suggest one should have on the quality of some of the NGOs. The NGOs are a real mixed bag of organizations. Obviously some are really quite professional, and I would cite, for instance, Oxfam, CARE--there are a number of good ones--and I like to feel the Red Cross is in that category. But there's an awful lot of fly-by-night NGOs, which are really there for very dubious reasons.

So the NGOs by themselves are not all the answer. I think one can work with corporations, one can work with governments, one can work with NGOs, I don't think suddenly this crowd is terrible and this crowd is great. There's just as much corruption in some of the NGOs as there is in some of the governments. So you're not necessarily over the hump by working with NGOs. It varies much, depending on the NGO.

Can one say that the African students who've returned to Africa have in fact made a big impact on Africa? You see, this is one of the problems that I face; we honestly don't know. I can cite a number of anecdotes. I can cite African students I've had and I can say, look at what they've done since, and I can think of very good things they've done. But in overall terms, it's just a few drops in a bucket. I really don't know.

To some extent I think one could take a position that a lot of the western education that Africans have had here in this country has perhaps not been very relevant to what they've gone back to do, but if it's sharpened their minds, maybe that's great. I think one can think of others who've gained immensely from being in Canada. A lot depends on what they did here.

As universities--I can say this, I think, with some certainty, but I know I'll be shot down--I don't think we've listened enough or thought enough about what those African students sometimes need. That's a sweeping generalization, but I don't think we have necessarily been responsive enough to students from Africa in designing our programs. We've tended to say, if you want to come to a Canadian MBA, you come to a Canadian MBA; you don't come to a Canadian MBA that's going to have some adjustments to make it pertinent to the kinds of situations you're going to have in Africa. We're not necessarily as responsive as we might be. That's one area I would raise.

As for the second question you had, I wrote down “aid to Africa”, but I didn't completely fill it out. And now I've gone over my time, but would you mind just repeating it?

[Translation]

Mr. Yves Rocheleau: It's a reference to paragraph 2 in your text, where you state: “Canadian assistance that has supposedly contributed to strengthening capabilities in Africa or elsewhere.”

I wish to know if your are targeting CIDA. In any case, I would like to know, in short, what you think about CIDA's activities in Africa.

[English]

Prof. Ian McAllister: Merci, monsieur.

I don't know enough about CIDA's activities in Africa to be able to sweepingly make comments. I know a fair amount of CIDA's experiences in parts of Africa in particular points of time. I could say, first of all, that there have been many occasions when I think CIDA has been exceedingly well represented by some of the staff they have there. Some of the high commissioners who have CIDA background as well, I think, have been first-rate people and have been very conscientious.

I can think of people like Charles Bassett, who ran into substantial problems in Zimbabwe, I remember; with the Mugabe regime at one point, and then he got thrown out. He was really first-rate. And I can think of David Reece. I can think of a number of very good Canadian representatives who had CIDA connections who've done a good job in Africa.

One of the things I had pointed out, responding to your point, is that when I say short term, that doesn't mean CIDA doesn't have evaluation studies done. But it seems to me they're much more interested in whether 20 students attended this course or whether such and such happened during the course, rather than what those 20 students really did learn. Five years after they're back in their jobs, what difference has it made? If we were to do it again, what might we do differently?

I don't think CIDA has been giving the projects it has been associated with the long enough kind of analysis that is needed if one is going to really learn what happened and what didn't, and that's one of the problems. One suggestion I'd make is that CIDA and IRDC could work a lot more closely together. I've always noted that as a problem.

Á (1155)

The Chair: Thank you, Mr. Rocheleau.

We'll move to Mr. Stoffer.

Mr. Peter Stoffer: Thank you, Madam Chair, and thank you, sir, for your presentation.

It's amazing how the images of Africa conjure up, as you say, tragedy and historical tragedy as well as some very positive aspects, especially at the turn of the new millennium. My concern, of course, is with all these various NGOs and organizations going into Africa, doing the best they can with the limited resources they have and with the short game plan that is played. What role does the UN have to play in all this, in your opinion?

Yesterday in our talks in Newfoundland, the United Nations wasn't even mentioned. I would think that instead of doing this, CIDA here, OXFAM here, CARE there, UNESCO here, plus various religious organizations like World Vision and all those, there should be some way to link all that together to get a better bang for your buck and really help these people so you can end the perception of a corrupted government or--and this is the first time I've heard this--a corrupted NGO. I haven't heard that phrase yet. Maybe I'm just naive in thinking that, but I thank you for pointing that out. If you can name examples of corrupted NGOs, I'd sure love to have them.

Prof. Ian McAllister: No, no.

Mr. Peter Stoffer: I know you can't, though.

Prof. Ian McAllister: I can, but I'm not going to.

Some hon. members: Oh, oh!

Mr. Peter Stoffer: Maybe I'll buy you a glass of red wine tonight.

Prof. Ian McAllister: In terms of relationships with the UN, I can't speak for some NGOs. I can speak, I guess, from my knowledge of the International Red Cross movement because I represented them on the UNDP.

The Red Cross is very committed to working closely with the United Nations organizations on condition that it is not comprising its neutrality. The movement has very close relationships with the World Health Organization and UNICEF—I think of the work on banning land mines—and increasingly with organizations like UNDP in financing and getting help on some of the bigger projects like the cyclone shelters on the coast of Bangladesh, and so on.

The UNDP—and the UNHCR, I should also mention—like any organization, is as good as the person who happens to be the resident UNDP representative in country A or country B. Some are easier to work with than others, and the usual kind of stuff one can say there. But I would say that in my own experience, the UN organizations are relatively easy to work with, relatively encouraging. Depending on the country, their financial situation is not usually that flush.

I agree with you that more cooperation is needed. The UN organizations themselves jockey for par. If you want to see jockeying for par, look to see the UNDP and UNHCR relationships in the field. Who is really coordinating what? Like any organization, they have...

The Chair: Thank you.

Ms. Carroll.

Ms. Aileen Carroll: Thank you, Dr. McAllister, for a very interesting presentation.

I know we don't have much time to question all of you. We need twice as much time. I just hearken back to your comment about the MDE program.

You mentioned that last year, of 50 African students educated there, 30 went back. A little later on you said that fewer are going back, either not wanting to go or in effect not going, and you made some recommendations there. That's very helpful and very important, and I think we would benefit from the more holistic approach you've recommended and hearing what's working elsewhere. You've suggested that the opportunity be provided--and that means financially--so students get a chance to go back home to re-root and reconnect during their studies. I think that's an important recommendation.

I worked for CIDA in the sixties, and at that time we did a lot of in-country training, but with an increasing failure rate. We provided all kinds of programs, doctoral programs in aeronautical engineering and so on. France of course was experiencing the same thing. We, the donor countries, were being accused by recipient countries of brain draining, as the term was then, rather than helping. Most of the donor countries got out of that.

Now, of course this isn't CIDA, but for universities like Dalhousie, what other recommendations would you make in that regard? What else would work--we call it “smart aid” from our perspective--from the educational institution's perspective?

Â (1200)

Prof. Ian McAllister: Well, first of all, I should perhaps just be clearer on the numbers. I may have been confusing in what I said. I have brought an annual report so you can see some hard details, one might say, and you can count the Africans and so on who've gone through.

The program has had 200 students, essentially, since it started nearly 20 years ago. With respect to those 200, 45 different countries were represented, in addition of course to every part of Canada. I think that of those 200, 45 are from the African continent. Of the 45 from the African continent, something like 33 or 34 have actually graduated. Others are still in the program in some fashion or another, sometimes in long-term relationships. Of those 35 who have graduated, I would guess that something in the order of between 17 and 20 have gone back.

The question then is, has one seen a trend? The trend I've seen is that more used to go back and stay back than seems to be the case today. I've noticed a definite trend for African students to try that much harder to stay on in Canada. Before we would accept them, we used to make it a condition insofar as we could that they would go back . Now you can't make that stick, though you can try it.

In many cases they were very conscientious students, and we were very careful in how we selected them. But we are finding it tougher to get them to go back now; that's one point. In part it's because of the situation back home, in part because of opportunities and pressures to do further work here in this country, further graduate work and so on, but really, they don't want to go back too often.

From the meetings I've had with some of these students back in their own countries, I'd say that a little bit of help would go a long way to getting them to go back, to making them feel wanted, and to making them feel Canada is still interested in them. It would simply be a case of things like giving them a small amount of money to continue one or two journals so they feel that they can keep up to date in the literature, because it's hard to get journals. I've been in African libraries where there hasn't been a book or a journal that was published in the last 15 years. There's quite a gap. I've been in hospitals in some places where you don't see up-to-date journals---not in Africa, in Southeast Asia, but I suspect you'd find the same thing in Africa.

To be able to go to a conference--perhaps a conference back in Canada, perhaps a conference somewhere else--would be good. A small amount of continued assistance to Canadian graduates who've gone back to Africa would, I think, go a long way. It could be built into their programming in some way. And the other one is of course to make it a bit easier for them to get financing while they're here. CIDA scholarships are not as readily given out as they used to be, and I think that's a great shame.

The Chair: Thank you very much, Professor, not only in terms of the precise way you've made the points to us, but in that you've left us some avenues for consideration and for further perusal. Anything further that you would like to add...our deadline is the end of April so we can make some input into the G-8 discussion.

So thank you, and thank you for the work you are doing.

We would like to call our next witness before us, who is also from your university. From the Department of Economics of Dalhousie, Professor Teresa Cyrus. Professor Cyrus did her dissertation on the relationship between trade and income and the effect of crossing borders on trade. At present her interest is the effect of trade on poverty and the relationship between trade and health.

Professor Cyrus, thank you for waiting. We're a little behind.

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Professor Teresa L. Cyrus (Economics, Centre for Foreign Policy Studies, Dalhousie University): I'm sorry there was a mix-up and I wasn't on the schedule. I think all of you were expecting to start your lunch break now.

The Chair: That's okay.

A voice: You are on the schedule.

Prof. Teresa L. Cyrus: Am I?

The Chair: Yes.

Prof. Teresa L. Cyrus: Perhaps I just wasn't on the schedule that was outside.

In any case I will keep my remarks brief and then expand on them during the question time.

I have three main points I'd like to make: first, the extent of Canada's trade with the U.S.; second, the apparent limits of that trade; and third, the possible dollarization in Canada.

First of all, as I'm sure you know, the United States is Canada's number one trading partner by a very large extent. In the year 2000 our trade with the U.S. amounted to $627 billion, which was 80% of our total trade. Our next biggest trading partner, the European Union, comprised only 7% of our total trade. Obviously, the United States is vastly important to Canada and to the Canadian economy. The percentage of our trade with the United States has grown from 62% in 1960 to 80% in the year 2000. The biggest amount of that growth has been since the free trade agreement.

We're all aware, though, that Canada is much less important to the U.S. than the U.S. is to Canada. This $627 billion of trade between Canada and the U.S. is only 21% of the total trade of the United States. We know that Canada must pay more attention to this bilateral relationship than the U.S. does.

The second point I would like to make is that even though there is a great extent of trade between Canada and the U.S., economists have found that this trade is not as much as we might have expected based on something we call the gravity model, gravity being analogous to Newton's law of gravitational force between two objects. The gravity between two objects would be directly related to their size, which in economic terms would be the GDP or the production of the two countries or regions, and inversely related to the distance between them. So gravity in economic terms would be trade. That's the tie between two regions or countries. So we would expect that two regions would trade more if they produced more goods and had a higher GDP and that they would trade less if they were farther apart from one another.

Holding constant, then, size and distance, in looking at trade between Canadian provinces and between provinces and the States, economists have found that Canadian provinces actually trade 20 times as much as provinces and the States. This is a very surprising result given the strong ties between the U.S. and Canada and given the fact that the U.S. and Canada have a stronger relationship than probably any other two countries in the world. In fact, when economists were surveyed by John Helliwell in 1996, before this result was published, as to what they would guess would be the size of this effect, most guessed that Canadian provinces would trade less with one another than with the U.S. In fact, they trade 20 times more with one another than with the U.S.

To give an example of what this would mean, British Columbia is equally distant from Ontario and from Michigan, and Ontario and Michigan are about the same size in terms of GDP, yet British Columbia trades about 30 times more with Ontario than it does with Michigan. In economic terms that just doesn't make sense. There's something about the border that's keeping trade within the country rather than across the border. This has been referred to as “the border effect”.

Quite a lot of work has been done in the last few years to try to figure out why this is such a strong effect. Is it really there? Is it there for trade between other regions, other countries, besides Canada and the U.S.? Of course, we have more statistics on internal trade--trade within Canada--than other countries tend to keep. The United States doesn't keep very good data on trade between states. So we're in a unique position to examine this issue here in Canada.

The size of this border effect is especially surprising, given that there are still interprovincial trade barriers within Canada. In fact, at a round table on internal trade that I attended about a year and a half ago, which was put on by the Internal Trade Secretariat, business people across the country all seemed to say that it is easier to do business outside Canada than inside Canada. It is easier to trade with U.S. states than to trade with other provinces, because there are still some onerous burdens placed on them when they wanted to trade with other provinces. What this border effect, then, is saying is that these international borders are even stronger than the interprovincial borders.

I have done some work on looking at the strength of this border effect in different industries. I found that it does exist in every industry, even in autos and auto parts, even in industries such as forestry products and fish products--things that we would expect Canada to really be exporting a lot and not consuming so much. But it is much stronger in some industries than others. It is very strong in dairy products. It's very strong in sugar and pharmaceuticals. It's not as strong in other goods such as fish or forestry products.

Many people have tried to explain the size of this border effect and the difference between the different industries in the size of the border effect. Of course, government subsidies matter, non-tariff barriers matter, items of perishability matter, because there is quite a lot of variability in terms of crossing the border--trucks waiting for clearance in crossing the border. Goods that are more perishable are less likely to be traded internationally. There are some other reasons that people propose for explaining this border effect, but this is still an open question. It's still something that is confusing to economists as to why this exists and what can be done about it.

The more recent research has shown that the border effect has fallen throughout the 1990s. In 1988-89 it was around 22. That means that the provinces trade 22 times as much as a province and a state, holding constant size and distance. By the end of the 1990s it fell to around 13. That's still quite high, however. It is different for different provinces. It's highest for P.E.I. and lowest for British Columbia.

In conclusion to that point, then, even though there is a lot of trade between Canada and the U.S., there still isn't as much as economists think there should be or could be.

The last point I would like to make is regarding a common currency or “dollarization” in Canada. It is a fact that countries that have fixed exchange rates or common currencies do have increased trade between them, because there's no exchange rate risk and it's very easy to make future contracts to trade goods. We would expect that a common currency would result in increased trade between Canada and the U.S.

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If our goal is increased trade, that would be one way to accomplish it. But there are significant negative effects to adopting the U.S. dollar or moving to a common currency between Canada and the U.S. It means that it would remove any possibility for independent monetary policy in Canada. To the extent that Canada and the U.S. are similar and experience similar shocks to their economies, then it wouldn't perhaps matter so much to have one monetary policy. But even though Canada's similar to the U.S., it's not the same. We do experience some different shocks, for example, the Asian crisis of 1997, which hit Canada much more strongly than it hit the U.S. because we trade so much with the Asian economies, especially in our resource goods. It is necessary when a country experiences different shocks that it should have its own independent monetary policy to address those shocks.

For example, after the Asian crisis the Canadian government allowed the loonie to depreciate, and that made our goods more competitive and allowed us to recover from that shock. If we had the same currency as the United States it would not be possible for us to have a depreciation. Therefore it would not be possible for us to recover as quickly as otherwise from those shocks.

So overall, then, the two recommendations I have are, first of all, that since trade is so important to Canada, especially trade with the United States, we should try to keep the border as open as possible and to keep barriers to the movement of goods and services as low as possible to make it as easy as we can to cross the border, for the movement of goods and services to move as smoothly as possible. My second recommendation is that we should not consider a common currency between Canada and the U.S. There are benefits, but the costs would vastly outweigh those benefits, I believe.

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The Chair: Thank you very much. It was an excellent presentation, concise.

Mr. Rocheleau.

[Translation]

Mr. Yves Rocheleau: Thank you, Madam Chair. Thank you for your presentation, Ms. Cyrus.

I will quickly ask about the second recommendation that you made concerning implementation of a common currency. You mention, quite strongly that, notwithstanding political or cultural reasons, there is practically no reason why there should be a common currency. What do you do about the current value of the Canadian dollar, which does not seem to be very strong, and the increasing number of people, both in Canada and in Quebec, who claim that we should at least be looking into it? Do you think that we have sufficiently thought about whether there is a common interest in Canada, the United States and Mexico-if we are to adhere to NAFTA, we have to include Mexico-to at least set up a working committee that would take an in-depth look at the opportunity, the value and the relevance of having a common currency?

[English]

Prof. Teresa L. Cyrus: I think there has been quite a lot of interest in the academic world about this.

First of all, on your first question of the present value of the Canadian dollar, I agree, I and think every economist would agree, that the Canadian dollar is vastly undervalued right now. It's somewhat of a puzzle as to why this undervaluation has continued for so long. I think that productivity differences between the U.S. and Canada are part of that reason, but possibly also some irrational behaviour on the part of investors as well.

It's important to remember that if we do try to join in a common currency with the United States, it wouldn't be one to one. It wouldn't be $1 Canadian to $1 U.S. I think some people sometimes forget that. They think that we will magically jump up to U.S. productivity levels if we can have that kind of exchange rate. That's not something we can force.

If we joined in a common currency with the U.S. it would have to be at an exchange rate like what we have right now. So I don't think a common currency would be a solution to the undervaluation of the Canadian dollar. It might in fact solidify it even further if we had to go into a currency union at the current exchange rate. There would be no possibility of that becoming better over time.

To the second point, are we reflecting sufficiently on a common currency? I think a committee to study the issue is a good idea. I think in particular we need to be looking at the European experience. Canada and the U.S. are not the same as Europe, but it is an interesting experiment they're going through. It is something we should be paying attention to.

I think especially that the Europeans have not yet been tested with respect to this new currency. The true test is, what happens if, as in the Asian crisis, there is a shock that is felt differently in one part of the euro zone than in the rest of the euro zone? That's when we see the limits of this one-size-fits-all monetary policy. It's very wise of us to stand back, look at the European situation, wait to see what's going to happen, see how well they react, and learn from their experience.

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The Chair: Thank you.

Mr. Stoffer.

Mr. Peter Stoffer: Thank you, Madam Chair.

Madam, I look forward to your reports on trade and poverty in relation to trade and health. I think those would be very interesting subjects because, as you know, poverty and health and how we deal with those intertwine with what we do in terms of trade.

In terms of dollarization, I hear the term “common currency” all the time, but the reality is that it won't be a common currency. It will be full adoption of the U.S. dollar. The U.S. is not for one second going to say, okay, we'll drop our dollar, you drop yours, and we'll come up with a common one. In Europe they dropped the French franc, the Dutch guilder, and the German Deutschmark, and now they have a new euro. That wouldn't happen in North America.

I've been trying to tell my constituents that it would be adopting Alan Greenspan's view of the monetary world. Would that be correct?

Prof. Teresa L. Cyrus: I think that is the issue. The most we could hope for is that Canada would become one out of the current 13 Federal Reserve districts, which would give us a vote of one-fourteenth of the current situation in the U.S. But yes, that's exactly right. There's absolutely no possibility that the U.S. would agree to a North American dollar to replace the U.S. dollar, so this would be a unilateral move on the part of Canada.

Mr. Peter Stoffer: Absolutely.

My second question for you... Yesterday we heard from the Manufacturers and Exporters association, the Canadian group, talking about productivity levels, and we hear that an awful lot in the House of Commons and elsewhere. I'm trying to find out, because we go across the country, exactly what does “increased productivity levels” mean? Speaking from a political or general labour point of view, I'd say that our workers in this country are working longer hours for less wages and for less benefits and that their productivity level in terms of producing output is pretty good. But Mr. McCarthy told us yesterday that “productivity level increases” actually means return on investment: that's what he means. That's what he said yesterday when I asked him, what does “increased productivity levels” mean to you? And he said increase on investment, which means more return for the shareholder.

I was wondering, what in your academic opinion does “increased productivity levels” mean? You yourself said it may have an effect on the reason our dollar's so low, because we don't have the same productivity levels as the States. I find that rather astonishing. I think our workers and our companies work as hard and are as productive as those anywhere else in the world, yet we keep hearing that we're not.

Prof. Teresa L. Cyrus: Economists define productivity or, more narrowly, labour productivity as output per worker, which is what your definition is. It's not the case that Canadian workers are becoming less productive. Canadian productivity isn't falling. It's just not rising as quickly as that in the U.S. So yes, Canadian workers are working hard, and Canadian productivity is rising, but it's not rising as quickly as it is in the U.S.

Mr. Peter Stoffer: Could you give an example?

Mr. George Baker: He wants the formula for how you measure productivity in practical and exact terms. I think that's what Peter is saying.

Mr. Peter Stoffer: How do I explain this to a person in my riding? What does it mean? I'm still confused. Yesterday the gentleman gave us one answer, and today you're giving us another. What does it mean?

Prof. Teresa L. Cyrus: You're going to get another professor this afternoon, Professor Bradfield, so you'll see if he has a different definition from mine. The definition we give our first year students is, output divided by the number of workers, the labour force. That's it. That's labour productivity.

Mr. Peter Stoffer: Thank you. That's what I always thought it was.

Prof. Teresa L. Cyrus: Right. But just as an example, you can imagine that productivity would be higher in Canada than in Thailand, let's say, because Canadian workers are better educated and have more capital and better machinery to work with. A farmer working with a tractor is going to have a higher degree of labour productivity than a farmer working with a rake. So the amount of capital that is in the country and the amount of investment that's taking place in the country--those are going to affect the productivity levels in the country.

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Mr. Peter Stoffer: So it has nothing to do with return on investments.

Prof. Teresa L. Cyrus: That's a new one to me too.

Mr. Peter Stoffer: That's what he said yesterday.

I asked him what productivity levels meant to him, and he said return on investment. That's exactly what he said, because I mentioned the fact of workers working harder and he said, no, and he's the vice-president of the Alliance of Manufacturers & Exporters of Canada

Prof. Teresa L. Cyrus: If I were a business owner, that might be how I would define the productivity as well. That's not the standard academic definition.

The Chair: It was the context of a business.

Mr. Peter Stoffer: No, I was always confused about that. I think I'm a little more clear.

Thank you.

Prof. Teresa L. Cyrus: You can ask Professor Bradfield later today and see. Maybe two out of three.

Mr. Peter Stoffer: I won't have to.

The Chair: But to follow up, have you researched the effects of NAFTA on income distribution?

Prof. Teresa L. Cyrus: Not directly, no. As Mr. Stoffer has mentioned, I have done some work on the relationship between trade and poverty. That's just been in the U.S. and Canada, not in Mexico. I was doing a study with Lars Osberg, who is also a professor at Dalhousie, and we were looking, on a state and province level, at how the level of poverty had changed throughout the nineties, and in particular how Canada is starting to look more like the United States in terms of poverty. American poverty fell throughout the nineties and Canadian poverty rose, so it seemed like we were getting closer together.

We were trying to see if trade could be one explanation of that. We were looking at the trade exposure of workers in the various states and provinces.

What we found was that to our surprise, actually, trade did not seem to play much of a role. It was really simply poor macroeconomic policy in Canada that was causing Canadian poverty to rise. So changes in employment insurance, the monetary policy that led to high unemployment, that seemed to be telling all of the story and trade did not seem to be playing a role.

I think there is more to be done there, but that's what we found so far.

The Chair: In other words, a trade framework will not help regions to catch up?

Prof. Teresa L. Cyrus: That's a hard question to answer. It is true that when we look at many countries for a long period of time, let's say, a large sample of countries, all the countries in the world since World War II, it does seem to be that the countries that have been the most open to trade have grown more quickly.

But the richer countries are also quite open to trade, so we haven't really seen convergence. We haven't seen catching up of the poorer countries to the richer countries, and the poorer regions to the richer regions, due simply to trade.

But it is true that, as we would expect, the more a country trades, the more a region trades, it forces their firms to be more efficient, it allows the exchange of ideas and technological innovations. It does cause countries to grow, but as for whether it causes them to catch up, that doesn't seem to be the case.

The Chair: I was asking that in the context of Mexico, Canada, and the United States, and if we're looking at the NAFTA or we're looking at the trade agreements as a way of helping the poverty situation in Mexico, you're saying that there's no correlation.

Prof. Teresa L. Cyrus: I'm saying that more trade will help Mexico to grow, but whether it will cause Mexico to catch up to the levels of income per capita in Canada or the U.S., there are many other things that seem to affect growth, for instance, macroeconomic policy and the amount of investment. We could say that to the extent that Mexico is locked into this kind of trade agreement, perhaps that will mean better macroeconomic policy, more investment in Mexico, and those things will help Mexico to grow.

But trade by itself—it's not clear that it is the avenue.

Mr. Peter Stoffer: Madam Chair, if I may interject, I remember clearly the debate on free trade, free trade being something a particular party was against at one time. At that time we were told by the Conservatives that if Mexico got into this free trade agreement, if we expanded it, their people would get out of poverty. They would have the same standards of health care and of workers' rights and everything else we have today. The reality is that it never did. It had nothing to do with that.

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Prof. Theresa L. Cyrus: NAFTA started in 1994, and it's only 2002. These things take some time.

Mr. Peter Stoffer: We were told free trade would do that as well.

The Chair: Let's get Mr. Baker in.

Mr. George Baker: Have you examined the effects tax agreements have had between the United States and Canada and what effect they have had on trade, particularly the elimination of the withholding tax for transborder money, profits, and so on?

Prof. Theresa L. Cyrus: Actually, that is not something I've studied.

Mr. George Baker: Have you examined what percentage of trade between Canada and the United States is done solely within multinational corporations that operate with headquarters in the United States?

Prof. Teresa Cyrus: I've seen some statistics on the amount of trade that is intra-firm trade. Now, I have not actually seen statistics on whether those firms are located in the U.S. or Canada, but it does seem that more than 50% of trade is intra-firm trade.

Mr. George Baker: The difficulty we sometimes have with looking at figures is that in examining the reasons trade has increased at a particular moment in time could be because of changes in tax policy. We've gone through substantial changes in tax agreements between Canada and the United States in the past 10 years. In fact, the withholding tax has gone from 15% down to 2%. Therefore, there would be a corresponding increase in things like transfer pricing and so on within corporations that operate in Canada and the United States. But you haven't examined that.

In examining poverty and so on, the effect that trade has on poverty... I'll just pick up on something Peter said a moment ago, and that is, in definitions—productivity, GDP, and so on—we're sometimes into this discussion on what GDP means. There's a formula you set out in your courses, and it's total value of goods and services exchanged in a society, but there are your wages and then your government. There's a little formula, as I recall, and then there are government wages and then there's exports minus imports, and this all equals your GDP. Of course, in judging poverty you look at the GDP. That is the standard measurement.

You would have a place in Peter's riding, in which there's very little GDP because everybody paints their own house, does their own plumbing, fixes their own car, doesn't get a barber to cut their hair, and doesn't order taxis. You would have the only money that's being exchanged in exporting fish. Now, that would be a very valuable GDP.

Have you seen any publications, any studies, or any books that have been done on breaking down the GDP from good to bad GDP? Is there any such thing as a good GDP and a bad GDP? In other words, you could have a huge GDP in, say, Ottawa. Ottawa would have a huge GDP, but could you live if you had no exports? This is why we get into this discussion on what we mean by certain terms. Sometimes the economist is using terms that really don't match reality, in a way. I suppose we do the same thing.

Do you have any comment on any of that?

Prof. Theresa L. Cyrus: Well, when we measure poverty, actually, we don't use GDP per se. We use the income of the people in that region, and that would include the taxes and transfers they receive. Taxes and transfers are of course not part of GDP, but they would be included because we would want to see exactly how much disposable income people have in a given region.

But your point about the barter economy or the underground economy is definitely well taken. There was a report just a few days ago, I believe, saying that 17% of the Canadian economy was underground.

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Mr. George Baker: But surely nobody would suggest that it would ever rise above ground. In other words, you wouldn't want to change that kind of economy, one in which people were self-sufficient and living on relatively few dollars but certainly enjoying a standard of living that far exceeded that of somebody in a metropolitan area where the GDP was very high.

Prof. Theresa L. Cyrus: Well, I think that's a difficult question. Are people better off because they're behaving this way? Or are they behaving this way because they have a lower income to start off with? I'm not sure. A lot of the things in an underground economy, things like construction—quite a lot of that industry is underground—are something we would want to be able to count more accurately.

Mr. George Baker: I agree with your conclusions, by the way. These are excellent observations, and I totally agree with your two recommendations.

The Chair: Thank you, Mr. Baker.

Thank you, Professor Cyrus, for being with us today.

We'll now call the meeting to a close until about one o'clock, when we'll meet again to hear our witnesses.

Thank you.

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The Chair: We'd like to begin the afternoon session.

We have two witnesses before us. Mr. John Harker is well known to us. He has been our envoy on Sudan and has done a report. You'll see copies of the report on your desk. With him is professor of political science from the Centre for Foreign Policy Study, Dalhousie University, Professor Sandra MacLean.

We'll start hearing our witnesses. Who is going first? I didn't establish that.

Professor MacLean.

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Professor Sandra J. MacLean (Department of Political Science, Centre for Foreign Policy Study, Dalhousie University): I want to make three main points in my presentation. The first point would be that there are several possibilities in Africa at the moment as well as problems. The second point is that I'd like to draw on the links that are becoming more evident on security and development. And thirdly, I'd like to talk a little bit about the international and transnational links, the north-south links specifically.

In terms of the possibilities, as well as problems, the New Partnership for Africa's Development, or NEPAD, which is the centre feature of the G-8 meetings at Kananaskis, to my mind is probably one of the more positive signs to have come out of Africa recently. It's positive in the sense that it was an African initiative that emerged from the New African Initiative and the Omega Plan for Africa, and it also was built largely on South African President Mbeki's idea of an African renaissance.

It's my understanding that the G-8 leaders were interested in putting Africa on the agenda at Kananaskis largely because they were convinced that Africans themselves are serious about doing something about African development at the present time. This has been suggested particularly by their emphasis on doing peer reviews and country evaluations and so on within this NEPAD agenda.

Another positive feature is related more to specific countries. Several countries in Africa have shown and demonstrated considerable growth in the last few years. We might look at Mozambique, Mauritius, or Uganda recently, or Botswana for the past several years now.

In spite of those positive trends, there are lots of negative ones, of which I'm sure you're all well aware. Just to quote some of the statistics that were in The New African Initiative, for instance, they said 340 million Africans—or at least half the population—live on less than one U.S. dollar a day, life expectancy is 54 years, and only 58% of Africans have access to clean water. And we're all aware of the casualties and costs of the conflict in Africa at the moment.

That brings us to the second point, and that is the relationship between security and development. This association was brought home very clearly to us in September; at least, it has been highlighted since September. It has not been non-controversial in that I'm not sure we're yet convinced of what that association actually is, but I think we're recognizing more and more that there is an association.

Linkages that are much less debatable are ones of inter- and transnational connections. These affect the security of both the north and the south. September 11 has highlighted these links very clearly, but these links were already being explored by several people and were also being exploited by several people. Many scholars have been working on issues of globalization for several years now, looking at these transnational connections and the connections between security and development.

Several issues come up in terms of African development and security. Several relate to the issue of governance. Here, I'm thinking corporate governance, which is on the centre stage for the G-8 meeting. It's one of the main emphases of NEPAD.

Part of the equation relating to this is the building capacity and infrastructure in Africa. This is where aid from northern countries could play a larger role. Perhaps we should be thinking about reaffirming our commitment to 0.7% of GDP to overseas aid.

Another part of the equation, however, is changing the structure of trade to benefit developing countries, or at least not to disadvantage them. According to a report from Partnership Africa Canada, the OECD countries spend more than $300 billion a year on agricultural subsidies, which is a figure roughly equivalent to the GDP of sub-Saharan Africa. Canada might therefore consider implementing and promoting ideas such as the EU's “Everything but Arms” initiative, which gives free trade access to 48 of the world's poorest countries, many of which are in Africa, as you know.

Another issue related to governance is the whole issue of democracy and human rights. Support for these efforts has been part of the donor agenda for some time, especially as a feature of the good governance program, which I know Dr. Schmitz has written about on several occasions.

One area we might consider as Canadians is that of focusing some attention on civil society within the equations on governance and the issues of governance. If we look at Zimbabwe and what's going on there now, for instance, probably the best hope has come from the civil society organizations—and they do need external support to be viable and even to be safe.

Corruption is another point that feeds into this issue of governance. The Zimbabwean case probably is as good an illustration of this as any other. There's a critical need for transparency in internal issues in some of these African countries, but there's also just as much need for the connection between these internal processes of corruption with external forces that are sometimes fuelling or exacerbating them.

I've mentioned the connection between the Zimbabwean government and military and the exploitation of the resources of the DRC, and the connections there that have just come out recently with the British timber industry, which has very high-level connections.

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A second issue is security. I'd like to mention the connections between governance and security. A considerable amount of material has been written recently about the “political economy of conflict”, which really talks about the association between poor African governance, the opportunism of and exploitation by various external economic forces, and then the connections these have to fuelling African wars. This has been treated, in one way, by focusing on various issues, such as blood or conflict diamonds, trade in oil and gold, small arms, and so on. There's been considerable effort and initiative in these areas.

My concern is that these are often treated as separate problems, and often as regionally specific problems, when in reality they're linked in various ways, not only in terms of the relationship between poverty and insecurity, or between poor governance and insecurity, but also in terms of the illegal transnational networks that now have unprecedented opportunities for exploitation due to unregulated or inadequately regulated trade and investment routes.

This then feeds into the issue of peacemaking, peacekeeping, and peace-building, all areas in which Canada has played a major role in the past, although clearly not without controversy or discussion. I'm not going to get into those discussions here, but I do want to make the connection between security and development, which relates to these issues in peace-building. I think Canada may be able to have a niche role in peace-building in a stronger way than it has before, and certainly in areas such as early warning, which is part of this whole peace-building agenda that Boutros Boutros-Ghali has suggested.

Peace-building feeds into my third issue, which is the issue of human security. Human security, broadly defined, would include these other issues of conflict but also such issues as health, certainly HIV/AIDS, malaria, the increasing use of tobacco in developing countries, including in Africa, and nutrition.

Each of these issues, I would stress, have external as well as internal dimensions, as witnessed in the recent AIDS and TRIPS issue in South Africa and as highlighted in the WHO anti-malarial campaign and the anti-tobacco coalitions and campaigns. Another issue is environment, with water and biodiversity being the main issues that Africa speaks to.

In this I've also included gender and age. I think those are critical elements that need to be addressed. Both women and children tend to be the most vulnerable people in a lot of these issues, in conflicts and in a lot of other human security issues. They're often the people who don't have any voice around any table to express their concerns or needs.

Finally, in terms of policies and strategies, just to highlight, I think there are four ways we can proceed on this. The first one, country-focused strategies, I think is well dealt with. Here I have I highlighted the new initiatives in CIDA that go toward human needs issues, infrastructure, human rights, democracy, and so on.

I think we could do more to focus on regions. We should try to understand the regional dimensions of many of these issues, particularly the regional dimensions of conflict. For instance, we could try to understand why SADC, or the Southern African Development Community, did not get involved more in the issues going on in, say, Zimbabwe, and look at the way in which some of these conflicts have serious regional dynamics or at some of the regional solutions to some of these problems. Perhaps one thing external actors could do is support some of the regional initiatives and regional actors.

The third point is the most critically neglected, I think, although it's probably the most important one.

· (1305)

September 11 has highlighted very clearly that there are international and particularly transnational—beyond the international—connections with a variety of security and development issues. We have to look beyond the interconnectedness of the criminal world on these issues, and look at the connections between the criminal world and some of the legitimate frameworks and pretenses of legitimacy that are associated with them. Exposing these links and finding ways to expunge them is a critical element that we need to focus on.

As my fourth point or fourth focus area, non-state actors play vital roles in a variety of areas in terms of governance. We have a lot of discussions now on civil society and civil society organizations. In terms of analysis, civil society organizations, such as think-tanks, are playing a critical role in understanding what some of the dimensions of these problems are. Particularly, some of the indigenous think-tanks in Africa lend very critical and important analyses to these debates and issues.

We're very well aware of the service dimension, and the peacekeeping and peace-building that NGOs bring in. We also can look at some of their initiatives in track two diplomacy and so on. In terms of advocacy, Canadians don't need to be reminded of the roles that NGOs and government play collaboratively in the Ottawa process, but certainly there are other areas in which non-state actors are working in conjunction with states, and increasingly with business. If we want to look at the Kimberley Process on conflict diamonds, that is developing at the present time. Related to African development, there are a variety of issue areas in which Canada could take an initiative and be responsible for developing contacts between state and non-state, between NGO, business, governmental, and international actors.

· (1310)

The Chair: Thank you very much, Dr. MacLean.

Mr. Harker, could we call on you for your presentation?

Mr. John Harker (Consultant, Harker Associates): Thank you very much, Madam Chairperson.

I want to also speak about Africa, and hopefully its recovery. I have a couple of points to make to begin, however. One is that there are times when we forget Africa is a very diverse place indeed.

Sandra mentioned Thabo Mbeki, for whom I used to work in Pretoria. I often had to drive between Pretoria and Johannesburg. I see he recently was held up in a traffic jam on that road, which at rush hour is usually mile upon mile of Mercedes and BMWs all crammed together. Yet there's the other side of the equation.

It's true that I spent a lot of time working on and in Sudan. Although it wasn't a feature of my report, I met someone who was emotionally overwhelmed by the fact that when he gave an empty baked bean tin to villagers in a south Sudanese village, they were extremely grateful because they hadn't gotten any vessel of any kind, let alone one full of baked beans. So Africa is very diverse.

I'm glad Sandra mentioned that there are 340 million Africans living on less than a dollar a day. Actually, the World Bank has said that's the only part of the world where, in terms of the numbers living on less than a dollar a day, the numbers are increasing.

We now come to the matter of NEPAD and Africa's development. I'm positive about the fact that Canada seems now to be showing real leadership on this issue. I don't want my positive approach to be overcome by what I'm going to say next, but I do think Canada has a responsibility to make sure that we also focus on the fact that the implementation of NEPAD has to take account of very great obstacles. These mainly surround conflict with their own governments, and an element of governance corruption. In fact, as Sandra has said, the NEPAD document states very clearly that “African leaders have learnt from their own experiences that peace, security,democracy, good governance, human rights and sound economic management areconditions for sustainable development”.

I think we have to take those conditions very seriously. For me, they come very close to equating with what Canada has committed itself to—the doctrine of human security—with one proviso.

Sandra mentioned HIV/AIDS, along with other health issues. I don't have any kind of medical training, but in the last year or two I've come to view AIDS as very much more than a health issue. I think it's threatening to turn life expectancy in Africa to levels not found since 1900, as awful as that is to contemplate.

It is weakening the African state, and in sub-Saharan Africa the GDP could be reduced by as much as 20% over the next few years. The family is being destroyed in many states. Families can't rely on their communities, and communities can't rely on the state, because it finds itself with greater burdens than before. The state has lessened capacities. Just down the road, they're expected to play a role in implementing whatever is agreed to at Kananaskis.

For example, the per capita income of Zambia declined from $490 U.S. in 1990 to $330 U.S. 10 years later. That was a year when that country had to spend more on servicing debt than it could spend on health and education combined.

It has a different form in other places. In Malawi, for example, it is now estimated that between 25% and 50% of urban workers—the people who are holding the skilled part of the economy together—will likely die of AIDS by 2005.

So there is an interactivity, as Sandra has said, among questions of trade, aid, debt, and poverty. All of these things are combining, regrettably. I think Canada understands this. Canada has now forgiven the debts owed to it by Tanzania. The Minister of Finance, when announcing this, pointed out that their debt load was unsustainable, and cancelling it would allow Tanzania to invest more in critical areas such as health care, HIV/AIDS prevention and primary education.

I don't doubt that virtually every African state is aspiring to democracy and providing human security in conditions of good governance. But regrettably, intentions are not capacities, and capacities, as we sit here, are being hollowed out from the inside. This takes many forms and affects all aspects of society.

I have recently focused very much on the impact of HIV/AIDS on armies in Africa. The United Nations estimates that in peacetime, soldiers have a two to five times greater risk of infection than civilians, with the risk being greater in times of conflict. Name me an African army that knows peacetime. Virtually none of them knows peacetime, as we understand it.

Sandra mentioned the war in the DRC, which has involved virtually every neighbouring state and some not so close to it. It's estimated that of all the armies involved there, the aggregate level of infection with HIV is somewhere between 40% and 90%.

It's not my place to argue, and I wouldn't dream of it, that HIV/AIDS has caused the war in DRC. There are other causes of war and conflict in Africa. Sandra has mentioned a number of them. The question of natural resources must rank very highly.

But I was interested to learn, when I was working on this issue for CSIS last year, that it's been reported that Ugandan army officers fighting in DRC were using illegal diamond wealth to purchase from South Africa the anti-retroviral drug AZT, which for one reason or another the South African state can't afford to or is unwilling to provide to its own people.

Talks are underway today—at least they were until a hiccup this morning—to maybe get to the point of resolution in the war in the DRC. Let's hope that happens. But as with the window of opportunity provided in Angola, for example, Canada must take a serious look at all of the causes of conflict. Unless conflict is abated, how can economic recovery and sustainable development really be achieved, as a result of Kananaskis?

· (1315)

We have in this country begun to develop a corpus of considerable work on conflict, natural resources and development. I've done some work on Canadian oil activity and the war in Sudan. Ian Smiley has done work for an NGO and the United Nations on Sierra Leone diamond mining. Bob Fowler, Prime Minister Chrétien's personal representative for this summit, chaired the U.N. Security Council's committee on mining and war in the DRC.

We do have things to say. Through such mechanisms as the support that has been generated in the last few years for university research chairs and by supporting credible NGOs, Canada could do a lot for human security by improving global understanding of the interaction between natural resources and conflict.

But I want to speak for a few minutes about how we can move forward. I'm not an economist. I don't want to get into questions of debt and trading relationships. But I do know that NEPAD, as I've said, is going to require the functioning of African states; and it must be helped. Already it has initiated work. There is now a secretariat In South Africa and it's really trying to engender work on all of the problems faced.

It seems to me we have in Canada the experience and skills to embrace one particular perspective on this—the challenge of training and developing the human resources necessary to enable the effective and efficient functioning of the state. Here I would very strongly include legislative and representative instruments vital to good governance.

Although it's been closed down—rightly, after the elections in South Africa—we had the experience of the Southern Africa Education Trust Fund. Still continuing in this field there is the IDRC and the parliamentary centre, perhaps known to many of you personally.

Canadian legislators have to understand that their African counterparts are anxious to meet the challenges set out in the NEPAD documentation. They could press our government to place a priority on training and capacity-building for African legislators, and even play a good strong part in delivering it.

In fact, on the other side of the Atlantic in the United Kingdom, the International Development Select Committee has recently looked into the question of how it can help enable the machinery of the state in Africa do more with less, in terms of the hollowing out so far of its human resources. They weren't focusing on NEPAD but on the impact of HIV/AIDS. But for me, if the focus is on the demands of NEPAD—where, unless corruption can be controlled, unless people can enjoy participation, the take-off and recovery we all desire will not be achieved...Canada could focus on this particular aspect.

Here again we have in our record something appropriate to this task. I'm sure many of you have met Nelson Mandela in one or more of his visits to Canada. The first foreign trip he took on release from prison was to Nigeria to meet Commonwealth foreign ministers. He conveyed to them the belief that South Africa would need trained and educated people, and he actually thought that looking at how to get these trained and educated people would contribute to a peaceful end to apartheid.

At the suggestion of Canada, this eventually translated into the setting up of a Commonwealth expert group on human resource development for a post-apartheid South Africa. Canada could play a key role for NEPAD in ensuring that Africa's human resources were appropriate to the challenge through initiating and creating a similar expert group, tasked with looking not just at one country but at the diverse continent itself, where state capacities and levels of participation vary so widely.

I want to come to a close to allow time for questions. It seems to me—and for one reason or another, by accident I guess, I've spent virtually all of my life working either in or on Africa—that there is a great danger as we approach this summit. The danger is that our desire to make a success of NEPAD will prevent our looking carefully at, and reacting positively to, the obstacles it's going to have to overcome.

Now, as has been pointed out, the African leaders have elaborated division of development they want. It's all contained in the NEPAD document. At one level they're very clear about the obstacles; these are set out. But on another, they haven't yet clearly shown that they're going to deal with such things as continuing conflict, corruption, the lack of good governance, even with HIV/AIDS. Note the reluctance in the past of many African leaders to criticize one of their own. The question of Zimbabwe perhaps will produce a test case in some form.

· (1320)

It seems to me that African states and G-8 countries such as Canada have needs in all of this, and that both have contributions to make. I do think the most significant contribution we can make is to energize training and capacity-building, which Africa needs now, in order to be able to meet what it sees as preconditions for sustainable development--that is, enabling African states to overcome the horrendous obstacles in the way of recovery, boiled down, in my view, to HIV/AIDS, conflict, and corruption.

We can do this. The Prime Minister has set aside $500 million, for example, as a Canadian contribution. There will be many claimants on the use of that money, but if we relate it to skills development, training, and the sharing of experiences, I think we'll all be the richer for it.

Thank you.

· (1325)

The Chair: Thank you, Dr. Harker.

Members, the last page of the document Dr. Harker has presented to us gives some of his credentials and the places where he is currently reflecting. As you can see, he is also with the Centre for Defence Studies at the University of Zimbabwe, so I guess his remarks in that area are apropos.

We will now go to questions from members. The questions will go to both presenters, so either or both of you can respond.

We will start with you, Monsieur Rocheleau.

[Translation]

M. Yves Rocheleau: Thank you, Madam Chair. Thanks to both of you for your excellent presentation.

It's one thing to talk about development in Africa, but what is more difficult is to discuss its funding. We have to be aware that it's not the 500 million dollars that has been “promised” by Canada, if we have surpluses, that is going solve the problem. I think that we have to talk about very significant sums. Yesterday, someone told us, if I understood correctly, that it would take 150 billion dollars to properly address the African problem. I think that it is very pertinent to ask that question here, in Halifax, before an influential group of thinkers and activists. I don't know them intimately, but you must undoubtedly know about them. These are the people from Alternatives, which is promoting the Tobin tax, which I guess would notably help in confronting the most catastrophic problem facing our planet, namely, the African problem.

First, I would like to know what you think about the Tobin tax or any similar means of funding, which would have the benefit of making the rich pay, and not the already taxed companies, whether in Europe, North America or elsewhere, where people pay their share of taxes. With the Tobin tax, we would collect money from people who have it, and who earn it through speculation, to boot.

Second, you speak a lot about a very alarming problem: AIDS. I would like to know what you think about the activities of the pharmaceutical companies regarding AIDS, and its cure or its treatment.

Third, don't these two questions lead us to very seriously question the eventual creation of a supranational instance that would legitimately intervene, not on behalf of special or continental interests, but really with a planetary approach, an instance for which the mandates would be clear and for which there would be sufficient resources for operations and assistance?

[English]

The Chair: It seems to me you're asking about dollars for development; what took place in Doha, and how we've moved on that agenda; and the other is with regard to some kind of supra-organization.

Ms. MacLean.

Prof. Sandra J. MacLean: You mentioned the Tobin tax. To my way of thinking, that's probably one of the few ways in which we can engender the amount of money that's going to be required for this kind of development. As you know, it's been very controversial, and they haven't yet worked out the way in which they're going to be able to implement such a tax.

I think when it was first raised, 10 years or so ago, around the issue of soft development, it was put on the back burner because it was inoperable. However, I've noticed recently there's been a lot more discussion about it, and I think that's an indication that people are now more ready to look at solutions of how they could perhaps utilize some kind of tax on financial transactions.

What they're talking about, in terms of the Tobin Tax--I forget the actual figures--is a very small amount on each transaction. But it would create astronomical funds for development, which indicates, in some sense, the imbalance we have here. The amount of money that's being transferred transnationally and the amount of money that's being made because of transnational operations and transactions is so far skewed on the heavy side in relation to what's actually being spent on development. So I think if we could tap into some of those resources, it would be a positive way to proceed.

Like John, I'm not an economist either, so I don't understand the implications of this. And I actually read an article by Tobin recently saying that it's being used in a way he didn't intend in the first place. Nevertheless, I think the fact that people are looking to this as a possible solution is positive.

That in some ways taps into your third point in terms of the supranational organizations. We discussed at lunch today the whole issue of state sovereignty and whether sovereignty is being eroded or not. When we start talking about supranational organizations, people immediately start to fear the possibility of further erosion of state sovereignty.

My own thinking on this is that we have moved so far in terms of globalization that we have reconstructed the nature of the state and state relations to its domestic constituency vis-à-vis its relation to transnational finance and international and transnational actors. Given that, we're probably going to have to move to some system of governance of shared sovereignty. That means that the state is going to play an important role, as it has always done, and it's going to maintain its sovereignty in that area.

But the other side of this is that there are going to be certain areas--perhaps in terms of generating income for development, or in various global initiatives like environment, for instance--for which we may in fact need to give over some of the state sovereignties to some kind of global institution that can deal with them more effectively.

In terms of the role of our pharmaceutical companies, I'm not so sure--like states, perhaps--that pharmaceutical companies themselves are not being driven by the institutional framework of the international economic community at the present time. And the TRIPS--obviously pharmaceutical companies as a group have pushed for this agenda, but now that it's been created, things like the TRIPS agreement make it necessary for companies to buy into those agreements.

So I don't know that we can expect Canadian companies individually to necessarily protest the arrangements or to act independently in any of these arrangements. I think it behooves governments, perhaps, to set the standards or to set the conditions--or change the rules--by which some of these needs can be met.

I think you can see what can happen when countries do take a stand, as happened in South Africa. Especially where you see countries that have a moral commitment and a very strong moral case on their side, they can change the rules of these international agreements on trade.

· (1330)

The Chair: Mr. Harker.

Mr. John Harker: Thank you.

The question of financing development is a very major conundrum. There was a preparatory meeting held in New York in January. I talked to someone who was there who felt that nowhere among states had there been any visible sign of any really positive or creative thinking.

I haven't heard very strong support for the Tobin tax anywhere lately in terms of it being a doable proposition. Maybe it should be, but it doesn't seem to me that those states with the ability to shift the agenda are really pushing it. They're more than likely to speak in terms of encouraging private sector investment to overcome these problems. Well, that has its ups and downs.

I recall a conversation with the CEO of Talisman Energy. He was telling me it was costing his company certainly no more than $2 a barrel to go from total exploration to money in the bank for oil from a conflicted part of the world, from Sudan. Well, you see the profits to be made if you are able to invest $2 and get a return of anything between $12 and $30.

Would private sector investment meet the challenge? I don't know. I'm completely unsure. But in my mind, it says there is great wealth in Africa. I think there is a need to be sure that more of it is put into development, rather than having it lining the pockets of Talisman, Chevron, Texaco or ExxonMobil. And I mention those last two because it has been alleged that, in 2001, $1.4 billion U.S. was taken from the money available to the Angolan state by powerful Angolans. At the same time, the international community had to come up with $200 million U.S. to meet the basic living costs of people displaced by the war. So I think we shouldn't be afraid to look hard at how the wealth of Africa can be helped to ensure that it contributes to African development. But I don't really profess to have any more of a partial answer than that.

On the question of the drug companies, interestingly, Monsieur Rocheleau, you mentioned a cure. We know there isn't a cure as of yet. Regrettably, in many African states people are paying a fortune for bogus cures. I think it really is necessary for the pharmaceutical industry and the international community to get together to work out how to do something to ensure that what is now a prohibitively expensive course of treatment becomes reachable in many African states. I hear the situation in Swaziland is so bad that the rumour has grown up that the only way to defeat AIDS is by having many, many more children, yet this is simply compounding the problem. But I don't really know what can be done.

On the question of a supranational organization, I have to confess to having once been a UN official. I used to hear people say that if the UN didn't exist, we'd have to invent it. I used to think, maybe yes, maybe no. Canada has recently assisted the holding of this International Commission on Intervention and State Sovereignty to try to get at how we can do it better, how we can avoid making mistakes. It's a very complicated, difficult businesses. But I myself can't see where anyone has the appetite for creating any kind of other institution. Regrettably, I think we've begun to lose that fervour—which was a Canadian trait—of trying to constantly reform and keep transparent the UN itself. We seem to somehow be failing in that exercise.

What do we have? We now have the emergence, unexpectedly, of what was held to be an isolationist power now seeking to play world policeman in a way that goes against many of its values and traditions. I think that's causing a need for us all to have another look at what we mean by conduct of foreign policy. That leads me to say that if we were able to encourage most states to view sovereignty, not just as a matter of borders but as a matter of responsibility to their own people—and this is an African trend that has been articulated in academic journals in the last year or two—and if that approach to sovereignty was more manifest, maybe the problems that have to be responded to through intervention would be less acute, and we might not need the supra-organization you have spoken about.

· (1335)

The Chair: Thank you.

Ms. Carroll.

Ms. Aileen Carroll: I'm just pondering what you just said. I had a question, but I'm going to leave that because I need to chew on it a bit more.

You've presented a tremendous amount of information, and I was pondering all of it, not just your last comments. On page seven you made a recommendation on what Canadian legislators can do. Those of us around the table have all participated in parliamentary associations and have had the opportunity to work as parliamentarians, and not in a partisan manner. Maybe that jumped out at me because I've done that a number of times.

I had the privilege of going to Africa with Governor General LeBlanc on an official state visit, with a representative from each party. We met in different groups. Our business contingent worked all day in one area, the Governor General in one area, and the parliamentarians in another.

We went to in Mali, Cote d'Ivoire, Tanzania, and Morocco. In either Tanzania or Cote d'Ivoire I was chatting with parliamentarians, and in the country there are approximately 26 political parties.

· (1340)

Our discussions—and they were phenomenal discussions, just marvellous—were on trying to convey how to cluster and create a party, and how not to leave a room at the end of an angry discussion and go outside and form another party. This is just...and in no way, as I'm sure you know, am I being condescending, not at all. It's just a different experience base, or else a base that doesn't exist, because of colonialism, because of tribally or hierarchically structured communities, and so on, all of which you know about much more than I.

I realized, though, in that setting, how hard a road they had to go to create those parliamentary institutions. What I'm coming around to...and this is not to bore you with my experiences, because they're not nearly as valuable as yours.

In here, where you mention what the Brits are doing, you say that perhaps we could make it a priority to train and capacity-build among African legislators. I do think there's a possible role there, but I also hearken back—and this was in Tanzania—to a discussion with women who want to become parliamentarians. They met with the few women who were there and asked, “How did you gain a profile in your Canadian villages so that you could run, so that you could try to knock off some of your male counterparts, who have all the time to go out and gain a profile and engage the process while we're busy walking ten miles for water?”—or doing, as we all know, the rudimentary tasks that take their entire 24-hour day.

I think what I'm saying is, at what point would we intervene? How would we assist those who would be legislators? It would become almost exclusive if we tried to deal with just the people who've made it. Do we perhaps need to get in on both levels?

I'm sorry to be...

· (1345)

Mr. John Harker: No, you've raised a point that I have not addressed. It appears to me that when the African leaders, in October 2001, elaborated on NEPAD, they set in place a number of functions that would fall to legislators. They had to provide oversight for government spending, more particularly, and all this kind of thing.

They want to improve their capacity to handle those challenges. That's where I'm starting from. And we should be helping them do that. This does not mean to say that we have the model, not by any means. In fact, the parliamentary centre, which I mentioned, has been working for a number of years with the parliament in South Africa, sharing experiences, seeing where there is a good idea, no matter its origin, and seeing if it can be utilized. All of that we can do.

When it comes to going to those people who might want to enter politics, well, I did say somewhere here that we also should be trying to enable—part of me would say “challenge”—African states to embrace participation of their civil society in this whole exercise. Stop the idea of keeping them out until the texts are written. In South Africa they're doing that; in other countries, I doubt it.

It seems to me that, for example, through years of funding by CIDA of NGOs in this country, we have very directly helped to ensure that, in the case of women who are anxious to get into public life, they have friends in other countries with whom they can develop relationships and the like. This begins to change things.

There is now in the offing an election in Sierra Leone. The first person really to contest this—in the face of a sitting president, Kabbah—is a woman who runs the most active NGO in the country. She has been sustained and has become a formidable leader by virtue of all the international contacts she has developed over a number of years.

So, yes, I don't mean in any way to say that those things are not vital, because I think they are, but they're not where I see our legislators having a role to play. Yes, in a private manner, great, and if you want to be involved through an NGO...but I'm speaking here of Canada helping, for example, a parliamentary centre to take its experience in South Africa and see if it has any bearing in Sierra Leone, that kind of thing.

The need is there, and they have expressed the need. We have partnerships, and I'm a big believer in real partnerships; as Lester Pearson said in 1968, partnerships between equals. We've lost that, in a sense. For many of us, partnership is just a legalistic form of division of funds. If we are real partners in development, we'll find ways of responding to their needs, not imposing our values.

· (1350)

Ms. Aileen Carroll: Exactly. It's “How do you see us helping you in that regard?”, rather than “Here's our plan and here's how we're going to bring it to you”.

And although it was a state visit, these were casual settings. We were asked to come and chat about building consensus within a party, and about what a loyal opposition is. They're interesting concepts. We spoke freely, the five of us, from our Canadian experience.

The Chair: For the record, I want to mention there is a Canada-Africa Parliamentary Group. I know Mr. Rocheleau is a member. We have 57 members from all parties in the House.

We've started to study the NEPAD, looking at the initiatives, making some recommendations to the Prime Minister, to Mr. Fowler, etc., again, trying to match up with the parliamentary centre with the hope that we might be able to get some funding to do some of the work.

It's not an established...as you know, there are established parliamentary associations that are funded by the House. This is not funded by the House. We hope somehow, since Africa is the only continent at this point in time for which there is no House funding for parliamentary activities, we might be able to get some funding in that respect so we can do some of the things that you and Professor MacLean and others have been talking about--how we can get around the table with parliamentarians.

I, too, was surprised when I visited some countries to find the percentage of parliamentarians who were first-time parliamentarians in a democratic, elected process. I think there is work. As you've mentioned, Dr. Harker, our experience in South Africa and some of those other places, where we have been on the ground working on governance issues, providing judicial and other kinds of support and human rights....

In other words, I think there are opportunities there. I just want to say that we have something that is already starting. It is the hope that we can move that forward as we move on the G-8 agenda.

Ms. Aileen Carroll: Are we going to have the voice of parliamentarians out at Kananaskis, Madam Chair?

The Chair: Again, this is something that, through that organization, we can work at in terms of how we can have input into that process.

Ms. Aileen Carroll: Maybe this committee might want to make reference to such a recommendation. It's just a thought that came to me.

Are we out of time?

I have a question for Dr. MacLean. Again, you're giving us so much to think about, we won't be sleeping for the next little while.

Among many points I want to contemplate further, Dr. MacLean, you made mention of financing development in the context of the relinquishment of sovereignty to a larger body more capable of accomplishing the goal on the wider scale—and that's me paraphrasing. It's the reverse...or the essence of the principle of subsidiarity, I guess. Likewise, if the smaller body cannot accomplish what the larger body can do better, then we let go. In reverse, we do not take away.

If we look at the EU, they've come a long way in relinquishing individual sovereignty. They haven't got to the point where they have a common foreign policy there, but I believe they will in time. Look how far they've come. Also, look back and see how many naysayers said they would never get there.

Are there any parallels there for us, Dr. MacLean? You made some reference at lunch time, but we didn't go the point of talking about the North American integration that's partly the focus here. I don't think anyone is proposing an EU kind of thing, not that it can't be. We're wide open. Everything is on the table, as our former chair said.

How do you see us accomplishing some of the goals that we've made paramount in this discussion of Africa through the creation of bodies that can better do the job? You mentioned environment as an example. If you took development, how would you overcome what appears to be the prevalent view in Washington right now toward aid, and an increase in aid, if you were to propose a larger body? Maybe it's too tough.

Bill, you don't need to go there. Yes, let's leave the last part, but speak to the issue.

· (1355)

The Chair: Yes. I think it's an important question. The U.S. position on Africa, in terms of the support there will be for the NEPAD initiative, is an important point. Pursue it. I think it's important.

Ms. Aileen Carroll: It is. Maybe we need to make it a two-part question to deal with the development of a larger body to accomplish the goals, and then add the American component. He might sink the first with the addition of the latter.

Prof. Sandra MacLean: I was going to answer you by saying just that. In fact, when you're comparing our experience with the EU, the American situation may sink it for that kind of comparison. I think if you want to look at initiatives on development for aid, for instance, or if you want to look at the initiatives on the environment you brought up, certainly the Americans would not be promoting the type of agenda I'm suggesting is necessary in order to get at the development issues we're seeking to address for Africa.

In terms of the kind of transnational body, John mentions the problems with the UN. Right now, the UN seems to be the only system to come forward as a viable alternative to the state. I don't think it's necessarily the only way to go on the issues; however, I think right now our institutional structure has not caught up with the issues we're dealing with.

I think what has been developing to address some of the issues are very informal structures. Some people are calling them informal structures of governance, in fact. They are some of the transnational coalitions developing, as I mentioned earlier, that are bringing in state and non-state types of actors. You can call them different names. They are epistemic communities, in some people's analyses, mixed-actor coalitions, if you like, or a variety of different names to look at some of the very diffuse types of accumulation of different types of actors.

There are some aspects of state in that there might be some state sectors or interested state actors. There might be some NGOs. There might be some aspects of different global movements, peace activists, or whatever. There might be business initiatives in some areas, coming together around certain issue areas dealing with some sorts of structure, that are actually creating structures of governance on some of the issues. They're outside the official structures of governance, but they may be preceding the institutionalization of something at a supra-state level.

Ms. Aileen Carroll: I think they may be more effective because they don't get ground down with the structure.

Again, Dr. Harker, I'd have to say sometimes one gets a little depressed with the United Nations. It's the only one we have. We have to have it. It's certainly improved over the League of Nations.

I was down, last fall, as a member of the Canada-Europe group. We are observers and work very well, much to our advantage, with the parliamentarians there. It was their yearly debate on regional organizations, such as the Council of Europe.

Some of the meetings we had were enough to make you terribly excited about things that were happening. There was another one. This one was not exciting. I've forgotten which country it was. The gentleman was a member of the group that had been meeting for nine years to discuss the reform of the Security Council.

We all know it's no small task, for any Pollyanna in the group. To listen to this dreadful discussion or conveyance of what had transpired over nine years was disheartening.

Again, please hear my contrast.

Then we were at another meeting where we thought it was just marvellous. We were moving and seeing great reason for optimism. But it made me think that maybe it's sometimes better to identify a goal and put together a team with enough authority to move, but not encumber it with this huge bureaucracy.

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Prof. Sandra J. MacLean: The authority may be ad hoc; it may develop along the way, but I think we have to be attuned to some of these initiatives that are taking place. We have to buy in where it's appropriate, and buy in at the national level where it's appropriate, and we can do some good.

I think you're right that perhaps some of these initiatives are developing because of some of the ennui in the United Nations, state systems, or whatever. There are needs out there in a globalizing world that are being met in some kind of way. So these are the types of networks that are developing to respond to those needs.

We need to understand them a little more clearly and use them a little more effectively, where we can.

Ms. Aileen Carroll: Thank you. Excellent.

The Chair: Good point. Before I let you go, there is one question I want to ask. What should Canada's approach be to try to get a G-8 consensus on at least a few key areas?

Mr. John Harker: I will hazard a view on the basis of very little information and probably a lot of accumulated bias.

I hope we do not go into this with the objectives of ensuring we come out of Kananaskis with no great egg on our face and looking for the lowest common denominator to get Bush and Blair and others to agree to something.

I think the Prime Minister made a very impressive speech to the World Economic Forum in New York a couple of weeks ago. So he clearly sees the stakes.

I had heard before it was a Canadian hope that we wouldn't talk about things like conflict at the summit. Well, I don't know how you can talk about African recovery without addressing conflict. Prime Minister Blair, in one fell swoop, said in Nairobi he was going to make sure we talked about conflict and even helping to find an end to the war in Sudan, for example.

So I think there are probably a raft of issues—September 11 might have brought them into clearer relief—where none of the G-8 leaders would be opposed to interventions related to trying to do something about conflict, realizing we won't end those conflicts immediately, but at least putting markers down that we're going to apply resources to make progress. I think that is an achievable one.

The more difficult ones will be in terms of writing off debts, changing trading relationships, and all of those things. I think Canada will have to work hard to go into this with a strong sense of common agenda with, for example, the U.K. and France, as has been mentioned by many commentators. They should not gang up on Bush, but ensure they encourage the American administration to see that their perception of the world requires that they look on this summit as a time when everybody must honestly realize we have a kind of common future we can safeguard by doing good things.

If we look for the lowest common way forward, we'll achieve very little, and it won't address what I think the U.S. administration must realize it cannot do on its own, or just by the application of military might--namely, a world in which a lot of things must be attended to before they get a lot worse.

The Chair: Thank you.

Prof. Sandra J. MacLean: John said this much better than I could, but I agree with the things he said. I think the issues of trade and debt will certainly be at the top of the agenda, so they will be taken care of.

I liked John's suggestion that AIDS, conflict, and corruption are three areas that need to be addressed, if we're going to do anything significant, in terms of operationalizing NEPAD.

What I would like to reiterate is that we must recognize the interconnectivity of all the various aspects of these issues of security and development in Africa. Unless we recognize that connectedness, unless we recognize the north-south links that contribute to, as well as possibly help to alleviate, some of these problems, we're never going to deal with any of them very effectively. If Canada can do anything, it could put that statement on the table fairly strongly.

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Mr. John Harker: Could I just make one additional point, Madam Chair? It was prompted by your mention of your Canada-Africa Parliamentary Group. I was invited by you to attend the opening session, the launch occasion. I clearly recall that the room was packed with virtually every African ambassador. There are some cynics who would say people just showed an interest because they wanted something, such as a grant from CIDA or whatever, but there was a very real feeling on the part of those African diplomats that this marked a new point of departure in our relationship, that it was more of a suggestion of partnership than in the past. That was almost two years ago.

Even if we can't do everything we would like to do with our allies, I think this is another time similar to when we held much more to being a partner with Africa than we have in the last number of years. I think we have to regain that, and I think that should be also in the Prime Minister's mind when it comes to how this summit is conducted.

The Chair: Thank you. I appreciate hearing that.

Also, I want to thank you for coming before us. We have to prepare our paper by the end of April, so it is our hope that, having heard from you... If there is anything further you would like to put on our agenda, please have it sent to us before the end of April.

Thank you again.

Ms. Aileen Carroll: Madam Chair, I know you've concluded and that it's inappropriate to add an addendum, but I agree with what you're saying. To hearken back just for one quick second, though, if we're going to try to convey to Washington a different view of the world, I hope the participating delegations of the countries at the G-8 don't wait to attempt to do that all of a sudden, in their face, at Kananaskis. I would hope someone would go gently to Washington in advance in an attempt to build that. I think it can be built, but I don't think you can do it at Kananaskis.

Thank you.

The Chair: Thank you.

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¸ (1415)

The Chair: We'll continue, then, with our witnesses: from Dalhousie University, Michael Bradfield, professor of economics; and from the Nova Scotia Federation of Labour, Mr. Rick Clarke, president.

We want to thank both of you for accommodating us by making your presentations together, one after the other. Then we'll have the questioning, which will be addressed to one or the other of you, or the questions could be answered by you both.

You may begin, then, Professor Bradfield.

Professor Michael Bradfield (Department of Economics, Dalhousie University): Thank you. I'm sorry for the mix-up in anticipation of the time I would show up, but we're here.

Basically what the brief I presented to you is trying to do is deal with the very fundamental shift that we've had in the focus of policy with respect to trade in terms of the role of the corporation.

The last several trade deals that Canada has been involved in and the negotiations we've had over the MAI and the more recent negotiations within the WTO have been heavily focused on giving corporations more rights. The point I'm trying to make in the brief I presented to you is that corporations are a legal fiction chartered by nations, and the reason the nations legitimize the role of corporations is because it is assumed that corporations will work in the public interest.

The incorporated company--the so-called “limited company”--is limited in the sense that the incorporation limits the liability of the shareholders to the amount of shares they buy. That was the original intent--to remove the liability for any given owner from complete liability for all of the debts of the corporation. So a limited corporation is limited as a means of raising funds. The fundamental shift that has occurred in the last 20 years or so is to try to turn corporations into citizens--to have citizenship rights--and then to use those rights to give them power over the state.

The basic proposition I'm dealing with is that the corporation is a legal fiction and is not a citizen. It doesn't have citizenship rights. An obvious example of the rights question is the question over freedom of speech. The classic case in Canada was the fuss--legal and political--that the tobacco industry made over attempts to restrict their right to advertise, arguing that their advertisements were a form of free speech and they had the right to free speech.

My point is that corporations do not have a right to free speech. They do not have the right to free speech because they're not a citizen. They do not have a right to free speech because, even within the commercial sphere that they operate, they don't have the right, for instance, to lie in their advertisements or to lie in contracts that they sign and don't deliver on. The point simply is that corporations, because they're not citizens, do not have citizens' rights and therefore should not be expecting through these trade negotiations to achieve powers over a government. It's the function of government to grant the charters for corporations, and then it's the responsibility of the government to make sure the corporations operate in the public interest.

The next question is the economic question, and that is whether we can be guaranteed that corporations will work in the public interest. In economic theory, we have the theory of the perfectly competitive market, a market in which no one has any economic power. The so-called invisible hand of competition then will in fact force corporations acting in their private interest to serve the public interest. The point I'm making in this brief is that the corporations that wish to limit the power of governments to regulate them are the large corporations that, virtually by definition, have economic power that takes them out of the perfectly competitive scenario of economic textbooks and gives them the power to work in their own interest without aiding at the same time the public interest.

The fundamental bottom line, then, is that the corporations that most want more powers, particularly power over government, and that want less responsibility towards government are the very corporations that violate the conditions under which a government can grant a corporate charter assuming that the corporation will serve the public interest.

The conclusion, then, is that rather than getting into trade agreements where we grant more and more power to corporations to sue governments if the government enacts an environmental or health legislation that takes profits--or potential profits--away from corporations, we should not be allowing corporations to do that. We need in fact, with growing power from the corporations, if anything, to enhance the power of the state to control the creatures that the state in fact has created.

So my brief is designed to go through the logic of why corporations were set up, what they're supposed to be doing, why they might work in the public interest if it were a competitive environment. The competitive environment doesn't in fact exist for these transnational corporations, and therefore one has to look at increased regulation of corporations, not decreased regulations, which is what many of the trade agreements we are now negotiating would do. That's the thumbnail sketch or walk-through of the brief.

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The Chair: We'll now go to Mr. Clarke, and then we'll have questions.

Mr. Rick Clarke (President, Nova Scotia Federation of Labour): Thank you, Madam Chairperson.

First of all, on behalf of the Nova Scotia Federation of Labour, I'd like to thank you for the opportunity to appear.

We are an umbrella organization that represents roughly 70,000 affiliated members across the province. Though we welcome the opportunity to appear before you, we do hope that this session is indeed a true consultation and not merely a bit of a PR exercise. That's not a reflection on the individuals who are at the table. It's a belief that in the past, people impacted by such trade agreements and the globalization or the free-market globalization that we're seeing today certainly haven't been consulted, or aren't being consulted, and we are pleased that we do have the opportunity today.

We outlined in our presentation some of the basic principles of the Nova Scotia Federation of Labour. I won't go through those other than to point out that the principles that guide our organization are for the betterment or advancement of the economic and social welfare of workers in this province, as well as their families and their communities, including the workplace laws that they depend on so much, such as the Trade Union Act, the Occupational Health and Safety Act, Workers' Compensation Act, and so on. The reason I put those in our presentation is to show that our basic principles are enough for us to want to come and talk about the relationship, or the North American relationship, following the free trade agreements and the portion of what we're talking about, the G-8 agenda for upcoming talks.

It would be difficult to go further without actually saying that since the initial free trade agreement, all the advancements that we fight for on a regular basis and that are meant to better the economic and social well-being of workers have indeed been an uphill struggle because of some of the side issues that have come out of our trade agreements.

With the initial talks, and well before the first free trade agreement had been put in place, the labour movement—not only in this province, obviously, but across the country—raised concerns about the impact it would have: job losses, weakening of social security, and so on. At that time we were branded as fear-mongering. Sad to say, when we look back over the last number of years, a lot of what we had forecast or predicted at that time certainly has come to be, with the attack on our social security and indeed the high unemployment and lost jobs that we've experienced.

So we do hope that out of this consultation process the Government of Canada and the other G-8 nations realize the need to ensure that a global economy is structured and works in the interest of people, rather than the interest of multinational corporations, as has been the case to date.

When we look at an economic agenda that has market liberalization at its centre, it's certainly not good for working people. When we look at the market potential from past agreements in the U.S. and Mexico, though they may be good for the U.S. and Mexico, they're certainly not necessarily good for Canada or the U.S. Equally, what may be good for the highly industrialized areas in Quebec or Ontario is not necessarily good for Atlantic Canada or Nova Scotia. To support a bit of what Mike had said, what's solely in the interest of large multinational enterprises is rarely, if ever, good for people.

The reason I raise those comparisons of what's good for other areas, including within our own borders, is the fact that if there are trade agreements, they certainly have to be diverse enough for a nation's uniqueness, and not only for the national uniqueness when you're talking about multinational deals, but also for the uniqueness in different regions, not only of the country but also within the province. The needs and wants of the people of this vast country are certainly very diverse and have to be taken into consideration when we're looking at any type of economic development strategy.

When we look back over some of the negative impacts we've had, it's quite obvious that we're very cynical of any of the positive that has come out of any of the globalization or unfettered free-market globalization, because we've been witnessing a stagnation of wages, and work has become more intense for people and insecure. Individual and family incomes have also stagnated.

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Our social security net is being attacked. We're seeing losses in services and downsizing in health care, education, and social services. Unfortunately, we in this province have the stigma of having the highest tuition fees for post-secondary education of any place in this country.

Our minimum wage remains low, and labour standards are weak. As well, our weak labour laws are being undermined on a regular basis. Unemployment remains unacceptably high, and the main trend in job creation is in part-time employment.

The only consistent growth we have seen since the free trade agreement is the gap between the rich and the poor.

All of this had both a direct and indirect impact on the size and services of government. The slow economy, the reductions and closures, and the slow growth have meant greater revenue losses for government. It has equally resulted in the downsizing of government, both because of economic issues and their own political desire.

Initially, trade deals, such as the free trade agreement and NAFTA, were about border issues, such as tariffs and duties. But today's issues are very much removed from those. The World Trade Organization deals more and more with the way laws and economic institutions are organized, government procurement policies, intellectual property rights, and government regulations in areas such as health and environment.

There is growing pressure to make government smaller through downsizing, contracting out, and privatization, all of which results in the loss of services and increased costs to consumers. In addition to the direct downsizing of government, we're witnessing downsizing through deregulation, which is having a serious impact on public safety, the environment, and workplace health and safety.

Trade agreements and their restrictions are eroding democratic principles and the ability of government to govern in the interests of its people, as shown in the chapter of NAFTA that ensures the rights of investors. The chapter I referred to, by the way, is where regulations of government can't unfairly restrict the profits that could be made by a corporation. Our own government was threatened with a lawsuit of up to $250 million. They eventually accepted $13 million. It's under chapter 11 of the NAFTA agreement.

This feature of NAFTA is an important reflection of the dominance of the commercial interests in the framing of the trade agreement, but it's important for another reason as well. When negotiations leading to the formation of the World Trade Organization were underway, an attempt was made to get a similar provision on investment included in the WTO. The suggestion was rejected overwhelmingly by less developed countries, and the suggestion was dropped, but only for the moment.

I want to digress briefly on that. I mentioned the privatization we're seeing across the country at both the national and provincial levels. Our fear in this region is because we have some examples of it taking place right now in health care and water. There's the case of the Ethyl Corporation in 1998. If we have regulations for some private sector to take over the governance of water or health care and if they see that regulations could hamper their ability to enhance their profits, then there is the potential of undermining our health care and our whole water system. It's for that reason that we're totally opposed to privatization in areas such as health care and water.

¸ (1430)

I'm going to skip a bit ahead because I know it's only supposed to be ten minutes. I want to talk very briefly on a couple of industries that are receiving a major negative impact in this region from the original free trade agreement. The first is of course the shipbuilding and ship repair industry.

Under the original free trade agreement, the U.S. was able to maintain a cluster of legislative packages commonly known as the Jones Act, which protected a number of their inshore or coastal types of operations, primarily in fishing vessels and other vessels involved in coastal work. At that time, Canada failed to sign a reciprocal clause in our portion of the agreement, and as a result of that, the American shipyards have been able to tender and bid and in fact do construction work on similar vessels for Canadian companies while our own companies, our own shipyards, are sitting idle.

I raise that as a concern because what we have now is the potential talks of expanded trade with some European countries, in particular Norway. This country, when it was into its own offshore development, had really closed its borders so that the country itself would benefit from the offshore development. They now appear to be willing to enter into discussions with Canada on a free trade agreement, and it's quite obvious why. They have a glut of offshore equipment, particularly offshore supply vessels, that they're looking to put into our waters or to dump into our waters to exploit our offshore oil and gas at the expense of our local shipyards in this country. If this is allowed to happen, it could well mean the demise of many of the operating shipyards, or the few operating shipyards, we have in this country today.

The other industry, which I know you're all too aware of because it's been in discussion in the House as well as in the media, is the softwood lumber industry. There's quite a negative impact on our industry in this province and indeed across the country. It's unfortunate that in an area where we do have some exports, an area that is providing jobs in this country, the U.S. is going to be putting contraband duties.

The final example I want to touch on—and I've added a copy of a media clipping on it—is the construction of locomotives that is currently, if the media report is correct... That was from yesterday's paper, and I checked today and there has been no retraction on it. I think it was originally awarded to GM, which gives some work out to Bombardier.

The federal government has provided some loans, and now because of NAFTA and the multinational corporations, we're providing loans to a company to create jobs in Mexico while our own plant in Quebec—in Montreal, to be more specific—has laid off all its workers because of lack of contracts. Something is clearly wrong with any trade agreement that permits the use of tax dollars to create jobs outside the country.

I'll just flip ahead to some of the basic recommendations we would make. Quite clearly, we believe that rather than simply focusing on a strengthened economy through economic growth, G-8 leaders must develop a clear focus on improving living standards of workers and eliminating poverty across the globe. Economic development that achieves these objectives needs to replace market liberalization as the centre of the agenda. National and regional diversity in the strategy and tactics of development must be accepted, even where the strategy and tactics depart from models of liberalized markets.

In particular, major economic powers have to stop using international economic institutions, such as the International Monetary Fund, the World Bank, and the World Trade Organization, to impose market liberalization on less developed countries. They need to reorient their domestic policies to place greater emphasis on employment creation and real wage growth versus fighting inflation, and they need to recognize core labour rights as a way of broadly diffusing the benefits of economic growth.

Among specific actions the G-8 leaders need to deal with are: measures to offset the downturn in the world's major economies, which emphasize the positive role of the public sector and domestic sources of economic growth; measures to tame international financial flow, including the currency tax or Tobin tax, national capital controls, and asset-based reserve requirements; the need to exclude public regulations and services, including health and education, from the disciplines of trade agreements; the use of the OECD guidelines on multinational enterprises as a basis for demanding much greater social responsibility on the part of multinational enterprises; unconditional debt relief for the world's poorest countries; increased overseas development assistance; and the need to curtail tax havens.

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We have a very large corporation in this region. I know that all regions have them. When the patriarch of this family company passed away, the operation was left to his sons, providing they moved to Bermuda to avoid Canadian taxes. When we have a system such as that in this country, where the wealth is made in this country, then clearly something has to be done to ensure that some of this money stays in the economy and certainly does help to provide jobs and benefits to the country.

We are part of the CLC, as I indicated earlier. They released a document, and we wanted to talk about the part on world security. We have attached it to our presentation. I put some background notes in there as well on globalization--economic, political--and references to the International Monetary Fund.

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The Chair: Okay. Thank you very much, Mr. Clarke.

I also want you to know that yesterday we heard from the Newfoundland and Labrador Federation of Labour. Elaine Price, the president, appeared before us. Also, we had the leader of the New Democratic Party of Newfoundland, Mr. Harris, where again the issue was the shipbuilding and the steel industry. Mr. Randy Collins, who is an MHA for Labrador West, brought that to our attention. So I can see some similarity in terms of your brief and what we've been hearing so far.

We'll now go to questions from the members, and we'll start with Mr. Rocheleau, who is the member for Trois-Rivières.

[Translation]

M. Yves Rocheleau: Thank you, Madame Chair.

My questions are for both witnesses, given their intellectual relationship. I think that my questions will be pertinent to both, on the evidence. My questions are somewhat philosophical.

I would like to hear what you have to say on the very concept of globalization, which many have presented as being irreversible, inevitable, and which, depending on the point of view could also be to a certain extent viewed as an Act of God. In my opinion, globalization is based on the free movement of people, goods and capital. There is a certain amount of confusion because we are told that we cannot be against globalization. We find that it is indeed part of progress, and the development of technologies. What is its failing? Where do we start to have doubts? I would like to hear you on this. I believe that it's when we talk about neoliberalism and the role of the State. Why I ask this question is that you use words that we practically no longer hear, such as “public interest” as opposed to “private interest” or yet, the “common good”. This is a concept that we hear quite seldom today.

I follow up on this with the second part of my question. Also, Mr. Clark, you touched upon the subject, but I would like to hear you again, as well as Mr. Bradfield, on this topic. What do you think about the eventual implementation of the Tobin tax, given that the problem is the African problem, and also, the sharing of wealth in this world of ours.

[English]

The Chair: Professor Bradfield.

Prof. Michael Bradfield: I'll start with the second question first, because in fact in my brief I do discuss the Tobin tax.

When I was originally planning to go on with Rick, I was going to send him a copy of my brief, but I couldn't find his e-mail address. Our briefs overlap strongly, nonetheless.

The Tobin tax seems to me a very fundamental thing. It goes back to your first question. You talked about the free circulation of goods, capital, and people. Unfortunately—and the economists are to blame for this—capital has two meanings. Capital has the meaning of the machinery, equipment, and factories we need for our jobs and to produce things to meet our needs. This is how economists normally use it. But there's also financial capital, which is in this case, internationally, the speculative money flowing around the world.

The Tobin tax has the effect of taking a very small percentage of the return of a financial investment. If the money flows from Japan to Canada as a financial investment with which to build a Honda plant in Alliston, that's a real investment. If there is a one-half of one percent charge on this international flow and they make an investment for 20 years, the one-half of one percent spread over 20 years is negligible and they don't mind paying it. But if it's a financial speculation, where someone comes in to buy Canadian dollars on the theory that they are going to rise and can then be sold and he or she can get out, so this person is only going to be into Canadian dollars for a week, then that one-half of one percent eats into the speculative profits.

I won't say it's 100%, but close to 100% of the time international speculative flows benefit no one. There's the question of arbitrage to even out currencies, and that is beneficial. But the types of massive flows we're seeing, where in excess of 30 times more speculative capital is going around the world than is necessary to finance world trade, are simply disruptive to nations. A Tobin tax would very much help to stop this.

So I'm 100% in favour of a Tobin tax. First, it stops, or it slows down dramatically, the speculative capital flows. Second, it would raise substantial amounts of money, revenues that governments could then use for dedicated purposes such as third world development or improving the social infrastructure internationally or nationally. In terms of this question, the House of Commons has already passed a motion in favour of a Tobin tax, and I think getting a Tobin tax implemented as quickly as possible should be one emphasis in our international discussions.

I might point out as a historical footnote that when the Bretton Woods agreement was being put together after the Second World War, John Maynard Keynes essentially proposed this tax we now call a Tobin tax, after James Tobin. Keynes argued at that time that a Tobin tax was necessary to prevent injurious speculative flows. The participants in the Bretton Woods conference agreed to that until the U.S. bankers heard about it. They were the ones who prevented it from happening during the putting together of the original Bretton Woods agreement. Not so much Canada, but other countries in the world have suffered a great deal because of the lack of something like a Tobin tax.

In answer to your first question, the philosophical question, again we're into more than philosophy; we're into semantics and what we mean by globalization. I would argue that the people who massed in Seattle, in Quebec City, and in various places to protest what the corporations were trying to get governments to do are globalizers. They are part of an international civil movement, a civil society, to see that we have more, not less, democracy.

In this sense, I don't think anyone's against globalization. The questions are who benefits from it and who pays. Given the powers of the multinational corporations, right now they benefit, we pay. We have many examples of this, more in the third world than in the first world.

There is an interesting program the committee might want to get. The Public Broadcasting Service, PBS, in the United States has been showing a program called Trading Democracy for the last couple of weeks on Bill Moyers' show. It is precisely about the issues Rick Clarke raised in his brief, about how corporations are able to use the trade agreements to force governments to back off on environmental and other legislation.

We have one example in the United States of the U.S. putting in regulations on the use of fuels. Because the major U.S. corporations are internal to the U.S., they were not able to use the trade legislation. So they went to Venezuela and used an outside platform there so they could use the trade agreement to force the U.S. government to back down on its regulation of fossil fuels.

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There were a couple of points I'd like to pick up on in your question. First of all, you talk about the free circulation of goods, capital, and people. We don't have free trade. The United States is a major player politically and economically, and if you read these agreements carefully--NAFTA, our earlier free trade agreement, and any agreement that we will get into--you'll see they're not free trade agreements. They don't do what economists argue in our textbooks we need free trade to do. What they say is we will lower tariff barriers, but they very clearly specify that U.S. corporations can use United States laws to stop any injury to them. Rick mentioned the softwood lumber case. That's a case where the corporations used the U.S. laws to prevent injury.

The problem is that trade is about trade: you sell one good and you import another good. What happens is when we export goods such as softwood to the U.S., which we produce more efficiently than they do, their softwood industry should shrink, while some other industry, like their truck industry, will grow under trade. The problem with the U.S. laws is that they are designed to protect those industries that, under the theory of trade, should be properly shrinking. But U.S. laws allow them to bring countervailing action against the more efficient--in this case, Canadian--industry.

So as long as we're dealing with trade negotiations and the United States is unwilling to really make its internal legislation consistent with free trade, we will never have free trade. We will have access to dispute resolution mechanisms that allow us to have our say about whether they are applying their laws properly, but that doesn't prevent them from putting in anti-free-trade laws, which they have on the books now, and which they're quite prepared to put on the books again.

I've already mentioned the fact that financial capital has too much free flow, in terms of free circulation. People do not have the freedom of circulation that capital does, and that's one of the problems, the disparities, that one gets in power. Those who have concentrated financial power can move their finances anywhere in the world. They have the ability to effect jobs anywhere in the world. People cannot move with the same degree of speed or ease. Therefore, it's the power of the money over the power of the people, which automatically sets up the kind of power imbalance that means the corporations extract the profits and leave us with whatever is left.

To answer your question on whether globalization is inevitable, whether it's progress, and whether it aids development, globalization on the corporations' terms is not progress, because very often it means using that power to exploit workers, to exploit the environment, to exploit politicians. In fundamentally anti-social, anti-democratic ways, I don't consider that to be progress. Very often when corporations go into a country to make a real capital investment to put up a factory--and we have cases of Canadian corporations doing this--we go in with the capital that we are used to using.

For instance, we have cases from 30 years ago where we went into Kenya and put in a bakery to produce bread. It was highly capital-intensive, because they were using Canadian capital. It required number two red wheat, which, interestingly enough, we produce and sell. It put out of work the small, independent bakers--basically street bakeries--that had been there for centuries. So we think it's a good thing that we take our high technology to third world countries, but very often what we're doing is ripping apart the underpinnings of their local economy. It isn't inevitable that the technology we take into another country, including foreign technology coming into Canada, is automatically to our benefit.

So is it development? Well, if development is giving some people jobs, then that looks like development. But if it means destroying jobs in other cases, that's a loss of development for some people. If it means, as we've had in Nova Scotia, changing our labour legislation, changing our environmental legislation, changing our health and safety legislation to please the corporations, so that our workers, whether we're talking Michelin, Westray, or whatever corporation, have less power to protect their jobs, protect their safety on the job, then that's not development.

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Do I think globalization is inevitable? Yes, I do. The question I'm raising in my brief is what kind of globalization will we have? If we have the right kind of globalization, it can be in the public interest, but it isn't automatically in the public interest.

Sorry for the long answer to good questions.

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The Chair: Thank you very much.

I'll go now to Mr. Baker.

Mr. George Baker: Yes, thank you, Madam Chairman.

I think someone listening to the broadcast of the proceedings back in Ottawa, or the people who will read the transcripts on the Internet in a couple of weeks, will be struck by one phase that has been repeated more often than any other by the witnesses so far. It is the phrase, “I'm not an economist, so I can't comment”.

We had an economist, the first economist we had, before the committee. We had some specific questions relating to a member who's presently not here. We asked the economist, who happened to be from Dalhousie University, a question. The economist from Dalhousie University said he didn't know much about the movement of money between states, but another economist, Michael Bradfield, was appearing, and he would know all about those things. Mr. Bradfield, now that you're here, we'll put the question that concerned the other member and the committee. I'll put it very briefly and give you the time to answer it.

The economist who spoke to the committee mentioned that when you talk about the increase in trade with Canada, between Canada and the United States or in the world, about 50% of trade is conducted within corporations. It is not between nations, between industries, but within corporations.

Could you comment, then, on two things? Number one, what effect does the term “transfer pricing” have on poorer nations? The second one is on the recent signing over the past ten years of tax agreements between members of the OECD, Canada, the United States, and several other nations, relating to removing the withholding tax, the cross-border tax on profits. They are the two questions we're interested in. What effect does transfer pricing have? What effect do the tax agreements have that Canada signed recently with other nations?

Prof. Michael Bradfield: I'll answer them in order this time.

Canada's trade is interesting. If you look at the numbers, roughly 80% of our trade, and it may be higher now, is with the United States. Eighty percent of the trade is intra-corporate, within a given company, such as General Motors shipping cars back and forth across the border. Some 64% of our trade as it relates to the U.S. is within the corporation.

It means transfer pricing is absolutely crucial. A corporation has the power to set its prices when transferring from a subsidiary in one country to a subsidiary in the other. It sets prices between subsidiaries in order to accrue profit in the jurisdiction that has the lowest tax rate.

Mr. George Baker: Can you explain it?

Prof. Michael Bradfield: I'll give you an example from the energy crisis of the seventies.

Mr. George Baker: Give us a practical example, something I can understand.

Prof. Michael Bradfield: Okay. The oil companies in North America operate extraction companies in the Middle East. They extract the oil from the ground, pump it on ships, and the ships bring it over here, particularly to eastern Canada and the eastern U.S. seaboard.

It was a U.S. subcommittee of the House in the U.S. that heard testimony. The oil companies have the extraction company, a shipping company, and then the refining company on our shores.

They extract the oil—say, at $10 a barrel back in the mid-1970s—they load it onto the ship, and the ship drops it off in Dartmouth at $25 a barrel. The $15-a-barrel difference goes to the shipping company. That's not what it costs to ship it, but that's where they take those profits. Where is the shipping company owned? Well, ExxonMobil or Texaco owns the company through a company it holds in a tax haven— just name your tax haven. So the profits of their extraction, refining, and retail activities are in fact accrued in a tax haven so that they don't have to pay taxes on those profits. That's the kind of thing transfer pricing does.

A study of companies operating in Brazil was done a number of years ago, and the majority of the funds they took out of Brazil were not in the form of profits. Instead, 85% were in the form of corporate charges like management fees, technology transfer fees, accounting fees, and a variety of other different fees. That's now called doing an Enron around reality, but there are all kinds of ways in which they can charge their subsidiaries so that they can say they're not making a profit there, that it's a losing operation. Yet they're taking massive amounts of money out.

If you want a local example, there's a lot of publicity right now about the lack of spin-offs for us through the offshore operations. One reason for that is the fact that we are dealing with companies that are using transfer pricing on the Nova Scotia offshore operation. If they want the profits to show up in New York and not in Halifax, all they have to do is charger a higher management fee, a higher rental fee on the rig or on whatever it is that they're supplying from another subsidiary that is based in New York, and the profit then shows up there, not here.

Particularly in jurisdictions such as a small province, when your jurisdiction is dealing with a very large corporation, the issue of transfer pricing is one reason why that corporation basically has the capacity to make deals that look good on paper. But when it turns out that they have control of the transfer pricing, they're basically able to make the profits wherever they want. That moves us down to the second question, the tax agreements.

Personally, I think we should increase the withholding taxes on corporations, and I think we should increase the taxes on corporations. In fact, the tax agreements give us a good reason for that, because we have reciprocal tax agreements both with respect to corporate taxation and with respect to individual taxation. The latter agreements say that if I get a job advising a U.S. company as a consultant—I doubt that I will, but let's say that happened—and I go down there for a day and make $20,000 for giving them advice, if I'm taxed on that $20,000 by the U.S. government, I can claim that tax payment as a deduction from that income, and the Canadian tax will be adjusted by whatever tax I pay. The same thing is true with corporations.

Here's the interesting proposition—and if I had known you were going to raise this question, I could have brought you a quote from none other than the International Monetary Fund, which is not known as a wild, radically-oriented group. Simply, if Canada lowers corporate taxes on, say, General Motors or some other corporation whose head office is outside of the country, the profits they take home are higher by that much, and their domestic taxes in the United States are correspondingly increased. When we give a corporate tax deduction, we are in fact transferring Canadian tax revenues to the U.S. government, or whatever the parent government is wherever that corporation is located. One of the ironies of the tax agreements that have these reciprocal arrangements is that when we give tax cuts to the corporations while thinking we're stimulating business, what we're really doing is giving a tax increase to the U.S. government. It's not clear to me that they need it, so I say to keep the corporate taxes up.

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Mr. George Baker: Basically what you're saying is that any corporation, such as Wal-Mart... And I'm protected by the rights of the House of Commons; I can't be sued for anything I say before a House of Commons committee.

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Prof. Michael Bradfield: Do I get the same protection?

Mr. George Baker: You have the same protection.

Take any company, any corporation. Take Wal-Mart. What you are saying is that they are able to sell to their subsidiary, set the price themselves to their subsidiary in Canada or in any other nation, and then pay the tax at the lowest tax rate they can find. In other words, they can sell a piano for $100 to their subsidiary to sell for $5,000, or charge $200 for a paperclip. That's what you're saying, isn't it?

Prof. Michael Bradfield: Yes.

Mr. George Baker: I have one further question. Have you analysed in the industrialized nations whether all nations have pursued the idea of bringing down to zero the withholding tax at border, or are certain nations doing it faster than other nations in these tax agreements? Are you aware, or have you looked at that at all?

Prof. Michael Bradfield: I have seen no numbers on that, but given the way different nations view the corporate responsibility, I would guess that you have quite a disparity. One of our problems as Canadians is we tend to compare ourselves with the U.S. But when you look around at say what the northern European countries--even Austria, Germany, and Scandinavian countries--do in many of these areas, they're much more progressive than we are in terms of taxation and social policy, etc. When we compare ourselves to the United States, we are usually looking at the lowest common denominator.

Mr. George Baker: Our withholding tax in Canada was 15% about 10 years ago. It has gone down to about 2% and I believe it's on the last legs of that 2%. I noticed Japan's withholding tax did not decrease very much at all. Would that be unusual to have one nation such as Japan taxing at border and a nation such as Canada not taxing at border?

Prof. Michael Bradfield: No, because the Japanese, like the northern European countries, are less likely to give in to the corporate pressures to lower their taxes than we are.

The Chair: Thank you.

Mrs. Carroll.

Ms. Aileen Carroll: I know Mr. Baker has used, with my permission, indeed the greater hunk of our time, but I just want to mention to Mr. Clarke that there are a number of voices within government on both my side of the House, which is the government's side, and the opposition side that are raising concern with regard to chapter 11. There are many who are keen to make changes, and discussions ensue in that regard. To me it is very much a chapter that if you ever get a book on the negotiations that took place and the quid that was and the quo it wasn't... Well, we never got the quo, as far as I could see, in reading Wrestling with the Elephant, Mr. Ritchie's book.

Anyway, it is problematic. That's a very mild word. I'm trying to stay restrained so that all of our recordings don't have Mrs. Carroll in the hyperbole.

You probably are well aware that Methanex Corp., which is a Canadian company, is pulling the same use of that chapter as others. It's being used by Canadian companies as well as American companies, and it's something that I think we have to remedy.

I grant you it will have to be done in a consensual manner, building that consent among the three NAFTA partners, but I do see signs of hope. I was delighted to see the IISD, the International Institute for Sustainable Development, obtain amicus curiae standing at the WTO, I think, on this matter or another matter related to...yes, asbestos, that's right. No, sorry, the amicus curiae status was gained at the NAFTA tribunal for the first time. Dr. Schmitz is quite right. The WTO granted amicus curiae standing on asbestos just prior to that, which was the very first time that has been allowed. It looks like baby steps, but sometimes those baby steps become bigger steps. I certainly join you in your concern, but know there are other voices that join you as well.

Mr. Rick Clarke: Thank you. It's very comforting that it's being looked at, because when you look at it, chapter 11 really is not there to benefit countries or governments. It's a very able and capable tool for multinational enterprises. I think, from the materials that I reviewed before coming here, there are three NAFTA nations that currently have lawsuits pending against them from multinationals. They could be based in Canada, the U.S., or anywhere, but they are multinational. They play the whole free trade deal almost as a game of chess, pitting one end against the other.

So it is comforting to know that we are looking at that provision, because it causes a lot of concerns when we're looking at other areas. We're facing deregulation in this province in health and safety and environment, so we know in occupational health and safety there is a cost to it. And if they can get their foothold in one area, it certainly can apply to other issues that impact directly on people.

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Ms. Aileen Carroll: But that investors' rights chapter doesn't need to be accessed by multinationals, just straight large corporations can use that. Sometimes I think we use the term “multinational” a lot. Perhaps Methanex and ethanol are multinational, but if you have a single company and either one of those countries has the legal resources, they can... No, you're right, in order to have an operation in the other country, that, by definition, makes it a multinational. Sorry.

The Chair: Again, as we ask questions, more questions circulate around. I wondered whether Mr. Clarke has focused on the movement of labour. We are talking about Canada, the United States, and Mexico. I'm also questioning what international institutions we need to address globalization, as opposed to that view. What suggestions do you have in that area?

I'm also asking if what we have right now, the North American trade framework, is not sufficient to address all of the concerns we put on the table. And if that agreement still exposes us to unfair trade actions, etc., how can we fix that? And if NAFTA has to be fixed, has to be changed, what changes should Canada seek?

Those are a lot of questions. We have this study that will be completed by the end of April, which maybe won't provide all the answers but should maybe be of some note to the committee. I think it might help us in the formulation of our draft document.

I'll let you ask your questions so there could be one answer therein.

[Translation]

M. Yves Rocheleau: Thank you, Madam Chair.

There is one aspect that you have not dealt with in your answer to my question. It's regarding the link to be made, or not to be made perhaps, between globalization and new-liberalism. I describe neoliberalism as follows. It's very sophisticated, it is the entire role of the State.

I would like to hear you as well, on the role that institutions such as the International Monetary Fund and the World Bank are playing in the globalization or americanization of underdeveloped countries, and companies such as Standard and Poor's Corporation toward developed societies. In my opinion, depending on the status of the borrower, they are under-developed or developed, as is the case for Quebec or Canada, paragons of discipline. I don't know if I am wrong. Is it paranoid to see a pattern, to see that all this leads toward favouring private capital and interest as opposed to the collective interest?

[English]

The Chair: That's not une question brève.

You can always write to us.

Prof. Michael Bradfield: I think it was Oxfam that used to have a poster that said “Just because you're paranoid doesn't mean they're not out to get you”.

The function of a corporation is to act in the interest of its shareholders. Some people are trying to get the law changed to say that corporations have to also recognize the social interest, but right now the function of corporations is to act in the interest of its shareholders.

The more powerful the corporation, the more its ability to make deals with people, whether it's with countries, with its workers, with its suppliers... And Wal-Mart was mentioned earlier. The power of a company like Wal-Mart isn't necessarily its greater efficiency, but that its greater size allows it to beat its suppliers into giving it just barely a break-even price and to force its labour to accept low wages and bad working conditions.

The definition of neo-liberalism that I guess I would use is reflected in my brief, I think, in the sense that the neo-liberalism we're facing is the idea that if we all act in our own self-interest, then we can all be better off. But that goes back to the discussion in my paper about a competitive market. If we all act in our own self-interest, but some are much more powerful than others, then they're going to end up with more and other people will actually be worse off.

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So I think the trade negotiations we've had and the emphasis on freeing capital from restrictions is in fact turning the marketplace into worse than an icon; it's turning it into a god. And it is a god that requires human sacrifice. The people who benefit from it, however, aren't the ones who make those sacrifices.

I think the closing line in my brief is that the market is a good servant but a terrible master. What these trade agreements do is try to make the market master; the market interest is primary and everything else presumably flows from that. This just reverses what in fact should be the case, particularly given the strength of the corporations.

The problem is not just the governments but also the international organizations that you mentioned. The World Bank and the WTO, for instance, have very much accepted that corporate agenda. Even though the World Bank will claim in its annual reports that it recognizes environmental, social, and other impacts, when push comes to shove it still sides with the corporate interest.

This goes back to the chair's question about how you fix things. Not being a lawyer, it seems to me to be easy. As I propose in my brief, I would think that every trade agreement we go into should state in the preamble that nothing in the agreement supercedes the right of countries to act in the welfare of their people or for the protection of the environment, and nor can anything in that trade agreement abrogate such international agreements as the Universal Declaration of Human Rights, the International Labour Organization conventions, and things like that.

What we get now is that these trade agreements supercede all of those other things, individual nations' legislation and international conventions. And that's basically saying that a tool, a hammer, can be used to smash whatever you want to smash. The law should say that a hammer is used to build buildings, not to smash things. The problem is, the focus of these agreements just assumes, even when there's very little evidence to support the assumption, that corporations will act in the public interest.

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The Chair: Thank you very much.

I think I'll restate the fact that our report is going to be written on this specific topic by the end of April. If there are any further remarks you want to contribute, we'd be more than happy to hear from you.

I'm sure, Mr. Clarke, we'll be hearing from other parts of the federation as we go along. We have one group in Quebec, and we have to go to western Canada as well as parts of Ontario.

Thank you so much for joining us today.

Mr. Rick Clarke: If I may, Madam Chairperson, perhaps I can add something else.

There were two issues referenced in the document discussion paper. One was the growing need for security, I guess, around some of the G-7 and G-8 sessions. We do mention in our presentation—I went through some of that fairly quickly—that when you look at the impact, we're seeing some stark poverty, unemployment, etc. So rather than focusing on ways to add better security for these sessions, I think we really should look at why tens of thousands of people are out protesting. There's something wrong.

To answer the question on globalization, the only people who are actually out promoting and speaking favourably on it are those who successfully exploit people in other lands or in other countries, or those who are shielded from the impacts of it. There's a growing concern that it's not working for people. When I see the negative impact it's had in a highly industrialized country like Canada, I'm very concerned about what will happen to the third world. As one of the leaders in the world, we have to ensure that it's done in the interest of people, in the interest of bringing up living standards and eradicating poverty. I really think we have to do that.

Finally, the last issue is the section that talks about fighting terrorism. You've indicated that you already have a copy of it, but I just want to add that we believe Canada must respond to this war against terrorism in a fashion that's compatible with the democratic rights and anti-racism commitments of Canada and other nations around the world. I know what we've experienced, and it's been a tough issue for everyone. We've had a lot of people leave our shores, and we're very supportive of them, but we've had some very unsavoury things happen even in this province, and we know in other parts of the country. That's all I want to add, then, that we just have to be very aware of other people as part of this.

Thank you for the opportunity to speak to you today.

The Chair: Thank you very much, Mr. Clarke.

We'll go directly to Mr. Peter Haydon. A former naval officer, he is a research fellow at the Centre for Foreign Policy Studies at Dalhousie and editor of Maritime Affairs, a journal dedicated to informing Canadians on the importance of maritime commerce and trade, shipping, and effective maritime and naval policies.

We want to welcome you here. We know you have a time limit, and we also have a time limit. If you would keep your presentation, Professor Haydon, to ten minutes, I'll limit the members to two and a half to three minutes. I know you are to administer an exam, and we don't want you to be late for that.

Ms. Aileen Carroll: Maybe we do.

Mr. Peter Haydon (Editor, Maritime Affairs): I think my students would be delighted if I were late. It's a mid-term test to make sure they've been doing the readings, and I suspect very strongly that some of them haven't and wish they had.

In the time available I'm going to try to talk on more of a macro approach. I'm not an economist; I think I'm what you'd call a “naval strategist”. Today I'd like to take a look and see if I can connect up the dots between three fairly important issues. They're important in Halifax in particular, but in many respects they're equally important in Montreal, Quebec City, Vancouver, Victoria--any port in this country of ours.

The three things I want to connect up are shipping and ocean use; the maritime dimension of homeland security, which is a burning fact, as you just heard in the footnote from the last speaker; and the naval role in both of these two other factors. I'll starting with the shipping.

The one thing we have to accept is that the global economy is. We have to live with it. The other fact we have to accept is that the global economy is remarkably unstable. It can be destabilized very quickly, in many places and in many ways. The health of the economies of the developed countries—indeed, the developing countries as a whole—depends on the stability of the global economy.

A very good example, as was said, is the 1992 Kobe earthquake, when the port was struck by an enormous amount of disaster. The shipping out of that port and the jobs and the local economy suffered enormously. The Japanese were very lucky they had other ports they could divert the trade to, but the impact on the local economy was by and large pretty horrendous.

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The other important part of this is the fact that the global economy now depends on the freedom of navigation between ports. So we have this very carefully balanced system that requires stability to make the national economies work.

When you turn the coin over and look at the national economies, you find two things that are important. One is that today very few commodities are totally manufactured and assembled in one country. There's a transshipment of pieces all over the world. Coupled with that there's the slightly alarming factor that we've adopted a concept of just-in-time delivery, so that nobody stockpiles any more. During the Cold War we got into the habit of stockpiling, and energy-dependent countries such as Japan would stockpile as much as 180 days' worth of energy, particularly oil. Today they don't stockpile more than three or four days. They're dependent on a constant flow of shipping. If for some reason the flow of shipping is halted, even for a short period of time, economies and their standards of living suffer immediately.

The governing factor that underlies my thinking on all of this is that it's very important to maintain the stability of the global economy and the system that works in and around it. There are some various factors in that. The ships themselves are vital. They are the movers along with the containers in a port such as Halifax, which is the third biggest container port in the country. We've seen eight trains, some of them as long as three kilometres, move out of here every day going to the midwest. You look at it as the global economy in action.

The other part of the global economy, which you can't see, is the electronic transmission of orders, the control of stock, and the transfer of money. Oddly enough, in Herring Cove, which is just a few miles to the south of Halifax, there is a major terminal for fibre optic cables, which come across the Atlantic as the alternate to the satellites, because the satellite communication systems are no longer capable of handling the bulk of communication transactions that now go on.

The vessels are important. One of the points about the vessels is that they're getting larger: they're deeper in the water, they can use fewer ports, and they are crewed by fewer people. There are what they call post-Panamax container ships with some 7,000 containers on board. You may have as few as 19 people operating that ship.

Is it a safe system? Not always. The drift away from national registry to flags of convenience has resulted in a diminishment of the safety standards. In a number of cases the certification procedure for masters, mates, and engineers has come under question. There have been a couple of incidents off the Nova Scotian coast where ships have gone out into storms when they should not have gone out. Quite clearly, the masters simply didn't understand the guidance they were being offered.

So the ships themselves are a vital part of it. The accountability of the owners for the general management of the ships is always very difficult. When they used to belong to a flag state, it was very easy to deal through the normal process of state business. Today you're talking to a registered bank account in Geneva, and you have no idea who is the owner of that ship. The crew may have five or six different nationalities. The operators may be another company in a completely different country. So you're never quite sure who you're dealing with, and this is one of the problems.

However, I think the most important thing to look at is the port. The port is the hub of the whole system. Ports, as you well know, have evolved, and Halifax almost evolved into one of the largest port cities in the world. We can talk about that afterwards, if you like.

We've gone to a hub-and-spoke concept where the very large ships come into a limited number of ports and off-load containers, which are either taken off on internal lines of communication, roads or rail, or are transshipped onto smaller vessels. So your big ports become vulnerable. Singapore is a huge port. That is almost entirely a transshipment port where boxes are shifted from one ship to another and moved around in a very convoluted network. These boxes have all the component parts. So Volkswagen will have the carburetors made in Thailand and the rear end of the transmission made in South Africa and then will have them assembled in Bangladesh. That's a bad example, but that is the sort of diversity that's going on.

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As we'll talk about in a moment, the opportunities for abuse and misuse are enormous. So we have that other part of it.

I already mentioned the communications that keep the whole thing on track. You're down to a point now where some of the more important containers actually have a little microchip in there and are tracked by the satellite themselves. This is an enormous, huge business upon which the global economy depends. Like dominoes all standing up, push down one piece and you may have repercussions in far distant corners.

The concern of those of us who are interested in maritime security is to watch the stability of the maritime system, knowing it is a major part of the global economy. Integrated into that are the various other ocean uses. The fishery we know well enough, and I think you probably heard a great deal about the fishery. It's fragile, it's abused, and it's a major concern of both international and domestic politics. There's exploitation of oil and gas. Again, we have an opportunity here on the east coast that could make us a have province instead of a have-not province.

Yet we are faced with a very difficult problem: the interaction between the need to conserve and preserve the environment and the exploitation of the natural resources that provide wealth. I think this is one of the most difficult political issues facing anybody. Again, it's a blend of international politics and domestic politics because the offshore oil rigs are just a microcosm of the global economy. The people working on the rigs are all languages.

I flew over to London last year. We fly from here to St. John's and over. The flight from Halifax to St. John's had about 20 people on it. It got into St. John's and filled up quickly. The lingua franca was probably Norwegian, and they were all coming off the oil rigs to go back to Norway, having worked over here. So I say the offshore oil and gas is a microcosm of the global economy.

I've mentioned the environment and the difficulties with the dichotomy between use and abuse. The other fact that comes very much into a Halifax perspective, and which you will also hear when you go to Vancouver, is the cruise ships. The cruise ship industry at the moment is enormous. We get just under 100 a year here. This is a major capital injection into the local economy. Several hundred thousand people visit Halifax as a result of that. Each of these ships can carry as many as 4,000 people, and the cruise ships are getting bigger.

The vulnerability of those ships, as we've seen in the United States, is considerable. There have been a couple of occasions where there's been a fire on board. I would put it to you that if we had an explosion or a major fire on a cruise ship, it would make the Titanic, albeit all those years ago, look like a picnic.

So that is basically the ocean use side of it. The second part of my little triumvirate is homeland security. I think the focus on homeland security is very much a function of September 11 last year. When you come to look at it and try to do something with it, it is again a blend of international and domestic politics. But from the domestic side of it, I think we're really concerned about vulnerability. What are our vulnerable points? Where are we open that somebody who wished to do us harm could have quite a free shot?

We've talked about terrorism over the years. I have papers at home on terrorism at sea going back into the 1970s. It's always been there. It's always been thought to be a soft target for terrorists. It hasn't happened yet wherever we are—knock wood—and let's hope it never does. But the cruise ship I've just talked about is a wonderful opportunity for a terrorist exploitation move. The offshore oil and gas rig is another one. There's enormous potential there, not only for symbolism, which is what the terrorist really is looking for, but also for environmental damage.

Natural disasters follow closely on the heel of terrorist acts and their devastation. I mentioned the Kobe earthquake. We hope we're unlikely to get earthquakes here in Halifax, but earthquakes are not unknown in Vancouver and on the west coast.

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So natural disasters are of equal concern, in many respects, in a true homeland security concept, as are the man-made disasters, and into that cauldron of difficult issues you have to throw the entire criminal act scenario, which varies with everything from the illegal smuggling of people to the illegal transportation of arms, of drugs, of all forms of contraband.

As an aside, I was driving up the eastern shore of the province not very long ago into a remote harbour, and there was a Russian research vessel loading cars. I got out of there quickly, because I suddenly realized it was probably an illegal operation. Our coastlines are so remote that we don't always know what is happening in the little ports and inlets. The Germans put a whole weather station up on the coast of Labrador during the Second World War before anybody found it. We have a very poor concept of coverage and of being watchful over our own property. With the huge ocean real estate that we have out there, and to a lesser extent out in the Pacific, and then to an enormous extent in the Arctic, we do not have nationally the resources to keep watch over the whole of that.

I think the basic principles of security, from a maritime capability, are essentially that you have to know who is using your waters, what they're using them for, and whether you are able to intervene in case of some illegal act. This requires a lot of activity, a lot of carefully coordinated activity, and the involvement of a great number of people.

The security in the ports is something I don't really want to get into, because you heard earlier that it gets into basic rights and freedoms of individuals. But if you're going to make your port secure, you have to be prepared to ask yourself, what is in all those containers that are coming in? I think one of the keys to this, as I'm sure you've been told, is intelligence, not just intelligence within the Canadian system but intelligence all the way around--against terrorism and against crime generally, from the maritime side as well as the land side. Intelligence and good surveillance will do as much as anything to keep you a little more secure and a little less vulnerable than you would be otherwise.

That brings me to my third point, the naval role in this--and I'll talk about coast guards a little bit, too.

A military force really has three functions: the defence of the homeland; internal security--still, unfortunately; and to act as an instrument of foreign policy. We'll talk about that. But when you get to the navy, what you're looking at here is our navy--which is small, but effective and relatively modern--which is an instrument of state policy on, over, and under the sea. It's only as good as it can afford to be on the budget. At the moment, the navy is probably cursed by its own success rate, because it has been able to meet every requirement that Parliament has placed upon it--with difficulty some days, and sometimes, like with the present operations in the Arabian Gulf, stretching sustainability to the limit. But you have a navy there that is an instrument of both international and domestic policy, especially in the homeland defence, but also in international security.

When you come back to my first basic premise, maintaining a stable environment, a navy is a remarkable contribution to that purpose. It can provide surveillance at sea. It can provide surveillance through port security details they have, which they use the naval reserve for. So it is quite a flexible instrument of policy, and I think this is something that is probably not always used.

The coast guard, unfortunately, is in a process of decline at the moment. They do not have the number of ships they used to have, so the coast guard presence on the high seas and in Canadian waters is not as great as it used to be. So when you come back to my basic suggestion, surveillance of the national water space or the national ocean domain, call it what you like, the capability is a little stretched and there's a difficulty doing it.

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We in Halifax are probably much more sensitive to the maritime dimension of the country than are people in central Canada, who simply do not have the day-to-day contact with the shipping industry, with the fishing industry, with the offshore oil and gas industry. We see this every day in this port city. My colleagues in Vancouver will tell you exactly the same.

I've probably talked enough. I hope I've left a little room for questions. I can talk much longer if you need me to, Madam Chairman.

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The Chair: Perhaps we'll go to questions then. This was very informative.

When you talk about the three important ports, what three ports are they?

Mr. Peter Haydon: The three big container ports are Vancouver--it is the biggest by a very long shot--Montreal, and then Halifax. Saint John is pushing close, it is trying hard to do it, but Halifax is still the number three port.

In terms of tonnage handled, as opposed to containers, Halifax ranks about seven or eight, because some of the large iron ore ports up the St. Lawrence River handle a much greater tonnage of raw material. Vancouver is still the nation's biggest port, and it's about the third biggest port in the continent. It's a huge port complex, a fascinating place.

The Chair: Thank you.

Monsieur Rocheleau.

[Translation]

Mr. Yves Rocheleau: Thank you, Madam Chair.

Mr. Haydon, you have a vision that I find to be pessimistic or worrying when I read the title: Homeland Security—Vulnerability. Do you really think that Canada eventually would be subjected to terrorist acts? What makes you think that...? In listening to you and in reading that document, we ask whether we should be in a state of alert. Are there things that you know and that we don't? We know that on September 11 there was a direct attack against the American way, the Americans being how they are. Should we feel the way you do?

[English]

Mr. Peter Haydon: That's a very important question.

I suppose I am pessimistic. The point is that from the eyes of a terrorist or the eyes of a criminal, there's very little discrimination between a Canadian and an American. We are part of that great big North American industrial complex that they see as fundamentally evil.

They chose the World Trade Center. It was a very symbolic target. There is absolutely no telling, no way of finding out, short of a deep intelligence, whether or not there were Canadian targets on the list that day, because some of the attack was thwarted.

We should not walk around feeling we are secure. It could happen to us exactly the same way as it could happen in Paris, London, Rome, in almost any of the major cities of the industrial complex. The heart and soul of the modern terrorist is very much against the western concept of capitalism and against all that we hold dear to our hearts at the moment.

I hope that answers it.

The Chair: Ms. Carroll.

Ms. Aileen Carroll: We raise this late in the day, but that does not in any way diminish the importance of what you've brought forward. I think you provided the committee with a good description for our blues, for our record. What's involved in shipping today, as you say, is this. One piece is manufactured in Korea and another perhaps in South Africa, and then they are put in containers, but all with the two to three days of just-in-time delivery as a part of the component.

We are facing the bar being raised considerably with regard to security by the Americans, understandably so, if we're engaging in rational discussions with them on all aspects of this. But I think they've made it amply clear that no more containerized units are going to land on American soil that have not been thoroughly cleared from the security perspective. So considering the way the whole thing works today around the world, as you've described it, and considering, as we've mentioned earlier in our discussions, what the economic impact is going to be on those ports, which have to be able to convey to the American port of entry that the security bar has been met, how is this all going to filter out, Mr. Haydon?

I think it does impact on flags of convenience, for one. I think this whole issue, which should have been looked at a long time ago, is going to face a fairly different lens now from what it has in the past.

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Mr. Peter Haydon: I think you're right. I think the way in which we do business must change. There are some 150 million containers on the move around the world at any one time. That's a huge number. Can they all be checked? Some of them, unfortunately, are empty. The movement of empties is almost as important as the movement of full ones, because the empty ones have to be in the right place.

Clearly, there has to be some screening mechanism, but I will go back to what I said before. I think intelligence is terribly important. This is where the ports have to be watchful not only of what is coming in but also of what is going out. Our whole attitude has to be a little more watchful than it was. You may even have to begin looking at coming through a concept of almost bonding individual containers as they leave workshops and major factories.

Reliability of some plants may be beyond doubt. Volkswagen may not be of concern to anybody. Volkswagen, like Honda and like Toyota, are major movers of component parts.

I think it's going to make us change our attitudes to a lot of this. I wish I could offer you a solution. I can't.

Ms. Aileen Carroll: I think you've brought a good discussion to us on the whole issue of shipping and maritime surveillance and where we are with resources in Canada and where we are not when it comes to security. I'd suggest that those ports that can't meet the Canadian bar aren't going to be shipping to American destinations, and that's a fairly big market. It's not going to be a choice here, at least if I read the papers and so on correctly.

So we can discuss it now, but it's going to be upon us very quickly. Halifax, Vancouver, Thunder Bay, and Montreal are going to be looking at an economic consequence if they can't deal with the issues we're discussing now in a semi-academic manner.

Mr. Peter Haydon: Halifax would be the port into Portland, Maine, and down the eastern seaboard. Vancouver is less of a feeder port, but certainly when you get into the Gulf of St. Lawrence and into the Great Lakes, there's an enormous amount of cross-border trade.

Yes, we do have a problem, I'm afraid. I'm sure we'll solve it, though.

The Chair: The Halifax Port Authority was invited to join us, and we regret the fact that they declined or they were not able to be with us.

Am I back in the olden days, as my children would say, if, in terms of security, I ask whether or not you see the re-establishment of port police?

Mr. Peter Haydon: With the added requirements of a broad-brush stability and with not only possible terrorist crimes, but also drugs, illegal immigration, the whole raft of crime that seems to have come up, I think that has to be considered very seriously. I don't think, though, that the municipal police have the expertise to deal with ports and with cargos. You do require some specialist knowledge with some of these.

We've talked about checking containers. It's a specialist task, so I think that has to be done. The navy has a contingency port security team, but that's mainly the physical security of little boats going around and doing things like that. They're not the experts on checking what's in the containers, on checking manifests. So I think one of the fallouts of September 11 could well be the need for a return to a dedicated port police force--whether that's federal or provincial, I don't know.

The Chair: We want to thank you for the time you've spent with us this afternoon. We want you to be very good on the students you're seeing for their examinations later.

In a serious mood, thank you very much, Professor Haydon.

Mr. Peter Haydon: I'm sorry I couldn't stay longer. Time is one of those unfortunate things. Thank you, and good luck with your further inquiries.

The Chair: We come to the end of a day that was full.

I want to thank the members for your endurance. We've had some excellent questions from you.

I also want to thank the translation and other staff who provided us with support for the day.

We'll resume tomorrow morning at nine o'clock in this very room.

This meeting is adjourned.