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37th PARLIAMENT, 1st SESSION

Standing Committee on Foreign Affairs and International Trade

EVIDENCE

CONTENTS

Wednesday, February 27, 2002

0900

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

Prof. John Hoddinott (Professor of Economics, Dalhousie University)

0905

0910

0915

0920

The Chair

Mr. Rocheleau

Prof. John Hoddinott

0925

0930

The Chair

Ms. Carroll

0935

Prof. John Hoddinott

Ms. Carroll

Prof. John Hoddinott

Ms. Carroll

0940

Prof. John Hoddinott

Ms. Carroll

The Chair

M. Rocheleau

Prof. John Hoddinott

0945

0950

The Chair

Prof. John Hoddinott

0955

1000

The Chair

Ms. Carroll

Prof. John Hoddinott

Ms. Carroll

The Chair

Prof. John Hoddinott

The Chair

Mr. Sean Cooper (Regional Executive Director, Atlantic Provinces Chamber of Commerce)

1005

The Chair

Mr. Rocheleau

Mr. Sean Cooper

1010

M. Rocheleau

Mr. Sean Cooper

The Chair

Mr. George Baker (Gander--Grand Falls, Lib.)

1015

The Chair

Mr. Sean Cooper

The Chair

Ms. Carroll

1020

Mr. Sean Cooper

1025

The Chair

M. Rocheleau

Mr. Sean Cooper

The Chair

Mr. Sean Cooper

1030

1035

The Chair

Mr. Sean Cooper

The Chair

Mr. Sean Cooper

The Chair

Mr. Sean Cooper

The Chair

1120

The Chair

Ms. Elizabeth Beale (President and Chief Executive Officer, Atlantic Provinces Economic Council)

1125

1130

1135

1140

The Chair

M. Rocheleau

Ms. Elizabeth Beale

1145

The Chair

Mr. Baker

Ms. Elizabeth Beale

Mr. Baker

1150

Ms. Elizabeth Beale

The Chair

Ms. Elizabeth Beale

1155

The Chair

Mr. Baker

Ms. Elizabeth Beale

Mr. Baker

The Chair

Ms. Carroll

1200

Ms. Elizabeth Beale

Ms. Aileen Carroll

The Chair

Ms. Elizabeth Beale

1205

The Chair

Ms. Elizabeth Beale

The Chair

Ms. Elizabeth Beale

The Chair

Ms. Elizabeth Beale

The Chair

1335

Professor Frank Harvey (Director, Centre for Foreign Policy Studies, Department of Political Science, Dalhousie University)

1340

1345

1350

The Chair

Mr. Rocheleau

Prof. Frank Harvey

M. Rocheleau

Prof. Frank Harvey

1355

The Chair

Ms. Carroll

Prof. Frank Harvey

Ms. Carroll

1400

Prof. Frank Harvey

Ms. Carroll

Prof. Frank Harvey

Ms. Aileen Carroll

Prof. Frank Harvey

1405

Ms. Carroll

Prof. Frank Harvey

Ms. Carroll

Prof. Frank Harvey

1410

Ms. Carroll

Prof. Frank Harvey

The Chair

Prof. Frank Harvey

The Chair

Prof. Frank Harvey

The Chair

Prof. Frank Harvey

The Chair

Ms. Carroll

Prof. Frank Harvey

1415

The Chair

1420

Prof. Frank Harvey

The Chair

Prof. Frank Harvey

The Chair

Mr. Mark Butler (Marine Co-ordinator, Ecology Action Centre)

The Chair

Mr. Mark Butler

1425

1430

1435

The Chair

Ms. Jan Slakov (President, Enviro-Clare)

1440

1445

The Chair

Mr. Rocheleau

Ms. Jan Slakov

1450

Mr. Mark Butler

M. Rocheleau

Mr. Rocheleau

1455

Ms. Jan Slakov

Mr. Mark Butler

Ms. Jan Slakov

1500

The Chair

Mr. Baker

1505

The Chair

Mr. Mark Butler

Mr. Baker

1510

Mr. Mark Butler

Mr. Baker

Mr. Mark Butler

1515

Mr. Baker

Mr. Mark Butler

Mr. Baker

Mr. Mark Butler

Mr. Baker

The Chair

Ms. Carroll

Mr. Mark Butler

1520

Ms. Carroll

Mr. Mark Butler

The Chair

1525

Ms. Jan Slakov

The Chair

Ms. Jan Slakov

The Chair

Ms. Jan Slakov

The Chair

Mr. Mark Butler

The Chair

1530

Mr. Mark Butler

The Chair

CANADA

Standing Committee on Foreign Affairs and International Trade

NUMBER 061

1st SESSION

37th PARLIAMENT

EVIDENCE

Wednesday, February 27, 2002

[Recorded by Electronic Apparatus]

¿ (0900)

[English]

The Chair (Ms. Jean Augustine (Etobicoke--Lakeshore, Lib.)): Pursuant to Standing Order 108(2), we are holding public hearings on the North American integration and Canada's role in the light of the new security challenges and studying the agenda of the 2002 G-8 summit.

I want to welcome Prof. John Hoddinott to our committee hearing. We welcome other witnesses who will be joining us today as the committee continues with its studies of two very important agendas facing Canada in respect 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 the North American context.

Canada is in the position of being president of the G-8 this year and host of its summit, which will take place in June in Alberta. 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 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 essential to that 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 reporting later this year. This is the beginning of a dialogue. More information in regard to both studies can be found on the committee's website. We invite additional input from Canadians. Please note that you can get in touch with us or make submissions by mid-April for the G-8 study and by the end of June for the North American study.

At the hearing this morning the members present are Mr. Yves Rocheleau, the Bloc Québécois member for Trois-Rivières; on the Liberal side, there are Ms. Aileen Carroll, the member for Barry--Simcoe--Bradford and parliamentary pecretary to the Minister of Foreign Affairs, and George Baker, a member from Newfoundland. So welcome all, and welcome, Professor Hoddinott. Please make your presentation, and there will be some questions for you at the end. Thank you.

Prof. John Hoddinott (Professor of Economics, Dalhousie University) Thank you very much, Madam Chairman. I am very pleased to have the invitation to address the committee this morning. My apologies for addressing the committee in English. Although I speak French, I'm afraid my French is not up to a full presentation like this.

I am a professor of economics at Dalhousie University, recently appointed, having spent the previous 15 years living in Britain, the United States and Africa. In the 10 minutes I have this morning I'm going to speak to four points, which I hope will act as a catalyst for further discussion.

The first point addresses the record of growth and human development in sub-Saharan Africa. There is a sense, a popular sense, a sense in the media, and certainly a sense in the documentation you've provided as background to the work of this committee, that Africa is a continent in crisis, characterized by massive past failures in growth, security, and human development. That these failures exist is absolutely true, but it's also important to remember that there have been important successes. Over the last 35 years the fastest growing economy in the world has been an African economy, that of Botswana.

In the realm of public health, not only has smallpox been eliminated in Africa, as it has elsewhere in the world, the incidence of polio, guinea worm, and river blindness are now a mere fraction of what they were 20 years ago. Prior to the onset of the HIV-AIDS pandemic Africa attained, over a 20-year period, increases in life expectancy that took Canada almost a century. While HIV and AIDS represent an enormous threat to the well-being and livelihood of many Africans, concerted public action can pay off. In Uganda, for example, prevalence rates among adults have fallen from 19% to just over 8% in a period of five years.

Further, countries that have enacted sustained economic and institutional reform have witnessed remarkable improvements in living standards. Since the early 1990s income poverty has fallen by more than 20% in countries as diverse as Ghana, rural Ethiopia, Mauritania, and Uganda.

¿ (0905)

In developing a new partnership for Africa, it is important to be aware not only of the many failures, but also of the successes. This is an important part in ensuring that we have a correct historical understanding. It is important because it allows us to build on successes, that is, to build on what works, but in a more fundamental sense, it's also important. Underlying much of the rhetoric we Canadians put forth when we discuss issues in Africa is that aid or assistance to Africa isn't offered out of pity. Yet at the same time, we claim we're trying to enter into a new partnership with Africans. It is simply illogical to assume that you can have partnership with someone you pity. I think a better appreciation of the historical record, understanding there can be both successes and failures, is a necessary step if we truly are interested in a partnership, not a relationship based on pity or pure charity.

That said, there are very legitimate concerns as to whether or not engagement with Africa will work. The problems can be huge. There are many past failures, easy to enumerate, particularly with regard to aid flows. There's an understandable temptation to say things like NEPAD, the Africa fund, are merely deemed to fail. Such a view is incorrect.

At the country level, there's now critical work that shows that there are a number of robust associations between countries with strong institutions, stable and sensible economic policies, and growth. In Africa aid plays an important role in enhancing the credibility of domestically led efforts to improve policies and institutions. Further, wealthier is healthier. Generally, countries which have good growth records also experience improvements in health and education attainments. In other words, to the question, “Will engagement with Africa work?”, the answer is that it can work, if done properly. It can work not only in raising growth, but in improving human development, such as in health and education.

In the notes you provided to me there was an enormous set of specific questions listed for public discussion. I thought I would highlight some thoughts or views on a number of them.

One question is, what should be the principal goals of the G-8 action plan vis-à-vis the partnership for Africa? In the documentation I was provided with--and I believe you also have been provided with it--the list of goals is enormous. What I would suggest is that these goals could be quite simply summarized along two dimensions. One is to reduce the proportion of people living in poverty by half by the year 2015, and the second is to make meaningful improvements in health attainment.

Focusing on poverty encapsulates many of the goals I believe this partnership is aiming at. Retaining the focus on poverty also makes our position consistent with commitments we've made in previously economic fora, most notably commitments we made under the OECD development assistance committee. In order to meet these poverty targets, we need a number of ingredients.

First, there needs to be a mechanism to facilitate more rapid economic growth. More rapid economic growth, in turn, depends on other factors, including better institutions, such as public sector capacity, contract enforcement infrastructure, appropriate and stable macro policy, improvements in physical infrastructure, and renewed investment in agriculture.

In all parts of the world, save Africa, the last 30 years have witnessed increases in productivity and yields in agriculture. The majority of poor people live in rural areas and rely on agriculture, and so investments in these areas have a real potential to actually improve individuals' living standards. Yields in Africa, however, have not been growing. In fact, they've been shrinking over time. The response of the Canadian government, and indeed many other western governments, in the face of these declining yields, has been to walk away and to actually reduce support to African agriculture.

In addition to focusing on poverty, the second goal should be improvements in health outcomes, as measured by reductions in malnutrition and morbidity, as well as infant, child, and maternal mortality. These are desirable not only because health is an important development objective in its own right, but also because better health makes individuals more economically productive, and because many improvements in health status are technologically achievable in the short run at low cost.

¿ (0910)

Meeting these objectives is feasible if there is a true partnership between African and western countries. African countries need to implement and maintain their commitments under NEPAD. Developed countries can play their part by appropriately increasing aid flows and reducing trade barriers. It would be useful at the G-8 summit to remind our European colleagues that agricultural subsidies in rich countries cost developing nations $1 billion a day in lost trade. To put that figure in perspective, that is six times the aid flows we provide to these countries. If one were legitimately concerned about welfare in those developing countries and were looking for the single most cost-effective measure to improve their welfare, it would not necessarily be increasing aid flows, it would be reducing trade barriers.

While providing for their assistance can have meaningful impacts, it is important to do it carefully. It is my sense, after living and working in a number of African countries, that this committee should be aware that there are many African governments that do not have a meaningful commitment to poverty reduction, and it is certainly not clear to me that we should be providing financial assistance to those countries. There are other countries that not only have such commitments, but have been acting on them. My sense would be that those are the countries where additional financial aid, as opposed to other forms of assistance, is likely to have the greatest impact.

If we truly believe this is to be a partnership, it is important to recognize that we, as partners, have obligations as well. For example, it would be wrong to offer these countries the form of a partnership, and when the financial goal comes in, to walk away. Further, it would be highly desirable in making these approaches if we coordinated across the G-8 countries.

The last comment I want to make is on the sustainability of Canada's role in the African action plan. I was very struck when I read through the Prime Minister's comments at the World Economic Forum. He descibed Canada's role in the Africa action plan as a source of national pride, a vote of international confidence, and a recognition of our credibility on the world stage. With all due respect to the Prime Minister, we delude ourselves on the credibility issue. Currently, we rank 17th out of the 24 countries in ODA, that is, the aid we provide as a share of GNP.

To provide a second example, imagine a hypothetical meeting among ministers for international cooperation from Britain, the Netherlands, and Canada. The British aid minister has been in her position for five years. Previously, she was the opposition counterpart to that ministry for another five years. Under her ministership, the British budget devoted to aid has increased by 50% over the last four years. The Netherlands devotes the highest share of aid as a percentage of GDP of any country in the world. The Netherlands aid minister is a distinguished academic who worked on development issues for more than 20 years before he went into politics. It is not even clear who the Canadian representative is ever going to be, or indeed, if the Canadian representative at this meeting will be the Canadian representative at the next one. I am well aware, and you are probably even more so, of the many reasons why cabinet positions are reshuffled, but with 27 ministers in 25 years, it is impossible to believe that we have any real credibility at these types of meetings.

Finally, it is worth noting that we bring little intellectual weight to discussions about African economies. I believe yesterday the committee heard from Professor McAllister, who is my colleague at Dalhousie, and at an earlier set of meetings you heard from Professor Helleiner from the University of Toronto. You may have noticed that both those gentlemen are in their late sixties. I do not mean that in an ageist way, but it is worth noting that I was recently appointed to Dalhousie. I believe I am the first person appointed in a Canadian economics department in Canada in the last 12 years who works on Africa.

¿ (0915)

To provide a second example, the World Bank writes a report every year on some development issue. Every 10 years there is one on world poverty. This is, in effect, the World Bank's blueprint for how poverty reduction should proceed in the next 10 years. In developing that report, the World Bank assembles a team of approximately 120 economists who stand to be the best economists in the world to work on issues of poverty. The last report, which came out in 2000-2001, had one Canadian amongst those 120 economists.

I could say this matters because I'm an academic, and of course, academics always like more resources, but I bring this up, not for that particular reason, but for the following. It is entirely conceivable that at the G-8 summit you could produce a wonderful African action plan under the leadership of Canada, a great document, lots of smiles and excellent photo opportunities, but I would hope your aim in discussing these issues is to go beyond that and, in some sense, to be a leader on this very important set of issues. As I think you are probably aware, leadership requires more than words. It requires real commitment and real resources. Africa is a continent that faces some very real problems. It also is a continent where there are some very real successes, and if we choose, we can contribute in an important and meaningful way too.

Thank you very much.

¿ (0920)

The Chair: Thank you very much, Professor. Your presentation was not only thought-provoking, it has also provided cause for us to pause and reflect on the task ahead. It is in that spirit that we will go around the table and begin a discussion with you.

Yves Rocheleau.

[Translation]

Mr. Yves Rocheleau (Trois-Rivières, BQ): Thank you, Madam Chair. Thank you, Mr. Hoddinott, for your excellent presentation.

I have two questions, the first concerning AIDS, a subject that you spoke of initially. What is your opinion of the actions of pharmaceutical companies in the face of the pandemic sweeping Africa? Do you feel that they are dealing responsibly and emphatically with this problem?

As for my second question, you mentioned that substantial sums of money would be needed to help Africa in any significant way. Judging from what you said, wealthy nations would have to provide $1 billion a day in agricultural aid alone, a truly astronomical sum of money.

If traditional assistance is provided, the burden will fall to taxpayers in Canada, Quebec, the United States, France, Britain and Norway, among others, unless another approach is adopted. One other measure that has been proposed, as you undoubtedly know, is the Tobin tax which would tax the wealthy who indulge in speculation. How do you feel about the possibility of bringing in at some point a Tobin tax, or something equivalent to it, a tax which possibly would be managed by the United Nations or another similar supranational agency?

[English]

Prof. John Hoddinott: Thank you very much for those two excellent questions, which I will take in turn.

The first issue pertains, as I understand it, to the provision of drugs to combat HIV and AIDS in Africa. There is a narrow set of issues and a wider set of issues I think your question speaks to. The narrow set of issues revolves primarily around making such drugs affordable, in particular, permitting countries to produce generic versions of these patented medicines, which can be produced and sold at a much lower cost. The leader in this area is South Africa, which very recently settled out of court a patent dispute with a number of multinational drug manufacturers.

My own view on the particular point you raised is that making drugs cheaply available to Africans is an important priority for public health. It's important to recognize that if our objective is, in very general terms, to improve health outcomes, this might not be the particular activity we put the greatest priority on. To put it very crudely, if our objective here is to maximize the number of lives we save or maximize the number of lives we improve, there are other possible interventions that may be more cost-effective.

There is, however, a wider issue that I think your question speaks to, the development of drugs and vaccines that are particularly important in the context of Africa. An extremely good example of this would be a vaccine against malaria. Malaria, as I believe the committee knows, affects somewhere between 300 and 500 million people a year across the developing world. Approximately 90% of those individuals live in Africa, and it leads to the deaths, on an annual basis, of one to two million people. Although it is technically feasible, as I understand it, to produce a vaccine against malaria, the costs of doing so are relatively high, about a billion dollars.

Suppose we were to offer the private companies with the ability to produce this vaccine the following proposition. We would like you to develop this vaccine. As soon as you've incurred all those development costs, which are very high, we'll then arbitrarily lower the price you will then receive for these vaccines, and thus cut you out of making any profit whatsoever. If you were the head of a drug company, would you be willing to take on the proposition of spending a billion dollars with the full knowledge that having spent that money, which may produce nothing--it is still a risky activity--you'll receive nothing from it?

So to lead on to the wider issues you raise, I think, as we move forward to think about the development of other drugs and vaccines for Africa, we need to think very carefully about the incentive structures we set up for the development of these. A much better approach might be the following. We will guarantee in advance that we will buy a certain number of doses at a certain price for a certain number of years. This is the price you can receive, this is, in some sense, your guaranteed market. In other words, what we do is provide incentives to produce drugs, rather than engaging in a continued adversarial relationship.

Malaria, then, is a good kickoff point for your second concern, which is the issue of funding these interventions. On a small point of clarification, I believe you misunderstood the issue about agriculture. The figure I was citing is the cost of current subsidies to agriculture in rich countries as a matter of lost trade to developing countries. But providing some of these resources is expensive. Canadians, as well as other people in other developed countries, face legitimate pressures on public expenditures. Where will this money come from? Will it be used effectively? As morning intellectual fun, why don't we work with the purported money for the Africa fund, the $500 million that may eventually appear? That could pay for approximately half the costs of developing a malaria vaccine. I'm not saying we should do this, but if we did, presumably, we could lead our other partners into providing the other half, which could save two million lives a year.

¿ (0925)

We ask ourselves what that $500 million represents. There are about 16 million working Canadians, so $500 million works out to about $30 per adult working Canadian. It costs about a dollar to buy a Tim Horton's cup of coffee. So the bargain we could offer Canadians--and I think you should do so explicitly, you shouldn't hide these costs--is say look, here's the deal: between now and the end of 2002 take a pass on one coffee at Tim Horton's a week. You make that commitment, and we undertake to put these funds into facilitating the development of a malaria vaccine, which, if it works--and we don't know if it will--will save 2 million lives a year.

I am not a politician, I am not someone who says what the choices should be, but I would submit that for some of the goals you want to set, financial costs, in a meaningful sense, are not as high as they first might appear.

You mentioned in particular something called the Tobin tax. I presume many of you know what this is. For those of you who don't, the Tobin tax is a tax on foreign exchange transactions, which would be collected by the United Nations and, hopefully, used for development purposes. I have to confess that I am slightly skeptical about the ability to implement such a tax, even though, intrinsically, it might appear to have some attraction. My sense is that those who work in financial markets are far smarter than we are, and they would not find it difficult to find ways around those taxes. If one is unable to solve the problem of implementing the tax in such a way as to make large-scale avoidance impossible, then I suspect the tax is unlikely to be feasible.

Thank you very much.

¿ (0930)

The Chair: Thank you.

Ms. Carroll.

Ms. Aileen Carroll (Barrie--Simcoe--Bradford, Lib.): That was a great presentation, and I am very glad that even if you chose to be an academic, instead of a politician, you still chose to address the process from your perspective. I think that's invaluable. We have listened carefully, with ensuing discussions, to two colleagues of yours from Dalhousie. I was reminded again how vital the academic input is, because you can approach it from a different point of departure. We need you, we need the courage of statements like this on both sides, so I do thank you for that.

There is so much to ask you about, but I think you have been very clear, so we benefit from that. Your point about European agricultural subsidies has been made before. It is very important to see it made again, particularly in this context. I think too that it's courageous to state, as you have, that where there is no commitment to poverty reduction, the bar has to be higher before aid in the financial forum is made available. I think that dovetails rather well with what we heard yesterday from Dr. MacLean and Dr. John Harker, who made recommendations as well, as I am sure you are aware, for what some of the other routes could be. While they didn't put it in exactly the same way, they talked about how we can assist with governance, both as parliamentarians and in other ways. That is a step before the other can take place. So I really think what you have said is very important indeed.

I note all of your African background, which is substantial. you were in Mali and Cote d'Ivoire. I have a very positive impression of the President of Mali. I think he has an understanding, Dr. Hoddinott, of development. Given where Mali sits on the human development index, of which you would be very aware, it is very important the input that Dr. Konare is having. So I would think some of the perspectives you bring forward are consistent with some of his approaches. He certainly doesn't have his head in the sand.

Let me just leave it at that and perhaps hear your perspective, and I'll come back round later.

¿ (0935)

Prof. John Hoddinott: I'll speak to Canadian aid efforts in Mali. As you point out, I lived in Mali for two months.

Ms. Aileen Carroll: Near Timbuktu?

Prof. John Hoddinott: Near Timbuktu, which really does exist. Indeed, on a personal note, Timbuktu produced one of the most bizarre personal experiences in my life, as I was sitting in the main town square watching a small television with about 40 other people. We all watched a show on lumberjacks from northern Quebec. I regarded Timbuktu as exotic, they regarded lumberjacks in Quebec as being equally exotic.

Mali is a poor country, one of the poorest countries in the world. It was enormously badly managed, both politically and economically. It was independent up to the early 1990s. It is remarkable that you could take one of the poorest countries in the world and make it poorer, through poor political processes or economic processes. Successive Malian governments managed to do that. It is almost impossible to understate how poor the country is. In the area where I was living and working two-thirds of the population lived on an income of less than $1.50 Canadian a day. Malnutrition rates probably ran around 50% or 60%. The nearest telephone was four hours away. It's an extraordinarily poor country.

It does, however, luckily, have a very good president, someone who has brought peace after a very unpleasant civil war. He has attempted to put in some meaningful economic and political reforms. That is the good side, and it is certainly true that Mali has grown in GNP per capita, that there have been some reductions in poverty and improvements in human development. Yet it is a terribly dangerous strategy to pin all your hopes on one particularly good man. It is not a sustainable strategy, because he may have a car accident the next time he takes a trip and die. While it is important for these individuals, in some sense it's as or even more important to support the infrastructure under them. Infrastructure is partly physical infrastructure, things like building roads, repairing bridges, and that sort of stuff. It also speaks to issues like institutions and governance.

A really good example that we can actually all be collectively a little pleased about is that under Canadian aid efforts, the Canadian high commission in Mali paid for posters explaining to people how they should vote, the mechanisms of the secret ballot. It was largely a whole series of pictures, because 60-odd per cent of the population are illiterate. You had this election coming up, and pictures showed how you got your ballot, how you marked it in a secret place, how you yourself put it in the ballot box, and how it was counted. It probably cost us very little to produce those posters and distribute them. That's a very small, useful way of improving democratic governance.

I think the message I would take is that Mali, at one level, is a good example of a country we can work with. It is not going to be a perfect country. There's corruption there, absolutely. There's corruption in many places. I think the question we have to ask ourselves is, given we have some promising preconditions, what are the ways in which we can strengthen this country so, for example, it's not reliant on one particular individual? We need, as I said, to focus on institutions, infrastructure, or ways to facilitate that.

Ms. Aileen Carroll: Do you think Dr. Konare has not been able or willing to make value judgments, he's not been building a political infrastructure that can survive his departure? Is it sustained just in his hands and not with other cabinet ministers?

¿ (0940)

Prof. John Hoddinott: I am probably not particularly qualified to make a strong statement, but I think a better way of thinking about this is to think of there being a set of countries, of which Mali would be one, where there are some some real problems with development. In Canada I think the strategy is to look at these countries, which, in some sense, have made the first step, made these meaningful steps, and work with them over the next 10 to 15 years. We know some of those countries are just not going to work out, it's just the way life goes. But if we are willing to adopt a longer-term perspective, some of those efforts will pay off extremely well. I think maybe that is the sense in which you should be thinking about these issues. That would be my view.

Ms. Aileen Carroll: I think you are talking of partnerships. You want someone like Dr. Konare on the African side of that partnership.

I can recall going to a village in Mali, and we could hear the sound of an engine. You've got to be a Nova Scotian, as I am, to know it was a make and break, an incredible invention that can go on forever. Indeed, that is what it was. Inside the hut a woman was grinding corn with the use of a make and break. There is foundry in Chester where they used to build them, and maybe we should reopen it. Better still, as Diane Marleau said, we should be sending the people over there to build the foundry, so the people of Mali can make them. We went through the whole process, which you know so much better than all of us. What she was doing was just a simple division of labour. The neighbouring villagers brought the corn, and she ground it. There is a tremendous spin-off from this, which showed that this particular village was moving ahead in ways others were not.

He looked around at all of us and he said “Ici, c'est le développement.” It is not the huge old capital projects that we thought we could do with those rivers, for instance, but it is that kind of assistance, and the Canadians are involved in that. As I say, it's a Canadian make and break engine. But we are not in it nearly enough, as you were saying. I have a sense that if we had people like him onside, we could do a lot of good things.

The Chair: Mr. Rocheleau, do you have one more question?

[Translation]

Mr. Yves Rocheleau: As far as the Tobin tax is concerned, you can understand why I'm dissatisfied with the answer. I think we need to show some imagination. If the situation is as serious as people claim it is, we need to confront it head on, first of all. Secondly, we need to come up with some imaginative solutions in terms of providing financial assistance. It's too easy to shift the burden of providing development assistance to Africa, as I was saying earlier, onto the shoulders of Canadian, Quebec, French or Norwegian taxpayers. The danger in all of this is that the public, while conceding that Africa must be helped, will also tell us to show some imagination, to assume our responsibilities and to look at who has benefited from this continent's development.

I'm thinking here about Nestlé which is involved in the coffee and cocoa industries. Why shouldn't this company be asked to get involved in the development process, as we have seen happen with Chevron and Shell, two companies that have an ongoing presence in the Ivory Coast? Why aren't these companies - and everyone knows who they are, no need for in-depth studies here - which have been involved in diamond mining elsewhere, being asked to put back some of what they have taken out of this continent? To my mind, this is far more plausible than asking the residents of Toronto, Vancouver, Montreal, Los Angeles and New York to lend a hand in helping the people of Africa, particularly when everyone is already stretched to the limit when it comes to taxes.

[English]

Prof. John Hoddinott: It seems a good idea to start off with where we agree. I think your point that we have to be imaginative is absolutely right. To spend more money on Africa, in some sense, is not very sensible, in part because it engenders a response from individuals, whether they be in Trois-Rivières or Montreal or Toronto or wherever, that they gave last year, and yet you're back asking for more. I do have some sympathy for the view that the notion of continually asking Canadian taxpayers to bail out other countries is not one that is, in the long run, going to be a successful or appropriate approach. So I do agree with those particular sentiments.

What follows from that, though--and this is something the committee might want to consider further--is that when we present issues such as the appropriate role for financial resources, maybe partnership is the wrong notion, rather than thinking of it more as a contract between different individuals or different countries. For example, we can have social contracts with the Government of Mali where we provide some assistance, and that assistance works towards meaningful targets.

What I would suggest isn't so much that Canadians are upset with the level of taxation they face--I suspect all of you are much better informed on that than I am--but rather that there may be a sense that it's not always clear what one gets for one's tax dollars. So linking outputs and outcomes in the use of these funds might be a way of addressing that particular concern, which, as I say, I think is a very legitimate one.

As for things like the role of multinational corporations, in particular mining corporations in Africa, it is absolutely right that what a lot of these companies do, and certainly did in the past, is extract natural resources, take them and process them elsewhere, and make, in some cases, enormous profits--not always, but sometimes. It's also worth bearing in mind that one of the reasons that particular process exists is trade barriers in developed countries. Unprocessed raw materials enter developed countries at extremely low tariff rates, but the tariff rates are much higher on semi-processed and processed goods. While I certainly have every sympathy with you in your characterization of some of these multinationals, it's also the case that western countries actually set up the conditions that produce what you described.

If one looks at the level of capital or savings that have been generated in Africa since around 1970 by Africans, as opposed to multinational corporations, so one is looking at the stock of wealth that has been accumulated in the last 30 years by Africans, our best guess is that approximately 40% of that wealth is held overseas. That is to say--and remember, this is highly imprecise--even wealth that is generated by Africans tends very often to be placed overseas. This is not because there is not an entrepreneurial business ethic, this is not because there are no profitable opportunities to invest in Africa, as there are all sorts of things one can do, but until relatively recently Africa, as a continent, was a very high-risk environment to work in.

In Canada, we talk very extensively, for example, about the role of government red tape. Some people feel we have too much, some people feel we probably don't have enough. A real difficulty in many African countries isn't so much the existence of government regulations, but the fact that these regulations aren't written down. It may sound almost comical to you, but could you imagine the Canadian government running in a manner where it puts out laws or regulations, but does not physically publish them, so no one knows what they are? Can you imagine being a businessman in that environment, when you don't know even what papers you're supposed to use if you want to try to export something?

¿ (0945)

In a somewhat roundabout fashion, I'm now going to come back to the issues you raised. Certainly, there are very legitimate concerns about the behaviour of multinational corporations, including Canadian ones, that operate in Africa. I would submit, however, that this should not be the principal focus of our concern, which is not to say they are unimportant, but rather that steps be taken to enable an environment that is conducive to investment and the promotion of growth, positive rather than purely adversarial. That may be the general approach that will have the largest payoff in growth and human development.

¿ (0950)

The Chair: Thank you.

I have a couple of questions and a few comments that I want to put on the table, and you may want to comment on my comments.

It surprises me that you laid out for us just two principal goals, reduction of poverty by 50% and improvement in health attainment. On the reduction of poverty, I imagine you would include the whole business of conflict resolution and governance issues, and you felt there was no need to make specific mention of governance, accountability, conflicts, peace activities, etc. These things seem to me essential for the poverty reduction.

Second, we've heard from others who have said, focus on those countries that are doing well. You did mention several in your paper. Should we differentiate between countries, pick the ones that are doing well, with the hope that if we allow them to progress and be models, others will come along? I just want your comments in that area.

You also mentioned the issue of technologically achievable goals in the area of health, and I wondered whether you were including in that sanitation facilities, clean water, and all those things that are meaningful improvements in health issues.

Finally, Canada has been showing some leadership in the area of debt relief, and we've had some initiatives in that area. Do you think there's more we could be doing in regard to debt relief, and what would some of your suggestions be?

Prof. John Hoddinott: I'll take those more or less in the order you gave them, and if I miss something along the way, you should tell me.

I thought very carefully about setting out what I would regard as the principal goals, and I decided on the two I listed for two interlinked reasons. One--and I may be way off in this--was a public relations notion. If one imagines the Prime Minister or the leaders of the G-8 summit saying, we have great concerns about Africa, here are the 50 things that are wrong with it, here are 60 goals we're trying to attain, would I, as a citizen, take that seriously? The answer is, absolutely not. It would sound to me like too long a laundry list. The attraction of giving these particular goals primacy is that it crystallizes in everyone's mind what should be attained, it doesn't privilege the mechanisms you use to attain those goals. In some countries the mechanism you might like to focus on, for example, would be conflict resolution. Maybe that's absolutely right, maybe that's the precondition that you need. In other countries maybe that's not the priority.

I'm afraid economists use the word institutions very much to describe what I think you have in mind. So I would probably try to communicate that on the one hand, there are some attractions in having just a few very clear goals, and then allowing flexibility as to how you attain those goals, rather than setting out a very long list. It's also worth noting that a number of the other goals in the NEPAD document are likely to be attainable--not attained--if one focuses particularly on poverty reduction.

A very good example of this is one of the goals that is described as reducing gender differences in education attendance. Not so much at the primary school level, but at the secondary school level, in Africa girls lag behind boys. Our best guess, from the research committees that work on this, is that it's a largely a reflection of income. As incomes go up amongst poor African households, girls' enrolments rise much faster than boys' enrolments. In very poor households, where there are only limited resources available, are those resources going to the boy rather than the girl? But at the margin, if additional resources become available, they go to ensuring that girls stay at school.

So, for example, if one makes poverty reduction one's overarching goal, other goals that are listed naturally fall into place.

The second issue to speak to is your point of a differentiation across countries. I think there are two points I'd like to emphasize on this. The first is that this is not saying we cut off all but 10 African countries, that we give aid or assistance to 10 countries, but not to the odd others, but rather, it is thinking carefully about what sort of aid is appropriate in what sorts of circumstances. To take Zimbabwe, which I know fairly well, large-scale financial aid will end up in the president's bank account. In a country like that, there's just no point giving money, trying to provide financial aid, at this time. When you're thinking about governance, there is a country where trying to have free and fair elections might be a very useful first step.

So one approach--one could even imagine working this into the partnership arrangement--is to say to countries, countries that truly show commitment that goes beyond words and show actions consistent with the goals we've set out are countries we are willing, on our part, to invest in by providing human and financial resources. Countries that are unwilling to make that commitment we don't cut off entirely, but we work at a much lower level, maybe a lower degree of intensity, work on trying to put into place precursors of the building blocks that at some point in the future might be useful in poverty reduction. I think that's the most important point I wanted to make.

Parenthetically, as I suspect many of you are aware, I believe Canada may give aid to more countries than any other country in the world. I believe at the moment we give aid to something like 125 countries. It's spread way too thin. But it's also worth noting that this particular mark is completely unoriginal. I suspect, if you go back 15, 20, 25 years, you'll find people like me appearing in front of people like you guys saying exactly the same thing. To be brutally frank, rather than decrying this and perhaps offering recommendations that we should concentrate more than we do, it would be really very useful to investigate why this particular condition persists year after year.

I would be willing to submit, from my somewhat limited interactions with Canadian aid officials overseas, the following dynamic. Every high commissioner needs--I wouldn't call it a slush fund--a resources pot. In every country there are worthy causes. Every high commissioner feels some obligation to respond to these worthy causes. The local women's dance troupe wants to put on a performance: will the the Canadian high commission sponsor it? Every high commissioner, every ambassador, has an incentive to make sure he or she has some money, because they'd look like complete fools if they didn't. So instead of decrying the way in which we spread out aid, why not just recognize explicitly that these types of issues exist. So in every country we give every high commissioner or ambassador a pot of money to be precisely used for these types of activities, which are worthy and may facilitate a whole series of Canadian foreign policy objectives. We keep that separate from the money we give for aid or development.

¿ (0955)

On the issue of health and sanitation, because I don't want to take much more of your time, I think your suppositions are absolutely correct. In areas such as child health, which I perhaps know better than others, there are many relatively low-tech inventions or devices one can use for improvement. For example, diarrheal diseases not only kill thousands of African children, but are a primary cause of malnutrition. Our best guess is that malnutrition experienced as a child in one way or another persists to individuals' adult lives. Children who are malnourished before the age of three do less well in school, have lower grades, and end up being shorter. The shortness actually matters, because, in particular, shorter women have children with lower birth weight and are at much higher risk of maternal mortality. Therefore, malnutrition in childhood is an intergenerational thing. So in the area of child health there are low cost interventions, such as those to combat diarrheal disease, that produce great meaningful results.

On the issue of debt relief, it is absolutely right that a number of countries face very large external debts, and these are a real drag on development efforts. To just write off debt without addressing the causes of that debt is not sustainable long-term development strategy. To put sustainable strategies in place takes time and effort, and I can give a vignette that I think illustrates this.

Malawi, a smallish country in East Africa, is again one of the poorest countries in the world and is eligible under the HIPC debt initiative for debt relief. There are very poor countries with very poor institutional capacity. Under the HIPC debt initiative Malawi is supposed to produce a credible plan for poverty reduction. That sounds reasonable for countries for which we want to provide debt relief. We want them to commit themselves to poverty reduction. Malawi faces a problem: they would like the debt relief, but they don't have the capacity to develop a poverty reduction plan in any meaningful timeframe. At the same time, the World Bank is under pressure from countries, including Canada, to accelerate that relief. So what do you do if you're the World Bank? You go to people--I was one of them--and you're given the following proposition: Would you, along with some of your colleagues, go to Malawi for several weeks and ghost-write a poverty reduction plan? The government will then present the plan to the World Bank. The World Bank can say to the Government of Canada and others that they now have a plan. The World Bank says, excellent, we will now put in place mechanisms to relieve debt. The World Bank is happy, the Government of Canada is happy, we now have a plan for poverty reduction. Is it truly meaningful? Absolutely not.

This is not to say I think debt relief in itself is a bad idea. In fact, one can create arguments that it can have very favourable effects on development. But it is somewhat naive to see it as a panacea, and somewhat perversely, efforts to try to accelerate that relief may have consequences that are both unintended and make the impact on debt relief unsustainable in the long term.

À (1000)

The Chair: Thank you very much, Professor.

Ms. Aileen Carroll: While you're on debt relief, when you say countries needing financial aid should have a credible record with respect to governance, civil liberties, and poverty reduction, do you consider debt relief financial aid?

Prof. John Hoddinott: No, I would consider it separate.

Ms. Aileen Carroll: You would? I think that is important. Thank you.

The Chair: We thank you very much for the time spent with us. Hopefully, you'll engage with us as we go along. Remember, our report is to be written by the end of April, so if there's anything you want to add, please feel free to be in touch with the committee.

Prof. John Hoddinott: Thank you very much for the invitation.

The Chair: Thank you, Professor.

The next round has, from the Atlantic Provinces Chamber of Commerce, Mr. Sean Cooper. Good morning, Mr. Cooper, and welcome to our committee. You have about 10 minutes to make a presentation, which will be followed by questions from all members.

Mr. Sean Cooper (Regional Executive Director, Atlantic Provinces Chamber of Commerce): Thank you very much for the opportunity to speak to you this morning about this most important topic. As you will see in my accompanying presentation, there are several issues of major importance to the chamber of commerce movement in Atlantic Canada. This morning I will touch on some of these, and dwell on one point in particular.

The removal of barriers to trade has long been a goal of the Atlantic Provinces Chamber of Commerce, and the economic integration of the North American economy certainly addresses most of these issues. The APCC has been promoting the trade corridor concept to our members and to all levels of government for the past three years. This corridor approach is one adopted by many areas across this nation, and many of the positions we take on issues come from looking at North America as one economic community.

As stated in the presentation, we believe it is time for the governments on both sides of the border to move towards implementing the 30-point action plan in the smart border declaration. Government must keep border management up to pace with economic changes. This has not happened since the signing of the FTA.

As for trade issues, it is imperative that we make progress on trade remedy mechanisms. This remains key unfinished NAFTA business.

On transportation, the Government of Canada should expand the 1995 open skies agreement. The other recommendations on transportation can all be found in the Canadian Chamber of Commerce report entitled Keeping Canada Moving. This was released in 2001 and is currently under review by policy-makers across this country. As a matter of fact, we're meeting in the next week to update that policy position.

I would now like to move to what we see as a very important issue to Atlantic Canada, the Kyoto protocol. I believe it is the wish of every Canadian to reduce the level of greenhouse gas emissions in the world, but what we must be careful of is that the pace of reduction reflects the integrated economy of North America. The refusal of the Bush administration to ratify the protocol should set off alarms right through this committee. If we are tied to the levels of the accord and our major trading partner is not, the ability of Canadian companies to remain competitive in world markets could be severely jeopardized. The U.S. commitment to the UN framework convention on climate change will see the Americans reduce their emissions and cooperate with other countries, but it will be on their schedule. Having targets for levels of greenhouse gases in the world is a good thing, but all players must be onside to achieve these targets, and the economic brunt of the reduction should be shared throughout the continent.

A major concern in this part of the country is the inability of the Canadian negotiators to secure credit for the emissions from energy exports. This can have a major effect on future developments of the natural resources found off the coast of these Atlantic provinces. As I understand this, if we are to generate electricity with our natural gas and sell this energy to the United States, offsetting coal- or oil-generated electricity there, we could not receive credits for those greenhouse gas reductions. This would see Atlantic Canada in a position where we would send the raw material found here to other jurisdictions to be turned into marketable products once again.

As outlined in the presentation, we believe a customs union between Canada and the United States will further enhance the economic well-being of our countries. I would like to stress that a customs union would not necessarily herald the creation of a single market.

I'd like to thank you for the opportunity to make the presentation we prepared for your perusal and the chance to come here and talk to you today. The business community is paying very close attention to the steps being taken as the government catches up with the reality of the economic integration, and we look forward to assisting you in any way we can.

Thank you very much.

À (1005)

The Chair: Thank you, Mr. Cooper. Thank you for giving us a brief summary of your paper, which we've all had the opportunity to read.

Yves Rocheleau.

[Translation]

Mr. Yves Rocheleau: Thank you, Madam Chair. Thank you, Mr. Cooper, for your presentation. I have two comments to make.

You mentioned the Kyoto Protocol. You stated that the United States seems reluctant to sign the protocol and if it fails to do so, Canada would be unduly penalized if it were to go ahead and sign on its own. As a representative of a highly credible organization, how do you feel about the environmental impact of this decision? After all, we're talking about the ozone layer and ever increasing pollution resulting from chemical use. You're as aware of the repercussions as I am. What is your response to the situation? The matter is far from settled just because the United States refuses to sign. Perhaps we should be putting a little more pressure on them to sign. That's my first comment.

Secondly, you spoke of a customs union. While we're on the subject, how do you feel about the possibility, given the weak Canadian dollar, of Canada one day sharing a currency with the United States or maybe even with the United States and Mexico?

[English]

Mr. Sean Cooper: We believe there needs to be a reduction in the greenhouse gas emissions throughout the world. We have concerns here in Atlantic Canada about those reductions. If we put the cap on that is set out in the Kyoto protocol, which calls for a 271 megatonne reduction in greenhouse gas emissions from business as usual in 2010 levels to the 1990 levels, the cost of putting those efficiencies in place and the cost of buying those credits on the world market will adversely affect our business community, as we are integrated with the United States, who do not have to do that. We look to the United States, where they are currently trading in NO² and SO². They have put in some measures for trading in greenhouse gas emissions. I think it is the levels that we are looking at more than anything else. We need to be very cognizant of them and make sure they are not detrimental to business in the short term.

We realize that we have to reduce greenhouse gases, we are not opposed to reducing greenhouse gases, don't get me wrong, but we also want to see the opportunity here in Atlantic Canada to develop the natural resources we have off our coast, our offshore oil in Newfoundland, natural gas off Nova Scotia, and the huge reserves that are off Labrador. As I said, if we use the natural gas off Labrador to produce electricity, we are going to create more greenhouse gases. If we sell that electricity into the United States and it offsets a coal-fired generating station, we will not get credit for reducing the amount of greenhouse gases if they do not sign. So we should be encouraging them to sign. If they don't sign, we should very strongly look at a North American solution to reducing our gases in consultation with the Americans.

As for dollarization, I purposely stayed away from that, basically because we have not formed a position here in the Atlantic provinces on it. As a volunteer organization, our board of directors has not studied it to the point where we can take a formal position. There are, however, many positions being taken by the chamber movement across the country. The Canadian Chamber of Commerce, I think, will be making a presentation to your group on dollarization in the future.

À (1010)

[Translation]

Mr. Yves Rocheleau: Do you think the Canadian government should strike a committee of experts or, as suggested by the Bloc Québécois, establish a monetary institute to thoroughly review the matter before making any decisions, so that we know exactly what we might be getting into, if we decide to move in this direction?

[English]

Mr. Sean Cooper: I think it is necessary for us to make sure we know what we are getting into. How we go about it, of course, is up to you people to decide, but we need to be looking at it, we need to study what effects it will have on our competitiveness in the global market. We also want to make sure we keep our identity and we are noted as being players in the world economy. So yes, I think it is necessary for us to look at it. I think it needs to be studied very strongly, so that we understand the ramifications of dollarization. There are many ways of doing it, and we should make sure we pick the right way to do it. Again, the Canadian Chamber of Commerce has some positions on this, and they will discussing it over the next two months, I believe. There are a couple of policy meetings on that subject. So I guess you will be hearing from them at that point.

The Chair: Mr. Baker.

Mr. George Baker (Gander--Grand Falls, Lib.): Madam Chair, all I wanted to say was that this is an excellent brief by the Atlantic Provinces Chamber of Commerce, as delivered by the regional executive director. There is a lot of very interesting information here. I might point out that the executive director has done an excellent job himself in the past with chambers of commerce in Newfoundland and Labrador and in the Maritimes. He is now in a position where he speaks on behalf of four Atlantic provinces.

All I wanted to do was ask him to elaborate on the chamber's position on what they call a customs union. I know it is explained fairly comprehensively in the brief, but for anybody who is listening to our broadcast and will be reading the transcript, perhaps the witness would like to elaborate on that subject.

À (1015)

The Chair: Thank you.

Mr. Cooper. I am pleased to acknowledge the compliment that was paid to you by the member from Newfoundland.

Mr. Sean Cooper: I thank the honourable member for the compliments, and yes, I still own property in his riding.

The basic idea of a customs union would be to encourage the goods to flow more freely by reducing the needs for customs inspection at the Canada-U.S. border. It would reduce or even eliminate paperwork, uncertainty, and costs associated with the rules of origin. Administrative burdens would be greatly reduced, and this is not insignificant. One study suggests that efficiency costs associated with the rules of origin system might account for as much as 2% to 3% of NAFTA GDP. Given that more than 85% of Canada's goods and services are exported to the United States, the potential cost savings are significant.

When we first started talking about the customs union, perimeter clearance was basically what we were calling for, even prior to September 11. We would look for a North American zone with common customs. It would mean for Atlantic Canada that we would become even more of a gateway to this continent for goods and services from the European market and worldwide, using the port here in Halifax and the ports in Saint John and St. John's. It would also give us the opportunity to have more freedom in flights, because along with common customs, of course, would come open skies, which we were calling for, and that would give us more opportunity to have competition within the airline industry on this continent and have regional carriers looking after the northeastern portion of the continent, including New England and Atlantic Canada.

The idea of the customs union, as we are looking at it, is tied closely to the EU. We know they still are wrestling through some of the things there, but we think it's a goal we would like to have, a full and true customs union between Canada and the United States definitely, between all of North America if we could.

The Chair: Ms. Carroll.

Ms. Aileen Carroll: I think there is an onus on all of us to really think this through before we come out with this kind of newspaper headline, which is not the chamber's, about 450,000 jobs lost. My problem with that kind of report is that I would contend that the Canadian Manufacturers and Exporters, unlike our government, are not looking at the other side of the issues there. What is it going to cost if we don't do it? I would ask the chamber to consider that.

I would also say that I think there has to be an incorporation of the health issues that go along with it. It isn't just a matter of looking at a spread sheet, it isn't a matter of looking through one lens. The whole dimension here has to be broadened, and I think there's an onus on government and on the chamber and on even Mr. Klein, I dare say, to consider some of the other dimensions that go into determining the real costs. I would ask you to comment on that.

My second question relates to the customs union. I think we have to fully understand what that recommendation means. In addition to other aspects, it is a whole integration of trade policy. It would mean Canada would not move separately from the whole on any trade issues once a full customs union obtains. As long as that's what's being proposed and we've thought that through, that's fine and that input should be made, but I sometimes think, as with Kyoto, we're not looking at the whole enchilada.

Just before I finish, I would mention Palmer, who conducts the negotiations for the Americans on Kyoto, and before that Rio. When Mr. Bush announced abruptly that they weren't going forward with Kyoto--that was before we all went to Bonn last summer--he did an excellent interview with CBC radio, and this was his whole contention, that the Bush administration was not considering the cost of not going forward, was not considering what it meant for plans to provide health care, as is necessary in the United States, since they have no health care policy. That's a huge cost of doing business in the United States. The Bush administration wasn't looking at any of the other sides.

So I invite you to comment on Kyoto and on customs unions.

À (1020)

Mr. Sean Cooper: On Kyoto, we're not coming out and saying we're going to lose 450,000 jobs and putting alarmist headlines in newspapers. The fears we have are in the short term. We agree that there is a need to reduce greenhouse gas emissions in the world. That we have to look at. But we cannot look at it and say we here in Canada can push the United States into signing. They are major polluters. We can do a lot here in this integrated economy, as I said, with the reduction, with us generating electricity through hydro, through wind, or through natural gas, that would retire a lot of the polluters in the United States, but it's our understanding that we have not been able to negotiate those credits for us. The emissions trading threat is if the Americans don't ratify the Kyoto accord. In that case, it becomes a molecules versus electrons debate. We will be sending our natural gas to the United States for them to offset their greenhouse gas emissions by generating the electricity there. It's our raw materials that are going to the United States to do that, and we get no credits for it whatsoever.

We are not allowed to develop new industries if the cap is put on. Here in Atlantic Canada, once the cap is put on, if its 571 megatonnes, we want to know how that's going to be grandfathered, how it's going to be distributed across the country. The Prime Minister has said the brunt of the Kyoto accord will be borne by the whole country. That's great in an area that's totally developed. We have a lot of things that are about to happen here in Atlantic Canada. The attitude here on growth and development is very strong, and we don't need roadblocks. The cost of the emissions that will have to be bought to put a smelter in Newfoundland, to put an aluminum smelter in Nova Scotia, to develop electricity from natural gas, may be enough to not have those projects happen. That's our fear.

So again, we need to look at negotiating the credits, so that it's a fair and reasonable way and we can continue to develop our own economy. We don't want to be held back. That's our point on Kyoto. It is not a matter of whether we should go out and increase our emissions. We are not talking about increasing emissions totally, we are looking at reducing the emissions in the world as a whole, and we have to look at it as a whole, and just a few of us should not bear the responsibility for the whole reduction.

À (1025)

The Chair: Thank you.

Mr. Rocheleau.

[Translation]

Mr. Yves Rocheleau: Further to the questions of my colleague Mr. Baker, I too have a question for you.

You mentioned a customs union. Assuming that Canada and the United States were in agreement on the matter of a customs union, how would this affect the softwood lumber dispute? Would it spell a resolution to the dispute? Using this case as an example, what would be the implications of a customs union?

[English]

Mr. Sean Cooper: Would there be a dispute? I hope not. As I say in my presentation, the United States anti-dumping laws and practices would have to be negotiated out. Given the central role these tools play in U. S. trade policy and how hard they fought to retain those tools in trade talks, it is difficult to envision them entirely giving up their right to impose countervailing tariffs, even in the context of a customs union, but it is something we would have to negotiate with them.

Canada and the United States would have to arrive at an internal consensus on positions for broad trade negotiations or, at the very least, narrow their differences significantly. The customs union would certainly deepen our economic integration, but it would not necessarily create a single market. For the foreseeable future goods will still have to be taxed differently, priced in different currencies, and be subject to different domestic regulations. We are not saying we are going to give up our regulations. A common external tariff is only one piece of an integration puzzle. There is more to it than that.

One possibility that has been suggested is that we can work on certain sectors and try this to see how it works. The steel industry is a good example of that. There is already a good deal of cross-border ownership and sourcing of raw materials, and even the union representation is cross-border. That trial would be a good way for Canada and the United States not only to improve the efficiency of the current industry, but also to assess the real impact of a common external tariff. We are saying, let's bring this in bit by bit, let's see how it would work that way, and we would iron out any of the difficulties we have in a customs union.

The Chair: You can see, Mr. Cooper, that with the whole notion of a customs union, which speaks to harmonizing trade policies with those of the U.S., Canadians are asking how would that benefit us. At the same time, I want to commend the conclusion in your paper, because I think most Canadians would agree with your final paragraph, where you say:

Canadians do not want to become totally integrated with the U.S. and they do not want to become Americans, but they do want to reap the economic benefits of being in an economic partnership with the Americans.

I think most Canadians would agree with that statement.

I want to move to the issue of transportation, because yesterday morning we began with a very strong presentation by the Atlantic Institute of Market Studies, where they spoke to us about the transportation corridors. I wonder whether the chamber has reflected on the issue of transport infrastructure, the fine-tuning of infrastructure, whether it should be private, public, federal, provincial, working with the United States on a corridor from Atlantic Canada through Maine, etc. Could you reflect on this? I am not sure if you have seen the work the Atlantic Institute for Market Studies has done in that area.

Mr. Sean Cooper: I'm familiar with some of their work in that area, and I'm very familiar with the Atlantic coast trade corridor. It was our initiative that actually started up the Atlantic coast trade corridor. We define it loosely as the Trans-Canada Highway and the I-95 from St. John's, Newfoundland, to Key West, Florida . There are some major concerns with the American funding of their portion of that corridor. It wasn't identified in the first TEA-21 round as being one of the major corridors. New England is left off their map altogether. We have been promoting it with our colleagues across the border throughout New England. I've made presentations to the New England governors and eastern Canadian premiers in this regard as well.

Funding of infrastructure comes from the taxpayer, we're going to pay for our roads. We're not really concerned with who puts it out first, we are concerned that we have the best tools to get our people, goods, and services to market, and we need to ensure that this is clear. We need the infrastructure. There are some major improvements in New Brunswick with their highway to the border point now. There still needs to be some on our old trade corridor, which basically goes up through to Quebec. But all in all, the infrastructure needs to be dealt with.

As for the border crossings, with the new divided highway through to the Woodstock-Holden area, that border crossing is now seeing an increase in traffic, because it is shorter to go that route, instead of going across the St. Stephen-Calais route, and you don't have to travel that airline Highway 9. There is a movement in Maine to develop an east-west highway that would go through Maine, New Hampshire, Vermont, and New York. This has some support in the States. We need to continue to drive that.

As the Atlantic Provinces Chamber of Commerce, right now we're in the process of developing a data bank of communities along the corridor to encourage twinning of those communities and the business communities, to promote the corridor as a whole, so that ownership is taken by the people who live along the corridor as they explore it and they increase our tourism.

It's an amazing stretch, just 50 miles wide, but the whole length contains some 89 million people, so it's a huge marketplace for us. It's our traditional marketplace. That's why we will continue to look for barriers that are there to trade and to the movement of people, goods, and services, so that we can get those eliminated. The border crossings are one of those, and that's where we see joint customs as being very important to us. The faster we can get our goods, people, and services to market, the better. It's always increasing our productivity as a country. This brings with it a whole realm of discussions that we're looking at, including trucking regulations, the rail system that goes through that area and the regulations that are impeding some of our movement of freight down through to New England. We also are looking at IT infrastructure as a very important part of this corridor and dedicated broadbands along that corridor, so that we can move our data, and our software companies can continue to move that service along the corridor, as most of our major markets are down through into Washington, Carolina, and Atlanta.

So yes, we're very much on top of the trade corridor. We have pulled together a coalition of organizations in Atlantic Canada and New England. We have the manufacturers, the tourism industry, the IT industry, trucking associations, ports associations, and so on as parts of our coalition for the promotion of the trade corridor. We will be continuing to work on that.

À (1030)

We have some fears about the way some things are going with trade corridor development across this country. There have been announcements of development in the Plattsburgh area of New York and the Champlain crossing there. That, to the credit of the chamber of commerce in Quebec and the chamber of commerce in Plattsburgh, New York, has now been moved ahead. The fear that we have out this far east is that the federal government, in looking at that trade corridor, as they see it move down through that area into New York from Quebec, will take it as the eastern corridor. That again cuts off New England and Atlantic Canada, so we want to make sure the Trans-Canada highway from St. John's to the border in New Brunswick and down through Maine, down through to New York, remains high on the priority list for trade corridor development in this country.

À (1035)

The Chair: Can I ask you to reflect on one sentence that you have in your paper, under “Border Issues”, where you say “Canada's vision for border management remains unclear.” Could you tell us how that could be clearer, coming out of the smart border declaration and the action plan we signed with the U.S.? Does that make the situation better?

Mr. Sean Cooper: The recommendations in the smart border declaration and action plan are very good. They will attempt to bring it up to speed, up to what we need. The vision for border management, as we see it, is still unclear.

The Chair: Could you elaborate on what is fuzzy?

Mr. Sean Cooper: If I could elaborate on what's fuzzy, it wouldn't be fuzzy.

We want to be assured that the border management is very clear and identified. The action plans are there, we want them put in place, we want them moved on. It's great to put these things down, but we want action, we want to speed government up on this. These are good action plans, move on them. Business would, government should.

The Chair: Thank you very much, Mr. Cooper. Thank you for the paper and for leaving us with some issues I think we all have to pay specific attention to as we get across the country and speak to Canadians and to business people like yourself. Thank you so much.

Mr. Sean Cooper: Thank you very much.

The Chair: We should take a break. Our next witnesses are going to be with us at 11:15.

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The Chair: We resume our hearing with Elizabeth Beale, president and chief executive officer of the Atlantic Provinces Economic Council. Welcome, and thank you for the material you've presented us with and the documents you've left with our clerical staff. You may begin your presentation any time.

Ms. Elizabeth Beale (President and Chief Executive Officer, Atlantic Provinces Economic Council): Ladies and gentlemen, thank you for the invitation to address you today. I will make my remarks in English entirely; my apologies to the member from the Bloc for doing so. All our information on this topic is in English only, but I understand some of it will be translated.

Today I'm primarily going to refer to some work we have been doing on the free trade agreement and the impact of NAFTA and the FTA on Atlantic provinces. This has been a long-standing interest of the organization that I head up. We did a study on part of the FTA implementation in the 1980s, and that helped companies and the provinces here to identify the issues they felt were important going into the FTA. We have, in the last three years, undertaken a study on the post-NAFTA and FTA environment and the implications of that for Atlantic Canada. I did bring along some copies of that publication. It looks at a whole range of issues related to merchandise, trade, trade diversification, the new economy, some of the IT sectors, agriculture. We tried to pick topics with key issues for Atlantic provinces, and we had a range of contributors, including our own staff. We are now going on to work on a new study in the area of foreign direct investment, and we anticipate we'll be doing a lot of work on that topic over the next few years.

Our organization is a research and public policy group. We are well supported by a wide distribution of members from provincial governments and some federal departments, but primarily from the corporate community in Atlantic Canada. So we approach this not only as economists, and of course, the members of our staff are economists, but with a very active participation from industry members in consultation on these topics. I think that is important in how we frame our own agenda for this area. So we use this both for consultation and to push forward policy issues we think are important on the region's behalf. And for those of you who are interested, I did bring a copy of our annual report, which lists all our membership and outlines our activities.

As an example, I presented some of this material in August to a meeting of the New England governors and eastern premiers. In Connecticut there is another conference coming up called “NAFTA on the Ground”, which will be in Saint John, New Brunswick, in May. I'm going to be the keynote speaker at that event. I'm trying to give you a review of what we're doing on this very important area, the main focus of our efforts, and we've worked very closely with all our industry partners.

What I'm doing today is giving you a brief synopsis of the topics I covered in the chapter at the end of that publication that you have, because it pulled together some of the issues from Atlantic Canada's point of view. I honestly don't know if this what you want to deal with for going forward in your own areas, but I thought it might be helpful to give some background on this. Please feel free to interrupt me and tell me if I'm going off on a tangent that is not relevant to your considerations.

In general, Atlantic Canada has adapted well to a more integrated North American economy. Our merchandise exports, for example, have grown very rapidly, increasing their share of GDP from about 23% in 1989 to about 32% 10 years later. This is important, because this is a much more positive response than was anticipated in advance of the free trade agreement's coming into effect, and it has resulted, of course, from the removal of tariffs that impeded the flow of the region's merchandise, exports in particular, but also, most importantly, from strong actions in removal of non-tariff barriers.

Some of the region's larger firms have responded particularly well to the opportunities for a more competitive global economy, and in these industries we have seen very good productivity gains, exactly the kind of direction of change we would like to see under more open international arrangements. We've seen this particularly in some of our larger food-processing industries, with an expansion of output and productivity gains. We've seen the same in a number of our wood products industries. That's true for the three Maritime provinces in particular. There are differences--and we can get into these at the end--in the trade profiles of the four provinces. So I may not make references to those, but please come back and ask me about them if you're interested.

I often use the example of what has happened to Prince Edward Island's economy in the period, because I think it's a good case study of how change can occur under more open trade environments. P.E.I. was basically a supplier of products with very little value-added in the Canadian economy for many years, in fact, for a large part of its history, but it's seen the most rapid change of all the provinces under the FTA. In the period following the implementation of the FTA, between 1990 and 1999, the province's exports more than doubled, and where they were concentrated in some resource products, they have added tremendously to the value-added of those products, in particular on the food-processing side. But not only that, we've also seen the introduction of some new industries, aerospace in particular. In fact, aerospace industries are often now the leading exporters in any particular quarter from Prince Edward Island, which is not the profile the country tends to think of with P.E.I. So I think this is a very good example of areas where very positive change can occur.

Of course, it's also occurred as a result of the transportation improvements on P.E.I. But nevertheless, it's reflective of a good direction, and the gains in international markets haven't been exclusive to the goods-producing sectors. We are seeing new exporters emerging in fields like information technology, biotechnology, geomatics, and knowledge-based industries generally. However, many of these firms are very small by international standards, and that's true right across the region, including here in Halifax.

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It's important to note here that this is a remarkable change, given the shocks that occurred to this region's economy during the 1990s. For example, with all the industrial restructuring that took place in the fisheries, there were four years between 1995 and 1998 when exports out of Atlantic Canada were more or less stagnant. For some provinces they actually declined. In Newfoundland's case, there was almost a 10-year contraction in growth until the late 1990s, when the energy developments took place. So overall, the period was not a robust one for Atlantic Canada, but despite all that, we saw a period of, I would say, very productive change in some sectors.

But I think these things point to some of the issues here with respect to Atlantic Canada. High-value products and services are still a very small share of total exports. The pace of growth lags behind Canadian performance, even though we have seen positive change, though I will warn you that with the data over the last couple of years, that's now masked by the mushrooming in energy exports out of Newfoundland and Labrador and Nova Scotia on the gas side. If you look at the overall trade data, you won't pick up the changes that are under way underneath.

I think there are also some issues here regarding the gaps in labour productivity that have occurred in some sectors. I mentioned that in some of our largest export industries we have seen a very positive change and growth in productivity, but that's not true right across the board. It really reflects the fact that the productivity rise in Canada generally has really come because of a pattern of intra-industry trade, in other words, trade between vertically integrated companies, trade that's based on product specialization and scale. Frankly, Atlantic Canada simply has very few sectors where there are possibilities for that to occur. For example, if you look at Quebec and Ontario's manufacturing base and the integration of companies on both sides of the border, you would be hard pressed to find comparable sectors in Atlantic Canada. That has delayed that process of positive adjustment, relative to the overall Canadian case.

Other factors I want to point to that still remain very substantive issues--and no doubt you will hear about these from other interveners at these hearings--relate to distance and transportation costs. We all like to pretend, as economists, that distance doesn't really matter, but it does matter for some of the products that come out of this region. We have a whole host of transportation challenges. Of course, in the period since last September the air access issue has risen to the top of that agenda. It wasn't when I wrote this a number of months ago, but it certainly is a big issue now. We, in fact, are just looking at doing a new study on transportation flows, and I think it's driven by a very strong region-wide concern with the loss in service and the difficulty now in maintaining the infrastructure related to that service across the region. Simply put, the distribution of a small population across a very large area here in Atlantic Canada holds back all sorts of potential, in new firm development on the air freight side, for example, as well as on the passenger side.

Á (1130)

I do point in this to the lack of diversity in the region's industrial structure as a key issue that needs to be dealt with as part of any trade strategy. You may, indeed, want to have a look at New Brunswick's economic strategy, which was just released. I'm not sure if you'll have any witnesses referring to this at these sessions, but New Brunswick did introduce a new economic strategy two weeks ago and did specifically identify trade diversification issues as something they want to address. New Brunswick is still the region's largest industrial base, and it tends to be, among the provinces, more forward-thinking on that topic.

Most of the gains in export performance, just to emphasize this point, have really accrued to the region's large exporters, so there's good success for the large exporters. The real issues come in for the small companies coming out of Atlantic Canada. In particular, what we have found is that a high proportion of new small exporters simply fail to move ahead and export in a second or third year. If you look at profiles of small exporters, their success in breaking through the barriers is very limited in Atlantic Canada. There are all sorts complex reasons to explain that, but I think it goes back to the points I raised about industrial structure, the lack of inter-firm shipments, the lack of a core of facilitating firms here who are able to invest in new ventures and act as a base for assisting those small companies to reach out to international markets. Small companies here often basically get left on their own to explore either new markets or new products. It makes it very difficult for them to sustain that activity on an ongoing basis.

Currently, there are a number of government departments that offer support to small exporters, including the Export Development Corporation and the Atlantic Canada Opportunities Agency, both of which are trying to recognize this challenge. So it's not a new challenge and it's certainly not unrecognized, but I think here the real issue is whether they're willing to come in and really sustain their support for these small companies over a number of years. Typically, assistance will be given on a one-time basis and may not follow through to subsequent years. That makes it difficult for those small companies to succeed.

The provinces and the federal government are also increasing trade promotion to assist small companies to reach markets. We've seen all sorts of things from new trade missions down into parts of the U.S. on a regional basis, with the four premiers going along with various federal ministers, in order to assist with that. But again, it's the follow-through and it's the commitment to making this a sustained and long-term effort that is really the key to breaking through these barriers. The initial entry point can be important, but it's the sustained support that matters.

I think there are really some questions in the region--and this goes beyond just trade strategy to wider economic development strategies--as to whether we need a much more concentrated effort to help companies here break through some of the barriers. I won't go into that here, but there's a lot of thinking at the moment on how the federal government, in particular, needs to have another look at its economic development strategies for Atlantic Canada if it wants to really make a change in the current patterns.

I point out a number of industries, and I will make specific reference, for example, to the change we are seeing in the region's economy related to the oil and gas developments. There is a very significant period of investment in the region's economy, but it's still a fledgling industry, it's still developing on a project-by-project basis. In fact, there is great debate within the industry itself as to whether you can really call it an industry yet here in Atlantic Canada. In particular, companies have very serious concerns about some of the barriers that exist among the provinces in Atlantic Canada and limit the potential to build up this industry on a region-wide basis. I mention this in the context of the importance of the agreement on internal trade and the continued efforts to remove barriers among the four provinces. Supply vessels cannot get recognition to work in both Newfoundland and Labrador and Nova Scotia. Skilled workers cannot get permission to cross and work across borders. I am sure you've heard lots about the progress we make on the international side and the lack of progress we make internally. I could flood you with examples, but I am sure you've heard lots about that. It really frustrates things here in Atlantic Canada, where we are such small provinces. It is really quite ludicrous the extent to which those restrictions still exist.

Á (1135)

I encourage the Canadian negotiators to take a strong interest in the issues emerging from Atlantic Canada on the trade dispute front. There is a real feeling here that we just fall off the map, our interests are too small to really affect the national economy, and therefore don't get adequately represented. That was certainly true with the softwood lumber dispute, although I think some of the strong lobbying effort from that has helped to push our interests forward. I think this really points to the importance of an integrated approach across the region by the premiers and others, working on this to make sure the interests of Atlantic Canada come forward strongly on national trade agendas.

I think that runs through the core points I want to make. I hope I have given you an overview of where the strengths and the positive changes have occurred, but I have also tried to finger some of the challenges in moving forward in this area.

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The Chair: We will now go to questioning. We'll start with Mr. Rocheleau.

[Translation]

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

You spoke at length about the concerns of the Atlantic Provinces Economic Council. Do you have any views or opinions to share with us on issues that affect us more closely, namely North American integration, border management, the imposition of protectionist measures by our US neighbours, north-south transportation routes - a matter of great concern to AIMS, a group we heard from yesterday - and finally, the prospect of an eventual customs union between Canada and the United States? I'm interested in hearing your comments on these four points: border management, protectionist measures, transportation routes to the south and the customs union.

[English]

Ms. Elizabeth Beale: I think you had Sean Cooper speak to you about the trade corridor. I am part of Sean's board, so I am very familiar with what we are doing there. I think there are all sorts of good opportunities there to resolve a number of issues on that front. One of the reasons I didn't address that today is that I knew he would be presenting it to you.

We have done some informal surveys of the companies who are members across the region on specific border issues at the current time. We have found that they are very specific to different industrial sectors. For example, the agriculture community has been very caught up on the restrictions on agricultural products moving across the border and additional inspections that are being imposed, often on an arbitrary basis, once the shipper is actually at the border. I think that it is very specific to a number of key areas, and I think there are good mechanisms to resolve some of those disputes on an ongoing basis. It is not perfect, but there are mechanisms in place.

The provinces and New England, under the New England governors and eastern premiers banner, do have a trade globalization committee. I don't know if you're familiar with the terms of reference for that initiative, but they have used it as a vehicle to look at some border-specific issues. The feedback I have had, since I have an association with that group, is that there have been relatively few border issues coming forward from Atlantic Canada, even in the post-September 11 period.

One area where I have heard a lot of complaints has been in the movement of business people across the region in recent months. I am not sure, again, whether you've heard some reference to that from some participants at this table, but other than picking up on very anecdotal fragments on that front, I really haven't heard. We don't have any substantive analysis on the extent to which it is really impeding business flows at the current time.

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The Chair: Thank you.

Mr. Baker, the member from Newfoundland.

Mr. George Baker: Thank you, Madam Chair. We really appreciate this presentation. I'm sure those people who are listening to us today back in Ottawa--this goes directly through to the House of Commons--appreciate it as well, and also the book entitled Atlantic Canada's International Trade in the Post-FTA Era. I notice you wrote chapter 10. Did you have any other involvement in the publication?

Ms. Elizabeth Beale: The publication is put out under my direction, so I took a very active role in setting up the terms of reference for each of the studies.

Mr. George Baker: Let me ask your opinion, not specifically on what you presented, because that will go into the mix, but on an interesting discussion the committee had dealing with international issues as far as the economy is concerned, a discussion we were involved in on Newfoundland regarding the terms used internationally by economists to judge the performance of the economy, specifically the GDP, the formula that's used, terms that are used by economists in studies and that we will use in compiling this report. Sometimes these terms on the health of an economy are perhaps not reflective of the health of the people in that economy and what the contribution is, say, to the general economy of an area that's considered particularly poor. Let me present this example to you and ask your opinion of it in your position and as an economist.

Newfoundland and Labrador is relatively poor in the Canadian setting, with migration of people out right now continuing. The whole subject of your book is exports. When you look at the exports from Newfoundland and Labrador, you get $1 billion of electricity going down to the U.S. from the upper Churchill. You get another $1 billion a year from the fishery exports. You get another $1 billion a year from the paper mills--there are three of them, and they export to Europe. Add in the oil refinery that exports to I don't know where. Add on to that the offshore oil production. You come up with a figure of about $5 billion or $6 billion a year in exports. There are only a half a million people. Divide half a million into five billion, and you come up with a figure of $10,000 for every man, woman, and child in Newfoundland and Labrador. The Canadian average with exports is roughly $3,800 per capita.

If you elaborate that into the Atlantic region, maybe you would see the same result, but Newfoundland and Labrador contributes, if you look at the importance of exports, three times as much to the economy of Canada as the average Canadian does per person. So the poorest area is sometimes the most valuable area. Would you agree with that? Do you believe we could have a healthy economy without exports, for example? Is that the determining factor of the wealth of an economy? Is that the determining factor on whether or not you can print money?

It is a general question I've got for you, because it comes right back to the young people who appeared before us in St. John's, Newfoundland. They were saying, GDP is a terrible measure, because you can have poverty galore and a very big GDP. Therefore, why use that measurement, and why are we using it in this committee? There is no doubt about it, we are going to be using it doing the report. I would like to ask your opinion on it.

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Ms. Elizabeth Beale: That is quite a big question, Mr. Baker.

The Chair: He has been grappling with that question for the last couple of days, so please help him along.

Ms. Elizabeth Beale: I think you're asking a very good question, because you are asking what we are getting out of this. Here are the data and here is what is happening. Where are the benefits to us? That is what we should be asking about anything we do. I prefer to go with measures I can quantify. Therefore, I am very comfortable using the ways we measure output in the economy, even though I recognize that there are all sorts of things that are very imperfect in that calculation. I think it is the range of indicators that needs to be used to get a full appreciation of what is occurring.

Newfoundland and Labrador I will not say is a special case, but it is at one end of the spectrum, in the sense that there are only a handful of products that make up exports coming out of Newfoundland and Labrador. I am sure you have had a chance to see the data. They would include things like forest products, iron ore, other mineral products, and now, of course, the crude oil and the refined shipments that are coming out of the province. We have a very active group of members and others in St. John's and elsewhere in the island of Newfoundland, and there are great concerns at the moment with this question. Here we have a rapid contraction of many industrial sectors, rapid change in the fishery, for example, where even though output has recovered from the effects of the northern cod shutdown, we've not regained and never will regain the employment base that is associated with that industry. Now we have a new industry that has come along, but it is still going project to project, lurching ahead. Oil prices now make everybody a little unclear about where we may go with that and what exactly the province and the people of Newfoundland are getting out of that. There are a lot of very legitimate questions that I think do need to be explored. Whatever our trade strategy or our export strategy is with those industries, we always should be thinking about how we benefit as Canadians or as Newfoundlanders.

If you project where the energy developments could be in Newfoundland and Labrador, everything is up in the air and the investments come along in a big chunk, and then there may not be anything for a while. It's not a smooth path here, the way it might be with much more widely diversified industry, but you can see a period where royalty periods will mushroom in that province and greatly change the nature of that economy. You will never see a period where the energy developments will provide a wide employment base in that province.

If we get the Voisey's Bay project off the ground, for example, there are better employment prospects in that industry. But we should keep in mind that we're dealing with a very narrow range of large industrial projects with a very limited employment base, whatever they are. The real employment gains now coming in the Canadian economy are coming on the other side of the agenda, in, for want of a better label, new economy areas, business services, knowledge industries. The rate of growth of those industries here in Atlantic Canada is much more muted. That's particularly true in Newfoundland and Labrador. Encouraging those industries to set up in smaller communities simply doesn't occur easily, and all the provincial governments are grappling with that.

That's not really a good answer for you, Mr. Baker, but I do think it is positive that you're asking what we get out of trade policy. It's who benefits from the kind of initiatives we undertake. We shouldn't only look at export flows, we shouldn't only look at GDP as a measure of potential.

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The Chair: Mr. Baker.

Mr. George Baker: I have one final question. Would you agree, then, in looking at the economic performance of regions, countries, provinces, or states that there's such a thing as a good GDP, there's such a thing as a bad GDP, and there's such a thing as a GDP that's going to lead to economic disaster, although it could be rising?

Ms. Elizabeth Beale: I would say it's how you interpret the data that matters. I would look not only at GDP and output, but at productivity gains, and in particular, what we call total factor productivity, which doesn't only pick up labour productivity, because labour productivity is going to rise very rapidly in Newfoundland at the moment, just by virtue of the fact of large output and small number of employees. I would look at productivity gains, and I would look in particular at employment gains in new sectors of the economy as a real measure of where Atlantic Canada is going. I think this is going to be a big policy issue for the federal government in Atlantic Canada. We've had reasonably strong growth in Nova Scotia and Newfoundland, and it masks some of the challenges underneath. Particularly in regard to the innovation strategy, the federal government needs to pay a lot more attention to what is happening in some areas of the country that are not responding as well to the current challenges.

Mr. George Baker: I just want to say in conclusion, Madam Chair, that I've listened to the presenter for several years now and I've had great admiration for the work she's done and the commentary she's given on issues that have come up from time to time in Atlantic Canada.

Thank you.

The Chair: Ms. Beale, the endorsement from the honourable George Baker is one that maybe you can put on your resume.

On a serious note, we go to Ms Carroll.

Ms. Aileen Carroll: It's been very interesting indeed to listen to the interchange, as well as your presentation. I hope I'm correct when I conclude from just the name Atlantic Provinces Economic Council and the paper you've given that the Atlantic provinces are acting now more as an integrated economic unit than in the past. Historically--I'm sure I'm not informing you, but perhaps other colleagues--we lost out from a competitive angle, as provinces competed against one other to give the best, and by that I mean, in the end, the worst for them, deal to companies So although you underscored, and rightly so, that we seem to be doing more internationally than we're doing inside Canada, with regard to interprovincial trade barriers, I'm hopeful that we have moved forward in Atlantic Canada in acting in an integrated and less internally competitive way. Is that a solid conclusion?

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Ms. Elizabeth Beale: I'm not sure I can completely support that conclusion. We are an Atlantic-based group. We don't have any direct support from government in our activities, we're fully independent. Nevertheless, we work a lot with the provinces. I do see positive signs. I do think these cross-border initiatives on a region-wide basis, for example, the governors and premiers initiative, are good venues to try to push across a cooperative approach. I know a lot of the actions that go on under that are very stylized, but nevertheless, they do provide a forum to try to exert some influence for bringing often competing jurisdictions together. So I think there are signs of progress in those areas.

However, as you'll realize, the nature of the approach at the moment in federal-provincial relations is very polarized, as it is among different groups of provinces. In particular, I think the areas related to energy development, with its importance to Atlantic Canada, are very fractured at the current time. This is not just my opinion, but that of many of our members, who are very frustrated. There is no ability to coordinate between the federal government and the provinces on a regionalized strategy in what amounts to the largest period of investment for the region's future. There's no ability, for example, to look at coordinated initiatives on local benefits or regulatory issues across the region that impede the ability of the companies to move ahead. I'm not arguing here for a deregulated environment, which some may come and do, I'm simply saying we have no mechanisms to act in what should be a common concern for Atlantic Canada at the current time. I go up and down on this point. Some days I'm feeling more positive about the direction, other times I'm feeling more frustrated at the lack of cooperation among the four provinces.

Ms. Aileen Carroll: Thank you.

The Chair: To continue on the note on which you ended, have the existing NAFTA agreements etc. been sufficiently sensitive to the region and to regional concerns? What would you like to suggest to us as we continue the discussion of regional concerns and NAFTA issues?

Ms. Elizabeth Beale: Again, I don't have anything particularly substantive to offer here, beyond an opinion that has been put forward to me. I feel, in general, the provinces have not put in enough resources to bring specific issues to the table. The process has become, as you know, very complex. It requires a great deal of specialization. For the smaller provinces, it then becomes an issue to engage in the level of analysis that's required for bringing issues to the table. So I see this as a policy vacuum at the moment.

I know, as a result, a number of the smaller companies reflect this. They feel, for the issues they would like to have dealt with under NAFTA, they simply don't have the resources to bring them to the table. I'm trying to think of a good example and not really coming up with one, but that certainly came up in discussions with respect to the restrictions on potato exports from P.E.I. I'm not sure if there's anybody who's intervened on that particularly. There are probably others better able than I to address the specifics of that.

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The Chair: If somehow you come up with anything further, you can communicate that to us, because we are hoping for some discussions on that in the G-8 summit at the end of June.

Ms. Elizabeth Beale: There's no mechanism for the provinces to have input into this discussion, is there?

The Chair: Yes. I think invitations went out.

Ms. Elizabeth Beale: Have you heard from any of the provinces on this?

The Chair: We've heard from a couple of MHAs in Newfoundland. That's not the province and not the provincial position, but they know the process and they know how they can have input into the process, so we hope we'll be hearing from them.

Ms. Elizabeth Beale: I will have a look around and see if I can put something to you.

The Chair: Thank you very much for joining us today and thank you for your presentation to the committee.

We will end this session. We resume at 1:30, and we'll start with Prof. Frank Harvey. Thank you.

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· (1330)

The Chair: We will begin the afternoon session. Thank you for joining us.

We'll start with Dr. Frank Harvey from the Centre for Foreign Policy Study at Dalhousie University. Frank Harvey is the director of the centre and a professor of political science and international relations. He has written several books and, members, you have before you a list of some of the books he has either written or co-edited with a very distinguished name.

We welcome you to the committee. You may begin. You have about 10 minutes for your presentation. Then we'll open it up for questions by the members.

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Professor Frank Harvey (Director, Centre for Foreign Policy Studies, Department of Political Science, Dalhousie University): Thank you very much. I'd like to thank members of the committee for the invitation to share some of my thoughts on Canada-U.S. relations and the Canadian security and defence policy.

I note in my speaking notes that 10 minutes is not a great deal of time to cover what is perhaps amounting to a pretty complex set of issues, but I'll do my best to address some of them. I also note that I had the opportunity to have a working lunch with Aileen Carroll yesterday, and I thought that was quite useful. I'll try not to cover much of the same ground. I will try to work on a variety of other tangents.

Let me point out what I will not be covering today and explain why. I will not be covering some of the work I've been doing over the last year on why I think Canada needs a new defence and foreign policy white paper. I spent most of last year developing that argument with colleagues at the universities of Calgary and Manitoba, and I have a report here that really develops those sets of arguments, which I can table for the members to take a look at. I have also produced quite a few articles on the subject of a national missile defence, and I'll try not to spend too much time on that specific issue.

What I would like to do instead in my 10 minutes or so is to evaluate what are emerging as Canadian alternatives to what I will refer to as two American sins: the sin of ballistic missile defence as a policy option of the United States and the sin of American unilateralism. What I would like to do is evaluate the Canadian alternatives to those sins in an effort to make a pretty straightforward argument that when you really explore the value of the alternatives that Canadians tend to bring forward to address ballistic missile defence and American unilateralism, on the surface they may appear appealing, but when you really scratch the surface, you find that in fact they are not particularly helpful .

Let me start with American sin number one, specifically ballistic missile defence, and outline what are usually cited by many in Canada as better solutions to proliferation and arms control. Among the alternatives are things such as constructive engagement, economic sanctions, transparency, verification, monitoring, import-export controls, and the list goes on. These represent the core of the arms control and disarmament movement. That's what the regime is about. Those solutions are put forward as the best way to stop the proliferation of nuclear weapons. But my argument is that while these may appear on the surface to be useful policy alternatives, they are not policy alternatives at all. In fact, they have proven to be far less successful than proponents claim they have been.

Consider for a moment, for the sake of argument, the amount of money that Canada, the United States, the Europeans--in fact, states on the planet--have invested in total in programs related to transparency, verification, monitoring, import-export controls, and so on. Ask yourself this: what do we have to show for it? Have we succeeded in stopping the spread of weapons of mass destruction?

The evidence is pretty compelling. In fact, even the most optimistic take on the proliferation problem would suggest that the record is not encouraging. Witness the recent failure of inspection, monitoring, and verification in Iraq, North Korea, and India and Pakistan, the two most recent additions to the nuclear club. Where exactly is the proof that investing another $20 billion, $30 billion, $40 billion, or $50 billion in those programs will make them more successful? Where is the evidence?

My understanding is that this committee's responsibility in part is to ask those questions. Where's the evidence that those programs work? Are those programs more likely to succeed in comparison with something that happens to be politically unpopular, such as national missile defence, something that is an alternative? What's the probability that additional investments will make those programs work? Is there a 20%, 30%, or 50% probability of success?

“You can't ask those questions, Frank. You can't be that precise about the probability of those kinds of programs.” But that's precisely what is being demanded of proponents of national missile defence. The demand on them is to be precise about success, but proponents of transparency and those Canadian alternatives don't suffer the same burden of having to prove their case, and I think they should.

Critics of that position, the argument I have just put forward, would say, “Frank, I think you're missing the point. There are so many other security problems out there.” The list usually includes terrorism, drug trafficking, environmental degradation, world hunger and disease, AIDS, intrastate conflict, refugees, and chemical and biological weapons proliferation. Those are the problems we should be focusing on. That's a popular opinion in Canada. It's not national missile defence. Those are the real security issues.

But the same questions apply. What solutions do we have to deal with those threats? How much do they cost? Where is the evidence that we're getting an appropriate return in our security for each one of those issue areas, and how does that compare with ballistic missile defence?

· (1340)

Think about the amount of money that Canada, the United States, the Europeans, and so on have spent to address terrorism, drug trafficking, world hunger and disease, and environmental degradation. Add all of that up, say, over the last 10 years, and ask yourself this: what do we have to show for it? If you track the trend lines for each one of those security problems, arguably they've all gotten worse, not better, notwithstanding the billions of dollars we've spent on addressing those security problems. That's what you compare to the investment in something such as national missile defence and what you get in return for your security dollar. That's what I think the basis of evidence should focus on.

My point is obviously not that we shouldn't as a country support investments in stopping terrorism, combatting drug trafficking, dealing with environmental degradation, and solving the problem of world hunger. Those are priorities. Canada has played a major role in addressing those security issues. My argument is not that we should chip money away from those problems, obviously. My argument, though, is that solutions to those problems are highly complex, more complex than the technological problems we face with national missile defence. It's harder to deal with those problems than it is to make a missile. Why? Because missiles have no political will. People do. For those solutions to work we have to confront and convince people in these countries to do the right thing and to use the money effectively for dealing with all of those security threats. That's tough, and I don't see solutions being outlined with specifics with regard to addressing those problems.

That brings me to sin number two, American unilateralism. The evidence for American unilateralism is pretty clear. The more insecure the United States becomes as a result of terrorism and proliferation, the more effort, money, time, and energy the Americans will put into becoming more autonomous and unilateral and less dependent on multilateral organizations. The correlation is pretty impressive. That's precisely why the United States' response to September 11 has been so traditional. Think about what they've done and where they've invested their money: an increase in U.S. defence expenditures by $48 billion to $390 billion, the largest single increase since the Korean war; $20 billion more on intelligence, for a total intelligence budget of $40 billion; $11 billion on border security; $39 billion on homeland defence; and the list goes on. Moreover, the Americans have now begun to take control over traditionally non-security areas: transportation, global financing, and immigration and refugee laws. The purpose is to become more autonomous, independent, and self-sufficient and dependent on their own investments for their own security.

Critics in Canada will argue that is absurd in a globalizing world. You can't remain secure independently. You need multilateral organizations. Critics of American unilateralism in Canada point to the fact that prior to September 11 the Americans were unilateral, but after September 11 the Americans needed the UN Security Council to legitimize their efforts. Why? Because only the UN can provide the legitimacy associated with responding to terrorism internationally.

But I would argue that the people who make that argument are missing an important point about what happened after September 11. The 3,000 deaths were more than sufficient to give the Americans the legitimacy they needed to respond. The UN needed the Americans more than the Americans needed the UN for legitimacy. Canada needed the Americans more than the Americans needed Canada for legitimacy. Countries were falling over each other to support America's war on terrorism, because that was the legitimate response. That was the right thing to do.

· (1345)

Now, all of this is bad for Canada, some critics would argue, because we will lose sovereignty. We will lose an independent capacity to govern and to control our own foreign policy preferences. But that argument, and I'll close on this, would be far more persuasive if those who make the argument would provide illustrations and examples of how U.S. and Canadian foreign policy diverge.

If you look at the evidence, there is far more convergence than divergence. Think about the Gulf War, Bosnia, Kosovo, Rwanda, POWs in Afghanistan, the war on terror. Canadian interests, values, priorities, and preferences are virtually identical to and indistinguishable from American preferences, priorities, and policies.

That is disconcerting to a lot of Canadians, but those who think that there is a great deal more convergence than divergence, and those who are satisfied with the fact that Canadian and American policies are similar, make that argument for very logical, balanced, and ethically and morally defendable reasons.

I guess I will end there.

· (1350)

The Chair: Thank you so much.

We will start with the member from the Bloc Québécois, Mr. Yves Rocheleau.

[Translation]

Mr. Yves Rocheleau: Thank you, Madam Chair and thank you as well, Mr. Harvey, for your presentation.

If I understand the gist of your presentation, you would like Canada and other western nations to be more independent of the United States than they are at present. Have I understood you correctly?

[English]

Prof. Frank Harvey: Excellent question.

If I had to summarize my position, it would be that popular opinion in Canada is that we should always be sure to remain distinct vis-à-vis the Americans on our foreign and security policy. My argument is that this would be a mistake, because the values I think most Canadians share in foreign and security policy are identical to the values that the Americans share. The wars the Americans have fought recently have been fought for reasons that most Canadians find entirely acceptable, morally justifiable, and ethically defendable.

If you want to protect our sovereignty, protect it in terms of the values and interests that we espouse. Sometimes that means supporting the Americans.

That's how I would explain it.

[Translation]

Mr. Yves Rocheleau: I'm happy you clarified that for me. However, do western nations have a choice, given the military, political and diplomatic clout of the US and given the US President's decree that anyone not siding with the US is against it? How much room to manoeuvre do they really have? When he makes statements of this nature, is the US President respecting the sovereignty of other nations?

Of course, this might just be the decisive turning point in the drive toward globalization and the Americanization of the planet. Perhaps bin Laden was merely lending the Americans a helping hand and giving them ammunition with which to justify actions which will make them increasingly dominant in just about every field. Even Europe is wavering and contending with this new reality. Despite its various cultural features, it has brought in a supranational government with all of its attendant inconsistencies and problems.

Therefore, as I see it, the Americans now feel justified in doing what they were already doing before, that it keeping the rest of the universe under their thumb.

[English]

Prof. Frank Harvey: I think you're absolutely right. I think the Americans, to the extent that they were doing it before September 11, have become much more aggressive about becoming unilateral after September 11. I think you're absolutely right that they're establishing a very clear frame of reference, saying that either you support the policies and initiatives we're putting forward or we'll have to conclude that you support policies and preferences that are inconsistent with our security interests, and that's a problem. That's what they're saying, and that's the message they're sending off.

As a country, as a group of individuals responsible for evaluating what's in Canada's interest, we should be doing it with reference to those issues, not the demand by the Americans to jump on the bandwagon. We should be doing it issue by issue, looking at what is in Canada's interest. If we did that we would work our way down from that major debate about sovereignty and U.S. “superpower-ism” and suddenly realize that our values and interests are in sync; they're entirely in sync.

We are so engaged with having to establish distinctions. The Europeans are doing it. The Canadians are doing it. Everyone is trying to establish distinction and distance from the Americans, because they don't want to be drawn into that power vacuum. What they aren't doing is evaluating the issues. Is national missile defence in Canada's interest? Make that decision based on the evidence and make a decision with respect to policy. Is fighting the war on terror in Canada's interest? Evaluate it and make a decision on that basis. Is going after Iraq in Canada's interest? Evaluate that choice and make a decision. Don't refuse to make a decision because you're going closer to the Americans. Make a decision about whether going closer to the Americans is in our interest and then decide. That, I think, is a more balanced approach.

I don't see that playing out in Ottawa very often, and I think that is a problem, because if there's anything that undermines this country's sovereignty more, it's making decisions for the wrong reasons.

· (1355)

The Chair: Thank you.

Madam Carroll.

Ms. Aileen Carroll: First of all, Dr. Harvey, would you agree that September 11 constituted a failure on the part of the American intelligence-gathering community? Just for the record, it's a community that has--had--three times the budget of our defence program in Canada. Would you accept that it was a failure on the part of their intelligence-gathering community? Do they have reason to have a different analysis, drawing different conclusions?

Prof. Frank Harvey: My immediate response is that it was a failure on the part of the American intelligence community, without question. When you look at their budget, you have to ask some pretty important questions about where the money was going. But I've given a lot of thought to that question, and the more I think about it, the more I've come to the conclusion that in fact any individual committed to doing that kind of catastrophic attack will do it. If you double, triple, or even quadruple the intelligence budget, there will be fissures and there will be holes.

If you want to evaluate intelligence expenditures, you have to find out how many they stopped, how many they identified, and compare that number with how many that got through. The problem is, when one attack happens, like the ones in New York and Washington, the overwhelming impression is one of absolute failure. Is that a balanced assessment of the capacity of intelligence to process information? I don't think so. If they quadruple the intelligence budget and somebody flies a plane into a building, the conclusion will be that all of that money was wasted.

Ms. Aileen Carroll: I agree with you that this wouldn't be a balanced conclusion, but I guess I'm trying to.... First of all, I just wanted to know your response to that, in and of itself, but I also wanted to make a link, possibly, between effective defence and whether, in spite of the sophistication of American intelligence, particularly when combined with British intelligence, which it is well fused with, in spite of the amount of money that's been spent on it, still the zealots can find a fissure.

If we then move on to national missile defence and we spend the kind of money that has been bandied about...and we don't really know what it's going to cost, but it's a considerable amount of money. As well, from my reading, it seems to me we don't have conclusive evidence that it is going to work. And I can't agree with you, if I have understood you correctly, that it's okay if it doesn't work, because none of the other things work.

If we spend all of that money and we're no further ahead, I'm not sure we've progressed. Is that fair?

¸ (1400)

Prof. Frank Harvey: That's not the position I would put forward when it comes to comparing the expenditures on intelligence versus national missile defence.

Ms. Aileen Carroll: Perhaps we can just leave the intelligence one for a minute and come back to the flow of thought in your paper with regard to where we've spent money--you've listed terrorism, drug trafficking, environment, all of these things--within the human security envelope. You argue--I think well--that we have not improved the situation.

Are you then jumping to say, well, if we've spent that kind of money on all of those initiatives and we're no further ahead, what do we have to lose by going ahead with a national missile defence and spending all kinds of money there? The proof may not be out there yet, but it will do the job, which is deterrence, right? You're saying, let's go down this route now to deterrence, but we don't know if it's going to work, either.

At what point do we connect investment with chances for success?

Prof. Frank Harvey: Fair enough. In fact, that's exactly what I demand in many of my publications. If you're going to make an argument, defend it with reference to logic, rationality, and the evidence.

I would put it forward that the evidence in favour of national missile defence, up until this point now, with respect to testing, is far more successful. As a program and investment, the return you get in security for your investment dollar is in the investment that has been put into intelligence, fighting terrorism, and so on.

Let me explain why. If you look at fully integrated tests of national missile defence, the worst-case assessment of success is three out of five hits. When you contemplate the complexity associated with hitting air missiles, and you conclude that the money has actually resulted in a 66% success rate, then I ask, what percentage of success rate can you apply to drug trafficking? First give me the bar, and then we'll evaluate the programs.

National missile defence for that investment gives you a return of about 66% success. That is where I think the focus should be for evaluating alternatives.

Ms. Aileen Carroll: Can I continue, Madam Chair? You're the boss.

Let's just stay there but look at it horizontally. I think we touched on this yesterday, but it might be useful to bring it into the forum this afternoon.

We were talking about effective deterrence. We were talking about a defence white paper and foreign policy white paper. I think we touched on the question of where do we need to wisely spend our defence dollars so as to deter the new kind of enemy. By “new kind of enemy”, I'm talking about sleepers, about zealots, who even with the one-third failure you were talking about, Dr. Harvey, will do that kind of damage. What I'm asking is, how many Stealth bombers do we need in order to effectively protect the society we all value against this kind of terrorism?

So I hope to see a discussion around this. We're not fighting World War II anymore. It is not conventional warfare anymore. We failed in Vietnam because we didn't adjust quickly enough--“we” being the Americans. How are we going to do this differently, and how does national missile defence show that we are deterring against a new kind of enemy? Yes, 66% of those launched missiles can be taken out by the system, but is that the enemy?

Prof. Frank Harvey: I would be hard-pressed to find a politician who would dismiss that as a legitimate threat. Weapons of mass destruction are proliferating. If you're going to make the argument that we're wasting a lot of money on national missile defence, the evidence you have to cite is that missile technology is not spreading, is not proliferating.

But I have to tell you, if you go to practically 80% of the think-tanks in the United States, Europe, and Asia that focus on whether weapons are proliferating, the evidence is absolute and overwhelmingly incontrovertible that this stuff is spreading. Now you have to ask: how do we address it? You have alternatives tied to what we've been doing all along, but if you look at the graph, all of those alternatives have not stopped the proliferation of weapons. Then you have additional alternatives, like national missile defence, which to some extent has been productive.

I'm not suggesting you dismiss any alternative. If you have a problem with proliferation, and we do, how do you address it in the most comprehensive way possible? National missile defence cannot be excluded from that list of options. That would be the height of folly, danger, and insecurity. That is precisely why, by the way, China and Russia are essentially conceding the point to the Americans. No American president, administration, or political party would get into power making that argument, for good reasons.

¸ (1405)

Ms. Aileen Carroll: I do not argue against the proliferation of weapons of mass destruction. I agree with you and the empirical data we both have before us.

I am simply saying--I am querying you, to take advantage of huge expertise--I don't think national missile defence is going to be the only arrow in your quiver if you're going to deter the terrorist zealot. Perhaps for the American economy that quiver has no bottom, but for the Canadian economy that defence quiver has a bottom.

Before I lose you--and please come back on that--let me ask for another thing. I want to hear your answer to this. Is the coalition's success in Afghanistan, coupled with the increased unilateralism you've described, leading to the disintegration of NATO as one of the multilateral fora you were looking at?

Prof. Frank Harvey: I'll address the first question, and then the subsequent follow-up on NATO.

On the first question, NMD should not be the sole quiver in the ammunition of the United States, the Europeans, Canadians, or any alliance--the sole approach for dealing with proliferation. You're absolutely right. But it would be a mistake to exclude it altogether because it's not sufficient for dealing with terrorism. You can spend on fighting terrorism, non-proliferation, disarmament, and a variety of other things, but you can't exclude national missile defence as an option.

On NATO, I think it's a little too early to tell, but there are signals that as an alliance, as a cornerstone of American security, it is diminishing in importance. There are two reasons for that, I think.

First, I think it's diminishing in importance because that alliance is not particularly useful for fighting the security threats the Americans are facing right now. The alliances they need are alliances in the Middle East and with countries like India and Pakistan and, to some extent, China and Afghanistan.

The security threat they are confronting is not conventional war from the Russians into Europe; it is terrorism. The response is homeland defence, and an intelligence community tied to allies like Pakistan and India, to process information to stop it from happening again.

The other problem with NATO is NATO expansion. To some extent, from the Americans' point of view, it's becoming watered down with respect to its military and security rationale. It's becoming more enhanced, some would argue, because it's engulfing more and more states, and once you bring more and more states into an alliance and attach economic benefits to that, stability will reign. That's the argument for expansion. But there's a point at which expansion reaches a level where the return to the United States for its investment and the loss in voting power within the alliance, notwithstanding its investment, creates a set of conditions where the Americans are backing off, which is why NATO wasn't instrumental in this effort.

Ms. Aileen Carroll: Does Canada need a foreign intelligence gathering agency?

Prof. Frank Harvey: It wouldn't hurt.

It's kind of like defence expenditures. I'm not convinced that sufficient investment in intelligence will produce a better overall return in intelligence, from a Canadian point of view. The Americans are, of course, investing billions in intelligence, and I suspect what they tend to gather will be the sole focus of whatever solutions they have for terrorism. But Canadians can't support that process, and we have a good reputation for having a strong intelligence community.

¸ (1410)

Ms. Aileen Carroll: [Editor's Note: Inaudible] ...when we pay our part of the bill. It's not going to... [Editor's Note: Inaudible]

Prof. Frank Harvey: I think you're absolutely right.

The Chair: I would like to ask a question--I have been overly generous--of Professor Harvey. When we listen to various presenters to us, and people with expertise like you, sometimes we have to sift out what we're hearing.

Reid Morden, the former head of CSIS, spoke to this committee on January 31 and said:

I think, if we've learned anything from this war on terrorism, it is that the foundation for a successful foreign policy can no longer be built simply on strategic alliances with historically like-minded countries. Instead, nations derive their greatest strength from identifying common goals to pursue globally, with the resolve and power of the global community behind them.

How would you react to that quote, in light of our discussions?

Prof. Frank Harvey: There are two ways to respond. First, are we likely to see that evolve when it comes to the approach states like the U.S. and Canada take to forming alliances? Second, if we are, will that necessarily succeed in resolving the problems?

In answer to the first question, I don't think that will be the choice of most states globally, even if there's some promise that's the right thing to do. It's not likely to happen because states are never likely to depend on others for their security, especially if they can afford to spend on protecting their own security, like the Americans.

The more fear they experience through terrorism proliferation--it's almost inevitable--the more they will turn inwards and depend on themselves for their security by stopping borders and becoming more powerful with respect to intelligence. They are not going to turn to multilateral global organizations.

On the second issue, I'm not sure if turning to multilateral global organizations will necessarily succeed in solving many of these problems, because states tend to be independent. They tend to applaud multilateralism; they tend to applaud globalism and alliances to fight things like terrorism. But they tend to not support the very organizations they're holding up as ideals. The UN is a prime example, and NATO is the latest example. Both organizations were excluded in the fight on terrorism, in preference to a unilateral, autonomous approach to their security.

The Chair: I think it's important to hear something from you about an integrated North American defence system, NORAD, or.... Where does that fit in, at least in your discussion?

Prof. Frank Harvey: It's certainly a high priority in the defence community, certainly within DND, and it's a priority because Canada has few options when it comes to its defence expenditures and its approach to defence.

Denis Stairs and Dan Middlemiss at our centre are spending quite a bit of time working on interoperability. Interoperability, integration, is the bus we're on, and it's unlikely we'll have the luxury of changing course. Is that good or bad?

My response to it, again, is issue oriented. A variety of issues becoming more entrenched, with the Americans fighting the same problems, is good for Canada. It's constructive. We get a lot of return on our defence expenditure because we are integrated and have interoperability with the Americans. We don't have the luxury to change it, and I don't think we should.

The Chair: I think most of us looked at The Globe and Mail today. I was talking with a researcher about the dangers of the weaponization of space. I am sure you saw the article this morning. Could we hear your initial reactions to this?

Prof. Frank Harvey: I have spent a lot of time on the issue of national missile defence and American defence expenditures. Jim Ferguson, from the University of Manitoba, is the resident Canadian expert on the weaponization of space. I understand you are heading there soon.

The Chair: Yes.

Prof. Frank Harvey: We've already begun the process of weaponizing space. Practically any component of space assets help us process credit card payments. Any component helps us get money out of a banking machine on the corner of Robie Street and Spring Garden Road. It's all tied into the same system with which we are all very comfortable and happy. Components of it can be used for the purposes of establishing more sophisticated space-based weapons. It's inevitable and very likely.

The question I ask when confronted with the inevitability is whether or not it is something I should worry about or something I should be less concerned about.

To the extent that the state that corners the market on the capability happens to be the U.S., and to the extent that what they've been doing recently with their power has been entirely consistent with what I share by way of values and interests, I am less concerned about the weaponization of space. Depending on who you ask, they will be more or less excited about it, given their views of American foreign policy and the prospects for unilateralism.

The Chair: Ms. Carroll.

Ms. Aileen Carroll: I have one last question. It is the last one because time is running out. I will have at least ten more when I think about this tonight and we're all in different places.

If we accept at the outset that we could spend a lot of time discussing what constitutes sovereignty, I would probably be closer to you than some of my colleagues on what I think still leaves us sovereign. I mean, there is a degree of integration that still leaves us sovereign.

For the point of discussion, let's say we come to a point where the goal of American foreign policy and ours diverge. Either we disagree or, in the negative option, we want to go in a direction they do not wish to go in. Granted, for the point of this discussion, we have not yet fused foreign policy. Given interoperability and how far down the road we have gone, or may go, how do we withdraw to pursue our diverging goals?

Prof. Frank Harvey: They are two really good points, and two really good versions of the sovereignty issue as they play out when it comes to U.S. and Canadian integration. What do we do in situations where we don't want to become involved? What do we do in situations where we would like to, but they won't?

Let me start with the second question. What do we do in situations where we'd like to be involved, but they are not enthusiastic about it?

It's our problem, not theirs. The reason we don't have the luxury of going in alone when they don't is precisely because we haven't made the defence expenditures and commitment to humanitarian interventions and building peace enforcement that we should have. We talk a very good game, but we haven't made the investments.

In terms of the first question, I am a little less worried about the situation, precisely because of what I see playing out when it comes to American foreign policy initiatives. There are critics of the Gulf War, Bosnia, Kosovo, and Afghanistan. There are critics of going into Iraq. I don't happen to be one of them. I'm less concerned about the prospect of being in situations where the Americans want to go in and we don't. I don't think it's as likely as some critics assume it is. Americans are not likely to go into some place that we're clearly opposed to.

¸ (1415)

The Chair: We don't have any examples?

¸ (1420)

Prof. Frank Harvey: I can't think of examples, aside from the obvious case of Vietnam, where clear forms of intervention were rejected out of hand, and rejected explicitly by Canadians, because they were found to be unacceptable. In fact, the opposite has happened recently.

We would have preferred American intervention in some places they didn't go into and we couldn't, like Rwanda. The problem isn't that the Americans are going to become too aggressive--hyper-vigilant, become a hyper-power. My concern is that they will turn inwards and reject what I consider to be a responsibility they have to deal with cases like Rwanda. That's my worry.

The Chair: Thank you very much, Professor. I'm sure, with time available to you and to us, we could keep going, almost like a soccer game, with the ball going from one to the other. So thank you very much.

Prof. Frank Harvey: You're welcome.

The Chair: We will continue with the next witnesses. From the Ecology Action Centre we have the marine coordinator, Mr. Mark Butler. From Enviro-Clare we have the president, Jan Slakov.

We appreciate that you're willing to present together, so we can ask questions to either or both of you after your presentation.

Would you begin then, Mr. Butler?

[Translation]

Mr. Mark Butler (Marine Co-ordinator, Ecology Action Centre): Thank you for the opportunity to address the committee today. That's about all I'm going to say in French for now.

[English]

I think your logic in hearing us last was probably to save the best for the last.

We would ask you to keep us to 10 minutes, so that we have time for questions. That's probably the most useful part of the exchange.

How much time do we have, approximately?

The Chair: We will give you 10 minutes, and we will give Ms. Slakov 10 minutes. Then the questions will go around the table. You're our last presenters of the day and our flight is a little later on, so we can go until our flight time. You have an hour with us.

Mr. Mark Butler: I'm going to present a short summary, briefly address a couple of specific issues, and provide you with some material that expands on those specific issues. If you have particular questions around fisheries, oil and gas, or bioinvasions, we can follow them up in the question period.

I guess both Jan's and my presentation will contrast somewhat with Frank Harvey's presentation.

The ecological and social fabric of this country and continent is being torn and worn by the pursuit of endless economic growth, i.e., trying to increase the GDP. In the long term this is an obviously self-defeating goal. We have resolved some of the more visible assaults on the environment, such as dirty smoke stacks, but we have not been able to resolve some of the more systematic and society-wide environmental problems such as climate change, invasive species, and overconsumption.

As the Commission for Environmental Cooperation notes in its recent report, improvements in environmental protection are being overtaken by these larger systematic or society-wide trends. I think you're aware of this report that was just recently released in January from the CEC. They note that, on balance, we have an ever-growing ecological footprint. Perhaps the one thing we could agree on with Mr. Harvey is that we haven't dealt adequately with the ecological problems that are besetting our planet.

I wonder how many people see the steady erosion and homogenization of the fabrics of natural systems. By “see”, I mean notice it. Perhaps not enough people are ecologically literate. The World Watch Institute determined in a survey--and this is for the States--that the average American can recognize more than 1,000 corporate logos, but fewer than 10 native plant or animal species.

As a mechanic is more likely to pick up on the signs that a car is beginning to have problems, or a doctor that a person's health is beginning to suffer, ecologists are more likely to see the warning signs that our ecosystem is in trouble. The land, the water, the atmosphere is in trouble. That's the assessment of people who know most about ecosystems, natural scientists. I put down natural scientists, but there are many who earn a living from the land, be it foresters or fishermen, who also see these trends.

With our continued pursuit of endless economic growth and ever-expanding trade, we are assaulting the security of the planet and every human and organism that lives on it. Environmental degradation puts at risk whole ecosystems, whole regions, and in some cases entire countries and, of course, the entire planet.

The economic costs and the death toll from environmental degradation will, if we continue on our present path, dwarf the impacts from any terrorism attack. What would a prolonged drought and heatwave do to the Middle East, Europe, or North America? What would happen if cholera was introduced into the Great Lakes at the same time? Tens of thousands of people could die from such incidents. Often the forest would be the most vulnerable.

We had the opportunity to listen to Frank Harvey's presentation. Because some of these issues are harder and bigger, one question I would have is whether that means we shouldn't tackle them. It is like your house is burning, but you decide to build a doghouse instead.

The second point I would make would be around investment. I don't think overall we have invested the kind of money we have to. It's not only money but effort and, as he mentioned, political will in environmental problems.

When we have invested that money we have seen results. We did invest in cleaning up some polluting industries, in tackling water quality in certain cases, and we did see results. But the problems we are now facing are bigger problems...just the fact that on this planet there are too many of us and we're using too much. Those are much bigger questions, but if we don't deal with them, then it doesn't matter what kind of fancy missile defence system we have if underneath that defence system is an ecosystem and a society that's falling apart.

I would like to make a point that is definitely outside of my presentation. It is my observation that the U.S. is never going to be able to protect itself militarily from the kinds of threats that we saw emerge in the last year. The U.S. is spread around the world. All it takes is a couple of families or an installation in Senegal, in Colombia, in the Philippines to be attacked, people to be taken hostage, and the U.S. is going to have to deal with these issues, not just on a military basis but also in other ways. It is going to have to put forward things like fairness and economic equality, etc., if we're ever going to have long-term security on this planet.

¸ (1425)

In terms of fisheries, I thought I would mention the issue of a trend that has been happening in fisheries in this part of the world, and that is the privatization of fishing quota. I know this is getting quite specific. Mr. Baker will be familiar with this trend, but where we take what is general quota and allocate it to individuals or companies, this means, then, that individuals or companies own quota and can buy and sell it as in the game of Monopoly. What we see happen with that is that over time there is concentration of ownership of the quota. So we now have in one fishing fleet here, the 45 to 65 mobile gear fleet, three companies owning most of the quota--quota for cod, haddock, pollock, and so on.

What does that have to do with your mandate? Well, the potential is that over time we could see a global trading system of fish quota--that is, a company in Iceland saying, we would like to buy 10,000 tonnes of redfish from a Canadian company; in return we will sell you 3,000 tonnes of redfish quota, and while we're at it, why don't we bring in a Lithuanian or Russian vessel, which has much lower labour costs, to fish that quota?

That's not going to happen tomorrow, but we spend an awful lot of effort pushing foreign fleets out of our waters. The most recent was the Japanese long-line bluefin tuna fleet. But I see the potential here for, while we have been establishing our sovereignty in that way, over time relinquishing that sovereignty through the privatization of fish quota, the buying and selling of fish quotas. There has been a lot of opposition to that in communities, amongst fishermen and, I think, amongst the general public. There are some serious conservation consequences to doing something like that, not just social consequences.

The Senate committee came out with a very good report in 1998 on privatization. Senator Gérald Comeau is very knowledgeable on this topic. But it is something that you should consider.

This trend is already happening within Canada as a domestic issue, but the potential for foreign ownership of our fish in our waters is there under the multilateral trade agreement.

The second point is on oil and gas. You may be well aware that there is an awful lot of oil and gas activity taking place off the coast of Atlantic Canada. I've provided you with a map of that.

We have had a lot of concern that these licences have been issued without any public consultation or environmental screening. This is contrary to the way the U.K. and Norway issue licences. We obviously would like to see that change.

There is also a question again in terms of the international mandate of this committee in international trade, that once we build a pipeline to the U.S. and start exporting natural gas, that obviously locks us into certain obligations under NAFTA. You would know more about that than I do, but again, it is a serious issue.

Norway took a very different approach to developing their oil and gas. They did it slowly. They actually set up a state oil company. They involve the fishing industry, the environmental community, and scientists before the issuing of licences. There are other models out there.

Finally, one issue that is noted that does not get as much attention as it perhaps should but is in the CEC report is this whole issue of bioinvasion, the introduction of a foreign, non-native species into another ecosystem. The starling would be a good example of that, or the house sparrow. Many of the garden weeds we see today actually came over from Europe. These invasions have been identified. The CEC has identified this as one of the greatest threats to biodiversity.

We can say that the starling is perhaps not the prettiest of birds, but so what. But we have had here in the port of Halifax the spruce longhorn beetle and the Point Pleasant Park effort to contain the spread of that beetle, which could put the whole forest industry in Atlantic Canada and perhaps North America at risk.

There is the potential, with increasing temperatures, that a ship could sail into the Great Lakes and discharge its ballast water, which could contain cholera. That cholera would somehow get into the drinking water of a large American or Canadian city, and you could have a cholera epidemic.

¸ (1430)

There are some serious health and economic issues at stake here. Tackling this issue, I would insist, is a tough one. I think in the end we're “rah rah” about increasing global trade and exporting lobsters to Australia and bringing lamb up from Australia here--we could question the value of that. This is a tough one. But the more trade there is between nations, the more these invasions are going to happen and the more degradation--homogenization--of ecosystems around the world we're going to see.

¸ (1435)

The Chair: Thank you very much.

Now Ms. Slakov.

[Translation]

Ms. Jan Slakov (President, Enviro-Clare): I'd like to do part of my presentation in French because I truly believe it's important to have the right to do so and to encourage overall diversity.

I know that some of what I am about to say today will not conform to the opinions expressed in the discussion paper prepared for the purposes of these consultations, or to the presuppositions underlining the G-8 Summit agenda.

Of course, my opinions are based on my life experiences and fundamental values. And while my experiences are necessarily unique, I think most or even all of the people here today share my values. If there is any real hope for humanity to work together to prevent the destruction of the planet and of our children's future, I believe it is precisely because we share some common values. However, it's not always easy to see that which we have in common.

Therefore, I would like each and every person to reflect on and take note of the reasons for our being here today. I'm not talking either about superficial reasons, such as “it's my turn to be here” or “I'm a member of the committee”, but rather about your reasons for being involved in politics in the first place or the reasons why I am taking the time to make a presentation to the committee, or to listen to the presentations of other witnesses.

Like many of the people here, my involvement in politics stems from my realization that decisive, urgent action is needed. For example, we know that we cannot continue destroying the land, our life source. Yet, instead of reining in our consumption of natural resources, we continue to consume them at an even greater pace. This is not at all necessary, or even inevitable.

As far as I can tell, no mention whatsoever is made of climate change in the government documents serving as a basis for these consultations. Yet, climate change is as much an urgent, catastrophic security risk as is terrorism. North Americans have a critical role to play in this area.

I also know that the gap between rich and poor is widening and that excessive wealth has become a terrible problem. According to the committee for social justice, the CEOs of Canada's 100 biggest companies earn on average over $2 million in salary and benefits, or 90 times the average salary of Canadian workers, which according to 1995 figures, stood at $30,000. Industrialized nations are home to only 20 per cent of the world's population, yet they consume 80 per cent of its resources.

I'm also involved politically because I don't want to behave as so many Germans did during the Third Reich and continue living my life as if nothing were amiss. My father is Jewish and I learned about the Holocaust at a very young age. For many years, I asked myself how the Germans could have participated in the Holocaust, or at the very least, why they did nothing to stop it. I discovered that we are all guilty of behaving in this manner.

We do whatever our government asks us to do, even if we know full well that the repercussions can be catastrophic. We do so because we have learned to do as others do, to obey and to put our hopes and dreams on hold because we feel it would be too hard right now to make them come true.

[English]

Out of concern for time, I'll now read the summary of recommendations to ensure that at least those are covered. First of all, democracy is not something we have; it is something we do. So my first recommendation to each and every person in this room is that we ask ourselves what we can do to protect that which is most precious to us, not our way of life, as Dick Cheney said, which is so terribly wasteful, but our deepest values, such as democracy, tolerance, non-violence, and the rule of law.

Instead of addressing the issue of how to promote economic growth, the G-8 summit ought to be focused on how to build an economy that would be ecologically sustainable and that would encourage economic fairness rather than increasing disparity.

The Canadian government and Canadian people in general should work to educate ourselves and our neighbours in the U.S. about how to demilitarize our society and reinforce democracy.

We must get out of this war of terror and strengthen, rather than erode, our fundamental rights and freedoms. We must recognize that with these rights and freedoms come responsibilities.

Reinforcing democracy also means building an electoral system where money and power would have less influence; for instance, having the kinds of restrictions on the amount of money you can spend that are currently in effect in Quebec.

I would like to list some people and organizations I think this committee ought to consult with. Looking over the documentation, it seems that so far this committee has gone out of its way to consult with professors of political science, ambassadors, and its government ministers. None of the names I recognized in the discussion document were people who I would say have a good grassroots constituency. My list is there, and you can look that over. I note at the end that my list is a preliminary one. Each of the people I list would surely be able to provide other essential suggestions. I hope you will notice that my list is quite inclusive. It includes people who are not Caucasian, whose first language is not English, and who are not male.

How much time do I have left for the presentation?

The Chair: You have five more minutes.

Ms. Jan Slakov: The part I would like to read is on page three. I'd like to turn to the subject of Canada and the North American challenge in the light of the new security environment.

I note a comment in the discussion paper by Professor Wesley Wark that whatever the nature of the intelligence failure on September 11, it contains political dynamite. I would second that. Why are we talking about spending more on the very systems that let us down, such as defence and intelligence?

Members of my group, Enviro-Clare, shared the feelings of shock and horror we all felt at the September 11 attack. A couple of our members felt it was crucial for us to respond as usefully as possible, and even with all my experience as a peace activist and a believer in the power of non-violence or love, I learned a lot from them. They showed me how important it is to build community, that community building is actually our best defence or security in these times. They helped me see that within the trauma of the September 11 attacks themselves, seeds of hope had been planted. The way Nova Scotians opened their homes and hearts to stranded passengers just blew some of those passengers away. The passengers came from all over the world and from all creeds and colours, and I think it is safe to say that they all were made to feel at home here.

Let me read you what the son of one of these passengers wrote. It states:

My father was on a Singapore Airlines flight from Frankfurt, Germany, due to land in New York's JFK around 10:30 AM on Sept. 11th. He was diverted to Halifax airport and spent the rest of the week there (until Friday).

This is a sometimes cynical man (his name is Oscar Kress) with a somewhat suspicious view of human nature (some would call it “realistic”) and he isn't prone to gushing. He came home late Friday night with stories of a people so giving, so generous and kind that he was overcome and moved. Our greetings were brief because he could not wait to tell us (his family) about the wonderful people of Halifax. He actually said it was worth the ordeal because he witnessed a side of people he had never seen before (or at least not in the last 40 years).

So, to our Canadian brothers and sisters, and specifically to the people of Halifax, thank you from the bottom of our hearts. We are truly blessed to have you as neighbours.

¸ (1440)

These same members of Enviro-Clare also alerted me to a report that Jean Chrétien came out of a meeting with President Bush saying we had to be wary of our neighbours, for one could never know if they might turn out to be terrorists. My friends were appalled. They explained that this was exactly the opposite of what we must do. It is in dictatorships that one is encouraged to spy on one's neighbour and distrust one another.

They pointed out that if the supposed hijackers did indeed live for many years in the U.S., all the while harbouring an intense hatred for that country, it's quite a commentary on the U.S. In all that time, no one reached through to those men and helped them find the love for humanity that is at the core of us all.

Frank Harvey talked about return on our investment, and that after spending so much money trying to tackle the problems of terrorism, environmental problems and hunger, we don't have the results we are looking for. The kinds of things we really need to do to address those problems do not necessarily cost money. They are things I've just finished mentioning, like helping people who are stranded and building up communities.

Just to give an example, in health care now the provincial government is closing some hospitals because of lack of funds, and local communities are begging the government for more money, not to cut them and so on. Local communities must take control of their own hospitals, take the funding into their hands, and take responsibility for them. That's what I mean when I say that our freedoms and rights must be protected, and along with those freedoms and rights comes responsibility as well.

I'll stop there so we'll have plenty of time for questions, I hope.

¸ (1445)

The Chair: Thank you very much for your presentation and that list. I'm sure the researchers will add it to the documentation we're compiling.

We'll start with Yves Rocheleau.

[Translation]

Mr. Yves Rocheleau: Thank you, Madam Chair.

I'd like to thank both of the witnesses for their very courageous presentations which represent a fairly radical departure from the testimony given earlier. I would especially like to thank Ms. Slakov for speaking French and for praising the Quebec Elections Act, which is indeed one of the most advanced pieces of legislation of its kind in North America and maybe even the Western World. The legislation stipulates that only those who are entitled to vote can make financial contributions to political parties.

I'm sure my next question won't come as a surprise to you. Mention has been made of North American integration, particularly of integrating Canada with the United States. My question is directed to both witnesses. In your opinion, how should the Canadian government react to the Kyoto Protocol and how should it respond to the US position on this matter?

Ms. Jan Slakov: Part of my presentation which I didn't have time to read covers the very issue of climate change. As Canadians, I believe our role is to appreciate our valuable position not just vis-à-vis the US government, but vis-à-vis the people of the United States. We are their neighbours and friends and we have a responsibility to educate ourselves, and to educate them at the same time.

A resident of Switzerland sent me some figures that should be quoted to jolt people into understanding just how important it is to comply with the Kyoto Protocol and even to go one step further.

In 1990, a United Nations committee reported that greenhouse gas emission levels should be reduced by 60 per cent.

However, between 1990 and 1999, emission levels in the United States rose by 21 per cent, while the distances covered by motor vehicles increased by 13 per cent. Fuel efficiency figures are down for the same period, whereas the focus was supposed to be on reducing automobile emissions.

My Swiss friend identified recreational vehicles, SUVs and the like as the most probable cause of this increase. There are many such vehicles currently on the roads. I recently heard a radio report which labelled these vehicles as dangerous and unsafe, since they can be toppled by the wind.

We hear how the economy is driven by the wants of consumers. However, how many consumers want to drive a dangerous vehicle which also happens to be a gas guzzler? We have a responsibility to change our economic system. That's why I want the G-8 to focus on ways of having of achieving a reasonable, ecologically sustainable environment, not on the growth of consumerism.

¸ (1450)

Mr. Mark Butler: I applaud the Quebec government for opposing the other premiers and Mr. Klein. I also applaud the federal government for sticking to its guns in the matter of the Kyoto Accord. I'd like to know what economic costs Mr. Klein is referring to.

The other day, I heard Mr. Klein say on the radio that this was too costly a proposition. However, I then heard either Alberta or Saskatchewan farmers talk about losses totalling $5 billion as a result of droughts in Alberta.

[English]

Here in Nova Scotia and Atlantic Canada we are putting all our eggs in the oil and gas basket. Yet that is not clearly where the future is. We are starting to look at wind power. For those early initiatives, where are we buying the technology from? We are buying it from Denmark. Europe is way ahead. They are producing the technology that we will be buying tomorrow.

It is very sad, unimaginative, short-sighted. Let's be creative. That kind of thinking from Klein is almost criminal, I would say. It is not looking at the total cost of climate change and looking at the opportunities.

[Translation]

Mr. Yves Rocheleau: Moving on to another subject, you mention fisheries in your presentation. Several years ago, I had an opportunity to travel with the Fisheries Committee to the Far North, to Labrador, Frobisher Bay, Iqaluit and points still further north. I'm not very familiar with fishery issues. I represent a Quebec riding near the St. Lawrence, but fishing is not done on as large as scale as it is in northern regions. What I remember most is people talking about incredibly huge nets used to trawl the lower depths, catching everything in their wake.

Over the years, fish stocks have dwindled to almost nothing. In the meantime, the Eskimo and Inuit continue to fish, even though the fish have been contaminated with mercury from the DEW Line installations, or so it would seem. Apparently, the Americans left a number of drums filled with PCBs on the ice.

My question is as follows: in the Maritimes, where fishing was and likely still is an important economic activity, is any thought being given to this issue? Are any studies being done on fishing practices? Are certain practices being discouraged? The residents of Canada's North and of the Maritimes are not the only ones to have employed these techniques. People from a host of countries, including Spain, Japan, Canada and the US, have also resorted to such practices. Should we not be giving some thought to the steps we should or should not be taking to protect humanity?

Fish are nonetheless an important resource. I would imagine that if we continue to fish in this manner, the resource will disappear completely and we'll wake up one day wondering what happened.

¸ (1455)

Ms. Jan Slakov: First of all, I think you should ask Mark that question because the Ecology Action Centre and another group are taking the Department of Fisheries and Oceans to court over the destruction of fish habitats through fishing practices.

Mr. Mark Butler: Yes, I have a...

Ms. Jan Slakov: Do you have a copy in French?

Mr. Mark Butler: Unfortunately, no, but trawlers are involved.

[English]

Yes, in response to his question. In Canada we don't go to court the same way they do in the U.S., but certainly around these issues there has been a lot of action in the courts in the U.S.

We decided to go to court after the science didn't seem to make any difference to the department, after years of fishermen's observations didn't seem to make any difference to the department.

We can manage our fisheries right. There are ways that will work for the fish and for the fishermen, but we are ignoring them. We've spent incredible amounts. One place where we spent obscene amounts of money was--and Mr. Baker might disagree slightly--after the collapse of the fisheries. Really we didn't spend it on the things like fixing the fisheries.

It's not that we have too many fishermen, but we have the wrong types of technology and the wrong types of management. We could do it right. It's not going to be easy, but we have all the knowledge in Atlantic Canada to do it right. We just won't bite the bullet and won't deal with issues of gear technology, because the system is too big and it's too powerful. Or we won't deal with asking whether quotas really work.

We know that up where Jan lives off Yarmouth, and where I was down in Digby and Cornwallis a couple of weeks ago talking to fishermen, they are saying that because of the ITQ system they have down there, their boats in one trip are dumping between 50,000 and 100,000 pounds of fish back into the water--because of the way the system is set up.

We all know it's happening, but nobody knows how to find the way out of the box we're in.

Ms. Jan Slakov: I would like to add, why do we have vehicles that consumers wouldn't actually have asked the corporations to build for them? It's the same with the fishery: why do we have fishing capacity--boats, technology--that some countries have worked very hard to keep out of their countries? In India people actually went on strike to keep draggers off their coast.

Why do we have them here? Why do we have what Mark was talking about earlier, the privatization of the fishery--ITQs? I think it is because of the way we've got our economy structured.

I notice one of the briefs you got before was from Professor Michael Bradfield, who was explaining that we have given corporations rights as if they are people, when we have to start, as governments, reining them in and taking control over our economy.

I would like to mention that a long time ago--probably in 1990-91--our MP for South West Nova was Coline Campbell, a Liberal. At that time they were thinking of introducing the ITQs, and I could see from reports I had read that they were dangerous. So I asked her what we could do about this. She said, “Well, Jan, there's not much we can do. Every time I fly to Ottawa there are paid lobbyists from the big corporations on the flight, and there's nobody representing the inshore fishermen.”

That's why I provided that list of people to consult. I'm concerned this committee has gone out of its way to get opinions from conventional experts who don't have grassroots constituencies. Our whole economy is structured that way. We must become more democratic, basically.

¹ (1500)

The Chair: Thank you.

Mr. Baker.

Mr. George Baker: Thank you, Madam Chairman.

A couple of days ago we were in Newfoundland. We had a presenter who was a specialist in African affairs, and there were two individuals with him--after him, a group of young people presented to the committee--and after the meeting, the two people with him wanted to speak to me.

So I spoke to them and received quite an earful. Their point was that our fishery had collapsed, as you say, and all of the 170-foot draggers had been sold to countries on the west coast of Africa. Some of those African countries are now convinced that their fishery has been destroyed by these draggers that were leftovers from the Canadian fishery.

The point is, of course, the draggers went out of Canada because of the collapse of our fishery and were exported to poorer countries in the world, where your corporations.... These draggers were owned by National Sea Products and Fisheries Products International.

We have a problem now relating to our continental shelf off the east coast, north coast and west coast of Canada. As you know, Canada is the only coastal nation in the world that has not ratified the Law of the Sea.

This was the other point brought to me two days ago in the foyer of the Fairmont Newfoundland. They said, look, we have this huge problem, and this should be the business of the foreign affairs committee. It's not just that the African countries are having their resource destroyed by dragging by Canadian vessels that were sold to the corporations to operate off those coastlines. We also have to the examine the continental shelf off Canada, where 17 nations--as Mark knows--right now are involved in the mobile fleet of the world--Japan, Iceland, and the major international fleets that drag.

They also drag up off Nunavut, where the honourable member from the Bloc was. Of course, the local people there are very upset that these quotas are being monopolized by these large vessels.

Of course, the problem we have in Canada is that a lot of these quotas are sold in the water. We had a big fuss last year in the House of Commons over a quota to P.E.I. Well, that quota is not caught by Prince Edward Islanders; it's caught by foreign nations and sold in the water for cash.

The Inuit quota is sold in the water for cash. The Inuit organizations get the money, but it's actually caught by Icelandic vessels and Lithuanian crews, as Mark said a few minutes ago.

We were speaking about it with the committee chair this morning. We came to the conclusion that we should sit down and talk about perhaps having a special subcommittee to look at Canada as it relates to other nations in the world and why we've not ratified the Law of the Sea. It could perhaps investigate the extension of our jurisdiction to encompass the continental shelf, via the Law of the Sea, and the protection of the ocean floor from dragging.

In fact, the committee chair and I were talking about it this morning. Perhaps it would be a good initiative, with the opposition members, for a subcommittee to have hearings in Ottawa and the east coast with the Canadian Hydrographic Service, which does that sort of mapping.

It leads me to my question for Mark.

Your organization made the first move to put your money where your mouth is and launch an action before the courts relating to dragging. You related it to dragging on the Georges Bank that is off the coast here. The U.S. has been mainly monopolizing the fishery, but we have dragging there, such as scallop dragging. There are not the 350-footers from foreign nations that we see off the Newfoundland coast. They are still dragging and destroying the ocean floor.

I want you to bring the committee, the people in Ottawa who may be listening to this, and External Affairs, who will be going over the transcripts, up to date. Why did your organization initiate this court action? Do you have support? Where do you have support in the fishing community? Have you seen it exemplified with fishermen who have approached your organization in support of your move through the courts?

¹ (1505)

The Chair: Mr. Butler.

Mr. Mark Butler: In preparing to go to court, we canvassed the scientific community. We have six scientists who submitted affidavits on our behalf. There were three from Canada, two from the U.S., and one from Norway. Before going to court, we sent our friends at DFO 150 documents. About 100 of them were scientific documents that show the impacts.

The law says “Thou shalt not destroy fish habitats”. It's what the Fisheries Act says. Fish habitat is anything a fish uses. If you want to take a look at some of the gear dragged over the ocean floor, it's very clear that it does have an impact on fish habitat.

We're not actually saying don't drag anymore. We're saying think about this a little more intelligently. There's a quote by an American scientist who says “I'm not suggesting that we don't drag anywhere. I'm just suggesting that we don't drag everywhere”. Let's address this issue. Look at what it has cost this country and people.

In terms of support from fishing organizations, when we did our press conference we were joined by a fisherman, Bill Williams, from Southwest Nova Fixed Gear Association.

I was in Digby. I did a presentation to the Bay of Fundy Inshore Fishermen's Association down there. They told me more about it. They were angrier than I was. They told me more about what the gear does and how it works.

I'm going to do a presentation to the Guysborough County Fishermen's Inshore Association. I was at a party last Friday where the head of the organization said, “You know, we're watching. Good on you. We're not going to come forward, but good on you. We're watching.”

When we do things, we like to do things that make sense for the environment and people. There are ways. If you look up “efficiency” in the dictionary, it says “doing things with the minimum amount of waste”. Dragging is a very wasteful way of fishing, both for people and the environment. If we use bottom hook and line, it's a very nice way to fish for good-quality fish.

We have a small seafood buyers group in our organization. We try to get fish that's ecologically and sustainably caught. We'd get haddock. You've never tasted haddock like it. It's hook-and-line fish. We're not anti-fishing; we like to see it done right.

Does that answer your question?

Mr. George Baker: Yes.

The amazing part of this is that everywhere you go in the world, I find, all the fishermen are in full support of stopping the destruction of the ocean floor and are vehemently opposed to the types of technology these world fleets have gone into. All the scientists you speak to say there's one sure way of destroying the future of the coast of Africa, and that is to allow to happen what is happening in some of these nations. A couple of countries in Africa have declared a 200-mile zone and declared war on any vessel that ventures inside that zone with a dragger, which is very encouraging.

Concerning the actual mechanism of your organization, are you affiliated with any organization of fishermen that's a part of your organization and is taking an active part like this, or is this something your organization came up with here in Halifax?

¹ (1510)

Mr. Mark Butler: It's our organization that's doing it. We work very closely with some fishing organizations. I used to work for a while as a deckhand on a fishing boat. We have many fishermen who are members of our organization, but there's no official relationship there. In trying to understand the ocean and what's going on out there, however, we've taken equally from what fishermen know about the oceans and what scientists know.

Mr. George Baker: There is one further thing I wanted to ask you. You mentioned Japan, with the tuna and so on. I's interesting that in Japan you see all of these demonstrations. People demonstrate against the destruction of tuna in Japan. You see all these people very angry at the Japanese companies, and yet the Japanese companies are out here in your harbour.

They're out here in your harbour because they have a quota of 105 metric tonnes. Whereas Nova Scotia has a quota of 35 tonnes for the year, the Japanese fleet have a quota of 105 metric tonnes. It's very unusual. I could never understand, looking at it from a bit of a distance, and perhaps you might want to comment on this.... Do you know where the silver hake box is? Do you know what I'm talking about? It's just off here about 80 miles.

I could never understand why the people of Nova Scotia would allow such a destruction of a resource 80 miles from their coast when we have a 200-mile zone in Canada, done in agreement with others. Granted, Cuba and Cuban vessels are involved, but why wouldn't there be--or is there--a great objection on the part of the fishermen along the coast of Nova Scotia that this is happening right here?

Mr. Mark Butler: It was my understanding--I was talking to somebody about this fishery yesterday who was mentioning that in certain area there was a high by-catch--that the fishery is becoming more “Canadianized”, which is an adjective for them.

That's a trend that's supported basically by the Canadian fishing industry and by us. It's my understanding that in the last year we did actually say that the Japanese could not catch their ICCAT quota in Canada waters. ICCAT is this international body like NAFO that regulates large pelagics--tuna and swordfish and sailfish and marlin--in the North Atlantic, all these big beautiful fish that are great to eat and beautiful to look at that are out there. The stories of how these fish are being abused and overfished by Europeans, by Japanese vessels, etc., are just so frustrating. You think, if only an entity like the U.S. would put just a drop of what they put into responding to terrorism into something like that, it could do so much. With this government too, it doesn't seem things like that.... I guess Newfoundlanders are very frustrated.

Just outside our 200-mile limit, anything goes. Inside, there's no ecological sense at all, and it's extremely frustrating to think there would be boats outside that 200-mile limit that are finning sharks, catching turtles and killing them, or cutting them off with a hook in the throat.All of these kinds of practices are happening just outside the 200-mile limit. Would the Law of the Sea help? I don't know if ratifying the Law of the Sea would resolve some of our problems or not.

¹ (1515)

Mr. George Baker: We were discussing, as far as this committee is concerned, the process of the ratification of the Law of the Sea with other nations. You would have to sit down, of course, with some of the nations who are considering this now. Some 12 nations are considering extension of jurisdiction over the ocean floor, which means the soil and sub-soil. If you control the soil and the sub-soil, then you control dragging.

Mr. Mark Butler: Is that in the Oceans Act?

Mr. George Baker: It's in the Law of the Sea, under the commission for extension of the continental shelf. There are 21 nations that presently belong to that commission. Canada can't belong to the commission because we have not ratified the Law of the Sea.

France has extended jurisdiction in the Pacific around their islands. Uruguay is doing it now, with the help of the Canadian Hydrographic Service in Halifax. In fact, we're doing their mapping.

But I think you are absolutely right--and the people testifying in St. John's, Newfoundland, especially the people who belong to an organization on African affairs were concerned--that we have to examine the export of this type of technology around the world. It's entirely destructive, and we have learned our lesson.

It's unfortunate we didn't have an organization like yours earlier, when the problems were being created, and didn't go to court like you did. We commend you for taking that action.

Mr. Mark Butler: We had a similar issue back in the early nineties. CARE Canada was going to take some Canadian fishing vessels and transfer the technology to Africa. There was CIDA funding involved, and a number of fishing and environmental groups complained. CIDA funding was withdrawn and it didn't happen.

I think the Oceans Act makes reference to extension of the sovereignty of the sea floor beyond the 200-mile limit. Two years ago, we hosted the first international symposium on deep-sea corals, and a lot of scientists from Europe came over. One thing the Europeans are doing is spending a lot of money on scientific research outside the 200-mile limit. It's partly driven by science, but it's also driven by politics.

Mr. George Baker: That's fascinating, because we were saying this morning that a subcommittee of the foreign affairs committee should look into actually doing what some of these other nations are prepared to do to protect the ocean floor. If the Government of Canada were to accept a recommendation from a subcommittee of this committee, we would be contributing perhaps in a far greater way than we could even imagine. If you could control the soil and sub-soil of your continental shelf, then--

The Chair: We'll follow through on this, Mr. Baker.

Ms. Carroll.

Ms. Aileen Carroll: Mr. Butler, you used the expression, Canadianization of the fisheries. Is there a corresponding improvement in sustainability? Is there a focus, from the Canadianization, on sustainability that's missing in the foreign--

Mr. Mark Butler: In most cases, if it's Canadian, it's good. Would I rather see Canadian draggers out there, Lithuanian draggers out there, Canadian swordfish longliners, or Japanese longliners out there? I'd rather see Canadian vessels doing it. There would be more control.

But a dragger is a dragger. To some extent, a conscientious captain can minimize damage, but even if you had Jesus at the wheel, that technology would still damage the ocean floor. You can't avoid it.

We have to come to grips. We're not going to say you can't sell your dragger to some venture in Angola, when as a government we still.... Hand-lining is still an economically viable way of fishing. With four hooks over the side you can catch 1,000 pounds in a day, and at 60¢ a pound, that's $600. Minus expenses, that's about $400, which is still a good wage. But DFO will not recognize that this is a more ecologically friendly way of fishing than taking some thousand-pound doors on each side of the net and towing that over the bottom, night and day.

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Ms. Aileen Carroll: I'm certainly pleased to hear of the improvement.

I hate to end my questioning on a depressing note.

I was born and raised here, and in the fifties when I was at elementary school I can recall my father and relatives sitting around the table crying.

So do you want to count up how many years later...? Do you want to tell me there's a direct proportionate relationship, that we've had as much success? How long do we need to listen? How long do we need to talk?

It was interesting to listen to a CBC radio report on a major symposium in Boston. Again, you have to bear with my amount of recall. It may twig things. I'm sure you may know more about it.

I had the impression that the presenters and scientists there were of a very high pedigree in the area of our oceans and the future therein. They brought forward the argument that you couldn't just look at fisheries off New England or fisheries management off the Atlantic provinces. You need to keep stepping back and seeing that the ecology is the worldwide ecology on fishing. And this continual reduction in fish habitat, whether it is as a direct result of the type of fishing techniques we've learned a lot about...and I have learned a lot listening to you, that's a childhood memory. In addition to the damage that's being done by that kind of technique, they talked about the fact that there was no place for fish to go anymore. There was no depth, there was no ability for fish to withdraw from, which they apparently did, the areas in which they were fished in order to spawn, in order to reproduce.

If we've been shocked by the collapse of the cod fishery and so on, as we all have, their discussions lead you to believe that we're going to see this dreadful crescendo of collapse, whether it's off the coast of an African country or it's off the coast here, because there's this integral interconnection of all of the habitat on a worldwide ecological basis.

Far be it from me to be stepping into your expertise, but I would be delighted to hear your comments.

Mr. Mark Butler: That's what we need, you're right. They are fairly dire warning bells from these scientists, perhaps more dire than I would sound.

I would like to add a little note about that. Something a lot of conservation organizations are promoting is marine-protected areas, closing areas to fishing, to oil and gas, to sand and gravel mining. MPAs have a place, but our concern is a little different in that we're going to close a couple of high-profile areas like the Sable Island Gully, and perhaps close them to all types of fishing, making no distinction between different types of fishing. And then the political message will be, “Look, we've saved the whales and the corals; don't worry, the rest of Canada, we've done something”, when with the remaining 80% or 90% of the ocean we haven't dealt with the fundamental problems like this gear issue.

If we said to catch cod, haddock, and pollack with a hook, not a dragger, then we could create all kinds of marine-protected areas unofficially. We wouldn't draw a line around them. Or, if we said no to the use of raw copper gear, which is a type of dragger gear that gets you into the bumpy areas, like they have done on the Cape Breton coast of the Gulf of St. Lawrence...and I've talked to some draggermen up there. Effectively, they said no raw copper gear, and they've created all kinds of protected areas, unofficially.

We don't want to see that part of the equation forgotten. Creating some marine parks looks good and has value, but let's make sure we address the fundamental problems in the fishing industry too.

The Chair: Ms. Slakov.

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Ms. Jan Slakov: I want to make sure I have the opportunity before people have to leave to catch their plane to encourage you to read the entire presentation. I didn't have time to read the whole thing.

I sent by e-mail a draft of it to people right across the country, because I moderate a list of people concerned about peace and justice issues in particular and also my local Enviro-Clare group. It was quite interesting, because I received two opposing views about what I should do with one issue. After hearing Frank Harvey speak about dealing with the terrorist threat, I want to say--and I feel it necessary to say--that there is lots of evidence that the September 11 attacks were carried out with American foreknowledge at very high levels of the U.S. administration. That has even come out on the Vision TV channel, and just recently a friend sent me an article from The Vancouver Sun alleging this as well.

Some people--

The Chair: I'm glad you used the word “alleging”, because there are all kinds of things circulating.

Ms. Jan Slakov: There are.

I think the most obvious problem people noticed has to do with the air traffic control regulations. They require that if a plane is off course for more than five minutes and is therefore considered to be hijacked, then the air force is to intercept that plane. They don't need presidential authority to do that. But, apparently, none of the planes was intercepted. But there are many other very disturbing points about it. I think it's very important to say this, because we must not assume that the terrorist threat is from people who are very different from us or from far away.

We must take responsibility for looking at the way our whole economy is structured to create a situation where the U.S. government, I believe, is under the control of people who are acting with a moral level that is very low. We can see that from what happened with the Enron scandal.

The Chair: Thank you. We'll read very carefully the brief you've presented.

You also gave us a list of people, some of whom we tried to contact. The Nova Scotia branch of the Canadian Centre for Policy Alternatives is on your list. I noticed there's someone on that list whom I know very well, Bruna Nota. We'll take your list very seriously.

Ms. Jan Slakov: Thank you.

The Chair: My memory doesn't go as far back as Ms. Carroll's does, to the fifties, but I remember that in 1995, I think it was, we all applauded the setting up of a trilateral committee, which included Mexico, the U.S., and us, in terms of the management of the ecosystem, etc. Do you know how that is working? I think we will meet with that group when we get to Montreal.

Mr. Mark Butler: Is that a question?

The Chair: What I'm saying is hopefully they will speak to us about the workings and maybe bring us up to date on how the committee is working out.

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Mr. Mark Butler: Good. I can't really speak with any authority on that. We're glad they're there as opposed to not there, and they are trying to document environmental trends in North America. But that would put in place, I think, as criticism of the thought somewhat and in terms of having real power.... I mean, there are some pluses there. But their report points out that overall environmental quality is going that way, not that way.

They do have a mechanism for filing complaints. It seems most of them are dismissed, but recently perhaps a few more of them have been moving forward, so that's good.

The Chair: That also would be part of our review and part of the work that you're doing and be inherent to that.

Mr. Mark Butler: Good.

The Chair: We thank you so much for coming.

Mr. Mark Butler: Thank you for listening.

The Chair: And thank you for waiting.

This meeting is adjourned.