FAIT Committee Meeting

Notices of Meeting include information about the subject matter to be examined by the committee and date, time and place of the meeting, as well as a list of any witnesses scheduled to appear. The Evidence is the edited and revised transcript of what is said before a committee. The Minutes of Proceedings are the official record of the business conducted by the committee at a sitting.

For an advanced search, use Publication Search tool.

If you have any questions or comments regarding the accessibility of this publication, please contact us at accessible@parl.gc.ca.

Previous day publication Next day publication

37th PARLIAMENT, 1st SESSION

Standing Committee on Foreign Affairs and International Trade

EVIDENCE

CONTENTS

Monday, May 6, 2002

0915

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

0920

0925

Mr. James Fergusson (Deputy Director, Centre for Defence and Security Studies, University of Manitoba)

0930

The Chair

0935

Mr. George MacLean (Associate Professor, Department of Political Studies, University of Manitoba)

0940

0945

The Chair

Mr. Pat Martin (Winnipeg Centre, NDP)

The Chair

Mr. Pat Martin

Mr. James Fergusson

Mr. Pat Martin

Mr. James Fergusson

Mr. Pat Martin

0950

Mr. James Fergusson

Mr. Pat Martin

The Chair

Mr. Pat Martin

Mr. James Fergusson

Mr. Pat Martin

Mr. George MacLean

0955

Mr. Pat Martin

Mr. George MacLean

The Chair

Ms. Anita Neville (Winnipeg South Centre, Lib.)

Mr. George MacLean

1000

Mr. Sarkis Assadourian (Brampton Centre, Lib.)

Mr. George MacLean

1005

Mr. Sarkis Assadourian

Mr. George MacLean

Mr. Sarkis Assadourian

Mr. George MacLean

Mr. Sarkis Assadourian

Mr. George MacLean

1010

The Chair

Mr. Pat Martin

Mr. George MacLean

1015

The Chair

1020

Mr. James Fergusson

1025

The Chair

Mr. George MacLean

The Chair

1030

Mr. Jim Cornelius (Executive Director, Canadian Foodgrains Bank)

1035

The Chair

Mr. Stuart Clark (Senior Policy Adviser, Canadian Foodgrains Bank)

1040

1045

The Chair

Mr. Pat Martin

Mr. Jim Cornelius

1050

Mr. Stuart Clark

The Chair

Mr. Stuart Clark

1055

The Chair

Mr. Stuart Clark

The Chair

Mr. Sarkis Assadourian

Mr. Jim Cornelius

1100

The Chair

Ms. Anita Neville

Mr. Stuart Clark

1105

The Chair

Mr. Stuart Clark

Mr. Jim Cornelius

The Chair

Mr. Stuart Clark

The Chair

Mr. Jim Cornelius

The Chair

1110

Mr. Larry Hill (Director, Board of Directors, Canadian Wheat Board)

1115

1120

1125

The Chair

Mr. Victor Jarjour (Vice-President, Strategic Planning and Policy, Canadian Wheat Board)

The Chair

Mr. Pat Martin

Mr. Larry Hill

Mr. Pat Martin

Mr. Larry Hill

Mr. Pat Martin

1130

The Chair

Ms. Anita Neville

Mr. Larry Hill

Mr. Sarkis Assadourian

Mr. Larry Hill

Mr. Victor Jarjour

Ms. Anita Neville

The Chair

Mr. Sarkis Assadourian

Mr. Larry Hill

Mr. Sarkis Assadourian

Mr. Larry Hill

1135

The Chair

Mr. Larry Hill

Mr. Victor Jarjour

1140

The Chair

Mr. Pat Martin

Mr. Larry Hill

1145

The Chair

Mr. Larry Hill

The Chair

Mr. Rob Hilliard (President, Manitoba Federation of Labour)

1150

1155

The Chair

Mr. Rob Hilliard

The Chair

Mr. Pat Martin

1200

Mr. Rob Hilliard

1205

Mr. Pat Martin

Mr. Rob Hilliard

Mr. Martin (Winnipeg Centre)

1210

The Chair

Mr. Rob Hilliard

The Chair

Mr. Rob Hilliard

The Chair

1215

Mr. Rob Hilliard

The Chair

Mr. Rob Hilliard

The Chair

Mr. Rob Hilliard

The Chair

Mr. Rob Hilliard

The Chair

Mr. Rob Hilliard

The Chair

CANADA

Standing Committee on Foreign Affairs and International Trade

NUMBER 075

1st SESSION

37th PARLIAMENT

EVIDENCE

Monday, May 6, 2002

[Recorded by Electronic Apparatus]

¿ (0915)

[English]

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

The order of the day, pursuant to Standing Order 108(2), is public hearings on North American integration and on Canada's role in light of the new security challenges and the study of the agenda of the 2002 G-8 summit.

We have before us today two witnesses from the University of Manitoba: the deputy director of the Centre for Defence and Security Studies, Professor James Fergusson; and Professor George MacLean, associate professor, Department of Political Studies.

¿ (0920)

As we welcome you as witnesses to the committee, we want you to know the committee is continuing its studies of two very important agendas facing Canada in terms of its role in the world and in North America. We feel it is essential to hear directly from citizens across the country on key foreign policy challenges, those arising in the context of the upcoming G-8 meeting and in regard to relations with our neighbours on the North American continent.

As you know, Canada is president of the G-8 during this year, and we'll be hosting the summit at the end of June in Kananaskis, Alberta. In addition to addressing the global economic situation and the international fight against terrorism, Canada is putting particular emphasis on advancing an action plan for Africa based on the African initiative for a new development partnership.

The committee's hearings on both the G-8 summit agenda and on how our North American relationship should evolve are being done concurrently, given time and budget considerations. We've already held hearings in Atlantic Canada, Quebec, and Ottawa. This week, in order to complete a national process, one group of committee members is here with you in Winnipeg, and is moving on to Ontario--Toronto and Windsor--while another group is in the three westernmost provinces. So you can see our committee is split in two.

In regard to G-8 issues, the committee will be tabling its report by the end of this month in advance of final preparatory meetings for the summit. In the case of the North American study, all aspects of the Canada-U.S., Canada-Mexico trilateral ties are open for examination, with a final report envisaged for this fall.

We want to thank you for joining us here this morning as witnesses and for taking the time to contribute to the committee's deliberations. We hope this will be an ongoing dialogue, that you'll keep involved in the process in which we are committed, and that we'll hear from you further. We know you've been before the committee in the past. We always look forward to your words of wisdom, and I'm sure this morning is going to be no different.

Welcome once again. The floor is yours.

I'm not too sure exactly who will begin. Okay, Professor Fergusson.

¿ (0925)

Mr. James Fergusson (Deputy Director, Centre for Defence and Security Studies, University of Manitoba): Thank you very much. It's a pleasure to be here this morning in front of the committee once again.

I'm going to keep my comments relatively brief. What I want to focus on, of course, is the defence and security component of the issue of North American integration.

I think it's fair to say that prior to September 11, the issue of North American integration, as much as it was on the political agenda, largely focused around economic concerns as a product of the free trade arrangement--NAFTA--and the rise of this idea of the pros and cons of adopting the American dollar. In my view, it was very much an economic agenda.

In terms of defence and security, the only real issue that stood out there, ironically, was about the future of cooperation between Canada and the United States centred on NORAD, and the future of NORAD in light of the looming issue of a deployed and operational America-limited missile defence system for the continental United States, Hawaii, and Alaska. Much of the debate in Canada was on the question of the future of the NORAD arrangement if, under whatever circumstances, Canada were to decide not to participate or were not invited to participate in the arrangements on command and control and other aspects of the system. So in a sense, where the economic element was driving toward integration, on the defence and security side the issue was in fact that of a degree of disintegration, or the fear of disintegration.

As we all know, this changed with September 11, when security suddenly popped up to the top of the integration agenda--if I can use the term “integration agenda”--or at least the issues emerging out of September 11 with regard to harmonization of a variety of security policies between Canada and the United States.

Since then, of course, a variety of other things have occurred. The United States withdrew from the ABM Treaty, which raised issues for Canada. Again, this was sort of lost sight of in the new security agenda for North America--and for the world, for that matter. In addition, a variety of issues also emerged surrounding the recent announcement of Northern Command in the United States as part of the unified command plan.

I think it's safe to say--and I'm going to focus on two very brief points--that first, as the issue has evolved and has started to move forward with some momentum on security and integration, sovereignty is at issue in Canada. The developments in the United States from perimeter security, harmonizing our immigration policies, and border controls right though to Northern Command raise significant threats to Canadian sovereignty.

The second issue and element of this as part of this threat to Canadian sovereignty is the idea that the United States will dictate or is dictating to Canada and that Canada really has little or no choice with regard to American desires. Implicit in both is some idea that the United States' goal, middle or long term, is integration in and of itself.

I would suggest to you that they're both blatant myths. As far as I'm concerned, Canada's sovereignty is not at issue at all regarding these issues of security and defence cooperation. Our cooperation with the United States, our closest friend and ally, has always been premised on its important role in maintaining Canadian sovereignty at a reasonable cost both fiscally and politically. NORAD, from its evolution since the late 1940s to its institutionalization in 1958, as well as other elements of Canada-U.S. defence and security cooperation, has always been grounded on the benefits it gives to Canada and Canadian independence. I would suggest to you that even after September 11 that logic still holds.

It's important for the committee and Canadians to understand that our international presence, that great pride of place we as Canadians put into peacekeeping operations, etc., has been possible largely because of the benefits of the cooperative arrangement with the United States. I'd be happy to expand my comments on that later on.

Second and related to this, the United States is not dictating to Canada, nor will it dictate, nor has it ever really, truly attempted to do so. Of course, from its own perspective the United States puts forward its views of its national interests and its national security interests in this regard. That is no different from Canada being a sovereign nation and putting forward our national interests and our national security interests in discussions with the United States.

As a country that's always prided itself on multilateralism, one that seeks consensus, negotiates, and tries to find the middle ground, of course in any arrangement, even with the United States, we have to deal with the same sorts of issues and problems. The idea that the United States is dictating is simply incorrect, largely on the grounds that we and the United States share similar interests in terms of threats posed to North America in general and particularly threats posed by terrorist acts against the United States as well as Canada.

In this regard, it's important that we recognize and understand fully that any threat through terrorist acts or what have you to the continental United States, to American cities, to American commerce, or to the American economy is a fundamental threat to Canadian national interests and Canadian national security. I would suggest this is one of the driving forces behind the need to integrate, if I can use that term loosely, or to cooperate as the United States tries to sort out its own security house under Homeland Security and Northern Command and as we try to sort out our house.

We can try to see where the common linkages and the important issues really lie, rather than resorting to what I would suggest is a certain degree of hysteria that the United States is dictating to us and that Northern Command is going to control Canada. That's about as true as saying European Command controls all the Europeans, Central Command controls all the Middle East, and Pacific Command controls China. It's complete and utter nonsense.

It will take a great deal of time before the United States gets its security house fully in order, just as it will take Canada time to sort out some of the aspects within the cooperation between defence and the other, non-defence departments and agencies in the federal and provincial governments. These processes have to work both within and between both countries as we try to find out how far cooperation will go and how far we need to move towards alternative models to the existing one, which has simply been centred on NORAD.

I'll end my comments there. Thank you.

¿ (0930)

The Chair: Thank you, Professor.

Professor MacLean.

¿ (0935)

Mr. George MacLean (Associate Professor, Department of Political Studies, University of Manitoba): I'd like to express my appreciation to the committee for allowing me to contribute to your deliberation.

Whereas Professor Fergusson spoke to the issue of security and defence, I'd like to deal with some aspects of the other side of the issue of North American integration. It has to do with the economic relationship.

With respect to Canada's foreign affairs, the shape and context of the emerging North American community is affected by two distinct yet intricately related factors. It is axiomatic to state that Canada's real interests in the region are defined by its relationship with the United States. This relationship in many ways is one of our own determination, given the relative lack of attention paid to Canada in Washington. However, though we may be able to determine the relationship we have with the United States, and I mean here, particularly the degree to which Canada decides to emphasize its bilateral relationship with the United States, the real consequence of the relationship will come as a result of the United States' corresponding engagement with Canada. On this matter, Canada is best served by underscoring at every opportunity the unique partnership it shares with the United States.

Initiatives relating to the bilateral relationship have indeed tended to emerge in Ottawa, largely due to the foresight of governmental officials and not Washington. However, Canadian interests in the bilateral relationship can and will be challenged if initiatives, or even perhaps expectations, originate in an anticipated fashion in Washington.

The other factor relates to the rest of North America and increasingly the hemisphere. In this broader context, Canada's foreign interests are best served through the pursuance of multilateralism, particularly as a means of preventing a singular hemispheric integration policy designed and implemented by the United States.

In short, Canada needs to maintain a balance of principal attention to the bilateral relations it has with the United States, coupled with an enhanced role in the hemisphere. In fact, in spite of the typical interpretation of a continental vision for Canada that assumes a retreat from the multilateral legacy, the new community, I'd argue, within the hemisphere allows for the weighing in of both bilateral interests and continental visions for Canadian foreign policy.

I've arranged the remainder of my remarks in two groupings. First, I have some general comments about Canadian interests regarding North American integration. Second, I have some specific observations about Canadian foreign economic policy in the region.

To begin, despite criticisms of Canadian integration policy, Canada has been very effective and has a successful record of maintaining independent interests and achieving goals. It is worth noting that many Central and South American states view Canada's close relationship with the United States with a degree of envy, but also make the argument that such a relationship creates responsibilities as well.

For instance, in the context of hemispheric economic integration, it has been alluded to that Canada's willingness to at times oppose the views of the United States gives Canada the opportunity to question American policy in a manner that other nations cannot. Canada then is not faced with a simplistic decision between bilateralism or continentalism. The reality is much more nuanced than that. The visions are in fact complementary, provided Canada maintains sight on its objective.

Canada's primary goal, both for its bilateral relationship with the United States and for any new community-building in the region, is decidedly trade and commerce space. This is not to suggest that other goals are unimportant. In fact, they are often intricately related. However, as a trading state deeply dependent on strong export markets, Canada's policy must reflect our primary economic goals.

Canadian trade with the United States represents approximately 87% of our total global trade. Although the American reliance on Canada is substantially lower, around 20% of U.S. total global trade, Canada is nonetheless still the largest trading partner for the United States. This means something, given the diversity of trading partners with the United States.

September 11, I'd argue in addition, has not altered the relative importance of Canada in Washington, notwithstanding the reduced level of attention the Bush administration was paying to Canada and the associated concerns about the implications of a shifting North American relationship balance. However, the American response to September 11 has resulted in serious effects for the bilateral trade relationship.

For instance, the 1999 Canada-U.S. partnership, CUSP, has been affected in at least two ways. The first relates to efforts to collaborate on external threats to Canada and the United States. This certainly has become more urgent. On this level, Canada has been variously criticized for alternatively standing aside and taking on too much in its anti-terrorist role.

The other effect involves border movement as CUSP initiatives to streamline and collaborate on bilateral border controls have been hindered by American border security concerns. It is important, however, not to place too much emphasis on September 11 and its effects on the bilateral trade relationship.

The relationship, in fact, for many years has been undergoing significant changes as Canadian reliance on U.S. trade increases steadily since the entry into force of the free trade agreement, FTA, in 1989 and the corresponding re-evaluation of American trade and commercial links. On the other hand, while the share of American economic trade with Canada has increased in absolute terms and the relative levels have remained strong, American trade diversification has become the hallmark of its post-NAFTA approach. This is one reason Canada needs to be front and centre in the negotiation of a free trade agreement of the Americas, or an FTAA.

The prospect of 31 countries in addition to the NAFTA partners all seeking greater access to the American market with the advantage of free trade does not bode well for Canadian bilateral trade and commercial interests. In brief, we must strive for multilateralism to meet bilateral interests.

It's also important to carefully weigh the concerns of those who feel deepening trade and commercial links with the United States in some way challenges Canadian identity. I'd say that economic nationalism is a generally discarded ideology and, if followed, would severely damage the standard of living and way of life of Canadians. I'd argue that nationhood in Canada is more determined by shared values based on distinctive social, cultural, and political histories than by economics and business.

Really what we have to deal with here, I think, is the economic reality of increasing integration and regionalism. This is the reality we're facing, not just in North America but in Asia and Europe as well. I don't accept the argument that increasing integration with the United States on trade somehow severely threatens Canadian identity.

On Canadian foreign economic policy, my specific point is that Canada's near-term goals for economic integration in North America ought to strive for a common market, with greater mobility for goods and services and workers amongst the three NAFTA partners. An even deeper economic union, such as the one in Europe, is not a realistic possibility given the distinctive challenges faced by Mexico, for instance, as a developing nation. Furthermore, it's not clear at this time that harmonization of social or currency policy between Canada and the United States would be practical or even desirable. This is particularly the case given the inordinate influence of the United States versus the European example, with several system-determining powers and many similarly positioned states.

Canada and the United States are two of the most prominent users of trade legislation such as countervail, anti-dumping, and non-tariff barriers. Standard regulations for subsidies and competition between the two states would reasonably reduce the degree to which both countries still rely on trade legislation. In addition, Canada needs to strengthen environmental and natural resource regulations even if it requires independent bargaining with the United States alone, outside of a NAFTA context.

A multi-speed NAFTA or even a multi-speed free trade agreement of the Americas is both plausible and possibly advantageous. Within the NAFTA, and the future FTAA presumably, intellectual property rights as well as production and labour mobility are important negotiating issues for Canada. They don't all have to be negotiated within the same forum.

In terms of timelines, given the particular difficulties to be faced on all these issues, Canada should seek staggered implementation of regulations standards on subsidies, competition, the environment, resources, and even a possible customs union. For example, setting up a possible customs union among NAFTA partners but removing potential FTAA member states from the list of non-member countries that would be subject to external tariffs and a mutual quota regime could, on the one hand, provide a base for a common market, and at the same time mitigate any potential problems or ill will within the FTAA negotiating forum. Linking objectives for deepened integration could slow the process or possibly the success in other issue areas.

It must be borne in mind that for Canada, deeper integration in NAFTA or the hemisphere really signifies deeper integration with the United States. To that end, therefore, Canada needs to identify advantageous features of deeper integration with the U.S. A common market would improve Canada's access to American trade and commerce. An economic union, on the other hand, would likely reduce Canada's influence and options. Dollarization would not necessarily solve the problems associated with the current strength of the Canadian dollar and, I'd argue, would seriously depreciate Canada's policy latitude in matters of currency measures and interest rates.

The case of Argentina is instructive here. Although circumstances are vastly different in Canada in many important ways, most notably in regard to economic market strength and integration with the United States, Argentina's relative inability to respond independently to its currency crisis is an indication of the extreme effect of dollarization.

¿ (0940)

Importantly, these objectives do not conflict with any aspirations for a wider hemispheric free trade agreement of the Americas. The negotiating principles for the FTAA do not preclude heightened integration within existing regional agreements or member states.

I'm suggesting that we can continue negotiations on different issues for staggered implementation with the United States, with NAFTA partners, and in no way abrogate any of the principles that we've undertaken within the context of a wider hemispheric union. Furthermore, these objectives would not in any way detract from Canada's ability to work within global economic regimes such as the World Trade Organization.

To conclude, Canada has a record of tracking bilateral goals using multilateralism as a tool. In many cases, pursuing multilateralism has also created subsequent benefits for Canada. NAFTA is an example of this. Regional integration in North America can be followed in this manner, provided Canada has prioritized its objectives and remains realistic in its approach.

Thank you for your time and your attention.

¿ (0945)

The Chair: Thank you very much, Professor MacLean. You have given us quite a debate. At the same time, you've put on the table several issues that I'm sure my colleagues would like to pursue with you and also Professor Fergusson.

Are you ready to start us on the questions, Mr. Martin?

Mr. Pat Martin (Winnipeg Centre, NDP): Yes, I would be, Madam Chair.

I'm very sorry for being late. I made the fatal mistake of checking into my office first on the way here.

The Chair: I saw you one evening leaving your office at midnight, and I wondered what you were doing in the office at midnight. You wondered what I was doing.

Mr. Pat Martin: That's right. You were there to see me.

The Chair: Thank you for joining us.

Please begin the questioning of the witnesses.

Mr. Pat Martin: Thank you, Madam Chair.

Thank you, witnesses, for the briefs you've put forward. I'm sorry I had to skim over some of the first brief that we heard, although I did see some interesting points. Perhaps you did make my questions clear during the early part of your brief, and if I'm asking a redundant question, I apologize.

I take it from the gist of your brief that you believe Canada should be involved in a future NMD, the national missile defence system. Would the funding formula that you contemplate be comparable to the current NORAD arrangement of 60-40? Am I understanding this correctly?

Mr. James Fergusson: Given that the United States has restructured its missile defence program, the term “national missile defence”, as you know, doesn't exist any more. Loosely, it has integrated all the various programs.

In terms of Canadian participation and then the funding arrangements for participation, the general 60-40 cost split has largely been the split on capital construction costs in Canada. Canada has never paid for any capital construction costs in the United States.

Mr. Pat Martin: No, I understand that.

Mr. James Fergusson: Unless there's a decision made by the government to actually deploy some parts of the architecture on Canadian soil, there would be no costs from that at all.

Mr. Pat Martin: But when we talk about going further with the NMD, are we not also talking about Star Wars, about Bush's great plan to launch a new Star Wars? When we hear the term NMD in Ottawa on the Hill, that's what people are talking about, Ronald Reagan's dream and Bush's vision of Star Wars.

Mr. James Fergusson: It's not Star Wars. There are issues that govern our general image of Star Wars or the SDI program of the mid-nineties, where the various ideas floated deployed either kinetic kill systems, brilliant pebbles in outer space, or space-based lasers. The issues surrounding those components of a missile defence program, which certainly people in the United States are looking at, are driven as well by other concerns about the vulnerability of western American space assets, satellites, which are being driven by a variety of other reasons alongside, but in fact independent of the missile defence question.

Secondly, the technology for those types of systems is at least a decade of testing off. What we're looking at today is, feasibly within the next ten years, ground-based systems augmented by sea-based systems and potentially an air-based boost-phase system. We're really not looking yet to weapons in space--except, of course, for new deployed early warning and tracking satellite systems, which will go up in the next decade or so. So it's really not Star Wars.

Mr. Pat Martin That would be a lot tougher sell.

¿ (0950)

Mr. James Fergusson: It could be a much tougher sell, and it could also be much costlier, as everyone knows. But I think we do an injustice to understanding American missile defence architecture, American missile defence thinking, by just dumping it as Star Wars and then dragging out all those arguments from the 1980s into the 21st century.

Mr. Pat Martin: Madam Chair, how much time do I have in the first round?

The Chair: You have about five minutes.

Mr. Pat Martin: What is the current inventory of missiles near Winnipeg right across the border? Have they been dismantling some of those, or is that current?

Mr. James Fergusson: To my knowledge, the entire field, what was known as the Grand Forks missile field, which was in the eastern part of North Dakota, was dismantled. The nearest silo was somewhere around 10 to 20 miles south of the border itself, and there were silos dotted all over eastern North Dakota, but they were all dismantled in the early to mid-1990s as part of START I. The Minot field, which is in western North Dakota, to my knowledge is still operational but will likely be dismantled as START II and wherever the unilateral cuts go in the United States. So I would suggest that by the next five years or so there will be no more missiles in North Dakota, nor any bomber systems.

Mr. Pat Martin: That's very helpful.

With the last couple of minutes I have, I'd like to direct a question to the second presentation.

Some of the reservations of the people who aren't quite as enthusiastic about globalization and free trade are based on the fact that a lot of them fear exactly what you've implied, that “economic nationhood is a generally discarded ideology”, one of the quotes from your brief.

There was a time when it was in vogue to say that we were fiercely proud Canadian nationalists, economically, culturally, and everything else. Statespersons like Walter Gordon and Paul Martin Sr. in those days used to speak vigorously about limiting foreign ownership of our key industries. They did so proudly. In fact it might be the last time Canada did hold its head up in any kind of a way at the bargaining table anywhere.

So I'm wondering if yours is a widely held point of view. I didn't really get to the introduction of who you are. You're an associate professor of political studies at U of M. I wonder how widely spread this boosterism is over there among your colleagues, or if you're pretty much here as an individual.

I would leave it with you in the minute we have left that It's really worrisome to me that somebody would be this much of a free trade zealot in a period of time when we're being asked to temper our arguments, and to try to be more realistic and understand the other case instead of putting our foot down. Your presentation seems out and out strident, almost aggressive. We're a couple of days away from the G-8 summit in Kananaskis and we're asking the purple-haired kids to back off, but you're coming on more strident than ever. I don't know, it's more of a comment than a question.

The question I would have is that Paul Martin Jr., the Minister of Finance, has agreed to raise the issue of a Tobin tax at the G-8 because we're the first Parliament in the world to openly approve and vote on a Tobin tax. In light of the tone and the content of your presentation, how would you view our Minister of Finance pitching a Tobin tax at the next G-8?

Mr. George MacLean: I don't know if I would characterize my remarks as either boosterism or zealotry.

The Chair: Defend yourself, defend your position here stridently.

Mr. George MacLean: I will.

Given the fact that you didn't seem to know who I was, to remark that I'm more strident than ever I find interesting as well. Given the fact that you don't know who I am, I don't think you can associate my cant--

Mr. Pat Martin: Whoever you represent.

Mr. George MacLean: I represent my own interest. There's no group for which I speak. I'm here as an individual. I think that if you look at the context of my remarks you'll see that it's not so much zeal or strident boosterism, but rather realism that leads to my remarks.

In fact, the context of my remarks is that Canada does have an economic identity, that our economic identity is based on shared values--which are not always the same as economic values--shared political systems, and social and cultural aspects of our history.

I don't think Canadians generally identify their nation with an economic rationale or view of the world. That's not to say it's not relevant. I think it is. But I don't think it's the primary motivating factor behind how we identify ourselves. I think--and I put emphasis on the first two words there--that Canadians generally share many of the values Americans have in regard to free trade and economic liberalism. That does not necessarily mean that comes unbridled.

I think, for instance, there are very careful measures we must undertake--and that was the context of my remarks. We must prioritize our interests. We must be clear and realistic in regard to what our goals are, and we must identify the national economic interests of Canada. We don't have to put all of our trade and commercial eggs in the American basket. At the same time, we don't have to focus entirely on NAFTA or the free trade agreement of the Americas. In fact, as my remarks indicate, we've been very successful at balancing a bilateral relationship that is more interdependent than any other in the world.

¿ (0955)

Mr. Pat Martin: Up until the softwood lumber deal, the Farm Bill, the steel tariff, and the Auto Pact, perhaps.

Mr. George MacLean: Well, if I could continue, I would say any relationship of economic interdependence is also vulnerable to division. Part of the problem, I would suggest, is that softwood lumber has never been properly integrated within free trade mechanisms. And that's one of the challenges we face in dealing with an issue such as that. In that case, I think it's quite clear that Canada's argument is legal. Canada's argument is legitimate. Unfortunately, our argument--which I think is very justified--that we are quite legitimately justified in dealing with our softwood lumber sector the way we do is simply not shared by the United States. That's the problem with dealing with such an inordinately powerful actor.

However, I would suggest that the benefits that come from the close economic interdependence we have with the United States require us to think about future multilateralism and our own domestic economy in the context of what the overall good may be. And it's necessary.

One of the points I made here is that if we are looking at deepening hemispheric integration--and we are, even though Canada doesn't have much of a hemispheric presence and we really don't have much of a role to play in the hemisphere right now--I would argue that we must at all times maintain a multilateral role so as to temper what's happening in Washington. I mean, as a result of our very close interdependent relationship with the United States it would be easy to say we have that close relationship, so we don't have to worry about it. Well, we do.

We were very successful, I would argue, with NAFTA in avoiding a hub-and-spoke mechanism that the Americans would have liked to have seen, which is to say bilateral free trade agreements with Mexico, then Brazil, and so on. What we were successful in doing is saying we'd like to be involved at the table in order to create a bilateral relationship, and make a bilateral relationship multilateral. What we were able to do effectively in the late 1980s and early 1990s is to curb a hub-and-spoke development that was taking place within the Americas. We have to do that now, even though in the Americas we are even less integrated than we were with Mexico, in order to maintain a true multilateral relationship.

Effectively, I think we can actually seek independent goals as a nation through multilateral means. Suggesting that doing it through economic nationalism or more isolationism is just wrong-headed. It's not the proper way to go. So if you call that boosterism, fine. I don't think it is. If you call it zeal, well that's fine as well. I don't think it's aggressive; I think it's realistic.

The Chair: Thank you.

Ms. Neville.

Ms. Anita Neville (Winnipeg South Centre, Lib.): Thank you.

I'm listening with interest, Mr. MacLean, and I welcome you both here. We have had much to do with each other over the past year.

I wonder if you could just expand a little further on multilateralism and the relationship with the U.S. You touched on it in response to Mr. Martin, but I'd like to hear more about how you see that developing.

Mr. George MacLean: The way I see it, multilateralism is in some ways a bit of an ideology. By that I mean there is a belief behind it. The belief I think Canadians generally have about multilateralism is that through the cooperation of three or more actors, we're going to achieve goals we otherwise would not be able to achieve on our own. An example of that is NAFTA. Although we don't have, quite frankly, real trade and commercial and investment interests in Mexico, and Mexico has even less trade and commercial interest in Canada, we have a trade deficit right now with that country. It's only $14 billion. That's because the price of oil went up in 2000. We'll probably see that the level of emphasis has declined as a result of the decline in the price of oil. I think NAFTA is an example of how Canadian economic interests can be met through multilateral endeavours.

Quite frankly, as a middle power and as a power that cannot determine the rules of increasing integration, as opposed to say Europe, where even a second-tier European state is able to influence to a certain degree the major actors in a way we can't, because there are several system-determining powers in Europe.... So you can go to the French, the Germans, or the British and say we have an idea here. For instance, Denmark isn't very successful in positioning itself on currency integration by having the British onside.

That type of multilateralism is different in North America, in that we have a single, inordinately powerful actor with whom everyone within the hemisphere would like to have a special relationship. We have it.

I think that if we were to engage in more isolationism or even just remain at a bilateral relationship and say we've achieved this and this is where we're going to stay in a holding pattern, there would be risks in that, because increasingly what we see in Washington is trade diversification. They aren't ignoring Canada. At the Department of Commerce in Washington they don't think Canada is unimportant. But in Washington there's a greater emphasis on diversification. In terms of trade partners, Japan and Mexico share second place after Canada, although their level is significantly lower than Canada's. Other actors have different levels of prominence, whereas in Canada it's the United States and then there's a very small role for other actors.

I think that the multilateral tradition Canadians have had in the realm of security and defence is one that positions us well. I think it's the only option we really have in terms of hemispheric integration. Hemispheric integration will take place. By 2005 we're going to have some sort of agreement in principle. If we are at the table saying this is what it must look like, and if we bring everyone together to try to put forward a common vision, we might be able to compete with an inordinately powerful actor.

What I find interesting is that when you speak to representatives of other South American and Central American states, they actually say, “It's your responsibility to stand up to the United States and say this a close, interdependent relationship, a harmonious one, but you can't do this. And we shouldn't do that. You're the only ones who can do that.” Many states, even significant countries such as Brazil and Argentina, are worried about actually standing up to and opposing American points of view. They're the ones who are saying increasingly, “You have that close relationship and you need to speak on behalf of us”. So in that multilateral context we have a very particular and important role to play with regard to the established relationship we have with the U.S.

The Chair: Thank you.

À (1000)

Mr. Sarkis Assadourian (Brampton Centre, Lib.): Can I ask a quick question? Sorry I was late.

I just heard your last comment. You said we have to complain to the Americans on behalf of South American countries. But at the end of the day, we end up paying for the request made by the South Americans, because they say “It was good to work with you, but we're not with you any more”. What happens to us then? It's good to be an outspoken person, but if you have to pay for everybody else south of the border, there's not much benefit to being outspoken.

Mr. George MacLean: I'm glad you made this point, because it allows me to clarify what I said. I obviously wasn't making my comments clear enough. I'm not suggesting that another partner in the free trade area of the Americas negotiating forum would come to Canada and say “Could you make this argument in Washington on our behalf?” Rather, the negotiating principles on production mobility, investment, or intellectual property, for instance, in a collective manner are best argued by Canada, it has often been said, because Canada does have a special relationship with the United States.

I've seen no evidence that Canada would abrogate any of its own principles, values, desires, or objectives and act on behalf of another state within the hemisphere. Rather, the argument that's being made is that we have a very unique relationship in terms of regional integration here in the Americas--that is, we have a single determining power. But we do have a second-tier power that although.... There's a sense, at least in the current environment, that somehow we're losing that relationship. I don't think that is true at all. Canada does have not only the ability to position itself differently from some of the weaker partners but also a responsibility to do so.

As an example, when we actually came forward and said there's a necessity to turn a U.S.-Mexico free trade agreement.... I mean, really NAFTA is about two bilateral arrangements, but it's a multilateral forum. When we came forward and said that we don't have trade and commercial interests in Mexico but we want this to be a multilateral framework because we see where this is going in the hemisphere, we see this environment taking shape, I think that was evidence of the responsibility that Canada has to its multilateral past. These are significant actors, but it's in our national economic interest to be there, to make sure that we are inside the room negotiating these principles. Otherwise, we wind up at risk of a hub-and-spoke set of affairs. If it had gone through, if we'd had United States and Mexican free trade in the 1990s and not a multilateral arrangement, I think we would have seen very real and serious implications and a depreciation of the trade and commercial relationship between Canada and the United States.

I'm not saying that we speak for our partners in South and Central America. In fact, I'm not sure that anyone would ever make that argument. But on certain principles and in certain arguments there is a position that we have and a role we can play that other partners simply don't have or are not willing to play.

À (1005)

Mr. Sarkis Assadourian: For the last four or five years I know we've been making the argument about softwood lumber, and you know what's happened to it now. We lost 100,000 jobs.

Are you again tying softwood lumber trade to gas, oil, or anything else? It should not be tied in to anything that will make the Americans upset. Is it good policy to say “If you put a tax on softwood lumber, I'm going to put a tax on gas export to you”? Is that a good policy, do you think, or should we avoid that kind of retaliation with the Americans?

Mr. George MacLean: I think trade retaliation is not the option we ought to pursue here. I don't think we have a position that is strong enough to play that card. I don't think it's a sensible card to play. It's one of the sectors of concern, obviously, but there are various reasons why softwood lumber is not included within this context. I think drawing in other areas or other sectors where there is success in the bilateral relationship and using that as leverage could pose a very serious problem.

I'm not underplaying or trying to play down the significance of that sector, especially in British Columbia and Quebec--it's significant--and I'm not suggesting that it's right. I mean, I look at this case and say here's a clear example of a situation where a bilateral relationship is not strong enough. It's evidence of just what we risk if we don't stay ahead of the game and position ourselves and prioritize our interests.

I'm not suggesting that softwood lumber can be prioritized and simply cast to one side. I am suggesting that it needs to be a sector that.... We haven't been successful, quite frankly, over the last twenty years at having it integrated within the context of NAFTA, mostly because it comes down to a difference in political systems, doesn't it? The Americans don't recognize the way we govern our sector as legitimate, whereas the rest of the international community says that it is.

Throwing a sector that works, such as gas, into that and saying we're going to use this in retaliation could be a tremendously risky thing indeed, especially if the Americans were to say they are willing to actually fly in the face of WTO rulings or NAFTA tribunal rulings on this issue of softwood lumber for political reasons, for strictly political reasons. If they're willing to do that, what would they be willing to do in terms of other sectors? I don't think it's a good idea to link things, because as important and as strategic as that economic relationship might be, it's also a tenuous one. I think we ought to be wary of that. So I don't think linkage is a good idea.

Mr. Sarkis Assadourian: May I make a final comment, Madam Chair?

Again on softwood lumber, many times the President and our Prime Minister had discussions on this issue. He assured our Prime Minister everything would be fine, what have you. But at the end of the day, Congress won. Would you consider in your formula that the relationship between Congress and the presidency is sometimes alien to each other and then we pay for it?

Mr. George MacLean: Oh, I think that's a very valid point.

Mr. Sarkis Assadourian: So what do we do now?

Mr. George MacLean: First of all, I think you've put a very good point on the issue, which is to say that this is not just an issue of executive relations. In fact, what we have here is a matter of multi-level governance in the United States and the power of Congress and constituent concerns.

The long and the short of it, I would suggest, is the level of trade we have in terms of softwood lumber is significant, given the overall growth and the relationship we have of well over $700 billion on a yearly basis today. I think it's not simply a matter of saying softwood lumber should be cast aside, but rather softwood lumber is a sector that needs to be integrated with the rest of the aspects that work.

Should we beat ourselves up and impose export taxes on our own goods? No, I don't think it's the right way of doing things either.

You might say it has taken us ten years to get to this point. What are we going to do? Obviously, executive agreements here, or at least a willingness at the executive level of government in the United States, are not enough on the softwood lumber case.

I would say this to conclude. I don't think the problems we are facing on softwood lumber, which are real and significant, are sufficient to say bilateral trade, commercial relations, and investment with the United States are not working. It's simplistic. I'm not saying you're saying this. Some people are suggesting softwood lumber is not working so the American-Canadian economic relationship is not working. It's not the case at all.

I would say that in any relationship of interdependence you have sensitivities to the relations among partners, but you also have vulnerabilities. When you have one state or one actor who makes a policy decision that's going to implicate the other, then we become vulnerable to them. It's clear. We've always known this. It's clear we are vulnerable to what the United States is going to do. I would suggest, though, that the vulnerabilities we would experience without the close economic relationship would be far greater than we're facing in a single sector.

À (1010)

The Chair: Mr. Martin, I'll give you five minutes between questions and answers.

Mr. Pat Martin: Thank you.

I'd like to back up a little to the larger picture of expanding the free trade relationship throughout the western hemisphere. As you say, by the year 2005 we probably will have at least some agreement in draft of a new FTAA, given that one of the goals we would seek is to elevate the standard of living conditions in those countries. I guess the theory from your side is it will happen because of a rising tide to lift all votes and all of the clichés we've been hearing about free trade agreements.

I have a question on a larger scale. How do we keep the free trade agreements from being a charter of rights for corporations that actually bypasses a freely elected government in the countries? It's one of the biggest fears, and is driving the protest movement, that the free trade agreements have a certain primacy over freely elected governments. If the globalization of capital is a fait accompli, a roller-coaster that we can't stop and we'd better get on board, then why isn't the globalization of labour standards, environmental standards, and human rights possible within the context of the new relationship we're going to have?

There have been 3,000 trade unionists murdered in Colombia alone in the last five years. Last year 150 were gunned down because they've been fighting to elevate the standards for the people there.

How can our trade relationship do something with the new partners we're going to have? Why can't the trades agreements be designed to achieve secondary objectives, not only the primary objectives of the free movement of goods and services? Do you have any thoughts on it, in two minutes?

Mr. George MacLean: I'll try my best. They are excellent questions.

I would first say I'm not an ardent believer in all of this. I'd caution you against making the assumption that I'm necessarily in a particular camp, in terms of elevating conditions, rising tides, and so forth.

First, on your issue of a corporate charter of rights I would say this. Within the domestic context, individuals and groups, including corporations and businesses, do have the right to take governments to court. On the other hand, the courts are ultimately run by a public sphere of governance. Ultimately, we assume, within a liberal democracy such as Canada, if a government is taken to court by a business actor, it doesn't necessarily mean somehow there's a star chamber making decisions outside of the realm of public governance.

In fact, we have a wing of government, the judiciary, ultimately making the case. We place our emphasis on the role of the judiciary here. We also emphasize the primacy of the rights of individuals and groups to take governments to court to seek damages and so forth.

Now, here's the issue, and it's within the context of free trade and within the context of growing economic unions. You have a web of enterprise of economic actors that are in fact moving across borders and acting transnationally. If that is the principle behind economic regionalism, then the logical question that comes up is should they not also have the right to do what domestic economic actors may do within borders, which is challenge governments?

If the tribunals and court systems that are overseeing those challenges are legitimate, and they are.... If you take a look at the NAFTA tribunals, every single member of the NAFTA tribunals must ultimately come from the public sphere. They are judges who are chosen by nations.

The argument that we have some sort of a behind-the-doors, secret environment of corporations taking governments to court and that we as citizens have no rights is the same argument as saying that if a corporation in Canada decides to take the federal government to court, we as citizens have no recourse. Of course we do. The recourse is the judiciary, and the judiciary is also going to be making the decision. Here the judiciary comes from the three nations in NAFTA.

Ultimately, we say that if any corporation in Canada, Mexico, or the United States decides to take one of the parties to court, we have to place our values and our trust in the judiciary that is chosen, the tribunal chosen by the three actors. It includes actors from the element of government that is the judiciary.

I would say that inasmuch as we trust the court system in Canada to guard the interests of the public sphere, then it is presumable that we should place the same degree of trust in the public sphere. The debate centres so much on a corporate charter of rights, as though there's no guard over this, and of course there is. The guard over this is that there is a tribunal system made up of judges to decide whether or not this is legitimate.

Now, on the issue of globalization, you raise an extremely good point, which is that globalization is multifaceted; it's as much a cultural or social concept as it is economic. The Coca-Cola-ization or the Hollywoodization of international cultures is one aspect of globalization.

Your point on the globalization of capital is an interesting one. That is, if we see increasing free trade agreements, customs unions, or regional associations, then why not similar movements on these other issues, such as human rights, labour standards, and so forth? What I would say to that is that free trade agreements deal with one aspect of the relationship; it's really up to the other agents to try to deal with aspects of human rights, labour, and so forth.

For instance, the Organization of American States is not a trade or commercially based organization. What is it there to do? It is there to try to instill democratic principles and to enforce democratization in the Americas. It is there to try to be an oversight for issues of human rights and labour standards. We have other agencies that are in place that hopefully will work hand in glove with other potential organizations or regimes such as the free trade agreement of the Americas. This ultimately would lead to a greater integration of not just economies but also of cultures, labour standards, and issues of human rights within these different constituencies.

The reason your question is so valid is that it really gets to the point of individual identities and constituencies. The bottom line is that many of the states we are involved with in the negotiating forum for a free trade agreement of the Americas quite frankly don't see issues of human rights, labour standards, production standards, mobility, or even intellectual property rights the same way we do. Does that mean that we say no, we won't have anything to do with it unless we can have everything on the table? Not necessarily. One of the principles of the free trade agreement of the Americas is consensus. Nothing will be agreed to until everything is agreed to. That's one of the mantras of the free trade agreement of the Americas.

The free trade agreement of the Americas, though, does not govern every aspect of interstate relations. What I would suggest is that it's necessary for us in a multilateral fashion to further not just the free trade agreement of the Americas regime but also other regimes. This is why it's so important that we ultimately did take our seat at the OAS. It's one of the reasons we ought to take a stronger role in organizations like the Inter-American Defense Board and the Inter-American Defense College to try to integrate security and defence issues as well as economic issues within the hemisphere. I think we must recognize that there are limitations to any regime, and if we try to put all our eggs in one regime basket, we probably won't get any successful conclusion whatsoever.

À (1015)

The Chair: Thank you, professor.

I have a couple questions I would like to put on the table. If you can't answer right now, Professor Fergusson, maybe you can send us a note.

It seems to me the argument you made to us this morning runs almost counter to pronouncements by the Simons Centre for Peace and Disarmament, Mr. Axworthy, and others over the last little while. It seems that they're asking really that if we are to get into any shared situation with the U.S., the bottom line is you have to have something in written form, with full-fledged detail, a legally binding treaty ratified by both countries to make sure that we enter into any NORAD-type arrangement.

I'd like to ask you to comment on that, if you have been following that discussion at all. Certainly since NORAD is air force only, how should we pursue other cooperation, naval and land, etc., in light of that first discussion that I mentioned?

There is another thing that's been hovering around my head as you both were presenting. Does it make sense to approach security issues in North America on a trilateral basis, and how can we do this involving Mexico? Does Mexico have a role in that entire discussion?

So I'll throw these questions out to you, if you have some comments to make in that light. If not, we'd love to hear from you further on this.

À (1020)

Mr. James Fergusson: Certainly if Canada decided and the United States also decided that they wanted to expand the NORAD arrangement, which is, you're correct, an aerospace arrangement only, into the maritime and land side and replicate a NORAD arrangement, then naturally there would have to be a negotiated agreement and NORAD would be the model. Remember in the NORAD agreement it does not say that the United States has to be the commander-in-chief of NORAD. All it says is that one country is commander-in-chief, the other is deputy commander-in-chief. The precedent is that it's always been an American, but there's nothing that's written there.

I think it's important to remember two things here. One is, and I'm loath to put a percentage on it, I would suggest to you that 80% to 90% of Canada-U.S. defence cooperation is done by negotiated memorandums of understanding between our two countries. They deal with the details of day-to-day cooperation between the air force within and outside of NORAD, with the army, the navy, on defence industrial cooperation relative to the defence production sharing arrangements, the defence development sharing arrangements. There are a slew of arrangements that govern the element of cooperation between our two countries, which are not formally negotiated in the sense of a NORAD arrangement.

When we look at how Canada will respond once the Northern Command itself is properly up and running and the kinks have been worked out of it, it's more likely not to run on the NORAD model for several reasons. One, we've cooperated with the United States on the maritime side for decades as well. We just haven't talked about it. We cooperated on the east coast, particularly, of course, during the Cold War through our arrangements under Supreme Allied Command Atlantic, stationed in Norfolk. There's been close cooperation between the maritime coast guards, the two navies on the east coast, on the west coast, the integration of a variety of arrangements, MOUs, what we loosely called rules of engagement, agreements between us.

These will be likely rolled in somehow or carried forward when the maritime side of what was the Joint Forces Command in Norfolk now rolls into Northern Command. Some of those arrangements will need to be tweaked at the edges possibly. You may need some new ones to deal with some of the concerns about terrorism relative to shipping, but I don't see any real need, at least for the time being, perhaps in a decade from now, for a formal negotiated NORAD arrangement...nor particularly on the land side.

I'd like to ask this question. What exactly is the northern commander going to do on the land side with the Canadian army, the Canadian land forces?

Certainly the northern commander will be the operational command in situations of a terrorist activity when domestic forces, the military, are called out, as the deputy chief of defence staff is in command of Canadian land forces when they are called out legally under aid or assistance to the civil power.

Likely you will need the deputy chief of the defence staff. If Canada needs to rethink a bit of its own command structure, it would be the natural equivalent to talk to northern command about things where there are perhaps terrorist incidents or disasters that cross the borders, like the Red River flood, coordination and cooperation. To me, this doesn't seem to require a major negotiated, expanded NORAD arrangement to take land, sea, and air and package it all together. It 's just not necessary, in my view.

To the final point about Mexico, I don't think, at least from the United States' perspective, there is much interest whatsoever in engaging the Mexican military and Mexican defence forces. George, my colleague, knows more about Mexico than I do, but my hunch is that the United States, and I think Canada as well, sees this basically as a bilateral arrangement, an arrangement that Canada's defence department--both defence departments, I would suggest--see as a mutually beneficial one, not only for North America but in terms of international cooperation between our two nations. I wouldn't see that in the foreseeable future, until Mexico develops further, there is much value in pursuing making the defence side of this arrangement a trilateral one, nor will there be much to pursue.

À (1025)

The Chair: Thank you.

Professor MacLean, do you want a final word?

Mr. George MacLean: I would just echo some of the comments Jim Fergusson made on the issue of integration of forces in Mexico and perhaps even into the hemisphere. Canada has made some strides. We're now heading up the Conference on the Armies in the Americas, the CAA, which is the first time we've taken over the leadership role within that group. We've expanded our military attachés. I think we now have four in the region, whereas up until a couple of years ago we only had two.

On the issue of Mexico and defence and security integration, I think Jim Fergusson is correct. There's not much interest in the United States or in Canada to try to integrate security forces, defence forces, aside from issues like border issues, migration, and so forth.

There are huge concerns about military interoperability outside of the Canadian-American relationship. Given the relative problems the United States and Canada have with even NATO partners in regard to interoperability--and we've had a long-standing relationship with those actors--to try to extend that to a whole new set of actors in Central and South America as well as Mexico would be problematic indeed. I've certainly not seen any discussion within the ministry of defence in Mexico City about integration with Canada. I think there would be eyebrows raised. “Why on earth would we have military integration with Canada? We barely have economic integration with Canada.” That's often the Mexican response.

To conclude, there is a desire in Mexico to be more integrated in a defence context with the United States, though that hasn't been reciprocated in any real way in Washington.

The Chair: I'm sure there's lots more we could ask about and lots more we could debate, many more issues with which we could hold a debate with you, but we want to say thank you for being with us this morning. We had a late start, and we appreciate your willingness to cooperate with us.

Again, I would ask that if there is anything further you want to put on the record through notes to us and our researchers as we write our paper, we'd be more than happy to hear from you. Thank you so much.

Continuing with our witnesses, from the Canadian Foodgrains Bank, we welcome Mr. Jim Cornelius, executive director, and Mr. Stuart Clark, senior policy adviser.

Thank you for waiting. I know we are behind by about ten minutes or so, but I thank you for your forbearance.

Please make your opening remarks, and then, as you've seen, we'll engage you with questions.

Mr. Cornelius.

À (1030)

Mr. Jim Cornelius (Executive Director, Canadian Foodgrains Bank): We come before this committee as representatives of the Canadian Foodgrains Bank. It's a consortium of 13 Canadian church agencies that work in the area of relief and development.

We work very closely with Canadian farmers and Canadian rural communities to address hunger in developing countries. We provide food assistance where there is considerable hunger. We support development projects to enable people to grow their own food to feed themselves in the longer term, and we advocate for just policies that will enable hungry people to exercise their right to adequate food.

We wish to thank you for the opportunity to present our views and perspectives and for travelling out to Winnipeg to hear our views. I note that my member of Parliament is sitting here. It's good to see Anita here.

Our brief presentation will focus on the New Partnership for Africa's Development, one of the three key issues that will be on the agenda at the G-8. We will offer some specific suggestions for how Canada and its G-8 partners can support this African initiative.

We will focus on the issue of hunger and rural poverty in Africa and make recommendations in regard to agricultural and rural development and trade negotiations, particularly in regard to the agreement on agriculture at the WTO. We'll also make some comments on tied aid.

Just for some background, the Canadian Foodgrains Bank was established in 1983 at the time of the great Ethiopian famine. My colleague Mr. Clark was at that time working as the Africa secretary for the Mennonite Central Committee and was very actively involved in all sorts of activities at that time to respond to the crisis. He has had a long career working on food and agricultural issues over many years.

The Canadian Foodgrains Bank since that time has remained very engaged in hunger and food issues in Ethiopia and in many other parts of Africa. Prior to becoming executive director, I worked in Eritrea on the development of a strategic grain reserve in that country, the development of a system for monitoring the food situation in the country.

Africa has been part of my world since I was a young child. My parents went to Africa--my mother from Winnipeg--in 1955 and spent the next 23 years working in that continent. My mother is now retired and has gone back to Africa as a volunteer, continuing her lifelong work.

Africa is a remarkable continent. It's blessed with dynamic people, with cultures that are varied and diverse, and Africans are inherently optimistic. It has a rich and diverse natural resource base, but as we all know, it is a very troubled continent that is currently going through a period of stagnation, decline in many areas, and increased marginalization in the world we live in.

We're encouraged that some of its new and most dynamic leaders are working with their colleagues to develop a recovery plan for Africa. This plan has been consolidated now in what is called the New Partnership for Africa's Development.

We wish to commend our Prime Minister for taking up the cause of Africa within the G-8 and for making personal efforts to ensure that the plight of Africa does not fall off the international agenda when other issues are all pressing for governments' attention.

We recognize there are flaws with the New Partnership for Africa's Development. Our African partners and other civil society organizations in Africa have begun to identify these flaws. There's been little consultation with citizens in Africa in the development of the plan. There's too little attention given to some of the critical social investments required in the areas of health and education to achieve the economic growth and poverty reduction desired. Many question the economic framework being proposed.

Nevertheless, despite these concerns, we believe it is important that Canada engage with this plan, work with African leaders and African civil society to improve and strengthen the plan, and provide financial support to those components of the plan that will substantially reduce hunger and poverty. The $500 million already allocated must be seen just as a start.

Africa is a region where the highest proportion of people face extreme poverty and hunger. Just as an aside, most hungry people in fact live in South Asia, but when we look at the proportion of people in an area, Africa has the highest proportion of hungry and poor people.

We believe any effort to promote substantial economic growth and poverty reduction in Africa must address the issue of rural livelihood. Most rural poor depend on farming or farm labour for their livelihoods. Thus, strengthening agriculture is central to any attempt to reduce rural poverty. While the development of an industrial sector is also important for poverty reduction, agriculture should be seen as the key economic sector that can drive economic growth and provide sustainable livelihoods.

Historically, a dynamic agriculture sector has served as a cost-effective catalyst for stimulating decentralized, broad-based economic growth and development and a corresponding reduction in poverty. This, in turn, has contributed to industrial development. A recent World Bank study concludes that higher agricultural and rural growth rates have a strong, immediate, and favourable impact on poverty reduction.

Small-holder agriculture is well suited to providing broad-based employment for the poor. Small farms support more people per hectare than do large farms. Small farmers and their employees spend more of their incomes on employment-intensive, rural, non-farm products.

Substantial macro-economic reforms have been made in Africa over the past 20 years, many of them designed to reduce the price biases against agriculture and to develop a more market-based agricultural system. However, many African countries lack the policy framework, support programs, and capacity to take advantage of these new opportunities created by the changes.

Structural adjustment programs have reduced needed public investment in agriculture and rural development. During this transition period, donor support for agriculture and rural development has declined dramatically. As a result, further stagnation and decline in agriculture and rural livelihoods seems likely unless changes are made.

Poverty reduction in Africa will require a significant reinvestment in agriculture and rural development and a reverse of a seeming bias against rural poor in the allocation of resources, including resources for rural health and education.

We are pleased to hear that agriculture will be one of the theme areas in the G-8 action plan of response to the New Partnership for Africa's Development. I was at a conference this weekend with our chair here. I asked Robert Fowler, who is a personal representative, whether it would be there, and he assured me that it would. We're looking forward to seeing the details.

But the point we would like to make here is that it is essential that Canada's aid program substantially increase its support for agriculture and rural development from its current pitifully low level. It has fallen off the agenda in terms of our aid program. If we want to be serious about poverty reduction, we must revitalize the support for the area of agriculture and rural development.

I'll turn my presentation over to my colleague to speak on two other issues.

À (1035)

The Chair: Mr. Clark.

Mr. Stuart Clark (Senior Policy Adviser, Canadian Foodgrains Bank): Thank you, Madam Chairman.

I would like to address two issues and then wrap up with a summary of the points we've made so far.

The first thing I would like to speak about is the critical issue of trade, particularly the WTO rules known as the agreement on agriculture. Much has been made of the relevant significance of trade and foreign aid in the gross domestic product of developing countries, including those in Africa. Certainly as an engine of growth and potentially poverty and hunger reduction, trade is the V-8; foreign aid is the starter motor. To carry the automotive analogy a bit further, this V-8 can take the car forward, or backwards.

We at the Canadian Foodgrains Bank have been active in supporting a rules-based trading system that moves hunger reduction and poverty reduction forward.

As part of Canada's response to the continent of Africa, there have been recent consultations regarding improving market access in Canada for the products of all least developed countries, many of which are in Africa. We have supported this step, urging Canada to go beyond only the products of the least developed countries to include those products of other developing countries whose production has a powerful poverty reduction potential. These additional steps will help the engine of trade to drive poverty reduction and hunger reduction forward, particularly for those slightly better-off producers who can take advantage of the export opportunities.

We must also urge Canada to look at situations where the engine of trade can perversely drive poverty reduction and hunger reduction backwards. The main issue here is the destructive effect of the import of low-cost and often highly subsidized staple commodities into African countries. As noted earlier, staple food production is an essential aspect of the livelihoods of the very poorest farmers. Disruption of their markets can quickly drive them into debt, leaving them no option but to join the trek to the slums of the major cities.

The Foodgrains Bank has been active in supporting the clarification and promotion of the development box. This development box is a set of trade rules for developing countries within the WTO. The intent of the development box is to provide African governments with sufficient flexibility to curb the strongly negative effects of the forced opening of staple markets in Africa. We urge Canada to support WTO agricultural trade rules to prevent the undermining of African small farmers' livelihoods. Canada, as an extremely important partner in the upcoming negotiations at the AOA, has a large role to play.

As noted earlier, the Canadian Foodgrains Bank provides food aid to many parts of Africa. We recognize that food aid is the ultimate low-cost import and can also have very negative effects on local markets. When and where there's a serious shortage of food throughout a region, the case for food aid sent from exporting countries like Canada is clear. However, hunger is sometimes quite localized and food may be available from close by for those who have money. In these cases, the supply of food aid from outside the region can spread the negative effects of the drought to adjacent areas by hurting farmers who are trying to sell into those markets as well, local farmers.

For the past four years the Foodgrains Bank has been advocating for greater flexibility to use CIDA funds to purchase food aid commodities locally and regionally. We've raised this matter with the standing committee on two successive years on World Food Day.

We believe that our Canadian food aid rules currently limit local purchase to only 10% of total food aid. We believe that flexibility to use up to 30% is more appropriate, because in addition to supporting and encouraging the development of African agriculture, this flexibility often means that with the same amount of money we are able to provide up to a third more food, mostly because we're not obliged to spend so much money on ocean freight and local transport, expenditures that have no positive benefit in Canada at all.

Such changes in the food aid rules would make food aid in Africa both more efficient and more effective. We believe that a decision on this matter is currently being debated within both CIDA and Agri-Food Canada, and we encourage you to become engaged in that question.

À (1040)

In conclusion, we welcome Canada's advocacy for Africa and willingness to support African recovery efforts. Africa for too many years now has simply been let to drift out of the orbit of important world events and certainly world economic arrangements. We urge Canada to actively engage in a discussion with African leaders and civil society to address flaws in what is admittedly a starting point, and a good starting point: this New Partnership for Africa's Development.

We urge Canada to reverse the dramatic decline in support from its aid programs for agriculture and rural development. We argue that support for agriculture should be built around small-holder agriculture, since this will have the most immediate and broad-based impact on poverty and hunger reduction.

We urge Canada to extend its positive initiative on market access for the products of least developed countries to include other African developing countries as well.

We urge Canada to support WTO agricultural trade rules that prevent the undermining of African small farmers' livelihoods.

And finally, we urge Canada to provide greater local purchase flexibility in its food aid policy.

We commend the leadership Canada is providing to ensure that Africa is not left behind. We believe our recommendations can further strengthen that leadership, and we look forward to your questions.

Thank you.

À (1045)

The Chair: Thank you, Mr. Cornelius. And thank you, Mr. Clark.

I think the leadership we provide again stems from that small history you gave us at the beginning. I think my colleague, Anita Neville, would join with me in commending your mother, yourselves, the Mennonites, and all those individuals who--

Mr. Sarkis Assadourian: Can we join you too?

The Chair: --have over the years not only worked in Africa but have committed themselves to Africa and the Africans.

What will be happening in Kananaskis is the continuation of the work of people like yourself and others who see the need in Africa and who want to do something about the plight of individuals who are caught in a malaise of conflict and poverty.

We thank you for the presentation. I was happy to see that you made it all the way to Montreal to make sure that you were part of the very interesting discussion that's taking place there.

We want to go to questioning and we want to start with the member from Winnipeg Centre. We are in Winnipeg Centre.

Mr. Martin.

Mr. Pat Martin: Ironically, I represent the financial sector. Life is full of contradictions.

Thank you very much, Stuart and Jim, for a very concise and useful brief. It helps me to understand how complex the issue of trying to meet the basic needs really is when you point out there's sometimes a secondary impact and that by trying to meet basic food needs you might be unknowingly undermining the local agricultural economy. For those of us who don't deal with this issue every day, that's a real insight.

I had the opportunity to meet Julius Nyerere in Tanzania just before he passed away. He said “The WTO, the IMF, and the World Bank told us that if we cleaned up corruption and if we introduced multi-party democracy then the world would come and invest here. That was twenty years ago. Ten years ago many countries did meet those standards, and still the world is not really investing in Africa.” Whether it's a fear of instability or whatever, capitalists are still nervous about investing in Africa.

Has your organization brought out a ladder or a flow chart that would get us to the point where the world will actually invest in Africa? Is it basic needs, and then small industry, and then stability? I'd ask you to maybe expand a little bit on your views on the order in which things need to happen.

Mr. Jim Cornelius I don't think it's nice tidy work. First of all, Africa itself is a very diverse place. Many of the countries are in very different situations, so it's hard to talk about one solution for Africa.

There have been a lot of reforms made in Africa, but many of them are incomplete. The developed countries have told the Africans they must make these changes, but they have really failed to follow up with any investment.

If we look at the agricultural sector, speaking very specifically on what's happening in agriculture, there's been substantial dismantling of marketing boards, trying to change it to a more market-based system by price distortions against farmers. One can make a case that this is a very positive thing for farmers, but when at the same time there are no extension services, the health system is collapsing in rural areas, education is going down, and we're dumping in subsidized product from abroad, those small peasant farmers simply cannot take advantage of the reforms of HIPC, highly indebted poor countries.The arguments are there that these reforms should benefit the farmers, but the way the situation has actually unfolded, many of those farmers are worse off than they were before.

We think it's critical that there be investment in rural areas and that public investment...it's the responsibility of the African governments themselves, but it's also a question of what we can do. Without that type of investment, the chance of foreign direct investment, private sector investment, is very small.

There is an argument to be made that foreign direct investment doesn't generate growth, it follows growth. It takes advantage of growth, right? When things are starting to happen, then it comes in. It can enhance it, but it is not actually the thing that gets it going. There is a requirement for a certain basic public investment.

The reality is that much of African capital has fled, and that needs to be repatriated as well. People bring it back where they have the confidence. Providing support for the basic infrastructure in these areas will encourage investment in small and medium-sized enterprises with African capital and some more foreign direct investment.

À (1050)

Mr. Stuart Clark: If I could, I'll just add two brief points to that. First of all, there is already a high level of economic engagement with Africa. The trouble is, it's in diamonds and tantalum, and it's in areas of conflict. A lot of money is being spent. A lot of northern money is coming into Africa, but it's often entering in the form of small weapons, in the kinds of things that foster the instability that makes us stand back and say “You have to clean up your house or we're not going to invest here”. Economic engagement is there, but it's a pernicious kind of economic investment. What we need to foster is a more beneficial kind of economic investment.

At the risk of sounding the way farmers always sound, agriculture is really key, and I think we would want to say that this is a real area of sensitivity for Canada. Clearly, with respect to international trade rules, Canada has a strong interest in a rules-based trading system that would allow our farmers to trade fairly in the world. We are therefore very zealous about the question of opening markets and being able to compete in those markets.

The trouble is that when the elephants fight, the grass gets trampled. A lot of the small farmers in Africa are being subjected to the same trade rules as farmers in Argentina and Brazil, who compete directly with Canadian farmers, let alone the ones from the United States and the EU.

That was the point of our presentation. We really need to pay attention to that, because our own farm sector was the sector upon which our industrial development was built. It became strong because it was protected initially, yet in the case of Africa a lot of our policy prescriptions are putting a Canadian farmer on 5,000 acres head-to-head with an African farmer on five acres and saying go to it. That is simply not going to build a strong agricultural sector. That's an essential step.

The Chair: Did you follow the discussions coming out of Doha? Perhaps you could speak to that.

Mr. Stuart Clark: Certainly, I followed it closely. I think in some ways it was a very positive development in Doha. I think the Doha development agenda already suggests that if the ship is not turning, at least it's taking note of some other agendas.

Indeed, the WTO is about trade. It's not, first and foremost, about development. The attachment of the word “development” to the Doha development agenda places different expectations on the WTO.

Practically speaking, Madam Chairman, there was a lot of recognition in agriculture to what they call meaningful, special, and differential treatment. This meaningful, special, and differential treatment is a set of special rules for developing countries that they can actually use. Much of the S and D in the first agreement in agriculture is simply too expensive for them to be able to use. Looking for some meaningful, special, and differential treatment is in the text as a primary objective.

À (1055)

The Chair: Are the terms defined? How is “meaningful” defined?

Mr. Stuart Clark: Meaningful, special, and differential treatment are special provisions for developing countries that they can actually use. Let me be a little clearer about what it really means.

There are two major provisions called domestic support provisions. It's money paid to farmers. You all know it very well. Under the kinds of budgets and “wallets” African governments are working with, the scope for domestic support is limited at best. Indeed, many of their commitments to the IMF prevent them from doing very much in the way of domestic support.

The other kind of meaningful, special, and differential treatment is allowing them to implement border measures, higher tariffs for specific crops, or that kind of thing. It's not a step backwards. Many people will say you can't do it, because we're looking for progressive trade reform and this is a step backwards.

The point here is this is targeted to specific types of crops that are produced by small producers. It's simply giving governments the flexibility to be able to implement higher tariffs, or maybe even quantitative restrictions, for crops that are absolutely vital to the development of small-holder agriculture. It's a practical example of meaningful, special, and differential treatment.

The Chair: Thank you.

Mr. Assadourian.

Mr. Sarkis Assadourian: Thank you very much.

I'd like to also join my colleague in praising your efforts to feed the hungry in the world. A few years ago I was working with your organization to help send some food to North Korea. I had a meeting with your local guy in Toronto. We did our best, anyway.

Where do you see CIDA fitting overall in your activities to help the hungry in Africa, in particular, and the world in general? Do you agree with tying foreign aid, in this case, to human rights and good governance in Africa?

Mr. Jim Cornelius: On the first point, we have been observing, over the last ten years, I would say, that CIDA support for agriculture and rural development has declined dramatically. The reasons for this are complicated and not always easy to fully sort out.

Part of it is, when working at other priorities, things fall off the map because you have other priorities. It has been a very noticeable decline. At times, when we've gone to CIDA to talk about agriculture, we virtually get the message to go play in traffic. There has been very little response.

We have formed a group of NGOs that are working very hard now at lobbying CIDA and the minister to revisit the issue of agriculture. It is why we're so pleased it's actually going to be in the action plan. We think that will begin to create some focus on it.

Most poor people still live in rural areas and depend on agriculture for their livelihoods. It will be happening despite the migration to cities. We're still looking at 60% to 70% of poor people living in rural areas and depending on luck.

We think CIDA must re-engage with the issues if we're going to get serious about poverty reduction. It's where we see CIDA fitting in. They can look at the rate program and see what they are doing in terms of rural societies and agriculture.

The governance issue is a very complicated problem, particularly for organizations like ours. We're involved in providing food aid.

Most places where there is a serious food crisis are where things are not working. We talk about North Korea; we're very active in North Korea. This is not a country that's top of the list on the human rights record. This is a very poorly governed country with large-scale human rights abuses. What do we in that context? We think the issue is not whether you provide aid, but the type of aid you provide.

Clearly, engaging directly with the government itself around major infrastructure projects becomes highly questionable with governments that are involved in fairly serious human rights abuses and that are poorly governing their societies. Do we then abandon the people who are suffering the effects of that? We say we can't abandon ordinary people. You could invest your aid resources in other ways by working through NGOs, if we're looking at Africa, by working through African civil society organizations, and by working on some of the social issues, education, health. These are all the things you can actually get at that will provide a platform for its citizens to hold their governments to account.

The World Bank, a couple years ago, put out a useful report on assessing aid and they made this distinction between the type of aid you provide. They're saying not to disengage from countries where there are problems, but just do your aid differently. Though it's not a yes or a no, it's a question of how you do it.

And yes, in those countries where they have a good governance, where they're acting in quite responsible ways, I think then you can invest in different types of ways in those countries, because you will get the return on your investment.

Á (1100)

The Chair: Thank you.

Ms. Neville.

Ms. Anita Neville: Thank you, Madam Chair.

Welcome.

I think the reason our chair singled me out along with her in terms of our concerns relating to Africa is that she and I have been part of a group strongly advocating for more involvement of women in the African agenda. And I think that's an important piece of it.

You talked about the flexibility required to increase purchases of agriculture to 30% locally. What would be required to make that happen?

Mr. Stuart Clark: My understanding is that this is a matter for the Treasury Board, which issues guidelines to CIDA on how aid funds are refused. And that guideline has been currently set at 10%. That's the formality of it.

I think there are two principal administrative constituencies for this, the Department of Agriculture and Agri-Food and CIDA. Within CIDA, under their concern for strengthening aid effectiveness, I think they are very supportive of the untying of aid generally, and of increased untying of food aid. So they're solidly onside there. I think within the Department of Agriculture and Agri-Food there is a concern that untying any measure of Canadian food aid is going to be detrimental to Canadian producers. I think we want to be really clear about that.

However, I want to say that while that seems to be very clear on the surface, if you take it apart a little, first of all, we're still talking about 70% of those resources being used for commodities in Canada. Furthermore, as I mentioned in my presentation, a lot of the cost of food aid programs is tied up in the ocean freight and especially the local transport, where you have to truck food over very bad roads for long distances. It can easily double the cost per tonne.

Saving that cost by going to local purchase has no negative effect on Canadian producers. In fact, Canadian producers under a liberalized trade regime are going to sell all that they have. The only issue here is that under Canadian rules, food aid is the price-taker, which means that we pay a little higher price than the Indonesians do, if they're buying our wheat.

So there's a slight price premium. I don't know how it could be done. To address that issue, it is probably the nub of the issue to ask, what is the down side, that slight price premium for what would be less than 20% of our food aid? It would be a heck of a lot cheaper to write a cheque for that price premium and give that to whomever, to the Wheat Board, and carry on with the local purchase. We would still be able to provide more food.

Á (1105)

The Chair: Be careful now, the Wheat Board is sitting behind you.

Mr. Stuart Clark: I know that, I can feel it.

Mr. Jim Cornelius: And Victor Jarjour worked at the Food Aid Centre for nine years.

The Chair: We'll have him address that when he comes back to the table.

Mr. Stuart Clark: We'll stay to hear the answer.

At any rate, basically that's the issue. There is a perception that there is a domestic downside. We think it's a very small domestic downside, but so far I think the calculus has been that the political upside of the significant plus, in terms of what it would do in places like Africa, simply hasn't outweighed that.

The Chair: Thank you.

We thank you so much for joining us this morning and for helping us to advance our discussion. Thank you, Mr. Clark; thank you, Mr. Cornelius. I think you may wish to stay and hear what the Wheat Board has to say. I'm sure that if you have any further input, any further remarks, both your members of Parliament are here.You can either put them through them or directly to the committee. So thank you for joining us.

Mr. Jim Cornelius: Thank you.

The Chair: We'll take a two-minute break right now.

Á (1101)

Á (1107)

The Chair: We will continue the discussion with our witnesses from the Canadian Wheat Board. Mr. Larry Hill is the director of the board of directors, and Mr. Victor Jarjour is vice-president, strategic planning and policy.

Welcome, gentlemen. Please make your presentation. We'd like to ask some questions, get clarification, and make some comments at the end of your presentation.

We're very pleased to be in Winnipeg and very pleased to see you here.

Á (1110)

Mr. Larry Hill (Director, Board of Directors, Canadian Wheat Board): Thank you, Madam Chair.

I'd like to extend my thanks for providing this opportunity for the CWB to appear before the Standing Committee on Foreign Affairs and International Trade to discuss our views on the future of the North American relationship and the 2002 G-8 summit. Our comments will focus on the former. I will make the presentation, and Victor and I will try to answer your questions.

The Canadian Wheat Board markets western Canadian wheat and barley in the export market for both food and feed, as well as domestically for human consumption. The CWB is governed by a board of directors, which consists of ten elected farmers and five directors appointed by the federal government. I am an elected farmer-director, and I chair the trade committee of the board.

On my farm I'm in the middle of the seeding process right now. I've just finished seeding my lentils, so the inclusion of lentils in the new U.S. Farm Bill is something that's of major concern to me as a farmer in southwestern Saskatchewan.

Moisture is accepted at any time. Snow would not be good if it comes at the end of May, but we'll take anything right now. We do need moisture.

The CWB's mission is to maximize western Canadian producers' revenue through the marketing of quality products and services. The CWB represents and markets grain on behalf of approximately 85,000 western Canadian farmers.

The CWB neither provides nor receives subsidies. Wheat and barley are marketed globally and domestically, based entirely on commercial consideration. The revenues generated in the market, less administrative costs, are disbursed to all farmers in each respective pool account.

The CWB sales amount to $4 billion to $6 billion annually. Export sales account for 63% of western Canadian wheat production, 75% of durum production, and 13% of barley production. The remainder is consumed domestically. Western Canadian farmers are considerably more dependent on exports than their counterparts in the U.S. and the European Union.

North American relations have an understandable priority for Canadian diplomacy. From the CWB's perspective, the U.S. and Mexico are important but not unique markets for Canadian wheat and barley. The U.S. market took one million tonnes of western Canadian wheat and 368,000 tonnes of durum in the 2000-2001 crop year. That amounts to 7.5% and 10% of sales, respectively. In the 2000-2001 crop year, Canada's wheat exports to Mexico totalled 1.2 million tonnes, or 8% of wheat sales. Mexico continues to be an important source of competition to the CWB in the durum wheat market.

The sales focus of the CWB is global, not solely North American. While the U.S. is an important market for Canadian agricultural products, including wheat and barley, it is also a significant competitor in export markets. It is the competitive side of the relationship that lies behind the trade frictions in this area.

The CWB has been subject to nine trade challenges from the U.S. in the past eleven years, none of which have substantiated any of the allegations of underpriced selling or predatory practices. In fact, the 2001 report by the U.S. International Trade Commission provided considerable evidence to the contrary. Of particular relevance is the finding that in 59 of the 60 months surveyed, Canadian durum sales into the U.S. were priced higher than corresponding U.S. durum prices.

Canadian wheat exports experience significant unfair competition from U.S. wheat in third-country markets, through the use of food aid and export credits in a trade-distorting manner. Food aid used for commercial market development rather than to serve humanitarian purposes is of particular concern to us. Similarly, U.S. export credits, with excessively long repayment terms and other uncommercial terms, are being used as a means for surplus disposal or market development in commercial markets. These pose a serious threat to a fair-market-oriented international grain market.

Effective disciplines must be imposed on abusive export credits as well as on the illegitimate use of food aid, to provide a fair international trading environment. Trade friction and unfair international competition will exist as long as Canada and the U.S. compete in world markets. Effective international trade rules are required.

Greater North American political or economic integration in agriculture is unworkable while very serious policy divergence between Canada and the U.S. exists. Most notable at present is the U.S. Farm Bill, agreed to by the House and Senate confreres on May 1. It does not make sense to harmonize economic systems while extraordinary agricultural subsidy transfers are taking place and increasing in the U.S. Extremely high levels of farm support, as are witnessed in the U.S. and the EU, provide incentive for uneconomic investment, which ultimately leads to overproduction and depressed world prices.

These impacts are most damaging to those who must compete without such subsidies, western Canadian farmers included. It is estimated that subsidies in foreign countries have cost western Canadian grain and oilseeds producers $1.3 billion Canadian in net income annually. U.S. agriculture subsidies for wheat were $135 Canadian per tonne in 2000, compared with $26 per tonne for Canada. That is more than a fivefold difference, and will in fact worsen under the new farm bill. Annual farm bill spending will be approximately $17 billion U.S. per year, up from $10 billion, with devastating effects for unsubsidized competing producers worldwide.

Á (1115)

The farm bill will result in serious erosion of U.S. leadership to negotiate credibly for fairer and freer trade rules in the WTO or any other free trade negotiation.

Besides the downward pressure on grain prices, what is particularly discouraging about the farm bill is how it conflicts with U.S. WTO proposals aimed at trade liberalization. Considering the status of the U.S. as a global leader in world trade and its importance in the negotiation process, its contradicting views and actions may jeopardize the entire round. This bill casts serious doubt upon whether the U.S. will ever be able to subordinate domestic political pressures to its proclaimed international trade commitments.

Further economic integration or policy harmonization would not necessarily result in better and more secure access to the U.S. market for Canadian products, including wheat, as trade irritants are primarily due to the domestic political clout of U.S. farm interests. Greater economic and policy integration with the U.S. does not make sense while Canadian farmers and other businesses remain subject to trade harassment and while there is no adequate trade remedy to guarantee unfettered access to the U.S. market.

Collaboration on information sharing across the border is not legitimate if the information collected is simply used to prepare for more trade harassment of Canadians. The most recent trade challenge by the U.S. against the CWB illustrated once again that the CWB is a fair trader and that our sales to the U.S. are not deflating prices received by U.S. producers. The U.S. was unable to find any grounds for imposing tariffs on Canadian wheat destined for the U.S. market, and, as such, Canadian wheat will continue to be sold to American customers.

The discouraging aspect of the decision is the continued harassment of the CWB and Canadian farmers, as evidenced in the U.S. trade representative's decision outlining potential future trade challenges. According to the USTR, these might take the form of a WTO dispute settlement case, or countervailing duty and/or anti-dumping cases within U.S. trade laws.

The CWB would support the development of rules to curb the abuse of anti-dumping remedies and countervailing provisions in order to prevent the repetition of groundless trade challenges under domestic U.S. trade laws.

The CWB believes that effective forms of cooperation must guarantee the smooth flow of commerce. The Canadian Wheat Board and Canadian farmers have an interest in improvements that will streamline the flow of Canadian wheat and barley moving into North American markets.

Harmonization of standards only makes sense if it brings greater benefits to both sides. Harmonization should not mean automatically adopting U.S. standards, particularly where Canada has higher standards, and wheat is an example of that. There's no reason to believe that the elimination of Canadian regulations or institutions such as the CWB would prevent future trade challenges to the entry of Canadian wheat to the U.S.

The CWB also needs to ensure that Canada's grain registration rating and inspection system is not compromised by imports from the U.S. Any new policies and practices in border management should meet this requirement. The Canadian system is simply better at delivering quality wheat in a timely manner to customers.

The CWB fully supports multilateral and bilateral trade agreements as the means to establish fair trading environments, combined with clear rules to resolve disputes. Canada's interests should be defended consistently in all trade negotiations, including the WTO, and in bilateral and trilateral relations with the U.S. and Mexico.

For Canada to be effective in advancing the goal of continued and improved Canadian agricultural competitiveness in the North American relationship and elsewhere, the international policy instruments and resources required include better dispute settlement mechanisms under NAFTA, in particular, rules that would prevent or reduce petty trade action. If the 2002 G-8 summit wishes to seriously address the question of strengthening global economic growth, it should do so by considering the problems that will be facing agricultural trade following the passage of the U.S. Farm Bill.

Madam Chair, the current round of WTO trade negotiations is referred to as the development round. The G-8 summit also has a development focus. It is paradoxical when farm subsidies in OECD countries--that is, primarily in the U.S. and EU--are eight times the level of development assistance to poor countries. While the U.S. and the EU provide generous amounts of development assistance, their impact is often negated by domestic agricultural policies.

Á (1120)

In conclusion, Madam Chair, the U.S. Farm Bill is irresponsible public policy and will hurt Canadian farmers. Western Canadian grain farmers have already given what they can in trade negotiations and want the federal government to support what they still have. The Canadian system of grain quality and marketing should not be given up to harmonize with a less successful system.

Thank you, Madam Chair.

Á (1125)

The Chair: Thank you very much, Mr. Hill. You will find very little disagreement from the chair's position on your conclusion.

Mr. Jarjour, do you have any comments, or will you be answering questions with Mr. Hill?

Mr. Victor Jarjour (Vice-President, Strategic Planning and Policy, Canadian Wheat Board): Yes, I'll respond with Mr. Hill.

The Chair: Thank you.

We'll go now to Mr. Martin.

Mr. Pat Martin: Thank you, Madam Chair.

Thank you, Mr. Hill, for a very interesting brief.

I don't know about my colleagues around the table, but as good as your presentation was, it absolutely makes my blood boil. Any Canadian should be furious about this, because quick on the heels of the softwood lumber dispute we have this farm bill that comes along, which, if I understand you correctly, will escalate the subsidy for grain to $135 a tonne versus the Canadian subsidy of about $26 per tonne now. I'll ask you later to see if I have those facts correct for the record.

Whose bright idea was it to begin with to unilaterally dismantle our subsidies to our farmers when our main competitors and trading partners are in fact expanding and escalating theirs? What bright light went on in somebody's head in Ottawa to even begin that process? Would you agree they should be dragged into the streets and shot? I guess that's my question.

Mr. Larry Hill: I won't go quite that far. I do think Canada entered the last round of negotiations in good faith--

Mr. Pat Martin: On their knees.

Mr. Larry Hill: --and gave up subsidies in good faith that other countries would give up subsidies, but clearly the United States and the EU did not do that.

The tactic the U.S. has developed here does make my blood boil as a pulse producer. I've been producing pulse crops for 15 years now. To see this inclusion and have the notion that they would basically subsidize away the value of what we have developed in my part of Saskatchewan does make my blood boil, like all the other producers in the area.

Look at the U.S. I think when you're guilty, a good tactic is to blame somebody else, and the U.S. is doing this by pointing the finger at Canadian farmers and the CWB. They're trying to divert attention from their issues and they're pointing it at us.

Mr. Pat Martin: A smokescreen.

When I first got to Ottawa in 1997, it was about the time the east coast cod fishery collapsed. Some of us were wondering about the size of the bailout programs, the TAGS program, etc. They were $6 billion or $7 billion a year. The east coast Atlantic MPs came to us and said, “How would you feel if your entire industrial base disappeared overnight and was undermined? Wouldn't you want the federal government to bail you out or at least back you up to some degree, to save your economy?”

Well, 11,000 farmers in the three prairie provinces, by my figures, left the farm in the last year alone. They just gave up, just kept on farming till it was all gone and then walked away. Would you agree that the federal government should at least be matching the U.S. subsidies until such time as we can negotiate a true dismantling of the subsidies? Should they not respect, recognize, and acknowledge agriculture at least to the degree that they acknowledged the collapse of the east coast fishery, per year?

Mr. Larry Hill: Speaking on behalf of farmers from Saskatchewan, we see this as a national problem. This is completely beyond the scope of our province. We don't have the ability in Saskatchewan, where we have a huge percentage of arable acres of land and a very small population. It's similar for Manitoba; Alberta is a slightly wealthier province. Nevertheless, in the west we do see this as a federal responsibility, because this is a trade action against the country of Canada, which basically affects producers in western Canada.

Mr. Pat Martin: Thank you.

Á (1130)

The Chair: Thank you.

Ms. Neville.

Ms. Anita Neville: Thank you for your presentation. I think you'll certainly find unanimity around the table on the concerns you've expressed here.

I was struck by a comment you made regarding the U.S. as a global leader in world trade and their importance in the negotiating process, the fact that their contradictory views and actions may jeopardize the whole trade round. You speak about internal political pressures within the U.S. in relation to wheat, and certainly to the softwood lumber issue. Have you any advice for us in terms of how to address the internal political lobbying, the pressures that go on within that country? I think that is a critical factor in the softwood lumber issue, and who knows what else.

Mr. Larry Hill: Madam Chair, to the member, I was completely aghast at the first meeting I went to in the United States, where the U.S. producers were lauding their wheat man of the year--this was the politician who brought the most money from Washington to American farms. They put the man on the podium and gave him a plaque that was this high, oak and gold.

When you go there and witness the significant sophistication--I guess that's the word I'd like to use--of the American farm lobby, I think you'll be shocked.

I don't clearly understand their political system, but they do have a system of trade-offs that gives politicians from the smaller areas more power than they would normally have. I see this as being a very difficult issue for Canadians. The American farm lobby is going to be powerful.

The other thing you have to realize is that the American government subsidizes the American farm lobby. They put money into the farm groups doing the lobbying, so they have the ability to hire professional, sophisticated people.

Mr. Sarkis Assadourian: Political action committees.

Mr. Larry Hill: Yes. They have several. They have the National Association of Wheat Growers, the U.S. Wheat Associates, the Wheat Export Trade Education Committee. All of these groups are very sophisticated, have presences in Washington, and are partially funded by the American government, so in fact they're putting taxpayers' money into the lobbyists. I see that as being very difficult to address.

Victor, I don't know if you have something you'd like to add to that.

Mr. Victor Jarjour: I think you've covered the key points. It's fundamentally frustrating to have the Americans go into Geneva in the trade negotiations and preach one thing, and come home and deliver quite something else, all in the name of an upcoming election. The problem in the United States is that there are elections every two years, and you have a revolving list of issues that keep getting addressed every two years in a way that affects producers in other countries in extremely negative ways.

Ms. Anita Neville: Thank you.

The Chair: Mr. Assadourian.

Mr. Sarkis Assadourian: I have a short comment regarding subsidies.

My colleague asked who in Ottawa removed the subsidies, but I want to remind everybody here that.... First of all, I'm sorry there is nobody here from the Alliance Party to defend their position, because they are the ones who always tell us not to do this, not to do that--Americanize, harmonize, whatever. We haven't even started Americanizing or harmonizing, and we're already paying for it.

Maybe the producers of these products should stand up and tell the Alliance Party to take a stand that is more beneficial to Canadian farmers, and to Canadians in the long run, rather than to the political short-term needs in the west.

Maybe you would choose to comment.

Mr. Larry Hill: Madam Chair, to the member, the American ideal, I think, is well ingrained in some political parties. The problem we've had with farm groups in the west is that we're...I guess “dysfunctional” would be a word to describe it, because you can find a farm group that will support almost every opinion. This has allowed anyone to pick whichever farm group they choose. They can pick the message they want. It's out there.

But I do see a coming together of farm groups in the west to where they're going to have more issues raised by one voice. I think they have definitely told the Alliance Party that they are going to want to see farm support.

Mr. Sarkis Assadourian: [Editor's Note: Inaudible]

Mr. Larry Hill: I think farm groups are going to stand up and tell these political groups that's how they feel. I would be a bit shocked if the politics and policies don't change somewhat to become more representative of what farmers are going to ask for.

Mr. Sarkis Assadourian: Thank you.

Á (1135)

The Chair: Thank you, Mr. Hill.

I'd like you to speak a little bit more about how that discussion could find itself in two areas of the G-8 agenda. As you know, the first item on the agenda might be the economic issues. The next item is the focus on Africa, and the third is global security. I'd like to see this as some part of the agenda.

Maybe I can ask you in some way to reflect on a two-pronged approach. One is the issue of harassment, for want of a better term. Is there some way in which we can strengthen, as you say, the global economic growth and get that item on the agenda?

At the same time, could you respond to the concerns the Foodgrains Bank raised earlier, where they suggested that the amount of food that can be purchased locally...? And they argued that the impact on the Canadian producers would not be too large, etc.

So as we talk about Africa and the G-8, how do we get this item on the agenda and make sure that it gets the economic perspective, and at the same time that it does get into that second part of the agenda, which is the issue of NEPAD, the economic partnership for Africa?

Mr. Larry Hill: Thank you, Madam Chair.

I will start this and I'm going to need Victor's help at the end of it.

Really, a 5,000-acre farmer in western Canada is a pretty small player when it comes to the world picture. I have been to meetings with farmers who have a farm my size, not that the size of my farm is 5,000 acres, and I think I received around $10,000 or $12,000 in subsidies last year on my farm. An American farmer of that size would be completely aghast, because he probably received $250,000. The difference is huge.

To put another perspective on this, where I come from American corn is flooding into western Canada, driving down the price of barley. In fact, I think the recent number is 1.3 million metric tonnes of corn that has come into western Canada this year so far, and this is affecting the price of barley. The farmers are out there saying that this is subsidized corn, and can't we do something about it? The answer is no, we don't have the clout to take on the United States. So I think all smaller farmers in the world need a rules-based system where they can count on the rules. It can't be the size of the country that's waving the stick around the world. That's the dilemma we have here. I think farmers in Africa will be in the same situation. They're going to have to look to the WTO to come up with a rules-based system that will give them some effective way of getting out of an unfair treatment.

The Chair: Mr. Jarjour.

Mr. Victor Jarjour: Thank you.

I was hoping we would get to the comments that our friends from the Foodgrains Bank were making earlier.

On the first item, I think there's a question of policy convergence. Clearly the U.S. and the European Union are both very generous providers of development assistance. There's no denying that. But what's important as well is that what they try to do with their development assistance programming is quite often offset by what is done through their domestic policy. We alluded to that at the end of our presentation. When you develop a farm bill that subsidizes farmers, that contributes to surplus, that contributes to lower prices, your effect is a disincentive in not only countries like Canada and other producing countries, but also in developing countries.

At the same time, they have certain food aid instruments that one would question whether they're driven by food aid criteria or by surplus disposal criteria, and that makes for fundamentally different food aid programming.

One example is PL 480, Title I, which is their U.S. program that provides subsidized interest repayment over extremely long periods of time. It seems to me that kind of development assistance is simply contributing to developing country debt over a long period of time.

As far as the comments made by the Foodgrains Bank are concerned, to a certain extent I believe that much of this is less a question of whether food aid ought to be tied or untied. Fundamentally, it's a question of whether or not enough food aid is being provided, where areas need it the most.

In the mid-eighties, I believe, Canada's food aid program was in the order of some $400 million a year. I understand at the present time that Canada's food aid program is considerably less than $200 million a year. I'm not sure there are fewer hungry people in the world.

As a first step, perhaps what we should be looking at is the level of Canadian food aid and whether or not, as well, we are respecting our international obligations when it comes to food aid, under what is called the Food Aid Convention, which is a legally binding obligation. Canada has a requirement, an obligation to supply a certain amount of food aid under that, and I understand that we in fact may not be meeting that obligation.

Á (1140)

The Chair: Mr. Martin.

Mr. Pat Martin: Getting back to how we first wound up in this mess, we sent somebody to negotiate on our behalf and they came home with what we have now. I overstated things the first time around, but surely there are people thinking about how much more of this abuse we are going to take before countervailing measures start, or before we simply say “If you're going to treat us this way, you can freeze in the dark--we'll turn off the tap for your natural gas”. They'll take some measures to bring them back to the table with some genuine, sincere....

I would ask you this question. Are you hearing desperate measures being called for in terms of countervailing duties or something else to trigger things? Are you hearing from your member-growers the level of sheer frustration that would say “Somebody traded our family cow for three beans and none of them have grown. We've sent these people to negotiate for us and they came back empty-handed.”

Mr. Larry Hill: The short answer to that is yes. I alluded to the American corn issue, to the producers in Alberta, especially where the corn is coming to. Lethbridge has the highest market for feed barley in Canada, and the price is being deflated by American corn being railed in and trucked out to feedlots. The producers there say “Can't we do something about it? We have natural gas pipelines heading south. We should just turn them off until this nonsense stops.”

There's no doubt that it's raising the hackles and the frustration of Canadian farmers. I think we have to be clear here, though, that the Americans are trying to make sure they have a huge supply of cheap grain within their country. The dilemma we face here is that it's causing us a lot of economic difficulty. I don't know how we'll ever come up with a way to handle this when the Americans are so large.

As much as we've run them down here, they are a really good customer for our grain. We really do want to sell our grain to their mills, because they want our grain.

I was at a meeting in New Orleans, and the miller stood up and said “Listen, in the United States you have over a thousand varieties of the various classes of wheat. When we order grain we may have every carload baking in a different manner, and we have to do a test. If we order Canadian grain, the whole trainload will bake the same.” They clearly recognize the advantages of our system when you talk to the millers in the United States.

To the American farmers' psyche, if you're winning, then you surely must be cheating. That's what they think. Clearly, they can't catch us cheating, because we've gone through all these investigations--

Mr. Pat Martin: Nine times....

Mr. Larry Hill: --and no evidence was turned up. So now the notion is, well, we should change the rules.

Á (1145)

The Chair: We should charge them with harassment.

Mr. Larry Hill: Well, we have to resist that. And if there were some way.... Clearly these challenges are under U.S. trade law, and we're not going to get the United States to change their domestic laws to favour us, I don't think. I think that's going to be a pretty tough challenge.

The Chair: At the same time, I think we want to be very fair in our business demeanour. We don't want to lay blame and say “We sent some people down there and they came back with a bad deal for us.” I don't think that is really what Mr. Hill was saying. I think we recognize the world we were in and the give and take of that arena.

I've heard a level of frustration expressed by those who give leadership in expressing the government position--Pierre Pettigrew; I've heard the House leader saying it's obscene. I think there is a firming up and a determination that this is one issue where all of us, on all sides, are saying we just can't allow this irresponsible public policy direction to be taken. We appreciate that this is a timely issue that has come before our committee, and we appreciate the opportunity to have the dialogue with you.

If there is anything further you want to get before our committee, we'll make sure today that we convey your presentation to us back to Ottawa and make sure it is current with whatever work is happening right now with the committee.

Thank you so much for joining us, Mr. Hill and Mr. Jarjour. Keep up the work.

We'll now invite the Manitoba Federation of Labour to the table. We have president Rob Hilliard and communications coordinator John Doyle. Welcome, Mr. Hilliard and Mr. Doyle. You'll make your presentation, and then we'll engage you in discussion. Thank you for joining us.

Mr. Rob Hilliard (President, Manitoba Federation of Labour): Thank you so much for having us here.

The Manitoba Federation of Labour represents the interests of Canadian Labour Congress-affiliated unions and their members in Manitoba. We provide a forum where common positions on issues can be developed and implemented. In all, more than 90,000 working men and women belong to our affiliated unions.

The MFL is pleased to have this opportunity to share some thoughts with this committee about the upcoming G-8 meeting in Kananaskis, Alberta. The material prepared for these hearings outlines three principal interest areas that will be addressed by the national representatives of the G-8 countries in June: one, strengthening global economic growth; two, building a new partnership for Africa's development; and three, fighting the scourge of international terrorism. All of these are important areas of discussion and planning; however, this presentation will focus on some issues that aren't part of this meeting's agenda and we believe should be.

Concerning global economic strategies, in our opinion, focusing the meeting on strengthening global economic growth, in the absence of meaningful discussion of the challenges facing working families and the elimination of poverty, is short-sighted and misguided. Many of these challenges flow from more than a decade of globalization policies and trade agreements entered into by the Government of Canada to facilitate the implementation of those policies. In other words, the first order of business is to fix the problems globalization has created while promoting strategies that will help us avoid the reoccurrence of them.

In February 1997 an annual meeting of influential and powerful international business leaders occurred in Davos, Switzerland. Participants heard warnings from advisers within their own ranks and from political leaders that enough is enough. The international drive to maximize corporate profits at the expense of communities and people was building a backlash against globalization throughout the world. Arnold Koller, then president of Switzerland, told them, “It would be disastrous if the historic process of freedom ushered in by the fall of the Berlin Wall were to give way to a new kind of servitude through the inhuman application of so-called market forces”. Former deputy secretary of the U.S. Treasury Larry Summers warned them that “global integration has become associated with local disintegration”.

At this point, I believe the written script says “past AFL-CIO president”. It's not our intention to kick John Sweeney out of his office. I believe he's still the president.

AFL-CIO president John Sweeney was even more direct. He told the corporate executives gathered there that attacking good wages, health care, a clean environment, and unions was building to a fury. He warned they were pushing toward a breakdown of society, with people being pushed to work longer and harder for less, while corporate executives earn multi-million-dollar compensation packages. He said “This can't be sustained. Working people will not watch their families erode without reacting.”

Only weeks ago, Manitobans watched with horrified fascination as a transnational corporation blackmailed workers and governments into agreeing with its demands or face the flight of the company to a greenbelt state in the United States. This is a company that has been operating profitably in Winnipeg since 1927. The workers were forced to accept substantial contract concessions after undergoing tremendous public pressure that poisoned the workplace, divided workers, and in some cases caused serious rifts within families that will take years to heal.

In addition to the concessions made by the workers, the governments of Canada and Manitoba were also forced to provide more than $25 million in support to the company in order to keep them operational in Winnipeg. This was made possible by international trade agreements that have turned out to be documents emphasizing corporate rights at the expense of rights for people.

The fact of the matter is, to date, globalization has worked out well for powerful and ever more profitable transnational corporations. It has, on balance, not been kind to working families or to poor people in developing countries.

In the 1990s the Canadian industrial hourly wage increased by only 1.8% for the entire decade. This amounts to an average hourly increase of 0.1% per year, compared to labour productivity increases of 1.2% per year. In other words, wages are not keeping up with productivity increases.

Over the same period, the base wage in collective agreements rose by 1% in real terms for unionized Canadians working in the private sector. In the public sector, however, the base rate actually dropped by 0.5%. Not surprisingly, stagnated income and an average national unemployment rate of 9.8% during the 1990s had substantial ramifications in terms of poverty.

Between 1989 and 1998, the number of Canadians living in poverty rose from 2.7 million to 3.6 million, a 34% increase. The number of single women living in poverty increased from 350,000 in 1989 to 503,000 in 1998. It's an increase of 44%. For men, the increase was 61%. The number of children living in poverty rose by 26% over the decade.

In most provinces, the drive to remain competitive in the global economy has resulted in round after round of personal and corporate tax cuts pinching off or seriously compromising critical tax-funded social programs at a time when people in need require them the most. “Free markets” has become the defining phrase within the context of globalization. The disparity between those who benefit from globalization and those who don't has fuelled the backlash against the whole process.

In June, the G-8 Kananaskis meeting will unfold amidst some of the tightest security ever seen in Canada. It will occur in an isolated part of Alberta where the comings and goings of those not invited to participate in the meeting can be closely monitored and tightly controlled. This, of course, anticipates that anti-globalization demonstrators will protest outside the meeting, as they have at similar meetings for years.

Meetings in Vancouver, Washington, Prague, Seattle, Quebec City, and Genoa attracted tens of thousands of angry people unwilling to gracefully take their economic lumps in silence. Water cannons, riot squads, attack dogs, rubber bullets, fences, and pepper spray have not deterred them.

How can this be turned around? How can we restructure our approach to economic growth in a way that benefits ordinary people?

Adopting that goal as a base principle in all policy discussions would be a good start. This means the G-8 countries should make a strong commitment to adopt economic policies that benefit the average person in the street, as well as the corporate bottom line.

Á (1150)

Economic participation and benefits for ordinary people do not preclude profits for corporations. The Canadian labour movement supports the idea that our companies should be healthy and profitable. That's where working people and our members are able to find well-paid and interesting jobs. But profits for corporations and little or nothing for working people simply cannot be sustained any more. This means that the sustained erosion of workers' rights to unionization, of the integrity of the environment, and of key public programs, such as the Canadian health care system, which assists working people, must end.

Putting all our eggs in the American economic basket has been a strategy for Canada for decades, and for a large part of the world since the mid-1990s. The result is economic volatility when the American economy is performing well, and widespread, even global, recession when it is not. This concentration severely limits the ability of the world economy to offset and help reverse the recession. We urge the G-8 to adopt economic strategies to reduce reliance on exports for the U.S. market and to broaden trade lanes throughout the world.

Another element that needs immediate and effective attention is the global financial system. Speculator-driven currency trading has been responsible for a great deal of instability in some countries. Establishing a currency transaction tax, the so-called Tobin tax, in G-8 countries would bring a measure of stability to the global financial system that currently does not exist. Such a tax could be a disincentive for excessive and economically unhealthy currency speculation, and could be used to create an international development fund, providing important benefits to less developed countries.

At the very least, Canada should require international investment to remain in Canada for at least six months or a year. This sort of provision saved Chile from the calamity of capital flight, which severely damaged Thailand's economy during the same period of the 1990s.

At this juncture, the MFL is pleased by a number of indications of support for this idea by some Canadian government members in recent months. A currency transaction tax is also gaining important support outside of Canada. We recommend that Canada lead the way in Kananaskis and promote this strategy to its G-8 colleagues.

In closing, we'd like to note the fact that we didn't address all the issues on your agenda. We apologize for devoting our allotted time before the committee solely to the economic matters. This, however, does not indicate disinterest in other questions that will be discussed at the G-8 meeting. With the short timeframe that was allotted to us, plus the fairly short notice period, we simply weren't able to address the other issues in a comprehensive manner. We would be pleased to respond to whatever you may have verbally. We would note that the Canadian Labour Congress, our national organization, has addressed those issues.

Thank you for the time, and we'd be pleased to answer any questions you have.

Á (1155)

The Chair: Thank you, Mr. Hilliard. Did you know that Mr. Georgetti had been before the committee with a very thorough brief?

Mr. Rob Hilliard: I am aware of that, yes.

The Chair: In Atlantic Canada as well as in Quebec we heard from some other members of the Labour Congress. They've covered a wide spectrum of the issues. Of course, you have several partners here this weekend from Africa. I met some of them in Montreal, and they were very much conversant with the issues. So the issues are on the table.

Mr. Rob Hilliard: Yes. We are aware of that.

The Chair: We want to thank the federation and the congress for the work you're doing in this area, and the awareness you are raising. I think you have a responsibility in this dialogue.

Mr. Rob Hilliard: Thank you.

The Chair: Now that our preaching is over, we go to Mr. Martin.

Mr. Pat Martin: Thanks, Rob and John. Welcome. I wish you were here for some of the earlier presentations. It would have helped for some of them to hear the balance you're bringing to the debate.

I would simply ask you to use what time we have to expand on the idea that.... Your challenge is how to restructure our approach to economic growth so that it benefits ordinary people. You do cite examples that clearly indicate that the rising tide hasn't been lifting all boats, as the cliché goes. In fact, figures came out today on CBC radio while I was driving to work. New figures are out that 18.5% of all Canadian children are living in poverty, which is up from the previous figure. I'm not sure what that was.

I should point out that in my own riding, where we're currently sitting, 52% of all children live below the poverty line. It is the third poorest riding in all of Canada. We see it very graphically when our quality of life slips even one iota, because when you're already on the margin, it's not that far to tip over the edge into poverty.

Your point is well taken that, if anything, there has been a race to the bottom. I won't restate things you've said.

I would ask you a question. In the first brief we heard, a fellow made the point that “Economic nationalism is a generally discarded ideology, and--if followed--would severely damage the standard of living and way of life of Canadians.” He makes the point that economic nationalism is an obsolete concept. Perhaps you'd like to comment on economic nationalism versus cultural nationalism and economic sovereignty leading to a loss of sovereignty generally.

Â (1200)

Mr. Rob Hilliard: Rather than use the term “economic nationalism”, which I think has a lot of negative connotations, I believe that a good way to look at this is that any people in a free and democratic country ought to be able to direct their own economy for their own benefit. That would include things such as making decisions about their own economy. If in Canada, for example, we decide that a path the United States has chosen is not the path that's best for us, we shouldn't be forced through economic pressure and trade agreements to give up our ability to make decisions and to have to go blindly down that path like lemmings. I think one of the characteristics of many of these trade agreements is that in fact we are forced to give up our ability to decide things for ourselves. Nations have legitimate interests that don't always coincide with those of other nations. If we give up our ability to make decisions in our own interests, then we give up our freedoms and our democracy, and we also, frankly, lower our standard of living.

With regard to the point that economic growth is of vital importance, I agree that economic growth is important. When we don't have economic growth, our members don't work, or they're forced to work for lower wages and with reduced workplace conditions. Having said that, promoting economic growth, period, does not pay off for working people and for large segments of the society.

If we were to approach these trade deals with the objective of wanting to raise the standard of living of most Canadians, we wouldn't enter these agreements. We wouldn't put on the table the kinds of policies and agreements we now have.

If we wanted to raise the standard of living of working people, we would look at the things that are important in order to do that. Using the labour movement as an example, research clearly shows that everywhere in the world where there is unionization, the standard of living of working people goes up. The ability for them to control their workplace conditions improves. That's a fundamental principle of democracy. In these trade agreements, if it doesn't explicitly say we want fewer unions, it clearly creates pressure on labour movements and unions that diminishes their membership and their clout in the process, and, as a result, on average lowers the standard of living of working people. I would say that we should go into trade agreements saying upfront we need to promote unionization, and where we have unionization we need to put into place legitimate protections to ensure it continues.

The NAFTA sidebar agreements on labour, to be perfectly blunt, are useless. They do nothing. They even state in those agreements that there is nothing in terms of domestic law that we can change. Domestic law shall prevail. All the trade agreements say is that you must enforce your own domestic law, and even there they have proven to be toothless. We have clear examples where the Canadian labour movement has attempted to use those provisions for what are obvious violations of even Mexican labour law. They have proven to be absolutely toothless in preventing what is clearly employer-dominated unions from using violence in many situations to prevent legitimate unions from forming.

They really enjoy absolutely no respect at all in the eyes of the labour movement in this country. If you really want to do something demonstrable to ensure that the standard of living of working people will rise, you put that upfront in the trade agreement and you say this must happen.

We must not attack the rights to bargain collectively, a practice that does go on and that is a feature of these globalized trade agreements. The pressures even come to bear here in Canada. We have been facing across this country in the last 10 or 12 years systematic attacks on labour standards and legislation, systematic erosion of long-standing labour rights. We've had it here in this province, we've had it right across the country, and we continue to face it. There is constant pressure to erode the labour rights we've had in legislation in this country for the last 30, 40, 50 years. These are features of these trade agreements. These are features of international globalization that continue.

The same pressures continue to erode the protection in environmental provisions. The same features are there that erode the ability of communities to have some standards of protection in their own communities. All these things get wiped away under marketplace-driven solutions that pay off for some but are not paying off for large numbers of others.

Â (1205)

Mr. Pat Martin: Your point is well taken. Maybe I'll even make a comment on the erosion of what we consider the post-war labour compact because of some of these trade agreements--that is, when productivity and profits go up, workers' wages are supposed to go up. That was the deal to ensure post-war labour peace. We've all but agreed that this compact has been chucked by the wayside. Could we have your thoughts on that?

Also, if you have time, briefly touch on the Tobin tax. I'm very glad you raised it. It was an NDP private member's bill that would have had the Parliament of Canada be the first parliament in the world to endorse the Tobin tax. The Minister of Finance has committed himself on a number of occasions to raising it at the G-8 level. Any further comments on that would be appreciated too.

Mr. Rob Hilliard: The Tobin tax idea or some form of regulation of speculative capital that comes in and out of a country is, I think, absolutely essential. I don't recall the exact years, but in the 1990s there was a severe downturn of the Asian tiger economies because there was a massive capital flight out of those countries all at once. Now, the downside effect of all that did not occur in Chile simply because they had a requirement for investment capital to remain in the country for...I'm not sure if it was six months or a year. However, there was a requirement that it couldn't stay there for only minutes or hours or days, so the ability to move money in and out quickly wasn't there for Chile.

In fact, if there were some provision like that in Canada, we would not then be vulnerable to all those short-term speculative capital flows in and out of the country. We believe that the idea of the Tobin tax or something like it has great merit, frankly, because it can also address the inequities that have occurred around the world in terms of third world development. It can be used to create a fund that can be directed and targeted towards development in third world countries. With that, we would also have the clear ability to exercise discipline on the quick in-and-out flows of speculative capital.

What's happened with globalization is that speculative capital is the dominant capital in the trade flows now, not investment capital for growing enterprises and for the development of trade and services. Instead, we have what is frankly gambling money going in and out and being used to inflict somebody else's point of view on the elected governments in those countries. Those who control large amounts of speculative capital have the ability to dictate to democratically elected governments what their fiscal and economic policies will be by simply having capital come in and go out, this based on a moment's changes. They're controlling the world economy in ways democratic governments can't do right now, and there needs to be some ability to regulate that for the benefit of elected governments and a broader spectrum of people.

We would promote the idea of a Tobin tax. We have noted that the finance minister has at least publicly mused about its having some value. We would encourage him to pursue that a little more aggressively. If in fact the time isn't right for getting other countries to agree with us on that, then at the very least we should do something to require capital to remain in our country for some minimum time so we're not subject to somebody else's economic views or dictates, if you like.

Thank you.

Mr. Pat Martin: Thank you.

Â (1210)

The Chair: As we talk about capital flows, workers' rights, the integrity of the environment, and a whole series of issues that I know you've put on the table and that the CLC supports, I just wondered if you could speak a bit about the issue of peace and conflict resolution. It seems to me it's almost like the higher level or whatever before we can begin to do all of the basic...especially in countries like the DRC, Sierra Leone, or any of the African countries.

As we approach the NEPAD, what are some of the activities you are encouraging in the area of peace-building and conflict resolution, some ways in which people could operate their lives in a secure environment so they could then approach these higher-level issues?

Mr. Rob Hilliard: I guess we would approach that in a more indirect way.

My apologies for going at it this way, but there are legitimate differences of opinion that arise--and I'll use the labour context here to explain--between employers and employees. I think it's naive to expect everybody to get along all the time like one big happy family, and I think the area where that becomes most clear is in the area of wages and benefits, even where it requires an employer to spend money on safe workplaces, for example. Employers will quite legitimately from their perspective say “We don't want to spend money here. We don't think we can afford to spend money.” That might be their opinion, that they simply don't want to spend as much, whereas workers would say “Our standard of living is being eroded and we need more wages”.

There's a legitimate structural difference of opinion on that. To expect everybody simply to get along and agree I think is naive. There are legitimate reasons for differences of opinion. I think what we need to do is have sensible ways of resolving those differences.

The Chair: I was speaking in a more global sense, because as we talk about the new economic partnership for Africa, we're talking about a number of countries where there are democratic processes and they're ready for some of the discussion we're having right now, but there are places where there is war, conflict on the ground, where people's lives are so destabilized that they couldn't even begin to address those.

I'm asking if the CLC works in some of those countries where peace-building has to be the number one issue before you can move into workers' rights, labour rules, or any of that. In other words, are you in those areas where peace-building activities...working with people on the ground to make sure that the fights, the struggles, the arms, and all of those things that are part of their neighbourhood...before you can get into some of the other issues?

Mr. Rob Hilliard: To the best of my knowledge, we are involved in those kinds of issues through other organizations and through our participation with other peace organizations. I certainly know that the Canadian labour movement has been active in supporting financially and organizationally some of the efforts in the Sudan, for example, and in Ethiopia and other places like that. We probably have less profile in a lot of those countries that don't have structures for us to work within. We tend to liaise with other labour organizations around the world. We do a lot of that. But where in fact there aren't those organizations developed, where the country is in a situation that perhaps the basic structures in that country don't even have those sorts of things.... It's a little less difficult for us to be more directly involved, and we tend to be involved with peace organizations, with development organizations. Oxfam--

The Chair: [Editor's Note: Inaudible]...with others.

Â (1215)

Mr. Rob Hilliard: Yes, we do. We have a less direct labour movement presence in those places, but we do work with others in those efforts.

I guess in some ways it's just a little more difficult for us to do that. If the Canadian government were to get more active in the Sudan or that kind of thing, I'm sure we would be happy to join in.

The Chair: I'm sure that through partnerships on the ground, that is really where the important work takes place. I know the issue of women and women's involvement in small economic activities--

Mr. Rob Hilliard: We've sent a great deal of aid to Afghanistan, for example. We've done things like that.

My colleague has reminded me of something else here, and I should mention this. My union is the United Steelworkers of America, and I'm very familiar with the fund that they've created, called the Steelworkers Humanity Fund. I know we're not the only union to have done something like that. I believe the autoworkers have, I believe the Communications, Energy and Paperworkers Union has, and there are probably others as well.

Often we're encouraged at the local level, when we're negotiating with employers, to dedicate so much per hour, a cent per hour or something, into this fund. We have many collective agreements where we have done those sorts of things, and these funds are then used often in just simply donation kinds of activities. Also, they might be directed toward some particular labour movement at a very early stage level of development, where we might encourage--

The Chair: Election preparedness.

Mr. Rob Hilliard: Sure, those sorts of things.

We've sent delegations. In fact, we sent delegations to South Africa long before, when there was still the apartheid regime there, to participate in elections to promote more democratic participation and things like that. So we have been active in areas like that, and often it does come through some of these funds that we have set up specifically for that purpose.

The Chair: That's important work.

Mr. Rob Hilliard: Yes, it is. I agree.

The Chair: Again in this, we have to work at various levels, and discussion has to take place at different levels. So we appreciate your being with us today. As I've said, we've heard from your colleagues across the country, and we'll take your brief along with all the others that we've had. The researchers have their work to do as they help us to formulate recommendations that hopefully we'll have ready for the ministerial meeting and the action plan that is going to go into this presentation at the G-8 summit.

I know they also told us about your engagement around the time of the summit and the activities that will be on the ground at that particular point in time. So we want to thank you for your work, your participation, and for the awareness and ensuring that we all, as Canadians, do the best we can at this point in time as we go into the summit.

Thank you.

Mr. Rob Hilliard: Thank you.

The Chair: Now we will bring this meeting here in Winnipeg to a close and convene again tomorrow in Toronto.

The meeting is adjourned.