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37th PARLIAMENT, 1st SESSION

Standing Committee on Foreign Affairs and International Trade

EVIDENCE

CONTENTS

Monday, May 6, 2002

0900

The Acting Chair (Mr. John Harvard (Charleswood St. James--Assiniboia, Lib.))

0905

0910

Professor Richard Harris (Telus Professor of Economics, Simon Fraser University)

0915

0920

0925

The Acting Chair (Mr. John Harvard)

Mr. Martin (Esquimalt—Juan de Fuca)

Prof. Richard Harris

0930

Mr. Keith Martin

Prof. Richard Harris

The Acting Chair (Mr. John Harvard)

Mr. Yves Rocheleau (Trois-Rivières, BQ)

Prof. Richard Harris

0935

0940

The Acting Chair (Mr. John Harvard)

Prof. Richard Harris

0945

The Acting Chair (Mr. John Harvard)

Prof. Richard Harris

The Acting Chair (Mr. John Harvard)

Prof. Richard Harris

0950

Mr. John Harvard

Prof. Richard Harris

Mr. John Harvard

Professor Theodore Cohn (Department of Political Science, Simon Fraser University)

The Acting Chair (Mr. John Harvard)

0955

Prof. Theodore Cohn

1000

1005

1010

The Acting Chair (Mr. John Harvard)

Mr. Keith Martin

1015

Prof. Theodore Cohn

1020

The Acting Chair (Mr. John Harvard)

Mr. Yves Rocheleau

Prof. Theodore Cohn

1025

The Acting Chair (Mr. John Harvard)

Mr. Yves Rocheleau

Prof. Theodore Cohn

The Acting Chair (Mr. John Harvard)

1030

Prof. Theodore Cohn

The Acting Chair (Mr. John Harvard)

Prof. Theodore Cohn

The Acting Chair (Mr. John Harvard)

Prof. Theodore Cohn

1035

The Acting Chair (Mr. John Harvard)

Mr. Lloyd Axworthy (Director and Chief Executive Officer, Liu Centre for the Study of Global Issues)

1040

1045

The Acting Chair (Mr. John Harvard)

Mr. Lloyd Axworthy

Mr. John Harvard

Prof. Michael Byers (International Law, Duke University (North Carolina))

1050

1055

The Acting Chair (Mr. John Harvard)

Prof. Michael Byers

1100

Mr. Lloyd Axworthy

The Acting Chair (Mr. John Harvard)

1105

Mr. Keith Martin

Prof. Michael Byers

1110

Mr. Lloyd Axworthy

The Acting Chair (Mr. John Harvard)

Mr. Yves Rocheleau

1115

Prof. Michael Byers

1120

Mr. Lloyd Axworthy

1125

The Acting Chair (Mr. John Harvard)

Prof. Michael Byers

1130

The Acting Chair (Mr. John Harvard)

Prof. Michael Byers

The Acting Chair (Mr. John Harvard)

Prof. Michael Byers

The Acting Chair (Mr. John Harvard)

Prof. Michael Byers

Mr. Lloyd Axworthy

1135

The Acting Chair (Mr. John Harvard)

Mr. Lloyd Axworthy

Mr. John Atta Mills (Former Vice-President of Ghana and Visiting Scholar, Liu Centre for the Study of Global Issues)

1140

1145

The Acting Chair (Mr. John Harvard)

Mr. Keith Martin

Mr. John Atta Mills

1150

Mr. Keith Martin

Mr. John Atta Mills

Mr. Lloyd Axworthy

1155

1200

Ms. Rhonda Gossen (Policy Adviser, Liu Centre for the Study of Global Issues)

The Acting Chair (Mr. John Harvard)

Mr. Yves Rocheleau

Mr. John Atta Mills

1205

Mr. Lloyd Axworthy

1210

The Acting Chair (Mr. John Harvard)

Mr. John Atta Mills

The Acting Chair (Mr. John Harvard)

Ms. Rhonda Gossen

The Acting Chair (Mr. John Harvard)

1335

Professor Reg Whittaker (Distinguished Research Professor Emeritus, York University)

The Acting Chair (Mr. John Harvard)

Professor Stuart Farson (Department of Political Science and Research Associate, Institute for Governance Studies, Simon Fraser University)

The Acting Chair (Mr. John Harvard)

Prof. Reg Whittaker

1340

1345

1350

1355

1400

1405

The Acting Chair (Mr. John Harvard)

Prof. Stuart Farson

1410

1415

1420

1425

The Acting Chair (Mr. John Harvard)

Mr. Keith Martin

The Acting Chair (Mr. John Harvard)

Prof. Stuart Farson

1430

Prof. Reg Whittaker

1435

The Acting Chair (Mr. John Harvard)

M. Yves Rocheleau

The Acting Chair (Mr. John Harvard)

Prof. Reg Whittaker

1440

Prof. Stuart Farson

The Acting Chair (Mr. John Harvard)

1445

Mr. Peter Coombes (National Organizer, End the Arms Race)

1450

1455

1500

The Acting Chair (Mr. John Harvard)

Mr. Keith Martin

Mr. Peter Coombes

Mr. Keith Martin

Mr. Peter Coombes

Mr. Keith Martin

Mr. Peter Coombes

1505

The Acting Chair (Mr. John Harvard)

Mr. Yves Rocheleau

Mr. Peter Coombes

1510

The Acting Chair (Mr. John Harvard)

Mr. Peter Coombes

The Acting Chair (Mr. John Harvard)

1515

Mr. Peter Coombes

The Acting Chair (Mr. John Harvard)

Professor Kathryn Harrison (Faculty of Political Science, University of British Columbia)

1520

1525

The Acting Chair (Mr. John Harvard)

Mr. Keith Martin

Prof. Kathryn Harrison

1530

Mr. Keith Martin

Prof. Kathryn Harrison

The Acting Chair (Mr. John Harvard)

Mr. Yves Rocheleau

1535

Prof. Kathryn Harrison

1540

The Acting Chair (Mr. John Harvard)

Prof. Kathryn Harrison

1545

The Acting Chair (Mr. John Harvard)

1550

Prof. Kathryn Harrison

The Acting Chair (Mr. John Harvard)

Mr. David Andersson (President, Pacific Corridor Enterprise Council)

The Acting Chair (Mr. John Harvard)

Mr. David Andersson

The Acting Chair (Mr. John Harvard)

Mr. David Andersson

1555

Mr. Greg Boos (Vice-President, Pacific Corridor Enterprise Council)

1600

The Acting Chair (Mr. John Harvard)

Mr. Greg Boos

The Acting Chair (Mr. John Harvard)

Mr. Greg Boos

The Acting Chair (Mr. John Harvard)

Mr. James Kohnke (Chair, Transportation Committee, B.C. Chamber of Commerce; Director, Pacific Corridor Enterprise Council)

1605

1610

The Acting Chair (Mr. John Harvard)

Mr. Bill Grant (Vice-Chair, Pacific Corridor Enterprise Council)

The Acting Chair (Mr. John Harvard)

1615

Mr. Paul Daniell (President, Cascadia Institute; Pacific Corridor Enterprise Council)

1620

The Acting Chair (Mr. John Harvard)

1625

Mr. Paul Daniell

The Acting Chair (Mr. John Harvard)

Mr. David Andersson

The Acting Chair (Mr. John Harvard)

Mr. Andrew Wynn-Williams (Director, Policy Development and Communications, British Columbia Chamber of Commerce)

1630

The Acting Chair (Mr. John Harvard)

1635

Mr. Keith Martin

Mr. Paul Daniell

1640

Mr. Keith Martin

Mr. Paul Daniell

The Acting Chair (Mr. John Harvard)

Mr. Bill Grant

The Acting Chair (Mr. John Harvard)

M. Yves Rocheleau

Mr. Greg Boos

1645

Mr. James Kohnke

The Acting Chair (Mr. John Harvard)

1650

Mr. Bill Grant

The Acting Chair (Mr. John Harvard)

Mr. Yves Rocheleau

1655

The Acting Chair (Mr. John Harvard)

Mr. David Andersson

Mr. Greg Boos

The Acting Chair (Mr. John Harvard)

Mr. Andrew Wynn-Williams

1700

Acting Chair (Mr. John Harvard)

Mr. Bill Grant

The Acting Chair (Mr. John Harvard)

Mr. Bill Grant

The Acting Chair (Mr. John Harvard)

M. Yves Rocheleau

Mr. Bill Grant

1705

The Acting Chair (Mr. John Harvard)

Mr. Andrew Wynn-Williams

Mr. Bill Grant

The Acting Chair (Mr. John Harvard)

Mr. David Andersson

The Acting Chair (Mr. John Harvard)

Mr. Paul Daniell

1710

The Acting Chair (Mr. John Harvard)

CANADA

Standing Committee on Foreign Affairs and International Trade

NUMBER 076

1st SESSION

37th PARLIAMENT

EVIDENCE

Monday, May 6, 2002

[Recorded by Electronic Apparatus]

¿ (0900)

[English]

The Acting Chair (Mr. John Harvard (Charleswood St. James--Assiniboia, Lib.)): Members, I now bring this meeting to order under Standing Order 108(2).

First of all, let me welcome the witnesses as the committee continues with its studies of two very important agendas facing Canada in terms of its role in the world and in North America.

We feel that it is essential right now to hear directly from citizens across the country on key foreign policy challenges, especially those arising in the context of the group of eight countries and in regard to relations with our neighbours on the North American continent.

As you know, Canada is president of the G-8 this year and will be hosting its 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 how our North American relationship should evolve are being done concurrently, given time and budget considerations. We've already held hearings in Atlantic Canada and Quebec, as well as in Ottawa, and this week, in order to complete a national process, one group of committee members is in Manitoba and Ontario, while another is hearing from the public in the three westernmost provinces.

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.

¿ (0905)

In the case of the North America study, all aspects of Canada-US, Canada-Mexico, and trilateral ties are open for examination, with a final report envisaged for this fall. Contrary to an article in The Globe and Mail today, the committee has reached no conclusions and there have been no prejudgments.

I want to thank all witnesses who will be appearing today for taking the time to contribute to the committee's deliberations. We hope this will be an ongoing dialogue.

We're very happy to welcome our first witness today, Dr. Richard Harris. He's the Telus Professor of Economics at Simon Fraser University here in Vancouver.

Welcome, Dr. Harris. You can give your opening remarks, and then I'm sure we'll have some questions.

¿ (0910)

Professor Richard Harris (Telus Professor of Economics, Simon Fraser University): Thank you, committee members. Welcome to Vancouver. I'm sorry I'm a bit late this morning. Untoward weather caused an accident on one of our bridges. I had to sit there for a while and watch the lack of progress.

I work in a wide range of areas having to do with economic integration, so I certainly welcome entertaining questions about a number of matters. I have distributed two papers to the committee. I would like to alert you to some others dealing with matters pertinent to the North American integration issue.

One of the papers, entitled “North American Economic Integration: Issues and Research Agenda”, was a prelude to a research program that was organized under the auspices of Industry Canada and took place last summer. I was both the principal organizer and research leader, and I was ultimately the editor of the volume of that series of papers that will appear this fall out of the University of Calgary press. It covers a wide range of areas, largely empirically based, having to do with the current state of the linkages in the North American economy, but with very heavy emphasis on linkages between Canada and the United States. It covers trade, investment, intellectual property, competition policy, environment, and a wide range of other areas.

I'm going to assume at this point that you have a very deep background in most of these matters. I want to focus the attention more accurately on where the current state of the policy agenda is likely to be in the next few years. I will raise what I think are some of the more pertinent policy tracks we might think about contemplating, as a country and a nation, at this particular point in our history.

The success of the economic integration we have achieved thus far with the United States, particularly in the last 13 years since the FTA was signed, has surprised even those of us who studied it very intensely before it happened. It's been the major engine of economic growth and prosperity in this country, and there's little reason to believe that's going to change over the near decade.

There are, however, lots of pressure points in the relationship. In order to continue to generate prosperity through trade and investment--which is really Canada's only option; the only question is how we do it--the North American linkages, and in particular our relationship with the United States, are absolutely critical.

I propose that there are basically two things we need to think seriously about. First, we need to think seriously about taking the existing commercial relationship with the United States, in the form of a free trade arrangement that is trilateral in nature, to the next step, which is a customs union.

A customs union falls a long way short of a common market. Of course, many common-market-like institutions exist in the NAFTA agreement, but in terms of straight commercial policy, the customs union issue is very important--although with two important caveats, which I'll get to in a second.

The second one is our monetary relationship with the United States. Our current problems with trade disputes in steel and softwood are completely typical of those that have been experienced by industrial countries under flexible exchange rates.

I note that the 24% duty that was just applied almost exactly compensates for the exchange rate depreciation Canada has experienced over the last six years. Much as the Europeans have discovered it's very difficult to manage on a day-to-day basis, particularly given the political context and the existence of administrative trade laws that allow industries to use temporary cost disadvantages to pressure the system politically, we have a difficult time dealing with rather extreme movements in the exchange rate.

That's a second set of issues I'd like to talk about. Let me talk first now about the customs union. A customs union is formally defined by economists as essentially a harmonization of external trade barriers between the members of the agreement. If it were the case that Canada and Mexico and the United States were to form a formalized customs union, at the simplest level it would involve essentially the harmonization of all our tariffs and quotas against third countries.

There's a very important reason to do this. Just let me emphasize the economic benefits, first of all. The difference between a free trade area and a customs union is that we have to have a very formal set of rules and procedures to deal with the fact that our relationships with third countries are treated differently between the two countries. In particular, the rules-of-origin system we developed in the 1988 FTA is a way in which we formally deal with the fact that the Americans may have a different external tariff against Japanese components of one form or another than Canada has.

If you look at the state of trade that existed in the mid-1980s, other than our auto industry--which was relatively heavily integrated in its parts sector at that point anyway--this really wasn't a matter of major concern. From the point of view of sovereignty, it's often felt, of course, that having degrees of freedom on your external trade policy is certainly an important foreign policy issue. But the problem is, from an economic perspective, what subsequently happened in the last 13 years is the manufacturing sectors of these two countries, Canada and the United States, but now also increasingly Mexico, are very heavily integrated with respect to all forms of production of parts and components. In fact, the industries are heavily specializing, with the exception of our natural resource industries, on a vertical basis, such that Canadian plants produce particular components that are part, basically, of a North American operation, which is also rationalized on a global basis. In fact, if you look at the growth in most of our sectors, with the exception of the resource sectors, this is in fact exactly what is happening.

The problem is this is where a customs union starts to bite, in the sense that the rules of origin become, effectively, a barrier to trade. The administrative burden, the compliance regime, and the whole problem of dealing with what we refer to as trade deflection becomes increasingly onerous. In fact in some of the industries--if you look at electronics, for example, in the television industry--they had to change the rules of origin because the industry found them so difficult to deal with that they simply defined a NAFTA TV as a television that had its major component--a picture tube--built anywhere in the three countries. Rather than dealing with the more traditional reclassification scheme, this allows us basically to bring in parts from anywhere else in the world, particularly East Asia. A NAFTA TV is a television that essentially has its picture tube made in Canada--a sort of technical definition of rules of origin.

My view is that Canadian prosperity is going to be very heavily linked to the continued development of these vertical linkages in our industries between Canada and the U.S. and that the natural step here is to take NAFTA towards a customs union. Even if the Mexicans were not interested--but I have no reason to believe they wouldn't be for exactly the same reasons we are--it would be pursued on a bilateral basis.

Now, there are two ways to do this. One, of course, is to have a formal re-signing of the whole agreement and essentially change it from a free trade agreement to a customs union. But at a more practical level, it could be done simply by looking on a piecemeal basis at those industries that are most important and agreeing to harmonize in those areas where we think the industries would find it most beneficial, and they'd be billed as potential frictions. That, in my opinion, would basically be most of manufacturing, with the possible exception of our natural resource industries, which are still, largely, highly competitive with certain aspects of American industry.

¿ (0915)

If we ever have the situation develop, we have some industries in Canada that are very competitive vis-à-vis the Americans. That is, they are basically competing for the same market and they're both relatively specialized but producing the same goods. Then we have a different set of industries, which is where the growth has been, in which Canada is specialized but as part of the North American system as a whole.

Of course, from a practical point of view, the major problem with a formal customs union is that it may not be politically saleable because it would involve explicit coordination on external tariffs and there would have to be some mechanism... I deal with it a bit in this paper, and there are some other papers about how one would deal with exceptional circumstances, for example, when the Americans choose to slap tariffs on European steel. But I think this can be essentially dealt with as a special case, as opposed to day-to-day management at the border and the way industries organize themselves.

Lastly... I just throw this out; I don't want to spend much time on this, but you mentioned our position on Africa. There's a great deal Canada could do, first of all, to remove some of these difficulties simply by lowering our tariffs on third world countries.

We still have fairly high tariffs, despite thirty years of trade liberalization, and I find it very difficult to rationalize, other than simply on purely self-interested political economy grounds, as to why we continue to levy these very high barriers against very low-income countries, preventing them from developing for the same reasons that Canada has benefited so enormously. Anyway, I'm glad to pursue that topic somewhat further.

Let me turn to the issue of monetary integration, or the exchange rate. There are a number of examples, of which we are the prominent example, by the way. NAFTA is really the only major example at the moment, but New Zealand and Australia, with the closer economic relations agreement, is another. The ASEAN agreement would be another. These are all examples of free trade areas that are operating currently under at least a form of flexible exchange rate regimes. Now, we clearly have a flexible exchange rate between Canada and the United States. In the other agreements I mentioned, it's probably less significant.

So in some sense, we are alone in terms of our current institutional structure in the way we're trying to manage our trade relationships together with the floating exchange rate, but let me just mention the obvious problems this causes and will continue to cause if it's not dealt with.

All countries in the NAFTA have in place anti-dumping and countervail legislation that allows the industries in question to essentially use these administrative or safeguard actions when they demonstrate injury. But what's been happening practically is an injury really has been a function of shifts in cost competitiveness that arise, largely, in older industries. If you look at the industries in which these are used, they're not really the high-tech industries. They're almost inevitably steel, textiles, somewhere further down the chain in terms of their industrial structure and their labour intensity. So when the exchange rate rises, it moves a great deal against one of these countries and their industries, and they will inevitably use these administrative trade devices as a way to insure themselves from further damage from imports.

Canadian industries still use anti-dumping extensively against largely lesser-developed countries and China, but the softwood and steel cases in the United States are absolutely typical.

The last time we observed this, if you will remember, was in the mid 1980s--I was working on the McDonald commission at the time--and it was exactly the same set of affairs. The Canadian dollar had gone to 69¢ during the Mulroney period, and we were hit with a number of cases in the U.S. I remember the steel case, in particular, was very prominent. Of course, that was one of the reasons for U.S. protectionism that led to the problems that also led, at least in part, to the signing of the FTA.

Another example in Canadian history was the 1988-1992 period when the dollar went to 89¢. The Canadian dollar was relatively overvalued. Of course, there were other things going on in the economy. We were also in a mild recession that subsequently became a major recession in manufacturing. But we also had very significant difficulties because of an overvalued currency.

¿ (0920)

The relative size of these swings matters somewhat. You'll typically find that smaller countries will lose market share much faster when the dollar goes up above some benchmark values, and the larger countries are typically slow to respond because of course they're less exposed. If you look at the history of the European Union, Belgium, the Netherlands, Austria, and Denmark were the countries agitating very strongly for exchange rate stability during that period. That ultimately led to the emergence of the European monetary system, which was the first step leading to the euro. But for a very long time, at least for those small sets of countries, that stabilized their exchange rate.

I predict this is exactly what's going to happen between Canada and the United states--that as long as the existing relationship changes, the dollar is going to continue to fluctuate, as it does under any flexible exchange rate. It may go up and it may go down, but every time it does and gets significantly away from its... In the long run, it doesn't really matter what the level is, but ignoring that problem, the point is, when it moves significantly, it does affect the relative cost position of manufacturers located in the two countries in a way that's going to be a disadvantage to one or the other.

Now, in my view, if this system remains unchecked, it's going to be very bad--and bad for Canada in particular--because of the following reason. Major international firms that are going to contemplate locating their plants in Canada are going to look at the history of events such as softwood and decide that of course Canada has a cost advantage at current exchange rates, so it looks like it's more cost-competitive to invest in Canada. But of course they're interested in servicing a North American market, so why on earth would they invest in Canada if they're going to be hit with a dumping action from the U.S. two years down the road, after having made that investment decision? They might as well invest in the United States anyway.

This is the logic that small countries find themselves very quickly faced with. In my opinion, this is going to be a major issue in the relationship over the coming years, and one of the most serious reasons why we should think about reorienting our monitoring arrangements from one based on price stability to one based on exchange rate stability.

The problem is going to become even more severe. We are now at the ratio where we have 80% through 83% of our trade with the United States. We have a 40% to 46% export-to-GDP ratio, if one includes services. I think the next big step in North American integration for Canada, anyway, is going to be in services and in e-commerce as well.

I can easily see our total trade ratios going to a Netherlands benchmark--80%, 60% over the next decade and a half. With those kinds of volumes of transactions, the exchange rate fluctuations are going to be increasingly a very serious irritant in the relationship.

In my opinion, those are the two major things from a formal level, from the top-down level, that we have to think seriously about in terms of future policy agendas. So I will close with that.

Thank you.

¿ (0925)

The Acting Chair (Mr. John Harvard): Thank you, Dr. Harris.

We have roughly 20 minutes or so for questions. We'll go to Dr. Martin first.

Mr. Keith Martin (Esquimalt—Juan de Fuca, Canadian Alliance): Thank you very much, Professor Harris.

I would like to ask you a few questions. I'd like to know your opinion as an economist on a few basic things for the record.

In a customs union, who will call the shots in terms of resolving differences that our two countries would have on the removal of non-tariff barriers to third parties?

Prof. Richard Harris: Well, I think there are two steps. First there would be an initial step in which these would obviously be negotiated between the parties. In the case of the MERCOSUR, for example, which is a formal customs union, Argentina in that particular agreement negotiated up to the Brazilian levels, as did Uruguay. Of course, I don't think that's a serious prospect in the case of NAFTA.

But typically in these first-round negotiations you agree on a rule. You'll take the lowest of the three or you'll take an average of the three barriers on tariffs, or something like that.

The quotas are going to be somewhat more difficult. As to the remaining quotas on textiles, you'd have to negotiate a global North American quota. It would probably be negotiated based on history, which would be some of the existing quotas looking at share.

The more problematic issue I think is looking down the road. If we negotiated a customs union in which there were some fairly significant barriers in place, then of course there would have to be a procedure, including our position in the WTO, as to how they would be subsequently negotiated, hopefully down. This would require consultation. I don't see any other real serious prospects.

¿ (0930)

Mr. Keith Martin: You mentioned that vertical integration is taking place in everything but the resource sector. Of course, our country relies so heavily on the resource sector, and yet that's also the place where we tend to have our trade difficulties with the U.S., not only in steel and in softwood but also now in agriculture.

You also mentioned that in the resource sector we are competitive with the U.S. How would a customs union enable us to... There are two different issues. There's the benefit of having status quo for our resource sector, if I understood correctly. In a customs union perhaps our competitive advantage would be removed, but the quid pro quo would be that we'd also receive a benefit in that the difficulties between the two countries would be removed. Am I understanding that correctly?

Prof. Richard Harris: Let me rephrase that. I think you're getting the gist. I don't think our comparative advantage in resources is fundamentally affected in any way by whether or not you have a customs union, or a free trade area, or a full common market. You're not going to change basic resource availability in the country through those agreements, nor are you going to affect world prices. We have to remember that in the resource sector the prices are determined largely in the global market, of which even the United States increasingly has a smaller share.

Secondly, in terms of doing the cost-benefit analysis, we have to remember that in 1982 I believe our resources accounted for approximately in the mid-seventies percentage of the volume of trade, and in 2001 it was about 32%.

In my opinion, these numbers are headed straight down. That's not because Canada is going to have fewer resources; it's just because the trend of world commodity prices is headed down. It has been going on for the last 50 or 60 years. Technological change is going to continue to drive those prices down.

The fact that we have abundant supplies of cheap stuff is not going to make us rich. This is a simple fact. British Columbia is a province that is discovering this problem in spades. If you look at the wealth generation process in this country, it long ago shifted from cutting trees, etc. In some sense, the economic stake for us of maintaining independence on the resource side I think is substantially weakened.

In any case, at the end of the day, if you look at what's happened, our resource industries largely sell, as I said, at U.S. dollar prices. The temporary advantages that are achieved, for example, through an exchange rate depreciation, are largely just a transfer within the country. It moves it from workers to firms in the form of increased profits and rents. It really does very little to enhance the growth process or in fact increase our trade balance. I think the resource issue is a wash.

However, I certainly don't think anyone is going to eliminate U.S. protectionism. I do think, however, that a customs union, together with an exchange rate stability system, would eliminate two major irritants. One is there would certainly be no issue of one country benefiting from another because of external trade barriers being different. Secondly, and most importantly in this case, you wouldn't be faced with the prospect of very severe changes in competitiveness that are due to short-run exchange rate movements.

The Acting Chair (Mr. John Harvard): Mr. Rocheleau.

[Translation]

Mr. Yves Rocheleau (Trois-Rivières, BQ): Thank you, Mr. Chairman. Good morning, Mr. Harris. Thank you for your presentation. I have three questions.

With regard to a customs union, what in fact would be the real advantage for the Americans of moving in that direction? That is my first question.

My second question relates to Africa. You said that customs tariffs should be reduced. The approach put forward to date aimed, rather, at alleviating or eliminating the debt of African countries. Would this be complementary? Is one option better, more efficient, more generous than the other? I would like to hear your views.

I now move on to my third question. In your view, if nothing is done with regard to the Canadian dollar and if no change is made to our relations with the United States, what will happen? Will the Canadian dollar remain as low as it is, creating in my opinion a false sense of security for Canadian companies, both in Quebec and in Canada, that are perhaps falling asleep at the switch in the comfort of knowing that it is easier to export when the dollar is weak? If the value of the dollar were to increase, what would happen? What would happen if nothing is done?

[English]

Prof. Richard Harris: Thank you.

Regarding the American interest in a customs union, I think you are well aware that the American interest in almost anything to do with trade liberalization at the moment is low on the agenda. The question, of course, is how one ever captures the imagination of any particular American administration.

The interest, though, goes well beyond politics. I think this is a basic commercial problem. If you speak to the firms that were involved in these investment decisions in Mexico and Canada and the United States, it's the firms that have significant interests in resolving this customs union issue. For them, dealing with the rules of origin and the difference in the external barriers is distorting.... Well, they don't view it as a distortion; the economists refer to it as a distortion. But it certainly affects the way they choose to allocate the activities across the three countries.

In my opinion, this is going to continue to grow in significance, for the reasons I alluded to earlier. This is a deeper vertical specialization that's occurring in the continent. The customs union is going to become a more plausible and natural outcome, and the irritants that the current FTA is going to impose on the firms are eventually going to lead to substantial agitation from the business community and investors to deal with it.

In that sense, I think the American interest in the long run is in some sense coincident with our own interest in having a customs union. In the short run, however, of course the Americans are fixated on a different set of issues since September 11, and I don't need to tell you about that. Who knows what the timeframe might be?

In terms of indebtedness versus tariff reduction, there are two ways to do this. First, I think for us to reduce tariffs and quotas against African countries is not costless in the short run. There are certain industries and sectors that are going to be impacted negatively, as is always the case. Of course, agriculture stands high on this list. How one negotiates a domestic political deal in order to secure the reduction of these tariffs is an important question. Part of the costs may be that there will have to be some form of temporary trade relief applied to these sectors in order to cut a bargain. This is not atypical.

In the longer run, however, I do think it is much more important to do this than it is to provide aid or long-term relief from indebtedness. I am personally in favour of both of these things. It's much more serious, it's more durable, and it allows them to lift their own boat. The whole period in the post-war of foreign aid is that in Africa and in many of these other countries, it simply is a form of transfer, which of course secures some temporary benefits the nation receives, but it simply does not allow them to engage in the process of economic development. If you look at the countries that have been very successful in terms of their development, they are countries that did not receive a lot of aid, but in fact did develop a very extensive manufacturing system that allowed them to participate in the world economy. Of course, Asia is the prominent example.

On a scale of one to ten, ten being the best, I would say that Canada wants to... Also, from the point of view of the G-8, if Canada were ever to do this, it would be a major demonstration effect within the G-8 and the OECD. For those of us who are trade economists, the current position of the high-income industrial countries on protectionism against the third world is absolutely atrocious, it's completely unjustified, and in my opinion it's essentially impoverishing them. So I would put this at a ten, and I would put aid and debt reduction at a four or a five. That's the way I would put the relative importance of those two things.

¿ (0935)

I think it's a long, hard road to develop a political constituency for this, because once you try to reduce the existing tariffs, you're going to discover that there are some interests out there that could be very significantly opposed. So that's not easy to deal with, although I would say that as a country our history with trade liberalization has been remarkably benign. We have gone through surprising and substantial transformations of our industry, our adjustment to the FTAA being one of the most remarkable.

I remember working on this, and 20 years ago we were saying, well, you know, we cut the tariff on the furniture industry and the prediction was that the furniture industry in Ontario and Quebec would just disappear. It simply didn't happen. The industry completely changed itself. It upgraded, took new technology, and it's now one of our most efficient and best producers in North America.

So I think we have to be optimistic about our own domestic ability to deal with these problems, and we certainly have to be optimistic and more generous in terms of what we're willing to give to these countries.

On the third question, about the Canadian dollar, I don't predict currencies, but I'll make one prediction. The number of countries that are floating, of course, since the euro, have been about cut in half. The big floaters in the world remain the big three zones--the euro, the dollar, and the yen.

The Chinese renminbi is fixed to the dollar. Most East Asian currencies are fixed to the dollar. All of Latin America, for all intents and purposes, is fixed to the dollar or dollarized. Most of Africa and Asia are basically fixed either to the euro or the dollar. So the big floaters left are Britain--the U.K., which of course is contemplating going into the euro zone--Canada, Australia, New Zealand, and Norway. Sweden is basically running a fix to the...

So we are basically, for all intents and purposes, only one of a handful of industrial countries left with a floating exchange rate.

On the other hand, we are economically integrated with our major trading partner to an extent greater than any pair of European countries that are in a single monetary zone.

So you have two problems. One is, we're attracting a great deal of speculation on the currency because they have nowhere else to go.

Secondly, my prediction is volatility. I predict that the currency will be very volatile in the absence of a formal change in the monetary regime, both volatile up and volatile down. I don't know where the long-run level will settle, but given that the Canadian dollar is increasingly a marginal currency from a global purpose standpoint, it means that relatively small movements in capital flows have very large effects on the value of the currency. So, of course, if it starts to go up--and that's certainly one possibility--as people move out of American assets, they might move into Canadian. Who knows what will happen? I guess that will depend on other developments. But if it does start to go up, the fact that the dollar has been so low now for a number of years is going to cause a number of our manufacturers a great deal of difficulty when it does.

¿ (0940)

The Acting Chair (Mr. John Harvard): Dr. Harris, we have about seven or eight minutes to go, so I'd like to close this out with two or three questions.

You may have read Stephen Clarkson in The Globe and Mail today. He argues that since the FTA and NAFTA, Canada's standard of living and productivity have not improved. I don't know how you would respond to that.

But to pursue your suggestion of a customs union, if we were to adopt a customs union, how certain would you feel about Canadian incomes going up in the wake of that? And if those incomes were to go up, would there be any certainty that they would go up right across the country--in other words, in all regions?

Prof. Richard Harris: First of all, there is nothing--nothing--governments can do to guarantee that our standard of living is going to go up. Of course, the smaller the country you are in, the more relevant that fact.

So regarding Mr. Clarkson's assertion, if it's true, that our standard of living fell relative to the United States, it certainly increased substantially over the course of the 13 years. But of course the big fact has been, at a macro level in the world economy, that our standard of living fell relative to our American trading partner. It did, however, rise relative to Europe, which is interesting.

So the way I view the customs union issue and in fact the whole Canadian trade policy issue is that obviously on the political side, the cost side, there's a tremendous issue of sovereignty, but there is the reality of economic life in Canada, the fact that we have to export to prosper.

Therefore, the trading relationships under which we operate are intensely important to this relationship. I can't guarantee that the relationship... if we improve the relationship, certainly the prospects of increased benefit from technology and the returns that come with that, all the things that drive economic growth, would be enhanced.

The big problems are the risks of Canada... I certainly think the FTA has been a tremendous thing, and keeping it in place... doing anything else is certainly not an option. But I think it's sort of the bicycle theory of international relationships--if you're not going forward, you're falling. So sometimes it's important talk about the next step, because if you don't, you may fall over. If we fall over, we are at a very serious risk. Those are the facts. We are not going to get rich selling resources.

One of the reasons we are poor, or at least relatively poor, is the fact that we do have a lot of resources, and the price of those resources in real terms has fallen by about 30% over this period. There's nothing we can do about that. We have to get on that bicycle and keep going forward. We are not going to get rich selling wheat, or oil, or trees. We're going to employ some people or we're going to employ fewer people. We are going to get rich only by selling software, machine parts, automobiles, and those things that make up the bulk of the modern economy, and that's a reality.

¿ (0945)

The Acting Chair (Mr. John Harvard): The other thing I have on my mind, Dr. Harris, is if Canada were to take, as you suggest, steps toward greater integration, what would be our best negotiating strategy to attain that? Wendy Dobson of the C.D. Howe Institute suggests something rather big and bold. I think she calls it “the big idea”. Would you favour something big and bold, or would you be a bit more cautious and do it in a more, let's say, timid or piecemeal fashion?

Prof. Richard Harris: You're outside my area of expertise, really. I think this requires political leadership and political imagination, and maybe your committee can come up with good ideas.

All I would say is if you take the issue of the customs union, it may well be that if the signal were to go out that Canada, Mexico, and the United States were to make this a very big deal and engage in a renegotiation of the arrangement with an objective of going toward a customs union, it might be an apple that would attract the attention of the U.S. administration.

On the other hand, at the practical level, I don't think it's all that important. At the practical level, I think what's important is that we get rid of some of these difficulties that the current trade regime is causing. If it can be done on a piecemeal and informal basis, I'm certainly in favour of it. If it turns out that a low kind of under-the-horizon approach to trade liberalization is a good thing, then I'm certainly in favour of it.

It does require changing the FTA, so it's not a simple matter. Parts of the agreement would have to be reopened, and it might be that some of the more contentious stuff--the chapter 11--would be linked with that. There are certainly issues there.

The Acting Chair (Mr. John Harvard): I have one more question. You're suggesting that if we didn't have this exchange rate problem, in other words, if the Canadian dollar were roughly at par with the American currency, we wouldn't have the softwood lumber problem as we do. My question is, does our economic history support that? I remember putting that question to a witness two or three weeks ago. I forget who it was. But his answer more or less was that we've always, regardless of where the Canadian dollar was relative to the American dollar, had difficulty in the area of softwood, and that the variance, the big difference between the values of the two dollars, wouldn't make much difference.

Prof. Richard Harris: Who knows? All I can tell you is that for most of our history we've had an exchange rate that barely moved against the American dollar. Most of the change in what we economists refer to as the “real exchange rate”, which corrects for inflation differences, happened subsequent to 1982. When we came out of the 1982 recession is when we started to see these very large movements in our currency for the first time in our history.

I would make two observations. We've had two big cycles. We had the big cycle of U.S. protectionism that occurred during the mid-1980s when the Canadian dollar was very low, and we are now experiencing another bout of that. I look at the European history, and you can see a similar pattern.

If you were to fix the exchange rate rigidly at its purchasing power parity value--say, 80¢--I'm not going to assert that all trade disputes would stop. But it's pretty clear the American disadvantage versus Canada in the labour-intensive sectors is largely exchange-rate related. This is a fact. The tariff almost, essentially, eliminates a cost advantage to Canadian industry that has been afforded them as a result of a cheap currency.

So who knows? The practical answer is we don't know. But the other answer is that from the historical point of view it's pretty clear that the force behind a lot of irritants would be removed.

¿ (0950)

The Acting Chair (Mr. John Harvard): Dr. Harris, on behalf of the committee, I want to say how much we appreciate your coming here today. Your remarks are most welcome.

Thank you.

Prof. Richard Harris: Thank you. I wish you the best of luck in your deliberations.

The Acting Chair (Mr. John Harvard): Members, we'll take just about a one-minute break so that we can say goodbye to Dr. Harris and welcome the next witness.

¿ (0950)

¿ (0951)

The Acting Chair (Mr. John Harvard): Okay, members, we'll resume our deliberations. Now we have the pleasure of welcoming Theodore Cohn. He's a professor of economics at Simon Fraser--

A voice: It's political science--

The Acting Chair (Mr. John Harvard): Oh, political science. I'm sorry, we just can't trust our researchers.

Professor Theodore Cohn (Department of Political Science, Simon Fraser University): Well, I teach international political economy, and I do research—

The Acting Chair (Mr. John Harvard): Anyway, thank you very much. Thank you for coming. We'll give you 10, 15 minutes, whatever you want, at the opening, and then we'll have some questions, I'm sure.

Welcome.

¿ (0955)

Prof. Theodore Cohn: Thank you. I was interested in your hearings because I have been working on an issue related, as it happens, to your discussion of the G-8. As the handout I gave indicates, I've just completed a book entitled, Governing Global Trade. It's for Ashgate Publishing's G-8 and global governance book series, and the series editor is John Kirton.

Although I don't focus the book on Canada specifically, or Canada-U.S. specifically, the main conflicts, which are so critical, I think, and which affect Canada, are conflicts between the U.S. and the European Union today. Also, I've tried to pattern these comments in a way, as a result of writing the book, to indicate what I think the implications are for Canadian policy, Canada-U.S. relations.

Most books on global trade--and I've been teaching trade relations and other issues for years--equate the global trade regime with the GATT/WTO--General Agreement on Tariffs and Trade and the World Trade Organization--as civil society groups. When they go to protest, it's the GATT/WTO. That's global trade, obviously. Interestingly enough, a very well-known trade specialist, John Jackson, years ago indicated the global trade regime involves far more than just the GATT/WTO. It involves a wide range of institutions. What I've tried to do in this book is look at the range of institutions--formal and informal--that are involved in the global trade regime.

I view decision-making in the global trade regime as a pyramidal process. At the top of the pyramid are developed-country actors and institutions. My book focuses primarily on the changing role of those nearer the top of the global trade regime pyramid. Who are they? They are the United States and the European Union, as the two largest trading entities, the G-7/G-8, the quadrilateral group of trade ministers from the United States, Canada, Japan, and the European Union--this is one of the least known groups--and the OECD, the Organization for Economic Co-operation and Development, a fascinating organization. Of these actors, as I mentioned, the quad has received the least attention. The reason I was able to write this book is I was fortunate enough to be given access to the relevant documents to write about the quad.

My book also focuses on changes in the third world developing countries and civil society groups and their reaction to these developed-country institutions, etc.

Here I obviously have to speak briefly, so I'll only offer some comments on the U.S., the European Union, the G-7/G-8, and the quad.

First of all, I notice your hearings mention the G-8, but, really, in trade policy the G-7, with the participation of the European Union, continues to hold most of the trade policy discussions at the annual summits, because Russia is not yet a member of the World Trade Organization.

During trade negotiations such as the GATT Tokyo and Uruguay rounds, the G-7's influence is greatest at the beginning of negotiations when it tries to get political support for the negotiations, it is greatest when it is involved in setting the agenda for the negotiations, and it is greatest nearer the end of the negotiations, at the final breakthrough phase when you usually need support at the highest political level.

The G-7 is rather uninfluential during the negotiations because, as Nicholas Bain has said, during the negotiations the division between the highest political levels and the technical levels, where the negotiations actually have to occur, is so great that the G-7 heads of government and state can't really get involved that much. So that's why in the GATT Tokyo Round, the GATT Uruguay Round, the G-7 had to constantly revise the deadline for the end of the negotiations. They're pretty helpless in between. It's at the end and the beginning when they have a lot of influence.

The G-7 also found it more difficult to exert influence in the Uruguay Round than the Tokyo Round, because there were many more key players and a much broader range of issues.

Another problem in dealing with trade is the G-7's overloaded agenda. In economic areas, the G-7 and G-8 have always given preference to financial and macroeconomic issues over trade issues. Then, in the 1980s, you get a situation in which the G-7 has to deal with all kinds of new political security issues, social issues, and they can't really deal with trade.

As a result of the overloaded agenda, various G-7 ministerial groups began to emerge in the 1980s. The first of these groups was the quadrilateral group, which I write about. There are other groups on finance, on social issues, on environmental issues, where ministers also meet. The origins of the quad--and I discuss the origins in detail--stem from a meeting of the U.S., the European Community, and Japanese trade ministers who met on the margins of the 1981 Ottawa summit. They did not include Canada initially. They then subsequently invited Canada to join, and the first quad ministerial meeting was held in January 1982.

From 1982 to 1996, quad ministerial meetings were normally held about twice a year. The quad also meets at the senior and junior officials level and quad ambassadors meet in Geneva. The importance of the quad stems from the fact that its members account for over 50% of global merchandise trade, both exports and imports, and are also the largest traders in services.

The quad played an important role in resolving disputes and developing a consensus. I'm going to make this short so I can discuss the more recent problems. It was important at the start, before the Uruguay Round. It played a somewhat less important role in the early stages of the Uruguay Round. The trade ministers have the same problem, to a lesser extent than the government leaders have--they're too far from the technical discussions. But in the latter part of the Uruguay Round, the quad played a very important role.

To give you an example, Canada and the European Union supported the formation of the World Trade Organization in the quad. The U.S. and Japan opposed it at first. It was an environment in which they could informally discuss these issues, and although the U.S. was the main supporter of the Uruguay Round, interestingly enough they didn't want the WTO.

The quad, I feel--and I discuss here why--is important for Canada. Let me mention three reasons why I feel the quad ministerials are important for Canada. First of all, Canada has been able to bring a distinct perspective to the quad. For example, Canada is the only member of the quad that's also a member of the Cairns Group of so-called agricultural fair traders. And Canada was able to bring the protests by the Cairns Group to the quad over the U.S./EEC, at that time, agricultural export subsidy war.

À (1000)

A second reason I think the quad is important to Canada is that without a quad, there are likely to be bilateral meetings, and those bilateral meetings are mainly going to be among the big three: the U.S., the EU, and Japan. Canada is more marginalized without the quad.

Thirdly, Canada, as I mentioned, has been able to join with others in the quad and not deal only individually on trade issues with the U.S. or the EU. I give examples in this paper. For example, Canada joined with the EU on the World Trade Organization; Canada joined with the U.S. in the quad criticizing European and Japanese protectionist agricultural policies; and most critically for Canada today, related to The Globe and Mail articles on trade recently, Canada joined with Japan in calling for a greater WTO role in controlling countervailing and anti-dumping duties.

What's happened with the G-7/G-8 and the quad since the GATT Uruguay Round? Quad ministerial meetings were normally held twice a year from 1982 until 1996, but they were held only once a year from 1997 until 1999, and in 2000 and 2001 there were no regular quad ministerial meetings. The quad continues to meet at the officials level, but they have not had regular ministerial meetings. Why? This indicates a major problem at the top of the global trade regime pyramid.

First of all, there have been serious disagreements between the U.S. and the European Union on trade. Rick Harris, whom I greatly respect--I heard the end of his comments--talked about the increased conflicts the U.S. is having with Canada on trade. Well, the U.S. is having increased conflicts with a lot of countries on trade, such as with the European Union on steel and a long list of issues.

Second, personal relationships among quad ministers are more distant than they were previously.

Third, after the Uruguay Round--and this is critical--the U.S. questioned the quad's effectiveness, and it has often preferred to meet bilaterally, with the European Union and Japan primarily, rather than in the quad.

Another reason is that developing countries have been hostile somewhat to the exclusive nature of the quad. This has also interfered with the meetings.

My own view is it is not good for Canada that quad ministerials are not being held.

A major factor--I'll finish in a few minutes--in the lower visibility of the quad ministerials relates to the changing roles of the U.S. in trade, the European Union, and the G-7/G-8.

The U.S. assumed a leading role in the global trade regime for about 50 years, from the 1940s until the early stages of the GATT Uruguay Round. In the latter stages of the GATT Uruguay Round, my research for this book has shown that the U.S. leadership position changed. In the latter stages of the Uruguay Round, the U.S. started to become more protectionist and had a less broad vision of the global trade regime.

The Uruguay Round was completed successfully because the European Union stepped in, to an extent, in taking more of a leadership role, and the new director general of the GATT at the time played a very assertive role. That's why the Uruguay Round was completed; they helped supplement U.S. leadership.

À (1005)

Since the Uruguay Round, the U.S. decline in its global economic hegemony in the trade regime has continued, and the U.S. has taken a more narrow view of global trade issues. The European Union was the entity that called for a comprehensive new round of trade negotiations in the quad. It was the U.S. that wanted to focus on the two areas that were supposed to follow up the Uruguay Round--agriculture and services--and just a few other areas.

Why the change? Well, first of all, despite U.S. economic prosperity, of which there's been a great deal, we should not forget that the late 1990s--and we're feeling the effects right now--was a period of rapidly growing U.S. balance of payments and trade deficits. As a result, the U.S. is taking a more narrow view than what one expects from a global hegemony. They want freer trade in the areas where they have comparative advantage.

Secondly, there's what some people call a domestication of U.S. trade policy. The critical issue was the NAFTA negotiations. During the NAFTA negotiations, there was a domestication of U.S. trade policy. All kinds of groups--labour groups, environmental groups--that were not involved previously became involved. Since the Uruguay Round, that domestication of U.S. trade policy has continued. As you know, there's been no renewal of fast-track authority yet.

In view of this problem, the lack of U.S. leadership, the European Union has not been able to fill the gap. They've been more assertive in their leadership, but they're too divided to substitute for U.S. leadership. As a result of this, the G-7/G-8 has been less assertive on trade issues since the GATT Uruguay Round. The lack of assertiveness on G-7/G-8 trade issues is directly related to the fact that the last quad ministerial was the 33rd quad in Tokyo in May 1999.

Why am I discussing all this related to Canada? My view is that it's important to view Canada-U.S. trade conflicts not only in bilateral terms. One of my biggest criticisms of Canadian foreign policy, literature, and research over the years--and I've been teaching for a lot of years--is that it's navel-gazing. We look at U.S.-Canada and we don't look at the rest of the world. I feel that what's going on right now in Canada-U.S. trade conflicts started before George W. Bush and will continue after George W. Bush. The Globe and Mail writes as if to explore why a Republican President is acting this way. There are reasons, and it's not just related to George W. Bush by any means. It's a symptom of broader problems of governance in the global trade regime. That's what I try to explore in this book.

Thanks. Sorry I went on so long.

À (1010)

The Acting Chair (Mr. John Harvard): Thank you very much, Mr. Cohn.

We'll go to Mr. Martin, followed by Mr. Rocheleau.

Mr. Keith Martin: Thank you very much, Professor Cohn. In fact, I wish we had more time to listen to what you have to say.

Numerous questions come to mind. First, what are the medium- to long-term prospects for the U.S. economy, particularly in view of its debt load--the domestic debt load, the personal debt load, and also the debt load for the country?

Secondly, are you suggesting that we ought to look at diversifying our trade relationship with other countries and other regions, particularly Europe and perhaps Southeast Asia?

Lastly, on the issue of governance issues and trade issues, if there is this vacuum in leadership, I assume it's because we're waiting for the U.S. to work with us and deal with that. If there is an absence of governance on trade issues from the U.S. perspective, do you believe Canada should start maximizing those bilateral or trilateral or multilateral relationships with other countries, essentially taking the bull by the horns and starting to work with other nations to resolve those trade differences to fill that vacuum where the U.S. is not prepared to do that for domestic reasons?

À (1015)

Prof. Theodore Cohn: Thanks. Those are good questions--a lot of questions.

First of all, before I start discussing the U.S. debt load, Rick Harris said he was an economist. I should emphasize that I'm a political scientist. I teach global political economy, but I don't try to be an economist. I look more at the political aspects.

On the first question, I feel you can find economists who are going to be more expert on that than I am. On the other hand, I have written a textbook on global political economy, and in that I explore U.S. balance of payments, U.S. balance of trade over time in other countries. My own personal view is that eventually it is going to catch up with the United States. I feel it is living beyond its means, and I do think the dollar is going to fall and there are going to be problems eventually.

Second, on diversifying our relationships, I guess I'm a combination.... I feel it is necessary for us. It is a concern to me how much our trade has increased with the United States, but in a realistic sense, the U.S. is by far our largest trading partner. Attempts historically--in the 1970s under Trudeau, the third option policy--did not succeed, not because of the U.S. but because the European Union and Japan were not viable options for us. I'm not sure that going back to that route is the answer.

I think combining your second and fourth questions is really important. People tend to just talk about diversifying our trade. I think looking at formal and informal institutions, like the quad, the G-7/G-8, the GATT/WTO, and other organizations, for Canada to establish a variety of alliances on trade, can occur even when we have a large percentage of our trade with the United States. So I think we should try to diversify somewhat. Realistically, that will have its limits, but even without our trade being more diversified, in the quad and in the G-7/G-8, we've been able to ally with different countries on issues like the WTO, sometimes with the United States and sometimes against the United States, and that's been perfectly acceptable.

So much of the discussion about diversification of ties has focused on the larger institutions because they're more visible, but it's the smaller ones where the informal discussions go on and where Canada really can ally on issues like whether we should substitute the WTO for the GATT, things of that sort. I think a stronger WTO is in our interest in the long term. If the dispute settlement mechanism had more teeth than it has, we'd be in good shape, better shape than we are on softwood lumber.

What do we do about the vacuum in leadership? It's a real problem. I think what to do about it is to have more collective leadership.

It is no accident that in the book I trace historically the OEEC, the Organization of European Economic Cooperation, which was replaced by the OECD in the 1960s. That ushered in a somewhat more equal relationship between Europe and the United States. The G-7/G-8 formed in the 1970s. That was no accident; that was when the U.S. was declining in collective leadership. It was no accident that the quad was formed in the 1980s--a further decline in U.S. economic leadership.

There's this strange situation. People talk about hegemony, and they're talking about two different worlds when they talk about security issues and economic issues today in the U.S.

À (1020)

The Acting Chair (Mr. John Harvard): We will now go to Mr. Rocheleau.

[Translation]

Mr. Yves Rocheleau: Thank you, Mr. Chairman. Thank you, Mr. Cohn, for your remarks which are quite different from the talk we usually hear. As a matter of fact, I would like to congratulate you on that.

I would ask you to comment once again on the words of your colleague, who stated that there was a lack of leadership on the part of the Americans and a lack of real interest towards Canada. As you were saying, we must look at this in the broadest context possible in order to deal with the question of the relationship between Canada and the United States. What is your view on the idea of a customs union between the two countries which your colleague brought up?

You also talked of the decline of the United States. You mentioned agriculture and services in particular. We all know that the services are an area that, according to Canadian claims, sets Canada apart from the United States. One normally thinks of the area of health care, among others. In the services sector, and more particularly in the area of health care, do you believe that our relations with the United States might eventually have an impact?

[English]

Prof. Theodore Cohn: First of all, as I said, Rick Harris is an economist and I'm a political scientist, and we would probably be talking a different language in some ways about the customs union. I would be looking more at the political implications and he would be looking more at the economic implications. I do have concerns about the political implications of a customs union.

You mentioned Stephen Clarkson, who wrote the article in today's The Globe and Mail. Some of the criticisms of free trade by people like Stephen Clarkson... It's interesting because many criticisms of the NAFTA are that it doesn't deal with social issues. The same people who criticize NAFTA for not dealing with social issues are often those who don't want integration at all. They don't even want NAFTA.

The European Union is able to deal with social issues because it's more integrated. Does that mean I'm in favour of more integration? No, it doesn't mean that. I think Canadians have a decision to make. Do we want to be able to deal with social issues the way the European Union does? If we want to, it will require more integration. But if we have more integration to deal with issues like social issues, whose vision of those social issues are we going to follow?

Look at the softwood lumber case. I think that case shows as much as any case that when you have a large actor and a small actor engaging in economic relations--I don't care; it's not just the U.S. and Canada--to the large actor, a merging of ideas, a consolidation of ideas, means “accept my vision” in many ways.

So my vision, according to the United States' vision of softwood lumber, is that our system of crown land is simply wrong because it's not the U.S. vision. It has to be subsidies that are unacceptable, etc.

If we want a further integration we should know what we're getting into. There's going to be a Canadian vision and there's going to be a U.S. vision. And, yes, we'll be able to deal more with social issues and other issues, but how are we going to be dealing with them, on joint terms, on U.S. terms, or on our terms? I don't have the answers to these things. I think you're starting to see I'm a great academic--I'm a fence-sitter. I'm not really a fence-sitter. I see the pluses and I see the minuses, and I've been disgusted over the years with debates over Canada-U.S. free trade, NAFTA, because I've seen one side painting it too positively, the other side too negatively, and I keep looking for those people who have the courage to say these are the positives, these are the negatives, and what do you want? What do you want for your destiny? I think in terms of our destiny we have to know that a merging of ideas is going to be more U.S. ideas than ours. If we're willing to accept that, fine.

À (1025)

The Acting Chair (Mr. John Harvard): Do you have one more question, Mr. Rocheleau?

Go ahead.

[Translation]

Mr. Yves Rocheleau: Mr. Coombes, in your document, you hardly mention Africa, whereas it is one of the issues on the agenda for the G8. The African question is also one of our concerns here. Is it a sign of the times or the fact that this question is more a concern of the Canadian government, to not say of Mr. Chrétien himself, perhaps for political reasons? Who knows? Given the dramatic nature of the situation in Africa, how do you explain than an honest man such as yourself is not more concerned by the situation in the context of world governance?

[English]

Prof. Theodore Cohn: You're mentioning a very good point. When I was asked to write this brief, I was, until yesterday, finishing this book. That's why there are a few things I've changed on the third page in writing. I could barely get this done in time, and I decided not to focus on issues I'm not an expert on.

I'm not an expert on Africa specifically. I agree with you that Africa is important, but it's not an area in which I have expertise. One reason I'm particularly interested in your question is that there's someone in our department--and I have no idea whether he was even contacted--who I'm just starting the process of writing a textbook with now, or co-authoring it, and his name is James Busumtwi-Sam. He's a faculty member in political science and he is far more of an expert on Africa than I am, and in our joint work he's going to cover the part on Africa. So yes.

The Acting Chair (Mr. John Harvard): I have a couple of questions, Mr. Cohn, and I'll try to stick to the political side of it. They are a follow-up to perhaps what Mr. Rocheleau mentioned and they have to do with Africa. Certainly at Kananaskis, Africa will be very much on the table, and the developed countries, including Africa, would like to have greater access to markets like Canada's and that of the United States. But given the current political situation inside the G-7--I'll leave Russia out because it's not a member of the WTO--what hope do the developed countries have of getting better access, lower tariffs, and so on into, say, North American markets?

À (1030)

Prof. Theodore Cohn: With respect to the question Monsieur Rocheleau asked and your question, I feel more comfortable discussing the position of developing countries in general. In the book I wrote I trace in great detail the developing countries. I think our dealing with their economic concerns is absolutely critical.

There was a test of faith. Until the 1980s developing countries wanted, for example, special and differential treatment in trade, and they did not want to be involved very much in the GATT. A critical year was 1982, the year of the foreign debt crisis. As a result of the foreign debt crisis, for a variety of reasons--too many to discuss here--the third world countries became more oriented toward trade liberalization and became more involved in the GATT Uruguay Round than in any previous round. As a result of the GATT Uruguay Round, at first the third world countries felt they had made major gains in areas like textiles, clothing, and agriculture. They later found that they had not made the gains they had thought. They gave a lot on issues the G-7 and the quad wanted, namely services and intellectual property, but they did not get what they had expected in textiles and agriculture.

There were a lot of promises made at the Doha WTO ministerial meeting as to what we're going to do for the third world. If we do not start putting some backing into those promises, there are going to be serious problems in global trade. That's in my area of expertise, and that's how I can relate to it.

I think there were problems getting the third world countries to agree to a new GATT/WTO round, and to get it implemented there could be serious problems.

The Acting Chair (Mr. John Harvard): I have one more question, Mr. Cohn.

You wrote a study on section 110 in the United States. You didn't mention it in your remarks, but I want to raise it. It has to do with the dispute around the entry and exit of people--

Prof. Theodore Cohn: I'm smiling, but it's not funny. It's awful. Long before all these terrorists activities occurred--

The Acting Chair (Mr. John Harvard): It really didn't come to pass, and since then we've had the so-called smart border accord. Given the kind of tensions felt in the wake of September 11 and the Americans' attitude toward border controls and so on, do you think anything like section 110 could happen again? How do we as Canadians prevent a recurrence of that kind of dispute?

Prof. Theodore Cohn: That's a very big question to cover in 120 seconds.

I have a lot of thoughts about that. In that little piece I wrote...in 1985 I spent six months in Mexico. I went there too soon because no one in Mexico was interested in Canada at the time and no one in Canada was interested in Mexico. Canadians are still not particularly interested in Mexicans, and vice versa, despite all the rhetoric. One of the things I argued about in that piece was that we have to start talking in genuine North American terms, that is, with Mexicans as well as Americans, and stop pretending we're the only special partner of the U.S.

If we deal with some of these cross-border issues in genuine trilateral terms, I think we're going to make further progress than trying to keep the clock back and say we're different from the Mexicans. We are different; we're very different, and our problems are very different. But this is a North American issue. There are many other issues related to this I could discuss.

À (1035)

The Acting Chair (Mr. John Harvard): Thank you very much.

On that particular matter, if you wanted to file a page or two with the committee, it would be most welcome, Mr. Cohn.

Thank you for coming. We appreciate it very much.

Members, we'll just pause for 30 seconds to let Mr. Cohn go; then we'll invite the next group.

Members, we're going to resume our deliberations. I have the distinct pleasure of welcoming Dr. Lloyd Axworthy, a man who doesn't require any introduction whatsoever and whose influence on Canadian policy continues, despite the fact that he's left the government. Some people might argue, Lloyd, that your influence is even greater now than it was two or three years ago.

Anyway, we certainly welcome your work and appreciate your coming here today. For those who don't know, of course, Dr. Axworthy is director and chief executive officer of the Liu Centre for the Study of Global Issues. He has people with him. I think, Lloyd, I'll let you introduce your friends. We have almost an hour and a half. We'll just let you do your thing; then, I'm sure, halfway through or so we will have time for questions.

Mr. Lloyd Axworthy (Director and Chief Executive Officer, Liu Centre for the Study of Global Issues): Thank you, Mr. Chairman.

Let me just say it's a great pleasure to be back before a House of Commons committee again. I take it that this time around it's not quite the same relationship. I can be here as an impartial, independent thinker, as opposed to one who has to defend positions and statements against outrageous fortune. I'm very pleased to be here and to see some of my old friends and associates again.

As you mentioned, Mr. Chairman, we are here as members of the Liu Centre for the Study of Global Issues. We hope this morning we can provide some commentary on two areas. The first is the very vital question of Canadian-U.S. foreign defence policy with particular reference to the present negotiations going on related to military integration.

I have with me Professor Michael Byers, who is a professor of international law at Duke University. He was commissioned by the Simons Centre, which is one of the operating units within our arrangement, to look at this issue from the standpoint of all its implications.

I would like to mention to members of the committee that this has now gone through three different separate rounds of consultation. We started working on this two months ago, when there was a meeting held at the Liu Centre with a number of experts just to look at the implications of this issue. Professor Byers drafted up an initial response, which was then circulated to a fairly wide range of experts. He got comments back, and then last week there was a third round of discussions held in Ottawa with about 20 people in attendance from across Canada: political scientists, defence experts, and international law experts. So in a sense the paper just isn't a solo operation; it's based upon quite an extensive round of examinations by a wide range of Canadians in the field.

In a moment Professor Byers will provide a commentary on it. We've tabled a paper with the committee. One thing I can indicate to you, one thing we have added since the interim paper was released last week, is a series of very specific recommendations. I hope the committee will find that of some use.

Let me comment as to one reason our centre took on this matter. We all know just how prevalent the various trend lines and forces of integration are globally and in North America in particular. We have usually treated those as primarily economic issues, and there's no question that this pressure is there and is mounting. What's happened recently is that there has been increasing pressure for military integration, so you have a layering effect. Not only is there the imperative and compulsion coming out of the economic players, but you're now having a similar kind of pressure emerging on the military defence side.

The culmination of those two--the chemistry, the interaction between those two--creates, I think, a series of very major questions Canadians have to answer about the degree to which we will maintain our ability to manoeuvre, our freedom of choice, and our ability to make judgments based upon what we calculate to be our own interests and our own values. It's important not to treat these things in isolation but to see this as a cascading effect, one that really has to be examined in all its implications. While we have focused primarily on the import of the defence side, you'll see that it does flow back into a number of other, related issues that have major implications for us domestically as well.

For the second part of our presentation we have with us Professor John Atta Mills, who is a resident scholar at the Liu Centre and who is sponsored by CIDA. John is the former Vice-President of Ghana and has been at our centre for the past year establishing a very strong focus on African matters. You can imagine that in the last several months, as we gear up for the G-8 meetings this June, he has been in quite active demand around the country to comment particularly on the proposals for the new African economic development plan. In fact, he was a major architect of it. You have somebody who has a very deep understanding both from an academic and intellectual side and very much from a practical side, from his work.

With him is Ms. Rhonda Gossen, a CIDA officer assigned to our centre, who is looking primarily at issues of development and conflict. We've been making a real effort to try to understand what the interplay is between foreign aid and conflict and how the two relate to one another. We've held a series of major meetings, and Rhonda has been the chair of that particular program.

You have in front of you an interesting variety of topics, and we'll accept your judgment as to how much time we'll assign to each. I think you'll find that the people who are here with me can provide this committee with some very important insights.

Let me just conclude by saying that this is the reason our centre is in existence. It was established for a very specific purpose and with a very specific mandate, which is to draw upon the good, serious, academic research that can be found in a university; to translate that into useable, effective policy recommendations that are available to government, to business, to NGOs, and to civil society; and to do so in an independent way.

À (1040)

Because we're a university-based organization, we have a high degree of freedom to think and speak based upon the research and analysis that we're able to develop. So in terms of the think tank role of Canada, I think we occupy an interesting place in that spectrum because we do try to provide a stimulus for public debate. There's an objective I've set to get things out in the open. Let's get people engaged in crucial issues and let's have a serious examination of those in a transparent way. And that's our purpose here today.

So with that, I'll now ask Professor Byers to do the presentation on the U.S. military, if that's okay, Mr. Chairman.

À (1045)

The Acting Chair (Mr. John Harvard): That's fine. I would just say, Mr Axworthy, that we have roughly one hour and twenty minutes. You can divide the time up the way you want, whether it's 50-50 or 60-40 in favour of one subject or the other. I think, though, if it's all right, we'll just leave any questions until both sections are completed. Do you agree?

Mr. Lloyd Axworthy: I think maybe it would be best if we could do them seriatim, because I think John would then like to issue a statement. He has a statement prepared as well. So maybe we could do them in two sections.

The Acting Chair (Mr. John Harvard): Fine. We'll have two rounds of questions. We'll have the first round after we hear from Professor Byers.

Welcome, Professor Byers.

Prof. Michael Byers (International Law, Duke University (North Carolina)): Thank you for having me here.

This is a complicated subject, and obviously summarizing it in ten minutes is a challenge. I therefore encourage you to read the report carefully later. I think there's an enormous amount here that needs to be digested. There are very many questions and not all that many answers, but that in itself is reflective of the uncertainty of the situation we're working with.

We don't really know what the plans are for closer military cooperation between Canada and the United States. My task in writing the report and in consulting with the various experts was to examine the possibilities and also the eventualities, the negative consequences that could arise. It may seem to some people that the report comes across as anti-American as a result. I find that a bit perplexing because I'm very much a pro-American. I'm a farm kid from southern Alberta who has chosen to live and work in North Carolina, which is hardly the most liberal part of the United States.

But my task here is to examine the things that would need to be negotiated and the safeguards that would need to be provided so as to ensure that the most important military relationship in the world continues to function properly to the interest of both countries. It's not an anti-American report in any way. It's a pro-Canadian, pro-American, report.

That said, what sorts of issues arise? The most obvious issue that arises is a question of Canadian sovereignty and what kinds of implications a closer military relationship between the two countries would have for Canadian sovereignty.

It so happens that the distinguished U.S. ambassador, Paul Cellucci, has taken a position on this issue, and I quote him here:

If Canada joins the US in a continental approach to security, Canadian sovereignty will not be infringed even one iota.

With all respect, the ambassador is wrong. There's nothing wrong with delegating sovereignty--countries do it all the time--but this kind of an arrangement would have a substantial impact on sovereignty. Part of the reason for that is the technical definition of something called “operational control”, and Ambassador Cellucci and others have said this isn't about command, this is about operational control. Operational control has nothing to do with sovereignty.

If you look at the definition of operational control in the NORAD agreement, 1958, and approximately every five years since, you find the following and I quote:

“Operational Control” is the power to direct, co-ordinate, and control the operational activities of forces assigned, attached or otherwise made available... Temporary reinforcement from one area to another. including the crossing of the international border... will be within the authority of commanders having operational control

That's a pretty extensive definition of what commanders of a joint force and integrated command could do with Canadian soldiers. I think most Canadians would think it amounted to a kind of command.

The second point on the issue of sovereignty is that theoretically, technically, and legally, countries have the option of withdrawing from international institutions. The United Kingdom, for instance, could withdraw from the European Union if it chose to do so. But everyone realizes that international institutions are sticky and that there's a serious political or economic price for withdrawal. Only the most powerful country in the world, the United States, can afford to withdraw from international agreements at will, as happened today with the International Criminal Court statute.

Canada is not a superpower. Even though it will have the legal capacity to withdraw from closer military cooperation, once it goes in, it would be very hard to get out. So what matters here is not legal sovereignty but practical sovereignty, the freedom to make decisions at the international level. Therefore, the kind of proposal that seems to be at play in Ottawa and Washington would have an impact on Canadian sovereignty as I think Canadians would understand sovereignty to be.

The second issue I look at in the report is jurisdiction in the Arctic, which is also a sovereignty issue. If you applied the NORAD definition and extended it to naval forces, a U.S. officer having operational control over an integrated command could send a U.S. naval vessel into the Canadian Arctic without the specific permission of the Canadian government. That's a simple extension of the NORAD arrangement to naval forces.

That may or may not be a good thing, but it does have an implication for Canada's claim to jurisdiction in the Arctic. We have a contested claim in the north, particularly with regard to the Northwest Passage. You remember the Polar Sea and the SS Manhattan.

So there is an issue here that needs to be examined. I don't know what the answer is, but in our recommendation section we do put forward one proposal that could deal with that. I'll get to that in a few minutes.

Another issue I've looked at is the implication of closer military cooperation for peacekeeping and foreign policy. Like it or not, forces committed to North American defence are not going to be as easily available for overseas peacekeeping as they would otherwise be. So there's a policy choice to be made here. If you go into some sort of closer military cooperation with the United States, it's going to be practically more possible to send Canadian soldiers and equipment on UN or NATO peacekeeping operations. It's a simple policy choice that needs to be understood by Canadians and by this committee.

Entering into closer military cooperation will necessarily have a restraining effect upon Canada's freedom in foreign policy. This is an example I put forward in the report. Imagine in a year's time that the United States decides unilaterally to mount an attack on Iraq. Suppose the Canadian government is opposed to that attack and thinks it is illegal. It's possible that the Canadian government might take that position. Will it be more difficult for the Canadian government to take a public position against the United States if part of its armed forces are subject to the operational control of the United States? You bet. Will the state of alert within North America be heightened as a result of the American adventure overseas? You bet. Will there be increased demands on the Canadian military and the Canadian defence budget as a result of the American decision overseas? Yes. These are important implications, which I'm not convinced have been thought through. They certainly haven't been debated publicly.

Another range of issues concerns things such as the differences in approach between Canadian military policy and U.S. military policy on issues such as women in the military, gays and lesbians in the military, and bilingualism in the Canadian Armed Forces. This is a very sensitive point in Quebec. I was on Radio-Québec last week, and I can tell you that they were very interested in the implications for the Official Languages Act of operational control over Canadian Armed Forces by U.S. generals.

I do not know what the answers are, but I know that the questions are important and they need to be answered before we move forward.

There is a whole host of legal issues. We all remember the problems the defence minister ran into in January concerning the Third Geneva Convention and prisoners of war. That's just one small example of the large number of legal problems that are waiting for Canada when it enters into closer military cooperation. You can protect against some of them if you think about these things carefully and get lawyers, foreign policy experts, and defence experts out front imagining the eventualities and guarding against them. But I don't see that being done, and I urge this committee to tell cabinet that those questions need to be answered quickly and before we move forward.

À (1050)

Finally, coming to the recommendation section of the report, because this is what will be most new to you, I'll just walk you through them very quickly. These are nine principles that should be followed--this is at the end of the report, just before the list of experts who have been consulted.

The first principle, an obvious one, is to conduct a full public debate before making a decision. There should be a clear role for Parliament in this. This is an important decision that's being made. I'm pleased that the committee is hearing us today, and I hope this debate will continue. Also, related to that, obviously the debate should take place on a Canadian timetable, not on a fast track because of pressure from the outside.

The second principle is to strengthen NATO, the United Nations, and the arctic council, strong multilateral mechanisms that work in Canada's favour, always have and always will, providing we provide them with the support they need.

The third principle is to support non-military approaches--not to the exclusion of military approaches, but support non-military approaches as well. For instance, the United Nations is taking very serious measures following Security Council resolution 1373 of September 28 on the freezing of terrorist assets, the linking of traditional and police cooperation. Canada should be there shoulder to shoulder with the 190 countries of the UN.

Fourth, include Mexico. We're talking about North American defence. It seems to me obvious that if we're moving forward on North American defence with the United States, Mexico should be at the table as well. They're a very important partner in NAFTA. They have the same concerns as Canada has.

The fifth principle is to develop detailed rules for military cooperation, not just with the United States but with the United Nations, with NATO, detailed rules that would protect against the kinds of problems we ran into on prisoners of war in January.

Douglas Bland, a defence expert and former military officer, terms these “the Canadian rules”. I think they're a wonderful idea. They're long overdue. They need to be developed.

The sixth principle is, if you're going to enter into closer military cooperation with anyone, conclude detailed, legally binding and transparent agreements. Two corporations entering into closer cooperation on an economic matter would have very detailed agreements, hammered out over weeks and weeks with lawyers and experts at the table. Why not two countries? This is how you protect your interests and those of your friends.

The seventh principle is to make any agreement time limited. NORAD is time limited, with a five-year renewable basis. This agreement, if it were to happen, should be time limited as well.

The eighth principle is, coming back to the Arctic, to insist on recognition of the need for specific permission before foreign forces can enter the Canadian north. This is Canadian government policy at the moment; it should stay Canadian government policy. If you enter into an agreement with another country, get them to commit to asking for specific permission so you don't get another USS Polar Sea or another SS Manhattan.

Finally, the last principle is to develop Canada's capacity to protect itself and to engage in peacekeeping.

The conclusion of my report is that we probably need to spend more on the Canadian military, but we need to spend it on Canadian priorities as the Canadian government deems these priorities to be. I have my own views as to what those priorities should be. They would include logistics and intelligence gathering.

The report is not saying we shouldn't spend money on defence, and it's not saying we should stop cooperating with the Americans. It's saying we should cooperate with the Americans; we need to invest in our defence, but we need to do so on our terms, in favour of our interests, after having thought very carefully about what we're doing.

Thank you.

À (1055)

The Acting Chair (Mr. John Harvard): Thank you.

Just before we go to Dr. Martin, may I ask one question?

How real are these pressures for the kind of military integration that you're concerned about and the kinds of questions you have raised, and of course the recommendations you're proposing? When we're talking about these pressures, are they coming largely from just the so-called Northern Command, or does it have a series of sources?

Prof. Michael Byers: You may be better positioned to answer that question than I am. It certainly is clear from statements, including statements from the Canadian defence minister, that the Americans are asking for a response from Canada within the next couple of weeks, because the Northern Command takes operation from October 1. There would seem to be pressure, but again, part of the problem here is that we don't know much about what the agreement is and what the actual timetable is. The report here is designed to ask precisely that kind of question.

On the question of the issues and how real they are, let me give you a simple example, because I've had this question before. Someone said to me, “Well, isn't the issue of prisoners of war a bit of a stretch with respect to North American defence?” Certainly prisoner of war problems arise in Afghanistan; they don't arise in Canada.

Well, imagine this scenario. There's a Canadian frigate 400 nautical miles off Sable Island and the American military picks up intelligence that there is a trawler with a biological weapon heading towards New York. The Canadian frigate is under the operational command of the Northern Command or some other entity and is ordered to intercept the frigate and to take custody of those onboard. Those onboard are linked to the Taliban. We now have a prisoners of war issue within North America, within the geographic limits of the Northern Command.

Every single issue, every single hypothetical, in my report could happen. You will remember the Prime Minister in early January saying that the prisoner of war problem in Afghanistan was hypothetical. It clearly was not.

Á (1100)

Mr. Lloyd Axworthy: Mr. Chair, if I could add a few comments to that, on your question, which I think is an important one, you have to put in the context in part the general defence exposure that's taking place. For example, the very strong unilateral decision taken to advance the national missile defence program clearly has major implications for Canada. The present United States administration wants an involvement. They have a proposal that goes onto several stages. It wasn't the limited stage that the Clinton people wanted. They're going to need that kind of an agreement.

I recall--shows how advanced I'm getting--back when I was in the government in the early 1980s when a very innocuous memorandum that suggested there would be cooperation in testing of military systems ended up requiring Canada to become actively engaged in testing the cruise missile, which resulted in a major public debate for a year and a half, in which I participated. What looked as if it was a natural, normal, routine item of cooperation ended up being a very severe question, which at the time put us in a dicey position in relation to what was going on in terms of politics between the then Soviet Union and the United States.

Now we're into much heavier stakes. We're now talking not of testing, we're talking of being an actual area of placement for major new defence programs.

Secondly, I want to comment that the Northern Command proposal, which has been described as simply an internal reorganization of the U.S. defence administration, is not that. It has already established a mandate, as it says, from the North Pole to Mexico. And because, as Professor Byers points out, some of those areas are in dispute, particularly the arctic waters, where the United States has never recognized our right to establish areas, or the initiative we took when we established the northern dimension of our foreign policy of trying to internationalize our waters, they don't agree with that. They have security interests up there and they want to retain them. There's a real disagreement of policy.

Thirdly, and perhaps this is most disturbing and goes back to my earlier remarks, Mr. Chair, I read in a commentary put out by the C.D. Howe Institute, which is being flogged by other economic organizations, that it's time we have a big deal and go into a common currency. As a throwaway, as a bargaining chip, they said let's throw in military security integration as part of the leverage we can get in order to get common currency.

I can think of four people around this table who have been to enough discussions over the last several years on public policy in this country to know that there are very strong influences in this country who simply believe that our future is to be as closely integrated with the U.S. economic, resource, energy, and defence systems as we possibly can be. What we're saying is, before we sign on, let's stop for a moment and ask the tough questions.

The Acting Chair (Mr. John Harvard) Thank you. I suppose our military wouldn't like to be likened to the cherry on top.

Dr. Martin.

Á (1105)

Mr. Keith Martin: Thank you, Dr. Axworthy and your colleagues, for being here. It's great to see you again among colleagues and friends.

Professor Byers, I would suggest the title of your document, “Canadian armed forces under U.S. command”, is a horse that will not run in our country. I believe no country in its right mind would ever or should ever give up its control over its military to another country, unless it wants to become that country. And I hope personally that never happens.

Your presentation was excellent. I have a few questions. The first one--and the devil, of course, is in the details in all of this--is, getting to the bottom line of operational control, do you believe we can negotiate an operational control model that would enable us to get within the envelope of a North American security perimeter while retaining control on sovereignty over our armed forces?

Secondly, when you refer to a legally binding agreement with other countries, I couldn't agree with you more, but what would the agent for the enforcement of that agreement be? What court would actually enforce that agreement, particularly given the United States' often utter disregard for other countries, particularly our own in many issues that are important to us and that even affect our own? I draw your attention to the softwood lumber dispute as one example.

Lastly, I'm very interested in your last comments that referred to your views on what we ought to do in buttressing our defence forces to improve their quality and to enable our men and women in uniform to deal with the changing structures and challenges in the 21st century from a geopolitical perspective.

Thank you.

Prof. Michael Byers: It's good to get some tough questions back.

How would you actually go forward on operational control in a way that would protect Canada's interests? I suggest part of the answer here is realizing that there's a different kind of immediacy involved in air defence as compared with naval and land defence. I think NORAD is a good system. I think NORAD made an awful lot of sense during the Cold War and probably makes a lot of sense today.

September 11, after all, was an air attack. It wasn't a land attack or a naval attack. In that kind of situation where you require an immediate response, it makes an awful lot of sense to have thought out in advance the integrated structures you can call upon to make sure the planes are in the air right away.

I don't see the same kind of immediacy with respect to frigates or land forces. I can imagine that instead of applying the NORAD model to the land and sea, which is what I suspect is planned, we should instead negotiate an agreement whereby the operational control wasn't really operational control but where there were clear mechanisms of accountability back to Ottawa--because you have the time to do that.

You can still have close military cooperation. I'm in full favour of close military cooperation, but making sure you don't have happen in the future what happened in 1962. In 1962 there was the Cuban missile crisis, and NORAD raised its level of alert without consulting Canada. I don't know exactly what happened on September 11, but it's possible something similar happened then.

Canadian political officials need to be consulted when possible, and land and sea situations do provide that possibility. It's difficult to imagine the scenario where there wouldn't be the possibility of going back to Ottawa before Canadian equipment and soldiers were committed.

On the second point, on the agent of enforcement, obviously the United States is the big kid in the playground at the moment. But fortunately it's a big kid that actually does believe itself to be a law-abiding country. The stature given to law professors in the United States, I can tell you, is an indication of that. It is a rule-of-law country, despite the fact that it is one that feels itself less in need of law now than perhaps it did in the past.

In my view, having a clear, detailed, and legally binding agreement would provide much more constraint and leverage on the United States than going forward without such an agreement. Leaving everything to trust and “we'll muddle our way through” when dealing with a country like the United States is a recipe for disaster.

Having a clear, detailed, legally binding agreement means you can actually discuss what's happening in those clear and precise terms. One could even include--and I haven't thought this through entirely--a dispute settlement mechanism, such as we have in NAFTA for investment disputes, chapter 11. We could conceivably have something like that in an agreement of this kind.

But the important point here is the United States does actually pay attention to its obligations, which is why, in the current situation, the Bush administration is not so much violating international treaties--although it's violating some international treaties--as denouncing them, because it prefers to pull out rather than violate. Now, obviously it's going to be more reluctant to pull out of a treaty with its closest trading partner than it would with other countries. So a clear, detailed, and binding agreement would be the best option.

On the final point, on defence forces and how we move forward, I'm not an expert on defence expenditure, but I do know that we have some serious problems. Yesterday I flew from London, England, to Vancouver, across the Canadian Arctic, in an Air Canada 747. If that plane had crashed we would all be dead, because the Canadian Armed Forces doesn't have the capacity to do search and rescue in the high Arctic. That, to my mind, should be the priority.

How do we defend our sovereignty? How do we protect against the emergency crisis situations that are going to arise inevitably? We invest in that sort of thing: heavy-lift capacity to get our soldiers to peacekeeping missions or peacemaking missions or terrorism tracking-down missions. It was embarrassing how long it took to get the soldiers from Edmonton to Afghanistan. Although I'm not an expert, to my mind that seems important. And where I see our priorities going, if we join up with the U.S., is in a slightly different direction, including financial support for ballistic missile defence, which could be extraordinarily expensive and would detract Canadian military spending away from other areas.

Á (1110)

Mr. Lloyd Axworthy: Mr. Chairman, I'll make just two quick comments to Dr. Martin's questions, as well.

First, in the recommendations we suggest that the committee in particular, but I think policy-makers in general, look at the trilateral process that we started two and a half years ago. First, as Professor Byers pointed out, North America does include Mexico. Secondly, one way to ensure that mechanisms of operational control are held accountable is to have an ongoing, continuing political oversight, which is a thing we were trying to do with the Mexicans and the United States on a number of issues by setting up this trilateral process.

It has been shelved over the last year or two. We haven't pursued the trilateral mechanisms, even though I thought they were beginning to really bite fairly substantially in a number of key areas--energy, resources, cross-border issues. But the point is there were regular meetings--three or four a year--between the three foreign ministers. They spun off a number of organizational requirements, so that there was this overview or oversight. Something as important as this defence thing would come under that kind of umbrella and therefore be subject to constant policy review, not simply an agreement between two defence staffs.

The second point I make is the larger question about how you make these judgment calls. I may be showing a bias here, but I think it's very hard to be making such crucial decisions on defence when you haven't completed a foreign policy review. It seems to me the broad foreign policy objectives, in terms of what we think is the value-added that Canada can provide in the world, in terms of whether it's support of the United Nations, reconstruction, rebuilding, defence issues, peacemaking issues....

As you know, I expressed publicly a concern in Afghanistan when we chose to forgo the opportunity to provide a peacemaking role, after my trip there in late November, as opposed to a combat role. Now, the choice was made, and people can debate it, but I felt the incidence of disorder that's now taking place in that country demanded a much stronger international presence in that country, something that Canada's good at doing, and we relinquished that opportunity.

Those are the questions that go back to what Mike put in his paper. We all know how tight resources are. If you have to make a decision between having some good C-5s in your own intelligence-gathering system versus a more complex system to move into space monitoring that would lead you into weaponization of space or missile defence, then you're skewing your foreign policy decisions before they've even had a chance for the Canadian Parliament and public to know what they are. That's what I think is important to do.

The Acting Chair (Mr. John Harvard): We're now going to turn to Mr. Rocheleau. You may want to put your interpretive devices on.

Mr. Rocheleau.

[Translation]

Mr. Yves Rocheleau: Thank you, Mr. Chairman. Welcome Mr. Axworthy. It is a real pleasure for me to see you here. I have a few questions. The first one is rather philosophical in nature.

You state, on page 2 of your document, that if a European country belonging to the European Union distanced itself from a given policy, it might be faced with reprisals, because that is part of the game. You say that only the most powerful country in the world has this sovereignty prerogative that shields it from reprisals. Philosophically speaking, is that not a denunciation of a monumental failure in the history of humanity?

Let us not forget that we are in the year 2002. However, during the course of the card game, the one who is bigger and stronger than the others will impose his rules along the way. Because he is losing, he will, through intimidation, ensure that no one is able to go on with the process. He protects himself.

Is that not a monumental failure? Is that not a primitive reflex? Is that not an example of the strongest setting the rules, whereas as members of the human race we are supposed to have evolved a little bit more in our ways of reacting to situations? Where is the role of the UN, of the United Nations, in the face of such a phenomenon? That is my first question.

Secondly, there is much talk about the need for security. We are constantly talking about a militaristic approach, mainly embodied by the United States. But are the developed countries of the world, in particular European countries--and I am thinking of Great Britain and even of France--not themselves falling into the trap by encouraging to this extent the Americans to think in terms of security, in terms of military intervention, instead of fighting against the causes of terrorism, namely the immense poverty that we well know exists--you only have to travel about the world a little bit--in Africa, in South America and in the Middle East? These parts of the world are fertile ground--everyone says so; it has become common knowledge--for the boiling up of terrorism. This is the least that can be said.

My third question is perhaps trickier, but a friend of mine showed me an article in the French edition of this month's Reader's Digest that talks about extremely important work done by the French judge, Jean-Louis Bruguière, today a world renowned expert who, with the support of the French government, developed tremendous expertise in the area of the fight against terrorism--it seems he was already aware of those who acted on September 11 and that he had met with the minister of Justice of Canada at the time to inform him of the presence of terrorists in Montreal. I do not know if you are aware of what I am talking about, but Canada gave a blunt refusal. It did not even wish to participate in an exchange of information, whereas this judge, who is well recognized throughout the world, had a great deal of information to relay.

How do you explain this type of behaviour? This case involved among others, Mr. Ressam, who was on his way to Los Angeles for January 1, 2000, and who was arrested. This issue calls to question this entire file. If you are interested, if you are not aware of it, I am prepared to lend it to you. As a matter of fact, it is said that this text is hitherto unpublished.

Those are my three questions.

Á (1115)

[English]

Prof. Michael Byers: I'll respond in English, because my English is better than my French.

The first question is one that goes to the heart of my academic work. When I'm not writing reports for the Liu Centre, I write about the relationship of international law and international politics in the age of the single superpower, the kinds of changes that are occurring or could be occurring.

Canada is obviously at the centre of the current development of a single superpower that is claiming a degree of exceptional rights in our world. I think the main difference we have now is that other countries are beginning to feel like Canada too. They're beginning to feel like they're living beside a powerful country that doesn't always listen to them. In a sense, to draw upon an expression of Pierre Trudeau's, the entire world is now sleeping with the elephant--not just Canada.

How does one deal with the United States? I think first of all one recognizes certain rather good attributes of the United States: the fact that it's a rule-of-law country; the fact that it has been a leader in the promotion of democracy and the promotion of development worldwide, albeit in its own ways; the fact that is has been a leader in terms of the efforts to defeat Nazi Germany and then the Soviet Union; and the fact that it is a relatively benevolent superpower. There's a lot to be said about the contributions of the United States. I have difficulty imagining a nicer superpower. God forbid having the United Kingdom or Russia or China as the single superpower.

So the question is, how do we work with a country that is largely friendly, that wants to do good but is so big and so influential that it sometimes doesn't pay attention to other countries? What you do is you operate carefully. You talk to them. You make sure that everything is negotiated, that you're dealt with as an equal, and that you are putting forward your assets and your strengths at every possible opportunity. And Canadians--and I say this as a Canadian who hasn't lived in Canada for nine years--sometimes forget just how influential their country is. It's a country that's a member of the G-7 and G-8, a country that is successful in promoting the adoption of major international treaties like the Rome Statute of the International Criminal Court or the landmines convention, a country that's listened to in Washington and London and Tokyo, and a country that has the second-largest piece of real estate in the world, massive energy, and other resources.

So my point is, in response to you, that we tread carefully but we go and deal with the United States as an equal and as a country that has something significant to bring to the table and a lot of friends around the world as well. My only concern about the situation, from a Canadian perspective, is I think Canadians sell themselves short. I think they underestimate the degree of respect and influence they can exercise in Washington. But that's just very much a philosophical response to a philosophical question.

In terms of the causes of terrorism, we say in our report, as one of our recommendations, that Canada should support non-military approaches. Non-military approaches to terrorism should include addressing the causes of terrorism. I think that should be obvious. And I think that current initiatives to deal with problems in Africa, for instance, are part of a response to the causes of terrorism. The simple fact is that building more prisons and hiring more police officers isn't going to deal entirely with the problem of crime. You need some prisons, you need some police officers, and you need to deal with the causes as well. This is a paper about military cooperation, but it's not intended to exclude any of those other factors.

As to your third question, I know nothing about the situation, so I'm afraid I can't comment.

Á (1120)

Mr. Lloyd Axworthy: I thought I would just add an editorial comment about Mike's point of doing things carefully.

About a month ago I was giving a talk at the University of Taipei and I was asked, how do you deal with a huge, big, powerful neighbour? And I quoted that well-known Canadian aphorism that it's like making love to a porcupine--do it carefully--except the translation in the Chinese paper came out that it was like making love to a concubine. So people were wondering what this very strange Canadian was talking about.

I'll make one short addition to Mike's view to Mr. Rocheleau.

One of the most important things I think we can offer in terms of dealing with terrorism--and I don't know the article you're talking about--is that partly what's implicit is that there must be a much higher degree of cooperation in intelligence sharing, enforcement, and apprehension. We have a series of treaties being negotiated, but the actual implementation of how information is broadly shared is still pretty poor and it's still very faulty. There's still a possessiveness among different countries on what they want to hear or see, and it happens within governments, it happens between governments.

One of the reasons why I became a strong promoter of the International Criminal Court is that I saw it as a catalyst that would help develop a broad-based international judicial system with appropriate investigations, inquiries, prosecutions, and apprehensions done on an international basis. In other words, we could have not just the rule of law, but we could actually have the instruments to make that international rule of law work. That's why I am very dismayed at the decision taken by the present U.S. administration to reject President Clinton's commitment to sign the International Criminal Court.

In a way, it contradicts... We hear, as you know, the great claims that this is a battle we're engaged in on behalf of justice. To have the major player reject a new international institution that supports justice I think is a serious and regressive step that's been taken. Not only would it be a court, but the court itself could generate a much broader network of law enforcement, investigation, and judicial apprehension.

Á (1125)

The Acting Chair (Mr. John Harvard): Before we wrap up this segment, I'd like to ask three questions of either Lloyd or Professor Byers.

My first question has to do with this American timetable vis-à-vis the Northern Command. You're talking about an implementation period in the fall--October, or something like that--and you understand the Americans would like to have some kind of response from the Canadian government in a couple of weeks. I guess my question is--and maybe I'm selling Canada short--how can we influence that timetable? If the Americans are quite firm on that particular timeframe, how could we alter it, and what would be a preferable timetable for Canadians, if it's not what the Americans are suggesting? That's my first question.

The second one has more to do with NORAD. If we were to remain largely aloof from further military integration, what effect does that have, if any, on the future of NORAD, at least insofar as Canadian involvement is concerned? If we were to stay away from North American integration, would the Americans maybe want to end our involvement in NORAD? You, Professor Byers, have a lot of time for the NORAD model.

My third question is perhaps to my friend Lloyd. Your reports over the last two or three weeks have caused some fury from Professor Granatstein. I understand he's so upset he got himself on the agenda of the foreign affairs committee in Toronto for tomorrow, to give his position.

Anyway, basically you're talking about linkages, whether it's in military integration or other policy areas. I think, Lloyd, you mentioned the “layering effect”. Professor Granatstein pooh-poohs these concerns, saying these risks are not as great as you would make them out to be.

Those are my three questions--and if you could, somehow respond to Granatstein.

Prof. Michael Byers: I'll respond to him first and then deal with the other questions.

I'm raising questions. If Professor Granatstein thinks those questions aren't serious, he should answer them. The point is he can't answer them. The Government of Canada can't answer them because the work hasn't been done.

I'm not taking a strong position against closer military cooperation. I'm saying if you're going to do it, do it right. Examine all of the possible eventualities, protect against them, and make sure this defence relationship continues to work for both countries. That's all. To pooh-pooh the concerns, to argue there's no need to answer the questions, is, in my view, irresponsible.

It simply is not right for Canada to go into something with its eyes closed. Ask him that question in Toronto. Ask him if he has the answers to the questions. He doesn't; no one does.

We can come up with the answers on a Canadian timetable, coming back to your question about a timetable. I don't know how quickly the Canadian bureaucracy moves. I suspect they can't move in two weeks. I suspect it's something that would take a year, especially with the kinds of public consultations you want to have on a major issue like this.

The point is that it doesn't matter how long it takes; it has to happen. That consultation has to occur; otherwise, there's a serious risk that Canada will lose in a significant way--not, perhaps, because the United States is maliciously trying to take advantage of us, but just because we and they won't anticipate problems. I'm not imputing maliciousness on the part of the Bush administration here.

Á (1130)

The Acting Chair (Mr. John Harvard): But also, Professor Byers, on the timetable you were suggesting, maybe it would take a year. What if we don't stop at just the military integration but get into the whole gamut of a foreign policy review, as you're suggesting, Dr. Axworthy; then, are we talking perhaps about even more than a year?

Prof. Michael Byers: Perhaps we are. The point here is that it's for Canada to decide. You ask how Canada should respond to American pressure. The answer is simple: you just say no. A sovereign country is perfectly capable of saying “Look, we need more time”. People underestimate the tolerance the United States has for countries that are prepared to stand up for themselves on these sorts of issues.

In the 1960s Prime Minister Pearson took a position strongly opposing the bombing of North Vietnam. He went to the United States and gave a public speech, with the U.S. President in the audience, condemning the bombing of North Vietnam. All his advisers said “Don't do this; they'll rip up the Auto Pact. You can't oppose the United States on North Vietnam.” They didn't rip up the Auto Pact, because the United States, or at least the border states like Michigan, depend as much on a good relationship with Canada as Canada depends on a relationship with the United States.

The Acting Chair (Mr. John Harvard): They say Mr. Pearson peed on his floor.

Prof. Michael Byers: Yes, and apparently he manhandled him a bit. But he didn't rip up the Auto Pact.

The point here is the Americans play rough, but they respect countries that stand up for themselves as well. If we need a year, if we need two years, that's fine. We should insist on it. And we will get it, providing the government has the balls to ask for more time.

The last point I want to deal with--because some people who are pooh-poohing my concerns have raised this argument--is if Canada doesn't cooperate with the United States, the United States will just take over North American security against Canada's wishes.

I think that is a ludicrous argument. The United States is a leading member of the international community and of NATO. NATO is a self-defence organization designed to protect against interference in sovereign countries. The United States would be violating everything it stands for if it were to intervene in its closest ally in order to provide security for itself. It simply won't happen. There is no need to worry about the United States taking over the defence of Canada, because the United States would be subject to the same kind of criticism Iraq was subject to when it intervened in Kuwait in 1990. We're talking about the most fundamental prohibition in the UN Charter. It's a straw horse that should be dismissed out of hand.

The last point is you will go back to Ottawa and will probably be told the plan the defence ministry in the United States want to implement is something called a policy cell, which simply involves sending in 50 or 100 Canadian officers to Wyoming to provide close cooperation with the United States.

In my view, without a detailed explanation as to how it would operate, that policy cell raises exactly the same kinds of potential problems as any other form of closer military cooperation. The same questions need to be asked and answered. Regardless of what you call it, the question is, would Canada's policies and would its freedom to act be compromised in a crisis situation? If a policy cell meant that Canadian frigate 400 miles off Sable Island would do something the Government of Canada wasn't consulted on, then it is the same as operational control or command.

The Acting Chair (Mr. John Harvard): And the future of NORAD, if we don't cooperate?

Prof. Michael Byers: On the future of NORAD, NORAD is as much in the U.S. interest as it is in Canada's interest. We have the radar stations; they're on Canadian territory. They're not going to pull out of NORAD.

The Acting Chair (Mr. John Harvard): Good.

Mr. Lloyd Axworthy: I'll just add that I think Professor Byers is quite right: you have to set your own timetable based upon what you think is important. There is, from my years in government, a certain technique of what they call the “fire bell” approach to policy-making: you keep demanding everybody rush out and make a decision, even though it may be a false alarm. I think in this case they're trying to push a decision through without proper examination. Even if Northern Command goes ahead without direct Canadian participation in it, so what? If you want to get involved later on, you do--it's not something that becomes a locked door--but at least you do so on the basis that it's been properly examined.

John, the point is, this is just too important to be left up to private negotiators behind closed doors making a deal and giving blind assurances. It's just too important.

On an allied question, if you look at the statement made by General Myers, he's already in effect said NORAD is going to be part of Northern Command--it's going to come under it. They're already making unilateral assertions as to what's going to take place. That's all the more reason for Canadian policy- makers to examine what the relationship to NORAD would be and put some prescriptions out.

I believe that, as Michael said, NORAD has its own generic value. Can it be added to something else? Of course it could be, but this is the crucial issue. Because it is sunsetted every five years, there is an opportunity, when it comes back, for a serious review. I think it's now within about another two years of review, if I recall. Then you sit down and look at its implications. That's the beauty of having a sunset clause in these kinds of agreements.

Finally, when it comes to Mr. Granatstein, my attitude is I don't pay much attention to people like that. Anybody who spends half his time making ad hominem arguments and arguing personalities simply shows he doesn't have much of substance to say. I hope he has something of substance to say to the committee. It would certainly be an improvement over what he writes.

Á (1135)

The Acting Chair (Mr. John Harvard): On that note, I guess we should be hearing from John Atta Mills.

Mr. Lloyd Axworthy: If I could, before John speaks, I want to point out that one of the areas where we don't do enough work in this country is in Africa. I want to point out, in our centre, in addition to the really quite amazing work John and Rhonda have done establishing an expertise in the area of Africa, we've also begun to do direct projects. We're doing work in northern Uganda right now, dealing with the whole problem in relation to the border with Sudan and children coming across, and trying to help negotiate an amnesty system, as opposed to the war that's being fought there right now.

We're trying to apply ourselves. I leave tonight to go to Sierra Leone. I've been asked by the Commonwealth to head up the election mission there. So part of the role of our centre is not just to be advisory or advocate, but we're also very much committed to being on the ground. One of the major initiatives we are discussing with Professor Atta Mills is how we can establish a close working relationship with EcoLoss, a regional organization he knows well. I would think that should be one of the major issues addressed in terms of the Africa agenda for Canada at the G-8; that is, how we provide the capacity-building for many of these really quite interesting regional organizations in Africa that deal with security, with environmental, with health and social problems. That to me is one of the really important policy initiatives that need to be examined, and I know John will speak to it.

Professor Mills.

Mr. John Atta Mills (Former Vice-President of Ghana and Visiting Scholar, Liu Centre for the Study of Global Issues): Mr. Chairman and members, it's both an honour and a privilege for me to appear before you today and to speak about Africa.

I believe the main topic that is conjured whenever Africa is mentioned is that of poverty, conflict, famine, and the greatest examples of bad leadership.

Africa presents a situation where half of our population live on less than one dollar a day. Life expectancy is 54 years. Indeed, Africa accounts for 33 of 48 least-developed countries. Yet the paradox is that Africa has immense natural resources. Why this situation?

Yes, many reasons account for this: colonialism, the Cold War, which indeed taught us corruption in Africa. We were used as pawns in a political chess game. If our leaders toed the line, they were granted huge bank balances. This was indeed what established the precedent that still haunts us.

Africa now realizes that poverty anywhere is human insecurity everywhere, and I'm happy that the honourable committee member made reference to that.

Now there's a wind of change blowing in Africa, and our people are putting pressure on our leaders to lead them out of the quagmire of poverty in which they find themselves.

Following the UN Millennium Summit, African leaders were encouraged to come up with the blueprints. Now we have these on the table to be discussed at the next G-8 meeting, which--luckily for us in Africa--is going to be hosted by Canada. I say luckily for us, because we consider Canada a genuine loyal and trusted friend. Canada has a good track record in Africa. Those of us who have been privileged to deal with Canada know that Canada works very quietly, is sensitive to our needs, and always maintains a low profile. Canada, indeed, has influence, and we know that if this document is going to be discussed, Canada will seek Africa's best interests.

Now, why this particular document? As I said, it is a product of African intellect and hard work. Indeed, it sets out very clearly the issues and difficulties confronting us. But I think the beauty in this document is that for the first time, African leaders are admitting our own shortcomings and inadequacies. We are telling the whole world that we have been guilty of bad leadership. We are telling the whole world that we have not adopted democratic principles. We are telling the whole world that, indeed, we have been guilty of bad governance. We are promising that this document is, indeed, a compact between African leaders and their citizenry. With it we are recognizing that, look, there are certain things that we did in the past we should not have done. We are promising to give you good leadership, to adopt transparent and accountable structures, and, indeed, we are providing you with a yardstick by which we African leaders are going to be judged.

In the past, many of our countries have been forced to adopt structural adjustment programs. Indeed the IMF and the World Bank have done something for Africa. But I must be the first to admit that in quite a number of cases they rather compounded our problems. I don't think any African country could have succeeded in avoiding the long arm of the structural adjustment programs. These programs have succeeded in removing some price distortions, but they've created a number of social problems for us in Africa.

This new partnership for Africa's development is indeed anchored on the premise that Africans must take the lead in their own development. We want a partnership with the developed world. We want trade. We want investment. We also are saying that, indeed, let's look at and come out with a new aid architecture. Already ODA levels are falling. We think there is the need for the developed nations to look at their ODA levels. We also want the developed countries to help us with capacity building. And as Dr. Axworthy said, we believe, as the Europeans do, in regional integration and regional cooperation. There is a need, therefore, to help strengthen and help with the capacity building for many of these regional initiatives we have on the ground.

Indeed, as far as Canada is concerned, we think we must strengthen trade links between Canada and Africa. For example, the establishment by Canada of an investment fund for Canadian businesses I believe will go along way in helping attract capital and helping with investment. We are not asking that we be given fish, but are asking that we be taught how to fish.

Now there is one scourge that can undo all these beautiful efforts and plans that we have on paper. Africa is being ravaged by the AIDS menace. Indeed, our rate of prevalence is about 8.5 times higher than that prevailing anywhere else. In fact, in Africa, I believe the rate of prevalence will be more than 20%. One of our best economies in Africa, Botswana, now has to import labour from South Africa.

Á (1140)

I'll also be the first to admit that we African leaders have not served our people well, in the sense that for a very long time we were not candid about the extent of the AIDS menace. We realize that unless we do something about this and the health situation is looked at... The UN came out with the health fund, but the response has not been very encouraging. Their figures or records suggest that indeed more can be done in this area to help to curb the AIDS menace in Africa.

I'm happy that Ambassador Fowler's office has been sensitizing people to the existence of this document, and trying to get especially African NGOs and civil society involved in the process. It is true that not too much is known by the Africans themselves of this document, but we think that for the first time in so many years we have something on the table that is credible, pragmatic, and realistic. We are asking the industrialized world to take a look at us and join hands with us, because it is, I believe, a joint responsibility to help our long-suffering people. We think this offers a unique opportunity to us to forge a partnership that will be mutually beneficial.

We have a new crop of African leaders now who are prepared to be held accountable. Our leaders are prepared to lead, be valid, and dictate to their people. I think the Kananaskis meeting will be an important watershed, an important chapter in the relationship between the industrialized world and Africa. I want to count on Canada's support, which we know will be forthcoming.

Thank you.

Á (1145)

The Acting Chair (Mr. John Harvard): Thank you for those remarks, Professor.

Now we'll turn to Dr. Martin.

Mr. Keith Martin: Thank you, Mr. Chairman, and thank you, Mr. Atta Mills, for being here.

I read the NEPAD document--the beautiful document that it is--but let me ask you, sir, a couple of questions.

First, I have a significant concern that the commitment of some of the key authors of the NEPAD may not be there. I bring to your attention the issue of Zimbabwe, as a litmus test for the commitment of African leaders to the wonderful pillars of that document. Perhaps you could allay our concerns over the commitment of the leaders.

Secondly, as I said to Ambassador Fowler, I think there's a minimum bar that has to be addressed with respect to the two arms of the NEPAD. If that could be resolved at the G-8 summit, it would be fabulous.

There should be a commitment by the African nations to the issues of governance corruption, and a commitment to an independent judiciary for investor protection for both foreign and domestic investors, to deal with what you've said. You have rich countries on the ground and poor individuals on top.

There is the issue of good macro-economic and micro-economic policies. There should be a fair tax regime for the companies working there, so they can use those moneys and plow them into primary health and education.

There should be a three-part commitment by the G-8 nations to reduce the barriers to trade, provide a debt reduction package for indebted nations, and set up an arms registry, specifically focusing on automatic weapons just for the G-8 countries--something they can sink their teeth into and is doable.

Lastly, Dr. Axworthy, on the really fabulous document you did with IDRC last year on conflict and sovereignty, could you please tell us what the G-8 should focus on, in dealing with the rules-based mechanism of prevention, so we can start to deal with conflict prevention before these situations spiral out of control, and prevent the unbelievable messes we are encountering?

If there's any time, give us a brief update on what the situation is in northern Uganda with respect to the LRA and the support Khartoum is giving the LRA. Why hasn't Foday Sankoh been tried for crimes against humanity? Why is he allowed to sit at the peace table? Can you give us any indication what is happening with the situation of the refugees in Guinea?

Thank you.

Mr. John Atta Mills: Thank you for raising the issue of Zimbabwe. I think it's a very unfortunate development. President Mugabe has played his part, but many of us also think his innings have come to an end. It is unfortunate, in my view, that the elections in Zimbabwe were linked to NEPAD. NEPAD has not been adopted, and therefore we are waiting to see what happens. But I must also say, whether the peer review mechanism in NEPAD will work well or not will depend on the commitment, the courage, and the honesty of our leaders. He who is without blame, let him cast the first stone.

I was not surprised with the reaction of some of our leaders to the Zimbabwe issue. I know many of them find it very difficult to criticize President Mugabe publicly. I must confess that I was not happy with the method adopted by my country, for example, which issued a public statement, because I thought that was most on un-African. Some of our leaders tend to react whenever there is any public condemnation. But I know that sometimes closed consultations have had the desired effect.

We think that efforts are still ongoing to try to get the situation in Zimbabwe under control. But I believe Zimbabwe is a test for our own leaders, to be able to look one another in the face and say “You have not lived up to expectations”. I also think that with the adoption of NEPAD we are going to have in place a system of monitoring and making our leaders accountable. In the final analysis, it may very well not even be the leaders who will be the arbiters. It will be the ordinary people themselves who will judge their leaders, and I'm afraid in many cases they will also have to impose the penalties on them.

I think that, yes, the compact has many sides. As you've rightly alluded to, it imposes an obligation on African countries ourselves to have good tax systems, good governance, and so on. Already, I must say, some beginning has been made. Gone are the days when African leaders did not operate according to the rules. For the first time, we have a situation where countries are holding elections and leaders are handing over power peacefully to their successors.

My only worry is that in defining what type of help to give us, the industrial nations adopt an impartial and objective yardstick. I get a bit worried when reference is made to good boys and bad boys. There are examples where people who a year ago were treated like lepers are now given red-carpet treatment because circumstances have changed. A statement was made at the Monterrey summit that, yes, we are going to increase the levels of aid by a determination that will depend on whether you are engaged in reform or not. Well, it's an innocuous statement. But we know that the application sometimes creates a few problems for us. There are double standards being operated by some G-8 countries.

Á (1150)

Mr. Keith Martin: Is impartiality is a problem?

Mr. John Atta Mills: If there's objectivity, we don't have any problem.

For example, we have a situation where somebody wants to perpetuate his rule in another country, and nobody talks about it, or some countries don't talk about it. Yet when this happens in Africa, then all kinds of accusations are made. So all we want is something that is fair and transparent in supporting us.

Mr. Lloyd Axworthy: In answer to your question, let me make one quite sobering statement about the G-8 meeting in Kananaskis and the impact it will have on the NEPAD program.

Unless a substantial decision is made to deal with existing trade barriers, it simply won't work. Oxfam tabled a report two weeks ago that showed that last year alone, close to $100 billion was in effect stolen from southern countries. This was simply because of the fact that our vast agricultural subsidies have distorted the agricultural market, and because of the protection of textiles. We simply don't believe in free trade when it comes to allowing free movement of the goods that are more generic to southern developing countries.

That's what we are prepared to do. And I understand how difficult it is to deal with those two issues, even in Canada. Here again we have this incredible contradiction. Just this weekend it was announced that the United States Congress is going to increase its agricultural subsidies by another 50%. There's a lot of concern about how that will impact on Canadian farmers. There's no doubt it's going to have an incredible impact. It's going to be like a rocket in the solar plexus of agriculture producing countries in the south.

How can the U.S. talk about being our partner when it in fact is basically saying it will continue a highly discriminatory trade system? This should be one of the clarion calls that's made--are we actually going to be serious about reducing barriers or not? That's point number one.

On your second question, one thing we can table with the committee, if you like, is a report we've just concluded called Development, Conflict and Peacebuilding. I think it has been tabled. It very much follows along on the IDRC initiative we took, Keith. It comes up with one very basic conclusion. When talking about development, if a preventative strategy and a post-conflict strategy aren't incorporated, the development system won't work.

A real debate goes on in the aid community about this. The reality is, if you really want to deal with poverty and you have a 13-year-old kid with an AK-47 wandering loose, you're not going to have much in the way of development. You have to deal with those conflict-related issues in a very significant way.

This is one of the reasons I think building up a capacity at the regional level is important, in order to provide the preventative means. ECOWAS has established a unit on conflict prevention. Two years ago, for example, Canada provided money to establish a unit in ECOWAS to deal with child soldiers. It's those kinds of direct support systems that we can offer to enable them to provide a response before the conflict erupts.

A second part that goes back to your recommendation on arms registration is the major and ongoing exploitation of African resources by developed countries and by the private players that still exists. We undertook a pretty major initiative in Angola to come to grips with the blood diamond trade. A lot of recommendations were made and some progress has been made.

But I have to tell you, if you look at what's going on in the Congo today and in Colombia today, the way in which the private war economy preys upon poor countries--steals their resources and trades them in for arms--has become one of the real scourges of our time. There's a real reluctance of developed countries... As you well know, about 90% of the weapons into Africa come from the OECD.

Frankly, we've backed off. This is what makes me concerned about Canadian foreign policy. There were times when we took the lead on those issues. After September 11, we backed off. And I think it's time we restarted a real commitment in coming to grips with those issues.

Finally, let me tell you about how that could be very explicitly and directly applied in northern Uganda, where there are a half a million people in displaced persons camps because of the war going on. It's a war the CNN doesn't cover. Nobody gets on the cover of Time Magazine, even though there are real heroes there who saved our skins when they stopped the Ebola virus from spreading around the world. But nobody pays attention.

It doesn't have the CNN effect or the CBC effect or the global effect; nobody pays attention. But right now the Ugandan army is chasing down the Lord's Resistance group--and I was just there, Keith, six weeks ago, so I know what I'm talking about. The Lord's Resistance group is using children as shields, and as a result, children are being killed as we speak. As opposed to working on an amnesty, a peace process, a justice reconciliation process, we again are using military means to solve the problem. As a result, a lot of kids are being killed.

Not only that, but the LRA itself was made up of child soldiers. They were the ones who were originally kidnapped ten years ago and have now sort of graduated into the ranks of warriors. When we were there, the mothers of these children were saying to us, “Find an amnesty process”. But there was no money in Uganda for an amnesty process, and nobody was giving them any money. In fact, money was being pulled out.

Á (1155)

If you want to do something to demonstrate a real commitment in a place like northern Uganda, then you have to come--as we've said in this report--with a serious, comprehensive, holistic approach that includes development, justice and reconciliation, limitation on arms, and also some real mediation to stop the fighting, and work with the regional organizations to do it. There are ways to do these things, but we're not doing them.

Â (1200)

Ms. Rhonda Gossen (Policy Adviser, Liu Centre for the Study of Global Issues): If I could just add one point to Dr. Axworthy's point on that, the purpose of this report was for us to help CIDA look at the security dimensions of their aid policy and their aid mandate. That's becoming increasingly important for them, I think. The Department of Foreign Affairs has asked them explicitly to be looking more at that issue and certainly at the conflict prevention angle. We are continuing our relationship, working with them on this, but peace and security is one of the main themes of the African action plan that will be tabled in Kananaskis. The committee seems to be focusing quite a lot on governance and economic development, but I think it's unclear how Canada is going to respond to the peace and security theme that they in fact have made number one under the action plan.

The Acting Chair (Mr. John Harvard): Thank you.

Mr. Rocheleau, we have about ten minutes to go, so we'll finish up with you.

[Translation]

Mr. Yves Rocheleau: Thank you, Mr. Chairman. I have a few questions for Mr. Atta-Mills and one question for Mr. Axworthy.

Mr. Mills, you talked of colonialism, of the cold war, to explain the dramatic situation in Africa. We know that Africa was systematically exploited. But we are also talking, at the same time, of Africa's debt owed to the Western world. I would like to know what you think of this paradox. On the one hand, the continent is being exploited, and on the other, it has a tremendous debt. Who does Africa owe this debt to? Private companies or governments?

I would like you to very quickly elaborate on the role of the IMF and of the World Bank with regard to true development policies for Africa.

Lastly, I would like to make a comment about Zimbabwe. Last week, the committee had the privilege of meeting with seven ambassadors to Ottawa, and the ambassador of Senegal made a rather eloquent history recap explaining, if I understood correctly, that the West had perhaps forgotten some of the key moments of the history of Zimbabwe and Rhodesia, and that the agreements had not been respected, which would explain why Africa, the Organization for African Unity, recognized the elections, whereas the European Union was at the very least annoyed. I would like to hear your comments on that.

Mr. Axworthy, when we talk of good governance, we are thinking mainly of corruption, which we would like to see diminish or disappear. But are there mechanisms in our countries, namely in Canada? When we talk about corruption, there are those who are corrupt, obviously, but there are also the corrupters. Do we have mechanisms here targeting the corrupters? In Canada, the whole CANDU reactor affair comes to mind. I believe there were at least some attempts to corrupt, if not corruption per se. Here, in Canada, are there mechanisms to go after corrupters?

[English]

Mr. John Atta Mills: There's no doubt that colonialism is one of the factors accounting for Africa's current predicament. We were chopped down like pieces of property, and at the end of the exercise we were left with very weak states. And indeed, in many countries what had happened and whatever training was done was done so that it could support the colonial power at that time.

Because of the weak states that we had it was difficult for us immediately after independence to make the right impact. Africa now owes a huge debt. But one of the reasons is that we have been very unhappy with the international economic order, and our problems have also been compounded by the IMF and the World Bank.

Sometimes we've been used as guinea pigs. All kinds of conditionalities and programs have been imposed on us in Africa. Now when you have a situation where you are in need, it needs very little persuasion to accept whatever is offered to you. Indeed, every African country has an IMF or World Bank representative. And indeed, it is no exaggeration to say that in almost all our African countries no budget statement is read without the prior approval of the World Bank representatives. I speak from experience.

Indeed, they stand outside whenever we have difficulties but rush to claim credit when they think there are successes. There are no more success stories in Africa. We've just had it these days because either at the time we're not prepared for the debt or we're not in a position to utilize whatever is made available because we lack the capacity. In many cases it is the donors who make the decisions based on what they think we want. Therefore, you find money being spent on projects that do not directly benefit our people.

Zimbabwe, as I said, is a tragic case. I think every leader must know when their time is really up. If I were in President Mugabe's position, I would call it a day. From the moment he started with land reform he was already a marked man. He fell into a trap by adopting certain policies, I believe out of frustration, just before the elections. Somebody should have been bold enough to tell him his time was up.

NEPAD is setting new standards for our leaders. We think that after NEPAD, not only will Africans be empowered to hold their leaders accountable, but the other parties to this compact, those in the industrialized world, will also have the right to monitor whatever progress is being made in this direction by African leaders.

Part of the problem with African leaders is that we still have remnants of the last group. There are some who have been in power for 30 years, some for 25 years, yet nobody talks about them because they happen to be in the good books of some of the powers. When you have a meeting that involves some of these people, who is there to get up and tell Mugabe, who has been in power for only 20 years, that it's time to go when they have been there for 30 years? I think we are dealing with very complex issues.

Â (1205)

Mr. Lloyd Axworthy: I'll just make a couple of quick responses to Monsieur Rocheleau's questions.

I think there has been quite a useful series of efforts at both the governmental and the non-governmental levels to come to grips with corruption. There are conventions at the OECD and the OAS, and there's a money-laundering convention Canada has taken a real lead on; we've just established our own unit.

That's been paralleled, I think, by a much higher level of recognition in the private sector that there have to be codes of conduct and agreements on corporate responsibility. There's a whole series of efforts underway in the mining and oil industries to establish real guidelines to determine practices to follow.

In fact there's an opportunity here, because, as you know, since the Millennium Summit there's been a much stronger emphasis on using private capital as the engine for development. The private sector is going to say we need to reduce our risks when we go into these countries and we need to have more effective, open, and transparent regulatory systems so we're not subject to these kinds of abuses and violations. There's real room for our partnership there, room that wasn't there before.

One thing that is going to be very important in this case, as Rhonda has said, is for countries like Canada to rewire their development policies to respond to that, which is one of the recommendations we make in the report. Not only that, we also need to have some enforcement compliance tools.

The last recommendation I made to this committee when I was still minister--Mr. Martin might remember this--was that a review be done of the Special Economic Measures Act to allow Canada to target specifically those transgressors who in the international rules of conduct commit, in effect, economic crimes. We can't do that right now. We can only trigger that measure if it's based on a broad United Nations agreement, which is very hard to come by in many cases, whereof I can speak from experience.

I think one of the really interesting areas of legislative creation the foreign affairs committee of the House of Commons could do would be to really sit down and look specifically at what might be a model recommendation so enforcement compliance could be used to make sure that the non-state actors, whether they are dealing in human smuggling, arms trafficking, the drug trade, or dealing in this murky underworld that we get into, can be held accountable. And that's something that we right now don't have the legislative power to do.

Â (1210)

The Acting Chair (Mr. John Harvard): Before we say our farewell, I have one question for either of you.

It was noted earlier by Mr. Rocheleau that last week this committee heard from ambassadors of seven of the countries behind NEPAD, and it was pointed out that NEPAD was developed with very little input from the so-called “civil societies” in Africa, and that on top of this NEPAD is really not well known in that continent. When the G-8 countries prepare any kind of action plan for Africa, could this particular concern be addressed in any way?

Mr. John Atta Mills: I know that this criticism is in part valid, but I'm not surprised it has been made. It has come mainly from academia, from civil society, and all of that, who maintain they were not consulted before the document was drawn.

As someone who has been a leader, you are to lead, you have to take responsibility, you have to take action. What my response is to this is that, yes, somebody had to take the initiative to come up with this document, but what is being done now is an attempt to get civil society and other groups involved in the process. Only two days ago we were in Montreal, where CIDA organized a forum for African civil society, academia, etc. I know that African countries have intensified efforts in this area.

Let me say that if past experience is anything to go by, whenever you want to wait for civil society, academia, and others to agree on something before you get even a draft document, you will end up with nothing. I'm saying that there's something on the table; there is still time for us. And indeed past experience has shown, and current developments show, that an attempt is being made to take into consideration inputs from these societies.

The Acting Chair (Mr. John Harvard): Rhonda Gossen.

Ms. Rhonda Gossen: Our CIDA document on aid effectiveness is going to cabinet, I think, in the next few weeks, and it may be very interesting to have a look at that vis-à-vis the NEPAD response.

The Acting Chair (Mr. John Harvard): Thank you.

I must say that the last 90 minutes has been most fascinating, and we committee members are indebted to all four of you. Thank you for taking this time out, and thank you for sharing your considerable thoughts with us. Thank you.

This meeting is adjourned until 1:30 this afternoon.

Â (1210)

· (1334)

The Acting Chair (Mr. John Harvard): Members, we'll resume today's deliberations. We have the pleasure of welcoming a couple of gentlemen, Reg Whittaker, distinguished research professor emeritus at York University, and Professor Stuart Farson, research associate, Institute for Governance Studies at Simon Fraser University.

Gentlemen, we have until 3 p.m., or 90 minutes, if you need that much time.

I gather you're going to go first, Mr. Whittaker. Are we going to make the presentations separate, though, so that we'll hear from Mr. Whittaker and then Mr. Farson? Are the presentations quite distinct?

· (1335)

Professor Reg Whittaker (Distinguished Research Professor Emeritus, York University): I have no idea.

The Acting Chair (Mr. John Harvard): I was just wondering whether we should take both presentations and then go for questions, or whether we should hear from you, Mr. Whittaker, and then take questions.

Professor Stuart Farson (Department of Political Science and Research Associate, Institute for Governance Studies, Simon Fraser University): I'm sure Reg can comment on many of the things I'm going to talk about, so it might be useful to combine them. I don't know what Reg is going to talk about, but...

The Acting Chair (Mr. John Harvard): We'll hear from both of you, and we'll start with you, Mr. Whittaker, if that's fine.

Welcome. Thank you very much for coming.

Prof. Reg Whittaker: Thank you.

First of all, my apology that I did not have the opportunity--as it was a rather short lead time, after being invited--to have a brief ready and distributed. But I'll have it for you later.

I wanted to talk about the impact of September 11 on Canadian-American relations. I think September 11 has impacted most pressingly on Canada in terms of heightened border problems.

U.S. security concerns have, of course, imposed serious economic costs upon Canada through border slowdowns and blockages. These costs are indeed also felt by Americans. However, U.S. costs are a much smaller proportion of U.S. GDP than is the case for Canada.

Moreover, Americans have resolved, post 9/11, to absorb whatever costs may be required to establish homeland security. Thus the onus is clearly on Canada to shift American attention away from the Canada-U.S. border as a security risk, by satisfying the Americans that U.S. security requirements are being met in Canada.

· (1340)

Of course, security issues surrounding the border actually predate September 11. The case of Ahmed Ressam had already attracted unfavorable political attention in the U.S., but in fact talks among officials on the concept of perimeter security in North America predated even the Ressam case.

Quite independently, at the same time, economic irritants within the NAFTA framework, most notably the softwood lumber dispute as it has impacted on British Columbia out here, had been building well before the current border problems emerged post-September 11.

The effect of September 11 has been to intensify the twin problems of North American security and trade and to tie the two together in an unprecedented manner. In the face of this security-trade nexus, there have been serious suggestions put forward that the way out of the current crisis is a greatly expanded and deepened degree of North American integration. These suggestions can be grouped into two categories.

The first, heard most insistently in the early period following September 11, was based on the assumption that the security problem could only be solved by the adoption of some new formal arrangement for broad integration, usually unspecified in detail but generally looking toward the European Schengen model of a harmonized external policy toward the entry of people and goods matched by disappearing internal boundaries within a common market, including labour. This seemed to be a direction pointed to by the U.S. ambassador to Canada in his offer to open talks on a North American security perimeter, an offer picked up on favorably by some opposition MPs and by some premiers, but one that has in fact been rejected by the federal government as unnecessary and threatening to Canadian sovereignty.

At the same time, the government has indicated a firm commitment to specific initiatives to reduce security concerns along the border, such as the smart border declaration with its 30-point action plan and a series of cabinet-level meetings with U.S. officials to smooth cooperation on matters of joint security concern. And of course there's been consultation with the private sector as well, especially with the blue chip Coalition for Secure and Trade-Efficient Borders.

More recently, a different tack toward greater continental integration has been manifested in new suggestions from the non-governmental sector. Instead of the earlier insistence that the border security issue can only be resolved within a new, broader framework for integration, which is an argument that no longer seems as convincing as it did earlier on, the call now is to seize the border security issue as a window of opportunity for Canada to convince the U.S. that North American integration should be accelerated and formalized. September 11 is thus redefined as an opportunity for Canada to resolve accumulating economic and trade irritants in the continental relationship.

This line of attack has been delineated clearly by Wendy Dobson in her April C.D. Howe commentary, “Shaping the Future of the North American Economic Space: A Framework for Action”. Now, I think it's notable that this paper was showcased simultaneously and quite unprecedentedly in both national newspapers.

Hugh Segal, president of the Institute for Research and Public Policy, in April gave a speech, “New North American Institutions: The Need for Creative Statecraft”, in which he called for an even more expansive although less carefully detailed vision of hemispheric integration. There are other examples of the same, but I'm picking those out, in particular Professor Dobson's argument.

I'd like to focus on the core of her argument. She suggests that piecemeal, incremental security adjustments such as those already being actively pursued by the government are insufficient to gain American interest in linking national security, the U.S. priority, to economic security, Canada's priority. Canada, she argues, should pursue a strategic agenda with large initiatives that address U.S. objectives at the same time they open new economic opportunities.

These big ideas, as she refers to them, are a customs union, a common market, and a third option, a strategic bargain, which is a more pragmatic mix of the first two without large-scale harmonization.

I wish to take serious issue with this argument. I agree that national sovereignty should not be understood as an end or objective in itself. Sovereignty should be a means to an end, which is a better life for Canadians. Limitations on sovereignty that serve this end should not be rejected for nationalistic reasons. Ideas like a customs union, common market, or other structural frameworks for North American integration might indeed serve that end of a better life for Canadians. The benefits, of course, have to be carefully assessed and balanced against the loss of sovereignty that would be entailed. But such big ideas are legitimately on the table for debate.

Nor am I considering the purely economic cost-benefit analysis of such arrangements. I'm not an economist, and I offer no expert opinion on issues such as the effects of a common currency or a common labour market on the Canadian standard of living. I am, however, sufficiently impressed by the accounting of the costs entailed by post-September 11 American security measures on cross-border trade to agree that American security concerns will have to be satisfied, which is, in fact, also to say that Canadian public anxieties must be satisfied, so that the border no longer serves as an impediment but rather as a facilitator to trade and traffic between the two countries. But I do not agree that the necessary measures to satisfy legitimate American concerns necessarily entail any loss to Canadian sovereignty, at least not any loss that is reflected in serious cost to Canada.

Nor do I agree that the current security crisis offers an opportunity to negotiate a grand, new framework to solve some of Canada's outstanding economic problems in the Canadian-American relationship, even if we are to assume that such arrangements would be a good thing, for the purposes of argument. Rather, the current context makes such negotiations particularly dangerous for Canada.

More than ever, I suggest, incrementalism is the safest route. My concerns arise from my background as a political scientist with regard to both process and objectives. Bargaining for a big idea, an enhanced and formalized framework for greater integration, would be a serious mistake, because as a strategy it ignores or misconstrues the political context.

A customs union, common markets, and common currencies are all ideas derived from the European experience. They indeed have much to be said for them as economic arrangements. It's certainly possible that some of the economic benefits could be reproduced in North America--if one has reference only to abstract economic models. But every step in the process of closer economic integration in Europe has been accompanied by carefully designed steps toward closer political integration.

Maastricht works to the extent it does because there are supranational political institutions that directly and indirectly represent the peoples of the European nation states in the political and administrative process. Moreover, no one nation, even Germany--the largest--can dominate the decision-making process to the exclusion of others. Even smaller states can play coalition politics to gain support from allies on issues of special concern to them.

Even in this political context, it must be said that there is a considerable democratic deficit that has drawn much attention and concern in Europe, much popular restiveness about a non-accountable bureaucracy, and anti-European extremist movements that have gained worrying currency as disruptive minority movements in most European states. These problems are not fatal to the European project, but they are worth noting to draw out the severe political shortcomings of any projected North American economic integration.

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Turning to North America, NAFTA has no supranational political infrastructure, and it was never intended to have such. NAFTA was intended to subordinate national politics and policies to the discipline of the continental market.

The vastly disproportionate weight of the U.S. within NAFTA means that where political decisions are being made, they are almost invariably the decisions of the U.S. administration and Congress, the courts, and various administrative and regulatory agencies of the U.S. government, as Canada well understands from the softwood lumber debacle. Even if we were to imagine a political suprastructure like that of Europe, neither Canada nor Mexico, even in an alliance, could wield enough weight to seriously influence the hold of U.S. national institutions over North American decision-making.

It is, moreover, thoroughly unrealistic to imagine any bargaining process that might yield an American willingness to agree to decision-making structures that would enhance the power of the two smaller states or provide some kind of veto capacity. It has been a consistent threat, running through successive American administrations but intensified in this administration, that no infringement of American national sovereignty by any extraterritorial authority will be tolerated. A current example is the decision of the Bush administration, in the last few days, to renounce or unsign the agreement for an international court of criminal justice, following closely on the renunciation of the Kyoto accord.

This points to a very specific political context about process. Any negotiation toward closer integration must be carried out with this current U.S. administration, which has been clearly revealed as the most protectionist and the most unilateralist administration in post-war history.

Moreover, it appears that September 11 has, if anything, actually consolidated the unilateralist and protectionist tendencies of this administration. After a brief flurry of multilateral actions early on in the process of building the anti-terrorist coalition, the Bush White House seems to have concluded that its priority commitment to homeland security can best be fulfilled by maintaining authority in American hands to the fullest extent possible.

The point here is not to complain about the Bush administration, but to emphasize that entering into strategic negotiations toward closer integration with a bargaining partner that is fully committed to unilateralism and maximum maintenance of its own sovereignty, and has the clout to enforce that, seems unwise and ill-advised.

Administrations, of course, change and sometimes even change their minds. It is hardly certain that in the future the U.S. might not find itself in a more compromising mood, although the insistence on the non-infringement of U.S. sovereignty is long-standing and has very deep roots in the American Congress. But any negotiations must be with this administration, at least for the next two and a half years, and it is within that timeframe that the border security issue has to be resolved.

Given this context, the prospect of a common market negotiated under present conditions is not welcoming, from a political point of view. European anxieties about the democratic deficit would be dwarfed by Canadian anger about an unaccountable and undemocratic North America. There are already serious legitimacy problems attaching to the national and provincial political institutions, which are elected, after all. There are deep wells of distrust about the remoteness of the instruments of globalization.

Locking Canada into a more closely integrated framework in which the instruments of decision-making would recede further from accountability to the electorate, or even from the influence of our elected national government, would seem to be a prescription for further popular disillusion with democracy.

There is another very specific political context that makes arguments for a common market impractical. A European-styled security perimeter works because Europe was premised upon the idea of a common policy toward entry into Europe, and of course that common policy is worked out by a political process of bargaining and negotiation.

NAFTA was not designed to foster a common labour market, except for certain designated business, technical, and professional categories.

· (1350)

Politically, it must be remembered that NAFTA was sold in the United States, especially in the Mexican border states, as a device that would discourage illegal Mexican immigration by encouraging the growth of factories on the Mexican side of the border.

Although a common labour market between Canada and the U.S. might be viewed with relative equanimity by Americans--it probably would be--the same could not be said for one that included Mexico, a politically unsaleable project in the U.S. at present.

For its part, Mexico, which has already called for a common labour market, would hardly tolerate a privileged inner core of NAFTA that excluded it. Politically, then, a common labour market is simply a non-starter, and almost any solution to the border security issue that is premised upon a European-style security perimeter, as such, is also a non-starter.

Therefore, I'm arguing that thinking big, as Ms. Dobson would put it, is thus under present conditions misconceived and dangerous. What of thinking small or incrementally, then? What are the realistic prospects of incrementalism in successfully dealing with the border security issue? I believe the prospects for success in incrementalism are actually quite a bit higher, perhaps, than many observers have allowed.

First, the post-September 11 security problem posed by the Canadian border was never as serious as journalistic and political critics have suggested. Canada is not now and never was a Club Med for terrorists, despite some irresponsible and ill-informed criticism.

Canadian rules and procedures for preventing the entry of terrorists and criminals have long been roughly equivalent to those in the United States. Indeed, intelligence sharing has meant a common database on the bad guys that is strongly influenced by American intelligence and American interpretation.

September 11, in any event, revealed that the U.S. itself was hardly watertight and indeed guilty of considerable laxity. It is not quite the model that some have held it to be. The one... Well, I could go on, and perhaps in the question period I will mention the Ahmed Ressam case and some of the ambiguity surrounding that, but I'll pass over that for the moment.

I think basically if there was a gap--and there was, in the past, a gap between Canadian and American performance--in immigration security, it was not in regard to rules and procedures but in enforcement. Canada did not in the past put as many resources into enforcement as the U.S. did. That gap is now narrowing, with the additional resources for security provided in the 2001 budget.

Apart from certain U.S. politicians and certain U.S. media outlets, the image of the Canadian border as a security risk has not actually made much headway with the U.S. public, according to recent polling by EKOS Research.

More to the point, I have been assured by officials in Ottawa that no responsible senior U.S. administration official really believes the scare stories about Canada that had some currency in the media.

However, the fact is that the U.S. has security requirements it intends to meet. These requirements must be met by Canada before they reach the border or they will be enforced at the border at great economic cost to Canada.

With additional resources into the system I believe they can be met. The joint initiatives around a smart border are on the right track. Pre-clearance of people and goods, the application of new technology, such as biometric identifiers embedded in passports and travel documents, data sharing and joint enforcement can all go a long way to allaying the legitimate security concerns of the United States.

The concept of zones of confidence, which has begun to replace perimeter security, is a catch-phrase that better captures, I think, the essence of realistic security cooperation.

· (1355)

No one, American or Canadian, can guarantee 100% security, but growing American confidence in the best efforts of its partner in North American security will encourage facilitating cross-border trade flows, which, it should be remembered, are as much in the U.S.'s interest as in Canada's, once their security concerns are allayed.

Negotiating these initiatives incrementally, without some reference to some wider framework of integration as an objective, also means that on specific points, where Canadian practices differ from those in the U.S. and Canada has good reason for wishing to maintain their usage, harmonization can recognize reasonable exceptions that within the context of wider integration might be more difficult to achieve.

Let me give two specific examples. The U.S.--and I might add, the United Kingdom--has armed itself with the power to detain non-citizens indefinitely on suspicion of terrorism. Canada detains non-citizens from time to time, but only for cause and subject to habeas corpus. Bill C-36, the anti-terrorism act, did not attempt to provide powers that would emulate the U.S. and British practice in this regard. Canada has the Supreme Court decision from the 1980s--Singh--that declares that non-citizens in Canada may avail themselves of the protection of the Charter of Rights. The federal government has shown no inclination to override this by invoking section 33, the notwithstanding clause.

It might be said that Canadian values on this point differ from those of our neighbour and that it is an appropriate exercise of sovereignty to insist that our practice be maintained. Moreover, Canada can explain to the U.S. that the Canadian practice does not, in fact, endanger American security. Threats to security can and are detained here, where there is reasonable and probable ground in law. If detention is contested, the crown may make its case without risk of disclosure of sensitive intelligence information in court, since evidence procedures in national security cases in this country permit ex parte proceedings where judges consider sensitive information in camera.

A second example is the so-called safe third country refugee provision currently under negotiation with the United States. Recently, the Minister of Immigration indicated that Canada was insisting that it would not return a refugee claimant who had entered from the U.S. if it could not be satisfied that the refugee would not be returned to their country of origin to face torture or death. He cited the example of refugees from Nicaragua. This is an important point. There are clear differences between Canada and the U.S. with regard to the treatment of refugees from certain regions like Central America. As long as this does not impinge on standards for excluding terrorists, Canada has sound humanitarian reasons for maintaining that difference.

In both these cases cited, exceptions to harmonization to recognize Canadian differences can be made where the negotiations are on an incremental, piecemeal basis. If the negotiations were being conducted within a wider framework in which some broad structure of integration were being pursued as the primary objective, such exceptionalism might prove difficult to obtain.

I'll make a final point with regard to differences. Piecemeal harmonization of immigration security is clearly achievable with little wrenching effect on Canada. Harmonization of immigration policy in general, which would be entailed in some of the “big idea” integration negotiations, is a very different story. There are many differences between Canada and the U.S. in immigration policy and good reasons why most Canadians wish to keep things that way.

To take one example among many, Canada has a preference for selecting francophone immigrants. This reflects the distinctive needs of Quebec, which alone among the provinces has exercised its shared constitutional role in immigration to strike a series of agreements with the federal government in immigration selection. This aspect of Canadian policy has no security implications and need not be threatened in any way by security harmonization. But when wider integration negotiations encompass harmonization of immigration policies, this distinctive feature of our policy might be called into question.

In conclusion, incrementalism in negotiating border security will neither open up nor resolve the host of economic integration issues that are the concern of economists and business people. This approach can, however, reduce the strains on cross-border trade to manageable proportions while at the same time safeguarding Canadian sovereignty in areas where it matters to Canadians.

¸ (1400)

Preoccupation with leveraging the current crisis to achieve one or more big ideas of broader economic integration in a context that ignores or downplays the necessary political integration that must accompany economic integration is, by contrast, unwise and ill-advised. Thinking big may sometimes be imaginative and daring. But under present circumstances, thinking small is more prudent and responsible.

Thank you.

¸ (1405)

The Acting Chair (Mr. John Harvard): Thank you.

Professor Farson.

Prof. Stuart Farson: Thank you, Mr. Chairman.

I'd like to raise a couple of issues with the standing committee that I believe are important for it to consider in its current work. I think these relate both to your examination of the U.S.-Canada relationship in the post September 11 environment and to your work on assessing the G-8 agenda, particularly in the context of international terrorism. The issues I want to raise are, first of all, the need for Canada to have a security and intelligence community that is both effective and efficient at what it does, and, second, for Canada to have an effective and efficient oversight system over that entire community.

It has been said that the events of September 11 changed the world forever. While I think this is perhaps an overstated assessment, there is little doubt that the events have had a profound effect not only on the perceptions of Americans and their government about terrorism, but also particularly on the security and intelligence relationship that exists between the Government of Canada and the Government of the United States.

Although there is much debate amongst academics and amongst national governments about what is terrorism, who are the terrorists, and the causes of terrorism, the type of political violence we've come to label terrorism is certainly not new. Many states, as we know full well, have had to endure its effects for long periods of time. Finding solutions to the problem of terrorism has frequently proven to be extremely elusive. In many instances, the hatred that underpins such violence is at once partly rational and partly irrational. We can also suggest that whole generations, from time to time, have had to grow up without ever knowing peaceful times.

Canada, as we know, has not been immune from acts of terrorism either. If we go back to 1985, we find that a terrorist bomb in fact was responsible for the largest mass murder in Canadian history. On the U.S. side, if we look at their experience, we find that the U.S. military, its diplomatic corps, and American citizens--when they've been working and living abroad--have been targeted by terrorists for many years.

Traditionally, I would want to make the argument that the U.S. government, in terms of its policy towards terrorism, has seen terrorism more as a problem or something that it has to deal with--perhaps as the price of being a superpower--rather than seeing it as something requiring concerted international effort to deal with and to root its sources out. What is new, of course, is that this view has changed in recent years. I think the shift started to occur as soon as domestic terrorism took place in the United States, with the initial bombing of the World Trade Center and the bombing of the federal building in Oklahoma City, for example.

The events of September 11, of course, have impressed much more strongly the concerns of Americans generally and of their government. I think for the first time--and this is what's new about the current circumstance--the American government now sees this as a very important problem, as something that it needs to put the full weight of its affairs against, and on which it needs international cooperation particularly to deal with.

So we could make the argument, I think, that the U.S. government now sees the threat of terrorism as perhaps its greatest threat to national security. We could also argue that the events of September 11 illustrate that there was a broad-scale failure of U.S. security and intelligence, and perhaps also of its allies and friends as well.

What is new about this current situation is the fact that asymmetry is now seen as being inherently part of contemporary terrorism. It has been recently recognized in Washington, I think, that a relatively small number of highly motivated people can now cause immense physical, material, psychological, and economic damage to the United States. Contemporary terrorists, I think we can say, particularly those of extremist religious views, are unlikely to be restrained by concerns for their own lives, or the lives of their potential victims, or by the normal standards of morality and ethics that we might attribute to them.

As a result, strategies and tactics once considered unthinkable are now widely and readily envisaged in Washington. In addition to planning for conventional attacks, the possibility that terrorists will replace conventional weapons with other, more serious nuclear, radiological, chemical, or biological ones must not only be considered but planned for.

It seems that Washington in fact is no longer viewing terrorism as a nuisance but as something that has to be dealt with completely. The result is a global campaign to eradicate terrorism, and states, friendly and otherwise, have been put on notice that they are either with the U.S. or against it.

In addition to being a principal trading partner, Canada is a long-standing ally and intelligence partner of the United States. This relationship has historically been of much greater benefit to Canada than to the United States. Since the Second World War, and particularly since the signing of the U.K./U.S.A. agreement in the late forties, Canada has benefited enormously from the signals intelligence and other forms of intelligence that have been shared.

For a while during the Cold War, Canada was able to provide a unique SIGINT contribution to its intelligence partners because of its geo-strategic position. In recent years, however, several commentators have voiced concern that Canada's SIGINT contribution to its partners has decreased in value, to the point where its partners may look more carefully at what is shared and perhaps in fact provide less valuable information.

However, I would argue that one of the consequences of September 11 has been to reverse this disposition of the critics. We may now say that Canadian security intelligence is of vital importance to U.S. security.

If we want to look at the principal benefits that have been attributed to Canada over the years from the relationship with the United States and its other partners, they've essentially been twofold. One, we haven't had a foreign intelligence service, so we have benefited particularly from this immense U.S. expenditure on intelligence. In a sense, we've had intelligence on the cheap.

After September 11, the Canadian government said it would consider the feasibility of establishing a foreign intelligence service. But two developments, I would suggest, have taken place recently. One is the loosening of restrictions initially placed on CSIS in 1984 against collecting foreign intelligence outside Canada. The other is the announcement very recently before the subcommittee on national security by Deputy Prime Minister Manley that the government has decided not to act on establishing a foreign intelligence service at this time.

I believe this committee should address the issue of whether Canada is able to obtain all of the foreign intelligence it currently needs, whether it's likely to get it in the future, and also, specifically, whether Canada should set up a foreign intelligence service.

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I think there are two perspectives from which you need to examine this question by looking carefully at what Canada's foreign intelligence requirements are and whether they're being met. And it is to be stressed in this context that the United States and other intelligence partners, such as Britain, do not share with us all of the intelligence they have that we may want. They provide to Canada only what they believe it should have. Furthermore, it's also important to point out that Canada has unique needs, about which the U.S. and other countries are unlikely to either collect or share intelligence.

It's also important, I would argue, for Canada to know much more than it currently does about the United States. While I'm not suggesting that Canada should go out and spy on the United States, I think it does need to use open sources, diplomatic channels, and other means to better analyse and assess the information it can glean.

I would therefore suggest this committee examine closely whether the process that is currently being done is adequate and whether sufficient resources are being put to the task. In particular, I would suggest you might want to look at the resources that are currently deployed both within our political analysis and intelligence liaison staffs in certain key embassies abroad and also within the resources that have been deployed in Ottawa for the foreign intelligence assessment secretariat, and whether they are adequate.

In my view, in the case of the foreign intelligence assessment secretariat, this organization is clearly not adequately resourced. Instead of expanding the capacity in the post Cold War period, there was actually a decline in the resources that were provided. Currently, it's doubtful whether its numbers can hope to provide a modicum of global coverage, and certainly in an emergency, I suggest to you, the staff is most likely to falter as there is no backup to cover illness or vacation periods.

As an aside, I would suggest it's difficult to imagine how Canada can hope to fulfil interest in African development with but one analyst to cover the whole of Africa in the FIAS.

Thus, in the case of the foreign intelligence assessment secretariat, the all-source intelligence and analytical staff should probably, in my view, be expanded fivefold or sixfold from its current level. It should be stressed that this could be achieved at relatively low cost and would, I think, have an immediate and profound effect on Canada's capacity to understand the world in which Canadians live and its government operates.

The other perspective is to look at CSIS and its involvement in the collection of intelligence abroad. I think this should be examined both from the perspective of whether it is complying with the current law and policy and whether it does so effectively and efficiently.

Currently, the CSIS Act does not restrict the service from collecting security intelligence abroad but does limit it to collecting foreign intelligence within Canada. The committee should consider, in my view, whether it is now appropriate to permit CSIS to collect foreign intelligence abroad and whether an amendment to the CSIS Act is now in order.

Given that the director of CSIS said last fall he did not feel he was restricted by the legislation in collecting foreign intelligence abroad, this may well be a case of bringing the law into line with current practice.

It should be stressed that there are a number of models for a foreign intelligence service that can be envisaged, and probably the one in which we have intelligence offices running agents inside foreign governments and hence breaching their laws is unlikely to be contemplated. Similarly, one in which permanent intelligence missions are established abroad would not likely be feasible either in terms of cost or flexibility. But one where intelligence officers can be readily deployed to meet immediate needs abroad might be, or some combination of the last two.

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In this case, one needs to ask the question, what institution might best provide such a service? One that has been put forward is, as I have suggested, to increase the mandate of CSIS. Another is to develop a unique small news service. In either case, it goes without saying that those involved would need to be able to speak a variety of foreign languages and to be extremely knowledgeable about the social, cultural, economic, and political status of the relative countries involved.

If my surmise is correct, that the United States is very concerned about the future of terrorism and how it's likely to attack their heartland, I believe certain hypotheses may be formulated about how the U.S. government is likely to act in order to protect its interests.

We have already seen the sorts of changes that they have undertaken in airport and aircraft security, immigration, customs control, and the exchange of information. It may be anticipated that if the U.S. finds Canada's security and intelligence actions are insufficiently geared to combatting the terrorist threat against the United States, it will be encouraged to operate in Canada, without Canadian permission.

I should also point out as an aside here that there is also concern in Ottawa about the involvement of foreign investigators operating in Canada--that is, police officers and other investigators. Therefore I believe it's vital for Canada to take steps to ensure that its security and intelligence apparatus is effective and efficient and has the resources to do the job now and in the foreseeable future, and I believe this committee should consider how such an evaluation should best be obtained. I would also suggest that this is no easy matter.

I think it has been the nature of successive Canadian governments not to think about intelligence as being an important function of government. We've tended not to view it very positively, in a sense, or to investigate whether Canada's intelligence community is working effectively and efficiently, unless of course a particular problem has arisen.

Since the end of the Cold War, in fact, most of Canada's allies have conducted broad reviews of their intelligence systems. We, on the other hand, have not done so. We've remained singularly detached from such considerations. In fact, I would point out, there has never been a full-scale independent review of Canada's intelligence and security apparatus.

It should be stressed, I would argue, that existing review bodies are inadequate to cover such a review. They do not have a sufficiently broad purview, and they tend to focus more on compliance with the law and with policy than with effectiveness and efficiency. In any event, they are busy fulfilling their statutory mandates.

If Parliament were to be involved, I would suggest to you that you'd first have to deal with the problems of access to data, security of information, adequate resources, institutional memory, and the politicization of the process. I would also suggest to you that a totally internal review is unlikely to be any more successful than the many reviews that have taken place in the past, if change is to be orchestrated.

So from my perspective, the most successful and desirable model for looking at this issue would be a task force set up involving security-cleared individuals who are drawn from and with knowledge of the intelligence community, and also from outside, but persons who are also knowledgeable of government and intelligence organizations.

Since September 11, governments around the globe have enacted legislation providing coercive and intrusive arms of the state with extraordinary new powers to fight terrorism. In earlier times, such powers would have been perceived as inimical to civil liberties and the democratic fabric. In current times, where the terrorist threat may seem or appear to have quite awesome consequences, such extraordinary powers may well be necessary. Certainly I would argue that erring at this time on the side of prudence is in order. However, the use of such powers also implies that greater efforts must be taken to ensure that they are not abused.

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Thus, I think that means greater oversight and broader review, and other safeguards are in order. It is, I believe, important that the Canadian public be convinced not only that the elements of Canada's security and intelligence community have the capacity to do the job set by government, and are effective at what they do, but also that they are not abusing their many newfound powers since September 11. For this reason, I would argue that it is Parliament's responsibility to stay fully engaged in the process.

Thank you.

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The Acting Chair (Mr. John Harvard): Thank you, Professor, and thank you, again, Mr. Whittaker.

Now we'll go to questions. We have a little over half an hour, so we should have plenty of time.

We'll start with Dr. Martin.

Mr. Keith Martin: Thank you, Mr. Chairman.

Thank you, Professor Whittaker and Professor Farson. There is so much to talk about.

The first thing, Professor Farson, on the issue of our intelligence community is that the CSIS budget, as you know, has been cut by 25% to 30%. As you mentioned before, there have been umpteen numbers of reviews on security needs. The problem is not one of solutions, I would suggest; the problem is one of action.

The first question is, how do you propose that we get action on the security needs that we require, specifically with respect to our intelligence community?

On the issue, Professor Whittaker, of terrorism and American unilateralism, while the United States is becoming more unilateral in its behaviour given its needs after September 11, is there a way, in your view, to convince them that the only way they are truly going to get security is through a multilateral response to the much broader security concerns that actually exist outside of their borders, and that dealing only with the North American security issue is a shortsighted attempt that will ultimately fail?

If you agree with that, what role do you think Canada ought to take in terms of interacting with a country south of our border that has little or any interest in our country with respect to the way in which they make their foreign policy decisions? How do we interact with them? How do we engage them? How do we draw attention to their needs, and, particularly, how do we draw out the United States into becoming a more multilateral nation?

Lastly, on the issue of economic integration with the United States, do you not think the first thing we ought to do is get our own economic house in order with respect to diminishing east-west barriers to trade, which are more extensive than north-south barriers to trade?

Thank you.

The Acting Chair (Mr. John Harvard): I believe I read the time allotment incorrectly. We don't have a half hour; we have more like 15 to 20 minutes. So maybe you can keep your answers relatively short, because we want to hear from Mr. Rocheleau as well.

Sorry, go ahead.

Prof. Stuart Farson: On the question of how we get action to improve the security intelligence community, I think the key issue is to have some fresh air brought to the situation. The way I think that can happen is by a comprehensive review of the sector, part one.

I would envisage, as I have suggested, that investigation being done by some form of task force made up of both knowledgeable former intelligence personnel and knowledgeable and informed outsiders, something akin to the Osbaldeston task force, which looked at CSIS during the late eighties. I think it has the best record of getting change to take place--33 out of 34 recommendations I think were acted upon. This is not the case with parliamentary reviews. The review of the CSIS Act that I was a part of in 1989-90, where I acted as research director...that committee put forward 107 recommendations. I think we managed to get four and a half changed.

You have to look for mechanisms that work.

Related to this, of course, is that Parliament has to be informed and needs to be engaged in the process of review. It must hear and have access to the product of the review. I also believe that Parliament needs to have a permanent security and intelligence committee--hopefully that can operate in a non-partisan manner. I think those are two important dimensions.

There are so many points of attitude that have to be changed. We have to look at the whole question of how the community is coordinated, how policy for the whole community is established, and whether the committee of cabinet ministers will be a permanent one. We don't know that at this point. There are so many issues to touch on, it's difficult to give you a really short answer.

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Prof. Reg Whittaker: American unilateralism vis-à-vis multilateralism is a very serious problem. The coalition the Americans put together in very short order to combat terrorism after September 11 was quite remarkable in breadth, including not only western countries but also many leading Islamic countries. At that time it gave some promise, indeed, that an administration that had indicated a tendency toward unilateralism had suddenly discovered the virtues of multilateralism. Unfortunately, that moment appears to have passed. Perhaps the problem is that the American military success in Afghanistan was too quick and thorough. Perhaps it gave the Americans a false sense of confidence in the efficacy of their own means and their own direction of the much broader war against terrorism.

In fact, in the broader context, it is very clear that it will not be a successful war against terrorism in the longer term if America persists in its unilateralist direction. With borderless threats, we can talk about a wider range of threats, not simply terrorism but also international organized crime--which in many ways parallels the methods of terrorist networking and financing, and so on. It's very clear that if there is to be effective global governance against these kinds of threats, it requires a substantial degree of multilateral cooperation among all states. Even for the world's only superpower--and certainly the world's only military superpower--it is simply not possible to wage the long-term kind of war that is necessary, particularly an intelligence war and intelligence gathering, without having cooperation.

At this moment, I think the situation with regard to Israel and the Palestinians, and the apparent American plans to extend the war to Iraq, are both seriously threatening the stability of the coalition. In this context, including Canada signing on in Afghanistan, it should be Canada's role not simply to acquiesce, if indeed our opinion--and I think it's the opinion of many other western countries--is that an invasion of Iraq would be a misconceived venture. That said, signing on in Afghanistan was the appropriate response. It was certainly backed by Canadian opinion, even after the recent unfortunate event there involving Canadian troops. Canadian support remains very strong for our military commitment in Afghanistan.

Hopefully, as time goes by, the Americans may begin to realize the limitations of unilateral action.

On the last question you asked, Mr. Martin, about interprovincial cooperation, it's a long-standing paradox in Canada that continental integration has intensified and has not been matched by an equivalent degree of integration within our own country. That does seem rather unfortunate.

I should also point out, however, that the decisions that were made in the late 1980s, with the signing of the Canada-U.S. Free Trade Agreement and its later extension into NAFTA, have made interprovincial economic integration less relevant, in a sense. The flow of trade is in many ways much more importantly north-south now. The statistics are very evident on that. Many of our provinces do a lot more business with their American neighbours than with their Canadian neighbours. So in that sense, perhaps the problem is not as pressing, in the long term, as it might have seemed a few years ago.

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The Acting Chair (Mr. John Harvard): We're really squeezed for time, Mr. Rocheleau, so please confine your remarks to one or two very short questions.

[Translation]

M. Yves Rocheleau: My first question is directed to Mr. Whittaker. In the aftermath of September 11, the concept of a security perimeter around the North American continent was quickly raised, the goal being, obviously, to protect mainly the Americans. Is this still in the cards? If so, can Canada oppose it legally? If Canada cannot oppose it legally, although being against the whole idea, what minimum measures should Canada take in order to protect its sovereignty in the first place?

Secondly, we know that Canada has been the subject, if not the victim, of a new behaviour of the new US administration. As we know, the first travel abroad of the new president was to Mexico rather than to Ottawa. Furthermore, he committed several sins of omission by “forgetting“ to mention Canada. I believe he also hesitated before apologizing for the sad military events that occurred, the collateral damage, so to speak, that occurred.

Is this a new way of dealing with Canada or is it rather a matter of incompetence, of lack of knowledge? Is this meant to be a signal to Canada that our relationship will never again be the same, in terms of Mexico's position? This is my first question.

Mr. Farson, you talk a lot about the war on terrorism, especially at the technical and administrative level. Without trying to legitimize terrorism, we must not forget that terrorism is nothing new in the history of mankind. It is an expression of despair, a response to a situation that has become unacceptable. This might be a way to describe this phenomenon. How can we at the same time talk about the widening gap between rich and poor, where rich people keep getting wealthier and the poor ever more poor and then show surprise when terrorism occurs? As an academic, how could one not see the obvious linkage?

[English]

The Acting Chair (Mr. John Harvard): Can I ask you to keep your answers as short as possible?

Prof. Reg Whittaker: On your second question regarding the Bush administration, every American president puts his own stamp on American foreign policy in particular. This President comes from Texas. There is a long-standing relationship there with Mexico. Unfortunately, it has manifested itself in ways that are very irritating to Canadians, such as their inattention. But in fact the previous President, Mr. Clinton, paid particular attention to Canada, and there's no reason to think this will not happen in the future.

On perimeter security, I think the key point is that many elements of what one can call perimeter security are being implemented. Some were implemented prior to September 11. This is not a new idea.

I think it should be understood that perimeter security is not an old-fashioned, static notion of defending the border. It's rather a notion that in a world in which there is instant communication and very fast transportation movements, you should deal with the problem before it arrives at the border. I don't think that threatens Canadian sovereignty. I don't think, for example, that pre-clearance of goods that originate in Canadian factories is in any way a diminution of Canadian sovereignty. Those goods have no right to enter the United States. They will be checked either at the border or at the point of origin. It simply makes more sense to do it at the point of origin. In fact, Canada itself has been involved in perimeter security in a broader sense: for example, the interdiction of illegal refugee movements at the point of origin using intelligence resources. I think as long as those elements are done on a functional basis, they can work for both countries.

However, I am not at all impressed with the notion of this as a new formalized arrangement like the fortress Europe system. I think that would sink Canada into a position in which it had little say.

If we negotiate these arrangements on a piece-by-piece basis, then we can have considerable effect on the way they're implemented.

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Prof. Stuart Farson: I think you're right to draw the relationship between rich and poor and the possible connection to terrorism. However, I wouldn't want to go down that road too quickly and make blanket statements because I think history also tells us that in some instances terrorist activity has nothing to do with the terrorists being rich or poor. There are other reasons.

If we are looking at instances where the perpetrators of political violence are feeling badly done by, I think intelligence can play a really important role in being able to analyse that problem. If, for example, we're looking at events in a particular state, intelligence can perhaps provide guidance on how Canada might help assuage the problems in that state. It may be able to give clues as to how aid might be directed. One of the key issues would be whether or not you wanted to put it through government hands. Intelligence may be able to discern modes of corruption within that government. So intelligence could play a really important role in helping us to better understand the situation and to better inform decision-makers about how they should develop policy abroad.

The Acting Chair (Mr. John Harvard): Thank you very much.

American hegemony didn't come up in our discussion, but we do have our own hegemony: it's called time. It's being felt again.

I appreciate your remarks, gentlemen. On behalf of the committee, thank you, and I hope we see you again.

Now we're going to invite to the table Peter Coombes, the national organizer of the organization called End the Arms Race. Mr. Coombes.

Thank you for coming, Mr. Coombes. You may want to take, say, ten minutes in opening remarks, and then we'll have some time for questions, I'm sure.

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Mr. Peter Coombes (National Organizer, End the Arms Race): I'll try to do it as quickly as possible. I think the last time I was before DFAIT I was in Ottawa and I made a complaint about the weather there, so I was looking forward to bragging here about welcoming you to Vancouver. It's payback; welcome to cold and wet Vancouver.

First I want to make sure everyone does have a copy of the brief we quickly put together this week and also a copy of our document, A Blueprint for Peace. There's a return envelope, so you can make a donation if you want.

I'm here today for two reasons. The first is that I want to speak some very unflattering, even stark, truths. I think what's facing us today is truly a global crisis: the war on terrorism; the likely attack against Iraq; the Palestinian-Israeli conflict; massive military expenditures; the U.S. threat to use tactical nuclear weapons; and North American continentalism, along with many other crises. All of these combined have created a moral and ethical crisis, an environmental, social, economic, and political crisis--a crisis of humanity.

The second reason I'm here today is that I think Canada's security is far, far too vital to be left to the military experts, to the security experts. From the chaos and the devastation--the crisis facing humanity--can arise a great hope. The western world has the capacity to change the world overnight, and Canada can play a lead role in making this hope come to life.

My presentation today is a broad stroke on foreign policy and security issues. It's a broad stroke because we believe a radical shift in foreign policy and security is essential. Thus, before we can begin a debate on the specifics, we must first have a debate on the general directions of Canada's foreign affairs and security matters.

I want to first take a quick look at who we are. We, Canadians, are part of the peoples of the western world, the richest people to have ever lived. We are the most technologically advanced society to have ever existed, and the things we can do are truly awesome. The knowledge we have is amazing and our wealth is awesome.

Yet we believe our military is morally superior. This is why Robert Cooper, a senior foreign office diplomat and close adviser to Tony Blair, is willing to state in his latest pamphlet that “the need for colonization, is as great as it ever was in the 19th century”.

So when we destroy whole countries, it's not aggressive, it's defensive. When we bomb cities, towns, and villages, it's not terrorism, it's humanitarian. We in the western world have little doubt of the superiority of our political and economic systems. Our superiority is to be thrust upon the world through western-based global corporations, the IMF, the World Bank, and NATO because it would seem, as Mr. Cooper says, the weak still need the strong and the strong still need an orderly world.

Our response to terrorism is to destroy villages, towns, and cities and the poorest people on the earth, and to curtail our own freedom and democracy. Our response has not been to go after the actual terrorists.

At the same time, we have built a global political system that is unquestionably dominated by the western world, the United States in particular. It's a political system where global corporations have vastly more power than people and in which elite bureaucrats set policies that promote the wealth and power of an extremely small global minority.

We have an economic structure that transfers massive amounts of wealth from the poorest countries to the richest, from the poorest people to the richest. The IMF imposes harsh social policies upon poor countries while encouraging them to subsidize global corporate investment and turns a blind eye to massive military expenditures.

We, the western world, Canada included, reject the idea of massive transfers of wealth that would alleviate poverty and rebuild the world's infrastructures, clothe and house people, and educate and employ people. These ideas of equality and equity repulse those who hold our political ideology.

It's acceptable to us to spend nearly $1,000 billion U.S. this year on militarism when we know 11 million children will starve from a lack of food and basic health care. We reject global democracy. The idea of sharing power frightens us. Instead, we're building a corporate-ruled world backed by the world's greatest military might. War is the tool of tyranny and oppression.

First we bombed Iraq to get rid of an evil menace, Saddam Hussein. Ten years later Saddam Hussein is still in power, and Kuwait, the country we liberated, is still run by a vindictive monarchy. Then we bombed Yugoslavia for humanitarian purposes. The only accomplishment we made was the same as we'd had in Iraq, a destroyed country. One difference, unfortunately, is that we did help to ethnically cleanse Kosovo; the Serbs and the Romany people have not been able to return to Kosovo.

Now we're fighting the war on terrorism, and it's truly a global war. The outcome of this war is still unknown and will likely last for years. The first major battleground has been Afghanistan, and we easily destroyed what little infrastructure Afghanistan had. We ousted the Taliban, but in its place across the country we've offered the kingdom of Afghanistan to groups of warlords with equally disturbing pasts.

At home our governments are undermining our democracy by curtailing our rights and freedoms. Canada, Britain, the United States, and country after country are enacting security laws that curtail our human rights and our political rights.

But I say, in the end it's very ironic that during this time of global wars, global domination, and global crisis there is more hope for global equality, democracy, and humanity than there has ever been. Emerging around the globe is a vibrant and global movement with a sophisticated agenda for global democracy and equality and against global militarism.

For example, here in Canada the polls indicate that nearly one-third of Canadians oppose the military retaliation against Afghanistan and that another 20% are very iffy in their support of our war against Afghanistan. Imagine if at the beginning of the Second World War nearly 50% of the people had been iffy about our support .

A firm consensus is developing among a significant minority around the world, and even potentially a majority, that war and corporate control are the problems and that war and corporate control benefit only a very small minority.

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We cannot stop this growing groundswell.

I want to give a few very broad recommendations to this committee. The first major recommendation is that I think Canada needs to embark on a truly democratic debate on foreign policy and security affairs. This committee needs to be widened, broadened. It needs to encourage hundreds, thousands, of Canadians to participate, because as I said at the beginning, security is far too important to be left to the experts. And we need not just to talk about details, we need to talk about a vision of where Canada is going. I think the vision that stands before many of us is that we want our government in Canada to take a major lead, a forward lead, in leading the world toward building a global governing system that provides democracy, equality, and a non-violent resolution to international conflict.

We need to embark upon the most ambitious building plans that people have ever taken upon them. The first order of business is to provide emergency aid to people around the world to stop starvation, to provide basic medical care, to eradicate diseases that we can easily cure, and to begin providing shelter for millions of people around the world and at home.

Instead of providing foreign aid, we need to redistribute the world's wealth. With the fair sharing of the world's resources, we can rebuild the world's infrastructures. Canada's equalization payments to the provinces are a good example of where the world needs to go, so we can rebuild transportation, communication, water and sewage systems; provide medical care and education; and build homes.

I'll skip ahead because I don't want to take too much more time.

I think in the end, when we look at the conflicts we've participated in over the last ten years, if we look at the Israeli-Palestinian conflict, it's very evident that war and violence have failed us. They've failed in resolving the conflicts between nations, the conflicts between classes, the conflicts between religions, etc. That's why Canada must not participate in building a security perimeter around North America, around NATO, or around the G-8. Canada must embark upon a global security plan that democratizes the United Nations and empowers it to uphold international law.

In general terms, this means supporting the United Nations by acting through it in times of crisis. It will require authorizing the United Nations to act on our behalf to resolve international disputes and conflicts. It will require giving the United Nations more power to act. It will require democratizing the United Nations so that we share our power with others around the world. It will mean not supporting NATO or U.S.-led war coalitions. It will also require that international trade treaties are made subordinate to the United Nations' charters of human, social, and economic rights.

In specific terms, it means continuing Canada's support for international treaties such as the ABM, the treaties on landmines, the biological and chemical weapons ban treaties, the NPT, the Kyoto Protocol, the International Criminal Court, and many others. It means pushing forward on many of these treaties, for example the NPT. Canada must push at the international level for nuclear disarmament--a timed nuclear disarmament.

The veto in the Security Council has to be abolished. It is undemocratic. And we have to invite other nations from Africa, Latin America, and Asia to participate in the Security Council. We must not allow one country or one small group of countries to impose their specific agenda on the world.

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To the military experts and the ideological realists, I know this may seem like pie-in-the-sky idealism. But to the establishment of an earlier era, the military, business, police, academia, and governments, the abolition of slavery was also a dangerous naiveté.

We at End the Arms Race believe continued adherence to the idea that militarization of the world will enhance security is a dangerous sentimentality. Using military might and power to secure our wealth and power is a downward spiral to ever-greater authoritarian regimes nationally and globally.

Every time we use our military might to protect our way of life, we destroy the lives of others and we inevitably throw fuel on the discontent and rage that boils against us. Thus is born more terrorism, and we whirl together down a spiral of authoritarianism and militarism.

Someone has to be bold. If it's not Canada and Canadians, then who will take the leadership? Someone has to be bold enough to take the lead in building democracy and global security. We believe Canada is in the position to do that.

Thank you.

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The Acting Chair (Mr. John Harvard): Thank you, Mr. Coombes.

Gentlemen, we have about 10 minutes for questions. We'll start with you, Mr. Martin. Do you want to divide that time up?

Mr. Keith Martin: Thank you, Mr. Chairman. I'll take a couple of minutes.

Sir, you mentioned you would like to see a global governing system, if I'm correct. Could you please tell me whether people such as Robert Mugabe, Foday Sankoh, Mr. Dos Santos, Daniel Moi, and others would adhere to a global governing system that would help the tremendous troubles within their own country?

Do you think the starvation that's taking place in places like Malawi and Zimbabwe are a result of corporate control? Do you think groups like the FARC and the ELN, that are greatly responsible for thousands of deaths in Colombia, and such problems as children having their limbs chopped off in Liberia would be resolved by a global governing system, and that these countries and leaders would acquiesce to such a system?

Mr. Peter Coombes: I'm going to turn the question on its head. Do you think that bombing villages in whatever country is going to resolve the problems of starvation, or is it going to stop a cruel revolutionary group from chopping off the arms and hands of young children?

Mr. Keith Martin: I'm focusing, as you know, on some countries that have some terrible problems and some of the poorest people in the world. This, as you know, is happening there. I'm just wondering, since you said that a global governing system would solve a lot of the problems of the poor and impoverished and that war and corporate control are responsible for this, how does that tie in to the examples I gave you, whether it's Angola, Congo, Zimbabwe, Malawi, Liberia, or Colombia?

Mr. Peter Coombes: I turned the question on top of itself because the immediate answer by our government right now is to resort to war when there is conflict, when there are problems. What I would have to first say is that a military response will not resolve those conflicts. But a global governance system is not meant to be the be-all and end-all to solving the world's conflicts.

The first country that will probably put up the greatest resistance to global governance--and has been putting up, probably, the greatest resistance--is the United States by its unilateral positions in many areas and its refusal to accept many of the international treaties on disarmament and--

Mr. Keith Martin: Shall I just focus on those countries that are having some very immediate problems, where people are starving and dying? You said that our response is a military response. We have no military response there. Our response would only be in peacemaking.

Mr. Peter Coombes: When it comes to those countries, I think it is appropriate for us to have a peacekeeping role. None of what I've said has ruled out the idea that we need to participate in peacekeeping, but I would have to revert to the type of peacekeeping we did in the 1970s and 1980s, as opposed to the military interventions we participated in.

With some of the countries you're naming, the problems are around resources and the western world's extraction of those resources. Canada, in particular, has a role in the oil exploration and trade of Sudan. Talisman has been implicated in helping to fund that government and its war against the people in Sudan. So we have a role to play there, through global agreements, global law, and our participation in stopping that government from behaving that way. There are no easy answers, and I think the problem has been that the military experts assume that dropping bombs is the easy answer.

Stopping global starvation is not something you do overnight, but the western world has the resources to pump in to stop those crises, and we're not. Canada spends $3 billion on foreign aid and $12 billion on our military. The United States spends $350 billion now on its military and about $10 billion to $15 billion--off the top of my head--on foreign aid. So where are our priorities?

I'm saying the priorities have to be on the other end of the scale. Let's spend $12 billion a year on rebuilding the world's infrastructures and $3 billion on the defence industry.

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The Acting Chair (Mr. John Harvard): Over to you now, Mr. Rocheleau. You have about five minutes.

[Translation]

Mr. Yves Rocheleau: Thank you, Mr. Chairman.

Mr. Coombes, I want first of all to congratulate you for your courage, or even your boldness, to use the word you yourself used in your presentation. I, for one, feel that if we had better global governance, there would be fewer of these tax havens in those island countries which have no taxes and which draw billions of dollars out of the Western economy and contribute to this inadequate sharing of wealth that exists at the present time.

You praised the Canadian equalization system as a model, which leads me to ask your opinion about the idea of implementing the Tobin tax on financial transactions, especially speculative transactions.

Secondly, I would like to know more about your organization, its objectives, its mode of operation and its influence.

[English]

Mr. Peter Coombes: I think the Tobin tax is a good step in the right direction. It is a way of trying to find some of the resources necessary to put back into rebuilding the global infrastructures to try to protect our environment. But in the end it's insufficient, because I think our governments need to take a lot more responsibility in redistributing our wealth--the western world's wealth in particular. Of course, we need to take steps in that direction, but it must be a much bolder plan and a much bolder direction.

My organization was founded in 1982, as a coalition here in Vancouver. We used to organize Vancouver's Walk for Peace every year. Our biggest Walk for Peace was attended by about 100,000 people, back in 1984.

Since then, especially in the last five years, we've become an individual membership organization, and we are spreading out across Canada. Like most peace groups in the country we are relatively small, but I think we have a major influence, or at least some influence, on political debate in the country.

Our aim is to educate Canadians about peace and military issues, and our final goal is for Canadians to participate in foreign affairs and security policy debates. Once Canadians participate in these debates a lot more, it will dramatically change the direction we do take.

Foreign affairs has been the final bastion of secrecy and closed doors in our democracy. Holding this type of committee hearing is a step in the right direction: opening up those doors.

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The Acting Chair (Mr. John Harvard): Thank you, Mr. Rocheleau.

I just want to finish off with one question of my own, Mr. Coombes.

In your remarks you have certainly challenged western policies, notions, attitudes, and methodologies, and I'm glad you've done that. You mentioned removing the veto from the Security Council in the United Nations. I suspect that would cause horror in the minds of the Jewish people, who feel they would be immediately ganged up on by about 55 Arab and Muslim countries in the United Nations.

My question really has to do with the acquisition of weapons of mass destruction. The world is concerned about that, especially the acquisition of those weapons by outfits like al-Qaeda or people like Saddam Hussein. What would you do about that particular matter? How would you prevent weapons of mass destruction falling into the hands of people like Saddam Hussein?

Mr. Peter Coombes: Yes, we need to get rid of the veto in the Security Council, and yes, it will mean that some countries will be very disappointed and very upset with some of the policy directions of the United Nations.

I may have been too glib when I said to get rid of the veto of the Security Council without putting it into context. Now, the United Nations needs a bit of an overhaul to make it a more democratic system. That would mean, then, that the Arab nations wouldn't be in a position to overwhelm Israel. There should be some basic rights that are already enshrined in the United Nations charter of rights that have to be abided by. A nation like Israel has the right to exist, and Arab nations don't have the right to say it doesn't.

That's a specific item I put forward to you, but I only put it forward as an issue that has to be dealt with in the context of the broad debate we need in this country and around the world. There are large numbers of Canadians who want to have this debate.

Weapons of mass destruction are another reason we need to improve the United Nations system. That's why we need to give it more power to act and to control weapons of mass destruction or any weapons that threaten the security of the globe.

The United States having the largest stockpile of weapons of mass destruction is not going to deter a terrorist from using a weapon of potential mass destruction against the United States. It can have all the nuclear weapons and warheads it wants--and in fact it does have all the nuclear warheads and chemical weapons it wants--yet it wasn't able to stop the attack of September 11. Nor would it be able to stop a rogue terrorist group from using a nuclear weapon in the future.

What will stop it is the world coming together and organizing to get rid of nuclear weapons and chemical weapons. It can be done, and it can be verified. I think it's just a matter of political will.

The Acting Chair (Mr. John Harvard) The United Nations certainly did try in Iraq, and the inspection system just... Well, they couldn't impose their will on Saddam Hussein.

Anyway, we'll leave it at that.

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Mr. Peter Coombes: It's very unclear whether there are any weapons of mass destruction left in Iraq, and it's most likely that there aren't.

The Acting Chair: Thank you, Mr. Coombes. I'm sorry, we're out of time. We appreciate everything you've said.

Mr. Peter Coombes: Thank you.

The Acting Chair (Mr. John Harvard): We will ask Kathryn Harrison to come forward.

Thank you again, Mr. Coombes.

Kathryn Harrison is a professor of political science at the University of British Columbia.

We thank you for this effort to come and share your thoughts with us. We have close to 35 or 40 minutes, so we're running a little short. So we'll probably cheat a few minutes out of you, but thank you for coming.

Professor Kathryn Harrison (Faculty of Political Science, University of British Columbia): Good afternoon. As the chair has said, my name is Kathryn Harrison. I'm an associate professor of political science at the University of British Columbia.

I have to admit up front that I'm not an international trade specialist.

The Acting Chair (Mr. John Harvard): We aren't either; don't feel bad.

Prof. Kathryn Harrison: However, I have spent much of the last ten years studying Canadian and U.S. environmental policy, so today I want to speak about that subject in the context of your work on North American integration.

My remarks today will draw on my own research, some collaborative work I've done with a colleague, George Hoberg, and some of George's other publications on his own and with other co-authors.

To begin, in the global scheme of things, differences in environmental policy between Canada and the United States tend to be at the margin. Neither country represents a credible pollution haven that threatens to steal away investment from its neighbour. This broad level of compatibility reflects the degree to which our societies are now and have always been quite similar. With similar levels of economic and technological development, it is not surprising that there is comparable public support for environmental protection and conservation in our two countries.

The similarities in our environmental policies also reflect the fact that North American integration, at least when it comes to Canada and the United States, is not a new phenomenon. Whatever the level of economic integration, there has always been quite close social integration. Government officials and also non-governmental actors on the two sides of the border are in regular contact with each other, and this has resulted in the transfer of not only information about the nature and extent of the environmental problems we face, but also different kinds of policy approaches that can be adopted to address those problems.

Having said that, there are differences between Canadian and U.S. environmental policy. This is perhaps most marked with respect to our approaches to making and enforcing environmental laws and regulations. In the U.S., the federal government plays a stronger role, typically co-opting state governments in the pursuit of its federal environmental standards through a combination of inducement and threats. In Canada, the provinces play a much more autonomous role in the environmental field. We have fewer federal standards than in the U.S. We also have a greater fondness in Canada for collaborative decision-making processes that invite compromise among the various stakeholders. In contrast, winner-takes-all litigation is much more prominent in the U.S.

These differences in approach arise largely as a result of differences in our political institutions. For instance, with the separation of powers between Congress and the executive in the United States comes a considerable degree of mistrust between those two branches of government. Congress therefore tends to write very detailed environmental laws, full of non-discretionary mandates and deadlines by which those mandates are to be met. Congress also typically authorizes anyone to sue the administration should it fail to meet those deadlines. In contrast, our parliamentary system, with its fusion of legislative and executive functions, tends to produce statutes that give much greater discretion to the executive.

Our environmental statutes tend to have a lot of “mays” rather than “shalls” and relatively few deadlines. The combination of those two factors tends to discourage litigation. Thus, procedural differences in Canadian and U.S. environmental policy arise primarily, I would argue, from our very different political institutions. Given that, I wouldn't expect those differences in particular to disappear very soon, despite closer economic integration.

Differences also persist in terms of the substance of environmental policy in our two countries. As evidence of those differences, Canada has significantly higher releases per dollar of GDP of most so-called “criteria” air pollutants, which include sulphur dioxide, nitrogen oxides, and particulates.

We also have considerably higher industrial releases of toxic substances than the U.S., whether that's normalized based on the number of jobs in each sector or on sales in comparable sectors in the two countries. Our pulp mill standards remain weaker in some respects than the comparable U.S. standards, and we do not yet have endangered species legislation at the federal level, though U.S. legislation has been in place for almost three decades. Nor have we achieved a level of coverage at the provincial level with respect to species at risk comparable with the U.S. It remains to be seen whether our paths will diverge with respect to the Kyoto protocol.

While our standards thus are not completely harmonized, I would say we have been moving closer together over time. Importantly, when we have achieved harmonization--or have moved in that direction, at least--it has normally been through one country's strengthening its environmental standards to catch up to its neighbour.

We have not witnessed a race to the bottom between our two countries. With the exception--an important one--of acid rain, the country that has done the catching up has usually been Canada. For instance, while we have matched the U.S. each time it tightened automobile emission standards, we have typically trailed behind by a few years. Our pulp mills didn't install secondary treatment of their effluents until almost two decades after their U.S. counterparts. And we created our own national pollutant release inventory five years after the U.S. introduced this innovative policy tool with its toxics release inventory.

I would argue that this degree of convergence has occurred primarily as a result of social integration rather than economic integration. Canadian environmental activists and bureaucrats alike take note when the U.S. revises its standards, and we often conclude that if it's good enough for them, it's good enough for us.

When it comes to the impact of free trade on environmental standards, there is no question that industries on both sides of our border resist regulation by arguing that the cost of compliance will hinder their competitiveness. However, I think it makes a big difference that our largest trading partner is the U.S., not a developing country with few standards and even less enforcement. For instance, in regulating emissions from automobiles, it's been easier for us to tighten those emission standards because vehicles in our integrated market were already being produced to meet tighter U.S. specifications.

American politician scientist David Vogel calls this the California effect, drawing analogy to the leadership role that the State of California plays among the United States. A similar argument might be made about the U.S. role within NAFTA, or for that matter Germany's role within the European Union. Vogel's point is that when the largest economic partner in a free trade region happens to have relatively high environmental standards, it can play an important role not only in resisting a race to the bottom, but in pulling its trading partners closer to the top.

The big test here will be Kyoto. When Canadian and U.S. environmental standards have diverged in the past, the U.S. has either been ahead or the difference between our two countries has been relatively small. The Bush administration's decision not to ratify the Kyoto protocol raises the stakes. We can no longer count on the California effect to make our job easier.

But even then, I think we need to ask ourselves to what extent our apparent misgivings about ratification of Kyoto are due to any marginal cost increases associated with U.S. non-ratification, or rather whether they reflect lack of resolve within Canada to undertake the kinds of changes in our behaviour that are necessary, regardless of what's happening south of the border.

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In closing, I would offer one relatively brief comment from my limited experience with the North American Commission on Environmental Cooperation, set up under the NAFTA environmental side agreement. The CEC, as it's known, has published an excellent series of reports tracking toxic releases in Canada and the United States, based on data from the Canadian national pollutant release inventory and the counterpart U.S. toxic release inventory.

Perhaps most importantly, the CEC has arguably played a critical role in facilitating Mexico's recent decision to create a comparable inventory, and to make reporting to that inventory mandatory--as it is in Canada and the United States. That's been done through tri-national coordination at the ministerial level, transfer of technical support at the bureaucratic level, and by facilitating the emergence of a tri-national network of non-governmental actors through the CEC's advisory groups and conferences. With the addition of Mexico's inventory, we will have an important tool to track environmental progress--or backsliding--throughout North America.

The CEC's role in that one case doesn't necessarily suggest that free trade per se, nor NAFTA in particular, is good for the environment. The implications of NAFTA's chapter 11 provisions on foreign investments remain particularly troubling, since they have been used strategically by companies to challenge environmental laws in all three signatory countries. However, the experience with pollutant release inventories does suggest that the institution created by the NAFTA environmental side agreement can have a positive impact.

Thank you for providing me this opportunity to testify. I'd be happy to do my best to answer any questions you might have.

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The Acting Chair (Mr. John Harvard): Thank you very much. I appreciate that.

Now we'll go to a round of questions. As usual, we'll start with Dr. Martin.

Mr. Keith Martin: Thank you, Mr. Chairman.

Thank you very much, Professor Harrison, for your eloquent comments.

From your perspective, what do you think Canada should be trying to pursue with the nations at the G-8 summit, with respect to lowering greenhouse gas emissions, given that the U.S. will not participate in Kyoto?

Kyoto seems bogged down in terrible problems, in particular with respect to Canada. Maybe with us it's a bit of a shell game, which is not really lowering greenhouse gas emissions at the end of the day, but buying and selling credits, and getting around the actual act of reducing our emissions.

Secondly, with respect to species at risk, what do you think Canada should be pursuing with the G-8 in trying to guard and protect critical habitat as a keystone to protecting endangered species? We don't have species-at-risk legislation here, and the current one will probably die, as you know.

And do you think there need to be any initiatives with respect to CITES by using the G-8 group as a place where you can get a greater commitment to the agreement?

Prof. Kathryn Harrison: To start with the climate change issue, I would at least hope that the flexible mechanisms within the Kyoto protocol--emissions trading and clean development--are not just a shell game, and that they will in fact result in real reductions somewhere in the world. If that's the case, and the reductions can be achieved at lower cost than we can do it at home, then maybe that's better than nothing.

It does seem to me that the time has come when Canada needs to make a decision. We keep pressing for other forms of flexibility from our partners under the Kyoto protocol. At some point we have to face up to the fact that we're one of the countries in the world with the highest level of greenhouse gas emissions per capita, and that perhaps we need to make some changes at home as well.

It's true that things are more difficult internationally with the U.S. not participating. But that also means that if we're going to collectively make progress on this issue, the participation by each and every one of the remaining countries that produces significant quantities of greenhouse gases is going to be critical.

With respect to the Species at Risk Act, if we don't pass the legislation this round, I wouldn't hold my breath for when we're going to do it. This is the third shot at it already.

I must admit I'm not familiar with the ways in which this issue is being discussed among the G-8 countries, but it does seem to me that in terms of an international context, there has been an international convention on biodiversity in place for ten years. Canada was the first industrialized country in the world to sign it. It's been ten years. I think maybe the time has come to take action, rather than looking to other countries, many of which have made greater progress on this issue than we have at home.

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Mr. Keith Martin: What are the key environmental initiatives we ought to bring to the table, Professor Harrison, at the G-8 summit? If you had the Prime Minister's ear, what would you say to him in terms of Canada's role, with respect to not only Kyoto but others?

Just getting on to the greenhouse gas emissions aspect, there's an argument, which The Economist has made very cogently, that Kyoto is not enough and that it is better for us to dump Kyoto and actually pursue an agreement that can bring in countries like the United States, and have deeper cuts over a longer period of time. That would give the industry the opportunity to adopt the scientific technologies that will be required in order for them to reduce those greenhouse gas emissions. We have to go deeper than what Kyoto actually is talking about. The actual timeline for Kyoto, because it's coming up so quickly, ensures that Kyoto will not work.

Prof. Kathryn Harrison: Certainly what I have read has also indicated that Kyoto should just be considered a start, that it's not enough to stabilize the global climate. It's a first step.

As to the question of whether we should not bother with the first step and set an ultimate goal that's further down the road, be more ambitious but allow ourselves more time, I have to say I'm skeptical, because we've already set ourselves a few deadlines that we've broken. We promised to hold our emissions or return them back to 1990 levels by the year 2000. I think at that point we were about 15% off.

Then in Kyoto we said we'd get to 6% below, averaging over the years 2008-12. Well, time is ticking and we haven't really made that much progress. Not as a policy-maker, but just as a citizen--a citizen who, like everyone else, tends to put things off to the last minute--I would be worried that not only Canada but other countries throughout the world would say, “Well, if we have 20 years, let's talk”. We would talk for 15 or 16 years and then we'd be in the same place or worse than we are today, and say that we need 20 more.

If we hadn't had the track record of missed goals and missed deadlines that we've already had to date, that proposal might seem more credible to me. But at this point, it just sounds like a way of putting off the inevitable.

If I had the Prime Minister's ear, what would I say would be the big issues? Climate change is certainly one of them. I hope the rest of the members of the G-8 will find ways to move forward on that issue, even if the U.S. isn't moving along at the same rate as we are. Certainly the U.S. is taking some steps. Hopefully, if the rest of the countries in the G-8 can set an example, they will eventually follow.

I think issues of the relationship between trade and the environment remain very important. We've done some things right in NAFTA, but there are some other things that require further attention, particularly as we talk about extending NAFTA to a free trade agreement among the Americas. So I think generally there are a number of issues about the relationship between trade and environmental protection and conservation that might be explored.

The Acting Chair (Mr. John Harvard): Thank you.

Mr. Rocheleau.

[Translation]

Mr. Yves Rocheleau: Thank you, Mr. Chairman.

As I sit here listening to you and reading your document, it seems to me Americans are very concerned and very protective of their own environment, but much less concerned about what happens outside of their borders.

We know that the automobile is one of the main sources of pollution and that the United States of America are a paradise for cars, a major contributor to pollution and one of the causes of the depleting ozone layer and climate change, with all their implications. We have seen that Americans are not very concerned when they are not directly threatened. This is true in Alaska where president Bush is said to be supporting oil development, possibly for electoral financing reasons. As you probably know better than I, this is a very unique area in terms of its ecosystem.

So I would be interested to hear your comments regarding their concern on the home front and their lack of discipline and recklessness elsewhere.

Next, you talked about Chapter 11 of NAFTA which, if I remember correctly, was modelled on a clause contained in the multilateral investment agreement and which came to light when a hacker stumbled on it on the Internet. This clause very obviously favoured the private sector over the public sector. One scenario that was easy to grasp was raised at the time by opponents: a corporation could have sued a government that took measures to protect the environment if that regulation had prevented the company from making the profit it expected. The ability to sue the government would have been based on the fact the company was prevented from making the expected profit.

Finally, do you know if US companies are compelled by law to protect the environment when they operate outside the United States, for instance in oil or mineral development? Is there any way American courts can bring down penalties on a US corporation that abuses the environment?

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[English]

Prof. Kathryn Harrison: I'll try to tackle all three questions.

With respect to your comment about the U.S. doing a better job of protecting the environment when it concerns their own citizens than when it concerns the rest of the world, I agree. I suspect we all do that to some degree. Canada hasn't ratified the Kyoto protocol yet, although hopefully we're still on track to do that. Canada's something of a paradise for cars as well, and our greenhouse gas emissions per capita are not behind those of the U.S. But absolutely, I think that's a huge problem.

Prior to the 1990 U.S. Clean Air Act, Canada had been kicking and screaming for over a decade about acid rain. And although the U.S. finally did pass the Clean Air Act amendment and it did result in significant reductions of sulphur dioxide releases, I don't really think that was largely because Canada was unhappy; I think it had more to do with changes within the domestic political scene in the U.S. It was time politically to make that change for domestic reasons, not because of Canada. I think we probably learned our lesson there, and I'm sure we'll learn it in other ways in the future.

With respect to chapter 11, I'm not sure exactly what the question is there. Again, I'm not an international trade expert, and my reading on chapter 11 suggests that there's a lot of pretty technical stuff in the wording, but my understanding is that the chapter 11 language.... The precursor to that in NAFTA was the Canada-U.S. Free Trade Agreement, but the language was broadened when we moved to NAFTA, largely because of concerns about expropriation of foreign investment that might occur within Mexico. Because of that, some of the language was made perhaps too broad. In fact, what a lot of individual companies are doing is challenging domestic laws by making an argument that the cost of compliance with those laws, even if the laws are non-discriminatory and they're enacted for valid public purposes, is tantamount to expropriation. Some of the NAFTA adjudication panels have agreed with that argument and have required that compensation be paid to companies.

That's quite troubling to me, partly because domestic producers who are affected by those same standards don't necessarily have a claim to compensation. The compensation could be expensive, but more importantly, that could create a regulatory chill. We may be reluctant to pass some of the kinds of laws that are needed for environmental or public health reasons if we fear that down the road it's going to cost us millions or billions of dollars in compensation.

The third question, whether U.S. law requires that U.S. businesses comply with environmental laws outside the country, I simply can't answer. Related to that, one thing I've been struck by is that in the discussion of Mexico's creation of its own national pollutant release inventory--it's called the RETC in Mexico--it was striking that some of the U.S. firms that had operations within Mexico were those most supportive of making the reporting to the inventory mandatory. They were already doing it in their home countries; they felt their operations within Mexico were meeting comparable standards, and they wanted to be able to demonstrate that.

I'm not sure what the legal requirements are. In some cases there may be public opinion requirements that are holding those firms to fairly high standards. I hope so.

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The Acting Chair (Mr. John Harvard): Thank you.

I have a couple of questions, Ms. Harrison, and first of all a general comment. I think that we as a nation--and certainly that would include government and in particular the federal government--have done a very poor job of addressing the environmental gap that exists between environmentalists on the one side and pro-business and pro-development proponents on the other.

This gap of misunderstanding or whatever you want to call it has really manifested itself in the controversy around SARA, Bill C-5. First of all, the amendments that were made to the bill by the committee were really in large part made as a result of pro-environmental sentiment. The government responded by more or less undermining some of those amendments. Yet the government is in as much trouble with the pro-business landowners and owners of animals as they are with the environmentalists.

The government--and I'm not trying to be an apologist here for the government--seems to be in an absolutely no-win situation. Perhaps it's because we as a government or just as a nation have not been able to do a very good job of somehow reducing the gap of values or whatever you want to call it that exists between these two groups. That would be my general observation.

With respect to the environment, environmental laws, and our NAFTA partners, I would ask you whether you think that the environmental commission under NAFTA should be strengthened in some ways. What should we as Canadians be asking in this regard from our NAFTA partners?

Maybe you could also make a comment on chapter 11. I remember that these questions on chapter 11 came up when we were in Mexico. It's not necessarily the right argument--we've heard a lot of arguments--but it was put forward that the protection afforded to investors under chapter 11 was really no greater than what is afforded investors in a domestic environment. That is, if certain things happened, say, within Canada, investors would have under existing Canadian law as much right to protect their investments. It wouldn't be called NAFTA, chapter 11, it would be called something else, but they would have as much right to pursue legal protections as they do under chapter 11 of NAFTA.

Anyway, I throw those things out to you.

Prof. Kathryn Harrison: With respect to the gap between environmentalists and businesses, for starters, I'm sympathetic. There can be a very wide gap in some cases and it can make life very difficult for those trying to craft legislation. The fact is, when environmental laws and regulations require people to change their behaviour, typically it requires some people to change their behaviour more than others, and that means the costs tend to be concentrated while the benefits tend to be widely shared. What that means is the politics of the issue I think often tend to exaggerate the cost, because the beneficiaries aren't necessarily paying attention, and those who are paying the costs are paying attention. That makes policy-making in the environmental field always difficult.

I think in the case of the Species At Risk Act, in some ways it hasn't been as difficult as it usually has been. In the late 1990s, I think it was, a constellation of actors came together from the environmental community, from industry, from a wide range of interests, and you saw, from my perspective as a student of environmental policy, quite remarkable documents emerging from the Species At Risk Working Group, which included the Sierra Legal Defence Fund on one hand and the Canadian Pulp and Paper Association on the other hand, putting forward consensus proposals to the government. That was pretty exceptional. So yes, there's still disagreement, but there was a lot more consensus to work with in that area than there has often been.

I also think the bill already goes much further than many of our environmental laws and regulations have in the past in offering compensation. We don't typically compensate the polluters who have to pay to clean up their emissions. What we are proposing to do in this bill is, in the first instance, to support stewardship programs so that the costs don't fall disproportionately on some actors. And if they do, we've left the door open for compensation down the road, which to me seems to be a violation in some ways of the polluter pays principle. So I think a lot has been done to close that gap.

One thing I find striking, apart from the Species At Risk Act, about the gap between environmentalists and businesses is that in some areas they've been closing the gap themselves by sidestepping government. So with respect to forest practices in B.C., a lot of groups got together and created a market campaign in the U.S. trying to create a market for sustainably harvested forest products in Canada. As a result, they created financial interest for those businesses and they've been meeting in the boardrooms with those corporations and coming to agreements among themselves without any government actors at the table.

With respect to whether the Commission for Environmental Cooperation should be strengthened, I think, yes, that would be a great idea. I think they probably have fewer resources than they would like to have. I suspect that this is particularly problematic in dealing with the issues the Mexican government faces. They simply don't have the kinds of resources that we do. The citizens submission process, where citizens from any one of the countries can come forward and ask the CEC to investigate a case where they believe there has been non-enforcement of environmental laws, is innovative, but it seems to me it's still pretty weak. The CEC can do an investigation, although usually they don't, and when they do, they issue a report at the end of the day. So the CEC has been able to make progress with publicizing the results of its studies, but that's been about the only tooth it's had.

On chapter 11, I'm surprised to hear the argument that domestic producers have the same opportunities to seek compensation, because I'm not aware of domestic laws that would allow a company, merely because its business interests have been harmed by an environmental regulation, to make a claim for compensation for expropriation of those business interests. I'm not familiar with any cases of that happening in Canadian domestic environmental law, and it's certainly the route that many companies are trying to take using chapter 11.

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The Acting Chair (Mr. John Harvard): Thank you very much. This has been very interesting and we appreciate your effort.

Just before you go, I want to mention that we will share your remarks today with the environment committee of the House of Commons, so they will have an appreciation of what you've told us today.

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Prof. Kathryn Harrison: Thank you very much. Good luck with your work.

The Acting Chair (Mr. John Harvard): Thank you very much, and good luck to you.

We shall proceed to the next group. There will be five witnesses altogether, although the sheet I have suggests there will be seven.

Mr. David Andersson (President, Pacific Corridor Enterprise Council): There will be just five of us.

The Acting Chair (Mr. John Harvard): We will be hearing from Mr. Andersson, Mr. Kohnke, Mr. Boos, Bill Grant, and Paul Daniell.

I just want to apprise you of the fact that we have until five o'clock, so as there are five of you, maybe you can restrict your presentation to a total of 35 or 40 minutes, or about seven minutes apiece, so we have time for questions. Is that fair? Will that be too restrictive?

Mr. David Andersson: Not at all. That's what we had in mind.

The Acting Chair (Mr. John Harvard): Okay, that's wonderful.

Mr. Andersson, you may begin.

Mr. David Andersson: Good afternoon, and welcome to snowy Vancouver.

The Acting Chair (Mr. John Harvard): It's all a joke, isn't it?

Mr. David Andersson: Year 'round.

I thought it might be useful and instructive for the panel to introduce ourselves in a little more detail, as you will be meeting some of us for the first time today.

My name is David Andersson. I'm the president of the Pacific Corridor Enterprise Council, a group that was started at the beginning of the Canada-U.S. Free Trade Agreement. We're a business organization, sort of like a cross-border chamber of commerce. About half of our members are American and half are Canadian. We straddle the border, and have a perspective that comes from being so close to the border.

Our first speaker today is going to be Greg Boos. He's a director of the Pacific Corridor Enterprise Council. He also chairs the American Immigration Lawyers Association's border watch group of about 8,000 U.S. immigration attorneys. Greg is an American. He lives in Bellingham, which is a little bit south of the 49th parallel. He drove up today to provide us with some remarks.

Greg is key to business organizations in our neck of the woods because he provides us with timely and insightful analyses of U.S. immigration legislation as it comes down the pipe. That tends to have a great impact on both businesses going down and businesses coming up, and professionals.

Following Greg we will hear from James Kohnke. He will be arriving in the middle of Greg's comments. Jim Kohnke is the chairperson of our transportation committee. He is also the executive director for the Totem Ocean Trailer Express Company, which runs all of the steamships between Seattle and Alaska. As such, he's very concerned about transportation across our border and the impact our relationship with the United States has. He also sits as the chairperson of the transportation committee for the British Columbia Chamber of Commerce, representing about 20,000 business individuals in the province of B.C.

Following Greg, we'll hear from Mr. Bill Grant. Bill is a businessman here in Vancouver and carries on business extensively in Whatcom County just on the other side of the line. We thought it might be interesting to hear a practical experience of what it's like to do business across the line these days.

There's Mr. Kohnke, just joining us.

In our cleanup position, wearing two hats, is Paul Daniell, president of the Cascadia Institute, a consultancy and business organization that is related to a group in Seattle. Paul will be sharing with you some comments about the international mobility and trade corridor project, which the State of Washington and the Province of British Columbia and their respective departments of transportation, together with some non-governmental organizations such as PACE and others, have put together to deal with border crossing issues. Paul will also address the issue of security in the western trade corridor.

With that very lengthy but hopefully helpful introduction, I'll turn the microphone over to Mr. Boos.

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Mr. Greg Boos (Vice-President, Pacific Corridor Enterprise Council): Thank you very much. It's a pleasure to be here, sir.

David indicated I'm an American. I do have a Canadian partner. The law firm of Chang and Boos has offices in Toronto and Ottawa as well as just South of the line here.

I want to talk today--and I'm sure I will not be the first person to talk--about this American issue, Canadian problem. What I'm talking about is a particular kind of visa that was approved under the free trade agreement and was subsequently incorporated into the NAFTA. It's called a TN or Treaty NAFTA visa. When this visa was incorporated originally under the free trade agreement, Canadians were the only people in the world who could have this visa. Now that we have NAFTA, Mexicans can also have this visa; however, the processes and procedures are much different for Mexicans to obtain these visas from those for Canadians. They are supposedly harder for Mexicans to obtain.

Under the TN status, 65 different professions can obtain, or should be able to obtain, fast and easy work authorization so long as the member of that profession is of NAFTA nationality and is going to one of the NAFTA countries. I have done a paper for you today. It's a little bit on the academic side, but I set out the 65 different professions in there.

This visa is important to Canadians, probably more than to any other nationality out of the NAFTA groups. Approximately 60,000 Canadians took advantage of this visa in 1999, compared with maybe 1,500 Mexicans taking advantage of the visa. Probably the number of Americans taking advantage of it is somewhere in between those two.

Because this visa has been in effect since 1989, one would think it would be easier, that all the kinks would be ironed out. However, there has been a growing restrictive trend in the United States for granting of these visas to Canadians. I want to speak about this restrictive trend.

The NAFTA visa, the TN visa, is unique, because a Canadian entering the United States is forced to present his or her application at the border, and it is adjudicated on the spot. Many of our other visas in the United States are adjudicated by sending them in in advance; then a person knows whether or not he or she is granted it and is given a written notice. But the TN was supposed to be adjudicated on the spot, supposedly to facilitate international trade and commerce.

The United States initially had designated free trade officers at U.S. border crossings. These free trade officers did have some training in NAFTA, and they would take a look at the visas. But the United States immigration service has eliminated free trade officers, and the policy and procedure now of the United States government is that whatever officer is standing at the kiosk when the Canadian comes into the building, that person adjudicates the visa.

We have old hands who have been around since 1989 in the Immigration and Naturalization Service, and we have people who have just graduated from the United States training facilities for visa officers. That has had a tendency to make adjudication of these visas wildly erratic. There is no predictability.

If I were to prepare an application and send it in to a crossing on any given day, one officer might say very glowingly to my client, “This is an excellent petition”. If I were to send that client back another day with exactly the same petition, an immigration officer might say, “This is a highly deficient application”. So instead of meeting NAFTA's needs to facilitate the flow of business people back and forth across the border, it is creating an impediment to back and forth flow of professionals between Canada and the United States.

Not only is it increasingly an impediment to the back and forth flow of Canadian professionals to the United States, but under the free trade agreement Canadians were supposed to be the most favoured nation of the United States. We used to say that Canadians are now the most favoured of the favoured nations; they have this visa that no other people in the world have. Well, let me tell you gentlemen, right now what has happened with NAFTA visas, the TN visa, because of some rulings that have come out of Washington, D.C., is that Canadian TNs are the only people in the world who are put into expedited removal at United States borders if they want to disagree with an immigration officer's refusal to grant them a visa.

It used to be that if these Canadian professionals came to the border and their application was turned down, they could take their application and go to another border crossing and ask another border officer to look at it, or they could ask to have their case put before an immigration judge. That immigration judge could then decide whether or not the immigration officer's decision was right. About a year ago a ruling came out of Washington, D.C., saying, do not let these people go in front of the immigration judges any more; put them into expedited removal.

In case you don't know--and you probably don't, as there would be no reason for you to know--under our 1996 harsh restrictive immigration act, expedited removal is a form of turning a person away at the border for a period of five years or life, and there is absolutely no administrative or judicial review of that decision. In other words, it makes the border guard the prosecutor, the judge, and the executioner. This harsh law, which was intended to get at criminals, intended to get at thieves, intended to get at crooks, is now being turned against Canadian business people. That's why I started off my presentation saying “American issue, Canadian problem”.

Thank you very much.

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The Acting Chair (Mr. John Harvard): Just before we go to Mr. Kohnke--if tha's who you're going to next, Mr. Andersson--I have just one question.

What is the lifespan of these TNs, these visas? If you're given one, how long does it last?

Mr. Greg Boos: It's good for a year. It's renewable as long as you can demonstrate that you are not using it as an immigrant visa, that you intend to return to your home country eventually.

The Acting Chair (Mr. John Harvard): You mentioned 65 professions. Give me an example of a particular profession that would use this kind of visa very often.

Mr. Greg Boos: Accountants, engineers and nurses, those three, probably use well over 50% of them, I would think.

The Acting Chair (Mr. John Harvard): Thank you.

Mr. Kohnke.

Mr. James Kohnke (Chair, Transportation Committee, B.C. Chamber of Commerce; Director, Pacific Corridor Enterprise Council): Thank you, and good afternoon.

My name is James Kohnke. I'm a director of PACE, the Pacific Corridor Enterprise Council. I also chair the transportation committee of PACE and that of the B.C. Chamber of Commerce.

We have been involved with cross-border trade for many years. We continue to have concerns over many issues related to it. Commercial transportation plays a vital role in Canada's economic well-being. In fact, the Canada-U.S. trade relationship is the largest in the world. Despite the tremendous growth in trade since the U.S.-Canada Free Trade Agreement, and subsequently NAFTA, impediments to trade still exist.

The B.C. trucking industry undertook a study a few years ago in which it was attributed that delays at border crossings amounted to some $60 million annually. We need to address these choke points, and we believe that technology holds many answers to some of these problems.

The ITS Corporation, which was formed about two years ago, comprises the Greater Vancouver Transportation Authority; the B.C. Ministry of Transportation; the Insurance Corporation of British Columbia; the greater Vancouver municipalities; the Vancouver International Airport; the Vancouver Port Authority; the University of British Columbia; PACE, the Pacific Corridor Enterprise Council; and Transport Canada.

This group recently completed British Columbia's provincial ITS vision and strategic plan. This was done with funding assistance from Western Economic Diversification Canada. Mr. Keenan Kitasaka, who is the manager of ITS, was going to be here today to provide a report on it, but in his absence I will go through and provide some highlights of his report, in which he says that investment and infrastructure have not kept pace with transportation demand, and the resultant congestion and delays are evident on every commuting day.

The traditional means of addressing congestion by building more capacity--constructing more lanes of highways, roads, and bridges--is often not possible, exacting too great a price fiscally and environmentally. Many jurisdictions have now turned to intelligent transportation systems to maximize efficiency in operation of the existing transportation network.

ITS refers to the application of technology, such as computer, telecommunications, field services, and other information systems, to improve the operation, efficiency, and safety of the transportation network. The history of ITS goes back to the 1990s. As a result of legislation by the U.S. Congress, the Intermodal Surface Transportation Efficiency Act provided for the first time significant amounts of federal funding to undertake research and operational tests for ITS in the United States. This was subsequently upheld with the Transportation Equity Act for the 21st Century, commonly known as T21, a landmark piece of legislation that provided billions of dollars of funding towards ITS deployment. However, there still remains a vast amount of federal funding available in the U.S. and relatively smaller programs in Canada.

As one example, despite severe levels of congestion and delay, greater Vancouver, as the third largest metropolitan centre in Canada, has no regional ITS deployment or traffic management centre. Despite the completion of this landmark plan that I referred to earlier, uncertainty in funding sources may again limit the ability to proceed with deployment of these important projects. Other provinces have completed similar plans or have works in progress with the same uncertainty in funding.

In North America, and particularly in the U.S., the deployment of ITS applications has played a significant role in the efficiency of the transportation network. If Canada is to reach similar benefits and address its transportation issues, it must support ITS programs through policies, legislation, and funding, as the U.S. has done.

As for the impacts of September 11, since that day we have seen a significant shift in priority on--or at least in the awareness of--the role of security and transportation in both the U.S. and Canada.

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The use of ITS technologies to provide screening and identification activities is not new. In terms of how we can balance between the needs of security and integration, specifically the federal government must provide enabling policies, legislation, and funding to support integration activities. Without this support, integration will not likely occur in any significant degree. In addition, the federal government, in partnership with its provincial and U.S. stakeholders, should develop, with some urgency, a blueprint document that provides strategic direction and recommendations for funding of targeted projects that affect integration and security.

There is a strong institutional structure in the Pacific Northwest to address transportation issues, particularly those related to integration and security of ITS. One of them has to do with the IMTC project that we will hear about a little later from Mr. Daniell.

In terms of recommendations, we suggest that we need to prepare a long-term ITS strategic plan to promote integration and security; have increased deployment of cross-border systems to support two-way movement of commercial vehicles and their cargoes; expand the scope of the International Mobility and Trade Corridor project in the Pacific Northwest to other border regions between Canada and the U.S; support regional agencies such TransLink in B.C. and local governments that have identified ITS-related needs; investigate the feasibility of dedicated commuter lanes and support intermodal freight management activities in tracking and monitoring shipments anywhere in the transportation network; support development of regional transportation forums and conferences; support the coordination of binational projects that are part of the trade corridor; and develop direct communications links with U.S. customs and Canada customs.

Those are highlights from Mr. Kitasaka's report.

º (1610)

The Acting Chair (Mr. John Harvard): Thank you very much, Mr. Kohnke.

Now I gather we're going to Bill Grant.

Mr. Bill Grant (Vice-Chair, Pacific Corridor Enterprise Council): Thank you for inviting me here today.

As a businessman domiciled in Vancouver with residences both here in Vancouver and across the line in Bellingham on the ocean and with offices here in Vancouver and Bellingham, I carry on a substantial amount of business in the U.S. and depend upon direct and rapid access into the U.S. I like to have a comfortable and relaxed return to Canada, which is critical to myself and to my employees.

The past several months have erased the progress of ten years under the PACE CANPASS system. Waiting time of one to two hours each way is expensive. It interrupts meeting plans or appointment times and it causes personal hardship--missed family and personal events, etc.

My business is in resort and commercial land development. The resort business was decimated in the U.S. border towns such as Blaine and Birchbank and substantially reduced in Canada. Long lineups of up to four hours created a slowdown and economic reduction on both sides of the border. Many visitors--tourists--just didn't go north to Vancouver and surrounding areas. This included many regular visitors within 50 to 100 miles who often visit Canada for business or pleasure. The question has to be asked: No matter what the policy of the U.S.A., why did Canada discontinue CANPASS?

Canada needs a policy of entrance into Canada based on our country's experience, not a knee-jerk reaction to events that may occur in the U.S.A. or any other country. The CANPASS system proved viable, no particular incidents, no unusual problems. Why shut it down as it was? I believe if we had retained CANPASS until a replacement such as NEXUS was implemented, the economic impact on Canada and the inconvenience to Canadians would have been substantially reduced.

I also believe that Canada should advocate to the U.S.A. through the northern citizens of the U.S.A., as they're the ones who seem to have the most severe impact on anything that shuts down the border. The importance of a seamless border and minimum travel disruption is absolutely critical to the economic viability of the region.

Thank you.

The Acting Chair (Mr. John Harvard): Thank you very much.

Mr. Daniell.

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Mr. Paul Daniell (President, Cascadia Institute; Pacific Corridor Enterprise Council): Thank you. I'd like to draw your attention to the handout package I've provided you with, and draw your attention to a little map we've put together of the region.

The Cascadia Institute has been working on promoting binational cooperation in this region for about the past 15 years now, and the region has some unique characteristics we would like the committee to understand.

First of all, the region forms a nexus of trade and people movement that's quite unique in North America, where NAFTA and Asia-Pacific trade with North America come together. We're the second busiest region in trade and people movement across the Canada-U.S. border, and the only one with all modes of transportation actively involved in the same condensed area.

We have four major land crossings close by, directly south of Vancouver, and some very unique trust-based relationships that bring together the federal governments of both countries, the State of Washington, the Province of British Columbia, regional governments, and the private sector.

This unique level of cooperation and personal relationship has framed a number of interesting initiatives in recent years. The PACE organization itself is testimony to that. Other accomplishments you may be a little less familiar with include the joint forces operations of our policing authorities; the integrated border enforcement teams, which include all of the policing and border enforcement agencies; PACE with CANPASS, as far as actual cooperative systems are concerned for pre-clearing people across the border; the IMTC project, which was referred to earlier--International Mobility and Trade Corridor; and the regional partnership that was established here, which grew out of the CUSP process.

On the second page of that handout, there are three concentric circles drawn to give you a feeling for the geographic relationships between these initiatives. The IMTC project focuses on the so-called Cascade Gateway--the area from the greater Vancouver urban area south through the border at Blaine to Bellingham, including Whatcom County. The regional partnership that followed from CUSP takes in the whole of British Columbia and Washington state, including the state and provincial governments.

The West Coast Corridor Coalition is a new initiative to expand this cooperation across the entire west coast of North America.

The IMTC coordinates planning and investment for border infrastructure in a way that really has no counterpart in Canada. Under the Transportation Equity Act, municipal and regional transportation planning organizations are established that are actually able to lobby for and make application for federal funding, and receive and administer the investments in projects at the border under the border and corridors program.

The IMTC has been successful as a grassroots model, bringing together all levels of government, the private sector, and NGOs in agreeing on priorities for investment, securing these funds, and actually managing projects to improve infrastructure.

The regional partnership followed on from where CUSP left off, the Canada-U.S. Partnership. We are aware that this process had some problems when it was decided in central and eastern Canada at least to try to make this work more effectively on a regional level. But here on the west coast we believe that there was some outstanding success that might prove instructive and be worth building on for some continuation in the process.

The West Coast Corridor Coalition is now taking that very good working relationship that exists in the region between the two federal governments and between the State of Washington and the Province of British Columbia and expanding it to the other American states. This is so we can have seamless integrated systems for transportation all the way from Alaska to Mexico through British Columbia. Agreeing on policies, building consensus for investment, and building integrated systems to accommodate that goal are what the basic objectives of this coalition are all about.

The third page of this top piece explains in a little more detail what the West Coast Corridor Coalition is doing and what its purpose and current status are. It goes into some of the funding that has already been made available in the States and talks about proposals that are receiving very broad political support from the border caucuses of the U.S. Congress and from all the governors of the states involved.

Canada has not yet decided how to address this initiative, but we have a head of steam building up with our American neighbours, who are intent on resolving some of these issues. Once more when it comes to infrastructure investment, we're lagging considerably behind them in Canada and are barely able to cope with the scale of investment. As the U.S. talks about many billions of dollars going into infrastructure, we're faced with squabbling over a $600 million program.

Our best hope here in this region is that of the $600 million for the border infrastructure program, we might see an allocation here of $150 million. the Boeing Company in Seattle did a study a couple of years ago on infrastructure requirements in this corridor and identified $90 billion worth of projects.

The Acting Chair (Mr. John Harvard): Was that $90 billion U.S.?

Mr. Paul Daniell: Yes, $90 billion U.S., not “dollarettes”, as our past chairman used to call them.

In any case, it leaves us with considerable challenges to keep up within the process, let alone find investment for Canada.

I'd like to leave you with these materials, which include a listing of priorities that were developed through the partnership process, the agreement that was developed through leadership from the U.S. and Canadian consulates. There's further background material on the IMTC and the Cascadia Institute.

I think it's very important to note that a great deal of this progress with the regional partnership, the gathering momentum through the IMTC, and the establishment of the corridor coalition has just been made in the last couple of years. The input to this process and the leadership from the consuls general has been very important in this exercise.

Incidentally, we're just about to lose both our consuls general, as they're both to be reassigned this summer. Roger Simmons, our Canadian CG in Seattle, has perhaps accomplished more in his term in the last couple of years than all the previous consuls in the ten years before him.

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The Acting Chair (Mr. John Harvard): He's an old colleague of ours.

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Mr. Paul Daniell: An old colleague of yours...

The Acting Chair (Mr. John Harvard): We'll make sure that he hears what you just said. Newfoundland will not be big enough to contain him.

Mr. Paul Daniell: Well, I think that it does say something about processes that the committee could perhaps comment on.

The Department of Foreign Affairs and the U.S. Department of State have given a lot of support. I don't mean to knock their officials in any way, but I know the officials do argue for consuls and ambassadors to come from within the civil service.

I think we have excellent proof with both consuls in place that politicians, who have the public experience with communication and realpolitik and dealing with real people, are able to make an incredible difference. We need more of that in the new reassignments for the consuls general.

We need that knowledge to be carried on in some formal continuance of the CUSP process. I don't want to use that name—I know it carries a lot of baggage, and that there were a lot of problems with it—but we've proven in this region that regional follow-up initiatives can work, and that we need a binational mandate to do this. So we would ask that the Minister of Foreign Affairs work with his colleague in the States to achieve that.

The Acting Chair (Mr. John Harvard): Mr. Andersson, we've gone almost 35 minutes. How much more do you have before we get to questions?

Mr. David Andersson: Mr. Chairman, I was very remiss. I did not introduce one of our colleagues, Andrew Wynn-Williams, of the B.C. Chamber of Commerce. I was expecting he'd be represented by Jim Kohnke, but he's here in person. So if we have a few moments, say five or ten minutes, we could hear from Andrew.

The Acting Chair (Mr. John Harvard): The time will just come out of questions, whatever.

Mr. Andrew Wynn-Williams (Director, Policy Development and Communications, British Columbia Chamber of Commerce): We welcome this opportunity today.

Normally, when you make these kinds of presentations you start with the broad generalizations at the beginning, then delve down. We're going to do precisely the reverse. I'm going to bring more of a global perspective to the discussion, in the context of Canada as a whole.

We work primarily through the Canadian Chamber of Commerce in these kinds of issues on a national scale. I'd like to thank them for the work they do and recommend that you continue to work with them with anything you do going forward. The B.C. Chamber of Commerce represents about 27,000 businesses throughout Canada.

The relationship between Canada and the United States has received a great deal of attention recently. The events surrounding September 11 and the subsequent security concerns and border congestion, combined with the softwood lumber crisis and other trade disputes, have made Canada-U.S. relations more prominent than ever before. Consequently, it's important to begin by noting that these issues are not new; they have simply been given more urgency.

The problems of congestion, poor infrastructure, understaffing, and a lack of dollars have all been evident over the past several years. They are all symptoms of benign neglect, a neglect that was the result of the success of our relationship with our southern neighbours. The old adage “if it ain't broke don't fix it” failed our border system miserably, as our decrepit border machinery was cruelly exposed by September 11. The result is that we now have to make some very important decisions quite quickly.

We have been building this crossroads in our relationship for some time. Recent cross-border trends are to greater economic integration, and increasingly similar objectives on other fronts, including immigration and security. The impact of NAFTA has been a massive increase in trade and cross-border traffic. These trends all cry out for greater investment in and integration of our border processes and practices. Our inability to keep up is creating a large barrier between us and our most important trading partner, and consequently is hindering economic development.

There are no easy answers to this challenge, but one thing is clear: the goal is not simply to return to pre-September 11. There are longstanding systemic issues that can only be addressed with a new vision and a fairly comprehensive overhaul of our border management system, and indeed of the nature of our relationship with the United States.

There are obvious priorities for a new system. The first is security. We must obviously enhance security without freezing trade systems and people movement. This requires more systems integration and coordinated policy development. There are differing approaches to issues on each side of the border that can create conflict. These must be addressed. Canada, for example, has concerns about gun control and free access to the border for guns. The United States, conversely, has concerns about Canada's approach to organized crime. It will take both commitment and compromise to deal with these kinds of issues.

On the border itself, machinery and infrastructure have long lagged behind demand, and this has obviously been made clear already. New technology is an essential tool. In particular, it is important to get the NEXUS program fully operational as soon as possible. We understand the system will be fully operational and automated for travellers heading south, but for those travelling to Canada the system will not be fully automated immediately. This must be addressed as soon as possible.

Canada and the U.S. must also pre-clear as many low-risk travellers as possible--essentially move the border away from the border. With proper risk management, a pre-clearance system would be more efficient and more effective because it would allow border agents to focus on high-risk travellers. It would also be less trade-distorting, making the border less of an impediment to cargo and to investment.

These solutions must be bilateral in nature, but nevertheless, it is only pragmatic to recognize that the U.S. is far more important to Canada than Canada is to the U.S., unless we're talking about the supply and demand of really good hockey players. Although the solutions should not be made in Canada only, Canada must certainly take the lead. The solutions that the chamber recommends the government consider include a perimeter system allowing for earlier interdiction of those approaching North America as a whole; better information sharing, including data storage systems that are compatible; land and port pre-clearance, as in airports; and pre-arrival notification processing. Note that many of these will require greater investment abroad.

The challenge of meeting Canadian needs and U.S. imperatives at the border is symptomatic of a larger public policy debate. The focus is the balance between sovereignty, economic security, and national security. This may not be a debate Canadians are ready for, but it has been forced upon us by September 11.

Within the context of this larger relationship, there are other concerns that must be considered. The majority of trade, for example, is not an issue, but some ongoing disputes are frustrating and costly. Softwood lumber, wheat, dairy, steel, and film are all examples. Often it is the Canadian approach, like wheat boards or stumpage, that draws the ire of American industry. Regardless of appearances, American trade remedy systems and American politicians can be relentless in their pursuit of what they perceive as unfair. In other words, our economies are integrated but our trade rules are not. The result is freer trade, but not free trade.

We believe the Canadian government could do a better job of resolving such issues sooner. In the softwood lumber situation particularly, full diplomatic negotiation was not brought to bear until it was far too late for it to have done any good. There is also the issue of harmonizing the regulations and dealing with stumpage, and where it would appear more fair to Americans.

There have been attempts to address these issues before, both globally and on the border, but there's been no real concerted effort. The CUSP process in particular was a good start, but it did not gain a great deal of profile and also hadn't really been completed. The shared border accord was unfinished. Even NAFTA has not been problem-free, as there have been issues surrounding people movement. Section 110 is a good example of the kind of problem that can arise in spite of NAFTA.

As noted earlier, these issues are not new, but because the events of September 11 have highlighted them, Canada has been presented with a new mandate and a new opportunity to address them. We must look at it as a chance to move forward, rather than backward. Canadians must be prepared for this challenging, emotional, and divisive debate.

The outline of key issues and questions for public discussion, as prepared by the parliamentary research branch for this committee, represents an excellent series of policy documents and lays out the issues in a reasonably balanced fashion. Unfortunately, members of the general public do not regularly sit down and read government policy. I apologize to Mr. Schmitz, whose name I saw in those. I don't know if that's a revelation to him, but most people aren't going to read them, no matter how scintillating they are.

In order to ensure the debate proceeds on something other than rhetoric and emotion, the content of these papers needs to have a broader distribution in a more user-friendly format. As I write and read public policy for a living, I'm probably not the best person to advise on what that format might be.

In summary, the reality is that integration is not going away, so whatever decisions we make, we must make them quickly or the opportunity to actually make a choice will pass us by. Canada has the ability to control this evolution of our relationship, primarily because it's one that matters more to us than to them. Whether it includes such things as a customs union, dollarization, or other monetary union, we can still get maximum advantage because we can drive the process.

The question we are faced with is whether we are going to make incremental changes to take what comes and to adjust to the changing global circumstances as they are forced upon us, or whether we are going to approach this with bold vision and strong leadership. The chamber believes we can't let the future happen by default.

Closing with the Canadian Chamber, as I began, Nancy Hughes Anthony of the Canadian Chamber of Commerce said it best when she stated that Canada must be in the driver's seat, not the passenger seat.

Thank you.

º (1630)

The Acting Chair (Mr. John Harvard): Thank you very much, Mr. Wynn-Williams.

Is that it, Mr. Andersson?

Mr. David Andersson: Yes.

The Acting Chair (Mr. John Harvard): Thank you. I really appreciate that.

Just before I go to Dr. Martin for the first set of questions, I have some information. All of you may already know this. I was going to direct it to you, Mr. Grant, because you raised NEXUS and CANPASS. Last fall this committee was concerned about the future of NEXUS and CANPASS because of what happened in the wake of 9/11, and we said so in a formal report to the government. We received a response from the government just last Wednesday. They pointed out that the NEXUS pilot program at the Sarnia-Port Huron, Michigan, location was reinstated back in December and that a reimposition of NEXUS at three southern British Columbia ports of entry will be fully implemented by next month. I don't know if you know that, but that's what we were told in this formal reply from the government just last Wednesday.

The government is also saying that they're hoping to replace CANPASS with NEXUS. They're discussing this with the Americans as to a timeline and a schedule.

I don't know if that's heartening to you. You may already know this information from your own inside sources. I just thought I'd share that with you.

Dr. Martin.

º (1635)

Mr. Keith Martin: Thanks very much, Mr. Chairman.

Thank you very much, gentlemen, for being here today and taking the time from your busy schedule.

Mr. Daniell, it's a sobering thing to see our deficit for infrastructure development being between $90 billion and $150 billion. Are there some innovative ways in which we could raise the money, such as public-private partnerships and tax breaks? Do you have any suggestions as to how we could narrow that deficit?

On the issues of a customs union and dollarization, what are your views? Are you for or against a customs union and for or against adopting the U.S. dollar?

On the issue of trying to resolve our trade differences with the United States, whether it's fish, agriculture, or softwood, can you provide us with any ideas that will enable us to resolve those differences? Do you think that a North American commission with Mexico, the U.S., and Canada would help to alleviate this problem?

Thank you.

Mr. Paul Daniell: The subject of funding has been something we've struggled with for some time. The Americans do have a number of other instruments available to them, particularly with regard to different types of bonds they can float in the United States and the tax exemption status given to them. It may be possible through legislative change in this country to come up with some more innovative opportunities for raising funds for infrastructure.

I believe that public-private partnerships, which you mentioned, have considerable potential. We're just starting to explore these in the province of British Columbia in light of a major shift in provincial government policy. It's not something Canada has a lot of experience with, or indeed even the Pacific Northwest states. But looking at infrastructure investment that's taking place in Australia, the United Kingdom, and other countries, it's clear that large-scale projects that run into several billions of dollars can be handled with private sector investment as well. So we're optimistic that there may be a larger role for the private sector.

I think this is a very important aspect of the regional cooperation here. The private sector involvement is unusual.

In most areas, on most policy matters, the government agencies do tend to take their own counsel, to establish working groups of their own. One thing that has worked very well in this particular region is our expansion of the federal government working groups to include province and state and, most importantly, the NGOs and the private sector.

Governor Tom Ridge recently was talking, in New Orleans, I believe, about infrastructure and security-related problems and investment and stated that he believed that 80% of the investment and solutions to these problems had to come from the private sector. So there's a tall order for that side.

º (1640)

Mr. Keith Martin: Sorry to interrupt you, but does that imply a lowering of a tax, both federally and provincially, in order to make the private sector competitive enough to enable them to make that investment?

Mr. Paul Daniell: I don't know that a lowering of taxes or tax forgiveness is the whole answer, no. But I think there should be a closer look in Canada at these tax-exempt bonds, for example, and the whole area of public-private partnerships. This doesn't need to only mean forgiveness of taxes. There are things like tolling policies, for example, that are very important to accommodate such investment. So there is a range of issues, and it's tough to give you a simple answer on the spot.

You raised a number of issues that are at the heart of current disputes, like fish and softwood. Despite the very good regional cooperation, I think we have a lot of areas where there are fundamental disconnects at the binational level. It may indeed be that going to the WTO and through the courts is the only way to resolve some of these issues at the binational level, but I would argue that we should place a greater emphasis on regional pilot projects, empowering regional organizations to seek practical solutions that are driven from the front lines by the operational management. That is the way we have succeeded in building joint forces operations for policing and our integrated border enforcement teams, and that's the key to success with the IMTC.

The Acting Chair (Mr. John Harvard): Thank you.

Mr. Grant.

Mr. Bill Grant: Simply as food for thought, it's an unusual situation where we're going to be paying $2.6 billion in tariffs because of the softwood situation. It may be worthwhile looking at alternative ways to use that kind of money other than going into the infrastructure of moving goods and services, perhaps forestry products. It could be in the best interests of both nations, as opposed to one getting the tariffs and the other one saying it's unreasonably priced.

The Acting Chair (Mr. John Harvard): Good point.

Mr. Rocheleau.

[Translation]

M. Yves Rocheleau: My first question is for Mr. Boos. How come this special visa intended to facilitate the movement of 67 professions between Canada and the United States is now being used against Canadian citizens? If I understood you correctly, people can now be barred by way of expedited removal. How do you explain such a change in attitude on the part of the US government? Do you know if Ottawa has been consulted or if this was an arbitrary and unilateral decision? This is my first question.

My second question is for Mr. Kohnke. This is a follow-up on the question of my colleague. How do you feel about a possible customs union between Canada and the United States? Would it be an advantage or a disadvantage for Canada to have a dollar that hovers between 62¢ and 64¢?

I have a more general question for Mr. Andersson. Should Canada abdicate part of its sovereignty for the sake post September 11 and for the sake of trade, or should it cling to its prerogatives vis-à-vis the United States?

[English]

Mr. Greg Boos: Thank you, sir, for your question.

The American policy is being driven from a number of perspectives. One is at the policy level in Washington, D.C.; two, it's being driven by the immigration officers, the adjudicators at the border.

One of the things that's interesting about NAFTA is this policy level in Washington, D.C. I filed a Freedom of Information Act request with the Immigration and Naturalization Service to obtain all policy rulings under NAFTA since...I had some, so I believe I said since 1996. I got back a letter saying, “We have received your Freedom of Information Act filing. Please explain what NAFTA stands for.”

I believe that's part of the problem: that decision-making in the United States is Washington-driven. The professional administrators our government has don't care as much for this agreement as we on the northern border do. In fact, if Americans knew how important NAFTA was to all of the 50 states, it would be important to them too. But on the northern border we are aware of it.

The other problem with this is some of the restrictiveness is being driven by the Immigration and Naturalization Service officers at the border. We see more and more of this, because they are taught that their job is to turn away people, to intercept criminals, to intercept terrorists. But the fact of the matter is 99.9% crossing the border between our two countries are legitimate folks, and these immigration officers need to be instructed when they're in the academy that part of their job is to facilitate legitimate traffic and part of it is to intercept that criminal traffic.

Just as a bit of an aside, with the Immigration and Naturalization Service being reorganized—you might think of that as being a domestic U.S. issue—it's going to be important to Canada too. One of the plans for reorganizing the U.S. Immigration and Naturalization Service is to turn the people at the border into total enforcers. They would be the equivalent of our border patrol.

The inspectors at the border really have a dual job. It's an adjudicative function—to get across the legitimate traffic—and an enforcement function, to catch the bad traffic. We can't let them forget about that adjudicative or service side. David and I, through our association, are working on that.

On to the next question: was Ottawa consulted on these changes? Well, it was on some of them, in a way. Under NAFTA, the three countries get together each year to discuss visa issues, and some of these restrictive policies I talked about did come through that trilateral discussion. But most of them—some that are in my paper and that I've documented there, some of the big policy memos—came down unilaterally through the United States.

I don't have any trouble at all with the idea of there being a trilateral discussion among the three countries, but what I have noticed is that when the trilateral people got together to make these new policies they did not consult the business community. They did not ask the business community if they thought these visas were being abused.

I don't know where they decided they needed to be restricted. It was as if they sat down among themselves and decided, “We need to tighten this up.” There was not a public demand for this tightening up, as far as I have been able to see.

I believe I've answered the questions. I hope I didn't miss any. Thank you, sir, for this opportunity.

º (1645)

Mr. James Kohnke: Thank you for your questions as well.

In terms of a customs union and dollarization, I think perhaps this may evolve in the long term, but I don't see it in the short term. Probably dollarization would be easier to achieve, inasmuch as the Canadian exporters are already pricing their goods in U.S. dollars, and the U.S. is the common currency, so it probably might evolve first. But I think it's a long-term situation.

Thank you.

The Acting Chair (Mr. John Harvard): Yes, Mr. Grant.

º (1650)

Mr. Bill Grant: I'd just say that I'm strongly in favour of taking a unilateral approach in Canada to support our positions against the United States policies, particularly when they decide that they'll shut down a forest industry or shut down some business.

I know it's not all that popular to say this, but why should we allow for that type of a situation between two countries that have free trade and we end up in a situation where a major part of an industry is completely decimated by a policy? I say we retaliate, quite simply. Shut off energy, or water, whatever.

The Acting Chair (Mr. John Harvard): I'm going to offer a couple of comments and a couple of questions, and anyone can respond to this. Perhaps I can start with your comments, Mr. Grant.

I guess the concern in Ottawa is if we were to draw linkages and take sort of a tit-for-tat approach, we Canadians would suffer more than the Americans would. Trade with them is well over 30% of our GDP, whereas the other way, it's about 6% of the American economy. So when you put their 6% up against our 35%, I would think they could fight a longer fight than we could. That's an observation that you may want to respond to.

Let me raise a couple of other things. Mr. Wynn-Williams mentioned a number of irritants that have cropped up between Canada and the United States and singled out a couple of flash points being the stumpage fees with respect to softwood lumber and the Canadian Wheat Board. As one Canadian, I have this sort of dirty rotten feeling that if we didn't have crown land or stumpage fees and if we didn't have the Wheat Board, it would be something else.

It was interesting that Dr. Harris, the economist who appeared before us this morning, was more or less suggesting that probably the big thing driving the softwood lumber dispute is the exchange rate, and that it just happens to be that the duties they've imposed pretty well offset the difference in the value of the two dollars.

Let me just finish, and then any of you can respond.

There is this question, Mr. Daniell, of paying, who pays, and how much involvement in the private sector. It is a big question and something that we in Ottawa wrestle with all the time. Take, for example, the so-called airline security fee. For better or for worse, Mr. Martin chose this $24 round-trip fee, and it has gone over like a lead balloon, at least in some areas, especially in the transportation area. It does embrace sort of the user-pay approach. We could have gone another way; we could have applied it to all taxpayers--whether you're a little old man living somewhere as a hermit, who never sees an airplane, you would have to pay. I suppose if we had done that, we would have been attacked as well. You may want to comment on that.

There are just two other things. One is, Mr. Boos, you say it's a U.S. issue and a Canadian problem. I certainly agree with you, but do the Americans not see that they have a stake in this as well?

I assume that when the visa system was adopted, the Americans saw that there was an interest from their point of view in facilitating these professional people crossing the border into America, that it was good for the American economy. I guess that was then and now is now. I would think if these professionals, chartered accountants or whomever, were coming into the States, they were offering something very concrete and positive to the American economy. So what happened?

The other thing, Mr. Kohnke—at least I marked it down when you were speaking—is the smart borders program that was announced, the 30-point plan. Has that been good from a Canadian point of view, as far as you're concerned?

Those are my observations and questions. Go ahead.

Oh, I'm sorry, Mr. Rocheleau.

[Translation]

Mr. Yves Rocheleau: I believe Mr. Andersson wished to answer my last question regarding Canadian sovereignty before...

º (1655)

[English]

The Acting Chair (Mr. John Harvard): I'm sorry. Go ahead, Mr. Andersson.

Mr. David Andersson: Mr. Chairman, the question was regarding the security of trade and whether implementing the U.S. agenda constitutes perhaps an abdication of Canadian sovereignty. That's a very tricky question. I think there are some real sensitivities on the northern side of the 49th parallel in that regard.

Practically speaking, we've seen at the Department of Foreign Affairs and the Department of State level that they've been quite willing to make the practical concessions back and forth quite rapidly to drop countries from the visa waiver list that constitute problems or irritants for the other side. In fact, they've been dropping at the rate of about one a month for the last few months. That doesn't threaten my sovereignty to drop countries from the visa waiver list that have been a source of irritants. I think it's a question of degree, perhaps, as to how far you adopt the U.S. policy.

If we had a lot more time, my colleague Mr. Boos has a very interesting story about Nicaraguan refugees coming through the city of Bellingham. As a matter of fact, seeing it is a foreign affairs panel, why don't I let you tell that story?

Mr. Greg Boos: One of the things I don't like about the 30-point plan, and one of the things that American immigration attorneys and other people who are concerned with human life in the United States don't like about the 30-point plan, is the 30-point plan calls for harmonizing U.S. and Canadian refugee policy. More specifically, the 30-point plan calls for saying that if a person were in the United States and didn't apply for refugee status, that person could not come to Canada and apply for refugee status.

Go back with me briefly to the 1980s and 1990s. There was this terrible civil war in Central America. The United States government was supporting some of the factions down there. People were fleeing the death squads that were part of those factions and were coming up to the United States and were asking for asylum and refugee status, and they were being denied by the United States Department of Justice. The United States Department of Justice not only denied them, but it fought their appeals all the way through the courts. Those were poor people. They were impoverished folks. They didn't have the money to do that.

Canada was great. Canada opened up its doors. It said that these Nicaraguans and Guatemalans, if they could make it to the Canadian border and show a prima facie case that they were going to be persecuted, would be let into the country and then they would have to present their full claim. I believe at that time Mr. Axworthy was your Minister of Immigration and was responsible for that policy.

Just south of the border.... I have a good friend here in Vancouver who is a lawyer who came down every weekend for three years. He personally put together 300 claims for Mexicans and Nicaraguans, brought them up to the border and got them into Canada. These are 300 people who, had they not had the right to come into Canada, probably would have been returned home to death and torture in those countries.

I think that what we need to do with the 30-point plan is we need to say that in the asylum and refugee forum there needs to be a common screening for terrorism between the United States and Canada, but I don't believe we should say that the two systems really are equal, so that if one person is in the United States he or she can't apply in Canada, or vice versa. You never can tell; it might be the United States that is wearing a white hat eventually in a particular case with a particular people and Canada wearing the black hat.

The Acting Chair (Mr. John Harvard): Who else wanted to respond?

Mr. Andrew Wynn-Williams: You raised a handful of points throughout the course of the discussion. One, going way back, is you commented on NEXUS being fully implemented. I think we're all aware of this; the most recent concern we have had is that travelling south, apparently, will be fully automated and travelling north is likely to be manned. This information came to me just a few days ago, actually. I have received it. That was the issue I was addressing specifically.

With regard to softwood, I don't want my comments to be misconstrued, saying that things like film boards, wheat boards, and stumpage should go out the window, but there were aspects of it that presented irritants. There were aspects of it, frankly, that needed to be addressed. A quick example is a forestry company under the old stumpage system, old tenure system, always had to harvest, regardless of the state of the market. Even when the market was low, they were still harvesting wood and then selling it for what would be below cost in the United States. That's an example of where our practices were actually unfair. But that sort of stuff could be easily revised.

The real issue, in our mind, is not so much the Canadian dollar--that is a part of it; it is more a productivity issue and a quality of wood issue that makes our product much more attractive and much less expensive. The whole subsidy concern in the U.S. is driven by market share. All it boils down to is that they want protection of their market share.

» (1700)

Acting Chair (Mr. John Harvard): Mr. Grant.

Mr. Bill Grant: I'm still retaliating here.

If the U.S. feels we're dumping timber on them, why don't we simply shut the timber off to them and let their own citizenry object to their government's policy?

We really know, just based on this change, that a house south of the border is going to cost between $1,500 and $4,500 more; that's a standard three- or four-bedroom house. They can't compete with the Canadian pricing. That is going to push up the consumer price and those people will be unhappy about that. I say advocacy from that side, by people being hurt by their own policies, is the way we'll get more in this country.

Second, why do we increase our log exportation at the very time we reduce our... They shut off the lumber that's processed in this country, but increase the log production so they can increase their processing. Now, how does that help Canada, allowing ourselves to shut down our sawmills and export logs? We'll go back to being hewers of wood. I feel very strongly about those things.

I heard the argument a few minutes ago about this economic benefit to Canada, and who gets hurt the most? Maybe it's time to—and I say this in all jest—tighten up our own guts and get a little stronger about our point of view here, and live with it for a while. Let people know we are serious, especially our neighbour down there. I know we are the mouse next to the elephant, but those people in the United States are not one group of people; they have tremendous differences of opinion themselves.

You need only go a few miles into the States, where they are hurting severely right now due to their own foreign policy, or aspects of their economic policies. They are not in favour of their own government. I think we have to use that to our benefit, to persuade people to what we need from an economic point of view.

The Acting Chair (Mr. John Harvard): I gather you think we are too timid.

Mr. Bill Grant: I don't think we're tough enough, and I have half my assets in the United States. This is not that easy for me to say. About $10 million to $15 million of my personal assets are in the United States--half of what I have, say.

You learn real fast, whether you are a Canadian or not, when you have assets on both sides of the border and you know you're going to hurt either way. I say it is time for us to stand up and say we need to support our own infrastructure in this country.

The Acting Chair (Mr. John Harvard): Mr. Rocheleau.

[Translation]

M. Yves Rocheleau: Do you think Americans would be sympathetic to a media campaign orchestrated by the Canadian government, with the support of British Columbia and Quebec, which is the second most impacted province in terms of softwood lumber, and maybe even support from the industry? I am thinking about an information blitz on the dispute and its negative impact on consumers and businesses. Home Depot initiated a movement at one point in time but without much success. Do you believe such an initiative would be well received or would it trigger a negative reaction because of the strong nationalism prevailing in the United States at the present time?

[English]

Mr. Bill Grant: I truly believe it would be highly accepted by the Americans, because there are such differences of opinion across the country there. I'll tell you right now, the Californians don't like to know that their house prices are going up because the Oregon guys are going to do more production. We really have to segment out a public relations campaign, target the market, and go after that advocacy with the U.S. government people--the senators and the congressmen, etc. I feel strongly about it.

» (1705)

The Acting Chair (Mr. John Harvard): Mr. Andrew Wynn-Williams and then Mr. Andersson.

Mr. Andrew Wynn-Williams: The B.C. Chamber of Commerce has already undertaken such a campaign. In late fall we wrote over 7,000 U.S. chambers of commerce advising them of what this is going to do to the cost of their homes, etc. It garnered some attention but was not hugely successful, obviously, in getting any public support, in part because it was largely underfinanced.

If such a program were going to be undertaken it would have to be conducted through U.S. organizations like the National Association of Home Builders, rather than be government ads from the Province of British Columbia and the Province of Quebec. It would have to be done through the consumer associations and the National Association of Home Builders, etc., using those as vehicles for driving this issue. Mr. Grant is quite correct: this is no longer an issue for government-to-government relations; it's an issue to get consumers in the U.S. concerned. I think, however, it should be done with a program, rather than with cutting off the wood supply.

Mr. Bill Grant: I would just add that beyond that, I think it has to be on CNN, NBC, ABC, CBS. We have to go to the consumer. Going through the associations is in no way strong enough. It's media time--spend money and tell people the story.

The Acting Chair (Mr. John Harvard): You wanted to say something, Mr. Andersson.

Mr. David Andersson: I agree. You're always inspiring.

I also heartily adopt Mr. Williams' position that going through the organizations is probably going to be the most effective way. We have sister organizations south of the line that are very sympathetic. I think the success that the Department of Foreign Affairs employee, Mr. Roger Simmons, has had south of the line is because of his savvy in being able to go out and find those organizations and build the coalitions. You can then find the mutuality of interest and let that grow.

American policy is very susceptible to lobbying. Mr. Boos is in Washington once every other month. And as American immigration lawyers, we're very confident that we can have an input in the way laws are drafted in the United States. It's the same thing with softwood lumber. Going to court is one way to do it, but court to an American is a contest--it's a sport. If you really want to have a more pragmatic solution, with perhaps less money, I propose the Roger Simmons smart solution--infiltrate and be sneaky.

The Acting Chair (Mr. John Harvard): Does anybody else want to finish it off?

Mr. Daniell, did you want to say something on who pays--the user or the taxpayer?

Mr. Paul Daniell: Yes, if you're prepared to take a little more time, Mr. Chairman. Thank you.

The question on user fees is a complex one again, because I can give you examples that would argue on both sides. The PACE program was a good example here where we were very successful in the region, gaining a great level of enrolment through waiving all user fees. If you look at this as a management or business decision, on a case-by-case basis, I think we could argue that there was a sound business case for not having a user fee, for upping the enrolment, and for getting the savings in our border infrastructure and staffing in the border inspection agencies.

In other cases, you mentioned the airport security fee. When we come up with requirements like that, where we clearly have the user benefiting from the system that needs to be put in place, I would say there's a sound business decision to have the user pay there.

There has been a lot of public outcry about airport fees and the cost of air travel, but it's more a problem of the overall cost of air travel, and the lack of competition, than of an individual fee. It's a case of it being a public relations fiasco because this has been just another straw on top of the old camel's back. I think there are a lot of cases where, if you indicate it to individuals in the average public--let alone to people in business who are getting value for some new service--they will be happy to pay user fees.

One example we talked about was border pre-clearance. There are other examples where we have been trying to move goods across borders in the inland corridors, and the business people have come forward and said that there is a hard cost for them, associated with the down time they spend waiting for a border crossing, and if we can give them an improved service, which will have them benefiting by saving hard cash, they would be prepared to pay a user fee. But they need the hard benefit.

» (1710)

The Acting Chair (Mr. John Harvard): Thank you.

You were mentioning litigation. We are now having some. I think Doman Industries—who, by the way, will be here tomorrow—are suing the Americans for $500-and-some million. And I think Timbec in Quebec is doing the same thing. Good luck to both of them, I guess.

Anyway, we want to thank all of you very much for taking this time out and sharing your thoughts. It has been very informative and we appreciate it very much. Thank you.

This meeting is adjourned.