SINT Committee Meeting

37th PARLIAMENT, 2nd SESSION

Subcommittee on International Trade, Trade Disputes and Investment of the Standing Committee on Foreign Affairs and International Trade

EVIDENCE

CONTENTS

Wednesday, March 19, 2003

¹

1545

The Chair (Mr. Mac Harb (Ottawa Centre, Lib.))

Mr. Robert Greenhill (President and Chief Operating Officer, Bombardier International)

¹

1550

The Chair

Mr. Ken Bee (President, Grain Growers of Canada)

¹

1555

º

1600

º

1605

The Chair

Prof. Wendy Dobson (International Business, Director, Institute for International Business, University of Toronto)

º

1610

The Chair

º

1615

Mr. John Duncan (Vancouver Island North, Canadian Alliance)

The Chair

Prof. Wendy Dobson

The Chair

Prof. Wendy Dobson

The Chair

Prof. Wendy Dobson

Mr. John Duncan

The Chair

Mr. Ken Bee

º

1620

Mr. Robert Greenhill

The Chair

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.)

º

1625

Mr. Ken Bee

Mr. Murray Calder

Mr. Ken Bee

Mr. Cam Dahl (Executive Director, Grain Growers of Canada)

Mr. Murray Calder

Mr. Robert Greenhill

º

1630

Mr. Murray Calder

Prof. Wendy Dobson

Mr. Murray Calder

Prof. Wendy Dobson

Mr. Murray Calder

Prof. Wendy Dobson

º

1635

The Chair

Mr. Stéphane Bergeron (Verchères—Les-Patriotes, BQ)

The Chair

M. Robert Greenhill

º

1640

Mr. Stéphane Bergeron

Mr. Robert Greenhill

The Chair

Mr. Ken Bee

The Chair

Prof. Wendy Dobson

º

1645

The Chair

Mr. Stéphane Bergeron

º

1650

Prof. Wendy Dobson

º

1655

The Chair

Mr. Mark Eyking (Sydney—Victoria, Lib.)

Prof. Wendy Dobson

Mr. Mark Eyking

Prof. Wendy Dobson

Mr. Mark Eyking

Prof. Wendy Dobson

»

1700

The Chair

Mr. Pat O'Brien (London—Fanshawe, Lib.)

The Chair

Prof. Wendy Dobson

»

1705

The Chair

Mr. Robert Greenhill

Prof. Wendy Dobson

»

1710

Mr. Cam Dahl

The Chair

Mr. John Duncan

Mr. Cam Dahl

Mr. John Duncan

»

1715

Prof. Wendy Dobson

Mr. John Duncan

»

1720

Prof. Wendy Dobson

Mr. John Duncan

Prof. Wendy Dobson

The Chair

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CANADA

Subcommittee on International Trade, Trade Disputes and Investment of the Standing Committee on Foreign Affairs and International Trade

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NUMBER 006

l

2nd SESSION

l

37th PARLIAMENT

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EVIDENCE

Wednesday, March 19, 2003

[Recorded by Electronic Apparatus]

¹  (1545)  

[English]

    The Chair (Mr. Mac Harb (Ottawa Centre, Lib.)): We have a quorum.

    Pursuant to Standing Order 108(2), we will continue our examination in view of strengthening the economic relations between Canada and Asia. And we have today a number of witnesses: Mr. Robert Greenhill from Bombardier International; Mr. Ken Bee and Mr. Cam Dahl from the Grain Growers of Canada; as well as Ms. Wendy Dobson from the University of Toronto.

    Colleagues, I thought we'd start first with a brief presentation from our witnesses, and then we will open the discussions and we'll open the floor for questions and comments.

    Two of our witnesses will have to leave before 4:45 p.m., so if we can condense our questions, we will be able to get out of here early enough and allow them to go back to their communities.

    We have with us a group of young Canadians who are attending our meetings. On behalf of the committee, we'd like to welcome you and wish you well in your mission.

    Mr. Greenhill, the floor is yours, and you have up to five minutes for your brief presentation. I understand you've already made a submission to the committee, and we will consider that as part of the proceedings. If you have not done so, then at a later date if you want to give us a submission, we will consider that as part of the proceedings.

    Mr. Robert Greenhill (President and Chief Operating Officer, Bombardier International): Thank you very much, Mr. Chairman.

    Honourable members, Bombardier is very glad to have the opportunity to speak here today.

    Let me start by giving you a sense of my role. As president of Bombardier International, my explicit responsibility is to accelerate Bombardier's involvement in markets outside of North America and western Europe, including the very important Asia-Pacific region.

    For Bombardier, it's clear to say that international trade is absolutely the lifeblood of our organization. Some 90% to 95% of our sales now take place outside of Canada. Over the last 10 years we've exported some $50 billion of high technology manufactured equipment in the aerospace, the rail transportation, and the consumer products areas from Canada, which has allowed us to increase our employment in Canada from 15,000 to 25,000 people.

    An important and growing part of that number includes sales to the Asia-Pacific region, which today represent some billion dollars of exports from Canada of our products every year. These products include Canadair regional jets and Challenger business jets to China, including the Q400 jet built in Toronto; the state-of-the-art turboprop to Japan; and also service exports, such as Singapore's decision last year to participate in the NATO flying training system that we have set up in partnership with the Canadian Armed Forces in western Canada.

    Asia-Pacific is important to us today, but it will become absolutely essential in the future. Depending upon our product area, we estimate that one-quarter to one-half of our global sales in 10 years for our different products will be coming from the Asia-Pacific region.

    Today China is the largest market in the world for new metro systems. It's expected to become the second largest market in the world after the United States for regional aircraft in the next 10 years.

    We see a massive opportunity for our rail-car transportation products as cities around the region deal with the challenges of mass urbanization in dealing with the environmental and transportation challenges of megacities. We also see a very significant role for our regional aircraft, both turboprops and regional jets, to help ensure more even economic development across the regions.

    As countries such as China try to have a more even development outside of Shanghai and the Pearl River Delta into the western regions, or as countries such as India try to have their economic development spread more evenly, we believe efficient and effective air transportation links will become increasingly important.

    For Bombardier, involvement in Asia-Pacific by Canada is extremely important. And we believe participation by Canada, by Canadian companies, must go beyond simply this being a market to sell into, but really this as being a partnership that we will fully engage in, including providing services and support in that region, procuring from that region, and being involved in technology transfer to the region.

    We actually have Mitsubishi of Japan, AIDC of the economy of Taiwan, and various other Asian partners involved today in many of our aviation products. Today we have about 1,000 employees in Bombardier-owned facilities and joint ventures across China alone.

    Looking forward, we would see three areas where Canada has already shown a really distinctive advantage that is worth leveraging more fully.

    First of all, and it's worth underlining, we have a reputation for honesty and transparency. Canada consistently rates very high in the ratings of Transparency International. More important than that, when we engage with governments and the private sector, the Canadian reputation for honesty and transparency is a real advantage.

    Secondly, Canada has traditionally had a high-level engagement with at least key parts of the region. Here I think it's worth noting the role played by Prime Minister Chrétien in strengthening Canada's relationship with China.

    I think it's fair to say Canada and the Canadian government punch above our weight in China today in part because of the consistent, high-level engagement with that country shown by the Prime Minister. That will be an extremely important factor as the leadership in China and the personal ties connected with it have changed, and as the leadership in Canada also changes over the next period of time.

    The third area where Canada has also shown strength has been in a leadership role in promoting the international rule of law and the opening of international borders. Canada, as an established multilateralist not only on the political but the economic side, has played a lead role in the formation of the World Trade Organization, in the promotion of APEC, and also in the examination of a number of bilateral agreements. That's a strength we have; that's a strength we need to develop further.

    In terms of recommendations, let me make three and then finish my remarks.

    The first would be to continue to push on the idea of the opening of borders. Obviously, multilateral and bilateral trade agreements are part of that, but one specific item, which is actually in the commercial law area and that is worth bringing to the committee's attention, is something known as the Convention on International Interests in Mobile Equipment, or the Cape Town convention.

    It is a convention that was signed in 2001 under the leadership of a number of countries, including Canada, as well as international bodies such as the International Civil Aviation Organization and the International Air Transport Association, IATA. It is a convention that's designed to ensure clarity in commercial law involving the sales of mobile equipment such as rail cars and aircraft. It's a convention whose ratification we believe would significantly lower the risks to financing aircraft sales by the private sector into many regions in Asia-Pacific, thereby lowering the cost to purchasers and in some cases allowing airlines that today do not have access to private sector financing to obtain it.

    This is an item that is on the Canadian government's agenda today and that is generally supported. What is needed is a push to actually ensure that ratification takes place within the next period of time. That would be one suggestion.

    The second suggestion is, ultimately our success in Asia is going to depend upon the links between people. It won't be governments; it won't be corporations per se; it will be the personal links between people who understand the different economies and who care about Canada's involvement in this part of the world. And there, we are privileged to have so many people who are either from Asia-Pacific or are first-generation Canadians in our cities and across this country, and so many very talented students who have chosen to come to study here. Our continuing to have open access of our borders to these people will be one of our key success factors compared with all of our international trading competitors.

    If I were to make a specific suggestion, it is that if we attract the best and the brightest to come to study in our universities, we will have tremendous benefits. Many of them will choose to stay. Those who go back will go back as great emissaries of Canada and what we can do. If we were to have, for example, a scholarship for the top thousand students graduating from Chinese universities to come to study in Canada every year, the impact of that, in terms of the people power it would provide us with, would be tremendous over time.

    Thirdly, and in closing, I think Canada has an extraordinary success story to tell. I think we always have had, from a socio-political perspective; we increasingly do from an economic perspective. That economic reality is not well known and understood. When it is known, it will encourage many more companies to consider investing in Canada, trading with Canada, and ultimately, I would hope, consider having Canada as their headquarters for their North American operations.

    Thank you.

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    The Chair: Thank you very much.

    Mr. Bee.

    Mr. Ken Bee (President, Grain Growers of Canada): Thank you, Mr. Chairman and committee members.

    On behalf of the Grain Growers of Canada, thank you for the opportunity to meet with you today to discuss the importance of Canadian agriculture trade, our trading relationship with Asia, and ways in which we can improve the outlook for this vital component of the Canadian economy.

    The Grain Growers of Canada represent some 80,000 grain and oilseed producers all across Canada. Our production is worth approximately $10 billion per year. The presentation today will first outline the importance of Canadian agriculture trade and highlight the need for extensive agriculture trade liberalization. I will then shift focus and specifically outline some of the challenges and opportunities with our trade with Asia. I will conclude with a review of key trade policy objectives of Canada's grain and oilseed producers.

    In terms of the need for agriculture trade liberalization, Canadian farmers continue to absorb the cost of foreign interference in the world markets. This has been calculated to be approximately $1.3 billion annually for the grain and oilseed sector alone. The negative impact of artificial world prices continues to grow as the domestic support paid out by our trading partners continues to rise--as an example, the 2002 U.S. Farm Bill.

    Help for Canadian farmers has declined despite the increases in trade- and production-distorting subsidies in competing nations. This trend cannot continue. The growing gap between Canadian agriculture expenditures and subsidies in other countries means our producers are increasingly being left to fight against foreign treasuries on their own, and we cannot continue to fight this by ourselves.

    A more secure and viable future for agriculture in Canada depends upon the world moving away from the distorted markets that result from government intervention. Canadian grain and oilseed farmers need trade liberalization.

    It's important to remember the significance of Canada's export-oriented agriculture sectors. Export-oriented agriculture commodities account for some 80% of Canadian farm cash receipts, and export-oriented commodities generate over $40 billion in business annually and employ nearly 500,000 Canadians in production and processing.

    Agriculture trade with Asia is characterized by high levels of subsidies, as well as large tariff and non-tariff barriers. These restrictions represent significant challenges to the expansion of Asian agriculture trade.

    However, there are also significant opportunities that if realized would generate growth in Canadian agriculture and value-added industries. The opportunities are a result of both a growing Asian demand, as well as steps, albeit modest, toward increased agriculture trade liberalization.

    Others may have told this committee that agriculture trade with Asia is not a worthwhile pursuit given the high level of protectionism and regulatory red tape. We must strongly emphasize that this situation cannot be allowed to continue. Our farmers' future is dependent upon the free flow of goods.

    While the United States will continue to be the dominant export market for Canadian agriculture products, the expansion of agriculture trade with Asia is a key area for growth. In fact, Asia remains second behind the United States as a market for Canadian agriculture.

    This paper specifically examines the challenges and opportunities of three countries--Japan, China, and India--as case studies.

    Japan remains one of the most heavily protectionist countries when it comes to agriculture. Import restrictions, tariffs, and excessive subsidization of the domestic industry limit Canadian farmers' exports. Despite this, Japan has provided significant opportunities.

    The success of the canola industry in Japan is an example of what can be accomplished when tariffs are removed. However, the lack of penetration for canola oil demonstrates how trade barriers, specifically tariff escalation, limit the expansion of value-added processing in Canada. Any successful trade deal must address this problem.

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    Regarding China, Canadian agricultural opportunities in China are growing for two reasons. First, the trade barriers in China are coming down as a result of China's accession to the WTO. Second, Chinese demand for agricultural products is rapidly expanding.

    When China joined the WTO, they agreed to eliminate the tariff rate quota, currently at 879,000 tonnes, on canola oil by 2006. After 2006, canola oil exports to China will still face tariff restriction, but the tariff barrier will be much lower than it is today. This, combined with the fact that Chinese demand for vegetable oil has doubled in the last 10 years, represents a tremendous opportunity for Canadian farmers.

    Export opportunities for other grains and oilseed products such as malt and malt barley can be expected to show similar opportunities for expansion. Despite these opportunities, barriers to processed products are higher than for raw commodities. Once again, correcting this problem would enhance the value-added processing opportunities in Canada. The 10% tariff on malt, versus the 3% tariff on unprocessed barley, and the 17% value-added tax on malt provide examples of this problem.

    India is a very interesting case study for a number of reasons. Its large and growing demand is attractive for Canadian agricultural exports. For example, India is the world's largest importer of edible oil, but extensive barriers to trade, such as the 75% tariff on canola oil imports, have limited these opportunities. Clearly, trade liberalization will benefit Canadian agriculture.

    The explosion of Canadian pulse crop exports, such as peas and chickpeas, provides a graphic demonstration of what can be accomplished when trade barriers are minimized. In the year 2000 Canada exported $103 million worth of these two crops alone. This represents 95% of Canadian agricultural exports to India. What could we accomplish if freer trade were extended to other commodities? Quite a bit, I might suggest. However, Indian trade liberalization must be viewed in the context of the country's status as a developing nation.

    Special safeguards must be put in place for developing countries if the current round of trade negotiations is to be successful. However, before this crucial aspect of the Doha development round is accomplished, the WTO must deal with a number of difficult questions. “Developing country” must be clearly defined, and the agreement must clearly spell out the conditions that will allow a country to move out from under the protection of special safeguards when its economy has progressed.

    These issues could very well determine the success or failure of the negotiations, given the importance of developing countries to the current round.

    What do we as grains and oilseed producers need from government? Canadian farm families are depending upon our trade negotiators to strengthen trade opportunities, including opportunities with Asia, by obtaining greater movement towards free and fair trade in agriculture. Estimates have placed the benefit of agriculture trade liberalization to the Canadian economy at about $2.5 billion each year. Add to this benefit the increase in value-added processing that will result in a freer movement of processed agriculture products.

    The Grain Growers of Canada believe the recent paper drafted by the chair of the WTO agriculture negotiations is a start down the road towards the necessary trade liberalization. However, farmers who depend upon world markets are expecting much more out of these negotiations. If the Harbinson paper becomes the final agreement, Canadian grains and oilseed producers would still be at a disadvantage because the subsidy gap between our competitors and our farmers would still be too large, access to foreign markets would still be denied, and export subsidies would be in place for far too long.

    It's critical to understand that the benefits of liberalization in agricultural trade will not be restricted to rural areas. Agricultural production and processing jobs employ over 500,000 Canadians. These jobs, located in both our cities and rural communities, will grow and expand when we achieve real reform in agriculture trade. The resulting economic expansion and job creation will benefit all Canadians.

º  (1600)  

    In summary, Mr. Chair, agricultural trade in Asia and around the world can be characterized by large amounts of government intervention and barriers to trade. These policies are a significant impediment for Canadian farmers who rely on international trade.

    Trade reform will result in significant expansion of trade opportunities for Canadian farmers. Increased trade opportunities will be realized as a result of expanding demand in Asia and more liberalized trade rules. These benefits are not restricted to the three case studies mentioned in this report. The same challenges and opportunities exist throughout all of Asia and the Pacific region.

    The benefits of trade liberalization will not only impact raw agricultural commodities; freer and fairer trade in agriculture can also significantly expand the opportunities for value-added processing in Canada.

    Grains and oilseed farmers are depending upon the current round of WTO trade negotiations to eliminate all trade barriers in grains and oilseeds and their value-added products, to eliminate all export subsidies, and to eliminate all trade- and production-distorting domestic support.

    Thank you for the opportunity to be here today. We welcome your questions.

º  (1605)  

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

    We have with us Ms. Dobson. The floor is yours.

    Prof. Wendy Dobson (International Business, Director, Institute for International Business, University of Toronto): Thank you.

    Thank you for the invitation to appear. I can see that 5 minutes means 15, but I'll see if I can stick with 5 minutes.

    You have a brief from me. The key theme is part of a broader concern that our foreign economic policy should have a clearer strategic focus in future. I think the questions we ask ourselves as Canadians and the goals we set for ourselves as Canadians tend to be managerial rather than strategic. In the long run, I think there is a price to pay for what I would call a “small-think approach”.

    Part of this is because of the characteristics and the dynamism of the Asian economies, which will be with us for the lifetimes not of just this geriatric group around the table but of the people behind us.

    My brief has a number of stylized facts. I won't go into those, but I'll emphasize the dynamism that has been restored, despite an extremely severe crisis in the late nineties and a characteristic of an emerging Chinese economy and economic leadership that will be a defining feature of this decade and probably beyond.

    So beyond Canada's relationship with the United States, which to me must always top the list of our relationships, I would say that the next most important strategic focus is China. There are a couple of reasons for that, obviously, because of its emergence as an economic leader in Asia--and beyond that it will become a world leader--and secondly, because we have a special relationship with China, which the first speaker referred to.

    Probably 30% of my students in the School of Business at the University of Toronto are from China. Their average age is about 27 years. They all know about Norman Bethune. It isn't Team Canada, it's Norman Bethune who was one of the heroes of the revolution, and they're still learning about him in Chinese schools.

    Beyond China, I think our focus should be on the region as a whole because of remarkable seeds that have been planted and changes that are under way that are bringing very diverse and formerly rivalrous countries and economies to converge around a regional vision and their developing regional institutions. The road toward regional institutions will be rocky. When I say “regional institutions”, I don't think primarily of APEC at all but about the trade and financial institutions that are developing.

    Canada cannot expect to play any role that is effective by looking simply at each economy on its own. We have to understand the dynamics in the region. So my suggested strategy for our relationship with Asia has three parts, but, as I point out in my brief, I don't even think we should begin unless we are prepared to make this a long-run, strategic commitment.

    I have been involved in Asia since I first went to India in the sixties. In the late eighties, I saw a shift in focus to Asia in the Pacific 2000 program. But then rivalries within the government for resources meant that program was closed down and resources diverted elsewhere, until we were the hosts of the leaders' meeting of APEC, and then there was another injection of resources. This won't do. Either we get serious or we don't proceed at all.

    So, in essence, what I'm saying is our strategies should be smart, and as the first speaker pointed out, we should leverage our strengths to promote our long-run interests.

    I won't go into the background; I'll just end with three recommendations. The first relates, as has been pointed out again by the first speaker, to human capital investment on the Canadian side. And I don't look primarily at our immigrants. It is a tremendous advantage, but I don't think we should overestimate it.

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    What we lack in Canada are world-class centres of excellence. This isn't just about Asia. I see this as a major weakness in our foreign policy and our foreign strategy overall. But we have again piecemeal funding for universities and think tanks. Some of it again appears because of passing political fancies, and then priorities shift elsewhere.

    There are some excellent examples of how we could do it much better than we do. I point out the Australian example, where I think they have a very superior linkage between what is a foreign policy strategy and the funding for human capital and centres of excellence. The United States has had title VI funding, which is part of the National Defense Education Act, but it has created a huge core of extremely knowledgeable people in 115 centres. I'm not saying we need even a tenth of 115 centres, but we don't have one right now that I think has world-class status.

    I think the second recommendation is more focused. Recognizing that we're a latecomer to Asian markets and therefore not a first entrant in many cases, we should build on our successes. Others have referred to where we have had success. Japan, of course, is our second-largest trading partner. China is, for the long run, probably one of our best prospects and our strongest beachhead because of our history. Then I think it's debatable. We have been successful in Indonesia, but it's having quite a bit of trouble recovering from the crisis. The Koreans have perhaps much more in common with us than Indonesia, so that's a bit of a toss-up. But my plea is for greater focus and strategic focus.

    The third issue I think is that as a middle power, and because of the reality of living next door to the United States, we're going through a very rocky and uncertain period right now because of decisions that we've made, but we have to live next door and manage our relationship with the United States, and it has to be a friendly and positive relationship in the long term.

    We have an historical relationship with China, and I would leave with you the thought that over the next 25 or 30 years, the key issue could be the rivalry between Beijing and Washington. While we can't be a bridge--we can't even pretend to be a bridge, and bridges tend to get walked on--we can be a facilitator and someone who sets tables and promotes understanding and common approaches to the big issues of the day. We can do that, but we have to invest in it.

    Thank you very much.

    The Chair: Thank you very much.

    Colleagues, we have exactly half an hour for two of our witnesses. So if you can condense your questions and pinpoint them at the specific witness, that will help us to finish on time.

    We'll start with Mr. Duncan, Mr. Calder, and then Mr. Bergeron.

º  (1615)  

    Mr. John Duncan (Vancouver Island North, Canadian Alliance): Just for clarification, are we asking questions only of the witnesses who have to leave right now?

    The Chair: My suggestion is that might be a good idea.

    Then, Ms. Dobson, if you're not under the same time constraint and you want to spend some extra time with us--

    Prof. Wendy Dobson: I was told this went on as a round table until 5:30 p.m.

    The Chair: Yes, that's correct.

    Prof. Wendy Dobson: Now you're telling me something else entirely.

    The Chair: No. We have one witness who has to leave at 4:45 p.m., unfortunately, because of some other commitment.

    Prof. Wendy Dobson: I'll stay.

    Mr. John Duncan: My first question then is for the Grain Growers. In the Asian market is there any effect on Canadian producers finding new markets as a consequence of us having the Canadian Wheat Board?

    My second question for the Grain Growers is this. You talk consistently about subsidy in reference to Asia, but there's no strong attempt to define what level of subsidy would be required. I wonder if you could somehow describe that in terms of how we currently stack up against, say, the U.S. or Europe. It would have to obviously fit into that framework.

    For Mr. Greenhill from Bombardier, I'd like to get a feel for three things. One is, could you describe for us where you have representation in the Asia-Pacific region? Second, what is the hold-up for ratification of the Cape Town convention? I assume it's other nations' feet dragging.

    You made reference to Canada being an appropriate place for North American headquarters without making any reference at all to the fact that our tax regime is seen as a major hindrance, at least certainly according to much of what I read. Is there some recommendation you can make in that regard?

    The Chair: Of course, Mr. Dahl, as well as Ms. Dobson, could also respond to the question. I'm not saying we will not have a dialogue, but the only thing is, I want to make sure...unfortunately, I did not know they had to leave earlier.

    Mr. Ken Bee: To answer your first question regarding marketing structure, such as the Canadian Wheat Board finding markets overseas, all our grains and oilseed commodities work together in some manner or another. The Canadian Wheat Board is one mechanism that tries to build relationships and meet customers' needs.

    The canola industry and the soybean industry do it slightly differently, without the single desk, and we do it through industry cooperation, producer cooperation, and by trying to meet our customers' needs and build those long-term relationships. Both mechanisms are ways to try to achieve the same goal.

    With regard to subsidies, as a simple measure, I believe currently Canadian agricultural subsidies amount to something in the neighbourhood of 0.75% of GDP. Both Mexico and the United States subsidies are over 1% of GDP. Also, in our brief we outline, based on OECD data, that European wheat farmers, for example, receive 44% of their income from government, the U.S. 40%, and Canadian farmers 18%.

    The key point we're trying to make in our brief is that we need to have this nonsense be disciplined and be eliminated as much as possible so that we have a level playing field and so that grains and oilseed producers in this country don't have to compete against the treasuries of the United States, Europe, Japan, or whoever.

º  (1620)  

    Mr. Robert Greenhill: Thank you.

    To the first question in terms of where we actually have offices of representation, in China we have offices in Beijing, Shanghai, Wonju, Shenzhen, Qingdao on the east coast, where we also have a rail car venture, Changchun further north, where we build metro cars, and of course Hong Kong.

    In India we have a facility that produces electric locomotives in Baroda. We also have a facility in Delhi.

    In Thailand we have offices, and we also have a software facility of about 100 people who are doing state-of-the-art transportation software.

    In most of the other countries in the region, including Australia and others, we would have at least a representative office. Probably in the region we have close to some 1,500 to 2,000 employees or employees of our joint ventures.

    In terms of the Cape Town convention, in fact Canada has not yet ratified. There's broad stakeholder support for the concept involving the airlines, the aircraft manufacturers, and the financiers. Frankly, the issue is simply getting it a high enough priority so that it can overcome the inevitable inertia in different governments to get it passed. In Canada it's complicated somewhat by the fact that it involves areas of provincial jurisdiction. It's a question of getting coordinated and focused.

    Canada has offered within the APEC structure to act as a pathfinder to move on this, but it's difficult to be a pathfinder until we've actually passed it ourselves. That's why we see this as an area that is a very good thing to actually help to facilitate private sector financing in these areas.

    Thirdly, in terms of the headquarters and a tax regime, I think no corporation, indeed no individual, is ever going to say they're happy with the tax rate, by nature. On the other hand, it has to be noted that in terms of capital taxes, in terms of taxes on corporate profits, Canada has become much more competitive over the last few years. At the same time, the cost and quality of our human capital, which Ms. Dobson made reference to, is actually very high at certain levels of expertise in terms of aerospace engineering and so on.

    That fact that we have a universal health care program that is government supported also means the cost of employees, including health costs, is actually significantly better in Canada than it is in the United States.

    There's more that can and indeed should be done, doubtless, but, frankly, when you look at the economics of considering to be in Canada, particularly if you need a multilingual and multicultural workforce, and particularly if it's, for example, a family-owned business, as many of them are, who would be willing to set up in a place where they would feel at home, Canada has a great economic advantage and a great existential advantage in that you can come from any place in the world and feel at home in Canada's big cities.

    The Chair: Ms. Dobson, do you have any comment on that?

    Mr. Calder.

    Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chair.

    One thing that is going to be very interesting with China in particular that's going to affect all the presenters here is that by 2008, or in and around that time, if they're successful, they will bring on the Three Gorges Dam on the Yangtze River. This means that there will be, for instance, huge opportunities for us in high-speed rail within China, and in technology.

    There's going to be what I feel is a mass exodus from rural China to urban China, so from there, there are advantages for farming technology. And because of that transition, there are huge opportunities for education for us and Canadian technology.

    For the Grain Growers, I'm wondering, right now I know China, for instance.... I was in Winnipeg in January and toured a few facilities there. They're using a lot of our research facilities for beer products, for instance. They consumed 20 million tonnes of beer last year, and they used 3 million tonnes of malting barley. It looks like that's increasing by about 5% to 6% a year. I'd like a comment on that from the Grain Growers.

    Could you also comment on the issue of GMO grains, particularly in canola, and whether or not you foresee any problems? And could you also comment on the on the Harbinson report? I was reading through here that you have some problems with it. You believe there's still too big of a gap within export subsidies and domestic subsidies, and I agree with you, but I'd like a little bit of a comment on market access because that will be a bit of a problem.

º  (1625)  

    Mr. Ken Bee: Murray, with regard to the barley and malt, yes, we recognize that China is a growing market for both of those products. I guess the point we want to make is we would rather have the jobs and the value-added processing of the barley into malt here in Canada so that we get those jobs in Canada.

    That's why we need to reduce the tariff escalation and the value-added tax that China currently places on malt. We think it's more beneficial to both our producers and to our country as a whole if we can have those jobs here instead of just exporting the raw product. But we do recognize that it is a growing market, and our growers and our marketers definitely want to take advantage of that.

    With regard to GMOs, some customers take GMOs and some customers prefer not to. I guess the best example I can give, that I'm most familiar with, is in the soybean industry. We try to deliver to the customer what they want, and if it's one or the other, we try our best to do that.

    I think our industry out in western Canada needs to get themselves better established in IP and tracking systems so that they can also better meet the needs of the customers, whether it be for genetically modified or what you would call a conventional product.

    Mr. Murray Calder: [Inaudible—Editor]

    Mr. Ken Bee: I would say more of an identity preserve protocol. I don't think we have to go so far as HACCP.

    Mr. Murray Calder: Okay.

    Mr. Ken Bee: With regard to market access, I'm going to defer to Cam on that one.

    Mr. Cam Dahl (Executive Director, Grain Growers of Canada): I get the easy ones.

    If you look at that, and especially in some of the Asian markets.... Again, going back to our discussions on India where there is a 75% tariff on our canola oil going into the country, this is the world's largest importer of edible oil, and there is a tremendous opportunity for us if we can find a way to get that tariff down, even if that tariff came down to 40%, a potential for growth for our exports of processed products. Not only would that benefit Canadian soybean and canola producers, who would get a higher price for their product, but it would also benefit the processing industry. That goes throughout Asia especially, as well as Europe, there is tremendous opportunity if we can increase the penetration for some of our products.

    An example of what can be accomplished is the explosion of growth, in less than five years, of the pulse industry into India. That carries through with the example of what happens with the value-added processing. Not only have we seen the explosion of the pulse industry, where that's 95% of our agriculture exports into India, but that has also translated into an explosion of processing plants, especially in western Canada, where rural communities have been able to come forward with value-adding processing plants. We are seeing that benefit as well.

    That's the type of thing that can be accomplished when the barriers to trade are minimized.

    Mr. Murray Calder: On rail and education....

    Robert, I'm wondering what you're seeing right now, for instance, with Bombardier, and the opportunity of a lot more hydro. Are they looking at high-speed rail similar to what you've established in Europe? What's the situation?

    Mr. Robert Greenhill: There is in fact a massive multi-billion dollar rail development program in China at two levels.

    One is in terms of connecting cities and regions, some of which is electrification. So we actually have the X2000, which is a Swedish design of Bombardier that's running between Hong Kong, Shenzhen, and Guangzhou, linking those cities. We're seeing more of that.

    But more fundamentally, where the big opportunity and necessity is in China is in urban transportation. They're soon going to be getting to a situation in places like Beijing and Shanghai where there are millions of cars in cities of 15 million, 20 million, and 25 million people, and the formula will no longer work. There's a tremendous ecological or environmental challenge, and an incredible economic challenge, because if those cities start grinding to a halt, a lot of their supply-chain economics are going to be adversely affected. So the biggest area of investment, totalling almost $10 billion for Beijing alone, is actually on the urban transportation side, both metros and elevated systems.

º  (1630)  

    Mr. Murray Calder: Wendy, on the education side and the fact that China has actually moved from low-quality products coming out of that country--they have made a transition to higher-tech products coming out with better quality--what do you see through the education system, their coming here to Canada?

    Prof. Wendy Dobson: I wouldn't generalize about China that way. There are still millions of people who are dependent on low-quality products, and you have to think of China as six different countries, or at least two--one a hinterland and one more advanced.

    I'm not quite sure what you mean about the education. Students come here on scholarships. Students come here because their families send them. I think what's more interesting is the linkage between education and immigration.

    Mr. Murray Calder: When you were giving your report, you touched on something that I think is very crucial for us, the fact that these students coming over here to be educated and trained in Canada, the ones who do go back to China--and there are a lot who have a foot in either continent--are huge emissaries for putting forward Canadian technology. I think it's an opportunity for us to take and sell ourselves better than we're doing right now.

    Prof. Wendy Dobson: I think that was actually Mr. Greenhill's point.

    I would comment that yes, as I understand it, 40% of annual immigration into Canada right now is from Beijing and Shanghai. There are some demographers in the country who are studying that, tracking trends, and see two things--one, that education in Canada and immigration to Canada is seen as a way to get a TN visa, a NAFTA visa, and be mobile within Canada, but the Chinese government has caught on to that and is developing its own green card system for overseas Chinese, to capture the brain power.

    I haven't seen a study, though probably the Asia-Pacific Foundation has done some work in the last decade on this sort of hidden advantage, the people link that Mr. Greenhill actually introduced.

    We've done some work on it, looking at the links between FDI, trade, and immigration, and they're not very strong.

    When I ask my students casually about what most Chinese who are here are doing to develop trade links, they say, well, they're not really the people who can do that. They're mom-and-pop import-export operations, and that's all they aspire to do.

    So I think it's a fairly complex area. For years we've known that there is potential here, in theory, but I haven't seen large potential being realized in practice.

    Mr. Murray Calder: Do you have any idea how we get past that step?

    Prof. Wendy Dobson: One way that Mr. Greenhill referred to or made some remarks on reminded me of the Australian experience, where the Australians developed a strategy. They basically said, we're going to export services and they're going to be called education services.

    They went all through Asia. A major activity of their foreign missions was to sell, export, education services. So many, many Asians who I see in my networks were educated in Australia, and their links are with Australia. My networks are the intellectual and the policy networks.

    I'm sure Mr. Greenhill has more information on this, but that's the kind of thing that comes to mind. It comes back to a strategy and working at it over a long period of time.

    I know there has been talk and some action on trying to imitate the Australians, but they were the first movers, and it isn't something where you catch up by imitating. You have to come up with your own approach that's unique and distinctively Canadian.

º  (1635)  

[Translation]

    The Chair: Mr. Bergeron.

    Mr. Stéphane Bergeron (Verchères—Les-Patriotes, BQ): Thank you, Mr. Chairman.

    I have a number of questions to ask, and I'm afraid that I will not be able to come back later to ask all of them. In any case, I will begin immediately, so that our witnesses can begin replying.

    Mr. Greenhill and Mr. Bee both dealt with an issue I find both dramatically simple and tremendously complicated: namely, the whole question of opening up the borders. You know as well as I do that opening up the borders requires negotiations, and that in cases where the existing rules of international law are violated, the matter is referred to the various WTO dispute settlement bodies.

    What more can Canada do than it is doing at the moment in terms of applying pressure to open up the border, given that for a number of years now, the strategy of the Canadian government, at the bilateral and multilateral levels, has been precisely to hasten the opening up of borders as far as possible ?

    This leads me to a second question about trade negotiations and the probable signing of the Free Trade Agreement with Singapore in the near future. This question is for Ms. Dobson more specifically, although Mr. Greenhill, Mr. Bee and Mr. Dahl will probably want to reply to my first question. Ms. Dobson seems to suggest that we needed an overview of the region, and not a fragmented one. Do you think the Canadian government's strategy, which is to enter into bilateral agreements with certain countries in the hope that they will have a domino effect on other economies in the region, is the right strategy, since you spoke of an overall vision, rather than a local or sub-regional vision of the Asia-Pacific region?

[English]

    The Chair: Volunteers?

[Translation]

    M. Robert Greenhill: I can comment on the first question.

    I think it is becoming increasingly important to open up markets, but it is essential that we implement agreements that have already been signed, because in the case of each trade negotiation, we give up something in the hope of getting something else in return. For example, at the WTO, we gave up a great deal, and it is clear that Canada has sometimes lost in proceedings involving the WTO. We decided to comply with the decision, because we think that this will enable us to make gains elsewhere. This is possible only if we have the political will and the legal skills required to win when we are entitled to win.

    For example, in the case of PROEX, which was referred to the WTO, as the issue stands at the moment, I hope we will be able to reach a negotiated agreement between Brazil and Canada, but it has been difficult. It has taken years and has been very expensive. One of the reasons this has been so difficult is that the role DFAIT is required to play in this situation is very different from the role it has traditionally played.

    Politically, Canada has played, must play and will continue to play the role of honest broker or middleman, between two opposing groups. As Ms. Dobson was saying to some extent, Canada could play this role in the future as a mediator between the United States and China. That is very important, but it is mainly political in nature.

    However, in order to ensure our acquired economic rights are respected, we sometimes have to be tough. We must protect our acquired rights in trade negotiations, in areas such as aeronautics, agriculture or others. We need a strategy that is somewhat different from the one adopted by Pearson, which had been in place for years. I am not talking about setting that aside completely, because it is very important, but we do have to be tough and firm regarding the implementation of these agreements.

º  (1640)  

    Mr. Stéphane Bergeron: [Editor's Note: Inaudible.]

    Mr. Robert Greenhill: I think it is always a challenge, and it is a question of will. We are involved. I think the current minister is a good defender of Canadian interests, but he also needs the resources to do the job. At the moment, DFAIT has some world-class lawyers specializing in international law, but it does not have enough people.

    In closing, I would say that negotiating other agreements is very important, but that the implementation of our current agreements is crucial.

    The Chair: Would you care to comment, Ms. Dobson or Mr. Bee?

[English]

    Mr. Ken Bee: Yes, Mr. Chair.

    Canada needs to aggressively pursue negotiating market access in conjunction with the elimination/reduction of export subsidies, and with elimination/reduction of domestic subsidies, especially the trade-distorting ones. It's a package deal. You can't do market access without the other two, or we're not going to be any better off.

    With regard to some of the challenges that exist today, we need to aggressively pursue non-tariff barriers and their removal. As an example, the European Union excludes Canadian canola from going into Europe, based on a non-tariff barrier. As a country, we have to aggressively remove those non-tariff barriers.

    I agree with Mr. Greenhill that we need to make sure that with the WTO, or whatever trade agreements we negotiate, there is some sort of effective discipline to make sure they are enforced properly.

    The Chair: Madame Dobson.

    Prof. Wendy Dobson: Yes, I have three points.

    First of all, if we look at the various economies in the region—particularly that of Japan, our largest trading partner in the region.... Actually, I did a study that proposed a Canada-Japan free trade agreement. The idea was taken up by the then BCNI, and the Japanese decided they weren't interested. One of the main reasons is because they have countries in boxes according to the sensitivity of the agricultural issues, and Canada is in a highly sensitive box.

    They are basically saying, and their strategy is, WTO comes first. We have to go to Doha, and everybody has to tackle agriculture in the broadest possible forum because of the trade-offs that have to be made. The Koreans are sort of in the same camp, in terms of their views of Canada.

    The centrality, and the challenge associated with it, of getting at agriculture—on the part of the Europeans, the Japanese, the Americans, and us, by the way—probably has to take place at Doha. Until that happens, initiating free trade agreements, ideas, or proposals to a number of these economies doesn't make a heck of a lot of sense.

    You mentioned Singapore. That's an example of a country—a city state of three million people—that initiated with us before the Americans, and the Americans are finished their negotiations. The Singaporeans are still saying, “Why is it so slow with Canada?” I don't know the answer. Maybe somebody else does.

    From Singapore's perspective, they're trapped in a bad neighbourhood. It's a strategic goal of theirs to conclude FTAs—I counted, and they have about 12 either completed or in the works, including with the European Union—as a strategy to improve options for themselves, given that they're trapped next to Indonesia, and between two Muslim states, by the way.

    The other comment I'd make is that we have to understand what is going on in Asia. A year ago Zhu Rongji made noises to ASEAN at an ASEAN-plus-three summit. First of all, he said, “Why don't we have an Asian free trade agreement?” Then he got real and said, “Why don't we have a China-ASEAN free trade agreement?”

    They've actually agreed—it's a very interesting piece of paper to read—how they are going about liberalizing their trade and economic relations, with a 10-year goal of beginning negotiations of a free trade agreement between China and ASEAN. That is a very, very powerful signal about China's intentions in the region—so powerful that the next day, practically, the Japanese made their proposal. Or maybe it was the Indians who made their proposal before the Japanese got their act together.

    Now ASEAN is basically saying: “Look at us. We're a hub, and these spokes—China, India, Japan....” That's not the reality, but that's how they see it. It's transforming the way they think about the region, and we are invisible.

º  (1645)  

    The Chair: Merci, Monsieur Bergeron.

    Mr. Bee has to leave; however, Mr. Dahl is staying behind. And I just got some good news: Mr. Greenhill also will be staying behind. I hope that satisfies you, Madame Dobson.

[Translation]

    Do you have another question, Mr. Bergeron?

    Mr. Stéphane Bergeron: I have two others.

    Ms. Dobson, you spoke about centres of excellence and said how important it was for the Government of Canada to invest in them to ensure—along the lines of Mr. Greenhill's suggestion, I imagine—not only that these centres can have an impact in Asia, but that Asian students can come to study here and take back with them a better knowledge of what Canada could represent for them.

    How would you like to see the government proceed? Given that Canada is a federal state and that education comes under provincial jurisdiction—and I do not think this comes as news to you—how should we proceed to achieve the objective of establishing centres of excellence with an international impact, particularly in Asia, with a view to getting into new markets? Should we be establishing chairs of excellence, as the government is doing at the moment? Should the federal government be establishing bilateral agreements with the provincial governments? What would you suggest in this regard?

    My other question has more to do with recent events. The Asia-Pacific Foundation did a survey of a number of Canadian companies. In December 2002, 116 of the 521 companies surveyed did not seem particularly concerned about the possibility of a war in Iraq or about the fear of terrorism.

    I found this surprising, to say the least, given that a significant majority of the population of a number of Asian countries is Muslim. In fact, the largest Muslim state in the world is located in Asia. What do you think explains the fact that many Canadian companies are not worried about the impact of war or terrorism? Also, how would you explain that the Asia-Pacific Foundation reported as well that most Asian countries—and perhaps this has to do with the point I just made about the size of the Muslim population in a number of these Asian countries—preferred to stay out of what is going on in Iraq at the moment or what is likely to happen there in the next few hours?

    There are very few Asian countries among the 45 countries that make up the Coalition of the Willing. Why do you think that countries in Asia are trying to stay out of events happening on the international scene at the moment?

    These questions are probably not very easy to answer.

º  (1650)  

[English]

    Prof. Wendy Dobson: Starting with the first question, I guess my first counsel to you would be, do not mix objectives, because then you don't achieve any of them very satisfactorily.

    The idea of exporting education services is very separate from what I am advocating, which is basically a restructuring of the funding that is available. In my brief I'm quite depressed, really, about the fact that not only do priorities shift, and therefore resource availability is not there for serious planning, but the government has tended to rely more and more heavily on CIDA to fund Canadian academics and institutions, therefore mixing objectives. I think we have an aid program that achieves practically nothing of note because it is spread so thin. I don't think it should be funding Canadian research. Certainly, it has always funded scholarships for third world students, and that's something it should do.

    What I would recommend, because we have a huge amount of experience now with the Canadian Foundation for Innovation and the funding for centres of excellence, is that universities and interdisciplinary think tanks should compete periodically for available funding, and the funding should be stepped up substantially. They should have to compete and they should be accountable in terms of world-class excellence for what they produce, the people they recruit, and so on. We have lots of experience; we know how to do this. We just have never gotten our act together on the international side.

    I would just underline what I said in my brief: the Association of Universities and Colleges has expressed concern about the lack of a strategy in this area of international education and research.

    On Iraq and its aftermath, I don't know the survey you're talking about. There are a lot of companies around, and the stock market recently suggests the expectation of a short war and no aftermath. It's only my personal view—and all of us are struggling to understand the geopolitical implications of what's about to happen—but as you rightly identified, in the Asian economies there are some of the liberal Muslim states where women are educated and very much involved in everything that goes on.

    What I do worry about in an aftermath—and I feel we cannot discount a rather protracted and rather extensive aftermath—is that we will see a fault line develop in Asia between the Muslim economies and the rest of Asia. It's the worry about that fault line that is one of the explanations why China is very quiet. They've been well briefed by the Americans. They have their own Muslim problems.

    I don't want to say any more than that right now, because the rest of it is speculative.

º  (1655)  

    The Chair: Mr. Eyking, then Mr. O'Brien, and then Mr. Duncan.

    Mr. Mark Eyking (Sydney—Victoria, Lib.): Thank you, Mr. Chair.

    My question is to Ms. Dobson. You mentioned that the relationship between the U.S. and China over the next twenty years could get quite dynamic and even hot at a certain point, or we could get close and have a role to play in the whole thing.

    I guess my first question is, does China look at us as quite separate from the U.S. in things like the way we treat Taiwan, our human rights issues, environmental issues, and things like that? Do they look at us as totally different?

    If we keep separating ourselves from the United States over the next ten years, is that going to give us an advantage as an entry point and exit point for products going from China to the States and vice versa because we're in the NAFTA?

    How will all that play out?

    Prof. Wendy Dobson: I guess I don't see us.... If we continue, to use your words, to separate ourselves from U.S. over the next ten years, we're crazy. We have to get along and we have to manage that relationship to our mutual advantage. And it has to be at the top of our foreign policy list of priorities, as far as I'm concerned.

    Mr. Mark Eyking: After dealing with China, would you be on the same wavelength as the U.S. in dealing with China?

    Prof. Wendy Dobson: I would say you're now asking me to analyze U.S. foreign policy towards China, and I guess the only thing I would say—to not have to launch into a long political discussion, because I happen to be an economist—is that as long as the school of foreign policy thought in the U.S. has sway that has sway right now, and is increasingly referred to as “the hawks”, we can expect that there will be an assumption in their foreign policy that seeks to preserve U.S. hegemony in a sort of zero-sum way: if we have it, nobody else can have it. And as China emerges, whether it wants to or not, it will have a certain hegemonic influence and will be seen as a threat.

    I can't comment on strands of Chinese foreign policy thought, but I wouldn't be surprised if the U.S. is seen as a threat. That's a zero-sum game, potentially. What my remarks and counsel relate to is creating a positive-sum game: peace and prosperity for all, rather than a zero-sum game where one wins and everybody else has to lose.

    Mr. Mark Eyking: We could get into situations where—I'm not saying we have to pick sides, but when China and the United States get into their tiffs about clothing, or things they're trying to stop, or whatever.... I know what you're saying: we have to stay close to the United States. But do you think that has to be the priority?

    Prof. Wendy Dobson: Well, “close to” the United States.... I'm an advocate of an ever-deeper economic relationship with the United States but in a way that preserves our political independence. To me, it is possible to have two different ways of being close to the United States. One is more distant than the other, but we need to know and be very smart about what we're doing. That means investing in a strategy and working on a strategy.

    I don't see us becoming some little nickel-and-dime arbiter between the U.S. and China on this dispute or that dispute. Again, as I've tried to emphasize, I see it as a strategy on our part—a large-picture canvas that we're painting—that creates opportunities for Chinese and Americans to get together to discuss common interests rather than their differences.

»  (1700)  

    The Chair: Mr. O'Brien.

    Mr. Pat O'Brien (London—Fanshawe, Lib.): Thank you, Mr. Chairman.

    I'll just comment that my colleague and I are normally closer in our thinking, but on this one I disagree with Mr. Eyking. We're not separating ourselves from the United States. I think the concern right now is that the United States has shown a lot of dangerous signs of separating itself from everybody else, in a whole series of ways we can talk about. I'm not even referring to Iraq now; I'm talking about a number of steps this particular administration has taken to show a dangerous trend towards unilateralism. I guess you could bring Iraq into that if you want.

    I think it's a given when we live next door to the United States, a country we do an enormous amount of trade with.... Murray may have the latest numbers, but when I was more involved in trade there was almost $2 billion a day of two-way trade in goods and services with the United States, 95% of which is trouble-free. I think we have to keep that in perspective. Obviously it's going to continue to be our number one relationship. With all due respect to other views, I think the concern is that this particular administration has shown a bit of a significant trend to go its own way, and I think that's very worrisome to Canadians and others.

    My observation, and I'd like to hear from all the witnesses on it, is that there was very little mention by any of the witnesses of APEC. Ms. Dobson made reference to it very briefly; I don't know that anybody else did. Just recall that the second prong of the Canadian trade strategy—and there is a strategy, and I would submit to you it could be better, but it's pretty darned effective, I think—is to pursue regional trade agreements. I guess I'm a bit surprised there's so little reference to APEC. I'd like to probe that a bit, Mr. Chairman, and ask the witnesses to make reference to APEC and tell us what they see as its strengths and weaknesses. What could we do to make APEC a more effective vehicle to increase our trade relationships with this part of the world?

    The Chair: Okay. Anyone may jump in.

    Prof. Wendy Dobson: APEC has, I think, defined itself as a talking shop because they were unable to play any kind of role in negotiating any kind of trade liberalization. APEC has three legs, and business facilitation is one of those. Technical assistance or—what's it called—eco-tech is another. Those, I think, are the legs that now define APEC. Trade negotiations that involve all the economies in the region are going to take place, and it is their preference that they take place at the WTO.

    Where does that leave APEC? Well, a bit like Canadian aid policy, it's spread far too thin and has far too little focus. The hopes of the Asians—and I think that's what matters for the future of APEC—are that it will become a more effective mechanism north-south to transfer resources and technical assistance. Yet when you look at the aftermath of the financial and economic crises, what is the number one lesson from the financial crises after “don't fix your exchange rate” or “don't have a soft peg”? It is to strengthen your domestic financial system and modernize it. And APEC has zero role to play. It's the IMF, the World Bank, Canada—the Toronto centre—that are playing those practical roles.

    Time and again in the last five years there have been opportunities for APEC, and it has not been able to achieve consensus, to grasp those opportunities and really define itself.

»  (1705)  

    The Chair: Mr. Greenhill.

    Mr. Robert Greenhill: Let me give you my observations, which will be somewhat different in their tone.

    I actually sit on APEC's business advisory council as an alternate member. It has three business people from each of the 21 member economies. Much of each conversation is spent in a bit of existential angst on the purpose of APEC and the purpose of all these busy business people coming from all over the world to jaw together for three days at a time.

    But particularly having seen the APEC leaders meetings, Churchill's old saw that it's better to jaw a jaw than to war a war actually has some truths. In fact, I believe one of the big undiscussed successes of APEC--and it will remain a success only as long as it's undiscussed--is that it's a relatively informal environment within which the leaders of these key economies can get together to talk about important issues. The G-8 has become a very scripted get-together, for example. A lot of the other meetings are either very diffuse or don't involve the right level of leadership to be effective.

    The APEC leaders' meeting in Shanghai right after September 11 was important because the Americans, Russians, and Chinese realized how they could work together on an issue. The APEC get-together in Los Cabos, Mexico, that took place just after the Bali bombing was also an opportunity to build a close-to-global consensus because it included a number of the moderate Muslim states, including Indonesia and Malaysia, in the war against terror.

    Since then, this consensus has been destroyed through the decision of the American government to move as a priority on Iraq. But the APEC gatherings bring together, in an important fashion, on an annual basis, the leaders of some of the most volatile and yet most important polities in the world today. So at that level, as a talking shop, it does play an important role.

    A voice: Selling airplanes.

    Mr. Robert Greenhill: Avoiding wars helps sell civilian aircraft.

    I agree with Wendy that it won't be the place where major trade agreements are going to take place. It's either too large or not large enough, depending on how you look at it. Where it does have a yet unrealized promise is in trade facilitation. There's a big role that could be played in the mechanics of making container trade work more effectively, efficiently, and safely between Asia-Pacific ports. In dealing with piracy issues on a multilateral basis, there's a really concrete operational issue there.

    I mentioned the idea of the UNIDROIT convention or the Cape Town convention. That is, in a sense, a mechanics issue that the APEC business advisory council put as a priority to the APEC governments. They said that was something they could just move on. If APEC, over time, developed a practical reputation for being able to make things happen on the ground, and at the same time continued to provide a forum for high-level interaction, it would be playing a role. If it tried to play any kind of ambitious role on the trade agreement front itself, it would likely be unsuccessful.

    Prof. Wendy Dobson: I certainly agree with the focus and the general sentiment that it's better for leaders to meet each other regularly. You never know, something might happen when they have an opportunity to develop an understanding that they wouldn't otherwise. On the two legs out of the three, there's still a challenge there for APEC.

    I guess what tempers my optimism is what I see happening in ASEAN plus three--China, Korea, Japan, and the ten ASEAN economies--in moving toward trade agreements among themselves and summits among those leaders. They are really bent on developing financial cooperation, monetary cooperation, and eventually some kind of common currency arrangement. It's a vision that could take 50 years, but it really motivates them now. That's their top priority.

»  (1710)  

    Mr. Cam Dahl: Just to echo what has been said, when it comes to trade and negotiation of more open markets, less distorted markets, and less distorted prices, at this time I think the venue is the WTO. I don't see APEC playing a significant role in that.

    From the agriculture community's perspective, we would like to see sectoral initiatives. For example, the brief talks a little about the zero for zero initiative in the oil sink industry, but again I don't see APEC itself playing a significant role in bringing those forward.

    The Chair: Thank you very much.

    Finally, Mr. Duncan.

    Mr. John Duncan: My first question is for Cam Dahl and relates to a reference in your paper. You talk about a problem with the current definition of developing country in the WTO. I was just wondering what part of the definition you find problematic. Maybe you could try to clarify that for us.

    Mr. Cam Dahl: The problem is there really isn't a definition of developing countries. A developing country is developing if it self-notifies. There is absolutely no question that having special safeguards and measures for developing countries in this round is going to be vitally important.

    However, at the same time, we have to be clear that major players in the export market cannot use these to shelter industries that they're significant players in. Brazil is going to be an example. Brazil produces 60 million tonnes a year of soybeans. They should not be able to use special safeguards to shelter or subsidize an industry of that nature.

    It's a very difficult question, but defining who is eligible, how long they're going to be eligible, and when they will no longer be eligible for special measures and safeguards is going to be a very important and difficult task for the WTO.

    Mr. John Duncan: That's critical.

    I'd like to address Wendy Dobson. I may be misreading your paper a little bit, but there seems to be an assumption inherent in it that somehow China and the U.S. will end up being at odds. I think that assumption would be dangerous to embrace, from the standpoint that it might lead to Canada not doing the appropriate thing.

    I say that because I think right now the U.S. is embracing China, Vietnam, and Taiwan. I was in the company of Republican congressmen recently, and they were most excited about their existing trade agreements with Vietnam and China, and expanding them to include Taiwan. The only stumbling block in all of this seemed to be the intellectual property question.

    If you look at the foreign direct investment that's heading there from the U.S. and other sources, particularly into China, I just see this as a very massive commitment. They are business people first and foremost. We know that about our southern friends.

    I guess I take exception to that part of your paper, but on the other hand I agree with you that Canada is completely missing the boat here, while they're talking about concluding free trade agreements. They have 40 Americans expediting a trade agreement right now in Australia with people who are now part of the coalition--people who were part of the military alliance in Vietnam. They're now paving the way, along with the Americans, to completely restructure the Vietnamese relationship. I just see Canada as floating along with their priority still toward Europe, Latin America--anywhere except Asia.

    I wonder if you could expand on that. Maybe I'm misreading what you're saying about this natural collision between China and the U.S.

    Will I have time for another question?

    The Chair: Yes.

    Mr. John Duncan: Okay, then I'll quit there for now.

»  (1715)  

    Prof. Wendy Dobson: Thank you for the question.

    I guess I'd answer it by saying, first of all, no, you haven't misread what I said. While it appears that we might disagree, I would elaborate on what I've said in the paper by thinking short term and long term. In the immediate or short term, there is no question that the U.S. and China have common interests, but if I look at demographic and economic trends over 50 years, the emergence of China is absolutely epochal. As the Chinese would say, “We have ended the 700- or 800-year downturn we went through”—which was very annoying in a 5,000-year history.

    I guess I'm tempered by what I understand to be the Chinese mindset and by what I understand of U.S. foreign policy now and how great powers relate to each other. They get along when it makes sense, but they can get in each others' way if each has different views of their respective roles in the world. We have a unipolar world right now in which the U.S. is unchallenged. You know all of the rest of this....

    As I said in my remarks, China will challenge this in many ways whether it wants to or not. So there will be tensions. As you are probably aware, there are entire volumes predicting war that have sold quite well in the United States. The world is not large enough for both of them; it's a zero-sum game, as I was saying earlier. I don't subscribe to any of this, but I see it as something that is worrisome to us, given the other logic of my arguments that we have an historic relationship with China—which will become one of the most dynamic and largest economies in the world. Over the long term, we should invest very seriously in this.

    I'm not going to repeat myself.

    Mr. John Duncan: No, but I want to explore that part of your document, because I'm from British Columbia—

»  (1720)  

    Prof. Wendy Dobson: So am I.

    Mr. John Duncan: We have a lot of ethnic Chinese in the lower mainland, and we have a lot of ethnic Chinese coming here from Asia for schooling. This is becoming problematical now, because a big part of this is their getting English language training in a Canadian environment. Some of the ethnic Chinese families are saying, “If we send our children to Richmond, they're actually going to end up spending their time in China”—which is right—“and they're actually not going to learn what they want to learn”. This opens up possibilities for other parts of the province.

    I guess I'm going a little bit where Stéphane Bergeron went, with something that's actually occurring in my backyard, which is that we have shrinking population in our rural areas and rural school districts. They are very warm and welcoming communities who want to attract students from Asia into their schools, but they don't have the resources to market themselves. A lot of these are primary and secondary schools.

    We have a practical example, where we had some Taiwanese who just happened to fluke into a relationship with a community. As a consequence of children's schooling, this has now led to an entrepreneurial community, export-oriented manufacturing, Taiwanese investment, Canadian jobs, and so on. By accident, it's a model of what I think you're promoting.

    To achieve more of this, what role could the federal government play, particularly in the case of education in primary and secondary schooling? It's provincial, but it seems to me there's a bigger interest here. I think everyone here probably intrinsically accepts your view of what we should do in terms of excellence at the college and university level, but I was just thinking more along the lines of primary and secondary—

    Prof. Wendy Dobson: I'm not an expert on education policy and how to tread through the landmines of federal-provincial jurisdictions.

    The only suggestion I have is a practical one. The Australians have been very successful, and there may be some lessons...though I think it's too late to imitate them. But there may be some lessons there. Actually, I think in general there are a lot of lessons we could learn from the Australians in terms of an overall international strategy. They've been particularly successful in marketing the export of post-secondary educational services.

    The Chair: Colleagues, with this, I guess we are running out of time. I want to thank our witnesses, particularly Mr. Greenhill, who changed his plans so he could stay with us until 5:30, as well as Mr. Dahl and Ms. Dobson.

    You have certainly given us a lot of food for thought, and your presentations today will form part of the proceedings. We will certainly go over the minutes and find any comments you have made that could help us in our final report. If you have some more thoughts or suggestions you would like to send to us, please feel free to do so. We would be happy to include them.

    It is 5:25, so the meeting is adjourned.