:
Thank you very much, and thank you for the invitation to appear.
As you heard, this is a decisive year for the Doha negotiations. The expiry of the U.S. fast track negotiating authority in July 2007 sets an effective deadline of the end of this year, at the latest early next year, for wrapping up the talks. While the impasse over agriculture understandably attracts the most attention, services are also a major component of the Doha agenda. In the GATS negotiations, key demandeurs are still pressing for ambitious results, and I'd like to speak to you about some of the implications of that today.
If there is a breakthrough in the agricultural and NAMA negotiations this year, Canada and other countries will be under strong pressure to increase gas coverage and to agree to new rules, currently under negotiation, restricting domestic regulation. In contrast with goods, as Rob Ready alluded to, where the main barriers to international trade are border measures such as tariffs and quotas that are easy to identify and quantifiable, the obstacles to trade in services usually involve more complex issues of national, provincial, and local government regulation.
WTO rules addressing services are fairly recent, since the mid-1990s. They're still largely untested, they're broad in scope, they cover investment in addition to cross-border trade, they apply a tough test of non-discrimination, and they even restrict certain government measures that are non-discriminatory, such as you can't put limits on the number of service providers in committed sectors, and that includes monopolies, like public insurance monopolies and so on.
In my view, Canada should be very cautious about making additional GATS commitments. Canada has commitments today in just over 100 of the 160 service subsectors. Many of the remaining subsectors are among the most sensitive ones. The policy implications even of the existing commitments have not been properly debated. Furthermore, Canada should stop pressuring developing countries into making GATS commitments that many clearly are not comfortable with. That was obvious at Hong Kong. The full policy implications are not understood for them as well.
Developing countries are being pressed hard on a wide range of fronts--environmental services, postal and courier, financial, telecommunications, transportation, distribution, maritime, education, and more. The issues at stake are not mainly about opening markets. Foreign companies, including Canadian companies, already have access to these markets, in most cases, or as much access as foreign companies have, say, to the Canadian market. The issues are really about government measures and policies and the ability of governments to regulate and to shape their own economic development and to take steps to ensure that liberalization benefits their citizens.
I would say that by pressing others too hard, Canada may be even undermining its own interests, and I'll just give a quick example. We joined in one of these plurilateral requests on telecommunications. We were a co-sponsor. Among the demands in that request was that countries allow majority foreign ownership of telecommunications companies, which of course existing Canadian law does not permit. Now, to my mind, either you're applying a double standard or Canada is also a recipient of this request, what's called a deemed recipient. Even though it's sponsoring the request, it's also a recipient of the request. So in a sense, the government's negotiating position is undermining our own domestic law. This is one of the reasons I think parliamentarians need to have a careful look at some of the details of these negotiating positions.
Many Canadians are concerned about the encroachment of these services, trade treaty rules, into public services. The exemptions for public services in the GATS are highly qualified and they are untested in dispute settlement. I can go into that if you want.
There are legitimate concerns that the agreement will lock in commercialization of public services, where they occur, and make it much more difficult to expand services, or to reverse commercialization or privatization, where it occurs. There's an ebb and flow in democratic governments that has to be respected.
The federal government has pledged that it will take no commitments in health, social services, and public education--which would leave open the door to private education--during the current round. It has also, so far, resisted demands to cover audio-visual and culturally related services, pending the negotiation of an international instrument to protect cultural diversity.
To give credit where credit is due, Canada has also pledged and has not made requests of other countries in these sectors, which it would have been free to do. You could make requests even in areas where you're not prepared to make commitments, but they've taken what I think is a good position, a principled position, not to make requests in areas where they're not prepared to make commitments, with the exception of these plurilaterals, which I just referred to.
But few Canadians, and I wonder how many parliamentarians, are aware that Canada already has, in the last round, covered health insurance and automobile insurance under the GATS. Once a country schedules a commitment, the market access rule of the GATS prevents governments at all levels--provincial and federal--from operating monopolies. So the existing system of public health insurance and provincial auto insurance in four provinces was excluded. It was exempted in the 1990s. But for another province, the one I come from--Prince Edward Island--or New Brunswick or others, or if Quebec were to expand its current system, which is a mixed system, that would become a WTO-litigated issue. To me, again, this is a good example of how these treaties have overreached and are infringing on what is the proper domain of elected governments.
Another important area in the current negotiations is for new disciplines on explicitly non-discriminatory domestic regulation. These rules are under negotiation today. Right now, as we speak, there's a commitment to come up with these rules, which would discipline non-discriminatory regulation affecting standards and affecting licensing of services. That could be facilities licensing, if you want to set up a toxic waste dump. It could be professional licensing. Standards could be everything from the quality of an educational service to pipeline safety, things like that. This is very sensitive stuff.
A majority of developing countries, in a very recent development, have come out strongly against the application on the necessity test. That happened at a meeting in early May. The United States has also spoken strongly. But at that meeting, anyway, Canada was silent, and that concerns me. Again, I think there is a role for Parliament in pressing the Canadian government and Canadian negotiators to explain the issues, their position, and why they are not moving now to put an end to what could be rules that we would regret if they're developed.
In closing, because services rules are novel and deal with regulatory issues that go to the heart of democratic decision-making, I believe it's particularly important that parliamentarians, and this committee in particular, play an active role in overseeing these negotiations. I hope you will dig deeper than indisputable claims that services comprise the largest share of developed economies, that services trade is growing strongly, and that Canadian service providers need to be active in the international markets.
All that is true, but Canada and other governments still need to proceed cautiously. The new services trade treaty regime raises many questions about public services, about public interest regulation of private services, and especially in underdeveloped countries and regions, including some regions of Canada, about the role of governments in ensuring that services liberalization benefits the broader community.
Thank you.
:
Thank you, Mr. Chairman. I think I'll make a few comments on the negotiations and then go into questions.
From time to time, I send a number of you commentaries on the state of play of the negotiations. I'd like to assure Ms. Guergis that I do believe the WTO is important, and if the reports are negative, they're just accurate reports on the state of play.
I think it's important, and I think that while we should be moving faster towards covering our own position on negotiating bilateral and regional agreements, we can't forget about the WTO. We have to put as much pressure on it as we can to try to reach a reasonable conclusion.
The negotiations about agriculture are stuck. They're also very important for us, because in the Uruguay Round we signed a bit of a blank cheque. We really didn't get paid for it, and our grains and oilseeds sectors are suffering for that now. They're suffering because the European Union and the United States have agricultural policies that are based on subsidizing their grains and oilseeds sectors so that they don't have to subsidize the livestock and other downstream sectors. Unless that sticks, we're going to be in a position where we're continuing to play catch-up, where we're going to be forced to provide emergency support to grains and oilseeds producers if we're going to keep them on the farm.
These subsidies are very important in the United States. There are 800,000 to one million farm families that depend on them. Don't expect them to go away; they're just going to put them in another box. They'll put them in the blue box and they'll put caps on the blue box, but anybody here who has farmed understands that the cap is meaningless, because you have crop rotation anyway and you have only a certain number of products that will benefit.
Decoupling is a myth. We're coming out with a paper on that within the next week or so, talking about how decoupling really is not the answer to avoid production- and trade-distorting subsidies. We have to take a very, very hard look at it, but we have to go to bat for our livestock producers, for our beef producers, for our hog producers, and get them the markets they expected they'd have before.
We were looking at a minimum 5% access. We don't have a minimum 5% access; we have two-tenths of 1% access for pork in the European Union. We don't have an awful lot more in Japan, and the systems are rigged. We have to get into those markets. If we can't sell our grain, we have to upgrade it.
The best way to upgrade it is that you put it through an animal, and you slaughter it and you export meat. If we're not on the same footing as the other people who are doing that, we're going to lose the biggest natural advantage in the world for producing agricultural products that we're sitting on top of because we're not collecting what we should be collecting. If we can't get it through negotiation, I think we're going to have to get it through challenging.
I'm not as concerned about services, because I know from discussions with the government that they're not going to put these sensitive sectors on the trading block. It has been a consistent government position.
There are always suspicions of government. I think this consultation process has been pretty transparent, and people can make their views known. That's why Mr. Sinclair is here today making his views known. He has valid concerns. I'm not as concerned about them, but his concerns are valid.
When we get into NAMA, what nobody is talking about is the 800-pound gorilla that's sitting in the room. The 800-pound gorilla is China. Nobody wants to cut their non-agricultural tariffs with China.
I just got back from China. These 40- and 60-storey skyscrapers are going up in Beijing like mushrooms. The Chinese laugh and say their national bird is the building crane. The place is booming. People are moving there to produce things. Who wants to drop their tariffs for the Chinese to take over?
If Brazil or India is negotiating with you on a tariff, the real beneficiary is probably going to be China. And tariffs you're looking to bring down in many areas, as the Chinese progress in technology, are also going to benefit the Chinese. It doesn't mean that you shouldn't do anything, but you should recognize that there are a lot of people who are happy in Geneva to see the negotiations hung up on agriculture or other issues, because in fact they don't want to move on NAMA.
There's a lot of pressure to go to more formula cuts on NAMA. It's not as big a deal for us because we've already adjusted to the United States. But when you go out there and you see countries where we're trying to get in over 20% and 30% tariffs, trying to cut them by 60%, that's a big cut for them to look at with respect to China, particularly as long as China is benefiting from the same cheap dollar that the United States is by riding on its coattails.
I think if I'm saying anything to you, it's that the WTO is not dead, but if we don't get a fair amount of movement between now and that ministerial meeting in June, effectively it is. I'm not concerned about the trade promotion authority in the United States. The trade promotion authority is only a mechanism for the United States to extract more concessions, because their administration can't carry an agreement without Congress. If the deal is worthwhile, they'll extend the TPA. If they don't like the deal, they won't pass it.
I'm happy to answer any questions.
:
I don't agree that we would have chaos. The WTO treaties would still be in effect. The dispute settlement system would continue to work.
There's a sense of the bicycle theory, that you have to keep ever expanding trade treaty rules, that if the bicycle stops, it will fall over. That dynamic is part of what has pushed trade treaty rules I think beyond their core competency, into more and more of these regulatory issues.
I'd also like to make the point that when this round was launched, whether this was genuine or cynical, it was called the Doha development agenda, as has been referred to. It was a development round. It has become basically just another market access round. I think it's true that a large majority of developing countries are very disappointed and nervous about the direction this has taken, and I think many of them would welcome a hiatus, but they are not in the driver's seat.
It is a slightly enlarged group of big players. It's no longer the Europeans and the United States. Now Brazil and India--and China is taking a quieter role--are the key players who will broker a deal that pretty much everyone else, if they get one, will have to accept.
I don't accept that a hiatus would be a disaster. It might be a blow to the stature of the WTO. It would be disappointing to negotiators. But the system will continue to function.
:
Mr. Chairman, I would like you to signal me when I shall have only two minutes left, because my friend Guy André would also like to ask a question.
Mr. Sinclair, I would like to know what are your thoughts about an issue that doesn't seem to be taken into account at the present time.
Mr. Pettigrew was been very clear when he was minister. He said that health and public education would not be open to negotiations at WTO. However, as concerns private education, he was never able to make a firm commitment. He even said that Canada was an expert in the field of education and training and that it would be nice if we could export that expertise. Considering that there are more and more private schools at least in Quebec, that our universities are mostly private and that Americans might probably be interested, should'nt we stipulate that the whole education sector should not be part of WTO negotiations towards liberalization of services?
A social economy is developing. Let us take, for instance, child care centres in Quebec. They are not private companies in the traditional meaning because they are non-profit. However, they are private inasmuch as they do not offer public services as such. They are autonomous and financed in a large part by the State, but also by users.
When we talk about public services, this sector of the social economy is not taken into account. It worries me a lot because child care services and home care services allowing functionally dependent people to stay at home, for instance, represent a market that will develop enormously in the next few years. Those sectors are not really identified as sensitive.
Have you started to reflect on those issues? Perhaps you already have a few ideas about it.
:
That qualifier, that the government will not make commitments in public education, concerns me, because commitments covering private education would certainly affect the public system. Educational providers such as universities offer training courses in competition with private providers, so commitments covering private education would certainly have implications for public providers in the public system.
Over the years, certainly at the start of this round, the government and negotiators expressed a strong interest in getting Canadian stakeholders onside, because Canadians export—even Canadian universities export—educational services abroad and train foreign students here.
They were completely unable to get the stakeholders onside. Universities and others felt that the GATS would not help them, and that the risks—for example, private suppliers demanding access to public subsidies, or demanding certification in the same way as universities—were just too high. I think it's somewhat encouraging that in the case of this plurilateral request on education, Canada not only did not sponsor it but was not targeted as a recipient. I take some comfort from that.
I think the issues you raise on child care are very important issues, and really important for understanding how the trade treaties work. It's often not enough to simply say that public services are excluded.
On the specific issue of child care, I don't feel it's at risk in this round right now—not under direct threat. The Canadian government has made it clear that it will not make commitments covering social services, including child care...unless there is some change in the negotiating mandate. We have a new government; that does create some uncertainty.
:
Yes, there is a paper and some material I will pass to the clerk.
In 1995, and later in an addendum to the GATS in 1997, Canada covered a whole range of financial services, including insurance. In the case of auto insurance, they took a country-specific exemption--it's called a limitation--for the existing public auto insurance systems, in four provinces, I think.
If another province, such as the one I come from, Prince Edward Island, or the maritime provinces, where this is under discussion, wanted to put in place a public auto insurance system, Canada would have to go back and renegotiate its WTO-GATS schedule.
I think that's inappropriate. It's not really a trade issue. I think it discourages, and it may have been a factor in discouraging New Brunswick from proceeding with a public auto insurance system, even though it was recommended by an all-party committee.
I will leave some material that clarifies this further.
Thank you, Mr. Clark, and thank you, Mr. Sinclair, for coming here today.
Mr. Clark, I haven't read the material Ms. Guergis takes such objection to, but I'm sure it's well worth reading, so I hope to be on your e-mail list in future.
Mr. Sinclair, I appreciate your being here today because I've read some of the books you've written on this subject. You probably know more about trade policy and the WTO than virtually any other Canadian I can think of, so we appreciate your being here today.
I'd like to direct my questions to Mr. Sinclair first, because the previous witnesses at the meeting from 3:30 to 4:30 seemed quite confident that the exclusion on government authority of services such as health care and education was satisfactory, to make sure there was no negative impact on those service sectors. From your opening comments, my sense was that you have some very broad concerns about how the service sector is being negotiated. So I wanted to get a sense from you of the implications to the service sector.
Second, you referred very specifically to two examples: one, the issue of health insurance and auto insurance under GATS, that existing provinces might be excluded, but if the voters, the citizens, of Prince Edward Island decided they wanted to have an auto insurance plan from the public sector, they might not be able to. I'd like to know the concrete implications of that. Does it mean ongoing litigation and millions of dollars for citizens to have the right to public auto insurance, or does it mean the WTO would say because we have made this agreement, no, you can't do that, the citizens can't have public auto insurance?
You also mentioned telecommunications and doing away with the majority Canadian ownership we have in telecommunications. What are the implications there? Again, if public policy...if Canadians decide they want to have a domestically owned sector, is it litigation that results from that, which costs Canadian taxpayers millions of dollars, or is it a question of it simply not being allowed?
I'd like to know the implications of that.
:
To address the issue of the adequacy of the governmental authority exclusion in the GATS, article I(3)(c), I don't believe—and this view is shared by many—that this is an effective exemption. It's certainly not a full exemption for public services. It states that services provided in the exercise of governmental authority are excluded from the treaty, but it goes on to further define that as services that are provided neither on a commercial nor a competitive basis, nor in competition with one or more service suppliers.
Most of what we call public service systems, as Monsieur Paquette was alluding to in the day care or child care area, are mixed systems, and the boundary between public and private is changing all the time. Often public service providers, such as universities, compete with private service providers, and they have advantages that are not extended to private service providers because they have responsibilities and obligations to provide services, which private service providers do not have. So the exclusion itself is not that comforting.
Despite being pushed on this, many governments, particularly from the developed countries, who are trying to push the expansion of the GATS, are reluctant to define the meaning of that more carefully. They prefer to leave it vague. In other words, it will be decided in dispute settlement at some point in the future, which I don't think is satisfactory.
On the specific issue of what happens if a provincial government, which doesn't have the benefit of exclusion, decides to proceed with public auto insurance, no, it doesn't mean that they absolutely cannot do it, but it does create a serious problem. Canada would have to go back to the WTO to invoke an article of the GATS to basically change its schedule and provide adjustment, which would mean, in the WTO context, that you have to commit equivalent sectors under the treaty. This is a significant deterrent, and if you look at WTO documents, sometimes they call commitments effectively irreversible for that reason. If you can't negotiate a satisfactory arrangement, you could face trade sanctions, and those could come in areas other than services.
Finally, on telecommunications, right now our foreign ownership provisions—restrictions—are excluded in our GATS schedule. As long as that doesn't change, they would provide effective protection. Those of us who support those provisions have to be vigilant that they're not changed, because once they are, they're gone virtually forever in that case.