Good afternoon, Madam Chair.
I'm pleased to be here today to provide an update on the government's engagement in the reform of the World Trade Organization, the WTO, including Canada's leadership of the Ottawa Group.
I am joined by several colleagues from Global Affairs Canada, namely Colin Bird, director of the Trade Policy and Negotiations Division, Darren Smith, director of the Services Trade Division, John Layton, executive director of the Trade Remedies Division, and Don McDougall, deputy director of the Investment Trade Policy Division.
Allow me to begin by providing a bit of context. The WTO is critical for Canada because it governs trade between 164 members and it provides a stable and predictable framework of rules and market access for Canadian companies accessing world markets, backed up by binding dispute settlement.
Canada is a founding member of the WTO, which was created in 1995, and has a long history and a solid reputation as a committed multilateralist. In fact, members are reminded of Canada's contributions to the multilateral trading system every time they walk through the doors of the WTO Secretariat building in Geneva. Canada donated the large wooden doors to the old International Labour Organization headquarters, where the WTO now sits.
Over the last few years, the multilateral trading system has faced an increasingly challenging environment, characterized by the rise of protectionism and the use of unilateral trade measures.
Beyond difficulties in concluding negotiations in a number of areas, current challenges include divergent positions on trade priorities, a lack of consensus on how to treat developing countries, an overloaded dispute settlement system, and a stalemate surrounding vacancies to the WTO's appeal mechanism. Such challenges put the credibility and day-to-day functioning of the WTO at risk.
Against this backdrop, several years ago Canada took up a leadership role to build support for reform of the WTO and to identify concrete initiatives aimed at reforming the organization.
As one of the more visible examples of our contributions, Canada has been at the forefront of efforts to reinvigorate the WTO and is playing a leading role in the Ottawa group, a group of reform-minded WTO members first brought together by then minister for international trade diversification in October 2018. The group of 13 WTO members is diverse in terms of geographical representation and levels of development. It remains small, to allow for meaningful exchange of views, but it is meant to support broader discussion involving all WTO members.
Since its creation, the group has met at the ministerial level four times, most recently in Davos this past January.
One of the key achievements of the Ottawa group has been its role as a sounding board for the exchange of ideas. For example, the group has identified ways in which to improve transparency for businesses, especially small and medium-sized enterprises, through more timely reporting and notification of new government regulations, laws and/or measures affecting trade.
Canada has also played a leading role in discussions on how to resolve the impasse in appointments to the WTO's appeal mechanism, also known as the appellate body, which is the most pressing issue facing the WTO.
Driven by concerns about the appellate body's functioning, the United States has blocked new appointments since 2017, so that, as of December 2019, there is a lack of quorum, which means that appeals can no longer be decided. Under these circumstances, a member deciding to appeal a panel finding can prevent the resolution of a dispute by effectively appealing into the void and undermining the legal rights of WTO members.
For a mid-size country such as Canada, this loss of recourse to binding dispute settlement has serious implications. We are an active user of the WTO's dispute settlement system and have been party to a total of 63 disputes since 1995—40 as a complainant, and 23 as a respondent.
The situation has provoked some creative problem-solving on the part of Canada.
This past July, Canada and the European Union developed a bilateral interim appeal arbitration arrangement to allow for appeals between ourselves until such time as the appellate body impasse is fixed.
Most recently, in Davos, this past January, Canada and 16 other WTO members built on the success of that arrangement by agreeing to work towards a similar interim arrangement that would apply between participating members until the appellate body is again functional.
While Canada's priority remains finding a multilateral solution to the appellate body impasse, these types of interim arrangements help safeguard our rights to binding two-stage dispute settlement with willing WTO members until the appellate body is functional again.
Canada is also playing an active role in a number of ongoing WTO negotiations. Although the current comprehensive multilateral round of negotiations launched in 2001, known as the Doha round, has reached a stalemate, negotiations continue on a stand-alone basis on several fronts.
That includes negotiations to address harmful fisheries subsidies, which have reached a critical stage. Fundamentally, this negotiation is about helping preserve fish stocks for future generations, but systemically, it is seen by many as a critical test of the WTO's negotiating function. Members are striving to conclude negotiations in time for the next WTO ministerial conference later this summer, and Canada has made a number of active contributions, including a recent proposal on overfishing and overcapacity.
Canada is also playing an active role on agriculture and has recently sponsored a statement by the Cairns Group in January calling for the reinvigoration of discussions to eliminate trade- and production-distorting agricultural subsidies, which represents a key interest for Canada and Canadian agricultural producers who face a very uneven playing field in trying to access international markets.
Challenges to the multilateral approach to negotiations have also led members to pursue negotiations through plurilateral negotiations, which involve only subsets of the entire WTO membership. For example, willing members have launched plurilateral negotiations, also known as joint statement initiatives, on e-commerce, investment facilitation for development, domestic regulation for services, and micro, small and medium-sized enterprises. These negotiations have the potential to deliver significant benefits for Canadian businesses of all sizes, and Canada is actively participating in each.
Due to external circumstances related to COVID-19, the ministerial meeting of the Ottawa group that was scheduled to be held in Ottawa on March 18 has been cancelled as of a few hours ago. Efforts will continue on how best to plan our work in the lead-up to the 12th WTO ministerial conference, in Kazakhstan in June.
A key priority for Canada in the months ahead will be to deliver on a commitment made by the group in January, in Davos, to enhance its efforts to engage business and our citizens on WTO reform efforts. It is safe to say that there is almost unanimous support that the WTO needs to be reformed in order to ensure that the organization is relevant and fit for purpose for the 21st century. The challenge, however, is that collective agreement on precisely what that means remains elusive.
Perhaps that is a good note on which to end my comments. As you can see, I have a few experts here to help answer any specific questions the committee might have.
Thank you, Madam Chair.
Thank you, witnesses, for being here this afternoon.
I'm glad to hear your announcement on the meeting next week. I understand why that happened, and I think that's a responsible measure you've taken. Hopefully, we'll find a step to work around that, maybe through telephone or video conferencing or something like that, because the work you're doing is very important.
I want to go back to the appellate body and the U.S. concerns around the appellate body. From what I understand—and I know enough to be dangerous here, so I'm counting on you to educate me to a higher level, hopefully after this meeting—a lot of the concerns they had are justifiable concerns. These are concerns that go against what the original intent was when the appellate body was set up.
Obama was complaining. George Bush Jr. was complaining. There's been more than one regime complaining about this scenario in the U.S. There have been many. Why has it taken so long, and why did the U.S. feel it had to take it to a head, as it has now, in order to get the rest of the countries around the table to look at this seriously? Can you give us some background on that?
I can start by giving a little context on the U.S. position on the appellate body.
The U.S. concerns—as have been cited by the member—are not new. For a number of years now, we have been hearing concerns about the way in which the appellate body operates.
I think that certainly any WTO member who has been involved in disputes at the WTO probably has some issues with some of the specific results of cases over the years. Certainly in a Canadian context, I can think of more than a few cases where we were disappointed with the way in which the appellate body took a decision on a particular issue.
Notwithstanding the fact that I think there are legitimate issues that need to be addressed by WTO members in looking very critically at the appellate body and the way it functions, both procedurally and how it handles certain substantive issues, what is important is that there is a need for a constructive dialogue on this. Certainly Canada and other WTO members have been ready to engage in discussions in Geneva in trying to find ways to reform the appellate body. We certainly see this as a very fundamental part of WTO reform.
This past year, New Zealand's ambassador to the WTO, Ambassador Walker, launched a series of discussions aimed at trying to find a solution to some of the long-standing problems affecting the appellate body, including addressing problems that have been identified by the United States but also by other WTO members.
Unfortunately, engagement by the entire membership was very uneven, and we did not see any engagement on the part of the United States on some of the specific issues that it had raised in the past.
I think that's a very timely question.
, last evening, chaired a dinner involving more than a dozen Canadian business people to talk specifically about the WTO and their views on the current challenges that are facing the organization. Some of the key themes that emerged from that discussion include the critical importance of the WTO for Canadian business.
The WTO, of course, governs the vast majority of our trading relationships. Although Canada has a number of free trade agreements in place with some of our key trading partners and 14 FTAs in force with 51 countries, that still leaves another hundred-plus WTO members who are not currently covered under any kind of preferential trade agreement.
In Canada, businesses, in particular, have expressed concerns regarding the impasse at the appellate body and are deeply concerned that Canada's rights at the WTO are undermined by that impasse, in particular vis-à-vis the United States.
We have also heard from Canadian business about the importance of ongoing negotiations in areas like agriculture, for example. E-commerce is another area that has been identified by Canadian business as very important and for which Canada is taking a very active role to try to bring their issues to the table.
I think that many countries have taken the WTO for granted over the last number of decades and have put the bulk of their focus on negotiating bilateral and regional free trade agreements, but the importance of the WTO, especially for a mid-sized country, really cannot be overstated.
Thank you, Ms. Hembroff, for coming to testify before our committee.
I listened to your presentation with great interest. It focused mostly on the attempts to reinvigorate the WTO, but unfortunately I didn't hear much about the why.
I believe you said that the efforts to reinvigorate the WTO are primarily motivated by the impasses caused by U.S. inaction. We could even bring up the 2006 impasses. That was the year when the Doha Round talks failed and were followed by protests, particularly in Seattle. The WTO never fully recovered from that challenge and could never re-inspire efforts to hold new rounds so it could start over.
My question is somewhat related to that. I have no problem with reinvigorating the organization, but why? Everyone agrees that there is a need for an institution that regulates trade globally. The principles and rules of the World Trade Organization, which emerged from the Marrakesh agreement, are very different from those that the 1947 Havana Charter, for example, would have had. There are a number of ways to regulate trade globally. There are several positions and approaches.
Is there a willingness to review and reform the organization's basic principles as well, before thinking of ways of implementing them?
Thank you for your very good question.
The fact is the WTO has not kept pace with the manner in which trade has actually been conducted over the last decade or so. We do not have disciplines on electronic commerce, for example, which is increasingly a modality by which a lot of international trade is conducted. While Canada and other WTO members have in many cases been negotiating commitments on e-commerce in our bilateral and free trade agreements for the better part of 20 years, the WTO, at this point, has no disciplines in this area.
Similarly, there are types of disciplines that exist on subsidies, whether in areas like agriculture, industrial subsidies, or fish subsidies. This is another area where the WTO is in urgent need of updating the rules.
I don't want my earlier comments on what we are doing in terms of WTO reform to suggest that we are looking at minor tweaks. In fact, we are looking at fairly substantive changes, both through the negotiations we are undertaking and in terms of some of the more procedural elements. One point I should make, which is very important, is that ultimately WTO reform is not something that will happen overnight. It is something that will take many years to accomplish, and it will have many moving pieces. We do this as a very comprehensive effort, but there are many different moving pieces that are part of it.
I think it's all about incremental progress. We have the 12th WTO ministerial conference which is coming up in June. I think that will be an opportunity to achieve some key outcomes that would push the needle forward in terms of WTO reform.
One of our goals for that ministerial conference is to conclude negotiations on fish subsidies. A lot of work still has to be done between now and then, but we think that would go a long way in delivering on a key negotiation that has been going on for almost 20 years.
Similarly, the negotiations on domestic regulations for services are also getting quite close to conclusion. That would be another key opportunity to modernize the trade rules.
Other elements will take more time. Certainly those aspects, such as reform of the appellate body, will absolutely require engagement by all WTO members.
Speaking maybe quite frankly, it is unclear whether or not the current U.S. administration will be prepared to engage on dispute settlement issues, so there may be other areas in which we can make progress for now. However, in terms of some of the issues related to dispute settlement that we've talked about, we could very well be several years away from being able to have those discussions.
I find the comment interesting, because we did hear a lot of testimony in the study of CUSMA that suggests otherwise, which is that actually what was put in CUSMA is going to benefit the existing large web giants that are predominantly located in the United States, and that what's in CUSMA forecloses on a lot of policy option debates within Canada.
I don't think it's just a simple matter of trying to level the playing field, because we heard very clearly that on some of the provisions you're talking about, it's not a level playing field right now and that those rules are to the benefit of the established players. While it may be a level playing field on paper, in practice it's not going to establish a level playing field, because you already have major players who have serious assets they can use to perpetuate their position within the industry. Also, it may actually be a serious barrier to entry into the industry for smaller players, as those larger players are allowed to continue to use their existing advantage against entry.
When you look at companies like Microsoft and Apple, for instance, and maybe particularly Microsoft, that actually seems to be the business model. It's to use their existing size and clout to keep smaller players out of the market or to only allow them to participate as start-ups that then, once they start to do something that could challenge the position of that larger company, they are bought out and assimilated into those companies.
For what it's worth, this is a word of caution. It sounds great to say that we're just trying to level the playing field, but I'm not convinced that's actually what's going on when we enshrine these kinds of rules. I do think that Canadians have a right to a meaningful policy debate, which is being circumvented by the government, first of all in CUSMA. I'm concerned that this is happening and that Canada is a proponent of circumventing our right to a domestic debate by already taking bullish action on these types of things at the international trade table.
Have I used all my time?