FAIT Committee Meeting

STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

COMITÉ PERMANENT DES AFFAIRES ÉTRANGÈRES ET DU COMMERCE INTERNATIONAL

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, June 13, 2000

• 0940

[English]

The Chair (Mr. Bill Graham (Toronto Centre—Rosedale, Lib.)): I call this meeting to order.

We're presently engaged in considering the issues of globalization and how they affect Canadian society and how Parliament operates, and where we should go with this study, or whether we can do such a study that would be useful.

This panel is very useful for us because it will help clarify our thinking.

We have a wonderful group of experts with us this morning, so I'm going to call them in the order in which they're on your agenda. We'll start with the Honourable Warren Allmand, President, Rights and Democracy Institute.

I was down at the OAS last weekend with Mr. Allmand and he told us all he's changed the name of his institute because it was so complicated, the International Centre for.... Anyway, it's the Rights and Democracy institute.

Mr. Warren Allmand (President, International Centre for Human Rights and Democratic Development): Thank you, Mr. Chairman and members of the committee.

Our legal name is still the International Centre for Human Rights and Democratic Development, but since nobody can say that in one breath—

The Chair: Can't say the acronym.

Mr. Warren Allmand: —we've done what Development and Peace did and we've now got the short name of Rights and Democracy. Anyway, thank you very much for inviting us here this morning.

Globalization can be much more than trade and economics and it can be either good or bad. As you well know, globalization is taking place in communications, in arts, sports and health, and even in crime, unfortunately.

Globalization has been a major program at Rights and Democracy for several years. It's one of our priority programs. Our concern is with global and regional trade agreements, with global and regional trade arrangements and institutions that facilitate trade and investment without any consideration of human rights and labour standards, without any consideration of the environment and health.

These agreements provide for a world where trade takes precedence over everything else. This is the case when we look at the WTO, at APEC, at NAFTA and the proposed FTAA so far, and at the MAI. These agreements, as written, set up pressures to harmonize with the lowest common denominator in the trading group. In other words, there's a race to the bottom, to lower standards in environmental areas, in labour, in human rights and so on, in order to attract investment and trade, etc.

Of course, I was in Parliament following the famous election of 1988 when we argued those very things with respect to the NAFTA and the FTAA.

We point out, and we hope it's going to get through eventually, that within our countries—within Canada, within the United States, within Europe—we have laws that facilitate trade and trade takes place. We have very active trading within Canada and with the United States, but it's subject to the Constitution and it's subject to the Charter of Rights. Trade laws are read in conjunction with all the other laws that Parliament has passed.

In none of those countries I've referred to does trade take precedence over the Charter of Rights or the Constitution or environment laws and so on. It's read in conjunction with them and is subject to our charter and to our Constitution. But it seems that with respect to international trade, when we raise these arguments with respect to the WTO and other global trading institutions, they say “Trade has nothing to do with human rights. Trade has nothing to do with labour.” I don't know where that logic comes from because it's not acceptable anywhere else or within our own country. In other words, there's sort of a double standard.

• 0945

Those same countries belong to the UN, have ratified the International Covenant on Civil and Political Rights, have ratified the International Covenant on Economic, Social and Cultural Rights, have ratified many of the ILO conventions on labour standards, have ratified all those conventions over here, then they go over there and ratify conventions with respect to trade, totally ignoring the commitments they made under the human rights and under the labour standards. One can say the same thing, although we're not into that—that's our specialty—with respect to environment and health standards. We say that this is unacceptable.

When you look at the United Nations' Universal Declaration of Human Rights, economic and social rights are spelled out very clearly there. They are not second-generation rights; they are full rights. Articles 22 to 26 of the United Nations' Universal Declaration of Human Rights speak of the right to food, the right to health, the right to a job, the right to protection, and so on. So when you're dealing with a globalized world with respect to trade and other matters, there must be consistency and coherence.

Mr. Chairman, our centre recently published, with the help of Professor Robert Howse and Professor Makau Mutua, a very good short document entitled Protecting Human Rights in a Global Economy : Challenges for the World Trade Organization. We released this book in Geneva during the convention of the United Nations Commission on Human Rights. It argues very strongly for the points I've been making but in greater detail, that if anything should take precedence, it should be, first of all, the charter of the UN and the human rights agreements that the world community has adopted, including the Universal Declaration of Human Rights and the other conventions that flow from it.

We say there has to be a coherence between trade agreements and the other agreements, and there has to be a system of global governance in order to bring these two together so that they are read together and balanced with each other.

I want to make very clear that we are certainly not against global trade. Some people try to suggest that, as the members who go back to the election of 1988 will remember, because we in the Liberal party at the time were opposing NAFTA, the FTA agreement, as it was written. We were accused of being against trade. We said we were not. Our centre, and many of those groups that take the same position as we do, are not against trade. But we want trade to be subject to humane rules and regulations that recognize the other commitments that the countries of the world have made with respect to other aspects of life. Trade yes, but trade in a humane way.

We say to countries that try to lower the standards in order to attract investment and go on to abuse human rights and other rights, if you want to play in the game of world trade then you must play according to the rules in the world society. And the rules of the world society are not just trade rules, they're a wide range of rules.

Mr. Chairman, we were quite pleased to read Mr. Martin's presentation to the committee a while back when he said that the world's poor are becoming “increasingly marginalized”—and I'm quoting from his remarks to the committee—and he said this result was “morally indefensible”. Of course, I would take this observation one step further and say that these are violations of internationally recognized human rights. Not only are they morally indefensible, but they're actually violations of the universal declaration, they're violations of the International Covenant on Economic, Social, and Cultural Rights, and they are violations of labour agreements we've signed through the ILO.

I agree with that point made by Mr. Martin, but I must disagree with him when he said before the committee on the same day that if only marginalized countries and sectors of society could have the skills to compete in the modern economy, then they would prosper. We would say that it's not only skills these people need but the protection of a global system that does not sacrifice equity and human rights on the altar of growth and competition.

Mr. Chairman, how many minutes do we each have?

The Chair: Ten.

Mr. Warren Allmand: Where am I on this?

The Chair: About 20.

Mr. Warren Allmand: I've had 20 already! But my background....

The Chair: You've got about a minute left.

• 0950

Mr. Warren Allmand: Then I'll bring this to a close and deal with other things during the question period.

I simply want to hammer home the thought that trade agreements and trade institutions, without accountability and transparency and certain controls, result in global anarchy where big transnational corporations can ignore human rights, can ignore labour standards, environment, health, and so on.

I ask you, is this what Canadians really want? Is this what the Canadian Parliament wants? I don't think so. And I would hope this committee, which put out some very excellent reports during the past year, would urge the minister and the government to take a position in international fora to strengthen the global governance system so that trade agreements would be read in conjunction with and would be coherent with the other commitments we made under treaties, especially human rights and labour standard treaties.

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

[Translation]

Mr. Stéphan Tremblay (Lac-Saint-Jean, BQ): On a point of order, Mr. Chairman.

The Chair: Yes.

Mr. Stéphan Tremblay: I don't know whether our witnesses were told that the objective of today's meeting is for us to get information from our witnesses, in light of their expertise, and to help design priority themes for an in-depth study we will undertake in the fall. That was the objective suggested to us, and I think it would be a good idea to mention it. That is the point I wanted to make. Thank you.

The Chair: Thank you.

[English]

Mr. Warren Allmand: Mr. Chairman, I must point out that I find that very interesting. We were only advised of these hearings—myself—last Thursday. I wasn't too clear. I read the notice and it said “globalization” on the agenda. I wasn't too sure what your goals were. I thought they were related to preparations for the G-20 meeting coming up.

The Chair: I apologize to witnesses and to members for any confusion. To some extent it relates to the fact that the subject is so vast. We're trying to come to grips with it and, as Mr. Tremblay said, we're looking at the possibility of doing further studies in this area. If so, we'll have to be focused. That was the purpose of at least this beginning, to see how we can focus our energies. If we just jump into globalization itself it would be like jumping into the middle of the Atlantic Ocean. We'd just disappear. We might disappear anyway, but we might as well at least try to find a raft to hang onto.

[Translation]

Mr. Brunelle.

Professor Dorval Brunelle (Sociology, University of Quebec in Montreal, Member of the Continental Integration Research Group of UQAM, Réseau québécois sur l'intégration continentale): I would like to take a little of the time I have, Mr. Chairman, to congratulate the people who put forward this idea.

A great deal is said about globalization and there are a great many charlatans in this field, Mr. Chairman. It is always difficult to define such a vast, vague concept. At the end of my remarks, I may make a few suggestions, but, like my colleague, Mr. Allmand, I too found out quite late that I was supposed to be here this morning.

I should tell you that I wear two hats, Mr. Chairman. That happens quite often in life. One hat is that of the Continental Integration Research Group. We've been working on this issue since the start of bilateral negotiations between Canada and the United States in 1985. Do you remember the touching scene on the Plains of Abraham, when two Irishmen sang When Irish Eyes are Smiling? This is how the free trade negotiations were launched. We sans them in. Rather than following the singing path, we went the way of political economics.

My other hat is my role, with others, in opposing the free trade agreements within the Réseau québécois sur l'intégration continentale (Quebec Network on Continental Integration). It is the Quebec counterpart of the organization called Common Frontiers in Canada. It is a group made up of central labour bodies, development and peace groups, rights and freedoms groups, research groups, and so on.

I will get to the heart of the matter immediately. The title of my text: Globalization and euphoria. One of the major problems of globalization is trying to make sense of the euphoria that envelops its proponents. I have tried to give two or three reasons for this euphoria. I think that the instantaneous or almost instantaneous research facilities available in our contemporary society and economy are unique in the history of humanity. Perhaps that explains the enthusiasm of those who enjoy the benefits of globalization.

There is also another aspect of globalization—a somewhat simplistic application of the market ideology, the idea that magical thinking can solve all our political, social and environmental problems. There is an obsession with privatization, while all our public networks are going downhill.

• 0955

That is why we have to adopt a very broad view of the issue of globalization in order to deal with it. One of the most significant problems is to imaging that we have all sorts of all-purpose solutions, when, in fact, when we look at the situation more closely, we realize that one of the causes of globalization as we know it is that we have forgotten the very serious origins of the thinking surrounding the establishment of the post-war order.

It is always quite surprising, when we think about reforming the IMF, the World Bank and the WTO, that we forget that these organizations were established in 1944-45 out of a whole host of organizations. The Philadelphia Charter, which re-established the IMO in 1944, was held in the same year as the Bretton Woods agreements. The Universal Declaration of Human Rights dates back to 1948.

There is a brilliant Canadian historian by the name of Shotwell, who is quite helpful in understanding the logic underlying the establishment of the post-war order. According to Shotwell, the logic was based on the so-called three pillars: health, safety and welfare. What was done to achieve these three objectives? A number of organizations, that were complementary, were established: they focussed on the economy, but also took into account safety and security, through the Universal Declaration, the ILO, and so on.

So when we take a quick look at what is happening today, we see that there is a profound asymmetry in the development of international institutions. Particularly in the last ten years, we have seen a dramatic growth in major economic international organizations such as the IMF, the World Bank and the WTO since 1994, and the collapse, or virtual collapse, of the ILO's credibility—we need only look at the ILO's annual reports to get some idea of this.

Initially, the States made commitments regarding union, social, economic and political matters at once. At the moment, however, everything is driven by economic consideration. I think the major problem lies in the way we think about the development of the world economy and globalization at the moment.

Of course, a factor that adds to the problem—and I will come back to this—is the fact that we are so enthused about globalization that we cannot get back to the spirit that underlaid the founding of this post-war order, which was based first of all on a universal Parliament. What has become of this universal Parliament? Can we really talk about globalization without establishing a universal policy? As a matter of fact, what has become of the word “universal”, not only in the economy generally, but also in universal programs within countries?

I think that the tragedy of the present is that we are not talking about globalization, and have set aside the concept of universality.

There was another component in the development of this post- war order. I would like to focus on it for two minutes. I think the political issue is crucial here, not just because we are seeing the entire UN political system being marginalized, particularly the General Assembly, but also because we are now seeing the same type of consequences within countries. I don't know if you have been struck by that. We are in a parliamentary assembly here. Within countries, parliamentarians, the legislative authority, have been marginalized by globalization.

The parallel between the two is quite interesting: the parallel between the marginalization of the UN system and the General Assembly in particular, which has no say over universal policy, and the fact that parliamentarians have no say about globalization.

It is quite revealing that we are here this morning, appearing before parliamentarians, to whom a whole series of free trade agreements have been presented. They don't even have the time to look at them, and they certainly cannot say anything about them. In short, what is happening, and what is of concern to you and to us, is that executive democracy, as it is called, is marginalizing the legislative authority. When we marginalize the legislative authority, the whole issue of the accountability of members of Parliament comes into play.

So there is a major phenomenon behind globalization, and this is been given a name. In Europe—and it is quite interesting that this would come from Europe, where they do have a European Parliament—the phenomenon is called the “democratic deficit”. This too is a consequence of globalization.

I would like to conclude these rather general remarks by talking about another profound characteristic of the establishment of the post-war order: it is called tripartitism. At the time, the founders of the post-war order had the whole war behind them. Forty million people had died, and this is cause for serious reflexion. At the moment, people don't realize that the damage is of a similar scope. Ultimately, we are not up to the challenge.

What was this tripartitism? It was the coming together of the three major economic and political players to build and establish the post-war order. The three players were: governments, of course, the business community and, for good measure, the unions.

• 1000

Of course, at the moment, we can say that tripartitism would not apply as much, to the extent that unions are no longer as important now as they were in 1944, 1945 and 1946. That is true, but it means that other actors are required to make up the third corner of the triangle. In addition to the union movement, there would be the feminist movement, the environmental movement, and so on.

So what is happening? Where tripartitism was incorporated into major international organizations—ECOSOC—where tripartitism was even absorbed within the OECD—and that is quite a feat—with its BIAC, the Business Investment Advisory Committee, and its TUAC, the Trade Union Advisory Committee, where tripartitism was incorporated into the model student of post-war international organizations, the ILO, what are we seeing at the present time? There again, because of the collapse of the union movement, we are seeing a dramatic rise in power of two actors, which together account for all the thinking on globalization: the business community and the executive authority.

You see almost a caricature of this in the process on integrating the Americas. Everything I have spoken about, namely this asymmetrical globalization, this globalization based on inadequate thinking and poorly integrated consultation, functions, after a fashion at the OECD, at the world level, because the WTO does have more openness than other organizations. In the case of the Americas, however, this globalization functions totally in the dark. On the one hand, there are the executive authorities, and on the other is the Americas Business Forum, and that is it.

This process prepares us for something unique in history: a set of standards and measurements that clearly run counter to what has been negotiated worldwide.

My colleague, Warren Allmand, was right to be concerned a little earlier. The question now is why we are agreeing to the establishment of a globalization process of varying speeds, given that the process in the Americas clearly runs counter to all the standards that we have had to date. I think we need to think about this. Why is it that this process is so far removed from consultation, from public debate? Look at the dates. We had the bilateral agreement in 1989, the 1994 agreement and—this is a scoop, Mr. Chairman—we could very well have a free trade of the Americas agreement ready to sign in April 2001.

The Chair: I doubt that very much, but in any case...

Mr. Dorval Brunelle: I'll invite you to have a look at the text we wrote on the network's site. Perhaps it might change your mind. The document will be ready.

The Chair: I agree with your comment, but I very much doubt that there will be a free trade of the Americas agreement for many years. If you talk to the Brazilians...

Mr. Dorval Brunelle: Long live the Brazilians, Mr. Chairman. We agree on that, but you will acknowledge that in the meantime the agreement is being signed bilaterally on a piecemeal basis: Canada and Costa Rica, Canada and Chili, Mexico and Chili, and so on. Perhaps it might not be the broad agreement, but I am talking about the establishment of standards that run counter to the spirit underlying the founding of the post-war order. We see that everyday.

That leads us to a fundamental problem: the problem of reconciling the integration of the Americas with worldwide integration, on the one hand and, on the other hand, the problem of seeing how these variable speed integration mechanisms promote or could promote a genuine globalization of society, and not just a globalization of production. That is the problem. We may applaud a globalization of production, but when we realize that globalization must not be limited to that, there may be a problem that should be studied.

I am going to complete my remarks. Like my colleague, Mr. Allmand, I have not thought about possible solutions or areas of research. Perhaps you could focus on the issue of the Americas. I think things are going on there that parliamentarians are not aware of. I would draw your attention, Mr. Chairman, to article 1023 of the North American Free Trade Agreement, which is a real Scud missile, because it provides that the agreement must be renegotiated.

Everything about the negotiations on services was supposed to be back on the table as of December 31, 1998. So for a year and a half now, committees have been negotiating somewhere on extending, enlarging or maintaining the exceptions contained in NAFTA. That is not a well-known fact, and it is quite interesting that parliamentarians are not aware of it either.

• 1005

What I have referred to as the disastrous article XI should also be reviewed. Perhaps it should be re-examined. I think in some circles this article was given the provocative title “charter of rights and freedoms of investors”. I do not claim authorship of this name, I am merely quoting it, but perhaps it too deserves to be reconsidered.

So there are a number of areas that could be studied, the most important of which would deal with the citizen demonstrations we are seeing at the moment, and I say that without any servile flattery. Ultimately, everything would be for the best in the best of all possible worlds, to quote Voltaire, if we did not feel completely excluded from the dialogue on globalization as such. I would like to say that even the idea of consulting civil society, which is honourable, is definitely not enough, because what is at issue, is really maintaining a public forum for discussion of all these matters.

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

Mr. Dorval Brunelle: Thank you. Do I still have some time left?

The Chair: Excuse me. You have already gone a little over your time, and I thought you had said that you were finished.

Mainly, we would like to keep some time for questions. I'm afraid there may not be enough.

[English]

Mr. Campbell.

Mr. Bruce Campbell (Executive Director, Canadian Centre for Policy Alternatives): Thank you, Mr. Chair, and thanks to the committee for inviting me to this round table on globalization.

I'm going to confine my remarks to issues of international financial reform raised by the finance minister in his testimony a few weeks ago. I got his testimony accompanying the invitation, so that's where I'm headed today at least.

I'd like to start, because it's where he started, with a little history of Bretton Woods, which as you know was set up in 1944 under the leadership of Keynes and White. It's important that, contrary to the thrust of financial architecture reform today, their goal was actually to restrict international capital flows, because they had become large and volatile in the 1920s and really exacerbated the Depression.

In the Articles of Agreement of the IMF, specifically in article VI, every member government was granted the explicit right to control all capital movements. This article still exists, despite efforts to have it removed.

Keynes was very explicit about the need for permanent controls—permanent controls—on both inward and outward flows. It was, in his words, to prevent the rich from using their power over capital to control the nation's agenda.

It's actually quite remarkable that the Bretton Woods system was put into place at that time, over the objections of most of the world's bankers. It also should be noted that the ensuing three decades were the longest recorded period of economic expansion in history.

More significant, the distribution of these benefits to the general population was unprecedented, and inequality and poverty fell. Remember, this was a time when nations were acting under the shadow of a huge debt overhang from the war, far greater than anything that ever existed in the 1990s.

So while a steady opening of trade occurred during these three decades through successive GATT rounds, nations maintained the ability, whether actually exercised or not, to place controls on capital movements, should circumstances warrant.

When the Bretton Woods system of fixed exchange rates started to unravel in the early 1970s, it was not due to the unsustainable expansion of the welfare state but rather the emergence of private international financial markets, notably the European markets. This of course was accompanied by the re-emergence of monetary austerity as a solution to the persistent inflation of that decade. It signalled the restoration by the financial elite of the ground lost to the Keynesians in the post-war decades.

We all know that private financial markets have grown enormously in the last 20 to 25 years and that they've had a huge impact on the lives of people around the globe. In my view, it's an impact that for the most part, for most people, including in Canada, has not on balance been positive.

• 1010

Let me just make a little comparison between what I will call the Canadian golden age—that is, the three post-war decades—and the era of what I'll call neo-liberal globalization, the last 20 years, in terms of their economic and social impacts. I'll just give a few numbers to put it into perspective.

Annual GDP growth averaged 4.7% in the golden age, over three decades, and 2.5% in the globalization age. That's just a little more than half. Unemployment averaged 4.9% in the golden age and 9.4% in the globalization era. Per-capita income increased around 100% in the golden age and 7.5% in the globalization era, and that includes a drop of about 4% during the 1990s.

So I don't agree with the minister that wholesale liberalization of international capital markets is inherently a good thing and should be strived for as a goal. Admittedly he sees a role for capital controls as an interim measure for emerging market countries that are moving towards mature financial systems, and he proposes a host of measures and rules to anticipate and limit crises and the disruptive effects of capital mobility. But he does hold that free capital convertibility, albeit with better rules, is the desirable goal and one of the key foundations for a prosperous and stable world.

I don't agree. I believe, on the other hand, what's good for banks and wealthy investors is not necessarily good for the general public. Liberalized international capital markets are inherently unstable, and that's been demonstrated quite forcibly in recent years. This is especially true for short-term capital flows. Moreover, they reduce the capacity for autonomous national monetary policy. They give too much power to unelected financial elites over elected governments, who want to pursue vital domestic policy objectives, such as full employment, growth, and income distribution.

So in summary, I believe the goal of financial architecture reform should be to provide greater national autonomy and greater system stability.

As you know, Mr. Martin mentioned that Canada had put forward two suggestions for an international bankruptcy regime: a collective action clause and a standstill clause. These are laudable measures. However, they're small steps. I would urge Mr. Martin to take some risks and propose some bolder measures when he convenes his G-20 group in October.

In his role as chair of the G-20, I would suggest he do a few things. First, push the idea of the Tobin tax. He has stated his support in principle, and he should not give up on promoting the Tobin tax with his colleagues at the G-20, despite resistance from major powers. We all know it's technically feasible. It currently lacks political will. A strong advocate such as Mr. Martin on the international stage could really change some minds. I understand Canada has put the Tobin tax on the table at recent WSSD meetings, which is commendable. I understand as well there is encouraging movement on the idea amongst the political leadership of both France and Germany.

Two, I would suggest Mr. Martin push hard for a joint commitment at the G-20 to maintain article VI of the IMF charter, permitting countries to impose capital controls in times of balance-of-payment crises. The industrial country drive to get rid of article VI was suspended in the wake of the Asian crisis, but I would propose that there should be a strong statement that the whole idea be permanently shelved and that Mr. Martin should be leading the effort to ensure this.

Thirdly, Mr. Martin should also use his position to advocate for major change in IMF structural adjustment policies. There has been, despite what's happened in Asia over the last couple of years, little real change to IMF policy prescription. So take on the IMF orthodoxy head-on.

• 1015

Finally, I have just a word of caution on the whole idea of consultation. It's a good thing, but when you're consulting with NGOs around these issues and at the end of the day they don't see their perspectives reflected even partially, then the consultation becomes counterproductive. It breeds alienation and resentment and reinforces the view held by many that especially in areas of core economic policy, the government listens only to the powerful Bay Street elite.

I wasn't meaning to say anything about trade, but I want to follow up and just make a brief recommendation on Mr. Tremblay's suggestion, shifting gears to the WTO negotiations. A very important negotiation is going on on services. It was part of the built-in agenda. Canada is supposed to be putting its position on the services negotiation on the table at the end of the year.

We at the Canadian Centre for Policy Alternatives are undertaking a major study of this negotiation. We have an overview paper that will be out in a few weeks. We're planning to do a number of sectoral studies in the coming months on health care, education, environment, and a number of sectoral areas and the potential impact of that services negotiation. It's a key development in the globalization agenda, and this committee would do well to focus on that closely in the fall.

Thank you.

The Chair: Thank you very much. That was very helpful.

Professor Sjolander.

Professor Claire Turenne Sjolander (Individual Presentation): Thank you.

I'll introduce myself to the chair and to members of the committee. I'm Professor Claire Turenne Sjolander from the department of political science at the University of Ottawa. I'm in a period of transition myself; I'm about to take over as chair of my department in two and a half weeks. It was at about 4 o'clock this morning when I found the time to actually think through some of my comments, so they come from perhaps some of the confusion and protests within the institution in which I'm dealing at this time.

The Chair: In the clarity of early morning light.

Prof. Claire Turenne Sjolander: That must be it. We'll see. You can tell me afterwards.

As the other members of this panel have remarked, I too received instructions that I was to speak about globalization and to do so in ten minutes. This is a life's work, so obviously I can't speak to it in ten minutes, but I will spin off a tiny part of it that reflects my current research interests. It has to do with the way in which civil society, for want of a better term, is responding or not responding to the processes of globalization; the confrontations we've seen increasingly in the press these past few weeks or months, most recently in Calgary this week; and the stalemate we see developing. I want to provide a very crass and very superficial overview of why I see this confrontation taking place and where I think we need to think very seriously about the problems coming out of these processes.

I too was sent a copy of Minister Martin's remarks and also looked at a speech Minister Pettigrew gave on May 15 to the Global Forum 2000 meetings, where he was reflecting on what happened in Seattle. He talked about “A Collision Between Two Worlds”; those were his words. The two worlds were on the one hand the traditional world, which he defined as the world of states, of negotiating, and of international organizations; and the globalized world, which on the other hand was the world of transnational corporations, of global civil society, and of international NGOs. He said the two met in Seattle and it was ugly, and he tried to explain why it was ugly.

The collision was not only manifest in Seattle, as we all know. It was manifest in Washington and Windsor, and a little bit in Calgary this week. And it follows upon collisions we've seen in the parallel People's Summits that accompanied the APEC leaders' meetings through the mid-1990s, as well as in the virtual campaign, which some claim helped to derail the MAI.

• 1020

I want to make two points in looking at this collision. The first is that the concerns of many protesters—and here I'm not speaking in favour of hooliganism or looting or property damage or injury—are real and legitimate. They have to be taken as so, for they're not going to go away. But my concern is that largely a dialogue of the deaf is going on in terms of both state leaders and protesters.

Secondly—I do a lot of work on Canadian foreign policy, and I think this is intrinsically related—the human security agenda has to be taken, it seems to me, to its logical conclusion in terms of both its inherently holistic nature, which I don't think has yet been captured in moves in the human security agenda to date, and consultation and democracy.

I'm going to start off in these comments by trying to give a very, very synthetical overview of two common themes that I see and that some of my graduate students have seen in looking at protests around globalization.

Two common themes come out in the protests. The first is the need for greater state control. Protesters, who use a variety of different languages, talk about the need for reinforcing sovereignty, which they perceive to have been eroded by the processes of globalization.

This is not because state control is a good thing in itself, and not even because they want to return to some notion of a Keynesian welfare state, although some of them do, but because the state is, at least so far, the best locus for—and this is my second theme—democracy.

So you see two things coming out. There's an erosion of state control, and that's a problem, because it's an erosion of democracy with all its possibilities, from protecting human rights to environmental protection and so on down the line. The irony, of course, is that this is not so very different from what most states, and certainly the Canadian state, claim to want—that is, greater state control over some of these processes and more democracy. So why is there a collision? In part, I think, it's a collision of perception, but perception isn't something you can blow out the window; perception is the way in which we understand our world and the way in which we act in it.

I'll return to Minister Pettigrew's characterization of the traditional world of states as being the old world and the protesters as being the new globalized world. Protesters' perceptions that this world of states is a traditional world.... I mean, they don't feel that way. States, through international organizations for them, have facilitated and enabled the economic restructuring, which is synonymous with globalization. In this respect states are the political engines of globalization, and international organizations, such as the WTO, the IMF, and the World Bank are the architects of this process, not actors that are trying to rein in this process or gain greater control over it.

In other words, while they might accept that any individual state is at the mercy of the globalized economy, there is far more skepticism—and rightly so, I would argue—that the sum of states, as represented by the Bretton Woods institutions and their progeny, are innocent bystanders, whether by design or by happenstance.

The perception of these institutions as the architects is reinforced, I would argue, by the claims we see in the press and in most speeches of the powerlessness of states put forward by government ministers. You see this in many speeches, that states are as much the victims of these processes as are citizens: “It's not our doing but we have to deal with it, we have to react to it.”

There are downsides to globalization. We know them well. My colleagues have pointed to some of them—marginalization, continuing abuses of rights and the environment, and everything else in between. Because these things are facilitated by global economic restructuring, groups are seeking a face to globalization, some structure of accountability, before which they can raise their concerns. Their governments are saying “It's not our fault; we're just as much victims of these processes as you are.” So where else do you raise your concerns? You choose the institutions, the international financial institutions, and increasingly any global institution, which appear to be the only ones writing any of the rules for globalization.

The paradox here is that protesters see the rules as being rules that facilitate the globalization of capital—and that's the control of business over these massive processes—whereas states see these rules as helping to make the processes of globalization more transparent and thus more predictable and thus as a source of perhaps indirect control for states. So you have a contradictory analysis going on.

• 1025

The reality is that no one side is completely wrong and no one side is completely right, because cause and effect is a two-way street here. But since each side sees the issue from its own vantage point—on the one hand, that international organizations are about facilitating globalization, and on the other hand, that international organizations are helping to define the rules for globalization and thus increase the predictability and the transparency and perhaps the control—engaging in dialogue is incredibly difficult.

Each side sees the other as representing the forces of globalization, whether it's institutions that are writing the rules to facilitate it or whether it's civil society and NGOs connected by the Internet, where borders don't matter so much and they can ostensibly mobilize instantaneous protest.

The dialogue of the deaf, I would argue, comes in part because both sides are correct, and there's been a difficulty in moving off the positions.

The other problem, then, is one for democracy. I think this is a key problem. Dorval Brunelle highlighted that very well. I think he's absolutely correct. States, including the Canadian state—for example, you certainly see it in speeches that Minister Martin and Minister Pettigrew have given—argue that democracy is satisfied, because in the case of the Canadian state, the Canadian government is democratically elected. It has a role and a voice in these international organizations, and the national processes of democratic control, including testifying before committees and answering questions in the House, are adequate and sufficient, and if people don't like what's going on they can exercise their democratic choice during the next election.

For protesters, the notion of democracy as represented in those speeches doesn't square with the language used by governments and government ministers to explain globalization—that is, that the government isn't responsible, isn't to blame, for some of the ill effects but are merely the exigencies of global competitiveness, to which states must adapt in a global environment.

Because that argument seems to make sense, even to protesters, that the process is bigger than the Canadian state, then what needs to be democratically accessible, directly, are the fora that write the rules of the globalizing economy—the WTO, the IMF, the World Bank, and so forth.

The problems here are huge, and I have no instant solutions for them. We are slowly beginning, in some UN fora, which have been marginalized, as Dorval Brunelle has pointed out, to think about models of NGO participation, but NGO participation comes with a whole host of problems and contradictions in and of itself, particularly in terms of democratic accountability.

We are fundamentally talking about different possibilities for democracy, though, within the locus of or beyond the nation-state. With a transnationalized economy, increasingly the pressures are to think about a transnationalized democracy and what that would look like.

My second point relates to the human security agenda—

The Chair: I'm a little nervous, Professor, because we're running into problems with time for questions.

Prof. Claire Turenne Sjolander: I'll be much shorter on this point, I promise.

The Chair: Okay. Then we're going to try to keep the other speaker to ten minutes and we'll have some time for questions.

Prof. Claire Turenne Sjolander: My second point relates to the human security agenda, because in many ways the Canadian state has been at the forefront of consultations with NGOs, certainly within the context of the human security agenda, and certainly within the celebrated land mines exercise. That agenda has many laudable points but many shortcomings. The biggest, I would argue, is that it remains untied to the economic restructuring of globalization and the consequences on human lives. It's not linked explicitly to the trade and development agenda, and I think it absolutely needs to be. We need to start thinking about these things in a holistic manner.

While it might be true, for example, that individuals need security from the scourge of drugs and drug trafficking, as some of you might have seen on The National two nights ago, the southwestern Mexican farmer needs an economically sustainable livelihood, which is not facilitated by the current context of globalization. In current market conditions, the farmer receives four times more from the heroin producer for his poppy than he would receive for growing corn. So without that economic basis, the human security agenda, by only focusing on narrow security problems, I think misses the boat in large respect.

I'll end by saying that if the Canadian state is going to address this seriously, despite the innumerable difficulties this represents, the human security agenda, which responds to one part of the post-Cold War reality, needs to be extended to encompass that second part, globalization, and the intrinsic links that exist between human security and economic restructuring. The consultative processes, which have just begun to be developed on the human security agenda, need to also exist on the economic agenda, but it's not simply talking to NGOs; it's also thinking about democracy in a meaningful sense.

• 1030

The Chair: Thank you very much.

I don't know how Mr. Axworthy is going to welcome your suggestion to expand his already complicated area of work.

Professor Visano.

Professor Brenda Spotton Visano (Individual Presentation): Thank you, Mr. Chairman.

To facilitate the work of the translators, I will read from a prepared text.

Let me begin by expressing my appreciation to the committee and its staff for the opportunity to speak to you about globalization in the financial arena and some of the challenges posed by it.

In my brief time, I will first make a few general comments about globalization and competition and then address these generalities in the context of some specific financial developments as they may concern this committee.

Globalization is a term steeped in multiple meanings and political undertones. “Globalization” refers to such developments as greater international economic integration, or greater social integration, or both. At times, it seems it is used to refer to the increasing homogenization of culture.

Too often, however, it has been used as a euphemistic rationale for promoting the interests of those who seek markets free of oversight and regulation. This argument—summarized to highlight its inherent contradiction—amounts to lobbying for international cooperation to encourage market access because international cooperation will promote international competition.

The extent to which we need competition should not be at the expense of cooperation. We can achieve the gains from specialization and trade with appropriately targeted cooperative efforts. This is as clear in finance as it is in any international arena.

The Honourable Minister of Finance, Paul Martin, in his testimony before this committee, likened the current state of the international financial system to a game of hockey without rules or referees. The explicit implication was that once the rules and referees were in place, the game would proceed in a way that would benefit all, participants and spectators alike. I disagree.

To promote growth and well-being, competition and price-guided market exchange need more than rules and referees. To have any hope of promoting growth and well-being, we need a reasonable and equitable distribution of resources before we can even start the game.

Suppose, for illustration, that one team has access to all the resources, including the skilled players with all the time to practise, and all the necessary equipment. The other team, by contrast, is simply a group of interested persons with no equipment, no knowledge of how the game is played, and no time to practise. No matter how potentially effective the rules, the game is won before it begins. There is no game. There is no competition. But surely there is scope for cooperation in the sharing of resources to encourage a fair and interesting tournament.

Now once the clock starts ticking, we need the rules and referees, this is true, but we need the referees to be on top of the game and to have at their disposal penalties that are effective in punishing the rule breakers. Without an ability to monitor the actions of the players, the referees cannot perform their job. The rules are useless. Domination by the powerful and unscrupulous is likely, and without effective penalties to punish deviant behaviour—or worse, with penalties that reward such behaviour—anarchy results.

To move from metaphor to global finance, this means that we must strive for more than a set of rules that govern the actions of international financial markets and their players. We must seek ways that directly and indirectly level the international playing field. We must seek ways to improve the supervisors' ability to monitor financial activity, and we must seek ways to effectively promote the appropriate bearing of costs of deviant behaviour, that is, bearing in proportion to one's contribution the costs of excessive risk taking.

Now some of these objectives are beyond the immediate purview of this committee, but some objectives are squarely within your powers to promote. In the short term, there is scope for ensuring a level playing field in the form of wider and equitable access to financial services internationally. In the longer term, devoted attention should be paid to reducing the vast gap between the rich and the poor.

Before saying more on the issue, let me set in the policy-making context the “trilemma” facing this committee. For purposes of illustration, I will state the following in the extreme. You are faced with a choice between promoting an autonomous nation-state, integration with other national economies, and sound public economic management. The trilemma—a sort of dilemma in three dimensions—exists because you can choose at most two of these objectives to target. So in choosing to develop sound public policy, you must choose between either the autonomous nation-state or integration with other national economies, but not both.

• 1035

In the area of financial services, taking as given international integration of financial markets and your choice to develop public policy around these developments, you must then focus on international financial policies, forgoing the autonomous nation-state perspective and its concomitant objectives. The role for Canada, in other words, is as a leader in developing internationally an effectively regulated financial system that parallels—but better to surpass—the historical soundness, stability, and accessibility of the Canadian financial system.

The challenge before this committee is to find policies that can navigate a path between the competing alternatives of fairer global trade in financial services and effective public financial services management. This challenge is especially severe. Our traditional and well-entrenched understanding of what is meant by financial services is undermined considerably by the developments in information communications technologies.

Never before in the history of western financial markets has there been technological change that at once affects the structure, the process, and the content of these markets. In recent history, Canada has witnessed a significant blurring of the lines demarcating the traditional four pillars of the financial services industry. Where once we had insurance companies dealing exclusively in property and life insurance, commercial banks in short- and medium-term loans, etc., now we have one financial superstructure.

But the process of change has not stopped. Until very recently it remained the case that financial services, however integrated, were exclusively and clearly financial services offered by a financial company that was chartered domestically and regulated as such. In the past couple of years, but with unmistakable increasing frequency and importance, we are witnessing the clear and gradual blurring of financial and non-financial services. Where once it was a chartered financial corporation offering financial services and products, now it may well be an unregulated software company or an Internet company or simply a network of connected Internet services.

It is well known that the scope for this committee to concern itself at all with financial sector developments lies in the fact that financial stability is necessary for economic stability. As such, the recent developments currently under investigation by the various international financial committees is something this committee should monitor very closely.

Ensuring that risks are both measured and monitored will go some distance in promoting a more stable international financial system, but we need as well to seek a means of preventing systemic collapse in a way that does not bail out those who created the crisis by undertaking excessive risk. Such improved measures would go a distance toward promoting a fair international financial system.

Recent financial sector developments suggest, however, a more active role for this committee. Consider by way of brief example the online investing opportunities that are rendered accessible by software products and Internet services of non-financial firms. The possibility of trading directly without the intervention of even a broker—afforded by software that supplies real-time, instantaneous, electronic matching of orders—is currently available and growing in demand.

But non-financial firms providing the electronic and software equivalent of brokerage services are not regulated by any of the financial overseers. Any new legislation expected to come out of these committees that is created by those holding more traditional and rigid views of the financial services industry risks ignoring too many of these peripheral but increasingly important developments.

Because these transactions are often across national boundaries, the responsibility for monitoring and promoting the international—or possibly coordinated national—regulation of these quasi-financial companies and activities lies clearly within the mandate of this committee. There is scope, I believe, for this committee to exercise enhanced oversight and leadership in the regulation of international electronic financial services.

• 1040

There is need for public debate around these developments for promoting effectively international financial stability, soundness, and accessibility. Only in this way may we start to level the playing field in a manner that truly encourages the equitable growth and distribution of global wealth.

Thank you. Merci.

The Chair: Thank you very much, Ms. Visano. It sounds like an invitation to enter into a turf war with the finance committee. We'll negotiate our way around that.

Thank you.

I will have to hold the questioning to 20 minutes because we have another very important panel coming too. Unfortunately, we had to squeeze in so many people this morning. I know people want to ask questions, but maybe we can go to five-minute rounds and see how far we get.

Mr. Grewal, do you have any questions to ask?

Mr. Gurmant Grewal (Surrey Central, Canadian Alliance): I will be very brief, Mr. Chairman. First of all, thank you. I welcome the witnesses to the committee. I really enjoyed their academic and qualitative presentations.

I have just a couple of questions. First of all, what is the single most important challenge any of the witnesses would like to highlight that the Canadian government faces in globalization, particularly in light of developing the international policies that will address the impact of globalization?

Also, in what policy area should the committee concentrate its efforts, if it pursues further study, and why?

Mr. Campbell mentioned that the finance minister should push the IMF structural changes. Can you list what structural changes the finance minister should push?

Those are brief questions for my five minutes.

The Chair: Bruce.

Mr. Bruce Campbell: Since I was singled out, maybe I'll start, briefly.

I was trying to get at the IMF structural adjustment policies that have been imposed on debtor nations, primarily in the third world and the emerging market world, over the last two decades. There is a mindset or an ideological bedrock that governs the policies the IMF and the World Bank apply to debtor countries in crisis. It's sometimes called the “Washington consensus”. It's a fairly simple set of policies that are applied, more or less across the board.

The results have been almost uniformly disastrous in terms of worsening the economic capabilities, capacities, and potentialities of the countries to which it's been applied. It has uniformly aggravated inequality and poverty and has caused severe damage, all with a view to allowing creditors and creditor nations to continue having their debts serviced.

So I'm suggesting there has been a real challenge to the structural adjustment orthodoxy, or certainly a chink in the armour, in the wake of the Asian crisis. For a number of countries, it visibly exacerbated the crisis. A number of very sort of mainstream economic types, including within the World Bank, were critical.

• 1045

So the opportunity to challenge that orthodoxy and actually kind of shift it to a set of policies that facilitate and allow economic growth and distribution and the maintenance of health care and so forth, to just allow the development process to proceed, is changing that basic mindset of the IMF that I was referring to.

The most important challenge is for nations to maintain that balance between what's going on globally and national autonomy to pursue national objectives, in a world where transnational corporate power really threatens the ability of nations to pursue their national objectives in the broad public interest.

Thanks.

The Chair: There's about half a minute left in that area. Does somebody want to answer what the most important challenge will be?

[Translation]

Mr. Dorval Brunelle: I'd like to say a few words about that.

[English]

The Chair: Can you be fairly brief?

[Translation]

Mr. Dorval Brunelle: Yes.

[English]

The Chair: Mr. Brunelle, and then Mr. Allmand.

[Translation]

Mr. Dorval Brunelle: I think that this is the wrong way of framing the issue. There is not a single objective or issue. In order for a government to do what governments are supposed to do, it must implement the standards it signs. That is all. If the government signed the International Covenant on Economic, Social and Cultural Rights, it should apply it in domestic and foreign affairs. Again it will not be criticized outside the country for not having applied the covenant, as happened recently. And if the government can do that at home, it can do it abroad as well. That is all, but it is a huge task.

[English]

The Chair: Mr. Allmand.

Mr. Warren Allmand: I agree with Mr. Brunelle that there are many challenges, but one of the greatest ones is for Mr. Martin and the Canadian government to rebut the ridiculous response we get from many state actors—finance ministers and trade ministers—that international business investment and financing has nothing to do with human rights, labour standards, and environmental standards. That position by many of the finance ministers and trade ministers has to be rebutted and rejected, and it hasn't been done so far.

The Chair: Okay.

We'll pass on to Monsieur Tremblay.

[Translation]

Mr. Stéphan Tremblay: My question is directed to all our witnesses. First of all, I would like to thank them for being here, but I would also like to apologize to them for giving them so little time to speak on such a vast topic. It is almost embarrassing that we gave you barely 10 minutes to talk about the social transformation or even the revolution we are seeing at the moment.

I learned from my history courses that people fought and died to preserve democracy. There seems to be one recurring theme in your remarks; namely, that we are living in an age when democracy is being worn away and is in fact seriously threatened. Some of you even spoke about the role that we should be playing as parliamentarians.

In my view, if democracy is threatened, we are no longer really living in a democracy. I would therefore ask you the following question: in future, should we be giving priority to the effects of globalization on democracy, for example the fact that financial considerations are placed ahead of human rights and citizens' representation? Is it not ridiculous to be talking about that today merely within the context of a round table?

Is our role as parliamentarians to prioritize the question of the impact of globalization on the autonomy of States? It seems to me that it will be increasingly difficult to maintain social cohesion if the autonomy of States is threatened.

This was the subject which was proposed to this committee originally. I would remind you that 50,000 citizens signed a petition calling for an in-depth study on the subject. I have been calling for such a study for two years and two months now, and I am sorry to see that we will be spending only a brief period of two hours on it today.

Do you think that the government and parliamentarians, not just here but in other countries around the world, have a role to play within the context of globalization? Should we make this question a priority as soon as possible and recognize its urgency?

• 1050

A voice: That was a speech.

The Chair: A speech and a question. Do you have any remarks to make on what Mr. Tremblay has just said?

Prof. Claire Turenne Sjolander: The short answer is yes. That sums it all up.

I think it is essential on at least two levels. First of all, from my studies in democracy, I remember that the nation-State is the most propitious environment for democracy to express its voice and its will. It is extremely difficult to define how a transnational democracy would operate.

I find it irrelevant, and I am in complete agreement with Mr. Allmand on this point, for ministers of Trade or Finance to state that international trade has nothing to do with human rights, environmental degradation or civil society in all its complexity. On the contrary, international trade has everything to do with these fields.

I think therefore that the short answer is yes. I feel it is a priority, and the threat of damage to the social fabric is very serious.

[English]

The Chair: Mr. Allmand.

Mr. Warren Allmand: Very briefly, democracy is being threatened on many fronts. Democracy is much more than free and fair elections. It also includes an equitable distribution of wealth. It include a full respect for human rights. The majority that wins the election has to make sure the minority that doesn't have political power is also fully protected.

As a result of globalization, trade, and investment in financial institutions, the gap between the rich and poor is becoming.... Not only are political institutions such as parliaments losing power, but there's more and more poverty among the peoples of the world.

By the way, wealth is growing, but the distribution of that wealth is being more and more badly distributed. That is an attack on democracy as well, because democracy means the wealth should be distributed more equitably. We've been going backwards rather than forwards.

I think Mr. Campbell made those points in his remarks.

[Translation]

The Chair: Mr. Brunelle.

Mr. Dorval Brunelle: I think that we must take the finding that we are living in a democratic deficit very seriously. It is recognized almost everywhere, even by the Europeans. We must really take this very seriously. It comes at us from all over and we should perhaps try to see how we can reverse the trend which has led to this situation. It was discussed this morning, and I will not go back over it.

There are three things which seem essential to me. Information is not getting out. Just try to find out what is going on with regard to the integration of the Americas. I defy you to find out, even though there are central stakes involved.

Second, it is rather strange that at a time when we are supposed to be more democratic, there has never been so much secrecy. By secrecy I mean that very important agreements are negotiated in complicity with businessmen, for example. They play too important a role in negotiating trade agreements, or at very least, their role must be counterbalanced.

Third, I think we are in the process of losing space for the exchange of ideas in all this. There is no place reserved for discussion. There is a place for demonstrations, and many have taken place—and we will see more of them—but there is no space for discussion. I had thought up to now that parliaments and assemblies, among others, were places for discussion. It is not enough, however. So there you are.

[English]

The Chair: We'll have to move on, just because we're trying to keep it to five minutes.

Mr. Gruending.

Mr. Dennis Gruending (Saskatoon—Rosetown—Biggar, NDP): Thank you, Mr. Chairman.

I would like to question each one of you, but we clearly don't have time. We have another group waiting. So I'm going to ask one question to Professor Sjolander.

You've talked about how demonstrations such as the one in Seattle indicate that people want these international organizations to be more accessible because they have an increasing amount of power over us. I'm wondering if you could think out loud, just a little bit further, on what kind of organization might provide that. I'm thinking on two levels.

As parliamentarians, we often feel we're quite powerless, and citizens' groups in civil society feel the same way. Do you have anything you can tell us about what you see as models perhaps, where we could have more democracy and clarity, both internationally and nationally.

• 1055

Prof. Claire Turenne Sjolander: I don't have any models in mind. I think we're in a work in progress. We see the European Parliament and the attempts within the context of the European Union to make the European Parliament more representative and to expand its ambit of power and authority. That's a very slow road. It has gone from being a completely marginal organization to one that has slightly more authority, and may have increasingly more authority over time, but it's a long road to hoe.

I think as the first instance, though, what would help is two things. One is more transparency, more flow of information so that these institutions are understood, decision-making processes are understood, and exactly what's being said where is understood.

I don't think it's sufficient for Minister Martin to say to this committee, “Well, it's democratic because I'm elected and I'm a governor, and therefore it's a democratic process”, if people don't understand what's going on within the context of these institutions or what levers to pull within their own national governments in order to make their voices heard. So information flow is one really important and serious thing that we need to look at.

The concomitant there is that I still think national governments and national parliaments are the best place in which these things need to be expressed. So the links between national governments and the authority of national governments within international organizations and those decision-making processes need to be understood. It needs to be more transparent, and parliamentarians need to be more involved.

I think that's where we have to start. We start with existing institutional structures.

Mr. Dennis Gruending: So you're saying that the Canadian parliamentary institutions have to be more accessible and more transparent, which I think also speaks to some of the comments made by Mr. Mills and and other parliamentarians, including Mr. Turner, recently.

Prof. Claire Turenne Sjolander: Yes.

The Chair: Thank you.

Ms. Marleau.

Ms. Diane Marleau (Sudbury, Lib.): It's a great dilemma for all of us. How do you bring democracy to the global level?

There are some very tiny steps being undertaken, one of which is, of course, the international criminal court. It's a very small beginning, but there needs to be much more of this particular kind of action on the global level.

I heard some remarks by Mr. Campbell about how the developing countries are treated in terms of restructuring with the IMF and the Bretton Woods institutions, but you can't just say we're going to have blanket forgiveness for all the debts when those particular countries have maybe ten families who control all the money and have all the wealth and all the power, without changing that particular structure at that level as well.

So while you have to be careful how you do it, you do have to push the countries into having the kinds of institutions that will allow the population to benefit from the wealth that is there in that country. We see that time and again—just like the Asian financial crisis.

Anyone who looked at what was happening in that country knew the banking systems there were really outrageous. They were lending money without being paid back, to friends, and so on, and in the end no one said anything as long as everyone was making money.

How do you expect us, here in Canada, to get the information and get it out to the people? This is really a problem of how you inform the population of some of the goings-on in some of these countries, which may have dramatic effects on our own pocketbooks, let alone on those of the people who live there who are extremely poor.

Not only that, the media now is about making money; it's no longer about informing people. It informs on sensation, but that's about the end of it.

What are your suggestions as to how we can strengthen the media or information-gathering agencies so that the people and the parliamentarians can actually have information on which to make decisions, on which to bring recommendations forward?

Mr. Warren Allmand: Mr. Chairman, very briefly, people have asked for models to look at. While the European Union is far from perfect, they have advances on other regional global institutions in that, for example, to become members you have to comply with the European charter of human rights. We've seen eastern European countries having to abolish the death penalty and do other things to become members.

• 1100

They also have a parliamentary assembly—and I congratulate the chair for pressing for parliamentary assemblies for the WTO and for the OAS. I think there are things that can be done, and I think the European model probably is the most advanced over other regional trade organizations of the world. I would suggest that some of the things they're doing, and some of the things the chair has tried to initiate with WTO and the OAS, are worthwhile.

[Translation]

Mr. Dorval Brunelle: May I answer this question?

I thought that if there was one place where information could be collected, it would be in a parliament. I find this question rather surprising because if you do not have the information, why would you think that we might have it? We have to find a way to combat this conspiracy, to combat this secrecy.

Senator Moynihan of the United States made a very startling statement in a recent issue of Foreign Affairs. Somebody else quoted from it. I cannot give you the reference at the moment. He calculated that 62% of public documents are classified secret in the United States at the present time, even more than during the worst moments of the Cold War. So there is a problem with respect to access to information.

I will give you an example. Earlier I quoted from clause 1023 of NAFTA, which required the reopening of negotiations on the inclusion of services on December 31, 1998. Since then, of course, a NAFTA Commission was set up. It held its first meeting in Paris. They had a choice of Mexico, Washington or Ottawa. They decided that the NAFTA Commission would hold its meeting in Paris. As you know, the committee issued a communique in Paris, and I quote:

We acknowledge the progress achieved across the NAFTA work program, comprising the activities of more than 20 committees and working groups, and a wide range of additional subsidiary bodies.

So as we speak, there are 20 committees somewhere negotiating expanded terms for NAFTA. That is quite something, isn't it? Did you know this? Who are they? What are they doing? Can we get this information? Do you not find it rather surprising? Among the services being considered are health services and education services, which fall within provincial jurisdiction, by the way.

Thus it is not just a slogan when we speak about executive democracy. It shows that crucial issues are being dealt with by committees instead of being debated in public, and by committees which are able to meet in Paris, not that there is anything wrong with that. Paris is a very pleasant city. It is still very strange, however.

While I think of it, could we have the text of the FTAA Accord? Do you have the text for the free trade agreement which is being negotiated for the Americas? We were able to get the MAI text. Even though it may have been secret we were able to get the text of the Multilateral Accord on Investment. There is a good chance now that this text will be on the table next year, and nobody is familiar with it. It should be possible to get it.

[English]

The Chair: In fact, our subcommittee on trade is doing a study of the free trade area of the Americas. The problem with getting a text is that it isn't a text until it's agreed on, and so what you want is all the brackets and propositions from—

[Translation]

Mr. Dorval Brunelle: That is how we got the MAI text, Mr. Chairman.

[English]

The Chair: There are 34 countries negotiating. You'd have to get everyone's negotiating positions, and unfortunately there's a limit to the capacity of our researchers in our own offices to both absorb and manage this information.

I don't disagree with your thesis, but....

[Translation]

Mr. Dorval Brunelle: If you have difficulties,

[English]

we'll get it for you.

[Translation]

The Chair: That is very kind.

Mr. Dorval Brunelle: If you have difficulties, we could ask colleagues in Brazil for it.

The Chair: No, no. When we want the text, we can always ask for them elsewhere. That is what I used to do when I was a professor of international law.

[English]

Mr. Bruce Campbell: Can I make a comment?

The Chair: Very quickly, because we're going to wrap up this panel. We're now eating into the time.

Mr. Bruce Campbell: I want to pick up on one of the points made. Yes, of course, there are huge discrepancies in income and wealth within those countries within the south; 450 billionaires have combined assets of the bottom 50% of humanity. And yes, in Latin America and Asia, the number of those billionaires living in those countries has jumped from five to about 125. There are huge inequalities and they are growing. The top 10% of humanity controls 50% of income, and in wealth it's even greater. I would argue, and it's substantiated by fact, that the growing gaps in income are much greater between the north and the south than within those. They are happening in Canada. They are happening everywhere.

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It has happened largely in the last 20 to 25 years as a result of the huge net outflows that have gone to servicing northern debt, either official debt or private debt, in those two decades. That's a big factor behind that growing income gap. That has to be looked at when you're looking at the policies of the IMF and the World Bank and structural adjustment. You want to reverse that situation.

The Chair: Thank you very much. I'd like to thank all the panellists. I certainly agree with Mr. Tremblay's observation—it's frustrating. But this is the beginning of a process; it's not the end. We're trying to get our minds around whether there's some way in which we can study this usefully. Many of your observations have been very helpful. I think you'll find many of the issues that were raised this morning this committee did raise in our report on the WTO, in which we tried to come to grips with many of these same concerns. We're revisiting familiar terrain.

Mr. Allmand mentioned the fact that this committee has been pushing the idea of greater parliamentarians' participation in many international organizations as a way of addressing the demographic deficit that Professor Brunelle spoke of. That's only one way, but it is a way. I think Professor Brunelle has put us squarely into the problem of well, if you're going to participate, you're going to have to be informed and have an informed participation. This is going to be another challenge.

Tomorrow Mr. Pettigrew is coming before the committee to speak about the FTAA. Members will have a chance to ask him questions. I don't know whether we'll get the text because these are negotiating documents.

Thank you very much for coming. We appreciate your appearance very much.

Colleagues, I'm not going to adjourn because we're going to have a new session; we're getting Mr. Culpeper and Mr. Valaskakis up here. So let's just move on right away. Don't move away.

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The Chair: We're going to start again, but obviously this is just a follow-on. Our witnesses have heard the previous discussion, so you'll know what we're in. I'm just going to take you on the list the way you're presented in the round table. I'll ask Mr. Culpeper to go first, and we'll just go down the list the way it is.

Mr. Roy Culpeper (President, North-South Institute): Thank you, Mr. Chairman. I've distributed a longer paper to members of the committee.

[Translation]

I think it has been translated into French.

[English]

But I'm only going to touch on the highlights and respond to some of the discussion earlier this morning to try to focus on where the committee might put its attention on this issue.

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Like Mr. Allmand, I think it's time to stop asking whether globalization is good or bad. This is the wrong question, since it's obviously both good and bad. Countries and people around the world can gain from greater access and do in fact gain from greater access to global markets. But the benefits of globalization, as we all know, are often unevenly distributed, and global markets also bring in their wake financial turmoil, economic upheaval, and social dislocation.

Therefore I think it's much more pertinent to ask whether the current rules and institutions governing globalization are adequate. In other words, can our current system of global governance effectively encourage the good while reducing the bad effects of global markets?

[Translation]

The answer to this question is no and that is clear. Our existing rules and institutions are powerless to prevent serious financial crises nor can they contain or mitigate the havoc they wreak. Recognizing the serious shortcomings in global government, the G-7 finance ministers and governors of central banks finally realized, during the crises which have taken place in recent years, that a reform of financial architecture was urgently required.

[English]

To spearhead the reforms, the G-7 created a Financial Stability Forum, and last December assembled a new group of 20 chaired by Finance Minister Paul Martin, who appeared here a couple of weeks ago. Many of my comments will actually be fairly critical of some of the things he said and the way he presented those reforms.

In parallel to the G-20 and to the Financial Stability Forum, the International Monetary Fund, the World Bank, and other global bodies are presently engaged in various initiatives to make the international financial system more stable.

Unfortunately, judging from the scope of the so-called reforms being considered, in my view these initiatives will not go very far toward tackling the fundamental sources of financial instability.

Let me spell out what is right and what is wrong with these initiatives. On the positive side, the G-7 countries have made an obvious and, I think on the whole, a genuine attempt to include other countries of the world in their deliberations. This is most apparent in the formation of the G-20, a body that includes other countries in addition to the G-7—Argentina, Brazil, China, India, Indonesia, Korea, Mexico, Saudi Arabia, South Africa, and Turkey. These are in fact the developing countries carrying the most weight in the global economy.

[Translation]

Initiatives taken to date are designed to strengthen the financial sector of countries with emerging market economies. By increasing transparency and helping to establish the rules required to avoid overly risky loans, these initiatives reduce vulnerability to speculations and the sudden exodus of capital. I feel that this too is a worthwhile objective.

[English]

These are steps in the right direction, but only tiny steps.

On the negative side, you have to wonder—and Mr. Chairman, this is actually one of the most important points I'm going to make—whether the G-7 countries are really prepared to cede any power. Why, for example, did they create two new bodies—a Financial Stability Forum and a G-20—instead of one? Why indeed has the G-7 not decided to dissolve entirely and be replaced by the G-20? The thrust of my remarks is going to be directed to the governance that is exercised by the G-7 over the world economy and how you change that.

You get a strong suspicion from what's going on that the G-7 wishes to keep control of the agenda while attempting to co-opt the other countries on a selective basis.

The Financial Stability Forum, for example, always includes the G-7 and invites on an ad hoc basis a few other so-called systemically significant countries to its meetings. Thus at its last meeting in Singapore in March, Australia, the Netherlands, Hong Kong, and Singapore were the only non-G-7 countries invited.

Moreover, both of these bodies in my view have a very narrow and very technocratic agenda. It is revealing that the more inclusive G-20 seems to have an even narrower focus than the highly select Financial Stability Forum. While the G-20 has decided to focus on transparency and standards in the financial sector policies of developing countries in emerging markets, the Financial Stability Forum has undertaken a review of hedge funds, capital market volatility, and offshore banking centres. But so far, little has come out of the forum that would change the status quo. For example, it has recommended against regulating hedge funds and against imposing capital controls.

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What's missing from this agenda? First, it focuses largely on the victims of crisis, which is perhaps understandable, but it should focus instead on the causes of crisis or, if you prefer, on the perpetrators of crisis. To rectify the imbalance I think we must contemplate measures that affect the behaviour and transparency of the industrial countries and private investors as much as, or more than, the developing countries. For example, I believe, with Finance Minister Martin, that there should be internationally sanctioned standstills on debt servicing payments for countries experiencing financial crisis through no fault of their own. There should be increased disclosure by and regulation of the highly secretive hedge funds and the banks that lend to them. Unsurprisingly, however, private sector representatives and some members of the G-7 have been very unsympathetic to these ideas.

Second, if we truly want to reform global financial governance, the policies of every country should be open to scrutiny and to change in the interest of the global community. The largest and most powerful—the United States, the European Union, and Japan—are not subjected to such scrutiny, yet their policies have profound effects on the rest of the world. At the other end of the scale, the poorest countries should have a voice. The G-20 only recognizes the largest developing countries as systemically significant. This reflects a disdain for the problems of the poorest, which are among the world's most difficult and deserving of a much greater share of international attention and resources.

Canada can play an important role in reforming global governance. There are a number of issues concerning the global financial system that are simply not being addressed. As I have mentioned, we have already taken a leading position on standstills, against the resistance of others in the G-7 and the private sector. Another issue is the so-called “mission creep” of the IMF, which needs to be checked; for example, by terminating its role as a development financing agency. But at the same time—and this might surprise you a bit more—I believe its core strengths need to be reinforced; for example, by enabling it to issue its own liquidity to countries in crisis. I can elaborate on that in the question period if you want. Also not being addressed is the world's exchange rate system, and I'd really appreciate a discussion on that, particularly because Tom Courchene is on this panel. Finally, the poorer and smaller developing countries need more voice in the world's highest councils, and they need champions among the developed countries such as Canada to advance their cause.

To conclude, I believe the steps taken over the last year to reform global financial governance are important, but they're too restricted to the technical issues and they don't really tackle some of the thorniest questions in which powerful interests in the G-7 countries have a stake. It is also evident that the G-7 are not yet ready to surrender their control of the agenda, even though they recognize that they must get buy-in from an expanding circle of countries if those countries are to open their economies and societies both to the benefits and to the vagaries of global markets. But the G-20 nevertheless represents a start on which Canada can build to ensure both that global governance becomes more inclusive and that globalization becomes more equitable.

Mr. Chairman, if you will permit me, let me just suggest some of the things the committee might focus on in its agenda over the coming months. First of all, there's the reshaping of the IMF. I find it quite ironic that the reflection on where the IMF should go has been almost entirely undertaken by the United States and the International Financial Institution Advisory Commission, the Meltzer Commission, for example, which brought down its report recently. It's time that this discussion became much more international, because the IMF is an international body.

Second, there's the exchange rate system. We hear a lot about dollarization these days, and the North-South Institute is going to have a conference later this year on whether or not dollarization is a good thing. We hear a lot about whether there's any middle ground between floating exchange rates and fixed exchange rates. But let's talk about that in the question period.

I would strongly suggest that the G-20 be given a much wider agenda. I believe what Jeffrey Sachs said in an article in The Economist about a year ago, that the process is as important as the product.

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The G-20, as you know, is populated by finance ministers and central bank governors. Why can't the G-20 be a committee of heads of state, who can bring together all of these various concerns, whether they be financial instability, the trade system, human rights, and so forth. The buck stops at the heads of state. If you have committees that are populated by finance ministers or trade ministers, then naturally they're going to concentrate on finance issues or trade issues. So I would suggest that if we're going to go anywhere with the G-20, it should be at the head-of-state level.

Finally, there's the role of civil society organizations in the multilateral institutions. The North-South Institute is presently undertaking a study of the role of civil society organizations in the OAS, the IMF, the World Bank, and the WTO. I think there are issues to be explored on both sides, because I think there are advantages for the multilateral institutions and the civil society organizations in having a much more positive win-win relationship than they do at present.

Thank you, Mr. Chairman.

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

Madam Sreenivasan. I think I left out a syllable there.

Ms. Gauri Sreenivasan (Coordinator, Policy, Canadian Council for International Cooperation): You did very well. Thank you, Mr. Chairman.

I'm Gauri Sreenivasan, and I'm here on behalf of the Canadian Council for International Cooperation, which is an umbrella group representing over 100 of Canada's development NGOs. I would like to thank you for the opportunity to appear this morning.

For the discussions with the committee this morning on globalization, I wanted first to share with you the outcomes of a very interesting process we've been involved in with a number of our members to run public forums for citizen deliberation on the issue of globalization, what the Canadian government and citizens should be doing about it—so non-expert citizen discussions of globalization. The outcomes of these forums provide, I think, an interesting starting point to then identify a few concrete entry points in Canadian policy for the committee, if it's interested in exploring issues of globalization in the fall.

In terms of these deliberation forums, last year CCIC and its members held over 30 of these public forums in different regions of Canada. Each forum allowed citizens from an explicit cross-section of society—business people, youth, teachers, students—to exchange views on globalization.

Unlike the polarized debates that dominate public discussion on many issues, these forums provided a chance to test ideas and consider some of the grey areas. By working through choices and trade-offs associated with different aspects of globalization, ordinary people can clarify for themselves what is most important to them and then may find common ground from which alternative policy directions can develop.

We surveyed people's views before and after these forums. Given the process of reflection that people went through, in our view the post-forum questionnaire results represent a much more considered opinion by Canadians than might be obtained from a one-time pool with regard to globalization.

It's certainly not representative, as it was just done in a number of regions and only 30 of them were done. But let me provide a thumbnail sketch of our findings regarding this sampling of Canadians' views, hopes, and concerns about globalization.

First, citizens did recognize that globalization is having a major impact on Canadians and on people around the world, and although they recognize the benefits of globalization, they expressed concerns about the directions it has taken. In particular they were disturbed by the gap between the rich and the poor and by many impacts of globalization on local economies and communities. There was a very strong sense that change is needed, that Canadians and Canada cannot sleepwalk through the process of globalization but should work to ensure that globalization proceeds in a way that reflects Canadian values of fairness and equality.

[Translation]

Many participants recognize the value of competition in encouraging innovation and excellence, but worry that the rules of the game may not be fair. Most of them fear that the relentless growth of businesses may increasingly reduce true competition. Participants feel that businesses, governments and individuals must be more accountable.

People do not accept the fact that the government is powerless in the face of globalization. Many support the idea that Canada should play a leadership role at the international level to make globalization more fair and to reduce negative effects.

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Participants subscribed to the idea of a fairer world economy, but had a hard time imagining what that would look like. A number of them could not see how we might solve the problem of imbalance between research and power.

[English]

I think we are challenged then as government, parliamentarians, and NGOs to ensure that Canadian policies and practices keep pace with these values and concerns of Canadians. If we turn now to the agenda of the committee on this kind of brainstorming session on how the committee could address globalization, I'd like to point to three possible areas for further study by the committee that could help build on these values and preoccupations of citizens; that is, how Canada can help identify and promote some concrete measures to build a fairer and more equitable and inclusive global economy. The three areas I'll briefly touch on are in the area of trade, on the issue of corporate accountability, and on the question of global financial governance.

The first area is building fairness into the global trading regime. What is the role for Canada? We heard a number of discussions about this on the earlier panel, and I think the collapse of trade talks in Seattle has given many reasons to pause for thought about what is the way to proceed. I think clearly just trying to dust ourselves off and get back into the same game is short-sighted. There are many possible areas for further study to try to get at that question. As citizens in the CCIC deliberations expressed, how do you address the inequities and power imbalances among countries? One area that has received only limited discussion in the trade debate in Canada is the importance for wealthy countries to address the needs and agenda of developing countries if global trade is to proceed in a more democratic way, and to address serious global issues of poverty and insecurity.

Recently in the Globe and Mail, International Trade Minister Pettigrew was profiled for trying to re-ignite one-off bilateral trade deals as a strategy to address the broader global trade talk breakdown. In our view, if Minister Pettigrew is interested, and the committee is interested, in developing Canadian leadership to help break the trade impasse, this committee could explore a menu of options for a Canadian agenda to make trade work for developing countries—our Canadian role. Witnesses might even include representatives from developing countries.

I think the study's scope would include issues of market access for developing countries and the acceptance of diversity in national development strategies, that is, building recognition that there really are no cookie-cutter approaches to national economic growth. It would also include the issue of north-south technology transfer and technical assistance to southern countries; rethinking patenting trends to assure the protection of communal and indigenous knowledge as well as basic social needs, including medicines; the whole thorny issue of linking socioeconomic and environmental rule-making; and, finally, identifying means for the full participation of poor countries in trade rule-making.

That's just a snapshot of some of the issues in that basket, I think. A second area for policy inquiry by this committee is the whole question of building the tool box for ensuring Canadian corporate accountability. The growing power of corporations was flagged consistently by citizens in our public deliberations. The concern that individuals and governments work to ensure corporate accountability emerged as a dominant thread. This confirms the recent Environics poll that placed Canadian citizens' expectations of ethical standards for corporations second highest out of 23 nations.

There is, we believe, a growing recognition that industry initiatives often need to be complemented by a stronger regulatory framework in order to ensure corporate accountability. This is building, with increasing and egregious examples of the negative impact of Canadian companies on communities abroad.

Canada is actually far behind current international standards for ensuring corporate accountability. As one very bad example, the impunity with which Talisman acts in Sudan undermines Canada's credibility abroad. And it undermines our diplomatic effectiveness.

We would make the following suggestions to the committee. First, that it might usefully explore various tools to empower government to respond to rogue corporations, including expanding government's power to act on extreme cases through the Special Economic Measures Act.

Secondly, the committee might review the legislative gap between how Canadian corporations are currently regulated and the need for a more robust framework and principles covering their international operations.

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Our NGO colleagues in the United Kingdom have developed a strong set of general principles for company law, for example. On that note, thirdly, the committee could help connect Canada to more advanced international best practices by reviewing initiatives that promote corporate social responsibility in Europe. For example, in England there is a minister for corporate citizenship, and Norway has recently drafted guidelines for Norwegian companies abroad.

The third area of policy we'd like to flag, to address making globalization fairer and more equitable, is the area of global financial architecture.

The committee heard recently from the Minister of Finance on this, and, as Roy has just done, other colleagues will likely explore this issue in greater depth. Let me say briefly that from CCIC's perspective, Minister Martin has played an important role in broadening participation in the debate on international financial governance through the G-20, but still there are very important areas of concern that will be left out of the G-20 meetings this fall, particularly regarding the need to make the international financial system fairer to the poorest countries, which are more borrowers and lenders and for which a different set of issues is key. We think this committee might usefully bring some political attention to the question of better delineating the role of the IMF.

Again, as Mr. Culpeper has just pointed out, this would be towards clarifying what really is, appropriately in its mandate, short-term financing, financial monitoring, and early warning rules versus involvement in long-term development and poverty reduction strategies. Second, there is the issue of building broader political acceptance for a variety of capital controls that both discourage short-term flows but also encourage long-term investment in the productive economy. Third, there is the issue of options for building a more stable international regime for long-term development financing, particularly for the poorest countries for which private investment flows are meagre. Last, and important I think, is the question of the democratization of the international financial institutions—greater accountability mechanisms that provide checks and balances to the power of the wealthiest countries, such as strengthened inspection panels and openness to scrutiny by civil society.

I'll stop there, having flagged those three possible areas for discussion later in questions: the question of how can Canada play a role in building an agenda for making trade work for developing countries; the whole issue of increasing our ability to get corporate accountability for actions of Canadian corporations overseas; and, lastly, this question of building fairer global financial architecture.

The Chair: Thank you very much. That's very helpful.

Colleagues, Mr. Schmitz appended to his discussion paper the report that the witness was speaking about.

It was pulled off your website, if I may say.

Ms. Gauri Sreenivasan: Excellent.

The Chair: Without your permission, but I presume you're happy he did this.

Our next witness is Professor Courchene from Queen's University.

Professor Tom Courchene (Director, School of Policy Studies, Queen's University): Thank you very much.

I have a handout here that I'd like to circulate. I apologize; apart from a summary, it's only available in English, but this is eventually going to be a book from the Institute for Research on Public Policy and it will be in both official languages.

I want to thank you very much for inviting me here today. I want to talk to, not from—it's too long—the paper I circulated, which is a summary, as I said, of a forthcoming book from IRPP later this fall. This book focuses on the implications of globalization and the information revolution for Canadian society, and then on the challenges this implies for Canadian governance, for institutions, and for policy.

What emerges in this analysis is that our collective future in the upper half of North America must be a human capital future. Indeed, I go so far in this handout as to argue for a single sentence mission statement for century 21. I recognize that this is a little bit broader than the mandate of your committee, but I will conclude with a few comments on how we ought to approach this.

As a framework, I want to turn to page 2. There's a chart on page 2 that focuses on the implications of globalization and the information revolution. First, on the square box, is citizens, markets, and governments, and then on the interface is citizen-market, government-market, and citizen-government. Very briefly, in terms of the impact on governments, powers, as we know, are being transferred both upwards and downwards from the central governments of nation-states. In terms of the form of the rationale, it's straightforward: economic space transcending political space, and therefore countries are transferring power to supranational organizations and structures like NAFTA, the European Union in Europe, the Euro.

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Powers are also being transferred downwards to markets through privatization and contracting out, to lower levels of government through the devolution of power in regard to forestry, mining, tourism, and training, and to citizens via the information revolution. In my work I've always referred to this as “glocalization”, a combination of “global” and “local”.

In terms of the second category, citizens, globalization is enfranchising citizens as consumers. Indeed, they're the principal beneficiaries of the information revolution. Kenichi Ohmae, a leader in globalization, actually defines globalization as consumer sovereignty. But globalization tends to disenfranchise individuals as citizens, and therefore this is where we refer to the term “democracy deficits”.

I'm thoroughly optimistic here, because I believe information-empowered citizens—

The Chair: Excuse me, Professor Courchene, the translators are having trouble.

Prof. Tom Courchene: Okay, I'm sorry.

The Chair: When I used to lecture, my students complained, and I always said, well, you'll just have to listen faster. But we can't make the translators do that.

Prof. Tom Courchene: My apologizes to the translator and to the committee.

Information-empowered citizens will eventually expand their power and influence, so that over the long term, my view is that globalization will be democracy-enhancing. But what is relevant for citizens is that returns to human capital are increasing, and those to land and unskilled and low-skilled labour are, if not declining, at least remaining stable. So we have a huge income distributional problem, and that's probably one of the largest challenges of globalization.

In terms of markets, I'll focus on just one area, namely that what is especially challenging for Canada is the increasing north-south economic and trade integration. Earlier work I've done on Ontario indicates that Ontario's exports to the United States are in the order of 45% of its GDP, which is nearly three times its exports to the rest of Canada. At last observation, only two of Canada's provinces—Nova Scotia and P.E.I.—now export less internationally than interprovincially. Eight of the provinces export more internationally than interprovincially.

As a result, Canada is becoming less and less a single national or east-west economy and more and more a series of cross-border regional economies. Phrased differently, we are no longer an economic policy railway, but rather a transfer and social policy railway. So the challenge for governance here is how to reconcile our east-west sharing and transfer and social system with our north-south trading system.

In terms of the interfaces, some of these have already been talked about, but globalization is triggering a simultaneous integration of work globally and a powerful disintegration of workers as a collective domestically. What is emerging is a vision of “an extraordinarily dynamic, flexible, and productive economy with an unstable, fragile society and an increasingly insecure individual”.

So part of the challenge here is that we have to reconnect citizens to markets. The 21st century has to find policies and instruments to reconstitute our social cohesion and our civil society that was easily accomplished in the “Fordist” era.

In terms of the market-government interface here—this relates most directly to the committee—globalization is enhancing openness at the same time as it is unwinding social cohesion internationally. Taxes on mobile factors are falling and those on immobile factors are rising. In other words, the brilliant period of post-war embedded liberalism, where the welfare state grew apace with integration, is becoming unstuck.

As Dani Rodrik—whom the committee should think seriously about having up as he is one of the gurus of this whole area—noted, the challenge is to ensure that further economic integration does not lead to domestic social disintegration. So we need new instruments to embed GIR.

More problematic within Canada is the fact that because of the increasing north-south trade, a lot of our east-west economic infrastructure is becoming stranded. The recent bank merger issue was all about re-orienting our banking system towards a north-south axis. Ottawa said no to these mergers, but the pervasiveness of globalization means that the underlying issue will not go away. This is a really profound political issue. How do you take a century and a quarter of east-west commercial infrastructure and re-orient it north-south? There's a huge requirement for new instruments.

Finally, on the citizen-government interface, the real challenge here is that program spending as a percentage of GDP has fallen from somewhere like 36% in 1994 to a forecast 26% at the end of this year, and we haven't yet fully absorbed how we're going to address this.

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In regard to what we're doing within Canada along some very creative lines, I think the social union framework is certainly one of the creative instruments. This is a response to, at the same time, integrating us east-west socially with the challenge of being a more decentralized and north-south operational system. So we are creative in this.

The final thing I'd like to point out in terms of the anatomy of globalization is that we're also witnessing a revolt of the elites. Robert Reich refers to the “symbolic analysts” as networking internationally, agglomerating in specific geographical areas, like Silicon Valley and Route 128, and effectively “seceding from America”. This is occurring perhaps to a lesser degree in Canada, but we have to be very concerned about this, and we have to find creative ways to re-forge common bonds between the rich and the poor in each of the cohorts.

These are some of the challenges of globalization. The issue is, how do we respond? How do we maintain our socio-economic distinctiveness in the upper half of North America?

I have two views here. In one, I adopt Wayne Gretzky's wintry wisdom, which is that we must skate to where the puck is going to be, not to where it has been, and I think the globalization puck is going to be in the hands or in the era of citizens.

If I'm correct that what we want to do as Canadians in terms of broad policy goals is to maintain economic competitiveness at the same time that we maintain social cohesion, we are actually quite fortunate, because where there's a window of opportunity now that suggests there's one area that would be absolutely key to both of these is the role of human capital.

On the second sheet that I've handed out, there are three wonderful quotes from Lester Thurow about the role of human capital. This leads me to design—economists don't do this very often—a mission statement for Canada in terms of a single sentence: To design a sustainable, socially inclusive, and internationally competitive infrastructure that ensures equality of access for all Canadians, so that they can develop, enhance, and employ in Canada their human capital, thereby enabling them to become full citizens of the information era in Canadian and global societies.

In terms of what this means on the economic front, we have to make sure we maintain our human capital within Canada, which means getting taxes on mobile factors down to levels that are competitive internationally. I have some comments on this, but in the interests of time, I'll move onward.

On the distribution side, we're going to get these tax rates whether we want them or not, so the key is to try to figure out the work on the human capital and income distribution side of human capital. Among other things, we need to seriously consider a human capital bill of rights for our children. We have to start viewing the family, among its many other roles, as the production locus for human capital, and design taxes and other policies with that in mind.

I think we have to pervade the bureaucracy of both levels of government with the fact that, progressively, states are going to become knowledge and information intermediaries in this system. In a sense, this goes somewhat along the lines of the Prime Minister's third-way speech in Berlin.

In terms of what this might do for this committee, on the international trade and policy side, I think it has been well documented that Canada, under Paul Martin, is taking the lead in terms of the G-20, but basically this is a stability exercise so far, and it has to be broadened so that it brings a human face to the international area.

Secondly—since Roy Culpeper gave me the opening—it's important that in this new era we do not have to change our goals as Canadians but we probably have to change our instruments. We have a couple of areas in Canada where the instruments have become so important that they become goals: medicare and flexible exchange rates. They're very hard to change because they become goals. My view is that they are really instruments. There are deeper goals than those.

But in particular, on the flexible exchange rate issue, I think we have to rethink aspects of this seriously. Because of super-mobility, because of the dramatic increase in north-south trade, and because of the rise of e-commerce on the Internet, I think our future is going to be one of enhanced currency integration. That's why I've been speaking across the country on a common currency for North America.

The bottom line is that my role is to outline the pervasive nature of the challenges posed by the new global order and to offer a uniquely Canadian response to these challenges. My fear is that we will eventually be forced to follow the U.S. on the economic front, in terms of taxes, for example. If we don't at the same time address the requisite aspects of social cohesion, we'll risk becoming Northern Americans. And should this happen, we have only ourselves to blame.

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But we do have room to manoeuvre, and it's my view that the way for a uniquely Canadian future is, as I stated earlier, to privilege Canadians in their ability to develop, enhance, and employ in Canada their human capital.

Thank you, Mr. Chair.

The Chair: Thank you very much, Professor Courchene.

I presume human capital formation has something to do with education. So it's not unlikely to find a professor pushing for....

Prof. Tom Courchene: That's right. I have tenure, so I'm not pushing for any special privilege.

The Chair: Okay.

Mr. Valaskakis.

Mr. Kimon Valaskakis (Honourary Professor, Montreal University; Former Canadian Ambassador to the Organization for Economic Cooperation and Development): Thank you, Mr. Chairman.

I have a four-page presentation that I will leave with the committee, but I'll summarize my intervention in terms of two groups of issues. One is the diagnostic issue and the other one has to do with solutions.

On the diagnostic side, the four years I had the privilege to spend as a governor of the OECD in my capacity as Canadian ambassador have actually taught me three things about globalization, which was at the centre of our deliberations throughout the entire four-year term.

The first is that globalization, when everything is said and done, is probably a good thing, because it has proved itself to be a tremendous wealth generator. It creates an immense wealth—of course, in combination with technological change. In fact, globalization and technological change are so intertwined that it is difficult to really separate them.

The good news is that it has been a tremendous engine of growth and wealth creation. The bad news is actually something that has been mentioned by many others: that it has not been good in terms of wealth distribution. It has therefore enhanced the winners and not taken care of the losers. In fact, some people are even arguing the existence of a winner-takes-all dynamic that increases the winnings of the winners and decreases what is left for the losers. So there are distributional problems.

In addition to distributional problems, a third element of globalization is that many areas have now spun out of control of national governments. Therefore, the globalization phenomenon immediately poses a question of a governance phenomenon at the global level. This is why, if we look at solutions to globalization, if we look at the management of globalization, we have to look at governance issues.

When I arrived at OECD, I thought the international governmental system, the system of intergovernmental organizations, could do the job with a slight tinkering at the margin. Mid-term through my stay at OECD, I became convinced that it would take much more than tinkering at the margin and that we probably would have to revise all the Bretton Woods institutions that have come out of the Second World War.

I now believe that even more radical and fundamental change is necessary and that we have to really reinvent a new international order.

The present international order is known to legal and other scholars as the Westphalian world order. It actually was born with the Treaty of Westphalia of 1648. That treaty, although it ended the European Thirty Years War, became the blueprint for the international system as we know it now. At the foundation of this system is the sovereignty of nation-state governments that is the binding link throughout the system.

My contention is that globalization, for good or for ill, has assaulted and attacked this whole concept of nation-state sovereignty; therefore, we have to fundamentally rethink the issue. This means we either have to invent a completely new system, or we have to, metaphorically speaking, sign Westphalia II—a second version of Westphalia that is actually cut for the 21st century.

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The road to Westphalia II is a very complex one, but I think it's something we would have to deal with anyway within this first decade of the 21st century.

In the context of this fundamental change, I'd like to make some comments on the G-20 initiative. I think the G-20 initiative as expressed and described by Minister Martin is a very good step in the right direction, but it's a very partial and incomplete step, and many other companion initiatives have to be considered.

Why is it only a very partial step? Well, for at least four reasons.

The G-20 idea, as expressed by Minister Martin and others, is to have a board of directors for the world economy. This is interesting, but the board of directors of a corporation is usually appointed by the general assembly of shareholders.

Who has appointed the G-20 and who has delegated the G-20 with the powers it will have? The answer seems to be that it is a self-appointing board of directors of the world economy, and this may create legitimacy problems. It may enhance the democratic deficit, especially when you consider that the composition of the G-20 is made up of finance ministers who are responsible politically to the people in democratic countries, but central bank governors, who are also in the G-20, are not. The central bank governors are completely outside the political process, and the same kinds of critiques and resentment that the WTO and the OECD, with the MAI and others, have generated in terms of democratic deficits may also be levelled possibly at the G-20 because of that.

Second, the G-20 does not include at this stage the non-state actors. My reading of the world economy as it's developing now is that the non-state actors—namely, multinational corporations, multinational entrepreneurs, non-government organizations, and civil society in general—are becoming much more important and we cannot exclude them from the debate.

The OECD is a club of the richest and most powerful industrial nations. If you had an OECD of the future, with the 100 most important economic entities in the world, 52 of these entities would be corporations and only 48 would be nation-states. So this is something that has to be factored in. The same thing must be said about civil society, because if civil society is not factored in and included, then we will again have legitimacy and efficiency problems.

Thirdly, the G-20 is a sectoral initiative. It focuses on finance. Finance is very important; it's crucial. But the approach that would consist in cutting up the world's governance problem at key sectors and saying the G-20 will do finance, the WTO will do trade, the OECD will do investments, some other organization will do the Internet, the IMF will do the monetary thing, is going, I think, to prove unsatisfactory, because one of the lessons we learned at the multilateral agreement on investment negotiation at OECD is that you can't trust international investment to international investment specialists because of the spillovers, because of the linkages, that investment decisions have environmental, social, and technological implications, and so on. The same thing is true about finance. The same thing is true about the WTO and trade.

The trade ministers who met at Seattle in December had to deal with issues beyond their jurisdiction. The gentleman to my left suggested we might consider having heads of state present themselves, and have a G-20 consisting of heads of state. It would make more sense if we were to go that route, but this is where I would bring the fourth objection or comment with regard to the G-20 initiative, which is that all intergovernmental organizations today reflect the Westphalian principle of sovereign equality, meaning every state has the same vote and the same weight. That means that Togo and Japan, Luxembourg and the U.S., India and Iceland each have the same vote. One state, one vote. At OECD, the sovereign equality was so great it was...actually each state had one veto, because everything was decided by unanimity and consensus.

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If this is going to be replicated at the G-20 or any other such organization, I think it's going to completely paralyse the organization. Internal rules of governance, internal change, would have to be factored in before we can hope to achieve something new and something valid.

I would argue in favour of a new initiative, and I've been pushing that initiative, which is a semi-formal process that would include heads of government, civil society, and many other actors in the modern world, but not with the formality of ambassadors or negotiators in intergovernmental organizations. Having been an ambassador myself, I know we are very constrained by instructions coming from the capital and can't really do much in terms of radical reform.

On the other hand, the other extreme is having academics get together. I was an academic and I'm back to being an academic. I think there's a danger that if it's a purely academic process, it will not have any impact on the rest of the world. This is why I'm advocating a kind of semi-commission club formula. I've tentatively called it the Club of Athens, because Athens in Plato's Republic was his inspiration for the ideal city-state. What I think we need, again metaphorically speaking, is to envision the global Athens, the global cosmopolis, the global republic, so to speak, that will give the government dimension to the world to complete the globalization dimension.

To sum up, globalization is here to stay. Whether we like it or not, we cannot repeal it and we cannot put the clock back. Therefore, I say complete globalization with forms of global government that are comprehensive, that are democratic, and that will allow the benefits of globalization to accrue to all. This is a very tall order, but I think the challenge is upon us. I believe Canada could take a lead in working on these new formulas for global governments, inspired by the experience we have with federalism and with multi-level government.

One of the things I would tend to reject is the self-regulation hypothesis that if we leave globalization by itself, everything is going to work out and the universe will unfold as it should. I believe this is not the case. If we leave things as they are without any kind of global government, then instead of having a world market system, we're going to have a world mafia system, a little bit like what has been happening in the ex-Soviet Union.

Thank you, Mr. Chairman.

The Chair: Thank you, Mr. Valaskakis.

I only see one person asking for questions. Again we've run out of time, and it's embarrassing when we have a panel of this quality to have such a short time.

[Translation]

Mr. Tremblay, you asked that we might extend the meeting for a little while this afternoon.

Mr. Stéphan Tremblay: Yes, Mr. Chairman. Mr. Valaskakis, you stated that we will eventually need some type of world governance or, as I would prefer to say, a global co-ordination, and you gave us some suggestions for doing that.

What role should be assumed by parliamentarians, and more particularly by citizens, in this undertaking? It is perhaps too broad an issue for parliamentarians to tackle, and you might feel that only heads of State and the elite will be able to draft a constitution to establish global co-ordination.

You also said that we should approach globalization sectorally. Earlier, I said that, in view of the scope of the issue and the problems, we should perhaps ask parliamentary committees to examine globalization. The Environment Committee could deal with the effects of globalization on the environment and culture, whereas the Finance Committee could study matters relating to the economy, and so on.

What should Canadian members of Parliament do? Should we establish a permanent table where we would discuss globalization, or do you think that we have no role to play in this and that we should let the heads of State take care of it?

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I will attempt to quantify through your answer the urgency of setting up a permanent debate mechanism. I believe I heard you say once, during a conference at the University of Montreal, that the situation we are experiencing now might possibly be dangerous. Do you think we should step up these debates?

Mr. Kimon Valaskakis: You have asked some excellent questions, sir, particularly as they apply to the role of parliamentarians. I am convinced that members of Parliament must play an ever greater role because they represent the link with democracy in our country.

But the power and jurisdiction of parliamentarians within nation-States are limited by the power of the governments of these nation-States. That is why we must advocate a certain level of globalization even in this sector, that is to say deal with groups of parliamentarians at a global level and perhaps even eventually imitate the Europeans, who have started to move away from the executive side with a commission and who now give greater powers to the European Parliament, which will have powers that, in some cases, will be greater than the powers held by the nation-States.

Internationalization or globalization of parliamentarism is perhaps something that can be explored. It will, however, be very difficult to explore because if we have a global democratic governance, it will be dominated by China and India, who have the largest populations. Therefore, many things are possible. I think the role of parliamentarians is essential, but it must apply at the international level rather than at the local or national level. If I am right in my prognosis, to the effect that the power of the nation-States is dwindling, then parliaments that influence the governments of the nation-States will be constrained by this globalization. In order to avoid that, they themselves will have to become globalized.

The Chair: Ms. Picard.

Ms. Pauline Picard (Drummond, BQ): Mr. Culpeper, during your presentation, you said that a change in the mission of the IMF should be considered, for example, by putting an end to development funding. You said you would elaborate during our question period. Could I ask you to do that now?

Mr. Roy Culpeper: Thank you, Ms. Picard. The IMF has prepared a program entitled Poverty Reduction and Growth Facility along with a program for staggering the debt that was created by the G-7 in 1988. The IMF has been given other powers to examine poverty in developing countries. If I may, I would like to speak in English.

Ms. Pauline Picard: Yes, of course. We have interpreters.

[English]

Mr. Roy Culpeper: It's not an area of strength for the IMF because it's not the traditional core strength of the IMF. It's an institution that's been developed to intervene in short-term balance of payments crises.

I became fairly alarmed over the last few months, as the IMF has been recruiting poverty specialists. So you have both the IMF and the World Bank looking at issues of poverty and poverty reduction. A lot of people now feel that the Poverty Reduction and Growth Facility should be transferred from the IMF to the World Bank. I believe that particular recommendation has considerable merit. What you have now is a confusion of roles and responsibilities and a duplication of activities, and I don't believe it is good either for the institutions or for the poorest countries, which both these institutions should be trying to help.

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By the way, this is something I disagree with Minister Martin on. Minister Martin, when he was here for this committee, seemed to believe strongly that the IMF should have a role. What I would say about that is that when the IMF is intervening in countries that have balance of payments crises.... I agree with Mr. Campbell from the previous session this morning that the kind of macroeconomic policies, fiscal and economic policies, that they impose on countries in short-term balance of payment crises should be consistent with long-term poverty reduction. But that's a very different kind of role from a role in which the IMF actually has some resources to lend to countries. That makes the IMF into a development agency, which really is not the core strength of the IMF.

To conclude, I would argue that the IMF, in its interventions, should make sure that the kinds of economic policy it imposes on countries in crisis should be consistent with long-term poverty reduction, but it shouldn't have a financing role to intervene in those countries. That role should be left to the World Bank and other multilateral institutions.

The Chair: We'll have to wrap it up now, colleagues, because people are anxious to go. This is the last week of Parliament; everybody's pressed to go.

Again, I'd just like to thank our panellists for coming and sharing their views with us. You've been very helpful in helping us formulate exactly how we want to approach this rather vast and immense project that Monsieur Tremblay has been largely responsible for pushing us towards. We will work on that together.

We thank you very much for coming and sharing your ideas with us this morning.

We're adjourned until 3:30. Colleagues, at 3:30 we are going to deal with a very quick motion on travel for the trade subcommittee, we are going to complete the Kosovo resolution, and then we're going to move on to a quick review of our trip to Central Asia and the Caucasus. Then we'll deal with future work of the committee.