SINT Committee Meeting

37th PARLIAMENT, 1st SESSION

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

EVIDENCE

CONTENTS

Monday, April 15, 2002

Á

1100

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

Dr. Rohinton Medhora (Vice-President, International Development Research Centre)

Á

1105

The Chair

Mr. Peter Clark (President, Grey, Clark, Shih and Associates Limited)

Á

1110

The Chair

Á

1115

Mr. Gerry Shannon (Senior Consultant, Government Policy Consultants)

Á

1120

Á

1125

The Chair

Ms. Sharon Maloney (Vice-President, Retail Council of Canada)

Á

1130

The Chair

Mr. Patrick Vanasse (Director of Research, Representations Services, Option Consommateurs)

Á

1135

Á

1140

The Chair

Mr. Casson

Mr. Gerry Shannon

Á

1145

Mr. Peter Clark

Mr. Rick Casson

Mr. Peter Clark

Mr. Rick Casson

Ms. Sharon Maloney

Á

1150

Mr. Rick Casson

The Chair

Mr. Gerry Shannon

The Chair

Mr. Patrick Vanasse

The Chair

Mr. Marceau

Á

1155

Mr. Peter Clark

Mr. Richard Marceau

Ms. Sharon Maloney

Â

1200

Mr. Richard Marceau

Ms. Sharon Maloney

Mr. Richard Marceau

Ms. Sharon Maloney

Mr. Richard Marceau

Â

1205

Ms. Sharon Maloney

The Chair

Mr. Peter Clark

Mr. Gerry Shannon

Â

1210

The Chair

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

Ms. Sharon Maloney

Â

1215

Mr. Mark Eyking

Ms. Sharon Maloney

Mr. Mark Eyking

Ms. Sharon Maloney

Mr. Eyking

Ms. Sharon Maloney

Mr. Mark Eyking

The Chair

Mr. Peter Berg (Committee Researcher)

Mr. Gerry Shannon

Â

1220

The Chair

Mr. Peter Clark

The Chair

Mr. Mark Eyking

Â

1225

The Chair

Mr. Gerry Shannon

The Chair

Dr. Rohinton Medhora

Â

1230

The Chair

Dr. Susan Joekes (Team Leader, International Development Research Centre)

The Chair

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CANADA

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

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NUMBER 030

l

1st SESSION

l

37th PARLIAMENT

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EVIDENCE

Monday, April 15, 2002

[Recorded by Electronic Apparatus]

Á  (1100)  

[English]

    The Chair (Mr. Mac Harb (Ottawa Centre, Lib.)): Good morning, everyone.

    I want to welcome all of you here today to give us your thoughts on Canada's position concerning the WTO negotiating issues.

    We will proceed with a presentation of up to five minutes by each one of our guests, and then we will open the floor for questions from my colleagues.

    We are quite fortunate to have distinguished leading experts in the field from the International Development Research Centre, from the private sector, Grey, Clark, Shih and Associates Limited, from Government Policy Consultants, from the Retail Council of Canada, and from Option Consommateurs.

    We will start with Dr. Rohinton Medhora. The floor is yours. You have up to five minutes.

    Dr. Rohinton Medhora (Vice-President, International Development Research Centre): I'm delighted to be here this morning to talk to you about the Canadian proposal to improve market access to the exports of the least developed countries. Bearing in mind the time constraints you've mentioned, I will limit myself to four points. My colleague Susan Joekes, who heads IDRC's trade program, and I will be happy to answer questions, should you have any. Thank you, Mr. Chairman, and members and associate members of the Subcommittee on International Trade, Trade Disputes, and Investment.

    The first point I should make is that although IDRC is not an advocate organization, we are generally of the view that Canada needs to be clearly involved in the development issues of today. Therefore, given the thrust of this initiative, we welcome it unhesitatingly, for a number of reasons. The least of our countries tend to be those that face the highest amounts of protection, so this is definitely a pro-poor policy. In fact, as we argue in the written brief that we will leave with you, the terms of trade of exports of these countries have been declining over the years quite dramatically, so that anything that improves market access will be good. If we keep in mind especially that the exports of these countries to Canada do not amount to a significant proportion of Canadian imports, this move means a lot more to these countries than it does to this country in respect of altering living standards.

    That said, the second point I would make is that this now puts the onus on the least developed countries to seize the market opportunity presented by this initiative. That involves what we think of as supply capacity building, which is a hard issue, meaning development of the infrastructure so that exports can be enhanced, but also a self-governance issue, improving the trade regime and the policy regime within which exports, investors, and traders operate in these countries. A lot of work needs to be done in both these areas. In fact, it is part of IDRC's mandate to work on those softer governance sides, so that improving the policy environment within which initiatives such as these become more effective is a priority for us.

    The third point I'd make is that while we welcome the fact that tariffs and quotas would be reduced, it is increasingly the case that non-tariff barriers to trade, to exports, form a significant impediment. Sanitary and phytosanitary standards, technical barriers to trade, tend to affect particularly primary exports from the least developed countries. There are a myriad of these. Abiding by them costs money, and we have several projects that have examined some of the costs. Some of these are genuinely concerned with improving health and environment standards in the north, but in other instances this is simply protectionism under a different guise. At the very least, there could be more effort towards harmonizing some of these standards. We do believe countries like Canada have a role to play here as well, so that would be a useful complement to the reduction in tariffs that is being produced in this initiative.

    The fourth and final point is that ultimately, this is about creating good development in these countries themselves. What that means is ensuring that the linkages from the trade sector in these countries back to poverty through the several steps in between are strong and effective. Once again, this is a policy and capacity building issue on which my organization is quite focused. Indeed, we have a myriad of programs in this area, a lot of projects that work in the countries in question. So the total package of tariffs, non-tariff barriers, technical barriers, and then feeding that back to poverty, is something with which we are concerned, and we stand ready to work with the authorities.

    Thank you.

Á  (1105)  

    The Chair: Thank you very much.

    Mr. Peter Clark, welcome again.

    Mr. Peter Clark (President, Grey, Clark, Shih and Associates Limited): Thank you, Mr. Chairman.

    The initiative the government is proposing with respect to the least developed countries is extremely interesting and long overdue. I can recall being engaged in discussions over this matter in Seattle, when the only two hold-outs on textiles were Canada and the United States, and then again at Doha, where the only two hold-outs were Canada and the United States. It's unconscionable, it's inequitable, and it's immoral to continue to impose tariffs on these countries. It's not to say we can't. I don't come at this issue with quite the same perspective as my other friends in the room, because for eight years I was the president of the Canadian Apparel Manufacturers Institute. I haven't done that for an awfully long time and have no ties holding me to them at the present time, but we have to look at the issues and see how they can be addressed.

    The concern I always hear expressed is whether we'll have a surge from Bangladesh. Quite frankly, if I were in the apparel industry, I would be far more concerned two years from now, or whenever the quotas come off China, about the surges one might have there. Then everybody else who is holding onto their quotas now and collecting their scarcity premium is going to be in a much different ball game.

    But there are several issues here. One is that the apparel industry has, over the years, changed significantly. When I looked at the numbers attached to the discussion paper on the website, I was interested to see the very big fluctuations in employment from year to year. Quite frankly, I don't think they're right, as it's a pretty stable industry, to go by all my connections with them.

    Second--and I can recall this fairly well--Canada introduced the preferential system of tariffs on July 1, 1974. I had to work that day in Geneva and go to the meetings to present our program. One of the things we did with the program was build in an escape clause, an anti-surge mechanism to deal with problems. Under the old tariff board there were several hearings into these safeguards, and in one or two cases the preference in the tariff was withdrawn or reduced to deal with the situation where there was demonstrable injury to a Canadian industry.

    When I look at what's being proposed here in footwear, it's not really a “least developed” issue. It's relatively small. In agriculture the biggest problems the least developed countries experience are the ones raised by the previous speaker, technical barriers to trade and SPS. The fact of the matter is, we can't have two sets of standards. We have to have one set of standards, the same ones that apply to Canadians. But technical assistance would seem to help there.

    So we come to textiles. Textiles is a very capital-intensive industry. It's not as labour-intensive as it was in the past. That's not a big issue for the least developed countries. But wearing apparel is, and when you talk about wearing apparel from all these 49 or 50 countries, you're really only talking about one in any significant way, and that's Bangladesh. Bear in mind that when the GATT committee on defining market disruption in 1959 did their analysis of the need for protection on low-cost imports, which is what they were called then, they looked to special mechanisms, because tariffs, anti-dumping duties, and countervailing duties didn't help. So the tariff is not going to make an awful lot of difference with respect to Bangladesh or anybody else, because their prices are already so low that I wouldn't expect a surge. The other countries in the least developed group that have quotas with Canada are not big factors in the marketplace. The removal of the quotas will either cause an increase in imports or it will cause a redistribution of imports to the extent that the quotas already in place in Bangladesh have teeth.

Á  (1110)  

    We have important employment pockets in Quebec, Ontario, Manitoba, and elsewhere in the apparel industry. These are very useful jobs, because if you've ever been through a factory, you know that most of the women who work in these factories are new Canadians. It's their first job. They're integrating into the Canadian economy. It is very useful employment for them in sociological terms and economic terms. So they cannot be a sacrificial lamb, so to speak, to make a point. But one can deal with that through a surge mechanism with an appropriate standard of what is a surge, looking at the total impact, and dealing with it in relation to real and demonstrable injury to production in Canada.

    I think there is no reason we should throw the baby out with the bath water through fears of what might happen. We should take a look at developing mechanisms that can be used effectively to deal with real problems and get on with life, because, quite frankly, for our reputation, this whole exercise is becoming an albatross around our necks.

    Thank you, Mr. Chairman.

    The Chair: Thank you very much for your thoughtful comments, Mr. Clark.

    Gerry Shannon, with Government Policy Consultants.

Á  (1115)  

    Mr. Gerry Shannon (Senior Consultant, Government Policy Consultants): Thank you very much, Mr. Chairman.

    The prospect of opening G-8 markets, including the Canadian market, to exports of the world's least developed countries is shaping up as a very significant outcome of the upcoming Kananaskis summit. Attention will undoubtedly focus on the no-tariff, no-quota option being espoused among G-8 leaders. I can offer a few observations based on my role as chief negotiator for the last round in Geneva, as well as some work my colleagues and I did in response to a request by CIDA to look at the relationship between trade and international development in the context of the new negotiations launched in Doha.

    First, Mr. Chairman, it makes sense, in principle, to further open industrialized country markets to the least developed. Contrary to some popular perceptions, the developing countries as a whole were, in fact, net winners in the Uruguay round, as can be seen in the significant expansion of their exports in the last decade; they grew by nearly a trillion dollars to about $2.4 trillion in 2000. Of course, this is less true for some of the poorest countries, particularly in Africa, which lack the wherewithal to take advantage of the opportunities the system has to offer. Many of them also continue to cling to a highly state-interventionist policy at the expense of market forces, which I believe to be bankrupt and self-defeating.

    Whatever you think about the globalization debate, two things seem clear. First, trade does lead to growth, and the recent experience of China is an obvious case in point. Second, countries that take tough decisions to get rid of internal obstacles to growth and give greater rein to market forces, generally speaking, outperform those who cling to a highly dirigiste form of government.

    How to make trade work for the world's poor, as well as for the rich and for the up-and-coming, is now one of the biggest challenges we have, and Doha is replete with commitments to make special efforts to assist the least developed in the new trade negotiations, including a commitment to the objective of no-duty, no-quota access to industrialized country markets.

    The potential benefits and costs of the Canadian market-opening initiative for the least developed countries need to be kept in perspective. As material recently circulated by Foreign Affairs points out, imports from the 49 countries that make up the UN category of least developed account for only a fraction of 1% of total Canadian imports, and half of these products already enter Canada duty-free. These numbers suggest that the domestic impact of a no-duty, no-quota tariff policy in Canada for LDCs will be correspondingly small. I understand that notwithstanding this, the Canadian textile and clothing industries are raising questions in this regard, but I would suggest, Mr. Chairman, that serious concerns on their part do not really seem called for.

    First, the physical capacity of the LDCs to make major inroads into the Canadian market is limited, with the possible exception of Bangladesh, which now has about 3% of Canadian textiles and clothing imports. The presence of sub-Saharan African LDCs on the market is much less.

    Second, under the terms of the last WTO round a period of seven years was provided to permit the gradual removal of apparel products from the list of those facing restricted entry. The process of removal has been highly selective, to the point where it will only begin to bite in the last years of the agreement. Domestic firms have had ample time to adjust.

    Third, Mr. Chairman, it may also be worth recalling that the negotiation of the Canada-U.S.A. FTA, which was probably the most disruptive trade agreement we've ever entered into, did not result in launching a major program of adjustment assistance. In fact, only the wine and grape industries received special assistance, while the rest of the industries affected made use of existing programs. Turning all this on its head, the small presence of LDCs in the Canadian market also suggests that the benefits to them in this policy should not be overestimated.

Á  (1120)  

    Ultimately, the costs and benefits will, of course, depend on how the recipients themselves respond. Opening the door wider does not in itself guarantee more will flow through it. Nor does it guarantee that LDC exports will not be swamped by those of China, as my friend Peter Clark points out, or other major exporters, even though the latter would continue to face fairly high tariff barriers after quotas come off in 2005.

    One of the most useful things Canada could do is provide more assistance aimed at improving the underlying capacity of poorer countries to trade, in the context of the government's decision to earmark up to $500 million for sub-Saharan Africa. Without a product to sell or the infrastructure and people through which to sell it, market opportunities don't mean much. This is why, for many developing countries, and particularly the smaller, least developed ones, improving their capacity to trade has become just as important as opening markets.

    If we want to strengthen the embryonic movement in sub-Saharan Africa or elsewhere towards more open, market-oriented economies, we should be giving serious attention to trade-related capacity building. It's a term increasingly used by the World Bank, the WTO, the UN agencies, and governments. Trade-related capacity building encompasses everything from helping countries to participate in the WTO to building the kind of institutional infrastructure required to operate in the modern trade system. This, of course, does not imply that trade should be regarded as some kind of panacea for development or that it ought to take precedence over other more traditional forms of development. It's simply a matter of recognizing that the days are fast drawing to a close when trade and development can be approached as two solitudes, each pursued in isolation from the other. Trade has become an integral part of development, and vice versa.

    Mr. Chairman, market-opening initiatives also seem unlikely to bear fruit without addressing the chronic problem many of these countries experience in attracting direct foreign investment. In other words, who in the private sector is going to invest in industries in Africa, and under what conditions? Without quality long-term investment, market openings may be of little benefit in themselves to the countries we're trying to help. Part of the answer lies in steps to improve governance and reduce perceptions of political and economic risks, which have discouraged such investment in the past.

    But it also raises the question of investment guarantees. Canadian firms are unlikely to invest in Africa without the provision of guarantees from a domestic source or by the Multilateral Investment Guarantee Agency of the World Bank. It's worth noting in this regard that the recently announced U.S. initiative for Africa includes some $200 million in investment guarantees, I think, from Ex-Im Bank for U.S. firms investing there.

    Finally, Mr. Chairman, it's important to go down the track of improving market access for the right reasons. Here perhaps I can register a few caveats.

    Canadian policy should not be changed out of some misplaced belief that Canada is somehow more delinquent when it comes to tariffs with respect to the LDCs than its G-8 partners. We should be careful about recent international studies that purport to show this. Those I have seen focus only on tariffs and ignore less readily measurable factors like quotas and other non-tariff barriers. The U.S. sugar quota or EU rules of origin and other entry requirements, for example, probably have a much larger impact on the real ability of LDCs to export than do Canadian tariff lines.

    The fact is that no industrialized tariff regime for textiles and clothing would win a beauty contest. Canada is probably no worse than others, and is arguably more forthcoming in its application. The problems in the Canadian tariff come in so-called tariff peaks, and they also come in textiles and clothing, which is an area of great importance, as some LDCs have shifted into low-cost manufacturing, and where Canadian protection, obviously, remains highest.

    When it comes to agriculture, Mr. Chairman, most Canadian agricultural tariffs in areas of primary interest to least developed countries, like sugar and peanuts, are comparatively low. Also, the shippers of most, if not all, imports that might affect Canada's highly protected supply managed industries come from developed countries, such as the U.S., the EU, and Australasia, not from LDCs.

    We should also not allow ourselves to be spooked by actions that have already been announced by our G-8 partners. While the EU's much touted “everything but arms” initiative moves in the right direction, it appears to be essentially an expanded application of its long-standing preferential regime for its former colonies that does not come into full effect until 2009 and does not deal with the highly problematic issue of a massive EU trade-distorting array of measures.

Á  (1125)  

    The U.S. Africa program is essentially a conditional scheme that provides preferred access to the U.S. market on the condition that they use U.S. yarn. It may well prove to be helpful to the LDCs. It undoubtedly will prove helpful to U.S. textile interests.

    It also needs to be borne in mind that the Canadian market is relatively small for developing countries, especially compared with the much larger European and U.S. markets, to which many of them are already closely linked. So increasingly are the rapidly expanding markets of other developing countries, such as Korea and Brazil, whose historic tariff levels against LDC exports are substantially higher than those in industrialized countries. The time has arguably come when some of the more advanced developing countries ought to be doing more to improve market access for their lower-income neighbours.

    In the final analysis, Mr. Chairman, arriving at a sensible strategy towards the LDCs will also be important for what it says about what may happen at the next round of multilateral trade negotiations, where both the expectations on the part of all developing countries and the stakes are much higher. This is a question on which the G-8 leaders might also usefully spend some time in Kananaskis.

    Thank you.

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

    We will hear now from the Retail Council of Canada, Sharon Maloney. You have up to five minutes.

    I just want to remind our friends, if you have any submissions or anything in writing you wanted to give us, please do so.

    Ms. Sharon Maloney (Vice-President, Retail Council of Canada): Thank you, Mr. Chairman.

    I just want to give you a little background before I begin with respect to the Retail Council of Canada, because I'm not sure how many of you are familiar with our organization. The Retail Council of Canada is a national trade association that represents in excess of 8,500 retailers across Canada. Our members include department stores, specialty chains, big box formats, independent retailers, and on-line merchants. The products they sell range from screwdrivers to footwear, from hundreds of countries in the world and produced by hundreds of thousands of factories.

    Canadian retail sales were $277.2 billion in 2000. We employ 1.2 million Canadians, with over 245,000 locations across the country. The retail trade represents 6% of Canada's gross domestic product, and as you are all no doubt aware, for the first time a retailer, Wal-Mart, has been named the largest company in the world.

    The Retail Council of Canada is a strong supporter of all efforts to liberalize trade. We believe increased trade benefits Canadians and citizens of other countries. We also believe the best way to help those countries that are less economically advantaged than ours is through the creation of jobs.

    The growth of imports through the 1980s suggests that Canadians have also embraced globalization and its benefits. The share of imported goods rose from 18% of national demand in 1981 to 42% in 1994. As the discussion paper prepared by the Department of Foreign Affairs points out, liberalized trade has resulted in savings being passed on to Canadians. Specifically, the consumer price index indicates that of food, shelter, and clothing clothing prices remain the most stable.

    That said, our members also know Canadians are fair-minded people who do not want to purchase goods made under inhumane working conditions. It is because of this that RCC, together with its member companies, developed the responsible trading guidelines. The guidelines lay out core recommendations to the trade to ensure that goods are made under humane working conditions. These include prohibitions on child labour, forced labour, and discrimination. They also require companies to respect lawful freedom of association and local labour laws and to provide safe and clean work facilities.

    We raise this because, although we support liberalized trade, we also believe our government and those of the countries with which we trade must work cooperatively to ensure that human rights and democratic principles are respected. Bad governance is bad for business. We do not, however, support Canada, or any other country, for that matter, insisting on this in isolation from its other trading partners or international organizations.

    We also do not believe corporations should become a fourth level of government. Rather, we believe corporations have to work with the support of a global infrastructure that recognizes that human rights are as important as liberalized trade.

    However, RCC does not believe Canada should take on the role of cultural imperialist. Our strength has been and should continue to be to work cooperatively with developing countries and others. To do otherwise is to ignore our own history and economic development. The changes we are experiencing in globalization are evolutionary rather than revolutionary. The proposed reduction of terrorists for the least developed countries is part of this, as is Canada's request that African countries address human rights and democratic principles. Little will be gained for citizens of either trading partner if these are not attended to and recognized as part of the challenge.

Á  (1130)  

    Similarly, we should not adopt programs that will only hurt Canadian businesses and do nothing to address the underlying challenges of protecting human rights and democratic principles. I am, of course, referring to the proposal that the Canadian registration number be changed so as to list the name and location of each factory where a good is made. Retailers deal with thousands of factories in many countries. Factories are changed regularly, for a variety of reasons. Indeed, the knowledge that a company can change its supplier is an incentive for a factory to conform with that company's code of practice. Lessen the ability of retailers to do this, and you remove a critical form of influence.

    The proposed program--and I'm referring to the CA registration again--would only succeed in hurting Canadian businesses and would not solve the problems all of us want to address. Companies would be forced to spend hundreds of thousands of dollars in registering and re-registering information, rather than working with the factories to improve compliance with their codes and local laws. Moreover, they would have to segregate the information for each article of clothing. They would also have to publish this on-line, meaning that the information would have to be constantly updated. It would, I suggest, be a classic example of bureaucracy gone wild. It would also not tell a consumer anything other than where the good is produced and by which factory. The proposal is, in our view, ill-conceived. It would hurt both Canadian businesses and the developing countries. Our members are currently investing millions of dollars in monitoring and compliance programs. Increasingly, compliance with these standards is becoming a term of business. In other words, commitment to human rights and compliance with local labour laws is an expected cost of business.

    Unless we achieve the right balance by addressing the worst forms of human rights abuses and respecting the role of national governments, we risk being viewed as paternalistic and interfering. We believe governments and international organizations must take the lead in dealing with human rights abuses of the country's trading partners. We suggest, however, that the role of the ILO is more properly used for this and perhaps some of the proposed changes with respect to international agreements in the WTO, rather than requiring programs such as the CA registration number.

    Thank you.

    The Chair: Thank you very much, Ms. Maloney.

    Now we will hear from Option Consommateurs, Patrick Vanasse.

[Translation]

    Mr. Patrick Vanasse (Director of Research, Representations Services, Option Consommateurs): Hello. My name is Patrick Vanasse and I am with Option Consommateurs. I am accompanied by Ms. Delphine Nakache. I will make the presentation and Ms. Nakache will answer your questions, if you have any.

    First of all, Option Consommateurs is a non-profit organization whose goal is to protect the interests of low and medium income consumers. We are interested in many domains, and only recently have we started looking at the liberalization of international trade, and in that particular case, we may not be able to respond to all questions that may be raised. We have therefore limited our statements to issues dealing with liberalizing services, and more specifically, applying the criteria of necessity.

    Within the context of Canada's intention to liberalize trade with less-developed countries, we would like for Canada's negotiating position to take into account a specific aspect: application of the necessity criteria as contained in section IV:4 of the General Agreement on Trade in Services.

    Worldwide, the services sector represents 60 percent of the total flow of direct foreign investments. In 1999, the value of cross-border trade in services amounted to 1,350 billion dollars, or approximately 20 percent of total transborder trade. Over the past two decades, the services sector has progressed more rapidly than goods.

    In Canada, the services sector is a major source of economic activity. The services sector is growing more rapidly, representing 60 percent of the gross domestic product. The services industry employs three quarters of the Canadian population, and creates nine out of ten new jobs. Canada has the highest proportion of economic activity dependent on international trade of any of the G-7 or OECD countries.

    Of course, no country can prosper today burdened by an ineffective and cumbersome services infrastructure. In addition, importing services can benefit Canadians by increasing competition and providing easier access to new ideas and innovative technologies. Competition generally leads to lower prices, improved quality and greater choice for consumers and services suppliers.

    However, greater choice for consumers may sometimes lead to a loss of protection that consumers already have. It is therefore far from evident that the relation between greater competition and maintaining protection will survive the General Agreement on Trade in Services, and that within the context of opening the Canadian economy to services provided by less developed countries, Canadian consumers will have the same protection. This argument is based on a study by Option Consommateurs on the potential effects that section IV:4 of the GATS, the necessity test, will have on two specific services sectors, tourism and legal services.

    Section IV:4 targets protecting its members against protectionism or discrimination by the State. The country which claims that the more restrictive trade measure is necessary must prove why it is required. The procedure is applied in two steps. First, it must be shown that the criteria of necessity links the applied measure to a legitimate objective. The following step consists of determining whether the measure is necessary in meeting this objective. In short, the measure put in place by the State to meet the criteria of necessity must have a legitimate objective, must not be more strict than is necessary and must be the least restrictive in terms of trade. The evaluation of other measures available to the member concerned is imperative in determining whether the appropriate measure is the one with the least restrictive effects on trade.

    It is important to emphasize that there are two schools of thought regarding the criteria of necessity. The first definition, supported by Canada, states that regulations must not be more restrictive on trade than is necessary.

    The second definition, supported by the European Union, favours the term “proportionality”, which has a very different connotation.

    Canada believes, in fact, that a measure restricting trade should not be considered necessary unless there is no other measure that is less restrictive on trade and for which it can be reasonably expected that a member will use it to reach the same general policy objective. These are the terms of the agreement.

Á  (1135)  

    It is a question of expecting that countries will have the least possible recourse to a restrictive trade measure to reach the same objective, and which could be adopted by using the factors of technical and economic feasibility.

    For the European Union, in fact, a measure should be considered as not being more trade restrictive and/or not more strict than is necessary if it is not disproportionate in regard to the objectives that are being pursued. The notion of proportionality does not necessarily reflect whether there is another option. With proportionality, on the contrary, a given measure should be submitted to a balancing criteria that consists of implementing the objective sought by the measure and its restrictive effects.

    We believe that as part of the negotiations leading to opening markets to the least developed countries, the current Canadian position on the criteria of necessity could put into question many protections that are currently given to Canadian consumers. We would hope to see Canada choose instead a position that would take proportionality into account, which would provide a better context to implement consumer protection measures.

    Currently, we are referring to the tourist sector, which has been studied by Option Consommateurs. This example is very interesting, because the sector is already very liberalized and Canada is part of the general liberalization movement, which has always been uncontested. We took into account Canadian commitments in the category of travel agencies and wholesalers and the mode 3 supply of services, the commercial presence in Canada, the Quebec legislation on travel agents and its regulations, especially the requirements of the act in terms of licensing, and condition for delivering permits to travel agents.

    The Quebec measures as criteria relating to the operation, documentation, and also the submitting of travel agents' financial statements, or measures relating to professional experience or individual or group bond, are as many measures that are unlikely to past the test of necessity, under the current Canadian perspective.

    The study showed that these requirements had been established to provide major protection to consumers in the travel industry. Consequently, there is a medium-term danger of less protection for the consumer, especially concerning any review of the bonding requirements, which are the most practical and the most certain to be implemented when it is a question of compensating travellers in cases of litigation or closure of travel agencies.

    Less protection does not mean minimum protection. There will always be minimum consumer protection, but we are far from the protections given currently under the permit system, especially since general cooperation does not take up the baton. For this sector, therefore, we must be careful to maintain consumer protection in the tourism industry. In negotiations with less developed countries, we will have to take this into consideration.

    Thank you.

Á  (1140)  

[English]

    The Chair: Merci beaucoup.

    With that, we will open the floor for questions, starting with Mr. Casson.

    Mr. Rick Casson (Lethbridge, Canadian Alliance): Thank you, Mr. Chairman. Thank you, all, very much for your presentations; they were very interesting.

    Mr. Shannon, you eluded somewhat to this whole issue of least developed countries, opening access, and doing whatever is necessary to allow them to succeed. They must have the ability to do that, so they'll need investment, and investors, of course, want returns. Maybe you can expand a bit on what you said earlier. How are we to create an atmosphere where people will be confident enough to go into some of these countries with their investment, knowing there are unrest and political problems in some? What can be done to ensure that even if the access is there, these countries will have the ability and investment to proceed?

    Mr. Gerry Shannon: Your question is a very good one. A number of efforts are being made by various national governments and by institutions like the Royal Bank and others to put in place rules in the area of governance that would try to avoid the excesses of a society that pose a physical risk or a financial risk to businesses that might want to operate there. If a country is unstable to the point where you wouldn't put your money in there, the odds are that businessmen would not do that either. I referred in my remarks to, for example, government investment guarantees as being one way of encouraging investment in countries that have the potential to produce and trade. That would apply in those cases where there's a reasonable prospect that such an investment would be honoured and a quality product would emerge that would be received in markets like the U.S., Europe, or our own.

    It's an incremental process. The key thing, really, is that if you do find that a number of developing countries are giving more scope for the operation of the marketplace inside their economies, they'll probably be much more disposed to welcome foreign investment and to treat it accordingly, knowing that it will produce reasonable jobs down the road for them.

    I'm not sure what more can be done, except, in the area the World Bank and others are now into, the World Trade Organization as well, to try to help governments establish policies and programs that make sense in the provision of basic human rights and the right sort of atmosphere for the conduct of economic activity, and then to find some means of assisting companies that have the funds and see potential for their funds in that market to invest them and be reasonably secure in the knowledge their investment will be backed, at least in the short term, by government guarantees.

Á  (1145)  

    Mr. Peter Clark: If you give them access in areas where they've been most restricted, where the investment might have flowed somewhat more vigorously in the past, that's a start. The industries I was speaking about have been the building blocks for all developing countries. If you give them guaranteed access, the investments will flow, and they'll flow beyond where they have flowed.

    The production equipment and plant infrastructure is fairly easy to move around. In fact, you'll find that those industries too can move. If they feel a government or a country is becoming unstable, they can move fairly easily to somewhere else.

    Mr. Rick Casson: If we do give the least developed countries special consideration, whatever form that takes, and they do get into the production and get into the industry, if those concessions run out, what guarantee is there that they will stay there? Will they not just automatically default back to the country that presently is involved in it? I suppose it would be a matter for them to increase their efficiencies and become a true competitor.

    Mr. Peter Clark: If you mean their graduating from the group and losing the concessions, projections are that not too many of them are going to do that in the near future. There might be one or two, but they would be the most advanced, and they would have other things in the sophistication of their industry. What you've found with these countries, as they've got into business.... I can remember, when I was negotiating these restrictive textile agreements, some of the countries were in the same basic position that Bangladesh is in today, and now they have world-renowned fashion designers, they're selling in all the top stores in New York, London, and Paris. It doesn't happen overnight, but there is a progression. You move up the scale to the point where price and cost and tariffs aren't the most important thing. And if we believe everything we hear, the quotas are supposed to be gone fairly soon.

    Mr. Rick Casson: To Ms. Maloney, and others if they wish, if all these things we talk about take place, what are the consumers in Canada going to notice? What's going to happen? Is their pricing going to be better? Is the choice going to be better? What do you see as a result of entering into this agreement?

    Ms. Sharon Maloney: From a general perspective, we believe--and I think my friend from Option Consommateurs would support us--consumers in Canada benefit. Most definitely, they benefit from more selection. That's why we always support something like this, because we think it's ultimately in Canadians' interests. Also, the paper from the Department of Foreign Affairs makes reference to the fact that apparel--and I suspect footwear probably falls in the same category--has not experienced a lot of increase in price. In fact, prices have remained relatively flat over the past few years with this expansion and liberalization we have encouraged and have seen.

    However, I have to say there's a flip side of that. I think Canadians are concerned, and we recognize that concern. If Canadians have doubts about the conditions under which these goods are produced, if they are concerned and afraid that the countries from which we are buying do not support and invoke their own laws, not even mentioning any standards we might suggest that may be a bit different in Canada, I think that is an issue of concern. It's an issue of concern for us as retailers, because we're often characterized as being at the top of the triangle. We see consumers at the top of the triangle, but we're the next level down. If that concern is there, it is damaging to us as a trade, if there isn't a degree of confidence and a degree of knowledge about what is occurring internationally with respect to these issues.

    I've made reference in the submission to our support of this. We think what will happen and does happen is that as you build the economies of these countries, as you provide the infrastructure, as you encourage those countries, through aid, coupled with direct investment, ultimately, you develop a better platform, where a lot of these problems will no longer be the problems they currently are.

Á  (1150)  

    Mr. Rick Casson: Thank you.

    The Chair: Mr. Marceau.

    Sorry, Mr. Shannon.

    Mr. Gerry Shannon: Mr. Chairman, if I may, I think we have to be a little careful about making judgments on where social values and labour values intermingle with trade considerations. Obviously, in the most egregious cases, where you've got things like child labour that go beyond the limits of all organizations, including the International Labour Organization, there are grounds for drawing a line. But you have to be careful, because there are also instances where social values differ country to country and region to region, not just with human rights issues, but also, for example, with environmental issues. Somebody in Europe may decide that the Canadian method, for example, of harvesting logs is inconsistent with global and environmental concerns, so they should ban imports of Canadian forest products on those grounds. You get into those kinds of dicey areas, where judgments are made that you may live to regret. It's a very tortuous path. Trade negotiators, and indeed governments, are going to have to focus on how to get around the problem of the conflicting areas in matters such as trade and environment, trade and labour relations, trade and human rights. All these are things that need to be worked on very carefully.

    Thank you.

    The Chair: Okay.

    Monsieur Vanasse.

    Mr. Patrick Vanasse: We also had concerns about the quality of the products, especially agricultural products, if Canada opens its frontiers to less advanced countries. Maybe Canada could challenge some regulations on the quality of the food. Canada has the reputation of having high standards on food quality. We are concerned that these negotiations could lead to lowering these standards of food quality, and there are some other concerns about GMOs. Canada has a project to have voluntary billing on GMOs, and if Canada opens it frontiers to these countries, they will have to be aware of these things. When you talk about labelling of GMOs, you can talk about Canada imposing responsibility on these countries that don't add infrastructures or the financial resources to do that. It's not only a question of tariffs, it's also a question of regulation of food quality, of quality of the products. It's very important for us to ensure that the quality of the product will be kept.

    The Chair: Thank you very much.

    Monsieur Marceau.

[Translation]

    Mr. Richard Marceau (Charlesbourg--Jacques-Cartier, BQ): Thank you, Mr. Chairman. First of all, I would like to thank you for being here this morning.

    Mr. Clark, you have touched on something that I find especially interesting, when you state what effect opening the soft sector markets of the Canadian and Quebec economy would have. Let's take textiles, for example.

    You have mentioned new immigrants, who use this sector to gain their first foothold on the scale of social development. In your opinion, what would happen to these soft sectors, and the workers in these sectors, if there were a project to open these markets to least developed countries?

Á  (1155)  

[English]

    Mr. Peter Clark: I started negotiating textile agreements in 1967. The industry's in about the same position now as it was then. I've heard all the calls of doom and gloom. For eight years I authored many of them. I wrote books on why we needed protection in the textile and clothing industries. I'm trying to redeem myself now.

    Quite frankly, not an awful lot is going to happen as a result of this. The bigger concern is always what is going to happen with China, where they have a sophisticated clothing industry that is going to have more access. The issue is, who are they going to have more access to? Are they going to have it only to Canada, or are they going to have it to the world? It does get spread out. That's why I said there can be real problems. The way to deal with real problems is to put an escape clause in that deals with this particular access, as we did when we introduced the generalized system of preferences. That can be invoked in a case of real injury and disruption.

    I'm not suggesting that we should have hundreds of new Canadians out of work in St. Denis, St. Laurent, St. Michel, or the eastern townships, where they work. These jobs have become much better, and in Quebec, as you're aware, they're also protected by the parity committees, to ensure that non-unionized workers get paid the same as unionized workers. They're not the types of jobs you see in movies about Los Angeles and Chinatown in New York. They work in air-conditioned factories for the most part. They get paid on an incentive basis, and it's a good way for them to get a start.

    The type of product we're buying from places like Bangladesh is not haute mode, it's basic stuff, it's underwear, it's t-shirts, and we don't make much of that anyway. So you have to look at it in a broad context, and if there's a real problem, you deal with it. It would be imprudent to just say, okay, total free access, unrestricted access here, and no ability to deal with injury. I think you have to deal with injury.

[Translation]

    Mr. Richard Marceau: Thank you.

    Ms. Maloney, you spoke about human rights, and you mentioned in your introduction the importance of human rights. I had some difficulty, however, in following the rest of your presentation on respecting human rights as opposed to trade.

    Should human rights be a pre-requisite to opening Canadian markets to a specific country? If yes, how should it be determined? This is difficult to determine, because there are not any quantitative elements on respecting human rights. If no, what's the point in talking about this if in any case, it is not taken into account when opening markets?

[English]

    Ms. Sharon Maloney: Let me be clear. I am not suggesting we not pursue other markets purely on the basis of their human rights record. What I am suggesting is that we cannot ignore the concerns Canadians have with respect to human rights, and particularly, in our specific industry's case, labour rights and respect for local labour laws. We see this really as something that is evolving in tandem with international organizations. What I'm really saying is that when you look, for example, at our industry and you ask the businesses in our industry to become responsible for making sure the standards in a number of the countries we are now trading with are respected, we have to do that in partnership with our own government. And we believe our government then has to deal with the governments of countries from which we are purchasing goods with respect to those areas, as opposed to saying it resides primarily, and sometimes almost exclusively, in the private sector.

  (1200)  

[Translation]

    Mr. Richard Marceau: But it will be odd because the roles will be reversed. Often, people like you tell elected officials such as ourselves to be specific, and give examples. Yet, when you say that we should consider Canadian opinion on respecting human rights or respecting workers' rights, specifically, what does that mean? What does it mean to work in partnership with the government to ensure that these rights...

    If tomorrow morning, you were in a position of responsibility to determine this type of question, what would you say, specifically? What would you specifically do to respect the principles that you have just outlined?

[English]

    Ms. Sharon Maloney: When I refer to human rights, I'm referring to what we consider to be the core areas Canadians are concerned about. We believe those areas to be child labour, forced labour, and discrimination. Indeed, what we have done as an industry, and what our companies are doing as members of this industry, is develop voluntary codes. Those voluntary codes reflect, almost exclusively, the ILO human rights standards. The only area where they do not is with respect to freedom of association, and specifically in our code we have qualified the right to freedom of association with “lawful”. This is because of concern with countries like China, where, currently, freedom of association is not part of their constitutional and legal structure. So when you ask what concrete things we have done and think we should do, that's the concrete thing we think we should do.

    In working with government with respect to that, when we're dealing with a country like China, what I'm saying is that you cannot ask our businesses, our retailers, to go into a country like that and say, you will follow freedom of association and collective bargaining, and if you don't, we will not purchase goods here. That is a role for government, not for business.

[Translation]

    Mr. Richard Marceau: OK. So since you regularly mention the International Labour Organization, what do you think of the suggestion that many people have made to take the main conventions of the ILO and integrate them into the WTO so that the conventions, those of the International Labour Organization, can be judged by the tribunals, etc., instead of being grand declarations of principle, as happens too often, and which in fact have no teeth, because it doesn't matter if a country doesn't respect the ILO conventions, because there are no sanctions?

[English]

    Ms. Sharon Maloney: I want to be sure I'm understanding what you're referring to. Are you referring to panels or groups who are going to be monitoring?

[Translation]

    Mr. Richard Marceau: No, what I mean is that, for example, if within the WTO, a provision from a trade treaty is not respected, it goes before a tribunal, before a WTO tribunal, and there is a sanction. Couldn't the same procedure apply for the main ILO agreements? I am looking at the principle that the WTO agreements are legally binding, that is, that a tribunal can impose sanctions when a country does not respect its agreements, while with the main ILO agreements, there are never any sanctions. It has never happened that a country has been sanctioned for not respecting the ILO conventions. Therefore, this would complete the kind of ethics guide that companies have created.

  (1205)  

[English]

    Ms. Sharon Maloney: I would support that with respect to the ILO. The reason I wouldn't support it with respect to the WTO is that I think the ILO is more properly designed to do that. I think that's what their function should be and is with respect to developing the principles, negotiating the principles, dealing government to government and government to business. It's a tripartite process. I would be concerned that if we ask the same process to be adopted by the WTO, we are going to end up mixing apples with oranges. The WTO is there to deal with trade. I believe the ILO is there to deal with labour standards. If it's a question then of saying we need to look at the structure of the ILO in order to facilitate that, if it does mean a form of sanctions or penalties, we'd most definitely be interested in looking at that. What we are saying is that there have to be some teeth to what we're talking about in the international forum with respect to labour standards.

    It's a challenge, I think, for all of us to find where that more properly resides, because I'm also acutely conscious, as I'm sure everybody on the committee is, that.... I think Mr. Shannon raised it and said it very well. We would not support seeing Canada become, as I termed it, a cultural imperialist. There are standards we need to be working towards. I think the ILO has articulated those with respect to the core human rights standards, and I think those are the standards we need to be dealing with, and because of that, I think the ILO is probably the better vehicle for doing it.

    The Chair: Mr. Clark, then Mr. Shannon.

    Mr. Peter Clark: Mr. Marceau, I think what we need to be concerned about here is that in the various international organizations your ability to impose sanctions depends on how many of the members agree that you should. In the ILO the problem is that many members have not accepted the core standards, including the United States with some of them. In the WTO you have a single undertaking that all the members sign on to, and you have 130 to 140 members, In that kind of organization the members have agreed that the rules they've all agreed to have to be respected, and if they're not respected, they're subject to dispute settlement. If people still don't respect them, there are sanctions, retaliation, or compensation.

    So it's a question of what's covered and what's not covered. I just came back from Geneva a few days ago, and there doesn't appear to be as much support for bringing labour issues into the WTO. In fact, there's far more cooperation now among the WTO and the bank and the ILO and these other organizations in discussing issues as they relate to globalization. But they seem to be also making sure they don't get into each other's turf. The experts are really in the ILO building, not in the WTO building. That's the big concern I have about it.

    Mr. Gerry Shannon: Mr. Chairman, Mr. Clark is totally right. The only point I would add is that the ILO does not have any forceful mechanism, as you yourself pointed out, Mr. Marceau, and on these issues it is basically a talk shop. They're anxious to do more than they've done so far, but the membership is not prepared, so far, to give the ILO any role other than passing resolutions that have no real impact.

    As far as the WTO is concerned, the vast majority of members, by which I mean the developing countries, regard the imposing of labour standards in the WTO as a means of slowing down their development, and they would be very reluctant to see the WTO move down that road, however much you might make the case that they should. In fact, the vast majority of an organization that is run by consensus, by and large, is strongly opposed to the WTO's taking an arbitration role in trade disputes based upon labour rights.

  (1210)  

    The Chair: Okay.

    Mr. Eyking.

    Mr. Mark Eyking (Sydney--Victoria, Lib.): My question is to Sharon. She seems to be on the hot seat here.

    Ms. Sharon Maloney: Because it was foggy in Toronto.

  (1215)  

    Mr. Mark Eyking: We had a presentation last week from the food service retailers, and their stand was almost identical to yours, especially on the multinationals bringing in cheaper products. I hope the intent from these, especially the multinationals, the retailers, is to help underdeveloped countries and not so much a red herring in looking at bringing in cheap imports, because it's a known fact that there's a better margin here than with the locally supplied goods.

    The difference in your presentation from that of the food people was that you would hope we, as a government, do the watchdogging. I think that could put us in an awkward position. What if you have a company in the Toronto area that's making tools, for instance, and they're doing a good job, they have a union, and everything is going fine, and Wal-Mart says, we'd like to buy these tools from China, or soccer balls from Bangladesh, so how about going over there and checking if everything is okay before we bring them in? To me, it sounds like we're doing their job. They have no problem--and I was in business for 20 years before I came on the Hill-- in checking local suppliers to see that they maintain sanitary conditions and everything else, I don't see why they can't go over. Why can't these big retailers send somebody to Bangladesh and see how they make the soccer balls? If a consumer group stands up and says, hold it now, those soccer balls are made with the wrong..., the retailers are all going to say, well, we didn't check, and it goes back on the government side. With the size of some of these retailers now, they have the resources.

    I don't mean to get into a debate, but I think it's a little too easy to say government should do the okaying, and it leaves us in a bit of an awkward situation. I'm hoping there's a mix there, where we can help underdeveloped countries without hurting our industries so badly, also not getting to be the bad guys.

    Ms. Sharon Maloney: Let me clarify for you. I'm not suggesting that the Government of Canada should expend the resources to go over and look at factories. What I am suggesting is that the Government of Canada and other governments have to determine what the platform is going to be. If we believe, as a country, that freedom of association and collective bargaining are fundamental to what we consider important, we, as a country, have to move that bar when we're dealing with other governments.

    When you're talking about going in and monitoring, I am glad you used a company like Wal-Mart, because I think I can say safely that Wal-Mart Canada, and I believe Wal-Mart U.S., are investing millions of dollars right now in doing just that. We accept that as our responsibility. I don't mean to be suggesting today that our members do this out of altruism. Our members are in the business of producing profits. When they produce profits, they produce jobs, which ultimately, we believe, helps Canadians and others.

    That said, there's no doubt their image, their brand image, their corporate image, the integrity of the industry is absolutely critical to them and to us. That's why we are engaged in the debate. Our equivalent organization in the United States would be the National Retail Federation, and they have been unable to reach a consensus within their organization to do what we've done. In fact, we are the largest trade association in the world that has done what we have done. It's not an easy issue to grapple with within business, because not everybody is persuaded that this is the right approach to take. We believe it is a partnership, a collaboration between business and governments and international organizations. That's the only way we're going to create the underlying infrastructures in economies to support, ultimately, what we want to do. It's not going to happen overnight.

    Mr. Mark Eyking: I think that's crucial, because it has to be a bit of a partnership. I guess I got a different sense from you. I thought you were saying, well, it's not our job, and I thought maybe we would be caught in an awkward situation, where we'd be jeopardizing our own industries.

    Ms. Sharon Maloney: I believe it's the responsibility of all of us, but I think we have to be very clear about who can do what, who is best equipped to do what. Too often, I think, people believe that because of the emergence of national corporations that increasingly employ more and have more money than most national governments, the role should then be that of those corporations. I think that is a perilous route for us to go as citizens. It is not the job of corporations to do that. We should not imbue that confidence. We have elected officials, we have you here in the room today, to be doing exactly what you're doing in raising these issues, and that's who should be dealing with it in respect of the top line principles, not, in my view, corporations.

    Mr. Mark Eyking: If I'm buying a soccer ball for my boy for Easter, and it's a nice soccer ball, it's a fairly good price, and you see Bangladesh on it--I'm just using that as an example--in the back of your mind you're saying, I just hope some little child is not... That's the way most consumers think. They have to take it on trust that everything is being taken care of, just as when they buy a food product, it has to be produced safely.

    Ms. Sharon Maloney: I agree, and we believe that's a reasonable expectation. Where we perhaps differ from some of our critics is on one key issue, and that is freedom of association and collective bargaining. That's not because we don't support freedom of association and collection bargaining. Obviously, we do. We work in the Canadian environment, so of course we support that. What we cannot do, though, is go into countries on the basis of our voluntary codes and say they must respect freedom of association and collective bargaining, when that is not a practice that is adopted in certain key countries with which we're trading. When I talk about government, that's where I'm really headed and what I'm referring to.

    Mr. Mark Eyking: Thank you, Mr. Chair.

    The Chair: Thank you very much.

    Do you want to ask any questions, Peter?

    Mr. Peter Berg (Committee Researcher): My first question is on supply management, because it's in Mr. Shannon's brief. You say here that most tariffs of primary interest to these countries are in products like sugar and peanuts and are comparatively low. The impact, if you opened it up, would be for supply management industries from countries such as the U.S., the EU, Australia, the developed countries. So we're not talking much in the way of risk here, but we're also not talking much in the way of gain from these least developed countries. Is that an accurate assessment? Should we exclude supply management products or should we include them?

    Mr. Gerry Shannon: What I said is an accurate statement of facts. The suppliers of our commodities that are under restriction in support of supply management are Australia, New Zealand, the U.S., and Europe. Why did we keep them off the list? You'd better ask Foreign Affairs for the excuse for that. I can't understand why they would do so. The only legitimate reason might be if they had deep concerns about phytosanitary or technical barriers to trade, which people would have to have a look at. But by and large, the vast majority of these countries, probably all of them--we're talking about the least developed countries--are not in a position to penetrate the Canadian market for such things as dairy products or, for that matter, poultry products.

    There is a related point, and since you've opened the door, I'll make the point I wanted to make anyway. We went through the last round of negotiations with a so-called balanced policy on agriculture, whereby the export interests of sectors like the grains and meat producers were balanced against the import concerns of dairy and poultry and egg producers. That policy we carried through, until we were knocked off finally by a combination of countries whose influence was just too great for us to cope with. The problem I see is that you have a hard time telling developing countries they need to go through some pretty substantial reforms of their domestic structure. You tell them they need to deal with the obstacles to growth that are there in their own countries and let market forces operate, while at the same time you're saying supply managed industries are different.

    So there's a circle here that can't be squared, and it strikes me that at some point in the course of the negotiations members of our negotiating team are going to have to confront that issue and, hopefully, find a way to deal with it, which would, in effect, mean a rapid acceleration of the process of getting rid of the exorbitantly high tariffs that currently protect our dairy and poultry industries.

  (1220)  

    The Chair: Thank you.

    Mr. Clark.

    Mr. Peter Clark: I don't want to get into a debate about supply management with my good friend Mr. Shannon. It's an area where I have clients, and he doesn't, obviously. But one of the bases of supply management is that you estimate what demand will be in a year and you know what your imports are going to be, because you've got your quotas that have been set, either through the NAFTA or through other negotiations. Anybody who wants and who qualifies under the Canadian Food Inspection Agency rules can fill these quotas. The quotas are primarily held by people in Canada. They can go and buy where they want to buy. We bring in cheese from all over the world. We don't bring in cheese from, obviously, the least developed countries, but it seems to me to be a contradiction to have open access from a number of countries when you've got a finite number set for the supply management.

    If the government wants to change the policy about supply management, they could move to open up all kinds of other holes. The problem with any agricultural product is that it's the last quantity in the market that sets the price; they're commodities. That's maybe an oversimplification, but I can see why the government would say, well, we can't have supply management, which assumes that we're going to export a certain amount; we know what the imports are going to be under the TRQs, but we'll leave this hole over here. We're not talking about doing something for the least developed countries here for six months, 18 months, or two years. We're talking about doing it as long as they qualify--I hope we are.

    So there is a policy issue. That policy issue, I agree with my friend Mr. Shannon, is certainly going to arise in Geneva. It's arisen already, and it's going to arise again, but at this stage I don't see the government's exclusion of supply-managed products being a contradiction.

    The Chair: Mr. Eyking.

    Mr. Mark Eyking: I have just a comment on supply management, Mr. Shannon. I'm also on the agriculture committee and the Prime Minister's task force on agriculture, and we travel the country. I'm not saying all commodities that are not supply-managed are doing poorly, but most of them are. The supply management is doing quite well. When you talk about tariffs, the base of selling those products is cost production formula, so they can't just gouge the price on milk. Many of those products are the same in the United States. I know we have to think business all the time.

    As to the social fabric, the communities doing well in this country rurally are the agriculture communities that have supply management. Sometimes people in the city think we should trade away the dairy and all these eggs, because maybe we'll have a few cheaper items in Toronto or some of these other areas, but there are big repercussions to it. I think we have one of the best systems in the world for agriculture. I don't think the urban people are always educated enough on how well it does for the rural areas.

  (1225)  

    The Chair: Is there a comment?

    Mr. Gerry Shannon: Mr. Chair, I'd be happy to comment.

    I don't doubt that people who are in the business of producing eggs and dairy products and poultry products are content with the system of supply management. It does control the market, it does deny competitive forces an opportunity to bid for your dollar. You're quite right, in some cases dairy prices in the United States, for example, for milk, would parallel those in Canada, and the reason is that for some reason or another, the distributors of milk have, in fact, raked off much of the profit to be made there through the production, distribution, and sale of milk supplies in the United States.

    My point is that when you're looking at an international trade negotiation and you are arguing the benefits of trade liberalization, in theory, everything is on the table. If you choose to restrict access to your market for certain products, there's a price to be paid for that. If Canadian consumers are quite content to have that reflected in higher cost, because of the imposition of highly restrictive duties at the border, so be it. That's their business to be in, but it's very difficult in those circumstances to argue with countries upon whom you're pushing the merits of trade liberalization, or indeed your own products to that market, and at the same time to say we should do this for ourselves, but when it comes to supply-managed sectors, it's a different matter: this suits us fine, just leave us be. Our situation is not different from that of the Japanese and Koreans on rice, where they have the same fundamental social and political reasons for maintaining what, in effect, is a restriction, almost a blanket restriction, on imports of rice. It's not much different from what the Swiss employ on dairy, for many of the same reasons we hold dear in this country.

    You can cut the issue however you like, in the trade context, the policy does not make sense. If you choose to advance it nonetheless because it makes sense socially, the government must decide how it will deal with its trading partners and the like, because one thing I think I can say with some assurance is that you will find in this next round those high levels of tariffication that currently protect our industries are going to be severely attacked, and you're not going to be living with triple digit numbers in support of supply-managed products.

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

    I have a question for IDRC, and if anybody else wants to comment on it, please step in, and that is dealing with the definition of least developed countries. This country's LDC rating was based on its 1968 GDP of less than $100, or the literacy rate being less than 20%, or the manufacturing in that country being less than 10% of the total revenue stream. I want to ask you if you feel that it's perhaps time for us to review this. Is it something that is working? How do you see that issue evolving?

    Dr. Rohinton Medhora: There is, as you said, a technical definition, which is focused almost exclusively on nominal annual income. There isn't even correction for what's called purchasing power parity. One could make the case that a broader definition of human development, which would include health and education, two of the points you made, would give us a slightly different picture. Where I think this list of 48 really starts getting interesting is when you look at their market penetration. The only countries on the list that would probably be cause for concern in Europe, the U.S., and Canada are Bangladesh, which keeps coming up, Uganda, and Zimbabwe. That's about it.

    There's a second aspect here. Where I think the business of how you define the list becomes contentious is with the exchange you had previously on labour standards and human rights. Once you begin injecting these other considerations, the list becomes less technical, and so less objective and much more contentious. If we're happy with this list and this allows us to move forward on this issue, I'd say we should stay with it.

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    The Chair: Dr. Joekes.

    Dr. Susan Joekes (Team Leader, International Development Research Centre): Thank you.

    Could I just make a point of information that I hope would be of interest to the members of the committee in connection with the issue of labour standards, codes of conduct, and so on? There is in Britain a joint government-private sector initiative called the ethical trading initiative, which is a forum for discussing precisely the very interesting issues that have been raised by the Retail Council of Canada in your discussion here. That is based, I think, on what is called now a white list approach, where those leading companies that recognize the benefits to themselves of a good branding image also understand the very great difficulties in this area, that attempts to impose these kinds of standards can be counterproductive. There is clear evidence that they can be very unfortunate in that respect. There is, as I say, a joint forum in which these matters are discussed and taken forward.

    The Chair: Thank you very much.

    I want to thank you very much for your excellent presentations today. You have given us a lot of food for thought, and your presentations will help us in the formulation of the committee report, which should be tabled in the House no later than the 2nd or 3rd week of May. If you do have any other suggestions or comments, please feel free to pass them on to the committee clerk. Also, you could send them either to myself or directly to the minister, and then we would be able to pass them on to the appropriate people for you.

    With this, colleagues, we will be adjourning until Wednesday, when we will be dealing with the WTO accession bill. I want to thank you very much for being here.