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

Wednesday, April 17, 2002

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1540

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

Ms. Andrea Lyon (Director, Tariffs and Market Access Division, Department of Foreign Affairs and International Trade)

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1545

The Chair

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

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1550

The Chair

Mr. Rick Casson (Lethbridge, Canadian Alliance)

Ms. Andrea Lyon

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Mr. Rick Casson

Ms. Andrea Lyon

The Chair

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

Ms. Andrea Lyon

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1600

Mr. John Duncan

Ms. Andrea Lyon

The Chair

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Mr. John Duncan

The Chair

Mr. John Duncan

The Chair

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

The Chair

Mr. Pat O'Brien

The Chair

Mr. Pat O'Brien

The Chair

Mr. Pat O'Brien

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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 031

l

1st SESSION

l

37th PARLIAMENT

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EVIDENCE

Wednesday, April 17, 2002

[Recorded by Electronic Apparatus]

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[English]

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

    I wanted to apologize to our witnesses. We had some deliberation in the House, and as a result, we were collectively delayed.

    We'll be today dealing with Bill C-50, an Act to amend certain Acts as a result of the accession of the People's Republic of China to the Agreement Establishing the World Trade Organization.

    We have with us witnesses from the Department of Foreign Affairs and International Trade and the Department of Finance. Later on we have a witness from the private sector who will be appearing, Mr. Peter Clark.

    So I thought we should start with a brief presentation from our witnesses, and if some of my colleagues have any questions to ask, we will do that. As soon as that is completed, we will move on to talk about the clause-by-clause. I will ask my colleagues to please stay until we finish the clause-by-clause, because we do need the quorum so we can pass motions and make our report.

    So we will start with Mr. Ray Boomgaardt and Mrs. Andrea Lyon. If you have one person who is going to speak, that would be great. From the Department of Finance, we have Mr. Guillaume Cliche.

    Okay, the floor is yours.

    Ms. Andrea Lyon (Director, Tariffs and Market Access Division, Department of Foreign Affairs and International Trade): Thank you, Mr. Chairman. Good afternoon.

    On December 11, 2001, China acceded to the World Trade Organization after 15 years of negotiations. The terms of China's accession will bring broad and extremely positive benefits and improvements in terms of access to the Chinese market for Canadian exporters of goods and services.

    WTO accession negotiations normally do not require Canada to make any legislative changes, as it is the acceding country, in this case China, that undertakes the concession and any required domestic changes. However, Bill C-50, which you are now considering, will enable Canada to implement fully certain special rights that were agreed to during China's WTO accession negotiations.

    As described in the briefing materials you will have received, the new rights implemented in Bill C-50, which are available to all WTO members, include China-specific safeguards and the right to apply non-market economy rules and anti-dumping investigations on Chinese goods.

    The Chinese-specific safeguards, which will be available for 12 years following accession, include the following: a product-specific safeguard that could be applied to any good originating in China that was causing or threatening to cause injury to our industry; and a diversionary safeguard that would be used to prevent Chinese goods shut out of one market via the China-specific safeguard from overflowing into a third market and injuring domestic industry.

    The anti-dumping measure that the legislation deals with will allow WTO members to apply special price comparability rules to China and anti-dumping investigations, while China makes the transition to a full market economy. This right will be in effect for 15 years from the date of China's accession to the WTO.

    These special measures will apply only to imports from the People's Republic of China. They will not apply to imports from Hong Kong or Taiwan, which are separate WTO members.

    These measures will be complementary to existing provisions in Canadian laws on safeguards and anti-dumping procedures. Canada's existing trade policies and trade legislation in these areas are guided by and based on the WTO agreements, including agreements on safeguards and anti-dumping.

    Other WTO members are also taking the necessary steps to amend their domestic, regulatory or legislative framework as necessary to ensure full implementation of these new rights.

    The measures being implemented in Bill C-50 are based on the negotiated agreed text and the protocol of the accession of China to the WTO. Relevant extracts of these are contained in your briefing books. The measures were designed to address China's unique place in the world economy as a major exporter with a high-tech production capacity and a large degree of government intervention and involvement in the economy. They are temporary measures that cover the period of China's transition to a market economy. These legislative changes are necessary to integrate these provisions into Canada's existing legislative framework I mentioned earlier.

    The laws that will be amended include the Canadian International Trade Tribunal Act, in order to create procedures for initiating and conducting China-specific safeguard inquiries; the Customs Tariff, so as to allow for the imposition of surtaxes pursuant to a China-specific safeguard action; the Export and Import Permits Act, to allow for the addition of goods to the import control list for purposes of enforcing a China-specific safeguard action; and finally, the Special Import Measures Act, to deal with the special price comparability rules I mentioned earlier.

    We do not anticipate a sudden increase in injurious surges of imports from China, as a result of China's WTO accession, that would require the use of these safeguards. China already has relatively open and free access to the Canadian market. Its terms of access to the Canadian market will remain largely unchanged as a result of WTO accession. Implementation of these measures will, however, ensure that Canada and affected Canadian industries have at their disposal the full range of rights that were agreed to during the negotiations.

    As I mentioned at the outset, these negotiations took place over 15 years. During the course of the negotiations, our positions were guided by consultations with the provinces and Canadian industries that have an interest in trade with China. The industry stakeholders support these specific measures, since they provide additional tools to respond to potential injurious import surges.

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    As you mentioned, Mr. Chairman, I have with me colleagues from the Department of Finance and the Department of Foreign Affairs and International Trade, and we'll be happy to respond to any questions.

    The Chair: Thank you very much.

    We are going to have a vote in about 37 minutes, so with your permission, because we are a House of Commons committee and take into consideration the views of both government and the public as a whole, we thought we would hear from somebody from the private sector, Mr. Clark. He's quite involved in issues of trade.

    Welcome to our meeting, Mr. Clark, on behalf of the committee. Perhaps you can give us your thoughts on this issue of accession in the legislation proposed before us today. After that, we will open it up for questions and comments.

    Mr. Peter Clark (President, Grey, Clark, Shih and Associates Limited): I'm pleased to find out Ms. Lyon has regained her voice, which she didn't have yesterday, and was able to appear. It's always a pleasure to deal with her as a representative of DFAIT because she's so direct, probably because she comes from Manitoba and it's too cold out there to take more time to do things than you really need to.

    Mr. Chairman, this is an interesting piece of legislation because in effect we didn't have to do anything to improve the situation for China as a result of its accession to the WTO. We didn't have to change any laws or rules to allow it in. China essentially had a level of treatment from us before its accession that is, with the exception of this bill, very similar to what it will be getting in the future.

    It's not normally Canada's approach to try to put all these extra conditions on a country. The problem we have here is similar to problems we have in other areas. The United States and others insisted on imposing these additional rules on the Chinese before it was permitted to have access. I am afraid Canada has no choice but to follow suit. Our market is one-tenth to one-twelfth the size of the United States for any given product. If that large attractive market is shut off to China... It comes across the same ocean to serve the North American market, and while I do find these special extra WTO measures somewhat counterproductive, I don't think we have any choice.

    Our first obligation is to all Canadian citizens and workers. I do hope we expand our exports to China, but it hasn't been a field day. There's a lot of unpredictability in dealing with China. There are problems dealing with this country on anti-dumping; the Chinese don't have real costs--perhaps in some areas where the plants are foreign owned. But it's very hard to get a handle on what's going on in China. Right now it's causing some misery to some metallurgical plants on the north shore of the St. Lawrence River that require great amounts of electricity.

    It's a difficult issue. We will have people saying if we're nice to the Chinese we'll get into the market and make great gains in our exports. Time will tell on that.

    On the other side of the coin, even though we have a lot of trade with China, we have relatively few anti-dumping investigations involving its products--steel is an exception, but this is true for all countries. As was mentioned the other day, we have had special safeguard provisions in the context of the generalized system of preferences. We didn't use them much.

    A number of things protect Canadian consumers and exporters from abuses of this legislation. The principal one is that in order to take trade-restrictive measures in Canada we must prove injury in a meaningful way, and we must prove it in a much more meaningful way than many of our trading partners.

    Because we have those safety nets built into the Canadian International Trade Tribunal, from my general perspective as a free trader, except when it comes to agriculture and supply management, I'm not concerned that this is going to cause any damage to Canada's trading relationship with China. Canadians tend to use these things with moderation. We have an open process with the Canadian International Trade Tribunal, which is subject to judicial review, scrutinized, and has a great reputation in Geneva. The CITT has never been challenged in the dispute settlement process in Geneva at all, and neither has the CCRA.

    So, Mr. Chairman, while it's a rather novel piece of legislation, quite different from Canada's usual approach, Flip Wilson used to say “The devil made me do it”, and our devil lives on the other side of the border.

    Thank you.

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    The Chair: Thank you very much for your thoughtful comments and your frankness.

    I will open it up now for questions from my colleagues.

    Mr. Casson.

    Mr. Rick Casson (Lethbridge, Canadian Alliance): I have a general question and I'm not sure you'll be able to answer it. How is China doing on meeting some of the obligations they put forward when they agreed to come into the WTO? We have a list here: legal and administrative structure, trade-related legislation. Are they working on their end of the deal?

    Ms. Andrea Lyon: Yes, they are.

    They formally acceded, as I mentioned, on December 11, which wasn't all that long ago. Since that time, the tariffs have started to come down, which they were required to do with respect to the elimination of tariffs. We've seen the publication of certain documents for comment, which was unprecedented, but required pursuant to their membership in the WTO. They have appointed their ambassador in Geneva and they are now actively staffing the various committees.

    That's not to say there haven't been problems. There certainly have been some areas where we've expressed some concerns about implementation or failure to implement. In the area of genetically modified organisms, for example, we had problems with certain of their regulatory procedures, as did a number of other countries.

    We now have an interim arrangement that will see the products through at least until the end of the year, and we'll work actively with the Chinese in order to ensure that the regime is fully compatible with their WTO obligations; likewise in the area of tariff rate quota administration, where there have been some delays in getting their system up and running. You mentioned financial services, where we do have some concerns with respect to certain of their requirements as they pertain to insurance and banking. In terms of a progress report, overall we're pleased with the status of implementation.

    We do have some concerns in those areas that I mentioned and there are a few other minor areas as well, but we are actively pursuing them in order to ensure that they abide by their WTO commitments.

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    Mr. Rick Casson: It mentions improvements to the legal system. Is this a really far-reaching, deep, entrenched change to how they have conducted business, or is it specifically legal towards trade issues?

    Ms. Andrea Lyon: In some cases it is both. They are required to set up administrative tribunals and to ensure that decisions are taken in a fair and impartial manner. When you look at the totality of the obligations, it is fairly far-reaching when you consider the nature of the Chinese economy as it existed. All the measures that they need to take pertain to trade and import and export and those sorts of matters, but it does introduce into their regimes the notions that are inherent in the WTO of non-discrimination, impartiality, rule of law, fairness, openness, and transparency, all of which will hopefully have broader application in the Chinese economy and, from a trade perspective, will certainly assist our exporters of goods and services by providing more predictability and certainty.

    The Chair: Thank you very much.

    Mr. Duncan.

    Mr. John Duncan (Vancouver Island North, Canadian Alliance): I missed the earlier part, so if this question has already been asked, please let me know.

    In the agreement by which WTO agreed to the accession of China, they made a commitment to provide WTO member states within 30 days with a statement--perhaps it was to Canada.

    Do you remember how I portrayed that question in the last meeting? You had taken note of it.

    There was a 30-day commitment after accession that they would provide to Canada all of the things they had done and put in place dealing with, I believe, agricultural issues. I wonder if they met that commitment.

    Ms. Andrea Lyon: I think what you're referring to is the tariff rate quota administration that affects, in large part, agricultural goods, but also potash and a number of other products.

    You're right, there were certain deadlines established that China was to meet in terms of notifying these procedures. A number of them have slipped, as I mentioned in the previous question. We are seeking further clarification from the Chinese government with respect to how they are going to be allocating these quotas.

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    Mr. John Duncan: Okay.

    I have a follow-up question. We've had a long-standing trade relationship with Taiwan, Hong Kong, and China--outside the WTO--so I guess my question would be related directly to the China-Taiwan issue. How do you see our relationship with Taiwan being affected specifically by these amendments to our acts? They obviously don't target Taiwan. Will this put Taiwan in a stronger position with us in terms of trading relations, or potentially a weaker position? Or I guess you could answer that it will help all three parties.

    I think everyone wants to have an opinion. Have you expressed some kind of opinion on how that relationship will be impacted?

    Ms. Andrea Lyon: My assessment of the impact on Taiwan would be that it would not have an impact with respect to our relations.

    As Mr. Clark pointed out, these sorts of legislative amendments are not normal in the context of an accession. But as I mentioned, because of the unique place, power, size, and might of China, it was felt necessary to negotiate these special provisions.

    Taiwan is now in the World Trade Organization. They acceded at the beginning of January. We'll continue to deal with them in terms of ensuring they pursue and adhere to their WTO rights and obligations, just as we do with China.

    But in my view, I don't see how these particular legislative amendments will affect our relationship with Taiwan.

    The Chair: Okay. Thank you.

    Colleagues, as we have heard from our witnesses, both from the department as well as from the private sector, the experts are telling us it's the objective of the bill to have a level playing field, to be on the alert in the event there are issues to be dealt with to protect Canadian taxpayers and Canadian interests.

    We are grateful to you, Mr. Clark, as well as Ms. Lyon, Ray, and Guillaume for appearing. You've been exceptionally great in your presentations and in the way you have approached this subject. On behalf of the committee, I want to thank you collectively.

    With the permission of my colleagues, what we perhaps should do--because we have a vote coming our way within about 10 minutes--is move to clause-by-clause, and you can tell me if you have any concern with any of the clauses. Otherwise, we'll just move on from one to the next.

    First, shall clause 1 carry?

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    Mr. John Duncan: On a point of clarification, are you talking about a vote here or are you talking about a vote in the House?

    The Chair: I was talking about a possible vote in the House.

    Mr. John Duncan: What do you know that I don't know?

    The Chair: I just thought there might be a vote between now and 5:45 p.m.

    Shall clause 2 carry?

    I'm advised by the clerk that we can go right to the end of the clauses, to clause 26, unless anybody has any problems.

    Mr. O'Brien.

    Mr. Pat O'Brien (London--Fanshawe, Lib.): Mr. Chairman, I have a number of suggestions. In many cases, they're wording changes or nuance--

    The Chair: On Bill C-50?

    Mr. Pat O'Brien: The WTO.... Yes, I gave you the--

    The Chair: The accession bill?

    Mr. Pat O'Brien: The accession bill, yes.

    The Chair: Are you talking about the report, or are you talking about the bill now?

    Mr. Pat O'Brien: Oh, I'm sorry, I'm on to the....

     (Clauses 1 to 26 inclusive agreed to)

    The Chair: Shall the title carry?

    Some hon. members: Agreed.

    The Chair: Shall I report the bill without amendment to the Standing Committee on Foreign Affairs and International Trade?

    Some hon. members: Agreed.

    The Chair: Shall Bill C-50 carry?

    Some hon. members: Agreed.

    The Chair: Okay, thank you very much, colleagues. That was most helpful, and I want to thank the members.

    We are going to adjourn for a minute or so and then go in camera to deal with some other matters. Thank you very much.

    [Editor's Note: Proceedings continue in camera]