Fisheries Committee on March 6th, 2008

[The Chair, Conservative, Fabian Manning]

Good morning. I will call the meeting to order.

I'd like to welcome back our guests, and thank Mr. Gauthier for his presence here this morning. My understanding is that the three of you may have some opening remarks, so you decide who is going to be first.

Go ahead.

[Gilles Gauthier, Director General, Multilateral Trade Policy, Trade Policy and Negotiations, Department of Foreign Affairs and International Trade (International Trade)]

Thank you, Mr. Chairman.

My name is Gilles Gauthier. I am the Director General of Multilateral Trade Policy at the Department of Foreign Affairs and International Trade. I would like to address the overall WTO process and then turn to my colleagues to elaborate on the specific issue of fisheries subsidies.

The current Doha Development Agenda of WTO negotiations was launched in Doha, Qatar, in November 2001. Since then, there have been WTO ministerial meetings to take stock and provide political direction to the negotiations. One in Cancun in September 2003, and one in Hong Kong in December 2005. This development-focused round includes negotiations in a wide range of areas, notably agriculture, non-agriculture market access, fisheries products, services, trade rules, and a host of other issues linked to trade facilitation.

The work is carried out in negotiating groups for each of these areas, and obviously, Canada is an active participant in all the negotiating groups.

Over the past years, chairs of each negotiating group have issued negotiating texts on their own responsibility to help guide the discussion in the negotiating group. In all respects, these negotiating texts represent a work in progress, and they are subject to revision. They are not agreed texts, nor are they final draft texts that could be submitted to ministers for decision. Indeed, in some areas, for instance, we have seen more than one revision to these chairmen's texts.

At this stage the work continues in the various negotiating groups to assess various proposals, the purpose of which is to identify those proposals with sufficient level of support to eventually become part of a final package of recommendations for ministers to decide on.

The WTO is a member-driven organization. Decisions are based on consensus and are typically taken by a ministerial conference. At this point in time, no date has been set for a ministerial conference.

In earlier testimony before the committee, reference was made to a possible ministerial meeting in April. While it is accurate that the WTO secretary general has raised this possibility, and indeed it was discussed among a group of ministers who met in Davos earlier this year, this will not be a ministerial conference to decide on the final outcome of the Doha Round. If such a ministerial meeting takes place, and it has yet to be scheduled, the purpose will be to provide guidance on how to move the negotiations forward. In that regard it very much resembles similar ministerial gatherings and formal meetings that typically occur throughout the year. I just mentioned that the last one took place at Davos.

All that is to say, Mr. Chairman, that Canada remains fully committed to a successful completion of the Doha Round.

I'd like to now ask my colleague to address the question of fisheries subsidies.

Thank you.

[The Chair, Conservative, Fabian Manning]

Thank you.

[Gorazd Ruseski, Director, International Fisheries Policy, Department of Fisheries and Oceans]

Good morning, everyone. My name is Gorazd Ruseski, and I'm the director of international fisheries policy at DFO. I'd like to offer a few brief remarks that build on the discussions at SCOFO last week.

When the chair of these negotiations introduced his draft fisheries subsidies text and draft text on other aspects of the agreement on subsidies and countervailing measures on November 30, he stated that he did not expect participants to agree to the text at this stage; he expected every participant to find things they did not like, and even things they disliked intensely. This goes to show that everyone involved in these negotiations accepts that there's a great deal of work ahead.

The chair's draft fisheries subsidies text has not yet gone through a first reading, and is only the first in what will likely be a series of drafts. As my colleague just mentioned, in other areas of these negotiations WTO members are working on second and even third drafts. In the end, until all WTO members, including Canada, agree to all areas of the round by consensus, including fisheries subsidies rules, there will be no deal.

In some places the chair's draft fisheries subsidies text was both controversial and unacceptable to Canada and a number of other WTO members. As a result, Canada is working with other like-minded WTO members to remove prohibitions on income support and port infrastructure from the text. We will also be working with other like-minded WTO members to develop text that will protect inshore and aboriginal fisheries programs, for example, that in our view are not part of the global overcapacity and overfishing problem that these negotiations are intended to help address.

Canada also has trade and sustainability interests to advance in these negotiations when it comes to developing countries. We have no interest in giving a blank cheque to those developing countries that are heavy subsidizers and contribute to overcapacity and overfishing. Canada has taken the view that if developing countries can afford to subsidize their fishing sectors, they can first afford to manage their fishing fleets responsibly. However, we've also taken the view that both developing and developed countries can benefit from legitimate, small-scale, inshore or aboriginal programs, and we will work with others in this direction.

Achieving the best outcome for Canada in these negotiations means not only ensuring that we retain the program flexibility we require for sustainable fisheries development within Canada's exclusive economic zone, but also ensuring that those programs that do contribute to global overcapacity and overfishing are eliminated.

Thank you.

[The Chair, Conservative, Fabian Manning]

Thank you.

Mr. O'Neill.

[John O'Neill, Chief, Trade Rules, International Trade Policy Division, Department of Finance]

I'm John O'Neill, the chief of the trade rules section of the Department of Finance, and the lead negotiator for Canada in the WTO rules negotiations.

This morning Mr. Gauthier explained how the WTO process is evolving in the negotiations overall. Last week I explained how the process is unfolding in the rules negotiations. We are at a stage where the chairman of the group, in an effort to progress the group's work, issued a first draft text proposal late last year. This draft proposal was prepared and circulated by the chairman on his own authority--not by the WTO as an organization, and certainly not as an agreed text by members. The negotiating group has met three times since then, but we've not yet finished a first reading of the text proposals.

Most of what I had to say has been said by my colleague, so I'm going to skip pretty close to the end of my statement so there'll be more time for questions.

There's one clarification I would like to make to the statements I made last Tuesday. I stated quite categorically in an answer to a question that neither aquaculture nor inland fisheries was included in the proposed additional disciplines on fisheries subsidies. That's certainly our understanding of the text as it's written, and that's how we interpret it. The discussions to date in the group certainly support that position. But I would like to reiterate that this is a negotiation, and nothing is final until the final text. We will be vigilant in watching to ensure that aquaculture and inland fisheries do not sneak back into the text.

In closing, I would like to reiterate that this is a first-draft text. Canada and many other members of the WTO have asked the chairman to release a first revision as soon as possible to address the numerous deficiencies we have found in the text, including the inclusion of income support and port infrastructure in the proposed prohibition. Our work is not nearly complete, and we have a lot of work to do before any text can be put before ministers for a decision.

Thank you for your time and attention this morning.

[The Chair, Conservative, Fabian Manning]

Thank you, Mr. O'Neill, and thank you to all of you for your presentations.

We'll open the floor for questions now. We'll begin with Mr. Simms.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Thank you, Mr. Chair.

First of all, gentlemen, thank you for coming. I really do appreciate this. There's probably some short notice involved here, and I'm glad you recognize that it's quite an issue for us, an eye opener to say the least. Mr. O'Neill, by your expression I'm sure you understand how grey this is.

In my research I was reading some of the chat going back and forth regarding some of the talks over the fishery subsidies. I noticed here that you mentioned that some of the inshore fishery would be exempt, or at least it would not be affected too much. But from what I can gather, the only emphasis on who will be exempt, when it comes to the subsidies, is on the developing nations. From this I understand there's a big push back from Canada, EU, Japan, Norway, United States, New Zealand, and Australia. On the other side of the thing, I'm assuming our subsidies are much higher than those. But they're really targeting the specificity. We have a situation here: when it comes to income support, we have a particular program that is set for fish harvesters in the EI system. I don't mean to meander about here from my research, but nonetheless it seems to me that the developing nations are the group that will receive more of a fair hearing than the developed nations.

Second, this text is so specific. They are really zeroing in on the specifics so that some of our programs, such as infrastructure, EI, and income support, are really going to have a hard time getting through this.

[John O'Neill]

The question has a couple of parts. I guess the first part is on whether any inshore fishery is exempt. You're absolutely correct. In the text right now are some special and differential treatment provisions for developing countries, not for developed countries. Last week we mentioned that one goal that Canada and a number of other developed countries have is to ensure that there is an exemption for programs in support of small-scale fishing, artisanal fishing, in the text. It isn't in there now, and we are pushing for that.

With respect to employment insurance fishing benefits, you're absolutely right that there are different criteria to qualify for benefits under EIFB. We have taken the position that EIFB is but one part of the overall employment insurance scheme in Canada, and it is part of a generally available program. That's our position, and certainly we will defend that. However, in these negotiations we're looking wider and we don't want to go to a WTO panel to find out whether our position will hold up or not.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Is this similar to something like the softwood lumber jurisprudence here or a precedent that they've set on their ruling? Is that what we're going to get into?

[John O'Neill]

Certainly down the road that would be possible. The WTO does play a dispute settlement role in trade disputes, but our position overall is income support. Social safety net programs do not properly belong within the mandate of the fisheries subsidies negotiations and therefore should not be included in any prohibition. That's it.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

I understand that. Here's what I keep reading through this, which bothers me the most. Article 4 of the draft text, entitled “General Discipline and the Use of Subsidies”, stipulates that “no member shall cause, through use of any subsidy...depletion of or harm to, or creation of overcapacity”. We have a serious overcapacity issue, which we are addressing domestically, certainly for the east coast.

[John O'Neill]

Yes, but I believe we're trying to decrease the overcapacity.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Yes, that is true.

[John O'Neill]

So that would be subsidies that would lead to increased overcapacity.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

But here's the problem. Let me create a scenario for you. The provincial government of Newfoundland and Labrador has a provincial loans board. It allows people to achieve financing to buy a bigger boat, for example, because the minister has just changed the rules on the vessel regulation size. Now, it doesn't increase, but it certainly doesn't decrease either, and that goes back to the capital gains tax issue, because that too is an increase to harbours. So you are allowed to bring your children in.

I'm creating these scenarios because although we are trying to decrease overcapacity, it's not going to happen very quickly, and we still have to maintain some semblance of an industry or infrastructure for an industry that's already there.

[John O'Neill]

Yes, I understand that, and I'm aware of all those programs—first of all, on the loans, and there are some loan guarantee programs. It differs from province to province. We believe those can be slotted in under an exemption for programs in support of small-scale fishing, and that is our objective.

As for the capital gains, what's been called the exemption, we're still looking into that, but what we have found so far is that it's actually a deferral, so the principal doesn't have to pay the capital gains. They can transfer the assets to children, a spouse, and there are other family members, I think, but I'm not sure of the rules exactly. It defers the capital tax rather than exempting it.

It's available for many small businesses; it's available for farmers, and there's a fishers program as well. Our position would be, again, this is generally available to the wide spectrum of the business community.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

What is a small-scale fishery? I open this up to anybody.

Some of the material I read is that when it came up, they said no, we don't want this to affect small-scale inshore fisheries. Some of the opponent countries said yes, but 80% to 90% of your fishery is inshore.

This is just some of the stuff I've been reading. But in your mind, what is “small-scale”, when it comes to this country?

[Gorazd Ruseski]

I can offer a brief response from my part, and maybe just a follow-up to your earlier question as well.

As I understand it, the way these negotiations have gone over the past five or six years, even before a chairs text was introduced, there has been a lot of debate about what is a small-scale versus an artisanal fishing program, and how do you ring-fence that concept for the purposes of these negotiations?

I think most of the discussion was focusing around trying to ring-fence the concept as desired to be applied by developing countries. So you might hear some developing countries say, well, we have small-scale fisheries for vessels that operate on the high seas that are x metres and so many tonnes. From our perspective, it's really difficult to call those small-scale fisheries.

That's something that we think does need to be looked at in these negotiations. After all, as I've mentioned before, developing countries account for half of world fisheries exports now. There are major developing country fishing powers out there now that are considered some of the heavy subsidizers--and to quote one of your previous expert witnesses from last week, the heavy “bad” subsidizers. So we think that should be covered in these negotiations.

The debate was never really resolved. I don't think there was ever really a consensus on what the concept of small-scale fisheries should be. That also means that in the ongoing discussions, developed countries, as I mentioned in my opening remarks, could have similar ground to occupy with developing countries, depending on what you define as a small-scale fishery, or an inshore fishery, or a fishery within an exclusive economic zone.

That's my best answer to that question.

I just want to clarify, you mentioned article 4 in your first question, but it might be instructive if we read the entire first sentence of that article so that you can get a sense of what I think the theme of that particular article is intended to address. If I could beg your indulgence, I'll just read it to you:

No Member shall cause, through the use of any subsidy referred to in paragraphs 1 and 2 of Article 1, depletion of or harm to, or creation of overcapacity in respect of, (a) straddling or highly migratory fish stocks whose range extends into the EEZ of another Member; or (b) stocks in which another Member has identifiable fishing interests, including through user-specific quota allocations to individuals and groups under limited access privileges and other exclusive quota programmes.

When I read that sentence, I think it's a little bit more oriented to high-seas shared fisheries and the responsibility of fishing countries to not provide subsidies to their fishing fleets in situations where that can lead to overcapacity or overfishing by those fleets that detrimentally affects other fishing countries. I think that's the theme of what that article is intended to address.

I hope that's helpful.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

It is. Thank you very much.

[The Chair, Conservative, Fabian Manning]

Thank you, Mr. Simms.

Mr. Blais.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

Thank you, Mr. Chairman.

Good morning, gentlemen.

I will start with a question that has been bothering me for some time. A text written by the chairman is in circulation. We are not talking about just anyone. He can, to a certain extent, take the initiative, but as far as I know, that chair is not necessarily a specialist or an expert in fisheries. He has undoubtedly drawn his inspiration from somewhere. He was surely inspired by people, groups, countries, and ideas.

What is your opinion on that? Who inspired him? It was surely not Canada. If you say that was the case, you will surely expose yourself to criticism. He must have been inspired by someone. Who?

[John O'Neill]

Yes, that's absolutely correct: he found inspiration somewhere. He found inspiration from the almost six years of discussions in the negotiating group. In the fisheries text, certainly, there are parts of it that were not inspired by Canada, and there are certain parts that were inspired by Canada. In particular, we pushed hard that any special and differential treatment that developing countries might get should not extend to high seas fisheries. That's something we had been putting forward, and it was included in the text.

There's inspiration from a large number of WTO members in this text. It's the chair's attempt to bring the thoughts of many members into a consolidated text, so that the issues can be debated in total, rather than on an individual basis.

Canada also has a number of issues we were pushing for in the other aspects of the text that were included. As well, there are a number of things in other aspects of the text that we really don't like. So fisheries is no different from other parts of the text; it reflects the thoughts and desires of a great number of WTO members.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

Is it true that the chair's main inspiration or main influences have come namely from New Zealand and Australia, and that these countries are supported by others like the United States and Iceland?

[John O'Neill]

In the prohibition section—article 1 of the chair's text—yes, I would say that would be correct. With the exception of income support, all of those prohibitions derive from papers that were submitted by one of the countries you mentioned—over the six-year period. Income support was something that was most often mentioned as specifically exempt, which is where we think it should be.