Thank you very much, Mr. Chairman.
I want to thank the committee for inviting me to speak to you today. I'll try to divide my remarks into three segments, somewhat as Mr. Clarkson did.
First, I'm going to remind you why Canada entered into a free trade agreement with the United States, which was eventually extended to Mexico. Then I'm going to talk about how that agreement has evolved in relation to Canada's priorities at the time. Lastly, I'll make a few suggestions for the future, in view of the change in context and administration in Washington.
I am well aware that this committee is the foreign affairs and international development committee and that there is a separate committee for international trade, but you will agree with me that a large segment of relations with the United States is first of all trade-related.
When Mr. Mulroney wrote to President Reagan in September 1985, he stated two objectives for Canada: first, he wanted more secure access to the U.S. market and, second, better access. What did that mean? It meant that Canada was essentially seeking that free trade agreement with the United States, which was the result of 150 years of effort, first to consolidate the gains it had made in the GATT negotiations. There were seven at the time. We wanted to consolidate those gains because, at the time, we were using contingent protection measures, such as countervailing duties in the case of subsidies, and anti-dumping duties, in cases of alleged dumping. By paying a price in terms of openness of its own market, there was an erosion of gains made by Canada with the United States. Already at the time, we had the first softwood lumber case; in fact that was more than 25 years ago. It was a very clear concern of Canada's.
The second objective was to improve access. Indeed, U.S. tariffs of approximately 4% were applied to Canadian exports.
When you take an overview, you can see that we have improved our access: most tariffs have been eliminated on both sides. In Canada, we've kept quite high tariffs on certain agricultural products because of the GATT negotiations that were conducted in the 1990s and that transformed a certain number of quotas that we considered necessary at the time for the Canadian supply management system for dairy products, poultry and eggs. Those quotas were transformed into tariffs, and, despite certain cuts, those tariffs nevertheless remained quite high. We have gained better access; we can confirm that.
Safer access meant a better trade dispute settlement system. That soon became the main issue in the 1987 negotiations, in particular, such that Canada's chief negotiator, Mr. Reisman, ultimately broke off negotiations because no progress was being made on the crucial issue, for Canada, of a better trade dispute settlement system.
Negotiations eventually resumed and we got what we call Chapter 19. That chapter established a completely new dispute settlement system. For the first time, the United States agreed that the decisions of their agencies could be reviewed by non-Americans. They didn't like that from the outset, but it must be said that, in the first phase, that of the Canada-U.S. Free Trade Agreement, the system worked well as planned, that is to say that waiting times were reduced to approximately 315 days, whereas previous time frames, in the U.S. courts, were more than 1,000 days. Costs were also cut because there were no appeals; under that system, the decisions by the panels were final.
Matters seriously deteriorated when we signed NAFTA. Was it because we added a new country, Mexico, which is a developing country? I doubt it. Instead I believe that U.S. interest groups, the very powerful lobbies in Washington, managed to convince U.S. authorities to oppose Chapter 19 systematically. A range of measures were then deployed to counter the operation of Chapter 19.
I won't go into the genealogy of all that; I believe it's already been quite well documented. Whatever the case may be, as a result, today, an average of nearly 1,000 days is required to settle a dispute. Some cases, such as magnesium, have taken 2,300 days. In the last episode, numerous softwood lumber cases took approximately 1,700 days. Obviously, in these conditions, you can't say the process has successfully met Canada's second objective. It must be kept in mind that that was the principal issue for Canada. The main issue for the United States, as we learned later, was more secure access to energy resources. Professor Clarkson just alluded to that.
So, as far as we're concerned, this hasn't worked. That's due not only to protectionist pressures in the United States and to efforts by lobbies to literally destroy what was agreed upon at the time of the first negotiations, but also to our own government. The Canadian government has engaged in a more or less wilful neglect—and I think it's been more wilful rather than less in certain cases—that has undermined the system, by not appointing, for example, panel members within the prescribed deadlines, by accepting unacceptable deadlines set by the U.S. and by never challenging U.S. decisions through the extraordinary challenge mechanism, whereas the Americans have literally made it an appeal mechanism. I don't think that's a partisan criticism, in view of the fact that a number of successive governments have also experienced wrongs, which is unfortunate. That mechanism has been eroded, and I believe we can seriously wonder whether it will be really useful in future.
I don't believe either, somewhat like Mr. Clarkson, that we can unscramble the omelette. We're in it, and so we have to do the best we can. What can we do? The new U.S. administration and the arrival of Mr. Obama have obviously raised considerable hopes around the world. Mr. Obama clearly views matters in a very broad and very practical way. The crisis in which he has found himself on arriving in the White House will probably reinforce that attitude. For example, in reading his trade policy statement, which appeared on February 27, one is struck by the fact that he puts a lot of things in the same basket. I think that, if Canada wants to be heard by the new President, it will have to take that fact into account.
The shopping list, that is to say our approach of going to Washington with a list of items of interest to us, doesn't work. However, Canada has a lot of advantages. The President himself moreover emphasized one when he came here a few weeks ago, the regulation of our banking system. We have a lot of advantages to put forward, on which we can base a new approach to the new U.S. administration. I'm thinking, for example, of a less degraded environment and of energy sources—some of which are highly polluting—that are already of considerable interest to the United States.
I think that, if we want to improve our relations with the United States, while dropping this moralistic approach we often adopt, we will literally be able to put ourselves on President Obama's agenda.
Thank you.