Evidence of meeting #2 for International Trade in the 39th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was negotiations.

On the agenda

MPs speaking

Also speaking

Randle Wilson  Assistant Deputy Minister, Strategic Policy, Communications and Corporate Planning, Department of Foreign Affairs and International Trade (International Trade)
John Curtis  Chief Economist, Department of Foreign Affairs and International Trade (International Trade)
Peter McGovern  Director General, North America Commercial Relations, Department of Foreign Affairs and International Trade (International Trade)
Susan Gregson  Assistant Director General, Regional Strategies Bureau, Department of Foreign Affairs and International Trade (International Trade)
Bruce Christie  Director, Multilateral Trade Policy, Department of Foreign Affairs and International Trade
Martin Loken  Director, Regional Trade Policy, Department of Foreign Affairs and International Trade

4:30 p.m.

Conservative

The Chair Conservative Leon Benoit

Mr. Christie, go ahead, please.

4:30 p.m.

Director, Multilateral Trade Policy, Department of Foreign Affairs and International Trade

Bruce Christie

Thank you, Mr. Chairman.

Our government's position in the agriculture negotiations is to continue to support and defend Canada's supply management system, and we'll continue to aggressively defend supply management in these negotiations.

As I mentioned earlier, we have a two-track set of objectives here: we're trying to preserve our domestic programs, like supply management, but at the same time we're trying to provide opportunities for export-oriented industries, which represent roughly 90% of the farm-gate receipts in Canada.

What I can say is that in the negotiations on sensitive products, proposals on the table, in terms of the number or percentage of tariff lines that members would be allowed to protect in an overall tariff reduction offer, range from 0% to over 12%. We have been part of those negotiations, and continue to be actively engaged in those negotiations. We have also argued for seeking the kind of flexibility in the treatment of sensitive products that would imply zero tariff reductions to those sensitive sectors. But that's the negotiation going on right now.

Japan would also like to protect its 1,000% tariff on rice. Other WTO members would like to gain better access into the Japanese rice market. This is the kind of pressure we're facing, too. Certain WTO members want access to our dairy, poultry, and egg markets. We continue to defend them vigorously in the negotiations.

Peter Julian NDP Burnaby—New Westminster, BC

I guess my next question is whether ultimately this is a deal-breaker if supply management is reduced. It's currently 11%. In the last discussion we had with the trade negotiator, he indicated that the American position was 1% but the Canadian position was 11%, and ultimately the compromise would be somewhere in between.

On behalf of the communities that depend on supply management, I'm hoping the instructions are that supply management will not be compromised. Having it reduced from 11% to 5% is still losing potentially half of that supply-managed sector.

I understand there are a number of agenda items. My question to you is whether this is a deal-breaker for Canada, and whether if we stand behind the supply-managed sector and it's compromised in any way, we wouldn't go any further.

4:35 p.m.

Director, Multilateral Trade Policy, Department of Foreign Affairs and International Trade

Bruce Christie

At this time I can't answer the question of whether that would be a deal-breaker for Canada, because we don't know what deal is on the table. We don't know what a final deal could look like. We may not get there.

But specifically, if your question is how far we would go to compromise within a sector coverage percentage, that really is a question that you should direct to Agriculture and Agri-food Canada and our chief negotiator. It would also depend on what the entire package would look like.

This is a negotiation. We are seeking new market access, and we're hoping to, as many members are, protect our domestic industries. What the final package will look like is a decision for the cabinet to make, as is whether the trade-offs involved in that hypothetical package would be worth accepting on behalf of Canada.

I can't answer the question of whether it would be a deal-breaker. We're not at that juncture right now.

4:35 p.m.

Conservative

The Chair Conservative Leon Benoit

Thank you.

We'll go to the second round, the five-minute round.

Is there someone from the Liberal Party?

Lui Temelkovski Liberal Oak Ridges—Markham, ON

Thank you very much, Mr. Chair.

I'd like to thank the department for coming out and doing a good job on the briefing. This is my first time on the committee, and I look forward to working with all of you as time goes on.

The number one issue I have to raise with the chair is that I came prepared for softwood lumber, and somehow that got switched. Mr. Paquette had such a passionate request for the softwood lumber, supported by Mr. Julian, that I hope we have an opportunity to have the information on that, although the ink may not be dry on the document yet.

4:35 p.m.

Conservative

The Chair Conservative Leon Benoit

The minister will be before the committee on Monday, and of course members are always free to ask the minister any question they like. The minister will answer what he or she can.

Lui Temelkovski Liberal Oak Ridges—Markham, ON

Thank you.

I also hope that the people from the department will be accompanying the minister, because he is still fairly new in the position and alone may not be able to do it.

My first question would be that last year in its May report, entitled “Dispute Settlement in the NAFTA: Fixing an Agreement Under Siege”, the committee unanimously put forward 20 recommendations designed to repair the NAFTA dispute settlement mechanism found in chapter 19 of the agreement. Furthermore, the report argued that it was time for the Canadian government to take a more aggressive stance on the trade dispute file with its American counterparts to ensure that the original intent of chapter 19 is respected. Can you comment further on this report, and whether it has been reviewed by the department? What actions have been taken, if any?

4:35 p.m.

Assistant Deputy Minister, Strategic Policy, Communications and Corporate Planning, Department of Foreign Affairs and International Trade (International Trade)

Randle Wilson

Thank you, Mr. Chair.

Clearly this is part of the general context that was considered and analyzed by the department in formulating advice to the new government, in particular in preparation for the NAFTA commission meeting in Acapulco and the first meeting of the leaders that follows I think a couple of weeks later in Cancun.

The immediate concrete follow-up has taken three forms. First and foremost, the priority given by the government to resolve the softwood lumber issue was obviously intended to take out and neutralize the single biggest thorn in our side. That said, there is work underway right now to follow the evolution of the last stages of that file—and I don't want to raise false hopes, because in fact those last stages in the softwood lumber file are still playing out—and see what elements can be used to handle other issues constituting irritants under NAFTA.

Secondly, there is and continues to be high level direction from leaders under the Security and Prosperity Partnership of North America to pursue a work program addressing the underlying causes of the disagreements. In some cases, those are no more than regulatory diversions, and there has been a longstanding NAFTA work program. But I can promise you that with the energy it's been given by both ministers at the NAFTA commission and at the leaders level at the SPP, this has a lot more momentum now.

Thirdly, NAFTA itself has been engineered to be able to continuously reinvent itself. That said, NAFTA is a five-letter word in certain parts of the continent, so there are ways of addressing the operation of NAFTA dispute settlement. There are concrete ways that are being explored and gradually worked out for implementation that do not in any way involve attempting to modify the treaty as such, which of course would be a recipe for a standstill. But these are ways that relate to the procedure, the standards of review—in other words, to all the lessons we have learned from years of American harassment on the softwood lumber file, to be blunt.

4:40 p.m.

Conservative

The Chair Conservative Leon Benoit

To the Bloc member, Mr. André, for five minutes, please.

Guy André Bloc Berthier—Maskinongé, QC

Good afternoon, everyone. Thank you for being here.

This is the first time I have spoken on this committee. I am a newcomer.

Earlier, you said that the Canadian economy was doing relatively well and similarly so was Quebec's economy. However, some industries have been hard hit by the rising of the Canadian dollar and competition from Asia. In some municipalities, competition from Asia has seriously hurt textile companies. These two factors will result in job losses in the Quebec furniture industry, particularly if the Canadian dollar continues to rise. This is hurting the production and sales of many industries that export to the United States.

I want to know whether the government has put in place mechanisms, programs or measures to ensure that the problems experienced by the textile industry, which suffered significant job losses, will not occur in the furniture industry or other sectors, including the bicycle manufacturing sector, which has also been hard hit by foreign competition.

My second question concerns supply management, which, in the agricultural sector, is a significant concern. Many farmers believe that supply management is protected. However, Quebec and Canada receive imports of what are called milk proteins, and this is very detrimental to farmers. For example, in Quebec, various statistics show that farmers have lost approximately $500 million. These losses are significant, and they are having a direct impact on dairy farms. I would like to hear your comments on this subject.

4:40 p.m.

Assistant Deputy Minister, Strategic Policy, Communications and Corporate Planning, Department of Foreign Affairs and International Trade (International Trade)

Randle Wilson

Thank you, Mr. Chair.

First, I want to answer your question about the industry. I have already indicated our wish to respond as best we can, but I want to be clear: my minister does not have a mandate to propose aid packages or structural changes.

Obviously, this context is extremely important with regard to the department's plans. That said, the minister's main objective — without putting words in his mouth — is to create jobs and generate productivity.

In the past few decades, we experienced similar shocks. In the 80s, the threat did not come from China, but rather from Japan and the United States. One of the most important lessons we learned from those experiences was to realize that the government cannot really predict the direction that the economy or an industrial sector will take.

For example, people had predicted as early as the 1980s the imminent disappearance of the furniture industry due to competition from the United States.

So, it is important to note that industries and companies operating in a flexible economy are better able to ensure their own survival. Quite clearly, we have seen a considerable change in the nature of jobs. For example, the textile industry has focused on design and retail sales, but it is important to note that the very nature of trade itself is escaping us. We can no longer rely on data about trade across our borders. The flow of trade no longer takes into consideration the complexity or totality of trade. This means that the government's most important role — and the minister insists on this — is to ensure a healthy economic environment, both nationally and regionally. That is why we are working with the municipalities to attract new investments and create and generate other prospects. Obviously, this is only one of the things we are doing. It is a way to ensure that wherever jobs are lost or are threatened, other jobs can be created to make up for that loss.

I see the chair looking at his watch.

I will talk briefly about supply management, if possible. It is important to first understand that it has been the policy of the Government of Canada, during these negotiations, to ensure that Canadian farmers continue to be able to decide how they want to do things. So, we have never tried to make decisions for farmers, but rather to give them a choice. The department also opposes export subsidies, or internal subsidies, which distort trade. The department wanted to allow them to remain competitive through their own efforts instead of through government funding.

With regard to milk proteins, we see on the one hand an evolution in the technology and on the other hand a market organization that goes back, in the case of the dairy industry, to the 1950s for cheese and to the 1960s for the Canadian Dairy Commission. The problem is that neither the industry nor the government is really able to predict the impact of technology related to the production of dairy products based on proteins or other ingredients.

Obviously, you are more up-to-date than I am on the recent rulings of the Canadian International Trade Tribunal. Consequently, when it comes to the challenges faced by the dairy industry, I'm sorry, but this falls under the mandate of the Minister of Agriculture and Agri-food, Mr. Strahl. This has to do with agricultural policy and not trade policy.

4:45 p.m.

Conservative

The Chair Conservative Leon Benoit

Thank you, Mr. Wilson.

We have time for one more questioner. Mr. Julian has indicated he would like to discuss something briefly before the meeting adjourns, so I recognize Mr. Menzies, for five minutes, then we'll deal with that business.

I have a very short issue I'd like to bring to the committee at that time, too. We'll deal with these things quite quickly, I would hope.

Go ahead, Mr. Menzies.

4:45 p.m.

Conservative

Ted Menzies Conservative Macleod, AB

Thank you, Mr. Chair, and thank you to our expert witnesses. It's a most interesting and timely subject. It's unfortunate we don't have more time to discuss it.

I want to clarify one comment Mr. Julian made about the farmers who were lined up on Wellington Street a few weeks back. My understanding from talking to most of those farmers was that they were not concerned about our government's defence of supply management as much as they were trying to raise awareness of their commodity price returns to their farms. Specifically, it was the grains and oilseeds industry that were raising the awareness of the crisis they were in.

I just wanted to clarify that. Unless I didn't meet any of the right farmers, that was the discussion I had with them, and I think it's important to remember that.

Going back to Mr. Christie's comment, about 90% of our agri-food gross returns come from those agricultural and agri-food industries that are dependent on exports. I'm confident that our negotiators—and excellent negotiators they are—are working hard to make sure we can somehow bring down those 600% tariffs that are keeping our products out of some of these countries.

We need to also remember that this is the Doha development round. We have had a lot of depressing comments here, but we did gain in Hong Kong the agreement that 97% of products coming out of the least developed countries would move quota free and tariff free. That's a plus. We should have gone 100%, but we're working on it.

Maybe this should go to Mr. McGovern. We're hearing a lot about the extension of the U.S. Farm Bill. Should I be as concerned as I am about that? I see that Congressman Collin Peterson has signed on today to that. I'm not only concerned that we have an issue at the WTO; what gains are we going to get in lowering U.S. domestic support if they simply extend the U.S. Farm Bill?

4:50 p.m.

Director General, North America Commercial Relations, Department of Foreign Affairs and International Trade (International Trade)

Peter McGovern

Mr. Menzies, that's an issue that's outside my competence. It falls more properly in that of our trade policy individuals, but we certainly can get a read for you and get back to you with it, if that would be all right.

4:50 p.m.

Conservative

Ted Menzies Conservative Macleod, AB

I guess I'm very interested.

4:50 p.m.

Director General, North America Commercial Relations, Department of Foreign Affairs and International Trade (International Trade)

Peter McGovern

It is a very important piece of legislation, which would be wide-ranging in its effects, and we should have proper....

Economists always like to make sure I'm very precise. I'm Irish; I go big all the time. But it could have wide-ranging effects, and we should get a report for you, if you wish, on the actual status of the legislation right now.

4:50 p.m.

Conservative

Ted Menzies Conservative Macleod, AB

Mr. Chairman, I know they haven't completed their 2007 bill, so if we're reverting back to the 2002 bill, then I'm concerned.

On a point of clarification, Mr. Christie, you talked about this new G-12, as I assume we're calling it. Who are those partners that we're in with, and has the Cairns Group fallen right off the map?

4:50 p.m.

Director, Multilateral Trade Policy, Department of Foreign Affairs and International Trade

Bruce Christie

No, the Cairns Group hasn't fallen off the map, and our good friends the Australians would never let that happen. As to the G-12, we're not actually calling it a G-12, maybe because it's not a group functioning at the ministerial level but is at the level of senior officials.

The current membership—and I say current because it is an ever-expanding group.... It started as a group of nine; it's now up to twelve. The G-4 group I referred to earlier—the United States, the European Union, Brazil, and India—are members, along with Australia and Japan, and the group has been expanded to include Canada, Malaysia, Norway, and Egypt, and China decided that they should be a member of this group, so we added them as the twelfth.

How many am I at now? I'm at eleven. Norway, Egypt, Malaysia.... Malaysia is the twelfth. But I can send it to you. That's the current group right now.

4:50 p.m.

Conservative

Ted Menzies Conservative Macleod, AB

This would be to Mr. McGovern, following up on your comment about the U.S. strategy. I sensed that you wanted to elaborate a little bit on that. Obviously, they're our largest trading partner. What are the potentials, and how are we going to access those?

4:50 p.m.

Conservative

The Chair Conservative Leon Benoit

You have about two minutes, Mr. McGovern. I would invite you to send any thoughts on that when you send a response to Mr. Menzies' question. If you could send that around to the clerk, he'll get it to all members of the committee.

Thank you.

4:50 p.m.

Director General, North America Commercial Relations, Department of Foreign Affairs and International Trade (International Trade)

Peter McGovern

Effectively, we have to be smarter in how we're working in the United States, in terms of the services we provide to the network of consulates, offices, and consulate generals in the embassy. We're proposing to approach the United States as a market of markets. Effectively, we've identified 15 markets: 14 of them are regional, the 15th being U.S. government procurement, which is effectively the defence sector. We want to focus our efforts on seven priority sectors--and I'll have to count them, but I can give them to you--where we see major value-added in terms of potential for Canadian exporters. The sectors are: aerospace and defence; agriculture food and seafood; automotive and transportation; bioscience and health; energy and environment; building products; and information, communications, and telecoms. Those will be the areas that we will concentrate our efforts on as an element of this strategy. It doesn't mean we're not going to stop doing the whole range of activities we do, because that continues on whether we're there or not, but this is where we think there is real potential for growth and opportunity.

4:55 p.m.

Conservative

Ted Menzies Conservative Macleod, AB

How many offices do we have in our expanded...?

May 10th, 2006 / 4:55 p.m.

Director General, North America Commercial Relations, Department of Foreign Affairs and International Trade (International Trade)

Peter McGovern

In terms of the expanded network, we have 22 offices, and I'd be very willing to provide where all those locations are, if that's of interest to you.

4:55 p.m.

Conservative

The Chair Conservative Leon Benoit

Mr. McGovern, in your response to Mr. Menzies' earlier question, which will be circulated to all members of the committee, if you could give a list of those offices, I think that would be good for us all to know. It's such an important market.