International Trade Committee on Oct. 5th, 2006

[The Chair, Conservative, Leon Benoit]

Good morning, everyone. It's good to see you here this morning.

Good morning to you, too, Mr. Menzies.

Today we're here to meet with members from the Canadian International Trade Tribunal. We have with us Pierre Gosselin, chair, and John Greig, director general, research branch.

That will be the first hour and a half of the meeting. In the last half hour of the meeting we have reserved some time to discuss the steering committee meeting from yesterday on future business for this committee.

Before we get started with the questioning, and just after the gentlemen give their opening statement, I will read a statement from the tribunal that outlines the types of questions they are allowed to answer and those they're not.

We'll start right away with the presentations from the two gentlemen here. You all have a copy of the speaking notes.

I assume, gentlemen, your presentation will be roughly ten minutes. Go ahead, please, Mr. Gosselin or Mr. Greig.

[Pierre Gosselin, Chair, Office of the Chairman, Canadian International Trade Tribunal]

Thank you, Mr. Chairman.

It is an honour for the members of the tribunal here today to appear before the committee. We will do our best to answer your questions. Mr. John Greig and I are here today with Mr. Reagan Walker, our Legal Department Director, and Ms. Hélène Nadeau, the tribunal's secretary.

You invited us to appear before the committee to explain the Canadian International Trade Tribunal's role in determining whether dumped or subsidized imports, in the context of dumping or countervail cases, or increase imports, in the context of safeguard cases, are causing or threatening to cause injury to the domestic industry. You asked for a summary of our recent caseload and the findings made in our inquiries.

We have filed with the committee our annual report for 2005-2006. The report presents a summary of our work during the last fiscal year. It also provides an overview of our mandate. I will be pleased to answer questions you might have on this report.

I will however give you a quick overview of our mandate in the area of dumping and subsidizing injury inquiries and safeguard inquiries as you have requested. As the chairman said, we have also filed with the committee guidelines that we will follow during this appearance, as there are some areas that we cannot discuss.

As you know, the Tribunal is a quasi-judicial institution that operates at arm's length from the government. The Tribunal publishes all of its decisions and recommendations supported by reasons. It does not comment on its decisions nor does it discuss the deliberative process underlying the decision-making process. We can provide information concerning our mandate and administration.

With this in mind, let me briefly explain the tribunal's mandate in the area of dumping, subsidizing and safeguard inquiries. The Tribunal's injury findings with respect to dumping or subsidizing are made in accordance with the provisions of the Special Import Measures Act and Special Import Measures Regulations. These largely implement the requirements of the WTO Antidumping Agreement and the Agreement on Subsidies and Countervailing Measures. The Special Import Measures Regulations, in accordance with the WTO agreements, prescribe the factors that the tribunal must consider when it is conducting an injury inquiry.

A dumping and subsidizing complaint is first filed with the Canada Border Services Agency and the tribunal begins its injury inquiry when the CBSA issues a preliminary determination of dumping of subsidizing. We have provided you with a diagram explaining the inquiry process.

When conducting an inquiry, the Tribunal follows a very rigorous process. The Tribunal ensures that potential participants that could be affected by a finding are properly notified. In addition, the Tribunal requests information and data from interested parties, receives representations and hold public hearings. Tribunal staff obtain information through questionnaires sent to manufacturers, importers, and purchasers of the subject goods. This information forms the basis of a staff report, which sets out the information in the context of the factors to be examined by the Tribunal in arriving at his findings. This report becomes part of the case record and is mandate available to the parties.

The legislation requires that the Tribunal's determination of injury be based on positive evidence and involve an objective examination of the volume of the imports, the effect on domestic prices, and the consequent impact on the state of domestic producers. The agreements specify that a causal relationship between the imports and the injury or retardation must be demonstrated and that any injury resulting from factors unrelated to dumping or subsidizing be set aside.

At the public hearing, the domestic industry must provide evidence that the dumping or subsidizing of goods has caused injury or retardation or is threatening to cause injury. Importers or exporters, and users challenge the domestic industry's case. After cross-examination, each side has an opportunity to respond to the other's case and to summarize its own. The Tribunal issues its findings within 120 days from the date of the preliminary determination. A positive finding of injury or retardation or of threat of injury is the legal authority for the CBSA to impose antidumping or countervailing duties immediately and for a five-year period.

I would now like to turn to the global safeguard inquiries.

There's a fundamental difference between safeguard measures and anti-dumping or accountability measures. Safeguard measures provide a remedy to rapid increases in imports that cause injury to domestic producers. The measures help injured domestic producers adjust to increased import competition.

In comparison, anti-dumping and countervailing duties provide a remedy to imports found to be underpriced that cause injury to domestic producers. The measures are designed to eliminate the advantages conferred by this underpricing.

I will first address global safeguards, and then we can turn to the China safeguards.

A global safeguard inquiry can be initiated either by the government or directly through a complaint by domestic producers. The purpose of the safeguard inquiry is to determine whether goods are being imported in such increased quantities and under such conditions as to cause serious injury or threat of serious injury to Canadian producers of like or directly competitive products.

In making its determination, the tribunal is to examine, among other factors, the actual volume of the goods imported into Canada from all countries, the effect of the imported goods on prices of like goods in Canada, and the impact of the imported goods on domestic production of like goods in Canada.

The inquiry process followed is very similar to a dumping or subsidy inquiry. Data is collected, a staff report is prepared, parties file their submissions, and a public hearing is held. The tribunal reports to the government and to the Minister of Finance when it completes a safeguard inquiry.

If the tribunal finds serious injury or threat thereof, it can recommend a safeguard measure only if it has been ordered to do so on referral by the Governor in Council. Without such an order, the tribunal has no statutory authority to address the remedy issue. The decision on whether to implement the tribunal's remedy recommendations rests entirely with the Governor in Council.

Moving to the China safeguard inquiries, the CITT act was amended in 2002 to implement the safeguard provisions of the protocol of accession of China to the World Trade Organization. China agreed to allow WTO members, during a 12-year period, to take bilateral safeguard actions against its imports if they were found to be causing market disruption or trade diversion. These bilateral safeguard provisions expire on December 11, 2013.

The most obvious difference from global safeguard inquiries is that the goods concerned come from just one source, namely China. Another key difference is that the causation and the injury thresholds are lower than in a global safeguard and consist of a significant cause of material injury versus a principal cause of serious injury.

As in global safeguards, the tribunal may commence a market disruption inquiry or trade diversion inquiry following a request by the government or a complaint by domestic producers. Following receipt of a complaint from domestic producers, the tribunal decides whether or not to accept the complaint and to commence an inquiry.

The purpose of a market disruption inquiry is to determine if goods originating in China are being imported into Canada in such increased quantities or under such conditions as to cause or threaten to cause market disruption to domestic producers of like or directly competitive goods.

In making its determination, the tribunal is to examine, among other factors, the actual volume of goods imported into Canada from China, the effect of those imported goods on prices of like goods in Canada, and the impact of the imported goods on domestic production of like goods in Canada. Once again, the tribunal reports to the government and to the Minister of Finance. It can only recommend a safeguard measure following a finding of market disruption, or threat thereof, if it has been ordered to do so by referral by the Governor in Council.

The purpose of trade diversion inquiries is to determine whether any action affecting imports of goods from China into the market of another WTO-member country causes or threatens to cause a significant diversion of trade into the Canadian domestic market. I won't go into detail on that aspect, since there has been no such complaint so far before us. The tribunal is, again, required to make its report to the government and to the Minister of Finance.

Mr. Chairman, that's my opening statement, and I will be pleased to answer the committee's questions.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Gosselin, for your presentation.

We'll go directly to questioning.

Mr. Gosselin, you did point out that this is a quasi-judicial institution and there are types of questions on which you really can't get into in any detail. I'll leave that to you to judge, as you're being asked the questions.

We'll start the questioning with Mr. Temelkovski, for seven minutes.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

Thank you very much, Mr. Chair, and thank you, Mr. Gosselin, for the briefing.

You mentioned that the tribunal's injury findings are reported due to the Special Import Measures Act and so on, but you also mentioned that they are only heard after they've gone through the Canada Border Services Agency. Why do they start with the Canada Border Services Agency prior to coming over to the tribunal?

[Pierre Gosselin]

The responsibility of the Canada Border Services Agency is, first of all, to determine whether there's a properly documented case. Once they've decided that they are going to initiate an inquiry, they pass the file onto the tribunal. The tribunal makes a preliminary determination of whether there is a prima facie case of dumping or a subsidy, and then the Canada Border Services produces the preliminary dumping or subsidy conclusion. After that, the tribunal starts its final determination.

You have before you, I believe, a chart that maps out the process.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

I see that the global safeguard inquiries collect the data and there's a report that's produced, at which time the parties are submitting their information, and I'm led to believe that your tribunal will produce a report of some recommendations.

[Pierre Gosselin]

I think we have to make a distinction between a dumping or subsidy inquiry and a safeguard inquiry. A dumping and subsidy inquiry is quite different. It involves, as you mentioned a few moments ago, CCRA starting the process and then sending the information to us to make a preliminary determination of injury. If and when we do that, CCRA then makes its determination as to whether or not there is dumping or subsidy. Then we start our final determination on that subject.

If we're talking about safeguards, CCRA is really not involved. The complaint is either sent to us by the government or we are approached directly by the industry. The complaint there has to do with a substantial increase of imports from a particular source, or from all sources. The tribunal then proceeds to determine whether that increase in imports has caused injury to domestic producers. There is no mention in the safeguard process of dumping or subsidy.

In both cases, when the tribunal makes a determination of injury--or not, as the case may be--it's always accompanied by a statement that gives detailed reasons as to how the tribunal arrived at its conclusion.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

Was the tribunal involved with the softwood lumber issues and any of the litigation or injuries that were caused to Canadians?

[Pierre Gosselin]

No, sir. The softwood case is before the U.S. court--the ITC, International Trade Commission. It's both a dumping and subsidy case, but it's in the United States, not in Canada. We have nothing to do with that.

We deal, sir, with complaints by Canadians against foreigners.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

Would you say that some of the processes and procedures you use are used by our cousins down south?

[Pierre Gosselin]

Yes, sir. The genesis of all of this is the international agreements in the World Trade Organization, which enjoin the parties to have certain kinds of procedures to deal with dumping and subsidy and safeguards. It starts from the same source. We then internalize those agreements into domestic legislation. The United States has done the same thing.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

We learn from each other, I would assume.

[Pierre Gosselin]

Let's say that we all participate at the same negotiation to establish those agreements. Those agreements, once the government has accepted them, are then internalized into domestic legislation.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

Are we exposed to any unusual amount of dumping from any particular country or industry right now that maybe you're looking at?

[Pierre Gosselin]

I don't think I would characterize it that way, no.

The cases on dumping and subsidy come to us as a result of industry complaints. It's really up to the industries involved to make the first move. They have to document their case and present it, then we'll deal with it. I guess over the years there has been a concentration.... The tribunal has heard many steel cases, for instance, many agricultural cases, and manufactured goods cases. They are the most prevalent.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Temelkovski and Mr. Gosselin.

We'll go now to the Bloc, to Monsieur André, for seven minutes.

[Guy André, Bloc, Berthier—Maskinongé, QC]

Mr. Gosselin, Mr. Greig, good morning and thank you for being here today.

My questions will primarily be on safeguard measures. As you are aware, several Quebec companies, including some from the bicycle sector, have asked that safeguard measures be introduced to protect them from competition from Asian companies. I imagine that you are also familiar with the barbecue issue.

In the bicycle sector, as you are aware, following an inquiry, the Canadian International Trade Tribunal recommended that safeguard measures be introduced. The process is often very complex and costly for businesses. Preparing a case for the Canadian International Trade Tribunal requires hundred of thousands of dollars.

The government did not introduced safeguard measures in response to the Tribunal's recommendation. I believe that this might have been for political reasons. Perhaps the government thought that if it introduced safeguard measures in vulnerable sectors, other countries would follow suit, and so on. In that regard, you know quite well the issues I am talking about.

I find it disheartening to see companies spending a fortune to state their case before the Canadian International Trade Tribunal. Even if unfair competition is proven, the government has the last word and can choose not to implement safeguard measures. This is in spite of the fact that these businesses have spent hundreds of thousands of dollars.

In Quebec, the furniture sector filed a request seeking safeguard measures; or should I say, try to do something in response to the threat it faces. The industry is very vulnerable to international competition. As I understand it, the Tribunal undertook a cost analysis and stated that this study was to be divided into seven, more detailed sections. I am sure that you are familiar with the file. When those working in the furniture sector realized that the government had ignored the Tribunal 's recommendations on the bicycle sector, they decided that, rather than spending $300,000, $400,000 or $500,000 seeking safeguard measures that would most likely not be implemented, they would be better off exploring other solutions.

That brings me to ask wether you have enough power. Should the Canadian International Trade Tribunal have greater power of enforcement? Should companies that spend exorbitant amounts of money seeking safeguard measures be compensated if they win their case?

It seems to me that there is really a problem. I would like to hear your views on the subject.

[The Chair, Conservative, Leon Benoit]

Mr. Gosselin.

[Pierre Gosselin]

It is somewhat difficult for me to answer your question as it is political in nature and that is beyond our mandate. We apply the law. Were the government to see fit to task us with providing more support to industry, through counsel, for example, it would be for it to set up and implement such a program. It is not for the Tribunal to comment on such questions.

[Guy André, Bloc, Berthier—Maskinongé, QC]

What I want to know is whether the government could improve the Canadian International Trade Tribunal and how it operates. We are here as a committee today—we can consider recommendations.

[Pierre Gosselin]

I appreciate that the procedures applied by the Canadian International Trade Tribunal are complex, but that cannot be avoided. The agreements negotiated in Geneva, at the WTO and elsewhere, that have been signed by the government and incorporated into Canadian law require that these procedures be followed in a specific manner. That involves a certain degree in complexity.

Obviously, when the government decides to intervene in an open market, we try to be as fair and transparent as possible. This is what leads to such complexity. There are very often a high number of stakeholders, of opposing views, involved in cases relating to safeguard measures. That was certainly true of the bicycle sector file.

[Guy André, Bloc, Berthier—Maskinongé, QC]

How many requests for safeguard measures have you received from Canadian businesses since 2002? How often have such measures been introduced? How much have businesses paid to have these measures enforced and their industry protected? Do have any figures on that?

[Pierre Gosselin]

I think that there have been six requests since 2002, one of which concerned finished bicycles and one which concerned bicycle parts. We have also received requests relating to barbecues, tobacco, furniture and clothing. Of these cases, three were heard, one was withdrawn, and another is still under review. In the case of the furniture sector, the Tribunal decided that there was not enough proof to warrant further action.

[The Chair, Conservative, Leon Benoit]

Merci, Monsieur André.

We'll now go to the government side, and Mr. Menzies, for seven minutes.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chair.

I have one quick question that I hope you can answer. What would CITT's budget be for a year, and how many people are we looking at?