International Trade Committee on Oct. 17th, 2006

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Maloney.

Monsieur Cardin.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you very much.

Good morning, gentlemen.

I've always said — and, if you haven't said it yourselves, you think it — that, when we talk about globalization or free trade agreements, everyone wants to globalize here and that we want to globalize somewhere else. Trade continually runs in both directions. However, the parties don't always have the same weight in terms of production and development, among other things.

Someone spoke earlier about natural resources. Indeed, they are important for Canada, but the economy that's increasingly developing is based more on what I call value-added, an intangible aspect of products based on innovation, creativity and, if we want to produce more, efficiency and competitiveness. In negotiating free trade agreements with other countries, Canada must really be convinced of its ability to innovate, to be productive and to compete around the world, as it were. Canada's ability is relatively limited, if only because of the difference between its population and that of the United States. The latter only needs to increase its production by six or seven percent and Canadian markets are invaded.

Having regard to these principles, what does Canada do? We know, as regards innovation and creativity, that the knowledge economy is based on raw materials. Here we're talking about secondary and tertiary processing. What is Canada doing in terms of support for businesses? Not all businesses have the R&D capability to achieve this kind of innovation and creativity. I think this is very closely linked. What kind of support are we giving those who negotiate overseas?

[Terry Collins-Williams]

It's a very good and fundamental question. As three individual government officials, we can only answer from a trade policy approach and a trade negotiating approach. But as I said in my introductory remarks, trade policy has to begin from domestic fundamentals. We have to know that we have a productive economy and that we can compete in international markets. As you say, we have to be able to move up the value scale in our international trade.

Canada has had a very remarkable record as an international trader. We are the most trade-dependent of the major developed countries, and have been for a long time. We are competitive. We have a very strong natural resources base, including our agricultural exports. But in trade policy and negotiating terms we also pay a lot of attention to what used to be called the new trade agenda and is now accepted as the services economy.

Since the 1980s, the free trade agreement with the United States, and the Uruguay Round of multilateral trade negotiations, the services economy has been brought fully into trade negotiations. We looked for access opportunities for our services industries.

Intellectual property and intellectual property rights have been brought into international trade negotiations. It's become a very important component for Canadian business to have the confidence to go into China to not only trade but make investments in China and be assured that their intellectual property rights are going to be respected. That was one of the keys to bringing China into the World Trade Organization.

I can't speak for the whole of the government's economic agenda, but in terms of the trade policy and trade negotiating agenda, I think we're very conscious of and have pursued approaches that encompass the whole of Canadian business opportunity and move up the value chain in our international trade.

[Serge Cardin, Bloc, Sherbrooke, QC]

If we're talking about negotiations for agreements between countries, we can say that the situation we recently experienced is an obvious example. We had a minor dispute with the United States, and we appealed, of course, under the NAFTA regulations and those of the WTO. Canada won, but is unable to enforce the decision at the legal level.

Ultimately, this sums up the present situation quite well, having regard to the international market and the disputes that may arise. The settlement of disputes with our partners has asumed considerable importance. We've recently been able to get an idea of the proportions this can take on.

We always have to ensure that it's binding. When we win, we win.

[Terry Collins-Williams]

The dispute resolution system in international trade is really unique to international relations, because there is no other area that I'm aware of in the conduct of international relations where countries have attempted and been willing to enter into binding commitments and some form of binding resolution of those commitments. And they will respect their international obligations and provide enforcement mechanisms if they don't.

We're relatively new--I mean internationally, not just Canada--in this game, because it was only with the creation of the WTO in a multilateral sense and enforceable panel decisions, and with the FTA-NAFTA with the United States and then Mexico, that we got into this game of enforceable dispute settlement systems.

I think what we've found--and I can speak more from the multilateral context of the WTO--is that the system of dispute hearing and adjudication of trade obligations has worked reasonably well; that is, the panel system arriving at decisions in panels, getting the panel decisions accepted by the parties, which in the old GATT never happened because there had to be consensus on the adoption of a panel decision and so the losing party would never agree to accept such a decision. Under the new system, the panel decision will stand.

Then you come to the area of enforceability, and that's where I think we're still in a testing ground, because as you say, and we all know, the issue is that we can win cases, but can we actually get our trading partner to change its behaviour as a result of having taken and won that case? That is, we have recognition by all the parties, including the losing party, that it's not respecting its obligations, but then what do we do? How do we get it to accept its obligations?

The WTO provides that either they will change their practice, they will offer compensation, or if we are the winning party we can extract retaliation. Retaliation in trade cases is a losing game, because trade is meant to be win-win. It's meant to be gain, to increase trade. To retaliate and decrease trade doesn't really help anyone, and we found that in the Brazilian aircraft case on both sides.

So there is obviously still work and conceptual work to be done, but it has moved forward.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Collins-Williams, and merci, Monsieur Cardin.

We'll go to Mr. Menzies for about seven minutes. That's what the others have been getting here.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chair.

Thank you, gentlemen, for being here.

My first comment would be that I'm reassured when I hear the level of knowledge of some of the people representing this country. Keep up the good work. Maybe we need to give you a little more help if Canadian companies and Canadian people are actually going to see the benefits of more free trade agreements.

Three individuals who just joined us could talk very forcibly about the benefits of trade. They represent the Alberta Beef Producers. We've recently gone through some challenges with the beef industry.

In the western hemisphere, specifically in North America, a lot of these issues crop up. You can call them non-tariff barriers. It could be a health issue or a lack of harmonization in our regulatory processes. These issues are considered back and forth across the border. Are you able to address those sorts of impediments in free trade agreements, or do we just have to deal with them as they arise? I ask this with regard to new agreements, not necessarily NAFTA agreements but free trade agreements. Are we able to build in mechanisms that would allow us to harmonize some of these regulations, so we don't have another BSE crisis or potato wart issue?

[Paul Robertson]

Perhaps I can start in the North American context. Your question, of course, is broader than North America. There are continual incremental gains being made with respect to understanding and disciplines relating to regulatory issues. I'm sure Mr. Collins-Williams could speak about the phytosanitary agreements in the WTO and the technical barriers to trade.

In the NAFTA context, more and more of the issues are being addressed. We've removed most of the tariff issues and are moving more into issues of regulation. This is one of the main areas of the new frontier. None of this can be done overnight. The high-water mark at which we now find ourselves in North America is the result of 20 to 25 years of work. I can assure you that we are continuing to work to increase regulatory disciplines and understandings as well as to remove potentials. This has been given a priority in our North American and bilateral work programs.

[Ted Menzies, Conservative, Macleod, AB]

At the WTO, we face more non-tariff barriers than tariff problems.

[Terry Collins-Williams]

Yes, it has been a real challenge getting at non-tariff barriers in the WTO, and partly just because of the extremely technical nature of those issues among 149, about to be 150, members of the organization.

I think Monsieur Cardin referred to differing levels of development among our trading partners. To take many of these technical issues into a negotiating context with many of the smaller developing countries is quite a challenge.

So there is an effort in the Doha Round to address non-tariff barriers. It was specifically identified in the non-agriculture market access negotiations. In that negotiation we spent the first three years just on the identification of issues and then on trying to place those issues in appropriate negotiating groups where some real progress could be made in developing disciplines to deal with them.

I think the most progress has been made in the area of trade facilitation, that is, at the border and leading right to the border: customs barriers beyond the tariff itself, administrative costs, internal transportation costs, the availability of internal transportation, making trade flow. Quite a bit of work has been done, and it requires a tremendous amount of technical assistance, because for most of these smaller countries the real barrier is that they don't have the resources to be able to provide the service. They would like to. They would like to be more involved in trade; they don't have the resources. So there's a huge technical assistance capacity building.

Specifically on agricultural non-tariff barriers, we made a decision before going into the Doha mandate that we did not see the prospect for making gains in TBT and SPS from the agreements we had from the Uruguay Round, because they were already under attack, again mostly from developing countries that actually wanted to lower the standards because they couldn't meet them. So those agreements are not part of the WTO negotiating mandate, and that was for a very tactical reason.

[Ted Menzies, Conservative, Macleod, AB]

On the subject of WTO, what can we do as a government to help facilitate a restart of this Doha Round after November 7, when things settle down in the United States? Do we have any hope?

[Terry Collins-Williams]

Yes, we certainly have hope. I think David said he was an optimist. Trade negotiators have to be optimists to be in the business, I think.

Yes, there certainly is hope. There are a lot of challenges. The challenges most immediately are in the agriculture area; you know that, both in subsidies--domestic support--and market access. They're the major players, and especially the European Union and the United States have to be willing to go further, the United States on making real cuts in its domestic farm support, and the European Union on guaranteeing more market access than they've been willing to put up so far.

There are a lot of other challenges and a lot of other opportunities in that negotiation for us. In the interim we have been examining other areas where we want to make progress. Services is one, where we're intensifying our consultation with the Canadian Services Coalition, and they have a very strong interest in moving forward.

I will say that our chief negotiator, John Gero, who is our ADM, trade policy, would have wanted to be here with you today, but he is at a meeting with a small group of WTO members in Europe, trying to do just that, to find a way to move the negotiations forward and to be able to get off the dime when the big players are willing to come back to the table and put something serious on offer.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Menzies.

Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you, Mr. Chairman.

This is my last round, so I'm going to put four questions to you.

I'll start with the issue of the failure of the trade regime--the bottom line, which is actually supporting working families and seeing a higher level of income. We know the income of 80% of Canadian families is now lower in real terms than it was in 1989, when the free trade agreement came into effect. That's a manifest failure, and I'd like to know whether within the department there were any discussions about having a different approach, given that this one hasn't worked. Please don't respond with “well, exports are up”, because the bottom line for trade is how it's impacting on working families, and most families are doing worse than they were in 1989.

Second, before you arrived the issue of labour rights was raised in the excellent presentation by the Canadian Association of Labour Lawyers. It's one way of trying to address the issue I'm talking about, of a race to the bottom. Is there any discussion within the department of advocating or creating a Canadian approach to trade regimes that takes into consideration a much stronger commitment to the environment, the involvement of labour rights to ensure that people's incomes actually come up--things of that nature? Is there any discussion within the department on that?

Third, during the presentation this morning there was the issue of the CA4 agreement.

And thank you very much for your information about how the Canada-Korea negotiations are coming forward; we had heard things were not proceeding as rapidly as they appear to be.

I'm interested in the CA4. Where are we in those discussions? Are they being as rapidly brought to a close as the Canada-Korea negotiations are? And what are the next steps in the negotiation process?

Finally, my last question concerns the issue of human rights. Is this something the department takes into account when we're discussing the possibility of trade agreements? Has there been any discussion around the issue of human rights and how Canada can play a role in promoting human rights through trade agreements?

[Terry Collins-Williams]

Thank you. I will attempt to respond to the first and last of your questions, and David to your second and third.

On the question of the effect of trade agreements on family income, I don't want to debate statistics and their relevance or accuracy, and I don't doubt in any way the statement you've made about lower family income since 1989, but I don't see how we can attribute a drop in family income since 1989 to any particular trade agreement. You would have to look at the performance of the whole economy and what's happened in that period of time. Certainly, trade agreements and Canada's export performance contribute to the Canadian economy—and have contributed demonstrably to the growth of the Canadian economy since 1989--but I don't think it's possible to make a direct correlation between the entering into force of a particular trade agreement and the overall income levels of Canadian families since a particular time.

On human rights and the relationship to trade agreements, certainly we consider our participation in trade agreements and the outcome of trade agreements contributing to human rights, in the sense that it is a fundamental human right that every individual in the world should have a decent living and a decent opportunity to make a living. We believe trade agreements contribute to that and contribute to the opportunities for growth in developing economies. That's why the Doha development agenda is directed specifically to the opportunities and benefits for developing countries, and it's the reason for their being given special consideration and treatment in the negotiation and in the outcomes of the negotiations.

[David Plunkett]

Thank you.

With respect to the labour rights question, as I said earlier, this question of labour side agreements is part of the process in which we are engaged. For example, we are looking for mutual commitments to respect fundamental labour principles and rights, and these, as Terry mentioned earlier, are based on some of the principles that one finds embedded in some of the other international organizations that have focused primarily on labour issues--in particular, the ILO. In that case, we look for transparency and opportunities for the public to be able to raise its concerns and for governments to have frank and useful exchanges in this area.

Generally, we consider that these labour agreements support our international development strategy. They advance economic growth and promote good governance and the rule of law.

You also mentioned the environment as well. Likewise in these agreements, we will look at environmental side agreements, which should also be supportive. Again, in that context, it may depend upon who it is we are negotiating with. Sometimes they become dealt with within the agreement, other parts may be parallel to it, and so each situation may depend on what we think is the best approach and what our trading partner at the time also considers. You sometimes have to be a bit flexible as to how you come at these things.

With respect to the CA4, the negotiations are reasonably well advanced. There was actually a meeting of officials last week in Ottawa. My colleagues who attended advised me that the discussions were useful, but there remain considerable differences on issues such as market access. As I said, we have to make sure before we entertain any agreement that it meets our needs, and we would not recommend signing any deal. It has to be a deal that we think meets the standard that we would expect.

No date for the next meeting in the CA4 has yet been set, but Canadian and CA4 officials have agreed to continue to talk and explore ways to overcome these remaining obstacles.

Finally, I will just clarify that with respect to Korea, while we did make some progress and are making progress, there's certainly no deadline yet for completion, and frankly, we still have fairly significant differences to overcome. Here again, we will not conclude until there is a good deal for the government and Parliament to review.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Julian.

We're down to five minutes or less, possibly. I have a couple of questions I'd like to ask. Is there anybody else with a burning desire?

Mr. Cannan, you were indicating that you'd like questions. Can we go to Mr. Cannan for a couple of minutes?

Go ahead, Ron.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thanks. I appreciate this.

I come from B.C., and we just announced our Asia-Pacific gateway, the $591 million. Premier Campbell is very excited about Canadians reaping the benefits of expanding the trade region in Asia-Pacific, so I am appreciative of your comments to my colleague Ms. Guergis earlier.

I want to clarify something in regard to Mr. Julian's comment about where we are at with working families and incomes. I heard you mention, Terry, that it's hard to statistically get into the debate, but where would we be if we didn't have the trade agreement?

[Terry Collins-Williams]

If I don't enter the debate from one side, I had better not enter the debate from the other side.

[Helena Guergis, Conservative, Simcoe—Grey, ON]

Doom and gloom....

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I appreciate that. If you want, we can talk about that afterwards with Mr. Julian and maybe go for a beverage.

I had a small business in Alberta, and one of the concerns is that there seem to be fewer and fewer small to medium-sized enterprises participating in the free trade agreement. Do you see some specific barriers or trends we can learn from, and so maybe reverse this trend and get them more engaged? As you know, Canadian small and medium-sized businesses are the backbone of our country and our economy.

[Terry Collins-Williams]

Right. That's certainly an issue that has been identified in the department and in the government, and I believe it is referred to in the report on plans and priorities. There are programs to bring small and medium-sized enterprises to export readiness and then to assist them, actually, with international business transactions.

From a negotiating perspective, I think we're negotiating the same access in international markets, in foreign markets, for all Canadian companies, regardless of their size. If we can open those markets, then it's our responsibility and that of another program within our department and of other government departments to provide the assistance to make sure those enterprises are actually able to take advantage of the negotiated opportunities.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I have just one quick question. In your opening comments, you mentioned that basically there's been very little dispute. Is it true that our Canada-U.S. trade agreement has been 97% dispute free?

[Paul Robertson]

Yes, it's in that range.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you.