International Trade Committee on Jan. 30th, 2007

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

I'm interested because this is very important information you are giving us. Over the same period in Canada we've actually seen increasing poverty. In fact, 80% of Canadian families' incomes have fallen. Only the top 10%, the wealthiest 10%, have seen their incomes skyrocket, and of course the top 1% have profited spectacularly in this period, so what we're seeing in Canada is much more income inequality. In fact, we're at the most unequal level since the 1920s, and most of the jobs created today are part time and temporary in nature.

With reference to your economic and trade strategy, what is it about Chile that has been different from Canada? How have you managed to start to actually tackle issues of poverty and falling incomes, while we in Canada have not been able to?

[H.E. Eugenio Ortega]

I want to clarify something. We can lower the poverty, but it's not the same as lowering the inequality. That is because all is increased, but increased in the same difference. Do you understand? That means we have an equal rise in income, but when we measure the difference between the 20% of the people who have the most income and the 20% who have the least income, in Chile it is 14 times bigger. It's important, but when you introduce social expenditures in the schools and in social life in general, when you introduce the social policies for this person, the difference is seven. The big change in democratic life from the neoliberal political situation before is that we now have a social policy, a very important social policy.

In education, for instance, I have the figures here. In education, in 1990 we had 1.6% of the GDP in expenditure in education; we had 3.3% in 2002, and we have increased it in the last year. That means, for instance, we doubled the post-secondary education. That means Chile, in terms of social policy, is very proactive. For this reason, the difference between the rich and poor is decreasing.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Julian.

We go now to the five-minute rounds, starting with Mr. Temelkovski.

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

Thank you very much, Mr. Chair.

Thank you very much, Ambassador, for coming and sharing so much information with us.

I'd like to get your opinion on what are maybe the three obstacles that Chile has identified in allowing us to increase our trade capabilities between the two countries.

[H.E. Eugenio Ortega]

It is a very good question. We have to work with the Minister of International Trade. We have a meeting next month with the commission that administers the free trade agreement. Madam Marie-Lucie Morin perhaps is going to Chile to make the evaluation, the first. We had worked in the evaluation of the free trade agreement, but I think, in my opinion—this is absolutely personal—we are working to answer this question in terms of empirical.

I think that we have one of the (inaudible) came from some difficulties to push the medium and small industry to go to the market. For this reason, we are learning here about the technical extension system for the medium and small industry. This is one point. And you have also the same problem in your middle with other levels of technology, but the same problem, in terms of market. Your enterprises, they have the security of the market in Canada, in their province, but they don't go to the world. They fear.

And it's not easy. The big companies that we have, and we have many, they are in the world, but the small and the medium companies, I think that we have not a good policy, a common policy, to push—push—the small and medium enterprises to enter into the international market. We'll have to learn from your experience, and I think that you have to learn also of ours, because we have some experience, very important, in different aspects or dimensions.

But we think that this is the first. We have many enterprises that don't go to the global market. They fear.

The second is financing. I think that we don't have a good system of finance the trade, the international trade, to promote the international trade. We have to organize in our financial system some possibility to give some incentive to these small and medium enterprises.

And third, I think that the big problem is that we don't have open relations in other sectors—I mentioned that before—that is very important, the trade.

I think that Canada has to define the possibilities that Chile offers, to establish in Chile companies to work for Latin America, not only for the 15 million persons, and we have this platform, in terms of...Chile's a model in (inaudible) and in terms of Internet and all the different service that need an enterprise to work well, and if you ask to the big enterprise how they have been received in Chile, how they find the country to make his business in Latin America, you will have...I asked them in (inaudible).

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

Do you foresee the same difficulties or obstacles with your other free trade agreement countries? Are they similar, or is this unique to Canada?

[H.E. Eugenio Ortega]

No, there are not too many obstacles. In the case of the European Union, we have a more complicated system of free trade. It is not only free trade. We have a system of technical cooperation to help enterprises go to market. They are Chilean....

We also have other free trade agreements along the same lines. For this reason, it is very important to know what we are looking for in the near future. How do we improve on new dimensions in our relationships? Because to only open the market and write the agreement is not enough. Our public policies in international trade must be more proactive, but together, so that we learn from each other. In this way, we can go forward more quickly.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Temelkovski.

We'll now go to Ms. Bonsant for five minutes.

[France Bonsant, Bloc, Compton—Stanstead, QC]

Thank you.

Good afternoon, Excellency.

My questions will be about education. You did not mention what percentage of young people go to school. In a number of countries, there are recruitment problems because the population is aging. I would like to know whether there are many children in your country who want to go to school, because we do hear a great deal about skills development. Does Chile have a problem recruiting new employees in all areas of activity, such as mining, medicine and agriculture? Are there young people there to take over the jobs? Does Chile invest heavily in research and development?

[H.E. Eugenio Ortega]

Thank you very much. Education is important to us.

I said in my presentation that our most serious problem is the quality of education. I am also referring to the quality of our technical education. We have some very good universities, even though they are not all at the same level as Canadian universities. We would like to have greater access to the Canadian university education system. We are having some discussions with the Canadian Association of Universities and Colleges. We have already met with representatives of this association and with the Association of Canadian Community Colleges. I went to Santiago with them. Our needs are mainly in the area of technical education. Our technical education programs are not of a very high level... Is that the correct term?

[France Bonsant, Bloc, Compton—Stanstead, QC]

Yes, that is right.

[H.E. Eugenio Ortega]

We do not offer our young people a high quality alternative—namely technical education.

[France Bonsant, Bloc, Compton—Stanstead, QC]

So, after high school, you go to university.

[H.E. Eugenio Ortega]

That's indeed the trend we've observed. We're trying to fix the problem and change things. For the past 10 years, we've gone to great lengths to improve technical education. In Chile, technical schooling is dispensed by private mining and agriculture companies.

[France Bonsant, Bloc, Compton—Stanstead, QC]

Is that similar to the technical training provided by Quebec's CEGEPs? After three years of study at a CEGEP, you get a diploma in nursing or agriculture without necessarily going to university.

[H.E. Eugenio Ortega]

That's what we're trying to do.

[France Bonsant, Bloc, Compton—Stanstead, QC]

Is it also similar to what you call the community college system?

[H.E. Eugenio Ortega]

Yes, it is. They visited Chile in November and had quite an important meeting with Chile's education minister. She may come to Canada at some point to meet with Canada's provincial education ministers and representatives from the Association of Community Colleges of Canada, and also to look at the Quebec model.

Our big problem is still the lack of funding for research and development. For example, Quebec will spend 3 per cent of its GDP on research and development from now through 2010. Innovation is crucial to Canada, and we have a great deal of work to do in this area. The education minister will be coming April 19, 20 and 21, as well as our finance minister. These meetings will be an opportunity to work with Industry Canada and to get an understanding of Canada's experience when it comes to innovation. We also want to increase the amount of money spent on research and development. That's one of our big challenges.

[France Bonsant, Bloc, Compton—Stanstead, QC]

Gracias.

[The Chair, Conservative, Leon Benoit]

Merci, Madam Bonsant.

We go to Dean Allison from the Conservative Party.

Mr. Allison.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

Thank you, Mr. Chair, and thank you, Mr. Ambassador, for being here today.

I just want to clarify something, because I know our good friends over at the NDP may lead you to believe that we're worse off in Canada now as a result of some of our trade agreements. I want to give you a benchmark, which has been produced by Statistics Canada, that says when NAFTA came into effect in 1994, the average family had a total income of $64,000, and by 2003 that income had risen to $72,000. So we are doing better as a result of some of our free trade agreements and we'll just agree to disagree on that particular fact.

In terms of your free trade agreements, it looks like you guys have some of the most extensive free trade agreements in the world. You've got agreements with China, the U.S., a very extensive range of free trade agreements. You guys are arranging free trade agreements with Australia, India, Thailand, and Vietnam right now in 2007. Is that correct?

Then my question is how do you decide who you're going to deal with in terms of free trade agreements? It's amazing--and I know it's been mentioned before by some of the colleagues--that we haven't completed any since 2001, but you have free trade agreements with countries like the U.S. and China. You also have some that aren't so impressive or that don't have that type of clout.

So why do you look at free trade agreements with various countries? Just from all the numbers, and by what you indicated to us on the board, it's looks like it's been very successful. What is the determining factor when you go looking at free trade agreements with other countries, and is there something in there that Canada could maybe learn from?

[H.E. Eugenio Ortega]

I think there are two or three elements that are very special for us when we define a country. Normally we know exactly that in China, in India, and in many other big countries and big markets, we want to establish our entrepreneurs. It's impossible now for us to forget China. We have worked to obtain the agreement with China...in many different democratic governments. The President of Chile has visited China 10 times, I think, and many times we have received the Prime Minister of China in Chile.

For them, the problem is Latin America. They don't go to Chile and sign an agreement only to establish relations with this small country. Rather we have, as I told you before, a big platform and this is the more important thing in their approach. In our approach, for instance, we have a free trade agreement with EFTA. EFTA is the free trade agreement of four countries: Iceland, Liechtenstein, Norway, and Switzerland. Why? Because we are very interested in the experience of Norway and Switzerland. Liechtenstein is very small, but they are part of EFTA. We signed the free trade agreement because Switzerland and Norway are important to us in many different sectors.

We have, for instance, an agreement with the P4--New Zealand, Australia, Brunei, and Singapore. That is not only a free trade agreement but also a cooperation model. This means we will work together on many different aspects with them. Singapore is interesting for us, not only as a place but also because of the sectors in which they work. With New Zealand we have a complementary relationship. They need Chile to develop some aspects in forestry, wine, and different sectors.

There are many reasons, not just one or two reasons. Each country presents different alternatives to give us different opportunities that we can use. You don't understand Chile now if you don't understand free trade, because in Chile 55% of our GDP is foreign trade. That means Chile has more than twice per capita the income from foreign trade that Argentina has, or more than four times that of Brazil. You understand Chile if you understand that we open our economy. We have put to our entrepreneurs the challenge to go to the market in competition with others.

We invite Canada to participate in the group of four, the P4, because we can organize with Australia, New Zealand, Brunei, Singapore, Canada, and Chile a very good standard to face the future. I think that if you have not only more commercial trade agreements, but also a cooperation system that we are looking for in the future with Canada, it will be very important, because that will give us many other opportunities.

Proactive thinking is limitless, and when you put together entrepreneurs, researchers, new technologies, etc., there are possibilities for both, for different countries, and we believe in that. We think our country is leaving poverty and underdevelopment behind.

In this scheme, we think the state has a very important role. We have nationalized some companies; in petroleum, in copper, and in different things the owner is the state, but also we have an e-state. I can say to you that our e-government, as evaluated by the World Bank, is one of the best. Excuse my pride, but it's one of the best. I have visited some provinces here and have had the opportunity to talk about the e-government in Chile, and they say, “We need your help, your assistance”. We have, really, an e-government that works very well, and Quebec has concluded they want to know about our experience.

I think when you go into this, you find partnerships not only in things, but in imagination and creativity.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Allison.

Mr. Julian is next, for five minutes.

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

Thank you, Mr. Chair.

Thank you, Excellency, for your comments around income inequality. My colleague Mr. Allison was quite right to point out the absurdity of having so-called average incomes going up when we know that for 80% of Canadian families they've actually fallen. That's what average income rates actually do: 1,000 people lose half their income and a billionaire makes another billion, and it appears that all incomes have skyrocketed. We know it's not the case, so I appreciated your comments about income inequality and making sure that the government analyzes that and understands what is actually happening.

I have three questions for you. The first is around value-added exports. We've recently had the government sign a softwood lumber deal that has led to sending raw logs across our border with a lot of job losses. It would be interesting to see what the Chilean government has put into place to ensure that the exports that leave Chile are actually value-added and actually contribute to the creation of jobs.

Second, you mentioned a long list of trade agreements that have been signed. Do those agreements, the most recent ones, include social, environmental, and labour components within them to ensure that the living standards of Chilean citizens are raised, as well as those of their trading partners?

Finally, you have a very diverse trading regime: no country has more than 13.5% of exports. In Canada we are extremely vulnerable: 86% of our exports go to one country. What does the Chilean government do to ensure there is a wide diversity, so you're not dependent on one market?

[H.E. Eugenio Ortega]

We think the results have shown that the free trade agreement with Canada is one of the best that Chile has signed. That is our position. We want to increase it, but we don't regret this step.

To your question, Mr. Julian, the first thing is value-added exports. This is the most important thing today. It is the first challenge that we have. We don't want to be a country that exports on the poverty of the people. We want to be a country that exports with our knowledge, our technology. That is our target. For this reason, we ensure the social and labour aspects of our exports, and we demand that the other countries have a labour approach like the one we have. For instance, in Canada what you have is better than ours, but we are very worried about that point.

We have always been very aware that our exports must be balanced for the markets in the world. For instance, in the Asian crisis, we defended our economy because we have many different markets. For this reason, Chile, as a little country, not only had great interest in the Doha negotiation, we also organized our own defence of our economy in the event of instability in the world economy, especially in terms of problems in the international financial market. That is very important because we are the first country where it is not possible that financial investors can come to Chile only to turn profit. They have to stay and put the money in for a period of time. They can not take the money immediately from the country. You know what happens when there are many international forums at play in the world that look for profit by profiting from others.

We will defend our economy from this type of financial institution. Normally we look at different areas of the world because we want to always balance our exports in the world, and not only in one or two global regions. That's my answer.

Value-added export is, for us, a first priority. We have to change. We have to move more quickly in this respect, with more research and development. We are spending more money in this government than the government before on this program.