International Trade Committee on June 7th, 2006

[Scott Sinclair]

That qualifier, that the government will not make commitments in public education, concerns me, because commitments covering private education would certainly affect the public system. Educational providers such as universities offer training courses in competition with private providers, so commitments covering private education would certainly have implications for public providers in the public system.

Over the years, certainly at the start of this round, the government and negotiators expressed a strong interest in getting Canadian stakeholders onside, because Canadians export—even Canadian universities export—educational services abroad and train foreign students here.

They were completely unable to get the stakeholders onside. Universities and others felt that the GATS would not help them, and that the risks—for example, private suppliers demanding access to public subsidies, or demanding certification in the same way as universities—were just too high. I think it's somewhat encouraging that in the case of this plurilateral request on education, Canada not only did not sponsor it but was not targeted as a recipient. I take some comfort from that.

I think the issues you raise on child care are very important issues, and really important for understanding how the trade treaties work. It's often not enough to simply say that public services are excluded.

On the specific issue of child care, I don't feel it's at risk in this round right now—not under direct threat. The Canadian government has made it clear that it will not make commitments covering social services, including child care...unless there is some change in the negotiating mandate. We have a new government; that does create some uncertainty.

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

Mr. Sinclair, you have said that one of our goals is to improve market access for our hog and grain producers. At the present time, our access to the export market is only two tenths of 1 per cent. We would like to increase that number to 5 per cent. Protection of supply management is essential to the survival of our agriculture.

What compromises do you think our agriculture industry should make to improve its access to the American and European markets, particularly through a reduction of subsidies in those countries?

[Peter Clark]

Mr. André, the proposals put out by the United States and by the European Union regarding subsidies are interesting in terms of the numbers, but there is a lot of water in the numbers they're starting from, because the base is very high. There is some question as to whether or not they would even have to reduce their support. The European Union has undertaken a CAP reform under which they decoupled their support, and they would do more of it as they go through their reform. But it's our view that the decoupling has not made their support less production-distorting or trade-distorting. In fact, we feel they'll still have to continue dairy export subsidies beyond 2013, because they just can't get rid of what they're producing.

The United States has indicated that they're going to move more and more of their support into the blue box, but they want to move counter-cyclical payments into the blue box, which are trade-distorting. They want to put caps on them, but the caps are meaningless.

I think the more important issue in agricultural support and agricultural subsidies is defining the subsidies and doing a realistic analysis of what is distorting. We haven't done that yet. We're doing one paper, which we'll be releasing at the end of the week, on decoupling, and another one, probably early in July, about the state of play of negotiations after this ministerial, if it happens, to show how far short we are of where we need things to be for Canada.

The problem we have is that if we don't sort that out, we're going to have to support our own farmers at the grains and oilseeds level for $4 billion or $5 billion a year.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Clark.

Ms. Guergis.

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

Thank you, Mr. Chair. I'll be sharing my time with Mr. Menzies.

I'd like to thank our witnesses for being here today.

I do want to say at the beginning that I do agree with the comments both of you have made that members of Parliament should be spending a great deal more time talking about the WTO negotiations, and I have expressed that to my colleagues around the table. I think we do need to spend some substantial time around this table talking about WTO. So I'll just leave that as a comment.

My question is for Mr. Sinclair.

I was hoping you could clarify this for me. You made some comments suggesting that the negotiators, or some of the agreements, were perhaps infringing upon provincial jurisdiction with respect to auto insurance. I was going to ask you to clarify that for me, and perhaps if you can't in the time we have today, is there something you could pass, through the clerk, to the committee members?

[Scott Sinclair]

Yes, there is a paper and some material I will pass to the clerk.

In 1995, and later in an addendum to the GATS in 1997, Canada covered a whole range of financial services, including insurance. In the case of auto insurance, they took a country-specific exemption--it's called a limitation--for the existing public auto insurance systems, in four provinces, I think.

If another province, such as the one I come from, Prince Edward Island, or the maritime provinces, where this is under discussion, wanted to put in place a public auto insurance system, Canada would have to go back and renegotiate its WTO-GATS schedule.

I think that's inappropriate. It's not really a trade issue. I think it discourages, and it may have been a factor in discouraging New Brunswick from proceeding with a public auto insurance system, even though it was recommended by an all-party committee.

I will leave some material that clarifies this further.

[The Chair, Conservative, Leon Benoit]

Mr. Menzies, go ahead.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chair.

And thanks to both of you for your comments.

Mr. Clark, I believe we have you on record in the not too recent past, at a breakfast I attended, saying that the WTO was dead--I remember that comment. Now you're saying it's not quite dead. Is it on life support, and is there hope for it yet?

I would like to expand on that. I won't just leave you with that question, which you can answer in one or two words. It's a voluntary membership. There are 149 members right now. We're not going down in membership; we're going up. So everybody wants to be part of this group of nations. Obviously, most countries recognize the benefits to it.

What happens if we lose it? Can you share with this committee what we need to do, as a country, to prepare for the potential outcome of not getting an agreement? Have we got enough bilaterals in place to offset a failure at the multilateral level?

[Peter Clark]

Mr. Menzies, I may well have said it was dead at a breakfast, but it's like a cat--it keeps coming back.

We've got Mr. Lamy around here. He has brought his dog-and-pony show to Ottawa or Kanata, or wherever he is this afternoon. He's trying to get people interested in it again, and he's a very energetic guy. He's a very bright guy. Everybody wants to be in because they really should be in.

You have to differentiate between the WTO as an organization and this round, which has run into problems. There are an awful lot of problems. They're hard to overcome.

What can Canada do? Canada can stick to the line, keep pushing, be there with ideas. Our people are working, they're lobbying, they're trying to get things moving. We have influence. Maybe we should be trying to spread it a little bit further and see if we can help, but we're not going to be the people who drive it. Those people are in Washington and Brussels right now.

[Ted Menzies, Conservative, Macleod, AB]

Who are we partnering with now that we might gain some leverage with? There is talk of this G-12. Maybe it's not a G-12, but we're part of a group of 12. Does that leverage our strength to offset some of these larger nations?

[Peter Clark]

When I talked at the breakfast, we were part of G-1. G-12 is a big improvement.

We are doing better, but we were bumped out of the quad, where we had an important role. We're a bit slow getting into our broader relationships. We're doing better now.

I think the more we're able to get ministers involved--we have two very good ministers on the key issues--the more face time we get them with their colleagues, but not in the context of inevitable failures. It's all these failures that are causing people despair and discouragement. I think we have to try to get some successes, and hopefully we can do some of that, to get it back on track, anyway, in June, even if it's to set a more reasonable timeframe for doing things.

[The Chair, Conservative, Leon Benoit]

You have a minute and a half, Mr. Menzies.

[Ted Menzies, Conservative, Macleod, AB]

Going back to the trade promotion authority in the U.S., you commented that you're not that concerned about it expiring.

[Peter Clark]

Let me explain. The trade promotion authority just means Congress will vote up or down on the deal: if they like it, they'll buy it, and they won't amend it. If they don't like it, they'll can it. That's the way it is.

They're shaping it through the process, so they can buy it. If the trade promotion authority expires, as it has in the past, all they do is look at it again and use it to try to leverage more concessions. If it looks as if they're going to get a deal sometime about the time it's going to expire, they'll find a way to extend it, but they'll try to extract more concessions, or put more conditions on it.

It's just a vehicle they use, because the President can't deliver without them. We found in the Tokyo Round in particular they would agree to things; for example, they agreed to something on a customs valuation in the Kennedy Round and Congress didn't deliver on it, so the next round they went into this trade promotion authority thing that said Congress wouldn't try to amend the deal once it was put to them. So that's what it's all about.

[The Chair, Conservative, Leon Benoit]

Your time is up, Mr. Menzies.

Go ahead, Mr. Sinclair, if you'd like to add a short comment.

[Scott Sinclair]

A short comment on that. It's always possible the trade promotion authority or fast track could be extended, but I think in the current political climate in the United States that is not very likely, and I don't believe anyone will want to negotiate seriously with the United States if the President does not have trade promotion or fast track authority. Prediction is a mug's game, but I think it would be very difficult in the current highly politicized context for the administration to get an extension of trade promotion authority.

[The Chair, Conservative, Leon Benoit]

Mr. Julian, you can take up to seven minutes.

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

Thank you, Mr. Chair.

Thank you, Mr. Clark, and thank you, Mr. Sinclair, for coming here today.

Mr. Clark, I haven't read the material Ms. Guergis takes such objection to, but I'm sure it's well worth reading, so I hope to be on your e-mail list in future.

Mr. Sinclair, I appreciate your being here today because I've read some of the books you've written on this subject. You probably know more about trade policy and the WTO than virtually any other Canadian I can think of, so we appreciate your being here today.

I'd like to direct my questions to Mr. Sinclair first, because the previous witnesses at the meeting from 3:30 to 4:30 seemed quite confident that the exclusion on government authority of services such as health care and education was satisfactory, to make sure there was no negative impact on those service sectors. From your opening comments, my sense was that you have some very broad concerns about how the service sector is being negotiated. So I wanted to get a sense from you of the implications to the service sector.

Second, you referred very specifically to two examples: one, the issue of health insurance and auto insurance under GATS, that existing provinces might be excluded, but if the voters, the citizens, of Prince Edward Island decided they wanted to have an auto insurance plan from the public sector, they might not be able to. I'd like to know the concrete implications of that. Does it mean ongoing litigation and millions of dollars for citizens to have the right to public auto insurance, or does it mean the WTO would say because we have made this agreement, no, you can't do that, the citizens can't have public auto insurance?

You also mentioned telecommunications and doing away with the majority Canadian ownership we have in telecommunications. What are the implications there? Again, if public policy...if Canadians decide they want to have a domestically owned sector, is it litigation that results from that, which costs Canadian taxpayers millions of dollars, or is it a question of it simply not being allowed?

I'd like to know the implications of that.

[Scott Sinclair]

To address the issue of the adequacy of the governmental authority exclusion in the GATS, article I(3)(c), I don't believe—and this view is shared by many—that this is an effective exemption. It's certainly not a full exemption for public services. It states that services provided in the exercise of governmental authority are excluded from the treaty, but it goes on to further define that as services that are provided neither on a commercial nor a competitive basis, nor in competition with one or more service suppliers.

Most of what we call public service systems, as Monsieur Paquette was alluding to in the day care or child care area, are mixed systems, and the boundary between public and private is changing all the time. Often public service providers, such as universities, compete with private service providers, and they have advantages that are not extended to private service providers because they have responsibilities and obligations to provide services, which private service providers do not have. So the exclusion itself is not that comforting.

Despite being pushed on this, many governments, particularly from the developed countries, who are trying to push the expansion of the GATS, are reluctant to define the meaning of that more carefully. They prefer to leave it vague. In other words, it will be decided in dispute settlement at some point in the future, which I don't think is satisfactory.

On the specific issue of what happens if a provincial government, which doesn't have the benefit of exclusion, decides to proceed with public auto insurance, no, it doesn't mean that they absolutely cannot do it, but it does create a serious problem. Canada would have to go back to the WTO to invoke an article of the GATS to basically change its schedule and provide adjustment, which would mean, in the WTO context, that you have to commit equivalent sectors under the treaty. This is a significant deterrent, and if you look at WTO documents, sometimes they call commitments effectively irreversible for that reason. If you can't negotiate a satisfactory arrangement, you could face trade sanctions, and those could come in areas other than services.

Finally, on telecommunications, right now our foreign ownership provisions—restrictions—are excluded in our GATS schedule. As long as that doesn't change, they would provide effective protection. Those of us who support those provisions have to be vigilant that they're not changed, because once they are, they're gone virtually forever in that case.

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

How much time do we have? Less than a minute.

I want to come back to that, because if what you're saying is that the decisions are virtually irreversible, then you've also mentioned the issue of vigilance. Have you seen more openness around what's happening at the WTO and Canada's position with the change in government? Is it easier to find out where we're going, what our negotiating principles are, and is there more consultation?

[Scott Sinclair]

No, I haven't seen an enormous change. My understanding is that the mandate has not changed, and I don't know if that's because Canada hasn't gotten to it or they've endorsed the position of the former government in a serious way.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Julian.

Gentlemen, Mr. Sinclair and Mr. Clark, I thank you very much for being here again, and we may see you in the future. All the best.

We'll go straight through the motions.

Mr. Paquette, you have two motions. We received proper notice, so if you'd like to introduce them, make some short comments and we'll take it from there.

[Pierre Paquette, Bloc, Joliette, QC]

I think that the list of people who have asked to appear truly justifies an additional meeting on the Canada-U.S. Framework Agreement on softwood lumber. This is my first motion before summer recess. We can count on at least four days, the 12th, the 14th, the 19th and the 21st of June. We might also--

[The Chair, Conservative, Leon Benoit]

Just to be clear, you are now speaking to which motion?

[Pierre Paquette, Bloc, Joliette, QC]

It is the first. They are not numbered.