International Trade Committee on Oct. 6th, 2009

[The Chair, Conservative, Lee Richardson]

Good morning. Welcome to the 28th meeting of this session for the Standing Committee on International Trade.

This morning we are going to pursue a study of the defence of supply management at the World Trade Organization.

We have as witnesses Don Stephenson, assistant deputy minister for trade policy and negotiations, from the Department of Foreign Affairs and International Trade, and from the Department of Agriculture and Agri-Food, Gilles Gauthier, director general and chief agriculture negotiator.

I understand that you've just come for this meeting from “buy American”. Oh, that's gone? Well, thank you for coming. I appreciate your attendance.

We will follow the standard format as usual. We'll allow opening statements from our witnesses followed by questions in a prescribed order that has been established at the committee.

Without further ado, I'm going to ask Mr. Stephenson to begin with an opening statement.

[Don Stephenson, Assistant Deputy Minister, Trade Policy and Negotiations, Department of Foreign Affairs and International Trade]

Thank you, Mr. Chairman, for the opportunity to address the committee and to discuss the WTO negotiations in general, as context for discussing the treatment of supply managed products in our negotiating position in particular.

I'm going to leave the second part of that pretty much to my colleague, Gilles Gauthier. Gilles is a very practised negotiator and at the moment serves as Canada's chief negotiator for agriculture in the WTO. He's the guy very much on the front lines on that issue and is best placed to report on the state of the negotiations.

My role, in addition to being the assistant deputy minister for trade policy and negotiations, is as chief negotiator for Canada with respect to the whole WTO negotiation, representing Canada in what are referred to as senior officials meetings in Geneva and managing the negotiations as a whole. Canada's negotiating team includes many players from several government departments, working in close collaboration with our colleagues and counterparts in provincial and territorial governments. So I'm well placed to brief you on the overall state of the negotiations.

I should make the point first that Canada supports a rapid conclusion of the WTO negotiations, the so-called Doha Round. Canada is a trading nation, heavily dependent on trade for our prosperity, so a rules-based multilateral trading system with strong, independent dispute settlement is in Canada's interests. It's for this reason that Canada has always been a strong supporter of the WTO, and indeed one of its principal architects.

The WTO helps Canada manage its trade relations with the world, including our biggest trading partner, the United States. The WTO agreements are our free trade agreement with most of the world, in the world, including with the European Union, the richest market in the world, and all the so-called emerging markets: China, India, and Brazil. The WTO is the only forum in which it's possible to achieve some things in trade negotiations, including agricultural trade reform, and strengthening rules on trade remedies: anti-dumping and countervailing measures that help us address unfair trade practices, including subsidies.

The WTO is the most effective forum for poor countries to negotiate in, and the WTO has the potential to provide the simplest structure of rules for Canadian businesses, avoiding the spaghetti bowl of rules of multiple bilateral free trade agreements. The Doha development round of negotiations holds the promise of significant improvements in our access to foreign markets, in both developed and developing countries.

In that regard, I would note that perhaps the highest objective for Canada in these negotiations, as for the vast majority of WTO members, developed and developing, is in the area of agriculture: the reduction of trade-distorting agricultural subsidies, and the reduction of tariff and non-tariff barriers to market access for Canadian agricultural products.

Canada has worked hard to advance the negotiations, including my own service as chairman of the industrial tariffs negotiations from February 2006 to August 2008. Across the negotiating agenda, Canada is active in presenting ideas and building coalitions to advance our interests, in the areas of industrial tariffs, services, agriculture, rules, trade facilitation, trade-related intellectual property, and the dispute settlement system.

The committee will know the long history of the Doha Round, which began in 2001. You will also know that the negotiations have been essentially at an impasse since the failure to reach agreement on agriculture and industrial products in July of last year. Ministers came very close to reaching consensus on these elements of the negotiations but failed, principally due to two issues: the protection of developing country agricultural markets from surges in imports, the so-called special safeguard mechanism and the treatment of special products in developing countries; and sectoral tariff negotiations in industrial products, the so-called sectoral agreements.

The last few months have seen renewed interest in advancing the negotiations. At the recent meeting of ministers and leaders in the G8, and at a meeting of WTO trade ministers in APEC in Delhi, and again at Pittsburgh in the G20, there was a consensus that the successful completion of the round would be one positive contribution that could be made to economic recovery. However, a lot of work needs to be done to ensure that the political will shown by leaders translates into concrete action and flexibility towards bridging gaps and maximizing our chances to succeed in concluding the round.

Presently, the focus is on mapping a way forward, the so-called road map in the negotiations. As a first step, the director general of the WTO, Pascal Lamy, has put forward new ideas for approaches to the negotiations that would see discussions taking place in various formats—in bilateral, plurilateral, and multilateral levels of discussion.

Efforts continue to be made to maintain pressure on the negotiators to advance work in their individual negotiating areas. As such, at the Delhi mini-ministerial meeting, a road map for the way forward was discussed.

Canada, by the way, was represented by the parliamentary secretary to the Minister of International Trade, Gerald Keddy, whom I had the pleasure to support.

At the Delhi meeting, ministers unanimously confirmed that the Doha Round should be concluded in 2010, and senior officials met in Geneva the following week to prepare an agenda of action and a process of engagement that would ensure, among other things, transparency among the entire WTO membership. The senior officials' meetings were successful in bringing negotiators back to Geneva to resume the discussions and provided positive signals to leaders in advance of their G20 summit in Pittsburgh, where there was further political impetus to move the negotiations forward.

So the negotiations have been re-energized and progress has been made that gives some reason for optimism that a positive and meaningful outcome is feasible, but at the same time, and as was pointed out by Mr. Keddy in his intervention in Delhi, substantial gaps remain in the positions of the key players and a breakthrough largely depends on meaningful contributions and leadership from those players.

That essentially is a report of the state of the broader negotiations. I'll have the pleasure of being in Geneva again in 10 days' time to pick up the discussions with my colleagues.

I will now turn the floor to my colleague, Gilles Gauthier, chief agricultural negotiator for Canada. He can respond to the specific questions on the state of the agriculture negotiations.

I'd then be very pleased to answer your questions.

But before I conclude Mr. Chairman, allow me to mention some of the other important work being carried on in WTO. In fact, in all discussions dealing with the WTO, we have a tendency to only speak about the Doha trade negotiations. However, I think it is important to point out that other things are happening at the WTO. These are in fact rather important issues.

First, I would note that the dispute settlement system in the WTO continues to work well, and not just because there's a Canadian in the chair, John Gero, my successor. As the committee will know, Canada is currently pursuing three challenges under the dispute settlement system: the first with regard to Korean market access for Canadian beef; the second a repeal of the ban on seal products in Europe; and the third, the elimination of trade-restrictive elements of country-of-origin labelling requirements for meat products in the U.S. market.

The WTO also administers important transparency processes, including the trade policy review mechanism and the director general's recent reports on protectionist measures taken by members. As well, there are the negotiations of accession for new members, including Russia, which provide important opportunities for Canada to seek improvements to market access through the reduction of tariff and non-tariff barriers.

Then there is the WTO's work in delivering aid for trade, which is another important part of its work, one in which Canada has played a central role. It's important to remember that many WTO members don't have the capacity to use the market access they get under their WTO agreements because they lack the capacity to produce and export. Economic development, including trade capacity-building, is the most sustainable form of development assistance, and it's a critical component to the success of the Doha development agenda.

Thank you. Let me turn the floor over to Gilles.

[Gilles Gauthier, Director General and Chief Agriculture Negotiator, Negotiations and Multilateral Trade Policy Directorate, Department of Agriculture and Agri-Food]

Good morning, Mr. Chairman, and good morning, members of the committee.

My name is Gilles Gauthier, and I am Canada's chief agriculture negotiator and director general for negotiations and multilateral trade policy at Agriculture and Agri-Food Canada.

I'd like to thank the committee for this opportunity to brief you on the discussion in the World Trade Organization, the WTO agriculture negotiations, and Canada's defence of issues important to supply management in those negotiations.

Let me begin by noting the importance of the WTO to Canada's agriculture as a whole. Canada is a major participant in global agricultural trade. In 2008, as the fourth largest exporter, Canada exported $38.7 billion of agriculture and agrifood products, for grains, oilseeds, and red meat exports account for more than 50% of domestic production. Roughly half of our exports go to the U.S. and half to the rest of the world.

Therefore, there is no doubt that Canada has a major stake in a well-functioning WTO system. The Doha negotiations provide a unique opportunity to foster Canada's agricultural trade interests via the elimination of all forms of export subsidies; the substantial reduction and strengthening of disciplines on trade-distorting domestic support measures; and significant improvements to market access for our exporters.

At the same time, Canada is determined to defend the interests that are important to our supply managed industries. Today, you have asked to hear specifically about the efforts Canada is making in this area of the negotiations.

The issues that are of greatest interest to Canada's supply-managed industries—our egg, poultry and dairy producers—relate to the agriculture negotiations on market access. In this regard, Canada has taken a very strong position in the negotiations, by opposing any tariff reductions or tariff quota expansion for our supply-managed products.

This position is stronger than that of any other WTO members. For that reason, we can expect to continue to face pressure in this area, both from developed countries because they have accepted to make a concession here, and from developing countries because they view these types of exceptions as inconsistent with the development objectives of the Round.

However, we remain firm in maintaining our negotiating position, both in bilateral meetings with other WTO members and in the multilateral context.

Since I have been in this job, that is for the past few months, I have also made Canada's position on the proposals in the December 2008 text clear to the new chair of the WTO agriculture negotiations, Ambassador David Walker from New Zealand, who was appointed last spring.

Here at home, we are also continuing to consult very closely with our supply-managed industries to ensure that they are well informed about development and that they have every opportunity to advise and to assist the government with respect to advancing Canada's negotiating position, and defending their interests, in Geneva.

I would now be pleased to take your questions.

Thank you, Mr. Chairman.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Gauthier and Mr. Stephenson.

With that, we'll begin our round of questioning, beginning with Mr. Brison.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you.

Thanks to both of you for being with us today.

The first question is on supply management. I'd like to understand how Canada's position, relative to paragraph 71 on sensitive products, compares with Japan's position.

[Gilles Gauthier]

Thank you, Mr. Chair.

The position of Canada in respect of paragraph 71 is that we are pressing to obtain a minimum of 6% of our tariff line in the agricultural sector to be designated as sensitive product. The current proposal calls for 4% of tariff line. In order to adequately protect the supply managed industry we need 6% of that designation.

Japan is asking for more. They're asking for 8% of tariff line to be designated as sensitive product, so they're further than us in terms of their demand. The difference, though, is that Japan has signalled its willingness to grant a higher degree of market access to its sensitive products in exchange for getting a higher number of tariff lines, whereas our position is that we do not agree to tariff cuts or expansion of TRQs.

[Scott Brison, Liberal, Kings—Hants, NS]

Ambassador Falconer signalled that Canada might accept a 5% solution instead of 6%. Is that accurate?

[Gilles Gauthier]

In December the then chair, Ambassador Falconer, did submit a working paper in which he outlined a few options to address Canada's desire to obtain 6%. Among these options is indeed a payment, in terms of increased TRQ, of a magnitude of 5% to 6%.

[Scott Brison, Liberal, Kings—Hants, NS]

The 5% would not be acceptable to our supply managed industries.

[Gilles Gauthier]

That's correct.

[Scott Brison, Liberal, Kings—Hants, NS]

I have a couple of questions on the WTO GPA.

First, is any procurement by American cities or by countries covered under the WTO Agreement on Government Procurement?

[Don Stephenson]

I'm not exactly certain what the link is to supply management, but no, the U.S. obligations taken under the GPA do not include municipalities, and they include 37 of their states but at varying levels of undertaking.

[Scott Brison, Liberal, Kings—Hants, NS]

Generally excluding transportation projects and infrastructure projects.

[Don Stephenson]

Yes.

[Scott Brison, Liberal, Kings—Hants, NS]

How do government procurement dollar-value thresholds in the WTO Agreement on Government Procurement compare with the thresholds in NAFTA?

[Don Stephenson]

I should have brought an expert in procurement agreements.

[Scott Brison, Liberal, Kings—Hants, NS]

You're one of our lead negotiators in “buy American”.

[Don Stephenson]

But I have an expert right beside me on the details of such agreements.

I would have to respond after the meeting with those details.

Generally speaking, GPA commitments are less than NAFTA commitments. The GPA is a series of bilateral agreements between countries in a plurilateral framework. Each country has a different set of obligations that you'd have to compare.

[Scott Brison, Liberal, Kings—Hants, NS]

You referenced that there is a lot of carve-out in the WTO GPA, and the U.S. carves out, in their sub-national governments, significant areas.

Would that include most infrastructure projects that are being carried on now under the guise of stimulus?

[Don Stephenson]

No. Outside of areas like transportation highways and large sections of the so-called MASH sector--academic institutions, hospitals, schools--there are many sectors in which infrastructure projects would be included.

[Scott Brison, Liberal, Kings—Hants, NS]

Does the U.S. include any provisions in its GPA obligations that protect its ability to use “buy American” provisions specifically?

[Don Stephenson]

No, it would work the other way around. They have not taken obligations that would restrict; rather, they've taken measures in the agreements to protect. It would be more of a positive list than a negative list.

[Scott Brison, Liberal, Kings—Hants, NS]

What would be required for Canada and the U.S. to include sub-national procurement under NAFTA on a reciprocal basis?

[Don Stephenson]

What would be required...?

[Scott Brison, Liberal, Kings—Hants, NS]

What steps would have to be taken?