International Trade Committee on Oct. 6th, 2009

[An hon. member]

It would take more than that, buddy.

[Ed Holder, Conservative, London West, ON]

They feel very interesting. You should try them, my friend. It certainly proved to me the importance of the seal hunt and what it means to us.

My question is around the dispute settlement mechanism, because that's obviously the critical piece to all of this: when all is said and done, what's the basis on which we're going to be able to settle the disputes among our treaty partners? We have the three that you've talked about: our Korean market for beef, our seal repeal in Europe, and COOL.

I apologize for the time remaining—this could be the total question—but could you give us a sense of where we are in those and whether the dispute settlement mechanism is tough enough, strong enough, and clear enough to protect Canadian interests?

[Don Stephenson]

I think the track record of the dispute settlement system in the WTO is still a very good one. Although it takes some countries longer than others to implement decisions of WTO panels and appeal bodies, in almost every case, ultimately they do. In that sense we can be confident.

With regard to where we are in respect of these three cases, we're in the very early stages of the process on Korean beef. We have requested the establishment of a panel. In seals, we haven't actually started the process, because legally the measure has not yet been taken by Europe. There's a process analogous to royal assent in Europe, and their ban has not yet reached that point, so legally there is no measure yet to challenge. As soon as they have done that, I expect my instructions from the government will be to make a request for a panel.

With respect to the country-of-origin-labelling requirements in the United States, we have completed the consultation process that precedes a formal challenge in the WTO and a request for a panel. We are ready to proceed, essentially at any time, as soon as the government gives me instruction.

I should caution, and I expect you already know, how long a dispute settlement procedure takes in the WTO. In most instances, the results of panel decisions are appealed to the appellate body, so the whole process—tribunal and then panel and then appellate body—takes the best part of a year before you get a final decision.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Holder.

Mr. Cardin.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chairman.

Good afternoon and welcome to the committee, gentlemen.

You spoke of a very firm position, without concessions. But Canada is negotiating alongside the Cairns Group, which is viewed as being one of those most adverse to supply management, as well as to any restrictions on agricultural trade.

I would like to know how this position, within the framework of the negotiations, could be to Quebec's or to Canada's advantage. In Quebec, we do not concentrate on very large exporting agricultural industries, but rather on small farms that mainly operate within the domestic market.

[Gilles Gauthier]

Mr. Chairman, Canada has been part of the Cairns Group for many years because we have many interests in common with the members of this group, however, the other members of the Cairns Group are entirely aware of the Canadian position on supply management and have accepted that Canada maintains this position. You can see through several press releases issued by this group over the years that the Canadian position on supply management is expressly recognized.

To date, the Cairns Group has never indicated it intended to exclude Canada because of its position. They simply take into account the fact that we have a sufficient number of other interests in common to make it important for us to continue in our partnership. For us, this is also a way in which to move forward our export-based interests. It must also be stated that there are divergent interests among the members of the Cairns Group. All of its members do not systematically agree on every issue.

[Serge Cardin, Bloc, Sherbrooke, QC]

It is as though there were negotiations within the group?

[Gilles Gauthier]

No more so than within the general membership of the WTO.

[Serge Cardin, Bloc, Sherbrooke, QC]

It seems that at some point, a position taken by all of the countries might be critical for supply management. Even if you are a member of this group, that does not necessarily mean that you would have guaranteed support or favour, given the other issues on which you see more eye to eye.

[Gilles Gauthier]

You have to realize that at the WTO, there are a great many such coalitions that are formed around common interests. The Cairns Group is but one. There is also the G20, which unites the developing countries. There are all kinds of other coalitions, like the G10, that brings together the countries that are importers of agricultural commodities.

There are therefore more informal coalitions focused on a common interest. However, this does not mean that within each of these groups, countries adopt the same positions or defend the same interests as in all areas of the negotiation.

[Serge Cardin, Bloc, Sherbrooke, QC]

Concerning agriculture properly speaking, what seems to be clear in light of the statements made is that the majority of the big countries gave huge subsidies to their agriculture. In response to a question that was put to you earlier, you said that it is not always easy to identify these countries. However, in the reports that are tabled, when you are negotiating at the WTO, are these countries not well identified? In what way and to what extent is this the case?

At the end of the day, if you have this information in hand, it is only a matter of the firm will of these countries to continue to subsidize their agriculture in order that they become competitive around the world.

[Gilles Gauthier]

The issue of agricultural subsidies is one of the three pillars of the agriculture negotiations. There are proposals on the table that quite directly target a substantial reduction in subsidies, because they create trade distortions. For example, these proposals are aimed at an 80% reduction in European subsidies, a 70% reduction in American subsidies and approximately a 5% to 55% reduction in other developed countries. The reduction goals of these subsidies remain considerable. They are indeed intended to allow the most competitive countries on the international scene to benefit from their competitiveness without having to be subject to the unfair competition caused by such subsidies. It is therefore one of the major objectives of the negotiations.

This is most certainly a sector in which Canada has significant interests to put forward. If you recall, some 15 years ago, several of our agricultural sectors were negatively affected by subsidy wars between the United States and Europe. The Doha Round is therefore aimed at putting an end to these kinds of subsidies and allowing fair competition on the markets. In this context, it would be our agricultural sectors that are globally competitive that would above all be able to benefit enormously from this.

[Serge Cardin, Bloc, Sherbrooke, QC]

However, the Doha Round does not only include agriculture. There are other components as well. What is the relative importance of agriculture in the Doha Round?

[Gilles Gauthier]

Agriculture is often seen as one of the most important components, for the simple and very good reason that a great majority of countries see it as a way to promote their development. For these developing countries—and there are at least 70—an improvement in agricultural trade rules would allow them to potentially have improved exports, and as a result, better development perspectives. For them, it is absolutely critical for the conclusion of the round.

It is one of the significant components, but there are others, obviously, such as market access for industrial products, intellectual property and the other sectors. However, agriculture is the most important sector for a great many countries.

[Serge Cardin, Bloc, Sherbrooke, QC]

It is therefore a very important issue, and we understand that. We could practically admit that it is not a commodity like the others.

Have you considered the thought that in order to make progress in the agricultural sector, it might be a good idea to hive off those negotiations?

Food sovereignty could be put into perspective in several countries; rules that are somewhat different than those applied to other products could protect this food sovereignty and allow us to face the countries that are subsidized. The idea would be to decrease all of that and encourage the emerging countries. They could then benefit from their agricultural exports.

Do you believe that it would be easier, within the framework of the WTO, to treat agricultural commodities differently from other products? In fact, it is not the same thing.

[Gilles Gauthier]

Absolutely. The WTO Agreement on Agriculture contains specific rules for agriculture in several areas, whether it concerns subsidies, food aid, export subsidies or export credits in particular. The WTO Agreement on Agriculture and the proposals put forward in the framework of the Doha Round include a great number of provisions specific to agriculture which are intended to recognize the specificity of this sector. You also mentioned food security. It is clear that for a great many developing countries, this is an important request. As far as exceptions are concerned, that is one of the factors that has been put on the agenda. It is an issue of designating their agricultural sectors that will require special treatment. For these countries, it is a concern related to development.

In short, there are quite a few provisions in the agreement on agriculture that clearly are aimed at recognizing the specificity of agricultural commodities in relation to those from other domains.

[Don Stephenson]

I would like to add that as far as agricultural issues are concerned, we have already tried to negotiate them separately. Within the framework of the WTO agreements in 1995, there was one that we referred to as the built-in agenda. It stipulated that the agriculture negotiations would be reviewed five years later. For the first time, WTO members agreed on a regulatory framework for agriculture. They did not go very far as far as market openings are concerned. They agreed that the negotiations on agriculture would be revisited five years later, but nothing happened because for quite a few members, other interests were needed in order to somewhat balance those of the rest of the world.

Within the framework of the current negotiations, the members are frustrated because of the time required to obtain results. There are now more discussions, separate negotiations. These are mainly plurilateral negotiations, and not multilaterals. They connect those who are interested in making progress in a specific area and not the full membership. Is that what we are heading towards? It is hard to say, but one thing is clear, we are discussing it.

[The Chair, Conservative, Lee Richardson]

Thank you.

I didn't get that, but that's 12 minutes, so we'll call that a day.

Well, it's 11:30 a.m. We have gone through two rounds, and we'll have a quick final round of five-minute questions, beginning with Mr. Cannan, then we'll go to Mr. Brison and conclude with Mr. Julian. If we can, keep it tight—five minutes for questions and answers.

Mr. Cannan.

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

Thank you, Mr. Chair, and thank you to our witnesses.

You alluded to how we are a trading nation, with NAFTA and our WTO discussions and our bilaterals. Already over 80% of Canadians are better off—we know that. What we need to do is continue to find new markets. It's pretty phenomenal, the fact of the $38.7 billion in agriculture and agrifood products we have in 2008.

From the department perspective, if you quantified some of the advantages, if we are successful in accomplishing our discussions at Doha, not only for agriculture, what would it mean for Canada in general?

[Gilles Gauthier]

It's always a bit difficult to have a precise assessment of the benefits. There's one thing that could be done. If we look back at the Uruguay Round, which was the last of the WTO rounds in the 1990s, the department has done a study trying to assess what has been the impact of the liberalization of agricultural markets, particularly in Asia for our red meat sector exports.

That study is probably one of the most comprehensive studies ever undertaken in the department to try to assess the impact of these trade agreements. The results are pretty striking. Our estimate is that without the liberalization from the previous round we would have witnessed a reduction of at least $1 billion in our exports for the red meat sectors in the Pacific area. That's pretty significant for exports for just one sector, the red meat sector.

That, I think, shows that over time these trade agreements do create new trade opportunities, and it's up to our exporters to take advantage of it. Clearly, in the case of the Uruguay Round, that sector took full advantage of these new opportunities.

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

Thanks.

I know this has been going on since 2001, and the multilateral framework is a pretty cumbersome process, with about 153 countries, I believe, around the table. It's often said there are two speeds, glacier-slow and reverse, and we're hoping that you are successful by 2010. But if you're not, are you working on some bilateral agreements in the parallel process?

[Don Stephenson]

Is your question specific to agriculture or to trade more generally?

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

It's in general.

[Don Stephenson]

The current trade policy strategy of the government, which is described in the “Global Commerce Strategy” available on the website, essentially instructs officials to get more active on a bilateral side, largely because of the impasse or at least the long delays in moving forward in multilateral trade negotiations, for the reasons I described earlier. If we are able to make progress on the multilateral front, that's what's best for Canada.

But in the meantime, the government invested two years ago in a much more active program of bilateral negotiations, the biggest piece of which we finally secured just this past year with the launch of negotiations with the European Union. Those negotiations are moving forward.

In fact, they're moving forward on a very ambitious timetable. The first negotiating session is just a few days away. Five negotiating sessions are planned before this time next year, which is, as trade negotiations go, a very ambitious timetable.

We have as well concluded negotiations with smaller countries. Some are before you in the House, and we are at some point in the process trying to engage many other negotiating partners, including important emerging markets like India.

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

Thanks.

My colleague Mr. Allison alluded to representing the Okanagan in British Columbia, where some great wines are trying to expand their markets as well. But it is a very cumbersome and expensive process, so I hope you are successful in clarifying what a subsidy is.

I have one final comment, just to follow up on Mr. Julian's questioning about our government's position. As a negotiator, are you prepared to walk away from the WTO negotiations if the deal does not protect supply management?