Thank you, Mr. Chair, and my thanks to all of you for inviting me to participate in this committee's deliberations.
I don't have a long prepared statement. Let me just give you some thoughts, and then I'd be happy to answer questions.
I'm of two minds on the Trans-Pacific Partnership. At one level, I think it would not be wise for Canada to absent itself from these discussions. Having looked at them from the outside for a few years, I think that this would probably not be a good strategy. I think it makes sense for us to participate in it, even if in the end it's not going to become much of an agreement. But the ideal of having a high-quality agreement that involves one of the most dynamic economic regions of the world is, at a minimum, a good idea.
That being said, I have some strong reservations about things as they stand. The TPP originated as an idea among the New Zealanders, the Singaporeans, the Chileans, and the Bruneians. The four of them thought it would be useful for them to negotiate a quality agreement. Given the high level of activity going on in the Asia-Pacific region, they wanted to make sure they set some parameters for what a high-quality agreement would be. But as the number of members has increased, the chances of getting that high-quality agreement have decreased, because the more partners you have, the more difficult it is to find common ground.
I think that was particularly the case when the United States became a party. The United States has a very strong agenda. It has more or less taken over these negotiations and indicated that it's their agenda or no agenda, and yet they do this without any allusion to the fact that they have no negotiating authority. As a former trade negotiator, one of the first things I learned when I became a government official back in the early seventies was that you never negotiate with the United States unless they have a mandate. In fact, during the Tokyo Round, the Uruguay Round, the FTA negotiations, and the NAFTA negotiations, one of the most important things that we considered was what the U.S. mandate really was. What mandate had Congress given to the administration? Well, that mandate ran out in 2007. That's six years ago. President Bush did not think it was worth his political capital to seek new authority at the end of his mandate, and President Obama has shown no interest whatsoever in gaining that kind of mandate. Even if he were to seek it, I don't think he would get it, because his view of what a successful negotiation would involve is very different from what the Republicans and Congress think a successful negotiation would involve.
If you're negotiating with the United States when they don't have a mandate, one result is that you have an agreement that must meet the standard of a treaty, which means it has to go to the U.S. Senate and get a two-thirds majority there. This is an extremely difficult thing to achieve, as we have learned to our regret in earlier negotiations. The most famous case was the east coast fisheries agreement, where two senators successfully destroyed an agreement that had been faithfully negotiated between the U.S. administration and the Canadian government. There are also—and this may come as a surprise to the committee—other agreements sitting in the in-basket of the chairman of the foreign relations committee that were sent to Congress by President Truman. In other words, the Senate foreign relations committee doesn't always act with the kind of expedition that we would like. That's one chance. That way it would, in effect, be the Senate saying yea or nay on the basis of a two-thirds vote.
The other way, which was the case until 1933, when Congress first mandated the President to negotiate agreements, was that an agreement would come to Congress and Congress would pass legislation to bring it into force, but Congress had no obligation to bring it into force without changing the agreement to suit its liking.
So the idea of a TPP being negotiated by all 12 parties, and then going to the U.S. Congress for some fixes, is not one that appeals to me. You end up with two negotiations, and you have no idea what the second negotiation is going to be all about because you're not party to it. Given the U.S. lack of negotiating authority, that is a very large question mark that I would raise.
Secondly, the most dynamic and interesting markets in the Pacific are not participating, and those are China, Indonesia, and India. If they were to participate, it would be a very different kind of negotiation, and it would probably be much more variable. But all three of them have shown no interest. They are much more interested in negotiating their current interests on a bilateral basis. As you know, the Chinese leadership kind of tweaked Mr. Harper on his last visit and challenged him to enter into a negotiation, and we're supposedly studying this. I understand that is on the back burner, and not much studying is going on.
Thirdly, I think the committee should keep in mind that we have well functioning agreements with all the current partners to the TPP. It isn't that we don't have agreements with these countries. We have. First of all there's a very good agreement through something called the World Trade Organization. In addition to that, we have the FTA, and the NAFTA with the United States and Mexico. We have FTAs with Peru and with Chile. We're negotiating FTAs with some of the other ones. So the idea that negotiating with these countries is the only game available is false. We do have good agreements with these countries, and we can pursue further agreements bilaterally. So negotiating multilaterally sometimes has an advantage in that you have the larger leverage that other members can bring to bear on a negotiation, but there is also the risk that you're looking for the lowest common denominator among the participants, and with a large country like the United States participating, the U.S. agenda is the real agenda, and the rest of the parties are part of the chorus.
The United States does have an agenda. I think the previous panel spoke to you about part of that agenda that is problematic, which is the intellectual property part of the negotiation for which the United States basically has an agenda that is different from that of the rest of the world. If you analyze it, it comes down to looking after the interests of the pharmaceutical companies and the audiovisual companies. The rest of the U.S. industry really isn't all that concerned about IP any more. The bargain that was struck in the Uruguay Round, which is reflected in the TRIPS agreement, is considered by most serious analysts to balance well the competing interests that you try to deal with in an intellectual property agreement. Those are the interests of consumers and competition and the interests of innovators. I think that balance was struck in the TRIPS agreement. The desire of both the European Union and the United States to strengthen that agreement in order to benefit their rights holders is one I can see from their perspective. I don't see it from our perspective. I don't think there are very many benefits to be gained by Canadians from strengthening the IP provisions.
Finally, I think that much of the agenda that's being pursued at the TPP, to the extent that we can understand what the agenda is, is the wrong agenda. At one point a kind of draft agreement was available on the Internet, and then it abruptly disappeared about 18 months ago. What we have is a text that was put out by the ministerial meeting in November 2011, which outlined what a good agreement would involve. If you look at those issues, I would say it's the wrong agenda. It's not the agenda that is important to the world of commerce as we know it today. It is what I would consider to be a backwards-looking agenda that is to perfect the trade agenda of the past, rather than to address the trade issues of the future. It's all well, and I think all these negotiations that Canada's engaged in now are of great interest to officials. They are of interest to the legal community. They are of minimal interest to the business community. The business community is basically sitting on its hands and saying to the government, “Negotiate these agreements and if they're of interest to us, we'll let you know.” But they're not going to put out any political capital to convince the government to negotiate these agreements, and there's a reason for that.
Many of the kinds of remaining problems that exist in the world of trade policy after the Uruguay Round and the NAFTA agreement are the most difficult politically, but commercially they're fairly marginal. So from a commercial point of view, most businesses have found their own solution to these problems. What they want governments to do is to look at the agenda of the future to deal with the really ticklish problem of how to ensure that the emerging markets, particularly in east Asia but also in countries like Brazil and South Africa, are truly contestable and to deal with the trade policy issues that are enshrined in the WTO. Free trade agreements will not do it.
Those markets are very similar to the Japanese market. They are what I call “permissions economies”, that is, economies where the government and business are heavily intertwined with each another, where much of what takes place in the economy is dependent on government involvement either through permissions in licensing or through state-owned enterprises, or other kinds of ways. That's where our businesses have a hard time.
We have many successful businesses that have made their way into those markets, but they've had to do this with some fairly expensive strategies.
What they would like is to see the government negotiate are agreements that make those markets truly contestable. That would involve negotiating agreements that include disciplines on competition policy, investment policy, intellectual property rights, and state trading rules. If you are able to negotiate an integrated set of rules governing that, which is judicial in settlement provisions, then you would have an agreement that is of great interest to the business community, and that would have a major impact on Canadian economic interests.
Thank you.