Good afternoon, everyone, and thank you for inviting me to participate in today's discussion. It's my pleasure to be here on behalf of Canada's 90,000 manufacturers and exporters and our association's 2,500 direct members to discuss World Trade Organization reform.
Our association’s members cover all sizes of companies from all regions of the country and all industrial sectors. We represent the majority of Canada’s manufacturing output as well as Canada’s value-added exports.
Manufacturers are some of Canada’s largest exporters, and global trade is the lifeblood of our sector. The manufacturing process relies on global supply chains to source and to make all the goods that the planet needs.
Our sector sells products to every corner of the earth, sustains good, high-paying jobs in Canada and creates wealth and prosperity for all Canadians. Therefore, the WTO and standardized global trading norms more broadly are critically important to managing the trade that our industry and our economy rely on.
Since its inception, the WTO has been instrumental in setting the rules for global commerce and for resolving disputes that arise while conducting business abroad. It has been a singular achievement and has established an international framework for productive and peaceful international trade.
This doesn’t mean we haven’t encountered problems along the way. Our research shows that Canada’s share of global exports started to decline around the same time that China was admitted to the WTO at the beginning of the century. Having such a negative and large player enter the club meant that Canada and its allies were at a cost disadvantage overnight.
Once legitimized by WTO membership, China increasingly became an indispensable part of global supply chains, and we are inextricably linked to it today as a result. The WTO’s handling of the China question will undoubtedly define its future and the future of the global trading order.
In any event, a lot of time has passed since the WTO’s inception in the nineties. Much as NAFTA started to show its age before we moved on to CUSMA, the WTO is now clearly in the same situation. Worse, the dysfunction we’ve seen in recent years at the WTO threatens its very existence and makes reform of the organization not a “nice to have” but a “must do”.
CME supports the WTO and its necessary reform and is especially appreciative of our government’s efforts at modernization, through the Ottawa Group. It is an example of global leadership, and we commend Minister Ng for spearheading this initiative.
For too long, everyone around the globe has whined about the WTO, but this push is the only real effort to actually do something about it. CME is proud to be part of this work, and it is definitely something we hope to support in the years ahead.
Because of the work of the Ottawa Group, we believe Canada is now in a position to play a larger role in the reform movement. Canadian manufacturers and exporters believe the following principles and areas of focus should be included in the WTO reform agenda:
Number one would be to strengthen the WTO’s monitoring function. This is a core responsibility of that body. The WTO is meant to police actors and ensure countries are living up to the rules and standards of their trade agreements. Transparency is key. Without it, actors can be tempted to use trade-distorting practices. Without proper monitoring and the production of real trade data, these distortionary actions are easier to slip in. Therefore, a robust and enhanced monitoring ability would keep everyone honest and potentially avoid having to resort to, and overburden, frankly, the dispute resolution mechanisms of the WTO.
Number two would be to strengthen those dispute settlement mechanisms. When monitoring and mitigation fail, the dispute settlement mechanisms need to be able to resolve disputes between trading parties quickly and fairly, with emphasis added on “quickly”. Before the appellate body atrophied last year, it was still taking years for decisions to wind their way through the system. This creates the incentive for bad actors to exploit and game the system and intentionally bog down disputes because it’s in their interests to do so. More concerning, it removes consistency and stability for business, and the trade ecosystem suffers as a result.
Number three would be to modernize trade rules to avoid falling further behind. Because there's been a lack of consensus on how to update global trade rules, countries have gone about resolving those issues in bilateral or multilateral trade deals, like Canada has. If the WTO cannot keep up, it will inevitably be left in the dust.
Canadian manufacturers and their global peers run into so many issues when trading abroad: unfair competition from state-owned enterprises, dumping, currency manipulation, industrial subsidies and trade barriers more generally. This is in addition to global trade rules not coming to terms with broader issues like digital trade, sustainable development and environmental regulations. In order to tackle all these issues, Canada should seek consensus with like-minded countries and prioritize which challenges to address first, and then update those rules accordingly.
To recap, WTO modernization efforts must focus on strengthening monitoring and dispute resolution mechanisms, and work with like-minded nations to update the rules.
However, as you've heard me say here before, while WTO reform work is very important to Canadian manufacturers and exporters, we still have the problem of our domestic industry's increasing inability to take advantage of global trade. Canada's manufacturer exporters are too small, and at full capacity. Generally speaking, a higher proportion of Canada's businesses are small SMEs than is the case for most of our global competitors. From a fundamental, structural perspective, then, we need to get our companies to invest in their businesses and help them grow and scale up. Larger companies are simply better positioned to take advantage of global trade.
The Canadian government is uniquely positioned to help in this way by continuing to support exporters through its various agencies, but also by investing in mentorship and trade skills training. We need to increase our production capacity and our domestic trade expertise to tackle this problem.
In conclusion, CME strongly supports Canada's efforts and leadership in WTO reform. This is not some arcane, theoretical exercise. It has real-world consequences, and will only become more important if we see these retrenchment trends in global trade, as a result of the pandemic, continue. A strong, rules-based enforcement body such as the WTO will be even more necessary in that scenario. However, it is all moot if we do not help Canadian industry first, at home. Only then will we be able to reap the benefits of global trade and thrive.
Thank you again for inviting me. I look forward to the discussion.