International Trade Committee on Oct. 25th, 2022

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

I call to order meeting number 32 of the Standing Committee on International Trade.

Today’s meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. Therefore, members are attending in person in the room and remotely by using the Zoom application.

I need to make a few comments for the benefit of witnesses and members.

Please wait until I recognize you by name before speaking. When speaking, please speak slowly and clearly. For those participating by video conference, click on the microphone icon to activate your mike. Please mute yourself when you are not speaking.

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Should any technical challenges arise, please advise me. Please note that we may need to suspend for a few minutes to ensure that all members are able to participate fully.

As part of the motion adopted by the committee on Tuesday, September 20, 2022, the committee is meeting virtually today with Nadia Theodore, ambassador and permanent representative to the World Trade Organization.

Welcome to our committee, Ambassador Theodore. We will start with your opening statement of up to five minutes and then proceed with rounds of questions. We're very glad you were able to join us today to share some information and knowledge with the committee members.

I will turn the floor over to you, Madam Theodore.

[Her Excellency Nadia Theodore, Ambassador and Permanent Representative of Canada to the World Trade Organization, Department of Foreign Affairs, Trade and Development]

Thank you very much.

Good morning, everyone.

As some of you may know, I wear three hats here in Geneva. I am the head of the permanent mission of Canada to the United Nations, the World Trade Organization and other international organizations. I am Canada's alternate permanent representative to the United Nations, and I am the ambassador and permanent representative of Canada to the World Trade Organization.

It is a real pleasure to be here today in my capacity under that third hat, as Canada's ambassador to the World Trade Organization, to update you on the latest developments at the only global international organization dealing with the rules of trade between nations.

The three pillars of the WTO—the deliberative, the negotiating and the dispute settlement pillars—are all of enormous importance to Canada. The work to maintain, improve and strengthen all three is ongoing. Working to uphold, safeguard and continuously improve the system has been a cornerstone of Canada's trade policy since its inception and remains so today. With that context, let me move to where we are today.

As was the case with many things due to the pandemic, the WTO 12th ministerial conference was delayed and eventually took place from June 12 to June 17, 2022. MC12, as it's known, produced a set of outcomes that represent the most significant package to come out of the WTO in recent years.

Could there have been a higher level of ambition? Well, Canada is a high-ambition, high-standard member, so the answer to that question will almost always be yes. However, the MC12 outcomes were significant and set the ground for the pathway forward.

Let me provide you with an overview of some of what was achieved.

Significant was the WTO agreement on fishery subsidies. It is the first sustainable development goal target to be fully met. It is the first SDG target met through a multilateral agreement, the first WTO agreement to focus on the environment and the first broad, binding multilateral agreement on ocean sustainability.

The moratorium on not imposing customs duties on electronic transmissions will continue to provide predictability for our businesses and our consumers, as members have agreed to extend the moratorium until the next ministerial conference or until March 2024.

Under the consensus-based decision that is commonly known as the ministerial decision on the TRIPS agreement or the TRIPS waiver, eligible developing country members may waive certain TRIPS provisions on patents for COVID-19 vaccines.

MC12 outcomes also included a package on WTO responses to emergencies, a ministerial declaration on the WTO response to the COVID-19 pandemic and preparedness for future pandemics, a decision on World Food Programme food purchases and a declaration on the emergency response to food insecurity.

This is where we are, coming out of the last ministerial conference.

Where are we going? As I already noted, Canada would have liked to have seen more ambition at MC12, and we are not alone in that regard. In all three of the pillars, members have already committed to doing more and under ambitious timelines.

Members have committed to the restoration of a fully functioning dispute settlement system by 2024. Members have begun work toward the implementation of the fisheries agreement and have already begun work on what I like to call the second generation of the fisheries agreement.

Discussions have already begun on whether to extend the TRIPS waiver to cover patents for the production and supply of COVID-19 diagnostics and therapeutics.

There is broad agreement among the membership that a way forward on agriculture is needed.

Members are also re-energized around the improvement of the deliberative function of the organization. Work around WTO reform of this function will feature prominently over the coming months.

The path to success will be as challenging as we know member-driven, consensus-based and legally binding success to be, but it is doable. Canada will continue our active engagement across all of the pillars. The Ottawa Group, inaugurated in 2018 under Canada's leadership, will continue to serve as a much-needed forum for incubating ideas and creating positive momentum across the organization. This will be of crucial importance in the lead-up to MC13, which is expected to take place before March 2024.

Before I close and hand it over for the discussion and questions, let me underscore that overarching in Canada’s engagement at the WTO is our commitment to constructive participation in the work on development across the organization and our active engagement on trade and gender and on MSMEs to ensure that these important issues are brought to the forefront.

We are also demonstrating considerable leadership in the area of trade and environment and serve as co-coordinator for the structured discussions on trade and environmental sustainability.

Thank you very much. I look forward to the discussion.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Ambassador. We appreciate your comments.

Now we'll open the floor for questions.

Mr. Carrie, you have six minutes. Go ahead, please.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Madame Chair.

Ambassador, thank you so much for being with us. Trade is so important to Canada and our economy. Coming from Oshawa, I really do understand the export and import business, and your synopsis of what's been going on is quite eye-opening.

I want to ask you about the MC12 and this dispute settlement system and the appellate body. Everybody is talking about how urgent the agreement to come together by 2024 is. What do you think the biggest holdups are? I know the Americans have been hesitant to appoint. Could you please give us a little bit of an update there? To me, 2024 doesn't sound too urgent.

[H.E. Nadia Theodore]

Thank you very much, Mr. Carrie.

That's a really good question, and it's so interesting, because 2024 does seem like a long time away.

As I'm sure you would know, in any negotiation—but certainly in multilateral negotiations—what seems like a very long time often ends up being a very short time in which to get over 160 members of the organization to come to consensus, so there's that.

Maybe what I'll do is say three things about the dispute settlement body, and in particular the appellate body, and the holdup.

Number one, you are absolutely 100% correct that the reason we are where we are with the the dispute settlement body and the appellate body is indeed that the United States, for some time now, has been blocking the appointment of panellists to the appellate body, which renders it not functional.

Number two, I would say that it's important to note that members have put together an alternate structure—if I could call it that—under the leadership of Canada, called “the multi-party interim arrangement”, or MPIA. I was trying to think of what the acronym actually means, because all we do is use the acronym here. That allows a group of members to use an appellate mechanism among themselves when and if the need to appeal a case comes up.

I think that's important to note, because it is not the case that disputes are not allowed to be heard and that if there is a need to appeal, there is absolutely no mechanism through which to do that. We do have this interim appeal mechanism that Canada has spearheaded and pioneered, which does provide us with an interim solution.

Number three, I agree with you that if we could get the United States to stop blocking panellists tomorrow, we would absolutely do that. Right now, what is happening here in Geneva is what I'll call a very thoughtful and inclusive process that is actually spearheaded by the United States—which is good news, since it means they're engaged—to bring together the membership to discuss what the issues are with the appellate body system and how we can move to address them in time for this 2024 deadline.

That process started in September and is in the sort of ideas-gathering phase. Then, starting in January, members are actually going to sit down, look at all of the ideas that have been put forward and see how we can put forward concrete proposals based on those ideas put forward by members.

The hope very much is that sometime before March 2024, we will indeed have come to a place where ministers will be able to sanction—to bless—whatever result will bring us to having a fully functioning dispute settlement system, which would include the ability to appeal by the entire membership, and not necessarily just by this interim solution that Canada has spearheaded.

[Colin Carrie, Conservative, Oshawa, ON]

I think it would be great if we could come up with something.

I've been around a little while, and it's a bit concerning when it takes so long. I think the Doha started in 2001, and we're at 2022 and we still haven't figured all that out yet.

The challenge is when we have managed economies such as China's. I think it was 2001 when China was admitted to the WTO. When we're talking about fair trade, free trade, I think the Americans have some legitimate issues with the process, just as Canada does. We can always talk about our softwood lumber issues as well.

I wonder how relevant the WTO is. Should Canada be looking at our trusted trading partners, people we can count on who will follow the rules, and with that, lead in there?

I want to ask you about the accomplishment with the fisheries subsidies and the agreement you mentioned in your opening remarks. I'm wondering how enforceable—

[The Chair, Liberal, Judy Sgro]

Mr. Carrie, my apologies for interrupting, but your time was up a couple of seconds ago.

[Colin Carrie, Conservative, Oshawa, ON]

Oh, was that six minutes?

[The Chair, Liberal, Judy Sgro]

We would like to give the ambassador an opportunity to give us some sort of a short response, if that's possible.

[Colin Carrie, Conservative, Oshawa, ON]

If you could cover how enforceable it is, I would appreciate it.

[H.E. Nadia Theodore]

Sure. Maybe I'll address the fisheries.

As I mentioned, we concluded the fisheries agreement at the last ministerial conference. Once two-thirds of the membership have deposited their instruments of acceptance at the WTO, which really means they have done all of their domestic work they need to do, Canada included, it will enter into force and will indeed be fully enforceable at that moment in time.

Even though I did mention that we had already started negotiations on the elements that we were not able to conclude, it's really important to recognize that what we did conclude at MC-12 is absolutely a full agreement, and members are now going through their domestic processes at home. Once two-thirds of the membership have fully deposited their instruments of acceptance, it will indeed come into force and be fully enforceable.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Ambassador.

We'll move on to Mr. Virani for six minutes, please.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Thank you very much, Ambassador Theodore. It's a real pleasure to have you here. We're really grateful to have you in the position that you are in. I know Minister Ng really values and relishes her working relationship with you at the recent MC-12 just took place.

I want to build on some of your opening comments and ask you about Canada's role in advocacy for trade and gender that you talked about. Obviously, you are well situated to comment on this, as you know that the recent renegotiation of CUSMA included a trade and gender chapter. I'm sure you're quite familiar with the importance of gender that the Prime Minister has placed on our government and what he's provided in the mandate letter of Minister Ng.

Could you comment on how Canada can really take a leadership role in advocating more inclusive trade, including for women, with respect to our interactions with the WTO?

[H.E. Nadia Theodore]

Yes, absolutely.

First of all, thank you very much for those kind words. It really, truly is a pleasure to be representing Canada here at the World Trade Organization.

Let me say a couple of things. For the past several years, Canada has taken a leadership role in the organization at the WTO in the terms of both the policy piece of trade and gender and in particular women in trade—everything that is about mainstreaming issues of gender across all of our agreements. That is as...I was going to say “basic”, but that makes it sound negative. However, it is as basic as looking at how some of our agreements, when they were first negotiated, didn't take into account that some of the barriers faced by those companies that are actually using the agreements will differ, depending on whether they are women-owned businesses or not.

It's taking a look at that and at things that are a little bit more sophisticated and a little bit more cross-cutting across the organization—for example, looking at how the WTO as a negotiating body works and deals with women-owned businesses, or allowing them to participate as observers, for instance, in some meetings and events we have at the WTO, or working more closely with some of the WTO and United Nations organizations, in particular the International Trade Centre, which Canada just recently recommitted funding to.

The International Trade Centre is a joint WTO and United Nations organization that is geared towards helping small businesses, in particular women-owned, youth-owned, youth-led and indigenous organizations, particularly in developing countries, to access markets. It's also creating the environments in those developing countries so that they can also better utilize exports from other countries that are looking to enter their markets.

Canada is—

[Arif Virani, Liberal, Parkdale—High Park, ON]

Thank you very much, Ambassador Theodore. I want to jump in with another question.

You also mentioned, when you talked about Canadian leadership, the Ottawa Group, which we've had in place since 2018, as another illustration of Canadian leadership at the WTO. You mentioned at the end of your remarks a bit about trade and the environment.

I want you to connect that to something you addressed with Mr. Carrie—namely, getting the fisheries subsidies hammered out. How do you connect ensuring the sustainable development goals that are being met in line with protecting global fish stocks with the broader agenda to ensure that the work of Canada at the WTO, and the WTO writ large, is ensuring that we are handling trade in a more environmentally sustainable manner? Can you connect those two for us, please?

Thank you.

[H.E. Nadia Theodore]

As I mentioned, the fisheries subsidies agreement is indeed the first agreement that fully meets one of the SDGs, that being SDG 14.6. Indeed, it is around controlling and regulating subsidies for fish stocks. It is the first multilateral agreement that actually deals with trade and environment.

Canada has, as I mentioned in my comments, through our work on the trade and environment sustainability discussions and our leadership role in concluding the fisheries agreement.... Again, that is actually a concluded agreement. We have just continued the work to go even further. There is more to hammer out, but we actually do have an agreement, which is very important, and which Canada played a leadership role on. That was the result of all the members, through the leadership of Canada, recognizing that sustainability issues and environment issues are at the core now of every multilateral organization, whether we like it or not. Issues surrounding sustainability and environment are crucial to the way we negotiate trade agreements and the way we set up the environment for trade for our companies.

As the common global good that the environment is, all members at the WTO recognize that this global problem of climate change requires global solutions. That is why the WTO, through leadership by Canada and by others, has taken that step with the fisheries agreement, but is going further right away with the second generation of an agreement and is also continuing work on trade and environment writ large across the organization.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Ambassador.

We will go to Mr. Savard-Tremblay for six minutes, please.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Madam Chair.

Good morning to all my colleagues.

Thank you for being with us today, Madam Ambassador.

Since the obvious thing that nobody wants to talk about is the issue of the Appellate Body, the body responsible for dispute resolution, I was a little surprised that you didn't mention it until you were asked specifically about it. We know that this is the major problem we are having.

You told us about the Americans' good intentions and the fact that they had a plan. Finally, we can say that the Americans are committed to thinking about the issue, but that's pretty much it. Am I summarizing the situation correctly?

[H.E. Nadia Theodore]

Thank you very much for your question.

No, I wouldn't say that they're just thinking about the issue. They're doing a little more than that. They've been thinking about it for a long time. The United States has been telling us for years that they've had problems with dispute settlement at the WTO; they've been saying it for years.

Today, we are about to begin work to resolve the situation for a specific reason, which is that in June, the ministers gave WTO members a very clear mandate to find a solution. There's no question that this is an issue, and we're working hard to resolve it, but it's also very important to know that Canada and other WTO members have been able to reach a multi-party interim appeal arbitration arrangement, or MPIA. So there is a way to resolve disputes at the WTO. It's not as if there's no way to bring a particular case with the WTO. There's a way to do it. It’s certainly not the best way, and it’s not a permanent solution, but at least it allows a group of members to resolve disputes among themselves when necessary. So it's very important to point that out.

It's also important to note that we're not just thinking about the issue; we're working hard to find solutions. As I said, we'll begin the process in January to find concrete solutions.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

You say that this is a kind of alternative, a plan B, until the issue of the Appellate Body, which is responsible for dispute resolution, is resolved. What is the status of this initiative?

How many disputes have been resolved that way? How many settlements have been reached? How many cases were resolved?

[H.E. Nadia Theodore]

That's a very good question. You can look at it as good or bad; it depends on how you look at it. There has only been one case where we had to come to an MPIA. It's not because that mechanism doesn't work; it's just that no cases have gotten to that point yet.

However, the mechanism exists, and WTO members can use it.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Great.

So you're telling me that there has been one case so far that could have been resolved in this way, that the mechanism is there and that WTO members can use it.

[H.E. Nadia Theodore]

That's right.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

So it's a temporary solution. That pretty much sums up your point.

Before examining some of the cases in more detail, I'd like to ask you whether the reform of the World Trade Organization deals solely with the institutional blockage of the institution, or has there been some discussion and reflection on its profound directions?

We were told that as a result of the COVID‑19 pandemic, we are now in a context where we no longer want to rely solely on trade as a means of sustaining humanity.

Is any thought being given to the profound directions of the WTO?

[H.E. Nadia Theodore]

That's a good question.

I think WTO reform is a very good thing. I am thinking, for example, of having deep discussions about what the organization is and whether it's achieving its objectives. We also have to think about the best way to regulate international trade and to study issues in depth. I think that's very important.

Just because we're trying to improve them doesn't mean that some aspects aren't good. It all works. It's a very important organization, especially for a country like Canada, which depends on its exports and the international market. There have to be multilateral rules. That said, there's always room for improvement.

I think the answer to your question is yes. We can think about it, and we're not because things aren't working. Things are working well, but they can be improved.