Debates of March 13th, 1996

Supply

[The Speaker]

I declare the motion defeated.

A motion to adjourn the House under Standing Order 38 deemed to have been moved.

[Rose-Marie Ur, Liberal, Lambton—Middlesex, ON]

Mr. Speaker, on February 29 I asked the Minister for International Trade why Canada chose to conclude an agreement in principle with the United States on matters relating to softwood lumber rather than take this dispute to a NAFTA dispute resolution panel.

This is the process we chose in 1994 after the U.S. imposed a duty on imported Canadian lumber. The duty was overturned by a bilateral panel which ruled that Canada stumpage fees do not constitute an unfair subsidy as was claimed by a U.S. lumber lobby. The U.S. appealed the decision to an extraordinary challenge committee which again ruled in Canada's favour.

According to the minister, the U.S. congress looked on these defeats and simply changed the laws. Rather than go through the uncertainty involved in another NAFTA panel process, the Government of Canada, several provinces and the lumber industry chose to make a deal with the Americans.

The crux of the matter is that NAFTA does not prevent United States' industries from using protectionist countervailing duties to harass Canadian exporters. It only provides that a binational panel can review U.S. governmental determinations to see if U.S. law has been applied correctly.

Obviously this is a serious flaw within the NAFTA. There are no clear cut rules on subsidies, nor are there any real definitions of what constitutes a subsidy. These are shortcomings that must be remedied as soon as possible.

In the meantime in appears we are engaged in a war of attrition with American protectionist forces, which is only intensified during an election year in the United States. The minister knows the Americans have applied to set up a NAFTA panel to rule on the legality of Canada's set of tariffs on supply managed commodities, which were negotiated during the last round of GATT. The United States is also signatory to this agreement. According to its reading of events Washington now claims that NAFTA takes precedence over the GATT agreement and that Canada's tariffs must be eliminated.

I am confident that Canada will emerge victorious from this most recent NAFTA panel decision. The fact remains there is nothing to stop the United States from launching an extraordinary challenge or from changing its laws again. What does Canada do then? Do we continue to stand by the principles of NAFTA, flawed as they may be, or do we simply throw in the towel on our dairy, egg and poultry producers? I am sure the Minister for International Trade will agree with me that this case is shaping up as the largest trade dispute ever between Canada and the United States.

However, even if Canada wins the case, and I am sure we will, under the current atmosphere of rising American protectionism this battle could drag on for several more years for the reasons I have just alluded to.

Let us be clear what is at stake here. According to a study conducted by economic forecasters, if the United States succeeds in knocking down the tariff wall that covers Canada's dairy, egg and poultry producers, by the year 2000 the opening border will wipe out 28,000 Canadian farms, farming and food processing jobs. This would result in $3.4 billion in lost sales and would cost the government $2.7 billion in lost taxes.

Obviously if the upcoming NAFTA panel decision on the legality of Canada's tariff levels were to go against Canada we would have a very serious problem on our hands. What I would like to know, and perhaps the Minister for International Trade can tell me, is in the event of a Canadian victory what steps will he take to ensure these GATT negotiated tariffs are not simply bargained away through a special deal with the protectionist minded Americans? Will the minister go to the wall for Canada's dairy, egg and poultry producers?

[Ron MacDonald, Liberal, Parliamentary Secretary to Minister for International Trade]

Mr. Speaker, the member for Lambton-Middlesex has been quite vigilant in bringing the interests of Canadian agricultural producers to the forefront each time she speaks in the House of Commons. The minister and the government listened very carefully to the concerns she raised.

In answer to the specific question, it is the hope of the government that actions to reach an agreement with the United States were done to put an end to almost 15 years of litigation between Canada and U.S. softwood lumber producers. I know the member is fully aware that although we have remedies under the NAFTA, many times our counterparts in the U.S. seem to become engaged with frivolous disputes which tie up the system for an undue length of time.

This was one of the considerations the Canadian government had to look at when the latest dispute arose. The Canadian industry and provincial governments decided negotiating an acceptable agreement to guarantee security of access to the U.S. market was preferable to the uncertainties and costs of fighting a countervail duty case.

I remind the House that in order to take the softwood lumber dispute to a NAFTA chapter 19 panel the United States would have to first launch a countervailing duty investigation and determine that Canadian lumber exports to the U.S. were being subsidized and conclude that U.S. producers were being injured. Furthermore, if it had so decided, the United States would have imposed the duty on Canadian softwood lumber exports. Such a duty would have had significant negative impacts on the Canadian lumber industry and its employees.

This industry is extremely important to Canada. It employs about 60,000 people across the country. Canadian exporters of softwood lumber to the U.S. reached record levels in 1995 of over $8 billion. This represents approximately 60 per cent of Canadian softwood lumber production. The value of these exports has grown substantially since 1990.

Therefore in striking a deal with the U.S. the agreement is designed to avoid another long, protracted and costly trade battle. The agreement which comes into effect on April 1, 1996 will give Canadian softwood lumber exporters security of market access to the U.S. market for five years.

I also assure the member that this deal should not looked at as a precedent. I do not think it is. The hon. member would find that the Minister for International Trade and the government will, as she said, go to the wall to protect the interests of Canadian supply side manufacturers, as we have the right to do under the GATT agreement.

Softwood lumber was a very special case. I assure the member her concerns and those of the people she represents will be taken into consideration in any future plans that the Government of Canada has with respect to supporting our producers.

[The Speaker]

Pursuant to Standing Order 38(5), the motion to adjourn the House is now deemed to have been adopted.

Accordingly, the House stands adjourned until tomorrow at 10 a.m., pursuant to Standing Order 24(1).

(The House adjourned at 7.20 p.m.)