EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, February 20, 1997

.0907

[English]

The Chairman: I call this meeting to order.

[Translation]

Before we move on to the Canada-Chile Free Trade Agreement, I would like to point out to the members of the committee that this morning Mr. English, as Chair of the Subcommittee on Sustainable Development, will table in the House the report of the subcommittee on putting an end to child labour exploitation in the world. I would once again like to thank all the members of the committee for their hard work during the final stages of the drafting of the report.

On behalf of all the members of the committee, I would also like to thank our clerk and support staff, who worked all night on the documentation and translation of this report which is to be presented this morning to the Minister, who will be leaving for Amsterdam this weekend.

[English]

Once again, thank you very much to everyone for the tremendous cooperation in getting that report prepared. Mr. English will be reporting it to the House at 10 a.m.

I understand, Mr. English, that you will be having a press conference at 11:30 a.m.

Mr. English (Kitchener): Yes.

The Chairman: Congratulations to you and members of the committee.

Mr. English: Thank you.

The Chairman: Mr. Minister, thank you very much for being with us once again. I think the members of the committee are getting the impression that if we don't cut your airplane travel points down...we're getting so much legislation from you we'll have to try to keep you off planes for a while.

Congratulations on the Canada-Chile Free Trade Agreement. We look forward to hearing what you have to say about it.

Hon. Arthur C. Eggleton (Minister for International Trade): Thank you very much. Merci beaucoup. Good morning. Bonjour. I'm happy to be with the committee once again.

I can remember, and you may recall, that when I was the President of the Treasury Board, and particularly when I was the Minister responsible for Infrastructure, I used to like to get up in the House and talk about the latest figures. I'd always say, ``Mr. Speaker, I have more good news!'' That infrastructure program has been a great success for us and a good example of how three levels of government can work together to create jobs and enhance the infrastructure in our communities.

.0910

I'm pleased to be able to come here today and say that I have more good news, Mr. Chairman.

On October 29, I had the pleasure of being here to share with you the details of the Canada-Israel Free Trade Agreement. And tomorrow I will be travelling to Israel with a business delegation of over 60 representatives of the business community in Canada to promote that agreement and to give it the kind of lift-off that I think will be most helpful in creating jobs back here in Canada.

Today it gives me a great pleasure to be able to say that I'm here with good news about the Canada-Chile Free Trade Agreement. This time we're taking a major step into South America and expanding our free trade with Latin America and the Caribbean.

[Translation]

I can't stress enough the importance of trade to the livelihood of Canadians, and it is a message worth reinforcing today.

[English]

Trade now accounts, colleagues, for one out of every three jobs in this country, and trade has moved up to the position where it's over 40% of the economy of Canada, over 40% of our GDP. With a relatively small domestic economy, Canada simply has no option but to find new markets abroad if we're going to maintain our standard of living and if we are going to create the opportunities for our children and for future generations to come.

We expect that this agreement will be a bridging agreement that will facilitate Chile's accession to the North American Free Trade Agreement, to NAFTA. But by signing this agreement now, we can provide Canadian companies with a significant head start into the Chilean market, a head start over our major NAFTA partner to the south of us.

Not only does this agreement provide a considerable advantage in that case, but it does the same in terms of our European and Asian competitors, because this is the most comprehensive agreement of any of them involving those countries, and it gives us a leg-up on Chile's regional trading partners in South America as well.

This initiative is important to Canadian businesses. It's important that they get active quickly and it's important to get this implemented quickly by June 1997, so that we can take advantage of that leg-up.

The agreement is significant for some other reasons. It secures access to a dynamic and strategic market, one that's been growing by over 7% a year. Also, it demonstrates our commitment to freer trade throughout the hemisphere. We're not just stopping at our neighbour's border to the south or at the Mexican border to the south of that; we're reaching out into the rest of this hemisphere.

This agreement, I should say, is only the beginning. I want to have more talks with the MERCOSUR countries, and I also want to advance the free trade agreement of the Americas, which has as its objective a free trade agreement in the whole hemisphere by the year 2005.

All of this, of course, is for the purposes of creating jobs and creating a new economic relationship between government and the private sector in Canada and Chile, which will support our further efforts at trade liberalization.

Our government's long-term objective in Latin America and in the Caribbean, as I've said, is the free trade agreement by 2005. This target was agreed to by heads of government at the Miami summit, which was held in December 1994. We are working diligently to see this target realized, and I hope the Americans will get back to the bargaining table soon to help realize the commitment that they made in 1994 but have been unable to acquit themselves of because they have not got the approval of the Congress on the fast track. I know the President and the Congress are going to go back at that soon.

We see the FTAA, the hemispheric agreement, providing a common connection between NAFTA countries and the other trading areas of the region, like the MERCOSUR, for example.

.0915

So what is happening here today is you have before you a free trade agreement with Chile that opens the door to this exciting region. With growth second only to Asia, Latin America and the Caribbean present an opportunity we cannot ignore and a market we cannot forgo. By the year 2000 this region will boast a total population of 500 million, 50 million of which will be middle- and upper-income earners, and the region will produce a GDP of $2 trillion U.S. dollars.

As these new opportunities have opened up, Canadians have embraced them to this point with energy and with a great deal of success. Canadians have risen to the challenge of freer trade and stiffer competition. Our companies have restructured. They have innovated to become more efficient and to become more competitive.

The figures on Canadians' ability in trade speak for themselves. In 1992 our trade surplus was $6 billion. Just over two years later, in 1994, it was $15 billion. Yesterday Statistics Canada announced that our trade surplus for 1996 is $31 billion, $6 billion more than last year and a new record year. I wish I could get my RRSPs to perform like that.

Mr. Speller (Haldimand - Norfolk): Hear, hear!

Mr. Eggleton: That's what Canadians can do when markets are opened up to them. That's what Canadians can do when they compete on the international stage against the best in the world, and that's the type of growth we're determined to sustain by seeking out new markets and new opportunities for Canadians.

I believe this free trade agreement with Chile will play a significant role in the future development of Canadian trade. Chile has the most stable and fastest-growing economy in the region. Over the last decade annual economic growth has average almost 7%. Market-oriented policies have encouraged an entrepreneurial spirit and a strong private sector.

In 1995 Chile had a budget surplus - that's nice - amounting to about 2.5% of GDP, while its foreign debt was only 10% of GDP.

The second free presidential election, held in 1993, demonstrates that Chile's transition to democracy is proceeding smoothly. I believe it is putting down firm roots in the Chilean soil.

With low unemployment, falling inflation, and increasing wages, Chile has established its credentials as a desirable trade and investment partner. Chile has strong trade links not only to the region but, as I mentioned, to the European Union and Asia.

Canadians have been quick to take notice of this positive environment and trade between our two countries has been rising dramatically. In fact, over the past decade Canadian-Chilean trade has more than tripled, from $202 million in 1983 to a high of $666 million in 1995. In one year, 1994 to 1995, our exports to Chile grew by an impressive 23%.

The nature of our trade with Chile is also changing. Since 1988 Canadian exports of machinery and industrial equipment have surpassed exports of raw materials and commodities, and they are growing at an average rate of 26% a year. These investments are encouraging further exports of Canadian value-added goods as well as joint ventures between Chileans and Canadians, particularly small and medium-size companies. They also create opportunities for Canadian companies to provide goods and services to Canadian investors: trade following investment.

Canadian investors are increasingly seeing Chile as a good place to put their money, so much so that we have been Chile's largest foreign investor in three of the years of this decade. The cumulative total of actual and planned Canadian investment there now exceeds $7 billion. As a country, we're the second-biggest investor in Chile in the world - exceeding $7 billion.

Much of these funds, of course, is invested in mining and mining development. But investment in banking and communications and energy is also on the rise.

One of Canada's priorities is to protect its substantial investment in Chile more effectively. We've been able to provide this through foreign investment insurance from EDC, which is financing lines of credit with both the Banco Sud Americano and the Banco O'Higgins. These EDC programs are opened to both the private and public sectors.

.0920

Reaching a double taxation agreement with Chile has also been an important objective for Canada. The two nations will begin negotiations on this after framework laws, which will soon be going into the Chilean Senate, are in fact approved.

More than fifty Chile-Canada joint ventures are already operating in Chile, ranging from fighting forest fires to building industrial machinery. This will generate increased opportunities for exports of goods and services.

So, Mr. Chairman, the ties between our two countries have been growing dramatically in recent years. It was therefore only natural that the two countries, which are both trading nations and which both have significant natural resource components to their economies, would want to expand trade between them.

This is why Prime Minister Chrétien led Canada's first trade delegation to Chile in January 1995. More than 250 business people representing more than 185 companies joined the Prime Minister on that trip. During the visit, 33 Canadian business people signed deals with more than $1.7 billion. In addition, Canada's Business Council on National Issues signed a strategic alliance with the Confederación de la Producción y del Comercio to promote direct business links.

Memorandums of understanding on the environment and telecommunication were also signed during that visit. The Alliance of Manufacturers & Exporters Canada and its Chilean equivalent developed an exchange program, which has actually been up and running since 1992. The Association of Consulting Engineers of Canada and its Chilean counterpart have also created an exchange program.

With so much contact between our business communities, and with so much exchange of personnel and information, the next logical step was a free trade agreement between our countries. This was also a natural step for Chile along its path to NAFTA membership.

Canada has four main objectives in pursuing this bilateral agreement. The first is to obtain barrier-free access to the Chilean marketplace for our businesses. The second is to protect our investments, currently exceeding some $7 billion and growing. The third is to secure Canada's attractiveness as an investment site. And the fourth, as has been mentioned, is to provide a bridge to Chile's accession to NAFTA. We believe all of these objectives have been met by the agreement that we have signed, and we're confident that our overall objective of stimulating Canada's economy and creating jobs will be met.

Let me quickly outline the main elements of the agreement, Mr. Chairman.

We get immediate duty-free access for most Canadian industrial goods, which account for 85% of our exports. In those cases, Chile's 11% import duty will be eliminated. For the remainder that are not instantly eliminated when this goes into effect, there will be a phase-out over a period of six years on the remaining industrial- and resource-based goods.

We get better access for our range of agricultural goods, including durum wheat, which I believe makes up about 35% of our agricultural products going into Chile. In the seasonal period, this will become duty-free. For barley, seed potatoes, pork, canola products, beef, etc., our exporters' overall access to Chilean markets will now be better than it is for our competitors in the United States and the European Union, and as good as the MERCOSUR partners of Argentina and Brazil. That's for agricultural products.

There is significant new protection for Canadian investments in Chile, including an agreement to automatically grant Canadian investors the benefits of any further liberalization that may occur.

There are important new guarantees for Canadian exporters of services.

The agreement calls for the creation of a free trade commission and secretariat to ensure the timely and effective resolution of disputes.

There are side agreements on the environment and labour - the first agreements of this nature ever signed by the Government of Chile.

The mutual elimination of anti-dumping duties within a maximum of six years will further guarantee barrier-free access for Canadian exports to Chile and contribute to making further progress - and I think this is important - in reforming and eventually eliminating anti-dumping measures within NAFTA.

It is also important to note what this agreement doesn't cover. This agreement exempts cultural industries, the Auto Pact, and supply-managed products. Social and health services are also fully protected.

.0925

While this agreement is good news for all our exporters, it holds particular potential for Canadians in the following areas: first, technologically advanced telecommunications equipment and specialized consultancy services; second, durum wheat, oilseeds, and similar crops; third, coal, mining, and energy-generation and transmission equipment; and finally, forestry-related and environmental products and services.

[Translation]

And as Chile modernizes its infrastructure, there is tremendous potential for Canadian companies both in construction and in consulting.

[English]

In December of last year it was my honour to participate in Canada Expo '96. This was held in Santiago. It was a trade show exclusively for Canadian businesses. Over 170 Canadian companies demonstrated their products and services. More than 4,000 people visited that fair, including the President of Chile. Many contracts were signed, many orders were taken. I heard a great deal of praise from the companies that were in attendance for our officials' having helped to organize this event.

Following that trade show, some major announcements were made by NorTel, Rio Algom, Newbridge, and Teck Corporation. These projects were estimated at several hundred million dollars.

One company even told me that they beat out an American competitor simply because they could deliver their products after the tentative date for implementation of June 2 and thereby get an 11% advantage because of the duty disappearing on that date for their particular product. So there it is. It's already showing signs of how well it will work and give us an advantage, a leg-up.

It isn't just the major companies that are realizing potential in Chile. A survey of small and medium-sized businesses that attended that Expo '96 indicate they also foresee substantial business opportunities in both the short and the long term.

So as you can see, honourable colleagues, Latin America and the Caribbean in their entirety hold promise of explosive growth and amazing opportunities for Canada.

Thank you very much.

The Chairman: Thank you very much, Minister.

It's now time for questions.

[Translation]

Mr. Sauvageau.

Mr. Sauvageau (Terrebonne): Thank you, Mr. Minister, for your presentation this morning.

As you have seen from your meetings with Mr. Carrière and other officials, and also from our statements in the House of Commons, the Bloc Québécois supports the Canada-Chile Free Trade Agreement. The Bloc Québécois will cooperate with you to ensure that standards and deadlines are met in the implementation of this agreement.

However, we would like to ask you a few questions on certain points which are still unclear. As you have only 30 minutes left, you may not be able to answer all our questions and I would therefore be grateful if we could obtain written responses from you, as is the normal practice.

Two of my three questions deal with your statement. You referred to the free trade area planned for the year 2005, as the Prime Minister has already indicated, a Free Trade Area of the Americas. Given that Chile cannot be expected to join NAFTA before the year 2000, what is the timeframe involved here and how will it be possible to bring in one country, more than one country, or blocks of countries between the years 2000 and 2005?

My second questions deals with a passage from a book we read occasionally, namely the Red Book. Page 24 contains the following statement:

A Liberal government will renegotiate both the FTA and NAFTA to obtain: a subsidies code; an antidumping code; a more effective dispute resolution mechanism; and the same energy protection as Mexico. Abrogating trade agreements should only be a last resort if satisfactory changes cannot be negotiated.

We have been waiting for the reports of these task forces since 1995. We know that the reports have been completed, but they are confidential. As they will probably be tabled on the eve of the next federal election, are you going to use them to say that you have fulfilled another promise from the Red Book?

.0930

My third question deals with your statement. You said that the cultural exemption clause was continued under the Free Trade Agreement with Chile. You also said some time ago that the cultural exemption clause was harmful in free trade agreements and even counterproductive. Why have you kept it in? Thank you.

[English]

Mr. Eggleton: Mr. Chairman, I thank the hon. member for the questions.

In answer to your first question, we have no specific plans with respect to other blocs at this point in time, other than the fact that I do want to develop a relationship with MERCOSUR. I can't say at this point where that might lead, but if something further develops with MERCOSUR between now and 2005, I would be happy to advise you of that possibility.

With respect to Chile coming into NAFTA, the timing of course depends on whether the President of the United States gets fast-track authority from Congress this year. It would take some time to negotiate the agreement, so the year 2000 may prove to be realistic. On the other hand, if he doesn't get fast-track agreement, it could take longer than that.

Meanwhile, we are moving along with hemispheric discussions on free trade of the Americas by 2005. In May I will be going to Belo Horizonte in Brazil to the annual meeting of trade ministers with respect to moving the agenda along. There is another summit meeting coming up next year in Santiago that the leaders will attend and it's my hope that we'll be able to launch negotiations at that time. We've been doing the background work and the study work with various committees up to now, and it's my hope that we will be able to launch the negotiations at that time so we will be able to get them done and implemented by the year 2005.

Secondly, with respect to your quote from the red book about subsidy code and anti-dumping, when we signed NAFTA we did so on the basis of pursuing the matter further with the United States and Mexico through a committee of NAFTA. We have a draft report from the staff, but unfortunately we've been unable to get a commission meeting - that is, a meeting of the three of us who are responsible for the trade agreement - up to this point. It appears that within the next month or so - I don't have a specific date - the commission will actually come together to meet, and we will consider the report at that time.

I should tell you that the report will bring about some changes. It will bring about some refinements and some improvements to the dispute settlement process and other components of the NAFTA agreement, but we still have a long way to go to reach our objectives with respect to trade remedy reform.

You mentioned subsidy code. Through the last round of negotiations in the GATT at the Uruguay Round, we now have, as part of the WTO, provisions related to subsidy.

Anti-dumping and countervail is going to take longer with the United States. There's no doubt about that. But we've been a victim of many of these measures, so we want to see reforms brought about. One of the things in this agreement that is helping to move us in that direction is an exemption in terms of anti-dumping measures that we would put into effect.

We've been lucky in that we haven't had any historic record of a need for these kinds of measures with Chile, but I think that in entering into this agreement with them and, I hope, subsequently with Mexico, we will then close in on our other trading partner, the United States, in terms of those provisions.

There has been progress. There will be a report. And as soon as I can get permission - with my colleagues after we've had a panel commission - that report will be made public and we will continue the effort. In fact, that will be a key item of discussion when we have the NAFTA Trade Commission meeting.

.0935

Third, on cultural exemption, yes, there's a cultural exemption clause. My remarks on the cultural exemption clause in NAFTA were not to the effect that it was harmful or counter-productive. I said exemption doesn't necessarily mean protection; we still are vulnerable to attacks. In fact, the American entertainment industry in many different respects is trying to pressure us to remove barriers to greater access for their cultural products. My goodness, they already have enormous access; I don't know what more they want. But they have been coming at us on different issues, one at a time. First it was country music television, and of course there's the WTO panel on split-run magazines.

One of the points I was trying to make in my remarks on this subject a while back was let's not get picked off on these issues one at time; let's make sure we get our act together and we have our strategy, we have our ability to defend our own cultural products for domestic consumption as well as for putting them on the international stage.

So the cultural exemption in NAFTA - and remember, the NAFTA agreement was used as a model here - exists. Should there be more than that? Should we actually have rules for culture? Well, that's something I've raised for discussion. Whether it be at the WTO or at NAFTA, that is something for consideration. Meanwhile the provision we have in NAFTA is in fact included here.

[Translation]

Mr. Sauvageau: Mr. Minister, first I would like to thank you for your answers. You negotiated the removal of antidumping duties in the Canada-Chile Free Trade Agreement. There are no antidumping duties in this agreement. This provision prevented Chile from joining NAFTA. What would be Canada's position regarding antidumping duties if the United States were to maintain its position on that point?

[English]

Mr. Eggleton: Well, of course putting it in here is part of our effort to get the United States to address the question of trade remedy reform. That certainly is going to be a major effort on our part and it's going to take some time to do that, but I think this agreement helps move us in that direction and helps put it on the table and bring attention to it.

[Translation]

Mr. Sauvageau: The answer will wait. Thank you.

[English]

The Chairman: Mr. Penson.

Mr. Penson (Peace River): Mr. Chairman, I would like to welcome the minister and department officials to the committee this morning.

I would like to pick up on what Mr. Sauvageau has just talked about. Certainly colleagues of mine from the Reform Party on this committee support the extension of free trade between Canada and Chile. We encourage the minister to continue the work he's doing to try to bring South America into some type of trading arrangement with Canada. We do know the Liberal Party is a sort of latecomer to free trade, but we still like the idea that the minister embraces free trade.

We certainly are seeing the benefits of the free trade agreements starting to take effect. I particularly like the area of protecting Canadian investment in Chile for our mining industry. We have a very big component over there. Agriculture is going to have access to some market that was subject to some tariffs before. I think it's a move in the right direction and one we need to continue to work on.

Mr. Sauvageau talked about anti-dumping. There again I welcome the move that has been made, but I wonder how it's going to affect Chile trying to move into a NAFTA context, if that will be a stumbling block in the next round with the United States. We know we haven't made any significant progress with the United States.

In addition to that, Mr. Minister, I would like to ask about these free trade agreements that Canada has been able to establish. We still seem to be running trade deficits with almost every country except the United States. I would like to hear your comments on why you think those trade deficits are occurring and why Canada can't take better advantage of free trade in order to post some positive numbers in these arrangements, as opposed to red ink, essentially, in net trade with most of the countries except for the United States.

.0940

The Chairman: Just so the minister can be clear, Mr. Penson, are you referring to the current account balance or just merchandise and service -

Mr. Penson: Whether it's trade surplus or trade deficit in terms of merchandise.

The Chairman: Okay. Sorry to interrupt.

Mr. Eggleton: On that last point, the $34.1 billion is a trade surplus on merchandise. To get to the current account balance, the service payments on interest, tourism, all these other financial transactions, go into it. But now of course we've turned the corner on the current account and gone into a surplus position on that as well.

Your welcoming of the officials has reminded me that I forgot to introduce them,Mr. Chairman. I could just note that Claude Carrière is director of the tariffs and market access division in our department. Dan Daley is our legal counsel from the trade law division.Keith Christie, the man who negotiated this agreement, is now in the PCO but was chief negotiator for an agreement that was done in record time. Thank you for welcoming them. I appreciate that.

About freer trade or liberalized - there's another good word - trade, the Liberal Party has been involved with that for a long time. I have been reading of late of Wilfrid Laurier's attempts in that area.

In the 1980s I think Liberals expressed a lot of concern about the free trade agreement that was proposed at that point between Canada and the United States because it did bring about enormous upheaval. A lot of people were concerned about losing jobs. A lot of adjustment was done and support programs weren't provided by the government of the day for that transition. I think that's the kind of concern we were hearing from Liberals in those days.

But we've now turned the corner on this. We've paid a price for the adjustment. We're now in fact in a very positive, beneficial period with freer trade agreements.

On anti-dumping, your question, as I recall, was relevant to what happens if the Americans don't go for this. As I said, it's probably going to be a long-term measure, but we're hopeful they will address the issue when Chile is brought into NAFTA and we can engage in some discussions on the overall NAFTA agreement. Particularly if we could get a similar agreement with Mexico, that would leave the United States as the only partner in those negotiations that hadn't come into that kind of arrangement. However, if they still resist and if we end up bringing Chile in under the agreement as NAFTA is today, without that provision, that provision will still apply between us on a bilateral basis with Chile.

It certainly gets it on the table. It ensures that in fact it's discussed. We'll be pushing that effort.

Mr. Penson: Overall, yes, Canada does have a trade surplus, and that's welcome news. The point I was making is that with most individual countries we are trading with these days, except for the United States, we are importing more than we are exporting to them. My question is what do you think the reasons are for that, and what can be done to try to put us in a better position in terms of getting to more of a balanced trade position with these other countries, or even running surpluses?

Mr. Eggleton: A lot of them are in developing economies. As they further develop, as their economies further advance, and as there is more wealth and more purchasing power created for our high-value-added products in Canada, we're already seeing increases in those areas. So I think we'll continue to see things move in that direction.

.0945

Developing economies growing at rates of over 70% - I mentioned the case of Chile, with many of in the Asia-Pacific region growing by bigger percentages than that - present a very healthy situation in terms of our future trade opportunities. We are, of course, taking Team Canada missions into many of these countries so that we can help to bolster trade, and we're getting a big impact with those visits. The Team Canada mission we had recently was the biggest one we had ever put together. It drew a lot of attention to Canada and Canadian businesses. A lot of contracts were signed, a lot of networking was done, and the process is beginning by which further trade expansion will occur.

We're also sending more trade commissioners into markets like Chile and Israel, where we've signed free trade agreements, and to these countries that are part of the Team Canada missions in order to bolster our staff and our opportunities there. As we gain momentum, we want to make sure we maintain it. We want to make sure that we are able to increase our market shares, increase our opportunities in those markets.

We have a very healthy trade surplus. Granted, a lot of it's with the United States - most of it is with the United States, but so is most of our trade; over 80% of our trade is with the United States - but we are making efforts to diversify our trade and, at the same time, to sell more of our goods and products into other markets.

Mr. Penson: Do I have any more time, Mr. Chair?

The Chairman: Yes, you do.

Mr. Penson: I'd like to ask about the issue of internal trade barriers within our own country. We've heard a lot of people - even representatives before our committee - in small and medium-sized enterprises talking about restrictions to trade and the things that are hurting their ability to develop the economies of scale necessary to launch into international trade. We know the numbers; not that many Canadian companies are actually responsible for the bulk of our trade. We therefore need to do some work.

My concern is that these internal trade barriers within our own country are restricting our ability to do that. I know the internal trade committee has been working on this through industry, but my understanding is that it has been pretty disappointing so far. I'm wondering what can be done to try to improve that in order to give our companies a leg-up in order that they can, first of all, compete here at home, can develop some economies of scale so that they can launch off into international business.

Mr. Eggleton: I couldn't tell you that I'm up to speed on that, although I follow it as much as I can. My colleague, the Minister of Industry, is moving that agenda along. We've moved it farther than it has been moved for a number of years. The agreement that we signed a couple of years ago was the biggest single advance that has been made in taking down trade barriers internally, within Canada, but there is a lot more to be done. He realizes that; all of us in the government realize that. We want to remove those barriers as quickly as possible, just like we've removed barriers in other countries. We need to do that in our own country as well.

Mr. Penson: But are you willing -

Mr. Eggleton: I think we all agree with that, and I think we're all out to accomplish that as quickly as we can. Of course, in terms of the provinces, we do have some partners at the table that we have to negotiate with, and it's taking its time.

Mr. Penson: The question I have is whether or not you are working with the Minister of Industry to try to bring that about. I think most people recognize that it is hurting our ability to compete internationally, especially for small and medium-sized enterprises. I guess my comment would be that I was told you would be working very closely with him to try to bring about those changes.

Mr. Eggleton: Yes, we are.

The Chairman: You don't represent a province that's as mercantilist in its view as you seem to be in terms of trade, in terms of wanting a surplus with everybody at all times.

Mr. Penson: I'm sorry, Mr. Chairman?

The Chairman: We don't want the provinces to adopt a mercantilist view of trade in the the way that some of the countries do.

Mr. Penson: No, but I think most of them realize it's in their best interests as well.

The Chairman: Yes.

.0950

Mr. Eggleton: Could I just add to that, Mr. Chairman? I think it's also important that all of us get the business community to bring pressure about. Let's get the business organizations and individual businesses in this country to put pressure on us and on the provincial governments to move this agenda. I think that would be most helpful.

The Chairman: Thank you.

Mr. Eggleton: They are the ones who are going to benefit from this. Let's get them more engaged in this so that it's not just politicians talking to politicians. We're doing what we're doing here today and what we do in other areas of international trade for Canadian business, so let's get Canadian business more engaged.

The Chairman: Thank you.

Monsieur Dupuy.

Mr. Dupuy (Laval West): First of all, I wish to say how much I support this agreement. I think the team that negotiated it, including the minister, deserves congratulations. It's part of an enlightened strategy. I'm delighted to see that Canada is moving ahead of the United States in developing these relations with Latin America.

My first question relates to the characterization of this agreement by the minister as an interim agreement. I can see that if a free trade area of the Americas develops in a hemispheric agreement our bilateral agreement will eventually be subsumed into this larger agreement. But I want to feel quite sure that some of the provisions, such as the provisions concerning anti-dumping, would not be put on the negotiating table in the context of the broader negotiation of a Latin America free trade area, because these provisions are extremely important. They are, in a sense, a breakthrough and an excellent precedent, and it would be unfortunate if a more multilateral negotiation dealt them away. That's the topic of my first question.

My second question relates to the cultural exemption. We know that this cultural exemption does not provide protection against retaliation, and that's the weakness of it. But should we not, in dealing bilaterally with countries such as Chile, do with them what we've done on anti-dumping? That is, should we not try to negotiate bilaterally some sort of agreement with them that would protect us from retaliation? Obviously, between Canada and Chile the substantive issue of one culture overwhelming the other does not exist. Chile and other Latin American countries would likely be sensitive to our own cultural preoccupation. Why is it that we have not used this opportunity to try to develop precedents on culture that would provide some protection against retaliation?

Mr. Eggleton: On the first point, it is an interim agreement on the basis that we want this to be followed by the accession to NAFTA, and it will require some further negotiations to finalize that matter, even though we've of course tried to bring this interim agreement as close to NAFTA as we can. We've been using the NAFTA as a model so that it will make it a lot easier to do so when the time comes.

But if there are changes, like additional liberalization, as a result of the negotiations with the United States, then we want to make sure we take advantage of that as well. But it doesn't mean that the whole thing would be subsumed into NAFTA. There are provisions that we may still want to keep between our two countries even if we can't negotiate them into NAFTA. The anti-dumping measure is an example. As hard as we're going to try to get it accepted by NAFTA, it could still survive as a bilateral arrangement. So the things that are good, unique and different, the things we want to preserve, we can preserve bilaterally. And if we can get improvements, we will get those as well.

For example, they're having an examination of their financial services sector - we don't have a financial services component in here - because they're undergoing some modernization of their system, and that's going to take them about 15 months. Before the end of the decade, we have a provision to enter into further negotiations with them. However, if it comes in the context of the negotiations with all the NAFTA partners, with the United States at the table, then we would get the same improvements anybody else would get at that time.

.0955

About the cultural exemption, there are provisions here, in accordance with the theme of trade remedy reform, not to retaliate, not to carry out retaliation against each other. So there actually is a better provision than exists in NAFTA between Canada and Chile. We have that additional measure, which we don't currently have with the United States, which again we would like to put on the table and have some discussions about with them.

Mr. Dupuy: Would it be your intention in future bilateral negotiations in Latin America to try to make further improvements on the handling of cultural products? They are a class of products that certainly are not widgets. These bilateral negotiations may provide an opportunity, because these countries will be more sensitive than the United States, certainly, and some other countries to the concerns of Canada. They might actually share them.

Mr. Eggleton: I'm not averse to that at all. I would want to consult with the cultural sector, because remember, the cultural sector wanted the exemption. The provision in NAFTA now is something they felt strongly about, and in that form. If we are in any way going to change things to their advantage in terms of the promotion of Canadian cultural product, then of course there would have to be some further consultations. But I'm not averse to that.

The Chairman: Minister, since this issue of cultural exemption has come up twice, could you or one of the officials tell us which section in the agreement deals with this, where you say it provides for additional protection?

Mr. Keith Christie (Assistant Deputy Minister, Federal-Provincial Relations, Privy Council Office): Mr. Chairman, it's articles O.06 and O.07. Article 0.07 includes the definition of what is meant by ``cultural industry'', and that's the same as it is in the NAFTA. Article O.06 refers you to annex O.06, which provides the actual text.

The Chairman: It's the usual snakes-and-ladders problem with these agreements. Thank you very much.

Mrs. Gaffney.

Mrs. Gaffney (Nepean): I have a quick comment. I had occasion to sit next to the Chilean ambassador to the United Nations in New York a few months ago. I said, I love your Chilean wine, and I asked him, what do you think of our Canadian wine? He had never tasted it. So I'm really pleased to see they can get duty-free access to our Canadian wine down there. Make sure you get some of our Canadian wine.

Mr. Eggleton: I'm sure our embassy has it.

Mrs. Gaffney: The other thing is that we have a subcommittee of this committee called Sustainable Human Development. It's human rights, more or less.

The Chairman: You'll have to discuss that with our colleagues.

Mrs. Gaffney: I find that title very confusing.

Last week we had the European Council before us. The European Council have what I thought was a good idea. Within the European Council they have a tribunal, which is a committee travelling on human rights. There are countries within the European Council that do have abuses of human rights. The European Council sets the guidelines and they impose these guidelines on each other. They are monitoring each other.

Now that the free trade agreements are expanding...and I know discussions were centred on this with Mexico. I'm not familiar with Chile and their labour practices or whatever. Is there any thought to imposing some kind of agreement among the countries we are adopting agreements with that we could maybe impose some kind of agreement on each other on human rights or labour practices or whatever?

.1000

Mr. Eggleton: The human rights situation in Chile, from our reading of it, has improved substantially over the past few years. We all know the difficulties in Chile's history, certainly in the last few years. They've gone through two free presidential elections. There's substantial reform in a number of areas that I think augur well in terms of human rights and the economic and social conditions for the people of Chile.

In this agreement, we have entered into the two side agreements in NAFTA, one on the environment and the other on labour. Labour issues, to a great extent, do involve human rights issues. So we have in this labour side agreement a commitment to promote 11 basic labour principles: industrial relations; employee standards; occupational safety and health; cooperation, dialogue and comparative studies in a work program with respect to the matter of labour relations; and a series of mechanisms to resolve concerns or disputes that begin with cooperative consultations, proceed to comparative evaluations of practices, and that can culminate in formal dispute resolution procedures in specific circumstances, such as child labour, a minimum wage and occupational safety and health.

Child labour is certainly not as bad in Chile. If there is some of it, I don't know too much about that in terms of Chile specifically. My understanding is that some exists, but not as much as that which exists in many other countries.

So this side agreement, certainly with respect to many human rights issues, will give us an opportunity to dialogue and work with the Chileans to help bring about and encourage reforms to labour law and to be able to monitor the enforcement of these labour laws as they improve. So I think this side agreement on labour has given us an opportunity to participate in those issues to a much greater extent than that which we have with any other country outside of NAFTA.

The Chairman: Mr. Minister, surely it would be also accurate to say that as members of the Organisation of American States, of which both Chile and Canada are members, and the Inter-American Commission on Human Rights, we'd be actively involved in those other areas -

Mr. Eggleton: Oh, absolutely.

The Chairman: - in human rights issues with Chile. So the committee can be assured that this agreement really tends to supplement those areas more in the labour and economic fields, and so extends the scope of the human rights -

Mr. Eggleton: You're quite right. I was referring largely to the context of this bilateral agreement. But you're quite right that there are international forums in which we deal with these issues at all times. The United Nations Human Rights Commission and the International Labour Organisation are two examples.

Mrs. Gaffney: Thank you.

The Chairman: We have about one minute.

[Translation]

Mr. Paré (Louis-Hébert): Over the past 45 years Canada has built an international reputation because of its work in the areas of international development, peacekeeping and the defence of human rights.

Before your government came into office and despite your statements when in opposition - and by "you" I mean the Liberal Party - Canada's new foreign policy represents a 180-degree reversal from its previous position regarding human rights.

Your new dogma is that trade relations are the universal method of solving the problem of human rights and poverty in the world. Amnesty International has researched this question and found that Chile had human rights problems and also political prisoners. Is Canada really concerned about these issues as it negotiates free trade agreements, or this just rhetoric by the Minister of Foreign Affairs in his speeches on the international scene?

.1005

[English]

Mr. Eggleton: Well, I would welcome any further information that you have about political prisoners. We don't have such information, other than that there are a couple from the old Pinochet regime who might be still incarcerated.

On human rights, we've done nothing less than strengthen the government's commitment to human rights in the time that we have been in office. In bilateral discussions, I raise them quite frequently with countries when we have real evidence with respect to human rights violations. And as was indicated in the last little dialogue between the chair and myself, they're raised in international forums as well.

So I don't understand the preamble to your question, and I don't agree with the preamble to your question. We will certainly continue to advance our human rights interests, both on a bilateral and a multilateral basis.

The Chairman: Thank you. I see it's 10:07 a.m., and I think you have to be in the House by ten past, Minister. You'll have to move quickly, but thank you very much for coming, sir.

I hope the officials will be able to stay in case there are technical questions that may arise as a result of the testimony from our other witnesses.

Mr. Eggleton: Thank you.

The Chairman: I would ask our other witnesses to step forward when the minister leaves the table. We have a long list of witnesses: the Federation of Agriculture, the Steel Producers Association, the Canada-Chile Chamber of Commerce, etc. We'll take a two-minute break while we're waiting for them. Thank you.

.1007

.1016

The Chairman: Order, please. We have a long list of witnesses, so the sooner we get going the better.

We have Mr. Wilkinson, from the Canadian Federation of Agriculture; Jean Van Loon, from the Canadian Steel Producers Association; José Duran and the Honourable Marc Lalonde, from the Canada-Chile Chamber of Commerce; Mr. Weese and Mr. Wilson, from General Electric Canada; Mr. Drake and Mr. Moore, from the Alliance of Manufacturers and Exporters Canada; and Mr. Pugh, from Prairie Pools.

Our order of reference is dated February 14, 1997. It's that Bill C-81, an act to implement the Canada-Chile Free Trade Agreement and related agreements, be read a second time and referred to the Standing Committee on Foreign Affairs and International Trade. That's the order from the House that authorizes us to conduct this hearing.

Perhaps we could start with the Federation of Agriculture, Mr. Wilkinson.

Mr. Jack Wilkinson (President, Canadian Federation of Agriculture): Thank you.

The Canadian Federation of Agriculture is an umbrella group of farm organizations. It represents the provincial farm organizations, a host of national commodity associations, and the major cooperatives, such as Prairie Pools and Coopérative fédérée in Quebec. Our comments will be broadly based, because we're trying to represent horticulture interests all the way through to grain exporting to supply management and others. Obviously Gordon will be going into more detail in relation to grains on the prairies.

The Chairman: Do you represent finished products such as wine as well?

Mr. Wilkinson: No, we just drink them. We represent the producers, not the manufacturers.

The Chairman: I see. By virtue of that do you have some special access to the products?

Mr. Wilkinson: No, we get no special deals.

.1020

The Chairman: Okay.

Mr. Wilkinson: In general, under the right set of circumstances, we're in favour of - and have been in favour of - expanding a trade regime. With the small domestic market that we have in Canada, many agricultural products depend very highly on exports. Generally, we are looking at a fair trade expansion deal with numerous countries as a positive theme, but as well we very clearly have some sectors within Canada that have historically situated themselves to serve the domestic market and gave up certain rights to do that. Therefore, we are obligated to and will continue to very forcefully support their interests.

Also, I think it is fair to say that horticulture in Canada is a commodity that has been hit very heavily under a number of the trade deals with Canada and the U.S., and hurt further by deals with Mexico. Obviously there are some concerns about Chile because of our climate, our high cost of labour and a host of regimes within Canada. Horticulture production is always very difficult, what with some of the international competition as tariffs continue to fall. Horticulture, by the sheer nature of the perishability of the product, is often subject to third-party countries dumping product in, because you either move it or lose it. Sell it or smell it, as the horticulture people say. That type of market therefore needs to have a certain amount of protection or producers can risk suffering a great deal.

That is the backdrop for going through a number of items.

In the middle of page 1 there are a couple of points we would like to put on the record. It's clear that it will take 17 years to eliminate some of Chile's agriculture tariffs. Chile retains the right until 2003 to use export subsidies on agricultural products covered by 83 different tariff lines. Chile also retains the right to continue their price band system - minimum import price levies - for agricultural products covered by 31 tariff lines.

Our point is that by reading the briefs from Agriculture Canada and from others, one could get the impression that the market is opening up. But we would like to put this on record: there is still quite a degree of protection being offered to Chile in a number of its sensitive areas, not only in the relationship of supply management, where they continue to have the tariff protection similar to what was granted to Canada, which we're in favour of, but also in their ability to maintain protection in a number of other areas.

When it comes to anti-dumping - and I think this is the major point of our presentation - I want to make it very clear that we are in favour of putting some disciplines on the use of anti-dumping, because it has caused problems, from a Canadian point of view, in trading with other countries. We thought it was inappropriate to move to the elimination of anti-dumping in the Canada-Chile agreement even though we know it's a long-term government policy. We feel it's absolutely inappropriate until you put other measures in place.

Look at New Zealand and Australia. They have a history of trade agreements back to 1920. It was only in 1988, with the comprehensive review of competition policy and of similar trade laws, that they chose to remove anti-dumping. There was a long history, a similar legal system and a lot of work in their competition policy.

We view having only the remedy of safeguards under NAFTA as ineffective in relationship to horticulture and other agricultural commodities. It's too slow. By the time the process is over, the damage is done. We have major concerns about the removal of anti-dumping. Even though it's not a problem for many of our commodities, it still is a very major problem, in our opinion, for long-term government policy.

And to think that by doing a bilateral agreement with Chile you're somehow magically going to bring the U.S. to its knees around the table of the NAFTA agreement on anti-dumping... I think somebody has to be dreaming in technicolour or was out in Vancouver at the hemp convention -

Voices: Oh, oh!

Mr. Wilkinson: - because there is just no way. The trade people from the U.S. have made it absolutely clear that they have no intention of moving to the elimination of anti-dumping and will refuse at every opportunity to do so.

I will move right to our three basic points at the end of the presentation to try to deal with them in time.

We recommend that chapter M of the agreement be changed so that a working group is established to study anti-dumping issues, and we recommend that the anti-dumping measure not be eliminated until we have dealt comprehensively with the protection still needed by many of our commodities in relationship to anti-dumping. It is very seldom used, but when it has been used it's been an effective tool for agriculture in protecting a sector.

.1025

Secondly - and Mr. Pugh may very well go into this in more detail - we do have a concern that when it came to the negotiations around grain, around market access, tariff reductions and what not, it wasn't part of the agreement. It is part and parcel in a letter that supposedly has strength in the sense that it does tie Chile into obligations and what not. But we think the committee should look at that ``letter''. We have a question as to why it's not part of the trade deal.

When you move to the NAFTA table with a side letter to this agreement, we're always worried and nervous when you start entering negotiations with the U.S. Apparently the letter does guarantee the same sort of access to Canada that would be offered if there was further access given to Argentina or the U.S. We think this committee should look at that letter and be very comfortable that the protection is there, that it's solid, it's binding. When we move into the discussions around NAFTA, there will then be no chance of a slippage that will in fact grant market access to the U.S. in these very important areas of grain exports, while cutting Canada out at the end of the time period.

Mr. Pugh can probably go further on that, but it's an issue we would like to see the committee look at.

The other issue is a recommendation to the Minister of International Trade to develop a position paper or statement that defines Canada's overall approach to trade policy development and negotiations. We have had a fairly long and busy run of signing trade deals - with Israel, with Chile coming in, with the NAFTA before that with Mexico. There has also been a lot of talk about what's going to happen in Asia over the next number of years. We think it's incumbent on the government to chart the course of where it sees, in some more detail, its goals and objectives globally, of what it's going to achieve.

From our point of view, you can get into a situation in which the signing of a host of bilaterals almost sets trade policy for you. If you haven't sat down and necessarily looked at where you want to go in the long run, you're basically doing this here and doing that there and whatever. After a decade, with ten or fifteen trade deals, you now have a trade policy that's obvious to everybody, but which maybe wasn't obvious to everyone before you started. So we think we should take this pause; it's time to reflect and work on overall trade policy.

There's one further step. A commitment was made by the Minister of International Trade and the Minister of Agriculture, on the time of elimination of anti-dump, that a special committee would be struck in the agricultural community, in the trade sector, to look at provisions in terms of new tools that could be given to the agriculture and other sectors to deal with this question of unfair, predatory pricing practices and dumping. As of yet, that committee has not been struck. It is sort of part of the number one recommendation, but it is our goal that this be looked at. We're very unsatisfied with the safeguard situation that now exists under NAFTA, and our view is that further remedy action has to be put in place.

Thank you very much.

The Chairman: Thank you, Mr. Wilkinson. We have your brief as well, and we appreciate that.

You mentioned Mr. Pugh from Prairie Pools. I had him down as sixth on the list here, but perhaps since you mentioned him and agriculture, maybe it would be appropriate for him to go next, and then I'll go to the Canadian Steel Producers.

Mr. Gordon Pugh (Manager, National Affairs, Prairie Pools Inc.): Certainly. We'll stay in the same field, as it were.

Thank you for the invitation to participate in this panel. We appreciate the opportunity to share with you our views on the Canada-Chile Free Trade Agreement.

Prairie Pools Inc. is the government relations arm of Alberta Wheat Pool, Saskatchewan Wheat Pool, Manitoba Pool Elevators, and for the pools' subsidiary companies. The pools are Canada's largest grain-handling companies. Together we have over 100,000 member-owners, and we employ more than 5,000 Canadians. Close to 60% of the grains, oilseeds, and special crops delivered to country elevators in Canada move through pool facilities.

Through our jointly owned company, XCAN Grain Pool Ltd., the pools are Canada's largest exporters of oilseeds and special crops. Individually and through XCAN Grain Pool Ltd., the pools act as agents for the Canadian Wheat Board to export prairie wheat and barley.

Almost without exception, prairie agriculture produces more than can be consumed within Canada. Prairie agriculture in general, and the prairie grains and oilseeds industry in particular, therefore rely heavily on exports. As a consequence, we endorse any governmental initiative that expands international market opportunities for prairie agriculture. For this reason, we wish to go on record as endorsing the Canada-Chile Free Trade Agreement.

.1030

Chile has not been a huge market for Canadian agriculture. In 1995, for example, Canada's total agrifood exports to Chile were about $77 million. However, virtually all these exports originated from western Canada and three-quarters of the 1995 total was wheat or durum produced on the prairies, and a further 10% was made up of lentils, peas, and other pulse crops, also produced on the prairies.

Moreover, these exports have increased in recent years, more or less in line with the acceleration of Chilean economic growth. For example, before 1990 we exported no wheat or durum to Chile, and in several years since then exports have exceeded 300,000 tonnes. Given Chile's bright economic growth prospects, we are confident of further market growth over time. I would just add that the pools have been significant exporters, through our jointly owned export company, of grain and oilseed products to Chile, both on our own and as agents of the Canadian Wheat Board.

I would now like to mention several specific provisions of this agreement related to the grains and oilseeds sector, first special crops, or pulse crops.

Chile will accord immediate duty-free access for lentils, white pea beans, other beans, canary seed, and so on. For other crops, such as mustard seed and dry peas, there will be a phase-in to duty-free access over a period. This provision will be of immediate and significant value both to prairie agriculture generally and to the pools specifically.

Canada has dominated the Chilean market for these commodities in recent years. Our export company, XCAN Grain Pool Ltd., has been a major player, and in some years the major player, in the market. These provisions should permit us to continue that domination, and because of the tariff elimination net returns to prairie producers should increase.

Now, on wheat, first of all I'll mention durum wheat. Effective immediately, durum wheat will be granted duty-free entry for shipments made between April 15 and November 15 of any year. Duty-free entry for the remaining portion of the year will be phased in over five years.

Canada has been the exclusive supplier of durum wheat to Chile for the last few years, with exports averaging above 100,000 tonnes, making it our fifth or sixth largest durum wheat market, depending on the year. We expect this situation to continue. Not achieving duty-free entry immediately during the November-to-April period should not be a serious handicap, since most sales have been made during the April-to-November period anyway. In any event, the Canadian Wheat Board has not had a problem at all in making sales at current tariff levels.

As far as milling wheat is concerned, in principle the duty on milling wheat is not phased out until Year 17 of the agreement. However, Canada will be automatically granted, or we've been told it will be automatically granted, any improved access Chile might provide to either the U.S. or Argentina as a result of any negotiations with either country. There will also be an opportunity to renegotiate this provision in eight years.

Of course we would have preferred that the phase-in period of duty-free access be more rapid than that provided for. However, this agreement does two things. It preserves our competitive position in Chile relative to Argentina, since it parallels the access Chile accorded Argentina in the MERCOSUR agreement, and it improves our position relative to that of the European Union and the United States.

We are also pleased with the provision that Canada will be granted any improved access Chile might provide to either the U.S. or Argentina. This would prevent the U.S., for example, from achieving any competitive advantage in negotiations they might initiate to bring Chile into NAFTA.

As Mr. Wilkinson said in his presentation, we have been told this particular provision exists, i.e., that on wheat we will achieve the same terms of access as the U.S. or Argentina might achieve over the next few years and that we would receive it immediately. We would like to see that on paper. We have just had verbal assurances of that, and it's not in the agreement specifically.

As for oilseed and oilseed products, Chile's current tariff of 11% on canola and other oilseeds will immediately drop to 6% and then be phased out over seven years. Chile will open a 3,000-tonne duty-free quota for canola oil in 1997, which will rise to 5,000 tonnes in 1998. The over-quota tariff of 11% will be phased out over 10 years.

.1035

Canada has not been supplying any significant volumes of either oilseeds or vegetable oil to Chile. Our affiliated oilseed crushing company, however, CanAmera Foods, has indicated that they will actively investigate any market opportunity this agreement may present, if it is the case that it does.

On barley and barley products, Chile will accord immediate duty-free entry for those. Duty-free entry for corn will be phased in over ten years. This provision may well open market opportunities for both malt barley and barley malt. With regard to malt barley, the elimination of the duty will improve our competitive position relative to the highly subsidized European product. We will be investigating market opportunities for both these products.

In conclusion, we reiterate that we endorse any government initiative that expands international market opportunities for prairie agriculture. The Canada-Chile Free Trade Agreement provides an expansion of market opportunities, and we therefore endorse it.

Thank you.

The Chairman: Thank you, Mr. Pugh.

I'll go back then to Jean Van Loon from the Canadian Steel Producers Association. Welcome back to the committee, Ms Van Loon.

Ms Jean Van Loon (President, Canadian Steel Producers Association): Good morning. Thank you very much for the invitation to be here this morning.

With me is Derek de Korte, who is manager of marketing for Algoma Steel and a very active member of our trade committee.

Our organization represents all of Canada's primary steel producers. That's a significant industry, with $11 billion in sales and more than 33,000 employees in six provinces.

To summarize where we're coming from, like the agricultural people, we support the expansion of trade arrangements, because more open trade leads to economic growth, which stimulates demand for steel. So we see that as a good thing in general. Like the agricultural people, we recognize that this has to be done with your eyes open, because in a number of countries there are domestic arrangements that make it impossible to compete fairly in certain circumstances.

The Chile agreement itself is not of a great significance for our industry. Look at the back of the presentation I prepared for people today. There is very little steel trade between Canada and Chile at the moment. For geographical reasons, we don't expect that to grow hugely.

What is of interest for us is the anti-dumping exemption. In a nutshell, our position is that this is exactly what we'd like to see with the United States. It's okay to have it with Chile, because we don't think it will have that much of an impact, but we would not like to see it applied as a general principle to broader negotiations with a wider range of countries.

In order to dramatize that, we understand that this is the intention of the government. We would like to make sure that's clear by proposing a slight wording change to the bill. But before we come to that, I just would like to explain a bit of why our industry sees the issue this way.

Our industry is one in which there is an excess of production over consumption in most regions of the world. North America is the exception: Canada, the U.S. and Mexico. If you look at the chart at the back of your package, I have put together a little piece of evidence on that point. Put that together with the fact that the technology of steel is such that there's a strong commercial incentive to keep producing at top volumes, and you have a situation in which there's a push on many producers to export excess production. They want to export it to faraway countries, so if there's any downward pressure on prices it won't be felt on the domestic market, but far away.

If you look at the Canadian-U.S. trading relationship, you can see why you can't do that. There are so many commercial ties that if a Canadian producer tried to get rid of excess supply in the U.S. at a dumped price, the customers would know in about five minutes. They would then buy their Canadian steel in the States and ship it back. There are no barriers of distance or information to prevent that.

Essentially, the farther away you get from Canada-U.S. trading relationships, the more potential there is for damaging dumping. That's why we wouldn't like to see this model applied for the FTAA, for example, or the APEC agreement.

.1040

Essentially, we are supportive of the bill, but we would like to see clause 89 modified. Instead of reading that the Governor in Council is authorized to strike an agreement for mutual exemption with any country, have the wording say that the Governor in Council is authorized to do that with Chile, the United States, or Mexico. We think that would be consistent with what we understand the government's intention to be. It would just make it perfectly clear.

Thank you very much.

The Chairman: That is clause 89, which amends section 14 of the Special Import Measures Act.

Ms Van Loon: That's right.

The Chairman: Okay. We'll have a look at that. Thank you. Thank you very much, Ms Van Loon.

I'd like to go to Marc Lalonde of the Canada-Chile Chamber of Commerce.

[Translation]

The Honourable Marc Lalonde (Chairman of the Board, Canada-Chile Chamber of Commerce): Mr. Chairman, members of the committee, I am here as a representative of the Canada-Chile Chamber of Commerce. I am Chairman of the Board. I am accompanied by Mr. José Duran, who is Chair of the Administration Board.

The Chamber of Commerce was created in 1995 following the January 1995 Canadian trade mission to Chile headed by the Prime Minister. Today, the Chamber has chapters in Montreal, Quebec City and Vancouver, and is working actively to set up new chapters in Toronto and Ottawa.

The Chamber already has a membership of over 130 businesses. Obviously, it is involved in promoting a wide variety of links between Canada and Chile. It organized and took part in a symposium in Santiago and Valparaiso last year. It participated in the symposium held in Toronto on the occasion of the visit of President Frei. It organized seminars in Montreal and Quebec City in January 1997 and was involved in various other events to develop economic and cultural relations between Canada and Chile.

Clearly, the Chamber wholeheartedly supports the agreement before you. Reference was made earlier this morning to the importance of economic relations between Canada and Chile, even without this agreement. The committee was told that Canada was the second largest investor in Chile, after the United States, and that last year Canadian exports there amounted to approximately $666 million. It should perhaps be noted that Canada enjoys a surplus with Chile, to the tune of $109 million in 1995.

In addition, it should also be noted that the growth in economic relations between our two countries in recent years has accelerated. At the end of the Pinochet regime in 1990, total Canadian investments in Chile amounted to $60 million. In 1997, the total has grown to over $8 billion. In the space of six years, Canadian investments have increased from 60 million to $8 billion.

During the first six months of 1996 Canada's trade with Chile has grown by 9.2% over the corresponding period in 1995. In 1995 the figure was 23% higher than 1994, and in 1994, 47% higher than in 1993. There is every reason to believe that the Free Trade Agreement will further speed up trade and investment between our two countries.

The 11% reduction for the vast majority of manufactured goods is a major part of this agreement, and it should be remembered that 85% of our trade will be duty-free after the agreement is ratified on June 2, 1997.

.1045

The priority areas for Canada are well-known. First, there is mining. Over 35 Canadian companies are already working in Chile, accounting for approximately 70% of all our investments there. There is also the energy sector, where the Calgary-based company Novacorp is currently involved in a major investment to build a pipeline between Argentina and Chile. There are other projects also being discussed.

Third, there is the area of telecommunications, where companies such as SR Telecom from Montreal, Newbridge from Ottawa and Nortel are very active at the present time. Nortel recently signed a contract worth approximately $250 million with a Chilean company.

Fourth and finally, there is the service sector. There are already four Canadian banks operating in Chile. In the area of professional services, it should perhaps be noted that a company such as SNC-Lavalin, which did not have one single employee there three years ago, today has 300.

We believe that this agreement will give Canadian companies a priority and advantage over European and particularly American companies, at least for a few years. We believe that it is very important that the agreement be approved and Canadian companies be able to benefit as quickly as possible from the comparative advantages available to them during this interim period. The Canada-Chile Chamber of Commerce obviously undertakes to encourage Canadian companies to become more familiar with the situation in Chile.

I mentioned the need to speed up the development of our relations. We believe that this agreement should be approved because it is consistent with Canadian trade policy, which places great store on diversification of Canada's trading relationships.

Canada has a long tradition of supporting multilateralism, as recently evidenced by its contribution to the creation of the World Trade Organization. Our relations with the United States will remain important and inevitable. Trade with Chile may seem small in comparison with the United States, which amounts to $1 billion a day whereas it is still only $666 million a year in the case of Chile.

We believe that the achievement of this agreement has both a symbolic and real value, as does the accession of Mexico to the NAFTA. We hope that this agreement is just a first stage in Chile's accession to the NAFTA.

We also believe that this agreement will be important in helping Canadian companies to become more familiar with South American markets through their knowledge of Chile. You are aware of the MERCOSUR complementary agreement, signed by Chile and covering Argentina, Brazil, Uruguay and Paraguay. The presence of Canadian companies in Chile will enable them to extend their links with the MERCOSUR countries and their contacts with other South American countries. It will also enable them to acquire valuable experience in doing business in South America.

In conclusion, it is obvious that this agreement is consistent with the objective of a Free Trade Area of the Americas by the year 2005. For the moment, we will have to wait and see what happens in that regard. We believe that it is very much in Canada's interest to proceed as quickly as possibly to ratifying this agreement.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Lalonde.

Mr. Duran, would you like to add something?

Mr. José Duran (President of the Administrative Board, Canada-Chile Chamber of Commerce): I would like to thank the committee for inviting me to participate in this meeting. As Mr. Lalonde and others have pointed out, this is a very important agreement for Canadian companies. There are many interests involved. We see this at the Chamber and we receive transfer applications every day from people wishing to go there as well as requests for information about Chile. I believe this is important for the development of free trade.

.1050

The Chairman: Thank you very much.

[English]

Mr. Drake.

Mr. Mark Drake (Senior Vice-President, Alliance of Manufacturers and Exporters Canada): Thank you very much, Mr. Chairman. We do have a real live exporter with us today,Mr. Weese, and I'll pass the bat on to him in a moment, if I may, but I wanted to make just one or two very quick introductory remarks.

Once again, I thank you very much for allowing the alliance to come before you. We're used to coming before this committee, and we welcome the opportunity. Previously Jim Moore and I have come usually representing the Canadian Exporters Association.

Just for the benefit of members of your committee, I would like to mention that we merged with the Canadian Manufacturers' Association just nine or ten months ago to create a much larger organization, which represents about 3,500 enterprises right across Canada, large and small. ``Alliance of Manufacturers and Exporters Canada'' is our full name.

Let me say I've had a lot of my thunder stolen not only by the minister, which is a great compliment, of course, but also by the previous speakers. We are very much a supporter of opening market opportunities presented by balanced free trade agreements. We're very encouraged that this should be a first step, this Chile-Canada agreement, towards the western hemisphere free trade area Mr. Lalonde mentioned a moment ago.

The minister mentioned this morning that this will give us a head start over the U.S., and we support that. We think the U.S. is likely to have fast-track negotiating authority shortly - that is what the rumour mill tells us - so let's use this time while we have the bilateral.

Many previous speakers have mentioned that exports to Chile have in fact doubled over the last five years. Among our members there's a lot of interest in this particular market in terms of exports and of course investment. We have taken four trade missions to Santiago and welcomed similar Chilean businesses to Canada in the last eighteen months or so. Over 130 meetings have been held with local prospective partners during these missions. Feedback has been very good.

The minister mentioned we have a cooperation agreement with the Sociedad de Fomento Fabril. I'm not sure my accent is any better than the minister's. SOFOFA, let's call it. This is a big organization, founded in 1883, with 2,500 enterprises, mostly manufacturing. It represents 80% of Chile's industrial GNP. So we're very pleased to have this agreement.

A couple other points about the interest in this market in support of the agreement. In the eighteen months since Prime Minister Chrétien went down there, our embassy's commercial offices have received 2,800 business visitors and have serviced over 4,000 inquiries. I think this demonstrates a very strong interest in the market.

In December last year 170 business people, including the alliance, participated in Expo '96 in Santiago. Tracking sales afterwards is always difficult, but the numbers we have are over $122 million in sales as a result of that exhibition.

Other speakers have also mentioned the other exports into the MERCOSUR area and the fact that the removal of the 11% duty that Chile levies on most of our imports will give us an advantage over the other suppliers. Equal access to Argentina and Brazil again was mentioned by other speakers.

I will mention investment only briefly. Mr. Lalonde mentioned that we have $7 billion or$8 billion invested. That's an exciting number, and again it demonstrates the Canadian interest in that market, whether it's in the mining sector, forestry, energy, or others. The Canada-Chile FTA will help secure this investment with protection rights and will encourage more.

I think if there is a little disappointment, it's with the continuation of the Chilean central bank reserve requirement on foreign direct investment. However, the conditions under which this will be applied are significantly improved by the agreement. The fact that this is an interim arrangement and it will be revisited in the future means it's going to be high on the agenda. We don't consider this a major impediment.

.1055

We've stressed the head start that this agreement gives us over the American friends, given the likelihood of the fast track I mentioned earlier, but I think, Mr. Chairman, that we have to move fast on this agreement, and we have to take advantage of the lead we have over the States. The alliance certainly urges your support for this process.

[Translation]

I am sorry that my presentation was only in English. I intended to do part of it in French, but because of time restraints I wanted to conclude quickly and therefore did it in English. In any event, we will be pleased to answer your questions in French.

[English]

With your permission, Mr. Chairman, right now I'd like to pass the microphone to Bob Weese from General Electric, one of the alliance members who has considerable experience in Chile.

The Chairman: Thank you very much, Mr. Drake.

Mr. Weese.

Mr. Bob Weese (Vice-President, Government and External Relations, General Electric Canada): Thank you.

The Chairman: I'm glad to know you're a real live exporter and not -

Mr. Weese: Yes. We're real live exporters.

The Chairman: I hope the other members of Mr. Drake's association are alive, too.

Voices: Oh, oh!

Mr. Drake: Yes, they're all alive. We're just a deadwood facilitator there. That's the difference.

Mr. Weese: Thank you, Mr. Chairman. I'm pleased to be here on behalf of GE Canada to support the alliance position and to support the Canada-Chile Free Trade Agreement, which is indeed very important to us.

I note as well that you've received a supportive brief from the Electro-Federation of Canada on behalf of its 200 or so members, of which we are one.

I'd like to introduce my colleague, John Wilson, who is now our government relations consultant in Ottawa. John is an electrical engineer and spent many years of his life working in Chile and in other exciting parts of the world on hydroelectric developments in the employ of GE Canada, of Acres Engineering before that, and before that of other equipment manufacturers who shall remain nameless.

To situate General Electric briefly, GE is a large diversified manufacturing, technology, and services company headquartered in Fairfield, Connecticut. It strives for global leadership in each of its twelve major businesses: lighting and appliances, medical systems, plastics, transportation systems, aircraft engines, broadcasting, electrodistribution and control, motors, industrial and power systems, information systems, and last but not least, GE Capital services.

GE's global revenues last year were $79 billion U.S., of which some 40% was earned outside the U.S., so it's become a truly global company.

GE has been in Canada for over 100 years and all of the GE businesses are now represented in Canada in one way or another. We have about a dozen manufacturing facilities across the country, 150 sales and services offices and 8,500 employees - mostly in Ontario and Quebec, but some in other parts of the country as well - and our revenues in Canada last year were $3.6 billion Canadian. Our exports from Canada last year were $630 million.

Over the last few years, two key features of our company's activity in Canada have been the rapid growth of GE Capital services in this market and the significant adjustment of our manufacturing operations here to respond to the opportunities that have flowed from free trade and globalization.

Most of our manufacturing plants in Canada now have product mandates of one sort or another and are producing for North American or global markets. Two of our businesses have full scope product mandates: our hydro business and our motors business. They serve global markets from a Canadian base.

Our hydro business, which is based in Lachine, Quebec, develops, designs, manufactures and exports hydraulic turbines and generators, up to the largest sizes in the world. That business grew up in Canada in response to requirements of Hydro-Québec, Ontario Hydro and other major utilities in Canada, but is now very active in China, in other markets in Asia and Chile, and in other parts of South America. It's a very exciting business, and now employs almost 700 people, most of them in the province of Quebec. Export sales of our hydro business represent about 80% of total sales of our hydro business and average around $200 million annually.

GE Motors, in Peterborough, Ontario, designs, develops, manufactures and exports large electric motors to all parts of the world. It employs about 1,000 people in Peterborough and has sales offices in other parts of the country. Again, export sales represent now something like 75% of the total sales from our Peterborough General Motors plant and average around $100 million annually.

.1100

Both the hydro business and the motors business have very significant market opportunities in Chile. Members of the committee will probably know the physical characteristics of Chile better than I. It's a long strip of a country, some 2,700 miles from north to south, between the Andes Mountains and the Pacific Ocean. Out of those snow-capped mountains rivers run down to the sea, and those rivers have a very significant hydroelectric potential, which we and other countries are aggressively trying to develop.

Of course there are also significant resource industries in Chile - we've heard about that already this morning - mining, forestry, pulp and paper. Those industries use large motors of the sorts that are manufactured in our Peterborough plant. So Chile is a very exciting market for both GE Hydro and GE Motors.

GE Hydro recently obtained an order for two large generators for the Panguay hydroelectric project in Chile. That order was valued at $25 million and was financed by Canada's Export Development Corporation. It was won against strong international competition from Europe and Japan. I'm pleased to say the first of the two units in Panguay was commissioned ahead of schedule and the customer is very happy with the service he has had.

The order before Panguay, the major hydro project before Panguay, went to Sulzer of Switzerland and Ansaldo of Italy on the basis of their lower price. As in other parts of the world, the hydro market is exceedingly competitive. It's exceedingly competitive on the basis of technology and price.

Right at this very moment GE Hydro is preparing to bid on three turbine generator sets for the next major project in Chile, the RALCO project. Bids are due in the second half of 1997. Again, strong competition is anticipated.

So for us, as it happens, the timing of the Canada-Chile Free Trade Agreement and the benefit of the tariff reduction, which will happen immediately for our hydro turbines and generators, is going to be a very significant assist.

GE Motors recently obtained an order for eight large synchronous motors and auxiliary equipment to be designed and manufactured in Peterborough and valued at approximately$17 million for the Collahuasi mining project, known as the ``project of the century''. Previous orders from 1993 to 1996 have exceeded $21 million, mainly for the mining industry.

I should add in parenthesis here, because I know members of the committee are interested in this, that when our hydro business, for instance, wins a large project in China or Chile or other places, it typically takes with it on that project dozens and sometimes hundreds of small and medium-size Canadian companies with whom we work and develop relationships. Jean Van Loon will know also that a lot of those exports include a large proportion of her steel, so we work closely with her members as well.

These examples I hope will demonstrate that Chile is a significant and growing market for GE Canada. We have shown we can be successful, but the competition, particularly from Europe and Japan, for major items of electrical equipment is strong and unrelenting, and many of our competitors have been established in Chile for many, many years. The Canada-Chile Free Trade Agreement, when it comes into force, will give us a clear and immediate advantage for a number of years. It will help to strengthen our foothold in this growing market, where among well-established manufacturers, all offering equipment of high quality, price is often the deciding factor.

We can't be complacent. That advantage is going to be temporary; we realize that. But it will give us a chance - and I think it's designed to do this, frankly - for Canadian companies to get established in that market and it will allow us to be successful in the long term.

The Chairman: Thank you, sir.

Maybe I could ask for two quick clarifications on what you said on two issues that have come up before this committee regularly. First, you mentioned the loss of a contract in Chile earlier to a Swiss and Italian consortium in the hydro business. You mentioned it was lost on price. Was the price lower because of financing terms or because of straight price? This is an EDC financing issue, which we deal with here on the committee all the time. I just wanted to know that.

.1105

Mr. Weese: If I might, Mr. Chairman, I'll ask my colleague to respond to that. I think he's probably closer to these details than I am.

The Chairman: I don't want a long response. If you can quickly...

Mr. John Wilson (Consultant, Government Relations, General Electric Canada): In that particular case, it was manufacturing. It was not the EDC being uncompetitive.

The Chairman: Okay, it was not a financing issue. Thank you.

Secondly, you mentioned exports from Peterborough at $100 million. Is that largely to the United States? Would it be fair to assume that would be about 80% to the U.S.?

Mr. Weese: Largely, but the large customized motors are sold around the world for big mining, pulp and paper, and other resource projects, largely.

The Chairman: Thanks.

Members, that's the end of the panel. I'm going to suggest that we ask Mr. Carrière andMr. Christie to come join the panel at the table. Mr. Carrière will provide us with the department's legal view of the changes to clause 89 that Madam Van Loon referred to in her testimony. We can get that on the table, and if questions come up it will give everybody an opportunity to discuss it once all the members understand all positions on it. And Mr. Christie will address the issue of the side letter that was raised by Mr. Wilkinson.

Mr. Claude Carrière (Director, Tariffs and Market Access Division, Department of Foreign Affairs and International Trade): Thank you very much. I'll address the question raised by Mrs. Van Loon concerning clause 89 of the bill, proposing to amend section 14 of the Special Import Measures Act.

The Special Import Measures Act provides for the imposition of anti-dumping duties when Canadian producers are injured by goods exported to Canada at prices lower than those in the exporting country, and for the imposition or application of countervailing duties on products causing injury.

Chapter M of the Canada-Chile agreement requires that under certain circumstances the anti-dumping provisions of SIMA shall not apply to goods from Chile. Section 14 of SIMA already grants broad authority to the Governor in Council to exempt goods from the other provisions of the SIMA. Let me read section 14 as it currently exists in SIMA:

The Governor in Council may, on the recommendation of the Minister of Finance, make regulations exempting any goods or class of goods from the application of this Act.

To preclude any uncertainty about whether or not goods of a specific country would fall within the meaning of ``any goods or class of goods'' in section 14 of SIMA, it was considered necessary by our legal advisers in the justice department and by the legislative drafters to clarify the existing broad exemption-granting authority in that section. For example, if we were to replace ``from any country'' with ``Chile, the United States, or Mexico'', the effect would be to narrow the existing authority in section 14. I know that's counter-intuitive, but in proceeding with the omnibus legislation, we are precluded from modifying the existing provisions. We can only introduce elements necessary to implement the agreement. If we were to specify Chile, the United States, and Mexico, we would be reducing the existing scope in section 14.

We understand and have heard of certain concerns because of the counter-intuitive element of that section, and we would be prepared to make clear our intention in the statement of implementation that will be published at the time when the agreement enters into force on June 2. We could make clear that our intention is to negotiate such improvements to anti-dumping and eventually elimination in the context of NAFTA.

Mr. Graham, if there are further questions, we do have legal advice here.

The Chairman: Well, if that's the position, it's helpful to at least get that on the table for when questions come up on this issue, if members have any.

Mr. Christie, sir.

.1110

Mr. Christie: Thank you very much, Mr. Chairman.

Two witnesses raised a question related to certain undertakings by the Government of Chile in the negotiation with regard to future negotiations that Chile might undertake with some agricultural products. In particular the case of milling wheat and wheat flour was raised.

I draw the attention of the committee and the witnesses to the Chilean tariff schedule, which is an integral part of the agreement. It includes a note.

This is really a two-part answer. The documentation is available for the committee, of course.

The first note on page 10 of the Chilean tariff schedule states -

The Chairman: Excuse me. I'm sorry to interrupt, Mr. Christie, but do the members of the committee have that in their materials?

Mr. Carrière: No, it's not in your materials, but it's available through the parliamentary distribution centre. And if they run out, we'll have more printed.

The Chairman: Oh, well, I'm sure it's on the Internet.

Mr. Carrière: Yes, it's also on the Internet.

The Chairman: Well, if you'll come to my office and show me how to push the buttons so I can find it, okay, but until you do that, I'll have to get the paper.

Some hon. members: Oh, oh!

The Chairman: Thanks.

Mr. Christie: Well, just very briefly, the note states that the commitment by Chile - and I'm translating from the Spanish - with regard to certain agricultural products, as has been established in a letter from the chief negotiator of Chile to the chief negotiator of Canada dated November 12, 1996, is incorporated into the Chilean tariff elimination list and forms an integral part of this agreement.

So the letter, which I'll now refer to, has been formally and completely incorporated into the binding legal obligations that Chile has undertaken as part of this agreement.

I'll summarize the letter, dated November 12. It states that if in any future negotiation between Chile and the MERCOSUR countries, Chile were to grant better access to what is then provided to Canada in the areas of milling wheat, wheat flour, oilseeds, and oilseed oils, that better treatment would be automatically extended to Canada.

In addition, with respect to the United States, the concern of course is what happens when we get into a NAFTA accession negotiation and whether it is likely or possible that the U.S. might get a better deal on some of these products. The insurance policy we have here extends again to milling wheat, wheat flour, oilseeds, and oilseed oils, and in addition to beef, pork, potato products, certain cereal products, and dried peas originating in the United States.

That is, if, as part of a NAFTA accession negotiation, the U.S. were to negotiate, as part of its own tariff deal, better access on any of these products, that better treatment would be, again without restriction, automatically extended to Canada.

If the document is not available, it certainly can be made available.

Mr. Speller: Why was that not put in the legislation?

Mr. Christie: Because of a certain preference on the part of the Chilean delegation in terms of the presentation of the overall package domestically, and we were sensitive to that concern.

The key point here, though, is that the letter is fully and completely incorporated into Chile's binding commitments under the agreement. There is no legal question of that whatsoever.

The Chairman: If I could summarize for the members of the committee, it's a sort of most-favoured nation treatment of that issue anyway, so it would be consistent with the general principles of the way the agreement would apply.

Mr. Christie: Yes, that's correct.

The Chairman: Okay.

Mr. Sauvageau wanted to ask a quick question about that issue as well.

[Translation]

Mr. Sauvageau: You said earlier, Mr. Carrière, that you would give in writing the legal opinion concerning the recommendation of the steel producers. Did I understand you correctly?

Mr. Carrière: I did not say that I would give it in writing, but if we are asked, we can do so without any problem.

Mr. Sauvageau: Could you also indicate to us why, in that same opinion, you added "from any country" in the English version? I am sure that you will do so, but I am asking you specifically because, as is the case with other committees, there are sometimes translation problems.

.1115

The French version reads: "provenant de tels pays". Does that have the same meaning?

Mr. Carrière: We will check, but I think that these are conventional expressions in legal documents and parliamentary usage. We will check that.

Mr. Sauvageau: Thank you.

The Chairman: Are you saying that it should be "n'importe quel pays"?

Mr. Sauvageau: It is because "from any country" should be translated by "de n'importe quel pays". Either it is the English expression "from any country" which is not clear, or it is the French expression "provenant de tels pays".

Mr. Dupuy: I have a question for Mr. Carrière on the same clause. If I understand correctly, our legal specialists considered that section 14 of the Special Import Measures Act was not very well drafted. They therefore are proposing the amendment you just read.

But why would this improvement to section 14 be carried out through the bill before us rather than through a bill amending the Special Import Measures Act, since the government intends to make a series of amendments to the said Act? Why would this improvement to section 14 be carried out through an agreement with Chile?

Mr. Carrière: It is not an improvement. If we were making an improvement, the clause would be drafted differently. Our intention is to extend the antidumping exemption to Chile only because we are implementing a Canada-Chile free trade agreement. Given that section 14 was drafted in such a way that its scope was very broad, by specifying the countries, namely Chile or Chile-United States-Mexico, the scope of section 14 under the current legislation would be reduced. This is a legal matter. To the best of my knowledge, this bill cannot change the substance of another bill; it can only introduce what is needed to implement the agreement.

We are in a dilemma because we cannot reduce the scope of the present section, but we must give the government the power to exempt products made in Chile from antidumping measures in certain conditions. In the declaration of implementation to be published in The Gazette in June, we can specify that the intention of the clause is to implement the agreement with Chile and not go any further.

Mr. Dupuy: Therefore, this would not rule out further amendments to section 14 so as to improve the wording, as might be proposed in a subsequent debate.

Mr. Carrière: In another bill. Exactly.

Mr. Dupuy: Thank you.

The Chairman: [Inaudible] ... of your committee.

Mr. Dupuy: That was my concern.

Mr. Carrière: We are trying to make a distinction between things.

The Chairman: We have all become experts in this area since the subcommittee has done its work. We have all become legal specialists. That is dangerous, isn't it Mr. Sauvageau?

Mr. Sauvageau: Did you use the expression "from any country" in order to make things clearer?

Mr. Carrière: To be specific and to ensure that the words which were already there - goods or class of goods - could include the products of a specific country. Some people could have maintained they did not. We therefore wanted to indicate clearly that they did.

Mr. Sauvageau: I see.

.1120

[English]

The Chairman: Mr. Speller is requesting a copy of section 14 as it presently reads, which would be helpful, I think. I'll just quickly read it for the members:

The Governor in Council may, on the recommendation of the Minister of Finance, make regulations exempting any goods or class of goods from the application of this Act.

Mr. Speller: What page are you on?

The Chairman: We are on page 63a of Bill C-81.

Mr. Speller: Is that section 14 of the Special Import Measures Act?

The Chairman: I just read you section 14.

Mr. Speller: Is that what it says now?

The Chairman: That's what it currently says.

We'll leave this legal issue, then, and we'll get an opportunity to ask questions of the witnesses, and we can come back to it. I'll just draw the attention of the members to the fact that we've all agreed that given the nature of the issue that's been raised, perhaps we'll put off clause by clause until March 3, 1997. Everyone has agreed that we can do it in the afternoon. It will give us an opportunity to reflect on these issues.

I'll just ask Mr. Carrière for a clarification following Mr. Dupuy's comments. It seems to me that section 14 as it currently reads would give the Governor in Council the opportunity to make a blanket order saying that all goods from Chile will not be subject to the anti-dumping or countervailing duty provisions under SIMA. What have you accomplished with the amendment that isn't already available to the Governor in Council under this section?

Mr. Carrière: I will turn to Mr. Hermosa, from the Departments of Justice and Finance.

Mr. Dan Hermosa (Legal Counsel, Department of Finance): Mr. Chairman, as you noted, the key phrase is ``any goods or class of goods''. There have been legal arguments to suggest that phrase does not include a class of goods from a particular country or goods from a particular country. And in order to eliminate any possibility that argument could be used in connection with the regulatory authority of the future regulation we'll be issuing, we wanted to ensure that we eliminated that argument.

The Chairman: As I understand it, what you're telling the committee is that if you were to make an order, say, with respect to... We won't say steel, Mrs. Van Loon or anything that anybody here represents...pick a product! If you were to make an order with respect to widgets coming from Chile or with respect to all goods from Chile, someone might say that he's bringing in widgets from Romania and that we've exempted them - it's a class of goods. You don't have the power to do that. Or someone might object to that on the grounds that the power could extend to a good or a class of goods, but couldn't extend to a good or a class of goods coming from a specific country.

Mr. Hermosa: That's right. We wanted to eliminate that issue and that's why we wanted to include the phrase.

The Chairman: So this would then enable the Governor in Council specifically... As I understand it, you're telling the committee that in fact this goes to the sense of Mrs. Van Loon's observations because it guarantees that this will be applied to Chile and not to other countries. That is the intention of what you're trying to do.

Mr. Hermosa: Yes, that's right. Of course the other intention was that the current provision is unlimited in that it's not limited to a particular country. The cabinet authority didn't require us to limit the provision to particular countries, so we had to at the same time of course maintain the breadth of the provision, which is why we didn't target the provision to the specific country of Chile.

The Chairman: Also, there will a revision of SIMA coming up where this whole issue will possibly be revisited as a result of the report on SIMA that was given to the Minister of Finance and the Minister of Foreign Affairs. Is that correct?

Mr. Dupuy: Yes. The report is now before the government and it will be up to the government to decide whether they want to proceed with amendments to SIMA.

The Chairman: We will hear from Mr. Penson, again on this legal issue, and then Mr. Speller wants to come back for a question. I'm sorry about this whole situation.

Mr. Penson: I have a question for the departmental officials before us today. Mr. Dupuy jointly chaired a committee reviewing SIMA just recently and I was a part of that. Why wasn't this need to change section 14 of SIMA brought to our attention so it could have been part of our committee discussions?

Mr. Carrière: It was a question of time and the fact that we work on implementing this bill and only this bill and we attempt not to trespass on work that is undertaken elsewhere. I believe the SIMA work was done before we were actually producing this bill. This bill has been in production since December. It hasn't been in production for a long time.

.1125

Mr. Penson: Mr. Chairman, I would suggest the department officials must have known this was going to be a requirement that was needed for Chile and there needs to be a little closer cooperation in the future.

The Chairman: Mr. Speller.

Mr. Speller: I agree with Mr. Penson. I've listened very closely to both answers and they are two different answers from two different departments and I'm still not sure I understand.

The Chairman: We've never had that before. This is a first.

I'm glad you're raising it for our attention and flagging it for us, Mr. Speller.

Mr. Lalonde is smiling. I want the record to show that.

Mr. Speller: But I take it the finance department's answer is that it wasn't in there before and it needed to be clarified, so that's why it's in here now.

Mr. Hermosa: Yes, Mr. Chairman, that's true, although I would also like to indicate that from our understanding of what External Affairs and Finance have said, our answers are exactly the same. They don't vary in any way.

Mr. Speller: Yes, I assumed you would say that too.

The Chairman: Well, I think we've elaborated that issue.

[Translation]

Mr. Sauvageau, do you have any questions for our witnesses?

Mr. Sauvageau: No.

The Chairman: You have no more questions?

[English]

Mr. Penson, did you have any questions you would like to address?

Mr. Penson: I have a question for Mr. Wilkinson. It has to do with the issue he brought up about the seventeen-year phase-out of tariff on milling wheat.

I agree that's a problem. It seems to me we should be encouraging a faster phase-out of tariff for finished product, but I would just point out the contradiction we have with protecting supply-management products here at home and having other countries protect sensitive industries themselves. I'm just saying if we want protection in certain areas we have to expect that's going to be a factor from other parties. I suggest it would be in our interests all over Canada to phase out tariffs as quickly as possible, in concert with that done with other countries.

Mr. Wilkinson: I don't agree with you, obviously. Reciprocal action was given to the protection of similar supply-managed commodities in Canada as well as those identified in Chile. Reciprocity was already done there. This is an extension into other commodities.

Our point is still that with the anti-dump... I would like to use this opportunity to expand for a moment. Around the special import measures legislation, all sorts of groups came before that committee and were concerned about the elimination of anti-dump, which was obviously taking place at the same time as the negotiations. It was more or less leaking out that Canada was going to move in that direction with the bilateral with Chile. Group after group was concerned about that, if no other protection mechanism is put in place.

My sense is that is still a major concern for people in the expansion of overall trade policy. Clearly people have put quotations around it, to say in relation to Chile we don't see it as a big problem, but if this is an extension of Canada's trade policy, and clearly it has been spelled out that such is exactly the intent, that in any future trade negotiations anti-dump would be a provision that would be looked at elimination, then we have concerns.

What is in here is very weak. Some concessions were made by the government in the context of concerns by a number of people that if problems are created with dumping from Chile while they still maintain the right to use export programs, it should be reviewed before the tariff is eliminated. A lot of these tariffs are going to be eliminated in six years, in the five-year period when there is a review of what should be done about the anti-dump provision, if anything.

As we read it, there's no mechanism in there to do anything. There is a clause that basically states that in five years, before a particular tariff is eliminated, they should sit down and review anti-dump. To do what? There is no mechanism, as we understand it. In fact, if Chile said tough luck, we don't want to do anything about it, there isn't a process to deal with it.

If there is any problem there is only a process of consultation. Again, as we understand it anyway, there is no mechanism to deal with that. So if in fact there are problems with anti-dumping down the road, they will still exist. That's our major concern.

.1130

We still want the committee to look at that, because clearly the evidence shows a very great weakness in the NAFTA agreement on safeguards. We don't have competition policy that people think will necessarily work with Chile. It is a very big leap of faith to deal with that question, and to just eliminate anti-dumping and presume it won't be a problem with Chile is still a concern.

Mr. Penson: Mr. Chairman, I would like to follow up.

That doesn't really address my concern. As an umbrella group representing agriculture, surely you must recognize there are sectors of agriculture that would like to have faster trade liberalization, such as, in the grain sector, oilseed.

What I'm asking you is how that is possible when we treat agriculture as a category and we're asking for protection on one side, and yet certain sectors in the agriculture industry could benefit by having a very much faster reduction in trade, just as you pointed out with flour, in the wheat sector.

Mr. Wilkinson: There is no problem with this. This happens on any occasion when you have what was a legal GATT rule of exemption under article 11 in the old system as it moves to WTO, having to basically move to market access questions and tariffs. Because the system they had in place was forced to change, particular commodities, whether they be steel, lumber, culture, or supply management, are going to want a substantive time period to make adjustments.

Very clearly in our brief we have talked about those export interests that are members as well, where we will, on a reciprocating basis, do deals where you in fact agree to market access and rates of tariffs, the same as was done for the protection under supply management.

All we're suggesting here is that, from a Canadian point of view, we're quite willing to move to much lower levels of tariffs with wheat, cattle, and other products. We see that as a plus. If Chile refuses to move in that direction, so be it, but it was a reciprocating agreement on dairy and others with Chile. They maintain the same protection as Canada does.

You can't look at an entire agriculture sector, with all the commodities, and say they're going to be treated exactly the same in negotiations.

Mr. Penson: We've been at this session for quite a while, and I won't do that, Mr. Chairman, but...

Mr. Speller: Keep going.

The Chairman: May I ask if Chile is a member of the Cairns Group at the WTO?

A voice: Yes, they are.

The Chairman: Okay.

Mr. Penson: We'll continue this privately, Mr. Chairman. It's a problem and it points out the contradiction we have in trade by trying to protect certain areas and asking for speedier reduction in tariffs in others. I'll leave it at that.

The Chairman: A vast country sometimes produces contradictions when we're representing the national interest as opposed to regional interests.

Mr. Wilkinson: I prefer not view it as a contradiction. I rather like to look at it as a sophisticated agriculture trade policy.

Mr. Dupuy: I have a quick question.

I suppose our negotiators looked at the track records before moving into that deal. Have there been cases of dumping by Chile into Canada, and what is the likelihood of dumping taking place in the sector that is of particular concern to you?

Mr. Wilkinson: Yes, they did look at the track record, and I'm sure they can speak to it. They saw very little likelihood in the future of it being a problem in relationship to agriculture trade. Part of the logic is because of the different climates in relationship even to horticulture. Effectively, with the fresh market products, we are not bumping into each other in the same marketplace in the same time period.

But that is to assume the status quo and that is to assume to look back is the same as looking forward. There are areas of concern. There are concerns about apples and there are concerns if they move into processed vegetables, for example. There are concerns depending on what develops in Chile. In our opinion, it's unreasonable to look back and say because it didn't happen in the past, it won't happen in the future.

Secondly, it's an indication of long-term government policy. We're not talking specifically about Chile. We're putting very clearly on the record that government intends, at every opportunity, to eliminate anti-dump in any of its trade agreements from now on into the future. The question is whether that is appropriate.

Is it appropriate to remove anti-dump from a host of areas without any other measures to deal with those places where anti-dump was effective, to be used on a very narrow and selective basis? We're concerned about that, because there have been cases in the past, such as sugar and horticulture products in B.C. and whatever, in which people in the agricultural community used anti-dump because it was the only tool at their disposal. Safeguards wouldn't work.

.1135

So we're quite happy to sit down at the table to look at a measure to find a very narrow scalpel to deal with predatory pricing or dumping. We're just not willing to accept the notion that anti-dump is gone and that's it; we view this as a precedent that will be in every other trade deal. We think problems can and will exist in the future in which we'll be exposed.

The Chairman: Have you looked at the Competition Act? There are a couple of points perhaps that everybody around the panel should understand.

Mr. Dupuy is chairing a subcommittee on which Mr. Penson and Mr. Sauvageau sit. They were wrestling, in the broader picture, with these very issues you're raising today. I'm sure we can examine them in that subcommittee. There will be an opportunity, because this is the relationship between anti-dumping and competition law and we're trying to decide how we can better amend perhaps the Competition Act to deal with predatory pricing from foreign products and things like that.

I understand your evidence vis-à-vis Chile, at least at the moment, at this snapshot in time, is that this is not a serious problem, but more the philosophical thrust of where this is taking us. That is what's concerning the association.

Mr. Wilkinson: Yes, and we would identify that there are two or three products about which we currently have concerns. There are concerns over apples, tomato paste, and onions. It's not huge in global numbers, but there's obviously concern over where they are moving into processed vegetable products. Will they in fact then be competing in our market at the same time period down the road? Also, how do you deal with that question then if you've already signed the agreement?

I clearly won't go into detail here, but here's a little bit of detail on the New Zealand-Australia situation, where there's a very long history of trade. There's a much more similar legal situation and competition policy, yet even there it was a very long, sophisticated process to try to deal with that.

We would certainly at any time be interested in talking to the committee. We're just suggesting that you sort of hold up competition policy as the cure for getting rid of anti-dump. It almost looks like politics. It almost looks like saying not to bother with anti-dump because there's competition policy.

We're saying that we don't think that has been investigated very well vis-à-vis Chile and other countries that have had much different legal backgrounds and systems. We're not interested in buying a pig in a poke here. Prove to us ahead of time, before you eliminate anti-dump, that you can deal with this problem around competition policy. If you can convince us, we're quite happy to say that the job has been done. We aren't convinced yet.

Mr. Christie: Mr. Chairman, I'll provide some additional facts on the particular issues that have been raised by Mr. Wilkinson and others on the anti-dumping exemption. I have just two comments.

First, the fact of the matter is that Chile has had duty-free access for apples into the Canadian market for thirty years, and there has never been the slightest whiff of an anti-dumping action being taken against Chile. This is despite the fact that Chile has been a major exporter of apple products into northern South America and into the U.S. market during that period. That's because of the complementarity of the seasons, primarily.

When we negotiated the exemption, there was a continuing concern about the impact of anti-dumping potentially on some of our key export interests, particularly wheat, beef, pork and certain other products.

Traditionally, Chile has itself not used - this is from the exporters' point of view - anti-dumping very frequently. It's interesting to point out though that it did take an anti-dumping action against Argentinian wheat in the late 1980s.

Our concern is that as Chile fully implements its WTO obligations in the area of anti-dumping duties, it will be modernizing, as it's called, its anti-dumping system so that it looks a lot more like the American system. They are gearing up to use the system much more actively than they have in the past. That could bite us in areas of key commercial export interests. It could bite us badly.

What we've got under the anti-dumping exemption is in fact what neither the U.S. nor Argentina has. It seemed to us at the time that this provided better protection for some of our key export interests.

.1140

The Chairman: Our advice in this committee is that the Mexicans are following the American example too. So everybody follows the bad American example. That's why Ms Van Loon keeps trying to get us to beat them down.

Mr. Flis.

Mr. Flis (Parkdale - High Park): My questions are also to the Canadian Federation of Agriculture. They presented three recommendations to the committee. I want to refer to the second one, in which you say to review the Chilean commitment to pass on to Canada any improved access for milling wheat that is granted to Canada's competitors and ask the government to take whatever steps are necessary to maximize the likelihood that Chile will honour that commitment. You went on to say also that we've exported $77 million of prairie crops in 1995.

I have just a couple of questions. First, what is the potential of those prairie crops to Chile within the next few years?

Second, is the blockage from not having access to the Chilean markets or is it the transportation problems? I'm hearing about the grain sitting in granaries in the elevators. They can't get the product to market. What good is it to sign any free trade agreements if the product is going to sit in the granaries and elevators?

Mr. Wilkinson: To refer to the second point, I assume the letter has been tabled and is available for people to read. Our concern was that people talked about a letter. It wasn't part of the agreement, so we flagged that as an issue.

We want to make sure there is an appropriate legal status for that so there is in fact the same protection in the written side agreement sort of thing on the letter that was there in the real... So say that's the case and it has been tabled. We think the number two recommendation has already been fulfilled from our point of view.

I think there's a great potential in relation to grain sales. Obviously, one of the reasons that Chile is slow on reducing its tariff on wheat is that this is viewed as one of its sensitive commodities. A lot of small producers are in business, and there's a fear in the Chilean government that this is one area in which they're going to have a great deal of economic problems. That's because they don't view their producers to be competitive in relationship to Canada and the U.S. So they're nervous about the economic impact, because we are very competitive from a Canadian point of view. I think there's a large potential in countries like Chile for growth in exports.

As for the transportation problem, I guess that's for another meeting. We're assuming that at some point this will get fixed or we're not going to meet any of the government's export goals on exports out of this country. It can't continue as it is, but I don't think this is necessarily the right committee for that.

Mr. Flis: No, but say we want to be world traders. We have excellent product, but if we can't get it to market, what good are free trade agreements?

Mr. Wilkinson: I appreciate that. It's a major problem. I'm not trying to belittle it. I'm just saying that we have to fix that.

Mr. Flis: This is just for my own edification. We sell durum wheat between April 15 and November 15. Just as an explanation, why is it that term? Is it to protect their local markets?

Mr. Wilkinson: Yes.

Mr. Flis: Okay.

Mr. Wilkinson: We have seasonal tariffs in some other areas as well. Take onions, for example. There are seasonable time periods that are in place and higher levels of tariffs to protect the local production.

Mr. Flis: You mentioned, Mr. Wilkinson, that the Wheat Pool is the agent for the Canadian Wheat Board. As we go more and more into world free trade agreements, is there any need to have the Canadian Wheat Board, according to CFA?

Mr. Wilkinson: Absolutely, yes.

Mr. Flis: Why?

Mr. Wilkinson: Because we are very -

Mr. Flis: You can't have it both ways.

Mr. Wilkinson: Yes, we can. I don't understand this approach that in some areas... There are reasons why, because of the structure of our agriculture, we would want to have a single seller in an international marketplace in which a very small amount of the world trade...

Say we broke that down such that basically every individual producer was trying to flaunt their product around the world. We think the producers would be economically disadvantaged. We think that pooling those resources, having an agency that has got at its disposal a vast quality range of wheat and what not, as well as the expertise to travel around the world to develop new product lines and what not, is advantageous to the farm community.

.1145

Lots of countries have single-desk selling or single-desk buying, whether it be governments in China that are joining the WTO or a host of other areas. It's not common in agriculture, I know, but a lot of governments are members of the WTO, and we see no reason why we shouldn't continue to pursue it, as long as it has producer support.

Gordon, you may wish to go further than that.

Mr. Pugh: Yes, I would like to add a couple of things.

We act as agents for the Canadian Wheat Board in sales, and it works the same as with the Ontario wheat board. We have done so in Chile and many other countries. There are several advantages we take to the table with us even when we are acting as agents for the Wheat Board by virtue of people knowing that we are working through a single-desk seller on these products.

One of the primary ones is the ability to assure quality. Quality is not necessarily just the intrinsic quality of the grain itself but the ability to supply consistency. We may ship in a 30,000-tonne vessel. The buyer knows in the front hold the grain is going to look exactly as it does in the back hold.

I don't know if you are aware of this, but Canada is the only wheat exporter which is able to sell sight unseen. We don't have to supply samples to our buyers in advance of a sale or at the time of the sale. That comes through having a system which ensures you are able to metre those products into the market at that time.

The other advantage, and a very major one, is that we are able to guarantee price-forward without having to resort to the market to manage risk.

Mr. Flis: I make that comment because after farming in Saskatchewan for 25 years I talked a few weeks ago to the people who bought out our farm and neighbouring farms. They said if they could get rid of the Canadian Wheat Board they could truck their wheat to the market and get a dollar a bushel more. I rest my case.

The Chairman: They would have to have it inspected, though, Jesse.

Mr. Flis: It's a market economy.

Mr. Penson: That's a job for the Canadian Grain Commission, by the way.

Mr. Flis: If the quality isn't there, they won't get the market the next time.

Mr. Wilkinson: I think the producers are going to have the opportunity to vote on this. I presume we are talking about the Canada-Chile trade agreement and not whether we should have a Canadian Wheat Board, Mr. Chairman.

The Chairman: We find the seamless web nature of political issues tends to invade this committee perhaps more than many others. It's very hard to isolate these issues.

Mr. Pugh: I do have to support Mr. Flis's concern about the transportation problems and the effect those are having on our ability to service markets. I know when Mr. Goodale goes on his Far East trip next month, to Japan and Indonesia, one of our largest customers is in Indonesia, Bogasari Flour Mill, and they are going to blast him for the inability of Canada to deliver on its contractual commitments. This is directly related to the transportation problems we are facing off the west coast right now. It is a very legitimate, valid concern. It is hurting our reputation. We have already lost sales. We could lose more.

The Chairman: Mr. Morrison, who is a member of this committee, raised that issue in the House when we were discussing rail transport. Thank you very much for that observation.

Mr. Culbert.

Mr. Culbert (Carleton - Charlotte): Thank you, Mr. Chairman.

In listening to the discussion this morning on the possible exemption of the anti-dumping regulation I have some concerns, because in addition to what Mr. Wilkinson indicated on the agricultural component - and he covered it very well - I want to touch on another farming area I hope the committee and department give due consideration to in their considerations, and that is aquaculture. It has grown in leaps and bounds in Canada. I can tell you it is also growing in Chile. In my region of the Bay of Fundy, for example, the aquaculture industry today is worth over $100 million a year and provides some 1,500 jobs to the region. My producers are certainly concerned that we not have that capability of dumping into Canada or subsequently into our other big partner, the United States, as they come on, as I'm sure they will, subsequently to the agreement between Canada and Chile.

.1150

I guess what I'm looking for this morning, Mr. Chair, is some assurance that these exemptions will not create undue problems for this certainly growing area of Canada's production in the aquaculture industry. It is one in which there is immense opportunity for future growth in all areas of Canada, and in various species. In my region, in most regions in Canada, and on the B.C. coast as well, the major part of it today is mostly in salmon farming, but there is certainly tremendous experimentation going on with other species. We expect them to be coming on in the near future, and to be very viable. We therefore want to be sure that we don't have that type of possibility of dumping in Canada, or - and I know this trade deal can't refer directly to the United States - that we set the tone so that subsequently we wouldn't be perhaps facing that in the United States as well.

The Chairman: Would we be in a position to respond, Mr. Christie?

Mr. Carrière: If I may, Mr. Chairman, we have been aware for some time of the concerns of New Brunswick salmon aquaculture producers about the anti-dumping exemption, just as we have been aware of the concerns of the Canadian Federation of Agriculture, the concerns of horticulture producers - especially those in British Columbia. We have attempted to address some of those in the negotiations.

I should also mention that one of the concerns that Mr. Wilkinson identified - and I understand it is another concern of salmon aquaculture producers - is the continued possibility of government intervention in Chile, and therefore possible subsidization. I wanted to make sure that all were aware that under this agreement, producers in Canada will continue to avail themselves of the rights under the SIMA for countervailing duties. If they petition the government that the Chilean government is providing subsidization to the production or export of products that are injurious to the Canadian market, countervailing duties may be imposed.

The anti-dumping exemption is limited to anti-dumping, not to government intervention and those kinds of measures that may be taken. I just wanted to clarify that.

The Chairman: That's very helpful. Thank you.

Mr. Carrière: I also understand that a major concern of the salmon aquaculture producers is essentially access to the United States market. Salmon imported into Canada has been duty-free for some time under MFN and GATT negotiations. My understanding is that their concern is putting product on the Boston market, for example. There is nothing we can do about that. Canadian producers will have to compete in the U.S. market against American producers or Chilean producers in that market. We can't do anything about that in a Canada-Chile negotiation.

Quite clearly, if U.S. producers dump into Canada, producers in New Brunswick may be able to avail themselves of the anti-dumping provisions of SIMA, both currently and in the foreseeable future, because, as members know, we have been trying to negotiate improvement and removal to anti-dumping with the United States for the past decade, bilaterally and in the NAFTA, and have not been successful. That continues to be a priority for the government, but we are not moving in that direction outside of the NAFTA. I also wanted to make that clear.

Mr. Wilkinson was suggesting that the government was seeking anti-dumping exemption outside of the NAFTA. That is not a statement that has been made by the government. To my knowledge, in both the WTO and in the FTAA, our position is to work towards improving the operation of anti-dumping in order to remove unjustifiable impediments that may be put in place via anti-dumping measures, but we have not made any statements beyond that.

Mr. Christie: Mr. Chairman, if I might, I'd just briefly add that during the course of the negotiations, among others, we undertook consultations with the salmon aquaculture industry in New Brunswick and with New Brunswick provincial trade officials. The main concerns seemed to be focused on the issue of subsidization.

There are two issues there. One is domestic subsidization, and Mr. Carrière has quite rightly indicated that the agreement preserves that right for the Government of Canada if material injury is being caused to a domestic industry because of subsidization in Chile or any other country. There's also the issue of export subsidies. Chile has a relatively modest export promotion program, which, pursuant to WTO commitments, must be phased out in its entirety by the year 2003. That commitment has been reiterated in the bilateral Canada-Chile Free Trade Agreement.

.1155

Moreover, we investigated whether any of the salmon products concerned were currently the subject of export subsidies from Chile. Their program is such that once a product reaches $20 million U.S. of exports, it is fully graduated from the export promotion scheme. Those products in the salmon area, where we compete with them in the New York market, have all graduated from their export promotion scheme. They no longer receive export subsidies.

Mr. Culbert: If I might clarify very briefly -

The Chairman: By all means, Mr. Culbert, but perhaps we'll let Mr. Wilkinson add to that and then you can deal with it all at once.

Mr. Culbert: Sure.

Mr. Wilkinson: I find very interesting the defence of government officials on anti-dump. If in fact the intention of the government is not to pursue anti-dump in any other trade agreements, which I totally disagree with...

The trade minister has made it very clear to us that it is the desire of the U.S. The word he used in a meeting with us was ``opportunity''. In an agreement with Chile, if you do not pursue anti-dump, how will you have any credibility when you go back to the U.S. and not force the issue there? So first of all I think it is the long-term goal.

If it isn't the long-term goal, I have a very interesting question. Why then are people defending anti-dump so much in this bilateral with Chile if the intention of the government is not to pursue it overall with future negotiations? What's the big deal?

Everybody said anti-dump is not a problem with Chile, necessarily. We're nervous about the policy it sets, so you have to ask if it's not the long-term goal, why the rigorous defence of it?

Secondly, to our point, yes, we have countervail available as a tool that works in cases where countervail applies. So then the question back to the government is why would you eliminate anti-dump with Chile, where it is a tool that on a selective basis was also useful, in particular in cases for the farm community? Why would you eliminate it?

What is the reason to eliminate anti-dump with Chile if it's not long-term government policy?

The Chairman: Mr. Carrière.

Mr. Carrière: I thought I made it clear that it is long-term government policy in the context of the NAFTA to ameliorate the situation and eventually remove the use of anti-dumping. I've made that clear.

Earlier in your presentation you indicated that you feel the government wants to proceed in the free trade area of the Americas or in the WTO, and I simply wanted to clarify that our long-term goal is in the NAFTA. In the WTO and in the FTA our goal is different. We are trying to improve the use of the anti-dumping mechanism in that forum.

In the NAFTA, our goal is and has been over the long term to negotiate the removal of the anti-dumping instrument. That has been clear government policy for many years.

The Chairman: But also clear government policy is that's only done in the context of it being replaced by a common competition policy that would provide protection against predator pricing. You're not going to do it without that, are you?

Mr. Carrière: No.

The Chairman: Okay.

Mr. Culbert: I have a brief follow-up, and I guess you touched on it. There's no question that a good portion of that product is exported to our markets in the United States, especially the eastern seaboard of the United States, and there are some concerns there.

The general feeling, or at least my feeling, is that our agreement with Chile will at least set an example if not indeed a precedent, which the United States may or may not follow subsequently. For us to move back or provide that exemption may in fact encourage the United States to provide a similar type of exemption. I don't want to put words in their mouth or in your mouth, but that is the way I see it from the outside.

Secondly, I want to mention to you and perhaps have your comments on something in regard to the same subject matter. As you would be well aware, the environmental standards in Chile are quite different from what they are in production here in Canada. There is a cost to those standards we have to adhere to in production, whether it be in agriculture or in aquaculture. Those lesser standards in Chile provide an immediate advantage for their producers over our producers, and that is a concern we want to see addressed.

.1200

I think it was probably in December that the minister referred to a phase-in period - and you might want to comment on that - with Chile agreeing to provide similar environmental standards, standards like those our producers experience here in Canada.

Mr. Carrière: Do you want to address that?

Mr. Christie: Mr. Chairman, the Government of Chile is in a process that really began with some intensity in 1989 with the passage of an environmental framework law to modernize and update legislation that they themselves admit is quite outdated in a number of areas. But there's a very conscious policy decision on the part of the Government of Chile - and they saw the environmental cooperation side agreement with Canada as useful leverage domestically - to move forward with reform of the environmental legislation in their own country.

They have agreed to review, over a two-year period, the entirety of their environmental legislation, to modernize it where appropriate, to bring in tougher standards, and then to have the obligations of the environmental side agreement apply to those environmental standards, just as we've agreed to do in the Canadian context.

Comparative advantage is a multifaceted thing. I would have thought, for example, that into the New England market we would have a certain transportation cost advantage. At the end of the day, the best and most price-competitive product will win. We're relatively well positioned and I would have thought have a very good track record and a world-class reputation in salmon products.

Mr. Culbert: No question about it, but we want to be assured that the playing field is level today and remains level in the future. And you're right, the transportation thing is not a problem. Wherever we go to the marketplace, we'll find the best form of transportation and we'll get our product to the market. That's our area of responsibility. We'll deal with that and we are dealing with it. That's not a problem.

All we want to be assured of is that we have that level playing field and that our producers can indeed compete. All we're asking for is the level playing field.

Finally, if those are the cases and if they are moving toward those environmental standards we have experienced in Canada - and that our producers and everybody support, generally speaking - why would we look at exempting the anti-dumping regulations at this time during that progression? Why wouldn't you look at perhaps removing the anti-dumping regulations or look at making exemptions for them as a phase-out for some time over the years as they bring their environmental standards up to ours?

Mr. Carrière: You're making a connection between environmental standards and anti-dumping that I hadn't previously made. Anti-dumping has to do with whether or not a producer sells in an export market below the price at which he sells in a domestic market.

Mr. Culbert: Yes.

Mr. Carrière: I'm sorry, but the connection with the environmental standards is not obvious to me.

There is a school that believes that various regulatory... Generally speaking, the regulatory requirements of governments in various fields do impose costs on business. But there's a wide range of differences in regulatory requirements in a wide range of fields between Canada and other countries. We can probably identify differences in one specific area, and there may be an advantage for one country or another or for one section of business or another for that particular regulatory slice, if you wish. But if you look at the total picture, it may not be so obvious that the regulatory differences provide an undue cost advantage.

There's also the fact that the entire productivity of the economy and of the sector may well be related to the regulatory infrastructure in that country. I think it's a well-demonstrated fact that productivity is the single most important element in the cost of production of most products. At the end of the day, that will determine the competitiveness of the exporters: whether there's a high productivity not only of the labour force but of the capital and technology employed. The regulatory environment in which they operate is one small element of that.

.1205

To conclude, though, we do have something we've not had before with Chile, the parallel agreement on environment, which builds on the memorandum of understanding that was signed three years ago. It will give us an opportunity in a wide range of areas to work with Chile to build up their systems.

Overall, we think we have a better handle on improving the environment in Chile, and by association those elements that are of interest to your constituents. But there is no direct linkage between the regulatory structures there and anti-dumping.

Mr. Culbert: I fully realize that. The only point I was making is with those questions that are in the minds of the Canadian producers we're representing, obviously - and I'm not being critical of anyone, but I don't have a satisfactory answer that puts my mind at ease - why would we exempt the anti-dumping regulations during this process at this time?

Mr. Christie: Perhaps two points would be helpful in this regard. One is that the anti-dumping exemption, depending on the product concerned, will in fact be phased in. For many products where the duty is already zero for the same product in both countries, the exemption would enter into force the day the agreement enters into force, June 2 next.

Mr. Culbert: Which would be the salmon.

Mr. Christie: But for other products, products that have longer phase-outs, the exemption will enter into force only when the tariff goes duty-free in both directions. That may be two years, three, or four, depending on the product, but no later than six years.

Now, why six years? Because we have a number of agricultural interests on the export side where the Chilean phase-out... Even though we've negotiated some good tariff rate quotas, on some products the overall tariff won't be eliminated for longer than the six-year period. There was a balance to be struck between providing some adjustment time where an exception was needed and protecting our export interests against potential increased use of anti-dumping by the Chileans.

The second point would just draw on that last comment. In the negotiation we were very conscious of the importance of achieving new access in areas such as grains and red meats and wanted to provide the best possible protection against Chilean protectionist actions down the road. The allusion has been made a couple of times, although the point has not been directly put, that maybe this could have been done on a sectoral basis. The difficulty with that kind of approach, though, is that the areas where we have particular agricultural and other export interests tend to be those areas where Chile had some sensitivities, or where the domestic industry perceived it had sensitivities. So if we were to exclude one or two or three sectors we would find that wheat would have been off the table, oilseeds would have been off the table, the anti-dumping exemption would not have been provided for beef and pork. The conclusion we reached was that given the nature of the bilateral trade it would be exceedingly difficult to cherry-pick, because the sensitivities were different in each country.

The Chairman: We've gone over our time by a good ten minutes, but...

[Translation]

Mr. Nunez, since you are here today and since you come from Chile yourself, would you like to comment briefly on the process?

Mr. Nunez (Bourassa): Not really.

The Chairman: Did the antidumping laws apply in your case, when you arrived in Canada?

Some honourable members: Oh! Oh!

Mr. Nunez: That was another problem.

Thank you, Mr. Chairman. You know how interested I am in the subject and in the free trade agreement between Canada and Chile.

.1210

I am very happy about this, as are the 35,000 Chileans living in Canada. I think that Chileans have done a great deal to strengthen trade relations between the two countries, and, of course, I hope that this agreement will come into force in June, as scheduled.

There seems to be a generally positive attitude towards the agreement, and I believe that applies in Chile as well. I am all for integration of the American continent, and I hope that the 2005 deadline will be met.

I know that you have some reservations, for example regarding the 30% cushion for the Chile Central Bank. However, I know how things are in Chile; Chile is a developing country. It has the right to protect itself against the movement of capital and I hope that what happened in Mexico does not happen in Chile.

There is one dimension of this issue which concerns me a great deal, and which I consider very important. It is the social dimension of the agreement. We should bear in mind that the agreement is supposed to benefit all the citizens of Canada and Chile. Employment and working conditions have to be improved, and workers have to be protected against some consequences of this agreement.

I consider the parallel agreements on labour and the environment to be extremely important. It is also my hope that business people here will make the social dimension of this agreement a priority. Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Nunez. You have touched on one aspect of our report, the one dealing with small and medium-sized businesses, in which we expressly mention the multicultural make-up of Canada. A great many people like you can establish contacts with their country of origin to improve conditions for labour, exports, imports, and trade. Thank you very much.

[English]

I'd like to also remind both the members of the committee and our witnesses that Mr. Dupuy's subcommittee - which Mr. Sauvageau and Mr. Penson are both on, as I said - is actively looking into this whole issue of the international framework within which we have to adjust our domestic regulatory framework to deal with the issues of greater trade liberalization, and is particularly looking into how we can adjust. Please do keep in contact with that committee, because I know its members would be interested in hearing any observations you have to make about those matters.

I'd like to thank everybody for coming before us. Thank you very much. I appreciate the evidence we've heard this morning.

We will not proceed to clause-by-clause this morning because we've taken the time to hear the witnesses. I'm therefore calling for us to meet at 3:30 p.m. on Monday, March 3. We will then proceed to clause-by-clause.

Members, I would suggest that at the moment, at least, the only clause that might require substantial discussion would be clause 89. The others seem to be non-controversial. We might therefore move very quickly through the first part of the bill and get to clause 89. If there's some other clause that's troubling you, though, you might just let us know before then, and we can deal then with it.

We're adjourned until March 3 at 3:30 p.m. Thank you very much.

Return to Committee Home Page