[Recorded by Electronic Apparatus]
Monday, November 18, 1996
.1537 
[English]
The Co-Chairman (Mr. Duhamel): Bonjour. My name is Ron Duhamel. I'm the co-chair of this committee. The Hon. Michel Dupuy is unable to be here today because he's on another assignment, but he did ask me to extend his best wishes and to welcome you.
I want to point out, my colleagues who are here, that there will be others. The Prime Minister is speaking on Zaire in the House of Commons. Some people have been delayed, so do not be surprised when others join us. We'll just continue. It's not unusual for things like this to happen.
At the table today we have
[Translation]
Mr. Philippe Paré, from the Bloc québécois and Herb Grubel, from the Reform Party.
[English]
The normal format is a presentation of five to seven minutes, and then my colleagues will want to raise some questions. It may be directed to one particular person or persons, but if you wish to add you may, in fact.
[Translation]
I invite you to do so. Do not hesitate.
[English]
Having said that, we're going to begin. I think I would like to start today with Mr. Herman, and then I'll do some sort of random selection - maybe select a number or something like that.
Mr. Lawrence L. Herman (Associate Counsel, Herman Associate Counsel, Cassels Brock & Blackwell): Thank you, Mr. Chairman and members.
It's a pleasure to appear before you on this important exercise. Within the very limited time in which to provide opening comments, let me be reasonably brief and succinct.
I sent the committee a detailed brief. It's quite long, about 60 pages with the annex. I don't expect that members will have had the time in their busy schedules to have read it in detail, but the brief goes through each of the main elements of SIMA, with comments and analysis, and makes suggestions for alteration or modification in the legislation.
Without going into the details that I have entered into in my written submissions, it seems to me that there are a number of main principles to keep in mind in the scope of this committee's review. The first thing that I think needs to be emphasized is that SIMA works reasonably well. It is a piece of legislation that has gone through a number of changes in order to implement Canada's international obligations. It's not a perfect piece of legislation, but it works reasonably well.
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The other point that I think is vital to underline in this respect is that the legislation implements international obligations on the part of Canada. We're not here, as I understand it, reviewing legislation in a vacuum. That legislation must be consistent, and any changes, alterations or modifications made must be consistent with Canada's international obligations.
The Uruguay Round agreement contains the two primary subagreements that SIMA implements - the agreement on anti-dumping and the agreement on subsidies and countervailing measures. Those set out in great detail the ingredients of the trade remedies regime, and Canada, consistent with all of the WTO member countries, is under an obligation to stick by those agreements. The legislation has to be consistent with the agreements in every respect.
The third point I would make as an introductory comment is that bearing in mind the need to ensure consistency with the Uruguay Round agreement, Canada's trade remedy regime must be - and this is my view as a trade practitioner - consistent with the trade remedy regimes of its major trading partners. It would not be appropriate, in my view, for Canadian legislation to be inconsistent with the trade remedy laws of its major trading partners. I'll come back to this point in a moment.
Those are the introductory points that I would make. They are reflected in detail in the brief I have submitted. I can go into any particular element that you are interested in during the question period.
Let me offer four values, if I could use that term, that I think this committee should keep in mind in its review of the Special Import Measures Act, bearing in mind what I just said in my introductory comments.
First is transparency and clarity. Is the act transparent and clear enough so that all major stakeholders know what the procedures are all about?
Second, is it efficient? Here I would address particularly the Canadian International Trade Tribunal's hearing process. Does the act allow for efficiency in the CITT hearing? I would suggest that there are some improvements in that regard.
Third is balance and equity. Does the legislation, as drafted and implemented at the present time, ensure that there is balance and equity? I would suggest that it does not. Whether that balance and equity can be restored through amendments or administrative procedures is a matter for consideration. I view the processes at the CITT hearing as being weighted against the interests of the domestic industry. We can go into detail in that regard in your questions and my answers.
Fourth, to come back to a point I made in my introductory comments, do SIMA and the SIMA procedures ensure comparability with the laws and procedures in the United States? I think it is vital that Canadian trade remedy laws in the North American trading environment, under NAFTA, ensure that there is at least comparability between the Canadian and American regimes. I'm not suggesting that there be mirror-imaging - far from it - but I am saying that as a practitioner, if I represent the domestic industry in Canada, I see no reason and indeed suggest that it's not in Canadian interests for the Canadian industry to be at a disadvantage in Canada in the application of our trade remedy regime vis-à-vis their counterparts in the United States.
Those are my comments. I would just succinctly mention the public interest representation issue that I understand you want to address today.
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I said at the outset that SIMA works reasonably well, and I would sweep into that statement the public interest representation component of the process. I think it works well. The process allows for public interest representations to be made once the tribunal makes its finding, and I would suggest that the problem, if there is one, is not in the way the law is drafted, it's that public interest groups or those representing the public interest have, for one reason or another, not seen fit to use those procedures as they might have over these number of years.
Those are my comments, Mr. Chairman. Thank you.
The Co-Chairman (Mr. Duhamel): Thank you, Mr. Herman. As you indicated, we're going to be talking about public interest, and I believe I would like to start with Ms MacMillan.
Ms K.E. MacMillan (President, International Trade Policy Consultants Inc.):Mr. Chairman, thank you for inviting me here today.
My comments are centred on the public interest issue, and I thought it would be most useful to give you some sense, early on, of what my perspective is. I was the CITT vice-chair for five years, between 1989 and 1994. I struggled with interpreting section 45 at that time, and I have since been involved as a private practitioner in one public interest case, which was that of refined sugar earlier in the year.
I'd like to talk a little bit about workability, the practical aspects, as well as some of the conceptual problems associated with section 45 as it's currently drafted. The statute, as you're well aware, provides no guidance on what ``public interest'' means.
Both as a CITT member and afterwards, in the process of working with industry on this, we looked far and wide as to what guidance was available. We looked at standing committee proceedings at the time the legislation was being put together, and we looked at other acts of Parliament that discussed public interest.
Basically the difficulty is this: the presumption is that Parliament is always acting in the public interest, and SIMA, as you're well aware, is a piece of legislation that is designed to provide special protection for industries that are injured or threatened as a result of dumped and subsidized imports. So it's an interesting conceptual problem to see why, on the one hand, one would give industries this special protection and, on the other hand, take it away in certain circumstances without articulating particularly well what those circumstances would be.
If one approaches public interest from the point of view of an economist and does a welfare economic analysis and runs some numbers, you would never have duties in place, because the cost to the consumer and to economic efficiency in general is always larger than the benefits that would arise from the duty. So I guess the struggle is to try to understand under what special circumstances the public interest should be invoked, and whether you, as a committee, could recommend some conditions that would apply for triggering this public interest provision.
As Mr. Herman said earlier, it's very rare that public interest has actually occurred. I think the CITT and the ITC have had 83 section 42 inquiries under SIMA. In three cases there have been public interest inquiries. There were two positive recommendations by the CITT to reduce duties, but the duties were reduced only once. So in 83 cases we've had one situation in which duties have been reduced.
Let's look for a second at what captured the tribunal's attention in those cases, what kind of criteria presented the kind of situations that it thought would warrant an inquiry.
One situation is damage or the threat of damage to a downstream industry, and this is the situation that occurred in grain corn. If another set of producers is going to be put out of business or will be severely disadvantaged, should the tribunal have a look at public interest issues?
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The second is damage to competition. If imposition of the duties in the full amount would basically wipe out all imports and leave, say, a monopolist or an oligopolist the ability to run free in the market, is that something else that would trigger a public interest inquiry?
Third, in the case of beer, where the duty is greater than necessary to counteract the injury suffered, that's the lesser duty. In situation one, that recommendation was not implemented. I know lesser duty is something that has interested this committee. Your interest is perhaps a little broader than just the public interest situation, but there it is.
If you were considering the possibility of setting out in more detail the kinds of things the tribunal should look at, I guess it would be some combination of damage to a downstream industry. Could there be some kind of mini-test the tribunal would have to go through to decide that, yes, this is something that bears further examination?
The other thing is the state of competition in the domestic market. Would imposition of the duties eliminate imports in their entirety? Would it give a strong producer in Canada carte blanche to raise prices, that type of thing?
Lesser duty is a more complicated thing. I would think if you wanted to go down that route you would probably want to look at making it a more general consideration rather than something that would be invoked just in the public interest. But there it is.
In any event, I think there's something to be gained from articulating better the criteria that would be involved in section 45. In a broader sense, I also think the best kind of public interest provision is one that would make special protection somewhat more difficult to get in the first place and harder to maintain forever. Maybe the kind of thing we should be looking for in practical terms is better monitoring of findings once they're in place. Perhaps the CITT staff could be asked to monitor industries in a more systematic way to have a look at what has happened to prices and competition and imports over the life of a finding, and in that respect ensure that findings stay in place only for as long as they are necessary.
To say that public interest has been a good thing when it's only affected 1 out of 83 cases is.... Perhaps in practical terms, it doesn't serve its purpose. The basic objective should be not to load SIMA excessively with these two sets of objectives but rather make it a more targeted tool to provide special assistance to industries in very narrow circumstances for a finite period of time - only for as long, say, as it's necessary to have that protection - and not complicate it overly with public interest considerations that are not very well articulated.
The Co-Chairman (Mr. Duhamel): Thank you, Ms MacMillan.
Mr. Cheng, I'd like to turn to you now, if I may.
Mr. Ronald Cheng (Lawyer, Osler, Hoskin and Harcourt): Thank you, Mr. Chairman.
You've already heard, from Ms MacMillan in particular, that others may be more able to address than I the tribunal's consideration and application of section 45, particularly the reasoning that may have led to their decisions. But since your clerk asked me to focus for today's session only on section 45, I hope I can provide a context within which we can consider the provision.
I've provided copies of background materials with which you and the other members may be familiar but may be convenient for reference. The first page of those materials simply reproduces section 45. The next three pages set out the so-called guidelines for public interest investigations, which were issued by the tribunal as a practice notice in February 1995 and essentially cover the procedure that has evolved since the passage of the section until the present. I will not cover in any detail the procedure. If we need to, I think that can be covered later in the discussion.
.1555
However, the point is, Mr. Chairman, you have really two areas in which you can deal with this and any other provision, procedure and substance. If you intend to deal with any of the SIMA provisions and make recommendations, your guidance on this section has been pretty sparse. Page 5 of these same materials reproduces the relevant comments from the Finance background paper. And as you probably recall, with respect specifically to section 45, it essentially says that there is scope to consider clarifying the use of the provision.
In my view, Mr. Chairman, no changes should be recommended. Even if you feel there is room for change in procedure, I think that's properly a matter for the tribunal who are to apply it.
As to substance, the section is consonant with the GATT. It has been applied, albeit in a limited number of circumstances, to reduce duties otherwise payable pursuant to an injury finding by the tribunal. And perhaps most importantly, Mr. Chairman, the section has permitted the tribunal to consider all of the factors argued by different parties to be public interest factors. This in fact, in my view, achieves the aim of the Mackasey report in recommending the enactment of the section as a matter of policy. And since it's working as it should, because of the way the tribunal has interpreted and applied the section, I don't think it should be amended.
The way the tribunal has dealt with the section is evidenced of course in its decisions. I've provided to you, separately, relevant extracts from 12 public interest decisions that were the basis of the conclusions and my views, which I've just stated. These I don't intend to review except to the extent that you may wish to discuss them later.
But let me demonstrate what I mean. Referring back to the first set of materials I provided you, page 6 of those materials sets out the GATT context for our section 45. Article 9.1 of the 1994 GATT agreement says in part that it is desirable that any duties resulting from material injury findings from the dumping or subsidy of imports shall not be higher than is required ``to remove the injury to the domestic industry''.
Section 45, Mr. Chairman, is permissive of this aim. A minimum duty is not mandatory, but the tribunal certainly is free to examine any rationale for reducing duties that would otherwise be calculated and collected in accordance with the act. The tribunal has considered these rationales while taking into account what I think clearly is the primary objective of the act, which is to provide relief to domestic production from injuriously dumped or subsidized imports.
At the same time, in considering and applying section 45 it has also consistently resisted the importation into its legislation and jurisdiction of any policy-driven considerations governed by other domestic legislation, such as the curbing of monopolistic behaviour, which is properly targeted by the Competition Act.
The principal areas of public interest that have been focused on by the tribunal in applying the section, as you have heard in part from Ms MacMillan, have been the increase in prices subsequent to an injury finding and the creation of a production monopoly or near monopoly in the Canadian market for subject goods. The corollary to this that they've considered is the continued availability of subject goods at a competitive price from either the dumped or subsidized import source or from other export sources not covered by the particular injury findings. It has also considered the effect of injury findings on the distribution systems within Canada and the downstream user impact on industries of the increased prices.
.1600
Mr. Chairman, essentially, I think I've covered the interpretation application and perhaps this will assist in the subsequent discussions. Thank you.
The Chairman: Thank you, sir.
Mr. Flavell.
Mr. Michael Flavell (Lawyer, Flavell, Kubrick and Lalonde): If I could respond immediately to my friend Mr. Cheng, he said that in his view section 45, as interpreted, had achieved the objective of the Mackasey commission, the Mackasey report, the Mackasey recommendations. It seems to me that if this is the case, the Mackasey intention was to achieve nothing.
We have heard Ms MacMillan - who should know, having been on the tribunal for five years - indicate that one in 83 cases has resulted in section 45 being applied in a manner that led to any reduction in duty. I know Mr. Cheng is a baseball fan, as am I, and I think he would agree with me that if he or I hit 1 in 83 in baseball or indeed, 1 in 83 in our law practice, we would soon be moving on elsewhere. I would suggest that this figure alone indicates that for reasons of legislative drafting or for reasons of interpretation by the tribunal, section 45 has been ineffective.
I think this is unfortunate. I was going to quote exactly the same excerpt that Mr. Cheng did from the Finance background paper, which indicates that the crucial thing that faces us here - and Minister Martin has said it as well - is trying to balance this terribly important and effective remedy, which is so favourable to domestic producers, against the interests of people who have to use the product that is being affected by the duty.
We have this ongoing debate, if you will, as to how we can best protect Canadian producers from unfair trade remedies from abroad, but at the same time, not hurt more than is necessary the people who use the products. So my hope, back when section 45 was introduced to the statute, was that this invitation - which is what I saw it as being - would be welcomed by the tribunal and more expansively used than it has been.
To be fair to the tribunal, the wording was not very precise; it was not very directive. It was left in the way that the tribunal could do this or could do that. So the tribunal, in its wisdom, has decided to be very careful indeed in using this section 45 and in trying, by its use, to balance the interests of Canadian producers and Canadian users of products covered by the duty.
One has to bear in mind that for reasons I will get into only if members press me, because it is so complicated and even more boring than the rest of anti-dumping law, the calculation of margins of dumping by the deputy minister often result in margins of dumping that are significantly higher than what you would expect them to be, because as a simplistic person you would expect that if the product sold in the United States for $1 and sold in Canada for 90¢, the margin of dumping would be 10¢. Often it isn't for reasons that I won't bore you with, but because of what are called constructive values, often those margins are much higher than that 10¢. When that is the case, particularly when that is the case, it seems to me that the tribunal could provide a most useful function in its duties, if it understood them to be such, to reduce that duty from, let's say, the 40 that the deputy minister finds to the ten that I have just described. I think all of us would agree that this is the real margin of dumping.
.1605
I would urge that the tribunal be encouraged by changes to the legislation to use section 45 more often. I would encourage that a message be sent out by legislative drafting that the lesser value approach might be one of several methods looked at. And I would suggest that section 45 be placed in tandem with section 42, if you will. It would be a twin, if you will, or at least be somewhat on the same level as section 42.
I'll try to explain what I mean by that by looking at the most recent case in which there was a public interest hearing, and that was the sugar case. We've heard mention of the sugar case. We've heard mention of the fact that the margins of dumping were of the order of 40%, 50% or more. We have heard that the persons in Canada who used sugar to make products that might be exported or might be sold in Canada were very unhappy with the idea that the duties were so prohibitive as to remove all effective import competition. This is where the balance of which I speak has to be worked in.
When the tribunal looked at the issue of public interest, after it had already found injury under section 42, it took the view - and I have the decision here and could read you quotes if you would like - that section 45 was an exceptional provision, that it was therefore to be interpreted restrictively, that those who would avail themselves of it therefore had to prove their case. If you will, there was a burden of proof against them to have section 45 relief.
As a lawyer, it seems to me that perhaps one way in which we could try to balance things out would be to at least make it clear that the primary focus of the act, under section 42 - that is to say, the injury inquiry by the tribunal - is indeed to protect Canadian industry. But once we find injury and we move on to section 45, it seems to me that section 45 should be a companion provision in which the persons who are putting forward the proposition that section 45 be used should not be starting behind an eight ball. They should not be deemed to be in an exceptional situation. The section 45 exercise should be on even grounds, if you will, and should not start off with this tilt against those who would use it. That would be one small thing that you could do to try to encourage its use.
I wanted just to say a few words about Mr. Herman's comments on the CITT. I have read his views elsewhere, and I know he feels the CITT process is weighted against Canadian industry. I know he feels it would be better to have a much shorter hearing and a much greater reliance on written briefs and the like, but I must point out that this is moving towards the American system, if not mirroring it.
As a practitioner of some 26 years, I would observe that I have never heard any aspect of Canadian law praised more widely than the CITT procedure, as opposed to the ITC comparison in the U.S. Everybody I have ever spoken to has said that we at least have a trial. We at least have a real case. We test the information, cross-examine the information. We find out the truth through a modified adversary system. From every point of view, they think it is a huge improvement over the American system. So I think that to move toward the American system in that regard would be an error.
My last thought would just be that in terms of comparability, I would suggest that the Canadian system is comparable to the U.S. system in the only real comparison that matters: Just as often as the ITC finds injury in the United States, our CITT finds injury. I realize that it may be another baseball analogy in looking to won and lost records, but if Mr. Herman wants to change the law in a manner that will result in even more wins by Canadian producers, we'll be left in a situation where the tribunal is little more than a rubber stamp.
.1610
The Co-Chairman (Mr. Duhamel): Thank you. As I listen to the testimony I was reminded of why my job is an interesting one, and that is because people who advise us don't always agree.
Two colleagues have joined us. They're member of Parliament Mr. Cohen and member of Parliament Mr. Assadourian. As is the normal process,
[Translation]
I shall start with Mr. Paré who is representing the Official Opposition.
Mr. Paré (Louis-Hébert): I had the opportunity to take part in a meeting of the Sub-Committee on Trade Disputes when a group of lawyers, including Mr. Cheng who is here today, appeared as witnesses. I had concluded that, to a large extent, those witnesses were quite happy with the way the law was working. I would say that we heard about the same thing this afternoon, even if the views expressed seemed to be a little more divided than last time.
Mr. Herman, you gave us a rather positive description of the law. You said that it is working rather well. Neither did not say that the implementation of the international responsibilities of Canada is not working. You talked about values and the improvements that could be made as concerns transparency and efficiency. But when asked if the law is fair, your answer was an unequivocal no. Could you explain to us why you consider the law as being unfair? Why is it not equitable?
Mr. Herman: If I may, I will answer your question in English as technical terms are difficult to interpret and translate from English into French.
[English]
I said it is important that the act be balanced and equitable, and here's where I think my friend Mr. Flavell and I have a fundamental difference in perspective.
When it comes to an inquiry by the tribunal under section 42 of the legislation, that is not, with all due respect, an adversarial process. It is a public inquiry under a statute. There's no plaintiff and there's no respondent. It's to determine whether the dumping, which has been found, or the subsidy, which has been found, is a cause of injury. There's no burden under the statute, and there shouldn't be one. I'll give you an example of what has happened, and perhaps examples can best illustrate my concern.
I'll give you an example of a case, which I appeared in, where the domestic industry filed an extensive amount of material. That burden, the filing of extensive written material, was not a requirement on the part of the importers or the exporters. Indeed, at this particular inquiry one exporter/importer filed no material on the record, presented no witnesses, and yet was allowed to appear with counsel and cross-examine the domestic industry.
I don't regard that as a fair and equitable process. There must be a balanced requirement on the part of the domestic industry to file written material. There must be a corresponding requirement on the part of those who have been found to have been dumping or exporting subsidized goods into the Canadian market to file similar material. The hearing process must similarly be balanced.
It is not, in my view, fair for the domestic industry to have to withstand days and days of cross-examination on detailed evidence and material that they have filed and not have a corresponding obligation on the part of the exporters and importers.
In fact, often in these cases the exporting interests choose not to appear at all. Importers come forward saying they have no information on how the exporters operate. They can't testify on whether the dumping will continue or whether there is a determined export interest into the Canadian market, because they don't have that information.
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So the process often allows a smokescreen, in my submission, to be put up by the exporters who will choose not to appear and not to undergo cross-examination. So that's why I say we need to think about restoring the balance, again bearing in mind that it's a public inquiry and not an adversarial one.
[Translation]
I hope that answer is satisfactory.
Mr. Paré: I am not familiar with all those processes and I did not really understood how the domestic industry was at a disadvantage vis-à-vis the exporter doing the dumping. Is it because of the burden of the process?
Mr. Herman: I was only referring to the inquiry by the tribunal where there is an unbalance. However,
[English]
I'm not suggesting that SIMA needs to be amended to restore that balance. I think that balance can be restored or implemented through changes to CITT procedures to ensure that the exporter's and the importer's interests are required to file an abundance of material, to appear with witnesses, and to be subject to the same detailed degree of cross-examination, with detailed supporting evidence as the Canadian producers. It's a matter of fairness, in my view.
[Translation]
Mr. Paré: I have a question for Ms MacMillan who chaired an appeal committee that was reviewing cases of dumping. You said that there were 83 cases before the tribunal and that there was a reduction of duties in one case only. I am inclined to believe that the system is working very well. Am I wrong? One case over 83 is in my view a very small average.
[English]
Ms MacMillan: What I attempted to explain was that there has only been one instance in which the duties were reduced in the public interest under the Special Import Measures Act. Obviously it depends on the perspective as to whether that's a good thing or a bad thing. I don't think it indicates this is necessarily a practical or workable provision. It hasn't been terribly meaningful in practical terms.
[Translation]
Mr. Paré: However, you seem to wish that public interest criteria be better defined. Could you give us some examples?
[English]
Ms MacMillan: Oui, and perhaps in doing so I can speak to something my friend Mr. Flavell mentioned. Perhaps I'm being unfair here, but he implied that the tribunal has to do a better job of essentially setting out the criteria and using them.
A better definition of the criteria would assist all parties before the tribunal. There's a great deal of uncertainty out there on what it takes to convince the tribunal of what the public interest is. So it becomes a very costly and a very time-consuming exercise.
In the case of refined sugar - and you can remind me, Mr. Flavell, but I think it was a one-week hearing on the public interest alone - there was a great deal of flailing around on what this meant. That is not in the best interest of the system as a whole.
If you are attached to this public interest provision, one of the options you might wish to consider is setting out a list of factors the tribunal might consider in deciding whether or not it should go to that public interest stage.
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What is it that would trigger the tribunal to examine this in greater detail? I would propose, among other things, that perhaps the tribunal might wish to look at the level of anti-dumping duties in place, because as Mr. Flavell argued, if you have a 50% dumping duty you're probably affecting consumer prices a lot more than if it is only 5%.
The other criterion that might be explored is whether imposition of the duties results in effectively eliminating all imports to Canada, or whether there are some other sources for imports that aren't covered.
One other thing is what it does to the state of competition in the country. Does it mean that a single Canadian producer has unfettered market power as a result? That's related a bit to this issue of eliminating all imports.
This is a starting point for some of the criteria you might wish to consider.
[Translation]
The Co-Chairman (Mr. Duhamel): Mr. Paré, is it enough? We might come back later on that issue.
[English]
Mr. Grubel.
Mr. Grubel (Capilano - Howe Sound): Thank you, Mr. Chairman. It's a pleasure to have all these great experts who are making a living off the existence of the Special Import Measures Act. I know there are lots of people from the Department of Finance who are really counting on this and taking notes. We're just an excuse to be a part of it. It's really between them and you.
I would like to ask you a question that comes clearly from my background as an economist.Ms MacMillan, I really appreciated what you said about this.
Perhaps you could wear another hat for a moment, not that of someone who's making a living off this, but someone who knows all about how this stuff is working. Is it really in the general public interest to have a Special Import Measures Act?
Next fall I'm going back to teaching, and here's what I'm going to tell my students. Once upon a time we lived in a world in which transportation was very expensive. Industries were localized. There wasn't the kind of arbitrage between prices that now takes place in the world. Not only were transportation costs high, but also communication was terrible.
Therefore, a good story could be told - and maybe it was even right at that time - that a nasty foreigner might come and dump his product at a price that was below the cost of production in Canada with the expectation of wiping out the domestic industry. Once the industry is wiped out, then that foreign producer will have the opportunity to play a monopoly game. He can raise the price so high that he more than recoups the investment he made when he first imported that product into Canada at a price below his own cost of production.
That makes a very good, logical story. But I wonder whether in 1996 that story makes any sense whatsoever.
I would say to my students in class that if there is dumping, then by definition that foreign producer will lose money on every unit he sells. How is he ever going to recover that? Why does the old story not hold any more? He can raise prices at will, so as to recover this. And the answer is: you give me one product where you in Canada can raise the price way above the cost of production without having the country flooded by competitors from all over the world who will make it impossible for that dumper ever to recoup the investment.
Therefore, by simple logic, I can't believe there is anybody out there dumping. What should I tell my students so that they will want to become lawyers with good conscience and work in your field when they grow up?
The Co-Chairman (Mr. Duhamel): This question is addressed to Ms MacMillian? To each individual?
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Mr. Grubel: It's to anybody who wishes to answer. I ask it mainly for the record. I just would like to see how people answer.
The Co-Chairman (Mr. Duhamel): Mr. Grubel, what was your point? I didn't get your last point.
Mr. Grubel: My last point was simply that I don't expect a limited answer. I didn't want to read into the record my position on this subject, which I believe reflects the thinking of modern economists, as much as I expect to get a lengthy and penetrating answer.
The Co-Chairman (Mr. Duhamel): I'm going to give each witness an opportunity.
Ms MacMillan.
Ms MacMillan: I'm an economist too, Mr. Grubel, and in the five years I worked at the CITT I found that industries don't work the way textbooks describe them.
I'd like to outline for you two scenarios. I'm not saying that dumping protection should be easy to get by any means, but I think there are a couple of legitimate situations in which it is fair and warranted.
One of them is when there's predatory pricing. It's done with a view to some kind of long-term strategy and an acceptance that there are going to be short-term losses.
The second situation is when the dumper's own market is protected and the price arbitrage that would normally occur and would occur in the overwhelming majority of cases does not occur. In that respect, I'd like to refer you to the situation of refined sugar, for example, where for all practical purposes it's impossible to get one bag of Canadian sugar into either European or U.S. markets. They both have highly generous subsidy programs in place and they create surpluses and dump them into the Canadian market. We do not have the ability to retaliate in kind.
I think the challenge isn't so much to ask if we can get rid of this but rather to set our system up in such a way that it's hard to get. When industries do pass the test, it's there for them; it's there in a finite way but it's there to protect them in the short term.
Mr. Grubel: This is what the law says, but in a sense I would like to broaden the discussion a little bit because I found your documents and your presentation just excellent. I don't see much to discuss in here.
Mr. Chairman, I want to broaden the discussion by saying that, sure, we have these laws and this is the way it ought to be. But how do you define the public interest? How could it possibly be in the public interest in Canada not to get sugar for the next 100 years at half the price of what it costs in the world to produce? I define the public interest as getting consumer products at the lowest price possible. Where does the damage come in?
The Co-Chairman (Mr. Duhamel): Let's find out what the others have to say. Mr. Flavell.
Mr. Flavell: Thank you, Mr. Chairman.
I don't know many lawyers, even those who practice in this field, who with any degree of thoughtfulness in their psyche would defend anti-dumping laws if we were in a perfect world of open competition. I think many people feel that within NAFTA it might make sense not to have dumping protection. We read about there being none between European Community countries and between Australia and New Zealand.
The current wisdom, as far as I understand it, is that because our major trading partners have these systems, because it is part of the WTO, and because - I know Mr. Herman will chime in happily here - our biggest trading partner, our beloved United States, has it and uses it firmly and often, we are pretty much obliged to keep it for the time being, reluctantly.
Mr. Grubel: Because they do? Does that make any sense, sir?
Mr. Flavell: Yes, I think it makes sense as long as other parties with whom we trade have the same system.
Mr. Grubel: You mean they want to give us their goods really cheaply and we say no, you can't give us your goods cheaply? What's the argument? I don't get it.
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Mr. Flavell: I think the answer is that in some instances, as Ms MacMillan has indicated - and I was involved in one for the Canadian bicycle industry - the industry simply would not survive. Politicians have made the judgment, right or wrong, that the bicycle industry should have survived and that SIMA should save them and should continue to save others in a like situation. But it is a political judgment; it is not an economic judgment. I agree with you.
The Co-Chairman (Mr. Duhamel): Mr. Herman, did you want to add something?
Mr. Herman: These are interesting questions and I think they certainly, Mr. Grubel, should be in our minds as we proceed.
As the other two speakers have said, in a perfect world we do face instances where goods cross the border at prices that don't recover all costs. While economists might theorize as to whether price equilibrium would be established at a given point in time, the fact is that industries in Canada are injured and their financial performance with respect to those goods does suffer.
Let me remind you of something, and this is very important to remember. If we're talking about dumping, it is an economist's notion. You have to go back to the Havana Charter and the GATT, which was not drafted by lawyers. It was written by economists, who in their wisdom felt that dumping across international boundaries was something that required international remedy. That's what we have today. The ensuing GATT practice, the GATT codes and the Uruguay Round all flowed from an economist's notion that dumping was to be condemned if it injured the domestic industry of the importing country.
It's not a perfect situation, but I would go one step further. I would say that given the tremendous legal difficulties involved in a multilateral agreement on the use of competition-type remedies, given the great, enormous problems of agreeing on the use of competition remedies on a multilateral basis, the anti-dumping remedies, as imperfect as they may be, are the next best thing to ensure that this practice is disciplined.
Mr. Grubel: I come from the University of Chicago, so I don't even believe we need anti-competitive measures. I think that the market in today's world is today's instruments of communication and transportation. You try to raise prices. You go and try. Even if you have billions, you try to corner the market. I haven't seen it work. But I know this is becoming almost ideological, so....
The Co-Chairman (Mr. Duhamel): Mr. Grubel, thank you. I wanted to give Mr. Cheng an opportunity to add.
Mr. Cheng: Mr. Chairman, thank you, but I don't have anything to add to what's already been said.
The Co-Chairman (Mr. Duhamel): Thank you very much. I'll now proceed to Mr. Cullen.
Mr. Cullen (Etobicoke North): I have a couple of questions, two for Mr. Herman and one for Ms MacMillan and Mr. Flavell. Maybe we can do the latter one if we have another go-around.
Mr. Herman, I wondered if you would deal with two questions. First, you mentioned that in your view the SIMA is weighted against domestic industries. I wondered if you could expand on that.
And I apologize because I came in at the middle of your presentation, but you talked about comparability. I'm wondering if you could elaborate on what you mean by that, and I'll throw in a little anecdote of mine.
I want to look at the forest products industry and the public interest clauses and the countervail duty battles we've had with the United States. Right now they're saying - and this has been an issue through every countervail - that putting up a home in the United States now, as a result of these impositions, is adding another $3,000 to the cost of a home. We've never been able to.... Well, we've marshalled the U.S. housebuilders down there to some extent, but because it's not part of the process, it's certainly not played very well.
Given that we in Canada seem to have stronger public interest clauses and measures, could you expand on the comparability issue in that context? It's one I'm familiar with.
Mr. Herman: Let me go back to what I said when I introduced my brief. I said that SIMA works well. It's not perfect and it has problems, but it works reasonably well given the nature of the legislation. It needs some adjustments here and there. I think many of the adjustments can be made administratively and not through legislative change, and to that extent I suggest that we look at where we can change it administratively.
.1635
Now, where is it not appropriately balanced? I thought I'd addressed this earlier. As matters have evolved in practice, the hearing process before the CITT - and I'm only addressing the CITT hearing process - as a matter of process has required the domestic industry to come forward and undergo extensive, and in some cases almost uncontrolled, or undisciplined, cross-examination by many counsel, one after the other. Four, five or six lawyers may cross-examine one witness for the domestic industry, having had the benefit of huge amounts of internal data from the domestic industry.
I don't think there's a comparable burden placed on the other side. Indeed, as I mentioned, export interests don't even have to appear. Often they don't appear. Importers attend on their behalf, representing, if you like, the other side, but when importers appear before the tribunal, one gets no information on the activities, planning or internal processes of the exporters who produce the goods and who've dumped those goods.
My own humble view is that the balance needs to be adjusted so that it is even-handed. To the degree that the domestic industry is required to produce data, the exporters must similarly be required to produce data. If an exporter through its counsel wants to cross-examine the domestic industry, the exporter itself has to be present to undergo cross-examination by counsel for the domestic industry.
These are somewhat technical matters but I think important, because the focus at the inquiry has been unduly, in my view, on the domestic industry and its witnesses. Some adjustment to make it more balanced is required, bearing in mind - and again, I have to emphasize this point - this is not an adversarial process at the hearing. It is a public process, an inquiry by the tribunal into a statutory matter.
In terms of comparability, let me give you an example of non-comparability. In the United States, the Tariff Act of 1930 defines the term ``material injury''. In Canada there's no definition of the term. In the U.S., material injury is defined as injury that is not immaterial, not inconsequential.
I laugh too, Mr. Grubel, every time I read the U.S. legislation. I'm not suggesting that we copy the American definition, but I am saying there's a substantive issue here. If it's more difficult to prove injury in Canada, and if the standard of causation between dumping and injury is higher in Canada, it puts Canadian industry at a disadvantage vis-à-vis their U.S. counterparts.
That's just one example. I don't think we should stress that as the only example.
I represent here the domestic industry, as I often do. I think you can tell that. I think I should have remedies available to my clients that are comparable to the remedies my counterparts in Washington have for their own clients. That's one of the things that drives my comments today.
As far as public interest is concerned, you raise a good question, and I think it bears some examination. I'm not exactly sure how the U.S. public interest process works, but coming back to the Canadian process, I think we need to discount the data we've heard about 1 recommendation out of 83 cases. Don't forget, it's in a very small minority of those cases that the public interest groups have even asked to be heard. Mr. Cheng has said there were 12 cases where public interest groups desired to be heard, so it's not 1 out of 83 but 1 or 2 out of 12.
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In the use of section 45, I think the tribunal, if you look at the cases, has a pretty good idea of what values it must assess in determining whether to abate or lower anti-dumping duties. The point to bear in mind is that SIMA is directed to ensuring against injury to the domestic industry; it is not designed to be a broad public interest piece of legislation. While Mr. Flavell talks about ensuring that there's a balance, I think we have to be very cautious here about what elements we inject into SIMA under the guise of finding a balance. SIMA implements the GATT anti-dumping and subsidies agreements. I don't think we can stray beyond that in terms of trying to inject some notion of ``balance'' that is outside of the four corners of those agreements.
The Co-Chairman (Mr. Duhamel): Are there other comments by other presenters?Mr. Cheng.
Mr. Cheng: Mr. Cullen, if I may, I have several comments.
First of all, there is no public interest provision comparable to section 45 in the U.S.
Second, you might want to keep in mind that the public interest section 45 also has another provision that might be used for the public interest; in fact, it was used once under the Anti-dumping Act, as it then was. It's now section 14 of the SIMA, which essentially gives the Governor in Council the right to exempt goods or a class of goods from the application of SIMA. It was used in the time of the Anti-dumping Act to exempt certain medical devices from findings of material injury and the application of anti-dumping duties.
Can I, though, take this opportunity to bring us back to this question of public interest and how perhaps to clarify it. Mr. Chairman, you heard earlier from a couple of my colleagues that there may be an opportunity, for example, to consider the lesser duty rule. I'd like to refer you first to page 9 of the materials that I handed out to you. I put down what I considered to be the issues that the tribunal, in its application of the provision, has considered. There is not one I've heard today that isn't on that page already.
Second, I've heard the term ``lesser duty rule'' bandied about before your committee before today's session. I've also heard it used today. Lesser duty is a difficult concept. In the other part of the materials I gave you, I provided extracts from specific case decisions by the tribunal under section 45. On page 6 is the beer case. You'll see that in fact the tribunal, in conducting a full section 45 public interest inquiry, says in the first paragraph:
- ...we believe that some portion of the anti-dumping duties applied on some of the dumped beer
imports are superfluous.
- And they go on to say why. But then you can see a little later in that same paragraph that they
say:
- The tribunal has not determined the exact price levels required for these products to remove the
injury to the B.C. industry.
The Co-Chairman (Mr. Duhamel): Thank you, Mr. Cheng.
Are there additional brief comments on this point?
Mr. Flavell: Thank you, Mr. Duhamel. I have just a couple of points, if I might.
I think what I would say to Mr. Cheng is that the way to deal with public interest and lesser value is precisely to offer some legislative help. I don't want anyone to think I was critcizing the tribunal for not having done this exercise. I think the tribunal was not directed very plainly to do so, and therefore chose not to.
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What I am saying is that there should be changes in section 45 that would make it clear as to what the criteria are and how it should be done. I think that would solve that.
I would like to pick up quickly on Mr. Herman's oft-repeated allegation, if you will, or proposition, that the Canadian process - the CITT - is somehow loaded against Canadian producers. I have represented Canadian producers as well as exporter/importers, so please give me some degree of objectivity.
You have to bear in mind the nature of the case. The case is that the tribunal has to decide whether it is satisfied that the Canadian producers have been injured. The Canadian producers, surely, are the people who are going to be bringing forward the evidence of this. So in a sense - and I use the term ``modified court system'' - the Canadian has to prove its case in order that the tribunal will be satisfied that he has been injured.
Traditionally what happens is the Canadians bring a great deal of evidence to show that they have been injured - as they should. What the foreign counsel do is cross-examine that evidence. I've been in cases where the Canadian producers have brought 120 allegations of lost sales to back their position that they have been injured. We on the other side of the table have to cross-examine those, because - surely you would agree with me - if we are able to prove that all of those 120 are ill-founded, are incorrect, that is going to bear on your decision. You're going to say, oh well, he says he's been hurt because of lost sales, and he hasn't had any lost sales, so I don't think he's been injured.
That is the nature of the process going on. To indicate that because that is the nature of the process, that that somehow loads the process against the Canadian complainant is, I think, unfair. The tribunal is merely trying to test those allegations that support a statement of injury.
The Co-Chairman (Mr. Duhamel): All right, colleagues, we can start another round.
[Translation]
Mr. Paré.
Mr. Paré: As everybody had a chance to react to Mr. Grubel's remarks, I also wish to make a comment. I shall be very brief and I shall speak not as an economist, but as a former school principal.
Mr. Grubel considers that it is impossible to sell products under cost. Personally I say that it is impossible in the long term but possible for a marginal part of production. In every case, I presume that it is done to eliminate foreign competition. This practice is probably done with that intent and is probably unfair.
The Co-Chairman (Mr. Duhamel): I would be interested to follow-up on this. Is this practice aiming only at eliminating competition? I do not believe so even if I am not a trade specialist. I heard that it might be a motivation, but I think there are other motives. Someone might want to react.
[English]
Mr. Flavell: Yes, with the greatest of respect, Mr. Paré, I think it is seldom the case that the foreigner is trying to drive out Canadian production.
In fact, Professor Trebilcock of the University of Toronto studied every tribunal case ever taken and found no instances of predation, no instances where the foreigner had approvable intention to drive people out.
What happens apparently, time after time, is that large companies, usually with excess capacity, would rather use their plant to sell some product at any price over variable cost in order to lessen its overhead per unit. So many dumping situations occur, as I understand it, simply because a foreigner is trying, if you will, to offload certain products and make a few dollars at it to keep his plant busy.
The Co-Chairman (Mr. Duhamel): Okay. Could we pursue that just a bit? Are you suggesting - I'm not sure that you have - that because it wasn't proven it is not so, or are you simply saying it wasn't proven? Because there is a distinction.
Mr. Flavell: Yes. I'm saying that Professor Trebilcock found that there were no instances of predation, from which I assume he reviewed the records and decided that the evidence did not support a case of predation - that no attempt was made to show that there was predation. Of course, that makes sense because there's no requirement that there be predation.
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The Co-Chairman (Mr. Duhamel): Are there any other reactions from any of the panellists?
Yes, Mr. Herman.
Mr. Herman: This is just a brief comment on two points, one on predation. Of course, the nature of the process doesn't allow the tribunal to get evidence of predatory intent because it looks at the fact of dumping and the causal link in Canada between that dumping and the injury to the domestic industry. How it gets evidence of predation is beyond me, because it doesn't get evidence of what the directors of a foreign company abroad might have had in mind in selling the product at a given price.
Second, you're absolutely right in that there are instances where a particular product may be dumped out of a whole range of products. One can speculate as to what the motives are, but often it's to get a marginal advantage in a market, bearing in mind that there are a number of exporting industries abroad that have a great need for hard currency at almost any cost. It's a fact of life.
Third, Mr. Flavell mentioned that it is the industry that has to show that dumping or subsidization has caused injury, but of course there is the issue of threat of injury. While the domestic industry may be able to bring forward on its own evidence that dumping has caused it injury, the only way it can find out whether there is truly a threat of injury is to be able to cross-examine the export interests. It's only through knowing how those operations operate in the international market that one can effectively prove threat of injury. I'm suggesting that there aren't enough requirements in the process to get at that information.
The Co-Chairman (Mr. Duhamel): I suppose one could also ask the question as to whether we all define predation the same way, but I'll stay away from that.
Are there additional comments to be made on that point?
[Translation]
Mr. Paré, is that enough for now? Yes?
[English]
Mr. Grubel.
Mr. Grubel: What's the name of the president of the steel company in Regina? Roger Phillips? I remember his coming to the Fraser Institute and giving a talk about this, where in fact he was complaining that the Americans are not allowing a perfectly good, economically efficient behaviour. If you have an economic downturn and total sales fall, your average cost will go up and you should really be selling at marginal costs. Americans are doing it here. I think this is unbelievably irrational behaviour written into this law.
I will never forget spending a day with Anne Brunsdale, who was, as if you didn't know, the chair of the International Trade Commission of the United States under Ronald Reagan. She left in total disgust. To answer you, Mr. Herman, one of the things she said is that in Canada we bring more trade actions against ourselves than we bring abroad to the United States. We find a higher percentage of damage than the Americans do against us.
Our media don't care to talk about this, because public interest in the form of consumers doesn't make any headlines. A bicycle factory having to close down might have had to close down anyway because they were not competitive any more. That is something else again.
What Anne Brunsdale said in the seminars I attended made an awful lot of sense to me. Why doesn't Canada get together with the United States and do what is the right thing for the public of Canada and get together on NAFTA and get rid of this? I know where your interests lie, but try to wear another hat.
We are in the same situation we were in 15 years ago. If somebody had said let's have free trade in North America at that point, they would have been lynched. The Liberals probably would have sicked the media on the person who said that in the House. They would never have been happy again.
Now we have free trade. We have to think the unthinkable sometimes. I would like to ask for your reaction on why you think it would not be possible for Canada to provide leadership and say, certainly within NAFTA, let's get rid of this monster called trade remedy legislation.
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The Co-Chairman (Mr. Duhamel): Mr. Grubel, are you arguing that if we all agree, if we all had the same set of values, we wouldn't have to disagree? I get the impression there are different values out there, different perspectives.
Mr. Grubel: No, there aren't.
The Co-Chairman (Mr. Duhamel): Let's see what the panel has to say.
Mr. Grubel: The political system encourages the rewarding of special interest groups that retain their loyalty to those who have rewarded them, and the cost is so diffuse that the political system does not care about the costs, because they're only public interest costs. That's why we have a lot of this legislation, and why we used to have protection. Now we have decided that the public interest is more important and we're trying to get rid of it.
The Co-Chairman (Mr. Duhamel): Let's see if there's agreement with your view.
Mr. Grubel: I think this government, this Liberal -
The Co-Chairman (Mr. Duhamel): You're about to say something nice now, so be careful.
Mr. Grubel: Even in the 1990s they think they can make themselves immortal, that they will be famous forever as having been the party that started getting rid of this legislation within NAFTA.
The Co-Chairman (Mr. Duhamel): Comments, reactions?
Mr. Herman: Mr. Grubel, you're not necessarily pushing on a closed door. First of all, I think you have to be careful when you talk about special interests. There are many interests and they're very interwoven and complicated, and as many of us around the table can tell you, we represent clients with different interests. They are not always the same.
I can't speak for the Government of Canada, but I understand it wanted an agreement with the United States that would, in the NAFTA context, do away with anti-dumping as a remedy. It makes perfect sense and I think many of the lawyers who practise in this area would agree that when the border disappears in terms of the tariff and trade is free, it should be theoretically impossible to dump into another market, and you know that as well as anybody.
I think that is the preferred position of many producing industries in Canada. They'd like to get rid of anti-dumping remedies. I understand that in the agreement signed with the Government of Chile that will be made public shortly, the Government of Canada and the Government of Chile have agreed to abandon anti-dumping as a remedy in the context of Canada-Chile trade, where products trade at zero tariff. Australia and New Zealand have done the same thing. I think it is possible to do it in the North American context, but - and I can't emphasize it enough - I can't see it being in Canada's interests or the interests of your constituents for Canada to unilaterally withdraw and leave itself at the mercy of the other trading partners that continue to have anti-dumping laws.
I don't believe for a moment that unilateral disarmament, if I can use that term, would accomplish anything. I just don't think that is the way to go. The way to go is through careful meticulous painstaking negotiation over a period of time, and hopefully convince others, as we've managed to convince the Government of Chile, that this is certainly a possibility. Hopefully, the people in Washington, our friends in the United States and in the Congress, will see the light some day.
The Co-Chairman (Mr. Duhamel): Other comments or reactions?
Mr. Flavell: Mr. Grubel, lately I have represented Americans slightly more often than Canadians, and I can assure you that at the moment our American friends are in no mood to agree with us to abolish anti-dumping. I was in Washington last Thursday and one very nice chap said, I suppose you and Chile will be ganging up on us now to get rid of anti-dumping, and he laughed uproariously.
I believe the feeling down there is that they are not prepared to give up their trade remedy, and as long as that's the case, regrettable as that is for theoretical reasons, I agree with Mr. Herman that unilateral disarmament would be unwise.
The Co-Chairman (Mr. Duhamel): Could you expand upon that just a bit more? Why has this happened? Was it always there and has simply surfaced more? What's your interpretation?
Mr. Flavell: I'll have a go and then let Mr. Herman have a go.
.1700
I perceive that in the U.S., trade remedy is regarded as mother's milk. It's a motherhood issue. I think it comes out of years of being frightened of the Orient and competition from the Orient. As well, I think it has been very effectively used by certain American industries. More recently they have chosen - for reasons too technical to bother you with here, but it's called cumulation - to include Canada in several of these actions, particularly in steel. So I think we're talking about an industrial group that sees the benefit of trade remedies and cloaks them in the fear of Oriental or low-cost type industries, and then kind of mixes that in, when it suits them, to Canada.
But I think it's something they hold in good faith as being something they need to keep.
The Co-Chairman (Mr. Duhamel): Thank you.
Are there any final comments on this point before I go to Mr. Cullen? Mr. Cullen.
Mr. Cullen: Thank you, Mr. Chairman. I think all of us would agree with Mr. Grubel that it's the world we want to move towards. Maybe Preston Manning can work on Newt Gingrich down there and we can begin to change things.
Mr. Grubel: I don't think it's Gingrich. It's Gephardt and those guys.
Mr. Cullen: Okay, whoever.
I'd like to come back to this question of harmony or disharmony, because I think we've been touching on it here - this business of unilateral disarmament. There's another tactic that says we should toughen up our trade rules. For example, in the public interest, I don't know what one could do there, because they don't have much down in the States, and ours has a 1-in-83 batting average. I'd like to come back to that later because sometimes if you're 1 in 83 or 1 in 12, as Mr. Herman says, you just don't have good batters or the issues aren't good enough to fight about.
In the area of harmony, if we look.... Mr. Chairman, I know you want to focus on public interest, but I'm trying to create a link here between other areas of their trade remedies and ours. One example is a prospective method of duty assessment and the retrospective.
I come back to an industry that I'm more familiar with, which is the forest products industry. Our industry here would love to see the kind of retrospective approach used in the United States go away. Coming back to the tactical approach to this trade law, we can make ours tougher and get their attention in the United States, and maybe they'll ease up on some of their rules. Others would argue that given the sizing that we're looking at, and Chile and Canada ganging up on us, as Mr. Flavell said, and the chuckles that go on....
It seems to me that one of the issues we're faced with is how we create a more level playing field. Do we change ours? Can we influence the United States to change their rules, or are we bound to live an eternity with this sort of imbalance of trade remedies?
Who would like to comment on that?
Mr. Herman: I'll have a quick go. First of all, there are people who have recently studied the two systems and have concluded that there is considerable comparability, and that the Canadian system is as effective as the U.S. system, if effective means obtaining injury decisions in going to the tribunal.
I think most experts would agree that there are aspects of the American procedures that are more demanding, difficult, time-consuming, obstructive and prohibitive of imports going into the U.S., but at the same time, the idea that the way to persuade a ``bad boy'' to get better is to adopt his badness is a strange approach to me.
.1705
It seems to me that we talk about taking the high road. I don't like suggestions that we adopt any of the American Draconian features as a way of getting their attention. To say that is to say that the way to deal with anything in this world is to poke the fellow in the nose as opposed to doing diplomacy. Sure, you get his attention, but I don't know if you achieve anything.
I'm not at all sure that it is fair to say the system is unbalanced in favour of Canada or the U.S. In terms of the win-loss record of the tribunal and the ITC, there's no perceptible difference as far as I can see. I looked up a bunch of tribunal decisions and there was a period from 1993 through to 1996 when there were 11 straight injury findings in our tribunal. That doesn't sound to me like a system that's unbalanced against Canadians.
The Co-Chairman (Mr. Duhamel): Are there other comments from the panellists?Ms MacMillan.
Ms MacMillan: I agree 100% with Mr. Flavell. I don't think it's settled or unanimously agreed that our system has fewer teeth in it overall than that of the U.S. Secondly, I wonder why, given that we have different objectives, a different industrial structure, and are a different sized country, we would necessarily want to emulate its trade policy here in this country.
The Co-Chairman (Mr. Duhamel): Mr. Herman and Mr. Cheng, in that order.
Mr. Herman: I have to revert to what I set out in the brief. Maybe some of my comments suffered by being too telescoped. I'm not suggesting that we mirror the U.S. system, and I'm not suggesting that we adopt U.S. laws in every respect where our laws differ. I'm not suggesting that for a moment. I'm saying that there is an overall need to ensure that in a free trade environment under the NAFTA, our trade remedy laws and the trade remedy laws of our other NAFTA partners are broadly comparable.
I suggest in my brief that there are specific instances where - and I know it's hard for Canadians to say this - the Americans just might have a better approach to one or another part of the dumping or subsidy remedies. I've pointed out in my brief some areas where I frankly think they do it better than we do, and we could profit from that. I don't think that is abhorrent as a matter of principle or philosophy.
I'm not sure I agree, though, that by tightening up certain parts of our laws administratively, we are adopting the other guy's badness. I don't think that's the case at all. I suggest in my brief that we should be trying to give Revenue Canada sufficient authority to collect the necessary data to ensure that they have a sound basis for an evaluation. We want to ensure that they have that authority, and I suggest areas where they can be given that authority.
There are other areas, and I won't go into them in detail, where I suggest we could change some aspects of the system to make it more comparable. I'm not talking about a broad rewriting of the trade laws. I'm talking about some areas where we could make fine-tuned adjustments here and there.
I come back to what I said earlier. SIMA works pretty well. I don't think any of us would disagree with that. It works pretty well in doing what it is set out to do: to protect the domestic industry from the injurious effects of dumping or subsidization, as the GATT and WTO agreements require it to do.
The Co-Chairman (Mr. Duhamel): Mr. Cheng.
Mr. Cheng: Part of what Mr. Herman said is very important to keep in mind. The rationale for many of the changes that have been suggested to you is not necessarily to get the Americans to change their system.
Very simply, there are aspects of the system that are conducted by them in different manners. If the proposals are that our law be changed, and it happens to be that it is the way they do it, that's not necessarily to suggest that we should be as hard on them as we argue they are being on us. It is simply that there are aspects, as Mr. Herman said, that may be conducted better and more efficiently, from both the exporter and the domestic industry point of view, in their manner, under their legislation, than under ours.
.1710
The Co-Chairman (Mr. Duhamel): Go ahead.
A voice: Mr. Chairman, I have a comment on the rate of success for domestic industries, the 1 in 83 or 1 in 12 or whatever.
In our discussion you alluded to some of the issues here, such as the fact that perhaps there's not a clear set of guidelines on what might be in the public interest or not. Mr. Flavell also touched on the point that through cross-examination or evidentiary means, it's possible to determine that the case is really not there.
I know it's a subjective call, but do you think the people who have come forward under section 45 have had good cases, or have they not been well presented? Have the facts not been there to support the case, or have the guidelines not been defined well enough? Or is it a combination of all of the above?
Mr. Flavell: I think it's the latter.
The guidelines aren't there. Section 45 is woolly, to put it mildly. I hope I never meet the legislative draftsman, because he might punch me in the nose.
A voice: She.
Mr. Flavell: She.
It is a very permissive type of provision that says the tribunal can. There's very much a permissive approach in it.
Again, I don't wish to appear critical, but the tribunal has taken a fairly narrow view of what the public interest means and what they should be doing under this provision. That is shown by the fact that in the very few instances where it has been argued effectively, they have only once actually made a recommendation to the Minister of Finance that was acted upon.
I think the purpose of the legislator was to try to effect this balance - this terribly difficult word we keep running into - by section 45. It was probably felt to be quite brave to do that, so they didn't want to be too brave in the drafting. If I'd been a draftsman, then I would have said, let's see how it works for 10 years, and if it doesn't work, we'll fix it. Now's the time to fix it if you're going to have it.
I think we all agree, or at least every paper I have seen expresses a theoretical agreement, with the concept of balance. It's been said over and over again that you may save 10,000 jobs in the producers and lose 40,000 jobs in the people who are using that product as an input. So it really does need balancing. I think section 45 was meant to do that, and it hasn't.
Mr. Herman: I presume, Mr. Chairman, that my friend Mr. Flavell would then agree that the tribunal should have the power to increase the amount of duties applicable if it determines it's in the public interest to do so.
The Co-Chairman (Mr. Duhamel): Thank you.
Ms MacMillan.
Ms MacMillan: The people in Geneva might have a bit of difficulty with that idea, though,Mr. Herman.
I have a comment on the whole issue of why the Minister of Finance and the tribunal have seen fit to reduce duties in the public interest on only one occasion. I can't help but think that if there were a really massive imbalance out there, such as what occurred in the grain corn case back in the late 1980s, we would see people regularly coming to Ottawa and arguing for this. There isn't a clear industry group or special interest group, as Mr. Grubel would indicate, that has taken a lot of interest.
I'd also caution once again against loading too much onto SIMA. SIMA is supposed to be there to help industries in very narrow circumstances that require special protection for a short period of time. To say we're going to help this industry out because we think it's going to disappear without the duties and then turn around and ask the same decision-makers who were charged with making that assessment to possibly recommend eliminating the duty or severely reducing it is perhaps putting an excessive burden on the system.
I can't help but wonder whether the very best thing, in the very best interests of the overall public, is to make that special protection available in only a very small number of cases, in very limited circumstances and for a very short period of time. Design the system in that way, and don't have the very same people who sat and listened to this story about the industry going out of business in a week and a half unless you could stop these imports hear from the Consumers' Association of Canada that it isn't good.
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Either it's good or it's bad to have special protection. I would argue for making it harder to get in the first place, making sure that people don't have it for a day longer than they require it, and getting rid of it in the event that they don't. That is, I think, in the best interests of....
The Co-Chairman (Mr. Duhamel): Mr. Cheng.
Mr. Cheng: I'd like to make several points, perhaps to clarify.
First, I wanted to not take responsibility for this 12 out of 86 or whatever, because in fact there are at least a couple more instances in which decisions were not rendered. They simply indicated there was nothing worthy of the public interest for them to even consider, so maybe the number's up to 14 now. But whatever numbers may mean....
I also wanted to point out that Ms MacMillan was indicating that the ability for someone perhaps other than the tribunal to take on this question in fact is exactly what is provided by the process right now. It is, as you know, a recommendation to the Minister of Finance that he reduce the levels. Out of the two recommendations he has received, the reports recommending reductions, only one had a specific number attached to it, and that was a 30¢ per bushel number in the grain corn report.
The minister did act, but the Order in Council that was pursuant to the report and his decision referred to a 46¢ per bushel number. So there is exactly now room for a second view and a second opinion, perhaps removed from the very people who have imposed the dumping material injury finding.
The Co-Chairman (Mr. Duhamel): Thank you, Mr. Cheng.
My colleague Mr. Grubel has asked to make a brief statement or pose a very short question. I have one question I want to ask, and then I'm going to ask each panellist to perhaps do a brief resumé. That means ``brief'' defined as one minute or less.
Mr. Grubel.
Mr. Grubel: Mr. Chairman, if we have to have the tribunal, I would very much encourage that changes be made to accommodate the recommendations Ms MacMillan made.
The lower the rate of return in terms of the length for which the protection is offered, the fewer actions we will get and the less damaging it will be to the consumer interest. If they have to have a toy, make it as little damaging as possible to play around with.
I would also support Mr. Flavell's recommendation that section 45 be given equal rank with section 42 and that they always be considered in combination.
Finally, my recommendation to the minister is please don't give up. Just remember that 15 years ago if somebody had said we would have free trade in North America, they would have been declared ready for the nuthouse. Similarly, let us stay alive to the opportunity that there may be some ambitious chairman of a congressional committee in the United States who would like to run with it, and let us be ready, make internal decisions, to say that to have an abandonment of those rules under NAFTA is what really would be best for Canada and for Canadians.
The Co-Chairman (Mr. Duhamel): Is there any major disagreement? If not, we'll proceed. I'm not trying to encourage agreement or disagreement, but if there is any reaction to those comments, please do not hesitate to comment now.
I'd like to ask my question, and perhaps people can correct me if I've misread something. I get the impression from certain panellists, not only today but previously, that some individuals feel it might be wise to have some administrative and legislative measures that are closer to those the U.S. has. If that's so - that is, if I've heard correctly - is there a possibility that if it were done it would contravene certain sections of NAFTA, the North American Free Trade Agreement? Is there a delicate balance there, assuming that the assumptions I've made are correct? Will someone help me to decipher that?
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Mr. Herman: There's a provision in NAFTA that requires us to consult with the United States prior to changing certain aspects of our anti-dumping, countervailing duty remedies. The consultations are required, but they certainly don't have a veto in those consultations and they only go to legislative change.
Second, if the changes were, let's say for the sake of example, simply to mirror, if you want to use that term, or to change our laws so that they adjust themselves to the U.S. laws, I don't see how the U.S. could even object in the context of those consultations. But that's not really what we're talking about. I think we're talking in many cases about some administrative adjustments to fine-tune the way SIMA works administratively.
The Co-Chairman (Mr. Duhamel): Legislative.
Mr. Herman: That's my view.
The Co-Chairman (Mr. Duhamel): And you're assuming that the United States would never question or seldom question the mirroring of their laws as being unfair?
Mr. Herman: First of all, I'm not suggesting we mirror their laws. I'm saying we make our laws comparable, but as long as we're in the same ballpark, I don't see how they can object.
The Co-Chairman (Mr. Duhamel): I don't see how they could, but I guess my question was do you think that they might. We'll get on to your colleagues. Perhaps they would like to make some points.
Mr. Cheng, did you want to react to that?
Mr. Cheng: Only to the extent, Mr. Chairman, from our past experience with U.S. legislators and domestic, as Mr. Grubel called them, special interest groups, I have no doubt that they would object. As to the particulars of whether we would have difficulties, I'm sorry but it would depend very much on the exact provision you are addressing.
The Co-Chairman (Mr. Duhamel): Thank you, Mr. Cheng.
Mr. Flavell and then Ms MacMillan, perhaps you'd like to comment.
Mr. Flavell: I have a recurring nightmare that they would smile and say, you've finally seen the light in changing your laws to be closer to our laws. That's facetious, of course, but I do have deep concern, though, that if we make our anti-dumping laws more difficult, never mind whether we're doing it by emulating the U.S. or for any reason, we are a country that depends terribly on exports to the United States. The United States is not a country that depends terribly on exports to Canada. If we make our system more difficult, the Americans more and more - and they already do it quite often - will simply cease exporting whatever product it is that forms 0.2% of their exports and is really of very little meaning to them. This is my great fear about anything, and I think Mr. Grubel's approach would mirror this, that you have to be careful about making this law any more difficult, because we are in a very perilous situation.
The Co-Chairman (Mr. Duhamel): Thank you.
Ms MacMillan.
Ms MacMillan: I'd agree completely, and I think as well that when we worry about our trade relations with the United States it's easy to think that they're disharmonious when in fact they're overwhelmingly harmonious. To rearm ourselves or increase our arms to capture the possibility that we might get into some trade dispute some time in the future in which we'll be firing shots at each other across the border I think would have significant long-term costs.
I think we are a country that depends very much on trade. We have a very important reputation in the world as a whole for the openness with which we conduct most of our trade relations. There's a lot of work going on in other multinational fora, such as the OECD and other places, that is aimed at actually getting trade to be more open and more liberal. I think that's where we should make our reputation, and not in increasing the arsenal of weapons we have to use bilaterally.
The Co-Chairman (Mr. Duhamel): Thank you. I think Mr. Grubel will agree with making it more open and more liberal.
Having said that, I'd like to thank all of the panellists for their contribution.
[Translation]
Thank you very much. I appreciated very much this discussion.
[English]
There's only one final comment I wanted to make, quite apart from thanking you most sincerely. Someone referred to these points, this topic, as boring. Not at all. We're talking about public interest and all the varied possibilities - for instance, predatory behaviour, whatever that might mean. There is also harmony and disharmony; are we in harmony or disharmony? What is injury? What is a special interest group? I thought Mr. Grubel was going to say the Reform Party was one, but he did not, he did not.
Thank you.
[Translation]
Thank you and have a good day.
The meeting is adjourned.