EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, September 18, 1996

.1538

[English]

The Co-Chairman (Mr. Dupuy): May I bring this meeting to order, please.

Let me first welcome our colleagues to this joint meeting of the subcommittee on SIMA and the subcommittee on trade disputes. We have a busy afternoon ahead of us.

First of all, we are going to proceed with what is basically a round table. We had agreed on this, we put it together, and that explains why the seating arrangements are loose today. We're not going to proceed in the usual routine way that we do when we have witnesses.

We plan to provide an opportunity to the experts to make a presentation of about ten minutes. I will name them momentarily.

[Translation]

Then, we will take the time we need, an hour if necessary, to ask questions. We will make our way around the table; it will all be rather informal.

As you know, our committee is privileged to have two co-chairs. I have arranged with Mr. Duhamel to handle the easy part and to leave him the hard part. I will be introducing the presenters while he will be presiding over the question and answer portion.

I remind committee members that we will be holding an in camera meeting after the round table. I would appreciate it if you would remain in the room for this in camera session.

.1540

[English]

Let me introduce the people who have kindly agreed to join us today to help us in our meditations and to improve our knowledge. From Queen's University, we have Mr. Klaus Stegemann; from the University of Toronto, Mr. Robert Howse;

[Translation]

from the École d'administration publique de Montréal, Emmanuel Nyahoho; and Peter Clark, President of Grey, Clark, Shih and Associates Limited.

[English]

Perhaps we should start in that order. I will invite Mr. Stegemann from Queen's University to take the floor.

Professor Klaus Stegemann (Department of Economics, Queen's University): Thank you, Mr. Chairman.

The committee kindly provided me with eight questions, which I answered in the written submission. I do not want to read all my answers. I would like to focus on two of these questions because I think they are closest to what this committee may want to consider and should consider in the present context of revising or amending SIMA.

Question two, Mr. Chairman, asks, ``Does the current system adequately consider the potential negative impact of anti-dumping and countervailing duty actions on consumers and downstream industries?'' and ``What are your views on the purpose and procedures of the public interest provision of the act?''

In response, I would like to say that in practice the current system does not consider the negative impact of anti-dumping and countervailing duty actions on consumers and downstream industries.

In my view, the public interest provision in SIMA has the purpose of permitting the tribunal to consider the negative impact of anti-dumping and anti-subsidy protection on consumers and/or downstream producers where the opposing interests make a strong case. This purpose was clearly articulated before the Mackasey subcommittee in 1982 and in that committee's final report.

However, the tribunal has not used this part of its mandate in a meaningful way. I do not believe procedures are at fault. It is a matter of political will - or the lack of political will - to back up recommendations for reduced protection that the tribunal could have made under this provision.

The following question is number three: ``Do you think SIMA provides an appropriate balance of the various domestic interests that may be involved or affected by anti-dumping or countervailing duty action?''

My response is that SIMA as implemented does not provide a balance of the various domestic interests that may be affected by anti-dumping or countervailing duty actions.

In my view, a policy that grants full protection without significant exceptions does not strike an appropriate balance, because the policy is unduly costly for the Canadian economy. Anti-dumping measures eliminate the most advantageous sources of imported inputs for Canadian producers. They have to use higher-cost inputs that could still be imported from other sources. The higher cost of inputs makes investment in Canada less attractive for industries affected.

Similarly, Canadian consumers have to pay higher prices because anti-dumping measures force foreign suppliers to raise their export prices by substantial margins. And ``substantial'' means 50% on average.

The tribunal should have a mandate to evaluate such negative effects, as they may offset the protective effects of anti-dumping and anti-subsidy measures.

How could one practically strengthen the public interest provision?

I think Parliament could strengthen the tribunal's mandate under the public interest provision by incorporating into SIMA a requirement to consider the ``lesser duty'' option recommended by the WTO anti-dumping and anti-subsidy agreements. In effect, this would give the tribunal a mandate to reduce the normal values as determined by National Revenue for its assessment of anti-dumping or countervailing duties.

.1545

Parliament could go further and make it mandatory for the tribunal to reduce nominal values to the price level at which like inputs are available to close foreign competitors of Canadian users of imported inputs, or that price level plus a modest margin.

In other words, Parliament could structure a public interest procedure that would require the tribunal to investigate the competitive circumstances of affected downstream producers if they make a case, including material injury suffered by them as a result of anti-dumping actions, and strike a balance that would stand as the tribunal's finding and would not depend on ministerial discretion.

I would leave it at this for the moment. Thank you, Mr. Chairman.

The Co-Chairman (Mr. Dupuy): Thank you very much.

The second person on our list is Mr. Howse.

Professor Robert Howse (Faculty of Law, University of Toronto): Thanks very much. I don't actually have a written submission, and having heard Professor Stegemann's remarks, I feel a little less unhappy about that since, first of all, I can start off by agreeing with his reflections on the questions he spoke about. But I'd like to start, if I may, from first principles, where I am coming from in supporting the kind of strengthening of the public interest provision he's spoken to.

Why do we have laws that permit anti-dumping actions and countervailing duty actions? The latter, of course, are much less important because, as we know, the United States is today virtually the only country in the world that really uses them.

The first reason that's often given is fairness, that there's something unfair about selling a product in our market at a price below which it's sold in some other market or the home country market.

I see no case as to why that's unfair, any more than most other forms of benign and legitimate price discrimination. I don't think there's anything in the economic literature that would support a concept of fairness that suggests there's something wrong with this, except perhaps if it's connected to anti-competitive behaviour like predation, which ought to be dealt with by competition laws and not really by these kinds of measures.

The second answer is that the reason we have this is that other countries have it and they're using it, including against us, so we have to have it too, even though in fact Canada has made, I believe, some kind of commitment to trying to replace anti-dumping laws in the North American context with some sort of supranational competition regime.

Does it benefit us to have it since others do? Is it a bargaining chip, so that if we were to get rid of it ourselves we would lose the possibility of exercising leverage to get others to agree with us? I'm not so sure, but that's at least less of a bogus reason why we have it than the first reason, that somehow what's involved is something that's intrinsically unfair or unjust.

The third reason we have it is that it helps or protects, supposedly, certain domestic industries and perhaps certain jobs. Here, really, it's a cost-benefit analysis, and this will bring me to the public interest issue that Professor Stegemann has already addressed.

Are there benefits to some interests - producers, workers - from having this kind of law that outweigh the costs or disadvantages to consumers? I think ideally the analysis would be in each case such a cost-benefit type of analysis.

I think two points have to be borne in mind. One, with the increasing globalization of ownership and increasing cross-ownership of companies, are we really even protecting Canadian industries? So the costs may be felt mostly by Canadian consumers or by Canadian firms that are users of inputs, but who are we protecting? We're protecting increasingly just the interests of global capital that has no particular allegiance to this country. Are we saving jobs, or is the protection used as a stopgap measure for these companies to restructure and move the jobs or the investment offshore? Who knows? Basically here we don't have any empirical evidence that we're actually saving Canadian jobs.

.1550

I think the fourth reason is related to the second, that other people have it, which is it that in certain sectors it allows us to fight trade wars against other people who are doing it against us in that sector. I suppose there's the sense that if we didn't have it, again, we wouldn't have the specific leverage to sit down with those people and try to hammer out some kind of settlement of trade differences that deals with the adjustment and related concerns that are actually underlying the real dispute.

At the end of the day, apart from the retaliatory, leverage-type reasons, as I say, the most coherent would be that you can do a cost-benefit analysis and in certain cases the benefits to legitimate Canadian interests will outweigh the costs to certain other legitimate Canadian interests. But to do this analysis we require a much more adequate public interest provision. Some of the possible changes to that have already been suggested by Professor Stegemann.

I think I would go even further and require that the analysis be done in each case - in other words, that it not be optional, that the tribunal has to conduct the analysis and give reasons for deciding that the public interest actually supports in this case the imposition of duties. I don't think we can rely upon intervention of other interests; that's very expensive. Some of these interests, like consumers, are extremely diffuse and they don't have a lot of money, whereas the interests on the other side of the table are not only concentrated and have big concentrated dollar stakes in what's going on, but also we have to remember that the government, the people, are giving them a subsidy, right? In effect, the action - the investigation - is being carried to a significant extent by the public purse.

The Co-Chairman (Mr. Dupuy): Thank you very much, Mr. Howse.

I will now invite Mr. Nyahoho to make his statement.

[Translation]

Please proceed, Mr. Nyahoho.

Mr. Emmanuel Nyahoho (Professor of International Economics, École nationale d'administration publique, Montréal): Thank you, Mr. Chairman.

First of all, I want to thank the committee for inviting me to take part in this round table.

You submitted for our consideration a series of eight questions. No doubt it would have been a useful exercise to examine each of these questions in turn, but I decided to focus rather on the specific question of dumping.

The question of anti-dumping and countervailing duties is inextricably linked to the very notion of dumping. My presentation today will focus on three areas.

Firstly, I will look briefly at the dumping situation; secondly, I will focus on what, in my view, is the crux of the matter, namely the manner in which the legislation is applied; and finally, I will conclude with a number of practical considerations.

Is dumping a reality or a myth? What exactly is dumping? I scanned the legislation and discovered that dumping is defined as the act of marketing goods at a price below their normal value. What exactly is the normal value of goods? Section 15 to 23, 29 and 30 of the act clarify to some extent the definition of "normal value of goods". However, on reading the legislation, we very quickly realize that it is not sufficiently informative; it contains prohibitions, exceptions and a long litany of conditional terms.

It is impossible, in my opinion, to draw a clear picture of what the normal value of goods is by reading SIMA.

I want to draw your attention in particular to section 17. This provision doesn't enlighten us as to the meaning of "normal value". It refers to like goods, a nuanced definition of which is provided in section 18, to the choice to be made by the Deputy Minister and to the conditions set out in the preceding section 16 and in section 30 which follows.

.1555

In short, these conditions are fertile ground indeed for squabbles where the most skilled will come out ahead. The fact is that any attempt at defining dumping falls short of the mark.

From a theoretical standpoint, we can identify three types of dumping. Persistent dumping, sporadic dumping and predatory dumping. Persistent dumping reflects the special characteristics of marketplaces; pricing characteristics of foreign markets are fundamentally different from those of the domestic market. Sporadic dumping, on the other hand, is the result of temporary overproduction.

The concept of dumping invariably calls to mind predatory dumping, which is a market penetration strategy based on lower pricing. Theoretical studies have found that the effectiveness of predatory dumping as a marketing strategy has not been clearly established.

Getting back to dumping and anti-subsidy action, what I see here basically is a power struggle taking place. Statistics are now available on the anti-dumping and countervailing action taken by various countries. Such actions have been commented on extensively by the IMF and the World Bank.

I examined the statistics and I noted that anti-dumping and anti-subsidy actions are largely concentrated in specific industries such as steel, textiles, electro-mechanics, chemical products and automobiles. All of these industries face stiff competition.

I observed that dumping practices are prevalent in those sectors or industries that have trouble withstanding foreign competition.

If we look closely at Canada's actions, we see that most of the measures have been directed against Asian countries, where wages are relatively low, the EEC and the United States and that certain and specific industries have been targeted, namely primary metals, manufacturing, textiles and clothing.

I took a closer look at the report of the Canadian International Trade Tribunal on dumping to ascertain the real impact of these measures. According to the report, between 1980 and 1990, anti-dumping measures affected approximately .6% of all jobs in the manufacturing sector, or 11,000 jobs in all, and 1% of shipments of manufactured goods which are on the decline.

What do these figures tell us? In absolute terms, they are significant, whereas in relative terms, their importance is negligible. The Tribunal cautions us that its analysis does not take into account the different levels of anti-dumping duties or the changes in import regimes.

My main argument is that the Tribunal's analysis fails to take into account the impact that protection has on other industries or its harmful effects on the consumer. Even if the figures are impressive, it all comes down to the custom tariffs which mean revenues for the government. This isn't reason enough for maintaining a protectionist policy.

What conclusions should we draw from anti-dumping actions? A satisfactory definition of ``dumping" cannot be found in any one piece of legislation and any effort to define the term would lead to a range of interpretations.

Moreover, it is becoming increasingly clear that anti-dumping and anti-subsidy actions are used, as I said earlier, as a protectionist tool. Even more embarrassing is the fact that to date, the statistics on anti-dumping and anti-subsidy duties have not been very convincing since the approach used fail to take into account factors which were more relevant.

Oddly enough, no respectable economist denies the phenomenon of price discrimination as practised by national firms on the local market. Should the Special Import Measures Act be repealed? Ideally, the answer would be yes.

.1600

However, as Professor Howse just explained to you - and I fully share his position - we live in a world in which countries are clamouring to take such actions at the first sign that they are about to lose their competitive edge.

I support the idea of maintaining the legislation, provided the investigative process is simplified and the Canadian International Trade Tribunal is given a bigger role to play. The initial investigations would be carried out by the Tribunal rather than by Revenue Canada and a determination would be made as to whether the investigation is warranted. The Tribunal's decisions would be final, not provisional, even if it meant that Revenue Canada would be implementing the Tribunal's decisions.

This concludes my presentation. I welcome your questions.

The Co-Chairman (Mr. Dupuy): Thank you very much.

[English]

I turn now to Mr. Peter Clark for his presentation.

Mr. Peter Clark (President, Grey, Clark, Shih and Associates, Limited): I will take a rather different approach. Since I graduated in economics and went to work in the customs administration, doing dumping, I realize there is no economic defence for anti-dumping measures. It's a political measure, which is designed to protect workers and firms in a domestic market against practices deemed to be condemned if injurious to local producers. I think we have to understand that's what the purpose is.

We're in a very interesting situation these days, Messrs. Co-Chairman and hon. members, because everybody is introducing anti-dumping systems. Over sixty countries now have them. Probably fifty shouldn't, because they would never know how to administer them. It is extremely complex, as was explained.

If you want to boil it down, as a practitioner can, you compare your normal value for your net price at the factory door for products you sell domestically and the price for those you export. Then you get into all those confusing regulations and exceptions and what-ifs you find in the legislation. That's because there is a very close race for the most dangerous people to be administering laws between lawyers and now accountants. It has now become virtually totally incomprehensible.

The reason why the codes in Geneva support this type of activity is that nobody understands it. No self-respecting senior official who understands trade policy and trade diplomacy will go to these meetings. It's become a captive of the constabulary. They make the rules and it suits them.

If you wonder why all these outrageous decisions are not appealed to the WTO, it's because people know they live in glass houses. So they don't appeal them and they build up a system where the abuses in the systems are compounded yearly.

I would like to make it clear that there is no such thing as a good anti-dumping system. They're all bad. Some are worse.

We are in a unique situation in Canada. Because we have a relatively small economy, a small structure, we're very vulnerable to foreign dumping of surpluses. By the way, I think Viner has seven or nine reasons or motives for dumping in his 1926 work. You've picked on the basic ones, but there are a number of others. There are some interesting explanations if you can get access to the study I prepared for the Department of Finance, which is one of the background papers for this hearing, and read what Andrew Carnegie had to tell the U.S. Senate in the early 1900s about the practice of continuous running, which means you keep your mill or your factory full. That's one thing to do in Canada, where you're very happy if you have 3% of the United States market, but in the United States market 10% of production in some industries could cover the whole Canadian market. So there's a disparity in size which we have to take into account when we're dealing with these issues.

I really don't think Canada can be left defenceless against injurious competition. Investment is the name of the game these days, and if you don't have roughly equivalent protection at the border from unfair and injurious practices, investment will flow to where that exists.

Our situation is really exacerbated, and this is an important issue to focus on, vis-à-vis the states in the United States, which have very deep pockets and are very willing to subsidize in order to obtain factories, or locations or jobs. This is not subsidization of exports. These are import competition subsidies. It's a very serious problem. You can now get at it under the GATT, under the serious prejudice provisions in the subsidies code, but that's not easy. It's a very hard test to meet, and how can individual companies deal with these issues?

.1605

I would agree with Professor Stegemann that the legislation as it's now administered does not pay adequate attention to the needs of consumers, particularly to the needs of industrial users. The purpose of anti-dumping legislation should be to eliminate injury. Too often we address it in terms of eliminating dumping, even though perhaps a partial elimination of the dumping would eliminate the injury.

So I would certainly support the introduction of a lesser duty rule in the legislation. I would support more meaningful public interest provisions.

A lot of our problems go back to when Canada was the pioneer in introducing anti-dumping in 1904, when Finance Minister Fleming told the House that dumping - or slaughtering, as he referred to it at that time - was an evil that must be addressed. It has always been characterized as an evil. If you read decisions of the tribunal, many times you will find them referring to the mischief that the act was intended to address. There is a view that the purpose of this legislation is to protect domestic industry from dumping. It is not; it's to protect them from injury. And once we get around to the point where we limit the protection to the injury that has been caused, we'll be in much better shape in terms of our own industrial structure.

It's not an easy thing to do. Revenue Canada has a very difficult job to do, as you've suggested, in determining dumping. I don't think that having the tribunal determine dumping would help. I do think that we could screen things out a lot better if we had the tribunal actually doing the preliminary injury examination, as is done in the United States. Public interest could be improved, perhaps, if we had a different panel looking at public interest than the one that found injury.

Coming back to this point about protection in excess of that required to eliminate injury, that is a windfall. In my view, that is imposing a tax without Parliament really understanding that it is imposing a tax. I think that because Parliament is the ultimate authority on who pays what tax for what, we should recognize that excessive protection as a tax and Parliament should consider it in the same way as it would consider a tax.

I've probably gone over my 10 minutes, Mr. Chairman, and spoken much too quickly for the interpreters, to whom I apologize, but I've done the best I can in 10 minutes. Thanks.

The Co-Chairman (Mr. Dupuy): Thank you very much, Mr. Clark.

Ron, over to you.

[Translation]

The Co-Chairman (Mr. Duhamel): Thank you, Mr. Dupuy.

Now it's my turn to ask questions.

[English]

What I would propose to do is the following. First of all, thank you all for your presentations. Let's say that you've accomplished something that is really quite outstanding. You've actually stayed within the limits we've asked you to respect. This has to be a first on Parliament Hill.

The intent now is for anyone, either parliamentarian or guest speaker, to challenge, to add to, to disagree with, call it what you will, some of the points that have been made. Having said that, let's proceed.

Who will be the first to raise a point? I see it in this order. Bill.

Mr. Graham (Rosedale): I'd like to reiterate your thanks to the speakers. I think they've managed to very succinctly clarify a lot of essential points that must be understood in what will be a very long and technical and extremely important study that this committee is undertaking.

I wonder if I might ask one general question of the various panellists, and then a couple of specific questions of the different panellists.

My general question would address the problem that none of them specifically addressed the situation we live in because of NAFTA and whether or not there is a requirement for a different regime. We have heard in the literature - it talks about needing to replace certainly anti-dumping duties with competition policy in the NAFTA context. What's their view on the likelihood of that taking place? We recognize that we live in an economically integrated market, but it's more economically integrated at that level. That would be my first general question.

Individually, Professor Howse suggested that the United States was the primary user of anti-dumping duties, but my understanding -

Prof. Howse: That's countervail. Sorry.

.1610

Mr. Graham: Countervail, okay. That makes more sense to me. The European Union, as I understand it, is now using anti-dumping. Certainly my talking to officials around the world suggests everybody is looking at adopting these procedures.

That straightens that out. I suppose then my last question would be to Mr. Clark.

Looking at the political nature, as you quite succinctly said, generally it's condemned by economists but recognized as having a political dimension. In this country, what are the regional consequences of that political dimension? Do different regions have different perceptions of the way in which anti-dumping duties and countervailing duties are applied?

Perhaps I'll stop there. Those are large questions.

Mr. Clark: The anti-dumping legislation, in terms of protection, is of very little use to the extremities of the country. It's a measure that benefits primarily Ontario and Quebec. There may be other cases where there are... Sometimes there are some benefits, for example, for agricultural products in Saskatchewan or Alberta.

The concern you hear expressed frequently is that, for example, people in British Columbia rely very heavily on trade with the west coast of the United States and with Asian countries, and they get caught up in investigations that are really driven by central Canadian factors and competition, but they are displaced in the marketplace as well. There was a recent decision by Revenue Canada where a number of importers were disenfranchised from their ability to import because of the application of punitive duties for non-cooperation. Well, in the original investigation six of them were from British Columbia. We are aware of who was addressed by the people who did cooperate in the investigation: none of the B.C. people were. So they have no access to imports from a number of countries or from the United States.

In British Columbia there have been regional market cases. Some of these have been particularly difficult to address, because the rules for providing regional injury protection, which we drove to make tough because we were concerned about the United States doing it to us, now make it very difficult to provide adequate protection from injury to regional industries in Canada.

I think most of the concerns will come from western Canada. It's not very often a problem in Atlantic Canada.

The Co-Chairman (Mr. Duhamel): The first question addressed by Mr. Graham.

Mr. Howse.

Prof. Howse: I must say I'm very skeptical that there's any real chance of moving towards a North American competition law or solution that would replace domestic anti-dumping regimes with a common competition policy or common competition authority. I might add that this was one of the reasons why I was actually against the FTA in the first place. I don't think you can address these kinds of issues on a bilateral or trilateral basis when the United States is one of the partners. If you look at the attitude towards domestic sovereignty and the fact that in effect they won't accept even the ruling of binational panels, the idea that you would move to some European-type common competition authority is just not in the cards.

In fact, I think supposing there's any hope out of the NAFTA or North American integration process for this is unrealistic. In fact, increasingly I'm coming to the view that in some of these disputes we are better off taking the Americans to the WTO than bothering with the NAFTA panel process, because I think it's much harder for them to walk away from that kind of institution, given the global stakes involved, than perhaps from the decision of a NAFTA chapter 19 panel. That's a pretty gloomy outlook, but then again, I never thought we should have put our cards in the regional basket in the first place.

.1615

The Co-Chairman (Mr. Duhamel): Thank you.

Is there a brief reaction to that? I have three speakers lined up.

Prof. Stegemann: Mr. Chairman, I would like to react to that.

First - maybe I'm coming from a different starting point - I believe in NAFTA. I think we need it and we cannot afford to abandon it, but that also implies that we have very little leverage when the United States will not concede on the anti-dumping regime.

I think there is an alternative. Mr. Howse was saying that the alternative is to take them to the WTO. But I think the alternative is to work on the multilateral level to try to find a coalition that will reform or help to reform the anti-dumping scheme on the worldwide WTO level. As for bilateral, I don't think there's much -

The Co-Chairman (Mr. Duhamel): What do you mean by ``coalition''? Could you just expand on that a bit?

Prof. Stegemann: Canada has a history of working through the Geneva offices - WTO now, GATT then - and I think there are other countries in the world that do not like anti-dumping systems, although many have now adopted them, which is a very dangerous trend, because once more countries do it, it becomes entrenched and is harder to reverse.

I think the alternative is for Canada to work at a multilateral level to try to find like-minded countries, and then for the next round to stand behind a proposal that would either reform or replace anti-dumping with competition measures.

The Americans are interested in having international rules on competition, so that might be the opportunity.

The Co-Chairman (Mr. Duhamel): Thank you.

Mr. Clark is next and then I'll go to Mr. Grubel, who has been waiting patiently.

Mr. Clark: Thank you.

With respect to whether you appeal to the NAFTA or to the WTO, if you appeal to the NAFTA, you want to ensure that the law is enforced, and if you appeal to the WTO, you want to ensure that the code is enforced. And you must bear in mind that the code is compromise language developed by nearly a hundred countries and there is a lot of wiggle room.

I think if you want immediate relief you had better keep going to the NAFTA panels. I don't say that just because I sit on them, but -

The Co-Chairman (Mr. Duhamel): I see there's going to be a whole lot of agreement here.

Mr. Nyahoho, on this same point, before I go to Mr. Grubel.

[Translation]

Mr. Nyahoho: Articles 1906 and 1907, covered later by article 1907.2 of NAFTA, make provision for a working group to develop a harmonized system of rules governing subsidies and unfair dumping practices.

It is very difficult to conceive of harmonizing our system with that in the United States for the simple reason that political constraints are different there , as is the constitutional system. It is highly unlikely that we could harmonize our system to deal with unfair practices.

The Co-Chairman (Mr. Duhamel): Thank you.

[English]

Mr. Grubel, please.

Mr. Grubel (Capilano - Howe Sound): I'm sorry, but I have to leave in about ten minutes, so I want to briefly express my thanks to all the experts.

I listened to you carefully, and I'm a bit disappointed that on the one hand you said this entire anti-dumping and subsidy program is not in Canada's interest and that it is political manoeuvring so the politicians can buy off voters, especially in the United States. On the other hand, you said we should keep it. Now, that's just a non sequitur in my mind.

I would like to try out on you - and for the record - just one little formulation of why I think this may not be a bad idea.

The public view, in my totally unscientific sampling of opinion, is that we must have anti-dumping laws because foreigners will come in, sell their widgets and drive out our producers, and once the producers are gone, the foreigners will raise the price and Canadians will be worse off because then we won't have our domestic competition.

I think this is a bad public perception that we have to deal with. It probably was correct in 1904 when we introduced it, and it may have even been true when Viner wrote his famous book, but it surely isn't true today.

There is no product any more that is unique, that does not have a very close substitute. So when a company tries to lower the price and drive out the other company, in the meantime the consumers benefit, but when a company then wants to go to the next step and raise the price, it will be so flooded by substitutes from the rest of the world that it just won't work.

.1620

Just think of Volkswagen trying to drive out Canadian automobile producers by heavily subsidizing and selling Volkswagens at a much lower price, with the expectation that later on they can raise the price so they recover all the subsidies they once made. Give me a break. That's not realistic. Japan would love to be there, and the Americans would love to be there, and our Canadian producers would love to be there, to undercut them. They will never be able to recover their benefits. So where is the harm?

I believe, in fact, the reason we cannot establish that there has been damage or we cannot really effectively establish that there has been dumping in the traditionally defined sense is that typically those actions are brought not for economic reasons but because the industry says its rate of return for investing in a few lawyers is higher than from competing in the marketplace.

Would you please react to this somewhat outrageous position.

The Co-Chairman (Mr. Duhamel): I think there will be some reaction.

Mr. Clark: I would really appreciate your coming and talking to some of my clients, telling them my fees are self-liquidating and justifiable.

I do believe Canada needs a form of anti-dumping protection and anti-subsidy protection that is, as I would call it, user-friendly to those who import. You just eliminate injury.

I also agree with you that we're not going to see prices go up. That has really never happened. It really hasn't been documented in very many cases, other than the few you can find in the U.S. Senate report in 1919.

So there will be competition. It's a moving threat, I agree. The problem is that the people who have lost their jobs to dumping can't afford the stuff even at the bargain prices. That's the political element.

Mr. Grubel: But can you imagine if we had this kind of thing in trade between the provinces or if we had it in trade between the states of the United States? There wouldn't be any international trade. How often do companies for competitive reasons temporarily sell products for less than they sell them in other places? Why is this an illegitimate form of competition? We know competition ultimately benefits consumers, and the workers, who are consumers as well.

The Co-Chairman (Mr. Duhamel): Before I go to the other two gentlemen who want to react, I believe Mr. Campbell wants a clarification.

Mr. Campbell (St. Paul's): Thank you, Mr. Chairman. I just want to clarify. I think Mr. Grubel is incorrect, and if so, maybe our experts will tell us. I believe within both the United States and Canada it does not go on unchecked. You have predatory pricing provisions, both the anti-trust laws of the United States and the competition laws of Canada. So it is precluded between states and between provinces.

I wonder if our experts want to comment.

Mr. Grubel: I would like to make a quick reply to this. Just one second, please, because I do have to run. I'm sorry about that.

This takes into account a theory of competition and the need for anti-trust legislation that in the last twenty or thirty years has been completely discredited.

Mr. Campbell: In fact, I'm not even engaging in the debate about whether those laws are justified. I'm just taking exception to your suggestion that there are no national laws between states or between provinces dealing with the same problem.

Mr. Grubel: I get it.

Mr. Campbell: I just didn't want us to be confused.

The Co-Chairman (Mr. Duhamel): Clarification has been made. We're going to move on.

Mr. Howse.

Prof. Howse: I should perhaps correct a misimpression. I don't believe I actually did state that I thought at the end of the day we need this legislation. I stated a number of rationales for why it might be justified and expressed great skepticism about some and perhaps a little less skepticism about others.

In fact, I would agree, and I've argued in various papers and books I've written or co-authored, that actually on balance the whole world would be better off without this kind of thing existing. Perhaps the strongest rationale is really the retaliation one. Under the existing GATT-WTO regime this is one of the few means we could possibly use to retaliate against others who are doing it to us. I leave it to experts in bargaining theory to tell you whether at the end of the day we're more likely to get a cooperative solution by retaliating and having it tit-for-tat and then that will produce sitting down at the table, or whether we're better off taking the high road. I'm not going to make a judgment about that, but I would say it's probably the only possible legitimate rationale.

.1625

As for predation, my colleague Michael Trebilcock and some other people have done studies that have looked at dumping cases against the competition law criteria of predation, and they have found that virtually no single outcome of a dumping case where duties were imposed could be explained in terms of the actual existence of predation on the facts of that case. So if we were to move to predation as the criterion, we would be essentially abolishing anti-dumping action.

The Co-Chairman (Mr. Duhamel): Mr. Stegemann.

Prof. Stegemann: Mr. Chairman, I'd like to reinforce what Mr. Howse was just saying about predation and competition law. I don't know if you are planning to invite people from the Bureau of Competition Policy, but I think if they came they probably would tell you that Canada has such a law, which is rarely applied because there are very few cases in which the criteria of the statute could be met, because predation is very rare in the present day. As Mr. Howse was saying, it's even rarer in the international market.

I think the experts here would be satisfied if you would say, as a committee, you wanted to propose using the criteria that are used in domestic law, and also in anti-dumping law. There would be no anti-dumping cases. I can guarantee that.

If the tribunal would investigate what the Bureau of Competition Policy has investigated in order to establish predation, the tribunal would say ``Nothing here'' in every case.

The Co-Chairman (Mr. Duhamel): Mr. St. Denis, I believe you wanted to add a point.

Mr. St. Denis (Algoma): Yes. I believe, Mr. Chairman -

The Co-Chairman (Mr. Duhamel): On the same one?

Mr. St. Denis: No, I have a different question. So if you want to proceed on that same point...

The Co-Chairman (Mr. Duhamel): Okay. I might.

[Translation]

Would you care to add to that Mr. Sauvageau?

Mr. Sauvageau (Terrebonne): No, but I do have a question. Is it my turn?

The Co-Chairman (Mr. Duhamel): Yes.

Mr. Sauvageau: I want to thank all of you for shedding some light on a very technical subject. I admit that I'm not much of an expert in this area.

We have all heard of Queen's University, the University of Toronto and ENAP, but I have to admit that I don't know anything at all about the firm of Grey, Clark, Shih et Associés Limitée, Therefore, my first question is for Mr. Clark. Could he tell us a little something about his firm?

My second question is of a more general nature. The discussion today centres on the Special Import Measures Act or SIMA. Could those who have made presentations explain to us how the investigative process could be simplified in cases where a company files a complaint under SIMA, and how our process could be made to resemble more that of the Americans so that complaints can be settled a little more quickly and businesses can spend fewer millions of dollars?

Are there any concrete proposals that the sub-committee could make to amend SIMA in order to facilitate its application by businesses and to cut the costs they incur?

The Co-Chairman (Mr. Duhamel): You have asked two questions. I would like to make one brief comment before turning the floor over to Mr. Clark who'll answer your question.

I just want to say that Mr. Clark was recommended to us by a number of people in the academic world who said that he was a highly knowledgeable individual.

Mr. Sauvageau: I was merely asking a question, not targeting anyone in particular.

The Co-Chairman (Mr. Duhamel): I simply wanted to share this bit of information with you. Please proceed, Mr. Clark.

[English]

Mr. Clark: Perhaps I can help you a little bit. The clerk of the committee has my CV, but I might explain to you that Mr. Grey on our letterhead was the gentleman who presented the white paper on anti-dumping to the parliamentary committee in 1968 when he was assistant deputy minister of finance. At that time I had joined him after being in Revenue Canada doing dumping investigations under the previous law. I was involved in that work. I was a Canadian trade negotiator until 1979, when I left the government to form my own company. I have been a practitioner before administrative boards and tribunals for some time. I appeared approximately seven or eight times before the Mackasey committee in the period when it was doing its presentation. I have written extensively on anti-dumping and trade remedy laws. I have been a member of the chapter 19 panellists under the Canada-U.S. Free Trade Agreement. I'm on chapter 20 under the NAFTA. I'm a member, nominated by Canada, of the WTO dispute settlement roster.

.1630

I do very little but trade, but I also work very hard to maintain a low profile. I'm happy you don't know much about me, but I'm happy to explain it.

The Co-Chairman (Mr. Duhamel): That will suffice.

We'll go to the question that was raised. Thank you.

Mr. Clark: I was going to go on to the next question.

[Translation]

Mr. Sauvageau: Thank you very much for answering my first question. I am now somewhat more enlightened on this subject. Could you answer my second question?

Mr. Clark: Certainly.

[English]

It is difficult, particularly for small companies, to comply with the requirements of Revenue Canada. Extremely difficult requirements have been written into the WTO/GATT anti-dumping code, and they have to be met. There's no differentiation between large companies and small companies. Small companies, however, will find that Revenue Canada is prepared to assist them in the preparation of their submissions.

The courts have made the system in Canada rather complex because of the need to protect people's right to ensure that there is natural justice and equity provided. It is very difficult for one to represent oneself in these findings. It was originally the intent of Parliament that our administrative tribunals and processes should be courts of easy access. That has become extremely difficult. Most of the discussions focus on confidential information. That confidential information cannot be disclosed to business competitors, so it's necessary to have independent counsel. That adds not only cost to the process, it adds time.

It is extremely difficult to do these things cheaply. I have had clients come to me wanting to bring anti-dumping cases. They had good grounds for bringing the cases, but found themselves unable to do so. In a discussion I had with the Minister of National Revenue back in April, she indicated that she hoped that in these hearings the various organizations would bring suggestions to you on how to reduce the costs. We hope to be doing that through some of our clients.

The Co-Chairman (Mr. Duhamel): Are there other experts or parliamentarians who want to respond to the question?

[Translation]

Mr. Howse, please.

[English]

Prof. Howse: The only thing I would say is that if we're talking about reducing costs, the emphasis should be all on reducing the costs of defending these actions. We have to remember - and I mentioned this in my opening statements - that there's already a very substantial subsidy, as it were, to the plaintiff, to the side that's bringing the action, because you have the investigation and it's being essentially paid out of the public purse. In most other contexts in which there are conflicting private interests battling it out, we don't generally subsidize one of the parties and not the other.

I'd be very interested in ways of reducing the cost to those who are the victims of these kinds of actions, particularly since a lot of the protectionist effect from these measures is their possible use for harassment of small importers who will just stay out of the market because they don't have the resources to defend these actions or to post the bonds where preliminary duties are imposed and so forth.

So I think we have to very much focus on this asymmetry and the disproportion of burden that's placed on a person or company being named in one of these actions.

The Co-Chairman (Mr. Duhamel): Are there additional comments? Yes, Mr. Clark.

Mr. Clark: I have just a quick response.

In representing both petitioners and respondents, it's been my experience that the fees for petitioners tend to be higher than those for respondents.

[Translation]

The Co-Chairman (Mr. Duhamel): Yes, Mr. Nyahoho?

Mr. Nyahoho: On reading the legislation, I was struck by the fact that the investigator process was rather cumbersome. I would propose that we proceed in two stages. Firstly, any investigation could be initiated by the Canadian International Trade Tribunal rather than by Revenue Canada. At present, Revenue Canada launches the investigations and takes a preliminary stand which, subsequently, can be reversed by the Tribunal. This approach leads to a number of problems. I suggest that final decisions be reached by Tribunal, even if this means allowing it to reverse its position, instead of assigning these responsibilities to Revenue Canada. Investigations would be initiated by the Tribunal, which would also be responsible for making decisions.

.1635

[English]

The Co-Chairman (Mr. Duhamel): I believe Mr. Campbell wants to introduce a new point. Is that correct?

Mr. Campbell: Thank you, yes.

Of course, the wonderful thing about these round table discussions is that we range back and forth over a number of issues, and I'm sure, Mr. Chairman, if our experts want to come back to anything they will.

Mr. Grubel's earlier comments remind me of the debate that sometimes goes on about nuclear weapons: you'd be nuts to use them, but everybody wants to have them if their neighbours do too.

I want to ask a question about a provision of our law that is not found in the anti-dumping laws of other countries and to get some comment from our experts about why we have it and others don't, and that's the public interest provision. I think Mr. Clark spoke about that briefly, but I want to give Mr. Clark and others an opportunity to explain - because they're way ahead of us on this stuff - why we have that provision in the law, what it's designed for, and why other countries have not opted for the same kind of opportunity to weigh the public interest.

The Co-Chairman (Mr. Duhamel): Mr. Clark.

Mr. Clark: It's perhaps a misperception that other countries don't do it. In fact, the European Community, which has a much more closed system than ours, assesses the community interest in virtually every case they conduct. Australia used to have what they called a NIFOB system, which is a lesser duty rule. They don't have it any more, I understand, but Professor Stegemann suggested they might.

The United States is the main country that doesn't have a public interest provision. We have one. The main driving force for that provision was Mr. Lawson Hunter, who I believe was the director of competition policy at the time, and Mr. Bonner, who was the head of B.C. Hydro. Mr. Bonner was in direct opposition to the Electrical and Electronic Manufacturers Association of Canada, who tended to dominate the last round of hearings. The view was that we should not really be imposing additional burdens on industrial users and consumers if a lesser duty would suffice, or, in another case, if it wasn't in the public interest to impose a duty, perhaps because there wasn't enough competition in the sector.

The Co-Chairman (Mr. Duhamel): Are there additional comments on that particular point?

[Translation]

Yes, Mr. Sauvageau.

Mr. Sauvageau: May I ask a few more questions regarding this matter?

The Co-Chairman (Mr. Duhamel): Certainly, but I believe it was Mr. Penson's turn. Is that all right with you?

Mr. Sauvageau: By all means, please proceed Mr. Penson.

The Co-Chairman (Mr. Duhamel): Right.

[English]

Mr. Campbell: May I follow up briefly to perhaps stimulate some other reaction? It's been suggested that part of the problem we have vis-à-vis the Americans in trade cases is that there is no formalized public interest provision and if we could we ought to convince them to have one. Does anyone want to react?

The Co-Chairman (Mr. Duhamel): Professor Stegemann.

Mr. Campbell: We're always looking at this from two perspectives: the application of -

Prof. Stegemann: Right. I think it's in Canada's interest to have such a provision because there are cases where we are shooting ourselves in the foot.

If B.C. Hydro, for example, had to import electrical equipment from the next highest bidder because they were not dumping, what's the advantage of doing that? You pay more for goods, say, from Japan because you cannot import them from the Soviet Union.

Mr. Campbell: Why would it be in Canada's interest to have such a provision and not in the interest of the United States?

Prof. Stegemann: Well, that was the result of an anti-dumping case. You see, if you have an anti-dumping case where the most advantageous bidder is hit with an anti-dumping duty and has to raise his price by 50%, and the next highest bidder is more expensive, the Canadian buyer has to pay the higher price. It doesn't necessarily mean that the Canadian producer gets the contract. That's one case where it's very obvious that it's not in Canada's interest to follow through with anti-dumping measures, or certainly not with a full margin of duty.

Mr. Campbell: I'm sorry, you might have misunderstood. I understand the rationale -

Prof. Stegemann: Right.

Mr. Campbell: - that made the case and made the point. Why wouldn't the same be self-evident in the United States? Why wouldn't they offer the same opportunity in their laws?

Prof. Stegemann: Well, they may be less enlightened. There may be political circumstances that would not permit it. Maybe they have more competition in their domestic market and they're not as dependent on it.

The Co-Chairman (Mr. Duhamel): Are there other comments on that particular point before we introduce a new one? Mr. Clark.

Mr. Clark: I think we should fight very hard for it. We came close to getting it in the last round of negotiations and lost any progress that we made at the end. It's a combination of the United States considering their trade remedy laws to be a right to protection and the fact that there generally is much more competition in the United States in most industries. There are more suppliers.

.1640

The Co-Chairman (Mr. Duhamel): On that point, we're going to leave it now.

Mr. Penson.

Mr. Penson (Peace River): Thank you, Mr. Chairman.

It was interesting to hear from our panellists today that most did not think it was in Canada's interest to have anti-dumping but in fact it might be necessary to counteract other countries, such as the United States, who use it against us.

If that's the case, Mr. Clark, I think it was you who suggested that we probably need to continue to have a lever to use against them because it's a retaliatory measure.

The steel industry is one that comes to mind that suffers a high compliance cost. They've come before our committee in the past and asked us to put in mirror legislation to that of the United States, just to try to bring home to United States industry that we're in this business too. We have resisted up until now.

What's your advice to us? If we're going to continue to use anti-dumping even though we don't like it, to keep something in our arsenal do we put in that kind of mirror legislation?

Mr. Clark: I had wanted to keep this on a fairly general plane, because the steel industry will tell you that I am not at all supportive of the mirror legislation concept. On the other hand, I do agree with everything they say about what they suffer in the United States and that we shouldn't have any dumping between Canada and the United States.

Let me illustrate the problem. I've just signed off a letter to Minister Stewart. There were at the final determination 109 suppliers of cold-rolled steel to Canada from the United States. Now there are 5 suppliers because everybody else has been knocked out of the market. We have also knocked out of the market the United Kingdom, France, Germany, and Italy.

We're also doing an investigation at the present time into corrosion-resistant or galvanized steel, which will likely knock Spain, Sweden, Australia, New Zealand, Japan, and Korea out of the market - wonderful for our international relations to do that. I don't think you get anywhere. The United States doesn't care. In this investigation my firm represents - and I'll make it clear - the United States integrated steel mills. The only five people to pass the test were the five companies I represent because those steel mills said, to hell, they were not going to be bullied and they would pay the cost, even if it wasn't commercially viable, of going through this extra investigation because failing to meet the tests here would de facto admit that their system was more restrictive. So they just didn't do it. I think it's a mugs game.

I used to say the silliest, most meritless action I'd ever heard of was Caligula making his horse a consul, but we have something right up there. This is really not the way to do it. We've shot the wrong guys, and they're out of the market. We now have four and potentially ten countries who are going to be annoyed at us for being sideswiped in the fight with the United States.

I sympathize with what the steel industry wants to do and with the problems they're having, but I just don't think it's going to work. I also represent a number of Canadian industries regularly, and they're quite satisfied with the way our law works. It works fine. It isn't broke; don't fix it. The WTO and the GATT say you're supposed to use anti-dumping and countervailing duties only to offset the injury caused by those practices, not as a lever in trade fights.

Mr. Penson: To follow that up, does anybody think it's possible to achieve...? Essentially, we have an integrated market with the United States in steel. Is it possible to do a sectoral anti-dumping-free process?

Mr. Clark: To their credit, the steel industry has been trying to do that for five years. They keep sending, but nobody is receiving at the other end. They're at an impasse. They have a really serious problem. We export 30% of our steel. When we're cut off in another market, it's extremely serious. The United States integrated mills ship 3% or 4% of their steel outside of the country, and it's barely a hiccup if they get hit. Besides, they sell everything on the basis of f.o.b. mill, so their dumping duties tend to be very small.

Mr. Penson: So, in essence, we need their market more than vice versa.

Mr. Clark: When I got into the discussion very early on, I indicated that because of the size of the Canadian market and because of the size of our industries we're much more seriously affected by the anti-dumping actions of others and we're much more vulnerable to theirs.

Mr. Penson: Thank you.

The Co-Chairman (Mr. Duhamel): Mr. Sauvageau.

.1645

[Translation]

Mr. Sauvageau: Mr. Clark, it is difficult at times to understand your answers or the answers given by other witnesses. In your opinion, does the current legislation meet the needs of the steel industry? In your opinion, is this industry truly integrated? I understand that the principle of integration is important when we refer to this industry and this sector. Did you say that the current Special Import Measures Act was satisfactory to Canadian steel manufacturers?

[English]

Mr. Clark: It's satisfactory for every industry that goes before it, sir, and tries to use it. The tribunal is well equipped. They have excellent research staff and their decisions are rarely turned around by the courts or condemned. Revenue Canada, on the other hand, may be adjusted from time to time, but that's the way the law is developed.

I do think the best solution for the Canadian steel industry is not to have anti-dumping laws within North America. I certainly support everything they will tell you about what they suffer in the United States. It is a serious inhibition to trade.

Mr. Graham: Mr. Chairman, I've found all our panellists have tended to speak of anti-dumping issues. The committee, of course, is interested in the problem of countervailing duties as well. I wonder if they would be good enough in their answers to indicate whether there are policy or other reasons why one might have a different approach to the countervailing duty issue from the one for the anti-dumping duty issue. In the literature everybody's down on anti-dumping, but when you come to countervail and it's government subsidies, suddenly the whole philosophical and practical nature of the debate changes. I wouldn't like the committee to start off without making a clear differentiation in our own minds between the factors that make those two cases different.

Mr. Chairman, perhaps I might also ask, and I apologize for my ignorance, about the extent to which the committee will be looking at other forms of contingent protection, such as emergency measures, or whether our inquiry is exclusively restricted to anti-dump and countervail or we're looking at what might be called chapter 19 of the GATT type of restrictions.

The Co-Chairman (Mr. Duhamel): You want some commentary on the distinctions between anti-dumping, countervailing, and other possible measures.

Mr. Graham: So at least when our witnesses are answering questions they make it clear for our understanding that they are or are not lumping the two of them together. If they're lumping the two of them together, then let them lump them, but if they distinguish between the two cases, let them distinguish, so when we're going back over the record we know what we're criticizing or not criticizing.

The Co-Chairman (Mr. Duhamel): Thank you.

I go back to Mr. Sauvageau, who I think wants to continue the discussion. Is that right?

[Translation]

Mr. Sauvageau: Yes.

The Co-Chairman (Mr. Duhamel): I'm sorry, Mr. Sauvageau.

Mr. Sauvageau: That's all right. Am I to understand then that simplifying the current legislation is not an important issue as far as you are concerned? You find the legislation straightforward and flexible enough for businesses. No changes would be necessary. I believe the call for simplifying the process comes not only from the steel industry, but from all of the stakeholders who have appeared before us. Isn't that right?

[English]

Mr. Clark: I hope it is, because the system is becoming more and more complex, and small and medium-sized business are finding it very difficult to use the system.

I'm sorry. I took your question to ask whether it is effective in providing protection. It is if you can afford to use it and if you can afford the resources necessary to prevail in a case. Yes, it is effective. The problem is that for smaller companies and for agricultural groups that may be disorganized it's a very expensive process.

[Translation]

The Co-Chairman (Mr. Duhamel): Could we hear what the other experts have to on this same subject? It is a very interesting subject.

[English]

So could we get some commentary on what Mr. Clark has just mentioned about the adequacy of current measures, laws, regulations?

[Translation]

Mr. Nyahoho: I was saying that the investigative process needed to be simplified.

The Co-Chairman (Mr. Duhamel): The process...

Mr. Nyahoho: The investigative process initially conducted by Revenue Canada and subsequently taken up by the Canadian International Trade Tribunal.

.1650

The Co-Chairman (Mr. Duhamel): Whose efforts are sometimes stymied.

Mr. Nyahoho: There should be some way for the request to go to the Tribunal rather than to Revenue Canada. Some consideration should be given to shifting Revenue Canada's resources to the Tribunal which would then assume full responsibility for initiating investigations and making the necessary decisions.

The Co-Chairman (Mr. Duhamel): Mr. Stegemann, do you agree with the point that has just been made?

[English]

Or do you see it differently?

Prof. Stegemann: Not really, on this point immediately.

The Co-Chairman (Mr. Duhamel): Okay.

Prof. Stegemann: I think it's really not worth trying to change the whole procedure by lumping together both functions, dumping investigations and injury investigations, into one institution. This is done in the European Community, but I don't think we could say that their system works better for that reason. I would stay away from that. If you want to keep anti-dumping and countervail systems at all, there's no reason to start reform by lumping the two functions together in one institution.

I think it's quite useful first to have the dumping investigation and the more technical things done by Revenue Canada and then to have a tribunal investigate injury and also do the reviews later on. That's the immediate response to this.

There was a question as to why we were talking about anti-dumping only and not as much about countervail. I think the main reason is that the other two types of trade remedies, countervail and safeguard measures, or emergency measures as he called it, have not been used as much.

There's a reason for it. I think the anti-dumping route is preferred because it's easier and more lucrative.

The Co-Chairman (Mr. Duhamel): More lucrative how?

Prof. Stegemann: Let me explain.

It's easier in that the WTO standard for the other measures is higher, especially for the safeguard measures. The WTO standard used to be much higher. Now there's a safeguard agreement. It's still higher. It's still more difficult for countries to have legislation conforming with WTO requirements, which makes it easy to get protection. Anti-dumping has made protection easy.

It's lucrative because margins are so high. You knock out a whole row of competitors because they have to raise their prices by 50%, or maybe 180% in some cases. I think the average is 50% of the previous dumped price. That's the main reason why anti-dumping is so popular. And that's the main reason why we talk about it: not because it's popular but because it's serious.

The Co-Chairman (Mr. Duhamel): I'll be seeking a comment from Mr. Howse, but before that I think Mr. Nyahoho wants to add, as well as Mr. Clark.

[Translation]

Mr. Nyahoho: The idea of assigning responsibility to the Canadian International Trade Tribunal stems from the desire to limit the application of the entire legislation.

The industry should be getting the message that before an investigation is launched, genuine grounds for such an investigation must exist. We need assurances that the Tribunal will see the investigations through to their conclusion in order then to make decisions.

This is not merely an administrative matter; at the same time, we are sending a message to industries that we are serious. The evidence must be conclusive before we take any measures. Under the existing legislation, Revenue Canada can take provisional measures, even if it means that they will be reviewed by the Tribunal as part of a more formal investigation. I view this as a waste of time and energy. Instead, we should be taking steps to ensure that the Tribunal has the resources it needs to see the investigations through to their conclusion.

The Co-Chairman (Mr. Duhamel): You have made this point on several occasions and I would be very interested in seeing if other colleagues agree or disagree with you. So far, I believe Mr. Stegemann disagrees with you, but I would like us to continue debating this question.

[English]

Mr. Clark: Let me give you my perspective as a practitioner. If I'm advising a client, I'm going to stay away from challenging the practices of other governments, because it's too difficult. If I can get relief through an anti-dumping investigation, it's far better, because there will be less political uncertainty surrounding what we're doing and much less likelihood of a challenge through the WTO.

Having said that, I have brought countervail cases against the United States on corn and against the European Community on beef. The reason there was that the subsidies were so massive that we were going to get the best relief there.

.1655

The Co-Chairman (Mr. Duhamel): Mr. Howse, did you want to add to the main point? Perhaps we could then go back to the question about Revenue Canada and the tribunal. We'll then go back to Mr. Sauvageau to see whether or not we've covered all of his points.

Prof. Howse: I would simply echo what Professor Stegemann said about the reason we've been talking mostly about anti-dumping, that it's just used a lot more and by a lot more players. There are, as has been noted, some Canadian countervail actions, but the vast bulk of those actions globally is brought by the United States and, really, it's an entrenched American practice.

That being said, one of the challenges comes from the Uruguay Round subsidies agreement, which does actually set out a set of subsidies that are in what are called the non-actionable category. So it will be important to accurately translate that into appropriate decisions. Perhaps also there's a justification for exempting broader groups of subsidies from countervail because we, as a country, have values that would suggest we think those are legitimate; for example, broad classes of environmental subsidies or, perhaps, adjustment measures; for example, worker adjustment measures. I think there would be a good case for saying we won't countervail those because we think those are important legitimate policies that are in the service of values that Canada believes in. That's one suggestion on the subsidies and countervail side.

On the question of the procedures, I would agree with my colleague who just spoke that in fact there's something objectionable to the idea of being able to impose preliminary duties. It increases the harassment potential of the legislation and I think it is also contrary to basic values of justice, where normally in the justice system to be able to do that you have to prove irreparable harm. There would be a very high threshold of proof, because somehow here we're dealing with ``foreigners'' even though the company might be more owned by Canadian shareholders, ironically, than the company we're supposedly trying to protect, given the globalization of capital. Really, this is unacceptable from the point of view of those administrative law values as well as creating harassment potential.

If you're a small importer, it can stop you dead in your tracks to have to come up with those moneys. There might be very little basis to the case, but you don't have the time and money to deal with that kind of thing. So we're really shooting in the foot particularly those countries that are in the process of growing and developing and liberalizing their economies, those exporters who are the people who are most likely to be simply frozen out by this kind of harassment that comes from the easy ability to get preliminary duties imposed.

The Co-Chairman (Mr. Duhamel): On that same point, Mr. Penson.

Mr. Penson: What about countervail, which Mr. Stegemann raised a few minutes ago? I just want to get clarification.

Mr. Stegemann said there is a proliferation of anti-dumping because it's profitable and fairly easy to do, but countervail at the WTO has come to a new level, and I wasn't sure what he meant by that. Is it easier for Canada to win a case, such as the softwood case, at the WTO now because of what's happened, or is it more difficult? I guess that's the question. The United States has changed its domestic law so that we can't take it to NAFTA probably. The new standard you're talking about, does that make it more difficult for us or easier for us to win a case on countervail?

Prof. Stegemann: Softwood lumber has been messy from the beginning, because the definition of what is a subsidy is at stake. I'm not certain whether the WTO code would have made much difference in this case. But there are now categories of subsidies called non-actionable. Therefore, if something clearly falls into those categories it would be safer to subsidize.

.1700

Mr. Penson: Can you give me an example of that?

Prof. Stegemann: Well, the R and D is one. It's regionally included, isn't it, Rob? I think some regional is included -

Prof. Howse: Some. Some environmental...

Prof. Stegemann: Yes, some environmental. There are three categories that are non-actionable. Then there are some that are clearly bad and there are some that are still grey areas.

But I think that approach makes it more difficult to have laws that can be abused or where it's easy to win protection. Also, the main argument I really wanted to make is that the margins tend to be lower under countervail than they are under anti-dumping, and Mr. Clark has just confirmed that.

Mr. Penson: It seems to me that our committee would be interested in finding out how our subsidies code definition can be improved at the next round of the WTO in order to give us the ability to fight these kinds of cases and so there's a clearer definition for those companies and those countries affected. That's work that needs to be done in the future, but it's something I'm certainly concerned about.

The Co-Chairman (Mr. Duhamel): Perhaps you have a small rejoinder here, Mr. Clark, before we clean up on a couple of items, and then we'll let Mr. St. Denis introduce another point.

Mr. Clark: Great progress was made in defining subsidies at the WTO in the last agreement. The problem is injury.

But if I could make just one comment, Mr. Chairman, I can't agree with any statement that Revenue Canada is frivolous in initiating investigations. I have to point out that much more than half the inquiries they receive on anti-dumping never see the light of day because Revenue Canada judges them to be without merit. They've only been overturned once by the tribunal on the preliminary review, on the initial determination. I think that criticism was unfair and unfounded.

The Co-Chairman (Mr. Duhamel): Mr. Stegemann.

Prof. Stegemann: On this point, Mr. Clark, do you mean that initial review means advice procedure?

Mr. Clark: No. In the initiation of an investigation and the advice the tribunal gives - although it's not a very serious test - they've only overturned them once.

Prof. Stegemann: Right. Okay, you've just said it. I was going to comment, and I did in my written reply -

Mr. Clark: I certainly agree with that, but in fact if you look at all the inquiries they've had over a period of time, I think somewhere between 20% and 30% of those inquiries turn into investigations.

The Co-Chairman (Mr. Duhamel): Let's go to Mr. Nyahoho.

Now, I want to clear up this particular point. I believe that on two or three occasions you've mentioned that Revenue Canada will get involved and will make some preliminary decisions that might be overturned by the tribunal. It was your statement, if I understood it correctly, that it might be preferable to change that. You might go directly to the tribunal. If I've interpreted that correctly, I wonder if we could get some comments from your colleagues, the other experts assembled here.

Do you agree with that? Do you disagree? Is there something here that needs to be added to refine what was said?

Mr. Howse.

Prof. Howse: I thought I was already agreeing. I don't think there should be a possibility of imposing preliminary duties, except perhaps on the kind of standard in civil justice for imposing an injunction, a kind of irreparable harm standard. I don't see that it's necessary in the least. If in fact the investigating authorities are doing their job, why not just let it work like the civil justice system? When you get a ruling in your favour, you get a ruling in your favour, and at that point you get relief.

If I'm suing somebody in court for some other kind of wrong - such as a tort - I can't get the court to impose a preliminary damages award on that party without having proven my case at a full hearing. Why should I be able to get it in this context?

The Co-Chairman (Mr. Duhamel): So you are saying it's not really inconsistent. You agree with the point that was made.

Prof. Howse: Yes, exactly.

The Co-Chairman (Mr. Duhamel): Mr. Stegemann.

Prof. Stegemann: Mr. Chairman, I have stated previously that I think the present structure is not bad. I would not want to suggest that you change the basic structure if you want to retain the laws. However, if you want to talk about fine-tuning, I think the so-called advice procedure Mr. Clark was referring to is pretty useless the way it is.

What it consists of is this. At an early stage, either the deputy minister or the complainant in certain situations, or the importers in certain situations, can go to the tribunal and say, ``Does the deputy minister have enough evidence on injury to start this whole thing?'' The tribunal then looks at it and says, ``On the basis of the evidence that is before the deputy minister, we conclude...'' In most cases, yes, the deputy minister has enough, but the tribunal does not do its own investigation. They don't hear anybody.

.1705

The Co-Chairman (Mr. Duhamel): So you say that particular point is not relevant, from your perspective?

Prof. Stegemann: No, what I am saying is it's useless if the tribunal looks only at what the deputy minister has to say. The tribunal should hear what others have to say about this so-called evidence which the deputy minister believes is sufficient to start the investigation. The advice procedure was introduced at the urging of other trade partners, who said you should look at dumping and injury from the start. Canadian law then said okay, we will look at both, and there's even this advice procedure, where the tribunal can get involved at an early stage.

But the way the tribunal gets involved now is pretty useless. I think it's absolutely useless.

The Co-Chairman (Mr. Duhamel): I want to go to Mr. Nyahoho.

I saw some body language, sir, and I'm not sure I understood if you wanted to react to that, or agree, disagree, clarify.

[Translation]

Mr. Nyahoho: When we talk theoretically about the damage caused by anti-dumping measures, there is no evidence to prove that Canadian industries have been saved by the legislation. We have no real evidence of this, but we do have some figures. One per cent of all manufacturing industries are protected, along with 11,000 jobs each year. Taking into account worker mobility, far more than 11,000 jobs are involved. Real figures show that the actual impact of this legislation is marginal. That is the reality we are dealing with.

The Co-Chairman (Mr. Duhamel): Your conclusion, therefore...

Mr. Nyahoho: The Tribunal should be left to take the appropriate measures to deal with specific cases since Revenue Canada's role is marginal, in terms of the scope of the national economy.

The Co-Chairman(Mr. Duhamel): I understand.

[English]

Mr. Clark.

Mr. Clark: I'm finding myself in the very strange position of defending the system.

Revenue Canada acts as the constabulary. They investigate whether or not dumping is occurring. The judiciary, the tribunal, decides whether or not that dumping is causing injury. You shouldn't mix the two.

I certainly agree with Professor Stegemann about the inadequacies of our preliminary injury determination. That's one of the biggest and most important changes you could make to benefit all Canadians: to ensure that's a meaningful test.

The Co-Chairman (Mr. Duhamel): I'm starting to conclude that you experts are not unlike politicians. You sometimes have some difficulty agreeing with one another on particular themes and sub-themes.

Anyway, now I'll let Mr. St. Denis introduce another theme.

Mr. St. Denis: Hopefully. Thank you, Mr. Chairman. I don't claim to be an expert such as I find around the table, so I'm pleased to have the chance to pose a question that might be more of a philosophical nature than anything else.

It occurs to me that the kinds of things that go on in dumping cases, when they take place within a country, are called ``sales''. If they are a gas company wanting to move another company out, they simply lower their prices. If it's Wal-Mart having an opening sale, they put out a thousand pairs of running shoes, size 7, and hope to sell them all and get you in the door. So things we tolerate within an economy we don't tolerate when it goes across the border, for obvious reasons, namely jobs in our own markets. But of course consumers generally would like to... As I see from having a chance to read Dr. Stegemann's points, consumers often interfere in the efforts of companies to challenge in cases of dumping.

So I was intrigued by a point Mr. Clark made, and it may have been made by others before I arrived; I'm sorry I was late.

You mentioned, Mr. Clark - and anybody else should feel free to comment - that... And I'm thinking of this question because to the extent that we're able to make some suggestions in this committee they should be in the right direction, whatever that direction is, whether they are small, tinkering, or major changes. Who is to know what we're able to recommend?

You mentioned, Mr. Clark, that we're better to look at the injury than the dumping. I interpret that to mean that within our country we can determine what the effect is on an allegedly injured firm. It's not so easy to go to some other country and determine what the benchmarks for dumping are, if I understand what you mean by the distinction between injury and dumping.

.1710

So would it move us in the right direction if the adjustments, if any, were to move us towards injury determination as opposed to dumping? Would that be moving us in the right philosophical direction so that in the long run, when there will be no need for dumping laws anywhere in the world, a thousand years from now, we will have moved ourselves in that direction?

Mr. Clark: It's necessary to determine whether or not dumping exists, because even if there's injury, you can't impose the duties if there's no dumping. So you have to calculate what the dumping is.

My suggestion is that we should be paying more attention to the quantum of relief that is required to eliminate the injury. Do we need to have the whole anti-dumping duty imposed? If the price suppression has been 5%, then maybe we should be raising prices by 5%. We shouldn't be raising them by 25% or 30%. That was the general thrust of my comments.

Prof. Stegemann: I'd like to add to this, Mr. Chairman, because I totally agree with what Mr. Clark just said. It's the quantum of relief that you can determine.

Also, on the question that it's obviously jobs, well, it's not obviously jobs, because it's jobs for the complainants, possibly jobs with the complainants, but the downstream industries may lose jobs because they go somewhere else, because input prices are lower somewhere else. Therefore, I thought that under the public interest clause the tribunal could investigate what we are losing downstream and what we may be gaining upstream.

The tribunal would also have to investigate the injury on the part of the people who have to pay a higher price. It's not just consumers; very often it's input users. Most of these industries actually complain about inputs being imported, rarely branded goods that go directly to consumers.

In a way, in some cases you're robbing Peter to pay Paul. In some cases you just exclude a whole row of competitors and the remaining competitors, if they compete, are very happy because they can now raise their prices. They may raise them not as high as the margins but clearly higher than was necessary before.

The Co-Chairman (Mr. Duhamel): Mr. St. Denis introduced an interesting point, assuming that I understood him correctly, which is a potential conflict between anti-dumping, countervailing, and the consumer. Is there a conflict there? Does anyone want to speak to that?

Mr. St. Denis: On that point, I'd just like to quote a sentence from Professor Stegemann, at page 50:

A Canadian survey of 69 firms with experience as anti-dumping complainants found that 23% gave customers' objections as a reason why producers with cause do not take action

and so on. I thought that was a rather intriguing point as we search for balance in all of this.

The Co-Chairman (Mr. Duhamel): Is there commentary from the experts?

Prof. Stegemann: Maybe you should have read on. It also says that maybe there are cases where the customers' objections stopped complainants from bringing an action. That's what they said in this.

But once complainants have brought an action, what customers say doesn't matter in the least.

The Co-Chairman (Mr. Duhamel): Why?

Prof. Stegemann: The tribunal wouldn't listen to it. The tribunal has a mandate to look at injury suffered by the complainant, not injury to the ones who are customers. They care if the customers say that this or that is not true, but they do not care about the injury suffered by customers.

The Co-Chairman (Mr. Duhamel): So their preoccupation is with the industry, the product.

Prof. Stegemann: I am not blaming the tribunal. It's the mandate of the tribunal.

The Co-Chairman (Mr. Duhamel): It's the mandate. I understand that.

Prof. Howse: I don't think we can get at the real problem by fiddling with the definition or the tests for injury. Because all of this is based ultimately on bogus economics, any categories are likely to be manipulable. Sophisticated work has been done by well-meaning people in the United States, people trained as both economists and lawyers, trying to get a more principled injury test, but at the end of the day this usually involves just increasing the costs, because you have to do much more sophisticated empirical work, and probably the same kinds of manipulations of the tests are going to occur as occur now because ultimately the foundation is unsound, the foundation is in economic falsehood. There's just no coherence to the idea that there's some kind of distortion in markets created by the price discrimination that is being attacked through anti-dumping measures.

.1715

I think the real action is in fact in the public interest provisions, in adequately weighing the consumer interests, the interests of other industries that, as Professor Stegemann says, are using these inputs. Also, another proposal would be to look at the real effects that are likely to occur on workers of imposing the protection. Will the companies who are demanding protection actually guarantee that jobs will be kept as a consequence of these measures?

The Co-Chairman (Mr. Duhamel): Let me make sure I've seized the two points, or at least two points. You are indeed indicating that consumer interests should be considered. You are also stressing that we need to make awfully certain that when we do something to protect workers this in fact occurs.

Prof. Howse: Exactly.

The Co-Chairman (Mr. Duhamel): Mr. Penson, on this same point, was it?

Mr. Penson: No. I have a different one.

The Co-Chairman (Mr. Duhamel): I just want to make sure we've covered Mr. St. Denis' point.

Mr. St. Denis: Given the time, I might be glad to have Mr. Penson pose his question.

The Co-Chairman (Mr. Duhamel): Okay. What I propose to do is as follows. I'm going to let Mr. Penson raise his question, I have one I'd like to raise, and then I'll give everyone an opportunity to make a closing statement. That should take us roughly fifteen to twenty minutes from now. I know some people have other meetings to attend.

Mr. Penson.

Mr. Penson: It just occurs to me that with Canada and the United States being each other's biggest trading partners it is probable that this is where the biggest part of our problem lies, between the two countries. What's your evaluation for the United States, the idea that the United States would eventually go away from anti-dumping with Canada? Isn't that basically what we're talking about here?

The Co-Chairman (Mr. Duhamel): Mr. Howse.

Prof. Howse: I was never so opposed to the idea of the third option. I don't think we understood at the time how to implement it, but the idea of diversifying Canada's markets or gearing policies to diversify to some extent away from dependency to the extent we have it on the U.S. market I thought was a good idea. Perhaps we gave up on that, or almost gave up on that, a little too early in putting many of our cards in the FTA basket.

I don't see a solution. The economic power of the United States will persist. The domestic political interests in the United States that drive administered protection will persist. So at the end of the day, I don't see that we can provide a government-driven solution, except perhaps in being much more aggressive in working with Canadian firms to expand into other markets. I think the current federal government is starting to try to do that and I hope there'll be some important successes on that score.

The Co-Chairman (Mr. Duhamel): Did you want to add something, Mr. Nyahoho?

[Translation]

Mr. Nyahoho: The US market is such that we have very little recourse. We musn't fool ourselves into thinking that the measures taken by the Americans won't harm their economy.

Consider for example the dispute over wheat. The Americans have made threats, claiming that Canada subsidizes its wheat exports. However, US exports are more heavily subsidized that those of any other country in the world. The United States' actions also harm American consumers. It's not because the U.S. harms its own consumers that we should take steps to harm ours.

American policies are rife with inconsistencies. It is not in our interest to interfere with U.S. actions because ultimately, we harm consumers.

[English]

The Co-Chairman (Mr. Duhamel): Merci. Mr. Clark.

Mr. Clark: It's likely that we're going to continue to have problems with the United States, but we should bear in mind that for three and a half years they haven't filed any anti-dumping actions against Canada in the United States. We're going to have many, many more problems with the new countries introducing anti-dumping systems, because they're all modelled on the very closed European system.

.1720

The Co-Chairman (Mr. Duhamel): Gentlemen, there are three threads, as I detect them. There may be many more still hanging out there. We've talked about anti-dumping and countervailing, but we've not talked about emergency measures. It may be useful to make a brief statement just to situate ourselves.

The second point is that I fear we may be leaving people with the notion that it's not in our interest to have these particular mechanisms, measures, laws, call them what you will, but at the same time we need them, we don't need them. It's less than clear, and I'm not sure where you stand. I don't say that in a critical way. I think it would be useful to know: do we or do we not? Perhaps I've not understood sufficiently clearly the statements that have been made.

A final point I'd like to address to the panel is as follows. It seems to me one of you has indicated anti-dumping duties might be based on the amount of relief needed rather than the margin of dumping. I guess it begs the question, is it possible to accomplish this particular feat, this particular initiative, through SIMA? Or how would one go about doing that? Do we have the mechanisms in place now? Do we have to do something new or different?

To repeat very quickly, when we talk about emergency measures, what are we talking about? Just so we can situate ourselves, what are we talking about?

Who will handle that for us? Mr. Howse.

Prof. Howse: Emergency measures are perhaps the most honest form of administered protection, in the sense that we're admitting up front that the other country, or the other country's company, hasn't done something wrong or evil, that our goal is really to give our industry some breathing space or assistance until it can adjust to changing conditions of competition. The advantage of this is that it focuses on the real issue, which is whether there is a justification for relief of the plight of workers or some kind of unpredictable situation the industry can get out of if it makes the necessary commitment to do so.

This is why my view would be that we should make all these forms of trade remedy something like emergency action, in the sense that the company that's asking for protection ought to be able to show that there is going to be a positive impact on workers, that the company is going to be more likely to survive as a viable entity and keep employing Canadians if it actually receives the protection. My suspicion is that in very many cases they wouldn't be able to prove it.

So in a way I would like to move towards the emergency action model even for anti-dump and countervail. But emergency measures in themselves are complicated, under the WTO agreement. Professor Stegemann has already mentioned that there is an agreement on safeguards and that it provides a number of criteria that have to be met and that are somehow more stringent than in the case of these other forms of protection. This is from the point of view of international law, not Canadian law. So it's going to remain less attractive to those who are seeking protection, I think, than anti-dump and perhaps countervail. For that reason, what we should focus on is much more introducing the positive features of emergency protection into the way we conceive and cast in law countervail and anti-dump.

The Co-Chairman (Mr. Duhamel): Are there any other panellists who want to add to what was said? Professor Stegemann.

Prof. Stegemann: Mr. Howse has emphasized the important points. The emergency law has more stringent criteria because it wants to give a breathing space rather than protection just because something is happening in the market. It requires action, actually, not necessarily protection. There could be subsidies for that reason, or there would have to be restructuring plans. Everything that's being done would have to be temporary, say three years, five years, but not five years with another five years, another five years, another five years, and so on, because that would not be a temporary emergency measure, it would be long-term protection.

That's what I want to say on that.

.1725

Temporary is important. If you talk about anti-dumping measures, and if safeguard measures are too difficult, maybe you should make anti-dumping measures a bit less lucrative by having a firmer restriction on how often they could be renewed.

The Co-Chairman (Mr. Duhamel): Mr. Clark, you wanted to finish this off.

Mr. Clark: I think the greater use of safeguard measures, such as surtaxes and quotas, is a bad policy option for Canada. We're a small, export-dependent country. It involves our challenging other countries at the political level about their own actions. There could be demands for compensation. It's a big-and-little game that we probably can't win, and it requires political decisions every time it's done. It doesn't provide relief once the threshold has been met. So you have to consider all of those things as well.

The Canadian government has been discouraging safeguards for years. I don't know why we'd want to shift to them now.

The Co-Chairman (Mr. Duhamel): Thank you.

Can I go to the second point, then? What we have said here to those who were listening to us in respect of the following - assuming that I've understood correctly - is that these are not in our interest. Yet at the same time, I guess we're saying we need these kinds of mechanisms, tools, protections. Could I just get a quick review here to make sure we understand what is being said? It may be for my benefit only, but I'm going to start with you, Mr. Howse.

Prof. Howse: I think you're quite correct, sir, in perceiving a lot of hedging in this respect. I actually don't think we need these measures, on balance. I do see the retaliation argument. But when you work out the real-life scenarios, how often have we been able to win by retaliation against trading partners, particularly those that are larger than ourselves?

As I say, I'm not one of your great negotiating theory or international relations strategic bargaining experts or whatever, so my common-sense view of the matter is that on balance we're not getting much out of this as just an instrument of retaliation - and that's the only legitimate rationale that I really see for it. I don't see a lot of rationales in terms of protecting workers against economic change. I think there are better ways of doing so, and I've never seen any convincing evidence that this has had a positive impact on that.

The Co-Chairman (Mr. Duhamel): But you are saying that if they were not there, there would be another mechanism in place, are you not?

Prof. Howse: It seems to me that the mechanisms we need in order to protect workers are adjustment policies, whether that means reforming unemployment insurance, creating more flexibility in labour markets, or better retraining policies. I don't think trade protection is either cost-effective or effective just in terms of getting results as a means of dealing with the hardships and uncertainties that come with economic change in a globalized environment.

The Co-Chairman (Mr. Duhamel): Before I go to Mr. Graham, are there others who want to add to that point?

Mr. Graham: Could I just ask a question as a point of clarification?

The Co-Chairman (Mr. Duhamel): Yes.

Mr. Graham: I want to go back to my point about anti-dumping duties and countervail. Let me illustrate it from Mr. Howse's statement. I would just like to probe him to know whether or not he does say the same thing: that with respect to anti-dumping duties there's no economic underpinning - or even political rationale - that is exactly the same for countervail. In probing him, I would suggest that as Canadians, or for other reasons, we might well take a different attitude if the fact that the goods coming into this country are of lower price than those produced in this country by virtue of a foreign government subsidy rather than by virtue of the commercial practice of an individual firm. It seems to me that these two issues introduce extremely different consequences when you're fighting an elephant as opposed to another commercial entity. You're fighting a foreign government.

For example, if we go back to the old case of the Soviet subsidies on turbines coming into this country, there was a big difference between dealing with a Soviet government subsidy on turbines and the fact that a firm in Sweden, for example, might decide to sell them at a cheaper price.

So I'm just asking you if you would clearly distinguish between whether you are lumping anti-dumping and countervail together when you're telling the committee of these attitudes towards these things, or whether there might be considerations that would cause the committee to look at the two issues separately for both the political and economic reasons that I've tried to express.

.1730

Prof. Howse: That's quite correct. I think there are reasons for looking at them separately. There is a class of subsidies, export subsidies, that are targeted to exports that are illegal under the WTO precisely because they're really just a way of cheating or getting around other bindings for free market access. So I think it's legitimate to continue to deal with those, but that's a case where there's a clear mandate under international law, in that they're not merely actionable but are in fact prohibited, and we can get at those by going to the WTO.

As for other subsidies, domestic subsidies, it seems to me that there is an enormous number of government-influenced factors that affect businesses, such as rates of tax and infrastructure. Subsidies are just another one among all of these. Why single out subsidies? The ultimate implication, if you want to level the playing field, is to have a world government, because that's the only way you'll ever balance the burdens and benefits on industry of government action from country to country. Since they can't be balanced, why single out some government measures rather than others?

The Co-Chairman (Mr. Duhamel): That's the next task force. I want to chair the one on world government.

Some hon. members: Oh, oh!

Mr. Clark: Mr. Chairman, the perception of subsidies is that these are decisions by another country unilaterally, without consultation, to undermine the tariffs that have been established, in our case by Parliament, and that's the approach we tend to take on subsidies.

My view is that if the subsidy creates price discrimination, we should deal with it under the anti-dumping act. It can be done effectively, and it doesn't create the international frictions you get from challenging directly the practices of other governments.

The Co-Chairman (Mr. Duhamel): We need them.

Mr. Clark: We need both of them. You need subsidies more in agriculture than in manufacturing.

The Co-Chairman (Mr. Duhamel): Mr. Nyahoho, Mr. Stegemann, did you want to add something? That's only if you want to.

Prof. Stegemann: Not really.

[Translation]

Mr. Nyahoho: Your summary is entirely accurate.

It is pointless to try and distinguish between subsidies and anti-dumping measures because the variables are interdependent. There is no getting around this.

It is unfortunate that we have the current legislation because its effectiveness is questionable. Even if it were amended, the situation would be the same. There is nothing to prove that the legislation was effective in the past and there is no theoretical evidence to predict its future effectiveness. Why then should it be maintained? Could it be, as Professor Howse mentioned, that we want to keep it solely to use it against countries that could eventually apply it? It provides us with a means of protection in specific cases. That is why we believe that the application of the Act should be overseen by a tribunal which would ensure that the evidence presented is conclusive.

[English]

The Co-Chairman (Mr. Duhamel): Merci.

I want to come to the final point that I've raised and then permit any one of the experts to make a final comment if they want.

Assuming I've understood the point correctly, I think one of the panellists had indicated that anti-dumping duties might be based on the amount of relief needed rather than the margin of dumping. If that's correct, how would this be done? Can we do it within the current confines of SIMA?

Who was it...? Did I misunderstand, or did I read it somewhere?

Prof. Stegemann: I did make that point in my opening statement, but Mr. Clark did too. We both did.

The Co-Chairman (Mr. Duhamel): Okay. Do you both want to speak to it, because you might disagree as to whether or not it can be done?

Prof. Stegemann: Should I try?

The Co-Chairman (Mr. Duhamel): Yes, please.

Prof. Stegemann: It's the so-called lesser duty rule, which is provided for in the WTO agreement. WTO agreements do not require it but they recommend that you use the lesser duty, which means the rate of duty sufficient to eliminate injury. This is rather than one that is sufficient to eliminate dumping, which is very high in many cases.

The Co-Chairman (Mr. Duhamel): Yes.

Prof. Stegemann: The European Community in fact has such a rule, which it applies in all cases.

The difference between the European Community and our system is that in our system the exporters in fact can avoid anti-dumping duties by raising their prices to normal values.

Therefore, I think that in our system we would have to give someone, presumably the tribunal, the role of adjusting normal values. They would have to say, okay, we account for injury, we find injury; however, in this case we think normal values should be reduced to such-and-such an amount - which they think is sufficient to eliminate injury but which also, I had suggested, is sufficient to balance the outcome.

.1735

Mr. Clark: During the Uruguay Round negotiations the Government of Canada proposed that this requirement become mandatory, so I assume that they had thought about it. What's necessary is to give the authority, probably to the tribunal, to establish a non-injurious price.

The Co-Chairman (Mr. Duhamel): Gentlemen of the panel, do you have some final comments to make before we bring the meeting to a close?

[Translation]

Do you have any final comments? It's up to you.

[English]

Mr. Graham.

Mr. Graham: I would test the question of the lesser duty rule by suggesting that in the end it's going to be a lot more expensive to establish, because you're going to have to establish what the real injury is and that's going to be extraordinarily complicated. Having participated in these hearings and cross-examined economists for a living, and having made my living as a lawyer doing so, I suspect that this would be even more time-consuming, more expensive, and more complicated than the present system, even with all its imperfections. But that's just an immediate reaction.

The Co-Chairman (Mr. Duhamel): You are saying that this solution would bring about another set of problems.

Mr. Graham: All solutions do that. Yes.

The Co-Chairman (Mr. Duhamel): Are there any final comments by anyone? No?

Thank you very much.

[Translation]

I want to thank everyone. I greatly appreciated not only the presentations, but the exchange of views as well. Thank you.

[English]

We're going to an in camera meeting of the committee for business purposes after a three-minute health break.

Return to Committee Home Page