[Recorded by Electronic Apparatus]
Wednesday, November 20, 1996
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[English]
The Co-Chairman (Mr. Duhamel): Ladies and gentlemen, thank you for being here. Let me tell you about the process. Let me as well share with you what I believe is happening this afternoon, which is going to cause some delay. We deal with that on a frequent basis and I hope you'll be patient, because we do need your testimony.
My name is Ron Duhamel, and I'm the chair of this committee. I co-chair it with theHon. Michel Dupuy, who unfortunately is absent today but asked me to convey his very best wishes to all of you.
I'm accompanied by colleagues: Mr. Grubel; Mr. Cullen; Mr. Penson; and Monsieur Sauvageau, who, because of some delays in the House, will be joining us shortly.
What we normally do goes as follows. We ask you to make a brief statement of five to seven minutes at most. Subsequent to those statements, the members will begin the questioning. Then if you want to add a bit, you can. You decide for yourselves.
Here's the complication I have to deal with this afternoon: There is going to be a vote in the House, we were told, at 3:45 p.m. It looks as if it may be a bit later. I hesitate to wait to see whether or not it's going to be sooner rather than later, because we have a lot of people here and we have so little time. So if you'll forgive me, please, I'm going to proceed.
[Translation]
We will now hear the witnesses.
[English]
If we have to stop - and no doubt we will have to stop - we'll go and vote, and then we'll return as quickly as possible.
Mr. Grubel (Capilano - Howe Sound): Couldn't we possibly pair off so that we -
The Co-Chairman (Mr. Duhamel): I would hope that someone somewhere up there in one of the towers is looking at that possibility.
Mr. Grubel: It would be a shame to have all these people in and have them sit around.
The Co-Chairman (Mr. Duhamel): Yes, it would be most unfortunate.
Have I identified all of my colleagues? I thought I had seen another colleague join us -Mr. Campbell is here as well.
Mr. Campbell (St. Paul's): Thank you.
The Co-Chairman (Mr. Duhamel): Who would like to go first? Would you like to start, sir?
Mr. John Kuhl (Chairman, Trade and Regulatory Committee, Canadian Horticultural Council): Mr. Chairman and committee members, I am John Kuhl. With me is Stephen Whitney from the Canadian Horticultural Council staff.
We trust that members of the committee have been given a copy of our submission. Due to its length and the time limit provided, we will only touch on key elements.
The Canadian Horticultural Council is a voluntary, not-for-profit organization whose members are involved, affiliated or associated with the production of fruit, vegetables and ornamental crops from across Canada, with a farm gate value of approximately $2.4 billion. We welcome the opportunity to present the consensus views of our very diverse membership to the committees in this formal review of SIMA.
Currently there are a number of Canadian anti-dumping rulings on imported fresh fruits and vegetables. These include a national application on Red Delicious apples from the United States and three regional applications on yellow onions, lettuce and potatoes imported into British Columbia from the United States.
We will attempt to respond to the key policy-type questions associated with this review.
The first question is: does the law adequately serve those firms that are being injured by dumped or subsidized imports? We have four main problems with the current law.
First, a firm is a corporate entity; a commodity may have numerous producers spread across the company. As an example, apple producers who operate independent businesses number in the thousands and are of commercial importance in five provinces. The ability to collect and assemble the data required is very difficult to coordinate.
Second, in the fresh fruit and vegetable sector the initiation of an action is a time-consuming and costly process. The implementation of a positive finding, while corrective in the longer term, cannot deal with the immediate need associated with a highly perishable product.
As well, the timeframe for making a preliminary determination is too long. An anti-dumping ruling can often go into effect after the domestic season has come and gone. This is one of the principal reasons this sector has favoured an effective safeguard mechanism; however, to date the government has only seen fit to allow horticultural producers access to snap-back tariffs, which are ineffective.
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Third, while countervail investigations suffer from the same deficiencies as anti-dumping, they add a further complexity. It is very difficult for industry to find and document trade distorting subsidies in foreign countries, which has to be done in order to properly document a complaint.
Fourth, both instruments leave another significant gap, and that relates to the ability to provide protection to producers on injurious imports of semi-processed and finished product. Producers of primary product simply are not eligible to file a complaint on such products as they are not deemed to be producers of a like product.
For example, if the injurious product is grape juice concentrate for wine production or indeed the finished product, Canadian grape producers cannot file a complaint because grapes are not deemed to be the same product. In that the majority of all Canadian grapes are grown for the ultimate purpose of producing wine and grape growers can be injured as a result of dumped imported grape juice concentrate or wine, it's difficult to explain to grape growers the technical jargon that denies them access to either anti-dumping or countervailing duties.
That is not unique to grape producers. It could be apples, tomatoes, or cherries, and so on. Producers of all these products have faced this problem over the years, and this issue needs to be resolved.
The second question is: does the system consider the potential negative impact of anti-dumping and countervailing duties on consumers and downstream industries?
In the case of fresh products that are sold into the fresh market with no conversion having been made, we believe the current system has enough safeguards to protect the interests of consumers and distributors.
For products that are converted, the question is somewhat more difficult as protection of the primary product, without some recognition of the need for some compensatory protection of the downstream product, simply transfers the problem to a different level.
The Canadian ruling on imported sour cherries from the United States is a classic example. The successful challenge by Canadian producers was eventually circumvented as the end user imported bulk cherry pie fill and bulk individually quick-frozen - IQF - cherries, forms of semi-processed sour cherries that could not be included under the challenge by Canadian producers. It can be argued that the end user - that is, the marketer of canned pie fill or the manufacturer of cherry pies and dessert - may likewise have been disadvantaged by one form of manufactured product being covered by the anti-dumping ruling and another form not being recognized.
Consequently the ruling was dropped, but the import problem did not disappear, leaving Canadian cherry producers injured. This issue needs to be addressed. If we don't, then we're asking producers to subsidize another level of the industry. Clearly over time this cannot be sustained by producers unless governments are prepared to foot the bill - a highly unlikely scenario.
We appear to be many years away from resolution of these inequities, which leaves a number of our commodities and downstream industries at risk. Can we afford to wait?
The third question is: is the current system accessible to all complainant companies?
No, producers of primary products cannot initiate an action against processed products.
The fourth question is: can the efficiency of the investigation process be improved?
Yes, it can, by requiring less documentation and reducing the timeframe for a preliminary determination. It would be of great assistance to this sector and to government officials if we could reduce the paper burden without losing the ability to properly document and argue the merits of any case.
Question five is: should the Canadian dumping laws and procedures be the same as those in the U.S.A?
Yes. If we could negotiate a bilateral agreement with the U.S., then we could at least say to the industries in the two countries that they're being treated exactly the same.
The sixth question is on views about respecting the economic change as brought about by globalization and the role of SIMA.
Under our training agreements, the Canadian government succeeded in improving the access for imports of horticultural products into the Canadian market. However, our federal and provincial governments have not been as successful in adjusting a number of domestic policy instruments that make it difficult for Canadian producers to compete.
You simply cannot continue to open your markets to imports and expect domestic producers to compete, without making other adjustments, certainly not in the face of dumped or subsidized competition. Until both levels of government succeed in bringing domestic policy issues more in line with global marketplace realities, SIMA must be maintained.
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We are especially concerned over the phase-out of anti-dumping measures in the Canada-Chile trade agreement. If this is the approach Canada wants to take with our other trading partners, especially under NAFTA, we are even more concerned. While we recognize that over the longer term, anti-dumping and countervail measures may be phased out, especially in the free trade zones, this should be permitted to happen only once market access issues have been resolved.
What do you consider to be the most important issues to be addressed? We have four, in order of priority. One is maintenance of SIMA as a trade relief mechanism. Two is resolving the producer status issue for downstream products by broadening the definition of ``like product''. Three is reducing the administrative burden on domestic producers, importers and foreign suppliers, and reducing the timeframe for a preliminary determination from 90 days to 60 days for highly perishable products. Four is development of mirror laws and harmonized procedures with the U.S.A.
We appreciate the opportunity to provide you with our input, and we look forward to answering any questions you may have. Thank you.
The Co-Chairman (Mr. Duhamel): Thank you, sir.
Now I'm going to proceed to the Canadian Wine Institute.
Mr. Roger Randolph (President, Canadian Wine Institute): Thank you, Mr. Chairman.I am accompanied this afternoon by my colleague Don Jarvis, our counsel in Ottawa. If you will forgive me, I have a bit of a cold.
Thank you for giving us the opportunity to address this joint meeting of the subcommittees of foreign affairs and international trade, and finance, on this very important issue.
I would like to clarify at the outset that our reason for participating in this round table is not part of some larger strategy to gain preferential treatment. All we're looking for is that elusive level playing field.
We are fully supportive of the principle that Finance Minister Paul Martin enunciated earlier this year: that Canada needs to provide its industry with the same protection as that employed by our major trading partners. Since 1989, with the establishment of freer trade, the world has gained national treatment for its wines in Canada, with no quid pro quo for Canadian wines in export markets. The proverbial playing field was more level for wine before CUSTA, NAFTA, GATT and the WTO.
It is essential, in our minds, that Canada get in step with Finance Minister Martin and protect its industries against unfair trade practices. Maintaining countervail and anti-dumping legislation across the board is a crucial component of such a proactive trade policy. Indeed, the CWI recommends that the Special Import Measures Act or its related regulations not only be maintained but be amended to provide a greater balance.
Canadian wineries are engaged in marketing wines made from pressing grapes and fermenting grape juice, but there are also establishments that specialize in selling wines made from blending and bottling bulk wines. The industry is closely regulated federally and provincially, and these regulations impact directly on the structure of the industry, the cost of production, product pricing and marketing.
Canadian wine has gained considerably in stature abroad and at home over the past six or seven years, at significant cost and effort. This renewal has brought with it future promise, a promise that can be fully realized only in a fair trading environment. I am pleased to point out that 1996 sales, for the first time in at least eight or nine years, have begun to show a significant turnaround.
The Canadian wine industry is comprised of 67 companies operating 77 wineries across Canada, with annual sales in 1995 of $550 million - of which members of the CWI account for over 89% - and an estimated tax contribution of $385 million. The industry provides quality employment for over 5,000 people.
Since 1989 imported wines have been afforded national treatment in terms of listings, distribution and mark-ups, and Canada has received nothing in return for its wines in export markets. The European Union, instead of decreasing its subsidies as it had announced, has increased them, and according to a 1994 Ontario government study, paid subsidies of more than $5 billion to its industry at all levels. This doesn't include the national subsidies paid by member states to their wine industries. These are estimated at an additional $1 billion.
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The United States over the past number of years has supported its industry with tens of millions of dollars in export subsidies, most of which is spent in Canada, its largest market. A GATT panel ruled in favour of Canada against the U.S. on discriminatory pricing, distribution, tax and import regulations. The findings of the ruling have not been implemented, allegedly because of U.S. constitutional inadequacies.
The home markets of our trading partners are dominated by their own wines: France, 98%; Italy, 98%; California, 92%; Spain, 99%; Australia, 97%; and New Zealand, which in terms of industry size is similar to Canada, 84%. By contrast, Canada has approximately only 40% of its home market.
In balance of trade terms for the European Union alone, in 1995 the value of Canada's wine exports was less than $0.5 million versus imports from the European Union of over $305 million.
Trade policy means many things, but to us it means protecting Canadian industry from unfair trading practices in our own country and opening up foreign markets where unfair trading barriers are being maintained against the letter and spirit of CUSTA, NAFTA and the WTO.
Consistent with these objectives, Canada should strengthen its enforcement and administration of existing legislation, in this case dumping and subsidizing, across the board, even in free trade zones. In this regard, the CWI supports the Canadian Federation of Agriculture that this legislation should be maintained in the Canada-Chile free trade agreement. Its removal would make Canada's wine industry potentially vulnerable to subsidized and/or dumped wine from Chile and would set a bad precedent.
The subsidies code and the anti-dumping code have as their objectives the prevention of dumping and the improper use of subsidies, on the one hand, while preventing, on the other hand, the use of countervailing and anti-dumping measures as tariffs in disguise. The Special Import Measures Act does not strike a proper balance between these two objectives.
The codes and the SIMA regulations require the authorities to examine whether any factors other than dumping or the subsidizing of the goods complained of have caused injury or retardation or are threatening to cause injury. If, as has been the case, domestic Canadian industries are required to prove that no factors other than imported, dumped or subsidized goods have caused the injury complained of, a next-to-impossible burden is placed upon them. Proving that no factors other than the imported goods have caused the injury complained of involves proving a negative. Experienced lawyers will tell you this is extremely difficult to do.
The requirements of the code should be regarded as rules of relevance, not as rules respecting the onus of proof in the determination of injury. The most fundamental principle respecting the onus or burden of proof is that the person who alleges a fact must prove it. Thus, a domestic industry complaining that subsidized or dumped imported goods have caused injury must prove that proposition. The domestic industry must prove that the imports have caused injury.
We are therefore urging Parliament and the government to amend SIMA or the SIMA regulations to provide that as long as the domestic industry presents some evidence of cause and effect between the imported goods and the injury to the domestic industry complained of, and there is evidence to support the complaint, the onus of proof should then shift to those representing the interests of the importer to persuade the authorities that one or more other factors, and not the imports, caused the injury complained of.
For example, one defence to an anti-dumping case might be that the reduced profitability or sales that the domestic industry complains of was in fact caused by something other than the imported goods, such as a recession, which reduced the demand for the domestic goods. In this example, it is the importer who alleges that some other factor is at work, and it is he who should therefore have the burden of proving that the other factor, namely the recession, caused the reduced profitability or sales.
It should be sufficient that the domestic industry has proved its assertion, namely, that there's a causal relationship between the imported goods and the injury caused, in our example reduced profitability or sales. Another other cause introduced by the importer for the injury should be proven by him. According to the principle of burden of proof, it is up to him to prove the allegation.
We are pleased to point out that our legal counsel advises that the changes to SIMA and the SIMA regulations to achieve this objective can be done while fully respecting Canada's obligations to the WTO regarding the codes. Importantly, the changes will reduce the unfair and formidable difficulties domestic industries face in countervail and anti-dumping proceedings and come significantly closer to achieving the objectives of the anti-dumping and subsidies codes.
Thank you.
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The Co-Chairman (Mr. Duhamel): Thank you, Mr. Randolph.
I'd like now to proceed to the Alliance of Manufacturers and Exporters Canada. The spokesperson will be Mr. Moore.
Mr. James D. Moore (Vice-President, Policy, Alliance of Manufacturers and Exporters Canada): Mr. Chairman, I will start the proceedings, if I may, and then turn it over to one of my colleagues.
My name is Jim Moore. I'm the vice-president of policy for the Alliance of Manufacturers and Exporters Canada. For those of you who may not be familiar with this name, the alliance is a result of a merger earlier this year between the Canadian Manufacturers' Association and the Canadian Exporters' Association. We have over 3,500 members, primarily from the producing sectors of the economy.
We appreciate this opportunity to appear. I would like to introduce my colleagues. Dennis Martin is the manager of trade relations and market information of Dofasco; John Bailie is the director of government affairs for Kodak Canada and is also the vice-chair of the alliance's market access and customs committee; and Michael Flavell is a senior partner with Flavell Kubrick& Lalonde.
The alliance has spent a good deal of time internally holding its own task force to try to reconcile the various interests and forces at play. The brief we put together and submitted to you represents the balancing of these interests, and more particularly a focus on SIMA procedures, how they can be improved and the right balance between protecting producers from unfair foreign competition and the need to ensure that the interests of consumers and industries requiring imported inputs for their production are also taken into to account.
You have received a copy of our brief. I would like to ask John Bailie to highlight the features we believe to be important to you.
Mr. John Bailie (Director of Government Affairs, Kodak Canada Inc.; Vice-Chair, Market Access and Customs Committee, Alliance of Manufacturers and Exporters Canada): Thank you, Jim.
I'd like to review some of the key points in our brief.
In preparing for our submission and this appearance, the alliance conducted an evaluation of our members' experiences with SIMA. We found that the present SIMA has served Canadian producers well but that it could be enhanced with some relatively modest changes that would improve efficiency and refine the balance between Canadian producers seeking trade remedy protection and the interests of other manufacturers affected by the increased costs resulting from the imposition of anti-dumping or countervailing duties.
We offer the following suggestions on improving the efficiency of the investigation process.
The CITT investigation process should begin earlier. The time for CITT hearings should be reduced by eliminating cross-examination time and encouraging the use of written briefs. The use of undertakings should be encouraged. It should be possible to reach an undertaking at any time up to the CITT hearing.
In discussing the balance issue, the manufacturer-consumer stakeholder group of the alliance raised three practical problems that warrant attention.
First is the situation of a provable, temporary, specific shortage from domestic suppliers of goods that are subject to a dumping or countervail order. We would propose that a simple procedure be provided for temporary remission of anti-dumping or countervail duties for specific quantities of specific products for a short period of time.
The second problem is goods not available in Canada that are covered by the scope of an injury finding. We would propose a relaxation of the interpretation of section 76 review to include modification of injury findings to reflect new, changed or overlooked circumstances or facts.
Third, we raise the issue of prohibitively high dumping margins, usually on a constructed value basis. We would propose the modification of the rules relating to the calculation of normal value to encourage the use of section 15 calculations - that is, price of like goods - as opposed to the constructed value methods of section 19.
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Considering that the purpose of SIMA is to impose duties only to the extent required to remove injury, we agree that in appropriate circumstances there should be an authorization under section 45 to calculate a lower duty. However, we caution that Canada should not adopt this approach until our major trading partners have also done so. To do so would put Canada at a disadvantage in attracting foreign investment.
In the year since SIMA was legislated, there have been profound changes in world trade. Falling tariffs, along with other trade-liberalizing initiatives, have significantly increased Canada's trade as a percentage of GNP. The Canada-U.S. Free Trade Agreement and NAFTA have resulted in substantially greater integration and rationalization of production facilities in North America.
The alliance believes Canadian and U.S. anti-dumping laws do not need to be the same, but they should be comparably effective. Competitive costs for inputs and comparable trade remedy protection to that of the U.S. are essential to continue a healthy manufacturing sector in Canada.
The alliance would also like to underline the importance it attaches to the World Trade Organization continuing its work to encourage transparent, harmonized and fair trade remedy laws worldwide. Canada, as a nation that is increasingly dependent on trade for its well-being, has a large stake in furthering these objectives.
The alliance strongly supports the government's efforts to negotiate elimination of traditional trade remedies in the North American marketplace.
Thank you.
The Co-Chairman (Mr. Duhamel): Thank you, sir.
We will have time to hear from representatives of the fourth group giving testimony today, so I'd like to proceed now to Westroc Industries Ltd.
Who will be the spokesperson?
Mr. Brent Thomson (Vice-President, Central Region and Chief Financial Officer, Westroc Industries Ltd.): I will, Mr. Chairman.
Good afternoon. I'm Brent Thomson, representing Westroc Industries, a Canadian manufacturer of gypsum board with six plants across Canada. I'm accompanied by Rob Morrow and Denis Gascon. I thank you for providing us with this opportunity to participate in the round table discussion.
Westroc has filed a written submission that documents our recommendations and our answers to the questions raised by the subcommittees. My comments today will serve to highlight and summarize the three areas Westroc considers to be of greatest importance: protection from unfair trading practices, the process for getting protection, and the review process surrounding the expiry of anti-dumping duties.
Westroc's interest follows directly from our experience in 1992, which led to the imposition of anti-dumping duties in January 1993. The anti-dumping protection has been necessary and very beneficial to Westroc, whose profitability and in fact viability were being threatened by the unfair trade practices of U.S. competitors in the latter part of the 1980s and the early 1990s.
In order to summarize our views, I will work from one of the questions posed by the subcommittees, question number 8, which was: what do you consider to be most important issue to be addressed in the review of SIMA?
Our response was the joint subcommittees must ensure that SIMA remains an effective means to protect Canadian industries from unfair trade practices and that the Canadian International Trade Tribunal process allows Canadian producers as well as importers and exporters to properly present their case to the tribunal. I note here that we might have added, ``in the most timely manner possible''.
This response can be broken down into two areas, one dealing with protection and one dealing with process. I will deal first with protection.
Protection from unfair trade practices is of paramount importance to Canadian producers, as we can evidence from our experience. Protection is currently available if two things are occurring: products are being dumped and this dumping is causing material injury to the Canadian producers. The determination of injury is ultimately based on the impact on profitability. If profits are being negatively affected, the viability or future of the Canadian producers can be at stake.
If Canadian producers are weakened and ultimately forced out of business, it is difficult to see the win for Canada. Although there may be a short-term lowering of prices in the market because of dumping, it must be remembered that exporters are in fact dumping, and therefore they are selling at prices that are effectively lower than those in their home market or they are selling at prices that do not generate a reasonable profit.
Such a situation cannot last forever. In the longer term, in the absence of domestic producers, prices would likely have to rise, there would likely be supply restrictions, and it is unlikely Canadian interests would re-enter the market, as any necessary investments would be very risky if there was no effective means of obtaining protection from unfair trade practices.
In the area of dumping protection there is always concern for public interest, and there are adequate mechanisms for the CITT to deal with this. Concern for public interest is entirely appropriate, and affected parties have an opportunity to be involved in the process.
Concern for public interest does not mean that effective protection cannot or should not be afforded the Canadian industry. As I outlined, weakening Canadian producers does not necessarily mean a gain for consumers. The short term and the longer term need to be balanced carefully.
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A couple of other points must be remembered in the debate on public interest. First, exporters are not being prevented from entering the Canadian market. Rather, they must enter it fairly. Secondly, Revenue Canada and the Canadian International Trade Tribunal are careful to ensure that dumping cases are well founded.
One other comment I want to make in the area of protection relates to the impact of globalization. Canadian companies such as Westroc have gone farther afield, and we must do so in a fair manner. Globalization has also caused foreign companies to look farther afield in order to enhance profits. This is good, but only if this new competition is done on a fair basis.
In summary, we believe the current protection is adequate and should be continued. But we have made one recommendation concerning the calculation of dumping duties to ensure foreign exporters are not exporting their own economic or financial problems to Canada.
Let us now move to the second area of our response, which deals with process, and in particular with the process of the Canadian International Trade Tribunal. We agree the tribunal needs to ensure the process is comprehensive, transparent, and fair. This, however, needs to be balanced against the fact that the future of the producer may be at stake and while the process is going on the producer is often under siege. We have made detailed recommendations concerning process in our submission and would summarize them as follows.
In the area of procedures, everything should be clearly set out in advance and strictly adhered to. Cases should be won or lost on the merits of cases that are properly contested, not by tactics surrounding the filing of evidence or the presentation of witnesses nor the exclusion of certain information from the affected parties; and in recognition of the importance of the issue at hand, timing should always be of the essence.
I would now like to comment on the review process for expiring duties. As outlined in our submission, we believe the onus for not having a review done should be on the exporters. In the absence of significant and substantial change in circumstances, the Canadian producers should be afforded the opportunity to attempt to have the duties continued by presenting a properly documented case while the existing duties are in place. To fail to do so would mean the Canadian producers would again have to suffer injury and go through the original process in order to have some protection reinstated.
My comments today are predicated on our own experience, where dumping protection has been beneficial not only to Westroc but also, we believe, to Canada.
I conclude with a repeat of our recommendation to continue to keep SIMA as an effective means to protect Canadian producers from unfair trade practices while modifying the processes in the manner suggested.
I thank the subcommittee for their time.
The Co-Chairman (Mr. Duhamel): I thank you all for your presentations. Rather than begin the discussion, because we would only be getting into it, I'm going to call a temporary recess, so we can go to vote. We hope to be back as quickly as possible. Please stay. Thank you.
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The Co-Chairman (Mr. Duhamel): Thank you. If some of you are interested in the job of member of Parliament, there'll be an opportunity. We could chat about that too. I'll tell you about all of the benefits and some of the challenges.
I'd like to begin with two questions and you can respond if you choose. You may want to simply leave others to do so, it's up to you. Here's the dilemma I'm facing, assuming I'm hearing and understanding the testimony reasonably well.
I look at all of the questions. I've reviewed them. I've reviewed the papers. Question number one - oh, just right, not quite right, too much, too little - and I could go through that. I'm not making fun of you or the various witnesses who have appeared. There's a bit of a challenge here, you know.
Does someone have some advice for me? Let's assume my basic supposition is a correct one. If I take all of the questions we pose plus a number of other points you've raised, there is some disagreement. If there are others, let's just simplify it and say it's just about right. Others are saying you have to make some adjustments this way, and others are saying you have to make some adjustments the other way.
I'd like your insights, if you have any you want to share with me, in terms of how my colleagues and I will come to some sort of meaningful conclusion where we're going to respond to your various needs. Who wants to tackle that first?
Mr. Bailie: I'd like to defer to my colleague Mr. Martin for comments from the alliance.
Mr. Dennis Martin (Alliance of Manufacturers and Exporters Canada): From what I've heard today and what I've heard at other hearings I've attended, I think the alliance's viewpoint is that we have to strike a balance between protecting the Canadian manufacturer/producer and the consumer of the manufactured goods.
On the other hand, we have to respect that if Canada wants to maintain jobs and maintain an investment environment that people want to come to, it has to be in a trade regime that has the same protection as the major trading partners around the world. To have the trade protection SIMA gives us now only requires small adjustments, in our opinion.
The Co-Chairman (Mr. Duhamel): Are there others? Yes, Mr. Whitney.
Mr. Stephen Whitney (Assistant Executive Vice-President, Canadian Horticultural Council): Mr. Chairman, I don't see any particular problem. If we go back to some of the original definitions we've talked about with respect to trade relief and these two instruments, they're there to provide for relief in the event of an industry being injured.
There are definitions for injury, etc. People have talked about when those occasions arise, either attached to subsidized product being sold into a country or where product is being dumped. I think if you go back to some of the fundamentals, I'm not so sure we're that far off with the legislation we have right now, but it does need some minor adjustments in order to make sure it provides adequate protection when an industry is being injured.
If we don't do it, we're going to end up in a situation whereby groups will continue to suffer, with no access to any instruments. I'm not so sure that's what we all want. But I don't see any conundrum in terms of balancing those views as long as the fundamental premise is correct that you want to provide a relief mechanism under well-defined rules.
The Co-Chairman (Mr. Duhamel): Would everyone agree with that? Good. Yes,Mr. Thomson.
Mr. Thomson: I would agree. I seemed to hear agreement today that there has to be protection against unfair trade practices, and on balance, people were satisfied with the legislation. We have to protect investment in Canada and that's an underlying goal of that.
Most of the adjustments seem to talk about process areas and process in terms of slight tweaking here and there, and perhaps timing and access were also issues. So I think the committee does have some middle ground that most of the parties presenting today were standing on, and that should help you.
The Co-Chairman (Mr. Duhamel): Thank you.
Are there other comments before I invite my colleague Mr. Grubel to make some statement? Yes.
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Mr. Martin: I would like to pick up on something Mr. Thomson said, which I couldn't agree more with. We're talking about ``fair'' trade. We are not against competing against fairly traded goods. I don't think any manufacturer in Canada is against any fairly traded goods.
The Co-Chairman (Mr. Duhamel): All right. Yes, Mr. Flavell.
Mr. C.J. Michael Flavell (Senior Partner, Flavell Kubrick & Lalonde): Just to bring a slightly different nuance to the alliance's position, because we have had to balance interests of what I would call producers against interests of consumer/manufacturers, I think there may need to be some tinkering with the other half of the balance - that is to say, the balance that is to protect the consumer/manufacturer. The user of imported inputs needs to be protected, at least protected to a degree that still does not rob the Canadian producer of protection. In other words, I think you have to find that middle ground between protecting him and not injuring the user group unnecessarily.
The Co-Chairman (Mr. Duhamel): Thank you.
Mr. Grubel, did you want to react to the comments? Thank you for having given me the opportunity to start the group. I was concerned about the second bell.
Mr. Grubel: No. I apologize to you for the fact that my colleagues, in cahoots with the Bloc, have engaged in parliamentary manoeuvres that I think are childish, but this is the way politics goes. We have only a very limited time.
I heard with very great interest that all of you, in fact, are taking what is potentially a major new initiative: you want SIMA to protect your industries against policies abroad that go beyond subsidies and dumping.
I tried to think of an example. Let's say that we have a certain environmental rule for growing apples and the Americans do not have that rule. That can be construed, according to what I heard from you - correct me if I'm wrong - as providing the American producers with an unfair advantage.
First of all, I would like to know from you whether this is the kind of example you had in mind when you said you wanted protection from unfair foreign competition based on things other than dumping and subsidies.
Second, I would like to hear...well, Mr. Thomson, quite clearly, it doesn't apply to gyprock, but what did you mean when you mentioned in your submission that you would like these other factors to be considered? Can you give us some examples?
Mr. Randolph: Mr. Grubel, I don't think we were saying that. I think what we're saying is that we're certainly not in favour of, if I can use a phrase that was coined a few days ago, ``unilateral disarmament''. All we're looking for is fair trading practice. And I don't think anybody here went beyond dumping and subsidies. And I think -
Mr. Grubel: I have a note here. Maybe I'll have to read your written submission, but you would like to have other factors considered that would be a cause of injury.
Mr. Randolph: No.
Mr. Grubel: Did I misunderstand you on that? Oh, well -
Mr. Randolph: No, that's not what I said. What I said was that the burden of proof, the fundamental principle of the burden of proof, is that whoever makes an assertion has to prove that assertion.
In the past, Canadian domestic industries have had to prove assertions other than those related to dumping and subsidies. All we're saying is that if we have proved that an imported product has caused injury and if the importing interests bring up something other than the imports having created dumping of those products into Canada, then it is up to them to prove that other assertion.
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Mr. Grubel: Give me an example.
Mr. Randolph: The example I used in my presentation, if I could just go through it.... For example, one defence in an anti-dumping case might be that the reduced profitability or sales the domestic industry complains of was in fact caused by something other than the imported goods, such as a recession that reduced the demand for domestic goods. In this example it's the importer who alleges that some other factor is at work, and it's he who should therefore have the burden of proving the other factor, namely the recession, caused the reduced profitability or sales.
Mr. Grubel: So if the importer says ``the reason why we're able to undersell you is that your department of environment has put excessively high regulatory costs on you'', you don't argue that it should now be admissible as a reason for action.
Mr. Randolph: No. It's the importer who has to prove that assertion.
Mr. Grubel: Let's say he proved it. Would you be happy with that?
Mr. Randolph: If he proves it, that's a situation I can't comment on.
Mr. Grubel: Okay. It would not then automatically by actionable under SIMA if that were to be proven as a fact.
Mr. Randolph: If he can prove it, yes.
Mr. Grubel: Thank you very much. It was an important clarification. I misunderstood it.
The Co-Chairman (Mr. Duhamel): Are there additional comments you wanted to make,Mr. Grubel, on the issues that were raised, or perhaps some additional question you wanted to raise at this time?
Mr. Grubel: No.
The Co-Chairman (Mr. Duhamel): Mr. Penson.
Mr. Penson (Peace River): Mr. Kuhl, you talked about how market access issues must be resolved before we discontinue any anti-dumping measures. What did you mean by that?
Mr. Whitney: On behalf of Mr. Kuhl, I could tackle that one.
In what we have found with the horticultural trade there is somewhat of a balance in the view we presented here today. We have export interests as well as people who are producing what we would call import-sensitive crops. When it comes to some of our export interests, in market access issues, if we look at situations such as licensing into the U.K., where our exporters are faced with certain licences they must procure in order to be able to move, there are tariff rate quotas when we start dealing with exports of some of our commodities going into such areas as Mexico, and licensing systems.
Other requirements have not been successfully addressed as we have entered into these freer trade zones. For example, under CUSTA and under NAFTA part of the commitment that was made under those agreements was not only to reduce tariffs over a scheduled period but to enter into other efforts, in conjunction with our trading partners, whereby we could harmonize some of our other instruments such as pesticide registration and technical issues such as pesticide residues. These are the areas where we find a degree of struggling has been going on, because it's somewhat harder to harmonize some of one's other domestic policy instruments in order to facilitate movement of goods.
If I can use pesticide registration as an example, if you look at the U.S. producing area, there is approximately ten times the amount of production in the U.S. that there is in Canada. It's usually a ten-to-one ratio. The market for the registration of products in the U.S. is ten to one over Canada. It's awfully hard to convince a manufacturer there's an interest in putting a product into the Canadian market for 300 acres of spinach. It's relative when you start looking at potatoes or apples or any of the other commodities.
At the same time, though, if you don't have those registrations and that technology available for your producers, not only do you place them at somewhat of a competitive disadvantage relative to competing not only in the domestic market but in the export market, but more than that, if you end up in a situation where you don't have those technical requirements such as on pesticide residues established for example on a North American basis, that can become a real restriction to trade. That becomes an access issue. Technical barriers can be access issues, but there also can be other policy things, including, as I mentioned, licensing systems.
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Mr. Penson: But you're not suggesting that access should be denied.
Mr. Whitney: No. We're saying if we can't address access issues in the immediate term, we can't afford to give up the only other things we have at our disposal, such as SIMA, a relief mechanism from unfair, subsidized and/or dumped product.
Mr. Penson: Surely the negotiations that went on at NAFTA and eventually at GATT must have struggled with those kinds of issues. It simply wasn't to be had at that moment. Do you see any improvement coming on the next round?
Mr. Whitney: I can only hope.
Mr. Penson: Are you putting that forward as a position from your industry?
Mr. Whitney: We have asked and we have pursued and we have worked with the officials to try to make progress in some of these areas, but of course it takes two to tango. Even if you can get your own government wanting to move on some of these issues.... There's the issue we raised today, the definition of like product. When the Uruguay Round was on, we were informed that the Canadian government was asking for a broadening of the definition of like product. That wasn't supported by our trading partners.
We have to succeed in negotiation those things. If we can't, some of our industries are going to be at risk, not only the primary producer but also the downstream industries.
The Co-Chairman (Mr. Duhamel): Are there other responses to Mr. Penson's point?
Is that it for the time being, Mr. Penson?
Mr. Penson: Yes, it is.
The Co-Chairman (Mr. Duhamel): I want to follow up on a comment made earlier today.I have not seen it in black and white, although I believe there's been some reporting of it in the newspaper, that anti-dumping mechanisms will not be part of the Canada-Chile free trade agreement.
Someone mentioned that they were nervous about that. Perhaps we could talk about that a bit more. Someone also asked me if this was not an opportunity for a pilot, an experiment, to see whether or not there may be benefits we have not anticipated, without taking too many risks. Perhaps I could have some response to that.
Mr. Moore: I would like to comment very briefly. When this proposal came up in the closing days of the negotiations, the alliance conducted, at two days' notice, a survey of most of the most-likely-sensitive product areas as to whether they would support our negotiators reaching such a conclusion in the agreement. To my surprise, I must admit, of those we contacted - and it was a very brief survey, conducted with very little time - we did not have any industry sector support that objective.
The Co-Chairman (Mr. Duhamel): You're finding it really surprising that this is so. You know it to be so, then.
Mr. Moore: I personally was surprised. There are arguments on both sides as to whether or not it should have been included in the negotiation. But from our very quick canvass - and it was a quick canvass; we didn't touch base with every industry sector - we did not find any industry sector that supported what is in the agreement in this area.
I'm not saying there are a lot of people out there very worried about it. Hopefully there won't be, but certainly it's of considerable concern to, I don't know, horticulture, who we did touch base with, and other sectors who could be adversely affected.
Dennis, do you have a comment on that in terms of the steel industry?
Mr. Martin: To the steel industry it's really a non-issue. The comment I would make about that - and I think we had this expressed from the alliance members - was that we should be looking at doing this with the U.S., not Chile, not Brazil. We need to complete that with the U.S.
The working parties that were supposed to come to a resolution in December 1995 did not get there. We're saying, why not? Keep going. Get it done.
The Co-Chairman (Mr. Duhamel): Is there general consensus on that statement?
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Mr. Moore: Yes. In the alliance membership there's a general consensus on that statement. It has been very disappointing, but despite the agreement both in the original free trade agreement and in NAFTA to get such a deal done, the negotiators have gotten nowhere because of the lack of responsiveness of Washington to this proposal.
The Co-Chairman (Mr. Duhamel): Mr. Whitney, I've not forgotten you, sir.
Are we saying that perhaps the Americans don't want this?
Mr. Martin: There seems to be a lack of political pressure in the U.S. to conclude it.
The Co-Chairman (Mr. Duhamel): I see. That's a nice way of saying it.
Mr. Whitney.
Mr. Martin: I'm looking for a politician's job.
Mr. Whitney: And they said there might be opportunities.
Some hon. members: Oh, oh!
Mr. Whitney: I can assure you that there is nervousness within our industry relative to the agreement between Canada and Chile not providing an opportunity to use anti-dumping. Horticultural products are one of the major exports, of course, from Chile into this country. Most of that is in the off-season. I suspect there's going to be a degree of nervousness for those parties who are manufacturers, canning and/or freezing products. I certainly note tomato paste. I think it's one of the items where the tariffs aren't being phased out quickly because there are some concerns.
When we bring that back into a NAFTA context, there's grave concern on the part of a number of horticultural commodities across Canada. That's not to say there aren't concerns as well that we've been subjected to trade actions going south. I can think of potatoes back in the early 1980s, and raspberries on the west coast subsequent to that. It looks like there's another 332 investigation in the works south of the border, again on potatoes. The Canada-U.S. potato trade has always been a rather thorny issue.
At the same time, we suspect that given the concerns at least within the horticultural industry in the U.S. - especially in Florida, California, Arizona and Texas - with respect to trade with Mexico, it may be some time before Congress will be overly enthusiastic about discussing a phase-out of an instrument like this. That gives some solace to some people in our industry.
The Co-Chairman (Mr. Duhamel): Were there other reactions or comments?
Mr. Thomson.
Mr. Thomson: Although the question you asked concerning Canada and Chile doesn't immediately look like it would impact on the wallboard industry, a couple of things to keep in mind are broad basics. We do have a globalization situation. Companies everywhere are looking further afield, sometimes to enhance their business in a fair manner and sometimes not in a fair manner, so I think that has to be kept in mind.
The other thing is that if Canada is to start entering into situations where there aren't anti-dumping laws, there have to be some alternative mechanisms to ensure that unfair trade practices don't happen. We have to have our eyes wide open. In our own case, much of it started when the U.S. industry was effectively bankrupt, so they were just looking for places to put product to enhance cashflow. I think those considerations have to be taken into account. As I say, the wallboard industry is not necessarily directly affected by these particular discussions, but if we get back to general basics, that may provide a bit of guidance.
The Co-Chairman (Mr. Duhamel): Mr. Randolph.
Mr. Randolph: I would like to support what Mr. Whitney said and add that wine is a major export of Chile, and Canada is one of its major exporting countries for wine. That makes us very nervous too and sends out the wrong kind of message.
The Co-Chairman (Mr. Duhamel): Mr. Grubel, if you have questions I'll go to you. Then I'll give our guests an opportunity to make some closing statements.
Mr. Grubel: I'm not quite sure where you people stand on this. On one hand, the removal of all SIMA-type protection with Chile bilaterally in both directions makes you very nervous. Yet at the same time, you would be willing to support a move to have those same restrictions removed throughout NAFTA. Or did I again misunderstand what you were saying here?
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Mr. Whitney: Certainly in our case we're not favourably disposed to seeing SIMA removed as an instrument under NAFTA. That's why we're so nervous about it being removed under the Canada-Chile agreement.
Mr. Grubel: Didn't somebody say this?
Mr. Martin: Yes, the alliance as a manufacturing group was saying let's resolve the issue with the U.S.
The Co-Chairman (Mr. Duhamel): Okay, but what issue? Let's make sure we're talking about the same issue.
Mr. Martin: That we have a free trade area; we don't take pot-shots at each other with dumping or countervailing.... Well, we're talking basically about dumping, but it's one single law. The alliance as a group has come to the conclusion that we need to conclude that before we start dealing with any other trading partner.
The Co-Chairman (Mr. Duhamel): Mr. Moore.
Mr. Moore: There's a reason for that. The free trade agreement was originally with the United States, and the economies of the two countries had become very integrated. They're both pretty high-cost economies. We're talking about economies that are essentially on a par, apart from the disparities of size. We need to have access equally to the U.S. on a basis where we're not constantly threatened by dumping cases against steel or softwood lumber. But when you're talking about countries beyond the United States you're generally talking about much smaller economies, and by and large economies which aren't as integrated with Canada and never will be, for reasons of geography or state of advancement or whatever.
With the kinds of exceptions you have heard about from other sectors, I think there's a fairly good consensus, certainly on the manufacturing side. I think manufacturers who are in fact processing agricultural products get a little nervous around the edges for the reasons you've heard about from the wine industry and the horticultural industry.
The Co-Chairman (Mr. Duhamel): Mr. Martin.
Mr. Martin: Don't mistake me. I'm not saying to get rid of dumping laws between Canada and the U.S. without resolving how you treat the issue, whether it's competition laws that have to be integrated.... The solution we're supposed to come to is how do we make this happen in the NAFTA? It wasn't just to get rid of dumping laws, period, and that's where it stopped. It was what other mechanism do you have, whether it's the competition law or whatever.
I hope I make myself clear. It's not just getting rid of dumping laws. There has to be another mechanism to protect companies in all three countries.
Mr. Grubel: I don't agree with that. Mr. Flavell knows this. They did it in Europe, and you can see we have done it now with Chile, and when we meet again ten years from now I'm quite sure it will have turned out to be maybe not so good for an individual company or industry but of wonderful benefit to consumers; and that's what I, as a representative of the people, most of whom are consumers, am very much interested in.
But I see a bit of a contradiction here with you people in the wine industry and so on. On the one hand you are often complaining about the treatment of potato exports and all that kind of thing. Wouldn't you feel better on balance if you didn't have that threat? Are you coming down on the side of wanting to retain this because the potato growers aren't here, because some of the other industries that have been damaged by American trade action aren't properly represented here? What if they were here? Might they not get together and say, well, we insist it be removed, because we're suffering all the time? In the end it would be better for consumers and others.
Mr. Randolph: Mr. Grubel, if we people had the same kind of subsidies as they have in Europe or in California or Chile, we might be happy about that. Unfortunately that is not the case. I would just remind you that Europe is receiving from the European Union $5 billion a year in subsidies, and from their national governments an additional $1 billion a year.
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Mr. Grubel: Mr. Randolph, I just want to say that the reason those issues go to tribunals to be discussed is because.... Maybe it's perfectly clear to you that these subsidies and dumping are taking place, but just look at how our softwood lumber industry is reacting to the same accusations. There are round table discussions now in the United States where people are saying there are billions of dollars of subsidies going to softwood lumber. Have you asked them?
This is one of the problems. To establish this with the kind of position you think it ought to be is not leading anywhere. It is leaving the consumer suffering all around. That's why in Europe they have begun to dismantle those kinds of things and we have as a result -
The Co-Chairman (Mr. Duhamel): Just a very, very brief statement. Mr. Whitney has been very generous and patient, but I feel he's coming to the end of that, and he's bigger than I.
Mr. Grubel: I'm going to shut up now.
Mr. Randolph: I'd just like to respond, Mr. Grubel, that there has been no quid pro quo in all of this. The Europeans were supposed to have reduced their subsidies in exchange for the national treatment they obtained in Canada in terms of pricing policies, distribution and listings. That never happened. So we go back to the basic premise - we're not complaining - that the only thing we're looking for is the level playing field, which definitely is not level.
Mr. Grubel: So does softwood lumber and so does the -
Mr. Randolph: I can't speak for those industries.
Mr. Grubel: But I can.
The Co-Chairman (Mr. Duhamel): Okay, so you're in agreement.
Mr. Whitney.
Mr. Whitney: I'd like to make an observation. As I mentioned earlier, when you think about our constituency, which covers fruits and vegetables from one end of the country to the other, and you take a case like potatoes, they are export-oriented on the east coast and they're import-sensitive on the west coast, like a big circle. If you look at production sites in Washington state, 75 million bushels of apples are produced in one state. The total Canadian crop is 25 million bushels. The U.S. potato crop is at least 10 times the size of the Canadian potato crop, and yet we have been quite successful in terms of exporting that product into the U.S.
You're right there is an interest within our community to make sure we are not exposed unnecessarily to harassment, as some of the other communities have been in the past. But at the same time, that whole community, underneath the umbrella of the Horticultural Council, still supports the maintenance of some mechanism that provides it with an opportunity to seek relief until such time, as we've heard from some other gentlemen around the table, as we are able to make some inroads in terms of levelling the playing field on a North American basis.
What really tends to tick us off is that governments are very successful at reducing economic barriers and changing legislative mandates where it suits them. When it comes down to making amendments in other domestic policy instruments - and I will cite pesticides because that is something that is going to plague us and has plagued us for 15 years - the response by this government at this particular time has been to put in place a vehicle that is going to cost us$36 million when it was costing $14 million. There will be 212% more bureaucrats working in this institution, and we're sitting here and being asked to be competitive.
In any event, I know I'm ranting at this point, so I will cease and desist.
The Co-Chairman (Mr. Duhamel): A little bit beyond the topic, Mr. Whitney, is that what you were suggesting?
Mr. Grubel: But I like it. You should have used the word ``Liberal'' in the thing.
The Co-Chairman (Mr. Duhamel): Mr. Grubel, please, everyone will know you are a Reformer if you continue.
Gentlemen, I'd like you to now sum up very briefly. I'll start from my right. Mr. Thomson, are there some final brief points you'd like to make that you perhaps haven't had a chance to make, or clarifications or punctuations?
Mr. Thomson: I would say no, on balance. I appreciate the opportunity to have been part of it. I will just say in closing that I did use the term ``balanced'' today a couple of times when I was presenting. I think we need to balance the short, medium and long terms. Short-term pricing, in the hands of the consumer, that is favourable does not automatically mean medium and long term. I think that's a dilemma that certainly faces government at all times.
Obviously, we're strongly in favour of protection from unfair trade practices, and that's the key - unfair trade practices, not good competition.
Thank you.
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The Co-Chairman (Mr. Duhamel): Mr. Randolph.
Mr. Randolph: I will reiterate what I've said before. All we are interested in is fair trading. What's good for the gander must be good for the goose.
The Co-Chairman (Mr. Duhamel): And vice versa.
Mr. Randolph: Yes.
The Co-Chairman (Mr. Duhamel): Thank you. Those were exemplary summaries. This is incredible.
Mr. Moore, I'd like you to match those.
Mr. Moore: If I may, Mr. Chairman, I might call on Dennis to say something and maybe Michael, or alternatively call on our co-chair.
Mr. Bailie: I can only summarize and add a preface to this given our last discussion. Given the environment external to Canada, we feel it's essential that SIMA legislation be maintained and be properly balanced to reflect the needs of all Canadian producers, consumers, and most of all investors, who ultimately keep us employed.
The Co-Chairman (Mr. Duhamel): Thank you. Mr. Flavell.
Mr. Flavell: I would just add that I fear that our friends to the south are not quickly going to agree to a North American replacement of anti-dumping laws by competition law or anything else. I hope I'm wrong, but I fear that is the case.
If that is the case, in the short to medium term we will have to have an anti-dumping law, in my view. We will have to make sure that as far as possible it protects Canadian producers without unnecessarily injuring users. That's the difficult balance Minister Martin expressed at the beginning of this, and that's where I think we would close.
The Co-Chairman (Mr. Duhamel): Thank you. Mr. Whitney or Mr. Kuhl.
Mr. Kuhl: I would agree with Mr. Randolph that we are concerned about fairness. We have listed our order of priority, with the continuation of SIMA being very important to us.
All of the producers on the Canadian Horticultural Council are consumers as well, and for us to remain consumers we have to continue to produce. For consumers to have the availability of the produce that we produce, we need to be competitive with the marketplace. We wish you the wisdom of Solomon in coming up with the right recommendations, Mr. Chairman.
The Co-Chairman (Mr. Duhamel): Thank you.
To the panellists, the witnesses, thank you.
[Translation]
Thank you. I very much appreciated both the evidence that you gave and this exchange of information. That has been very useful to me.
[English]
I want to tell you two more things before we disband this evening. Mr. Grubel and I have been able to reach an agreement. We decided that rather than leave, we would hear you until the end, as we have. I thank Mr. Grubel for his cooperation. Just in case anyone ever says that I've never worked closely with a Reformer, this will be the evidence that it is not true.
Secondly, you used the word ``balance'' frequently this afternoon. I should like to tell you that that's synonymous with ``Liberal''.
Thank you. Merci. The meeting is adjourned.