Proceedings of the Standing Senate Committee on
Foreign Affairs
Issue 16 - Evidence
OTTAWA, Wednesday, December 4, 1996
The Standing Senate Committee on Foreign Affairs, to which was referred Bill C-61, to implement the Canada-Israel Free Trade Agreement, met this day at 3:15 p.m. to give consideration to the bill.
Senator John B. Stewart (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, today we resume our consideration of Bill C-61, an act to implement the Canada-Israel Free Trade Agreement. That is the only reference that is before the committee at this meeting.
Our first witness today is from Newbridge Network, Mr. Leo Lax, Assistant vice-president in Business Development.
Mr. Lax, yesterday we had a presentation on some of the technical details of the bill by officials from the Department of Trade, after which there was discussion of some of the political implications of the measure. I can guess the focus of your presentation, but I think I should not try to do that. I should turn the floor over to you and let you proceed as you will.
Senator Prud'homme: What is Newbridge Network, please?
The Chairman: I think Mr. Lax is the person best suited to tell us about Newbridge.
Mr. Leo Lax, Assistant Vice-President in Business Development, Newbridge Network: Thank you for giving me the opportunity to tell you who we are and what we are doing in Israel.
Newbridge Network is a 10-year-old telecommunications company out of Kanata. We design, manufacture, and sell communications equipment world-wide, primarily to telephone companies and large corporations. We have approximately $1 billion in annual sales, 90 per cent of which is exported. We have offices world-wide, and our major clients are major corporations or telephone companies all over the world.
We look forward to passage of this bill since it significantly improves our ability to be competitive in a global marketplace. Competitors of Newbridge all over the world, especially in the United States and in Europe, are currently able to sell their equipment in Israel at an advantage compared to us.
To give you a history of our sales interest in Israel, in 1992, we sold over $1 million U.S. This year, we are over $20 million U.S. Our customers in Israel include the telephone company, Bezak International, both major banks, the airline El Al, and many other large corporations.
Last year, we developed a joint venture with Tadiran, which is a telecommunications firm in Israel, to help better serve our customers in the area. We have board representation with them and 25 per cent ownership. Our chairman, Dr. Terry Matthews, is in fact chairman of the company called T&N Networks.
In the past, we traded with Israel through our U.S. subsidiary. The United States has a free trade agreement with Israel today, and that gave us the ability to provide product for our customers at a price similar to that of our U.S. competitors. However, we incurred some additional costs as a result. In addition, we have a joint venture agreement linked to this.
We also have research and development activities in Israel which help us develop products that they are better suited for developing. A free trade agreement with them will allow us to transact these agreements on a much more equitable basis with our competitors world-wide.
We hope that these things will continue. Our sales in Israel are continuing to grow. We currently import approximately $2 million of equipment from Israel, primarily in terms of licence agreements but also in subsystems that are being used by our clients in other parts of the world.
I hope that gives you insight into what we are doing and why we believe this agreement will give us the opportunity to create more jobs here in Canada and enable us to be competitive world-wide while meeting the requirements of growth in Israel through our activities here in Canada.
The Chairman: Thank you, Mr. Lax.
Senator Grafstein: Mr. Lax, what are you speaking of in terms of dollars?
Mr. Lax: This year, we will export about $20 million of equipment into Israel.
The Chairman: You seem to be doing very well, notwithstanding the fact that the field is not level.
Mr. Lax: That is true. That is testimony to the quality of our equipment and the service that our partners in Israel are providing. However, we currently are required to take at least one additional step and we reduce our internal capabilities in order to do that. We ship to Israel via the United States.
I believe that export numbers from Canada to Israel are significantly understated, because I am sure that we are not the only ones who use that mechanism to provide product and services to Israel.
Senator Spivak: What can you tell us about the rest of the telecommunications industry? Canada is the leader in the world in wireless technology. I do not know what the situation is in Israel. Of what advantage would a free trade agreement be for the telecommunications industry, or sections of it?
In this particular field, companies are most anxious to export abroad, because we have a terrific comparative advantage and because this field has a much more economical infrastructure program than the typical wired technology.
Mr. Lax: Newbridge is presently not directly involved in the wireless business. However, one of the benefits of a wireless telecommunication infrastructure, especially in developing countries, is that it does not require the physical construction that a wired infrastructure normally requires.
Within that context, the Canadian company Nortel is a leader in wireless technology worldwide. The ability of Nortel to service that market directly from Canada will put them in a significant advantage compared to others, due to this agreement not being in place.
Senator Spivak: Do you see this agreement as an advantage not only to Israel but to the entire Middle East area? Through the process which is occurring, there is beginning to be an increase in economic activity among all the countries in the Middle East. What impact do you think this particular agreement might have?
Mr. Lax: We believe that these products are key to economic development in that area. The know-how which is being gained in Israel by putting the infrastructure in place there could be used throughout the entire region to raise economic development capabilities.
Senator Corbin: Everyone is getting involved in free trade. The European Community and the U.S. already have a free trade pact with Israel and the Canadian government hopes that this project will go ahead.
You say that if we proceed with this legislation for a free trade agreement with Israel, that would improve your commercial chances.
Mr. Lax: Yes.
Senator Corbin: I do not quite understand the commercial workings, but there must be winners and losers in a free market.
Mr. Lax: Yes, that is correct.
Senator Corbin: Surely the Americans and the European Community are major players in this field with Israel. I do not understand how your chances would improve against these giants, considering the order of economies and the political might of the U.S., especially with Israel, for reasons well known to everyone around this table.
You have not convinced me that this would be a plus for Canada. Could you add further to your comments?
Mr. Lax: Although you are absolutely right that we are no match for the economic might of the United States or Europe, in the telecom area we are a world leader. In this particular part of the industry, Nortel, Newbridge, Mitel and a number of other companies on the wireless side, have commanded a dominant place in the world market. The telecom industry in Canada has proven to be very capable in competition with European and American companies all over the world.
A free trade agreement between Canada and Israel would create a strong incentive for the telecom industry in Israel to work with Canadian companies in the same way as it has worked with Europe and the United States. We are recognized as leaders. The lack of this agreement is a psychological impediment.
In addition, a level playing field would put us on an equal footing so that our products would be judged strictly on their own merits rather than on the financial considerations associated with them.
Senator Corbin: I can understand your argument about a level playing field. However, do you not think that when it comes to the crunch, some decisions are politically based? Let us be realistic: the United States and Israel have an extremely close relationship. When it comes to the bottom line, do you not think that there will be pressure from U.S. lobbies to facilitate even greater penetration of American products into Israel, as opposed to Canadian? In Canada, we do not use those kinds of tactics. However, the Americans are very prone to using them for services rendered, past and current.
Do you think you will have a level playing field?
Mr. Lax: I think this agreement will give us a better chance at having a level playing field.
Senator Corbin: Thank you.
The Chairman: You refer to Europe, by which I assume you mean the European Union. What specific countries within the union are you talking about? I assume you are not speaking of Portugal.
Mr. Lax: That is correct. I speak primarily of Germany and the U.K., where the strong telecom industry is based.
Senator Doody: I am curious about the American subsidiary that you mentioned. Was that established as a result of the Canada-U.S. Free Trade Agreement or as a vehicle to facilitate the export of your products through the United States because of their free trade agreement with Israel, or is it a manufacturing plant of its own? Is it a component plant or simply an export facility?
Mr. Lax: Our U.S. operation is a full-service operation. We have final assembly, test, customer service, marketing and sales operations. We employ approximately 600 people in the United States. We have offices in about 80 countries around the world. Our corporate headquarters is here in Kanata, but our subsidiary which services North America and South America is in the United States.
Senator Doody: The $20 million U.S. in export that you did with Israel last year was done from your American plant?
Mr. Lax: It was done through what we call our North and South America division. It is a wholly owned subsidiary of Newbridge.
Senator Doody: How would the establishment of a Canada-Israel Free Trade Agreement affect the current arrangement? Can we suppose that the $20 million worth of product will come from the Canadian plant under these circumstances?
Mr. Lax: Yes.
Senator Doody: What is the advantage to you to have the product shipped from Canada as opposed to from the United States?
Mr. Lax: Senator, you have identified the situation exactly. We would be shipping the product from here into Israel.
Senator Doody: Then the American plant would lose that business. I presume there would be additional jobs created in the Kanata area.
Mr. Lax: That is absolutely right.
Senator Doody: Do you have an estimate of what that might entail in terms of employment?
Mr. Lax: I do not have prepared numbers. Our company worldwide currently ships about $75 million a month. This would be a small portion of that. We currently employ about 1,500 people in Kanata. We would need perhaps an additional 40 or 50 people to handle that load.
Senator Doody: That is important to 40 or 50 people.
Mr. Lax: Yes, it is very important.
Senator Bolduc: I understand, sir, that the rules of our agenda are less restrictive than those in the NAFTA. The arrangement you have with the United States for exporting from there will remain in place and you gain an additional advantage by that treaty. Is that true?
Mr. Lax: Could you repeat the question, please?
Senator Bolduc: Given that the rules of our agenda are less restrictive than those in the NAFTA, you can use your production in Canada and in the United States and export the entire product. Part of a product can be made here and part in the United States for export to Israel. It will be easier to do that with the treaty than without the treaty.
Mr. Lax: I am not sure I understand the question, but the majority of our product is manufactured here in Ottawa. It is assembled and tested in the United States for destinations in the United States. Under this agreement that would no longer be required because we could do it here.
[Translation]
Senator Prud'homme: You stated that you did $1 million in business last year and $20 million this year. Did I understand you correctly, $1 million and $20 million?
[English]
Mr. Lax: I am sorry, I may have been misunderstood.
We exported $1 million in 1992. That was the year we started our activities in Israel. In 1993, exports grew to $3.3 million. In 1994, we exported $12.5 million, in 1995 about $13 million, and in 1996 about $20 million.
[Translation]
Senator Prud'homme: The increase occurred without there necessarily being a free trade agreement in place. I congratulate you on this remarkable progress. Whether or not free trade played a role in it, you have made substantial progress. The facts are positive, but still more could be achieved.
You stated that you finish your products in the US because that is the largest market for them. If your products are destined for Israel, do you intend to finish them there? You could finish them in Canada, but since your market is in Israel, undoubtedly, you will complete production in that country. Am I correct?
[English]
Mr. Lax: Under this agreement, we would be finishing all our products here and shipping them to our customer destinations. Given our joint venture agreement in Israel, there may be some final assembly and test activities done there. That has not yet been decided. I am not sure whether there would be any advantage for us in doing some manufacturing in Israel. No manufacturing is currently done there on our behalf.
Senator Prud'homme: We have not spoken with you about the political aspects of the situation. We will go into that with others.
This committee does not wish to send the wrong signal at this time in the peace process in the Middle East. If the committee recommends that the government not refuse to sign but postpone until we have a better idea of the intentions of Mr. Netanyahu in the process, it would not disturb your progress since you have increased your exports from $1 million to $20 million.
Mr. Lax: It is an issue of degree. Our growth has been directly related to the need of the local economy to grow and build the infrastructure for telecommunications. We are meeting it as best we can with our current arrangements. I believe that an improved trade relationship will increase our growth even more. That will be great for us, and great for the economy here.
Senator De Bané: Would it be accurate to say that your major competitors are mostly Japanese, French, German, British and American?
Mr. Lax: That is correct.
Senator De Bané: Your strategy essentially is to be better and more competitive than those major players?
Mr. Lax: That is correct. We want to be judged only on our product quality rather than on the financial arrangements that may impact our ability to function properly.
Senator Bolduc: Do you sell in other countries in the Middle East?
Mr. Lax: Yes, we do. We have offices in Bahrain and a major arrangement in Egypt. The current information highway initiative in North Africa is being implemented using our equipment.
The Chairman: Thank you very much, Mr. Lax. You have been most helpful to the committee.
Our next witness represents the Mennonite Central Committee of Canada.
Please proceed.
Dr. William Janzen, Director, Ottawa Office, Mennonite Central Committee of Canada: Mr. Chairman, we wish to thank you for inviting us to appear here.
As noted, we are an international relief and development agency sponsored by the Mennonite church working in about 50 countries. We do not appear here as technical experts on all aspects of this agreement, but we claim to know a little about the situation of the Palestinian people, having worked there since 1949. I should like to talk to you from that perspective.
In fact, I should like to comment from three perspectives. The first is the immediate life of the people. I had the opportunity to visit Palestine in October. I asked several Palestinian people, including Palestinian leaders, for their views on the proposed free trade agreement with Canada. They said that they support the principle of the free flow of goods and services, but that Canada should not extend the benefits of that principle to Israel without ensuring that Israel extends that principle to the Palestinians who are Israel's most immediate neighbours. They explained that Israel is currently prohibiting the free flow of goods in drastic ways.
They explained how the closures prevent the flow of goods between towns and villages within the Palestinian territories, between the West Bank and Gaza, and between the Palestinian territories, Israel and the outside world.
Palestinian farmers do not have assured access to their land even two kilometers away. Palestinian workers cannot get to their jobs. Palestinian suppliers cannot get their products to retail outlets. Palestinians cannot export their vegetables, citrus fruits, olive oil, et cetera. Palestinian investors cannot set up factories because they are not assured of supplies, workers and so on.
In Bethlehem, we visited a small factory which had produced souvenirs for the tourist market in Jerusalem just five miles away. The factory was closed. For months, the Israeli closures had prevented them from taking their products to retailers in Jerusalem. In Gaza, some 700 small textile enterprises, which had earlier done subcontracting work for factories in Israel, were now closed because they could neither get the necessary supplies in nor their finished products out.
The Israeli closures have contributed to a major decline in standard of living for the Palestinians.
In Gaza, a school administrator told us of children who come to school without breakfast because the families have become too poor.
In recent weeks, the Israeli closures have eased slightly, but serious obstacles remain. These continue to add in a major way to the hardships of the Palestinian people.
The second perspective from which I would like to comment includes geographical considerations. Israel continues to work very diligently to establish an irreversible position of dominance in the West Bank. Since the 1993 Oslo peace process began, Israel, instead of freezing settlement work, has allocated increased resources for settlement construction and building by-pass roads for settlers which, in most cases, Palestinians are not allowed to use.
Israel also controls the water resources with the result that Israeli settlers in the West Bank can have swimming pools, while the nearby Palestinians do not have enough to irrigate gardens.
When the 1993 peace process began, the Palestinians understood that they would get a territory in which they would control resources and which would be more or less in one unit to allow them to build a society and develop their economy. To date, they have been given full control of only 3 per cent of the West Bank.
I should like to show you a map on which the areas circled in blue represent that 3 per cent over which the Palestinians have full control. The larger areas in yellow are what are called Zone B areas. Under the original plan, that was also to be turned over to the Palestinians, but now it is under joint control. The white areas, which include just over 70 per cent of the West Bank territory, are still under full control of the Israelis.
The current Israeli government has said it does not plan to move forward on what has already been given to the Palestinians. The Israeli government stance, it must be noted, is a sharp repudiation of Canadian policy. Canada continues to hold that the settlements are not only obstacles to peace but illegal; that the Israeli occupation of the Palestinian territories is illegal; that the Israeli claim to East Jerusalem is illegal; and that many actions by which Israel maintains its occupation is illegal. Why then would Canada bless that government with a free trade agreement?
The situation has troubling similarities to that of South Africa 20 years ago. At that time, South Africa set up bantustans, such as the Transkei which, though technically independent, were small, fragmented, subservient to the dominant power and doomed to poverty. At that time, Canada did not enter into a free trade agreement with the dominant power. It did not consider arguments that there would be trickle-down benefits for the people in the bantustans. Instead, Canada imposed economic sanctions. I am no great fan of sanctions, but I have strong reservations about Canada blessing and signalling approval of a dominant power in such a situation.
Third, I would like to say a few words about an historical dimension. Early this century, Great Britain, which then handled Canada's foreign affairs, committed itself to setting up a homeland for Jewish people. This implied that the local inhabitants, the Palestinian Arabs, would have to make a significant concession, but Britain's commitment was such that the arrangement should not cause injury to the local inhabitants.
In 1947, the UN carried this idea further and recommended the partition of Palestine into two states. The Jewish state was to have 56 per cent of historic Palestine. As such, the proposal asked the Palestinian Arabs to make a significant territorial concession. Arab countries did not want to do that and fighting resulted. The Jewish groups were well armed and, when the dust settled and the state of Israel was declared, it held 77 per cent of the territory.
The Western World quickly recognized the state of Israel and the boundaries that it then claimed. However, in 1967, when Israel took over additional territory, the Western World, through the United Nations, said, "No, this is too much. The land claimed by military force should be returned." It said that year after year, but nothing happened. The land was not returned. Now, almost 30 years later, the Western World is in the process of giving partial legitimacy to Israel's possession of parts of the occupied territories, its position of dominance and the methods it has used to maintain it there.
I take no pleasure in raising these concerns. We believe this way of signaling approval for the current policies does not lead to a just and sustainable peace or to a basis whereby the two peoples there can look to a future of peaceful coexistence and mutual respect. It also has ramifications for the larger scene, for the peaceful coexistence of the west and all the peoples of the Middle East.
My sense is that the Canadian government may already be so committed to this agreement that its delay or substantial change may be very difficult. I would, however, ask that if you cannot make changes in the agreement, then at least make a strong commitment that this committee will monitor activities there very closely, as well as Canada's policies and activities. In this way, Canada's actions can contribute to the stated goals of a just and sustainable peace and the coexistence of different peoples, all of whom have suffered far too much for too long.
Senator De Bané: I fail to see the logic of your conclusion when put with the rest of your exposé. You explained to us why it would not be wise for Canada, through this bill and in view of the policies pursued at the moment by the present Israeli government, to give our blessing to those policies. In your conclusion, you urged that if we cannot stop that bill, we monitor what is happening there.
For half a century, Canada has tried to have an even-handed policy in the Middle East by selling arms to neither Israel nor the Arabs, by helping the poor and refugees, and by trying to promote peace. For 50 years, this was the policy of the Government of Canada.
If we pass this bill, do you think Canada will retain its image in that region of the world of not taking sides and of pushing both the Arabs and the Israelis for peace?
One of the main rationales of the government is that this free trade will trickle down to the Palestinians. However, as you said, the Palestinians need free trade with Israel, not with Canada.
Do you understand my point?
Mr. Janzen: Yes, I do. Thank you for giving me an opportunity to explain something which obviously sounded different than what was intended.
My greatest preference and my strongest recommendation is that this bill not be approved and that this agreement not be implemented. It sends the wrong signals not only to the Palestinian people and, in a sense, to the Israeli government, but also to the different countries of that region.
In recent years, a certain confidence had been starting to build. Since 1993, Israel had benefited quite a lot from that. It received diplomatic recognition from 38 additional countries which had earlier not recognized it, and some of them were countries from the Middle East. However, that cannot go on. It is very clear that the people of the Middle East are extremely troubled by the developments and trends. The governments are similarly troubled.
In some situations the strongest sign of friendship, whether at an individual or other level, is to say, "My dear friend, you are on the wrong path. For your own good, I cannot support you in it. I urge you to turn around." That is the kind of message that Canada should send to the Israeli government.
My conclusion is that if this agreement cannot be stopped, there should at least be close monitoring by this committee, although that is not my first preference.
Thank you for giving me the opportunity to explain that.
Senator Whelan: Mr. Janzen, did you say that you have spent quite a bit of time in the area that we are discussing?
Mr. Janzen: Our organization has been working with the Palestinians since 1949. We also have worked in Jordan, Egypt, Lebanon and Syria. I lived in Egypt from 1993 to 1995 and travelled throughout the region. I also visited with Palestinians for one week in October of this year.
Senator Whelan: Do you speak their language?
Mr. Janzen: Not really; I am sorry.
Senator Whelan: How did your organization help the people?
Mr. Janzen: With the Palestinians, for many years we were involved in fairly practical things such as helping them to make the best possible use of the land that they still had with irrigation systems, with developing cisterns so they could reclaim waters and with seedlings for olive gardens.
We also had a substantial craft importation program. Needlework, particularly that done by Palestinian woman, was purchased there and sold here in North America. Other organizations are doing more of that work.
We are assisting a number of organizations with developing non-violent conflict resolution methods within the Palestinian society. We also have a number of projects to assist women and people with disabilities to develop income generating activities. It is very low-level involvement. We do not have $1 million. We are using several hundred thousand dollars there. It is grass roots, people-oriented work.
Senator Whelan: You could use the value of one jet fighter to great advantage, then?
Mr. Janzen: That is an understatement. We could, indeed.
Senator Whelan: When you were in Palestine, did you talk to the Israeli people about the conditions you are explaining to this committee?
Mr. Janzen: On my most recent trip, I had only one conversation with an Israeli person. I must admit that I was listening more to the Palestinian side than the Israeli side.
Senator Whelan: When you were there, did you talk to any Canadian authority?
Mr. Janzen: Oh, yes.
Senator Whelan: Did you speak to our ambassador?
Mr. Janzen: I did not talk to the ambassador but I talked to officials in the embassy.
In my recent visit, I asked Palestinian people about some of the counter arguments. For example, Time Magazine had a picture on its cover depicting a Palestinian policeman shooting at Israelis. When asked about that, their answer was that they deplore the violence terribly but that the Palestinian authorities had not done that kind of shooting until the Israelis had entered those areas where the Palestinians have full control; namely, that 3 per cent.
I visited one home where the father, who was a Palestinian police officer, had been shot and killed. They told me the story. This was a Muslim home. They said that worshippers had come out of the mosque after Friday prayers. An enormous number of Israeli police and military people were in the area. Some of the Palestinians had started throwing stones and the Palestinian police had tried to disperse them and urged them to move away and go home.
The Palestinian police told the Israeli officials that if they would make themselves less conspicuous, the people would disperse much more quickly. However, the Israeli troops did not do that and instead started shooting. Eventually the people dispersed, but many were shot. They were shot in the upper part of the body and often in the back, indicating that it was not really defensive shooting.
The people I spoke to pointed out that the areas over which the Palestinian Authority now has full control pose less of a threat to the Israelis now than when Israel controlled them. They pointed out also that none of the extremely tragic suicide bombings which happened earlier this year have been attributed to a Palestinian worker with a permit to work in Israel.
I tried to do some probing on the question of Palestinian democracy, which is a serious concern as well.
Senator Whelan: What most alarms me is trade in perishable products. I come from Southern Ontario where many perishable products are grown. Many Mennonite people from all over the world work together there growing that produce. I know how great the loss can be if you cannot market your product and if you do not have the proper type of temperature-controlled storage.
What did the authorities to whom you spoke have to say about that? Are they reporting back to Ottawa on what is going on there?
Mr. Janzen: The loss is great. Figures which I believe come from the UN estimate that about $6 million per day is lost in the Palestinian territories.
Canadian officials there told me they are making representations to Israeli authorities. They felt that the Israeli government was beginning to recognize that it was in its own interest to take steps which would ameliorate the economic condition of the Palestinians.
In the last six weeks, there have been some steps taken in that regard. I am grateful for that and I commend the Israeli government for it. However, the Israeli government holds the key to instituting a closure at a moment's notice for any reason it deems appropriate.
Given the statements of the current government, it is still a faint hope, at best, that the Palestinians will get a territory which is more or less in one unit where they can develop their society and build an economy. Much remains to be done.
Senator Whelan: This is very tragic, Mr. Chairman. I visited Israel and Jordan quite a while ago. I traveled with an agricultural extension person who was born in the United States and trained there, but had spent the majority of his life in Israel. He worked very closely with the Arab villages.
I visited a village which was 100 per cent Arabic in what they called the strawberry belt. They grew beautiful strawberries there. I have never seen such strawberries, even in the most productive part of Canada where I come from. They grew strawberries eight months a year. They shipped them the night they were picked to Berlin, Amsterdam or New York on 747 transport planes.
The man I was traveling with said, "I am Jewish. When the Arab kids come home from school, they hit the strawberry fields. Our kids learn music." I saw what they were doing.
The Israeli people had done some great research. We signed an agreement to exchange scientists with the Israelis at that time.
There seemed to be a much more harmonious situation there in 1983. I was very impressed with what they were doing. We are talking about free trade now, but there seems to be less freedom, less free trade and less free everything than there was at that time.
I am interested to hear what reports our embassy people on the scene send back to our government. Are those reports available to members of this committee?
The Chairman: Inquiries could be made, senator.
Senator Kinsella: Mr. Chairman, could our witness comment on the definition of "country" as provided in the bill before us on page 20, clause 41(1)?
Mr. Janzen: This is not my area of expertise but I have heard other witnesses express the concern that Canada may be giving free trade benefits to products produced in areas under Israeli control, which occupation Canada deems to be illegal.
Senator Kinsella: Can you comment on the expression which appears throughout the bill which refers to another CIFTA beneficiary? Are you familiar with that phrase?
Mr. Janzen: If the terms and conditions whereby that beneficiary could actually get benefits were spelled out, and if those were made conditions, I think it would be a very significant part of the bill. However, as I understand it, it currently remains up to Israel to allow or disallow other beneficiaries benefits from these provisions.
The record I described indicates that Israeli has prevented Palestinians from getting benefits. The current record does not suggest that there will be many benefits for them.
Senator Kinsella: We were told by officials that the territories which would be under the umbrella of the CIFTA beneficiary would be those areas in which Israeli custom rules apply.
In your view, would all three of the areas which you have pointed out to us on your map not fall under that rubric?
Mr. Janzen: No. I think the Israeli settlements in the occupied territories would benefit from it. However, even if all those territories would apply, Israel has used an array of measures to prevent the flow of goods from the Palestinian territories. I do not believe that all of that area could gain access to this trade agreement. Israel is now preventing Palestinian access to the Israeli market in a major way. It does not make sense that it would now allow Palestinian access to the Canadian market in this way.
Senator Kinsella: Have you examined the model of machinery provided for in the agreement which could be used in the kinds of cases you have been describing?
Mr. Janzen: To be very candid, that is not an area at which I have looked closely. Witnesses who are appearing after me this afternoon could better answer that question. I appreciate your questions. They are entirely appropriate. I am sorry that I am not well equipped to address them.
Senator Prud'homme: Thank you for being so clear on the 3 per cent and 70 per cent issue. Canadians are under the impression that once Israel removes itself from Hebron, the Palestinians will have authority on the West Bank. It is very clear that these six cities represent only 3 per cent of the territory. That is far from total authority. Palestinian authority over what? That has always been a concern of mine. It has always been misunderstood by many people.
I do not wish to make life difficult for those who work, as you do, in that region. However, I have been made aware of a letter sent to a minister. It is not necessary to start a witch hunt in the Department of Foreign Affairs to find out who gave me a copy of a letter sent to Mr. Axworthy. It did not come from there.
I should like this letter to be distributed to all members of the Senate, or at least to the members of this committee, in order that they can understand a little better all the outcomes of signing this treaty with Israel, which is a friend of Canada, but not an ally. There is a big difference between "friend" and "ally" in international politics. An ally is one that you must defend. Israel is a good friend of Canada. However, that does not preclude us from being good friends with the Arabic countries or the Palestinians.
Would you be willing to share with us that letter sent to Lloyd Axworthy?
Mr. Janzen: Yes, senator, I would be honoured if you would arrange for its distribution.
Senator Prud'homme: It is a very short letter. It is very clear and from the point of view of Mr. Janzen, of course. If the committee has no objection, I will ask that the letter be appended to the minutes of today's meeting. In that way it will be translated.
I see no objection to that suggestion.
The Chairman: Mr. Janzen, do you wish this letter to be regarded as part of your testimony before this committee today?
Mr. Janzen: That is what the honourable senator is proposing and I have no objection to that. I am pleased with that.
The Chairman: Is the committee agreeable to that?
Hon. Senators: Agreed.
The Chairman: It will be appended to the evidence heard here.
Senator Prud'homme: I am an admirer of anyone who tries to help anyone else. If it were people of Jewish faith who needed assistance, I would applaud as much anyone who came to their assistance. I want that to be very clear.
I admire the work that you have done since 1947 at your expense. I know what you go through to raise money across Canada. It puts to shame many people who should do the same kind of work. Thank you for the work you do there.
Mr. Janzen: Senator Whelan mentioned personal relationships between Israelis, Jews and Palestinian Arabs. There is no doubt that there are many very good individuals on all sides. In fact, there are programs whereby Jewish-Israeli citizens and Palestinian Arabs meet and discuss these issues. I am pleased that some of the public opinion polls in Israel indicate support for a considerably different direction than the current government there is pursuing. Those are all elements on which Canada can build. Thank you very much.
The Chairman: Thank you very much for your testimony, Mr. Janzen.
Honourable senators, our next witness is from the National Council on Canada-Arab relations.
Dr. Michael Lynk, Secretary Treasurer, National Council on Canada-Arab Relations: Mr. Chairman, I expect Dr. Atif Kubursi to be here momentarily. He is currently attending a meeting on Lebanon which is being chaired by member of Parliament Mac Harb.
I am prepared to commence and he will make his remarks when he arrives.
I have distributed a copy of our statement to the committee. It is lengthy, but I hope it bears reading. At the end of the document we have included an article from the last week's edition of the Guardian Weekly from Manchester, England, on Israeli closures of the Palestinian economy. I will be addressing that point in a few minutes.
Thank you very much for the invitation to speak here.
In the early 1980s, this committee made a substantial contribution to peace in the Middle East by inviting the delegate to the United Nations of the Palestine Liberation Organization to testify before it. That helped to melt the ice in terms of Canada's relations with the Middle East. Most things I have read on Canada-Middle East relations refer to that. Congratulations on that effort.
I will speak primarily on international law. I am a lawyer by training. When Dr. Kubursi joins me, he will be speaking on economic impact with respect to the free trade agreement.
I wish to make five points to the committee before taking your questions.
Senator Prud'homme: Mr. Chairman, as some regular members of the committee are not present today and may not have a chance to read this statement, perhaps the witness could highlight the points contained therein. Either this document should be appended to the minutes of today's proceedings or the witness should read it. It is a difficult document to understand.
The Chairman: The usual practice of committees when detailed documents are presented is that they are circulated to the members of the committee and the witness highlights the major points. It is not the practice to have a parallel presentation; that is, to reproduce the entire statement in the minutes as well as to have the verbatim record of what was said in committee.
My inclination is to say that that is the practice we should follow. If the members of the committee feel that is not reasonable, the committee can decide otherwise.
Senator Prud'homme: Is it the practice to distribute the document only to full members of the committee? At the end of the day, it is the Senate that will vote on this legislation. All senators should be given the opportunity to read these statements.
The Chairman: That is a good point. I do not think any member of the committee would object to you circulating the document to all the members of the Senate.
Senator Prud'homme: That is not my job.
The Chairman: I do not think that I have the authority to do that. I have certain duties within this committee, but they are not of that nature relative to the Senate as a whole.
Senator Prud'homme: I suggest that the witness bear in mind that if he wants certain important points to be on the record, he should read them aloud. Otherwise, they may escape our attention.
Mr. Lynk: Thank you very much for that advice, Senator Prud'homme.
Senator Prud'homme: That is just a suggestion.
Senator De Bané: I agree with the guidelines that you have stated, Mr. Chairman. However, the National Council on Canada-Arab Relations is the umbrella group and think tank of people interested in issues related to relations between Canada and the Arab world. Could we not make an exception for this organization and have their brief appended to today's record? We should do the same with the brief from the Canada-Israel Committee. This would be an exception and not a modification of our rules.
Senator Carney: I should like to hear the witness. We are running short on time.
Senator De Bané: I should like to have my request considered.
The Chairman: If you want to make a motion, senator, I will have no choice but to put that motion to the committee.
Senator De Bané: I move that the statement by the National Council on Arab-Canada Relations be appended to the minutes of our proceedings of today.
The Chairman: Members of the committee, you have heard the motion. Would you indicate, by raising your hand, if you are in favour of the motion?
Senator Lynch-Staunton: Let us worry about the housekeeping when the witnesses have left. Let us get on with hearing the witnesses now.
The Chairman: We have a motion to deal with, Senator Lynch-Staunton.
Senator Carney: We can speak to the motion later.
The Chairman: Is it agreeable, Senator DeBané, that you withdraw your motion now with the understanding that I will receive it later?
Senator De Bané: Certainly.
The Chairman: I would ask the witness to continue, please.
Mr. Lynk: I wish to make five points after which I look forward to receiving questions from the committee. I should like to leave some time for Dr. Kubursi to speak in his area of expertise.
First, as much as we would like it to be otherwise, politics and economics cannot be separated in any part of public life. They certainly cannot be separated with respect to analysis of this free trade agreement. We cannot separate the Canada-Israel free trade agreement from progress toward peace in the Middle East in general, and between Israelis and Palestinians in particular.
It is fair to say that this agreement would not have come about had the Oslo I and Oslo II agreements not been signed in 1993 and in 1995. Canada saw this agreement as a contribution that it could make toward linking economics and politics in the Middle East and toward enhancing the confidence in the peace process which the parties were slowly beginning to feel.
Having said that, I think the movement has changed. The peace process is no longer progressing. It is halted, if not actually moving backward. The timing for this bill is wrong. It sends a wrong signal, particularly symbolically to the Middle East. The National Council on Canada-Arab Relations would like this legislation to be withdrawn until the timing is more propitious with regard to progress toward peace in the Middle East.
We say that also with respect to the current political direction in the Middle East.
I direct you to page 8 of our brief, at the top of which we point out some of the current breaches which have taken place since the inauguration of the current Israeli government six months ago.
There has been a heightened drive to build new settlements and populate existing ones. There has been expansion of a settler road system throughout the West Bank and prolonged and highly disruptive closures of Palestinian-administered territories with its resulting destruction to the Palestinian economy.
There have been repeated statements by senior Israeli government officials that they have no intention of yielding any ground on any of the final status issues, including -- and these are important to both parties, but particularly to the Palestinians -- Jerusalem, settlements, final borders, right of refugees to return, sovereignty over water and Palestinian sovereignty in order to make a just and final peace achievable.
Finally, there is also the evident desire of the government of Israel to retain permanent control over as much of the lands conquered in 1967 as possible.
I direct you also to pages 14 and 15 of our brief which contain excerpts from the governing guidelines of the current Israeli government agreed upon in June 1996 by all the parties who were represented in the cabinet headed now by Prime Minister Netanyahu. They are explicit with respect to their stance on the issues of settlement, Jerusalem, retention of territory and so on.
I also draw your attention the middle of page 16 where we quote Mr. Netanyahu when he was visiting the West Bank settlement of Ariel last week. Mr. Netanyahu spoke in defence of his government's settlement policy while dismissing the Palestinian claim to their ancestral lands. For the record, he said:
People haven't lived here for thousands of years. Look at these hills. Have we deprived anyone of anything? Barren land. You know what, if we hadn't come here, it would have stayed barren land for another 2,000 years.
The third point I wish to draw to the attention of the committee is the role which international law must play with respect to final settlement of a just and lasting peace in the Middle East.
I first note the public statements of Canada, with which the National Council on Canada-Arab Relations wholeheartedly agrees.
In April of 1995 the Ministry of Foreign Affairs and International Trade stated:
Canada does not recognize permanent Israeli control over the territories occupied in 1967 (the Golan Heights, the West Bank, East Jerusalem and the Gaza Strip) and opposes all unilateral actions intended to predetermine the outcome of negotiations, including the establishment of settlements in the territories and unilateral moves to annex East Jerusalem and the Golan Heights. Canada considers such actions to be contrary to international law and unproductive to the peace process.
Some of the principal features of international law which were codified in the 1949 Geneva Conventions forbid acquisition of territory through military action or war; transfer of civilian population of a conquering power to the occupied territory; imposition of collective penalties upon an occupied population; interference with the welfare of the occupied population such that it would deny them access to food, relief goods or medical care; denial of fundamental legal rights to detainees or their transfer from the occupied territories; interference with the private property rights of the occupied population; or imposition of security measures upon the occupied population any greater than the absolute minimum required to ensure law and order.
A few weeks ago, I went through the collection of United Nations Security Council resolutions passed between 1967 and 1991. There were 116 resolutions passed by the United Nations Security Council directing Israel to give up lands it has occupied, either the ones I have mentioned or lands it now occupies in southern Lebanon. To date, they have been virtually to no avail.
Our fourth point echoes one made by the previous witness. It is the question of with what boundaries of Israel we are embarking on a free trade agreement.
Current figures suggest that approximately 260 Israeli citizens live in settlements on the West Bank. These settlements are illegal under international law. These settlements are becoming increasingly important to and integrated into the Israeli economy with respect to manufacturing, light industry and agriculture.
There is no stipulation in Bill C-61 with respect to goods coming from within Israel's pre-1967 borders or from the settlements founded after 1967.
Our concern is heightened by comments made by Minister Eggleton in his testimony before the House of Commons Standing Committee on Foreign Affairs and International Trade on October 29. He was asked several times about whether Bill C-61 was limited to the pre-1967 boundaries. He said:
It covers the entire area, the boundaries of Israel today.
He was then asked by Mr. Loney to be more precise. Mr. Loney asked whether there are areas which are excluded.
Mr. Eggleton said:
Do you mean within the boundaries of the State of Israel today? I don't think so.
...It applies in the territory over which they have customs control, which includes the Palestinian Authority's territory.
Recently, as reported in the media, Revenue Canada took steps to delist a charity in Canada because it sent tax exempt funds to settlements in the West Bank and Gaza. That was done in accordance with the policy of Canada which I mentioned several minutes ago. It seems to me contradictory for Canada to be doing that, on the one hand, while on the other signing a free trade agreement with Israel which allows goods manufactured by these illegal settlements in the occupied territories to come into Canada under preferential terms.
People often ask whether, if a free trade agreement is signed with Israel, the balance would not be righted by also signing a free trade agreement with Palestine. The National Council on Canada-Arab Relations would support a free trade agreement signed with the Palestinian Authority. However, that would do very little in terms of righting the wrong or setting right the balance.
We hold that opinion because Israel basically has an advanced, European-style economy, and to Israel a free trade agreement would have substantial benefit. In contrast, Palestinian has a very backward, anaemic economy of Third World level with a per capita income of between $1,200 and $1,500 per year. Israel overwhelmingly dominants the economy and it would be far more beneficial to Palestinian economic and political development for Canada to join with other western powers who are friends or allies of Israel to influence Israel to stop the devastating economic closures of the Palestinian economy than it would be for Canada to institute a free trade agreement with Palestine.
The Palestinian economy is primarily agricultural, with very little manufacturing. The over 300 closures of the Palestinian territories since the signing of the Oslo agreements in 1993 cost the Palestinian economy approximately $6 million a day. Palestinian agricultural goods are often held up at Israeli ports and airports until they rot and can no longer be exported.
I will turn the floor over to Dr. Kubursi who will speak more generally with respect to the economic implications of this treaty.
The Chairman: I wish to advise the committee that we are hearing witnesses who have asked to be heard.
We will now hear is Dr. Atif Kubursi, who is an economist. He has been a professor at McMaster University and has served as the Academic Visitor in the Faculty of Economics and Politics at Cambridge University. There is much more that I could say, but I will forgo that pleasure.
Dr. Kubursi, I do not know whether you have had the advantage of hearing the testimony which we have previously heard. I am hoping, given the hour, that your testimony will not be repetitious. If it does become repetitious, you will excuse me if I tell you that we have heard it before. If I do so, please use your time to make a new point.
Dr. Atif Kubursi, Senior Member of the Board of Directors, National Council on Canada-Arab Relations: Thank you very much, Mr. Chairman. That is a tall order, but I will definitely try.
I have three points to make. First, the free trade agreement with Israel is not based solely on economics. The economics involved are very minor. I am sure that many have said this. Access is not a problem. Trade between Canada and Israel increased measurably last year. Exports increased by 37 per cent and imports by 32 per cent. It seems that there are no problems of access.
Second, there are many other countries with which we trade -- and we export much more than Israel -- with which there are no trade agreements in existence or contemplated. The issue here is the implications this will have on the Arabic economy at large, the Palestinian economy in particular, and the Canadian economy. On these three counts, we believe that there are some problems we need to address.
With regard to the Arab economy, we are giving the wrong signal. Canada exports to Saudi Arabia alone more than the two-way trade volume between Canada and Israel. We export more than $500 million to Saudi Arabia.
It is also the wrong signal in the sense that we are giving preferential treatment to one country which we are not giving to the rest of the region. It is not in the interests of Canada, which does a tremendous amount of trade in the region, while only 17 per cent of our trade with Israel, to bestow upon Israel preferential treatment which we have not given to others. In my view, this is not in the best interests of Canada at the moment, given the potential for trade in the region and given the negative signals this may send to the region.
The other important point is that it has negative impacts on the Palestinian economy, and not only due to the fact we are giving the occupied areas, particularly the settlements, preferential access to Canadian products which might enable them to illegally use water which belongs to the Palestinians. This would be contradictory to some established, long-cherished views, procedures, rules and laws to which we have been party.
The consequences for the Palestinian economy are also dire. Even if we were to extend this trade arrangement to the Palestinians, it would not serve their interests because at the moment they have no control over the land and they are denied access to the water. This is primarily an agrarian economy. The only exports which we could possibly get from there are agricultural products. These products are not being produced. Even if they were produced, they would not be accessible because they have to pass through Israeli check points.
Perhaps the most damaging thing is that the largest component of Israeli exports to Canada is fruits and vegetables. These are water intensive and it is preposterous that one of the most water-poor countries in the world is exporting water-intensive products to the richest country in the world. In my view, giving preferential treatment for these products will compromise the ecological integrity of the common acquifer which the Palestinians and Israelis share. It would be in our interest to provide incentives for more rational use.
At the moment, Israel gives tremendous export incentives and prices these agricultural products at a fraction of their value as judged by the limited availability. By giving them preferential access, we are encouraging profligate use of this water. We are exacerbating further the ecological integrity of that acquifer, which is non-renewable. This is at the heart of issues of water conflict in the region.
Increasingly, and most important, we are sending the wrong signal also because you cannot divorce economics from politics. We believe that this agreement must be concluded at a time of peace. By concluding this agreement now we would be telling the Israeli government that no matter what it chooses to do, no matter how it may delay or derail the peace process, Canada is willing to turn a blind eye rather than asking them to sustain the peace process. We would be rewarding them for doing exactly the opposite of what this agreement was based upon.
Senator Whelan: Do you know whether foreigners own businesses in the occupied territories?
Mr. Kubursi: Businesses are primarily Palestinian owned in the Palestinian area. There is very limited foreign ownership. However, in the settlements, there are both Israeli and foreign-owned corporations.
Senator Whelan: Are there any Canadians there?
Mr. Kubursi: I am not sure.
Senator Whelan: Could we find that out, Mr. Chairman?
The Chairman: We can take the question under advisement and see if that is an investigation which the committee wishes to launch.
Senator Whelan: It would have a definite bearing on this. The more I hear about this free trade agreement, the less free it sounds, for either side. It may be beneficial for a few individuals and I would like to know whether some of them are Canadians.
Senator Grafstein: What countries does the National Council on Canada-Arab Relations represent?
Mr. Lynk: We do not represent any countries. We are Arab-Canadians.
Senator Grafstein: I heard in the evidence that there was a feeling that this might be unfair to other Arab countries. Perhaps you could clarify that. Which countries specifically are you talking about when you say that?
Mr. Kubursi: I say that in the sense that it might create an impediment and negative sentiment about relationships with Canada.
Senator Grafstein: To which countries, though?
Mr. Kubursi: I would say every Arab country, of which there are 22, with which Canada has trade relations. They will feel that Israel has been singled out for special treatment which they have not been accorded. It is asymmetrical.
Senator Grafstein: I would like to get more specific about the relationship between the National Council on Canada-Arab Relations and the Palestinian Authority. We have read newspaper reports about recent events in that part of the world.
To whom, specifically, has the National Council spoken in the Palestinian Authority with respect to the free trade agreement? When were those meetings held and what was said about the free trade agreement?
Mr. Kubursi: We have not met with anyone and we do not intend to do so. We are talking about it as scientists, economists and concerned people. I have done a tremendous amount of work in the region. I am currently working on a water project there for the International Development Research Centre.
I am the regional director for the Harvard University Middle East Water Project. I am continuously in touch with the region and I have written several books on it.
Senator Grafstein: I am not challenging your expertise or your knowledge. I want more concrete information respecting the present position of the Palestinian Authority. Specifically, what has been said by the Palestinian Authority with respect to this free trade agreement, who said it, and when was it said?
It would be helpful to the committee to consider a more specific statement because we are dealing with two markets: the Israeli market and the Palestinian market. We heard from the previous witness, the Mennonite representative, that he was there for one week and had some discussions with local citizens, but I did not hear in his evidence any specific statements about meeting with authorities.
If you have that information, it would be helpful. If you do not, I understand.
Mr. Lynk: I will offer a two-part answer to that.
First, we cannot provide the voice of the Palestinian Authority with respect to that. We are an organization of Canadians of Arab descent. That is whose perspective we are representing today.
In order to find out what the Palestinian Authority has said, you may wish to speak to the Palestinian representative to Canada, based here in Ottawa. I am sure he would be delighted to answer your questions, either before the committee or privately.
Second, I concur in what Dr. Janzen has said. I was in the territories for two weeks in January; my third trip to the territories. While it was not my main purpose there, I did speak to Palestinian businessmen. When issues arose with respect to Canada, they expressed the view that they would welcome more Canadian assistance and more trade with Canada.
However, first and foremost, they remarked upon the ruinous nature of the ongoing Israeli closures of the Palestinian economy. That was their most important economic issue. It would be impossible for them to make effective use of the development aid which they receive and of the trade relations they would build with Canada, Europe, the United States, or any other country, as long as these closures continue.
Senator Grafstein: Can you give us any specific information about the number of Palestinians who work in either Palestinian or Israeli businesses which are export oriented?
Mr. Kubursi: Presently, 22,000 Palestinians work in Israel. They work primarily in construction, which is not an export commodity, and on agricultural plantations, which typically export half their product and retain half for domestic use.
Senator Grafstein: What percentage work only in export-oriented businesses? That is the subject matter of this discussion.
Mr. Kubursi: That would be a very small number. At one time, 130,000 Palestinians were working in Israel. Due to the closures now, only a small number are able to work there. Those who do, work primarily in construction. The number of Palestinians who work in Israeli export-oriented businesses is very small.
Senator Grafstein: What would be the percentage of the 22,000 workers?
Mr. Kubursi: Of the 22,000, it would be less than one-quarter.
There is another aspect of this. The Palestinians have a free trade agreement with Israel under the Paris Protocol, but they have not been able to take advantage of it at all.
Economists do not agree on many things, but we do agree that the advantages of free trade, particularly between a rich country and a poor country, depend to a grade extent on the ability of the poor country to gain access and exports to its primary sector. Typically, these poor economies do not have advanced manufacturing sectors. Their level of sophistication and manufacturing capacity is very limited. Their most product sector is usually agriculture, and agriculture in the Middle East depends critically on water.
Senator Grafstein: I take your point. I have heard that and I appreciate it.
Mr. Kubursi: In the occupied territories, they have less than 100 cubic meters of water per person per year. Of this, only 70 per cent goes to agriculture. Even under the last stage of the Oslo agreement, the Palestinians will have command over less than 26 per cent of their land and less than 20 per cent of their water. Under such circumstances, it is impossible to create a viable primary economy that can take advantage of free trade.
It is extremely important at the moment, particularly if Canada wants to help the Palestinians, to ensure that they have greater control over their water and land such that they can develop a viable primary economy to improve their lives.
Senator Grafstein: Are there any businesses other than agriculture and crafts that Palestinians are gearing themselves up for with respect to exports?
Mr. Kubursi: Yes.
Senator Grafstein: Could you give us a list of them?
Mr. Kubursi: I will give you three major areas. They are trying to get into food processing, particularly in olive oil. They have a few presses and are trying to develop and maintain high quality. They have also done some good work in biscuits, chocolates, and dried fruits.
Another area they are working in is batteries. They have tried to go into areas which require little manufacturing and also into textiles, particularly labour-intensive textiles because the comparative advantage of the Palestinians is cheap labour. Palestinian women are particularly good at embroidery which has been a tradition of theirs for hundreds of years.
There is now some emphasis on developing technical service expertise, particularly geographic information systems, and I am very proud to be part of a group that is developing that. For the first time, the Palestinians are ahead of the Israelis in terms of cartography and mapping. They even do this for the Israeli land use systems.
Senator Grafstein: You mentioned that there is some interest in exporting textiles. Is there also some interest in exporting low-tech equipment and in the assembly of that equipment?
Mr. Kubursi: Yes.
Senator Grafstein: There is some interest in expanding the manufacture of religious objects for export. There is a whole raft of nascent small businesses which, if the situation were different, would be anxious to get into the export mode, and they would be very competitive because of their cost structure.
Mr. Kubursi: There are a number of issues on the supply or cost side and then on the demand side.
On the demand side, the Palestinians would have a great competitive advantage if they had greater access to Arab markets. They would then be competing among equals. It is very hard for the Palestinians to compete with more advanced economies.
In this respect, they have been severed from the traditional markets, particularly in the Gulf and in Jordan, Syria and Lebanon. They have been denied some competitive advantages which they had developed and garnered over the years. Now, having to compete with a more advanced economy, their chances and capacities are limited.
On the supply side, the Palestinian economy has been exposed to the high-cost Israeli economy. This has imposed a tremendous cost on the Palestinian economy. They have had very little competition, even in their traditional markets. They must now compete for credit at much higher rates.
They must look at labour differently, particularly with labour's comparative alternative of work in Israel. Israel can pay these high wages given its very productive and highly competitive economy. They cannot pay it in the domestic economy.
Also, deliberate, systematic Israeli policies have made it very difficult for nascent, domestic, industrial capacities to emerge.
In 1967, when the Israelis went into the West Bank, they had a particular set of industries, and industry represented 7 or 8 per cent of their gross domestic product. Today, they have the same set of industries and only very minor changes have taken place.
In my view, Israelis have felt that the Palestinian economy is a captive market, and have preferred that it remain so. They did not give the Palestinians equal access to credit. They did not give them the same comparative incentives that they give to their own industry.
Having been exposed to the Israeli high-cost economy and severed from the traditional markets, this all combined to undermine, in a very substantive way, the capacity of the Palestinian economy to stand on its feet.
Senator Grafstein: Is it fair to say that the other Arab countries are concerned, because of the existing free trade agreements between Israel and the United States and the EU, and the potential agreement between Israel and Canada, that this would put not only Israel but the Palestinian economy at a competitive advantage over those Arab countries which do not have the same trade relations with the U.S., the EU or Canada?
Would it, in effect, put the Palestinian economy at a comparative advantage over those which do not have the same trade relationships?
Mr. Kubursi: The concerns of the Arabs are multi-dimensional. One concern is that the agreements give Israel some preferential treatment that they are not getting. Second, Israel is being rewarded at a time when it has revoked its commitment to the Madrid conference on peace. I am sure that in some sense the Jordanians would feel a bit concerned.
Senator Lynch-Staunton: Of the 22 Arab countries, are you aware of any that have formally protested to the Government of Canada over this agreement? Have there been formal representations made by any Arab country to the government on a country-to-country basis, protesting or questioning the propriety of such an agreement?
Mr. Kubursi: They have not confided that to me, no.
Senator Lynch-Staunton: You are reflecting the apprehensions of the Arabs. You must, therefore, be considered a spokesman for them. I want to pursue that. Has any Arab government gone further than to delegate you to speak for them? Have they told the Government of Canada of these same anxieties on a formal, country-to-country basis?
Mr. Kubursi: I am not the spokesperson for any of these countries. As we said, we represent Canadians of Arab origin.
I am convinced that when they reflect on this they will see this as an exclusive agreement which Canada has chosen to conclude.
Senator Lynch-Staunton: Allow me to interrupt you. We heard concerns from you and from other witnesses yesterday about the possible deterioration of relations between Canada and the Arab countries if we enter into this agreement because, in effect, we would be sanctioning acts by Israel which, at least, are reprehensible.
Are the Arab nations so concerned about Canada entering into such an agreement that they have protested directly to the Government of Canada?
If the witness cannot answer, is there anyone here who can answer that, Mr. Chairman?
The Chairman: Presumably, there will be a witness from the Department of Foreign Affairs and International Trade to whom that question might be addressed.
Senator Lynch-Staunton: Has the Palestinian authority made representations to the Government of Canada? It is important to get a better appreciation of the feelings of the governments involved. I do appreciate the expressions given today and yesterday, and there are more to come. I would be more comfortable in assessing these anxieties if I knew that they were a direct reflection of one or more Arab countries.
I respect your stand. All I have heard today is that you are speaking as Canadians of Arab descent. I am of Irish descent, but I would not presume to speak for Ireland.
Mr. Kubursi: We are looking at two areas. We are very much concerned about any action that may inadvertently result in negative consequences and in impeding the progressive and increasingly friendly and positive relations between Canada and the Arab world.
We cannot but reflect on two aspects. One, there will be, no doubt, knowledge of this because the press will carry it. It has already been carried in the press. There is evidence that they have concentrated on it. I would not be breaking any news to tell you here that not all the press in the Middle East is private and independent. If this is any indication, it is an indirect one. It definitely reflects anxiety on the part of these governments.
They do not see it purely as economic signaling, as we have tried to point out. It is also a political signal. This will definitely be taken in the Arab world as a reward to a government which they do not think should be rewarded, particularly since it has not lived up to the agreements it has concluded and it has obstructed the peace process, in the view of Arabs.
Senator Lynch-Staunton: Mr. Chairman, I hope we can find out if these views are those of the countries themselves. Have our ambassadors been called in by the countries to which they are accredited, to be given these views by the governments themselves?
The Chairman: Mr. MacDonald, the parliamentary secretary, will appear before us this evening. Presumably you will want to ask that question of him.
Senator Prud'homme: I do not care what the Arabs think of this agreement. We are all Canadians here. They are not Canadian. As a matter of fact, we could say that Mr. Kubursi has just been appointed --
Senator Lynch-Staunton: Be careful now.
Senator Prud'homme: But do you understand, he has been appointed --
Senator Lynch-Staunton: You are speaking for --
Senator Prud'homme: I do not care, to be frank. What is Canada's interest in the Middle East? That is my question to him.
What is Canada's interest in the Middle East? What kind of signal, according to you, are we sending?
The Chairman: We have been told that several times.
Senator Prud'homme: In addition to everything Dr. Kubursi said, he is on the special liaison committee for Lebanese reconstruction, appointed by the Minister of Foreign Affairs and International Trade.
You are talking to a Canadian who has been asked to help Canada rebuild Lebanon. He is part of this committee led by Mr. Mac Harb. He met this afternoon with the department. He is here to speak as a Canadian.
Senator Lynch-Staunton: We are not here to have exchanges between senators. I am not here to challenge the validity of the views of any witness; I am here to get a better appreciation of the countries which we are told will be severely upset, if not greatly concerned, by us entering into this agreement. So far, I have not heard that they have expressed that view.
Senator Prud'homme: Mr. Kubursi, the views you express and your concerns are those of Canadians sending signals, not of spokespersons for an Arab country, the PLO or Israel. Are you saying, as a result of your collective knowledge of the Middle East, your collective understanding, that if this agreement were to be signed, it would be sending the wrong signal at the wrong time?
Mr. Kubursi: Absolutely. Indeed, we are concerned. We also have feelings toward our old countries.
The Chairman: Senator Prud'homme, your question is repetitive. We have heard this at least nine times. I have heard nothing to suggest, on any one of the occasions on which we have heard it, that it is being challenged. I wonder how much repetition you want on this point.
Senator Prud'homme: On the subject of the Middle East, you need to repeat things often in order for people to understand. I have heard this discussion for 34 years.
I am satisfied that I do not need representations from the Arab countries. I am thinking of what is in Canada's interests. The witnesses are saying that, according to their experience and their knowledge of the Middle East, it is sending the wrong signal. They are saying this as Canadians; not as Arabs, but as Canadians of various origins. We are all of different origins. I am satisfied that they, with their experience which we do not have, are telling us what they believe, to their best knowledge. They do not need to know what the other Arabic countries think or believe. I am satisfied with the answer.
In answer to Senator Grafstein, you said that there are 22,000 Palestinians now, versus over 100,000 previously, who work in Israel, and you said they work as cheap labour. Man for man, when they are allowed to go to work, do they get the same salary as Israeli workers?
Mr. Kubursi: Their salaries are at the lowest end of the wage scale. They pay for all the social benefits but do not receive them. You could discount another 25 per cent.
The Chairman: This has been most interesting. There are many questions I might ask about your work with the IDRC, but I will forgo that because it is not within our terms of reference. Thank you for being so helpful to the committee.
We will now turn to the Canada-Israel Committee. The chief spokesperson is to be Mr. Shimon Fogel.
If there is other curriculum vitae information which would be helpful to the committee, Mr. Fogel, please supply it before you begin your presentation. Please bear in mind that we are more interested in hearing what you have to say than in hearing about you.
Mr. Shimon Fogel, Director, Government Relations, Canada-Israel Committee: I am mindful of the late hour and what you have heard over the last couple of days.
I am a fairly modest person, so I will not elaborate on your brief introduction of me. However, I should like to introduce Professor Maureen Molot, who is affiliated with Carleton University and the Paterson School of International Relations here in Ottawa. She has a particular expertise on free trade in its generic application and perhaps could help the committee with some of its considerations.
I confess somewhat ruefully that, after hearing the last few presenters and having been debriefed on some of the discussions that you had yesterday, I am almost convinced myself that we should scrap this free trade deal and move on to other things, but I am not entirely convinced.
Senator Prud'homme: We will try to convince you.
Mr. Fogel: The honourable senator is ambitious.
Let me outline what I should like to share with you. Perhaps I can then ask for your indulgence in allowing Professor Molot to share some observations about free trade that would perhaps inform some of your deliberations which will take place after we and the parliamentary secretary have left.
I am a bit torn in terms of how to respond to you and how to contribute to your considerations because I would react mainly to the political arguments which have been raised over the last several days, and I fervently believe that this is not the forum for them. I do not disguise the parochial perspective with which I come to the issue. After all, I am mandated to seek to advance Canada-Israel bilateral relations. I am not indifferent, nor are those whom I represent, to many of the legitimate grievances the Palestinians have, both with respect to Israelis and with respect to historical developments over a long period of time.
However, I become terribly frustrated when we seek to look at particular issues. In this case, we are looking strictly at an economic issue, and I will return to that in a moment. We find that it degenerates into a debate about who will make the more compelling or evocative case with the hope that that will steer legislators into a particular direction.
As was mentioned earlier, the Senate went through exhaustive work approximately 12 years ago and presented a report on what it felt ought to be Canada's approach to the Middle East. Some of you will recall the scope of that endeavour. It was not something that was covered over a period of two or three days, and it was not limited to a series of witnesses who brought to the debate a particular position which could have been predicted beforehand. The Senate studied the issue exhaustively and sought to corroborate everything that was raised in order to shape Canadian policy.
Someone can come into this forum and raise issues about various UN Security Council resolutions that call for Israel to return territory occupied since 1967 and would presume, since we are all people of good faith, that that would be accepted. What they fail to say -- and what the record will show -- is that every single resolution based on UN Security Resolution 242 is an equation. It does not simply call unilaterally for land to be returned to Palestinians. It calls, first and foremost, as does Canadian foreign policy of successive Canadian governments, for return of the state of Israel.
I could spend a considerable amount of time challenging the various statements that I have heard here over the last two and one-half hours. I will not because I do not believe this is the place for it.
Let me frame my position in a context in response to something which a witness before me offered. The suggestion was made that politics and economics are not divisible. I suggest to you that the present government of Canada, based on the pattern established by a previous government in this country, has said precisely the opposite. In fact, a foreign affairs review was conducted during the current government's tenure which concluded very specifically that trade issues, and Canada's position within the international community on issues of economics and trade relations, are distinct and discrete issues which we will pursue as a trading nation with all possible vigour.
There are appropriate fora in which we carry our concerns as a country on issues of human rights and other issues related to those concerns that have been expressed here earlier today.
This agreement between Canada and Israel is a logical outgrowth of the evolution of the bilateral trade relationship. Canada prompted it in discussions between the Prime Ministers of the day because it was concerned about responding to Canadian businesses in all parts of the country that were saying, "We are handicapped and are unable to compete on a level playing field." This was not a reward for Israel. Indeed, formal discussions about a free trade agreement started well before Washington, well before the Oslo accords were known, and certainly well before any of them were implemented.
This was done because it is good for Canada and Canadian businesses. It is critical that we maintain a focus on the issue. The question is not one of rewarding a particular Israeli government, notwithstanding that we recognize that Israel is the only democracy in the Middle East and that Israelis have every right and privilege to select a government which they feel reflects their best interest. To deny going ahead with this measure will not send a message to the Israelis; it will punish Canadian companies, precisely at a time when we are seeking to carve out a niche for ourselves there, specifically in the high-tech area.
Some of the comments made a few moments ago relate to areas which are not relevant to 22 Arab states, not because Canada would not want them to be but simply because the economies are fundamentally different and at different levels. Canada is looking for partners with which to enhance our opportunities abroad. We need to be partners with countries which offer something in the areas in which we are looking to achieve growth. In Israel's case, it is primarily the high-tech area.
Canada has shaped its foreign policy with a particular philosophy in mind. Unlike the Americans, who talk about dual containment and embargoes on trades with countries with which they do not agree, Canada has even gone so far as to trade with countries with which it shares virtually nothing -- not a form of government, not values, not interests -- because we have believed for years in the proposition of constructive engagement. We believe that the closer we get to a country, the closer they will match their interests to ours and the more sensitive they will be to our concerns. That is no different with respect to Israel than with respect to any of the other countries with which Canada does trade in a substantial way.
I wish to offer two more points which came up in the course of discussion. First, I have a concern about what Arab countries and, in particular, the Palestinian Authority, have to say about the free trade agreement. You will have occasion to speak with the parliamentary secretary. There are officials from the Department of Foreign Affairs and International Trade here. I think they will confirm for you that, quite apart from the undertaking that was expressed in a formal letter from Minister Eggleton's counterpart in Israel, Mr. Shcharansky, about how the benefits of the free trade agreement would be extended in full to Palestinians in the territories, Canada has engaged the Palestinian Authority in a series of discussions for well over one year now on the issue of free trade. They have not expressed opposition to the free trade agreement between Canada and Israel and, although I am not a spokesman for various Arab countries, I can tell you that none of the Arab countries have expressed opposition either. That is important for you to know.
People, including myself, come to this table with very parochial agendas. I am not sure that in the limited time you have to consider this legislation you will have the luxury of ferreting the specific realities which have been raised over here.
I will now ask Professor Molot to introduce some of the economic issues that you might want to consider.
Ms Maureen Molot, Professor, Carleton University, Norman Paterson School of International Affairs, Canada-Israel Committee: Mr. Chairman, I would like to thank you for giving me the opportunity to appear before you tonight.
I have long been a student of free trade. I have watched carefully all the debates on whether Canada should have signed a free trade agreement with the U.S. and whether we should have participated in the NAFTA talks. I have spoken with many of the officials in this room about that. Those discussions were always framed in terms of the benefit to Canada from these agreements, as Mr. Fogel has said; in terms of benefits to Canadian companies and Canadians generally in terms of jobs, et cetera.
The testimony I have heard this afternoon has been interesting because very little attention was paid to the benefits to Canada. We are a country whose exports now account for approximately 40 per cent of our gross national product, up from about 25 per cent in the mid-1980s. That is rather significant. It, therefore, behooves us to be attentive to opportunities to ensure that those who produce goods can sell them abroad.
I would go further and suggest that the growth in the Canadian economy in recent years -- and it has certainly not been robust -- has been primarily from our exports because domestic demand has been so weak. Therefore, we cannot take lightly the opportunity to find new markets.
Another point in terms of Canadian exports has been a long-standing concern that we diversify our exports away from dependence on the U.S. Statistics from the last few years show that although our exports to the United States have grown in dollar value, there has been a small decrease in the percentage of our exports to the United States. If we are concerned about diversifying our exports, it would seem reasonable to take those opportunities available to us to increase exports to other countries. This free trade agreement would do just that.
Free trade is good for Canada. The studies that have been done to measure the impact of the Canada-U.S. Free Trade Agreement on the Canadian economy over the last few years clearly show that Canada has benefited enormously from free trade. Exports of goods have risen in those sectors where tariffs have been reduced. I am thinking in particular of a study done by the C.D. Howe Institute a few years ago which looked at the impact on Canada of the free trade agreement with the U.S. in the first couple of years after it was implemented.
More work has been done since then and it points to the continuation of a phenomenon whereby our exports in those sectors liberalized by free trade have increased. Moreover, it is clear that our exports to countries with which we have free trade are increasing at a faster rate than exports to those countries with which we do not have free trade.
It is also important to note that the composition of our exports is changing. We are moving away from resource exports to more manufacturing and high-tech, as was indicated by the first witness this afternoon.
Mr. Chairman, free trade agreements are good for Canada. We have just signed another one with Chile, as all honourable senators are aware. Canadian firms benefit and the Canadian population benefits from the jobs which are created. As Canadians, we have a responsibility to ensure that we take actions which will be of benefit to the citizenry of this country.
Senator Whelan: Perhaps you know my views on free trade. I have never met a real free trader, someone who would not take advantage of someone else.
I had a lot of experience in my 12 years as a minister dealing in perishable agricultural products. We were always a free trader compared to other countries. We traded 80 per cent of our agricultural products free, and when we were not in production of perishable products, we had no tariff on them. The United States kept tariff protection on their perishable products 12 months a year. We had some of the freest trading rules of any nation in the world.
When I went to Israel in 1982, I visited a big export company which was funded approximately 50 per cent by subsidy. They developed and exported beautiful products such as orchids, avocados, tomatoes and strawberries. Arabs and Jewish people harvested them together, cooled them and packaged them. They were loaded onto 747s and flown to New York, Copenhagen, London and other places. However, that operation was highly subsidized and I wonder whether it is still operating in Israel.
There are certain agricultural products which Israel will not trade. I notice that dairy and poultry products are protected under this so-called agreement.
Mr. Fogel: Yes, in both places.
Israel has recently moved dramatically away from subsidized government intervention in the production and manufacture of goods. This has created some great challenges for the Israeli economy, to which it has responded quite well. However, the philosophical spirit, not only of the Israeli government but of the Israeli people, is one of free enterprise and a reduction in government intervention and regulation.
If you were to return to Israel, Senator Whelan -- and I encourage you to do so -- you would find a different kind of relationship between the government and industry, in both agri-food and high-tech.
Senator Whelan: I am told that there are still subsidies of approximately 50 per cent for those products.
Mr. Fogel: For poultry and dairy products, there are marketing boards similar to the ones we have in Canada.
Senator Whelan: Speaking of the dairy industry, in 1935, Canada gave Israel their first Holstein bulls, which enabled them to develop a proficient dairy industry.
Senator Kinsella: I am interested in how the kibbutz and moshavs operate. Do you see that as a type of cooperative subsidy? What do they bring to the agreement?
Mr. Fogel: The kibbutz and moshav movements, which were the centrepieces of the state of Israel during its early development, have evolved substantially over the last number of decades. We can now observe two periods in which a labour government was not in place for an extended period of time, and we see that government subsidies to the kibbutz movement, as well as to some of the specific kibbutzim which were producing various products, have been virtually eliminated. While they are collectives, they can be seen from a Canadian perspective as simply private companies with shared ownership amongst the employees. However, they no longer benefit from previous levels of government support and subvention.
Senator Kinsella: My other question relates to the opportunities that you might see under this agreement for cooperation -- which is mentioned in one of the preambular paragraphs -- between Canada and Israel in terms of those territories which might be defined as CIFTA beneficiaries in terms of the enforcement mechanism for the treaty. Perhaps you could reflect on some practical examples.
For example, what opportunities do you see for a Canadian entrepreneur who wishes to establish a direct relationship with the community of Jericho, be it in farming or industry?
Mr. Fogel: Thank you for that question, senator. It allows one to consider the economic equation on three separate dimensions, all of which have an impact on Canada.
I state this as a basic premise which is borne out by the evidence of not only the current Israeli government but the one it replaced. It is and has been declared in Israel's interests, certainly in discussions with Canada, for the Palestinian economy to begin emerging in a more sophisticated and substantial way. That is complete self-interest simply based on the proposition that if Palestinians -- the indigenous population -- are more successful and prosperous, they will be happier and we will see that they are stakeholders in the peace process. Israel itself has an interest in trying to facilitate a more productive economy.
I acknowledge that some of the measures which the current Israeli government and the previous labour government have taken have presented enormous challenges and difficulties for Palestinians. However, on economic growth and cooperation, Israel came to Canada seeking support for various Palestinian initiatives.
Canada also has direct links to the indigenous Palestinian communities in the territories and funds projects independent of any consideration of Israel. Canada has committed some $75 million since the beginning of this current peace process specifically toward helping to establish a Palestinian infrastructure ranging from unions to small business capacity, et cetera.
The third area is the one that perhaps holds the most heartening potential and that is three-way cooperation between a private sector Israeli entity, a similar one on the Palestinian side and a third one on the Canadian side.
Notwithstanding challenges and developments in the area over the last period of time, some specific initiatives have already begun to take shape. One initiative in which Canada is particularly interested extends to Jordan as well. It is a new high-tech medical inquiry research and development facility in the area of various cancers.
This is precisely the type of economic cooperation which allows all the parties to recognize that they are not only stakeholders but that they stand to make meaningful and concrete gains.
Senator Kinsella: If a Canadian entrepreneur wanted to conduct business in Bint Jubayl or Tibnin, in southern Lebanon, would that be included under this bill under the definition of "territory"?
Mr. Fogel: At one time, quite apart from any free trade agreement, Israelis in the north, or what they call the finger, in Metulla, and various entrepreneurs in southern Lebanon cooperated on economic projects all the time.
The references in the agreement to beneficiaries is recognized by everyone as referring to only one party; that is, the Palestinians or the Palestinian Authority in the name of the Palestinian people in the occupied territories.
Perhaps the parliamentary secretary could speak to that with more authority. However, that was worked out to the satisfaction of both the Palestinian government and the Authority. It was not intended to include Iraq or the sovereign territory of Lebanon. Israel has no territorial claims to Lebanon. It was meant as a way of referring to the Palestinian Authority.
The ability to further define that has been left not to negotiations between Israel and Canada, but to the Canadian Governor in Council.
Senator De Bané: Mr. Fogel, did you say that senators do not have the luxury of looking at the specific realities in the region during our study of your bill?
Mr. Fogel: I do not presume to tell this committee or senators what they should do.
Senator De Bané: No. The thrust of your argument this afternoon is that this is an economic issue and should be dealt with as such, that if we vote against it, we will not be hurting Israel but punishing Canadian companies.
Are you saying that we do not have the luxury of looking at the specific realities of the region during our study of this bill?
The Director of Government Relations of the Canada-Israel Committee is day after day selling Israel for its high moral values, standards and ethical ideals. Yet, today you say, "Forget all that; let's talk money."
This must be the first occasion on which you have put forward that case at this level. In a few years, you will be disappointed by the slant of your testimony this afternoon.
This is the first time in the history of the Jewish people that someone has told us, "Look at this as a business deal. Forget the other dimensions that were put to you in the last few days. You would be punishing Canadians, not Israelis."
I know some Canadians who are quite masochistic. Yesterday, we heard from Mr. Bronfman of Claridge Holdings who said that he will not invest as long as Mr. Netanyahu continues to pursue his current policies. He must be quite a masochist for a Canadian businessman.
Frankly, the argument you made this afternoon is the antithesis of what I have heard from Israel.
Is it true, as we have been told, that the Israeli settlements in the occupied territories, which were to be frozen after the Oslo accords, received extensive new Israeli government funding and that their population increased by 48 per cent in the West Bank since 1993 and by 62 per cent in Gaza?
In the first sentence of your presentation you said that you have great sympathy for legitimate grievances of Palestinians. Is that true, Mr. Fogel?
You have two options. If, on the one hand, Israel is against a bi-national state and, on the other hand, you do not want to allow Palestinians to have their own state, what kind of future are you reserving for them? It is either one or the other.
The Chairman: Honourable senators, I doubt that the trajectory that we are now on will be helpful to the committee when it comes to make its decision.
Mr. Fogel: I will defer to your considered opinion. A serious charge has been made against me.
The Chairman: If you feel that way, we will hear from you.
Mr. Fogel: I will expand on what I said earlier. I think the blues will indicate that I did not say that you do not have the luxury. I put it in a particular context.
The context was that if this committee wants to explore the Israeli-Palestinian conflict and developments over the last period of time, it should do so, but it should do so with the terms of reference it used in its exhaustive Stanfield report.
We heard from one of the presenters that the Senate went so far as to invite testimony from the PLO representative to the United Nations in the preparation of the report that was submitted to the Government of Canada at that time. If that is the interest of this committee, then you must do that kind of thorough and comprehensive analysis.
It is you who must decide this, senators, not I. I am not dictating the terms of reference to this committee on this piece of legislation or on its work with respect to its larger mandate as the Senate's eye on foreign affairs.
If you are limiting yourselves to an assessment of Bill C-61, it must be assessed within the context of what the bill stands for. It is not Canada's proclamation on the Arab-Israeli dispute. We have lots of evidence of Canadian interventions on that issue which are perfectly compatible with the objectives of this bill.
If you want to engage in a discussion of the relative merits of different parties to the conflict, then do so within a context which allows for a full examination by this committee of those issues.
The Chairman: As I said before, Senator De Bané, I doubt the value of continuing this particular trajectory.
Senator De Bané: You will be relieved, Mr. Chairman, that my next question will be on economics.
The Chairman: Please proceed.
Senator De Bané: You mentioned that you thought highly of the report this committee did a few years ago. I remind you that one of the important things said in that report was that Canada, as a western industrialized member of the G-7, has a vital interest in the stability of the Middle East. I am speaking economically. Canada has a vital interest, in economic terms, in the stability of that region.
The present government in Israel is pursuing policies which a great number of Israeli citizens, foremost among them Mr. Shimon Peres, are saying are not conducive to peace, and that is vital to the interests of Canada.
I think we should take some time to see where the present government of Israel is going before taking another step. If it goes in the right direction, we should move also, because this is Canada's way of expressing our support to the government. Let us wait to see where it is going.
Senator Grafstein: I should like to get back to economic issues.
The witness spoke in his testimony about Canadian business anxiously awaiting the facilitation of this agreement which could result in Canadian jobs and Canadian exports. He has not given a list of them.
I will give you a list and perhaps you can add to it. When the minister signed the agreement in Toronto several weeks ago, there were 500 Canadian businessmen present from across Canada, although mostly from Ontario, all anxious to do business. Among them were businesses in prepared foods, Canadian wines, Canadian drugs, modular furniture, lumber -- raw, prepared and otherwise -- construction products, prefab homes, newsprint, clothing, textiles, high-tech equipment -- specifically telephony equipment -- and software.
That is only a partial list of the companies that I encountered at that meeting, all of which were very anxious to proceed, many of which had never done business with Israel.
That represents businesses in every part of this country. Is that an exhaustive list?
Mr. Fogel: I do not think it would be. Some of the categories you identified were generic. In high-tech it could be broken down into a variety of categories. In the bioengineering sector, Israel and Canada share a particular expertise in medical diagnostic equipment. In the area of telecommunications, Canada and Israel complement the sector in each other's economies.
Those areas which we have independently identified here in Canada as the economic sectors which promise the greatest prosperity for Canada over the next long period of time are precisely the areas in which they see Israel as a very attractive market and an attractive partner in penetrating Europe and some of the Middle Eastern and African states.
Senator Spivak: I wish to address the issue of timing. I am not sure that this witness can answer this question best, because it concerns the policy of the Canadian government.
My understanding of Canadian trade policy is that it is not dependent on allowing certain governments to have time to act in a manner which conforms to our standards. This is not a comment on anything which is happening in Israel today; it is simply a comment on timing.
The argument sounds fairly reasonable. Maybe we ought not do this now; maybe we should allow the government some time in order to function a bit better.
I have particularly in mind the issue of China. Canada is anxious to do trade with China, it even loans China money, and the issue of timing is not a question.
The Chairman: You have made your point, but I do not know that this is a point on which this particular witness should be expected to be helpful to us. I am sure it is an argument that you will want to make when we consider our report.
Mr. Fogel: I should like to distinguish between Canadian political support and Canadian trade strategy. I made the point earlier about our philosophical approach to international trade. We have deliberately and explicitly said that the trade policy which enhances the position of Canadian companies and the prosperity of Canadian companies to the benefit of Canadians is a separate and independent consideration of the political relationship Canada enjoys with other countries.
Senator Prud'homme: The witness began with a quote and I should like to reply to it.
The Chairman: Is that not something with which the committee should deal?
Senator Prud'homme: No, because Mr. Fogel he will not be here.
The Chairman: We are not here to edify this witness. He is here to answer our questions.
Senator Prud'homme: I will put it as a question for comment.
The Chairman: Senator Prud'homme, you are straining my patience. If you wish to continue, do so at your jeopardy.
Senator Prud'homme: The witness said that this is not the place to talk about the politics of this agreement but rather to talk about free trade. That is an argument. However, he mentioned a better time and he used as an example the report made by Senator Van Roggen on Middle East policy.
I was privileged to be given the paper produced by Senator Van Roggen. This was the ninth draft. The committee studied the issue for years. Honourable senators did a good job studying Canada's relationships, economic and political, with the entire Middle East.
To put it politely, the report was watered down. That is why there were nine drafts. At the end of the day, two senators voted against it; Senator Nurgitz and Senator Grafstein, who is present here today.
I objected at that time, and still object today, to the fact that anyone who talks about the Middle East is accused of being anti-Semitic. That is what happened then. There is no historical evidence to show that Senators Murray, Asselin, Flynn, Haidasz or Hicks are anti-Semitic. They were collectively accused of being biased after doing great work for Canada, the kind of job that you suggest we do.
The politics of the issue is as important for us as it is for the witness. For Ms Molot, the question is solely one of free trade. For us, the politics of it is just as important.
The Chairman: I wish to thank the witnesses for their appearance and expert testimony today.
Our next witness is from the Department of Foreign Affairs and International Trade, Mr. Ron MacDonald, the parliamentary secretary.
Mr. MacDonald, the committee has been focusing fairly intensively on the proposed free trade agreement between Canada and Israel. We have gone over much of the ground repeatedly. I assume that you have been told the areas which have specifically attracted the attention of the committee. It would be helpful to us if you could presuppose that we have a fairly good bird's-eye view of the terms of the deal and also of the political ramifications attending the deal. If you would focus on the particular points on which you think you can be most helpful to us, we would be highly appreciative.
Mr. Ron MacDonald, M.P., Parliamentary Secretary, Department of Foreign Affairs and International Trade: Mr. Chairman, the department has prepared a fairly detailed dissertation for me to deliver to you tonight. With your indulgence, I will ask that it be appended to the record. I know that senators are very diligent when they take on an issue and that they try as best they can to immerse themselves in the background and all the intricacies of it.
Rather than taking your time reading my presentation, I will give it to your clerk. It contains nothing new. It is information restated on behalf of the Government of Canada with respect to the CIFTA.
If that is agreeable to the chair and senators, I will not read the statement into the record.
The Chairman: This question came up earlier in another connection, and we decided that we would leave the question pending at that point.
I am afraid that you are confronting us with a practical problem now.
Is the committee agreed that we append not only Mr. MacDonald's statement but the statement of the National Council on Canada-Arab Relations?
Hon. Senators: Agreed.
The Chairman: That is agreed.
Mr. MacDonald, you can assume that the material will be reproduced in the record of the committee.
Senator Corbin: Mr. Chairman, there were questions of a political nature put to the officials yesterday to which they chose not to respond, or to which, in your opinion, they should not respond. Does the parliamentary secretary have any comments on those questions put yesterday? That would be the new element of any presentation he would want to make. We do not want him to recapitulate what the officials said, but is there a new element to which he would like to respond?
Mr. MacDonald: I wish to thank the committee for inviting me here today. I bring with me apologies from Mr. Eggleton, who is currently on his way to Chile to sign the Canada-Chile free trade agreement.
I will preface my remarks with a brief discussion of some of the policies of the government. As you know, it has been the policy of successive governments in Canada to pursue, where practicable, free trade deals with some of its trading partners.
Indeed, both chambers of Parliament have heard much debate on the NAFTA, the FTA, the Canada-Chile deal, and also the CIFTA, between the state of Israel and the Canadian government. I need not repeat the statistics. The verdict is pretty well in that free trade is better for Canada than living in a protectionist state.
The policy of the Government of Canada has been, where practicable, to enter into free trade deals where it makes sense for Canadian producers of goods and providers of services. Indeed, that policy has proven very successful, with the conclusion of the Uruguay Round on free trade, the GATT, and the WTO, which has fallen out of that process. It is very clear that the world is going in the direction of removing trade barriers wherever possible, when countries have certain rules in place that allow for freer trade in goods and services.
Indeed, Canada has benefited so greatly that we are now one of the world's biggest trading countries. We lead the G-7 in percentage of our GDP for trade, that currently being 37 per cent. This is very positive. The majority of the jobs that have been created in the private sector since our government was elected in 1993 are in trade-focused industries.
The Speech from the Throne at the beginning of this session of Parliament clearly indicated that for economic development and job creation we are relying on our ability to get 500,000 new companies to export as a matter of course in their daily business.
It is not unusual that we would be faced with a free trade deal between Canada and Israel at this time.
Some people have asked why we would now get into free trade with Israel. Our two-way trade with Israel is only about $500 million, while we do $1 billion in two-way trade with the U.S.
The structure of the economy in Israel, as well as the fact that our American neighbours and members of the European Union have entered into free trade arrangements with Israel, have created an unlevel playing field for Canadian companies wanting to export to or import from the state of Israel.
I should now like to speak on some of the political issues.
This free trade deal was initially negotiated at a time when there was great hope that the peace process which had been started would be concluded successfully. It is still the wish of most reasonable Canadians, Israelis and Palestinians -- indeed, all people who care for peace and prosperity in the world and for the people in the Middle East -- that this process will get back on track.
By the time we had concluded most of the negotiations, there had been a democratic change in government in the state of Israel. As democrats -- even though sometimes we do not like the results of democracy -- we must accept that democracy is the way to go. The peace process has slowed. That is not news to anyone here.
The question then becomes whether Canada should make a larger political statement by deciding not to honour the commitment and agreement, which was negotiated in good faith between Canada and the state of Israel, and hoist this bill to try to lever the Israeli government and Prime Minister Netanyahu to put the peace process back on track. This is something with the government did not take lightly. There was considerable debate about whether certain actions of the Government of Canada would produce certain results with respect to the peace process.
It was always understood that the benefits of a deal between Canada and Israel must also accrue to goods produced in the Palestinian territories of the West Bank and Gaza. That was a very strong statement about our commitment to the conclusion of the process and the final determination of the status of the Palestinian territories.
Our government has continued to make strong statements with respect to the peace process. We have indicated clearly that we believe that the only hope for prosperity in the region, for Palestinians and for Israelis, is a just and lasting peace. We have never once backed away from those positions.
We have always made it clear that we believe that the expansion of settlements in the occupied territories is contrary to international law. We have never modified our position on that. We have never supported statements by members of the Israeli government in favour of increased settlements. We do not think that that is helpful to the peace process.
A free trade deal with the Israeli government would be concluded for the main purpose of ensuring that Canadian producers of goods can operate on a level playing field. It would not be concluded as a reward or a punishment for anyone.
We are not blind to the political reality in the Middle East. We have worked very hard to ensure that the economic benefits of free trade apply not only to the Israeli people but also to people in the West Bank and Gaza.
When I took on this file two months ago, I asked many questions of our officials, many of the same questions that senators have asked of them over the last few days. I wanted to ensure that this deal did not advantage or disadvantage any particular player in the very complex situation in the Middle East. That question was raised in debate in the House of Commons as well as in its Foreign Affairs and International Trade Committee.
Indeed, I was concerned until about a week ago that the Palestinians did not want this trade deal, that perhaps the Palestinians and the Palestinian Authority would seek to get Canadian lawmakers to postpone it because they did not think it would hasten the peace process.
Last week, I went to the West Bank and Gaza. I spent nearly three days there. I met with Mr. Masri, the Minister of Economy and Trade, and Dr. Nabeel Shath, the Minister of Planning and International Cooperation. I asked them whether they saw any benefits in the Canada-Israel trade deal and its potential application to the territories.
I also met with senior business people and senior economic advisors to Yasser Arafat. To an individual, the two ministers and the seven or eight business people with whom we met indicated that they believed there would be a benefit to Palestinian businesses and they wished to have the free trade deal extended to the West Bank and Gaza.
I asked Mr. Masri specifically whether the Palestinian Authority is opposed to the Canada-Israel free trade deal. He answered unequivocally that they are not. He said that if a free trade deal between Canada and Israel benefits the people of both those countries, they would not stand in the way.
I also asked how a Canada-Israel free trade deal would apply to the occupied territories, the West Bank and Gaza. After we had spoken for about 40 minutes, it became clear that there were some technical issues to be dealt with. What would the regulation look like that would extend these benefits into the West Bank and Gaza? How would it be worded? Would there be a declaration in the House of Commons?
Mr. Masri had written to the Canadian government on approximately October 20 seeking some changes. After two hours of preliminary discussion on that matter, I indicated that three or four of the changes in wording which they sought did not seem difficult to me, but that I would have to consult with our legal people in Canada as well the minister before proceeding.
I specifically asked Dr. Nabeel Shath if it was his desire to hold off on the application of the benefits of the free trade deal in the West Bank and Gaza pending the disposition of some of Mr. Masri's requests, and he said no. He sought three things. The first was clarification of how the regulation would be worded and enforced. The second was clarification of some of the language in the letter sent by the ambassador. The third was, if they did agree to have the deal extended, public acknowledgment of that.
This is not to downplay some of the significant issues they raised.
Mr. Masri asked if we would enter into a dialogue on a framework and protocol for economic cooperation between the West Bank and Gaza and the Canadian government. I indicated that we had no difficulty with that. We both recognized that we are not dealing state to state, because the final status of the West Bank and Gaza has not been determined. There was no argument on that.
I am currently waiting for some information from Mr. Masri with respect to input for a document which would compel the Palestinian Authority and the Canadian government to work with businesses on both sides to increase economic opportunity for Palestinian businesses by penetrating Canadian markets for Palestinian-produced goods.
At 1:30 today, I again spoke to Dr. Shath and indicated to him the results of my preliminary discussions with senior officials in the department. We agreed to have an exchange of correspondence over the next few days to ensure that we are very clear on the issues.
At the end of the day, senators, I settled the concerns that I had initially with respect to whether this deal should be held up, whether this deal advantaged a particular position of a government in power, or whether this deal had the potential for economic growth in the Palestinian territories. After three days of meetings last week, I can say unequivocally that in the eyes of the Palestinian business people and the Palestinian Authority, a free trade deal can have positive benefits, although there are some details yet to be worked out.
When in Ramallah, I meet with a number of business people to talk about business opportunities. One of the business people there was a Palestinian Canadian who has been in the area for about five months. I asked what would happen if the provisions which would extend the agreement to the Palestinian lands in the West Bank and Gaza were deferred. They were somewhat shocked by the question. They said they had some potential investments to make in the West Bank on January 1. When asked what would happen if that regulation were not enacted for 15 or 30 days, they indicated that some of the investments may be in jeopardy.
I passed that on to both of the Palestinian ministers in order that they would understand there was potential investment.
In the final analysis, I must deal with the political reality that there is a difference of opinion.
During third reading debate in the House of Commons, I listened very attentively to the opposition, and they raised legitimate concerns about whether this deal would confer any real benefits on the Palestinian people. As parliamentarians, we sometimes think we need to be a voice for people who otherwise would not have a voice. However, I believe that the Palestinian people have a very strong voice. Whether it was heard as clearly as it should have been is another matter.
Honourable senators, I have met with the Palestinian Authority and they have never asked that we hold up the passage of this bill past its scheduled Royal Proclamation date of January 1. They have not asked to be excluded. They have asked to enter into some discussion, to which I have agreed. We will be pursuing that over the next five to ten days.
Senator Bolduc: Do you actually have negotiations in process with one of the 22 Arab countries that could result in a free trade deal between Canada and that country?
Mr. MacDonald: We are not currently in any formal negotiations. During my visit to the Middle East and the Gulf states last week, I was in Muscat, Oman, Abu Dhabi, Dubai, Amman, Jordan, Ramallah, Gaza City, Hebron, Kuwait, and Tel Aviv. In every case, we were looking for ways in which we can work government to government, in all of the Middle East but particularly in the Arab world, to increase investment and two-way trade.
A number of things were suggested by senior government ministers in each of those places. I hope to pursue some of the ideas put forward. With Jordan in particular, we have agreed to put together a program to identify major investment opportunities there. The Jordanian government will be identifying senior business people who are capable of undertaking some of those major projects. By the end of March, we will be setting up an exchange to match them with Canadian companies which have the expertise and financial ability to carry out these joint ventures.
That is the type of thing I initiated over the last several weeks. It is follow-up work to what our embassies and the department have been doing over a number of years.
Senator Bolduc: This afternoon a representative of a Canadian telecommunication company told us that a free trade deal would be beneficial to them. I suspect it would also be beneficial to them to have an agreement with one of the Arab countries in order that they can compete successfully with the European Union.
Mr. MacDonald: I agree entirely. The opportunities in that region are huge. Unfortunately, we have missed many of them because Canadian business people have heard many negative stories about that region. They hear of terrorism, war and threat of war, and they do not see the economic potential.
The Canadian government is assisting Jordan and Saudi Arabia to join the WTO. I had lunch today with the Egyptian ambassador, and we talked about things we could do, nation-to-nation, to better prepare ourselves for an era of free trade.
When I was in the United Arab Emirates last week, we tabled a document with the government to get rid of the requirement for visas in order that there would be a more seamless exchange of business people between the UAE and Canada. In Oman, we talked about double taxation agreements which may be important there, as well as FIPA agreements.
There has recently been increased activity between officials of our government and those of many of the Arab states to put in place a better framework for joint economic cooperation, investment, and creation of jobs in all of our countries.
Senator Lynch-Staunton: The extension of the free trade agreement to the beneficiary of CIFTA is dependent on Israel's cooperation. Are the Palestinians satisfied they will get that cooperation?
Mr. MacDonald: The Palestinians are very concerned about their access to the Israeli market as well as the West Bank and the Gaza markets. I will not pretend that what I heard was rosy. There are some grave concerns with respect to non-tariff barriers to trade. When closure takes place for security reasons, it is very difficult to get any product in or out.
I also heard many times that Israeli customs officials will frustrate trade. I heard that from the Jordanians and from business people in Gaza and the West Bank. It was disturbing to hear.
However, one of the positive things about the CIFTA deal being expanded to the West Bank and Gaza is that it gives the Palestinians added ammunition in their fight against Israeli officials who may be using non-tariff barriers to trade. We have established a trade commission of ministers. If access to the West Bank or the Gaza market is being frustrated, the commission will go to the Israeli officials and indicate that their actions are contrary to the terms and conditions of the trade deal.
I raised this issue with Mr. Masri, and he was not entirely positive about it. I indicated that this is another tool which could be used. He asked who would initiate it. I said that if a Canadian company were trying to ship goods into Gaza under this deal and the goods were being held up at the border, the Canadian company could complain to the Canadian government about a non-tariff impediment to trade obstructing their ability to access that market, and that the Canadian government would do what we did under the NAFTA and the FTA and use every level of the dispute-settling mechanism, the first being the trade commission to launch a dialogue with the Israeli government in order to have this stopped.
Senator Lynch-Staunton: Is there a recognition in the agreement of Canada's indication that it would extend this agreement to the occupied territories? I know there is correspondence in our briefing book, letters from the ambassador and from the minister to the Israel authorities, and a very satisfactory answer, but is this an obligation on the part of Israel or is it something less binding?
Mr. MacDonald: In the negotiations that led up to the agreement, it was clear that it was the intention of the Canadian government, agreed to by the Israeli government, that this deal would apply to the area where Israeli customs laws are applied.
There is also an interim agreement between the Palestinians and the Israelis under the Oslo accords to have the Israeli custom law apply in that territory. It is an interim deal while the peace process goes forward. There is an inherent recognition in the deal that it will apply where Israeli customs law applies, that is, in the West Bank and Gaza.
In recognition of the unique status of the Palestinian authority with respect to the occupied territories, we have sent a letter asking them to work with us on certain details so that we can enact a regulation which would specifically apply the deal to the West Bank and Gaza. Those are the negotiations on which I sought clarification when I was there last week and in my meetings today.
I am somewhat hopeful. It is amazing what can happen in an eye-to-eye meeting with people about whom you otherwise only hear on the news or with whom you merely exchange correspondence.
We fully understand that the Palestinians want to make some political statements here. We will work with them to have the benefits apply equally to goods produced in the West Bank and Gaza so that they can get on with fixing their economy as this peace process is concluded.
Senator Lynch-Staunton: You answered one question with regard to the attitude of the Palestinian authority. From your meetings with the two ministers, it is clear they are supportive and do not want to delay. Are you aware of any of the 22 Arab nations which object to Canada entering into this agreement with Israel?
Mr. MacDonald: I am not aware that the government of any of the 22 nations have given us a formal indication that they oppose this measure.
Last week, I was in seven of those nations. I never missed an opportunity to talk about the Middle East peace process and to get feedback from the leaders of those nations about the process. I asked them what they thought the role of Canada could be. They thought there could be increased economic cooperation between Canada and the West Bank and Gaza. To a country, they said that although the peace process has slowed, it will conclude in a fair and just manner because peace is the only option in the region for the Israelis and the Palestinians. As well, they said that the only way to find lasting peace is to have economic growth and stability in the West Bank and Gaza. That is not lost on the Arab world. A peace which is not accompanied by commensurate growth in the Palestinian economy will not be a lasting peace.
Senator Lynch-Staunton: The main argument we have heard against this agreement is in terms of its timing. There is disagreement with some of its content, but that is secondary to timing.
We have been told by knowledgeable people who know the area well that this agreement could have repercussions, that Canada could be considered a blind ally of the United States, which is considered a blind ally of Israel. You have heard these arguments. I have heard them as well, although not as often, and I have been impressed by them.
The people who appeared here yesterday and today expressed feelings with which I sympathize. Are those feelings reflected through official contacts between Canada and the Arab countries of the Middle East, via your visits, diplomatic notes or exchanges of our ambassadors or representatives?
I was surprised and pleased to hear that the Palestinian Authority is supportive of the deal. I understand that the Arab countries are not objecting to it, at least from what you know and from what your officials here can confirm. Is that correct?
Mr. MacDonald: This is a deal between Canada and Israel. Both of the ministers with whom I met indicated that it is not their wish to hold up this deal. They do not think they have a right to do that. They have asked for greater clarity on how this deal could potentially apply to the West Bank and Gaza. They also want the economic benefits of free trade with Canada under the same terms and conditions as the free trade deal with Israel. With the final status of the West Bank and Gaza still unresolved, however, it may not be the cleanest way to have these benefits apply.
That is not lost on the Palestinians. We had a very productive conversation. Most of our conversation was on whether we could enter into some discussions on a protocol on greater economic cooperation between the Palestinian territories and Canada. I agreed that we would do that. We are waiting for some suggestions to come back from the minister.
I have heard no one anywhere in the region condemn the deal. The only place I have heard people condemning the deal is in Canada. Many of the people who have condemned it in Canada do so because they legitimately believe that the deal rewards the slow down of the peace process and that it will not give the benefits that we are hoping to the West Bank and Gaza.
I will not criticize those people for having those thoughts. Early on, I had those same thoughts. However, when you visit the area, you see the situation in a vastly different light. You need only spend a day at a refugee camp in Gaza City to see the huge disparity in income and living conditions between Palestinians in those camps and people living only 12 miles up the road in Israel. A massive economic rebuild must take place after the successful conclusion of the peace talks. There is a huge need for economic investment and development so that the Palestinian people can live not only in peace but in some measure of prosperity. This deal will not do it, but it is a step in the right direction.
We must not get ourselves tied up in the larger and very emotional debate in the Middle East between Israel and Palestine. There is no question that this issue has political overtones. I visited the West Bank and Gaza to find out how real the concerns are.
To answer your question, senator, at the end of the day, these issues are no less complex. Neither of the ministers asked us to hoist this bill, although I asked them specifically whether that was their wish. I came back with clarity of mind on how the issues must be resolved. I think we have started a process toward such a resolution.
The Chairman: You say that is not what they are asking. Tell us specifically what they are asking.
Mr. MacDonald: Rather than come under an umbrella in which free trade with the territories is a direct consequence of the deal negotiated, they would like an exchange of letters, some clarity and, for obvious reasons, certain references omitted from the letter that we sent to them. As well, they would like to get our commitment to pursue dialogue on an economic protocol for greater exchange and understanding of each others' economies.
Their request is not great. We will be responding sometime tomorrow and we hope to have their response by early next week.
Most of the issues raised which need to be addressed dealt with language.
Senator Lynch-Staunton: Can this fine tuning be done directly? Do we need Israel's approval?
Mr. MacDonald: Absolutely not. It has nothing to do with the deal.
Senator Lynch-Staunton: They can be an impediment to its implementation. You say they can stop a truck.
Mr. MacDonald: Yes, they can, but we have an agreement, and it is part of the agreement between Canada and Israel.
Senator Lynch-Staunton: I am not arguing with you. I am on your side as far as this goes. However, if you do not have Israel's agreement, there will be a dispute.
Mr. MacDonald: We will not be seeking Israel's agreement on it. These are bilateral discussions which are being held between the Canadian government and the Palestinian authority.
Senator Lynch-Staunton: Do you know if Israel is negotiating other free trade agreements at this time?
Mr. MacDonald: My officials tell me that they are negotiating with Poland. They have just concluded an agreement with the Czech Republic, Slovakia and, in March of 1996, they concluded one with Turkey.
Senator Lynch-Staunton: Thank you very much. As far as I am concerned, you are welcome at any time to come back here to extol free trade. You have made my day.
Senator Bolduc: Usually in a trade agreement there is a clause which states that with six months' notice we can disrupt it if the other player does not play the game properly. Is there such a clause in this agreement?
Mr. MacDonald: Yes, there is.
Senator Bolduc: For example, if they do not behave as they should with the Palestinians, we can drop the agreement.
Mr. MacDonald: Yes.
Senator Bolduc: I would like to see that clause.
The Chairman: I am told we should look at article 11.4 relating to duration and termination.
Mr. MacDonald: It states that the duration of the agreement shall remain in force unless terminated by either party with six months' notice to the other party.
Senator De Bané: Mr. Parliamentary Secretary, I wish to commend you for your sensitivity about the plight of the Palestinians and the candour and honesty in your analysis of the circumstances and the hopes of Canada during the negotiations of that agreement and also with the consequences of the election of the new government in Israel.
When do you think you can conclude this agreement with the Palestinian Authority? Obviously you think you can move the officials of External Affairs. You seem to have much more weight with them than Mr. Spector, who complained that he could not move them. In view of the way you mesmerized those officials, when do you think you will conclude those agreements with the Palestinian Authority?
Mr. MacDonald: We will not be enacting a regulation which specifically extends to the West Bank and Gaza until we have the agreement and until the Palestinian Authority tells us that they are in agreement. That is the letter the ambassador sent and which we are now adjusting subsequent to our conversations. I do not foresee that being a major difficulty. We talked today. It will depend upon the timetable of Mr. Shath. However, we had no difficulty getting him on the phone today. We discussed it at some length, and that tells me he is anxious to get this concluded.
To give you some background, senator, he is the gentleman who just concluded the agreement with the European Union. He negotiated it. He sees very clearly that there are benefits to having these types of normalized trade deals with the Palestinian Authority because once peace comes, their major problem will be with the economy.
Senator De Bané: My question was about the time frame.
Mr. MacDonald: I am hopeful that we can get this done. Our officials will be working late tonight and tomorrow to get this letter. I told him I would fax it to him at his home tomorrow. He has my home number, and we will talk over the weekend to see whether we have some agreement. I hope that will proceed quickly.
The second agreement we made was with Mr. Masri. We agreed to look at how we put together a protocol on greater economic cooperation. I would think that is something longer term, but their signing the deal is not contingent upon that. That was a secondary but positive thing for us to be doing with the Palestinians and for Canadian and Palestinian businesses. I am hopeful, senator.
Senator De Bané: With respect to the agreement and assertions about an unlevel playing field, what do you say about exports to Canada originating in the Jewish settlements of the occupied territories? As you know, the government of Israel has very generous subsidies and public assistance for businesses locating in those territories. The settlement in those territories has increased substantially in the last few years.
Look at it from a Canadian point of view. Where is the level playing field if Canadian companies must face competitors who are heavily subsidized?
Mr. MacDonald: I spent a day in Hebron with the mayor of that city and one of his assistants. I went down to Abraham's Tomb and saw the area where the settlers were located in the downtown core. I understand fully the consequence of not having that situation resolved for all concerned, and in particular for the economy of Hebron which has suffered a great deal over the last number of years.
The settlements themselves -- and I have not been to them all -- are not very large. They do not seem to be places with a lot of industry.
Senator De Bané: The minister has just announced an increase of 100,000.
Mr. MacDonald: I realize that, but let me answer your first question.
The settlements I visited did not seem to produce a lot of goods. They seemed to be mostly residential. I read in the newspaper there some statements by senior officials of the Israeli government that the settlements would be increased. I am not about to conclude that that will actually happen. I do not know that that will happen. I do not know that that is not positioning by certain members of the Israeli government. I do know that the Israeli people want less rhetoric, and they want the peace process to go on.
I know where you are coming from on this. The deal does not specifically exclude anyone's product. It is a territorial deal. It refers to goods that are produced in this area.
Senator De Bané: That area is defined as the one where Israelis have control.
Mr. MacDonald: Customs laws apply. They certainly apply in the West Bank and Gaza. You are correct that there are settlements which are deemed to be illegal under international law and which currently reside in the West Bank and Gaza.
I asked one of our legal officials. Even if we could say that this deal applies but does not apply to settlements which are contrary to international law, it is something you could never enforce. When you have a free trade area, everything becomes seamless after a while. It enters into the marketplace. Who is to say what was produced where?
I understand what you are saying but, for practical purposes, there are many more Palestinians in those areas than settlers, and many more Palestinians are involved in basic trade in goods and services and will benefit from this deal more than settlers.
Senator De Bané: The major point about which I disagree with you -- and I hope I will be proved wrong -- is your optimism that peace will eventually be achieved. Personally, I am very pessimistic for the same reason eloquently put forward by Shimon Peres. He said that we understand finally that in order to have peace, we must give back land. He is saying to the Palestinians, "You give me peace and I will give you nothing." For that same reason, I am very pessimistic about peace being achieved.
Mr. MacDonald: The reason I am not pessimistic but rather optimistic is because the Israelis I spoke to -- and not necessarily the people in government -- are desperate for peace.
They want a normalization. They do not want threat of conflict. They want peace, security and economic stability. Since the peace process has slowed down, the Israeli economic growth rate is around 0 or 1 per cent. It dropped a percentage point.
Israelis want peace. When I was in the Palestinian area, I heard nothing from any Palestinian that did not conclude with, "Peace is inevitable because it is the only solution."
The Palestinian Authority or the Israeli government may say something different, but I have great faith in democracy and those elected to serve should listen carefully to what is being said by both the Palestinian and Israeli public. It is peace they want and peace they must have.
Senator De Bané: Let us hope that your wish will become a reality.
Senator Prud'homme: Was this your first trip to the Middle East?
Mr. MacDonald: It was my first time in any Arabic country.
Senator Prud'homme: You have seen how difficult Middle East business is.
No Arab country will tell Canada what is good for us. No country of the 22 will say, "Do not sign a treaty with Israel." That is not the Arab way.
I am glad that you went to Gaza and the West Bank. That you have seen the situation there gives us some assurance that there will be monitoring of this accord.
The Palestinians will not tell us that we should not sign this agreement. They will try to get anything they can get. That is the problem. However, Mr. MacDonald, they have pride; they do not like to beg. Palestine is not an appendage.
I am sure that Palestine would like to have their own agreement, but they would prefer that it come into effect on January 2 rather than January 1, to show their independence.
There is hope if people understand the pride of Palestinians. I am sure that in every country you visit they will tell you that peace in the Middle East will start will a solution to the Palestinian question.
I share the pessimism of Senator De Bané, especially with the new government. Mr. Chrétien instituted the discussions with Mr. Rabin. That was an encouraging sign.
You said that trade has declined in the last six years. That is exactly the argument of many of the witnesses we heard. If we do not do something to assist them, it could be interpreted as indifference on the part of Canada.
I am very pleased that you visited the Middle East. I hope that your mission will be fulfilled in the next few days. I would like to have your assurance that there will be monitoring.
Mr. MacDonald: I believe that as a government we must find ways to better expose Canadian business people to the opportunities in the Arab world. There are massive opportunities. At the same time, we must work with governments and, more important, the private sector in the Arab world to ensure that they fully understand the economic opportunities in Canada.
How can Canada, a small country of 30 million people, have more influence on politics in the Middle East, or any other part of the world? One way is by using the goodwill we have engendered around the globe to almost inextricably link Canada and the values carried by most of our businesses with businesses in those areas.
For example, Yemen needs a massive amount of economic development if they are to ensure they do not return to the spiral of civil war within civil war. They need investment and open trade. The government in Yemen has made incredible progress in only a few years, despite a civil war in 1994.
These countries need to reform their economies in order that they can trade and attract investment.
Our job is not always to second-guess the politics of a region but to do what we do best. Because we are culturally sensitive, we are easier to do business with than most of our American friends. We are world-competitive in many sectors. The best thing the Government of Canada can do is to expose Canadian companies to opportunities in the Arab world and Arab companies to opportunities here. We need to get on with the business of getting on with business.
The people sitting in refugee camps in the Gaza could not care less about what we are doing at this table. They care about a regime that will allow them to succeed; a regime that will treat them with respect and allow them to grow in an economy where they will have a future. When you go to a place like Gaza and you see old women in the streets selling rags, you know that the solution cannot only be only political but must also be economic.
If Canada is serious about trying to assist in that region, we must work as hard as we can to make deals like the Canada-Israel trade deal to apply to areas like Gaza and the West Bank. We have gone a long way toward that with this bill.
The Chairman: Thank you for appearing here tonight, Mr. MacDonald.
The committee adjourned.