Proceedings of the Standing Senate Committee on
Foreign Affairs
Issue 21 - Evidence - Morning sitting
VANCOUVER, Friday, February 7, 1997
The Standing Senate Committee on Foreign Affairs met this day at 9:07 a.m. to examine and report on the growing importance of the Asia Pacific region for Canada, with emphasis on the upcoming Asia Pacific Economic Cooperation (APEC) conference to be held in Vancouver in the fall of 1997, Canada's year of the Asia Pacific.
Senator John B. Stewart (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, we have a panel this morning on Canada-China relations, the emphasis of course on China. I cannot say that I know all the witnesses. From looking at the list and the curriculum vitae, I conclude that the group is diverse.
The members of the panel are four in number. Dr. Paul Lin is Professor of Chinese History at the University of British Columbia. Professor Pitman Potter is from the Faculty of Law at the University of British Columbia. Professor Potter is with the Centre for Asian Legal Studies there. From the Canadian Broadcasting Corporation we will hear from Mr. Patrick Brown. I will ask Mr. Brown to say a word or two about his own credentials, because we asked him to participate at the very last minute. From the Senate of Canada we have an authority on China, from the China-Canada Business Council, Senator Jack Austin.
I will turn first to Mr. Brown in order that he can say a word or two about his Chinese experience.
Mr. Patrick Brown, Reporter, Canadian Broadcasting Corporation: Mr. Chairman, I was assigned to our London bureau from 1980 to 1990. The first job I did there was to go to Gdansk to cover a shipyard strike. Based in London, I covered Eastern Europe and the Middle East for 10 years. I moved to China in 1990. I was the Beijing correspondent for CBC and Radio-Canada, French and English Radio-Canada for six years until the end of 1996. I am currently in Vancouver and I will be moving to Hong Kong for a short period from about April until August of 1997 to cover the hand-over.
Senator Austin: Mr. Chairman, our consensus was to start with Dr. Lin. Dr. Lin is indeed an eminent historian and a man with enormous practical experience in China. I do not know whether the biography states this, but he is a Canadian-born person of Chinese descent who left Canada in 1950 to work in China in the liberation period and stayed there until 1966. He has a deep understanding of what makes China tick. Dr. Lin was also one of the founders of the Canada-China Business Council in 1978, and has had a long association with the development of commercial relations between Canada and China.
Dr. Paul Lin, Professor of Chinese History, University of British Columbia: Mr. Chairman, may I thank you very much for this opportunity to make some comments on China-Canada relations before this very distinguished group of senators.
This being the new year, the Year of the Ox, I should like to take this opportunity to wish everyone a happy new year, a very prosperous one and a very bullish one.
There is no question that the coming year in China will be another bullish year. The leadership is talking in terms of keeping the rate of growth at about 8 per cent. All the fundamentals seem to be healthy. The debt-service ratio is still quite healthy. The rate of savings is still in the 30 per cent range as against approximately 6 per cent or 7 per cent in the United States. Everything points towards another continuous growth period.
In the longer term, we see what is happening in China with regard to very constant assurances that the policy of reform and opening will continue. The most important concern about it, however, is that there be stability in order for it to continue. That was very much emphasized in the conference at the end of 1995 during which Mr. Jiang Zemin brought forth 12 items which he considered to be absolutely necessary if China were to continue on this path.
Before I talk about those 12 issues, however, I should like to address a little the concern at this point in China's relations with the western world. There seems to be a dichotomy of views with which to look at China from the western point of view. On the one hand there is a great eagerness for increasing trade and investment and other economic relations with this booming economy, which the World Bank states may possibly be the largest economy in the world by 2010. That is one aspect. The other aspect is a constant, and indeed escalating, news coverage which denigrates China as an almost completely anti-modern country that has continued, and indeed is intensifying, its violations of human rights, its suppression of the democratic movement, and the commission of many violations of the rules of international importers, particularly in terms intellectual rights.
There seems to be both praise and denunciation all at once. Those who deal in trade and commerce have a constant feeling that they are being attacked for being unconcerned about rights, and human rights specifically; therefore, a sense of guilt arises as to whether even dealing at all with China is a healthy thing to do. The answer to that is not easy, because I do not see, personally, the necessity to relinquish one as against the other. What is lacking here is historical perspective, because the rise and the creation and the perfecting of democratic systems historically has been a long and very complex process. It took the West several centuries to perfect a democratic system, and some of us, perhaps, if I may be allowed to say this before senators, may say that it is still not perfect. In fact, many violations of human rights have continued to the present day in the West.
For instance, I was reading some of the comments on the civil rights movement in the 1960s in the United States, when armed and booted troopers beat, and in some cases lynched, those who were fighting for civil rights; and those who were the victims of that repression numbered not in the hundreds and thousands but in the millions.
So there is a great deal of arrogance, and it is perhaps self-serving to put this issue on the top of the agenda with regard to China. This is not a situation which requires us to dichotomize the two issues, trade and human rights. I am attempting to advocate here that we do not know in history of any situation in which democracy has been achieved before the development of the economic and social institutions and the culture for democratic change, and China is very far behind in that respect.
Having gone through a history of 2,000 years of autocratic, authoritarian, political systems, China, despite that, had one of the most important humanistic philosophies in the world: the Confucian and Mencian and all the other classic systems of thought in China certainly surpassed those of western Europe.
To the Confucian, the most pre-eminent, most important basis of the state is the people; secondarily, it is the emperor. This concept could still withstand the imperial regime's opposition, because it was a culture that was deeply rooted in the classical literature of China. This attitude of democracy is known as ming ben zhuyi, meaning the people are the base, the people are the core of society. It was not democracy, but was humanistic; that is to say the emperor had to abide by the tao, the laws of Heaven, and he had his mandate, which was a limited mandate. He could not deal in ways that would oppose that mandate. To me, that is a concern that is very important up to the present.
The san gang wu chang are the three relationships and the five virtues; the five virtues are virtues that all of us can accept, and they involve integrity, loyalty, wisdom, judgment and compassion, and all the great elements of a compassionate society; but the san gang, the three relationships, were those between emperor and subject, father and son, and husband and wife. These were all unequal relationships, so there was a hierarchy of authority that made the system one that only relied upon the benevolence of the social superior.
The difference with democracy is that the building of democracy was actually the shifting of power to the people to the extent possible. That concept, however, never became part of Chinese tradition and it is only in recent years that it has become prominent in the thinking of the leadership. Deng Xiaoping, at the Eighth Congress of the Communist Party in 1986, expressed new concepts of democracy that at that time seemed to him to be appropriate, the beginning of a new democratic age, but in fact the events that took place after made it impossible for him to carry them out.
The essential point to me, in order to understand what we are up against in China in terms of China's modernizing its values and institutions, is that it is a whole civilization in transition. We are not dealing with a China of today or tomorrow, just watching its economic fundamentals. We are talking about a major transition. This transition is civilizational in scope. This is the first time in China's history that the concept of economic growth has been not only understood but brought into the realm of institutionalization and into the realm of policy in a sense that is far deeper than any previous economic and social transition.
As a matter of fact, the Confucian ethic throughout these thousands of years has been to put economic activity, over and above what is necessary to sustain life, at the bottom of its priorities. Most important of all in the hierarchy of people who serve society have been scholars. At the top level were scholars; second was the peasantry; third were the artisans; and the soldiers were at the bottom, and the businessmen were also very close to the bottom. So there was a situation where there was a difference between yi and li, "yi" meaning integrity and loyalty, and "li" meaning profit, the Confucian position being zhong yi quing li. In other words, emphasis should be on the values of loyalty, service and responsibility, while profit is a lowly approach to life. That certainly was not the type of ethos that would encourage the development of a system of economic growth. In fact, Mao Zedong to a certain extent continued with that tradition.
I was in China in those years in the 1950s; it seemed to me that the emphasis was so great on self denial that anyone who in fact seemed to be anxious to make money was decried as a bourgeois. Those were not the types of values that in any way provided incentives for economic growth.
It was not until 1978 that, for the first time, Deng Xiaoping raised the question of unequal growth, which is the principal dynamic of a capitalist market system. Unequal growth is not necessarily a bad thing, but to expect that economic growth can grow from the spread of egalitarianism is a false concept. This had a tremendous impact because of the negation of everything that had been taught to the students and to the people in general as the central ethos of a communist society.
What happened during the Fourteenth Congress of the Communist Party at the end of 1978 was a totally revolutionary conception. In the communist world, no one had dared to raise these ideas. The idea of openness to the global market, combined with reform at home, which was again the creation of a market, albeit described as a socialist market, was something that threw out and was a rejection of everything that had gone before, not only in the communist society from 1940 on, that first 30 years, but also of everything that preceded it in traditional China. To my mind, that is why the regime now has to go through a process of re-evaluating many traditional systems of thought.
When they came into power in 1949, the Chinese, looking for a system of growth, accepted the Soviet system as the easiest, because they had been rejected by the West and because the Soviet system was a paradigm with many appealing characteristics, such as emphasis on heavy machinery and heavy industry; so it was a paradigm taken from the Soviet model. But that paradigm, in turn, was a counter-paradigm; it was a counter-paradigm to the capitalist system in the West. But shortly thereafter, because the system did not work and also because of the arrogance of the Russians in their relations with Chinese and because of other strategic issues which alienated the two, China under Mao Zedong rejected that paradigm. Since China had rejected both the western capitalist system and the Soviet socialist system, Mao tried to put in an indigenous system. The indigenous system was a great leap forward, and so were the peoples' communes; in effect, this was another counter-paradigm, but it was now a counter-paradigm to a counter-paradigm.
In other words, it rejected now not only the original capitalist system but also the Soviet so-called socialist system, and that was of course very ill defined and very poorly conceived and there were tremendous economic losses in the first place.
The most important aspect of that disaster was the breakdown of the agricultural system, which created famine. I was in China at that time and we barely had meat more than once a month. That not only brought down the economic system, but it also caused a rejection of Mao Zedong's leadership. His legitimacy as a leader of economic growth in China was gone.
The attempts to criticize him and to reverse the situation were not acceptable to him, of course. The famous meeting at Lushan was a turning point, because he found almost everybody, with few exceptions, in the hierarchy of the Communist Party against him. That created a total crisis for him. He had to even make a self-criticism, and I was asked to listen to that self-criticism. I could not understand more than a third of his Hunanese accent, but it was an historic moment.
In order to recoup his losses and to try again to assume the leadership after the criticisms made by Liu Shaoqi, Peng Dehuai and the top leaders of the country, he launched the Cultural Revolution. The only ones that he could rely on for absolute support, strangely enough in this history, were the children, and the ultra-left elements in the party that now were left to control China.
I am afraid I have gone too far, but let me explain why I am giving this short history. First, it is to help you understand the psyche of the Chinese people today and why they behave the way they do, because it is not only a matter of the Communist Party, but it is the people of China. Their psyche is based upon history. It is a psyche of long years of greatness in culture.
Joseph Needham, a great Sinologist, one of the greatest in the world, has written volumes of books on this. He recorded the transfer of Chinese technology, Chinese science to the West, which made or helped make possible the modernization of Europe. Up to the 15th century, China was ahead of the world in naval supremacy. There were the famous seven trips to Southeast Asia by Zheng He with vessels so large that each of them could probably have carried both the Nina, Pinta and Santa Maria on its decks. Whole armadas of 10,000 visited all those countries, in each case not colonizing them but asking only for recognition of the Son of Heaven.
This type of pride and culture in history is deeply ingrained in the hearts of the Chinese people.
Around the 15th and 16th centuries, Europe sped ahead and this was a process of many major revolutionary changes in society. If China had gone through a renaissance, a Protestant Reformation, an intellectual and scientific revolution, the industrial revolution, that would have been quite different. China, with its humanistic traditions, would probably be among the foremost democratic countries in the world. China never went through that and the Confucian system did not allow it to go through those processes.
What happened after that during the first contact with the West in the middle of the 19th century was very unfortunate. Not only was there an invasion by superior British forces, but the invasion, from the Chinese point of view and certainly from a humanitarian point of view, was one of the most ignominious wars in history. The original struggle was caused by China's attempt to keep out contraband opium while the British tried to use the sale of contraband opium in order to buy Chinese silk and tea. That made a deep impression on the Chinese psyche. After that, of course, there were more and more incursions from France, the United States, Belgium -- little Belgium -- Holland, Germany, and finally Japan. All preyed on what they thought to be the dying carcass of ancient China.
That made a deep and lasting impression on the Chinese, and the relationship between China and the West became one of suspicion and fear. That is why the institutions of the West could not be implanted in China during that whole period of more than a century and a half, and it has a large bearing on China's relations with the western world today.
On top of that of course is the fact that the relationship with the West, with Europeans and Americans, during the early part of the 20th century did not encourage any more trust, especially because of what happened at the Versailles Treaty, where the western powers, despite Chinese protests, turned the province of Shantung not back to China but over to the Japanese. Immediately, there was an uproar that spawned the famous May 4th Movement, which tried to make a distinction between democracy and totalitarianism. It was a great intellectual movement that would probably have become a democratic movement, but instead it was divided into a left wing and a right wing, and the left wing became the founders of the Chinese Communist Party.
I wish to state that these are factors that make it difficult not only for the communists but for the people of China to accept this change.
I had prepared a much longer speech, honourable senators, but I decided last night at midnight that I had better dump it, because it just is not possible to cover the ground in one meeting.
Honourable senators, this process of change has been as abrupt as it could possibly be. Nothing before 1979 had prepared the Chinese people for accepting, even in part, the western economic structure, or for accepting, God forbid, from the Marxist point view, the global market as part of the dynamics for change. This means of course that when such a sharply different system is applied to China, many things begin to happen. People's minds have to change. They have to reject all their former values in order to accept this one, including Confucian as well as Marxist values.
Secondly, new interest groups are immediately created, and we see them all over China now, many of them being the nouveau riche. How will those interest groups operate in a China that is democratic? When will we have the kind of middle class that will support a stable and effective democratic system?
These issues are so massive, so complex, that I believe the Chinese will never undertake the process which the West wants it to, which is to put democratic change ahead of economic change. We must be patient. We must look at our own history to see whether the process Europe and America went through -- Europe especially, but America took over the institutions of Europe -- would make possible a peaceful and effective way to enter into the modernization of China's political institutions.
In a sense that makes it possible for us to have the two aspects of relations to China joined together in the whole integrated position, and that would be a good thing for Canada's image. In other words, the moment we build an economic system that provides pluralism and a culture of democratic change, a desire to do that and a struggle for it must be an indigenous struggle. The moment we accept that, I think we have begun the process not only of economic growth but of China's movement to democracy and human rights.
The Chairman: Thank you very much, Dr. Lin; what you have said is so interesting that, if I were to let the senators ask questions now, that would take all of the time. Therefore, I think we should hear the initial statements of the other members of the panel before going to questions.
Professor Potter, would you go next, please.
Professor Pitman B. Potter, Centre for Asian Legal Studies, Faculty of Law, University of British Columbia: Mr. Chairman, I also have cut down substantially the original plan for briefing notes.
I prepared a paper for the Joint Economic Committee of the Congress of the United States on the relationship between legal reform and economic change in China. I had that distributed to members of the committee this morning. Most of the substantive points on legal reform and its links to economic change in China are addressed in that paper, so with your permission I will not restate those.
I should like to focus on a few basic issues that are tied to ways in which China's law reforms have relevance for Canada's relations with China.
I should say as a matter of introduction that I started my interest in China as a Chinese history person in university and then did my graduate work in Chinese politics, so I am really a China person before I am a lawyer, but in any event that combination has given me an interest in the Chinese legal system and how it interacts with economic, social and political forces.
The first point I would make as a matter of preface is that it is important to recognize that business relations with China are not separated from other aspects of the relationship, just as within China business relations are not separate from other aspects of social and economic and political ties. It is most important to recognize that, particularly in the legal context.
I agree with the point made that it is presumptuous of Canadians and others of the European-North American tradition to insist on democracy in China. I completely agree with that. At the same time, however, we need to be cautious that economic growth itself is not a guarantee of the emergence of civil society or democracy, and the example I would give you is from China.
During the Qian Long era of the Qing Dynasty, China experienced economic growth of staggering proportions and it certainly did not lead to the emergence of civil society or democratic institutions. Similarly, 1,000 or so years previously the Sung Dynasty saw dramatic economic growth and dramatic urbanization, and that did not lead to the emergence of civil society or of democratic institutions.
Although it is certainly a reasonable position to take, and I basically agree that we should not be insisting that China adopt democratic principles today, at the same time we need to be cautious about assuming that economic growth will lead to democracy. The reason we should be careful about that assumption is tied directly to the points I should like to make about general approaches to the role of law in China, the implications of those approaches and what Canada can do to prepare itself to deal with those issues.
With respect to legal reform in China, it is critically important to recognize that China subscribes to what I refer to as a public law ideal. Law is a mechanism for managing society. Law is not seen as an instrument for empowering private individuals and interests. In fact, the record of legal reform over the last 15 years can be seen as a record of tension and conflict between tentative and halting approaches to recognize something resembling private rights in property and contract, for example, and an overwhelming political and legal culture that denies the validity of those private rights.
I would suggest as well that this stems from an ideological tradition of Confucianism, which emphasizes the notion of virtue, which itself entrenches ideas about hierarchical and unequal relations between members of society, as Professor Lin noted a moment or so ago. That stands in very dramatic contrast to the natural law tradition of the West, which posits notions of equality in society and thus empowers private law rights.
In China the legal regime is seen as a mechanism for managing society by the state, and indeed the state is seen as responsible for the people, not responsible to the people. That is a very significant distinction and it explains a lot about what happens with legal institutions in China. Chinese traditional influences of Confucianism, hierarchy and virtue combine with Marxist-Leninist rhetoric on law as the instrument of the ruling class to create attitudes about law among the elite which put public obligations over private rights.
We are not making value judgments today; we are just describing the circumstances.
Another feature of the role of law in China is that law is fundamentally instrumentalist; it is an instrument for the enforcement of policy.
A third general approach is one that I and others refer to as formalism. This means that the articulation of policy goals in law are seen as tantamount to achievement of those policy goals.
I have listed a few examples and I will go through them briefly.
With respect to economic law in the People's Republic of China, the very notion that there is a category of law termed "economic law" is emblematic of the public law ideal. Economic law in China is taught as a category of law schools, and in the courts in China there are specific chambers of the courts with specialized jurisdiction for economic law issues. We ask, therefore, what is economic law? Economic law is the law by which the state regulates the economy. We might think of it as administrative law, but nonetheless in the Chinese context it is referred to as economic law.
The public law ideal in the context of economic law emphasizes law as articulating public obligations rather than private rights. If you look at the intellectual property law regime, the enforcement efforts in intellectual property give primary emphasis to public punitive sanctions as the basis for enforcing intellectual property rights and give very little attention, if any, to private compensatory remedies. If you go through each of the intellectual property laws in China, of which there are many, on patent, copyright and trademark, it will be seen that the bulk of these sanctions are public punitive sanctions.
Similarly in the securities market regulations, which have been given quite a bit of attention over the last five years or so, the provisions on information disclosure are primarily aimed at empowering state regulators, and they have very little to do with providing information to private market actors. There is a host of other examples, but the intellectual property regime and the securities market regime are two useful ones to reveal that the focus of regulation in China and the focus of law in China is on public obligations rather than private rights.
Instrumentalism of Chinese economic law is carried out in a way that shows that economic law is a mechanism for managing and enforcing economic policy. The consequences of economic law and economic law behaviour are viewed in terms of public welfare not in terms of private rights. So that, for example, in contract law it is quite common for the violation of a contract to lead to criminal sanctions. There has been a gradual, tentative and halting attempt to bring out a private law doctrine, and the examples I give in the briefing notes are the general principles of civil law which came out in 1986; they are the most recent -- within the last three or four years -- economic contract law revisions. But the institutions themselves remain in a public law mode.
I would suggest that an example of that is the continued use of the economic law category in law schools and in court organizations -- the Economic Law Chambers.
I should suggest as well that, if you look at the case record in the Economic Law Chambers of the people's courts, the vast majority of cases are about bribery and corruption, which tells you how the term "economic law" was conceived.
I have asked numerous Chinese lawyers, economists and policy makers what is meant by the term "socialist market economy," and the diversity of opinions suggests that it is a very flexible term. Legislation supporting the policy of the socialist market economy is taken as evidence of the reality of a market economy. I would simply point you to the papers generated by the Ministry of Foreign Trade and Economic Relations in connection with China's application to accede to the GATT and now the WTO.
Similarly, the revisions to the economic contract law of 1993 emphasize the socialist market economy; essentially, they took out every single reference to "state plan", which had been in the 1991 version of that law, and replaced it with "state policy". That was taken as an indication or as evidence that China was moving to a market economy. If you have a state policy that is state-plan oriented, then merely replacing the word "policy" for "plan" does not change the economic reality. However, the presentation of the economic contract law as evidence of the emergence of a market economy seems to me to suggest evidence of formalism. I could give you many more examples, particularly in the areas of criminal law and procedure, human rights and women's rights, in particular.
What are the implications of this? One major implication is that law as it is in many societies is very much captured by bureaucratic politics; that competing political interests seek to control the process by which law articulates policy norms. That has implications for the continuity and stability of law.
For example, when the 1993 revisions of the Constitution were enacted they were specifically aimed at articulating the ideals of a socialist market economy. For that reason, the debates over the Constitution were quite heated in terms of policy preferences.
Another example is the 1986 bankruptcy law, which was held up in the National People's Congress Standing Committee by the chair of that committee, Peng Zhen, because Peng Zhen and his colleagues opposed the implications of the bankruptcy law for accountability of state enterprises and economic accountability of state enterprises. Therefore, in the law-making process, as in many other societies to be sure, because law is seen primarily as the articulation of an ideal, there is great competition to control the process of articulating that ideal.
A result of that is that bureaucratic organizations in China compete with each other for the power to issue rules, because by issuing a rule a bureaucrat organization then has power to interpret that rule and thus control the articulation of the ideal expressed in that rule. It is quite common in China for different bureaucratic ministries to issue their own rules about the same activity, whether it be economic contracts or intellectual property. There are competing bureaucratic institutions wanting to control that process of articulation of ideals and therefore issuing competing regulations. The dilemma for the foreign business person or foreign lawyer is: "Which regulations do we follow?" And it depends on which ministry you happen to be dealing with, but it does impede the role of bureaucratic regulations and legislation in giving predictability to business relations.
The second issue is in the area of enforcement, where attention is paid to formalistic or pro forma rather than substantive enforcement, where campaigns take priority over institutionalized regulation. I would suggest that the anti-corruption campaigns in China are a perfect example. China has enacted at least a dozen -- that I am aware of -- major national regulations on controlling corruption. I do not think there is any evidence to suggest that these are institutionally enforced at the local level, much less at the national level, and the treatment of former Beijing mayor Chen Xi Tong is a perfect example of the politicization of this through campaigns rather than the institutionalization of the process through organizations and through law.
Secondly, an emphasis, as I suggested previously, on public and punitive rather than private compensatory remedies is a character of the public law ideal. It increases the political cost of enforcing laws and legislation, so that when the central government enacts rules on intellectual property and then tells the provinces to enforce them, the mechanism for enforcement is punishment, but the political leaders of the province have personal, institutional and economic ties with the violators, so it is a very high political cost for them to impose those punishments. The cost, I would suggest, might actually be less if the emphasis on enforcement was compensatory remedies, because it actually is a market sustaining force and it might be easier to put across politically.
Finally, the enforcement is selective based on political and bureaucratic priorities, and that is where I would suggest there is a major intersection of human rights issues and business conditions. Frankly, the committee might be interested to pursue this. If you look at the pattern of behaviour in China with respect to human rights and the pattern of behaviour in China with respect to business conditions, you will see a very close parallel of improvements and declines. The reason for that is that the very norms of political and legal behaviour that relate to abuses of human rights and the ignoring China's own laws on criminal procedure, for example, or its own commitment to international human rights treaties, relate to business relations; you will see a similar pattern of abuses of business relations, with corruption and unpredictable and arbitrary government decision-making and lack of transparency. I would suggest that this is an area where the political and bureaucratic priorities that govern enforcement affect both business and other issues.
In addition, the instrumentalism, the formalism and the public law ideal have a significant impact on a general lack of transparency in government decision-making. As I suggested, those ideals create a political and legal culture in which the government is responsible for, but not responsible to, its constituents. Unfortunately, in government decision-making transparency is not seen as permitting meaningful participation in the rule-making process. If we see the Chinese efforts to comply with WTO transparency requirements over the past few years, it has focused merely on the publication of laws and regulations. There has been very little opportunity for input by interested parties into rule-making. The example I would give is the proposed limits on foreign lawyers hiring domestic lawyers in their law firms. This has been ruminating around the Ministry of Justice for quite a long time and was issued or announced at the end of last year. To no one's real surprise it has now been shelved indefinitely, although there was an effort to float the idea in the actual rule-making process where there is precious little input.
Another example is where the Ministry of Electronics Industry had authority to draft regulations on the copyright protection of computer software. Although there were a number of pro forma meetings with foreign businesses those meetings had the role of announcing to foreign businesses what was going to happen rather than seeking input.
I suggest that the lack of transparency in government decision-making -- in the input to the rules and regulations and in the accountability of government officials -- combined with a general drive toward rent-seeking breeds corruption at the government level. That issue has been recognized by the Chinese government repeatedly over the last 15 years, indeed over the last several hundred years.
Another aspect of transparency is the financial paper and what it represents. As China's economy develops there is an increased emphasis on relying on corporate statements and financial paper to understand the reality of the economic strength and financial conditions of companies in China, and I would suggest that the reporting is still a long way from being transparent.
In addition, there are issues of institutional regularity where we need to have some level of assurance of effective and enforceable dispute resolution mechanisms in particular, and this is one example. In the last few years an arbitration law has been in force in China which empowers local governments to establish local arbitration committees at the provincial level. These committees are part of a broader pattern of institutional competition to capture a market, make dispute resolutions and capture the fees generated by that. The courts are involved as well, and this institutional competition may ultimately lead to an improvement in these institutions. Nonetheless, the fact that the arbitral institutions are essentially part of the same governments that are approving business transactions as part of a larger regulation of the market economy does raise questions about their impartiality and political independence.
A second aspect of the dispute resolution area where we need predictability and transparency in institutions is enforcement of arbitral and judicial decisions, and in particular the recognition and enforcement of international arbitral agreements pursuant to the New York Convention to which China is a party. Suffice it to say that China's record on that is less than consistent. We can go into that in detail. The Revpower case is of particular interest.
This leads to a final implication of the dynamics of public ideal instrumentalism and formalism, and that is China's compliance with international agreements such as bilateral tax treaties, investment treaties, the WTO, and so on. I would suggest that the emphasis on formalism leads to a disjunction between the text and the enforcement of agreements.
With respect to the WTO, it is important to recognize that the circumstances in China may make it difficult, if not impossible, for the central government actually to ensure enforcement of that agreement. The authority and power that the central government has in the regions is simply limited. I would also suggest that the GATT and WTO are based on a European ideal of the nation-state system which, frankly speaking, does not apply to China and has never applied to China and is unlikely to apply to China any time in the near future. So when we look at China's agreement to international treaties, we should really be questioning the issue of whether China is in a position to enforce these things.
These are a number of the implications that stem from these general characteristics of the Chinese legal culture.
What can Canada do? This part of the outline is fairly limited because there is a limited amount of things we can do. First is better understanding. I believe very strongly that engagement and openness are critical to Canada's interests and to Canada's relations with China. It will not help the Chinese, it will not help the Canadians, for us to try to close China or ignore China. China is a force in the world and openness and understanding are essential.
On that issue I would contrast circumstances in Burma with circumstances in China. Burma has largely been closed to the outside world over human rights issues and the situation has not got much better. China is a country that has been open to the outside world certainly since the late 1970s, and the changes in the quality of people's lives and in the extent of openness, to give them credit, are substantial.
Openness is important, but at the same time we need to build the tools in Canada to take advantage of that openness, to understand that society better.
First is resources in language training. There is no substitute for language training in studying China. That is the bottom line. High school training in Chinese, college level training programs in Chinese, programmes for Canadian students to study language in China are essential to providing or to developing a core of individuals who can understand China well and serve Canada's interests.
Second is resources on research in China. Most of what we know about China comes from research that is taking place in a number of major cities in China and a number of selected model counties. We know very little about what goes on in China and that is made more difficult by the fact we are inundated with information. We have information overload and have not developed the tools to work with that information. I would suggest we need to emphasize better understanding through more attention to language training and more attention to research.
At the same time, we have to have a willingness to engage. I would completely agree that we should not engage in abstract moralizing. I do not think we should be insisting that China realize democracy immediately, but at the same time, when China enacts laws which purport to grant procedural rights to people in the context of criminal defence, in the context of human rights, in the context of the rights of women, it is fair to expect China to live up to those ideals.
There should be a willingness to reject double standards. China is an important country. China has a unique culture. At the same time, however, China has agreed to perform certain obligations and abide by certain norms and it is not unreasonable or untoward to expect China to live up to that.
If there is a tendency to try to dichotomize between China the virtuous and China the demonized violator of rights, it is really the Chinese who try to enforce that dichotomy by trying to compel foreign companies and governments not to raise questions and criticisms about China's human rights record. Look what happened recently in the Disney case, where they are making a movie about Tibetan Buddhism and the Chinese government says, "You cannot do that because it is unfriendly to China." It is the Chinese who are trying to force that dichotomy on us.
I would suggest that it is important to recognize the important contributions that China and Chinese culture make to the world; at the same time it is not necessarily helpful to continue to hold to a double standard. We need to combine respect for sovereignty and respect for Chinese culture -- which is what got me interested in China to begin with -- but also expectations about the need for compliance with international standards. This has to do with the enforcement of agreements that China has concluded -- for example, the New York Convention on the recognition and enforcement of foreign arbitral awards and human rights agreements.
In this area we need to help clarify the issues. It is not a question of imposing western norms on China. It is a question of suggesting to China that they have agreed with certain international treaties, so let us see those treaties enforced. They have enacted a law on the rights of women which is intended to implement the convention on elimination of all forms of discrimination against women; so it does not seem unreasonable, in fact it is important, to see institutions built to see those laws and norms effected.
We want to support institutions that have the potential to address issues of enforcement. I would suggest that these issues are not all together foreign and all together alien to both the Chinese elite and the Chinese intellectual classes, which are not completely the same but are somewhat the same.
We saw efforts to build legal institutions in late Imperial China. We have seen efforts to build legal institutions in Republican China of the 1930s. I would say the mixed court in Shanghai had its imperialist problems but revealed the capacity and the interest on the part of Chinese legally trained intellectuals to pursue what looked like formal legal institutional norms.
I do not think this is planting seeds on infertile soil. In fact, there is quite a lot of receptivity to these kinds of issues.
In the area of engaging with China it is important to engage, it is important to avoid abstract moralizing, but nonetheless to expect China to live up to its international and domestic obligations and also to support the institutions that have the potential to address those issues.
I apologize if I have gone on longer than I should have. I have attempted to address a number of questions about general issues in Chinese legal and political culture, about the public law ideal, obligations over private rights, the implications for various aspects of Chinese legal behaviour, both domestically and internationally, and also some of the points that Canada can focus on in order to manage that relationship better.
The Chairman: We will now turn to Mr. Patrick Brown.
Mr. Brown: Mr. Chairman, I am honoured to share a table with Dr. Lin and Professor Potter. Journalists are supposed to know a little about a lot, and today I find myself in somewhat intimidating company sitting with people who know a lot about a lot.
I would like to state a couple of points from my experience of China. To a certain extent the press is held responsible for continually drawing attention to human rights in China. I do not think we would be doing that if it were not an important issue. Certainly, from my point of view the issue is not to say one should or should not do business in China unless it is tied to human rights. They are not, as has been said by several participants, mutually exclusive concerns.
There is a very interesting man in Hong Kong, John Kamm, who has been doing business with China for a quarter of a century, first as a representative of a petrochemical company and then on his own hook. He has been instrumental in drawing the attention of the Chinese government to the desirability of paying attention to some of these issues without in any way compromising his business interests, and he has very interesting things to say about how business can advance the cause of a civil society in China without getting into a confrontational lecturing position which never works with China.
I spent quite a lot of time with Wei Jing Sheng, who is China's leading dissident. He is back in prison facing another 14 years, having already served 14.5 of a 15-year sentence for the crime of having said, when Deng Xiaoping was consolidating his power and was permitting the expression of opinion through the institution known as the Democracy Wall, where people could put up posters and letters and there was this great outpouring of views, that for modernization of things like agriculture, industry, technology all well and good, but if we do not also pay attention to democracy then we are doomed to fail and that Deng Xiaoping -- and he named Deng Xiaoping by name and that was probably the crime for which he is being punished to this day -- is in danger of becoming a dictator. If he were imprisoned, he would rest his case on that. Well, he was. I met him the night he got out and I asked him if he had changed his views; he said indeed no, and repeated them, and that is why he is back in prison today.
What he is not saying is that China should have immediate democracy. He is not saying that China should have a free and fair election tomorrow on the parliamentary model and that there should be MPs for Shanghai and the islands sitting in the Great Hall of the People. That is not his point. His point, as Dr. Lin has so eloquently said, the whole scope of Chinese history and civilization is such as to have brought us to where we are, and if we want to move forward in a way that does not include chaos then there has to be some attention paid to this.
I deem there not to be a huge thirst for democracy in the parliamentary sense in China. I did not see that when I was there on assignment for the first time in 1989 during the early part of the student movement; people were not demanding elections tomorrow. In fact the biggest demonstration in May of 1989 was for the retraction of an editorial that appeared in the People's Daily, which denounced the students as counterrevolutionaries, and the citizens of Beijing in vast numbers, 2 or 3 million, came out in support of the students because they thought it was unfair that the students should be considered counterrevolutionary for calling for an end to corruption and official dishonesty and economic policies which were leading to the falling behind of large sectors of the population while party officials were getting rich.
Those circumstances prevail today. There is a thirst for fairness and justice and that is what Professor Potter was saying was key to that, that it is justice rather than democracy that people want. For a country that has had so little justice over the millennia in its government there is an intense sensitivity to injustice among individuals.
As China opens up and changes, one phenomenon is the hot line. Many institutions set up hot lines which people can phone up. There is a women's organization in Beijing that opened a women's hot line, and I went to see it when it was in operation for the first time. The number is published in the newspapers and confidentially you can call in and discuss your problem with their counsellors. I was sitting listening to these calls coming in, with the callers not knowing that there was a foreign journalist and party officials listening in. They were talking anonymously to another woman. You could have sold me tickets to that for weeks to come, because I very rarely had the opportunity to hear totally unfiltered opinions from Chinese people. Normally, they would not speak unguardedly to me because of the way I look or appear to represent.
It was striking how people would talk openly about their personal problems, problems with society, problems with the bus, problems with the county officials. People feel that justice or the administration of the country is utterly arbitrary and is in the hands of individuals, as opposed to being a system of law. The popularity throughout Chinese society of the television program Justice Pao which can be seen here in Vancouver on Fairchild Television is evidence of that. It is about an impartial incorruptible judge, and he is more popular than Baywatch.
I raise that as an issue to say that it is not parliamentary democracy people are demanding, but that there is a huge thirst for justice in a country where a peasant's income can be around $100 a year and the local policeman is riding around in a car with dark windows that it would take that peasant roughly 2.5 millennia to afford, if he saved his entire income.
Another point is the issue of legitimacy that was brought up. Mao Zedong had a certain legitimacy by having seized power through revolution. There is the idea of the mandate of heaven, the idea of an apostolic succession which comes down to Deng Xiaoping as a long marcher; he has a reason to have been the supreme leader. He has no titles. He is the Honorary President of the Chinese Bridge Association. He is in his 90s. He obviously does not have anything to do with the daily administration of the country. He is, or the last person who claims to have spoken to him with any kind of credibility is, the final arbiter of everything. It is as if nothing could happen in Canada without the supposed approval of John Diefenbaker, were he still alive.
It is an extraordinary set up legitimated by the fact that Deng Xiaoping was in succession to Mao, and one of the most common things heard about Li Peng and Jiang Zemin from the ordinary person in the street is, "Who are these guys?" They have degrees from Chinese universities or Soviet universities. I do not mean those two individuals, I mean the leadership in general, and they have come up through a totally secure and opaque process of the Communist Party, whatever it takes to rise to the top. That is a discourse in itself. But it is totally obscure and they do not have any sort of legitimacy that one can point to.
That is a serious problem. One of the reasons the system is right now so tight is that they have a sense of insecurity personally. I can talk more about that if there are questions.
There was another point that was important to have heard from Dr. Lin on the history. To understand the importance of the return of Hong Kong you have to remember the fact that Britain went to war to defend creating China's opium habit in order to pay for its tea habit. It is really vital to understand the Chinese attitude towards sovereignty when you have anything to say about Hong Kong, or when you have something to say about Taiwan, as a foreigner, you have to remember you are speaking to an absolute conviction of the importance of Chinese sovereignty over every square centimetre of its historical territory. It is deeply felt and there are deeply held emotional issues at stake here to do with the perceived shame of this great civilization being dismantled by "little Belgium" and all those other countries.
One of the few regular windows into the Chinese official attitude was a bi-weekly press conference held by the Chinese government, which went forward in both English and Chinese for a long time, but for the last year is now only in Chinese, to the dismay of some of my colleagues. Mostly it is denunciations of foreign interference and infractions of the five principles of peaceful coexistence, of which the favourite is the non-interference in the affairs of other states. To hear the spokesmen talk you would think that the entire Chinese people spent its entire waking hours in a state of perpetual indignation about what the rest of the world thinks and says and does about China. It is not only rhetoric, it is a completely different mind-set and attitude and has to be taken into account. I do not recommend a course of action one way or another. I only draw attention to it.
I was in North Korea a little while ago. I noted that they have tour buses. The Chinese can do all sorts of things now that they could not do before. They can travel in their own country and they can travel to North Korea. I found it entertaining to hear these Chinese tourists talk about their experiences in North Korea. It was like a time machine. I had never seen anything like it since the 1970s, because North Korea imitated the cult of personality -- and continues to do so -- and China has changed so much that Chinese tourists to North Korea are flabbergasted by what they see and hear there. That is an illustration of how China has changed despite all the problems.
I am here as a journalist. I do not speak for the CBC. I speak as a journalist and I will make one last point. I find it pathetic that Canada has so few journalists resident in Asia, or in the rest of the world, for that matter. I certainly will not go into the financial problems of my own organization. It is the same whether one works, as I do, for the Canadian taxpayer or for Conrad Black. The issue of Canadian journalistic interest in the rest of the world is critical, because I have heard more than one Sinologist say that it is not a question of the mystery of the East, but is a question of the ignorance of the West.
The daily diet of information about things that are happening in this vitally important region is coming from two or three individuals. Good as we are, or good as I may have been, it is not enough. If the film is from American and British sources then it is not the right set of lenses. If you look at countries such as Norway or Sweden, because they do not have these big neighbours reporting in the same languages, they have a much more extensive foreign press corps than we do, and we Canadians have been somewhat lazy in this regard.
Senator Jack Austin, President of Canada-China Business Council: Thank you, Mr. Chairman. I am here in my capacity as president of the Canada-China Business Council. My objective this morning will be to acquaint you with the role of the council and to discuss with you the need for a more collaborative effort between the private sector and the government sector in opening opportunities for Canadian business, in delivering agreements for Canadian business and, in the long term, following through the Canadian commercial relationship with China. If time permits, I have some views on the existing and developing political reality of China, but I will put those aside.
You have heard three remarkable presentations this morning and the committee has received a superb backgrounder in what is China and what is the nature of the place we are trying to develop commercial, political, social, legal relations with over a very long period.
Brand Canada, if I can call it that, stands very high in China. We have a very good reputation with the Chinese, both as friends and as commercial partners. As friends, all of you know that Canada was first in the modern era in exchanging diplomatic relations with China. The Trudeau government entered into an exchange of diplomatic relations on October 13, 1970. That preceded U.S. efforts to establish relations by two or three years, and, in effect, we found the formula which allowed the rapprochement with China and the western community. It was a very simple phrase that said, "We take note of China's position with respect to Taiwan." That issue has not gone away in world affairs. Taiwan is still a major issue in the eyes of the Chinese, as you heard Patrick Brown mention.
The commercial relationship was resumed in 1960 by the Diefenbaker government with respect to the sale of grain to China, and again was a question more of presentation than it was of actual economic circumstances. I want to make that case, because such an excellent background has been given to it here. The Chinese did not want to accept credit on these sales. The Chinese did not want to be debtors to a western country, so language had to be found that created the concept of deferred payment rather than debt, and that concept ultimately allowed the Canadian Wheat Board to establish an historically dominant position in Chinese imports of wheat, which has continued until this day.
Of course, Canadians are aware of Norman Bethune, and Chinese are very much aware of Norman Bethune and his role, and as that role is taught in elementary school in China, the image of the friendly foreigner, the self-sacrificing foreigner, who happens to be a Canadian -- and I think many Chinese are aware of that fact -- has given Canada an excellent image.
It is not as well known in Canada, but Canada has a very famous Canadian known today in China. His name is Dashen, or Big Mountain, otherwise, in Toronto, known as Mark Roswell. He is famous because he has been a TV character in a soap opera in China that has run for many years. He is not a foreigner in that soap opera; he is playing a Chinese role and his Chinese is perfect and the idiom is perfect and I am told that, if you closed your eyes, you would not know that this was not a Chinese. He is a six-foot-four, red-headed, very light-skinned Canadian from Toronto.
The Canada-China Business Council was organized in 1978, at the very beginning of the Deng Xiaoping economic reform period. It was organized by a group of leaders, Paul Desmarais, Maurice Strong, Paul Lin, and one or two others, to begin the development of a commercial relationship with China. The organization today is composed of well over 200 Canadian companies. It is an organization with approximately 20 employees. The head office is in Toronto. We have eight employees there, two in Vancouver, one of whom is Alison Winters on my right, who is the manager of the Vancouver office and is so efficient that she almost covers the work of the Toronto office by herself.
We also have an office in Beijing which we have had since 1983. We have seven employees in Beijing, most of whom are Chinese nationals. The manager is a Canadian. We have two employees in Shanghai. If that does not add up to 20, it comes close to it.
We attempt to provide our members with a comprehensive set of services. I have placed before the committee my presentation, entitled, "Securing Canada's Place in the China Market: The Case for a New Partnership Between Business and Government." I hope you will take it as read.
Our principal function is to provide information on business conditions and market opportunities in China, to deliver logistical support to Canadian businesses in China, and to build a greater awareness in China of Canada's commitment and capabilities. We are an active provider of policy advice to the governments of China and Canada and we create events that give senior decision makers access in both countries.
One of the principal events of the Canada-China Business Council is our annual meeting and policy conference, which we alternate between Canada and China. Perhaps the most famous of those meetings was the Beijing-Team Canada meeting which took place in November 1994. I would like to mention something of that as an illustration of the effectiveness of the council.
When the present government was elected, Prime Minister Chrétien made it clear that he put trade for Canada at the top of his economic priorities, along with deficit reduction, but for himself he would be the Canadian trade Prime Minister. You heard former Premier Harcourt speak the day before yesterday about the initiation by the premiers of the idea that they would accompany the Prime Minister. What actually took place is not different from what Premier Harcourt said, but there is more to add, and that is that Prime Minister Chrétien presented to the premiers the idea of a trade mission. The premiers responded with alacrity. What also took place previous to the suggestion of the Prime Minister was an analysis by the Canada-China Business Council, along with officials in the Trade Department, of a visit by Chancellor Kohl of Germany, who went to China in 1993 with a group of 100 German businessmen. We did an analysis of the impact of that visit on China and came to the conclusion that for Canada that was a formula that we could improve on and which would have great impact.
What has to be understood, and previous speakers have referred to it, is that China is run on a "top down" basis, and always has been run that way. The central government has run a command economy which is in the process of being translated into a mixed economy with, however, a very strong state sector to remain in what the Chinese consider to be strategic economic activities. The Chinese economy is managed from the top down. It is a command economy with five-year plans. It is a very well organized economy, which is now in its ninth five-year plan, which is a 1996-2000 plan. So, when we are talking about a market economy, a socialist economy with Chinese characteristics, do not laugh at the concept of a socialist economy. It remains very much a planned economy, and where the market becomes enterprising in characteristic, it is usually according to the plan to make those sectors an enterprise activity.
So far Canada has been a small player in the China market. While we have a very good reputation, it was only two and a half years ago that the Trade Minister, Wu Yi, came to Canada and told us that China had more capital invested in Canada in one enterprise here in British Columbia, the Castlegar pulp mill, than all Canadians had invested in China, and at that time there was less than $200 million Canadian invested in China.That was about two and a half to three years ago.
Canadians, in typical character, have been in a big hurry to be second. We are very cautious investors. We want to trade but we do not want to leave any capital at risk. So we have, as foreign direct investors then and even today, a very small role in China. Investment is the chemistry that creates trade. It used to be "trade follows the flag". "Trade follows investment" is the motto in the late part of the 20th century, and for Canada to have a serious impact in the Chinese economy, as we heard from Madam Wu Yi, we would have to become more significant investors and we would have to show that we gave the Chinese market a serious political priority on the part of Canada. That brings me back to Team Canada.
The concept of Team Canada was to make a penetrating political statement in Chinese consciousness at the top of the command system. So when the Prime Minister and nine premiers and over 400 Canadian business executives arrived in Beijing, it got the attention of the Chinese. The Canada-China Business Council organized the business presence aspect of the program, which involved the Prime Minister and the premiers at a banquet of 1,700 people in the Great Hall of the People to which Premier Li Peng and Prime Minister Chrétien spoke. These were door openers for the Canadian business community. They served the Chinese by creating a new imprint of legitimacy for the regime, confirmed by Canadian business leaders.
So here we are: we arrive in China; we obviously acknowledge that we want a high-level relationship with the regime in place; the signal goes down through the Chinese commercial system that Canadians are very much on side, that they are government approved, that Canadian businesses can be dealt with safely from a political point of view, and therefore an effort should be made to build the Canadian involvement in China. That was profoundly shown by the Chinese side working very diligently over a period of many months prior to our arrival in November 1994 to conclude agreements and to open new negotiations.
The total value of that program as announced at the time was $8.6 billion of either contracts or of new negotiations being opened. One of the most significant to Canada was the beginning of a negotiation to sell two 700 megawatt nuclear reactors to China. That two-year negotiation was concluded in Shanghai, again at our annual meeting in Shanghai in November of 1996.
The council has a desire to work with the government of Canada and with the provincial governments in expanding these trade opportunities. One of our difficulties is that the Canadian foreign service and trade service is going through its own revamping of its priorities. The downsizing of funds available to the Canadian trade service has created the need for structural reorganization and conceptual reorganization of the role of the Canadian trade service. Therefore, the council believes that it can play a larger role in the systems delivery part of Canadian business activity in China.
We are unusual as a trade council. We do not receive any funds from the government of Canada, but are entirely financed by the business community. I want to pay some attention to a document entitled, "The Canada-China Business Forum", which we publish every two months. It contains a wealth of information on Canada-China commercial relations, and if you take a look at the board of directors, which amounts to 27 Canadian business people, you will see a comprehensive Canadian group of business people, both large corporations and small, active in this council.
I might mention in passing that Senator James Kelleher is a vice-chairman of the council and very active in its work. The council publishes economic data, which you will see here. At the back, you will see some graphs showing Canada and China at a glance. I will not take you through those numbers except to tell you that they give you, at a glance, an excellent picture.
The combined trade between Canada and China is $8 billion Canadian. The objective set by the Canadian government and the Chinese government for combined trade in the year 2000 is $20 billion; so from $8 billion to $20 billion will be quite a reach in the next three years. The council is supported through memberships and through functions. Six large Canadian corporations do a great deal to subsidize the role of small and medium enterprise in trying to do business in Canada. That is done by a contribution of $50,000 a year to the work of the council by the corporations Bombardier, Barrick, NorTel, Bank of Montreal, Power Corporation, and Atomic Energy of Canada. They do not get $50,000 worth of value from the council every year, but they make that contribution in the hope of building a stronger commercial relationship between Canada and China.
Honourable Senators, I draw your attention to a third document, which is an article that I have written for the next issue of the Canada-China Business Forum. It is entitled, "China: Where Will its Leaders Lead?" It is essentially a presentation on political issues and economic issues in China. I simply want to summarize it by saying that you know well that China is emerging as a major player in international trade. The World Bank, in its April 1993 report, said that over 20 years China would average GDP growth of eight per cent and that it is on track or better. That means that the economy of China grows every year by the size of Canada's economy.
China is a country that, in modernizing, needs capital and technology, but China intends to keep control of its economy. It does not intend to create defeasance of its strategic economic interests. China wants help from the world, but China is not for sale. Canadian business has an excellent opportunity in China to grow as part of that market. At the moment, although we are growing, we are not growing as quickly as our economic rivals are growing in that market. If you compare Canada to the United States, Germany, France, Japan, or Australia, Canada is growing less quickly than they are in participating in those markets; therefore, focusing on the reason for that has to be a significant exercise in Canadian trade policy.
I wish to echo Professor Pitman Potter's comments about transparency. The biggest problem Canadian business has is its inability to understand the rules. It is a system which has never been transparent. I thought Professor Potter explained the situation very well. It gives rise to many trade disputes. Canada needs a foreign investment protection agreement with China, which we do not have. These negotiations have gone on for years and still sit nowhere.
The final comment I want to make is that, as professor Huntington has said, China intends to modernize but it does not intend to "westernize". That is a fact that we have to grasp. I agree that we must be engaged with China. President Nixon, in 1973, said that even nations that are most deeply divided on values must continue a dialogue and must work on the things they do agree on and work from there to deal with the things they do not agree on.
We have an example of Canada's policy in a statement by Canada's Secretary of State for Asia Pacific, Raymond Chan, which was referred to in the Vancouver Sun of January 28:
Canada will keep human rights off the agenda when leaders from the 18 nations of the Asia Pacific Economic Cooperation Forum meet in Vancouver in November. Chan said that decision was made because APEC operates by consensus and on human rights it is difficult to come to any consensus.
Human rights and our values is a subject we must keep to the fore, but over time we believe, and the business community believes, that engagement along business lines will bring the two countries and the two systems, the Asian system and western system, closer together.
The Chairman: Our panellists have been most forthcoming, and we will now hear from some questioners.
Senator Carney: Our first problem will be to discipline ourselves to deal with our subject, which is Canada's relations with China, because the participation of the witnesses has been so fascinating and so broadly based that we could easily stray from the subject.
Staying within the confines of our relations with China, which are mainly but not exclusively trade relations and their impact on the people, I want to ask Dr. Lin and Professor Potter whether it is realistic for us to expect China to accept the disciplines that are demanded by the WTO.
As you have pointed out, there is trade liberalization, there is transparency, there is the role of law, and there are trade-based rules. It seems to me that the central barrier to China's membership in the WTO, is either reluctance or inability to commit, carry out, and implement those rules, such as the intellectual property rule. I know that Canada spends a great deal of effort at the bureaucratic and political level in trying to encourage this; are we just fooling ourselves or is this a practical objective?
If we are going to do the things that Senator Austin talks about, in facing the problems that we have been told about with respect to small business trying to do business in China and with respect to the contract law business, are we asking the impossible?
Dr. Lin raised questions in terms of the history of China. Professor Potter dealt with the implementation of rules from the central government down to the provincial level. The WTO only works at the central level; it does not take into account provinces and state regulations. Can China do this?
Dr. Lin: It is a difficult question to give a simple answer to. I think Professor Potter mentioned several times with respect to legal issues that laws often do not seem to be binding from a Chinese point of view. It is a basic issue that China has not crossed the threshold yet on the sacred importance of law, and to a certain extent it is still what the Chinese say, ren zhi and not fa chu, that is to say it is the people whose concerns and interest move things, it is not the law. As he says, there is a great deal of instrumentalism in the attitude towards law.
WTO is a huge organization with tremendous, massive rules, and I think at this stage the Chinese are likely to just look at its usefulness to them in terms of this structure of power. I think some of the rules are easily adapted. For example, opening the market is a lengthy process, but to the extent that this is useful to the Chinese as they grow to see the importance of fair exchange it will happen, and some of the members of the WTO seem to feel that they are already doing enough in that area.
Senator Carney: Communications and telecommunications agreements they have difficulty with.
Dr. Lin: That is more difficult, but Canada can play a role there more than any other because its viewpoint is more acceptable to China. In UBC we have a Chinese legal studies program headed by Professor Potter. When these issues are discussed at that level, very often the people who come from China are actually government people, and then it can be referred back to them without any confrontation and with a feeling that they are being helped by friends to understand the long-term importance of following the rules. But at this point the mass breakthrough has not yet occurred.
Senator Carney: The capacity to carry out the obligations is not there or even the will, perhaps?
Professor Potter: If I could just add one or two points on this, for a trading country like Canada, including an economy as large as China's in the WTO is unquestionably in our interest, but we have to be realistic about the short-term difficulties of complete compliance. However, it is very important not to legitimate deviation from the WTO rules in the context of China's succession.
Within the next 10 years or so China will have one of the largest economies in the world. If you take merely the coastal zones of China, which are the most relevant for trading purposes, they are already developed in the WTO-GATT sense of the word. Although there will be problems, and in our own policy discourse and in our own perspectives we have to be prepared for problems, I do not think that we should anticipate those by allowing there to be double standards about China's succession. I am not in favour of concessions on China's succession.
The larger question is how you build an institutionalized legal culture. I would look at the Chinese military, which I did some writing on when I was younger. The military in Chinese history has always been, as Professor Lin suggested, at the very bottom of the social heap. They did not have status, they did not have prestige. That was true in the Republican period; it was true in the Qing period. Today the Chinese military is one of the most powerful institutions in China and may be the only institution that will keep that country unified if it goes into a period of tumult in the next two decades. How did that happen?
Political interests designated the TPLA as an important institution, and it took several decades but over time that institutional interest generated personal interest in supporting that institution. To this day we take that as a model. So if we take that as a model of institution building, we can see a circumstance where WTO imposes on the Chinese central government an obligation to build GATT-friendly WTO-consistent institutions. Initially, there will undoubtedly be problems; there is no question about that. But over time political and personal interests will begin to coalesce around those institutions and personal interests and political interests will be identified with them. So, if we are interested in bringing China in as a co-operative participant in the international trade regime, as symbolized by the WTO, the key is to get them into the system and encourage the building of institutions that will encourage their compliance, rather than saying we know it will be a problem and let us really give them a lot of exceptions and concessions.
Personally, I think that the terms ought to be without concession; we ought to be patient and understanding in our expectations, and we ought to be taking steps to build institutions that will gradually develop their own personal and political interests that will enable WTO to be more meaningful. However, I have no illusions about the difficulties.
Senator Carney: This is a generic question that may be difficult to answer. In your view, is the world trading system worth the effort? Can the world trading system or the WTO survive without China? That is a question that we will have to ask ourselves, and in view of the American interest in creating conflict with China, it is a question we may have to face. What is the cost of excluding China if it cannot meet our expectations and the obligations imposed by these global institutions?
Professor Potter: The difficulty that medium powers like Canada have is that we do not have the political and economic power to influence decision-making by the Chinese government. The Americans do. We do not. So we are more dependent on the participation of the States in multinational institutions.
I would suggest, from the Canadian perspective, that it is very much in our interest to have China join the WTO. China is already linked directly and indirectly through a whole network of trade agreements that contain most-favoured nations clauses and national treatment clauses -- many of the principles that are enshrined in the WTO; so we already get some benefit out of this network of bilateral treaties, but the point is that with WTO's emphasis on transparency, with its issues on trade-related services, intellectual property, and, most particularly, with its increasingly binding dispute resolution mechanisms, which it did not have before -- even the GATT panels were really not binding in that sense -- it draws the parties into an institutional framework that gives greater accountability and predictability to their activity. Particularly for a medium-sized power like Canada, where we do not really have the political tools and the economic tools to work our will in another way, the way the Americans try to do, having them part of an institution like this is very much in our interest.
Senator Carney: I have a point to make about the Canada-China Business Forum, because it has done excellent work under its present leader. However, I do notice that none of your directors are women.
Senator Austin: We have one from Peat Marwick.
Senator Carney: Women involved in this have told me that they do find the attitude of this to be rather like an old boys' club and I wished to draw that to your attention.
Senator Austin: I appreciate that. We have asked four women in the last year to come on to our board, but they have declined for various reasons. I would be delighted to have suggestions of business women active in Canada-China commercial relations at any level.
I wish to add to something stated by Professor Potter. The understanding that I have of the U.S.-WTO discussions is that essentially it is a matter of the phasing in of privileges which China seeks as a so-called developing country. I hope that the issue is not a dichotomy: China joins-China does not join, because the world would be at a great disadvantage with two different trading systems. China's own market is such that it could disturb the world trading system enormously. I agree with Professor Potter that we have a huge interest in China's joining, but within the rules of the WTO.
Senator Carney: Our Canadian position, as you know, has been that we support China's accession at the point that it can meet its obligations. In terms of what Dr. Lin and Professor Potter have told us, is that an unreal expectation? That is the question.
Dr. Lin: I believe that is also a key issue to which Senator Austin referred. The United States is putting on pressure to represent China as a developed nation. In terms of per capita income, China is very far down the ladder and it does no harm to stage a process whereby they remain for a time longer as a developing nation. I think that is a major obstacle to China's entry.
The Chairman: Senator Bacon.
[Translation]
Senator Bacon: Mr. Brown, you mentioned the West's ignorance of the mysteries of the East. We all share that ignorance to some degree. I'd like to discuss this at the individual level. At the level of the ordinary Chinese person.
We wanted to do business with China. Some people have come before us and mentioned that democracy is being felt in villages, for example. It is a sign that at the individual level, there is a wish not only for justice but also for democracy, at least a little bit, or so it would seem to me, even though you may not feel this great thirst for democracy.
What is the best advice you could give your successor so that we could learn, through the CBC, what are the wishes and dreams of these individuals, because they must dream just as we do?
Mr. Brown: I think professor Walls waxed eloquent about democracy. I won't exaggerate the level of the experimental process of setting up democratic organizations and institutions at the village level because it is mainly experimental. It is also often a matter of legitimizing the orientation of a plan or of another individual who is actually in charge of village affairs. It is not really democratization as professor Thom understands it. I think he was a bit more positive than I would be.
I must repeat that there is a thirst for justice at the most elementary level. Village heads and village party secretaries do not profit from their positions. Ideally, instead of that system as professor Lin said, a system of rules of civil law based on the person should be set up, if you will.
As for advice to my successor, that is hard to say. But it does come back to what a lot of witnesses have said here and it is this: learn Chinese as quickly as possible. Chinese is the key that opens the door to understanding what's going on over there.
I think I support everything that was said on how important it is for our school, our colleagues and our universities to promote language programs especially since in Canada we have a lot of citizens who speak several languages, like the witnesses who have appeared before you.
I do not think we will ever insist enough on that point for our young people. I would offer a lot of support for what has been said by several academics yesterday and today on that matter.
Senator Bacon: Thank you.
[English]
Senator De Bané: Do you agree with some of the comments of Professor Huntington in his book about the clash of civilization in which he stresses that the post-Tiananmen regime is openly anti-American, anti-West, that it stresses not only that the Chinese culture is different from western culture but that it is also superior. It took the United States half a century to double its economy and China is doubling its every 10 years. He sees an inevitable clash; that one of the major thrusts of the Chinese post-Tiananmen regime is a fairly strong, assertive nationalism. Those are some of the comments of Professor Huntington. Do you agree with him or do you think that he is really off the wall?
Dr. Lin: I do not know whether "off the wall" is strong enough. I have the greatest respect for Professor Huntington and many of his really marvellous books on management. However, I do not think he grasps the world trends in making that statement.
The clash of cultures, the clash of civilizations, is a dangerous position because it might actually be a self-fulfilling prophesy. There is enough ethnic, cultural and religious orthodoxy that could make it happen. In my view, we have come to a point in world history where there are possibilities for that, but not necessarily as Kipling would have it, "Oh, East is East, and West is West," which is the ultimate extreme. I think Professor Huntington is even more extreme than Mr. Kipling, who seemed to have a broader view than his. There are, of course, differences. In many ways they are growing. Certainly Islamic culture is one of the areas that we are concerned about because it is violent in its attitude toward other cultures and other civilizations and other religions. In my view, the Chinese academics and intellectuals I have been in touch with over the last few years since professor Huntington first made that statement in an article on foreign affairs -- and he has written a new book on this issue -- feel that what we need is exactly the opposite. The Chinese seem to be very sensitive to what he has brought up and in terms of strategic geopolitical activity they are now moving in the opposite direction.
They are calling for the revival of the Silk Road; in other words they want to institute a new corridor between the East and the West that could serve as a land bridge between China and Europe, from the east coast of China all the way to the west coast of Europe, a Euro-Asian bridge, and they have already begun the links with Central Asian countries, parts of the former Soviet Union, through to the Middle East and through the Balkans to France. The idea behind that is that this will not simply be a land bridge on a ribbon of land, like a transcontinental railway, but will include a ribbon of development which will include both an economic exchange and the exchange of cultures.
It is based on the concept that cultures can be different and sometimes confrontational, but we should now be at a stage in a globalized economy where there are possibilities for a symbiosis of culture -- not a convergence necessarily, but a symbiosis in which two cultures and two civilizations from vastly different bases can find areas in which they can learn from one another and adapt. Ultimately, in my interpretation of this process, which may be too optimistic, we very badly need a symbiosis of values, and these values are the values of development.
It can be a global system. The differences that lie between Chinese ways of carrying out trade and investment issues that were brought up by the WTO can be overcome, because the Chinese very often are more comfortable with consensus. Consensus-building may be the strongest basis for overcoming these tensions that Professor Huntington predicts will make a major confrontation between East and West. In my opinion there is no basis for the belief that there are actually conspiratorial relationships between certain of the civilizations. He names six or seven civilizations that seem to be tilted against the West. I see no evidence of that.
The idea that Islam and Confucianism would be forces for creating this threat is overemphasized. It is a little crazy to talk about Confucianism as being the dominant ethos that has created the rise of the "Little Tigers" and now we have the "Big Tiger". Because of some of those essential elements that I described earlier, Confucianism and rapid economic growth are as incompatible as they could be. To me, just to put a hat on it and say it is Confucianism is pointless; there are so many Confucian countries in the area, that it caps them all.
What is dominant in that area may be Confucianism in the sense of social cohesion -- for example, family values, the work ethic, the importance of loyalty to friends. That may be, but that does not come from Confucianism. It comes from all Chinese culture, and they are not outwardly aggressive. It seems to me, therefore, that there is no basis for this in terms of either empirical evidence or the theoretical.
The Chairman: I gather Professor Potter might want to say a word or two.
Professor Potter: Sam Huntington has been acting as a gadfly in the political science discourse for at least 30 years, so part of his book has to be seen from that perspective. He likes stirring the pot a bit and seeing what happens.
It is important to recognize that any time any country does things that the Americans do not agree with, it is "nationalistic". So there is that element that informs his perspective. However, there is no doubt, and the evidence is overwhelming, that the Chinese government at the central level is trying to resolve its legitimation crisis by reference to nationalism. There is not a doubt about that. The evidence is overwhelming. When we see the books that have come out, China Can Say No, China Through the Third Eye, these are not autonomous authors out there in the cultural milieu deciding to write a book. These are officially sanctioned efforts. That is the nationalist part of it. There is no doubt that the regime is pursuing this.
What Huntington misses is that there is not a single China. I would suggest that the cultural differences between Beijing and Guangzhou are greater than the cultural differences between Confucianism and Islam, for example or between Confucianism and the West. We must recognize that there are many Chinas and many subcultural differences, and to take a political regime which is pushing nationalism to resolve its legitimacy crisis as emblematic of Chinese culture as a whole is a huge mistake. I would agree that many intellectuals in China are very worried about the regime's nationalistic rhetoric, because they see it as counterproductive and problematic.
One of the things I think Huntington is correct about is to suggest that we need to recognize that there is a very significant problem with building a normative consensus in the world, that the Cold War imposed a bipolar normative consensus and basically subordinated all these other cultural conflicts, and we see them now emerging at the end of the Cold War. The evidence of that is also overwhelming. But then the question is what one does about it, and it seems to be that institution-building is part of it. However, that institution-building has to be coupled with recognizing the stakes that parties have in the institutions.
I would just turn us back to the Lushan plenum that Professor Lin recognized. The Lushan plenum and the purge of Peng De Hua after the Lushan plenum revealed the disintegration of the consensus-based decision-making at the top of the Chinese leadership. How did that consensus work? People and leaders in that consensus of leadership were willing to actually lose on decision-making because they had faith in a process that would allow them to win at another time. So they were willing to say, "Yes, I may not win the argument today, but there is a system that will permit me to win the argument tomorrow, and therefore I am subscribing to that system and I am part of it."
What happened at Lushan was that Mao was unwilling to lose, and Mao ended up purging his opponent, and that began the destruction of the elite consensus. We can take a lesson from that in the international context, which is to say that where there are international institutions that recognize differences of norms and create a process by which differing perspectives can successfully subscribe to a decision-making process, and in many ways consensus-building process, that is possibly one way to reconcile some of these cultural differences.
The cultural differences are there and we need to recognize them. One very good example is the difference of opinion over the right to development of international discourse. What does "development" mean? The Chinese have one perspective, the Australians have another perspective, and the Canadians have a third perspective. These are all different perspectives and that is fine, but if there are institutions that allow those perspectives to be reconciled through a process that treats the parties relatively equally so they have a stake in the process, that might be one way to address these "Huntington" concerns. It is complicated, obviously, but Professor Huntington is not completely off the wall. He is just emphasizing a few features that need to be seen in a broader context, particularly his American perspective and his concern about what is essentially nationalist rhetoric from the regime. I certainly do not think it is shared by many of the people in China at either the intellectual level or in the masses.
Senator Stollery: I have found this to be a fascinating morning. It will be necessary to read the testimony and reflect on some of the interesting observations that have been made. At one point I felt that there seemed to be a little confusion in the sense that the Americans are on this democracy kick. I do not think that is true in Canada. It is certainly not true of me. There is an old rule in international policy-making that you cannot impose systems on a country from outside.
Democracy in China does not seize me particularly, because it is impossible. We politicians have a common characteristic: we know that in all systems personalities are very important, that there are people behind these names. Frankly, I do not know who these people are, although I have heard the names and may even have read a little more about the subject than some others. It was most interesting hearing about how Mao Zedong basically did everyone in. There is an enormous amount more for us to learn about these personalities. Politics have to be that way in China just as they are everywhere else, because there are universal characteristics to life. Regional cultural differences may have a huge effect on them, but there are also universal characteristics.
We are dealing with trade matters in China and we have heard some interesting testimony from some very interesting people, more interesting than I thought we would hear when I came to Vancouver. I cannot understand how a system can operate without some form of independent judiciary. If there is a dispute between two parties on a commercial matter, there should be some form of independent judiciary that hears the case. How can development in China get past a certain level without the development of an independent judiciary?
The Chairman: I think Mr. Brown brought up the distinction that is now raised by Senator Stollery. It is an old distinction in the literature of political philosophy. It is a distinction between civil liberty on the one hand and political liberty on the other hand. As I recall, the writers of the 18th century used to say that civil liberty may well be possible in an enlightened despotism.
Mr. Brown, you have stated that what the people in at least certain parts of China wanted was a sense that the system was fair, that the ordinary man in the rice paddy, for example, was not being exploited to maintain the opulence of the local police chief. So it seems to me that this is the question that Senator Stollery is raising. Are the two of you on roughly the same ground there? I am not asking you for a long comment, Mr. Brown, because I will turn to Professor Potter and I will ask him to address what I think is a common concern of Senator Stollery and yourself.
Mr. Brown: The question was whether China can develop in the way that everybody would like to see it develop, that is to say, can it develop into a more prosperous and more reasonable and successful society without great instability, without instituting some kind of independent judiciary? My notion is that probably it cannot, and I think the Canadian government recognizes that, in that one of the programs supported by the government is an effort to train judges.
The structures that collapse in earthquakes are the very rigid ones. What we have, as described by everybody, is a society in enormous transition, and transition produces stresses, stresses of an earthquake sort of magnitude, and if the society is so rigid as to make it counterrevolutionary to assert one's views, and counterrevolutionary to try to get one's economic rights, as opposed to those of the local party secretary who wants the lot, or counterrevolutionary for even a foreign businessman to assert his rights, then there may be an earthquake sort of stress-related collapse.
If one is of Chinese descent and is a foreign businessman asserting one's economic rights, one very often ends up without one's passport and in jail. So the cover for this kind of arbitrary detention and arbitrary punishment is that once you start accepting, in a society like this, attacks on the official or a criticism of the official, then it becomes attacks on the party, then it is counterrevolutionary and it is very rigid in that regard. I say that that is the inherent source of instability in China, and the danger that I fear is in not moving as fast as we can towards the kind of civil society that is needed.
Professor Potter: I am glad that Mr. Brown raised the issue of the judicial training program, because I have had the privilege of being somewhat involved in that and it raises an issue which I will get to in just a moment. There are two interlocking ideas here that are not quite the same but are related. One is independent; the other is impartial.
The Chinese legal system is derived essentially from a European civilian model where the courts are part of the bureaucracy. So they do not have the kind of structural independence that we associate with the Anglo-American tradition. However, there is still independence of the judiciary in Europe and that is because of professional integrity and because of a tradition of impartiality by judges. What we see in China is a situation where the judiciary institutionally are part of the bureaucracy; they are subject to a number of interlocking supervisory agencies, including the bureaucracy and the Minister of Justice. That is potentially a problem but need not unavoidably lead to the problems of impartiality.
The impartial arbiter of commercial disputes is, as you suggest, critical and it is critical for fairness, and it is critical really for the predictability of the dispute resolution process. I think it is fair to say, with all due deference to Chinese efforts recently to improve the situation, that the courts in China have a long way to go before they are either independent or impartial. I think that is a major problem. However, it is worth paying attention to what is going on with what we might look at as a market for dispute resolution services. The market reforms in China have created a burgeoning market for dispute resolution services and that market generates fees for the institutions that can control and participate in that dispute resolution activity, and the courts realize that. The courts are traditionally under-funded, badly staffed and so they see opportunity here. There are other organizations also competing for this market, including the local arbitral organizations that are being set up in the people's governments. I think the long-term result of this is an institutional competition to capture this dispute resolution market, and I think the long-term result is that all these institutions will try to become more dependable, more reliable and more useful for businesses in lending predictability to the resolution of their disputes.
I have some hopes for the long term, but in the short term it is very problematic. It speaks well of the Chinese Supreme People's Court, which administers the system, that it is trying to improve it by participating in judge training programs that will increase the competence of their judges, most of whom until recently had little, if any, legal education and were drawn from the military. That is changing gradually. It speaks well of them.
The issue is partly competence and partly training, but it is also a matter of development and an effort towards impartiality, but we will not achieve that by merely saying to them that they should be impartial. What will happen is that this demand for dispute resolution services will create institutional competition, and in order to compete in that environment institutions will try to become more attractive and more reliable and perhaps more impartial. There are structural issues about independence; there are behavioural issues about impartiality. They are both problematic at the moment, but perhaps there is cause for optimism.
Senator Andreychuk: This has been an excellent session. In some ways I wish this session had been first; then we might have been more succinct in our questioning of other people. Although I have many questions, I will reduce my comments and questions to two issues.
From everything we have heard in three days and the kinds of things we talked about -- cultural understanding, language training, the need for more information, and Canadians seeming to be there quickly, but in second place, not first -- I am reminded of what I have heard over and over again in discussions of Canada's global trade issues. When we went into the EC we were there almost after the game, and had to deal with Brussels and not just the various capitals.
Obviously, taking into account China's size as one dramatic difference, what else is so uniquely different as an impediment to Canadian business that we do not find as impediments in other countries?
While you are reflecting on that, I will go to my second point, which is picking up on what Dr. Lin and Professor Potter have said. I admired both of their presentations and their subtle ways of putting the issues forward. Canada did not create the human rights issue. It came out of a collective experience and very much buying into a foreign policy that multilateralism is the way to go, and the knowledge that, if we have universal standards, then we all benefit, particularly because of our size.
From the time of Prime Minister Pearson onwards I have not found much difference in our approach to international rules for human rights, for fairness, for justice, or for good governance. However, it seems that our relations with China have recently changed, and in my opinion it should not be "China and human rights" that is at issue, but "Canada and human rights" because that is the dilemma. I would be interested in Mr. Brown's thoughts on this.
It seems to me we have always spoken quietly what we believed to be the truth. We have tried to find international fora in which to do that; when we felt the need to put our views forward, we did so, not in a moralistic or arrogant way, but in a realistic and frank way. However, there now seems to be a dilemma within Canada: On the one hand, for years we have taken a traditional stance on human rights; on the other, we say that we are not going to tie trade to the human rights issue. That policy creates a problem for certain sectors in Canada, who ask, "Why not?" So we have created a debate within Canada about trade and human rights that is not necessarily reflective of how Canada has traditionally acted and reacted both within and outside our country.
Mr. Raymond Chan says we will not raise the human rights issue in APEC. I wonder why he had to make that statement. I wonder why he would preclude the opportunity for us to express Canadian points of views and values that might be necessary in the dialogue. Mr. Axworthy, on the other hand, in the same time frame, stated at the United Nations that the protection and promotion of human rights is a primary Canadian value and a key goal in our domestic and foreign policy. Obviously, there is then a reaction from certain segments in Canada.
Are these mixed messages, or are they complementary messages? Why are we saying we will not raise the matter of human rights in APEC but have not said we would not do so in WTO? Doesn't that create a confusion about human rights within Canada? Has this all come about because we are reacting to human rights activists who are moralists? I do not believe that that has been the Canadian perspective in the long run, has it? Surely we should rethink our domestic policy as opposed to our foreign policy on human rights.
That is a long-winded way to say that I think we have lost our way in our values and we had better think about our own values and our own statements and our own practices rather than justifying them in an international forum.
The Chairman: Those are two questions. I was thinking that Senator Andreychuk's second question might more appropriately be addressed to the Leader of the Government in the Senate rather than to any one of these witnesses.
On the first question, does anyone wish to respond?
Senator Austin: Canada is attempting to project itself into much stronger commercial relations in Asia and other parts of the world. China being the focus of this particular discussion, we have correctly read what are the access portals to Chinese decision-making. Team Canada was very effective in proving that point. Canadian business is a small part of the world business community. By Canadian standards we have had some very senior business leadership in the Chinese market -- very significant leadership from members of this council. NorTel, in telecommunications; Barrick in mining; Bombardier in transportation; Power Corporation in finance; AECL now with a major investment; Manulife in the investment industry, and four Canadian banks <#0107> all are working in China.
We meet head-on competition from the Americans, the Japanese, and the European communities. Their institutions are much larger than our institutions and they can bring more to the table for the Chinese in the way of capital, and, in the case of Germany, substantial technology. We must find our niches. We must find things where we are experts, and there are many such. We have had expertise in engineering services in resource development and power development. SNC-Lavalin has been tremendously successful in providing engineering services, and Agromanenco, another Canadian company based in Ontario, has been tremendously successful in providing services.
What we do well in Canada we can compete in. We do well in Canada in transportation, communications and natural resource development. We also are doing extremely well in information technology and in agriculture. These are sectors where Canada is pushing the edge with the Chinese, and with very good success.
We cannot compare ourselves with the success of the Americans or the Japanese or the Europeans in the China market, but I do feel that we are not getting our share of that market, and that is where I believe a more intense effort by the government at the federal level, by governments at the provincial level and by the business community itself, with the requisite skills, is required. I believe this committee needs to focus in its own discussions on where the pivotal point is for bringing that co-operation together.
Senator Andreychuk: Perhaps I can reduce all the things I want to say on the second question to the point that in the past our foreign policy has been rather clear and has not changed much from the Pearson years onwards; but more recently we have had witnesses who stated that they see Canada's foreign policy equated to jobs, jobs, jobs -- in other words, trade policy, -- and that has led to an uneasiness in certain sectors in Canada who wonder if we have abandoned the other aspects of our foreign policy, most notably human rights? Therefore, it plays out on an international scene, but it is a domestic difficulty in interpreting the foreign policy.
Mr. Brown: I do not know that I have an answer, but I have an observation or two. I do not think a discussion should go forward along such lines as: "It is either boycott China or be accused of nurturing the butchers of Beijing." There are not only two mutually exclusive options here. Ways should be sought to promote trade, which is very good for the large majority of people in China and in Canada, as well as promoting better human rights and a better system of justice in China, which is also very good for the vast majority of people in China. Because of what I have said about an excessively rigid system being susceptible to collapse, it is very good for the current management of China. A very real thing that the people in Beijing need to understand is that their positions are increasingly insecure in direct proportion to their willingness to build a system that can be overturned by chaos.
There is a whole vocabulary in Chinese, similar to the vocabulary about snow, dealing with chaos. There are many flavours and types of chaos. There is a great fear, given the chaos both internally and externally that China has lived through over the last century. One of the great trump cards of the regime is that people do not want to rock the boat; they want fairness.
The Chinese do have a point that they are judged by standards that are not applied to other countries. In India, for example, the police routinely shoot at demonstrators and nobody says a word. Not so long ago American National Guardsmen were firing on students in Kent State, but nobody suggested boycotting the United States. We do seem to have a special way of thinking about China and that comes from the fact that we do not understand it very well; we do not know enough about it. Also, the Chinese themselves encourage this ignorance to a certain extent. They demand to be treated by different standards, and so we do, but it is a real conundrum in terms of government policy.
Finally, in answer to your question about why Raymond Chan said what he said, I am guessing that it is because someone asked him, "Mr. Chan, are you going to raise the issue of human rights at APEC?", and he said, "No, it is not the appropriate forum because of the consensus." I do not know that for sure; I am just guessing that he was asked that. A Chinese leader could not be asked that question, because there is no free press to ask that type of question in China. That is another problem in China. It does not have the flexibility to deal with the vast changes that it is going through and we really should encourage it to find that flexibility.
The Chairman: Senators, we are approximately 55 minutes late. We have two other witnesses waiting. I have one name on my list and that is Senator Grafstein.
Senator Grafstein: I will try to be succinct. I first want to say to the committee, as someone who has travelled widely in China, that this is a fascinating morning and I thank you all, because it has elucidated for me many of the current issues in a brilliant and succinct manner.
Mr. Chairman, I thank all the members, including my colleague, Senator Austin, who has done remarkable work in deepening the cognomen in China, which is that Canada is an old friend of China. I think that all of your work has intensified that relationship, which makes it easier for us to deal with all the issues we hope to deal with in terms of reform of trade.
Professor Lin, I travelled the Silk Road north and south with my family and so I understand what has happened in China in the current time. I would like to get into the whole question of stability and rules, but time only allows me to ask one rather succinct question. My question relates to trade rules. As a trading nation, we want to have stability and we want to have trade rules, which is exactly what my colleague Senator Stollery was trying to get at. How do we have trade rules as opposed to democracy? For us, trade rules mean democracy, and common law was based essentially on trade rules that transformed themselves into civil rules. So our objective is still to get at trade rules.
We have a number of fora in which to deal with this issue; we have the ASEAN forum, we have APEC, which we are discussing, we have our bilateral relations through our Action Plan in China, we have the indirect or indecisive energy with respect to the Foreign Investment Protection Act with China. Given all that, what would be the best way for Canada to use its leverage to develop a bilateral dispute mechanism with China? Is the best route through the ASEAN exercise, through APEC, which is on the agenda, through our own bilateral relations, or through our own action plan? What is the best way to start in a rudimentary way to develop that mechanism?
Certainly, we would have it through the WTO, but I do not think WTO does it for us and I am not sure it would be properly exercised. From a mechanical standpoint, or tactical, what is the best route for us to take?
Professor Potter: I co-authored a paper on differing cultural approaches to dispute resolution in the Pacific Rim for the Asia Pacific Foundation last year and my focus was on China, and this is tied to an initiative within APEC to try to develop a voluntary trade mediation service. One of the difficulties is determining how you find the niche, because you have WTO and you have the ICSID system for investment disputes; so what do you do? Bilateral investment treaties are often a very useful way to set up, either to plug investment disputes into the ICSID process or to create an alternative. The problem with ICSID is that it is all voluntary, so that is a non-starter.
A dispute resolution mechanism in a bilateral investment treaty which committed the parties to participate in binding arbitration would be quite a useful approach. Then again, there would be problems with sovereignty. On the other hand, because most of the Chinese partners in joint ventures are essentially, at least ostensibly, private enterprises -- they are very much state controlled, but they have often been spun off and created at least as nominally private enterprises. So part of this is taking advantage of that shifting of the labels and saying that this is not a sovereignty issue any more, but is private-to-private arbitration.
That is certainly a place to start, and what it would do is commit the two governments to support a process by which their private entities could arbitrate decisions in a forum to be selected by the parties. That would be one way to do it.
One of the problems is that you do not want to be in a situation where you are duplicating things that are already there, and there is already a network of private international commercial arbitration centres around the world that are available to resolve trade and investment disputes. There is also the WTO system and the ICSID system, so really it is a dilemma as to how to do this.
I have thought about it a bit, but I would want to think about it a little more. The key is to try to make the institutions that are there more effective by committing governments to supporting those institutions as opposed to creating as many escape hatches as possible, such as the ICSID system that allows governments to get out of their obligations on the basis that it is voluntary. If too many of those institutions are created, that is duplicative, and most particularly, it undermines the importance of predictability in these relations, which is what the business people want.
I would suggest that in the bilateral context with China, a bilateral investment treaty that commits the governments to support their enterprises in arbitrating disputes through existing mechanisms would be quite useful.
The Chairman: Our witnesses have been more than generous with their time. I want to thank Professor Potter, Dr. Lin, Senator Austin and Mr. Brown for being with us today. They have been most helpful and enlightening.
Our next witnesses are ready and Senator Carney has agreed to assume the chair during the next phase of our work.
The Deputy Chair: We apologize to our two witnesses, Darcy Rezac and John Hansen, for being so late. However, as I am sure they are aware, the earlier panel was a wonderful opportunity for us to access good British Columbia brains on behalf of this committee.
I will ask Darcy Rezac to give his presentation.
Mr. Darcy Rezac, Executive Director, Vancouver Board of Trade: Thank you very much, Madam Chairman. For those who are not from British Columbia, on behalf of my chairman, Brandt Louie, Chairman of the Vancouver Board of Trade, I bring you greetings and welcome you here.
The Vancouver Board of Trade is the Chamber of Commerce for Vancouver. We have been around for 110 years. It is no accident that our mission is the same as the Asia Pacific initiative, which is to enhance, promote and facilitate the development of this region as a Pacific centre of trade, commerce and travel.
After the city had burned to the ground in 1887, the Vancouver Board of Trade was formed for the purpose of rebuilding it, and we have participated somewhat in what you see around you. We have lobbied for most of the major issues of the day, including the Faculty of Commerce at the University of British Columbia. We participated in the rebuilding after the great flood in 1948, and helped to bring standard time and daylight savings time into British Columbia, and on it goes.
In most recent years we are probably best known for lobbying, as Senator Carney well knows, as she was one of the chief architects in the devolution of the Vancouver International Airport into a local airport authority. That was an initiative that started here in British Columbia and in fact caught on across the country; it was invented right here in downtown Vancouver.
On December 6, 1986, Senator Carney and Mrs. Grace McCarthy of British Columbia signed an historic document entitled the Asia Pacific Initiative. The Asia Pacific Initiative came about as a result of two years of consultation with leaders in our community with respect to what our region of Canada could and should become following the historic Expo 86 World's Fair, which was so successful. John Hansen and I were the authors of the Asia Pacific Initiative and we had two able champions in the federal government and the provincial government to carry it forward. Senator Carney, as the senior Minister in British Columbia, and Grace McCarthy, assembled a team of 250 volunteers to pursue a number of initiatives that would help describe this vision and bring it to reality.
The centrepiece was Vancouver International Airport becoming a continental gateway and hub. Other initiatives included the International Financial Centre. One that is not so well known but which is eminently successful is the International Maritime Centre. There were immigration initiatives, cultural initiatives and there were initiatives in tourism. It involved everybody, including David Lam and people like M.Y. Chan, who worked on several committees and sits on our Board of Trade today, and continues to pursue some of those bold visions.
The International Maritime Centre I will pick out as a second example. Twenty-one companies have relocated their headquarters from around the world to British Columbia because the Asia Pacific initiative was successful in persuading the federal Department of Finance to recognize that in that industry, if we were to compete globally, then we could not impose taxation on worldwide income if the mind and management of those firms were located here. That was agreed upon and enshrined in legislation, in regulations certainly, and those firms have moved here and I believe there are probably 800 jobs here as a result of that. That initiative is not well known but it is highly successful.
The airport initiative was particularly exciting because we saw the opportunity for the airport to undertake a major capital investment, with a new terminal building, a new runway and then with a new bilateral air agreement with the U.S. to position itself as a continental gateway and hub. If a straight line is drawn on a map from Atlanta, Georgia and Miami to Singapore, it goes straight over Vancouver. It goes from Vancouver to Seoul and then down that way. So we are in the great circle.
What has been the result of that initiative? Within three months of the airport being transferred to the local authority, ground was broken on the international air terminal. This year the new air terminal opened and the new runway opened, and recently an Alaska Airlines pilot coming from San Francisco described the airport to his passengers by saying, "Ladies and gentlemen, welcome to the most beautiful airport in the world."
In addition to having the facilities, we now have the connections. Since the Asia Pacific initiative was initialled, we have 83 flights a week to major Asian destinations, including Tokyo, Taipei, Seoul, Shanghai, Osaka, Nugoya, Manila, Jakarta, Hong Kong, Beijing and Singapore. That compares with 37 flights from Seattle, our major competitor, and 21 from Portland. We have more flights to Asia than does Chicago. So we are doing well.
There is one impediment to that division that you should be aware of and that is the question of pre-clearance. As you are aware, the U.S. government has customs and immigration agents in Canada to facilitate passengers going to the United States by pre-clearing them. When they board a plane here, they are already cleared; they do not have to clear customs when they arrive in the U.S. Envision people coming from Asia to Vancouver and then getting on a connecting flight from Vancouver to the United States. The situation now is that they have to clear Canadian customs and then go through U.S. customs pre-clearance. Negotiations are under way right now with the U.S. to eliminate the Canadian customs step. That will require legislation and I would commend the legislation to you to allow us to achieve this destiny. Should we not be able to achieve that, then I can assure you that Seattle is lobbying. They have two parallel runways now and they are lobbying for another runway. They have the terminal facilities. They could play a very, very strong competitive role in getting business that we otherwise would, and this is good business for us.
The airport in Vancouver creates about 3 per cent of the GDP in British Columbia, and it is growing all the time. The port makes a similar contribution, but you will be hearing from the port and the runway people this afternoon, and I will not make any case about that.
Our Board of Trade is involved, through its association with the World Trade Centres Association, with world trade centres around the world. By the accident of geography, being on the great circle, we have more than our fair share of international visitors, and in recent years the board certainly has developed probably one of the most active "distinguished speaker" programs in North America, if not the world. In recent years we have hosted Prime Minister Kai Fu from Japan as a distinguished speaker, Lee Kuan Yew, Corazon Aquino and the Prime Minister of Thailand, to mention just a few.
We have, in fact, trademarked or are in the process of trademarking what we call the "Pacific Canada Lectures". The first was delivered by Lee Kuan Yew in 1992. We have invited President Clinton, Prime Minister Goh Chok Tom of Singapore, the Prime Minister of Japan, and C.H. Tung from Hong Kong to deliver Pacific Canada lectures this year as part of our year of Asia Pacific that focuses on the APEC meetings.
We are a co-operating partner with the Pacific Basin Economic Council and the Business Council on National Issues, hosting the APEC CEO Summit, which will take place on November 22 and 23, and we will incorporate our Pacific Canada Lectures featuring the people that I named, should they accept during that period. The Prime Minister of Singapore has accepted our invitation to come and speak in Vancouver when he is here in the fall. Our chairman, Brandt Louie, and I met with him very recently. We took a trade mission to Malaysia and to Singapore and we attended the World Economic Forum Summit in Hong Kong, and we are in the process of attracting more distinguished visitors to Vancouver.
The Pacific Canada lectures are designed to provide a forum, a platform, that will allow visitors to just drop in. So we do not have to do it over a meal. They can just drop in and deliver a lecture any time of the day or night and we will televise that and get that word out. We have thus become, in the past 10 years, recognized as a player in the Asia Pacific. We are active members in the World Economic Forum and we have been members since 1989. Our chairman, Brandt Louie, just returned from Davos. We have been to Davos every year since 1989 and we had a delegation of 12 people to the World Economic Forum Hong Kong Summit in October and will be taking people back there again.
The discussion that John and I overheard this morning was fascinating. The world has become China-centric, and I guess for good reason. We, of course, are interested in China. Our primary interest in Vancouver is Hong Kong. Much of our economic wellbeing is contingent upon what happens in Hong Kong. Much of our wealth in recent years comes from Hong Kong. It is a very strong connection.
Including cargo flights, we have more than 30 flights a week to Hong Kong from Vancouver. Seattle has four. The reason for that is the terrific amount of commerce going back and forth.
The board is interested in other parts of Asia. We have a focused interest in Japan. We think the Japanese are excellent people with whom to do business. They pay their bills on time, their word is their bond, they understand how business is done. It may take a while to get the order, but when we do it is very good business for us and our trade figures would echo the importance of Japan to our economy.
For instance, the Board of Trade has established a special relationship with the Osaka Chamber of Commerce. It is an organization similar to ours but 10 times our size, with 48,000 members. Taking a radius of 50 kilometres around downtown Osaka, the Kansai region including Kyoto and Kobe, 22 million people live there. The average income per family is $78,000 U.S. per year. The GDP produced is three per cent of the world's GDP, just within that 50-kilometre radius; 20 per cent of Japan's economy comes from within that 50-kilometre radius, so it is a very wealthy, dynamic part of Japan.
When I first went there three years ago there were over 600 projects under way in that 50-kilometre radius, all of which were bigger than our Vancouver airport project. They want to do business with us. We have a very able Consular General there. Margaret Huber was there first. Now we have Peter Campbell. We have worked with Wilf Wakely in the B.C. Trade office to establish a relationship with the Osaka chamber which has borne fruit. They have a trade show every year for small and medium-sized business called the Global Business Opportunities Convention. We had 40 people there last year and we will have probably 60 people there this year. That is where small and medium-sized businesses get together and do business. The difference between that trade show and other trade shows that small and medium-sized businesses participate in is that you register six months in advance, something which Canadians are really not used to doing, I might add. We are last-minute folk. But when our delegates get there, they have appointments made for them and they have anywhere from six to a dozen appointments for people to come and see them. So it is highly successful.
In establishing this relationship, we invited the Japanese back to Canada. We told them that it was not good enough for us to take our people to Japan, but that we wanted them to come and see British Columbia. The chamber of commerce system in Japan is not unlike Canada's, but it is more rigid. People rise to become the volunteer chairman but they stay for a number of years and it does attract the most senior people in their community. For example, Mr. Ohnishi is the chairman of the Osaka Chamber of Commerce and he is the chairman of Osaka Gas, and the chairman of the Sanyo Corporation is also the chairman of another chamber of commerce.
In June of this year we invited seven chambers of commerce from the Kansai region to Whistler for the first Kansai-Canada West Business Forum. We invited 200 delegates from Winnipeg West, and we included Gary Filmon and Terry Matthews from Newbridge Networks and David McLean from CN, and on it went. We assembled over 200 people. We were looking for 150 and ended up with 300. We spent a day and a half in Whistler.
We took the Japanese delegation through Vancouver. They met with the Minister of Trade and they visited the Vancouver film school. They are dazzled with the information technology capability that we have in Canada. In fact, they remarked on that when they held their press conference after they got back to Japan. While here, they went to Whistler. Raymond Chan greeted them there. We had our ambassador over from Tokyo and the Japanese Ambassador from Ottawa and we had an intensive day and a half of seminars and sessions. We finished up on the Wednesday with the mandatory golf tournament, which went very well, the Kansai-Canada Cup, and then we bussed everyone to Squamish and put them on board one of our newest frigates, HMCS Vancouver, and took them back to Vancouver aboard the frigate.
We had a reception on board, at Canada Place. We had the Japanese chairman at the helm doing figure 8 turns off Atkinson Point, much to his glee, having been a former Imperial Navy type. After the reception on board, the Japanese guests were taken to Canadian homes for dinner.
It is well worth while meeting senior business people around the world, be it in Davos or at the World Economic Forum in Hong Kong or in some place in Malaysia, because it gives the opportunity to establish ties. In this case, they were very senior business people, including the chairman of Kobe Steel and the chairman of Sanyo Corporation, and they were all absolutely dazzled by British Columbia and have invited us back to Kobe. So we are going back for the second Kansai-Canada West Business Forum in October of this year. Gary Filmon will be there with a large delegation from Manitoba. The government of Saskatchewan is also very interested in participating and bringing a business delegation; so we are looking at anywhere between 60 and 80 people.
I have taken the time to dwell on that because there is so much business to be done. It is an area where they want to buy. There is a foreign policy in place in Japan to import more. They have money; they want to pay. Too often we are invited to take trade missions into countries where we are asked to invest. We do not have any money to invest. We have $600 billion of debt, and somehow these countries do not know that.
Well, perhaps that is being facetious. We certainly do have money to invest, but we really want to write orders so we can create jobs through exporting. So I would commend the committee not to overlook Japan. That area of Japan has a brand new airport, so there is direct access. It is closer to us than Halifax. My last trip was seven and a half hours back.
Last year in Japan, there were 1.5 million housing starts. With only half the population of the United Stated they have more housing starts, and they want to buy building products from us and they like 2-by-4 construction. Of course, there is a need for construction there. Two years ago the great Hanshin earthquake killed 6,000 people, injured 50,000 and destroyed 200,000 buildings, but if you were to visit Kobe today you would not know there had been an earthquake, because there is no sign of that earthquake. There are a number of vacant lots where buildings stood, but all the rubble is in the ocean and they are waiting to build and are actually starting to build new homes. Obviously, there is a terrific amount of business that could be done in that area.
This time next year there will be a Vancouver film school opened in Kobe as a direct result of that initiative that came here. There will also be a Vancouver film school opened in Malaysia this time next year as part of the multimedia explosion going on in Malaysia. Malaysia has just launched its own satellite, so they have four new television channels of their own and they are going into multimedia in a big way with what they call the multimedia corridor.
Some members of the committee may not be aware of the leadership role Vancouver plays in North America, and indeed in the world, in film and multimedia production. Walt Disney has just opened a studio in Vancouver; we already have terrific post-production capability, as witnessed in films such as The Rainmaker. We are among the best in the world and we are connected to Hollywood and Silicon Valley by an optical fibre cable which gives us direct access up and down that west coast corridor; people are coming from around the world to seek our expertise and we are now just beginning to export that.
Those are some of the exciting things that we are doing. The Board of Trade has a number of events taking place, including the APEC related events. This year we are hosting our annual Governor's Banquet as a salute to Hong Kong. We expect 800 people to attend. We are hoping to take a trade mission back to Malaysia. When the Vancouver film school signs the agreement there, we hope to be there with them with a delegation.
I do some volunteer work with the Canadian navy. I cannot begin to tell you what terrific ambassadors our sailors are when they travel the Pacific, particularly with our newest high-tech frigates. The Japanese did a tour of the entire ship when they came down on the HMCS Vancouver and that just reinforced their new-found image of Canada as a leader in information technology and high-tech.
We will be receiving delegations, of course, from abroad and we will be going abroad and will be active at the World Economic Forum.
John Hansen has few comments to make with respect to immigration and some other data, but I should point out that in the past 10 years, since the Asia Pacific initiative was signed, the representation by Asia Pacific consulates in Vancouver has grown to 12. There are 12 consulates and consuls general here and we have nine bilateral organizations. 10 years ago the Board of Trade was the secretariat for the Hong Kong-Canada Business Association. There were probably 100 members at that time. It has now grown to an organization that has over 600 members and it is very active.
Mr. John Hansen, Chief Economist, Vancouver Board of Trade: We have been very fortunate in past years in the economy of British Columbia to be the recipient of a lot of immigration and in-migration from other provinces. In fact, that is one thing that has really driven the economy of this province. You have seen from other parts of the country the news coverage about how dynamic and growing the economy of B.C. has been over the years; much of that has been based on the number of people coming in from other parts of Canada and from overseas.
In 1995, the total immigration into Canada was something in the order of 210,000 people; B.C. was the recipient of 44,000 of those. That is about 20 per cent of all the immigration into Canada as a whole, which is very important for us. When you look at the immigration from Asia, in fact, our percentages are even higher. Just from Hong Kong itself, of 32,000 people coming to Canada in 1995, 37 per cent settled in B.C., and most of those came to Greater Vancouver. We have been very fortunate to have had the benefit of that kind of immigration, both from the standpoint of the entrepreneurship that the people coming here bring and also from the standpoint of the business and family connections that they retain within that region of the world. We would like to see that continue in the future.
The in-migration from other provinces is in fact drying up quite a bit now that Alberta and Ontario are doing much better than they were relative to this province, but the immigration from offshore is still very important.
Mr. Rezac: On that point, this is the first year in which more people have moved from British Columbia to Alberta than from Alberta to British Columbia.
Honourable senators, you ought to be aware of one issue that we have taken a position on at the Board of Trade, and that is the disclosure of offshore assets. That is a very important issue. Canadians are required to report worldwide income for income tax purposes and the Board of Trade supports that policy. What we do not support, however, is a policy that calls for Canadians to list everything they own offshore. This may have been viewed as a B.C. issue and as an issue related to immigrants. It is not. This is an issue that relates to all Canadians. If someone has a home in Memphremagog, or a time-share in Florida, anything worth over $100,000 is required to be reported. In fact, the current income tax form specifies that you must list all your offshore assets valued at over $100,000. The forms are complex. It is a very complex reporting requirement, and our concern is simply this: While the government has given us their assurances that it is not the intention to impose a wealth tax on property owned offshore -- and we believe them -- once that inventory is in place, it will be very easy for a future government to impose a wealth tax on offshore assets. That would be very detrimental to immigration and investment in Canada.
We feel that the system now in place is sufficient, where an audit is the check, and the government should do a random audit. During the audit would be the appropriate time for the auditors to seek what offshore assets people have to determine whether or not there is any income being generated. To put in place an inventory of offshore assets would just be too tempting for governments, which are trying to balance budgets, to impose a tax at some future date. I will ask Mr. Hansen to state the expression that our chairman used.
Mr. Hansen: The expression or the model that is used is that it is similar to drift net fishing. This is a huge, huge net that is being spread out there, hoping to catch people who are cheating, and it will catch a lot of taxpaying Canadians in the net who will be required to fill in the forms and to fill in all the data.
Mr. Rezac: The worry is that at some later date there will be a tax imposed. We have had a bad experience in this province. Senator Carney and Senator Perrault will recall, I believe it was four years ago, that the provincial Minister of Finance imposed a punitive wealth tax on homes valued at more than $400,000.
The Deputy Chair: He is now Premier.
Mr. Rezac: That is correct, he is now Premier. By the way, would he have access to that data base or not? That would be a question one should ask.
The response of the Board of Trade was to take out a full page advertisement in the Vancouver Sun and Province, saying, "If you are mad as hell and do not want to take it any more, join the Board of Trade; we are sending a message to the premier." People jotted down their messages and sent them in. We had a voluntary contribution because we had no budget to pay for the $25,000 advertisement. We received 1,500 replies immediately and raised $24,900 and paid for the advertisement. That was at the time of the Clinton-Yeltsin summit.
We delivered the faxes to the Premier with our message. The Premier fired the Minister of Finance a week later, the public were so incensed. What the minister had not realized was that the Premier of the day, Mr. Harcourt, was also caught up in that and his taxes were going to rise dramatically.
So we do have a special fear in this community of wealth tax. That is the nature of the fear with this inventory of offshore assets, because most people in B.C. who are in the middle class have some property across the border or have some other assets, perhaps like jewellery. When they go to Hong Kong and entertain, they keep their jewellery in a safety deposit box there, and I am sure most would find it offensive to have to list that and have that as part of the government's business.
Mr. Hansen: I am sure Mayor Owen will focus on that this afternoon, so there will be further discussion on this item.
The Deputy Chairman: To my Senate colleagues, I would like to say that we have appearing before the committee two very good examples of the kind of energy that drives the private sector here in British Columbia. The Board of Trade has given dynamic and innovative leadership. Some of the examples have been outlined for you. I am very glad that they came here to put it on the record.
Gentlemen, I want to clarify something with you for the sake of our reporters. You mentioned Mr. David McLean of CN. Did you mean CP?
Mr. Rezac: No, David McLean, chairman of Canadian National Railways.
The Deputy Chairman: You talked about the need for legislation on the pre-clearance issue at Customs. Because we are involved in a law-making process, can you just elaborate on what will be the nature of the legislation?
Mr. Rezac: As I understand it, for U.S. Customs officers to clear people when they arrive in Canada in preparation for them going to the U.S., they will have to be deputized by Canada to allow them to have search powers when people arrive in Canada. That is my understanding of it.
The Deputy Chairman: Thank you. We will watch for that legislation.
Senator Perrault: I would like to commend Mr. Rezac and his associates for doing a great job in Canada and in British Columbia particularly. It is truly outstanding. How are we doing in the battle we fought for a number of years regarding non-tariff barriers? The Japanese for a while kept B.C. lumber out on some technicality, that there was some mysterious nematode. Are we making any progress at all? Are some of these barriers down? Is there freer access by your members?
Mr. Rezac: Our embassy, in particular Don Campbell and his staff, and our consulates in Japan have done an outstanding job. For the first time, for example, I am told that Ontario hothouse tomatoes -- and hopefully B.C. hothouse tomatoes will be next -- have access to the Japanese market. So there is progress being made. It is much slower than we would all like to see. It is not the tariff barriers; it is the non-tariff barriers.
Senator Perrault: They are just as hurtful as full tariffs, are they?
Mr. Rezac: They are, but I do see that changing. I will leave with the committee a list of the delegate profiles from the Kansai-Canada West Business Forum. Senior officials such as those from the Marubeni and Mitsubishi corporations, who are involved in this exercise with Kansai-Canada West are very influential in impacting public policy in Japan. We had thought this exercise would be every two years. They want to make it an annual event now, one year in Japan, the next year back here. We are optimistic that the progress we have seen so far will continue.
There are hundreds of Canadians in Japan building houses right now, and the building standards have to change.
Senator Perrault: They are doing 2-by-4 construction.
Mr. Rezac: That is right. The 2-by-4 construction stood up in the earthquake and the Japanese traditional houses with the heavy tile roofs collapsed, and that is where most of the people died. So we are making some real inroads. I was in Winnipeg earlier this week and you will see an export home designed for Japan on display in downtown Winnipeg. The benefits are right across Western Canada. We hope in time that this Kansai-Canada West initiative will become a Kansai-Canada initiative.
Senator Perrault: Out of that Kobe tragedy could come some good business for Canadian construction.
Mr. Rezac: It has already happened. We have people regularly sending container loads of homes over to Japan.
Senator Perrault: I understand that during the initial phases of the new airport there was overcrowding and delays in expediting baggage, and that occurred right from the day it opened. Some additional bays are being added.
Mr. Rezac: The new terminal in Vancouver is already at capacity and we are expanding the airport.
Senator Perrault: There will be 14 new bays added?
Mr. Rezac: Yes.
Senator Bacon: As the Chairperson on the Transport and Communications Committee I was quite interested to hear from you. We were here in December looking into transportation safety; we visited the airport and I must say how impressed I was at the safety of the airport. I was pleased to pay the $10 to leave. I did it with pleasure. What would you like to see by way of legislation to help Vancouver keep the flow of visitors and not lose that flow to Seattle?
Mr. Rezac: Well, for example, one area we would like to see government stay out of, and I mean both federal and provincial governments, is the aviation fuel tax. They have intruded in recent years in the area of aviation fuel tax. As a result of the problems with Canadian Airlines, the provincial government in Alberta and the provincial government in B.C. have indicated that they may do something with the aviation fuel tax. This is a very competitive business and it will not take much to siphon off those continental gateway folks into Seattle. Right now we are very competitive.
I should point out that the federal government is about $40 million better off than it would have been had it still been running the airport. None of that $500 million of construction is federal debt. It is not part of the $600 billion federal debt and it is not guaranteed by the federal government. I must admit that the way of financing that was a bit outrageous. We actually got away with charging the toll on the bridge before the bridge opened. I do not know if that has ever been done before in public policy, but in fact it was accepted and was the only way that construction could have taken place; it is well accepted by travellers, as you indicated.
I would say that the area of aviation fuel tax would be one. The other would be anything to do with Customs facilitation and pre-clearance.
The Board of Trade was also instrumental, as Senator Carney and Senator Perrault know, in initiating the PACE line at the border. We went to Ottawa when Larry Bell was our chairman, and to Washington, D.C., and lobbied for that. Both governments agreed to the experiment at the border with a sticker and pre-clearance for customs and criminal violations. People would not have to stop going through the border. The CanPass system flowed from that, and that has been spread across Canada.
We would ultimately like to have people go through proper pre-screening and have continental clearance so that there is much better access back and forth across the border. It would require some form of special ID card, if not a passport, but I do not think a passport would be necessary; it would be a PACE card of some kind. It would be exceedingly helpful to cut down those delays that have to do with Customs and Immigration.
Senator Bacon: Would you need the co-operation of the airlines?
Mr. Rezac: Certainly with respect to having U.S. Customs do the clearance for both Canada and the U.S. when they use Vancouver as a gateway and hub, I am told that the United States wishes access to the passenger list before the aircraft lands.
One of the big problems we have here at Vancouver is that the Charter of Rights gives everybody in Canada status, regardless of where they are from. Prior to the Charter of Rights, refugees and others could not simply come and get status here. They had to apply from offshore. We have a problem with people boarding the airplane, showing the documents to the airline people, flushing the documents down the toilet and then claiming refugee status when they arrive. There are some difficulties associated with that. We cannot do things now that we could do before.
Senator Stollery: What size of material is used in Japan, if they do not use 2-by-4s.
Mr. Hansen: They use different sizes of building materials; some are 2-by-4s, and some are different sizes. The type of building construction that has been traditionally used in Japan has been a post and beam construction, where there are big posts and then beams lying on top, as opposed to the frame construction that we use here, in which we use 2-by-4s to build the walls.
Senator Stollery: So they do not use studs?
Mr. Hansen: They are starting to use studs. There is a Japanese carpentry school operating in Vancouver and some 100 carpenters come here every year to learn the building techniques used here; they then take those techniques back and employ them in Japan. That is an interesting export opportunity.
Senator Stollery: I have heard about adopting Japanese standards for 2-by-4s and I could never quite understand what that meant.
The Deputy Chairman: Over the years there has been a good deal of material in the press about the Port of Vancouver and the reliability of the port for the efficient shipment of heavy cargo, particularly wheat. This was in the news lately. I do not know whether you are the appropriate people to deal with the question, but, assuming that there is indeed a genuine problem, what seems to be the cause? What is the cause of the problem in getting wheat to the port and on to the ships?
Mr. Hansen: Perhaps I can just throw some thoughts out on this. It is not a simple problem with a simple solution. For instance, because of the weather we have been experiencing recently, the railways have had great difficulty in getting their grain cars to the port. Obviously, that is a temporary problem, but there are some additional issues that are of real concern, such as the way wheat is shipped and then sorted and cleaned in the port. In fact there are some plans afoot to change the whole cleaning approach so that different grains are not handled in a single terminal; instead, one type of grain would be handled in one terminal and another type would be handled in another terminal. As things stand, in order to pick up a full load of grain, ships often have to shift a number of times from terminal to terminal. Each time they make a shift, it takes time, and tow boats and pilots are required. There are a lot of problems with that.
At a broader level, our organization has been very active over the last few years in urging that the restructuring of ports take place. Bill C-44, which is now in progress, is a major step in the right direction to give the regional ports, the major ports, the freedom to manage their affairs and not have to apply to Treasury Board and apply through the Canada Ports Corporation for everything that they need to do.
You will hear more from Captain Stark this afternoon. He will talk specifically about those kinds of issues. We would like to see the ports move in the same direction as the airport authorities have gone, to be able to raise financing in the private sector, to respond quickly to the marketplace and to the needs of the shippers and the users of the port and to work with the local communities more effectively.
The Deputy Chairman: You seem to imply, and probably intend to do so, that the present problems with respect to wheat shipments are not to be laid at the door of the railway companies; it is not a question of mismanagement -- and you referred to the weather situation. Am I correct in drawing that conclusion?
Mr. Hansen: You are correct in that conclusion.
Senator Andreychuk: In defence of the Minister of Agriculture, he quite rightly said yesterday or the day before that he is seriously going to sit down with the railways. We have always had weather problems in January, so there has to be more to it than that. There is simply a lack of boxcars coming in on a timely basis to take that wheat out, and therefore it is sitting there waiting. I think that was on the national news. It goes back to rail transportation and some of the undertakings that the railways made and the priority they are giving to the shipment of wheat. Surely you cannot say the weather is the cause, because we have had a lot of different kinds of weather. I think the minister was quite right in saying that that could not be the entire defence, and he is looking into it.
Perhaps I could pick up on that. The rail problem has been an ongoing boxcar problem, and that is one part of it, but certainly the modernization of the ports with the immediacy of needs is an absolute priority if Vancouver is going to be used as a port, not only for grain but also for a lot of small manufacturers through Vancouver, because certainly the feedback I am getting on the prairies is that perhaps they will truck to Seattle if they do not get the response here. I am pleased to see that that is on your agenda.
Mr. Rezac: Or they will go by train to Seattle. There is talk of a deep water port being put in at Cherry Point, which might be a coal port. With the Crow rate gone, there is no reason why we have any special claim. There are alternatives; you are quite correct.
The Deputy Chairman: I just have two closing questions. One deals with private-sector co-operation and the second deals with Hong Kong and its impact on Vancouver. We have heard quite a bit about how effective the Team Canada approach has been at a central-government-to-central-government initiative, and you have outlined how on a domestic level the Asia Pacific initiative between the federal government and the provincial government unleashed a lot of energy, which led to several successful changes, including the airport and the Maritime Centre. This is not a process which is used extensively across the country. Is there any way it can be enhanced? Clearly, part of our relations with Asia have to involve the private sector. From your experience, is there anything we should be doing to enhance this kind of public-private sector?
Mr. Rezac: I think the Asia Pacific initiative was very successful because it did not take a lot of government money.
The Deputy Chairman: $2 million.
Mr. Rezac: Yes. It was peanuts, but it did involve the whole business community and other parts of the community as well. I personally do not think there is a need to do that here. We have institutionalized our relations with Asia very well and with new airports and new air bilateral agreements and the terrific representation we have here in the bilateral organizations and the work that Senator Austin and Senator Carney and others have done, all we have to do is keep that going and do more of it.
I would encourage the government to take a look at the Asia Pacific initiative formula with other provinces. Perhaps you would know it better than I, but certainly Manitoba is very keen on Japan, and Manitoba, given its geography, needs all the help it can get, but that will pay off in spades in terms of exports. I think a very inexpensive federal-provincial co-operative agreement could be made with Manitoba and perhaps with Saskatchewan, because they are very keen on Japan and Asia as well. I have not met with the provincial people in Alberta. I know they have a twinning arrangement with Sapporo and that region of Japan.
With British Columbia it is difficult. It is not clear to us that our provincial Premier understands the importance of trade, because he dismantled his trade department entirely. He has not done the same with any other provincial department, but he has dismantled trade at a time when our trade in B.C. is down 8 per cent year over year, and we have high unemployment and negative or low investment.
I do not know if there is much hope, senator, at the provincial level here, but I think the business community can carry it here. However, I would encourage those in Ontario and Quebec, since it is the Year of Asia Pacific, to become involved in a very inexpensive Asia Pacific initiative type of exercise. The Asia Pacific Foundation has a lot of experience and that could be a role for them. They are very busy during this year, but they could do it as a follow-up.
The Deputy Chairman: Has the Board of Trade done any impact studies on what will happen to Vancouver and British Columbia with the hand-over of Hong Kong to China. Have you done any negative or positive impact analysis?
Mr. Rezac: We have not, but the consensus around our board table is that it is the business community in Hong Kong that drives the economy, and that is not going to change. Quite frankly, there is terrific optimism around our boardroom table with respect to the health of the Hong Kong economy after the changeover. It is not something that we are concerned about.
The committee adjourned.