Proceedings of the Standing Senate Committee on
Foreign Affairs
Issue 7 - Evidence
OTTAWA, Wednesday, December 10, 1997
The Standing Senate Committee on Foreign Affairs met this day at 3:24 p.m. to examine and report on the growing importance of the Asia-Pacific region for Canada.
Senator John B. Stewart (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, we continue our work examining the growing importance of the Asia-Pacific region for Canada. Today, we have with us Mr. John Klassen, the Director General of the APEC. He will be giving us an assessment of the achievements of the conference which took place recently in Vancouver. We all know that the circumstances in which the Vancouver conference took place were not fully anticipated when the plans for the conference were first made.
One of the effects of the economic circumstances was to direct a great deal of attention to the conference. That was, in a way, beneficial because it made the organization and the meeting of far greater importance than it might have been if those circumstances, unhappy as they were, had not occurred.
We are most appreciative that Mr. Klassen is with us today on what is undoubtedly a very important assignment, to make an appraisal, an evaluation, of the achievements of the conference which took place in Vancouver.
Mr. Klassen, I assume that you have opening remarks. The floor is yours.
Mr. John Klassen, Director General, APEC: Thank you, Mr. Chairman. What I propose to do is to review the highlights of the meetings with you, and then I am quite prepared to answer any questions and enter into a discussion with you.
I have provided for you this package, APEC Vancouver 1997, which includes in it the ministerial statement, the leader's declaration, and a publication that we call the APEC 1997 Results Report. This was a Canadian innovation. Nobody has prepared a results report like this before. The reason we did this was that, frankly, we wanted to try to capture in a reader-friendly, and even a media-friendly, way what it is that APEC accomplished, what we accomplished in our year as chair of this process.
APEC has suffered and continues to suffer, to some extent, from a certain lack of understanding, from an inability to explain itself, what it is that it is doing for business people and more broadly for peoples in the region, what it is that this large complicated process, which absorbs a fair amount of resources, is delivering and is doing for us as individual members of the forum and, also, for the region as a whole.
We are rather proud of this publication. I commend it to you as a summary of what we achieved during the year.
Let me talk about three groupings of what occurred in Vancouver. The first is the meeting of ministers, which was the meeting of foreign and trade ministers. They co-chaired the ministerial meeting. Second, of course, was the meeting of the economic leaders themselves. There is a third element that I think we should mention, which is the people's summit, which is not an official APEC event but which clearly had a fair bit of profile and attention and engagement with our ministers, which is quite important to note.
You are quite right, Mr. Chairman, when you noted in your opening remarks that this meeting was unique amongst APEC end-of-the-year meetings, in that it took place at a time when certain external circumstances were really impinging upon the agenda. This is quite different from any of the other APEC leaders' meetings that have taken place in that, other times, they have met and they have focused on APEC activities, APEC priorities. This time, the financial crisis in Asia and spreading beyond was clearly front and centre in people's minds, and clearly front and centre in the minds of the media as well. It dominated discussion amongst the leaders. I will come to that when I speak about the leaders' meeting.
Another issue that was at the top of the list, in a sense, was climate change. It was a little lower on the list than the financial crisis, partly because Kyoto, which is happening now, was at that time only two or three weeks away. I think everyone agreed that Kyoto was the place to try to negotiate climate change, not to try to do it within APEC.
Within that framework we engaged in the meetings.
I would add that I recall seeing a number of press reports before the conference in Vancouver stating that there was great danger that the financial crisis would just blow everything else off the APEC agenda. In fact, that was not true.
The other major accomplishment of the meeting and of our year was the progress we made on early voluntary sectoral liberalization, which goes by the unhappy acronym of EVSL in the APEC world. This was a significant achievement in a period of only six or seven months under our chairmanship. That stands by itself as an accomplishment coming out of Vancouver. In fact, there is a rather interesting link between what we achieved there and the financial crisis in Asia.
The ministerial meeting itself was preceded by a couple of days of meetings of senior officials to review the agenda, in particular, to focus on this question of sectoral liberalization. This grew out of the trade ministers meeting in Montreal in May, at which time ministers instructed us to prepare for them, for November, a list of potential sectors for early voluntary sectoral liberalization. Ministers made it quite clear in Montreal that this was not to be all pre-packaged for them by officials. Rather, we were to do preliminary work, but we were to present them with options and leave it up to ministers to make the decisions.
We launched the work program following that meeting in May. To our considerable surprise, we ended up with about 60 different nominations of sectors for early voluntary liberalization. Virtually every APEC member, with one or two exceptions, put forward some proposals. Canada put forward about seven or eight proposals.
Through a series of meetings, a number of bilateral contacts and so on, officials then worked to whittle that down. We did that by trying to identify those sectors that attracted the most attention, the most support, and the most activity. We had a rather complicated voting support system that showed how these were shifting as the time went on.
By the time the ministers met in Vancouver, we had cut it down to 15 sectors. The trade ministers met by themselves, without the foreign ministers, on the Friday morning, to focus solely on this question of sectoral liberalization.
When I say we had cut it down, that does not mean that the others were all dropped off the table. It was simply recognized that these 15 were the ones that attracted the most attention, activity, and support across the board.
At the back of the ministerial statement, you will see an annex which is the statement on early voluntary sectoral liberalization, which has listed in it the 15 sectors that we had identified as the primary candidates for support and for recommendation to leaders. Out of that 15, we reached an agreement on nine, which are also listed here, as those that warrant immediate attention --immediate means the beginning of 1998 --to complete the work on these proposals through finalizing the scope for coverage, flexible phasing, measures covered and implementation schedule, including choice of measures, et cetera.
Quite clearly, what we agreed to in Vancouver was to initiate a further process. This is not like the ITA, the Information Technology Agreement, in which APEC played a considerable role last year in giving it a boost of support at a critical time in the November meetings. Rather, we identified and agreed upon nine, key product areas where we will engage in substantive work beginning in 1998 to flesh out these proposals, to identify precisely what kind of product coverage we are dealing with and what elements of the proposal we are talking about.
This is not like a sectoral initiative that one would have in the World Trade Organization. There you would focus pretty well on tariffs or non-tariff measures. In the APEC context, you have both of those elements. You also have elements of economic and technical cooperation, technical assistance, perhaps trade facilitation. Each proposal is quite different, and each has this mix of various elements. We have to define these more clearly.
A lot of work remains to be done. We have given ourselves as a time-frame, if you will, the meeting of APEC trade ministers in June in Malaysia when we, as officials, will have to report to ministers on the progress we are making.
Our aim on the nine primary sectors is to commence implementation, wherever possible, in 1999. This is an ambitious schedule, but it is one to which we have committed ourselves. Canada will continue to play a fairly lead role in pushing this process forward.
Of the nine primary sectors, three are Canadian priorities and were Canadian priorities in the original proposals. Those are environmental goods and services, fish and fish products, and forest products. Oil seeds and oil seeds products was also a Canadian proposal. It did not quite make the top nine list, but it is part of the top 15 and, therefore, it will continue to receive attention through 1998 to move that ahead further.
It is no real secret that not all APEC members were delighted with this process. Not all APEC members are prepared to sign on to all elements of all proposals. The concept is in here; and the wording about the voluntary nature of this process is also here. However, some might ask: What has been achieved if it is voluntary in nature; and how are you going to drive this forward in terms of trade liberalization?
We are confident that, as we develop these proposals, as we get more members to sign on, to commit themselves, we can build sufficiently broad support amongst members on these proposals to move them forward. You commit yourself on a voluntary basis, but once you commit yourself to participate, you have then bought into the process.
One question that often comes up is whether we are proposing to do this on the basis of only APEC economies or whether it is contingent on moving it into the World Trade Organization. Of the 15, the environmental goods and services is the only one that explicitly states that the purpose is to build a consensus, a block, if you will, within APEC that we can carry into the WTO, recognizing that we must have the WTO -- which basically means the Europeans -- on board if this is to work.
All the others leave the question open. It is our preference to build these into WTO work, but we may well make a decision at some point that it is worth our while to proceed on an APEC-only basis. APEC-only in this context means that you give the tariff concession to others as well. APEC is not a free trade area and, therefore, we cannot give tariff concessions just to each other. Everybody else who is a member of the WTO benefits from any tariff concession, reduction or elimination, that has been agreed to in the APEC context. However, in some sectors, that may well be worth our while. Fish and fish products is a very good example of this. If you can capture a significant proportion of the trade within the Asia-Pacific region, the fact that some others would get what is called a "free ride" is not a major problem because the free ride is too small to worry about.
This is an assessment that you have to make on a case-by-case basis. It is an assessment we will all make individually on a case-by-case basis and see where we come out. Clearly, as I said earlier, our preference is to use these to build forward into the WTO. In fact, we have already made a presentation to the WTO working party on market access, advising them in some detail of the results of the ministerial meeting in this area, thereby encouraging our WTO friends who are not members of APEC to consider this, to be informed about it, and to think about the process.
In addition to what we achieved on sectoral liberalization, there are a couple of other key points on the trade agenda. One was to highlight trade facilitation. The key elements of trade facilitation are explained fairly well in the results report. This recognizes what was done in APEC over the year, work that we directed, to a large extent. We pushed a number of the working groups and committees to move their programs forward and to define better what they have in mind, where they are going, what their objectives are in terms of trade facilitation.
It is perhaps in the trade facilitation area that APEC can have its most direct and its most immediate impact on the bottom line of business. An interesting study was done by the Economic Committee of APEC which was based on the commitments made last year under the Philippines chair. It concluded that, in terms of impact on overall GNP in the region, APEC straight facilitation measures would at this stage have a greater impact than would its trade liberalization efforts. That was before we started to engage in sectoral liberalization. Nevertheless, I think it is a very important element.
An element that is not very exciting to many people is customs. It is standards and conformance. It is government procurement. These are not the sorts of things that make headlines, but they make a significant difference to business people.
The jewel in the crown for us is the customs blueprint, which is referred to in the document which has been provided. It is also available as a separate, glossy document as well as on the Web page. This is, very simply, a program designed to harmonize and simplify customs procedures through the Asia-Pacific region, throughout the APEC region. It is way ahead of what anybody else in the world is doing. If the members do what they are committed to doing, by the year 2001, we will radically change the way business does business, and the way goods move throughout the region. This is well supported by the members.
Proof of this is that we were faced with the unique and not unpleasant situation of having to deal with businesses, private companies, who were coming to us and saying that they wanted to put money into this to help us realize our goals. Much of it involves technical assistance to the developing members of APEC. Freight forwarders, express parcel people, customs brokers, these kinds of businesses, came to us, and we have had to develop some principles as to how we can engage them and use some of their funds to support the program. This is a good indication that business believes that this will have an impact on the way goods move throughout the region.
Another element of the trade agenda that ministers discussed was a study by APEC on the impacts of trade liberalization. This is an area of increasing study in a number of multilateral organizations: In the OECD, WTO, UNCTAD, and others. We argued, and we were supported by others, that what we should be doing is not only studying the benefits of trade liberalization, but also recognizing that trade liberalization does have impacts on different elements of society. It results in some dislocations. If we are to share experiences and knowledge on the benefits of trade liberalization, there would be a value in also sharing experience and knowledge in how we deal with the impacts of trade liberalization on our societies.
There was an agreement that we would proceed in that manner. Officials have been instructed by ministers to develop a work program and to make sure that we are not duplicating what is going on in the rest of the world because, as I say, there are a number of multilateral institutions now focusing on this sort of work.
The other main area of APEC activities, as I have previously explained when I met with you, is in the area of economic and technical cooperation. You can think of APEC activities very broadly in two groups: One is trade and investment liberalization; the other is economic and technical cooperation.
On the economic and technical cooperation side, ministers thoroughly reviewed the results of activity through the year. Last year, ministers and leaders gave us six priorities for economic and technical cooperation work within APEC. These are listed in the ministerial statement. Canada gave a focus to infrastructure and to sustainable development as two of the six. There was discussion and review of what we had achieved in not only those two, but also in the other four, and how we are treating these six as cross-cutting issues within APEC to try to bring a better focus to what we are doing on economic and technical cooperation.
Ministers also approved the creation and the establishment of a subcommittee of senior officials on economic and technical cooperation. This responds to a concern of a number of developing members, in particular, of APEC who feel that the emphasis on the agenda is unbalanced, who feel that there is too much emphasis on the trade agenda, and not enough on the economic and technical side of things.
I do not think that is a correct assessment of APEC work, where it has gone and where it is going, but it is a fairly strongly held view. The argument has been that there is a committee on trade and investment but there is not a committee on economic and technical cooperation. We have created that in order to focus more on the work on economic and technical cooperation.
The ministers met with the members of ABAC, the APEC Business Advisory Council. Canada also chaired ABAC this year. There the discussion focused on some of the ABAC comments on APEC's work program from last year and how a number of APEC programs are already responding to ABAC priorities and concerns.
On the Saturday morning, we introduced an innovation in an APEC meeting by moving the ministers into a retreat-type format. We did this in order to focus, in particular, on the question of broadening the engagement of APEC, and on the need or the desire to engage broader elements of civil society in APEC's work. For many, this is a sensitive issue. We thought that it would be best to stage this in a retreat-style format where we hoped ministers would feel more at ease and engage freely in discussion.
There was also Minister Axworthy's initiative on emergency preparedness, as well as the membership question.
On the question of broadening the engagement of APEC, there was a very good exchange amongst ministers. It went on longer and was more extensive and more detailed than perhaps we had even hoped for. There was a strong recognition amongst ministers around the table of the need for APEC to be seen to be responding to the concerns of broader elements of society and not just the business community.
There is, however, a difference of view as to whether or not one does this at the APEC level as, for instance, we do with the business community through the APEC Business Advisory Council, or if this is a responsibility of national governments who then represent the views of their societies around the table in APEC. We had no intention of trying to drive this towards any kind of a conclusion or decision. We wanted to initiate the discussion within APEC, which has not had this kind of discussion at the ministerial level. We had done it at the level of officials earlier in the year. From that point of view, it was quite successful.
There was very strong support for Minister Axworthy's initiative on emergency preparedness. There was agreement that officials should work and report to ministers by June 1, to report intersessionally, on what an APEC work program or niche might be in the whole area of emergency preparedness. There is already a fair amount of work going on in APEC groups which deal with earthquakes, the results of earthquakes, volcanoes, oil spills, and certain environmental disasters. There are, of course, many institutions involved in the region, whether it be the Asia Development Bank, the Red Cross, or the United Nations. Officials have been instructed to co-ordinate, and to try to define an APEC value added role in this process. What can APEC add to better preparation for emergency preparedness across the board, without trying to define the emergency?
Ministers had a fairly extensive review on the membership question, which was interesting, because they did not reach a consensus. They did not reach a decision, but leaders did. I will deal with that when I talk about the leaders' meeting.
In the final plenary of the ministerial meeting, there was discussion of how to characterize the financial crisis in the ministerial statement, and what sort of action APEC should be taking with regard to that crisis. There was a very strong consensus that APEC should, and in fact did, endorse the Manila framework that emerged from meetings of senior finance officials in Manila just a few days before the ministers and leaders met in Vancouver. There was some discussion of perhaps accelerating the finance ministers' meeting which Canada hosts this year in Kananaskis. There was some discussion as to whether or not that was the way to go. In the end, there is a reference to it in the ministerial statement.
As to the leaders' meeting over a day and-a-half, the main event was the meeting with the APEC Business Advisory Council. This is the only group that meets formally with the leaders. They had a very good meeting. I know the business people were pleased with what transpired. They met for about 65 minutes.
The ABAC members presented the highlights of their 1997 report -- which I can make available if you are interested or it can be pulled down off the web -- focusing on their recommendations on trade and investment, some of their ideas on greater business mobility, some initiatives respecting economic and technical cooperation and how to engage the private sector. They also include a proposal respecting an information technology education initiative and a proposal they have on facilitating infrastructure investment. They then deal with the exchanges of the various leaders.
The next day, the leaders went into their private meeting. No ministers attended. We had thought the discussions would focus on infrastructure, which was one of our key priorities this year. We did a fair bit of work on that and we developed a Vancouver framework for facilitating private sector investment in infrastructure, and public-private partnerships in infrastructure development. We had envisaged some discussion amongst leaders on certain aspects of infrastructure development but, quite frankly, the discussion of financial crisis took over at this point, and the leaders spent almost all of their time on the question of the financial crisis.
It was a very interesting discussion because, in one room you had representatives of those economies that are currently suffering as a result of the crisis, some of which had suffered previously from similar or even more severe crises. There was a most interesting and very useful exchange of views on how best to respond to these sorts of crises, and what are the key elements that one has to engage in order to manage these crises.
The consensus came down to two or three key elements: One was that, in facing a crisis of this order, it is imperative that one be prepared to engage quickly in a substantial and transparent domestic reform of banking and financial systems. A second key element was that one has to have external financial support but that one must use that external financial support not just to paper over the cracks but rather to support what it is that is being done in terms of internal reforms. A third key element was, very simply, reaffirming the old adage regarding short-term pain for long-term gain, that the harder and the faster you take your medicine, the quicker and the stronger you will emerge from the crisis.
There was a very good discussion along those lines, and an exchange of views amongst those who are suffering the effects of the crisis at the moment as opposed to those who have been through it in the past.
There was some discussion over lunch on climate change. Leaders meet alone at lunch. There are no note takers present. As I understand it, it was more or less a general exchange about principles and priorities for the Kyoto meeting but they did not get into any detailed discussion. There was certainly nothing resembling any kind of negotiating on positions for Kyoto.
When the ministers returned after lunch, there was more discussion on the financial turbulence and then they focused on the question of membership. There was a very good exchange around the table on membership and, in the end, as the Prime Minister announced, leaders agreed to admit three new members, Vietnam, Peru and Russia, who come in as nineteenth, twentieth and twenty-first members of APEC in 1998, accompanied by a ten-year period of consolidation or membership moratorium, if you will.
There is a strong feeling amongst economies that APEC should not grow too large, too fast, that one of the benefits, particularly at the level of leaders, is the relative smallness of the group, the collegiality of the group, the ability that it provides to have exchanges on some sensitive issues such as financial turbulence, as we were able to do this year, and that, therefore, now working with 21 members, we should have a period of consolidation whereby we can continue to evolve APEC's work program and APEC itself, as well as absorb these new members. These will not be without some challenges. With Russia we now have the second largest non-WTO member in the world, the other being, of course, China, within APEC. That will affect the dynamic. How, I am not exactly sure, but I think it will.
On the other hand, I think that it provides Russia, for instance, with an excellent opportunity to begin to learn, to begin to become much more familiar with a number of the trade policy concepts and concerns that we deal with in APEC which mirror, to a large extent, what you have to deal with in the WTO.
The third and last matter I will speak to briefly is the people's summit which was held in Vancouver. It was a series of meetings or workshops from about November 19 to 23 to deal with a number of issues. I can say without fear of contradiction that we, Canada, certainly our ministers and the Prime Minister, had deeper and more frequent connections with representatives of the people's summit than I am sure has been the practice in past APEC meetings.
It really started last October when the Prime Minister met for about an hour and-a-half with a group of about 35 or 40 people from the Asia-Pacific Labour Union, which is an off-shoot of the International Confederation of Trade Unions in Geneva, wherein the labour leaders presented a statement to the Prime Minister, as the chair of APEC, about their concerns, including their desire for a more structured engagement with the APEC process. What they would really like is something analogous to the ABAC, the APEC Business Advisory Council, but in a labour forum. Frankly, I do not think APEC is quite ready for that. However, they did recognize themselves that there had been significant movement during the Philippines year and in the structure and wording of the leaders' declaration last year and, more particularly, in the human resource development ministerial meeting in Seoul in September, where there was explicit recognition that labour, management and government must work together in order to develop proper human resource development policies.
Coming out of that ministerial meeting there was an instruction to officials to identify programs and initiatives whereby this tripartite approach could be used. In Vancouver, we had daily briefings of the Canadian NGO groups by a Canadian official on progress through the officials' meeting, and through the ministerial meeting. The ministers, Axworthy and Marchi, met with six representatives from the people's summit who presented to them the principal conclusions and recommendations of the people's summit. They also met separately with three other groups from the people's summit. They met with representatives of the sustainable development forum, the free media forum, and the labour forum.
I cannot speak for the NGO community, but I believe that we did meet their needs and their wishes, in terms of engagement with Canadian ministers in Vancouver, by welcoming, listening to and receiving their representations on APEC. In fact, a certain amount of this was then reflected in the retreat discussion I mentioned earlier, when ministers Axworthy and Marchi addressed the retreat and, leading off the discussion, drew upon a number of the points that had been made to them by these NGO groups.
In summary, where do we leave APEC at the end of 1997? We are in the process of passing on the mantle to Malaysia. I think that we leave APEC stronger than we found it. I believe we leave it better managed than we found it. I think that we have helped to structure the continuing evolution of this body. In fact, one of the key points to remember is that APEC has changed enormously from what it was even two or three years ago. It is a body that continues to evolve, that continues to become much more mature. It is now, especially on the trade agenda, much more recognized as one of the key elements in that sort of multilateral constellation of organizations that deal with trade and economic issues, whether you are talking about the OECD, the WTO, UNCTAD or whatever. People also now consider what is happening in APEC. This is a sign of the maturity and the evolution of the process.
I think that we have left the trade agenda much stronger than we found it, in particular with respect to the work that we did on sectoral liberalization and some improvements in individual action plans. We have presented a much better management outline of the economic and technical cooperation file through a number of innovations we introduced respecting management techniques, particularly by taking the approach that it is not sufficient for the working groups to simply be off doing their own things. They must be aware that they are contributing to the larger picture as defined by these six priorities.
We have improved, through the year, business involvement in APEC. It was not done only at the ABAC meeting in Vancouver. Through each of the sectoral ministerial meetings we held this year, we had substantial business involvement from not only the ABAC but also from the broader business community. We had extensive dialogues between business communities and sectoral ministerial meetings.
I believe we have gone some distance in broadening the engagement of APEC. We placed emphasis this year on the engagement of youth and women. We had a youth element in all of the sectoral meetings held in Canada. We had a youth element in Vancouver. We emphasized the role of women and gender issues throughout the various working groups. Next year in Manila, in the Philippines, there will be the first ever APEC meeting on women's issues. This is a direct result of a Canadian initiative. Working with our friends in the Philippines this was very much a Canadian objective and very much Canadian work that led to the decision to hold that meeting, which was blessed by, and endorsed by, the ministerial meeting in Vancouver.
On the domestic side, we have gone much further in our efforts to positively engage wider elements of civil society in the management and the development of APEC process. We do not control the agenda as much as we do in our own backyard, but we have put the issue on the table.
I think APEC has now come to a point of sufficient maturity that it is developing its own dynamic, in a sense. There have, frankly, been some who have asked whether subsequent chairs will put as much emphasis on, say, trade as we did. Each chair brings a certain emphasis to the process. The Malaysians have stated that they want to emphasize, under economic and technical cooperation, human resource development and new technologies for the future. The trade agenda, for instance, I believe has now developed a sufficient momentum that it is becoming more ingrained, if you will.
What we have launched in the area of sectoral liberalization will continue. We have the pressure point of the trade ministers meeting in June. Then the next pressure point will be the November meeting of ministers and leaders. The programs have become more complex but, at the same time, they have taken on a certain dynamic and a certain commitment from APEC members that I think is a sign of the maturity and evolution of the process.
I will stop there, Mr. Chairman. I will be pleased to answer any questions you may have.
The Chairman: Thank you very much.
Senator Grafstein: Is it Ambassador Klassen?
Mr. Klassen: No, sir, not yet.
Senator Grafstein: I would congratulate you and your colleagues on managing what obviously was a most complex and difficult task in such a short time. Being confronted, almost before the event got off the ground, with a major crisis must not have made your days there easy. We were watching and following it as best we could from here. It was obviously a tour de force in the sense of handling a very complex and moving target.
Mr. Klassen: Thank you.
Senator Grafstein: Our committee is obviously interested in APEC. One of the things we are wrestling with is how we bring focus to a general range of topics, because we agree that Canada has limited resources. How do we focus on the issues that we think are in our national interest as opposed to covering the kaleidoscope of 15 or 20 issues? We cannot deal with those at the United Nations, let alone at APEC, so where should our priorities lie? I am delighted that you mentioned some priorities on the trade side at least.
Through all of this uncertainty, where in the short run are our best bilateral trade prospects? Have you and your associates on behalf of the Canadian government, bearing in mind our limited resources on the trade bilateral side, come to any conclusions as to where should we be engaged? Should it be with Taiwan, with Korea, with Vietnam?
As you know, the Americans are often fast-tracked. This allows us to move quickly on fast-track bilaterals as opposed to multilaterals. Should we be engaged in a free trade agreement with Japan or at least in a sectoral agreement with Japan with respect to the automotive industry? That is my first question.
My second question relates to the IMF. I have been given to understand by former officials of the IMF that the IMF was caught off guard by both the speed and the intensity of the problems in Asia-Pacific. There is enormous difficulty now in obtaining the back-up funds necessary to ensure that the pockets of IMF are deep enough to deal with what just may be the beginning of some earthquakes. We may have just heard the tremors of the financial earthquakes in Asia which could hurt us here.
The American government, at least the executive, agreed in principle to raise $3.5 billion as part of their secondary support for the IMF, but Congress has turned them down. You do not ask for secondary support unless you need it. Where do we stand on the IMF? What are the deep problems with the IMF? Should we be preparing for more violent shocks in a shorter time-frame and, if so how do we go about that?
If the witness has difficulty with the first question, the more important question is the second question regarding the IMF.
Mr. Klassen: Unfortunately, senator, I can answer the first one better than I can the second one. I am the representative for APEC and trade policy within the department. Frankly, I do not feel competent to answer your questions on the IMF. I respectfully suggest that you might want to invite some officials from the Department of Finance to come and talk with you.
We are now chairing the APEC finance ministers' process, and that process does have a fairly extensive work program. Essentially, it deals with how you put in place a well-structured and transparent banking and financial system. It deals with the medium- to longer-term fundamentals of how to structure your economy and your financial system in the best way so as to avoid these kinds of problems.
As for the IMF being caught off-guard, where are the deep pockets, and what does that mean for Canada, I am afraid I would have to leave those questions to finance officials.
Your other question about where we put our energies and our priorities in terms of trade is a very good one. It is a broader question than dealing with the Asia-Pacific region that we have to wrestle with in the department. As you know, we are now engaged in a number of initiatives. We have APEC. We have a very substantial built-in agenda coming up in the WTO in the next couple of years that will engage substantial resources in negotiations. There is talk about a new round in the WTO, which would probably be launched within the next few years. There is also the Free Trade Agreement of the Americas, as well as any number of other of bilateral arrangements. You may have seen the reference lately to Canada-EFTA free trade agreement. Then, of course, there is a wide range of trade disputes that we have to manage on a day-to-day basis. The questions are how to deal with these and where to set priorities.
Clearly, for us, the overriding priority and the overriding principle remains that of the multilateral principle and our engagement in the WTO. At the same time, we believe that moving on bilateral FTAs, on free trade agreements, or within regional groupings like APEC -- which is not a free trade area but still has a drive towards trade liberalization -- is good because the end result is a liberalization of trade. Eventually, this will lead to a further liberalization at the multilateral level.
An FTA with Japan has been talked about from time to time. Quite frankly, it is possible there might be some interest from Japan on the industrial side. On the side of fish and agriculture, which are principal interests of ours in Japan, there is zero interest in engaging in any kind of a free trade discussion. There is very strong concern on those fronts as to how we engage in the WTO and in the APEC process.
These are all areas, even on a sectoral basis, that we continue to explore where and when we can, recognizing that we do not have the resources to focus on everything at one time.
Many of these issues are longer-term. Opening the market does not immediately result in a flood of Canadian exports. You may change the framework and improve the base, but then you have to tie this into programs of international business developments so that you alert Canadian business to these new opportunities. You assist them, where you can and, where you must, you educate them as to the opportunities and how to enter the market.
We are defining or targeting better certain growth markets, markets where we see the greatest potential for Canadian exports in terms of business development. The minister is committed to moving more resources for trade development out of Ottawa and into the field so that they focus on new areas or growing areas, such as the Asia-Pacific region.
I do not have a specific or direct answer for you. We see it all of it as part of bigger picture when we are working on these bilateral and larger regional groupings within the context of what we are trying to achieve in the WTO.
Senator Grafstein: It strikes me that one place where we have a common interest and where there is some stability is Japan. This is an absolutely unique opportunity -- and the Americans are off on the fast track -- for us to be much more aggressive on a fast bilateral arrangement with Japan. While I recognize Senator Whelan's concern about agricultural products, I am also concerned with industrial products, particularly the Auto Pact. It strikes me that this is an area into which we should invest some energy and make some commitments in the short run because we could scoop the Americans on this.
The Chairman: Assuming that the Japanese are not prepared to open their ports on agricultural and fish products, what advantage is there to us to open our ports to their automobiles and other heavy industrial products? That is probably the question on which the department would focus. We might want to see some analysis of how that would balance.
Senator Bolduc: I agree with my colleague that we do have limited resources and that we are committed to APEC in general. However, the Japanese economy is so huge, that we should focus on that. We have made a deals with Chile and with Israel. Instead of looking for opportunities for trade with Indonesia and other Asian countries, I think we should focus on Japan because its market is so huge. The same can be said of India, but I believe we should focus on China and Japan.
Mr. Klassen: We have not engaged in detailed discussions on this point with the Japanese. I do not think the Japanese are ready for it at this point.
Senator Bolduc: Does Canadian business pressure the government to try to open doors in Japan, or do you leave a company such as Nortel to do what they can?
Mr. Klassen: No, we assist in every way we can. Unfortunately, the principal trade irritants or problems we have with Japan are particularly in the areas of fish, forestry, and agriculture. Largely, the Japanese industrial tariff is not very high on these products. Their quotas and restrictive practices tend to be much more in the primary resource areas.
There are some difficulties with standards and Japanese regulatory processes, but those are changing. We are making progress on those on the bilateral front and through multilateral efforts. As I say, it is in those three principle areas, the fishery, forestry and agriculture, where the problems arise.
Senator Bolduc: Do you believe that the situation with respect to industrial equipment and so on will evolve slowly?
Mr. Klassen: We continue to press where we can. We have assisted a number of high tech companies in addressing standards issues and regulatory problems with Japan, and we have pushed the Japanese to be more transparent and more open in those areas. The list of trade difficulties with Japan encompasses those very sensitive areas where the Japanese are not prepared to move at this point.
Senator Bolduc: I suspect they are like the Europeans on the subject of resources -- they just do not want to make any concessions.
Mr. Klassen: They are fairly restrictive.
Senator Whelan: Japan is a member of the WTO, is it not?
Mr. Klassen: Yes.
Senator Whelan: How can they be so restrictive then? In Canada, we are told that we can appeal to WTO if we do not allow dairy products in. How can they be so different and yet be equal partners in the WTO?
Mr. Klassen: A number of their restrictive measures are legal under the WTO. Some would say that Canada has pretty restrictive measures, such as a 350-per-cent tariff on some dairy products, but that is legal under the WTO. You cannot challenge that as an illegal measure.
Several Japanese quota systems or tariffs that we would like to change are not necessarily illegal under the WTO. You cannot challenge them in that respect. You must, however, keep the pressure on them to liberalize, to open up, to change their domestic systems.
Senator Whelan: We set up our dairy programs under the international rules of GATT. No political party and no farm organization, asked that that be changed in Canada. However, somebody has asked that Article XI be changed in GATT, but it certainly was not a request from political party. Therefore, it must have been big business and bureaucrats who asked for changes to Article XI.
Mr. Klassen: We are now referring to the Uruguay Round of negotiations. There was considerable pressure from our trading partners to change Article XI and to do away with supply management altogether. We justify that under Article XI of the GATT. As you know, in the Uruguay Round, to use that awful word, we "tariffied" our quotas and now we have tariff barriers.
Senator Whelan: Were you at the Uruguay Round?
Mr. Klassen: Yes, I was part of the team at one point.
Senator Whelan: So you are one of those, when Mazankowski was minister, who gave away dairy products, because Uruguay was the start of it.
Mr. Klassen: We are getting a little off topic, but I do not think we gave it away, senator. When we have a tariff wall of 350 per cent, we have not given much away.
Senator Stollery: That is always the first step, because then they lower the tariff.
Mr. Klassen: It takes a long time to reduce it by 350 per cent.
Senator Stollery: Mr. Chairman, I must say I cannot see the Japanese, in the current turmoil of their financial system, agreeing to very much in the foreseeable future.
The APEC is, essentially, a business and trade amorphous group. Could you describe the extra-curricular activities around the conference which seemed to lead to all kinds of newspaper stories and headlines?
Were the leaders so restrictive in the subjects that they wanted to discuss that people felt they had no access to this group?
Mr. Klassen: The people's summit entailed a series of workshops over a period of about four or five days. Ramos Horta was there to open it on November 19. These workshops dealt with everything from labour rights and free media to environmental questions and sustainable development.
The people's summit is a very large and amorphous group of associations.
Senator Stollery: It is like APEC.
Mr. Klassen: It is even more diverse and amorphous. It runs the gamut from those who are interested in engaging with APEC on a positive basis, to those who merely use it as a platform for special interests and an opportunity to catch the media's eye. There were a great number of media representatives in Vancouver at the time.
Over the past year and a half, I have met regularly with NGO groups here in Canada and tried to engage them, much as we engaged the business sector, in discussion about what it is that APEC does. You are quite right when you say that APEC is principally a trade and investment organization forum, but it is much broader than that when you look at the full range of activities that it covers.
I do not know how many people the NGO groups had at these various fora in Vancouver, but their activities took place without incident. There was a march in downtown Vancouver to the Vancouver Trade and Convention Centre which was conducted fairly peacefully, and there were demonstrations out at UBC where we had the leaders' meeting.
Nobody, including ministers, has access to the leaders' meeting. There are a couple of note takers present, and that is it. One of the virtues of the meeting is that the leaders meet together, alone, and therefore are much freer to exchange views and have discussions.
The ministers met four or five times with different groups from the people's summit to receive their representations and hear their concerns. Ministers Axworthy and Marchi met together with six representatives from the people's summit, only one of whom was a Canadian, the other five being foreign nationals. Then they met separately with the sustainable development forum, the labour forum, and the free media forum.
During that very busy three or four days in Vancouver, the ministers took time out of their schedules, they made time, to meet with these people. They carried that into the retreat meeting where they wanted to initiate a broader discussion.
I know we have gone much further than anyone else in trying to introduce the idea of the broader engagement of a civil society. It is something that Ministers Axworthy and Marchi feel quite strongly about and to which they are quite committed. I am sure that a number of our APEC members would identify that as one of the distinguishing characteristics of the Vancouver meeting and of our year.
Senator Stollery: I realize that you sometimes find extremists in these groups, but you also find a broad range of people who have legitimate views in the APEC.
Mr. Klassen: Exactly.
Senator Stollery: A couple of our own ministers did what they could to deal with this approach. I get the impression that some other countries cannot deal with this kind of thing.
Mr. Klassen: It varies, senator. I would have to give credit to the Philippines who are very active in this area. They were quite active last year and I think we built on what they started.
As to some of the other members, some are prepared to engage in this, and others are not.
Each chair must decide, when the meeting is held in their home town, how to play it. I think that we have put the issue on the table, in a sense.
Senator Stollery: That is good.
Mr. Klassen: Certainly, if it were to remain a Canadian interest and initiative, we do not intend to give up on what we have started. An example of that is what we accomplished under HRD because we were chairing the working group on human resources development. There is recognition of the engagement of labour and so on.
Senator Stollery: Where will the next APEC conference be held?
Mr. Klassen: Malaysia.
Senator Stollery: Without overstating it, this puts Malaysia, to some extent, slightly on the spot, because they have to deal with what was initiated by the Philippines, and the approach taken by the Canadian ministers. It will be difficult for them to ignore that.
Mr. Klassen: I think that is true. In many ways, in these sorts of areas, you make progress slowly. The Prime Minister's meeting with the labour group has become an annual affair. That was the third time they met.
That same labour group met with the Prime Minister of Japan and the President of the Philippines, as the two previous hosts.Perhaps we have set an example that others will build upon.
Senator Andreychuk: Just prior to the APEC conference, we heard from our APEC partners that we should not impose our culture and our ways. That almost seemed to imply that we had to abandon ours. Now you are saying that we made slight inroads into showing them our way.
Have you received instructions from your political masters that this will be a working agenda for you?
Mr. Klassen: It will remain a working agenda for us in the sense, as I said to Senator Stollery, that we are not going to abandon the efforts that we have already undertaken to focus, for instance, on women's issues in APEC, or to work on labour engagement through human resources development.
Senator Andreychuk: I am speaking of the engagement of civil society.
Mr. Klassen: These are all elements of civil society. We would define civil society fairly broadly and it would include, in my view, people who are interested in environmental issues, sustainable development, education and so on. We deal with all of these issues in APEC. It is on those issues that I have tried to, and I want to, engage those elements of Canadian civil society that have expertise in these areas. I would like to engage us in defining the APEC work programs, the APEC priorities, and so on.
We make a big deal in APEC about talking to business, and we do talk to business. The basic philosophy is that, if we are principally a trade and economic organization, we should be working in harmony with business and respecting their priorities.
We do not always meet their priorities. We do not move as far or as fast as they might like us to. Frankly, we will not implement some of their proposals because we do not think they are appropriate. I think we can have a similar kind of engagement at the level of civil society on several of these other issues, including the trade issue. There are elements of broad civil society that have concerns about the impact of trade but, clearly, we want to work with those who want to work positively with us.
Our starting point is that this is a good process and the objective is a good that we should collectively work towards.
Senator Corbin: Mr. Chairman, I would like to clarify one matter. I recall that the witness said earlier that no notes are taken at the leaders' meeting. He later told Senator Stollery that there were a couple of note takers present.
Mr. Klassen: If I said there were no notes taken, I misspoke myself.
The leaders meet in a room and each economy has one official in another room who watches on an video and takes notes of what is being said, so that there is some kind of record of what is said.
Senator Corbin: I would hope so.
The Chairman: Were there any notes taken at the retreat of the ministers?
Mr. Klassen: Yes. There were officials in the room. There were ministers plus two officials behind for each delegation. There were a couple more Canadians because we were managing the whole conference. Yes, we took some notes.
Senator Andreychuk: Was lunch totally private?
Mr. Klassen: The leaders' lunch was totally private. Perhaps that is the period I was referring to when I said that there were no note takers at the leaders' lunch. That is a totally private affair.
Senator Corbin: That is where you said it. Thank you for refreshing my memory.
Reference was made to the concerns of society beyond the business community. On looking at the documentation, I would suggest that we do not have very much to go on in that respect. Could you elaborate on what you call "the concerns of society", beyond what we have at our disposal here and what you have already put on the record?
How far do you go in that respect? Do you go beyond the labour standard issues? You did not mention human rights at all today. Are you going to leave it aside entirely? Are heritage values and cultural concerns included in the concerns of society that you mentioned?
Mr. Klassen: I have not mentioned human rights.
Senator Corbin: Was that deliberate?
Mr. Klassen: That was deliberate, because it is not on the APEC agenda and it was not raised in the APEC meetings per se. Ministers raised specific issues in bilateral meetings where concerns were raised. For instance, the concern with Pak Pahan, the imprisoned labour leader in Indonesia, was expressed. Minister Axworthy raised these concerns in his bilateral meetings.
APEC, at this stage of its development and given the basis upon which it works, is just not ready to tackle those kinds of questions head on. However, the meetings give us the opportunity to meet bilaterally to raise these issues. We were able to sort of show our values in the way we conducted the meeting, in the way that our ministers made themselves very available to the representatives of the people's summit and then raised those kinds of questions in the retreat with the other ministers, and so we sort of "walked the walk" -- to use a modern expression. Through that kind of engagement, we tried to show our APEC friends and colleagues how we do it in Canada and how we hold these values important.
We also believe that in engaging in the broader issues, you do start to deal with questions of governance to the extent that through economic and technical cooperation we can improve levels of economic development, the style of life. You start to deal with some of these fundamental questions of poverty. You start to deal with, in a sideways fashion, some of the questions of governance. You start to broaden, you start to open up a number of these societies. I believe that APEC can, and does, contribute significantly in that way.
You ask me where, particularly, we have progressed. If you look through the ministerial statement and even the leader's declaration, you will find references to contributions of labour and management in attaining APEC's objectives of promoting sustainable growth. You will find references to people-to-people linkages, the importance of engaging all sectors of society in sustainable growth and equitable development, the participation of such stakeholders in APEC meetings.
Senator Corbin: I find those statements rather vague. Is that, again, deliberate?
Mr. Klassen: It is deliberate in the sense, senator, that this is a process where you have to make progress slowly. If we went back and looked at ministerial meetings' declarations from two or three years ago, you would find much less of this kind of language. I was quite struck, when this labour group met with the Prime Minister in October, by just how much weight they attributed to the language in the Manila Declaration, where there was clearly an opening up. There was more recognition of the fact that APEC has an impact on broader society, not just the business community. They take this as positive. They take this as an important evolution of the process. I think we have taken it even further this year.
It behoves those of us who believe in this to continue to push this, to continue to have this as an emphasis and a priority in how we approach the work programs and priorities within APEC. It is an evolutionary process that I think is going in the right direction.
Senator Corbin: When you say "we", do you mean Canada?
Mr. Klassen: I mean Canada.
Senator Corbin: What about our friends? Are they pushing along the same lines?
Mr. Klassen: There are some who share our approach. I mentioned the Philippines earlier. They are very sympathetic on the question of a broader engagement of non-governmental organizations. A number of the ASEANS are more open to this than one might think. Of course, some of the other developed members of APEC have much more experience with this sort of requirement, even pressure, and are prepared to deal with it.
Senator Corbin: We took advantage of the fact, I suppose, and we could not escape it because the conference was held in Canada. Surely, that has to be a factor that enabled us to raise these issues, bilaterally or otherwise. Is it your view that when the conference is held in Malaysia we will have the same facility? Do you feel that there will be continued progress on the next round?
Mr. Klassen: I cannot really speak to how the Malaysians will manage it in Kuala Lumpur, but I would say that the Canadian ministers have now set a standard for themselves. When we go to Kuala Lumpur, Canadian ministers are still totally free to meet with representatives of the people's summit or whoever they wish. They made time to do it here. I do not see why they would not make time to do it in Kuala Lumpur, assuming the same people attend. Far be it for me to speculate on that. They have the same commitment to this sort of thing.
I have a comment to make about your comment that it was here in Vancouver and so we had to do it. In fact, Vancouver was the culmination of a year-long program. The efforts that we undertook on gender issues, women's issues, and getting agreement on a women's APEC ministerial meeting next year did not just happen in Vancouver. It involved many months of work with our APEC friends.
We had a discussion amongst senior officials in St. John's, Newfoundland, about this whole question of broadening the engagement. In fact, the department commissioned a study of how other multilateral institutions deal with these questions. Again, not trying to force it to a decision, not trying to force it to a conclusion, we said: "Look, we think this is something we should be discussing. Other people are doing it and, lo and behold, the sky does not fall down."
We did it in our own meetings this year. In our environmental ministerial meeting in Toronto, we had representatives of two NGOs on the Canadian delegation, who were full-term delegation members. There was another NGO group whose connection is with Geneva, but whose office is in Winnipeg; they are called the International Institute for Sustainable Development. They were there as rapporteurs. They put on the web, every day, a summary of the discussion at the ministerial meeting. At the conclusion of the meeting, they put on the web an excellent discussion of what they thought were the strengths of the meeting, what it had achieved, and that sort of thing.
We used this example to say to our APEC friends: "Look, you can do this. These people acted very responsibly. They put forward very good reports." The NGO community really appreciated it in terms of its transparency, in terms of opening up the process. One of the principal criticisms of the process was that it was too closed. We have done what we can to try to bring some light to it.
Senator Di Nino: I want to continue for a moment in the same area. I am delighted that the previous speakers, Senator Andreychuk and Senator Corbin, eloquently addressed this issue. I ask you to expand on what is meant by the broadening of the engagement.
In conjunction with that, I would like to ask a specific question. Today marks the beginning of the 50th anniversary of the United Nations Human Rights Declaration. I wondered if that was ever discussed or if that subject matter was part of the discussions, either at the ministerial level or at other levels.
Mr. Klassen: No, senator, that particular point was not discussed. Again, one has to recognize that, on the one hand, APEC's agenda is broadening if you look at the scope of activity that APEC is covering. On the other hand, it is not necessarily the place to discuss all things.
For instance, on the question of labour standards, which is an issue to which the government is committed, we feel quite strongly that the proper place to do that is in the ILO in Geneva. That is where we are working on developing what are called core labour standards and a convention on prohibiting, or doing away with, child labour.
We develop those core labour standards. We are going to have to address the question further down the road when we get into the issue of trade and labour standards, which is a very sensitive area for a large number of members of the WTO. We have not addressed those specific questions within APEC.
On the question of engagement, there are really two tracks here. One is how far can we push the APEC system, how much can we open that system. The other track is what can we do domestically. We have much more control over what we can do domestically; for example, along the lines of some of the things I just mentioned to Senator Corbin about what we did in the environmental meeting, the study we commissioned on what other multilateral institutions are doing.
An APEC-NGO coalition was established to organize the people's summit. I have met with them every six or eight weeks over the last year. We commissioned from them a study on how they want to relate to APEC. Frankly, in the NGO community writ large there is a lack of knowledge about what APEC is all about. We said to them: "In order for you to have a better understanding, we will pay you to hire a consultant to examine the APEC process and to come up with some proposals on how we can engage you, or how you would like to engage in the process."
We have that report. We have to respond to it. Some of their proposals go further than I think we are prepared to go at the moment, but there were some very good suggestions. I see it as all part of a dialogue, all part of an engagement. We have been totally open with our NGO friends in supplying documentation, explaining the APEC process to them and encouraging them to engage in the process, to give us ideas on priorities and programs and where we should or should not be going.
We do not always agree with the business community. The business community in some respects has been critical of APEC. They were critical in the press about how we are not moving far and fast enough on their recommendations. As I say, we will not move on some of their recommendations at all, in my opinion. We cannot be all things to all people, but we can and we do seek to engage elements of broadly defined civil society, those who want to engage positively in the process.
Senator Di Nino: As you see it, though, do you expect this broadening of the engagement to be a continuing dialogue within the Canadian contingent, which will be representing us in 1998 and in future years? From your standpoint, is this something that is continuing?
Mr. Klassen: Absolutely. This is not something we undertook this year just because we chaired the conference. We undertook it because we believe in it; we undertook it because there is a lot of concern. There is a lot of interest out there about what APEC is and what it is doing, and how the NGOs can be more involved. This has not just been a one-shot, one-year affair for us. We will continue to meet with the NGO community. We will continue this kind of dialogue. We will continue to try to encourage them to become involved.
When we went to the meeting of the senior officials in St. John's, we had two members come as observers of the Canadian delegation. We are quite open to continuing that kind of process.
We invited labour representatives to go to the HRD ministerial meeting in Seoul last year. Previous commitments prevented them from attending, but they were invited. We invited them to be part of the Canadian delegation in Vancouver. Again, they did not pick it up. Yes, we will continue down this road.
Senator Di Nino: I want to go into one of the other issues. Obviously, the financial crisis in Asia must have hijacked the agenda of the meetings to a large degree. At least, this is the impression one received from what we read and heard in the reports, those of us who were not present.
I am concerned that some of the culprits, if not all of them, are not prepared to be accountable for the actions they take in their own countries. Their unaccountability places a tremendous burden on the rest of the world, which finds itself responsible for carrying the load for these errors and mistakes.
Was this something that was freely discussed at the meetings of the leaders, or at least the meetings of the ministers, that some accountability has to come forth from some of these countries?
Mr. Klassen: I do not think I would agree that the financial crisis hijacked the agenda. In fact, I would put a positive spin on it.
Senator Di Nino: You should be a politician.
Mr. Klassen: I really believe that it showed the relevance of APEC in the sense that it was able to deal, in its limited way, with this whole question. It was extremely useful to have those 18 heads of government sitting down together and discussing for several hours issues relating to the financial crisis. Sure, the agenda that we thought we were going to focus on was changed, but that was fine because it gave these leaders the opportunity to focus on what was the crisis of the day globally. Those discussions made the meeting worthwhile, so I was not at all concerned about it being hijacked, as far as that goes.
Senator Di Nino: You say it changed the agenda, though.
Mr. Klassen: It changed the agenda. It certainly changed the focus of the discussion, there is no question about that.
Your other question is a little more difficult to answer. As I said earlier, one of the clear messages that came out of the discussion, particularly from those who have been through this kind of crisis, was that in order to deal with this kind of crisis, you cannot just paper it over. You cannot try to find the soft landing. There are no soft landings when you are in this kind of a situation. You have to implement often drastic but necessary financial and banking reforms. You have to be extremely transparent. You have to be prepared to suffer some pain of adjustment, because it is going to be painful, but the harder and the faster you can do that, the stronger and the better will be your emergence, your recovery. That was a very clear message that came through.
Now, how those who are in the crisis will respond to that remains to be seen. You have to look at what is Malaysia doing in terms of its commitments, what are the Indonesians doing, what are the Koreans doing. It is my understanding -- and I am not an expert in this area, at all -- that they are receiving some hard medicine from the IMF, but they are taking it.
The Chairman: Senator, the committee will be having two or three meetings on this topic. There is the Mexican situation, what worked there, and what has happened in specific Asian countries.
Senator Di Nino: My concern is that this has now been talked about and it may not continue to be a major focus in future agendas. Obviously, if it is not a major focus, we will end up with a similar situation somewhere down the line. I would hope that the Canadian contingent or representative would ensure that this is a discussion that will continue, affording us an opportunity to take a look at the results of the actions of those particular countries.
Senator Corbin: Is the consultant's report on the NGOs available?
Mr. Klassen: Do you mean the experience in other multilateral institutions? There were two reports. There is one that we commissioned from my office on our experience in other multilateral institutions in dealing with NGO pressures. That is one report. That was the basis of a discussion amongst senior officials in St. John's.
The other report that we commissioned from this NGO coalition was their views on how they would like to engage in APEC.
Senator Corbin: Can that be made public?
Mr. Klassen: It is in-house until we give them our formal response, which we are in the process of writing.
Senator Corbin: We could have both documents then.
Mr. Klassen: Yes. I can send you the multilateral institution one right now.
Senator De Bané: Mr. Chairman, I understood what was said about the focus of the meetings that we are going to have, but I would like to pursue the question Senator Di Nino has brought forward and Mr. Klassen's response in that regard.
Mr. Klassen said that those countries will have to bite the bullet and accept some painful, drastic reforms. Japan, the second largest economy in the world, has not yet bit the bullet. If it is true that 10 to 15 per cent of the bank loans are non-performing loans, one can imagine, of course, the size of this crisis and how painful the reforms will be that should be brought in.
For Canada, a country with great exports, seeing that danger in Asia already has had a depressing effect on our dollar. Obviously, it is related, to a great extent, to those problems. On the other hand, it is true that the Japanese economy is much more robust than those of Latin America.
Japan, particularly, is a society of consensus, where the different groups tend to work together. Obviously, they are realizing that if they undertake those very painful reforms, maybe one of the partners will not be able to deliver on its commitments. Perhaps that is the reason they are procrastinating, while the rest of the world is looking toward what they are going to do.
Maybe it was not hijacked but, surely, that must be something that has quite an impact on the issue of our trade relations with those countries because if they go into a recession, they will not buy our products. If they devalue their currency, we are going to be deluged with their products.
What can you tell us about the magnitude of that problem and where it can lead to if those politicians lack courage, as you said, to undertake drastic and painful reforms?
Mr. Klassen: I do not think I accused anyone of lacking courage.
Senator De Bané: Everybody understands that this is it: They lack courage.
Mr. Klassen: Again, I think this would be a very interesting point of discussion in the follow-up that the chairman is suggesting. Again, I am not an expert in this area. Clearly, the financial crisis in Asia will have an impact on Canadian export interests, for the very good reasons that you quite clearly stated. These economies will, to some extent, retrench. That will have some kind of effect.
Just to bring the discussion back to APEC for a moment, it is very interesting that in this whole exercise on early voluntary sectoral liberalization, one could have expected that the members of ASEAN who are suffering the most would be the first to say that they cannot be expected to engage on sectoral liberalization because of the pounding they are taking at home. That did not happen. They were not the ones who were trying to slow the process. They were not the ones who were saying that they have to hang back here.
Some of their leaders have spoken publicly to the effect that it is difficult, but the way to respond to this kind of crisis is not to shut down, is not to close yourself up. The way to respond is to continue to open up, to liberalize, to become more transparent in your process and in your market access, and that sort of thing. In fact, we found our Asian partners, some of whom are suffering under financial problems at the moment, to be quite engaged in the area of sectoral liberalization, showing a willingness to continue to explore, to develop the proposals, and to move down that road. I think that is a very positive sign.
I am sure you get all kinds of Japanese experts in here to deal with what is happening in Japan. I am only speaking from personal knowledge here. Although I was posted in Japan some years ago, I was there in the great bubble economy, before it burst. The joke when I lived there was that the quickest way to become a millionaire in Japan was, if you could possibly afford it, to buy a square metre of ground in Ginza, hang on to it for 24 hours, and then sell it. The real estate market was just out of control.
There is a great deal of concern about Japan. You read about the Japanese economy in the financial pages, about what some would say is their lack of resolve in dealing directly with some of their problems. Of course, there is nothing like a crisis to focus the mind.
The Chairman: As Dr. Johnson said.
Mr. Klassen: Exactly. He said it in a slightly different context. Maybe the Japanese just have not faced that total crisis yet. They have not had the sort of meltdown that some others have had. They have not had to call in the IMF. There is a considerable resiliency in the Japanese economy and in the Japanese people.
Japan is changing. It is opening up. I returned to Japan a couple of years after I left in 1989, and I was amazed at the number of import shops that simply did not exist when I lived there. What you are seeing is the reverse effect: Many of the lower-end items are now being produced in other Asian countries and being imported by Japan. You get discount shops, which would have been unthinkable when I lived there from 1985 to 1989. It is opening up; it is changing. It still has some fundamental problems and difficulties that it is going to have to address.
Quite clearly, again, you can read it in the financial pages, there is a lot of concern about what happens to an economy of that size with these sorts of challenges. I would suggest along the lines of what you have said, Mr. Chairman, about having a follow-up discussion. It would be very interesting to get some Japanese economic experts in to have that kind of discussion.
The Chairman: Mr. Klassen, thank you very much for your report on the APEC, and also for whetting our appetites to look at the way in which our international institutions attempt to cope with the kinds of financial crises that we saw in Mexico and that we are now seeing in Asia-Pacific region. We are going to be following up on the second of that.
The committee adjourned.