Proceedings of the Standing Senate Committee on
Foreign Affairs
Issue 9 - Evidence
OTTAWA, Wednesday, February 25, 1998
The Standing Senate Committee on Foreign Affairs met this day at 3:20 p.m. to consider the consequences for Canada of the emerging European Monetary Union and other related trade and investment matters (Multilateral Agreement on Investments).
Senator John B. Stewart (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, as you know, we have been focusing in recent months on Canada and the Asia-Pacific. However, we do have another reference: The consequences for Canada of the emerging European Monetary Union and other related trade investment matters.
It is the day after the budget and given the fact that so many of our people are concerned with budget matters, it seemed appropriate to put aside the Asia-Pacific reference for the time being and have a look at what has been happening to our relations with Europe and Latin America. That is the business that has been planned for this afternoon.
We are fortunate to have with us for the first part of our work this afternoon the director of political affairs of the Council of Europe.
I will ask our colleague, Senator Grafstein, to introduce the director. Senator Grafstein has met the director personally and therefore is in a better position to do the director justice.
Senator Grafstein: Mr. Chairman, members of the committee, while I was at the Council of Europe, it was brought to my attention that the most senior officials of the Council of Europe would be coming to Ottawa for a two-day session. I thought it would be remiss on my part if this committee did not have the benefit of the views of these two senior officials. We have spent a fair bit of time looking at the consequences for Canada as a result of the European Monetary Union.
This committee has travelled to Europe; we have come up with a report. Perhaps the clerk might make available that report to the witness. We consider it to be a very important aspect of our activities.
I was absolutely delighted when Mr. Furrer accepted the invitation to come if we could arrange it. It turned out to be very felicitous timing because the two-day meeting which many of us attended, which we thought was superb, ended yesterday. We now have with us Mr. Furrer and his colleague, Mr. De Jong, who is the head of international relations for the Council of Europe.
Mr. Chairman, I have said to both of these gentlemen that, while we are tied to the United States and to Mexico with respect to trade, cultural and business activities, we have a deep interest in ensuring that we expand our relationships across to Europe. The question that I put to Mr. Furrer, Chairman, was how can we in Canada deepen and thicken our relationship with the Council of Europe.
Just for background information, I thought we had voting status there. However, I found out that, while we do have full voting status and membership at the OECD, we are an observer with full status to participate in the debates but not to vote. I was assured by Lord Russell-Johnston at lunch today that we are in a preferred position because not only do we have the right to participate in all debates as a permanent observer but we are also on the intergovernmental council. Perhaps Mr. Furrer could explain that to us.
It is really important for this committee to have the benefit of Mr. Furrer and Mr. De Jong's advice on these matters. As a committee we have been wrestling with how we balance our overwhelming relationship with the United States -- trade, investment, cultural and social activities -- with the place where we have our deepest roots and that is in Europe.
With that introduction, Mr. Chairman, I hand the floor back to you. Mr. Furrer has been forewarned of my own interest and desire to thicken and deepen our relationship with the Council of Europe.
The Chairman: Mr. Furrer, we would be more than happy to hear any presentation that you should like to make.
Mr. Hans Peter Furrer, Director of Political Affairs, Council of Europe: Mr. Chairman and honourable senators, I am extremely honoured and pleased to be here in this meeting, and I shall attempt to give you a picture of the Council of Europe and to respond to your questions.
As Senator Grafstein said, we have had the happy occasion for three days now to discuss with many people from administration and Parliament how to develop cooperation and how to work together in Strasbourg and elsewhere. I have also felt a need to explain what the Council of Europe really is about and why it would matter to cooperate with that organization. I will, therefore, give a very rapid overview about essentials concerning the Council of Europe as we see it from the inside.
The Council of Europe was created in 1949 as the first organization with the task to promote unity in Europe. It was given this task particularly for the sake of bringing European countries together on the basis of a common commitment to the fundamental principles of cooperation in Europe which are: first, respect for democratic principles; second, respect for human rights and, third, implementation of the principles of the rule of law.
Military questions were left outside. They were given at that time to NATO. Questions of economic integration have not been dealt with further in the Council of Europe after the creation of the European Union beginning in the early 1950s with the coal and steel union, then the economic community and so forth. However, the Council of Europe has developed many-fold activities in all those fields which are relevant, if you wish, to secure the democracy, human rights and the rule of law.This is justice affairs as well as social affairs, public health affairs, culture, education, youth and so forth.
The Council of Europe has three main pillars. First, there is the parliamentary component of the organization. Second, there is the intergovernmental element. Third, there is the control mechanism within the organization.
The parliamentary component is the parliamentary assembly, a body composed of delegations from national parliaments, which delegations are necessarily composed of parliamentarians from the national parliaments. That is where Canada, inter alia, has observer status and is invited and encouraged to send as often as possible a national delegation from Parliament here, as referenced by Senator Grafstein. It is true that, in general, this delegation does not have a voting status but a deliberative status. There is one series of debates organized in the Parliamentary Assembly of the Council of Europe where Canada, together with other non-member delegations, has real voting rights, and that is the annual debate on the reports of OECD. OECD uses the Council of Europe Parliamentary Assembly as a parliamentary platform for the discussion of its activity reports, reports on future programs and so forth. There, the Canadian delegation, like the U.S. delegation and others from OECD member countries, can fully participate.
Besides the parliamentary assembly, there is also another quasi-parliamentary body in the Council of Europe, the Congress of Local and Regional Authorities in Europe. It is composed of national delegations of elected officials from municipalities, regions, and other territorial entities within the member countries.
The second pillar of the Council of Europe is intergovernmental cooperation. This is under the authority of the committee of ministers, the ministers for foreign affairs and their deputies. A characteristic feature of intergovernmental cooperation in the Council of Europe is that it is a broad-range involvement of various governmental departments. As I said, ministries of justice, of the interior, of social affairs, of family affairs, of cultural affairs, of education and so forth, work together within the Council of Europe, and we have regular conferences of these specialized ministers. It goes far beyond cooperation of diplomatic services of the member countries.
The third pillar is the control, and this is essential for the Council of Europe. One of the first instruments it created was the European Convention of Human Rights in 1950, one year after its foundation. This convention not only contains a catalogue of rights to be protected but a very sophisticated system of collective control, mainly of a judicial nature. As of next November, when the reform of the system which has been prepared over the last years is in operation, it will be conducted through a court of human rights with jurisdiction on all cases brought to Strasbourg. Cases can be brought to Strasbourg from every member country, including now, for instance, the Russian Federation after they have ratified this convention. Complaints can be brought by member states against each other, or, and this is even more important, by each and every individual in any of the member countries who feels that his or her human rights have been violated. Each and every person through this individual applications procedure can get remedy in Strasbourg. The decisions of the courts are compulsory. Their execution is being supervised by the committee of ministers. The states must comply with them.
Recently we had a very spectacular case where Greece was ordered to pay almost $30 million U.S. in compensation for an illegal expropriation. It was difficult for the Greek government to convince the Finance Minister to deliver, but they did because they knew that the judgment was compulsory and would have to be executed. Otherwise, the Council of Europe will come with sanctions which could be as severe as expulsion of the member from the organization.
There are also other control procedures, including an independent committee looking into the performance of member countries concerning the protection of social rights and a committee to prevent torture and inhuman treatment, with the right to go and spontaneously visit places of detention in member countries and report upon the situation it has found in that country. This pillar of control mechanisms is extremely important in the Council of Europe.
As you know, up to 10 years ago, the Council of Europe had a very natural development in bringing all the Western European democracies within its orbit and organizing their cooperation. We fulfilled that important task, which was not overwhelmingly difficult.
Since 1989, we have had the chance to bring other countries into the Council of Europe. Some countries had a forced interruption in their democratic traditions for 50 or 70 years, and others have had no democratic tradition at all. All these countries applied for membership in the Council of Europe because they understood that in order to be able to participate in structured, institutionalized cooperation in Europe, they had to first go through the Council of Europe. It was, in a way, the compulsory gateway into European cooperation -- that is to say, to become a member of the Council of Europe, giving the commitment to realize democracy, human rights and the rule of law, and giving evidence that they were able to do so. This was a very difficult task.
The council had to respond to these requests, and we have done so. Up to now, 16 of these countries have gone through years of preparation for membership. Finally they were given the green light to enter because the parliamentary assembly and the committee of ministers in the Council of Europe were convinced that they had taken the essential steps to give credible evidence of the fact that they were now directed towards a democratic future.
That was not so easy because we had to deal with countries like Romania and Bulgaria. It was easier with Hungary, Poland, the Czech Republic and Slovakia. We also had to deal with Albania, and we had to deal with the Russian Federation, Ukraine, Muldovia, and we set apart the Baltic states which have been given entry into the Council of Europe on a plan of their own.
What did we do in order to manage all this development? First, the Council of Europe stood firmly by its principles. There was no question of saying, "Listen, we know who you are, so we accept that you should not perform as do the other member countries already in the Council of Europe."
Second, we had to provide programs to assist these countries to develop their democratic reforms. These were many-fold programs of assistance and cooperation in institutional reforms, legal reforms, administrative reforms, policy reforms and also concerning the training and education of those who had to manage the new institutions, above all, in the field of law, the judiciary and so forth.
At the same time, the Council of Europe offered all these countries, whilst they were in the transformation process, opportunities to participate in Council of Europe activities. The parliamentary assembly created the so-called "special guest" status which was offered to all these applicant countries. The parliamentarians of the newly elected parliaments of these countries could come and go through a learning process based on real parliamentary practices demonstrated and practised within the Council of Europe, and this was extremely helpful.
This process is not over. There are still four or five countries which are not yet in the Council of Europe. There is Bosnia and Herzegovina, and the accession of that country to the Council of Europe will presuppose the implementation of the Dayton agreement in re-establishing Bosnia and Herzegovina as a state with a common future.
Belarus had applied for membership but their application was suspended after developments there which showed that the president was not willing to submit himself to genuine democratic procedures concerning the functioning of their parliament, justice and so forth. Their application is now suspended and we hope that the situation can be improved in the future.
We also have three applications from the Caucasus states: Georgia, Azerbaijan and Armenia. This is quite important progress for Azerbaijan and Georgia. We have had a setback concerning the settlement of the Nagorno-Karabakh conflict which has a bearing on the question of when and how these countries can enter the Council of Europe.
I know the Ukraine is very dear to many in this country. We had a very happy beginning of cooperation with Ukraine. The government there was very willing to cooperate with the Council of Europe. We have done much in terms of reform of the judiciary, reform of legislation and so forth. However, we came across a very difficult problem, and that was abolition of capital punishment. Abolition of capital punishment is a European standard which is very deep in the hearts of European politicians and those who think about the future development of European society and so forth.
Therefore, all applicant countries must commit themselves to abolish capital punishment and while it may not be immediately possible from a legislative point of view, they must institute a moratorium to halt executions. We have been informed that for a while even after this commitment, executions took place in the Ukraine.
Monitoring by the Council of Europe of the commitments of member countries to the standards of the Council of Europe took a very strict and harsh form in the case of the Ukraine. There was a very difficult discussion in Strasbourg. The question is not yet completely settled. Further debate will take place at the end of April. The parliamentary assembly will want to be given more precise and secure information that the abolition of the death penalty will be a fact in that country.
You can imagine that we have many problems to deal with if you look at each of the countries which have entered or are close to entering the Council of Europe. To give you an example, we are working very hard in Bosnia and Herzegovina. There the Council of Europe has also been involved in the treaty itself, in the civilian aspects of its implementation because it was mandated to create a human rights chamber, that is, a human rights court for Bosnia and Herzegovina with international judges. We must continue to maintain the correct functioning of that court which includes financing, logistical support, staffing and assistance for the staff there in Sarajevo. That is part of our involvement. It shows also that the Council of Europe is working in many situations as part of an effort of the international community involving other organizations. In the case of Bosnia and Herzegovina, we are involved with the North Atlantic Treaty Organization or NATO, the Organization for Security and Co-operation in Europe or OSCE, the European Union and the high commission which has been specifically created for that country. There is cooperation and on a day-to-day basis operations are proceeding in a very concrete way, in the field and also at headquarters.
We had a similar situation in Albania after the very deep crisis which occurred in that country. However, we are now working very closely with OSCE, which has a presence in Tirana, as does the Council of Europe.
A similar development occurred concerning the OSCE mission in Croatia where we have a kind of division of labour. Whenever the mission in Croatia is confronted with a question of assessment of a legal situation, or a question requiring legal expertise for the modification of a legal situation, immediately the head of the OSCE mission will call upon the Council of Europe because the Council of Europe has a network of specialists through its intergovernmental cooperation which we can mobilize in order to fulfil a given task very rapidly. That is the division of labour we have now with OSCE in many countries, above all in Croatia.
This shows that the Council of Europe clearly understands its position within a Europe which is characterized by the plurality of its institutions. They will remain that way for a long time, that plurality of institutions. We cannot dream of a uni-institutional Europe today. This applies to OSCE, the Council of Europe, the European Union and to NATO.
The cooperation between organizations is probably now the first item on the agenda in Europe. We understand very well that we must look at the OSCE with its specific transatlantic advantages for European cooperation, involving the U.S. as well as Canada.
The OSCE has a very efficient capacity of deployment of diplomatic action. That is not the case in the Council of Europe because we are too difficult and too complicated a structure. We cannot from one day to another initiate rapid action somewhere. We have to ask the parliamentarians and involve various governmental departments and so forth. However, we can later provide the necessary know-how and experience necessary for a more in-depth job than can be done by the diplomats in general.
We have a similar approach now with the European Union. The European Union's relationship with the Council of Europe was not an easy one.Because the European Union takes care of economic integration, which had been abandoned by the Council of Europe, in the search for political cohesion of union members and political union later on, it has been expanding its level of cooperation and action in many fields which were traditionally dealt with by the Council of Europe. We had a problem of competition in many fields. We are now at the point of overcoming the difficulties stemming from that competitive situation, and we are aiming now at a real partnership between the European Union and the Council of Europe through the conclusion of a formal cooperation agreement with Brussels.
Perhaps I could say a few finals words about what we expect from our contacts with Canada. With the importance which the Council of Europe gained through the processes of its enlargement, it was quite natural that certainly the United States of America and Canada were looking at the Council of Europe with fresh eyes and regarding it as a body where important developments in European cooperation were taking place, and would arrive at the view that it is better to be present than to be absent. That was the motivation behind the offer made from the Council of Europe side to create this observer status. In the case of Canada, as was said, the observer status is for both the parliamentary side of the Council of Europe and the intergovernmental side. You have an ambassador, the ambassador of Canada in Bern, Switzerland, who is also the observer of the government with the committee of ministers of the Council of Europe, and that is extremely helpful. The same offer was made to Japan, but, as in the case of the U.S., observer status is limited now to the inter-governmental side, excluding the parliamentary side.
There are perhaps new developments in this respect, and other countries may become involved in the future. However, we attach greatest importance to developing the special relationship we now have with Canada, and this has to do with the fact that we feel a very clear affinity between ourselves and Canada. The two-day seminar we have had has shown that, in many aspects, we have the same problems and we speak the same language about those problems. We probably do not have the same solutions. We have had the example of multiculturalism, which is a concept in Canada but yet to become a concept in Europe, although we know what it is about. We have this problem of minorities. We have the problem of racism and the development of tolerance. We must devise new modalities for multiple allegiance and multiple citizenship; that is to say, multiple participation of the people at different levels of the political realities in Europe. We have the same problems, we have the same language, and we can learn a great deal from each other in developing the best solutions.
We have also found a number of very concrete ways and means of developing that cooperation. One thing I was advocating yesterday is that we in Europe make better use of the very rich, relevant and good documentation you are developing in this country on many of the problems with which we must deal in Strasbourg. I was in contact with the policy research unit of the government on that matter. I have seen documents prepared here in the Senate and in the House of Commons which would be of extreme value to Council of Europe deliberations. As to reciprocity, I would suggest that Council of Europe documents, mainly reports in the parliamentary assembly, should be prepared for easier access for yourselves here in Ottawa.
We have also suggested that cooperation in some fields in the intergovernmental field could be developed -- legal cooperation, cooperation in the social policy field, cooperation in culture -- and that is well under way. We have singled out one item which is very close to both our interests. Ten years ago, the Council of Europe conducted a campaign to promote public awareness in Europe of the north-south interdependence and the solidarity requirements which follow from that interdependence. A result of that campaign was the creation of the North-South Centre of the Council of Europe in Lisbon, which continues to build public awareness in Europe. It also shows that knowledge about interdependence and solidarity can be promoted in appropriate dialogue with people from Africa, Latin America, and Asia.
We are now preparing a second operation similar to the one 10 years ago, and it is a campaign on global interdependence and solidarity. We have suggested that Canada might perhaps be interested in knowing about our programs and perhaps in joining us, because here too we are in the same boat, and it is perhaps a good idea to work to make the boat move in the right direction.
Mr. Chairman, I have spoken for a long time , and I apologize for that, but I thought what I said was relevant to our visit here to Ottawa.
The Chairman: Indeed it is relevant, and we are most appreciative.
Senator Corbin: I thank the witness for his excellent presentation. I was particularly interested in determining the extent to which we become involved in problems which are not, strictly speaking, the domain of the Council or within your mandate. I know that a European organization was highly concerned about developments in Algeria, for example. I do not know whether it was the Council or the European Union that sent a high-powered delegation to Algeria in January, I believe.
To what extent do you concern yourselves with developing critical situations on the fringe of the council? Do you avoid these situations? Do you get involved, and to what extent would you get involved?
Mr. Furrer: This is an extremely difficult question for the Council of Europe today. The general approach would be to say that the Council of Europe should care about European problems. However, on the other hand, there are the principles of the Council of Europe and, if you take them seriously, you cannot be indifferent to problems which arise in your vicinity about these same principles. You cannot even be indifferent about the fact that the principles at stake are world-wide and that help from our side may make the difference.
That is the reason we had this campaign on north-south interdependence and solidarity. It was mainly, also, about the question of what is the bearing of Council of Europe principles on developments in other parts of the world.
Concerning Algeria, the Council of Europe Parliamentary Assembly had a debate last January and adopted a resolution expressing very serious concern and calling for greater attention by governments and parliamentarians to developments in that country.
It is true that it was the European Union which sent delegations, from both the governmental side -- the troika of the European Union -- and the European Parliament, which is different from the Council of Europe Parliamentary Assembly. However, they have reserved the possibility of further debate and possible action by the Council of Europe in that matter.
With the help of the North-South Centre of the Council of Europe, we have tried to develop a program with a number of elements concerning the Mediterranean in general. One of the outcomes of this effort was that recently we organized, in Strasbourg, a round-table discussion on the Middle East in which Shimon Peres participated, as did representatives of Mr. Arafat and the Israeli government. The result of that was the constitution of a contact group in a triangular situation -- representatives from the Council of Europe, representatives from the Palestinians and representatives from the Israeli authorities -- to look further into possibilities of promoting and assisting the Palestinian territories in the development of democratic institutions and an efficient administration to cope with a number of problems. These efforts might be helpful also, in the future, to overcoming the present crisis in the peace process there. That is an example of how we handle such matters outside the Council of Europe; with extreme prudence, but not with indifference.
[Translation]
Senator De Bané: I would like to ask you what is the situation as regards the so-called democratic deficit in this Europe that is being built, where the people have real control over the decision-makers. What would you respond as regards this issue of the democratic deficit, since the institutions do not respond to democratic control?
Mr. Furrer: My first answer is that the democratic deficit is an issue of particular concern to the European Union rather to the Council of Europe, for the following reason: in the European Union there was in the past and still is a transfer of authority from member states to the Union, as a result of which decisions binding the whole area of the Union will be taken in the form of regulations or directives by community authorities.
However, the community authorities of the European Union are not, and this is a problem, fully democratic. Decisions are taken on advice or proposals given by the Commission, which is a bureaucratic organization, and by the Council of Ministers, which is a body representing the governments of members states. The European Parliament is consulted and sometimes has joint decision-making power. But such decision-making power, or joint decision-making power, is not fully developed. There are still shortcomings. That is what is referred to in technical terms as the democratic deficit.
That does not apply to the Council of Europe for the simple reason that it does not take binding decisions, but the Council of Europe does have binding jurisdiction. But that is not a problem of democracy.
Within the European Union there are very significant developments taking place today to correct the democratic deficit. Pursuant to the Treaty of Amsterdam which is not yet in effect, 80 per cent of decisions will be submitted to the European Parliament for a joint decision. The question remains whether the European Parliament is, in terms of its constitution and efficiency, as democratic and democratically effective as a national Parliament. That is another question which remains unanswered.
Within the Council of Europe, the democratic deficit is a factor which we consider when looking at precisely what steps should be taken to make the democratic process more effective within member states. A number of difficulties have arisen in recent years, such as a certain democratic fatigue on the part of the electorate which no longer participates or participates only to a small degree in elections, and also perhaps quite a clear drop in the level of trust shown by the electorate towards candidates or elected representatives. These are problems which merit very serious consideration.
We are trying to overcome these problems by developing democracy at the local and regional level. That is why we placed so much importance on local autonomy, through decentralization or the strengthening of the federal structure, or federal model, by increasing the opportunity for individuals and members of the public to become involved in the decision-making process at the local level.
This is also done to give them a taste of the democratic process, with the hope that in so doing progress can be achieved on the road to democracy at the national and international levels.
Senator De Bané: We are now seeing a broadening, for example, of the European Union. I know that you represent a different institution which is moving more towards the East and the Mediterranean basin. Do you not think that as an indirect result of this development the European Union will not be as close as its founders hoped it would? It will not be as federal in character if it includes a large number of countries which are very different from one another.
You are quite right. Such fears and criticism are widespread in Europe and are also expressed in relation to the Council of Europe. As you know, the Council of Europe has been criticized by people who argue: with this expansion which is taking place too quickly, you have compromised the credibility of the organization and the seriousness with which it seeks to implement the principles of democracy, human rights and the rule of law. We would answer that, in the Council of Europe, the essential point is that member countries must undertake to consistently follow the reform process and the full implementation of democratic institutions.
We see this as a process through which the Council of Europe monitors the situation in those countries to ensure that deviations are corrected and that issues such as deficits are discussed. There is some truth to the criticism levelled against the European Union that the progress achieved in terms of community and integration is being eroded since it now wishes to include Poland, Hungary, the Czech Republic, and perhaps other countries as well.
This criticism is far more serious since with the opening of the Union towards those countries -- even if this is staggered over a certain time frame, with transition periods -- it will certainly be impossible to achieve the same degree of cohesion with the rest of Europe as has been achieved through integrating the economies of France, Germany, Italy and even Spain.
To do so, more resources than are presently projected will have to be mobilized. That is why we will have to adjust structural funds which, as we already know, can not meet the requirements of new countries to the same degree as they did in the case of Spain, for example.
That is why this concept of flexibility was introduced within the European Union. This means giving up a rigid approach. Such flexibility will be a remarkable achievement by the European Union. However, the question is whether such flexibility is in the interest of the evolution of Europe itself, because it has been noted that the result of increased integration is a wide-ranging bureaucratization of the European Union. This was something felt by many people, and as a result the affection that people had for the European Union has fallen off to a large degree. The Union appeared to take on the aspect of a large bureaucratic machine. Perhaps things may be looked at differently, and a flexible approach is very helpful to the future of Europe.
[English]
Senator Di Nino: Mr. Furrer, I have a question with regard to the responsibility of the council on human rights. Does it play any role on this issue outside its own boundaries?
Mr. Furrer: Yes. I referred to that very question when speaking about the Mediterranean, Algeria and developments in the Middle East. I repeat that the mandate which we have been given by our member governments is clearly to concentrate on Europe. The opinion of our governments is that there is so much to be done about human rights and the correction of deficiencies in this respect in Europe that we should not start trying to reach out of Europe. On the other hand, it is also clear that we can not speak of human rights as something which is only for Europe, as though Europeans are the happy owners of human rights, and that we do not care about the have-nots.
We have made some attempts to be helpful outside of Europe through the North-South Centre in Lisbon. We have some programs to promote democracy and human rights in Africa, for instance. Also, we have good, cooperative contact with the American commission and court of human rights; for instance, and with the African commission on the rights of peoples. We also try to mobilize some assistance, in the case of Africa, for the functioning of that commission. We know that it is very far from efficiency and the resources we can mobilize in the Council of Europe are probably not enough to make the difference there.
We do, however, try to develop new contacts with United Nations human rights bodies, in particular with the newly appointed High Commissioner for Human Rights of the United Nations. We are trying to develop useful contributions to their work in the world.
As was said yesterday, we must ensure that concentrating our efforts on Europe does not diminish the resources we allow to be mobilized at the universal level for the protection of human rights. We heard the appeal yesterday that we should not be jealous of the United Nations but indeed should be helpful partners with the United Nations in the field of promoting human rights in the world.
Senator Di Nino: Would you consider the human rights issue in Chechnya different than that issue in Indonesia or China?
Also, could you tell us how busy the human rights court in Strasbourg is? How full is its docket?
Mr. Furrer: Your first question is one which pains us. You ask what we are doing about Chechnya, and we have come to the conclusion that we can do nothing, for the time being, about Chechnya. We have tried to be helpful in ending the hostilities. I think the contribution was positive and was accepted by both sides. However, new developments there go in a direction which is very difficult to assess. It is extremely difficult to even find out what could be done to correct the situation.
First, they still have hostages from our member countries, and yours, in the region. They must be liberated but how is that achieved? It is extremely difficult. We care very much about human rights in Chechnya, but deciding what should be done is a desperate situation.
It is all the more desperate that we should feel responsible for Chechnya, much more than we should feel responsible for Rwanda or any other country. We feel somewhat responsible for Rwanda, Burundi, and the events which occurred there. The Council of Europe was the only organization after the 1996 genocide that organized a conference, with the help of the Netherlands and the Swiss governments, to assess the extent of the catastrophe there and to discuss remedies. This was the only conference which has taken place. Canadian representatives were also involved. However, I tell you that was not a happy exercise for us because there are governments with responsibilities in the region that do not wish to allow the truth to come to light. That is one of the sad aspects of what has happened in Africa generally.
This is an item which must be addressed in a proper way in the future. I speak very openly about it. We have not yet found a common language about what has happened in Africa and what is still threatening to happen in the future there.
The human rights court in Strasbourg has a work load which goes beyond its present capacity. There are hundreds of cases being dealt with and pending. We must ensure that the new court that will be established after the reform of the system will have the means to cope rapidly with the cases still before it. We must ensure that in the future the human rights court in Strasbourg will not be responsible for behaviour which, if it happens in the national courts, would rightly be condemned as a violation of human rights; that is to say, undue delay in justice.
The Chairman: Honourable senators, Mr. Furrer has been very generous with his information and his time and at this point I want to express our great appreciation for the assistance he has given the committee.
Mr. Furrer: Thank you, Mr. Chairman.
The Chairman: Honourable senators, we turn to the second aspect of our work for the afternoon. Returning now to this hemisphere, we will be brought up to date on developments relative to free trade in the Americas.
From the Department of Foreign Affairs and International Trade, we have as witnesses, Kathryn McCallion, who is the Assistant Deputy Minister for International Business, Passport and Consular Affairs; and Claude Carrière, Director of Tariff and Market Access Division.
Please proceed.
Ms Kathryn McCallion, Assistant Deputy Minister, International Business, Passport & Consular Affairs, Department of Foreign Affairs and International Trade: Good afternoon, honourable senators. I am also the head of the Canadian delegation to the Free Trade of the Americas talks. I have been leading on the Canada MERCOSUR work, and I was the ADM Latin America when we did Canada-Chile, so it was felt that I probably had the necessary information, if not on paper, in my memory banks. I have a short statement to bring you up to date, and then Mr. Carrière and I would be happy to take your questions and elaborate more fully.
I was asked to address three aspects of Canada's trade policy in the Americans: the free trade area of the Americas, Canada-MERCOSUR trade relations, and the Canada-Chile Free Trade Agreement.
Under the free trade of the Americas, since the Miami summit in December of 1994 when leaders called for the creation of a free-trade area in the hemisphere by the year 2005, Canada has played an active role to move the process forward and to launch negotiations at an early date. Leaders are expected to launch the negotiations at the second summit meeting which is this April in Santiago, Chile. In the intervening period, trade ministers will have met four times: Denver in 1995, Cartagena in 1996, Belo Horizonte, Brazil last spring, and in March in San Jose, Costa Rica. The progress made since the first trade ministerial meeting in Denver and last year's meeting in Brazil has been quite significant, especially over the last 18 months.
In Denver, trade ministers started the preparatory process for negotiations and created seven working groups in key areas to exchange information and recommend ways to conduct negotiations. At Cartagena, trade ministers created four more working groups and reiterated the basic principles of the free trade agreement, including that it should be WTO consistent, comprehensive in scope, and constitute a single undertaking.
At the Belo Horizonte meeting in May of 1997, ministers agreed that negotiations should be launched by the leaders at the Santiago summit and tasked vice-ministers to make recommendations on both the structure and the site for the negotiations, as well as the initial mandates for the negotiating groups. There is general agreement that the negotiations should be conducted under the auspices of a trade negotiations committee assisted by a range of negotiating groups covering such issues as market access, services, investment, intellectual property, trade remedies, competition policy, and dispute settlement.
It is also generally agreed that negotiations should take place at a single location which would also be the site for a small, temporary, administrative secretariat to support the negotiating groups. Seven cities are currently competing to be the site of the negotiations: Miami; Kingston, Jamaica; Mexico City; Panama; Cartagena, Colombia; Lima, and Rio de Janeiro.
All participants have indicated that negotiations should be launched by leaders in Santiago whether or not the U.S. administration receives fast-track authority from Congress. The administration needs this authority to implement agreements, not to initiate the negotiations, as was the case in 1986 at the launch of the Uruguay Round. Nevertheless, the absence of fast-track authority has been interpreted by some Latin American countries as a lack of political will by the Americans to engage in trade liberalization and could provide an excuse to slow the free trade area of the Americas, or the FTAA, process down.
MERCOSUR is our largest trading partner in Latin America, accounting for some $1.8 billion in exports in 1997, up 17 per cent from 1996. Canadians have invested some $6 billion in the MERCOSUR countries, primarily in mining, oil and gas fields, and telecommunications. While MERCOSUR is currently a customs union in formation, it is also becoming a common market which will cover the internal movement of services, investment and people, and it is a mechanism for political integration and the protection of democracy.
Since last spring, we have been developing with MERCOSUR a trade and investment cooperation agreement, called TICA -- we in Foreign Affairs are good at coming up with short forms -- as a framework for enhancing trade relations. The TICA would be a first step leading to bilateral trade liberalization. It would commit Canada and MERCOSUR to a range of activities, such as collaboration on the FTAA itself, the WTO and the Cairns work group programs, the establishment of an advisory council of business representatives, joint assessment of barriers to trade and investment, negotiation of foreign investment protection agreements, and development of cooperative arrangements in the areas of trade and labour and trade and the environment.
The TICA was scheduled for signature during the recent Team Canada visit to Latin American, but Brazil was reluctant to proceed because of a commercial dispute between two aerospace companies. We hope the commercial dispute will be resolved shortly so that we can proceed with the signing of the TICA.
The Canada-Chile Free Trade Agreement entered into force on July 5, 1997. The agreement is modelled on and is intended to facilitate Chile's accession to the NAFTA. It covers trade in goods, services and investments and is accompanied by parallel agreements on labour and the environment. I believe some documents have been passed around, and they are both in French and English.
Whether and when Chile will accede to the NAFTA will depend on the U.S. administration receiving fast-track negotiating authority. Chile has stated publicly that it would not enter into accession negotiations until the administration has fast-track approval. At this point in time, it is unlikely that the administration will seek fast-track approval this year, given congressional elections in the fall.
Mr. Chairman. I am happy to take your questions.
Senator Grafstein: We studied the Canada-Chile Free Trade Agreement and held extensive hearings on it. Our principle reasons for moving quickly on that was to get a head start on the United States in terms of investment and so on. We have signed it. How is that working? What is the early anecdotal information on that?
Ms McCallion: It is working very well. We do have a head start on the Americans, to the point where the per cent advantage that Canada has on certain products has actually been referred to in the American Congress. Politically, the message to Latin America that Canada was willing to go ahead without the Americans, proceeded to take the risk and initiative, and has done it, has resulted in Canada being favoured in other forms of business. It was a strong message that Canada is open for business and follows up on its promises. The promise was delivered upon in Miami by the Prime Minister himself. So, all things considered, it is doing well. Statistically, it is doing well. Investments, particularly in mining and some of the gas transmission line sectors, are going ahead very well.
Senator Grafstein: It would be helpful for us if, at the end of one year or whenever, you could circulate to the committee any concrete changes in the numbers. I say that because I sent a copy of our debate on this bill to representatives of Congress, and I have received an acknowledgement. I said in comments, as I think did other senators, that this was Canada's head start, that we wanted to move quickly, and that we do not care if the Americans do not catch up in this arrangement. While some may be preoccupied with NAFTA accession, as far as I am concerned, I do not care if they do not fast-track that proposal in the foreseeable future. It will be to our trade advantage in the short run while we develop good relations. It would be helpful for us to get that information at the appropriate time. I know it is anecdotal at this juncture, but as soon as you have any material, it would be useful.
We were obviously dismayed when we read that we would not be able to sign the TICA with MERCOSUR. How close are we to resolving the aerospace dispute? Is it on the cusp? There must be some give there from the Canadian side, I guess, from the Canadian supplier. Can we see that happening quickly before the Americans fast-track MERCOSUR? In my view, having made the agreement with Chile, we should take the step up into MERCOSUR as well, and I think they would be prepared to proceed with us if we can get Brazil on-side. Where are we on that matter? Is there anything ministers should be doing to ensure that that happens quickly?
Ms McCallion: The deadline for the report of the two special envoys assigned by both the Prime Minister of Canada and the President of Brazil is now March 15. Mr. Lalonde was indisposed for a brief period, so the deadline was extended. It is now mid-March, with a little bit of flexibility. Once those reports are in, the decision has to be made.
The Brazilians have asked for consideration in not going to the WTO as the first course of action. It is in the hands of the two enjoys to see if there is room for a bilateral agreement and, if not, what should be the next step. I would say that it is on a fairly fast-track basis.
As to the MERCOSUR-Canada agreement, MERCOSUR is very much concerned with deepening and broadening MERCOSUR as their primary objective. They, too, are happy that the Americans do not have fast-track authority. It gives them much more capacity in their own backyard. That is why Canada is consistently taking the lead on these subjects and pushing. We want them to consider us. We want into the Latin American market before the Americans and before the Brazilians consolidate the South American free trade agreement or SAFTA, a Latin America free trade area. That would mean we would be negotiating block to block, NAFTA-SAFTA. We do not think that would be to our interests necessarily. It is in our interest to continue to push, which we do.
Brazil is hesitant on its internal policies. They had a unilateral liberalization several years ago. They had some bilateral agreements with Argentina. Now they have MERCOSUR and the capacity of their business sector to continue liberalizing at a very fast clip. There is a bit of internal drag, as well as our pressure on them externally. However, I am quite hopeful.
I saw my counterpart a week ago in Costa Rica, and there was nothing negative and no retreat on the dialogue as to the FTAA and other issues, only on this issue, which is being held hostage to a certain extent.
Senator Grafstein: I notice that on page 3 of your remarks you mention Miami, Kingston, Mexico City, Panama, Cartagena, Lima and Rio de Janeiro as possible sites. I would like to put South Toronto on that list. We have wonderful facilities. We speak all the languages. We have a warm, multicultural community. We have many people from Brazil. Our convention centre would be a wonderful place within which to deal with exactly these issues.
Ms McCallion: Let me say "noted", but perhaps I could comment on that. One of the difficulties all along has been the economic disparity in the hemisphere itself. We have been working very closely with our colleagues in the Caribbean and some of the smaller economies. One of the huge criterion is cost. We are trying to locate somewhere where the costs are minimal.
Senator Carney: I believe the last time I saw you was at the OECD, and it is nice to see you here. Thank you for your extremely concise briefing or update on these issues.
I want to talk about the U.S. fast-track process. You mentioned some of the advantages to us of not proceeding with the U.S. fast track or the advantages to the region in the Americans not receiving fast-track approval. Could you tell us about some of the disadvantages?
In that context, you mentioned that the Americans have the right to start negotiations but not to implement negotiations without the fast-track authority. Realistically, how far can these negotiations go without the fast track? It could be some time. What are some of the disadvantages for this group in no U.S. fast track, and how far can a concerted effort go in terms of negotiations before the lack of approval for fast-track implementation slows down the process?
Ms McCallion: It comes under two different headings. One is political advantage or will or leadership, and the other is national courage.
Briefly, the United States has experienced a major loss of influence in Latin America because economic integration, access to the U.S. market and access to the North American market were seen as bulwarks to the growth of democracy and the concept of growing out of problems. Everyone is very much aware that aid dollars and donor dollars have been reduced and are being reduced. There has been a lot of encouragement for Latin America countries that historically have been dictatorships to become politically democratic and to integrate into the hemisphere. They were all basically import substitution economies, which is costly and detrimental. The poor stayed poor and the rich got richer.
To a certain degree there is a measure of disappointment with the Americans in their leadership. The market of choice is the United States. Irrespective of the economic disparity, there was a lot of hope in Miami that there would be a chance to penetrate the U.S. market without going into a global negotiation in the next round of the WTO.
For us, we have a small short-term advantage. However, economically Canada's long-term advantage is to have a free trade agreement to which all partners in the hemisphere are party.
At the end of the day, it behoves all of us to persuade Congress and the Americans to fast track.
Yes, we can launch the negotiations, but they will not go very far if the Americans do not have fast track because everyone has been taught by the Mexican experience that if you negotiate first with the administration and second with Congress, you lose. This lesson was also followed by the Chileans. Ex-President Bush advised the Chileans not to negotiate with the Americans without fast track, and they passed the word.
I think you will see an establishment of base rates and where we start. However, if the Americans do not have fast track in the near term, the whole process will slow down.
The second or third intervening factor is that left over business from the Uruguay round comes back onto the international schedule -- agriculture in 1999 and service in the year 2000. Anything we try to do in the hemisphere will be subsumed back into Geneva, and we will lose the momentum.
Senator Carney: On the housekeeping issue you talk about seven working groups. In Denver, trade ministers set up seven working groups. Later on in your presentation you happen to identify seven groups. I was wondering if they were the same. This is just for clarity of the record.
Ms McCallion: No.
Senator Carney: Could you provide us with the information on what the seven working groups refer to and the four others?
Ms McCallion: Yes.
Senator Carney: That will help us keep track.
If I recall correctly, the joint committee of the House and the Senate singled out Latin America and Asia as areas where Canada should be increasing its representation and its efforts. What impact, if any, has the meltdown in Asia had on the priority being given these particular free trade agreements or bilateral agreements?
Ms McCallion: There has not been a major shift. The meltdown occurred about the same time as the APEC summit, which had its own agenda and timetable. The real problem will be the impact of the Asian meltdown on Latin America. We look to Latin America because Asia slowed down a bit, but the overflow of the Asian crises will affect Latin America as well. There will be a bit of a slowdown in Latin America as a result of the Asian crisis because of the amount of Asian trade, particularly with respect to Peru, Chile and Brazil.
Senator Carney: I was not aware there was that much trade.
Ms McCallion: Yes, there is.
Senator Carney: You are just holding on your steady course.
Ms McCallion: Yes.
Senator Carney: You are not re-evaluating.
Ms McCallion: Not at the moment. It is constantly under review, but it is a steady course at the moment.
The Chairman: Can specific results of the NAFTA be cited as the cause of the reluctance of Congress to go ahead with fast-track authority for an extension of the NAFTA?
Mr. Claude Carrière, Director, Tariff & Market Access Division, Department of Foreign Affairs and International Trade: The NAFTA has been unpopular in U.S. political circles from the time of the Perot statements about the great sucking sound of employment into Mexico. Since the passage of the NAFTA implementation bill, following the conclusion of the parallel agreements on environment and labour, the administration has withdrawn from the debate. Everything that went wrong in the United States was attributed to the NAFTA and no counter argument was brought forward by either the administration or business groups, and so on.
NAFTA is not a perfect agreement, but not all ills are caused by it. For three or four years, all these flaws have been attributed to NAFTA. The mythology has grown so that in Washington NAFTA has become a four-letter word. In resuming the fast-track campaign last fall, the administration started too late, proceeded in fits and starts and without coordinating its effort with the business community. When it went to Congress, there was not a sufficient ground swell of support on the pro side to counter the negative arguments that were made by those on the left wing of the Democratic Party and the right wing of the Republican Party that were against expansion of trade through the fast-track procedure. It is a problem. It will take some time for this to be addressed. It goes back to the 1994 to 1997 period, when the administration did not address those issues.
The Chairman: You seem to imply that the comment, "a great sucking sound could be heard", was not well founded. Was there a movement of jobs from, for example, Texas, or adjoining states, to Mexico?
Mr. Carrière: Employment in the northern border region of Mexico increased. Obviously, plants have started up.
One of the objectives of the NAFTA <#0107> that is, Chapter Three -- was to remove the incentive to locate in the northern region and to remove the Maquiladora incentive that required export only. These incentives will be removed through NAFTA, and those plants will be allowed to sell in Mexico as well as in the export market.
It is difficult to isolate any one cause for any reason or to take credit for any one reason but, if one looks at the overall picture, the NAFTA has provided an increase in trade and investment flows among and between the three NAFTA parties, which was what it was designed to do.
If we look at the overall employment numbers in the United States, they have certainly gone up. They have a low unemployment figure. Unfortunately, in Canada we have not been able to achieve the same record. Perhaps in the next several years, we will. From our point of view, the NAFTA has delivered what it was designed to do.
The Chairman: At the beginning of the NAFTA negotiation, I was told by an influential American that the real goal that they had in mind was not so much economic as socio-political. They were hoping that, by reason of the trade agreement, the social structure and the distribution of income in Mexico would be improved, with the result that there would be the prospect of greater and better political stability and less immigration pressure on certain American states.
Is it too early to ask if the NAFTA has achieved a socio-economic improvement in Mexico?
Ms McCallion: It is too early. The collapse of the peso, which came shortly after the signing of NAFTA and was not directly attributed to NAFTA but to bad investment and to bad fiscal framework management by the Mexicans, has impacted on the perception of NAFTA. More time is needed. The first six months was a devastating six months with the loss of value of the peso, and it was definitely not attributed to NAFTA. It was related to their financial markets and the peso crisis. It will take several more years.
The other consideration is globalization which has had a structural impact on both the United States and the whole NAFTA region.
The Chairman: Would you spell that point out?
Ms McCallion: The restructuring of economies, companies going larger, the large international firms and how they are doing business -- they have plants here and plants there -- have had and are having an impact at the same time that you are trying evaluate statistically the results of one trade agreement.
Senator Carney: I asked about the working groups. April is just a couple of months away. Can you give us a little bit more here, in terms of the working groups and what our priorities will be at the meeting which will take place in just a few weeks time? Normally, in a working group, Canada has special interests or particular priorities. That would be important in terms of the update on these negotiations.
Ms McCallion: You asked about the titles or the subject matter under the 12 working groups. They involve everything from market, access, standards, sanitary issues -- all those things. It has been an extremely powerful exchange of information.
Many countries that did not even know they had the information or how to gather the information have been assisted by what we are calling the tripartite committee, which is a composite of the OAS, the development bank and ECLAC, the UN Economic Commission for Latin America and the Caribbean. They have been helping countries exchange information.
Our objective in round 1, next month, is to have eight negotiating groups. We will take 12 and scrunch them into eight. They have not been agreed upon. MERCOSUR is proposing that they have a special group on agriculture, for instance. Many of us feel that agriculture issues should be under market access. You have heard that debate before. The Mexicans, for instance, would like to have competition policy lumped together with anti-dumping, and we do not agree with that proposal.
Senator Carney: Nothing has changed.
Ms McCallion: Our objective for round 1 is to have eight reasonably sensible negotiating groups capable -- in terms of the breadth of this agreement, because everything is on the table <#0107> of coming up with negotiating capacity within each group.
In the longer term, we will be consulting with our sectors at home. The first round is to get a workable negotiating structure in place.
Senator Andreychuk: I want to underscore the statistics because that was one of our preoccupations. I want to go back to the Canada-Chile trade agreement. At that time, there was some concern that Chile had a separate understanding or agreement with MERCOSUR. We were assured that there would be no glitches either for the Chileans or for ourselves in signing a bilateral agreement. In fact, it would enhance our ability to join MERCOSUR to have the agreement with Chile.
Do we have any indications that that is an acceptable arrangement and that we have profited from it, or is it too early to tell from the statistics?
Ms McCallion: It is early, but people should realize that Chile has been wooed by just about everyone. Chile is seen by the European Union as their access point -- as was MERCOSUR, but Chile was their first choice. Chile was the one country whose external trade was evenly balanced with Asia, Europe and North America, as well as their partners in the regions. They have an agreement with MERCOSUR, but they are not part of MERCOSUR. They have a bilateral agreement with MERCOSUR but they are not the same as a member of MERCOSUR.
Mr. Carrière: On the statistical side, we will do our best to provide you with information but the agreement entered into force on July 25, which is not a classic date for entering into force of an agreement. We will provide statistics at least on an annual basis, where possible.
The Chilean strategy in negotiating the agreement with Canada converged very much with our commercial strategy in Latin America. Their principle objective is to attract investment, technology and know-how from Canada as part of their development strategy. They have looked at how we have developed from a resource economy into a tertiary, human capital economy. They are mapping their development strategy on the sorts of things we have done. They are a resource economy growing out of that.
For our part, we should like to use Chile as a base to enter Latin America, to develop joint ventures and to establish there, to learn Spanish and to learn the culture in Latin America. We then hope to work with Chilean partners to spread out to MERCOSUR and to the region. We have anecdotal evidence of companies that are doing that very thing, but it will take some time for us to have a statistical base in order to show that.
We are also thinking of working with the Chileans to identify narrow product categories where the intersection between the Canada-Chile Free Trade Agreement and the Chile-MERCOSUR association agreement could provide us an advantage in bringing input, parts and components from Canada and assembling them in Chile for sale into MERCOSUR and other countries. This is one of the topics we have discussed with the Chileans and we should like to work this out over the next several months and years.
This is part of the strategy, but it takes time to bear out these thrusts, at least statistically.
Senator Andreychuk: In other words, the strategy has not changed. Although we are now talking directly to MERCOSUR, using Chile as a jumping-off base is still part of the strategy?
Mr. Carrière: Yes.
Ms McCallion: We have signed an implement to put into force a free trade agreement with Chile. We are in the process of starting the process with MERCOSUR. Ipso facto, Chile has a three-year start on anything we could do with MERCOSUR. The answer is "Yes."
The Chairman: Senator Grafstein, I hope we will not end the meeting without making reference to the Caribbean.
Senator Grafstein: I have been pondering a notion arising out of our financial institutions and the failure of the IMF and others to forewarn us in Canada about the coming crunch. It might be helpful to us and, perhaps, to the department.
Every major global company with which I am familiar, has a market-driven model as part of their business plan. What the market-driven model says is, "If things go down in this sub-market or regional market, we can quickly shift our goods, our attention and our things to other places." Put simply, in the clothing business in Asia, when prices went up in Hong Kong, people moved offshore to Taiwan and then off to Singapore. There was a movement in the marketplace reflecting the conditions in the particular marketplace.
We are presently confronted with a situation in parts of Asia. I do not know if it is affecting all of that region. I do not know how it affects Taiwan or Japan. We know that China may be out of it and that Indonesia, Malaysia and Singapore are in trouble.
We are now becoming dependent on trade and our major customer happens to be the United States. If we ever had a serious problem with the United States, we would not have time to move or reorganize ourselves. Is the department looking toward developing a risk model based on things happening in Asia? How do we quickly advise our export companies that they should be shifting to South America and perhaps to Chile? In other words, how do we quickly move to keep ahead of the dramatic ups and downs in various regional markets, which we know will continue to occur?
Team Canada travelled to South America. They probably said to small business people, "If we go to Brazil, this is a safe place to invest." A small business will not do a risk averse analysis, they will conclude that the government has done that. On the other hand, do we not have an obligation to set up for ourselves a sophisticated, computerized model to say, "Here is what is happening in Asia. Ease up on Asia and move to South America, or may be you should head for Mexico. This is the crisis and here are the alternatives."
The good news is that we have now developed enough trade links around the world through Team Canada that we have some flexibility. If things happen in the United States, maybe we have more flexibility than others. Sometimes six months' notice is enough time for people to change their machinery, equipment and their quarter year plan to move in another direction.
That is a complicated question, but there may be a simple answer. Is the department working on models like that, namely, risk averse or trade averse models?
Ms McCallion: No. We are coming at it in a different way but with the same objectives.
First, as the chief trade commissioner, which is one of my other hats, we are very much aware that we are overly dependent, although profiting widely, from our penetration of the U.S. market. Part of our policy and activities are to encourage Canadian companies that have been successful in the U.S. market to continue to sell to the U.S. but to expand abroad. Over the next 10 years, a NAFTA integration model will eventually become almost our domestic market.
Our posts are being used constantly by business people, and we advise carefully on trends and risk analysis, which is part of our department. It is where a lot of the activity happens, namely, on-site.
My department advised Canadian businesses not to precipitously take a huge discount on their investments in Mexico but to ride out the shock. That is the other side of your question, namely, whether one should leave now or stay. The possibilities of return to growth and prosperity are greater than you think in the moment of a market crisis.
That solution is not quite the way you are suggesting it, but it is a good idea.
Senator Grafstein: That is something we should consider.
Senator Di Nino: I have some opinions on that as well. Perhaps we can discuss that at a later time.
Senator Carney: My next question follows a discussion we had in this committee last week on the impact on businesses of the Asia meltdown. We heard from the Bank of Canada officials that they expect non-performing loans to increase in the future because of some of the problems that would be encountered in our own business community by failure of some the Asians to fulfil the context.
The reminder that you are trade commissioner leads me to ask this question: Should we be concerned about the Team Canada approach and putting too much pressure on Canadian companies to sign contracts, deliver the goods, make commitments and then have them exposed to some of the financial difficulties that are emerging in the Asia meltdown?
Senator Grafstein and I have had some candid discussions about this approach, particularly the practical aspect of being very gung-ho on some of these trade missions and getting businessmen into situations for which they may not be adequately prepared.
Have you been giving much thought to this possibility? Is there anything you can tell us about where you are at in pursuing this issue?
Ms McCallion: We have been giving it some thought. We have been working closely with the provinces on devising a conscious follow-up plan that works. One of the things that is not widely known is the difference between what is signed through Team Canada and what eventually makes it to the bank. In many instances, it is very hard to take along a businessman. If you get him to the well and he does not want to drink, he will not drink.
Senator Carney: Or her.
Ms McCallion: That is correct. In many cases, you will find deals that have almost reached fruition and the presence of the politicians and the hoopla or the focus causes that deal to finally be signed.
There is a second set of letters of intent and memos of understanding <#0107> that is, a commitment to consider a deal. It is in those letters that we are trying to be careful and make sure that they are followed through carefully. We are putting in time and effort with the provinces, which are also concerned about this matter. We may be not only artificially persuading business people to do the wrong thing but also missing some opportunities. There is the crescendo and then dead silence. The crescendo is somewhere in the other part of the world. Everyone says, "What happened to the Canadians? They were here big time last year and we have not seen them since." We are trying to fill in the gap and make the crescendo a little more constant. We are committed to our firms doing well so that the fly-by-night deals fall by the board. There is not that many of them, though. That is part of the plan.
Senator Carney: Is this a matter of concern? You say that you are giving it some thought. One of the things that came out in our other discussion is that there was little warning by the IMF and the world agencies about this problem. Our own post may have reported it, but there was little official recognition of this problem. Did it take you by surprise?
Ms McCallion: Yes, it did.
The Chairman: I pulled together stories in The Economist from over the last two and one-half years. All the warnings that that one magazine was publishing is amazing.
Senator Di Nino: Yes, and others.
The Chairman: Yes. I asked this question of a banker in London who had worked with the IMF: "If the IMF knew about this situation, why did it suddenly burst upon the investment world late in the summer of 1997?" He replied that the market has a motivation of its own, which may not have anything to do with the facts in the short run. I thought that was very revealing. In other words, there was data out there.I would be happy to send you copies of the magazines.
Senator Carney: This is a good debate but we have trade policy in Canada. We have people like our witnesses, who are specialists in trade policy. They are important to the business community because business takes its queues from our trade policy people. It is interesting to hear our witness say that this took her by surprise.
The Chairman: Yes; exactly.
Ms McCallion: Actually, I was more worried about Japan than I was worried about Indonesia. Maybe I read the wrong articles.
Senator Carney: The issue is: What can we do to protect our business people from this sort of event? We are doing a study on Asia-Pacific.
Senator Di Nino: Listen to the business people.
The Chairman: No, they are the people who went in and put their money on it.
Senator Di Nino: That is from where you are getting your opinions.
Senator Andreychuk: Actually, in Asia-Pacific is different.
The Chairman: I think we have identified this problem.
Ms McCallion: We also have an institution that is good at this kind of forecast but does not necessarily get asked by all businesses. One is your local banker. If you only go to him for a loan for your air ticket, he will not tell you that where you are going is risky. However, if you go to the major banks in Toronto their risk analysis divisions will give you the information.
A lot of businessmen do not do that, but the Export Development Corporation is good at this. They have a huge risk analysis and risk recovery section. More and more, we are working with them on their outreach program. I may not have it in my head but someone does. The business person should talk to EDC before they make a move, irrespective of whether or not they think they need insurance or whether they need loans or coverage. It is part of the network we are trying to put in place. The information is readily available in the government but it must be accessed more readily.
Senator Carney: You are talking about this question of access again. Businessmen in Saskatoon or Victoria may not have the same access as those in Vancouver. We should flag this as an important issue that we have to address, namely, that trade policy is based on information. How good is the information to the business person? Is there adequate follow up? Are we exposing them to taking the risk incurred by "our" government policies?
The Chairman: Honourable senators, I wish to thank our witnesses for a very crisp and candid statement of the situation with regard to the hemisphere. It has been helpful.
The committee adjourned.