Proceedings of the Standing Senate Committee on
Social Affairs,
Science and Technology
Issue 31 - Evidence, March 23, 1999
OTTAWA, Tuesday, March 23, 1999
The Standing Senate Committee on Social Affairs, Science and Technology, to which was referred Bill C-61, to amend the War Veterans Allowance Act, the Pension Act, the Merchant Navy Veteran and Civilian War-related Benefits Act, the Department of Veterans Affairs Act, the Veterans Review and Appeal Board Act and the Halifax Relief Commission Pension Continuation Act and to amend certain other Acts in consequence thereof, met this day at 10:06 a.m. to give consideration to the bill and to consider the dimensions of social cohesion in Canada in the context of globalization and other economic and structural forces that influence trust and reciprocity among Canadians.
Senator Lowell Murray (Chairman) in the Chair.
[English]
The Chairman: Senators, on Thursday last, Bill C-61 was referred to this committee. There is a consensus among the leadership in the Senate that we should refer this bill to our subcommittee on Veterans Affairs, chaired by Senator Orville Phillips.
I will entertain a motion, which Senator Butts is prepared to move, that Bill C-61 be referred to the Subcommittee on Veterans Affairs.
Is it your pleasure, honourable senators, to adopt the motion?
Hon. Senators: Agreed.
The Chairman: The subcommittee will be meeting presently to consider this bill. As you know, the protocol is that the subcommittee cannot report directly to the Senate, but must report through us. Rather than convene this committee, which would take 24 hours notice and so forth, simply for the purpose of receiving their report, perhaps we can follow the precedent that we established some weeks ago in a similar case. If it is agreeable to the committee, Senator Butts, as Vice-Chairman, and I as Chairman will be deputized to receive and adopt that report on your behalf. That is simply for the purpose of presenting it in the full Senate.
Is that agreeable, honourable senators?
Senator Cools: Normally I am not so eager to agree to these sorts of things; however, in this particular instance, it is a very worthy action. In view of the fact that Senator Phillips will be retiring very shortly, it is very important that the consideration of this bill receive his full and proper attention. Therefore, I am quite prepared to support this motion, but I want to add that it is an expression of confidence in Senator Murray and Senator Butts.
The Chairman: It is an expression of confidence, if I may speak on Senator Butts' behalf, that we both appreciate. You are happy, Senator Cools, to move that the Chair and Deputy Chair be authorized to receive and adopt, on behalf of the Standing Senate Committee on Social Affairs, Science and Technology, the report on Bill C-61 of the subcommittee on Veterans Affairs?
Senator Cools: Yes.
The Chairman: Is it your pleasure, honourable senators, to adopt the motion?
Hon. Senators: Agreed.
The Chairman: We now resume our consideration of social cohesion in Canada under the pressures of globalization and technology. We have two witnesses today who are experienced in the study of global standards, if any. Each will make an opening statement and then I will open the floor for questions and discussion.
Christine Elwell has a Master of Law from the London School of Economics, where she specialized in European law and institutions. She is an adjunct professor of law at Queen's University, teaching international law, including trade, human rights, and the environment. She received her LL.B. from Queen's University in 1984. She has published articles on international social policy, human rights, labour standards, and trade, including "Human Rights, Labour Standards and the New World Trade Organization: Opportunities for a Linkage." Ms Elwell has just returned from meetings of the WTO in Geneva, so she may have some fresh news or a fresh perspective to bring on some of these subjects.
Craig Forcese is from the University of Ottawa, Faculty of Law. He received his LL.B. summa cum laude from the University of Ottawa and a Master of Arts from the University of Carleton Norman Paterson School of International Affairs. He has served as a board member for Democracy Watch and for the Canadian Lawyers Association for International Human Rights. He has received numerous awards and has written articles for the International Centre for Human Rights and Democratic Development. We heard from the head of that organization, the Honourable Ed Broadbent, a few months ago. Mr. Forcese has written articles for them, including "Putting Conscience into Commerce <#0107> Making Human Rights Part of Business As Usual" and "Putting Conscience into Commerce <#0107> Human Rights and Corporate Codes of Conduct."
With those brief thumbnail sketches of the careers of our witnesses, I will ask Ms Elwell to make her opening statement first.
Ms Christine Elwell, Adjunct Professor of Law, Queen's University: I am pleased to make this presentation to you as you study social cohesion and global standards and strategies in the context of globalization, and in particular, your task of giving Canadians hope.
It is undeniable that economic changes have polarized Canadians into a society of haves and have-nots. Indeed, I rely on Judith Maxwell's study, indicating that, on average, the poor in Canada die some five years earlier than the rich. Pressures of globalization are putting Canadian traditions of social justice at risk. Your task is to highlight weaknesses in existing institutions and to identify the best emerging new ideas.
In my brief time with you this morning, I would like to review some of the existing institutional machinery and the Canadian government's position externally on these matters, including at the WTO, NAFTA, and the FTAA. I also want to review some of the measures that are currently in existence to protect the social and physical environment, and indicate to you their weaknesses and opportunities for improvement. Finally, I wish to address the issue of striking the right balance between economic growth and social cohesion.
Indeed, I was at the WTO trade and environment meeting in Geneva last week on behalf of the Sierra Club of Canada. This is a high-level meeting, including 134 countries, many international NGOs, and international government organizations. The International Labour Organization was remarkable by its absence.
I have brought a number of documents from that meeting with me, including a list of international government organizations and NGOs that participated, and two WTO background documents. There has been a step back from the promise made in Marrakech at the first ministerial meeting of the WTO. At that time, there was a promise to continue the existing collaboration between the WTO and the ILO and a commitment that members would recognize core labour standards. There has been a complete backsliding from that promise. The absence of the ILO at this high-level meeting speaks to that in particular.
We took the position at the meetings that many NGOs and others advocated, that is, rather than take steps toward a new WTO round, there should be a review of the current round. What has happened since Marrakech? How has the Uruguay Round affected social and environmental issues? We need to complete the unfinished business promised at Marrakech on core labour standards and on collaboration with other international government organizations.
We emphasized to this group the work of the World Summit for Social Development in 1996, which directly linked unsustainable patterns of trade, production, and consumption with aggravating world poverty. There was a clear link between human rights, the environment, and economic development. Still there is resistance to these ideas. Indeed, it is the view of some that the position of the Canadian government regarding the link between the WTO and core labour standards is weak. The U.S. and Norway seem to be carrying the can on that issue.
At a cocktail party I attended, a U.S. negotiator said to me, "If we drop labour, maybe we can get more on environment." NGOs were being asked to make that trade-off. I was not part of that. At the same party, I spoke with the Indian delegation. We all agreed that we were in favour of human rights, but the gentlemen from the Indian delegation objected to any sort of labelling indicating child-labour-free products, or any of those basic steps or mechanisms that you could use to try to integrate these areas.
My main recommendation to you is that you re-enthuse the Canadian government on its view about the necessary linkages. Those linkages are necessary globally so that we can enjoy them at home. I have some documents here that describe many labour groups and human rights groups that were at the high-level meeting. We ask you to remind Sergio Marchi, as he said in his opening statement in the standing committee hearings on WTO, that it is the government's view that the global economy must be a humane place, where good governance, democracy, and the rule of law ensure that the benefits of trade are shared amongst all levels of society.
We continue to see no correlation between the economic growth brought by trade and the economic benefits to the people. There is still this disconnection between the economic expansion from trade and the promise of environmental or social benefit.
Existing measures are inadequate. Currently, there is a debate at the WTO on whether the general exemptions under article 20 should be revised to clearly state that member parties may enforce a multilateral environmental agreement or core labour standards. This has been on the table since at least Marrakech, which was five years ago. Yet the statements from governments indicate that they are not willing to revise article 20 to make those general exemptions more clear and to reverse the onus of proof, of who needs to defend what.
When you look at the record, despite the rhetoric, none of the cases that relied on article 20 survived. Senators, you must know that Canada is on the edge of those countries that are force-feeding beef hormones down the throats of Europeans, allowing the slaughter of dolphins for the sake of tuna, and insisting that French workers use asbestos, despite workers' and public health protests. You must know that the Canadian government has a very aggressive trade policy, and there may be some disconnection between what we say at home and what we are actually doing out in the world.
The issue of article 20 is still very much on the table. There are also issues about whether we need to revise the sanitary standards and technical barriers to the trade agreement. There are issues about what goes on labels, issues that might be tied to codes of conduct, and how you verify that corporations are meeting certain standards so that consumers can choose products. If consumers want to buy a carpet made without the use of child labour, they should have the right to do so. The trade community should not be putting up barriers to consumers' right to know about socially and environmentally friendly products.
Another major issue on the table is the dispute settlement agreement. There is some question of whether there should be more transparency and more participation by civil society in these disputes. I can tell you that there is resistance to that. The Indian government, for example, was quite opposed to having any NGOs or anyone else participate or be involved in these negotiations. My colleague will speak today about the importance of public accountability. Justice needs to be done and needs to be seen to be done. When the door is closed and you do not know what is going on behind it, it is very difficult to believe that any of the dispute resolutions have been legitimately arrived at.
A genuine social and environmental impact assessment is needed before any new WTO round. That review would indicate, for example, the inappropriateness of adding a multilateral agreement on investment at the WTO. We made that point in Geneva, and there was quite a lot of interest. We recalled the terrible time we had been having under NAFTA chapter 11, with all those investor state disputes. In the last six months, Canadian laws on hazardous waste, water exports, and forest products have come under attack by this secretive mechanism that allows U.S. corporations to challenge those laws behind closed doors and is tantamount to expropriation. We alerted the world community to not go down that road because we have had not a good experience with it.
A true social and environmental impact assessment would indicate the need for new global institutions to coordinate policy so that the trade community has the appropriate expertise with which to judge, or at least consider, trade measures that impact on other areas. There is a major debate about whether there should be a global environmental organization. It is important to understand that social justice groups were asking for new, corresponding machinery of international agreements to provide a counterweight to the increasingly entrenched and strong WTO. They included the relevant UN bodies on human rights, environment, and gender equality. This was in order to avoid conflicts in member states' legal obligations. There is a push on now to take all the environmental and social development files that are scattered in all these institutions and put them in one house, and through that one house, provide better expertise and balance to the WTO.
We challenged the WTO generally, and the United States delegation in particular, to engage in a public debate in Seattle. As you know, the ministerial meeting will be in Seattle in November. Canadian, Mexican, and U.S. human rights, environmental, and civil society groups have launched an impressive campaign across the country. We are trying to organize a train trip through the major cities to highlight public awareness about the WTO. Elizabeth May, with whom I work at the Sierra Club, loves these cross-country train trips. The need for parliamentarians to be engaged in that debate is fundamental. That is what will strike the right balance.
I really need you to understand how aggressive we are on the world stage and how all the WTO cases have gone against environmental or social policy. Thank goodness for your great work on the milk hormone case, exposing all those issues around rBST. Your work was just phenomenal and we thank you for that. We hope parliamentarians will play a greater role. If not, the backlash against globalization and economic liberalization will increase, which is not good either. To get that balance right, all the main values and goals need to be on the table.
Mr. Craig Forcese, Professor, Faculty of Law, University of Ottawa: I am both pleased and honoured to have an opportunity to share some thoughts on this important issue of social cohesion and globalization.
Globalization, broadly put, is about dismantling barriers between countries. Clearly, developments in communication technology are part and parcel of globalization. Witnesses have spoken to this issue in the past in this committee. The other dimension of globalization, the elements associated with increased trade and investment, reflects progressive and incremental codification of new international standards and regulations. These developments originated in concrete policy decisions made by governments, including the Canadian government.
Economic integration is typically touted as a means of maximizing prosperity. In many instances in the past, however, economic integration was presented as a means of achieving laudable political ends. For example, the General Agreement on Tariffs and Trade, which is, as you know, the linchpin of the world trade system, was largely the product of policy makers concerned that the Great Depression and the Second World War were a function of the anarchic trade system that existed before that period. The European Coal and Steel Community, which was the predecessor of the European Union, was about harmonizing and internationalizing control over the smokestack industries associated with armament production.
In more recent times, economic integration has been presented as an opportunity to constructively engage countries with poor human rights records. Trade and investment is viewed as a means of encouraging the development of appropriate human rights standards in these countries.
Globalization is a public policy end that should not be measured in terms of how well we acquire the trappings of free trade, but rather in terms of how well we satisfy other policy agenda items, for example, maximizing human well-being.
Let me comment on human rights, since this is the area I know best. There is no empirical evidence suggesting that economic integration and liberalization induce improvements in human rights performance. There is little empirical evidence that constructive engagement actually works. In fact, the empirical studies suggest that democracy and economic growth are not affiliated or linked.
I ran a simple statistical test several months ago in which I correlated the amount of direct foreign investment in countries with their human rights performance. I found that there was no statistically significant correlation.
Given these figures, it is not surprising that there is a strong perception in civil society that globalization, as presently practised, is about entrenching prosperity for some to the disadvantage of the majority. Consider that globalization is occurring in a context where the 225 wealthiest individuals on this planet have an income equivalent to that of 47 per cent of the world's population. There are a billion people in this world who live in abject poverty. Consider also that the perceived beneficiaries of globalization -- large corporations -- have been repeatedly cited as engaging in or being complicit with human rights abuses abroad. Ignoring the human rights implications of globalization risks undermining public support by contributing to the perception that the process is, in the words of free trade's most acerbic critics, "giving huge, massive powers to foreign corporations that are accountable to no one in this country."
I am largely sympathetic to these views. If, to paraphrase Roy Culpepper, who is the president of the North-South Institute, Canadian values such as human rights standards and democratization are important, and if these kinds of values are swept under the rug in Canadian trade policy, then you do have the effect of Canadian trade policy subverting Canadian values.
In my opinion, whatever other purposes globalization and economic integration serve, they are not principally about fostering long-time Canadian values.
Consider that the principal tools of economic integration, the world trade agreements, are increasingly prohibitive of actions taken by states to encourage and promote human rights abroad. We have an international trade system that is now capable of grappling with products produced by pirated technology, but is totally incompetent in its efforts to deal with products produced by means unlawful in international law, through abuses of human rights, and the like.
We have a system that could conceivably declare those much-touted voluntary corporate codes of conduct promoted by government to be technical barriers to trade. We have a system that could conceivably say that the practice of ethical government procurement is itself a violation of these trade agreements. That goes not only for human-rights-sensitive purchasing, but also for such initiatives as the Federal Contractors Program, which encourages employment equity among major contractors of the federal government.
We have a global trading system in which the dispute resolution mechanism is an in camera process entirely inaccessible to the public. It is a process that has been called a "star chamber." We have a process for setting food safety standards at the international level that is entirely opaque and ridden with conflicts of interest that we would not tolerate in our own system.
Economic change, as many of your previous witnesses have said, has always resulted in social difficulties, but government policy has evolved to bolster social cohesion in the face of the crises presented by this change. Government policy does not exist to guard the forces of economic change against the adjustments required to promote and protect social cohesion.
In the area of protecting and promoting human rights, there are a number of very simple steps that government could take to enhance the credibility of the globalization process. I will just list them very briefly and can address them in questions later on.
First, the government needs to recognize the primacy of international human rights law over trade law whenever there is a conflict. A legal argument can be made that international human rights law does have primacy. Second, the government needs to undertake a series of initiatives to ensure that when Canadian businesses go abroad, they are part of the human rights solution and not part of the problem. They can do things to promote these voluntary codes of conduct, but such codes are of no use unless there are significant inducements from government for corporations to abide by them. Your colleagues in the Senate Standing Committee on Foreign Affairs noted a number of steps that the government could take in their report on the Asia crisis. Third, as Christine has noted, the government should promote a social clause in trade agreements and also greater transparency and openness at the WTO.
In my view, these modest steps are required to ensure that globalization is about improving the well-being of human beings. I believe that these initial steps are required in order to avoid what Kofi Annan, in a recent speech, indicated would be the most serious challenge to globalization, namely a backslash, if issues such as human rights are not addressed in the multilateral venue.
Senator Wilson: Mr. Forcese, you quoted the president of the North-South Institute speaking about Canadian values, but would he not be in a stronger position if he quoted the Universal Declaration of Human Rights? What are Canadian values? Who knows?
Mr. Forcese: Our government has been very explicit about regarding the Universal Declaration of Human Rights as customary international law, which means it is binding on all nations. It is also the interpretative device used to determine the content of the human rights obligations under the UN charter, which, as you know, has an almost quasi-constitutional status. So yes, the UN declaration of human rights takes primacy over any conflicting trade agreement.
Senator Wilson: I have heard this phrase used four times in this committee by presenters, and it is not adequate, because then you pose Canadian values against Chinese values and you get into that whole comparison. We should think more in terms of humanitarian law and what that really means.
In terms of voluntary codes of conduct, there has been some work done around benchmarks for monitoring and verifying those. Do you think those are necessary, and what else is required in order to strengthen that area?
Mr. Forcese: As any number of observers have said, including the U.S. Department of Labour in their study on child labour, the prerequisite for any voluntary code of conduct is a credible monitoring system. In the absence of that, the codes are frankly not worth the paper they are written on.
In practice, in the absence of inducements encouraging corporations to not only create these codes with sufficient standards, but also to implement efficient, independent monitoring systems, corporations will not move. A number of existing proposals have been followed more extensively in the United States than here. Government procurement policy should base access to government contracts on adequate overseas behaviour by corporations, and financing from the Export Development Corporation should be made conditional on human rights performance. As you know, the Export Development Act is currently up for review and will be going before Parliament in several months time. Amongst other things, Minister Marchi has said that the human rights implications of the EDC will be examined. A consultative body has been hired to assist on this issue and a number of us have appeared before it. It will go before Parliament, and that is an important opportunity to ensure that the EDC is consistent with other planks of Canadian foreign policy, including promotion of human rights.
There are any number of other actions available to government. Senator Wilson, you have expressed interest in Canadian corporate law. One of the problems we have with it is that if you, as a shareholder, wish to put a proposal before a shareholders' meeting regarding human rights, it is likely to be excluded under Canadian corporate law. Again, the Canada Business Corporations Act is apparently up for amendment and proposals will be made. That is another opportunity to drive home the human rights implications of globalization in a domestic context.
Ms Elwell: Senator Wilson, I would like to pick up on your second question. You were asking about mechanisms, one of which was codes of conduct. I would emphasize labelling as another viable option. It is a similar mechanism because you go through a process of certifying whether or not the product actually meets these criteria and indicators. You then create a market through that labelling and environmental or social justice groups can sign up customers. It provides us with an opportunity to shape the market, and I really emphasize the importance of that.
The Chairman: There is a subcommittee of assistant deputy ministers that is carrying out a series of major research projects for the government with a view to identifying the pressure points on Canada, and on the governance of Canada, in the year 2005. In a progress report that they released almost two years ago, they said:
At this time, the chances of introducing a social clause in WTO agreements are next to nil by virtue of the united objections of developing countries.
I get the impression, Ms Elwell, from what you said, that you did not notice much change in that situation when you were at the WTO a few days ago. Do you have any comment on that statement?
Ms Elwell: Technically I think you are right, but they also objected to environmental performance measures. However, in five years, we have seen definite improvements.
Grappling with economic change is difficult for developing countries, and probably even more difficult for us. Everybody wants to be in the market. That is the beauty of it, actually. That is what sustainable development is. There is resistance, but the pressure to be part of the open markets can be good.
The Swedish trade development agency published a document on actions that could be taken to bring developing countries around. It cited the largest textile company in India as a positive example, where their products gained particular certification on dyes and on working conditions. They were able to raise their prices by 8 to 10 per cent and their market grew by 10 per cent in less than two years. If we can continue to give positive examples of where it makes sense to have environmental performance, human rights, labour standards, gender equality performance, and they can make money at it, what could sell better than that? We have to keep giving those positive examples.
The Chairman: On the environment, Professor Forcese, I have here what I think is an extract from your work, "Putting conscience into commerce." It comes from the International Centre for Human Rights and Democratic Development. There is a reference to the fact that President Clinton managed to dispel much of the public antipathy towards NAFTA, but only after promising that the agreement would include labour and environmental side accords. What is your opinion of the efficacy of those side accords?
Mr. Forcese: Christine would probably be better equipped to comment on that because I am not very familiar with NAFTA.
Ms Elwell: It has been a slow process. Over the last five years, we have seen institutions develop their own expertise. There are both good and bad points to be made. More importantly, though, the bigger picture is that we can say to the world, "Here is a model. It is not perfect, but at least it is trying address these matters and integrate these agendas." From that point of view, it is not a bad world model, although it could be improved. What I like to say to Indonesia, or other countries, when they complain is this: "Mexico has been living with it for more than five years and the walls have not fallen apart. The earth has not stopped. Their exports have increased. They are the second highest nation for foreign direct investment." The best thing to do is to relieve their concerns and show that life has gone on.
If you want to get into the details of the side agreement, it is basically a talking shop. They can make a report, but they have not yet reached the stage of actually changing trade patterns. I do not say that they will not in many more years. It took the European Union 40 years to develop its social charter, so we cannot expect it all in five years.
An important case, the Echlin case, was recently brought by Canadian steelworkers and others. It was our first venture into using the side agreements. The Canadian NAO did empirically find that the workers in this Mexican plant did not enjoy their right to freedom of association. Indeed, there was also an issue of asbestos at the workplace, and we expect the second part of the Ecklin ruling, on occupational health and safety, this week. The significance there is that they looked at the Mexican law in terms of the labour principles in the side agreement. We are moving to a system where we measure national laws and national practice in terms of regionally agreed standards. That is really where we need to get to.
Senator Butts: Professor Elwell, did I hear you say that you object to allowing the slaughter of dolphins for the sake of tuna?
Ms Elwell: Indiscriminate slaughter, yes. It is an avoidable practice.
Senator Butts: Would you say the same about slaughtering seals for the sake of the cod?
Ms Elwell: Avoiding pillage is always a good thing.
Senator Butts: But you did talk about balance in the same breath. Where is the balance? There are people who can make a living from seals and there are also people who can make a living from cod.
Ms Elwell: I am not an animal rights advocate, but there were many at the WTO, so let me tell you what they said. It was not so much about whether or not the animal was killed, it was more about how it was done. This relates back to what we call the PPM issue, process and production methods. It is how the product came to be that is important from the human rights, environmental, or animal welfare perspective. It is the level of "cow comfort." Senator Eugene Whelan raised the issue of the comfort of cows in relation to these milk hormone products. It is a concern that things be done in a humanitarian way. That is all the insight I can offer you, senator. It is how it is done that is most important.
Senator Butts: It seems to me that the first priority should be that people be allowed to make a living.
I want to go back to something very basic. At one point, a professor of international law said that technically, it is not a law. That has to do with what law is all about. You cannot arrest a state; you cannot put it in jail and you cannot punish it. They do not have to appear at the court if they do not wish to.
In light of that, would it not be more profitable if we could convince other states to pass national laws? Can we put some effort into that side of it?
Mr. Forcese: Are you speaking about the universal declaration? Which law are you referring to?
Senator Butts: Any of them. You talked about NAFTA, and it is the same thing. In some cases, they just refuse to sign it. The countries that did not sign it are still selling. We go to a country and clean them out and they just buy more.
Mr. Forcese: One of the problems is that international law is to regular law what Swiss cheese is to cheese. It is cheese, but full of holes. The biggest hole is the lack of enforcement.
One of the attractive elements of international trade law is that there is a sanction that is convincing to countries, and that is the threat of trade retaliation. One of the interesting attributes of trade law from the perspective of someone working in international human rights law, as I do, is the possibility of linking human rights performance to trade. That brings with it that possible sanction, which is often persuasive to countries.
The enforcement aspect has always been and will remain a difficulty with international law. There are developments such as the International Criminal Court, and the ad hoc tribunals for Yugoslavia and Rwanda, that deal with individual criminal culpability in international law. But you are right, the problem with general, generic, value-based enforcement of international law remains.
Senator Butts: Again, is it not a question of balance? If you refuse to trade with others, you punish your own people as well.
Ms Elwell: Senator, this is a big issue with respect to multilateral environmental agreements. What do you do with non-parties, and when is it appropriate for parties to the MEAs to take trade measures against a non-party?
The best example is the Montreal Protocol on ozone-depleting substances. In that situation, instituting trade measures against non-parties was considered appropriate because the parties to the protocol were trying to protect a global resource, the ozone layer. When it is not just a domestic but a transboundary or global concern, it is considered appropriate to take trade measures against non-parties that enjoy the free ride of ozone protection without having to incur the additional expense of eliminating CFCs. If you look at, say the CITES convention on endangered species or the Basel convention on hazardous waste, the mechanism they have used is to treat non-parties as if they were parties. In other words, Africa will not export ivory to Turkey except under the same conditions as would apply to its export to a party to the CITES convention. There is a system of import and export certificates that must be exchanged between the parties before these exports take place.
Different multilateral environmental agreements use different mechanisms, but it all goes back to trade. Even if you cannot get a country to sit down in a court and deal with your concern, in a global society and a global marketplace, there are pressures you can bring to bear. I am not saying unilaterally. I am not asking for unilateralism here. I am saying that within a multilateral concept on shared values like the human rights declaration or ILO core provisions, it is possible. We have experience with mechanisms to make non-parties accountable for those values.
Senator Butts: I have a friend from Zaire who is a student here. When I talk about these things, he tells me that this particular accent on environment is the luxury of the rich, because what countries like his want are some jobs and a way to earn a living, and let them get to the environment afterwards. How would you answer a person like that?
Ms Elwell: Since Marrakech, the WTO has adopted the goal of sustainable development, recognizing that economies are based on sound resource management and environmental protection. While there is a linkage between increases in income and increased expenditure on environmental protection, the world community, since Rio de Janeiro, and even Stockholm previously, has been clear that you need a sound environment to have sound economic growth. I would say to your student that there is a huge market out there for environmentally green products. Our duty in the north is to open up those markets to environmental services, environmentally sound goods, and demonstrate that they will make more money by caring for their environment than by degrading it.
Senator Butts: Is it not true that historically, we went through this process ourselves? We want them to jump immediately to the environment, whereas we did it gradually. We have arrived at the stage now where we can afford to talk about environment. His point is that you want him to start where we are now after a couple of hundred years of industry.
Ms Elwell: Point taken.
The Chairman: There was a time, senator, when, not far from where you and I grew up, people would see the sky lit up at night from the coke ovens or smell the odour of pulp operations. If they complained, people would say that it is the smell of prosperity. We have moved somewhat beyond that.
Senator Butts: But generations made their living from it. That is the dilemma for me.
The Chairman: There was fallout in terms of health and so on. Nobody can deny that.
Senator Poy: I have always been troubled by the comparison of standards for child labour between First World and Third World countries. In a country like Canada it is not allowed. In a Third World country such as Indonesia, when children are very tiny, they follow the parents. By doing that, they are able to learn a trade. They work from morning to night, right next to the father or the mother. This is often criticized by First World countries. How else would these people make a living? How else would these children learn a trade? How do you make our standard their standard?
Mr. Forcese: You present the interesting dilemma that confronts us. Child labour is the difficult one. I would be a lot less sympathetic to a cultural relativism argument with respect to violations of freedom of association, such as discrimination in the workplace, and other fundamental rights.
Child labour is a difficult one and it is one with which the international community is grappling. There is an emerging view that when we talk about child labour, there is a core labour standard that should be protected at the WTO. We are talking there about exploitative forms of child labour, not simply underage child labour, but the sort of bonded or conscripted child labour that one hears about in the context, say, of Craig Kielburger's campaigns.
It is these extremely egregious forms of exploitation that have to be addressed. In the circumstance that you are talking about this extreme form of child labour, I would not necessarily be all that comfortable with the cultural relativism argument.
Senator Poy: When you say "extreme," what do you mean? Do you mean children are herded into factories to work instead of going to work with the father or the mother? Is that how you make the differentiation?
Mr. Forcese: In part, for example, bonded child labour.
Senator Poy: Like slavery?
Mr. Forcese: It is an analogy of slavery. Or child labour under health and safety circumstances that are incredibly egregious, the sort of Charles Dickens-like scenarios that we are familiar with from western history.
In terms of addressing the concern that by banning child labour you throw children out of work, and as a consequence they are not able to provide that needed income for their family, there are more nuanced approaches that have been developed, in part, in South Asia, where children work for half the day and then the employer provides education in the afternoon. There are halfway houses along this path that are not simply prohibiting child labour, but also addressing the development concern, which is the point of your question.
We have been talking about sanctions and penalties for human rights abuses. The other side of the equation is development assistance. That is also true with regard to the environmental question you asked. We cannot necessarily say we are going to punish you for behaving in this fashion, and at the same time cut our aid budget. There has been a lot of criticism of the cuts in our aid budget. The Canadian Council on International Cooperation has said that our aid system is about giving money to the least needy in the developing world, and as a consequence, there is another side to this coin: How do we promote development so that people do not have to rely on child labour? That is a broader question.
Ms Elwell: There are incentives such as the rug mark campaign. The German NGO carpet producers agreed to add a 1 to 2 per cent surtax on the cost of the carpet. That money went to fund schools at the factory.
There are real transition mechanisms. We must recognize the economic development needs of that family, but also provide them with real options, and education funding, so that eventually, they will not have to work in those carpet factories. It is a marvellous opportunity for retailers like The Body Shop that we really need to open up. I must tell you that the Canadian government is largely hostile to labelling and certification, based on their desire to further the forestry industry. They are under great pressure on the issue of sustainable forest management. They are very concerned about certification by the Forest Stewardship Council. Home Depot, for example, has said they are now going to stock their shelves with FSC-certified lumber, knocking out the less rigorous ISO standards. There is a huge debate here.
I suspect the hostility of the Canadian government towards these mechanisms is related to its forest file. As you can see, senators, we could adopt these mechanisms that are not based on command and control. These are market-based mechanisms, based on consumers' rights and the ability to create and sell to new markets. I think that is a winner and a good compromise. I hope you can get the Canadian government to be less harsh on that subject at the WTO.
Senator Poy: From your remarks, it is important that some of the money made from these products goes back to, say education for the children. What is not acceptable in Canada is luxury in a lot of countries. We are talking about double standards here.
The Chairman: Let us come back for a minute to the question of whether the integration of these countries into the global economy is likely to, or does, lead to improved performance in some of the areas that you are interested in, such as human rights and labour standards.
Somewhere in the material that one or other or both of you provided -- and I have been through it -- there are references to an OECD study on this subject. The government policy research committee that I referred to earlier has a somewhat different view of the OECD study than you do. I want to read a couple of sentences to you. This is about core labour standards, not about human rights broadly. They say:
The most ambitious and comprehensive study to date on the relationship between trade and CLS is the work conducted by the OECD.
They continue:
The OECD study also indicated that there was evidence that respect of CLS was closely linked to the level of economic development and the degree of integration of developing countries into the global economy. Therefore, it might be expected that greater participation of developing countries on the international scene might create pressures for a convergence of policies in many fields toward OECD country standards.
Do you disagree with that?
Mr. Forcese: There is undoubtedly a correlation between observance of human rights and wealth. You simply have to look at the example of the developing countries versus the developed countries. We often talk about these human rights abuses, but there is a distinction there. There is an overlap with socio-economic cleavages. The whole constructive engagement argument is predicated on the observation that wealthier countries have better human rights standards.
What I query is the causality. There is a missing link when we say that wealth or economic integration necessarily leads to improvements in human rights. The more nuanced analyses suggest that there is nothing preordained about economic growth subsequently leading to improvements in human rights. It has to be a more balanced form of development, and not simple maximization of economic gain. There has to be some effort to address social justice issues at the same time as economies are growing. It is that balance that is lacking in our present global integration system. The WTOs are all about maximizing wealth, maximizing economic gain. They are not about nuancing that economic gain so that it can address these social justice issues at the same time.
That OECD study acknowledged that there were countries in the world that felt, whether empirically justified or not, that by restricting these core labour rights, they were improving their competitiveness. As a consequence, there were examples of countries that had debased or undermined these core labour standards in the hopes of encouraging greater investment. The OECD went on to say that in fact there was some evidence that corporations were responding to the cost advantages of operating in these repressive societies. They did not go too far on this, saying that the empirical evidence was mixed. The OECD study touches on some of these issues, but not in a very detailed way.
The Chairman: Neither of us is in a position to summarize this whole thing. However, on the point that you just made, they say this:
Their analysis shows that countries with low labour standards have not systematically recorded better trade performances than countries characterised by a high level of labour standards. Furthermore, the trade performance of countries which have experienced marked improvements in the respect for CLS does not appear to have deteriorated as a result of these improvements.
Mr. Forcese: The OECD study largely addressed the downward harmonization argument that more developed countries, by integrating with these other countries, would feel a downward pressure on labour standards and human rights. The empirical evidence in the OECD study is actually very helpful in countering that argument. It says that really there is no empirical evidence that by debasing these standards, you will increase your performance. Nevertheless, the OECD study acknowledged that there is a perception on the part of some countries that by debasing standards, they can improve their competitiveness. Empirically justified or not, the perception existed. Certainly a number of countries in these export-processing zones are reducing labour standards in their efforts to encourage direct investment. Whether it is empirically justified or not is another question.
The Chairman: You have read the study, while I have read what the public servants of Canada say about the study. With that qualification, let me say that my view on it is that increasing integration into the global economy is, on balance, helpful, certainly in regard to core labour standards.
Mr. Forcese: I am not sure that you can make that causal link on the basis of their findings. They studied something like 42 countries. They said that in 15 instances, improvements in freedom of association, for example, occurred after economic integration. In about 30 other countries, either the improvements occurred before economic integration, or there was no improvement, or there was no data. I am not sure that you can come to the conclusion that there is a causal link between economic integration and improvements on the basis of their findings.
Ms Elwell: I also had the opportunity to read that study. I am quoting from my paper, "Implementing International Social Policy" in the Canadian Foreign Policy journal of last year. I also noted the same issue. The OECD found that there was a weak, yet positive association between the level of per capita GDP and the degree of observance of freedom of association. My interpretation of that work is that in a truly competitive market, there is an expectation that social progress will keep pace with economic development. I believe that is a positive finding. In other words, if people are actually benefiting from the economic development that trade produces, then it raises their expectations on ideas such as freedom of association. However, if you have artificial barriers to people enjoying the benefits of trade, in other words, all the money goes to an elite, then there is no positive correlation.
Let me add another interesting finding of the OECD. With respect to risks associated with foreign direct investment, the OECD report observed:
It is readily admitted that the expectation of high profitability due to the economic environment provided by host countries may be able to outweigh some of the concerns of foreign investors about low levels of observance of core standards by the host government.
These risks include future discontent, unrest, and risk of consumer boycotts.
I noted that it was significant that the OECD recognized that the failure to observe core standards might lead to disruption and consumer boycott.
Moreover, it underlined that private investors are often unwilling, on their own initiative, to give up high profits in order to ensure observance of core standards, and that this spoke to the need for direct government intervention to ensure that these market failures or externalities were internalized, so that investors were getting the right signals and not exploiting the situation.
Your point is that you did not think there was evidence that high standards were causing any deterioration in terms of trade.
The Chairman: The deputy ministers said that that is the view of the OECD.
Ms Elwell: That goes against other evidence. For example, we have had a number of NAFTA reviews. NAFTA is currently in a five-year review for which the three countries have provided input. The Canadian National Civil Society view is that the Canadian manufacturing base has been reduced by at least 20 per cent since NAFTA, and that much of the investment in plant relocation is going to Mexico or the right-to-work states in the United States.
There is also the work of an individual from Cornell University in the United States, who did a study for the AFL-CIO, and stated that NAFTA legitimized the threat in the United States of plant relocation to Mexico and caused a significant drop, I think 20 to 30 per cent, in union-organizing drives there. The evidence is split, shall we say. I think you can find negative impacts of social and environmental dumping, where developing countries have not signed on to at least minimum rules with respect to human rights, labour standards, and the environment. I believe the OECD evidence indicates that investors will go to pollution havens or export-processing zones.
The Chairman: Let's come closer to home then. Mr. Axworthy is saying that increasing economic growth and trade does raise people's expectations and help to promote human rights. Professor Forcese quotes the minister in this document put out by the international centre. You can correct me if I am wrong, but you quote him with disapproval on the subject of constructive engagement, where he says:
both trade and the promotion of human rights can serve the same purpose -- namely bettering the well-being of individuals... As a trading nation, Canada must promote trade as an engine for growth and jobs, both at home and abroad. The creation of work is a critical aspect of the human rights agenda.
I invite you to comment on that and perhaps there will be some other questions about what he or the Government of Canada should be doing.
Mr. Forcese: The constructive engagement view expressed by Minister Axworthy has also been espoused by the Business Council on National Issues, and U.S. groups and the like. If you unpack that notion, constructive engagement is predicated on two prerequisites. The notion is that engagement with businesses, through trade, et cetera, operating overseas, will spread these human rights values through contact. There will be a demonstration effect. This is coming straight out of the documents that American lobby groups use in promoting constructive engagement.
The other impact associated with economic integration is a trickle-down effect. There will be economic growth, and with economic growth will come the emergence of a middle class that will demand political reform, et cetera. It seems to me that in that context, there are two prerequisites for constructive engagement to operate, and I do not see those prerequisites being met in Canada.
The first is, you need a demonstration effect. You need western companies to operate in a fashion that it conducive to human rights. Yet we have all these reports of western companies participating or being complicit in human rights abuses.
The Chairman: Please talk about Canadian companies now, if you can, Professor Forcese.
Mr. Forcese: There are Canadian mining companies operating in countries with notorious human rights records, and operating in a fashion that lends support to those governments by providing them with a key source of revenue. In Sudan and Burma, we have Canadian mining companies that are paying royalties directly into the coffers of regimes that are engaged in serious human rights abuses. There have been a number of instances and a number of reports of these companies offering material assistance to military forces.
The Chairman: That is the first specific thing you have mentioned. You have told us that they are operating in countries that have horrendous records in human rights and that they are paying royalties. Of course, they are going to pay royalties wherever they operate. Then you say that, indirectly, if are you paying royalties, you are helping to finance a government that is oppressing its people. However, you are not suggesting, are you, that the Canadian companies are themselves complicit in actual human rights offences?
Mr. Forcese: Let me give you another example. A major Canadian retailer was, at one point, sourcing from a factory in Burma. The major shareholder of that factory was the Burmese government's military procurement agency. When there was a sit-down strike at that same factory, the military came in and threatened to shoot all the workers if they did not return to work.
The Chairman: Your remedy for this is an indirect one, is it?
Mr. Forcese: My remedy for this basically gets to the solutions I proposed in my presentation. There are two prerequisites of constructive engagement. You need means to encourage Canadian companies to abide by international human rights standards in their overseas operations, both for this demonstration effect to operate, and also to ensure that when you talk about trickle-down effects of economic growth, that that economic growth is capable of occurring. I challenge whether economic growth is capable of occurring and producing a middle class that will subsequently demand political liberalization, if that economic growth is feeding money directly into the coffers of a repressive regime that subsequently uses that revenue to increase its repressive capacity.
In this circumstance, we need a nuanced approach. First of all, I think the code of conduct option is a promising one, in large part because there have been success stories in the past, but codes of conduct need to be backed by and supplemented with inducements to abide by them. We can talk about some private sector inducements such as consumer campaigns, and also about public sector inducements. Why do we have Canadian companies that are not screened for their overseas human rights performance participating in Team Canada missions?
The Chairman: When you talk about their overseas human rights performance, that is rather different from saying they do business in a country that has a poor record in human rights, is it not?
Mr. Forcese: It is the same thing, and there are examples, particularly in the retail sector. It is very difficult, in that sector, to trace direct Canadian company involvement because there are sub-chains of contractors. This has been the pattern in the United States. Nike does not necessarily produce at Nike facilities. They subcontract. They control quality at the subcontracted facilities, but do not necessarily control human rights standards. By the same token, Canadian retailers have a very complicated chain of suppliers and the like. The problem is how to get Canadian corporations to take responsibility for the chain of contractors. If they can take responsibility for quality control, then they should also take responsibility for labour standards in these facilities.
The Chairman: That is fair enough, but what should the government do?
Mr. Forcese: I am not proposing direct regulation. I do not think it is viable, although we do have precedents with the foreign corrupt practices legislation that just went through several months ago. What I am proposing are inducements -- a carrot, if you will -- to encourage corporations to actively promote and protect human rights. We get into the government procurement side. We get into the various government conditionalities, Export Development Corporation conditionalities. We can also remove the constraints on private action to encourage corporations to move on these issues; for example, those that exist under our corporate law that prevent shareholders from expressing ethical concerns before their peers at annual general meetings. There is no justification for these constraints. Government action is required to remove that provision in the legislation.
The Chairman: But you are not suggesting that Canada should cease to do business with these countries, are you?
Mr. Forcese: I will say categorically that if you are doing business in Burma, you are supporting the regime. The democratically elected but deposed government of Burma, just as with South Africa in the 1980s, is calling for investment sanctions. The U.S. has been fairly clear, as has their former ambassador to Burma. Any revenue gained by that regime bolsters its staying power and its capacity to engage in human rights abuses. We have to get out of Burma. Burma would be one of the few; Sudan possibly.
The Chairman: That would be fairly low cost for us, would it not, in terms of the business we do with those two countries?
Mr. Forcese: With Burma, we have already put some measure of economic sanctions on the country that have reduced trade. The real problem is foreign direct investment. We have several Canadian mining companies operating in Burma, many of which have partnered directly with the Burmese regime. They are in 50/50 joint ventures with the Burmese regime in these huge mining projects.
The Chairman: What should we do?
Mr. Forcese: One of the things I have been arguing in favour of is using the Special Economic Measures Act to impose investment sanctions on Burma.
The Chairman: Unilaterally?
Mr. Forcese: Unilaterally, but by the same token, we would be in the company of many other countries who have imposed sanctions. The European Union has introduced, not investment sanctions, but trade sanctions. The Americans have imposed trade sanctions on Burma. Burma is a clear case where action is required.
The Chairman: China is going to be the biggest economy in the world in a very few years and the human rights record is not great. What do you think the government should do? Should the Governor General have gone there on our behalf, as he did a while back? Should the Prime Minister and other ministers lead Team Canada missions to China?
Mr. Forcese: There will be people who disagree with me, but I do not believe China is in the same camp as Burma. I am not proposing that we disengage from China. If we are going to practice constructive engagement vis-à-vis China, as the Canadian government has in essence proposed with its Team Canada missions, then we need to follow these prerequisites that I have mentioned. We need to encourage Canadian businesses operating in China to have a code of conduct that addresses some of the human rights concerns in that country.
One of the principal concerns is that China outlaws freedom of association, but there are a number of initiatives that have tried to address this problem by encouraging corporations to take action. Certainly they cannot necessarily recognize unions, but they should provide an opportunity for their workers to come together in some capacity, to meet, to organize, maybe not as a formal union, but to get around the ban on freedom of association in some other way. I do not have the details of these proposals in front of me, but they are in existence.
Ms Elwell: A number of human rights and workers' groups of the WTO were raising concerns about China, particularly about work camps, labour camps. Workers are not getting paid at all and they are producing goods that are traded on the world market. If the WTO does not deal with labour standards, then China will be able to swamp the market. How can any country possibly compete with free labour? It should be a quid pro quo.
The Chairman: Are they in the WTO?
Ms Elwell: Not yet, but it is imminent. It could be as soon as Seattle.
The Chairman: If Mr. Clinton can persuade the Congress.
Ms Elwell: It will be some time. This is why we need to get our ducks in line. You need some basic labour standards at the WTO.
The Chairman: Ms Elwell, is it your view that Canada is not working hard enough or enthusiastically enough, or has given up on the idea of social clauses in the WTO?
Ms Elwell: Yes, sir, it is my view that our support for that initiative has waned. It is wrapped up in this concern about process and production method standards, how the product came to be. Canada is pretty much in the camp of, a can of tuna is a can of tuna, whether it killed 100 dolphins or none. From a civil society perspective, how that can of tuna came to be produced is the whole question. In Canada, we are very, very sensitive about PPM issues related to forest products. Because of that, it has permeated all of the other sectors, whether it is energy, agriculture, or labour standards.
Labour standards is a PPM. It is how the product came to be. Whether children are tied by their wrists to a woven carpet with blood all over it is no different from a carpet that was made by adults, according to trade theory.
The Chairman: But it is different from a dolphin and a can of tuna, is it not?
Ms Elwell: No. Apparently, a can of tuna that was caught with a whole bunch of dolphins is the same, in terms of product similarity, as a can of tuna that did not kill any dolphins. The PPM, how that product came to be, whether it is carpets or tuna, is very important.
Going back to the question of China, if China can produce textiles with free labour, how can India or Montreal or anybody compete with that? We need some basic rules. The Canadian government has been backsliding. The political body is disconnected from the staff. The staff at the Department of Foreign Affairs is incredibly rigorous in their zeal for trade theory. Despite Sergio Marchi's, I am sure genuine and sincere, wanting to do the right thing, it is very difficult. It is a big file. There is some real resistance and we have to break that.
The Chairman: Which countries are the leading advocates of a social clause?
Ms Elwell: The European Union and the United States. Mexico has turned into this huge force for resistance, yet it is living not unhappily with NAFTA and the side agreements. They seem to be doing all right here at home, and yet when they go to the WTO, they complain. There are pockets of resistance.
As the environmental conditionality improves, as we make more and more progress on the environment side in trade, we will also make progress on the social policy side, because the mechanisms we use are going to be the same. It is just a matter of time. We may as well be on that cutting edge rather than in the camp that is opposed to it.
The Chairman: Thank you very much.
Tomorrow we will be hearing from James Lahey, who is one of the co-chairs of this policy research project that I have been alluding to off and on. He will be giving us a progress report, because this has been going on since 1994 and has produced some interesting work. I am not sure that he will be in a position to go into the details, but I think he will be able to show us where and how some of our concerns are being grappled with by the federal government.
The committee adjourned.