Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 7 - Evidence, November 7, 2006
OTTAWA, Tuesday, November 7, 2006
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 5:25 p.m. to examine the Canada-United States agreement on softwood lumber.
Senator Peter A. Stollery (Deputy Chairman) in the chair.
[English]
Senator Stollery: Welcome to this meeting of the Standing Senate Committee on Foreign Affairs and International Trade. Today we begin our study of the softwood lumber agreement. In particular, we are interested in the dispute settlement mechanism for the North American Free Trade Agreement, NAFTA. We will look at how the dispute settlement mechanism has been affected by the agreement between Canada and the U.S. on softwood lumber.
Today we have Lawrence Herman, counsel at Cassels Brock, and Jon Johnson, a lawyer at Goodmans.
[Translation]
Carl Grenier is the Executive Vice President of the Free Trade Lumber Council of Canada. This is not the first time today's three witnesses have appeared before our committee. They were here in February 2003 in conjunction with our study of NAFTA.
[English]
Mr. Herman has worked on different trade agreements, such as the General Agreement on Tariffs and Trade, GATT; World Trade Organization, WTO, agreements; Free Trade Agreements, FTA; and NAFTA. He regularly appears as counsel before dispute resolution bodies under NAFTA as well as before the Canadian International Trade Tribunal and the courts in Canada.
Mr. Johnson's practice focuses mainly on trade and international trade law. He continues to advise the government, various industry associations and clients in both the public and private sectors on matters involving international trade arising under NAFTA and the WTO. Mr. Johnson has also been extensively involved in Canada's softwood dispute with the United States and has gained valuable insights into U.S. trade remedy law and the functioning of the NAFTA binational panel process.
[Translation]
Mr. Grenier represents the Free Trade Lumber Council, a private Canadian organization representing forestry product companies and industrial associations in Canada. The council was established in 1998 to promote the restoration of free trade in lumber between Canada and the United States.
Without further ado, I invite Mr. Herman to make his presentation. He will be followed by Mr. Johnson and lastly, by Mr. Grenier. After that, we will go to questions.
[English]
Mr. Herman, you have the floor.
Lawrence Herman, Lawyer, Cassels Brock, as an individual: Thank you. I have taken note of the committee's areas of interest and I commend it for its examination of an agreement that, as I have said in my written submission, is one of the most exceptional and controversial international agreements ever entered into by the Canadian government. The extent to which this agreement involves indirect and direct U.S. oversight over Canadian economic activity is probably unprecedented in the panoply of Canadian agreements, trade or otherwise.
The Softwood Lumber Agreement, SLA, is a negotiated agreement and negotiated agreements are part of the fabric of NAFTA and the WTO. It is not in any way exceptional that parties should enter into negotiated settlements in international trade law. Having said that, I think all observers recognize that the softwood lumber dispute in the SLA reflects the realities of an unbalanced trade and power relationship that Canada has with the United States. As well, the SLA and the softwood dispute at large illustrates the dangers that Canadian companies face when they enter into the U.S. market, especially when they depend on that market.
Regarding the SLA, I think we will have discussion amongst ourselves here at the table. There are gains for Canada in the SLA. The question is whether the gains are worth the price. Canada gains a degree of access to the U.S. market — I said a degree of market access — and Canada gains back $4 billion in duties that Canadian companies have paid which will be disbursed to the Canadian industry. On the positive side of the ledger, Canadian industry gains, hopefully, a period of commercial peace and stability, which is of benefit to the Canadian lumber industry and to Canadian workers and communities.
At the same time, though, we should have no illusions but that the SLA entails a highly managed and highly structured trade system. It is nothing resembling free trade. It is a highly managed trading relationship in softwood lumber and it gives the right of the U.S. industry, through a variety of mechanisms, to challenge changes to Canadian forest management practices. We can go into the details later, but there is no question that U.S. industry and the U.S. government can challenge Canadian internal policies. There will be significant external limitations on the rights of both Canada and the Canadian provinces to manage their own resources.
That situation is not unusual in a broad sense because every treaty and international obligation puts external limitations on state sovereignty. However, there will be an important limitation on Canada's and the Canadian provinces' sovereign rights over resources. There is no question about that.
Taking all this information into account, notwithstanding all the significant concessions that Canada had to make to achieve access to the American market — and while that access is highly conditioned and constrained — on balance, my view, and you will hear disagreement among my eminent and learned colleagues at the table, the agreement was probably the most palatable solution for Canada under the circumstances. The agreement is, marginally, in Canadian interests.
You are looking at the longer term implications of the agreement on the NAFTA dispute settlement provisions. What we cannot tell you, and I do not think anyone in the trade law business can tell you, is what the precedent-setting nature of the agreement is on the NAFTA dispute settlement panel system. However, it does have potential precedent setting because it is an agreement concluded outside of the NAFTA framework. Some would say, including myself, that it drives a major hole through the NAFTA dispute settlement system. The question, though, is difficult to answer as to whether it has negative implications for NAFTA as a whole and for other Canadian industry sectors.
The question most often asked is: Does the SLA and the softwood settlement have implications for other sectors? That is a difficult question to answer. At most, I think it is unclear. The potential is there to affect other industrial and economic sectors trading into the United States, but we must recognize that softwood is, in many respects, unique. There may not be another case like softwood. It is difficult to say.
To summarize a number of conclusions in terms of the effect that this negotiated deal and the entire softwood lumber dispute has on NAFTA, the agreement does a number of things. The U.S. position on the NAFTA panels and the extraordinary challenge committee's decisions brings out some of the weaknesses in NAFTA Chapter 19. I will confine my comments on the Chapter 19 process. I think honourable senators know the difference between Chapter 19 and Chapter 20. Chapter 19 is a review launched by private parties on the decisions of trade agencies, and softwood lumber brings out the inherent limitations of the Chapter 19 process.
The question is whether Chapter 19 could ever handle disputes of the magnitude of the softwood lumber dispute. The weakness of Chapter 19 is that the panels have limited review jurisdiction. They have no power, for example, to say that the finding of injury by the U.S. International Trade Commission, USITC, is contrary to U.S. law and actually to order the duties returned to Canada. They cannot do that. They can remand the decision to the USITC, which they did on three occasions, but they have no right. The American government, through the U.S. Trade Representative, said they had no right to order return of the duties and they did not, so the American government has no legal obligations to return the duties, notwithstanding the finding of the panel. There is the weakness there.
In terms of countermeasures or retaliation, Canada arguably could have the right to retaliate for the U.S. failure to implement the panel decisions but retaliation is a difficult game politically and the provisions themselves in NAFTA are long and cumbersome. Canada must go through a number of hoops before it can retaliate.
I also do not think that opening up NAFTA Chapter 19 is in any way a viable option. It is really a non-starter. The Doha Round of WTO trade negotiations is lifeless until after the next presidential election, so there will not be anything in the multilateral forum that will have a bearing on either Chapter 19 or other aspects of our bilateral trade disputes.
I think the effect of the SLA on Chapter 19 will bear careful watching. In many respects, Chapter 19 will go on and will work well. In my experience involving U.S. products, Chapter 19 works pretty well, but we must recognize that it may not be sufficient as a process to deal with major trade disputes of this nature, so we are back to negotiating a settlement.
Therefore, while I have a lot of misgivings about the SLA and about the concessions that Canada made to achieve conditioned access and a period of commercial stability, I have major concerns. I recognize that if the agreement works and if it runs for its full seven-year term, it will provide a period of commercial peace and stability important to Canadian companies and their workers. On balance, I conclude that the agreement is marginally acceptable to Canada. Those are my comments.
The Deputy Chairman: Thank you, Mr. Herman. Mr. Johnson, please proceed.
Jon Johnson, Counsel, Goodmans, as an individual: I want to focus on the effect of the Softwood Lumber Agreement 2006 on the NAFTA Chapter 19 binational panel process form of dispute resolution. The effect is negative not for what the SLA does but rather for what it does not do. The SLA 2006 resulted from Canada's decision to negotiate a settlement for the softwood lumber case with the United States after the U.S. government refused to honour a Canadian victory. That victory was achieved through the binational panel process that should have resulted in a full refund of deposits and a cessation of the collection of deposits. It is clear that the purpose of the refusal on the part of the U.S. government to honour Canada's victory was to force Canada into a settlement, and that is what happened.
The U.S. refusal to honour Canada's victory was based on U.S. government interpretations of its own law that implements Chapter 19 of the North America Free Trade Agreement. The positions taken by the U.S. government with respect to its own law, if left as they stand unchallenged and not reversed, gravely threaten the future of the Chapter 19 process. The refusal left three major issues outstanding when SLA negotiations began in April.
The first was the section 129 issue of the Uruguay Round Agreements Act. This act is the U.S. legislation for implementing adverse WTO panel decisions. The U.S. uses that process to come up with a new determination. The U.S. International Trade Commission came up with a new affirmative injury determination that was used to supersede the negative decision of the NAFTA panel. The second and most critical issue is on duty refund. The U.S. took the position that under its own legislation, the NAFTA binational panel decisions operated prospectively only. That means that for the two or more years that the process went to a final decision, no refunds of deposits collected during that time would be made, even though they were collected illegally. The third issue was that the U.S. took the position that, under its own implementing legislation, no U.S. court had the jurisdiction to enforce the decision of a binational panel. These positions were all outstanding at the end of April 2006, when the negotiations of the SLA commenced. The SLA does not address any of these issues and does not rectify them. Instead, it provides that the litigation under which these issues would have been definitively resolved is to be terminated, although Carl Grenier pointed out to me that, under the amendment, the parties shall seek to have the litigation terminated. Exactly what will happen to the litigation is unclear.
Article XI(1) of the SLA 2006 states that the SLA is without prejudice to each of Canada and the U.S. to maintain the positions that it maintained during the softwood litigation. In other words, the U.S. may maintain that, notwithstanding having given back 80 per cent of the money under the Softwood Lumber Agreement, the U.S. can continue to maintain that NAFTA binational panel decisions are prospective only and there is no refund of money collected during the two or two and one half years that it takes to get the decision.
I will elaborate on each issue. On the section 129 issue, under anti-dumping and countervailing duty law, there must be a finding of injury or threat of injury to support anti-dumping or countervailing duties. The U.S. International Trade Commission found threat of injury, and this decision was challenged by Canada under two fora: first, through the binational panel process and second, through the WTO. The binational panel process ultimately resulted in the binational panel effectively ordering the ITC to come up with a negative threat of injury finding, which the ITC did. The NAFTA extraordinary challenge procedure was invoked, which the U.S. had the right to do. The U.S. lost and that should have been the end of the matter. The duty deposits should have been refunded in full and there should have been no further collection of duties.
However, Canada had also challenged the threat of injury finding before the WTO. The WTO decided in Canada's favour and the U.S. invoked its section 129 process to send the matter back to the ITC for a new threat of injury determination. The ITC came back with an affirmative determination and the U.S. government said that it superseded the NAFTA negative determination so, therefore, there will be no refund of duties at all.
Canada and the Canadian industry sued the U.S. government — the case is called Tembec, after one of the lead plaintiffs — in the U.S. Court of International Trade. The argument was that section 129 permits only the implementation of negative ITC determinations, which is clearly what the statute says. The court agreed with Canada and issued a ruling to that effect on July 21, 2006, but that was after the negotiations of the SLA had begun. That is the section 129 issue.
On the duty refund issue, the Canada-U.S. Free Trade Agreement and NAFTA clearly provide that the binational panel review process, which is a substitute for the domestic judicial review process, must lead to the same result. If Canada were to receive a total refund under domestic U.S. procedures, then the same result should follow with a binational panel process. The U.S. took the position that their legislation meant that the binational panel decision operated prospectively only. In the case of softwood lumber, this meant huge amounts of money because, from May 22, 2002, when duties and deposits were initially collected, until November 4, 2004, which was the effective date of the binational panel decision, there would be no refund of the deposits collected, which amounted to approximately $3.5 billion.
In the Tembec case this position was taken by the U.S. government in its briefs as to what its own legislation meant. The Court of International Trade totally disagreed with the U.S. government and found in Canada's favour on October 13, 2006. We had achieved complete victory in that case, although the status is unclear.
As far as no court having jurisdiction to enforce a binational panel decision, a number of provisions in U.S. law are designed to prevent a U.S. litigant from going to the U.S. courts to seek review of a binational panel decision. That is because the only review of binational panel decision permitted is through the NAFTA extraordinary challenge procedure, and that is why those provisions are in place. Another set of provisions basically says that the fact that the United States has approved of NAFTA gives no cause of action to an individual by virtue of the sole fact of approval, which is logical. Basically, the U.S. government twisted those provisions of U.S. law into an argument that no U.S. court has a right to enforce a binational panel decision. In its July 21 decision in Tembec, the Court of International Trade totally rejected those U.S. arguments.
Where does this leave us? In respect of duty refund, this is critical. If you are not going to get your deposits back for the two and one half years it takes to fight the case, you will not use a binational process. Rather, you will use a domestic process in the United States. However, the more bizarre twist to this is the way in which the bi-national panel works. In a case involving U.S. antidumping or countervailing duties against goods of Canada, the U.S. government could invoke the binational panel process. A powerful domestic U.S. industry could demand this and put the Canadian litigants into a situation where they would have doubt as to whether they would ever get their deposits back.
The section 129 issue in a nutshell puts a chill on the Canadian government to exercise WTO rights at the same time that it pursues either domestic judicial review or binational panel review in a U.S. anti-dumping or countervailing duty case.
There may be other problems with Chapter 19, but had the U.S. applied its own implementing legislation that it was supposed to have done, Chapter 19 would have worked fine. We would have gotten our money back and deposits would no longer have been collected. The problem is not with NAFTA itself or with the U.S. implementing legislation but with the way the U.S. interpreted that legislation and chose to apply it.
As far as courses of action are concerned, other NAFTA dispute settlement procedures, Chapter 20 and article 1905, which Mr. Herman referred to in his paper, are of no use whatsoever in this case. The case has been settled. In any event, as Mr. Herman correctly points out, all we get out of these things is a right to retaliate, which is difficult to exercise.
It would be fair, having regard to the decisions of July 21, 2006 and October 13,2006 that the Canadian government justifiably go to the U.S. government and say, "We want your assurance that you will apply the law the way the Court of International Trade, which is a respected court, has said you should apply it.'' As to how far they would get with that, I do not know, but I think it would be perfectly reasonable to make a strong case to that effect.
The other course of action, and this could be in addition to or alternative to, is that these issues will come up, and the Canadian government should support litigants in pursuing these issues to a full and complete conclusion. There are other cases where duty refund will be in issue, and again, as Mr. Grenier pointed out, the litigation is not necessarily dead. Those are my comments.
Carl Grenier, Executive Vice President, Free Trade Lumber Council of Canada: I admire my colleagues for being so dispassionate about this issue. I personally have been involved in the softwood lumber issue since November of 1982, and I feel rather strongly about some of these matters.
You have asked us to address the Softwood Lumber Agreement "with special emphasis on its impact on the dispute settlement mechanism'' of NAFTA. As I hope will be clear from my testimony, the impact of the SLA will be most severely felt in NAFTA's Chapter 19, the part that deals with subsidization and dumping allegations. Chapter 11, which deals with investor state relations, is also affected by this deal, but in these opening remarks I will focus on Chapter 19.
Some say the settlement implemented on October 12 finally put an end to exhausting and expensive litigation that had to stop. Some claimed softwood lumber disputes were never supposed to be resolved through NAFTA. Some say no harm has come to Chapter 19. Some even say that the settlement agreement is better than any result that might have emerged from litigation. I contend that all these views are wrong.
First, making the deal itself hurt Chapter 19. The very existence of the settlement agreement reached at the moment when critical judicial results were at hand is damaging to Chapter 19. As the United States found ways to stall and delay judicial results, sometimes with Canadian government complicity, and always contrary to the intent of Chapter 19 for speedy dispute resolution, the industry agreed that settlement might be better than indefinite legal conflict. We could see the writing on the wall.
Because U.S. demands for settlement were always so unreasonable, litigation continued. When finally we were about to win everything, the Government of Canada decided, without serious consultation with industry, and for a transparent political purpose, that it would settle by yielding to every U.S. demand, and even more. The United States government, for example, did not initially ask for the $450 million the Government of Canada gave away as an enormous carrot for settlement. Settlement at that moment in April of this year meant that the rule of law was to be replaced by negotiation, cash was to be paid to resolve trade disputes, and illegal trade restrictions, such as quotas forbidden under the WTO rules, were to replace free trade. Both governments rode roughshod over the very concept of relying on the rule of law to resolve trade disputes between the two countries.
The Government of Canada's action and their timing could not have been worse for NAFTA. On March 17, a NAFTA panel decided, finally and definitively, that Canadian softwood lumber is not subsidized. As you recall, subsidization was the crux of the issue. It took a long hard fight to get to that result. The United States had 40 days to challenge that decision or it would become final and the countervailing duty order would need to be revoked immediately. The United States then would be required to stop collecting $40 million a month just on the countervailing duties in cash deposits last April. The United States and Canada announced basic terms on April 27, the deadline for the U.S. challenge. Now, that agreement did not stop the U.S. from filing the challenge. They filed the challenge, but it was a specious placeholder designed for two purposes: to prevent the NAFTA panel decision of March 17 from becoming final, and to require Canadian industry to keep paying. Since then, we have paid $800 million that we would not have had to pay at all.
According to NAFTA rules, the extraordinary challenge had 90 days to be completed. Having prevented the panel decision from becoming final on April 28, the extraordinary challenge should have ended on August 10 and the legal outcome was doubted by no one. We would have won that. Because of the April 27 agreement on basic terms, Canada and the United States jointly announced an indefinite "suspension'' of the extraordinary challenge the same day. The damage done was enormous. The panel decision could not become final. The concept of the extraordinary challenge itself was mocked by a specious U.S. filing. The procedures were repudiated by an illegal act. Extraordinary challenges cannot be legally suspended — there is no rule for that — by this action of the two governments joining to prevent the countervailing duty from being revoked.
The fact of the negotiation also sent a clear signal to U.S. companies seeking to protect themselves against competition from Canada: File a petition, and you will at least get a compromise. A compromise will always be less than free trade, and more if you make it expensive enough for Canadians. No doubt, if you make it long enough, you might get money too.
When the Government of Canada rewarded the U.S. industry with $500 million on April 27, it was after the U.S. industry had learned from a U.S. judge on April 7 that the Americans were entitled to nothing — not a penny. By demanding a deal, they received $500 million. Had Canada stuck with Chapter 19, the American competitors would have received nothing.
Trying to block judicial results also hurt Chapter 19. The U.S. has tried to scare Canadians out of relying on Chapter 19, and they have done this for a while. They scared Canadians by threatening to keep duty deposits collected prior to any panel decision that might find the deposits that had been collected contrary to law. This was the point made by Mr. Johnson.
The U.S. theory has been that court decisions lead to full refunds, but not NAFTA panel decisions. This was their theory. A three-judge panel of the U.S. Court of International Trade chaired by the chief judge herself struck down that theory on October 13. The court said that the panel powers in this regard are no different from the court's own powers. Astonishingly, the Government of Canada then joined the Government of the United States, and both moved swiftly to have the decision declared moot and therefore of no meaning or consequence, effectively vacating the decision.
Without this decision, no Canadian can sensibly use Chapter 19 because the U.S. has pledged upfront not to give Canadians back their money even if they win their case. Why Canada would not want to see this decision alive and well, assuring Canadians that they receive the same relief from Chapter 19 as from the U.S. court but without the huge delays and expenses of appeals, is inexplicable. Moreover, the United States, or at least U.S. industry, will almost certainly appeal it.
With Canadian industry effectively finished with the dispute because of the settlement — the SLA — and the Government of Canada having moved to dismiss the decision, it is not apparent that anyone will defend the court's decision in an appeal. Should the decision not stand, Chapter 19 is as good as dead.
There is, too, the U.S. industry challenge to the constitutionality of Chapter 19. After it was fully briefed and heard in the U.S. Court of Appeals, Canada and the United States both moved to dismiss it. The U.S. industry opposed those motions, and so did the Canadian industry. Industries on both sides of the border want the question resolved whether Chapter 19 is constitutional.
The United States government would rather not answer that question, so that Canadians will have to worry about whether to rely on it. The Canadian government does not want an answer because, well, I really do not know why. Maybe the Canadian government wants to have the same position as the U.S. government.
Finally, there is the recent astonishing U.S. interference with the NAFTA Secretariat. Ten days ago, the U.S. Secretariat published two notices in the Federal Register — this is the equivalent of our Gazette — one terminating an antidumping proceeding, and the other incorrectly ending the countervailing duty case. It turns out we have strong reason to believe that the U.S. instructed the secretariat to publish these notices. Even though the notices are wrong, and despite efforts of the Government of Canada to have them corrected, the U.S. is resisting.
The secretariat is like a clerk of the court, and the U.S. is now so emboldened by the Softwood Lumber Agreement as to believe that it can order the clerk to take sides. Of course, were the clerk to work for one side against the other, Chapter 19 could not operate.
The secretary should be fired — no question about it. However, the United States certainly will not take that action, and although Canada is trying to fix the immediate problems of the two cases, it does not look like Canada will demand the secretary's dismissal.
In conclusion, without the Softwood Lumber Agreement, U.S. courts would have completed judicial endorsements of Chapter 19. We would know that it is constitutional. We would know that binational panels have the same powers as courts to order agencies to act and to return all monies collected. One of these decisions is pending, the other is in hand, and yet the Government of Canada has moved to avoid both of them.
Without the Softwood Lumber Agreement, relying entirely on Chapter 19 and judicial processes, we would no longer pay any cash deposits and we would be about 12 months away from the return of our money — all of it, 100 per cent, with interest.
Make no mistake; contrary to some statements, Chapter 19 was created expressly with softwood lumber in mind. This ancient dispute was always supposed to be resolved according to the rule of law through Chapter 19.
The Government of Canada has joined with the United States to repudiate Chapter 19 results. It has failed to act as a proper custodian of NAFTA by joining in an illegal suspension of an extraordinary challenge, by failing to appoint judges and by permitting political interference with the NAFTA Secretariat.
There are outstanding panel requests for which the Government of Canada has failed to meet its obligations to name panellists. For Chapter 19 to be saved, an institution of great value to Canada, the Government of Canada must reverse course, join the industry in trying to preserve the CIT decision of October 13 and obtain and then secure a favourable decision on constitutionality.
Some apparently think that these cases are over; this is wrong. The SLA was amended on October 12 — 19 pages of amendments for a 100-page agreement — and the requirement to terminate litigation was dropped. The Government of Canada must also insist vigorously on responsible custody of the institution, in partnership with the United States and Mexico. The advantages of Chapter 19 are in serious danger of being squandered.
The Softwood Lumber Agreement has been terribly damaging to that chapter. Recovery will be difficult, but not yet impossible. As members of the Senate, you are about to be presented with Bill C-24, the proposed softwood lumber products export charge act, 2006. There is much that you can do in your deliberations to mitigate the damage done to the industry and to NAFTA's dispute settlement mechanism.
Thank you and I will gladly answer any questions.
Senator De Bané: It was depressing listening to your point of view about what has happened. I have read the opinions of the two legal experts, and it is discouraging to see that, at the end, the United States has really used its might and we had to submit to it.
I have in mind what Gordon Ritchie, who was the number two in those negotiations with NAFTA, said in talking about that dispute some time ago. He said, essentially, we were dealing with thugs; that was the word he used. For a former deputy minister of Foreign Affairs and International Trade Canada to use such a strong word — thugs — about the leaders of the other side of the industry was strong.
Some time ago, our committee was in Vancouver where an expert on those lumber issues reminded us that the dispute about lumber has a history of 200 years — two centuries. He wrote a whole book on that issue. In reading the written briefs that you sent us, it is depressing to see your assessment of those two things.
In view of what you have said, what do you think of the following comments of the Government of Canada some time ago in response to a recommendation by the report of the House of Commons Standing Committee on Foreign Affairs and International Development. Their recommendation number 3 reads:
That the federal government collaborate with the United States and Mexico to give Chapter 19 panel rulings precedent value over subsequent panel rulings covering the same products.
I will read an excerpt from the government's answer.
Any such change, as advantageous as it would be, would clearly require a re-opening of Chapter 19, which would not be in Canada's best interests at this time.
That response of the Government of Canada to a recommendation was prior to the agreement that was finally reached. What would be your reaction to that statement — "require a re-opening of Chapter 19, which would not be in Canadians best interests at this time''? Does that make sense to you? I see Mr. Herman is smiling. What do you feel about that, or Mr. Johnson?
Mr. Herman: On the question of reopening NAFTA, it is not only a matter between Canada and the United States; there is a third party, the government of Mexico, and they would have to agree. My understanding is the government of Mexico does not agree to opening up NAFTA.
Be that as it may, senator, opening up NAFTA in one small area is impossible without opening up NAFTA in other areas. Where it would lead is problematic even if the United States agreed to open up NAFTA, which I doubt they would.
I think we need to be governed by the reality. The reality is that Chapter 19 will not be reopened. NAFTA will not be reopened. The United States has no interest in agreeing to open it, and Canada has no leverage to obtain that agreement.
That is the reality.
Mr. Johnson: I agree with Mr. Herman insofar as reopening NAFTA, for those reasons. It is just not on. Dealing with the U.S. on trade is difficult for a whole variety of reasons. We would need to deal with Congress; the U.S. president probably does not have the authority after December to do much of anything. In any event there is no mood for it down there, and if it were reopened the U.S. would have a list of modifications that would be a mile long that would be totally unacceptable.
The problems that I pointed out, and Mr. Grenier pointed out, with Chapter 19 is not what NAFTA says. It is not even what the NAFTA-implementing legislation in the U.S. says. The problem is getting the U.S. to comply with their laws. If the U.S. would comply with their laws as written and as they have been interpreted by the Court of International Trade, then most of the problems with Chapter 19 would be resolved.
Mr. Grenier: I agree with Mr. Herman and Mr. Johnson. I do not think the solution lies with reopening Chapter 19, or NAFTA itself.
It is useful to recall that we had FTA before NAFTA, and Chapter 19 was barely changed between the two agreements. That took everything we had. We had to break off negotiations three weeks before the end to obtain Chapter 19, and we did not get everything we sought, of course. That political alignment of the consolations, if you will, is no longer there: Not now and perhaps never. Indeed, if the U.S. government followed only what it agreed to do when we negotiated Chapter 19, I do not think these types of problems would arise.
The one way in which we can get the U.S. government to follow what it agreed to do is through the U.S. judicial system. This is exactly what we started to do in the softwood lumber litigation.
Senator De Bané: Those two briefs raise serious issues. For instance, Mr. Johnson concludes his brief by saying that the position of the United States government in implementing legislation that has been categorically rejected by a well- respected U.S. court is inconsistent with the obligation of the United States to perform its treaty obligations in good faith. Those comments are serious.
As for Mr. Herman, he says that this agreement we have signed with the United States will give the United States, in some cases, direct oversight of Canadian economic activity, and that is unprecedented.
When you read potent things such as, the United States refuses to apply its own laws, refuses to behave in good faith and from now on in some sectors can direct the economic activity in our country, all of that reminds me of what Mr. Pearson used to say: The United States is Canada's best friend, whether we like it or not.
Senator Eyton: It is good to see some friendly faces at the end of the table.
Probably all Canadians have been exposed to softwood lumber and the questions around it for too long. I first ran into it in some detail in the 1980s when I was involved with MacMillan Bloedel and some eastern producers. It seemed to me it was a great question and problem then. There were a multitude of arrangements and dealings over the years that tried to answer the problem between Canada and the United States concerning the industry.
I also had some involvement with the process leading up to the free trade agreements. I did not understand Mr. Grenier's point when he suggested that the free trade agreements, and their provisions were meant to provide a process to settle softwood lumber disputes. I naively thought softwood lumber is off on the side and different. It could be helped by the agreements and its provisions, but to my mind it was always a separate problem never quite resolved; a problem looking for a solution.
Picking up on Mr. Herman's suggestion, is softwood lumber a unique problem? Of course the significance is that if we can see it is unique and say that in a firm and compelling way, it may not establish a precedent and therefore not wreck the havoc you have talked about in your remarks.
Mr. Herman: Senator Eyton has raised some valid points.
If you look at the history of Canadian-U.S. trade relations, softwood lumber stands out as highly unique and unusual. We had problems with fresh and frozen pork in the 1980s and groundfish, which were large sectors and the subject of U.S. actions. To some extent, Chapter 19 of the old FTA was concluded hopefully to deal with cases such as that where huge economic sectors were side-swiped or directly swiped by U.S. trade actions.
My view is that softwood lumber is probably unique. Lawyers like to use the term sui generis. I accept a lot of what Mr. Grenier has said, but I do not believe the sky is falling. The agreement has implications for Chapter 19, but on the day-to-day Canada-U.S. trade cases, Chapter 19 works pretty well. On those day-to-day cases, I do not think there is likely to be a significant negative impact.
I hate to sound like a lawyer and I am trying to be more forthcoming, but it is difficult to say whether this settlement will have an impact. What I said in my earlier remarks was that it has driven a hole through the NAFTA process in the sense that Chapter 19 was supposed to resolve these disputes and has not been able to. So I say the jury is out. Let us close this chapter and move forward.
At the end of the day, we had to negotiate a settlement with the United States to resolve this and many of the outstanding issues in one form or another. Litigation alone would not have solved everything. As Mr. Grenier said, had we won everything and gone through the U.S. courts — which would have taken years — and gotten all our duties back, the U.S. industry, given the economics at stake, would have started a new case the next day and we would have been back to Lumber V.
Being pragmatic and swallowing hard, I would say it is time to turn the corner and hope that this negotiated settlement can bring us some degree of commercial stability, which is of benefit to Canadian industry and workers employed by that industry.
That is my hope. I think there is a chance that this agreement may do it.
Mr. Grenier: Senator Eyton is right that when we negotiated the FTA in the 1980s, softwood lumber was pushed to the side. Neither government wanted to deal with softwood lumber while they were negotiating a much bigger deal, the FTA itself, which became NAFTA and Chapter 19.
An exception was made because a deal was reached at the end of 1996, well before the conclusion of the broader negotiations. The Memorandum of Understanding of 1996, which established an export tax, et cetera, was denounced by Canada in 1991 at the urging of British Columbia. Most other provinces in Canada and the rest of the industry strongly believed that we would be in Lumber III quickly after that, and we were, in a brutal fashion. The U.S. government did not wait for the coalition to bring a new case.
However, we had Chapter 19. We used it to defend ourselves and we won fair and square in 1994. We sat down with them for "consultations,'' which became negotiations, which became the SLA of 1996. We were in a better position having won and having had two years of free access to the market because of Chapter 19.
Yes, there was an exception made in 1986 in the FTA, but that exception is long gone.
Mr. Johnson: The exception in the Canada-U.S. agreement for the MOU was a narrow one. In the Canada-U.S. agreement, export charges were prohibited and this wascarried forward into NAFTA. The MOU was based on export charges and it was inconsistent with that FTA provision, so an exception was made. It was a narrow exception dealing with that narrow issue.
I do not think there is anything unique about softwood per se. The unique thing is that the softwood lumber industry in the U.S. happens to have incredible influence with the U.S. government. That business conducts a huge amount of trade, and that trade, unlike the auto trade, which goes both ways, tends to go one way. That is one factor to take into account.
However, the unique thing about softwood lumber is the power that industry has through its coalition to influence U.S. government decisions to the extent that the U.S. was willing to renege on a treaty obligation to effect a settlement.
Senator Di Nino: Thank you, gentlemen. Listening to the three of you, I have learned how little I know about this issue.
As a businessman, I know that it is not unusual in business to negotiate settlements. It is a normal phase of doing business on a regular basis. This agreement is a little different, but it is a way of reaching compromises with your clients and customers when you have disputes. I do not see why this matter would be seen differently simply because governments are involved.
Do you agree with that?
Mr. Herman: As I said in my opening remarks, negotiation is part of the fabric of international trade law. It is built into NAFTA, albeit not in the context of Chapter 19, and into the WTO as it was in the old General Agreement on Tariffs and Trade. It is part of the process of resolving trade disputes. I think negotiated settlements as a principle are to be applauded. The alternative is endless dispute litigation and retaliation which is tantamount to, in broad terms, trade war. A negotiated settlement is part of the process and is a good thing in principle.
The difference between us, which I do not think is all that great, is that my colleagues think that the negotiated deal is a bad one. My view is that it is not a great one but it is probably better than a set of unpalatable alternatives. There is the margin of difference between us.
Mr. Grenier: I have been involved in negotiating with the U.S. for a long time. I started in 1976 as a member of the Department of External Affairs, as it was then called, with the Tokyo round. I was involved in negotiations with the U.S. then and through subsequent years.
I believe we should negotiate with the U.S. to set new rules in a broader context. We have done it, of course, with the FTA, NAFTA, the WTO, and GATT before that. We have negotiated with the U.S. to settle disputes such as softwood lumber three times in 20 years. I was involved in various guises in those three negotiations. I submit that negotiating to settle a dispute on something like softwood lumber or any commodity is different when negotiating with the U.S. It is different because there is a huge symmetry between the two. That is the basic reason Canada sought clearer rules and rules with teeth when we negotiated the first free trade agreement with the U.S. in 1980s.
When you sit down with the U.S. to negotiate something like the softwood lumber deal, it is not a real negotiation; it is a grinding-down process. They grind you down, and at some point you agree, sometimes after a change of government here in Ottawa.
Mr. Johnson: You draw a commercial analogy. I would draw it this way: You and I have a contract. I egregiously break the contract. You say, "You have broken the contract; you should make it good.'' I say, "That is too bad. I am bigger and stronger than you, and this is the result I want.'' That is a commercial analogy.
Mr. Herman: Mr. Johnson is right; there is a commercial contract here, but it is like a supplier being totally dependent on one customer and when that customer turns nasty, the supplier has problems. That may be the broader lesson for the Canadian softwood lumber industry.
Senator Di Nino: I do not disagree.
In the context that we conduct approximately $1 billion per day of trade with the U.S., it seems to an amateur like me that we have not done too badly in this relationship. Is that an overstatement or an understatement?
Mr. Grenier: I think that is exactly right. Of course, it is like being unemployed. The unemployment rate is only 5 per cent, but if you are unemployed it is 100 per cent for you.
Senator Di Nino: He gives and then he takes away very quickly. That is the reality of life, unfortunately.
You have all agreed that reopening Chapter 19 or the agreement is a non-starter, and I agree with that. I believe that retaliation would be totally foolish.
However, one could do other things to improve the Chapter 19 situation. The other place has suggested a couple of things such as a permanent roster of panellists or things of that nature.
Do you have any suggestions of recommendations that we could make to the government?
In my opinion, we should increase our sphere of influence and advocacy in the U.S. One thing we recommended some time back was to increase the number of trade offices, particularly in areas where we have difficulty. Do you have any thoughts on that recommendation?
Mr. Grenier: Especially with respect to the last suggestion, increasing our influence in the U.S. is clearly the way to go. As you have probably concluded, we have a political problem with the U.S. It is a trade problem, but in the end it is a political problem as a result of the way the U.S. system is set up. The president does not have the final word. Congress and the Senate Finance Committee have the final word.
Our group concluded a long time ago that we should try to set up a counterforce with the Coalition for Fair Lumber Imports. We invested some money, not a lot because we did not have a lot. Unfortunately, this move was not supported by the whole Canadian industry.
You will be pleased to know that as a result of those efforts, at least 150 legislators out of 535 in the U.S. Congress now support the Canadian position. They oppose restrictions on the importation of Canadian softwood lumber. This counterforce had never been done before. Previously, the field was left wide open to the coalition.
I believe that if we were to mount a more serious effort, this must be completed over many years. It cannot stop when you reach a settlement, such as we are doing now. It is a permanent thing.
I believe that we could reach some sort of gridlock situation in the end with the coalition within the U.S. political system. I do not suggest anything out of the ordinary. Other countries have done it to address similar kinds of problems.
Senator Di Nino: There are numerous supporters of our position, the housing industry being one. When we were completing the FTA review in the United States, a few large corporations — for example, Home Depot — appeared before us and were supportive of our efforts. We should work with those interested companies.
The Deputy Chairman: When you stated that we have a political problem with the U.S., it crossed my mind that they have a large political problem with us and with a whole lot of people. The opinion of the world over the last few years has not been helpful to the U.S.
With these horrible disputes, they may have won but they have not won in the court of Canadian public opinion, if they are interested in image.
When you stated that softwood lumber was a special case, I was speaking with some U.S. trade negotiators a while back, and they told me that, as we all know, most trade between Canada and the U.S. is dispute free. It goes back and forth.
One gentleman was a senior negotiator, and he said that between the U.S. and Canada, there are a half dozen disputes. They are the most difficult disputes that the U.S. has in trade. They are almost unsolvable, and they all revolve around primary products such as softwood lumber. You also mentioned fisheries.
The committee remembers in Winnipeg when we heard about the wheat difficulties: They revolved around the Wheat Board. Then we heard the same case will come up eleven times. The cases are about primary products such as fisheries, forestry and agriculture, and they are extremely difficult to resolve. Is that true?
Mr. Grenier: Yes.
Mr. Herman: I should point out a couple of things to help clarify and maybe put things in perspective.
Canada has, on the record, applied a considerable number of anti-dumping orders against U.S. products. I do not think we should forget that. I do not have all the examples with me, but a couple of years ago we applied anti-dumping duties against steel wire from the United States. It goes on and on, with respect to raspberries, iceberg lettuce and all kinds of agricultural products. We have hammered the Americans with our system. Let us not forget that.
The other point that figures into softwood lumber is that some of this is a reflection of structural issues. I think Mr. Grenier mentioned that softwood lumber moves one way. That means that the U.S. are the market and we are the suppliers. That movement will always cause problems on the trade front.
The steel industry used to have many problems. There used to be a fair number of trade cases against U.S. steel entering into Canada and Canadian steel entering into the U.S. That has largely subsided. The industry is restructured.
Trade, steel and steel products, partly as a result of the auto pact, move back and forth. It is not only a one-way trade flow. That has made a difference.
In the last number of years, there has been, essentially, peace in the steel sector as a result of these structural changes. That might make a difference long-term in the softwood lumber sector. It may not, but it may.
These things must be borne in mind. I return to the fact that Canada has brought major trade litigation against U.S. products, so it does not occur only to the south of us.
The Deputy Chairman: The committee has heard evidence that in the steel industry in particular, the biggest user of steel is the automotive industry. Car manufacturers in Canada buy their steel in Canada. It is one part of the industry that is not integrated. American cars use American steel and Canadian cars use Canadian steel. The reason is probably the cost of transportation. You do not want to haul heavy steel back and forth across the border. One unusual part of the auto industry is that the steel component is not integrated.
Mr. Herman: I am not sure that is correct. I think steel buyers in Detroit will buy steel from Hamilton and from South Carolina. I think steel flows both ways. You see many trucks with hot-rolled coil on the QE entering the United States and U.S. steel entering back into Canada. I think the trade flows are integrated, but I may be misinformed.
The Deputy Chairman: We looked into it, and those are the statistics we obtained.
Senator Andreychuk: Thank you, Mr. Herman, for bringing up the issue of anti-dumping. The problems are sometimes on our side of the border and they are sometimes on the other side.
I wanted to ask about Mr. Johnson's opening remarks. You said there was nothing wrong with Chapter 19 and nothing wrong with the U.S. implementation legislation. It was in how it is interpreted.
Is it always the case in trade that there is a foreign policy aspect and a trade aspect? People, at least legislators, look after their constituents, and that is part of the problem. They spin their agreement to their benefit.
This committee has often suggested we approach trade from agreements but also look at it as a foreign policy issue. There should be more and continuous cooperation and involvement between legislators across the border. This committee has said we should have more parliamentarians trekking to Washington and vice versa to get to know each other.
Do you agree that we will not have negotiated settlements all the time, but we can probably arrive at settlements faster if there was a more continuous approach toward foreign policy on this issue?
Mr. Johnson: In this particular case, back in 1988 when the free trade agreement was entered into, the U.S. implemented Chapter 19, and the legislation that they passed did exactly what it was supposed to do. When you read the Statement of Administrative Action, which is basically the U.S. administration's document that is tabled with the legislation explaining what the agreement is about, why the legislation implementing it is necessary and what it means, it was clear that they wanted to give effect to Chapter 19 and make the binational panel decisions binding and so on. In this particular case, there was nothing wrong with the legislation.
One of the shocking things is that when you read the briefs that the U.S. filed in the Tembec case side by side with what they said in the Statement of Administrative Action, there is a world of difference between the two positions.
You suggest that legislators need to communicate more to achieve better legislation to implement trade deals. I think in this case there was nothing wrong with the implementing legislation, but the problem developed subsequently, and I think it had to do with the influence of the softwood lobby in the U.S. on the administration.
Mr. Grenier: I believe I understand your suggestion that there should be more political contacts between the two countries and between legislators. I think that contact is a good thing. Having a good overall relationship between the leadership is also a good thing, obviously. However, I have to recall here that we did nothing to the U.S. on softwood lumber; they did things to us. It is one thing to bring dumping cases on U.S. products into Canada. That is fine and follows the usual pattern, and we do not have the incredible saga that we have with softwood lumber. There is a lesson to be learned there.
I recall one meeting with U.S. legislators who came to Canada on their way to Japan in the 1980s. They stopped in Vancouver, and we had organized a big meeting with the softwood lumber industry. The chairman of one of the key congressional committees at the time was a large man who knew what he wanted. I remember a good presentation of the Canadian case explaining everything: why we were not hurting them and why we were not subsidizing. We mingled after that, and he put his arm around me and someone else at the same time. He had long arms. He said, "Well, we have heard all this. What can you do for me today?'' This is also what you are exposing yourself to. Indeed, all politics is local. As we will learn today, perhaps not all of it is local in the U.S.
Senator Andreychuk: Mr. Grenier is making my point. There is a legal aspect, but there is also a political aspect. We say that the softwood components in the U.S. have this great influence on the system, and I have heard the same about agriculture and steel. Inevitably, when there is a political push, it does not always succeed, but in most cases it helps in the end. You can have the best agreements, but you need good relationships and to work at your foreign policy as you work on your trade agreements. That is the point I tried to make.
[Translation]
Senator Corbin: My question is primarily for Mr. Grenier, although I welcome comments from other witnesses. In my opinion, this agreement has so many clauses and stipulations that I have to wonder about its longevity. Would you care to comment?
Mr. Grenier: You are quite right. Three agreements have been negotiated with the United States in the past 20 years: one in 1986, one in 1996 and the current one, in 2006. The last agreement is by far the most complex one and, in my view, the one that least reflects the reality of the market and the way in which lumber is marketed between Canada and the United States.
It is a well known fact that the United States has not been self-sufficient in lumber for over a century. Canada has a one-third share, or thereabouts, of the U.S. market and would have an even bigger share were it not on the receiving end of repeated attacks. There is no question that the United States needs lumber. That nation's tactics are clear and transparent. Its attacks on Canada are aimed simply at restricting the amount of lumber on the market in order to keep prices higher. That is the simple truth. Our opponents in the coalition know very well that subsidies are not the problem, nor is dumping of lumber between Canada and the United States. Clearly, that is not going to stop them.
As recently as two weeks ago, shortly after that agreement took effect on October 12, lawyers for the coalition announced in court that they were not prepared to abandon their constitutional challenge under Chapter 19, because they felt they would likely need to opt for this course of action sooner rather than later.
The term of the agreement is seven years and can be extended to nine years. They themselves admit that the agreement may not remain in force that long. That is unfortunate, because this agreement is going to cost us dearly. Moreover, the market stability that everyone has been wanting for some time now may not be achieved.
In my opinion, the main threat to the longevity of the softwood lumber agreement will be the document's complex nature. If any disputes arise over the implementation of this agreement, they will not be settled using the same process provided for under Chapter 19 or at the WTO. Now, an arbitration tribunal based in London and made up of non Canadians and non Americans will be called upon to settle any disputes that may arise.
Inevitably, there will be disputes. This type of trade agreement has set a precedent. Nothing like this has ever been negotiated before between Canada and the U.S. The only similar precedent I can think of is the agreement reached last year to resolve the cement issue between the United States and Mexico.
This newly created precedent has given the coalition a very good reason for going back on the attack fairly quickly. Will Canada be able to live with this agreement? How will Canadian companies manage within the very restrictive parameters of the agreement? These are questions to which I have not received any answers.
[English]
Senator Austin: I respect the fact that you have been sitting for a time and the hour is late. I want to pursue two questions. The first one is relatively simple. It is an industry question, and I have not heard it asked. It relates to the access that, particularly, European lumber producers have to the U.S. market, the constraints if any that exist with respect to those imports and the possible impact on the U.S. lumber industry as well as the Canadian lumber industry.
That is my first question. The second I will ask of all three of you. You have referred, in one way or another, to the issue of leverage: either it is commercial, national or binational. Senator Andreychuk pursued the complex question of the whole relationship issue, not only trade, foreign policy and the number of other issues.
I noticed in your presentation, Mr. Johnson with some interest, which is dated March 8, 2005, you say toward the end of it, and I quote:
If through U.S. intransigence Canada is forced to live with less than it bargained for under the CUFTA and NAFTA, the same should apply to the United States. Canada should put itself into position of giving the United States a choice between living up to its obligations respecting the Chapter Nineteen binational panel procedures that Canada values highly or to lose advantages under NAFTA that the United States values highly.
It is a nice sounding statement. Is there any practical application of such a statement to Canada-U.S. relations? You mention the energy security issue. Were you thinking of possible linkages to Canadian energy or perhaps Alaska Gas Pipeline? As I said, I had only a couple of simple questions that we could end on quickly: First, on the foreign lumber competition, please.
Mr. Grenier: That is an interesting question. You recall that before we made the last deal, 1996, and for 15 years, the U.S. market share of third-country suppliers of softwood lumber was constant at one-half of one per cent. Canada's share was growing with the U.S. market and the fact that the U.S. cannot supply for all the growth of its market. Because of the quotas that were imposed from 1996 to 2001 under the SLA of 1996, that share of third-country suppliers to the U.S. increased dramatically and now it is nearly 5 per cent. It has been multiplied by 10. It is still small overall, but it is growing fast.
Senator Austin: Our growth, however, is constrained and it leaves a vacuum for them.
Mr. Grenier: They do not have any constraints except the market constraints of price. Whenever prices are low, as they are now, they retreat from the market considerably. It is interesting to note that when we vacated the market space in 1996 and agreed to impose volume limit on our exports, our U.S. competitors were not able to conquer it back. It was basically taken by third-country suppliers. If this deal flies and lives, will it have similar effect? That is an open question. If prices rise again you will see competition in the U.S. market from people who were not in that market before.
Senator Austin: The U.S. producers wanted to hold Canadian lumber and presumably all foreign imports into the United States at 30 per cent. Then it moved up to 33 per cent. Now, we will be at what number and 5 per cent will add what percentage to it?
Mr. Grenier: It is defined in the agreement as 34 per cent. I think that the U.S. authorities do not want to take on entities such as the European Union, Brazil or others because the array of suppliers would be wide: not only Europeans, but New Zealand, Brazil is a strong supplier and eventually Russia will probably come into the fray. I do not think they would take the risk of broadening these restrictions only to do the bidding of the coalition. No, they are aiming at Canada because we are the largest foreign suppliers and we are close.
Senator Austin: We are capped and they are not. Mr. Johnson do you have a comment?
Mr. Johnson: I was thinking specifically of NAFTA article 1905, which Mr. Herman mentioned in his paper. At the in time of my March 8, 2005 comments, the U.S. had either recently reneged or was about to renege. I do not think the ECC process had worked its way through but the U.S. government was giving strong signals that it would treat the section 129 finding as trumping the NAFTA ruling, and also they would take the position on refunds described in the comments. That is exactly what they ended up doing.
At that time, given that there was a real and present prospect of the U.S. reneging on a successful Canadian outcome, which did happen, one option discussed was article 1905 of Chapter 19. Article 1905 was put into Chapter 19 to deal with the situation of Mexico. The Americans were afraid that Mexico would not live up to its obligations and the Americans wanted Chapter 19 to be adhered to, which is interesting. Article 1905 was of general application and there is a procedure that one can go through, which is not an attractive one.
If, for example, the United States refused or declined to enforce a result of the binational panel decision, then Canada could request the formation of what is called a special committee, which is like an extraordinary challenge committee, and the process is the same process for choosing it. If the special committee decided that Canada was correct and that the U.S. had improperly refused to implement, then there would be a number of options open to Canada, one of which would be to suspend benefits under NAFTA, and there is no proportionality provision there. The U.S. could only object, for example, if the suspension were manifestly disproportionate.
Now, we were certainly thinking about these things at that time, and a lot of serious thought was given to article 1905. There was a question as to whether to invoke it and, if so, when to invoke it. It was decided, in the course of the section 129 litigation, that it would not be wise to invoke it until that litigation had seen its way through. It was sent to the back burner. It was in that context that I was thinking of article 1905 in those comments.
One thing to remember is that if the U.S. ultimately does renege under Chapter 19 — supposing the constitutional case goes through and the Chapter 19 process is found to be unconstitutional so the U.S. cannot perform under it — we cannot withdraw benefits unilaterally. We need a basis and it would be an article 1905 process. I think I was more bullish then than I am now, but it is clear now there is no stomach for withdrawing benefits and there is good reason for that. As has been pointed out, 95 per cent of our trade with the U.S. is dispute-free and it is a huge benefit to both countries.
That is the context where those comments came from.
Senator Austin: Perhaps you will come back so I can ask Mr. Herman questions.
The Deputy Chairman: I want to thank the witnesses for an interesting and informative discussion. Before everyone runs off, we have checked and we are not certain from the Department of Foreign Affairs and International Trade as to whether the minister or officials will appear tomorrow so I cannot tell you. We will find out and inform you.
The committee adjourned.