Proceedings of the Standing Senate Committee on
Foreign Affairs
Issue 15 - Evidence
OTTAWA, Tuesday, December 3, 1996
The Standing Senate Committee on Foreign Affairs, to which was referred Bill C-61, to implement the Canada-Israel Free Trade Agreement, met this day at 3:26 p.m. to give consideration to the bill.
Senator John B. Stewart (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, on Thursday, November 28, the Senate gave second reading to Bill C-61, to implement the Canada-Israel Free Trade Agreement, and referred it to this committee. Thus, we now begin our consideration of the bill.
I propose now to turn to the lead witness from the Department of Foreign Affairs and International Trade, Mr. Moroz.
Senator Lynch-Staunton: Before doing so, Mr. Chairman, I was hoping that either the minister or a minister or the parliamentary secretary would be with us today to give us a political overview of this agreement.
The Chairman: We received a letter from Mr. Eggleton, the Minister for International Trade, which states, in part:
...I am departing Canada for Chile at noon on December 3 in order to attend a formal signing of the Canada-Chile Free Trade Agreement and to open a major trade exposition. Please convey my sincere regrets to your Committee.
As you know, I have asked my Parliamentary Secretary, Ron MacDonald, M.P., to replace me as a witness before your Committee. In view of the fact that Mr. MacDonald has just returned to Canada from a lengthy visit to five separate countries in the Middle East, including Israel and the West Bank and Gaza, where he discussed the provisions of the Canada-Israel Free Trade Agreement, I am confident that he will be an important witness for your Committee.
The arrangement that we have set up, senator, is that we will start with the officials from the department, who will introduce us to the trade aspects of the bill. We will then hear from certain witnesses who have asked to be heard relative to the bill. When that has been completed, we will hear from Mr. MacDonald, the parliamentary secretary.
Mr. Moroz, would you begin, please.
Mr. Andrew R. Moroz, Deputy Negotiator, Rules of Origin,Department of Foreign Affairs and International Trade: I am the deputy director of the Tariffs and Market Access Division in the Department of Foreign Affairs and International Trade. I was the deputy negotiator responsible for Rules of Origin during our negotiations with Israel.
As the letter you read out indicates, Minister Eggleton regrets that he is not able to attend this hearing on the Canada-Israel Free Trade Agreement. He had hoped that the timing of these hearings would be such that he could appear.
On behalf of the Department of Foreign Affairs and International Trade and other government departments, I would like to take this opportunity to summarize the main reasons for which we negotiated the Canada-Israel Free Trade Agreement, outline its main provisions and the key elements of the implementing bill, Bill C-61.
Mr. Chairman, Canada is a trading nation. Over one-third of Canada's gross national product is created by exports. One in three jobs comes from exports. For every $1 billion of exports, 11,000 jobs are either created or maintained.At the same time, Mr. Chairman, Canadians benefit from open trade, both as consumers of goods and services produced abroad and as producers who use imported inputs and materials to make the goods and services they sell in Canada and export.
Open trade also encourages countries to become more competitive internationally, hence a better place to grow and prosper in the globalized economy. For these fundamental reasons, Canada has actively pursued trade liberalization, be it multilaterally through the World Trade Organization or directly with other countries through free trade agreements, such as the North American Free Trade Agreement, better known as the NAFTA.
The Canada-Israel Free Trade Agreement is another building block in the government's efforts to expand trade opportunities and hence gain the benefits of increased trade for Canadians. While current trade in goods between Canada and Israel is modest -- two-way trade in 1995 was just over $450 million -- it is growing quickly. In 1995, two-way trade grew by 37 per cent, with Canadian exports rising by 49 per cent.
Regarding the free trade agreement itself, it concentrates on removing barriers to trading goods. Under the free trade agreement, tariffs on bilateral trade would be removed, immediately upon implementation, on virtually all industrial products. The only exceptions in the case of industrial products are the Canadian tariff on women's swimwear and the Israeli tariff on certain cotton fabrics. These tariffs are phased out over two and a half years. In the case of swimwear, Canada negotiated this phase-out because of concerns raised by Canadian producers. In the case of agriculture, duties are removed or lowered on a range of agricultural, agri-food or fish products that have direct export interest to both countries.
The removal or reduction of tariffs will provide new opportunities to increase trade with Israel.Canadian manufacturing sectors which are expected to benefit from this include, amongst others, the environmental pollution control equipment sector, the advanced technology products sector, and the energy, oil and gas, and forestry products sectors.In the case of agriculture, sectors well positioned to take advantage of the new access to the Israeli market include grain and grain products, oil seeds, pulse crops and various processed foods.
Mr. Chairman, the agreement also addresses an important concern raised by Canadian producers. The free trade agreement will level the playing field for Canadian producers in competing against their European and American competitors. Israel has had a free trade agreement with the European Union and the United States for a number of years now and has negotiated agreements with other countries in more recent years. As a result, Canadian exporters have had to face Israeli tariffs which range from 10 to 25 per cent for many of Canada's exports, while their main competitors have enjoyed duty free access.
A case in point is the telecommunications sector. Until now, our major producers, such as Newbridge, have been exporting to Israel from the U.S. plants in order to avoid the Israeli tariff of 15 per cent. Under the free trade agreement with Israel, they will now be able to export products made in their Canadian plants.
The Rules of Origin are a fundamental part of any free trade agreement, as they determine how much production and sourcing within the free trade area is required before a good is eligible for the tariff preferences provided under that agreement. The Rules of Origin under the Canada-Israel Free Trade Agreement are designed to be straightforward. These rules reflect the open and trade-dependent nature of the Canadian and Israeli economies. They are intended to allow Canadian producers to take advantage of the opportunities of free trade with Israel without having to make major changes in their current suppliers of inputs and materials.
Under the agreement, producers will have recourse to bilateral safeguard actions in the event of unforeseen import surges that result from the removal of tariffs and cause serious injury during the first two and a half years of the agreement. At the same time, Mr. Chairman, the agreement provides that each party will exclude imports from the other under global emergency safeguard actions, except under strict conditions, such that the imports from the other side are a significant share of imports and contribute directly to serious injury.
The agreement also establishes a trade commission comprising the trade ministers to oversee the operations of the free trade agreement. It also provides for consultations and binding dispute settlement to resolve any problems that may come up. Regarding those areas that are not covered by the agreement, for example, services, investment and government procurement, these areas will continue to be governed by the WTO rights and obligations of the two parties.
Mr. Chairman, the government is proceeding at this time with Bill C-61 to implement the free trade agreement because it undertook a commitment both to Israel and to Canadian businesses by signing the agreement which calls for implementation on January 1, 1997. Canadian producers are expecting and are preparing for the January 1 implementation date and the earliest removal of the disadvantages they now face vis-à-vis their American and European competitors.
Turning to the implementation itself, Bill C-61 would make the required changes to Canadian law to implement the free trade agreement. The bill starts with a number of general clauses intended to define the scope of the bill and its interpretation and to implement the administrative and institutional provisions of the agreement, such as those related to dispute settlement provisions and the trade commission for overseeing the operation of the agreement. It also provides advantages for us, as I just said earlier, for January 1, 1997.
Most of the bill, however, Mr. Chairman, involves making amendments to a number of existing acts. In particular, the bill amends the Customs Tariff to provide for the removal or reduction of duties on imports of originating goods from Israel. It amends the Customs Tariff to allow for bilateral safeguard actions against originating goods from Israel during the first two and a half years. It also amends the Customs Tariff, the Canadian International Trade Tribunal Act, and the Export and Imports Permit Act to exclude imports from Israel under global emergency safeguard actions unless the strict conditions that I referred to earlier are not met.
Finally, Mr. Chairman, it amends the Customs Act to implement the obligations and customs procedures in the agreement, including with regard to the export certificate of origin, origin verifications and advance rulings. Bill C-61 also provides authority for establishing domestic regulations, including with regard to the rules of origin and related customs procedures.
Mr. Chairman, you may recall that when the government announced the conclusion of the free trade negotiations on January 12 of this year, it also announced its willingness to extend formally the benefits of the agreement to goods produced in the West Bank and Gaza in cooperation with the Palestinian Authority. This offer was reiterated when we signed the free trade agreement on July 31 of this year.
Mr. Chairman, as you noted earlier, the Honourable Ron MacDonald, parliamentary secretary for the Minister of Foreign Affairs and International Trade, will be appearing in front of the committee tomorrow. He has just returned from the Middle East where he met with ministers from the Palestinian Authority. He had good and positive discussions with them and his discussions did include the issue of the benefits of free trade to the West Bank and Gaza, and it is his intention to cover this issue tomorrow.
My colleagues and I are prepared to address any questions regarding the agreement and its implementing bill.
The Chairman: As I understand it, there has been a free trade agreement between Israel and the United States for over ten years. Why is it that it has taken Canada ten years to follow the American pattern; was this a matter of principle or were there specific obstacles that delayed Canada from year to year?
Mr. Moroz: Mr. Chairman, the United States negotiated its free trade agreement with Israel in 1985. In terms of Canadian free trade policy, at that point, you may recall that we were focusing on the trade negotiations with the United States, in that case the bilateral agreement. As we moved into the 1990s, our primary focus was two major sets of negotiations: first, the Uruguay Round of the GATT negotiations, which led to the formation of the WTO organization; and secondly, our negotiations with the United States and Mexico to form the North American Free Trade Agreement.
The Chairman: I would have thought that during that period, certain American exporters would have entrenched themselves in the Israeli market and would now be entrenched there, in a sense, as privileged competitors against companies coming in from Canada under this new free trade agreement.
Mr. Moroz: It is true that until this agreement, the Americans and the Europeans had a privileged position in the Israeli market. The purpose of this agreement is to address that problem head on.
The Chairman: You have knowledge as to which Canadian industries hope to penetrate the Israeli market. Do we have a realistic appraisal of their ability to overcome the entrenched position of, let us say, their American competitors?
Mr. Moroz: Mr. Chairman, under NAFTA, our companies have proved capable of competing head on with the Americans in their own market. Canadian producers have made strong inroads in many markets abroad, the telecommunications equipment sector in particular being a good example. We have been told that if the tariff were removed, they would be able to compete against their American counterparts.
I would add that in our consultations, many companies -- whether they be security lock producers, telecommunications producers, environmental control equipment producers -- have indicated they feel confident that they can compete if the playing field is level. You are absolutely right -- they need to catch. The Americans have had a ten-year head start. This agreement is designed to remove that obstacle, which is why they are looking for implementation as early as possible.
The Chairman: Do you mean to imply by the language just now used that the obstacles against Canadian exports to Israel will be no greater in any way than the obstacles to exports to Israel from the United States?
Mr. Moroz: Precisely. The main obstacle at this stage has been the tariff.Israeli tariffs range anywhere from 4 to 30 per cent. For most Canadian products, the tariffs range from 10 to 25 per cent range. If I can stay with my example, telecommunications equipment, the Israeli tariff is 15 per cent. U.S. producers have had to pay no tariff getting into the Israeli market. A 15-per-cent tariff is a significant obstacle if you are trying to compete with an American or a European company. By removing that, that being the major obstacle our producers have faced to now, that will level the playing field.
Senator Grafstein: Why are services, investment and government procurement exempted from the free trade agreement?
Mr. Moroz: When we sat down prior to the beginning of the negotiations at the end of 1994 to examine what might be done, it was agreed by both sides that in view of the recently concluded Uruguay Round negotiations these areas were adequately covered for purposes of the trade between Canada and Israel. As a result, it was felt that we should focus mainly on removing barriers to trade for goods. Hence, the negotiations focused mainly on removing the tariff and other non-tariff barriers. At present, trade in services, investment issues, intellectual property and so forth will continue to be governed by WTO obligations. And that is referenced directly in the agreement -- the agreement does make reference to WTO obligations in these areas.
Senator Grafstein: Does the United States free trade agreement with Israeli exempt services, investment and government procurement?
Mr. Moroz: My understanding is that the United States agreement does not cover areas like intellectual property, services, investment; it makes reference to cooperation and, I believe in one case, to WTO obligations. I believe that their agreement now contains a clause on government procurement, but that was not part of the original negotiations. It came out of subsequent negotiations, I believe.
Senator Grafstein: So the playing field between Canada and the United States with respect to those items is roughly parallel, with the exception of this proposed legislation?
Mr. Moroz: Yes. I would add, just so that you have all of the facts, that the United States and Israel have just recently concluded a further agreement on agriculture. As a result, they now have in certain products a step up on us. They were negotiating this during our negotiation, and we concluded before them. However, we include in our agreement a provision that we will return to agriculture within two years. We insisted on that provision because we knew that Israel was engaged in negotiations with the Americans and we wanted to have an opportunity to return to that issue once they had concluded their negotiations with the Americans.
Senator Lynch-Staunton: My first question on the bill itself refers to clause 6, which is on page 3. Do we find the same wording in the NAFTA agreement, and if not, why the difference? I am particularly interested in 6(2):
No person has any cause of action and no proceedings of any kind shall be taken, without the consent of the Attorney General of Canada, to enforce or determine any right or obligation that is claimed or arises solely under or by virtue of the Agreement.
Is that peculiar to this bill?
Mrs. Ellen Stensholt, Senior General Counsel, Departmentof Justice: No, it is not, senator. It is a standard clause. You will find it in NAFTA; it was in the FTA. The intention is that we are not creating new rights for individual citizens. This is an agreement between countries. Under NAFTA, in fact, there has been a fishing licensing argument in British Columbia where somebody tried to use the provisions of NAFTA to enforce a private action claiming that NAFTA required the Canadian government to grant a licence. We have specifically said that this is an international trade agreement; it is not intended to create new causes of action for individual citizens.
Senator Lynch-Staunton: I appreciate that, but that leads me to my next question. When a domestic producer has a complaint, that comes within the agreement, right?
Ms Stensholt: Yes.
Senator Lynch-Staunton: There are initiatives that individuals can take within the agreement.
Ms Stensholt: There is a dispute resolution chapter. If an individual producer has a complaint, he must first raise it with the government, at which time, the government concerned will raise the issue with the other government. In the first instance, the intention is that the complaint would be resolved at the level of the trade commission, which is the two trade ministers for the respective countries. If it is not able to be resolved at that level, then a dispute panel is set up and we have a dispute resolution mechanism, which is very similar to that of the original Canada-U.S. Free Trade Agreement rather than the NAFTA. You will recall that the NAFTA country-to-country dispute resolution is rather more elaborate than the Canada-U.S. FTA dispute mechanism. This Canada-Israel mechanism is very like the Canada-U.S. FTA dispute mechanism.
Senator Lynch-Staunton: Can you remind me of the difference between NAFTA and FTA regarding disputes?
Ms Stensholt: With regard to panel selection, for example, in NAFTA, we have a provision that each country establishes a roster. Then we have the supply management cases. It has just come out, so this is a timely moment to be discussing it. Canada chooses two U.S. panellists from its roster and the U.S. chooses two Canadian panelists from the roster that we have put forward. And then the chair is a third party national.
The Israelis pointed out to me, as I was negotiating this U.S. chapter with them, that in the ten years of the U.S. Israel Free Trade Agreement, they have had exactly one dispute with the United States. Given that, the Israelis did not believe that such an elaborate dispute mechanism was necessary. So although we had started by talking about the NAFTA one, we agreed that, indeed, in view of the level of the volume of trade and the likelihood of disputes arising, a simpler dispute mechanism was appropriate and that is what we agreed on.
Senator Lynch-Staunton: But is the NAFTA mechanism working despite its complexity?
Ms Stensholt: It seems to be. I think there is a great deal of happiness in Canada on the over-supply management, yes.
Senator Lynch-Staunton: In clause 15, just for information, it stays:
The Governor in Council may make regulations
(b) ...for carrying out and giving effect to paragraph 1 of Annex 8.9 of the Agreement."
What is paragraph 1, Annex 8.9 of the agreement?
Ms Stensholt: I think it establishes the Canada-U.S. Free Trade Commission. Chapter 8 is dispute resolution. Annex 8.9 -- the commission develops and maintains a roster of individuals who are willing and able to serve as panellists.
Senator Lynch-Staunton: Well that is just to trigger off the system?
Ms Stensholt: Yes.
Senator Lynch-Staunton: The effect that the Governor in Council can extend the benefits of the free trade agreement to, I think the term is CIFTA territory.
Ms Stensholt: CIFTA beneficiary, I believe.
Senator Lynch-Staunton: That comes back in various forms over and over again. Can you elaborate on exactly what that means?
And I will answer my question in part. The briefing note tells us that the government announced its intention to extend the benefits of the agreement to the West Bank and Gaza, so I assume that that is what we are talking about. But why were not the West Bank and Gaza included in the bill, to make it specific that what we mean by extended territory or beneficiary means those two territories?
Ms Stensholt: There is, as you may know, a customs union between the Gaza Strip and the West Bank between the PLO on behalf of the Palestinian Authority and Israel, and goods flow freely in that area. When we were negotiating the agreement, we defined the territory to which the agreement applies as being the territory where Israeli customs laws are applied. Pursuant to that customs union, Israeli customs laws are applied in the West Bank and Gaza. It is very carefully spelled out in an annex to the Protocol on Economic Cooperation between the PLO and Israel exactly what rights the Israelis have with respect to enforcement, which is why the language speaks of a beneficiary of the agreement rather than naming the West Bank and the Gaza strip specifically.
We are negotiating, and this could change.But at the moment, we decided to go with what was certain, which was the Protocol on Economic Cooperation.
The Chairman: Would you clarify, for the purpose of our record, what CIFTA means?
Ms Stensholt: Canada-Israel Free Trade Agreement.
Senator Lynch-Staunton: That means that the agreement itself spells out what these beneficiaries are or to what limit the term "beneficiary" can be applied?
Ms Stensholt: No, the agreement applies to the areas where Israeli customs laws are applied. You have a regulation-making authority in the bill before you which permits the Governor in Council to define what CIFTA beneficiary is, and CIFTA beneficiary will be defined as the territory subject to this Protocol on Economic Cooperation.
Mr. Moroz: Mr. Chairman, if I may just add, we included that clause, based on the willingness we expressed when we announced the conclusion in negotiations and again the signing of the agreement, to extend the benefits to the West Bank and the Gaza. As you are probably aware, there have been discussions with the Palestinian Authority since then, the most recent ones involving Mr. MacDonald, the parliamentary secretary, who met with ministers last week. How that regulatory authority will actually implement it will in part depend upon the outcome of our discussions with the Palestinian Authority. In our offer to extend the benefits, the government wanted to extend the benefits of the free trade agreement to goods produced in the West Bank and the Gaza by virtue of them being produced in the West Bank and the Gaza, irrespective of whether or not Israeli customs laws applied. In making that proposal, we also said that this would have to be done in cooperation with the Palestinian Authority. In a sense, the legislation provides for that option to be activated should events so call for it.
Senator Lynch-Staunton: But "we", being the executive. The bill says that we are will have a free trade agreement with Israel, which is a defined territory. But then, we are also asked to approve the extension of the agreement to what in fact is an undefined territory, at least in the bill, and a semi-defined territory, from what I have been listening to, subject to negotiations and subject to many things. We are being asked to entrust to the executive the extension of a free trade agreement beyond what we know is before us today. I wonder how far that authority can extend in the years to come by, in effect, a decision of the cabinet without any reference to Parliament, which originally had approved this in a form which it thought was quite specific. To my mind, it allows an extension into areas which are in a state of flux.
Ms Stensholt: As you know, regulations are subordinate legislation and, therefore, very strictly controlled. You might look at this and say that you can define for the purpose of the custom tariff what CIFTA beneficiary means, and you might, to take the argument to its absurd end, say South Africa. Well, clearly, it will not extend to South Africa. So what are the limits you will place on the executive's ability to make a regulation-defining CIFTA beneficiary? I would refer you first to the preamble to the legislation, which says near the bottom of the first page:
Whereas the Government of Canada has announced its willingness to extend the benefits of the Agreement to another beneficiary;
That is the first restriction on it. We are talking another beneficiary which has already been announced. The only beneficiary which has already been announced, which has been on the table from the very beginning of these discussions, has of course been the West Bank and Gaza. From the time the announcement of the negotiations with Israel was made in Ottawa when Yitzhak Rabin was here, it was announced that we also intended to extend to the West Bank and Gaza.
And then, if you look at clause 4 of the bill, entitled "Purpose", it says clearly:
The purpose of this Act is to implement the Agreement, the objective of which, as elaborated more specifically through its provisions, is to eliminate barriers to trade in, and facilitate the movement of, goods within the free-trade area established by the Agreement, and thereby to promote conditions of fair competition and substantially increase investment opportunities in that free-trade area.
If as a lawyer I were to go to the Governor in Council having drafted a regulation that purported to extend the benefits of the agreement to say that a CIFTA beneficiary was anything other than the territory covered by this agreement, which is in fact Israel, the West Bank and Gaza, I would be without legislative authority for that regulation. I would not be able to make that regulation. It is a very limited authority conferred by this bill.
Senator Lynch-Staunton: Well, I am afraid that is not the way I read it. I will try once more, and maybe I might make myself clear.
Clause 41 replaces the definition of the word "country" in the Customs Tariffs to read:
"country", unless the context otherwise requires, includes an external territory of a country or other territory prescribed by regulation;
Why do we put that in here if it is so limited?
Ms Patricia M. Close, Director, Tariffs Division, Department of Finance: This is an amendment to the Customs Tariff overall. Hence, whatever country is specified, anywhere, in any free trade agreement, it refers back to this definition of country. The change was made or territory prescribed by regulation to accommodate the Israeli Free Trade Agreement, to allow us by regulation to follow through and describe the territory of the West Bank and Gaza.
Senator Lynch-Staunton: Yes, changing an act overall to allow it to comply with this particular bill. However, it can also apply to similar cases in the future, and in fact we are making some major changes in other legislation as we have done in other bills of this nature. I cannot think of any other situation today because my political and geographical knowledge is limited.
In any event, I am not clear now how the Governor in Council can be limited in limiting the extension of this agreement to Gaza and the West Bank -- what it is in the wording here or in the agreement which specifically limits them to those two areas, which apparently are the only ones that should be of concern to us.
Ms Close: Elsewhere in the tariff where it refers to "country" and to other free trade agreements, it specifically sets it out as "the country", like the United States or Mexico, and so on. Therefore, every time we go into a free trade agreement, we do define the territory; it is defined in that part of the act which deals with that free trade agreement.
This is just an overall provision, a definitional provision, to allow us in other sections of the Customs Tariff or the implementing legislation to in fact use the country correctly.
There would not be in the other free trade agreements which we have signed a provision to add countries to it by regulation, although there is in the Customs Tariff under section 12 the ability to do that. There is an ability to extend a free trade agreement or change a free trade agreement if, in fact, that is pursuant to a free trade agreement signed by the executive. There is a minor amending clause that is in there. But elsewhere, there is nothing to do that.
The Chairman: The authority to define the country or the area by regulation has to be conferred somewhere. As I understand it, that authority is conferred and defined in the agreement which is rendered statutory by this bill. Is that correct? Is that the way we get to a specific meaning for the term "regulation" as it will appear in the revised customs statute?
Ms Stensholt: The agreement says that the agreement applies where Israeli customs laws are applied. For the sake of your customs officer at the border who has something coming into Canada, he needs a better definition than that. He has to enforce this at the border. Somehow, we must get from that broad definition down to something that the border guard can implement. The way we did that was to say in the legislation that we would define this by regulation. That is, to some extent, because negotiations were ongoing. As my friend, Mr. Moroz, has explained -- and I am sure Mr. MacDonald will explain further tomorrow -- we have offered to the West Bank and Gaza, to the Palestinians, that they could be named, but we need cooperation from them in return. Until that happens, we are defining it, again, so that the customs guard knows that if it comes from the West Bank and Gaza, it comes into Canada duty free. But the definition does not use the words "West Bank" and "Gaza"; it simply says "Israeli customs laws are applied". You could not include another country in that scheme.
I am a Justice lawyer. My clients come to me and they say: "We want to add to this. We do not wish to go back to Parliament; it's a nuisance." I have heard it more than once, honourable senators, if you want me to be honest. It is very difficult to get legislation through; it takes time.
So can I, by regulation, add another country? I would look at the preamble; I would look at the "Purpose" clause that I read to you; I would look at the fact that this bill is intended to implement the free trade agreement for the area covered by the legislation -- and that is explained within the bill -- and I would say that you cannot do it. It would be outside the scope of the bill; it would be ultra vires. It would not go through, and we would not put such a regulation forward.
Senator Lynch-Staunton: Should the territories we are talking about become an independent country, or a series of independent countries, would those independent countries continue to have the benefits of this free trade agreement that they will have received by regulation as a territory?
Mr. Moroz: That will depend whether or not we come to some arrangement with the Palestinian Authority.
Senator Lynch-Staunton: Who is "we"?
Mr. Moroz: The Government of Canada. When we announced the conclusion of the trade negotiations with Israel, we also announced the willingness of the Government of Canada to extend the benefits of that agreement to goods produced in the West Bank and the Gaza. The desire there was to extend the benefits to those goods by virtue of being produced in the West Bank and the Gaza and the government wished to do that in cooperation with the Palestinian Authority.
In terms of the legislation, it was designed by reference to another CIFTA beneficiary to allow for that precise extension in view of the fact that there is now an interim agreement between the PLO, on behalf of the Palestinian Authority, and Israel which will likely evolve over time. If an arrangement is made with the Palestinian Authority, and depending upon how the mutual agreements between Israel and the Palestinian Authority evolve, the answer to your question would be that, yes, the benefits would continue to apply to the West Bank and the Gaza regardless of whether or not Israeli customs laws apply at that point in the future. But that is premised on this separate and independent action of the Government of Canada extending the benefits to those two territories in the future. Right now, by virtue of the interim agreements, the agreement would apply since Israeli customs law apply to those areas at this time.
Senator Carney: Under the circumstances described by Senator Lynch-Staunton, would the principle of reciprocity apply?
Mr. Moroz: In the letter that we provided to the Palestinian Authority, it was based on the concept that we would provide free trade, they would provide free trade. As I indicated in my opening remarks, senator, Mr. MacDonald, the parliamentary secretary to the Minister for Foreign Affairs and International Trade, has just come back from the Middle East where this matter was discussed with ministers of the Palestinian Authority. He will be appearing tomorrow. He is in a much better position than I am right now to talk about what was actually discussed respecting the Canadian offer and what next steps may occur.
Senator Kinsella: My first question is also in regard to clause 41(1). If we are to read very carefully these words, on the assumption that each word is supposed to mean what it says, are you comfortable that the English and the French are saying the same thing? They speak of "external territory". That clause reads, in part:
..."country", unless the context otherwise requires, includes an external territory...
Does it also include an internal territory?
Ms Close: The wording of the tariff prior to this change was "includes a dependant territory of a country". That wording was found not to be appropriate in this particular situation and that is why the change was brought into the tariff. Also, the idea of dependant territory did not seem to be very relevant, and we had never used it as such. So we are really dealing with territories external to -- for example, in reference to France, Guadeloupe would be an external territory.
Senator Kinsella: The definition does not seem to be resting on granite because of the relativity that is provided for -- "unless the context otherwise requires". Could you give me an example of a context, so that we know what you are referring to here? Why that first phrase -- "unless the context otherwise requires, includes an external territory..."? It is not very tight.
Ms Close: I am talking only hypothetically right now, but a scenario would be one where you have a dependant territory of a country, but the free trade agreement, or whatever you were referring to in the tariff situation, was referring to a country but not that dependant territory or that external territory. One example I can give you is Saint-Pierre-et-Miquelon, which is a territory of France, which received the GPT treatment for a while from Canada. However, that changed. That is an example of where you had a territory of France that got a different tariff treatment than the country itself. Hence, if you were entering into a free trade agreement with a country that had a territory, much like the Saint-Pierre-et-Miquelon situation, you could choose to exclude it or not. If you did that in the agreement, then this clause would kick in.
Senator Kinsella: My next question is in regard to a paragraph of the preamble which was alluded to a little bit earlier. This is the paragraph which reads as follows:
Whereas the Government of Canada has announced its willingness to extend the benefits of the Agreement to another beneficiary;
That paragraph is found in the preamble. Does it find expression explicitly in the text of the bill?
Ms Stensholt: Well, to the extent that we talk about the purpose of the proposed legislation. The other section that I read to you that said that it was to facilitate the movement of goods within the free trade area established by the agreement. And the free trade area established by the agreement includes what is currently a customs union between the territory of Israel, the territory of the West Bank and the territory of Gaza. All are within a customs union, and that customs union is defined in the Protocol on Economic Relations between the PLO, on behalf of the Palestinian Authority, and Israel.
Senator Kinsella: If you had to make your legal argument, you would not be basing it upon the paragraph in the preamble?
Ms Stensholt: No, I would be going to clause 4.
Senator Kinsella: My final question relates to subclause 7(1) on page 3 of the bill -- the definition of "water". Why does this not apply to water? What is the policy behind this?
Ms Stensholt: The history behind this clause is that when the Canada-U.S. FTA was negotiated, you may recall that water was a very contentious issue as we went through committee hearings, continental water, and so on, was very controversial. When we brought in the legislation implementing the World Trade Organization, we put in a water clause to make sure that people understood that our own water resources, our continental water resources, were protected. This is nothing more perhaps than what lawyers call an excess of caution; that in fact, it is unlikely that anybody would consider Canada's continental water resources to be a good within the meaning of the Canada-Israeli Free Trade Agreement. However, to be absolutely certain, we have said that we are talking only about bottled water, not about a continental water resource.
Mr. Moroz: If I can just add one thing to that, senator. You will find this in the NAFTA implementing legislation and probably in any future free trade agreement legislation because of the history behind this. As my colleague indicated, this is to make it very clear to everyone that the agreement does not oblige us to somehow build a tunnel or a pipeline from one party to another to ship water, and that is exactly what this is all about.
Senator Carney: I would just like to add that I hope that at this trade agreement, this issue has been put to rest, since it has been around to haunt us for the last ten years.
Ms Stensholt: We hope so, too.
Senator De Bané: Would you please tell me if the policy of the Canadian government has changed in relation to the following -- and I am quoting the position of the Secretary of State for External Affairs when he spoke to the Senate committee in 1983. I am quoting from page 52 of this committee on the Middle East.
Canada has made it clear to Israel that we cannot accept the position that it has gained the right to retain permanent control over the occupied territories. We are deeply concerned over action which Israel has taken on the ground to extend its control; its annexation of East Jerusalem and the Golan Heights as well as its establishment of settlements in the occupied territories. We regard these actions as contrary to international law and extremely unhelpful to the peace process... The repeated assertions by Israeli spokesmen that Israel will never withdraw from these territories, coupled with the announced determination to increase the number of Israeli settlements in them and to reject any suggestion about their removal in any peace arrangement, seriously undermine the possibility of successful negotiations leading to a permanent and secure peace.
And the Right Honourable Joe Clark, in his speech to the United Nations in 1984, said that Canada also supports the realization of the legitimate rights of the Palestinians, including the right to a homeland within a clearly defined territory, the West Bank and Gaza Strip.
To quote Mr. MacEachen again when he was before this committee, he said, with respect to the settlements:
We would like to see an end to settlement activity, not just a freeze.
Can you tell me in what way this bill, as it is drafted, and particularly in relation to the questions put to you by Senator Lynch-Staunton and other members, is conducive to peace, in view of the recent statement of Prime Minister Netanyahu?
The Chairman: I am not disputing the relevance of your question; however, I am not sure that these are the appropriate witnesses to put that question to. It is a policy question, is it not, rather than being related to the details of the bill?
Senator De Bané: I will abide by your decision, Mr. Chairman.
The Chairman: Let us see whether the witnesses feel competent to deal with this question or whether it something that should be dealt with at another level.
Mr. Moroz: Mr. Chairman, it would strike us that this is a policy question that would be best left until tomorrow when the appropriate witness is here.
Senator De Bané: Mr. Chairman, I will rephrase my question.Instead of asking if this bill is conducive to peace, in view of the recent declarations of Prime Minister Netanyahu, I would simply ask you this. I have cited several quotations by former ministers of foreign affairs. Is our policy today different from what I have just read to you?
Ms Barbara Gibson, Director, Middle East Relations Division, Department of Foreign Affairs and International Trade: Senator, perhaps I can deal with that question. The broad outlines of our policy have not changed. It is the policy of successive Canadian governments. What has changed is that there have been developments in the region in recent years leading to peace agreements between Israel and Jordan, Israel and the Palestinians, two successive agreements, and I think the situation in the region has changed.
Senator De Bané: I view this bill as having no rationale except a political one; it is Canada's message of encouragement to the peace process in the Middle East. My interpretation of the agreement between Mr. Chrétien and Mr. Rabin of two years ago is that it was Canada's gift to the Middle East to encourage them in the peace process. Am I right?
Ms Gibson: I think it was several things at the same time. It was certainly an economic agreement to level the playing field for Canadian exporters against unfair competition from both the Europeans and American companies. It was done for Canadian reasons.
Senator De Bané: What are those reasons? We do have a vital interest in the peace in that region.
Mr. Moroz: The reason we entered into this free trade agreement -- if I may answer that question first -- was precisely to provide a level playing field for our producers competing against the American and European producers who already have a free trade agreement with Israel. That was the economic rationale for doing a free trade agreement.
Our general conduct to trade policy, our objective, is to try to remove trade barriers wherever possible and to provide equal footing for our producers in markets. We entered these negotiations on the trade agreement precisely to remove those trade barriers, so that our producers no longer had to face higher tariffs wherever you wish to point to. That was the driving force in terms of the actual negotiations in the free trade agreement.
Senator De Bané: I may respectfully beg to differ with you. We all know the size of the trade between our country and Israel, and if we were interested in having a level playing field, I can give you a lot of other markets where we do not have a level playing field because of their agreements with the European Union.
The reason here -- everybody knows. As a Canadian, I applauded when that agreement in principle was announced, because it was our gift to that region -- we wanted to encourage them in the peace process. This is it.
You have your own point of view about what kind of spin to give to this, but let me tell you that it is essentially a political gesture on the part of Canada, and you cannot, with all due respect, hide it with an economic rationale. We all know the size of the economy between our two regions.
I submit that a bill that objectively -- objectively -- will be a significant departure from our repeated policy that those settlements are against international law, and in that we are in tune with Great Britain, with France, who have repeatedly held the same thing. To have a bill where, now, free trade will extend to the occupied territories, explain to me how, with such an extension, Canada is going to, as the report of this committee a few years ago suggested, exert a restraining influence on both sides. On both sides. I submit, respectfully, that by allowing free trade to extend to the territories would not be conducive for peace.
You are aware of the particular subsidies that the Government of Israel extends to industries and people who settle in the occupied territories?
Ms Gibson: We are aware of Israeli government policy.
Senator De Bané: And do you think it would be fair from a Canadian point of view to have to compete with industries that have been heavily subsidized because they have been established in the occupied territories?
Ms Gibson: As I said, senator, there is a process under way between the two parties involved, Israel and the Palestinian Authority, to pursue negotiations.
Senator De Bané: No, no. I am talking from a Canadian point of view, as a Canadian manufacturer. You were talking of a level playing field. You are aware that the Government of Israel has very generous subsidies for people who agree to live in the Jewish settlements, or to establish businesses in those areas. I am asking you: Is it fair for Canadian companies to have to compete with companies from the Jewish settlements in the Arab territories which have been heavily subsidized?
Mr. Moroz: I think, senator, in terms of levelling a playing field, you take it one step at a time. In the case of this agreement, the first step -- at least in the context of this agreement -- is to remove the tariff barriers that face Canadian producers that do not face the U.S. and European producers.
That is precisely what this agreement does and that was the purpose of this agreement, in the economic context; in other words, by providing economic benefits to both parties, it will contribute to the peace process, something that we would hope and encourage.
Senator De Bané: Maybe I failed to express myself clearly. You have businesses in Israel that receive preferential public assistance if they are established in the Jewish settlements. I am asking you under what rationale those companies established in those settlements can compete with Canadian companies with the same privileges as those in Israel proper.
Mr. Moroz: If the question is with regards to exports to Canada, we maintain as a general trade policy our countervailing duty system under this agreement by reference to the WTO. That mechanism remains in place.
As regards our exports to Israel, the concern we want to deal with in this trade agreement is the tariff. The trade agreement itself, just like our trade agreement with NAFTA, does not deal solely with domestic subsidies.
Senator De Bané: Mr. Chairman, if I may, I would like to conclude with one comment. Up until now, I have asked all my questions, as I should, as a Canadian, from a Canadian point of view and for Canada's long-standing interest in the peace in that region.
If I may be allowed, I would like to add just one point. As a person who was born in Palestine, I can tell you only one thing: If you really want to help Palestinians, it is not by opening the Canadian market to them. You know, and I know, that in this present situation, they are not in a position to have access to our market. If you really want to help them, give them access to the market of Israel.
Senator Prud'homme: I am afraid that for my own understanding, you will have to repeat what you have said already. You talk about this customs officer in Canada, a good servant of Canada, who has to know the origin of goods coming into the country. And if the goods are from Israel, they have to indicate that. Of course, it is free trade with Israel -- right? So far you do not disagree.
Why is it that we do not mention only Israel? The gentleman next to you mentioned the European community. For us, for our understanding, you know, it is great -- if it is good for the United States, surely it is good for Canada; if it is good for the European Economic Community, it is good for Canada.
I read the free trade agreement and Israel is mentioned everywhere. There is no mention of extension to a neighbour -- extending it to the Palestinian Authority. They mention Israel.
Also, interestingly, article No. 1 says:
[Translation]
The relations between the parties and all the provisions of the present agreement are based first and foremost on the respect of human rights and the democratic principles underlying their domestic and foreign policy and forming part of the present agreement.
Why, in this strange definition of "country", keep coming back with this word?
[English]
-- quote, in English, "we are ready to extend." I checked with the Palestinian Authority, since it was studied rather rapidly in the House of Commons, and they are not of the same opinion that was expressed in every speech in the House of Commons as, "This is the greatest thing that will happen to the Palestinians." First, they object to the word "extension". They do not believe that they are un appendice de l'État d'Israël. They would probably love to have free trade with Canada, but they would like it to be Canada-Palestinian Authority -- since it is forbidden at the moment to say Palestine.
Is the Canadian customs officer at the border in a position to know if these goods come from Israel solely, or if these goods come from companies at the moment run by settlers in occupied territories? Are we in a position to know that?
Mr. Moroz: Senator, this agreement applies to those areas to which Israeli customs laws apply, and we have linked that to the interim agreements at this stage.
I wish to make basically two points. Insofar as a producer producing within the area to which Israeli customs laws currently apply today signs that certificate declaring that his good meets the rules of origin, hence, by virtue of that being eligible for either duty free trade or preferential tariff access into Canada, the customs official at the border will let the product in duty free if he makes that claim.
Now, the way our free trade agreements operate -- not only in the case of what has been proposed in Canada and Israel but also with the NAFTA, but also in the one that we have with Chile, if approved -- is that they all rely on the fact that the producer within the prescribed territory signs a certificate of origin. We then include in our agreements -- in the case of the Canada-Israel agreement, this would be chapter 5 -- a series of procedures with regards to customs enforcement.
Senator Prud'homme: You are helping me in my reflection. If the country of origin is Chile, surely we know it is Chile.
Mr. Moroz: Exactly.
Senator Prud'homme: If it is Israel, what do we know?
Mr. Moroz: In terms of the current situation -- and I am separating this explicitly from the government's offer to extend the benefits to the West Bank and Gaza, just to make the distinction -- in the current situation, the area to which Israeli customs laws apply are governed by the interim agreements they have reached between the Israelis and the Palestinians.
Within that area at this time, which will include the West Bank and Gaza, a producer could sign a certificate of origin and that good would be entitled, if it actually met the rule of origin, to enter into Canada duty free. The producer of the good could sign the certificate. He does not need a government agent or anybody to sign it. The person exporting the product can sign the certificate of origin.
What we do in our trade agreements, then, is to follow up on sampling or verifications. We will send questionnaires to ensure that they use the right inputs, and so forth. That is how we go about doing our trade agreements, as a general matter.
Insofar as the government offer to extend the benefits to the West Bank and the Gaza, that was based on the desire, in cooperation with the Palestinian Authority, to extend the benefits to goods produced in the West Bank and the Gaza, irrespective of whether or not Israel's customs laws apply.
It was similar to what the Americans have already done, and that was the particular model we had followed at that time. As you have indicated, the Palestinian Authority has indicated they would like to discuss other possibilities. The Honourable Ron MacDonald was in the Middle East recently, and that was the issue, extending the benefits or alternatives, he was discussing with them. He will be here tomorrow and he will be able to report on his discussions with the Palestinian ministers.
Senator Carney: I notice that this trade agreement does not have side agreements on environment and labour, whereas the Canada-Chile free trade agreement does.
Our briefing notes tell us that it is because Israel has a good environmental standard machine. To me, that would suggest that you would want to include side agreements -- because they would be relatively non-controversial.
Could you tell us why these side agreements are not included in the Canada-Israel agreement, whereas they are in the Canada-Chile agreement?
Mr. Moroz: Senator, in the case of Chile, since the agreement that we have negotiated with Chile is to serve explicitly as an interim agreement bridging to the NAFTA, we want to include the side agreements both on labour and the environment. In the case of Israel, it is true that a relative number of other countries do have higher labour standards and higher environmental standards.
When we went to negotiate with Israel, both sides agreed from the onset that they would focus on the main issue, which at that time was the tariffs on trade between the two countries. At no time did Israel suggest that they wanted to join the NAFTA at this particular time. So we just focused on the area of tariffs and barriers to goods trade, for the same reason that we do not include services, investment, intellectual property, and so forth.
Senator Carney: That is my second question.The point is made that the major reason for having a trade agreement with such a small customer and such a small amount of bilateral trade -- $500 million worth of trade -- is that it was felt that Canada and Canada's exporters should have competitive access to the Israeli market, and vice versa.
But there is such a huge list of items that are left out, including investment, government procurement, intellectual property, agriculture, et cetera. Some of these are in the U.S-Israel agreement. We understand that that is because these issues are being addressed in the WTO.
Is Canada still at a competitive disadvantage with the U.S. and the Economic Union with the signing of this agreement, or is it, in fact, an equal playing field?
Mr. Moroz: Senator, in terms of those references -- let me set aside agriculture for one second; that is a slightly different situation. In terms of areas like intellectual property, services, and so forth, the references in the U.S.-Israel agreement predate the Uruguay Round results and therefore are more in the sense of best efforts, whereas, the Uruguay Round results are concrete obligations in these areas. And since Israel has these obligations vis-à-vis us, the United States and everybody else are on a level playing field.
In the area of government procurement, as I noted earlier, I think the United States, in the context of the Uruguay Round, gained an advantage over us in terms of its telecommunications equipment by the state-owned utility.I would have to check that; the details elude me right at the moment.But we intend to pursue that because we have maintained our WTO rights with regards to government procurement vis-à-vis Israel.
In the case of agriculture, Israel has just concluded negotiations with the United States in agriculture which expands the coverage of that agreement. We were aware that they were negotiating with the Americans at the time we concluded our negotiations. Therefore, in this agreement, we have the provision that calls for the return to the table on agriculture within two years. We insisted on that provision precisely because we knew that the Americans and the Israelis were negotiating something on agriculture.
Senator Carney: So at the moment, the playing field is not level -- that is what I wanted to establish -- but there are provisions to achieve that if we want to pay the cost of doing so?
Mr. Moroz: Yes, it will be a level playing field. In the negotiations with Israel that concluded in January, there were some areas where we were not able to open up the Israeli market. We plan to return to the table in the course of the next two years precisely to do that. In terms of the U.S., there are some new agricultural advantages that the U.S. gains. These were just recently concluded, about a month ago.
Senator Carney: My final question is: Considering the small volume of trade and the amount of effort involved in these negotiations, is this a priority, given Asia Pacific or some of the other hemispheric trade issues? Do you consider this a priority?
Mr. Moroz: As I indicated at the beginning, the main reason we did this was to level the playing field vis-à-vis the Americans and the Economic Union. We have now concluded these negotiations. It is an important market for a number of our producers, but of course we attach a high level of importance to the WTO and the APEC efforts, for sure.
Senator Carney: There are 36 countries, trading partners, ahead of Israel in our trading relations. I wish you success in all of them.
Mr. Moroz: As you well know, we are actively engaged in a free trade agreement which will hopefully open up free trade in the entire hemisphere within the next 10 to 15 years. We are also engaged in APEC, which has a longer time frame; and in the WTO, we have been pressing for further trade liberalization wherever possible.
Senator Lynch-Staunton: Has Israel ratified the agreement?
Mr. Moroz: Their process of ratification is somewhat different than ours. The agreement in effect becomes self-enacting. It must first be approved by the cabinet. Following that, it must be tabled in the Knesset for two weeks, minimum, after which time the cabinet can then implement the agreement.
It was tabled in the Knesset last Sunday, December 1, so their two-week countdown has started. I believe that on December 14, they will be able to return to the cabinet for ratification.
Senator Lynch-Staunton: The agreement spells out a number of duty free tariff rate quotas imposed on goods exported by both countries, and they are all specified. Is it typical of a free trade agreement to impose that kind of quota?
Mr. Moroz: In some of Israel's agreements, yes.
Senator Lynch-Staunton: But in Canada, this is the first time?
Mr. Moroz: In our case, there are supply-managed products which we have tariff rate quotas on. I am referring directly to the panel that was recently concluded.
Senator Lynch-Staunton: But supply-managed sectors are excluded from this.
Mr. Moroz: In this agreement, they are excluded, and that is because we asked to exclude them.
Senator Lynch-Staunton: Are they subject to the WTO? I was surprised to find quotas in a free trade agreement. Is this typical? Have we had free trade agreements in the past where we will impose quotas beyond which duties, I assume, or tariffs, will be imposed?
Ms Close: If you have a particular item that is sensitive -- and they usually are in the agricultural products -- and the country does not want to move on it, it will often agree to move a certain amount duty free. So it is actually a liberalizing, not a restraining thing. Without the quota, nothing would come in duty free, or the duty rates would be higher. And, yes, we did have those in the NAFTA agreement in the agricultural areas.
Senator Lynch-Staunton: That was the free trade agreement?
Ms Close: Of the NAFTA.
Senator Lynch-Staunton: It is in the NAFTA agreement?
Ms Close: Yes.
Senator Lynch-Staunton: In agricultural products?
Ms Close: In agriculture.
Senator Carney: And in lumber?
Ms Close: Lumber.
Senator Carney: Horticultural products?
Ms Close: Yes.
Senator Lynch-Staunton: And horticulture, fine. My last question today -- and I thank you for your patience -- is this: The agreement and the explanatory notes make reference on more than one occasion to our obligations under the World Trade Organization, and reference is made to that as a reason not to bring those subject-matters into this agreement because they are already taken care of in a universal agreement; correct?
Mr. Moroz: Yes.
Senator Lynch-Staunton: I was wondering, when we do this exercise again, if it is not too much trouble, if you could summarize what those obligations are that we are excluding from the agreement but are bound under WTO. We supported and passed WTO, but we do not always remember it.
Senator Corbin: The witness referred to the tabling of the accord in the Knesset. What do you mean by tabling? Is it in the form of a bill, or what? You referred to a two-week limit and then it goes to cabinet.Is that a legislative process?
Mr. Moroz: It is not a bill. It is the agreement itself that is formally provided to the Knesset for its comment. It stays there for two weeks, at which time, whatever comments the Knesset may or may not have, it would then go back to the cabinet with the agreement itself.
Senator Whelan: I do not want to belabour this situation if the witnesses are coming back, but I would like them to bring such information as the kind of survey they did in Israel before they negotiated this? Do they have all of that information? Is all of that information available to us -- that is, the types of subsidies and operations?
The Chairman: I will now ask the next witnesses to come forward.
Mr. Skalli, you have been present in the room, I believe, and you will have noticed that we have had two lines of discussion -- one on the detail of the agreement and the bill, and the other on what you might call the political suitability of the bill.
I think it would be very helpful to the committee, and we would appreciate it greatly, if you would try to break and cultivate new ground, rather than -- to follow language that Senator Whelan would understand -- plough and harrow ground that we have already been over. If you would use your discretion in that matter, it would be most helpful to the committee.
[Translation]
Mr. Jawad Skalli, President of the Centre d'études arabes pour le développement: I thank you, Mr. Chairman. It was not my intention to speak to the preceding debate, but, rather, to expand on the question of this free trade agreement between Canada and Israel.
I was coming here, even before I heard the conversation, to point out the very political significance of this agreement. The level of trade between Canada and Israel could perhaps justify a free trade agreement, but it is in 70th or 76th position compared to that of Canada's various other trading partners with whom similar agreements might be considered.
The agreement had a very political significance at a specific point in time where the peace process was a bit too quickly confused with peace itself. There was a process, but peace had not yet been truly reached.
With every good intention, Canada provided Mr. Rabin and Mr. Peres with arguments for selling the peace process to the people of Israel and for saying to them: "You see, with peace, we win."
Mr. Peres based his election campaign in Israel on the fact that foreign investment in Israel, Israel's foreign trade and its gross domestic product had increased very significantly since the start of the peace process and that this was a payoff of peace.
At that point, Canada arrived saying: "You are right, we want to support Israel's new vision of peace." Quite simply, the facts changed; the situation changed radically. Opposing Mr. Peres in the elections was Mr. Netanyahu saying: "I want the same trade agreements, the same growth and the same foreign investment, but without taking a single step in the peace process, rather, by taking the hardest line possible."
Our initial message, which was: "We support peace" -- simply because we were not aware of the change in the situation -- became the opposite: "We support intransigence." Yesterday, we were prepared to reward a peaceful approach. Today, objectively, we are saying: "The world understands, regardless of what we want to say, the Middle East partners understand." Canada is prepared to reward a closed and negative approach over any progress in the peace process.
I do not think this is the message either our government or our people wanted to send to the region. I fully believe that our government did not intend to send such a message, however, somewhere between intentions and actions, this is the message that was received here.
The significance of the free trade agreement of November 1996 is radically different from the same free trade agreement of two years previous. That is the first element.
The second element I wanted to point out is Canada's foreign policy principles and a definite stance on the Israeli-Palestinian conflict.
How can the preamble and objectives of a free trade agreement run counter to a whole set of official positions in force for the past 20 years?
I will give you an example. The claim is made that legal status is not accorded to the West Bank, the Golan and Eastern Jerusalem and all the territories acquired by force. And yet, when it comes to dealing with the reality of the occupation, the free trade agreement provides for customs unions.
Can we talk of customs unions? It is absolutely mind boggling. If Israel effectively has control over customs in the Golan, can we then say that the Golan is part of Israel, when, for 25 years, we have continually said to every international tribunal that we do not recognize the acquisition of territories by force. We do not consider the Israeli presence in such territories legal.
The subject of customs was raised because, at an interim stage -- and I stress the word interim -- the Palestinians and the Israelis negotiated a transitional phase during the peace process in which certain elements would come under Palestinian control, while others would remain under Israeli control. The Israelis, it is true, were absolutely unbudging on foreign matters, including customs. They insisted that, during the transitional phase, they would retain control over customs matters.
Today, as we talk, negotiations on final arrangements and status should have started six months ago. This in no way means, however, that the Palestinians and Israelis have signed any sort of customs agreement between them.
To say today that politics are not involved, that this is a trade agreement and that we are dealing with what is really in an Israeli-Palestinian customs agreement amounts, in my opinion, to saying that, if, tomorrow, during a war, which no one wants, if things remain unchanged, this is certainly what will happen. If, tomorrow, Israel continues to occupy half of Lebanon, that half of Lebanon will be considered part of the Israeli customs union and so it too comes under discussions with Israel, which is, de facto, there, and its customs laws therefore apply.
I do not think this is the political message we want to send or that anyone in the country wants to send. The messages we send must reflect precisely what we want to say, and I do not think this has been the case.
The issue of colonization and of the refugees is absolutely unavoidable in the free trade agreement. There are a number of reasons in the case of colonization. First of all, it is illegal. Canada has said so and maintains its position. The land was stolen from its legitimate owners. The water was stolen from its legitimate owners. Are we going to buy the products of this land and this water from people we consider to have stolen it? Under the law, this is known as receiving stolen goods.
We cannot pass legislation that says in one voice, through the spokesperson at the U.N. and the official opposition, that this is robbery and in another voice that we are prepared to facilitate the trading of products of the robbery between us. It is impossible. It is one or the other. It cannot be both.
The second issue -- that of the Palestinian refugees -- is extremely important. I would find it funny, if it were not so dramatic, that Israel is the only country to have officially supported the United States' Helms-Burton law, which provides that business cannot be conducted with companies that have been built up using goods stolen or confiscated from American companies. That takes some nerve.
So long as the issue of the Palestinian refugees remains unresolved, and Canada's official position to date on this issue has been to support resolution 181, which considers their return and compensation reasonable, so long as neither one nor the other has taken place, the Israeli economy has been built using things stolen from others who are alive and in refugee camps today.
We cannot continue to say two things. We cannot say, on the one hand, that we support the U.N. resolutions and the right of the Palestinian refugees to return and we cannot head the multilateral task force on refugees, which must find real solutions and, on the other hand, recognize that the land, businesses and goods belong to the Israelis, while ignoring the issue of the Palestinian refugees.
The final extremely important issue we must consider, is all the yakking -- and I apologize for the term -- about the benefits of free trade extending to the Palestinians. It is absolutely ridiculous in the present context to talk of this.
Palestinians today do not have free trade with their neighbour. Right now, with the territories being cordoned off, it is impossible for the Palestinian farmers to work their fields. Palestinian workers, whose factory is a few dozen metres away from their village, are not allowed to go to work. A truckload of strawberries, oranges or tomatoes from Gaza literally rots at the checkpoint between Gaza and Israel, because it cannot be moved to the West Bank until it rots. The load sits 36 or 40 hours waiting for authorization to move into the West Bank, still within Palestinian territory, between Gaza and the West Bank. It sits waiting 36 hours and, once it is rotten, authorization is given for it to leave. Talk in such conditions of free trade with Canada is totally surrealistic. I am not even talking about the access of Israeli products to Israeli markets. I am talking about authorizing Palestinians to trade with one another, creating conditions where they can to a limited extent.
Today, we were talking about cordoning off, long before Mr. Netanyahu's arrival in power. One thing has been radically changed, is radically different. In the past, when the Israeli army sealed off the occupied territories, it would not permit the Palestinians to cross the green line, to go from the West Bank to Israel or from Gaza to Israel. Under the Oslo accord and the agreements that followed, Palestinian territory is divided into zones A, B and C. Zones A are those under Palestinian control. The Palestinian zones are only the major cities. Cordoning off no longer means a person cannot cross the green line. It means that a person can no longer leave their city. Most of the teaching staff of Birzeit University live in Ramallah, 15 kilometres away. When areas are sealed off, they cannot get to the university. Farmers living in the outskirts of the cities cannot get to their fields -- under military authority and military law.
How under such conditions can we trust the Israelis to ensure the benefits of free trade are extended to the Palestinians? This is unacceptable in my opinion. It is painful to have to confront people once considered friends or allies. It is legitimate to want to sit down to and share in the peace banquet. But it means first taking the heat of the peace kitchen ovens, sometimes confronting those we considered allies, which means dotting a few "i"s. Then, perhaps, we can talk of free trade.
[English]
Senator Grafstein: I am not familiar with the work of the centre -- perhaps the witness could tell us the work of the centre, briefly, and what countries the centre works in.
We have not established, Mr. Chairman, the background of this particular witness, but it would be useful for the record. Just describe briefly the work of the centre and what countries it works in.
[Translation]
Mr. Skalli: The Centre d'études arabe is a Canadian organization in Montreal, Quebec. Between 80 and 85 per cent of its membership not of Arab descent. Its mission is to promote democracy in the Arab world. With the support of CIDA, the Government of Canada, universities and all sorts of partners, we have development programs in the occupied territories -- in Egypt, Lebanon and Morocco -- as well as here in Quebec and Canada to inform people of the facts. I can give you more details if you need them.
Senator De Bané: Mr. Skalli, could you give us your understanding of the text of this bill regarding the territories where this free trade agreement between Canada and Israel will apply? What will it extend to?
Mr. Skalli: We have two contradictory concerns. First, there is the danger of extending it outside Israel's internationally recognized borders. It is clear that, on the one hand -- we are concerned that it be more specific --, Canada may remain true to the positions it has taken internationally and say to its Israeli partners that they may sign the agreement, but it must be clear that it applies to Israeli territory and only to Israeli territory. It must not, in our opinion, apply to illegally occupied territory.
On the other hand, we are also concerned about the opposite state of affairs with respect to both territory and people. We would like the Palestinian people to enjoy the potential benefits of this agreement. Clearly, if, because of Israeli obstinacy, we are not able to talk with a Palestinian partner who has real authority to decide, there is no acceptable solution reflecting both.
I spoke of our haste in assuming that peace would arise from the peace process and that we had already achieved it. Things as they stand now indicate that we were at the very first stages of a process and that we could not rush things. Now we have made some progress.
What is important now that we have made some progress is to emphasize the principles underlying our foreign and trade policies and to send another message, for example, to initiate direct negotiations with Palestinian authorities or representatives so that we discuss the matters of the occupied territories and their people with them and not the Israelis.
It is extremely hard to discuss with the Israelis how the agreement will be extended to include the Palestinians.
It is not up to them to speak of our point of view, of our positions as the Government of Canada and the people of Canada. Relations with the Palestinians are not defined with the Israelis, but with the Palestinians themselves. Let us get on with it!
Senator De Bané: I have one final question, Mr. Chairman. Do you agree, Mr. Skalli, that if Canada really wants to do something useful for the Palestinians it would be to use its good offices to pressure the government of Israel so that Palestinian business could trade among themselves, particularly between the two territories, and also with their neighbour, Israel, and that these two priorities come well ahead of the priorities of access to the Canadian market?
Mr. Skalli: If I may say so, Canada's principle contribution to the people of Palestine and of Israel would be to truly promote fair and lasting peace in the region.
I am definitely not a pessimist. I can say, however, with certainty that no peace will come of Israeli-Palestinian discussions. There will be no peace for a very simple reason. The relationship of power between the two puts the Palestinians at such a disadvantage that discussions between them amount to a series of diktats by the stronger party to the weaker one, and no peace is ever built that way. Peace is built in a degree of justice where relationships of power are favoured through mediation and the intervention of friends and allies of the two parties, who help provide a basis in law and in principle to the negotiations. The negotiations must not simply reflect the relationship of military strength where there is a strong party and a weak one.
What does the strong party want? And the weak party?
There is no way lasting peace will come from Israeli-Palestinian negotiations. A mediating and tempering force must intervene to counterbalance their relationship. No peace can come from the American, Israeli, Palestinian solitude, because, instead of providing a balance in the relationship of power, the United States simply reinforces the stronger and undermines the weaker and pressures the weaker rather than the stronger.
Peace in the region can come only from strong involvement like that of Canada, certain countries of Europe and Asia and so on to permit escape from the vicious circle of the relationship of power, American positions, Israeli diktats and the Palestinians continually under pressure to give up more and more of what is meaningful to them.
If Canada were to commit, as it has already indicated it will -- except that it has not gone beyond the intention -- it would be to try to pressure Israel, the stronger party, to reach a peace process. Once peace is established in the region, it would be very difficult to say today whether a free trade agreement, an agreement with the Israelis, a program supported by CIDA or other types of aid would be the most useful at that point. I do not think we have reached a point where peace is close enough and sufficiently palpable to be able to build on it.
What sort of peace will there be? Under what conditions?
We are still working on it. Canada has a major role to play as a middle power, as a power none of the partners in the region considers an enemy. I am afraid that the signing of a free trade agreement at a point when the Israeli government is saying: "I will continue to colonize; I will annex the West Bank; I will not permit the return of the refugees; I will not give up the prisoners", will be interpreted by the people and the groups in the region as a declaration of war by Canada as well. The United States declared war, and Canada followed its lead.
I want to say there is nothing in it for us. It does not even reflect who we are. We have not declared war on anyone. Our people and our government do not want to.
Why send a message that could be given such an interpretation?
Senator De Bané: I thank you very much.
[English]
The Chairman: We will now hear from Dr. Mohamed Mahmoud of the Canadian Arab Federation. It would be helpful, Dr. Mahmoud, if you would start off by telling us a little bit about your organization.
[Translation]
Mr. Mohamed Mahmoud, Canadian Arab Federation: I am a good Canadian, as Senator Prud'homme puts it.
[English]
Mr. Chairman, honourable senators, I am 35 and am of Syrian origin. I am here to speak on behalf of the Canadian Arab Federation, which is the only umbrella organization for Arab organizations in Canada. The federation represents approximately 20 organizations from coast to coast in Canada.
When I quit my childhood place, I was younger -- I was six years old -- I was chased by Israeli defence forces. I was chased from the Golan Heights in 1967 by the Israeli army. When forces like this, defence forces, attack another country and chase its population, this holds some meaning for me -- and maybe for you too.
I wish to distribute a copy of a newspaper article from La Presse. The headline, translated from French, reads that Israel is very worried about its image around the world. A smaller headline in the article indicates that there are three new settlements on the Golan Heights. That is where I lived and from where I was chased from by the Israeli army. Three new settlements in order to increase the Israeli population on the Golan Heights, which were occupied in 1967 and annexed by Israel government in 1981, a territory internationally recognized as a part of Syria.
I am not the only child who was chased from his homeland. Thousands and thousands of Palestinians were also chased from their homeland. Last summer, my three children went to Syria with their mother. Before they left, they asked me, "Daddy, is it possible to visit the place where you lived?" And I said, "No, it is not possible -- it is not possible because this place is occupied." My daughter, who is 11, asked me, "Is it possible to get in with a visa?" And the answer was, "No, it is not possible because this is an occupation." This is not another country now. This is a country which has occupied my territory, my country.
So please, when you vote on this proposed legislation, remember that this state is an aggressive one. If you give more to an aggressor, the aggressor will be more aggressive. Please remember this.
I understand the actions of our government here in Canada to promote relations with other countries in economical, political and cultural fields. I understand that the Team Canada missions can be helpful to the economy of our country. But when it comes to a free trade agreement between Canada and Israel, I have to ask the question: Why now and why to Israel? Are we looking for external markets? There are 22 Arab countries, representing something like 300 million consumers; Israel has only 5 million inhabitants. So why Israel, unless there is a political significance, political meaning to this free trade agreement?
[Translation]
I am going to speak French now in response to Senator Corbin, who protested that French is a means of communication. It is my pleasure to speak French, Senator.
Senator Corbin: I made no protest.
Mr. Mahmoud: Fine. Israel is very concerned about its negative image around the world. It is concerned, because its image is becoming increasingly tarnished. And its image is becoming tarnished because of it is reluctance in the face of the peace efforts by the Arab countries and by the Palestinians primarily. The Palestinians have made every effort to achieve peace. In the past, the Israelis and their lobby around the world were saying "The Arabs want to dump us in the sea." The Arabs no longer want to dump them in the sea. They agreed to the principle of peace for the territories. Now, Israel is saying the principle has to change to: land for security. And who knows, tomorrow, perhaps, the Israelis will ask the Arab countries to move, to squeeze in a little more, because there are going to be more immigrants, more Jewish immigrants to Arab countries. Squeeze in a little more, move back a bit, that will be better.
So, if I understand correctly, the free trade agreement between Israel and Canada was initiated to compensate the "peace efforts", in quotes, of the state of Israel. We must not forget that the state of Israel occupied the territories of three Arab countries at the time. It continues to occupy two Arab countries: Syria and Lebanon and the occupied Palestinian territories. We must therefore not forget all that.
Nevertheless, the agreement was initiated to encourage the peace efforts of both parties. However, with the departure of the late Mr. Rabin, the entire situation changed. Mr. Rabin, we must not forget, was a general, a long way from being a dove of peace. He was a soldier who had fought wars, two or three wars, but he realized that war would lead nowhere in the region. He realized this and on this principle turned toward peace. Everyone applauded, around the world including in the Arab countries.
We wanted this peace. However, with the departure of Mr. Rabin and the arrival of Mr. Netanyahu's right in power, everything changed, everything turned upside down. The present Israeli government is refusing to continue the peace efforts, refusing to withdraw, refusing to redeploy its forces in Hebron and refusing to do a lot of things. So, what is it after? What will it accept? Quite simply, money, free trade agreements like this one, which help it establish its image as a hardliner, in order to stay where it is and probably conquer new territories. We have a responsibility here. We must not leave things to chance. This is why I ask you, honourable senators, to think twice before signing such a document.
I would like to close on a humorous note. On October 29, I addressed your colleagues in Parliament. When the vote was taken -- surprise, surprise -- none of the committee members was present. The committee had left on a trip to the North Pole. I would ask you, should the government suggest you go on a trip, that you not go. I will answer your questions now.
[English]
Senator Lynch-Staunton: Your presentation is based on the fact that you identified Israel as an aggressor and therefore we should not sign a free trade agreement with an aggressor. Is that basically your argument?
Mr. Mahmoud: It is not the only argument.
Senator Lynch-Staunton: But it is the main one.
[Translation]
Mr. Mahmoud: I cannot say that entirely. I do not want to say it is my only argument. I cannot say it is an argument. It is one of a number of arguments.
Senator Lynch-Staunton: No, but you did say that, after Mr. Rabin's death and the election of the new government, there were changes in the geo-political situation and the area that would make Israel more of a threat than a few years ago.
Mr. Mahmoud: Yes.
Senator Lynch-Staunton: And the peace agreements were no longer being honoured or some of the conditions being met. You quoted the article and used it as an argument. I am not opposing the argument, I am trying to understand. Since, according to your definition, Israel is becoming the aggressor, very aggressive, Canada would be seen as supporting its position in the Middle East by signing the free trade agreement?
Mr. Mahmoud: Yes, sir.
Senator Lynch-Staunton: So, we would be better off not passing this bill?
Mr. Mahmoud: Yes, I would say so without any hesitation.
Senator Lynch-Staunton: But you said so?
Mr. Mahmoud: Pardon me?
Senator Lynch-Staunton: You said so. That is what I am trying to...
[English]
I am trying to extend that argument to other countries with whom we do not have a free trade agreement but with whom we do trade and who can also be considered aggressors. You think that Canada should not trade with any country which can be identified quite clearly as being an aggressor?
Mr. Mahmoud: I wish my country would do this.
Senator Lynch-Staunton: I want your opinion on this.
Mr. Mahmoud: That is what I am saying. I wish that were the case.
Senator Lynch-Staunton: Are you suggesting that the Americans and the European Union abrogate their free trade agreements with Israel?
Mr. Mahmoud: No, I am not saying that. What I am saying is that voting for free trade between Israel and Canada will be interpreted in the Middle East and Arab countries as a hostile gesture.
Senator Lynch-Staunton: Is not a continuation of a free trade agreement between the United States and Israel, the European Union and Israel, Turkey and Israel and the Slovak Republic and Israel also considered an act similar to the one that we would be committing?
Mr. Mahmoud: I would exclude the United States agreement with Israel because -- the United States knows it very well, and everybody knows it very well -- the United States is considered an enemy in the Middle East. This is not the case with Canada. Canada has a lot to lose if it is trying to appear as such an enemy to the Arab world.
Senator Lynch-Staunton: What is the difference between signing a free trade agreement and opening up trade possibilities and trading with a country as we are now? Why is signing a free trade agreement such a hostile act, but continuation of trade with Israel is not?
Mr. Mahmoud: You will be providing opportunities to Israel to trade more and more with Canada; therefore, a lot of money will be made by Israel as a result of this.
Senator Lynch-Staunton: That is your hypothesis. I am seeing a contradiction in your presentation. If you are going to advance this theory that we should not deal with an aggressor, the theory should be advanced to its ultimate conclusion.
Mr. Mahmoud: I did not understand your question.
[Translation]
Senator Lynch-Staunton: I do not want to prolong the discussion if you think that, by signing the free trade agreement with Israel, Canada will be considered hostile -- that is the word.
Mr. Mahmoud: Yes.
Senator Lynch-Staunton: It would be considered an ally of Israel, which is the enemy of many countries. Why not go further and say we should no longer have trade relations with Israel. We have already reached a point where things are expanding somewhat. I do not understand the argument that, by signing an agreement like this, we suddenly become a mortal enemy.
Mr. Mahmoud: I am not saying Canada would change overnight, but it would be the start of a change in Canada's image in the Middle East. Yesterday, I called someone in Syria, a businessman. I spoke of preparing to come here today.
I told him about the state of the issue here. He said he saw the Canadian flag in 1974, when the Canadians arrived as peacekeepers in the Middle East. It was the first time the Canadian flag was seen. Why would Canada support the Israelis by giving them ease of access to the Israeli market and by importing Israeli goods into Canada? He did not understand why, and he lives there.
That is what I do not understand. Why now? If the peace efforts had succeeded and gone the whole way, well, the agreement would benefit everyone. Under the circumstances, however, I do not understand why.
I do not see how the people there will be able to understand the reason for this action.
Senator Prud'homme: If I have understood correctly, Mr. Chrétien's offer to Mr. Rabin was to encourage him in the steps he had taken. It is a request of the Prime Minister. It helps the process. If I understand you, you are not opposed to free trade with Israel of itself. At this point in time, it sends the wrong signal, which could be interpreted by Mr. Netanyahu in his aggressive settlement policies, in his refusal to fulfil his Oslo obligations, as encouragement to the effect that, regardless of what is done in Israel, everything continues as if it were normal.
Here is a country as stable as Canada signing a treaty. This is proof. Is this what you are saying?
Mr. Mahmoud: You are entirely right. What I wanted to say is that, at the outset, everyone was encouraging the peace efforts. There was talk of $300 million going to the Palestinians for development. We continue to make progress and there is no sign of the money.
At the time, everyone wanted to help and encourage the peace efforts. There was a real and sincere desire by both parties to aim for peace. With the disappearance of Mr. Rabin, unfortunately, the Israeli side not only put on the brakes, it backed off. I support the free trade agreement not only with Israel, but with all the other countries, including the Arab countries, but not right now.
Senator Prud'homme: In a word, if Mr. Rabin were still alive and the Right Honourable Jean Chrétien had continued with his officials, and so on, you would not be here today.
Mr. Mahmoud: Unfortunately not, that is all.
[English]
Senator Grafstein: When did Turkey enter into a free trade agreement with Israel?
Mr. Mahmoud: Months ago.
Senator Grafstein: Can you give us the date? Can we get that, Mr. Chairman?
Also, Mr. Mahmoud, you are from Syria -- is Syria a democracy?
Mr. Mahmoud: I do not understand, senator. Is Israel a democratic society?
Senator Grafstein: If the committee would like me to give evidence, I am prepared to. I think it is up to the witness to answer; if he cannot, I will understand that. Is Syria a democracy?
The Chairman: I am having difficulty, Senator Grafstein, seeing the relevance of your question to the clauses of the bill.
Senator Grafstein: I think it relates to the question of the role of the Golan Heights as it relates to this agreement. He has given us evidence about Golan Heights as it relates to this agreement. It is a simple question. Is Syria a democracy?
Mr. Mahmoud: I would like to answer this question. When a high court of Israel permits its secret service to use hard physical methods to extract "aveux" from a Palestinian prisoner, this is not a democratic society. As to whether Syria is a democratic society, maybe no, maybe yes. It depends on your own point of view, honourable senator. If your point of view is that a democracy is made up of elections and a Parliament, well, in Syria, there are elections and a Parliament. If democracy is to be representative of something, yes. If democracy is torture, yes, Syria is and Israel is in this case, too.
[Translation]
Senator Corbin: I made a comment at the outset. You were apologizing for the text being only in French. Usually, the opposite is true in committee. A lot of witnesses apologize for not being able to speak French. There was no need to apologize for having a text in French only.
Will the Palestinians living in the territories occupied by the Israelis benefit from this agreement?
Mr. Mahmoud: I do not think so simply because, in the case of the territories, you have to go there to understand. They are surrounded by colonies, and the colonies are within international borders. To travel from the occupied territories into Israel, you have to cross borders.
I was in France between 1986 and 1991. At the time, all the products from Gaza were marked "Made in Israel". I raised the question a number of times in the central market of Paris. I was interested to know. I was told a number of times that products from Gaza arrived in France identified as "Made in Gaza". Gaza is not a state, but that does not matter. At no point during almost three and a half months of research at the main market in Paris, did a "Made in Gaza" label appear. That was in 1991.
Since 1992, we have been told that it would be local. I have been a careful market watcher, both here and in France, and from 1992 to date, I have never seen a "Made in Gaza" label, or from the territories that are occupied, or, administered, as they say in Israel. They are administered by the Israelis, not occupied. No, I do not think so directly, to answer your question.
Senator Corbin: You will have to be more specific. In the textile sector, where many Palestinians work, on Israeli territory, strictly speaking, every day, they cross the line to go and work on Israeli territory. Is that a fact?
Mr. Mahmoud: They work primarily in construction.
Senator Corbin: According to my information, they work in the textile industry. They are not suffering under the current situation, are they?
Mr. Mahmoud: Do you think that their salary is going to be raised under the circumstances?
Senator Corbin: They are prevented from going there in their usual numbers because of the situation that developed after the current Israeli government took power.
They cannot go there as easily or in the usual numbers. Am I to conclude that the Palestinians are at a disadvantage under the current political context and that they will continue to be at a disadvantage if we proceed with this agreement?
Mr. Mahmoud: I would have no hesitation saying, yes they will continue to be at a disadvantage. Once you no longer have a government structure that allows you to defend your rights, you are at a disadvantage. To earn a living, you have to cross to the other side of the United States' borders to work and then return in the evening. Where is the preferential treatment in this case? There is no point in the Palestinians trying this, and with the former government it was not any better. The borders were blocked for weeks.
Senator Corbin: Without revealing my position, and I never take a final position until the vote is called, would you be prepared to tell us to wait six months or a year before we approve this bill to see exactly what is going to happen in the peace process, if indeed progress will be made, in keeping with your line of argument.
Mr. Mahmoud: I do not generally applaud anyone. I will applaud you in this case.
Senator Corbin: This is not about applauding or not applauding.
Mr. Mahmoud: Not you, personally, but the entire Senate.
Senator Corbin: Would it contribute to the peace process if we were to put off giving this bill our approval?
Mr. Mahmoud: Yes, without reservation, putting it on hold for a year or six months would first put pressure on the Netanyahu government and show it that people want peace in the region, send it the message to stop making things difficult for the people there, because what it is doing has an impact and it must join in the peace process undertaken by its predecessor.
[English]
The Chairman: Our next witness is Dr. John Sigler. He is a professor of Political Science and International Affairs at Carleton University and an adjunct professor of Political Science at the University of Ottawa. He has written extensively on American and Canadian foreign policy and on Middle East matters. He has served as an advisor to the Canadian Department of Foreign Affairs and International Trade with regard to arms control and Middle East peace. He has served as an advisor to the Canadian delegation to the United Nations General Assembly. He has also served as an advisor to the International Development Research Centre. He has sat on many boards, including the Canadian Institute for International Peace and Security, the Canadian Centre for Arms Control and Disarmament and the United Nations Association in Canada.
Welcome, Dr. Sigler.
Mr. Sigler, Professor of Political Science and International Affairs, Carleton University: I have listened very carefully to this afternoon's discussion and am favourably impressed by the sophistication and pertinence of the questions. In fact, I learned a great deal from them. I am not surprised at that. I had a relationship with this committee over a decade ago when the Senate did a very important study on Canada and the Middle East. I must say that that was one of the more prescient policy documents to emerge from Ottawa on an area that has received, I think, far too little Canadian attention.
Let me make a couple of points. First, on the question of the text itself, I think the committee members focused very carefully and appropriately on those passages having to do with definition of country and of boarders and this unique definition of defining a country as that where a customs union applies. This is treading on new legal turf. It was my objection the first time to the process here in terms of consistency, as Senator De Bané already asked, about Canadian policy on the nature of the settlements, not simply in the West Bank and Gaza, but we must add the Golan.
So, it goes beyond the way the answers went here, because another country involved in the peace process is also tied up with this issue of the settlements. It has consistently been Canadian policy, as it has been for almost all of the international community, that under the terms of the fourth Geneva convention on military occupation, the signatories, which include Canada and Israel, are responsible for the maintenance of that agreement, it states quite clearly that settlements in territory occupied in war are illegal. Therefore, there has been a long-standing problem for the international community in dealing with the treatment of the settlements.
The government witnesses talked about Palestinian territories. You got the impression that that was equated with the West Bank and Gaza. As has been made clear in subsequent testimony before you, only 3 per cent of the territory of the West Bank and Gaza is under control of the Palestinian Authority. We are tied with a whole set of stalled negotiations on whether or not any more withdrawals will take place or whether or not there will be a question of a Palestinian entity finally on the negotiating table.
It is that that makes the awkwardness of the timing here about normalizing the situation with Israel, using, I think, a very wide-open definition which permits normalization of a newly defined territory under the notion that custom law applies. Curiously enough, you are led to believe also from the testimony that all of this custom union is working very effectively. This is not the case since last February. That customs agreement does not apply to the Palestinians at all. There has been almost complete closure.
In fact, there has been a 30 per cent loss in the gross domestic product. We are dealing with 70 per cent unemployment in Gaza. I just came from the Middle East Studies Association in Providence where paper after paper was presented from people living in the occupied territories talking about the desperate economic situation now faced by the Palestinians.
So it is that narrow question of timing. If this custom union were in place and functioning, if Palestinians could import raw materials and export their products, this would all be fine. That is not going on. This has been reduced to a small fraction. It is under those conditions of desperate unemployment in the application of that that we are asked to make a longer-term definition about territory.
I had asked earlier if one could get an opinion from the international legal division of the Department of Foreign Affairs on whether the definition of "country" as used in this agreement is consistent with our obligations under the Geneva Convention. There is an important international legal question that I think has been raised quite appropriately by the committee.
My next point, which is provoked by Senator De Bané's questioning earlier of whether or not we are still applying this Canadian policy, is that of consistency in Canadian foreign policy.
Revenue Canada has recently put in place provisions for not allowing tax exempt status for donations made to settlements on the argument that Canada does not support settlements, that they are illegal.Does Revenue Canada have a different foreign policy now than the Minister of Trade?Some clarification about those settlements is needed, not only related to the question of Palestinian Authority, but also the Golan Heights.
Moving beyond the text to the context, I have two comments to make which I think are extraordinarily appropriate based on the earlier discussion about the precedence of the American free trade agreement, and particularly the European Union. Both of these, incidentally, were done in the period prior to the recognition between the PLO and Israel. I have the strong belief that neither the European Union nor the United States would initiate a free trade agreement like this one at this point in time.
They have raced very hard to say that there are consultations with Palestinians.I think you can get formal testimony that there were no proper consultations.I have abundant evidence of this.They added this very quickly as a result of criticism that they were not dealing adequately with the Palestinian Authority as required under the Oslo Accords.
There have been talks, but if you compare the extent of the discussion with the Israelis, as opposed to the sort of pro forma talks with the Palestinians, I think this desperately needs to be reviewed.
The European Union is the largest aid provider to the Palestinian Authority. It also has free trade agreements with most of the Arab countries, with which it also has substantial aid agreements. The European Union is Israel's largest trading partner, as it is the largest trading partner of most Arab countries. Hence, there is much more balance in the European arrangement than what is being followed here.
Secondly, if you look at the European Union agreement, it includes a human rights provision and provisions consistently applied by the European Union about allowing Palestinian trade with Europe and free access. The Israelis have resisted that, but each time they come up for negotiation, the European Union toughens these requirements even more. Conversely, this proposed legislation is silent on that, other than a promissory note from the Israeli trade minister that they will do something about it. That is inadequate in terms of proper trade negotiations, let alone its political ramifications.
It was in the euphoria of the peace process that these free trade negotiations were begun -- but they were rushed through. We did not wait to see how the international community was going to deal with the new Israeli government. That really needs to be clarified. I think in that sense, a wrong signal has been sent. I do not think we should exaggerate the importance of a Canadian free trade arrangement. This is not moving the Embassy from Tel Aviv to Jerusalem and all that bad history from the earlier period. It is not that important, in and of itself, other than is it being used as a precedent for normalization of relations with Israel before it concludes adequate peace arrangements with its neighbours?Is that the real push behind this? I would not have thought so if the former ambassador, Norman Specter, had not been so public in claiming that he was totally responsible for this agreement supported by the pro-Israel lobby.
That is what is embarrassing for Canada, not that the officials of this country decided for good reasons of trade policy or for support for Canadian business, because now we are told that that is not how it happened, that in fact they were opposed to the timing of it.
The fact that this has gone public is deeply embarrassing to the foreign ministry of this country. It will get reported in the area and I think that is the regrettable part of the whole story.
Senator Prud'homme: Did all members receive a copy of the letter in The Globe and Mail by Mr. Axworthy, in view of the fact that our distinguished guests have mentioned the Specter letter, in which he bragged about being responsible?
The Chairman: We will see if we can find it.
Senator Prud'homme: For tomorrow.
Senator Corbin: It is not that you are opposed to a trade agreement with Israel; it is that you are opposed to it at this time, correct?
Mr. Sigler: Yes.
Senator Moore: Mr. Sigler, is there an agreement in place now between the European Union and Israel?
Mr. Sigler: Yes. There is also one with the Palestinians, which was just signed last week. You are correcting the business of the one-sidedness. They have already done this. We start off and then just postpone it. That is my objection to the process. I do not understand what all the hurry was about, why we did not complete full talks with the Palestinian Authority. You are writing a blank cheque on that one, as the questions have already indicated.
Senator Moore: You also mentioned that each time the European Union and the Israelis discuss their trade agreement, the European Union is pressing for the inclusion of Palestine in the Israeli agreement?
Mr. Sigler: Precisely.
Senator Moore: If they have their own agreement now, why are they -- I don't understand that.
Mr. Sigler: No, with the agreement to make sure that the Israeli army, which controls this area -- I think the point is not whether these are democracies or not; it is a question of whether the area customs union is under military occupation and military law. That is a different trade precedent than any of the other arrangements we have been under.
Having said that, what the Europeans have insisted upon -- and I must say, with all due credit to tomorrow's witness, that the person who pushed this policy hardest was the Canadian Mennonite Central Committee representative in Jerusalem, to ensure that Palestinian production, particularly of citrus from Gaza, was allowed to enter European markets.What was happening was that the Israeli military would not let the trucks through; also, they would sit on it in the export ports, and the stuff would all rot.
So this is where the deep disagreement is. And the Europeans said: "If you want to continue free trade, you better clean up your act in allowing the Palestinian production out." That has worked, until recently, where the same thing is happening. They blocked Palestinian access from Gaza, either in the airport, which Canada helped build, or in the port, which the Europeans are helping with.
The current situation is extremely difficult.Now, you cannot always tie trade negotiations to immediate local conditions -- I understand that -- but that was the reason for just putting it off until the situation clarified.It is this rush to approval which I find surprising.
Senator Lynch-Staunton: According to our briefing book note, at the end of August, and again at the beginning of November, there were seminars held in Gaza and in the West Bank between Palestinian businessmen and Canadian government officials, all organized by the Canadian Embassy in Tel Aviv, and the conclusion is that it was clear from the reception received from businesses in the West Bank and Gaza Strip that they were in business for business and are looking forward to dealing directly with Canadian businesses.
Mr. Sigler: I think that is true, but they were hoping for the kind of European pressure which may open up the closures.
Senator Lynch-Staunton: From your sources, have you had any feedback on these meetings as to how they felt about being identified as an extended territory, or whatever it is -- beneficiary?
Mr. Sigler: You could ask Mr. Janzen that tomorrow, because he has just returned from a mission where he has talked to many of the Palestinian authorities.
I can only tell you that in the consultations that took place, there were many with Arab businessmen and with Canadian businessmen, particularly about this, but that was tied to the situation well before this deterioration began. In fact, the principal Arab businessman from London, Ontario who supported this testified to the house committee that he was now opposed to the timing of it. He was the leading spokesman in the Canadian Arab business committee for this arrangement and was the last witness before the committee in the house. I was surprised that that witness, who is generally seen in the Canadian Arab community as the one most in favour of this, now opposes it because of closure.
Senator Lynch-Staunton: My suggestion is that in the absence of the Minister of International Trade, with all due respect to his parliamentary secretary -- there are implications to this agreement that go beyond trade. I would urge that we consider inviting Minister Axworthy, if he is available <#0107> and I know his schedule is as busy as anyone's -- to appear before our committee to address some of the topics that we have been discussing, particularly those to which the officials could not give the political answers and the trade people can only give certain answers to. I believe that that would complete our discussion.
The Chairman: I will be happy to explore that possibility.
Senator Prud'homme: It seems to me that we are being encouraged to believe that everything is fine with the Palestinian Authority, that we have consulted them and so on. Yet, at the end of our briefing book, in Section 8, we are informed that First Secretary Barber delivered by hand the original of a letter dated October 28, 1996. What was that letter? It was a letter to the Palestinian Authority from the Canadian Ambassador, on behalf of the Honourable Arthur Eggleton, Minister of International Trade. A letter that was considered to be important was delivered by hand after hours to the Palestinian Authority and was accepted by a young Palestinian in the bureau.
It is unfortunate that the committee cannot hear from some official from the Palestinian Authority, because there is nobody to speak for them.
That is what I want to put out as a comment to you. Let me say that I am in favour of free trade with Israel.
Senator De Bané: Professor Sigler, I would like to have you explain in more detail your opinion about the political significance of the enactment of this bill in Parliament at this point. What do you mean in relation to long-standing Canadian policies concerning that issue of peace in the Middle East? Since 1947/1948, Canada, under several different governments -- whether Liberals, Conservatives -- has adopted certain policies. As an observer of how Canada has enunciated its position and policies towards that region, what will be the political significance if this bill is enacted now?
Mr. Sigler: I answered first that I do not think we should exaggerate this. But I must say that when you asked the question previously, and one detected the hesitation from leading Canadian officials at the public service level, I became worried, which only lent credence to the Specter argument that they do see this as changing Canadian policy. And that perhaps is the underlying political reason for it, not the economics of it at all. I must say that I became worried when I detected their hesitation on that.
I think the questions about "what is the country" are highly related to that. Canada is not a major player in Israeli trade. Thirty-five countries are higher on the list. I do not know any Canadian businessmen who are chopping at the bit for this, frankly.
On the contrary, the leading investor, Charles Bronfman of Claridge Israel, is holding off on all investments right now in Israel. He has made it quite clear publicly that given the Netanyahu government, this is not the time to invest in Israel. So I am not sure where the immediate pressure for this economically is.
However, I am concerned about the question you ask; that is, is this a very subtle way of shifting long-term Canadian policy?
Now the Americans have already done it, but it is not very subtle; it is quite clear. They have wiped out all UN resolutions. That is not our policy. We have long been defenders of the United Nations on these positions, and the Europeans are increasingly worried about the American role on these questions. Canada I think is caught up in a much larger international political game here.
The Chairman: Professor Sigler, thank you very much for a clear and explicit statement of your position.
The committee adjourned.