March 27, 1998 No. 72

Please find attached a letter sent today by International Trade Minister Sergio Marchi to:

Mr. Bernard Landry

Vice-Premier and Minister of State for the Economy and Finance

Province of Quebec

Mr. Sylvain Simard

Minister of International Relations

Province of Quebec

and

Ms. Louise Beaudoin

Minister of Culture and Communications

Province of Quebec

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For further information, media representatives may contact:

Leslie Swartman

Office of the Minister for International Trade

(613) 992-7332

Media Relations Office

Department of Foreign Affairs and International Trade

(613) 995-1874

This document is also available on the Department's Internet site: http://www.dfait-maeci.gc.ca

(TRANSLATION)

March 27, 1998Mr. Bernard Landry

Vice-Premier and

Minister of State for the Economy and Finance

12, Saint-Louis Street, 1^st Floor

Québec City, Quebec

G1R 5L3

Mr. Sylvain Simard

Minister of International Relations

525, René-Lévesque Boulevard East

4^th Floor

Québec City, Quebec

G1R 5H9

Ms. Louise Beaudoin

Minister of Culture and Communications

225 Grande Allée East

Bloc A, 1^st Floor

Québec City, Quebec

G1R 5G5

Dear Vice-Premier and Ministers,

I have noted with interest your recent statements on the ongoing negotiations toward a potential Multilateral Agreement on Investment (MAI), and I am pleased that the positions of the federal government and the government of Quebec continue to be so complementary.

Your colleague, Mr. Bertrand, and I were able to review these same MAI issues you raised in your statements at our meeting of federal and provincial trade ministers on February 19. At this meeting, I was again struck by how much our positions, and those of other provincial ministers, had in common.

I believe this is in large part the result of the extensive consultations that have been ongoing between federal and provincial officials since the beginning of the MAI negotiations. These consultations have ensured that provincial views were taken fully into account as Canada developed its negotiating positions. In fact, I understand that our officials held discussions yesterday on the latest developments at the OECD.

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I would like to briefly reiterate the federal government's positions on the main points you have raised.

We are clearly in agreement that Canada's participation in these negotiations is in keeping with our role in the international community and our efforts to achieve clear and enforceable rules for international trade and investment. Canada does much better when there are transparent rules governing the international playing field on which our businesses compete. However, it should also be understood that the federal government will only sign an agreement that advances and protects our national interests -- one that is of clear benefit to our country.

In my speech before the Centre for Law and Trade Policy on February 13, I restated the Government's bottom lines on the MAI. I have already sent a copy of this speech to Monsieur Bertrand, but I attach an additional copy here for your information. In summary, I underlined that:

At both the national and provincial level, there must be ironclad reservations, with no rollback or standstill, that completely preserve our freedom to act in key areas, including health care, social programs, education, programs for Aboriginal Peoples and programs for minority groups. Canadian culture must also be completely exempted from any MAI provisions. None of these areas is negotiable.

The interpretation of "expropriation" must make clear that legislative or regulatory action by government in the public interest is not expropriation requiring compensation, even if it has adverse profitability consequences for companies or investors.

As well, Canada will not accept an agreement that adversely affects our supply management regimes. We will take the necessary reservations to preserve investment measures specific to our agriculture interests. The same will apply to the management of our natural resources.

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We will continue to consult with provincial governments and other interest groups in developing a strong position on labour and environment standards, and on this issue, as I noted at the federal-provincial meetings, I would welcome specific proposals from Quebec and the other provinces on how best to achieve this objective. Finally, we will continue to push for clear provisions to address extraterritorial application of laws on investment, such as the U.S. Helms-Burton Act.

With regard to culture, I concur with Quebec's position that we should try to obtain a general exemption for culture, so that culture is off the table for all countries. Indeed, we have been working with France and other like-minded countries to obtain such a general exemption, and will continue to do so. At the same time, if other countries insist on including their cultural industries in a MAI, we will ensure that this has no impact on Canadian culture by lodging a country-specific exemption. Either way, Canadian culture is simply not negotiable.

I take note of Ms. Beaudoin's concerns regarding the issue of a general exemption on culture versus a country-specific exemption. In my view, we need to achieve a balance in international trade agreements whereby countries can enjoy the benefits of freer trade in goods, services and investment, while at the same time, preserve and nurture their unique cultural identities.

The federal government will continue to work with Quebec, the other provinces, and Canada's cultural industries to ensure that our vital objectives of protecting and promoting Canadian culture are met.

Finally, you mentioned that Quebec believes that the MAI discussions should be taking place at the WTO. I believe that the OECD is providing a useful forum to pursue discussions on international investment issues and the progress we are making will be important to one day achieving a truly multilateral framework of investment rules at the WTO. Canada's ultimate objective is, indeed, that a MAI or similar framework of rules should eventually find a home at the WTO. I have already advocated this position publicly, and will raise this issue with my OECD Ministerial colleagues when we meet at the end of April.

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As you are no doubt aware, it is now clear that negotiations will not conclude next month. Moreover, Canada has made it clear that we are not wedded to any particular timetable -- we will only accept the right deal at the right time.

We will, therefore, have additional time to continue consultations and to ensure that any potential MAI fully serves Canada's national interests. I appreciate Quebec's continued support and constructive input in this process.

Yours sincerely,

Hon. Sergio Marchi

c.c. Mr. Roger Bertrand

Minister assigned to Industry and Commerce