99/7 CHECK AGAINST DELIVERY

A STATEMENT BY THE

HONOURABLE SERGIO MARCHI

MINISTER FOR INTERNATIONAL TRADE

TO THE HOUSE OF COMMONS

STANDING COMMITTEE ON

FOREIGN AFFAIRS AND INTERNATIONAL TRADE

"CANADA AND THE WORLD TRADE ORGANIZATION:

OPENING OPPORTUNITIES TO THE WORLD"

OTTAWA, Canada

February 9, 1999

(9:00 a.m. EST)

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

Let me begin, Mr. Chairman, by thanking you and the members of this Committee for inviting me to join you today. I always welcome these opportunities to appear before you, both as a means of sharing information with you and as a forum for receiving input from you.

I have certainly valued the counsel you have provided me in the past and I look forward to maintaining a very open-door relationship with this committee in the future.

We live in exciting times. Around the world, trade barriers are falling down, opportunities are opening up and the possibilities for Canadians to create better lives for themselves and for their children are greater than at any time in our history.

Technology is collapsing distances, and there is an ever-smaller distinction between international and domestic markets. We are able both to buy from and sell into markets that had previously been closed to us.

For a trading nation such as ours, these developments are to be welcomed. They provide Canadians with rewards for their labour, markets for their products and hope for their futures.

But we would be less than candid if we did not acknowledge that many people are uneasy about the pace and the path of change. What some see as the successes of liberalized trade represent for others a march down a road they don't fully understand.

While our vocabularies have been expanded by words like "globalization," our understanding of these concepts has not always kept pace.

That is why I am so pleased that this Committee will soon be embarking on cross-country hearings on international trade and the World Trade Organization (WTO). This will give Canadians, from every walk of life and from every part of our country, the opportunity to air their concerns, explain their positions and offer their views on what Canada's trade objectives should be on the international stage.

These Parliamentary hearings are both timely and historic. Timely because in December of this year, WTO ministers will meet in Seattle to embark on a new series of trade negotiations, and we believe that Canada must be at the table. Historic because your consultations will help to determine a national consensus on what Canada's trade priorities should be -- now and for the future.

It is our firm belief that ongoing, broad-based consultations with the provinces, the business sector and the public at large are essential for Canada to identify its negotiating positions and objectives.

These hearings are also important for the role they can play in educating Canadians both about the opportunities that await us and about the challenges that confront us. And they will be a chance to discuss openly the values that should inform our policies and direct our positions.

And so I welcome these hearings and look forward to receiving this Committee's report at the end of the process.

As we look ahead to a new set of negotiations at the WTO, let me outline six areas that will be crucial in framing the debate:

• assessing where we have come from;

• recognizing the new dynamic that all trade is now local;

• promoting Canadian values abroad;

• addressing the need for further negotiations;

• deciding how these negotiations should proceed and what they should cover; and, finally,

• opening up the process.

  Where We Are Coming From

  In order to understand the journey before us, it is necessary to understand the road that the international community has already travelled.

  The Uruguay Round of negotiations, which was completed some five years ago, greatly strengthened the international trading system by expanding the rules of the game and by providing for mechanisms to resolve disputes that might arise.

  Canada has benefited from those results.

  First, we have benefited from liberalized trade because our economy is so dependent upon trade. In fact, we depend more upon trade for our prosperity than any other G-7 country.

  The figures are well known to the members of this Committee but bear repeating:

• Forty percent of our GDP and one in three Canadian jobs depend upon our ability to sell our goods and services abroad.

• Between 1992 and 1996, our exports grew roughly four times faster than our GDP. Due in no small measure to this performance, the Canadian economy created more than 1 million new jobs -- 450 000 last year alone. The connection between our trade figures and our employment figures could not be clearer.

• This is something that we need to stress. Trade is not an abstraction. It produces real jobs for real people and is not just happening on the international stage -- it is happening locally, in our communities and in our neighbourhoods.

  Behind the large numbers of so many billions in exports or trillions in trade are individual Canadians -- men and women who are working, buying homes and building a better life for themselves and for their children.

• There has also been a significant shift in the nature of our trade. Since 1992, machinery and equipment have become our top exports, overtaking commodities. Indeed, as a percentage of our exports, commodities have fallen from about 60 percent in 1980 to just 35 percent in 1997.

• This is a clear indication of the modernization of our economy and bodes well for future growth.

• And just as trade abroad has bolstered our economy, so too our openness to international investment has brought with it jobs and opportunities to Canadians here at home.

• Studies show, for example, that every $1 billion in foreign investment creates or sustains some 45 000 jobs. And, at present, total foreign investment in Canada stands at an impressive $188 billion.

  As a result of earlier rounds of trade talks, we have opened our economy and enhanced our opportunities. And, as a country that depends so heavily upon trade and investment, we have benefited from more open markets.

  At the same time, we have remained free to regulate in areas such as culture, health care, education, social programs, the environment, labour standards, and programs for Aboriginals, minorities and the management of our natural resources.

  Second, we have benefited from liberalized trade because it brought rules to what had been an international free-for-all, with the biggest and richest nations usually coming out on top.

  As a mid-sized economy in the world, Canada no longer has to worry about an environment where "might equals right" or where the law of the jungle prevails.

  Fair and predictable rules mean Canadian products should not be excluded from foreign markets by discriminatory standards. Rules mean Canadian companies have the same opportunity to win contracts from foreign governments as their competitors. Rules mean that subsidies and other incentives do not distort trade or investment decisions.

  Rules also mean that Canadian intellectual property, including designs, are protected against theft or piracy. This is a crucial protection in a world where trade in services, as well as goods, is becoming increasingly knowledge-based.

  Not only have these rules allowed us to gain access to key markets around the world, but they have also provided the framework for very successful regional agreements, such as the NAFTA [North American Free Trade Agreement], which has created thousands of jobs for Canadians.

  The fact is that by making trade subject to clear rules -- rules that apply to all, regardless of size or economic might -- we have levelled the playing field. And given this fair chance, Canadians have demonstrated themselves able to compete -- and win -- against anyone in the world.

  So much so, in fact, that Time magazine has called Canada an "exporting superhero," and our annual trade figures look like the graphs for one of those outperforming mutual funds.

  The bottom line is that trade is something that Canadians are extraordinarily good at, and the worldwide trend toward freer trade plays directly to our strengths.

  Our strategy, therefore, must continue to be to push for access to international markets and to encourage others to open their economies, so that they too can enjoy the benefits that freer trade provides. At the same time, we need to continue to do everything we can domestically to ensure that our companies can take advantage of the opportunities that are unfolding.

  That's why our Government has made a deliberate effort to encourage companies -- especially small and medium-sized companies -- to begin exporting. Indeed, I have created a special unit within my department aimed specifically at small and medium-sized enterprises.

  We have also targeted special programs at women, youth and Aboriginal entrepreneurs in order to ensure that the benefits of trade are broadly shared.

  The Prime Minister's Team Canada trade missions are perhaps the best known of our efforts to open doors and break down barriers to trade. But they are by no means the only ones.

  The Government has also invested some $100 million over the past three years in programs that promote trade and investment. We have created Team Canada Inc, which brings together all of the various federal programs and services under one roof, so that companies can quickly get access to the information they need to begin exporting.

  Through initiatives like the Program for Export Market Development (PEMD) and the recently announced PEMD-I, which focusses on investment, we have helped entrepreneurs enter export markets and involved the municipalities in our partnership.

  We have also established the WIN Exports database, which matches Canadian capabilities with opportunities abroad. And we have enhanced our Trade Commissioner Service, putting more officers in the field where they can serve Canadians best.

  Abroad, we have worked hard to open doors so that our companies will have access to key markets. We have signed free trade agreements with Israel and Chile, and have expanded the free trade agreement with the United States to include Mexico.

  And we are currently involved in negotiations to create a Free Trade Area of the Americas (FTAA), as well as pursuing a free trade agreement with the European Free Trade Association (EFTA).

  These regional negotiations complement and enhance the efforts we are making on the multilateral front, through the WTO.

  These and a host of other efforts, both at home and abroad, have been undertaken with one single objective: to allow Canadians to participate in the exciting opportunities that trade liberalization is bringing.

  But while the Uruguay Round was significant and resulted in real benefits for Canada, it did not address every issue or solve every problem. Many stones remain unturned, and much work remains to be done. As we undertake this new work, it is important to carry the lessons we have learned into the next round.

  A New Dynamic

  There can be no doubt that in recent years the trade landscape has changed -- and changed dramatically. Let me suggest two characteristics of this new dynamic.

  First, just as all politics is local, so too all trade is local. Second, and related, foreign trade is now very much a part of the domestic agenda.

  Let me expand on each of these.

  I spoke earlier of both the tremendous opportunities that are opening up for Canadians and of the anxiety some Canadians feel about further liberalization of trade and investment.

  Part of this apparent disconnect between the benefits that abound and the perceptions that exist is due to the singular failure on the part of government, business and international institutions to explain the benefits of balanced freer trade and to encourage participation in it.

  Our task is to show the immediacy of international trade -- to demonstrate its relevance to our daily lives and to prove that, at the end of the day, all trade is local.

  Canadians don't need to understand the arcane language of trade policy to be informed about what it can mean to their businesses. Nor do they need to follow every twist and turn in negotiations over some esoteric point of trade policy.

  But they do need to understand that international trade and investment is not something that happens "out there," to "other people." It is what happens when an automobile is assembled in Windsor or Cambridge, using steel produced in Hamilton, aluminum from Quebec, zinc from British Columbia, plastics from Ontario and electronics or computer components from across the country.

  It is what happens when a Canadian university markets its programs abroad and recruits students from around the world. It is what happens when a local high-tech company sees a niche for its product, sells it abroad and expands its operations at home.

  And so, while it is true that the game has changed, it is a bigger and potentially more lucrative game. And all of us have a responsibility both to grasp its potential and to explain its significance.

  But let me say that this responsibility is not just that of government. The private sector, too, must become informed, involved and engaged. Business needs to explain what the international trading system means to its bottom line and to our way of life. It needs to make it its business to know what's going on in Brussels as well as what's going on in Ottawa.

  Another way we can begin to meet public concerns is through policies and programs that encourage business participation in the global economy. There is nothing that demystifies international trade more than winning that first contract in a foreign land.

  Just ask the thousands of Canadian businesses that have done their homework, put in the effort, raised their sights to new frontiers and then gone out and made it happen.

  So that's the first thing we have to understand: that all trade is local and brings benefits right to our front doors and to our main streets.

  Second, foreign trade is now an integral part of our domestic agenda. Let me explain what I mean by that.

  One of the fundamental changes that has occurred in recent years is the increasing overlap between international developments and domestic policy.

  Earlier trade negotiations were primarily focussed on so-called "border issues" and addressed things like customs procedures and tariffs -- impediments that delayed or blocked access at the border. These negotiations were very successful, and many tariffs have now been eliminated or significantly reduced.

  Today, the greatest impediment for business is non-tariff barriers -- issues such as standards, licensing and approval procedures, product and professional certifications, and, more broadly, the regulatory framework.

  All of these areas have traditionally been the purview of individual states. So, too, have environmental, social and cultural policies, as well as competition and investment policies.

  Now, these are trade issues, discussed in trade negotiations and often the subject of trade agreements. And as a greater range of areas that were traditionally domestic in scope become trade issues, the number of players involved with trade issues must also expand.

  The fact is that trade is no longer a matter for trade ministers alone, but for many other departments as well. Nor is it simply a matter for the federal government. As provincial and even municipal areas of jurisdiction become affected, they too must be engaged and consulted.

  Just next week, for example, I will be hosting my provincial counterparts to address these sorts of issues.

  The fact is that our participation in the world economy -- through our trade agenda -- is now an integral part of our domestic political agenda of jobs, growth, safety, security and social programs.

  And throughout this whole process, Canadians have the right to be heard.

  That is why last Saturday, our Government posted a notice in the Canada Gazette -- and on our Web site -- inviting all Canadians to express their views on this challenging new trade agenda.

  I might add that our desire to involve the wider public is not just something that we practice at home. In the negotiations on the FTAA, for example, we pushed for -- and obtained -- a special working group on civil society that will hear views from all segments of our societies.

  With more and more elements of our domestic agenda now having a trade dimension to them, we simply must engage our citizens in our discussions.

  The move away from so-called "border issues" has had an international impact as well as a domestic one. With the emphasis increasingly on non-tariff barriers and on transparency, the international trade agenda has become as much about strengthening markets as about opening them.

  And so the focus has shifted to issues like creating a stable, predictable environment, good governance and discouraging corruption.

  The real challenge in trade policy, therefore, is not protectionism versus liberalization -- closing or opening our borders -- but to recognize our interconnectedness and learn to manage our national differences.

  Promoting Canadian Values Abroad

  As we embark on a new round of negotiations, it is more important than ever that we go in with our eyes open, our priorities identified and our principles clearly articulated.

  And it is very important that Canadian values are reflected in the positions we propose.

  It has always been this Government's view that trade allows us to export not only our goods, but also our values; that the global economy must be a humane place where good government, democracy and the rule of law ensure that the benefits of trade liberalization are shared among all levels of society. We have never believed that it is necessary to sell our souls in order to sell our goods.

  And just as we have a responsibility to protect individual rights and maximize opportunity within our own society, we also believe that similar obligations flow with respect to the global community we are creating through freer trade.

  Indeed, I would go so far as to say that if we simply pursue markets without concern for the citizens within those markets -- if we do not temper the pursuit of progress with the commands of compassion -- then we are destined to fail. More, we deserve to fail.

  And if we do not temper our push for profit with due consideration for the environment, we will be like the person who constructs a new foundation for a house by borrowing material from the roof: we will simply have achieved today's objectives at the expense of tomorrow's opportunities.

  So today, more than ever, debates over trade must address issues of fairness and justice and the equitable sharing of prosperity.

  Do We Need Further Negotiations?

  Now, with all of the progress we have made, it may be tempting to pause, to consolidate, to take a breather. But while it would be tempting, it would also be a mistake.

  Our efforts abroad have opened up exciting new markets for Canadian businesses and created new demand for their goods and services. We need fair and objective rules to preserve these hard-won gains. We cannot afford to be satisfied with the status quo -- we must continue to grow and to expand the benefits of a rules-based trading system to other sectors and to other parts of the world.

  The fact is we still have work to do. As I said earlier, the Uruguay Round left unfinished business that we need to complete.

  Access, for example, remains an important issue. In today's global village, there are still neighbourhoods we cannot enter, streets we cannot travel, customers we cannot secure. We need to open those doors and make our village one that is fully accessible to all.

  We need to encourage others to take the steps we have -- to become open, outward-looking economies and to explain the benefits of doing so.

  We also need to find ways to advance participation in the global economy by less-developed countries. To marginalize them now would not only deprive them of their greatest hope for future prosperity, but it would be also be to deny ourselves the future contribution they can make to the world's economy.

  More negotiations are also necessary because, as recent international economic upheaval has shown, no nation can restore growth solely through its own domestic market. Trade holds the potential to help solve these problems, and so we need to extend its reach.

  And if we are to make the trading system truly universal, we must include sooner rather than later in the WTO such major economies as China, Chinese Taipei, Russia, Saudi Arabia and Ukraine and make them partners in future negotiations.

  Finally, we have to ensure that the rules of trade themselves keep pace with the changes taking place in business practices, technology and social systems. We cannot proceed into the next millennium with rules that don't reflect the new realities.

  And so there is a need for further trade negotiations.

  How Should We Proceed and What Should These Negotiations Cover?

  The immediate issue before us is how we should proceed and what should these negotiations should cover.

  In terms of the form these talks should take, Canada's position is that flexibility should be our watchword. As you know, some would like to see a comprehensive new round, while others favour tackling issues on a sector-by-sector basis.

  Our view is that both options carry their own difficulties.

  A major new round, in trying to encompass so many divergent issues and interests, can become unwieldy and exhausting. And its dynamic of all or nothing means no progress for several years until every last issue has been resolved.

  The sector-by-sector approach, on the other hand, leaves itself open to countries simply "cherry picking" those sectors that work to their advantage. Such a mercenary approach does not indicate great confidence in the WTO or in its ability to create widespread agreement.

  That is why, for over a year, we have proposed a middle ground. We have suggested broad-based discussions that would deal with clusters of issues and sectors in a way that is manageable, digestible and timely, and has something for everyone.

  This would mean setting a timetable to implement results in clusters as they are achieved, thus detaching them from other areas where progress could be slower or more difficult to obtain.

  This would produce an "early harvest" of agreements and provide momentum at a crucial time.

  At the end of the day, however, a single undertaking, whereby all countries accept playing by all of the new rules, must still be our ultimate goal.

  I am pleased to say that this approach appears to be carrying the day, with both the United States and the European Union also seeking the implementation of concrete, early results as they are achieved.

  We must also take steps, in addressing the form of these negotiations, to ensure that the particular needs of developing nations are taken into consideration and that these talks produce benefits for developing and developed nations alike.

  In terms of the content of the negotiations, our view is that the talks should be broadly based, both to attract support and to satisfy a wide range of interests.

  Ideally, this means that negotiations will extend beyond the mandated areas of agriculture and services. Without pre-empting your consultations or prejudging their outcome in any way, let me suggest the following areas that governments might consider:

• further reductions to tariffs on industrial goods, particularly those that prevent our products from competing in foreign markets, and the possible elimination of so-called nuisance tariffs -- those below 2 percent;

• addressing non-tariff barriers that impose unnecessary bureaucratic costs on our exporters, including issues dealing with standards, customs valuations and rules of origin;

• curbing the abuse by foreign competitors of antidumping, countervailing duties and safeguard actions;

• extending the coverage of rules on services trade, with a particular emphasis on professional services;

• bringing agricultural trade more fully under the rules, including eliminating all export subsidies;

• expanding trade rules to respond to modern ways of doing business internationally in such areas as intellectual property, electronic commerce, transparency in government procurement, and investment and competition policy;

• exploring ways to ensure that trade rules fully take into account and fully respect sound cultural, environmental and labour policies; and, finally,

• ensuring that governments retain the ability to regulate for reasons of public health, consumer safety, social policy or other legitimate public interests.

  We are mindful, of course, that we will not win every battle or obtain every concession. In a process involving more than 130 countries, everyone must be prepared to compromise. But we are confident that, at the end of the day, Canadian interests will be significantly advanced and that we will be in an even better position than we are at the moment.

  Opening up the Process

  Finally, I have often said that the process of negotiating trade agreements is as important as the substance of those talks. And so we need to throw open the windows of the WTO process -- and I made this very point at the Ministerial Meeting marking the 50th anniversary of the General Agreement on Tariffs and Trade last May.

  Secrecy serves no one and risks alienating everyone.

  Indeed, in order to build and maintain public support and understanding for international trade, I believe policy makers need to do three things, both internationally and at home:

• First, we need to make the whole process more transparent. Canadians want their governments, and international institutions, to be more open and accountable. As we construct the framework for the global economy, we must ensure that Canadians' voices are heard.

• Second, we need to be more responsive. When Canadians express their concerns -- whether they be over labour standards, human rights or a perceived loss of sovereignty -- we cannot dismiss them as overreactions of the uninformed. We need to address the concerns head on and present Canadians with the facts.

• Third, and related to the other points, we need to be more inclusive. We cannot continue to carry on discussions about trade and globalization over the heads of the people. The changes we introduce are felt by individuals. And, if history teaches us anything, it is the importance of building a strong consensus on issues that affect our people so directly.

  We also have to remember that the benefits of trade and investment are often not immediately obvious, that they are incremental, usually poorly publicized and poorly explained. On the other hand, the costs of adjustment are often dramatic, felt at the local level and publicized in headlines.

  So while freer trade may be an idea whose time has come, it is not an idea whose success is assured. We need to stop assuming that everyone sees or agrees with the wisdom of our actions. We need to bring people in, not shut people out.

  One of the ways to do that is to consult and to communicate better with Canadians. The Standing Committee on Agriculture has already embarked on hearings to examine vital agriculture issues in the context of the upcoming WTO talks. And that's why I am so glad that this Committee favourably considered my suggestion to hold these public hearings on overarching international trade and investment issues.

  That is why, in addition to my ongoing consultations with the provinces, business community and civil society at large, I also intend to use my department's Web site to post information on the issues being negotiated, including the papers that Canada tables at the WTO, and to seek Canadians' input on the progress we are making.

  Conclusion

  Canada stands today as a trading powerhouse at a time when the world is embracing freer trade as never before. We are in the right place at the right time, and our future has never been brighter.

  But there is nothing automatic or preordained about our success. We need to be at the table early, so that we can help to shape the discussions as we have done so successfully in the past.

  We need to continue to work hard in an increasingly competitive world. We need to protect our interests even as we project our values. And we need to ensure that all Canadians have a say in the future we are building.

  We want to make Canada, already a trading nation, into a country of traders. This means expanding the number of companies doing business abroad. It means developing even more of a trading culture, which sees the whole world as its marketplace.

  By experiencing first-hand the benefits of trading abroad, many of the concerns about liberalization are put into perspective. And far from seeing trade liberalization as something to be feared, Canadians have come to see it as something to be embraced.

  If we move forward with a clear understanding of the connection between international trade and domestic prosperity; if we strive to promote Canadian values in our international relationships; if we demonstrate that all trade is ultimately local; if we can make international trade more transparent, responsive and inclusive; if we continue to knock down barriers through trade agreements and negotiations, while encouraging our companies to seek out new opportunities abroad -- if we can do all of these things -- then we will have positioned ourselves to compete and win in the new economy.

  And we will have secured a brighter future for our children and our children's children.

  I look forward to working with the members of this Committee as we build that future together.

  Thank you.