Agreed.

No.

The Acting Speaker (Mr. McKinnon):

I heard a negative. I will call on the Hon. Minister of Labour on debate.

Hon. Pierre H. Cadieux (Minister of Labour):

Mr. Speaker, in 1984, Brian Mulroney stated that his Party was committed to four priorities. One of these was economic renewal. Today, I am proud to inform Canadians that the Government of which 1 am a member has kept its promise. By signing a historic trade agreement with the United States, Canada has obtained the best guarantee for a prosperous economy. The free trade agreement is the culmination of over twenty-five years of hard work by Canadians and Americans aimed at improving and strengthening the framework of their commercial and economic relations. It was high time the Canadian Government adopted a comprehensive view of the economic changes that were taking place. Canada had to get a head start in the race in which countries the world over were competing, and the best way to do this was to gain secure access to the biggest and richest market in the world: the United States. We all know the arguments in favour of signing a trade agreement with the United States. About 80 per cent of our exports go to the United States, representing sales worth around $180 billion annually, while one out of three jobs depend on our ability to export our products.

The growth of our external trade is therefore closely linked to the trade relations we have had and have today with our

Canada-U.S, Free Trade Agreement

neighbours to the south, something our predecessors understood. In 1879, Sir John A. Macdonald shared this comprehensive vision of Canada's economic future, witness his trade policy. In 1911, the desire of Sir Wilfrid Laurier's Liberal Government to establish a comprehensive trade agreement with the United States reflected the economic realities of the time.

These are only a few historic facts, but there are many others. Thanks to the testimony and experience of our predecessors we are able to understand our own economic realities, and we will be able to build a future in the image of this country.

When in September 1985 we decided to negotiate a bilateral trade agreement with the United States, we knew what we were doing. We were not only mindful of our country's growth as a trading nation, we were also acting on a unanimous recommendation by committees and commissions of inquiry, including those of the Senate and the House of Commons and the Macdonald Commission, whose members represented all groups in our society. Need I recall, Mr. Speaker, that there was a Liberal majority in the Senate and that the Hon. Donald Macdonald was a Minister in Mr. Trudeau's Government?

Despite all these recommendations, the Liberals tried to ignore the lessons of history by involving Canada in a multilateral trade policy, while our trade with the United States continued to increase, from about 65 per cent to more than 75 per cent, and it did so despite the liberals' so-called nationalist policies and their rhetoric about their so-called third option.

Today, Mr. Speaker, the same Liberals would have Canadians believe that the same multilateral free trade process would give Canadians the same advantages as a trade agreement with the United States. What they do not tell Canadians, Mr. Speaker, is that the free trade agreement will enable Canada to control protectionist spillovers from the United States caused by domestic reaction to a budget deficit they have trouble keeping under control.

Mr. Speaker, let me remind these free trade detractors that Canadians are not being fooled and understand quite well that the Liberal Party does not offer a valid alternative to the accord.

Here is what Quebec Premier Robert Bourassa said in a press conference last August 16:

With respect to the issue of negotiating on a sectoral basis we have to take into account the various GATT regulations ... We did get the Auto Pact, of course, but it is becoming increasingly difficult to secure GATT approval to negotiate on a sectoral basis with another GATT country.

Canadians understand as well that they will be able to prosper in the 21st century if today they are prepared to look to the future and face the greatest challenges with vigour and determination. They are conscious of the fact that Canada's economic prosperity basically depends on the ability of our industries and our companies to maintain and improve productivity.

August 29, 1988

Canada-U.S. Free Trade Agreement

We know that Canadian farmers rank among the world's best traders, and they have demonstrated their skills on many occasions. Not only can we face up to our competitors in this sector, but we are also aware that access to American markets is a guarantee our farmers must have.

The value of Canadian agricultural products shipped to the United States is about $3 billion a year and that, Mr. Speaker, does not include grains and oilseeds. It accounts for over 50 per cent of Canadian food exports. Such figures faithfully reflect the situation, Mr. Speaker.

In addition to securing access to the American market the Free Trade Agreement will protect our agricultural sector against American compensatory anti-dumping duty and salvage measures. Some Canadians may have forgotten that pork and cattle producers have been the target of retaliation, but the people involved certainly did not, Mr. Speaker. With the FTA we can guarantee that they will never again be the hapless victims of American policy. Without the FTA, Mr. Speaker, history is bound to repeat itself.

We have maintained our marketing boards and the import control measures that constitute the very basis of our supply management system. During the 1986 Tokyo Economic Summit, the whole world became aware, thanks to the leadership of our Prime Minister, of the need to undertake a global reform of farm policies. For us, the first step in that process was certainly to agree with our main trade partner. Who could blame us for having brought forward what we have recognized ourselves, along with the international economic community? Need I recall, Mr. Speaker, that agriculture is one of the main pillars of our economy, as is the case with other countries?

As a Government and also and more importantly as Canadians, we had to take the necessary measures to ensure our continuing prosperity in that area as well as in all other sectors of our economy.

Admittedly, some adjustment will be needed following the implementation of this agreement and that is why our Government has set up an advisory council on adjustment in order to react quickly and judiciously to future changes and possible problems. Businesses, unions, consumer groups, teaching institutions are represented on that council and also the Federal Government which is automatically a member, Mr. Speaker. The council has the responsability to assess our programs and to ensure that they are used efficiently so that we are at all times ready to benefit from new opportunities arising in the work market.

Free trade will create new opportunities in the industrial sector. The Government has established a Skills Shortages Program in order to train employees in skills and jobs that will be increasingly in demand.

Companies can also use the Skills Investment component of the program in order to hire and train laid-off workers, Mr. Speaker. Moreover, communities that are particularly hard it

by new technologies or markets can ask for assistance within the framework of the Community Futures Program under which businesses can be created and training assistance given at the local level. Who said, Mr. Speaker, that this Government did not care about giving businesses the means to adjust their production to the new trade dynamics? The same free trade opponents, Mr. Speaker, who tried to ignore that Canada is a large export nation which depends to a large extent on its trade relations with the United States!

The Conservative Government is committed to adjustment programs and it has assured businesses of a secure access to the U.S. market for their products. In the future, Canadian businesses will be able to produce more goods and to diversify services, thereby enhancing regional growth through resource development and economic growth.

Our Government has put forward an industrial and regional development policy which embodies one of the principles we cherish most: a country's prosperity depends on the economic strength of each of its regions. Decentralised decision-making is the basis of this policy. In our opinion, Mr. Speaker, the people of the regions are those most able to make the best decisions to help their region develop its industrial base and its export capacity.

By having greater control over their economic future, the regions will be able to take better advantage of the opportunities offered by the Free Trade Agreement. They will be able to benefit fully from those advantages and consequently, Mr. Speaker, not only the large centres but the country as a whole will benifit from free trade.

Allow me to give you a few examples. British Columbia will be in a better position to market its forestry products; Alberta's oil and gas sector will experience a new boom; the uranium industry in Saskatchewan will be able to expand as a result of the lifting of restrictions on uranium-enrichment processes; the Manitoba manufacturing industry will find new outlets on the American market; service industries, most of them in Ontario, will gain readier access to the American market; and Quebec will boost exports of electricity as well as pulp and paper products, not to mention eventual pork and beef sales, and demand for engineering and consulting services is expected to rise. As to the Atlantic provinces, Mr. Speaker, they will come to realize that a better trade environment is bound to spur the growth of their manufacturing and forestry sectors, their fisheries and their agriculture.

Given decision-making authority, the regions of Canada will be able to take better and quicker advantage of the new outlets of the wide North American market of over 250 million consumers. The regions will also be urged to ensure that industries switch to new technologies as soon as possible, for improved competitiveness rests on revamping the industrial base which leads to higher productivity and lower production costs. Mr. Speaker, the last two elements are essential if we

August 29, 1988

are to gain a foothold in the huge southern market which will become a worthy challenge to our skills and enable us to create a great many new jobs. Mr. Speaker, Canadian workers need these jobs now, and tomorrow younger generations will take over.

Anxious to create these job opportunities for young Canadians, in 1985 the Conservative Government set up a comprehensive employment policy geared to training. Mr. Speaker, the purpose of this policy is to meet the challenge of the skilled labour force training necessary to hold specialized positions in a highly technical and competitive Canadian industry. This policy is particularly aimed at our young people coming on the labour market. Mr. Speaker, gone are the days in Canada when without proper training, a young man could find a good and financially rewarding job. The need for unskilled workers is waning because our industrial base is continually developing to meet the harsh competition on world markets.

With or without a free trade agreement, Mr. Speaker, this reality of a greater need for a specialized labour force remains true. That is why the Government has put together an employment policy which is flexible and consistent with local needs.

To prepare a flexible and competent labour force, and prepare young Canadians to hold specialized jobs represent one of the greatest challenges Canada has ever been faced with. An employment planning strategy which already reflects the policy of the Canadian Government is already in motion. All its programs involve an element of manpower training or retraining. Steps will be taken to ensure Canada has the necessary qualified labour force to successfully participate in the new economic order. We need not only provide young Canadians with jobs consistent with their expectations, but we must also rely on them. And our Prime Minister perfectly expressed this deep conviction when he stated in the House of Commons on October 5, 1987, and I quote: "We go forward with confidence in our future, confidence in our country, and, most of all, confidence in the youth of Canada. We have set a course for a stronger, a more united, and a more prosperous Canada. It is not a path-it never was and it never will be- for the faint of heart, but this country was not built by timid souls. This is a pact for the daring, the innovative and the nation-builders who are now called upon to make a firm decision on behalf of a strong, united, and prosperous as Canada."

These are the distinctive qualities of youth and that is why the young people are confident in their ability to take on the new challenges that will confront them.

These young people support the Free Trade Agreement because they are aware that only in a stable and prosperous economy will they be able to fully develop their potential. Surely, they want to be able to choose from a host of interesting jobs, but they also want to test their talents as managers, entrepreneurs and innovators.

Canada-U.S. Free Trade Agreement

Who will have the courage, Mr. Speaker, to deny them a future worthy of their aspirations and their hopes? Precisely those who refuse to see in this agreement our best guarantee of economic success, the free trade detractors, Mr. Speaker, those who play up the fears by spreading false rumours, those who share neither the will and the foresight of their forefathers nor the spirit and the determination of their children, those who cast doubts upon the worthiness of our enterprises and those who believe that we do not have the power to preserve our distinct character and identity and who believe that an essentially trade-oriented agreement is a step towards our assimilation by the United-States!

Mr. Speaker, I would like to remind those people today that Canada is and has always been a strong and distinct country and that foreseeing its assimilation amounts to doubting the very stature of those who built this nation. Nothing in this Agreement threatens our sovereignty any more than our social programs. Our Government has always vowed that Canada's sovereignty would not be jeopardized by a trade agreement and it has kept its word.

Mr. Speaker, I see that my allotted time has expired. That is a pity because I do have a lot more to say.

Mr. Boudria:

Mr. Speaker, I listened carefully to the Hon. Member's speech, and perhaps I should say hon. neighbour, since our ridings are next door to each other. First of all, 1 would like to congratulate him on his excellent speech. I noticed, however, that in his speech he said that the free trade agreement contained a guarantee for the sale of Canadian agricultural products in the United States. I would like to ask the Minister, who mentioned agriculture at the beginning of his comments, what specific part of the agreement contains this guarantee that will help us sell our agricultural products to the United States.

Mr. Cadieux:

Mr. Speaker, first of all, I would like to thank the Hon. Member for his kind remarks-and I must say that doesn't happen very often-in referring to my speech. In fact, Mr. Speaker, and I say this for the benefit of all Canadians, we share a common border which separates our two ridings, mine on the Quebec side and the Hon. Member's on the Ontario side.

As for the free trade agreement, I think that all Canadians who have followed this debate from the very beginning-a debate that did not start recently, since it has been going on for a very long time ... I remember mentioning in a previous speech how many hours of debate we have had and how many committee meetings, including the Legislative Committee and the Senate Committee and the Committee of the House of Commons, all of which considered these issues. Mr. Speaker, everybody realizes that what we obtained through the free trade agreement was guaranteed access to the U.S. market for our products, including agricultural products, and that the main advantage was also that we obtained a mechanism for the settlement of disputes that might arise from time to time.

August 29, 1988

Canada-U.S. Free Trade Agreement

and which did arise in the past when we did not have this kind of mechanism.

Mr. Speaker, with this agreement, unlike the situation we had in the past, we now have access to the biggest market in the world with a potential of 250 million consumers, where our farmers will be able to export more and more of their products, and 1 am thinking of our pork and beef producers who obviously endorsed the free trade agreement we have today.

Mr. McDermid:

Mr. Speaker, I have a question for the Minister. The Leader of the Official Opposition is going around telling people in Canada that the free trade agreement is the sell-out of Canada. He also says that it is the give away of Canada. He says that we will become the fifty-first state, and so on and so forth. He says that anyone who supports this deal is really giving Canada away or selling Canada to the United States.

I would like to ask the Hon. Minister, who is a resident of the Province of Quebec where there is great support for the free trade agreement, if the people of Quebec feel that Premier Bourassa, because he supports the agreement, is a traitor to Canada, is selling out Canada, is giving Canada away to the United States? Or, does he expect that Quebec will become part of the United States if this agreement goes through?

Mr. Cadieux:

Mr. Speaker, I thank the Hon. Member for his question. No one in the Province of Quebec, and I am sure no one in Canada, thinks that Premier Bourassa is a traitor, to put it in the words of my hon. colleague, with respect to the free trade agreement or any other matter. As a matter of fact, on the contrary, I believe that the Premier of the Province of Quebec, like most premiers of the other provinces, thinks that this agreement is not only good for Canada but good for the provinces and the regions. I am sure that if Mr. Bourassa supports this agreement it is because he feels like so many other Canadians that it is good for the nation. Since my colleague referred to the Right Hon. Leader of the Opposition, I would like to take this opportunity to read to the House a quotation that I would have given a little later in my speech had I the time in which to do so. It is from a former Minister in the previous Government, Mr. Regan, who stated:

When I was Minister of Trade... in Mr. Trudeau's Government... I sought to move in that direction by initiating free trade talks with the U.S. on a sector by sector basis ... I have come to the conclusion that the present free trade project is a more meaningful... courageous... and important undertaking than our more limited negotiations.

Obviously, we are moving in the right direction. We have obtained an agreement which will favour all Canadians from all areas of the country and which will give an opportunity to all Canadians to participate in the growing economy of Canada and to obtain better jobs either for themselves or for their children in the future. One thing to which the Government has been committed from the outset is to bring back the

economy of Canada the way it should have been before

the way it is now.

Mr. Boudria:

Mr. Speaker, perhaps I could ask a supplementary question, further to the one I just asked the Hon. Minister who was praising his Prime Minister's free trade agreement.

I wonder if the Minister is aware of the statement made by the Canadian Federation of Agriculture-and I must remind him that the UPA is a member of the Canadian Federation of Agriculture-that: "The CFA believes that Bill C-130, to implement the free trade agreement, threatens many sectors of Canadian agriculture." And further on, "It has a negative impact on the marketing system and the future of the quota systems, the whole marketing system of the Canadian Wheat Board, quality standards for Canadian agricultural products and the horticultural sector."

I wonder if the Minister is familiar with this statement of July 30, 1988 signed by the National Council of the Canadian Federation of Agriculture. How does he react to this statement? Is the Canadian Federation of Agriculture completely "out of it", or "fallen in the potatoes" as we say in French? Have these people been completely misled, as the Government Members claim the Members of the Opposition are?

Mr. Cadieux:

Mr. Speaker, I would never claim that the UPA is "out of it", as my hon. colleague would have me say, although of course potatoes are an important crop. I would certainly not claim, as my hon. colleague would have it in his statement, that the UPA is "out of it". On the contrary, Mr. Speaker, I think that the UPA in the past has shown its knowledge, and usually great understanding of agricultural issues.

It seems that the UPA has taken a position this time that is not shared by all the associations that have something to do with agriculture. Mr. Speaker, coming from a constituency with many dairy farmers, I am told that despite what the UPA says, the free trade agreement is not only beneficial for these farmers, but they are obviously satisfied with the proposed safeguards in the Free Trade Agreement. Obviously, Mr. Speaker, they are even more pleased to have guaranteed access to the American market of 250 million consumers and they are especially pleased as well to have the threat of unilateral protectionist measures, which the United States used to take, removed by the free trade agreement.

Hon. Donald J. Johnston (Saint-Henri-Westmount):

Mr. Speaker, I welcome this opportunity to say a few words this evening about Bill C-130 and the free trade agreement which the Bill implements. It is obvious to everyone in the House and in the country that this agreement is of historic importance to Canada. The question is: Will the ultimate impact be positive for the parties to it, namely, Canada and the United States?

August 29, 1988

Will it also be positive for the international trading environment? Of course, promoters of the agreement-obviously, the Government-argue that it will be. 1 must say that I hope that they prove to be correct.

Unfortunately, Mr. Speaker, because of all the emotion surrounding this debate, opinions become polarized. We cannot afford to let that crucial issue, that national challenge turn into a struggle, which, put in simplistic terms would pit free traders against sovereignty advocates.

1 have reviewed the agreement and as many of the arguments that have been brought to my attention both for and against it. I say to my colleagues with, 1 believe, a good deal of objectivity, that there is good news here and there is bad news here. First, the bad news is that the agreement is not as good as the Government and its promoters pretend it to be. The good news is that it is not as bad as its detractors claim.

Some of the declarations with respect to the agreement strike me as being almost ridiculous to the extent that I understand the language which is plainly set forth in the agreement.

It seems to me that the question before this Elouse, in deciding whether or not it should support the agreement, is to consider what I called the bad news and to decide whether the free trade agreement and of course the Bill that implements it, but the free trade agreement for all its problems and disappointments, should be ratified.

We all bring a certain bias to this debate. For some it is pure knee-jerk anti-Americanism. For some it is fear that Canada is swimming into the whale's mouth, which was a turn of phrase recently used by John Ralston Saul in an article in The Spectator. I have somewhat more respect for that position, but I believe that it is born of inferiority and insecurity, suggesting that Canada needs another ninety-odd GATT partners to bargain effectively with the United States.

New Zealand has apparently been quite successful in its free trade arrangement with Australia. Admittedly, the dimensions are somewhat different, but we are looking at something like five times the population. New Zealand clearly has the better part of that bargain. I have always felt that skilful negotiators in Canada, and efficient industry in Canada, would have enormous advantages in a comprehensive agreement with the United States.

For still others who oppose the agreement there is fear of persona! dislocation, job loss, and so on. This fear will legitimately persist no matter how many arguments may be made that Canada and Canadians as a whole will benefit. Adjustment will be very much a part of the implementation of this agreement. It seems to me that the Government has fallen

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far short in satisfying those constituencies that the necessary adjustments will be made in a timely fashion.

I have my own preference, Madam Speaker, I will not call it a bias, born of my experience as a Minister of State for Economic and Regional Development in the previous Liberal Government, my role as Minister of Science and Technology, and my own personal contacts with GATT and with our major trading partners at the international level. I believe and I would like to think that my preference which has always been for a comprehensive bilateral agreement with the United States is not born of bias but is born and essentially arises from the appraisal of a number of very salient facts. I am not going to repeat them, because many of them have been repeated ad nauseam in the House, and in other places.

We all know the extent of Canada's dependence on international trade. We all know the extent of Canada's dependence on the United States market. Much as many of us may deplore that fact, and we tried to take Canada way from that dependence when I was Minister, that is a hard fact, and also that the United States market is the largest and most significant market for finished goods in the world. I know many who will argue that we should enhance our trade with the newly industrialized countries, the Third World, China, and India. I agree with that, and I see no incompatibility between that posture and a comprehensive agreement with the United States.

I would point out for those who wax enthusiastic about the Peoples' Republic of China that the Gross National Product per head in China, in the range of $600 per year, gives it a total capacity to consume foreign goods of something in the neighbourhood of Canada's, and perhaps a slightly less domestic market. One must always bear that in mind. Sometimes people get carried away with the fact that we are looking at one billion souls. The fact is that it is their purchasing capacity that counts in terms of international trade.

I also have to point out that we have seen the growth of trading blocks. Much has been said about that. It is very significant, the Macdonald Commission told us, and it is an incontrovertible fact that Canada does not have unfettered access to a market of 100 million people, as do members of the free trade area in Europe, the Economic Community, Japan, and the United States.

Finally, another very salient fact has been the growth of U.S. protectionism. We fought it as best we could during the years when we had the stewardship of the Government and of the country. We were relatively successful sometimes, but not successful at others because the Americans have a wide range of non-tariff barriers, regulatory proceedings, and others which prevent Canadian firms from having unfettered access to the United States. It is absolutely obligatory that the access we have for the products we now sell be secured. Another thrust, of course, is to ensure that that market is enhanced to the extent it can be.

August 29, 1988

Canada-U.S. Free Trade Agreement

Finally, any arrangement that is entered into with the United States must be compatible with GATT and acceptable to our trading partners. The only arrangement which is acceptable to the GATT and acceptable to our trading partners is a free trade area under Article 24. It could be a custom's union, or it could go further. However, essentially it has to meet the criteria of the GATT. I would like to say a word in that context about the sectoral approach.

I have always been, as I suppose we all should be, a great advocate of the sectoral approach. There is nothing like carving out those niches in someone else's market, penetrating them, and exploiting them. That is what we attempted to do. That is the best of all possible worlds. Unfortunately, in the areas we were interested in penetrating in the U.S. market during our negotiations and meetings with Mr. Brock who was then the U.S. trade ambassador, it became quickly apparent that the Americans were not interested in such sectoral agreements. Going beyond that, as Members of this House probably know, although some may not, sectoral agreements are totally incompatible with the GATT and require waivers from two-thirds of the GATT members in order to enter into them.

These are not areas, and this is not an approach which enhances international trade. It restricts international trade. Hence, that is why the GATT itself sanctions a comprehensive free trade area, which cannot be prejudicial to third parties, which cannot restrict trade, but in the long term is intended to expand and enhance international trade.

Returning to the criteria and assessing this agreement, I pointed out that there were a number of important thrusts. First, the importance of securing access to the U.S. market. Why is this such an issue? Why can this not be resolved through the GATT?

[ Translation]

So I would have this to say to my colleagues. Although tariffs may have been noticeably reduced since the Second World War, members of the GATT, including Canada and the United States, have obviously introduced clever new mechanisms in order to protect their national products against foreign competition. As you know, madam Speaker, this is what we call non tariff barriers and there is a whole range of these barriers as far as the United States are concerned and also other countries, even Canada. These non tariff barriers, although not very visible, are quite real and indeed reach incredible proportions. In fact, hundreds of them have been pointed out in studies conducted by the GATT on this matter. One glaring example of this, and I will come back on it later on, is a non tariff barrier that exists in the United States, that is the preference being given national products by all levels of Government in the United States as far as public procurement is concerned.

Also, madam Speaker, as we know full well here in Canada, there are the so-called trade remedies being used by Americans, antidumping laws, countervailing duties and other special measures aimed at protecting their national products against

foreign competition. The list of Canadian products that have been hit by these measures is long: chemical products, canned clams, salt, cut flowers, potatoes, fish, pork, steel, wood shingles, and of course the most famous case of all, softwood lumber. So there is the problem!

Can we resolve this kind of non-tariff barrier through the agreement? The sad part is that I do not think we have. I do not think that the agreement provides the kind of security of access that we desired and that we anticipated.

The binational dispute settlement mechanism, that is, the provisions of Chapter 19, is a very far cry from a dramatic breakthrough. It is really, in essence, a substitute for the U.S. court system. They do not become relevant, as I presume Members know, until a dispute, whether it be softwood lumber, shingles or whatever, has travelled the same route as it does now, namely, the U.S. Commerce Department and the International Trade Commission.

Going back to our own experience as a Government, the issue was not a distrust of U.S. courts; it was trying to create a surprise-free environment which would inhibit the introduction of these actions destined to harass Canadian industry. The experts can argue that with the creation of this binational dispute settlement mechanism, which will apply to the domestic law of the United States, the process may be shortened.

In most cases that we will be concerned with regarding disputes between our two countries, one would hope that it never reaches that level, because it is the creation of that uncertainty through the International Trade Commission and the Commerce Department that has been the problem. The softwood lumber dispute settled in 1983 never went to the court system; it was settled at the level of the International Trade Commission.

Was there an alternative? I would argue that there was. If this agreement is adopted, I would hope that the process will be examined and that efforts will be made to find a mechanism to create a surprise-free environment.

Let me offer an example. The Hon. Gerald Regan, when he was Minister for International Trade in the previous Government, had proposed such a mechanism and had discussed it with some of his U.S. colleagues. We were told that the Americans would not surrender sovereignty over a dispute mechanism, that they would insist upon the application of their laws or insist upon the ultimate authority of Congress. I believe that the Canadian Parliament should have the same authority.

The mechanism that was suggested was that up front there would be a binational panel of this kind, without travelling the full administrative route in the United States, which would render a binding decision subject only to it being overturned by

August 29, 1988

either an Act of the U.S. Congress or an Act of the Canadian Parliament. The likelihood of that kind of action being taken by the Congress or by the Canadian Parliament is of course very remote, so one would have effectively established a level of certainty far exceeding what one finds in this agreement.

A lesser proposal, not quite as dramatic, is simply that a blue ribbon panel be set up ab initio to deal with the particular complaint of a U.S. domestic industry, and in that fashion a determination would be made by a blue ribbon panel. Then, should the complainant really want to take on that panel and proceed through the administrative mechanisms in the courts of the United States, the complainant would be free to do so. It was felt that over a period of time the stature of such a panel would dominate and, by convention, would probably become effectively the panel of first and last resort on these disputes.

I do believe, if we look at Chapter 18, the creation of a Canada-U.S. Trade Commission, that this lays some groundwork at the cabinet level which I think over a period of time could be developed into an effective agency for the resolution of most international disputes.

There are other areas that are seldom discussed, such as the frequent application of Section 337 of the 1930 U.S. trade law, which is used to harass, especially new wave industries who claim patent protection, and they are basically through a simple petition exercise involved in U.S. court proceedings. This is something which I understand was addressed during the negotiations but was not resolved in Canada's favour. We have here, indeed, the status quo. In any new wave industry, if any of us should develop a product which we feel must have access to the United States market, which effectively all new wave products must have, then the question is: Why would I put my plant in Montreal as opposed to Burlington? Would I not be better off trying to export back to a market of 25 million people and stay in the market of 250 million?

I say again that security of access was not achieved. The situation remains effectively where it is. What about enhanced access, government procurement? Again, I think that we all have reason to be profoundly disappointed. We now have achieved, according to the calculations, an increase cutting into that $700 billion of government procurement of approximately one-half of 1 per cent. Big deal. We have moved to $4 billion. It is a little movement, but certainly a far cry from the expectations that Canadian exporters had with respect to achieving greater inroads into U.S. government procurement at all levels. You may recall that government procurement by America was one of the specific examples that I cited a moment ago.

What about the other side? What about this issue of sovereignty that we hear so much about? Are social programs and subsidy codes and so on going to be affected? I think that one thing that the people who criticize this agreement must recognize-and most refuse to do so-is that the GATT already provides a very high degree of encroachment on Canadian sovereignty. Canadians are not free to subsidize as

Canada-U.S. Free Trade Agreement

they like. We may have done it in certain instances, but we are not getting away with it in many instances. That will get worse and worse.

To use the sovereignty argument one has to recognize that every treaty of any kind, in any area, is an encroachment on sovereignty. It is a surrendering of sovereignty to an international forum.

I would remind you, Madam Speaker, and others of this House, especially critics of this accord-because no one knows what the total impact may be-that this agreement is terminable on six months' notice. It seems to me that that is a complete answer to the sovereignty question. If Canadians feel at a given moment in time that yes, indeed, their social programs are going to be affected, are going to be homogenized, are going to be swallowed up by the whale, surely there would be enough national will in Canada to say "Enough is enough, we will terminate the agreement".

I might add as a footnote that I wish that Meech Lake were terminable in such fashion. The free trade agreement is there for six months, but Meech Lake, I fear, is there forever.

I also hear a lot of people lecture Canadian business on the fact that it does not really know what is good for it. I would not presume to do that. The business community has looked at this agreement and by and large has decided that it is in its best interests. 1 am forced to rely upon its opinion. It seems to me that it is somewhat presumptuous to tell the Canadian business community that this agreement is really bad for it and that we know better in this place.

What of the threat to cultural industries? 1 come back to the question of sovereignty. One argument to which I have never received a satisfactory response when I always argued for a comprehensive agreement was this: Does one as a Canadian seriously think that in terms of cultural industries the Italians, the French, the Japanese, the West Germans, and the British are going to step forward and protect the Canadian publishing sector or the Canadian communications sector or the Canadian theatrical sector? It can only be done in one way, and that is by a bilateral negotiation with the United States. It cannot be escaped, because the others have totally different interests. I do not think that the Japanese are especially concerned with their publishing industry in terms of American intrusion.

I understand that I am running out of time. Let me just say that I am satisfied, from my own experience and my own studies, that the GATT is not an alternative. I should say that in cleaning out my office-because, as I have said, I will not be running in the next election-I came upon a speech which I gave to the National Liberal Leadership Convention in 1984. In one paragraph of it I said: "Those who are involved with me in my campaign are tired of the old refrain that the world is a hostile, competitive environment, that we must peer beyond our borders wary and trembling in collective insecurity". I say that the adoption of this agreement will be very much in keeping with that thought, although I have serious reservations about it, as I have pointed out. Much improvement is needed,

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and I like to look at this as a beginning of a process, not the end of a process. The agreement must be improved, but for the reasons which I have outlined, I intend to vote for Bill C-130.

Hear, hear!

Mr. McDermid:

Madam Speaker, I think everyone in the House would agree that the Hon. Member delivered a very thoughtful talk. I think it was enjoyed and listened to by all who were in the Chamber and, 1 might add, by those who were close to the Chamber as well.

The Hon. Member said that he is not running in the next election. We have sat in this House together for nine or ten years now. I think it is fair to say that he will be missed. I hope that he will come back and play the piano for us the odd time. It is Canada's loss.

The Hon. Member is absolutely right when he says that this is the beginning, that we did not solve all the problems, and that there is much negotiating to be done in the future. He was an economic Minister on the Treasury benches of a Government. What advice would he give to the Government and the negotiators who will, over the next five to seven years, be trying to define a subsidy? When does a subsidy becomes an unfair trade practice and when a regional development program is just that and not an unfair trade practice? What kind of advice would he give to the Government's negotiators for that period of negotiation?

Mr. Johnston:

Madam Speaker, the issue of where a subsidy begins and where it ends is an extremely complicated issue. GATT, of course, already has rules, and I am one of those people who happens to believe that a benefit that may come from this agreement is that there will be some trail-blazing in establishing criteria which is much easier done one on one between Canada and the United States, criteria which then may be extended to our trading partners as a whole.

I cannot deal with all the regional subsidies. It would be a bit complicated to deal with them in a few minutes. It is my own view that national programs which are available without discrimination on a national treatment basis are programs for which Canada should fight strongly.

In terms of regional development, I think Canada should say "if you have national treatment and you are the subsidiary of a United States firm and want to locate in Cape Breton, you will get the Cape Breton development tax credit along with everyone else". The object of these programs is not to discriminate against the United States; it is to promote industrial development and jobs in the regions. That is the kind of effort that should be made, and the United States will have similar objectives as different areas of the country become impoverished from time to time and market forces are not capable of dealing with them. They have them now.

We in Montreal used to read every day that it pays to locate in New York State, and indeed it did. This is not something

that is unique to Canada. It is a problem both countries will have to deal with, but I would like to think it would be dealt with on that kind of basis in order to satisfy the GATT partners as well.

Mr. Malone:

Madam Speaker, I want to echo the words of my colleague and add to them our best wishes to the Hon. Member for Saint-Henri-Westmount (Mr. Johnston) when he leaves this House. I would like to ask the Hon. Member three questions. First, if this deal were to fail, what would be the ability of a new Government to negotiate a new deal? Does he see that as being possible or realistic?

Second, if this deal were to fail, does he believe that after such a failure there would be any possibility of opening up sector-by-sector negotiations? Third, could he comment on what he would presume to be the expectancy of the Auto Pact if this agreement agreed upon between Canada and the United States were to fail to become ratified?

Mr. Johnston:

Madam Speaker, I think the question is highly hypothetical. How do we know what the reaction will be on either side of the border if the agreement should fail? I think the reasons for its failure would be important, but implicit in the Hon. Member's question is that there would be hostility and lack of trust, that we would essentially revert to where we were, that the protectionist forces might increase, and that Canada would not have the benefit of the so-called side-swipe provision which is in the agreement. I suppose that is a possibility.

Another possibility is that there could be a change of administrations on both sides of the border and another look would be taken at an agreement in a different form. It is a hypothetical question. My own preference would be that it not fail, but that there be a very strong commitment on both sides to improve it in some of the areas I have touched upon.

That ties in with a third question as well, what would be the impact on the Auto Pact if the agreement were to fail. Of course, the Auto Pact is terminable on one year's notice. Again, the question presumes an underlying hostility. I think the real issue is that in business and commerce, by and large, as the Hon. Member knows, if an agreement is operating to the advantage of both parties, it is unlikely to be terminated. On the other hand, if it is operating only to the advantage of one party, then it is very likely to be terminated, irrespective of this particular agreement.

That was the point I made earlier in regard to the sovereignty argument. If this agreement operates dramatically to the benefit of the United States and to the detriment of Canada, a future Canadian Government will be in a position to terminate it and to receive a mandate from the Canadian people to do so.

The Hon. Member asked if we would have any chance of getting sector by sector agreements if the agreement were to fail. I said earlier that I basically favour sector by sector agreements. Who would not favour sector by sector agreements? I suppose it is what one would call cherry picking, if

August 29, 1988

one could get away with it, but it has to be done on a reciprocal basis.

When we sought agreements on urban transport, steel, informatics and agricultural implements, the four areas that we last tried to do sector by sector agreements on, we were quickly told by the United States administration that it was not interested. I am not so sure that the failure of this agreement would have any impact one way or the other. I think the difficulty is that sector by sector is a non-starter, would be frowned upon by GATT, and very likely would not be approved by the requisite two-thirds of the membership.

The Acting Speaker (Mrs. Champagne):

The period provided for questions and comments has now expired. Resuming debate. The Secretary of State (Mr. Bouchard).

Hon. Lucien Bouchard (Secretary of State of Canada):

Madam Speaker, this occasion fills me with awe and respect, since it is the first time I have had an opportunity to rise in the House to speak in debate. I shall, if I may, address my initial remarks to my constituents in the riding of Lac-Saint-Jean, to those who made it possible for me to enter these precincts and who have placed their trust in me. I want to give them the assurance that I will do everything I can to deserve that trust and will always be available to listen to what they have to say.

I am of course delighted that my maiden speech will be in support of a bill that is vital to Canada's future, to our economic development and to the national reconciliation to which this Government has dedicated so much of its energies.

A great deal has been said since the beginning of the debate on the Canada-U.S. Free Trade Agreement, which has given rise to some remarks that were often bitter and spread a great deal of confusion in the minds of our opponents.

We are faced with two points of view. One is apocalyptic, and it is therefore necessary to try and put a more accurate perspective on this debate.

The Canada-U.S. Free Trade Agreement is merely an agreement that enshrines an irreversible reality. The facts are stubborn, that we know, and basically, it has been long accepted that our economies are interdependent. Actually, this agreement reflects a world-wide and unescapable trend towards putting an end to tariff barriers between trading nations.

At a time when the Common Market, with a population of 350 million people, is a reality that is increasingly making itself felt, our North American economy must also learn to express its maturity and get rid of artificial barriers on the road to progress.

I referred to Europe, Madam Speaker. We have all heard the arguments that raised the spectre of Canadian sovereignty being undermined as a result of the agreement. We must

Canada-U.S. Free Trade Agreement

realize that Europe went through this a long time ago and since then has taken some realistic steps, going beyond the stage of an economic market to a commitment to a continental political entity. We must not forget that in Europe there are several political institutions, including the European Parliament and the Council of Europe, and that we in Canada must become part of the international market, the international club of trading nations, mindful of the fact that a nation that does not have a market of 100 million people is doomed to failure.

We are a big country, we have almost unlimited resources, but we are few in number. One of the difficulties with our country is that we have the will to succeed, we have all it takes, everything needed for what we desire, but we are limited by our numbers. With our population of 26 million, we cannot isolate ourselves, living in a world where interdependence is the rule.

This means that the dynamics of events, history, everything that drives the economy, the whole outlook for this country require an agreement with the large trading partner next to us.

Trade between Canada and the United States has increased steadily since 1935, when we first reduced tariffs. Today, we know how important trade with our southern neighbours is.

In Europe, when 1 was Ambassador in France, 1 often told the French people and Europeans with whom I spoke, to impress upon them the importance of our trade with the United States, that in some years the Province of Ontario alone sold the United States as much as all of Japan, if not more. 1 assure you that compared to the situation in Europe, this makes people realize how dangerous it is for us and for our country not to ensure secure access for such an important trade. Basically, people who tell us about the dangers for sovereignty should themselves recognize that the best way to assure Canadian sovereignty is secure access to the American market. We cannot live every day at the mercy of the U.S. Congress, when our trade is so important. Remember that when President Nixon slapped a levy on all Canadian imports a few years ago we immediately had an economic crisis on our hands. We cannot accept to live with this threat. We must set our sovereignty on a firm base. We must for ever protect our economic security. We must sign the agreement.

Today's new reality is that Canada-U.S. trade is no longer a one-way street. People like Campeau, Bombardier, Seagram and Molson control thousands of jobs south of the border. Canadians and Americans have gradually become partners on the same market of 250 million consumers.

What Canada needs to do now in this context is to make sure that we stand fast against the wave of protectionism in the United States and maintain this vital market for our economy by signing a firm agreement with our American partner.

Madam Speaker, I come from Quebec. 1 represent a riding there and our people have reached a strong consensus concerning the free trade issue. For very sound reasons, politicians as

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well as businessmen, industry, and large and small companies see eye to eye on the need for the Free Trade Agreement.

The Quebec economy simply cannot do without the American market where, I would remind the House, the province sells in excess of 75 per cent of its products, and that works out to roughly $16 billion a year.

Our major companies and our service industries, not to mention hundreds of small- and medium-sized businesses, have long since lived up to the challenge of competitors and they report massive exports to the United States. Our people are not afraid of free trade. They have been asking for it for a long time now because they know that tariff elimination spells lower production costs, higher productivity and guaranteed access to a huge consumer market.

When talking about such a sensitive sector as the forest industry we must keep in mind that Quebec exports to the United States total $3 billion. This is where we can see that for such an important sector-particularly in my riding where a lot of people depend on forestry products-untold benefits will flow from the implementation of the FTA. In recent years Quebec, like other Canadian provinces, was hard hit by American protectionism, especially in connection with softwood. Signing an agreement with the United States will put our producers beyond the reach of these coutervailing trade measures.

Our petrochemical industry, which is also facing high tariffs, will benefit from the elimination of U.S. trade barriers which, in turn, will promote the processing of our products to a larger degree within our boundaries.

For Quebec's outlying regions which have suffered for a long time from being far away from markets, the free trade agreement offers an unprecedented opportunity for economic renewal. The Government has already clearly determined that regional development policies will be implemented so that our regions can benefit from the new climate created by the free trade agreement.

National reconciliation that this Government has tirelessly championed will not be brought about merely by a constitutional agreement, it will also require an increase in a better distribution of collective wealth. This, in turn, will not be brought about by protectionism but rather through openness, a greater awareness of our capabilities and a willingness to tackle difficulties.

This is the way our businesses have set out to capture the American market. The way, Hydro-Quebec, with our huge hydro resource base as well as an expertise which is second to none, has gained faithful customers among New England States and is selling them its power surpluses, so much so that at this time, Hydro-Quebec has already signed for the coming years power delivery contracts totalling more than $32 billion. Now that the Quebec Government wishes to launch Phase II of the James Bay development, the free trade agreement with the United States confirms and clarifies our access to the

American market for this energy resource as well as for other energy sources originating in Canada.

At the same time, with this deal, Quebec electricty becomes much more attractive to U.S. suppliers of energy. Under the provisions of the agreement giving our partners access to energy supplies, it will be easier to finance such ventures as Phase II of the James Bay project.

For Quebec, as for all provinces with energy resources, the free trade agreement will mean new investments in the energy sector and its related industries.

As a Quebecker, I am particularly sensitive to the new horizons this agreement opens for Quebec. The creative enthousiasm of our young people and the calm self-confidence of our older entrepreneurs who have already started to gain access to the U.S. market will now be visible throughout the North American continent.

Of course, opponents of our initiative have implied that, for all practical purposes, this agreement would put an end to the provinces sovereignty over their natural resources. Far from the truth!

In no way will the provinces lose their natural resources because of the free trade deal. The provinces will continue to own, manage and preserve, as is the case now, the various resources located within their boundaries.

Naturally, exporting provinces will have to abide by this Agreement. Nevertheless, they will gain enormous benefits as far as investment, guaranteed access to the market and jobs are concerned. The provincial Governments involved in no way attacked those special provisions in the Canada-United States agreement.

In the area of energy, as in other areas of the trade agreement, Canadian sovereignty never was put into question, nor were the traditional rights of Canadian provinces to manage their resources.

Canadian sovereignty, Madam Speaker, has been at the heart of the free trade debate. And no doubt that aspect of the debate gave rise to the most evident signs of demagogy and assumed outrage.

However, nothing that makes this country politically, socially and culturally different from the United States is affected by the agreement's provisions. Our cultural industries-the publishing industry, the film industry, TV, music and broadcasting are specifically excluded from the free trade agreement.

The century-old commitment of the Canadian Federal entity to fight regional economic disparities also is outside the scope of the Canada-U.S. agreement.

This means that the negotiation of regional development agreements will go on between the Canadian Government and provinces. This involves the essence of this country, its perception of equality, its social justice goals.

August 29, 1988

Over the years, Canada has built up one of the most advanced social system in the world. This to its mind is the sign of a society committed to reducing inequalities, a society where compassion is a major factor.

The American society, for reasons of its own which are not for us to discuss here, chose another road. It would be highly naive to be ignorant of what our Canadian values are, to believe the signing of a trade agreement with the United States implies that Canada would adhere to the Americans social standards.

Our social programs are here to stay. And I challenge anyone among our friends opposite or our friends anywhere to show that the free trade agreement will be the end of any social program.

No provision in the treaty requires Canada to harmonize its economical or social policies with those in United States.

Since 1935, Canada and the United States have been gradually reducing their mutual tariffs by 72 per cent. In the meantime, our social policy has evolved in a way that is quite different from that in the United States. Why should the total elimination of tariffs force us to do away with it?

By the same token, the reduction of tariff barriers did not impede Canada from promoting bilingualism and multicultur-alism.

Our programs in such areas as Medicare, Old Age Security pensions, family allowances and unemployment insurance have never been on the table.

Moreover, American fishermen who felt that the unemployment insurance benefits paid to their Canadian counterparts were concealed subsidies saw their claims turned down by the US Department of Commerce.

The additional wealth resulting from the free trade agreement remains in fact the best assurance for the maintenance and development of our social programs. The economic stagnation and protectionism suggested by free trade oponents would be the best way to jeopardize our social gains.

Our Canadian identity cannot flourish in isolation, Mr. Speaker; it cannot be the result of artificial barriers. It will result from a world oriented stronger economy, to the advantage of regional development.

I strongly urge all Quebecers and other Canadians to be suspicious of all the prophets of doom and gloom who suggest that Canada will be swallowed by its huge neighbour. The Free Trade Agreement is a major step towards the achievement of the Canadian national goal. It is also the affirmation of our country's global role. Our relations with our neighbour to the South should increasingly become more responsible and adult. Fear and unwillingness to face facts would lead us nowhere. The United States are our natural partner. We cannot overlook the benefits which we could and should gain from this free trade agreement.

Canada-U.S. Free Trade Agreement

The surest sign Canadian maturity is the support already given to the Free Trade Agreement, a support which proves Canadians are no longer afraid of competition, that they have gotten rid of their inferiority complex towards the United States and that they are determined to get their share of the North American economy.

Mr. Speaker, more than a trade issue this will have an impact on the very future of this country, something which could motivate people into correcting shortcomings and help Canada achieve the place it deserves among nations.

Mr. James:

Madam Speaker, I want to congratulate the Hon. Member for Fac-Saint-Jean (Mr. Bouchard) on his maiden speech and especially on his thoughts on this very important agreement. I want to bring to his attention the area of petro-chemicals which he mentioned and ask his thoughts on it. I would like to refer to a recent speech made by Thomas d'Aquino, the President and Chief Executive Officer of the Business Council on National Issues. He talks about myths and reality. He said:

Here the myth becomes even more fantastic, especially when we count the many precise ways in which access to the United States market is either improved or made more secure by the Agreement. Take the case, for example, of where access is improved. Virtually all tariffs on trade will be removed over a 10-year period. Precise rules of origin will help clarify uncertainties at border crossings. Customer user fees will be abandoned by the United States by 1994. Except where the Agreement provides otherwise, the right of national treatment will ensure that the United States will not discriminate against Canadian producers. Steps are taken to reduce or inhibit the establishment of non-tariff barriers such as discriminatory product standards and product approval requirements. Tariffs and quotas on all agricultural goods, except for quotas in support of supply management schemes, will be removed.

Access to government procurement markets will be expanded. Rules of origin offer more protection against offshore parts producers thereby giving increased reciprocal access to Canadian and American producers. A significant number of service industries will benefit because of the provisions dealing with the right of establishment and the principle of national treatment. Temporary entry for Canadian business people and service personnel is facilitated.

I know that the Province of Quebec is interested in furthering its petrochemical industry. With regard to tariff removal in particular, Polysar said:

It is Polysar's considered opinion that the recently negotiated free trade agreement with the U.S. will provide significant benefits and opportunities for all Canadians.

In our case we believe the removal of chemical tariffs over the next five years is a key element. Recently we have been considering reopening a plant to produce styrene that has been shut down since 1981, and the removal of tariffs could have an immediate impact on that project. The elimination of the 7.4 per cent duty on styrene would improve the Company's profit margin on the commodity by 2.5 cents for every pound sold. If the plant is reopened, the 100,000 ton of styrene would all be exported, largely to the U.S., leading to an improvement in profits of $5 to $10 annually.

What have the key executives and workers in the petrochemical industry in the Province of Quebec said to the

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Member about the opportunities there to expand the petrochemical industry in which I know that province is so very interested?

Mr. Bouchard (Lac-Saint-Jean):

Madam Speaker, of course, the free trade agreement would provide us with a marvelous opportunity to improve Quebec's chances in the petrochemical industry. I can draw a parallel between this sector and the aluminum sector.

I was elected in a riding where raw aluminum is very important. We have raw aluminum plants in Alma, and there is another large one in Arvida, as well as in La Baie. The paradox is that while raw aluminum goes freely into the United States now, when we try to transform it in the secondary industry, we cannot do so without being exposed to tariffs. This is very bad because regions like mine can only be the exporters of natural resources, like electricity. This agreement will allow us to create secondary industries which are very important and will revitalize our region. It will create new jobs in the small enterprises for our young people. The youth of our region will not leave to live in big cities. While it is a good thing for them to leave sometimes, it is bad for the future when most young people leave their families and the region.

This is also a social project in that it will create jobs and new and great opportunities for young Canadians to build a new society.