August 29, 1988 (33rd Parliament, 2nd Session)

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
Canada-U.S. Free Trade Agreement
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,

August 29, 1988
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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.