Proceedings of the Standing Senate Committee on
Foreign Affairs
Issue 25, Evidence, June 5
OTTAWA, Wednesday, June 5, 2002
The Standing Senate Committee on Foreign Affairs, to which was referred Bill C-50, to amend certain Acts as a result of the accession of the People's Republic of China to the Agreement Establishing the World Trade Organization, met this day at 3:30 p.m. to give consideration to the bill.
Senator Peter A. Stollery (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, in connection with our meeting on Bill C-50, officials are in the room and prepared to answer any questions that may arise during our clause-by-clause consideration of the bill.
Senator Andreychuk: I understand that Senator Carney is on her way down from her office. I believe Senator Di Nino has informed the Chairman that he cannot be here today.
If the minister is to appear before the committee on Tuesday, then we would have an opportunity to ask questions of him and we could proceed to our clause-by-clause consideration later that day.
Senator Austin: I do not know what questions the minister could address that we cannot deal with now with officials.
No policy questions have been raised. The questions that we did raise have been answered in the form of written answers which explain the technical system by which trade regulation is conducted. Frankly, we have work to do next week.
As I said yesterday, and I wish to make this point again, I do not wish to use the minister's time on this topic unless a policy issue is involved. I have issues to take up with the Minister of International Trade on other trade issue topics, and I would be disappointed to lose the opportunity to question him because of a discussion on Bill C-50.
With respect, I wonder if we could not proceed, and when Senator Carney comes, we can interrupt our clause by clause to allow her to pursue her questions.
Senator Andreychuk: Senator Austin, would you agree that each senator should be afforded time to question the minister? Senators will determine how they utilize that time. I fully appreciate what your agenda is, and perhaps you know what mine might be with the minister.
Senator Austin: A fixed amount of time is available to Minister Pettigrew. He cannot stay here until all of our questions are exhausted. Quite a number of senators may wish to talk about various trade issues. In fact, our experience has been that almost every senator wants to take advantage of that opportunity. I would suggest to the chairman that members should use the maximum time that can be used by senators to discuss general trade issues.
Senator Bolduc: The minister has been in his position for the last two years. He has spoken all over the world. He has spoken to every group in Canada except the Senate, so we would want to take some time to discuss that with the minister.
Senator Austin: I agree that there are many issues to discuss with the minister. However, Bill C-50 is a waste of his time, in my submission. Bill C-50 is a technical bill that provides safeguards on a China-specific topic. There is no question that he would not turn over to his officials. There is no question of policy here. He will simply turn the question over to officials.
Senator Bolduc: You do not see any question of policy.
Senator Austin: I am the sponsor of the bill.
We would be wasting time that ought to be used on questions about general trade policy and bilateral trade issues with the United States, the Doha round, and so on. With the greatest of respect to honourable senators, let us leave whatever questions are left on Bill C-50 for the officials. If a major policy issue arises, then we can revisit the question; otherwise, let us go to clause-by-clause consideration.
Senator Andreychuk: Mr. Chairman, from our side, I wish to register that it is highly improper that a minister would not come here to defend his bill. I know of no other committee that I am on that, when there is a significant bill, such as this, the minister would not be here to present the bill to us. For example, in the Standing Senate Committee on Legal and Constitutional Affairs, we would not deal with a bill if the minister did not appear to defend the bill. Other committees are the same. I find it highly unusual that the minister was not called to present this bill or that he would not come. I do not wish to go into that. Nonetheless, we have not had the benefit of the minister's evidence.
Senator Austin: I would contradict what the senator has said. When a bill raises policy issues, committee members like to hear from the minister. When a bill is a matter of technical presentation, then rarely does a minister attend. Officials deal with the bill. In most cases, ministers do not defend their legislation before committees unless there are major policy issues being presented by a government.
Senator Andreychuk: I think there are policy issues.
Senator Austin: Having said that, I am quite happy to hear if there are policy issues that only a minister could clarify.
Senator Carney: As I understand it, we agreed yesterday to have a discussion of the issues of the Chinese diplomatic note that is, after all, a fairly significant matter, either here or in the Senate.
Since none of us has had a chance either to read the diplomatic note or the answer, we decided that we would address that matter today so that we could understand the situation. That is what I understood.
Are there officials here from the department to answer some of the issues that are involved? For instance, I am very interested in the issue of preliminary determination and how it is raised. I am interested in how it is dealt with in Canada, and whether it is dealt with differently in this bill.
I remind honourable senators that the department's response yesterday was that this bill puts into Canadian practice the WTO protocol.
The point in the Chinese diplomatic note is that there are discrepancies between the WTO protocol and this proposed legislation. My request is for the department to comment on that. The department has replied to the diplomatic note, but does not deal with the issue of how preliminary determination is dealt with in Canada.
The Chairman: I understand. That is why we have some officials sitting at the back who may be able to respond to your request.
If someone at the back would like to step forward, we would be interested in hearing what you have to say.
Senator Carney: When I spoke, I should say for the record, that there was nobody in the witness chairs. That is why I asked if there was anybody from the department here.
The Chairman: We were waiting for you and we did not want to start the meeting until you arrived.
Our witnesses are Mr. Cliche, Mr. Goodinson and Mr. Boomgaardt.
Please proceed.
Senator Carney: Gentlemen, I believe you know the general thrust of my question that is really technical in nature and for exploratory.
As I understand it, and you may correct me, the Chinese concern is the manner in which preliminary determination is dealt with and the fact that the legislation as laid out here is not consistent with the protocol.
We heard testimony yesterday that the purpose of this bill is to be consistent with the WTO protocol. The Chinese say it is not. We have a response from yesterday's witness, Ms Andrea Lyon, that does not answer the question. It is simply that, in Canada, the Minister of Finance makes the preliminary determination in a report to cabinet.
As you know, normally, preliminary determination follows a process in any trade issue. There is a process by which a preliminary determination is raised. First, from your point of view, what is the justification for the Chinese complaint?
Second, how is the preliminary determination made in Canadian trade law practice? Do you understand my problem?
Mr. Guillaume Cliche, International Relations Officer, Trade Remedies and General Trade Relations, Department of Finance: Honourable senators, I understand your concern.
Under article 16.7 of the China protocol, there is a provision for a provisional safeguard in critical circumstances. I am not reading directly, perhaps I should.
Senator Carney: Again, for the record, we do not have copies of the protocol before us.
Mr. Cliche: I am reading from tab 5 of your briefing book, page 82, the left-hand page.
Page 82, paragraph 7 reads:
In critical circumstances, where delay would cause damage which it would be difficult to repair, the WTO Member so affected may take a provisional safeguard measure pursuant to a preliminary determination that imports have caused or threaten to cause market disruption.
It goes on to say in the last sentence:
Duration of the provisional measure shall not exceed 200 days, during which the pertinent requirements of paragraphs 1, 2 and 5 shall be met.
In Canadian legislation, the Minister of Finance, who reports to the Governor in Council on the basis of critical circumstances, makes this provisional determination. This mirrors what is also found in global safeguards that implement the WTO Agreement on Safeguards and allows for a provisional application of the safeguard measure.
That matter is immediately referred to the Canadian International Trade Tribunal that will determine if there is injury caused to domestic producers.
Senator Carney: I understand that. That was in the letter that was written by Ms Lyon to the Chinese consulate.
My point is, I should like to know how preliminary determination is made. This letter says exactly what you have just said. I say that is not sufficient.
Explain to me how the preliminary determination is made before it goes to cabinet by the Minister of Finance? Who conducts the preliminary determination and how is that done?
One of the concerns of the Chinese embassy in their presentation to the Senate is, and I quote:
However, the current Bill C-50 does not provide procedures for the investigation prior to the preliminary determination to be reported by the Minister of Finance. Neither does it provide the participation of the International Trade Tribunal in any investigation prior to the preliminary determination. It is different from the provisions in the Report.
Your argument is that this bill is consistent with the protocol. I gather the ``Report'' is the Report of the Working Party on the Accession of China. The Chinese say that that is inconsistent with the report. There is nothing in this letter that denies or confirms that.
I should like to know how the preliminary determination is achieved before it is reported by the Minister of Finance. It is not stated in this procedure. It does not provide for the participation of the International Trade Tribunal in any investigations prior to the preliminary determination. I am asking you a process question. I am not asking you to report the material that has already been presented to us. I am asking you to address the Chinese government's concerns presented to the Senate. I am asking you to give us the information that they have asked us for and that we would like to receive.
Quite simply, who makes the preliminary determination? It has not gone to the Canadian International Trade Tribunal. Who does that?
Mr. Cliche: The Department of Finance, for whom the Minister of Finance is ultimately responsible, determines that. That would be determined pursuant to the information that would be available at that time, consistent with the urgency of the matter to be decided. That is in full consistency with obligations under WTO agreements. That is also fully consistent with the practice of China. On May 24, 2002, China took a provisional safeguard related to steel. This measure was based on a finding of critical circumstances. The determination of the China ministry of foreign trade and economic cooperation was based on a request by Chinese domestic producers for provisional determination.
Senator Carney: You can understand that our concern is not how the Chinese arrive at preliminary determination, our concern is how the Canadians arrive at preliminary determination, if this is consistent with the report to the working group, and if it is consistent with our application of trade laws to other countries.
If a Canadian company, say, in the lumber business, wanted to bring a trade action against the United States of America, would the Minister of Finance conduct an investigation into preliminary determination entirely in-house in the Department of Finance, with no other input, or no reference to a tribunal?
I am asking for information on how this process works. I am not looking for scapegoats. The Chinese say this is not consistent with the report. Your answer does not give us the information.
Mr. Cliche: The determination of the minister is referred once it is made to the CITT, but the CITT is not involved in the provisional determination. However, our international obligations dictate that certain information and findings be made if Canada chooses to impose a provisional safeguard.
In that case, the Minister of Finance, the Department of Finance, would abide by international obligations, some of which are listed in the Report of the Working Party on the Accession of China and involve a finding of sufficient evidence of market disruption and critical circumstances.
Senator Carney: I do not know if that helps with this matter. Is the method of dealing with preliminary determination different from an application of this to other countries, ``yes'' or ``no''? Is it different or the same?
Mr. Cliche: This is exactly the same process as is used in global safeguards that are applicable to all WTO members.
Senator Carney: The second concern of the Chinese government deals with the definition of ``significant cause.'' It says:
The threshold for ``significant cause'' as provided in the Bill is substantially lower than that in its normal definition, which allows greater flexibility in taking safeguard measures.
Flexibility means that, if it is lower, it can deal with surges that may be harmful. The key part is:
The definition as provided in the bill is different from that given by the WTO panels. As we understand, the definition of Significant Cause in Bill C-50 takes reference of the US safeguard legislation. The WTO Panels and the Appellate Body determined respectively in July and November, 2000, that the US understanding and practice on causation did not comply with Article 2.1 of the Agreement on Safeguards in the Gluten Case (EU v. USA, WTO/DS166). Similar determinations were made by the WTO panels and the Appellate Body with respect to safeguard cases involving the US. As the Chinese side understands, the US approach should not be taken as a sufficient and satisfactory reference in defining Significant Cause. If the Canadian legislation insists on taking the US definition and practice, the Chinese side shall reserve the right to query in compliance with WTO rules in relevant WTO mechanism.
Is it your position that the Chinese are wrong in saying that Canada has taken the American rather than the WTO panel precedents?
Mr. Ray Boomgaardt, Special Counsel, Trade Law Bureau of Vital Statistics, Department of Foreign Affairs and International Trade: Honourable senators, the term ``significant cause'' does not appear in the WTO agreements; it appears only in the protocol of accession of China. The term relates to the importance of increased imports as a determinant of injury to Canadian industry. This bill implements parts of China's protocol of accession.
The term ``significant cause'' is found in the text of the protocol at paragraph 4 of article 16, but does not appear elsewhere in the WTO agreement.
The definition of ``significant cause,'' at page 2 of the text of the bill reads:
``Significant cause'' means...an important cause that need not be as important as, or more important than, any other cause of the material injury or threat.
We are really focusing on the word ``significant,'' because that is what is new here. That is defined in the Oxford dictionary as ``noteworthy, important or consequential.'' We have used the word ``important.''
In the WTO agreement, the phrase at issue is ``principal cause.'' ``Significant cause'' is different from ``principal cause.''
Senator Carney: To cut to the chase here, Ms Lyon writes in her reply to the Chinese that:
... significant`` is defined in Bill C-50 on the basis of the normal meaning of the word, in conformity with Canada's international obligations.
Are those obligations based on the American reference as the Chinese suggest? In deference to the Chinese government, and the Chinese embassy, this reply is inadequate. You might consider elaborating on it.
I ask you: Does ``in conformity with Canada's international obligations'' mean that it is based on the U.S. law or the WTO practice?
Mr. Boomgaardt: There has been discussion in certain WTO cases of the meaning of the word ``cause.'' You will see from the definition that we do not attempt to further define that. We only attempt to define the word ``significant.''
The question of the United States' practice in relation to the use of the word ``cause'' is not in any way addressed by this proposed legislation. I am not an expert on the way the CITT handles the issue of cause, but I believe that we have our own practice and we consider it fully consistent with the WTO understanding of what the word ``cause'' means.
The WTO case cited is a case where the United States took into account imports from Canada in terms of defining whether or not there was injury and then deducted those imports in terms of its further analysis and the WTO finding in the Gluten case was that that procedure was incorrect. We do not understand the relevance of that to the points being made by China.
As far as the United States' definition of ``significant cause'' is concerned, Public Law 106-286 says that the term ``significant cause'' refers to a cause that contributes significantly to the material injury of the domestic industry but need not be equal to or greater than any other cause.
You will notice that our definition avoids the circularity of using ``significantly'' to define ``significant.''
Senator Carney: I do not know if we can pursue this much further. You might consider writing a letter that responds more significantly to the comments presented to the Senate committee by the Chinese government. Would you consider that? If it is confusing to us, it must be confusing to them.
Mr. Boomgaardt: I am just the lawyer providing legal advice to others in the department. Perhaps Mr. Goodinson could speak to that.
Mr. Steven Goodinson, Trade Policy Officer, Tariffs and Market Access Division, Department of Foreign Affairs and International: Honourable senators, as Mr. Boomgaardt has pointed out, we chose not to respond directly to the case that the Chinese cited because we did not think it was in any way relevant to the issue at hand.
Senator Carney: Why do you not say that in your response to the Chinese government?
Mr. Goodinson: We provided a response that we thought was adequate. The Chinese have not actually come back to us.
Senator Carney: The Chinese government has come back to the Senate committee. They are not happy with it, because they would not have come back to the Senate committee, an unusual move, unless they had some concerns.
I am asking you as a member of the Senate committee, and I think I have some concurrence from some other Senate members, that you address these concerns that were brought to the Standing Senate Committee on Foreign Affairs in a more coherent response.
Whether you consider it relevant or not is not the point. The point is, that the Chinese government felt it was relevant enough to bring to the Senate committee. We are asking you to respond to their concerns. Is there disagreement on that?
Senator Austin: First, I wish to thank Senator Carney for her line of questions. They are very useful in trying to get a clearer picture of our practice with respect to ``significant cause.''
Second, all that can be done with respect to Senator Carney's specific last question is to refer it to the minister for his consideration. These officials cannot respond to a policy question.
The Chairman: The committee can do that.
Senator Austin: The committee can refer the matter to the minister for his further consideration.
I should like to comment that the line of questions asked by Senator Carney and the answers have made really clear the difference between the WTO standard and the standard that will be applied as a result of this protocol.
If there is a continuing dispute, as was answered yesterday in a question put by Senator Andreychuk, it is WTO justiciable. If China feels that Canada is applying the wrong standard, and it is contrary to WTO, then China will raise the matter as a WTO procedure.
Beyond the distance we have gone now, I would suggest that this is in the bilateral regime of government-to- government relations. The bill asks us to apply tests that we now understand better. I feel comfortable with that.
Senator Carney: Would you agree that the chair should write the minister, forwarding the concerns of the Chinese government as presented to us for his consideration and response?
Senator Austin: I certainly agree that the Chair can report that we have received representations from the Chinese government, if we have received them from the Chinese government.
The Chairman: It had not been clear to me whether it was from the Chinese government or some individuals in Shanghai.
Senator Corbin: It came from the embassy.
The Chairman: It came from some people through the embassy.
Senator Austin: The note is a bilateral note between governments. The note itself was not submitted to us as a note to us. It was by way of showing us the record in the bilateral discussions. I do not know the origin of the other document. They are quite similar.
If, indeed, we had been approached by an official source in the Chinese government, I agree with Senator Carney that a summary of the discussion with respect to the Chinese view that it does not meet tests should be drawn to the attention of the minister and we should ask him to consider whether a further and fuller answer is desirable.
Senator Carney: I would concur with that. Thank you, Senator Austin.
Senator Graham: The only evidence that we have with respect to this document, ``Comments on Bill C-50 from Chinese Government,'' is the fax note at the top that says ``Comm. Off. Emb. China.''
I should like to know how this document came into our hands. Was there a covering letter?
The Chairman: We discussed this yesterday.
Senator Graham: I am sorry, I was not here. I have apologized for that and I have already given you reasons for not being here. Perhaps you could repeat the reasons, or tell me how the note arrived in our hands.
Senator Carney: Why do you not check the record?
The Chairman: It is somewhat complicated, Senator Graham. There was a group that I was originally told was from the Chinese embassy that wanted to appear at the House of Commons committee when the subcommittee discussed this bill. The subcommittee did not discuss it.
They seemed to have agreed with that suggestion. However, no one showed up. Then I received a call asking if this group that I thought was from the Chinese embassy, could appear before us. That seemed irregular to me in the sense that I questioned whether a Canadian delegation from the embassy in Beijing would be able to appear before the equivalent committee in their Parliament. This is a government-to-government arrangement, and that request seemed inappropriate. I suggested instead that they send me a letter. That is the letter.
I had always thought this document was from the Chinese embassy. It is now not clear whether it is from someone in Shanghai or elsewhere. That is where it ends.
Senator Carney: We have agreed on the procedure.
The Chairman: We have agreed.
Senator Andreychuk: You indicate that the term ``principal cause'' is used in WTO agreements. We are using the term ``significant cause.'' The WTO will ultimately tell us whether we are right or wrong.
My concern is that, if we are veering off the norms and the standards that the WTO is attempting to set, will this be leave and licence for others to impose legislation on us that may veer away from the WTO standards that we have been desperately trying to put in place?
Mr. Boomgaardt: The use of ``significant cause'' is authorized by the protocol of accession of China. In other words, because of the size of the Chinese economy, and other considerations that are relevant to China, but that are not relevant generally in the context of the WTO, there is a different standard with respect to safeguards and measures in relation to imports from China.
Senator Andreychuk: You believe the protection is the protocol; is that correct?
Mr. Boomgaardt: Yes, we are acting in accordance with the protocol.
The Chairman: Honourable senators, I would entertain a motion that we proceed to clause by clause.
Senator Corbin: I so move.
The Chairman: All in favour?
Hon. Senators: Agreed.
The Chairman: As moved by the Honourable Senator Corbin, the committee will now proceed to clause-by-clause consideration of Bill C-50, to amend certain acts as a result of the accession of the People's Republic of China to the agreement establishing the World Trade Organization.
Honourable senators, shall the title stand?
Hon. Senators: Agreed.
The Chairman: Honourable senators, shall cause 1 carry?
Hon. Senators: Agreed.
The Chairman: Honourable senators, shall clause 2 carry?
Hon. Senators: Agreed.
The Chairman: Honourable senators, shall clause 3 carry?
Hon. Senators: Agreed.
The Chairman: Honourable senators, shall clauses 4 to
10 carry?
Hon. Senators: Agreed.
The Chairman: Honourable senators, shall clauses 11 to
15 carry?
Hon. Senators: Agreed.
The Chairman: Honourable senators, shall clauses 16 to
20 carry?
Hon. Senators: Agreed.
The Chairman: Honourable senators, shall clauses 21 to
25 carry?
Hon. Senators: Agreed.
The Chairman: Honourable senators, shall clause 26 carry?
Hon. Senators: Agreed.
The Chairman: Honourable senators, shall the title carry?
Hon. Senators: Agreed.
The Chairman: Honourable senators, shall I report Bill C-50 to the Senate without amendment?
Hon. Senators: Agreed.
Senator Andreychuk: Will the replies that were given to us today form part of the record?
The Chairman: Would you care to make a motion, Senator Andreychuk?
Senator Andreychuk: Honourable senators, I move that these documents form part of our report.
The Chairman: These reply documents will certainly form part of our record.
I will add that it is somewhat irregular for Chinese officials to come directly to the committee and involve themselves in what is a government-to-government negotiation. If they have a problem, I would think they would deal with their opposite numbers in the Government of Canada. That is just an observation from the Chair.
We will certainly include those documents in the minutes, Senator Andreychuk.
Senator Andreychuk: I was talking about the records from the department that we received today. The other documents are already part of the record.
The Chairman: Yes, that is correct.
Senator Corbin: I simply wish to elucidate one matter.
At my request, we were given the document entitled ``Export controls,'' today. It is dated March 2000. I should like to know how often this is updated or revised.
The Chairman: Perhaps our researcher can tell us that.
Mr. Jay Sinha, Research Staff, Library of Parliament: Honourable senators, my understanding is that the 2002 version is supposed to come out in the very near future. I do not know exactly when, but it will be very soon.
Senator Corbin: I should like to get the updated version.
The Chairman: These things come out automatically, Senator Corbin.
The committee adjourned.