Notes for an Address by the Honourable Sergio Marchi, Minister for International Trade

Before the Subcommittee on International Trade, Trade Disputes and Investment, of the Standing Committee on Foreign Affairs and International Trade [SCFAIT] on Canada's Priority Interests in the Free Trade Area of the Americas Process

INTRODUCTION

1. Thank you, Mme Chairwoman and Subcommittee.

Last month (Feb. 9) exchanged views with full Committee on Canada's multilateral trade agenda.

Pleased to be able to follow up today by situating the FTAA within that broader agenda.

Know you also had a technical briefing last month (Feb. 11) on the FTAA by my officials.

2. Would like to outline what we are trying to achieve in the FTAA, where we stand and what challenges we face in the period ahead. Would then be pleased to answer a few questions.

George Haynal and other officials will provide a briefing on Canada's relations with the hemisphere.

WHAT ARE WE TRYING TO ACHIEVE?

1. Larger picture: Canada playing host to the hemisphere.

Summer: we will welcome athletes from throughout the hemisphere to the Pan American games in Winnipeg.

September: Conference of Spouses of Leaders of the FTAA will be held in Ottawa.

November: meeting of FTAA Ministers and the Americas Business Forum in Toronto.

Year 2000: Canada will host the OAS General Assembly and will later receive the leaders of the hemisphere for the third Summit of the Americas.

2. Canada is chairing the FTAA negotiations for the first eighteen month period which began last spring.

This will culminate with a meeting of Trade Ministers which Canada will chair in Toronto on November 3 and 4, immediately following the Americas Business Forum on November 1 and 2.

We have committed to making "concrete progress" by the turn of the century, and to completing our negotiations by 2005.

Canada will play a leadership role through our chairmanship.

These negotiations hold the potential for creating the world's largest free trade area, with 800 million people and a combined GDP of $9 trillion.

The FTAA would position Canada on the ground floor of one of the principal economic areas of the world.

Even excluding our NAFTA partners, the region is already a $4 billion export market for Canada, and is the destination for $26 billion in Canadian direct investment.

Total two-way trade with the region, again excluding the United States and Mexico, reached $8.5 billion in 1998.

An FTAA offers to Canadian exporters and investors the prospect of greater market access for goods and services and enhanced rules and dispute settlement procedures.

Canadian exporters still face relatively high tariff barriers in the region in such key export sectors as automotive products (70% common Mercosur tariff), machinery (20-25% tariffs in key South American markets), paper (12-16% average tariffs in Mercosur economies) and plastic goods (tariffs in the 14-18% range in key markets).

Canadian imports from Latin America and the Caribbean, on the other hand, already face very low tariffs in Canada, with many qualifying for GPT or other preferential tariff treatment.

Eliminating tariffs under an FTAA would therefore improve access for Canadian manufacturers of these and other goods and services acrossthe country, without likely imposing a significant adjustment burden on the Canadian economy.

This in turn means more and better jobs here in Canada.

PROGRESS TO DATE

FTAA process is on track - pleased with progress.

Good launch in Santiago - all 34 leaders present.

Administrative Secretariat is up and running in Miami, with 5 members and Canadian Michael Eastman at the helm.

In June, Canada chaired the first meeting of the Trade Negotiations Committee in Buenos Aires:

- established work programs for the nine negotiating groups (market access; agriculture; investment; services; subsidies; anti-dumping and countervailing duties; government procurement; competition policy; intellectual property rights and dispute settlement);

- and for the three bodies dealing with some of the broader, cross-cutting issues: electronic commerce; the special concerns of smaller economies; and the participation of civil society.

These groups held their inaugural meetings in September and October, and the second round of negotiations is currently ongoing in Miami.

In December in Suriname the Trade Negotiations Committee held its second meeting:

- focused on the issue of business facilitation;

- achieved real progress with agreement to concentrate initial efforts in the area of customs procedures.

The Trade Negotiations Committee will reconvene at the end of April to examine options and begin to flesh out a package of measures for Ministers to discuss in November.

CHALLENGES

On the whole, therefore, the perspective from the chair is that the process is unfolding as expected and our outlook is guardedly optimistic.

Guarded because there are certainly a few challenges on the horizon.  Let me touch on a few.

1. U.S. fast-track authority:

- not fatal at the moment but has clearly had an impact on the level of engagement by the United States;

- in turn will affect the engagement of others, for no country will agree to negotiate twice;

- likely result is that first few years of negotiations will focus on process and issue identification as players fine-tune their positions, leaving the hard trade-offs to the later stages of the talks;

- the focus for achieving concrete progress by the turn of the century is therefore on business facilitation -- the second major challenge ahead.

2. Business facilitation:

- the aim is straightforward - to make the conduct of business across the hemisphere smoother and simpler;

- the bottom line is that it should be as easy for a firm here in Ottawa to do business in Santiago as in Miami;

- our chief negotiators have had a successful first discussion of proposals for reducing red tape and other costs of doing business in the hemisphere - focus is on simplified and harmonized customs procedures;

- this is an area where we can produce practical results, prior to the completion of the FTAA and, at the same time, provide momentum to our talks;

- I would therefore see this as a major theme at the FTAA Ministerial meeting in Toronto.

3. Disparity in size and economic development among the various

FTAA participants:

- negotiating a free trade agreement among such a diverse field of countries -- from the world's only superpower to the smallest Caribbean island -- is unprecedented;

- smaller economies of the hemisphere, some dwarfed in size by large corporations in the region, are worried that their interests will not be taken sufficiently into account;

- Canada understands these concerns, and we can share our experience in negotiating trade arrangements from an unequal power position;

- that experience has been positive:

- we entered into a free trade agreement with the United States a partner 10 times our size;

- and have prospered under a rules-based system where trade disputes are decided on the strength of the argument and not on the size of the participants;

- Canada is also well-placed to help in building the necessary institutional capacity of the smaller countries, so that they may effectively prepare for, negotiate and follow up on the FTAA negotiations;

- because at the end of the day, a successful FTAA means leaving no members behind.

4. Global financial crisis:

- potential impact on the FTAA -- impossible to predict -- of continuing volatility in international financial markets;

- to be sure, recent events in Brazil have clouded the short-term economic outlook for the region, and we are monitoring the situation closely, but the longer-term picture remains positive;

- from our perspective, these developments only make the case for trade liberalization more compelling;

- countries pushed into recession by financial turbulence and rising interest rates may not put continued trade liberalization at the forefront of their policy priorities;

- those in affected countries facing painful economic adjustment may press for protectionist relief, as might those in neighbouring countries suddenly faced with a flood of devalued imports;

- our challenge is to resist these demands and demonstrate the benefits to be gained by continuing down the path of freer trade;

- when crises arise and they will we must act with firmness and resolve.

- we must not allow the current economic difficulties to obscure the longer view.

5. Civil Society:

- finally, the full participation of civil society -- a high priority for Canada -- remains a tough challenge;

- from our perspective, it is crucial that we conduct our negotiations as openly and inclusively as possible;

- this will not be an easy task, but we cannot expect to establish an historic, 34-country trade agreement without involving our people;

- process leading to a trade deal matters as much as the contents of the deal itself - reaching out to stakeholders, not only, domestically but across the hemisphere, will broaden politicalsupport for continued trade liberalization;

- at our meeting in Costa Rica, the Trade Ministers of the Americas, among others, endorsed the principle of increased participation in the FTAA by representatives of civil society;

- we agreed to establish a Civil Society committee, which was a Canadian initiative;

- the Committee has issued an invitation for written submissions by the end of the month, and will report to Ministers in November;

- this is a productive first step, but the Committee needs a permanent chair and a broader mandate that includes direct interaction with non-governmental organizations;

- the challenge we face is to bridge the gap between those that welcome that active engagement and others who harbour suspicions about the civil society agenda.

CONSULTATIONS

No more effective way to make the case for the participation of civil society at the hemispheric level than to show leadership on this at home.

As the negotiating process unfolds and we prepare for the Ministerial meeting in November, it is particularly important that we consult fully with Canadians.

That is why the hearings that you are holding, as well as those of the full committee, are so important.  That is also why the Government has issued a Gazette notice seeking broad-based public input on WTO and FTAA negotiations.

My Dept. will undertake stakeholder consultations with various civil society organizations in the spring.  Canadian NGOs are playing an important role in domestic consultations.  The CCA, for example, is organizing the Americas Business Forum this fall. Our consultations will hear from groups and citizens from all walks of life as we formulate our policies.

These initiatives complement formalized consultative mechanisms that we use (C-Trade for consulting with provinces, and the Sectoral Advisory Groups on International Trade for consulting with the private sector).

I also had an opportunity to consult directly with my provincial colleagues on Canada's trade agenda two weeks ago - there was considerable support.

Key role for sub-committee is in domestic consultative process - I am prepared to help in any way I can, and look forward to your interim report later this year.

CONCLUSION

Mme Chairwoman, let me say in closing that Canada remains firmly committed to the FTAA negotiations.  It represents a unique opportunity to unite the countries of this hemisphere in a more open and prosperous trade area that will create jobs and boost growth in all of our economies.

Notwithstanding the challenges before us, we will continue to bring leadership and commitment to the process throughout our chairmanship period and beyond.

We look forward with confidence to a productive Ministerial meeting in November.

I would be pleased to take any questions you might have.