Canadian Views on the Doha Round and Perspectives on Building a National Trade Policy Consensus

I really welcome this opportunity because I think the issue before us is a very challenging one. I do not think any of us have managed to figure out the appropriate means of developing a national consensus on trade policy issues. What I wanted to do was to talk a little bit about the Canadian experience. I would really like to have an exchange of views on what is happening in Japan and hope to pick up some tips on how you do things that I could take back to Ottawa and implement.

It used to be that trade policy was very simple, dealing with measures only at the border that were very clearly quantifiable. There were not a lot of people either knowledgeable about or really interested in the subject matter, which gave a lot of flexibility to ministers, bureaucrats, and governments in general to do whatever they thought was best for the national interest. It also resulted in much quicker negotiations.

Unfortunately, starting really in the Tokyo Round, things got a little more complicated because negotiations were not just about tariffs but about nontariff barriers. Furthermore, not only were they talking about measures at the border but about measures that were internal to the country. As you started talking about things like government procurement or other nontariff barriers, there were more people that had an interest in it. In general, it was still very much limited to a dialogue between government and business, who had pretty much the same concepts in a macro context of costs and benefits. That was the beginning of more formal consultations. Although it forced the government to at least have some input from those other than civil servants, it was really input from people that shared the vision of what liberalized trade was all about.

That complicated our life partly because we had done such a good job succeeding in international trade policy negotiations. We had by accident built an international organization that existed 50 years on being a temporary ad hoc organization, the General Agreement on Tariffs and Trade (GATT), which in essence developed into a quasi-legal international organization that actually worked. It allowed countries to sit down and practically resolve their differences.

As we headed into the Uruguay Round, people started to pile other issues onto trade negotiations - issues that were still very much in the forefront of trade but started to be a little more tangential. They were not really in the context of measures at the border but were a lot more domestic in nature. For the first time in the Uruguay Round, we started to negotiate things like services. We started looking at things like intellectual property, which really was not a question of trade per se but dealt with the domestic legal framework. We started to look at things like capital flows, which were not directly related to measures of the border, although in the end, we limited it only to the trade-related aspects of investment measures.

We were successful in all of these things to some extent, way beyond our dreams. Not only did we manage to incorporate more international disciplines on trading goods, but for the first time we managed to build in disciplines of trade and services. We had an absolutely phenomenal new agreement on intellectual property, and I can say that because I was the Canadian negotiator on intellectual property.

What became evident in the context of the Uruguay Round of the World Trade Organization (WTO) and the establishment of the WTO is the creation of an organization after 50 years of trying. Secondly, because of the 50 years of experience in resolving various disputes, we now as countries agree to internationally binding dispute settlements. No other international organization had managed to achieve that. We created a major international organization that is going to have a big impact on our lives because in essence, it can tell our governments what to do. Not only that, it now has established disciplines in areas that hither to domestic economic policies.

All of a sudden, there was a much larger constituency because we had been used to just talking to the business community. If you start talking about services such as environmental services or about patents, you now have a World Trade Organization that has a major impact on an individual's life. Not surprisingly, people are asking how they can influence the international organization in Geneva. We have, as citizens, the ability to influence domestic laws because at least in democratic countries like Japan and Canada, we vote for members of parliament. But if somebody in the WTO decided that the Government of Japan or whatever government could no longer do what it was doing, how do I as a citizen influence that? All of a sudden, trade organizations started cropping up in ordinary neighborhoods in that context.

This movement was further affected by the information technology revolution. It created instant information in open societies where through the web you have access to basically whatever information you want. Secondly, the Internet also became a very powerful communication tool that allowed me as an individual citizen to all of a sudden go beyond my ordinary reach in the geographical context. Third, for various reasons in various countries, the trust that individual citizens placed in their own governments was eroding, and this prompted citizens to use technology to become better informed about issues. Hence, if citizens had a problem, then we had a problem because technology has given them the ability to mobilize public information and public interest and public opinion very successfully. All of a sudden, it became really easy to hate the WTO.

As a result, governments now had to play the public opinion game in the context of trade policy because people started to say trade was bad. You had a very interesting dichotomy in Canada whose economy is very open - 40% of our gross domestic product depends on trade for exports. People's livelihoods depend on it. In the late 80s, we had a bilateral free trade negotiation with the United States, and we had in essence a public war on whether that was good or bad for Canada. Those that won the election were ones that believed trade happened to be good and that the free trade agreement with the United States was maybe good. As a result, the public's view that trade is beneficial for Canada has increased steadily since that time. If you poll Canada, 70% of people will say trade is beneficial in the context of an open economy for a small population like that of Canada. But if you ask is trade good for you, the answer overwhelmingly is no. So people have not made the connection between the fact that trade is good for the country and the individuals. The reason that that dichotomy exists is because of what I would call "public churn," with a lot of discussion on the bad effects of globalization and the bad things that the WTO and trade do.

Polling in Canada shows that people do not make the connection between their jobs at the port or at the auto plant and trade. To some extent, it is a challenge for the Canadian government and for everybody else to make that linkage. We need to start moving in the direction of public consultation and public education to resolve this difficulty and to resolve this problem. Interestingly enough, we are making some headway in that regard.

Let me now take you through what I believe are the various tiers of public consultation. It involves, from a trade policy perspective, four or five different aspects. The first one is public education. That is absolutely crucial because while people say that they do not really know what trade or trade policy is about, they say the WTO is terrible. So the first issue of public consultations is an educated populace. It seems to me that the only way governments and those in favor of trade can show that trade is not bad for the population is through a fairly detailed sort of public education campaign. In Seattle, the debate was at that sort of basic public level - was trade good or bad. By the time we got to Cancun, the public debate was no longer whether trade was good or bad but about what kind of trade. Through various means, we managed to move the public information about trade. That is a very significant shift in the debate because you are past the debate of theology, which is very difficult to debate. Instead of debating whether the WTO kills dolphins, the debate is about how the WTO will go about dealing with environmental measures and oceanography.

So the number one critical step from the government's perspective is to have a public educated about trade so that they can at least have a meaningful and very valid societal discussion of the concepts and the costs and benefits. However, it takes an enormous amount of effort. It is very resource intensive, both capital wise and people wise because it is only by extreme transparency, by putting things out on the website, by having focus groups, by going into church basements to actually have discussions. If you do not make the effort, it is to your own detriment. That is kind of the first level.

The second level is, once you have a meaningful level of education, you then need to have a meaningful level of consultation. Consultation is a question of generating that public debate about what is good and bad for the country. That debate is no longer between the government and the industrial sector. It could be agriculture etc, which have a direct economic interest. It is more and more a debate with the whole citizen because an awful lot of people feel they have an indirect interest. For example, when the issue of cutting down trees comes up in an international trade negotiation, I want to have an input because it affects my quality of life. That creates a far more complex and different dynamic into government public consultation.

What we found is that you cannot do it bilaterally. You need to have a discussion with industry, some of the nongovernmental organizations (NGOs), the church groups, etc, all who do not like what the government is doing. To be able to reach a consensus, you really need to have a kind of multi-stakeholder discussion. However, it is virtually impossible to do because at least in Canada, the government is ahead of the private sector. The private sector is only now starting to wakeup to what I would call the soft side of economic policy or corporate social responsibility. Yet, they do not want to get into a public debate about this. Therefore, it is very difficult to get economic interests and the noneconomic interests in the same room and have a meaningful debate because you have difficulty in finding the interlocutor. But, it is really vital to try to generate this kind of equilibrium in the debate because that is how you develop a public consensus. If that debate does not take place, it is virtually impossible for it to happen.

The second problem with that is that unlike discussions between the government and the private sector based on the assumption that certain economic development is good, a multi-stakeholder debate includes a group which does not buy into that kind of assumption. This brings the debate back to the general principles of (a) is economic development really good, and (b) is globalization particularly beneficial. It becomes particularly difficult for bureaucrats because that is largely a political debate, and their intentions are limited by a certain government direction and shareholder intentions of the business community and other groups. There is no such thing as homogeneity between businesses, agricultural producers, consumers and NGOs. The way that you try to generate a national consensus, at least in Canada, is to put people that will actually have a good discussion in the room to get people engaged.

All of that has challenges, and I suspect all of that in each society has to be done by trial and error. In Canada, we have had some atrocious consultative sessions and some really good and productive sessions. There is no way to predict how those sessions are going to turn out. The important thing to know about public consultations is that it is very uncomfortable for bureaucrats because they cannot control that kind of situation. It is much better to have just an inter-departmental meeting, but you have to be willing to take that chance to get a national consensus. That is the kind of public consultation.

The third level of consultation involves talking to very knowledgeable people with whom you can really engage in a much more in-depth kind of discussion. That is absolutely vital from the government's perspective because you need to look at these various issues from various parts. Because trade policy has become complicated and diverse, you desperately need to have that dialogue with knowledgeable people that can bring various aspects to that debate because that is how you, in developing your own policies, become much more knowledgeable of where the pitfalls are in that context.

The fourth aspect is not a collective consultation, but a bilateral consultation with individuals. We are playing with the economic players in each of our countries, and therefore, it is absolutely vital as a fourth element of that public consultation framework to have an established, meaningful and very trustworthy one-on-one relationship with them. Unless you know in detail what the real, everyday interests are of the individual economic players that you represent, it is absolutely impossible to develop a national position.

All of those things are key to developing a national consensus and a national consultative mechanism. Ultimately, it comes back to the fact that you are dealing with individual people at different levels of knowledge and perspective. The only way that you can get to them is by talking to them. Therefore, the bottom line to all of this is you have to be able to on the one hand communicate and on the second hand, even more importantly, you have to be able to know how to listen. If you cannot do those things, even with the best mechanisms, none of it will work because you cannot develop the trust between two people or 100 people to generate that national consensus.

Q: We often hear an argument about outsourcing in the United States, which shows the need for public education. The U.S. government is trying hard to educate the people about the benefits of globalization, investments and so forth. How do you see that? Also, is there a similar type of argument in Canada?

Secondly, it seems to me that the role of media is very important as a way to educate the public. I feel that those media people like to write a lot on the negative rather than the positive effects of trade. How do you see the role of the media and what can we do to improve the media's response to this type of problem?

A: Very interesting questions on outsourcing. At the time that the North American Free Trade Agreement (NAFTA) was signed, Ross Perot, a presidential candidate, became famous for his phrase "that giant sucking sound." This means that having a trade relationship with Mexico will mean that Mexico will suck out all the jobs in the United States. Basically, what people play upon is fear. In this context, it was fear of blue-collar jobs - assembly work, various other lower-paying jobs. It plays on peoples fundamental fears as a means of trying to get them to see your side of the story. Of course, the result of NAFTA is that there has not been a "giant sucking sound" to Mexico.

Outsourcing is a somewhat more sophisticated question. The term is now used to get at the middle class vote as opposed to the working class vote. The middle class computer programmers are warned about free trade because companies are outsourcing to India. The terminology is silly to be perfectly frank because tourism is outsourcing. So is moving from New York to Indiana. That is just the nature of globalization. It is the nature of the way the economy is evolving. So it is a real and political issue. It is used in an election campaign as a means of generating political votes, but one hopes that it will die down after the election. It is something that Canadians are watching very carefully because a myriad of state legislators are starting to introduce various pieces of legislation at the state level which have an economic impact on Canada. Particularly if it is connected to government procurement, the WTO is really the only leverage.

Media is problematic only where there is a conflict such as when five protestors wave signs in front of the WTO or the Korean gentleman kills himself in Cancun. If you get people to sit around the table and if you frame the debate correctly, then it takes the bad news aspect out of it and it does not appear on the front page. It gets framed in op-ed pieces where people are really entering their views. I think there are things that one can do in trying to ensure that the media takes a more neutral position and to generate the debate towards a more meaningful public debate. This has to utilize the media because that is how you ultimately change public opinion.

Q: You mentioned rather extensively the issue of NGOs and their impact on trade and the obstacles of free trade. How would you rate the relative weight of the NGO issue, the civil society broadly defined, and that of traditional lobbies? How would you rate the relative weight of these two impediments to free trade? Do you think one helps the other? Do you see linkages? Do you see old-fashioned groups actually giving money to NGOs because that is kind of another way of influencing the policy debate?

A: Absolutely. I think a number of anti-globalization NGOs are to some extent funded by protectionist industries because if you stop trade, then you no longer have to expand public effort doing that. I do not think that is a prevalent situation, but it exists. It is unfortunate that private and public interests coincide sometimes, particularly if they are anti-trade. Ultimately, they tend to feed off each other and make a common cause. That is the nature of the debate. From my perspective, that is okay because I think they represent legitimate points of views.

As to whether the protectionist lobbies or NGOs are more effective, I think they are each effective in their own ways. Significant NGO lobby groups have gone from zero to very significant in a very short period of time. Unfortunately, the pro-trade lobby groups, be they NGOs or the private sector, are nowhere near as effective as the protectionist lobby groups, who put in a lot more resources. That creates an imbalance between the two.

As you know, we had 150 years of conflict with the U.S. over soft lumber exports. The United States utilized various means to stop cheaper, more effective and better lumber coming in from Canada. The U.S. lumber lobby, or rather the anti-trade forces are very effective because they have lots of resources, and they pepper Congress very effectively. The U.S. consumer lobby, be it the house builders, the construction companies that sell the lumber to retailers, or the U.S. consumer who has to pay $3,000 more per house because of these measures, is very ineffective because it has a much more diffuse powerbase. That is part of the problem with trade. The anti-trade folks are very focused, are very well-organized. The pro-trade forces are not.

Q: I think the situation in Canada is complicated because you are part of NAFTA. So what will be the national policy of Canada to have a good balance between the regional, bilateral and bigger regional organizations such as the Free Trade Area of the Americas (FTAA) as well as the WTO? Do you have such a policy?

My second question is about NGOs. Their activities were not the reason for the breakdown of Cancun, but that was part of the reason. I hear also that some developing countries with a voice in WTO negotiations are greatly influenced by NGOs. Some less developed countries may even ask NGOs what to say at the WTO meetings. Do you think we have to do something about this? How will NGOs continue to influence the decision-making process of the WTO?

A: Two good questions. Not surprisingly, the first priority of Canadian trade policy is our bilateral relationship with the U.S., which has become even more critical since September 11th because the border matters. If the border gets shut for security reasons, we are in trouble because 80% of Canada's trade goes to the U.S. Lots of people say that is a problem. I think of it as an opportunity. From my perspective, we are sitting next to one of the richest markets in the world, and therefore, to be able to take advantage of it is pretty good.

Secondly, I think item number two is the WTO because it is clear to us that the two issues that most affect our relationship with the United States are not resolvable either bilaterally or regionally but only globally. Those two issues are agriculture and trade remedies. The only solution for those two issues is the WTO. We need to pay attention to that because in Canada agriculture is really important and trade remedies, as in the soft lumber case, affect a significant amount of Canadian trade.

Thirdly, Canada is pursuing regional, multilateral and bilateral agreements because as much as we love the WTO, it is a very slow and cumbersome kind of instrument to negotiate. We got to deal once every 15 years. For everybody to declare victory, you need to have agreement between 148 countries on 25 issues. It takes a long time for everybody to be satisfied. That is okay as long as you do not expect to get a quick fix in the WTO context. But when you do get it, it has a meaningful impact like the Uruguay Round. So it is worthwhile to spend some time at that as slow and frustrating and debilitating as it seems. However, it is possible to resolve smaller issues more quickly. It creates benefit and also education, good precedent and examples that other people could utilize. So from our perspective, each one of those three issues is very important for us.

On the influence of NGOs, I disagree. I do not think NGOs caused the breakups of either Seattle or Cancun. It was the governments because the political will was not there to agree partly. Possibly, but to be perfectly frank, those are not the issues that either Seattle or Cancun faltered on. It is easy to look at Seattle and blame the protestors. But you raise a very important aspect, which is that the NGO community was much quicker to utilize the Internet and global communications to move public opinion, and they are much quicker in infiltrating and influencing government positions in places that the developed world had ignored. One of the phenomena of Cancun was that a number of developing countries had as part of their internal delegation representatives well-known international NGOs. Those international NGOs also wrote a number of position papers that affected national positions. They are learning to play the game and saying that they can to find a way to get a seat on the table even if the WTO is only in the context of state-to-state negotiations. Just as domestic protectionist interests are real players, so are NGOs. In some context, they have figured out better ways of influencing the outcome than some of the domestic protectionist players. That too is reality.

All that proves to us is that trade policy and trade negotiations are an open book. At the FTAA negotiations, we have been distributing negotiating texts officially in four languages to 34 governments. A meaningful WTO negotiation is impossible without the negotiating texts. That puts a real emphasis on public consultation because everybody will know what you know. They will come and demand to have a discussion with you because they saw the latest Japanese position on the website with which they disagree. That is the beginning of a beautiful dialogue.