TORONTO, February 18, 2002 -- York University professor Daniel Drache will tell a parliamentary committee on trade and investment this week that Canada has been unable to defend its interests at the World Trade Organization (WTO), and Ottawa should rethink its trade dispute strategy.

Drache will appear on Wednesday, Feb. 20 before the committee on trade, trade disputes and investment, a sub-committee of the Standing Committee on Foreign Affairs and International Trade that is assessing Canadian negotiating issues at the WTO. He is director of the Robarts Centre for Canadian Studies at York and co-author of a recent study showing that Canada is especially weak in defending itself in the areas of public health, and industrial and regional policy. The study concludes that the WTO is incapable of addressing the social effects of trade, which it describes as the ‘social deficit’.

The study, entitled The First Seven Years of the WTO and Canada’s Role at Centre Stage: A Report Card on Trade and the Social Deficit, examines Canada’s record at the WTO in four leading trade disputes -- patent protection of pharmaceutical products and the availability of generic drugs; the North American Auto Pact; Brazilian aircraft subsidies; and France's ban on asbestos – and the resulting social deficit in each case. Canada won only the aircraft subsidies dispute.

Among the principle findings of the study:

• In Canada’s dispute with Europe over the extent of patent protection on pharmaceutical products, intellectual property rights are at odds with the need to provide the world population with affordable drugs. The 20-year patent protection period emerged unscathed, making it difficult for generic drug producers to provide cheap generic drugs to the public.
• Canada’s aircraft subsidies dispute against Brazil reflects the difficulties developing countries have in competing on the international market in high-technology industries and the barriers to entry created by the WTO’s dispute panel. The issue in dispute was the right of middle-income nations to use export subsidies to secure overseas markets. The panel decided that Brazil’s subsidies were inconsistent with international trade rules but was silent on Canada’s subsidy practices. A subsequent panel questioned the appropriateness of the Canadian government’s support for its aircraft manufacturing sector.
• In dismantling the Auto Pact, the WTO not only disregarded Canada’s national interests, but also raises difficult questions for governments that wish to make domestic arrangements for developing an infant industry into a world-class producer. The WTO supported Japan and the European Union’s argument that the North American Auto Pact discriminated unfairly against certain countries by giving wrongful duty exemption to the "Big Three". Nevertheless, Canada’s claim that it is WTO-compliant is strong. There was no discrimination based on the origin of the products themselves because companies that qualified for Auto Pact status were able to import vehicles form anywhere in the world.
• Canada’s challenge to France’s ban on asbestos, a carcinogenic substance, was rejected by the panel on public health grounds. At the centre of the dispute was Canada’s need to appease the Quebec-based asbestos industry by securing their right to sell asbestos internationally despite having banned asbestos for domestic use. This dispute opens the door for future Panels to subject domestic policy to WTO review, thereby increasing the intrusiveness of the WTO in domestic policy areas. The asbestos dispute effectively demonstrates the limits of the WTO dispute settlement system because in circumstances where the evidence of the threat to public health is less obvious than is the case with asbestos, a trade-biased panel may deny the importing government an exception. This approach will endanger democratic choices in important areas of social, environmental, or cultural policies. Furthermore, this case demonstrates how WTO decisions are never black and white in their resolve. Public health advocates, in France and Canada, were clearly winners by any standard. The dilemma for observers is to establish criteria with which to determine a win from a loss. Few nation states are prepared to accept that a loss may be in the global public interest.

Robarts Centre Director Daniel Drache, who led the study, says that the narrowness of many of the WTO's decisions undermine the ability of governments to implement policies in the public interest and foster international cooperation. "It raises questions of whether other international bodies are needed to address complex policy issues that arise from the world trading system that would ensure a proper balance between the need to trade with the social effects of trade," he said.

Drache notes that the WTO’s perceived effectiveness is further compromised by the organization’s uneven and disappointing litigation, and an almost non-existent capacity to legislate. He adds that unless the WTO finds a way to address the social impacts of trade and reduce the social deficit, its credibility and legitimacy as an institution will remain under attack by the anti-globalization movement in a post-Quebec summit world.

The full report and additional report cards are available at the Robarts Centre’s Web site: www.robarts.yorku.ca.

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For further information, please contact:

Daniel Drache	Laura Taman	Cim Nunn
Robarts Centre for Canadian Studies	Robarts Centre for Canadian Studies	Director, Media Relations
York University	York University	York University
416-736-5415	416-736-5499	416-736-2100, ext. 22087
drache@yorku.ca	llt@yorku.ca	cimnunn@yorku.ca

YU/022/02