Hon. Jerahmiel S. Grafstein:

Honourable senators, this resolution is self-explanatory. I urge all honourable senators to read it. It is neither long, nor complicated. It has been debated now for several years at the OSCE, which is an interparliamentary group to which I will refer in a few moments. Essentially, it calls for expanding free trade between Europe and North America. As you know, 87 per cent of our trade is with the United States. For years and years, some of us in this chamber have advocated alternate trade. Obviously Europe, the second or third largest market in the world after North America, is one market with which we should have closer ties, and certainly free trade, and free trade not just between Canada and the United States and the member states of the European Union but between regional and sub-regional governments and groups. I urge you to read the resolution carefully.

The question you may ask is, why now? In my view, this resolution could not be timelier. Canada is a trading nation; 50 per cent of our jobs, economy and activity depend on foreign trade. Several weeks ago, we learned the disastrous news that for the first time that in over three decades we now have a trade deficit, especially in manufacturing goods and services.

It is time for the Senate to take a fresh and precise look at this particular question. At this precise moment, when we hear the awesome drum beats of protectionism in the United States, as we heard last week in Congress, and the protectionist responses in Europe and Asia, it is even more important once again to make the case for free trade. Now is the time for the Senate of Canada to take a stand.

The free trade debate, especially with the United States, has been raging in Canada since Confederation. You all know your Canadian economic history. Here is a quick survey. Forgive me for being less than comprehensive. This is a fast thumbnail sketch of free trade, as reflected by our key prime ministers.

Sir John A. Macdonald was against free trade. He was for high tariffs and protectionisms.

Sir Wilfrid Laurier was for free trade. However, in 1911, he lost the election on the question of trade reciprocity with the United States. He was a true believer in free trade.

The International Joint Commission was established in 1911, one of only three bilateral institutions ever established between Canada and the United States. In all the years, between Canada and the United States, we only have three bilateral institutions. The IJC was the one, and it continues to operate. The Honourable Herb Gray is our representative on that commission.

Mackenzie King was on all sides, as he was usually on all economic trade questions. A number of times he contemplated a trade agreement with the United States during the Great Depression when Mr. Bennett took on protectionist clothes of the Conservative Party, though many in the West and the East were free traders. After World War II, King dithered after considering and drawing up a comprehensive free trade agreement with the United States, but he withdrew this initiative as he was moving towards his resignation as prime minister in the late 1940s.

Louis St. Laurent was, by impulse, as many Quebecers are a free trader. He took a leadership role in order to establish closer economic relations with the United States and advocated a majestic binational infrastructure project, such as the St. Lawrence Seaway. Of course, the much maligned C.D. Howe was an advocate of free trade. John Diefenbaker, however, was suspicious of the Americans and was against free trade, as were some of his leading advisers. His cabinet was divided on the issue.

Mr. Pearson was, by instinct, an internationalist and a free trader, but his cabinet in a minority government was split between free traders and economic nationalists. Mr. Trudeau started as a free trader and a continentalist, and then shifted at the height of the oil crisis to protectionism and relied on the foreign investment agency as a countervail to U.S. takeovers of Canadian firms.

John Turner was a reluctant free trader and led against the free trade agreement with the United States because he was afraid that there was not ample protection for Canadian workers or a satisfactory dispute resolution mechanism in the FTA promulgated by Brian Mulroney, and Mr. Turner was correct.

Of course, Mr. Mulroney, true to his Quebec roots, was an unabashed free trader. Mr. Chrétien, like most Quebecers, was also a free trader, as was as his mentor, Mitchell Sharp, but succumbed to protectionist sentiments from time to time as Minister of Energy and was ambivalent about his relationship from time to time with the United States leadership.

Mr. Martin was by nature a free trader but succumbed to protectionist sentiments from time to time, as has Mr. Harper, who I believe is an unabashed free trader.

The question is: Where does the Senate stand? The Senate has periodically considered the question of free trade, especially with the United States. Most recently, as a matter of fact, the late and very respectable George Van Roggen from British Columbia, a distinguished Liberal senator, who was Chair of the Foreign Affairs Committee of the Senate, on which I served, produced a report that antagonized the leadership of the Liberal Party when it recommended a free trade agreement with the United States.

Senator Van Roggen was a small "L" liberal senator in the great tradition of this place, who was prepared to sail against the winds of conventional wisdom on this question and other questions of the day.

Senators may properly question: Where do I stand? I am and have been a Manchester Liberal, a member of the Manchester school of liberalism that favours free trade over protectionism.

Winston Churchill was also a Manchester Liberal and an unabashed free trader. Let me quote from Winston Churchill on the free trade debate in the British Parliament in 1906. Winston Churchill's words —

Senator Segal: I was there when he made that speech.

Senator Grafstein: The honourable senator heard the original speech. Good for him. He was a Liberal for over two decades, during his most glorious and splendid period.

Let me quote Winston Churchill, from 1906, in the debate:

When we suppressed the slave trade we were fighting the cause of humanity. We broke the power of Napoleon in defense of liberties of Europe. So it was in the days of Greek Independence. So it was when we proclaimed ourselves Free Traders . . . in every part of the world, instead of being . . . little selfish preserves . . . have been thrown open to the commerce of all nations freely to buy and barter as they will . . . the people who have thrown open their ports to commerce of all nations are by far the greatest exporters.

That people whose coastwise trade is free to the foreigner as to themselves . . . are the same people who have secured overwhelming mastership of the seas. Large views always triumph over small ideas. Broad economic principles always in the end defeat the sharp devices of expediency; tolerance and liberty are always more profitable than arbitrary restrictions . . . free imports can contend with hostile tariffs . . .

Free trade is a condition of progress; it is an aid to progress; it is a herald of progress; but it is not progress. Some more is needed . . . we must produce.

Honourable senators, let me turn to the specific resolution and its origins. The OSCE Parliamentary Assembly, of which I am proudly the vice-president, for more than a decade has held regular economic forums across Europe and Asia to spread the free trade theology based on the European Union's template that has reached beyond Europe to its Eastern neighbours and now to the Mediterranean Basin. The EU is the largest trading zone in the world and the second largest market in the world, yet the EU has been ambivalent about opening up its economic space to free trade with non-member states and especially with North America.

Those of us who are free traders have had a problem until recently with the EU's commission, and particularly with the former Commissioner for Trade at the EU, Pascal Lamy, who was prepared to negotiate free trade agreements between the EU and Mexico, the EU and the Mercosul in South America, but was not prepared to negotiate a free trade agreement between the EU and North America; in fact, neither with Canada nor with the United States, together or alone.

The good news, honourable senators, is that Mr. Lamy has left the EU and, ironically, is now the head of the World Trade Organization and has now found the true faith of free trade but regretfully is encountering tough protectionist sentiments within the EU, especially with respect to our agricultural tariffs.

He has gone from the EU, so now it is time, in my view, to accelerate negotiations with the EU for a free or freer trade agreement between the EU and North America. That, I am pleased to report, is under way, but it is not moving fast enough.

The Hon. the Speaker pro tempore: Honourable senators, I cannot hear the speaker, so please keep the conversations low or in the Reading Room.

Senator Grafstein: Honourable senators will recall that in the 1930s Canada was a leader of Commonwealth trade preferences, involving trade protectionism, but those agreements and treaties were eventually displaced with Canada's active entry and adherence to the WTO, so back to the OSCE.

The OSCE is composed of 56 states reaching from Vladivostok to Vancouver. The OSCE emerged from the Helsinki Accords in the late 1970s into a full and active institution on the government side and on the parliamentary side where I so proudly serve, as I do with my colleague and great member of the OSCE Parliamentary Assembly, Senator Di Nino.

If honourable senators read the Third Basket of the Helsinki Accords, the OSCE's organizing agreements, this basket stresses trade and economic cooperation. Indeed, in 1975, all member states, including Canada, agreed to expand mutual trade in goods and services and to foster conditions for economic development in the agreement within the Helsinki Accords. That agreement within the agreement is entitled "The Agreement and Cooperation in the Field of Economics, of Science and Technology."

By the way, this economic cooperation between member states is now under way with respect to the states of the Mediterranean Basin. The OSCE is reaching down to establish membership with partner states in the Mediterranean Basin in order to foster free trade in that region, and that is the subject matter of another resolution on the Order Paper.

Why now? The Helsinki Accords called for economic cooperation because one of the most important lessons of history teaches that free trade has always been a harbinger of stability, growth and the rule of law.

Historical examples demonstrate that "free" trading practices have contributed to modernization, prosperity, peace and stability. Trade propelled the growth of the Roman Empire. Trade propelled the ancient Middle Kingdom of China until subsequent decisions by Imperial China's leadership chose to close borders to trade and investment and to trade inward and downward.

Senator Segal: Where was the honourable senator in 1988? Why was he not campaigning on our side?

Senator Grafstein: I was in the Senate dealing with the issue here. Look at my votes.

China's opening in recent years to international trade investment has led to significant economic growth in that country and also significant moderation in its civil life. China's leadership has moved the debate in the country from internal ideology to trade and economics. They are opening up, and there is moderation coming, not as fast and swift as we would like, but it has certainly become a more moderate state than it was under strict communist rule.

Free trade created the Hanseatic League in the 14th century. "Free cities" of Europe formed an international trading union that led to the formation of the rule of law.

A lesson from history, honourable senators: Commercial rule of law preceded the civil rule of law. The rule of law, as it applies to civilians and citizens, came after commercial law. Commercial law even preceded the common law. Therefore, the commercial law is a harbinger of a common law, of a civil law and of an individual rights law.

The transformation of Japan during the Second World War reduced emphasis on military spending and gave priority to economics and trade. As a result, Japan grew quickly from the devastation of war to one of the world's largest and most successful leading economies. The lessons of history are clear. Free trade acts as a catalyst to growth. Growth produces jobs and wealth. Jobs and wealth foster peace and stability.

Most instructive in Europe, the EU political arrangement of a single market was preceded by common coal and common steel agreements led by one of the greatest economic leaders of our times, the late John Monnet. He was the godfather of the European common market. It started in 1952, not with a political agreement but with an economic agreement to establish a free-trade zone for coal and steel. That agreement, in turn, led to the political integration, as we see it today, in Europe. Free trade came before political development.

Trade has always acted as a precursor or catalyst to broader international and domestic law; for example, rules around shipping lanes. Many on the other side are experts in navigation. If one looks at history, one will learn that the early rules of the sea were called lex mercatoria. Laws of trade were developed from those laws in medieval Europe and ultimately, emerged as the basis for both civil, local and criminal law for stability and predictability.

I will not bore honourable senators with my papers given at these past forums preaching free trade as a road map to peace and prosperity. The papers are available, if any wish to read them.

Now let us confront the emerging recession and perhaps depression. Have we learned the lesson of the last depression? Roosevelt's first 1932 new deal failed in the United States because Congress supported the Smoot-Hawley law, and established tariff laws as a defence against the depression, and we followed in Canada. As a result, that recession, instead of improving after we threw millions of dollars at it, grew worse until they removed, or started reducing, the tariff laws. Protectionism had the opposite effect of deepening the depression and reducing growth.

This subject has become a hot-button issue in the United States, as we learned from Senator Johnson who was meeting with Congressmen, senators and governors last week. They talk free trade — the President of the United States talks free trade — but if honourable senators look at the legislation, they will find it is crippled by protection elements. That was one of the mandated jobs that Senator Johnson and I led our teams to discuss with individual senators in government.

Now we must learn once again the harsh and hard lessons of protectionism. It impedes growth, creates greater job loss and accelerates the downward spiral of economic activity.

As I said in another resolution, I will pursue the peace benefits of a free-trade agreement amongst and between the states of the Mediterranean basin, and now we need to be concerned with free trade in North America and Europe.

We need to actively counterbalance and counter the arguments against protectionism, which is the most recent reiteration in the stimulus recovery package recently passed by the American Congress. This resolution, honourable senators, is the right idea at the right time. Let the Canadian Senate speak and let us speak clearly. President Obama came to Canada and he will therefore listen more carefully to what the Canadian Senate thinks about this matter. The resolution might influence decisions taken not only in Ottawa but later in Washington.

On a personal note, I was concerned for the first time, as was Senator Johnson, to hear in our private conversations the drum beat of protectionism.

The Hon. the Speaker pro tempore: I regret to inform the honourable senator that his time has expired. Is the honourable senator asking for more time?

Senator Grafstein: Yes, may I have five minutes, please?

In the National Post today, there is an interesting article on page 15 entitled "Obama's plan for unfree trade." I urge all honourable senators who have questions about the comments I have made to look at that article.

Honourable senators, I urge the speedy adoption of this resolution to help those who are against the cause of protectionism. This is a time for the Senate to speak because if we speak now, we will be heard not only in Canada but in the United States and across the heart of Europe. I urge the speedy adoption of this resolution.

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