SINT Committee Meeting

SUB-COMMITTEE ON INTERNATIONAL TRADE, TRADE DISPUTES AND INVESTMENT OF THE STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

SOUS-COMITÉ DU COMMERCE, DES DIFFÉRENDS COMMERCIAUX ET DES INVESTISSEMENTS INTERNATIONAUX DU COMITÉ PERMANENT DES AFFAIRES ÉTRANGÈRES ET DU COMMERCE INTERNATIONAL

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, November 26, 1997

• 1522

[English]

The Chairman (Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.)): Colleagues, we will now begin. This is the tenth meeting of the subcommittee on international trade dealing with the MAI. We've been holding meetings for the last few weeks and consulting with Canadians as to their views on the MAI.

We have with us today people we've categorized somewhat into the consumer and the social field. It's a difficult catchment to categorize you under one area. For our own purposes, that's what we've done, but we don't expect you to speak just on those areas.

Generally what we ask witnesses to do is to give us a ten-minute presentation, and then we'll have ten-minute presentations of questions and answers, at which time the respondents who may disagree with somebody else's answer can jump in also.

We have a time limit today in that we have another group coming in at five o'clock. So we'll go from now until five, at which time we'll hear from the Government of British Columbia.

What I'll do is go in the order of the list I have here, and I'll start with the Consumers Association of Canada, Marnie McCall. Welcome.

[Translation]

Mrs. Marnie McCall (Executive Director, Consumers Association of Canada): Thank you and good afternoon, ladies and gentlemen. Unfortunately, Mrs. Gail Lacombe, the Association President, is unable to attend today's meeting. My name is Marnie McCall and I am the Executive Director of the Consumers Association of Canada.

[English]

Having now expended the majority of my French, I will continue in English.

First, I would like to tell you a little about the Consumers Association of Canada. We have a national office in Ottawa, with a very small paid staff complement, and regional offices in Vancouver, Edmonton, Saskatoon and Winnipeg, which are staffed almost entirely by volunteers. CAC is the only national consumer organization in Canada.

Our mandate is to inform and educate consumers on marketplace issues; to convey the positions of government and industry to consumers; and to work with government and industry to solve marketplace problems in mutually beneficial ways.

• 1525

CAC is a grassroots, volunteer-based organization, but we are not a populist organization. All our policies on specific issues are framed within a set of general, consumer-oriented principles, which are sometimes referred to as the consumer bill of rights.

Consumers have the right to safety; the right to be informed; the right to choose; the right to be heard; the right to appropriate remedies for harm, often referred to as the right to redress; the right to consumer education; and the right to a safe and healthy environment. Along with these rights, consumers also have responsibilities—for example, to take care for their own safety; to inform themselves; to choose carefully; and to make themselves heard.

We also operate from an assumption that consumers are generally well served by a competitive marketplace. We believe government's role is to establish a system of rules that facilitate fair competition and ensure consumer protection.

We support the use of voluntary codes and other alternatives to direct command-and-control regulation. However, we believe government must always retain the power to intervene in the public interest, including for consumer protection.

CAC also supports the process of international harmonization of standards and has in fact been involved in standards development work for many years. At present, CAC members and consumer representatives can be found on the Standards Council of Canada; on the board of the Canadian Standards Association, and on the consumer policy committee of the International Organization for Standardization, usually known as ISO, as well as on more than 50 individual standards development committees at both the national and international level.

The Consumers Association of Canada developed a comprehensive policy statement on consumers and trade in 1987 in the context of the free trade agreement. Copies of that statement have been provided to the committee. Before proceeding to comment on the proposed multilateral agreement on investment, I would like to read portions of that statement:

1) CAC believes that the consumer interest lies in the widest possible selection of consumer goods and services at the lowest possible prices.

This interest, in our view, is best served by the removal of barriers to trade.

2) CAC favours trade arrangements that allow all Canadians to share, through a competitive marketplace, the benefits derived from free [and freer] trade.

4) CAC supports the principle of comprehensive trade liberalization provided that trade agreements:

a. encompass non-tariff as well as tariff barriers;

b. provide for periods of adjustment and policies to ensure re-employment of workers from less-competitive industries or sectors of the economy; and

c. [agreements which] are compatible with continued efforts to achieve multilateral free trade and meet the needs of developing countries for access to [Canadian] markets.

8) CAC [also] favours the use of direct subsidies from general tax revenues to support the development...of Canadian cultural activities....

19) Standards and regulations [provide] important protection for [Canadian consumers]. In the areas of health and safety, on which Canadians place top priority, CAC believes that Canadian standards must be maintained or improved as a result of international harmonization of standards and regulations.

CAC also believes there must be a “procedure for developing new standards and regulations...to ensure that Canadian consumers continue to benefit” from current levels of Canadian standards.

We support “the minimization of restrictions on imports from developing countries” and greater recognition during trade negotiations “of the needs of developing countries for [freer] access to world markets....”

Finally, we believe that consumers have “a direct interest,” and in fact, an “investment in Canada's trade policies. The consumer interest must be represented and considered in the development of trade policy.”

Our invitation to appear here today suggests that consumers' rights to participate in the development of trade policy are beginning to be more fully recognized.

Lest you think these policy statements mean CAC is in wholehearted agreement with the results of previous international trade agreements, please be advised that we will soon be re-examining our consumers and trade policy document in light of the failure of many of these agreements to live up to the promises of consumer benefit, adequate workforce readjustment programs, and protection against a race to the bottom in standards and regulations.

Coming now to the multilateral agreement on investment specifically, in our view, the current negotiations do not accord with the principles I have just outlined.

We have three main concerns: the MAI is being negotiated within the framework of the OECD and not in the WTO; the concept of national treatment and international harmonization appear to us to be inappropriately mingled; and Canadians, both as consumers and citizens, have not been adequately informed about the costs and benefits of the proposed agreement and have not had a reasonable opportunity to participate in developing Canada's positions.

• 1530

On the first point—being negotiated in the wrong forum—the Consumers Association of Canada believes that negotiation of a treaty as potentially far-reaching as this one should be taking place under the auspices of the World Trade Organization and not at the OECD.

Along with our fellow members of Consumers International, we are concerned that developing countries have been excluded from the process and from the potential benefits of an agreement. The MAI will do nothing to meet the needs of developing countries for access to our markets.

The Consumers Association of Canada also believes that the risks and benefits of an action must fall proportionately on all those likely to be affected. In order to determine where risks and benefits will fall, all those likely to be affected should be at the table.

The majority of the world's countries are not included in these discussions and there appears to be some reason to believe that the benefits of this agreement may disproportionately accrue to those who are at the table and the burdens to those who are not. When a more inclusive venue is available, CAC does not support these negotiations taking place in an exclusive manner.

Certain provisions in the MAI appear to be in conflict with sectoral agreements already made under the auspices of the WTO. CAC has, for example, been informed that the MAI, if approved in its current form, could require changes to the recently approved WTO agreement on basic telecommunications and might therefore require the removal of provisions protecting quality of service or subsidies for serving high-cost areas of Canada. Moving these negotiations into the WTO forum would decrease the likelihood of such inconsistencies.

With regard to national treatment and standards harmonization, the Consumers Association of Canada fully supports the notion of national treatment. All companies should be treated equally, whether they are domestic or foreign, and all consumers should be treated equally, whether they are dealing with a domestic or a foreign firm.

CAC also believes that countries have and should retain the right to establish standards in the interest of their own citizens, especially in areas of health, product safety, environment, culture and labour. If a country wishes to change these standards, it should be able to do so provided that the standards apply to all firms, foreign or domestic, and are not being introduced to act as non-tariff barriers to trade.

As mentioned earlier, CAC supports international harmonization of standards. We believe harmonization to best practices levels in fact facilitates developing countries' access into first world markets. Until harmonization has been achieved, however, this agreement or any other international trade agreement must include a system for assessing the equivalency of standards, both so that Canadians are not disadvantaged by entry of inferior products and services and so that developing countries with equivalent but not identical standards have access to Canadian markets.

Canada's recent experience in the negotiation of a mutual recognition agreement with the European Union on electrical safety highlights the importance of ensuring that a system of establishing equivalencies is included in the agreement.

CAC does not support the view that the concept of national treatment freezes all standards at the date of signing and only permits the lowering of standards thereafter. If this is in fact a correct interpretation of the concept of national treatment, CAC does not believe it is in the Canadian public interest. In particular, we do not agree with, nor can we support, the view that the mere introduction of a new or higher standard is tantamount to expropriation requiring compensation to be paid to the foreign firm.

CAC is also concerned with any provisions of the agreement, as well as previous agreements we must note, which would permit foreign companies to sue Canadian governments for actions for which those governments could not be sued by Canadian firms. We are also concerned that foreign companies would be given the right to sue Canadian governments while Canadian governments would have no recourse against foreign companies. This is of particular concern in the area of environmental protection, and CAC believes Canada should not approve provisions that permit such inequities.

In our view, the concept of national treatment should also mean that Canadian citizens have the same recourse against foreign companies in Canada as they do against Canadian ones. Canadians need to know whether they can take a foreign company to court in Canada. If their only legal recourse is in the home country of the foreign company, Canadians need to know whether their governments, federal or provincial, will assist them to pursue their rights in that other country.

Much of Canada's economy is fuelled by small and medium enterprises. Canadians rely on these SMEs for innovative products and variety in the marketplace. Innovation and variety contribute to Canada's international competitiveness. A growing portion of Canadian exports are produced by SMEs, which are also a major engine of job growth in Canada.

• 1535

CAC believes it is vital that the federal government ensure that this important sector of the Canadian economy is not disadvantaged or damaged by this agreement.

Much of the debate about the wisdom of Canada signing the MAI is due to a lack of transparency. It is not clear to Canadians that we will be able to retain existing standards in health, product safety, environment, culture or labour or that we will be able to raise those standards if we believe that to be appropriate.

Neither is it clear that provincial regulations and standards will be protected in an agreement signed by the Canadian government. This is a major concern, since most regulations relating to health, consumer protection, environment and labour fall within provincial jurisdiction.

Another part of the controversy over the MAI is a result of the apparent secrecy surrounding it. While negotiations began in the spring of 1995, the MAI did not come to the attention of the general public until the spring of 1997, just before the agreement was originally to have been signed. With the then minister saying last April that it was too early to debate the agreement publicly, there is a natural human tendency to wonder what it is that they don't want you to know.

The lengthy lock-in period in the current draft of the agreement also contributes to this perception.

CAC believes that consumers have the right to be consulted and to participate in the development of international trade policy and trade arrangements. It is individual Canadians who are at the end of the line. We bear the cost, whether as consumers or as citizens, of the decisions made on our behalf.

To recap, CAC supports trade liberalization, with certain provisos. We have grave concerns that those provisos have not been met to date, and we are not at all confident that they will be met in the proposed multilateral agreement on investment.

We believe the MAI should be negotiated through the World Trade Organization, both to ensure consistency with existing WTO obligations and to ensure the inclusion of developing countries. However, since these negotiations are unlikely to be transferred to the WTO, we want to take this opportunity to urge the government not to sign this agreement or any other international trade agreement until Canadians can be satisfied that their interests as consumers and citizens are being protected. We have some suggestions for accomplishing this:

—We believe the government should ensure that the agreement makes clear that standards cannot be lowered in order to attract investment. This is similar to what has been done in the agreement on internal trade.

—Clarify that signatories have the right to maintain the improved standards so long as they are not artificial non-tariff barriers in disguise.

—Ensure that differences in, for example, provincial labour and environmental standards are not required to be dismantled so long as foreign and domestic companies operating within a province are subject to the same rules.

—Ensure that any exceptions to the agreement—for example, for culture, health, labour, environment, safety, etc.—are clearly and strongly stated and applied to all levels of government, including municipal where that's appropriate.

—Ensure that Canada's SMEs are not disadvantaged by any terms of the agreement relative to Canada's larger companies.

—Ensure the presence of reciprocal rights to redress for both citizens and government. In particular, ensure that the concerns about Canada having to pay polluters, rather than the other way around, are addressed clearly.

—Finally, and perhaps most importantly, address all the questions about and criticisms of the MAI on the assumption that all the companies in a particular sector—for example, telecommunications or banking—are foreign owned. What protections would we need and want as individuals and as government if that were the case? Build those safeguards and protections into the agreement now.

If Canadians cannot be assured that their interests and those of their country will be safeguarded in this agreement, Canada should not sign, and we urge this committee to so recommend.

Merci.

The Chairman: Thank you, Ms. McCall.

Colleagues, again I want to remind you that we have just until five o'clock today.

I ask the presenters to keep their submissions to about ten minutes so we can have some time for questions and comments. We have another group coming in at five.

From the Citizens for Public Justice, Harry Kits. Welcome. I understand you have somebody else with you, Andrew Brouwer, who is your communications director.

Mr. Andrew Brouwer (Communications Director, Citizens for Public Justice): Yes, that's right. I'll start and Harry Kits will take over.

• 1540

CPJ welcomes this opportunity to advise the Canadian government on the proposed multilateral agreement on investment. As a non-partisan ecumenical Christian research and advocacy organization, CPJ applies the principles of love, justice and stewardship to Canadian public policy.

We do so in the conviction that responsible public policy making requires an integrated approach that applies these fundamental principles equally to all areas of public policy, whether economic, social, environmental or trade. All public policies must support the practices of equity, fairness, stewardship and community, leading to human and environmental well being.

In the context of today's discussion, policy integration requires that we ensure that measures to protect the freedom of international investors do not lead us to abandon the vulnerable among us. Equitable and integrated trade policy must actively support the common good, addressing the human and environmental needs both of Canadians and of our neighbours in the global village.

This government has, on several occasion, committed itself to just such an integrated approach. The 1993 red book states:

The Liberal agenda is premised on an integrated and coherent approach to economic policy, social policy, environmental policy, and foreign policy. Liberals understand that these policies must be linked.

Social, environmental and economic and trade issues constitute, in our view, a single agenda. Solutions are not the domain of one sector but the reinforcing responsibility of all. We must not look for linear answers and discrete solutions for interconnected problems. It's short-sighted and costly to pursue global competitiveness in a way that widens the poverty gap; contributes to job insecurity and unemployment; and damages the environment in Canada and around the world. These are fundamental principles of public justice that must not be relegated to side agreements or future debates.

Canada, we believe, should take the lead in opening up multilateral discussions around trade and investment on the basis of these core values. This must be done before we take further steps in laying the groundwork for comprehensive trade agreements.

To date, the government's pronouncements regarding the proposed MAI give little sense of an overall value framework within which the government is negotiating. All we have seen is the concern for the liberalizing of markets to facilitate untrammelled material economic growth.

CPJ reminds the Government of Canada that the government does have a specific task in society. The core principle that defines government's task is not material economic growth but public justice.

Governments must be aware of the different needs of people, communities and organizations and balance their public claims so that all have the freedom to fulfil their God-given calling.

Prime Minister Chrétien stated in his introduction to the 1993 red book that, “Government must be judged by its effectiveness in promoting human dignity, justice, fairness and opportunity.” We see little evidence of the government's commitment to public justice in the agreement being discussed today.

In fact, of the voices that are being raised about the MAI, the vast majority that do address the question of justice are asserting that the agreement will be detrimental to government's ability to carry out its public justice task.

CPJ recognizes the important contribution business investors make to a healthy economic system. We also acknowledge that, in certain circumstances, investors need to be protected from unfair government actions. However, we would remind the government and this committee that businesses also have responsibilities as corporate citizens.

Our governments have the constitutional right and the political duty to hold all citizens, including corporations, publicly accountable for the effects of their policies and practices on the common good and on the public interest of our communities and country. Corporations must be held publicly accountable not only for the financial return on their investment but also for the way in which that return is achieved and distributed. Any multilateral agreement on investment should enhance rather than diminish government's ability to hold corporations responsible for their behaviour.

We also have a series of specific questions we would like to address to the federal government. Those are in our brief if you want to check them out.

Harry.

Mr. Harry Kits (Executive Director, Citizens for Public Justice): Our primary concern about the proposed MAI is that it reflects an uncritical faith in everlasting, unfettered economic growth, a growth that demands liberalized markets and liberalized investment. It's this kind of growth that promises well being but in fact delivers often social and environmental misery.

• 1545

We've been told again and again that international investment is the engine of economic growth, and economic growth is equated with human and environmental well-being. The goal, though, of economic growth—always in the future and never enough—is used to rationalize the lowering of standards for social, cultural, labour and environmental programs. As governments increasingly withdraw from these areas, the responsibility for decisions about human welfare shifts from the political sector to the market. Poverty increases—also here in Canada—and the gap between the rich and poor widens.

CPJ submits that our current national obsession with material economic growth is badly misguided. It's becoming increasingly evident that untrammelled material economic growth is not just failing to solve unemployment poverty and environmental degradation but is in fact contributing to these problems. A book that we had a role in putting together, Beyond Poverty and Affluence: Towards a Canadian Economy of Care, details this argument.

In our drive to make ourselves more attractive to foreign investors in order to increase economic growth, we've elevated that growth into a goal in and of itself. In the process, all other values and goals have been displaced. People and creation have become little more than means to that one overarching goal.

CPJ believes that as a society we need to pause to reflect on where we're headed. We need to reassess whether this “faith”, as we call it, in material economic growth is helping us, particularly whether it's helping the vulnerable among us. And we must ask ourselves, in fact, how long we can realistically expect growth to continue on a finite earth.

Many good international resolutions have been passed at the UN, the OECD and elsewhere in regard to social and environmental concerns. But as these authors argue,

Misplaced optimism has weakened the resolve to implement fundamental reform, driven by the faith that rising production and incomes will automatically `trickle down' to all the people of the world, especially to the poor regions. Our understanding of economic processes does not support this view. In and of itself, rising production does not lead to just distribution; just distribution requires empowerment of the less well-endowed and an embrace of justice by the privileged.

The question of including labour and environmental standards within or alongside the MAI is an important point. If it were to be ratified in its current form, however, lacking those kinds of measures, the economic processes stimulated by the MAI would run roughshod over sound environmental and social policies.

We believe that Canadians ought to test every new form of political and economic cooperation with the criteria of social and environmental sustainability and a genuine openness to participation by weaker states. If we don't do so, we're only further advancing the agenda of a single-minded economic growth which is destroying our world today.

We in fact recommend that the government of Canada pull back from instituting the MAI, what many observers call “the cornerstone of the new global economy”, and instead take a leadership role in calling for an international pause in the negotiations. Canada and other nations need time to address the deeper questions about whether the underlying assumptions of current trade agreements, which push cultural, social and environmental concerns to side agreements without clout, is the way to pursue the common good, including the well-being of the poor and the marginalized in Canada and around the world.

No nation stands alone. Economically and politically, nation-states are increasingly interdependent. We recognize that it would be unwise and probably impossible to try to untangle the growing web of international economic relations. Moreover, to the extent that international economic co-operation is actually oriented towards environmental sustainability and human well-being, economic globalization has the potential of serving as a tool for justice, and enforceable, inclusive multilateral economic and trade agreements that seek the common good and respect cultural, political and economic diversity would be a very worthwhile goal.

But the MAI does not appear to be oriented towards the common good of all nations and citizens. The only rationale that we've seen for it relates to the purported benefits for Canadian investors and corporations and the Canadian economy.

As an agreement forged by the members of the OECD, the MAI reflects the concerns and goals of its members, 29 of the most powerful nations on earth, and the corporations based in those countries. Other countries, including those that are developing or are “in transition”, are expected to accede to the agreement in the future. We're concerned that economic necessity—the need for foreign investment—may force poor countries to accede to an agreement that does not reflect their long-term interests. In fact, the MAI would appear to contradict the May 1996 commitment made by the development assistance committee of the OECD, which set specific and realistic global targets for poverty reduction, access to primary education, gender equality, access to health care and sustainable development, and explicitly recognized that these goals must be pursued through individual, national approaches that reflect local conditions. How is the MAI going to allow that?

• 1550

We urge the subcommittee and the Government of Canada to acknowledge that the diversity of the world we inhabit, including the diversity of cultures, values, goals and perspectives, needs to be recognized. Real respect for diversity also requires allowing space for the expression of that diversity in trade agreements.

What is missing from the proposed MAI is respect for economic pluralism. Our colleague, Marjorie Griffin-Cohen, has developed some work here. We recommend that the Government of Canada insist that developing countries be invited, should they wish, into the negotiating process immediately and be given an equal voice in further negotiations on the MAI.

CPJ is also disturbed by the apparent lack of balance in the MAI's treatment of investors and governments. The MAI extends enforceable rights to international investors and corporations. It requires that national governments treat them in exactly the same way that they treat domestic corporations, and protects them from unfair expropriation. We don't dispute the necessity of these guarantees, but we're dismayed by the absence of any mention in this agreement of the balancing responsibilities of the corporations.

The other side of this issue is the weight this agreement gives to the responsibilities of governments, this time without acknowledging or protecting their right to fulfil their democratically mandated responsibility to act for the national good. The MAI fails to take into account the fact that it may be in the public interest for some goods and services to be provided on neither a purely public nor a purely private basis, but with some mix of the two. For example, under the MAI it appears that churches and charities that provide publicly funded social services would have to compete for public funding with foreign for-profit corporations.

In our view, it's simply not acceptable for governments to rush through major pieces of legislation without allowing adequate time for the public and for Canadian organizations to have time to express their views about such legislation and to suggest changes. While we realize there is a powerful momentum in favour of approving the MAI by next May, we strongly urge the government to call for an international pause so that democratic rights can be respected on this matter.

We realize it can be very hard for our government to take a stand contrary to that of our major trading partners; yet we need to remember the positive, humane role taken by Canada on issues of international concern in the past. More recently, Canadians can be proud of the stand taken by their government on the critical issue of anti-personnel landmines. We believe the MAI calls for similar courage.

Thank you.

The Chairman: Thank you.

From the Centre for Policy Alternatives from British Columbia, we now welcome the chair, Marjorie Griffin-Cohen.

Ms. Marjorie Griffin-Cohen (Chair, Canadian Centre for Policy Alternatives—British Columbia): The multilateral agreement on investment is frequently presented by its supporters as a vehicle for providing rules to govern international investment. The implications are that investment is now either ungoverned or unfairly governed, and that this agreement would provide some order and security for all.

This line of reasoning is a fiction that serves as a justification for an agreement that will result in considerable disorder in the control of international corporate activity. While it will provide security for international investors, the MAI will have a disabling effect on all levels of government. Supporters of the MAI focus on its non-discriminatory language, implying that the main issue is one of treating foreign and domestic corporations in the same way. In fact, it goes far beyond equal treatment, and provides for different and better treatment for all corporations in the interest of international investors. The special status that will result will force substantial changes in public policy and actions at all levels of government.

The point of the MAI is to limit the ability of nations to regulate capital. The challenges likely to result from the new rules will mean that many of the ways in which governments are able to design programs to meet distinct needs of Canadians will need to be changed.

One of the assumptions of the agreement, as stated in its preamble, is that international investment is invariably good for the parties to the agreement and “has considerably contributed to the development of their countries”. This is an idea very frequently expressed, but it is one that deserves careful examination, particularly because Canada appears willing to become party to a new agreement that will shape the entire nature of our economy as though this assumption is true.

• 1555

The contrary evidence to the assumption of the benefits of liberalization in international investment is striking. For example, the liberalization of international investment rules in Canada, both through the FTA and NAFTA, have not improved the net flow of investment into this country. Rather, this seems to encourage the outflow of both direct investment and portfolio investment.

The outflow of total business investment is growing at an alarming rate. This outflow was about 3% of business investment in Canada in 1993, but it has grown steadily year by year, so that it is now 14% of total investment.

Even when direct investment does occur, it does not necessarily improve the productive capacity or employment levels in Canada, the very benefits that are supposed to flow from increasing foreign investment. This is because foreign direct investment most often takes the form of the acquisition of existing corporations. These takeovers are frequently financed by carving up the business, selling off its most profitable aspects, and downsizing the labour force.

I want to talk about specific areas in the MAI. I want to avoid duplication, which I know will happen when other people from British Columbia talk about this. Specifically, consider the impingement on the rights of provinces. But I want to talk first of all about privatization. Current investment rules do not cover privatization and the American-based multinational corporations are very specifically calling for the right for foreigners to bid on all stages of all privatization initiatives.

The provisions of privatization could mean very serious limitations on the ability of Canada to shape its privatization measures to benefit people in this country. It appears unclear exactly how privatization will be treated in the MAI because of a lack of agreement among the parties, but it's vagueness at this stage should not be ignored.

There are very serious threats at stake for Canada, as I have just said. Frequently, the sale of public assets in Canada have been developed to meet specific public objectives and involve specific types of ownership arrangements.

If we have a situation where special rights are given to foreign investors, anything other than a sale available to the entire international community of the OECD would be no longer permissible. This is particularly problematic for privatization measures that might occur in order, for example, to increase competition in an industry or that are designed to involve general-public and special-share arrangements.

These provisions on privatization in the MAI are particularly important to Canada in the near future because of the very real possibility of the massive deregulation of electricity markets, which could result in at least a partial disposal of assets by provincial governments. Governments may prefer to do this through the distribution of shares to the general public, employee buyouts, or a distribution of certain assets to local or municipal governments.

But this kind of control over public assets could be challenged by the very broad and sweeping language of the MAI, and the results could be the control by international firms, like Enron or Utilicorp, of a very essential resource that we rely on as part of our infrastructure in our nation.

Canada has reserved its position on privatization clauses in the MAI, but the vulnerability of these reservations in general and their inability to hold over a long period is of considerable concern.

Also, it's really unclear what type of reservation Canada is proposing. According to the note accompanying the text, Canada is reserving its position because “dedicated MAI provisions on privatization are unnecessary, since the basic NT/NFM obligations would apply to privatization”.

Apparently, Canada sees these privatization measures as something that can be enforced elsewhere in the agreement, so it does not feel the need for a special clause here. Canada's reservation then is no protection against the power of the MAI to control future privatization measures in Canada.

This agreement touches on issues of provincial jurisdiction in ways that will prevent provinces from managing their resources in their public sectors. In particular, I think we're all concerned about what constitutes expropriation. The term “expropriation” here, as I'm sure you have been told before, is not used in its legitimate and normal sense of the expropriation of a physical or monetary asset, but rather covers, in addition, both direct and indirect measures that are deemed as “having equivalent effect” of expropriation. This term “having equivalent effect”, according to the commentary accompanying the text, is designed to cover something called creeping expropriation that could occur through tax measures and virtually any government regulation.

• 1600

The implications of this definition of expropriation are quite extraordinary. Any investor could claim a tax increase or a change in policy regarding rights to use resources, for example, could cause loss or damage, and therefore would be in a position to charge that the investment had been expropriated. It is important to note that an expropriation will be deemed to have occurred to a foreign investor even if the government measure is non-discriminatory and also applies to domestic investors. This is an extremely worrisome feature of this.

Some defenders of the MAI have pointed to similar wordings in other trade agreements, most notably NAFTA, on issues of national treatment and other issues. They explain that this doesn't signify anything particularly new. I argue there are really very major distinctions in the MAI which will place this agreement in an entirely different category, even though some of the words look similar. I list these distinctions in the brief I've put to you, but most notably the very definitions of “investment” and “investor” are so inclusive that this really does change the whole shape of the agreement.

The other issue is the extent to which the MAI covers sub-national governments, including those at the local level. It's a much more expanded way. I think another thing other people will have talked about is the way in which the reservations for environment and culture are not here.

These are some of the issues that I think are most significant around the distinctions between the MAI and something like NAFTA.

The implications of this for social services are particularly important. Social services are not just for the very poor. They are things that enable all Canadians to have a decent way of life. It's particularly important for disadvantaged groups of people, such as women and minority groups, who have relied on government programs to redress discrimination and to provide conditions to encourage the full participation in the economic and social life of the country. Many of the programs provided by governments at all levels are now subject to substantial change. Change will make them much less accessible in the future.

The national treatment provisions in the MAI are particularly intrusive for a country like Canada—this has been raised before—because of the mix in our system between public and private and profit and non-profit. As the federal government's responsibility diminishes in areas particularly dealing with health and education, it's clear there are going to be changes in ownership and delivery of services in this country. Provincial jurisdiction is not protected through Canada's reservation on social services, since this applies only to those which remain in the federal jurisdiction. The main problem for continued access to social services in Canada centres on what will be perceived as a legitimate role for government in direct subsidies to public or non-profit providers, particularly those which are in direct competition with private providers.

These are the kinds of things we are most concerned about. Women's groups are very concerned about the implications for child care. There are particular problems for issues around health care, which I know this committee has been apprised of before. But I want to talk about another particular one, which is the implications for universities.

People often do not realize that the university is defined as an enterprise and any government grants to a university, and specifically research grants to specific researchers within a university, could be challenged through the MAI. For example, the Social Sciences and Humanities Research Council requires that awards to research recipients be citizens or have immigrant status in Canada. It seems fairly reasonable—taxpayers are paying for this—that it should be Canadians who receive the benefit. Under the provisions of the MAI it seems likely that, for example, a visiting professor from a foreign country could claim this discriminates against his right as an investor. It also appears possible that any grant to a college or a university would have to be equally available to for-profit or even private non-profit institutions from a foreign country. As education becomes increasingly privatized in Canada, it is unlikely that governments will be able to sustain funding to public institutions under these conditions.

I think there are things Canada should be doing. The previous presenters asked Canada not to sign this agreement as it exists, and I would echo that. There are real initiatives Canada could take as a progressive leader in the world, but these would be very different kinds of agreements. They would focus not on controlling nations, as the MAI does. This is controlling nations in order to discipline the public in the interests of big international corporations, as the MAI does. We need international institutions to control the international corporate sector. Canada should have some kind of focus and should call for this to occur in the international round.

• 1605

We're also very well aware that poor nations are incredibly disadvantaged through this, which is being conducted through the OECD. We need to have at the international level some kind of redistributive function that nation-states now provide, which is escaped when international corporations are no longer controlled in the same way by nation-states.

I want to end by saying that people's rights are undermined by the MAI in ways that will be very difficult to confront in the future once this becomes codified under the OECD. The OECD is not an international government, although it is now behaving like one. While member nations belong, it is mainly a think tank for the 29 richest nations in the world.

The international rights of corporations are the only interests of the OECD. It is time to create institutions at the international level that will provide meaningful discipline over corporate international activity and protection for people, the environment and labour. It is time for international laws to mirror national ones and address more than only corporate needs. Canada could and should show leadership by not simply supporting the needs of only international business, but the needs of the people of this world as well.

The Chairman: Thank you. Thank you for your presentation. We must move on now.

From the Fraser Institute we have Owen Lippert. Welcome.

Mr. Owen Lippert (Fraser Institute): Thank you for inviting me to appear here today.

First of all, I guess it's the nature of such committees to hear from people opposed to something that is government policy, and it is the policy of this government to go ahead with the MAI. In that I differ. I support the MAI and the Fraser Institute supports the MAI, particularly the principle that lies at the heart of the MAI, which frankly from what I've heard has been seriously misunderstood, and one fears misunderstood by the public as well.

I'm referring to the principle of non-discrimination, which simply says you cannot treat a foreign company differently from a domestic company. If you have a labour law that says all companies have to be unionized and pay $40 an hour, that labour law would be acceptable. If it said only foreign companies have to have a totally unionized staff and pay $40 an hour, that would not be acceptable.

It's a fairly straightforward principle. It is certainly not a new principle. It's been developed since World War II. It is certainly part of NAFTA, so we in Canada have been living essentially under MAI-like rules since 1993. Indeed, 65% of the foreign investment in Canada currently is benefiting from that treatment, and the country has not fallen apart. I think we've seen tremendous economic growth since 1993.

This also strikes at the heart of the MAI in that this is a restriction on government and not new rights for corporations. It's simply trying to restrain government from doing what it will do if left to its own devices—subsidize here, give a special break there, “Joe, my old pal, president of a corporation, maybe we can do something”.

Governments realize that is unproductive activity and when you have a level playing field you get greater economic exchange and greater wealth. So they all got together and agreed, “Look, I won't do it if you won't do it”. That's really at the basis of this agreement.

The wealthiest countries in the world have reached a level of political maturity where they can make that kind of decision. I heard some complaints about developing nations not being invited, but most of them remain wedded to this idea of having government subsidies and intervention and decided not to join.

• 1610

Hopefully, with the MAI in place, other countries from the developing world will sign on. Certainly they have a great deal to gain from this—and a great deal from getting government to stop all its little games as to subsidizing this or that industry.

Canada can be very proud of its role in helping draft the MAI and deserves a lot of credit, certainly in the public, for its position.

That having been said, there are a few items in the MAI where the Government of Canada has deviated from its principles animating the MAI. Certainly its list of exclusions is far too long. When you include culture, health, and social services, these are precisely the industries that are in need of new ideas, new money.

First of all, there is nothing in the MAI, with the Canadian exclusion to social services, to lead to the situation that was given here, where a church would have to compete with a corporation in giving some service to the poor. I heard that and I was dumbfounded. Why is not the emphasis on providing the best service to that person in need, rather than trying to find some way to jimmy it so the local chaplain gets to provide it rather than somebody who can provide a better service? Shouldn't that be the emphasis—on the individual, on individual well-being?

I'll stray a little bit and talk about how the MAI is doing publicly, because I've been doing quite a few interviews on this. It struck me that there is a great deal of misinformation that ought to be addressed, or this issue will become a huge political football—undeservedly so—and that there may be seen to be moving away from what is a seriously progressive trade agreement. That information should be made available to the public in a more aggressive fashion, because the history of all trade agreements is that there's always public uproar and insecurity. We saw that with the free trade agreement and NAFTA. It takes effort on the part of the government to convey that to the public. In part, it's conveying the basic economics as to why trade makes us wealthy.

Anyway, with some reservations about the reservations of the Government of Canada, the Fraser Institute stands in full support of the MAI and would request the government to gear up in making a good agreement, or at least a good agreement better known in the public.

The Chairman: Thank you, Mr. Lippert.

Now, from the B.C. legislature, a fellow colleague, Gordon Wilson.

It seems to be B.C. day today. We have the Fraser Institute, and the British Columbia government will actually be coming later on.

Welcome.

Mr. Gordon Wilson (Member of the Legislative Assembly of British Columbia): Thank you very much, Mr. Chairman, and thank you to the members of the committee for providing this opportunity to make a presentation.

I'm actually tempted to discard my notes and just go straight after Owen; however, I'll defer that for the time being.

Mr. Owen Lippert: That really would be B.C. day.

Mr. Gordon Wilson: I'll defer that for just a second and come back to what I wanted to speak about.

I should say, by way of disclaimer at the beginning, that I do not purport to sit here and speak on behalf of the B.C. government. The B.C. government has a representative here and will be making a presentation. I am, however, an elected member of the Legislative Assembly and the leader of a political party in the province of British Columbia. I make representation out of concern, particularly with respect to the constitutionality of what is being discussed.

In my years as an elected member, I've made it more than just a hobby to try to work on matters of the Constitution, particularly in relation to federal and provincial powers and how those powers may be shared. So I'm going to focus, really, on that issue, and then on a couple of others that I think are specific to British Columbia.

Because other individuals here have given more broad-ranging discussions of the merits or problems with respect to the implementation of the MAI, I want to be a little bit more specific and address those areas where the MAI actually expands NAFTA, where it actually expands the provisions that are already provided for in NAFTA.

• 1615

In that regard, what I would say is that the NAFTA prohibitions are expanded to include several areas that I think fall clearly and squarely within provincial jurisdiction. They are matters that the federal government has no constitutional authority to negotiate on behalf of the provinces.

For example, the NAFTA provisions provide for the requirements, commitments and undertakings, with respect to prohibitions, not to achieve a given level of research and development in its territory—there's been allusion already made to that with respect to the universities and the requirements—and also to exclude the provision that would require hiring of given levels of nationals.

We have in the province of British Columbia already initiated government-supported job creation programs within the largest of the primary sector industries, the forest sector. I think we would have some concerns with respect to how that might be interpreted.

It also talks about the prohibition with respect to the requirement to establish joint venture. That is the fundamental tenet of most of the first nations treaty negotiations under way in the province of British Columbia today. We would have serious concern if an international agreement would prohibit the right of the province and first nations in British Columbia to come to agreement with respect to the management of their resource base on lands that they would deem treaty lands. Therefore, the question of ownership is differentiated from crown lands by virtue of this agreement. It is not clear that this agreement would not provide prohibitions in those areas.

Lastly, on the matter of the minimum level of equity participation, which is a functional part of B.C. law already, this may in fact now be challenged, at least in part. I think that has already been alluded to by Ms. Griffin-Cohen. I'm not going to go back through that.

So I think what the committee needs to consider here—and I offer this as a legislator and therefore a colleague, albeit at a different level of government—is the extent to which, through the acceptance of this treaty, if indeed we go forward with it and if indeed it is signed, the federal government has moved into areas of provincial jurisdiction or has in fact usurped areas of provincial jurisdiction where it has no authority or no ability to enforce.

I raise this issue because I think it's an important one for this committee to consider. Within the provisions of the MAI, one of the differences between MAI and NAFTA is the question with respect to the right of a foreign national to, through civil litigation, sue government. The government they sue may well be municipal or provincial. They may sue them on the basis of any one of those issues that expand NAFTA, and that I've just alluded to.

If they were to do that, because the federal government cannot force the province to sign by virtue of the fact that it is the federal government that is the signator, the suit would have to take place against the federal government. The federal government is then going to have to try to seek remedy against the province.

That's a serious issue constitutionally. What it says is that the federal government is going to usurp the right of the province to be able to have a paramountcy on these questions.

The second issue that is tangential to that is in the matter of several phrases used that are not clearly defined. There's the question of “advantage”, for example. Within the MAI it says very clearly that much of those issues I've just talked about would be okay if advantage was provided by the government—in other words, if a subsidy is being provided by the province. However, nowhere in the text is advantage defined.

The difficulty we as a province would have, I would think—I do, certainly, as a provincial politician—is that we are going to be subjected then to an interpretation on the basis of really no defined language within the text; and secondly, the possibility of that interpretation being decided by a tribunal that is outside of our area of jurisdiction and influence. I have serious concern about that on a very simple basis of jurisprudence.

I would also say that the same case arguably could be made against the question of the subsidy in terms of who makes the determination with respect to the subsidy, and what does or doesn't constitute that.

• 1620

In British Columbia we have had, as anybody who has followed the softwood lumber issues in a different forum knows, a significant ongoing dispute through softwood, and it has caused enormous financial difficulty, especially for some of the smaller lumber operators operating in our province. I think as provincial politicians we would be remiss not to raise that as an issue of concern right now, because in order for this to take effect the federal government is going to have to bring about implementing legislation. In order for the implementing legislation to take effect, the province will be required to implement enabling legislation which will be parallel to or will accommodate the implementing legislation. The text of that implementing legislation will be absolutely critical to defining what are now established constitutional rights of the province.

I have very serious reservations that at a time when we are seeking to build bridges on the matter of national unity, when we are trying to establish a more clearly defined role between the federal and provincial governments, a continued pushing of this agreement in the international context in the absence of provincial personnel present at the negotiating table is going to lead us into some serious constitutional questions. I would strongly urge, as one recommendation, that the provinces be directly included, and not on a consultation basis after the fact; that we actually be at that table.

I believe the B.C. legislature is the only legislature which had a motion introduced on the matter of the MAI that was debated, and debated widely. Unfortunately, under the rules we ran out of time before the vote. Some might say that was orchestrated by those who desire not to have it come to a vote. I don't think that was the government. It might have been the official opposition, but not being a member of the official opposition I wouldn't want to lay that charge.

Nevertheless, it didn't come to a vote. But what is clear is that concern was expressed on all sides of the House that the matters of provincial jurisdiction and the questions of the province's right to be able to determine its abilities and make the choices required on the issues I've outlined where this agreement expands NAFTA....

There are many others I don't have time to get into today, but on those in particular, I think the province of British Columbia, and certainly its legislated members, would have serious concern.

Let me very briefly draw one other issue to the attention of the panel. I would be happy to expand when and if we have a chance for questions.

The other is the matter of government procurement. We are told government procurement is not on the table, yet we see no documentation in anything that has been recently released—and I think we have all the recent documentation—to show in fact that is off the table. That fundamentally must be the choice of government, and that must rest with the province, and it cannot be subjected to these matters.

My concerns about culture, notwithstanding my friend Mr. Lippert here, perhaps can be dealt with by way of question and answer. But I do raise those issues, particularly the joint venture and the aboriginal question, and the question about the constitutionality of what the federal government is attempting to do.

Let me say finally that as a legislature.... While perhaps the MAI is not on the lips of British Columbians on a daily basis, there is widespread concern that a few days of hearings in Ottawa, where it's extremely difficult for British Columbians to come forward and have their voices heard, does not really constitute public consultation and input from the public. As a legislator I caution that in days when accountability of government is becoming more and more the issue, you might want to think carefully before you proceed on this matter.

The Chairman: Thank you, Mr. Wilson.

On our role as members of Parliament in this committee, we were given a request to consult Canadians before the negotiations start again in January. Given the timeframe we were given, and given the fact that we felt we could contact a large number of umbrella groups which represent most of these people, why we chose at that time to spend these two weeks and hear from a large number of groups representing, I think committee members would agree, a large perspective on this issue.

Our final presenter today will be Howard Mann, from International Environmental Law and Policy. Welcome.

Mr. Howard Mann (International Environmental Law and Policy): Thank you, Mr. Chairman and members of the committee.

• 1625

By way of introduction, I'm a lawyer in private practice. I specialize in international and Canadian environmental law and trade and environment issues. Formerly I was with the federal government and acted as a legal adviser to a large number of Canadian delegations to international environment negotiations, and also on the NAFTA environmental side agreement. I am speaking today purely in my personal capacity; I'm not representing any organization or any other group or any other persons.

I'm very pleased to have the opportunity to appear here today and I thank you for giving me that opportunity. The MAI, in my view, is an extremely important negotiation going on today, and one that Canadians, as we know, are paying increasingly close attention to. The Minister for International Trade and you are to be commended for opening up the process as you have over the past month or two.

My formal written presentation has been circulated to everyone, and I don't intend to read it at all here. I'll just try to introduce the key elements to it and leave you to read it and ask questions following the presentation.

The specific issue I want to address today is environmental and sustainable development concerns that arise out of the multilateral agreement on investment. For many, issues of environment and sustainable development as they relate to the MAI become very polarized into essentially a winner-take-all debate. You can support the MAI and you can support the multinationals, or on the other hand, you can support the environment and sustainable development, but you can't do both at the same time.

I don't believe that's correct. I think you can do both at the same time and I think there are ways to have an effective MAI, effective environmental protection, and support for sustainable development both domestically and internationally. That's what I'd like to speak to.

International law to protect investments is not a new field. It's been growing for several decades, probably about 50 or 60 years. The development of an MAI is not something that should be automatically rejected in a knee-jerk reaction against free trade, internationalism, or the other dynamic and evolving factors in the global economy. But I do think that expanding the existing law, which the MAI would do, should be done in full and frank awareness of the possible impacts of doing that. That is where the concern from an environmental perspective lies.

There are two main issues I'd like to address from an environmental impact perspective. One is the impacts of an MAI on the ability of states to continue to respond to environmental concerns in their own jurisdiction, including through new environmental laws. The second is the opportunity to use the MAI to promote investments that will contribute to environmentally sustainable development. That second issue is one that gets very little air play today, though it's quite critical.

To deal with the first one, the concerns for impacts on national environmental laws, originally international law in this area developed, as colleagues on the panel have said already, to address the common understanding of “expropriation”. You have property, the government takes it to build a highway or a defence plant or something like that, and you get compensation for it; or the government nationalizes your oil production and you get compensation for it, or if you don't, you go to arbitration and sue for it.

But as has been rightly pointed out, the definition of “expropriation” has been expanding under international law for the last 10 years or so. Today, other forms of interference of property—and this goes under the rubric of substantial deprivation or impairment to investments—are also increasingly being included in the definition of “expropriation”. These quite rightly raise real concerns for environmental law-making for the future.

The limits of what that means are actually right now being tested under chapter 11, the investment provisions of NAFTA. Ethyl Corporation, as I'm sure all of you are aware, has initiated an arbitration under chapter 11 of NAFTA for over a quarter of a billion dollars U.S. against the Canadian government, following the passage of the MMT legislation.

Canadians were told at the time chapter 11 was completed that there would be no impact on environmental law-making in Canada. In April 1997, just days after the MMT legislation was adopted, Ethyl filed its claim to arbitration and initiated the process under chapter 11. At least one aspect of the Ethyl claim is that this environmental legislation amounts to, in NAFTA terms, a substantial deprivation of Ethyl's Canadian subsidiary's business and therefore an illegal interference with its operation.

• 1630

Other concerns that I believe are raised in the claim allege breach of the national treatment obligations for an investor. That claim for arbitration is now proceeding. It's proceeding in secret. I have asked for and been refused copies of the statement of claim and any Canadian response on that litigation. It is not available to the public and will not be made available to the public. In fact, Canadians are not allowed under the rules of the dispute settlement process to know what the Canadian government is arguing in response to that $250 million lawsuit. I don't even know if MPs could get a copy of those documents.

I believe these issues are very real and very critical, and that the members of this committee need to be fully aware of the critical legal reality that an investment agreement that provides investment protections but does not treat environmental issues is not neutral on environment issues. Leaving environmental issues out of the agreement creates a legal situation where the international obligations on investment protection have legal primacy over a country's ability to enact environmental laws in the future. This is the legal reality that flows from an absence of environmental exceptions or provisions in the investment agreement.

The arbitration panel would then have to look squarely at the law of that agreement. If any environmental law or other labour law or other social law was challenged under it, the arbitration panel that is convened by the investing company could only look at the letter of the law in the agreement and not at other values or other balancing factors that might justify fully and completely the laws that were adopted by the government. If in fact the panel ruled that the investment provisions were infringed then compensation would follow that decision.

In short, there is no balance required if there is no balance put into the language of the agreement itself. If it isn't there it isn't required and the arbitrators are in fact not allowed to inject that kind of balancing test.

I think this issue can be addressed in three specific ways. I've put them into the written text of my presentation more fully. I'd quickly like to try to introduce them.

First, the MAI should include a general exception for environmental regulation, as it does now for financial services issues. There is a bracketed text on this now in the MAI, and I think that text should be strongly supported by the Canadian government. It is similar in intent to what is already in the GATT as an environmental exception, so there is a strong precedent for it. That should very much be supported, I believe.

Second—and these are related issues—I don't think you can do one and say you've accomplished the environmental objectives without doing the other things as well. The definition of what constitutes expropriation has already been raised. In the text of the MAI there are three separate tests that are enunciated: the definition of expropriation, a measure equivalent to an expropriation, and a measure that impairs an expropriation. All these three terms are used in the MAI text in section 4, articles (1) and (2). Each of these creates rights for the investor. None of them are defined. The absence of a definition of those terms in the context of the type of litigation that Ethyl Corporation is now pursuing I believe raises very legitimate concerns as to what constitutes measures equivalent to expropriation and impairment of an investment.

The commentary to the text in the section on dispute resolution notes specifically that lost profit opportunities are damages that are claimable under the arbitration process. So even if you don't get to make your investment, you can still claim the protections of the MAI for lost profit opportunities.

The third and last point on this issue is that the MAI is built on the concept of national treatment. As Mr. Lippert quite rightly says, a foreign investor should have the same rights and receive the same treatment as domestic investors. But in the environmental area it's very difficult to measure that, especially in a country like Canada, where so much of our resource base and industrial base is foreign-owned. Environmental regulation, by its nature, is often very site-specific or substance-specific.

• 1635

Two steel mills 25 miles apart can be subject to very different environmental regimes, because the receiving environment will be different in each case. That is quite normal and quite commonplace in the environmental area. Yet if one is foreign-owned and one is domestically owned, the foreign-owned one, if it's subject to stricter regulations that cost it more money to implement, could well claim under this agreement that it's being discriminated against. I think these issues and these types of differences can be addressed in the agreement.

There is a way to include, in a legally applicable manner, an understanding as to the types of differences that are legitimate for environmental law, including what I think are four key factors: that the receiving environments play a very critical role in determining whether investments are treated in a like manner, or what “similar circumstances” are, in the jargon of the agreement; that site-specific regulations are an appropriate environmental tool; that cumulative effects are valid considerations for regulatory purposes; and that the ratcheting up of environmental standards over time will mean that new investments are treated differently from old ones, whether they're foreign or domestic.

The second major issue of concern from my perspective is the opportunity to promote environmentally sustainable development through this agreement. While there are many rights given to multinationals under the proposed MAI, there is no mention of any responsibilities. The MAI, in my view, provides a very important opportunity to consider whether incentives can be introduced that promote the goal of sustainable development for investment in both developing and developed countries.

Underlying this issue, I believe, is an important conceptual question. Is investment, pure and simple, the goal, and what should be protected? Or is the goal an environmentally sound and socially responsible investment that promotes sustainable development? The MAI essentially will promote and protect either one, and that, I think, is the policy choice we're facing.

First in this area, Mr. Chairman, investor use of the dispute resolution provision can be conditioned to very minimal environmental requirements that are common to all OECD countries today in order to make it effective in promoting sustainable development. One method is to include a code of conduct, and there is talk of the OECD code of conduct for multinational enterprises being included as a voluntary annex. Quite frankly, that document is old, out of date, and doesn't deal effectively with sustainable development at all, and if that is the sole route, it will be entirely ineffective and inefficient.

More appropriate could be a requirement to include a provision that any investor wishing to use the dispute resolution process, the arbitration process included in the MAI, must be certified as ISO 14000 for that particular investment or facility. The ISO 14000 is an internationally adopted and recognized environmental management standard and it would provide a minimum level of environmental performance guarantees for a facility, which would in effect impose a responsibility that a company would have to fulfil in order to use the arbitration process. The rights would still be there, but their ability to trigger the recourse to their rights would be conditional on their own environmental performance.

Another requirement that I believe should be imposed is environmental impact assessments being made mandatory on any proposed investments in order to receive the protections of the MAI. This is standard fare for any international bank activity—World Bank, Asia Development Bank, any other one—and it should, in my view, be standard fare in order to receive the protection of this agreement. And it would not be a radical proposition. All these multinationals must perform these environmental assessments for their own domestic investments.

Second in this area, I believe there's a large opportunity here to expand corporate liability to the home state as well. If corporations were made liable in their home state for environmental damage that they cause in a foreign state, it would even up the liability regime substantially, and would impose, through market forces incidentally, not regulation, a liability regime that boards of directors would have to take very strong account of. And that is a legal step that is very simple and easy to accomplish.

• 1640

Third, I think the obligation to enforce environmental and labour standards that is included in the two NAFTA side agreements can and should be included in the MAI. That would help impose responsibilities on governments as well to address this issue. It would be in addition to the obligation not to reduce or waive environmental laws, article 1114(2) of NAFTA, which is now voluntary.

The Europeans have proposed making that mandatory. The Canadians have not supported making it mandatory after negotiations so far. In my view, that position should be reversed and Canada should support making that provision mandatory.

Mr. Chairman, I would just like to mention one other area of concern, and that is the secrecy associated with the dispute resolution process.

The Chairman: Very briefly, if you can.

Mr. Howard Mann: I think the secrecy should be reversed and the documents—the statements of claim and responses, and so on—should be publicly available, and all the arbitrations, not just the final awards.

Those are some of the environmental aspects, not all of them. I thank you for your time.

The Chairman: Thank you, Mr. Mann.

Colleagues, we have twenty minutes left. I want to make one short comment, though, before I turn it over to Mr. Penson.

I appreciate the work that has been done on the presentations today. I know some groups are national groups and other groups are just private representatives, but I would encourage all groups in the future that appear before a parliamentary committee, if they can, to have translated copies of all documents that they bring. It certainly helps us in our deliberations, because not having the translation really gives a disadvantage to some of our members who may not be able to read as well the English language.

Mr. Penson.

Mr. Charlie Penson (Peace River, Ref.): Thank you, Mr. Chairman.

I have been advised that we have five minutes per question and answer, so that doesn't leave very long. I probably will just have a chance to welcome the group here today. It has been an interesting process.

It seems to me, though, that a lot of the controversy surrounding this issue has been over the secrecy of negotiations, lack of information, and quite a bit of misunderstanding. I fault the government for not involving the public in this debate a lot earlier. It seems to me that it has weakened Canada's negotiating position to some extent, and that we would be far better off at the OECD if we could go there and with some authority say that we have the Canadian public behind us on this issue. I think to a large extent it probably is, but there is a lot of misunderstanding about this agreement, and that, I think, weakens it.

The Minister for International Trade came before this committee when we first started to study, and told us that what they are looking for is NAFTA moved to 29 member OEDC countries. He said they would look for exemptions in areas that they have in NAFTA. Because NAFTA already governs about 65% of foreign investment in Canada, I guess we have a known commodity. We have a commodity that we have had in place under the Free Trade Agreement since 1988, changed somewhat under NAFTA in 1993, but we have a model to look at.

We also have people like the dean of business from the University of Alberta, Mike Percy, saying that Alberta is going to need $20 billion of investment in the next 10 years to develop tar sands and various projects that are going to be funded there.

We also have people like the mining industry around the city today talking about the difficulties in having mining in Canada. There was some mention made by Ms. Griffin-Cohen about the alarming rate of outflow of capital from this country. When you ask the mining industry why they are locating outside the country, they talk about the difficulties getting permits, the long timeframe it takes to get acceptance of development—just exactly the type of thing that we don't want is driving investment out of our country. It seems to me that is part of the alarming problem we have. We are making it so difficult for companies to invest in Canada that they are looking for other sources.

I have a couple of questions, and would like to ask a lot more, but given the limited time, I'd like to ask one of Mr. Lippert. You said earlier that the list of reservations in what you've seen of the MAI you think would be too long. First, what would you cut from that list?

• 1645

The second thing is that we've heard that a carve-out for the environment is required, that anything short of that would be insufficient. We've heard it from a number of groups that have come to us today. How would you address that issue? Would you agree?

Mr. Owen Lippert: On the exemptions, economic theory would say that you would have no exemptions, that when you protect one industry you really harm another industry, that we're simply deciding to protect this group because they have some political significance.

Culture is a classic example. There's always the reaction that we have to save that which is distinctly Canadian—misunderstanding what in fact the cultural industry in Canada is.

If you remove those exemptions, you then expose those industries to competition. The result, as one can see over the years, is generally good. When free trade came in, they said, “Oh, my goodness, it's going to kill the Canadian wine industry”. In fact, as a result of the competition, the Canadian wine industry is today stronger and exporting all over the world. So it's been a tremendous boon, and there's no reason to say, at least from the point of view of economic theory, that culture, health, or social services are any different.

On the environmental cut-out, the point is it's non-discrimination. You can continue to change your environmental legislation, whether it goes up in the eyes of some.... It's only that you can't discriminate. It's really that limited, and I just fail to see in the text or from any of the comments from any of the negotiators, such as William Dymond, that it would be anything other than just stopping discrimination. Certainly the whole expropriation and all those costs associated with that—it's just based on a complaint of non-discrimination. So I would say that an environmental cut-out is unnecessary.

The other point is a bit more controversial. I'll be very brief on this. What some people would call lowering standards other people might call reforming standards. For instance, in British Columbia they have passed a zero emission law on chlorine. Actually, it was quite interesting that John Reynolds, who was just here, proposed that legislation.

Anyway, new scientific evidence, and certainly new economic evidence, would suggest that this law is too stringent. It is unnecessary. It's an open question whether reforming that law in order to preserve the existence of a major industry in British Columbia would fall afoul of MAI.

The Chairman: Colleagues, when I give five minutes, I do not mean five-minute statements and then questions. I would ask that your questions be brief and to the point.

Ms. Bulte.

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): Mr. Mann, I'd like to go back to your international trade law expertise here and help us try to make this agreement better.

One of the things you talked about was the dispute settlement under NAFTA. I assume we've embodied that same dispute settlement in the MAI. You said that one of the things was with respect to secrecy. My understanding—correct me if I'm wrong—is that the rules we use under NAFTA are the UNCITRAL rules, which are the rules of international trade established by the United Nations. If we're a party to that convention, then how can we exempt ourselves from being a party to that convention, and how can we take the secrecy out without amending NAFTA?

Mr. Howard Mann: You can do that by agreement in the MAI. There is a provision in the MAI that the final award under any arbitration going forward under the MAI will be made public. That isn't present in the model rules or in the rules of procedure of the two arbitration organizations that are cited here. That would be an additional rule of procedure, that the award would be made public and the parties are free to do that under the agreement.

They can do the same for the statement of claim that would be put forward by the investor and for any government response or any other papers that would be prepared, including a brief that could be presented by a third party, a state party, to the agreement.

Ms. Sarmite Bulte: Should we not go farther? You're talking about in camera proceedings here.

Mr. Howard Mann: Yes.

Ms. Sarmite Bulte: Using the example of Ethyl Corporation, where you can't get copies of this document, should we not be making a recommendation that any kind of arbitration proceedings not be in camera but that they be open to public scrutiny?

• 1650

Mr. Howard Mann: In my view, that's absolutely right. I can't understand the justification in this day and age for having this kind of proceeding against the government, particularly on this type of legislation, going forward in secrecy, where Canadian citizens aren't entitled to know what their government is arguing in defence against a claim for this kind of money. Not only do I think the documents should be public but I agree the hearings should be public.

Ms. Sarmite Bulte: The second question is on the definition of expropriation. A number of people have talked about the fact that it seems to be expanding here. Is your recommendation to put in a very specific definition of expropriation? I'm sure there are international trade arbitration journals which have defined expropriation. How are those decisions going currently and how would they affect this agreement, so we can ensure we all understand what expropriation means?

Mr. Howard Mann: The arbitrations that have taken place in the last ten years or so.... And a particular set of arbitrations has been the Iran-U.S. arbitrations. Those followed the takeover of power by the Ayatollah Khomeini and the freezing of assets between Iran and the U.S.A. That led to a whole series of arbitrations.

One of the things to come out of that series of arbitrations is the invigoration, if I can put it in that way, of the view of creeping expropriation or expropriation by generally applicable laws. That's what you see in terms of impairment. We don't know exactly what “impairment” would mean. It's a very general term.

If you look at that kind of litigation, it would suggest that laws of general application could be an impairment of the investment. Environmental laws could well be an impairment of the investment. That is certainly what is being argued in the Ethyl Corporation case today. Without access to the Canadian counter-arguments, all we can know is that is one of the bases of the claim by Ethyl Corporation: the expanding definition of expropriation under NAFTA.

In response to the first question, maybe it is bringing NAFTA forward, but we still don't know all the effects of the NAFTA chapter 11 provisions yet either, and we are taking it forward to a broader level without knowing fully what those implications are.

The Chairman: Mr. Blaikie.

Mr. Bill Blaikie (Winnipeg—Transcona, NDP): Thank you, Mr. Chairman.

I'm tempted to ask Mr. Lippert what the relationship between wine and culture is, but I won't.

I'm reminded of when Mordecai Richler appeared before the committee on the free trade agreement in 1987 and said there was only so much schlock he was prepared to drink for his country.

Mr. Lippert said that basically the essence of the MAI agreement was “I won't do it if you won't do it”. I guess what I want to ask Mr. Lippert—but anybody else can jump in on this—is why we should agree to a multilateral agreement which imposes that kind of binding “I won't do it if you won't do it” when it comes to the treatment of investors and the disciplining of government.

You're the first person who has come forward and been really honest about what is going on here. This is to discipline government. But we don't have in the agreement a similar agreement....

Basically the MAI says “I won't jail my trade unionists, but I won't require you not to; you can keep jailing your trade unionists if you like, because, after all, it's a free planet”. It's not a free planet when it comes to investment, but it's a free planet when it comes to labour standards, because those are going to be non-binding, just like a lot of other things which are going to be non-binding. The only thing we're going to make binding, because the only thing that really matters—everything else is secondary in the hierarchy of moral values here—is the rights, not even the responsibilities, but the rights of investors. I was just wondering why you think that is a morally acceptable universe.

Mr. Owen Lippert: I don't accept that jailing trade unionists is morally acceptable.

I think the thing to remember is that this is an agreement on investment. It's not an international social charter. It's not a constitution of the world. It's a fairly straightforward agreement among advanced countries on how to treat investors.

• 1655

On labour issues there's clearly scope for more discussions, but they fit more properly in other forums.

Mr. Bill Blaikie: In a non-binding context.

Mr. Owen Lippert: They could be made binding or non-binding, depending on the wish of the parties.

Mr. Bill Blaikie: There is no other binding context. Why do you find it so morally acceptable to have an agreement that instigates binding protections for investment, for money, but when it comes to the environment, people, communities and democratic governments, they can work this out on some less binding level?

Mr. Owen Lippert: I would just say that in the end, when you see trade advance and investments made—you don't get trade without making investments—you start to see a progression in civil society where jailing trade unionists becomes a liability to your country and to your company.

Mr. Bill Blaikie: So we should just be patient and 25 years from now some of these guys might get out of jail.

Mr. Gordon Wilson: If I could take your invitation to jump in, I take real exception to what you're saying, because I think you're misleading this committee if you're saying what I think you are.

The crucial difference between the MAI and NAFTA is NAFTA permits governments to enforce commitments and undertakings it receives from investors who will benefit from government advantage, while the MAI expressly prohibits the government from enforcement of voluntary undertaking. It's a substantial and major change. It's wrong to say “You do it, we do it, we're all together.” That's not true. It expressly changes that section. That's one of the areas in which it expands on the NAFTA agreement.

The Chairman: Mr. Wilson, I don't know how they handle it in your house, but we don't use the word “mislead”. It really gets us into trouble here.

I'll let Mr. Lippert respond.

Mr. Gordon Wilson: I apologize if the language is offensive.

Mr. Bill Blaikie: That's only if you deliberately mislead.

Some hon. members: Oh, oh.

A voice: You can say “unwittingly mislead”.

The Chairman: Yes, you can say “unwittingly”.

Mr. Bill Blaikie: God knows we get misled often enough.

Mr. Owen Lippert: It's always very difficult to get governments to not interfere in trade and not interfere in investment because there are so many pressures on them to do precisely that, whether it's for environmental reasons, cultural reasons, or labour reasons. You have to simply say that those exchanges are best done voluntarily, the growth comes from that and government should restrain itself.

Maybe in the MAI it's pushing a little more than NAFTA in terms of restraining government's arbitrary actions, but that is a positive sign and one to be applauded.

The Chairman: What if the government acts as arbitrator? What if it's democratic and it's acting on a mandate to do certain things?

Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC): I have a couple of observations and I'd like your feedback on this.

Ms. McCall, as a representative of consumers I believe you mentioned that liberalized trade does have the capacity to improve the lot for consumers and provide more competition, lower prices, better products and that sort of thing. There has been a revamping of the Canadian retail industry, and arguably the products being received by consumers now are more competitively priced and better than those that were available prior to NAFTA. I'd like your feedback in a moment on the success of NAFTA relative to the Canadian consumer.

Ms. Griffin-Cohen mentioned the capital flows in Canada. I thought she intimated that more money is leaving Canada than is coming in. That's not right. In the early 1990s Canada received a net inflow of $4 billion and we were a net recipient of foreign investment. I just wanted to clarify that for the proceedings here today.

Ms. Marjorie Griffin-Cohen: I hope I get a chance to answer that.

Mr. Scott Brison: Absolutely.

In terms of environmental policy, you mentioned one plant 20 miles from another plant under a different jurisdiction. Given that it's one environment, would we want to treat a company differently because of its ownership? We don't want Canadian companies to pollute so we wouldn't want foreign companies to pollute. They would be under the same regulations. Essentially the agreement ensures that foreign companies and Canadian companies are playing under the same environmental laws. That's something I'd like some feedback on, from your perspective.

• 1700

I have one last observation, Mr. Chairman, that I think is very important. We have to recognize the ability of trade liberalization to improve conditions internationally. We need only look to Mexico and the environmental strides that have been made by Mexico as a result of trade liberalization, and to a certain extent the democratization effort that has occurred in Mexico.

The Chairman: Ms. McCall, Ms. Griffin-Cohen, and Mr. Mann.

Ms. Marnie McCall: In deciding whether consumers have benefited from the FTA and NAFTA and other international trade agreements, you can't just look at gross benefit. In the retail sector, I think there has been a considerable amount of benefit in terms of choice and variety and price, but at what cost do the benefits come?

When you do a cost-benefit analysis, you have to do both sides of the ledger. While there have been some gains as a result, the gains have not been perhaps as large as were anticipated or as large as perhaps were promised. The obvious negative impacts that would happen in a transition effect were not addressed in the way that had been promised.

So there are some benefits. We're not in a position to say whether there is a net benefit, but certainly some of the mitigation of losses that were promised were not there. I'm not sure the gains that are there were of the magnitude that people have been led to expect. We want to ensure that the next time we get a bigger net benefit.

Ms. Marjorie Griffin-Cohen: My source for this information was Statistics Canada. Perhaps the member of Parliament has some other sources more reliable than that.

What you see is that in 1996 the net outflow was $3 billion in direct foreign investment and over $8 billion in portfolio investment. That's a net outflow. I'm talking about net here. So that is the source of my statistics.

I can't help but comment on Mexico. Since the signing of NAFTA, the economy has been in absolute disastrous circumstances. The average real income of people has declined by 50%. In the past year there has been some success, and it has increased by 7%, but this is over what has been an absolute disaster in terms of the economic performance of the country.

I don't think, even though you do have a better situation in Mexico City with regard to the government, you can consider this as an example for us of democracy in action as a result of trade.

The Chairman: Mr. Mann.

Mr. Howard Mann: In answer to the question that was directed at me, yes, I do think Canadian foreign companies should be treated equally under the law, but that doesn't mean they're going to be treated the same environmentally. Different receiving environments demand different results from an environmental management perspective.

If you do have facilities producing the same thing, regulated differently, this MAI agreement simply invites the foreign investor to say, “I'm treated differently because I'm a foreign investor”. That poses an enormous burden on the regulators, the bureaucrats who work in environmental assessments contexts and impose conditions, who develop site-specific permits and regulations and authorizations. It puts an enormous burden on them not to impose different conditions or other conditions for what are otherwise valid reasons.

You now have Ethyl Corporation saying, “It's going to cost you a quarter of a billion dollars if you do that”, which imposes what is referred to as “regulatory chill” on the bureaucrats, on the regulation makers. It also allows the agreement to be used to prevent environmental conditions from being put on. It raises real questions, which we are in fact now seeing played out in the Ethyl Corporation case, as to the ability of a country to impose environmental regulations, especially in an area where the industry is either solely or largely foreign owned.

Mr. Scott Brison: May I clarify something, please, Mr. Chairman?

The Chairman: Very quickly.

Mr. Scott Brison: I was using Statistics Canada information as well, but I was talking about the first five years of the 1990s, as opposed to one year.

Ms. Marjorie Griffin-Cohen: From 1993 until now there has been an increase in our net outflow of foreign investment, both direct and portfolio. It has escalated every single year since 1993.

Mr. Scott Brison: Sure. Thank you.

The Chairman: Mr. Nault, one quick question.

• 1705

Mr. Robert D. Nault (Kenora—Rainy River, Lib.): Mr. Chairman, my question is for Mr. Mann. In one of his main recommendations, which is the obligation to enforce environmental and labour standards—it's in NAFTA side agreements—he says that in fact at present no similar type of obligation is being proposed as it relates to MAI.

Mr. Mann, considering that it was the government's policy and that the government of course went out and got those side agreements for NAFTA, I'd like to get your view as to why Canada doesn't in fact have it on the table at this point. If that was our policy not too long ago, it's surprising that it's not now.

And if that is not the case and they can't get those side agreements because other countries might not wish to have them, can you then explain to me why we don't have a general exception or reservation on environmental protection purposes, period?

If you can tie this in, I still can't get a handle on—Mr. Wilson touched on it a little bit—the whole issue of subnationality on issues as it relates to the environment, and this sense that we are entering into other people's jurisdictions. And if so, why is it, then, that the provinces don't step forward and say what reservations they want, and tell us to put them as a listing?

My understanding is that a suggestion is being made by our negotiators, which may in fact happen, but it hasn't happened up to now. Could you give us a quick five-minute feel for those three issues? I don't know if that's possible in this short time. We may have to talk about this later, but I think the big issue for us here is this whole combination of jurisdictions and policy. On the one hand, it was acceptable in NAFTA, but it's not on the table now.

The Chairman: Mr. Mann.

Mr. Howard Mann: I presume I don't have five minutes. Any of those, or all of them together...yes, no, yes—

Some hon. members: Oh, oh.

The Chairman: Thank you, Mr. Mann.

Some hon. members: Oh, oh.

Mr. Howard Mann: You're welcome.

In terms of the enforcement issue, I don't know why the Canadian government is not actively promoting that type of issue. There are two provisions in NAFTA dealing directly with environmental issues. One is 1114.2, which the Canadian government believes should be left as a voluntary commitment or a political commitment. To date they have not put forward the enforcement issues. I believe they should have done that a long time ago.

One thing that has happened over the last four to five years is a decoupling of trade and environment issues, both in Canada and in some other places. But certainly under this government the push to include environmental and labour issues in trade agreements, and in this case investment agreements, has diminished. The international trade department has been very successful in limiting or removing the pressures to include those kinds of issues in Canadian positions, and this is one reflection of that.

I forget the second question.

Mr. Robert Nault: It was about the exceptions—

Mr. Howard Mann: Oh yes, the exceptions. In particular for provincial jurisdictions, I think it is going to be up to the provinces to certainly step up to the plate, as it were, and raise the issues of exceptions for their environmental or other laws, if that's what they want to see take place. Otherwise they won't be excepted from the agreement. A general exception in the agreement for environmental regulation would certainly cover the provincial legislation as well as federal legislation and would include in the other kinds of definitional markers that I've suggested in my paper...it would also cover those kinds of issues in large measure.

I won't speak to the other kinds of provincial or jurisdictional issues that might be out there.

The Chairman: Colleagues, unfortunately that brings our time to an end.

I want to thank the panellists for coming forward. Your briefs are all very good. You've raised a number of issues that we'll have to raise tomorrow when the chief trade negotiator comes back again. It was good that you came today just before that happens.

I want to assure you that as we follow this through, not only until we give a report in the first week of December, but in its negotiation stage, whether it be until April 1998 or whenever—we've had experience with these going on for years—this committee will continue to follow the issue and will continue to seek your knowledge about this. We have your phone numbers, and if we have more questions we may call on you again. Thank you once again for coming.

• 1710

Next, colleagues, we're going to be hearing from the Government of British Columbia. This is the first government to officially appear before this committee.

We're also welcoming back a former member of Parliament who has been around this table before. Welcome back, Ian. I understand you're representing your government now in a new role as a provincial MLA.

The structure is that the chair allows ten minutes. Since you're a former member, you know the chair's responsibilities in this area. Then we'll turn it over to questions and answers.

Mr. Ian Waddell (Member of the Legislative Assembly, Government of British Columbia): Thank you very much. It's a particular pleasure for many reasons for me to be here today. I want to thank the chair and the clerk for getting us on at a late date. Thank you for that.

We have a brief here that's available. It's quite detailed, so I'll just summarize it. I've got some speaking notes that I'll summarize.

[Translation]

We also have a brief in French. It is almost the same as my presentation.

[English]

With me is Mr. Noel Schacter, who is the director of the international branch in the British Columbia Ministry of Employment and Investment.

I know I have some time restraints, so I'll try to go over this as quickly as I can.

British Columbia is strongly opposed to the proposed MAI. In our view, the MAI offers no clear benefits to British Columbians and Canadians. Second, it would not provide a solid foundation for broad participation of the non-OECD countries—that means the developing countries—within a balanced and durable multilateral arrangement. We think the MAI does have a downside. It has risks for us without benefits.

If adopted, the MAI would place unacceptable restrictions on the ability of democratically elected governments to act on behalf of citizens at the federal, provincial, and local levels. It's an anti-government measure.

It could also have a significant negative impact in public policy areas that are critical to Canadian citizens. It could threaten the integrity of Canada's existing health care and social service systems, and it could undermine the legitimate role of governments to create new job opportunities, protect the environment, protect consumers' interests, and manage and conserve natural resources.

You might say we can make reservations in the agreement. While reservations can preserve an important scope for governments making policy, they have serious shortcomings. Reservations only offer temporary protection. Even if Canada were to be successful in obtaining all of its draft reservations, serious concerns could still remain. Reservations as a form of exception to a treaty's obligations will be interpreted restrictively. Ultimately, their exact scope and meaning may be left to be decided by an unelected dispute panel.

The future of our health care system, social services, and environmental protection laws, and our ability to manage and conserve natural resources in the public interest are all matters of public policy and are priorities of the present Government of British Columbia. These are simply too important for governments to pass over to unelected and unaccountable dispute panels.

So before moving to some specific concerns about the MAI, I'd like to emphasize that British Columbia attaches great importance to trade and investment. We pursue international investment very aggressively. We need international investment. We think we provide in British Columbia a safe, secure, stable, and profitable investment climate to all investors—you don't get thrown out of helicopters in British Columbia—both domestic and foreign.

Foreign investors know this. Premier Clark just returned from the Asia Pacific, where some of the world's largest investors were very enthusiastic about investing in British Columbia. We'll have some big announcements on investment to make, not today but to follow.

• 1715

The Asia Pacific forum, which just ended in Vancouver, provided British Columbia with a unique opportunity to showcase its products and expertise, from fuel cells to Pacific salmon, and from Okanagan apples to state-of-the-art fast ferry technology.

Yes, we have an open economy. Yes, we encourage investment. Yes, we believe in international investment rules—they're already there and we're bound by them. But we also believe in a balanced approach. We believe that one of British Columbia's greatest friends, for both our citizens and our potential investors, is our ability to integrate economic interests with broader social and environmental priorities.

I've just come from APEC Vancouver. There is a message on the streets of Vancouver. It's saying that you also need to consider the interests of people, not just those of business. As Chief Joe Gosnell said, remember the voices out there are the people. So let's not get out of balance.

We believe that British Columbia can trade and promote investment at the same time that we keep and improve our educational system, our universal medicare system and our environmental and labour standards. In fact, we believe that's why we'll get the investment in British Columbia.

Our aim is to produce the world's first sustainable economic region. We think we can do that. We believe that only governments have the ability to integrate social and economic priorities in an appropriate way on behalf of citizens.

International investors can't do it; it's not their job. Negotiators in the narrow field of trade law can't do it, either; it's not their job. Dispute panellists can't do it. In the end, only governments that are accountable to the public can provide such a balanced decision-making approach. This is what democracy is about.

The MAI would make such a balanced approach far more difficult. It would tilt the balance in favour of international investors. In our view, it's more than just a non-discriminatory investment agreement.

To tilt the balance at the expense of elected governments' ability to meet the needs of all citizens is unacceptable for the Government of British Columbia.

Let me focus on some specifics.

First, the definition of investment in the MAI is unacceptably broad. It's too broad. This definition of investment could hardly be broader. It covers every kind of asset owned or controlled directly or indirectly by an investor. It would extend to licences and permits. It would cover rights to search for and extract natural resources. It could even extend to claims to money and performance resulting from cross-border commercial transactions.

The MAI could thus extend new investment rights even to an investor who merely had a contractual relationship to someone in an MAI signatory country. It is clear that every other provision of the MAI must be read with this broad definition in mind. This definition is so extraordinarily broad that it is difficult to anticipate the full sweep of potential ramifications for federal, provincial and municipal practices.

Second, the MAI would further restrict or prohibit performance requirements. It goes beyond non-discrimination and national treatment obligations and includes troubling prohibitions against several types of government actions. One of these is the restriction on so-called performance requirements.

Performance requirements are used by governments to hold investors accountable to job creation and other economic benefits. For example, often companies that receive government financial assistance or permits to exploit publicly owned resources make specific commitments to maximize local job creation or to provide specific economic benefits.

We own the woods in British Columbia, the trees. So we made a forest and timber accord with the forest companies to provide jobs in return for cutting permits. As a result of this MAI, we could be in trouble if we wanted to do that again.

The exceptionally broad definition of investment, together with the MAI's performance requirements restrictions, would call into question the enforceability of these freely negotiated commitments.

Job creation is one of the top priorities of our government, and, I think, of Canadians. It is simply unacceptable that the MAI would make it more difficult for governments to lever jobs and other benefits for British Columbians when investors are granted access to publicly owned natural resources.

Third, the MAI would extend national treatment obligation to investment incentives. There appears to be a consensus among MAI negotiators that the principle of national treatment will be extended to cover investment incentives. If this occurs, it could mean that public expenditures now targeted to small business could be challenged as having a discriminatory effect.

• 1720

In addition, public expenditures for community-based or non-profit health, social service, and education providers might have to be offered, and on a non-discriminatory basis, to large foreign-affiliated investors and service providers. This is true in health care.

[Translation]

In order to avoid any ambiguity concerning the protection of health care and other social services within the Multilateral Agreement on Investment, British Columbia suggests that the Federal Government recommend that social services and health care be excluded from the Agreement.

Canada can expect a strong support from the majority of the OECD countries, because these countries have public health systems and other social services that they want to maintain and even expand in the future.

[English]

Fourthly, the MAI would extend investment protection to include an unconditional right to compensation in the event of an expropriation. This is a complex and sensitive issue. Let me explain it by way of example.

If in the public interest a government decides to rezone land, create a park, revoke a natural resource permit, postpone or cancel a development project, or ban a harmful substance, the owner's title to this property is not extinguished. The government action may, however, affect the owner or investor's ability to profit from the property investment. Under domestic law, provided the government acted in good faith and in the public interest, this kind of financial injury is generally seen as a foreseeable commercial risk and the level of compensation could be limited. However, under the MAI, if a government action of this type deprived a third-party investor of property interests covered under the broad MAI definition, a foreign-affiliated investor could seek financial compensation under the investor state provisions of the act. In our view, this recklessly exposes the Canadian taxpayer to an open-ended financial liability.

Remember, we've done some of them. We stopped the Kemano completion. We were sued by Alcan in our courts, not in another tribunal. Then we made an agreement. We made a deal. We used cheap B.C. power to have a win-win situation where we got the environmental protection and we got Alcan building another smelter. It worked out for us. We are concerned we couldn't have done that under MAI because Alcan's foreign investors would have taken a very different route on it.

British Columbia is simply not willing to submit highly sensitive and complex issues such as those surrounding aboriginal land claims—Mr. Wilson mentioned that—the creation of new parks—we're trying to create 12% of the land in our province as parks—or land use and natural resource management to binding MAI dispute-settlement panels which are inaccessible to ordinary Canadians and beyond the reach of domestic law.

Fifthly, the MAI would entrench and extend one of NAFTA's most problematic features, the investor-state dispute mechanism. Expanding foreign-affiliated investors' unilateral rights to challenge a wide range of regulatory measures through this MAI process would increase uncertainty for policy makers and expose the Canadian taxpayers to significant additional financial liability. Over time we feel this could have a chilling effect on governments, as one of the environmental people mentioned before. They may shy away from passing legislation to protect the health and safety of citizens. No government could afford to ignore the potential for substantial financial claims against it for acting in the public interest. You could do things, but you would have to pay so much you're not going to do them.

Surely if the interests of banks are protected through a carve-out in the agreement, similar protection must be provided for governments' ability to safeguard the environment and the interests of consumers and workers. Quite frankly, I believe it would be irresponsible for governments to agree to expansive sweeping and unbalanced provisions through the MAI.

I'll end, Mr. Chairman, with one simple point. We believe the federal government is obligated to respond to provincial interests in areas where the provinces are competent: here, in this specific area, in this investment and how it affects our province. Many of the matters addressed by the MAI fall squarely within the areas of shared or exclusive provincial jurisdiction, and we're not at the table. We're not objecting to the officials. We're not at the table. We don't believe our interests will be protected. Therefore the application of the MAI to the province of British Columbia should not be assumed.

• 1725

Thank you once again for letting me speak. I tried to get through that fairly quickly. I know it's at the end of the day and you're tired; however, we are very pleased that we're the first provincial government, I think, to come before the committee, and we wanted to get that on the table.

Thanks again. Mr. Schacter and I will be happy to answer any questions.

The Chairman: Thank you.

Mr. Sauvageau.

[Translation]

Mr. Ian Waddell: I speak some French, but it takes me more time to express myself.

Mr. Benoît Sauvageau (Repentigny, BQ): I should be very brief.

Mr. Ian Waddell: When I use French, I sometimes need the help of an interpreter.

Mr. Benoît Sauvageau: I must apologize but we have to leave at 5:30. Unfortunately, I shall be unable to attend the whole presentation. However, be assured that we greatly appreciated the fact that you made a point to submit your documentation in both official languages as required by our Official Languages Act. We will use it. Unfortunately, I have to leave and I thank Charlie for allowing me to intervene. Thank you.

Mr. Ian Waddell: You can leave; I have reached the end of my presentation.

Mr. Benoît Sauvageau: Thank you.

[English]

The Chairman: Charlie.

Mr. Charlie Penson: Mr. Chairman, I'd like to welcome Mr. Waddell here today, along with our other guest.

I do want to just ask, to be absolutely clear, if this is the official position of the Government of British Columbia.

Mr. Ian Waddell: Yes.

Mr. Charlie Penson: Okay. So, Mr. Waddell, considering that you have said the B.C. government strongly opposes the MAI, if the Canadian government were to proceed with it in spite of that, knowing that your government is opposed to it, would B.C. not sign onto it?

Mr. Ian Waddell: Well, we of course hope that wouldn't happen. We hope there would be a further look at the MAI as a result of what this committee's heard, some of the briefs, and as a result of our position today. We haven't got down to that part of the road yet. We hope they would look at it.

There could be some exemptions. They might exempt the provinces, for example. Then we wouldn't have a concern. But we're not quite down that road. We've made some suggestions here and we've tried to explain how it can affect us, and we think that reflects public opinion in our province.

Mr. Charlie Penson: That's very interesting, because if that were to happen—if an exemption were made for the provinces—what would be the process? Would you then not have the ability to sign on? Is that what you're saying?

Mr. Ian Waddell: Well, I'll ask Mr. Schacter. Perhaps he can answer.

Mr. Noel Schacter (Director, International Branch, Ministry of Employment and Investment, Government of British Columbia): The federal government can negotiate strictly with federal coinage, and that proposal has been made to us and we've indicated that would be our preference. They're under no obligation in fact to include the provinces. Certainly the provinces, while we have been consulted extensively—and we give them credit for doing that—are not at the table and our interests are not being represented.

So our preferred option would be that if the federal government is going to proceed—if we can't stop them; if we can't convince them otherwise—they should proceed with federal coinage and leave the provinces out of the agreement.

Mr. Charlie Penson: By making an exemption.

Mr. Noel Schacter: Well, no, they don't have to. The question is who is included, and they would just specify that it's the federal government in measures that are being included, not provincial measures. That could be done in a variety of ways, but we'd leave that up to the federal government to decide.

Mr. Charlie Penson: And I gather your preference is that during the actual negotiations, all the provinces be at the table.

Mr. Ian Waddell: Let me answer that. Our preference is that the government not go ahead with the MAI. That's our preference. If we can't get that, our second preference is that they exclude us from the bad agreement. Our third preference is, yes, to go to the table and once again outline our concerns. But we prefer the first one.

Mr. Charlie Penson: Just so I'm clear on this, you're not really suggesting that Canada should not be at the table and should not be a part.... Let's use a hypothetical. If the 29 member countries of the OECD decided to go ahead, and Canada said no, this is not for us, are you suggesting that we not be part of a package that might include an MAI for the other 28 countries?

• 1730

Mr. Ian Waddell: Noel can answer this in detail, but we think, as has been expressed by the witness, this is an agreement for the big boys. This is for the big international investors to restrict government. Our government has some things to do for the little people of British Columbia: to try to get them some jobs, to protect their parks and their environment, and to try to have good health care.

I would think Reform might want to be on that same side, too. I don't know your position, so I won't comment on it. You asked about our position. We don't think the federal government needs to go ahead with this MAI. We think there's more of a downside than an upside to it. We already have agreements now where pretty well investors are protected against discrimination in Canada, and we don't see why you need to increase that.

Mr. Charlie Penson: That's what I'm trying to find out—

Mr. Ian Waddell: There's the answer.

Mr. Charlie Penson: Even a little bit more. Wouldn't you be concerned if Canada were not part of a package that was negotiated in our absence?

Mr. Ian Waddell: I think I just answered your question.

Mr. Charlie Penson: So to the extent that we still would have the NAFTA investment agreement and we have so much of our foreign investment in Canada governed by NAFTA already, how do you regard that? Is that not a base there where we have substantial rules already—

Mr. Ian Waddell: That's right. We do have investment rules. Investors are protected. I personally voted against NAFTA, and maybe some of the members over there did too—I should say not NAFTA, but the free trade agreement—

Mr. Charlie Penson: The FTA.

Mr. Ian Waddell: —while I was a member of the House of Commons. But that's there now. I might say I think it's fairly early. I heard the questions to the previous panel of witnesses. It's a little early to say what all the effects will be of that. They're just coming in now.

We're bound by that, and we already have the investment protection and we think it's enough.

Mr. Charlie Penson: But the minister—

Mr. Ian Waddell: What I said in my brief was a way of getting investors to come in B.C. in the long run will be the kind of province we are. If we have good high education, an educated labour force, good health care and one of the best environments—arguably the best in the world—we're going to get investors. We don't need this MAI, and it's just going to restrict us from doing the first thing.

Mr. Charlie Penson: The Minister of International Trade—you probably heard me ask this question earlier—came before this committee when we kicked off these MAI hearings and suggested that it's going to be NAFTA expanded to the rest of the OECD countries and nothing more. That's what their bargaining position is going to be. If this is the case, are you happy with that?

Mr. Ian Waddell: I heard your previous question on that. Perhaps Mr. Schacter would like to reply to that.

Mr. Noel Schacter: Yes. First of all, that may be the objective of the federal government, but it's not reflected in the present text. The present text actually exceeds NAFTA in a variety of ways. We've already pointed out with respect to the question of definition that it's broader under the MAI than under NAFTA and so on. There's a variety of ways in which our basic obligations would be expanded under the MAI.

If in fact what the federal government did is simply achieve NAFTA, that also is of concern to us for a variety of reasons, one of which is there's considerable exposure under NAFTA that we haven't really had an opportunity to assess yet. We're seeing the first investor state dispute. As was pointed out, the potential costs for the federal government on one case will be $350 million. This is the first case.

An hon. member: Which case is this?

Mr. Noel Schacter: This is the MMT case with Ethyl Corporation. One has to keep in mind that if they do lose, others are going to begin to look very carefully at the investment provisions in chapter 11 of NAFTA and see whether or not there's room for them to move as well.

If you take that, you have two nations and all the corporations that are capable of taking an investor state dispute forward. If you expand that 14 fold to 28 nations, you're expanding our obligations considerably even if it's just the same as NAFTA. You have to remember that there are things in NAFTA you can't protect yourself against, and one of them is the expropriation provisions and the investment protection provisions.

No matter how many times you reserve, you're not reserving against those provisions. That means the provinces, the federal government and the municipalities are all going to be subject to considerable exposure, which is going to, as we pointed out, have a very chilling effect upon—

Mr. Charlie Penson: You see companies that are investing outside of Canada do that.

Mr. Noel Schacter: Yes, and let's look at the OECD. Keep in mind that among OECD nations we have very high levels of standards of investment protection. We have the best in the world. I don't think there's any corporation we would be afraid to have come into Canada, or any Canadian corporation that would be afraid to go into any of the OECD nations. They already have that high level of investment protection.

• 1735

This raises the question of why you need this high level of protection among already advanced nations. I think that's a question that begs answering.

The Chairman: Mr. Nault.

Mr. Robert Nault: Based on the information you've given us so far, and your position, can you tell me—and think this is something we want to pursue a little further when we get our own negotiators back at the end of the hearings—how they they consult provinces? We didn't get into that in any extensive way, and I think it's important for us to understand that.

You're giving us a signal—and you can speak for yourself, so correct me if I'm wrong—that there is not a lot of consultation in this process, and for that reason you don't have a good sense that you're being protected or represented properly by the federal government. Give me a little bit of background on how the consultation works.

Mr. Ian Waddell: Thank you, Mr. Nault. I was gasping for a moment. I thought you might ask me a question on gun control or something.

Some hon. members: Oh, oh.

Mr. Robert Nault: No. I was going to mention that you didn't vote on that, because you weren't here. I just want you to know that.

Mr. Ian Waddell: FTA.

Mr. Robert Nault: Okay. I feel better now.

Mr. Ian Waddell: Which way did you vote, Mr. Nault?

Mr. Robert Nault: I voted for NAFTA because of labour and environmental standards. Now we're there, you see?

Mr. Ian Waddell: Right.

With respect to your question, first of all, I don't want to give the impression that I'm knocking in any way the federal officials. I think they're good people, good public servants. I believe they've tried—and Noel will tell me—to consult him and make information available and so on. But the fact is, we think we have special interests. We're not at the table in an official capacity.

I also have to say that we have some fundamental disagreements with the principle of going ahead with the MAI for the reasons I outlined in my brief. So we find it a little disheartening that under our system, a trade deal is negotiated for us and we really have to implement a lot of this. It affects us but we're not really part of it.

Second, we have some fairly fundamental objections. We're saying you don't really need it in the first place. The objection especially is that we think it will restrict our B.C. government from doing things. I mentioned the Alcan deal, the timber accord. There are all sorts of things.

Mr. Robert Nault: I understand that, but I'm trying to get some specifics. I listened to your presentation. What I'm trying to find out is if in fact the B.C. government has some fundamental concerns.

For example, I'd like to know if you have a copy of the legal text of the reservations you would like to make as in relates to provinces. That's the first thing. If the reservations in the brief you gave us suggest that you're concerned about how reservations work, that you prefer that there should be full carve-out of social services and things like that, well, can I see the text of that? Or is what you're telling us that it's your position but it's never been pushed to the point of giving it to the federal government?

So far, when I ask federal negotiators what is the province's position, and where are their reservations and/or carve-outs or whatever, there are none, or at least they didn't give us a copy of them. They've given us everything else so far, it seems. I'm assuming, then, you didn't give them any officially at this point in the process.

Mr. Ian Waddell: Thanks, Mr. Nault. Good question—so good I'm going to ask my colleague to answer it.

Mr. Robert Nault: I expected that.

Mr. Noel Schacter: I want to make it very clear that we've had very good cooperation on the part of federal officials in terms of consultations. They've been very good. As an official I'd like to go on the record as saying that we certainly have a lot of respect for the work they've done. They've done a very good job of consulting us and informing us of what is going on.

With respect to the whole question of reservations, as you know, that whole process is now beginning to happen. Federal officials have told us at this particular point in time that federal coinage is on the table but they have not yet put provincial coinage, if you will, officially on the table. That is the official line we've heard. However, they've also told us that they are waiting to get a better offer—in other words, greater trade liberalization, which concerns us. We are, in other words, a bargaining chip. That's where our concern would be.

• 1740

So of course we haven't been asked to give reservations, because at this time that commitment hasn't been made by the federal government. We would, however, for the reasons we've stated. Reservations are very inadequate for the ability to protect the interests of provincial jurisdictions, in our opinion, and have serious shortcomings. They could be subject to standstill and roll-back. As you probably already have heard, not all provisions in the agreement can be reserved against. They are usually designated for greater liberalization down the road, and so on. There are all these considerations which concern us.

Mr. Robert Nault: I want to go to the issue of NAFTA. Our understanding is, and in your brief it says, that in NAFTA Canada was able to take unbound reservations in certain key sectors, including the provinces. You're suggesting here that may not be permitted under MAI. If that's the case.... And you make it very clear further down that as far as B.C. is concerned with medicare and social services, it would be your position that because a lot of other countries would support this, you do a complete carve-out. Have you made that position your formal position, and what is the response of the federal government as it relates to that? I'm sure not only provincial governments but certainly the federal government will be very interested in protecting that particular area.

Mr. Noel Schacter: Yes. In fact, our minister, Mr. Miller, wrote to Minister Marchi at some time in the summer; in July, I believe. We have the correspondence here. He explicitly addressed that concern and recommended that health care and social services be carved out of the agreement. We did not receive back a response that indicated the federal government shared our concerns. The federal government feels the annex II-C-9 reservation under NAFTA, which purportedly protects health and social services, is fully adequate. We beg to differ; and the reason we beg to differ is that the American government has said it doesn't agree with our interpretation.

Consequently, because there are disagreements between the two key parties to NAFTA, the ultimate decision about whether or not that annex is properly going to carve out health and social services will be determined by a trade panel. That is not something we want to see. We don't believe our health care system and other social services should be subject to trade panel decisions. We think that's Parliament's decision, that's legislators' decision; it's not the decision of trade panels. We're very concerned about it.

Mr. Ian Waddell: Mr. Chairman, with your permission, I would like to table the two letters. We have two letters, one to Minister Eggleton and then one later to Minister Marchi. We'll table those with you so you can see that.

As Mr. Schacter said, there are broader questions we have, on the role of government and so on. But let me add just one other thing.

I have found out in my limited experience, about a year and a half, on the provincial level that you have to deal with what you have in the province. You have to deal with the best you have. We have resources. We have cheap power, things like that. What we try to do when there are difficulties with a corporation is to try to come to some sort of agreement with them. There are trade-offs. I gave the Alcan example, where we got sued for $500 million and we basically, I think, saved the Fraser River system by the cancellation of Kemano II.

That's being pretty broad. That's my viewpoint.

It was a significant step. The feds are so scared to get involved in anything like this, but we did, and ultimately we made an agreement. We saved some fish. We got some jobs in Kitimat. We got another smelter coming. We got some good things out of it.

If we had this MAI we're concerned the company wouldn't deal with us. They would just go to these trade panels and they would say, we don't have to deal with you guys, we don't have to deal with governments, you're restricted in what you can do. It would really crimp us in what we could do as a government.

The Fraser Institute—and if I were a Liberal I wouldn't want to be in bed with that institute—would say the opposite: just let the market do it.

The Chairman: They were here earlier to talk for themselves.

I'm going to turn it over to your former colleague, Mr. Blaikie.

Mr. Bill Blaikie: They were the witnesses who sounded most like the Minister of Trade, though, I must say.

The Chairman: Now, now.

• 1745

Mr. Bill Blaikie: I raised my hand because you were asking this bit about the provinces and the provinces not having entered reservations. The provinces haven't been asked to enter reservations. You were trying to get this straight from Mr. Dymond and he was saying “Well, we haven't entered any reservations because we haven't included the provinces yet, and they haven't been asked to give any reservations because the federal government hasn't taken a decision”. But if they were to take a decision, all that would involve, if I understand correctly, is the kind of reservations that we now find in the NAFTA and about which there are already different interpretations as to the American and Canadian views of what these reservations entail.

The interesting thing about what Mr. Schacter says is that they're worried that the provinces are actually being used as a bargaining chip and that at some point they'll say “Well, look, if you give us this or that, we'll throw in the provinces”. I don't think that's how the provinces should be used.

The federal government can throw the provinces in without provincial consent. They can make this agreement apply to subnationals without the provinces, just like they did in NAFTA.

Ms. Sarmite Bulte: I don't think so.

A voice: That's not what we're being told.

Mr. Bill Blaikie: Am I wrong on that?

Mr. Ian Waddell: We're not getting paid for giving a legal opinion here, so we won't give one. That may be. All I can say discreetly is that we're looking at that and we may have something to say down the road on that.

Ms. Sarmite Bulte: Was it not in NAFTA where they talked about one of the things they really wanted from the United States was that states could sign off as subnationals? The states in the southern United States are a very strong lobby, and if the United States wanted to exempt something, they had reservations for their subnationals.

Mr. Bill Blaikie: Yes, but the American federal government entered those reservations. Now, the Canadian federal government could enter those reservations on behalf of the provinces, but if they didn't want to do that, then it seems to me they could include the provinces against their will.

The Chairman: I'm not an international lawyer either, but from what I've heard they can sign on behalf of provinces and include provinces in areas of exclusive provincial jurisdiction, but they can't force the provinces to actually do it.

Mr. Bill Blaikie: I know, but then where does the investor state come in? They don't have to enforce it with the provinces. If they sign the agreement, what status does the investor state thing have?

Mr. Charlie Penson: If these people here don't know, then I suggest we ask Bill Dymond tomorrow.

Mr. Bill Blaikie: I suggest we ask our researchers to do some work on this too, because if we don't know that, we don't know much.

Mr. Robert Nault:

[Inaudible—Editor].

Mr. Bill Blaikie: You're the guys who think it's a wonderful agreement. You tell me what it means.

Mr. Noel Schacter: I wonder if I could respond briefly on that.

Mr. Ian Waddell: I'm going to ask Mr. Schacter to respond.

Mr. Wilson, my colleague from the legislature, is here, and I thank him. He made a special effort to get here, and it's not easy when you're a backbencher, not on the government side. I know that, and I want to thank him personally for that.

Mr. Robert Nault: A four-day car ride.

Mr. Ian Waddell: We're not quite there yet.

He informs me that he thinks there is some case law to the effect that you can't force the provinces, but we'll dig that out for you and send it to the committee.

Mr. Schacter has something to add.

Mr. Noel Schacter: The position we've taken is that in areas of provincial jurisdiction the federal government can't do this, and that's the position we've taken at the table. Certainly this is going to be a matter for legal interpretation, as you point out, but that is the official position that not just the province of British Columbia but also other provinces have put forward in this regard.

The federal government can sign an agreement—we understand that that is their right—but whether or not they can enforce it is another matter. Our position is that we don't think they should be signing on our behalf if they can't enforce that agreement.

I want to talk a little bit about the reservation process, just to show you how complicated that is and how problematic it was.

If you understand the reservation process it might be helpful to you, because the notion that we're talking about here is government measures, and a measure is very broadly defined to include legislation, regulations, procedures, requirements and practices. Not all those things are actually codified. So when we came to the process under NAFTA of trying to actually find out what measures we had to protect, we couldn't codify all of them. We didn't know they were all there.

• 1750

As a consequence, the Government of British Columbia encouraged the federal government—and in fact this took place—to have what was known as a general reservation, which basically carved out all pre-existing measures for the provinces, and the federal governments of Mexico and the United States did the same.

That may not happen in the MAI. At this point there is some resistance on the part of other parties. So you can see how problematic it then becomes. We aren't able to protect all our existing measures, simply because we can't codify them. It's very difficult; there are thousands and thousands of such measures. So if that's the case, that's another deficiency in the whole reservation process.

Ms. Sarmite Bulte: Could I have a direct reply?

My understanding is if we're limiting the pre-existing, that's the problem we run into with the standstill and the rollback provisions, is it not? Certainly in the cultural area we don't want either the rollback or the standstill.

Mr. Noel Schacter: Well, that's right. That's the distinction between bound and unbound reservations. If you had an unbound reservation, in theory, at least under NAFTA, you're right, it's not subject to standstill and rollback. In practice, the reality is that it could be subject to rollback simply because there's nothing to stop parties from putting it on the table.

If the United States says we don't think the health and social services measure should continue to be an unbound reservation, there's nothing to stop them from putting that on the table and negotiating with us.

Ms. Sarmite Bulte: It would still be subject to negotiation.

Mr. Noel Schacter: Yes, but so would the others. It's no different. The only thing is that it's not subject to standstill.

The Chairman: Mr. Reed.

Mr. Julian Reed (Halton, Lib.): Thank you, Mr. Chairman.

I will be very brief, gentlemen. I thank you for coming and being the first province to put a position on the table. I would ask, though, that rather than taking a totally negative stance at this time, understanding that negotiations haven't really started yet....

It's true, the hard negotiations haven't started. What has been produced to this point are drafts of the concepts of 29 different countries. Of course I think we all have some sympathy. We have sympathy for getting 10 provinces to sing out of the same hymn book; 29 countries must be even worse.

But the fact is that Canada is at the table, and when I hear you speak in such negative terms, it's as if you would rather we walked away from the table now and not continue down to the wire.

Canada can always walk away. That's not a debatable issue. But if we don't pull as much of it together as possible, it may be that Canada would end up missing a target or an achievement that might be proved to be worth while in the future.

One statement was made this afternoon that perhaps the WTO should be the vehicle for this kind of negotiation. But there you can imagine how many more countries are involved and how much more difficult the process would be, although the long-term objective will be to encompass as many countries in the world as possible, simply because Canada has learned that we work better with some ground rules than in the jungle.

I will make one other comment. I heard twice this afternoon the words “big boy” or “big corporations,” that big corporations are going to control all the policies of government, and so on. The fact is, the majority of multinationals are small and medium-sized businesses.

I was at a conference a couple of months ago of mining exploration companies. There are 700 of them in Canada. Many of them are multinational, and the average complement of personnel is 15. Now if that's a big corporation with a huge foot in countries, I've got news.

• 1755

Remember that the process works both ways, and there's the element of investing and being in another country. It allows us to export our brain power and our capabilities to other countries, but if we're there without any rules, we're vulnerable, especially if we're small corporations or small companies. As an example, I give you this tragedy in Russia that took place a few weeks ago, with the Nova Scotia investor who is now being physically forced out of his investment because it's the “wild, wild east”.

Some hon. members: Oh, oh.

The Chairman: Thank you, Mr. Reed.

Mr. Julian Reed: I just put this to you in trying to explain some of the motivation for trying to arrive at agreement. If we don't, we don't, but—

The Chairman: Mr. Waddell.

Mr. Ian Waddell: Just briefly, I might say.... And indeed, I'm sorry, but I don't know you personally. I think you're a former provincial minister though.

Mr. Julian Reed: I was a minister—always in opposition though.

Some hon. members: Oh, oh.

Mr. Ian Waddell: This may be a vote that you might want to miss.

We do have ground rules already. You raised the point that some witnesses suggested going to the WTO. Yes! Good idea! It should, because then it includes developing countries and that's who you really want to get anyway. It's not that Sweden and Belgium are going to discriminate against your investors. It's the developing countries. So put it in there. That is the forum that it should be in, not in the OECD. It's in the OECD because they have a little club with big business going on there. That's why it's there, and they hope to get the rest of them later. That's the politics of it.

Companies in B.C. do differ from those across the country. In B.C., some of the smaller corporations don't have the wherewithal to be the big international investors, so it's a little different. We have our own particular economy and our own particular concerns there. I think I made it clear why.

You say that Canada could walk away, so do it. Walk away. That's our first preference.

The Chairman: Mr. Waddell, I'm going to conclude here, but I do have one brief question. You took a sort of different direction from what I thought you might.

I've been listening to your premier talking about investment. Your province obviously has a lot of investment that has come in from a lot of Asian countries, so I was somewhat surprised with your strong disagreement with any sort of set of rules. Is it because there are already agreements in place with these other countries where you're getting your investments and that essentially this won't change that? Or is it...? I'm not sure. I thought philosophically I could understand why you disagree, but I just can't.

Mr. Ian Waddell: Thank you for letting me clarify that. I'll try to answer, and I'll let Mr. Schacter answer as well.

As I said in the brief, we want foreign investment. We need it. We are a resource-based economy. Still, we want to diversify that economy. We think the reasons we can get it.... I already said that for things like a good environment and good health care we need government measures to do some of those things. We're concerned that the MAI would stop our government measures. We think the protections are already in place for foreign investment. There are rules already.

The Chairman: Bilateral agreements, you mean.

Mr. Ian Waddell: Yes, bilateral. We have NAFTA, we have the FTA, we have all sorts of things. We have our own rule of law and our own system. We think this goes beyond just a non-discriminatory system. We think it goes beyond, to an act. This is a new ball game: “NAFTA on steroids”, somebody called it. Those are our concerns.

Do you want to add anything, Noel?

Mr. Noel Schacter: Yes. I just wanted to add that it's not the agreements that are in place that effectively provide protection; it's our own domestic laws that provide us with protection. We don't want to give up the right to be able to make sure that when investment comes into our province it does so on terms that are mutually agreeable to both the investor and the province.

If the agreement is put in place, we lose the ability, for example, to leverage local economic benefits from investors, so we lose the ability to potentially control our resource conservation and our environment. Those are the concerns. I think we should really emphasize those points.

• 1800

We're not opposed to rules that provide investors with protection, but these go beyond that. We already provide those investors with protection. We have our own domestic laws with respect to expropriation. With those laws, Alcan could come and sue us in our courts, and they tried to, but we had some leverage; we could negotiate with them. As Mr. Waddell pointed out, we're not going to be able to do that.

So quite frankly, we are still concerned about NAFTA. We're very concerned about it. You don't need an agreement to give protection. And I don't think most investors, quite frankly, are worried about the security of their investment in Canada. They're just not.

The Chairman: What about destructive competition at the international level? Do you think there should be some rules there to stop the bidding wars?

Mr. Ian Waddell: That's a broader question. One of the witnesses said that earlier. Yes, we need an international.... I hope the 21st century will see some form of world government that will have some restrictions on capital. Right now there isn't, and domestic governments are declining in power. This is another example of that trend, where business is king.

I tell you, the politicians here, that I saw it in the streets of Vancouver last week: people were starting to say “Geez, do we really want this Asian system that's coming about, with business meaning everything? Do we really want that to be the basis of what Canada is going to be like?” No, there's more to it. There are human rights, there's education, there's good environment, and so on.

So I think the pendulum, at least in Canada, is starting to swing a little bit about the be-all and end-all being just trade agreements. We don't have to get on that....

The Chairman: What I was asking, though, is would you support curbs on governments doing this international bidding, whether it be by lowering standards or—?

Mr. Ian Waddell: I would, but I don't know how it can do that.

The Chairman: In any event, colleagues, that brings it to an end. I want to thank our witnesses today.

I want to remind members that tomorrow we will be having the chief negotiator, Mr. Dymond, as a witness, after which we will go in camera to discuss some of the information we've received and try to come to some conclusions.

We're adjourned until tomorrow.