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]

Thursday, November 27, 1997

• 1522

[English]

The Chairman (Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.)): We will begin.

Colleagues, this is the eleventh meeting of the trade subcommittee looking into the question of the MAI. The MAI question was brought to this committee with a letter from the Minister of International Trade asking us to comment on and to consult with Canadians on their views on the MAI and to bring this to his attention.

We have departmental officials here as our last witnesses. They were our first witnesses and now they're back to wrap up.

On the agenda today there will be no statements. What I would like to do is just go into questions. I know many members of the committee have questions, so I'd like to spend our time today asking questions and trying to sort out some answers.

Once we've gone through all the questions, we will then go in camera. We need some direction in terms of where we go from here.

Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau (Repentigny, BQ): Do we have ten minutes, Mr. Chairman, or is it unlimited?

[English]

The Chairman: Yes, ten minutes.

[Translation]

Mr. Benoît Sauvageau: Mr. Dymond, I want to welcome you for the third time to our Committee. You accompanied the Minister on the occasion of your first visit. So we will move immediately to questions.

The Bloc Québécois has prepared a list of about ten questions. I would like to try and ask as many as I can. The others I will simply send on to you, and we would appreciate receiving a written response to them. When Minister Marchi appeared before the Sub-committee—and you were present as well—he told us that all the provinces supported the federal government at the MAI negotiating table.

Yesterday, however, a representative of the Government of British Columbia appeared before the Committee and told us that British Columbia is vigorously opposed to the MAI and will never sign it. How do you expect to be able to sign an agreement that affects both shared and provincial jurisdictions, without the approval of the provinces?

[English]

Mr. William Dymond (Chief Negotiator, Multilateral Agreement on Investment (MAI), Department of Foreign Affairs and International Trade): Should I take these one at a time?

Mr. Benoît Sauvageau: Yes.

Mr. William Dymond: Mr. Chairman, thank you very much for your welcome. I'm accompanied by the same group as I was last time, and with your permission I will call on them to answer questions I can't handle.

The Chairman: Could you introduce them first?

Mr. William Dymond: Mr. Doug Anderson is from the Department of Finance; Mr. Blair Hankey is associate general counsel, trade law, from my own department; and Mr. Rob Ready is from the Department of Industry. These are the sitting members of the negotiating team for the MAI.

• 1525

To respond to the first question, let me first say that I was as surprised as anybody else by the statement made yesterday. All provincial governments have hitherto supported our participation in these negotiations, and they have with greater and lesser degrees of precision made clear their interests, which we continue to reflect faithfully in the negotiating position adopted by Canada.

I would further note, as I reflect on the positions being put by the provinces, that the concerns they draw to our attention—I could name a few; for example, the protection of health and social services—are concerns that are deeply felt by the federal government, owing to our own important responsibilities, not as great as the provinces but nevertheless not without significance, and accounts for our determination to secure the protection for these areas, which we achieved in the NAFTA.

As to the last part of your question, we are in negotiation. This is a work in progress, and we will continue to maintain our intimate and intensive contacts with the provinces. I could note in that respect that our next meeting on the MAI will be December 10, which will be two days after the next negotiating session.

[Translation]

Mr. Benoît Sauvageau: When you first appeared before the Committee, and I asked you about what percentage of provincial support would be required for you to sign the MAI, you responded by saying that this was a hypothetical question. Now that British Columbia has stated that it will not sign the MAI, can I put that question to you again, since it is no longer hypothetical? How many provinces must support it in order for you to sign the agreement?

[English]

Mr. William Dymond: Mr. Chairman, I would refer to the answer to the first question. I received only late last night the brief submitted by British Columbia, and we are studying those concerns with great attention. As I said, many of them parallel concerns of the federal government and concerns of the provinces, and I am hopeful, and indeed it is our objective, to produce a text that will adequately respond to those concerns.

Secondly, on the question of the percentage, it's not so much a hypothetical question as one that we answer in a different way. The committee will be aware that the federal government has exclusive treaty-making power and undertakes all treaty negotiations. It is the federal government that signs treaties for international agreements that are binding at international law.

In the area with which I am most familiar, that is, trade agreements, we have adopted over the years a flexible and pragmatic approach. As the subject matter of trade negotiations has come closer and closer to matters that fall within the jurisdiction of Canadian provinces, the methods we have found have been satisfactory to our trading partners and to the provinces, and we will continue to work with them to find the best way.

The first order of business is not the method but the substance; that is, ensuring this agreement is satisfactory to Canada and to all parts of Canada.

[Translation]

Mr. Benoît Sauvageau: So, even if the provinces don't agree, Canada has the power to sign the agreement.

For the time being, the government is only negotiating those parts of the MAI that affect federal areas of jurisdiction. At what point does the government intend to involve the provinces in the negotiations taking place in Paris?

[English]

Mr. William Dymond: Mr. Chairman, I would say that in this negotiation, as with all trade negotiations, we are negotiating not only for the federal government but for all of Canada in accordance with our constitutional division of powers and in accordance with the flexible and pragmatic procedures I referred to.

What we have said to date in Paris, and I wish to be very clear on this.... We have told our trading partners that it should be assumed by no one that the provinces are, ipso facto, covered by this agreement by virtue of the federal government taking part. We are working very closely with our provinces, however, and are trying to make the agreement attractive to them.

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[Translation]

Mr. Benoît Sauvageau: Could you tell us about the result of your negotiations with the provinces regarding protection of labour and environmental standards? Can you tell us what Canada's position would be with respect to the inclusion of mandatory standards in this agreement or in side agreements?

[English]

Mr. William Dymond: We have not met with the provinces on these issues again since I last appeared before the committee. It would certainly be our intention to make the labour and environment issues a focal point of our meeting on December 10 as we continue our dialogue. Further, as my minister made clear, we need to consult—we are consulting—with all stakeholders on this from the environmental community and with unions. In fact, I did have my third meeting with representatives from the CLC last week.

When those consultations are complete, and particularly when the report of this committee is available to the minister, that will be the time when the government will make its position known and so instruct the delegation to the talks.

Secondly, with regard to the question of side agreements, the side agreements within the NAFTA are essentially agreements on the right or on the obligation to enforce environmental laws. In so far as the Government of Canada is concerned, we don't feel the need to be obligated by international agreement to enforce our own laws. This is what we do, and this is not particularly a problem with the OECD countries, but it was a problem during the NAFTA negotiations. It was an issue in Canada and in the United States respecting Mexico's enforcement of its own environmental laws. I suspect that general issue, which is an important one, will become ever more important at the date when we move into global investment negotiations in the WTO.

[Translation]

Mr. Benoît Sauvageau: Almost all the witnesses told us that it would not be a catastrophe if Canada didn't upon completing of the last round of negotiations.

As far as you're concerned, what would the consequences be for Canada of not signing an agreement that Quebeckers, Canadians and the provinces in general do not consider fully satisfactory?

[English]

Mr. William Dymond: Mr. Chairman, as I believe I said—certainly more privately to some—the job of a negotiator, of a negotiating team, is to work for success and to prepare for other results at the same time. Our definition of success is precisely that: an agreement that will be satisfactory to Canada and satisfactory to the provinces. Such an agreement would be one that replicates the rights and obligations of the NAFTA in all substantial aspects. I cannot possibly speculate on the reasons why such an agreement might not be possible, but clearly if the agreement that emerged departed significantly from either the rights or obligations of the NAFTA, some very serious questions would be raised. I cannot speculate beyond that.

You know that the minister has made our objective clear, and we have been guided by this from the beginning. Our objective is to replicate the rights and obligations of the NAFTA. That is why we are resisting proposals that go beyond the NAFTA in terms of obligations and that are less than the NAFTA in terms of rights that would be available to Canada.

The Chairman: You're way over time, but you can ask a quick follow-up to this.

[Translation]

Mr. Benoît Sauvageau: Your optimism seems genuine. There was some discussion about whether the issue of environmental standards, labour standards and a comprehensive cultural exception could be a deal-breaker. However, you could be a little more forthcoming as to what would constitute an unsatisfactory agreement.

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At your first appearance, you told us that there was no legal difference between an exception and a reservation. Could you then explain the impact of the standstill and rollback clauses on the reservations? Could a reservation be permanent and thus not subject to the rollback?

[English]

Mr. William Dymond: Yes, and in so doing I would refer to the NAFTA model. The NAFTA model in article 1108 defines the terms and conditions for reservations, but it also creates the facility for what we call “unbound reservations”, which are then contained in annex B of Canada, the United States, and Mexico.

If I may cut through that verbiage, I expect what we will see is an article in the MAI that will have the legal words for standstill and it will say you will find the reservations that are stood still subject to that obligation under annex X, for example. It will also establish the facility for unbound reservations—reservations that are not subject to standstill—and it will point you to annex Y to discover what those reservations are.

That, in broad terms, is the model that was used in NAFTA. A variety of models are possible, but the legal effect will be to create a set of reservations that are stood still. As I explained to the committee last time, some of the reservations, in fact better than half of our NAFTA reservations, are stood still, and there is a second set that are unbound and that constitute carve-outs for the agreement, and to which no obligations apply, perhaps, other than transparency. That is consistent with the minister's undertaking in his statement to the committee that Canada does not accept the principle of standstill applying to all the reservations we shall take.

I could add to that and say the legal effects of a general exception and an unbound reservation are, in our opinion, exactly the same.

Were you going to give those questions to us in writing? We can wait for them.

[Translation]

Mr. Benoît Sauvageau: Mr. Chairman, will there be a second round? Are we to have only one round of questioning?

[English]

The Chairman: We won't leave here until we have all our questions out of here. You might want to have supper brought in.

Mr. Penson.

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

Welcome again to Mr. Dymond and his group here this afternoon.

Mr. Dymond, I want to be absolutely clear on the process for involving the provinces. You've said you're going to be negotiating for all of Canada. I want to know the process for the provinces' signing on with this deal if they should decide to do so. Could you briefly go through that for us?

Mr. William Dymond: Yes. As I pointed out in the last series of questions, it is the federal government that has exclusive treaty-making power. Accordingly it's the federal government that undertakes these negotiations and signs any treaty that emerges and is acceptable.

Arrangements involving the provinces in terms of their compliance with the terms of any agreement are a matter purely internal to Canada and for us to resolve with the provinces. Over time we have employed a variety of techniques to do that. One technique was employed in the NAFTA. Another technique was employed in the WTO. All these we are exploring, but we are exploring them in the context of finding an agreement that, because it replicates the NAFTA, will be satisfactory to all the provinces.

There is no off-the-shelf model we use, no automatic, mechanical system we use for this process. In our experience it very much depends on the subject matter of a treaty or an agreement and the extent to which matters coming under provincial jurisdiction are involved in the treaty Canada would sign.

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Mr. Charlie Penson: In any event, the provinces are not required to sign on against their wishes.

Mr. William Dymond: Yes, because the question of signature of an international agreement by the provinces does not arise.

Mr. Charlie Penson: Furthermore, do you intend to have discussions with the provinces on how this can be implemented?

Mr. William Dymond: Yes, we already are. This is a matter that is coming up in our discussions. It's not a matter on which we can reach any conclusions with the provinces because the question immediately arises—implement what? What you implement is a completed agreement if it's satisfactory to you.

We anticipate and are working for an agreement that replicates the rights and obligations of the NAFTA and does not change in any way the obligations of the provinces that are incumbent in the NAFTA, vis-à-vis the United States and Mexico, except in the sense of extending those selfsame rights and obligations to the rest of the OECD.

Mr. Charlie Penson: I want to get on to a different area. We heard some concerns at committee, particularly last week, about the whole area of expropriation and the difference between true expropriation and whether governments could be affected by making regulations where companies would regard it as expropriation. I'm wondering if you could help to clarify that concern for us.

Some witnesses were quite concerned that provincial governments, for example, would not have the right through regulation to change a policy on forestry or some of those areas. It would be regarded as expropriation by companies and we'd see quite a proliferation of cases as a result of that.

Mr. William Dymond: We have followed that aspect of the debate, indeed all aspects of the debate before the committee, with great attention and are sensitive to the concerns that have been expressed. The position of the government is that enforcement of Canada's environment laws and regulations—if this is the particular issue to which you're referring—is not an expropriation. We would allow nothing to come into the MAI to limit the government's ability to strengthen the Canadian Environmental Protection Act. All companies in Canada, foreign or domestically owned, are of course subject to the full rigour of the law.

I appreciate that there isn't agreement amongst legal experts all over Canada as to what this means, but we have to take a view, and that is the view we have taken.

Mr. Charlie Penson: Further to that, Mr. Dymond, we've also heard that a country-specific reservation in the area of the environment would not be satisfactory. There would need to be a broad carve-out for the environment. Is that how you intend to handle this area?

Mr. William Dymond: We intend to handle it by ensuring this agreement does not affect the ability of governments to regulate in the area of the environment. The suggestion has been brought forward, and it is something we are looking at, that perhaps you need not have so much an exception—although I suppose you could look at it that way—as something modelled along the lines of article 20 of the GATT: “Nothing in this agreement shall be construed to prevent a country from regulating....” That would be the concept.

That idea has been brought forward by a number of people, not only within this committee, and is one we will give very serious consideration to. It has also been brought forward in Paris. But we hold to the basic position that we will not allow anything to creep into this agreement that purports to limit the government's right to regulate in the area of the environment or, as we said last time, in any area of normal regulation of business by governments—any of that normal interface—as long as the principle of non-discrimination is observed.

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Mr. Charlie Penson: If that were not to be coming out of this next round of negotiations in the MAI, would it be a deal-breaker in terms of your position, then? If that were not available for protection to Canada, would we walk away, would we not be a part of it?

Mr. William Dymond: On a point of detail, I don't think anything particular on that issue is going to emerge out of the next round. The whole labour-environment complex will be one of those issues that will likely find its settlement one way or the other towards the end of the negotiations.

Secondly, I hope you understand that it is ministers who will make that decision and not civil servants.

Third, if indeed it were the fact—and we don't believe it is, but negotiations are not finished yet—that this agreement could in some sense interfere with the government's right to regulate, this would be of concern not only to the Government of Canada but to most of the governments around the table in Paris. Some of them, as I've heard, have reputations that some people in Canada would say are considerably more “robust” than that of Canada in the area of environmental regulation. If that were the case I can't imagine what people like the Dutch and the Germans would say.

Mr. Charlie Penson: Just to try to define this, to get back to the whole area of expropriation, because that seemed to be a point that was quite a concern this last week...there was a concern that if Canada belonged to this MAI there'd be a new round and a lot more cases of expropriation against the Canadian government. How do you respond to that?

Mr. William Dymond: In two ways. First of all, the definition of expropriation will not exceed that of the NAFTA. Accordingly, if there is a problem with that definition, if this is the definition that will be maintained, then the problem is of a larger character. It then involves the NAFTA, it involves our bilateral investment agreements, and it involves all modern bilateral investment agreements that most countries around the world—up to 1,300 of them, as we said last time—are facing.

Secondly, as to whether there are more cases coming down the pipe, I have no reason to say that is true or untrue. But my own view is that extending this agreement, extending the principles of the NAFTA and the provisions of the NAFTA, in substance, to 26 other countries in the OECD can hardly be said to make a material change in the expropriation discipline, certainly the way these things are conducted in Canada.

Mr. Charlie Penson: Just to finish up, I guess in the time we've had a NAFTA investment chapter in effect, we've only had one case against Canada under that expropriation rule, the Ethyl case. That is before a panel right now and we don't know what the outcome is going to be. So it's hardly a proliferation of expropriation actions against Canada during the time we've had a model to look at.

Mr. William Dymond: Yes, that's correct.

The Chairman: Ms. Bulte.

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): Mr. Dymond, I wonder if you can help me out with respect to what Canada's position is and what you're arguing at the OECD regarding the non-discrimination clause. When I take a very quick look at chapter IV on general treatment.... I wonder if you could turn to it. It's investment protection, chapter IV, under section 1.2.

Mr. William Dymond: General treatment?

Ms. Sarmite Bulte: Correct. It states that:

A Contracting Party shall not impair [by unreasonable or discriminatory]

—which I would submit are decoupled words or “unreasonable and discriminatory”.

What is Canada's position? I understand non-discrimination, but what is unreasonable? Who's going to define unreasonable? Why is it even there? If we're talking about non-discrimination, that's one thing, but what does “unreasonable” mean?

What are we arguing at the OECD? Are we arguing for the decoupled words or the other way?

• 1550

Mr. William Dymond: You're quite right in pointing out that the standard is quite different, and unreasonable and discriminatory is a much tougher standard to prove. Accordingly, the protection conveyed to the investor by that provision is less.

I have to tell you that this issue was debated about a year ago. It has not come back. It's in square brackets. I think our position—but this is one that we have not been firm on—leans towards the higher protection for the investor.

Some countries believe that the unreasonable and discriminatory, which provides a lower standard of protection for the investor, is the formula that should be adopted, but we have listened to that debate.

The concept is not in the NAFTA.

So this is one of the outstanding matters that we will be looking at.

To be frank with you, I cannot tell you that it has been regarded by any party around the table as a central issue. It's an important one, but it doesn't come up there with the really crunchy ones.

Ms. Sarmite Bulte: I would think that the unreasonable or discriminatory would actually be a much lower one, because if we take away, the party doesn't even have to do anything discriminatory, as long as it's unreasonable. That's not the same as what I understand is non-discrimination. One is non-discrimination and one is unreasonable. I would submit that the two are totally different. I guess my concern is, why is unreasonable even there and are we taking any position to have it removed?

The Chairman:

[Editor's Note—Inaudible]...the difference between the two words. I agree.

Mr. Blair Hankey (Associate General Counsel, Trade Law Division, Department of Foreign Affairs and International Trade): Unreasonable is clearly a broader term than discriminatory, and it's a term that has come in from a number of European bilateral investment agreements. It's not a term for which we have particular enthusiasm. It's not in our bilateral model and it's not in the NAFTA, but of course we're negotiating around a table with 29 parties and it's a quite normal part of the debate that three of the parties refer to a particular agreement, be it the NAFTA, and needless to say 26 other parties are not necessarily committed to that text. So at the end of the day the text represents a compromise and we continue to debate what the implications of each of these terms would be, but clearly reasonable or unreasonable is a broader or looser term than discriminatory. We know what discriminatory means. It's a tighter term.

Terms like equitable and reasonable are used in many contexts in treaty language. We've not used it, as I say, in bilateral investment agreements—in ours—but we have to listen to our partners around the table and at the end of the day we'll have to make an assessment as to whether or not we can accept it and try to figure out what the implications of it are.

Ms. Sarmite Bulte: So am I right to believe that Canada's position is that we are promoting a discriminatory position, or don't we have a position on this yet?

Mr. William Dymond: May I draw to your attention that the parallel to this article is the “minimum standard of treatment” article in the NAFTA. It's article 1105. It's one that conforms with our approach to these matters and the approach of the United States. What it says is that:

Each Party shall accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment....

So we capture in one paragraph what is captured in two.

We talk further on in that paragraph about what happens to property that is lost owing to strife, and we do that in one paragraph whereas this draft seems to require several.

The position is that our benchmark always is the NAFTA.

Now, I have not made up my own mind—and I would be grateful for any advice that the committee might wish to render on this point—whether these formulations, “unreasonable” and/or no “unreasonable” but just “discriminatory”, conform most closely, in your view, with the concept embodied in article 1105.

• 1555

Again, as my colleague, Mr. Hankey, pointed out, we can't be in the position of insisting that the other 26 members of the OECD accept the NAFTA word by word, although we think, as I said, it is the model agreement.

Ms. Sarmite Bulte: Thank you.

On the expropriation question, one of the concerns I heard coming from some of the witnesses is that the term “expropriation” is getting a much larger definition in international trade arbitration boards. It's been widened from what we know as the actual physical expropriation of, let's say, a plant, especially in relation to some of the United States actions that are going on in the Middle East, where they see expropriation as ability to make less profit.

Does this agreement contemplate anywhere defining “discriminate”? Are we going to be bound by those international trade decisions that are being made right now, as the word “expropriate” tends to expand? Or would it be desirable to actually define what “expropriate” means in this agreement?

Mr. Blair Hankey: There is a fair bit of jurisprudence in international law on expropriation. Of course the most authoritative jurisprudence is the jurisprudence of the International Court of Justice. The Iran-United States Claims Tribunal would have a lower priority in terms of judicial precedents binding on other tribunals. There has been some broadening of the definition of “expropriation” by the Iran-United States Claims Tribunal beyond perhaps a purer, more classical definition, but we're not convinced that these definitions would necessarily be binding on, for example, a NAFTA or an MAI panel.

In any case, it's very clear that international law does recognize something called a police powers exception or regulatory powers exception to expropriation. International law distinguishes between expropriations that are compensable and those that are not. We believe that even a taking where there is an exercise of police powers or regulatory powers is, in international law, not compensable.

Ms. Sarmite Bulte: Would you not recommend defining “expropriate”? Do you think it's not necessary in this agreement?

Mr. Blair Hankey: It would probably be an extremely difficult thing to do. Very often in international agreements, where there are perhaps various opinions as to how a term can be defined, the negotiators prefer to allow details to be developed through jurisprudence. It's a normal way that international law is developed, as domestic law is developed.

Ms. Sarmite Bulte: Thank you.

I have a question on the culture exemption. Today in the Standing Committee on Heritage we had a presentation on the multimedia industry. In Canada the culture industry is responsible for 25% of what is called the multimedia industry. One of the concerns I have is that in the NAFTA definition of “culture”, there is no mention of multimedia. I will acknowledge that we haven't regulated it; that is a non-regulated area right now. Is it advisable that we include this multimedia in that definition of “culture”? And what are the consequences of not including it in the culture exemption?

Mr. William Dymond: Thank you. That is one of the areas, and a very important one, precisely in which we are looking for advice. I have read with great interest the submissions made before the subcommittee by the various groups that have appeared before you. I have said to them, including when I spoke to the cultural SAGIT earlier this week, that the definition of “culture” is one of the areas in which we require advice.

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The definition we arrived at in 1993 conformed to the state of the subject at that time and was considered satisfactory by the cultural groups. The question we have been asking and looking at ourselves is, we are now five years on from the NAFTA technology move; does this definition continue to be satisfactory or does it require change?

From my point of view, I want to hear from everybody, and I'm sure the minister wants to hear from everybody with an interest in it. Some may say yes and some may say no. Of course, we are working very intensely with Heritage Canada and will be meeting with them tomorrow on that subject. But our deliberations are very much informed by what we hear from the most affected groups.

If I may say so, you have put your finger on one of the most critical questions in the cultural file in so far as this negotiation is concerned.

The Chairman: Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC): Thank you, Mr. Chairman.

I have one question. It's another question on NAFTA, chapter 11, investor state provisions, and it's related to the Ethyl case. Bill C-29, which was brought in by the current Minister of International Trade when he was Minister of the Environment, was designed to protect Canadians against an additive that was deemed to be environmentally egregious and dangerous to the public.

If we're talking about the same chapter 11 type provisions being expanded to 29 states, there's no guarantee—obviously, if you based it on that one experience—that in the future any environmental legislation the Canadian government introduces in order to protect Canadians against environmental risk, for instance, will not be subject to this type of legal action. This is a very important issue from the perspective that effectively government would become handcuffed, and certainly the bureaucrats.... There would be a legislative chill against both bureaucrats and politicians in introducing any new regulations that could potentially expose the government to another $350 million—or perhaps far greater—lawsuit.

I'd like to get some feedback from you on that.

Mr. William Dymond: Of course, I cannot comment on a case that is before a tribunal, and so I will not do so. What I can point out is that under our law, any citizen, natural or corporate, has the right to sue the government for actions it considers arbitrary or in breach of statute. If you believe there is a chill effect—and I've heard the expression “chilling effect” as well—the chill effect surely arises in the first instance from the right of corporations in Canada to use litigation to address alleged wrongdoing by the government. In the event this agreement does not succeed, whatever chill effect, in terms of environmental legislation or regulation, remains by virtue of the right of citizens to sue.

Mr. Scott Brison: The government introduced this legislation for one reason and one reason only, and that was because of a risk to the public relative to MMT. Even if that risk is proven to be not a valid risk, what you are essentially saying is that there's no protection in the future for the Canadian government or for the Canadian taxpayer against any well-intentioned environmental legislation.

This was the case, for instance, with.... There are two other cases now against the government under the chapter 11 provisions. It seriously threatens Canadian environmental policy.

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One of the benefits of going on and negotiating new trade agreements is that we can learn from past experiences and hopefully develop safeties to prevent a repeat of this type of exposure. In this case, I understand there's a reasonable chance that Ethyl Corp. does have a decent chance against the government.

I know you can't comment on that case, but you can certainly take responsibility for the risk the Canadian taxpayer is placed under with this type of exposure. We're expanding it to 29 countries. That in itself represents a huge increase in that exposure for Canadians.

Will you take a hard look at the chapter 11 failings, if there were failings, and assure Canadians that we will take a look at what may or may not have been wrong under those provisions, with the three cases that exist, for instance? Perhaps the Canadian government is not considering the trade agreements we're already in before they introduce legislation. That's one of the reasons there should be at least an impact analysis on current federal, provincial, and municipal progress; there may be current federal, provincial, and municipal programs that would be immediately in violation.

Mr. William Dymond: Thank you. I will take that as an observation. It is a very important issue that you raise. Of course, it is relevant not only to chapter 11 but to the other agreements in which it is contained and which we are currently negotiating. Moreover, it's not something invented by the Government of Canada that first saw light of day in the NAFTA; it is a provision that is common to bilateral investment agreements around the world. You raise an important point, and of course we will be considering the issues you raise and those the committee will draw to our attention.

Mr. Scott Brison: I have one last question.

I've heard from a number of the presenters or witnesses during these sessions that the government will effectively be handcuffed against introducing new legislation, such as environmental legislation, for instance. Even if the government wants to bring forward environmental legislation and is prepared to apply the new laws and environmental regulations to all companies doing business in Canada, both foreign and domestic, it will not have the power to do that based on standstill. That's one of the issues raised by witnesses, and I would like your feedback on that.

Mr. William Dymond: I disagree with that totally. Standstill has nothing to do with it. Standstill is a precise obligation you may or may not accept as it relates to specific reservations in the agreement you require. In the NAFTA, for example, we accepted a standstill on our limitation of foreign ownership of Canadian air carriers and we propose to carry forward that standstill. It seems to be without controversy. But whether or not you like standstill in principle, it is not in any sense applicable to environmental regulation or any other area of regulation.

When I saw the issue raised I was struck by the fact that it is a matter that would be of concern to all governments around the table. I cannot imagine the German government or the British government or the Dutch government being willing to contemplate an agreement that impeded their right to regulate, not only now but in the future as the science changes and as the environmental challenge changes with the arrival of new technologies. That's not what we're about. In any case, the issue of standstill in that sense does not arise.

The Chairman: Mr. Blaikie.

Mr. Bill Blaikie (Winnipeg—Transcona, NDP): I have a number of things going back to the discussion of “unreasonable” and “discriminatory”. It seems to me that if the Canadian team were to take the view that it should have to be both unreasonable and discriminatory as opposed to just discriminatory, which seems to me to be the preferred position, that would be more consistent with our view of other rights.

• 1610

In our own Canadian Charter of Rights and Freedoms it says certain things are not possible except where it's reasonable in a democratic society. So we have parallel uses of the notion of “reasonable” and “unreasonable” in our own law, and I'm not sure why that shouldn't be applicable to trade law in this case.

You said to Mr. Brison corporations already have access to the domestic courts. You've said this a number of times. But we've also had a great deal of evidence to the effect that the tradition of jurisprudence in the domestic courts on expropriation is quite different from what is to be expected from the as yet unknown, to some degree, jurisprudence that will flow from these binding trade dispute settlement processes. It's very hard to know, of course, because apparently you can't even find out what the Canadian government is saying in the Ethyl case, which is quite unlike the domestic court situation, where you can find out what the arguments are and you can pass judgment on what the arguments are. This happens—and this is part of the offence taken by many groups, it seems to me—and whatever happens, it will happen behind closed doors and it will happen between trade lawyers of the various countries, and it won't be subject to the same kinds of criteria as are the case in the domestic courts.

I'm just trying to get a handle on this because you say you hold to the view that the government will be able to continue to legislate in the environmental area. I'm not trying to be facetious here, but what is that worth, that you hold to that view? Won't that finally be decided the day some corporation decides to take the Canadian government to this dispute settlement process and then we'll find out whether the view you hold to is correct or whether the dispute settlement panel has an entirely different view of what the MAI means? As a country we are left hoping your view is right, but at the same time, by proceeding with the agreement we are leaving ourselves vulnerable to the prospect that a dispute settlement panel might decide otherwise, unless there were a total carve-out for environmental measures, which there isn't and which I don't understand the Canadian government to be advocating.

Is that a fair rendition of...?

Mr. William Dymond: On the standards that may be applied in the international courts and domestic courts, I'll allow Mr. Hankey to respond, so I don't get sued on that question.

But Mr. Blaikie, I would argue that what you're raising is a basic issue of dispute settlement: should the government take part in dispute settlement mechanisms as we do in the GATT and a variety of agreements? Of course the reason we do, and we have traditionally argued very vigorously for effective time-limited dispute settlement procedures, is the protection for our economic interests that affords: the interests of our exporters, our service providers, and in this case, in the agreement we are contemplating or negotiating, the interests of our investors. We have taken a great interest in dispute settlement in our bilateral investment agreements and in the NAFTA, and in this agreement.

I'm very pleased to say that around the table, Mr. Hankey is the acknowledged expert of the representatives who go there.

Why do we take such an interest? We take such an interest for the same reason as we have been in the forefront of those arguing for international rule-making in order to equalize the power between strong countries, which don't need the rules, and medium-size and small countries, which do. Part and parcel of that is effective dispute settlement.

So the optic we bring is a twin optic. Of course there is the risk to Canadian measures, not only in investment but in the GATT and the WTO, which may be found vulnerable to dispute settlement actions by our partners. But there is the benefit to Canadian exporters and Canadian investors of having effective dispute settlement procedures in agreements such as these.

The point I understand you're making, and it's similar to that of Mr. Brison, if there are serious faults within the NAFTA, should we extend those to the rest of the OECD, is a point on which we will need to reflect. But it does go beyond that. It is a larger point than that because it is in fact a reflection of the ability for companies, Canadian citizens, corporate or natural citizens, to sue within domestic courts, and it's a reflection of what we already have with the country with which we do most of our investment business and with 24 or 25 countries with which we are doing an increasing volume of our investment business.

• 1615

As I say, I'm not diminishing or denigrating the point at all. I've just always thought intellectually that if there is a problem there, the smallest part of the problem is with the MAI if the MAI emerges on this subject as we think it might, and as we are arguing for.

Did you want me to deal with the standards?

Mr. Bill Blaikie: Well, I don't want to have all my time used up.

Mr. William Dymond: Oh, sorry.

Mr. Bill Blaikie: I have a couple more questions that I want to ask.

The Chairman: Go ahead.

Mr. Bill Blaikie: I'm just saying we've had credible argumentation to the contrary that there is quite a difference between what is argued in domestic courts and what is argued in trade dispute settlement. I listened very carefully and I didn't hear you tell me I was wrong. In the end, your view of the agreement will be decided somewhere down the line by a trade dispute panel. You think there's a fair trade-off there, because a similar thing will be available to Canadian investors in other countries. Fair enough. That's something people will have to decide the value of.

I wanted to ask a question about the provinces. Other people have asked this, I know, but I want you to make it clear. You say it's a replication of NAFTA. Well, in NAFTA, you did sign on for the provinces, right? The provinces are subject to NAFTA.

Mr. William Dymond: Yes, but they're—

Mr. Bill Blaikie: They're subject to certain reservations, but they're subject to NAFTA.

Mr. William Dymond: Yes, but they didn't sign—

Mr. Bill Blaikie: And the federal government has the power to sign. The provinces themselves didn't sign individually.

Mr. William Dymond: That's right.

Mr. Bill Blaikie: They didn't?

Mr. William Dymond: That's right, they did not.

Mr. Bill Blaikie: They did not. Well, then, the MAI would be the same. The federal government signs for the provinces—it signs for the whole country—which is the point I tried to make yesterday. Everybody made a great hoo-ha about it, but that is the fact of the matter. It is then just a matter of whether or not the provinces will comply with the federal government's signing. But what constitutes compliance is something that has to be negotiated between the federal government and the provinces, which is quite different from the federal government having or not having the power to sign on for the provinces.

Now, one of the things that was said to us yesterday by a British Columbia delegation was that they feel the provinces are being used as a bargaining chip. One of the reasons why there is so much uncertainty about whether or not the provinces are covered is that the Canadian negotiating team, which you head, is holding the provinces back, if you like, as a kind of negotiating chip—if you give us this, this and this, we'll throw in the provinces. It's not a—

Mr. Julian Reed (Halton, Lib.):

[Editor's Note—Inaudible]

Mr. Bill Blaikie: Pardon? Listen, I was told for months once that energy wasn't in the free trade agreement, but it was in there when the elements of the agreement came out. Anybody who trusts that what is revealed to them is only that which is going on is very naive. All kinds of things can happen in these negotiations, particularly as you get down to the desperate, last 48 hours, if the government really wants to cut a deal.

What is the stance? When do you make a decision about the provinces? I want criteria. It won't be based on whether the provinces want it or not, because—

The Chairman: Bill, let him answer.

Mr. Bill Blaikie: Yes.

Mr. William Dymond: Mr. Chairman, may I just go back briefly to the other question to respond to Mr. Blaikie's conclusion? I want to affirm that the standards contained in the MAI as it is emerging, and in general international law, are fully consistent with Canadian legal standards. Where the treatment accorded under Canadian laws, regulations, and policies is inconsistent with the MAI—for example, cultural policies—those are the areas where we propose to obtain either exceptions or reservations.

• 1620

I didn't want to leave any impression that we'll enter into international agreements with effective dispute settlement mechanisms while having no idea what the applicable legal standards would be. That would be an irresponsible act. We have never done so, and I can't imagine that we would do so in the future.

With respect to the provinces, while British Columbia is entitled to its own view, I take particular objection and I will make that point to them that I do not accept that the federal government would use the provinces as a negotiating chip to buy something for the federal government.

Indeed, it is wrong to characterize in the MAI on the issues before us—this means reservations, labour, environment, and the rest of it we talked about—that there is a federal interest here and a provincial government interest there.

I referred earlier to health and social services. In my view, our interests are identical. On the issue of the cultural exception, in our interest with the provinces—this is particularly with Quebec and Ontario, which have expressed great concern, but all of them are concerned by this issue—there is no difference.

When we as a negotiating team say we will require a carve-out, an unbound reservation for health, social, and education services, we are representing the interests of the whole of the country. As we know, the federal government has important but not preponderant responsibilities in that area. It does not change our substantive concern with the manner in which the agreement could affect those areas.

What we have been trying to do—I continue to persuade my colleagues from the provincial governments—is to make this agreement attractive to the provinces. The reason we're holding out is because a number of countries just automatically assume.... These are the unitary states, which are the majority. That's fair enough, as they can assume whatever they want. When a country like Canada, the United States, or Australia signs the agreement, then its provinces and states and so forth are automatically part of that agreement.

I said no, it doesn't apply in Canada. You're going to have to convince us, the whole of Canada, all of the governments involved, of the value of this agreement, and you haven't done it yet.

That is the position we have taken and continue to defend. It's certainly not the issue that we are holding out on the provinces so we can get a goody for the federal government.

The Chairman: Thank you. We'll come back to you, Mr. Blaikie.

Mr. Sauvageau, with a quick question.

[Translation]

Mr. Benoît Sauvageau: Thank you, Mr. Chairman, and I also want to thank Mr. Nault. You're very kind. I will be brief because, unfortunately, I have to leave soon. But as I said earlier, I will leave a list of our other questions with you.

When you appeared before the Committee on November 5, you said that the French clause was a self-judging clause, which seems somewhat paradoxical. Last Thursday, SOCAN representatives presented a concrete proposal for a cultural exception that mainly reflected the opposite view, namely that the French clause was not self-judging.

You also said that you had carefully read the testimony. Have you reviewed your own and Canada's position on the self- judging aspect of the French proposal?

[English]

Mr. William Dymond: Yes, and that review is continuing. There were a couple of aspects on the French proposal that I noticed with particular interest. I believe it was SOCAN. But certainly the Canada Council for the Arts said to us in our own meeting that they found the French definition too loose and vague to convey protection.

It's possible to argue the other side: that more protection is conveyed through more vagueness. Whereas the opinion of Mr. Appleton was that the French exception, the way it was worded, was satisfactory.

I think we have to say that the jury is out on that. SOCAN has asked for a self-judging exception that contains nevertheless a number of definitions of what the cultural sector consists of. Those are, of course, inherently contradictory notions. If a sector is self-judging, it's self-judging. You don't say what it is, because you're going to decide what it is. Or for greater certainty, you say it's books, movies, whatever definition you agree on.

• 1625

So those are all areas we are reviewing, and as I said before, the advice of the committee, I'm sure, will be welcome to the minister, and we will be consulting with other stakeholders on that. We are reviewing, but we have not completed that review.

[Translation]

Mr. Benoît Sauvageau: With respect to Helms-Burton, do you have support for the proposal found in pages 162 and following? Does Canada have support for its proposal? And how have our American friends reacted to it?

[English]

Mr. William Dymond: Without enthusiasm, I would say.

We originated in March 1996, a week or so after the Helms-Burton bill was enacted into law. We initiated the discussion in Paris and we made proposals. Those proposals have been subsequently modified by the European Union, but I can say with confidence that the Canadian proposals enjoy the support of all the members of the European Union and the support of NAFTA. While some delegations are silent, nobody opposes them. But the United States' enthusiasm for them has been muted, I would say; modest. It is a very difficult area.

[Translation]

Mr. Benoît Sauvageau: I know you have so far been optimistic, and that you will continue to be so. However, I am not sure you will be willing or able to answer the following question. Perhaps you could simply give me a yes or no.

Can Canada not sign the MAI?

[English]

Mr. William Dymond: Of course, anything is possible.

The decision for the government when we come out of negotiations will be, here's the text; is it satisfactory to the government? It's certainly possible that the government can say no. There's nothing inherent in participating in a negotiation that a signature is inevitable. The agreement has to be satisfactory. That's quite clear.

[Translation]

Mr. Benoît Sauvageau: Thank you, Mr. Chairman.

[English]

The Chairman: Thank you.

Mr. Nault.

Mr. Robert Nault (Kenora—Rainy River, Lib.): Thank you, Mr. Chairman. Thank you, Mr. Dymond and your colleagues, for coming.

Can you take out the NAFTA agreement and go to page 11-10, which is article 1114, “Environmental Measures”? Can you tell me what that is? Is it an exception, a carve-out, a non-bound reservation? What is it?

It's very specific when it says, and I'll read the first part for the record:

1. Nothing in this Chapter shall be construed to prevent a Party from adopting, maintaining or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure the investment activity in its territory is undertaken in a manner sensitive to environmental concerns.

2. The Parties recognize that it is inappropriate to encourage investment by relaxing domestic health, safety or environmental measures.

Of course, it goes on. There obviously was an intent to put this in there. Is it to suggest that the environment under article 11 is not going to be allowed by governments to be used as a political football for investment purposes? What would this be considered? Just a section in the chapter? Or is it an exception? It makes it pretty clear that you can't do certain things. I'm trying to get it clear in my mind what that means.

Mr. William Dymond: In fact, sections 1 and 2 address different aspects of the same question.

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Section 1 is an assertion that is inspired, in my mind—I didn't write this paragraph—by the notion of GATT article XX: nothing in this agreement shall be construed to prevent you from doing something. That is an affirmation of the rights of states to regulate, if you like.

Section 2 deals with a different measure, a different aspect. Having said in section 1 that this agreement does not constitute an impediment to your enforcement of environmental laws, to put it in plain language, it says you shouldn't be enforcing them in a manner to attract investment by lowering them to attract investment. So it's intended to be a safeguard, in a way.

The two go neatly together. You could, in a different form...and there's no protocol here, there's no convention, that requires you to put certain paragraphs in certain sections. I would see no objection theoretically to lifting section 1 and making it an exception. It does not change its legal value. But to my mind obviously it was attractive to the drafters, to the negotiators, to combine these two notions in one paragraph, in one article, in the same place, so you don't have to flip all over the agreement to find out what is going on.

Mr. Robert Nault: So for the sake of this debate you would consider section 2 to be an exception.

Mr. William Dymond: No, section 1.

Mr. Robert Nault: Section 1. Section 2 is what, then?

Mr. William Dymond: Section 2 is an....

Mr. Robert Nault: An acknowledgement of something?

Mr. William Dymond: No, section 2 is a provision of the agreement that does not quite constitute an obligation, because it's not worded in those terms, but it is telling you as contracting parties, as governments...it is defining an activity you should not engage in. It's not an exception to the agreement. It says you should not do this.

That was my point last time. It is a “best endeavours”, or as we say, a hortatory. The only penalty is consultations. The debate we're having in Paris, and an issue on which we're consulting, is whether you make that sanctionable or not, in which case you would need a different form of words the drafters would come up with. The notion would be going from best endeavours to binding obligation.

Mr. Robert Nault: In essence, then, under chapter 11 there is a reference, of course, to environmental measures. You've been telling us for a number of days now that the MAI is NAFTA on—

Mr. Bill Blaikie: Steroids.

Mr. Robert Nault: Steroids or whatever, but it's NAFTA. That means there must be a position of the federal government on the environment.

Let me go a step further. As you know, it wasn't too long ago that the present government asked and received some side agreements on the environment and labour under NAFTA. In view of that, are we asking for the same thing of our partners at the OECD for those side agreements to assure ourselves on the whole environmental and labour question? That seems to be this present government's position, since we just signed some not too long ago, as a party, and of course as a government and the party in power.

We've had some difficulty in getting a sense that this is an issue and important to the government, but it's obviously important to the party I represent, since we went out and asked for it from President Clinton, the president who is there now, and we did receive it. Am I assured this is going to be part of the negotiating strategy?

Mr. William Dymond: First, on the generality of it, the minister stated the position of the government in his appearance here on November 4, and that is that Canada is seeking very strong provisions on the environment, and they will appear in a number of different places in the agreement, including the preamble, on which work has just begun. So that is quite clear. The precise issue on which we are seeking advice before the government adopts a position is this issue of binding and not binding.

On the question of the side agreements attached to the NAFTA on labour and environment, as I mentioned, these are agreements constituting an obligation to enforce your own laws. They do not address the issue of standards high or standards low or fiddling with your standards. They were intended to address a concern expressed quite vigorously in the public debate in Canada and even more so in the United States that notwithstanding the otherwise high quality of Mexican laws in the area of labour and environment, they weren't much good unless they were enforced. There was concern about enforceability of laws on the books, not the substance of laws on the books.

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I have to tell you frankly that amongst the OECD countries generally, the commitment to the enforcement of national laws—whatever you have—on environment and labour is quite high. It has not been an issue that we had to tell the German government, the United States government, or the Dutch government that they had an obligation to enforce their laws.

This enforceability, the obligation to enforce, is an issue that could come forward. We have been thinking about it amongst ourselves. Whatever profile it attains in the MAI it will clearly be a very important issue when we get into global investment negotiations in the WTO.

Mr. Robert Nault: Let me go back to our presentation last night from the province of British Columbia, which I found to be quite a concern to the members of the committee and to me personally.

I'll just read to you what they are saying are the specific concerns about the proposed MAI text. It's on page 5.

There is still considerable uncertainty over how, and what, reservations to the MAI will be permitted. Even if all Canada's draft reservations were accepted by other MAI parties (by no means a certain prospect), we do not believe that reservations are adequate means to protect Canadian sovereignty and policy flexibility.

Is it true that when you put our reservations on the table—and I go back to our reservations that are included in article 11 of NAFTA—they are not a certainty and in fact we are negotiating our reservations that are in NAFTA now? Is it true we may have less than we had under NAFTA because it is part of the negotiation that it isn't a certainty?

While you've been telling us it's NAFTA and those reservations are there, that's not what our colleagues from British Columbia are telling us. They are saying in essence it's not a certainty and you may come back from these negotiations saying “I'm sorry, we lost two of the reservations we had before because that's what we needed to get the deal.”

I think I'm following up somewhat on Mr. Blaikie's point of view. We need that clarified. Is that part of what we're doing here?

Mr. William Dymond: If the Government of British Columbia is making the observation that the negotiations are not yet concluded, it is of course perfectly correct. The certainty we will be able to provide to the committee on the reservations will be when the negotiations are concluded. We have said these are the reservations we require.

Anybody looking at them will know that some are going to be more important than others. The reservations on culture—and we say we presume there will be a general exception of culture and health and social services—are clearly ranked higher in the minds of the provinces and the federal government than certain other ones, and I'm not going to name them.

If a country wants to come to us and say “Are you prepared to deal on such reservations?” I'll say “What are you talking about? Which ones are you interested in?” On the ones that are really critical, the answer will be no.

In response to your question, if the final result of the agreement is a list of reservations that is too short at the NAFTA, the government will have a decision to make about which reservations we are talking about, how important they are, and whether they affect the overall balance of rights and obligations.

I certainly can assure the committee that on the matters that have been raised, at least according to the written presentations I have seen, the matters that are the subjects of the greatest concern to your various interveners—health and social services, culture and a variety of other things—are of great concern to the government as well. I can't imagine that an agreement would be acceptable that was short on those items.

• 1640

Mr. Robert Nault: I think the long and the short of that answer is yes, they are on the table and they can disappear, depending on how the deal is made. That was the answer to question I asked.

Mr. William Dymond: No, I—

Mr. Robert Nault: That's what you said, in a roundabout way.

Mr. William Dymond: No, I'm sorry, I did not say that.

Mr. Robert Nault: That's what I got out of it.

Mr. William Dymond: We cannot exclude that the agreement that emerges will be unsatisfactory to the Government of Canada, which is why I responded to the question.

Can I conceive of an agreement that the government cannot sign? Theoretically, of course, that is possible.

Mr. Robert Nault: Okay.

Mr. William Dymond: Can I guarantee that the agreement, which will be acceptable to all countries, to the majority of countries, to a large consensus of the countries, will be acceptable in every measure to the Government of Canada? No. Of course I can't guarantee that. The government will have a decision to make when the negotiations are concluded as to whether this agreement is acceptable or not. In my view, a key element will be the reservations that have been obtained and the legal certainty this attaches to them. And that is not a judgment we can make now.

Mr. Robert Nault: Mr. Chairman, I have a few more questions. The one I want to deal with is carve-out versus an unbound reservation. I'm of the assumption that a carve-out and an unbound reservation are the same thing.

Our friends from B.C. last night suggested that it's unclear that the MAI will permit unbound reservations. Can you tell us whether that's the case or not? Do we have some unbound reservations of our own for what I would perceive to be the priorities of the Canadian government? For example, an unbound reservation or a carve-out would be medicare and other social services that are so important to all us Canadians. Let's use that as an example. Surely we can agree whether that is a carve-out or an unbound reservation.

Mr. William Dymond: I have sympathy. I recall Mr. Blaikie's question to me last time round when he said that we use these terms rather loosely—carve-outs, bound, unbound, and so forth—and my observation at the time was that if you look at the NAFTA you don't find the terms carve-out, bound, unbound. We do these in legal terms. The draft reservations, which we made available to the committee, contain, from about page 35 or 36 on, the unbound reservations Canada will require. You can tell they're unbound because we use the words, “Canada reserves the right to adopt and maintain”.

They do indeed cover the critical areas, and one of the critical areas—I make reference to one of the concerns of B.C.—is programs adopted by the government for aboriginal peoples. They are in the NAFTA, and in this agreement they will be fully protected via an unbound reservation, meaning we're not limited to the programs we have now. Parliament could adopt new programs and they would be uncovered.

As I explained to the committee last time, one of the key areas for negotiation is the question of unbound reservations. Some countries indeed take the view that there should be no unbound reservations. We take the view—and have made it very clear—that unless there are unbound reservations this agreement will not have the NAFTA countries as part of it. That is a basic requirement.

Mr. Robert Nault: I'm getting used to the negotiating language. It's been a while since I've been in that forum.

I'm doing very well, Mr. Chairman, at reading between the lines now. I'm just hoping everybody else does.

I have one last question, which relates to the provinces. Have the provinces given you, either in writing or verbally, what they believe to be their reservations? My question to the B.C. government last night was just that: if you have a lot of concerns, what are your reservations and have you given them to Canada? The answer was no.

So they come along and drop this on us and say they don't like it, but that's not exactly what the official was saying. It was the politician beside him who was saying that. The official wasn't saying too much. In fact he was saying, “You guys get along real well; you're working very closely together and very co-operatively.” I suspect the politician wasn't letting the bureaucrat say what he thought, but that's why I'd like to make it clear.

• 1645

Is it the structure and the process we follow that provinces, in discussion with yourselves and the other negotiators for Canada, give you some written concerns of their reservations, or do you just say “I'm representing Canada; therefore I know what you think. I am communicating with you, but we're on our own, basically, and you'll see what the end results bring”?

Mr. William Dymond: No, certainly not. The communication is constant and intense, and not only on reservations but on all issues of the agreement. I do not have a list from the provinces—I haven't asked for one—but my understanding is that the reservations required by the provinces are the protections secured by the NAFTA.

A number of them in our meetings have made it abundantly clear that from the perspective of their governments they are not prepared to go beyond the obligations incumbent on them by virtue of the NAFTA. That leads us to the conclusion that for the provinces, as for the federal government, the NAFTA reservations are the ones we require, and of course the NAFTA reservations applicable to the provinces. This is what I understand to be the position of all of them, and nobody has said they need additional reservations going beyond the reservations that are in the NAFTA.

Mr. Robert Nault: I can be assured, then, that the reservation as it relates to culture will be a non-bound reservation?

Mr. William Dymond: Yes.

The Chairman: Mr. Reed.

Mr. Julian Reed: Mr. Chairman, I think this discussion has been very thoughtful and very useful, and all of the questions I had have been asked and asked very well.

I would say to Mr. Dymond and the good people with him that once again he has been able to explain this complex proposal in the most succinct way and make it well understood by all of us laymen who are here. I would like to thank you, Mr. Dymond.

The Chairman: Mr. Penson.

Mr. Charlie Penson: I'm not so sure I agree with Mr. Reed. I sometimes think this diplomatic language is probably a necessary evil, considering what happened to our Canadian ambassador to Mexico when he strayed from the jargon.

Mr. Dymond, I want to remind you that we had a lot of groups come before this committee that asked for minimum exemptions and reservations, that Canada should seek an MAI that tries to move investment liberalization a step forward, and that we would need to take exemptions in sectors that are sensitive, but they should be kept to the minimum and they should be justifiable. After all, if each country goes to the table with a long list of exemptions and reservations, what are we going to get? We won't get any agreement, or an agreement worth anything.

I have a question that has to do with the dispute settlement process. We heard from I think the Canadian pulp and paper industry that they're concerned about this area in terms of.... If there was a need for the Canadian government, or a provincial government, to make an expropriation in some area, foreign companies would have a different process to go through than a Canadian company. It's not the first time we've seen this.

In fact, I think we are negotiating better international agreements, quite frankly, than we have right here in our own country. I'm thinking of problems with our internal trade inside Canada.

About a year ago a committee here was studying international trade. We were studying why small and medium-sized companies are having difficulty and what restrictions they're facing getting into the export business. We had companies come before us. One company had moved from Ontario to Michigan and told us that it's now a lot easier to do business back in Canada with the different provinces than it was when it was located in Ontario and trying to cross interprovincial borders.

I'm concerned that we're setting a higher standard, a better standard, internationally, and this applies to the dispute process as well. If an expropriation took place here, a Canadian company would go through the Canadian courts, but a foreign company would have access to a panel. I think the Canadian pulp and paper industry told us that would be more timely and they would probably have a quicker resolution to it. Is there not some way we could make sure Canadian companies have access to the same timely process in this negotiation?

• 1650

Mr. William Dymond: Thank you, Mr. Penson.

On the question of the language I used, I'm reminded of what the late Sir Harold Macmillan once said: “A diplomat is always hovering between a banality and an indiscretion.” But I suppose that's what we're paid for.

An hon. member: Touché.

Mr. William Dymond: On the question of whether or not Canadian companies operating in the domestic system should have better or more rapid access, obviously I'm not sufficiently competent to comment on that, so I won't. I was surprised at their intervention, but I won't pretend to know whether or not that particular association has taken a position on investor state dispute settlement.

Canadian businesses generally, speaking through organizations such as the CCIB—the Canadian Council for International Business—the Chamber of Commerce and others that have brought this agenda to us have brought an agenda that says they want enhanced protection for our foreign investments abroad that may be conveyed by investor state dispute settlement. This is why we have it in the NAFTA and this is why we have it in our bilateral agreements.

Any international agreement creates rights and obligations, and this is no exception. If we intend to achieve, as we have achieved for our investors, the enhanced protection of investor state dispute settlement, then clearly we must offer the same possibility to foreign investors active in Canada. If Canadian businesses no longer believe investor state dispute settlement serves their interests, I expect they would find some way to communicate that changed point of view to the government.

The Chairman: Just on that point, is there any difference in the definition of how this investor state dispute mechanism would work in the MAI as compared to NAFTA? Are there any differences, or are they exactly the same as in NAFTA?

Mr. William Dymond: Again, this is Mr. Hankey's particular area of responsibility, but we are working to replicate in the MAI the system of investor state dispute settlement that we have in the NAFTA.

There are other systems around. They all come at the same point, and these negotiations are not concluded. I'm not aware of any significant differences that have yet arisen, but clearly there are procedural issues that are still on the table and that we're continuing to work at. That is one area we will have to look at very carefully at the end of these negotiations in order to make sure we are satisfied with the result against a NAFTA benchmark.

The Chairman: Thank you.

Mr. Penson.

Mr. Charlie Penson: I accept what you've said, Mr. Dymond. I know Canadian companies are asking for a timely and fair dispute settlement process. I'm just asking if Canadian companies shouldn't have access to the same thing if a dispute arose in Canada. Shouldn't we have the higher standard?

I guess you're saying this is a political decision that has to be made, but it just seems to me that we have a possibility of conflict here. If the case arose where there was a decision made by some level of government and it affected a Canadian company and a foreign company, one could have its expropriation settlement in a timely manner and the other would be dragged out over several years. I can see some problems arising as a result of that.

The Chairman: Mr. Blaikie.

Mr. Bill Blaikie: I have just a couple more things. You said the provinces had indicated that they wouldn't want it. A sort of NAFTA benchmark would be okay, but isn't it the case that with respect to performance requirements or prohibited performance requirements, for instance, what's in the draft MAI goes beyond the NAFTA? According to the information I've received from the B.C. government, a number of things that are included in the MAI currently for prohibited performance requirements aren't in the NAFTA. Is it the position of the Canadian government that those have to go?

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Mr. William Dymond: Yes.

Mr. Bill Blaikie: Again about the provinces, you said a reservation would be taken on programs for aboriginal peoples similar to that in the NAFTA. You said something like that in answer to a previous question. To what extent would that cover not government spending on aboriginal economic development but, say, a land claim settlement that impinged upon the profit strategies or rights or whatever of a particular corporation? Would that be covered by the kind of exception for aboriginal concerns that is in the NAFTA and that you mentioned just a few minutes ago? Certainly there's a concern by the provincial governments, in this case the province of B.C., that the MAI would affect or could possibly affect land claims.

Mr. William Dymond: Our reservation, which is an unbound reservation, states—it's on page 38 of the list we gave you the other time—that:

Canada reserves the right to adopt or maintain...

—again, “adopt or maintain” being the magic words for unbound—

...any measure denying investors of other Contracting Parties and their investments, or service providers of Contracting Parties, any rights or preferences provided to aboriginal peoples.

Mr. Bill Blaikie: So that includes land claims.

Mr. William Dymond: Yes. That is my understanding.

Now, if there is a precise issue, we would want to examine that against what is in the NAFTA, because this is the NAFTA standard. This is the NAFTA reservation. I believe that is the case. If there is a precise question we can certainly look at it, but it would be answered in terms of the agreement we know rather than the agreement we're negotiating.

Mr. Bill Blaikie: Well, for instance, there was just a ruling—this has nothing to do with B.C.; it's just off the top of my head—in New Brunswick which gave timber rights to aboriginals, a ruling based on a treaty. If it were the case—I don't know whether it is the case—that the timber granted to the aboriginal community by virtue of that court decision was owned by a foreign company, would they not be able to take this to a dispute settlement process based on the authority of that exception?

Mr. William Dymond: Mr. Blaikie, you're really asking a question about the NAFTA. We would have to look at that and give you a legal judgment.

I regard this exception, which we have drafted in an intentionally slightly broader way because of the uncompleted nature of the reservations, as giving Canada the right to any measure denying rights or preferences we provide to aboriginal peoples to deny those self-same rights to foreign investors. That is what we try to do. But if your question relates to whether that would be considered an expropriation under the agreement, I'm afraid we would have to examine that, but examine that against the NAFTA standard.

Mr. Bill Blaikie: So the possibility exists that it could be considered an expropriation.

Mr. William Dymond: I don't know.

Mr. Bill Blaikie: How would it be determined? In the end it would be determined by a dispute settlement process.

Mr. William Dymond: No. What I'm asking for is a little time to examine the question, together with my legal counsel, to see how such a question would be addressed under the NAFTA; that is, the precise question you asked. I simply do not know the answer.

Mr. Bill Blaikie: I have just one other point, then, again going back to something you said earlier. You have a tendency whenever we ask you something about the MAI to say, well, this is not unlike what we had in the GATT, and it's not unlike something we had in the NAFTA, or it's not unlike something that's in the other bilateral investment agreements, and this somehow is supposed to make us feel good.

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An hon. member: Aren't you feeling good yet?

Mr. Bill Blaikie: No, I'm not feeling good yet.

It seems to me, though, that there's quite a difference between the MAI and the GATT, in the sense that the GATT—not the WTO but the GATT—was in the final analysis non-binding, or certainly not binding in the way the WTO and the MAI will be. Countries had more flexibility in the GATT than they have in the WTO and the MAI.

Secondly, with respect to NAFTA, NAFTA has a six-month escape clause. Whatever these things are that we're going to discover as we move into the wonderful world of the MAI and find out either that the views you hold about certain things hold or don't hold, if they don't hold, we're kind of stuck holding the bag for 20 years.

It seems to me that it's somewhat massaging the subject to say well, this is like the GATT, or it's like NAFTA. The MAI is qualitatively different from these other agreements in terms of the time period that it is binding. Is that a fair comment?

Mr. William Dymond: Let me answer you in this way. By referring to the GATT and the NAFTA, I'm not trying to induce a sense of soporific comfort, but to point out that the concepts we are discussing in the MAI are familiar concepts. They have been negotiated, some of them, over centuries, and they are concepts with which we as a government are familiar.

I would further argue that the policy decisions implied in an MAI that will be satisfactory to the government have in fact already been taken, and were taken at the time of the NAFTA.

The question you raise on the length of the agreement is quite right. The NAFTA has a six-month or a one-year clause, but of course it's not only the investment chapter, it is the whole of the NAFTA that is subject to that. It has been customary in bilateral investment agreements, and does find its place in our bilateral investment agreements, to provide for a much longer period. The economic reason for that I think will be clear. We're talking about five years of initial application, withdrawal upon six months' notice, and protection for the investments made under the agreement available for a further 15 years, not investments made after a country withdraws from the agreement. So to say that a contracting party would be bound on all of its investment policies for a minimum of 20 years I think is a misstatement.

Mr. Bill Blaikie: Do you want to say that one more time about the five years and the six months?

Mr. William Dymond: Yes. According to the current draft—and the current draft picks up language that is quite common, it's language and concepts we use, it's concepts the Europeans use—what it provides is: you're in for an initial period of five years.

Mr. Bill Blaikie: So once you sign, you're in for five, whether you like it or not.

Mr. William Dymond: That's right.

Mr. Bill Blaikie: Then you have a six-month notice.

Mr. William Dymond: Then you have six months. Having given that six months, when it takes effect, you withdraw. Any investments made during that five years would enjoy the protection of the agreement for a further 15. Clearly, investments that occurred after the withdrawal would not enjoy that protection, and the reason for that is that one is looking at a 5- to 15- to 20-year amortization period for an investment. In that sense, you're quite right, the agreement is different.

Mr. Bill Blaikie: Do any of our bilaterals now have that provision?

Mr. William Dymond: Yes, they do. It's not something that has been invented and suddenly sprung out of the woodwork with the MAI. It is a concept quite familiar to European and other agreements and one that we have adopted in our NAFTA-modelled agreement in order to give the protection, and you can see—

Mr. Bill Blaikie: Why wasn't it in NAFTA, though?

Mr. William Dymond: The NAFTA applies to everything. I cannot explain why that is. It is a difference. I acknowledge that there is a difference. There it is.

There is just one point, again, for the record. We have always regarded the GATT to be binding in international law.

Mr. Bill Blaikie: “Regarded” is the key word.

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Mr. William Dymond: That has been our position, and we have taken dispute settlement and won dispute settlement and lost dispute settlement under the 1947 GATT as an agreement binding in international law.

Mr. Bill Blaikie: I think that was a noble position, but it was a question of regarding rather than requiring.

Mr. William Dymond: I don't understand the difference.

Mr. Bill Blaikie: What I am saying is other countries didn't feel exactly the same way about the GATT, did they?

Mr. William Dymond: Yes, they did.

Mr. Bill Blaikie: I think the Americans had occasion to—

Mr. William Dymond: Well, the Americans have certainly complied with GATT judgments we won against them.

The Chairman: Thank you.

Mr. Bill Blaikie: Not against everybody, though.

The Chairman: I'd like to move on. But before I move on to Ms. Bulte, you keep saying “in this MAI draft as it stands now”. When do you think this committee might see another draft from the MAI? Will another draft come out at a certain time or...?

Mr. William Dymond: There has been no discussion in Paris to date of producing a third version. This is the second iteration. There has been no discussion amongst delegations as to whether a third version can or should be produced. Certainly if that were the case, we would make it available to the committee.

The difficulty in doing so is countries will have different views as to what the production of a draft means. I've always taken the view that the production of this draft is an assembly of work produced by working groups.

Some people in Canada—and the British Columbia government may be one—think the production of a draft such as this implies that somebody has agreed to it, which is certainly not the case. But they're not alone in that view, and I think you would find a variety of people around the table in Paris saying, well, you'd better be very careful about how you produce it and where you record agreement and disagreement. That might well lead to a consensus that it's not worth the trouble and the hours of discussion that would be required in order to suitably qualify the production of a third draft.

From the Canadian side, I have no difficulty with it. I'm not sure it's particularly helpful. We have the materials with which to work, and if the committee were interested in bits and pieces of revised draft language as it appeared on parts of the agreement, we could certainly make it available.

The Chairman: Thank you.

Ms. Bulte.

Ms. Sarmite Bulte: Following up on that, one of the concerns we've heard from people is the concern that this agreement is being negotiated in secrecy. If there could be something to address or allay those concerns of my constituents.... It's just what you're saying. Canadians maybe look at it differently, that it's all part of the public process and the ability to provide input and seek discussion. I convey that to you as a comment I certainly have received from members in my own riding.

I would like to move on from there to the arbitration provisions and article 1120 in NAFTA, which I understand to be the basis of the dispute settlement under the MAI. I understand one of the reasons or the purpose of getting into this agreement is the need or the ability to provide transparency. The question I have when we look at the rules—and correct me if I am wrong—the arbitration rules, the UNCITRAL, which I understand are the United Nations rules for resolution of disputes in trade and international law, is that one of those rules again requires secrecy. The concern I've heard is should we not also have transparency in the sense of having public access to arbitration hearings, the ability to have people submit briefs in those?

Again, on the concerns I've heard, especially when we talk about the definition of expropriation, yes, there are international rules, but should it really be left up to these tribunals to decide what expropriation means? Is this not a role where we as legislators should have input into that process?

I would like to receive your comments. Is there any way we can make the hearings themselves more transparent?

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Mr. Blair Hankey: On these proceedings, the various arbitral instruments that are set out in 1120 and also in the draft MAI have varying degrees of confidentiality. For example, the ICITO is somewhat more open than the UNCITRAL, and in the ICC, the International Chamber of Commerce, it's more closed. The general rule is that the proceedings are closed unless the parties otherwise agree. The parties can agree to open them.

It is a classic feature of arbitration as opposed to court litigation that the proceedings are confidential. Historically that has been considered classically an advantage of arbitration relative to litigation. Because it's closed and because you can't have third-party interventions and so on, it's thought to be cheaper, faster, and more efficient. So it is a classical distinction between litigation, which is open, and arbitration, which is historically closed.

We can also say that the position of the government has been, or is currently, that we do favour more transparency in an international dispute settlement. Mr. Marchi is on the record as so advocating, and it is a position that we are taking in various fora, including the MAI negotiation in Geneva. There will be a review, for example, of the dispute settlement system of the WTO next year. One of the things we will seek will be greater transparency.

Ms. Sarmite Bulte: I have another question, if I may continue, with respect to arbitration. One of the things that came up, again with our witnesses, was the concern that this was the final binding arbitration, that there was no right of appeal. Can you comment on that?

Mr. Blair Hankey: That is true, except that there is a nullification procedure if, for example, the decision were tainted by corruption or by conflict of an arbitrator or because the panel exceeded its jurisdiction. There is a procedure for vacating an arbitral award for a reason such as that, but there's not a normal appeal process. That has been considered. Again, one of the classical advantages of arbitration over litigation is that it's a single instance procedure instead of a multiple instance procedure and therefore it's faster and cheaper.

Ms. Sarmite Bulte: Just to follow up on the question with respect to the nullification procedures, will there be a requirement for transparency disclosure? Will there be a requirement for reasons for judgment? Will there be a requirement for reasoning to be handed out with these decisions?

Mr. Blair Hankey: Yes. Again, these classical procedures set out here do not require the judgments to be published, but the MAI specifically requires that the awards are published. They have to be reasoned and they have to be published. These rules apply to the extent they're not modified by the text of the MAI itself, and the MAI, the current text, does require that the judgments be public.

Ms. Sarmite Bulte: Thank you very much.

The Chairman: What's the definition of investment?

Mr. William Dymond: The draft definition of investment is laid out in section 2 and it's divided into two parts. One is the definition of an investor—you need to know the animal you're talking about—and the second is the definition of investment. There are, in the current draft, as indeed I think is hinted in the footer to it, a great many problems with this investment definition.

For example, we have yet to reach understandings or a consensus on the treatment of indirect investment, on the treatment of intellectual property, on the issue of concessions, public debt, and real estate. As I have pointed out to the negotiating group, these are rather fundamental to the definition of investment, and the solutions that are found there will inform the decision to be taken on the investment definition.

Another problem with the investment definition is that in contrast with the NAFTA it is in the form of an open definition, whereas we have been arguing for a closed definition. NAFTA has a definition of investment that says investment is the following thing, and then there is a trailer that says investment is not these things.

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This is one of the areas that's almost typical, but there are others where there is the most intimate relationship between the text of the agreement and the reservations that will be taken. This is the working draft we have. It has been useful because it has clarified thinking around the table about how to get on with other issues. It is not, in its present form, satisfactory to the Government of Canada.

The Chairman: The B.C. government said the definitions were so broad it was worried about its implications on provincial jurisdiction. You're saying essentially there really isn't a definition until you deal with these other issues.

Mr. William Dymond: That's quite right.

The Chairman: Mr. Penson, a short question.

Mr. Charlie Penson: I just wanted to follow up Ms. Bulte.

Is there any requirement by the OECD members in negotiating this agreement that Canada cannot discuss this agreement with the Canadian public?

Mr. William Dymond: I'm not sure I understand the question.

Mr. Charlie Penson: In the MAI that's being negotiated at the OECD is there any stipulation from the OECD members that member countries such as Canada would not be allowed to explain this deal to the Canadian public?

Mr. William Dymond: Certainly not. The only limitations that would exist, and even these have been breaking down, are the normal rules of confidentiality. We would not be at liberty, for example, to release the negotiating position of a member country of the OECD. I wouldn't feel comfortable at all giving great detail about what the United States seeks to achieve. That's certainly up to them.

The manner in which we conduct our public consultations is entirely for us to decide. As I say, the only limitation is the treatment of documents and of course your discussion of the positions of other parties around the table.

The Chairman: That brings this session to an end. The committee will have to go in camera now to discuss this further.

I want to thank you, Mr. Dymond and your officials for coming today. Do you have anything further you would like to say to the committee?

Mr. William Dymond: Just one or two things, Mr. Chairman. The Department of Industry has produced a study on foreign investment trends, which was distributed at a conference in Toronto two weeks ago. I would invite Mr. Ready to give a copy to the clerk for the information of the committee. It contains basic facts and figures and an analysis that I hope will be of interest and a contribution to your report.

The second thing I would like to do on behalf of myself and my colleague officials is to thank the committee for the time, the attention, and the courtesies extended to us. Thank you very much.

The Chairman: Thank you, Mr. Dymond.

Colleagues, we'll take a break for two minutes and come back, at which time we'll discuss this further.