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]

Monday, November 17, 1997

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[English]

The Chairman (Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.)): Colleagues, we're continuing our study into the MAI.

We have with us today, from the University of Toronto, Alan Rugman; Maude Barlow, from the Council of Canadians, with Peter Bleyer; Tony Clarke, from the Polaris Institute; and Michael Hart, from the Centre for Trade Policy and Law. Welcome.

We're here today to get your opinions on the MAI. I think we'll start with Alan Rugman from the University of Toronto. Welcome.

Professor Alan Rugman (University of Toronto): Mr. Chairman, thank you for inviting me to appear before this subcommittee.

My remarks are contained on page 4 of this CIB Perspectives, which is a newsletter put out by the University of Toronto. Basically, Mr. Chairman, I'd like to summarize the key points in this newsletter.

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Mr. Chairman, I think there are two reasons why the Government of Canada should support the Multilateral Agreement on Investment. The first of these is that the Multilateral Agreement on Investment will do nothing to diminish Canadian sovereignty and Canadian ability to regulate inward foreign direct investment.

The principal reason is shown in my table in this little document. It indicates that in 1996 two-thirds of the inward foreign direct investment was from the United States. So 68% of all the stock of inward direct investment into Canada is from the United States.

Mr. Chairman, as the minister explained recently to this committee, Canada already has a set of rules to deal with this inward investment from the United States. We already have a multilateral agreement on investment with the United States. It's called the North American Free Trade Agreement. As I understand the negotiations in Paris for the MAI, the MAI is basically replicating the investment provisions of NAFTA. Therefore, Mr. Chairman, there will simply be no change in aspects of Canadian sovereignty as a result of the MAI, because we already have negotiated these rules going back 10 years to the original Canada-U.S. Free Trade Agreement, carried over into NAFTA.

On the other hand, Mr. Chairman, there is a reason why Canadian business would like there to be rules to govern Canada's outward investment. Today, only 54% of our outward investment goes to the United States. So the other 46% is not covered by a set of rules such as we have in NAFTA. It would logically seem to me, Mr. Chairman, that if we can get an MAI negotiated in Paris that has the same rules as in NAFTA, we will have better access for the outward investment in which Canadian firms engage.

Firms like Northern Telecom, Mr. Chairman, would clearly benefit from rules in order to carry on investment in Europe and in Asia. So I see the Multilateral Agreement on Investment, Mr. Chairman, building on NAFTA, as a win-win situation. On the one hand, Canada will not be losing any sovereignty in terms of our inward investment, but on the other hand, we will be gaining rules to deal with outward investment.

To deal with these two points in more detail, as I understand it the multilateral agreement being negotiated in Paris is on track. It should be concluded by April of next year. It will have three principal components. It will give foreign investors national treatment. National treatment, Mr. Chairman, simply means that foreign firms are treated the same way as domestic firms, according to Canadian legislations, federal and provincial. But if we have national treatment for our investment abroad, we will not be subject to discriminatory measures as we now could be in Europe and in Asia.

The second principal component is that there will be transparency in the agreement. This simply means that any sectors that are exempt from national treatment will be listed as they were in the NAFTA investment provisions.

I read with interest the statement by the Minister of Trade that culture will be exempted from the national treatment provisions, as it is in NAFTA, and I welcome that statement by the Government of Canada.

Thirdly, there will be provisions for dispute settlement. Again, as I understand it, Mr. Chairman, these in the MAI will simply copy the investor state dispute settlement provisions we have already negotiated with the United States in NAFTA.

The way in which the MAI will be based on the investment provisions of NAFTA, I believe, is in the interests of Canada. We've already negotiated the substance of this type of agreement before and we've been through the problem of negotiating the exempted sectors. So I believe the MAI will exempt culture, health, social services, education, and transportation, the same sectors, of course, that were negotiated in the free trade agreement and NAFTA. It's for that reason, Mr. Chairman, that I don't think there will be any changes affecting the ability of the federal or provincial governments to enforce their rules and legislation.

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The final point I'd like to make is that I believe the OECD is the appropriate forum for the Multilateral Agreement on Investment to be negotiated. The members of OECD, the 29 countries that are members, literally account for 98% of all the world's foreign direct investment, so it's the logical place to have these rules.

The OECD has a history, going back to 1975, of providing codes of conduct for multinational firms, and the ethics of international investment have always been of concern to the OECD. I believe that eventually the MAI will be a basis for investment rules on a multilateral basis in the World Trade Organization. The WTO so far, as you know, has not been able to launch such a set of negotiations, but I believe the OECD MAI will put this on the right track.

In conclusion, Mr. Chairman, in this little piece I argued that Canadian business should support the MAI. As I understand it, this is the position of Canadian business groups, and I would like to endorse the position of the government and minister in participating in the MAI.

Thank you.

The Chairman: Thank you, Mr. Rugman.

Ms. Barlow.

Ms. Maude Barlow (National Volunteer Chairperson, Council of Canadians): Thank you very much. I too am very pleased to be here and to have the opportunity to present our views.

We're not able to get into a debate on NAFTA today. I would just say that not all of us think of it, as has just been described here, as being wonderful. Two statistics that come to mind are that since Canada signed the Canada-U.S. Free Trade Agreement there's been an almost 50% increase in child poverty, and there are now three times more millionaires in Canada than we had on the day it was signed. These are just two things to think about as we start our deliberations on the MAI.

With five months to go, Mr. Chairman, we have a document in front of us, the Multilateral Agreement on Investment, that has absolutely no provisions, safeguards or protections for Canadian culture, social programs, health, education, jobs, labour standards, environment or natural resources. In fact, it protects the American military and the banks.

We're talking about an agreement that is literally months away and the government has been basing its assurances to us entirely on country-specific reservations it has been seeking. We got hold of these country-specific reservations a month or so ago and were very concerned when we saw them. We did not believe they were going to afford the kind of protection the minister was telling Canadians they would. So we went to a trade specialist, Barry Appleton, and asked him to give us a legal opinion on the security these reservations would provide to the Canadian people in all of these areas.

Before I get to those, I want to say that it's important to remember that the reservations the government has put forward are not yet a done deal. They are a wish list and still have to be negotiated. Once they are negotiated, and one can expect there will probably be substantially fewer than exist now, they will become a hit list. They will then be subject to standstill and roll-back. I describe from the draft text that those two are to produce a ratchet effect leading to “the elimination of non-conforming measures to the MAI”.

Finally, as long as the right exists for corporations to directly sue governments for bringing in any kind of legislation they feel inhibits their profits, it would render these reservations meaningless, in our belief. We feel that basically the effect of the MAI would see the Government of Canada giving away power to the corporations and then renting it back by paying for the right to bring in legislation.

In his brief, Mr. Appleton gave the benefit of the doubt to the government, and that benefit is...say all of these reservations are accepted. He meticulously detailed the limited nature of reservations under international law as well as the narrow manner in which all exceptions to treaties by definition are interpreted. He concludes:

Despite the protestations of governments when making or when relying upon reservations that they are broad, reservations will be strictly and narrowly interpreted by international tribunals.

Very quickly, he broke his concerns into three areas. The first is with regard to social services, health care, public education, child care, and so on. Mr. Appleton found that although the language of Canada's proposed reservation for social services is identical to the reservation taken by Canada under NAFTA, because it applies to the federal level it would only totally cover the provision of public law enforcement and correctional services. That excludes health, education, child care, elder care, and a number of other social services.

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We find it fairly alarming that our negotiators don't seem to know how the federal-provincial system in this country works and neglected to protect those services under provincial jurisdiction.

Secondly, Mr. Appleton found that the U.S. government's interpretation of NAFTA's social services reservation suggests that services not directly and pretty well exclusively provided by government would not be considered within the definition of the term “social services”.

This is particularly serious in the Canadian context because in most areas we have a mix of providers such as government, private for-profit, and private not-for-profit involved in the health, education, child care, elder care, and other sectors of our society.

Mr. Appleton's opinion, therefore, is that Canada's reservations are virtually meaningless for health, public education, and child care, as each involves aspects provided by commercial providers in Canada. He also told us that Canada's reservations would not guard against transnational corporations suing the government if they were not granted full access to Canadian public services.

On the culture front, Mr. Appleton was very concerned that the Canadian government has put forward no reservations for an area that he says would significantly be affected by the obligations of the MAI. Mr. Appleton listed six examples of policy areas that would require coverage by a general exception or a specific reservation in order to protect the Government of Canada's ability to act, maintain, develop or foster made-in-Canada culture.

A charitable interpretation of the Government of Canada's position is that it's lying low and allowing the Government of France to do its work on culture.

We also have another opinion from Garry Neil, of the Canadian Conference of the Arts, however, because he says that in dealing with exceptions-to-trade rules, experience suggests that international panels interpret language narrowly since they are comprised of individuals who generally support attempts to liberalize trade.

In this connection it is important to note that the language of the proposed French exception clause is in itself narrow. It may not adequately cover all of the existing forms of cultural expression, let alone those that will emerge in the next century. If tested before an international panel it could well be applied to accept only measures supporting culturally significant work or work in a minority language.

In any case, the likelihood of the Government of France getting this full general exemption is not very great since it would be more of a protection than Canada received under NAFTA. Indeed, the U.S. government has made it very clear that it's not ready to do this. We consider it very troubling that there is no mention of culture in the reservations. Canada does not even state its support for the French proposal, and Appleton says, and I quote:

Government measures that attempted to maintain, develop or foster made-in-Canada culture would be inconsistent with the goals of the MAI.

Finally, Mr. Appleton looked at the issue of the environment. He did a brief history for us of decisions made before international trade tribunals, including NAFTA, GATT, and the WTO, to describe the undermining of environmental protection through trade and investment agreements.

As Minister Marchi has confirmed, the Government of Canada has chosen to accept weak, non-binding language on the environment in the preamble of the MAI. By failing to even propose reservations to try to protect the ability of Canada to take environmental measures that would otherwise violate the MAI, Canada has, and I quote from our opinion:

...chosen to voluntarily bind itself, its provinces, and its municipalities to obligations which protect investments over the environment.

Environmental deregulation is currently well under way both federally and in many provinces. Between one-third and 60% of the environmental budgets have been cut in most provinces, and our concern is that this legislation would lock in the environmental standards where they are now. Most particularly, of course, there is the concern about what this would mean for third world governments or the newly emerging former communist countries of the east bloc that don't have any kind of environmental legislation whatsoever.

In conclusion, we want to say that the proposed reservations put forward by Canada fail to deal with the critical areas of culture and environment and are virtually meaningless for health care, public education, and other social services.

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The Government of Canada strategy for protecting Canadian interests at the MAI negotiating table is poorly thought out and seriously flawed. Meanwhile, the OECD secretariat reported in November 1996 that:

MAI negotiators are determined to keep [general exceptions and country-specific reservations] to a minimum.

With an opening position this weak and only five months before the OECD deadline, it is hard to imagine the final result will not be disastrous for Canada and for Canadians.

The Chairman: Thank you, Ms. Barlow. Actually, we're seeing Mr. Appleton tomorrow—

Ms. Maude Barlow: I know.

The Chairman: —so it's good that we have his interpretation beforehand.

We'll now turn to Tony Clarke, from the Polaris Institute. Tony.

Mr. Tony Clarke (Polaris Institute): Thank you, Mr. Chairman, for the opportunity to appear before this committee. I'm glad this committee is taking up this topic.

I would like to focus my remarks today on the statement the minister made when he appeared before this committee on November 4:

I can also tell you what the MAI is not. It is not a charter of rights for multinational corporations, nor does it spell the end of Canada's sovereignty.

Now, I don't know what document the minister was actually referring to when he made this assertion, but I can tell you this. After reading the many drafts of the MAI and background documents I have no doubt in my mind that the MAI is designed to be nothing less than a charter of rights and freedoms for transnational corporations in the new world order.

Nor should this be a surprise to any of us. When we look at what is happening in the world today, we know transnational corporations have a great deal more economic clout than nation states. Today 51 of the top 100 economies in the world today are individual corporations. Mitsubishi is bigger than the fourth most populous country in the world, namely Indonesia. General Motors is larger than Denmark. Ford Motor is bigger than South Africa. Toyota is bigger than Norway. Philip Morris is larger than New Zealand. Indeed, Wal-Mart is actually larger than 161 countries, including Poland, Israel, and Greece.

What is more, the combined sales of the top 200 corporations in the world outstrip the combined economies of 182 countries. In other words, only nine countries are left in the world with sufficient economic clout to checkmate these global giants, and even that is questionable.

From the perspective of transnational corporations, to be sure, setting global investment rules that will grant them the right and freedom to move capital, buy and sell and transfer their operations whenever and wherever they want around the world, unfettered by government intervention or regulation, probably makes a lot of sense. It probably also makes sense to negotiate this treaty within the confines of the OECD, which, after all, is the home base of 96% of the global Fortune 500 corporations. But this does not mean it's good for Canada, or for that matter any other nation state.

Like the minister, I would like to debate the MAI focused on facts, not myths. Unfortunately, I feel the minister misled this committee by declaring that the MAI is not a charter of rights for multinational corporations. Indeed, I believe the minister conveniently ignored some of the fundamental facts about the MAI.

My text has this all written out, but I'll go briefly through these points.

The first point is that these negotiations have been conducted in secret for over two years now. When the draft text was actually leaked here in Canada on April 3, most cabinet ministers had not heard very much about it at all. Certainly most parliamentarians knew nothing about the MAI.

The fact is that the deal appears to have been negotiated behind the scenes, with groups such as the Council for International Business in the United States, which makes up the 200 largest corporations in the United States, actually going into the negotiations and before and after negotiations meeting with the U.S. negotiating team. We also have a situation where the chamber of commerce, followed again by the International Chamber of Commerce, was actually putting forward a blueprint for how this investment treaty should be drafted and carried out. Yet nobody knew about this beyond those business actors who were part of the whole picture. Very few people knew about this, and they were left in the dark.

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The second point is the legal standing with regard to transnational corporations. They are in effect, under the treaty itself, given a legal standing that is equal to that of nation states themselves. This comes both with the most favoured nation clause and with the national treatment clause.

Under the most favoured nation clause, transnational corporations are to be given preferential treatment with regard to investments. Under the national treatment clause, transnational corporations or foreign-based corporations are to be given treatment equal with that of domestic companies in each of the signatory countries. In other words, foreign-based companies are to be treated no less favourably than domestic companies.

On top of that, there's a kind of quasi-diplomatic status that is actually given under the MAI to transnational corporations for free movement, unrestricted entry, and authorization to work in any country for executives, managers, and specialists.

Three, the investment rules themselves. This is not a treaty that sets forth investment rules to regulate what corporations can and cannot do in different countries. What it is is an investment treaty that actually says what governments can and cannot do for the promotion of profitable investment and competition.

It confers rights on corporations, with little or nothing in the way of corresponding obligations. The obligations fall squarely on governments, not on corporations. This contradicts fundamentally the rights and duties of states that have been passed through the United Nations in 1974, which gave nation states the political authority to regulate foreign investment in relationship to their national, social, cultural, and environmental priorities.

Furthermore, the MAI not only puts a ban on performance standards but also lists the items that are being included under that ban that go far beyond NAFTA. Furthermore, the ban is absolute. It is very clear in the document that the ban is absolute.

Fourth, the takings rule. With regard to the MAI itself, the heart of the MAI is what is known in U.S. constitutional law as the takings rule. This fundamentally is rooted in and relates to private property rights, making sure that governments are prohibited from taking private property without adequate compensation and valid public purpose.

While this makes sense in terms of giving fair treatment to corporations in their dealings with governments, the problem is that when this becomes a centrepiece of a global investment treaty, it has enormous, far-reaching implications, particularly when we look at the MAI and at the definition of investment and the definition of expropriation, both of which are very broad and cover a wide range of things. This means that the takings rule, when it's applied, will have incredible implications on governments.

Worse, on top of this what happens is that corporations are in a position actually to take away the powers of governments to serve and protect the democratic rights of their citizens through legislation, with little or no recourse in return.

Fifth, the whole question of the power to sue governments. Unlike any other deal that we've seen—certainly in NAFTA any power to sue governments was extremely limited with regard to parts of the investment code—what we have in this deal is that the entire MAI rules are grounds for corporations to sue governments. Not only this, but we have a special investor state mechanism that's set up that allows corporations to go directly after governments without, as in the past, having to go through their home state in order to take on another state and to take them through the dispute panel process. This gives them a direct route and a powerful weapon to invoke the takings rule against governments. The Ethyl Corp. case, which is now before the courts here in Canada, is an example of this, but we can see this being multiplied many more times.

What's more, the treaty does not give governments the rights and powers to sue corporations in return.

Sixth, with regard to the question of discrimination, the national treatment clause is supposed to safeguard corporations from discrimination, and does so with regard to the application of the national treatment clause to subsidies and government incentives.

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The problem with all of this is that by pushing that so far down the line, the result could very well be a reverse form of discrimination. The fact is that government subsidies and incentives have often been used as a tool of government economic strategy in this country, to stimulate local economies and job creation by providing those subsidies to small and medium-sized businesses. Now that these same subsidies would have to be available to foreign-based corporations, it sets up the possibility of a reverse discrimination process whereby small and medium-sized domestic companies, and indeed, for that matter, public enterprises like our crown corporations, become second-class corporations, with the status of first-class being granted to foreign-based corporations.

Seventh, on the whole question of rolling back legislation, the roll-back clause, the standstill clause in the treaty as it presently stands means simply this. Once the country signs on and has non-conforming policies, laws, and programs, that country is obligated to roll back that legislation, those programs, and those policies over a short period of time. Furthermore, any new government that comes into being that tries to put forward new laws, policies, and programs that are considered to be non-conforming would also be stopped through the standstill clause itself.

As is quoted by Ms. Barlow a few moments ago, that is clearly laid out in the treaty as having a ratchet effect on unwanted legislation. When you add to this the investor state mechanism pushing this down the road, it has enormous implications.

Finally, with regard to the lock-in measures, Mr. Chairman, I refer to the fact that this is an incredible provision in this MAI, which says, in effect, that once you sign on, you are locked in for virtually a 20-year period. In previous trade agreements, by invoking the abrogation clause, a country could get out of a deal or withdraw from it by giving six months' notice. Under the MAI, you can't get out of it for the first five years, and after you get out of the deal the actual disciplines and rules remain in place for another 15 years, thereby, for all intents and purposes, amounting to a 20-year lock-in.

On top of that, what we have here with the MAI, as far as the drafters are concerned, is that the rules themselves will be applied to provincial and municipal governments as well as federal governments. This again poses some very thorny constitutional questions in our country.

In conclusion, it should be clear that the minister, I believe, was wrong in his interpretation and assessment of the fundamentals of the proposed investment treaty. The MAI is most certainly meant to be a charter of rights and freedoms for transnational corporations, but it is more than this. It is also a corporate rule treaty. It puts into the hands of transnational corporations a set of power tools that can be used by unelected and unaccountable bodies to shape and reshape the policies and directions of nation states like Canada. This is not simply a threat to national sovereignty; it poses a fundamental threat to democracy itself. The MAI will surely accelerate these emerging trends of corporate rule. Regardless of what our party affiliation may be or where we are in the political spectrum, the MAI raises some profound questions and alarm bells about our democratic future.

Not in Canada, the minister says, but perhaps before we become too confident that this will never happen to us in Canada we should take note of the fact that investment plans of corporations are moving ahead, and these investment plans want to move into public spaces to take over lucrative markets in areas of social security, health care, and public education.

As a brief example, we might simply look at the following facts. One of the world's largest and biggest arms manufacturers, Lockheed Martin, is currently being retooled to take over the management and delivery of social security programs in the United States and is casting an eye for markets elsewhere, including Canada.

The world's largest for-profit hospital chain, Columbia/HCA, has targeted several provinces in Canada as potential growth markets for the establishment of privately run, profit-based hospitals in the future.

Dozens of food and beverage corporations, plus computer and telecommunications corporations, are moving into our cash-starved schools, offering services and equipment in exchange for market presence in our public education system.

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Mr. Chairman, you can be certain the MAI will serve to accelerate these and related corporate strategies.

The Chairman: Thank you, Mr. Clarke. You've given us quite a few issues to look at.

Now I'll turn it over to Michael Hart.

Professor Michael Hart (Centre for Trade Policy and Law, Carleton University): Thank you, Mr. Chairman. I too am pleased to be here and to work with the committee in its study of the Multilateral Agreement on Investment. I understand the committee has a paper I wrote last year, a paper that indicated what the background to these negotiations is. I've prepared a statement, which I've given to the clerk, but let me briefly go through the main points of that statement.

I want to begin by emphasizing that it's very difficult for me to enter into a discussion of the specifics of this particular agreement, largely because it is an agreement that remains to be negotiated. What happens during these negotiations is that many drafts are circulated, many ideas are put forward by individual delegations, and draft agreements tend to have all of that included in the agreement, but rarely do these drafts reflect what will be the final product. The final product is very hard to judge at this particular point, because I think it is still not clear what the zone of common agreement among governments will be. Given that, I would like to concentrate strictly on the basic ideas and concepts that lie behind this proposed agreement and indicate to you why I think it is in Canada's interest to participate in these negotiations.

First of all, let me emphasize that in my view the MAI, in whatever shape or form it finally is negotiated and tabled, will have very little impact on Canadian policy on either incoming investment or outgoing Canadian investment. The reason for that is quite simple. The proposals that are on the table and that are most likely to be included in the final agreement largely track existing Canadian policy, policy that has been in place since at least 1984 and in many cases long before that. So as far as incoming direct investment is concerned, it will have very little impact.

As far as outgoing investment is concerned, again, because it is an agreement that is being negotiated among the OECD countries and most of the OECD countries have policies that are very similar to those of Canada, again, the MAI will have very little direct impact on the treatment of foreign direct investment emanating from Canada.

The agreement's main purpose...its long-term impact will be on developing countries, and they are not parties to these negotiations. It is there where the treatment of both Canadian and other foreign investors is less than ideal. Therefore the long-term targets of this agreement really are developing countries. The aim of the OECD countries is to try to negotiate, to try to consolidate, in effect, existing international treaty law into a common agreement, which will then form the basis of a negotiation that will take place at some point in the future with developing countries, most likely under the auspices of the World Trade Organization agreement.

The basic concepts found in the MAI in the various drafts that are around are concepts that have been around since time immemorial. They are, as previous speakers have already indicated, the concept of most favoured nation treatment and national treatment, which together basically provide that governments will not discriminate in their treatment of foreign direct investment. That's a very simple concept. It's a concept that underpins trade agreements, investment agreements, and all other economic agreements.

I for one find this a very comforting concept, for the very simple reason that this agreement would apply not only to investors coming into Canada but also to Canadian investors going abroad. As an official who has had some experience in dealing with disputes with other countries, particularly with the United States, I find it comforting to know the United States will become party to an agreement that prevents the kinds of things Congress likes to do to Canadian and other foreign investors. So rather than looking at this as a threat to Canadian regulation-making, I look upon it more as an opportunity to ensure the kinds of things Congress loves to do cannot be done, because of the nature of this agreement; that is, it enshrines existing practice in law. Those practices are ones that are quite familiar, in fact in most cases are enshrined in Canadian law, and really will not add anything of great moment to existing practice.

The agreement will also involve dispute-settlement provisions, which I think will increase the certitude of both Canadian investors abroad and foreign investors in Canada by providing, in effect, treaty status to existing domestic procedures. That is, it will provide foreign investors in Canada and Canadian investors abroad with the guarantee that if they do run into trouble, if they do run into some kind of discrimination within any of the OECD countries that will be signatories to this agreement, they have the opportunity to, first of all, seek state to state or government to government dispute resolution similar to what already exists in many existing trade agreements. In addition to that, should they not be satisfied with that or should they want to use another avenue, there's an opportunity for investor state dispute resolutions. That is, there is the opportunity to basically ensure that member governments live up to the obligations they have entered into in this agreement to not discriminate. Again, I think that basically does little more than provide treaty status to existing Canadian law.

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Finally, let me say something about the ancillary elements of the agreement, which have raised a lot of excitement among some people. Those are issues related to the environment, to labour, and similar kinds of issues. Currently there is some discussion of them, but there probably will not be much about them in the MAI, I think largely because the world is not ready to enter into a set of binding multilateral commitments on such issues.

This does not mean that such issues are not desirable, or that it's not desirable to enter into commitments on issues such as labour standards and environmental standards. I just think they are more likely to take more time than was available for the MAI. They're more likely to be enshrined in a future agreement negotiated under the WTO that will also include issues such as competition policy and other codes of conduct dealing with the behaviour of foreign firms beyond their own shores. I think this is a very desirable thing to do, but I think it is not necessarily an element in this particular agreement.

So in short, Mr. Chairman, let me tell you that from my perspective, I welcome the fact that the Government of Canada is participating in these negotiations and is pursuing Canadian interests. At the same time, I do not think much of great moment will result from these negotiations.

Thank you.

The Chairman: Thank you, Mr. Hart.

Colleagues, we'll now move to questions and answers.

Witnesses, the questions will be directed to a certain witness, but you can jump in whenever you like on a question.

I'll turn first to Mr. Lunn.

Mr. Gary Lunn (Saanich—Gulf Islands, Ref.): Thank you, Mr. Chairman. I have two questions. The first one is for Ms. Barlow, and my second question will be for Mr. Hart.

Ms. Barlow, I think it's safe to assume you are opposed to this proposed Multilateral Agreement on Investment, so my question is going to be based on that premise, if that's okay.

I understand that this agreement is modelled primarily after the investment sections of NAFTA, which we're familiar with. I hear a lot of concern from you, particularly with regard to culture and sovereignty, and I believe you also said the environment. You think we're going to be compromising our standards in those areas in Canada. I haven't seen that, and I listened to your colleague Mr. Clarke's comments, to some of his arguments about how that could happen. I want you to comment specifically on specific examples within the NAFTA whereby culture, sovereignty, and the environment have been compromised as a result of that agreement. Can you bring the two together so there's a direct correlation?

Ms. Maude Barlow: I appreciate your question, because I think it is important for us to have a discussion of the MAI in relation to both NAFTA and the World Trade Organization. I agree with you that it's very difficult to separate them out.

I started off with a very startling statistic on the incredible rise in child poverty since the Canada-U.S. Free Trade Agreement was signed. I'm not suggesting that it was all because of the Free Trade Agreement; however, I would suggest that we have to look at larger trends in order to understand what part a trade agreement that harmonizes our system, economic and so on, to the American system, does to other sectors of our economy.

I would say the evidence is very clear in culture. We have cut our spending on culture, our support of cultural institutions in this country, almost in half since the Canada-U.S. Free Trade Agreement was signed. We have put our culture at great risk under the WTO. You know, of course, about the split-run magazine rulings. What the WTO said was that we can still protect our magazines, we just cannot use this method to do it. Under an MAI and the standstill you couldn't even come around and say, okay, we'll try it in a different way; we'll try to do the same thing. These build on each other.

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In terms of social programs, the day the Canada-U.S. Free Trade Agreement was signed, 87% of Canadians were insured against unemployment. Today it's under 40%. I remember having a debate with Mr. Crosbie, who said, “Oh, Maude, you're always so negative, girl. What would make you think it wouldn't go the other way and the Americans will just come on up to our standards?” Well, it hasn't happened on social programs.

There are two very specific situations I would refer to. One is that an American corporation, Ethyl, is suing the Canadian government for basically banning the use of MMT, which is a manganese fuel additive. Ethyl is saying we have caused it to lose future profits and future reputation in the world to the tune of $350 million. That's directly under NAFTA and that's exactly what we fear. We fear a day when large corporations can say to a country, “If you bring in this legislation, you will owe us $1 billion”, or whatever.

The statistics Tony gave on how much larger many corporations are than the national treasuries of individual countries is very important. What we fear is the chill effect. I actually agree with something Michael Hart said. I don't think it's aimed so much at Canada. I think it's aimed more at keeping the environmental legislation at the lower levels at which it exists in the developing world. So these countries would have to pay to be allowed to bring in stronger legislation.

We have another case today where there's a strike situation with Maple Leaf Foods. That's an absolutely clear example of what happens under a trade regime when you harmonize your practices. A Canadian company, Maple Leaf, has to compete with huge American factory farms, which are horrible. The conditions down there are absolutely deplorable. Canadian pork farmers are selling their pork directly to these big corporations in the United States, putting Maple Leaf in a situation where it's saying to its workers “If you don't lower your standards, if you don't lower your demands so we can compete”—on what some of us call a race to the bottom conditions—“then we will have to close down”. With the one on strike out west, it has said it will actually close the plant.

I don't think it's a case of sitting here and saying NAFTA causes x and y. We're talking about a series of trade agreements and investment agreements that chip away one at a time at the rights that Canadians have to protect culture, social programs, agriculture, and so on.

I want to say that I don't think this is a partisan issue. I really want to back what Tony said. We are really hoping that individual people on this committee won't think of this along party lines, but will ask some very important questions.

There was a study done by the western governors in the United States, who I don't think are a bunch of lefties. They were questioning what the MAI would do to their ability for land use regulation and all sorts of things. So they commissioned the Georgetown Law Centre to look at what would happen to their states.

They're so worried about what they found out that they've asked President Clinton to exempt current state legislation from the MAI. This is not a left-right issue for them. They're saying, “What are we governors for if we're going to give away this kind of power?” This is about the rights of citizens to establish and maintain the quality of life, the kinds of social programs and cultural programs we decide. Let's saddle it out left and right, but let's not have that decision made by some trade tribunal at the OECD, which we've lost control over.

Mr. Gary Lunn: Mr. Rugman.

Prof. Alan Rugman: Let me make two comments on the statements, factually.

In discussion of the member's question about to what extent the MAI builds on the NAFTA investment provisions, Maude Barlow brought up the case under culture of Sports Illustrated. Now of course the point is that the Sports Illustrated case was not brought under NAFTA, because we exempted culture in the free trade agreement 10 years ago and in NAFTA. That explicit exemption for Canadian culture allowed us to carry on those discriminatory measures in favour of the Canadian magazine industry.

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Those states didn't have a snowball's chance in hell of winning a case under the investment provisions of NAFTA, nor would they under the multilateral agreement on investment, because the MAI is simply going to copy the investment provisions of NAFTA.

Where the Americans went on that case was to the GATT World Trade Organization, because it does not yet have any investment rules.

So Canada, in our portfolio of investment and trade rules, has nicely covered off the cultural exemption in NAFTA. We want to get the same provisions into the World Trade Organization.

The second point she mentioned was to deal with environmental matters, and she mentioned the case of the MMT-ethanol issue.

Again, the point about NAFTA is that it is the first international trade agreement with anything about the environment. It set up in Montreal the CEC, the Commission for Environmental Cooperation. Minister Copps lobbied to get that commission established in Canada.

The CEC is beginning to do very important work.

The basis of NAFTA again could be used in the MAI. If the MAI is going to do anything on the environment, it would likely have a side accord, as we managed to get in NAFTA, to deal with environmental measures.

It seems to me that this is just reversing the facts of the case in these two areas. Culture was exempted. NAFTA works very well in that way. Environment was included for the first time. It's not perfect in NAFTA, but again some progress has been made. I hope that both of these areas can be captured in the MAI.

Mr. Gary Lunn: Mr. Hart, following up on this line on the environment and the culture, we heard Mr. Clarke comment that the laws that were in place, whatever standard they are for the environment, etc., could not be raised once this agreement is signed. I would like your views. Do you believe that is true, or could we strengthen our environmental laws after the fact in our own country? Could provinces make them stiffer after this agreement is signed?

Prof. Michael Hart: This agreement will not provide any substantive provisions on environmental laws. It may—I'm not sure it will—have a provision in it that says you cannot use environmental laws as investment incentives. That is, you cannot say, we have an environmental law but we're prepared to exempt this particular investor, we'd like to come into this country in order to attract that investor. In other words, you cannot use environmental laws negatively.

But nothing in this agreement, or for that matter in the NAFTA, in any way prevents the Government of Canada or the provincial governments from passing such environmental regulations as they see fit, with one exception. In those environmental regulations, in those environmental laws, they cannot put in place laws that discriminate between domestic and foreign investors. In other words, one law applies to all. It is a non-discrimination standard, and that applies to all the various areas that have been raised.

The Government of Canada's ability to regulate, to make laws, to do such things as the Government of Canada sees fit and as the Parliament of Canada sees fit is not in any way undermined by this kind of treaty, except for that fundamental rule that you cannot discriminate.

Mr. Tony Clarke: First, it's really important for the committee not to get caught in the trap of simply saying that the MAI is a replica of NAFTA. It's a lot more than that. There are a lot more provisions in there than we ever saw in NAFTA, and there's a strengthening of certain provisions that were in NAFTA.

For example, we do not have the precise kinds of provisions that we have in the MAI regarding roll-back and standstill. They're very precise in the MAI. Those sorts of things are not outlined in that way in the NAFTA.

Second, with regard to culture, or for that matter anything else that requires a subsidy itself, NAFTA does not require that national treatment rules be applied to subsidies, but this is the case under the MAI. As a result of that, it means that many government subsidies that we have that go towards the cultural communities and the arts communities would be struck down or would have to be made available equally to foreign-based corporations at the same time.

So we are dealing with a quite different set of rules and a quite different set of circumstances than we found in the NAFTA.

• 1620

So I would caution against this kind of argument, that we're simply seeing here a replica of what was in the investment code in NAFTA.

I think the final thing is that we have to recognize that the right to sue...and the investor state mechanism is a special mechanism that has been set up in the MAI and was not available in NAFTA.

There are a few provisions that allow corporations to sue governments in NAFTA under specific parts of the investment code. But they certainly do not apply to the whole of the investment code, nor do they apply to all of the NAFTA rules, whereas in the MAI the right to sue applies to all of the MAI rules and that has enormous implications in terms of governments and the kinds of situations they would be put under.

The Chairman: Ms. Barlow, you can have a brief comment.

Ms. Maude Barlow: This is such an important question you have asked, Mr. Lunn. I will just read to you from the section on expropriation and compensation. It says that:

A Contracting Party

—a country—

shall not expropriate or nationalise directly or indirectly an investment in its territory of an investor of another Contracting Party

—a corporation from another country—

or take any measure or measures having equivalent effect

—which is the Ethyl Corp. situation—

except for a purpose which is in the public interest

—that's good—

on a non-discriminatory basis

—that's fine—

in accordance with due process of law

—that's fine, and then it says “and”, not “or”,

and accompanied by payment of prompt, adequate and effective compensation....

Then it gives the articles on how it has to happen.

This means that, yes, you can bring in whatever law you want, but you have to be prepared to pay compensation to the transnational investor if it decides that law is not in its commercial interest. It's right here.

I do urge you to talk about this with Mr. Appleton tomorrow because this is really his area of speciality.

The Chairman: Thank you.

Mr. Nault.

Mr. Robert D. Nault (Kenora—Rainy River, Lib.): Thank you, Mr. Chairman. I commend you for bringing forward a very interesting panel. It's unique to see groups so totally opposed to an issue, one saying it's a yawner and it's pretty standard and the other saying the world's coming to an end or that our structures are fundamentally going to change. It makes it quite difficult for parliamentarians to make up their minds.

I asked a question the other day that I think needs to be dealt with by both groups and it is this. If the minister and the number one negotiator for our country have said that culture is not on the table—definitely not on the table—I'd like to know from the panel here why hasn't Canada tabled a reservation on culture if that's the case?

I asked the question the other day in all good faith, trying to find out...considering that I believe this is a negotiation. If you don't think it's a negotiation, then of course we should all go in there and say here's what we want, take it or leave it, see you later. If the debate revolves around this scenario, that there's a lack of trust of our negotiators and you don't believe they're looking after the best interests of Canada, then obviously you believe we should go with a set format: here it is, here's the legal text, there's no fooling around about it, we know exactly what we want.

I'd like to know whether you think that's the approach Canada should take to negotiation internationally. If that's so, then it's very clear. If not, then would you see the strategy of the Canadian government as being somewhat flawed because culture is still not a tabled reservation of the Government of Canada?

Let's start with Ms. Barlow.

Ms. Barlow, I'd like to know how that works, quite frankly. I tried to get that out of Mr. White the other day, he being a negotiator and I being similar to him, and I couldn't get a straight answer out of him: do you not look at this as a negotiation, where you have to trust our own people, trust that they're going there in good faith to do the best they can for Canada and that they're not in some conspiracy looking to hurt us?

Ms. Maude Barlow: First of all, I would say it's not a conspiracy. I think we are seeing a clash of ideologies to an extent. I must say, I turn my head to what Mr. Marchi would have said if Mr. Mulroney were still in power and this were Mr. Mulroney's deal. The bells go and every now and then in the middle of the night I wake up and think about what he and Mr. Axworthy would have to say about this. I can tell you, they would be sitting here saying what I'm saying. I'll tell you that right now. It's difficult for us to come at it when the players change but the scenario seems to stay the same.

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I will give you that they would probably like to get an agreement on culture. I will give you that they are probably hoping...they know this is a glaring error. It is extremely curious to us that they have not put a reservation in nor have even made a statement anywhere in the reservations that they support France's position. The Americans are on record saying they will not allow a full carve-out, which is what France has asked for, although, as I read to you from Mr. Neil from the Canadian Conference of the Arts, he feels it's far too narrow, so there's even a question about that.

It is very curious to us and it makes us worry a lot, so when some of us went to Paris a couple of weeks ago to meet with the OECD, we asked our negotiators to put a moratorium on this until we could have a full debate on it in Canada. Our worry is that this is too short a time period for you to be able to really look at this in the way it needs to happen; that you're not able to travel and therefore get out and talk to Canadians, who are just beginning to learn about it.

I haven't an answer for you. I'm going to assume that they really mean it on culture, and we're going to hold their feet to the fire. But I'll tell you, they're not going to get that full exemption, and they don't seem to have a fallback. As it stands now, Canadian content, taxes, investments, any protection of Canadian culture whatsoever would be illegal under the MAI. And I repeat: we're five months away from a deal.

The Chairman: Mr. Hart.

Prof. Michael Hart: Thank you, Mr. Chairman.

In response to Mr. Nault's question, let me first of all express my bias. Mr. Dymond and I were colleagues for 22 years, so it would not surprise you to learn that I have a lot of confidence in his integrity and in his ability to negotiate. I also know that the way these negotiations are pursued, you negotiate in a number of different places, and one of the places where you negotiate is in the negotiating room in the OECD. In addition to that there are ongoing discussions with the provinces and with various advisory groups, bilateral discussions and so on, so it is critically important that you deal with the issues at the right time in order to make the greatest tactical use of the various mandates you have.

If the minister says, and the negotiator corroborates that he has instructions to that effect, that culture is not on the table, what they mean is it's definitely on the table; it means other people are asking about it, but that the Canadian government's position is that they will not compromise on this issue. In effect, Canada is determined on this particular issue, as on a number of other issues, to take whatever is necessary in terms of either an exemption, a reservation, broad language, and so on, to get that in. How that particular card will be played I think is a question that the negotiator has to play based on his own assessment of when is the best time to do so.

The fact that there is no language in various drafts that Ms. Barlow and Mr. Clarke have seen means nothing to me. What counts at the end is what's in the final text, and that is the text on which the government and Parliament will have to make an ultimate decision, not on these various drafts.

While I also have the floor, may I also comment on a number of other statements made by both Mr. Clarke and Ms. Barlow on such questions as roll-back, standstill, what's in the NAFTA, and so on. What's in the NAFTA is an investor state provision, and that's one of the elements that is being negotiated in the MAI also. This particular provision builds on a long-established series of agreements that have been negotiated onto the auspices of the New York Convention, onto the International Centre for the Settlement of Investment Disputes, and under the Pan American Convention. There is also a multilateral investment guarantee agency under the World Bank, where all these kinds of issues have been under discussion and where these procedures have been in play for quite a number of years. In fact, they are in play in the more than 1,300 bilateral investment agreements that have been negotiated by various OECD governments with developing-country governments. Canada itself has 25 of these. Again, let me emphasize that this is not new territory; this is very well-plowed territory that is being consolidated into a single agreement.

On the question of whether this is a NAFTA plus, my reading of what I have seen so far is that this will be a NAFTA minus. From my perspective it's regrettable that this agreement will not be as good as chapter 11 of the NAFTA, but I think that reflects the realities of the negotiations among the 29 participating countries.

The Chairman: Mr. Nault.

Mr. Robert Nault: I'm going to go to you in a minute, Mr. Clarke.

I'm very interested in the whole philosophical debate. I know we should have more time as a nation to do that.

• 1630

Fortunately or unfortunately, we've been down this road a number of times before. The whole issue of the free trade agreement and NAFTA was all somewhat part of an election campaign, which at times really isn't a good place to have a debate, because of course people's skin is on the line and you know what they will say sometimes, especially if you're from the left.

I very much appreciate what Mr. Hart is saying, because I come from the left, supposedly, in the labour movement, and I'm really quite confused about this whole perception that you negotiate with all your cards up in front. If that's the way Canadians want us to go at it, I guess we can do that, as representatives, but I've never seen any other country do it in that way, and I'm quite surprised that people are advocating that. I do have some faith in the people who represent us, very strongly.

I want to go to this next issue, though, the one that is on the average Canadian's mind, and that's the reservations on health and social services. I want to ask Mr. Hart, since he seems to be somewhat familiar with our chief negotiator and the fact that we're a federation and there are provinces involved in this—and anyone here can jump in—and because Mr. Clarke has a sense that this is more than just an agreement, this is really a charter for multinationals.... My view is that in order for us to be a successful nation trade-wise, the more simplified we can make the rules, so you don't have 150 or 300 agreements running around there.... I would hate to be in the business of selling abroad if that's the case as we open up markets in the developing world if we don't know from one country to the next...or have some commonality in regulations.

On that premise, how do you make Canadians feel comfortable about safeguarding Canada's health and social services? We certainly do it differently from the majority of countries in the world, and I think Canadians' view is that we like it the way we do it. How do you perceive us protecting ourselves at the MAI or any other negotiation where people are asking us to have standard regulation rules of engagement?

The Chairman: Mr. Hart.

Prof. Michael Hart: It's simply not an issue. I would disagree with you when you say we do it differently from the rest of the world. It's the United States that does it differently from the rest of the world. Most countries in the OECD have government-run health and welfare security schemes. Therefore it is the United States that is the only country that is out of step in any major way and it is the United States that would like to see opportunities for its private sector providers of health care, hospital care, and similar kinds of services. No other OECD country is interested in making that into a private sector activity.

So I have no fear this MAI will in any way establish a set of rules that says you can no longer have a government-run health care scheme. What it will say is this. In those areas where you are prepared to allow competition, where you are prepared to allow the private sector to provide services, and only in those areas, you must allow that to be done on a competitive, non-discriminatory basis.

Given the fact that these health care services are within the provincial domain, the issue has not yet been broached in the MAI, largely because the discussions between the federal government and the provinces on the reservations and so on have not yet been concluded. I'm quite confident that when they are concluded there will be no question whatsoever that Canadian health care assistance will continue to be provided by governments and governments will have no obligation to open those to private sector competition unless they themselves desire to do so, and not as a result of this particular agreement.

The Chairman: Mr. Clarke.

Mr. Tony Clarke: I think again we're faced with a very different interpretation of the facts here.

I want to point out two major things. The first is that when we look at health and social services, in Canada we have a mixed system. It involves direct government-to-people delivery. Secondly, it involves nonprofit-to-people delivery. Thirdly, it involves private-for-profit to people delivery.

Under the MAI, it is more than just the private delivery that is at stake here, because the United States has made it quite clear that it interprets non-profit delivery to be the same as private sector delivery. We have an enormous amount of delivery of health and social services through non-profit delivery. Therefore under the MAI that would be treated as a form of commercial operation and therefore would be subject to the MAI rules. That is a very serious breach of our situation and would put us in real jeopardy as far as the MAI is concerned.

• 1635

The second thing is that in Canada, obviously, we deliver largely through provincial and municipal governments. In so far as the MAI, and the negotiators are working very hard to make sure that subnational governments will be included and therefore subject to the MAI rules, this means in effect that the delivery through provincial and municipal governments would be subject to the same MAI rules, and that means there is no escape clause there unless we find some way out of it.

So this is a very serious set of problems, much more profound than we ever saw in NAFTA, and therefore something that I think bears serious study by this committee.

The Chairman: Thank you, Mr. Clarke.

Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau (Repentigny, BQ): I would first like to thank all of you.

Ms. Marleau and Mr. Clarke, during your presentation and in your book, you explained your concerns about the reservation for culture or the cultural exception clause. According to us, and to the minister who appeared before us, these are not reservations, but rather a cultural exception clause. The clause could have a more restricted interpretation, but more specific than the one in NAFTA.

If I'm not mistaken, France's position was espoused by Canada during the MAI negotiations. I would like to hear your positions, Mr. Clarke and Ms. Barlow, on what the Canadian government should do during the negotiations on the cultural exception clause. Since a reservation is temporary in nature, I think it should be taken out immediately. What position do you think Canada should adopt in the event negotiations fail on a clear interpretative clause on cultural exception, a comprehensive exception? That is my first question.

My second is for Mr. Hart. You seem very optimistic about the MAI and future negotiations on other agreements. I was led to believe that labour and environmental clauses would be discussed very soon, during other negotiations; those would come after investments. I think perhaps they should have been discussed before.

You stated that the labour clause could be discussed later with the WTO. I would like to point out that the WTO has already discussed it, that it refused to discuss it any further and referred the matter to the ILO. That was for the labour clause.

As for the environmental and labour clauses, contrary to what the Liberal government had said during its penultimate election campaign, where its battle horse was their inclusion in NAFTA, people were satisfied with parallel clauses. If I understand you correctly, Mr. Hart, you are saying that even a parallel clause is not important or essential for the time being. Do you not think it would be useful in the future?

You also talked about encouraging compliance with a voluntary code of conduct, especially for Canadian investors who go abroad, but also for foreign investors who come here. Are you aware of the fact that such a voluntary code of conduct already exists, that the Canadian government refuses to abide by it or to force it upon Crown Corporations and that the EDC, which helps businesses and investors abroad, refuses to take a clear stand on that? I would like to hear your views on this matter, Mr. Hart, Ms. Barlow and Mr. Clarke. Thank you.

[English]

Ms. Maude Barlow: I will answer on culture, but I want to respond on the environment first, because the question you've asked is so terribly important.

• 1640

Even if there were a statement in the MAI that claimed to be binding on environment, unless groups like Greenpeace were given the same ability to sue a government for failure to comply that corporations have been given for failure to protect their interests, it still wouldn't have the same weight.

One of the most important provisions of the legal opinion that we received from Mr. Appleton was that treaty obligations like this, particularly with the enforcement mechanism, will override Canada's other multilateral environment agreements. This is one of the concerns. Again, I really hope you'll get into that tomorrow.

On culture, Mr. Nault made such an important point.

We're not sitting here saying that there should never be an agreement. We are actually very much in favour of an international agreement on investment, but we wouldn't start by protecting transnational corporations. We would start by protecting social rights, labour rights, environmental rights, natural resources, and cultural rights—including those of Quebec, by the way—and from there we would move on to say that we will promote trade and investment within the framework that guards the heart of these rights for citizens.

So when you ask me what provision could be in this MAI for culture, I would have to say to you that I wouldn't even trust a full carve-out. I think a full carve-out, if it is subject to roll-back and standstill, which the government is saying it won't be...we'll see. The proof will be in the pudding. That would certainly be better than what we have now.

But an agreement that continues to allow the big American entertainment industry to sue governments if they bring in legislation as electronics change, as technology changes...and if our government tries to keep up with technology by bringing in new legislation, it can't do it, even with the full cultural carve-out.

So to me it's like asking how you would protect culture when you've given so much power to transnational corporations. You'd have to take out that clause. To me the most egregious clause in the multilateral agreement on investment is the one I read earlier; even if it's in the public purpose and even if it's done in due process of law, you still have to pay for it.

I would be loath to say that you should put an exemption in and everything will be fine. I think the MAI starts from the wrong premise, and I would just briefly add that when Mr. Hart says this comes from years of trade law, he's right. Let us ask ourselves, as citizens of the world, as we approach the millennium, what does it look like under that set of rules? Who is winning and who is losing?

What we know is how much wealthier the wealthy are becoming, such that we're creating a global south, a third world, in every first world country. We're creating a first world in the third world.

When I went to the Philippines last year for APEC with colleagues in this room, we watched as the royalty—which included our Prime Minister and our businessmen and our bureaucrats—waltzed in through the special line into those big limos; we watched as they shut down the highways to bring them in, and we watched as they poured blue dye in the ocean on Manila Bay so they could see the pretty water. They took down thousands and thousands of shanties of poor people.

I saw what it's like when we create this globalized world where the wealthy and the political royalty are running things and the peoples of the countries are left out. I would say yes, let's get into the details of this thing, but just because we passed NAFTA, does that mean it has been good? Does that mean this is what we as a people espouse as we move to the next millennium? I say no, there is a whole different model here.

The Chairman: Thank you, Ms. Barlow.

Mr. Hart.

Prof. Michael Hart: Mr. Sauvageau asked a very interesting question, which requires me to put on a hat that is not strictly an MAI hat, but a kind of visionary one as to where I think multilateral negotiations are going over the next 25 years. On this kind of issue, I think it is helpful to take the long view.

I was trained as an historian rather than an economist, so to some of the members who may think I take an economic point of view because of my economic training, I would say no, it's because of my historian's training. I'm used to looking backward in order to understand where we're going on a forward basis.

• 1645

If you look back over the last 50 years.... I don't know whether this committee commemorated a couple of weeks ago the 50th anniversary of the signing of the GATT—it passed rather unnoticed in Canada, which I think is a pity—but we now have had 50 years of experience in negotiating multilateral agreements. The experience on the whole has been a very positive one. We have seen an expansion of discipline among member governments. We have seen a deepening of those commitments, and as a result of that we have seen a tremendous rise in the wealth, in the prosperity, of member countries.

Ms. Barlow mentions the terrible things that she sees. I've also travelled extensively over the last 25 years, to many countries. What strikes me is the tremendous progress that has been made over the last 50 years, over the last century, in raising millions of people out of poverty, largely because of the ability of countries to trade with one another, to share investment, to share technology, and so on. So it has been a tremendous boon to mankind.

Does it mean that the battle is over, that everything has been done? Not by any means whatsoever. There's still a very long way to go. There are many kinds of agreements yet to negotiate.

One of the agreements that I think still bear negotiating is the one within which there will be room to deal with environmental and labour issues. That's not to say that there are not already many agreements on environmental and labour issues.

To take just labour, under the International Labour Organization there are currently 172 conventions, which together account for 70,000 standards in the labour area. The problem is not that there aren't any standards, or that there isn't broad international consensus on what is the proper way for governments to enforce the labour market regulations, but enforcement. It's strictly a matter of how those kinds of regulations can be enforced.

Many of the developing countries say that they are members of the ILO, that they have signed the conventions. In fact, the country that has the record for the least number of signatures under the ILO is the United States, which has signed only 11 of the 172 conventions under the ILO. It is that they are too poor to enforce these kinds of agreements. So they say, don't come at us now and say we must enforce these kinds of agreements now, whether it's labour, environment or similar kinds of things.

I have some sympathy for that point of view—but only some, because to a certain extent there's also a high degree of rent seeking and rent taking taking place in those countries, where there are egregious examples of flouting of laws and regulations and conventions and so on that they have agreed to.

What I think we will see happen over the next 25 years as a further response by governments to both the problems and the opportunities raised by globalization is the negotiation of an agreement that some of my friends call a contestability agreement. That is an agreement that allows firms located anywhere on the globe to contest markets anywhere else on the globe. That is, using concepts that are derived from competition policies and so on is more than just access to markets; it is also the ability to contest a market.

What we will see in that will be three sets of rules: a set of rules that bind governments in the way they will regulate economic activity; a set of rules that will bind corporations as to how they will behave in the global market; and a code of conduct on such ancillary matters as labour, environment, and similar kinds of things. So you will have a kind of tripartite agreement on contestability.

In effect what you will have is the international community agreeing to raise current accepted standards of governance of the marketplace as we see in most OECD countries to a global level. That won't take place overnight. That's a very difficult proposition. I think it's a very exciting one. It will take 25 to 30 years.

The Chairman: Thank you very much.

As we have a very short time period, I will ask if we can limit our answers.

[Translation]

Mr. Benoît Sauvageau: You can put on both hats if you wish, that of historian and your current one; I will not talk about the future.

In 1993, the Liberals said they would negotiate labour and environmental standards for NAFTA, which never happened. What do you think of the fact that with this MAI, there is no reference to standards and the Canadian government's position is to negotiate parallel agreements on the environment and labour rights? Do you also agree that a code of conduct already exists and that the Canadian government does not want to follow it? I'm not talking about what will happen in 25 years. You said it was up to the WTO to discuss labour standards. Do you agree that last year, not in the future, but in the past, the WTO refused to hear about labour standards and handed the matter over to the ILO? I am talking about the present and the past, not about the future.

[English]

The Chairman: Mr. Hart, very briefly.

Prof. Michael Hart: I'll try to be brief, Mr. Chairman.

• 1650

In the NAFTA negotiations, in 1993 the current government indicated it wanted to negotiate labour and environmental issues. That was done in a set of side agreements that set some very important precedents about the obligations of parties to a trade and investment agreement to also uphold a certain set of standards on environment and labour. But they are not agreements, I think, as far as they could go, and as far as they are likely to go in the future.

The effort under the WTO to include labour standards, that is, to include a provision within the WTO to make labour standards enforceable under the WTO, is at this point not a negotiable proposition, in large part because I think there's a large fear among developing countries that such a weapon in the hands of the United States Congress will be used unilaterally against developing countries in a way that is more likely to disrupt trade, to create disputes, than to solve problems.

At the same time, I find it very interesting that at the end of the WTO ministerial meeting they agreed that there is a relationship between trade and investment and labour standards and authorized the secretariat to begin work with the ILO to work on that particular issue.

The Chairman: Thank you.

Ms. Barlow briefly, or Mr. Clarke.

Ms. Maude Barlow: I just wanted to say what a good politician Mr. Hart would be, because he did not answer the question. Apologies to all the politicians in the room, but the point you made was incredibly important.

The Chairman: Mr. Clarke, briefly.

Mr. Tony Clarke: I think it's extremely important, simply because this government and this negotiator were sitting in a meeting in July where the whole question of labour and environmental binding accords was discussed, and this government was zippo; it did not commit itself at all to the question. I think we are dealing with a situation where clearly this government is not committed to this.

Secondly, you cannot really expect anything from side-bar agreements that don't at the same time challenge the very core of the agreement itself and force the core of the agreement to deal with those issues. In this case we're dealing with an investment treaty itself. Unless you have labour and environmental codes that are at the very centre of what the deal is all about, then you will not achieve anything at all.

Thirdly, on the question of culture, it would be nice to see this government take a strong stand and insist that culture will be a deal breaker. If we do not get the full carve-out and exemption, then we're walking away and that's it. It would be good to see strong leadership coming. But I'm afraid your precedents, what you said before, were quite clear. What we saw in 1993 regarding NAFTA, what we've seen in subsequent negotiations and in dealing with the WTO, indicates we're not dealing at all with a government that is operating from a position of strength and prepared to negotiate on those terms at all.

Finally, with regard to historical reflection, I would say to Mr. Hart, I hope you also recognize that next year happens to be 1998, the 50th anniversary of the United Nations' Universal Declaration of Human Rights. Furthermore, the charter of rights and duties of states itself, which was built upon that human rights charter, is now being completely turned around by this investment code, by this investment treaty. It's the complete opposite of that. We used to believe—

The Chairman: Mr. Clarke, if you could wrap up....

Mr. Tony Clarke: —that states had a right to regulate foreign investment. I'm afraid that is being stripped away.

The Chairman: Thank you, Mr. Clarke. Normally I'm cutting off the politicians, but today it seems to me—

A voice: You're doing very well.

The Chairman: You're all doing very well.

Mr. Blaikie.

Mr. Bill Blaikie (Winnipeg—Transcona, NDP): Mr. Chairperson, it's hard to know where to start. Perhaps I'll just let my questions be the basis for a continuing debate between the witnesses, because I think this is important. Rather than having one group one day and another group the other day saying completely the opposite, it's nice to have you together being able to react to each other's positions.

First, I want to say I share the view that what's wrong with the MAI is that to the extent it represents a sort of hierarchy, if you like, of values, the values that are at the top of this hierarchy are the needs and the rights of investors, and the rights and needs of communities, environments, workers, etc., are way down, right at the bottom of this hierarchy of values.

• 1655

I'm not particularly comforted by Mr. Hart's view that perhaps in 25 years or 30 years we'll get around to a set of multilateral rules which will deal in some way or other with the people who are left out of the current negotiations. It seems to me an appropriate negotiation, or a more morally appropriate negotiation, would be one that dealt with the needs of the powerless first, because the powerful can already look after themselves. Instead there's this global urgency to address the anxiety of people who already, as Mr. Clarke has very well described, are much more powerful than most of the nation states on the face of the earth.

So why this urgency? Where does this moral imperative come from, that we have to deal with the needs of these institutions first and the rest of this stuff can be dealt with whenever we get around to it or whenever it becomes whatever it was you said? That's one thing I would like people to comment on.

Secondly, I didn't hear you refute Mr. Clarke's analysis of the fact that our health care and other social services are provided in the context of a mix of private, direct government-to-people services, non-profit, and of course also for-profit. I think we need to remember that in our health care system the only thing that's mandated in medicare is that health insurance itself will be publicly administered. There's a tendency in the country to think medicare is provided by government. Health insurance is provided by government. Health care delivery itself is provided in the context of this very mix which was described, and that's where the danger comes in. That's also true in a number of other social services. If that is not a real danger, I would like to know why, or have it elaborated why it is in fact a real danger and why the language the government has so far said it hopes to include in the agreement is not sufficient.

Prof. Alan Rugman: Perhaps I could just preface my response by saying that from 1970 to 1978 I was a professor at the University of Winnipeg. At that time I used to deal with these very issues in that liberal arts college framework, interacting with colleagues in political science, sociology, and so on; and I enjoyed that interaction. My thinking about the role of multinationals and the ethics of multinationals goes back to that time, and it is very simple.

In terms of the discussion here about the MAI, the Multilateral Agreement on Investment is about investment. The investment is done by multinational businesses, multinational enterprises, so these are the institutions within the political economy that need the rules. Our firms need rules for doing investment abroad. About 95% of the time the issue we're discussing here is if we apply these rules equally to foreign investors, will they somehow compromise our ability to run our country? The answer to me, Mr. Chairman, still seems to be that it won't, because we've been addressing this issue now specifically for 10 years in our relationship with the major investor here, which is the United States.

When I was teaching economics at Winnipeg, and now when I teach it at the University of Toronto, I'm interested in the jobs that go with foreign investment. IBM Canada, as you know, employs more engineers and computer specialists from the University of Toronto than any other business. Ford and GM, foreign-owned firms, have made the workers of those firms quite wealthy.

My view is that multinational enterprises are businesses. Businesses provide jobs and employment and pay taxes and are part of our social system. I have no problem with that. I also have no problem with foreign-owned firms. IBM Canada is a Canadian business. Some 99% of the people working for foreign-owned firms in Canada are Canadians.

The multinational enterprise is a great engine for increasing wealth and prosperity. The world wants more multinational enterprises. The poor countries of the world have been trying desperately to attract investment. To do so, they have to compete with us. We have Investment Canada, which is an agency of the government that's trying to attract investment here. We're competing with Asian and European countries to get business in Canada.

• 1700

Given this global need for business, as a small country I think we need to have rules to govern the investment. In terms of the big investor here, we've already done this for 10 years.

Mr. Bill Blaikie: Maybe less powerful people in communities need rules too. If it's a question of protecting the weak from the Canadian perspective when it comes to trade, then maybe the same principle applies in other realms.

Prof. Alan Rugman: The communities around the world are trying to attract investment.

Mr. Bill Blaikie: On certain conditions.

Prof. Alan Rugman: Yes, but the reality is that the sourcing of 90% of the world's investment is in the triad, which is the richest economies: United States, European Union, and Japan. These are the suppliers of all of this investment.

We in Canada would like to diversify our reliance on the triad as much as possible. We've been doing that in terms of our outward investment. We now only have 54% of our outward stock in the United States. This went down dramatically from 60% to 70% as of ten years ago. It was at the time of the free trade agreement.

So the role of multinational enterprises, I believe, is at the core of this MAI. In my career of studying multinational enterprises, I find that they behave according to codes of conduct that go back to the OECD to 1975. We have federal and provincial governments with policies to attract investment in. The MAI is simply going to codify these existing practices.

Mr. Tony Clarke: I appreciate Mr. Blaikie's question. He put it in an ethical and moral framework.

As a trained social ethicist of sorts, I would have to say that the moral argument here goes two ways. First, a treaty of any kind that confers rights on one party without obligations on the other party without corresponding new rights is something that is flawed morally. What we have here is fundamentally morally flawed. Second, in this case, consider the concrete example that Mr. Rugman brought to our attention regarding large corporations. They need the right to move in and be able to operate in other countries, and things of that nature.

Look at the example I used before about the 200 largest corporations in the world having all of this power in comparison to nation states. They also happen to be institutions that are not creating jobs of any great magnitude. With the changes in technology that we have and the consolidation of capital that we have going on, these 200 corporations are responsible for only one-third of 1% of all the jobs created in the world.

We all know in this country that the big job creators—it has been a proven fact over and over again—are small and medium-sized businesses. Yet I would argue that under the MAI, with the subsidies code and the application of a national treatment clause, the very sector of our society in terms of job creation that will be punished will be the small and medium-sized business sector. Therefore, we're talking about another kind of moral imbalance with regard to the outcomes.

The Chairman: I have one point on the small and medium-sized businesses. We did a study on them in the last Parliament. We found how multinational these groups actually are. In fact, a lot of the trading we do overseas now is with SMEs. It's certainly incumbent upon all governments to keep that flow going.

Mr. Hart, and then Ms. Barlow.

Prof. Michael Hart: Let me try to respond to Mr. Blaikie's questions.

On the specific question of health care, if memory serves me correctly, something like 70% of the health care delivered to Canadians is delivered by governments, and about 30% is delivered by the private sector.

Mr. Bill Blaikie: What do you mean it's delivered by government?

Prof. Michael Hart: In terms of hospital care—

• 1705

Mr. Bill Blaikie: Hospitals aren't owned by the government; they're owned by churches, by non-profit—

Prof. Michael Hart: No, most hospitals in this country are owned, mandated, and regulated by government.

Mr. Bill Blaikie: Not where I come from.

Prof. Michael Hart: The delivery of health care will only be an issue if the Government of Canada in its regulations allows the delivery of health care to be undertaken by certain for-profit kinds of organizations. Then it would be covered by the MAI and not the not-for-profit sector or the government health sector.

The Chairman: Thank you, Ms. Barlow.

Mr. Hart, quickly.

Prof. Michael Hart: On the moral issue, I don't understand this idea of hierarchy of values and that for some reason or other investment is kind of at the low end of moral values.

Mr. Bill Blaikie: It's at the high end right now.

Prof. Michael Hart: You said it was the wrong way around, so in your view the investments are at the bottom end. Investment is you and me. I own RRSPs; I own parts of an investment plan at Carleton that is going to look after my retirement. In other words, I am one of the people who has a stake in IBM, General Motors, and so on. I'm interested in ensuring—

Mr. Bill Blaikie: I didn't say turn it around; I said why is it a hierarchy.

Prof. Michael Hart: It isn't.

Mr. Bill Blaikie: Why isn't it something in which other rights are equal? I was just clarifying what I said.

The Chairman: Your time is coming to a close. I want to get Ms. Barlow on first.

Mr. Hart.

Prof. Michael Hart: It's not a hierarchy of issues; it is issues that are currently before the international community that have proven to be negotiable. These are issues that are currently preoccupying governments. Governments are seeking solutions to them. They have reached a certain level of consensus on what the particular solutions will be.

These issues are discussed in a variety of fora. The week after next in Kyoto governments will be discussing environmental issues, as they have in other fora. They will be discussing labour issues elsewhere.

When they discuss them in a WTO or an OECD context, why are they not considered to be of the highest moral order but when they consider them elsewhere they are? These are just issues that governments are confronted with, where they are seeking common solutions to common problems.

The Chairman: Thank you.

Ms. Barlow.

Ms. Maude Barlow: I appreciate that you've given us a lot of time and I want to thank you. I'd like to leave you with the chilling opinion we got from a trade lawyer who is neutral. In fact, he happens to be the lawyer for Ethyl.

On the question of Canada's health and education what he has pointed out is terribly serious. Whether you like the MAI or not he says there's a terrible flaw in the position that's been put forward. He says:

Canada's MAI obligations will affect all levels of government in Canada. However, this reservation only permits the federal government to take actions that are otherwise inconsistent with the MAI. Despite the fact that most social services are provided by provincial and municipal governments, Canada has not taken any measure to protect them against the obligations of the MAI. This would result in making public education provided by provincial and local governments subject to MAI without any relief. Similarly, provincially-provided health care, child care and training programs would be covered by the obligations of the MAI while federally delivered programs (such as those delivered on military bases or for aboriginal peoples) would be covered by the reservation.

Secondly, he goes into what is wrong with the definition of social service. He says it's far too narrow because other countries in the OECD have a different definition for social service and therefore we'd have to move to the common denominator. He says:

On the basis of the foregoing, we are able to conclude that there is a considerable amount of uncertainty in the meaning to be given to the words of the Social Service Reservation, especially for the phrase social service. Despite the use of the broad term “public purpose” in the Social Service Reservation, this will not extend the scope of coverage of this reservation. The term “social service” is much more limited in scope and it will limit the usefulness of the reservation. The definition of this term will need to reflect the varied backgrounds of OECD members such as Turkey, Mexico, the United States, Germany and Japan. The MAI does not set out any meaning for this term and it has not been the basis of any international court review. Accordingly, we can only be certain of the simple fact that there is no clear definition for this term.

He says we are inadequately protected.

• 1710

So I leave you with the words of Mr. Appleton.

The Chairman: Thank you.

We'll actually be seeing him tomorrow, so we can go through this with him then.

Mr. Reed.

Mr. Julian Reed (Halton, Lib.): I'd just like to clear up.... I don't know if it's a misconception on my part. It is the business of being able to sue governments.

To me, there's nothing new about that. Companies have sued governments since time immemorial. So the question of whether or not it can be done is redundant.

You mentioned Greenpeace being able to sue. Well, they do that in the States. It seems to me there's nothing to stop any organization—they want to become multinational, too—from undertaking the same thing.

I would even go one step further to say that in the laws of Ontario—and I don't know all of Canada—when there's a project that an environmentalist considers deleterious or something else for whatever reason, under the act any person can stop a project. Further to that, they have no financial responsibility at the other end if the charge is specious.

So this business of litigation with governments is a straw man.

Ms. Maude Barlow: It is very key, though.

Mr. Tony Clarke: First, Mr. Reed, you're quite right that corporations have sued governments, but what you're talking about is domestic law and under domestic law itself. What we're talking about is something that is international and within the confines of an actual agreement among contracting parties.

In the past with, say, the free trade agreement, or NAFTA, or the WTO, for that matter, in all of these agreements in the past—and this is where I disagree with Mr. Hart—the dispute-settlement mechanism, the way you deal with disputes and so forth, has been largely a state-to-state process. That is to say that if a country has a problem with our laws and our policies and programs, then it's the state, the government of another country, that deals directly with us through the dispute-settlement mechanism, be that through the courts or through arbitration panels.

Under the MAI, though, for the very first time, corporations don't have to go directly to their state to be able to take on another. In other words, if a U.S. corporation has a problem with our laws, it doesn't have to go to Washington and get Washington to take on the issue. What happens is that a direct mechanism is now set up that allows foreign-based corporations to go directly after our laws, policies, and programs, and to ratchet them down through this process.

It seems to me that this is a very major institutional change. Certainly there were early developments of it elsewhere, but this is a major institutional change in terms of its application in the MAI.

Mr. Julian Reed: So it's something new.

Mr. Tony Clarke: It is brand-new, and it is full and comprehensive.

The Chairman: [Editor's Note—Inaudible]

Mr. Tony Clarke: No, it is not. There are portions of the investment code in NAFTA that allow for that, but there is no specific investor state mechanism that is set up with all the apparatus that is being proposed with regard to the MAI.

Prof. Alan Rugman: The point is that in the NAFTA, which this government approved, investor state provisions are introduced, and the MAI, as is well noted and as the minister said, is basically replicating the investment provisions of NAFTA. So there's nothing new.

But a more important point is this: if Mr. Clarke and Ms. Barlow are worried about this, we can look at the record. How many cases have there been of these nasty transnational corporations suing governments, the investor state? The answer is none. There is only one case that may be brought, which was mentioned earlier, the MMT-ethanol case, and we don't know where that's going. So, despite nearly four years of NAFTA, there are no cases.

So this is a storm in a teacup. I don't understand why this is going to be a difficult thing, because it's not new, it is in NAFTA, and it isn't an important issue.

The Chairman: I want to go back to Mr. Clarke before I go to Mr. Hart again, because you were shaking your head.

Mr. Tony Clarke: I believe Mr. Rugman is again misleading. There are narrow provisions in NAFTA that allow for a direct investor state.... By no means is the whole of NAFTA subject to investor state action, and that is an extremely important difference between the NAFTA and the MAI.

• 1715

Secondly, on his point about why we haven't seen more action, well, partly it's because of what I just said, only narrow provisions, but secondly there is what we call the “chill effect”. Many things have happened behind the scenes, where the threat of exercising by the investor state was there and the government has backed off. We can name a number of cases where that has been the case, starting with plain packaging of tobacco. What I'm saying is that the chill effect of actually being able to use and threaten these kinds of suits has in many ways a much more telling effect than does the actual bringing of cases before the dispute-settlement methods.

The Chairman: Mr. Hart.

Prof. Michael Hart: Mr. Clarke is making a distinction without a difference. Chapter 11, part B of the NAFTA introduces the concept of investor state dispute settlement in dealing with investment. The MAI introduces investor state dispute resolution regarding that agreement, which is about investment. So to say the investor state provisions of chapter 11 of the NAFTA do not deal with the rest of NAFTA...yes; just as the MAI only deals with investment.

Investor state dispute resolution exists. It has existed for three and a half years. It has been used once. But as Mr. Reed quite correctly pointed out, corporations have always had the right to sue governments when they feel aggrieved. All that the NAFTA did and all that MAI does is raise to treaty status a right that private citizens, including corporations, which are private citizens under the law, have under existing law.

The Chairman: Mr. Clarke.

Mr. Tony Clarke: I think the section cited by Mr. Hart has more specifications than he's leading us to believe. Furthermore, the actual force of the courts and the force of the investor state mechanism, in applying to all the MAI rules, will have a much more comprehensive effect than we have ever seen under the NAFTA.

The Chairman: Mr. Reed.

Mr. Julian Reed: Thank you, Mr. Chairman.

I'm glad the subject of small business was raised here. There's a concept and a misconception that somehow multinational corporations are big corporations. As was pointed out, the vast majority of them are small and medium-sized business. I could only refer you to mining exploration in Canada: 700 companies with an average complement of personnel of 15 people, many of whom are multinationals because they have to establish offices in Chile and Brazil and wherever it happens to be.

If we've learned one thing over the last period of years, it's that it seems to me Canada works better with rules than without rules. To survive in the jungle of international commerce with a country the size of Canada does not do it a great deal of good. Whatever we come up with, it seems to me that if the rules are suitable, that should help Canada.

I wonder if you want my comment on the business of having rules and the protection it provides for small business. It allows small business to have the same opportunity eventually to become big business if they so desire and have the panache to do it.

Prof. Alan Rugman: Mr. Chairman, I think Mr. Reed has hit the nail on the head here. Basically the MAI is dealing with businesses, and as Mr. Reed said quite correctly, the multinationals include small and medium-sized businesses. At the United Nations Conference on Trade and Development, UNCTAD, in Geneva, there is an annual directory of the 33,000 multinational enterprises in the world. It's now gone up to 35,000. Most of these are small and medium-sized businesses.

The other point, of course, is that it's not useful just to distinguish between large multinationals and small ones and so on. The point is that business operates in clusters; in networks of clusters. In Canada we have clusters that are competitive on a world basis.

• 1720

If we go back to an earlier point, the automobile cluster in Canada accounts for literally one-third of our trade, imports and exports. The firms that lead the automobile cluster are multinational firms called Ford, GM, and Chrysler. They happen to be foreign owned, but it doesn't make any difference to the efficiency and competitiveness of this Canadian cluster, which of course is integrated with the U.S. one because we've had rules for the Auto Pact for over 30 years, since Simon Reisman negotiated them—and they were retained in the free trade agreement and in NAFTA.

So the analysis underlying this, Mr. Chairman, is where the small and medium-sized businesses fit with the large multinationals. These are all businesses. They all need to be covered by investment rules. As a small country with small businesses, Canada unambiguously would gain by having transparency and clarity in the rules governing business, especially international business.

The Chairman: Ms. Barlow.

Ms. Maude Barlow: Mr. Reed, you talk about some small Canadian mining companies being really small. I couldn't help but wonder where you would have put Bre-X in that, but I'll guess I'll let that go.

Some hon. members: Oh, oh.

Mr. Julian Reed: I said mining exploration companies, to make it fair—

Ms. Maude Barlow: Right

Mr. Julian Reed: Seven hundred.

Ms. Maude Barlow: All right.

Let's be very clear. In our international travels we are told by our colleagues in countries around the world that some of the bigger Canadian mining companies are among the worst polluters in the world.

Frankly, I want a set of rules that is not just going to open the doors for Canadian mining companies but is going to set rules on how Canadian mining companies act in other countries so that I'm not ashamed when I go to international conferences because I'm told how many pollutants they dump into the ground, what they leach into the water, how they treat the people, and how they expropriate local communities. This is not a nice thing to hear when you're at these international meetings.

I believe that most small and medium-sized businesses in this country want to make a living and build a good business based on being good corporate citizens of the country and of the world. What we're talking about here is having a set of rules that balance, and right now in this agreement we have a set of rules that favours the interests of those who would be least ethical. Let me put it that way. Those who may want to act in a more ethical way would be put at a disadvantage, because this takes the rules off. It doesn't put the rules on; it takes the rules off for governments.

You talked earlier about laws within countries. We're not against paying for expropriation. We think that's absolutely fair. If a government expropriates from a business, it should pay, absolutely.

But this, as Mr. Clarke explained, sends it outside of your country's courts to an international tribunal of maybe three people that you can't get at and that groups like ours couldn't even make representation to. It all goes up into the stratosphere somehow.

It also talks about measures having effects equivalent to expropriation. That means laws. If a provincial or federal government brings in legislation that is harmful to the commercial interests of these large investors, they can take the country's government to court, to an international tribunal, even if the people of that country voted for that government and told that government that legislation was what they wanted it to do.

We're not against laws. We're against stacking the deck against nation-state governments, and that's what we believe this does.

The Chairman: Mr. Hart, briefly.

Prof. Michael Hart: Mr. Reed makes a very important point. The purpose of the MAI and similar kinds of agreements is to make rules for governments and rules for corporations. Basically what we are seeing in the MAI negotiation is the continuation of an effort to take the basic rules of the game, the rules of the market as they exist in Canada, the balance that has been developed between the interests of equity and the interests of efficiency in which I think Parliament plays a very important role in legislating on, on a regular basis...that's the whole purpose of Parliament in the economic sphere, to regulate between the interests of equity and efficiency. Those kinds of considerations are being extended increasingly to the global economy by negotiating among governments a set of rules that try to find a new balance at the global level between the interests of equity and efficiency.

Mr. Blaikie, I think that's a very moral position.

The Chairman: Thank you, Mr. Hart.

Colleagues, that brings to an end the time we have for today.

I do have one brief question, though. It's just a general question I'm wondering about. What happens if we don't have an MAI? I guess we'd have the status quo. I would take it an MAI would give us more rules and maybe more controls over multinationals. What would happen if Canada decided not to sign it?

• 1725

I heard you, Ms. Barlow, say you want an agreement. You just want certain things in that agreement that you're not hearing the Canadian government saying now. I'd like to know from you what would happen if we didn't sign one.

Ms. Maude Barlow: Mr. Speller, when you say that the MAI would give us more control over transnational corporations, it's exactly the opposite. It gives transnational corporations more control over us. That's our concern. If we didn't have an MAI, we wouldn't be giving this huge new tool to transnational corporations.

Does that mean we wouldn't need some rules on investment in the world? No, of course not. We'd start anew, with a new set of principles.

But I want you to ask yourselves, if this is such a wonderful thing, why did the developing countries en masse turn it back at the WTO? That's a very important question. The developing countries are very concerned about this.

We had someone speak to our annual general meeting, a man named Martin Khor Kok Peng, who is the director of the Third World Network, which is a network of about 600 NGOs from Africa and Asia. He said if you pass this you will set up a system where governments will be disempowered for years and years to come. He said maybe you guys think your governments can withstand it, but we don't believe ours can.

I would urge you to carefully consider this as individuals and not as members of a political party.

The Chairman: Thank you. You say that we should, though, have an MAI, but not under these circumstances.

Ms. Maude Barlow: We should absolutely turn down this MAI.

The Chairman: Good.

Mr. Hart.

Prof. Michael Hart: If these current negotiations do not succeed or if in the end Canada decided it's not in its interest to sign this particular agreement, it would not be a tragedy. As I indicated earlier in my opening statement, I think the impact on Canada, both in terms of incoming and outgoing investments, will be marginal.

On balance, I think it is preferable that this agreement be successfully negotiated because I think it creates a very important basis, a foundation for future negotiations on these issues in the WTO. But will it be possible to do that without an MAI? I think it will be, and in fact I think probably—and this is water under the bridge—it would have been preferable to have initiated these negotiations from the very beginning in the WTO. That was a decision taken by governments three years ago, that they wanted to do it in the OECD. That's the reality we face.

For a country like Canada, which is a major trader and a major investor, a member of the G-7, I think it behoves us to be a player in these kinds of negotiations and to try to ensure that this is a successful negotiation. But if they fail, it really is not a tragedy. It is not the end of the world.

In so far as developing countries are concerned, my intelligence is somewhat different from Ms. Barlow's. I was at a seminar not long ago, chaired by the Secretary General of UNCTAD, Mr. Reubens Ricupero, where this issue was discussed among representatives from developing countries. Only two governments of the more than 35 developing countries that participated in that were very much concerned about negotiating investment at this particular time; that was India and an African representative. All the other governments indicated an interest in negotiating on this issue but are concerned about what's involved, what kind of homework they need, what the long-term implications are—in other words, homework kind of issues. More importantly, they are worried about what is the trade-off. In other words, if they enter into these kinds of obligations, how can they use this strategically to gain other kinds of advantages that are important to them? That does not mean they are against it, but they are playing a very important strategic game in these negotiations.

The Chairman: Thank you, Mr. Hart.

Mr. Clarke.

Mr. Tony Clarke: I think there are a couple of points to add to what has been said.

Once again we would argue that we need to have global investment rules. The question is whether or not these are rules that weight so much on the side of putting obligations on governments about what they can and cannot do to promote profitable investment, or whether these are rules that equally put pressure and set rules and restrictions as to what corporations can and cannot do on a whole range of social and environmental issues. These are fundamental questions that need to be examined.

I think the problem is that as parliamentarians there is a deeper issue. It is happening not just with the MAI. It has happened with the WTO. It started with NAFTA and the FTA. That is the extent to which decision-making about public policy matters is increasingly being taken out of the hands of democratically elected governments and put in the hands of, in this case, transnational corporations, but particularly under the guise of these kinds of institutions, whether it be the WTO or the MAI or anything else.

• 1730

These are really fundamental questions, because often people say one thing in opposition, get in power, take over the reins of government, and find that the rules are set somewhere else. This is a fundamental problem.

I think it's something that's being experienced not only in this country but in other countries as well. We have reached a stage in the globalization process where we have to put a moratorium on things and examine the balance that needs to go on between local and national entities and self-determination on the one hand and what needs to happen globally. These are very profound questions.

If we go ahead with the MAI at this point, we will have tipped the balance further in that kind of direction and it will cause some very serious problems.

I have one final thing with regard to developing countries. Investment matters have been discussed under UNCTAD. It's a different model and approach that UNCTAD has taken in the past with regard to investment matters. They have approached the thing based very much on the principles that were outlined in the charter of rights and duties of nation states in 1974, and that had been the framework. In many ways, many of the developing countries and people that are engaged in those kinds of issues feel that we need to return to that kind of model for an investment treaty, not the model that Mr. Hart and Mr. Rugman have been advocating here.

The Chairman: Finally, Mr. Rugman.

Prof. Alan Rugman: Just briefly, Mr. Chairman, on the very last point, before answering your own question, the United Nations Conference on Trade and Development, UNCTAD, in its latest world investment report basically strongly says that the United Nations is recommending that there be a multilateral agreement on investment. So I'm not sure where Mr. Clarke is getting this information from. What we have in fact is a consensus amongst experts who study investment issues that the MAI should build upon the investment provisions of NAFTA. These were breakthrough decisions, and the MAI drafts that have been seen so far are indeed building on that, with the full safeguards for Canadian sovereignty.

So my answer to your question is the following: you asked what would happen if there is no MAI, and I agree with Mr. Hart that it would make essentially very little difference. The reason is that, in terms of economics and business, most of our business is with the United States and most of our concerns about foreign ownership and the need to discriminate against foreign investors in Canada have come from our problem with the United States. We have covered that off through the free trade agreement, which is now ten years old, and NAFTA.

So, Mr. Chairman, I would ask your committee to simply check the record. What has happened in those ten years? Has Canadian culture disappeared, has the Canadian health system disappeared, and so on? I think you'll find that the answer is no.

If there is a multilateral agreement on investment, it essentially will not change the nature of Canada in any way that has not happened over the last ten years.

The Chairman: Thank you, Mr. Rugman.

Colleagues, that brings our debate today to an end. I want to thank the witnesses who came forward. It was an exciting debate. You brought forward many issues of interest to us that we'll look into. We'll see Mr. Appleton tomorrow to go over his ideas further.

Colleagues, Mr. Sauvageau has asked to meet with us afterwards to deal with some housekeeping matters. We'll pause for five minutes and then we'll come back in camera to talk about some of the agenda.

[Editor's Note: Proceedings continue in camera]