In future should provincial actions cause significant legal obligations for Canada, the Government of Canada will create a mechanism so that it can reclaim moneys lost through international trade processes.

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Now that Canada is opening up a whole new area of potential claims against Canada from the Canada-China investment treaty, I would like to be updated on what the Prime Minister plans to do to claim millions back lost in arbitrations with China?

Hon. Peter Van: Mr. Speaker, I thank the leader of the Green Party for her question on this issue. It is good to see recognition that the opportunity of this agreement is to protect Canadian investors. For many years, the Liberal Party members who interestingly were asking questions about this after not having done anything to protect investors and businesses in China for some 13 years, we now have in contrast to their record an agreement in place that will protect Canadian investors, will protect their efforts to do business in China to create success, economic growth, prosperity and jobs back here at home.

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Attention should be paid to the fact that the Prime Minister has signed a deal with President Hu of China that promises investor protection. The text of said deal is not yet before the House of Commons, but everything I read about it (including from business analysts at Heenan Blaikie and Osler, Hoskin and Harcourt) anticipates the deal will include investor-state provisions similar to those in Chapter 11 of NAFTA.

Chapter 11 of NAFTA allows corporations from Mexico or the USA to claim damages against Canada if any level of Canadian government (municipal, provincial or federal) causes them to experience less profits than they had anticipated. Canada has actually repealed a law limiting a toxic gasoline additive when the US-based manufacturer sued under Chapter 11 — and we paid $10 million plus in damages. This outrage only gets more outrageous if the claims for multiple millions in damages come from a non-democratic enormous economy to which we have hitched our wagon as a compliant resource colony.

When will Mr. Harper share the text of this investor agreement with Parliamentarians? When will it be shared with Canadians? It was signed on September 8th when both Harper and Hu were in Russia. It must now be ratified. Assuming all the Conservative MPs who are worried about selling out our country to China do what they always do and submit to the will of the Boss, it will become a trade obligation. China will, if offended by any new health, labour, or environmental law, be able to make a claim for damages. I have already witnessed the chilling effect of Canada knowing a US based corporation can sue under Chapter 11. It was rumoured that former Liberal Health Minister Allan Rock refused to ban cosmetic use of pesticides for fear of Chapter 11 claims by US pesticide manufacturers.

What happens when Canadian laws, passed democratically, are struck down in hotel room arbitrations launched by the Communist Party of China?

I pay attention to things that CNOOC’s CEO says in public. In the August 29, 2012, Wall Street Journal, CNOOC CEO Wang Yilin said, “Large-scale deep-water rigs are our mobile national territory and a strategic weapon.” OK, so the bitumen isn’t mobile – until you mix it with diluents and stick it in a pipeline. But the oil sands do become Chinese territory. What did he mean about “strategic weapon?”

Are there national security implications?

I would love to trust in a national security review under the 2009 amendments to the Investment Canada Act, except that Stephen Harper specifically rejected the advice of the blue ribbon panel (struck after the Minmetal attempt to buy Noranda) that Canada needed a clear, objective definition of “national security.” The experts thought we should have a definition and use it to assess any takeovers of Canadian companies by foreign interests — particularly state-owned enterprises. Our PM rejected the advice. Instead the Canada Gazette for the 2009 amendments says that “national security” cannot be defined. It is, apparently, a fluid term.

Smart people I respect, like Andrew Coyne, say “don’t worry — there’s no national security threat when you cannot take the resource out of the country.” But then I run into stories like this:

Beijing hints at bond attack on Japan

Jin Baisong from the Chinese Academy of International Trade – a branch of the commerce ministry – said China should use its power as Japan’s biggest creditor with $230bn (£141bn) of bonds to “impose sanctions on Japan in the most effective manner” and bring Tokyo’s festering fiscal crisis to a head.

Writing in the Communist Party newspaper China Daily, Mr. Jin called on China to invoke the “security exception” rule under the World Trade Organisation to punish Japan, rejecting arguments that a trade war between the two Pacific giants would be mutually destructive.

Separately, the Hong Kong Economic Journal reported that China is drawing up plans to cut off Japan’s supplies of rare earth metals needed for hi-tech industry.

– The Telegraph, September 19, 2012

OK, maybe he’s just threatening to destroy Japan’s economy. Maybe he doesn’t mean it. Maybe the WTO wouldn’t let him do it…. but then there was the Sino-Forest fraud, busted by the Ontario Securities Commission:

OSC puts the spotlight on Sino-Forest gatekeepers

In its allegations Tuesday, the OSC noted that auditors Ernst & Young “were not made aware” of Sino-Forest’s “systemic practice of creating deceitful purchase contracts and sales contracts.” The commission makes no further comment on the audit firm’s work. A spokeswoman for Ernst & Young could not be reached for comment Tuesday.

The OSC issued a report in March calling on boards, underwriters, auditors and stock exchanges to improve the practices for listing foreign companies on Canadian stock exchanges, saying there has been a broad lack of “skepticism” about business practices in emerging companies like China.

– Globe and Mail, May 22, 2012

There’s a beautiful term: “broad lack of skepticism.”

It makes me nervous that Chinese companies are merely branches of the Chinese government. The Communist Party hierarchy appoints the boards of directors of CNOOC, Sinopec and Petro-China.

When I read in the business pages that Petro-China wants to bid on construction of the Enbridge pipeline, and read in the same story that Chinese companies are very competitive in their bids because of low labour costs, I picture the labourers who built the national dream of Pierre Berton’s imaginings… with a brutal and nasty history. We have a temporary foreign workers programme. It could happen. And the bitumen going through the proposed pipeline is to go to Chinese supertankers to Chinese refineries.

All this makes me nervous. It makes me nervous in two quite contradictory ways. Firstly, I am a tolerant small “l” liberal type of person. I am not Sino-phobic. China is not a country one can ignore. In terms of global climate negotiations, China’s engagement is essential. China has been, at least at COP17, far more progressive than Canada in talking about the need for a global climate deal.

I want greater ties with China for environmental endeavors, and cultural exchanges, and — yes – trade too. Losing sovereignty to China makes me nervous. I don’t want to be intolerant. But I want us to trade items made in Canada, by Canadians, to China. I don’t like the idea of China owning Canada. It makes it hard for us to point out to the Chinese government that it must start respecting human rights. We need to be really forceful in advocating for religious and political freedom in China. How do we do that when they have veto power over Canadian laws?

And then there are issues of global tensions. Mr. Harper and John Baird are talking tough to Iran. But what about the fact that, while we claim we are exerting sanctions on anyone doing business with Iran, Sinopec, now a major stake-holder in Syncrude, is Iran’s number one customer for oil? Or, that Chinese oil money helps prop up Bashar al-Assad?

So, bottom-line, the Nexen-CNOOC deal doesn’t have me nearly as freaked out as the investor deal Stephen Harper signed in Russia. But when I think about the idea of “net benefit” I just don’t see any answer but “no.”

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As always, the models for free trade are based on the NAFTA principles and not on the principles of other agreements that would, in my opinion, produce more benefits for the environment and for all societies.

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There are specific issues relating to Jordan with this trade agreement. I would like to preface that with a review of how we came to where we are in terms of where Canada’s interests lie as a society, not merely our trade in goods. All of these debates usually rest on the notion that if members have questions about new trade agreements, they are against trade with another nation. I remember a venerable senator who had been minister of agriculture for many years commented that trade is not new, what was Marco Polo doing. We certainly have had trade for a very long time. No one is against trade.

In the context of global trade, we have seen a remarkable transition. We used to live in a world of tariff barriers that allowed the Canadian economy to grow to be as strong as it is now. After the Second World War tariff barriers were targeted and we began to see them coming down. The efforts to say that one country must not discriminate against another began to swing the pendulum in the opposite direction to what we had seen before the Second World War.

These efforts led to the creation of the General Agreement on Tariffs and Trade. In the first instance, the GATT was quite restrictive in terms of focusing on trade in goods, which is what most Canadians understand we mean when we talk about trade agreements: trade in goods, our ability to buy and sell, the ability of our neighbours to buy and sell to us. This trade in goods is something that has been handled by the GATT for a very long time.

Things changed substantially in the 1990s. It took nine years of negotiations, the Uruguay round, to bring forward an updated version of the General Agreement on Tariffs and Trade, and within that new agreement to do some things that had not been done before. It was the advent of looking beyond goods to look at trade in services, to look beyond those things that were completely commercial and make changes that had implications for culture, for society overall, for the environment and for labour. In other words, the approach of the trade world began to impinge on other aspects of society. They became not just trade agreements, but agreements that actually changed the very fundamental relationship between citizens and their government versus the relationship of corporations and those governments.

If there was a time when we had too many tariff barriers, if there was a time when we were too protectionist, that time is long past. We have now seen the pendulum swing so far that the so-called liberalization of trade is not just advancing the flow of goods but to advance the interests of a dogma of globalization, which allows more and more multinational corporations to dictate policies, to have a greater role and arguably a greater role than the citizens.

I will back up and look at the model to which I referred earlier, the NAFTA model. It has dictated a great deal since we entered into that agreement. Probably the most egregious part of the NAFTA model is the investor state provisions which allow a corporation based in a country that is part of the trade agreement, in the case of NAFTA corporations based in the U.S. or Mexico, to have the ability to sue the Canadian government if it passes a law that they do not like.

Chapter 11 of NAFTA, the investor state provisions, allows a foreign corporation from the U.S. or Mexico to sue the Canadian government at the federal level. It allows a foreign corporation to have rights which are superior to those of a domestic corporation. A domestic corporation does not have the right to sue our government. This provision actually gives preferential treatment to foreign corporations to sue Canada if there is a regulation passed by the House of Commons. In a democratic house of assembly we can pass a law which is untouchable by a Canadian corporation, but a foreign corporation can sue us for damages.

Not only under the investor-state provisions within NAFTA can a U.S. or Mexican corporation sue us, it can sue the federal level, a province and a municipal government. We have seen the examples under chapter 11 of NAFTA for quite some time. Laws passed by this House had to be repealed because of a chapter 11 challenge. I refer specifically to Ethyl Corporation of Richmond, Virginia, which sued the Canadian government for costs and damages when this House chose to restrict access to a manganese-based gasoline additive that the health community warned was neurotoxic and the environment community warned was a danger to the environment. The car manufacturers said that they did want it in their cars because it compromised the catalytic converters, hurt their warranties and they needed action on it.

Even when the factual basis for governmental action is not in question and there is no notion that the action taken was in any way motivated by trade discrimination, in other words, we were not trying to give preferential treatment to a Canadian industry or product, the agreement is sufficient. The lawyer who represented Ethyl Corporation at the time, Barry Appleton from Toronto, said, “it would not matter if one added liquid plutonium to children’s breakfast cereal, if the government banned it and the people who made it said that they lost profit through that action, they could sue”.

I may have taken too long on that specific example but I wanted to make the point that trade agreements have gone too far. We are no longer talking about access to goods and services. We are talking about changing the fundamentals of the relationship. The primary relationship between a government should be to the citizens who elect the members of Parliament to serve in that government. There should be no superior rights of redress to a foreign corporation but we have seen that happen time and time again.

The most recent and egregious example was when the Prime Minister chose to pre-empt a complaint by a forest company against actions taken by the Province of Newfoundland and Labrador. In that case, AbitibiBowater was the holder of what had been a 99 year lease that allowed it, at bargain basement prices, to have access to a large area of forest on the condition that it ran a pulp mill. Into the bargain, believe it or not, in this 99 year lease, had been thrown water rights and other ancillary benefits.

When the Province of Newfoundland and Labrador said that it would not let AbitibiBowater close its mill and sell off everything it had under the lease, which would include water rights and the forest itself, as Newfoundland and Labrador said that it did not have access to those, the foreign corporation sued. In that instance, the Prime Minister chose to castigate the Government of Newfoundland and Labrador to pay out tens of millions of dollars to AbitibiBowater and said that it did not want something like that to ever happen again.

These investor-state provisions are creeping into all of these so-called bilateral investment agreements, or BITs. The Prime Minister just returned from Beijing and was very thrilled to have a new proposed trade agreement with China that would include these very provisions that would allow a foreign government to sue us.

In this instance, we are looking at a proposed agreement with Jordan. There are many good and substantial reasons to improve relationships with Jordan. Jordan has a reputation and a long-standing role as one of the most stable and least xenophobic Arab states and is certainly the most supportive of the existence of the state of Israel compared to most of the nations in that region.

Jordan has many things to recommend it but democracy is not among them. It is a monarchy. However, the late King Hussein of Jordan was always seen as someone of enormous wisdom. I must say that I was always impressed by his sense of wisdom and by his wife, Queen Noor, who was a strong advocate for the environment.

I had the great honour of serving on the earth charter commission, which was co-chaired by Mikhail Gorbachev and Maurice Strong. I had the good fortune to get to know Princess Basma of Jordan, who was King Hussein’s sister. As I approach this, I have a sense of Jordan’s place in the world and a sense of, albeit small, personal connection.

However, when we look at the implications of this trade agreement with Jordan, I do not think we should rush into it without having much better and more substantial answers for a couple of key points. We have heard numerous commentators point out that the Canada-Jordan free trade agreement could create free licence to greater human smuggling, that there would be an increased flow of foreign workers into Jordanian factories and that this could undermine labour rights in Jordan.

When we enter into a negotiation such as this, I would suggest a couple of steps that we tend to miss. The first step would be how to build a stronger relationship with a country. We can fill in the blank for the country, although in this case it would be Jordan. Yesterday we were talking about Panama. How do we build good links? Canada, traditionally, has been able to build good links through a robust Department of Foreign Affairs. There were skilled and qualified diplomats working in these countries. There were people who spoke local languages, spent time getting to know the local NGO community and were able to provide a context with which we dealt with nations. The importance of our foreign affairs outreach in recent years has been quite diminished. We have closed embassies and consulates around the world, which means that our reach is reduced.

When we have a relationship with a country, whether it is Panama, Jordan or China, it is important that the relationship be built on many pillars. One is, of course, the diplomatic one to which I referred. Another is greater social interaction and cultural exchanges. The government has shut down all the programs that dealt with allowing Canadian artists to perform overseas, which was building stronger relationships through our culture.

We also need relationships to be built on, not on the model of the NAFTA but more like the model from the European Union. In that model, all nations within the EU, when they undertook to become part of that shared common market, had to accept the toughest levels of environmental and labour standards of any one of the member countries. This is a key principle that is completely lacking in NAFTA. Under NAFTA, there are no requirements to meet higher standards. The most we got out of the language of NAFTA was that it would be unacceptable for a country to lower its environmental standards in order to advance trade.

There is a very large difference between NAFTA saying that countries are not allowed to lower their environmental standards to attract more trade and the completely different approach of the EU, which is that countries must raise their standards. Generally speaking, Germany has the highest environmental standards and therefore other countries had to raise themselves up to equal the German standards. Some of those countries were poor and so there was a transfer of resources to help them do that.

If one were looking at models around the world to find ways to use the trade pillar to advance other issues, then one would never follow the NAFTA model. It would be the worst possible way to go. One would look at the best examples around the world and follow those. If we have relationships on the basis of trade, those relationships should include raising the bar and telling foreign corporations that they need to look at a code of conduct enshrined in law internationally in the same way that we protect intellectual property rights. We know how to design regimes, such as the TRIPS Agreement, which requires that all nations proactively pass legislation to protect intellectual property rights and give all countries the ability to search and seize goods crossing a border if they do not meet the qualifications for intellectual property rights. We know how to do these things.

What if we were to say, for instance, that no goods at a border are allowed to pass if they have involved child labour? We could say that we will not allow goods to cross a border if they involve the destruction of precious ecosystems. Instead, our trade mantra is that we do not interfere with PPMs, process and production methods. What is an intellectual property infringement other than a process and production method? It means the product was produced by stealing someone else’s intellectual property. Why is it a greater offence under the trade regime to steal intellectual property than to exploit children, destroy forests or increase greenhouse gas emissions?

If we look at the global governance of trade, there is tremendous potential there for good. There is tremendous potential to harness the ability that has been used to protect intellectual property rights and use those kinds of agreements to protect labour standards, to protect children, to protect ecosystems and to advance a low carbon economy. All of these things could be done but they are not being done.

To ensure that Canadian corporations, U.S. corporations, Dutch, Chinese or whatever corporations participate in the GATT, we should have a global agreement on corporate behaviour stating that all corporations operating within this trade zone, which is basically every country except Cuba, need to meet minimum standards, such as proper labour standards and environmental standards. In that way, no corporation would be disadvantaged by having to take these standards on because all corporations would have a level playing field. It would be quite progressive coming from the lessons learned through the development of the GATT, the WTO, the TRIPS Agreement, the General Agreement on Trade in Services and so on. We have not done that here.

We have before us an agreement that follows the traditional typical model. It would give investment rights. It has a few nice words. There would be more of an environmental assessment review. We have had a review of what the Canada-Jordan free trade negotiations would mean. There is some agreement to work together on environmental issues. However, we still have the looming problems of reduced labour standards within Jordan, the risk of human trafficking and the fact that we have skewed the relationship that we have with other nations to the effect that it appears that nothing matters other than trade.

I suppose the House can now sense that there is a theme to what I am saying. We are not against trade and we are not against new trade agreements but a balance must be achieved so that our relationship with other countries in the world is based on multilateralism and internationalism. It must always recognizes the priority of citizens in a country to make decisions and have them binding. It must not give superior rights to corporations over citizens. It must rebalance the importance of diplomacy, of exchange and of fair trade in goods. It must insist that the rules that govern our trade agreements constantly reinforce and elevate the nature of our relationships, not put us in a situation where the populace of various countries push back.

We will see come before the House before too long the comprehensive economic trade agreement with the European Union. As I have been talking about EU trade agreements, how ironic is it that we are not seeing in the draft of that agreement a replication of the EU model but one that looks more like the NAFTA model with the benefits that will largely accrue to European pharmaceutical companies and so on? However, that agreement is not before us yet.

I do not oppose the bill going to committee where it can be improved. Our relationship with Jordan is important but it must be much richer, more complex and more nuanced than advancing agreements and relationships with Jordan through a trade agreement that fails to live up to its potential. We must revisit this. We must protect the rights of workers and protect the environment.

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I am very cognizant of the fact that the Uruguay round resulted in a new version of the General Agreement on Tariffs and Trade, the WTO, in which all nations are involved. We trade with all nations and the GATT rules are more than adequate in most circumstances, but these additional trade rules tend to be more about conveying new powers to corporations and new obligations on governments.

I would ask the member to comment on that.

Jinny Jogindera Sims: Madam Speaker, absolutely, we have seen that happen with NAFTA and other free trade agreements. There is more and more power being invested in international corporations and powers that go way beyond. Often as nationals we are told that we have no control over that because it is part of the NAFTA deal. This is what I meant about going from a date to a marriage.

I also want to talk about child labour. We know the horrific nature of child labour, but I want to point to a province in Canada, namely B.C., where it is legal for children at the age of 12 to go to work. That is in our own backyard and we need to address that too.

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After my talk, I had a half dozen requests for its text. I confess that I rarely speak from a written text. I prefer to speak extemporaneously, so I use a few notes to myself in illegible scrawl, usually point form and on the back of envelopes or old boarding passes. Still, the requests to share the key themes have persisted, so please accept the use of my Island Tides column in providing that text to some Salt Spring Islanders keen to read it!

Every trade deal represents a limitation on national sovereignty. While Canadian nationalists quite rightly rush to defend Canadian identity, national sovereignty is not always to be celebrated. After the 1992 Rio Earth Summit, Norwegian Prime Minister Gro Harlem Brundtland was asked why the world leaders had failed to take stronger steps on climate and biodiversity. She answered ‘national sovereignty’—the unwillingness of nations to have others critique, and correct, domestic policy in the interest of common global security.

At the same time that the Rio treaties stumbled to the finish line, the same governments were giving away national sovereignty with both hands in the Uruguay Round. The eleven year round of negotiations under the General Agreement on Tariffs and Trade (GATT) resulted in the creation of the World Trade Organization. Looking at both sets of treaties, it is clear that the trade deals have teeth; environmental treaties have a strong set of gums.

Trade Sanctions

Enforcement mechanisms matter. The most successful global environmental treaty has been the Montreal Protocol. In September 1987, I was part of the Canadian government team in Montreal to negotiate a deal to protect the ozone layer. The key to the success of the protocol was that it contained effective sanctions. Any country that signed and ratified and subsequently chose to use ozone-depleting substances in contravention of the legally-binding protocol faced trade sanctions from the other parties.

Ten years later, in December 1997, the Kyoto Protocol was negotiated. By design, it shared the architecture of the successful ozone treaty. It relied on ‘common but differentiated responsibilities’: that is to say, the wealthy industrialized countries were to reduce emissions first, developing countries could catch up later.

But, unlike the Montreal Protocol, the Kyoto Protocol did not include trade sanctions. In fact, Canada’s then- Minister of Environment, the Hon Christine Stewart, said that if trade sanctions were included, Canada would not sign. Why this turn-around?

It was all due to the creation of the World Trade Organization. The WTO set up its own Committee on Trade and the Environment. Rather than ask the question that troubled many of us: ‘Are there trade deals that damage the environment?’ the committee probed the question, ‘Are there environmental treaties that impede trade?’ The WTO committee made no ruling on the matter, but identified the Basel Convention on Hazardous Waste, the Convention on the Trade in Endangered Species, and the Montreal Protocol as impediments.

Suddenly, it became ‘off limits’ to use the only effective international tool (short of military invasion) to hold contracting parties to their word. Kyoto ended up with a limp noodle for enforcement. Any country that failed in the first commitment period, 2008-2012, to meet its targets would have an additional .3 ton/per ton penalty added to whatever new commitments were made in the second period. No wonder Canada’s government wants to kill Kyoto. The only penalty for the Harper government’s decision to repudiate a legally binding commitment does not kick into gear until we negotiate a second round of Kyoto.

Trade lawyer Steven Shrybman pointed out years ago that we would have effective climate action if governments cared about the climate as much as they care about intellectual property (IP) rights. To protect IP, the WTO community negotiated the Trade Related Intellectual Property Rights Agreement (TRIPS for short). Under TRIPS, every nation in the GATT market has a positive obligation to re-write domestic patent laws to meet US tests. Cross-border scrutiny to seek out products that violate IP rights can involve search and seizure. Imagine if those tools were brought to bear to protect climate: all nations must pass laws limiting carbon, bring in a carbon tax, install renewable energy, or they will not be allowed to trade. Goods crossing borders will be subject to seizure if the embedded carbon exceeds global norms. Or, as a placard in Copenhagen proclaimed, ‘If climate was a bank, they would have saved it already.’

The good news, out of this lopsided development of global trade laws versus environmental protection, is that the WTO has shown us how to develop tools that work. The United Nations Charter proclaims clearly that no international agreement is allowed to supersede the UN Charter. The WTO must be subservient to the larger international commitment to peace and security. From this aspect, we need to negotiate the next phase of climate action with meaningful enforcement.

The planet is already global. The process of so-called globalization has been all about taking what is held in common and transferring it to private interests. It has been about reducing the ability of democratically elected nations to determine their own course, while increasing the power of transnational corporations.

Tools of The Trade

Re-balancing trade and the environment ensures that trade is fair, does not jeopardize local security and resilience, and that economies thrive, sustaining healthy communities.
We do not lack for solutions. We only need the key to the tool box kept exclusively for the WTO.

Elizabeth May, Order of Canada, practiced environmental law and attended many WTO meetings, from its first meeting in Singapore, to attending Seattle as an advisor to the minister for trade. She is the leader of the Green Party of Canada.

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