International Trade Committee on Nov. 7th, 2023

[Bruce Christie]

I'm sorry, but I don't have that determination at hand. I will certainly provide it to you.

[Wilson Miao, Liberal, Richmond Centre, BC]

Can you submit that to the committee?

[Bruce Christie]

Absolutely.

[Wilson Miao, Liberal, Richmond Centre, BC]

Great.

I understand that here in Canada we have our own legislative process. The committee is part of that process. I'm sure, on the other side, Ukraine also needs to go through their parliamentary motions to pass this agreement.

Can any one of you share with the committee what the legislative process will be in Ukraine compared to that of Canada?

[Bruce Christie]

Thank you for the question.

I know this committee will be meeting with or hearing from Ukraine's ambassador to Canada on Thursday. She will be in a better position to provide the details of Ukraine's parliamentary ratification procedures. What I can share with you today is that both parties are committed to have this free trade agreement enter into force as quickly as possible.

Ukraine's parliamentary system is different from Canada's in the sense that, first, we have obviously two chambers of Parliament; Ukraine has only one. Also, where we have three readings of the legislation here in Canada, Ukraine's process allows for up to three readings, but they have more flexibility in how they can streamline their ratification process. They can also table legislation in Parliament that's deemed for “urgent consideration”. It's up to the president to make that determination. Even though Ukraine's process is similar to Canada's, they have more flexibility in how it can be streamlined.

[Wilson Miao, Liberal, Richmond Centre, BC]

What other committees or other institutional bodies will exist under the Canada-Ukraine free trade agreement?

[Bruce Christie]

In addition to the committees that already exist, there's a new labour committee. There's a new committee on financial services, and there are obviously the new chapters on trade and gender, trade and SMEs, and trade with indigenous peoples. We will establish committees to monitor the implementation of those provisions as well.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you.

I can see the potential of this free trade agreement benefiting my riding of Richmond Centre, since there is a good group of Ukrainians settled in the community. Will the provinces or territories need to sign the CUFTA to make that happen? If not, why is that?

[Bruce Christie]

No, they will not. This is a federal treaty. This is a treaty signed by Canada, but on the obligations in the treaty itself, although Canada is responsible for those, some of those obligations fall within provincial-territorial jurisdiction. We work closely with the provinces to ensure consistent application of the obligations in the free trade agreement.

[Wilson Miao, Liberal, Richmond Centre, BC]

This modernized CUFTA includes an updated chapter, which you mentioned earlier could fall under labour or finance, with comprehensive and enforceable labour obligations. Could you provide our committee with an update on how this chapter will benefit workers and their working conditions?

[Bruce Christie]

Absolutely, and thank you very much for the question.

One of the provisions of the labour chapter is that, first of all, it uses the text from Canada's gold standard labour chapter found in both the CUSMA and the CPTPP. That labour chapter and the provisions therein are fully subject to dispute settlement procedures.

Also in the chapter, there are provisions that aim to improve labour standards and working conditions by building on the international labour principles found in the ILO conventions. There's also a non-derogation provision that prohibits parties from weakening or reducing the protections offered or...any goods or services provided through forced labour. Also, there's a stand-alone article on violence against workers. These are some of the new provisions we've included in this trade agreement that build on CUSMA and the CPTPP.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you.

Let's talk about the financial service chapter. On the current comprehensive and progressive financial services commitment, could you share with our committee how this chapter will help to provide a level playing field between Canada and Ukraine?

[Bruce Christie]

Yes. What it does in this chapter, building on some of our previous agreements, is that it includes core obligations such as market access, national treatment and most favoured nation treatment to Canadian financial service providers, along with our Ukrainian counterparts.

It also provides new commitments on electronic payments and the processing of applications, but also includes, as we would typically seek in a free trade agreement, a robust prudential exception that allows our financial service regulators to take measures to maintain the integrity and stability of the financial system, and when—

[The Vice-Chair, Conservative, Kyle Seeback]

I'm going to have to cut you off right there. We're already over time.

Just for everyone in the committee, I would say, if you're asking questions and you happen to have your earpiece on, please don't lean in too close to the microphone. Doing that is causing some challenges for our translators.

I would now like to turn it over to Monsieur Savard-Tremblay for six minutes.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Mr. Chair.

Thank you to all the witnesses for being with us today.

Perhaps I will ask again some questions that I previously asked the minister. However, I will not ask the question for which no answer was readily available. We will wait for the written explanation. But I would like to go back to the investor-state dispute settlement mechanism.

Why is Canada willing to accept that mechanism and using a defensive strategy? Why is Canada promoting such provisions, in spite of the precedent set by the Canada-United States-Mexico Agreement, where the mechanism was abandoned?

[Bruce Christie]

Thank you very much for your question.

Just to clarify, as Minister Ng mentioned earlier this morning, when we look at our obligations on investor-state dispute settlement, when we sat down with Ukraine to expand and modernize the agreement, it was Ukraine that asked us to include provisions on ISDS. They did so because they realized that, during the negotiations and during the illegal war, they were going to have on their hands a major project to rebuild and reconstruct their country. They were going to have to rely on foreign direct investment to facilitate that reconstruction. They wanted to provide foreign investors with the additional comfort of knowing they could invest in large-scale infrastructure projects in Ukraine and knowing that they were protected by the rule of law and subject to dispute-settlement mechanisms between the investors and the state government.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Before NAFTA, things were very simple: a company that thought it had been wronged had recourse, but it had to ask the government of its country of origin to act on its behalf. Right now, in the proposed agreement, multinationals and states are on an equal footing.

According to the report of the United Nations Conference on Trade and Development, or UNCTAD, which dates back to 2013, states won their case 40% of the time, and businesses won 31% of the time. The rest of the time, out of court settlements took place. This means that in about 58% of the cases, for-profit companies have been able to successfully oppose the democratic will of the people, or the will of lawmakers, in whole or in part.

How can Canada justify this position?

[Bruce Christie]

Thank you for the question.

Maybe I'll start by reiterating the point that, under the current CUFTA agreement that came into force in 2017, neither party has brought an ISDS case forward. We don't anticipate a flurry of ISDS challenges by investors against the government as a result of a modernized agreement. What the ISDS provisions seek to accomplish is to provide investors with that protection in the event, as was mentioned in the earlier session, that a government makes an arbitrary decision to expropriate an investment. Then there will be protections in the agreement.

Also—and I wouldn't make this specifically about Ukraine—in some cases, we tend to include ISDS provisions in our foreign investment protection agreements and in our trade agreements with developing countries that don't always have the same standards that we do on the rule of law or their legal systems. In this case, it was at the request of Ukraine that we included these provisions. We're not anticipating that they will lead to a dramatic increase in challenges against states regarding investments. This agreement does build significantly on the 1994 foreign investment protection agreement.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

You say that you do not anticipate this, but I asked you a rather simple question earlier: would a Ukrainian citizen with investments here be allowed to sue the Government of Canada if his assets are expropriated for having supported Russia, for example, as we saw in Ukraine?

I was told we do not have an answer to that question, so how do you know what to anticipate?

[Adam Douglas, Senior Counsel and Deputy Director, Investment and Services Law, Department of Foreign Affairs, Trade and Development]

Let me caveat by saying that it's hard to answer these things in the abstract without a concrete fact pattern. There are protections within the treaty, though, that do allow for Canada to protect its essential security interests, and there are exceptions to the obligations that Canada has undertaken when it needs to protect its essential security interests.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Let us take the example of a Ukrainian citizen who does business and has investments here in Canada. In addition, he also does business in or supports Russia. If the Government of Canada wanted to expropriate that Ukrainian citizen's property, do you think it could be done using the national security exemptions? Could that citizen use the dispute resolution mechanism?

[Adam Douglas]

I know the time is limited.

Again, it's very difficult to answer questions in the abstract without a specific fact pattern. The rule for protecting national security is stipulated in the free trade agreement. It wouldn't be as specific to address the situation that you are referring to, but the provisions are broad enough to allow Canada to protect its essential security interests, so if the fact pattern you are explaining would create that type of situation, Canada would have the policy flexibility to do so.

[The Vice-Chair, Conservative, Kyle Seeback]

We'll now turn to Mr. Cannings for six minutes.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you, again, for continuing to be here, and thank you for your response to my colleague's question about ISDS, because I was a bit confused by the minister's answer, which seemed to think that Ukraine was worried about investment situations in Canada. If it's the other way around, I can, perhaps, understand that.

We have this FIPA agreement with Ukraine that's been there for 30 years. There were no ISDS disputes in that time. How different is the version in this treaty versus the FIPA from 1995? How is it improved or whatever from a Canadian standpoint?

[Bruce Christie]

The previous foreign investment promotion and protection agreement, FIPA, with Ukraine was one of our older-generation agreements, so almost 30 years later, we've applied our new FIPA model, which came into effect a few years ago. In this new FIPA model, it includes new drafting to ensure that parties are able to maintain the right to regulate and provide the policy flexibility in areas such as environment, culture, indigenous, gender and cultural diversities.

It also includes a more updated, modernized dispute settlement system, as my colleague was addressing earlier. One of the important updates is that it's not encouraging that parties or investors in ISDS cases or state-to-state cases rush to launching disputes. It provides strength and alternatives, options to consider to avoid arbitration. That would be the key: to allow the parties to sit down with the investor to discuss the injury that they claim to have faced and find a way forward without going forward, ultimately, to litigation.

The last point I would say is that, under the modernized ISDS provisions, we also streamline the litigation procedures and make them more accessible to our SMEs, which found themselves outside of being able to take advantage of disputes because they just simply weren't funded to pay for lawyers and whatnot. It's more inclusive in that regard.