Mr. Speaker, I am pleased to stand today in the House and speak to Bill C-24, the Canada-Panama trade agreement. The full name is an act to implement the free trade agreement between Canada and the Republic of Panama, the agreement on the environment between Canada and the Republic of Panama and the agreement on labour co-operation between Canada and the Republic of Panama.
Before I go too much farther, I will answer the question just raised by my hon. colleague from Winnipeg North. The reason this agreement has taken so long to get through the House is that the Conservative Party and the Prime Minister of this country prorogued Parliament twice and this bill that was before the House was killed and parliamentarians were deprived of their opportunity to deal with it. That is why the bill has been delayed, not because of anything New Democrats have done.
It is always nice to add some factual basis to the House, as opposed to the government's general approach of relying on spin and accusation and oversimplification, as opposed to solid evidence-based approaches to government.
I would like to briefly describe to the House what Bill C-24 is about. By this legislation, Canada would eliminate all non-agricultural tariffs as well as most agricultural tariffs upon ratification of this agreement. Overall the bill, if passed, would eliminate 99% of tariffs for imports from Panama, and a limited number of tariffs would be phased out over the next 15 years. Canada would not, by this agreement, eliminate over-quota tariffs on supply managed goods such as dairy, poultry and eggs. Additionally, Canada would not eliminate its tariffs on certain sugar products. Therefore this deal is not comprehensive and it does not deal with certain sensitive agricultural issues that are often so delicately handled in trade agreements.
This agreement would see Panama immediately eliminate all non-agricultural tariffs for imports from Canada, and upon ratification 90% of Canada's exports to Panama would enter the country duty-free, including many agricultural products. Other agricultural tariffs would be phased out within five to ten years. A limited number of Panamanian tariff lines would be unaffected by the implementation of the proposed free trade agreement.
Currently, Panama's average most favoured nation tariff rate, which is the lowest tariff rate Panama offers to countries with which it does not have a free trade agreement, for non-agricultural products is 6.4%. Its average most favoured nation tariff rate for agricultural products is 13.6%. However, some agricultural imports into Panama face tariff rates as high as 70%.
This agreement deals with services as well. It extends liberalization of trade and services beyond that established by the World Trade Organization's general agreement on trade in services in finance, information and communication technology, environmental services and energy services.
This agreement facilitates border entry for service providers and business people. It would provide a framework for the eventual reciprocal recognition of professional licensing qualifications in both countries.
This deal also has a chapter on government procurement. It allows contractors to bid on government contracts in both Panama and Canada. Moreover, contractors from Canada would be eligible to bid on Panama Canal Authority contracts. This agreement would prohibit government contracts with domestic content requirement rules that may impede potential suppliers or subcontractors from the partner country. Panama and Canada would both be required to post contract opportunities in a transparent manner for contractors from the partner country. In other words, this deal would open up procurement in Canada to Panamanian businesses and vice versa.
There is a labour co-operation agreement appended to this agreement that is referred to as a side deal on labour. It would require both parties to respect commitments under the International Labour Organization's 1998 Declaration on Fundamental Principles and Rights at Work. It would protect the right to collective bargaining, obligate the parties to work toward abolishing child labour, eliminate compulsory labour and prohibit employment discrimination. Canada and Panama would also agree to minimum employment standards, occupational health and safety standards and compensation for sick and injured workers.
Moreover, either country could request a consultation with respect to the other country's obligations under the proposed agreement. If the countries could not reach an agreement with respect to a complaint, a review panel would or could be established if a country persistently abrogated its obligations under the proposed agreement and if the matter is so-called “trade related”.
This independent review panel could impose monetary penalties, which would be collected pursuant to a domestic court order. Those penalties would be limited to $15 million per year for each country and would be spent on programs in the country that violated the labour co-operation agreement.
There is also a side agreement on the environment in this trade deal. Both Canada and Panama would be required not to weaken their environmental regulations, such as they are, in order to attract investment. Both countries would be required to enforce their existing environmental regulations, again such as they are. To this end, mechanisms would be established to ensure that environmental impact assessments occur for proposed projects. In both countries, interested persons could request that the government investigate alleged violations of environmental rules.
Furthermore, the agreement would provide a framework for environmental co-operation between the countries with respect to environmental enforcement capacity, protection of biodiversity, conserving shared migratory or endangered species and developing mechanisms to protect the environment.
Disputes between the countries would be resolved through consultations and exchanges of information only. If those consultations and exchanges were unable to resolve the dispute, the offended party could request that an individual review panel be established to investigate the dispute.
We are opposing this bill for a number of reasons.
First, Panama has an established clear and absolute long-standing reputation as a tax haven for tax evasion and tax avoidance.
Second, Panama has a history of military dictatorship. It has a poor record of labour and human rights. As well, the deal's side agreements for both labour and the environment are very weak, as I will delineate.
Third, we are also concerned that the agreement provides greater rights and powers to foreign investors. This is worrisome given controversies on the environment and human rights records of some Canadian mining firms in Panama.
There are no penalties for environmental violation of this agreement whatsoever. If there was any single violation or multiple violations of the environmental side agreement, not one penny is provided for in this agreement to be levied in terms of fines or penalties; in other words, the environmental side agreement is only suggested.
I will first deal with the tax haven situation. The amount of money invested in tax havens in the world globally at the moment is at an all-time high. In 2011, almost 25% of Canada's investment was invested in the world's top 12 tax havens.
According to a Tax Justice Network report from 2011, Canada loses an estimated $80 billion per year to all forms of tax evasion. The government does not have a system for estimating and publishing the amount of lost revenues due to offshore non-compliance.
In 2011, there were more than 9,000 CRA employees working on taxpayer compliance. As of May 2012, 510 were assigned to the international audit program. That number has not changed since 2008, even though the use of offshore accounts has skyrocketed.
The CRA's 2010 audit of its own enforcement branch confirms the agency's inability to pursue complex offshore cases worth millions of dollars. Instead, it prefers to chase down the so-called “low-hanging fruit”, such as small business and the self-employed.
Panama, as I said, has a long history of serving as a tax haven. Here is some of the testimony we heard at committee in 2010 by Todd Tucker, who is the research director of Public Citizen's Global Trade Watch. He testified that Panama offers foreign banks and firms a special offshore licence to conduct business there. Not only are those businesses not taxed; they are subject to little or no reporting requirements or regulations.
According to the Organisation for Economic Co-operation and Development, the OECD, the Panamanian government has little to no legal authority to ascertain key information about these offshore corporations, such as their ownership.
Panama's financial secrecy practices also make it a major site for money laundering from places throughout the world. According to the U.S. State Department, major Colombian and Mexican drug cartels, as well as Colombian illegal armed groups, use Panama for drug trafficking and money laundering purposes. The funds generated from illegal activity are susceptible to being laundered through Panamanian banks, real estate developments and more.
A recent Cornell University study analyzed all prosecutions of the Internal Revenue Service in the United States over a 10-year period, and it found that Panama was tied as the number one country in the world as a source of drug-laundered money and as a tax haven.
There was some testimony at committee that this situation was so-called “improving”. Recently, Panama was removed from the so-called OECD “grey list” after implementing the standard for exchange of information when it signed a tax information exchange agreement with France. Panama now has 14 such agreements.
In March 2012, Canada and Panama entered into negotiations for a tax information exchange agreement. However, importantly, and critically for the opposition, this agreement has not yet been concluded or signed.
This is very troubling, considering the large amount of money laundering in Panama, which I believe no one in this House disputes, including money from drug trafficking. Panama's lack of taxation transparency has led the OECD to continue to label the nation as a tax haven.
I should point out that the so-called “greyness” is lifted from a country when it signs tax exchange information agreements with 12 countries. Notably, former president Sarkozy of France said that, notwithstanding that Panama had signed more than 12—in other words 14—such agreements, he still did not consider Panama to have entered the legitimate world of open transparent banking systems in the globe.
At committee, I questioned the government officials who testified about what due diligence Canada had done in determining the role of drug money in Panamanian banks and businesses. Astonishingly, they had done no study.
Cameron MacKay, a DFAIT official, on October 2, 2012, testified thus:
...we don't have figures in that regard, and to my knowledge the Canadian government hasn't done particular studies. But we are well aware, of course, that Central America is a region now that's suffering very seriously from the narco-trafficking trade. It's a serious issue across the region, including in Panama.
The U.S. Congress refused to ratify a free trade agreement with Panama before signing a tax information exchange agreement. According to witnesses, this agreement has “a large loophole...that...allows Panama to sidestep tax transparency provisions if they are 'contrary to the public policy' of Panama”.
Analyses of these tax exchange information agreements indicate they are highly ineffective in preventing legal tax avoidance or legal tax evasion unless they are carefully drafted. These agreements typically do not have an automatic information-sharing provision, but rather individual requests must be made.
Furthermore, these tax exchange information agreements generally do not require a partner country to provide information necessary for determining tax compliance in the other nation if it has not been previously created. In particular, it is typically necessary to know the name of the individual suspected of tax evasion to request the overseas tax information. Governments rarely have this information without a whistleblower.
Prior to the clause-by-clause review of Bill C-24, the NDP official opposition proposed to the committee a motion that would stop the implementation of the Canada-Panama trade agreement until Panama agreed to sign a tax information exchange agreement, as the U.S. Congress did.
My motion was defeated by the Conservatives and the Liberals who argued that progress was being made on this matter with regard to negotiations underway to sign an agreement. However, we do not have a tax exchange information agreement between Canada and Panama today as we sit and vote on this free trade agreement.
In other words, we are dealing with a noted tax haven, one of the most notorious drug laundering centres in the world. The U.S. Congress said it would not be safe or prudent to sign a free trade agreement with such a country until it first had a tax exchange information agreement in place. However, in this House, the government is asking parliamentarians to go ahead and give a most favourable nation status free trade agreement that would allow money and investment to flow with very little barrier between our two countries, when we do not have a tax exchange information agreement in place, but one might happen in the future. That is imprudent. That is irresponsible.
The U.S. Congress would not ratify its FTA with Panama before a tax exchange information agreement was signed. Why are we?
I want to talk a bit about the labour co-operation agreement. It is not as strong as it could be. It has weak enforcement mechanisms. It invokes international labour organizations' core labour standards. However, according to testimony we received at committee, the agreement does not include specific protection for the right to organize and the right to strike. It provides instead for so-called “effective” recognition of the right to collective bargaining, making this deal weaker than others Canada has signed. Enforcement is weak. Fines are small. There are no countervailing duties and there is no provision for abrogation or any other such remedy.
We heard a lot of testimony that what Canadian business wants is a level playing field. I questioned experts and witnesses at committee and asked what the minimum wage was in Panama. The answer I got was between $1 and $2 per hour. How is that a level playing field for Canadian employers who have to pay minimum wages in Canada of at least $9 or $10 an hour, as well as workers' compensation, health benefits and Canada pension plan benefits? As well, they have to comply with a whole bunch of regulations that are part and parcel of a modern industrial economy. How are they supposed to compete on a so-called level playing field with Panamanian employers who are paying their workers $1 to $2 an hour? That is not a level playing field. It is not fair to Canadian business to sign and enact a trade agreement with a country that has such low standards.
The agreement on the environment is a replication of environmental agreements we have signed before and does not provide for a single penny of penalty. What kind of agreement obligates another country to certain environmental standards, but if it violates them we send it a letter and admonish it? That is irresponsible.
I have a quote from Jennifer Moore from MiningWatch. She states:
Although [this agreement] includes an environmental side chapter, this is a non-binding declaration that relies on political will for its implementation, of which sort we have not seen in Panama. On the contrary, we've seen the undermining of environmental protections at the behest of Canadian companies.
The agreement has an investor-state dispute settlement, something that we have heard a lot about in the House over the last two weeks because one is contained in the foreign investment protection agreement with Canada and China. This deal would further entrench the ability of companies to sue governments for policies that are seen to hurt investments. They are administered through tribunals that do not live up to Canadian values of justice, where the judges do not have security of tenure and there is no effective appeal mechanism. In fact, there are about 60 international lawyers around the world who sit on these tribunals. One recently said that he could not believe that any country in the world would give over to an unaccountable panel of three lawyers the power to strike down its domestic democratic legislation. That is exactly what was said.
These investor-state dispute settlement mechanisms are very dangerous. We have seen in the FIPA that they could subject Canadian taxpayers to millions, perhaps billions, of dollars of liabilities simply for the government taking measures to protect Canadian businesses or the environment or social programs. That is wrong.
In terms of the environment, there is a Mesoamerican corridor in Panama that is one of the most important biological and biologically diverse areas of the world. Currently there is a worldwide attempt by mining companies to mine in that area. This is something that is very concerning to many environmentalists. Hundreds of different types of species are at risk through unrestricted mining activities. We heard testimony at committee that this is also of major concern.
Panama accounts for less than 1% of our trade. It is actually 0.03% of Canada's trade. The government always brags about the number of agreements that it has signed. It has signed nine agreements. Who were those agreements with? They were with Panama, Jordan, Colombia, Honduras, Liechtenstein. With great respect to these countries, they are not major economic powers.
What the New Democrat opposition wants is a strategic trade policy where we restart the multilateral negotiations, where we sign trade deals with developed countries that have high standards and developing countries that are on progressive trajectories. These are countries like Japan, India, Brazil, South Africa and the BRIC countries. These are the countries that we should be signing trade agreements with, not countries like Panama that are drug laundering centres, tax havens and have low standards that will hurt Canadian business.
