Canada-China Relations Committee on June 19th, 2023

[Peter Fragiskatos, Liberal, London North Centre, ON]

Would it be accurate to say that there's no single factor that is more important than other factors? Are these factors taken together?

[Kathleen Wrye]

I think each investment decision is unique. As to which considerations are perhaps more important than others, it would be difficult, really, to say, other than that fiduciaries are required to take all factors into account in making considerations about investment decisions.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Mr. Hutchison, do you have anything to add on the matter?

[David Hutchison]

Mr. Chair, the Department of Global Affairs Canada doesn't really play a role in terms of pension funds.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Okay.

I want to stay with the concept of human rights but be a little more specific, because the Deputy Prime Minister has been quite vocal on the idea of “friendshoring”, which is the notion that we would engage particularly in relations with countries that share our values—in particular, human rights values—on questions pertaining to economic development. Pensions would fit within that.

I'll go back to Ms. Wrye here. Given everything you've said, within the framework we're focused on here, what can you share relating to the place of friendshoring within analyses that are given relating to pension decisions?

[Kathleen Wrye]

It would really be difficult for me to speculate on what each plan administrator is thinking about when they're looking at a specific investment, but I think an example of things that pension plan administrators may take into account are things such as friendshoring or human rights issues. When they're looking at the long-term best interests of their beneficiaries, they want to consider all things that may have a long-term impact on that investment. If certain countries or certain investments are looked at in a different light, politically I would think that would be part of their considerations.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Is there a view taken within the Department of Finance that moves in the direction of friendshoring on such matters? Is this gaining traction, or is this still an idea that's so new, so to speak, that there hasn't been the time necessary to apply it and make it policy relevant?

[Kathleen Wrye]

It's another area I could not really speculate about. The pension legislation sets out a broad framework of fiduciary duty, which then puts into the hands of the plan administrators the responsibility to consider all things, ultimately, that are in the best interests of their plan members. Pension legislation doesn't set out rules or requirements with regard to those investments. It is the fiduciary duty framework that sets the rules.

[Peter Fragiskatos, Liberal, London North Centre, ON]

I have only about 30 seconds left, but if I have another opportunity at some point tonight, I want to drill down a little more to understand how decisions are made with a human rights lens, what sort of criteria are looked at, all the way down to what sorts of reports are assessed at the organizations you're looking at in terms of understanding points of view that exist on country X, Y, Z, so to speak, when decisions are made. If I have a chance and you're still here, I'll come back.

Thank you, Mr. Chair.

[The Chair, Liberal, Ken Hardie]

Thank you, Mr. Fragiskatos.

We will go to Monsieur Brunelle-Duceppe for six minutes or less.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

Thank you, Mr. Chair.

Thank you to all the witnesses for being here tonight.

I am subbing for a colleague, but I still have several questions, since this is somewhat related to my files.

Mr. Hutchison, you spoke about the Canadian legislation that bans the import of goods produced using forced labour. Our neighbours to the south, the Americans, have adopted the Uyghur Forced Labor Prevention Act. Since this law came into force, the U.S. customs service reports that, of a total of 3,588 shipments, 490 were refused, 1,323 were admitted and 1,778 are waiting to be processed.

Do you know how many shipments Canada sent back to China under the new Canadian law on forced labour?

[David Hutchison]

I believe the issue related to the import ban act is led by CBSA, so I'm not in a position to speak to that issue.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

Mr. Hutchison, you mentioned it in your opening remarks, so I thought you might know. Let me therefore give you the answer: only one boat has been turned back.

The Canadian law came into effect on almost the same date as the American one. For their part, the Americans are doing their job, but Canada has only sent one boat back. I expect both of us is an expert on their file. Could you tell me what the difference is between the American legislation and the Canadian one?

[David Hutchison]

Mr. Chair, I'm not in a position to speak to import legislation. The trade commissioner service works on exports.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

Can any of the other witnesses explain the difference between the Uyghur Forced Labour Prevention Act and the Canadian law on forced labour?

[Kathleen Wrye]

I'm sorry; I'm not able to speak to that either.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

In that case, I will tell you: in the United States, the burden of proof is on the exporter. Indeed, the people who ship the goods to the United States are the ones who have to show that they were not produced using forced labour. In Canada, however, it is the customs agents who are tasked with showing that the goods were produced using forced labour. It seems to me some departments still have a lot to learn.

Ms. Wrye, in your opening remarks, you said we have to act prudently with respect to investments. I imagine your department developed certain scenarios. Recently, my uncle Raymond told me that, in his view, Taiwan would soon be invaded by China.

If my uncle Raymond, who is not necessarily a geopolitical expert, is talking to me about China invading Taiwan, I imagine your department has in its files a scenario where this plays out. In your opinion, what will happen to the retirement funds invested in China if China invades Taiwan? Have you considered a scenario for such a situation?

[Kathleen Wrye]

I'm sorry; I don't think I can directly respond to that question. I couldn't really speculate on what would happen, other than to say that geopolitical risks are something that pension plan administrators should be taking into account when they are making their investment decisions.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

I will be more direct. Regarding Canada's investments in China, has your department worked out a scenario in case of a possible invasion of Taiwan by China?

[Kathleen Wrye]

I'm afraid I can't really answer that question either. My area of expertise is federally regulated pension plan policy, and that's not the type of analysis that we do.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

All right.

You were unable to answer my previous question, but perhaps you will have an answer to this one: what does it mean to “act prudently”?

[Kathleen Wrye]

Which part of my opening statement were you referring to? In general, I'd say that a pension plan administrator should be considering all factors, including geopolitical risks, in making their investment decisions, but that would be the extent of my comments on that.

Was there something more specific that you were wondering about?

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

No. I do not think I will get an answer to my question.

On April 24, the special committee heard from two academics on several risks associated to investing in the People's Republic of China, including challenges in investing in a non-democratic country with a secretive regime. According to one of the witnesses, Canada can choose one of two paths: either to completely avoid investing in the People's Republic of China to eliminate any risk, or to put in place much more binding risk reduction or risk mitigation strategies.

To ensure that public pension funds will not be invested in businesses of the People's Republic of China that are complicit in human rights abuses, what other approaches has the federal government considered?

[Kathleen Wrye]

Again, this is not something that I can speak to directly, as pension legislation doesn't set out specific rules with specific types of investments. It sets out a broad framework for the fiduciary duty and puts the onus on the plan administrators to take all factors into consideration that could have an impact on a pension plan's funded status and the benefits of members.

With respect to public pension plans, that is also outside my area of expertise, as I am responsible for federally regulated private sector pensions. All of the large public sector pension plans, when you think of Canada, of the Maple Eight, they are not under the purview of my department. They are largely provincially regulated or, in the case of the CPPIB, a shared jurisdiction, and the Public Service Pension Plan Investment Board is the responsibility of Treasury Board Secretariat.

[The Chair, Liberal, Ken Hardie]

Thank you, Mr. Brunelle-Duceppe.

We will now go to Ms. McPherson for six minutes or less.