Evidence of meeting #122 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was aiib.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Gervais Coulombe  Chief, Sales Tax Division, Tax Policy Branch, Department of Finance
Antoine Brunelle-Côté  Director, International Policy and Analysis Division, International Trade and Finance Branch, Department of Finance
Nicole Giles  Director General, International Finance and Development Policy Division, International Trade and Finance Branch, Department of Finance
Neil Saravanamuttoo  Chief, Multilateral Institutions, International Finance and Development Division, International Trade and Finance Branch, Department of Finance
Anchela Nadarajah  Economist, Multilateral Institutions, International Finance and Development Division, International Trade and Finance Branch, Department of Finance
Manuel Dussault  Chief, Securities Policy Division, Department of Finance
Justin Brown  Director, Financial Stability, Financial Sector Policy Branch, Department of Finance
Christopher Graham  Principal Economist, Bank of Canada
Hugues Vaillancourt  Chief, Financial Sector Policy Branch, Department of Finance
Lorraine McKenzie Presley  Director General, Portfolio Management and Corporate Secretariat, Department of Natural Resources
Margaret Hill  Senior Director, Strategic Policy and Legislative Reform, Department of Employment and Social Development
Réal Gagnon  Senior Policy Analyst, Strategic Policy and Legislative Reform, Labour Program, Department of Employment and Social Development

5:10 p.m.

Conservative

Tom Kmiec Conservative Calgary Shepard, AB

Right, but now you're joining an institution that does finance these types of projects in these types of countries, and the supermajority vote.... China has enough shares that there is no veto allowed for any other country, except for China, for supermajority-related votes. Between China and Russia, they can block most things that go on at the AIIB, if they don't like a direction that's being taken.

You mentioned this as well; you said “if we don't have a voice at the table to decide”. We should only have a voice at the table if we've put money into it. That's when we care. Outside of that, why does it impact Canada's environmental and human rights record when other countries choose to pursue an infrastructure project in another country? We have our own issues and our own other multilateral organizations, like the ADB, where we could be ensuring we're all playing by the right rules and to the standard that we have.

We're giving $375 million U.S., according to proposed section 7 here of division 2, to an organization that is financing projects in countries that have poor human rights records, like Azerbaijan.

5:10 p.m.

Director General, International Finance and Development Policy Division, International Trade and Finance Branch, Department of Finance

Nicole Giles

I think those are interesting project examples, because those are projects where the AIIB is co-investing with other multilateral development banks. For example, the natural gas project in Bangladesh is a project that's being jointly done with the Asian Development Bank. The project in Egypt, the solar one—I assume that's the one you're referring to—is being done jointly with the World Bank's IFC, which is the private sector window of the World Bank, and some of the other projects as well.

As I mentioned, for the AIIB at this point, because it's a relatively new institution, 75% of the projects it has done have been joint with other multilateral development banks. They will be doing shared assessments of those projects. Again, the analysis is done on a project-by-project basis.

5:10 p.m.

Conservative

Tom Kmiec Conservative Calgary Shepard, AB

I'd like to go back to the initial question I had.

If Canada finds a particular project wanting, whether for environmental reasons, human rights reasons, foreign affairs, or the project is not to our liking for whatever issue we have, we have a 1% share of the vote, which is equal to I think Poland or Israel. We don't have a spot at the board of governors or the directors, or at least not yet. Potentially we could be one of the third or fourth substitutes to have a seat and have a bigger voice, but we have 1% of the shares.

There are so many other countries working at this, and nine out of 12 are reserved for countries in the region of Asia as defined by the agreement. How can our voice be heard for this $375 million U.S.?

5:10 p.m.

Director General, International Finance and Development Policy Division, International Trade and Finance Branch, Department of Finance

Nicole Giles

In terms of the board seat, again if and when we do become a member, in the constituency that we would likely be joining, that would make us the largest shareholder in that constituency. There would be a very good likelihood that we would be taking that seat at the table or it would be alternated with the other largest shareholder in that constituency. I think the voice at the table wouldn't be a third or fourth alternate. It would be a consistent voice or perhaps an alternating voice with the other large shareholder in that group.

One of the challenges that I think Canada always has in any multilateral forum—and this is the same in terms of our membership at the World Bank, at the IMF, at the EBRD, the Asian Development Bank, and the African Development Bank—is that the nature of our country and the size of our economy is such that we're never the majority shareholder. As Neil mentioned, our influence comes from being able to influence early in that project process, being able to work effectively with our partners to encourage the right type of project coming forward, and to have a voice in the development and the assessment of those projects.

Generally, this is the role that Canada tends to play in the international order because of the size of our country and the size of our economy. The influence is greater than just that 1% share. The influence comes from the variety of levers that we're able to pull.

5:15 p.m.

Conservative

Tom Kmiec Conservative Calgary Shepard, AB

In the project assessment for the trans-Anatolian natural gas pipeline, TANAP.... This is just to continue on with something that the chair had said, and I'm not putting words into your mouth, Mr. Chair.

In the project objectives and expected results, it says that the project’s development objectives are to “integrate Azerbaijan with regional and European energy markets by strengthening its connectivity and transit role”, to diversity Azerbaijan's gas export markets, and “to improve the energy supply security of Turkey and South Eastern Europe.”

Those are all fine goals, if you live in southeastern Europe, Turkey, and Azerbaijan, but we have difficulty in securing our energy supply in eastern Canada using western oil. Why are we financing these goals and objectives with $375 million U.S. from Canadian taxpayers? These are competitor markets to Canadian natural gas.

5:15 p.m.

Director General, International Finance and Development Policy Division, International Trade and Finance Branch, Department of Finance

Nicole Giles

That project is one that was done jointly with EBRD, EIB, the World Bank, the Asian Development Bank, as well as the private sector. I believe that Canada would have some foreign policy interests in diversifying the pipeline of oil into southern and southeastern Europe from the primary oil pipeline right now that is pulling the oil through eastern Europe. However, again, I'm not able to testify to our foreign policy interests at this point.

For this particular one, there is value to diversifying that market and to diversifying how that oil is moved to market.

5:15 p.m.

Liberal

The Chair Liberal Wayne Easter

Hopefully, these are the last questions. Go ahead, Mr. Fergus.

5:15 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

Thank you, Mr. Chair.

Thank you very much, Ms. Giles and all the witnesses.

I would like to go to the penultimate question from Mr. Kmiec. I'm trying to place this in the right order. It really is a choice. We could either be a part of the AIIB or we could choose not to be. Let's explore that.

If we choose not to be, as we haven't been up until this point, we wouldn't have any say or influence over the projects that the AIIB would choose to fund. Am I correct?

5:15 p.m.

Director General, International Finance and Development Policy Division, International Trade and Finance Branch, Department of Finance

5:15 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

We wouldn't have an ability to work with our different partners to try to develop coalitions to bring about a particular sensitivity to the types of projects that we would like to have happen. Is that correct?

5:15 p.m.

Director General, International Finance and Development Policy Division, International Trade and Finance Branch, Department of Finance

5:15 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

I'm assuming that we would also not have the ability to make a contribution, à la Canadienne, for us to encourage developing countries to achieve a certain level of development that would allow them to have the necessary resources to provide for their internal domestic needs and provide some economic and presumably political stability. Is that correct?

5:15 p.m.

Director General, International Finance and Development Policy Division, International Trade and Finance Branch, Department of Finance

5:15 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

It seems that, if we want to have influence, we would need to or we should take part in the AIIB. That's on the philosophical level. I hope that's an appropriate question to ask an official.

5:15 p.m.

Director General, International Finance and Development Policy Division, International Trade and Finance Branch, Department of Finance

Nicole Giles

We can only influence the bank if we're a member of it.

5:15 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

Very good. Let's explore that side of things. We become a member of the bank. We are not going to be coming in at a 30% share of the bank. It's not available, nor would we be able to politically sustainably offer to finance at that level. Am I correct?

5:15 p.m.

Director General, International Finance and Development Policy Division, International Trade and Finance Branch, Department of Finance

5:15 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

When we are placed in such a condition, as you pointed out in your, I thought, very substantive answers to this question, you had taken the perspective that this is par for the course for a country the size of Canada. Is that also correct?

5:15 p.m.

Director General, International Finance and Development Policy Division, International Trade and Finance Branch, Department of Finance

5:15 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

Then it would behoove us when we want to have some influence in a country of our size, of our population, of our economic size, although our economic size is nothing to sneeze at, we would want to seek to create partnerships, to seek coalitions at the multilateral level.

5:15 p.m.

Director General, International Finance and Development Policy Division, International Trade and Finance Branch, Department of Finance

Nicole Giles

Correct. That is traditionally how Canada exerts both its foreign policies as well as its international development policy.

5:15 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

This is, again, normal, par for the course, for Canada to take part. Really it comes down to whether we want to continue to play that “punch above our weight” role by taking part in as many multilateral organizations as possible, or do we want to pull our marbles back and choose to only play on a field where we'll have, frankly, what comes down to an effective veto, and I'm assuming there are not many organizations that we can do that at the global level. Would that be correct?

5:20 p.m.

Director General, International Finance and Development Policy Division, International Trade and Finance Branch, Department of Finance

Nicole Giles

Correct. To give you, perhaps, some perspective on this, our shareholding at the Inter-American Development Bank is 2.6%.

5:20 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

Yet Canada plays a pretty significant role at the Inter-American Development Bank because of the connections and the coalitions that we've built with the members of that bank.

5:20 p.m.

Director General, International Finance and Development Policy Division, International Trade and Finance Branch, Department of Finance

Nicole Giles

We would like to think so.