Foreign Affairs Committee on Feb. 27th, 2012

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

Mr. Chair, how much time to I have left?

[The Chair, Conservative, Dean Allison]

You have about 30 seconds.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

What is your opinion of the new measures CIDA has undertaken to create more transparency and accountability to Canadian taxpayers, such as our open data portal and project browser?

[Pierre Gratton]

Is that for me or for...?

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

It's for anyone who feels comfortable answering.

[Pierre Gratton]

I'll leave you with that. You're better placed than I.

[Lucien Royer]

The fact is the CSR projects aren't a corporate accountability mechanism. They have no capacity to monitor accountability or to report on it. They may serve a specific function, but they won't solve the problem and they won't promote employment for youth in the way that you want.

The best way you can promote employment for youth with these projects is to do a better analysis according to the ILO decent work agenda, which Canada supported at the G-20. That would mean also looking at alternative ways of promoting employment, compared to what is being proposed now, and actually instituting mechanisms that are far more long term.

The international community that is really focused on corporate accountability would argue, and especially at the OECD, that reporting finances and monitoring mechanisms don't change misbehaviour. They don't correct misbehaviour. If you don't have a mechanism to actually correct misbehaviour, you can't speak about accountability. That's why the OECD guidelines, the guidelines for multinational enterprises, would be a far stronger mechanism to institute than this loosey-goosey corporate social responsibility. It's not that the CSR projects in and of themselves don't serve a function, but they don't serve that function.

[The Chair, Conservative, Dean Allison]

Thank you.

We're going to move over to the NDP. Ms. Sims, you have five minutes.

[Jinny Sims, NDP, Newton—North Delta, BC]

Thank you very much.

First of all, I want to start off by clarifying that at a previous session I said that I did see a role for the private sector, but within certain guidelines. With regard to the role of the private sector, I did not see a partnership in many ways with a lot of the funding that comes out of CIDA. The private sector can play a very active role in international work by itself, for example, in social and corporate responsibility and where that comes in--all of those.

For me, what we're seeing is that more and more of our aid, which is very limited, as we know, because it has been artificially frozen.... It's already much less than it was two years ago. It's so limited that I don't think it needs to be going to corporations that already make very healthy profits. That should be part of their responsibility back to the country they are extracting ore from. That should be their way of paying back, through education and establishing long-term, systemic education programs in the area, and not just looking at the short term.

Absolutely, cleaning up the environment around the mining areas should be an absolute given, as well as the training of its own workers. Absolutely. I've never seen the role of education, generally, as just to train workers for one company. The role of education is far more. It builds capacity to give people a kind of role they can play in participating in their democracy, and also in building well for themselves as time goes by.

Also, I know that the CLC shares some of these concerns with us around some of the mining companies and the issues around labour rights. But we'll leave that for another day.

Can you tell us a bit about the record of some of these companies that are now receiving CIDA funding through these partnerships? What is the record of protecting the rights of some of the world's most vulnerable workers of companies like Rio Tinto Alcan, IAMGOLD, and Barrick Gold Corporation? I can tell you, I've visited some mining areas in South America, and what I saw was quite horrific.

[Kenneth V. Georgetti]

MiningWatch and others have documented some of this in detail, as the history of Canadian mining companies in the third world has, regrettably, a long and tragic litany of trampling on the human rights of indigenous peoples and environmental devastation. Most recently, five people were fatally shot at Barrick Gold Corporation's North Mara Mine in Tanzania. Allegations have surfaced regarding sexual abuse at this operation. Barrick Gold Corporation actually reports finding “credible evidence” that its security guards and Tanzanian police sexually assaulted local women.

Back home in Canada, the threat of legal action from Barrick Gold Corporation has forced Vancouver-based Talonbooks to postpone the publication of a book about the Canadian mining industry. The book, Imperial Canada Inc.: Legal Haven of Choice for the World's Mining Industries, was to be published in the spring of 2010. But in February the publisher and everyone else involved with the book got a threatening letter from Barrick Gold Corporation, and didn't publish that book.

I think Canadian mining companies, frankly, enjoy impunity virtually everywhere they go and operate overseas. Many governments are unable or unwilling to effectively regulate these transnational companies. Frankly, they have the power even in our own country. If you want to look around at Vale Inco, who just got slapped very hard by the Ontario Labour Relations Board for their behaviour in Sudbury, and Rio Tinto, who locked out workers in Montreal and will soon probably lock out workers in British Columbia, they now have more power than nation-states. They are huge multinational corporations. If they don't like the rules or anything the government says to them, they just pack up and leave to go somewhere else. We would argue—and we've argued for a long time—that we recognize that corporations have neither the heart to bleed, nor the bottom to kick. That's the job of governments and politicians like you.

[Jinny Sims, NDP, Newton—North Delta, BC]

Thank you.

[The Chair, Conservative, Dean Allison]

That's all the time we have.

We're going to move back over. I just have one question for Ms. Lissakers before we go back over to Ms. Brown.

You talked about governance. You talked about transparency. It seems to me that one of the large issues of getting a country's right to the minerals is really the governance of the country and it not being strong enough. How do they get that kind of governance? How do they get the expertise? Where does that come from? If a country is weak, where does that fall in between the company trying to step up and other countries...? I appreciate the transparency. That makes sense, because then their citizens have a chance to have a look at them. But what would you suggest? You mentioned governance as one of the issues that holds these countries behind.

[Karin Lissakers]

You're the development committee, and you know this is a complex business. There is no single solution. You need to address a number of core issues simultaneously to have any sustained beneficial impact.

One thing is having strong transparency rules, because that's a critical tool for accountability, but at the same time working with citizens and with parliaments, because in the end, parliaments should have the oversight responsibility for their own governments' actions.

We've been very encouraged by the work we've been doing in Tanzania, for example. We're running basic workshops for the Tanzanian Parliament, particularly for the members of the energy and mining committees and their staff, who have begun to take an independent role, which was never true before--it was a rubber-stamp Parliament--in asking the government, the executive branch, to explain why they're conducting the mining policies they're doing, what they are collecting. The Parliament sent back a mining bill because they deemed the royalty structure to be strongly unfavourable for Tanzania. This affected Barrick. They also felt there weren't strong enough oversight mechanisms embedded in the law. Thus the law was changed because Parliament asserted itself.

Tanzania is going to be a very substantial gas producer, and the Tanzanian Parliament has now asked the government to present the master plan for the long-term development of the gas sectors. That is a systemic game changer, to have Parliament in public ways, through public hearings and public discussions, demand accountability and explanations and descriptions of policies. You need to have that going on while you also try to address the retail poverty issues.

I'm all in favour.... I think companies can make a big contribution in sharing skills, training workers, and developing supplier companies that can supply services and goods to the industries, building dual-use infrastructure, railroads that don't just carry ore, but also carry agricultural products, fertilizer and so on. Companies are beginning to think of that.

Some of the smaller local corporate social responsibility projects are really going to have very limited impact if they're not embedded in a larger governance change in the country. That means working with the oversight institutions, the media, the Parliament, civil society, having an international transparency standard, as I said.

Governments should be building the schools and providing the health clinics--not mining companies; it's not their business. I think it's a service to the communities where they work, and better that than nothing, but it takes the load off the governments. The responsibility and the action should come from the national and the local governments. I think a sustained policy from the G-20 or the G-8, where Canada is a significant player through the development policies and through the international community generally, can really begin to change the trajectory.

I agree that you need to bring the Chinese and Indian investors on board. It's very interesting to see. Chinese companies have developed a very negative reputation in many parts of Africa and Latin America, and they're beginning to recognize it and the government is clearly concerned. You see more and more Chinese companies entering into joint ventures with respected Australian, Canadian, and U.S. companies. Partly, it's a matter of their wanting to begin to do better. They know they have to do better just in the quality of their performance in environmental and labour standards.

I think they look to these partnerships to help them do that. They will come along. I don't think the solution is for the U.S., Europe, and Canada to say that the Chinese are competing by playing dirty and therefore they have to as well.

[The Chair, Conservative, Dean Allison]

Thank you very much.

Ms. Brown, five minutes.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

Thank you very much, Mr. Chair.

I think it's interesting to note for the record the incredible collaboration that's gone on between our NDP colleagues and the questions they've asked our witnesses--obviously prepared.

My question goes to both Mr. Gratton and Ms. Lissakers, if you don't mind.

I had the opportunity to meet with members of the extractive industry, not just from Canada, but a multitude of actors who are in Zambia. Zambia is known for its gemstones, particularly emeralds and garnets, and there have been people there for quite some time in the extractive industry. Twenty years ago Zambia was under a socialist regime and there was an expectation on the part of the government that these companies would contribute to education particularly, but also to health care facilities. Now that the government is a different style of government, many of these companies are still providing these kinds of resources to the country and the country has had tremendous benefit in education and health care.

Could you comment on the whole aid transparency initiative that's being undertaken, whether or not these companies, who are contributing in these mechanisms...? We talk about the money that goes back into the country, so would these companies not welcome these kinds of initiatives? Because they are contributing, but it's not really being recognized for the good that they are doing in the countries.

Could you comment on that, Ms. Lissakers? And then, Mr. Gratton, maybe you could comment from the extractive industry's perspective.

[Karin Lissakers]

I think many companies would like to have greater recognition of the contributions they make, the tax payments and the social payments they make. Sadly, in some cases the companies actually pay very little in tax for the very lucrative mining and oil and gas ventures that they have, and those are the companies that have been most resistant to the transparency regimes.

We have pushed to have social payments, social contributions, corporate social responsibility projects included in the EITI reports, for example, and we've been surprised to find that some of the companies that deliver these projects actually don't want them included. It leads, I think, to a not-surprising suspicion that maybe the money they're paying isn't actually benefiting the communities, but is benefiting individual political leaders or community local leaders. I think that's probably an exception rather than a rule. I think most companies that do these projects really want them to benefit the communities. But it is a very mixed picture.

If you take Zambia, for example, Zambia's big mineral wealth is not gemstones, it's copper. They have one of the biggest copper deposits in the world. They get about 9.5% of their tax revenue from copper, even though it is their single-biggest industry. They have negotiated very bad deals, and now the new government in Zambia is looking to renegotiate the terms of these deals, and surely should succeed, because it is really so imbalanced. Then they can afford to pay for their own schools and health clinics.

[The Chair, Conservative, Dean Allison]

Mr. Gratton, you have one minute.

[Pierre Gratton]

Well, there are two parts. I said earlier that there's an increasing recognition that transparency is good for business. There is an issue between mining versus oil and gas and transparency of royalty payments. Oil and gas royalties tend to dwarf ours. There are some fundamental reasons for that. Once you've drilled a well, you don't have a lot of workers, and there's not as much capital infrastructure that goes into it.

What our industry has often, through these tables, tended to argue is that you have to look at the whole picture. At a mine site there could be a $2 billion to $5 billion capital investment behind it. There could be several hundred permanent workers. There's a lot of spending that goes to support that entire operation, with a lot of spinoffs that flow from that. If you just look at the royalty picture, you won't get a proper, full picture of the contributions the mining industry makes when you compare it to oil and gas.

I don't know if that has come up in your discussions, and you're far more immersed in these international discussions than we at MAC are, but that is certainly one of the concerns I've heard raised. What would be fairer for us is a more complete presentation of the total economic contribution from a mine, not just the royalty payments.

[The Chair, Conservative, Dean Allison]

We're over time.

Finish with one comment, please, Ms. Lissakers.

[Karin Lissakers]

Certainly there are other contributions from the industry. To take the Zambia example, most of the taxes that the copper mining industry in Zambia contributes are basically the pension contributions of workers that the companies collect on behalf of the government. So it's really the employer's own taxes, not revenues that the company is paying to Zambia.

It's true that obviously the industry structure is different among oil, gas, and mining. But we've been working in Guinea, as I think I mentioned, and we estimate that as a result of changes in Guinea's iron ore royalty structure—which moves it into the range of the broad international standards and not the high end—it's probably going to generate $3 billion a year more for Guinea by 2017. That's just for iron ore. That's a lot of revenue that Guinea didn't have before. That can make an enormous difference in that government's ability to provide social services, but to make sure the money actually goes for that.... At least it has the first element, which is a revenue stream, and that comes from, as I say, a rebalancing of the terms of the transactions between them and the mining companies.

[The Chair, Conservative, Dean Allison]

Thank you.

We're going to start our fourth round. I've got Ms. Sims, Mr. Dechert, and then Mr. McKay. Of course if there are other people, we may still have some more time for another round, but that will complete all the questions.

Ms. Sims, you have five minutes.

[Jinny Sims, NDP, Newton—North Delta, BC]

Thank you.

For the record, there's been very little time to collaborate between Mr. Georgetti and me. I would say we share similar concerns, so we do have some similar questions, but he was not party to the questions I was going to ask, at all, before today.

I want to carry on this conversation a little bit about the role of mining companies in international development. I want to pick up on the point that it's not the job of mining companies to go into other countries to build a school, build a well, build a hospital, and then they've done their bit. Their job is absolutely to help to build the capacity so that the governments there can run hospitals, can run schools, and can develop their infrastructure. That can be assisted by corporations, and this is where I do see a role for mining companies in international development in paying a fair share of taxation and royalties, internationally and nationally, because that's what provides the infrastructure to support our civil society.

At the same time as doing that, I'm also hearing a lot about—I heard through Mr. Gratton here—the role CIDA could play in partnership, because CIDA has skill sets and some experience in international development. If the mining companies need some sessions, some workshops on how to do that, I think that would be a great role for CIDA to play, to put on workshops and to train personnel on how to do long-term systemic change-building and how to make for a strong civil society overseas.

I really want to get back to what we know or what I read about or what I have seen happening overseas with some of our mining companies and also the kind of role they do play there. So I am going to go back to Mr. Georgetti again to ask him this.

Do you have any recent examples of very egregious reports from some of the developing countries about the role of the mining companies there, whether it comes to the environment or whether it comes to labour practices or whether it just comes to supporting civil society?

[Kenneth V. Georgetti]

We don't have anything right now that we could give you. We could provide you with data. If the committee wants it, we can provide you with that data and—

[Jinny Sims, NDP, Newton—North Delta, BC]

I would like to see that data, yes.

Also, I believe that you've had Emmanuel Rosenthal come out to the Canadian Labour Congress from South America, and he spoke at one of your events. He told me he did.

[Lucien Royer]

It could be.