Thank you very much, Mr. Chair, for the opportunity to speak to you about this important topic.
The Mining Association of Canada is the national organization for Canada's mining industry. Our members account for most of Canada's production of base and precious metals, uranium, diamonds, metallurgical coal, and mined oil sands, and are actively engaged in mineral exploration, mining, smelting, refining, and semi-fabrication across the country. Many of our members are headquartered in Canada, though not all, and are active in Latin America.
We have shared with you our power point presentation that describes for you, first, the reach of Canada's mining sector abroad, and second, information on the research of Professor Paul Haslam, which you have now received directly from him. Third is the considerable work MAC and our members have undertaken to advance responsible mining practices in Canada and abroad. Indeed, I doubt we would find another national association that has a track record anywhere close to comparable in this regard. Finally, fourth is research that provides an illustration of the opportunity for poverty alleviation and economic and social development that mining offers the developing world. With this as background, let me make the following remarks:
Canada's mining sector is a global leader, one of the few sectors of the Canadian economy that can make this claim. We represent 10% of Canada's outward investment and the largest percentage of that is in Latin America, accounting for 40% of all Canadian investment abroad or $78 billion in 2016. Within Latin America, the countries of greatest importance in terms of Canadian investment are Mexico, Chile, and Argentina, followed by Peru, Brazil, and the Dominican Republic.
Increasingly however, Canadian investment is facing competition from Australian, South African, Swiss, and Chinese multinationals. Indeed, although Canada's mining sector is still a global leader, we can no longer claim to be the global leader as the world's largest mining companies are headquartered in Australia, the U.K., Switzerland, and South Africa.
In fact, Canada has only one of the top 10 largest mining companies in the world and only eight of the top 50. China has 10 in the top 50. While Australia only has five, they include the top two, BHP Billiton and Rio Tinto, which combined are double in size of all the Canadian companies put together.
This investment abroad brings value back to Canadians. Canada is home to the third largest number of mining supply and services companies in the world behind the United States and Australia. I might note we were second until this year when Australia overtook Canada. These engineering, banking, equipment, geological, and legal knowledge-based firms have expanded their own growth by supporting Canada's mining sector abroad. Of course, Toronto remains the global centre for mine finance.
This leadership and expertise extends to leadership in responsible business practices. Indeed, it is a common refrain whenever I travel abroad, which is quite often, that countries welcome Canadian investment because we, more than others, contribute to raising standards. MAC's own program, towards sustainable mining, TSM, is an example of this. A program developed in Canada over a decade ago, it is now being exported around the world, and sought after by mining sectors on five continents as a tool for driving responsible behaviour and improving the adoption of best practices.
TSM is mandatory for MAC members in Canada and involves site level performance evaluation, independent verification of performance and public reporting. It's also overseen by a national advisory multi-stakeholder panel. Several MAC members apply TSM outside Canada as well. Recently, MAC also made mandatory the implementation of the voluntary principles on security and human rights on a global basis, the first and only industry association in the world to make this commitment.
Against this backdrop, which I would argue is the norm, the committee is aware of troubling examples of conflict involving Canadian mining properties in Latin America. In saying it is the norm, I would draw your attention to the presentation last week from Professor Paul Haslam of the University of Ottawa. As you would have learned from him, the data shows that the vast majority of Canadian investments in Latin America have had no reported cases of conflict and further, that Canadian companies are significantly less likely to experience conflict than multinational firms based in other countries. But examples of conflict exist. In some cases, the conflicts are severe. So, like Professor Haslam, I'm not suggesting that this performance by Canadian companies is a reason for complacency. The question is what do we do about these examples?
You heard testimony from Global Affairs that accurately describes the challenging context that exists in many Latin American countries. Weak governance, corruption, extreme inequality, and pre-existing social strife can make investments in some countries difficult. Expectations that companies provide services and support more appropriately provided by governments are high, and a company's ability to deliver such services is not always straightforward.
What we do, therefore, is a very challenging question. There are limits to Canada's extraterritorial reach. In all these cases, we are dealing with complex environments where responsibility is shared and blame can often be hard to assign to any one party. Countries such as Guatemala and Honduras, which have had decades of civil strife, if not outright civil war, weak governance, and high levels of distrust, stand out for much of the controversy in those troubling examples we read about. It is not surprising, therefore, to see MAC members, such as Goldcorp and Hudbay, walk away from investments in those countries.
Is that the answer? Is leaving countries with which we've concluded free trade agreements desirable? If walking away means creating a space for others that do not strive to implement Canadian standards, is that desirable? If walking away means depriving these countries, which struggle with poor economic outcomes and fewer opportunities for economic and social development, is that a desirable outcome? These, I would suggest, are very difficult questions with few easy answers.
What can, and should, Canada do to help reduce conflict and promote respect for human rights in other countries?
First, let's consider what Canada is doing. Canada has been actively promoting and supporting the dissemination of MAC's towards sustainable mining initiative abroad. TSM is being implemented in three other countries—Finland, Botswana, and Argentina—and was recently adopted by a fourth, the Philippines, due in large part to the promotion of TSM by Canada's trade commissioner service, something that began only a few years ago. In the next six months, at least two new countries, and possibly more, are expected to follow suit, including Norway and Spain.
Canada's mining industry, with the help of its government, is contributing to raising standards around the world, something we should be proud of.
Canada has put in place a CSR strategy that is unique in the world. In large part due to our advocacy, Canada's CSR counsellor and national contact point now include consequences for companies that refuse to participate in mediation when complaints are registered with either body. The consequences, as you know, are withdrawal of trade commissioner support and access to EDC funding, the two consequences that were advocated by the final report of the round tables on corporate social responsibility. These consequences have been actioned in two cases, one in mining and another in real estate. The existence of consequences has been hailed by John Ruggie, the author of the “UN Guiding Principles on Business and Human Rights”, as globally leading.
EDC has significantly strengthened its CSR due diligence when making financing decisions, and it is now possible for those companies that choose not to participate in the NCP or CSR counsellor process to lose access to EDC financing.
Last, Canada's trade commissioner service now actively promotes Canada's CSR strategy abroad. In fact, last week the trade commissioner service began a project in partnership with the Centre for Excellence in CSR focused on developing guidance aimed at protecting human rights defenders. The service also recently hosted a discussion on the responsibility of financial institutions to respect human rights.
What else could Canada do? You have received many ideas from the people who have presented to you already. I will conclude by focusing on two that are frequently cited: access to Canadian courts, and the establishment of an ombudsman.
With respect to access to Canadian courts, there are currently three cases before Canadian courts. At issue is the judicial discretion to determine whether Canadian courts are the best place for cases to be heard. Our view is that judges are best placed to make such determinations, and as we have seen, are not afraid to make them. When they do, they are typically cases where there are concerns regarding the impartiality and incorruptibility of the judiciary in the countries of origin. Court processes, though, are lengthy and expensive, another barrier to access that merits discussion.
The establishment of an ombudsman, in our view, should be justified based on whether such an office would offer services not currently provided by the CSR counsellor or the NCP. Such an office should add to the remedies available to help resolve conflicts on the ground. Though such an office might involve the investigation of conflicts, its primary purpose should not be focused on assigning blame or castigating one party or another, particularly since in many cases, conflicts may not be the result of intentional or deliberate action, nor due to a single party. Rather, the focus should be on resolving those conflicts. In this respect we do believe a gap exists that could be filled by an ombudsman focusing on delivering the services of joint fact finding.
Joint fact finding is a well-known implemented process in which a neutral party brings together the complainant and the alleged instigator of the conflict to: (a) reach agreement on the nature of the conflict; (b) find agreement on how to investigate it; (c) get agreement on who should conduct the investigation; and (d) a determination of appropriate remedies. Joint fact finding has been used by the IFC ombudsman for many years with considerable success, and Canada could again prove globally leading by establishing a similar body. Its success is due to the fact that the process of joint fact finding brings both parties together at the outset, thus creating ownership of outcomes and reducing polarization.
If Canada establishes an ombudsman, we believe it should apply to all sectors, not just mining. As Global Affairs can tell you, complaints about mining projects have been declining whilst complaints involving Canada's textile, software, renewable energy, real estate, and weapons sectors have been on the rise. If Canada is truly committed to promoting business and human rights, it should include all industries. Additional resources would be needed for an expanded role in this area.
Last, Canada should establish a multi-stakeholder advisory committee to advise on the promotion of business and human rights and the mechanisms that exist to advance protection of them. John Ruggie, in the same report that hailed Canada for leadership in imposing consequences for non-participation in dispute resolution mechanisms, recognized Switzerland as the only country with such a body. Let's learn from the Swiss and then truly stand alone as the global leader in business and human rights.