International Trade Committee on May 28th, 2008

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

I guess sometimes the challenge is that just because it's been said doesn't mean it is so, and I think that's what our NDP friends want to constantly go back to. Just because a trade unionist has made a statement doesn't mean it is true.

My question is to Mr. Simpson, who is doing business there, as well as Mr. d'Aquino. Along with what Mr. Miller had to say, there are some issues there in terms of trade unionists actually being involved in criminal activity, not necessarily with drugs, but there are certainly illegal activities in terms of some of the things that go on. I'm just wondering if some of the deaths—and you've spent some time there, Mr. Simpson—had to do with the argument the trade unionists possibly want to frame, that it's just a labour issue. They make it sound as if companies are not abiding by the law and are just going out and killing some of these members. What I'm wondering is whether it is possible it has nothing to do with the companies whatsoever. Maybe, just perhaps, they're involved with other illegal activities and that's causing some of the issues here.

You've been down there doing work. I know, Mr. d'Aquino, that you've got companies that are doing stuff. I don't think it's that black and white that you can say it's because they're involved with companies, they're anti-company, and they're killed as a result of that. Is there not a possibility of other reasons?

[Greg Simpson]

Well, first of all, I've not been in Colombia directly. I've only worked from my office in Saskatchewan, so I've not been in Colombia to actually be engaged with this particular issue. So I really can't comment directly on that.

All I want to say is that the companies we deal with are all on the up and up. There have not been any illegal activities. We are very transparent. The people I deal with have a high level of integrity. They have a heart to feed people. They really are looking at the consumer. There may be issues behind some of this in terms of the cost of food and things like that, I don't know, but the whole idea from my perspective is for us to deliver food to people in a country of need, aside from the political issues. I'd hate to see something like the free trade agreement become a political football and have food embroiled in it. One way or another, we need to deliver a commodity from Canada that is in demand from Colombia.

[The Chair, Conservative, Lee Richardson]

Very quickly, Mr. d'Aquino.

[Thomas d'Aquino]

Thank you.

I know we had a colourful exchange with some of the honourable members from this side, and I don't want to leave this room with the sense that we are so ideologically at odds that we can't see the common ground.

Let me put it to you very simply. We're dealing with a country here that has had some very difficult internal problems. The Colombia of 10 or 15 years ago, the Colombia that I first came to know, was a country where you dared not walk outside for fear of being kidnapped, so what we are seeing is improvement. The only argument I'm making is that there is plenty of right and plenty of wrong, left and right. I happen to be a believer that part of the fundamental problem we're trying to deal with in the whole of Latin America is that it's a continent that's been riven by class divisions, where the poor have been exploited. There is a long, unhappy, unpleasant history of dictators working hand-in-hand with monopolists and crony capitalism. I'm aware of all of that. What I'm interested in is seeing progress, the kind of progress we have seen in little countries like Costa Rica that signed a free trade agreement with Canada, a country like Chile, where the presidential palace was being bombed and the president assassinated. Look at Chile today. It's where we can see progress.

We see real progress in Colombia today, but the central driving force of that progress has to be democratization, the opening up of the economy, accountability, rule of law, through which you will have protection of human rights. And the enterprise system, especially those from our own country and those who carry with them, I think, the highest possible values, can be seen as only a powerful force to aid and abet those causes.

Now is not the time to say, “Look, trade unionists in a small minority, tragic as it is, are being assassinated, but you know, general Colombians are being assassinated in much greater numbers than that. We don't want to have anything to do with you. It's too dangerous to be here.” It's not the right thing to do. If we took that attitude, then we'd say why go to China? Why go to some countries that today rank quite highly in the OECD but whose rule of law, values, murder rates, lack of accountability are still problematic? The name of the game is to engage people and to bring the rule of law, to bring openness and transparency to them. That's what I see this great initiative with Colombia is about.

To me, the few additional--I say few, but it's relatively few in relation to the bigger accomplishments--financial benefits that will come to Canadian companies, the thousand that are there now and the more that will come, against what Colombia can be five years or ten years from now, if Colombia can aspire to be a new Chile, I think is remarkable. If we can make a contribution to that, terrific. And a free trade agreement between Canada and Colombia will signal that Canada is not a fair-weather friend. We want to help. That is why this government has committed itself, not only to a free trade agreement but to promoting capacity building, building governance, social responsibility.

All I can tell you is that for any Canadian company of any size that is operating in Colombia, the people who are running those organizations would say the same thing I am saying to you. They don't want to be in a country that is riven by murder, by rape, by kidnapping. They want to be in a country that works. The best way to do that is to bring the rule of law to the country, and a free trade agreement will help to do that.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Allison.

I'm sorry, we're again short of time. We had to rush that a bit.

To all of our witnesses today, I appreciate your presentations and your visit here today. With that, we'll take a minute to change the name tags and bring in the next group.

Thank you.

[The Chair, Conservative, Lee Richardson]

We shall reconvene.

After some brief discussion with the parties concerned, I am going to suggest, because we have a vote at 5:30 and we have been rather late today, that in fairness to our witnesses...both have agreed that they will return. We're going to ask them to give their presentations today. We may have time for one or two very quick questions, but they've been gracious enough to offer to come back.

So I think this is what we'll do: we'll hear their testimony today, and maybe have a couple of quick questions, but we will have to adjourn at 5:30 for a vote.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

We can go to 5:40. The bells will ring at 5:40.

[The Chair, Conservative, Lee Richardson]

Well, there you go. Everyone is being most accommodating today. But we won't get anywhere if we don't get started. We'll see how the clock goes.

The general principle, Mr. Dhaliwal, is that we're going to ask Ms. Simons and Mr. Hodgson to come back and conclude a round of questioning on another day, perhaps 10 days hence.

Without further ado, on a most cooperative afternoon, we're going to hear from Glen Hodgson, senior vice-president and chief economist of the Conference Board of Canada. Then we're going to hear from Penelope Simons, an associate professor in the common law section in the Faculty of Law at the University of Ottawa.

I think I'll call upon you to begin, Ms. Simons, with a brief statement. Again, we'll hopefully be able to carry this on at a future meeting.

[Professor Penelope Simons, Associate Professor, Faculty of Law, Common Law Section, University of Ottawa]

Mr. Chairman, honourable members, ladies and gentlemen, thank you very much. I appreciate the opportunity to come before you to talk about some of these important issues about the free trade agreement that's currently being negotiated with Colombia.

I want to make a few points, and I'll just quickly summarize them at the beginning.

First of all, the extractive industry corporations that are investing in Colombia are operating in a conflict zone, and they're more likely to become complicit in violations of human rights that might be committed by the security forces that are protecting their business interests. They operate there with very little legal liability. Canada has no law to address this governance gap, and voluntary codes of conduct and voluntary self-regulation regimes are not effective in ensuring that corporations are not complicit in these violations.

I'm going to say also that a free trade agreement with Colombia will not improve the human rights situation. What it will do is increase protections for corporate actors, and it may also restrict Colombia's capacity to regulate in order to protect human rights. It will impose no legal obligations on corporate actors to ensure they respect human rights.

We've heard some discussion today about the situation in Colombia. As I said, those companies that are operating in the extractive industry have the possibility of becoming complicit in egregious violations of human rights that might be committed either by public security forces that are also supported by the paramilitary, or by private security forces, or even by guerrilla forces that may be extracting money to protect those business interests. Corporations that operate in rural Colombia cannot operate as neutral entities in this ongoing civil conflict.

I said that corporations operate in a regulatory void. No general international law or international human rights law clearly imposes direct obligations on corporations to respect human rights. There's little chance that the host government, such as Colombia, whose forces are among the perpetrators of grave violations of human rights in protecting certain extractive industries, will regulate the human rights impacts of corporate activity. There's no clear international legal obligation on home states like Canada to ensure that their business entities take steps to ensure their companies respect human rights standards and international humanitarian law and are not complicit in violations of human rights when they're operating abroad.

Canada has no effective legal mechanisms in place to ensure that Canadian companies that operate in conflict zones like Colombia don't become complicit in human rights violations. This is despite the fact that they actually have extensive authority and capacity under international law to regulate corporate nationals extraterritorially. There's no Canadian law that requires corporations to adopt a human rights code of conduct, perform human rights impact assessments, mitigate any assessed human rights impacts before investing in a conflict zone, or arrange for independent monitoring, all in order to ensure that Canadian investment abroad does not contribute to or profit from violations of human rights. All of this is left to the discretion of the company.

The government has preferred to rely on corporate discretion to adopt voluntary self-regulation regimes. These voluntary codes or privatized self-regulation instruments raise serious concerns about their effectiveness in ensuring that corporate actors respect human rights or are not complicit in violations of human rights when they're operating in conflict zones. Few of these instruments that include the OECD guidelines for multinational enterprises, the global compact, and the voluntary principles deal sufficiently with human rights issues associated with corporate activity in conflict zones. They don't provide effective compliance mechanisms or either reporting or verification standards, and essentially it's not in the public interest for corporate entities to frame their own obligations or verify their own conduct in relation to human rights. So violations of human rights are likely to continue or complicity might continue while corporations are being regulated only by voluntary codes of conduct.

An FTA, a free trade agreement, will not improve the human rights situation in Colombia or address this governance gap. There's no necessary link between trade liberalization and investment protections created by free trade agreements, on the one hand, and democratic development, the protection of human rights, and the rule of law on the other. Unless they're explicitly designed to do so, trade and investment agreements will not automatically protect human rights, and can, in fact, undermine the protection of human rights. These agreements create strong protections for corporations, but impose no correlative obligations to respect human rights. In addition, some of these provisions can operate to restrict the capacity of the host state, like Colombia, to regulate in the public interest, including in ways that would promote and protect human rights.

So how will they constrain Colombia's capacity to regulate in the public interest? Well, just very briefly, where domestic laws or regulations or policies of the host state violate substantive provisions like national treatment, most favoured nation obligations, and pre-establishment rights, and then have a negative effect on protected investment, the foreign companies concerned can take the host state, such as Colombia, to binding international arbitration. The Colombian government may be required to pay high sums in compensation—in the hundreds of millions of dollars in some cases. This is even the case where such laws or regulations are introduced to protect or promote or fulfill human rights.

These agreements also have restrictive termination provisions, so Colombia could not simply withdraw from the agreement if it found that the agreement were restricting its capacity to respect, protect, and fulfill human rights. This Colombia-Canada agreement would likely remain in force for 15 years after it were terminated.

A free trade agreement will, therefore, create more rights for corporations and no obligations; and there will be no obligations on the home states of corporations in relation to investor conduct.

So Canada's model investment provisions create strong rights for investors that can be enforced under international law through binding arbitration, with no requirement to exhaust local remedies. In contrast, there are no obligations for investors or their home states. So there are no provisions that require corporations to respect internationally recognized human rights, that is, to do no harm.

There are no obligations on investor corporations to conduct and make pre-establishment impact assessments of their proposed investments or to mitigate any assessed negative impact.

If a labour side agreement or chapter is negotiated, it will only cover labour issues. It will not include legal obligations for corporations to comply with labour laws. Any labour chapter or side agreement that's negotiated, even if it has a stronger dispute settlement resolution mechanism and complaint mechanism than the North American Agreement on Labour Cooperation, will not address the key human rights violations that have been attributed to the Colombian military, which protects extractive industries, or attributed to paramilitaries.

There are no obligations on corporations to screen security forces or to conduct human rights training of those forces, or to disclose payments to the host state government or to guerrilla forces. Corporations that do these things will still have access to the dispute resolution settlement provisions of any free trade agreement.

There are no provisions that require the home state, such as Canada, to create a right of action or to ensure access to the courts for victims of human rights violations committed by corporate nationals of the home state, or if those nationals are complicit in such violations.

There are no provisions that require the home state, such as Canada, to prosecute any corporate nationals who may commit or become complicit in egregious violations of human rights constituting international crimes, such as war crimes, crimes against humanity, and genocide.

In closing, I'd like to argue that at the very least, a free trade agreement with Colombia—which has such terrible human rights problems, and is a country in conflict—should include minimum obligations that actually require transnational corporations operating there to be responsible for ensuring that their activities do not contribute directly or indirectly to human rights abuses, and that they do not benefit from those abuses; that they shall not commit or be complicit in violations of human rights or humanitarian law; that any security arrangements of these corporations observe international human rights norms, as well as the laws and professional standards of Colombia; and that any companies intending to operate there undertake independent risk assessment that includes human rights and humanitarian consequences of the proposed activities and assume the responsibility of getting the consent and cooperation of the Colombian government to facilitate this independent risk assessment and any ongoing monitoring of the subsequent investment.

In addition, at the very least there should be obligations on corporate investors to respect internationally recognized labour rights.

Thank you.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I just learned that the bells will be going off at 5:40, which means that Mr. Dhaliwal's proposal is a valid one. The bells are at 5:40 now, for 5:55.

[The Chair, Conservative, Lee Richardson]

Thanks for that. We'll carry on until the bells ring.

Mr. Hodgson.

[Glen Hodgson, Vice-President and Chief Economist, Conference Board of Canada]

Thank you, Mr. Chairman.

Maybe I'll start by reminding members of the committee who the Conference Board is. We're an independent not-for-profit business research organization that tries to facilitate dialogue between governments, private sector, labour in Canada, and the not-for-profit sector. We're not here to advocate for any particular cause but to talk about research and our perspective on how the world could be better organized.

I want to make four brief points of principle to start, and then address Colombia.

First, we believe that reductions in trade barriers everywhere and anywhere are a good thing. International trade is a creator of wealth because it creates competition at home, markets abroad, and increasingly it is allowing our businesses to become more efficient through traded inputs. The ideal way to have more open trade is multilateral, but with Doha stalled, we have to look to regional and bilateral agreements. Canada, to a great degree, has been left behind in this movement towards bilateral free trade. We should not be left idle on this particular front.

Second, we're now in an era that I call “integrative trade”, where more and more we're seeing a linkage between all parts of trade, foreign investment, and exports and imports as a means to make firms more efficient. Clearly Canadian firms have the desire to become as competitive as possible in a very competitive global marketplace. Therefore, to be effective, we think trade agreements should be as comprehensive as possible. They should take into account trade, investment, goods and services, and the fact that imports matter for Canadian companies as much as exports, and are now a key part of our national economy.

Third, Canadians clearly place a high value on respect for human rights. However, we must be very careful about choosing the right instrument for the job when it comes to influencing human rights, and be careful about adding excessive political conditions onto trade negotiations. This approach can quickly become one of a slippery slope, and really forms a creeping protectionism. I only have to point to the comments in the U.S. political campaign of political intervention in free trade to show how we're really at a point where the global economy is very subject to protectionist forces right now. Whenever economic growth slows down, protectionism rises up; you can see this on a global basis right now. So be very careful if you start to add extra conditions onto trade agreements.

Fourth, I think that if political factors like human rights are important in a given country's case, as much as possible we should make evidence of improved respect for human rights part of a bigger dialogue, not simply a condition within a trade agreement.

As for Colombia, I have to confess a certain degree of agnosticism, or very mixed feelings. For me, Colombia is clearly not a black and white case. Frankly it's not even that important a case. Colombia is not a top-tier market for Canada. I did some simple calculations: only 0.15% of our Canadian exports actually go to Colombia. Our annual trade with Colombia is about the same level as with South Dakota, and it is actually smaller than with Delaware or Rhode Island. Compared to some other markets that are much closer, Colombia is not really a major player. Of course as Mr. d'Aquino mentioned, 80% of Colombia's imports to Canada are actually duty-free already, so the gains from free trade are probably not as great as they would be in other cases.

While clearly there are sectors--you heard from one of those sectors just now--where expanded market access would be a good thing and would increase the prospect of greater Canadian sales, in general I think there's very little evidence that Canadian companies are going to boost their international competitiveness through increased trade with Colombia. There will not be huge degrees of improvement in an integration between Canada and the Colombian economy. We should be careful not to use Colombia to set precedent for other agreements, because it's a small case.

Indeed, I would think that absent multilateral deals, whether it's Doha or something like free trade of the Americas, we would probably see greater gains in terms of wealth creation in Canada from a sub-regional deal that included other countries in the region rather than through a series of bilateral negotiations. We're already talking about bilaterals with Peru. Adding Colombia to the list doesn't necessarily make it better; it actually makes it more complicated for the limited pool of talent we have to do free trade negotiations in Canada.

On balance we would certainly be in favour of free trade with Colombia, but it's really a question of setting national priorities. Is Colombia really the next country on our list, or should we be thinking, for example, about free trade with the EU on the heels of our free trade agreement with the EFTA countries? There, of course, it's important that I say that Premier Charest has shown very important leadership nationally by putting freer trade with Europe at the top of the agenda.

Perhaps I'll close by suggesting that if you want to debate the issue of human rights and trade, I think China would be a far more interesting case than Colombia, because China is clearly now at the centre of globalization. It is the driving force of the global economy. So there are benefits with respect to China that simply do not exist from freer trade with Colombia. That is, of course, why China has signed a whole series of bilateral free trade agreements, including agreements with countries like Australia and New Zealand, which also respect human rights and are also advanced democracies.

So really, the issue comes down to this: if you start pursuing free trade with a country that has a history of human rights abuses, is that tacit approval or support or endorsement of those policies, or is free trade really a means of getting into a deeper engagement with that country? We have argued in our research that, in fact, pursuing free trade with countries that are not as democratic as open societies like Canada is probably a necessary condition for expanding the dialogue. But that's really the issue for this committee to debate.

Thank you, Mr. Chairman.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Hodgson.

I think we can get in five-minute rounds here. Again, we'll just have to do it the way we did it the first time. Each party gets five minutes. You can divide it up as you like.

We're going to begin with you, Mr. Dhaliwal. You're on.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Thank you, Mr. Chair.

To Mr. Hodgson, you said that 80% of the imports are duty-free. But we're looking at it the other way around. We're looking at it from a Canadian perspective. When we are talking about lentils and barley and all that stuff, we are exporting to Colombia. We are paying a 15% tariff, and we are the ones who are going to gain that 15%. So could you comment on that?

[Glen Hodgson]

I'd agree; that's why the elimination of tariffs everywhere is a good thing. It actually creates a much more level playing field internationally for us in pursuing markets abroad.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

So basically, you agree that this free trade agreement will help that market. So we should go into a free trade agreement to achieve that situation.

[Glen Hodgson]

Well, certainly for people who are pulse exporters, the elimination of the tariff or a reduction of the tariff would be a good thing. It would actually create a more level playing field against other sources of supply in the Colombian market.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Next, to Professor Simons, you said that the human rights situation will get worse in Colombia. It's not improving at all. When we were talking to the vice-president of the country, in fact he admitted that there is a long way to go, but he said that they have come a long way when it comes to human rights.

Let me put it this way: if we had to go ahead and enter into this free trade agreement with Colombia, what are some of the ramifications? What are some of the steps we can consider to make sure that we address the human rights and labour rights situations that you are concerned about?

[Prof. Penelope Simons]

Thank you for your question.

I don't think I said that the human rights situation will get worse. My point really was that there is no causal link between a free trade agreement and improving human rights. The trickle-down argument actually has not been proven to be true.

If we were to go ahead with a free trade agreement with Colombia, I think there would have to be, as I said, some obligations imposed on corporate investors to ensure that they are not complicit in human rights abuses and that they comply with internationally recognized labour obligations. Particularly because it's a conflict zone, there should be a number of minimum obligations, such as screening security forces and having pre-establishment impact assessments. There should be an obligation to not become complicit in or profit from violations of human rights because your security forces are committing human rights violations to protect your business interests. Those are the types of things.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Are you aware of whether companies that are already doing business are following the recommendations you are making?

[Prof. Penelope Simons]

Right now, a lot of corporations have voluntary codes of conduct. The point I was making was that in the studies we've done in relation to voluntary codes of conduct, those regimes--the codes and the social reporting that's done--are voluntary codes with vague provisions that are voluntarily adopted. They're voluntarily self-assessed and they're then voluntarily verified. So it's really the fox guarding the henhouse. And they have not proved effective in ensuring that corporations are not complicit in human rights violations when they're operating in areas of conflict.

[The Chair, Conservative, Lee Richardson]

Ms. Murray.

[Joyce Murray, Liberal, Vancouver Quadra, BC]

Thank you.

You were really addressing your comments, Ms. Simons, to the extractive industries, where the Canadian companies are there, and there's no legal way to ensure they're not exacerbating human rights abuses or profiting from them. Would you extend that concern and comment to Canadian companies that are importing or exporting but are not present in an extractive role?

[Prof. Penelope Simons]

No, not those ones, companies that aren't actually present there. The thing about this free trade agreement is that it's mostly about protecting investment. We heard that the trade is actually a minimal part of it. There's $3 billion or so worth of investment in Colombia right now, and a lot of that is extractive.

[Joyce Murray, Liberal, Vancouver Quadra, BC]

A previous intervenor argued strongly for human rights and environmental factors to be in side agreements, with teeth that were enforceable. If there were provisions legally binding Canadian companies to demonstrate and monitor that they were not profiting from or contributing to human rights abuses, would you see that being in a side agreement, or would it need to be in the basic agreement?