International Trade Committee on March 24th, 2009

[The Chair, Conservative, Lee Richardson]

Monsieur Cardin.

[Serge Cardin, Bloc, Sherbrooke, QC]

Good morning, gentlemen, and welcome to our committee.

Someone said earlier, regarding your main concern, that a simple notice of intent created some commotion when complaints are filed. That can in fact be the case. Although I don't like this possibility, this can be an opportunity to review and analyze chapter 11. In that way I am quite happy. Of course, there are environmental and scientific aspects to this, but I am convinced that an in-depth study of chapter 11 is essential because the trend is for new free trade agreements to include increasingly fewer such provisions. Of course, investment agreements are sometimes separate, but the same provisions are not included. There was the question of the expropriation principle, which is quite broad, but we're not necessarily defining public interest, or at least not specifically. So there could be a huge problem between the two.

With regard to pesticide 2,4-D, the ban applies in Ontario and Quebec, but other provinces are still using this product. However, for the United States, the fact that it is allowed in some areas and banned in others confirms that they are entitled to file suits or complaints. Under NAFTA, a free trade agreement between two countries, it's easy for them to step in and file suit if standards vary from one province to another.

[Hugo Séguin]

The commotion that was created by Dow's filing of the notice of intent has had two effects. You're absolutely correct in saying that this bri ngs attention to extremely significant issues concerning chapter 11 and how it is interpreted. Indeed, a number of elements therein are not clearly specified, for example, the whole notion of public interest. It is my sense that a number of committee members would like to further study this issue. On behalf of the organization I represent, I can say that we would be completely in favour of reviewing the content and meaning of chapter 11.

I would like to say that the uproar has also had a positive consequence. This is basically a governance issue. Canadian governments are often trying to find ways to protect public health. The action taken by Dow has brought the ban on pesticides to the fore, has led provinces like Ontario to question their approaches and develop regulations banning certain pesticides. The issue has been brought back to public attention and is getting people mobilized. I would not be surprised if the uproar leads municipalities, provinces and the federal government to review their own regulations governing the use of pesticides and to make them more targeted in order to protect public health.

[Serge Cardin, Bloc, Sherbrooke, QC]

We met with representatives of the European Union a few weeks ago. They spoke to us convincingly about their standards. They screen their imports. When a product does not meet their standards, that's that, they do not import it. However, as I said earlier, our standards are not applied evenly. Things vary from one province to another, and that opens the door to lawsuits. You said that the uproar could bring the issue back to the fore, that people could come together and become mobilized, and uphold certain standards. Indeed, I do not believe that a foreign country could oppose the standards that are widely shared by the citizens of another country.

[Hugo Séguin]

We are trying to show that the regulation is non-discriminatory, completely acceptable and supported by the public. That is what we are trying to achieve. This leads me to talk about an issue that is somewhat related to the matter at hand.

In Canada, there are at least three levels of jurisdiction that can be brought to bear on pesticides. The federal government, through the PMRA, has a procedure banning pesticides. The agency assesses a number of pesticides and certifies their use in Canada. In a way, the PMRA establishes a minimum standard across Canada. Provinces can adopt more stringent measures: they can exclude a greater number of products than the PMRA. Municipalities can be even more stringent with regard to the use of pesticides within their jurisdiction.

Based on what we have seen in Quebec and Ontario, through their adoption of the precautionary principle, we tend to believe that some provinces place much greater importance on that principle than does the federal government, when assessing the same uses and chemical elements. This goes to show that regulations in Canada play a major role in this issue.

[Serge Cardin, Bloc, Sherbrooke, QC]

Since Quebec has now been recognized as a nation, if it were to decide tomorrow morning that all products had to be organic and that was the standard throughout Quebec, Quebec would be the target of all producers of chemical products and pesticides, etc. There would constantly be litigation.

In reading article 1114 concerning environmental measures, the conclusion states: “Accordingly, a party should not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such measures as an encouragement for the establishment, acquisition, expansion or retention in its territory of an investment of an investor.” In other words, and I again quote: “The parties recognize that it is inappropriate to encourage investment by relaxing domestic health, safety or environmental measures.”

Now, there needs nonetheless to be consensus throughout Canada, since you are saying that the provinces and municipalities have the right to legislate such matters. If Quebec did so, for example, with regard to chapter 11, it would never end, there would constantly be litigation. First, we need to get rid of chapter 11, or better define it. Then, we need to be able to adopt higher standards for all of Canada.

[Hugo Séguin]

I would add a very short comment on this matter.

Pesticides are far from being the only subject in which constituent entities or municipalities are more proactive than the federal government. Often, the provinces or municipalities are used as a test for very progressive initiatives that are then adopted in other regions throughout Canada. We think this is a good thing.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Monsieur Cardin.

Thank you for your brief answers as well.

I'll go now to Mr. Julian.

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

Thank you, Mr. Chair.

Thanks to our witnesses. You make a very strong case for how chapter 11 undermines our democracy and our ability to establish stronger standards for quality of life.

I'd like to start with you, Mr. Shrybman. You've been very eloquent about how Canadian governments and crown corporations have essentially lost about 80% of the cases brought forward under chapter 11. American government and public corporations have won every one, so there's very clearly an imbalance. Could you give us briefly a summary of what has happened with the language around chapter 11 subsequent to NAFTA being adopted? In other words, what path did the United States take around investor-state provisions and what path did Canada take around investor-state provisions in bilateral agreements? You made reference to TILMA and internal agreements.

[Steven Shrybman]

Congress has taken an interest in this mechanism and instructed U.S. trade officials to moderate the language.

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

So the language has changed in the U.S.? They're not using this in subsequent agreements?

[Steven Shrybman]

No. They're using other language in subsequent agreements.

It's also important to appreciate that the WTO regime, which is a free trade regime, doesn't include this mechanism because it was rejected on three different occasions by the members of the international trading community. That includes the United States. So it's true, the yardsticks have moved in the United States, and arguably internationally. But that's not true of Canada's position.

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

Just to clarify, then, for agreements like the U.S. and Chile, or the U.S. and Singapore, Australia, Morocco, whatever, in the United States they ensure that it can't attack legitimate public welfare, public health, or public safety objectives that are set by government policy.

[Steven Shrybman]

I believe there is at least one bilateral agreement that doesn't include an investor-state mechanism. I think they're moving away from it as a reasonable way to moderate the interests of investors in states under these treaties.

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

In the United States they've rejected the type of chapter 11 structure that was--

[Steven Shrybman]

They've moderated it in some cases and rejected it in at least one.

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

What's happening in Canada?

[Steven Shrybman]

We seem to be moving to implement it domestically. Certainly we're staying the course in our commitment to the NAFTA mechanism. One of the reasons I think Canada is losing and the U.S. is winning is that Canadian officials haven't been doing a wonderful job of defending Canadian measures, to judge by the way we've responded to some of the claims.

We caved on Ethyl before we had a determination from the tribunal. If you look at the S.D. Myers case, you have federal trade officials conceding that the measure wasn't a valid environmental measure. I think that was wrong: it was clearly a valid environmental measure. So you have to scratch your head about the way in which Canada's interests have been represented before these tribunals. The case we did win, the UPS case, I was involved in. There were intervenors for the first time, but Canada Post put up a very spirited defence. If Quebec is interested in seeing its measures defended, it needs to get itself in the middle of the dispute process to ensure an appropriate outcome.

But we're moving not only to keep in place our commitment to this regime, but also to implement it domestically as a feature of the Agreement on Internal Trade. It's actually now being implemented as part of this agreement between B.C. and Alberta.

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

So to summarize, this is bad policy. The United States moved immediately away from it, but in Canada our international trade ministry has continued to implant these bad investor-state provisions in bilateral agreements and is even using them domestically. That's important information to have.

Thank you, Mr. Shrybman.

Mr. Séguin, I'd like to come back to the issue regarding 2,4-D. In Dow's presentation to the committee, its representatives almost said that 2,4-D is so good that we could even put it in shampoo. They say that there is no problem with 2,4-D.

First, could you again list the number of countries where 2,4-D has been banned or restricted. Second, when you say that we need to review chapter 11, could you tell us exactly what you want the federal government to do with regard to chapter 11? You referred to international law, Mr. Amos as well, but international law is not what we are following in this instance, it's the fact that the country has signed an agreement with regard to chapter 11. What should we do? Withdraw chapter 11? Try to change it?

[Hugo Séguin]

Thank you for your question, sir. As I said in my opening remarks, Quebec is not the only jurisdiction in the world to ban 2,4-D, but other than banning 2,4-D, dozens of chemical ingredients have been banned elsewhere, namely in Denmark, Sweden, Norway and Ontario. Furthermore, various Canadian provinces intend to do the same shortly.

Jurisdictions are not banning 2,4-D because they don't like the name. There is a procedure that is followed to determine whether a product has potential consequences on human health. The Quebec government used, among other things, recommendations or the ranking by the International Agency for Research on Cancer, a United Nations agency, under the World Health Organization, and which ranks the family of pesticides to which 2,4-D—dichlorophenoxy—belongs as being potentially dangerous for human health.

It is this notion of something that is “potentially dangerous” that generates reflection around the precautionary principle. If a product is potentially dangerous and we cannot prove beyond all reasonable doubt its harmful nature, the precautionary principle demands that caution be taken and the substance be banned. It is on this basis that 2,4-D was banned in Quebec, twice, not just once.

Concerning your question regarding chapter 11 of NAFTA, in my opinion, it would be correct to say that our organization has, in this case, significant concerns, which are confirmed by Dow's action before the NAFTA dispute resolution mechanism. We believe that the fundamental principle is that it is the right and responsibility of governments to protect the environment and public health must prevail over the rights of companies to make a profit or protect their commercial interests.

With regard to what exactly we would like the Canadian government to consider here, I believe that it is not for us to say. It is fair to say that we have significant concerns, but that we prefer to leave it up to the committee members to study this issue and to respond in the way that seems the most interesting and intelligent to the concerns of civil society, which includes the organization that I represent.

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

Do I have time for another question?

[The Chair, Conservative, Lee Richardson]

I'm sorry, but it's already been eight minutes. We've been trying to keep to the record, so I have to go to Mr. Harris now.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Thank you, Mr. Chair.

Thanks for coming this morning, gentlemen.

In your opening presentations, as Mr. Brison pointed out, none of you mentioned that this was in fact a reciprocal process, where private companies in Canada or citizens could launch disputes against the United States under chapter 11. I think that's important. You know, what's good for the goose is good for the gander, as the old saying goes. It works both ways.

You also pointed out that it isn't fair, because the United States is winning more cases than Canada. I'm not a lawyer, but this is what I'm getting from your tone: if you win it's good, if you lose it's bad, and because we've lost so many cases, it's bad.

It sounded from your comments, Mr. Shrybman, that you thought it was wrong for citizens or private companies in Canada to be able to challenge government policy, even international government policy as the provision in chapter 11 provides for. It appeared that you were saying this shouldn't be allowed, in some respects.

I'm assuming that what you're presenting today is very similar to the legal presentation that will be presented when this comes to arbitration under the provisions of chapter 11. What we have on our hands here is a legal question. It will have two sides to it, as always. There will be the defence and the plaintiffs. There's always a winner and there's always a loser. It depends on who has the best lawyers or the most money, it appears.

As to the qualities of 2,4-D and the case, I will leave it to the health scientists. They're the most equipped to answer whether it's good or bad. I think--most people might--that most things with chemical-sounding names may be bad. On the other hand, they may be good.

That brings me to my question. Not being a lawyer, I have to ask it just as a private citizen. It's perhaps for Mr. Amos, or Mr. Shrybman.

If the Province of Quebec is in fact successful with the defence of its actions banning 2,4-D, using the arbitration provisions within chapter 11, and there is no compensation and 2,4-D is banned, is it reasonable for an average citizen like me--not a lawyer, not a scientist--to assume that chapter 11 provisions in fact are good because Quebec won its case? Is that a reasonable assumption?

[Steven Shrybman]

Let me try to respond to that.

The question of pesticide regulation in Quebec has actually been resolved by the Supreme Court of Canada in the Hudson case, which did apply the precautionary principle, a principle that an investor-state tribunal could not apply.

So if your question to me is whether or not a complaint like this should come forward or be allowed, then I would say no. If a foreign company has a complaint with something that a Canadian government has done, there are two places it should be able to take that complaint--to the political process, to you, to this committee, to the legislature, to the people who represent the companies and their constituencies; or to the Canadian courts. Those are the only two places that a complaint about public policy and law should be allowed, not to a tribunal sitting in another country to pass judgment on Canadian laws.