International Trade Committee on May 26th, 2009

[The Chair, Conservative, Lee Richardson]

I'm sorry for the late start.

We have a lot of conversations going on this morning, but I do want to get to our witnesses today and continue our study of Bill C-24, An Act to implement the Free Trade Agreement between Canada and the Republic of Peru.

With us today from the Canadian Environmental Law Association we have Theresa McClenaghan; from the United Steelworkers, Mark Rowlinson; and as an individual, Maxwell Cameron, who is a professor at the University of British Columbia's Department of Political Science and has some familiarity, I understand, with Peru.

With that, if everyone's ready to go, I think we can go for an hour from the time we start here and then we're going to have to go to clause-by-clause. When we get that done, we have some pretty important business today, including consideration of additional witnesses, Thursday's agenda, and also the upcoming visit. That will have to be done following our witness presentations today.

With that, I would like to begin. I will ask Theresa McClenaghan, from the Canadian Environmental Law Association, to begin. We will go with five- to ten-minute opening statements from each of our witnesses and then go to questions.

Ms. McClenaghan.

[Theresa McClenaghan, Executive Director and Counsel, Canadian Environmental Law Association]

Good morning.

Mr. Chairman and honourable members, thank you for inviting me to appear before you this morning to speak to Bill C-24 regarding the recently signed free trade agreement between Canada and Peru.

Good day, ladies and gentlemen. I apologize for the fact that my presentation will be in English only.

My organization, the Canadian Environmental Law Association, is a federally incorporated not-for-profit NGO and an Ontario specialty legal aid clinic. We provide direct legal services to clients, including environmental precedent-setting and test cases to those who would be unable to afford a lawyer. Our mandate does include law reform, public legal education, and community outreach.

For this morning's commentary, I have drawn on the extensive background that CELA has in trade and the environment, including the work of the late Michelle Swenarchuk, formerly our director of the trade and environment program. There are three points that I want to make before you today. I would note that these comments are not necessarily unique to this particular bilateral agreement.

The first point is that the provision of the direct investor access to investor-state claims under the investment chapter is itself problematic in that it invites repeated challenges, in my opinion, of environmental health and safety regulatory action by Canada and the provinces. I'll speak to that.

The second point I want to make today is that if direct investor access is to continue to be provided, then the bilateral free trade agreements must be explicitly clarified to apply to situations of true expropriation and made explicitly inapplicable to regulatory action by Canada and the provinces in the matters of environment, health, safety, and worker protection--at least.

The third point I'd like to speak to is that the proliferation of the bilateral free trade agreements, both in Canada and by other nations, is establishing a patchwork of rules pertaining to the protection or lack thereof of the sovereign rights of Canada, the provinces, and other nations to establish environmental health, safety, and labour rights legislation and regulation as the governments see fit. The very existence of that patchwork makes the assessment of the risk of trade challenges problematic and becomes in itself a greater chill on regulatory action.

First, with respect to direct investor access to investor-state claims under the investment chapter, I would submit that it's not necessary to provide direct access to states by investors in the bilateral free trade agreements, even if one wishes to provide protection against expropriation. The trade agreements normally provide that investors are entitled to the same treatment as nationals. Accordingly, the domestic law--both common law and statutory--regarding expropriation would be available for recourse. That is what happened in the U.S.-Australia Free Trade Agreement, the second bilateral free trade agreement that the U.S. negotiated with “a developed country”, as they put it in their environmental review in 2004.

The U.S.-Australia Free Trade Agreement gives no direct investor-state remedy, even though it does contain provisions regarding expropriation. In the final environmental review, the reviewing committee said:

In recognition of the unique circumstances of this Agreement--including...the long-standing economic ties between the U.S. and Australia, their shared legal traditions, and the confidence of their investors in operating in each others' markets--the two countries agreed not to implement procedures in this FTA that would allow investors to arbitrate disputes with governments. Government-to-government dispute settlement procedures remain available....

That agreement included provisions--which are normal--regarding expropriation, including that it be for a public purpose, that it be not discriminatory, and that prompt, reasonable compensation be provided and in accordance with due process of law. I would comment on that. I'm speculating, but by 2004, NAFTA had been the subject of some investor-state challenges and claims for compensation for regulatory action; I would speculate that the negotiators wanted to avoid those types of claims.

So rather than providing that kind of direct investor-state remedy, the U.S.-Australia Free Trade Agreement provided a proviso for consultations, such that if they decided down the road that they wanted to provide a remedy to a particular investor, they would have consultations about how to do that. But what they settled on in the agreement was the normal expropriation rules of each country. In a case of complaint with those, they could make it the subject of the agreement's dispute resolution procedures.

Before I leave this point, I would submit that the absence of a direct investor-state procedural remedy under the U.S.-Australia agreement is itself a protection for the state parties in terms of their ability to regulate with respect to the environmental health, safety, and worker protection matters, among other things. If an investor had a true expropriation claim, then it could proceed under the normal domestic law. On the other hand, in order to garner attention for an alleged indirect expropriation based on regulatory action by the state, the investor would first have to persuade its own government that it had a legitimate complaint and that the regulatory action in question was one of those rare circumstances of indirect expropriation.

Since the U.S.-Australia parties were clearly anxious to protect their own right to carry on with high standards of environmental regulation—I point to chapter 19 of the Australia agreement—I would suggest that they would be very reluctant to pursue a complaint, and I would suggest the likelihood of that would be quite small. Democratic governments have to consider a range of competing factors, including many matters of public interest such as environmental protection, human health, safety, worker rights, as well as the social and economic impacts of their regulatory actions, and that's their prerogative.

It would be my recommendation under the first point that the right of direct access by investors to a claim against the parties be removed and that instead an approach be taken akin to the U.S.-Australia Free Trade Agreement—in other words, provide access to the Canadian domestic procedures courts of law for cases of true expropriation and do not provide for claims of indirect expropriation. At least these would be regulatory action by Canada or the provinces for environmental health, safety, and worker protection matters.

The second point is that if there is to be direct investor-state access, contrary to the submission I've just made, it be explicitly applicable to true expropriation only. Granted, I understand that the free trade agreement has been negotiated and your decision is whether to approve the legislation putting it into effect. I would submit that the points I've been making about the regulatory impact of the direct investor access are important enough to pause at this point, especially before we continue with this agreement or any future agreements, and go back and review what has been happening vis-à-vis these indirect expropriation claims. Furthermore, certainly for any future agreements, the Australia approach is the one that should be followed.

In terms of the type of language that would restrict matters to true expropriation only, I first want to clarify that my organization has never argued against expropriation in domestic or international law in terms of appropriate compensation provisions. There are important protections of long standing, for example, including highways, transmission lines and so on, but on the other hand, we've long argued against arguments that public interest regulation amounts to expropriation or that compensation is due when activities are curtailed because of public interest regulation. Examples like that include land use decisions, facility approvals, and pollution emission controls. These are all valid regulatory actions in the public interest, even though they may impose costs on owners or preclude certain activities.

In terms of limiting claims to direct expropriation, we would suggest that language in the agreement should specifically limit the direct investor access to those claims of true expropriation. I would suggest that approach be taken instead of the case-by-case approach provided in the Canada-Peru Free Trade Agreement. Even though there is an attempt in that agreement to clarify that these cases do not generally amount to indirect expropriation, the very fact that the claim may be brought means there is uncertainty as to the arbitral panel's rulings and a regulatory chill may still prevail.

You've already heard testimony another day about the recent claim being brought by Dow Chemical against Canada for actions in Quebec under the pesticide code. At the time that claim was filed, as you may know, the Province of Ontario had enacted amendments to its pesticide act dealing with cosmetic use and sale of lawn and garden pesticides and was in the process of consulting with respect to the regulations under that statute. The Ontario Minister of the Environment at the time felt compelled to make public statements in the media late last year that the fact of the Dow challenge against Quebec would not cause Ontario to reconsider its approach. So in my opinion, the very fact that these claims can be brought is a problem in its potential to interfere with valid regulatory action. The potential for those claims gives greater weight or consideration to the commercial interests represented, even though the contemplated regulatory action by the government is not an expropriation in customary or domestic law. The problem extends not just to the federal government but also to the provincial and territorial governments as well.

To finish on that point, does the Canada-Peru Free Trade Agreement provide that explicit limitation? No, I don't think it does. The language could be perceived to be an improvement over NAFTA. However, the agreement in annex 812.1, in determining whether a measure is an indirect expropriation, states that it will be determined case-by-case. It provides several factors, including economic impact, the extent it interferes with investment-backed decisions, and the character of the measure, and then includes the provision, which I know you've reviewed before, that except in rare circumstances--when a measure or a series of measures is so severe in light of its purpose that it cannot be reasonably viewed as having been adopted and applied in good faith--non-discriminatory measures that are designed and applied to protect legitimate public welfare objectives, such as health, safety, and the environment, do not constitute indirect expropriation.

My concern is that, first of all, those types of provisions--this isn't the only bilateral agreement that includes that language--have only been included in bilateral trade agreements recently. I would note that the very same paragraph is found in the Australia-U.S. agreement I was referencing earlier, but they didn't find it necessary to give a direct investor claim there.

In any event, the fact that the claims may be brought case-by-case means that the tribunal would evaluate it. For instance, is this one of those rare circumstances? Is the measure severe? Was it reasonable? Was it adopted in good faith? Was it perhaps discriminatory? Was it designed to protect legitimate public welfare objectives?

Interestingly, Howard Mann, a lawyer for the International Institute for Sustainable Development, said on the Methanex NAFTA decision in 2005 that there the tribunal had drawn a bright line between what's true expropriation and what isn't. This clause in the Peru agreement actually opens that up to question.

The final point, which I've already mentioned, is that the very existence of the proliferation of bilateral free trade agreements across a range of countries, with slightly different ways of attempting to protect the right to regulate, is itself becoming a problem. Now the analysis of where the regulation is subject to challenge is becoming much more complex, and there are slight differences between them.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Ms. McClenaghan.

To the witnesses, I'm sorry, I should mention that we want to try to keep it to between five and ten minutes, if we can. That was just a little over 13 minutes.

I'll go now to Mr. Rowlinson.

[Mark Rowlinson, Labour Lawyer, United Steelworkers]

Good morning.

My name is Mark Rowlinson. I'm counsel to the United Steelworkers union and I am also on the international affairs committee of the Canadian Association of Labour Lawyers.

The United Steelworkers is an international trade union with roughly 250,000 members in Canada. Through our international work, we have built strategic alliances and close working relationships with trade unions throughout South America, in particular in Peru. Our union is also the leading union in the mining sector in Canada, and as such, we have a particular interest in the relationship between Canada and Peru and in the labour movement in Peru.

I'm also appearing here this morning on behalf of the Canadian Association of Labour Lawyers, which is an association of 350 progressive lawyers who represent workers in trade unions in Canada. CALL has been very active in trying to promote the benefits of labour rights throughout the Americas, and we have been active in the pursuit and litigation of a variety of cases under the labour side agreement to the North American Free Trade Agreement.

I'm appearing before you this morning to provide some specific comments and analysis regarding the labour rights provisions in the Canada-Peru Free Trade Agreement. That's the only area of the trade agreement I'm going to address this morning.

By way of background, the labour provisions found in the proposed Canada-Peru FTA generally, of course, follow the pattern found in existing hemispheric trade agreements, notably NAFTA, Canada-Costa Rica, and Canada-Chile. And of course, the provisions in the Canada-Peru FTA are very similar to the provisions in the proposed Canada-Colombia FTA.

There is general consensus among the trade union movements, certainly in this country and others, that the labour protections found in existing trade agreements thus far negotiated by the Canadian government have left a great deal to be desired. They all contain certain common problems. I'll just list those for you quickly.

First, existing trade agreements focus on the enforcement of domestic labour standards rather than on raising labour standards.

Second, the enforcement mechanisms in the agreements in respect of labour rights are uniformly unsatisfactory. They are typically slow and cumbersome. The complaint process is not independent and transparent. Instead, complaints are investigated and evaluated by the bureaucracies established for that purpose by the signatory governments. They are not presently investigated and evaluated by independent judicial or even quasi-judicial bodies. This, of course, stands in stark contrast to the investment chapters of trade agreements we have assigned so far in which, as we've heard, the complaints of parties, investors in particular, are entitled to substantial effective remedies imposed by independent quasi-judicial bodies.

It should be noted that under the NAFTA labour side agreement, which has been in effect now for 14 years, not one single case has actually proceeded to an arbitration panel. That is, of course, again in stark contrast to the investment provisions of NAFTA, which have seen repeated litigation by investors in both the United States and Canada.

Turning then to the specific provisions of the Canada-Peru FTA, the labour provisions in Canada-Peru represent an evolution from the existing provisions in the NAFTA labour side agreement. Chapter 16 of the proposed agreement, which is the labour chapter, itself contains very general provisions setting out the parties' objectives and obligations with respect to labour issues. In particular, the parties--that is to say, Canada and Peru--reaffirm their obligations as members of the ILO and their commitment to the ILO Declaration on Fundamental Principles and Rights at Work. However, chapter 16 of the agreement only sets out general affirmations and objectives. These general statements do not provide parties with enforceable rights. Rather, as with all previous Canadian hemispheric trade agreements, the substance of labour rights and obligations are set out in a so-called labour cooperation agreement, often referred to as a labour side agreement. So if one wants to understand the labour rights in these trade agreements, one has to, of course, look in-depth at the labour side agreement itself.

Part 1 of the labour cooperation agreement generally contains the substantive rights of the agreement. Both parties, Canada and Peru, must ensure that their laws provide protection for the internationally recognized labour principles contained in the 1998 ILO declaration and in the ILO's decent-work agenda. As such, this article contains greater substantive labour rights than those found in any trade agreement to which Canada is currently a party. Unlike NAFTA, this agreement requires the signatories to ensure that its statutes comply with ILO standards. This, I will tell the committee, represents a significant improvement over the existing labour side agreement to NAFTA.

However, article 2 of the Canada-Peru LCA—the so-called non-derogation clause—only prohibits the violation of ILO standards where it can be demonstrated that the violation was done “to encourage trade or investment”. This would appear to suggest that one can violate labour rights provided it isn't done to encourage trade or investment. That's a significant limitation on the substantive obligations provided in part 1.

The remaining obligations in the Peru labour side agreement are very similar to the provisions found in existing Canadian trade agreements, which focus on the enforcement of existing laws and the protection of procedural rights.

I now want to turn to the enforcement provisions in the labour side agreement.

Because labour rights are again relegated to a side agreement, the enforcement of those labour rights is not subject to the same enforcement mechanisms applied to other rights in the agreement. This is a major shortcoming of the agreement and distinguishes this agreement, for example, from the agreement negotiated between the United States and Peru. The U.S.-Peru free trade agreement provides that labour rights are not only in the body of the agreement, but essentially have access to the same enforcement mechanisms as other rights under the U.S.-Peru agreement.

Under the labour side agreement of Canada-Peru, article 10 provides for the submission, acceptance, and review of so-called public communications. This is the primary complaint mechanism under the labour side agreement. As with the current NAFTA complaint process, a complaint, if accepted, may lead to consultations between the ministers of labour of the two countries. That's article 12.

Following ministerial consultations, article 13 provides that a national signatory—i.e., not the party that filed the complaint—may request that a review panel be convened if it considers that the matter is trade-related and the other party has failed to comply with other obligations under the agreement. In other words, the party that filed the original complaint under the agreement has no right to push the matter to a review panel if it's not satisfied with the ministerial consultation process.

Again, this is, in my view at least, a major deficiency in the Canada-Peru agreement. Unlike the investor provisions, where an investor can of course pursue a matter all the way to arbitration, workers and trade unions and their advocates may not do the same under the labour side agreement.

Articles 14 through 20 of the labour side agreement provide for the review panel process. At the conclusion of that process, the review panel provides a report, and it may then impose a monetary assessment of up to $15 million U.S., which is paid into a fund. That fund is then expended on appropriate labour initiatives in the territory of the party that was the subject of the review.

It should be noted that the enforcement mechanism does contain certain advances over the existing enforcement mechanisms found under the NAFTA labour side agreement. First, the process is less cumbersome. Second, the scope of the review process is substantially broader.

However, many of the flaws that have characterized the enforcement mechanism in the NAFTA process persist with the Canada-Peru labour cooperation agreement.

First, again, the Canada-Peru labour cooperation agreement is dependent upon the willingness of the state signatories themselves to pursue the complaints. The complainants themselves cannot advance matters to a review panel. Given our experience under the NAFTA labour side agreement, it seems highly unlikely that any complaint will ever get beyond the level of ministerial consultations.

Second, the agreement provides every opportunity for the offending nation to negotiate a resolution to the complaint.

Finally, the penalties are limited to fines. There is no possibility for trade sanctions, trade tariffs, or the revocation of the trade agreement itself as a penalty for the repeated and systematic violation of the labour rights set out in the agreement.

Again, the failure of this enforcement mechanism stands in stark contrast to chapter 8 of the Canada-Peru agreement, which is the investor rights provision that provides investors with an arbitration mechanism that is effective, independent, and relatively quick. The decision of the investment tribunal is final and binding. The tribunal has the authority to award monetary damages, the restitution of property and costs to the investor. No comparable rights are given to those who suffer labour rights violations. In short, the enforcement mechanism given to investors is far superior to the one found in the labour side agreement.

A similar inequity exists, of course, under NAFTA, and therefore it's no surprise, again, after 15 years of NAFTA, that you can see an enormous disparity in the number of claims that have been pursued under the investor provisions compared to the number of claims that have been pursued under the labour rights provision.

In conclusion, the labour rights protections found in hemispheric trade agreements negotiated thus far by the Canadian government have not provided real enforceable rights for workers. Our view of the labour provisions found in the Canada-Peru agreement is that while improvements have been made, the essential structure of the labour clauses found in previous trade agreements remains largely unchanged. Substantive labour rights protections remain in a side agreement rather than in the body of the agreement; enforcement of these rights remains entirely at the discretion of the signatory governments; there are no provisions that provide for independent legal actions by trade unions or workers' organizations that could lead to real remedies for affected parties; and finally, the agreement contains no provisions for real trade sanctions in the event that a party systematically violates labour rights.

In general, experience suggests that the labour provisions in trade agreements, whether they are inside the agreements or not, are unlikely to lead to concrete improvements for workers. Trade agreements continue to be written not to improve labour standards; and there is little evidence that such agreements can become vehicles for the improvement of labour rights—at least at the moment. It should therefore come as no surprise to this committee that the labour movements in both Canada and Peru have overwhelmingly rejected this proposed trade agreement.

Thanks very much.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Rowlinson.

Now we're going to hear from our next witness, Mr. Maxwell Cameron.

[Professor Maxwell A. Cameron, Professor, University of British Columbia, Department of Political Science, As an Individual]

Thank you very much for the opportunity to be here and to share with you some reflections on the Canada-Peru Free Trade Agreement.

I've been doing research on Latin America, and Peru specifically, for 25 years. When I first started to teach Latin American politics, it was in the early 1990s at the time of the NAFTA debate, and I recall being deeply unsettled by some of the claims that were made by advocates of NAFTA who argued that Mexico was poised to become a first world country, that it was going to become a prosperous, capitalist democracy under NAFTA and that it represented a model both for developing countries and potentially even for post-Soviet states. This kind of simplistic, ahistorical, and one-dimensional view of Mexico just didn't fit with my training and my understanding of Mexico, and I found myself wondering whether my training was irrelevant or whether the debate on NAFTA was that disconnected from reality.

Then I recall vividly early in January 1994 opening the newspapers and reading about the Zapatista insurrection in Chiapas, and here was another Mexico, a Mexico that had been ignored, rearing its head and reminding us that Mexico is a big, complex, and very unequal society. There are two Mexicos, one with a foot in part in Central America and another with a foot in Texas. By the same token, there are two Perus. There's a Peru that wants to compete with Chile, and there's a Peru that has a greater affinity with Bolivia.

So when we hear government officials saying that countries are becoming prosperous democracies due to free trade agreements, sometimes even before these agreements have been implemented, one has to ask the question, what countries are we talking about?

Peru is a country deeply divided, divided between the coast and extractive enclaves on the one hand and the south and central highlands and the jungle regions on the other. Over the past five or six years, really from about 2003 onward, we've seen very substantial economic growth occurring in the coastal areas and in the mining sector, and the benefits of this growth have to some extent trickled down at least to people in the coastal areas, so that the rate of poverty has declined from 49% to 39%. However, the benefits of this export-led growth have not trickled down to the south and central highlands and to the Amazonian jungle region, where 63% of the indigenous population live in very severe poverty.

One thing that's striking about Peru is the inability of recent governments to undertake measures that would distribute wealth in such a way that all Peruvians could benefit from the growth we've seen, which is led by exports. I think there's a very real risk, particularly in the current context of economic turmoil in international markets, that some of the benefits in terms of poverty alleviation will be lost. I would argue that the principal challenge that Peru faces today is to find ways of articulating the growth that is occurring, that's driven by exports in the coastal areas and around extractive enclaves, with the populations in the south and central highlands and in the jungle areas that have not received those sorts of benefits. But that requires major public investments. It requires a commitment to human development and to overcoming long-standing barriers of social exclusion that recent democratic governments have really not been successful in undertaking.

Let's look at the mining sector in particular. It's responsible for some 60% of Peru's exports and it's obviously an area in which Canada has major interests. One of the things that are striking is that many of the mines, indeed most of the mines, are located in exactly the areas that are poorest in Peru. So naturally you have a very important potential conflict between mining industries and local communities.

There is a system, called “the canon”, by which royalties that come from the extractive sector are to be plowed back into local communities. But this system has itself generated considerable conflict, in part because of the curse of the centralism in Peru, which means that local governments, whether municipal governments or regional governments, which have very little capacity even to formulate effective proposals to make requests to the central government to get access to those resources, are often unable to put together compelling proposals. When they do, they're held up in the central government for long periods of time. The kinds of proposals that these governments are capable of implementing tend to be building monuments, or at best, building infrastructure. They're often sort of white elephant projects that do very little for development. They're not investing in health care, education, training, and the sorts of things that would enable people to be more effective agents of their own development.

This is really a problem of state capacity, both at the local level and at the national level. So not surprisingly, we have seen a real growth of conflicts. Just in the last year, between April 2008, at which point there were 104 registered conflicts in various parts of Peru, and April 2009, when the number grew to 250 conflicts, we have seen a massive increase in the number of conflicts, seventy per cent of which are in fact focused on mining activities. The conflicts involve water, contamination of underground and surface water and land, displacement of populations, failure of companies to live up to their agreements, and the issue of access to royalties.

The Peruvian government, instead of resolving these disputes in ways that would help local communities, has in fact criminalized protesters, has called their leaders terrorists, and has refused to consult with indigenous communities, as it is obliged to do under its treaty obligation. Peru is a signatory to ILO Convention 169. In fact, and perhaps most alarmingly, as part of the package of implementation of the Peru-U.S. free trade agreement, the government has submitted a series of proposed laws that Amazonian tribes regard as a fundamental threat to their ability to defend their land and their culture. As a result, there has been a veritable uprising in the Amazonian region in protest against these laws.

I would rather see Canadian mining companies operating in Peru than Chinese companies, which have an appalling record when it comes to labour standards or the environment. But make no mistake about it, whatever companies operate in Peru will be embroiled in these kinds of conflicts.

Let me give you just one example from recent years of a Canadian mining company that was given a contract to explore the possibility of mining in an area called Tambogrande in the north of Peru, in Piura. They discovered a massive deposit of gold, but it happened to be in a community in which there is a vibrant agricultural economy that produces mangoes and limes and so forth. The community got together and, under their own laws of participation, voted against proceeding with this development on the grounds that it would displace much of the population and contaminate both subterranean and surface water. The Government of Peru sided in this case with the community, and the company, after first seeking arbitration, left Peru. But I wonder, in the context of the sorts of things that Theresa was talking about with respect to investment provisions of the free trade agreement, had there been an FTA in place, if it would have considered suing the government for damages. It's not clear to me what the outcome of that would have been, but simply giving companies that weapon potentially gives them a very important source of leverage over local governments that I would argue could very well exacerbate the kinds of conflicts that we are seeing in Peru today.

I would sum up and conclude with three fundamental points. First of all, I think there are very solid grounds for being skeptical about the ability of FTA negotiations to lead to multilateral trade liberalization or even to hemispheric liberalization. The record does not support the idea that free trade negotiations are moving us in the direction of a single hemispheric agreement. We're instead getting this sort of complex spaghetti ball of FTAs.

On the question of whether FTAs will result in shared and sustainable prosperity, I would argue that they will result in winners--who will be the people living in the coastal areas, the extractive industries, and foreign investors--but that highland peasants, workers, and local communities will often be left behind.

Finally, with regard to the political effects, which I would argue are almost unpredictable, I would nonetheless dispute the claim that Peru's democratically elected government ran on a platform of free trade. In fact, the 2006 election was a closely fought election in which Ollanta Humala, who is clearly critical of the FTA, won in the first round, lost in the second round, as a consequence of the voters of Lima shifting their support to the APRA party, which was agnostic on free trade throughout the campaign. The APRA party has proceeded with the negotiations that were negotiated under the previous government. It is deeply resented and very unpopular in the highland areas in the south and central parts of Peru.

If we proceed with the free trade agreement, in the absence of the kinds of investments that are required to ensure shared and balanced prosperity in Peru, I would predict that the likely outcome of this kind of model of development will be that we will see more anti-system political outsiders of the same ilk as Hugo Chavez and Evo Morales arising in Peru.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Cameron.

We'll now go to questions, beginning with Mr. Cannis.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you, Mr. Chairman. I'll be sharing my time with Mr. Brison.

I was interested throughout the presentation, but near the end you talked about a specific company that ended up leaving because the government stepped in, if I understood correctly, and took them to court or made them adhere to certain rules they weren't prepared to abide by. Could you elaborate on that for me?

Also earlier, you mentioned the failure of companies to live up to their commitments, but it would seem, given what you said afterwards, that the legislation is there to protect or move toward protecting.

You mentioned you prefer Canadian companies to be mining, for example, in Peru. I hope I didn't misquote you. I'm asking that question because, as we deal with these FTAs wherever and mining is an aspect of the entire agreement, we are obviously speaking to all stakeholders or all parties. We're often told we can't do this or we shouldn't do that; we shouldn't go here, we shouldn't go there. I'm pleased to hear you'd prefer Canadian companies. Tell us why you'd prefer Canadian companies. Is it because we are more respectful of the law? Or is it because we have environmental standards we adhere to?

Just give us an idea of why you made that comment.

[Prof. Maxwell A. Cameron]

Thank you.

I think Canadian companies do have a good reputation as corporate citizens in the region, for the most part. That's not always the case. I recall being in a campaign rally in 2006 and somebody came up to me and asked where I was from. I replied that I was from Canada. This person burst into shrieks, saying my country is destroying the world. This was the first time, as a Canadian, I'd ever been exposed to that kind of reaction when telling people I was from Canada. It turned out that this person came from a mining community where there was a mining company that, in his view, was doing terrible environmental damage.

We have both big and small companies. I think often the juniors don't have the kind of corporate social responsibility codes that some of the larger companies do.

[John Cannis, Liberal, Scarborough Centre, ON]

Would the law not step in, given the example you provided to us?

[Prof. Maxwell A. Cameron]

It could well. In the case I gave you, the government did indeed decide that in light of the non-binding decision of the community, they would not proceed with this development. Then they had to defend that legally. That could, of course, happen again.

[John Cannis, Liberal, Scarborough Centre, ON]

When we talk about corporate social responsibility, I think what you're really telling us is that it's a two-way street.

[Prof. Maxwell A. Cameron]

Absolutely.

[John Cannis, Liberal, Scarborough Centre, ON]

It's incumbent upon the local government.

Mr. Brison, the floor is yours.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Mr. Cannis, and thanks to each of you for your interventions this morning.

I'd like to start with Mr. Cameron on the issue of the gap between rich and poor, and the effect of economic change or development on that, potentially. Industrial revolution also led to an increase in the gap between rich and poor, but it also improved quantifiably the standard of living for the poor. I think any time a country is industrialized or develops its economy, there will be some level of risk of gap between rich and poor, but the standard of living for the poorest also is strengthened. That has been demonstrated throughout periods of economic change.

I don't think Peru is unique in terms of gaps between rich and poor. We have issues in Canada on gaps between rich and poor. If you compare the conditions on aboriginal reserves to Rosedale, you're going to see a significant gap. If you consider the difference between Canadian provinces and the variance in our economies in terms of the resource sectors in some economies and the financial sectors in other economies, I don't think this situation is unique to Peru, that there are gaps between rich and poor or geographic disparities.

[Prof. Maxwell A. Cameron]

Latin America is the most unequal region in the world, largely because the rich are very rich. There are historical reasons for this that date back to colonial times. The disturbing and troubling thing about inequality in Latin America is that it's so persistent. Even a country like Chile, which is surely the most successful example of a market-oriented economy and has seen poverty alleviated, has nonetheless seen inequality persist and even get worse in recent years.

We have to ask ourselves if we are in the world of the Kuznets' curve, where inequality increases at the outset of industrialization and then improves over time. I would argue there isn't a lot of basis for suggesting that's the case in Latin America today, partly because we have not made the kinds of public investments required to ensure that those at the bottom benefit. I think you drive incomes up across the board and attenuate inequality by ensuring that productivity gains are passed on to workers and investments are made in their ability to be gainfully employed.

[Scott Brison, Liberal, Kings—Hants, NS]

I agree with you, but those are largely domestic political decisions that will be made by sovereign governments as to how they implement public policy. I agree with you about what is required. Those governments will make those decisions and will be under political pressure to do so, and I hope they make those decisions.

I have a question for Mr. Rowlinson on the Canada-Peru FTA. You were saying that the labour provisions are the most robust of any Canadian FTA so far, but they don't go as far as the U.S.-Peru FTA.

[Mark Rowlinson]

That's correct, particularly as they relate to enforcement.

[Scott Brison, Liberal, Kings—Hants, NS]

Does the United Steelworkers' U.S. chapter endorse the U.S.-Peru FTA?

[Mark Rowlinson]

It's an interesting question. The AFL-CIO has been in fairly detailed discussions with the Democratic Party about what labour provisions would be acceptable to the AFL-CIO. For a variety of political reasons, the AFL-CIO was ultimately not able to endorse the U.S.-Peru agreement, but it did agree on model language, I believe. Certainly when the Democrats were in opposition they agreed on a model language, which the AFL-CIO endorsed, on the labour protections that should be found in trade agreements. That model language is substantially better than what's in the Canada-Peru FTA, and it's obviously much better than what's in the existing NAFTA.

My point is that in the United States at least, for whatever reason, the Democratic Party has historically been engaged with the labour movement on these issues in a manner that, without getting into the minutiae of Canadian politics, has simply not happened in Canada. I think that's important to note. I don't know if that's of assistance to you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Rowlinson, Mr. Brison, and Mr. Cannis.

We'll go now to Monsieur Cardin for seven minutes.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chair.

Good day, Madam, gentlemen.

Clearly, parallel or side agreements have a relative importance. I often say that the unique thing about two parallel lines is that they never meet. You all seem to agree that parallel or side agreements respecting labour or environmental rights should be an integral part of the main agreement, that this agreement should have teeth and contain obligations for the parties that are more than just pretty words.

Let us consider the following example, even though comparisons are not always a good thing. Let us say that I am an investor and I decide to open a pesticides production facility in Peru. Such an operation would entail certain risks for workers. Let us say that the country subsequently decided to raise its environmental standards and to ban the production of certain products because that could pose a health risk. Strict conditions would be put in place to ensure a safe working environment and consequently additional costs would come into play. Because of the high level of risk, higher salaries for workers would be demanded.

If such a situation arose, what would become of the labour and environmental rights side agreements? What would happen if the country decided, after signing the agreement, to raise its standards or requirements in the area of labour and environmental rights?

[Mark Rowlinson]

Thank you for your question. If you don't mind, I will answer in English, because I am more comfortable doing so.

If you look at the agreement itself, the investor about whom you speak has access to chapter 8 of the agreement. It's right here, section B, “Settlement of Disputes between an Investor and the Host Party”. That is to say, this dispute resolution mechanism has teeth, it has real remedies. It makes the investor whole, and it frankly challenges--and perhaps my friend from CELA will say this--the autonomy of the state in respect of these kinds of regulations. That is to say, investors are given procedures and real enforceable rights.

In respect of labour rights, those things simply don't exist under this agreement. Yes, a complaint can be filed, but relatively early on in the process the complaint itself is removed, is taken away from the party that files the complaint, whether it's the worker or the trade union, and put entirely in the hands of the state parties to resolve.

Under the NAFTA labour side agreement, our experience has been that the states themselves thus far have had no political will to actually follow through with these complaints. And for whatever reason, it continues to be the case that states in North America and throughout the Americas simply refuse to hand over any national sovereignty in respect of labour issues, while at the same time giving unprecedented rights to investors to assert their rights.

I am here largely just to point out that disparity, that we cannot promote these trade agreements as protecting labour rights if in fact the way labour rights are treated is fundamentally substandard when compared to the way the other rights under the agreement are treated.

[Theresa McClenaghan]

I'll speak in English as well, if that's okay.

With respect to my concern, it does work both ways. I'm concerned that the Canadian federal and provincial governments may find their ability to regulate freely, as they see fit, being impacted vis-à-vis issues of risk to workers and to the environment and to health and safety. That's true as well for our partner nations in any of these bilateral trade agreements. They could similarly be impacted by a Canadian investor making a claim that they don't have the right to regulate for the sake of their workers, that it's interfering with their economic integrity.

As to the agreement itself, there's rhetoric, as you say, about a high standard of environmental protection and improving environmental protection. But as was said with the labour agreements, that's not quantified in any way. So in terms of another nation and its level of protection for workers or for the environment, it may be a long distance from Canada's level of protection, and yet, as it moves to improve and bring those into a more protective and appropriate level of protection, it is open for our private investors investing in those countries--Peru, Colombia, and other countries--to argue against that with those local subnational or national governments. And it's not to say that this couldn't or wouldn't happen. We have that happening right within our own country by some of our national private investors.

My fundamental point is that governments have to be able to make decisions balancing everything they do in the normal rule-making process. They do already take into account the fact that something needs to be safer, healthier. They also already look at social and economic factors. Once they do that, they shouldn't have that undermined by this indirect expropriation claim.

[Serge Cardin, Bloc, Sherbrooke, QC]

You talked about the loss of sovereignty by States, their regions or their provinces. When a government truly wants to enact legislation in the public interest... You mentioned Dow Chemical and its product 2,4-D. Quebec passed legislation to ban this product which was used solely for cosmetic or esthetic purposes. I think this is an important consideration for countries with which Canada intends to sign free trade agreements. Countries must have the means to safeguard their sovereignty and to continue improving their laws with a view to protecting the public interest. I'm sure you will agree that all bilateral agreements concluded from this day forward should include side agreements so that labour and environmental rights can truly be promoted. Mere recommendations do not suffice. Therefore, we could talk about the progressive aspect of the new agreements to be signed with other countries.

The word “progressive” is no longer associated with the Conservative Party. I think the Liberals should jump at the opportunity and appropriate it for themselves, reject these agreements and send the government back to the drawing board to ensure that parallel or side agreements are included in the main agreement. Promotion of human rights, and labour and environmental rights is important. That's my little speech for today. If I have any time left, I invite people to comment.

It seems that my time is up, so I would simply like to thank you.