International Trade Committee on Nov. 29th, 2010

[The Chair, Conservative, Lee Richardson]

I call the meeting to order.

We welcome all the international trade crew back to Canada.

We have a little bit of business, but we may try to do it at the end of today's meeting. It's nothing urgent. We'll leave it until Wednesday if we don't get through it. It's just some technical stuff to clean up.

There's also the report from the visit to the European Parliament and the European Union. I'd like to have the committee spend five or ten minutes to give some further direction to the analysts and the clerk on the preparation of that report. If we have time at the end of this meeting, we'll do that. I won't take any further time from our witnesses, who have been patiently standing by. I apologize for the slow start today.

We have with us Jamie Kneen, the communications coordinator for MiningWatch Canada.

Via video conference from Panama City, we have Donald-Fraser Clarke, general manager of Clarke Educational Services.

We'll proceed in the usual manner. I'll ask each witness to provide an opening statement to express their points of view. Something under 10 minutes would be useful for us. Then we'll open it up to questions and try to get a round of questions from our members following that brief introduction.

I'm going to ask MiningWatch Canada to start. We'll follow right away with Mr. Clarke. Then we'll proceed to questions.

With that brief introduction, I'll ask Mr. Kneen to start. You can introduce yourself further if you like.

[Jamie Kneen, Communications Coordinator, MiningWatch Canada]

Very good. Thank you

Good afternoon, committee members. I'd like to thank you for this opportunity to share our observations on the free trade agreement between Canada and Panama. Since the invitation came very recently, I apologize that we have not had a chance to prepare a more detailed written brief or to submit it in advance for translation. I have provided an unfortunate stack of supporting documents that I've referred to in the brief and that members or researchers may find of use in their work.

MiningWatch Canada is a pan-Canadian coalition of environmental, aboriginal, social justice, development, and labour organizations that researches and advocates for responsible mining practices and policies in Canada and by Canadian companies abroad. We work with communities affected by Canadian-based mining activities in many parts of the world and with experts and organizations that are trying to ensure that mining investment is accountable to the affected communities and subject to international standards for environmental protection as well as protection of workers and the recognition of the rights of indigenous peoples. Canadian mining investment in Panama has been controversial since the 1990s, and MiningWatch has been monitoring it since our establishment in 1999.

Obviously our remit is not related to trade in nuts and bananas or financial services or many of the other areas covered by this free trade agreement. Many of the agreement’s measures sound positive to the untrained ear. However, there are potentially serious difficulties associated with the investment provisions of the agreement, specifically as they relate to environmental planning and protection. There is scant evidence that the environmental side agreement will have any meaningful effect in alleviating them.

In addition, the environmental impact of the agreement itself is impossible to gauge, given that the final environmental assessment has not been released, if it has even been completed. It was supposed to be released upon the conclusion of the negotiations on the FTA itself.

The report that is publicly available, which is on the initial environmental assessment, is almost completely devoid of meaningful content. While it acknowledges that the main effect of the FTA “is likely to be greater protection for existing Canadian investment in Panama”, it proceeds to completely ignore the environmental implications of such protection. Despite changes in commodity markets and investment patterns that were evident at the time, the report states that “large changes in investment patterns are not expected to result from the FTA. Therefore, it is concluded that the environmental effects of the Canada-Panama FTA will be minimal to non-existent.”

No evidence is provided for any of these statements, other than that changes had been minor since the 1998 Canada-Panama Foreign Investment Promotion and Protection Agreement.

Realistically, however, given increasing commodity prices, especially in metals, as well as growing interest and existing investment commitments, it is more reasonable to assume that the FTA could lead to increased Canadian mining investment in Panama, with major implications for the environment that should have been taken into consideration in the environmental assessment.

One current proposal, Inmet Mining’s Cobre Panamá open-pit copper project on the Petaquilla concession west of Panama City, is forecast to deforest some 5,900 hectares of mostly primary rainforest in the middle of the Mesoamerican biological corridor. This $4.3 billion project had been identified long before the FTA negotiations or the environmental assessment were concluded.

On the same concession, Canadian-based Petaquilla Minerals’ Molejón gold mine has been highly controversial, provoking divisions within the neighbouring communities, being repeatedly accused of deforestation and contaminating local rivers, and in fact being fined almost $2 million for environmental violations. The Petaquilla concession itself has also been controversial, as it grants its owners a series of legal and regulatory exemptions.

At the same time, another Canadian company, Corriente Resources, has been operating illegally in the Ngöbe-Buglé indigenous territory, trying to overcome community opposition to a huge open-pit copper mine project so that they can first obtain and then sell the property to a larger mining company for development.

There are a handful of other significant Canadian mining interests in Panama, far outweighing any other country’s, though only the Molejón mine is actually in production. This Canadian investment is not a problem in itself; the problems have to do with the conditions of investment and the probable effects of the FTA on those conditions. Environmental protection and legal enforcement and compliance in general in Panama are notoriously weak, even within the framework of existing laws and regulations. The Molejón and Corriente examples demonstrate this.

The danger is that the FTA's investment protections will end up protecting mining investments that are taking advantage of lax governance and the resulting low-cost operating environment, undertaking projects that would be extremely unlikely to be approved in Canada or any other country with more stringent controls, while the agreement on the environment provides no enhanced protection or recourse for affected communities or public interest organizations.

The present FTA provides ample cause for concern on both fronts. In terms of environmental protection and environmental planning, the agreement on the environment does provide some modest measures for environmental cooperation, while the FTA includes a non-derogation clause to protect environmental legislation. Non-derogation is good, but hardly sufficient in a case in which significant improvement is what is required.

At the same time, the agreement on the environment follows the recent model of the Colombia and Peru FTAs in omitting access to environmental dispute resolution by citizens and reducing the joint advisory panels and complaints mechanisms of earlier agreements, such as NAFTA or the Canada-Chile Free Trade Agreement, to a single coordinator with no independent powers or capacity and a review panel that can only be invoked by states, not citizens.

This is significant in the case of a country like Panama, where there are serious challenges in establishing the institutional and technical capacity to administer, monitor, and regulate activities like large-scale mining that have not previously existed in the country—activities that have demonstrated the political and technical limitations of state supervision in neighbouring countries such as Costa Rica, Honduras, and Guatemala.

There are also disturbing precedents in the abuse of investment protection measures contained in free trade agreements elsewhere in the region. These may simply involve threats, as in the case of Glencairn Gold, now Central Sun Mining, which threatened the Costa Rican government with legal action under the Canada-Costa Rica Free Trade Agreement if its Bellavista project was not exempted from a ban on open-pit mining. The mine's leach pad collapsed barely three years after it was inaugurated, and the mine has not been operational ever since.

They may also involve actual lawsuits, as in the current case of Pacific Rim Mining, a Canadian company using its U.S. subsidiary to sue the Government of El Salvador under the United States-Dominican Republic-Central America Free Trade Agreement for not issuing permits, and this despite the company's failure to complete the filings required to obtain such permits and inconsistencies in the information it did submit.

There are also numerous examples of successful and unsuccessful but nonetheless costly lawsuits under NAFTA.

The investment provisions in this FTA provide similar measures on regulatory expropriation in chapter 9, article 9.11, although they are limited by the exemptions under the corresponding annex 9.11 for “reasonable regulations” to protect the environment. These exemptions are welcome, but they have not been tested before the International Centre for Settlement of Investment Disputes or any other international trade tribunal. Given the strength of the expropriation protection, it is far from clear that the exemptions will be sufficient to allow Panama adequate space to effectively regulate in the public interest.

This applies not just to environmental protection but critically to any effort to change the regulatory environment to enable new measures to promote accountability and transparency or to generate new revenues from royalties or taxation in support of the state's legitimate efforts to finance its social development obligations.

The net effect is to impose barriers to the raising of these domestic standards. There is an emerging concern on the part of analysts and academics for “...the harm done to the public welfare by the international investment regime, as currently structured, especially its hampering of the ability of governments to act for their people in response to the concerns of human development and environmental sustainability”.

In conclusion, while the objectives of enhancing both investment stability and environmental protection are laudable, they are not well met by the present text, although determining the likely impacts of the agreement is made difficult by the absence of a serious environmental assessment, and there is no attempt to frame any aspect of the agreement in terms of sustainable development. The agreement, as negotiated, presents a very real risk of entrenching an ineffective and possibly irresponsible regulatory regime by protecting investments from tougher environmental or fiscal measures.

Thank you for your time. I'll answer questions when the time comes.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Kneen.

We'll go now to Panama City to hear Donald-Fraser Clarke, the general manager of Clarke Educational Services.

Mr. Clarke, thank you for your patience. You're on, for up to ten minutes, and then we'll go to questions. Thank you.

[Donald-Fraser Clarke, General Manager, Clarke Educational Services]

Good afternoon, Mr. Chairman. Thank you very much.

I'd like to begin by first explaining a little bit about our company. Clarke Educational Services is a first nations-based professional services firm that works with Canadian and Latin American indigenous communities, governments, and companies in developing inclusive businesses that promote the use of natural resources in a culturally appropriate and socially and environmentally responsible manner.

Our company has been working in Panama for approximately two and a half years and is made up of a skilled team of professionals who are working with the Ngöbe people, which is an indigenous group here, to advance the Cerro Colorado copper project in a socially inclusive and economically viable manner.

Our company is indigenous-rights focused. Under law 10, article 48 of Panamanian law, the Ngöbe people are to be informed and advised of, and are to participate in, all natural resource developments within the comarca territory. Cerro Colorado is a world-class copper project that has been identified on the traditional territory of the Ngöbe people.

The Ngöbe people represent approximately 10% of the Panamanian population, 160,000 of whom live within the comarca boundaries. The comarca itself is 650,000 hectares, and the Ngöbes in the comarca, according to the World Bank data, as well as our own observations, are among the poorest citizens of Panama. Some 90% lack basic necessities and are living on less than $2 per day.

Prior to our working and training in Ngöbe communities, our company conducted a series of meetings with communities located near the Cerro Colorado project area to determine whether or not the people would like to learn about responsible mining practices and the experiences of indigenous peoples from Canada with respect to mining and our relationships with Canada.

Also, our company studied the comarca law to ensure that our activities would be compliant with the national laws of Panama as well as the traditional customs of the Ngöbe people.

To date, we have worked and trained with approximately 2,000 Ngöbe people in the Cerro Colorado area. These are individual landowners and community people who live in the direct and indirect impact area of this potential copper mine development.

Our experience in Panama has given us insight into how business has been conducted in the comarca in the past. Usually business or development initiatives have been placed upon the people without their full consent, without being properly informed or advised, and without being integrated into these initiatives. It has always been our intention to respect local and national laws and to promote fair business practices and development in the region through informed and prior consent.

On the government side, there has been a long history of governments taking advantage of the lack of capacity that exists in the Ngöbe-Buglé comarca. In our opinion, creating additional and new trade with Panama through the FTA could lead to a lot of very positive perspectives. I have a list of some of the things that we believe would really assist here in terms of the way we see business being conducted.

Canadian business has a well-developed concept of CSR and of the implementation of high CSR standards, which could be introduced by Canadian companies doing business here in Panama, particularly in areas and regions where the concept is not practised or well developed. Of course, our experience has been in the Ngöbe-Buglé comarca, and we have seen that there has been very little CSR in different activities that have occurred there in the past. Cerra Colorado has a very long history. A number of Canadian companies in the past had worked there, but they really didn't involve the local people, nor did they keep the local people informed.

Canadian business, particularly in the resource sector, has a significant amount of experience in working with first nations people for common and mutual benefit. These experiences could be used as a competitive edge for Canadian companies interested in working with indigenous peoples here in Canada and throughout the region. Panama is also strategically located in the region, and with well-developed infrastructure, Panama is extremely business-friendly in comparison with a lot of its geographical neighbours. Panama could be a logical place for Canadian business wishing to engage in doing business regionally.

Canadian industry, in our experience, is generally well received by people in Panama, and particularly in the Ngöbe-Buglé comarca, and we believe this is the biggest case that supports the FTA. In the case of mining, this industry needs to be founded, established, and legitimized in Panama. For this, it's critical that we have examples of good company practices, strong institutions, and a culture of accountability. We believe there are a number of companies in Canada that are constantly striving towards these goals.

My colleague mentioned Inmet. Inmet has had some good experiences working with our first nations people in the province of Quebec. While I'm not totally familiar with everything Inmet does, I have followed them from time to time. We see them implementing a good level of CSR. We see them supporting communities. We see them informing the local population of their plans to advance their project. We believe we are doing exactly the same thing. Maybe we're doing a little more, because we are in the comarca, but we believe that we have been in compliance with the traditional as well as the national laws.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Clarke.

With that, we will begin questioning.

Ms. Hall Findlay is first.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you, Mr. Chair. Thank you, Mr. Clarke and Mr. Kneen.

Between the two of you, you've highlighted one of the best examples of the entire discussion about free trade, and that is whether you believe in the philosophy that free trade and increased engagement can be positive for the people in both countries involved, or whether you take a negative approach.

I have to say, Mr. Kneen, that I find the approach of Mr. Clarke and the work they're doing in Panama to be very positive in saying that this FTA would increase Canadian mining investment. Right off the bat, I think that's a really good thing, and I think that kind of investment can be even more positive for the residents of Panama.

Mr. Kneen, I want to ask you about understanding the concerns. This is not to take away from the legitimate concerns we all have about corporate social responsibility and environmental degradation. In the past, there has been significant abuse, and there may still be some, but in general, increased investment and engagement can help to build local capacity and increase awareness of the need for environmental protection.

We're trying to determine whether to approve this trade agreement. Do you believe that conditions for the people you've raised concerns about in Panama will be enhanced if Canada says no to this free trade agreement?

[A voice]

Good question.

[Jamie Kneen]

I'm trying to parse a double negative. Will...?

[Martha Hall Findlay, Liberal, Willowdale, ON]

Would it be better if Canada said no?

[Jamie Kneen]

The problem I'm trying to highlight with the existing agreement is that it does not provide the protection that should be in place to go along with the investment. Certainly increased investment could bring benefits, but only under conditions that are not evident in this case. That's my problem. I don't see the evidence. That's the other point I'm trying to make. It's a question of what you believe philosophically or ideologically, not what the evidence shows.

[Martha Hall Findlay, Liberal, Willowdale, ON]

From the committee's perspective, we're being asked to say yes or no to this. We're not in a position to create major changes in the trade agreement as it's proposed.

I understand there are some concerns. I would be the first to say that we would want to make sure that the activities of all Canadians abroad take place according to the highest standards, but this agreement was negotiated among grown-ups. I say that not to be facetious. Both Panama and Canada had significant teams negotiating this agreement. If the protections that you want to see are not there, then I think your questions should be directed to the Government of Panama. I'm also a big believer in the importance of local capacity and local laws. If our concerns are about Panamanian conditions, then the first government responsible would be the Government of Panama. There's a certain amount of respect to be afforded the people of Panama who negotiated this agreement and got it to where it is today.

I'll leave it at that. I will take it from your answer that if it were a black and white yes or no, you would think this was a good thing to do. On the assumption that we can't make any changes, do you think that saying no to this would be a positive thing?

[Jamie Kneen]

I think there are significant dangers to it, and I don't see what the urgency is to approve something that we don't understand. I don't understand why these significant teams of people doing all this work that you're talking about couldn't show us some of the work they did, or why they couldn't provide some of the rationale, some of the details, for some of the measures we're looking at. If there aren't protective measures there, why are they not there? Were they not considered, or were they discarded for some particular reason? Were they even analyzed? This is what we don't know.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Yes, but I would argue that's the responsibility of the Panamanian government. If the Panamanian government agreed to the terms of this free trade agreement, they would have made the decision that it was in the best interests of Panama, just as we're in a position to determine the best interests of Canada.

Mr. Clarke, my view is that the two testimonies indicated very much the negative opportunity or the positive, and I commend you for taking the positive approach. Could you talk about some specific opportunities that you see from this free trade agreement in terms of the concerns that Mr. Kneen has raised legitimately about some of the conditions? I know you talked about them a little bit in your testimony, but if you can elaborate a little bit on them, it would be very helpful.

[Donald-Fraser Clarke]

Sure. As we all are aware, we live in a global age. When you look at Canadian companies in our industry, if we start doing things wrong, people know right away. The Internet is a very powerful tool. Knowledge is a very powerful tool.

When we look at our industry, our mining sector—and I'm going to speak about what I know—we have several thousands of mining companies in Canada doing business all over the world, all over Latin America, and here in Panama. What I see these companies bringing to Panama is a higher standard of CSR, a higher standard in working in and engaging communities. I think this is extremely positive, and I believe the FTA would only allow more Canadian businesses and more Canadian investment to come into Panama.

This is something that's very exciting for us. I speak as a first nations-based company, a Canadian company. We have spent considerable resources here in community...[Technical Difficulty—Editor]

[The Chair, Conservative, Lee Richardson]

It appears that we've lost the feed momentarily, but there's no reason we shouldn't proceed with the others. We had just come to the end of Ms. Hall Findlay's time. We are going to go on with Monsieur Guimond.

Oh, let me just say hello to Mr. Clarke.

We lost the feed momentarily. I'll let you finish your answer, and then we'll proceed to the next member.

[Donald-Fraser Clarke]

Sure. The way we see things is very simple: if we're increasing the amount of trade and the amount of investment, then we have a greater influence in Panama. If we decide we're going to sit off to the side and not approve this FTA, then how are we ever going to make things better here in Panama?

There are some issues here in Panama. It's a country that is moving forward economically, but there have been a lot of challenges in the area of CSR and community engagement. I believe that's something that Canadian business and Canadian investment bring to this country, and I believe that's something very positive, something very powerful. It's something that's long term and lasting.

That has been our experience here. That has been our experience working with our stakeholders in the comarca. We only have an agreement to do training at this particular time, and the people will decide if they want to move forward or not with that mining project, but at this particular time, that has been our experience here.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you. It's great to hear from someone on the ground.

Go ahead, Monsieur Guimond.

[Claude Guimond, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chairman.

I don't mean to contradict my colleague Ms. Hall Findlay, but I believe that parliamentarians can always introduce amendments to improve an agreement. I hope Ms. Hall Findlay can support the amendments that we will be presenting to improve an agreement, as everybody wants.

Mr. Kneen, you're an expert; what are the actual development opportunities for Canada in Panama?

[Jamie Kneen]

The opportunities are considerable. As I pointed out, Inmet has a commitment of over $4 billion to the Petaquilla project. There are eight to 12 other significant project areas. As Mr. Clarke pointed out, some of them have been very badly managed in the past and have created considerable controversy.

The opportunities are there, but there's an area in which I tend to disagree. My understanding and our observation of the pattern of investment globally is that Canadian investment can bring significant advances in corporate social responsibility, training and education, and social participation, but only under certain conditions, and only under conditions of strong governance and regulation.

The kinds of agreements we've seen in the north--for instance, the impact benefit agreements--rest on a legal foundation that doesn't exist in most other countries of the world. While the pattern can be brought to bear and implemented in other parts of the world, it's expensive and it goes against the interests of the shareholders, so it takes a little bit more than enlightened management on the corporate side to implement it.

The opportunities are there, but unfortunately they are enhanced by the potential for lower levels of environmental protection or public health protection than we would expect in Canada. We don't see how that is a competition we want to be encouraging.

[Claude Guimond, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

In your introduction, you talked a lot about environmental problems. I'm surprised to see that, every time we start talking about an agreement, it's always very good and there are never any problems. However, when we invite witnesses like you, who see what's going on in the field, they always come up with negative things.

In your opinion, what are the real environmental problems in Panama?

[Jamie Kneen]

I'm going to use the example of the Molejón mine, because most of the mining projects currently identified in Panama are in the exploration stage. Some of them are doing drilling; some of them are just doing reconnaissance. The Molejón mine is the only one that's actually producing at this point.

There have been earlier experiences--negative ones, shall we say--with Canadian companies like Greenstone Resources, but the Molejón mine is a Canadian-Panamanian company. It was initially set up as a joint venture between the Panamanians, Inmet, and Teck. The operation itself has caused considerable disruption in the local environment and has been fined by the Panamanian authorities. It declined to pay the fine, which I find astonishing, and is continuing to operate profitably as a Canadian company in Panama. In my documentation I've provided some of the background material on that.

[Claude Guimond, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Last June, the Panamanian government introduced Bill 30, which many people considered anti-union legislation. A few weeks ago, the Parliament of Canada introduced Bill C-300, which was defeated.

What do Panamanians still have to help them access jobs that are of the slightest degree of quality? Do these people still have means?

[Jamie Kneen]

I understand that the Panamanian government has been revisiting Bill C-30. At the same time we've lost Bill C-300. The opportunity is there. As I say, the question is, what kind of investment would be made by Canadian companies in the absence of any particular requirements?

In Canada, under the land claims agreements, for instance, we have specific powers for first nations and Inuit to require impact benefit agreements with profit-sharing, employment and training, and so on. We have other examples in the provinces of mining companies engaging in long-range planning and training projects in order to bring local people into those better jobs.

In Latin America it has been less successful. Even in countries with mining experience--and Panama is not one of those--it has been more difficult. Countries like Peru have been able to move their own people into the better jobs, but only over time and with some cost. I think the difficulty is that instituting that kind of investment in a virgin territory, for lack of a better term, is not going to lead to success in the short or even the medium term.

[The Chair, Conservative, Lee Richardson]

Thank you, sir.

Thank you.

We'll proceed now to Mr. Julian.

Go ahead, Mr. Julian.

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

Thank you very much, Mr. Chair. It's a delight to see you again after a couple of days of absence.

Mr. Kneen, thank you very much for being here today. The FAIT committee has just come back from Europe, where we met with European parliamentarians, both in the European Parliament and outside of it. We had some private meetings with European parliamentarians who are very concerned about investor-state provisions that of course are in both the Canada-Panama agreement and the negotiations going on with Europe.

You mentioned some of the cases in which companies have used the investor-state provisions to override decisions that are made by governments to protect the environment and for social development. Could you talk a bit more about those cases?

Are you concerned about the increasing use of mailbox companies, companies that no longer have any relationship to the bilateral itself, but that use the fact that they've incorporated somewhere else in order to use the investor-state provisions that are contained within Canadian agreements to go after those local governments or those national governments? Particularly in the case of Panama, we've heard testimony that there are four times as many corporations in Panama as there are in Canada. I could pick up a phone and incorporate myself tomorrow as a Panamanian corporation and thus be subject, regardless of where my real base is, to the investor-state provisions, and I can start suing any local government that makes a decision I don't like. How concerned are you about that aspect of this agreement?