International Trade Committee on Oct. 4th, 2012

[The Chair, Conservative, Rob Merrifield]

I call the meeting back to order.

We want to first of all thank the department for being here. We almost know them by their first names. It's good to have you with us as we go through clause-by-clause consideration of this very important piece of legislation. It has passed the committee once before—actually, maybe even twice. Not much has changed except the timeline.

We're dealing with clause-by-clause study of Bill C-24, An Act to implement the Free Trade Agreement between Canada and the Republic of Panama, the Agreement on the Environment between Canada and the Republic of Panama and the Agreement on Labour Cooperation between Canada and the Republic of Panama.

Go ahead, Mr. Davies.

[Don Davies, NDP, Vancouver Kingsway, BC]

I'll move my motions and get them out of the way before we go to clause-by-clause study.

[The Chair, Conservative, Rob Merrifield]

I believe we have a couple of motions that Mr. Davies would like to introduce.

Mr. Davies, the floor is yours if you want to introduce the first one and explain it.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chairman.

Mr. Chairman, this is the first of the two motions that I'll move:That, notwithstanding the Order adopted by the Committee on Thursday, September 27, 2012, the Committee postpone its clause by clause consideration of Bill C-24 until Canada and Panama have signed a tax information exchange agreement.

I'll briefly explain the purpose and reasoning for this motion, Mr. Chair. One of the major considerations as this agreement has come before Parliament in the past has been Panama's reputation as being a known tax haven, a place where offshore money can be hidden in banks without disclosure to other countries. That concern has been exacerbated by the fact that illicit money from illegal activities, notably the drug trade, has also been identified to have flowed into Panama, leading to a concern that investment money that goes into Panama could fly out of Panama and go to other jurisdictions, including Canada.

We've heard evidence that the situation seems to be improving since this agreement came before the committee. We understand that Panama has been removed from the so-called grey list because it has signed 12 tax information exchange agreements with countries. That's enough to remove it from the grey list.

I understand from the witnesses we've heard that Panama and Canada have been negotiating a tax information exchange agreement. I reviewed the previous testimony before this committee and found that Panama was resistant to Canada's request that we sign such an exchange agreement.

It's important that Canada and Panama have the ability to exchange tax information as a means of stopping the laundering of illegal money and to ensure that Panama is not a tax haven. Again, to Panama's credit, we heard from the ambassador that the negotiations are at a fairly advanced stage. I formed the impression that they were near completion.

My research indicates that the U.S. Congress went in the reverse of this Parliament. Because of Panama's history as a tax haven and drug-laundering centre or attraction, the U.S. Congress required that a tax information exchange agreement be signed before they would sign off on a trade agreement. The reasoning is pretty obvious. Until you have a tax exchange information agreement, you really have no way of opening up the Panamanian banking system or tax system to scrutiny by our jurisdiction; therefore, you don't know if money flowing into Canada is flowing in from drug cartels or other illicit activities.

This motion essentially agrees with the same responsible position of the U.S. Congress, which is that whatever the merits of signing a trade agreement are—and I understand the government is fully behind such—I think we all agree that a tax information exchange agreement is an important part of the puzzle.

I think it's only prudent that we, as parliamentarians, reassure Canadians that such an agreement is in place so that we can rest assured that any concerns regarding status as a tax haven or a drug-laundering centre are taken care of prior to signing a trade agreement that will see the flow of investment—presumably from Panama into Canada and Canada into Panama—at increased levels.

I'd urge all members of the committee to vote in favour of this motion. It doesn't mean this Parliament won't pass a trade agreement; I think it just puts it in the right order, and puts prudence and care before haste.

[The Chair, Conservative, Rob Merrifield]

Okay.

Go ahead, Mr. Keddy.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman.

I won't take too much time on this, because I realize that we have clause-by-clause consideration, but it is a substantive motion and it deserves a rebuttal.

Mr. Davies has mentioned a couple of pertinent facts, the first one being that Panama is off the OECD grey list. They've been off that list for some time now, because they've signed a number of taxation information exchange agreements with other countries around the globe.

The part of his discussion I would quite disagree with, Mr. Chairman, is that I don't think we can simply say that Panama is a tax haven for drug money. I think it's much more complicated than that. The over $100 million in trade with Panama today from Canadian companies is all clean money. Those are good investments. I don't think any Canadian money whatsoever is being sheltered in Panama, quite frankly.

The importance of a tax information exchange agreement, though, is real. We are negotiating that. In a dual system, we have a negotiation going forward for a tax information exchange agreement. We've already negotiated the free trade agreement. We see them as two separate issues. Both are extremely important issues, but they are two separate issues. The official opposition recognizes that. I understand their point, but we're ready to get on with this treaty and to continue to negotiate the tax information exchange agreement.

[The Chair, Conservative, Rob Merrifield]

Okay. I think everyone's made their points.

Mr. Easter, go ahead.

[Wayne Easter, Liberal, Malpeque, PE]

Just to make one point, Mr. Chair, I will be opposing the motion.

I believe that progress is being made. When witnesses were here on Tuesday, we talked about this somewhat. I'm personally firmly of the opinion that when you have an agreement, you actually do have more leverage, in any event, in dealing with issues such as money laundering.

I spoke with some of the folks who export frozen french fries to Panama, and they are worried. Their number one worry is how the dollar value is affecting them and their ability to be competitive.

We are in a delicate timeframe vis-à-vis the United States. In this case, we need to get the agreement into the House and through our system as quickly as possible so that we can stay strong players in that market.

I understand where Don's coming from on this and I understand that it's with the best of intentions, but I will be opposing this motion.

[The Chair, Conservative, Rob Merrifield]

Go ahead, Don, very quickly.

[Don Davies, NDP, Vancouver Kingsway, BC]

Chairman, I have three quick points. One is that as laudable as it is that Panama has signed 12 tax information exchange agreements with other countries, they have not signed one with us. There is no agreement with Canada.

My second point is that we could sign and pass this trade agreement, and we have no guarantee at this point that the parties will actually conclude a tax information exchange agreement. We're hopeful that it may be the case, but my concern is that once we have a free trade agreement, there will be no leverage anymore. If for any reason negotiations break down, we'll be left in a situation of having a trade agreement with preferential treatment for Panamanian investors without having a tax information exchange agreement. We're taking a leap of faith here that I don't think is prudent.

My final point is that nothing in my remarks is meant to suggest that there's anything but legitimate investment flowing from Canada to Panama. I would even argue that much of the investment from Panama into Canada is likely legitimate as well.

My understanding of the way illicit money is transferred into illegitimate funds is that illicitly gained money from drugs or any other kind of illegal activity is put into a legitimate type of business in, let's say, a country like Panama. If they have secrecy laws, or if we don't have a tax information exchange agreement with Panama, then that money, once it's turned into a legitimate business, could then flow into Canada. We wouldn't have the ability, without such an information agreement, to actually have full transparency and scrutiny.

That completes the reasoning behind this motion.

[The Chair, Conservative, Rob Merrifield]

Go ahead, Mr. Holder.

[Ed Holder, Conservative, London West, ON]

I'm in violent agreement with Mr. Easter on the point that once we have an agreement in place, what this free trade agreement does is propel us towards better conduct. I don't call that a leap of faith. I just call that progress.

Frankly, this feels like a filibuster. I'm not looking for a retort, but frankly, this is the never-ending story. It's high time, Chair, that we call closure on this. I leave that to you and your wisdom.

[The Chair, Conservative, Rob Merrifield]

All in favour, please signify.

Those opposed—

[Don Davies, NDP, Vancouver Kingsway, BC]

Can I have a recorded vote, please?

[The Chair, Conservative, Rob Merrifield]

Yes, you can.

I will ask the clerk to proceed.

[The Clerk of the Committee, Mr. Paul Cardegna]

The question is on the motion in the name of Mr. Davies.

(Motion negatived: nays 7; yeas 4)

[The Chair, Conservative, Rob Merrifield]

The motion is defeated.

We have one more motion that you have put on the table. Are you interested in bringing it forward?

Go ahead, Mr. Davies.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chairman.

Before I start that, I would comment that Mr. Holder's comment about a filibuster is uncalled for.

[The Chair, Conservative, Rob Merrifield]

Just go on.

[Don Davies, NDP, Vancouver Kingsway, BC]

Well, if someone is going to say “filibuster” when one has not been.... That's not—

[The Chair, Conservative, Rob Merrifield]

Just introduce your motion, or I'll keep going.

[Don Davies, NDP, Vancouver Kingsway, BC]

I do have the ability to speak.

[The Chair, Conservative, Rob Merrifield]

Yes, if you are introducing your motion, you do.

[Don Davies, NDP, Vancouver Kingsway, BC]

Mr. Chairman, this motion reads as follows:

That the Committee:

recommend that the Government of Canada negotiate an agreement with the Government of Panama that would provide for financial penalties of up to $50 million per violation of the Agreement on the Environment contained in Bill C-24;

report this to the House of Commons; and

notwithstanding the Order adopted by the Committee on Thursday, September 27, 2012, postpone its consideration of Bill C-24 until this agreement is signed.

I will give the committee the rationale behind this motion.

As we all know, and as was confirmed by our witnesses who are here with us today from the department, in the labour and environmental side agreements of the Canada-Panama trade deal there are in the labour part financial penalties of up to $15 million for any violation of the labour side agreement.

Of course, these agreements are something the opposition cares deeply about, and the government has responded that they are the types of comfort provisions Canadians can look to in ensuring that when we make an agreement with a country such as Panama, they will respect and will try to improve their labour and environmental standards, or at least not reduce them as a means of attracting trade and investment.

However, funnily enough, there is zero penalty in the environmental side agreement, which leads in our view to a perverse situation in which we've just signed an agreement under which a country such as Panama, which has some significant environmental sensitivities that I will talk about briefly in a moment, if it violates the terms of the environmental side agreement and lowers its standards to attract trade, will attract a penalty of exactly zero—not a nickel. We can talk, we can bring it up, we can complain, but there is zero penalty.

One thing I will give the government a lot of credit for is that they have presented a legislative agenda over the last five or six years that seeks to really impose responsibility on people who would break agreements and break the law, but in this case you could have a party to an agreement flagrantly and brazenly break the terms of agreement and there would be no financial penalty whatsoever.

Now, in terms of the environment, we heard testimony from MiningWatch. Whatever else can be said of the entirety of the testimony, we know that there is significant mining activity and other activity in Panama that is economically beneficial but that creates environmental concerns. We know there are extremely sensitive environmental areas in Panama, including the Meso-American biological corridor, which we have heard about; there are UN-protected sites; there are hundreds and hundreds of species at risk.

To me it would seem, if we really want to make sure that Panama and Canada live up to the environmental commitments they have made in these agreements, that we should back them up with some sort of meaningful penalty in the event that they are breached.

I certainly hope they are never breached and that the penalty would never need to be implemented, but to sign an agreement that has absolutely no enforcement teeth is wrong. I think it reflects a complete lack of concern for the environment.

If we really do say that environmental side agreements are important to us, and if we want to make sure that parties, as a result of trade and investment, improve their environmental standards and concern for the environment, then we have to demonstrate our resolve by showing that we are serious and that we will back them up with meaningful sanctions in the case that there is a violation.

Thanks, Mr. Chairman.

[The Chair, Conservative, Rob Merrifield]

Okay.

Go ahead, Mr. Keddy.