International Trade Committee on Oct. 9th, 2014

[The Chair, Conservative, Randy Hoback]

Pursuant to the order of reference, Wednesday, October 1, 2014, Bill C-41, an act to implement the free trade agreement between Canada and the Republic of Korea, I'll call this meeting to order.

Mr. Davies.

[Don Davies, NDP, Vancouver Kingsway, BC]

Mr. Chairman, during the course of the testimony we heard about the Canada-Korea agreement. The concept of currency manipulation and use in the context of trade came up. I think the Canadian Council of Chief Executives talked about it. I know that some auto companies have also mentioned it.

I want to read into the record the motion that I will be tabling for this committee's consideration:

That, pursuant to Standing Order 108(2), the Committee undertake a study of the use of currency intervention by states throughout the world to create advantages in international trade, policy options available to address unfair currency interventions, and report its findings back to the House. The focus of this study should include: a) investigating the challenges and opportunities in using trade and investment agreements to address currency intervention; b) examining the status of progress at multilateral bodies in developing fair international rules on currency intervention; and c) balancing respect for sovereign nations in the management of their monetary policy with the development of fair international rules to level the playing field for exporters in all countries.

I look forward, Mr. Chairman, to discussing this motion in committee business and receiving the unanimous support of all committee members at that time. I did want to get on the record on this because I think it came up as an important issue in this study and I think it's something this committee would be well advised to study.

[The Chair, Conservative, Randy Hoback]

Your intent then is that actually we'll hear this motion on the Tuesday we come back, when we do committee business on that day.

[Don Davies, NDP, Vancouver Kingsway, BC]

Then, or at the end of committee business today. Or we can do it at your leisure, Mr. Chairman, but I wanted to serve notice and put it on the record.

[The Chair, Conservative, Randy Hoback]

It's on the record that you served such notice.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chairman.

[The Chair, Conservative, Randy Hoback]

Colleagues, we do have one bit of housekeeping to do. We have an operational budget in the amount of $7,500 that's sitting in front of you right now. I think it's fairly straightforward. It's more or less for paying for some of the witnesses to appear in front of us.

I need a motion to approve the budget.

[Don Davies, NDP, Vancouver Kingsway, BC]

I so move.

All those in favour?

(Motion agreed to)

[The Chair, Conservative, Randy Hoback]

Then we'll move into clause-by-clause.

Pursuant to Standing Order 75(1), consideration of clause 1, the short title, will be postponed of course.

If it's okay with the committee, I'd like to clump clauses until we get to the point of an amendment and then I'll stop there. For example, clauses 2, 3, 4, and 5 and then the new clause 5.1 would be the first NDP amendment.

If there is consent I'd like to combine clauses 2 to 5.

(Clauses 2 to 5 inclusive agreed to)

Mr. Davies, we have amendment NDP-1 that would establish new clause 5.1. I'll give you a minute or a minute and a half to discuss your amendment.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chairman.

This amendment makes it clear in the agreement that nothing in the Canada-Korea trade agreement would affect or minimize or adversely affect the ability of the Government of Canada or any of its sub-national governments to legislate or regulate in the public interest.

Many people in Canada have expressed concern about the investor-state provisions of trade agreements and are concerned that by giving rights to investors to challenge government legislation or regulation that they believe unduly adversely affects their financial interests, this may in some way negatively impact the ability of governments to take bona fide decisions to legislate and regulate the public interest.

Some examples of that include government legislation on the environment, or on our natural resources or social policy.

We have seen claims in the world filed in this regard, whether it's a challenge to plain packaging laws for tobacco companies in Australia, or a challenge currently in Canada by a company that is challenging the moratorium on fracking adopted by the Government of Quebec. It is a real concern.

What this amendment would do for greater certainty, Mr. Chairman, is to make it clear that nothing in this act affects the powers of the Government of Canada or of provincial, municipal, or first nations governments to enact legislation in the public interest. It would make it absolutely clear that when it comes to investor rights or trade agreements that the sovereign right of government to legislate or regulate bona fide in the public interest is unaffected.

I would conclude by saying that a response of those who favour ISDS provisions is often that they have taken care of the right to regulate in the public interest and that's clear in the agreements. When I read the agreements I don't think it's as clear as this. This amendment would make it crystal clear.

[The Chair, Conservative, Randy Hoback]

Thank you, Mr. Davies.

Mr. Cannan.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

I appreciate my colleague's perspective. When I read it, I thought his proposed amendments, rather than providing for greater certainty, actually created more ambiguity and confusion in interpreting this act and agreement, given the absence of such a rule of interpretation in Canada's previous implementation acts. I'm not clear why the language in the federal statute would refer to legislative powers of provincial, municipal, or first nations governments.

This agreement, like other free trade agreements Canada has entered into, includes reservations and exceptions where additional policy flexibility is required to address sensitive areas such as health, safety, the environment, and the provision of preferences to aboriginal people.

In conclusion, Mr. Chair, I think this is unnecessary because Canada's free trade agreements are negotiated and drafted to ensure that governments retain their right to regulate in the public interest. I think that's so important as long as the measures are applied in a non-discriminatory and non-arbitrary manner.

[The Chair, Conservative, Randy Hoback]

Any further debate on clause 5.1, amendment NDP-1? All in favour?

(Amendment negatived [See Minutes of Proceedings])

We'll move to clause 6, and then clauses 7 and 8.

(Clause 6 agreed to)

(On clause 7—Purpose)

Mr. Davies, on amendment NDP-2.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you again, Mr. Chairman.

Mr. Chairman, it's quite common in Canadian provisions and trade agreements on the environment to provide a number of obligations on both parties. One of them, that I have read in previous agreements, makes it very clear that the parties to the agreement are legally obligated not to reduce or in any way degrade their environmental standards or regulations for the purpose of attracting trader investment.

The environmental provisions in this agreement do not contain a clear enough provision in that regard, so my amendment is to provide that clarity. The amendment says:

For greater certainty, in relation to the objective referred to in paragraph 7(f), no federal law establishing environmental protection standards may be repealed—or amended so that its effect is diminished—in order to facilitate increased investment under the Agreement.

Mr. Chairman, I don't think that this is inconsistent with the chapter on the environment or with any of the objectives of the party, so I don't think either the Government of Korea or the Government of Canada would have any objection to this kind of clarity.

I would respectfully submit that this improves the chapter in this regard.

[The Chair, Conservative, Randy Hoback]

Mr. Richards.

[Blake Richards, Conservative, Wild Rose, AB]

Although I appreciate the thoughtfulness in the amendment, I think it's another unnecessary amendment, Mr. Chair. As with previous agreements, there is already a provision in the environment chapter that prohibits parties from wavering or derogating from their environmental law to encourage trade or investment between the parties.

There is also a provision in the investment chapter that discourages derogation from environmental measures, and also includes health and safety and other measures that would be in order to encourage investment. I think what he's suggesting here is unnecessary.

[The Chair, Conservative, Randy Hoback]

Any further debate?

(Amendment negatived [See Minutes of Proceedings])

(Clauses 7 and 8 agreed to)

(On clause 9—Agreement approved)

On clause 9 and amendment NDP-3, Mr. Davies.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chair.

Mr. Chair, this amendment would remove from the Canada-Korea trade agreement all of the provisions respecting the investor-state dispute settlement mechanism.

We could probably spend quite a long time debating the pros and cons of investor state, which I don't propose to do here today.

What I will do is summarize a couple of concerns. Investor-state provisions, in effect, allow investors to take disputes over the agreement not to the domestic courts of either jurisdiction, particularly the jurisdiction in which it is alleged that there is a violation of the agreement, but rather to an international tribunal that is outside the domestic sovereign court systems of the parties to the agreement.

It is my understanding that this originated in chapter 11 of the Canada-U.S. Free Trade Agreement and then NAFTA. One of the reasons for that was because at that time Mexico, one of the parties, was not considered to have a judiciary that was considered to be robust enough. Their commitment to the rule of law was not such that the parties would have confidence that they could get a fair adjudication of their claims in Mexico.

What's happened, in my view, is that investor-state provisions have made their way into all trade agreements, even when the signatories to the agreement have mature judiciaries, established rules of law, fair court systems with attributes like security of tenure for the adjudicators, and solid appeal systems, and where the people of the country can be quite satisfied that litigants appearing before the court get a fair hearing. I think that's the case in both Canada and Korea.

So the case to be made for the investor-state provisions is not present in this case, particularly when the risk of the investor-state provisions is that we are subjecting Canada to potentially massive liabilities by investors to be heard before foreign tribunals that we are not confident have security of tenure; for which we're not confident that there is an effective appeal mechanism; and where judgments could be made against the Government of Canada, subjecting taxpayers' dollars to liability when those claims, we think, should be more properly adjudicated in the Canadian courts or the Korean courts.

I would urge my colleagues to support this amendment and remove the ISDS provision from this agreement.

[The Chair, Conservative, Randy Hoback]

Mr. Cannan.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

You shouldn't be surprised that we're absolutely opposed to this amendment because the investor protection provisions are the cornerstone of a modern trade and investment agreement, as we've heard from Mr. Burney and a number of staff who've appeared at this committee over the years.

The fact that the NDP want to remove this component is, I would say, very disappointing. The fact that we'd send the negotiators back, and the January 1 effective date would be delayed because they'd have to renegotiate the agreement, is basically anti-trade. You'd be cutting the premise of the agreement.

We talked about providing fairness and equality. This basically is, as I said, the rule of law. We have fairness in interpretation of all our agreements.

I can understand Mr. Davies looking after his core supporters, in particular from some of the unions and some of the anti-trade groups that have appeared over the years. But it's not in the best interest of, I believe, hard-working Canadians. We even heard from one of the unions that presented here last week—or earlier this week—at our committee. This agreement is in the best interests of Canadians. We fully support this investor-state provision in this agreement and our 21st century agreements as we move forward.

We'll be voting against this amendment.

Thank you, Mr. Chair.

[The Chair, Conservative, Randy Hoback]

Mr. Davies, do you have a quick rebuttal?

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chair.

I will rebut that a little bit.

The New Democrats believe that the Canada-South Korea agreement is good overall for Canada. There's no question about that. Our amendments are, in our view, intended to build on that good agreement and make it stronger, so they're not anti-trade at all.

The other thing I would point out is that we also believe that investors need to have protection. The question that we raise with this amendment is: in what venue are investors to enforce their claims? According to this agreement, they get to enforce their agreements in international tribunals, not in domestic courts. We agree that investors should have protection, but we see no reason why a Korean investor who's aggrieved by a Canadian government decision shouldn't have to establish and prove that claim in a Canadian court, where we have every belief they'll be treated fairly. And vice versa for a Canadian investor in Korea.

My final point would be that one thing these kinds of provisions do is give extra rights to Korean investors that Canadian companies don't have. Domestic Canadian companies that have disputes over commercial agreements have to use the Canadian court system, but international investors are allowed to take their claims to an international tribunal. We don't think that's fair to Canadian corporations.

[The Chair, Conservative, Randy Hoback]

Thank you.

Ms. Liu, quickly.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

I'd just like to add my comments in support of Mr. Davies' amendments. I think the Conservatives have failed to make the case as to why it's a necessary part of this trade agreement between, as Mr. Davies mentioned, two countries whose judicial systems are very robust. I think the fact that it's taken for granted is something we should question. In fact, countries across the world, among others Germany, are actually putting into question the need to have ISDS in trade agreements. I don't think it's something we should take for granted. I'd like to second all of Mr. Davies' comments.

[The Chair, Conservative, Randy Hoback]

Thank you.

Mr. Shory.