International Trade Committee on Feb. 29th, 2024

[Stephen Potter]

I agree that there was violence.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

We've made progress, as you refused to denounce it at the time.

My time is up. Thank you.

[The Vice-Chair, Conservative, Kyle Seeback]

We'll now go to Mr. Cannings for six minutes.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

Thank you, Ambassador, for being here with us today. In many ways, I envy you. Ecuador is one of my favourite countries, and I have dreamed, several times in my life, of spending more time there and living there for extended periods. I have not had that opportunity, though, so I envy you.

I just want to follow on with what Monsieur Savard-Tremblay was talking about.

There seems to be a pattern of.... First of all, we have Canada as a major investor in Ecuador, and it seems the major part of that investment is in mining. Canada's big interests in the country, and presumably in this free trade agreement, revolve around that fact.

We have a history in Ecuador of a previous government basically tearing up all its free trade agreements that had investor-state dispute mechanisms in there, because it had bad experiences with them. They tried to change human rights legislation or environmental legislation, and they ended up being sued by those companies and facing very hefty damages, so they said, “We want to have that sovereignty back. We're going to get rid of that. It's in the constitution that you can't do that.”

I asked this of a previous witness. We have, in one sense, Canada saying that we need this investor-state dispute mechanism in here to protect, I would argue, largely, our mining companies that are active there, because they don't want a government in the future to say, “Actually, we want to protect our people. We want to protect our environment.” However, we're going to have, I'm sure, chapters in this agreement that say we have to protect human rights, the environment, labour laws and women.

I just have real trouble squaring that circle whereby we're in one sense trying to protect Canadian companies that have had—and I don't think you can dispute this—a very checkered past with regard to human rights and the environment and trying to have a modern free trade agreement that seems to be trying to do both things at once.

I don't know if that's too broad a question, but help me understand what the Canadian priorities are here. Are we going to protect the people of Ecuador, or are we going to protect Canadian mining companies?

I'm sorry. I'll just let you answer.

[Stephen Potter]

I'll let my colleague chime in after I make a couple of comments, if he wishes.

First of all, I would invite all members of the committee to visit us here and land at the airport that was built by the Canadian company Aecon, which is also protected by an investment agreement and where there has been a dispute.

Most importantly, the Government of Ecuador wants ISDS as part of this agreement, and I think it has the capacity to negotiate hard for adequate protections, as my colleagues have mentioned before, against changes in legislation in the future. It feels it is not competitive with other countries in the region as a destination for investment, and it would like this in there.

Although the ISDS is not currently part of the framework here, despite what other witnesses have testified to in past sessions, each project here is protected by an investment protection agreement that is negotiated separately. Even without ISDS, companies will be looking for bilateral investment protection agreements, because, as I mentioned, they're making huge investments here.

With the Las Naves project that was mentioned, which is $282 million over the next two years, the investors are looking for some sort of protection, particularly against arbitrary changes that would put their investments in peril.

Our government is interested in protecting Canadian investors. I think this is something that will need to be discussed between the two sides in the upcoming negotiations. Both parliaments will have an opportunity to ratify the agreements.

[The Vice-Chair, Conservative, Kyle Seeback]

You have 30 seconds.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Can I just jump in?

You say you want to protect against arbitrary changes, yet here we've been hearing about—whether you can call it arbitrary or not—a change to the constitution that will let the people of Ecuador decide how they want to protect themselves and their environment.

You can't argue both sides. I don't think so.

[The Vice-Chair, Conservative, Kyle Seeback]

Unfortunately, we're out of time. Being mindful of the time, because we're almost at a quarter to, perhaps the ambassador could answer that in a different round of questions.

Colleagues, we're in the second round, which should take 20 minutes, but we don't have 20 minutes, so I'm going to propose that we do just the first round of questions. We'll give five minutes to the Conservatives, five minutes to the Liberals and two minutes each to the Bloc and the NDP, and then we're done. We won't go back to the Conservatives and the Liberals.

Is that okay with everyone?

[Some hon. members]

Agreed.

[The Vice-Chair, Conservative, Kyle Seeback]

Excellent.

We'll turn to you, Mr. Baldinelli, for five minutes.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Chair.

Thank you, Ambassador, for being with us.

Mr. Foster, thank you for being with us as well.

I'm going to follow up on some of the questions that were asked earlier by my colleague with regard to the formal negotiating mandate and how that is derived.

Ultimately, you indicated that it emanates from the cabinet. Right now, you mentioned that exploratory discussions are taking place between Ecuador and Canada. You're sharing templates and other past agreements that Canada has entered into, because we asked the question with regard to carbon pricing and whether or not the inclusion of carbon pricing has been discussed. You mentioned that it has been, probably through those exploratory talks and the sharing of previous agreements.

Could you share what the views of Ecuador have been on that being raised?

[Dean Foster]

I would say the exploratory discussions really played out until the summer and the start of the fall, and the particular debate around carbon pricing co-operation provisions hadn't really come up yet in terms of the Ukraine process.

What I can say is that Ecuador is very keen to pursue environment provisions in an agreement, but I don't think we touched on carbon pricing specifically in the exploratory discussions.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

I ask that, Ambassador, because in your opening remarks, you mentioned that a free trade agreement with Ecuador was “more than a trade deal”. It would help bring about stability, and stability would bring about economic growth. However, if you look back at the history of Ecuador, in 2019, when the government at the time reduced fuel subsidies, there were riots in the streets. Again, the government in Ecuador declared a state of emergency on January 8, 2024, and a nationwide state of internal armed conflict on January 9, 2024.

Seeing the instability raised by such issues as riots for fuel subsidies, do you think it would be wise for the Canadian government to propose adding a carbon tax to a trade agreement with a country that has stability issues right now? If anything, Ecuador is looking to reach agreements to bring about stability.

I'll go to Mr. Foster first.

[Dean Foster]

I guess I would start by saying that Canada will not, and has not, imposed a carbon tax through any trade agreement. We have included, in one instance, co-operation-based provisions with the words “carbon pricing”, but about climate change more generally, that commit parties to getting together and talking about climate change policy.

With regard to the facts on the ground, I would defer to the ambassador.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Ambassador, I want to pose a quick question. You made an interesting comment about this being more than a trade deal, that it would help bring stability and that stability would bring economic growth, but with the lack of stability that we see on the ground right now.... How can we encourage Canadian firms to want to invest unless there's stability now?

[Stephen Potter]

Yes, the honourable member is absolutely accurate that we're looking for stability and that the government is looking for stability. A free trade agreement with Canada and with other countries is part of bringing that stability and part of bringing new investments to Ecuador.

I could mention that the issue of the reduction of fuel subsidies is on the agenda. Right now, at least $5 billion a year out of the national budget goes to fuel subsidies. Many parties in the government and in the assembly are interested in reducing that to help build fiscal stability within the country.

[The Vice-Chair, Conservative, Kyle Seeback]

You have 30 more seconds.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

I will cede my time.

[The Vice-Chair, Conservative, Kyle Seeback]

Then I'll take your time, Mr. Baldinelli.

Mr. Foster, has an economic analysis been done on what the potential gains in trade between Canada and Ecuador would be for Canada? If so, could you table that analysis for the committee, so that we understand what the actual potential economic gain is? So far, no one has been able to tell us what that would look like.

[Dean Foster]

An initial economic analysis has been undertaken. I believe we intend to share a summary. If one has not been shared already with the committee, we will endeavour to do so.

[The Vice-Chair, Conservative, Kyle Seeback]

It hasn't been, so please share.

We will now turn to Mr. Arya for five minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Mr. Chair.

Ambassador Potter, my question is for you. Whenever a massive investment is made in any country, whether in Asia, Africa, Latin America or even Canada, especially a democratic country, there will always be some people opposing it. For example, in Quebec, the Swedish company Northvolt is investing billions of dollars in starting up a battery plant. Some Canadians are opposing that project. Similarly, in Ecuador, when Canadian companies make massive investments in mining operations, a few thousand people may object.

In your opinion, considering the economic potential for Ecuador and the economic benefits brought to the country and its people, and considering the social infrastructure built in Ecuador due to this economic investment, do the majority of people in Ecuador and the government, duly elected by the majority of people in Ecuador, welcome these investments in the mining sector?

[Stephen Potter]

It's difficult to judge. I've been reaching out to members of the assembly and to the government, of course. In those contexts, there is strong support for responsible mining investments and for the reduction of illegal mining, which is becoming an increasingly important issue.

These issues are decided through processes in Ecuador, some of them democratic processes like referendums and elections, and others at the local level, where there are consultations and processes for community participation.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Ambassador.

Mr. Foster, sometimes we have heard the view that Ecuador is a small market, so why should we spend our time negotiating a free trade deal? Firstly, in your opinion, whether or not it is a big trade agreement like CUSMA, CETA or the CPTPP, with Canada being a trading nation, and with over 67% of our GDP coming from international trade on which our prosperity relies, do you think we have to focus on where the opportunities are available to have free trade agreements that can benefit our small exporters, like farmers or agricultural food manufacturers?

Secondly, if we don't have agreements wherever it is possible, are we going to open the doors to the competitors of Canadian exporters to have free trade agreements in those countries?

[Dean Foster]

With regard to the first question, through the course of the exploratory discussions and public consultations, what we've determined is that it is worthwhile to proceed with this negotiation and essentially to add it to a longer-term regional strategy that has been going for 25 years, really, alongside others in the Andean and Latin American region, like Chile, Peru, Colombia, Panama, Costa Rica, Honduras, Mexico—and above it, if you think about it that way, as a puzzle piece available to complete FTA coverage on the Pacific coast of Latin America. What we have found is that most of the interested exporters, in particular, see it as an additional market in a region that they are already exporting to or are interested in considering beginning to export to.

On the second one, of course, we basically have floor-level coverage through the World Trade Organization rules with a country like Ecuador. If we proceed with the FTA, we will have an advantage competitively over countries that don't have an FTA, like the United States. Conversely, if we don't, we would have a disadvantage vis-à-vis economies like the European Union, Chile and soon South Korea, which do have free trade agreements with Ecuador.