Debates of Sept. 30th, 1998

Equalization

[Tony Valeri, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, it is a pleasure to rise and speak on behalf of the government in response to private member's motion 424.

The motion deals with two of the most important attributes that make both Canada and its federation unique: first, the economic significance of the resource development project and, second, the efficient and equitable system of transfer programs that form the heart of Canadian federalism, in particular the equalization program.

The role of financial transfers in the Canadian federation has a long and rich history. Built on the spirit of a Canadian fraternity our system of transfers illustrates the willing co-operation and coordination which has long become a Canadian trademark that is the envy of federations around the world.

In a recent report to parliament the auditor general referred to the program as one of the main successes of the federation. For over 40 years the federal government has fulfilled its constitutional responsibility to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services and reasonably comparable levels of taxation through the equalization program. It is an example of how the Canadian federation has and will continue to work well.

I confirm to the House once again that the government is committed to the ongoing sustainability of programs as important as the equalization program. As we enter a new era of government financing it is critical that we continue to do what is most important to Canadians and to do it in the most efficient and equitable way possible.

With reference to the motion before us, let there be no doubt that natural resources have long been a staple of the Canadian economy. From coast to coast to coast since the first settlers arrived from Europe in the 15th century, even prior to European settlement on this continent, natural resources formed the heart of aboriginal economic development. From forestry to nickel, from oil and gas to sand and quarrying, natural resources have been the foundation of Canadian economic success for centuries. They are under our constitution an area of provincial jurisdiction.

The sustainable development of our rich natural resources is crucial to provincial economic growth, and sustainable economic growth is critical to fiscal stability and autonomy for all provinces. The government is committed to supporting all efforts by provinces and regions to develop their economies and to promote the sustainable development of our rich natural resources.

The motion presented to the House is concerned with the reductions in equalization payments that occur as revenues from natural resource development projects come on stream. There is no doubt that the government wants to work co-operatively with provinces but I think we must be clear. The government believes it is crucial that such economic development projects go ahead on their own merit. Such economic development projects must go ahead because they make good economic sense and not simply because of government subsidies. This is why we must keep strong, effective programs such as equalization separate from individual provincial economic development decisions.

Equalization is an unconditional transfer that provides provinces with resources to support economic development projects. The federal government does not say where such resources must be spent. Decisions on how to allocate such revenues are at the discretion of provincial governments. In this way equalization is a central component by which co-operative economic development takes place within Canada. Provinces that require support receive such financial support with the maximum amount of flexibility to use as they see fit. Equalization must maintain its transparency, sustainability and underlying principles of fairness.

It works according to a formula approved by parliament that applies equally to all provinces. The amount a particular province receives is determined by a statutory formula and not by the political pressures of the day or a particular development project. As the province's fiscal capacity goes up its equalization entitlements go down. As a province's relative fiscal capacity goes down entitlements go up. It is the way equalization has worked for over 40 years. It is this principle that applies to all equalization receiving provinces. The formula is the very basis of the program.

We cannot compromise a formula driven program that applies to all provinces equally by treating some provinces better than others. This motion would do just that. Compromising the program for one province would undo the 40 years of successful co-operation and sharing that characterizes the equalization program.

As Canadians we are there for each other. We help each other out when times are tough. We saw this in the aftermath of the floods in Manitoba and Quebec last year and in the ice storm in eastern Ontario and western Quebec during January 1998. It is in the same spirit that the equalization program works. When times are tough, when times are bad, equalization payments increase but as a province's economic situation improves its equalization entitlements are reduced. Even when times get better the equalization program has the added benefit of protecting provinces against large, year over year reductions in entitlements.

There is a floor provision that applies to all provinces which ensures not only the predictability of the program as a whole but also that provinces which experience growth will not be immediately or adversely affected by reductions in equalization.

In addition to this protection, Nova Scotia and Newfoundland have traditional protection for revenues that result from offshore developments. Under the Canada-Newfoundland offshore accord signed in the early 1980s, Newfoundland is granted transitional protection against equalization reductions. It lasts for 12 years. It allows the province to benefit from natural resource development projects. Under the Canada-Nova Scotia offshore accord Nova Scotia is also granted transitional protection.

Under the current agreements and arrangements Newfoundland would benefit substantially from the offset arrangements already in place. It ensures that Newfoundland's overall physical position is not significantly impacted and that the provincial economy will benefit from job creation, higher incomes and stronger, more lasting growth. This protection is on top of the expected increase in revenues that the province would derive from the project through royalties and taxes.

Further, the federal government also supported the development of Newfoundland's natural resources through other means, including the $195 million coming from the Canada-Newfoundland offshore development fund, over $2 billion from the petroleum incentive program and over $1 billion in federal cash contributions, interest free loans and loan guarantees entrusted toward the development of Hibernia. This is on top of the fact that both Newfoundland and Nova Scotia have historically been the main beneficiaries of equalization.

Together these arrangements show the extent to which the federal government is an active partner in supporting natural resource development projects that make for long term economic success in the provinces. The current equalization agreements clearly allow for provinces like Newfoundland to benefit significantly from such projects.

As I said earlier, equalization is a program that works and works well. It is one of the most established and successfully recognized transfer programs of the Canadian federation. It is distinctly Canadian. It is about ensuring that all Canadians, regardless of where they live, have access to the same kind of government programs and services at comparable levels of taxation. For 40 years the program has been there for provinces when regional economies faltered. It will continue to be there in the future.

Even when we were forced to reduce expenditures during our deficit battle the equalization program was not touched. Why? It was because of its importance to Canadians from coast to coast to coast. Compromising national programs for the sake of any particular province does not make a strong federation. Canadians want strong national programs that are efficient and equitable. Equalization as an enduring program fulfils these criteria. The government will ensure that it is sustainable, transparent and fair to all Canadians.

It is for these reasons that I urge my colleagues to reject Motion No. 424.

[Jason Kenney, Reform, Calgary Southeast, AB]

Mr. Speaker, I am pleased to rise in debate on Motion No. 424 regarding equalization put forward this evening by the hon. member for St. John's East. I commend the hon. member for his hard work on this matter and his diligent representation of the interest of his province and constituency. I think the member is well known for such diligence.

The motion seeks to end what the member characterizes as a decrease in equalization payments to provinces that see an increase in revenues through resource development projects.

In this case he is referring to the projects recently off the ground in Newfoundland such as Hibernia, Voisey's Bay and others. All Canadians take some gratitude in the fact that we now have some real economic development in terms of natural resources happening in these areas of Newfoundland. We all hope that these developments will signal a new and brighter economic future for the people of Newfoundland and Labrador.

The motion addresses the question of equalization. It seems to us that equalization formulae already take into account the possibility of provincial revenues growing from within the resource sector. There are already in place floors to protect provinces from variations in the reductions from equalization as a result of increases in the provincial resource tax base.

A province with a relative per capita fiscal capacity less than or equal to 70% of the national average in the equalization formula is entitled to a floor protection of 95% of the equalization entitlement of the previous year.

In the case of Newfoundland, which has already signed agreements with the federal government applying to resource projects initiated by the Hibernia project but also applicable to White Rose in Voisey's Bay, this means that in the short run Newfoundland may lose just 5 cents in equalization for each new dollar in resource revenue and that in the medium run it may lose less than $1 or about 70 cents in equalization payments for each new dollar in resource revenues. In other words, a transition mechanism is already built into equalization to smooth resource driven declines in equalization entitlement.

If the capacity of a province to raise revenues increases then its equalization entitlement should decrease, which is what the current formulae allow for. However that decrease is smoothed out over time. It is not jarring. It does not happen too quickly so provinces should have the ability to adjust.

The hon. member appealed at the end of his remarks for a new deal in Confederation based on true equality among Canadians so that all people would be treated equal. Those of us in the official opposition could not agree more strongly. We advocate the principle of equality as the basis for any true and lasting union in our Confederation.

However, the kind of equality that we speak of in economic terms is equality of opportunity and not equality of outcomes. It is simply not possible for this or any other government to guarantee equality of outcomes in terms of the economic situation of various Canadians. We can try to provide a basic level of equality of opportunity, and that is what the current equalization system attempts to do.

The problem with the hon. member's motion is that it would seek to treat Newfoundland differently from all other provinces. The money that comes from equalization payments does not just come from out of thin air. It does not grow on trees. It is not just printed by the Bank of Canada. It is money that is taxed from certain Canadians and redistributed to provincial governments in other parts of the country. In this respect I do not believe that equalization is necessarily the most efficient means of creating equality of opportunity and redistributing income.

There are people in my constituency in Alberta of modest income. They work hard and carry a very large tax burden, yet part of the federal taxes they pay to Ottawa are redistributed in the form of equalization payments to citizens in other provinces, which in the sense of fairness that Canadians pride themselves on is a reasonable principle. Except what you end up with is the aberration of lower income working people paying taxes to Ottawa in areas like Alberta, Ontario and British Columbia in order to subsidize public services that upper income people benefit from in other provinces such as Newfoundland and Quebec and the other so-called have not provinces.

This is not an equitable form of redistribution. It is difficult to believe that in a country like Canada, being one of the wealthiest countries in the history of the world, there are seven have not economically disadvantaged provinces.

We accept the principle that we need to assist those who are going through difficult times such as people in Newfoundland and Labrador. We do not accept the principle that there are seven have -not provinces which should always be guaranteed a transfer from the taxpayers of other provinces. That is why we would propose to readjust the equalization formulas to focus benefit on the four poorest provinces as opposed to the seven provinces which are currently characterized as have not.

In so doing, by changing the incentives in the equalization system we hope to remove the potential for the so-called welfare trap effect taking place. There is now a disincentive for provincial governments to broaden and deepen their tax bases because if they do so they lose some of the equalization payments. What is needed are greater incentives for serious private sector economic development which can create meaningful sustainable jobs for the people of the economically disadvantaged regions.

For 30 years we have followed an economic approach in places such as Newfoundland and Labrador predicated on government intervention, on enormous subsidies and transfers. As a result we have seen unacceptably high levels of unemployment and unacceptably low levels of economic development. If we look to those areas of the country which have relied more on policies that are oriented toward private sector investment and lower taxes, greater incentives for people to work, save and invest, what we see in such jurisdictions as Alberta are the lowest levels of unemployment and the highest levels of growth.

We ought to look to the recent economic history of Confederation to suggest that continuing the enormous subsidization of regional economies does not create real jobs or real opportunities. Unfortunately that is why so many people from the province of Newfoundland and Labrador are leaving, because of a lack of economic opportunities. They are moving to, for instance, Alberta which has for the past many years has pursued quite a radically different approach to economic development, one of lower taxes, less intervention and fewer subsidies.

I close by commending the hon. member for the sentiment behind his motion and his effort to speak on behalf of what he regards as the best interests of his constituents. However, in the true interests of equity and fairness across the country we cannot change the rules of equalization when a province is starting to see some broadening of its tax base. We must treat all provinces with some degree of equity. For that reason we would like to reform equalization but not by creating a double standard where a province can see higher own source revenues and continue to be subsidized by Ottawa.

[Bill Blaikie, NDP, Winnipeg—Transcona, MB]

Mr. Speaker, it is an interesting debate.

It was interesting when the member responsible for the subject being debated in the House was speaking, but it is always more interesting after the member from the Reform Party gets up. We hear in his comments on the proposal the not so hidden but explicit agenda of the Reform Party with respect to equalization.

I do not agree with the hon. member from Newfoundland with respect to his proposal for some of the reasons that have been outlined in previous speeches on the government side and on the official opposition side, that it would be a mistake to make this kind of exception. It could prove over the long term to be the undoing of the equalization payments program we have in this country, a concept and a program that Canadians should be reminded is in the Constitution of Canada. This is not some ad hoc or even long term contingent decision of successive Canadian governments. The principle and policy of equalization payments was enshrined in the Constitution when we patriated the BNA Act in 1982. I was in the House at the time and remember well that this was one of the concerns that many of us had, that when the Constitution was patriated the principle of equalization would be enshrined and therefore beyond the reach of governments which, for whatever reason, might have wanted to do away with the principle altogether.

I think it is a great principle and I think it is too bad that we cannot bring ourselves to treat each other the way we have decided to treat each other when we consider ourselves as provinces. In other words, we have this principle in the country that all provinces shall basically have a guaranteed adequate income in order to provide, if I remember the wording correctly, reasonably comparable services to all Canadians no matter where they live.

I say that because the member from the Reform Party repeatedly talked about equalization payments as having something to do with economic opportunity and equality of opportunity. Only in a very indirect sense, because equalization payments are not about equality of opportunity, except in so far as they may be about a reasonably comparable level of educational services or a reasonably comparable level of heath services or a reasonably comparable level of many other kinds of services provided by the provincial government. But it does in the end have to do with the provision of services by the provincial governments so that provincial governments, no matter what province they may be the government of, can provide this reasonably comparable level of service.

I think that is a principle we need to preserve and extend into the way we treat each other as individuals so that all Canadians as individuals and not just their provinces might be guaranteed a reasonably comparable standard of living no matter where they live.

It was interesting to hear the member from the Reform Party who talked about Albertans being taxed so heavily. Is this not the province that does not have a sales tax? I always get a bit of a charge out of hearing people from Alberta say woe are the Albertans because they are so heavily taxed. They do not have a sales tax. Whatever taxes they do have are ameliorated by the income that has come from the energy sector there over the years. It may be going down now, but this may be because, contrary to the rhetoric of the hon. member, it is not just in various imaginary socialist worlds that governments subsidize industry. What about all the money in Alberta that has been lost subsidizing capitalists like Peter Pocklington who liked to go around badmouthing government and badmouthing subsidies and badmouthing intervention in the marketplace but have been more than willing to step up to the trough when it was their turn.

It not just amused me but actually infuriated me that I have had to listen to so much anti-government intervention rhetoric over the years here from Alberta members of parliament when successive Alberta governments, Progressive Conservative governments in particular, have been more than willing to put all kinds of public money into various private ventures and not, I might say, with a great deal of success. So spare us the false dichotomy between those on the right who are so prudent with the public's money and those on the left who allegedly are otherwise.

The record will show that governments on the right have been frivolous and even outrageous with the kinds of the money they have been prepared to put into the business ventures of their friends. It is not that we intervene in the marketplace. It is that we intervene in the marketplace on behalf of somebody who is not our friend. That is the real offence of the right-wingers in this country. If it is done on behalf of friends it is trying to help the economy along, trying to create the right climate, all that sort of thing that we have had to listen to for years.

I am also concerned about an argument that I heard just the other day. We need to be aware of this as there is some truth in it. Those who supported the free trade agreement should be concerned about it. I heard that Professor Thomas Courchene said, I think at a C.D. Howe Institute forum, that over the long term the erosion of east-west economic and political ties in the country and the strengthening and expansion of north-south ties would erode the willingness of Canadians in the so-called have provinces to participate in equalization.

His argument was that in the previous Canadian context if money was going from Ontario, Alberta and B.C. to other provinces and they were spending that money they would be spending it in a national economy. The money would return to Ontario, B.C. or whatever in the form of purchasing goods or commodities coming out of those so-called have provinces. The long term effect of the free trade agreements would be that this no longer would be the case. Money coming from Ontario to Manitoba would not be turned around and spent in Ontario again. There would not be this effect that there used to be. The money would be spent somewhere else, probably buying something made in the United States or Mexico or in the global economy given the effect of globalization.

It is a very interesting argument and one that bothers me. It is not something I would like to see. It points out once again all the unintended side effects of entering into these agreements which at the time many people warned would have the effect of breaking down certain traditions within the country and certain ways of viewing each other and relating to each other.

Equalization is one of the primary ways we have of relating to each other as Canadians through the principle that all Canadians no matter where they live should have provincial governments that are fiscally able to provide a reasonably comparable level of service. Anything which poses a danger to this should be of concern.

I have noticed in the past that Mr. Courchene has often been the harbinger of bad policy and things that when we first heard them we hoped they would never come true but then 10 or 15 years down the line they are conventional wisdom. I hope his current reflections on the equalization program do not belong in the same category.

[Norman E. Doyle, Progressive Conservative, St. John's East, NL]

Mr. Speaker, I am very pleased to close the debate. I thank all hon. members for their submissions in this debate. I am not surprised that there is very little agreement among members especially from have provinces to change the equalization formula.

With respect, the government member who spoke talked around the problem of equalization. He talked around the motion. We are all very much aware of how the formula came about. He offered very little help and very little advice about how the formula could be changed to reflect the very real economic problems of the have-not provinces in this nation.

Simply put, we need economic development and jobs. We need to maximize the impact of any resource development on our economy and on the provincial treasury. We in Newfoundland and Labrador have lost a lot in our economy due to federal government cuts in programs and personnel. We are seeing the spectacle of every new resource dollar being clawed back, being subtracted dollar for dollar from our nearly $1 billion in equalization payments. As I said earlier in the debate, the Hibernia development is an exception. From those revenues, we will only lose 70 cents on the equalization dollar.

We need the equalization formula improved. This improvement needs to be applied to the other resource developments as well. That is the whole point of the motion, a change in the equalization formula. If there is no change, there will not be a catching up. There will not be a chance for equality of the provinces unless there is some recognition of the fact that the very pool of money made available by the federal government through equalization to keep provinces from starving is the same pool of money that will keep them permanently poor.

I am not saying that we should put in place a new equalization formula for ever and a day. I am saying that we should work out an arrangement for have-not provinces that will see resource revenues clawed back on a more gradual basis. For example, there could be a 50% clawback on a development such as Voisey's Bay and maybe a 35% or 40% clawback on a development like Sable Island. That way there would be an opportunity to play catch up, to bring back to an acceptable level the employment rate and the quality of life for people who happen to live in a have-not province.

I am willing to listen to an alternative to that. If there happens to be no agreement on changing the equalization formula, maybe in the next budget some alternative measures could be taken to help the economically deprived provinces of which I belong to one. I do not expect to change the world today but I want the people of Canada to know that the current equalization formula is taking one step forward and one step back. If that is the case, how can we ever get ahead, how can we equalize, how can we catch up?

[The Deputy Speaker]

Order, please. There being no further members rising for debate and the motion not being designated as a votable item, the time provided for the consideration of Private Members' Business has now expired and the order is dropped from the Order Paper.

Do hon. members agree to call it 6.30 p.m.?

[Some hon. members]

Agreed.

A motion to adjourn the House under Standing Order 38 deemed to have been moved.

[Peter MacKay, Progressive Conservative, Pictou—Antigonish—Guysborough, NS]

Mr. Speaker, I am honoured to rise in the House and to follow the remarks made by my colleague from Newfoundland. He spoke very eloquently and no doubt is going to be a fine parliamentarian in the same vein as the speaker previous to him, my colleague the House leader of the New Democratic Party.

I am pleased to speak tonight with respect to the Liberal government's mishandling of what is now becoming the APEC security issue and the scandal surrounding it.

Day after day in this House, the Canadian public and we in this chamber have been subjected to the repeated evasions and diversions to questions about the role of the Prime Minister in this matter. There is also the matter of the government's selected perception as to the role of the RCMP Public Complaints Commission in investigating last November's crackdown at the APEC summit in Vancouver.

The issue extends well beyond whether the RCMP were out of line in security measures they used against protesters. It extends beyond the appropriateness of former Indonesian President Suharto even being here on an official state visit.

At the heart of the issue is the mounting evidence that the Prime Minister and his office staff interfered with the RCMP in the arrangement of security to basically placate the wishes of a foreign dictator, to avoid offending him. We have seen e-mails, memorandums and notebooks which express the wishes of the Prime Minister and his staff. They are referenced there quite clearly.

We have also witnessed the Prime Minister in the thick of the protest. Camera angles have caught him at that. Even the Prime Minister's assertion that he was not, in the words of the NDP, barking out orders, it certainly raises questions as to what was taking place at that time.

At the very least, the Prime Minister should be given the opportunity, and I suggest he has the opportunity, to rise in this House and clarify contradictory statements made about the handling of this affair.

A ministerial statement in the House is appropriate. That is why my colleagues in the Conservative Party and I have been calling for the Prime Minister to make such a statement in this House and clearly outline what role he played in directing the RCMP during the security at APEC.

That is why as well we put a motion before the justice committee to conduct an independent review of the relationship between the PMO and the RCMP to determine whether political interference occurred in APEC and whether there are grounds to look at this further and perhaps clarify the boundaries of what the Prime Minister's role should be in political interference when the RCMP are handling matters such as this.

Canadians rightfully want answers and the government continues to throw up smoke. It points to the inquiry conducted by the RCMP Public Complaints Commission into the APEC role as a means to get to the bottom of these questions.

Regardless of the commission's inquiry, nothing prevents the Prime Minister from speaking to this matter in the House. It would not interfere with the inquiry in any way, shape or form. In fact it might raise new questions for the commission to pursue.

I suggest the cloud that hangs over the commission further complicates the matter because the commission's mandate is intended to focus on complaints directed toward the RCMP. It has nothing to do with political interference. The commission is headed by a chairperson who has made political donations to the Liberal Party of Canada, thus bringing into question the arm's length integrity of that person, sadly.

The recommendations that that commission might make in any event are not binding. The report is then made to the RCMP commissioner or the solicitor general himself, thus further undermining the integrity of that commission.

Clearly what we need to have happen in this case is have the Prime Minister stand in his place in this chamber and give Canadians what they deserve: accountability and responsible leadership in government.

Canadians need an investigative process that is open, transparent and accountable and also has the appearance of such. I call again upon the government and the Prime Minister to clarify what exactly took place in Vancouver. Let us stop the stonewalling. Let us stop talking about what the commission is charged with doing and talk about what the commission is not charged with doing, and that is the accountability of the Prime Minister and political interference that is alleged in this matter.

[Beth Phinney, Liberal, Parliamentary Secretary to Minister of National Revenue]

Mr. Speaker, the public complaints commission was created by parliament in 1986 to act in the public interest in addressing complaints by the public against the Royal Canadian Mounted Police.

The commission is an independent civilian board. Each year it receives on average 1,000 complaints from Canadians about the RCMP. About 300 of these complaints result annually in independent investigations. The commission has a strong list of members and has carried out its mandate with integrity.

Opposition members of this House have charged that the public complaints commission will not be able to get to the bottom of the issues relating to the APEC summit because its mandate is too narrow.

The terms of reference in this particular hearing show clearly how broad the scope of an inquiry can be. The APEC panel will hear all evidence and will report on “the events that took place during or in conjunction with demonstrations during the APEC conference in Vancouver”.

The chair of the public complaints commission has stated that the panel will follow the evidence where it leads and that the scope of the investigation will be broad.

Any questions regarding the RCMP operations prior to and during the APEC summit are squarely within the scope of this hearing. Continued attacks on the ability of the PCC to investigate properly the APEC summit will undermine the integrity of this body, which I might emphasize has developed a strong reputation over the past 12 years for fairness and thoroughness in its deliberations.

Members should be aware that the government has provided additional funding to assist the commission to hold a very complex hearing in the public interest. This funding will, for example, cover the administrative and witness costs of the APEC hearing. A number of senior federal officials from, for example, the PMO and DFAIT will testify at the hearing.

I also stress that the government has co-operated fully, indeed has gone to great lengths with the commission's council for the release of documents. The government is just as interested as hon. members across the House in seeing a full and complete independent inquiry into security at the APEC summit.

[Bill Blaikie, NDP, Winnipeg—Transcona, MB]

Mr. Speaker, I rise pursuant to a question I asked of the Minister for International Trade in the House last week with respect to the decision taken by the government this summer having to do with the suit brought against the government by Ethyl Corporation under the conditions of NAFTA, whereby Ethyl was suing the government for $350 million on the basis that the government's decision to ban MMT, the gasoline additive, would cost Ethyl Corporation that amount of money in anticipated profits from the sale of MMT.

This was done pursuant to chapter XI of NAFTA in which we find one of the more insidious aspects of NAFTA, something that was not included in the Canada-U.S. Free Trade Agreement but which found its way into NAFTA. That is an investor state dispute settlement process whereby investors are able to directly sue governments in a way that they were never previously able to do with respect to trade disputes.

In the past, prior to NAFTA, a corporation, an American corporation in this case which felt that it had been unfairly treated by the Canadian government, would have had to persuade its own government to enter into a trade dispute settlement process with Canada. This now with NAFTA is not the case and Ethyl was able to proceed to sue the Government of Canada under chapter XI.

What happened this summer was that the government capitulated, settled out of court with Ethyl, paid $13 million and declared that it had been wrong on MMT.

This raises a couple of concerns. One is the environmental concern with respect to MMT, but the one that I am more concerned about today is the way in which the response of the government to the suit by Ethyl Corporation points out the weaknesses of NAFTA. I believe this is why the government settled out of court.

The government did not want it to go the full length of the process under chapter XI because had it gone the full length of the process and had the ruling gone against the government, as I think the government anticipated it might have, this terrible fundamental flaw in NAFTA would have been bared for all to see. It would have been revealed to be the kind of mistake that it truly is.

Instead of allowing this to proceed and having that revealed for all Canadians to see, the government decided to settle out of court, blame its decision on another ruling having to do with the internal trade agreement between the provinces in Canada and duck altogether the possibility that this terrible weakness in NAFTA would have been revealed.

I asked the minister of trade if in that light, having learned this about the agreement, he was now prepared to say that the government would not be pursuing a multilateral agreement on investment which included this investor state dispute settlement process because the MAI, as it is currently outlined, would extend this provision to investors in all OECD countries. Instead of just American corporations having the power to bring suit against the government, it would be all countries of the OECD.

What kind of answer did I get? The minister got up and said “This never went to a NAFTA dispute settlement panel” and then she sat down. I never said it went to a NAFTA dispute settlement panel. That is an entirely different matter, an entirely different aspect of the agreement.

What I said had to do with the investor state dispute settlement process and I never received a decent answer from the minister on that.

[Beth Phinney, Liberal, Parliamentary Secretary to Minister of National Revenue]

Mr. Speaker, the government's decision to delist MMT responds to a ruling by a panel established under the agreement on internal trade, AIT.

This panel determined that the Manganese-based Fuel Additives Act was inconsistent with the federal government's obligations under the AIT.

In the light of the government's response to the panel's recommendation, the government also moved to resolve Ethyl Corporation's NAFTA claim and Ethyl Canada's challenge in the Ontario court. Ethyl has terminated its legal actions.

Studies in Canada and the United States are proceeding on the impact of MMT on health and the environment. If subsequent federal government action is warranted, it will act using the Canadian Environmental Protection Act.

The government's right to regulate in the public interest is not in question. NAFTA is consistent with Canada's sovereign right to regulate in the public interest respecting public health, environment and the safety of Canadians.

In the investor state proposals under discussion in the MAI negotiations, Canada continues to favour open and transparent processes which reflect high standards of procedural fairness compatible with Canada's legal practice.

The government's position is clear. Nothing in the MAI would prevent the government from regulating in the public interest. This includes legislation to protect our environment, our labour standards and our health and social services.

In April, together with other OECD countries, Canada confirmed that the MAI must be consistent with the sovereign responsibility of governments to conduct domestic policies and not inhibit the normal non-discriminatory exercise of regulatory powers by governments.

The Government of Canada will only sign an agreement if it protects and promotes our national interests. This includes our sovereign right to regulate in the context of protecting the health, safety and environment of Canadians.

[The Deputy Speaker]

The motion to adjourn the House is now deemed to have been adopted. Accordingly, the House stands adjourned until tomorrow at 10 a.m., pursuant to Standing Order 24(1).

(The House adjourned at 6.32 p.m.)