Madam Speaker, since May 1 is International Workers Day, I want to begin by saluting workers from Quebec and the whole world.
I also want to congratulate the New Democratic Party for its initiative, which is entirely in keeping with the work that the Bloc Quebecois has been doing for the past number of weeks in this House to ensure a true public debate on the ongoing negotiations on the free trade area of the Americas.
Chapter 11, and particularly the issue of dispute settlement, is at the very core of the lessons that we should learn from the North American Free Trade Agreement and the Free Trade Agreement with the United States.
I remind the House that the Bloc Quebecois supports free trade. This being said, we are, based on the experience gained with the two agreements that we signed with the United States, and with the United States and Mexico, in a position to draw some conclusions as to what has worked well and what has not worked so well.
The motion proposed by the New Democratic Party allows us to debate an aspect of the North American Free Trade Agreement that is very problematic, even in the eyes of the government. Indeed, both the Minister for International Trade and the Prime Minister have alluded to a number of issues concerning, among others, chapter 11.
The forum of parliamentarians we helped organize during the people's summit in Quebec City was attended by representatives from every country in the Americas, particularly Latin America. These parliamentarians told us “In Canada, in Quebec, in the United States and in Mexico you know what a free trade agreement is all about. We would like to share that experience with you”. But for us to do that, we ourselves must take the time to digest the positive and sometimes less positive results of the North American Free Trade Agreement.
From this angle, it appears that today's debate is extremely useful, not just for the House, but also for all parliamentarians in the Americas. I undertake to share the results of today's debate with the parliamentarians present at the people's summit forum of parliamentarians.
When the North American Free Trade Agreement was signed, no one had assessed the full impact of chapter 11, particularly as regards the dispute settlement mechanism. I have here a quotation from the June 23, 1999 La Presse . Howard Mann, who was a member of Canada's negotiating team and who drafted the environmental portion of the trade agreement, said, and his comments were reported in La Presse , as I mentioned:
This is a situation that nobody anticipated. It was only in 1996, with Ethyl Corp.'s lawsuit, that we realized how far companies wanted to take certain provisions of the agreement.
So, it was not the intention of those who negotiated this chapter for Canada, for the United States and for Mexico, that it would be used as it has been for the past few years.
Between 1996 and 1999, seven lawsuits, for a total of $1.5 billion, were filed under chapter 11. All seven of these lawsuits, which represented half of all those filed, had to do with environmental legislation. All of them challenged environmental standards which these companies felt were discriminatory or amounted to the introduction of protectionist measures.
Last week, in the House, the Prime Minister seemed to feel that Canada's chapter 11 record was good. I wonder how he, of all people, can think such a thing, with his recent boasting about his political longevity; if his concern for a good record in the case of chapter 11 matched his concern for his own personal record, I do not think he would still be sitting in the House.
The record shows that we struck out twice. The case involving Ethyl Corporation was settled out of court, but Canada admitted its guilt by paying the company compensation. In the S.D. Myers case, we lost. There was one victory, but it was an obvious one in my opinion, that of Pope & Talbot's challenge of the provisions of the Canada-US agreement on softwood lumber, under chapter 11, on the grounds that they were contrary to NAFTA. There is still one case pending, UPS against the federal government in connection with unfair competition by Canada Post for delivery services. Sun Belt Water is still involved with the Government of British Columbia as well.
I think it is, therefore, very early to be saying that Canada has had good results relating to chapter 11. On the contrary, it seems to me that what the Minister for International Trade said—version one, that is, since there seems to have been a rather rapid change in his thinking since then—constituted an appropriate beginning of a position when he stated before the Standing Committee on Foreign Affairs and International Trade as follows:
What I have been seeking, for some time, as we discussed at this committee the last time I was here, is clarification about some elements of chapter 11 that I believe have been given extension beyond the real intention of the drafters. Some are about expropriation, for instance. You use some clauses on expropriation in a way that is, in my view, excessive and not useful.
That was last March, when the Minister for International Trade was before the Standing Committee on Foreign Affairs and International Trade.
He went on to state:
We want more transparency as well. I think chapter 11, in that clarification, which would be binding on the three NAFTA countries, would need to adopt more transparent ways of dealing with the investment, and particularly the investor-state, aspects.
So even the Minister for International Trade was, only a few weeks ago, questioning the dispute settlement mechanism.
It was totally in keeping with his April 5, 2000 statement about chapter 11, reported in the motion by the NDP, when he replied:
On chapter 11—and we had a discussion a few weeks ago, and I understand where you're coming from—I can assure you that we are not seeking an investor-state provision in the WTO or anywhere else in other agreements.
A member of the NDP asked “On the FTAA?” The minister responded “No, not on the FTAA, either”.
These are the words of the Minister for International Trade, who said a month ago, and a year ago, that the government did not intend to include a dispute resolution mechanism in the FTAA and the WTO accord equivalent to that found in NAFTA.
If it were the intention of the minister and if it were the intention of the government, there must be a problem with the mechanism. So, let us look at the problem and resolve the causes of the problem.
As I mentioned earlier, this was the position of the Minister for International Trade in the first draft. Then, in the conclusions of the summit of the Americas in Quebec City, the Prime Minister of Canada intervened. He felt reasonably satisfied with chapter 11. Afterward, here in the House the Minister for International Trade changed his position, and on April 24, we heard him say here “Mr. Speaker, the government believes strongly that chapter 11 is working reasonably well”.
It was a bit troubling to see such a quick change in the Minister for International Trade's thinking, when, for a year, he considered and stated that there were problems with the application of chapter 11, specifically the dispute regulation mechanism.
In the summary of Canada's position on the matter of investments with respect to the FTAA—because we are still waiting to hear Canada's position on investments—I quote what appears on the government's website, which we have been advised to consult regularly:
Canada is not advocating the replication of NAFTA investor-state rules in the FTAA and has not supported the proposals made so far by other FTAA countries to include such a type of dispute settlement mechanism.
The issue is one of consistency, I think. The other parties in this House may think that anything on international trade that comes from the New Democratic Party or the Bloc Quebecois lacks credibility, but the NDP motion presents the position of the Canadian government itself, as stated on its website. I would find it hard to see how the government party could vote against its own position.
This being said, it is true that this is the summary of the position on investments. We still do not know the government's final position on investments and dispute settlement in the context of the negotiations on the free trade area.
I am asking the government to state that position as soon as possible, because it is one of two elements that generate a great deal of distrust toward the whole process, the other one being the fact that last week the party in office defeated an amendment brought forward by the hon. member for Saint-Hyacinthe—Bagot to the effect that any final agreement be voted on by this House before being ratified by the government.
It is perfectly legitimate to debate and question the validity of the dispute settlement mechanism, which is found in chapter 11 of the North American Free Trade Agreement and which is, for some countries, perhaps the United States and perhaps Canada, an acceptable basis for negotiation.
It is neither the position of the Bloc Quebecois nor that of the institutions committee of the Quebec National Assembly.
The following is a passage from page 68 of the report entitled “Le Québec et la Zone de libre-échange des Amériques: Effets politiques et socioéconomiques”:
—a number of stakeholders are concerned that states no longer seem to be allowed to set their national development policies without having to constantly consult investors. In addition, the dispute settlement mechanism is a worry because it seems to circumvent governments and traditional justice and concentrate this power in the hands of trade tribunals.
As can be seen, not only is our concern shared, but it is shared by parliamentarians.
It must be realized that the mechanism provided for in chapter 11, which allows investors to sue states directly for contravention of this chapter, is almost unique in the world. In other words, Canada, Mexico and the United States have saddled themselves with an obligation that does not exist in any of the international trade agreements, whether they involve the World Trade Organization or are between European countries which, when there are international disputes, resolve them between states.
That is one of the reasons that has screwed up—the right word for it, in my opinion—all the negotiations on the Multilateral Agreement on Investment, because of the belief, by the premier of France in particular, that state sovereignty could be shared between states but could not be handed over to private enterprise. Such is the case, unfortunately, with chapter 11.
That is not, however, the only problem with the dispute resolution mechanisms contained in chapter 11 of NAFTA. I will touch on some of the criticisms that can be made.
First, the interpretation of certain provisions is unclear, because every time a dispute panel is formed by virtue of chapter 11, it is not bound by previous decisions. There is therefore no precedent, each case being judged, I would say, on its merits by adjudicators who are different every time. This creates uncertainty for government administration. Will what was valid for one case also be valid for another? There has been no jurisprudence created for administration of this chapter.
Second, there is a lack of transparency in the whole process. The decisions rendered by the dispute panels are not made public. This applies even to the number of court cases under way. I have referred to 15, while others speak of 18. Obviously, these are against the governments of Canada or the provinces, or those of the United States or Mexico.
Third, there is the whole matter of the mandate and the impact of decisions by international adjudicators relating to chapter 11 disputes. These arbitrators are perhaps experts in trade, but they do not see all of the ins and outs leading up to the decision by one or other of the governments. In this regard, public interest may have to take a back seat to a very sectorial private interest, which can be very damaging for certain segments of the population.
A fourth element I want to introduce is the fact that the dispute settlement mechanism benefits foreign investors over local ones. Obviously, we are talking about national treatment, and I think everyone will agree that all investors must be treated the same way. But here, with chapter 11 of NAFTA, as concerns dispute settlement, foreign investors are being given an advantage, which local investors are not. To me this seems to contradict the very spirit of these trade agreements.
More basically, I would say that the question of the dispute settlement mechanism is whether the arbitrators appointed under chapter 11 can legitimately make decisions dictating certain behaviour to governments, be it the federal government, a provincial government or a municipal one, all of which are democratically elected.
For all these reasons, it seems to us that the dispute settlement mechanism in NAFTA causes a problem and cannot serve as the basis for proper negotiations on the protection of investments—which we agree with—in the free trade agreement of the Americas.
As I mentioned, in the NDP initiative, what is interesting is that it is possible to speak as I did on one aspect of chapter 11, the settlement of disputes but I think other problems must be addressed as well. I will name two of them. There are others, but I will run out of time, I guess.
There is the definition of “investment”, which is found in Article 1139. That definition has broadened in a significant way, the definition of “investment” used in the free trade agreement with the United States.
In the free trade agreement with the United States, “investment” was defined as “an American majority interest in Canada” and conversely for Canadian interests in the United States.
In NAFTA, that definition also includes minority interests, including in portfolios. This also includes loans, real estate and majority or controlling interests by investors from signatory states.
This definition creates an extravagant situation whereby, in theory, a bank that would have loaned money to an American business in Canada could potentially feel prejudiced by a decision of the Canadian government, even though the American company located in Canada might not itself feel prejudiced. This definition of the term “investment” is much too broad. It should be restricted.
Another problem with chapter 11, and the Minister for International Trade himself alluded to it, is the notion of expropriation. As members know, in international law, the concept of expropriation traditionally included two elements: there must be an act by a state and that act must lead to a transfer of property.
This is how Article 1110 defines “expropriation” and it is extremely important to read it, because is it is the root cause of a major problem in that chapter of NAFTA:
No Party may directly or indirectly nationalize or expropriate an investment of an investor of another Party in its territory or take a measure tantamount to nationalization or expropriation of such an investment.
As can be seen, this definition of indirect expropriation of a measure tantamount to nationalization or expropriation opens up a whole series of possibilities, with the result that some companies have extended the notion of expropriation to activities that they might have engaged in and to profits that they might have made. In the case of Pope & Talbot, for example, the company's reason for suing the federal government was that it felt that if it had located in the Atlantic provinces rather than British Columbia, its sales would have been higher, its net worth would have been greater and its profits would have been higher.
The damages sought by this company had to do with this notion of indirect expropriation. In a case such as Pope & Talbot, I would say that a Canadian company would not have had recourse against the federal government. Fortunately, in this case, as with the lottery, we won. Unfortunately, we do not know what the arbitration tribunal will decide the next time around.
As I mentioned, the Bloc Quebecois is for genuine protection of foreign investments. This requires regulation. The state must assume its responsibility of protecting national and international investors but, in so doing, it must balance public and private interests. Investors must have both rights and obligations.
In the case of NAFTA's chapter 11, which we do not want to see form the basis of negotiations for a free trade zone of the Americas, investors have rights, but governments have obligations. This seems completely unbalanced to us. The Bloc Quebecois will therefore be voting in favour of the New Democratic Party motion and the amendment.