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House of Commons Hansard #52 of the 37th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was chapter.

Topics

Point Of OrderOral Question Period

3 p.m.

Some hon. members

Agreed.

Point Of OrderOral Question Period

3 p.m.

Some hon. members

No.

Point Of OrderOral Question Period

3 p.m.

Progressive Conservative

Bill Casey Progressive Conservative Cumberland—Colchester, NS

Mr. Speaker, I ask for unanimous consent to present a petition on behalf of the Canadian Grandparents Rights Association of Nova Scotia.

Point Of OrderOral Question Period

3 p.m.

The Speaker

Does the hon. member have unanimous consent to revert to presentation of petitions?

Point Of OrderOral Question Period

3 p.m.

Some hon. members

Agreed.

PetitionsRoutine Proceedings

3:05 p.m.

Progressive Conservative

Bill Casey Progressive Conservative Cumberland—Colchester, NS

Mr. Speaker, it is my pleasure today to present a petition that consists of 4,000 signatures from the Canadian Grandparents Rights Association of Nova Scotia.

These people support the rights of grandparents having access to their grandchildren unless there is concrete evidence to do otherwise. These individuals request that the federal government revise the 30 year old Divorce Act now to give grandparents access to their grandchildren. I want this group and the grandparents here today to know that I support them.

The House resumed consideration of the motion and of the amendment.

SupplyGovernment Orders

3:05 p.m.

Parkdale—High Park Ontario

Liberal

Sarmite Bulte LiberalParliamentary Secretary to Minister of Canadian Heritage

Mr. Speaker, I forgot when I was speaking before question period to say that I would be splitting my time. As I said earlier, I am here to speak to the NDP motion and its concerns regarding chapter 11. I started to talk about how important investments were for Canada and for individual Canadians and corporations that do business abroad.

One of the most significant features of Canada's recent economic history has been the rapid growth of Canadian investment abroad. Since 1996 Canada has become a net exporter of capital. With the free trade of the Americas agreement so prominently in the minds of Canadians, it is important to remember that Canada continues to be a major investor in South America, particularly in the telecommunications and natural resource sectors.

Investments abroad create opportunities for Canadians by giving our firms new markets to expand their businesses through exports and through local sales. Often securing new customers and making sales in new markets requires investments in local services, customer support, assembly and distribution channels.

The most important thing we must remember is that when Canadians invest abroad they bring our values together with increased exports of goods and services. It adds up to jobs and opportunities for all Canadians.

As I said earlier, chapter 11 of NAFTA deals with foreign investment. Section A of chapter 11 deals with the definition and the treatment to be accorded within the North American free trade zone, and section B of chapter 11 deals with the settlement of disputes concerning investments.

The main forms of treatment of foreign investment dealt with in chapter 11 are national treatment and most favoured nations treatment. This is what is applicable to foreign investment. Under national treatment NAFTA countries are generally obligated to accord to investors and investments from another NAFTA country treatment no less favourable than the treatment accorded to domestic investors and investment.

With respect to most favoured nations treatment, NAFTA countries are generally obligated to accord to investors and investments from another NAFTA country treatment no less favourable than the treatment accorded to investors and investments from any other country, be it NAFTA or non-NAFTA countries.

Chapter 11 restricts the ability of NAFTA countries to impose certain performance requirements on the investors and investments from other NAFTA countries such as a requirement to export a certain level or percentage of goods or services.

Generally these so-called performance requirements do not restrict the ability of a NAFTA country to condition what is called an advantage to be conferred upon a foreign investor or investment upon compliance with a requirement to locate production, provide a service, train or employ workers, construct or expand facilities, or carry out research and development in its territory.

At a minimum, NAFTA countries are required to treat foreign investors and investments from other NAFTA countries in a manner consistent with international law. This point is very important and I hope that my NDP colleagues are listening. There are a number of exceptions and reservations to the general non-discrimination obligations I have outlined. Aside from the general exceptions which are contained in NAFTA, reservations are set out in the country schedules to annexes I, II, and III of NAFTA.

These reservations are generally either bound or unbound reservations. A bound reservation means that a NAFTA country may maintain a non-conforming measure identified in the appropriate schedule and may amend that non-conforming measure, provided that the amendment does not make the measure more trade distorting. An unbound reservation allows a NAFTA country to maintain an existing non-conforming use to make the measure even more trade distorting or to create new non-conforming measures in relation to certain broad areas or sectors.

For example, in the case of Canada certain unbound reservations exist in relation to aboriginal affairs, communications, transportation and social services. The latter reservation includes income security, social security, social welfare, public education, public training, health and child care.

Historically under bilateral conventions to promote and protect investment possible disputes about the application of these conventions were settled between the governments concerned. Chapter 11 of NAFTA improves bilateral conventions to promote and protect foreign investment mainly by making it possible for a private party to challenge a disputed measure directly with a foreign government.

Expropriation is the main subject of disputes concerning foreign investment. An expropriated private party claiming that a government may not expropriate or has not respected the applicable rules in expropriating may challenge the measure under the dispute settlement mechanisms contained in part B of chapter 11 of NAFTA.

It is also important to note that the dispute settlement mechanism also proceeds at stages. An investor claiming that a foreign government has breached its obligations may submit its claim to arbitration if it incurs a loss or damage as a result of the breach of obligation.

The parties to the dispute must consult with each other in an effort to settle the dispute. If the dispute cannot be settled an investor wishing to pursue a claim must send a written notice of claim and of intent to submit the claim for arbitration. However the investor may not submit the claim to arbitration until 90 days after the notice of submission of the claim to arbitration has been sent. Nor may a claim be submitted to arbitration until at least six months have elapsed since the events giving rise to the claim.

A limitation period may apply to the submission of a claim if more than three years have elapsed between the date the investor knew or should have known of the breach by the foreign government and the date the claim is being submitted to arbitration.

Arbitration concerning investment is done before a tribunal composed under one of the three conventions listed in article 1120 of NAFTA, the existing international rules. There are also prerequisites for arbitration.

Before a dispute concerning investment may be submitted to arbitration, the investor must consent to arbitration and waive the right to any other proceeding of any party under the law. The parties to the arbitration must agree to the rules and procedures governing the arbitration.

Perhaps the greatest area of the investment chapter that is of concern to the government is the investment expropriation provisions. In that regard the chapter includes specific commitments of fair treatment in the event of expropriation of an investment by a NAFTA country.

Expropriation of an investment can only occur for a public purpose, on a non-discriminatory basis, in accord with due process of law and on the payment of compensation to the foreign investor. Perhaps the concern with the expropriation provision of most people is that the definition of expropriation act includes the words tantamount to expropriation. This broad language could possibly extend beyond what governments would normally consider to be expropriation to possibly include regulations or measures that significant impair or nullify benefits to NAFTA investors.

In conclusion, it is always possible to improve the dispute settlement process under all our trade agreements. Yes, there have been disputes and yes, there will continue to be disputes. The disputes that actually reach the arbitration process are rare. It should not be forgotten that Canada has greatly benefited from the system to date. Any future negotiations should be conducted with this record firmly in mind.

SupplyGovernment Orders

3:15 p.m.

Canadian Alliance

Deepak Obhrai Canadian Alliance Calgary East, AB

Mr. Speaker, I saw my friend across the way point to our NDP colleagues and ask them to listen, but I can assure her that I was listening to the good points she made. My colleagues on the other side are good friends of mine but they do have selective hearing. They only want to hear what they want to hear on chapter 11.

Perhaps the member would like to comment on what the minister and the Prime Minister said about chapter 11. I know the minister very well and I know his own gut feeling is that the provision is needed and is appropriate to protect investments going out. I am sure the member agrees with that.

Does the member think that perhaps the statement was a slight misunderstanding or misstep by the minister?

SupplyGovernment Orders

3:15 p.m.

Liberal

Sarmite Bulte Liberal Parkdale—High Park, ON

Mr. Speaker, let me begin by thanking my colleague from the Alliance across the way for listening to what I had to say.

The motion talks about completely throwing out chapter 11. Neither the minister nor the Prime Minister ever said that. Therefore, first and foremost, there is no inconsistency between the two.

What I have tried to do in my presentation is talk about chapter 11. Chapter 11 is composed of many things. It is composed of schedule A, which talks about national treatment and most favoured nations treatment. Schedule B talks about the dispute settlement system. There is a long process.

In addition, what I think is very important for all Canadians to remember, and what we have not been hearing, are the annexes and schedules that talk about restrictions, exceptions, the unbound exemptions and the bound exemptions. Under no circumstances does chapter 11 throw out the ability to ensure public education in our country. Under no circumstances does chapter 11 stop us in any way from legislating on health care.

With respect to the general exceptions under NAFTA, we can look at the exceptions in culture, but we do need to do more, which is what I said about our trade agreements.

The history of trade agreements goes back to 1947 and the GATT when the first dispute settlement process was actually put into place. We have built on that process, starting with the free trade agreement and then with NAFTA. We have Chile and Canada, Israel and Canada and, most recently, and we should be very proud, we also have a Canada and Costa Rica agreement that puts us in the centre of Central America.

We are always looking to build on agreements. If we look at the history, from the GATT to where we are today, there are some concerns. If we need to work with a few words that does not mean we throw out entire sections or chapters. The fact is that NAFTA has been good for Canadians. It brings wealth. We as a government have a role on all sides to ensure that wealth is properly distributed to all of our citizens.

SupplyGovernment Orders

3:15 p.m.

NDP

Svend Robinson NDP Burnaby—Douglas, BC

Mr. Speaker, the hon. member paints a glowing picture of the triumph of chapter 11 but she may not be aware of the fact that the International Institute for Sustainable Development just released a very damning report on the impact of chapter 11.

Professor Howard Mann said that the current interpretations of NAFTA's chapter 11 could have a significant and determinative negative impact on government decision making in relation to the public interest.

They already have. The study points out that chapter 11 has been used to challenge the only two major federal environmental laws that have been passed since NAFTA came into force in 1994. One of those laws subsequently was repealed and compensation was paid. That was in the case of the Ethyl Corporation and MMT. In the second case, the S.D. Myers case, the damages award was pending.

I have a question for the hon. member. If chapter 11 investor state provisions are working so well, why is it that the International Institute for Sustainable Development and others are telling us not to duplicate them in the FTAA?

SupplyGovernment Orders

3:15 p.m.

Liberal

Sarmite Bulte Liberal Parkdale—High Park, ON

Mr. Speaker, let me begin by saying that I value the opinions of Professor Howard Mann. He is an extremely brilliant individual who has worked with our committee.

Having said that, I wish, once and for all, we would tell Canadians the truth about the Ethyl Corporation case and how it arose. It arose as a result of a challenge by the Alberta government that dealt with the interprovincial restriction on trade. It was only when that interprovincial matter was ruled upon in favour of Alberta that we chose to settle before the matter ever reached arbitration. This is not a case where the arbitration panel found against it. It was settled before it ever reached arbitration.

When we look at the number of arbitration cases we see only three cases. Last week we won another case, the Pope & Talbot case, which was the only pending case after the NAFTA five year review was disclosed.

SupplyGovernment Orders

3:20 p.m.

Liberal

Maurizio Bevilacqua Liberal Vaughan—King—Aurora, ON

Mr. Speaker, I rise on a point of order. I think you would find unanimous consent to revert to routine proceedings for the purpose of presenting a report from the finance committee.

SupplyGovernment Orders

3:20 p.m.

The Speaker

Is there unanimous consent to revert to presentation of reports by committees?

SupplyGovernment Orders

3:20 p.m.

Some hon. members

Agreed.

Committees Of The HouseRoutine Proceedings

3:20 p.m.

Liberal

Maurizio Bevilacqua Liberal Vaughan—King—Aurora, ON

Mr. Speaker, I have the honour to present the third report of the Standing Committee on Finance regarding its order of reference of Monday, April 2, in relation to Bill C-18, an act to amend the Federal-Provincial Fiscal Arrangements Act.

The committee has considered Bill C-18 and reports the bill without amendments.

Message From The SenateRoutine Proceedings

May 1st, 2001 / 3:20 p.m.

The Speaker

Order, please. I have the honour to inform the House that a message has been received from the Senate informing this House that the Senate has passed certain bills, to which the concurrence of this House is desired.

The House resumed consideration of the motion and of the amendment.

SupplyGovernment Orders

3:20 p.m.

Papineau—Saint-Denis Québec

Liberal

Pierre Pettigrew LiberalMinister for International Trade

Mr. Speaker, I am very happy to rise today in this House to take part in this third opposition motion on matters of international trade in as many weeks. Obviously, matters of international trade interest our parliamentarians and all Canadians, and that makes me happy.

Free trade and NAFTA have been beneficial for Canadians, that is clear. Since NAFTA came into effect, trade, investment and jobs have grown spectacularly in Canada and in all countries in North America.

Recently, at the Quebec City summit, the 34 countries of the Americas, the representatives of small and large countries, the heads of the most developed and of developing countries and those representing countries whose economies are especially vulnerable expressed their interest in and desire to establish a free trade area of the Americas.

A number of these 34 countries are headed by socialist leaders. Others are headed by centrist leaders and others by conservative leaders. Yet there was unanimity. They all wanted free trade in the Americas.

There must indeed be something good about this project if all countries, large and small, developed and less developed, and all leaders, socialists, conservatives and centrists alike, want free trade.

All 34 countries want in, whether they come from smaller or bigger countries, whether they come from the most vulnerable economies to the largest and stronger economies of our hemisphere. That says a great deal about the importance of international trade. It says that international free trade leads to development and to democracy. The vast majority of Canadians and the vast majority of citizens across the Americas understand that very well.

It is too bad that the opposition today on this particular motion does not want to understand what even most socialist leaders believe. Even labour leader Tony Blair said not too long ago in this House that free trade was for the poor. Only one party here does not seem to understand that.

A clear set of rules applicable to the conduct of international affairs constitutes one of the key reasons for NAFTA's success.

The rules applicable to trade and investment form a road map or navigation system, which guides and protects the flow of trade and investment capital.

Being a country more oriented towards investment and international trade than any of its competitors, Canada has an interest in maintaining the vigour of this bilateral flow of trade and foreign investment. Foreign investment helps to guarantee that Canadian businesses will have the capital they need to succeed and grow in the highly competitive world economy.

Investment creates jobs and encourages innovation through the contribution of new ideas and new technologies to our businesses. It gives Canadians access to the capital and skills which will strengthen our country.

Canadian investment abroad is equally important as this helps Canadian firms establish a presence in foreign markets and share Canadian expertise through exporting goods and services to those markets.

It should be further noted that a large proportion of profits from new investments is reinvested in Canada contributing to a higher growth rate and a rise in Canadian living standards. There is no doubt today that foreign direct investment in Canada and Canadian investment abroad have joined the international trade in goods and services to become our principal engines of growth and job creation.

Direct investment abroad by Canadian business is part of its strategic effort to increase market share and stay competitive in foreign markets. Companies are increasingly using outward investment to strengthen their operations, penetrate new markets and acquire new technologies, resources and skills. The value of Canadian direct investment abroad has increased fivefold between 1985 and 2000, that is from $57 billion to $301 billion.

Since 1995 the stock of direct investment abroad by Canadians has exceeded the stock of foreign investment in Canada. This reflects the maturity and wealth of the Canadian economy. This type of investment results in increased sales and production from home facilities.

A recent study by the OECD found that on average every one dollar of investment is followed by two dollars of export. It adds up altogether to jobs and opportunities for Canadians.

We have also seen that income from Canada's outward foreign direct investments increased during recent years helping to improve our standard of living.

More than ever, it is important for Canada to try to seek a fair, open and secure environment for international investment, both in Canada and abroad.

The part of the North American Free Trade Agreement dealing with investment, better known as chapter 11, guarantees investors fair treatment in accordance with international law. This chapter and especially the investor-state provision are a fundamental component of the agreement.

It is important to point out that the benefits Canada has gained from investment have not jeopardized our main economic and social values. Foreign investment in Canada is subject to the same legislation and regulations as Canadian investment, including those protecting the environment and ensuring higher labour, health, construction and safety standards.

When one compares the number of challenges under chapter 11 of NAFTA and the amount of the claims to the two-way trade daily of $1.9 billion between the United States and Mexico, one quickly realizes that the number of challenges these last few years has been minimal compared to the overall trade and investment activities.

Last year, the overall investments of our NAFTA partners in Canada reached $186 billion. All in all, we were able to attract, last year, a record high of $93.2 billion in new foreign direct investments.

Yet, from this important growing source of investment, and despite thousands of new laws and regulations passed by each level of government in Canada since 1993, the Government of Canada is facing only five challenges under chapter 11 of NAFTA that are currently under arbitration.

The Government of Canada believes that NAFTA, including chapter 11, works well, and we are not seeking to re-open the agreement. As the Prime Minister has noted in the House, there are many thousands of investments among NAFTA partners and thousands of measures are taken by governments that can affect investments: laws, regulations and programs of all sorts and at all levels of government. However, of all these investments and government measures, only five have resulted in complaints against Canada under chapter 11 of NAFTA.

As we have noted in the House, the Government of Canada does want to clarify the provisions in chapter 11, which would give future tribunals clearer and more specific understanding of the obligations of chapter 11 as originally intended by the drafters. There are mechanisms built into NAFTA to allow for this type of clarification.

Even more important is the fact that we want the investor-state dispute settlement mechanism to be more open and more transparent so it is more effective. In fact, Canada has already taken measures to make this process more transparent.

The foreign affairs department's website contains all publicly available documents relating to chapter 11 arbitration cases involving the Government of Canada.

We would like to make all the documents public, within certain limitations, obviously, to protect confidential trade information. We would also like to open hearings to the public.

I will stop here to allow for a brief exchange with opposition members. But that is our government's position, its true position, not based on a short sentence taken here or there, but based on its true intention with regard to NAFTA's great success.

SupplyGovernment Orders

3:30 p.m.

Canadian Alliance

Werner Schmidt Canadian Alliance Kelowna, BC

Mr. Speaker, I want to congratulate the hon. minister for the depth of his understanding of the problem. The only scary part of it is that I found myself agreeing with almost everything he said.

There is one point I do want to raise. I would like to ask the hon. minister if he would clarify for us whether indeed it is true that perhaps some of the fiscal policy of the government has indeed resulted in a net increase over and above the investment that foreigners direct into Canada. Has foreign direct investment to Canada been exceeded by the direct investment in other countries by Canadian firms? There has been a shift and there is a negative balance there.

It is all very well to speak about how wonderful it is that people have invested in Canada. I think he made the statement that this reflects the maturity of the Canadian economy. I would like to suggest to the minister that he should clarify that, indeed, it is not the maturity of the Canadian economy here that has caused this negative balance. In fact, the reason that people are investing more money outside of Canada than in Canada is due to the fiscal policy of the government.

SupplyGovernment Orders

3:30 p.m.

Liberal

Pierre Pettigrew Liberal Papineau—Saint-Denis, QC

Mr. Speaker, I had the opportunity to give an address to the National Press Club today at the luncheon, in which I revisited the extraordinary performance of the Canadian economy in the year 2000.

We are presenting a report on the health of the Canadian economy, on the growth in our trade. We now export 45% of what we produce in this country, of our GDP.

Last year we received extraordinary foreign direct investment of $92.3 billion, so Canada is really a land that attracts a lot of foreign direct capital and it is extremely good for our economy. Indeed, Canadians are now in a position to invest abroad and that is very good, because if we want to export our goods, if we want to export our technology and if we want to export our services, we have to invest abroad.

There was a time when trade led the global economy, that is, first we traded with a foreign country and after having traded with it for some years we would then invest in it. Instead of exporting to it we would start producing the goods in that country. Trade led the economy and investment followed. It is the other way around now, and it has been the other way around for the past 15 to 20 years.

If we want to maintain our export level and trade development we have to invest abroad because now it is investment that leads the international economy rather than trade.

SupplyGovernment Orders

3:35 p.m.

Bloc

Paul Crête Bloc Kamouraska—Rivière-Du-Loup—Témiscouata—Les Basques, QC

Mr. Speaker, we just saw a glaring example of the reason why people do not trust governments and of the current government's lack of transparency.

The minister mentioned the website. The website says: “Canada is not advocating the replication of NAFTA investor-state rules in the FTAA”.

On December 13, the minister himself said that he would not sign an agreement if it included a chapter 11 equivalent. He said:

“That is my position. I am very preoccupied with this”.

Today, in a way that is absolutely extraordinary but that will fool no one, they have decided to do a complete about-face and to change their position.

Does the minister not realize that, with this attitude, he is justifying the position of those asking that negotiations be done in a more transparent fashion? If the minister is able to change his position like this at a time when negotiations are not yet in full gear, we can imagine how it will be when we are seriously negotiating these issues.

Can the minister explain to us this complete about-face?

SupplyGovernment Orders

3:35 p.m.

Liberal

Pierre Pettigrew Liberal Papineau—Saint-Denis, QC

Mr. Speaker, I must say that the Minister for International Trade, which I have been for the past year, has fought for transparency throughout the Americas. We were successful in Buenos Aires in gaining the consent of all countries to make the draft free trade agreement public. Canada directed an effort of remarkable transparency, a successful effort.

We do not need any sermons from the Bloc Quebecois member who always resorts to personal insult, to making accusations of flip flops and of lack of transparency, to laying all the blame on us. This is a deplorable way of focussing on the remarkable efforts being made by our government and our international trade policy.

My position on chapter 11 is unchanged and absolutely clear: Chapter 11 serves the interests of our investors and our policies well.

What I called for, and what our government wants, is to clarify within the mechanisms set out by NAFTA certain interpretations that have been made by the courts so that they may be taken into account in future. Obviously, we will be taking into account the improvements I would like to see in the free trade area of the Americas.

SupplyGovernment Orders

3:35 p.m.

Bloc

Paul Crête Bloc Kamouraska—Rivière-Du-Loup—Témiscouata—Les Basques, QC

Mr. Speaker, on a point of order. The minister says I insulted him personally by saying that he changed his mind.

SupplyGovernment Orders

3:35 p.m.

Liberal

Pierre Pettigrew Liberal Papineau—Saint-Denis, QC

No. He mentioned the lack of transparency.