Mr. Speaker, I am pleased to speak to Motion No. 391 brought forward by the member for Joliette. It reads:
That, in the opinion of this House, any free trade agreement entered into by Canada, whether bilateral or multilateral, must include rules for the protection of foreign investments which do not violate the ability of parliamentary and government institutions to act, particularly on behalf of the common good, and must exclude any investor-state redress provisions and consequently, the Canadian government must enter into negotiations with its American and Mexican partners with a view to bringing the North American Free Trade Agreement (NAFTA) in line with the aforementioned principles.
This is all about chapter 11 of NAFTA. Many Canadians have heard about chapter 11 in reference to the bankruptcy rules in the U.S. and that is a large point of confusion. What we are talking about here is chapter 11 of NAFTA, something quite separate and different.
The premise of the member's motion runs contrary to the principle of national treatment which mandates that foreign based companies should be treated the same as domestic ones unless compensated. National treatment investor rules are contained in chapter 11 of the North American Free Trade Agreement, NAFTA.
If foreign companies believe they will not be discriminated against then more companies will compete to provide goods and services. Competition ensures that Canadians, or our trading partners, receive the highest value for their hard earned money.
The Bloc Québécois, Maude Barlow, the NDP, and environmental activists argue that chapter 11 of NAFTA would destroy the ability of Canada's three levels of government to make individual decisions and that corporations would be able to challenge Canadian sovereignty in areas such as health care, education, labour and environmental standards. They never talk about investor protection for Canadian companies in other countries.
Chapter 11 allows private companies to sue federal governments covered under NAFTA over policies that expropriate their profits. Chapter 11 was designed to help reduce the risk of investing in foreign countries. It embodies the strongest rights and remedies ever granted to foreign investors in an international agreement. The process allows foreign investors to utilize a country's domestic court system or alternatively to use independent arbitrators instead. This is only fair. This gives foreign investors remedies available beyond the domestic courts which may be stacked completely against them.
Chapter 11 of the North American Free Trade Agreement sets down the rules protecting foreign investors in the three countries bound by NAFTA: Canada, Mexico and the U.S.
There are two sections of the chapter, the first being substantive and the second outlining procedures for dispute resolution. The second section is where the tribunals under the authority of supranational bodies and agreements are set up, namely, the International Centre for Settlement of Investment Disputes in the World Bank and the United Nations International Convent on International Trade Law.
Despite all of the international agreements that we have seen proliferate in the world, chapter 11 in NAFTA is unique. It is the first comprehensive, international trade treaty to provide to private parties direct access to dispute settlement as a right.
Chapter 11, by all accounts, has been controversial largely because of various high profile environmental organizations that dominated much of the debate. The national treatment and most favoured nation status requirements are modeled on the similar provision in the World Trade Organization where they apply to trade in goods and services. A decision on whether to negotiate similar provisions in the WTO will be taken later this year at the ministerial meetings in Mexico.
There are reservations and exceptions to chapter 11. Various activities are excluded for all parties, including: education, health and welfare, procurement, subsidies, grants and foreign aid. Local government measures are not subject to direct claims, although non-conforming measures of local governments have been seen as indirectly the responsibility of national governments. We can talk about that when we talk about the Metalclad case which is one of the three cases trotted out as being the rationale for saying that chapter 11 should not be in NAFTA.
There are strict rules regarding expropriation and restrictions on the ability of the state to expropriate and a subsequent obligation to compensate. This section was designed primarily to protect investments from Canada and the U.S. from arbitrary government action, such as nationalization in Mexico, where the legal system was much less developed and private property rights less regularly protected.
What purpose does chapter 11 serve? At its most basic level, the theoretical economic and political basis for the provisions of the chapter lie in the principles of the sanctity of private property against random or unaccountable government action, and that of well-regulated market forces being most able to allocate private investment efficiently, thereby increasing productivity and general welfare.
High levels of investment are important for developing productivity and so we do not want to see discrimination between investment on the basis of origin, foreign or domestic, as it is counterproductive. Furthermore, the importance of transparency and codified regulatory frameworks are essential for attracting foreign investment. That is what chapter 11 is all about.
In a sense the chapter actually enhances national sovereignty insofar as measures which respect sovereignty are those which do not mandate unilateral sanctions or justify extraterritorial reach of national measures. I would argue that this chapter is a codified multilateral agreement entered into and maintained freely by sovereign governments who enter into it.
There have been three successful cases that are often talked about. One of the most prominent is the MMT case. In that case the Canadian government was found to have banned MMT without scientific evidence. We ended up paying a $20 million out of court settlement to Ethyl Corporation. I was in the House of Commons when that happened. I can say with certainty that we warned the government not to expropriate MMT's profits by the actions it subsequently took and it ended up paying for them.
In the case of Metalclad, it only had a case because the Mexican government had assured them they had all the necessary permits, environmental and otherwise, to build an industrial waste facility. Then the city of Guadalcazar refused to issue a building permit and the state government subsequently declared the site a nature reserve. This had nothing to do with environmental protection. It had everything to do with protection against unilateral action.
In summary, I oppose the bill.