moved:
Motion M-391
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.
Mr. Speaker, I am very pleased to move Motion No. 391, which calls on the Government of Canada to no longer negotiate a certain number of things in free trade agreements, whether bilateral, that is between Canada and another country, or multilateral, for example, within the current negotiation of the Free Trade Area of the Americas or the World Trade Organization.
This motion calls on the Government of Canada to no longer negotiate rules for the protection of foreign investments that would violate the ability of parliamentary and government institutions to act on behalf of the common good and in the public interest.
I will read it so that everyone can understand what this debate is about:
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.
As I was saying, not only do we want, through this motion, to urge the Canadian government in the future to not negotiate provisions that violate public interest or the ability of parliamentaryand government institutions to act, particularly on behalf of this public interest and the common good, but we also want the Canadian government to ban agreements including investor-state redressprovisions. I will have the opportunity to come back to this point during my presentation.
Finally, further to the opinion provided to the government by the House, we consider it appropriate for the Canadian government toenter into negotiations with its American and Mexican partnerswith a view to bringing the North American Free TradeAgreement into line with the aforementionedprinciples, particularly in Chapter 11, which provides for the protection of foreign investments. For Canada, this would obviously involve investments by Mexico and the United States. For the United States, it would involve foreign investments by the other two partners, and so on for Mexico.
I remind the House that direct foreign investments have become the biggest challenge of current negotiations, with respect to both the FTAA and the WTO.
Each year, nearly $4,000 billion US is directly invested abroad by the various countries. Of course, the vast majority of these investments come from Northern or developed countries, around the world.
As for Canada, every year, $430 billion are directly invested abroad by Canadian companies and individuals.
The negotiation of rules for the protection of foreign investments has become a major issue. Let us take, for instance, the last meeting of the Ministers for International Trade held in Doha. Nobody, including our own international trade minister, expected specific discussions over the issue of investments. Before the Standing Committee on Foreign Affairs and International Trade, the minister told us that, in terms of investments, he did not expect anything to come out of the meeting in Doha.
Suprisingly, the Ministers for International Trade agreed to begin discussions about the provisions for the protection of investments that could be included in the World Trade Organization agreement.
Therefore, we have to be very clear on the issue of protecting investments. We have a problem with the model currently included in the North American Free Trade Agreement. The House should make it clear that it is against using the current NAFTA model in the upcoming negotiations on the protection of investments.
There are at least three issues that need to be raised about chapter 11 of NAFTA. The first is the notion of expropriation, which is much too broad and would now include direct expropriation, meaning that if a firm has assets abroad that a level of government needs to expropriate for some reason, compensation will be granted, which is only normal.
Not only does direct expropriation now give rise to compensation, but if memory serves, with section 1110 of chapter 11, the concept of expropriation now extends to loss of profits, which are referred to as indirect expropriations.
For example, during a temporary Canadian government moratorium, the American company SD Myers, which was supposed to receive PCBs from Canada for destruction by burning, claimed it had been dispossessed of an economic activity and thus deprived of profits. It went before a special NAFTA chapter 11 tribunal and was awarded $6 million in compensation. This was not for activities carried out, but for activities it could have carried out, had it not been for the Canadian regulations.
In our opinion, this concept of indirect expropriation is abusive and we should revert to the concept of expropriation of actual assets.
The second problematical element in NAFTA's chapter 11 is the expanded concept of investment. Lending agencies are now also considered investors under the provisions of NAFTA and those relating to the protection of investments.
We might find ourselves in a very strange situation where a bank could loan money to a Canadian, an American or a Mexican company. While that company might not feel that it has been harmed in any way following the enforcement of this new legislation or of new regulations, the bank that has loaned the money could, under chapter 11, challenge the government decision and seek some compensation under the agreement.
Finally, the third problem is with the investor-state redress provisions that allow foreign companies recourse not available to domestic companies. These foreign companies can bring the governments before the special courts--as I have mentioned in the case of SD Myers--something a first nations company cannot do. I think it is totally unfair to put the public and private interests on the same footing. Which is why I think we should eliminate the investor-state redress provisions.
Also, the special courts set up under NAFTA are not transparent enough, as was recognized by the Minister for International Trade.
So far, there have been just over 20 suits filed by companies, either in Canada, the United States or Mexico. I think it is important to mention that almost half of these suits have involved environmental issues.
Since we have just signed the Kyoto protocol, we will soon be looking at the implementation phase. Well, chapter 11 of NAFTA could very well become, in the hands, for instance, of American companies--need I remind the House that the United States has not signed the Kyoto protocol--a weapon against any new initiative the Canadian government or the provinces might want to take.
As I said earlier, these provisions would not prevent governments from taking any action, but they would allow companies to seek compensation. Therefore, Canada and Quebec would have to pay to be able to uphold their international commitments under the Kyoto protocol.
I mentioned that there were some 20 suits. As for Canada, I can point out a few. In the case of Ethyl Corporation, there was an out of court settlement that cost Canadian taxpayers $13 million; SD Myers—I mentioned it earlier—cost $6 million; there was Pope & Talbot, which challenged an agreement that Canada had signed with the United States and which provided for quotas. It felt it had been penalized by this agreement. Indeed, the Americans forced us to sign it because they were challenging, as they are doing now, our forestry management in the case of the softwood lumber industry.
UPS is currently suing the Canadian government. Last December, the Canadian government lost the first level of appeal because it claimed that the grievance filed by UPS did not come under chapter 11, but under another chapter of NAFTA. However, the court decided that it had jurisdiction.
There are also Sun Belt Water and Crompton Corporation which are suing or want to sue the Canadian government under chapter 11. There are other cases in the United States. There are also some in Mexico.
Thus, on the whole, the existence of this chapter 11 in NAFTA and in other bilateral agreements signed by Canada raises a problem of governance and democracy.
When democratic bodies, elected representatives, be it Parliament or the government, make decisions, it seems to me that these decisions must have precedence over private interests. However, NAFTA, specially chapter 11, gives equal importance to private interests and the public interest, the common good, the common interest.
Even if in general the best interest of multinationals or foreign firms operating in a country coincides with the common good and the public interest, it is not necessarily true all the time. This is why we believe we must have foreign investment protection clauses that give precedence to the public interest.
The second matter at issue, after this matter of governance and democracy, has to do with other NAFTA provisions. Some in particular, under chapter 12, which deals with trade and services, are putting pressure on our public services in Canada and Quebec.
I mentioned UPS a moment ago. This shows that private businesses and multinationals can use NAFTA provisions to challenge, for instance, Canada Post's monopoly, claiming unfair competition with regard to courier services. That is what UPS has done.
As for health care, it is clear that the current agreements are protecting our health care system as it stands now, but are preventing its expansion. In this regard, it is worth noting that several studies done for the Romanow Commission showed the dangers posed by chapter 11 of NAFTA in particular.
I am referring to, for instance, study No. 32, conducted by Richard Ouellet, of Laval University, entitled “The Effects of International Trade Agreements on Canadian Health Measures: Options for Canada with a View to the Upcoming Trade Negotiations”. Mr. Ouellet talked about potential major risks for our health care system.
Another study entitled “How will International Trade Agreements Affect Canadian Health Care?” was conducted by Mr. Jon R. Johnson. It is study No. 22. It is even more clear.
I will quote a short paragraph from page 29.
The single provision in all the trade liberalizing agreements that has the most negative potential impact on Canada's public health care is NAFTA Article 1110. If this provision and the accompanying investor/state dispute settlement procedures had existed in the 1960s, the public health care system in its present form would never have come into existence.
This is the article on expropriation and compensation that I was talking about earlier.
This is extremely worrisome, and it seems to us that this House should tell the government that the whole chapter 11 should be reviewed and that, in the future, we should not include similar provisions in the agreements that we sign.
Unfortunately, I notice that Canada has signed 18 agreements with southern countries that include chapters on the protection of investments that are similar to NAFTA's model.
So, as I mentioned, we must reject this approach and redirect it with our partners. Currently, when there is a dispute at the World Trade Organization, it is dealt with between states. It is not Bombardier or EMBRAER that sues the Brazilian government or the Canadian government. It is the Canadian government and the Brazilian government that represent the interests of their respective companies.
In the FTA, which preceded NAFTA, chapter 19 included a state-to-state dispute settlement mechanism. As for the FTAA and the WTO, the Minister for International Trade has always told us that it was out of the question to have an investment protection model similar to the one found in chapter 11.
In the proposals that it just tabled as part of the WTO negotiations, the European Union announced that it categorically rejects the investor-state dispute settlement procedure. Finally, the Standing Committee on Foreign Affairs also rejected it last spring.
For all these reasons, we must go back to a foreign investment protection mechanism that gives priority to the common good, that tightens up the definitions of expropriation and investment, and that prohibits the investor-state dispute settlement procedure and goes back to a state-to-state mechanism.
For all these reasons, I am convinced that the vast majority of members in this House will support motion M-391.