Mr. Speaker, maintaining and enhancing a strong investment flow is important to a strong and vibrant Canadian economy. Capital flows worldwide have grown rapidly in recent years. Global outward foreign direct investment has increased more than tenfold over the past two decades, from U.S. $568 billion in 1982 to U.S. $6.55 trillion in 2001.
Canada is an active and strong player in this global economy. For example, Canadian direct investment abroad has more than quadrupled, from $98 billion in 1990 to $432 billion in 2002, and since 1996 has surpassed foreign direct investment in Canada.
Canadian investment abroad spurs the growth of Canadian companies and innovaction and technology which in turn creates jobs in Canada. In fact, an OECD study estimated that each $1 of outward investment generated $2 worth of additional exports. Over the same period of time, the stock of foreign direct investment in Canada more than doubled, from $131 billion to $349 billion in 2002.
Foreign investment in Canada is an important source for Canadian jobs, especially high skilled jobs. It also brings advantages in research and development, new ideas and technologies, and talented people. These spinoffs have all made lasting and real contributions to our economic and social well-being.
Investment also provides Canadians with access to the capital and expertise that makes our country stronger and contributes to the quality of life of every citizen.
It also should be noted that yet another benefit of foreign investment is 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. Clearly, maintaining and enhancing a strong flow of investment is vital to the health of the Canadian economy. As such, our government policy needs to support a secure and predictable business environment that provides Canada with the principal means of attracting investment to our communities and provides Canadian investors with the protection they need to expand into new markets.
Achieving a fair, open and secure environment for international investment both at home and abroad is key to increasing our productivity and our prosperity. Canada has long been a supporter of a rules based approach to international trade and investment where agreed rules regulate the flow of goods, services and investment. These rules help to bring the investment regimes in other countries to Canada's level of openness.
Investors are looking for a commitment to a stable and predictable environment and Canadian investors are requesting their government to pursue internationally-agreed rules of a high standard which ensure a level and transparent playing field, including recourse to an impartial dispute settlement mechanism.
Because Canada now invests more abroad than it receives in foreign investment at home, such protections are all the more important to Canadians. We can see clearly on trade issues what happens when rules based systems are not in place or not respected. The way that Canada's softwood lumber industry has been harassed by the U.S. industry over the last two decades is a tragic case in point.
Lumber I, as it is now affectionately referred to, was launched in 1982 and ended in 1983 with the U.S. department of commerce concluding that stumpage did not confer a countervailable subsidy. Lumber II began in 1986 and ended with a memorandum of understanding between Canada and the U.S., which provided for the levy of a 15% lumber export tax by Canada. This charge was subsequently eliminated.
In 1991 lumber III began, leading to a ruling by the U.S. department of commence in 1992 that stumpage and log export restrictions were not countervailable subsidies. In 1996, in the search for trade peace, Canada and the U.S.A. finalized an agreement on softwood lumber covering the five year period to March 31, 2001. Essentially, this agreement called for managed trade in softwood lumber, limiting exports from Canada through quotas. Here we are again with lumber IV to which has been added an anti-dumping duty.
The reality is that even though Canada succeeds in its arguments, a new countervailing duty process could be launched the very next day producing lumber V and an unlimited number beyond that.
Despite winning the battles, we are losing the war, so it should be no surprise to any of us that rules can be broken, but does that mean that we should give up on trade and investment rules? No, it does not because it is in our best interest to have them. I have introduced a motion into the House of Commons which will be debated this fall that addresses many of these concerns, but I do not have time to get into that today.
Trade and investment rules promote values that are important to Canadians. They reflect the principles upon which our governments already operate; that while mindful of public well-being, one must act in an even-handed and non-discriminatory manner. While freer trade drives our economic growth, Canada does not negotiate trade agreements at any price. We obtain benefits that are in the interests of Canadians. Despite outward interests, we remain alert to the implications for all areas of domestic policy. These rules do not restrict the rights of governments at any level from legitimately regulating or legislating, nor could a government be forced to remove or amend an existing regulation or legislation.
In addition, Canada's investment agreements contain a broad range of exceptions and reservations for social services, such as health, public education and social welfare, and sensitive sectors, such as culture, transportation, fisheries and telecommunications. They also contain specific exemptions which affirm the ability of countries to adopt and enforce measures that they consider appropriate to ensure that investments are undertaken in a manner sensitive to environmental concerns.
Canada implemented its first foreign investment protection agreement in 1990. Since then we have negotiated 22 further agreements and have included investment components in the NAFTA and the Canada-Chile free trade agreements.
Canada is currently negotiating the free trade area of the Americas, better known as the FTAA, the central America four, the CA4, and the Singapore free trade agreements. The Americas region represents Canada's most important market and strengthening our economic ties with this region is a high trade priority for the government. We are also holding preliminary discussions toward free trade with members of the Caribbean community and the five Andean countries.
Although the set of investment rules contained in NAFTA Chapter 11 has worked relatively well, there is always room for improvement.
As such, the government is not advocating the replication of the NAFTA dispute settlement rules in the FTAA.
While the government is committed to providing our investors with recourse to impartial dispute settlement, we are equally committed to ensuring that the experience gained through the operation of NAFTA chapter 11 is reflected in the FTAA and Canada's CA4 negotiations and in any future agreements. As part of this work, the government is studying the operation and provisions of chapter 11 and consulting widely on its operation.
Both today and before today we have heard arguments that chapter 11 works for U.S. corporations but we do not hear much about how it can work for Canadian corporations. I should note here that a major forest products company in Canada, Canfor Corporation, recently invoked the provisions of chapter 11 of NAFTA, claiming compensation from the U.S. administration for unfairly diminishing the value of its corporate assets as a result of the unjust and unfair countervailing duty and dumping charges on its softwood lumber to the United States, and there may be others. Chapter 11 does work both ways.
The government has several mechanisms in place to facilitate consultations on chapter 11 of NAFTA: regular federal-provincial consultations, a federal-municipal working group, and ongoing consultations with key stakeholders such as the business, academic, legal and NGO communities. In addition, Canada is actively engaged, with our NAFTA partners, in a thorough review of chapter 11 with the objective of clarifying the provisions if required.
In conclusion, the Canadian government is determined to provide the best protection possible to Canadian investments abroad. It has also made a commitment to put into place an investment structure that is stable, predictable and transparent, this being essential if we are to attract foreign investment to Canada.
We do not and will not, however, negotiate this at any price. Canada's position on this is very clear. We will use the knowledge gained from the operation and analysis of chapter 11 and we will continue to safeguard Canada's fundamental values, including our legislative and regulatory framework, to protect the health, safety and environment of Canadians.