FAIT Committee Meeting
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STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE
COMITÉ PERMANENT DES AFFAIRES ÉTRANGÈRES ET DU COMMERCE INTERNATIONAL
[Recorded by Electronic Apparatus]
Tuesday, November 16, 1999
The Chair (Mr. Bill Graham (Toronto Centre—Rosedale, Lib.)): Colleagues and members of the panel, we're going to start, please.
I'm pleased to see this many people here interested in the EDC. I'm confident this will be very helpful to us. However, I'm going to ask for your cooperation. If you could, please keep your presentations to 10 minutes each, because with eight panellists, you'll appreciate that's already 80 minutes, and we do want to get to questions. So if you could even cut it down, that would be appreciated, except for Mr. Allmand of course, who's used to filibustering in Parliament anyway. Oh, he said he'll keep it to five minutes, so that's a challenge. Everybody will go to five then. Thank you very much.
We'll start with the EDC Working Group. Is Mr. Freeman or Ms. Foster going to speak first?
Ms. Foster, just keep your crutches there beside you in case you have to make a hurried getaway.
Voices: Oh, oh!
Ms. Pamela Foster (Spokesperson, EDC Working Group): Thank you, Mr. Graham.
I'm the coordinator of the Halifax Initiative. Before I start, I would like to go over the order in which the people on this end of the table would like to do their presentations this morning, because it differs slightly from the sheet you have in front of you, if that's all right.
The Chair: By all means. If you have another order, that's fine by me.
Ms. Pamela Foster: Okay. Following me, we will hear from Kimy Pernia Domico, who will be introduced by Bill Fairbairn with the Inter-Church Committee for Human Rights in Latin America. Jacques Bertrand with Development and Peace will follow Kimy, then Aaron Freeman from the EDC Working Group, Mr. Allmand with the International Centre for Human Rights and Democratic Development, Linda Nowlan from the West Coast Environmental Law Association, Gail Whiteman with the North-South Institute, and Joan Kuyek with Mining Watch.
The Chair: I want to make a special point of welcoming Mr. Pernia, who was in my office in Toronto, and thank him. He is from Colombia, for the other members and the panel.
Mr. Fairbairn, will you explain to him that we do only have 10 minutes per person this morning, and because of the shortness of time, we will have to make sure we stick to that agenda?
Go ahead then, Ms. Foster.
Ms. Pamela Foster: As I mentioned, I'm the coordinator of the Halifax Initiative. The Halifax Initiative is a coalition of 14 Canadian NGOs that are deeply concerned about the policies and practices of the international financial institutions.
Since 1995 we've joined efforts to push for reforms at the World Bank and the International Monetary Fund—reforms that will make these institutions protect human rights and the environment, reduce poverty, and increase equity among people. In the last couple of years we've realized that even what little progress has been made at the bank and the fund towards these goals is being threatened and even undermined by export credit agencies, including the EDC.
Collectively, export credit agencies hold more debt of developing countries than the World Bank and the IMF combined. Export credit agencies are also the single largest public financiers of large-scale infrastructure projects in the developing world, exceeding the total annual infrastructure investment of all of the multilateral development banks and lateral aid agencies. In the last decade, which has been marked by dropping aid levels, export credit loans and guarantees have increased fourfold.
Whereas the World Bank has developed social and environmental guidelines, an appeal process, and contractual obligations for the protection of two core labour rights, and has made strides in the level of transparency and disclosure, export credit agencies, with the exception of the U.S. export credit agencies, work in secrecy and in what amounts to a social and environmental policy vacuum. And unlike the World Bank, export credit agencies themselves have not taken any responsibility for the debt crisis of the highly indebted and poor countries.
Many of the NGOs testifying before you today are part of a 12-member working group on the EDC, hosted by the Halifax Initiative. Today we will argue, among other things, that Canadian foreign policy commitments to sustainable development and international labour, human rights, and environmental conventions should be ensured by requiring EDC to minimize environmental impacts, respect human rights, and take into account social needs of communities, such as health, livelihoods, and the right to voluntary resettlement.
External accountability mechanisms should be put into place to assist in ensuring adherence to these policy commitments. Accountability to the public should be promoted through policies that require adequate disclosure. And when engaging with the poorest countries, EDC should take particular care not to exacerbate their indebtedness, which has placed them in an economic and social crisis.
In the areas that concern us, the Gowlings report makes some recommendations we would support and others we would strengthen. It does not discuss the debt-creating aspects of the EDC nor the need to protect the social needs of communities affected by the EDC. I will focus on these two areas.
After the Mexican debt crisis, export credit agencies, as the IMF noted, stepped in where commercial banks feared to tread.
ECAs now hold 56% of the debts of third world countries. The level of external debt of the highly indebted and poor countries is now widely recognized as a key impediment to their social and economic progress.
Unlike commercial bank loans, EDC lending may result in private debts being transformed to public ones. The guarantees provided by host governments create, in effect, subsidies to Canadian businesses seeking to export, encouraging them to engage in trade and exports that would otherwise be economically not viable.
To an extent, the increase in export credit lending reflects an export-driven desire for expanded business rather than a need for funding on the part of the borrower. This encourages the process of excessive and unproductive lending, unchecked by a lack of transparency and responsibility to local communities.
The poorest people in the world owe Canada, through the EDC, approximately $2.5 billion. This is the poorest 55 countries in the world. Of these debts, $76 million is in arrears. EDC can verify this. It is a debt that is unpayable by these countries and uncollectable by EDC.
The corporation has written off commercial debts that it can't collect, but the situation is different for sovereign loans. EDC relies on the Government of Canada to cover its losses.
We recommend that new sovereign loans by the EDC should not be made with the expectation of reimbursement by the Government of Canada. This will in effect require EDC to include the highly indebted nature of the poorest countries in its risk assessment of the projects.
We also recommend that EDC take into account socio-economic conditions of communities by defining social issues and adopting policies to address them. The definition in the Canadian Environmental Assessment Act says, and I quote:
(a) any change that the project may cause in
the environment, including any
effect of any such change on health and
socio-economic conditions, on
physical and cultural heritage, on the
current use of lands and resources for
traditional purposes by aboriginal persons,
or on any structure, site or
thing that is of historical, archaeological, paleontological
The CEAA definition of social needs as well as the World Bank policies on indigenous peoples, safeguarding cultural property, and involuntary resettlement should act as baselines for the EDC.
The Export Development Act should be amended to require social considerations as part of EDC financing and guarantees.
In conclusion, EDC has argued that it's up to the host country to protect its people and the environment. It is not up to the host country to ensure that EDC's public policy mandate be made consistent with other Canadian public policies, interests, and values. It's up to you as the Canadian government.
The Chair: Thank you very much, Ms. Foster.
As I recall, we are going to Mr. Fairbairn next.
Mr. Bill Fairbairn (South America Program Coordinator, Inter-Church Committee for Human Rights in Latin America): Thank you and good morning. The Inter-Church Committee on Human Rights in Latin America is an ecumenical, social justice coalition formed by more than 20 national Canadian church denominations and religious orders.
The Inter-Church Committee has asked to appear before these hearings today because we believe that changes must be made to the Export Development Act governing the Export Development Corporation. We come to this conclusion based on our deep concern about the experience of the Embera Katio of northern Columbia, whose people and source of survival had been irreparably damaged by a hydro-electric project that received credit assistance from the EDC.
Last year our committee joined with the Embera and 24 highly respected organizations from both Columbia and a dozen other countries. Together we filed an injunction before Columbia's constitutional court to halt the Urrá megaproject in order to prevent further violations of human rights.
An injunction is just a stop-gap measure and it does nothing to prevent similar situations from occurring in places in the future. For this reason, we have brought before you Kimy Pernia Domico, an Embera leader who lives in one of those communities being directly affected by the dam.
Our committee and its member churches fully endorse the testimony and recommendations that Kimy Pernia is about to give you.
Mr. Kimy Pernia Domico (Indigenous Leader, Embera Katio Nation; Inter-Church Committee on Human Rights in Latin America) (Interpretation): Buenos días. My name is Kimy Pernia Domico, and I'm a member of the Embera Katio. My people live on the upper Sinú River, in the northern Colombian province of Córdoba. Until very recently, our river and wetlands were incredibly rich in biodiversity, with many species of fish and animals. We have gardens of the last remaining tropical rain forest of the Caribbean coast of Colombia.
The diet of the Embera Katio people has always consisted of protein from the many species of fish in the river. At least, that was until four years ago. In 1995, a dam built by the Urrá Company blocked and diverted the course of the Sinú River. Nothing has been the same since then. The dam has brought death to our people, death to the fish, and death to the members of our community who have seen their source of protein vanish, and death to our leaders who have protested or challenged the dam.
The Urrá I Dam, which cuts across the Sinú River like a big wall, has blocked the migration of fish up the river to their spawning grounds. The impact on my people is very sad. These days, with the fish gone, it is common in my community to see people fainting because they're weakened by malnutrition, which leaves people vulnerable to diseases that never used to affect us. The worst is that many children have died as a result.
And there is another problem. The dam has created standing water, which has brought mosquitoes. Along with them has come malaria. Just as I was leaving to come to Canada, my four-month-old granddaughter fell victim of this disease. You can imagine how anxious I am about her now.
The dam was built without those of us who are directly affected ever being directly consulted. That violates the rights contained in the Columbian constitution, as well as in international covenants. In November, the court ordered a temporary halt to the project until proper consultation takes place and an agreement is reached. Even with this court order, we have heard that Urrá is going to proceed anyway. When it does, the land on which we cultivate our crops, find our traditional medicines, where our ancestors are buried, and where our sacred sites are located, will disappear under water.
The situation is heating up even as we speak. Urrá and the Ministry of Indigenous Affairs are using underhanded tactics in an attempt to divide our communities, and the Ministry of the Environment granted an environmental licence to the company without consulting us. We have been offered a small amount of money in exchange for agreeing to the dam. Some Embera have been pressured to accept, but many of us are clear that such a payoff does not compensate for the irreparable damage to our environment and the loss of our full security. Unless we can obtain other land on which we can grow crops and have access to fish, our survival as a people and as a culture is very much at risk.
I must stress that the Embera Katio are not against development, but we want you to know that the situation we are faced with now should never have happened. We do not want other people to suffer as we have.
Let me be clear that saying these things to you today puts my life in danger. Already four Embera leaders have been killed by paramilitary forces for challenging the negative impacts of the Urrá project. These gunmen have set fire to our boats to prevent us from going to meetings. They have set up checkpoints on the rivers and have detained our people.
Anyone who dares to speak about Urrá is accused of being involved with the guerrillas, and with that pretext they have declared both of our communities and leaders to be a military target. You can understand that my people live in great fear, both of an imminent attack and also of the fact that we are facing the uncertainties of a future without our land and without our fish.
It is for all these reasons that I come in the name of the Embera Katio of Córdoba to call on you for the support we so badly need. My first recommendation to you concerns your investment policies abroad. If a Canadian company or a Canadian crown corporation like the Export Development Corporation seeks to get involved in a development project in a country like mine, there must be transparent, broad, and authentic consultations with all of those who will be directly affected by the project before any decision is made to proceed.
After the Urrá I Dam was built and we were already seeing the fish disappear, we hired a consultant who conducted a study and found that there were more than a hundred negative impacts caused by the megaproject. In the future, we would urge that such an independent and credible study of the economic, social, cultural, and environmental impacts of a proposed investment project, and an impact study that takes into account input from affected communities, must be carried out before the project is approved. It is not right that a development project involving foreign investment serves only to enrich a small minority of investors at the cost of environmental, social, and cultural degradation that impoverishes entire communities.
In a country like Colombia, a victim of many armed conflicts, it is also crucial that an additional prerequisite be prior consultation with respected national and international human rights organizations. The objective of such consultations would be to assess how a development project might exacerbate existing violence and lead to further human rights violations.
Furthermore, since Canada's Export Development Corporation has contributed to the Urrá megaproject that has caused such damage to the Embera people and other non-indigenous inhabitants of the region, we believe the Canadian government shares this responsibility to ensure that we are adequately compensated for this damage. Such compensation would include, among other things, the following key elements: new arable land for the affected communities before their land is flooded; adequate resettlement of some 600 people from the communities of Vegido, Doza, Amborromia, Sambuda, and Nagua, whose homes will be flooded; sufficient tanks of aquaculture fish farms in each community in order to guarantee food security; compliance on the part of the Colombian government with the Embera Katio ethno-development plan; protection and conservation measures in accordance with the traditional culture of the Embera people; and guaranteed rights for indigenous people to participate in the benefits.
We also believe the involvement of the Export Development Corporation in the Urrá I Dam and all that has happened since leaves Canada with a responsibility to press the Colombian government to guarantee the safety of Embera communities, to investigate and bring to justice those responsible for killing our leaders, and to disarm paramilitary groups that are terrorizing the region.
Finally, we call on the members of this parliamentary Standing Committee on Foreign Affairs and International Trade to urge the Government of Colombia to comply with its own constitution, as well as with international obligations. Our right to live as indigenous people cannot be taken away from us.
This is the information I wanted to give you, and I thank you for your attention.
The Chair: Muchos gracias, Señor Pernia. We're particularly grateful to you for coming from so far away to share your thoughts with us. Thank you.
We are now going to turn to Mr. Bertrand.
Mr. Jacques Bertrand (Researcher, Development and Peace): Greetings to members of the committee. I too have travelled the same distance as Kimy because in the past few days, I was in the Embera Katio territory. I arrived in Montreal at midnight last night, which explains why I don't have a written presentation.
The Chairman: If you doze off during your presentation, we'll understand.
Mr. Jacques Bertrand: Nevertheless, you will find the main points of our analysis of the situation in the territory of Embera Katio in the letter that Development and Peace sent to the EDC and that I will make available to the people in this room. I will also table the EDC's response to that letter.
Development and Peace works in international development and human rights. This organization was established by the Catholic Church of Canada and is active in all areas of the country. Since 1966, it has supported thousands of organizations in Latin America, Africa and Asia, including groups that defend human rights and Aboriginal groups.
In the case of Columbia, we directly support the Embera Katio group, as well as the national Aboriginal organization of Columbia.
What particularly struck me during my recent visit to the Embera Katio is the situation in which they find themselves. They are squeezed between the paramilitary, the army and the guerilla forces. One thing that's important to understand about the context here is that in Columbia, the armed conflict has meant that a little over a million and a half people have become refugees within the country and have been displaced. All human rights organizations have stated that the paramilitaries are responsible for three to four times more murders, massacres and incidences of torture than the guerilla or the army.
However, links have frequently been established between the army and the paramilitary. What complicates the situation in the case of the Embera Katio is the fact that the grand chief of the Columbian paramilitary organization is himself in that region. This is an area of major landowners, including Carlos Castano, the leader of the paramilitaries.
This territory has been fought over despite the consequences that arise and that were described by Kimy earlier. Embera Katio leaders have been killed. Incidentally, there is no doubt in my mind that by coming here to testify, Kimy is putting her life in danger. Houses have been burned down. People have been chased away from their homes. Boats that are essential to the survival of these people have been destroyed. These people are truly living in constant fear.
When Development and Peace examined the situation, it was concerned by the fact that this dam project had been financed in part by the EDC. Last spring, we wrote to the EDC in order to obtain clarification. I will give you an idea of the nature of the questions that we asked. As I indicated earlier, I will give you a copy of our letter. Amongst other things, we asked this:
1. At the outset, did the EDC take into account the fact—that had
been previously announced—that the project would likely increase
violence and injustice against the Aboriginal peoples in the
This is a rather basic question that the organization should have asked before supporting a project like this.
2. Did the EDC take into account the fears, the analyses and the
denunciations expressed by the Aboriginals of this region with
regard to the environmental impact of the project and its
repercussions on their way of life?
3. Did the EDC consult the Aboriginal communities to hear their
views on the social and environmental impact of the dam?
Those are some of the questions we asked EDC. We also asked EDC to intervene and to take six very simple measures. One of the things we asked was that they contact president Pastrana, the president of Columbia, immediately to guarantee the protection of the Embera Katio people. We considered such a step to be very important because killings were still taking place and the threats continued.
We asked EDC to request that the shareholders of this project and the company that owns the dam go along with the judgment of the constitutional court requiring the Columbian Department of the Environment and the Department of the Interior to negotiate with the Embera Katio.
In its very short reply, EDC noted that it attaches great importance to human rights and environmental matters. It basically attempted to minimize its involvement in this project. In fact, it is not a dominant partner with investments of approximately $18 million U.S. in a project that will require a total investment of $700 million U.S.. Nonetheless, we consider it is very important to defend this matter of principle.
EDC suggested we communicate with the Columbian authorities for more detailed information. That was basically their response. This response leads us to ask a number of questions relating to EDC's sense of responsibility in relation to this matter. We knew from the outset that it would prove to be fairly weak and our apprehensions were confirmed.
We are even more concerned when we look at the general context of Columbia, a country benefitting from a huge amount of direct investments from Canadian businesses. I have visited this country on two occasions in the last 18 months and have been told about Canadian companies in the south, the north and in the centre and various concerns have been raised.
In how many of these cases is EDC involved? In how many cases do the Canadian companies respect or fail to respect the environment and human rights? These are all questions of great concern to us and that require further research. In our view, the case of the Embera Katio is sufficiently disturbing for measures to be taken concerning EDC transparency and accountability.
In this respect, we believe your committee does have a serious responsibility. Thank you.
The Chairman: Thank you, Mr. Bertrand. You probably know that a subcommittee of this committee will be undertaking a study on Columbia in December. Do you intend to be present?
Mr. Jacques Bertrand: Yes, we hope to take part.
The Chairman: I see. I would prefer our study of EDC this morning to be a fairly general one without us getting into very specific cases. You may however rest assured that I appreciate your comments because they allow us to understand the type of problems the corporation faces. But we should keep in mind that we are studying EDC here and its operations. The question of Columbia will be examined by the subcommittee.
Mr. Jacques Bertrand: Of course. I am pleased to hear the clarifications you have given. The correspondence I will share with you will give you a good idea of what we think of the role of EDC and the response that we received from it.
The Chairman: I see. Thank you.
Now we're going to go to Mr. Freeman.
Mr. Aaron Freeman (Spokesperson, EDC Working Group): My name is Aaron Freeman, and I'll be addressing the issue of disclosure and access to information.
In an important sense, access to information is an underlying issue of accountability, because as several members of this committee have pointed out in previous hearings, without sufficient information it's impossible to assess whether an institution is meeting ethical standards.
Despite the benefit that EDC enjoys as a public financial institution, including its immunity from paying taxes, its limited liability clause, its government-guaranteed credit rating, and the fact that its capital base is derived from taxpayer dollars, EDC discloses very little information to the public. As noted by the Gowlings report, “public disclosure obligations” on EDC “are almost non-existent under current legislation”.
EDC is exempt from the Access to Information Act, other than Canada account financing administered through the EDC, and there are no provisions in the Export Development Act that require the EDC to provide any information about project financing to the public.
This record of secrecy is unacceptable for any public institution. EDC should be disclosing enough information so that the public can evaluate whether the minimum standards set out in legislation and/or the policies of the EDC are being met and whether projects are harming the communities in which they operate.
This secrecy is also remarkable when we look at our major trading partner, the United States. The U.S. Export-Import Bank lists all of its projects and their locations on the agency's web site. While there are provisions to maintain commercial confidentiality, these are considered in the context of each individual project. In contrast to the EDC's blanket withholding of all project information, disclosure is the default for U.S. export financing agencies.
U.S. agencies are also subject to the Freedom of Information Act. While there is an exemption in the FOIA for confidential business information, this exemption is less restrictive than the commercial confidences exemption in the Canadian Access to Information Act.
Relative to the EDC, disclosure is also the default at World Bank financing agencies. Each private financing agency of the World Bank provides key information on not only the projects that are financed, but also the projects that are proposed to be financed. Similarly, the Inter-American Development Bank makes factual and technical information on the environmental impact of its projects available to the public.
While concerns about commercial confidentiality should not be dismissed lightly, the Gowlings report canvassed these concerns and concluded the following:
...that the publication of general information regarding
EDC clients and activities would not, in most cases,
adversely affect the commercial interests of EDC
customers. Moreover, owing to its status as a
government entity, EDC customers should not expect
their EDC relationship to be entirely shielded from
In Canada, placing the EDC under the Access to Information Act would give the public access to important information. The fact that CIDA, including CIDA Inc. and other crown agencies, as well as Canada account financing done by the EDC, all fall under the act has not harmed these agencies' relations with the private sector.
In addition to placing the EDC under the purview of the act, the public should be guaranteed access to basic information about EDC-supported projects. The working group agrees with the Gowlings report's provisions that would require EDC to disclose the name of the borrower, the country, the name of the exporter, the amount and type of financial support, the term, and a brief description of the goods, services, or project provided.
It's noteworthy that every year until the mid-1980s EDC listed all of its loans and related bank financing, including the name of the client, the products financed, the exporter, the country, and the amount. As with other financing institutions, like Ex-Im Bank, OPEC, and World Bank financing agencies, this information should be made available at the proposal stage—this is where we differ from the Gowlings recommendation—with provisions in place that would protect specific information that is sensitive.
Some have argued that EDC cannot be compared to these agencies, because unlike these institutions, EDC is not a lender of last resort. However, none of these agencies, which do both lending of last resort and other types of lending, have separate provisions governing situations where the client is a borrower of last resort. All clients are subject to the same basic disclosure provisions.
We've just heard testimony about the Urrá Dam in Colombia. I would urge the committee to consider that these types of projects may be only the tip of the iceberg, but until the EDC functions in a more transparent fashion, we will find out about EDC's involvement in these projects only after they become well-publicized disasters.
The Chair: Thank you very much, Mr. Freeman.
Now, as I understand it, you're the last spokesperson for the EDC Working Group. Is that right?
Mr. Aaron Freeman: That's true, although there are other members of the working group who will speak on behalf of their organizations.
The Chair: Okay. I just wanted to, on behalf of the committee members, thank your group for the very helpful report, particularly for your executive summary. And the fact you were able to get all your recommendations on one page has our researcher here absolutely.... You're his favourite witness to date.
You've been very helpful. Thank you very much.
We'll now turn to Mr. Allmand. He needs no introduction, as we always say, before this committee.
Mr. Warren Allmand (President, International Centre for Human Rights and Democratic Development): Good morning, Mr. Chairman. I was pleased to note last night that the City of Montreal has sent the government an outstanding advocate for international human rights in Irwin Cotler. I look forward to seeing Irwin play an important role in the matters you have before you this morning.
The Chair: Is he part of your scheme to leave...?
Through someone else?
Mr. Warren Allmand: Exactly.
The Chair: Okay. Well, forewarned is forearmed.
Mr. Warren Allmand: We lost him. He was a member of our board. He's going to be with you.
The Chair: He was a colleague of mine too.
Mr. Warren Allmand: As President of the International Centre for Human Rights and Democratic Development, I welcome these parliamentary hearings on the Export Development Act, and I particularly welcome the fact that human rights are a part of the mandate of this review. One of the priority programs at the International Centre for Human Rights deals with the impact of globalization and trade on human rights and democracy, which consequently explains why I'm here today.
As the linkings between trade and human rights are increasingly acknowledged by the Canadian government and by many multilateral agencies, it is important that we examine how the Export Development Corporation can contribute to furthering the cause of human rights, which is a central pillar of Canadian foreign policy.
I met with Minister Pettigrew two weeks ago during the FTAA meetings in Toronto. He was very clear in his presentation that he sees a clear link between economic activity and human rights. Minister Axworthy has acknowledged on several occasions that trade and human rights must go hand in hand.
Last year in Edmonton he stated, and I quote:
Just this week, I met with the Canadian directors at
the IFIs (International Financial Institutions) about
how to reinforce good governance and democracy as a
consideration in lending decisions. And we need to
better and more actively integrate human concerns into
international forums dealing with commerce and trade.
This is not utopian nonsense—it is simply good
I agree with Mr. Axworthy that it is simply not enough for us to promote Canadian trade and investment in developing countries, presuming that rights and democracy will fall automatically in place. We cannot on the one hand support human rights and democratic development through CIDA, the Canadian International Development Agency, and on the other hand defend policies that do not support these same goals in certain multilateral fora or in the activities we undertake in support of Canadian business abroad. We must integrate our policies that promote Canadian business with our policies that promote human rights. The EDC has a key role to play in this regard.
The international centre believes it is not possible to make effective progress on human rights by restricting ourselves to traditional human rights treaty bodies at the international level, important as these may be. Human rights are being affected by decisions at the World Trade Organization, policies adopted by the World Bank, the International Monetary Fund, and many large corporations operating globally in the world today. Not all of these have demonstrated respect for human rights.
As a crown corporation, the Export Development Corporation's regulations must also respect, and certainly should not undermine, the Canadian government's foreign policy commitment to human rights. How can this best be accomplished?
First, on access to information, I won't repeat all that Aaron Freeman has said, but we fully support his position and what he said. Given that the taxpayers of Canada are ultimately the guarantors of EDC loans, a higher degree of disclosure is absolutely essential. Without this, it is virtually impossible for civil society groups in Canada, or elsewhere, to find out about potential involvement in human rights violations.
Secondly, there must be consistency between human rights and trade policies. Mechanisms must be put in place to ensure that the EDC does not directly contravene Canada's priority on human rights and its foreign policy.
There are checks that should be made on certain problems. Canada supports core labour standards, as defined by the ILO, and recognizes those labour standards as human rights. It should be a basic requirement of any firm receiving EDC financing that it respect core labour standards. The Gowlings report recommends that EDC implement a policy of asking its clients to indicate whether or not they've adopted a voluntary code of conduct. Our organization has done extensive research on voluntary codes, and we have observed that only a small proportion of Canadian companies have such codes. Moreover, even fewer have codes that include human rights, and fewer still have effective implementation and monitoring mechanisms.
Therefore, we believe that rather than relying on unenforced voluntary codes, the EDC should require a clause requiring compliance to international human rights norms in each contract it concludes with Canadian businesses.
Next, Canada is an important proponent of women's human rights on the international scene. The Export Development Corporation should be able to ensure that none of the contracts it helps finance have clauses that discriminate on grounds of gender, which would clearly undermine our goals for gender equality; nor should contracts containing clauses that discriminate on grounds of race, ethnicity, religion, or any other status be accepted for EDC support.
Despite the fact that part of the EDC mandate is political risk assessment and insurance, human rights do not appear to be part of political risk assessment. This is totally unacceptable. Persistent patterns of human rights abuse are bound to create instability and political risk. It is therefore not only morally objectionable but also short-sighted from a business point of view to not take human rights into account in political risk assessment.
On EDC support for exports to countries with serious human rights violations, globalization and international competition have meant that economic sanctions are tools that are only used in the most exceptional circumstances, and business is likely to continue in countries with extremely serious human rights situations, including in countries in the midst of war.
Canada does have some restrictions on exports of military equipment to such countries, although we share the serious concerns about how the area control list is established and the lack of transparency in establishing criteria for putting countries on that list.
In our view, there are some countries in which no international trade and investment should be allowed because it is impossible to undertake economic activity without, in some way, being complicit with human rights violations.
Burma is the obvious example, and there is a broad consensus in the human rights community that this is the case. Economic sanctions in such a case are appropriate. However, business will go on in other countries where dissidents are routinely jailed and executed, freedom of association is outlawed, torture is practised, freedom of speech is non-existent, and corruption is rife.
In this context, I was a little disturbed to read in a recent DFAIT press release that the EDC is currently accompanying Minister Chan on his trade mission to China. I was even more upset yesterday when I read that the deal has already been made to admit China to the WTO, when human rights should have been a bargaining chip to permit their entry.
The International Centre believes that no government support should be offered to firms seeking to do business in countries that do not guarantee fundamental rights, fully recognizing that private actors will continue to operate.
The Department of Foreign Affairs and International Trade, in consultation with the Canadian NGO community, should establish a list of countries that should no longer receive any support for Canadian trade or investment, including EDC support, CIDA support, Team Canada missions, etc. This list could be reviewed periodically and would be a form of pressure that Canada could exercise in order to limit the scope of Canadian business in countries with gross and systematic human rights abuses.
Taxpayers' money should not be used in any way to bolster repressive regimes or support unethical business behaviour. Systematic reviews of the human rights situation in different countries are essential in order to achieve foreign policy consistency.
While this recommendation extends beyond the mandate of EDC per se and would require the cooperation and resources of DFAIT, including missions abroad, agreement from EDC that such a list be established would certainly be welcomed by the human rights community.
Mr. Chairman, I want to thank you for the opportunity to appear this morning, and I trust that these comments will be useful in your review. I will be available to answer questions and discuss these ideas with you, and I look forward to seeing your report.
Thank you very much.
The Chair: Thank you very much, Mr. Allmand.
Ms. Nowlan from the West Coast Environmental Law Association is next.
Ms. Linda Nowlan (Spokesperson, West Coast Environmental Law Association): Thank you, Mr. Chairman, and good morning.
The West Coast Environmental Law Association is a public interest environmental law centre in Vancouver. We're celebrating our 25th anniversary this year, so we're one of the oldest environmental law centres in Canada.
I'm very pleased to be here, especially before my former—not my old—international law professor from the University of Toronto.
Ms. Colleen Beaumier (Brampton West—Mississauga, Lib.): Oh, he's old.
The Chair: You can see we're going downhill from there. You should have kept this a secret.
Ms. Linda Nowlan: I won't pursue that. I'm not sure if you're still teaching, in addition to your duties here, but I'm sure that if you are you will likely be teaching that our international environmental commitments aren't implemented in Canada as well as they should be. One of the ways in which they can be better implemented is through a consistent foreign policy, and a consistent foreign policy requires the EDC to abide by environmental standards.
In today's global world, we can't expect that Canadian companies face one set of standards here in our country and face other lesser standards as soon as they leave the borders. I think that's really the basic point of my submission.
I will concentrate on environmental standards and the recommendations in the Gowlings report related to environmental standards. Those are very good first steps that don't go far enough.
Before I go into detail about the amendments to the Export Development Act that we're suggesting are necessary, I'd like to make three general points. The first one I've already hit upon and Mr. Allmand already talked about in terms of human rights—that is, it's very important that we have consistent foreign policy, and right now we don't.
CIDA has one set of standards. We have environmental people in the Department of the Environment and we have environmental people in the Department of Foreign Affairs going abroad, negotiating treaties, and spending a lot of time and energy—government time and energy, taxpayer-funded time and energy—negotiating commitments and ensuring that Canada acts strongly in the field of environment, but the EDC is not required by law to do that. That's just an inconsistent message.
Instead of exporting environmental problems—and we've heard an example of that today—we should be exporting the solutions. We have some solutions. We have a lot of solutions. We have good environmental laws in Canada. We should be exporting those laws and those solutions, not the problems.
My second general point is that the EDC is not yet taking the environment seriously. There are some steps forward, as Gowlings mentions, but they're just not yet at the stage where they're taking it seriously. As evidence of that, I just need point you to their own submission to the Gowlings review. The environment is mentioned very summarily on the last page, in two sentences.
I don't think that's enough, in today's world, to say that they're seriously addressing the environmental problem when a major review of their governing statute comes up and they don't address the environmental at all.
They are suggesting that voluntary standards are enough, and they have taken the laudable step of introducing a short environmental review framework, which is voluntary. Again, that's a good step forward, but it's not good enough.
Studies show that voluntary standards do not cause changes in behaviour to nearly the same degree as regulations. Some of those studies are cited in my written submission. I'll just refer you to the 1998 United Nations Environment Programme's survey of financial institutions. Those financial institutions around the world say that regulations are the reason they change their behaviour. Thus, we submit that the EDC should be bound by law to give serious consideration to environmental standards, which is not the case now.
My third general point is that the EDC will respond that the problem is competitiveness, that it cannot ask its clients to abide by statutory environmental standards because that would hurt their competitive position. In answer to that, we need only look south to our major trading partner and business competitor, the United States. They have statutory environmental standards in the U.S. for their two export credit agencies.
The environmental standards the U.S. requires are extensive. Not only do the governing statutes for both the Export-Import Bank and the Overseas Private Investment Corporation contain environmental standards, but those agencies are also required to abide by the National Environmental Policy Act, which is the U.S. equivalent of our Environmental Assessment Act.
I'm afraid Gowlings has made an error in their statement in the report that the U.S. agencies only have to follow NEPA, the National Environmental Policy Act, in the United States, its territories, and Antarctica. In fact, they have to follow it for any project that will significantly affect the environment of the global commons outside the jurisdiction of any nation.
Many NGOs, ours included, argue that this includes projects with significant climate change and biodiversity-loss effects, because those are outside the jurisdiction of any one nation and are problems affecting the global commons.
With regard to access to information, the U.S., as you've heard, has extensive public participation, and access to information disclosures are also legally required. Those agencies in the States also require their agencies to give preferential support to certain environmentally beneficial projects—for example, energy projects that focus on renewables and demand-side management.
Going to the Gowlings report and the environmental recommendations contained in that report, their first recommendation is that the EDC should continue to work towards an international consensus for all export credit agencies around the world. Again, this is a major reason the EDC says it can't be expected to take action now; they have to wait for the international consensus.
Well, that's not good enough, and it's not fast enough. If our major trading partner, the U.S., can afford to take unitary action, certainly we can too. Canada has shown that it's not afraid to act alone when it has an important policy objective. We've seen that over and over again.
I first wrote to DFAIT in 1996 about the EDC support for Canadian companies involved in the Three Gorges Dam. That's over three years ago. At the time, I was told to wait for the international consensus. We're still waiting. And that's not good enough.
With regard to the environmental review framework, Gowlings says it's good but it should be developed after fuller public consultation. I certainly agree. I won't go into the environmental review framework, but it is, in our submission, inadequate.
I have a longer, detailed brief if the committee is interested, even longer than the one you have, I hate to tell you. If you're interested, I'd be happy to provide you detailed comments on the environmental review framework.
My colleague, Gail Whiteman, will talk about that in more detail.
Going to the EDC's formal mandate, Gowlings makes some good suggestions, and we support them, but again they don't go far enough. They won't promote changes in behaviour at the corporation, in our submission. They're just not strong enough.
We say that more extensive amendments are required. Specifically—and I'll refer to the last page of my brief—the Export Development Act should be amended to mandate the promotion of sustainable development and ensure that there are opportunities for public participation in the EDC decision-making process as two additional purposes of the corporation. Right up front, in the purposes of the corporation, these should be there.
We're not saying the EDC is a development organization, just that one of their purposes, again for a consistent foreign policy, should be the promotion of sustainable development. This language is already found in other Canadian laws, such as the Canadian Environmental Assessment Act, and there's no reason the EDC should not be governed by statutory language of that kind.
Secondly, environmental assessment procedures should be required for the EDC, and those procedures should be required as early as practicable in the planning stages of a project and before irrevocable decisions have been made. We've heard from Kimy today that, unfortunately, that's not the case right now. So we would like the EDC to be required by law to do EAs as soon as possible in the planning stages of a project.
It's also important that the EDC has a list of categorical prohibitions of projects that it will not support. Again, this precedent is found in the EDC's U.S. counterparts and in the World Bank group of agencies. They have categorical lists of projects that will not be supported.
For example, they won't support any project that converts primary, old-growth forest. Again, Canada is out there working very hard promoting a global forests convention on the one hand and yet, on the other hand, the EDC finances projects that would work against the very purposes of a global forests convention. That is not consistent foreign policy. Let's require them to abide by some basic standards.
Climate change is another example. The U.S. Export-Import Bank is embarked upon a difficult but necessary process of tracking CO2 emissions so that it can decide whether emissions from a particular project would render the project unacceptable in terms of the climate change convention. There's no reason the EDC shouldn't be required to do the same thing.
Again, legislative amendments are required to mandate EDC to increase its support for projects that are environmentally beneficial. In Canada we have a very good environmental industry, very important and growing. To its credit, the EDC has developed an environmental exporters program, but it doesn't go far enough, one more time. There's no reason, again, why the law can't require it to give effect to the same public policy directions we have in other agencies.
I've already talked about the fact that the EDC is often supporting projects—although we don't know the details because we don't have full access to information, what we do know is that some projects go directly against Canada's treaty obligations. This should be prohibited by law. There are lots of examples of those, and some of them are in my brief.
Export credit agencies need to be partners in the implementation of environmental treaties, not spoilers of those treaties. We talk about integration of environmental and economic policy; it's one of the fundamental parts of the foreign affairs mandate. The web site of the foreign affairs department explicitly talks about integrating environmental and economic policy, environment and trade policy. We're not there yet if the EDC is acting alone.
There are two other legislative amendments outside the issue you're looking at. One is reform of the Export Development Act, which would increase the EDC's environmental obligations. That's to bring the EDC under the purview of CEAA. Right now they are not obligated to abide by the Canadian Environmental Assessment Act, and they should be. The other is to require the EDC to prepare a sustainable development strategy pursuant to the Auditor General Act. Many other agencies, including Foreign Affairs, of course, have the obligation to prepare this strategy. The EDC should take its sustainable development obligation seriously and prepare a strategy.
I'm going to close by repeating one of my opening remarks. Canada has been a very good leader worldwide in forging environmental agreements and helping other nations take a lead environmentally. Unfortunately, our reputation in that area has been flagging in recent years. Let's stop exporting environmental problems and start exporting solutions.
The Chair: Thank you very much, Ms. Nowlan. Our researcher says you must have been an A student because he likes your brief a lot. I told him you must be an A student because you moved to Vancouver. It shows another form of intelligence.
We'll now go to Ms. Whiteman, please, from the North-South Institute.
Ms. Gail Whiteman (Senior Researcher on Corporate Social Responsibility, North-South Institute): Good morning. Thank you for holding this session. My name is Gail Whiteman and I'm a senior researcher at the North-South Institute. For those of you who don't know the North-South Institute's work, we do research on international development issues and foreign policy. We're not an NGO, although we certainly support the NGO recommendations you've heard this morning.
The area I work in is in corporate social and environmental responsibility. I have given Janice some copies of an overview of a report we did on Canadian companies and social responsibility in 1998, which might be useful in this area.
Taking the perspective of corporate responsibility, the first thing I would like to say is EDC is lagging behind the private sector in this area. They are nowhere near as advanced as the private sector is in environmental management. I think that's quite surprising.
The two things I would like to talk about today are, first, an assessment of the environmental review framework that EDC has developed, and second, some specific recommendations we would like to talk to in addition to the environmental recommendations Linda Nowlan has made.
When we take a look at the Gowlings report, it states that the environmental review framework stops short of setting objectives or benchmarks. It's not specific, and it is not clear. Gowlings concludes that EDC's environmental framework appears to lack substantive and methodological clarity. Now, what does that mean? We support that, and we agree with that.
I'd just like to illustrate something visually. This is EDC's environmental review framework. In comparison, this is the World Bank's. So when we say this is vague, not clear, and not specific, I really mean it.
We have on a number of occasions made strong recommendations to EDC that they adopt the World Bank practices and policies, for a number of reasons. De facto in the international scene many companies are already using World Bank guidelines. These have been tried and tested out. There are areas that can be improved on, but this exists—why reinvent the wheel? Why go to something that is as vague as this approach? I think we're in support of the fact that EDC is actually trying to do something; we certainly applaud that. I think we could piggyback on work that's already been done in this area, and we don't need to reinvent the science and the methodology. Let's go with what's out there.
In particular, looking at the World Bank framework, not only is there a detailed methodology, but there are also specific processes for transparency, public consultation, and an appeal process. In addition, the World Bank has policies for indigenous people and resettlement, among many other things.
For example, if I look at this framework, and I did a word search on it, there's not a straight simple mention of indigenous peoples in it. Why? I think Kimy's testimony today says perhaps there should be, and we would strongly encourage that.
So what I would like to say is if the framework that EDC has developed by itself is the best shot they have, then I think they need legislative guidance to strengthen this. My recommendations then from the North-South Institute would focus specifically on how they can do this.
In addition to agreeing with West Coast Environmental Law's suggestion that EDC's mandate in the act include an adherence to principles and practices of sustainable development, we would also suggest the act be amended to introduce a general requirement that EDC establish environmental review procedures that are consistent with those set up by the World Bank. Let's put that in the act.
Gowlings I think agrees that the use of the World Bank standards would facilitate accountability, as the science and methodology involved are relatively clear. I've had a couple of conversations with the private sector on this, and they agree that they're quite comfortable with the detail that's in this report. I don't think EDC can simply say we need something more flexible than the World Bank, because the World Bank has different levels of criteria. So we're not suggesting that every single piece of business that goes through EDC has to adhere to this. What we're saying is that the big ones or the ones that are going to have adverse impacts take this approach.
Secondly, we'd like to have the act clearly outline the legislative process for public consultation, public appeal, and an independent review process. I think local affected communities like Kimy's community should have an ombudsperson they can go to and talk to directly on social, environmental, and human rights.
Finally, we would like to suggest that EDC post and solicit feedback on its environmental impact assessments for a period of 60 days prior to financing. This can be easily done using the Internet, and again that's another international standard that's out there. That currently is not part of their practice, and we would encourage them to do that.
In addition, we would suggest that they immediately do a public consultation on their framework. While there was some input from a variety of groups on issues to be included in this, this framework has never had a consultation on it, and I think it could really benefit from doing that.
In closing, I would just like to stress again that EDC is lagging behind the private sector. While EDC in an earlier presentation to this committee stressed that they were meeting the needs of Canadians, I would suggest this is a very narrow way of evaluating the performance, because what they're really saying is they're meeting the needs of a number of their clients. I would suggest they take a look at stakeholder satisfaction and start trying to measure themselves as to how they are meeting the needs of local affected communities and environmental issues, environmental representatives, and see how they can meet the needs of those stakeholders in addition to some of their clients.
That's all I have to say, and I certainly look forward to questions. Thank you.
The Chair: Thank you very much, Ms. Whiteman; we appreciate that.
Mining Watch Canada, Ms. Kuyek.
Ms. Joan Kuyek (National Coordinator, Mining Watch Canada): Thank you very much for the opportunity to speak to this committee today.
My name is Joan Kuyek, and I'm the national coordinator of a new pan-Canadian organization called Mining Watch Canada, which is supported by environmental, social, justice, aboriginal, and labour organizations around the country. We were formed out of the urgent need for a coordinated public-interest response to the threats to public health, water and air quality, fish and wildlife habitat, and community interests that have been posed by irresponsible mineral policies and practices both in Canada and around the world.
The founding members of Mining Watch Canada are the Environmental Mining Council of British Columbia, the Canadian Nature Federation, the Canadian Environmental Law Association, Northwatch, the Innu nation, the Yukon Conservation Society, the Canadian Arctic Resources Committee, and Inter Pares. We may be tiny, but we've got a lot behind us.
The Export Development Corporation has been brought forcefully to our attention by communities and non-governmental organizations that had to deal with the impact of Canadian mining development abroad. They want to know what role Canadian institutions are playing, perpetuating some of the problems they face, and what if anything Canadian citizens are doing to support them.
On August 19, 1995, 200-metre cracks opened in the lining of a tailings pond at the Omai gold mine in Guyana. The pond was full of cyanide-laced waste. Within seconds, millions of cubic metres of effluent gushed out and into the nearby Omai River. It flowed downstream to the Essequibo River, the largest waterway in Guyana, wiping out the fishery, poisoning residents, and changing their way of life forever. This is a Canadian-owned mine, with only a 5% interest from the Guyanese government. Months before this spill, a geologist warned of the impending disaster. The dam had been leaking since it was constructed.
The mine was restarted again in 1996, and people say it is still not safe. No compensation will ever make up for what they have lost. In a letter to Cambior president Louis Gignac on August 19, 1999, the people of Essequibo said:
Our now pristine river here in Guyana's rainforest,
which scientists say is the largest intact section of
virgin rainforest left in South America, is now polluted.
We have learned that some of the toxic chemicals that
your mine is putting into our water will remain in the
environment for hundreds of years.
In 1992, EDC had issued $163 million in political-risk insurance to Cambior for this mine. Political-risk insurance is a very interesting thing to look at.
Submarine tailings disposal is not allowed in Canada. Nevertheless, EDC recently guaranteed $29.6 million of a syndicated loan from the Union Bank of Switzerland to investors in the Lihir gold mine in Papua New Guinea. This is a project owned by Lihir Gold Limited. It is one of the most colossal gold mining projects in the world on an island near a pristine coral reef. The gold is locked in a geothermally active volcano. Extraction will involve lowering the water table, using the sea to cool the fiery ore, then discharging the water back into the marine environment, all of this within 100 metres of the coast from a pit that will eventually reach 300 metres below sea level. The mine is expected to last 15 years, but the waste rock and tailings, some 400 million tonnes, will be dumped directly into the ocean.
Even the company acknowledges that the mine water, geothermal water, and leachate from the stockpiled ore will destroy seven kilometres of coral reef, and a major nesting zone for Melanesian scrub fowl. The U.S. OPIC has refused to support the project because they say it violates international conventions prohibiting waste disposal at sea. I'm not sure why Canada thought it didn't.
The EDC has supported projects that have had some of the most serious mine disasters in the world. Mining is very risky business. It is risky not only for the investors, but for the communities and ecosystems where it takes place. They need to be assured that the mining project will not damage their environment irreparably. The mine is rarely there for more than 20 years, but the people and the land will be there forever. Added to these concerns is the fact that the mining industry is characterized by a substantial gap between its initial optimistic forecast of technical competence and its performance. Even a large, relatively clean mine can upset the balance of a fragile ecosystem on which indigenous people depend for life.
The construction of roads can lead to side effects like increased farming and logging, and during the life of a mine, pollution flow-throughs are a concern. Mining and milling take enormous amounts of water and energy, both of which have effects on the environment.
Some extraction processes are very dangerous, like cyanide heap leaching, but it is mine closures that must be given the highest priority. Depending on the quality of ore and the method of extraction, up to 99% of the rock removed becomes waste, and rock surfaces that are exposed to air and water oxidize and create acid mine drainage. The acidified water dissolves the heavy metals in the waste rock, takes it into rivers, aquifers, and lakes, and takes other heavy metals with it. Usually this problem does not appear until many years after a mine closes, and it can last for hundreds of years.
AMD is the mining industry's greatest environmental problem and its greatest liability. It is the largest cost of doing business, and it is rarely on the company's ledger. It is not enough to have environmental assessment at the front end of the project. Consistent, measurable evaluation of environmental performance must be done, and where EDC has a major financial stake in a project, it must have the power to step in and force improvements before disasters happen.
In 1982, EDC lent $1.36 million for Placer Dome's Marcopper mine on the tiny island of Marinduque in the Philippines. Between 1975 and 1991, Marcopper dumped more than 200 million metric tonnes of tailings from its Mount Taipan mine into the shallow and coral-rich waters of Calancan Bay. The 12,000 fishermen and their families who depend on the bay for their primary food source have been devastated by its demise. Because of the loss of income caused by the poor fish catches, some villagers can no longer afford to buy rice, and some have become ill after eating seafood caught in the bay.
A study conducted in 1997 confirmed the villagers' worst fears. A medical team from the University of the Philippines and the Philippine health department found elevated mercury and lead levels amongst the children of the Calancan Bay area. Children are now being flown to Manila for treatment of lead poisoning.
That wasn't the end of the problems for the people of Marinduque. In 1992 Marcopper began dumping its tailings into the mined-out Mount Taipan pit. On March 24, 1996 a tunnel beneath the pit failed, and over a period of several weeks more than two million cubic metres of tailings poured from the tunnel into the Makulit and Boac rivers. At least 20,000 people have been affected by this spill.
According to United Nations investigators, Marcopper failed to exercise good management at the mine. Local people have yet to receive compensation, and Placer Dome refuses to accept responsibility for remediating the site, despite a Philippine court ruling that found the company to be responsible.
It's in the interest of EDC to publish information about the projects, governments, and companies it supports, if for no other reason than to avoid blame for projects it has rejected.
The Canadian public has a right to know where their money and their reputation are being spent.
I thank you very much for the opportunity to present, and I hope these examples are useful.
The Vice-Chair (Ms. Colleen Beaumier): Thank you.
From Probe International, we have Patricia Adams.
Ms. Patricia Adams (Executive Director, Probe International): Thank you, Madam Chairman. My name is Patricia Adams and I'm executive director of Probe International. We're a public interest research group based in Toronto, and we've been monitoring the social, environmental, and financial effects of the Export Development Corporation for more than 20 years. Our research on EDC is probably more extensive than that of any other independent group in the country. We publish it in books, articles, major Canadian newspapers, and magazines.
I've submitted some of those to this committee as evidence. We also have 20,000 supporters across Canada, many of whom have written letters to various prime ministers over the years, to ministers of international trade, and to their own members of Parliament expressing their concerns about EDC's costly and damaging activities.
We have participated in this current review and submitted our comments on the Gowlings report to the Minister for International Trade. We believe there are fundamental problems with EDC and that Gowlings' recommendations do not address those problems.
The Export Development Corporation transfers the private risks of international business to the public sector. By socializing these risks it spawns moral hazard, allowing exports, investments, and projects to proceed that are economically unviable.
EDC interrupts important messages conveyed by the market to recipient governments that good governance and the rule of law will attract honest business. By doing so, EDC has bankrolled bad governments against their people and spawned crony capitalism.
Using its government-granted borrowing, tax, and regulatory advantages, EDC finances and ensures commercially viable projects that the private sector would otherwise finance, and then uses those profits as a sort of mad money to finance the pet projects pushed by politicians here or in the emerging markets.
Those are projects that the private sector is too prudent to support. Because of its exemption from the Access to Information Act, EDC's activities are sheltered from public scrutiny. The absence of public oversight or market discipline make EDC's activities a perfect breeding ground for corruption and for business activities that destroy the environment, sink third world and eastern European citizens in debt, and cost Canadian taxpayers money.
Probe International agrees with the dean of the Yale School of Management, Jeffrey Garten, and with the Economist magazine. They both argue that governments ought to get out of the export credit business altogether, and the marketplace has been corrupted by the presence of government.
Internationally and domestically, a lively debate challenges the very public policy purpose of export credit agencies in general, and of EDC in particular. Gowlings, without so much as an explanation, dismissed that debate. In our view, the Gowlings report is biased in favour of those who wish to maintain EDC's privileged status—a handful of subsidy dependent, high profile, politically important large corporations—while discounting the view that EDC's commercially viable activities should be privatized and its high-risk lender of last resort activities eliminated.
Here are just a few of the major shortcomings from the Gowlings report. Gowlings heard a very clear and compelling argument from the insurance industry that EDC should withdraw from the credit insurance business. Gowlings instead recommended creating—and for an indefinite period—a sort of big brother of the insurance industry, in which EDC and the private sector would produce a single-credit insurance policy. Effectively, this would be a public-private cartel designed, in Gowlings' words, “with a view to developing the market [and] creating Canadian private sector capacity”.
To mute the banking sector's criticism that EDC takes away its business, Gowlings similarly recommended that the government transfer private risk to the public purse through guarantees that would reward the private banks in officially supported transactions. This public-private collusion to create a cartel, this socialization of private sector risk, this corporate welfare, this buying off of your opponents with public resources, is offensive to taxpayers and harmful for the Canadian economy.
While I disagree with many of Gowlings' recommendations, I do commend Gowlings for one very important contribution to the debate over the need for EDC. Gowlings dispels, perhaps inadvertently, the myth EDC has long laboured to create that EDC is a commercially viable, self-sustaining enterprise.
EDC finances its activities at preferential rates on the good faith and credit of the taxpayer. It does not pay taxes to the government or dividends to shareholders, and it doesn't obtain reinsurance or abide by the same regulations governing the private sector. Gowlings acknowledged that these financial benefits likely conferred on EDC from its crown status “a competitive advantage” over its private sector competitors.
Gowlings also confirmed that EDC must mine the profitable private financial services sector, both banking and insurance, to finance commercially unviable high-risk projects. These high-risk ventures, euphemistically known as lender of last resort activities, account for approximately 70% of EDC's business. Gowlings said:
In short, without commercial
quality business to offset its higher risk business,
EDC would require substantially more capital as well as
annual government appropriations.
This is extremely important. In effect, Gowlings has acknowledged and pointed out that without these advantages, EDC would not be able to finance CANDU reactors in eastern Europe and the third world, the Three Gorges Dam in China, the Urrá hydro project in Columbia, and gold mines in Guyana and Kyrgyzstan. It also would not be able to evade the annual wrath of taxpayers.
Lastly, let me turn to the issue of disclosure and accountability. EDC's exemption from the Access to Information Act gives EDC the power to hide its activities and the financial liabilities it is creating in the name of taxpayers. Gowlings' recommendation that EDC release a list of the projects it supports simply restores what was standard practice in 1983, when EDC attached to its annual report a statistical review that included all the details Gowlings has recommended be released.
This is wholly inadequate. The public wants to know far more. Until EDC is subject to the Access to Information Act, we will not have the ability to determine, for example, if EDC's portfolio is sufficiently diverse to protect taxpayers. Nor will we be able to confirm the anecdotal evidence that relatively few large firms receive the lion's share of EDC support.
We won't be able to analyse which parts of EDC's operation subsidize others. We will not know if EDC adheres to the rules and regulations laid out by the Office of the Superintendent of Financial Institutions and the Bank for International Settlements. We won't know which export projects and foreign investments EDC is considering supporting, as we know with the World Bank. We also won't know what losses EDC is incurring.
In 1990, I wrote to Robert Richardson, then president of EDC, requesting details of the Paris Club's rescheduling of EDC's loan to Argentina for the CANDU reactor. He responded, saying that the information was confidential. At the same time, I wrote virtually the same letter to the Export-Import Bank of the United States requesting details of its loan to the Philippines for the Bataan nuclear power station. It responded promptly with details of its original loan and an accounting of the rescheduling agreements plus a repayment schedule.
The Honourable Paul Martin refuses to tell us how much Canadian taxpayers have provided to EDC, after EDC wrote off bad loans to third world and eastern European countries. By my calculations—and I've compiled this number from historical information from EDC and annual reports—since 1990, taxpayers have paid EDC nearly $700 million to get bad debts to such countries as Zaire, Benin, Cameroon, Republic of Congo, Guyana, and the Ivory Coast off its books.
No public officials are standing up for the public's right to know about EDC. Every five years the Auditor General carries out what is called a special examination report of EDC. It's a review of the economy, efficiency, and effectiveness of EDC's operations.
Last year, I asked the Auditor General's office for a copy of the EDC's 1994 special examination report. The Auditor General's office said it was not permitted to disclose it and told me to ask EDC. So I did. EDC refused on grounds that it was private. I then submitted an Access to Information request to the Department of Foreign Affairs and International Trade. After a thorough search of the files, no copy could be found. The 1994 report was submitted to EDC's board of directors but never to the Minister for International Trade.
Two weeks ago, I asked EDC for the Auditor General's 1999 special examination report and was once again turned down on the grounds that the examiner, the Auditor General, did not require that it be submitted to Parliament. So it too remains confidential.
The status quo is an affront to our democracy. Those of us who have watched EDC over the years have known and seen that it doesn't exercise due diligence and it responds to political interference. EDC supported the Three Gorges Dam in China because Prime Minister Chrétien told it to on the eve of the first Team Canada trip to China.
Three Gorges is an environmental and a human rights disaster in the making and could well become the world's most notorious white elephant. Like a neighbouring dam that has no customers for much of its power, Three Gorges will have difficulty finding customers. At 8¢ a kilowatt hour, its power will be at least twice as expensive as power from high-efficiency gas turbines that are also cleaner, more efficient, and more readily available. The Three Gorges Dam has the Canadian flag all over it. No foreign financiers, public or private, would fund Three Gorges until EDC started the race to the bottom. The Three Gorges Dam will haunt the good name of Canadians for generations to come.
As I carry out my research on EDC, the term I hear most frequently from industry officials, from EDC clients, and even former employees to describe EDC is a slush fund for the government in power. Despite EDC's best efforts to portray itself as something else, an increasing percentage of Canadians know otherwise.
This committee needs to stand up for the citizens of this country. Too many of EDC's operations are morally repugnant, environmentally unsustainable, and financially unsound. Parliament should do its duty to the country and dismantle EDC in an orderly fashion.
The Chair: Thank you very much.
That is the end of a long list of witnesses. We'll now turn to questions.
Mr. Yves Rocheleau (Trois-Rivières, BQ): I have two questions for Mr. Allmand somewhat along the lines of the ones put by Ms. Adams. We have heard a great deal this morning about the social responsibility of EDC and, by the same token, of companies. Holding this view, as I do, how would you respond to the argument claiming that if Canada is the only one to show some concern, it would merely discredit itself? Generally speaking, under the international rules of the game, very little concern is shown about such matters. So if Canada adopts such a position, it would decrease its ability to compete. That is my first question. What type of answer would you have to that?
Here's my second question. We hear a great deal of criticism about the lack of transparency in the way EDC works. As a seasoned former parliamentarian, you must have dealt with those people. We even felt it here, when I asked for a breakdown by province of businesses given business support by EDC; I was immediately told that that information was confidential. In fact, it is not really a delicate matter. Given your experience, how do you explain EDC's penchant for secrecy?
Mr. Warren Allmand: I will answer the second question first. I always proposed amendments to have the Export Development Corporation included in the Act. As a number of witnesses have already explained this morning, the United States has shown that it is possible to have an investment assistance system and do more or less the same type of work, while complying with guidelines on training and transparency.
If I understand your first question, the answer is much the same. We did not take the same stand as Ms. Adams and recommend that EDC be dismantled. I am not against that recommendation, but we did not take that stand. We have proposed bringing EDC under the Access to Information Act, increasing transparency and requiring that contracts comply with international conventions on labour and human rights.
For example, we are not asking for other countries, under these contracts, to have to respect Canadian standards, but rather the international standards included in the major conventions on human rights, economic, social and cultural rights, and civil and political rights that 140 countries have ratified.
We ask only that these labour and human rights, which are recognized at the international level, be recognized and adhered to. For example, companies doing business in Canada must comply with the Charter of Rights and Freedoms. Why, in the international market place, should environment legislation and human rights conventions be totally ignored?
Mr. Yves Rocheleau: In your opinion, are other countries adhering to these conventions?
Mr. Warren Allmand: Not all countries, but...
Mr. Yves Rocheleau: So Canada becomes the culprit.
Mr. Warren Allmand: Yes, Canada is a culprit, along with others. I am not really familiar with the situation concerning European countries. Perhaps other witnesses here could answer that. This morning we gave examples regarding the major player whose performance is better in this area than ours is in Canada. Ms. Whiteman even said that the World Bank's standards were more effective and more stringent than those of Canada's EDC. So there are many examples where other countries, not Canada, but... Perhaps other people who are here could give other examples.
Mr. Yves Rocheleau: This is a critical point, in my view. Do we need to set the bar higher for Canada than for other countries, or is Canada delinquent in not upholding the treaties that it has signed?
Mr. Warren Allmand: I don't know if you understood. They want other examples than the United States, which respects higher standards than we do in the EDC.
The Chair: But I think Mr. Rocheleau's question also directed itself to the question of cases where we fail to live up to international standards that we've signed. I believe you or Ms. Nowlan or somebody mentioned the fact that we've missed on certain treaties; we have treaty obligations and we're not making sure that EDC is—
Mr. Warren Allmand: It is difficult to identify all cases if these companies are not subject to the Access to Information Act. We try to find examples, but it is not always possible because everything is secret.
The Chair: Okay, does anybody else have any comments?
Yes, Ms. Whiteman.
Ms. Gail Whiteman: In addition to the World Bank, for example, I think the European Bank for Reconstruction and Development is a very good example of a very sophisticated approach to environmental impact assessment, and we've also encouraged EDC to look at their approaches. They have an entire department to look at environmental impact assessments, which EDC does not have. So that would be one example of another set of standards that EDC could certainly look at that are much higher than the current ones.
Linda, did you want to comment on Canadian treaties that they're not living up to?
Ms. Linda Nowlan: Again, it's hard to give case examples, because a lot of the information is hidden. Joan gave one example of a mine project in the Philippines that wasn't abiding by our Law of the Sea Convention, which prohibits underwater dumping of tailings.
The list of treaties that I think Canada routinely doesn't pay enough attention to or implement properly is a long one and includes the Climate Change Convention. We're setting emission limits, yet we're not setting emission limits for projects that the EDC is promoting abroad, and that's fundamentally going against what the Climate Change Convention is promoting. Similarly, the Biodiversity Convention requires a host of things—not locating major projects in protected areas, for example. I don't think the EDC has any similar obligations. I can't give you a project example, but I imagine the example in Colombia that Kimy gave us probably has a protected area near there, if not part of the project area.
There is a host of international conventions that require public participation. Every modern environmental convention and human rights convention requires public participation, and that is obviously not done ever by the EDC.
Ms. Gail Whiteman: If I can quickly add to the Columbian example, one of the things that EDC's environmental review framework says is that clients must adhere to host country laws. We would suggest that this is not good enough. But actually, in the case of Colombia, Colombia has ratified ILO 169 and has domestic law that says there must be prior consultation of indigenous people with projects. That clearly did not happen in this case.
The Chair: Since you're just talking about that specific one, if you look at that, what EDC says about Colombia points out that it's about 2.5% of the total, and that in fact it was the Nordic Investment Bank that was in charge. Do you think there's a role for saying that if we're a small player in here, then we can rely on the lead lender to ensure that the conditions are followed? That's often done in these syndicated loans; there's a lead lender. To me, Nordic Investment Bank says we have somebody up there we are always admiring, whose policies are even more pure than our own. When I see that name, I think one would assume there was some form of monitoring there that would be good when we're such a small participant. That seems to be what's suggested in their letter. Is that realistic?
Ms. Gail Whiteman: I think obviously EDC can't monitor everything, but what they can do is ask for monitoring reports and make those public, and that was not done.
The Chair: Mr. Freeman, and then Pamela.
Mr. Aaron Freeman: There's certainly a need, and the working group has stressed this, to develop consistent international standards in all of the areas we're talking about. I think the most prominent international standards that are out there right now are the World Bank standards. They are adhered to by the World Bank agencies. They're also adhered to by the U.S. export credit agency.
You talk about the big players. Those are the big players. The other thing to stress is that the EDC itself has frequently stated that other export credit agencies are looking to the EDC for leadership. They've stressed this many times. Recently—in September—they held a meeting of all of the international export credit agencies to discuss environmental assessment. The reason why EDC says Canada was chosen for that meeting is that many countries are looking to EDC for leadership on this issue. This is the chance we have to encourage higher standards instead of the race to the bottom.
The Chair: Ms. Adams.
Ms. Patricia Adams: I would address three points that came up. One is that it decreases Canadian competitiveness. I think it's important to understand that the competition is between the taxpayers of one country and the taxpayers of another country. It's not competition wherein these companies have a product that is of higher quality than a product from another country. It's competition between taxpayers. So I think you then have to ask whether you want to create these kinds of jobs, because they are very expensive jobs and I think the money could be better spent if it were not spent through the Export Development Corporation.
The other issue that was raised is, why are they being so secretive? I think there are two reasons. One has come out here. If NGOs find out about the activities of EDC, they will be able to expose violations of treaty agreements and so on. So it's in their interest to keep that information secret. Also, I think it's important for them, before various trade tribunals, to keep the information secret, because as the WTO investigated, there are the chances of illegal subsidies being delivered by EDC in the Canada account to various exporters in this country.
Also, in terms of the point you raise about being a small contributor, Canada has contributed some $230 million to the Three Gorges Dam; it's probably going to cost $55 billion. We're a small but very influential contributor to that dam.
The Chair: That's helpful. Thank you very much.
I'll go to Ms. Augustine.
Ms. Jean Augustine (Etobicoke—Lakeshore, Lib.): Thank you, Mr. Chairman. I was really very pleased to hear the presentations here today, because some of the questioning we had previously when EDC appeared before us was in line with some of the responses you put before us today. EDC's response to a number of the issues where we probed around labour laws and environment laws and human rights, etc., was to say we are in keeping with Foreign Affairs policies and we really don't make policies outside of that. This was really what I got from the various answers. Since the critique you gave this morning seemed to indicate that there is inconsistent application of policies, I wonder by what sort of process, or in what way, we could apply all these guidelines you've been putting on the table around environment, human rights, etc.
How do you see this happening within a body such as EDC, which has a board. Do you see a change in the board? Do you see change in rejigging the administration? How do you see the recommendations you're making being amplified or implemented if we were to work towards implementing some of the suggestions you've been making?
I hope I was clear, Mr. Chair.
The Chair: You're always clear. Anyway, you've given a lob there that they're going to bounce back anyway.
Mr. Warren Allmand: Amend the law. It's been recommended that you recommend the Freedom of Information Act law be amended to include EDC. That's one. Parliament can amend laws whereby you make it a requirement that in the contracts EDC finances they require compliance with international human rights norms.
Others have said the same for environment, that in political risk assessment they should consider human rights observations or mass violations, because this affects business in the long run.
These are all things that we would hope you would recommend and then implement. Also, we've recommended that you establish a list of countries that no longer receive public support for trade and investment, including EDC, CIDA, and Team Canada missions. That's another thing you could do. You've done that in the past with certain countries. I can recall banning foreign aid, bilateral aid, to El Salvador during the peak period of of their human rights violations. It was done in South Africa. There should be a list of countries that are carrying on activities that are so bad you won't support any kind of commercial or financial support to them.
Mr. Aaron Freeman: If I can add to Mr. Allmand's suggestions, we've been sitting through the hearings when both DFAIT and EDC were here, and we've heard from both sides that they function consistently with Canadian foreign policy. The question I would ask EDC when they're back here is, show us the money. What are the mechanisms you use to ensure that your policies are consistent with the Government of Canada's? There aren't any. They're not written anywhere.
We keep harping back on this point, but because of the lack of transparency we have no way of knowing. We have no way of knowing what those policies are and how EDC is supposed to be consistent with the Government of Canada's policies.
We have a series of recommendations. I would urge you to look at the summary of recommendations, which has basically three categories of recommendations. One is amendments that we would make to the Export Development Act, and that includes incorporating consistency with Canadian foreign policy on human rights, environment, and the other issues we've addressed, which would be written into the corporate mandate of EDC. This has precedence with U.S. export credit agencies.
We also have a series of recommendations for policy changes at the Export Development Corporation. These include many of the transparency obligations we've discussed throughout the day, and also Government of Canada recommendations, including bringing EDC under the purview of the Canadian Environmental Assessment Act and the Access to Information Act.
We also need independent accountability mechanisms such as an ombudsman. Again, there are precedents at U.S. export credit agencies and World Bank agencies where independent stakeholders, those affected by EDC finance projects, have a mechanism to complain about EDC projects and have the financing of those projects investigated.
The Chair: We have Ms. Nowlan, Ms. Foster, and Ms. Adams on the list. I'd appreciate it if you would be brief because we have some more questions to ask.
Ms. Linda Nowlan: Yes, I'll be brief. Aaron referred to one of the chief ways you can ensure consistency. We've made our recommendations about amending the act. I think that's the main way you can change behaviour.
Having an appeal mechanism whereby NGOs and ordinary people can complain that the policies aren't being followed is very powerful. We have a prominent Canadian, Tom Berger, who led the independent review into the Sardar Sarovar Dam in India, which caused the World Bank to create its first inspection panel. There are precedents around the world. The World Bank's private sector arms, that is, the IFC, the International Finance Corporation, and the MIGA, the Multilateral Investment Guarantee Agency, have recently established an ombudsperson. So this is a very concrete way you can ensure that the public can bring EDC to account.
The Chair: Some members of this committee went down to the World Bank when we were doing our foreign policy review at the very beginning of the government's mandate, and they were just beginning that environmental review process at that time. I agree with you that there's a lot to learn from what they do.
Ms. Foster, then Ms. Adams.
Ms. Pamela Foster: I just want to share an anecdote. A couple of weeks ago I was in Paris attending a meeting on export credit agencies in sustainable development at which the EDC participated in a panel presentation on this issue. During this panel presentation the representative from the EDC said they are subject to Canadian environmental law, which struck me as interesting since they're exempted. Then I thought, I guess in a way if you're exempted and you act as if you're exempted, you are somehow subject to Canadian environmental law.
I was thinking also of another speaker from an NGO in the United States who told a little story, and I thought it was really appropriate. He said that what the export credit agencies are doing when they argue they are responsible to internationally accepted standards around environment and human rights is they're like little kids who don't want to eat their vegetables. They argue that they don't have to eat their vegetables because they thought about eating their vegetables.
I'd just like to reinforce Aaron's comment in that there are no mechanisms in place. You can't act in coherence with foreign policy without putting in mechanisms to act in coherence with foreign policy. I think the summary of recommendations we have will lay that out.
The Chair: Ms. Adams.
Ms. Patricia Adams: As Aaron and Pam have pointed out, in addition to asking to see their methodology for ensuring consistency in policy, you can also show them the evidence, and there is quite a lot of evidence. You've heard very good evidence this morning from Kimy and Joan. We have a long list of easily a couple dozen projects EDC has supported over the years in our submission to the Gowlings review, and I would be happy to make copies of it available to this committee. There is a lot of evidence of environmental damage EDC has done and to human rights as well.
The Chair: Thank you very much.
Excuse me, witnesses, but we're going to have to do a little bit of what we call petite cuisine here or we won't function next week, and I know you want this committee to go on.
Members, this is not a travel budget. This is just the normal operating budget. The printing of the FTAA reports has already been done, but we need approval of that. We will need approval for the printing of the EDC report. That would be $6,000. We have witness' expenses.
It is $6,000 for the two reports, the one on North American free trade and this report. There are at least 22 EDC witnesses, including those for the subcommittee, for a total of $22,000. Then there is the $1200 that we generally set aside for coffee and other petty expenses; this amount is generally not fully used and in this case the total is $980. The total is therefore about $30,000. This was prepared by our clerk, in whom I have full confidence. I therefore believe that all these figures are correct.
Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): I don't agree. Who pays, you or Janet?
A voice: Bill and Janet.
The Chair: You don't agree. We don't agree. I'm going to ask Probe International to pay, because I see that Gail Regan, who is one of my neighbours, is the chair of this. She was a very successful chair of the Women's College Hospital, and I know she'd come to the aid of the committee.
Some hon. members: Oh, oh!
The Chair: The amount is $30,000. It's the normal thing. Is that satisfactory, members?
Some hon. members: Agreed.
The Chair: Merci. Thank you very much.
Mrs. Beaumier, could I ask you to take the chair. I have to go.
But before I go I want to thank every one of the witnesses this morning on my own behalf.
I must say that when we undertook this task, I had no appreciation of the complexity and importance of the role of EDC. We know of the importance of the role of EDC, but I didn't appreciate the complexity of what we are engaging in. We're grateful to you for very thorough, extremely competent, and helpful briefs.
Thanks to our colleague from Colombia in particular, who has come so far. Obviously, he's going to decide he wants to stay in Ottawa for the winter because he likes the cold. He's shaking his head no.
The Vice-Chair (Ms. Colleen Beaumier): I think I'm the next questioner.
I think one of the things the panel should realize is that many of you are expressing many of the concerns we've all felt over the years. I have tried to get after EDC, and I have run up against the same frustrations you have. So if there is a lack of people lining up for questions, it's because when you're finished we generally have said, yes, and there's not a lot more to be said.
I had to leave before the whole thought was finished, but Patricia was talking about EDC not being a competition between businesses and taxpayers. But as politicians we understand that really is what international trade is all about. If Canadian companies are not able to trade, then we can't feed our people in our constituencies.
You've pretty well answered most of the questions, but my question to the panel is, how do we make EDC fit what we believe it should be? If we were to give it certain standards to honour agreements and make it subject to the Access to Information Act, do you not still see EDC as a viable vehicle for smaller companies that would not qualify for credit under the banks or the insurance companies?
Ms. Patricia Adams: I think it's an important economic point you're raising. I think Canadian exporters would fare better under a well-developed, private financial services sector.
You have heard the testimony and I'm sure you've seen some of the letters from the Canadian Bankers Association and the Insurance Bureau of Canada who have made the case that they would be there if EDC wasn't. But because EDC has preferential treatment—as a crown corporation it has access to cheaper funds and so on—it can actually crowd out the private sector. I think Canadian exporters would be better served.
I'll give you just one anecdote that I think is quite sad. The section of General Electric that is producing what is becoming an outdated technology, which is hydroelectric technology, is in Canada.
If you go into the private sector, you will find that the private sector will not finance large dams because they are not economic, as is the case with the Three Gorges.
So because of subsidies from the government, we're keeping an industry going, instead of taking advantage of changes in the electricity industry to produce much more competitive, cleaner, more efficient ways of generating electricity. In the end, I think we're damaging the Canadian economy.
The Vice-Chair (Ms. Colleen Beaumier): I agree with you, but if we had these safety nets in place on the principles that we expect EDC to follow.... When you talk about turning it over to private industry and to the banking system, I'm taken back to when I sat on the study of access to capital for small businesses. I know that banks, in the past, have been very reluctant to finance small businesses. The thing I would be concerned about is that small exporters would not be taken seriously by banks. This is kind of a broad statement, but a small woman exporter would be taken less seriously by banks and then be put at a disadvantage.
I guess I'm just arguing with you, but if these conditions were put in place, and if the EDC came under the Access to Information Act, do you not see it as being salvageable?
Ms. Patricia Adams: No, I don't. I think it would slow the EDC down, and that would be a step in the right direction. That would be a good thing, because it would make it more difficult for them to finance some of these especially egregious projects, but I don't think it would stop them. We have seen the government try to get around the rules in order to finance the CANDU sale to China.
This is something that NGOs always fear, which is of course why we like to see things put into law: so that there is something we hold different parts of the government to.
But I don't think it is worth salvaging. This is the point. You have to ask the banking sector if it would finance these kinds of projects, because I certainly cannot speak for its members. But I don't fear the market. With good rules, the market is actually often very good at internalizing the risks of various exports. I think what you find with EDC is that for 70% of their operations that are not commercially viable, a large percentage of those are not commercially viable because they're environmentally unsustainable, because there are terrible political risks associated with them because of human rights abuses and because the projects shouldn't be financed in the first place.
Mr. Warren Allmand: On that point, I'd like to make clear what I said in French. Many of us have not taken the same position as Patricia Adams, that it should be abolished.
The Vice-Chair (Ms. Colleen Beaumier): I wanted to hear from some of the others. Is there a role for export market financing?
Mr. Warren Allmand: The choice isn't between total abolition and the status quo. We're not opposed to that. We haven't considered it.
The Vice-Chair (Ms. Colleen Beaumier): Okay.
Ms. Linda Nowlan: Yes, it's a similar response.
It's not an option we really considered. As a crown corporation, it should follow environmental standards.
The Vice-Chair (Ms. Colleen Beaumier): Okay.
Mr. Yves Rocheleau: My question is for all the witnesses. One of the recommendations in the Gowlings Report was that EDC should no longer be audited by the Auditor General but rather by a private auditor or an independent internal auditor. I would like to hear your reaction to that recommendation, which seems a bit strange to us.
Mr. Aaron Freeman: Just very briefly, the working group believes that the recommendation in the Gowlings report should be rejected. We should bring the EDC under the purview of the Auditor General Act, particularly with respect to developing a sustainable development strategy, as every other government agency under the act must do, and also with respect to reporting to the Commissioner for the Environment and Sustainable Development.
Ms. Patricia Adams: Could I just add to that?
I'm not sure it would be a bad thing. I don't have enough information, but I think it might force EDC to adhere to some of the rules that the private sector has to adhere to, which are much tougher. But I would be nervous if a public body like the Auditor General did not also carry out an audit as well.
One thing I would love for the committee to seriously consider is what the implications are of changing the status of EDC under the Financial Administration Act, which was recommended by Gowlings. I don't understand what the implications are of that, but I wonder what it would do to EDC's accountability to the public.
The Vice-Chair (Ms. Colleen Beaumier): Madame Marleau.
Hon. Diane Marleau (Sudbury, Lib.): I'll have you know that I am not a great admirer of government agencies or corporations. I've had numerous dealings with them, and they are a particular species of being. That being said, in some instances they are a necessary species. That doesn't mean they should be doing commercially viable projects as much as they should be there for those not supported by that.
I want to thank you for your interventions, because they touched on an awful lot of points that we all agree with, as was said earlier. That leads me to something I've witnessed personally over the last few years. There is this tendency, internationally as well as within Canada, to separate business from the social envelopes, from the environmental envelopes, from the poverty envelopes. They say, “Oh, well, that's business, and the boys”—excuse me using the term “the boys”—“know about business, so they will go and meet in this room and discuss how to do business, while you girls go and talk about how you can feed the poor.” I'm being very nasty in my way of saying this—
Mr. Warren Allmand: Some men end up in that room too.
Ms. Diane Marleau: Some men do end up in that room, but what you're touching on is exactly that happening with this particular corporation in a lot of ways.
Since the Asian financial meltdown, I would hope that we as governments, as countries—especially the developed governments and countries—have learned some lessons. Pursuing business for the sake of money only in the end doesn't pay, and it certainly doesn't pay for the people at the other end. That's what we said in Indonesia, and that's what they're living with still.
We have a long way to go to move in many of the directions you're recommending, and EDC is only a small part of that. Much more needs to be done at the international level so that we all walk the same walk and talk the same talk. Unfortunately, very few people walk the walk. They may talk the talk, but they don't follow it.
One of the very big challenges for the 21st century is of course the environment. That's plain for everyone to see. We have to get Canadian corporations more interested in and doing more work internationally. How do we get Canadian corporations to do that? I ask because they are good; they do follow good norms. How can we ensure that they follow those norms wherever they go?
As well, how do we move democracy to that next level? That is a very difficult issue. Many of our corporations work under different rules. Many of these countries have beautiful laws, but they don't enforce one of them. Canada being a minor major player in this sphere, we have to move this to another level so that it's not just little Canada out there saying, “Oh, by the way, we're here. Don't do that. That's bad.”
Has anybody ever thought about how we move the pressures of social development and sustainable development to that other sphere? By and large, I've found that Canadian businesses mean well, by the way. Do they always do everything? Well, that's to be debated, but by and large they're not out there because they want to destroy at the other end. But how can we help them? If they're dealing with others who do not mean well, it's very difficult for them.
So I'm asking you how we can use the Export Development Corporation to help our own businesses develop better practices overseas by doing some of the things you're saying, but not by abolishing the Export Development Corporation. That won't solve anything, believe me. If the project is financially viable, the big banks will rush in there and the money will go, just like it did in Indonesia. Don't kid yourself. It won't be better. They'll make money at it, but it won't necessarily be better. The private sector won't do it by itself, so how do we as a country, as institutions, move that process forward?
The Vice-Chair (Ms. Colleen Beaumier): Thank you.
Ms. Gail Whiteman: I think the first answer is that we have to look to the mainstream. Having just defended my own Ph.D. at the Queen's University School of Business, with a special focus on environmental management, I would suggest that business is moving ahead and business education is moving mainstream social and environmental issues into economic decision-making. I think that's an excellent advancement.
I would encourage EDC to make strong alliances with the World Business Council for Sustainable Development, which is a group of large international companies that are very progressive in moving sustainable development into core decision-making aspects of their operations. They've done a lot of work, and they certainly could look at taking a mentoring role and then translating that to small businesses.
The idea that business only looks at economic issues is a really old one. The Dow Jones now has a sustainability index. I think that indicates that companies themselves see a competitive advantage in being social and environmental.
Ms. Diane Marleau: Some.
Ms. Gail Whiteman: Some of them, true. But the idea is how EDC can push that, and I think the first thing is to mainstream sustainable development into its own mandate.
The Vice-Chair (Ms. Colleen Beaumier): Linda Nowlan.
Ms. Linda Nowlan: Thank you.
Yes, I think that's an excellent question, and I completely agree with you that a lot of corporations actually are well-intentioned and are creating jobs and doing good things that we in Canada support.
Rather than abolishing the EDC—and again, it's not something we've looked at carefully at all—I was interested in Patricia Adams' comments about the subsidies for the very high-risk projects. I wonder if one way you could encourage the EDC to get involved more and put more pressure on Canadian corporations to get into the sustainable development business, into mainstream sustainable development, is to give subsidies or, if you prefer, preferential treatment for those projects that are environmentally and socially beneficial. Encourage them to work more with CIDA. I know you would be particularly interested in that. Require preferential treatment for some categories of projects. Again, there are precedents for that, and I have one example in my brief.
The Vice-Chair (Ms. Colleen Beaumier): Thank you.
Ms. Pamela Foster: Thank you. I also enjoyed your comments.
As I mentioned in the beginning, a lot of NGOs in Canada have often been working for 20 or 30 years at getting people to change, both businesses and financial institutions. In our own advocacy work with the World Bank, it wasn't easy getting the standards they have now. It's still not easy getting them to comply in all circumstances—they're a large bureaucracy—but the policies on paper are excellent. That is the leverage we have.
Often when you advocate for these reforms, you hear over and over this Chicken Little scenario: the sky's going to fall and we're going to hurt Canadian jobs and we're going to hurt Canadian business. Over and over, we've shown this to be a myth. We've shown that when you get greater public oversight for human rights, environment, transparency, and public disclosure, it does not hurt Canadian business. We've seen this in the United States, and it doesn't hurt business.
I don't think we've tested it adequately in Canada, but it hasn't hurt business in the United States. Exxon has seen its clientele list grow. It hasn't hurt the International Finance Corporation. You've heard over and over from the World Business Council for Sustainable Development how it's actually better for business.
Through greater public oversight in Canada, there are implications to leading export credit agencies, as we've heard. There are opportunities to lead other financial institutions and private financial institutions, because it will debunk the myth that this greater public oversight in these areas will damage the Canadian economy.
What we've seen is the race to the bottom, where people are saying over and over that we cannot do this without.... I don't think that's true. So what we're saying is to put in these reforms, and what we'll see is actually a race to the top. It will benefit the economy, it will benefit the environment, and it will benefit people.
Ms. Diane Marleau: I agree.
The Vice-Chair (Ms. Colleen Beaumier): Thank you.
Mr. Warren Allmand: Can I say something short?
The Vice-Chair (Ms. Colleen Beaumier): Yes, short.
Mr. Warren Allmand: Diane mentioned that it's hard to move ahead in Canada unless the international consensus moves ahead. I abhor that international consensus process, because it usually means the big guys—
The Vice-Chair (Ms. Colleen Beaumier): Say no.
Mr. Warren Allmand: —that won't go along, like China and the United States, can in fact have a veto even though 80% of the countries in the world are for something. It also means you move to the lowest common denominator.
Canada went against that consensus principle on the land mines treaty and on the international criminal court. In both cases, China and the United States didn't go along, but Canada showed leadership and went ahead. The majority of the countries in the world support us on land mines and the international criminal court, and we should do the same thing on this issue and to hell with China and the United States.
Ms. Diane Marleau: No, I wasn't talking about consensus at the international level. I agree with you that the UN as an institution is almost an impossible institution in which to do what I asked. That's why I asked the question. I asked how you move. Yes, we can do some things as one country, but much more needs to be done. How can we use our position to move more dramatically at the international level? And it's not just on one issue like land mines or the international criminal court, because there are many other areas.
Mr. Warren Allmand: We can do it the way Pamela just suggested. If we do it in Canada, it'll probably move the whole world agenda up.
Ms. Diane Marleau: Well, sometimes it does and sometimes it doesn't, because of the challenges at the international level. We have to work with like-minded people who happen to be doing the same things that we're proposing to do.
The Vice-Chair (Ms. Colleen Beaumier): Thank you.
Patricia Adams, it'll have to be very short.
Ms. Patricia Adams: If I could just respond to your question about what we can do, I think what we have to do is stop relieving the private sector of the risks associated with these projects. We have to stop subsidizing them, and I'll give you an example.
In the case of the Omai gold mines, I interviewed the vice-president for shareholder relations at Cambior. I asked if he would have invested in this mine if he had not gotten the political risk insurance from EDC. He said he had shareholders, and that if you had $10 in your pocket and had the choice of investing it in Guyana or in Canada, you would invest it in Canada, of course.
The point is that these are very risky operations and they are seeking ways to alleviate themselves of private corporate risk by passing it on to taxpayers. We have to stop doing that.
The Vice-Chair (Ms. Colleen Beaumier): Thank you very much, each and every one of you. As I say, I think we're mostly all singing from the same hymn book here. We really appreciate your suggestions, and we certainly hope we can come up with a document that will at least begin the process of finding solutions for the human rights abuses.
The meeting is adjourned until 3.30 p.m., in the Railway Committee Room, with Minister Pettigrew.