ENSU Committee Meeting

STANDING COMMITTEE ON ENVIRONMENT AND SUSTAINABLE DEVELOPMENT

COMITÉ PERMANENT DE L'ENVIRONNEMENT ET DU DÉVELOPPEMENT DURABLE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, February 3, 1998

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[English]

The Vice-Chairman (Mr. Bill Gilmour (Nanaimo—Alberni, Ref.)): Order, please.

Here's the chair now.

Charles, I was just going to start.

The Chairman (Mr. Charles Caccia (Davenport, Lib.)): Thank you, Mr. Gilmour.

I apologize for the delay. Good morning.

[Translation]

Good morning, ladies and gentlemen, and welcome to our meeting. Pursuant to Standing Order 108(2), we are considering the environmental aspects of the Multilateral Agreement on Investment.

[English]

We have as witnesses this morning Mr. Steven Shrybman, from the West Coast Environmental Law Association; Michelle Swenarchuk, from the Canadian Environmental Law Association, CELA; and then Robin Round, campaign co-ordinator from the Sierra Club of Canada. From the Canadian Labour Congress, we have Mr. Martin.

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It's nice to see you again. Welcome to the committee.

Finally, would you introduce yourself, sir, please.

Mr. John Gero (Director General, Commercial Policy Bureau, Department of Foreign Affairs and International Trade): My name is John Gero. I am the director general of the Trade Policy Bureau in the Department of Foreign Affairs and International Trade.

Mr. Dymond sends his apologies. Unfortunately, he wasn't able to make it. I'm here instead of him.

The Chairman: So you're representing Mr. Dymond, presumably.

What we usually do is provide an opportunity for witnesses to make a brief presentation, possibly within ten minutes, so that there is enough time for a good round of questions.

Who would like to go first?

Mr. John Gero: Thank you, Mr. Chairman.

As I said, I first want to apologize for Mr. Dymond, who, unfortunately, couldn't be here with us this morning.

What I would like to do is very briefly describe to you a little bit about the MAI, talk a little bit about its environmental provisions, and then of course I'll be happy to answer any questions as it goes along.

As members may know, the MAI negotiations started in 1995 at the OECD, among 29 countries, as a means of trying to see if one could multilateralize what are now up to about 1,300 different bilateral investment protection agreements, with a view to seeing if one could, through negotiations in the OECD among the 29 countries, in essence come up with one multilateral set of rules rather than a whole series of bilateral or, in some cases, regional rules on investment protection.

The basic negotiating context for the MAI was that protection should be provided to investors in other countries, and the idea is to come up with a set of multilateral rules to provide that.

As such, the multilateral agreement on investment is in structure very similar to all the existing foreign investment protection agreements that are out there.

In Canada's case, of course, we have a regional agreement in the context of NAFTA and we have a whole series of bilateral foreign investment protection agreements with a number of countries around the world.

These types of agreements have in essence three substantive bases.

One is the provision for non-discrimination; that is, the requirement to treat companies in the same way as other nationals. That is, you wouldn't discriminate between different foreign investors—that's the so-called most-favoured nation treatment—and the fact that you would treat them in the same way as you would treat a national investor, and that is the national treatment provisions of these types of agreements.

Secondly, it provides for investment protection. That is the context of ensuring that if there are expropriations, they would be fully compensated as such.

Thirdly, of course, it would provide, as with most international agreements, a dispute settlement mechanism, which has two aspects to it. One is a state-to-state dispute settlement whereby countries, between themselves, can resolve difficulties in the context of disciplines agreed to within the agreement, and a provision on investor-state arbitration, which allows investors to have disputes with states of the agreement.

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That, in general, is the set-up of the agreement as it is with other foreign investment protection agreements.

A vital part of all of these arrangements, of course—because the MAI, like other investment protection agreements, is what I call a top-down agreement; that is, they have general provisions—is a series of exceptions and reservations by which countries ensure that, to the extent they wish to limit their obligations under the agreement in certain areas, they are able to do so. Every foreign investment protection agreement has such reservations and exceptions, as will the multilateral agreement on investment.

It has been two-plus years under negotiation. The original deadline was last May. Unfortunately, it was not possible to conclude an agreement at that point in time, and therefore ministers of the OECD—

The Chairman: This general knowledge is quite well known by members of this committee. It would be helpful if you were to enter the perspective from an environmental point of view so as to give us an insight into what we might not know already.

Mr. John Gero: Okay. I apologize, Mr. Chairman. I thought it would be useful, but if members know that, then I won't do that.

The Chairman: We read newspapers as well, Mr. Gero.

Mr. John Gero: On the environmental side, there are three aspects to the environmental issues in front of the negotiators.

One has to do with language in the preamble, which recognizes the need to ensure environmental protection and to maintain sustainable development. I don't think there are major disagreements in the context of negotiators on the kind of strong language that would be required in that context.

The second provision is the question of whether guidelines that exist in the OECD on multinational enterprises would be associated with the agreement. There, too, it is likely that this will be the case. There doesn't seem to be a great disagreement among the various countries negotiating in that regard.

The third has to do with the question of whether the agreement should include provisions in the context of discouraging countries from lowering their environmental standards and regulations to attract investment. I think there's widespread agreement that such a provision is needed in the treaty. What has yet to be decided is the precise wording in that regard, particularly as it relates to the binding nature of such provisions.

Those, in essence, are the three major issues on environmental concerns in the agreement.

I could talk a little bit about the process from now until at least this spring.

There will be another ministerial conference at the end of April, at which point it is hoped the agreement will be concluded. I think it's fair to say that it is clear now that there will not be any signable text at that point in time, but there could very well be an agreement in principle, which would require further legal scrubbing subsequent to April.

There will be a series of meetings at the OECD over the next few months to see whether it will be possible to conclude the general terms of this agreement.

Why don't I stop there, Mr. Chairman. I will be happy to answer any further questions that you or your members may have.

The Chairman: Well, Mr. Gero, you are stopping when it's becoming interesting. Actually, you could start where you stopped. Anyway, we'll leave it to the question round perhaps and proceed from there. Thank you.

Who would like to be next?

Mr. Steven Shrybman (Executive Director, West Coast Environmental Law Association): I believe that's me, Mr. Chairman.

Thank you, Mr. Chairman and members of the committee, for inviting me here today.

I have provided the committee with two documents that have been translated as well. The first one is a fact sheet that we've prepared on the environmental impacts of the MAI. The other is a more detailed submission having to do with the investor-state suit provisions of this investment regime. It's the latter document that I will attempt to summarize in my remarks this morning.

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I'm not sure whether you have these documents before you. There's a submission on the West Coast Environmental Law Association and the fact sheet. If you've had an opportunity to review our fact sheet you'll see that we have a broad array of concerns about the environmental implications of the agreement that we think is fundamentally incompatible with the notions of environmental protection and sustainable development. I won't take you through those this morning. I've reviewed the submissions of my colleagues on the panel this morning, and I'm supportive of them. What I'd like to do here today is to focus on one particular aspect of this investment regime, and that has to do with the investor-state suit provisions of this agreement, of the MAI.

You will know, Mr. Chair and members of the committee, that our association—and this is true of others on this panel this morning—have worked long and hard to establish the participatory rights of Canadians in various environmental decision-making processes over the last several decades. Whether those participatory rights arise in the context of informal negotiations with departments around environmental initiatives or whether they stand in our courts as the opportunity to intervene in proceedings that have environmental importance, these rights truly represent the hallmarks of a democratic society. That's why I'm here today to share with you concerns about the particular aspect of this investment regime that we believe has far-reaching and adverse implications for the very founding principles upon which our justice system has been established.

As you know—and Mr. Gero has pointed out the fact—the investor-state suit provisions of the MAI are not unique, but rather build on the provisions found in chapter 11 of NAFTA and in several bilateral investment agreements that Canada has negotiated in recent years. However, the potential implications of these precedential agreements has gone largely unnoticed, in our view, and has never to our knowledge been the subject of informed debate in this country.

In broad terms, the investor-state suit provisions of the MAI and the precedents upon which they rely extend the principles of international commercial dispute resolution to a vast and new array of potential disputes that have very little to do with international legal commercial relations. In effect, the MAI would provide foreign investors with a large number of new substantive rights, which they can now enlist to challenge a diverse array of government policies, programs, and law. We believe that this transposition of the principles of international commercial dispute resolution to the virtually unbounded domain of investor-state disputes engendered by the MAI was accomplished with very little analysis or consideration of the potential public policy consequences of such a transformation.

The Department of Foreign Affairs and International Trade would invite us to conclude that these developments—which in our view are in many ways revolutionary—are without any significant adverse public policy implications. This is a conclusion you cannot support, Mr. Chair and members of the committee.

The principle of encouraging international commercial disputes to be resolved in accordance with normative arbitration processes of commercial arbitration is probably firmly grounded in public policy where those disputes are commercial, where they are founded in contractual relationships between parties of relatively equal bargaining power. However, when those regimes are applied holus-bolus to the resolution of disputes that concern the broadest sphere of public policy, which have no grounding in contract whatsoever and which may in only the most tangential way be considered commercial in character, then the potential consequences create very real challenges for the democratic norms of Canadian society.

In the few minutes remaining to me I'm just going to highlight a few of the key points I make in this submission that you have before you.

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The first one is that while Canadian legislation implementing these international regimes... You'll see them referred to in the investor-state suit provisions of this agreement as the ICSID rules, the UNCITRAL rules. Canadian legislation implementing those regimes is very new in this country. That legislation only dates from 1985 and 1986. These are not regimes that have been a feature of the Canadian legal landscape for very long. They have not been tested. We do not know whether there is constitutional competence in the federal government to actually implement these international dispute resolution regimes.

The second point I make is that the legislation implementing these international dispute resolution regimes preceded by many years the negotiation of the NAFTA agreement and the other bilateral investment agreements DFAIT has referred to. Parliamentarians did not, I believe, have in mind at the time that these statutes were enacted at either the federal or provincial level the fact that several years later they would be used in the very dramatic new way this agreement and its precedents portend.

The third point we make has to do with the fact that Canada is offering in the MAI to unilaterally declare its consent to the arbitration of disputes that an unknown and unknowable universe of foreign investors may have with Canadian public policy long in advance of those investors either being identified or the character of their disputes being known.

If you have any notion that arbitration arises in the context of privity of contract, that notion is turned entirely on its head by these unilateral declarations of consent to arbitration with parties that have no contractual relationship with the Government of Canada and that are now entitled to bring complaints about Canadian public policy and law that are virtually unbounded by any clear or precise parameters.

The next point we make has to do with the extremely secretive character of these dispute resolution processes. Contrast the dispute processes that have been put in play by Ethyl Corporation and its challenges to Canadian MMT regulation: one is taking place in the Supreme Court of Ontario; one is taking place under the arbitration rules of the MAI-like provisions of NAFTA.

In the Supreme Court of Ontario there was public notice of the complaint. There was full access to the documentation filed. There was the opportunity to appear in court and ask the court for the opportunity to either intervene as a party to the proceeding or as a friend of the court.

None of those rules apply with respect to international commercial dispute resolution. These disputes are resolved in secret. We have been denied by the Department of Foreign Affairs and International Trade access to either the complaint filed by Ethyl Corporation or the department's response to the complaint. The department has refused to support our request that we be given status to intervene in those proceedings. We can't observe them. No other member of the Canadian public can observe them. They are profoundly secretive and turn on their head virtually every principle of the democratic adjudicative process that has been a feature of our judicial system dating from several centuries.

The first mistake of the MAI is to imagine that a regime that was established to resolve disputes between contracting parties of a commercial nature could be simply transposed in one large block to an entirely new domain of disputes that might arise between literally millions and millions of foreign investors and the Canadian government with respect to a broad array of Canadian domestic economic and environmental policy. That's the first mistake.

The second mistake is to imagine that even if that were a legitimate public policy objective—a conclusion we would vigorously resist—to embrace a dispute resolution process that is opaque, secretive, non-participatory, and undemocratic is simply without any public policy justification whatsoever.

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To conclude, our federal Department of Foreign Affairs and International Trade has taken the position that there is nothing unique or untoward about the dispute resolution rules of this investment regime. That is, in our view, a misleading proposition.

These regimes are unique in international law. While it's true that Canada has negotiated bilateral investment agreements along these lines—they are only two or three years old, from what I can gather—these principles have not been tested, either within the context of international dispute resolution or certainly by courts of this country or most others.

We know the type of use that corporations will make of these prerogatives. We've observed that in the Ethyl case. We've heard those arguments in the context of plain packaging regulation for Canadian cigarettes. We've heard them in the context of the Pearson Airport litigation around the termination of those leases, some of them to the benefit of U.S. corporations. And we've heard them in the context of Ontario's efforts to establish public auto insurance.

What has made those arguments so powerful is the direct recourse that these corporations enjoy to the dispute resolution apparatus of these investment regimes. There is no bar for a foreign investor who wants to invoke this process. If they own a share as a foreign investor in a corporation doing business in this country, they can invoke these dispute resolution procedures.

The very arduousness and resource demands of simply having to respond to those disputes, however specious or unfounded, will give all Canadian governments serious pause when it comes to determining whether or not they want to proceed with legitimate public policy direction initiatives.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Shrybman.

Who is next?

Ms. Michelle Swenarchuk (Executive Director, Canadian Environmental Law Association): Thank you, Mr. Chairman and members of the committee, for inviting me here today.

I've provided two documents to the committee. One is the brief that we previously presented to the subcommittee on international trade last November, and then there is a shorter summary document, which I've called “The MAI in Canada: Economic Deregulation, Round Four”. I'd like briefly to summarize some of the elements of those documents and then talk more specifically about some of the proposed terms of the MAI and some recommendations we've made.

As some members of the committee will know, I'm from the Canadian Environmental Law Association, which is a public interest law clinic in Toronto. We've been in existence since 1970. We've been analysing and following the environmental implications of trade agreements since 1988.

So when we look at the MAI, we see it in the context of the other major trade agreements that Canada has signed—the Canada-U.S. agreement, the NAFTA, and the GATT of 1994—and we're also looking at it in the context of the bilateral investment agreements, almost 60 of them now, that Canada either has signed or is in the process of signing on so-called investment protection.

To give you a brief overview of the perspective that is outlined in the larger brief, we look at the trade agreements and their impacts on environmental policy, through both the increase and preference for international trade as an economic strategy, and we consider that the trade agreements have provided a background for what we see as very significant environmental deregulation in Canada. We have deregulated trade and increasingly deregulated investment, and we also have deregulation that is removal of environmental protections.

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In the brief I've provided a couple of references for any of you who'd like to read the dismal story of the dismantling of environmental law in Ontario in the last three years. We do also note that red book commitments of 1993 with regard to an improved Canadian Environmental Protection Act and an Endangered Species Act have not happened in Ottawa. Of course, we're extremely distressed at last week's harmonization agreement, which we see as another failure on the part of the federal government to carry out its environmental protection mandate.

In any event, over the period since the trade agreements began to be signed, which was 1988 to now, we have also seen environmental deregulation proceed apace in Canada.

I've reviewed in the brief some of the so-called environmental protection language that is in those trade agreements. Unfortunately, trade dispute panels similar though not identical to those my colleague has just described have inevitably, when adjudicating between a trade interest and an environmental protection or health interest, in every case, found for trade, with the result that various provisions for environmental protection in various countries have met their demise because of trade panel decisions.

The types of strategies used in the trade agreements that contribute to deregulation are summarized in the larger brief. We have GATT article XX, which is a form of protective language, and had it been interpreted as we think it should have been it could have allowed an integration of environmental protection with liberalized trade, but in fact it has not been interpreted in that way.

The agreements have also led to an internationalization and harmonization of standard setting around the world with we think very unfortunate results. They have also promoted, as the OECD guidelines do, for example, voluntarism as an approach to a replacement of law.

Finally, with the NAFTA section, we have the addition of so-called investor protection in chapter 11 of NAFTA. Mr. Shrybman has talked about that and the secret panel process by which investors can sue governments for large amounts of money, claiming that an investment has been expropriated, with a definition of expropriation so broad that in my view virtually any governmental action that reduces the profit margins of a corporation leave the government liability to suit.

We know the Canadian government is facing the $350 million Ethyl Corporation suit because of the ban on MMT in gasoline. I've also talked in the brief about another lawsuit under the NAFTA chapter 11. This is at page 6 of that brief. It's a suit by Metalclad. It's also an environmental problem. Metalclad, an American waste company, is suing the state of San Luis Potosi in Mexico for $90 million for refusal of permission to establish a waste disposal site that would have, in the opinion of scientists, polluted the local water supply. American commentators have pointed out that that $90 million cost of the lawsuit represents more than the combined total household income of every resident of the area affected.

So these are the kinds of dangers that the expropriation and investor-state suits cause for us.

I've also discussed in the brief, using previous CELA writings on the subject, to what a great extent the expropriation wording of these agreements vastly expands the concept from what would be compensable as expropriation under Canadian law. There's considerable jurisprudence on the question. For example, do zoning changes that affect property values give rise to compensation claims by the owners affected? Fundamentally in Canadian law they do not. In these agreements it would be quite a different matter.

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Some of you perhaps have seen the position the British Columbia government has taken on the MAI. The brief they presented to the trade committee last fall discusses environmental implications and resource management implications. With regard to the expropriation rights under the MAI, they signalled a potential problem, which I think is real right across Canada; namely, that in settling, for example, native land use claims it may require the return of land or other resources such as fish and forest, which are now subject to non-native use—that is, investment. Foreign investors could claim full compensation, no matter how tenuous or preliminary their investment.

In my view, this provides an excellent example of the problems of international harmonization without regard to historical, social, or environmental differences. Clearly, aboriginal rights are not issues for public policy decisions in European OECD countries, but they raise many live and pressing issues in Canada and in other countries with extant aboriginal populations.

The federal government has attempted to exempt its aboriginal obligations from the purview of the MAI with a reservation—not very comprehensively worded, in my view—but whether that exemption will survive the negotiation process is unknown, and no protection for provincial obligations is proposed. That's one I think particularly Canadian example of the danger of the expropriation chapter.

Now, turning to the wording of the MAI, it's striking that, as many people have said, there's a complete lack of balance in this agreement between the rights and protections extended to corporate investors and the complete lack of rights and protections extended to citizens or to the environment. For example, this agreement contains no general exception for environmental or social goals, as it does contain—and that's at page 69 of the current text—for security interests, for non-proliferation of nuclear weapons, for arms and ammunition production or for peace obligations under the United Nations, and for prudential measures regarding financial services to protect investors. So apparently arms and ammunition production is worthy of a general exemption from this agreement, but the environment or social goals are not.

Now, with regard to the environmental language, which Mr. Gero already referred to, I'll merely say with regard to the preamble wording that, as we all know, preambles are not enforceable. The NAFTA negotiators were very frank about that, because they put environmental wording in the preamble of NAFTA too.

There is some possible proposed language in brackets that would give an environmental exception to some performance requirements. Now, the performance requirements area of this agreement is another serious problem for a whole range of public policy issues, including environmental ones. As proposed, there appears to be an absolute prohibition against governments establishing rules or performance requirements for investment. This is at page 19 of the current draft. We can't tie investment in this country to, for example, requirements for domestic content in production, local purchasing, technology transfer, local hiring, local investment funds. There is a proposed exemption bracketed, and therefore dubious, discussing some environmental grounds for allowing performance requirements, but only domestic content and domestic purchasing. So that is very limited.

If we can't require local hiring and local purchasing and local processing of resources, we will be continuing further down the road that we're already on of faster and faster depletion of natural resources and export of the processing jobs to another country. This agreement seems to open the door to that further.

Now to the non-lowering-standards language. That's at pages 49 and 50 of the brief. First of all, it's heavily bracketed; this language has not been settled. At best, it appears that it will repeat the NAFTA wording. Article 1114 of NAFTA is one of the most misquoted and misunderstood sections of NAFTA. It has been commonly said, including by the Government of Canada, that NAFTA prohibits lowering standards to attract investment. That's simply incorrect. Article 1114 says countries shouldn't lower standards; it doesn't mean they can't. We have the outstanding example of Mike Harris, who says, at the same time as he dismantles the environmental law framework of Ontario, “Ontario is open for business”. The two things go hand in hand.

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So the so-called lowering standards wording being proposed for the MAI is no stronger than the NAFTA wording. It's not a prohibition, and in my view it's not going to help us maintain standards.

Just briefly in my remaining time, I will deal with the bilateral process. The Ministry of Foreign Affairs provided me with some very useful information about the bilateral agreements Canada has entered into. As I say, we're up to around 60 of them. Most of them are using a model that contains the essential elements of the MAI. Add to that the NAFTA chapter, which governs approximately two-thirds of our foreign direct investment, which is with the U.S., and we're actually far down the road of MAI-type agreements already. So are the other OECD countries, especially the major powers. Germany leads the world, I think, with 109 bilateral agreements, France has 74, etc.—high numbers. So in fact there is, as Mr. Gero said, a web now of this type of agreement around the world.

I've made specific recommendations in the brief as to what I think Canada's position should be with the MAI, but I just want to take a moment on the bilaterals to flag for you the extent to which our government has committed Canadian policy to this type of approach quietly over the years. To my knowledge, this has never been publicly discussed. I put this in the same category as many of the other negative impacts flowing from free trade agreements, negative impacts on the environment. I'm requesting that you as a committee provide a better opportunity for yourselves and for us to scrutinize the trade policy practices of our government in Geneva at the GATT, at the OECD in Brussels, and around the world, because I think we lack seriously in this country any outside scrutiny of trade policy.

I contrast this to, for example, the negotiation of various international environmental agreements under the UN system, which I'm sure some of you are familiar with. You've been members of delegations. So have I and other environmentalists. We actually get to participate. Those negotiations are public. People know what's being done. That's not the case with trade policy. I hope we can open that door wider.

Thank you.

The Chairman: Who's next?

Ms. Robin Round (Campaign Co-ordinator, Common Front on the WTO, Sierra Club of Canada): Thank you for inviting me here today.

I provided three documents to you this morning: a submission that I gave to the subcommittee on investment; a useful brief prepared by Appleton and Associates comparing the NAFTA and the proposed MAI; and the brief I'm drawing my remarks from today.

As I believe you're aware, members of the committee, the Sierra Club of Canada is a national member-based environmental organization, which has been active in Canada since 1969, working to protect the integrity of our global ecosystems. Our work involves education, public mobilization, research, and advocacy.

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Together with the Canadian Environmental Law Association, the Canadian Labour Congress, the Council of Canadians, West Coast Environmental Law, and other groups, the Sierra Club has formed the Common Front on the World Trade Organization.

The common front advocates environmental social justice and democratic rights on matters related to international trade and the full participation of the public in national and multilateral trade policy development.

The proposed multilateral agreement on investment would codify the rights of investors and threaten the ability of democratically elected governments to legislate in the public interest. It is profoundly anti-democratic and undermines the principles of sustainable development.

Sierra Club Canada shares the serious concerns raised by our colleagues here today, but I will focus my remarks on questions surrounding the relationship of the MAI to subnational governments and the role of non-OECD governments in the agreement.

With the authority for environmental protection increasingly being devolved to the provinces, and then on to the municipalities, questions regarding the protection of environmental interests at the subnational level in the MAI are crucial. Unfortunately, however, the role and responsibilities of the provinces and municipalities in the MAI have not been made clear by the federal government.

Canadian officials negotiating the MAI have stated that it does not apply to provincial governments, while at the same time stating that they are looking to replicate the investment rules of NAFTA, which do apply to provincial governments.

In its February 1997 submission of reservations, the federal government stated that the agreement's application to Canadian provinces depends on a satisfactory overall balance of rights and obligations in the MAI, which would suggest that the provinces will be involved at some time in the future.

These contradictory and confusing statements led to an urgent call for clarity by the Standing Committee on Foreign Affairs and International Trade in its report on Canada and the MAI released in December.

The committee's recommendation assumes application to the provinces and is based at least in part on the following facts.

One, that the MAI state that it applies to all land, territory, international waters, and the territorial sea of a contracting party.

Two, nothing in the draft text itself would in any way restrict its application to all levels of government, from the federal to the local. The MAI has no procedure to deal with obtaining consent from other levels of government. The MAI does not acknowledge constitutional systems that have a division of power.

Three, both the U.S. and the European Community have clearly stated their position that the MAI applies to subnational governments. The U.S. federal government is concerned that the MAI would impinge on state and local sovereignty and has filed reservations that would exempt all state and local government laws from MAI obligations on national treatment, most-favoured nation performance requirements, and senior management and board of directors.

While these provisions may not provide adequate protection given the standstill and rollback provisions of the MAI, they are, at a minimum, an attempt to protect a multitude of state laws that balance economic development with environmental protection.

The report of the Western Governors Association in the U.S. has concluded that certain state environmental laws would be contrary to MAI provisions, including those that attempt to balance economic development with resource management; that seek to ensure the ability of states to use performance requirements to protect jobs in the environment, to limit development on private lands in order to protect natural resources and environment values, to maintain citizen and residency requirements for public lands, and to provide tax or grant incentives for investment in pollution prevention and control equipment.

While it is conceivable that an MAI could be concluded that would apply only to federal measures, this would be highly unlikely for the reasons noted above and because of the very substantial jurisdiction enjoyed by provincial governments in the area of investment.

As Michelle has mentioned, the province of British Columbia has stated its opposition to the proposed agreement. In his testimony before the subcommittee, MLA Ian Waddell stated that the MAI offers no clear benefits to British Columbians. He stated that the MAI would place unacceptable restrictions on the ability of democratically elected governments to act on behalf of citizens and could undermine the legitimate role of governments to create new job opportunities, protect the environment and protect consumer interests.

Resolutions have been passed in the legislature of Prince Edward Island calling for the Government of Canada to impose a moratorium on ratification of the MAI until full public hearings on the proposed treaty are held in Prince Edward Island and across the country so that all islanders and Canadians may have the opportunity to express their opinions.

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A motion was adopted in the Yukon legislature calling on the federal government to cease all negotiations of the MAI.

This past weekend Premier Roy Romanow stated in two public events that:

We say to Ottawa that what is developing on the MAI is a set of rules that will put Canada into a straitjacket. We will not accept a race to the bottom.

Given this evidence, we strongly believe the provinces and municipalities of Canada will be subject to the terms and conditions of the MAI in spite of what we're hearing. The federal government's ambiguity on the role of subnational governments must not be used as a means of avoiding debate, especially on the MAI's impact on the environment. An environmental impact assessment of the MAI, including the implications on areas of subnational jurisdiction, must be conducted prior to the continuation of negotiations.

My second point is on the role of the OECD countries in the MAI. Although negotiations have taken place within the OECD, the MAI is designed as a global investment agreement. The International Chamber of Commerce, in its 1996 outline of the key provisions of the MAI, stated:

The preponderance of restrictions on foreign investment lie outside the OECD area. ... Business needs the benefits of an international regime to include the fast-growing countries of Asia, central and Eastern Europe, and Latin America.

The OECD ministerial declaration of May 1997 concluded:

The Ministers express their determination...to pursue intensified dialogue with non-member countries...

While non-OECD countries appear targeted by the MAI, they have not been participants in its negotiations. They will be invited to a free-standing international treaty they did not draft and cannot change. Canada should not be party to any agreement that is not negotiated by the countries it intends to cover.

MAI provisions to roll back existing legislation so that all sectors are open to inward investment would undermine efforts in developing countries to set their own development agenda and at the pace at which they integrate into the global economy. Canada would not have reached its current state of economic development without requirements on the performance of foreign investors designed to protect the public from negative impacts of investment and to strengthen links between foreign investment and local economies. The MAI would disallow southern governments from doing the same. It is not surprising that developing countries rejected the negotiation of the global investment treaty through the WTO in 1996.

Many developing countries currently place restrictions on foreign investment in key sectors. Some examples include highly polluting industries in Taiwan, processing and disposal of toxic or radioactive waste in Columbia, forestry, fishing, mining, and agriculture in the Philippines, purchase of agricultural land, real estate, and areas around natural reserves in Brazil, Brunei, and Pakistan. These are just a few examples.

Nascent environmental regulatory commitments and limited enforcement capacity will be threatened by lawsuits from large multinationals, the economic clout of which dwarfs many of the economies of developing countries. Annual sales of the eight largest multinationals exceed the GDP of the 50 poorest countries. Developing countries will not have the luxury of developing environmental legislation without assessing the threat and financial implications of corporate challenges under the MAI.

Additionally, the global and devastating impacts of the Southeast Asian crisis have led to calls for increased control over short-term investment flows, not a global treaty to liberalize them further. Canada needs to examine the impacts of the contagion effects of the Southeast Asian currency crisis, including the collapse of overseas markets for Canadian exports, in its eagerness to tear down investment barriers abroad.

We believe there is a need for international rules on foreign investment, but those rules must be designed to support government responsibilities and regulate foreign investment in ways that serve national sustainable development priorities. The MAI is too important to be slipped into place without a thorough examination of all sustainable developmental issues, including the impacts on developing countries. Until this assessment is complete, Canada should not continue MAI negotiations.

To address the concerns of this brief, we call on the committee to recommend the following measures to the House.

First, Canada should undertake an independent and comprehensive assessment of the environmental, social, and developmental impacts of the MAI, with full public participation. Negotiations must be informed by a broad range of opinions on the MAI's impact on national and subnational governments, local communities, employment and existing international obligations, and domestic laws to safeguard the environment, public health, consumer protection, labour rights, and human rights. National public hearings on the MAI should be held to allow Canadians, the provinces, and municipalities to participate in this assessment.

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The second recommendation: Canadian negotiators should press for an extension of the April 1998 deadline until such time as the MAI impacts assessment is complete. If the impacts assessment reveals that the social and environmental costs to Canada outweigh the investment benefits, Canada should withdraw from negotiations.

Thank you very much.

The Chairman: Thank you, Ms. Robin.

Mr. Martin, you've been patiently waiting for your turn. You have the floor.

Mr. Dick Martin (Secretary Treasurer, Canadian Labour Congress): Thank you, Mr. Chairman and members of the committee.

I'm going to try not to duplicate. I endorse, on behalf of the Canadian Labour Congress, the comments of my colleagues. Much of what they've talked about is covered here.

Perhaps just before I start, I should tell the chairman and members of the committee that we take this issue very seriously. Bob White, the president of the Canadian Labour Congress, is also the president of TUAC, which is the Trade Union Advisory Committee to the OECD. He just had a meeting in Paris with representatives of the Canadian government and other governments and employers in Paris and in fact talked about the entrenchment of both labour rights and environmental concerns within the MAI.

He reported that the Canadian officials seemed to be more in favour to extend, but as has been put forward, the ink has not been put on the paper yet by a long shot. However, we are not very confident that the business community is going to be favourable towards this whatsoever. They are perfectly happy that it would be inappropriate to encourage investment by lowering health, safety, and environmental standards. But they certainly are not in favour of putting it in any text in any mandatory way, simply that mandatory consultations would take place between the affected parties.

As has been stated here, we found that the mandatory consultation under NAFTA on both environmental concerns and labour rights amounts to about zero—a talk shop, as far as we're concerned. We keep hoping that something will come out of it, but at this point in time there don't appear to be any changes affecting or improving environmental concerns or labour concerns within NAFTA.

As well as being secretary treasurer of the Canadian Labour Congress and chair of our Canadian environmental committee, I happen to also be the president of the Inter-American Labour Organization based out of Caracas, Venezuela, representing all the central trade unions, 90% of them, of this hemisphere. I might tell you that this is also a major concern to that group. We indeed are meeting with government officials, presidents, the trade ministers and others, trying to make sure that in an FTAA—Free Trade Agreement of the Americas—the environmental concerns would be addressed there along with labour and human rights.

Next week we are meeting a number of the trade union leaders with Inter-American Development Bank officials in Washington to once again put the case forward that environmental and labour rights have got to be entrenched in any future trade agreements that are being put forward. We're hopeful that we will also meet with the Organization of American States to put the case forward there. We are going to have a big delegation of NGOs and labour go to Santiago, Chile, to argue the position of human rights, environmental and labour concerns with any future trade agreements, which takes us into this MAI.

We believe, as others have said, that at this point in time, the MAI, as proposed, is simply a charter of corporate freedom. We also repeat what others have said: we are absolutely dismayed that the Ethyl Corporation is suing the Canadian government over a ban on the importation and interprovincial trade in the neuro-toxic gasoline additive MMT. We congratulate the government for taking that position to ban the additive, and now we're on the hook collectively, as a society, to pay for them putting poison into our atmosphere. It's just absolutely outrageous—unbelievable.

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Under the investor-state procedures, an investor under MAI can submit to arbitration—as was pointed out by Steve—and can sue a contracting party, which is a national government, for breach of the MAI that causes loss or damage of the investment. Neither the citizen workers affected by the investment nor national governments can sue investors; nor can citizens sue contracting parties. Indeed, it's all a one-way street there. I'd sure love to have that type of thing in a collective agreement if I had a way. I'd never get it. I suppose even the employers would love to have it too, but we wouldn't agree to that.

I would just go on to the environmental protections that we think are needed in the MAI.

The first thing that is needed is a wide and specific carve-out from the scope of the operations of the MAI of any measures taken by governments over health, safety, environmental protection, including resource conservation. The language should be strong and explicit enough to protect policies that favour community land tenure and local resource conservation rights, as well as subsidies, tax breaks, and investment privileges that support local and regional sustainable development schemes. Multilateral environmental agreements, MEAs, should also be specifically exempted. This would automatically narrow the expropriation rule and the scope of investor suits. Also needed is a proper environmental impact analysis, as has been put forward by other witnesses for this committee.

A caveat is needed over the role of MEAs in the MAI—that's a tongue twister. The recommendation is that all international treaties over health, environmental protection, and resource conservation should be specifically exempted from the rules of MAI. The work of the two international bodies in particular is not to be on the list of MEAs, since they are not public, democratic, and accountable bodies, nor does their work require international ratification before becoming de facto part of international law. In other words, they're negotiated somewhat in secret by specific interest groups and then somehow or other become part of international law.

We think a good example is the Codex Alimentarius Commission, which regulates food safety—for example, pesticide residues and food contaminants. The Codex Alimentarius Commission is a particularly inappropriate body to be referenced in international agreements. The Codex is not an agency of the United Nations, nor was it commissioned by the UN, as far as we can tell, nor by anyone else for that matter. It just kind of appeared there and people are in the business of taking part. Though members aren't national governments, delegations at meetings have very strong business representation from, for example, chemical companies, the food industry, and agribusiness, sometimes to the point where business people outnumber government personnel, to the virtual exclusion of public interest organizations. We certainly are never invited into it, nor are any of our colleagues here. But you can bet the chemical producers are always there.

One major area of Codex activity, the designation of maximum residue limits, which concerns allowable pesticide residues in food, is avowably not based on scientific considerations but instead of course on the efficiency of the agricultural industry—i.e., their bottom-line profits. Codex MRLs are specifically protected in NAFTA and the GATT, in the sense that if a party adopts Codex standards it cannot be subjected to a trade challenge. Yet countries that impose stricter limits than the Codex have to justify their move by scientific evidence, such as the results of risk assessments—once again a one-way street.

In 1997 Canada lost a case before a GATT-WTO panel over hormone residues in beef. The panel found that since countries are obliged to follow international standards where possible, since the Codex was specifically included as an international standard, and since the European standard was stricter than Codex, European bans on North American beef were unjustifiable under international trade law and must cease. There's a case for specifically excluding the Codex from the operation of trade rules for stating explicitly that Codex is not on the list of protected MEAs.

The same applies to the policy and procedural standards of the International Organization for Standardization, ISO. Like the Codex, this is an unaccountable body, which is in fact a private, voluntary organization. Its standards, such as ISO 9,000 on quality management and ISO 14,000 on environmental quality, are specifically protected in NAFTA. In the GATT, international standards such as those of ISO are recognized, and parties must adhere to them wherever feasible.

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There is a clear intention on the part of business to have ISO management standards replace tangible national standards, measures, and regulations and to have the latter ruled out as unnecessary obstacles to trade. For instance, Stephen Van Houten, president of the Alliance of Manufacturers and Exporters Canada, recently wrote of such voluntary standards that they become the basis for an alternative regulatory system to that of government. Mr. Van Houten is chair of the environmental strategic steering committee of the Canadian Standards Association.

Any international organization that has the effect of weakening national systems and environmental regulation should be specified as not being on the list of protected international agreements.

Finally, where there have been unilateral cases, those not covered by MEAs, brought before trade panels, the environmental case has always been lost—as was pointed out by Michelle Swenarchuk—in favour of freedom of trade. To the extent that MAI rules and procedures follow those of free trade regimes, the prospects of environmental protection are not good, however the environmental protections are strengthened. As long as cases are decided in secret by trade bureaucrats, under this dispute procedure and jurisprudence of free trade regimes we can have no confidence that environmental interests will be fairly balanced against those of free traders.

There is a strong case for saying that environmental safeguards in the MAI may be absolute in the sense that they are immune from all actions under the MAI, its procedures, panels, and institutions. Even this will not succeed if investment cases then go to the WTO, as disputes over MEAs are always liable to do. The jurisprudence of the WTO in environmental cases has proved to be erratic and arbitrary, with little predictability except for the near certainty that the environmental case will be lost on some grounds or other. No international agreement is acceptable unless it has tough, comprehensive protection for the environment.

I urge the committee to consider whether the basic premise of the agreement is at odds with safeguarding the environment and social development. Ultimately, environmental and human rights carve-outs from a market-liberalizing agreement will not be enough to protect other human societies or the global environment.

The position of the national government seems to be to work for labour and environmental exceptions in the MAI and possibly also to narrow the scope of expropriation rules. Where this is not possible, the government may insist on reservations that in effect exempt Canada from the operation of certain MAI rules. This of course is subject to negotiation and dilution of the Canadian position. Further, what is gained over reservation may be lost in that Canada is made less attractive to foreign investors, since they would have the rights in the rest of the OECD that they would not have in Canada. The problem, Mr. Chairman, is not with the exceptions and reservations; it is with the MAI.

Thank you.

The Chairman: Thank you, Mr. Martin.

In your opening remarks you made a reference to a document in Paris. Would it be possible for you to trace the document? If you find it, could you make it available to the members of this committee?

Mr. Dick Martin: Certainly. In fact we just had a report by the general secretary of TUAC. I was reading it last night. I'll get it to members of the committee.

The Chairman: Thank you.

Before launching the first round of questions, I would like to recognize the presence in this room of the previous chair of this committee, the Honourable David MacDonald, a very distinguished parliamentarian and member of Parliament who produced some very fine reports on behalf of this committee, which he tabled in Parliament between 1988 and 1993. The government of the day did not listen very closely to the recommendations contained in those reports, but then there is a vengeance at the end of the day when electors eventually catch up with governments.

Would you like to say a few words in this respect? Welcome to the committee.

The Honourable David Macdonald (Individual Presentation): Thank you. I appreciate the opportunity.

Certainly the committee continues to do some very excellent and important work. You and I served together on that committee for five years. What I appreciate most, Mr. Chairperson, is the way in which much of the material is still being used in important benchmarks in terms of current debate, especially with issues having to do with the atmosphere.

I just wanted to say that I have four students with me today from Concordia University who are studying the MAI. They have come here to hear the witnesses and hear the discussion. They'll be coming back later, hopefully to talk to each of the party representatives to get into greater detail. We feel this is a good learning experience to see public policy as it is actually being considered and made. We appreciate the opportunity of being witnesses—witnesses in the silent sense—here this morning. Thank you very much.

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The Chairman: Thank you. I want also for you to know, David, that we are still making good use of your report on the Constitution and the environment. Actually we are urging certain people to make it mandatory reading these days.

Mr. David MacDonald: Excellent.

The Chairman: Now, with that we start with the representative for the Reform Party, Mr. Gilmour, followed by, I suppose, Mr. Bigras and then by Madam Kraft-Sloan, Mr. Lincoln, and then whoever will raise their hands. Mr. Gilmour.

Mr. Bill Gilmour (Nanaimo—Alberni, Ref.): Thank you, Mr. Chairman, and my thanks to the witnesses for a most interesting and informative hour.

I'll direct my comments to Mr. Gero. We've heard of the secretive nature of the MAI. During the election in June in British Columbia this was a big issue. I gather it was not a big issue in Ontario, but in the west it was, and it continues to be. I'd like to ask about the process. We as parliamentarians should have an opportunity to see the final document, to debate the final document before it's signed. Will this happen?

Mr. John Gero: My presumption... This is a question that obviously will be determined by the government rather than by me as to the process they will follow in the context of should there be an MAI and how it would go through parliamentary procedures. Obviously it will be a function also of whether there will be legislative changes required as a result of the MAI. So the decision of how Parliament will consider the final version of the MAI has not yet been made and will also be a function of what legislative changes, if any, will be required at that point in time.

Mr. Bill Gilmour: You said there will be no signable text in April, yet the government is going to sign a letter of intent. So the train's already on the tracks. It's going down at a pretty great rate. I as a parliamentarian—and I would hope the government side is feeling the same way... We haven't had the opportunity to see it. How can we debate something that is not even written? It makes no sense. So please tell me, what is the process?

The Chairman: That is a question for question period, Mr. Gilmour. I don't know whether Mr. Gero can give us a satisfactory answer, but if he wants to try, then by all means.

Mr. John Gero: Mr. Chairman, clearly there's a process under which the government would have to get the approval of cabinet before it would even sign a text. Until the Government of Canada signs a text in Paris, there is no commitment by the Government of Canada on any such text. So until there's actually a Canadian government signature on a text, that does not in any way commit the Government of Canada.

Secondly, of course the Government of Canada would also have to ratify that text, and the procedures the Government of Canada would follow, both in the context of signing and ratifying any international agreement, to a large measure will depend on the kinds of requirements in that agreement and the legislative changes that would be required as a result of that agreement.

Mr. Bill Gilmour: This is obviously very secretive. So the foreign affairs department is doing the negotiating. Are those your running rules, to keep it secretive? Have you been told to run it in that manner?

Mr. John Gero: No, it's not at all a secret process. The issues of the existence of the MAI and negotiations on the MAI were made public at the time of the decision to negotiate. It's true that there wasn't a lot of attention given to it in the first eighteen months of the negotiations. There's been a lot more public debate and focus on it in the last nine months or so. But in that context, from the Department of Foreign Affairs and International Trade perspective and clearly from the Minister for International Trade perspective, he values the public debate.

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There have been hearings in a number of House committees on the MAI, including full hearings in the Standing Committee on Foreign Affairs and International Trade, with a report. We have regular consultations with all interested parties, including, I believe, every group that's around this table.

In that context, the OECD itself, during the negotiations in the last six months and prior to that, has had regular consultations in the agreed formats of negotiations with the labour unions and with the business community. They also had a session with non-governmental organizations in that regard where there were discussions among the negotiators and those non-governmental organizations.

So I would strongly suggest that this is by no means a secret negotiation.

The Chairman: The subcommittee on foreign affairs produced a report on which your party is represented under the chairmanship of Bob Speller around December 15.

Ms. Michelle Swenarchuk: Mr. Chairman, could I just comment that the reason we are able to debate it is that the text was leaked, not that it was ever provided by Foreign Affairs.

Mr. Bill Gilmour: I would take umbrage on the point that it's been public. I'm not aware of any meetings in western Canada, where this is a big issue. Where are the public forums? Where has it been debated? Where is the forum for people to come forward with their concerns? There are a number of concerns here. Are you listening?

Mr. John Gero: Absolutely. There have been a number of discussions out west as well, which the negotiator, Mr. Dymond, has participated in—public discussions of the MAI.

The Chairman: Thank you. Now Mr. Bigras, followed by Madame Kraft-Sloan.

[Translation]

Mr. Bernard Bigras (Rosemont, BQ): I too would like to thank our witnesses for the information they provided this morning. In light of what you've told us, it is clear the agreement will have an impact on the environment.

I would like a clarification. The Executive Director of the Canadian Environmental Law Association gave us an overview of the impact of international trade agreements on national environmental protection legislation. The agreements make the legislation weaker. At the Foreign Affairs Committee, she gave a very specific example—the decision made in August 1997 by the World Trade Organization and GATT panel on bovine growth hormones. I read the panel's report, but it contained only a few lines on this topic. I would like some clarification about the environmental impact of these agreements.

Ms. Michelle Swenarchuk: I will answer in English.

[English]

This was a case decided at the World Trade Organization, first of all last August and then on appeal subsequently. This was a complaint filed with the WTO by Canada and an identical complaint by the U.S. against the European Community's ban on hormone residues in beef, which amounts to, and still is, a ban on Canadian-raised beef.

The WTO decision is about 300 pages long. They convened a panel of experts. They examined the process by which the EC had established its hormone residue ban, which preceded the 1994 GATT. For a number of reasons, they applied the sanitary and phytosanitary chapter of the GATT, and they decided that the wording of that chapter of the GATT, the need for risk assessment in setting standards, and the fact that the Codex Alimentarius standard was different from the European standard meant that the Europeans are not entitled to maintain a ban on hormone residues in beef. So Canada won that case. Health standards went down.

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The case has subsequently been appealed. The appellate decision is not available to people like me. It perhaps is at Foreign Affairs. I understand that, as expected, the WTO decision has been upheld, but with some further discussion on reasoning. Perhaps Foreign Affairs can tell us that. I also understand that the European Community is not prepared to simply drop its standard immediately, so there will probably be some continuing political consultations.

This to my knowledge is the first health standard that has been downed by the WTO. There have been other environmental-related standards.

The Chairman: Madam Kraft Sloan, followed by Mr. Charbonneau, Mr. Jordan, Mr. Duncan.

Mrs. Karen Kraft Sloan (York North, Lib.): The witnesses have identified problems in regard to subnational governments—provincial and municipal governments. It's not clear exactly what their status is going to be vis-à-vis the MAI is what I'm understanding from you.

I'm looking at the term “federal” versus “national” and what the implications are, given the fact that we have just signed a harmonization accord with the provinces so that there would be a body set up that would undertake a system of nationally set environmental standards. So if the provinces are going to be participating in this, does that subject them to MAI provisions? What is the difference between federal and national, and is that recognized internationally with this agreement?

Mr. Steven Shrybman: There are two questions. Let me respond to each.

We believe the MAI will apply to subnational governments. The OECD documents available on their own website indicate as much. That is the position of the EU and the U.S. There seems to be little debate about application to subnational governments, although Canada seems to be trying to reserve the provinces as a bargaining chip. We suspect it will play at some point during the negotiation process. But no other party to this negotiation seems to be in any doubt about the application of this agreement to subnational governments.

On your second point about CCME—is it a national institution or an institution of subnational governments—we believe arguably that it would be a government of the national level, and therefore not only subject to MAI rules, whether they apply to subnational governments or not, as we believe they will, but also to WTO rules. And the commitments that Canada has made in the context of negotiating that harmonization agreement with the provinces are irreconcilable, in our view, with the commitments they've made under the WTO. We raised that issue before this committee on an earlier occasion.

The Chairman: Mr. Charbonneau, followed by Mr. Lincoln, who I had overlooked, Mr. Jordan, Mr. Duncan, and the chair.

[Translation]

Mr. Yvon Charbonneau (Anjou—Rivière-des-Prairies, Lib.): In the last two months, we, as parliamentarians, have heard many points of view about the Multilateral Agreement on Investment. I would like to report on the many letters sent to a number of members of Parliament, with copies to all the others. These letters were from well-informed and well-documented people who are concerned about the impact of the agreement or the secrecy with which it is being negotiated.

We have also received many representations from various organizations, including the Canadian Labour Congress, which appeared before us this morning, the Canadian Teachers' Federation, the Council of Canadians and so on.

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I would like to ask the departmental official to comment on recommendation 13 contained in the December 1997 report of the Standing Committee on Foreign Affairs and International Trade. It states, with reference to Canada:

The concerns of Canadians regarding the maintenance and introduction of effective environmental standards must be addressed through the use of strong and unambiguous language in the text of the agreement [...]. Nothing in the MAI, apart from the national treatment of non-discrimination provisions, should infringe on Canadian governments' capacity, at all levels, to introduce new measures to protect the environment and promote sustainable development.

The recommendation refers to “Canadian governments” and not just to the central government.

Second, I would like to know your reaction to the first suggestion made this morning by the Sierra Club:

[English]

Canada should undertake an independent and comprehensive assessment of the environmental, social, and development impacts of the MAI, with full public participation. ... National public hearings on the MAI should be held to allow Canadians, the provinces, and the municipalities to participate in the assessment.

[Translation]

I would like to hear what you think about these two ideas.

[English]

The Chairman: Mr. Gero.

Mr. John Gero: Thank you, Mr. Chairman.

The government will respond formally, obviously, to the recommendations of the committee, but let me underline to you what the minister said in front of that committee. He said:

On environment and labour standards, I want to be clear that the Government will never accept an agreement that would limit our ability to protect the environment or maintain high labour standards as we see fit. We are also pushing for strong language in the agreement so that other countries do not lower their standards to attract investment.

I think the minister very clearly outlined to the committee what the position of his government is, and obviously there will be a formal response to the recommendations of the committee.

As you know, Mr. Chairperson, there will be an environmental assessment done, as it is done on all international agreements. I can't, at this point, tell you the process of it. Obviously one needs to know what's in the agreement first before one can fully assess it from an environmental perspective.

If I may just—if you permit—touch on one other issue, there has been some confusion about the role of provinces and federal-provincial responsibilities. It is currently the position of the government that this agreement does not cover provincial governments. That is the position.

Now, it may be that during the course of the negotiation and in consultation with the provinces there will be a decision that provincial governments would be covered by this agreement. That's a decision that has not yet been taken. Certainly if that is the case, if there are provincial governments covered, they would be subject to the same kinds of exceptions and the same kinds of reservations as is the federal government. On this issue, in the context of the environment and labour, obviously, as the minister said, those are joint jurisdictions in Canada, and we consult very closely with the provinces in this regard.

Thank you, Mr. Chairman.

[Translation]

Mr. Yvon Charbonneau: Mr. Chairman, I would like to ask a question of the departmental official. Canadians in the organizations I mentioned earlier are concerned about the matter. How can they be assured that the agreements signed eventually by the Canadian government will match the minister's statements of intent, of which you reminded us this morning? How can we be sure that these statements will appear in concrete form in the text of the agreement before it is signed?

[English]

Mr. John Gero: Well, if I may say, we are in constant consultation with all the groups represented around this table. There have been a number of discussions held with a number of these organizations, including the CLC. We're constantly open to having further consultations in this regard. That's the way we would wish to ensure that as things develop in the next three or four months, they will be satisfied with the positions the Government of Canada will take and has taken.

Ms. Michelle Swenarchuk: With respect, Mr. Chairman, perhaps Mr. Gero is not aware that that's simply not an accurate statement from our perspective. We had the opportunity to have lunch with Mr. Dymond in Paris at the OECD-NGO consultation. That's the only consultation we've had with the government.

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Secondly, in response to your question, sir, I have to say there is no way that Canadians should be reassured that the language being proposed for the agreement will be sufficiently protected. It will not. More protective language, a general exception, exists in the GATT; that's stronger than anything proposed here, and it has been no protection whatever for environmental laws. So in all honesty, we have to say to Canadians that there is nothing on the table here that will protect the environment.

What we proposed to the committee—and I would repeat again today—is a very broadly worded carve-out. Other people here have proposed the same thing. That is, a very broadly worded exception that takes all environmental policy and resource management policies, which are key to environmental protection here, out of the agreement. That would be a start. But that has not been proposed by our government.

The Chairman: Mr. Lincoln.

Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.): When I read the briefs of the labour and environmental groups that are before us today, Mr. Gero, a few main positions seem to emerge. I'm going to ask you what your feeling is.

Do you agree with them in regard to the sections on national treatment and performance requirements? To just quote these two, under these sections today, if the MAI went forward it would prohibit resource management rights; it would restrict a citizen's requirements for certain permits or licences or certain advantages that would be given to Canadian citizenship for environmental protection or land protection; it would make it much more difficult if not impossible to apply subsidies for these same reasons; it would restrict the domestic content provision and also the provision that would favour local hiring. Do you see it that way in regard to the present wording of MAI?

Mr. John Gero: Mr. Chairman, I think the minister has been clear on a number of those issues. For example, he's made it clear that the Government of Canada is totally opposed to performance requirements vis-à-vis local hiring. Certainly the Canadian government continues to be opposed to those kinds of requirements.

There may still be texts in a draft text of the MAI, but he made it clear that to the extent that Canada does not think that these safeguard our abilities to take whatever environmental standards or labour standards we feel we require, then Canada will not sign the agreement. I think he's on record as stating that. It's true that the draft text is evolving. There are still certain provisions in this regard—in square brackets of course—and we've expressed our opposition to them.

Mr. Clifford Lincoln: What you are saying is that all the reservations that have been expressed by the environmental groups in regard to the tremendous impact of the national treatment provisions and performance requirements on environmental and resource rights protection would not be agreed to, and if they were still in there then the agreement would not be signed. I understood you to say that.

Mr. John Gero: One would have to look at it item by item, Mr. Chairperson, but I think in general on some of the issues that have been raised and that we've been consulting them on there isn't a great deal of difference between the position of the Government of Canada and those of the environmental groups.

Mr. Clifford Lincoln: That's certainly not what they seem to say.

I have one last question in regard to investor protection. Do you agree or disagree with the groups here that expropriation according to the MAI and also of course NAFTA and all the WTO rules really is a tremendous change in the operation of our system in Canada, taking it away from the courts and the court of public opinion and public information into a secretive and unknown territory of panels, of WTO and MAI and NAFTA, where this gives tremendous advantages to people like Ethyl Corporation or Metalclad and others, who will constantly now challenge our positions in regard to legitimate environmental protection.

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Mr. John Gero: I think it's fair to say that certainly from our perspective that isn't the case. Under Canadian law, of course, any company, whether domestic or foreign, has the ability to submit claims to Canadian courts if they believe that the government has treated them unfairly. That's a possibility that exists to them under Canadian law.

Now, it is true that the system of an international arbitration panel is different from that, but in essence, from our perspective, it should rule in the same kind of context.

The texts on expropriations have been developed in international law for over a hundred years, so there's nothing new in that context. From a Canadian government perspective, I don't think anybody would claim that Canadian governments act unfairly when they deal with corporations.

Mr. Clifford Lincoln: I didn't say that at all. What I asked is just the reverse. Are you saying that Ethyl Corporation is in the same boat now, going before a NAFTA panel and claiming expropriation and prejudice, versus it having gone before a Canadian court? Are you saying it's one and the same?

Mr. John Gero: Mr. Chairman, I'm not a lawyer, and obviously that would take a certain amount of legal analysis to give the points of contention Ethyl Corporation would have in the context of a NAFTA arbitration panel and a Canadian court as such. I wouldn't be in a position to answer that in detailed legal terms.

The Chairman: Mr. Jordan.

Mr. Joe Jordan (Leeds—Grenville, Lib.): Thank you, Mr. Chair. I just want to comment on something Mr. Gilmour said about the secretive nature of the MAI process and discussion.

During my campaign—and I sort of fancy myself as a bit of a political junkie and informed—I was asked at a debate about the MAI, and I racked my brain wondering if we left prisoners in Vietnam, because I had no idea what this thing was all about. And I don't think I was alone in that regard. So it started to surface as an issue, but I certainly don't think it has had anywhere near the public debate and consultation that the subject deserves.

I just want to make a comment about where we might be headed as a country and the implications that being a signatory to this document might have.

When I look at the Ethyl Corporation action and the MMT ban or at the legal action against an area or region of a country that doesn't see the logic of locating a dump where it might pollute the water table, these are hardly radical moves that a government might take to protect the environment. If those things are becoming subject to international dispute panels, rightly or wrongly, I think the point that was made about the risk of this type of legal action really inhibiting perhaps government regulation, just based on scarce financial resources and at the end of the day it comes down to a poker game... If I can financially double the bet each time I lose, I'll tell you, I'm eventually going to win.

So whether these companies are justified and whether the chances of legal success are there, there's still an infringement to action.

But let's say that we wake up some morning as a nation and decide that economic growth for growth's sake has done nothing for the environment, has done nothing for society, has done essentially nothing for us as a nation. And I'm not saying that this is right or wrong, but let's say that happens. Is it a fair assumption that given the legal challenges to what I would say are non-radical government regulations that make absolute sense, if a government decided that perhaps self-sufficiency was the bar and that they would engage in international trade simply to benefit from trade and not become dependent on it. As the depth and scope of government regulation increases, is it going to increasingly come into conflict with this agreement? I realize that might be a bit of a rhetorical question, but I'd like to hear your comments. If we decide as a nation—and I honestly think we should—that our ship is headed in absolutely the wrong direction and we want to try to right some of the wrongs, if we move from the status quo in that direction, are we compounding our problems, given the nature and scope of this agreement?

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Mr. Dick Martin: Let me respond to your last question. I think that we are hemming ourselves in. More and more we've hemmed ourselves in. I don't want to go through all the wars of the FTA, but that was our concern under the FTA. It was our further concern under NAFTA. We now have more experience under NAFTA than anything, at least I have, in particular from the labour side agreements, and we're finding the side agreements ineffectual, a talk shop, as I said. We also see the same thing in terms of the environmental component of it.

The way we read the MAI as it is at this time is that once again we are going to be prohibited, essentially, from bringing in, as you said, non-radical legislation to protect the environment and protect the citizens. We understand that the MAI isn't finished yet, but what we see there and what is proposed is very radical and reducing government to collecting taxes and in control of the army and the rest of it will be voluntary.

That's why we referred to, in our brief, talking about these voluntary organizations that are not governmental, not commissioned by the UN, not commissioned by the ILO, not commissioned by any recognized international body, but come together and make the rules that affect all of us and then they're reflected in an agreement such as MAI, into which our organization had no input, and quite frankly parliamentarians had no input into it at all.

I don't want to get into conspiracy theories; they're pretty easy to get into sometimes. But after a while it's not very difficult to say that somebody else is out there pulling the strings. I think it's the job of every government... Certainly as a Canadian, it's the job of the Canadian government to protect our sovereignty to make decisions that are to the benefit of Canadians generally, and not to multinational investors.

We've made other briefs before parliamentary committees. This business of the investment coming first before everything else—well, excuse me, but people come first.

Mr. Steven Shrybman: As a practical point, once you're in the MAI you're in for an awfully long time. You have to provide other parties five years' notice of your intention to withdraw. Under NAFTA that's six months. From that point on, investors with an interest in this country—and we're talking about anybody who owns a share in a corporation doing business here—have the right to preserve that protection for an additional fifteen years. That's why people say it's twenty years before you can get out. But really the MAI is forever.

Ronald Reagan described the free trade agreement in the United States as an economic constitution for North America. The director general of the WTO made the same claim recently about the WTO. These are about economic constitutions that constrain sovereign prerogatives. There really isn't much debate about that among people who are willing to be serious about these initiatives. So the whole intent and purpose of these regimes is to lock in these policies.

The ones you describe in favour of self-reliant production, we decide we want to become self-reliant in agriculture production, reduce the distance between garden and table because it's consistent with reducing energy demands production, because it will promote food security in this country—all of those policies are fundamentally at odds with this notion that we want to globalize production in agriculture trade and everything else in this world.

So we are vulnerable to challenge in any number of different ways under these regimes. There's no way to reconcile the two. And this is intended to entrench the very dominant paradigm that I think many environmentalists believe we suffer under so that it will be immutable and future governments—who may come to their senses, we hope, one day about the unsustainable path we've been travelling—will not be able to change course.

The Chairman: Mr. Duncan.

Mr. John Duncan (Vancouver Island North, Ref.): Thank you, Mr. Chair.

I'd like to start off with a simple statement, and that is that it appears that there's a serious attempt by the government not to engage the public in this whole debate. That's not a question directed to anybody, but certainly I'm getting that strong impression.

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This document, Mr. Gero: I wonder if you've had an opportunity... We've had a document tabled with us by Appleton & Associates, International Lawyers. There's a series of statements in the document referring to the differences between the MAI and NAFTA. They really go to the heart of a lot of the questions people are asking about what they know about the MAI to date. I wonder if we could explore a few of the statements in here.

For example, the coverage of the MAI as it applies to provincial, territorial, local, and aboriginal governments: we heard you make the statement that it's the position of the Government of Canada that the provincial governments are not necessarily covered by this agreement. Could I ask you the same question about territorial, local—i.e., municipal—and aboriginal governments? That would be my first question: whether the MAI would cover them.

Mr. John Gero: Yes, I was using shorthand, “provincial” for subnational governments. At the moment the disciplines of the MAI, as far as the Government of Canada is concerned, apply only to federal governments.

Mr. John Duncan: One of the reasons I asked that question is there's obviously a divergence of legal opinion on that case, as there often is on anything. For example, right now the Supreme Court of Canada is entertaining argument and debate on whether constitutionally there is a third order of government in Canada, that being that of aboriginal peoples. For 130 years Canada has argued there are only two levels of government.

Further in the document, by excluding provinces you actually exclude many of the statements in this document, so this is a very dramatic and important and essential ingredient in whether the MAI does apply to provincial governments or not. If it does not, is there not a clear way in the MAI to state specifically that it does not apply to provincial governments?

Mr. John Gero: I would have to check the exact wording, but my understanding at the moment is that the Canadian reservation that has been submitted in the MAI makes it clear that this applies only to the Canadian federal government.

Mr. John Duncan: That leads to my next question. The MAI draft document that is most often discussed in public circles is now a dated document. Are the latest drafts available from your department, and is the list of exclusions and exemptions that Canada has tabled at OECD also available to the public?

Mr. John Gero: My understanding is that the minister tabled the full list of Canadian exceptions and reservations with the Standing Committee on Foreign Affairs and International Trade.

The Chairman: I'm told, Mr. Duncan, that they are listed on the web site.

Mr. John Duncan: Okay. A further question then is, do we have available through your department the list of exemptions and exclusions from the other nations that are also a party to this set of negotiations?

Mr. John Gero: I believe some of them are public, but the choice of whether governments make their lists of exceptions available publicly or not is up to each individual government. But I understand that some of them are in fact public. I'm not sure whether all of them are.

• 1030

Mr. John Duncan: Thank you.

I have another question. I heard you say you're not a lawyer. I've also heard it said that if the Canadian legislation that had banned the use of MMT had been crafted on the basis of science rather than politics, there would be no basis for the Ethyl Corporation suit. Is your department also of that opinion?

Mr. John Gero: I'm sorry, I'm not familiar enough with the details of the case to be able to give you an answer to that question.

Mr. Steven Shrybman: Mr. Chairman, I think the answer is pretty straightforward. Even had there been the clearest health grounds in the world—let's say we're talking about cigarettes now—the fact that there were bona fide health reasons for the ban would not in any way influence, in terms of the provisions of this regime or of NAFTA, Ethyl's claim.

The wording of those provisions said that unless there's a legitimate public policy objective, you can't do it at all. But even if there is a legitimate public policy objective—a health objective, for example—you still have to compensate a corporation for the property taken. So the environmental language that is in this draft, which I don't believe is worth very much, at first instance simply doesn't apply at all to the expropriation provisions. Let's be clear about that.

The Chairman: Mr. Duncan, last question, please.

Mr. John Duncan: I guess my last question is to ask Mr. Gero if he would be prepared to get an opinion from his department on the Ethyl Corporation question and on the provincial government issue I brought up and table it with this committee.

Mr. John Gero: Mr. Chairman, I think the situation on the provinces is very clear. I can't make you a commitment on the Ethyl case because of course it's sub judice and I'm not sure what I can or can't table in front of the committee.

The Chairman: That's an important point. Mr. Duncan, you may get some satisfaction by addressing the question in the form of a letter to the Minister of Justice and see what kind of a reply you get. That's the department that is presently handling that file.

Mr. Finlay, followed by Mr. Laliberte and by the chair. Then we start a second round.

Mr. John Finlay (Oxford, Lib.): Mr. Chairman, let me first take this opportunity to say it's a pleasure to be substituting on this committee this morning on this important topic, and I appreciate your chairmanship, as always.

I have a couple of comments. One is to follow up on what Mr. Gilmour and my colleague Mr. Jordan said about public consultation and MAI. Either the government's not doing a good job or the newspapers aren't—it's too technical for them—or something. I want to tell you, Mr. Gero, I spoke to six gentlemen a week ago in my office and asked them what they thought about MAI. They were in business, the six of them. They looked at me blankly and that was it. The public generally, business, etc., doesn't know what it is.

You made a statement, I believe, Mr. Gero, that we need an agreement before we can do an environmental risk assessment on the clauses of this agreement. Have we got this thing backwards? It seems to me we should have some idea of the environmental risks we're taking before we write the clauses, and certainly before we agree to them. I'd like your comment on that.

The other thing that bothers me greatly is that in all our work so far with the environment—and I served on this committee for nearly two years—it seemed we followed or tried to follow Margaret Mead's suggestion that with respect to the environment we think globally and act locally. I would suggest that if we don't do a lot more thinking about this suggestion, about this MAI, we'll be coming up very, very short, because it seems to me the thinking globally is all one sided and there's very little thinking locally.

Canada is a favoured nation and we're a federation. Maybe that word is a little too new for some of our world partners, but it involves a responsibility, it seems to me, from the national level to the provincial level to the local level and vice versa. A lot of our local leaders expect the federal government to look after international issues in the best interest of all of us.

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There is going to be a public meeting in my riding next week, and from what I've heard this morning, Mr. Chairman, it's certainly not too soon. I'm going to encourage my constituents to go.

I'm disappointed entirely with a lot of things I've heard this morning from the point of view of how we're carrying on these negotiations. One, shouldn't we be doing some risk assessment first? And two, shouldn't we be paying strict attention to the local wishes, the wishes of local people and provinces, rather than international corporations?

Mr. John Gero: I have a number of comments.

We're endeavouring to talk to as many Canadians as possible in that regard. Being in the centre of it all, it's difficult for me to recognize that there are people who haven't heard of the MAI, but that's absolutely true. You're correct in saying there's a large number of Canadians who either haven't paid attention or really are not interested in any way in the context of the MAI.

Secondly, we are trying to consult as broadly as possible with all the interested parties involved. What Ms. Swenarchuk said is absolutely correct: we haven't met with her since October, when we met in Paris. But we met with the CLC as late as late January, we met with the Sierra Club in early January, and we talked to the International Institute for Sustainable Development in January as well, so the consultation process with all interested Canadians continues. We of course are prepared to sit down with anybody who wishes to discuss this agreement with us.

It's absolutely correct that from the minister's perspective it's vital that Canadians know what's in this agreement, and that's the reason he suggested that there be full hearings in the committee on foreign affairs and international trade and the report it has, which the government will be responding to. I will take the blame fully on my own shoulders that not every Canadian knows about the MAI, but we're trying desperately to get the message out to as many Canadians as we possibly can and certainly hear their point of view.

The Chairman: Mr. Gero, I have a feeling that by the time this meeting is over, Mr. Dymond will owe you more than just a case of beer.

Mr. Laliberte, please.

Mr. Rick Laliberte (Churchill River, NDP): Thank you.

When you refer to being in the centre of it, I envision a storm brewing, and if you're in the eye of the storm, you won't recognize the whole turmoil you're creating. In Canada, with the whole sovereignty issue and the whole environmental protection issue, there's a major storm brewing right around you. Being in the eye of the storm, you're not cognizant of it, because you're not affected. When you back off and sign the agreement and negotiate this agreement, we take the responsibility from here on in, as Canadians, and leave a jurisdiction and a legacy for our children.

Looking at the historical aspect of it, the last major impact on North America in this context was probably manifest destiny, where investors and people coming on to this land assumed a relationship amongst themselves. That's what the investors are doing now: assuming a relationship amongst themselves without regard to the people who are affected.

A question that was raised, and it's right to the point, is why is Canada not pulling out the environmental and resource management aspect of it? Why aren't you carving out that issue? What are you protecting, Canadian industries? The major industries that are going to be affected in this area are probably forestry and mining. All the other industries have some code or some aspect, but the standards on environmental impact of forestry and mining are probably the focus of this topic.

• 1040

Mr. John Gero: I guess I can't say much more than what the minister said in front of the committee on foreign affairs and international trade, which is that he will never accept an agreement that would limit our ability to protect the environment. I can't be more specific in that regard than the minister has been. He clearly is aware of the issues that are raised and that's the commitment he made to that committee.

Mr. Rick Laliberte: So the minister or the negotiator is not saying that you're in sight of carving these issues out of the MAI. I say this because we would stand behind you to support you in that kind of resolution.

On the other aspect of your terminology of federal government and our aspect of federation, provincial governments, territorial governments, and municipal governments are all connected to this federal government. So the responsibilities trickle down. Regardless of what the provincial institutions or provincial governments enact in the future, the definition or that terminology legally will come into play by these multinationals, however they want to test our national resolve.

Mr. John Gero: I think there is a difference between provincial government legislation and federal legislation under law and in the international context, and if the Canadian government takes on obligations that limit the federal government but not the provincial government, there's a clear distinction in that regard.

In that context, how one will achieve that has yet to be seen. But, as the minister said, he will not sign an agreement that in any way affects the government's ability to protect the environment.

Mr. Rick Laliberte: It's a political issue when you start testing the word of one person negotiating on a nation's behalf, and we're just not comfortable with that.

The Chairman: Thank you.

It is a political question that we've been pursuing, and probably there will be another place and another opportunity for you, Mr. Laliberte.

Before I launch the second round of questions, allow the chair to ask two brief questions, which I hope are technical.

I would like to ask you, Mr. Gero, whether your department has conducted any study on the effectiveness so far of the side agreements under NAFTA in protecting labour and the environment, in the light of what you are undertaking now, so as to draw conclusions as to whether the proposed side agreements for labour and the environment under the MAI would be effective. Has there been a study on that, and if so, what is the conclusion so far?

The impression of those of us who deal with the environment commission in Montreal, as well as from what we hear out of Washington from the labour commission there, is that they have not been very effective in achieving the goal for which they were set up.

Mr. John Gero: I'm personally not aware of these kinds of studies, but I will certainly endeavour to go back and check what has been prepared, by either private or public institutions, in this regard.

The Chairman: That would be helpful.

The second question has to do with the hypothetical question, should Canada decide not to sign and walk away, what would Canada lose? We have a very high reputation for foreign investment; we would continue to attract foreign investments for a number of reasons too long to describe but which we all know. Secondly, Canadian capital investments would still be welcome abroad for virtually the same reasons. What have we got to lose by walking away?

Mr. John Gero: A number of issues arise in that regard.

One is that Canada traditionally has been of the view that, being a middle-sized power, it is to our advantage to have an international rule-based environment, rather than in essence a situation where might is right and you can use your economic powers to reach negotiated settlements.

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So we have been supporting, over many decades, the concept that an international rules-based environment is better for our economic growth than a “vigilante system”, if I can call it that. That's the first question.

Secondly, there are of course two other aspects to this. One is foreign investment coming into Canada, which creates jobs and growth in Canada, and in today's environment, foreign investment abroad has similar effects. Is our signature, or non-signature, on the MAI going to affect that? Well, the indications are that it very well could to the extent that an investor has a certain level of protection in one country as opposed to another. There are investment location decisions that are taken. To what extent that would play into a final decision is very difficult to say, but chances are it will have some effect.

Similarly, from a Canadian perspective, the reason we have bilateral foreign investment protection agreements, for example, is that Canadians come to us and say they're going to make an investment in country X or country Y, and they want to be able to safeguard those investments in those countries. They know their legal system isn't as good as the legal system in Canada, and they want to have a bilateral agreement between the two governments that allows certain protection for our investment in those countries. For both those reasons, both from foreign investment coming into Canada and foreign investment going out of Canada, the creation of a rules-based system is beneficial.

The Chairman: Some of us a year ago made presentations to your Mr. Dymond urging that water be amongst the items to be exempted. The reason is, there could eventually be, 100 years from now, foreign investments that would aim at redirecting the flow of rivers, as it was once proposed some 15 years ago, and benefit another jurisdiction to the disadvantage of Canada. Has water been discussed ? If so, is it going to be on the list of exemptions?

Mr. John Gero: From the Government of Canada's perspective, the MAI doesn't cover water at all in the context that this is not an agreement that talks about trade in goods or services. It doesn't get into the question of prohibiting exportation, for example. So it's not an issue in that regard. From our perspective, the MAI does not cover water at all.

The Chairman: Thank you, Mr. Gero.

We have Mr. Gilmour, Mr. Jordan, Mr. Lincoln, and Mr. Bigras. Mr. Gilmour, please.

Mr. Bill Gilmour: Thank you, Mr. Chairman.

I'd like to go into the provincial exemption area a little deeper. I'm somewhat confused. We've heard through the witnesses that B.C., Saskatchewan, the Yukon, and P.E.I. have various levels of concern over the MAI. I agree with Mr. Laliberte that it's going to be natural resources that will be hit. It will be forestry, mining, gas and oil. They're all under the provinces by the Constitution—forestry, mining, gas and oil. How can the provinces be exempt when, by definition, they're going to be the ones that will be impacted?

So I'm having great difficulty with this idea that the provinces aren't part of the equation. They are, through natural resources in the Constitution. Perhaps you can clear up my thinking.

Mr. John Gero: The provincial governments are implicated only to the extent that when Canada signs this agreement, it says that this agreement covers the provinces. If the Canadian government says they are willing to undertake these obligations only as it relates to the behaviour of the federal government, at that point those obligations do not affect the provincial governments.

Secondly, to the extent that provincial governments and the federal government in consultation come to the conclusion, toward the end of this negotiation, that maybe it should cover provincial jurisdictions as well, then presumably the same kind of exemptions and carve-outs that currently apply to the federal government would equally apply to the provincial governments, be it in the areas of social services or health care or anything else.

So at the moment the position of the Government of Canada is that if Canada signs this agreement the obligations it takes on apply only to the federal government. If that changes—because we're in regular consultation with the provinces—and in the end the MAI would apply to both the federal and provincial governments, then the kinds of concerns you've heard expressed at the federal level about the need for certain reservations and exceptions would obviously be reflected in the context of the MAI as well, just as they were in the context of the NAFTA. The NAFTA includes, in the end, provincial governments, although there are exceptions in the investment chapter that apply, obviously, to provincial government measures.

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Mr. Bill Gilmour: A very short one, Mr. Chairman.

Take forestry in my home province of British Columbia. B.C. is not enthusiastic about the MAI at the moment. It's doubtful at this point that they will sign on. However, Canada signs on. Some timber expropriation takes place for a land claim or whatever, and an American company sues.

Are you saying that the federal government will then pay the bill because B.C. isn't involved? I mean, B.C. has to be involved. They look after the timber.

Mr. John Gero: No, I'm saying to you that if the federal government took on obligations for the federal government only and if the B.C. government expropriated a property, then nobody would have a claim under the MAI for the B.C. government.

Let me give you an example. There's a WTO agreement on government procurement under which the federal government undertook obligations that certain federal entities will behave in a non-discriminatory manner in purchasing. As a result, if one of those federal government entities discriminated in their purchasing practices, we would be subject to a WTO panel, saying we're breaking our obligations under this agreement.

In that context, the provincial governments are not covered. Therefore, if a provincial government entity continues to discriminate they are under no obligation not to do so, nor would they be subject to challenge under the WTO government procurement obligations just because the federal government has taken on obligations in that respect.

So there's a very clear distinction between measures taken by the federal government and measures taken by the provincial governments. To the extent that the federal government has not taken on obligations that affect the provincial government, as is the case in government procurement, no country has the ability to say to the Canadian government, well, wait a second; British Columbia's forestry department is discriminating in its purchase of forestry equipment, and therefore, because the federal government has taken on obligations, it applies to British Columbia. That's just not the way it will be reflected.

Mr. Steven Shrybman: Mr. Chairman, I have to protest. I believe the department is being anything but forthcoming in terms of its position around inclusion of subnational governments, or provinces.

The U.S. has been clear that subnational governments have been bound. The European Community has taken the same position. So has the OECD. Well, Canada has reserved the provinces, I believe as a bargaining chip. It's unrealistic to expect that an agreement will be concluded that will include the Government of Canada if it alone is saying to the other members of the OECD that with respect to the largest fear of constitutional jurisdiction in this country, having to do with foreign investment, we're not in.

So for the federal government to keep saying to everybody that the provinces aren't in, knowing that the story is probably going to change quite dramatically at the eleventh hour, when it will be too late to influence the outcome or engage in any full debate in this country about the implications of this regime for the provinces, is at best coy and at worst a deliberate attempt to mislead the people of this country so that they can't engage, in a meaningful way, in precisely the kind of debate that the department is claiming it wants to encourage.

Mr. John Gero: Unfortunately, I don't have a crystal ball. I can't tell you that the provinces will be involved at this stage. All I can tell you is that if the provinces are involved, the kinds of measures that would be covered in the provinces would be the same kinds of measures that would be covered in the federal government. Therefore, the debate we're currently having vis-à-vis the applicability of the MAI to federal government measures will be exactly the same kind of debate one would have in the context of the provinces.

To the extent, for example, that the minister has made a commitment that he will not sign an agreement that, for example, in any way affects our ability to protect the environment, my presumption is that views from the provincial governments would be identical in that regard. Should they be covered, they will not wish to see themselves covered in that regard either.

The Chairman: Mr. Jordan, please.

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Mr. Joe Jordan: I want to pick up on a point. I think the inclusion of the provinces is such a fundamental and important aspect of this that we don't want to overlook it. I think what we find—and we went through this with the harmonization debate—is that in some cases the provinces have a tendency to favour short-term economic interests over the long-term environment. Saying they are covered by the same rules is fine, but I don't think they are necessarily coming at it from the same angle.

The “threaten the environment” statement by the minister: I think there's some vulnerability there on two points. One is the very clear and good point made that just a threat of investor-state arbitration is enough to affect the action of government. To me that's a very real threat.

The second one is the point I think the CLC made. Even if you carve out an aspect for protection, there is a larger context that involves a great deal of inertia that is going to affect what happens to that element. A side agreement, formally or informally, is going to be tied to the agreement. It's like tying your lifeboat to the ship and saying if the ship goes down, get in the lifeboat. There's no way that isn't going to affect the standards we put in place or are able to enforce.

Ms. Michelle Swenarchuk: There are no side agreements to the MAI. The language is either in the agreement or it's not there. It's not a question of side agreements.

Mr. Joe Jordan: I guess that was a reference to NAFTA and the—

The Chairman: Excuse me. And they are not being proposed, either?

Ms. Michelle Swenarchuk: No.

The Chairman: They are not proposed. —Sorry.

Mr. Joe Jordan: I guess my point is that if you think that's going to settle the issue, it's not with me.

But I want to ask a specific question of the environmental lawyers' association. Let's say Canada decided it was going to pursue lifetime product stewardship legislation. We are going to say to companies that build something that isn't built domestically in Canada, so the idea of equality of treatment of investors may not be applied...let's say television sets, assuming for the sake of argument that we don't make them in Canada. If we were to try to put together legislation that would say to the manufacturer, when this television set breaks, you're assuming all costs of recovering this set and you have to assume all costs of disposal, is that type of regulation going to be coming in conflict with this agreement? Is that something we won't be able to do, or might not do?

Mr. Steven Shrybman: The way I would answer that is to say you would probably be likely to run into more trouble under the technical barriers to trade agreement of the WTO, although of course corporations could argue that any constraint on their ability to operate here is an effective expropriation of their business opportunities and therefore compensable under these rules.

While I have the mike... The minister again... It's galling to hear these kinds of assurances from DFAIT, assurances that I think really are very misleading. If the minister said he won't sign an agreement that in any way undermines our ability to pursue environmental initiatives, there is no language Canada has offered, none it has shared with us, and there is no text in this agreement, that would qualify in any way the expropriation roles of this regime for environmental purposes. On the very point where we have the best example of how these rules contradict environmental goals, there is no proposal to ameliorate the provisions of these expropriation rules. So it's just not fair to say to Canadians, we won't sign an agreement that is going to interfere with environmental prerogatives, when every single piece of information we have about this regime is that Canada is content with these expropriation rules and hasn't offered to qualify them in any way.

The Chairman: Mr. Lincoln.

Mr. Clifford Lincoln: First I would like to place a short statement on record about this agreement and all its public exposure. Mr. Chairman, I think you remember how we suddenly discovered this thing though an article in the Globe and Mail or Toronto Star, I think it was, and we started to ask questions and we asked the then minister for a briefing. There were so few parliamentarians that ever knew anything about it, including ourselves then, that there were only two to show up, and we were faced by a battery of bureaucrats—there must have been eight or ten—and, significantly, there was nobody from the Ministry of the Environment.

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I've questioned people at the senior level of the Ministry of the Environment who didn't even know what MAI meant then. I know of one minister who didn't know what MAI meant then.

Very few people ever knew, and we found out at this meeting that you and I attended that negotiations had been taking place for 15 or 18 months. I think there wasn't one parliamentarian who knew anything about it, let alone the Canadian public.

So I think this thing has been done in stealth for a long, long time and we've already cooked our goose, a long time ago. I read statements there that the minister, actually the present minister, is saying, well, he isn't going to walk regardless of environment and stuff, we've got to continue to go at it, and it looks as if it's a fait accompli. When I hear today that maybe we'll sign something in April, it really shakes me to the core to think that we're going to sign something in April that the public and the provinces haven't had a chance to discuss deeply. When you see all the tremendous problems that this thing will cause to our country, I think it's just very bad.

I'm not going to put Mr. Gero on the spot. I really sympathize with him to come here; he's a non-political person and he's got to bear the brunt of all these questions and so on, and I don't feel that's fair.

I would like to ask the other panellists, because I believe it was Gordon Gibson, if my memory serves me right, who wrote an article saying that if we walked out of the MAI today and we said we aren't going to sign, there would be no difference to our ability to conduct investment overseas and to receive investment abroad.

The other panellists must have studied that question, because in all the statements they've made, even about a carve-out, they say even if we carve out...

I would like to ask two questions. First, is this agreement fixable at all in the condition it's in? Number two, if we walk out, how badly off will we be?

Ms. Michelle Swenarchuk: First of all, no, I don't think it's fixable. I think it is very intelligently and comprehensively designed to reach certain goals and certain investor protections at the cost of a broad range of social and environmental goals.

Secondly, will we be any worse off? Well, as other people have testified to the trade committee, the Canada-U.S. NAFTA agreement investment chapter doesn't appear to have helped Canada with regard to U.S. foreign investment. In fact, our share of U.S. foreign investment has fallen during the period since that chapter was put into effect. So there's certainly no guarantee, in fact no evidence to suggest, that signing this agreement is going to make Canada more appealing for foreign investment. Given that two-thirds of our foreign investment comes from the U.S. and the NAFTA chapter didn't have that effect, why would we assume that this agreement would have that effect?

The most of our foreign investment that it could impact would be the remaining third, and it seems to me that really the net effect of this would be to give European and Japanese investors the same rights in Canada as we've already given U.S. investors. I don't see the advantage of that to Canada at all.

I think we also have to look beyond it and recognize that Canada is signing and is negotiating similar agreements with many other countries, almost 60 now, and we ought to be taking a look at that as well. Most of those countries are either east European or southern countries. I think the advantages in those agreements are all on the Canadian capital side. I don't think that in any way benefits the people of Canada either.

Mr. Dick Martin: I'd like to address Mr. Lincoln's comments in a different way.

When you look at it, it has a lot less to do with protecting investors in the international scene, as it's purported to do, than with using a way to attack labour programs, human rights, environmental and such.

Where are investors at risk today? I don't know of many governments in the world that are doing much expropriation or nationalization. It's going in the absolute opposition direction. Mexico is deregulating and privatizing massively across the place. Eastern Europe is doing the same thing. So where are investors at risk in the world in terms of multinationals or banks? They're not at risk.

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They already have their way to a large degree, and we're a good example of that in Canada. The mining companies keep saying that our environmental rules are too stiff at the provincial level, so they're taking their money and investing in Chile, which has a lot fewer environmental standards already. Or for environmental reasons, they're going to Argentina, but their investment is protected. They're using it as a lever on us to hit us over the head and say, “Deregulate or at least have fewer environmental standards in Canada before we bring our investment back to Canada, because your environmental stance is too tough.”

We talked about the secrecy and the stealth. I agree with Mr. Lincoln on the stealth, but we're a parliamentary democracy, a little bit more open. Can you imagine the great big debate going on in Mexico with this? I bet a lot of Mexicans really know a lot about what we're talking about—absolutely nothing.

We have constant contact with Mexican trade union independent people outside the PRI—environmentalists, intellectuals, and such. When we started to talk to them about MAI, they went blank in the face themselves and said, “We don't know what the heck you're talking about.” After we explained it, they started to have a little more discussion, but there's certainly no great big discussion, even this amount of discussion, going on in Mexico, in that great parliamentary freedom democracy that's part of OECD.

We asked our counterparts in the United States if there's much debate going on in the U.S. Congress or in the media there, and once again, it comes up zero. So it is indeed being negotiated, in our opinion, in stealth. We welcome an opening up, but I can tell you a lot more consultation has to take place within Canada.

Others have answered the argument, what difference would it make, in the final analysis, if we walked out of it? I guess in the final analysis there would be a little more protection and it would bring a little bit more to bear upon the international negotiations, saying this isn't acceptable because this is really a covert attack on a lot of other things besides talking about protection of investment. It's a covert attack on standards and regulatory regimes. That's why we addressed the issue of non-governmental, non-UN, private associations being reflected in international and federal legislation. We don't have any input in that. Neither do you.

The Chairman: Thank you, Mr. Martin.

Mr. Laliberte, would you like to conclude?

Mr. Rick Laliberte: That's the perception I was going to portray as well. Nobody wants to debate this in Canada, because it would be a one-sided debate. There's nobody to defend MAI. I haven't heard anybody defend MAI anywhere. Everybody has drawn a concern and a caution, even a farmer down in White Fox, Saskatchewan, who when he first heard of it said, “Why is Canada signing away its sovereignty? Why is Canada signing away its jurisdictions to the international interest? ” People immediately come to one conclusion: why? There's nobody defending MAI in this country, except the negotiators. If there's a debate, it will be a one-sided debate.

The issue of environment is very important in this country because of our resource base interests. If we try to draw standards, the only one where there's federal jurisdiction is probably the uranium industry, just off the bat. The forestry industry is at the provincial level. It won't take long for the investors to find loopholes or to find a test in the court or the tribunals to bring the provincial jurisdiction under their realm.

I beg somebody to give me examples of insecurity of investment in Canada. We're a very secure place to invest. We have our sovereign right. We want to protect our environment, our labour standards, our community standards, our social standards, and our cultural standards. These are part of the investment requirements that we Canadians demand, and rightfully so, but we're compromising this with MAI.

So let's have a debate.

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The Chairman: If there are no further questions, we will conclude.

We have a motion that was put forward by Mr. Pratt.

Ms. Michelle Swenarchuk: Mr. Chairman, could I respond to one question that you put to Mr. Gero earlier? You asked if water is exempted from the agreement, and he said this isn't about goods, so there aren't those kinds of exemptions.

I think what you're concerned about is this question: Is investment in water exempted from the agreement? Of course it's not. And that's a very live issue in Ontario right now, where major multinationals are looking at the increased privatization of water supplies and treatment plants in Ontario. They're lining up in Ontario. They will have these rights under that agreement.

The Chairman: Thank you very much for that clarification.

Regardless of what has been said this morning, I'm deeply indebted, and I'm sure my colleagues are too, to the multinationals and the international investors, because without them and without MAI, we wouldn't have had this meeting this morning. We have made good use of the time available. On behalf of my colleagues and those present at the table, I would like to thank you for your participation.

Mr. Pratt, I understand you have a motion with respect to the expenditures incurred yesterday when we met. The floor is yours.

Mr. David Pratt (Nepean—Carleton, Lib.): Yes, Mr. Chair. The motion is as follows: that from time to time the committee hold working sessions during meal hours and that at such times the cost of the meal be charged to the committee.

The Chairman: Thank you. Do I have a seconder? Mr. Laliberte, thank you.

Motion agreed to

The Chairman: This meeting is adjourned until tomorrow afternoon. Thank you again.