Demands for transparency on investment rules have multiplied in recent weeks following the federal government’s decision to block the proposed takeover of Progress Energy, a Calgary-based natural gas company, by the Malaysian state-owned Petroliam Nasional Bhd.
After Prime Minister Stephen Harper put the kibosh to the $5-billion deal on a Friday at midnight, a move apparently designed to avoid a media flap, one commentator wrote that Canada’s murky investment rules create too much uncertainty “at a time when Canada badly needs billions of dollars to build the vast infrastructure needed to get resources to hungry global markets.”
At the time of writing, commentators are also fretting about how Ottawa will deal with the proposed $15-billion takeover of the Nexen oil and gas company by a Chinese state-controlled company, and whether “transparency” will prevail over obscure backroom decisions by politicians.
It’s ironic to see these discussions take centre stage while the Harper government quietly implements a shady deal with China known as the Foreign Investment Protection and Promotion Agreement .
It’s true that to the current federal government transparency is anathema, but critics miss the point by focusing on deals such as the Nexen takeover.
We should be more concerned that Ottawa is willing to push the FIPA into law without any debate in Parliament or any study by the House of Commons industry committee.
The environmental website DeSmogBlog cites international investment expert Gus Van Harten, who suggests the deal could tie the hands of Canadian lawmakers.
In an interview posted on the website last month, Van Harten says the FIPA will allow Chinese investors to challenge any law or regulation enacted by Canadian authorities such as provincial legislatures, Parliament, or the judicial system. Investors will be able to take their complaints to international arbitrators, whose decisions can’t be appealed in any Canadian court, Van Harten says.
A government attempting to enact stronger environmental laws governing, say, a tar sands pipeline could find arbitrators demanding massive compensation for investors who see such measures as a violation of their rights. Canada, Van Harten adds, will be locked into the deal for at least 31 years under the terms of the agreement.
And we’d be remiss to ignore the impact the agreement could have for people living under the repressive Chinese regime.
FIPA could stymie efforts to improve human rights in China by giving Canadian multinational corporations the right to sue the Chinese state over any laws that could be bad for business, according to Harjap Grewal, an organizer with the Council of Canadians, a leftist social advocacy group.
In a post on the group’s blog, Grewal notes that China has increasingly allowed multinational corporations to take land from farmers and write their own laws.
“Entering FIPA with Canada will provide one more instrument for multinational corporations to grab land from under the feet of farmers in China,” he writes.
On the other hand, supporters of such investment treaties, such as former Liberal Industry Minister John Manley (who is now the head of the Canadian Council of Chief Executives, an association of CEOs), say these deals encourage economic growth through stability.
The idea is that FIPAs extend certain protections to foreign investors that domestic businesses already enjoy. One example is security from expropriation without compensation, in which the state summarily seizes a company’s assets.
Such guarantees of protection reap benefits from newly confident investors, including oodles of capital flowing into the economy, which leads to job creation. Or so writes Manley in a statement titled “Who benefits from foreign investment?” posted on the website for the Ministry of International Trade.
Manley also notes that such deals mean access to new markets for Canadian companies competing abroad. These Canadian multinationals tend to enjoy higher profits, he writes, due partly to their “ability to exploit economies of scale and scope.”
But this language of exploitation – with all of its historical baggage, and deployed so casually by FIPA promoters like Manley – should raise eyebrows for anyone concerned about the degree of power that global corporations have over government policies designed to protect people and the environment. This is especially true when it comes to decisions made by arbitrators operating behind closed doors.
To implement this treaty without a political debate is the antithesis of transparency, and much more significant than the much-maligned opacity of current investment rules that may hold back oil and gas development, such as the Nexen deal.