Canada Ratifies Controversial Chinese Investment Treaty

Did Canada just sell out a huge chunk of its sovereignty?

Canada ratified a radical new trade agreement with China on September 12. According to critics, it puts both Canada’s resources and its ability to pass laws into the hands of a secret tribunal dominated by foreign judges.

Canadian International Trade Minister Ed Fast hailed the Foreign Investment Promotion and Protection Agreement (fipa) as a step in the right direction for Canada: “Investment agreements provide the protection and the confidence Canadian investors need to expand, grow and succeed abroad. We remain committed to opening new markets around the world for Canadian companies, including in the fast-growing Asia-Pacific region,” Fast said. “This fipa will create jobs and economic opportunities for Canadians in every region of the country.”

On the surface, this agreement looks great. Both countries are supposed to benefit. But in reality, Canada just gave away part of its sovereignty for nothing in return.

Misleading Phrases

Looking at the September 12 press release, this deal seems to set clear rules to govern how investors are treated in the opposite country. The statement reads:

The Canada-China fipa will help ensure that Canadian companies doing business in China are treated fairly and benefit from a more predictable and transparent business environment. It will give Canadian investors in China the same types of protections that foreign investors have long had in Canada. Specifically, the fipa sets out clear rules governing investment relations, including dispute resolution and protection against discriminatory and arbitrary practices, creating a secure and predictable environment.

The agreement guarantees Canadian investors will have the same rules applied to them that Chinese companies in China have, the rules that China’s communist government implements. Sounds good, right? Clear rules. A secure and predictable environment. But whose rules, and which environment? One could infer from this statement that Canadian investors in China will have the same rules applied to them as Chinese investors in Canada.

However, that is not the case.

What the agreement guarantees is that Canadian investors will have the same rules applied to them that Chinese companies in China have, the rules that China’s communist government implements. In contrast, Chinese investors will have all the perks and protections that Canadian companies in Canada have. Gus Van Harten, an international investment law expert and associate professor at the Osgoode Hall Law School at York University, in an interview with cbc Radio’s The House, described the reality of the treaty: “The treaty does not allow market access except under the existing legal framework of each country. Our existing legal framework is more open and less opaque than theirs, so it shouldn’t be locked in, or the treaty shouldn’t be based on that existing lack of reciprocity [access to market].”

Diane Francis of the Financial Post described the deal this way:

The deal, using a hockey metaphor, allows only a select few to play on Team Canada on a small patch of ice in China and to be fouled, without remedies or referees. By contrast, Team China can play anywhere on Canadian ice, can appeal referee calls it dislikes and negotiate compensation for damages while in the penalty box behind closed doors.

It is true, Canadian investors do have a “secure, predictable environment” to work in now, but that environment is one dictated by the Chinese government—which is notoriously corrupt, extremely lax in protecting intellectual property rights, and known for favoring domestic companies. Chinese investors, on the other hand, get to bask in the privileges of a free market Canadian system.

Political Takeover

The reason Canadians are taking more of the risk has to do with what the agreement allows China to do. Under this agreement, Chinese companies will have the power to sue the Canadian government outside of Canadian courts, should they not like new labor laws. Because the agreement guarantees Chinese companies the same protection under Canadian law as Canadian companies at the time of the agreement, if any changes are made down the road, Chinese companies would have the power to sue the Canadian government. This agreement, in fact, gives Chinese companies more power in Canada than Canadian companies have.

Should a Chinese company decide to sue the Canadian government, the hearing would be held in a secret tribunal consisting of three arbitrators: one appointed by the Canadian government, another by the Chinese government, and a third by the World Bank, who must be approved by both nations. No limits are set on how much in damages can be awarded by these arbitrators. This is how Canadians take on more of the risk: More Chinese investors and companies means more lawsuits, meaning Canadian taxpayers will have to foot the bill for more damages awarded to Chinese companies that win the lawsuits.

Locked In

Despite much objection, this treaty is now here to stay for awhile. Thirty-one years to be precise. For the next 31 years, municipal, provincial and federal governments will have to make every decision with this treaty in mind. Canada has made no other deal where it has locked itself in for such a long time. Even nafta contains a six-month exit clause.

Full article: Canada Ratifies Controversial Chinese Investment Treaty (The Trumpet)

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