Date: Sun, 15 Feb 1998 14:29:04 -0500
From: Bob Olsen <firstname.lastname@example.org>
Subject: MAI Canadian Labour Congress
Date: Mon, 16 Feb 1998 00:29:05 +1300
To: Bob Olsen <email@example.com>
Subject: CLC submission Nov 6
To the House of Commons Sub-committee on International Trade,
Trade Disputes, and Investment Regarding the Multilateral Agreement
Submission by the Canadian Labour Congress, 6 November 1997
The CLC believes that the proposed Multilateral Agreement on Investment
is based on a wrong premise. We indeed live in a world in which capital
is highly mobile. The problem is not barriers to mobility, but rather
the fact that capital has too much freedom to move and too great an
ability to escape responsibilities to society. We believe that there
should be international regulation of investment issues, but our starting
point would be a very different one.
That said, we recognize that a process of negotiations has begun.
Therefore, our brief raises grounds of concern regarding the MAI, and
makes recommendations concerning the position that should be taken by
the Canadian government on some key issues.
The Multilateral Agreement on Investment (MAI) marks another important
stage in the progressive dismantling of the power of democratic
governments to regulate the market in the interests of citizens, workers
and communities. It takes us even farther down the course of extreme
market liberalization set by the FTA and NAFTA.
In an astonishing and still undefined range of policy areas, the MAI
would strike down policy levers which have been and remain of great
importance to Canadians. It would give transnational corporations
important new powers with which to challenge government policies.
Our experience with the FTA and NAFTA has taught us that agreements which
are designed to secure and promote the interests of mobile capital do not
promote the interests of workers and communities. Wages, working
conditions and social standards have been subject to continual downward
The MAI is explicitly designed to promote still greater mobility of
capital. Yet the evidence shows that there have been large net capital
outflows from Canada in recent years, and disinvestment in many sectors
We reject the central assumption of the MAI - that what is good for
mobile international capital is necessarily good for workers and
We are greatly disturbed that the MAI negotiations have taken place until
now in the absence of broad, democratic scrutiny, and in the absence of a
meaningful public debate here in Canada over the implications of a very
far-ranging agreement. The CLC sent a letter to all MPs requesting
public hearings and we are pleased that this Committee has been
established. However, a few days of Committee hearings here in Ottawa are
simply not enough. The issues raised deserve serious examination and the
Committee must set conditions on what the Canadian government should
We are also concerned that the MAI negotiations are taking place almost
exclusively among the advanced industrial countries which are capital
exporters, and largely exclude developing countries which generally still
seek to regulate foreign direct investment in the interests of national
The CLC appreciates that we live in an increasingly integrated
international economy. We believe that international regulation of
international investment would be a good idea. Indeed we have strongly
supported positive action at the international level, such as a Tobin Tax
to curb out of control international financial speculation.
The CLC, with the international labour movement, has pushed for
international agreements which would establish a common floor of core
workers' rights between countries, and secure a basis for strong
Unfortunately, the MAI is designed almost exclusively to tear down
so-called "barriers" to the international mobility of capital, and is not
concerned with building an international framework which would balance
corporate and investor rights with appropriate obligations. In short,
the MAI as it is currently conceived is fundamentally flawed and
Our brief raises concerns about the very broad definition of investment in
the MAI, the still unknown implications of the agreement in many areas,
the binding nature of the agreement if it were to be concluded, and the
fact that the power of investors and corporations to directly challenge
government policies would be greatly increased.
Our brief also speaks in detail to a number of specific concerns.
The MAI challenges our ability as a country to maintain not for profit
public and social services, particularly services delivered by the not
for profit sector in areas of mixed public/private delivery.
The MAI threatens government measures to support Canadian culture.
The MAI undermines policies which are needed to ensure that foreign direc=
investment increases employment and economic activity here in Canada, and
policies which help build our economy and create jobs by supporting
Canadian based enterprises.
All of theses concerns must be addressed. We are unconvinced that
proposed reservations will satisfy these concerns. Even reservations
which are not negotiated away before an agreement is finalized will most
likely freeze existing regulations, and will be subject to removal over
The brief also speaks to the need to incorporate strong enforceable
provisions regarding labour rights and standards as well as environmental
standards in any international investment agreement.
The CLC urges the committee to oppose a fundamentally flawed and
unbalanced agreement, to thoroughly investigate the implications of the
draft MAI for Canadians, to reject draft provisions in specific areas of
concern, and to propose positive provisions.
The CLC requested that Parliamentary hearings be held into the MAI to
allow Canadians to present their views and concerns before any agreement
is concluded. We welcome the opportunity that has been provided to us.
We also wish to acknowledge that the government has briefed CLC staff on
two occasions, and has responded in a positive way to concerns which we,
and others, have raised. The government has tabled some important
reservations to the draft agreement, has indicated its opposition to some
draft provisions which cause particularly great concern, and has
indicated its support for labour standards provisions in the agreement.
All that said, the government is clearly committed to the conclusion of
an agreement which we cannot support.
There are four major grounds for our opposition to the MAI.
1) The MAI establishes unnecessary and inappropriate barriers to
achieving key social and economic objectives by ruling out various
actions on the part of governments.
In an astonishing and still undefined range of policy areas, the MAI would
strike down policy levers which have been and remain of great importance
to Canadians. We are particularly concerned about the implications of the
MAI for the future of not-for-profit and public services, for needed
government measures to support Canadian culture, for policies which are
needed to ensure that foreign direct investment increases employment and
economic activity here in Canada, and for policies which help build our
economy and create jobs by supporting Canadian based enterprises. These
specific concerns are detailed below.
2) The MAI provides rights to investors and transnational corporations
without providing appropriate counterbalances that would allow other
parts of society to protect themselves against the decisions and actions
Even if the MAI includes the labour and environmental clauses that have
been proposed, it will still have the effect of freeing highly mobile
capital from national legal constraints. There may be some positive
economic potential regarding this liberalization. But experience shows
that it is too easy for "liberated" capital to pit governments and people
against each other. The result of these efforts by capital is to
undermine living standards and to destabilize communities at the national
and local levels.
The position of the Trade Union Advisory Committee to the OECD (TUAC) on
labour standards which we support is outlined below.
3) The MAI makes no positive contribution to the real concerns of working
people in Canada: jobs, stagnating living standards, increasing
inequality, and insecurity.
Participation in the MAI negotiations is premised on the view that
Canadians would benefit from still greater inflows and outflows of
investment capital. But the explosion of national and international
investment flows in recent years demonstrates that existing "barriers" are
not significant, and that there are costs as well as benefits from the
perspective of workers and communities. The case for still greater
openness, going even beyond NAFTA, is both dubious and unproven.
The table annexed to this brief demonstrates that in recent years there
has been significantly more Canadian investment outside Canada than there
has been foreign investment in Canada. The total net outflow of capital
from Canada (foreign direct investment and investment in portfolio equity
combined) was $10.9 billion in 1995 and $11.2 billion in 1996, equivalent
to 14% of total business investment in the Canadian economy in each of
those years. The situation is even worse than these figures suggest in
that more than half of all foreign-direct investment in Canada in the
past two years represented retained earnings of existing foreign-owned
corporations, not new investment. By contrast, almost all Canadian
foreign-direct investment represents new investments or acquisitions in
Some Canadian foreign-direct investment outside the country may support
job creation in Canada to a limited extent, but foreign-direct investment
and portfolio equity outflows in excess of inflows mean that Canadian
capital is not being put to work creating jobs and raising living
standards here at home. Put bluntly, it is clear why Canadian businesses,
which are making large investments outside the country, support an MAI.
It is much less clear why Canadian workers and communities should support
an agreement which would, in all likelihood, accelerate capital outflows.
4) The MAI negotiations are taking place almost exclusively among the
advanced industrial countries which are capital exporters, and largely
exclude developing countries which generally still seek to regulate
foreign-direct investment in the interests of national economic
The MAI is designed to establish new rights for transnational
corporations vis-=E0-vis governments without reference to the needs of
workers and citizens, particularly in the developing countries. Canadians
should not support an agreement which is basically designed to do an "end
run" around developing countries.
The MAI is being negotiated to remedy the supposed weaknesses of the
World Trade Organization (WTO) agreement with respect to investment
issues. The US and, more recently, other major industrial countries have,
on behalf of "their" transnationals, long pushed for GATT/WTO rules to
limit the ability of governments receiving foreign investment to impose
performance requirements, such as achieving a certain level of domestic
content or export sales. They have also pushed for an opening of closed
or regulated national markets to foreign investment.
Some of these objectives have been achieved through the "structural
reform" programs imposed on heavily indebted developing countries by the
IMF and the World Bank.
The WTO does limit states' rights to regulate foreign investment in areas
directly related to trade. However, in the view of transnational
corporations and many governments, this leaves ample scope for restricting
access to foreign investors and negotiation of a wide series of
performance requirements. By contrast, many developing countries argue
that successful development - as in South East Asia - has involved
significant government regulation of foreign investment, and that these
tools of policy must be retained. Opposition to a major investment round
in the WTO is the reason why the MAI is now being negotiated among the
major industrial countries.
For all of these reasons, the CLC is opposed to the conclusion of an MAI
as it is presently conceived.
II Process and Outcome
It is imperative that the committee clearly identify the implications and
ramifications of a complex legal document. While we and other
organisations have done some preliminary analysis, we make no pretence
that we have grasped the full implications of this agreement. At the same
time, we know that once agreed to, its provisions would remain in force
for twenty years, and that it would establish procedures which would make
government policies subject to appeal by investors and corporations.
The basic intent of the MAI is to prohibit all "discrimination" against
foreign investors through the key principle of national treatment, and to
make government decisions to regulate or control foreign investment
subject to appeals by foreign governments and foreign investors and
companies. The key principle of National Treatment is the philosophical
and legal touchstone of the MAI:
"Each Contracting Party shall accord to investors of another Contracting
Party and to their investments treatment no less favourable than the
treatment it accords (in like circumstances) to its own investors and
their investments with respect to the establishment, acquisition,
expansion, operation, management, maintenance, use, enjoyment, and sale
or disposition of investments."
The Most Favoured Nation (MFN) principle is also stated - meaning that
all Contracting Parties shall be treated equally.
The following aspects of the MAI arouse general, far-reaching concern:
* The MAI is a "top down" agreement - everything is included unless
explicitly excluded. This contrasts with the WTO which is a "bottom
up" agreement. The nature of the agreement means that the guiding
principle of "non discrimination" will apply and be binding except
where there is express limitation.
This means that all government measures which "discriminate" against
foreign corporations should be seen as vulnerable to challenge under
* The key question of the application of the MAI to provincial
governments is not yet resolved. The federal government has indicated
that it wants the provinces to be covered in a "good" agreement, and
that appropriate reservations for provincial policies would then be
filed. But the implications of the agreement for a huge range of
policies at the provincial level are largely unknown.
* Investment is defined very widely to cover every stage of the
investment cycle - pre investment, operation and management, and
repatriation of profits and dividends. An investment includes rights
under contract, intellectual property rights, claims to money and
performance, real estate, and government concessions and licences,
including rights of access to natural resources and the right to
contract to governments. Coverage of investment in its
pre-establishment phase is far reaching, going beyond existing
agreements such as NAFTA. This means that government policies and
changes in policy could be challenged long before there has been any
direct impact on a foreign investor or corporation. The government has
indicated (letter to the CLC) that it shares the concern regarding the
very broad definition of investment, but there has been no clear
statement regarding the Canadian position on precisely which areas
should be covered.
* Bracketed language would prohibit and make open to challenge
"unreasonable" and "discriminatory" measures against foreign investors.
This potentially threatens even regulations, policy changes, etc.,
which may not have an overt discriminatory intent - but simply reduce
profitability, reduce the market, etc. Would restrictions on tobacco
advertising, for example, be deemed to be "unreasonable" by a panel?
* A key intent of the MAI is to provide investors with a direct
mechanism for seeking redress and compensation for violations of the
agreement by governments. This element of the MAI builds on NAFTA,
which opened up the normal state-to-state dispute resolution process to
investors and corporations. The dispute settlement procedure will
likely be available even before an investment is made, i.e. a company
which wants to establish in Canada but is not allowed access will be
allowed to challenge that decision. An investor can bring forward a
dispute if there is an alleged breach "which causes loss or damage to
the investor." Decisions can be made by domestic courts or by an
international tribunal which can declare that a party was not complying
with the agreement and can award pecuniary compensation or restitution.
The CLC recommends that the Committee pay close attention to the
dispute resolution process under the MAI. Experience with
international trade agreements suggests that the dispute resolution
processes are sometimes ill suited to balancing trade issues with social
and environmental concerns. Among the things that should be present in
the dispute resolution process are: an open hearing process;
recognition of interested parties other than governments and businesses;
and, adjudication panels that are not limited to experts on trade and
III Specific Concerns
The government has responded to many specific concerns by indicating that
it is prepared to respond by seeking changes in the text, and by filing
reservations. However, reservations are subject to negotiation, and a
"wish list" at this point is far from a guarantee that a satisfactory
final text will be concluded. Further, many reservations will likely be
subject to "standstill" and "rollback". It is, therefore, imperative
that this committee clearly spell out the grounds on which the MAI should
be rejected by the government.
A. THE MAI AND GOVERNMENT POLICIES TO MAINTAIN AND CREATE CANADIAN JOBS
The CLC has a number of concerns regarding the potential impact of the MAI
on current and possible future policies which regulate foreign investment
so as to create and sustain Canadian jobs. The key concerns relate to our
ability to review foreign investments to ensure that there are net
employment and other benefits for Canadians, the ability of Canadian
governments to extend financial support to Canadian-based business which
create jobs, and our ability to regulate access to natural resources.
1. Negotiating Canadian Benefits From Foreign Investment Through
New foreign direct investments and acquisitions may benefit Canadians or
they may lead to a loss of jobs, productive capacity, and future
productive potential in a particular sector. It is imperative that the
federal government retain the right to review foreign-direct investment
to ensure that it benefits Canadians, and to impose conditions where this
The MAI provides that, in connection with the establishment, acquisition,
expansion, management, and operation of an investment, an investor (from
a contracting or non contracting party) shall not be required to - export
a given level or percentage of goods and services; achieve a given level
of domestic content; relate levels of exports to imports; transfer
technology or locate its headquarters in the country. The addition of
services to prohibited performance requirements is an addition to NAFTA
and WTO limits and the addition of technology transfer is an addition to
WTO limits. Still bracketed clauses would further prohibit: achieving a
given level of production, investment, sales, employment or research and
development in its territory, hiring a given level of nationals, and
achieving a minimum level of equity participation. The intent of the
bracketed text is to move limits on performance requirements beyond
trade-related areas, and to address all "distortions" created by
government regulation of foreign investment. This goes beyond the
principle of national treatment.
NAFTA maintained Canada's right to review foreign investments of more
than $150 million (and all investments in the cultural sector), with
such reviews not being subject to appeal by a potential investor or a
foreign government, and allows Canada to turn down a foreign investment
or takeover if there is no net benefit to Canada. The agreement also
allows Canada to require a foreign investor to locate production, carry
out R&D, to employ workers, and to construct or expand facilities in
Canada. Canada has much broader rights in this area under the WTO.
Reservations to the MAI filed by Canada would retain some existing rights,
but appear to weaken our ability to negotiate and enforce performance
requirements for at least investors from non NAFTA countries, and with
respect to the negotiation of Canadian equity participation.
Clearly, requiring that jobs be maintained or created in Canada in cases
of foreign establishment or takeover is potentially challenged by the MAI.
While noting that the government has filed MAI reservations to preserve
some rights retained under NAFTA, we urge the Committee to recommend that
the MAI should not dilute in any way the current provisions of the
Investment Canada Act and should ensure that Canadian governments retain
the right to negotiate employment and other benefits from foreign-direct
The MAI would prohibit all "discrimination" in favour of Canadians and
Canadian-based enterprises if governments extend subsidies for job
creation, training, research and development, regional development, and so
on. Some countries are pushing for the MAI to prohibit a requirement that
companies receiving subsidies create or maintain jobs in return for
Even NAFTA excluded subsidies from the principle of national treatment and
preserved our right to make corporations maintain jobs, production and
investment in research and development and training in return for
The MAI would extend the principle of national treatment to government
subsidies, i.e. governments could not "discriminate" against foreign-owned
enterprises in providing financial support. We oppose this provision
(though we note that it may well be appropriate to extend subsidies to
foreign-owned enterprises in many commercial sectors). It appears that
the extension of national treatment to subsidies has been accepted by the
Canadian government, subject to a general exclusion for cultural
industries. As noted below, it is also vital that governments should also
retain the right to "discriminate" in the area of public and social
Some countries have pushed for stringent limits on subsidies in the MAI.
It is, however, our understanding that the MAI will likely not prohibit
non-trade-related performance requirements (construction or continued
operation of facilities, training, employment, research and development
in return for government support). The committee must ensure that this
is the position taken by the Canadian government.
3. Canadian Jobs from Canadian Resources
The issue of access to resources is key for Canadians. Over many years,
governments have regulated to ensure that Canadian enterprises have
preferential access to some resources, and to ensure that more jobs are
created in Canada through local content requirements and through further
processing as opposed to the export of raw resources.
The principle of national treatment, combined with the inclusion of
government regulations, licences, and concessions in the definition of
investment under the MAI, means that transnational corporations could
challenge as "discriminatory" any preferential access by Canadians to
fishery, forest, energy, and other resources.
One area of concern is foreign access to the fishery and to Canadian
commercial fishing licences. We note that a reservation has been filed,
as under NAFTA, which may cover this issue in part.
NAFTA reserved petroleum and natural gas on federal lands for
Canadian-owned companies, and reserved Canada's ability to require benefit
plans (employment, domestic content) for developments on such lands.
Hibernia and Nova Scotia offshore development benefits plans were
specifically reserved. Again, reservations have been filed to respond to
concern that the ability to negotiate benefit plans may be undercut, but
their adequacy must be examined by the committee.
Most resource issues are under the jurisdiction of the provinces, whose
inclusion in the MAI is still undetermined. Potentially, the MAI could
challenge such key policies as timber resource processing requirements in
BC, and controls on foreign ownership of land.
B. THE MAI AND PUBLIC AND SOCIAL SERVICES
The MAI has no general exclusion for public and social services, opening
up the very real possibility that transnational corporations could claim
that public delivery of a service, such as health care and government
subsidies to not-for-profit providers, are "discriminatory" practices.
These concerns are greatest when public services are not delivered
directly by governments, but rather through the mix of public, private,
and not-for-profit institutions which characterises much of the Canadian
health and social services sector.
While the federal government has indicated that a country-specific
reservation for social services delivered for a public purpose identical
to that to be found in NAFTA will be made to the MAI, the NAFTA provision
is itself weak and inadequate.
The MAI adds to these concerns in that it provides that governments cannot
"discriminate" if subsidies are given, meaning that foreign corporations
could claim the same treatment given to not-for-profit organizations.
Further, the MAI has a very broad definition of investment which includes
government concessions and licences. Government procurement may yet be
part of the MAI. The defects of NAFTA and the additions of the MAI in
combination pose a clear threat to the maintenance of not-for-profit
public and social services.
Under NAFTA, there is a broad reservation for social services:
"Canada (the U.S., Mexico) reserves the right to adopt or maintain any
measure with respect to the provision of public law enforcement and
correctional services, and the following services to the extent that they
are social services established or maintained for a public purpose: income
security or insurance, social security or insurance, social welfare,
public education, public training, health, and child care." The
Government of Canada has filed a comparable reservation in the MAI.
Both in the debate over NAFTA and subsequently, fears have been expressed
that NAFTA could lead to the undermining of Canada's system of public and
mixed public/private delivery of health and social services. The context
for that concern is the far greater extent of public and not-for-profit
delivery of services - notably health care - in Canada compared to the
U.S., and the fact that U.S. corporations delivering health and other
social services have expressed interest in obtaining greater access to the
Canadian health services - physician and hospital care - are typically
delivered by independent doctors and by non governmental (but
not-for-profit) hospitals, with the costs being covered by public health
insurance (largely funded through general taxes). In short, the system is
publicly financed (by the federal and provincial governments) and
regulated (by provincial governments), but is not delivered directly by
governments. Many significant areas (dental care, drugs outside hospitals=
are largely delivered outside the framework of publicly funded Medicare,
and many elements of the health care delivery system are contracted out to
private firms (e.g., diagnostic testing, some hospital operations). Large
U.S. health care corporations such as insurance companies and health care
management organizations have occasionally expressed interest in entering
the market, but have been generally excluded to this point and are
confined to selling supplementary health insurance and selling some
specialized and non Medicare services to physicians, patients, and
The pattern of mixed public/private delivery extends to social services
such as elder care, child care, and home care. Often, government and
public agencies contract for services from both commercial providers and
not-for-profit agencies, and/or subsidize not-for-profit operations which
compete with commercial providers.
The Government of Canada long maintained that the general exclusion in
NAFTA (which covers future as well as current measures) was sufficient to
protect Medicare and social services from challenge by U.S. corporations
and investors who are either excluded from the Canadian market or are
denied subsidies and support on the same basis as Canadian not-for-profit
or commercial providers of services. The issue has not been tested by
NAFTA dispute settlement panels. However, it did arise in the context of
the required listing of non conforming provincial government measures.
Canadian provinces and U.S. states were given a grace period to reserve
all existing non conforming measures under Annex I through a process of
detailed enumeration and listing, a process that was ultimately intended
to lead to the application of NAFTA investment disciplines to lower levels
of government and to further negotiations to roll back non conforming
measures. In the event, in April 1996, the NAFTA countries agreed to
protect indefinitely from challenge all existing sub federal investment
measures, meaning all non conforming measures in place as of January 1,
1994. This general reservation under Annex I does not cover future
provincial initiatives in the social services area.
This outcome arose largely because of growing Canadian concerns regarding
the lack of adequacy of the general Annex II exclusion for social
services, expressed particularly forcefully by the Government of British
Columbia and by public interest groups and unions. While the federal
government initially argued that the general exclusion in Annex II made it
unnecessary to list non conforming provincial measures in the social
services and health area, critics argued that the general exclusion was
vague, that it was interpreted differently by the U.S. government, and
that it was vulnerable to challenge. Ultimately, the blanket exclusion
of non-conforming provincial measures in Annex I reflected at least
limited federal government acceptance of the case of the critics.
In the process of advising states on the listing of sub national
reservations, the U.S. Trade Representative expressed the view that the
general exemption covered only services delivered directly by governments,
and not services characterized by a mixture of public, private, and
not-for-profit delivery. It was stated in a letter to the State of Oregon
that a reservation could not cover government services "if supplied by a
private firm, on a profit or not-for-profit basis." An extended legal
opinion prepared by Dr. Bryan Schwartz of the University of Manitoba for
the Canadian Union of Public Employees and the Canadian Health Coalition
argued that the social services exclusion is ambiguous and rife with grey
areas. In a context of government withdrawal from direct funding of at
least some services, deregulation, and partial privatization, he argued
that it is far from clear what a NAFTA dispute panel would find to be "a
social service delivered for a public purpose." While Schwartz thought
the U.S. Trade Representative's view would likely be found extreme, he
argued that the "for a public purpose" provision would be undercut by
significant privatization, extra billing for services, and private
delivery. He further argued that extending subsidies only to
not-for-profit providers does not provide a shield from challenge. The
key conclusions reached were that the vagueness of the general exclusion
creates hazards, and that funding cuts and deregulation potentially
undermine an exclusion on the basis of public purposes.
The reservation in NAFTA, which has also been made in the draft MAI, is
not a good model because it is too vague and fails to take adequate
account of the complexity of systems of delivery of public and social
The fact that the MAI extends the principle of national treatment to
subsidies and has left the area of government procurement of services
unresolved creates significant additional grounds for concern that it
could be a lever for privatization and commercialization of public and
We strongly urge the committee to make a thorough study of this issue.
In our view, the MAI should contain a crystal clear general exclusion
for public and social services.
C. THE MAI AND CULTURE
The fundamental principle of national treatment in the MAI and the
inclusion of subsidies would rule out as "discriminatory" most existing
forms of government support for Canadian culture, including Canadian
content provisions and support for Canadian-based cultural industries and
artists. While the Canadian government has said that a general
reservation will be negotiated, it is far from clear that this will be
either possible or adequate.
The Committee should insist that culture be excluded from the agreement.
D. THE MAI AND PUBLIC ENTERPRISES
While the MAI does allow for public enterprises, bracketed text provides
that "monopolies" should not be allowed to cross-subsidize so as to
artificially support services which compete with other providers, and
should act "solely in accordance with commercial considerations" in
purchase or sale of monopoly good or service. This language would provide
foreign companies greater leverage in trying to break into areas of the
market which have traditionally been served by public enterprises.
The principles of National Treatment and Most Favoured Nation would
explicitly apply to privatization and subsequent transactions involving
privatized assets (i.e. share sales could not be restricted to nationals.
Bracketed language would either prohibit special share holding
arrangements such as "golden shares" or privatization via a sale to
employees - or, alternatively, would explicitly allow governments to
ensure some continuing control of privatized assets. This is still an
actively contested issue.
NAFTA (Annex I) reserved the right of Canadian governments to prohibit or
limit foreign purchases of shares when a public enterprise is privatized,
and to require that the boards of directors and senior management of
privatized companies be Canadian citizens. Limits on foreign ownership of
Air Canada and Petro-Canada shares (25%) and other privatized Crown
corporations were grandfathered. It appears that similar reservations
have been filed for the MAI, though this would still limit options in the
case of privatization.
The MAI should ensure that governments can determine the future ownership
structure of privatized enterprises, and retain the right to bring such
enterprises back under regulation or public ownership should circumstances
IV Labour and Environmental Rights and Standards
As noted above, the major thrust of the MAI is to prohibit or limit
government regulation of foreign investment. The agreement as a whole is
not intended to provide a basis for setting and enforcing standards in a
world in which capital is highly mobile.
That said, the need for a "positive" dimension has been recognised to a
very limited degree in the draft MAI. There is broad agreement that the
preamble should speak to positive goals with respect to labour and
environmental issues; that a clause should provide that health, safety,
environment, and labour standards not be lowered in order to attract an
investment, and that the OECD Guidelines for Multinational Enterprises
should be associated with the MAI. However, there is no unanimity on
these issues, and there is disagreement on whether a commitment not to
lower standards should be enforceable or should simply lead to
The position of the Trade Union Advisory Committee to the OECD and the
CLC with respect to labour issues is as follows.
The preamble to the MAI - which is of some limited legal importance in
terms of providing an interpretative context - should commit governments
to protecting, enhancing, and enforcing basic workers' rights as defined
in the core conventions of the International Labour Organization. Basic
worker's rights include the right to free collective bargaining, freedom
of association and non discrimination in employment. Such a declaration
would commit governments to respecting a basic floor of internationally
agreed labour rights.
It should be stressed that a commitment to respect workers' rights does
not in any sense mean that wages or standards would or should be equalized
between countries. Rather, countries should commit themselves to allowing
free trade unions to exist and to collectively bargain with employers in
order to negotiate wages and working conditions.
The preamble should also speak to the importance of the existing OECD
Guidelines for Multinational Enterprises - a long-standing set of positive
provisions relating to both the responsibilities of multinational
corporations to respect labour rights and environmental standards, and
compliance with government policies in areas such as taxation. The OECD
Guidelines are a not legally binding but they are internationally agreed
upon and periodically revised "code of conduct" for transnational
corporations. As such, they have moral weight. Existing OECD procedures
allow for complaints to be made to national governments regarding
adherence to the standards, under the overall guidance of an OECD
Committee which has regular input from employers and trade unions.
The text of the MAI should commit member countries to set up National
Contact Points to implement the Guidelines. The role of such contact
points is to promote the Guidelines and to receive and investigate
complaints that the Guidelines may not have been observed. The
incorporation of the Guidelines within the MAI would give them more
prominence and more attention, and would very modestly bring some balance
to a very unbalanced agreement. (It should be noted that a Canadian
Contact Point does currently exist.)
The text of the MAI should also incorporate a clause which would prohibit
governments from lowering domestic labour and environmental standards or
violating internationally agreed, core labour rights in order to attract
a foreign investment. This clause should cover health and safety and
environmental standards, as well as domestic labour standards and core
labour rights. It should provide that such standards should not be waived
or derogated from in order to attract a foreign investment. The clause
should be binding and subject to dispute settlement.
We urge the committee to recommend that the government of Canada support
strong and binding language with respect to labour rights and standards
and environmental standards.
This brief has outlined the CLC's general and specific grounds of concern
regarding the MAI. We believe that there is no need for this agreement,
and that any future international agreement on investment issues should be
much more balanced, and should be negotiated in a different forum.
The MAI would have very major, and still largely unknown, implications for
future government policies. The agreement provides significant new rights
for foreign investors and transnational corporations, including the right
to directly challenge government policies before binding international
tribunals. It is imperative that this committee commission research and
solicit wide input to determine the impact of this agreement before any
final text is concluded, and before it is too late to make substantial
changes to the text.
It is also imperative that this committee clearly set out recommendations
as to the negotiating position of the Canadian government. We urge the
committee to press for preservation of current policies which are needed
to support job creation, a clear exclusion for public and social services,
and for strong environmental and labour rights and standards provisions.
This document is respectfully submitted on behalf of the Canadian Labour
FOREIGN INVESTMENT FLOWS ($ Billion)
| ||In Canada||By Canadians, Outside Canada||Net Outflow|
|1993||6.1 ||-7.6 ||-1.5|
|1994||11.6 ||-12.5 ||-0.9|
|1995||14.8 ||-15.3 ||-0.5|
|1996||8.7 ||-11.6 ||-2.9|
|PORTFOLIO INVESTMENT IN STOCKS|
| ||In Canada||By Canadians, Outside Canada||Net Outflow
||total Net Outflow||Outflow - % Total Business Investment in Canada|
|1993||12.1 ||-12.8 ||-0.7 ||-2.2 ||3.1%|
|1994||6.4 ||-9.3 ||-2.9 ||-3.8 ||5.0%|
|1995||-4.2 ||-6.2 ||-10.4||-10.9||13.9%|
Source: Statistics Canada, Canadian Economic Observer, Oct. 1997,
Table 17 and Table 1
|1996||8.3 ||-16.6 ||-8.3 ||-11.2||13.9%|
TOTAL FOREIGN DIRECT INVESTMENT STOCK
AS A SHARE OF G.D.P.
| ||DIRECT FOREIGN INVESTMENT IN CANADA
||CANADIAN FOREIGN DIRECT INVESTMENT|
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