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<html> <head> <meta name="Generator" content="Corel WordPerfect 8"> <title>MR. MARCHI - ADDRESS TO THE STANDING COMMITTEE ON FOREIGN AFFAIRSAND INTERNATIONAL TRADE'THE MULTILATERAL AGREEMENT ON INVESTMENT' - OTTAWA, ONTARIO</title> </head> <body text="#000000" link="#0000ff" vlink="#551a8b" alink="#ff0000" bgcolor="#c0c0c0"> 97/48 CHECK AGAINST DELIVERY NOTES FOR AN ADDRESS BY THE HONOURABLE SERGIO MARCHI MINISTER FOR INTERNATIONAL TRADE TO THE STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE "THE MULTILATERAL AGREEMENT ON INVESTMENT" OTTAWA, Ontario November 4, 1997 This document is also available on the Department's Internet site: http://www.dfait-maeci.gc.ca Colleagues: The Multilateral Agreement on Investment -- the MAI -- is about establishing rules to ensure that international investment and trade continue to mean jobs and prosperity for Canada. Canada does much better when transparent and enforceable rules -- and not the whim of more powerful nations -- govern the way business is done. The MAI negotiations are set to finish in April 1998, but already, some groups are criticizing the potential agreement, using this deal on international investment to attack free trade, globalization, open borders and the participation of foreign-owned companies in our economy. We have to listen to these voices but we must also weigh them against the Canadian reality. We are a nation that relies heavily on trade. Our future well-being -- and that of our young people -- will be tied to Canada's ability to compete in global markets. And we will only be able to compete if there are clear rules that encourage foreigners to invest in our country and that protect Canadians -- both corporate investors and individuals like you and me -- when they invest abroad. Through initiatives like the MAI, this government is looking forward, with a vision, to secure our country's economic future. The MAI debate must focus on the facts and not the myths. This is why I asked your Committee to look at this issue, and why I appreciate the chance to provide you with my views. More importantly, I look forward to the advice the Committee will be able to provide the Government after you hear the views of other Canadians that will come before you. Let me begin by answering three basic questions on the MAI: what it is, why we need it, and what are Canada's objectives in the negotiations. What is the MAI? Canada is one of the 29 countries at the OECD [Organization for Economic Co-operation and Development] that hope that this agreement will establish multilateral rules to promote a secure and predictable framework for global investment. The MAI has two overriding principles: non-discrimination between national and foreign investors, and fair and equitable compensation from governments in the case of expropriation. The current patchwork of international rules does not serve Canada's interests: incredibly, there are over 1300 bilateral investment agreements worldwide.<a href="#N_1_">(1)</a> Canada itself has concluded agreements with 24 countries and is negotiating with another 33. Today, the total value of foreign direct investment is estimated at $3 trillion,<a href="#N_2_">(2)</a> and investment, like trade, is increasingly important to the global economy. Canada, in particular, is reliant on international trade and investment for its economic well-being; it is clearly in our national interest to establish one set of multilateral rules that will promote investment in Canada and protect Canadian investments abroad. I can also tell you what the MAI is not: it is not a charter of rights for multinational companies, nor does it spell the end of Canada's sovereignty. We will retain the right to enact laws in all areas -- social policy, health care, corporate rules, labour and the environment -- and to have these laws apply equally to foreign-owned and domestic companies. We will still be able to impose restrictions on foreign investment in sectors -- like culture, health care and education -- that we believe require a uniquely Canadian approach. We will also be able to impose new ones when privatizing Crown corporations. As in the NAFTA [North American Free Trade Agreement], Canada will not accept any general commitment to freeze (the so-called "standstill") or phase-out ("rollback") restrictions on foreign investment. Canada will retain the flexibility to carry out public policy in core areas of national interest. The MAI would also not force Canada to lower its labour or environment standards. In fact, it is intended to keep other countries from lowering theirs to attract investment away from Canada. Nor would the MAI remove regulations requiring foreign companies operating in Canada to hire Canadians first. The Government will continue to be able to link the receipt of investment incentives to conditions like job creation or research and development, and, on the international front, Canada will still be free to impose UN economic sanctions like those used to end apartheid in South Africa. Finally, the MAI would not make it easier for foreign-owned companies to sue the Government. Under Canadian law, all companies -- whether domestic or foreign-owned -- can already submit claims to Canadian courts if they believe that they have been unfairly treated by the Government. Through the NAFTA, and our bilateral investment agreements, investor-state arbitration already exists in Canada -- a similar transparent system in the MAI would only improve the protection of Canadian investors abroad. Let me turn briefly to the second question, namely, why we need an MAI. The answer lies in the importance of international trade and investment to Canada. Why we need an MAI Trade and investment are the twin engines of Canada's economic future. The Throne Speech clearly identified the Government's commitment to improve Canada's international economic performance by expanding our trade base and making Canada an attractive place for global investment. With one in three Canadian jobs currently tied to trade, any other policy would be irresponsible. Canada is heavily reliant on foreign direct investment for capital. This foreign investment also plays a critical role in the Canadian economy: it creates jobs, brings in new technologies, and stimulates growth. In 1996, foreign investment in Canada amounted to $180 billion -- a twofold increase in 10 years.<a href="#N_3_">(3)</a> This is key, because as shown by Industry Canada and my department, $1 billion of new foreign direct investment in Canada creates an estimated 45 000 new jobs over five years.<a href="#N_4_">(4)</a> However, we cannot rest on our laurels. A recent report by KPMG showed that Canada is one of the most competitive places in the world in which to invest and do business.<a href="#N_5_">(5)</a> Yet, at the same time, the United Nations notes that our share of global investment has slipped from 8.7 per cent in 1985 to 4.3 per cent in 1995.<a href="#N_6_">(6)</a> Joining the right kind of MAI would reinforce Canada's attractiveness as a first-class destination for foreign investment, both today and in the future. Canadians are also increasingly active investors overseas. Our investment abroad totalled $171 billion in 1996, a 164 per cent increase in 10 years.<a href="#N_7_">(7)</a> This investment does many things: it provides better market access for Canadian companies, introduces them to new partners and technologies, allows them to grow, and creates new jobs here at home. An MAI that meets our interests would ensure protection for these investments -- both for big and small companies -- and for individual Canadians who invest abroad through their mutual funds, pension funds or RRSPs. Nor should we forget that by participating in these negotiations, Canada is ensuring that we shape the MAI to meet our best interests. Let us now examine these Canadian objectives. Canada's Objectives in the Negotiations Canada's participation in the MAI continues a proud tradition at the forefront of international rule-making. Given the importance of international trade to our economy, establishing rules and promoting freer trade makes sense. Canada was a founding member of the GATT [General Agreement on Tariffs and Trade], and its successor, the World Trade Organization [WTO]. Canada has been well served by the WTO global framework for trade in goods and services, and by our regional and bilateral trade arrangements. We now seek a similar framework for global rules on investment, starting with the MAI. The MAI negotiations started in September 1995. It is important that this Committee realized that a successful MAI would not turn Canada's current investment rules on their head. Canadian negotiators have been tasked with simply replicating in an MAI the investment rules and exemptions Canada secured in the NAFTA. The MAI rules would not be new; they would be consistent with Canada's existing legislation and policy, namely: non-discriminatory treatment between foreign and domestic investors; that the expropriation of investment property be for a public purpose, be done fairly, and be accompanied by prompt and equitable compensation; and access to effective dispute settlement. Canada also hopes that these negotiations will help address issues such as the U.S. Helms-Burton Act. Canada, with the support of the European Union, has tabled proposals to curb unilateral, extraterritorial measures targeted to investment. 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. In this regard, the Committee knows that labour and the environment are shared jurisdictions; we are currently consulting with the provinces on this matter. We are also working with the other countries and with interested Canadians -- including non-governmental organizations -- to balance different viewpoints in a responsible fashion. I do not mean to be evasive, but at this stage, it would be premature for me to prejudge the results of these consultations. Clearly, however, the Government's preference is that the rules be as strong as possible. Finally, I want to emphasize that this Government will listen to the views of all Canadians. The MAI is not being negotiated in secret. Since assuming the portfolio of Minister for International Trade, I have made every effort to provide more information and ensure all views are heard. My Department is consulting closely with the provinces, the private sector and non-governmental organizations. Consultations have intensified, and this will continue. Canada supported the OECD releasing a draft working text of the MAI to non-governmental organizations. I am pleased to table this same text with you today. In addition, I have communicated directly with Canadians that have voiced concerns about the potential agreement, like the Council of Canadians, the Canadian Environmental Law Association, and the Canadian Labour Congress. In fact, these groups have already met our MAI negotiators. I have also sent briefing packages on the MAI to all MPs and Senators and made sure that my Opposition trade critics received briefings on the issue. Your Committee is now playing a vital role in ensuring that Parliament continue to reach out to all Canadians on the MAI. I can assure you that the Government will only sign a deal that serves Canada's national interests. The building blocks of the MAI are in place but the hard issues are now on the table. I look forward to hearing your views and responding to your concerns so that, together, we can make this agreement improve the economic prosperity and future of our country. I am confident that this is a common goal that we all share. Thank you. Endnotes <a name="N_1_">1. </a>1. United Nations Conference on Trade and Development (UNCTAD), World Investment Report 1997: Transnational Corporations, Market Structure and Competition Policy, United Nations Publication 1997, at xviii. <a name="N_2_">2. </a>2. United Nations Conference on Trade and Development (UNCTAD), World Investment Report 1997: Transnational Corporations, Market Structure and Competition Policy, United Nations Publication 1997, at xv. <a name="N_3_">3. </a>3. Statistics Canada, Canada's International Investment Position 1926 to 1996, 1997, at 48. <a name="N_4_">4. </a>4. Ross S. Preston and Haider M. Saiyed, The Impact of Foreign Direct Investment on Job Creation and Economic Growth: Evidence from the WEFA Canada Macro Economic Model, (study commissioned by Industry Canada and the Department of Foreign Affairs and International Trade), publication of the WEFA Group 1995. <a name="N_5_">5. </a>5. KPMG, The Competitive Alternative: A Comparison of Business Costs in Canada, Europe and the United States, KPMG Canada and Prospectus Inc., October 1997. <a name="N_6_">6. </a>6. United Nations Conference on Trade and Development (UNCTAD), World Investment Report: Transnational Corporations, Market Structure and Competition Policy, United Nations Publication 1997, at 313. <a name="N_7_">7. </a>7. Statistics Canada, Canada's International Investment Position 1926 to 1996, 1997, at 38. </body> </html>

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