Many concerns have arisen about Canada’s pending Foreign Investment Promotion and Protection Agreement (FIPA) deal with China. The deal, which could be legally ratified any time now, is advertised as creating greater investment security for Chinese investors in Canada and also for Canadian investors in China. Harper has also defended the deal on the grounds of potential job creation.
More prevalent than news of the actual agreement, however, is the controversy which has developed around it. From the exact creation of the agreement to the claims made about its benefit, disagreement with and opposition to the agreement are stealing the stage.
In search of clarity, Arthur communicated with Trent Economics Professor (and Department Chair) Byron Lew and asked about his thoughts on the matter.
In response to Harper’s claim that this deal could create jobs, Lew told us, “To the extent that there might be more investment by Canadian firms in China, that could create jobs in the long run. The impact of Chinese investment in Canada would be much more limited in potential jobs in Canada.” However, that’s not to say that there is no potential for Canadian jobs.
Lew went on to explain, “The larger, less certain, implication is whether Canadian firms could expand by investing in China. The jobs that might result from that would be higher income skilled jobs for professionals, and they would more likely be in B.C, Ontario and Quebec because they have larger populations and skilled jobs are more concentrated there.”
Mixed in with talk about this trade deal is the conversation about China’s bid to take over Calgary-based company, Nexen. Many question if, with FIPA on the table, Canada can refuse such a large take over. From Lew’s perspective, “This agreement puts Chinese investors in Canada, including the Chinese government, on equal footing with Canadian investors. So laws that apply to Canadians will apply to Chinese investors. The Canadian government is agreeing not to place restrictions on Chinese investors that it would not place on Canadian investors.”
Furthermore, “Canada could not block the takeover simply because it is a Chinese company that is making the purchase. They can block it for any reason they might use to block a Canadian take over of another Canadian company.”
In concluding comments Lew told us, “China is one of Canada’s largest trading partners. Closer ties with China will benefit both countries. This agreement is one example of a closer relation.”
In response to concerns about China’s government being less transparent than Canadian Government (and Chinese law would apply to Canadians investing in China just as Canadian law applies to Chinese investment here) Lew said, “I personally do not agree. The incremental benefit of additional protection for Canadian investment in China is more valuable to us than is the reciprocal benefit to Chinese investors simply because of the greater uncertainty facing Canadian investors in China without this agreement.”
He also noted that “… the oil company deal [with Nexen] is a sideshow. It is important to China to get into the oil patch, but won’t make much difference to us whether it is owned by Canadians, Americans, or Chinese. But it is a ‘hostage’ that Canada can use to make sure we get equal treatment in China. If China sets arbitrary rules for Canadian investment in China, we can retaliate against their large oil investment here, an investment they would be keen to protect.”
A second look a the controversy surrounding this deal, having attained some semblance of clarity through conversation with Lew, revealed a lack of balance in the arguments against the FIPA. Much of the reported anger against the Bill come from the “secrecy” in which it was created and the lack of conversation currently happening in Parliament.
The largest argument against the Bill itself is how the difference in Canadian and Chinese Governments leaves room for a big difference in how Canadian investors are treated in China from how Chinese investors are treated in Canada. Lew addressed this though, that from his personal stance the risk was worth it.
Another concern about the agreement’s contents is that it would allow Chinese investors who feel wronged to sue the Canadian Government in private tribunals. While the North American Free Trade Agreement requires that this kind of legal action be made public knowledge, FIPA does not. This is a concern as it is not in line with general Canadian practice but perhaps could be negotiated to make the agreement more agreeable for opposing groups. That would all come back to discussion in Parliament, Senate and back to conversation between Canada and China.
While the prevailing concerns about our Conservative majority acting in secrecy are valid and need to be addressed, is it a valid reason to squash this potentially beneficial agreement?