FIPA’s worst critics, speaking anonymously for the PM

Too bad there wasn’t some sort of treaty to protect Canadian investors in China … hey waitaminnit —

by Paul Wells

John Ivison’s latest column is mostly about the F-35 F-18 replacement  F-35, but it includes a bit about the CNOOC-Nexen deal as well.

“The public seems to appreciate that the takeover of a relatively minor player, for a whopping premium, at a particularly ticklish time in the Canada-China trade relationship was a prudent move. The government will now use this as a bargaining chip in the attempt to strike a more reciprocal rapport with the Chinese, as we move toward exploratory talks on a broader free trade agreement.”

The notion that CNOOxen is a “bargaining chip” is one we’ve seen fairly frequently lately. From the Globe:

“Senior federal government officials told The Globe and Mail that Prime Minister Stephen Harper has been increasingly concerned with how Canada might gain more bargaining power to open up markets for Canadian companies in China. The Conservatives, they say, feel that the two-way investment relationship is overwhelmingly in Beijing’s favour right now.”

And from, well the Globe:

“People close to the federal government said the idea of gaining more leverage with foreign governments came to be a key factor in Mr. Harper’s thinking.”

It’s too bad the government had to use a Chinese takeover of a Canadian energy firm as the long-sought bargaining chip. It’s too bad the government didn’t have some sort of treaty that could protect Canadian investors in China hey waitaminnit

For indeed the government has spent very nearly all of Calendar Year 2012 proclaiming it has just such a treaty in hand: the notorious Canada-China Foreign Investment Protection and Promotion Agreement, or FIPA. 

“The Government of Canada is committed to creating the right conditions for Canadian businesses to compete internationally,” the above-linked news release says. “An important part of this equation is ensuring that two-way investment between Canada and other countries can take place in a stable, secure manner… By ensuring greater protection against discriminatory and arbitrary practices, and enhancing predictability of a market’s policy framework, a FIPA allows investors to invest with greater confidence.”

Well, why play chicken with Chinese takeovers if the FIPA gives what’s needed? Because, as some of us have pointed out, it probably doesn’t. Most of the criticism of the Canada-China FIPA, especially from Canadian nationalist groups, has been around the notion that it’s a Trojan-horse thingie designed to give the Chinese nefarious and irrevocable access to Canada’s precious bodily fluids. But what stood out to me was the very shaky market access protection it provides prospective Canadian investors in China. The government’s once-removed off-the-record rhetoric this week suggests that analysis was not mine alone.

There’s a little mystery that persists with the FIPA. It’s been subject to ratification by order-in-council decree since 21 sitting days after it was tabled in the Commons — so, for several weeks now. But the Harper government hasn’t ratified it. The government press release I linked above suggests a plausible and fairly innocent reason: it suggests Canada will ratify the FIPA once “the ratification process” in China has completed. So it’s possible that there’s no point ratifying FIPA now until the Chinese do.

But the notion that we are waiting on the Chinese authorities to ratify the treaty is a little embarrassing too, because it suggests we’re not the ones with leverage.

I want to be clear that I’m not endorsing most of the FIPA apocalypse chatter that’s coming from the Council of Canadians’ corner of the chessboard. I don’t see the FIPA as a serious surrender of Canadian sovereignty. But neither do I see it as an effective tool for forcing any surrender of Chinese sovereignty, even one of the sort that would force the Chinese to act like most of Canadian businesses’ other investment destinations. This treaty seems like half a loaf. And again, not only to me.




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FIPA’s worst critics, speaking anonymously for the PM

  1. The clock ran out with Harper an Co. looking like a deer on the highway at night. Looking forward to the day when Diane Findlay rises in the HOC to announce tweaks to the Temporary Foreign Workers program — Mandarin and ‘deference to authority’ will be added to the list of technical skills in short supply.

  2. Aew points. Ivison states:

    The public seems to appreciate that the takeover of a relatively minor player, for a whopping premium
    If he was to check the stock price for CNOOC, I believe the takeover price of $27.50 is at or below it’s 2008 peak. In that context, not so “whopping”.
    It should be also noted that in the oilpatch, many of the “Captains of Industry” are the ones that pushed Harper into this CNOOC now, not Cnooc later. So, despite what some academics suggest, those that are expanding the oil sands and have been active players, don’t see the lack of capital from China being an issue (they can always do joint ventures up to 49% – it’s the control and hence the oiperator that is the issue.
    I wondered about that FIPA issue that you highlighted some time ago. It did seem one sided. I don’t recall, however, what Manley of the Canadian Council of Chief Executives had to say about the deal. They or similar industry groups would be the ones on the front line with the most at stake.

    • Are you suggesting there’s some reason to believe that Manley and the CCoCE might ever seriously consider themselves offside with Harper?

      • Nope. Just don’t recall any opinion from him. If he endorses, it would seem to me the issues identified with the FIPA are secondary.

          • Thx. Will attempt to read without zzzzzzzzzzzzz

          • “Myth: Canada would never have signed a deal like this with any other country.

            Reality:
            The Canada-China FIPA is consistent with every one of the 24 foreign
            investment treaties that Canada has implemented with other countries.
            (Another six have been negotiated but have yet to take effect.”

            It appears Manley doesn’t buy like PW’s half loaf theory.

  3. Canada wants a free trade deal with India so our government agrees to reward India for breaking the Nuclear Non Proliferation Treaty and agrees to sell nuclear materials.

    Canada wants a free trade deal with China and our government offers up ownership to Petro China (CNOOC) of our stategic oil and gas sector.

    Is our government naive or negligent?

  4. ‘” But neither do I see it as an effective tool for forcing any surrender of Chinese sovereignty …”

    Chinese don’t have same laws as Canada does, it is not possible for ChiComs to grant the same access to China that Canada allows foreigners. Chinese don’t have level of protection – namely rule of law – that we have in Canada so Harper might as well demand unicorns in future negotiations.

    Also, Chinese have completely different ethics and morals than we have here and there are enormous differences in how businesses behave. Just one example, it is considered clever to copy your competitors well selling products and sell it yourself to make money. North American companies are struggling to adapt to China market and I have been reading articles about how American companies are either relocating their plants to other third world countries or they are bringing their branch operations back to US. Fracking, cheap energy, in the US is making it more attractive to stay in Amreica.

    Canada’s downtrodden and working classes have benefitted most from trade with China because cost of living has been reduced. Keep trading with China and other countries but Harper should drop his self centred and quixotic belief that he is capable of forcing foreign countries to conform to our standards.

    • No idea why people are voting this down. Seems entirely rational and reasonable. Are you feeling ok today TA? Of course i am assuming you know something about the culture in China.

  5. Carter also wrote: “Canada has taken a very aggressive approach on
    dispute resolution and procedure in its FIPAs, notably surrounding
    public access and allowances for amici in the arbitration process. The
    procedural provisions of China’s investment treaties are patently broad,
    and do not afford the same level of transparency.”

    Here again, the language in the final treaty is very restrictive.
    “The treaty does not require that arbitration of disputes be done in a
    manner that is open to the media and the public,” Luke Eric Peterson
    told me. He’s a reporter in New York City with this investment arbitration newsletter. ”This
    is a huge concern,” he added — especially because the arbitration
    process is designed to supplant the previous forum for such disputes,
    which is the courts. “Journalists that want to cover this beat in future
    may be deeply chagrined to discover that they are barred from
    arbitration hearings and may not be able to access the ‘court file’
    related to major disputes — unless the states decide that it is in the
    ‘public interest’ to allow such access.”

    So when massive commercial disputes are arbitrated under this FIPA, they will be arbitrated out of public view unless both Canada and China agree. Again, this is a departure from Canadian practice and an embrace of Chinese practice.

    Peterson’s bottom line: “It will be interesting to see if this is
    spun as an agreement that ‘liberalizes’ or opens markets for Canadians.
    If it is, that will not be true.”

    Good catch Wells. If you’re on the right track[ or i am following properly] can we say a pattern can be discerned right about now?

    Peterson’s bottom line has predictably come true, and if you factor in Harper’s move on Nexen as an attempt to belatedly put the arm on the Chinese,[ gain some leverage within China] it starts to make sense.The thing is it makes no sense in terms of forcing open China’s markets. At best result it may keep China’s purchases in Canada under a majority ownership threshold. [ surely a good thing] As for leverage inside China – Ivison’s been smoking something…and everyone knows how gullable the Globe is when there’s a secret anonymous source around.

    It looks suspiciously like we never had any real leverage in China all along. [wow! Surprise!] Harper knew that but is so desperate to stitch together election platform 15, he has tried to spin “us” on this.[ clearly he isn't fooling anyone in the know within China] That’s so outrageous it reads like a conspiracy theory. If it’s true it’ll go down as a play to equal Mulroney’s infamous rolling of the dice metaphor. We all know how that ended.
    But since we do need to broaden our trade links i wonder how someone else might have played this? Harper’s genius is he always seems to have cover for his more outrageous moves and never really seems to pay the price for it. Of course someone else might just see that as being prudent and forward thinking. It mostly seems like an impossible task to separate domestic politics with good overall policy making, no matter who’s in charge. But in Harper’s case it always seems to start, and end,with the domestic agenda.

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