The Foreign Investment Promotion and Protection Agreement
What does this scantily discussed agreement mean for Canada
Contributor: derek cameron – contributor
On Oct. 1, Canada and China signed the Foreign Investment Promotion and Protection agreement (FIPA). The agreement has been a thorn in the side of Canadian politics since Stephen Harper decided trade relations between China and Canada should be further pursued. And, as per the fine print, the FIPA agreement will last “at least 15 years.”
,In 2012, FIPA, originally signed privately in Russia, hit a snag when the public, led by the LeadNow Campaign, decried it as “undemocratic and exploitive to Canada.”
These claims are, to a large extent, true.
Not once was the FIPA agreement debated in parliament prior to 2014. And even in 2014, when it was tabled for ratification, the introduction of the agreement was not debated. The only debate was on its impending ratification after the fact.
As far as being largely exploitative, Chinese foreign investment in Canada far outweighs the investment of Canada in Chinese ventures. Alone, this does not mean much.
The concerns of exploitation largely stem from a distinction between companies already established in Canada and China and those that look to establish themselves in the future.
Right now, China has $55 billion invested in Canada while Canada has $4.2 billion invested in China. Under Article 6 of FIPA, these investments will be treated as if the companies were native to the countries; a Chinese company in Canada will be viewed as Canadian and vice versa. This is incredible news for companies already established, as their expansion will be easier than ever. Unfortunately, under FIPA, companies looking to establish will be treated only as a “foreign, highly favoured investor,” according to article 5 of the agreement.
Whereas China has a broad base of investment to continue expanding, Canada has a relatively small base to expand from. This means that China, with its high levels of established investment, will be allowed to expand quickly and, if it wishes to execute hostile takeovers, now, by law, the Government of Canada will not be allowed to interfere. However, in China, our relatively small-established infrastructure will be allowed this same provision.
Article 8 of FIPA states that, in the case of “sale of government equity,” the country can impose “nationality requirements,” meaning the sale of any company owned by the government of the country can be restricted to native buyers. In China, “30 per cent of the economy is state-owned,” based on the latest numbers from the government of China. In Canada, however, this number is 5 per cent. Canada is cut off from 30 per cent of the Chinese economy and China is only cut off from 5 per cent of the Canadian economy; again the equality of the agreement is called into question.
The FIPA agreement is crafted in such a way that it allows certain provisions to Canada to entice us into signing and maintaining the agreement. Unfortunately, the agreement is also crafted in a way that will give China tools to control much more of our economy than Canada will ever be allowed to gain in China. And, if exploited, Canada has to wait 15 years to leave the agreement.