The Trade Ministries of Canada and France dropped the buck last week when they failed to conclude the Multilateral Agreement on Investment (MAI). If wiser heads had prevailed, the future of trading nations like ours would have been brighter.
The major provisions of the treaty need no defence. They are simply common sense rules of fairness. The pact would have codified a hodgepodge of 1,600 agreements now in place between dozens of countries that basically say the same thing:
- Foreign and domestic investors in the signing countries will be subject to the same set of rules.
- The signing countries will not discriminate between foreign investors.
- Investors who may have received unfair treatment will have recourse to impartial and binding arbitration to settle the dispute.
These principles, already entrenched in existing and successful treaties like NAFTA, offer protection to investors from the arbitrary and capricious behaviour of national governments. Remember when Ottawa imposed the National Energy Policy in the 1970s, and the mass exodus of oil drilling companies from Canada? MAI puts a stop to that sort of foolishness.
Many of our immigrant grandparents left the old country in part because their assets had no protection. They sewed valuables into their clothing, because they never knew when the Cossacks would ride over the hill and pillage their possessions. MAI reins in the modern Cossacks, rogue governments which confiscate or attach investors’ resources.
As such, it reduces the power of national governments. That’s why MAI became a lightning rod for Canadian nationalists still smarting from their failure to defeat NAFTA. They repeated the same arguments. Our education and health care systems will be compromised. Environmental protection will collapse. Wages will fall to the lowest common denominator. Manufacturing plants will head for Third World countries. "MAI will lead to fascism," warned one fulminator.
None of these things happened under NAFTA, and none of them would have under MAI. Sidebars to the agreement provide sufficient hedges against any efforts to disembowel national policies.
Fears of income collapse for Canadians in a standardized global marketplace ignore the facts. The average worker in undeveloped countries earns a small fraction of our wages, but the average worker in Canada is many times more skilled and productive. The net effect of erasing economic borders means more specialization and efficiency. We do what we do best, and let workers in other countries produce the goods and services when they can beat us for price or quality. Letting economies play to their strengths means, over time, increased standards of living for everyone.
We also heard a lot of guff about the power of malevolent multinational corporations under MAI. This argument is overcooked. Does buying a Volvo or a stereo from Phillips mean that we fall prey to dark forces in Sweden and the Netherlands? Under free trading arrangements, the multinationals compete vigorously against each other as well as the thousands of smaller companies always waiting in the wings.
Canada is a trading nation. Thousands of jobs rely on the integrity of contracts protected by the rule of law. Almost $200 billion of our business assets are invested in other countries, even more than others have chosen to invest here. MAI reduces the risk that unwise national governments can compromise their people’s welfare by confiscating those investments, whether here or abroad.
Negotiations failed because Canada and France insisted on nationalistic protection for cultural industries. The fear that our culture cannot stand on its own in the marketplace reflects a view based on weakness and pessimism.
Canada won’t collapse without MAI. But we’re giving up a chance to make it a better place to live, work and invest.