FIPA agreement with China: What's really in it for Canada?

The secrecy shrouding the much-delayed Foreign Investment Promotion and Protection Agreement (FIPA) with China makes it hard for experts, let alone average Canadians, to figure out what benefits this country will see from the deal.

While reporting on Prime Minister Stephen Harper for the first time, during his visit to China in early 2012, I wrote a column with the headline Great Glorious and Always Correct, which began: "If Stephen Harper ever gets tired of being Canada's Prime Minister, he might like to consider a second career in China – he'd fit right in."

Used to a degree of give and take with previous prime ministers on the road, I had been struck by Harper's similarity to a Chinese official surrounded by a servile entourage, and by the transformation of the parliamentary press gallery into a steno pool.

"The 'press availability' consists of six journalists asking their prepared questions in turn, each receiving a prepared answer which has been carefully redacted to give as little information as possible, paint as rosy a picture as possible, and claim as much credit as possible," I wrote. "When Chinese officials discuss their own wise and far-seeing policies, it's customary to describe the Communist Party of China as Great, Glorious, and Always Correct. It's a phrase Harper might consider borrowing."

I pointed out how, having spent a total of less than a week in China (including his first visit in 2009), Harper claimed to have:

Developed new ways of dealing with his Chinese counterparts that had eluded his weak and foolish predecessors.
Negotiated an agreement on FIPA, which those same predecessors had tried and failed to negotiate for two decades.
To have wangled a couple of pandas where previous panda-seeking prime ministers had always been denied.

The pandas duly arrived in Toronto, and have been happily munching on gourmet bamboo and delighting zoo visitors ever since. But the Foreign Investment agreement, known as FIPA, quickly disappeared from view.

The government revealed the text of the FIPA agreement and signed it in Vladivostok not long after the Beijing trip, and gave a briefing to the parliamentary trade committee for one single hour in October 2012. Then the cone of silence descended.

'It is hard to understand why (FIPA) has been shrouded in secrecy, why it was not ratified for almost two years, and why there has been no attempt to answer questions with anything much beyond breezy assurances that it is a good thing.'

That is, until last week, when two great Canadian mysteries were resolved within days of each other.

On Tuesday, with the pomp of a press conference appropriate to a glorious prime ministerial achievement, Harper announced the discovery in the Arctic of the wreckage of one of the two ships of the Franklin expedition, which went missing while searching for the Northwest Passage in 1846.

Then late Friday afternoon, the witching hour favoured by spinmeisters with stealthy announcements they hope everyone will forget by Monday, a press release revealed that the agreement with China, mysteriously unratified for almost two years, has been approved by cabinet. It goes into effect Oct. 1.

Critics of the agreement, such as Gus Van Harten, an Osgoode Hall law professor who has written two books on investment treaties, raise several key objections:

Canadian governments are locked in for a generation. If Canada finds the deal unsatisfactory, it cannot be cancelled completely for 31 years.
China benefits much more than Canada, because of a clause allowing existing restrictions in each country to stay in place. Chinese companies get to play on a relatively level field in Canada, while maintaining wildly arbitrary practices and rules for Canadian companies in China.
Chinese companies will be able to seek redress against any laws passed by any level of government in Canada which threaten their profits. Australia has decided not to enter FIPA agreements specifically because they allow powerful corporations to challenge legislation on social, environmental and economic issues. Chinese companies investing heavily in Canadian energy will be able seek billions in compensation if their projects are hampered by provincial laws on issues such as environmental concerns or First Nations rights, for example.
Cases will be decided by a panel of professional arbitrators, and may be kept secret at the discretion of the sued party. This extraordinary provision reflects an aversion to transparency and public debate common to the Harper cabinet and the Chinese politburo.
Differences between FIPA and the North American Free Trade Agreement may offer intriguing loopholes for American lawyers to argue for equal treatment under the principle of Most Favoured Nation.

In contrast, others such as Matthew Kronby, a lawyer specializing in international trade and investment who worked for the federal government's trade law bureau for 15 years before going into private practice, dismiss these fears as overblown.

One objection raised by critics of FIPA is that Chinese companies investing heavily in Canadian energy will be able seek billions in compensation if their projects are hampered by provincial laws on issues such as environmental concerns or First Nations rights.

When details of the treaty were released in 2012, Kronby wrote in the Globe and Mail that evidence from agreements that China and Canada each have with other countries supports the government view that FIPA is a virtuous agreement which offers protection to Canadian investors in China, and Chinese investors in Canada.

Most Canadians lack the legal education needed to judge who is right on the finer points of a complex document, Van Harten or Kronby, but they have reason to doubt the good faith of a government which has done everything in its power to prevent informed debate both in parliament and among citizens.

If the agreement is indeed an important step forward for Canada's relationship with China, it is hard to understand why it has been shrouded in secrecy, why it was not ratified for almost two years, and why there has been no attempt to answer questions with anything much beyond breezy assurances that it is a good thing.

If on the other hand, there are serious flaws in FIPA, future Canadian governments will have another reason to take a leaf from China's playbook.

When trying to get their way, Chinese diplomats often invoke "The Century of Humiliation" and "Unequal Treaties," referring to the defeats, occupations, and one-sided agreements imposed by foreign powers, beginning with the first Opium War of 1839-42.

The 31-year lock-in of FIPA is short of a century, but Chinese negotiators should not be surprised if Canadian diplomats start showing up with complaints of their own about "Unequal Treaties."

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If you're confused about the name and acronyms FIPA and FIPPA, that's understandable. The federal government has many Foreign Investment Promotion and Protection Agreements with various countries, and although the name has two Ps, the acronym doesn't (FIPA).

The government of Ontario has the Freedom of Information and Protection of Privacy Act, with two Ps in the name and acronym (FIPPA).

Both acts are related to protection and privacy, but the similar names may lead to confusion rather than clarity.