IISD Statement to the House of Commons Standing Committee on International Trade

Our President-CEO Scott Vaughan presented to the House of Commons Standing Committee on International Trade on May 1, 2018, regarding a Canada-MERCOSUR free trade agreement.

Mr. Chair, thank you for inviting me. I’m pleased to share an initial perspective with this Committee regarding a possible Canada-MERCOSUR Free Trade Agreement.

This Committee’s work takes place at a moment of exceptional policy instability, not least around the fate of NAFTA. Globally, there is uncertainty with regards the WTO system. The slow emergence of China’s Belt and Road Initiative is likely to have important regional trade and investment effects: two of MERCOSUR’s largest countries—Brazil and Argentina—have joined this Initiative. Unilateral U.S. tariffs and other actions are being updated almost daily, while Canada is now listed on the 2018 USTR Intellectual Property Rights Priority Watch-List[1].

A Canada-MERCOSUR agreement should ... support many working families through sustainable forestry, sustainable fisheries, sustainable agriculture and other commodities of export interest, notably sustainable mining operations and their products in value chains.  

Given this context, we welcome work towards a possible Canada-MERCOSUR free trade agreement. MERCOSUR comprises over 300 million people. Among the strategic objectives of MERCOSUR are not simply the enhancement of trade and economic cooperation, but also the support of democratic governance and the rule of law. It’s important for Canada to diversify our trade relations and deepen our engagement with hemispheric partners.  

Details in trade negotiations matter; we encourage Global Affairs Canada to support transparency proactively, by engaging not only with industry but wider civil society organizations on an ongoing basis during the negotiations.  

We also welcome Canada’s support of progressive trade policy. I wanted to make four points briefly in this regard.

Environmental Goods and Services (EGS): Currently, the TPP and CETA agreements commit to deepening the liberalization of EGS, through both zero tariffs and the removal of non-tariff barriers. In recent years, green markets, broadly, are expanding, and the pace of green market uptake has accelerated since the 2015 Paris Climate Agreement. In 2017, estimates show that global investment in renewable energy was US$333.5 billion, once again surpassing global investment in conventional energy. The global EGS market is at US$ 866 billion per year, and some forecasts show it growing to USD$1.9 trillion by 2020. 

Given this growing market, it’s important that a Canada-MERCSOSUR environmental chapter carves out an ambitious group of environmental goods and services, for accelerated liberalization.  

Standards: A Canada-MERCOSUR chapter on sustainable development should also support sustainability standards, and amplify the example of CETA’s chapter on sustainable development and its inclusion of eco-labels and corporate social responsibility (CSR) standards. A Canada-MERCOSUR agreement should include not only clean-technology standards, but also a broad range of goods that support many working families through sustainable forestry, sustainable fisheries, sustainable agriculture and other commodities of export interest, notably sustainable mining operations and their products in value chains.  

IISD colleagues report on voluntary sustainability standards in various commodity markets, through the State of Sustainability Standards. We work with the World Economic Forum and others to examine how voluntary standards are aligning with the Sustainable Development Goals (SDGs), and how trade can support this alignment.

Gender: The December 2017 Buenos Aires Joint Declaration on Trade and Women’s Economic Empowerment, supported by 118 WTO member countries, is a positive step in supporting more women in trade. The challenge is implementation. The International Trade Centre continues to do good work in the area of e-commerce and women, and this can be one specific area in which a new agreement can make real headway.

Finally, Mr. Chair, Investment: No doubt the Committee is aware of the regional agreement on investment cooperation and facilitation within MERCOSUR.

Building on Brazil’s model developed in 2014, the regional agreement offers a new way to spur collaboration on investment and encourage investment flows. Instead of focusing on investment protection, its primary goal is to facilitate investment flows and cooperation. It sets up a system of dispute avoidance rather than adversarial dispute settlement through investor-state dispute settlement. As a last resort, it provides for state-state dispute settlement. This approach could also be followed in the Canada-MERCOSUR agreement.

Details in trade negotiations matter; we encourage Global Affairs Canada to support transparency proactively, by engaging not only with industry but wider civil society organizations on an ongoing basis during the negotiations. 

In addition, Canada could propose to build on the CSR provisions included in the MERCOSUR investment agreement, as well as the sustainable development chapter in CETA, to integrate more fully and comprehensively investor responsibilities.

Accountability of investors could also be enhanced by ensuring access to justice for individuals and communities harmed by investment projects in the home state courts of the investors. These steps would complement and support some of the steps the Canadian government has recently taken at the national level to hold its companies accountable abroad.

Finally, the Canada-Mercosur negotiations offer an opportunity to update and replace the outdated investment treaties in force between Canada and two MERCOSUR members (Argentina and Uruguay).

Scott Vaughan has been a Counsellor in the Secretariat of the World Trade Organization (WTO), head of economics and trade at the NAFTA Environment Commission, and Director of the Department of Sustainable Development at the Organization of American States (OAS).