The following is an excerpt from Yves Engler’s new book, House of Mirrors: Justin Trudeau’s Foreign Policy, released in March of this year by Black Rose Books.
Those who ‘own’ the economy wield substantial power over any government’s domestic policy and overwhelming control over foreign policy where there are few democratic checks and balances. Based on accumulated evidence there is little difference in this regard between Liberal and Conservative governments. Certainly, the Justin Trudeau regime has pushed corporate interests through various forums. They signed investor accords and expanded the Trade Commissioner Service (TCS) while demonstrating little interest in reining in corporate abuses and Export Development Canada. Trudeau empowered international investors by negotiating and signing Foreign Investment Promotion and Protection Agreements. FIPAs give corporations the right to sue governments — in private, investor-friendly tribunals — for pursuing policies that interfere with their profit making. As such, they undermine governments’ ability to democratically determine economic and ecological policy.
The Liberals signed FIPAs with Nigeria, Moldova and negotiated them with a half dozen more states. Following his participation in the November 2018 Africa Investment Forum, Parliamentary Secretary to the Minister of International Trade Omar Alghabra wrote: “To further help Canadian companies compete and succeed in this thriving region, the Canadian government has negotiated foreign investment promotion and protection agreements (FIPAs) with Benin, Burkina Faso, Cameroon, Ivory Coast, Guinea, Mali, Senegal and Tanzania. These agreements encourage increased bilateral investments between our countries by helping to reduce risk and by increasing investor confidence in our respective markets. We continue to advance FIPA negotiations with a number of other African countries.”
The “free trade” agreement the Liberals signed with the Ukraine included a FIPA style Investor State Dispute Settlement (ISDS) mechanism. Against the wishes of New Delhi, the Liberals pushed for an ISDS provision in the “free trade” accord it negotiated with India. A similar dynamic played out with the US-Mexico-Canada Accord. Donald Trump insisted on removing ISDS from NAFTA (Chapter 11) while the Liberals pushed for a “progressive” ISDS mechanism in the updated accord. The 2018 Comprehensive and Progressive Agreement for Trans-Pacific Partnership included an ISDS provision. The Liberals’ main addition to the accord with Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam was to add the word “progressive” to its name.
The Liberals finalized the Comprehensive Economic and Trade Agreement (CETA) with the European Union, which included a “progressive” ISDS provision. Freeland claimed CETA was the “most progressive free trade agreement in history” that would “advance environmental protections, transparent investment rules, workers rights and world-class public services.” Notwithstanding the over-the-top rhetoric, barely any of the 1,600 pages of text the previous Conservative government negotiated with the EU were altered in the final CETA accord. The agreement gives multinational corporations unprecedented rights to bid on public contracts to the detriment of provincial and municipal agencies’ ability to buy local and pursue other environmental and socially minded policies. It also extended patents, driving up pharmaceutical drug costs. Finally, environmental and labour provisions in the accord were not binding.
The Liberals’ bid to strengthen the World Trade Organization (WTO) reinforced international inequities. In October 2018 international trade minister Jim Carr created a coalition of 13 WTO members (EU, Japan, Australia, Brazil, Chile, Kenya, Mexico, Singapore, New Zealand, South Korea, Norway and Switzerland). The group met in Ottawa amidst trade tensions between the US and China and while the US president was criticizing the WTO. The aim of the initiative was to find an agreement on WTO reform that could later be brought to the institution’s broader membership. The spokesperson for the African Group, South Africa’s envoy to the WTO, Xavier Carim, criticized the Canadian-led scheme. “When we look at these proposals, we see them as making the imbalance that we have even worse,” said Carim. “They should make it difficult for developing countries to advance.” Carim said the African Group wanted greater policy space to industrialise and reforms to agricultural trade distortions.
Through the WTO the Liberals challenged EU restrictions on gene-edited crops. In July 2018 the European Court of Justice ruled that agricultural gene editing should be regulated under the EU’s genetically modified organisms (GMO) protocols. In response Canada, the US and 11 other countries criticized EU farm product regulations at the WTO. They claimed that exports with a low-level presence of gene-edited crops should not be restricted even if the product was unapproved in the recipient nation. Changing food at the molecular level, gene-editing is used to modify the flavour or texture of fruits. Big agricultural firms such as Monsanto/Bayer promote gene editing partly to tighten their grip over the food supply. But, there were unresolved questions about the long-term effects of gene-edited organisms on human health and the environment.
The Liberals took up big agriculture’s challenge to other European health and environmental legislation as well. A July 2019 Le Devoir story detailed Canadian efforts to weaken various EU regulations on pesticides and GMOs. The Liberals, for instance, pushed the EU to allow the herbicide 2,4-D, which was used on Canadian soybeans but classified as a probable carcinogen by the International Agency for Research on Cancer. Framing their effort as defending free trade, the Liberals effectively undercut environmental protections and the precautionary principle.
The Liberals also did little to weaken corporate tax avoidance. Often called “transfer pricing” or “trade misinvoicing”, multinational corporations artificially adjust the price of goods sold between their subsidiaries or partner companies in order for profits to end up in low (or no) tax jurisdictions while costs appear in high tax countries where they’re deducted from a company’s tax bill. Resource starved African governments lose tens of billions of dollars annually from “transfer pricing”.
Canadian mining companies often have subsidiaries in a multitude of locations, including well-known tax havens. In 2017, for instance, Toronto-based Barrick Gold had some 80 interlinked, but distinct, corporate entities sprinkled across the globe, including in the Bahamas and Cayman Islands. The aim was partly to lessen tax payments.
The Liberals have remained largely passive regarding reforms to the international corporate tax system. They don’t, for instance, appear to have engaged with the OECD’s Inclusive Framework “new practice notes” for countries dealing with tax avoidance/evasion in the mining industry.
But the Liberals did aid Canadian firms operating abroad by boosting the Trade Commissioner Service (TCS). In November 2018 they increased the Global Affairs run TCS’ budget by $184 million over five years. TCS had over 1,000 officials at Canadian embassies, high commissions and consulates in 160 cities.
‘Our business is helping Canadian business’ has long been the ethos driving TCS. From working with European colonial administrators in Africa a century ago to selling arms to Gulf monarchies bombing Yemen in 2019, TCS has been little troubled by ethical considerations. Barrick Gold, SNC Lavalin and other controversial Canadian firms have benefited from TCS services in recent years. TCS also aided the Canadian Association of Defence and Security Industries and Canadian weapons sellers.
TCS has promoted privatization in Africa. In September 2019 the CEO of the Canadian Council for Public-Private Partnerships, Mark Romoff, lauded TCS in a story describing how its representatives brought CPCS Ventures together with Zambia’s publicly owned power utility during the 2019 Africa Energy Forum in London. As a result, the Ottawa-based consulting firm—an aggressive proponent of Public-Private Partnerships in Africa—was awarded a $9.4 million contract by ZESCO to advise it on developing a 750-megawatt hydro power plant. Having TCS help set up the initial meeting with ZESCO “brought a lot of additional weight,” explained CPCS Ventures CEO Arif Mohiuddin. “If a trade commissioner who represents the Canadian government says, ‘I know this company, I know the work it does,’ it helps.”
Export Development Canada (EDC) is another pillar of Canada’s corporate empowering foreign policy apparatus that the Liberals have failed to rein in. The crown corporation offers trade financing, insurance, bonding services and foreign market expertise. With 1,500 employees at dozens of Canadian and international offices, EDC is one of the largest government export credit agencies in the world. As this book went to press it had over $50 billion in outstanding loans.
But, EDC is not required to consider the environmental or human rights implications of its loans. Left-wing activists have long criticized the crown corporation’s practices but in 2018 and 2019 EDC received a bout of negative publicity, particularly in the Globe and Mail. Environmental groups complained about the $12 billion EDC loaned to oil and gas companies in the first two and a half years of the Liberal government while EDC’s top client Bombardier was embroiled in a series of corruption cases. In the most discussed case, EDC loaned US$41-million to support a luxury jet sale to the Gupta brothers who were central to a corruption scandal that toppled South African president Jacob Zuma in 2018. EDC covered 80% of the cost of the businessmen’s private jet, which appeared designed partly to help Bombardier gain a lucrative locomotive contract from a state-owned freight company where the Guptas wielded influence. EDC also financed what became a $450 million Bombardier rail contract with South Africa’s Transnet SOC.
In the June 2019 exposé “See no evil: How Canada is bankrolling companies accused of bid-rigging, graft and human-rights violation” the Globe and Mail Report on Business detailed some controversial EDC deals. According to the story, even when its clients were targeted by law enforcement or court rulings, EDC sometimes continued to offer assistance.
The crown corporation has been exempt from the regulations governing private-sector financial institutions. It wasn’t obliged to follow the rules set out by the Office of the Superintendent of Financial Institutions, which supervised federally registered banks, insurers, trusts and lenders.
As part of a mandatory review of EDC’s rules, a number of groups called on the Liberals to modify the Export Development Act to compel EDC to screen clients for human rights and environmental considerations and to loosen its privacy restrictions. As this book went to print, it appeared unlikely the Liberals would heed these calls. The government dragged its feet on the mandatory 10-year legislative review that began in 2018. In May 2019 they released a standalone human rights policy for EDC, but it wasn’t binding on the crown corporation or its corporate clients. The Steelworkers union described it as “a policy that uses the right words in many places, but includes enough ambiguity and ample room for discretion that it raises concerns and questions about the ability of EDC to place human rights front and centre.”
The international trade minister’s statements about EDC’s response to the negative publicity suggested he would not press for legislative change. In September 2019 Jim Carr told the Globe and Mail that EDC had taken steps to clean up its act after a series of embarrassing revelations. “The early evidence, from our perspective, is that mistakes were made, lessons have been learned and they are now being applied,” noted Carr. “Compared to where I believe we have been, we’re in a better place.”
The Liberals’ protection of SNC Lavalin reflected their indifference to corruption abroad and the primacy of promoting Canadian corporate interests. In the biggest Liberal scandal during their first term, the Prime Minister’s Office interfered in the prosecution of the engineering and construction giant accused of bribing officials in Libya. Former attorney general Jody Wilson-Raybould claimed she was repeatedly pressured to defer prosecution of the Montréal-based company and instead negotiate a fine, which would allow the company to avoid a ban on federal government contracts. Ultimately government lawyers negotiated a $280 million fine with SNC in December 2019.
Facing a 10-year ban on receiving federal government contracts if convicted of bribing Libyan officials, SNC began to lobby the Liberals to change the criminal code in February 2016. The company wanted the government to introduce deferred prosecution agreements (DPAs) in which a sentencing agreement would allow the company to continue receiving government contracts. At SNC’s request the government changed the criminal code but Wilson-Raybould resisted pressure from the PMO to negotiate a DPA with the engineering firm.
Before Trudeau went to bat for SNC the firm had either been found guilty or alleged to have greased palms in Libya, Bangladesh, Algeria, India, Kazakhstan, Tunisia, Angola, Nigeria, Mozambique, Ghana, Malawi, Uganda, Cambodia and Zambia (as well as Québec). A 2013 joint investigation by the CBC and the Globe and Mail of a small Oakville, Ontario, based division of SNC uncovered suspicious payments to government officials in connection with 13 international development projects. In each case between five and 10 per cent of costs were recorded as “‘project consultancy cost,’ sometimes ‘project commercial cost,’ but [the] real fact is the intention is [a] bribe,” a former SNC engineer, Mohammad Ismail, told CBC.
While Trudeau’s interference in the prosecution of SNC highlights corporate influence over politics, it is also a story about a firm at the centre of Canadian foreign policy. “With offices and operations in over 160 countries”, SNC has long been a leading corporate face of Canadian foreign policy. Historically, it is not much of an exaggeration to describe some Canadian diplomatic posts as PR arms for the Montréal-based firm.
SNC has been one of the largest corporate recipients of Canadian “aid.” The company has had entire departments dedicated to applying for Canadian International Development Agency (CIDA), UN and World Bank funded projects. SNC’s first international contract, in 1963 in India, was financed by Canadian aid and led to further work in that country. In the late 1960s the firm was hired to manage CIDA offices in African countries where Canada had no diplomatic representation. In 2006 SNC was bailed out by the Canadian aid agency after it didn’t follow proper procedure for a contract to renovate and modernize the Pallivasal, Sengulam and Panniyar hydroelectric projects in the southern Indian state of Kerala. A new state government demanded a hospital in compensation for the irregularities and SNC got CIDA to put up $1.8 million for the project (SNC-Lavalin initially said they would put $20 million into the hospital, but they only invested between $2 and $4.4 million).
Justin Trudeau’s ongoing support for SNC Lavalin highlights Liberal Party indifference to corporate corruption in foreign countries. This indifference to, or sometimes active encouragement of, corporate corruption has been especially evident in the mining sector, where Canada is a global giant. The story of the ‘Ugly Canadian Abroad’ is the subject of the next chapter.
Yves Engler has been dubbed “one of the most important voices on the Canadian Left today” (Briarpatch), “in the mould of I.F. Stone” (Globe and Mail), and “part of that rare but growing group of social critics unafraid to confront Canada’s self-satisfied myths” (Quill & Quire). He has published nine books.