Canada ratifies investment deal with China despite misgivings

International Trade Minister Ed Fast laughs with Canadian Prime Minister Stephen Harper after he made a joke during a news conference following the close of the APEC Summit in Vladivostok, Russia Sunday Sept. 9, 2012. (Adrian Wyld / THE CANADIAN PRESS)

OTTAWA -- Canada has finally ratified the contentious Foreign Investment Protection Agreement with China amid a series of recent tensions between the two countries that had placed Prime Minister Stephen Harper's scheduled Chinese visit this fall on tenterhooks.

International Trade Minister Ed Fast announced Friday that the pact, known as FIPA, had been signed by Canada two years after its terms were first negotiated by the two countries.

"Investment agreements provide the protection and the confidence Canadian investors need to expand, grow and succeed abroad," Fast said in a news release.

"We remain committed to opening new markets around the world for Canadian companies, including in the fast-growing Asia-Pacific region. This FIPA will create jobs and economic opportunities for Canadians in every region of the country."

China is Canada's No. 2 trading partner, and Harper is scheduled to visit Beijing in November for the annual APEC summit.

The deal, however, has been met with suspicion and alarm not just by the government's usual critics, but by senior Conservative cabinet ministers too.

Employment Minister Jason Kenney, for example, expressed misgivings about forging closer ties with China as recently as this spring.

The government had failed to ratify FIPA amid a series of recent tensions in Canada-China relations. Earlier this summer, Harper accused the Chinese of a cyberattack on the National Research Council, while the Chinese claimed a Canadian couple living in China were spies.

Late last month, a Chinese delegation led by assistant foreign minister Zheng Zeguang visited Ottawa to discuss the relationship with high-level Foreign Affairs personnel and Ray Novak, Harper's chief of staff.

The failure to ratify FIPA was creating additional tensions between the two nations.

Wenran Jiang, a China expert from the University of Alberta and director of the Canada-China Energy and Environment Forum, said the ratification will help thaw the icy relationship.

"This is a major step by the Canadian government -- and to be more specific, by Harper himself and the cabinet -- to mend the fence prior to his November China trip," he said.

Jiang added it will also help the prime minister plan a successful bilateral visit with his Chinese hosts during APEC, the prospects of which were dim until Friday.

"The Canadian effort of approving FIPA at this exact moment is not accidental," he said.

Canada has similar investment agreements with several other nations, including Russia, but has separate rules for investing for each country.

Proponents of the FIPA model, enshrined in the North American Free Trade Agreement, say it sets standards of non-discrimination for foreign investment and guarantees the rule of law in the event of disputes.

But opponents decry the agreements as part of a broader global corporate agenda that allows foreign companies to use binding arbitration to override Canadian laws in a range of areas -- including the environment and energy -- on the basis that they nullify the protections guaranteed in the deals.

Green Party leader Elizabeth May accused Harper of selling out to China by ratifying FIPA.

"I am certain no Canadian company will ever benefit from this agreement," she said.

The NDP was equally scornful.

"Instead of admitting their mistake and getting a deal that actually benefits Canadian companies, the Conservatives have locked Canada into a badly one-sided agreement for the next three decades," said trade critic Don Davies.

"In effect, it will give China access to, and control over, some of Canada's natural resources for the next 31 years and subject Canadian taxpayers to enormous liabilities through investor lawsuits."

Despite the ratification of FIPA, other Canada-Chinese initiatives remain in limbo, including the so-called economic complementarities study that was announced during Harper's 2010 visit to China. It was meant to spur wide-ranging trade negotiations and improve economic ties between Canada and China.

"After the complementarities study was announced, China immediately made an offer to negotiate a free-trade agreement, but Canada has so far not agreed to that," said Sarah Kutulakos, president of the Canada-China Business Council.

"China has been in a position where it's saying: 'Hey, Canada, we've been really putting forward our best efforts to do business with you, and you don't seem very interested.' The question is how long will China keep trying."

Kutulakos praised Canada's ratification of FIPA, saying it will help ease tensions in the relationship and provide a level playing field for both Canadian investors in China and Chinese investors in Canada.

-- With files from Stephanie Levitz and Mike Blanchfield