Canada risks being 'colonial exploiters'

A Liberal MP fears that companies in the country risk exploiting developing nations if his proposal in parliament is not passed.

John McKay, a Canadian MP, says more needs to be done to stop Canadian companies from exploiting developing countries.

TORONTO // Nearly half of all mineral, oil and gas extraction projects by companies listed on Canada's largest stock index are carried out in developing countries with little government oversight, a fact that has prompted Liberal MPs to begin pushing corporate social responsibility legislation through the House of Commons. "We pride ourselves on not being colonial exploiters of developing nations," said John McKay, a Liberal MP from Toronto's eastern suburbs. "Sometimes, occasionally, there are incidents where we don't live up our image of ourselves."

Last year, the resource-dominated Toronto Stock Exchange (TSX), Canada's largest, and its junior Venture Exchange (TSX-V) had a market capitalisation of 215.7 billion Canadian dollars (Dh792.2bn) in mining and traded a value of $429 billion in oil and natural gas. But companies such as Barrick Gold, Goldcorp, Inco and Talisman Energy have been accused of violating human rights and causing environmental damage in Papua New Guinea, Tanzania, Honduras, Indonesia and Sudan.

In response, Mr McKay tabled a non-binding private member's bill in late February known as the Corporate Accountability of Mining, Oil and Gas Corporations in Developing Countries Act. If approved by the House of Commons, the act would ensure extractive companies that receive support from the government of Canada comply with environmental practices and with Ottawa's commitments to human right standards.

Bill C-300 would empower the foreign and international trade ministers with the ability to sanction corporations whose activities defy Canada's guidelines on environmental and social responsibility. The ministers could cut off a loan or insurance from Export Development Canada, the national export credit agency, and the Canada Pension Plan would be required to divest itself from those companies. "It only applies to those who are on the government credit card," said Mr McKay.

So far, Mr McKay's bill has passed its second reading in the House of Commons in March, though by a tight margin of four votes. It is now being considered by the House's foreign affairs committee where amendments can be made before its third and final reading. Catherine Coumans, a research coordinator with MiningWatch Canada, a coalition of organisations favouring the improvement of mining practices, described the initiative as a "humongous step forward" for its enforcement of accountability and human rights standards.

Business and mining organisations, however, regard Bill C-300 as a threat. The Canadian Chamber of Commerce argues that the proposed legislation risks the competitive position of companies, and it could complicate and harm their financing. Canada's extractive sector is the third-largest source of foreign direct investment at $94 billion in 2008, up by nearly 20 per cent from 2007. Tony Andrews, the executive director of the Prospectors and Developers Association of Canada, which has more than 1,000 corporate members, said corporate social responsibility is a complex area because each host country possesses its own unique conditions.

"The people acting to push this forward knew very little about the subject area," Mr Andrews said. Mr Andrews contends that weak governance and an absence of enforcement capacity in the more than 100 countries where his members operate are the real problem and fall beyond the reach of Bill C-300. Mr McKay's initiative reflects the failure of the prime minister Stephen Harper's government to craft an effective strategy on corporate social responsibility, an issue that has dragged on for years.

A 2005 report by a House of Commons committee recommended that the government make its support to extractive companies conditional on their meeting environmental and human rights standards. That was followed by a national round-table on corporate social responsibility and the Canadian extractive industry in developing countries, which began in 2006 and ended with the publication of an advisory report in March 2007.

According to Ms Coumans, who was a member of the advisory group, the final document reflected a consensus achieved between industry and civil society. It recommended an independent ombudsman and withdrawing government support for Canadian extractive companies who failed to comply with government guidelines. Ottawa, however, waited two years to offer its response. The Harper administration's proposal calls for voluntary compliance and participation, avoids implementing any sanctions for failure to comply and creates the position of a counsellor for extractive sector corporate social responsibility to resolve issues involving Canadian companies.

It failed, however, to impress Mr McKay who argues that the investigative power of the counsellor is so circumscribed that it appears to be written by a defence lawyer. The Canadian government's department of international trade said the proposal was the most effective way to promote corporate social responsibility in the international extractive sector. But its bureaucrats are partisans in the effort to crush Bill C-300 before it becomes law.

"The forces against this bill are marshaling," Ms Coumans said. "It's a real alignment of the government bureaucrats and disgruntled members of industry, people who are not really happy with the round-table process." Mr McKay remains sanguine despite the anger directed at him by mining companies. He's hoping to repeat his past successes at turning private members bills into law. "For corporations who believe they adhere to corporate social responsibility, they have nothing to worry about. They should embrace Bill C-300."