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China’s growing influence in oil sands development might be the most important issue facing Canada’s energy sector that nobody is talking about.
Canadian companies have happily accepted billions of dollars in investments from Chinese state-owned enterprises in recent years on the basis that the energy-hungry emerging Asian superpower will soon be their best customer.
Meanwhile, as the public grows increasingly concerned about the potential importation into Canada of questionable Chinese corporate practices and opposition politicians raise questions of possible interference with Canada’s national interests, industry associations, environmental groups and the government of Canada itself have stayed mute.
“Any enterprise that is owned by another nation state raises sovereignty issues, but in the case of China the security advisors to the government of Canada for a long time have expressed particular concern about Chinese influence,” Elizabeth May, leader of the Green Party of Canada, said in an interview this week.
During a visit to Beijing in February, Prime Minister Stephen Harper signed a declaration of intent to establish the Canada-China Foreign Investment Promotion and Protection Agreement, marking the end of nearly two decades of negotiations between the two countries. The agreement, which must still be ratified by both national governments before it can come into force, was heralded by Mr. Harper as Canada’s first “comprehensive economic agreement” with China.
While Ms. May said she has not yet seen the agreement, she added that other deals recently struck with countries in Latin and South America contain a similar provision to one found in Chapter 11 of the North American Free Trade Agreement (NAFTA), which allows a foreign corporation to sue the Canadian government for any decision that reduces that corporation’s expectation of profit.
Including such a provision in any agreement with China would be “so outrageous where we’d have a situation in which not only a foreign government but a foreign non-democratic government would be able to challenge the decisions reached by democratically empowered governments at the municipal, provincial and federal levels in Canada,” Ms. May said.
Companies in the United States have made liberal use of the provision in NAFTA over the years, occasionally resulting in dramatic changes to Canadian policies. In 1998, U.S.-based Ethyl Corp. sued Ottawa for US$251-million after the government imposed a ban on a fuel additive known as MMT, claiming the ban “expropriated” future profits. Canada not only lifted the ban on MMT but also agreed to pay Ethyl US$13-million for its trouble.
“If the same provision were extended to an investor provision with China, you would have the Chinese Communist Party able to say, ‘We insist you pay us X tens of millions of dollars because the effect of your improved environmental regulations has been to reduce our expectations for profit,’ ” Ms. May said.
Two years ago, Chinese state-owned refining giant Sinopec Corp. paid $4.7-billion for ConocoPhillips Co.’s 9% stake in Syncrude Canada Ltd., among Canada’s largest oil sands operators. Despite owning a small minority of shares, Ms. May contends it is enough for Sinopec to put Chinese national priorities over Canadian.
“What would happen if Syncrude were to decide they would do better putting in a refinery here and selling their crude abroad as a finished product? China [Sinopec] could say, ‘No, we veto that, we want it in China’, ” she said.
“The concern I have is that we are not asking these questions at all. I don’t know why I’m the only one asking questions about this but I do know that when I ask I’m not the only one who is concerned.”
In fact, the majority of Canadians appear to share her concern. Last spring, the Asia-Pacific Foundation of Canada released a poll finding 75% of Canadians were opposed to Chinese state-owned companies gaining controlling stakes in Canadian firms and 57% said they viewed the rise of Chinese economic power as a threat to Canada’s interests.
Around the same time, another poll conducted on behalf of various Canadian environmental groups found nearly three-quarters of British Columbians (72.8%) were worried about China’s increasing command of Canadian natural resources.
“I can see where Canadians might have the impression that foreign companies will be importing practices from their countries into Canada,” said Yuen Pau Woo, chief executive of the Asia-Pacific Foundation of Canada.
For the rest of this article, please go to the National Post website: http://business.financialpost.com/2012/05/10/industry-quiet-as-public-concern-grows-over-chinas-energy-influence-in-canada/?__lsa=4abfde00