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Harper Gov't 'Conceded to China' under Pressure: Treaty Expert

FIPA 'is the price China demanded to open its purse strings for investing in the resource sector in Canada.'

By Jeremy J. Nuttall 13 Sep 2014 | TheTyee.ca

Jeremy J. Nuttall is The Tyee's Parliament Hill reporter in Ottawa. Find his previous stories here.  

This coverage of Canadian national issues is made possible because of generous financial support from our Tyee Builders. 

At one point during his nearly 20 years in China, Mark Kitto had all the success he could handle.

A publishing company, advertising firm and consultancy business were yielding good money and he estimates his businesses were worth about $10 million.

The Financial Times even referred to him as a "mini media mogul."

Kitto, originally from the United Kingdom, called China home for 18 years and during his time started magazines you can still purchase in the country -- only Kitto doesn't own them now.

As the Canadian government announced it had ratified the highly controversial Foreign Investment Promotion and Protection Agreement with Beijing, Kitto reflected on his own story.

In 2005 his business was taken from him by a partner who was Chinese, at the time a legal necessity for foreigners, in cahoots with the Chinese government in what has become one of the most fabled stories of expat anguish in China and the subject of Kitto's upcoming book That's China.

During his day in court during the dispute, Kitto managed to prove the conspiracy against him by producing a letter from the public relations arm of the communist party to his business partner instructing him to fabricate evidence for the case.

"In the letter that went from the state council of information office to the person they were asking to fabricate evidence included the line 'We need to teach this foreigner a lesson,'" Kitto said on the phone from England, where he now lives.

The judge sided with Kitto, but after taking a phone call came back and reversed the decision.

"I lost the case and that was that. I lost everything."

China had just signed on to the World Trade Organization at the time, but even as a foreign business person with a local partner he said he wasn't protected.

And he said he doubts Canada's deal with China would prevent others from suffering the same fate.

From small business to large corporations, it's the same treatment for foreign business, according to Kitto, though he said larger businesses are less likely to bellyache.

"There's no level playing field as far as they're concerned," he said. "Such a thing does not exist."

Why sign the deal?

Gus Van Harten is an associate professor at the Osgoode Hall Law School and an expert in investment treaties.

Van Harten said FIPA is practically a one-way deal in favour of China, and Ottawa needs to acknowledge the non-reciprocal aspects of the deal and explain why they would ratify it two years after it was first signed.

"It seems to me the federal government has conceded to China under pressure to give them this treaty," said Van Harten. "My guess is this is the price China has demanded to open its purse strings for investing in the resource sector in Canada."

He said China had ratified the deal right away and seemed to be getting antsy Canada had taken so long, even speculating the recent detentions of two Canadian coffee-shop owners in the country on accusations of spying may have been part of Beijing's pressure.

In a press release today, Ottawa insisted the deal will protect such Canadian investors in China and help build trade relations.

The release claims the deal will give "Canadian investors in China the same types of protections that foreign investors have long had in Canada."

But Van Harten doesn't buy that line.

"One aspect of the treaty is it has an exclusion of all existing discriminatory measures in Canada or China," he said. "China, it's safe to say, has far more existing discriminatory measures than Canada does."

Local government rules or different tax rates will now be locked in under the agreement, giving Chinese officials a tool to punish any Canadian investors it wishes to, he said.

Meanwhile, the New Democrats blasted the deal Friday afternoon.

"It is clear that there are some profound problems with it," trade critic Don Davies said.

He said the deal is imbalanced and subjects Canadian taxpayers to massive liabilities from Chinese companies, many state-owned, who can now sue Canadian governments.

And, Davies said, they can settle the cases behind closed doors if they want, even when tax dollars are on the line.

"We have public liability in a private setting and that violates the basic precepts of Canada's judicial system," he said.

Davies said the deal's 31-year timeline is also far too long of an agreement, alleging the Conservatives announced the ratification on a Friday afternoon because the party's leaders know Canadians don't support it.

Back in England, Kitto's experience left him wary of any claims the agreement with Beijing will end up being something from which Canada benefits.

Even if the agreement was completely reciprocal, he said he doubts Chinese business and government would honour it, pointing to a number of claims filed recently by foreign companies under various agreements around the world.

"There is no such thing as a reciprocal agreement," said Kitto of Beijing. "For them the other party signs on to the agreement, opens up and then you take advantage of them. That's the way they reciprocate."  [Tyee]

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