Canada, Investment and the Multilateral agreement on Investment Protecting Canada’s Health Care System

December 4, 1997

Thank you Mr. Chairman. It is a great pleasure for the Business Council on National Issues (BCNI) to have the opportunity to address your committee. I know that the Committee would like this session to be primarily based on questions from Committee members, and will therefore keep this formal statement as short as possible. It will deal entirely with the MAI and the implications for Canada’s health care system. The Business Council has earlier submitted a more general statement on the MAI to the House of Commons Sub-Committee on International Trade, Trade Disputes, and Investment. This has been given to the Clerk of the Committee, in the event any Committee members wish to refer to it.

I would like to make three main points. First, the Business Council cannot stress enough the importance of protecting Canada’s health care system. Second, it is our conviction that the present approach which the federal government is taking to protect Canada’s health care system in the context of the MAI is an effective one, and will in fact fully protect the integrity of our health care system. Third, you will have heard claims from others that Canada’s health care system is not being adequately protected in the Paris negotiations. I want to look briefly at some of these claims. They are an unusual mix of wild exaggeration or distortion of what is actually being negotiated, a misunderstanding of how trade and investment agreements are actually negotiated, and a refusal to recognize the protections to the Canadian social safety net which have been built into existing agreements, in particular in NAFTA, and on which the Canadian position to the MAI talks in Paris are modelled.

PROTECTING CANADA’S HEALTH CARE SYSTEM

Canada’s health care system has come under real strain over the past years, as a consequence of successive federal governments failing to address, as they should have ten or 15 years ago, the looming crisis of federal deficits and debt levels spinning out of control. The present federal government therefore deserves credit and recognition for helping to bring the federal deficit under control. We know full well that this has created strains on Canada’s health sector, but we are also convinced that getting Canada’s deficit and debt under control is crucial to assuring the long term viability of a health sector which will work for all Canadians. The Business Council is committed to protecting that system, not in the sense of trying to protect the status quo, but because core elements of the system work, both socially and economically.

We should also not forget that Canada’s health care system is a valuable component in increasing Canada’s competitiveness and desirability as an investment location. When one compares the costs of Canada’s health care system to that of the United States, it fares very well, and companies considering locating in North America will take this into consideration. An effective Canadian health care system, in short, should help Canada to attract more foreign direct investment, thereby creating more jobs and government revenue to be plowed back into the health care system itself.

NEGOTIATING APPROACH

Canada is pursuing the same type of reservation for Canada’s health sector in the MAI as it has in NAFTA. The NAFTA reservation exercise has been an unqualified success in protecting full policy flexibility for Canada’s health care system at all levels of government, and there is no reason to believe that the same approach in the MAI will not produce the same results. (In the event Committee members are not already aware, the specific reservation in NAFTA is Annex II-C-9, and the exchange of letters between the trade ministers of the three NAFTA Trade Ministers of March 1996.)

RAISING UNFOUNDED FEARS

A small but vocal group of Canadians have claimed that under prospective MAI rules (and indeed under the existing NAFTA rules), Canada’s health care system would be gutted, and taken over by foreign corporations. This is quite simply false. The Canadian reservation to the MAI rules (those on national treatment in particular) in this area is quite explicit in stating that it reserves the right "to adopt or maintain any measure with respect to the following services to the extent that they are social services established or maintained for a public purpose…" The listing includes health services. The phrase "social services established for a public purpose" is broadly cast, and would capture, in our view, the differing mix of public, not-for-profit, and for-profit services which are all offered under Canada’s health system. A "takeover" of the system by foreign companies would thus not be possible.

We are also aware of fears which have been raised by a recent legal opinion sponsored by the Council of Canadians which argued that the protection for the provision of health services Canada would obtain in Paris based on Canada’s present negotiating approach is inadequate. We do not share the analysis of this legal opinion. The fears it has raised are unfounded.

In this same legal opinion, the view is expressed that the Canadian reservation does not cover the provinces, and is therefore a step backward from what was included in NAFTA. This suggests a misunderstanding of how trade and investment agreements are actually negotiated. If in fact the provinces are part of the agreement, then the Canadian reservation as it applies to health will most certainly apply to them. If the provinces are not part of the agreement, then the reservation need not cover them, since they would not be subject to any of its obligations. All of this remains part of the active dynamic of the negotiations, and it is thus incorrect to suggest that provincial health policies and measures would be in jeopardy as a result of this agreement.

Finally, some have claimed that new initiatives in health care, and here I refer specifically to ideas related to a national pharmacare program, will be prohibited as a consequence of the prospective MAI rules. These claims are, again, false. Any expropriations which might theoretically take place as a consequence of a new national pharmacare program would have to meet requirements of domestic law vis a vis expropriations. In general, the rules in the MAI in this area are no more stringent than existing Canadian domestic law, and thus the MAI itself would have no constraining effect whatsoever on such initiatives.

This concludes the Business Council’s formal statement. I would be happy to respond to any questions you may have.