NGO Working Group
on the Export Development Corporation
A working group of the Halifax Initiative
for the Standing Committee on Foreign Affairs and International Trade Hearings on Bill C-31 on the Export Development Act
October 15, 2001
The NGO Working Group on the Export Development Corporation is a coalition of 17 Canadian non-governmental organisations concerned about the social, human and environmental impacts of export credit agencies. The NGO Working Group has been participating fully in the legislative process on the Export Development Act since 1999, including the SCFAIT hearings in 1999, the public consultations on the EDC’s disclosure policy and environmental review framework, and the international campaign to reform export credit agencies which has focused on the OECD’s Export Credit Guarantees process.
As a Canadian public financial institution, EDC can borrow with the full faith and credit of the Canadian government. Unlike other financial institutions in Canada, it does not pay taxes. It is the Canadian Parliament, and through it, the Canadian public, who is ultimately responsible for its successes, its failings and its image abroad. As a Crown Corporation, EDC also differs from private financial institutions in that it exists to serve a public policy mandate to support and develop Canada’s export trade and Canadian capacity for engaging in that trade.
The Canadian government should ensure that EDC’s public policy mandate be made consistent with other Canadian public policies, interests and values. Accountability to the public should be promoted through policies that require adequate disclosure. Canadian foreign policy commitments to sustainable development and international labour, human rights and environment conventions should be ensured by requiring EDC to minimize environmental impacts, respect human rights and take into account social needs of communities, such as health, livelihoods and the right to voluntary resettlement.
Whereas the EDC has taken some steps to improve its standards and policies, the Government must play a defining role in the standard-setting process by amending Bill C-31.
The NGO Working Group believes important changes must be made in three key areas which are disclosure, environmental protection and human rights. Bill C-31 should accomplish the double purpose of giving the EDC the flexibility it needs to fulfill its commercial mandate, while providing the parameters for EDC’s activities.
Purposes and Powers
Working Group recommendation:
- Section 10 of the Export Development Act, which refers to the purpose of the EDC, should read: (1) The Corporation is established for the purposes of supporting and developing, directly or indirectly, Canada's export trade and Canadian capacity to engage in that trade and to respond to international business opportunities in a manner consistent with Canada's international obligations.
- EDC is already obligated as a Crown Corporation to uphold Canada’s commitments and therefore giving statutory weight to this requirement increases its accountability to do so. The Standing Committee on Foreign Affairs and International Trade recommended this change in its report, Exporting in the Canadian Interest: Reviewing the Export Development Act (December 1999), in Recommendations 1, 21 and 22.
- That in carrying out its mandate and exercising its powers, the Corporation shall give due regard to the benefits to Canada to be derived therefrom, and to the commitments and obligations undertaken by Canada under international agreements (p.19).
- Minister Pettigrew, himself, suggested that these changes would be made in the Act on June 26, 2001. In the Backgrounder on the Legislative Review of the Export Development Corporation, Minister Pettigrew notes that a report to Parliament in May 2000 included undertakings to
- Require EDC to take account of benefits to Canada and Canada’s international commitments, especially in human rights, core labour standards and the environment (p.1).
Working Group recommendations:
- Bill C-31 paragraph 9 on Section 10.1 (1) (b) should be changed to read that the Board of Directors must be able to withhold financing support after taking into account adverse environmental, social and human rights impacts.
- Environmental Effects be changed to Environmental, Social and Human Rights Impacts.
- Section 10.1 (2) on the directive should lay out basic criteria which the Corporation must follow in terms of an environmental assessment process. This section could reference Section 16 of the Canadian Environmental Assessment Act that lays out the factors of good environmental assessment. It could also refer the Corporation to CEAA Guides such as the Reference Guide - Determining Whether A Project is Likely to Cause Significant Adverse Environmental Effects, Reference Guide: Assessing Environmental Effects on Physical and Cultural Heritage Resources, Cumulative Effects Assessment - Practitioners Guide and The Citizen's Guide.
- A regulation on the environmental assessment process for the EDC must be developed under the Canadian Environmental Assessment Act (CEAA).
The SCFAIT recommended, in conjunction with the mandate change, to establish some basis of environmental criteria on which to determine the eligibility of project proposals for EDC support (Exporting in the Canadian Interest, p.48).
Bill C-31 requires EDC to determine whether the project is likely to have adverse environmental effects despite implementation of mitigation measures. This is an improvement. However, it then allows (a) EDC to define the term “project”, the criteria it would use and any exceptions, and (b) allows EDC to justify entering into the transaction (Section 10.1). It is also mentioned in 10.1 (3) that the directive is not a statutory instrument.
The process and the implementation of the framework can not be left up to the EDC; the EDC should not be able to make major modifications the environmental framework without the Government’s consent. Therefore, the basis for standards and processes applied by the EDC must be outlined in the Act.
Furthermore, the Auditor General Office’s report released in May 2001 demonstrated the EDC’s failure to implement its own environmental framework. A process with statutory weight is needed to ensure compliance. An audit from the Auditor General’s Office at least every five years is not enough to ensure compliance, without legal recourse to inaction or inadequate implementation.
Although Gowlings, SCFAIT and the Office of the Auditor-General found EDC’s level of disclosure inadequate, Bill C-31 places no requirements on EDC to disclose information to the Canadian public.
Project proponents could simply be required by EDC to agree to the disclosure of their environmental assessments as a condition to obtaining EDC support (Gowlings, p. 112).
EDC should be required to post, on a regular basis, specific information regarding transactions it has supported (Gowlings p. 104)
Working Group recommendations:
- The Act must be amended to require the disclosure of project-related information in a timely and regular manner.
- Pre-approval disclosure of environmental and social information for projects with known or potential significant adverse impacts must be included in Bill C-31.
The Review of the Export Development Act by Gowlings in June 1999, by SCFAIT in December 1999, and by Minister Pettigrew, recommended that the EDC be required to disclose information related to transactions. The EDC has developed a disclosure policy which was implemented on October 1st, 2001, and is establishing an internal compliance officer. However Bill C-31 places no requirements on EDC to disclose information. It is important to note that the EDC decided once in the mid-80s to stop releasing project-related information to the public.
Also, it is imperative that the EDC adopt pre-approval disclosure of environmental and social information for projects with significant adverse environmental or social impacts. Pre-approval disclosure is imperative to any efficient environmental impact assessment process, and is already part of the environmental assessment process of other international financial institutions such as the IFC and the European Bank for Reconstruction and Development (EBRD). The export credit agencies of the United States and Australia release such information 45 to 60 days prior to approval. This is accepted good practice in environmental assessment processes and is a principle in the Canadian Environmental Assessment Act (CEAA). The requirement for prior disclosure of environmental and social information for projects with severe known or potential impacts must be required of the EDC.
Working Group recommendation:
- The NGO Working Group is demanding that EDC be subject to the Access to Information Act.
The Business Development Bank, another crown corporation, is already subject to the Access to Information Act. Both American export credit agencies are subject to the US Freedom of Information Act. It is unacceptable that such a crucial question as transparency be left up to internal discretion of the corporation and not be required by law.
Working Group recommendations:
- The purpose of the EDC must be changed to include the respect of Canada’s international obligations in the area of human rights. (see Purposes and Powers section)
- The EDC must undertake an efficient human rights assessment process when considering a project.
In 1999 SCFAIT recommended that section 10 of the Act, which refers to the purpose of the EDC, be changed to enjoin EDC to give due regard to international agreements, including United Nations human rights instruments (recommendation 22, page 52). Minister Pettigrew had announced in June 2001 that EDC’s responsibilities to adhere to Canada’s international obligations in the areas of human rights, core labour standards and the environment would be strengthened. However, regarding human rights, Bill C-31 is mute.
Other Federal Acts
In 1999, SCFAIT recommended that a provision be added to the Auditor-General Act establishing the Office of the Commissioner of Sustainable Development as the Government’s designated agent for that purpose. Bill C-31 should adopt this recommendation.
We thank the SCFAIT for inviting us to present our views on Bill C-31 and hope that our concerns will be represented when amendments to the Bill are considered. We believe the government should legislate the crown corporation to ensure that Canadian policies and values are respected. We also believe that the changes recommended below would not interfere with the EDC’s role to promote Canadian exportations.
NGO Working Group on the Export Development Corporation