March 28, 2008

The Honourable James Flaherty
Minister of Finance
House of Commons
Wellington St.
Ottawa, ON
K1A 0A6

Dear Minister Flaherty:

I am writing with respect to the 2007 OECD Revised Council Recommendation on Common Approaches on the Environment and Officially Supported Export Credits. The Recommendation currently lacks a credible mechanism to monitor Member implementation and I write to urge Canada to support the adoption of a peer review system. I understand that the Secretariat of the OECD Export Credit Group (ECG) intends to include the issue of peer review for the Common Approaches in the agenda of the upcoming ECG meeting in April 2008. A peer review system is essential to generate credible information for use in the 2010 report to the OECD Council on the implementation of the Recommendation.

Recent OECD publications reiterate that "peer review lies at the heart of international cooperation in the OECD" and that "[p]eer review has been used at the OECD since the organization was created more than 40 years ago. It has evolved over time to take account of new developments, including the involvement of civil society and labor."

Canada and other OECD ECG members have an interest in promoting a credible level playing field concerning environmental due diligence in the OECD Export Credit Group. Together with other ECG Members, Canada endorsed the OECD agreement on common environmental approaches for OECD export credit agencies (ECAs) in 2003, which was revised in 2007 and approved as an OECD Council Recommendation. Unfortunately, the 2007 revised recommendation still lacks an effective arrangement for joint monitoring of its implementation by ECG Member ECAs.

Since 2003, the Halifax Initiative has been deeply concerned by growing evidence that ECAs do not consistently implement the Common Approaches. Some ECAs approve financial support for projects that other ECAs would reject on the basis that they do not comply with the Common Approaches. In fact, financial support for one such project was approved by three ECG Member ECAs in early 2007 in the midst of final negotiations for the revised Common Approaches. In this case, the three Member ECAs themselves acknowledged that the project violated numerous World Bank Performance Standard requirements, many concerning critical issues such as the resettlement of 75,000 people in a politically volatile zone of ethnic conflict. Nevertheless, the ECAs in question approved financing based on questionable assurances made by the sponsor to make 150 changes in project design and implementation. NGOs have documented that even if these changes were to be implemented, the project would fail to comply with the Common Approaches.

Such examples undermine the credibility of political commitments made by OECD Member states concerning export credits and the environment, and by extension, the credibility of OECD Recommendations in general and of the OECD as a forum where member states reach consensus and implement declared common commitments in good faith.

The revised 2007 Council Recommendation on ECAs and the environment provides an opportunity to address this issue. It calls upon Members to "[e]nsure, through appropriate measures and mechanisms, compliance with their policies and procedures pursuant to this Recommendation" and to "monitor and evaluate, over time, the experience with this Recommendation at a national level, and share experiences with the other Members" and to "continue to enhance and improve procedures at a national level to address the environmental impacts of projects, and to encourage their ECAs to allocate appropriate resources for this purpose" (para. 21). Moreover, "the ECG shall, in the light of experience, review all elements of this Recommendation not later than the end of 2010 and report to Council" (para. 24).

The ECG is a conspicuous exception within the OECD, where other committees and working groups concerning anti-bribery, development and environment (the Anti-Bribery Group, DAC, and EPOC) have applied peer review mechanisms for years. An ECG peer review process would involve a framework and procedures that are agreed upon by Members, and would benefit from the experiences of other OECD committees and working groups. In contrast to current arrangements in the ECG that involve self-reporting of some aspects of implementation of the Common Approaches, a peer review system would involve a process of independent peer assessment regarding the implementation performance of each ECG ECA, and public disclosure of non-business confidential information on peer review findings, as occurs in other OECD peer review processes.

The Halifax Initiative would be happy to meet with you to discuss in more detail our ideas on peer review for the implementation of the Common Approaches. We have set out in more detail our suggestions concerning peer review for the Common Approaches in the attached memorandum, prepared by ECA Watch, the international coalition working to improve ECA environmental and social practices, which we hope you will consider.

We further propose that the ECG establish a working group, consisting of ECG representatives and representatives of civil society, to advance a peer review process. NGO members of ECA Watch would be pleased to participate. We urge Canada to support this proposal.

Thank you very much for your attention.

Yours truly,

Catherine Coumans
Chair,
Coordinating Committee

cc:
Mr. Paul-Henri Lapointe, Canadian Ambassador to the OECD
Mr. Eric Siegel, President and CEO, Export Development Canada
Members of the Parliamentary Committee on International Trade
Members of the Parliamentary Finance Committee
Secretariat, Export Credit Group, OECD