Canada, China and the Foreign Investment Protection Racket

November 1, 2012, Ottawa Citizen.

The first thing you need to know about the Foreign Investment Promotion and Protection Agreement, which has been called Canada’s most important treaty since the North American Free Trade Agreement, is that the treaty wasn’t concluded with the legitimate government of China, because there is no such thing.

It is nonetheless quite right to call the deal a “protection agreement.” That’s because the Chinese Communist Party has mutated into a classic protection racket that brutalizes and corrupts everything it touches.

Because we are becoming accustomed to hearing the word “reciprocity” in commentary and reportage about the agreement Ottawa has struck with these gangsters it’s necessary to know that paradoxically, the agreement provides no reciprocity in “market access.” Beijing’s tariffs remain untouched and Beijing retains the prerogative to strong-arm Canadian investors as usual. But there is an actual degree of reciprocity involved, of a kind.

It works like this.

Beijing promises that the Chinese Communist Party will regularize its bribe system and put the boots to China’s subnational, provincial, county and municipal governments on behalf of Canadian companies, in the same way that the CCP’s enforcers put the boots to everyone on behalf of Beijing’s state-owned enterprises. So long as Canadian investors do as they’re told, everybody gets along.

To reciprocate, Ottawa promises that China’s state-owned companies will be similarly exempt from any impertinence from the Canadian courts, from the provinces and from municipalities. Any backchat — say, a law sensibly requiring that Alberta bitumen be upgraded and refined in Canada rather than pumped through Beijing-financed pipelines to awaiting tankers on the west coast — and the upstarts can be punished with penalties assigned by special, closed arbitration tribunals in decisions beyond the reach of judicial review.

“Canada is willing up give up elements of its democratic traditions on the promise of investment coming in,” is the way Gus Van Harten, an authority in international law at Osgoode Hall Law School describes the deal. But once you’re past that small matter it’s true that the agreement is pretty well boilerplate lifted from similar deals Ottawa has struck with a couple of dozen countries, among them Latvia, Barbados, Costa Rica, Armenia, Romania, Ghana, and of course that economic powerhouse known as Trinidad and Tobago.

You will be right if you’ve guessed that just one reason there is a difference is that none of these other countries has a so-called government that can boast the captive labour of a sixth of humanity or the convenience of a sovereign wealth fund that just opened up shop in Toronto with $323 billion in currency reserves at its disposal.

Prime Minister Stephen Harper and outgoing Chinese president Hu Jintao signed the Canada-China deal in Vladivostok on Sept. 9. Its contents were kept secret until the agreement was tabled in the House of Commons, which doesn’t get to vote on it, on Sept. 26. Even so, reports of the agreement’s contents have already triggered a cascade of protests and petitions across the country. The PMO can call the thing a ratified treaty 21 sitting days after its tabling, which is to say pretty well any day now. The agreement is supposed to last 31 years.

If Harper seems to be in a terrible hurry to get such a sketchy arrangement rammed into force and effect it’s because the “energy superpower” legacy he laid out in 2006 as the thing he wanted most to bestow upon Canada is already a complete shambles, and it’s about to get worse. Beijing has him over a barrel.

To strike his target of tripling Albertan oilsands production, the prime minister had to turn to the cash-rich Chinese Communist Party’s overseas acquisitions arms. Beijing’s state firms have already spent at least $25 billion in their buying binge. But by two weeks ago, eight out of 10 Canadians surveyed told pollsters from Angus Reid that they’re against the whole damn thing. As if to teach us all something of the vicissitudes of political irony, those ordinary hardworking Albertans whose virtues the Conservatives persist in hectoring the rest of us about have turned out to be among the fiercest opponents of Beijing’s biggest-ever overseas gambit, China National Offshore Oil Corporation’s $15.1 billion, way-over-premium bid for Nexen Inc., and it’s still in the hopper.

To get a sense of what the prime minister’s witless critics on Parliament Hill understand about what we’re dealing with here, it is helpful to know the responses Epoch Times reporter Matthew Little elicited last month after spending a day or so wandering around up there, asking a single, simple question: Is China under authoritarian control? Only Green Party leader Elizabeth May and Liberal Party fixture Bob Rae were capable of answering like grown-ups: Yes. Biggest foot in mouth: NDP environment critic Megan Leslie. She said she’d need to consult her political science textbooks and then get briefed before she’d be prepared to give an answer.

This is what China’s state capitalism looks like.

The party hack tipped to be anointed China’s new president when the unelected and self-replicating Communist Party leadership meets on Nov. 8 is a shadowy geezer by the name of Xi Jinping. His family has amassed about $400 million in a wealth trajectory that by the oddest coincidence mirrors Comrade Xi’s rise through party ranks. But that’s nothing. By the meticulous reckoning of a Pulitzer-worthy New York Times investigation published last week, the family of outgoing Chinese Prime Minister Wen Jiabao has accrued to itself a net worth of nearly $3 billion.

While China’s per-capita income hovers around that of sand-rich Turkmenistan, last year the net worth of the wealthiest 70 members of China’s laughably named National People’s Congress, by Bloomberg News’ calculations, was $89.8 billion. China’s nouveau riche know very well that the jig is up. Two surveys carried out in 2011 by China’s Merchant Bank and by Shanghai’s Hurun Institute found that roughly 60 per cent of China’s millionaires are already preparing for emigration or are planning to leave the minute a chance arises.

The Communist Party’s princelings have been plundering the country so ravenously that China’s financial institutions are starting to feel the shocks of capital flight. The China Economic Weekly reports that over the past 12 years more than 18,000 executives and officers of Chinese state-owned enterprises have been caught trying to flee with plundered funds. According to a study published just last week by the Washington, D.C.-based organization Global Financial Integrity, China’s elites squirrelled $472 billion out of the country last year alone.

This isn’t socialism with Chinese characteristics. This is the Sopranos with Chinese characteristics.

The final thing you need to know about the Foreign Investment Promotion and Protection Agreement is its specific function. It’s to elevate Canada’s China-trade business executives from their hitherto mostly supine position as accomplices of Beijing’s gangland regime to a more formalized and official status as willing accessories to the beggaring of the Chinese people and the plundering of their wealth.

Protection is precisely what FIPPA’s Canadian beneficiaries will be very much wanting one day when all their trade agreements, their exquisitely-phrased contracts and their joint-venture undertakings are ablaze in bonfires from Guangdong to Xinjiang. Protection is what they will want, and they will deserve no such thing.

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