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The Toronto Star : January 28, 1999
By Naomi Klein

A Chance to Practice What We Preach

It wasn't supposed to be this way. When Trade Minister Sergio Marchi announced a routine review of the Export Development Corporation, an arcane crown corporation that provides insurance and financing to Canadian companies operating abroad, the Ottawa watchers knew just what to expect.

Obviously, the review would be a run of the mill privatization standoff. The EDC insiders and pork-barrel beneficiaries would fiercely protect their turf, defending their right to receive sweetheart deals on insurance and loans simply because they are helping Canada integrate into the global economy.

The insurance companies and the free-market zealots would tell the government to get the hell off of their turf and bellow that the EDC's services would be provided better by the private sector - and with fewer "distorting'' effects.

With both parties set to drop in a quarter and act out their roles, something very odd happened: The terms of debate shifted under their feet.

During the public consultations, which wrapped up last month, the review panel heard testimony not only from importers, exporters and insurers but also from human rights groups, unions and environmentalists. These parties had an entirely different vision for the EDC.

It should remain a publicly owned body, many argued, only with one major change: It must truly act in the public interest, making decisions about which international projects to support not only on their financial merits but also on their human and environmental impacts. Since the EDC is indirectly supported by Canadian taxpayers and answerable to Parliament, it need not merely be a socialized insurance company - it can be a force of positive global change.

To understand why this is a revolutionary concept, one needs to look at what this institution has been doing up until now.

As well as insuring clean-handed widget exporters against currency crashes, the EDC has also supplied financing and insurance to several of Canada's most scandal-ridden corporate citizens. According to documents before the review, virtually every time a Canadian corporation has been involved in a high-profile environmental or corruption meltdown overseas, tha company got to where it was thanks, in part, to a leg-up from the EDC.

The documents state that Canadian-owned mines that have suffered major toxic spills in the Philippines, Guyana, Kyrgyzstan and Papua New Guinea - accidents that have sullied the reputation of Canadian miners - have all received millions in EDC financing.

Furthermore, the EDC backed a loan for a dam project in China (a month after the Tiananmen Square massacre), writes Patricia Adams of Probe International. And when the Pakistani government cancelled a deal with B.C. Hydro last July alleging corruption, part of the loss was swallowed by the project's "senior lender'': the EDC.

All this information has come out in the press over the course of messy political controversies. For the most part, however, EDC activities are protected by layers of confidentiality, meaning that this federal body could well be involved in many more ethically questionable projects which we know nothing about.

Some critics make the argument that, as a Crown Corporation, the EDC is less a pure financial institution than an arm of "Team Canada'' - a pompom-touting member of the government's free-trade cheer-leading squad.

The problem with this is that, in its enthusiasm for export and investment promotion, the EDC has been prone to back riskier projects than the market and good sense would support. Even EDC literature boasts of its taste for "higher risk'' ventures.

Though it has become official Liberal party gospel to preach the need for a kinder, gentler global free market, the government's actions through the EDC tell of a different agenda.

Not only is the government failing to encourage ethical, environmentally-sound international business - it may be actively encouraging just the opposite.

Critics charge that the EDC slows down reform in undemocratic countries by eliminating much of the risk to investors.

Why, for instance, should China become more respectful of human rights and less tolerant of corruption if Canadian companies will invest there anyway, thanks to their "political risk insurance'' from the EDC?

There is, however, another option: rather than slowing down reform, the EDC could try to speed it up. Several of the papers before the review are calling on the EDC to use its uniquely-powerful position to foster a brand of Canadian foreign investment that complements - rather than sabotages - the Liberals' stated foreign policy goals.

Next week, I'll look at those proposals in detail.

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