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The Globe and Mail : March 6, 2000
By Madelaine Drohan

Export Agency Head Seeks Flexible Standards

A. Ian Gillespie says companies that get financing from Export Development Corp. should not have to abide by the same strict environmental regulations abroad as they do at home

Ian Gillespie doesn't want the federal government to tie his hands by putting tough environmental wording in legislation renewing the mandate of Export Development Corp.

Being "whiter than white" by insisting that projects backed by the EDC meet Canadian environmental standards won't help anyone if it raises the project's cost to the point where the recipient country looks elsewhere, says the president and chief executive officer of EDC.

What is needed is a flexible approach, he says, where the highest possible environmental standards are used, but not necessarily ones as high as expected by Canadian governments or by the World Bank. In other words, Canadians should not expect companies that receive EDC financing or loan guarantees to use the same standards overseas that are required at home. "It's a little bit akin to the view that sanctions help. Embargoes help. Cutting off countries from the international community is somehow going to instill a faster move towards democracy and the like," Mr. Gillespie says. "And I think what we're really saying is trade helps. Trade helps in terms of ensuring that these countries have the best possible advice, the best possible technology, the highest possible standards in keeping with their own domestic interests." Setting the bar "too high," Mr. Gillespie says, might mean that countries either won't buy from Canada or won't buy from anyone at all. And that might mean much-needed projects, such as upgrading water or sewage systems, are not done.

Despite its name, EDC is not a private company but an arm of the federal government. It is a Crown corporation. Many countries have similar bodies whose mandate is to encourage exports through financial support, loan guarantees and market analysis.

The matter of the environment and how it fits into the EDC mandate is preying on the president's mind because of moves, both within Canada and abroad, to get agencies that back exports to pay more heed to environmental and human rights issues when deciding whether to support certain projects.

Within Canada, EDC has almost completed a parliamentary review that involved hearings before committees of the House of Commons and the Senate. The Senate committee is finalizing its report after which the Minister of International Trade will introduce legislation to Parliament.

The Commons committee recommended that the legislation include a requirement for environmental assessments of projects when a company applies for EDC backing. EDC has its own internal code of ethics that covers the environment, human rights and corruption. It also has in place a screening process that weighs the potential environmental impact of projects.

The Commons committee report said this is a good start, but it wants language put in the Export Development Act that would require EDC to "give due regard" to commitments Canada has made on the environment and human rights in international agreements.

Abroad, ministers of the Group of Eight countries (Canada, the United States, Japan, Germany, Britain, France, Italy and Russia) agreed at their summit in Cologne, Germany, last summer to produce common environmental guidelines for export finance by the end of 2001.

The protests last December at the World Trade Organization's meeting in Seattle, where environmental, labour and human rights groups demonstrated against current trade practices, increased the pressure on governments to broaden the trade agenda to include their concerns. Critics of export credit agencies believe they are too focused on increasing trade to the detriment of human rights and the environment.

As a group, export credit agencies subsidize almost 8 per cent of world trade. Their loans, guarantees and insurance schemes support more than $400-billion (U.S.) worth of exports annually, of which $50-billion is for big infrastructure projects in developing countries.

EDC supported more than $40-billion (Canadian) in sales and foreign investments by 5,182 Canadian companies in 171 countries in 1999. Mr. Gillespie believes these sales and investments will suffer if companies are forced to comply with Canadian environmental standards. Project approval will be delayed as assessments are done. Environmental lobby groups could also use the process to impede approval. "We could be paralyzed," he said. He prefers that environmental and human rights standards be dealt with through the Organization for Economic Co-operation and Development in Paris, whose 29 member countries, including Canada, are working on a set of guidelines for multinational corporations.

Companies from OECD countries, however, have already complained that they will be at a competitive disadvantage if they enforce the guidelines for corporate conduct and their competitors do not. Mr. Gillespie says the host country's standards are a definite minimum. "We hope to push the projects beyond that."

But each project has to be looked at on its merits. It wasn't so long ago that Canada was building infrastructure that wouldn't pass muster with environmentalists today, he said. Yet projects such as the St. Lawrence Seaway were instrumental in the economic growth of the country. "A few people were moved. Relocated. . . . They [critics] forget that that was a very important decision in terms of the future of Canada and what it's been able to do." He said it's "simplistic" to think you should not displace one person or 10,000 people for an infrastructure project similar to the seaway in other countries. "What are those countries to do? How do they provide for their populations? How do they grow economically? So it's not simply you can't move people and somehow that's a better outcome."

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