Dec '13/Jan '14

MAC Economic Commentary

The international agenda

By Pierre Gratton

The Canadian mining industry has a significant international presence and is a major stakeholder of the Government of Canada’s international programs and services, making the federal government’s current review of programs that support the extractive sector abroad particularly welcome. The Department of Foreign Affairs, Trade and Development (DFATD) undertakes many of its functions very effectively, but increased focus on several key areas would be beneficial to extractive companies operating abroad, to the host communities and countries where they operate, and to Canada itself.

From a trade perspective, the federal government should continue aggressively expanding Canada’s trade and investment regime. Since 2006, 27 free trade agreements (FTAs) and foreign investment protection agreements (FIPAs) have either come into force or been concluded and 24 sets of negotiations for these agreements remain ongoing.

There is a need, however, to develop stronger trade ties with Asia and Africa through FTAs, FIPAs and double taxation agreements (DTA). As the centre of global consumption shifts East, and as Africa continues embracing mining investment, Canada must redouble its efforts to create strong links with these jurisdictions.

The implementation of FIPAs in jurisdictions without DTAs has enabled some countries to negotiate taxation treaties where significant Canadian business interests exist, thus enhancing their tax competitiveness relative to Canadian companies operating there. It would be valuable for DFATD and Finance Canada – the department responsible for DTA negotiations – to liaise with industry in identifying key jurisdictions where gaps exist and pursue a strategy to address them.

To help the domestic mining industry address the ongoing skills crisis, DFATD should consider every effort to include meaningful labour mobility provisions in free trade agreements. The mining industry workforce comprises 66 core occupations, many of which require technical skills obtained without university-level education, and all of which will require new workers to meet the domestic industry’s hiring needs.

From a corporate social responsibility (CSR) perspective, the federal government’s recent efforts to collaborate with the mining industry and non-governmental organizations in community development partnerships in host countries are a clear demonstration of its understanding and appreciation of the positive contribution our industry is making in the developing world. The creation of the Canadian International Institute for Extractive Industries and Development and the support for the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development are important examples of how Canada can demonstrate clear leadership in this area.

Efforts must continue to focus on helping raise capacity in host countries. This would better equip host jurisdictions to effectively manage their natural resources and attract additional investment opportunities. Creating regulatory, environmental and fiscal stability through transparent fiscal regimes, robust anti-corruption legislation, and a willingness to collaborate with communities of interest benefit both industry and host jurisdictions in achieving win-win outcomes. This will benefit the Canadian mining industry through more conducive investment climates, stable regulatory and fiscal regimes, and better relationships with communities.

Further, the federal government should link the extractive sector trade strategy with the next iteration of the CSR strategy. This would not only send a clear signal that the Government of Canada supports the Canadian mining sector abroad, it would also communicate its expectation that Canadian companies will perform responsibly wherever they operate.

The Canadian mining industry believes that, wherever possible, disputes should be solved through local-level mechanisms. However, these mechanisms are not always effective in every circumstance. When such mechanisms fail, the government can play a strong role in providing neutral dispute resolution mechanisms to overseas communities where access to facilitated dialogue and dispute resolution cannot be effectively provided by the industry itself.

The Canadian CSR Counsellor’s Office and Canada’s National Contact Point through the Organization for Economic Co-operation and Development are viewed by the mining industry as two important tools provided by the Government of Canada to help resolve disputes between mining companies and local communities. In particular, the CSR counsellor has contributed to a broader and deeper understanding of the standards to which the government expects the mining industry to conform, and has contributed to an appreciation of the value of grievance and dispute resolution mechanisms.

Finally, mining is a highly complex business and improving DFATD staff’s depth of knowledge of the industry would enable them to better provide the type of “on the ground” intelligence companies require to navigate regionally specific dynamics before challenges arise.

By incorporating the above recommendations, the Canadian mining industry believes that DFATD and the Canadian mining sector can further enhance Canada’s leadership in mining on the international stage.

Pierre Gratton is president and CEO of The Mining Association of Canada.

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