Embassy, July 4th, 2007
Trade Deals May Become Socially Responsible
The government has polled the business community on including corporate social responsibility in free trade talks, but one expert says there are better ways to ensure accountability.
By Lee Berthiaume
As the government prepares to launch free trade talks with a host of developing countries, it is quietly weighing private sector attitudes on including references to corporate social responsibility in the deals.
"The government is exploring ways to encourage other countries to promote the adoption of corporate social responsibility principles by their own business communities," International Trade spokesman Brooke Grantham said yesterday.
"The inclusion of non-binding CSR references in trade agreements is one of the options being examined."
Canada has been including side agreements on environmental and labour co-operation with free trade deals for years.
Chile and Costa Rica signed such co-operation agreements when they completed free trade agreements with Canada.
An environmental document has been signed with the four-country bloc of El Salvador, Guatemala, Honduras and Nicaragua, with which Canada is negotiating a free trade deal, though a labour co-operation agreement with the Central American Four has proven controversial and is one factor holding up successful completion of the deal.
The co-operation agreements, which International Trade officials say will be included in any deals negotiated with Peru, Colombia, the Dominican Republic or the Caribbean Community, are designed to help the two countries work together to enhance and enforce environmental and labour standards.
Until recently, free trade agreements have generally been devoid of such references as they are considered purely economic documents.
Yet over the past few years, Mr. Grantham said, other countries, including the United States and the European Union, have moved to include corporate social responsibility in actual free trade agreements, and Canada is looking to follow suit in an effort to promote the principle abroad.
Mr. Grantham described the consultation as "very limited at this point," but acknowledged the government has had discussions with stakeholders, including the business community, to solicit their views. He could not say what other parties have been included, though several civil society groups said yesterday they were unaware of the consultation.
The Canadian Chamber of Commerce, which is leading the business community in the consultations, has made a submission to the government, said the chamber’s international policy analyst, Brian Zeiler-Kligman.
"The Canadian Chamber of Commerce is supportive of voluntary corporate initiatives and of government’s efforts to build capacity in this area," reads the letter submitted to the government.
"We would support a reference being made to voluntary corporate initiatives in free trade agreements, provided that the reference is directed to [the two countries] and not to companies," it adds. " The reference should remind the parties of their role in promoting and facilitating, but certainly not mandating, voluntary corporate initiatives."
Not only are companies not party to the agreement, and thus assume no legal obligations from the agreement, the letter continues, but companies must already meet legal requirements in the countries they are operating.
The letter goes on to state that any reference should be carefully crafted to prevent foreign governments from using it to bilk money from a Canadian company, and it should appear in the preamble to reflect that it is voluntary and non-binding.
Mr. Zeiler-Kligman said the chamber does not generally support the idea of including corporate social responsibility in free trade agreements.
"These are two separate issues," he said, "and that’s why we feel if there is going to be a reference that we could support, it would be in the preamble and directed towards the governments."
Hard to Marry CSR and Trade: Analyst
Gauri Sreenivasan, trade policy analyst at the Canadian Council for International Co-operation, was surprised to learn the government was considering corporate social responsibility for future free trade agreements, especially given the long list of recommendations that were presented to it following a national roundtable earlier this year.
Free trade agreements not only outline what governments can and cannot do, but also are essentially designed to reduce the government’s regulation of trade, she said.
The documents are legally binding and set down mandatory-rather than voluntary-rules, regulations and policies.
"The government wanting to pursue corporate social responsibility is a good idea," Ms. Sreenivasan said. "But in our view, it would be very hard to marry corporate social responsibility into the current framework of trade agreements."
There has been movement towards adoption of mandatory measures for corporate social responsibility, and Ms. Sreenivasan said adopting a new style of trade deals could actually make a difference.
But she said it makes more sense for the government to act upon the recommendations presented by members of the roundtable process than to add a non-binding reference in free trade agreement preambles.
"We need a new approach to trade rules that enables governments to ensure positive outcomes from commercial activities," she said. "It wouldn’t work to add just a little bit of CSR into the existing trade model."