Sunshine disinfects best

U.S. President Barack Obama will soon make a decision on the Keystone XL pipeline, with very serious implications for Alberta and Canada’s economic well-being.

Although Canadian Prime Minister Stephen Harper has said the approval should be a “no-brainer,” it has turned into a cliff hanger because he has underestimated American concerns about carbon emissions and climate change. Having formally withdrawn from the Kyoto protocol, Canada’s Conservative government has handed Keystone opponents the perfect argument: Why should the U.S. help Canada sell more oil when our government is not acting responsibly?

Putting aside the merits of the Keystone argument, the larger issue is the “social licence” to operate responsibly. Corporate social responsibility, the darling of lefty liberal circles for the last decade, has recently moved from the fringes of corporate culture to the mainstream. For Canadian mining companies, it has become as important as the accounting or legal department.

Canadian mining companies are world leaders in geological and operational know-how. They know better than most where the mineral is and how to get it out. The more difficult task has been to manage the social licence required to turn a potentially profitable discovery into a wealth generator for all citizens. There are numerous conflicts involving the extraction industry. Regulators have tried to create a framework to constrain industry excesses but nothing substantial has yet emerged.

Generally, to establish an international regulatory environment you need the U.S. onside. Since congress is the focal point for any initiatives, Canadians should be paying attention to the Cardin-Lugar amendment in the Dodd-Frank Act.

During the 2008-2009 financial crisis, the U.S. congress passed a law that “requires mining, oil and gas corporations to submit annual transparency reports that disclose all payments provided by them or their subsidiaries to a foreign government for the purpose of furthering mining, oil or gas industry activities. It also makes it an offence to fail to comply with this requirement and establishes a penalty for such contravention.” The sanction for non-compliance is harsh: the delisting from U.S. stock exchanges. The law takes effect this September.

Like everyone else, the Americans are fed up with bribery and corruption depriving indigenous populations of their rightful expectations to health and wealth. Unfairness leads to instability, which leads to failed states and in turn terrorism; hence, the Obama administration’s enthusiasm for a bill directed at transparency and accountability.

The EU and the U.K. are also fed up with corruption. British Prime Minister David Cameron has said his country is “looking for concrete moves in three key areas – including the potential for signing up to an anti-corruption measure for extraction industries to encourage poorer countries to follow suit” at the G8 summit in June.

So the U.S., the U.K. and the EU are all pushing for a bill modelled on the Cardin-Lugar amendment. Where is Canada, the country responsible for the largest mining industry in the world? Apparently nowhere. In spite of intense pressure at the last G8 meeting, Harper nixed any joint communique which would have committed Canada to similar legislation.

One would be naïve to expect corruption and bribery would disappear with this modest legislative initiative; however, to be the country that actually sabotages a worldwide initiative doesn’t endear us to our closest allies, and could cost us dearly.

Canada is currently negotiating a free trade agreement with the European Union, and it is never wise to gratuitously irritate your negotiating partner. The Harper government wasted four years gratuitously irritating the Government of China, costing Canadian businesses valuable time and money. The economic consequences of cancelling Kyoto have also been significant for Canadian firms.

Introducing a private member’s bill to remedy a legislative shortfall is not the optimal procedure. Nevertheless, out of necessity, I have introduced a parallel version of the Cardin-Lugar amendment as Bill C-474, a.k.a. “the Sunshine Bill.” It is as similar as possible to the American legislation because it is part of a global effort to combat corruption. It also aims to make the regulatory burden as light as possible for Canadian companies. Many of the larger firms are cross-listed on the U.S., U.K. and EU exchanges so they will have to comply regardless. Unfortunately, that leaves a large number of Canadian companies out of the regime, creating a two-tier system.

It is reasonable to assume that Canadians don’t want to host companies that hide their payments to secure concessions. That is not a reputation that Canada wants or that Canadians should be burdened with. A poll by GlobeScan found that, “Canada’s popularity among its major trading partners has declined … and the deterioration could hurt Canadian business interests.”

So here we are just prior to the G8 meeting in the U.K. with no indication the Government of Canada has learned from its foreign policy fiascos. Failing to be serious about managing carbon emissions has cost us millions and may well cost us multiple billions. We are about to gratuitously irritate the United States, the United Kingdom and the European Union. Diplomacy matters, trade matters, but doing the right thing matters even more. My hope is that the Prime Minister goes into the G8 meeting with a firm commitment to promote the Sunshine Bill for the good of our nation.

John McKay is the Liberal Member of Parliament for Scarborough-Guildwood

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