Tories propose to protect telecom as Canadian-owned in EU trade deal

The Conservative government has proposed an exemption to EU trade negotiators asking that Canada's telecom companies remain Canadian-owned, trade documents show. Canada completed a ninth round of negotiations with European Union officials last October with a view toward finalizing the EU-Canada Comprehensive Economic and Trade Agreement (CETA) this year. Leaked drafts of the agreement previously showed that the EU proposed to open up Canada's telecom sector to foreign ownership. A new leak released this week by the Réseau québécois sur l'intégration continentale (RQIC), an NGO coalition of researchers, shows that in initial offers made Oct. 12, 2011 on the services and investment portions of the agreement, Canada proposed an exception—known as a reservation—to keep Canadian telecom companies and networks Canadian-owned as written under the Telecommunications Act. “Canada reserves the right to adopt or maintain any measure ... limiting foreign investment in facilities-based telecommunications service suppliers, provided that the measure adopted or maintained by Canada does not limit foreign investment to less than a cumulative total of 46.7% of voting shares, based on 20% direct investment and 33.3% indirect investment requiring that facilities-based telecommunications service suppliers be controlled in fact by a Canadian,” Canada proposed in the reservation, which is located in an annex in the leaked document. The limitations set out in the Canadian reservation are the same as those in the Telecommunications Act, which restricts foreign investment in the sector to 20 per cent direct investment and 33 per cent indirect. The Conservative government said in March 2010 that it intended to bring Canada's telecom sector under the Investment Canada Act—a suggestion that it would eliminate the investment restrictions in the Telecom Act—but the statement was never followed up with legislation. The government is now preparing to release the ground rules for an auction of valuable 700 MHz spectrum licences, which it has said will take place this year. Industry Minister Christian Paradis said last year that he intends to clear up any questions over the government's foreign ownership policy before the 700 MHz auction. “It's an initial offer. So it's a bargaining position that could change,” Scott Sinclair, a senior researcher on trade and investment with the Canadian Centre for Policy Alternatives who has been following the CETA negotiations, said in an interview. He spoke to The Wire Report Wednesday after reviewing the reservations. Sinclair pointed out that Canada included similar reservations to protect the telecom sector in NAFTA and the Canada-Colombia Free Trade Agreement, which Canada signed in 2008. According to the leaked reservations, Canada proposed the protection for telecom as an “Annex II” reservation, which “provides stronger protection because it allows for future policy changes in an exempted sector,” Sinclair wrote in a research note Wednesday. This would “allow governments to take new measures that would otherwise be CETA-inconsistent,” he wrote. In contrast, protection for Canada Post is proposed under an “Annex I” reservation, he said, which means any future liberalization of the Crown corporation would need to be more in line with the agreement. That reservation, he said, would not protect the Crown corporation's monopoly over international mail from liberalization. “They're willing to concede that. They're taking a stronger approach in telecoms,” he said. Sinclair said the government may prefer to take its own approach to telecom liberalization, independent of a trade agreement, which the EU could be willing to support. “There have been policy reversals or certainly stops and starts ,” he said. “The Europeans may accept the argument that the Harper government is more likely to liberalize if it has the ability to fine tune or scale back initiatives that don't work out.” But if the government is planning to loosen the restrictions before the agreement is finalized, the EU will be willing to pressure the government to include it in the trade deal, Sinclair predicted. A cabinet document leaked to The Globe and Mail last year said the government was considering opening the telecom sector to foreign ownership for small players with less than 10 per cent market share. In the reservation, the Canadian government also proposed to maintain Northwestel's regulated monopoly in the North. Northwestel is owned by BCE Inc. “Canada reserves the right to adopt or maintain any measure that may limit competition in providing local wireline telephone services in the serving areas of Northwestel Inc.,” the Annex II reservation says. The CRTC issued a decision in December to open the North to competition. Canadian and European negotiators began trade talks in 2009 and held the final, formal round last October. Negotiators will meet again in Ottawa next week to go over more detailed points. Matthias Brinkmann, ambassador of the EU to Canada, told Embassy newspaper in a story published Jan. 25 that “there is a joint , together with the Canadians, to wrap this up this year, ideally before the summer break, but not weeks." The EU has also proposed increased rights holder protections under Canada's Copyright Act. sdoyle@thewirereport.ca

Tories propose to protect telecom as Canadian-owned in EU trade deal

News | January 25, 2012

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