OTTAWA (Reuters) - After its fourth-largest bank abandoned a multimillion dollar investment in Argentina, Canada is backing plans to let companies sue countries in a proposed Americas-wide free trade pact, a senior Canadian official said on Thursday.
The proposal, due for debate at a ministerial meeting in Quito, Ecuador on Nov. 1, is similar to a controversial law that applies in the North American Free Trade Area of the United States, Mexico and Canada.
Critics say that deal encroaches on sovereignty in matters of health, education and culture.
Canada wants those three sectors excluded from the talks to create a tariff-free trade area stretching from Alaska to Tierra del Fuego, the so-called Free Trade Area of the Americas (FTAA). But it says all other investments should be included.
"If we look at foreign investment figures, Canadian investments in the countries of the (proposed) free-trade area outside North America, then it is in our interests to ensure our investments are treated equitably," the official said.
He said a law is needed allowing investors to sue in cases of expropriation, or its equivalent, by a foreign government.
Canada is fighting a series of lawsuits brought by U.S. companies but the government says it does not oppose the law, it simply wants to clarify legal ambiguities for the future ahead of the possible extension of the rule to other nations.
Argentina's mismatched conversion of savings and loans to devalued pesos, bringing local and foreign banks to the brink of collapse, is a prime example of why the rule is necessary.
"They (Argentines) are going to have a hard time attracting foreign investors without this kind of rule," he told Reuters.
Bank of Nova Scotia sold its Argentine unit last month for a fraction of its original cost, writing off the entire C$540 million ($345 million) investment, after the Argentine authorities halted most of its operations.
The United States has been looking for a rule where the "mere diminution" in a firm's investment value is not the same as to expropriation and regulatory changes to protect the public be made exempt from lawsuits.
The meeting in Quito will be the first gathering of top trade officials from the 34 FTAA countries in over a year as they look for ways to create what could be the world's largest tariff-free zone by 2005.
Since that last meeting, countries across South America have become embroiled in financial and political crises, with problems in Brazil, Argentina and Venezuela through to Peru, Uruguay and Paraguay.
FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. NoNonsense English offers this material non-commercially for research and educational purposes. I believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner, i.e. the media service or newspaper which first published the article online and which is indicated at the top of the article unless otherwise specified.