Foreign Investment in the Child Care Sector: Canada’s International Trade Obligations

Steven Shrybman

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Multinational child care comes to Canada
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Foreign investment imperils child care
APRIL 1, 2008
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CUPE has released a legal opinion suggesting that if the federal and provincial governments don’t act fast, a company called “123 Busy Beavers” might make universal child care an impossibility.

The opinion – by noted trade lawyer Steven Shrybman examines NAFTA rules around public services and foreign investment. Paul Moist, Shrybman, National Child Care Advisory Committee Chair Shellie Bird, and Tracy Freitas, Early Childhood Educator and CUPE 2204 member, released the opinion at a press conference Apr. 1.

Canada has for-profit child care, but it’s mostly delivered by small businesses and individuals. There is little – if any – foreign investment.

That could change though, as a company with ties to Australian child care ABC Learning Centres has been buying up for-profit child care centres in Alberta, BC and Ontario.

And if the amount of for-profit child care delivery grows, and if the amount of foreign investment grows too, Shrybman argues, child care would be considered a commercial venture, rather than a “reserved” public service, under NAFTA.

Any new program – such as the national child care program envisioned in Bill C-303 or even the Ontario government’s plan for full-day kindergarden – could be considered a violation of the rights of the for-profit child care sectors’ investors.

A government that still wanted to proceed with a publicly-delivered child care program would have to pay damages to any foreign company whose profits were affected.

Shrybman argues the only way for the federal and provincial governments to preserve their right to create a public child care program is to use it.

“Once the door is opened to foreign investment in the child care sector, it may be impossible for governments to close it,” he argues.

This opinion builds on a 2004 legal opinion Shrybman produced on the former Liberal government’s plans for a national child care program.

Related articles:

Union report sounds alarm over foreign daycare chains; CUPE warns trade rules could be used to block universal public system
April 2, 2008

…. A legal opinion prepared for the Canadian Union of Public Employees, … warns there are risks if Ottawa does not limit foreign corporations – like Australia’s ABC Learning Centres Ltd. – from buying up small child-care operators in Alberta, B.C. and Ontario.

International trade lawyer Steven Shrybman says that under NAFTA rules, foreign investors, if they become significant players as daycare providers, would be able to challenge future “public policy” efforts by governments to regulate or expand child care.

… Right now, governments can limit or ban foreign investment in child care and “preserve future policy options,” he said. They can require a child-care centre to hire locally, provide service to a particular region as a condition of its licence, or ensure that parents and members of the local community comprise a majority of the board of directors.

But if federal and provincial governments do not exercise their right to regulate foreign corporations, those companies will be in a position to sue for damages if future government measures “impinge on those investments.” …  “the prudent course for provincial governments would be to restrict foreign investment in the child-care sector,” said Shrybman.

“If they fail to do that, the future of child-care services in Canada may well be determined not by communities or by governments, but by private tribunals meeting behind closed-door meetings in proceedings at World Bank headquarters in Washington, because that’s where these disputes will be resolved.”….

Vue Weekly – Edmonton

…. Privatization, says Moore-Kilgannon, is the “common thread at the root of so many problems …. Consistent through all these sectors is that they are under constant pressure—waiting lists, cutbacks, poorer quality of services.”

Moore-Kilgannon explains that privatization is part of a familiar cycle: governments reduce spending on public services, sometimes dramatically. The public sees a downturn in services, and demands change. The private sector—often massive multinational corporations—steps in to offer solutions. Those solutions are sold to the public as cheaper and more efficient.even though Moore-Kilgannon says the evidence most often shows they are neither.

Research has shown privatized health, child care and seniors’ services to be more expensive—both to individuals and to governments. A layer of profits has to be skimmed off the service for it to be a viable business venture, and those profits come from either cutting back on wages or quality or by raising fees.

Australian social policy researcher Deb Brennan, an expert on child care, says all of that and more has happened in her country…ABC built their business model upon government subsidies.

Australia used to fund child care as many other developed countries do: giving direct subsidies to non-profit and community-run centres. Now, they simply cut a cheque to parents, who are then able to “choose” the child care services they like best.

Non-profit centres have since all but disappeared, bought up by ABC and other for-profit ventures. Fees have gone up and wages for workers have stagnated. … Last year, ABC received $150 million (CAD) of taxpayers’ money.

Australia elected a new, more left-leaning federal government last fall, but Brennan says it’s made precious little difference in the government’s approach to child care.

“They’ve just announced the government will now cover 50 per cent of child care fees. That’s just an open invitation to for-profit operators to raise fees.”

Brennan says there are no rules constraining how much child care operators can charge. “It’s part of the philosophy of letting the market decide. But the quality and standards are very mixed for the cost.”

… She says Canadians need to take a hard look at market-based models, “to find out whether this model actually delivers high quality early learning and care services. In Australia, it doesn’t.”

…Just six months ago, a division of ABC bought 11 child care centres in Alberta, as the province has boosted Australia-style subsidies for parents. Called Busy Beaver Learning Centres, the ABC subsidiary had also been looking for more opportunities in BC and Ontario….