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Trade treaties bloom, sovereignty wilts

By: | June 18, 2014

The federal government is engaged in five major “free trade agreements” that threaten the degree of control Canadians have over their land, resources, freedom and future

Marilyn Reid
Cutting through the spin on CETA is a series examining the reticent nature of a treaty that threatens Canada’s economic sovereignty

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An image from the provincial government's presentation "Newfoundland and Labrador Iron Ore: World Class Resources and Opportunities for Foreign Investment", delivered at the China Mining 2013 conference in Tianjin, China. Under FIPA, "Chinese investors already in Canada [could] easily buy up or take over Canadian companies without a foreign investment review ... [and] China could gain unprecedented control over our country’s pace and scale of resource development." Photo: NL Department of Natural Resources.

Two more anticipated dates for closure of the Canada-Europe Comprehensive Economic and Trade Agreement (CETA) came and went over the last month. The expectation that Trade Minister Ed Fast and EU Trade Commissioner Karel De Gucht would sign off on the deal May 7 came to nothing. Prime Minister Harper’s June 5 meeting with President Jose Manuel Barroso of the European Commission also led to little more than a statement that the CETA process remains on track.

Why the constant delays on a deal that was concluded in principle last October? The European Commission and Harper government may be enthusiastic about CETA, but EU countries are no longer so sure. Part of the reason has to do with the Transatlantic Trade and Investment Partnership (TTIP) currently being negotiated between the EU and the US. Under pressure from their citizens, European politicians have increasingly exhibited concerns about the extent to which the TTIP will allow transnational corporations to constrain public policy through the threat of investor-state lawsuits. This growing precautionary stance will have been considerably reinforced by the recent elections to the EU Parliament. It’s estimated that over half of the EU parliamentary delegates may now represent parties either opposed to, or undecided about, trade liberalization treaties.

Even if CETA appears to be on hold, Canada is still embroiled in at least 16 other sets of free trade agreement (FTA) negotiations. Many of these are with small countries where Canadian mining companies have pushed for strong investors’ rights protection. Whatever the consequences of the trade agreements in these countries, the FTAs may have little impact here in Canada. On the other hand, there are four FTAs that could affect us considerably: the Trans-Pacific Partnership (TPP), the Canada-China Foreign Investment Promotion and Protection Agreement (FIPA), The Canada-Korea Free Trade Agreement and the little known Trade in Services Agreement (TISA).

The Trans-Pacific Partnership (TPP)

Participants in the TPP include Canada, the United States, Mexico, Australia, Chile, Japan, Peru, Brunei, Malaysia, Singapore and Vietnam. Not surprisingly, the TPP shares features with CETA. It appears to offer extended patent protections for prescription drugs that would delay the introduction of less-expensive generic drugs. It has an Investor-State Dispute Settlement (ISDS) mechanism that would allow companies to sue governments in offshore tribunals where national and provincial laws count for nothing. There are procurement rules that would prevent any favouritism or support given to Canadian companies or workers, and it includes restrictions on new government spending to meet public interest priorities, including protection of the environment.

The TPP could also result in the loss or substantial weakening of Canada’s unique supply management system. Under supply management, Newfoundland and Labrador’s egg, milk and poultry producers are awarded quotas that exactly match local demand for these products. This guaranteed market is protected by high tariff barriers that effectively discourage foreign producers from selling their products here.

Supply management was not a big issue under CETA. It was cheese that interested the Europeans, not eggs, milk and poultry. The Americans and the New Zealanders, on the other hand, are determined to gain access to this lucrative Canadian market. The betting is that Canada will be forced to concede to their TPP demands and dismantle tariffs and quotas over a defined phase-out period. If or when that happens, Canadian producers will find it extremely difficult to compete with the cheap imports. Newfoundland will be hit hard. Supply management brings in approximately $90 million in annual revenues to this province.

The Canada-China Foreign Investment Promotion and Protection Agreement (FIPA)

“The Tories, backed by a naïve Canadian Chamber of Commerce and a handful of big, conflicted business interests, have demonstrated the worst negotiating skills since Neville Chamberlain… Ottawa capitulated to China on everything.”

So wrote columnist Diane Francis of the Financial Post, claiming there was minimal reciprocity in this FIPA, continued Chinese protection of their own industries, and little realistic likelihood of Canadian companies using the investor-state dispute mechanism against China.

On the other hand, the China FIPA essentially allows Chinese investors already in Canada to easily buy up or take over Canadian companies without a foreign investment review. It’s Canada’s resource sector that particularly interests China. Under FIPA’s terms, China could gain unprecedented control over our country’s pace and scale of resource development. That could lead to the further shipping out of refining and other value-added benefits to China with a subsequent loss of Canadian jobs and growth.

But most worrying, according to Gus Van Harten, trade expert at Osgood Hall Law School, is the extent to which the Canada-China FIPA allows Chinese asset holders—even those with only a minority share in a Canadian enterprise—to challenge Canadian legislative, executive or judicial decisions outside of the Canadian legal system. This could be done on matters such as taxation, land and property rights, and natural resources. For example, if a Chinese investor objected to stronger environmental regulation over the oil sands or fracking they could take their case to an ISDS offshore tribunal, where there is no appeal process. Any decision against Canada would be irreversible. The treaty has a 31-year duration period but has not yet been ratified due to extensive public opposition and a soon to be resolved court challenge by the Hupacasath First Nation.

The Canada-Korea Free Trade Agreement

According to a study by the Economic Policy Institute, the US-Korea FTA led to 40,000 lost jobs in the United States in the year following the 2012 ratification of the treaty, and increased the country’s trade deficit by $5.8 billion. That’s not a good precedent for Canada’s agreement with Korea, which has been concluded but not yet ratified. The most significant blow could be to our automotive industry.

In spite of setbacks caused by the strong Canadian dollar and NAFTA job losses to Mexican factories, automotive products still constitute Canada’s second largest export (after petroleum), with most of the vehicles and parts going to the U.S. A recent study by Jim Stanford of the Canadian Centre for Policy Alternatives (CCPA) reports that the Canadian automotive manufacturing industry employs about 100,000 workers (about one-third assembly, and two-thirds in parts). It’s also estimated that every job in auto plants supports a total of 10 jobs up and down the supply chain. However, unlike with agriculture and oil, there is no inherent Canadian base to this industry. We are 100 per cent dependent on decisions made by global corporations with head offices in other countries.

The Canada-Korea Free Trade Agreement will lead to increased imports of Korean vehicles. Link that to the increase in European luxury vehicles expected under CETA and the likelihood that Japan will demand similar concessions under the TTP. This will undoubtedly lead to the loss of market share by the Canadian automotive industry. How will this affect the business case for global corporations to continue to produce motor vehicles in Canada? Did our negotiators even consider the fact that lowering tariffs could lead to foreign direct “de-investment” in our auto industry? Did they consider how huge the reverberations of that scenario would be across our economy as workers compete for fewer and fewer jobs?

The Trade In Services Agreement (TISA)

Unlike other trade and investment agreements, the TISA focuses exclusively on trade in services. Talks began in 2012 and currently involve 23 governments representing 50 countries. Trade negotiators, as with other trade agreements, continue to insist that nothing in the treaty will force governments to privatize. Perhaps true, but they will limit future public policy initiatives. Scott Sinclair of the CCPA writes: “The negative impact on public services include: confining public services within existing boundaries by raising the costs of expanding existing public services or creating new ones; increasing the bargaining power of corporations to block initiatives when new public services are proposed or implemented and locking in future privatization by making it legally irreversible.”

The TISA aims to stop the growing worldwide “remunicipalization” of privatized public services by communities dissatisfied with the performance of private sector providers. Why should that concern local governments in our province? Our current federal government is pushing the privatization of public services by increasingly directing funding to projects that involve private sector involvement. Newfoundland municipalities considering a public private partnership (P3) to meet the upgrading requirements—mandated by the federal government—of their waste water treatment infrastructure need to consider how difficult it might actually be to take back these services should they be dissatisfied with their private sector provider, if or when TISA is signed.

The common thread in these FTAs government doesn’t want to talk about

Current treaties have evolved into constitutional-style documents that constrain governments, and in ways only loosely related to trade. These agreements tend to build on the ones before them. How? Any protections for domestic industries, for public services, or for regulatory capacity achieved in a specific agreement become targets for elimination in the next slate of talks. That’s hardly surprising given the drive for all of these agreements comes from transnational corporations both in Canada and abroad.

There are three reasons why large corporations do so well out of FTAs. First, their lobbyists have sufficient access to the negotiations to, in their own words, “define the challenges and help the negotiators overcome them.” Secondly, the small, elite group of investment lawyers who write the agreements for governments also service the ISDS process, sometimes as judges, and sometimes as lawyers for the corporations. That conflict of interest gives them a vested interest in writing agreements in legal language that encourages lawsuits. Finally, our elected federal representatives from the three major parties, instead of being outraged by the blatancy of this bias, appear to have gone along with the process. Their criticisms have been tepid.

Meanwhile, civil society groups are not only denied input into the negotiating process, but are not allowed to see what’s been negotiated in our name. We are supposed to be content with summary statements that camouflage or misrepresent the real intent of these treaties. It’s only through leaked documents that we’re able to find out what’s really at stake.

Who is defending the public good here?


Editor’s note: If you would like to respond to this or any article on TheIndependent.ca, or if you would like to address an issue we haven’t yet covered, we welcome thoughtful and articulate Letters to the Editor. You can email yours to: justin(at)theindependent(dot)ca. Not all letters will be printed, but all will be read.

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