Harper's trade deals are a poison pill for democracy

Please chip in to support more articles like this. Support rabble.ca today for as little as $1 per month!

Opponents of so-called free trade deals have always struggled with the question of why these international treaties don't generate more alarm and vocal opposition from Canadians. These treaties, after all, trump all other Canadian authority to make laws -- provincial legislatures, Parliament, the courts and even the Constitution. If, instead of being bored by news of another ho-hum "trade deal," Canadians were told that a panel of three international trade lawyers would be reviewing all new laws and determining, in secret, which ones passed muster by meeting with the approval of their giant corporate clients, would they react differently?

That is effectively what all of these corporate rights treaties establish: extra-judicial rulings whose objective is to protect the profits against laws passed in the public interest. The clauses that allow such suits are referred to as investor-state dispute settlement (ISDS). This is not hyperbole -- that is the actual, stated objective of ISDS: if a new law affects the expected future profits of a foreign-owned company, it can sue the federal government for damages. And the decision is made by a panel of trade lawyers whose bias is, naturally, in favour of facilitating corporate interests -- because that is who they normally work for. They aren't environmental lawyers or labour lawyers or human rights lawyers. They're trade lawyers. Foxes judging the right of other foxes to kill chickens.

Opening the door to corporate claims

Twenty years after the North American Free Trade Agreement (NAFTA) -- the first free trade agreement to include ISDS -- came into effect, there are many examples of laws duly passed by legislatures in the public interest that have been ruled in violation of NAFTA. Some are more egregious than others -- but they all challenge and assign financial penalties against laws that one government or another thought were important enough to implement.

According to Scott Sinclair with the Canadian Centre for Policy Alternatives:

"Canada has been the target of over 70 per cent of all NAFTA claims since 2005. Currently, Canada faces eight active claims… Foreign investors are seeking several billions in damages from the Canadian government. These include challenges to a ban on fracking by the Quebec provincial government…"

Canada has never won a case against the U.S.

The rate of challenges is increasing and the rulings are actually getting worse. In 2007 the Nova Scotia and federal governments rejected a proposal to create a huge quarry in an environmentally sensitive area important to local communities. The company won before a NAFTA tribunal and is seeking damages of over $300 million. But the reasoning was even more outrageous than usual. The company successfully argued that an environmental review panel relied on "community core values," which company lawyers argued was unacceptable. Adding insult to injury, the panel ruled on the basis that there was a "possibility" the review panel's decision might have been overturned in federal court. Effectively, the company just did an end-run around Canadian environmental laws and the Canadian judicial system by going straight to NAFTA.

And what did we get for all this pain? By the late 1990s, Canada had lost hundreds of thousands highly paid industrial jobs due to NAFTA. The trade numbers look even worse today. In our largest export market -- the three NAFTA countries -- Canada has steadily lost ground to Mexico. According to data from Bloomberg:

"In 1997, the United States imported twice as many goods from Canada than Mexico -- an $82 billion gap. For the month of February [2015], this gap has narrowed to just $781.5 million."

If the medicine doesn't work, increase the dose. That seems to be the position of the Harper government on these corporate rights agreements. He has signed one with South Korea and another with China (FIPA), shoe-horned his way into another, the Trans-Pacific Partnership (not yet signed) and is still waiting for the European Union to decide on yet another, Harper's most ambitious -- the Comprehensive Economic and Trade Agreement or CETA. Harper also wants one with Japan but that country has apparently lost interest in continuing negotiations.

Countries push back

Trade and investment agreements were designed to be the quintessential globalization mechanism aimed at effectively erasing borders and making the nation state increasingly irrelevant -- and impotent. But something happened to the globalization imperative in 2008. The economic meltdown suddenly challenged the notion that the only entity that could efficiently allocate capital (that is, make economic decisions for all of us) was the "marketplace" -- a.k.a. global finance and its international institutions, the World Trade Organization, World Bank and International Monetary Fund.

The crisis demonstrated decisively that globalization and its neoliberal ideology simply could not deliver the goods. But there was no one with power willing to declare that the emperor had no clothes. Globalization has failed spectacularly but its momentum carries it forward despite the fact that for capitalism to actually succeed (that is, to grow), it needs the check on financial power that states can provide. The continued lack of accountability of global finance weakens nation states' capacity to respond to economic fallout.

There are signs that at least a few countries are trying to get some of their governing power back from transnational corporations. The deal that Harper has pinned so much of his economic reputation on, CETA, is in trouble. Germany and France were the first to express grave reservations about the investor-state dispute settlement provisions. They have now been joined by Austria, Hungary, the Netherlands (where the Parliament passed a resolution condemning ISDS) and the new left-wing government of Greece. The Harper government has implied that without ISDS, the deal is off. We can only hope: CETA would give enormous anti-regulatory power to the oil and gas industry, increase Canadian drug costs by $2 billion a year and make it almost impossible for local governments to give preference to local suppliers.

The Trans-Pacific Partnership may also be in trouble. In order to pass in the U.S., it has to be given "fast track" status by both the Senate and the House of Representatives. Fast track means that the deal goes to an "up or down" vote -- it is either passed or defeated exactly as negotiated. Without fast track it is subject to hundreds of amendments which would almost certainly kill it. The Senate has passed fast track. The upcoming House vote is too close to call.

Harper's poison pill

There are cracks appearing, however tentative, in developed nations' free-market consensus, with some returning to the use of state powers. But no country seems as determined as Canada to jettison the powers of government. Unlike Australia, for example, whose previous Labour government stated it will not sign any trade and investment agreements containing an ISDS clause, Canada stipulates it won't sign one without it. Given its appalling record of losses and even worse future challenges under NAFTA, it seems that weakening state power is precisely what the Harper government intends. Canada loses against the U.S. on NAFTA challenges in part simply because the U.S. is an empire and Canada is not. Demanding an ISDS clause with Europe invites even more challenges from states that are far more powerful and will be investing more in Canada than vice versa.

The same is true in spades with the deal Canada has already ratified with China -- the Foreign Investment Promotion and Protection Agreement (FIPA). This agreement breaks the mould by being even more lopsided than other agreements in several respects -- all of them making it more difficult for future governments to regulate investment by what will soon be the most powerful economy on the planet.

Unlike NAFTA, which can be exited with six-month notice, FIPA lasts for 31 years, binding governments for the next seven elections. China will have an enormous advantage because the deal locks in existing restrictions and China's "rules" are so arbitrary it will be extremely difficult for Canadian companies to navigate them or successfully challenge them.

As trade expert Gus Van Harten points out, given the size differential, FIPA is basically a capital-importing agreement as Canadian investment in China will be minimal. That means potentially dozens of huge Chinese state enterprises gaining access to the ISDS clause and challenging environmental regulation, First Nations rights and labour rights. 

There are already many such investment protection agreements in place and there have been many dispute panel awards of over $100 million and $2 billion-plus awards. These could make awards paid by Canada under NAFTA (approximately $190 million to date) look like stamp money.

Companies targeted with a hostile takeover often use a "poison pill" strategy to make their stock less attractive to the acquirer. What better poison pill for a right-wing libertarian prime minister than to tie the hands of future governments with a string of corporate rights agreements.

Murray Dobbin has been a journalist, broadcaster, author and social activist for 40 years. He writes rabble's State of the Nation column, which is also found at The Tyee.

Photo: Backbone Campaign/flickr

Related Items

Thank you for reading this story…

More people are reading rabble.ca than ever and unlike many news organizations, we have never put up a paywall – at rabble we’ve always believed in making our reporting and analysis free to all, while striving to make it sustainable as well. Media isn’t free to produce. rabble’s total budget is likely less than what big corporate media spend on photocopying (we kid you not!) and we do not have any major foundation, sponsor or angel investor. Our main supporters are people and organizations -- like you. This is why we need your help. You are what keep us sustainable.

rabble.ca has staked its existence on you. We live or die on community support -- your support! We get hundreds of thousands of visitors and we believe in them. We believe in you. We believe people will put in what they can for the greater good. We call that sustainable.

So what is the easy answer for us? Depend on a community of visitors who care passionately about media that amplifies the voices of people struggling for change and justice. It really is that simple. When the people who visit rabble care enough to contribute a bit then it works for everyone.

And so we’re asking you if you could make a donation, right now, to help us carry forward on our mission. Make a donation today.

Comments

We welcome your comments! rabble.ca embraces a pro-human rights, pro-feminist, anti-racist, queer-positive, anti-imperialist and pro-labour stance, and encourages discussions which develop progressive thought. Our full comment policy can be found here. Learn more about Disqus on rabble.ca and your privacy here. Please keep in mind:

Do

  • Tell the truth and avoid rumours.
  • Add context and background.
  • Report typos and logical fallacies.
  • Be respectful.
  • Respect copyright - link to articles.
  • Stay focused. Bring in-depth commentary to our discussion forum, babble.

Don't

  • Use oppressive/offensive language.
  • Libel or defame.
  • Bully or troll.
  • Post spam.
  • Engage trolls. Flag suspect activity instead.