In the recently announced United States-Mexico-Canada Agreement (USMCA), Prime Minister Justin Trudeau and U.S. President Donald Trump have reportedly agreed to “phase out” the controversial Chapter 11 investor-state dispute settlement provision.
But Brock University political science professor Blayne Haggart suggests that “six-year mandatory review” provision in the USMCA has ominous implications in this regard.
Article 34.7 ( covering review and term extension) of the USMCA states, “No later than the sixth anniversary of the entry into force of this Agreement, the Commission shall meet to conduct a ‘joint review’ of the operation of the Agreement, review any recommendations for action submitted by a Party, and decide on any appropriate actions.”
Haggart argues, “The spectre of this review would likely make Canadian policy-makers hesitant about implementing policies that may upset the United States and thus threaten the entire economic relationship.”
He adds, “This effect would be similar to the ‘regulatory chill’ associated with NAFTA’s Chapter 11 investor-state dispute settlement mechanism — it fuelled governments’ reluctance to regulate in some areas due to the fear that a foreign company would sue them for doing so.”
There is merit to this argument.
First of all, it’s clear that the Trudeau government found the originally proposed five-year “sunset clause” unacceptable because of its impact on investment decisions.
In September 2017, David MacNaughton, the Canadian ambassador to the U.S., commented, “One of reasons you do (a trade agreement) is to create an environment within which business can make investments. (In) many of those investments people will look to 20 years’, 25 years’ payback. If you have to do it every five years, the pricing of political risk is very high.”
MacNaughton’s quote implicitly recognizes the threat (intimidation factor) a “six-year mandatory review” would pose to both business and governmental decision-making.
It’s also significant that the Trump administration didn’t oppose Chapter 11 for the same reasons we did. We are concerned about transnational corporations being able to sue national governments in secretive tribunals for lost future profits relating to public policy, most commonly environmental protection legislation.
Instead, the Trump administration used sovereignty as a key reason to explain their opposition. In June 2017, U.S. Trade Representative Robert Lighthizer told the Senate, “I’m always troubled by the fact that nonelected non-Americans can make the final decision that the United States law is invalid. This is a matter of principle I find offensive.”
As such, a mechanism — like the threat of Article 34.7 — that could achieve the same end (dominance, corporate-friendly decision-making by governments) without “non-Americans” being involved, would likely suit the purposes of the Trump administration and U.S.-based transnational capital.
Furthermore, let’s not forget, if we are to maintain an internationalist perspective, that Chapter 11 still exists as an obstacle for our Mexican allies (and us).
The Washington Post notes, “In the end, Chapter 11 is mostly gone, except for a few key industries, such as oil, that lobbied hard to be able to challenge the Mexican government if it changes the rules and tries to nationalize its energy sector again.”
In December 2013, Bloomberg reported that ending Mexico’s state ownership of its energy sector could attract $15 billion in foreign investment and increase oil production to as much as four million barrels per day (from the current 2.5 million barrels) and natural gas production to 10.4 cubic billion feet per day (from the current 5.7 billion cubic feet).
To think these carbon emissions won’t impact the lives of all of us, and that somehow we’ve escaped the impacts of Chapter 11, would be detrimental to the kind of trade justice and solidarity movement we need to build on a global scale to challenge transnational capital and their neoliberal governments in Ottawa, Washington, Mexico City and elsewhere.
In the absence of Chapter 11 in NAFTA, Canadian capital, of course, can also utilize the investor-state provision in the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) should public interest legislation in Mexico infringe on its profit-making there.
Certainly the case could be made too that transnational corporations were threatening governments with capital flight, exerting influence through intensive lobbying, and promising lucrative post-political career positions long before Chapter 11 came into force.
Chapter 11 has been a handy tool for transnational capital via NAFTA, but it’s not the only instrument at its disposal.
Brent Patterson is a political activist and writer.
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