Applause for Prime Minister Harper’s freshly concluded trade deal with the European Union was swift and loud. Ontario Premier Kathleen Wynne joined the celebration last Friday, saying her government would support the proposed Canada-EU Comprehensive Economic and Trade Agreement (CETA) — with conditions.
The province should be compensated by the federal government, said the Premier, for an expected nine-figure increase in drug costs, as well as the effect of subsidized European cheese imports on local dairy farmers and possible hardship at Ontario wineries.
Think about that for a second. The feds will hand money over to Ontario, who will in turn hand much of it over to pharmaceutical giants. Taxpayers like you and me will be padding the bottom line of already-profitable multinational corporations.
That makes for a very expensive trade deal. It’s even more absurd when you consider that provincial trade officials say they are estimating only $100 million in annual savings to local businesses from tariff reductions.
And it’s not even the full bill the public can expect to pay for CETA. Premier Wynne left out the most expensive part of the EU deal: its investor rights chapter, which on its own could keep the provincial government in the red for decades.
Using the investment protection chapter and investor-to-state dispute settlement process in the North American Free Trade Agreement (NAFTA), U.S. companies have sued Canada for billions of dollars for alleged harm to their profits. No laws need to be broken for a company to sue under these rules, and the government decision, policy, law or other measure does not have to discriminate against foreign firms to violate NAFTA. In fact, in most cases the measures in dispute treat all companies the same.
In Canada, those measures have included a ban on trade in hazardous PCB waste, a research and development profit-sharing program in Newfoundland and Labrador, the decision to build a second bridge from Windsor to Detroit, a temporary moratorium on hydraulic fracturing (fracking) in Quebec, and a Canadian court ruling in a patent dispute between generic and brand name drug companies.
Ontario has been the target of several high-profile investor lawsuits against government decisions or policies.
For example, in the recently settled St. Marys Cement case, the company was denied a permit to dig a quarry on prime Ontario farmland outside of Hamilton. The local community objected to the plan, which would have had a considerable impact on the area’s watershed. The government, thankfully, listened.
But rather than challenge the quarry decision in court, St. Marys Cement threatened to take the matter before a private, paid and largely unaccountable three-person NAFTA investment tribunal. The decision would have been final, with no room for an appeal. Though this particular case never made it to arbitration, Ontario eventually paid the cement company $15 million for dropping the matter.
In other words, we had to pay St. Marys Cement not to dig a quarry.
Two outstanding NAFTA cases against Ontario’s renewable energy policies provide more examples. The first challenges a temporary moratorium on offshore wind development while the impacts on water are studied. The second attacks the Green Energy Act, partly for its domestic content quotas on wind and solar parts. Combined, the U.S. investors in these cases are claiming compensation of more than $1.2 billion for perceived violations of their right to fair and equitable treatment, or for indirect expropriation of profits. These “rights” are not accessible to Canadian companies.
In total, Canada has paid more than $160 million in awards or settlements to U.S. companies because of NAFTA lawsuits. Globally, investment panels have awarded more than $3.5 billion to U.S. corporations alone in their crusade against government decisions that have interfered with profits.
European companies are likewise very good at winning these lawsuits and will use CETA to their advantage if it is ratified. EU-based private water companies, for example, successfully sued Argentina for bringing failed private water systems back into public hands. Investment lawsuits against European countries have been rare, but a high-profile, multi-billion Euro case against the German government for its decision to phase out nuclear power is a sign of what they can expect from Canadian firms under CETA.
South Africa is cancelling its bilateral investment treaties with EU countries because it can see these deals are much more trouble than they’re worth. The Australian government is still refusing to include an investor-state dispute process in the 12-country Trans-Pacific Partnership agreement, despite the recent conservative party win in national elections.
Extreme investor “rights” like those in NAFTA and Canada’s other investment treaties neither attract new investment to Canada nor do they encourage new Canadian investment abroad. They simply get in the way of the federal and provincial governments’ duty to do their job, which includes regulating for public health, environmental protection and resource conservation without the threat of costly investment arbitration.
It is inevitable that Ontario policies will face new and more expensive lawsuits. There are already candidates up north where Indigenous communities could very well resist the government’s massive-scale plan to extract minerals from the Ring of Fire. The St. Marys NAFTA dispute is proof that the federal government will be looking for ways to make the provinces pay when resource companies have their hopes dashed by public opposition and the democratic process.
Given the huge amounts of compensation the provinces say they need to support CETA, we can reasonably ask why the federal and provincial governments couldn’t have negotiated a better deal with fewer pitfalls for local farmers, wineries and prescription drug users. Adding the extremely high cost of investor-state dispute settlement, the better question is whether we can afford Harper’s EU deal at all.