The Harper government has made new trade and investment agreements a cornerstone of its Economic Action Plan. Until recently, this has meant signing NAFTA-like treaties, most of which were started by the previous Liberal government. These deals have been inked with minor economic players including Colombia, Honduras, Peru and Panama. They are largely a means for opening new markets in which to dump Canadian agricultural over-production and to help Canada’s financial, energy and mining, and engineering sectors expand, especially by giving these corporations the right to attack host-country regulation through investor-state arbitration. Trade flows with these countries are small and these FTAs essentially perpetuate a neo-colonial relationship with the developing world that almost exclusively benefits established economic elites.
But with the conclusion of a “next generation” FTA with South Korea, and the nearly completed EU and Trans-Pacific Partnership (TPP) talks, Canada is entering a brave new world of globalization. These deals will have significant repercussions for labour, public services and social programs, and permanently narrow the field of legitimate government intervention into the economy.
With Canada’s labour movement searching for alternative economic models for a post-crisis, climatically unstable world, these new trade and investment pacts are barriers to a better future and must be resisted.
Drinking the Kool-Aid
The period of economic globalization that began after the Second World War saw a marked increase in the mobility of capital, especially in the manufacturing sector. As wages grew in developed countries up to the 1970s, companies shifted production to jurisdictions paying lower wages. This decreased the bargaining power of organized labour in the developed world. If a company could just pack up and leave there was little incentive to meet demands for better salaries and benefits.
The subsequent era of trade and investment liberalization was a response by conservative (or neoliberal) governments to regulate the changing trade patterns, again to benefit transnational corporations. Eliminating tariffs on the movement of most goods meant that countries would no longer be able to discourage offshoring production by putting high customs duties on imports — a “protectionist” tool that every major developed country has relied on to some extent in its economic development. As Cambridge University development economist Ha-Joon Chang pointed out, rapid trade liberalization had the effect of “kicking away the ladder” that developing countries should be able to use to grow nascent industries or, in the case of South Korea, pioneer the technologies of the future.
Canada also relied on now-prohibited economic tools such as domestic content quotas and minimum processing requirements to climb up the economic supply chain, moving away from resource dependency and towards a mixed, high-tech and high-productivity economy. The Canadian government turned its back on this strategy when it signed a free trade agreement with the United States in the late-1980s, beginning a global era of liberalization and de-industrialization that has intensified over the past five years.
These changes locked in labour’s unfavourable position not just in rich countries like Canada but across the globe. In fact, the free trade regime shares the blame for the growing inequality we are witnessing inside most countries, including our own, since it deprives governments of many of the means with which they could redistribute wealth associated with increased trade. For example, the NAFTA largely precludes the creation of a genuine industrial strategy. The World Trade Organization, based largely on the NAFTA model, has declared Ontario’s renewable energy promotion policy (the Green Energy Act) illegal because it encourages domestic employment in solar and wind power. The Canada-EU Comprehensive Economic and Trade Agreement (CETA) and the TPP would go even further.
Under the CETA, Canadian municipalities and provincial governments will sacrifice the right to favour Canadian bids on major infrastructure or service projects, and will no longer be able to ask any company, whether Canadian or European, to locally source a percentage of labour, goods or services. This will almost certainly constrain the burgeoning local food movement, which has rightly identified government procurement as an effective way to support farmers and co-operatives trying to re-localize our food systems. The much-reviled “Buy American” policies south of the border are not the counter-productive vote-winners their critics in Canada claim, but tried and tested ways to create decent jobs. Our government would rather bury its head in the ideological sands of free trade than embrace opportunities to build labour skills and renew local economies.
Temporary movement of professionals
Also in the CETA, Canada has agreed to move much further on what they call Mode 4 — services delivered by people from one trade partner in the territory of the other. From the NAFTA onwards, trade agreements have included such provisions for the temporary movement of business professionals, investors, technicians and other specialized service employees. The overall dynamic created is one where a certain class finds it much easier to move across borders while lower-skilled or lower-paid workers are captive to whatever immigration system or temporary foreign worker program is in place in their country of destination. The Canadian labour movement and migrant rights groups have rightly condemned the inequality inherent in this unfair distinction.
Where the CETA, the TPP and likely the TISA agreements will further rankle Canadian labour is in the expansion of temporary entry to professions not covered in previous international agreements such as the NAFTA or the GATS. Canada’s Mode 4 offers in the CETA trade in services chapter were recently leaked and include: legal, accounting, insurance and taxation services; engineering and urban planning; medical and dental; advertising and market research; mining (advisory and consulting only); telecommunications and postal; construction; higher education; environmental services (e.g. water treatment); manufacturing (advisory and consulting services), and others.
There is no permanent immigration or path to citizenship for these temporary workers implied in these commitments. Employees wishing to work in Canada (or Europe) in the above sectors must be engaged in the supply of a service on a temporary basis (on contract) and for a “juridical person” (i.e. an investor or corporation) of the other party. Canadian governments would be prevented from limiting the total number of contract service providers or independent professionals entering the country on the basis that suitably trained local professionals or workers should be given first crack at these jobs.
This prohibition of “economic needs tests” contrasts with the Harper government’s recently announced reforms to the TFW program, which put a stricter onus on employers in Canada to prove they need to look outside the country for workers. The effect of these CETA provisions would be to further discourage training in Canada to fill current and future job vacancies, since foreign-based companies will, with far fewer obstacles, be able to import temporary managerial and technical specialists to meet their needs.
Public services at risk
Canadian public service unions are rightly deeply concerned about the implications that the CETA, TPP and the Trade in International Services Agreement would have on public services. CETA’s longer monopoly patent rights for brand-name drug companies will increase drug costs by hundreds of millions of dollars annually, eroding Medicare and employee pension plans. Moreover, the federal government treats all new trade negotiations as an opportunity to chip away, in secrecy, at the list of exempted public services. In the case of the CETA, Canada had pressed Europe to weaken its general carve-out for public utilities (e.g. water, electricity and other public services which are often locally delivered). The EU resisted, but only to a point, since the CETA includes investor protections that freeze the current lay of the land with respect to these services.
Under this scenario, right-wing governments would be free to privatize public transit, water or power utilities, whenever they like, without penalty. But future progressive governments would not be able to return those services to public hands without facing the threat of a trade challenge or investor-state lawsuit. Ironically, re-municipalization — returning privatized services back into public hands–is the current trend in much of Europe, including traditional free trading countries such as Germany. It is outrageously anti-democratic that the practice could be outlawed by “next generation” trade treaties.
Making the right connections
The Harper government promises that the CETA, TPP and TISA agreements present more opportunities for Canadian business than threats to the public and workers. These are fairly easily dismissed by looking at the NAFTA’s poor record when it comes to job creation and productivity gains, and the government’s own studies suggesting, at least in the case of Europe, that Canada’s trade deficit will widen considerably once the deal is in place. The government appears not to have done any assessment of the likely effects of the TPP on jobs. What these deals will do — the only thing they can be counted on to do — is to further empower capital by disempowering labour and our public institutions. We dream of a better economy that prioritizes equality and a shared, sustainable prosperity. But getting there will become much more difficult unless we can stop these next generation trade and investment agreements.
Polls suggest Canadians largely support new trade deals with Europe and the TPP countries, but only in principle. The more they find out about the threats to buy-local government procurement, public services and democracy (from investor-state lawsuits) that support quickly declines. So it is crucial that the labour movement and, broadly speaking, progressive organizations continue to educate their members and the public about how far these deals have strayed from what most people understand to be trade-related issues.
We can take strength from a recent public backlash against “next-generation” deals in the United States and Europe, Canada’s two most important (dollar-wise) trading partners. In the first case, the Obama administration is unlikely to receive “fast-track” authority that would let it rush the TPP into law because of scepticism about the NAFTA-plus agreement from left and right. In Europe, a peoples’ movement against the Canadian and U.S. transatlantic free trade deals has pressured European parliamentarians and even some governments like Germany to reject at least parts of these agreements related to investment protection and regulatory harmonization. The European labour movement, which has traditionally been supportive of free trade, has also joined powerful consumer and environmental organizations in opposition.
The Harper government clearly thinks the CETA and other “next generation” trade deals are an electoral ace in the hole. Any criticism is robotically, and absurdly, attacked as “anti-trade.” But once Canadians appreciate how damaging this far-reaching agenda is to workers, public services and the health of our democracy, the tables can be turned.
To say no to the CETA, the TPP or obscure international TISA negotiations is not to say no to trade. It’s a first step in loosening the stranglehold that multinational capital has on economic governance — a step that will open up new possibilities for what people acting together, and through their democratically elected governments, can do for each other.
Check out the rest of the UP! Canadian labour rising series here.
Stuart Trew is the senior editor of the CCPA Monitor, a monthly publication of the Canadian Centre for Policy Alternatives. Scott Sinclair is the director of the CCPA’s Trade and Investment Research Project.