The Honourable Chrystia Freeland
Minister of Foreign Affairs
House of Commons
Ottawa, ON K1A 0A6
October 25, 2017
Dear Minister Freeland,
I would like to provide certain comments about the impact of NAFTA on the environment. In your request for comments you say that trade officials are “seek[ing] information [to] otherwise improve their understanding of the relationship between trade and environmental issues at the earliest stages of decision making.”
I deeply appreciate that your office has been approaching these negotiations with a view to transparency and consultation. However, with all due respect, we are neither at the earliest stage of decision-making in this process, nor should trade officials require further information to improve their understanding of trade and the environment. Policy experts and advocates have been clear – while free trade has its place, mechanisms like Chapter 11 and measures relating to water and resources, pose a significant risk of harm to Canada’s environment.
Protecting legitimate economic activity while removing perverse elements of NAFTA is a winning formula that may give President Trump what he craves in populist approval domestically, while protecting the significant and symbiotic trade linkages between Canada, the US and Mexico. Canada’s success in these renegotiation talks depends on standing up for Canada – acknowledging that not all of NAFTA was ever to our benefit, particularly with respect to its impact on our environment.
Chapter 11: Investor-State Dispute Settlements
Chapter 11 of the agreement has been interpreted so broadly as to be nearly unrecognizable in its enforcement in comparison to its original intent. And it has wound up becoming a mechanism that seriously threatens Canada’s environment. The reality of the arbitration system as it is currently structured is that the Canadian government is the most sued under Chapter 11 provisions, the majority of which are not for violations of article 1110 (direct or indirect expropriation) but rather the use of other articles to challenge environmental protection, resource management and health care. As of 2015, nine active Investor-State Dispute Settlement (ISDS) claims place Canada liable for over $6 billion in alleged damages. And Canadians should be concerned about losing these cases – Canada is notoriously unsuccessful in tribunals, with claimants being successful in 46% of claims against Canada.
Yet proponents of ISDS continue to make erroneous assurances that, as the Parliamentary Secretary of Trade, David Lametti, recently said of CETA, “Nothing … prevents governments from regulating in the public interest to protect or promote public health, social services, public education or the environment. This principle, which is well recognized in international law, is clearly set out in the CETA text.”
The reality is that ISDS mechanisms lead to regulatory chill. As Professor Gus Van Harten explains succinctly : “Corporate giants and the super-rich, alongside the ISDS legal industry, have been the main beneficiaries of ISDS by far, at significant expense and opportunity cost to countries and to those who would have benefited from laws and regulations that were deterred by ISDS.” This has, and will continue to have, an impact on the way we regulate our environment. One only needs to examine the recently decided Bilcon case to see the potential for ISDS to take a scalpel to the manner in which Canada regulates environmental protection.
There are those who claim that recent jurisprudence suggests a limiting of the interpretation and scope of the NAFTA tribunals. In fact, the opposite is true. While the recent decision in the long-awaited Eli Lilly Case went in Canada’s favour, the implication was that had Lily’s claims not been as baseless as they were, the tribunal could have ruled in their favour. As the tribunal pointed out in its conclusion, it could not find allegations of arbitrariness or discrimination because there was no “fundamental or dramatic change in Canadian patent law.”
As Michael Geist, professor of Law at the University of Ottawa, puts it: “While Eli Lilly failed in its efforts to use the dispute settlement system to extract hundreds of millions from Canadian taxpayers, the dangers of the system remain a reality … as new trade deals are negotiated or renegotiated, should rethink the need for investor-state dispute settlement provisions in agreements with countries with respected court systems that offer investors sufficient protections and reliable legal recourse.”
The potential for Chapter 11 cases to impact Canadian law has not been diminished, in fact it only grows. Former Canadian government officials have been quoted as saying there are letters from American law firms for “virtually every new environmental regulation and proposition.”
It is clear that the ISDS provisions in NAFTA are deeply flawed. Any renegotiation of the agreement must have at its fundamental core the goal of limiting the potential of ISDS tribunals to intercede on Canadian sovereignty by deterring or chilling the exercise of lawmaking power. The Green Party advocates for wholesale removal of Chapter 11 from the agreement or, at the very minimum, a limiting of investor protections. It is the only way to protect Canada’s ability to enact environmental regulations.
Of the threats to Canada’s environment posed by NAFTA, the agreement’s stipulations with regards to water are of chief concern. NAFTA threatens Canada’s control over our water – classifying Canadian freshwater as a good or service capable of being exported for a price.
This characterization was summed up by then Assistant Deputy Attorney General Mr. Konrad Von Finkenstein, who testified to the House of Commons Legislative Committee on the NAFTA implementation bill in 1993: “… if you trade water in its natural state you put in tanks, or bottles, or something and sell me freshwater that you’ve taken out of a well or something like that, then you are indeed trading in water and it’s then a good and is covered by the GATT, by the FTA, or by the NAFTA … Water is no different from any other resource.” We disagree. As stewards of 9% of the world’s renewable water, we cannot simply treat it like any other resource.
The issue of freshwater will only become more vital as we face the effects of climate change and the accompanying scarcity of water resources. We must act to enshrine, enforce and strategically implement the 1987 Federal Water Policy to meet the requirements of sustainable water management – equity, efficiency and ecological integrity. We must remove all mentions of water as a good from NAFTA, in addition to passing federal legislation to prohibit bulk water exports, building on the current law banning exports from transboundary basins. Canada can also work to ensure the removal of similar language from CETA, and other trade deals based on the NAFTA template.
Donald Trump may be the loudest sabre rattler on NAFTA, but it was under Barack Obama that Canada failed to reach an amicable settlement to the long lingering softwood lumber dispute. Thousands of jobs and dozens of mills are under threat without an agreement. Canada’s forest heritage – 300 million hectares or 10% of all the world’s forests – is on the line. In order to ensure Canada’s environmental interests are protected we must cease the practice of exporting raw logs. Furthermore, throughout the process of renegotiation, Canada must work toward a management strategy for our forests with long-term, environmental sustainability as a priority.
While energy lobbyists and others have advocated that the NAFTA provisions touching the energy sector shouldn’t be altered, the Green Party believes it must be a part of the renegotiations. We must not allow NAFTA to constrain our options in approaching how we combat climate change. Export controls must be allowed in the context of domestic environmental frameworks, especially in light of the recently agreed to Pan-Canadian Framework on Clean Growth and Climate Change.
Commission for Environmental Cooperation
NAFTA’s Commission for Environmental Cooperation (CEC) has been effective, though slow, in holding all three NAFTA countries to account on issues of environmental stewardship. However, it can only do so much, given the weak, non-binding nature of the NAFTA environmental side agreement. Some have suggested the future of the council is in jeopardy due to recent Trump cuts to the Environmental Protection Agency. Despite this more recent development, it’s been Canada, not the US, which has been threatening the credibility and effectiveness of the Commission.
During a period of one year under the former Harper administration, the Canadian government successfully stopped three separate CEC investigations into Canadian misconduct, including BC salmon farms, polar bear protection and Alberta’s tailings ponds. Renegotiation serves as an opportunity to not only redouble our commitment to the principles of the CEC, but also to protect and strengthen the Commission by putting into place mechanisms to ensure the Commission operates free from political interference.
As the Sierra Club’s report, NAFTA: 20 years of Costs to Communities and the Environment, demonstrates, the CEC is too poorly funded and institutionally weak to be an effective enforcer. The impacts are felt not only in Canada where CEC appeals failed to hold the Harper government accountable, but in Mexico, where the country has incurred an estimated $120 billion in environmental damages. The CEC, while a useful tool in principle, must be strengthened in order to provide meaningful, adequate oversight to the implementation of NAFTA`s environmental side agreement. This will be especially true if the side agreement is updated, which I know is one of Canada`s negotiating positions.
As a Canadian citizen and fellow parliamentarian, I can only empathize with our negotiators given the erratic and disrespectful conduct of our major trading partner in negotiations. These recommendations could modernize that trading relationship while enhancing our democracy and environment.
Thank you for taking the time to consider my thoughts.
Elizabeth May, O.C.
Member of Parliament
Leader of the Green Party of Canada
PDF version of original submission available, here.