Op-Ed: Can Trump really undo NAFTA on a whim?

On Friday, January 19th, 2018 in Articles by Elizabeth, Publications

The Hill Times, January 17, 2018

By Elizabeth May

I am not losing sleep about the threats to NAFTA from the United States administration. There are serious questions about whether U.S. President Donald Trump has the legal authority to unilaterally pull the U.S. out of NAFTA. And if he did, wouldn’t the previous Canada-U.S. Free Trade Agreement remain?

The constitutional questions bear review.

It is clear that, unlike the Paris Climate Agreement which the U.S. cannot legally exit any sooner than November 2020, NAFTA has a simple six-month exit clause. But that clause does not specify which branch of government can send the notice.

But there are very large questions about whether a U.S. president can revoke a treaty unilaterally, which, though raised, have never been settled by the U.S. Supreme Court. Would the U.S. Senate have to approve any executive action by the president?

And the earlier agreement, the Canada-U.S. Free Trade Agreement (CUFTA), may be revived if the exit from NAFTA is successful. While that would expose Mexico to serious economic repercussions, Canada may have belts and suspenders at the same time. Again, on this question, there are differing legal views. One concern is that CUFTA’s dispute-resolution process may be voided more easily than the agreement as a whole.

On that key issue, CUFTA is clearly superior to NAFTA. While the CUFTA dispute-resolution provisions deal only with government-to-government issues, NAFTA gives foreign private corporations the right to sue governments for legislative changes that affect their profitability.

The Green Party supports trade that is free, fair, and green. Fair trade does not place private corporate interests ahead of the public interest. NAFTA does exactly that by allowing foreign corporations superior rights to domestic corporations. Chapter 11 of NAFTA was the first so-called “investor-state” provision to allow foreign corporations to seek damages if their expectations of profits were reduced through any level of government action. No protectionist animus is required, nor does the decision to change regulations or laws have to be found to be in any way improper. It is enough that a foreign corporation’s expectation of profits is diminished.

Canada has been at the receiving end of a large number of anti-environmental complaints from U.S. corporations. One of the most recent, and arguably the most outrageous, is the Bilcon case in which a U.S. mining company won a complaint when Conservative governments in both Nova Scotia and Canada did the right thing in denying a permit for open-pit mining and increased marine traffic threatening the endangered right whale. That arbitration, on a 2-1 decision, is now being appealed by Canada. The fact that such a complaint was possible at all is only due to Chapter 11’s invention of special rights for U.S. corporations.

Any renegotiation of the agreement must have at its fundamental core the goal of limiting the potential of investor-state dispute settlement (ISDS) tribunals to encroach on Canadian sovereignty by deterring or chilling the exercise of lawmaking power. The Green Party wants Chapter 11 removed completely from the agreement. At the very minimum, investor protections must be severely curtailed. Investors should be protected from threats of expropriation, but it is unreasonable and over-broad to protect their profits at the expense of taxpayers.

Meanwhile, the World Trade Organization also gives Canada effective dispute resolution. Canada’s recent complaints to the WTO against the U.S. application of punitive duties demonstrate the extent to which protectionist measures can be challenged under multiple regional and global agreements.

Clearly, the Trudeau government must do all it can to maintain the certainty for our economy that an orderly renegotiation of NAFTA implies. But the bluster and bravado of Trump must undergo the reality check that the U.S. Constitution demands.

Elizabeth May is the Member of Parliament for Saanich-Gulf Islands, B.C., and leader of the Green Party of Canada.

 

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