When is a trade agreement not a trade agreement?

On Wednesday, January 20th, 2016 in Articles by Elizabeth

The question is neither hypothetical nor esoteric.  It is immediate and urgent as governments around the world commit to so-called “trade deals” that have little to do with trade.

A trade deal, as conventionally understood, sets out an agreed commitment to reduce and/or eliminate barriers to trade rated by protectionist impulses of governments.  Trade deals open up sectors of one country’s economy for investments by other countries. Trade deals, in essence, are about trade in goods and services.

On the other hand, agreements to convey to foreign corporations rights and privileges not available to domestic corporations are not about trade.  Such investor-state agreements, or foreign investor protection and promotion agreements (FIPAs), travel alongside trade agreements (as in Chapter 11 of NAFTA) or sometimes masquerade as trade agreements (as in Canada’s FIPA with China), but they are not trade agreements.  As Nobel Prize winning economist Joseph Stiglitz pointed out in his damning New York Times critique of the Trans-Pacific Partnership Agreement, deals such as the TPP are more about managing trade in the interests of foreign corporations than they are about trade.

Understanding the difference between an investor state agreement and a trade deal is critical.  Note that the Investor-State agreements have a number of acronym descriptors – ISDS, FIPAs, Investor-State.  This alphabet soup may not have intentionally further disguised this stealth attack on national sovereignty, but disguised it unquestionably is.

Canada has lost, or caved and settled rather than lose, more environmentally premised attacks through the ISDS of Chapter 11 of NAFTA than any other country.  We have considerable experience in this area, yet little awareness that such is the case.  Canadians, in particular, need to understand that our losing track record under Chapter 11 is not because our government, federal or various provincial governments, have behaved in ways that were rooted in trade discrimination.  To lose when taken to Chapter 11 arbitration does not require that our actions were unreasonable, discriminatory, trade disruptive or unsupported by science.  All we have to have done is act to reduce a foreign corporation’s expectation of profits.  In the most recent Chapter 11 loss, a US corporation ignored its right to pursue its complaint in our federal courts.  This was an unprecedented move to opt for a secret arbitration tribunal instead of open courts.   US mining company, Bilcon of Delaware, asked a secret NAFTA arbitration panel for $300 million in damages against Canada.  No Canadian corporation in similar circumstances could have sought this amount, nor accessed a private tribunal.

Bilcon’s proposal for a basalt quarry in Digby Neck, Nova Scotia had been rejected by a joint Federal-Provincial Environmental Assessment Panel back in 2007.  The panel found the proposal to be so seriously damaging to the environment that no mitigation was possible.  Transiting shipments of basalt through the Bay of Fundy to build highways in New Jersey threatened the survival of the most endangered whale species on the planet – the North Atlantic Right Whale. It threatened existing economic activity in tourism and the lobster fishery.  It offended community values.

Based on the panel’s recommendations, the project was rejected by Progressive Conservative Nova Scotia Environment Minister Mark Parent and federal Conservative Environment Minister John Baird.  Then Bilcon opted for Chapter 11 of NAFTA.  The local community had no access to the secret proceedings. Neither did the Canadian environmental law community.

In spring of 2015, two out of three arbitrators found for Bilcon.  The dissent by the only Canadian arbitrator, Prof Don McRae of University of Ottawa Law School, outlined the outrageous nature of the ruling.  McRae noted that the Bilcon Chapter 11 ruling does unprecedented damage to Canadian sovereignty and to the integrity of the environmental assessment process.  Thankfully, the previous government filed an appeal to the ruling.  It is hoped the new government will vigorously pursue the appeal. Still, NAFTA Chapter 11 cases are virtually impossible to win on appeal.  (Someday perhaps Murray Rankin, MP for Victoria, may explain his service to Bilcon, testifying against Canada in the secret tribunal while a sitting MP).

As damaging as Canadian experience has been with Chapter 11 of NAFTA, even graver threats to our sovereignty are posed by the Canada-China Investment Agreement.  The Canada China FIPA was ratified by the previous Cabinet, without any hearings in Parliament, without any vote in Parliament.  Osgoode Hall Law professor Gus Van Harten has done all Canadians a service by writing “Sold down the Yangtze: Canada’s lopsided investment deal with China.”  We are locked into that deal until at least 2045, unless Beijing agrees to renegotiate.  And now the TPP presents the threat of another nine countries with the right to take Canada to arbitration.

It is time to shine a light on these investor-state agreements.  It is time for a multi-lateral review and re-negotiation of the lot of them to an agreed upon international template to fairly protect investors without undermining national sovereignty, as well as domestic health, labour and environmental laws.

Originally published in Embassy.

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