Elizabeth May (Saanich—Gulf Islands)
2021-03-09 20:35 [p.4807]

Mr. Speaker, I hope that my colleague will not find this question difficult to answer because I really wanted to ask it of the hon. member for Sherwood Park—Fort Saskatchewan. It is about the issue of slavery in supply chains. I am really encouraged to see how much discussion we are having. It is tangential to the Canada-U.K. trade agreement, but given that the U.K. has tackled this issue of slavery in supply chain, I am wondering if I could take it up with her as well. We have Bill S-216 sitting in the Senate. We need to move ahead with these measures to help Canadians know that the goods we are consuming here are not produced with slave labour.

We do have a problem, though, that the general agreement on tariffs and trade and the World Trade Organization generally has identified these kinds of concerns as what it calls “PPM”, process and production methods that are outside the scope of government action. I am wondering if the hon. member for Kelowna—Lake Country would agree that we should grab the momentum toward taking action against slavery in supply chains while we have the chance and try to move Bill S-216 ahead as quickly as possible?

Tracy Gray (Kelowna—Lake Country)
2021-03-09 20:36 [p.4807]

Mr. Speaker, I appreciate the question from the hon. member. It is actually very timely because I am not sure if the member might be aware that at the international trade committee yesterday, the Conservatives put forth a motion dealing with forced labour in supply chains. We put forth a motion to look at government measures and their effectiveness. There are a couple of measures in place right now. We wanted to look at how effective they are with forced labour and human rights in Xinjiang and region and call the Minister of Small Business and a number of officials and look to see where there are gaps. That motion did not go through. The Liberals voted against it, as did the Bloc. Unfortunately, that study will not be happening despite the fact it would have been a very good and very timely study.

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The trans-Pacific partnership agreement has had a convoluted and somewhat rocky road. I think we would all admit that. I would like to take a bit of time to go through its history and then take as much time as possible, given that it is abbreviated now that we are down to only 10-minute speaking segments and time allocation has already been applied, on why it is completely anti-democratic to have investor-state provisions included in agreements, particularly the one currently before us.

I would like to adopt and support the submissions of the hon. member for Essex. The trade critic for the New Democratic Party has put forward clear arguments. So has the MP for Vancouver Kingsway. I agree with all I have heard from them. This allows me to concentrate on investor-state provisions rather than delve into the different sector-by-sector problems with the TPP.

Going back to where it started, the TPP was well under way in negotiation under the previous Conservative government of Stephen Harper. It knew the TPP was under way and Canada did not have a seat at the table. Therefore, there are a number of reasons the agreement is lopsided against certain Canadian sectors. It has to do with the fact we joined late. We were aggressive with trying to be in. Some will remember that even during the 2015 election, when a government is supposed to have no more than a caretaker role, the former minister of trade was working hard to try to get this deal done. That was inappropriate, given that the writ had already dropped, but he certainly did work hard to achieve the TPP.

We know that the incoming U.S. president pulled out. That had a very substantial impact on the economic reach of the agreement. With the U.S. out, it looked like the TPP was dead. However, bad trade deals never die, they rise again, and this one came back without the United States and now with 11 countries in the trade pact.

It is important for Canadians to know that we already have trade agreements, within NAFTA, with Mexico. Therefore, that means we are agreeing to new agreements with nine new nations. When we talk about the Pacific region, I think a lot of Canadians would assume this includes the big economic players. When we hear TPP, the trans-Pacific partnership, or now as it is styled, the comprehensive and progressive TPP, or CPTPP, one would assume it would include China and Indonesia. However, large economic players in Asia are out of the agreement, other than the big one, which are Japan, as well as Malaysia, and of course Australia and New Zealand. There are smaller economic countries, such as Peru and Vietnam, as well as Singapore, which is significant but relatively small in terms of trade.

We have a cobbled together agreement that we now are rushing to pass. We were promised that we would not rush through trade deals in this place, that we would have full debate. I gather the committee has been told that it has to rush as well. Therefore, this trade agreement will not be adequately debated. That is now a foregone conclusion because of time allocation.

In the six and a half minutes remaining to me, let me explain why I submit to the House that investor-state dispute resolution sections do not belong in any agreement. They do not belong in trade agreements. They in fact have nothing to do with trade. They are often conflated and confused with trade dispute resolution agreements. Therefore, in the case of NAFTA, which, by the way, was the source of these investor dispute resolution systems, chapter 11 in NAFTA had never been requested before. They were not understood. They were not even understood by the people who negotiated NAFTA.

What we have under NAFTA is chapter 19, which deals with how one sorts out disputes over tariffs and unfair trade decision. We are used to those. That is appropriately a trade dispute resolution provision. One needs those if one has a trade deal. What we do not need is this bogus, anti-democratic investor-state provision, which arose in chapter 11 of NAFTA. What does it mean? On paper, when people first read NAFTA, including in all the fights over adopting NAFTA, none of the anti-NAFTA groups ever noticed chapter 11. No one talked about it; it was a sleeper.

What chapter 11 seemed to say was common sense. If someone had invested in a country and the asset that was built was expropriated, such as when Fidel Castro took over Cuba, the expropriation of assets would require compensation, which is the international norm already. It looked like chapter 11 was about that. We found out that was not what the chapter was capable of doing in the Ethyl Corporation case, when Ethyl Corporation of Richmond, Virginia brought the first chapter 11 case again Canada.

It should be noted that as of now, Canada is the most sued industrialized country under these investor-state agreements and we have lost repeatedly. We have lost, but it was not as if we did something that was a subversion of our trade, not as if we treated some country that we promised we would give it friendly treatment and it was a duplicitous action in pursuit of a trade benefit. No, we have lost when we were trying to protect public health and the environment.

Let us look at Ethyl Corporation. In that instance, the former minister of environment, Sheila Copps, heard of the efforts of groups like the one I was executive director of, Sierra Club Canada. We worked hard to get rid of a toxic gasoline additive called MMT, which is manganese based. We were joined in that effort, believe it or not, by the car makers. The car makers said that MMT gunked up the engines and compromised the catalytic converters. In other words, it increased pollution in a way that could void their warranties.

Therefore, the auto manufacturers, the environmental groups and a number of health groups, with evidence from neurotoxicologist Dr. Donna Mergler of the University of Quebec in Montreal, said that this stuff increased manganism in the human population, in other words tremors that looked a lot like Parkinson’s, and at the same time threatened to void the warranties of cars. The minister of the environment brought forward a law which was passed in Parliament. The law said that we would get rid of MMT in gasoline.

It is important to know that at this point the United States Environmental Protection Agency had refused to register MMT, because its advice was that this stuff was bad for the environment, bad for human health and we should not use it. Therefore, Canada banned it.

Ethyl Corporation said that it was going to chapter 11 of NAFTA. However, before that chapter 11 case was through, the government of the day decided to settle, and we cannot say “out of court” because there are no courts involved here. These are private arbitration matters generally heard in hotel rooms. Therefore, if we are going to call a chapter 11 arbitration “out of court”, we have to insert the word “kangaroo” before the word “court” so the whole thing makes sense.

However, Ethyl Corporation got out of Canada an award of $13 million U.S., which was taken out of the A-base budget of Environment Canada. If members do not think that had a chilling affect on Environment Canada’s willingness to ban dangerous chemicals that were made in the United States, then they are not looking at the facts of what has happened since then. That was the first one. By the way, what was Ethyl Corporation’s investment in Canada? Did it have a plant here? No. Did it create jobs here? No. It was selling the toxic gasoline additive here, and that was enough to make it an investor. The same thing happened with S.D. Myers, which was the next case.

S.D. Myers is an Ohio-based company that runs incinerators for PCB contaminated waste. Sheila Copps, former minister of environment, banned the export of PCB contaminated waste from Canada consistent with the Basel Convention to which Canada was a signatory, but S.D. Myers sued. Guess what. It was suddenly an investor. It had expected profit from taking Canadian PCB waste and burning it in Ohio.

However, when we banned the export of PCB contaminated waste from Canada, the import of PCB contaminated waste into the U.S. was illegal under U.S. law. On that set of facts, we could not imagine that we would lose, but we lost. Canada appealed to the Federal Court of Appeal, which said that it was not significant enough of an egregious error under the rules of arbitration for us to win, and so we had to pay S.D. Myers money.

We are now awaiting Bilcon, which has asked for $580 million in damages. Canada has lost in Federal Court in our efforts to defend the good decision of a very ethical, thorough, independent, thoroughly evidence-based finding of the environmental assessment panel on Bilcon’s efforts to do an open-pit quarry in Digby, Nova Scotia.

Ethyl Corporation did not go to the courts in Canada, which it could have done. By the way, that decision led to the Progressive Conservative government of Nova Scotia turning down the permit and the previous Conservative Government of Canada environment minister John Baird turning down the permit. However, Bilcon, in New Jersey, went to a secret hearing under chapter 11 of NAFTA and it won.

TPP does not have such egregious secrecy; that is the one area in which this is different. However, we pass this and we will regret it. We will have chapter 9 suits under TPP, again from Malaysia and from Japan, and we will lose because Canada generally loses. This is corrosive to democracy, and I urge us to take investor state out of the bill in front of us.

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The first group of flaws has a lot to do with Canada joining the talks when they were already quite far advanced.  We started from a very weak negotiating position on a wide range of trade issues – from the auto sector to the patent protection of prescription drugs to intellectual property protection – and from that weak position, we caved.  The US auto sector gets protected far longer from Japanese competition than their Canadian counterparts.  The cost of Canadian pharmaceutical drugs will soar.  And the potential for Canada to excel in the ideas economy is kyboshed while those new economic winners in the virtual economy are enshrined in their existing power position.  Canada will be frozen out.  As Jim Balsillie, founder of Research in Motion, told the trade committee, Canada will be a “colossal loser” under the TPP.  The game will be fixed and we will not have a seat at the table.  His advice to Canadian innovators if the TPP goes through?  Move to the US and start your business there.

Which is quite the observation when one considers what US economists are saying about the TPP.  Nobel Prize winning economist and professor at Columbia University, Joseph Stiglitz describes the TPP as “the worst trade deal ever.”  Not the worst deal for Canada – the worst deal ever for the United States too.  And the US negotiators struck a much better deal.

Stiglitz observes that the TPP is not really a trade deal at all.  It is about managing trade in a way that benefits a new global regime of corporate rule and not the actual promotion of the trade in goods and services.  In that sense it is not a traditional trade deal at all.

The alarm felt about the TPP in the US has much to do with the dawning recognition of how investor-state agreements work.  The TPP is not the first one the US has entered into. The US has executed dozens of ISDS treaties.  But unlike the first one, Chapter 11 of NAFTA and unlike ones between the US and Ecuador or the US and the Philippines, this is an ISDS in which the US might actually lose. The reality of these provisions, that allow a foreign corporation to bring arbitration suits against governments that enact changes that have the incidental, even if unintentional, effect of reducing a foreign corporation’s profits, is that the arbitration is neither fair nor neutral.  Almost every single case is resolved in favour of the larger economic power.  So if it is a case between a US corporation and the Canadian government, or between a Canadian corporation and the US government, the US is about 95% likely to win – whether state or investor.  But the TPP opens up the chance of other serious economic players being able to bring arbitration cases against the US.

The political debate over TPP has separated Hilary Clinton from Obama’s legacy.  She has come out against the TPP, and so has Trump.  It will make no sense at all to ratify a treaty that the US may not ratify.

Meanwhile, the debate gives us a chance to re-examine all of the investor-state agreements.  They are offensive and anti-democratic by their very nature.  They have nothing to do with trade promotion or protection of the assets of foreign investors.  They are all about the erosion of the ability of sovereign states to act in the public interest.  The ability to act in the public interest remains, but is forever constrained.  Profits of foreign corporations will trump acting in the public interest.  That such an unholy and outrageous scheme could be elevated to “routine” is shocking.  The CETA agreement with the EU now boasts a new approach – setting up an Investment Court.  Don’t be fooled.  It is no different than its predecessors.  It has some window dressing, but fails to remedy the central objectionable feature of ISDS agreements.  Whether under the CETA approach, NAFTA or the Canada-China Investment Treaty, foreign corporations are given extraordinary rights to demand compensation when a government – municipal, provincial or federal – acts in a way that reduces a foreign corporation’s expectation of profits.

We need to engage a global process of re-negotiation of all ISDS.  Canada should open the dialogue about the creation of a rebalancing of nation state rights versus corporate rule.  We should propose within the WTO the creation of a model agreement to protect the legitimate interests of the investor and the protection of domestic sovereignty.  With the litany of perverse decisions accumulating under these agreements, we should find many countries willing to demand a new approach leading to the replacement of all current ISDS agreements.

Meanwhile, we start by saying “no” to the TPP.

Originally published in the Hill Times.

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These provisions allow a foreign corporation to bring a challenge by way of private arbitration against a government if that government’s actions can be interpreted as “tantamount to expropriation.” Ever since Chapter 11 of NAFTA where this anti-democratic instrument first emerged, arbitrators have been willing to find that perfectly reasonable measures by governments have reduced foreign corporations’ expectations of profits.

“Tantamount to expropriation” ceased to mean anything close to actual expropriation. It has become a way for foreign corporations to threaten and punish governments for regulating to protect health, safety and the environment around the world. Trade lawyer Steven Shrybman once correctly described them as “fundamentally corrosive to democracy.”

The remarkable thing is the way in which such outrageous measures have cloaked themselves with the language of the ordinary. When the Green Party tried to raise awareness about the threat to our sovereignty of the Canada-China investment agreement, we were treated to repetition of the bromide, in patronizing tones, “this is a standard foreign investment protection agreement” (FIPA). It is like being told, “but this is a standard water-boarding technique.”

Governments have lost in secret arbitrations for warning citizens that cigarettes cause lung cancer, or for terminating contracts, even when allowed within the terms of the contract, where oil and gas leases are at stake, for banning toxic gasoline additives, or ruling that projects are such a significant threat to the environment that the damage cannot be mitigated. In none of the cases was the foreign corporation required to establish that a government had acted in a discriminatory manner. None required evidence that a government had lacked scientific evidence. All that is required is that a foreign corporation is likely to make less profit.

The most controversial part of the Comprehensive Economic Trade Agreement (CETA) with the European Union is the investor-state provision. The most controversial part of the Trans-Pacific Partnership Agreement (TPP) is the investor-state agreement. These concurrent debates create the opportunity to debate for the first time whether such agreements are in the public interest—anywhere.

Essentially the issue has never been debated. Despite a significant public debate in Canada before ratifying NAFTA, Chapter 11 was never identified as a source of concern. It was a sleeper. Not even Canada’s NAFTA negotiators had contemplated that the language could be interpreted as it has been. An elite group of lawyers globally have profited—enormously—as arbitrators, as counsel and as expert witnesses in ripping off governments in the interest of corporate power. Domestic governments and legislatures at all levels—municipal, state/provincial and federal have lost around the world.

Now the EU Trade Commissioner Cecilia Malmström has proposed what is described as a reform—an Investment Court System (ICS). Despite being oversold in the media, the actual proposal is simply rebranding the ISDS mechanism. One of the few independent Canadian experts in investor-state dispute systems, uncompromised by a career in profiting from the inherent injustice of the ISDS system, is Prof. Gus Van Harten of Osgoode Hall Law School. In a recent article for the Social Science Research Network, he has carefully critiqued Malmström’s proposal. Van Harten rejects it as allowing the continuation of ISDS, despite a degree of whitewashing of its sins.

The sensible thing to do, as the issue is hotly debated in the CETA and TPP context, is to move for a thorough global review of all these agreements in the context of the WTO. The Canada China investor-state agreement is arguably the worst Canada has ever entered into. The Conservative cabinet ratified it in secret by order in council. The earliest Canada can exit the agreement is 2045. Our only way out is either through a global review or if Beijing agrees to renegotiate FIPA in the course of our new trade talks.

A global review of all such agreements is long overdue. Their rationale was never established. They are clearly not a necessary precondition to investment. Australia, for example, has a far larger volume of trade with China than Canada and never entered into an ISDS with China at all—much less the lop-sided deal with which Harper has left us.

The first priority is a new law ensuring all Canadians transparency. The minute any government or foreign corporation threatens Canada, that must be made public. Canadians need to know if we are being threatened. Secondly we need to re-open the TPP and CETA to remove the proposed ISDS provisions. Take them out now and gather up all these pernicious instruments to be replaced by a newly drafted and fair set of rights and responsibilities of foreign corporations.

This ugly threat to democracy slipped out of Chapter 11’s Pandora’s Box. It’s long since time to put it back in the box.

Originally published in the Hill Times. 

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Of course, Canada has a choice and should decide to reject the TPP.  We shouldn’t sign. In that, the new government would have a solid argument – the agreement was concluded in secret by the previous Conservative government in the midst of the election.  It was pretty shocking as, in a writ period, the tradition is that any government is limited to minimal and essential activities.  The terminology is that the any government in an election is a “care-taker government.”  In the writ period, under the Conservative government, Canada skipped major United Nations meetings to negotiate the new Sustainable Development Goals, replacing the MDGs.  But when it came to the TPP, Ed Fast, former Trade Minister, left the campaign trail to negotiate in Florida.

In the campaign, the Conservatives lauded the TPP as opening up the world’s largest ever trade bloc, with a combined “new” market of over $27 trillion. Of course, the reality is that the vast majority of that “new” market is found in the three members of the existing NAFTA.  Canada, the US and Mexico make up $21 trillion of the “new” markets open to Canada.  The nine nations of the Pacific region joining NAFTA nations are Vietnam, Singapore, Peru, Chile, Japan, Malaysia, Brunei, New Zealand and Australia. For a Pacific regional deal, large economies like China and Indonesia are not included.

Meanwhile, the key elements of TPP are not in Canada’s interest.

Provisions that protect pharmaceutical companies from competition and generic drugs will drive up the costs of Canadian medicines.  The dairy sections pose a threat to supply management and Canadian dairy producers. Despite the fact that TPP promoters deny this is true, former Prime Minister Stephen Harper announced billions of dollars in compensation to dairy farmers in the midst of the election campaign.  In fact, this TPP compensation was never secured, but why was it put forward, if, as promoters claim, supply management is protected? The reality is that the Canadian milk supply will be open for the first time to competition.  US milk, contaminated by the GMO Bovine Growth Hormone, will be allowed in Canada.

Prominent businessman and Blackberry founder, Jim Balsillie, has blasted TPP.  He argues that the Intellectual Property (IP) provisions of TPP are skewed structurally.  The IP provisions will enrich those countries that already have significant IP ownership.  Due to years of failed policies, Canada has fallen behind in innovation.  No wonder the previous government worked to expand export opportunities for Canadian beef, seafood and canola, but has negotiated an agreement that will prevent Canada from ever establishing our economy as one benefitting from innovation and IP.  As Balsillie wrote in a January 30, 2016 article in the Globe and Mail, “Make no mistake about it: This is not your father’s trade agreement. TPP clearly demarks a shift in global value creation from tangible to intangible goods by creating unprecedented advantages to current large holders and producers of IP.”

For all this, even with the lop-sided benefits to the US, this is the first trade deal to face serious opposition in the US.  Two prominent members of the Clinton administration now oppose Obama’s TPP.  Both Nobel prize winning economist Joseph Stiglitz and former Labour Secretary Robert Reich oppose TPP.  The major reason for their objection is the Investor State provisions.  Their objections, and likely those of her surprisingly effective competitor Bernie Sanders, appear to have influenced Hilary Clinton who now opposes TPP. There is a compelling case for Canada to avoid any commitment to TPP when there is a strong chance it may never be ratified by the US.

The primary driver for US politicians (0n the left and the right) to denounce the TPP is the presence of an investor-state agreement.  The TPP will give corporations from nine new nations the right to bring multi-billion dollar arbitration claims against Canada.  Based on the first of these pernicious agreements, Chapter 11 of NAFTA, the growing web of investor state agreements (also called “Foreign Investor Protection and Promotion Agreements – FIPA’s) are a threat to the sovereignty of nations.  Together they comprise the machinery of global corporate rule. That is why Joseph Stiglitz pointed out that TPP is not a trade agreement.  It is an agreement to manage trade.

With the recent Chapter 11 challenge by Trans-Canada against the US government for its decision to reject the Keystone pipeline, more Americans are now noticing Chapter 11. The size of Trans-Canada’s claim- $15 billion – gets their attention.  Canada has been the loser in case after case of Chapter 11 challenges to environmental laws and decisions.  The US government and its corporations virtually always win contributing to low public awareness of the threat of Chapter 11 in the states.  Ironically, we may end up thanking Trans-Canada for the defeat of the TPP.

Originally published in Island Tides.

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“I congratulate Mr. Balsillie for voicing his strong opposition against the TPP,” said Ms. May. “I am in total agreement with his position that trade negotiators have profoundly failed Canadians and our future innovators. For example, the TPP would impose intellectual property standards, set by the U.S., which would be extremely damaging to Canadian entrepreneurs.”

In addition, Paul Manly, Green Party International Trade Critic, expressed concern about the TPP as an investor-state agreement that allows foreign corporations to launch suits against Canada in private arbitrations.

“It’s clear that the TPP could cost Canada hundreds of billions of dollars and is a threat to Canada’s sovereignty,” said Mr. Manly. “We will work to ensure there is an open and transparent debate in Parliament before any vote to reject or ratify the TPP agreement is taken.”

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“In 1999, Health Canada banned bovine growth hormones (rBST), because of animal welfare concerns, including an increased risk of mastitis, a painful bacteria inflection that affects the udders, a 50 percent increase risk of clinical lameness, and shorter lifespans for cows. I played a key role in keeping the bovine growth hormone out of Canada as the Executive Director of the Sierra Club of Canada.

“In Canada it is still illegal to use bovine growth hormone to increase milk production, yet the TPP would allow milk with this hormone into Canada. We really do not know the affects of this hormone on humans, which is one of the reasons why Europe has already banned rBST. The International Agency for Research in Cancer has concerns that rBST increases cancer in humans. Milk that includes hormones needs to be kept out of Canada.”

“The Green Party has serious concerns with the fundamentally undemocratic and non-transparent nature of the negotiations surrounding the TPP. At this point, the TPP is an agreement only in principle. The Green Party will work in Parliament to ensure that an open and transparent debate takes place before any vote to reject or ratify the agreement,” said Paul Manly, Green Party International Trade Critic.

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Leaked documents obtained by the New York Times reveal that Canada has been pressuring the US to abandon logging regulations, a ban on the harvesting of sharks’ fins, and other environmental provisions included in a draft version of the trade agreement between Pacific Rim nations.

“Our party has long expressed concern that this secretive trade agreement threatened Canada’s ability to legislate for the good of public health and the environment,” said Elizabeth May, Leader of the Green Party of Canada and Member of Parliament for Saanich–Gulf Islands. “While we can no longer be shocked by Stephen Harper’s aversion to all things green, to learn that the Conservatives are actually fighting US efforts to include minimal environmental controls in the agreement is beyond disheartening.”

The TPP is a proposed free trade and investment agreement between Canada, the US, and ten other Pacific Rim nations that would include drastic changes to copyright law and would grant sweeping new powers to foreign corporations operating in Canada.

Negotiations between member states have been carried out in secret, and public information about the agreement is extremely limited. The TPP is opposed by the Green Parties of Canada, New Zealand, Australia, Japan, Taiwan, the Philippines and the United States.

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Why is this? Why could we not negotiate as good a deal as Benin got from us?

Right Hon. Stephen Harper: Mr. Speaker, once again, as I think I have said many times before, Canada’s economic relationship with China is very important. China is the second-largest economy in the world and growing. I note that Canadian businesses, Canadian investors and Canadians generally have welcomed the fact that we will have legal protections in our dealings with China.

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January 29, 2013

To whom it may concern,

The following comments are submitted as part of the Environmental Assessment of the Trans-Pacific Partnership (TPP) Free Trade Agreement Negotiations that Canada has officially joined and which Ministers Moore and Fast announced on October 9th, 2012.

While the secrecy surrounding these ongoing negotiations renders it difficult to know precisely what the full extent of the environmental impacts could be, given the demonstrable negative environmental effects that similar kinds of agreements have had and continue to have in Canada and internationally, there are a number of things we can conclude.

Despite Australia’s urging against the inclusion of such measures in the TPP, and despite the Gillard Government’s published Trade Policy Statement stating that it will no longer agree to such measures, we can be very certain that the final iteration of the Trans-Pacific Partnership Free Trade Agreement will include investor-state provisions.

While not directly related to trade, there exists ample evidence that the inclusion of investor-state provisions in treaties, such as the TPP or Chapter 11 of the North American Free Trade Agreement (NAFTA), fundamentally erode a government’s ability to enact laws, regulations and policies that protect its environment or the health of its citizens. In particular, insufficient attention has been paid to an analysis of the arbitrations under Chapter 11 of NAFTA.

The first of these suits was in 1997, when Ethyl Corporation of Richmond, Virginia, challenged a Canadian statute that had been democratically enacted to protect Canadians from MMT. MMT (Methylcyclopentadienyl manganese tricarbonyl) is a neuro-toxic gasoline additive that posed both health and environmental problems. It was compromising the catalytic converters on Canadian cars, alarming car makers about the potential for voiding their warranties, while also increasing air pollution. As well, its impact in the atmosphere raised concerns it could have neuro-toxic effects on particularly vulnerable populations – children, pregnant women and the elderly. The same company had manufactured, and I believe still does for sale in the developing world, leaded gasoline. The public health experience with leaded gas demonstrated conclusively that if one wanted to increase absorption to the brain of a toxic heavy metal, adding it to gasoline was an effective delivery method. Ethyl Corporation’s creative use of the “tantamount to expropriation” language of Chapter 11 was a surprise to the trade and investment community. What they now so sanguinely defend as a “typical FIPA provision,” was not the intent of the NAFTA negotiators. I have spoken to a number of them who believed that the Chapter 11 language was only to codify what was clear in international law: that is a nation-state nationalized and expropriated the assets of a foreign corporation, compensation was owed.

As the Ethyl Corporation challenge became known, there was an effort through the Organization for Economic Cooperation and Development to being in an international version of Chapter 11 under the name “Multilateral Agreement on Investment.” The OECD chose to consult with global civil society and, as Executive Director of Sierra Club of Canada, I attended a session with OECD negotiators in the Paris headquarters of the OECD. The session was under “Chatham House Rules,” meaning I can relate what happened, but not attribute quotes. It was clear from that session that the negotiators within the OECD working on the MAI were shocked that a US-based corporation could use Chapter 11 “tantamount to expropriation” language to claim damages from Canada for the decision to remove a toxic product from trade. The collapse of the MAI negotiations was proximately related to concern of the French government

for protection of its culture, as well as a massive international citizen mobilization, but the Ethyl MMT complaint was a warning of the way the language had morphed into something with the potential to undermine democratic decision-making. Barry Appleton, Canadian lawyer for Ethyl Corp, said at the time, “It wouldn’t matter if you were adding liquid plutonium to children’s breakfast cereal. If you ban it and a US corporation loses its expectation of profit, you will owe money under Chapter 11.” (This quote is a paraphrase of his comment.)

Following the decision of former Prime Minister Jean Chretien to push the MMT matter to a settlement prior to the arbitrators’ ruling, a second Chapter 11 case was brought by S.D. Myers of Ohio, complaining of the impact of the ban on export of PCB contaminated waste from Canada. S.D. Myers had hazardous waste incinerators in the US. It had none in Canada, so the term “investor” was a stretch. This matter went to arbitration and Canada lost.

The S.D. Myers ruling is notable for several reasons:

1. It was a law of general application, i.e. PCB exports were banned. There was no way in which the move was discriminatory towards the United States in general, nor to S.D.Myers in particular.
2. It was a move taken consistent with Canada’s obligations under the Basel Convention on Hazardous and Toxic Materials. Further, the Basel Convention is specifically referenced in NAFTA as a pre-existing multi-lateral obligation of Canada, exempt from NAFTA requirements.
3. At all material times when Canada banned the export of PCB contaminated waste, it would have violated US law to import the PCB waste to the United States.

The S.D. Myers case should be a clear warning to anyone looking at the Canada-China Investment Treaty that international arbitration can come to bizarre conclusions. Chapter 11 of NAFTA has had a higher proportion of environmental law challenges than in other areas of public policy. Mexico lost to Metalclad, a US-based hazardous waste disposal company that wished to locate a large toxic facility in San Luis Potosi. The state level government rejected the application and the federal government of Mexico was successfully sued.

It must be stressed that the nature of the full environmental impacts of Chapter 11 of NAFTA has never been assessed. I submit that the chilling effect of the Ethyl Corporations and S.D. Myers was profound. I am aware of a letter warning Alan Rock when he was Health Minister that removing the registration of pesticides for use in lawns for cosmetic purposes could give rise to Chapter 11 suits, so the move was not made. We have no way of assessing the “chilling effect” of the Chapter 11 cases that Canada has lost. In my opinion, there is a compelling case that the Ethyl and S.D. Myers case have resulted in failures of the Canadian government to regulate and/or ban toxic substances that they would have in the pre-Chapter 11 era. A thorough review of the regulatory process by the Commissioner for Environment and Sustainable Development, within the office of the Auditor General, assessing why certain pesticides and toxic substances have not been banned could provide empirical evidence of the chilling effect. In my view that is the single greatest environmental threat in this treaty. I believe municipal, provincial, territorial and the federal government will find themselves second-guessing policy and law-making related to environmental quality, health and safety based on how they imagine the investors awarded these powers by the TPP might respond.

More recent instances of such investor-state provisions being used to challenge sustainability or environmental protection measures here in Canada, and by Canadian firms abroad, are equally troubling. This past November, US energy company Lone Pine Resources launched a Chapter 11 challenge against the Quebec government, demanding $250 million in compensation. The damages that Lone Pine is alleging emerge from Quebec’s adoption of a province wide moratorium on hydraulic fracturing (or fracking), and related suspension of exploration rights in the Gulf of St. Lawrence, pending the results of a comprehensive review into the negative environmental impacts of the practice. Such cases represent clear barrier to environmental protection and regulation in Canada. As stated by company spokesman Shane Abel, “We think that the expropriation is arbitrary and without merit,” he said. “… We think that’s a clear violation of the NAFTA agreement.”

In practice, findings that such a regulatory decision is “arbitrary” are themselves arbitrary, since a many government decisions, such as those resulting from a democratic change in government, can be viewed as “arbitrary” from the perspective of investors. This creates a basis for arbitration claims in any area of Canadian policy. And while guarantees against arbitrary and uncompensated expropriation are important to ensure a stable investment climate, in reality, the domestic courts in any of the countries participating in the ongoing Trans-Pacific Partnership negotiations would provide sufficient protection for investors against such risks.

At minimum, I would insist that any inclusion of investor-state arbitration clauses into the Trans-Pacific Partnership Free Trade Agreement include clearly stated exceptions against claims of expropriation for any laws or regulations pertaining to environmental, social, or labour policies that a future government may want to pursue. Yet while better than nothing, even here such exceptions present unacceptable risks to Canadian’s sovereign, democratic rights to govern ourselves, including in environmental protection.

As explained by investment law expert Gus Van Harten, “The catch is that these exceptions are always uncertain and, ultimately, in the arbitrators’ hands. Arbitrators have often decided that a measure was not “necessary”, for example, where a less restrictive option was available to a government.” The potential environmental impact of this degree of power being vested in an unelected and unaccountable body is both direct, wherein an arbitral panel may award damages in response to environmental laws or regulations that, in its sole opinion, are not strictly “necessary”, creating pressure for them to be rescinded, and indirect, wherein the implicit threat of such legal action is sufficient to pre-empt a government from enacting an environmental law or regulation that could even potentially be challenged using the dispute resolution mechanism likely to be included in the TPP.

As described above, and for the reasons listed here, the Government of Australia has commissioned a major national review of the impacts of investor-state dispute resolution on the Australian economy and environment. Published in November, 2010, the 400 page “Bilateral and Regional Trade Agreements Productivity Research Report” formed the backbone of the “Gillard Government Trade Policy Statement”, from April, 2011. The Policy Statement arrives at some conclusions that are particularly relevant in considering the environmental impact of the Trans-Pacific Partnership.

Describing the negative impact of investor-state mechanisms on the ability of an elected government to pursue laws and regulations in the public interest, the Policy Statement states:

Some countries have sought to insert investor-state dispute resolution clauses into trade agreements. Typically these clauses empower businesses from one country to take international legal action against the government of another country for alleged breaches of the agreement, such as for policies that allegedly discriminate against those businesses and in favour of the country’s domestic businesses.

The Gillard Government supports the principle of national treatment – that foreign and domestic businesses are treated equally under the law. However, the Government does not support provisions that would confer greater legal rights on foreign businesses than those available to domestic businesses. Nor will the Government support provisions that would constrain the ability of Australian governments to make laws on social, environmental and economic matters in circumstances where those laws do not discriminate between domestic and foreign businesses. The Government has not and will not accept provisions that limit its capacity to put health warnings or plain packaging requirements on tobacco products or its ability to continue the Pharmaceutical Benefits Scheme.

Australia has, in no uncertain terms, identified the linkage between investor-state provisions and the erosion of democratic control over the laws governing its social, environmental, and economic spheres. As a direct result, as a matter of policy the Government of Australia “will not support [investor-state] provisions in trade agreements that constrain our ability to regulate legitimately on social, environmental or other similar important public policy matters.”iv When it comes to our domestic ability to enact environmental laws or regulations, Canada would do well to heed Australia’s example during these negotiations.

I urge the Trade Agreement Secretariat to make public the terms of this Agreement currently being negotiated in our name.

Sincerely,

Elizabeth May O.C., M.P.
Member of Parliament for Saanich-Gulf Islands
Leader of the Green Party of Canada

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