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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That was the point of view of a Special Committee on the Multilateral Agreement on Investment created by the British Columbia Legislature in 1998. Its December 29^th report stated that:

• “It must be emphasized that provincial governments are not simply another set of ‘stakeholders’ to be consulted by the federal government en route to treaty signature and implementation. Under the Canadian constitution, the federal government is incapable of unilaterally implementing international treaty obligations in areas that fall within provincial jurisdiction. Nor is it acceptable for the federal government to use its treaty-making powers to do an end run around the federal-provincial division of powers or in a way that diminishes Canadian federalism and democracy.
• “How is it that the federal government can expose provincial measures to binding international arbitration without the province’s consent? […] Who will pay if a provincial measure is found to violate the federal government’s treaty obligations?”
• “In the committee’s view, if the federal government fails to gain the express consent of the Legislative Assembly, then the Province must vigorously defend its authority on behalf of all British Columbians.”

“These are exactly the kind of issues the Green Party of Canada has been raising since the Conservatives quietly tabled the Treaty on September 26^th. We are the only party in Ottawa opposed to the Treaty. Our online petition against ratification has been signed by 22,637 citizens,” said Elizabeth May, Green Party of Canada Leader and MP for Saanich-Gulf Islands.

“The Treaty pays lip service to provincial authority by stating that provincial and

territorial representatives were ‘updated’ on the progress of the negotiations with China and ‘did not express any opposition to the Agreement.’ What kind of Federal government is Harper’s? An ‘update’ does not meet the federal obligations under the Constitution,” added the Green Leader.

“The provinces should be very worried of having Harper signing this without their consent. We have attempted to reach premiers across Canada. We now have 9 days to prevent Harper’s Conservatives’ attack on our democracy,” concluded May.

Green Party’s webpage against the Treaty: http://www.greenparty.ca/stop-the-sellout

The post The Canada-China Investment Treaty Cannot be Ratified Without Provinces’ Approval appeared first on Elizabeth May.

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Others in this House might not have been thinking throughout this debate of the famous palindrome: a man, a plan, a canal — Panama. As members know, a palindrome is something that reads the same forward and backward. Unfortunately, I cannot read this trade deal as anything but backward. When the man is the Prime Minister and the plan is this free trade agreement, we do not get anything very progressive. We do not get a canal; we get a ditch.

We have a very small level of trade with Panama. While we see the Conservatives trying their best to gather up as many small trade agreements as possible, such as the one we passed with Jordan and this one with Panama, it is worth bearing in mind the level of trade that is currently at stake.

In 2010, there was just under $214 million in trade in goods between Canada and Panama. We do not expect this to go up very much even with a free trade agreement. If we look at previous free trade agreements with countries like Costa Rica and other small bilateral free trade agreements, we find that in a number of cases our trade has declined after signing the agreements.

We have a global trading framework already which includes the general agreement on tariffs and trade, and under the Uruguay round the creation of the World Trade Organization. We are not labouring any longer as a global society of nations under high tariffs and protectionist measures. They have been mostly slashed.

What would one want in trading and approving a trade agreement with Panama?

We have heard much in this House of the need to improve labour rights within Panama. We have heard that Panama continues to be a nation that traffics heavily in narcotics and drugs, and the rest of the world would like to stem their flow. We also know that Panama is a country that has extensive money laundering problems. This agreement does nothing to address these issues.

When we look at the ways in which Panama has operated as a tax haven, according to the Organisation for Economic Co-operation and Development, Panama is one of 26 jurisdictions in the world that have not yet fulfilled their promise as of 2002 to provide tax sharing information. That would provide a greater understanding of when a country is operating unfairly and illegally to harbour revenue and wealth so that the country of origin cannot tax it properly.

The trade agreement with Panama unfortunately does not deal with any of these issues. It does not deal with narcotics trading. It does not deal with the tax haven problem. It does not deal with money laundering. It does have a side agreement to deal with labour, but we can already measure from previous efforts with such side agreements that they have no real effect on improving labour conditions in a country. 

Through the 1990s there was a great increase in trade agreements and a great wave of globalization. Its triumphalism was the creation of the World Trade Organization, but things have slightly stalled since Doha and there is a little less triumphalism. Some people feel that trade, trade liberalization and greater economic activity, particularly greater strength and power to corporations, will raise all boats. Gus Speth, the former head of the United Nations Development Programme, famously said, “This kind of trade raises all yachts”, but it does not do much for the poor. It certainly does nothing to improve labour conditions. If we negotiate a trade agreement while turning a blind eye to the things about our trading partner that worry us, things like drug trafficking, money laundering, human rights abuses, tax havens and places to shelter income that should be taxed under public revenue elsewhere, it is unlikely we would be able to fix them later.

Turning to the text of the agreement, in article 106 there are some carve outs so that the agreement would not unfairly target multilateral environmental agreements. I wish the trade negotiators for Canada had listed all the agreements that are important. They certainly have carved out the ones that were listed in NAFTA, such as, CITES, the Convention on International Trade in Endangered Species, the Montreal protocol on the ozone layer, the Basel convention on the transport of hazardous materials, the Rotterdam convention on trade in hazardous goods, and the Stockholm convention on persistent organic pollutants. 

A startling omission, since both Panama and Canada are parties to the framework convention on climate change, is that the framework convention on climate change is not listed as an agreement that would be protected against any incidental accidental implications from this trade agreement to climate policies. As we speak, both Canada and Panama remain parties to the Kyoto protocol, although we know that Canada has signalled its intention, quite shamefully I may add, to withdraw from its legal commitments there. I would not expect to see the Kyoto protocol in this agreement, but I certainly expected to see the United Nations framework convention on climate change, to which both countries are currently committed.

More concerning are the sections that appear in chapter 9 of the Canada-Panama free trade agreement. Chapter 9 deals with the quite devastating investor state provisions.

It sounds like the most boring of topics, an investor state provision. What could it be and why do we care? I want all Canadians to care. This provision is our innovation. We were the first anywhere on the planet to create this provision. It was done in NAFTA. In NAFTA, it is chapter 11. In the Canada-Panama agreement it is chapter 9, but it has the same effect.

There was an effort to make this kind of provision global. Some may remember the efforts were negotiated within the Organisation for Economic Co-operation and Development. It started within the World Trade Organization, but it stalled there. At the WTO they were called multilateral investor agreements. They regrouped and went to the OECD and called them the multilateral agreement on investment, the MAI instead of the MIA. It stalled and failed there. Thank goodness. It was the result of widespread grassroots opposition.

It is the first truly global campaign I have ever seen where grassroots groups using the Internet reached out to each other. I remember one parliamentarian saying to me at the time, “I can’t imagine that any Canadian citizen is really worried about something called the multilateral agreement on investment”. He came back to me a few days later, after he had been on an MPs’ study tour and said that while he was paying for gas at a station in Corner Brook, Newfoundland, he saw on a clipboard a petition to stop the MAI. It contained several pages of signatures.

Why do Canadians at the grassroots and people globally not want more investor state provisions? I should say that once it failed at the OECD, largely thanks to France, but other countries ran to catch up, once it failed there, they abandoned it. By they I am referring to the corporate entities that are pursuing the notion that corporations should have powers superior to those of elected legislatures. The essence of an investor state provision is that multilateral corporations should be able to trump decisions made by democratically elected parliaments and legislatures around the world and they should be able to sue a country if that country passes legislation that a corporation does not like. That is the essence of it. It is not in any traditional way an expropriation.

They have taken it from global to doing it BIT by BIT, literally the acronym BIT, bilateral investment treaty, such as this one. They are collecting up by BITs to replace what they could not do directly, a global agreement that allows corporations to sue governments when governments take action, even when that action is not in any way designed to inhibit trade. It is as such when Canada banned a toxic gasoline additive, or when Canada took steps to ban the export of PCB contaminated waste pursuant to the Basel convention I mentioned earlier, or in the very sad and tragic case of Metalclad, a U.S. corporation. Metalclad wanted to put a toxic waste site next to a little community in Mexico called San Luis Potosi. The people of San Luis Potosi said no, that it was too close to their water source and they would not let that giant U.S. corporation, Metalclad, put its toxic waste disposal facility there. Under chapter 11 of NAFTA, Metalclad sued the federal state of Mexico. 

This agreement means that any corporation with a mailbox in Panama can claim to be an investor and sue Canada at the municipal, provincial or federal levels for any decision it does not like, that it feels impedes its expectation of profits.

In the case of poor little San Luis Potosi, Mexico ended up owing Metalclad just under $17 million.

I fear that my time to speak to this agreement may be coming to a close. I want to conclude by saying firmly and clearly that we must learn from what has gone wrong with chapter 11 of NAFTA and stop including investor-state provisions as an automatic, unthinking addition to every single trade agreement we negotiate.

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