Despite an improved dispute mechanism, trade deals remain suspect

Essentially a Donald Trump vanity project and a slightly modified version of the North American Free Trade Agreement (NAFTA), the Canada–U.S.–Mexico Agreement (CUSMA) did contain one win for the people. As the Centre for Policy Alternative’s Scott Sinclair notes in a new report, the removal of inves

Last updated on May 03, 23

Posted on Apr 29, 21

5 min read

Essentially a Donald Trump vanity project and a slightly modified version of the North American Free Trade Agreement (NAFTA), the Canada–U.S.–Mexico Agreement (CUSMA) did contain one win for the people.

As the Centre for Policy Alternative’s Scott Sinclair notes in a new report, the removal of investor-state dispute settlement (ISDS) from the renegotiated NAFTA was a critical victory for democratic sovereignty over investor power. Within three years, CUSMA will eliminate ISDS between Canada and the U.S. and significantly scale it back between the U.S. and Mexico.

That makes for a nice change, he notes, given the number of negatives Canada has suffered under NAFTA’s investment provisions in Chapter 11. Sinclair cites examples in which Canadians not only had environmental hazards imposed on them, but were forced to pay for the privilege, the result of ISDS provisions that had gone largely undiscussed prior to NAFTA’s coming into force in 1994.

“The obscurity of NAFTA’s ISDS system was short-lived. In 1996, Ethyl Corporation, the U.S. company responsible for leaded gasoline, launched the first NAFTA claim against Canada. Ethyl objected to a Canadian ban on the import and inter-provincial trade of MMT, the manganese-based gasoline additive that is a suspected neurotoxin. Automakers also claimed that MMT interfered with automobile on-board diagnostic systems.

“In 1998, after preliminary tribunal judgments against it, the Canadian government settled with the company. It paid Ethyl US$13 million, repealed the MMT ban and, ludicrously, apologized to the company. Suddenly, NAFTA Chapter 11 had the attention of policy-makers and the public,” he writes in The Rise and Demise of NAFTA Chapter 11

“Next up, in 1998, a U.S. waste disposal firm challenged a temporary Canadian ban on the export of toxic polychlorinated biphenyl (PCB) wastes. Canada argued that the ban was taken for environmental protection reasons in accordance with its obligations under the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal. The NAFTA tribunal brushed this argument aside, deciding that Canadian actions had violated the Chapter 11 rules on discrimination and minimum standards of treatment. It awarded SD Myers $6.05 million and ordered the government to pay the investors’ legal costs of US$850,000.”

Such issues are a clear example of how talk about free trade has little to do with trade – and even less with freedom. In fact, NAFTA and the types of deals that followed – CETA, TPP, CUSMA and their ilk – are all about corporate control, subverting the public good in the name of profits.

The trouble is that deals such as the Trans-Pacific Partnership aren’t about trade. They’re about enshrining corporatism and eliminating national government control over unfettered capitalism in all its abusive glory.

Moving farther along the “trade” deal continuum, new deals such as the TPP enshrines the right of corporate profit over good public policy, the environment and even people’s lives. Corporations can and will sue governments for impeding profits, able to claim massive compensation from governments if they’re unable, for instance, to offer private health care services in Canada.

TPP-like agreements are no longer primarily about reducing traditional trade barriers. Instead, they’re about policies that have nothing to do with comparative advantage, policies that are often designed to lead to higher consumer costs and concentrated corporate power.

So, the TPP has little to do with trade – and recall that free trade deals have largely been harmful to most Canadians and their working- and middle-class counterparts in the U.S. – but everything to do with increasing the wealth of a few while killing jobs and driving up prices here. On that, many critics – Nobel laureates included – agree.

Many see it as an end-run around sovereign nations and their ability to protect the public good – already a dubious enterprise, given the corrupt and co-opted governments we elect. There will be a loss of governance, higher prices – changes in rules about intellectual property and patents will drive up the cost of items from pharmaceuticals to music – and a downward pressure on wages.

We know, of course, that sweeping trade agreements have largely been harmful for our economy, encouraging the kind of globalization that has gutted the manufacturing sector in Ontario, as it has even in the U.S. heartland.

Language in early deals such as NAFTA becomes even more pronounced in CETA and the TPP allow for end-runs around national governments, essentially constraining their powers. In many ways, its continued deregulation by stealth, as governments would be handcuffed. As parties to the negotiations, they do so willingly, attempting to hide from the public the desire to turn more power over to corporations. Once the agreements are in place, national governments can simply wash their hands of any issues raised by their citizens.

It’s a corporate-friendly agenda, to the detriment of other priorities citizens may have, turning over the levers of control from public hands to private.

It can be argued that liberalized monetary policies and trade deals that favour corporate interests over the well-being of citizens – policies that have eroded our standard of living for three decades. The cure, we’re told, is yet more deregulation and globalization, essentially offering a drowning man more water instead of a lifejacket.

It’s the angst over sweeping changes to our economies that has help fuel the rise of populist movements, from the perpetrator of Make America Great Again to citizen-friendly groups such as Syriza and Podemos.

The actualities of the trade wars such as we saw from the previous U.S. administration, for instance, don’t make sense, but the sentiment does, particularly to the ever-important base. In principle, Western countries under strain from the influx of overseas goods and the insidious trend of outsourcing to offshore locales, which have been more pressing concerns than trade with our U.S. neighbours, with whom we have much more in common on every front … until recently, that is.

Buying locally, especially from small producers and retailers, is the perfect tonic for the globalization that has destabilized the financial system, weakened the domestic economy and lowered the standards and safety of the goods we consume. It may not be that simple, but simplicity and sloganeering are the hallmark of the types of populism we’re seeing in the U.S.

Trade deals have typically reflected the imbalance of power between corporate investors and the vast majority of the public. But there’s some reason for optimism, Sinclair notes in his report.

“Just as the early NAFTA Chapter 11 cases turbocharged the ISDS regime in North America and globally, its undoing in USMCA might animate the reverse process of dismantling the system. In Europe, there is anger over lawsuits from investors demanding massive compensation for the phasing out of fossil fuels.32 In the Global South, dozens of countries, large and small, have chosen to extricate themselves from damaging investment treaties.

“While it will not be an easy task, the prospects for dismantling ISDS are better today than ever.”

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Steve Kannon

A community newspaper journalist for three decades, Steve Kannon is the editor of the Observer.

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