Global trade has advantages. For starters, it allows those of us who live through winter to eat fresh produce year-round. And it provides economic benefits to farmers who grow that food. That could change as oil, the world’s main transport fuel, becomes increasingly scarce, hard to obtain and costly, but we’ll be trading with other nations for the foreseeable future.
Because countries often have differing political and economic systems, agreements are needed to protect those invested in trade. Canada has signed numerous deals, from the North American Free Trade Agreement (NAFTA) to several Foreign Investment Promotion and Protection Agreements (FIPA), and is subject to the rules of global trade bodies, such as the World Trade Organization (WTO).
Treaties, agreements and organizations to help settle disputes may be necessary, but they often favour the interests of business over citizens. With Canada set to sign a 31-year trade deal with China, a repressive and undemocratic country with state-owned corporations, we need to be cautious.
Should we sign agreements if they subject our workers to unfair competition from lower-paid employees from investor nations, hinder our ability to protect the environment or give foreign companies and governments excessive control over local policies and valuable resources? Under some agreements, basics like protecting the air, water and land we all need for survival can become difficult and expensive.
One recent case could put Canada on the hook for $250 million. Quebec has put a hold on fracking pending a study into the environmental impacts of blasting massive amounts of water, sand and chemicals into the ground to fracture rock and release gas deposits. A U.S. resource company plans to sue Canada under Chapter 11 of NAFTA, claiming compensation for the moratorium’s damage to its drilling interests. Similar disputes have already cost Canada millions of dollars.Ontario also wants assurances that fracking is safe before it allows the practice. That province is facing costs and hurdles because of another conflict between trade and environment. Japan and the European Union filed a complaint with the WTO, claiming a requirement under the Ontario Green Energy Act that wind and solar projects must use a set percentage of local materials is unfair.
Many of the problems arise because of an investor-state arbitration mechanism, which is included in NAFTA, as well as the proposed Canada-China FIPA, Canada-European Union Comprehensive Economic and Trade Agreement and Trans-Pacific Partnership. It allows foreign investors to bring claims before outside arbitrators if they believe their economic interests are being harmed by a nation’s actions or policies. So economics trump national interests.
This has caused many countries, including Australia, South Africa, India and several in Latin America, to avoid signing deals that include the investor-state arbitration mechanism. In Australia’s case, the country recognized the pitfalls when tobacco companies, including Philip Morris, attempted to claim damages under a bilateral investment treaty after the federal government introduced a science-based law requiring cigarettes to be sold in plain, unappealing packages.
According to Australian National University law professor Thomas Faunce, Philip Morris then lobbied the U.S. government to include a similar mechanism in a new trade agreement it was negotiating with Australia. In an article for Troy Media, Faunce wrote that, with such a mechanism, the International Centre for the Settlement of Investment Disputes “would, in effect, become the final arbitrators on major Australian public policy questions concerning mineral royalties, fossil fuel and renewable energy, water, telecommunications, banking, agriculture and power.”
The 31-year trade agreement between Canada and China is worrisome, with its 15-year opt-out clause (compared to just six months for NAFTA), but the inclusion of the mechanism in other agreements is also cause for concern. At the very least, we could be on the hook for millions or billions of dollars if our environmental, health, labour or other policies were deemed to harm the interests of those investing in or trading with Canada.
The government’s desire to expand global trade may be understandable, but we mustn’t give away too much. We must tell our elected representatives to at least delay the Canada-China FIPA until it has been examined more thoroughly, and to reconsider the inclusion of investor-state arbitration mechanisms in all trade deals.
Written with contributions from David Suzuki Foundation Communications Manager Ian Hanington.