Canada is the most-sued country under the North American Free Trade Agreement and a majority of the disputes involve investors challenging environmental laws, according to a new study from the Canadian Centre for Policy Alternatives. Over 70 per cent of claims since 2005 have been brought against Canada, and the number of challenges under NAFTA’s settlement clause is rising sharply.
A Huffington Post story by Sunny Freeman on the CCPA report says that the investor-state dispute settlement mechanism contained in NAFTA’s chapter 11 grants investors the right to sue foreign governments without first pursuing court action. The provision included in the 1994 treaty on the argument that U.S. and Canadian investors needed protection against corruption in Mexican courts. But the mechanism limits governments from enacting policies on public concerns such as the environment and labour or human rights, and negotiations are often carried out in secret.
The CCPA believes the federal government’s commitment to Chapter 11 and its willingness to settle and compensate claimants is encouraging this trend. There were 12 cases brought against Canada from 1995 to 2005, and another 23 in the last decade. This compares to 22 against Mexico and 20 percent against the U.S. since 1995.
Canada has lost or settled six claims paying a total of $170 million in damages, while Mexico has lost five cases and paid out $204 million. The U.S. has won 11 cases and has never lost a NAFTA investor-state case.
“Thanks to NAFTA chapter 11, Canada has now been sued more times through investor-state dispute settlement than any other developed country in the world,” said Scott Sinclair, who authored the study. He estimates that Canada has spent $65 million defending such claims over the past two decades.
About 63 per cent of the claims against Canada involved challenges to environmental protection or resource management programs that allegedly interfere with the profits of foreign investors. The government has lost some of these challenges and has been forced to overturn legislation protecting the environment.
In 1997, the Ethyl Corporation, a U.S. chemical company, used chapter 11 to challenge a Canadian ban on the import of MMT, a gasoline additive that is a suspected neurotoxin and which automakers have said interferes with cars’ diagnostic systems. The company won damages of $15 million and the government was forced to remove the policy.
A year later, U.S.-based S.D. Myers challenged Canada’s temporary ban on the export of toxic PCP waste, which was applied equally to all companies. Canada argued it was obliged to dispose of the waste within its own borders under another international treaty. However, the tribunal ruled the ban was discriminatory and violated NAFTA’s standards for fair treatment.
There are currently eight cases brought by U.S. companies against the Canadian government asking for a total of $6 billion in damages. Many of the current challenges involve domestic environmental protections such as the promotion of renewable energies, a moratorium on offshore wind projects on Lake Ontario and Nova Scotia’s decision to block a mega-quarry.
In one case, Lone Pine Resources Inc., is suing the Canadian government for $250 million over Quebec’s moratorium on natural gas fracking, which applies equally to foreign and domestic companies. Lone Pine argues it was not consulted before the ban nor compensated for its wasted investment or loss of potential revenue.
Sinclair argues that the threat of challenges under chapter 11 has a chilling effect on public interest regulation, which will only worsen unless political and legal action is taken.
“Buoyed by their past successes, foreign investors and their legal advisors are now turning to NAFTA chapter 11 with increasing frequency and assertiveness,” he wrote. “Unfortunately, compared to other parts of the world, there is surprisingly little political debate about the corrosive influence of ISDS on public policy and democracy in Canada.”
Canada is embarking on a new generation of treaties such as the Comprehensive Economic and Trade Agreement (CETA) with the European Union, and the Trans Pacific Partnership, both of which contain investor-state dispute settlement (ISDS) systems. While governments can be sued under ISDS, there is no similar recourse for states to hold foreign investors accountable for their actions.
Image Source: http://www.commondreams.org/views/2015/10/23/naftas-isds-why-canada-one-most-sued-countries-world
Even the loudest advocates of the Trans-Pacific Partnership concede that the macroeconomic benefits for Canada will be small, as we have written before. Canada’s former trade minister promised a $3.5 billion boost to the Canadian economy—a fraction of a percent—if the massive trade treaty goes ahead. The most optimistic forecasts, including a recent report from the World Bank, point to an increase of around 1% to the Canadian economy by the year 2030.
Nevertheless, business groups, right wing think tanks and other TPP cheerleaders have been singing the deal’s praises, downplaying its clear harms and calling for its timely ratification. These commentators would have us believe that Canada has nothing to lose and at least something to gain from the TPP, if only we would act quickly to push it forward.
But if the economic argument for the deal was weak before, a new study from researchers at the UN and Tufts University may have finally laid the case to rest. Their analysis shows that Canada can expect a mere 0.28% increase to GDP growth—effectively zero change—over the next ten years if the TPP is implemented. The situation is worse for the U.S. and Japanese economies, which will actually shrink under the TPP, according to the authors.
More troubling is the TPP’s effect on employment. The study suggests that despite a negligible macroeconomic impact, ratifying the deal will lead to 58,000 net job losses in Canada over the next ten years. In other words, the TPP won’t grow the Canadian economy but it will hurt workers, who will see their share of the economic pie shrink by 0.86% under the deal.
In fact, the authors argue, the TPP will lead to “job losses and higher inequality in all participating economies” (and in many other countries that aren’t even part of the deal). The net employment impact of the TPP will be millions of jobs lost. This is in part because greater capital mobility and more integrated supply chains will encourage cost-cutting across the globe. And when employers cut costs to compete in the world’s largest free-trade zone, jobs and wages will be one of the first targets for savings.
Why don’t other macroeconomic forecasts predict job losses from the TPP? Incredibly, it is because most other forecasts assume stable, full employment. TPP advocates have simply shrugged off the implications for labour when assessing the deal’s likely consequences. This new study does not make the same oversight.
Trading our sovereignty for… what exactly?
The list of TPP “cons” is long: among other issues for Canada, it will increase drug costs, rattle the agricultural sector and undermine Internet freedom. Most worrying of all, it will give new rights to foreign corporations to sue Canadian governments for regulations enacted in the public interest.
But if the TPP ever had a saving grace—one item for the “pro” list—at least it was going to grow the economy and create jobs. As the evidence mounts against even modest macroeconomic benefits, however, the “trade-offs” are looking increasingly unpalatable.
Is the TPP worth it for Canada? We say no, and we think that Canadians agree. As trade minister Chrystia Freeland contemplates signing the deal (as early as February 4th), this is a message she needs to hear. A deal that costs too much and delivers too little is not a deal that Canada needs.
A renegotiation of the Trans-Pacific Partnership trade deal is not possible even though serious concerns may be raised during public consultations, Canada’s trade minister said Thursday.
“The negotiations are finished and for Canadians it’s important to understand that it’s a decision of yes or no,” Chrystia Freeland told reporters Thursday after receiving varied feedback at a meeting at the University of Montreal.
Freeland said the treaty negotiated by the Harper government during the election campaign is very complicated, involving 12 countries along the Pacific Rim that make up 40 per cent of the global economy.
All countries have two years to ratify it, but the treaty comes into force if the United States, Japan and four other countries give their approval.
“It’s important for us to understand that we don’t have a veto,” she said.
The NDP said it is unacceptable that the minister would accept the content of the deal even as U.S. presidential candidate Hillary Clinton and some congressional Republicans have voiced concerns.
Trade critic Tracey Ramsey believes there is a way to reopen the deal that preserves jobs and avoids higher drug prices.
“It will involve some work but we know that a better deal is possible for Canada,” she said in an interview.
The minister said she’s heard both opposition and support in consultations so far. A Council of Canadians representative on Thursday described TPP as a deal of “plutocrats” in reference to a book of the same name about income inequality that was written by Freeland before she entered politics.
University of Montreal political science professor George Ross wondered about the point of the government’s commitment to consult if changes are impossible because they would risk unravelling what had been achieved.
Still, Freeland said the government is committed to hearing from Canadians before a ratification vote is held in Parliament.
No date has been set for hearings or a final vote. The Liberal government also hasn’t announced whether it will attend the formal signing Feb. 4 in Auckland, N.Z.
Freeland said the key date is ratification, not the formal signing. But her parliamentary secretary, David Lametti, said in order to ratify, you have to sign the deal.
“So we’ll go through each step one at a time.”
Meanwhile, Freeland said the complexity of the TPP hasn’t slowed the government’s work on ratifying a trade deal with the European Union known as CETA, describing it as a priority for the government.
“I think CETA will be really the gold standard of trade agreements. I’m working hard on it and I’m confident we will get a deal soon,” she said, refusing to say if approval will come before TPP.