By Alan M. Field
Among Canadians, long-standing negative views about NAFTA provide firm foundations for negative views about other trade and investments pacts, both bilateral and multilateral. That includes the Trans-Pacific Partnership, currently being negotiated by twelve countries, spearheaded by the United States, but including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
Although numerous observers are skeptical about the ultimate chances that the TPP will ever be enacted, largely because of domestic political opposition in the twelve nations, supporters of the TPP have been encouraged by two events that took place in early November. First, on November 4, the Republican Party won a plurality in the U.S. Senate, a victory that is likely to weaken the hand of the opposition to the TPP, when the newly configured Senate meets in January. Second, on November 10, the twelve TPP ministers and their negotiating teams announced collectively that they have “made significant progress in setting the stage to finalize an historic, ambitious, comprehensive, balanced and high-standard TPP.” Signaling the approval of Prime Minister Harper, President Obama told negotiators [November 10], “It’s up to all of us to see if we can finalize a deal that’s both ambitious and comprehensive. This has the potential to be historic agreement.” Canadian trade negotiators will need to think hard and fast about what concessions they may wish to consider, if necessary, to protect traditional agricultural and automobile manufacturing industries, in order to gain the wider advantages inherent in becoming a TPP signatory.
Whatever its ultimate fate, the TPP is being viewed as the template for the more comprehensive trade agreements that will become the ‘new normal’ of the future. Whereas, two decades ago, much of the commotion focused on the tariff reductions mandated by NAFTA – long the essence of any agreement on trade – most of the attention now focuses on the other chapters in NAFTA, TPP and other ‘new-generation’ trade pacts; those chapters that would cover such increasingly vital global concerns as intellectual property protection, the rights of foreign investors, and environmental protection standards. Don Davies, the New Democratic Party’s official opposition critic for international trade, said that it all began with NAFTA, which was “the genesis of the current template” for international trade agreements. “It is the seminal agreement that started the process of dealing with other issues that had been the subject of sovereign [states’] policy making,” rather than topics covered by trade agreements. As Davies acknowledged, “worldwide, tariffs are already quite low, an average of four percent, although high in certain” sectors, and government negotiators have agreed to tackle these other, non-tariff barriers to the free movement of goods, capital and individuals.
As the Council of Canadians, the Ottawa-based social activist group, noted in a recent statement, “Of the twenty-six chapters currently being negotiated in the TPP, only two have to do with trade. The other twenty-four deal with issues as diverse as how a government regulates corporate activity, what Crown corporations can and cannot do, how long pharmaceutical patents or copyright terms should be, how the Internet is governed, the sharing of personal information across borders, banking and taxation rules, and when a company or investor should be compensated when environmental or public health policies interfere with profits.”
Some Canadian critics argue that the issue of “trade” agreements – now defined so broadly, is also a geopolitical weapon of the U.S. government, which is (not so secretly) trying to isolate China in the Asia-Pacific region, and to block alternative models of economic development. According to this line of thought, the TPP would support the needs of multinational corporations, rather than the populations of the countries where they operate. As the statement by the Council of Canadians states, “The TPP is being resisted by people across all participating countries because of how it will lock-in a myopic type of corporate globalization that is the main cause of runaway climate change and which has done little to create good, sustainable jobs or reduce poverty worldwide. People working across borders fought and defeated the Free Trade Area of the Americas. Our goal is to make sure the TPP suffers the same fate.”
According to this line of argument, the TPP would directly threaten public-health and access to medicine; the creation of higher environmental standards; and even unrestricted access to the Internet. Regarding public health, for example, the Council wrote, “The U.S. is using the TPP to push for excessive patent protections and other intellectual property rights that are guaranteed to make medication much more expensive in Canada and even inaccessible to the poorest countries involved in the negotiations. Across the world, health advocates claim it is a matter of life and death that we say no to these changes in the TPP.”
Regarding environmental protection, the TPP would supposedly “put a screen on all environmental policies to make sure they do not hurt trade and investment. The only winner from this situation is climate change.” Those critics also note that the United States, the lead actor in TPP negotiations, wants all of these TPP countries, including Canada, to change their copyright laws in ways that restrict the open Internet, making it illegal to circumvent digital locks on copyrighted material even for non-infringing purposes. This, charges the Council of Canadians, would “stifle innovation, raise the prices of books, CDs and movies, and reduce economic opportunities to businesses, creators and the public. The dream of a democratic world-wide web is fading but still there. The TPP would make the dream much harder to realize.”
Trade critic Michael Geist, Canada Research Chair in Internet and E-Commerce Law at the University of Ottawa, noted that the Canadian government has announced that new copyright rules associated with Internet providers will take effect starting in 2015. “The Canadian system, referred to as a ‘notice-and-notice’ approach, is widely viewed as among the most balanced in the world, providing rights holders with the ability to raise concerns about alleged infringements, while simultaneously safeguarding the privacy and free speech rights of users.” However, noted Geist, according to leaked text from drafts of the TPP, the United States has been demanding that Canada abandon ‘notice-and-notice’ in favour of rules that could lead to terminating subscriber access, content blocking, and even monitoring of online activities. Canadian law currently provides protection for the life of the author plus an additional 50 years. Although Canadian law complies with the international standard, the U.S. wants all TPP countries to extend the term to life plus 70 years, effectively keeping works out of the public domain for decades. Geist said he fears that this would extend the term of patents in a manner that would keep cheaper generic drugs off the market. The net effect could be to “sharply increase health care costs” in Canada.
Geist added, “The Canadian government approach stands as one of the most secretive in TPP history. Why the secrecy? The answer may lie in the substance of the proposed agreement, which leaked documents indicate often stands in stark contrast to current Canadian policy. The agricultural provision may attract the lion’s share of TPP attention, but it is the digital issues that are particularly problematic from a Canadian perspective.”
Investor-state dispute settlement
Like NAFTA, the TPP, the TTIP (Transatlantic Trade and Investment Treaty) and the CETA (Canada-European Union Trade Agreement) would each include an investor rights chapter and investor–state dispute (ISDS) process, which allows foreign investors to bypass domestic courts and directly challenge government measures at arbitration tribunals that are not accountable to the public. This provision has attracted a great deal of criticism from numerous groups that are critical of other free-trade practices and institutions. In a statement, the Council of Canadians said that as a result of the ISDS, “Policies or decisions could theoretically be legal and fair (i.e., they treat national and foreign firms identically), or be designed to effectively protect the environment or public health, and yet still face corporate lawsuits demanding hundreds of millions, and sometimes billions of dollars in compensation. Canada has lost or settled five such claims under NAFTA costing the public over $160 million. Leaked texts show the TPP would create even more opportunities than in NAFTA for corporations to challenge public decisions. This powerful tool of corporate rule, designed to undermine democracy, is reason enough to stop the TPP.”
As Geist noted, “Months after Canada and the EU announced that they had reached agreement on CETA, it is the investment provisions, particularly the investor-state dispute settlement (ISDS) that could seeming derail the entire agreement.”
In a highly publicized case of the investor-state (ISDS) process, Eli Lilly & Co. sued the Canadian government in September 2013 for $500 million, alleging that Canada violated its obligations under NAFTA by allowing Canadian courts to invalidate patents for two of Eli Lilly’s drugs – Zyprexa, used to treat schizophrenia, and Strattera, used to treat Attention Deficit Hyperactivity Disorder (ADHD). Not content with the ISDS provision of NAFTA, Lilly is lobbying to include ISDS in the Transatlantic Trade and Investment Treaty (TTIP) now under negotiation between the European Union and the U.S. A Lilly executive has said that TTIP would be “a once-in-a-lifetime opportunity to simplify transatlantic business, addressing longstanding trade issues, [and] create new markets.” Canada is expected to file its response to Lilly’s brief in January 2015, but a hearing for the case is not expected to take place until spring 2016.
For his part, Scott Sinclair, senior trade policy researcher at the Canadian Centre for Policy Alternatives (CCPA), argued that “there is no convincing justification” for including the ISDS mechanism in either the CETA or the TTIP. The ISDS mechanism in the TTIP is modelled on the ISDS mechanism in the Canada-EU Comprehensive Economic and Trade Agreement (CETA). Sinclair added, “We emphatically oppose its inclusion in the CETA and strongly recommend against its inclusion in the TTIP. The court systems in Canada, the European Union and the United States already grant high levels of legal protection to all investors, regardless of their nationality. If investment protection rules must be included in the CETA and the TTIP, any disputes concerning their application should be resolved solely at a government-to-government level.”
Don Davies, Canada’s opposition critic for international trade for the New Democratic Party, said that “we are in favour of an agreement with the European Union” but that the critical question is “what is in that trade agreement.” While it is true that trade agreements boost GDP, it’s important to ask if that additional GDP is distributed fairly. “Are the taxes on that additional GDP equitable? Does the government distribute the extra GDP fairly?”
Davies cautioned those who support trade agreements willy-nilly, regardless of their details, that “there is no data to back up” the oft-assumed proposition that trade agreements automatically create jobs. Those trade pacts that are “well done” may improve the employment rate by one percent, but he stressed that “with every trade agreement, there is job dislocation. With NAFTA, Canada lost a significant number of manufacturing jobs to the United States.” These losses were particularly important, he added, because “these were higher paid, middle class jobs,” such as those in the Quebec textile industry. These kinds of losses are particularly likely “if you are not careful about how you negotiate the treaty.”
The dangers of secrecy
Although WikiLeaks’ editor-in-chief Julian Assange is not Canadian, bold criticism of the TPP’s forthcoming intellectual property provisions have resonated among Canadian opponents of the trade pact. Rather than view the TPP as an instrument for protecting the free speech and intellectual property of individuals and enterprises – as claimed by its Canadian and U.S. supporters – Assange said early in 2014 that the TPP would be bound to abuse those rights. “If instituted, the TPP’s IP regime would trample over individual rights and free expression, as well as ride roughshod over the intellectual and creative commons. If you read, write, publish, think, listen, dance, sing or invent; if you farm or consume food; if you’re ill now or might one day be ill, the TPP has you in its crosshairs.”
Shortly thereafter, legislators in seven of the twelve TPP countries issued a statement calling on TPP negotiators “to publish the draft text of the Agreement before any final agreement is signed with sufficient time to enable effective legislative scrutiny and public debate.” The statement, which was endorsed by both the federal New Democratic Party (NDP) and the Green Party of Canada, lashed out against a trade agreement that “threatens to undermine the very notion of the public good, by giving corporations more power to undermine public policy.”
For his part, Davies, the NDP’s trade critic, said that Assange’s “critique of the TPP is very exaggerated.” However, he noted that when trade agreements are negotiated in secrecy, “it breeds a climate of suspicion.” Moreover, the inevitable leaks that occur during secret negotiations “create a frenzy of exploitation, and projects based on fragmentary evidence.”
The leaked intellectual property provisions of the TPP propose sweeping reforms in publishing, patents, copyrights, trademarks, civil liberties and the liability of internet service providers. Internet freedom organizations, including Canada’s Openmedia.ca, have criticized the TPP’s intellectual property provisions, arguing that the agreement would restrict innovation and force internet service providers to police copyright.
Canadian opponents of the TPP negotiations have also criticized the Obama administration for proposing to ‘fast-track’ the TPP through the U.S. Congress, a process that would prevent the Congress from amending specific provisions. Those efforts have been highly criticized by Republicans for being insincere or half-hearted, and there has been little support for ‘fast-track’ among Democrats in the Senate. However, with the Republicans now in control of the Senate, a more vigorous effort to promote ‘fast-track’ could be in the store in the near future. In the absence of presidential ‘fast-track’ authority, argue its supporters, foreign governments are not likely to sign on to a TPP, because those governments would not be certain of the contents of the agreement they are signing.
While it’s understandable why all of the negotiations cannot be conducted in public, “If you have serious negotiations, the people at the table need to have a full mandate [from the public] to negotiate,” said Davies, a former labour negotiator. “More transparency is possible, and there should be more consultation with the public, to let the public in to shape the agreement. Throughout the bargaining process, you can report to the people about what issues are being discussed.” Overall, he concluded, “A balance can be struck between the needs of confidentiality and transparency.”
Finally, the more traditional issue of foreign access to Canada’s tightly controlled market remains one of the biggest hurdles to bringing Canada into the TTP, U.S. trade negotiators said in late October. U.S. Trade Representative Michael Froman noted that Canada’s supply management system, which sets prices for cheese, dairy and poultry – and limits foreign competition, remains a thorny issue. Froman added that two kinds of troublesome issues remain. One is “market access, which is sort of the heart of the trade agreement.” The second overall obstacle is different national rules — related to intellectual-property rights, state-owned enterprises, labour and environmental rules. But there has been “significant progress on those fronts”, and the main contours of the TPP have increasingly “crystallized.”
Ultimately, there is a broader problem with gaining support from stubbornly anti-trade Canadians – and their counterparts in the United States and Mexico, notes Gary Hufbauer, Senior Fellow at the Peterson Institute for International Economics in Washington. While the benefits of free trade are barely perceptible to the large number of people who derive those benefits, the losses are strongly felt by those people who suffer them. Hufbauer said, “The large number of winners are dispersed, but the losers are very concentrated.”