Failure of NAFTA could be good for our creativity

It’s a toss-up on whether the North America Free Trade Agreement will survive. The fifth round of discussions has concluded in Mexico and Foreign Affairs Minister Christie Freeland is not optimistic. “Hope for the best and prepare for the worst and Canada is prepared for every eventuality,” she said.

     image: AgWeb.com

Failure of NAFTA will have only a slight negative economic impact. If the U.S. terminates NAFTA, as the unpredictable President Trump has threatened to do, trade would revert back to rules of the World Trade Organization. Under those rules, the added tariffs would only add 1.5 per cent of the cost of goods exported to the U.S. according to a study from the Canadian Centre for Policy Alternatives.

With “trade” in the title, you could think that’s what NAFTA about. And since Canada is a trading nation, you could conclude that NAFTA is vital to our economy. While NAFTA offers some advantages, it has a number of disadvantages such as the investor-state dispute settlement provisions that allows foreign firms to sue governments. And exports of Canadian softwood aren’t even covered.

However, trade deals like NAFTA are not primarily about trade. Trade takes place without them. These trade deals are actually about protection of corporate interests such as “intellectual property” which is not property in the usual sense. It’s a means of commodifying artistic and technological creations such as brands, music, movies, patents, and software.

America normally supports trade deals because they benefit most. The deals enforce corporate interests, and in the U.S. corporate interests = government interests. The reason that the U.S. is so interested in intellectual property is because it’s one of their biggest exports. Culture, what the U.S. calls entertainment, makes up one-third of American exports. American movies are seen in theatres around the world. U.S. pop songs are heard in the streets. Kids play American-made video games. American inventions such as the iPhone are ubiquitous.

An indication of how poorly President Trump understands the American economy is his rejection of the Trans-Pacific Partnership. It was a license for U.S. corporate giants to impose protection of intellectual property. I celebrated its demise after Trump cancelled the TPP but I had to wonder what (if) the president was thinking.

The demise of NAFTA would lift a weight off of Canadian creativity and allow it to flourish.

Michael Geist, Canada Research Chair in Internet and E-Commerce Law at the University of Ottawa, was asked to advise a Senate Open Caucus meeting on modernizing NAFTA.

“To my surprise, the shift in focus to a post-NAFTA world was liberating, opening the door to considering Canadian policies that have previously been viewed as unattainable given intense U.S. pressure on intellectual property policy that favours ‘Americanization’ of global rules,” he said (Globe and Mail, October 20, 2017).

By loosening the grip of the U.S. on creativity, Canadians can market their innovations globally; innovations such as software developed by Blackberry for self-driving cars and recently sold to the Chinese firm Baidu.

Of course, our intellectual property needs protection. With the U.S. out of the way, international agreements can be struck that encourage innovation while protecting creators without one player holding a big stick.

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Thank you, Mr. Trump, for killing the TPP

It’s a rare thing when the views of president-elect Trump and Canadian activists align as in their opposition to the Trans-Pacific Partnership. Trump has vowed to kill the deal the day he is sworn in.

However, the source of loathing couldn’t be more different. Canada is a trading nation and we depend on the flow of goods for jobs. Trump wants to set up barriers to trade and regards such deals as “job-killing.”

Unlike the deal between Canada and Europe, the Comprehensive Economic and Trade Agreement (CETA), we were on the sidelines when the TPP was negotiated. The TPP had little to do with reducing trade barriers. Law professor Michael Geist of the University of Ottawa outlines the other provisions:

“Much of the TPP focused on economic regulation, such as intellectual property enforcement, health regulation and environmental standards. Trade agreements are a poor place to negotiate these issues, which have traditionally fallen within the purview of international organizations that develop consensus-based treaties with broad stakeholder participation (Globe and Mail, November 16, 2019).”

Trump has NAFTA within his sights, too. With the North American Free Trade Agreement threatened by the belligerent president-elect, it’s vital that Canada look elsewhere. Canada already reached a deal with South Korea in 2014 and has engaged in talks with Japan, India and China regarding similar agreements.

Ongoing irritants plague all of these trade deals because corporations insist on corrupting them with their own interests under the label of “free trade.” One of those irritants is the investor-state dispute settlement provisions (ISDS) which allow companies to seek damages from governments when local regulations interfere with profit making.

Canada was stung by an ISDS under NAFTA in which a Delaware-based company proposed expansion of a quarry in the Bay of Fundy. Nova Scotia rejected it on environmental grounds. The federal government rejected it. Then a secret NAFTA tribunal approved it and we are stuck with a bill of hundreds of millions in compensation.

Tribunals aren’t a necessary part of trade agreements when you consider we have a court system. It’s not like we’re dealing with developing countries whose court systems are unknown or viewed as dodgy. CETA is a slight improvement over NAFTA. Members of the tribunal will be appointed by countries instead of corporations giving it the aspect of an international court.

One way to bypass trade deals is for unions to negotiate international agreements that are not susceptible to tribunals. Canadian auto unions have recently bargained deals with the big 3 auto manufacturers worth $1.6 billion. Jim Stanford, former economist for the Canadian Auto Workers and Unifor, and now professor McMaster University is thrilled with the deal which acknowledges superior productivity in Canada:

“Most Canadian auto plants operate at or near full capacity. Combined with advanced technology and work organization, that gives the Canadian industry an important productivity advantage. Output per worker is 10 per cent to 15 per cent higher than it is in the United States (November 21, 2016).”

Trade deals have been muddied by the addition of non-trade provisions, although I doubt that’s what motivates Trump.

Be prepared to walk away from NAFTA

Canada is a trading nation. As such, we need well-crafted trade agreements. NAFTA is not one of those.

Photo courtesy Council of Canadians

Photo courtesy Council of Canadians

Both candidates for president of the United States have indicated that they would renegotiate or tear up the North American Free Trade Agreement with Canada and Mexico. Both are reflecting the discontent of the American people from the rust belt. They have seen well-paying jobs evaporate, only to materialize in low-wage countries.

There have been few winners of NAFTA, says Gordon Laxer, founding director and former head of the Parkland Institute at the University of Alberta.

“The big winners since 1988 (the year the FTA was signed) have been the global 1 per cent. The big losers have been the lower-income and middle classes in the rich countries. That underlies the populist revolts of Brexit and the presidential candidacies of Donald Trump and Bernie Sanders (Globe and Mail, August 31, 2016).”

Canadians aren’t happy with NAFTA either. An Angus Reid poll revealed that one-third want it renegotiated, one-third are unsure or want it done away, and only one-third want it left as is or expanded.

Canadians have reason to be unhappy. As taxpayers, we have paid $190 million to foreign corporations to settle lawsuits. Under NAFTA, Canada has been sued 39 times mainly over our environmental protection laws. The U.S. has never lost a case.

Disputes are settled, not by judges but by secret tribunals run by exorbitantly paid corporate lawyers who decide what Canadian laws have hurt U.S. corporate interests here.

Then there is the “Mexican exemption.” Mexico wisely refused to agree to the NAFTA clause that required countries to supply the U.S. with the same proportion of energy as in the previous three years –even if it hurts the exporting country.

Unlike Mexico, Canada is not exempt from this so-called proportionality rule. In the event of a sudden loss in our energy production, Canada would have to supply the U.S. even if it meant that we did without. What makes this clause worse is that the U.S. keeps 700 million barrels in the Strategic Petroleum Reserve in case of an emergency, while Canada has none.

What Canada supposed to get in exchange was unlimited access to U.S. markets. In other words, we would have free access in times of plenty in exchange for compulsory supply in times of dearth.

Except we don’t even have that now. The agreement to unlimited access was broken when President Obama stopped TransCanada’s Keystone XL pipeline.

It never crossed the minds of the Canadian negotiators of NAFTA that easy oil would run out and that the difficult tar-sands oil would be priced out of global markets. It never occurred to them that Canada would be burdened with CO2 emissions that would be produced from exported oil.

Canada is a trading nation and the world wants what we produce. We don’t have to settle for a second-class trade agreement. Laxer concludes:

“NAFTA is flawed and outdated. Two of its rules hurt Canada. We must be ready to negotiate hard and to walk away if necessary, using the six-month exit clause.”

Even without the details, one thing about the TPP remains constant

We don’t know much about the Trans-Pacific Partnership that the Conservatives recently signed except that it will replace North American Free Trade Agreement.

TPP

As a trading nation, Canadians generally favour trade agreements. Last year, an Angus Reid poll showed 68 per cent in favour of a trade deal with Europe.

We favour of trade deals while being woefully ignorant of the details; sometimes in the dark about their very existence. In the case of the TPP, Environics showed that 75 per cent didn’t even know what the TPP was; let alone that the Conservatives were negotiating it on our behalf.

This blind faith in the concept of trade agreements often leads us into a blissful unawareness. One principle about the TPP will likely remain constant: private tribunals will replace our courts when it comes to disagreements.

That’s what the Investor–State Dispute Settlement provision does under NAFTA. I would hazard a guess that few Canadians are even aware of the ISDS provision under Chapter 11.

ISDS allows foreign investors to settle disputes with governments through binding private arbitration instead of Canadian courts. Yes, governments can be dictated to by arbitrators. Why would governments give up such a mandate of their power? The Monitor magazine explains:

“The dubious rationale for granting this extraordinarily sweeping right to foreign investors was that the Mexican courts of the day were prone to corruption and political interference.”

If that were a valid justification, Mexico should be on the receiving end of corporate claims. In fact, Mexico has only had a few while Canada has had the most.

“Canada has faced 36 ISDS claims, more than any other developed country in the world, and since 2005 we’ve been hit by 70% of all NAFTA investor lawsuits.”

One of those claims against Canada came in March this year after ExxonMobil’s Canadian subsidiary won $17.3 million in damages after challenging requirements that they dedicate a tiny percentage (0.33%) of their revenues to research and development, education and training in Newfoundland and Labrador.

“But what is especially galling about this case is that Exxon, along with every other company active in the offshore oil sector, had explicitly agreed to abide by provincial R&D commitments.”

In 2010, the federal government had to pay AbitibiBowater $130-million to settle an ISDS complaint after former premier Danny Williams’ expropriation of the company’s mill. Williams said that the owners had broken the lease agreement by walking away from mill, leaving 800 unemployed.

The Harper government tried to weasel out of paying the settlement claiming that the province had caused the problem. More likely, it was an attempt to punish William’s for his lack of Tory support. The last time I looked, Newfoundland is still part of Canada and since NAFTA applies to Canada, it applies to Newfoundland. If the offending province were Alberta, Harper probably would not have complained.

Most of the talk around the TPP has been whether car parts will hurt and beef parts will prosper. Don’t hold your breath waiting to hear how Canada will be dictated to by corporations through private tribunals held in secret.

Zombie Canadian mining company stalks Costa Rica

The vital statistics of Infinito Gold, based in Calgary, don’t look good. It has no functioning mines and a negative working capital of $154 million. Monitor magazine assesses their condition bluntly: “Infinito should be six feet under.”

Infinito

Yet, it staggers on. The only thing keeping the zombie mining company going in Costa Rica is cash infusions from Calgary billionaire Ronald Mannix. He refuses to let it die.

If you’ve been to Costa Rica, you know how important eco-friendly tourism is to the small Central American country. Infinito seems to have been blind to that culture when they bought land on the border of Nicaragua to build an open-pit mine fifteen years ago.

When I visited the area near the border of Nicaragua in 2012, Costa Rican pride in their pristine rivers and forests was evident.  Back in June 2002, on the occasion of World Environment Day, the Costa Rican president of the time, Abel Pacheco, banned open-pit mining completely.

But not even banishment could stop the mining company from lurching forward. In an apparent bribe, Mannix flew to Costa Rica in 2008 to offer $200,000 to a Foundation named after the new president Oscar Arias Sánchez. Suspiciously, shortly after the trip, the president decreed that the open-pit mining ban was lifted.

Costa Ricans were incensed and through a citizen court secured a moratorium on Infinito’s activities; regrettably, not before the company had done $10 million in damage to the proposed mining site.

Costa Rica’s attorney general wanted to get to the bottom of Sánchez’s motives for lifting the ban. While that move would be virtually impossible in Canada under the iron fist of the PM, Costa Rica’s attorney general boldly investigated possible wrongdoing of his own government.

The key was whether the $200,000 offered by Mannix had actually been transferred to the president’s foundation. A request was made of Canada’s Department of Justice to provide a definitive answer. At first, Canada ignored the request, and then stonewalled by demanding additional information from Costa Rica; disclosure of which would have breached the country’s privacy laws.

In the absence of cooperation from Canada, Costa Rica’s attorney general recently stated the case against Sánchez would have to be closed for lack of corroborating evidence.

When apparent bribery doesn’t work, Mannix has yet another scheme to jolt the lifeless body of Infinito. It’s called investor rights. The concept was first embedded in NAFTA, soon to be entrenched in the TPP.  Rick Arnold explains the twisted strategy.

“Time to call it quits? Nope. Infinito Gold’s main backer, the unremitting Mannix, decided to up the ante by gambling on an investor–state lawsuit against Costa Rica, to be heard outside the courts by a private, investor-friendly World Bank tribunal. The legal costs would be expensive, but a win could earn the empty shell of a company megabucks in compensation for not building its mine.”

Even if Mannix wins, the shattered hulk of Infinito will crumple. It’s a lose-lose situation. Costa Rica will lose $94 million for rejecting a mine that was never wanted, promoted by a vindictive Canadian, conducted by a tribunal in secret.