Let me emphasize at the outset that I support free trade. Indeed, I think it is essential that a country with Canada’s small population seeks expanded markets for its companies and gains access to goods that are not easily produced at home. What I do not support, or understand, are rules governing free trade that are so clearly biased in favour of multinational corporations and against the governments of the countries that are participants in such agreements. This is particularly the case with respect to the mechanisms for resolving disputes between companies and governments, as will be evident from the examples below.
Canada is one of the 164 member states of the WTO, an organization whose rules apply to more than 90% of world trade. These rules, as written, are designed to prohibit a vast array of government regulations that might interfere with the actions of large corporations. Powerful enforcement tools exist to ensure compliance with these rules. As a result, the ability of national governments to act on behalf of their citizens has been severely compromised. In my book A Citizen's Guide to Government (McGraw-Hill Ryerson, 2005), I quoted a study which found that of the 167 contested trade issues brought to the WTO as of March 1999 in every case in which an environmental, health, or food safety law was challenged, these laws were declared illegal barriers to trade.
NAFTA (North American Free Trade Agreement)
This agreement also features a very one-sided set of rules (known as Chapter 11) giving companies the right to sue governments for compensation under a very broadly defined category of expropriation that essentially extends to any government actions that might deprive a company of immediate or even future loss of profits. When the Canadian government attempted to ban the gasoline additive MMT, a product that allegedly poses a significant health hazard, the manufacturer (Ethyl Corporation of the United States) launched a $251 million lawsuit against the government, claiming that its future profits had been expropriated because of the ban. The federal government retreated and withdrew the ban. NAFTA’s definition of expropriation has been found (by a British Columbia Supreme Court Justice) to be sufficiently broad to include a legitimate rezoning of property by a municipality.
CETA (Canada-Europe Trade Agreement)
This is the agreement that our government is apparently read to sign sometime this fall. Once again, however, this agreement has very one-sided provisions for resolving disputes between companies and governments. A recent legal analysis by an Osgoode Hall Law Professor concludes that companies will have access to “an extraordinarily powerful process of international adjudication – and potentially to billions of dollars in public money – to enforce their rights,” without any offsetting mechanism for holding companies to account “if they flout, labour, environmental, consumer, or other standards.”
Baffling Behaviour
Why do we do this? It is not as if multi-national corporations would refuse to sign the agreements if we don’t give in to these unfair provisions. They are NOT signatories. The ones who have to agree are national governments. So, why would they give up their autonomy to placate corporate interests? We are constantly told that these free trade agreements cover so much of the world’s economy that we dare not be left out. But doesn’t that mean that corporations also would not wish to be “left out” from agreements covering such a large portion of the world’s economy? If we negotiated provisions that were more balanced and fair, where else would the corporations go with their businesses?
What makes this whole situation even more puzzling is that there is no indication that corporations feel any gratitude or loyalty when governments made these concessions. Instead, businesses are constantly on the alert for opportunities to outsource or relocate wherever lower wages and fewer government regulations can allow them to increase their profits. Indeed, corporations would argue that they have no choice in the matter and that their shareholders insist upon such behaviour.
As we apparently prepare to sign another agreement to transfer power to multinationals, we are still digesting news of the Panama Papers – the millions of leaked documents that detail information on almost one-quarter million offshore entities established to maximize tax avoidance by businesses and individuals. We have also learned that the European Commission is cracking down on the sweetheart deal between Apple Inc. and Irish tax authorities. A U.S. Senate investigation found last year that over a four year period Apple shifted $74 billion in profits to an Irish entity that had no “tax residence” anywhere in the world, and thus owed minimal taxes to any country. Disturbing as this revelation is, we can only hope that the European Commission's actions are but the first step in reining in the widespread tax avoidance schemes that too many countries have been prepared to accept.
Does the continued deference by governments reflect the dominant influence wielded by business interests? If so, as seems the only possible explanation, why do we extend it even further with new agreements such as CETA (and, for that matter, the TPP or Trans Pacific Partnership)?
Our Democracy as well as our Economy are at risk
It is particularly frustrating that government decision makers don’t seem to understand that by supporting the business agenda and the increasing inequality in society that is an inevitable result, they are contributing to the growing anxiety and anger on the part of those whose jobs are gone or increasingly at risk. The consequence is a substantial segment of the population that no longer believes in our governing institutions and politicians, that is increasingly paranoid and resentful of immigrants, and that offers fertile soil for dangerous demagogues like Donald Trump. In their continued pursuit of free trade agreements that lack balance and fairness governments do harm not only to our economy but also to our democracy!