As I have posted previously, one can be in favour of free trade and still be opposed to particular free trade agreements – because of the extent to which such agreements contain provisions that restrict government actions that allegedly have an adverse impact on company profits or anticipated profits. An example of this very issue has been in the news at the same time as the CETA setback.
In February 2011, the Ontario Government imposed a moratorium on offshore wind developments. While one can argue that this action was politically motivated and a response to the controversy surrounding such developments, it also responded to widespread concerns about their environmental impact. An American company (Windstream Energy LLC) that had been contracted to construct a 100 turbine wind farm in Lake Ontario, just off Wolfe Island near Kingston, sought $568 million in damages under the Chapter 11 investor protection provisions of NAFTA (North American Free Trade Agreement). It has very recently been awarded $25.2 million in damages and almost $3 million in legal costs by a NAFTA tribunal on the grounds that the moratorium on offshore wind developments broke the rules under the free trade agreement.
Interestingly, Windstream insists that it still has a contract with the Ontario Government and remains ready to proceed with the Kingston-area project. If it received damages because its contract had been voided by the Ontario Government, it is difficult to understand how that contract could still be in force. If it is still in force, it is not immediately evident why Windstream was entitled to damages. The full text of the NAFTA ruling has not yet been released.
It is appreciated that we are talking about two different free trade agreements here – the apparently moribund CETA and the longstanding NAFTA – but much of the objection to CETA stems from concerns of the sort raised by this recent NAFTA ruling concerning the wind farm project. Indeed, there are reports that Wallonia had requested that Canada reopen a section of the agreement that allows foreign investors to sue countries if decisions are taken that hurt their investments – which Canada has refused to do.
Free Trade Shouldn’t Override the Public Interest
While I have cited the offshore wind moratorium case because of its timeliness, there are many more egregious examples of free trade provisions being used to thwart government actions. One such instance, cited in an earlier blog, saw the Canadian Government withdraw its attempted ban of the gasoline additive MMT, a product that allegedly posed a serious health hazard, when the product manufacturer, Ethyl Corporation, launched a $251 million lawsuit claiming that the ban had expropriated its future profits. We can, and should, expect continuing resistance to so-called free trade agreements as long as they include one-sided provisions that favour private profit over government initiatives taken in the public interest.