Trade Minister Peter Van Loan (right) with Peruvian Foreign Trade and Tourism Minister Martin Perez at an APEC meeting in June.
Canadian trade officials and Minister Van Loan were in Peru this week for bilateral discussions with countries negotiating a Trans-Pacific Partnership, according to Inside US Trade (subscription). The TPP — an eight-country free trade negotiation that includes the United States, Australia, Brunei Darussalam, Chile, New Zealand, Peru, Singapore and Vietnam — is a priority for the Obama administration. Depending on who you talk to, Canada is not participating either because it is too busy with its own European free trade talks, or because key TPP players — New Zealand or the U.S. — don’t want us there for one reason or another.
Minister Van Loan told Inside US Trade that Canada hasn’t decided whether to join or not, but that by being in Peru, other TPP member countries will see we are “in the frame and [will] be wondering whether it makes sense for us to be there [in the talks], contributing constructively.” He added that “most” countries think Canada should be at the table, with the U.S. suspected to be the major detractor.
Possible reasons for this cited by Inside US Trade include:
– A lack of clarity from government sectors outside of DFAIT on whether Canada is willing to join;
– An unwillingness to put supply management of dairy and poultry on the table;
– Dissatisfaction (despite Harper’s proposed new Copyright bill) with Canada’s intellectual property regime;
– Canada’s extensive national content requirements in broadcasting.
“Some sources also believe that from a strategic point of view, the U.S. may want to present Canada with a finished deal that would require certain concessions rather than allowing Canada to participate in the actual negotiations. But [Deputy U.S. Trade Representative Demetrios] Marantis last week denied that this was true,” reports Inside US Trade.
US campaign for trade reform: Start with the TPP?
Public Citizen, a U.S. citizens advocacy group, sees the TPP as a “critical venue in which the administration can formally create and then implement a new U.S. trade agreement model to replace the failed Bush-NAFTA model. The process by which President Obama approaches the TPP will determine whether the administration will follow through with his commitments to new transparency and inclusiveness in U.S. trade policymaking.”
The organization is one of over 50 groups involved in the Citizens Trade Campaign (CTC) push for US trade policy reform through the Trade Reform, Accountability, Development and Employment (TRADE) Act. This bill “sets forth concrete ways to push our shared conviction that trade and investment are not ends unto themselves, but must serve as a means for achieving greater societal goals,” according to the CTC.
In the spirit of contributing to real trade policy reform, on August 9, Public Citizen released a report with EARTHJUSTICE, Friends of the Earth, the Institute for Policy Studies and Sierra Club called “Investment Rules in Trade Agreements: Top 10 Changes to Build a Pro-Labor, Pro-Community and Pro-Environment Trans-Pacific Partnership.” I’ve pasted the 10 recommendations below, but the full report contains much more detail.
“Changes to [the NAFTA-style investor-state dispute] mechanism are critical if we are to strike the right balance between public versus private for-profit interests,” says the report. “However, even if this mechanism is left intact, other reforms could go a long way towards reining in the excessive powers granted to private investors.”
The report poses interesting questions for us here in Canada fighting the Canada-EU Comprehensive Economic and Trade Agreement. The Trade Justice Network, made up of over two dozen Canadian environmental, labour and social justice organizations, has proposed:
There should be no right [in CETA] for an investor or private company to directly challenge in private tribunals, the laws or regulations of a foreign government that is a party to the trade agreement, but this right to challenge should reside solely with the competent government jurisdiction. Instead, Canada should immediately begin negotiations with the United States and Mexico to remove the investor-rights provisions in Chapter 11 of NAFTA.
The Public Citizen et al report offers a thorough explanation why this demand is fundamental. In the Canada-EU case, there is some danger the CETA negotiations will expand the definitions of ‘investment’, ‘fair treatment’ and ‘expropriation’, with the inevitable effect of further empowering corporations in investment disputes against democratically elected governments.
TPP, CETA and Canada
Engaging the Conservative government on CETA, as the CTC has actively engaged Obama on trade reform, is almost certainly pointless. Harper is aggressively pushing forward on many of the EU’s demands, interested as his government is on reforming the country and constricting what governments can do to regulate the ambitions of multinationals. For the sake of the US campaign for trade justice, we should hope and pray that Canada remains a peeping tom to the TPP party.
On the other hand, opposition parties in Canada, which will be studying the CETA negotiations in trade committee as soon as ministers come back to Ottawa from the summer break, should be considering how to do their job on CETA, especially around the investment chapter. The NDP and Bloc have proven capable of critical analysis during the Peru and Colombia FTA discussions. The Liberals have been a foil for the Harper government at committee and need to get their act together.
No matter who your MP is, you might send them the Public Citizen et al report, which you can find here: http://www.citizen.org/documents/InvestmentPacketFINAL.pdf. Tell them we need trade policy reform in Canada, too, starting with the CETA negotiations with the EU.
Exert from “Investment Rules in Trade Agreements: Top 10 Changes to Build a Pro-Labor, Pro-Community and Pro-Environment Trans-Pacific Partnership.”
1. Replace the Investor-State Dispute Settlement Mechanism
The international tribunals that currently rule over investor-state claims lack public accountability, standard judicial ethics rules, and appeals processes. This system should be replaced with a state-to-state mechanism to guarantee the crucial role of governments in protecting the public interest. If this is not possible, investors should at least be required to exhaust domestic remedies before proceeding to international tribunals. A diplomatic screen should also be established to prevent frivolous claims or claims which otherwise may cause serious public harm. See page 3 for more detailed information.
2. Limit Claims over the “Minimum Standard of Treatment” to Ensure Compliance with the “No Greater Rights” Principle
Vaguely worded provisions guaranteeing foreign investors a “minimum standard of treatment” (MST), including “fair and equitable treatment,” open the door to investor-state claims over a wide range of government measures that are otherwise permissible under the U.S. Constitution. In Glamis Gold v. the United States, the United States successfully persuaded the tribunal to accept a relatively narrow interpretation of the MST principle. Since the tribunals are not required to follow judicial precedent, State’s arguments should be codified in FTA or BIT text to prevent arbitrators in future cases from making overly broad interpretations that undermine responsible policymaking. See page 4 for more detailed information.
3. Limit Claims over “Indirect Expropriation” to Comply with the “No Greater Rights” Principle
In the past, expropriation applied to the physical taking of property, for example when a government expropriates a house to make way for a highway. Under most international investment agreements today, investors are also protected against “indirect” expropriation, which can be interpreted to mean regulations and other government actions that reduce the value of a foreign investment. While international arbitration tribunals cannot force a government to repeal laws or regulations, the threat of massive damages awards can put a “chilling effect” on policymaking. FTAs and BITs should be revised to clarify that regulatory measures that do not transfer ownership of the investment do not constitute acts of indirect expropriation. See page 6 for more detailed information.
4. Narrow the Definition of Investment
Covered investments should include only the real property rights and other specific interests in property that are protected under the U.S. Constitution. See page 7 for more detailed information.
5. Allow Policies to Prevent and Mitigate Financial Crises
Although many governments have used capital controls effectively to avoid the worst effects of financial crises, U.S. FTAs and BITs still include sweeping restrictions on this policy tool. Existing rules could also thwart efforts to adopt small taxes on foreign exchange transactions and trades of other financial instruments aimed at curbing excessive speculation. Agreements should include safeguards for financial crises that are not subject to investor-state dispute settlement. They should also exclude short-term investments (“hot money”) and sovereign debt from the definition of investment. Moreover, the prudential measures defense language common to many FTAs and BITs should be strengthened in the TPP. See page 10 for more detailed information.
6. Add a General Exception for Environmental and Labor Protections
Some FTAs include an “Investment and Environment” provision that appears to be intended to safeguard environmental regulations from investor-state claims. However, the language could be interpreted as meaningless, since it provides protections only for government actions that are “otherwise consistent” with the FTA or BIT. Investment rules should include a general exception for measures related to the protection of health, safety and the environment; natural resource conservation; and international human and labor rights. See page 13 for more detailed information.
7. Eliminate the Subsidiary Loophole
“Denial of Benefits” provisions contain a loophole that allows corporations to bypass their own country’s domestic courts by filing investor-state claims through foreign subsidiaries located in a FTA or BIT partner nation. This is explicitly permitted in many agreements, so long as the corporation has “substantial business activities” in the other Party. Since “substantial” is not clearly defined, a U.S.-based corporation could sue the U.S. government by setting up a storefront subsidiary in another country. See page 15 for more detailed information.
8. Prevent Abuse of National Treatment Obligations
Protecting foreign investors from flagrant discrimination is a basic principle of international trade and investment agreements. However, existing texts open the door to abuse. Under national treatment provisions, an environmental regulation that results in a disproportionate impact on a foreign investor could be considered a violation – even if there is no intentional discrimination.
9. Prevent Abuse of Most-Favored Nation Obligations
Existing MFN provisions leave open the possibility that foreign investors could claim greater rights than are provided under the FTA or BIT agreed to by their home country. This loophole could lead to an even larger web of excessive international investor protections, where investors could pick the most advantageous standards and dispute settlement mechanisms.
10. Create a Level Playing Field Between State-owned and Private Enterprises
As the U.S. government pursues investment agreements with countries that are major capital exporters and that have large state-owned enterprises, it is clear that these deals can no longer be viewed solely as packages of rights for U.S.-based foreign investors. Negotiators should ensure that state-owned enterprises which invest in productive assets in the United States do not receive financing and inputs at below market rates or access to other anti-competitive subsidization by a foreign government.
