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How will Trudeau respond to the U.S. proposal to make Chapter 11 voluntary in NAFTA?

On the first day of the 4th round of NAFTA talks, petitions from The Council of Canadians and numerous allies calling for an end to Chapter 11 were presented in Washington, DC.

The Trump administration has just proposed making the Chapter 11 investor-state dispute settlement mechanism voluntary, eliminating the Chapter 19 panels that examine anti-dumping and countervailing duty cases, and turning the Chapter 20 state-to-state dispute settlement panels into advisory bodies.

The Canadian Press reports, “The American proposals would render all of [these chapters] toothless. Chapter 11 would become voluntary, with countries being allowed to opt out. Chapter 19 would be eliminated entirely, after a phase-out period. And Chapter 20’s panels would become an advisory body.”

The CBC adds, “For example, the American proposal on Chapter 11 would make the current arbitration system voluntary, meaning countries would have to opt-in. When it comes to the state-to-state dispute resolution process, the panels that make decisions would become advisory.”

Bloomberg further notes, “For investor-state dispute settlement, presently laid out in NAFTA’s Chapter 11, the U.S. wants a system where nations opt in, effectively allowing each country to decide if it will take part, the people said, speaking on condition of anonymity as talks continue. For the state-to-state disputes, contained in Chapter 20, the U.S. wants to replace them with non-binding advisory panels, the people said.”

The Council of Canadians has long called for Chapter 11 to be removed from NAFTA.

That’s because since NAFTA came into force on January 1, 1994, there have been at least 38 Chapter 11 challenges launched by transnational corporations seeking more than $6 billion in damages from the Canadian government. The Canadian Centre for Policy Alternatives has noted that 63 per cent of the Chapter 11 claims against Canada involve challenges to environmental protection or resource management measures.

As for eliminating Chapter 19, the CCPA has previously stated, “These reviews are arguably more time consuming, costly and unfair than appeals through U.S. domestic courts. …Even if the review process were abolished completely, Canadian exporters will still be able to have a final determination reviewed in the U.S. courts. Its loss would be felt, but its benefits should not be exaggerated.”

It’s important – though clearly obvious – to highlight that this move by the Trump administration (which is made up of billionaires who are rapidly gutting basic protections for workers and the environment) isn’t because it is concerned by provisions that enshrine corporate rights and undermines the public interest. Rather, U.S. Trade Representative Robert Lighthizer has commented, “I’m always troubled by the fact that non-elected non-Americans can make the final decision that the United States law is invalid. This is a matter of principle I find offensive.”

We don’t yet know how the Canadian government will respond to these demands.

Prime Minister Justin Trudeau has previously commented, “A fair dispute resolution system is essential for any trade deal that Canada signs on to and we expect that that will continue to be the case in any renegotiated NAFTA.” And Global Affairs has previously stated, “NAFTA Chapter 11 establishes a framework that provides investors with a predictable, rules-based investment climate. While disputes are a normal part of every trade relationship, they represent a very small portion of the billions of dollars in investment that Canada attracts and the billions that Canadian companies invest abroad.”

The Globe and Mail has also previously argued, “Without an independent mechanism for assessing NAFTA trade disputes, the Americans would be free to act as judge, jury and executioner of their own trade complaints. NAFTA wouldn’t be a binding contract; it would an aspirational wish list, to be violated at will. An independent dispute settlement mechanism is Issue No. 1 for Canada.”

This 4th round of NAFTA talks is scheduled to end on Tuesday October 16.