What would trade look like with a different set of values

Conference photo

The following speaking notes were from my keynote presentation at the Canadian Fair Trade Network Conference held on March 2, 2019 in Ottawa, Ontario.

Congratulations to the Canadian Fair Trade Network on your 7th anniversary. I know you work more at the grassroots level, but since Justin Trudeau has never seen an international trade agreement he doesn’t love, I want to address big trade deals, how they have changed and what we should be demanding. I want to talk about how we can take the values of our movement and bring them into national and international policy.

The purpose of “free” trade

The purpose of trade agreements has fundamentally changed since the post-war Bretton Woods international institutions were established to rebuild a shattered world economy and promote international economic cooperation.

Trade used to be about taking down tariff barriers to the trade in goods and could often be a win-win for all.

The Auto Pact was a great example of that. It allowed American car makers to sell their vehicles in Canada duty-free if they created jobs here, and the Canadian auto parts industry was born.

But most tariffs have come down around the world and the purpose of trade agreements has fundamentally changed. The use of the term “free” trade was the turning point because it denoted freedom for markets and a more limited role for governments in the movements of goods and services across borders.

These changes started in the late 1970s and through the next two decades as domestic corporations and capital went global and left behind their countries of origin.

Transnational corporations wanted four things:

  1. To move production to low wage countries without censure.
  2. To remove export controls on resources such a trees, minerals, fish, food, energy, etc. so that they could supply their manufacturing centres in low wage countries. This meant that governments could no longer require secondary production/manufacturing of raw resources. For a resource dependent country like Canada this is a huge issue.
  3. To challenge government regulations in finance, workers’ rights, environment, health and safety and more, so that they could move across borders with common (low) standards.
  4. To gain access to public services that most governments still protect and exempt from trade agreements. This is the mother lode in terms of government spending – health care, education water services, child and senior care, etc.

How free trade serves transnational corporations

Starting with the Canada-US Free Trade Agreement and NAFTA, and then the creation of the World Trade Organization in the mid 1990s, modern free trade agreements helped transnational corporations attain these four goals.

Modern free trade agreements make it very hard for governments to favour domestic production and services or hire locally and they require governments to open their markets to foreign competitors.

They curtail the right of governments to regulate in many ways. Government laws must not be more “trade restrictive than necessary” and can be challenged as being protectionist.

Newer trade agreements actually build in a regulatory harmonization process whereby the countries agree to set up common standards and regulations that they negotiate alongside their private sector advisors.

Transnational corporations seeking lower standards and cheap labour obviously do not want to establish high common standards, so a race to the bottom ensues.

Corporations also use what is called “standstill.” This says that a public service that is exempted is protected until privatization occurs; then the liberalized service can never be returned to public management. And it makes it next to impossible to create a new public program such a pharmacare.

The biggest tool they have is ISDS – Investor-State Dispute Settlement.

It used to be that if a company or an industry sector had a concern about their treatment in another country, it had to get their own government to lay a complaint or go to a domestic court of the other country.

First in NAFTA, and now in all the deals, corporations and private investors have the right to bypass their government and go directly to an arbitration to seek compensation if the government of another country brings in a new law or even interprets a current one in a way they can show caused them to lose money – what they call the “right to profit.”

They can use the court at the World Bank or private arbitration. With NAFTA, the dispute goes to three trade lawyers who generally support the concept of corporate rights.

There are now over 3,500 bilateral investment deals between countries and they have been used by big corporations to sue countries almost 1,000 times. The majority of decisions are in favour of the corporations.

Many are poor countries that cannot afford to pay these obscene punishments.
For example, the World Bank ordered Ecuador to pay Occidental Petroleum $2.3 billion when the country objected to the company selling one of its oil fields to a Chinese consortium without government approval. This amount is about what the government spends on health care for all its citizens every year.

Argentina paid French water utility Suez $405 million for the right to return its water services to public management and Estonia is being sued by a UK water corporation for saying no to their demand to raise water rates again.

NAFTA one

The purpose of NAFTA was to seamlessly integrate the economies of the three countries. In this, it was spectacularly successful. There are now 42,000 American companies operating in Canada, most of them in retail or resource investment.

This harmonization of the economy forced the harmonization of many standards – from the way we grow food and the way we mine resources to the chemicals we permit on our soils and waterways.

It was understood that each country would use its “advantage” to help promote the whole. Canada had resources, Mexico had cheap labour, and the U.S. could lead the way with its business know-how and advanced corporate power.

During the NAFTA campaign, a cartoon told the story. It depicted a cow astride North America. It was eating in Canada, being milked in the U.S. and relieving itself in Mexico.

On my first visit to the infamous free trade zones called “Maquiladoras” on the northern border of Mexico, I saw firsthand what this meant. North American corporations treated Mexican workers like slaves and dumped their toxins and waste into local waterways without even tertiary treatment.

There were many adverse impacts of NAFTA on Canada but I will address just two here.

Jobs

The Auto Pact had to be abandoned because of challenges to it under both NAFTA and the WTO. This led to a huge migration of auto jobs to the U.S.

Unifor says 30,000 direct jobs were lost in the auto sector from NAFTA.

Mexico now has 45 per cent of North American auto jobs and Canada has just 6 per cent. But when Trump says that Mexico is “the winner,” this is not true. At $6 an hour, Mexican workers cannot afford to buy the cars they produce. NAFTA was a win/win/win for the automakers and a lose-lose-lose for workers in all three countries.

The story is the same in many other manufacturing sectors. Because American corporations no longer had to set up branch plants and create jobs in Canada to enter tariff-free, many American companies closed their Canadian manufacturing operations and either moved them back to the U.S. or set up shop in Mexico.

The result for Canada was a sudden and huge drop in manufacturing operations and the loss of hundreds of thousands of jobs after years of government promotion of secondary production of our natural resources. In fact, at the beginning of the 1980s, manufacturing accounted for 26 per cent of our GDP; now it accounts for less than 11 per cent.

High-paid manufacturing jobs were replaced by minimum wage retail and food services jobs. NAFTA was one of the factors that led to a precarious work force in Canada. Many workers are without security and many others have to take more than one job to survive.

And of course, there is a great and growing disparity between the average worker and their family and the elites as well as a growing income and inequality gap. The top CEOs in Canada earn 193 times more than the average worker.

Environment

There are many ways in which our environment is hurt by trade agreements. As our manufacturing sector declines, we become more dependent on exploiting our natural resources, and that hurts the environment.

NAFTA also established a parallel harmonization process where all three governments came together to establish common standards, rules and regulations.

As the business community was intimately involved in this process, the pressure was on to choose the lowest standers across the board.

NAFTA One contained an energy proportionality clause that locked us into continued energy exports to the U.S. and that in turn, locked us into tar sands expansion.

This makes is harder for Canada to honour our climate agreements.

The resource sharing agreement would have done to same to water if any province had initiated commercial exports of raw water to the U.S.

And Chapter 11, the ISDS provision of NAFTA, has been used by North American corporations to launch 84 challenges against one another’s governments.

Canada has been sued the most under ISDS – 39 times – and has lost or settled eight cases. The government has paid well over $200 million out in damages as well as having to spend $65 million to defend itself.

Canada is facing another half billion dollars worth of challenges from American corporations, two-thirds against our environmental regulations.

But Canadian corporations are not victims – they have used ISDS to successfully claim $2 billion from other countries and are currently seeking another $10.5 billion in cases pending.

These deals represent a charter of rights for corporations of all stripes and nationalities.

NAFTA two – USMCA

At this time, the replacement for NAFTA One – the so-called United States Mexico Canada Agreement (USMCA) is in limbo, with opposition from the House Democrats in the U.S., and the demand that the Trump administration end its tariffs on aluminum and steel from the governments of both Canada and Mexico. Whether it will ever be adopted is up in the air.

But what does it look like?

There are four major improvements:

ISDS is gone between Canada and U.S. and greatly reduced between U.S. and Mexico.

All resource proportional sharing is gone, including for energy and water. Canada cannot be forced to continue to provide natural resources to the U.S. if it chooses to curtail exports.

Labour standards are built into the agreement and steps to improve wages for Mexican workers are included.

And protection for Canadian culture is improved as it has added an exemption for digital – i.e. modern – forms of cultural expression.

There are several new problems, however.

Biologics is a drug produced from living organisms used to treat some cancers, arthritis and bowel disease for which demand is steadily growing. NAFTA Two would extend the intellectual property rights of the brand companies in Canada from 8 to 10 years, which will increase prices of an already expensive drug.

NAFTA Two allows a lot more American milk into Canada and our dairy farmers, reminding us that there were already import concessions in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), call this death by a thousand cuts. We should also be very wary of the possibility that bovine growth hormone – which Canada banned a decade ago – will be imported into Canada with this new rule.

And the new agreement calls for a formal process of regulatory harmonization and formally establishes the rights of the private sector to be involved in setting common standards and rules – similar to the same rules in Canada-European deal (CETA) and the CPTPP.

What kind of trade agreement do we want?

Modern free trade agreements, along with deregulation, privatization and the slashing of governments’ ability to act as an antidote to a corporate free for all, have led to the greatest wealth disparity since the robber barons at the turn of the 20th Century.

Of the world’s top economies, 31 are countries and 69 are corporations.

Apple’s revenues exceed the GDP of two-thirds of the world’s countries. Walmart’s annual revenues exceed the GDP of 157 countries. BP is bigger than Russia. Exxon is bigger than India.

This, in a world where three-quarters of the working age population are among the precariat – in low wage, insecure jobs with no benefits – last year the world’s 2,000-plus billionaires had a combined wealth of almost $9 trillion.

The neoliberal promise that everyone would benefit if governments would just hand over policy decisions to the market and allow corporations to set their own rules has been proven to be a vicious lie.

However, in our analysis of this inequality and of the role free trade has played, we have to acknowledge that we can sound an awful lot like the right-wingers who oppose NAFTA.

Donald Trump smartly noted the devastation of the rust belt in the aftermath of losing American manufacturing jobs to NAFTA and China and said that globalization had left many behind. He and his counterparts in Europe say their populism seeks justice for the forgotten people.

Their solution, however, is profoundly different than ours. It not only scapegoats “others” – often in a violent way – but, as Council of Canadians trade campaigner Sujata Dey points out, aims to destroy the social state and social programs that are the best equalizers for marginalized people, the poor and for workers.

This has resulted in attacks on workers and unions in “right to work” states, lowering taxes for the rich and corporations, the rollback of Obamacare and Donald Trump’s war on the environment, all in the name of “making America great again.”

The Trump administration is turning its back on international environmental treaties and international institutions such as the UN. In fact, Trump’s national security advisor, John Bolton, said if he were redoing the UN Security Council, he would have only one permanent member: the United States.

Our narrative, on the other hand, is based on a deep commitment to diversity, inclusion and social justice.

Rather than a populism based on division, we see the need for a progressive populism with a vision that goes beyond national sovereignty to create both nation-state and international laws and institutions to challenge global corporate power and bring it under the rule of law.

What would trade look like with a different set of values?

There is a powerful movement growing around the world to reassess the purpose and goals of trade.

What would trade agreements look like if they prioritized the needs and rights of workers over corporations?

What would trade agreements look like if they promoted a more sustainable model of food production that protects soil and water and respects farmers?

What would trade agreements look like if they had to take into account their water and environmental footprints at home and in other countries?

What would trade agreements look like if they promoted alternative, more sustainable sources of energy?

What would trade agreements look like if, instead of giving preferential treatment to global corporations, they established binding human rights and environmental obligations on corporations and placed capital controls on runaway speculation of the kind that caused the 2008 crash?

What would trade agreements look like if they took into account the free, prior and informed consent of Indigenous peoples now enshrined in the UN Universal Declaration on the Rights of Indigenous Peoples?

First we would establish that trade and the economy should serve people and communities, not the other way around.

This, in turn, would mean that corporations and business lobbies should not be the driving force behind trade deals, nor should they be given privileged seats at the negotiating table.

(I am remembering back in 1996, when we first heard about the MAI – the Multilateral Agreement on Investment – that would have given ISDS suing rights to all the corporations of OECD countries – how the Canadian government told us there was no such negotiation going one but that soon after, through access to information, we discovered that government trade officials had been meeting regularly with the big business community for almost three years on this almost-complete deal. We managed to defeat it anyway!)

This in turn would require changing the secret way in which these deals are negotiated. We never saw either the CETA or CPTPP texts until they were signed and TiSA, the Trade in Services Agreement, is still being negotiated in secret. If these agreements are so good for us, why are the being negotiated behind closed doors?

Our trade agreements would promote local democracy and self-reliant local economies. They would promote the concept of subsidiarity, which gives priority to goods and food that can be produced locally and promote local food sovereignty.

Our trade agreements would support the goals of the Fair Trade movement and nurture it.

Our trade agreements would promote and protect cultural diversity and enshrine core labour and human rights.

Our trade agreements would also enshrine the precautionary principle putting the onus on the producer to prove a product is safe instead of the current system of risk assessment which allows trade rules to trump the environment.

They would be built around an agreement to fight climate change and allow governments to curb or ban trade where the import is damaging the air, water or soil of the exporting country.

They would close the loopholes in current trade agreements that allow corporations to play off lower human rights standards of one country against the higher standards of another.

Our trade agreements would preserve the rights of governments to regulate in the interest of their people and the environment and to introduce new public policies, as well as return privatized social services to public management.

They would eliminate the right of foreign investors to sue governments if their policies inhibit the corporate “right to profit.”

Positive developments

There are signs of hope! There is growing opposition to ISDS in many governments and grassroots organizations. In fact, the provisional implementation of CETA excludes the investor court clause and it will only ever be included when every one of the member EU states ratifies the deal in total. This may never happen as there is great opposition in at least Italy.

Huge rallies against CETA and its American counterpart TTIP were heard all across Europe and several years ago, the European Commissioner said ISDS was so controversial that the EU would likely never include ISDS in any future trade deal.

And there are other positive signs from Europe as well. Norway has connected its trade policies to economic growth and poverty reduction in the weakest countries with which it trades.

As well, the EU recently announced that it will refuse to sign trade agreements with countries that do not ratify the Paris climate change accord. It is also listening to its very trade literate population with promises to link public procurement to sustainability.

We need to take a moment to reflect on our achievements.

Our movement has been incredibly active and effective given what we are up against and our lack of resources compared to the corporate lobbies on the other side.

First, we created a continental network and then an international one. We didn’t stop NAFTA, but we did stop it being extended to the rest of the Americas. We put together an awesome international alliance to stop the MAI and we kept ISDS out of the World Trade Organization.

In fact, with prolonged opposition, we seriously wounded the World Trade Organization. And we did get our governments to address environmental and labour issues inside both CETA and NAFTA Two.

This must be just the beginning. There has never been a better time for a debate about the nature of these free trade agreements.

There has never been a better time to reign in the power of transnational capital and transnational corporations and recognize the sacred democratic authority of people, communities and their elected governments to protect human and workers’ rights and the environment upon which we all depend for life.