June 23, 2010

Free Trade Goes Local

Provincial “barriers to trade” broken under new regional agreements

by Dan Kellar

The Dominion - http://www.dominionpaper.ca

WATERLOO—While the Canadian government was prorogued and the Canadian public was watching the Olympics, Prime Minister Stephen Harper quietly signed the Canada-USA Procurement Agreement (CUPA).

The agreement navigates around a recently enacted United States “Buy-American” policy. Critics of the CUPA argue that the agreement further locks neoliberal ideologies into Canadian-American trade policy. This free-market expansion challenges or removes much of the capacity for provincial and local governments to control local economic development decisions.

The implementation of the CUPA foreshadows Canada’s agenda at the June 2010 G8/20 meetings where, as Harper stated during a planning meeting in Ottawa in March, he will be urging the G20 to “open global markets” and “resist protectionism.” Miranda Goeltom, Senior Deputy Governor of the Bank of Indonesia, noted at the G20 Workshop on the Global Economy in May 2009 that the G20 agreed upon commitments to “reinvigorate world trade and investment,” primarily through “reducing trade and investment barriers and financial protectionism.”

The CUPA overcomes what a March 2010 edition of the Global Trade Alert report calls a “worrying measure” of protectionism. Under the CUPA, resisting protectionism means decision-makers will have to consider bids from American contractors for procurement contracts, giving no favour to local companies. In an appendix in the CUPA titled “Market Access,” procurement associated with publicly funded schools and local economic development programs in Ontario and Quebec are not protected from the CUPA’s reach. For other provinces and territories, specific exclusions were created for education and local economic development programs.

While there are no tariff barriers between provinces in Canada, differences in regulation and approaches to management in environmental protection, labour rights, health care delivery, and public education are equated to barriers by trade economists. These views are shared by a group which holds considerable influence at the G20 summits—the World Trade Organization. Agreements such as the 2007 Trade, Investment and Labour Mobility Agreement (TILMA) between Alberta and BC aim to eliminate these barriers.

In 2009 the Council of Canadians (CoC) released “State of Play: Canada’s Internal Free Trade Agenda,” a report giving updates on TILMA and other interprovincial Free Trade Agreements (FTAs). The report critiques these agreements for allowing “corporations and individuals to challenge any provincial or municipal government measure they feel ‘restricts or impairs’ their investment. Even measures designed to protect the environment and public health can be brought to an unelected TILMA dispute panel with the authority to impose penalties as high as $5 million [against the challenged government].”

This allowance is akin to the CUPA provisions in Notes to Appendix A, which challenge strengthening environmental protections as “disguised barrier[s] to trade,” or the Chapter 11 review panels of the 1994 North American Free Trade Agreement (NAFTA), which allows corporations to sue governments when they change policies or regulations that could affect trade. A 2009 case brought to the NAFTA review panel by DOW Chemicals found that Quebec’s restrictions of certain toxic pesticides were considered a disguised trade barrier.

“It [TILMA] will dramatically restrict the ability of governments—including local governments—to act in the public interest,” said Murray Dobbin of the CoC.

Unlike NAFTA, in TILMA there is no limit on how many times a corporation may bring an issue to the dispute panel. If a regulation is found to be a “disguised barrier to trade,” foreign corporations may continue to sue the offending government until that regulation is changed. To avoid continual negative repercussions, governments may avoid implementing stronger standards and policies.

The CoC reported that “some US states have shown an interest in signing TILMA, which would lead to massive deregulation in Canada as we harmonize policies with the United States. TILMA thus becomes an issue of democracy and of deep integration with the US.” With the two agreements sharing many of the same clauses, the implementation of the CUPA forces many of TILMA’s clauses onto provinces, states, and municipalities who had little-to-no input into the agreement.

Canada is discussing a Free Trade Agreement (FTA) with Europe that the CoC says “is likely to put pressure on provincial governments to increase privatization, including in areas such as child care and public health care...municipal governments will also be forced to fall into line.”

Fraser Institute economist Amela Karabegovic and trade advisor Robert Knox wrote that “interprovincial barriers are, and will remain, a major roadblock in the current negotiations... the free-trade agreement with the EU is an opportunity for Canadian governments to finally resolve the remaining interprovincial barriers.” It becomes clear that the regulatory harmonizations that result from TILMA and the CUPA must take place for FTA negotiations to continue.

“The [G8] recognized in its Pittsburgh statement last year that ‘there are different approaches to economic development and prosperity,’ which is the same as saying that free trade, privatization and open markets don’t always work,” Stuart Trew of the CoC told The Dominion. “Harper disagrees with that idea and has made noises that he’d like the G20 to broaden its mandate to go after ‘protectionism in all its forms,’ which would include important national measures to protect the environment or help local industries grow up and compete.”

Dan Kellar is an organizer with AW@L and is co-host of AW@L Radio. He will see you in the streets of Toronto in June.

This story was published in The Dominion's special issue on the G8 and G20 summits in Ontario. We will continue to publish independent, investigative news about the G8 and G20 throughout the month of June.

For up-to-the-minute G8/G20 news from the streets of Toronto, visit the Toronto Media Co-op.

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