by Thomas Walkom
Canada is going all-out to save the North American Free Trade Agreement. The ruling Liberal government has even enlisted the help of the opposition Conservatives in this crusade.
Rumours suggesting that U.S. President Donald Trump might kill the pact have cast a pall over official Ottawa.
Yet a new study shows that in at least one key area NAFTA has been terrible for Canada.
That study, written by trade researcher Scott Sinclair for the Canadian Centre for Policy Alternatives, examines how Canada has fared under a section of the pact that, in effect, allows foreign firms to overturn Canadian laws.
Known formally as the Chapter 11 investor-state dispute resolution system, this section gives foreign companies the right to challenge domestic laws in Canada, Mexico and the U.S. that interfere with their profitability.
The challenges are heard by special NAFTA trade panels that operate outside of the judicial system. The panels’ decisions are binding.
The study calculates that since NAFTA took effect in 1994, Canada has faced 41 Chapter 11 challenges – far more than either Mexico (23) or the U.S. (21).
Of the 17 cases against Canada that have been settled, Ottawa has won nine and lost eight. Mexico has done slightly better, having won seven of its 12 settled cases. The U.S. has lost none.
To date, the entire Chapter 11 fandango has cost Canada $314 million in penalties and legal fees.
But the raw figures don’t capture the full absurdity of Chapter 11. In the cases it lost, Canada was pursuing public policy goals that in most instances were reasonable and in all lawful.
In 2015, for instance, a NAFTA panel ruled that Nova Scotia had no right to prevent an American firm from digging a quarry and building a marine terminal in an environmentally sensitive area. This effectively overturned the decision of a legally constituted environmental assessment panel.
In 2016, another U.S. firm successfully challenged Ontario’s moratorium on building offshore wind turbines in Lake Ontario. That cost the Ontario government $25 million.
While the moratorium was in part politically motivated, it was also within the government’s purview.
On it goes. In 2015, two U.S. energy companies challenged a Newfoundland and Labrador law that required offshore oil drillers to undertake some research and development in the province. The companies won.
In 2011, a U.S. firm challenged an Ontario government decision to prevent it from opening a quarry near Hamilton. That was eventually settled when the government paid the firm $15 million.
In 2009, a U.S. lumber firm that had been granted extensive water and timber rights by the Newfoundland government to operate there shut down its mills in the province and filed for bankruptcy. The government, not unreasonably, took back the water and timber rights.
The bankrupt firm challenged that before a NAFTA panel and won – to the tune of $130 million.
The most recent Chapter 11 case detailed in the study involves the U.S. firm Omnitrax, which owns the railway line to Churchill, Man. on Hudson Bay. The rail line is the only land link to Churchill and has been out of commission since last year because of flooding.
The federal government has threatened to take Omnitrax to court for failing to live up to its agreement to keep the line operable. Omnitrax has responded by challenging Ottawa under NAFTA for decisions made years ago related to the marketing of wheat – decisions that it says reduced the potential profitability of the company.
This is NAFTA Chapter 11. It has hurt Canada and benefitted the U.S. Yet Trump wants to scrap it and Prime Minister Justin Trudeau wants to keep some version of it. Keeping Chapter 11 is not, however, one of Canada’s non-negotiable demands. Rather, it appears to be quite negotiable. Let us hope that Ottawa quickly agrees to negotiate it out of any deal that might emerge – before Trump wises up and changes his mind.
Thomas Walkom appears Monday, Wednesday and Friday.
Copyright 2018-Torstar Syndication Services