Trade May Be Great, But Beware Of Surrendering Power to Corporations

John Milloy

While the entire world was focused on the outcome of the Brexit vote, another significant trade issue was brewing with much less fanfare. Under the terms of the NAFTA agreement, TransCanada Corporation formally filed a $15-billion lawsuit against the United States for rejecting the Keystone XL pipeline.

Most Canadians didn’t seem to notice or care – yet we should.

Trade has suddenly taken centre stage and not just because of Brexit. Donald Trump has come out swinging against NAFTA and recently described the Trans-Pacific Partnership (TPP) trade agreement as nothing but the “continuing rape of the United States.” In his recent address to Parliament, President Obama warned that “restricting trade or giving in to protectionism in this 21st-century economy will not work.” Our trade minister, meanwhile, has been holding town hall meetings across the country on the TPP.

Although I support freer trade, I welcome the current debate. For far too long, elites have characterized trade discussions as too complicated for the general public to understand. It’s time we engaged ordinary citizens. My only plea is that we don’t ignore the growing power and influence that multinationals and foreign investors are gaining through these agreements.

Modern-day trade agreements are not simply about country to country relations. Most also contain something known as Investor State Dispute Settlement (ISDS) provisions. These allow foreign investors and corporations to challenge a government’s policies, actions or decisions if they believe they will hurt their bottom line. To make matters worse, these matters are not dealt with through a country’s regular judicial system but instead by special trade tribunals that lack the same procedural protections as a court.

Not only is the process questionable, but it also allows corporations to challenge matters such as environmental, health and labour protections that they feel hurt their business. Under NAFTA, for example, corporations have challenged Canadian laws designed to prohibit the export of PCB waste; ban gasoline additives suspected of being neurotoxins; restrict fracking; and stop development in environmentally sensitive areas. In 1994 the tobacco giant Philip Morris International threatened a NAFTA suit if the federal government went ahead with plain packaging rules for cigarettes.

Which brings us to the Keystone XL pipeline: Last November, after seven years of debate, study and analysis, the United States announced that they would not approve the pipeline, designed to bring Alberta oil to American refineries, because it was not in the “national interests of the United States.”

Not good enough, says TransCanada. Claiming that US government analysis found no environmental threat from the proposed pipeline, they are accusing the Obama administration of making the decision for purely political motives in order to “appear strong on climate change.”

Companies argue that their ability to challenge these sorts of decisions helps maintain the proverbial level playing field. They argue that politicians are not immune from using exaggerated or even phony environmental and health concerns to hamper the activities of foreign corporations. Many argue, for example, that Canada’s efforts to stop PCB waste exports was more about protecting our domestic PCB disposal industry against foreign competition than it was about environmental concerns.

But is it not ultimately up to a democratically elected government to make the final call?

If the United States doesn’t like the Keystone XL pipeline, should it not have the right to say so without fear of reprisals from large corporations with deep pockets? Moreover, to what extent is fear of ISDS challenges shaping policy-making by our governments? Are they hesitating to bring forward certain measures to avoid challenges from multinationals?

And where will it stop?

As the frequency of these challenges increases, are we going to start to see the erosion of vital programs — like public healthcare – as companies challenge the lack of private competition in these areas? Reminiscent to what happened in Canada, Philip Morris recently brought a claim against the Australian government’s plain-packaging laws for cigarette packs. Although unsuccessful, it does demonstrate the steps that corporations will take to challenge domestic policies.

Talk of ISDS provisions causes eyes to glaze over, and the few who criticize them often use overblown rhetoric. Although Canada has the distinction of being the country that has been challenged most often under trade agreements, it is wrong to try to characterize our government as a puppet of multinationals.

It is worth questioning, however, the constraints being placed on us as we negotiate more and more trade agreements. Sadly, few Canadians are even aware of them. It took European complaints rather than Canadian ones, for example, to force changes to the Canadian European free trade agreement to provide greater protection for governments against foreign corporations.

As a nation we may decide that these infringements on our freedom of action are worth it, but let’s have the discussion. Trade brings many benefits but isn’t it time we wake up to the full costs.

John Milloy is a former MPP and Ontario cabinet minister currently serving as the co-director of the Centre for Public Ethics and assistant professor of public ethics at Waterloo Lutheran Seminary, and the inaugural practitioner in residence in Wilfrid Laurier University’s Political Science department. He is also a lecturer in the University of Waterloo’s Master of Public Service Program. Milloy is the editor of, and a contributor to, Faith and Politics Matters (Novalis, 2015).