TPP consultation — my submission

Earlier this year, Canadians were invited to participate in a public consultation regarding the Trans-Pacific Partnership Agreement (TPP).  The deadline for submission is 23:59 EDT, October 31, 2016.

My submission is slightly over 4000 words in length; too much for a blog post.  Below are the closing paragraphs; the entire document is available here.

Update: A thoughtful reader alerted me to a 404 response when trying to access my submission.  If the direct link does not work, try the attachment page.

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… The principle argument to join the TPP seems to be that Canada cannot afford to be left out. Even if the agreement was only a matter of tariff and subsidy reductions, that argument is weak.[1] Given the nature of the entirety of the TPP, the costs of which will be felt through heightened expenditure for medicines, diminishment of Canadian culture, elimination of future innovation, absence of attention to public well-being for fear of international reprisals, and the loss of sovereignty when such reprisals are unavoidable, one has to ask: whom is this government wishing to please by committing Canada to the TPP?  The answer does not appear to be: Canadians. One must also ask: has our existing business community been sufficiently engaged to warrant our confidence that fulfilling their wishes will lead to better living for all?

That does not appear to be the case. In 2012, Mark Carney, former governor of the Bank of Canada, indicated that instead of investing in the economy, Canadian businesses “were holding on to nearly half a trillion dollars in cash, an increase of 43 per cent since the end of the recession in 2009.”^[2] Recently, the esteemed firm Deloitte, an internationally revered organization, released a damning report concerning the willingness of Canadian businesses to take the necessary steps to reinvigorate the economy. In Deloitte’s words, too many “lack an essential game-changing quality: courage.”^[3]

By virtue of the TPP, the individuals that Canada most desperately needs to encourage – the innovative entrepreneur looking to develop new industries to drive the economy when our wood and water have been exhausted – will find that no amount of courage can overcome the hurdles put in place by their own government. As the actual trade measures of the TPP bring very modest gains to Canada, and the remaining components will inflict costs far in excess of those gains, adopting this agreement makes little sense beyond acquiescing to the corporate bullying that is likely happening behind closed doors. If that is the sole reason that Canada must go forward with the TPP, please be honest to Canadians about the government’s reasoning. Please do not pretend that this is solely about Trade.

The TPP is an international omnibus bill, the effects of which will be detrimental to Canadians. The greatest pain will be inflicted upon those youthful voters whom this government so assiduously courted.

Regards,

Meera Nair

 

 

[1] The C.D. Howe analysis estimates the loss to Canada for not joining the TPP; “The real GDP impact would be a negligible -0.006 percent in the first year, rising to about -0.026 percent in 2035.” The losses to existing industries are not taken lightly, but it is essential to wonder what industries could rise in their place, if unrestricted by the constraints embodied within the TPP.

[2] Michael Enright, “Canada’s cowardly CEOs are sitting on billions, rather than investing in the economy,” The Sunday Edition, 16 October 2016 <http://www.cbc.ca/radio/thesundayedition/timid-ceos-endless-war-in-syria-steve-earle-fall-in-vermont-1.3801572/canada-s-cowardly-ceos-are-sitting-on-billions-rather-than-investing-in-the-economy-michael-s-essay-1.3801574&gt;.

[3] Deloitte, The future belongs to the bold, <http://www2.deloitte.com/ca/en/pages/insights-and-issues/articles/the-future-belongs-to-the-bold.html&gt;.  As an aside, poetry lovers will enjoy the inference of Invictus by the report’s authors.

 

a $3.5 billion reminder

Investor-State Dispute Settlement (ISDS) reappeared in the news last week. Writing for Toronto Star, Les Whittington alerts Canadians that our country is on the receiving end of a claim of $3.5 billion by the owner of the Ambassador Bridge which connects Windsor and Detroit. “Matty Moroun … is claiming damages from Ottawa in connection with Canada’s plan to help build a second bridge linking Ontario to Michigan at Detroit.”

It is the ISDS mechanism established within the North American Free Trade Agreement (NAFTA) that is providing the avenue of complaint for Moroun. I have written about ISDS before (most recently, see here); in essence, foreign corporations have recourse to sue governments, via private tribunal, when government or judicial actions of the home country are deemed to compromise the foreign investment. ISDS was introduced ostensibly to provide security to corporations when dealing in countries with less-than-robust systems of law, but has now become part and parcel of most bi-lateral or multi-lateral trade agreements. The recently agreed upon Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union, and the pending Trans-Pacific Partnership (TPP) which is described as the largest trade agreement negotiated outside of the World Trade Organization, are no exceptions. From a Canadian perspective though, it is perplexing that any government of Canada should embrace the continuance of ISDS in trade agreements.

Whittington draws from a newly–released compilation of actions against NAFTA governments, authored by Scott Sinclair for the Canadian Centre for Policy Alternatives (CCPA), to observe that, disproportionately, Canada receives most of the action. It could be argued that Canadian trade with the United States is of higher volume than that of Mexico, and thus such proportion is inevitable. One could also argue that Canada’s past commitments to public-wellbeing are more likely to impede a laissez-faire mantra, and that is why we attract unwanted attention. A day after Whittington’s article, Thomas Walkom also weighed in via Toronto Star: “… 69 of the 77 complaints made against governments in the three countries were leveled against public policy measures in areas such as environmental protection, land-use planning, drug regulation and health care.”

Whittington observes that the Canadian government sees concerns of ISDS as overdrawn; with respect to CETA, he quotes a representative: “Investment protections have long been a core element of trade policy in Canada and Europe, and will encourage job-creating investment and economic growth on both sides of the Atlantic.” But, in March of last year, Public Citizen issued a report which comprehensively illustrates that ISDS offers protection far beyond what occurred in the past and that “… countries bound by ISDS pacts have not seen significant FDI increases, [whereas] countries without such pacts have not lacked for foreign investment (p.3).” And in that same report, Public Citizen illustrates precisely how deleterious actions under ISDS are to public well-being.

For instance, both Uruguay and Australia have drawn fire for their anti-smoking efforts (larger warning labels and plain packaging requirements), despite the fact that the World Health Organization commends such effort. (Jim Armitage, writing for The Independent last fall, described in detail Uruguay’s success in reducing smoking rates among its population.) Yet tobacco company Phillip Morris, is challenging both countries by way of ISDS. As noted by Public Citizen, “Philip Morris is demanding compensation from the two governments claiming that the public health measures expropriate the corporation’s investments in violation of investor rights established in Bilateral Investment Treaties (p.2).” Neither Uruguay’s health success nor the fact that Australia’s regulations were upheld by its Supreme Court, will have much sway in the tribunal operations of ISDS.

Under ISDS, disputes are managed by a trio of corporate attorneys who rotate among the positions of representative and judge. These tribunals are not answerable to any electorate and do not address public well-being as a court of law would do when confronted with the same dispute. Even if one is willing to accept that such critical decisions are rendered outside the forum of any country’s judiciary, the lack of statutory guidance to the outcome is extraordinary; Public Citizen writes:

If a tribunal rules against a challenged policy, there is no limit to the amount of taxpayer money that the tribunal can order the government to pay the foreign corporation. Such compensation orders are based on what an ISDS tribunal surmises that an investor would have earned in the absence of the public policy it is attacking. The cases cannot be appealed on the merits. There are narrow technical and procedural grounds for annulment. Firms that win an award can collect by seizing a government’s assets if payment is not made promptly. Even when governments win cases, they are often ordered to pay for a share of the tribunal’s costs. Given that the costs just for defending a challenged policy in an ISDS case total $8 million on average, the mere filing of a case can create a chilling effect on government policymaking, even if the government expects to win (p.2-3).

For Canadians, that last sentence is not conjecture; Walkom writes “[In 2013] … the Ontario government paid a U.S.-based company $15 million to withdraw its complaint.” Moreover, the phrase “would have earned in the absence of the public policy it is attacking” should send chills down everyone’s spine. Clean air, clean water, access to medicine, and, worker and public safety, all sit on the cost side of any ledger. It is unrealistic to expect that measures addressing these social needs would have been voluntarily adopted by entire industries, and then maintained by those industries, without some prodding from government. The appropriate forum to address dispute between corporate expectation and government commitment to public well-being, can only be a court of law.

Harold Innis (1894-1952) once remarked upon the brilliant achievement that was the development of law; that law represented “an alternative to force.” True, in the 21^st century, citizens of nation states do not fear marauding armies traipsing through the streets in a hostile takeover of the nation. But we should not lose sight of the fact that nations can be taken over in a far more insidious way; losing the supremacy of our judiciary and the autonomy of our government should be an early warning sign.

TPP and ISDS – more acronyms

“Countries that want to preserve flexibility on copyright term pretty much have no strategy in the TPP. Canada is about to fold.”

This tweet came early Friday morning from James Love, Director of Knowledge Ecology International. Love is in Singapore watching the latest drama of the TransPacific Partnership (TPP) negotiations. However, given that Canada officially has no negotiating power, its efforts to opposing copyright maximalism may not matter anyway. (Thomas Walkom, of The Toronto Star reported in 2012 that Canada’s admittance to the group did not include the right of negotiation.)

As many readers know, the TPP is a trade agreement in the making, negotiated in secrecy (except for privileged members of the business class). In November, Wikileaks published details of the negotiations with respect to intellectual property rights; they did not look promising. At that time, Michael Geist offered a series of posts detailing the shortcomings of the agreement. In his first post, Geist wrote:

The good news is that Canada is pushing back against many U.S. demands by promoting provisions that are consistent with current Canadian law. Canada is often joined by New Zealand, Malaysia, Mexico, Chile, Vietnam, Peru, and Brunei Darussalam. Japan and Singapore are part of this same group on many issues. Interestingly, Canada has also promoted Canadian-specific solutions on many issues. The bad news is that the U.S. – often joined by Australia – is demanding that Canada rollback its recent copyright reform legislation with a long list of draconian proposals. …

And in his regular column with The Toronto Star, Geist added:

The U.S. finds itself relatively isolated on many issues, with only Australia offering consistent support for its positions. For example, Canada and most other TPP countries support a general objectives provision that references the need for balance, promotion of the public domain, protection of public health, and measures to ensure that intellectual property rights themselves do not become barriers to trade. The U.S. and Japan oppose these objectives.

If the U.S. is successful in pressuring other countries to meet its demands, Canada would be required to radically overhaul its current law, reversing course on many of the rules the government recently enacted as part of its long-awaited copyright reform package or negotiated in the trade agreement with the European Union.

Returning to Love’s assessment of the current talks, the prospects of Canada (or any country) maintaining a sovereign system of copyright looks bleak. Copyright term extension is high on the list of demands; earlier today Love tweeted: “One USTR official I talked to said, yes, 70+ life copyright terms [are] wrong. But Europe made us do it, and now, we need everyone to follow.” Even more disturbing was the news that Mexico is arguing for “at least” life plus 100.

Yet copyright may be the least of our problems.

By far the most insidious part of the TPP is the determination by the Office of the United States Trade Representative (USTR) to further entrench the Investor State Dispute Settlement (ISDS) process. This mode of dispute resolution allows corporations to sue governments, not through courts of law, but in private tribunals. Earlier this year, law professor Brook Baker published a comprehensive examination of the risks ISDS poses to access to medicines:

Suddenly intellectual property rights, already hugely protected, are given another mantle of protection, namely protections as investments.  In addition, investors are given rights to bring claims for private arbitration directly against governments whenever their expectations of IP-based profits are frustrated by government decisions and policies.   Decisions of these private arbitral tribunals consisting of three international trade lawyers are not subject to judicial review, but are reducible into court judgments that can be levied against government property.

The principle behind compensation for thwarted expectation may have seemed rational at its outset (investor-state dispute mechanisms were first introduced in NAFTA in 1994) — to ensure corporations have recourse against unstable governments whose court systems may lack objectivity and rigour. But the mechanism has allowed egregious actions by corporations directly against governments, sidestepping robust courts of law. That health, environmental, or financial regulations seem to hinder corporate profit, is considered sufficient cause to bring action. That these regulations serve the citizens of that elected government is irrelevant.

In a TPP information session in Singapore, Melinda St. Louis of Public Citizen gave a presentation describing actions brought under ISDS; video available here.  Some of the highlights:

• Even municipal actions can provoke claims of frustrated expectation.
• The private attorneys who participate in the proceedings rotate between serving as arbitrators and serving as judges.
• Tribunal rulings are not bound by precedent.
• There is no means for appeal.
• Governments cannot counter-sue investors.
• The proceedings are very expensive for governments; it is in the interests of the tribunal arbitrators to drag out proceedings as even if the government wins, “almost always they are ordered to pay half the tribunal costs.”
• Tribunals have the discretion to award unlimited damages.
• Each year, the number of disputes increases.
• An example from St. Louis’ list (there were many): Occidental Petroleum (OP) breached their contract with the Ecuadorian government; the tribunal recognized the breach of contract but still awarded OP $2.4 billion to be paid by the government.
• Canada features in the list a few times; including the matter of Eli Lilly.  As I have written before, the U.S.-based pharmaceutical company has taken issue with Canadian courts’ invalidation of patents for two drugs and is seeking $500 million. St. Louis emphasizes how significant this case is: “[Eli Lilly is] actually challenging Canada’s entire patenting system.”

As a result of numerous actions against governments, many countries are starting to question whether ISDS should be part of trade agreements. Intriguingly, all 50 state legislatures in the United States passed a resolution opposing ISDS in trade agreements. Which makes it all the more perplexing that Canada appears to have already agreed to such terms in the purported Canada-EU free trade agreement. Announced in October by the Harper government as an agreement in principle, the text has not yet been publicly disclosed.  But in the summary document provided by our government, discussion of ISDS is artfully worded:

The process that investors follow to seek compensation is called “investor-to-state dispute settlement” (ISDS) and involves an independent arbitral panel hearing facts and making a decision on the merits of an investor’s claim. ISDS rules have been a standard feature of Canada’s comprehensive free trade agreements since the North American Free Trade Agreement and give assurance to investors that their investments will be protected from discriminatory or arbitrary government actions (p.21).  …

When individuals have disagreements, they have various ways to resolve them. They can try to negotiate  among themselves or, if that doesn’t work, they can seek the help of an impartial third party such as a mediator, an arbitrator or a court. Trade disputes between countries work much the same way. Trade agreements include various dispute resolution mechanisms so that governments can resolve their disagreements. For instance, when consultations fail to resolve a problem, trade agreements provide governments with the option of using impartial third parties to help resolve the dispute. In some cases, these third parties act like courts in the sense that they hear evidence from both sides and ultimately render binding decisions (p.38).

While our government assures us that the agreement, “includes provisions to guard against frivolous claims in order to ensure that the process will not be abused,” the disparate bargaining positions vis-à-vis the Europeans do not bode well for Canadians; see this assessment of the imbalanced negotiation by Gus Van Harten (an Associate Professor at Osgoode Law and well-versed in international trade).

Our best hope seems to be that saner Canadian heads will prevail before the final language is set. And that other countries can remove the deleterious conditions of ISDS from the TPP.