CIIT Committee Report

Canada-US Relations
Peter Julian, MP

Supplementary & Dissenting Opinion – NDP
June 10, 2009

Supplementary Opinion: CANADA-US BORDER ISSUES AND BLACK LIQUOR

The report of the Standing Committee lacks vision for the trading relationship between Canada and the United States.  The NDP proposes a better relationship between the two countries, based on fair trade, so that the huge volume of business going back and forth across the border is to the benefit of all Canadians and Americans, and that it respects strong labour and social rights and environmental standards.  The legacy of NAFTA and unregulated free trade is clear and unequivocal most Canadians are poorer.  The report is too animated by the philosophy of the Security and Prosperity Partnership that ultimately aims to lower Canadian standards and continue the disastrous legacy of NAFTA.

The NDP would like to add its own suggestions and solutions regarding the border issue between Canada and the United States.  With regards to the Western Hemisphere Travel Initiative, the NDP has proposed that the Government reduce passport fees to a level of cost recovery only, that passport life be extended from five years to ten years, and that a coordinated advertising and marketing strategy be put in place for border towns as a counterweight to any drop in cross-border day-tripping.  These easy to adopt measures would go a long way to address some of the frustration experienced by Canadians under the new border rules.

In order to make our border more efficient and effective, the Government should also create a mechanism for monitoring border traffic and establish protocols and policy to relieve excessive wait times.  The NDP believes that the Windsor-Detroit border in particular, the busiest crossing in North America, should have a public authority created to provide oversight and governance over the border in the public interest.

Finally, with regards to the militarization of the border, the NDP stresses that US border agents operating in Canada must not be allowed to carry or use any arms that Canadian agents do not use.  Furthermore, the Government must ensure that only Canadian border agents arrest and detain Canadians in Canada.

The report of the Standing Committee expressed concern that unfair black liquor loophole which constitutes a to the U.S. forestry industry will not be closed before it is set to expire in December 2009. However, Guy Caron (National Representative, Special Projects, Communications, Energy and Paperworkers Union of Canada) made a strong case that the tax credit could be renewed for a few more years.  The NDP feels the Government should establish a contingency plan in the event that it is renewed this December.

Dissenting Opinion: CHAPTERS 11 AND CHAPTER 19 of NAFTA, ENERGY, THE SECURITY AND PROSPERITY PARTNERSHIP, AND A FAIR TRADE VISION FOR CANADA-US TRADE

One of the single most egregious chapters in the NAFTA, Chapter 11 gives incredible investor right privileges to corporations to sue democratically elected governments for legitimate regulation and policy-implementation in the public interest.  The record of this model is one of abject failure for the citizens of Canada; it has resulted in a variety of past and ongoing cases against the Governments of Canada and the Provinces that severely restrict the ability of sovereign, democratic governments and parliaments to act in the public interest and uphold the most basic principles of democracy.

The Dow Chemical case currently making headlines is the latest attempt by corporations to undermine the work of democratically elected governments through Chapter 11.  Dow Chemical Company has launched a Chapter 11 case against the Government for $2 million in compensation due to a Government of Quebec ban on pesticides.  Dow claims that the banning of a pesticide ingredient, 2,4-D, considered dangerous by the Quebec government, will hurt its profits.  This type of challenge against a policy so clearly in the public interest is exactly why Chapter 11 is a blight on our democracy.

Though the United States has moved away from these extreme investor-state provisions, they are still used by the Government in all bilateral free trade agreements negotiated by Canada with countries around the world.

The dispute resolution mechanism in NAFTA has been the subject of criticism for some time; in fact, in 2005, the predecessor to this Standing Committee submitted a report to Parliament on its dysfunctional and the urgent need for a resolution.[1]  Interestingly, this was even before the final Softwood Lumber Agreement came into effect in 2006.

At the time, the Subcommittee remarked, among other things, that Chapter 19 lacked clear criteria, was stuck hearing the same cases over and over, was taking far too long to consider cases, was abusing the extraordinary challenges committee as a court of appeal, was stacked with biased US-appointees, and was generally being subverted by the United States.  As Dr. Elliot Feldman (who testified before this Committee again before the publication of this report) said in 2005:

 “U.S. private interests believe they would have fared better in U.S. courts [than under Chapter 19].” As a result, he added, “the United States has refused to negotiate anything like [Chapter 19] with anyone else and regrets having negotiated it with Canada and having extended it to Mexico.” Instead, “(t)he United States, therefore, wants to destroy Chapter 19 and has been trying to do so for the last ten years.”[2]

The disastrous Softwood Lumber Agreement that came into effect in 2006 and left almost $1 billion in retained illegally levied tariffs in the United States, is proof enough that Chapter 19 has been rendered irrelevant, which is costing Canada billions of dollars and countless jobs.  Recently, witnesses before this Committee testified that in addition to already having been forced to pay $68 million in damages under the arbitration system of the Agreement, further cases could soon see damages upwards of $1 billion going to the United States- right out of the pockets of Canadian taxpayers.  This, at a time when the forestry industry is in crisis thanks to the economic recession. 

Under the proportionality clause of NAFTA, Canada is forced to supply oil to the United States in proportion to its domestic supply.  This would mean that in the case of an energy shortage, Canada would have to continue supplying oil proportionally to the United States, even if the lights were going out across the country.  This severe constraint on our national sovereignty has left Canada without a national energy policy- the only NAFTA country without one.  This is a serious blind spot in Canada`s energy and sovereignty policy that urgently requires attention- before an energy shortage or crisis rocks the country and we are left scrambling.

The report of the Standing Committee makes ambiguous reference to the Security and Prosperity Partnership (SPP)- the NAFTA plus attempt by corporate CEOs to collude, behind closed doors, with the government to lower Canadian standards by merging them with US standards in a myriad of areas of legitimate public interest.  The overwhelming public opposition and outcry to the undemocratic process of the SPP, which was never submitted to Parliament, provides lessons that this Committee ought to consider.  An undemocratic, corporate-driven race to the bottom was the intent of the SPP and Canadians from the grassroots and civil society rejected it in a broad coalition.  The SPP was the wrong way to approach Canada-US-Mexico trade relations and closer cooperation needs to aim to raise standards, not lower or discard them altogether.

The simple fact is the United States is a much larger market than Canada and the danger is always that the larger market dictates standards and practices to the smaller one.  The NDP stands for a fair trade solution, one that uses trade in a cooperative model to boost the standards of living in both countries, not lower them.  NAFTA has failed; it is time to envision a better relationship between Canada and the United States.

The NDP advocates a race to the top- not to the bottom.  A clear, negotiated framework of high standards and regulation for trade and commerce between the two nations is the only way to reverse the tarnished history of NAFTA.  When it comes to workers’ rights, a living wage, environmental standards, cap and trade markets or energy issues, Canada needs to sit at the table with the United States and work together to arrive at higher, superior standards that raise both countries and are sustainable.  It is time to end the dogmatic deregulation and lowering of standards that has lead to a financial meltdown and the worst recession since World War II.  The fact is the weak environmental and labour sides agreements to NAFTA have done nothing to improve the environment or ameliorate workers` lives and are effectively useless.  Stronger standards, in the core text of an agreement, are needed.  However, the record of the Conservative Government on standards, safety and the environment, especially when it comes to trade, is appalling.  It continually negotiates bilateral free trade agreements that place labour and environmental rights in neutered side-agreements that have no teeth or effect.

The European Union is providing us with a better model for higher standards- there, a ``California`` effect has occurred within the EU to export higher environmental standards to EU members, not through the market, but through political initiative.  High standards in countries like Germany, for instance, have served as unilateral trade barriers to other EU states, prompting them to raise their own standards- all through the supranational body of the EU.[3]

Fair trade means new trade rules and agreements that promote sustainable practices, domestic job creation, and healthy working conditions while allowing us to manage the supply of goods, promote democratic rights abroad, and maintain democratic sovereignty at home.  There is no better place to start than with our largest and most important trading partner- the well-being of the future generations of Canada and the United States depend on it, especially since the new Obama administration in Washington provides a hopeful opportunity for change.

A bilateral fair trade relationship between Canada and the United States must therefore address more than just the problem areas like the legacies of NAFTA.  It must rely first and foremost on a fair sharing of added value produced by trade, within a context of sustainable development.  This cannot be left to the whims of the market- in this case, a few dozen corporations that control the bulk of our trade with the United States.  High and fair standards for labour, the environment, and consumer and health protection lead to fair trade.   These are, of course, a direct result of government policy- it requires, as has been illustrated forcefully by James Galbraith, planning.[4]  The need is for a democratic framework and institutions that can bring those positive changes- not NAFTA, or the Security and Prosperity Partnership- but a transparent set of cooperative institutions that do not abandon the sectoral approach, and which are accountable to our respective legislative bodies.

Such Canada-US commissions working on cap-and-trade, the border, the auto-sector, and other issues, would be independent of the executive branch, so as to eliminate the possibility for abuse, but also accountable to Parliament, to keep them as democratic and transparent as possible.  Some fair trade institutions actually already exist within Canada- look at the Canadian Wheat Board, for example. 

The other major area for work is procurement, an issue that affects tens of billions of dollars of trade between Canada and the United States. 

The report notes concerns about “rising US protectionism” with respect to the “Buy America” provisions in recent stimulus spending, but then documents a few pages later that this trend is worldwide.  In fact, 17 members of the G-20 have enacted some form of legislation to safeguard their markets in the face of the current economic downturn.[5]  The NDP believes that a “Buy America,” “Buy Canadian,” and a joint “Buy North American” program will help Canada and the U.S. ensure that their spending and stimulus legislation go to the right targets.  Erin Weir of the United Steelworkers and Progressive Economics Forum advocated before the committee that a “Buy Canada” policy, with an exception for the U.S. in exchange for a Canadian exception in any “Buy America” legislation, would be a way to ensure that procurement money is spent wisely.[6]

We need a procurement policy that is not mutually exclusive.  There are three dimensions in Canada however: local, provincial, and national.  Therefore, it is not only about the WTO, but also about agreements between municipalities, provinces, American States, and other levels of government.  For example, Australia has negotiated procurement agreements with some 33 American states (Canada has agreements with none).  The federal government in Canada needs to convene meetings to allow similar agreements to be concluded.  The NDP believes that proportions of locally made versus foreign made procurement need to be established, negotiated, and enshrined between jurisdictions in order to strike the right balance between our economies.

All of this is in contrast to the Security and Prosperity Partnership, which was a cloaked, undemocratic process of bureaucracy controlled by corporate interests and never submitted to the public for consideration.  Years of conservative economics have undermined the public sector and eroded many of the most important public institutions of Canadian society.  We are proposing a renewal of the public sphere through a partnership for fair trade and sustainable development.

It is a new way of doing business, because more of the same will not help us anymore.