Trade and Investment Research Project

Remarks by Scott Sinclair, to a public meeting on the Canada-EU Comprehensive Economic and Trade Agreement (CETA) in Charlottetown, PEI

Introduction

No one questions that international trade is vital for the Canadian and PEI economies. But there are legitimate questions that need to be asked about who benefits from trade and about the role of public policies in ensuring that those benefits are shared as widely as possible.

Today, one of Canada’s world-class trading companies faces a dire threat to its very existence. For decades it has operated successfully in cutthroat global markets on the basis of the highest quality and consistency, commanding a premium price for Canadian products. It is one of Canada’s most recognizable and internationally respected brands.

This Canadian export powerhouse has annual revenues of between $4 and 8 billion and exports to over 70 countries. Each year it sells about 21 million tons of Canadian commodities. This enterprise is threatened not because it couldn’t compete internationally, but because it competes too successfully. It is under attack from relentless ideologues working on behalf of foreign interests.

In their eyes, this organization’s sin is that it shares the benefits of international trade with primary producers. Last year it had revenues of $5.2 billion. It returned every penny, minus administration costs of $75 million, to Canadian grain farmers. And this is the reason the Canadian Wheat Board (CWB) may perish.

I want to take a moment to congratulate the Council of Canadians, the Friends of the CWB, lawyer Steven Shrybman, and everyone else involved in the case for their stellar work in defending the CWB. A federal court judgement yesterday found that the move by the Conservative government and minister Gerry Ritz to abolish the CWB without consulting farmers is “an affront to the rule of law.”

Don’t be fooled by simplistic notions that critics of trade and investment treaties are reflexively anti-trade or that their proponents are consistent champions of international commerce.

Question everything. Read the fine print. Ask yourself … who benefits?

The same goes for agreements such as the CETA, which are about far more than simply trade. These agreements have developed into constitutional-style documents that affect public regulation of investment, services, intellectual property, public purchasing and other important matters that are only peripherally related to trade.

This evening, I’d like to briefly explore some issues related to these negotiations which could have significant implications for PEI.

Investor rights

Investor rights agreements such as the NAFTA Chapter 11 allow foreign investors to bypass domestic court systems and instead use investor-state dispute tribunals. These tribunals, which lack accountability, can order governments to compensate investors allegedly harmed by public policies or regulations.

There have been 30 investor-state claims against Canada under NAFTA, targeting public policy measures at all levels of government. These include challenges to export bans on toxic waste, environmental assessments and wildlife conservation measures. While cases continue to mount, Canada has already lost or settled five claims and paid damages of $157 million, not including legal costs.

Some of the most controversial features of the NAFTA investment chapter were absent from past EU-wide trade agreements. The European Commission, however, recently gained the power to negotiate investment protection agreements on behalf of the entire EU.

Early in the CETA negotiations, Canada put the NAFTA Chapter 11 template on the table. The EU responded by demanding even stronger investment protections than those found in the NAFTA. It is also insisting that provinces and municipalities fully comply with the agreement.

Canada’s NAFTA experience is raising some concerns in Europe. Both the European Parliament and an official EU sustainability impact assessment have questioned the need to include investor-state dispute settlement in the CETA.

These concerns have been heightened by recent actions under the investor-state arbitration rules of the European energy charter treaty. Vattenfall, a Swedish energy company, has already succeeded in a claim against Germany related to the regulation of a coal-fired plant in Hamburg and is now threatening to challenge Germany’s decision to phase out nuclear power.

The CETA threatens to expand this controversial model of investor protection while public awareness is low and before citizens understand all the implications. Both Canada and Europe have highly regarded court systems that protect the rights of all investors regardless of nationality. There is simply no justification for including investor-state arbitration in the CETA.

Public purchasing

In the area of public purchasing, unconditional access to government procurement, particularly at the provincial and municipal government levels, is the EU’s top priority.

PEI stands to benefit from the recent contracts for new naval, coast guard, and icebreaker vessels won by Halifax shipyards. Those shipbuilding contracts were restricted to Canadian suppliers and assessed, in part, on the basis of local benefits. Without such conditions, these ships could easily have been built in South Korea or Norway.

When making purchases, it is economically rational for governments to consider, and to encourage, local spinoffs such as taxes paid, wages, training for workers and other local benefits. This approach results in best value for public money.

Why shouldn’t the sensible approach taken in the shipbuilding contracts be applied to other major contracts such as mass transit, food purchases by hospitals and nursing homes, or renewable energy?

Wind energy

In fact, the PEI government’s Ten Point Plan for wind energy states that: “the evaluation criteria [for wind energy projects] will favour development proposals that maximize benefits to Prince Edward Island – through both construction and ongoing operations.”

Premier Ghiz has also stated that “Wind energy produced for the export market will be developed in a manner that will provide the greatest benefits to landowners, businesses and our Island community as a whole.”

Will this be possible under the CETA? The EU has demanded that PEI cover the PEI Energy Corporation under the procurement rules.

CETA’s restrictions on government purchasing would take away the ability for PEI to use its purchasing power to enhance local benefits, even when contracts are competed openly and do not discriminate on the basis of the nationality of the suppliers. These rules prohibit so-called offsets, which are defined as “any condition or undertaking that encourages local development.”

Since wind is a public resource and the costs of the transition to renewable energy are borne by PEI residents, Islanders should share in the economic benefits.

A European multinational GDF Suez Energy is already established on PEI as a wind energy producer. Its legal team can be expected to vigorously enforce any new rights the company gains under the CETA.

Indeed, in 2010 Suez Energy’s parent company won two investor-state disputes against Argentina over the failed privatisation of municipal water systems. The company is seeking over $1 billion in damages. We shouldn’t kid ourselves that if we are foolish enough to provide corporations like Suez with similar rights under the CETA, that the same thing couldn’t happen here.

IPRs and drug costs

The CETA would also be the first Canadian bilateral FTA since the NAFTA to have an intellectual property rights (IPR) chapter, going well beyond Canada’s existing international obligations. The EU demands include:

• Adding the extra time it takes for a drug to receive regulatory approval (up to five years) on to the regular 20-year term of monopoly patent protection,
• Longer terms of data protection, up from eight to ten years, including protection for non-innovative drugs, and
• New rights of appeal that would enable the brand-name drug industry to delay the approval of generic drugs.

Each of these changes would reduce the availability of cheaper, generic medicines and drive up costs to all Canadians. A recent study estimates these extra costs at $2.8 billion annually. The added costs to PEI consumers, businesses, unions, and the provincial government would be $10.4 million annually.

Since drug costs are the fastest-rising component of Canadian health care costs, these provisions could deal a critical blow to the sustainability of Canada’s health care system.

Fisheries

Arguably, fish is one of the few sectors where the lowering of EU trade barriers might produce significant gains for Atlantic Canada.

In return for dropping its high tariffs on fish, however, the EU is making demands that would adversely affect the management and regulation of the Canadian fisheries.

The EU has demanded that Canada eliminate all resource export restrictions, including restrictions on the export of unprocessed fish in Quebec and the Atlantic Provinces. It is also pressing Canada to eliminate foreign ownership limits in the fish processing industry and for new port privileges that would make it easier for European vessels to catch fish in or adjacent to Canadian waters.

Secure access to natural resources, including fish, is a major EU priority in the CETA negotiations. The Atlantic Canadian fishing industry could gain from more favourable access to EU markets. But agreeing to EU demands would undercut vital Canadian fisheries policy priorities: notably, to add value to raw and minimally processed resources prior to export; to create and maintain jobs and livelihoods in the fisheries sector; and to manage the fisheries sustainably within ecological limits.

The PEI government has an important role to play in ensuring that fisheries are properly regulated and that the local, inshore fishery thrives. The CETA could undermine this.

The principles of trade and investment treaties and fisheries management are like oil and water; they do not mix. Canadian governments allocate fishing quotas on the basis of historical dependence and geographical adjacency, both of which are prohibited forms of discrimination under international trade rules. While Canada will certainly take steps to protect fisheries management under the CETA, it’s important for our fishing industry and communities not to be complacent about how the full application of trade treaties could threaten their future livelihoods.

Agriculture

Agriculture is another critical issue in these negotiations.

While the Conservative government has pledged to protect supply management, the EU is insisting on additional market access that will further erode supply managed sectors.

A good example is the dairy industry, one of the few sectors where a Canadian farmer working hard and efficiently can make a decent living in agriculture today. This exemplary system ensures that famers get a greater share of the income generated in the farm sector. It makes our rural communities stronger and provides consumers with a secure supply of healthy food at reasonable prices.

Unfortunately, the EU wants increased access for its cheese and industrial milk products, which will reduce the market available to Canadian dairy farmers.

Our supply management system is under threat as never before. It is very likely to be eroded in the CETA and other ongoing trade negotiations such as the Trans-Pacific Partnership threaten its continued survival.

The Harper government’s heavy-handed actions against the Canadian Wheat Board - overriding the wishes of a majority of grain farmers who support keeping it as the single-desk seller of Canadian wheat and barley – demonstrate that Islanders and other rural Canadian need to rally to defend supply management.

Our own provincial government should be leading those efforts, but instead it is quietly playing along with the CETA negotiations, blinkered in its pursuit of lower European tariffs on frozen lobster and French fries.

This federal government has a seemingly insatiable appetite for trade agreements that eat away at public rights and those of provincial, territorial and municipal governments. As concerned citizens, we should keep the pressure up against the Harper government’s tactics and demand that our provincial government step up and defend our democratic autonomy and threatened public interests.

Scott Sinclair is the Director of the CCPA's Trade and Investment Research Project.