With the chaos of the Trump administration as a backdrop, Canadian diplomats will arrive in Washington later this month for NAFTA talks that they hope will be no more than a skinny renegotiation.
According to Canadian lore, the North American Free Trade Agreement has been a great boon to Canada, so our fingers should be crossed that Donald Trump, busy composing tweets or colluding with Russia, will forget he demanded Canada and Mexico renegotiate the trade deal, leaving our beloved NAFTA intact.
This narrative is fundamentally wrong. Yes, trade is vital to Canada, but we would have gone on trading, with or without NAFTA.
This is not to say NAFTA’s impact hasn’t been enormous and game-changing. It has — although not in the way we’ve been told.
In reality, NAFTA has been key to the transformation of Canada over the last two decades, enabling corporations to become ever more dominant economically and politically, while rendering our labor force increasingly vulnerable and insecure.
Indeed, the much-lamented rise in income inequality and feelings of powerlessness among working Canadians aren’t mysterious consequences of participating in the global economy. Rather, they’re the predictable consequences of our country signing a trade deal that greatly empowers corporations and their investors at the expense of everyone else.
Gus Van Harten, an Osgoode Hall law professor and expert in international investment law, says NAFTA provides “Exhibit A for how rules of the global economy have been rewritten to favor large corporations and the superrich at the expense of the general public.”
Van Harten is referring to NAFTA’s Investor-State-Dispute-Settlement (ISDS) mechanism which, amazingly, allows foreign corporations to sue governments over laws that interfere with corporate profitability — even if those laws are aimed at protecting the public from, say, environmental or health risks.
These corporate lawsuits are adjudicated by special tribunals — notoriously sympathetic to corporate interests — that can force governments to pay the corporations compensation (out of our taxpayer dollars!) There’s no cap on the size of the awards.
Canada has already been sued this way 39 times, and paid out more than $190 million, with the money mostly going to major corporations and extremely wealthy investors, notes Van Harten. In addition, we don’t know how many times governments have backed off from introducing laws, to avoid provoking a NAFTA lawsuit.
ISDS, which has now been adopted in other international trade deals, has created an extraordinary set of legal rights for corporate investors. “If anyone doesn’t need to be protected it’s these guys,” notes Toronto trade lawyer Steven Shrybman.
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Yet “these guys” enjoy legal protections much stronger than the protections available, for instance, under international human rights laws — for victims of torture and wrongful imprisonment.
Furthermore, NAFTA gives corporations rights — but no responsibilities, Van Harten says. Governments can’t bring a claim against a corporation for breaching NAFTA, and affected individuals and groups have no right to standing at the tribunals.
Indeed, NAFTA provides few rights for citizens or workers to counter all this corporate power, only “side deals” on labor and the environment that are weak and largely unenforceable.
NAFTA’s lopsided empowerment of corporations is a departure from earlier, more balanced trade deals, like the 1965 Canada-U.S. Auto Pact, which provided U.S. auto manufacturers access to the Canadian market — on the condition that they locate some production here.
Effectively, under the Auto Pact, for every car sold in Canada, one had to be produced here — a requirement that guaranteed Canada hundreds of thousands of well-paying jobs and became the backbone of Ontario’s economy.
Such requirements are banned under NAFTA, although the Auto Pact was grandfathered and remained in place until 2000.
Since then, auto (and other manufacturing) investment has flowed to low-wage Mexico, leaving Canadian workers forced to compete with downtrodden Mexican workers who are largely banned from unionizing.
The NAFTA renegotiation should be an opportunity to revise the trade deal to include rights for workers and citizens, not just corporate investors.
But proposals that ISDS be eliminated are unlikely to win support from, for instance, Rex Tillerson, U.S. Secretary of State and former CEO of ExxonMobil, which won $14 million from Canada in a NAFTA lawsuit.
And Trump, a billionaire whose companies (along with daughter Ivanka’s fashion business) routinely outsource work to low-wage jurisdictions, clearly has no interest in tampering with the wildly pro-corporate rules of NAFTA.
Nor apparently does Justin Trudeau, who styles himself a champion of struggling middle-class workers but seems content to do nothing about NAFTA’s headlock on working Canadians.