Applause for Prime Minister Harper's freshly concluded trade deal with the European Union was swift and loud. Ontario Premier Kathleen Wynne joined the celebration last Friday, saying her government would support the proposed Canada-EU Comprehensive Economic and Trade Agreement (CETA) -- with conditions.
The province should be compensated by the federal government, said the Premier, for an expected nine-figure increase in drug costs, as well as the effect of subsidized European cheese imports on local dairy farmers and possible hardship at Ontario wineries.
Think about that for a second. The feds will hand money over to Ontario, who will in turn hand much of it over to pharmaceutical giants. Taxpayers like you and me will be padding the bottom line of already-profitable multinational corporations.
That makes for a very expensive trade deal. It's even more absurd when you consider that provincial trade officials say they are estimating only $100 million in annual savings to local businesses from tariff reductions.
And it's not even the full bill the public can expect to pay for CETA. Premier Wynne left out the most expensive part of the EU deal: its investor rights chapter, which on its own could keep the provincial government in the red for decades.
Using the investment protection chapter and investor-to-state dispute settlement process in the North American Free Trade Agreement (NAFTA), U.S. companies have sued Canada for billions of dollars for alleged harm to their profits. No laws need to be broken for a company to sue under these rules, and the government decision, policy, law or other measure does not have to discriminate against foreign firms to violate NAFTA. In fact, in most cases the measures in dispute treat all companies the same.
In Canada, those measures have included a ban on trade in hazardous PCB waste, a research and development profit-sharing program in Newfoundland and Labrador, the decision to build a second bridge from Windsor to Detroit, a temporary moratorium on hydraulic fracturing (fracking) in Quebec, and a Canadian court ruling in a patent dispute between generic and brand name drug companies.
Ontario has been the target of several high-profile investor lawsuits against government decisions or policies.
For example, in the recently settled St. Marys Cement case, the company was denied a permit to dig a quarry on prime Ontario farmland outside of Hamilton. The local community objected to the plan, which would have had a considerable impact on the area's watershed. The government, thankfully, listened.
But rather than challenge the quarry decision in court, St. Marys Cement threatened to take the matter before a private, paid and largely unaccountable three-person NAFTA investment tribunal. The decision would have been final, with no room for an appeal. Though this particular case never made it to arbitration, Ontario eventually paid the cement company $15 million for dropping the matter.
In other words, we had to pay St. Marys Cement not to dig a quarry.
Two outstanding NAFTA cases against Ontario's renewable energy policies provide more examples. The first challenges a temporary moratorium on offshore wind development while the impacts on water are studied. The second attacks the Green Energy Act, partly for its domestic content quotas on wind and solar parts. Combined, the U.S. investors in these cases are claiming compensation of more than $1.2 billion for perceived violations of their right to fair and equitable treatment, or for indirect expropriation of profits. These "rights" are not accessible to Canadian companies.
In total, Canada has paid more than $160 million in awards or settlements to U.S. companies because of NAFTA lawsuits. Globally, investment panels have awarded more than $3.5 billion to U.S. corporations alone in their crusade against government decisions that have interfered with profits.
European companies are likewise very good at winning these lawsuits and will use CETA to their advantage if it is ratified. EU-based private water companies, for example, successfully sued Argentina for bringing failed private water systems back into public hands. Investment lawsuits against European countries have been rare, but a high-profile, multi-billion Euro case against the German government for its decision to phase out nuclear power is a sign of what they can expect from Canadian firms under CETA.
South Africa is cancelling its bilateral investment treaties with EU countries because it can see these deals are much more trouble than they're worth. The Australian government is still refusing to include an investor-state dispute process in the 12-country Trans-Pacific Partnership agreement, despite the recent conservative party win in national elections.
Extreme investor "rights" like those in NAFTA and Canada's other investment treaties neither attract new investment to Canada nor do they encourage new Canadian investment abroad. They simply get in the way of the federal and provincial governments' duty to do their job, which includes regulating for public health, environmental protection and resource conservation without the threat of costly investment arbitration.
It is inevitable that Ontario policies will face new and more expensive lawsuits. There are already candidates up north where Indigenous communities could very well resist the government's massive-scale plan to extract minerals from the Ring of Fire. The St. Marys NAFTA dispute is proof that the federal government will be looking for ways to make the provinces pay when resource companies have their hopes dashed by public opposition and the democratic process.
Given the huge amounts of compensation the provinces say they need to support CETA, we can reasonably ask why the federal and provincial governments couldn't have negotiated a better deal with fewer pitfalls for local farmers, wineries and prescription drug users. Adding the extremely high cost of investor-state dispute settlement, the better question is whether we can afford Harper's EU deal at all.
The trade pact needs the consent of Canada's provinces and EU member states to become law. So far, it's looking good on the provincial front: Quebec, Manitoba, New Brunswick, Newfoundland and Saskatchewan's leaders have all praised the deal, and Ontario seems open to it assuming it can get compensation for some of its industries that will be harmed by the deal. Pictured: Canadian Prime Minister Stephen Harper and European Commission President Jose Manuel Barroso shake hands following a joint media availability Friday, October 18, 2013 at the European Commission in Brussels, Belgium.
Canada will partially extend patent protection for brand-name drugs, which would delay the introduction of cheaper generics by up to two years. Officials say it will be eight years before any impact of these changes show up as higher costs for provincial drug plans. Earlier reports have suggested the cost to the health care system of extended drug patents could run between $1 billion and $3 billion annually. Jim Keon, president of the Canadian Generic Pharmaceutical Association: The EU trade deal will "delay market entry of cost-saving generic prescription medicines in Canada in the future, increasing health-care costs for provinces, employers that sponsor drug plans for their employees and Canadians who pay for their prescription medicines out-of-pocket." The federal government has suggested it will compensate provinces for higher costs as a result of the agreement.
Domestic car producers will be able to increase sales into Europe to 100,000 units from about 10,000 today under relaxed rules. The EU will phase out its 10-per-cent tariff on imports, and Canada will phase out a 6-per-cent tariff on European car imports. That could be good news for Canadian fans of European luxury cars, as those vehicles will be cheaper. But that, in turn, could be bad news for Canadian auto manufacturers. Dennis DesRosiers of DesRosiers Auto Analysts: "I don’t think anyone can definitively know what the impact of the current EU Agreement will be on the automotive sector. ... The [Canadian] industry peaked in the year 2000 and has been struggling since and, indeed, just finished one of its worse decades in history and continues to deteriorate. Was this the long term result of FTA and NAFTA? We don’t know but it could be."
Canadian beef farmers increase their quota by 50,000 tonnes, in addition to 15,000 tonnes for high-quality beef. Pork farmers will see their quota rise to 80,000 tonnes from the current 6,000. But producers will have to convert to hormone-free product for the European market, which experts say can add about 15 per cent to costs. Martin Unrau, president of the Canadian Cattlemen's Association: "The removal of long-standing barriers in this agreement, such as high tariffs, finally enables Canadian beef producers to benefit from the high value that the European beef market represents." Dairy Farmers of Ontario: "It will take income from Canadian dairy farmers and their communities and give it to the European industry."
Companies will be allowed to bid on major government procurement contracts right down to the municipal level. A joint study showed the new access will give European companies leeway to bid on federal contracts worth between $15 billion and $19 billion an year, and municipal contracts worth $112 billion a year. Critics say that, because of the common practice of "hiring Canadian" in government contracts, EU access to them could mean job losses in Canada. Trade Justice Network: "Canadian governments would lose a powerful tool for spurring job creation and economic development."
Foreign takeovers of Canadian firms now require a formal federal government review if the deal is worth $1 billion or more, but this agreement will raise that to $1.5 billion.
Labour and consumer groups fear CETA could lead to the privatization of Canada's water supply and infrastructure. According to early leaks from the negotiations, Canada did not try to protect water resources as part of the trade deal. The Council of Canadians writes: "This deal will give French companies Suez and Veolia, the two biggest private water operations in the world, access to run our water services for profit. Under a recent edict, the Harper government has tied federal funding of municipal water infrastructure construction or upgrading to privatization of water services. Private water operators charge far higher rates than public operators and cut corners when it comes to source protection."
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