Split Decision: The Trans-Pacific Partnership
Split Decision: The Trans-Pacific Partnership
by Jacob Mantle
Last week, Prime Minister Harper announced the conclusion of the largest free trade deal in Canadian history and the creation of the world’s largest trade bloc. The TPP includes 12 Pacific Rim countries with a combined population of almost 800 million people and a combined economy larger than both China and the European Union.
The TPP is, without question, a win for Canadians. The TPP will lift the less fortunate out of poverty, strengthen the middle class, and set the Canadian economy on a path to growth and prosperity. It helps those struggling to make ends meet and protects vulnerable workers by eliminating the majority of tariffs that currently apply to goods and services, which will make them cheaper for Canadians.
In international economic parlance, this means that the real income of those less fortunate will rise. It also refers to purchasing power and the amount of goods/services that can be bought with the wages earned. Since prices decrease with increased competition caused by free trade, citizens can purchase more with the same amount of money.
On the legal side, the TPP is the first international trade agreement of its kind to introduce binding and fully enforceable labour obligations. These obligations include protecting the freedom to bargain collectively, eliminating child and forced labour, and requiring member countries to have laws on acceptable working conditions. This is the largest expansion of labour protections in history.
Unfortunately for workers in Canada, the Liberals and the NDP have been highly critical of the new deal.
The NDP have promised to “tear up the agreement” should they form the next government. The NDP’s most significant legal criticism is that the current government does not have the constitutional authority during an election to conclude a trade deal like the TPP. They argue the government has overstepped its traditional caretaker role of the Canadian government in an election period.
So what can a government do during an election?
During an election, the Caretaker Convention guides government ‘dos’ and ‘don’ts’. A review of the convention shows the government does have the necessary constitutional authority to conclude the TPP. The convention states the government retains “full legal authority to govern during an election”. In determining the need for government action, the convention says “the Government must exercise judgment, weighing the need for action and potential public reaction”.
Since the TPP represents a significant international obligation that Canada has been negotiating for five years, walking away from the deal would jeopardize the Canadian economy, put Canadian businesses at a serious disadvantage, and leave us on the sidelines to the largest trade deal in history–and this historic deal is one in which we need to be involved.
The TPP will grow and strengthen the middle class because it will provide new markets for Canadian goods and services. Many middle class Canadians work in high-value knowledge-based industries such as computing, engineering, and financial services. These industries support high-wage jobs in Canada.
The Bank of Canada reports that export in services account for about 15% ($75 billion) of Canada’s total exports. This exceeds cars and car parts and machinery and equipment, which are common focus areas for trade talks or local economies.
Middle class Canadians can expect to see new job opportunities and growing business opportunities and it is no coincidence that broad cross sections of Canadian businesses have voiced strong support for the TPP.
It is all the more surprising that the Liberals and Mr. Trudeau, the self-professed champions of the middle class, have refused to pledge support for the TPP because it is secretive and short on details.
The same criticisms were leveled during negotiations for the Canadian-European Union Comprehensive Economic and Trade Agreement (CETA), which, if approved, will come into effect in 2016. CETA was also announced before the draft text was released.
As with most international agreements, confidence in negotiations is crucial. The government must exercise a degree of restraint in releasing information while discussions are ongoing .
The full text of the TPP will be released and be subject to full Parliamentary review and approval before it is brought into force. Mr. Trudeau’s charge that the deal is overly secretive underscores his inexperience and lack of understanding of the international process.
One of the main criticisms raised by both the Liberals and the NDP is the specter of manufacturing and auto sector job losses.
Free trade brings with it competition, no doubt creating difficulty for some firms and sectors. However, the idea that 21st century manufacturing competitiveness is based solely on labour costs is outdated. Skills, knowledge, infrastructure and access to global markets, like the TPP countries, are vital in the new global economy.
This is why high-value, high quality manufactured goods from Germany and Japan remain competitive globally. Canada must follow suit and continue to move towards high-value, high paying manufacturing jobs and the TPP will help us get there.
We must choose to participate in the global economy and not hide behind protectionist barriers. We must choose to support the less fortunate, grow the middle class and build a 21st century Canadian economy. There is simply too much to lose. To borrow the words of Prime Minister Harper, we must choose “a future of participation and not isolation”.
Jacob Mantle is a contributor to Juris Diction. He is in 3L.
TPP: The Good, the Bad and the Ugly
by Jess Spindler
Last week, Prime Minister Stephen Harper announced that Canada, along with 11 other countries, signed on to the largest trade deal in world history: The Trans-Pacific Partnership (TPP). The deal creates a free-trade zone spanning several Pacific Rim countries accounting for roughly 40 per cent of the world’s economic output. Think of it as the new NAFTA, but a whole lot bigger.
The Good news is that the deal promises to lower trade barriers by reducing or eliminating tariffs on a wide range of goods and services, giving Canada greater access to global markets. This is clearly positive for trade relations, although the jury’s still out on whether it will have a noticeable impact on consumer prices.
The Bad relates to processes and certain economic sectors. The government negotiated the deal in private, engaging in next to no consultation with the public and the provinces and some sectors are concerned about concessions Canada made in reaching the agreement.
Under the deal, vehicles with just 45 per cent content from a TPP country can be imported into Canada duty-free. That’s a far cry from NAFTA’s 62.5 per cent regional content provision, and has the auto sector worried that domestic auto assembly and parts production jobs will be at serious risk.
Another concerned group are dairy farmers. The deal opens up 3.25 per cent of Canada’s dairy market to foreign producers. While less than the anticipated 5-10 per cent, one dairy farmer I spoke with still has concerns about what this will mean for the future of family farming. The government has promised to compensate farmers for their losses, but the TPP may signal the beginning of the end of supply management in Canada.
Dispute resolution is where the TPP might get Ugly.
Right now, details of the TPP’s dispute provisions are slim. What we do know: the rules will be modeled on the WTO’s existing system and the agreement will contain a provision similar to NAFTA’s Chapter 11, better known as investor-state dispute settlement (ISDS).
This allows foreign companies to challenge domestic laws in outside courts, and seek damages for interference with the expected profitability of foreign investments. Queen’s Law Professor Nicolas Lamp, an expert in international trade law, is critical of the system because he says it creates privileged access to justice for foreign actors. Professor Lamp questioned the integrity of ISDS, which appoints arbitrators on an ad hoc basis, lacks an appeal mechanism, and is susceptible to conflicts of interest.
In the U.S., which has never lost an ISDS case, Senator Elizabeth Warren flagged her concerns in the Washington Post, arguing the adoption of such a clause would tilt the playing field in favour of large multinational corporations, undermining U.S. regulatory sovereignty.
Canada also has reason to be concerned. The Canadian Centre for Policy Alternatives has found that over the last two decades, Canada has been the main target of investor-state claims under NAFTA.
One example is Ethyl Corporation v Government of Canada, in which the corporation successfully challenged Canadian regulations banning the import of a gasoline additive (and suspected neurotoxin). The case resulted in the government abandoning the policy and an award of $15 million in damages.
There are a number of other active Chapter 11 claims against Canada including challenges of Quebec’s ban on fracking (Lone Pine Resources Inc v Government of Canada) and disputes regarding Ontario’s renewable energy plan (Mesa Power Group LLC v Government of Canada).
Given that government authority to enact policy measures can be seriously jeopardized by ISDS, we should be thinking seriously about whether accepting a similar provision in the TPP is in Canada’s best interest.
Despite its significance for the Canadian economy, it’s unlikely the TPP will become a full-blown election issue for two reasons. First, Canada has already faced this debate before when the Canada-U.S. free-trade agreement dominated the 1988 federal election. Free trade won the day and the sky didn’t fall. Second, with less than two weeks before heading to the polls and few specifics on the deal’s contents, Canadians are running out of time to meaningfully consider the implications of TPP.
The outcome of the October 19th election could have a significant effect on the deal’s destiny. While Canada has signed on for now, the TPP will still need to be ratified in the House of Commons. With the election looking uncertain and the parties having articulated varied stances, it seems until the full text of the agreement becomes available it is difficult to fully evaluate the positives and negatives.
What’s clear for now is that Canadians deserve to know more specifics because—in trade pacts—the devil is in the details.
Jess Spindler is a staff writer for Juris Diction. She is a 3L student.