Grow fair trade: shape and strengthen global governance

Grow fair trade: shape and strengthen global governance

 GPC 2015 platform background paper

Success for Canada in the international sphere starts at home, where we can build on the strengths of our land, our people, and our economy. In negotiations abroad to rebalance trade and investment flows, our stance must be a principled one. The Green Party supports fair trade that protects sovereignty, human rights and the environment, and does not undermine health, safety, consumer or labour standards. Investor state agreements like the Foreign Investor Promotion and Protection Agreements (FIPAs) and the Trans-Pacific Partnership (TPP) are not fair trade agreements. The Green Party does not support FIPAs and the TPP, which elevate corporate interest over the public interest by allowing corporations to sue governments over laws that reduce their profits such as environmental, labour and consumer regulations. For example, a tobacco company can sue the government over health and anti-smoking regulations.  Gas companies can sue over fracking regulations. The TPP will also extend patent, copyright and other monopolies. 

Canada should help reshape global governance for the twenty-first century, from the International Monetary Fund and World Bank, to the new Sustainable Development Goals, and the U.N. Framework Convention on Climate Change. Canada must reengage in a wide range of networks and international agreements for cooperative action on global problems of mass poverty, energy security, pandemics, and climate change. In terms of providing international development assistance, we are certainly not doing as much as we can afford to. Our level of official development assistance (ODA) has sunk to an embarrassing low of less than 0.3% of gross national income (GNI), a far cry from the long-promised target of 0.7% ODA/GNI set in 1970.

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Canada is well equipped to reestablish our respected global position.  We can rebuild our national power and global influence by promoting social stability, access to safe and green sources of energy, clean air and water, and good health care and education systems. A nation’s power and influence will also increasingly depend on the diversity of its population as it absorbs new people and cultures and creates a huge pool of human talent, firmly networked into the international community.

Canada could not be described in any better terms. More and more Canadians are global citizens — Canadians without borders – exploring the world or staying connected to their countries of origin more instantly, easily, and inexpensively than ever before. Large numbers of Canadians have travelled outside Canada and the U.S.; half are tightly connected with one or more foreign countries, and 80% report following international events closely. Many new Canadians build business and commercial links to their home countries and nurture global networks that are enormously valuable economically, socially, and politically. We should encourage these networks and the associated employment opportunities for all Canadians.

We can build on the strengths of our land and our people to grow our economy and expand our trade relationships. Although managing our economic and diplomatic relations with the United States will remain the primary focus of Canada’s attention, emerging economies such as those of China, India, Brazil, and South Korea are rising rapidly in priority. However, global trade has developed a negative underbelly.  Trade agreements which extend their reach beyond fair trade in goods and services to expand transnational corporations’ power and influence in our country can be anti-democratic.

The Green Party is particularly concerned with investor-state agreements otherwise known as Foreign Investment Protection Agreements or FIPAs. While investor-state agreements are sometimes associated, or even confused, with free trade agreements, they are not the same. A trade agreement opens up areas or sectors of national economies to allow other countries access to them. An investor-state agreement is different. For example, the Canada-China Investment Treaty did not open any new sectors to trade. China still limits foreign investment in its energy sector while it makes major purchases of Canadian energy resources. FIPAs and now the Trans-Pacific Partnership Agreement (TPP) elevate corporate interest over the public interest by allowing corporations to sue governments over laws and regulations that reduce their profits.  This undermines Canadian legislation, especially laws protecting the environment, health, labour and consumers. For example, a tobacco company can sue the government over health and anti-smoking regulations.  Gas companies can sue over fracking regulations. The TPP will also extend intellectual property (patents, copyright) and other monopolies. Other agreements undermine domestic digital privacy protections.

An investor-state agreement gives a foreign company (an “investor”) the right to seek damages from a country (a “state”) in private arbitrations. These are not court actions, although the word “sue” is often used. These are claims for damages arbitrated by a panel of three arbitration lawyers – usually in a posh hotel room somewhere. The first investor-state agreement in the world was Chapter 11 of the North American Free Trade Agreement (NAFTA). In the late 1990s, an attempt was made through the Organization for Economic Cooperation and Development (OECD) to extend Chapter 11 principles to all industrialized countries. The OECD proposal was called the Multilateral Agreement on Investment (MAI). In what is viewed as the first global citizens’ campaign using the Internet effectively, the MAI was defeated. The pro-MAI community then turned to advancing bilateral investment treaties. These are generally referred to as “FIPAs” which stands for Foreign Investor Promotion and Protection Agreements. Hundreds of these FIPA agreements now exist, crisscrossing the globe with treaties that are, by their very precepts, fundamentally antithetical to democracy.

As referenced above, Chapter 11 of the NAFTA was the first investor-state agreement in the world. It would fundamentally erode any Canadian government’s ability (whether federal, provincial, territorial, municipal, or Indigenous), to enact laws, regulations, and policies that protect its environment or the health of its citizens. In particular, insufficient attention has been paid to an analysis of the arbitrations under Chapter 11 of NAFTA. Canada has been subjected to arbitration complaints numerous times by U.S. corporations, but we have rarely been successful when we are brought to a Chapter 11 tribunal.  Our most recent loss due to NAFTA was to Bilcon of Delaware over a controversial quarry proposed for Digby Neck, Nova Scotia.

The results of other Chapter 11 tribunals have been equally disastrous.  We have paid out millions to MMT’s manufacturer Ethyl Corporation in Richmond, Virginia for banning a neuro-toxic gasoline additive, as well as repealing our own law for banning the export of PCB contaminated waste to S.D. Myers – a PCB incineration company in Ohio.  Another American corporation to profit from NAFTA at our expense was Abitibi-Bowater, a company awarded substantial damages for actions taken by the Newfoundland government in attempting to keep that forest industry giant to the terms of its contract when it pulled out of the province.

On the other hand, when Canadian companies have sought to rely on Chapter 11 of NAFTA to sue the United States, only one company has ever succeeded. This is the pattern of the growing reliance on these FIPAs – arbitrators are neither fair, nor neutral. A clear pattern exists globally:  the larger economic power almost invariably profits at the expense of smaller economies.

In what will likely be regarded by historians as Stephen Harper’s single largest betrayal of Canada’s interests, he rammed through a FIPA with the Peoples’ Republic of China without a vote in Parliament. This agreement is particularly disturbing. It is worse than NAFTA in several ways.

Whereas NAFTA can be exited with six months’ written notice, the investment treaty with China will be in force for 15 years.   At that time, Canada or China could give a one year written notice to exit the trade agreement, but all existing investments would be covered by the terms of the agreement for a further 15 years, ultimately amounting to a 31-year “lock-in.” Even though it is true that U.S. (or theoretically Mexican) corporations can bring multi-million dollar claims against Canada for laws passed with no intent to discriminate in trade terms, the “investors” from China are not individual corporations. State Owned Enterprises of the Peoples Republic of China are all branches of the Chinese government, with boards and CEOs appointed by the politburo of the Communist Party of China.  The ramifications of this, for Canada, are huge.

Under the Canada-China FIPA, all claims over trade disputes will begin with six months of diplomatic efforts to resolve the issue. Under such a provision, the larger economic party with all its corporate activities under central control (China) will be able to combine all its investments in Canada into a serious threat for economic retaliation. This is not something a U.S.-based firm would be capable of doing under NAFTA, and, in any event, a diplomatic process is not part of NAFTA.

Under the Canada-China investment treaty none of the claims made or arbitration decisions are required to be made public. While Canada’s government is permitted to tell the Canadian public about disputes, there is no requirement that it do so.

The Green Party supports the re-opening of the Canada-China FIPA and will firmly insist on renegotiating the agreement with the Peoples’ Republic of China (even if this means going to arbitration and potentially paying Beijing to restore the right to protect our laws). We must exercise caution when entering into any new FIPAs such as the proposals in connection with the Comprehensive Economic and Trade Agreement (CETA) with the European Union, and the disturbingly secretive talks for a Trans-Pacific Partnership (TPP) involving the United States, Australia, New Zealand, Japan, Taiwan, South Korea, Chile, Peru, Malaysia, Vietnam, Singapore, and Brunei. We must ensure that Canada’s sovereignty is not compromised and any arrangement is fair and balanced.

The Green Party also supports negotiating a new Multilateral Agreement on Corporate Rights and Responsibilities. The effort from 1995 to 1998 to negotiate a Multilateral Agreement on Investment in the OECD failed as it lacked balance. The Green Party of Canada, working with Green Parties around the world, will press for new global negotiations to create a level playing field for multinational corporations and to uphold individual countries’ sovereignty. The template will be based on the European Union’s (EU’s), whereby no country’s environmental and labour laws can fall below the most rigorous standards of any EU state.

This will require Canada to take the lead in establishing a transparent, enforceable corporate accountability framework for Canadian companies operating abroad, one which would include clear standards, tough sanctions for non-compliance and an independent oversight body.  In collaboration with provinces, territories and key stakeholders, Canada should establish a mechanism for mandating disclosure of payments made by companies to foreign governments. We should also implement the recommendations of the 2007 National Roundtables on Corporate Social Responsibility to require Canadian companies to respect and comply with international human rights law, adhering to minimum standards to protect children, the environment and labour rights when operating overseas, and subject to sanctions for non-compliance.

Since the collapse of most recent round of multilateral trade talks through the World Trade Organization (the Doha Round) in 2008, Canada’s focus has unfortunately been on concluding as many bilateral free trade arrangements as possible just to increase the absolute number, at the expense of ensuring they serve the national interest. Despite many ongoing bilateral negotiations, we have concluded only one so-called free trade deal with an Asian nation – an arrangement with South Korea that includes a controversial investor-state agreement. Canadian businesses need the help of government-to-government trade deals to expand their ability to market Canadian goods and services to fast-growing emerging economies, especially those in East Asia and South Asia. Yet we have been negotiating a deal with Singapore since 2001 with no results, ongoing discussions with Thailand appear to be lagging, and talks with India should be much more robust. In addition, we have settled for the damaging China-Canada FIPA discussed above.

The Green Party believes that the federal government must only pursue fair trade negotiations adhering to clear goals and principles. To facilitate negotiations we must first successfully conclude international negotiations for a Multilateral Agreement on Corporate Rights and Responsibilities. The Green Party supports fair trade that protects sovereignty, human rights and the environment, and does not undermine health, safety, consumer or labour standards.

Shaping and strengthening global governance

As we participate in the economic, social, and political global networks of the 21st century, it is important for Canada to play a leading role in shaping global governance. At the United Nations, for example, where Canada once had a sterling reputation, parochialism has replaced principle in our long-standing efforts to block the addition of asbestos to the list of hazardous chemicals. This and other embarrassments, such as sabotaging climate change negotiations, have devalued Canada and the Canadian perspective on the international stage.

The 2008 financial meltdown due to greed and unethical speculative financial transfers ended American dominance of the postwar global economic order.  It undermined the U.S. dollar as the world’s reserve currency.  For decades no one seriously questioned the value of the American dollar or American financial leadership - all that has changed.

Canada should play an active collaborative role to bring about changes in global governance that reflect 21st-century global power realities. In the International Monetary Fund (IMF), for example, China holds only 3.8% of the voting rights despite the fact that it recently became the world’s second-largest economy, while the U.S. has nearly 17% and a veto over all significant IMF decisions. At the very least, a large and dynamic economy like China must be allocated more voting weight in the IMF. Bringing China’s new wealth into global institutions will help the IMF react much more quickly and effectively in future emergencies than it has done in the Eurozone crisis.

Unfortunately, the U.S. Congress continues to block important and long overdue reforms to the structure and operations of the IMF and the World Bank – the global institutions that were established so successfully at Bretton Woods after World War Two.  So China is now substantially underwriting a new Asian Infrastructure Investment Bank (AIIB) which will eventually provide some $50 to $100 billion for its capita base to help it finance $8 trillion of infrastructure spending that Asia will need from 2015 to 2025.   To date, Canada has refused to indicate whether we will participate in the AIIB.  This is wrong.

Mary Robinson, a former president of Ireland, calls 2015 “the Bretton Woods moment for our generation.”  By this she is referring to a quartet of United Nations conferences in 2015 that could have a critical impact on global governance in the 21st century. The first conference took place in March in Sendai, Japan, and focused on how to reduce the risk of natural disasters.  The second conference will be held in July in Addis Ababa and will deal with finding ways to raise the trillions of dollars needed for projects to speed social and economic development, to crack down on illicit trade flows, and to boost multilateral world trade talks.

The third conference in September will be a United Nations conference to approve a set of Sustainable Development Goals (SDGs) that will replace the Millennium Development Goals (MDGs). Eight specific MDGs were established in 2000 and measured progress towards providing clean water, combating HIV/AIDS, and reducing child and maternal mortality.  Those MDGs expire this year. The proposed SDGs are much broader in scope and currently number a rather unwieldy 169 objectives. The 18 most cost-effective SDGs address health interventions, energy policies, phasing out fossil fuel subsidies, and education investments.

The fourth conference will be held in Paris in December – the 21st Conference of Parties within the United Nations Framework Convention on Climate Change. The aim is to conclude a global treaty to tackle climate change successfully – the first since the Kyoto Protocol of 1997. Clearly all four UN conferences are interrelated: climate change increases the risk of disasters which in turn exacerbate poverty, and increasing numbers of people living in poverty in turn exacerbates climate change, and so it goes.  We can no longer remain on the sidelines or, worse, actively undermine responses to these urgent challenges. We need a new federal government to provide the bold national leadership that is so critical to taking action to build a better future for our children and grandchildren [A serious climate change agenda].

Canada must reengage in a wide range of networks and international agreements for cooperative action on global problems of mass poverty, energy security, regional militarization, pandemics, and climate change. This will include rebuilding the Canadian International Development Agency (CIDA) as a force for the elimination of poverty. Mass poverty is the greatest moral challenge and dilemma of our time. In the near future, hundreds of millions of young people around the world will find very few employment opportunities, except in the informal economy, because they lack education and skills. They are living in crowded megacities where they will be attractive recruits for radical groups alienated from the global economic, social, and political system. These groups look at the U.S. and see only Guantanamo Bay and Abu Ghraib.

As we increase our efforts to support our global neighbours, we must deal firmly with corrupt self-interested regimes.  These despotic administrations in too many developing countries rule by fear, siphoning off funds intended to advance social and economic development. They are guilty of manufacturing poverty, alienation, and anger for their own political ends.

Some wonder whether there’s enough money in the world to end poverty. According to Global Financial Integrity, a watchdog organization, poor countries lose more than $1 trillion in illicit financial exports a year to tax-free offshore banks in such places as Luxembourg, Singapore, and the Virgin Islands. This is 10 times the amount of all countries’ foreign aid combined, and at least four times the amount that experts have calculated would eliminate poverty. To eliminate poverty, what we lack as an international community is will, not wealth.

Finally, Canada should join like-minded nations in Europe such as France and Germany in promoting and implementing an international financial transactions tax (popularly known as the “Tobin tax”).  As is the case in current discussions within the European Union, the tax could apply to all transactions between financial institutions (including hedge funds) involving stocks, bonds and derivatives, and would be payable by both the seller and buyer. To be most successful, such a tax would need sufficiently broad acceptance in the international community to minimize speculative electronic traders seeking out non-participating jurisdictions in order to avoid paying it.  The financial transactions tax was initially proposed in the 1970s by Nobel prize-winning economist James Tobin to slow speculative currency transactions. As a side benefit, it was seen as an efficient way to raise substantial funds for international development. Now the tax is also viewed as a potentially useful step to force the financial world to contribute to the costs created by the financial crisis of 2008 and its aftermath [Link A].

Addendum: Canada also needs actively to prevent multinational companies from “treaty shopping.”  This occurs when a foreign corporation funnels income made in Canada through a shell company to a lower tax jurisdiction that has a tax treaty with Canada, such as Luxembourg or the Netherlands. This permits the corporation to avoid the Canadian withholding tax of 25% on income generated here and reduces the tax rate to 5%. Unlike the United States and the OECD countries, Canada has not yet taken any action on corporations that practice this form of tax evasion. Apparently Conservative Finance Minister, Joe Oliver, is concerned that foreign investors, especially in the energy and resource sectors, would demand higher returns to come to Canada, and this would, among other things, discourage foreign investment in the oil sands.  This is yet another sad example of the misguided ideological approach of the Conservative government which is doing so much damage to Canada.