Wednesday, 5 November 2014

Is CETA a Sugar-coated Poison Pill?

Letter Published in the Telegram, October 29th, 2014

After more than five years of secrecy, the final text of the Canada European Comprehensive Economic and Trade Agreement (CETA) has been released. We can at last compare the essence of CETA with government rhetoric, which roughly goes like this. Trade is good for Canada. The European Union will make a good trading partner. Therefore, CETA is good for Canada.

More specifically, the Harper government claims that CETA will boost the Canadian economy by $12 billion annually and equates that with the creation of 80,000 new jobs. Increased European investment in Canada will also create more industries. Finally, CETA will make it much easier for Canadian businesses to expand into the huge European market.

But is this information accurate or realistic?

 Even the corporate sector has publicly doubted government’s predictions of increased GDP and job growth. The (CCPA) Canadian Centre for Policy Alternatives’ projection of GDP contraction and job losses seems more probable. Given that CETA targets government procurement and our public service sector, it’s also doubtful that European investment will create new industries. NAFTA style takeovers and privatizations are more likely.

As for corporate expansion into Europe,  Canadian per capita investment in the EU is already fifteen times that of European investment in Canada, which suggests our big corporations there (mostly finance and insurance) are doing just fine without CETA. Smaller Canadian corporations face significant barriers to penetrating the EU market that have nothing to do with tariffs. These include a fluctuating dollar, high shipping costs, and regulations and languages that differ from country to country.

It is not, however, CETA’s questionable benefits that have pushed groups like the Council of Canadians to oppose the agreement. It’s CETA’s real intent, which is to shift power away from governments and our own court system into transnational corporations and corporate friendly offshore tribunals.

CETA bypasses national courts: In a recent interview with The Globe and Mail, senior German official Uwe Beckmeyer made it clear that Germany finds unacceptable CETA’s Investor-State Dispute Settlement (ISDS) mechanism that allows corporations to sue government in offshore tribunals where national law counts for nothing. By contrast, the Harper government continues to proclaim the benefits of CETA’s ISDS clauses, in spite of the fact that, under NAFTA, Canada has already paid out $170 million in ISDS damages to corporations and is currently facing billions of dollars in current NAFTA lawsuits.

CETA prohibits Buy Local and Hire Local policies:  Even though they seldom exercised this right, provinces, municipalities and crown corporations could in the past favour local businesses that paid local taxes and hired local workers.   On purchases of goods, services or construction projects over certain low thresholds, this right will be gone under CETA. European corporations will have unconditional access to a significant portion of the enormous government procurement market, generally valued at 10 to 15% of GDP or $130-$200 billion annually.

CETA restricts the right to regulate: Loopholes in CETA’s language suggest that governments will have the right to regulate only in so far as their policies are consistent with the obligations in the investment chapter of CETA. This means that governments will increasingly hesitate to regulate to protect the environment or community and worker rights because of the risk of facing ISDS lawsuits.

Expect more privatization of public services under CETA: Nothing in CETA can compel Canadian governments to privatize. However, the federal government is clearly pushing municipalities in this direction through its funding for public private partnerships. Municipalities should realize that once they choose this route for services like wastewater management it will become very difficult (and expensive) to reverse course, given corporate recourse to ISDS lawsuits. Moreover, under the “list it or lose it” approach CETA negotiators have taken to public services, it will also be hard for governments to introduce new public services in the future. All of this undermines the right of citizens to democratically choose which services they want their governments to deliver and to change their opinion on this issue over time.

Young, educated Canadians will face increased competition from temporary foreign workers under CETA: The federal government and some provinces have accepted without reservations a CETA clause that allows European university educated workers (self-employed or working for a European company with Canadian contracts) to fill one year, contractual positions that can be renewed for up to two years.

CETA will increase drug costs: Since 2003, big brand name pharmaceutical manufacturers in Canada have consistently failed to meet previous pledges to invest 10% of their sales revenues in research and development. 2013 was the lowest year on record at 5.4%. Yet, in spite of this, CETA has extended patent protection on pharmaceutical drugs. It’s estimated that this will cost Canadians at least an extra $850 million annually.

CETA will reinforce our competitive trade disadvantage with Europe: Canada runs a $20 billion trade deficit with the EU and it’s been growing. Furthermore, 83% of the EU’s exports to Canada are comprised of highly processed or finished products compared with only 18% of Canada’s to Europe. CETA will remove 99% of import tariffs which we cannot then re-impose. The ability of fu­ture governments to utilize tariffs to support strategic sectors as Can­ada competes with the much larger EU economy is gone. That’s an enormous concession. Canadian industries that will be most negatively affected by cheaper EU imports include processed foods, textiles, clothing, motor vehicles, machinery and equipment.

As for exports, Newfoundland and Labrador may well sell more fish to the EU but the minimum processing jobs that give employment to people will be gone. Canadian farmers probably won’t increase agricultural sales to Europe by much, as the Europeans produce and export beef, pork and food crops.

The really big winner may actually be the oil industry. The Harper government has intensely lobbied the EU over the last five years to get tar sands oil into Europe. Is it possible that the enormous giveaways detailed above were made to achieve that purpose? If so, was this ever necessary? The deteriorating relationship between Europe and Russia, a major exporter of oil to Europe, already means that Europeans are reconsidering their position. In June Spain received its first shipment of tar sands oil.

A report worth reading: In a timely manner, and for this I’m very grateful, The CCPA has just come out with a 127 page analysis of the CETA document. The shift towards expansive corporate rights documented in Making Sense of the CETA is so profound that one has to ask why any elected government would want to do this to us. As to the how, they managed to do it, that’s simple. They held highly secret negotiations to which corporate lobbying groups had access while just about everybody else was excluded. MPs, MLAs and MHAs were told virtually nothing about CETA. Around 50 municipalities across the country, including both small and very large, were so upset by what they learned from CETA leaks that they actually requested to be exempted from the agreement. Their requests were ignored. 

Ratification of CETA may take up to two years but the Harper government has already asserted that they will not entertain any major changes to the agreement.  But heh!  Trade is good for Canada.  The European Union will make a good trading partner. Therefore CETA is good for us.