Chinese trade pact for dummies

In 1997, the Canadian government placed a ban on imports of the manganese-based fuel additive MMT, a known neurotoxin.

In 1997, the Canadian government placed a ban on imports of the manganese-based fuel additive MMT, a known neurotoxin. Ethyl Corporation, the manufacturer of the additive, mounted a challenge under NAFTA Chapter 11, and Canada was forced to rescind the ban, pay compensation of $19 million, and make a public statement that MMT poses no health or environmental risk.

It was a precedent-setting decision. Supposedly drafted to prevent governments from discriminating against foreign companies, Chapter 11 could now be used to suppress unprofitable health and environmental legislation.

In a 2010 study, the Centre for Policy Alternatives found that Canadian governments had paid out $157 million in NAFTA claims, and spent tens of millions more on associated legal costs. Today, Lone Pine Resources, a Calgary-based company incorporated in the U.S., is bringing a Chapter 11 case against Quebec for its ban on hydraulic fracturing.

Like MMT, fracking presents known hazards to health and the environment. It takes millions of litres of water to frack a gas well, all of them contaminated with a cocktail of chemicals whose make-up is a secret, but which include such known toxins as ethylene glycol, mercury, uranium, and lead. Water wells in the vicinity of fracked gas wells have been found to contain highly elevated levels of methane – in some cases to the point where tap water will ignite.

Lone Pine may turn out to have no case – not all Chapter 11 challenges succeed – but at the very least it will have forced the Quebec government to spend time and money defending its right to ban fracking.

A couple of weeks ago, a letter appeared in the Yukon News under the signature of MP Ryan Leef – though anyone familiar with his prose style may be excused for doubting that Leef penned this relatively articulate reiteration of the Conservative position on Chinese trade. The letter was an attempt to calm Yukoners’ fears over the Canada-China Foreign Investment Promotion and Protection Act, a trade deal that will give Chinese state-owned companies even greater powers to challenge Canadian law than U.S. and Mexican firms have under NAFTA.

Leef, or whoever, had this to say: “In Yukon, (the agreement) does not detract from legislation that already exists.” Very true. But then, nobody said it does. The problem is that it ties the hands of future governments which might try to change that legislation. So if Yukoners in the future want to raise mining royalties, restrict access to a particular area, ban fracking, or update environmental, health or labour laws in ways that could affect the bottom line of any company wholly or partly owned by China, they face the possibility of a challenge.

Since such a challenge could bankrupt the territorial government, legislation will have to be drafted with care. So even in the best-case scenario, Chinese Communists will exert an influence over the Yukon’s democratic decision-making.

The Leef letter goes on to say that “Chinese investment in Canada will continue to be subject to the Investment Canada Act for both the net benefit test for acquisitions above the applicable threshold and for national security concerns with respect to any investment.” True again, the threshold in question being $1 billion. Which means that a Chinese company purchasing a share of $999 million or less in a Yukon enterprise passes under the radar.

The letter makes the claim that the “Opposition has incorrectly stated that a 15-year notice period is required to end the Foreign Investment Promotion and Protection Agreement with China ….This is wrong. The agreement is a 15-year agreement, after which one year’s notice is required to pull out.” Here is what the agreement itself has to say: “The agreement remains in force for a period of 15 years. After this period, either party may at any time terminate this agreement by giving at least one year’s notice … For investments made prior to the … termination of the agreement … the provisions of the agreement remain in force for a further 15 years.”

So we are locked in for 15 years, after which it could take a further 16 years to disentangle ourselves, which is precisely what critics of the deal have been saying.

According to the Leef letter, “Canada’s economy benefits greatly” from deals like NAFTA and the Chinese trade pact: “jobs get created, businesses are able to grow, and we are able to continue our goal of ensuring Canada’s future in our world.” But what has NAFTA done for Canada? Before it, 19 per cent of our gross domestic product was created by exports to the U.S., most of it in the form of manufactured goods. Today, it’s still 19 per cent, mainly in unprocessed resources.

In a recent Globe and Mail article, economist Jim Stanford demonstrates that NAFTA has done nothing for exports or income growth and that our access to American markets has dropped since Brian Mulroney signed the free trade agreement, as has our balance of trade.

The Canada-China trade deal puts fetters on democratic decision-making in Canada for at least the next 31 years, based on the unproven proposition that such deals are universally good for the economy. The letter Leef wrote, or at least signed, does Yukoners a disservice with its catalogue of half-truths and misrepresentations. I would refer the Yukon’s MP to the government’s own web site, where he can find the text of the agreement. If he’s going to sign off on Conservative Party talking points about the deal, he might as well read it.

Al Pope won the Ma Murray Award for Best Columnist in B.C./Yukon in 2010 and 2002.

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